Fusemachines Inc 8-K/A, filed Nov 28, 2025
Fusemachines Inc. (FUSE)
About this 8-K/A
Fusemachines Inc filed this 8-K/A on November 28, 2025, reporting on events of October 23, 2025.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date
of Report (date of earliest event reported) November
26, 2025 (
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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 13(a) of the Exchange Act.
Explanatory Note
Fusemachines Inc. (formerly known as CSLM Holdings Inc.) (the “Company”) is filing this Amendment to the Existing Form 8-K to include (a) the unaudited condensed consolidated financial statements of Fusemachines USA, Inc. (formerly known as Fusemachines Inc.) (“Legacy Fusemachines”) and its subsidiaries as of September 30, 2025 and for the three and nine months ended September 30, 2025 and 2024 as Exhibit 99.1, (b) the Management’s Discussion and Analysis of Financial Conditions and Results of Operations of Legacy Fusemachines for the three and nine months ended September 30, 2025 and 2024 as Exhibit 99.2 and (c) the unaudited pro forma condensed combined financial information of the Company as of September 30, 2025, for the nine months ended September 30, 2025, and for the year ended December 31, 2024 as Exhibit 99.3. Accordingly, the Existing Form 8-K is hereby amended solely to amend and restate Item 9.01. The Existing Form 8-K otherwise remains unchanged. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Existing Form 8-K.
Item 9.01 Financial Statements and Exhibits.
The audited financial statements of the Company for the years ended December 31, 2024 and 2023 included in the Proxy Statement/Prospectus beginning on page F-2 are incorporated herein by reference.
The audited financial statements of Legacy Fusemachines for the years ended December 31, 2024 and 2023 included in the Proxy Statement/Prospectus beginning on page F-47 are incorporated herein by reference.
The unaudited financial information of the Company as of and for the three and nine months ended September 30, 2025 and 2024, and the related notes thereto, included in the Company’s quarterly report on Form 10-Q filed with the SEC on November [_], 2025 are incorporated herein by reference.
The unaudited financial information of Legacy Fusemachines as of and for the three and nine months ended September 30, 2025 and 2024, and the related notes thereto, is set forth as Exhibit 99.1 to this Current Report on Form 8-K are incorporated herein by reference.
The unaudited pro forma condensed combined financial information of the Company and Legacy Fusemachines as of and for the years ended December 31, 2024 and 2023, and the nine months ended September 30, 2025, is set forth in Exhibit 99.3 and incorporated herein by reference.
* Filed herewith
+ 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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: November 26, 2025 | FUSEMACHINES INC. | |
| By: | /s/ Sameer Maskey | |
| Sameer Maskey | ||
| Chief Executive Officer | ||
Exhibit 99.1
Fusemachines Inc. and Subsidiaries
Condensed Consolidated Interim Balance Sheets
(all amounts in USD, in thousands, except number of shares and per share data)
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
(Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | 106 | 500 | ||||||
| Accounts receivable, current, net | 1,237 | 1,427 | ||||||
| Unbilled revenue | 47 | 113 | ||||||
| Deferred transaction costs | 1,871 | 1,865 | ||||||
| Prepaid expenses and other current assets | 259 | 219 | ||||||
| Total current assets | 3,520 | 4,124 | ||||||
| Property and equipment, net | 274 | 348 | ||||||
| Intangible assets, net | 192 | 187 | ||||||
| Accounts receivable, net | - | 4 | ||||||
| Deferred tax asset | 10 | 10 | ||||||
| Operating lease right-of-use assets | 775 | 870 | ||||||
| Other assets | 12 | 5 | ||||||
| Total assets | 4,783 | 5,548 | ||||||
| Liabilities and stockholders’ deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 8,517 | 6,537 | ||||||
| Accrued expenses and other current liabilities | 4,112 | 3,700 | ||||||
| Deferred revenue | - | 54 | ||||||
| Convertible notes payable, at fair value, current | 9,480 | 8,986 | ||||||
| Convertible notes payable, current | 455 | 255 | ||||||
| Related party convertible notes payable, at fair value, current | 7,530 | - | ||||||
| Related party loan payable, current | 700 | 700 | ||||||
| Operating lease liability, current | 82 | 74 | ||||||
| Total current liabilities | 30,876 | 20,306 | ||||||
| Related party convertible notes payable, at fair value | - | 6,524 | ||||||
| Convertible notes payable | 180 | 200 | ||||||
| Warrant liability | 850 | 945 | ||||||
| Cumulative mandatorily redeemable common and preferred stock liability | 1,034 | 1,000 | ||||||
| Operating lease liability | 783 | 878 | ||||||
| Total liabilities | 33,723 | 29,853 | ||||||
| Commitments and contingencies (Note 16) | ||||||||
| Stockholders’ deficit: | ||||||||
| Convertible preferred stock ($0.00001 par value, 9,076,734 shares authorized as of September 30,2025 and December 31, 2024; 9,043,234 shares issued and outstanding as of September 30,2025 and December 31, 2024 | 7,865 | 7,865 | ||||||
| Common stock ($0.00001 par value, 24,200,000 shares authorized as of September 30,2025 and December 31, 2024; 12,729,805 and 11,716,680 shares issued, and 12,062,805 shares and 11,039,388 outstanding as of September 30,2025 and December 31, 2024, respectively) | 2 | 2 | ||||||
| Treasury stock, at cost (667,000 and 667,000 as of September 30,2025 and December 31, 2024, respectively) | (2,903 | ) | (2,903 | ) | ||||
| Additional paid in capital | 5,268 | 4,698 | ||||||
| Accumulated deficit | (39,430 | ) | (34,217 | ) | ||||
| Accumulated other comprehensive income | 258 | 250 | ||||||
| Total stockholders’ deficit | (28,940 | ) | (24,305 | ) | ||||
| Total liabilities and stockholders’ deficit | 4,783 | 5,548 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Fusemachines Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Operations and Comprehensive Loss
(all amounts in USD, in thousands, except number of shares and per share data)
| Nine months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Revenue | 5,779 | 6,641 | ||||||
| Cost of revenue | (2,488 | ) | (3,019 | ) | ||||
| Gross profit | 3,291 | 3,622 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | 934 | 1,550 | ||||||
| General and administrative | 5,131 | 8,170 | ||||||
| Research and development | 489 | 555 | ||||||
| Total operating expenses | 6,554 | 10,275 | ||||||
| Loss from operations | (3,263 | ) | (6,653 | ) | ||||
| Other (expense) income: | ||||||||
| Interest expense | (213 | ) | (161 | ) | ||||
| Loss on extinguishment of convertible notes payable / notes payable | (391 | ) | (549 | ) | ||||
| Loss on extinguishment of payable | - | (70 | ) | |||||
| Gain/(Loss) on change in fair value of convertible notes and warrant liability | (1,405 | ) | (4,337 | ) | ||||
| Other (expense) income | 59 | (91 | ) | |||||
| Total other (expense)/income, net | (1,950 | ) | (5,208 | ) | ||||
| Loss before income taxes | (5,213 | ) | (11,861 | ) | ||||
| Provision for income tax | - | (72 | ) | |||||
| Equity in earnings of investee, net of income tax provision of $0 and $0, respectively | - | (1 | ) | |||||
| Net loss | (5,213 | ) | (11,934 | ) | ||||
| Other comprehensive income (loss) | ||||||||
| Change in foreign currency translation adjustment | 8 | 50 | ||||||
| Total comprehensive loss | (5,205 | ) | (11,884 | ) | ||||
| Net loss per share - basic and diluted | (0.46 | ) | (1.14 | ) | ||||
| Weighted-average common shares outstanding - basic and diluted | 11,255,399 | 10,424,137 | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Fusemachines Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Stockholders’ Deficit
(all amounts in USD, in thousands, except number of shares and per share data)
Convertible preferred stock | Common stock | Treasury Stock | Additional paid-in | Accumulated | Accumulated other comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | income | deficit | |||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | 9,043,234 | $ | 7,865 | 11,039,388 | $ | 2 | 667,000 | (2,903 | ) | $ | 4,698 | $ | (34,217 | ) | $ | 250 | $ | (24,305 | ) | |||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | 176 | - | - | 176 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (5,213 | ) | - | (5,213 | ) | ||||||||||||||||||||||||||||
| Issuance of shares upon repayment and forgiveness of 2023 Promissory Notes | - | - | 10,292 | 0 | - | - | 3 | - | - | 3 | ||||||||||||||||||||||||||||||
| Issuance of common stock upon cashless exercise | - | - | 1,133,537 | 0 | - | - | 707 | - | 707 | |||||||||||||||||||||||||||||||
| Shares withheld related to cashless exercise | - | - | (120,412 | ) | (0 | ) | - | - | (707 | ) | - | (707 | ) | |||||||||||||||||||||||||||
| Loss from extinguishment of convertible notes payable | - | - | - | - | - | - | 391 | - | - | 391 | ||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | - | 8 | 8 | ||||||||||||||||||||||||||||||
| Balance at September 30, 2025 (unaudited) | 9,043,234 | $ | 7,865 | 12,062,805 | $ | 2 | 667,000 | $ | (2,903 | ) | $ | 5,268 | $ | (39,430 | ) | $ | 258 | $ | (28,940 | ) | ||||||||||||||||||||
Convertible preferred stock | Common stock | Treasury Stock | Additional paid-in | Accumulated | Accumulated other comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | income | Deficit | |||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 9,043,234 | $ | 7,865 | 9,220,534 | $ | 2 | - | - | $ | 2,307 | $ | (18,834 | ) | $ | 193 | $ | (8,467 | ) | ||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | 976 | - | - | 976 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (11,934 | ) | - | (11,934 | ) | ||||||||||||||||||||||||||||
| Common stock repurchase | - | - | (667,000 | ) | (0 | ) | 667,000 | (2,903 | ) | - | - | - | (2,903 | ) | ||||||||||||||||||||||||||
| Exercise of stock options | - | - | 26,146 | 0 | - | - | 12 | - | - | 12 | ||||||||||||||||||||||||||||||
| Gain on extinguishment recorded as a capital transaction | - | - | - | - | - | - | 343 | - | - | 343 | ||||||||||||||||||||||||||||||
| Issuance of shares upon repayment of 2023 Promissory Notes | - | - | 24,28,833 | 0 | - | - | 888 | - | - | 888 | ||||||||||||||||||||||||||||||
| Premium from extinguishment of payable | 70 | 70 | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | - | 49 | 49 | ||||||||||||||||||||||||||||||
| Balance at September 30, 2024 (unaudited) | 9,043,234 | $ | 7,865 | 1,10,08,513 | $ | 2 | 667,000 | $ | (2,903 | ) | $ | 4,596 | $ | (30,767 | ) | $ | 242 | $ | (20,965 | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Fusemachines Inc. and Subsidiaries
Condensed Consolidated Interim Statements of Cash Flows
(all amounts in USD, in thousands)
| Nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities | ||||||||
| Net loss | (5,213 | ) | (11,934 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | 73 | 84 | ||||||
| Amortization of intangible asset | 66 | 42 | ||||||
| Provision for credit losses | 46 | 455 | ||||||
| Stock-based compensation | 176 | 976 | ||||||
| Amortization of right-of-use assets | 65 | 88 | ||||||
| Changes in fair value of Convertible Notes at Fair Value | 1,500 | 3,806 | ||||||
| Change in fair value of common stock warrant liability | (95 | ) | 531 | |||||
| Accretion of cumulative mandatorily redeemable common and preferred stock liability | 71 | 57 | ||||||
| Equity method investment obtained in exchange for services | - | (104 | ) | |||||
| Equity in earnings of investee | - | 1 | ||||||
| Loss on extinguishment of convertible notes payable | 391 | 549 | ||||||
| Loss on extinguishment of payable | - | 70 | ||||||
| Unrealized Foreign exchange gain/(loss) | (7 | ) | 47 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, current, net | 87 | (1,298 | ) | |||||
| Unbilled revenue | 56 | (37 | ) | |||||
| Prepaid expenses and other current assets | (44 | ) | (33 | ) | ||||
| Accounts receivable, net | 4 | 12 | ||||||
| Other assets | (7 | ) | (59 | ) | ||||
| Accounts payable | 1,989 | 3,087 | ||||||
| Operating lease liabilities | (53 | ) | (71 | ) | ||||
| Accrued expenses and other current liabilities | 461 | 1,223 | ||||||
| Deferred revenue | (54 | ) | (2 | ) | ||||
| Net cash used in operating activities | (488 | ) | (2,510 | ) | ||||
| Cash flows from investing activities | ||||||||
| Costs capitalized for internally developed software | (72 | ) | (107 | ) | ||||
| Purchases of property and equipment | (8 | ) | (51 | ) | ||||
| Payment made to capital creditors | - | - | ||||||
| Disposal of property and equipment | - | 3 | ||||||
| Net cash used in investing activities | (80 | ) | (155 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from convertible notes payable | 180 | 455 | ||||||
| Proceeds from related party loan payable | - | 600 | ||||||
| Proceeds from convertible notes payable, at fair value | - | 6,500 | ||||||
| Payments on notes payable, net of penalty and lender fees | - | (3,000 | ) | |||||
| Payment of deferred transaction costs | (5 | ) | (2 | ) | ||||
| Common stock repurchase | - | (2,000 | ) | |||||
| Exercise of stock options | - | 12 | ||||||
| Net cash provided by financing activities | 175 | 2,565 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (1 | ) | - | |||||
| Net change in cash and cash equivalents | (394 | ) | (100 | ) | ||||
| Cash and cash equivalents at beginning of the period | 500 | 266 | ||||||
| Cash and cash equivalents at end of the period | 106 | 166 | ||||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | - | 25 | ||||||
| Cash paid for income taxes | 18 | 7 | ||||||
| Non-cash investing and financing activities: | ||||||||
| Waiver of deferred transaction costs as of the end of the period | 505 | - | ||||||
| Unpaid deferred transaction costs as of the end of the period | 507 | 1,177 | ||||||
| Common Stock issued upon cashless exercise of stock options | 707 | - | ||||||
| Purchase of property and equipment through capital advances | - | - | ||||||
| Issuance of shares vested upon repayment and forgiveness of 2023 Promissory Notes | 3 | 888 | ||||||
| Settlement of non-recourse 2023 promissory note in exchange for common stock repurchase consideration | - | 903 | ||||||
| (Loss) / Gain on extinguishment of debt (Refer Note no. 9 - Long Term Debt) | (391 | ) | - | |||||
| Investment in Equity securities | - | 104 | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Fusemachines Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements
Note 1. Organization
Fusemachines Inc. and its subsidiaries (“Fusemachines” or the “Company” or the “Parent”), listed under the Parent company below, is a Delaware corporation headquartered in the United States. Founded in 2013 and headquartered in New York with operations across North America, Latin America and Asia. Fusemachines, a privately-held company, is a provider of enterprise artificial intelligence (“AI”) Solutions (Products and Services). The Company accelerates its customers’ data to AI journey by offering a suite of AI services that addresses the strategic goals and vision of their enterprise. The Company operates under five legal entities and one branch (as noted below):
| ● | Fusemachines Inc. (Parent) | |
| ● | 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) | |
| ● | Fusemachines 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. (Refer to “Note 7 – Cumulative Mandatorily Redeemable Financial Instruments”).
Merger Agreement
In January 2024, CSLM, Merger Sub, and Fusemachines entered into the Merger Agreement, which was subsequently amended in August 2024 (the First Amendment to the Merger Agreement) and February 2025 (the Second Amendment to Merger Agreement), collectively referred to herein as the Merger Agreement. Pursuant to the terms of the Merger Agreement:
| ● | At least one business day prior to the Closing Date, CSLM will undergo the Domestication which involves CSLM merging with and into a newly formed Delaware corporation, CSLM Holdings, Inc or Pubco. Following this merger, CSLM will cease to exist and the newly formed Delaware corporation, Pubco, will be the surviving entity. | |
| ● | Merger Sub will merge with and into Fusemachines, the separate corporate existence of Merger Sub will cease to exist and Fusemachines will be the surviving company and a wholly owned subsidiary of Pubco. |
The business combination will be accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the United States (“GAAP”) and not as a business combination under ASC 805. Under this method of accounting, CSLM will be treated as the acquired company for accounting purposes, whereas Fusemachines Inc. will be treated as the accounting acquirer. Under the Merger Agreement, the Fusemachines equity holders that hold shares of company common stock, shares of convertible preferred stock, company stock options, or convertible notes will receive an aggregate of number of common stock equal to the quotient obtained by dividing (a) $200,000 thousand, by (b) $10.00 in exchange for all Fusemachines’ fully diluted company common stock. The Merger Agreement will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Delaware or upon certain conditions as specified in the articles of the merger.
In February 2025, CSLM entered into a second amendment to the Merger Agreement (the “2nd Amendment”) to (a) amend the definition of the “PIPE Investment Amount” to mean the sum of (i) $8,840,000, and (ii) the Contingent PIPE Investment Amount, if any; and (b) remove the delay fees incurred in connection with delivery of Fusemachines’ audited financial statements.
On October 22, 2025, the Company consummated the business combination whereby (a) CSLM merged with and into CSLM Holdings., 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” or “New Fusemachines”) 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 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 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 “Combined Company”) and Fusemachines was renamed “Fusemachines USA, Inc.” (the “Company”). These unaudited condensed financial statements do not reflect the impact of the de-SPAC Transaction, since it was executed after September 30, 2025.
Covenant Fees
Pursuant to the Merger Agreement, the Company was covenanted to deliver to CSLM its audited financial statements for the twelve month periods 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 nine months ended September 30, 2025 which have no impact in the unaudited condensed consolidated interim 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 unaudited condensed consolidated interim balance sheets.
Note 2. Summary of Significant Accounting Policies
There have been no significant changes to the accounting policies during the nine months period ended September 30, 2025, as compared to the significant accounting policies described in Note 2 of the Notes to Consolidated Financial Statements in the Company’s audited consolidated financial statements included in the registration statement Form S-4/A filed on April 23, 2025.
Basis of Presentation and Principles of Consolidation
The Company prepares its unaudited condensed consolidated interim 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 unaudited condensed consolidated interim 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 unaudited condensed consolidated interim financial statements are presented in United States Dollars (“USD”or $), which is the functional currency of the Parent Company.
Unaudited Interim Financial Information
In the opinion of the Company, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in stockholders’ deficit and cash flows. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet at December 31, 2024, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The accompanying unaudited condensed consolidated interim financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended December 31, 2024, which provides a more complete discussion of the Company’s accounting policies and certain other information. The interim results for the nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025, or for any future periods.
Prior Period Reclassifications and Restatement
Certain amounts in prior periods have been reclassified to conform with current period presentation.
The Company identified an immaterial prior period error in the Condensed Consolidated Interim Statements of Operations and Comprehensive Loss for nine month ended September 2024. The error relates to an administrative error in documenting the exercise price for certain stock option awards, which resulted in an incorrect stock-based compensation expense in the previously issued financial statements. The Company assessed the materiality of this change on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that this error corrections in its Consolidated Interim Statements of Operations and Comprehensive Loss is not material to previously presented consolidated financial statements. Accordingly, the Company updated the comparative financial information for the nine month ended September 2024.
The amounts in the “As previously reported” columns are amounts derived from the Company’s financial statements included in S-4 dated 27th November 2024. The amounts in the “Restatement adjustments” columns present the impact of the following adjustments:
The corrections in the Consolidated Interim Statements of Operations and Comprehensive Loss were as follows for the periods presented below (tables only present those line items which have been impacted):
| Nine months Ended September 30, 2024 | ||||||||||||
| Previously reported | Correction | As corrected | ||||||||||
| Cost of revenue | -3,029 | 10 | -3,019 | |||||||||
| Gross profit | 3,612 | 10 | 3,622 | |||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing | 1,576 | -26 | 1,550 | |||||||||
| General and administrative | 8,287 | -117 | 8,170 | |||||||||
| Research and development | 596 | -41 | 555 | |||||||||
| Total operating expenses | 10,459 | -184 | 10,275 | |||||||||
| Loss from operations | -6,847 | 194 | -6,653 | |||||||||
| Loss before income taxes | -12,055 | 194 | -11,861 | |||||||||
| Net loss | -12,128 | 194 | -11,934 | |||||||||
| Total comprehensive loss | -12,078 | 194 | -11,884 | |||||||||
| Net loss per share - basic and diluted | -1.16 | 0.02 | -1.14 | |||||||||
The corrections to the condensed Statements of Stockholders’ Deficit were as follows for the periods presented below (tables only present those line items which have been impacted):
| Total Stockholders’ Deficit | Total Stockholders’ Deficit | |||||||||||
| (As previously reported) | Correction | (As corrected) | ||||||||||
| Balance at December 31, 2023 | $ | (8,467 | ) | - | (8,467 | ) | ||||||
| Stock-based compensation | 1,170 | (194 | ) | 976 | ||||||||
| Net loss | (12,128 | ) | 194 | (11,934 | ) | |||||||
| Common stock repurchase | (2,903 | ) | - | (2,903 | ) | |||||||
| Exercise of stock options | 12 | - | 12 | |||||||||
| Gain on extinguishment recorded as a capital transaction | 343 | - | 343 | |||||||||
| Issuance of shares upon repayment of 2023 Promissory Notes | 888 | - | 888 | |||||||||
| Premium from extinguishment of payable | 70 | - | 70 | |||||||||
| Foreign currency translation | 49 | - | 49 | |||||||||
| Balance at September 30, 2024 (unaudited) | $ | (20,965 | ) | (20,965 | ) | |||||||
The corrections to the Statements of cash flow statement were as follows for the periods presented below (tables only present those line items which have been impacted):
Nine months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2024 | |||||||||||
| (As previously reported) | Correction | (As corrected) | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net loss | (12,128 | ) | 194 | (11,934 | ) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Stock-based compensation | 1170 | (194 | ) | 976 | ||||||||
| Net cash used in operating activities | (2,510 | ) | (2,510 | ) | ||||||||
| Net cash used in investing activities | (155 | ) | (155 | ) | ||||||||
| Net cash provided by financing activities | 2,565 | 2,565 | ||||||||||
Use of Estimates
The preparation of unaudited condensed consolidated interim 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 unaudited condensed consolidated interim 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, 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 unaudited condensed consolidated interim financial statements. Changes in facts and circumstances may cause the Company to revise its estimates.
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 unaudited condensed consolidated interim statements of operations and comprehensive loss.
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.
Fusemachines operates as one operating segment with a focus on data engineering, AI consulting, and technical services. The Company’s Chief Executive Officer (“CEO”), as the Company’s chief operating decision maker, manages and allocates resources to the operations of the Company on a consolidated basis. This enables the Company’s CEO to assess the overall level of available resources and determine how best to deploy these resources across service lines in line with the Company’s long-term company-wide strategic goals.
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 unaudited condensed consolidated interim balance sheet as “total assets” and its significant segment expenses and net loss are listed on the accompanying Unaudited Condensed Consolidated Interim 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 | ||||||||
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Nepal | $ | 219 | $ | 286 | ||||
| United States | 246 | 249 | ||||||
| Total long-lived assets | $ | 465 | $ | 535 | ||||
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 9 – 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 unaudited condensed consolidated interim 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.
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 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 overtime.
In addition to time-and-materials arrangements, the Company also enters into milestone-based or fixed-fee contracts. For these contracts, revenue is recognized over time using input method (e.g., labor hours incurred relative to total expected hours) that faithfully depicts performance. If a contract does not meet the criteria for over-time recognition, revenue is recognized at the point in time when control transfers to the customer. During the nine months ended September 30, 2025 and September 30, 2024, the revenues from milestone based or fixed fee contracts were insignificant.
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 nine months ended September 30, 2025 and September 30, 2024, the product revenues were insignificant.
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 unaudited condensed consolidated interim balance sheets.
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 unaudited condensed consolidated interim 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 unaudited condensed consolidated interim 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.
Because the Company is privately held and there is no public market for its Stock, the fair value of the Company’s equity is approved by the Company’s board of directors thereof as of the date stock-based awards are granted. 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 unaudited condensed consolidated interim balance sheets.
Advertising Cost
Advertising costs are expensed as incurred. Advertising costs were $29.1 thousand and $ 18.3 thousand for the nine months ended September 30, 2025, and 2024, respectively, which are included in selling and marketing costs on the unaudited condensed consolidated interim statements of operations and comprehensive loss.
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. As of September 30, 2025 and December 31, 2024, $1,871 thousand and $1,865 thousand of deferred transaction costs, respectively, were capitalized and recorded in deferred transaction costs on the unaudited condensed consolidated interim balance sheets. Transaction costs that are not eligible to be capitalized are expensed as incurred and included within general and administrative expense in the unaudited condensed consolidated interim statements of operations and comprehensive loss.
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 $489 thousand and $555 thousand for the period ended September 30, 2025, and 2024, respectively, which are included in the unaudited condensed consolidated interim statements of operations and comprehensive loss.
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.
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 unaudited condensed consolidated interim financial statements for pending litigation. Currently there are no pending or threatened litigation matters that management believes require accrual or disclosure in addition to those presented in the Note on Litigation (refer Note 16 – Commitments and Contingencies).
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 September 30, 2025 and December 31, 2024, the Company had four customers whose accounts receivable balance accounted for at least 10% of the Company’s consolidated accounts receivables, respectively. These customers accounted for approximately 57.9% and 61.6% of the Company’s receivables at the end of the respective periods. For the nine month ended September 30, 2025 and 2024, the Company had three and two customers whose revenue accounted for at least 10% of the Company’s consolidated revenue, respectively. These customers accounted for approximately 43.3 % and 21.6 % of the Company’s total revenue at the end of the respective periods.
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 September 30, 2025 and December 31, 2024, the Company had two and three suppliers whose account payable accounted for at least 10% of the Company’s consolidated account payables, respectively. These suppliers accounted for approximately 47.2% and 57.05% of the Company’s total payables at the end of the respective periods.
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.
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.
Going Concern
The Company’s unaudited condensed consolidated interim 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 September 30, 2025, the Company had cash of approximately $106.0 thousand. For the nine months ended September 30, 2025, the Company used approximately $488.0 thousand in cash for operating activities. Historically, the Company has incurred recurring net losses from operations and negative cash flows from operating activities. As of September 30, 2025, the Company had an accumulated deficit of approximately $39,430 thousand. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern within one year of the date these unaudited condensed consolidated interim 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, continuation is contingent on the Company’s ability to obtain necessary equity or February 24, 2025 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 Fusemachines, with Fusemachines continuing as the surviving company and becoming a wholly owned subsidiary of Pubco. In connection with the closing, approximately $14.0 million in cash was received for the issuance of shares of Fusemachines Pubco Common Stock. All convertible notes were settled through the issuance of Fusemachines Common Stock, 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 unaudited condensed consolidated interim 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 unaudited condensed consolidated interim 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 unaudited condensed consolidated interim 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.
Net Loss per Share
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 nine months ended September 30, 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 nine month period ended September 30, 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
Emerging Growth Company (EGC)
The Company is an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act, (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act and has elected to use the extended transition period for complying with new or revised accounting standards. As a result of this election, the Company’s unaudited condensed consolidated interim financial statements may not be comparable to companies that comply with public company Financial Accounting Standards Board (“FASB”) standards’ effective dates.
On October 22, 2025, the Company consummated its merger with CSLM Holdings, Inc., a publicly traded Special Purpose Acquisition Company (“SPAC”), pursuant to which the Company became a wholly owned subsidiary of CSLM Holdings, Inc. (renamed Fusemachines Inc.) and the transaction was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Transaction”). Refer to Note 1 – Organization for additional details regarding the Transaction. Following the completion of the Transaction, Fusemachines Inc. continues to qualify as an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act of 2012 and will retain such status until the earliest of: (i) the last day of the Company’s first fiscal year following the fifth anniversary of the completion of the SPAC’s initial public offering; (ii) the last day of the fiscal year in which the Company has total annual gross revenues of at least $1.07 billion; (iii) the last day of the fiscal year in which the Company becomes a large accelerated filer (market value of non-affiliate-held common stock exceeding $700 million as of the prior September 30); or (iv) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the preceding three-year period.
Recent Accounting Pronouncements
New Accounting Pronouncements Not Yet Adopted
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 unaudited condensed consolidated interim 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 unaudited condensed consolidated interim 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 unaudited condensed consolidated interim financial statements.
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. 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 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. 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 unaudited condensed consolidated interim 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.
Financial Instruments Not Recorded at Fair Value
The carrying values of the Company’s accounts receivable, unbilled revenue, prepaid expenses and other current assets, accounts payable, deferred transaction costs, accrued expenses and other current liabilities and cumulative mandatorily redeemable common and preferred stock liability approximate their fair values based on the instruments’ relative short-term nature.
As of September 30, 2025 and December 31, 2024, the estimated fair values of our convertible notes payable, current and related party loan payable, current approximated their carrying values due to their relatively short maturities.
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 September 30, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Related party convertible notes payable, at fair value | $ | - | $ | - | $ | 7,530 | $ | 7,530 | ||||||||
| Convertible Notes payable at Fair Value | - | - | 9,480 | 9,480 | ||||||||||||
| Warrant liability | - | - | 850 | 850 | ||||||||||||
| $ | - | $ | - | $ | 17,860 | $ | 17,860 | |||||||||
Fair Value Measurements at December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Related party convertible notes payable, at fair value | $ | - | $ | - | $ | 6,524 | $ | 6,524 | ||||||||
| Convertible Notes payable at Fair Value | - | - | 8,986 | 8,986 | ||||||||||||
| Warrant liability | - | - | 945 | 945 | ||||||||||||
| $ | - | $ | - | $ | 16,455 | $ | 16,455 | |||||||||
The following table shows the change in the fair value of the warrant liability (in thousands):
| Amount | ||||
| Balance as of December 31, 2023 | $ | 430 | ||
| Issuance of common stock warrants | - | |||
| Change in fair value of warrant liabilities | 531 | |||
| Balance as of September 30, 2024 | $ | 961 | ||
| Amount | ||||
| Balance as of December 31, 2024 | $ | 945 | ||
| Change in fair value of warrant liabilities | $ | (95 | ) | |
| Balance as of September 30, 2025 | $ | 850 | ||
The following table shows the change in the fair value of the Convertible Notes at Fair Value (in thousands):
| Related party convertible notes payable at fair value | January 2024 Convertible Notes | Total Convertible Notes at Fair Value | ||||||||||
| Balance as of December 31, 2023 | $ | 3,764 | $ | - | $ | 3,764 | ||||||
| Issuance of Convertible Notes at Fair Value | - | $ | 6,500 | $ | 6,500 | |||||||
| Gain on extinguishment of debt recorded as a capital transaction | (343 | ) | - | $ | (343 | ) | ||||||
| Change in fair value of Related Party note and Convertible Notes at Fair Value | 1,457 | 2,349 | $ | 3,806 | ||||||||
| Balance as of September 30, 2024 | $ | 4,878 | $ | 8,849 | $ | 13,727 | ||||||
| Balance as of December 31, 2024 | $ | 6,524 | $ | 8,986 | $ | 15,510 | ||||||
| Issuance of Convertible Notes at Fair Value | - | - | - | |||||||||
| Change in fair value of Related party note and Convertible Notes at Fair Value | 1,006 | 494 | 1,500 | |||||||||
| Balance as of September 30, 2025 | $ | 7,530 | $ | 9,480 | $ | 17,010 | ||||||
Common Stock Warrant Liability
The Company estimates the fair value of the common stock warrant liability (refer to “Note 9 – 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 September 30, 2025 was determined using the following assumptions: a dividend yield of 0.0%, a risk-free rate of 4.00%, a stock price of $6.41, a term of 7.90 years, and annualized volatility of 60.0%.The fair value of the warrant liability as of December 31, 2024 was determined using the following assumptions: a dividend yield of 0.0%, a risk-free rate of 4.5%, a stock price of $7.48, a term of 8.65 years, and annualized volatility of 65.0%.
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 – 9 – 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. Subsequent measurement of fair value of the Convertible Notes at Fair Value as of September 30, 2025, and 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.
The following tables set forth the significant inputs to the probability-weighted valuation model used to value the Convertible Notes at Fair Value as of September 30, 2025:
| 2019 and 2021 Convertible Notes | ||||||||||
| Type of Events | Expected Date | Probability of Event | Discount Rate | |||||||
| SPAC Transaction | 10/22/2025 | 95 | % | 57 | % | |||||
| Maturity | 2/28/2026 | 5 | % | 57 | % | |||||
| Default Feature | N/A | N/A | N/A | |||||||
| January 2024 Convertible Notes | ||||||||||
| Type of Events | Expected Date | Probability of Event | Discount Rate | |||||||
| SPAC Transaction | 10/22/2025 | 95 | % | 48 | % | |||||
| Maturity | 02/28/2026 | 5 | % | 48 | % | |||||
| Default Feature | N/A | N/A | N/A | |||||||
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 | 4/3/2025 | 75 | % | 54 | % | |||||
| Maturity | 2/28/2026 | 10 | % | 54 | % | |||||
| Default Feature | N/A | 15 | % | 54 | % | |||||
| January 2024 Convertible Notes | ||||||||||
| Type of Events | Expected Date | Probability of Event | Discount Rate | |||||||
| SPAC Transaction | 4/3/2025 | 75 | % | 45 | % | |||||
| Maturity | 7/12/2025 | 10 | % | 45 | % | |||||
| Default Feature | 7/12/2025 | 15 | % | 45 | % | |||||
As of September 30, 2025 and December 31, 2024, there were no transfers between Level 1, Level 2 and Level 3.
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.
Note 4. Accounts Receivable, net
Accounts receivable, net consisted of the following (in thousands):
September 30, 2025 | December 31, 2024 | |||||||
| Accounts receivable, current | $ | 1,383 | $ | 2,015 | ||||
| Accounts receivable | - | 4 | ||||||
| Total accounts receivable | $ | 1,383 | $ | 2,019 | ||||
| Less: Allowance for credit losses | $ | (146 | ) | $ | (588 | ) | ||
| Total accounts receivable, net | $ | 1,237 | $ | 1,431 | ||||
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 Nil, and the face value is Nil as of September 30, 2025. The present value of long-term receivables was $4 thousand, and the face value was $5 thousand as of December 31, 2024.
The following table sets forth the activity in the Company’s allowance for credit losses (in thousands):
September 30, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | 588 | $ | 368 | ||||
| Provision for credit losses | 46 | 540 | ||||||
| Write-offs | (488 | ) | (320 | ) | ||||
| Ending balance | $ | 146 | $ | 588 | ||||
Unbilled revenue as at period ended September 30, 2025 was $47.0 thousand and $113.0 thousand as at year ended December 31, 2024.
Note 5. Property and equipment, net
Property and equipment, net consisted of the following (in thousands):
September 30, 2025 | December 31, 2024 | |||||||
| Computers and other hardware | $ | 499 | $ | 504 | ||||
| Office, furniture, and equipment | 162 | 167 | ||||||
| Leasehold improvements | 91 | 94 | ||||||
| Vehicles and other fixed assets (excluding computers) | 32 | 35 | ||||||
| 784 | 800 | |||||||
| Less: accumulated depreciation | (510 | ) | (452 | ) | ||||
| Total property and equipment, net | $ | 274 | $ | 348 | ||||
The Company recognized depreciation expense related to property and equipment in the unaudited condensed consolidated interim statements of operations and comprehensive loss of $73.0 thousand and $84.0 thousand during the nine month ended September 30, 2025 and 2024, respectively.
Note 6. Intangible Assets, net
Intangible assets subject to amortization consisted of the following (in thousands):
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Internally developed capitalized software | $ | 345 | $ | 274 | ||||
| Less: accumulated amortization | (153 | ) | (87 | ) | ||||
| Total intangible assets, net | $ | 192 | $ | 187 | ||||
The Company recognized amortization expense related to capitalized software in the unaudited condensed consolidated interim statements of operations and comprehensive loss of $66.4 thousand and $42.4 thousand during the nine month ended September 30, 2025, and 2024, respectively.
Note 7. 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 $964.2 thousand in Fusemachines Nepal Private Ltd. Fusemachines Nepal Private Ltd issued 39,750 Ordinary Shares with a par value of 100 Nepalese rupees and also issued 1,110,250 cumulative and compulsory redeemable Preference Shares with a par value of 100 Nepalese rupees. The Preference Shares contain an annual coupon rate of 10% 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 200% 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 unaudited condensed consolidated Interim balance sheets, and accretions to the redemption value are recorded within interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss. The effective interest rate is 13.7%, the accrued dividend was $288.2 thousand and $238.3 thousand at September 30, 2025 and December 31, 2024, respectively, and is recorded in accrued expenses and other current liabilities in the unaudited condensed consolidated interim balance sheets, and the issuance cost incurred was $13.7 thousand.
The outstanding balance of the Cumulative Mandatorily Redeemable Financial instruments were $1,034 thousand and $1,000 thousand for the period ended September 30, 2025 and December 31, 2024 respectively.
The following summarizes the key terms and provisions of the Preference Shares and Ordinary Shares:
Preference Shares
Rights and privileges – Preference Shares will be paid dividends before the Ordinary Shares. Preference shareholders will receive a 10% percent annual dividend on Preference Shares. Apart from this, Preference Shares will not receive any kind of dividend or profit. If the Company fails to make a profit in any year or if the Company decides not to distribute dividends, then the dividends to be received by the Preference Shares will be cumulated and those amounts must be returned to the preference shareholders in a lump sum in the year when the dividends are distributed or when the Company withdraws the Preference Shares. Preference Shares will be given priority when the amount of shares is returned in case of liquidation of the Company. Preference Shares will not have voting rights in the general meeting of the Company. The preference share amount is redeemable after a certain period.
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.
Note 8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
September 30, 2025 | December 31, 2024 | |||||||
| Wages and consultant costs payable | $ | 3,214 | $ | 2,525 | ||||
| Covenant fees | - | 435 | ||||||
| Dividends payable (Note 7) | 288 | 238 | ||||||
| Legal expenses | 91 | 141 | ||||||
| Deposit liability for early exercised options | - | 3 | ||||||
| Accrued expenses | 519 | 358 | ||||||
| Total accrued expenses and other current liabilities | $ | 4,112 | $ | 3,700 | ||||
Note 9. Long-Term Debt
Long-term debt consists of the following (in thousands):
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Current | Noncurrent | Total | Current | Noncurrent | Total | |||||||||||||||||||
| 2024 Convertible Notes | $ | 455 | - | $ | 455 | $ | 255 | $ | 200 | 455 | ||||||||||||||
| 2024 Convertible Notes at fair value | 9,480 | - | 9,480 | 8,986 | - | 8,986 | ||||||||||||||||||
| Related party convertible notes payable at fair value | 7,530 | - | 7,530 | - | 6,524 | 6,524 | ||||||||||||||||||
| Related party loan payable | 700 | - | 700 | 700 | - | 700 | ||||||||||||||||||
| February 2025 Convertible Notes | - | 180 | 180 | - | - | - | ||||||||||||||||||
| Total | $ | 18,165 | $ | 180 | $ | 18,345 | $ | 9,941 | $ | 6,724 | $ | 16,665 | ||||||||||||
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 $2,000.0 thousand (the “2019 Convertible Note”). The 2019 Convertible Note bears interest at a rate of 10% per annum, compounded quarterly. The 2019 Convertible Note matured in September 2022.
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 $450.0 thousand (the “2021 Convertible Note”) (the 2019 Convertible Note and the 2021 Convertible Note collectively, the “2019 and 2021 Convertible Notes”). The 2021 Convertible Note was issued with the same terms as the 2019 Convertible Note, except with a maturity date of October 2022.
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 15% for the period from December 2022 through December 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 $7,500.0 thousand (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 $386.4 thousand due no later than March 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 $386.4 thousand.
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 $343.0 thousand recorded in additional paid in capital in the unaudited condensed consolidated interim balance sheet as of the nine month ended September 30, 2024, with any change in subsequent fair value incorporated into future valuations and any amendment fees or third-party costs to be expensed at the time of the amendment, and the amended terms to be incorporated into the valuations at each subsequent balance sheet date.
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 $85,000,000, 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.
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.
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) $2.235 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 $300.0 thousand to $4,000.0 thousand and the corresponding SPAC PIPE Financing amount ranges from $15,000.0 thousand to $40,000.0 thousand.
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 $115,000.0 thousand, on a fully-diluted basis.
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 charge of $1,006.0 thousand $1,457.0 thousand related to changes in fair value for both the 2019 Convertible Note and 2021 Convertible Note, which is recorded as Gain/(loss) on change in fair value in the unaudited condensed consolidated interim statements of operations and comprehensive loss, for the nine month ended September 30, 2025 and 2024, respectively.
As of September 30, 2025, and 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 18 - 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 $2,000.0 thousand (“January 2024 Convertible Note A”) and $4,500.0 thousand (“January 2024 Convertible Note B”), respectively, that each bear interest at a rate of 4.863% per annum, 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.
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 $5,000.0 thousand (the “January 2024 Notes Qualifying Financing”), it will let the holder know at least 10 days before this funding round is set to happen. The holder then has the option to turn any outstanding obligations from the January 2024 Convertible Notes into shares of preferred stock when the funding round closes, based on all of the outstanding obligations under the January 2024 Convertible Notes (the “Conversion Amount”), divided by a specific price calculated as the lower of two figures: (i) either the maximum share price (the share price cap as discussed below) or (ii) 80% of the price at which other investors are buying the preferred stock in the funding round (the “Conversion Price”). However, if this funding round also counts as a company sell-off or shutdown the holder can choose the optional conversion upon a liquidation event (as described in the “optional conversion upon a liquidation event” section below).
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 667,000 shares of common stock held by Sameer Maskey, CEO of the Company. The share price cap is $3.00 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 $1,000.0 thousand as defined in the January 2024 Notes Agreement). The proceeds received under the January 2024 Convertible Note B are to be used to repay third-party debt of the Company and for working capital purposes. The share price cap is $5.798.
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 3,600,000 shares of common stock held by Sameer Maskey, the CEO of the Company (refer to “Note 18 – 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 charge of $494.0 thousand and $2,349.0 thousand related to changes in fair value for the January 2024 Convertible Notes, which is recorded as Gain/(loss) on change in fair value in the unaudited condensed consolidated interim statements of operations and comprehensive loss, for the nine months ended September 30, 2025 and September 30, 2024 respectively.
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.
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 $4,000.0 thousand in three separate tranches. In that month, the Company withdrew $3,000.0 thousand (the “First Tranche”). The Company additionally had the opportunity to request, subject to the terms of the 2023 Notes Agreement, an additional tranche of $500.0 thousand in or before March 2024 (the “Second Tranche”) and a third tranche of $500.0 thousand in or before June 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 effective interest rate was 23%. The 2023 Notes were secured by substantially all of the Company’s assets.
In January 2024, the Company repaid the entire aggregate outstanding principal on the 2023 Notes Payable in the amount of $3,000.0 thousand along with an additional payment of $78.5 thousand for interest, prepayment fees, and lender fees. The Company recorded a loss of $601.1 thousand on extinguishment of debt, in the unaudited condensed consolidated interim statements of operations and comprehensive loss for the nine months ended September 30, 2024.
Common Stock Warrants—In connection with the 2023 Notes Agreement, the Company issued to the lender common stock warrants (the “Common Stock Warrants”) to purchase up to 140,133 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. The Company determined that the Common Stock Warrants are freestanding financial instruments and were determined to be within the scope of ASC 480-10, and accordingly, are liability classified. As of nine month ended September 30, 2025 and December 31, 2024, the fair value and carrying amount of the Common Stock Warrant Liability was $850.0 thousand and $945.0 thousand, respectively (refer to “Note 3 - Fair Value Measurements”).
The Company recorded a gain of $95.0 thousand and a charge of $531.0 thousand related to changes in fair value, which is recorded as loss on change in fair value in the unaudited condensed consolidated interim statements of operations and comprehensive loss, for the nine month ended September 30, 2025 and 2024, respectively.
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 $125.0 thousand, that bears interest at a rate of 4.71% per annum and is convertible to common stock (the “April 2024 Convertible Note”). The April 2024 Convertible Promissory Note matures in April 2025.
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 $4.94.
Warrant issuance – Upon the conversion of the April 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.
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 $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 unaudited condensed consolidated interim statement of profit and loss for the nine months ended September 30, 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
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 $130.0 thousand, that bears interest at a rate of 4.71% per annum and is convertible to common stock (the “June 2024 Convertible Note”). The June 2024 Convertible Promissory Note matures in June 2025.
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 $4.94.
Warrant issuance – Upon the conversion of the June 2024 Convertible Note to common stock of CSLM, the Company shall issue the holder a warrant to purchase 7,500 shares of cm ki9oommon stock of CSLM with a per share exercise price of $11.50.
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 $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 will be recorded as loss on extinguishment of debt in additional paid-in-capital with a corresponding debit in the unaudited condensed consolidated interim statement of profit and loss for the nine months ended September 30, 2025.
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 June 17, 2026, pursuant to the 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.
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 $100.0 thousand (the “September 2024 Convertible Notes”). The September 2024 Convertible Notes bear interest at a rate of 4.71% per annum. The 2024 September Convertible Notes mature in September 2026.
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 Merger 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 $4.94.
Warrant issuance – Upon the conversion of the September 2024 Convertible Notes to common stock, the Company shall issue the holders each a warrant to purchase 7,500 shares of common stock of CSLM with a per share exercise price of $11.50.
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 $ 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 will be recorded as loss on extinguishment of debt in additional paid-in-capital with a corresponding debit in the unaudited condensed consolidated interim statement of Operations and Comprehensive Loss for the nine months ended September 30, 2025.
February 2025 Convertible Notes
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 agreement, 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.
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 Merger 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 $3.15.
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 $700.0 thousand (the “2024 Related Party Promissory Notes”). The 2024 Related Party Promissory Notes bear interest at a rate of 4.71% per annum and mature in December 2025. Upon an event of default, the 2024 Related Party Promissory Notes shall become junior and subordinate to the January 2024 Convertible Notes (also see “Note 18 - Related Parties”), and any amounts owed will bear interest at 10% per annum until the obligations are satisfied in full. The 2024 Related Party Promissory Notes have customary events of default. As of September 30, 2025, the balance of the 2024 Related Party Promissory notes of $700.0 thousand, is included in related party loan payable - current in the unaudited condensed consolidated interim balance sheets and is being accounted for at amortized cost.
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 unaudited condensed consolidated statements of operations and comprehensive loss, for the nine months ended September 30, 2025.
Subsequent to September 30, 2025, Fusemachines 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. The terms of the merger are disclosed as a part of Note on Subsequent Events (Refer Note no. 20 Subsequent Events).
Others- February 2025 Convertible Notes
In connection with the second amendment to the Merger Agreement, Consilium Frontier Equity Fund, LP 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 to the Pubco all of the Funds in the Escrow Account.” Accordingly, the escrowed funds are not freely available to the Pubco 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.
Since the release of proceeds is contingent upon the occurrence of the Business Combination, an event not wholly within the control of the Company, the same has not been recognized in the unaudited condensed consolidated financial statements as of September 30, 2025.
Subsequent to September 30, 2025, Fusemachines received funds from a convertible note with an affiliate of the Sponsor in the principal amount of $2,160,000.
Subsequent Conversion
On October 22, 2025, Merger Sub merged with and into Fusemachines, the separate corporate existence of Merger Sub ceased to exist and Fusemachines was the surviving company and a wholly owned subsidiary of Pubco Following the completion of the business combination, all convertible notes (related parties and other convertible notes) were converted into equity of the public company. The terms of the merger are disclosed as a part of Note - 20 Subsequent Events.
Note 10 - 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 9,038,725 to 9,076,734 (including 5,441 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”).
The authorized, issued and outstanding shares of the Convertible Preferred Stock, liquidation preferences and carrying values as of September 30, 2025 and December 31, 2024 were as follows (in thousands, except share numbers):
| As of September 30, 2025 and December 31, 2024 | ||||||||||||||||
| Series | Authorized Shares | Issued and Outstanding Shares | Liquidation Preferences | Carrying Value | ||||||||||||
| Seed-1 | 2,018,725 | 2,013,724 | $ | 1,350 | $ | 1,323 | ||||||||||
| Seed-2 | 1,402,568 | 1,402,606 | $ | 940 | 940 | |||||||||||
| Seed-3 | 2,700,000 | 2,681,851 | $ | 2,515 | 2,515 | |||||||||||
| Seed-4 | 2,950,000 | 2,945,053 | $ | 3,100 | 3,087 | |||||||||||
| Total | 9,071,293 | 9,043,234 | $ | 7,865 | ||||||||||||
Rights, preferences and privileges of the Convertible Preferred Stock
The rights, preferences and privileges of the Convertible Preferred Stock were as follows:
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) $1.0553 per share (as adjusted for stock splits, combinations, and reorganizations) plus declared and unpaid dividends, if any, or (b) such amount per share as would have been payable had all shares of series seed-4 Convertible Preferred Stock had been converted to common stock immediately prior to such liquidation, dissolution or winding up or deemed liquidation event. Given that deemed liquidation event is within the control of the common stockholders, the Convertible Preferred Stock is recognized as permanent equity within the unaudited condensed consolidated interim statements of stockholders’ deficit.
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, $0.9379, $0.6704, and $0.6704, respectively, per share plus declared and unpaid dividends, if any. After the payment of all preferential amounts required to be paid to the holders of series seed-4 Convertible Preferred Stock, then the holders of series seed 3, 2 and 1 Convertible Preferred Stock, shall be entitled to be paid out of the assets of the Company. After distributing to all preferred stockholders, the remaining assets of the Company will be distributed ratably to the holders of the common stock on a pro rata basis.
Note 11. Stockholders’ Deficit
Common Stock
In connection with the Restated Certificate, the number of shares of common stock that the Company is authorized to issue is 24,200,000 as of September 30, 2025 and December 31, 2024.
The Company’s reserved shares of common stock for future issuance related to potential conversion of the Convertible Preferred Stock, exercise of Common Stock Warrants and exercise of stock options are as follows:
As of 2025 | As of December 31, 2024 | |||||||
| Convertible preferred stock (as converted to common stock) | 9,043,234 | 9,043,234 | ||||||
| Common stock warrants | 140,133 | 140,133 | ||||||
| Common Stock Contingent Obligation | 45,000 | 45,000 | ||||||
| Stock options | 1,053,849 | 2,583,577 | (1) | |||||
| 10,282,216 | 11,811,944 | |||||||
(1) Includes 10,292 stock options as of December 31, 2024 that were legally exercised prior to meeting the service base vesting requirements in exchange for nonrecourse promissory notes (Refer to “The Promissory Notes Transactions” in “Note 13 – Stock-based Compensation”).
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 9,076,734. (Refer to “Note 10 – Convertible Preferred Stock”).
Warrants
As of September 30, 2025 and December 31, 2024, the Company had Common Stock Warrants outstanding to purchase up to 140,133 shares of the Company’s common stock at an exercise price of $0.46 per share and have a contractual term of 10 years. The Common Stock Warrants were issued in August 2023. (Refer to “Note 3 - Fair Value Measurements” and “Note 9 - Long-term Debt”).
Common Stock Contingent Obligation
As of September 30, 2025, the Company had a contingent obligation to issue 45,000 shares of common stock upon closing of the Merger to a certain vendor (also see “Note 16 – Commitments and Contingencies”).
Note 12. 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).
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Customer locations | ||||||||
| United States | $ | 5,464 | $ | 6,458 | ||||
| Rest of the world | 315 | 183 | ||||||
| Total revenue | $ | 5,779 | $ | 6,641 | ||||
The table below presents the breakdown of the Company’s revenues, based on the customer’s service type (in thousands):
| Nine month ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Service type | ||||||||
| AI Solutions (Products and Services) | $ | 5,656 | $ | 6,641 | ||||
| AI education services | $ | 123 | - | |||||
| Total revenue | $ | 5,779 | $ | 6,641 | ||||
Service Type
During the nine months ended September 30, 2025, and 2024, the Company had one significant service type, AI Solutions (products and services). For the nine months ended September 30, 2025, and 2024, there was $5,656 thousand and $6,641 thousand of AI Solutions (products and services) revenue. The company had insignificant revenue from AI Solutions – Products for the nine months ended September 30, 2025, and 2024, respectively. The revenue recognised for AI education services was $123 thousand and Nil during the nine months ended September 30, 2025, and 2024, respectively.
Deferred Revenue
During the nine months ended September 30, 2025, the Company recognized revenue of $53.7 thousand from the deferred revenue balance as of December 31, 2024. During the nine months ended September 30, 2024, the Company recognized revenue of $20.6 thousand from the deferred revenue balance as of December 31, 2023.
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 unaudited condensed consolidated interim balance sheets included capitalized balances in the amount of $20.9 thousand and $21.9 thousand as of September 30, 2025 and December 31, 2024 which represents the current portion and is included within prepaid expenses and other current assets, respectively and Nil and $5 thousand, as of September 30, 2025 and December 31, 2024, respectively, which are included within other assets. Capitalized commission fees are amortized on a straight-line basis over the average period of service contracts of approximately two years and are included in selling and marketing in the accompanying unaudited condensed consolidated interim statements of operations and comprehensive loss. Amortization recognized during the nine months ended September 30, 2025, and 2024 was $22.82 and $27.4 thousand, respectively.
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 asset | Deferred revenue | Unbilled Revenue | ||||||||||
| Ending balance as of December 31, 2023 | $ | 22 | $ | 21 | $ | 80 | ||||||
| Increase/(decrease), net | 5 | 33 | 33 | |||||||||
| Ending balance as of December 31, 2024 | 27 | 54 | 113 | |||||||||
| Increase/(decrease), net | (6 | ) | (54 | ) | (66 | ) | ||||||
| Ending balance as of September 30, 2025 | $ | 21 | - | $ | 47 | |||||||
Note 13. Stock-based Compensation
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. 4,951,530 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 595,000 to 5,546,530 shares of common stock.
As of September 30, 2025, 1,498,650 shares of Common Stock were available for future grant under the 2023 Plan. Shares that are expired, terminated, surrendered, or cancelled without having been fully exercised or issued will be available for future awards. The Company may use either authorized and unissued shares or treasury shares, when available, to meet share requirements resulting from the exercise of stock options.
The stock-based compensation expense during the nine month ended September 30, 2025, and 2024 are reported in the following unaudited condensed consolidated interim financial statement line items (in thousands):
| Nine month ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| General and administrative | $ | 117 | $ | 662 | ||||
| Cost of revenue | 16 | 38 | ||||||
| Selling and marketing | 28 | 160 | ||||||
| Research and development | 15 | 116 | ||||||
| Total stock-based compensation expense | $ | 176 | $ | 976 | ||||
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.
The following table summarizes the stock option activity for options with service-based vesting conditions during the nine month ended September 30, 2025:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (In thousands) | |||||||||||||
| Outstanding balance as of December 31, 2024 | 2,583,577 | $ | 1.24 | 6.50 | $ | 11,885 | ||||||||||
| Granted | - | - | - | - | ||||||||||||
| Exercised | (10,292 | ) | $ | 0.46 | - | - | ||||||||||
| Cashless exercise (1) | (1,133,537 | ) | $ | 0.62 | - | - | ||||||||||
| Forfeited | (21,840 | ) | $ | 3.48 | - | - | ||||||||||
| Expired | (364,059 | ) | $ | 0.38 | - | - | ||||||||||
| Outstanding balance as of September 30, 2025 | 1,053,849 | $ | 2.16 | 7.14 | $ | 3,940 | ||||||||||
| Options vested and exercisable as of September 30, 2025 | 773,769 | $ | 1.93 | 6.74 | 3,074 | |||||||||||
| (1) | During the period ended 30th September 2025, certain employees have exercised 1,133,537 options through cashless exercise |
During the nine month ended September 30, 2025 and 2024, the Company recorded stock-based compensation expense of $176.0 thousand and $976.0 thousand, respectively. As of September 30, 2025, total stock-based compensation expense not yet recognized related to unvested stock options was $493.0 thousand, which is expected to be recognized over a weighted-average period of 2.16 years
The total intrinsic value of options exercised was $6,036.4 thousand and $10,674.5 thousand during the nine month ended September 30, 2025 and year ended December 31, 2024, respectively.
The weighted average grant-date fair value per share of stock options granted during the nine month period September 30, 2025 and 2024 was Nil and $2.80, 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:
| September 30, | ||||||||
| 2025(1) | 2024 | |||||||
| Weighted average expected term (years) | - | 5.79 | ||||||
| Weighted average expected volatility | - | 66.90 | % | |||||
| Risk-free interest rate | - | 4.08% - 4.10 | % | |||||
| Dividend yield | - | 0 | % | |||||
| (1) | There were no stock options granted during the nine months ended September 30, 2025. |
Cashless Exercise of Stock Options
In August 2025, certain Fusemachines employees exercised 1,133,537 options to purchase Fusemachines common stock. The exercise prices for the 1,133,537 options were paid on a cashless basis via net share settlement resulting in the net share issuance of 1,013,125 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.
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 2,470,000 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 3.82% interest bearing non-recourse note (the “2023 Promissory Notes”), for an aggregate principle of $1,136.2 thousand. The notes are scheduled to mature in February 2030.
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’s unaudited condensed consolidated interim 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 Nil and $9.2 thousand for the nine month ended September 30, 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 $0.58 per share, (ii) an exercise price of $0.46 per share, (iii) an estimated risk-free interest rate of 4.02%, (iv) an expected term of 3.50 years, (v) volatility of 75%, and (vi) a dividend yield of 0%. These assumptions resulted in a grant-date fair value of approximately $0.35 per option.
The Company continues to recognize expenses for the original option award of 2,470,000 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 September 30, 2025 and 2024, the Company recognized Nil and $31 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 Nil. The weighted-average grant-date fair value per share of the February Option Awards was $0.33.
Repayment of the Promissory Notes
In January 2024, the Company repurchased 667,000 shares of common stock from Sameer Maskey, the CEO, at a price of $4.352 per share, totaling $2,902.7 thousand (the “Repurchase Consideration”). Mr. Maskey applied $902.7 thousand of the Repurchase Consideration toward repayment of his 2023 Promissory Note to the Company. Upon repayment, the 2023 Promissory Note, along with any accrued interest, was settled, and the vested shares pledged under the 2023 Promissory Notes are now considered exercised. As of the September 30, 2025, there were no shares which were subject to vesting.
Note 14. Net Loss Per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands except for share and per share amounts):
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Numerator: | ||||||||
| Net loss | $ | (5,213 | ) | $ | (11,934 | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding - basic and diluted | 11,255,399 | 10,424,137 | ||||||
| Net loss per share attributable to Fusemachines Inc. common stockholders - basic and diluted | $ | (0.46 | ) | $ | (1.14 | ) | ||
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:
| September 30, | December 31, | |||||||
| 2025 (I) | 2024 | |||||||
| Convertible Preferred Stock (as converted to common stock) | 9,043,234 | 9,043,234 | ||||||
| Common Stock Warrants | 140,133 | 140,133 | ||||||
| Stock options | 1,053,849 | 2,583,577 | (1) | |||||
| 10,237,216 | 11,766,944 | |||||||
| (1) | Includes 10,292 stock options as of December 31, 2024 that were early exercised in exchange for non-recourse promissory notes. (Refer to “Note 13 – Stock-based Compensation”). |
The Convertible Notes were also outstanding as of September 30, 2025 and 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 September 30, 2025 and 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 9 - Long-term Debt”)
The Company has also entered into a contingent obligation to issue 45,000 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 16 - Commitments 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 September 30, 2025, and 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.
Note 15. Income Taxes
For the nine months ended September 30, 2025, and September 30, 2024, the Company recorded income tax expense (benefit) of Nil and $ 71.5 thousand, respectively, primarily related to the corporate income tax obligations of our foreign operations.
The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which primarily consist of capitalized R&D expenses and net operating loss carry forwards. The Company has considered its history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As a result, as of December 31, 2024 and September 30, 2025, the Company has maintained a full valuation allowance against its net deferred tax assets.
Note 16. Commitments 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 $10.0 thousand per month as well as a commission fee as defined in the agreement.
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 $408.9 thousand owed to the vendor for services provided. The Second Agreement stipulates that in full and final satisfaction of this balance, the Company will: (i) issue 45,000 shares of its common stock to the vendor immediately prior to and contingent upon the consummation of the Merger (see “Note 1 – Organization”), and (ii) pay $208.9 thousand in cash to the vendor within ten days after the closing of the Merger. If the Merger does not close the $408.9 thousand will be payable to the vendor in cash.
The Company evaluated the feature in the Second Agreement whereby the closing of the Merger triggers the obligation to issue 45,000 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 $478.6 thousand, and the net carrying amount of the initial obligation was $408.9 thousand, which resulted in a loss on extinguishment of $69.7 thousand, which is recorded in loss on extinguishment of payable in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2024. In accordance with ASC 470-20-25-13, the offset to the loss on extinguishment of $69.7 thousand was recorded as an increase to additional paid-in capital as the premium associated with the new obligations issued under the Second Agreement was determined to be substantial. The $408.9 thousand obligation incurred under the initial consulting agreement, which is described in the Second Agreement, is recorded in accounts payable in the unaudited condensed consolidated interim balance sheet as of September 30, 2025 and December 31, 2024.
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.
Subsequent to September 30, 2025, and upon the closing of the business combination, the Company settled its obligation through the issuance of 29,610 Fuse machines, Pubco Common Stock shares (reflecting the 0.6580 Conversion Ratio applied to 45,000 Company shares) and a cash payment of $0.2 million.
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 September 30, 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
Fusemachines Inc. received a legal notice dated March 27, 2025, requiring payment of $76.3 thousand to a vendor under a Work Labor & Services agreement due to alleged non-fulfilment of payment obligations. Based on its assessment of the services received and contractual terms, management believes that the amount payable is $41.3 thousand, which has been recognized in its unaudited condensed consolidated interim balance sheet as of September 30, 2025, and intends to contest the remaining portion of the claim. 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 the aggregate materially affect its results of operations, financial condition, or cash flows.
Lease obligations
Refer to “Note 17 – Leases” for a description of the Company’s lease obligations as of September 30, 2025 and December 31, 2024.
Note 17. Leases
The Company has operating leases for office space. These leases have expected remaining lease terms ranging from less than one year to 7 years. The Company currently has two leases with an initial term of 12 months or less that are accounted for as short-term leases. The Company does not separate lease and fixed non-lease components of lease contracts. The Company’s lease terms may include options to extend or terminate the lease. These options are included in the lease term only when it is reasonably certain that the Company will elect the option.
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 no sublease rental income for the nine months ended September 30, 2025 and 2024, and the Company is not the lessor in any lease arrangement. There were no related party lease arrangements during the nine months ended September 30, 2025, and 2024.
The table below presents certain information related to the Company’s lease costs for the period ended (in thousands):
| For the Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease expense | 128 | 160 | ||||||
| Short-term lease cost | 73 | 79 | ||||||
| Variable lease cost | 14 | 21 | ||||||
| Total lease cost | 215 | 260 | ||||||
Lease Position
Operating lease right-of-use assets and operating lease liabilities were recorded in the unaudited condensed consolidated interim balance sheets as follows (in thousands):
September 30, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Operating lease right-of-use assets | $ | 775 | $ | 870 | ||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Operating lease liability, current | 82 | 74 | ||||||
| Noncurrent liabilities: | ||||||||
| Operating lease liability | 783 | 878 | ||||||
| Total operating lease liability | $ | 865 | $ | 952 | ||||
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:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Weighted average remaining lease term (in years) - operating leases | 6.42 | 7.17 | ||||||
| Weighted average discount rate - operating leases | 9.25 | % | 9.25 | % | ||||
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 nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Amortization of right-of-use assets | 65 | 88 | ||||||
| Change in operating lease liability | (53 | ) | (71 | ) | ||||
| Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets | - | - | ||||||
Future minimum lease payments required under operating leases are as follows (in thousands):
| Period ended September 30, | Future Minimum Rents | |||
| 2025 (remaining) | 39 | |||
| 2026 | 161 | |||
| 2027 | 169 | |||
| 2028 | 177 | |||
| 2029 | 187 | |||
| 2030 and thereafter | 435 | |||
| Total minimum lease payments | 1,168 | |||
| Less: effects of discounting | (303 | ) | ||
| Present value of future minimum lease payments | 865 | |||
Note 18. Related Parties
Related Party Convertible Notes
In October 2019 and September 2021, the Company 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 the Company. 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, recorded in “Related party convertible notes payable, at fair value” in the unaudited condensed consolidated interim balance sheet. Refer to “Note 9 – Long-Term Debt” “Convertible Notes at Fair Value” section.
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 (“Mr. Maskey”) the Company’s CEO (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, the Company could opt to refund Mrs. Maskey prior to the Completion Date without having to issue the January 2021 Subscription Shares. In 2021, the Company 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. (Refer to “Note 7 – Cumulative Mandatorily Redeemable Financial Instruments”). 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. Fusemachines Nepal Private Limited incurred an initial arrangement fee of $ 13.7 thousand which was recorded as a reduction to cumulative mandatorily redeemable common and preferred stock liability in the unaudited condensed consolidated interim balance sheet for the periods ended September 30, 2025, and December 31, 2024. Additionally, Fusemachines Nepal Private Limited incurred Nil as an annual monitoring fee for the nine months ended September 30, 2025 and 2024.
Repurchase and Repayment of 2023 Promissory Notes
In January 2024, the Company 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 (see “Note 13 – Stock-Based Compensation”).
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 (also see “Note 9 – Long-Term Debt”).
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 $700.0 thousand (refer to “Note 9 – Long-Term Debt”).
Note 19. Prepaid Forward Transaction
On July 31, 2025, CSLM Acquisition Corp. (the “Counterparty” prior to the closing of the Business Combination, and thereafter Holdco / Pubco) and Fusemachines entered into an OTC equity prepaid forward confirmation with Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the “Sellers”) (the “Forward Purchase Agreement” or “FPA”).
Subsequent to quarter ended September 30, 2025, and upon the closing of the Business Combination on October 22, 2025 (the date on which Merger Sub merged with and into Fusemachines), the Investors (Meteora) delivered a Pricing Date Notice under the FPA. Based on this notice, the applicable Prepayment Amount became determinable and was subsequently funded by the Counterparty from the Trust Account 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 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) 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 to Counterparty equal to the number of Terminated Shares 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 exercisable for Shortfall Warrant Shares equal to the difference between the Maximum Number of Shares and the number of Shares specified in a Pricing Date Notice; such warrants have exercise terms and a Reset Price as provided 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. |
Note 20. Subsequent Events
The Company has evaluated subsequent events through the date of issuance of these unaudited condensed consolidated interim financial statements and determined that there have been no events that have occurred that would require adjustments to disclosures in the unaudited condensed consolidated interim financial statements except for the below items:
Merger Agreement
On October 22, 2025, Merger Sub merged with and into Fusemachines, the separate corporate existence of Merger Sub ceased to exist and Fusemachines was the surviving company and a wholly owned subsidiary of Pubco. Pubco’s common stock began trading on the Nasdaq Stock Market under the symbol “FUSE” on October 23, 2025.
Upon the closing of the Merger:
| ● | In connection with the Business Combination, CSLM Holdings, Inc. was renamed “Fusemachines Inc.” (“Pubco”), and Fusemachines Inc. was renamed “Fusemachines USA, Inc.” | |
| ● | On the Closing Date, (a) the shareholders of Fusemachines were issued an aggregate of 19,214,201 shares of New Fusemachines Common Stock, an aggregate of 693,420 shares of New Fusemachines Common Stock were reserved for issuance upon the exercise of stock options, and an aggregate of 122,211 shares of New Fusemachines 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 New Fusemachines Common Stock, (c) all public rights were converted into 1,897,500 shares of New Fusemachines Common Stock; (d) New Fusemachines issued an aggregate of 4,743,750 shares of New Fusemachines Common Stock to private placement investors; (e) New Fusemachines issued an aggregate of 1,184,000 shares of New Fusemachines Common Stock, in connection with the PIPE Financing; and (f) the Sponsor Convertible Notes were exchanged for an aggregate of 408,639 newly-issued shares of New Fusemachines Common Stock. | |
| ● | Approximately $ 8.8 million in cash was received for the issuance of 884,000 shares of Fusemachines Pubco Common Stock. In addition, $ 3 million in cash was received under the contingent PIPE investment, resulting in the issuance of an additional 300,000 shares of Fusemachines Pubco Common Stock. Further Fusemachines Inc. received funds from a convertible note with an affiliate of the Sponsor in the principal amount of $2.2 million. On the Closing Date, the note was converted into a number of shares of Fusemachines Inc. Common Stock pursuant to the conversion terms of the convertible note agreement. The overall net proceeds received by Fusemachines Inc. for the issuance is approximately $ 9.4 million. | |
| ● | Approximately $11.0 million prepayment was made by CSLM to the Meteora Parties pursuant to the Forward Purchase Agreement, which was funded directly from the Trust Account at Closing. | |
| ● | For the promissory notes held at amortized cost issued to its Chief Executive Officer in 2024, principal and accrued and unpaid interest amounting to approximately $ 0.74 million was repaid in cash upon the Closing. | |
| ● | Each Fusemachines convertible note (including both related party and other convertible notes) that was issued and outstanding immediately prior to the Closing was converted into Fusemachines Common Stock of 8,048,770 shares in accordance with the applicable convertible note agreement and immediately following such conversion such Fusemachines Common Stock was converted into Fusemachines Pubco Common Stock in accordance with the Conversion Ratio specified in the Merger Agreement. | |
| ● | Subsequent to September 30, 2025, and upon the closing of the business combination, the Company settled its obligation through the issuance of 29,610 Fusemachines Pubco Common Stock shares (reflecting the 0.6580 Conversion Ratio applied to 45,000 Company shares) and a cash payment of $0.2 million. |
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FUSEMACHINES
The following discussion and analysis provides information that Fusemachines’ management believes is relevant to an assessment and understanding of Fusemachines’ consolidated results of operations and financial condition. The discussion should be read together with Fusemachines’ unaudited condensed consolidated financial statements as of and for the nine month ended September 30, 2025, and September 30, 2024, and the respective notes thereto, included elsewhere in this proxy statement/prospectus. Capitalized and defined terms used in this section shall have the meanings ascribed to them herein. Capitalized terms not defined in this section shall have the meanings ascribed to them elsewhere in this proxy statement/prospectus.
The discussion and analysis should also be read together with Pubco’s unaudited pro forma condensed combined financial information as of and for the nine month ended September 30, 2025, and September 30, 2024. See “Unaudited Pro Forma Condensed Consolidated Combined Financial Information.” This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Fusemachines’ actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this proxy statement/prospectus. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fusemachines” to “we”, “our” and “the Company” refer to the business and operations of Fusemachines Inc. and its consolidated subsidiaries prior to the Business Combination and to Fusemachines Inc. and its consolidated subsidiaries following the consummation of the Business Combination.
Company Overview
We are a provider of cutting-edge artificial intelligence (“AI”) solutions across a number of industries and verticals and have been doing so for over 10 years. We help enterprises integrate AI into their business with our AI solutions (products and services) supported by our global talent from underserved communities.
To date, customers that have benefited from our AI solutions include consumer brands, online consignment/ resale platforms, healthcare technology providers, medical equipment providers, global media enterprises, SAAS technology companies, and cybersecurity companies. These customers, and others, have successfully leveraged our solutions to accurately and efficiently authenticate and value products, forecast future sales revenues, improve efficiency by eliminating manual entry to reduce human error, reduce development costs through strategic sourcing and partnerships, deliver relevant and personalized content to end-users, extract key-values from critical documents, and detect malicious sessions in-network in real-time. See “Our Customers – Case Studies” for more information.
In addition to our AI Products and Services we offer a multitude of AI Education Services to students, professionals and organizations. Our flagship learning program is our AI Fellowship Program, a dynamic 6-month course, held online, designed by leading global AI and tech experts. The course is created to upskill AI professionals, provide hands-on experiences and real-world AI applications. We have over 700 certified Fusemachines AI Fellows in the United States, Nepal and Dominican Republic. Our fellows have leveraged their certifications with Fusemachines for positions at leading technology employers, and other global companies, proving their competencies and expanding our global alumni network.
Recent Developments
Covenant Fees
On February 4, 2025, the company, CSLM Acquisition Corp. and CSLM merger sub inc. entered into a second amendment to the original merger agreement dated January 22, 2024. The amendment specifically deleted Section 7.3 of the original agreement, which had stipulated a delay fee in the event the Company failed to deliver the audited 2023 financial statements to the CSLM by the PCAOB audit deadline.
| 1 |
Under the terms of the original agreement, the Company was required to provide the audited financial statements no later than February 29, 2024, or incur delay fees as mentioned in the agreement
The Company had covenanted to provide the audited financial statements no later than February 29, 2024, however, provided the audited financial statements to CSLM in September 2024. As a result, the Company has recorded $505.0 thousand of deferred transaction costs on the consolidated financial statement as of December 31, 2024.
Pursuant to the second amendment the delay fee provision is eliminated 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 nine months ended September 30, 2025 which does not have impact in the unaudited condensed consolidated interim Statements of Operations and Comprehensive Loss as the amount of provision got eliminated from the deferred transaction cost and from the Accounts Payable, Accrued expense and other current liabilities in the unaudited condensed consolidated interim 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 $85,000,000, 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.
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.
| 2 |
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 unaudited condensed consolidated interim statement of profit and loss for the nine month ended September 30, 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 unaudited condensed consolidated interim statement of profit and loss for the nine months ended September 30, 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. 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
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 unaudited condensed consolidated interim statement of profit and loss for the nine months ended September 30, 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 agreement, 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.
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 April 2024 Convertible Note will be used for working capital purposes.
| 3 |
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 unaudited condensed consolidated statements of operations and comprehensive loss, for the nine months ended September 30, 2025.
Subsequent to September 30, 2025, Fusemachines 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. The terms of the merger are disclosed as a part of Note on Subsequent Events (Refer Note no. 20 Subsequent Events).
Others- February 2025 Convertible Notes
In connection with the second amendment to the Merger 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 to the Pubco all of the Funds in the Escrow Account.” Accordingly, the escrowed funds are not freely available to the Pubco 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.
Since the release of proceeds is contingent upon the occurrence of the Business Combination, an event not wholly within the control of the Company, the same has not been recognized in the unaudited condensed consolidated financial statements as of September 30, 2025.
Subsequent Conversion
On October 22, 2025, Merger Sub merged with and into Fusemachines, the separate corporate existence of Merger Sub ceased to exist and Fusemachines was the surviving company and a wholly owned subsidiary of Pubco Following the completion of the business combination, all convertible notes (related parties and other convertible notes) were converted into equity of the public company. The terms of the merger are disclosed as a part of Note on ‘Closing of Merger’ below.
Litigation
Fusemachines Inc. received a legal notice dated 27 March 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 the aggregate materially affect its results of operations, financial condition or cash flows. The company has already recognized $41.3 thousand liability in its unaudited condensed consolidated interim balance sheet as of September 30, 2025.
| 4 |
Prepaid Forward Transaction
On July 31, 2025, CSLM Acquisition Corp. (the “Counterparty” prior to the closing of the Business Combination, and thereafter Holdco / Pubco) and Fusemachines entered into an OTC equity prepaid forward confirmation with Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the “Sellers”) (the “Forward Purchase Agreement” or “FPA”).
Subsequent to quarter ended September 30, 2025, and upon the closing of the Business Combination on October 22, 2025 (the date on which Merger Sub merged with and into Fusemachines), the Investors (Meteora) delivered a Pricing Date Notice under the FPA. Based on this notice, the applicable Prepayment Amount became determinable and was subsequently funded by the Counterparty from the Trust Account 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 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) 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 to Counterparty equal to the number of Terminated Shares 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 exercisable for Shortfall Warrant Shares equal to the difference between the Maximum Number of Shares and the number of Shares specified in a Pricing Date Notice; such warrants have exercise terms and a Reset Price as provided 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. | |
| ● | Subsequent to September 30, 2025, and upon the closing of the business combination, the Company settled its obligation through the issuance of 29,610 Fusemachines Pubco Common Stock shares (reflecting the 0.6580 Conversion Ratio applied to 45,000 Company shares) and a cash payment of $0.2 million. |
Merger Agreement
On October 22, 2025, Merger Sub merged with and into Fusemachines, the separate corporate existence of Merger Sub ceased to exist and Fusemachines was the surviving company and a wholly owned subsidiary of Pubco. Pubco’s common stock began trading on the Nasdaq Stock Market under the symbol “FUSE” on October 23, 2025.
| 5 |
Cashless Exercise of Stock Options
In August 2025, certain Fusemachines employees exercised 1,133,537 options to purchase Fusemachines common stock. The exercise prices for the 1,133,537 options were paid on a cashless basis via net share settlement resulting in the net share issuance of 1,013,125 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.
Financial Performance
For the nine month ended September 30, 2025, and September 30, 2024, we generated revenues of $5.78 million and $6.64 million and reported a net loss of $5.21 million and $11.93 million, respectively. Net cash used in operating activities was $0.49 million for the nine month ended September 30, 2025, and $2.51 million for the nine month ended September 30, 2024. As noted in our condensed consolidated interim financial statements, we had an accumulated deficit of $39.43 million as of September 30, 2025.
Business Combination and Public Company Costs
On January 22, 2024, Fusemachines entered into a plan of merger agreement (the “Merger Agreement”) with CSLM in which Fusemachines Inc. will be the surviving corporation and a wholly owned subsidiary of CSLM. The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP and not as a business combination under ASC 805. Under this method of accounting, CSLM, will be treated as the acquired company for accounting purposes, whereas Fusemachines Inc. will be treated as the accounting acquirer. Under the Merger Agreement, the Fusemachines equity holders that hold shares of company common stock, shares of Convertible Preferred Stock, company stock options, or Convertible Notes will receive an aggregate of number of common stock equal to the quotient obtained by dividing (a) $200,000 thousand, by (b) $10.00 in exchange for all of Fusemachines’ fully diluted company common stock. The Merger Agreement will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Delaware or upon certain conditions as specified in the articles of the merger. Fusemachines Inc.’s total transaction costs from January 1, 2024 through the anticipated Closing Date are estimated to be $6.63 million.
As a result of the Business Combination, Fusemachines will become the successor to an SEC-registered and Nasdaq-listed company, which will require Fusemachines to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Fusemachines expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit, and other professional service fees.
On October 22, 2025, Merger Sub merged with and into Fusemachines, the separate corporate existence of Merger Sub ceased to exist and Fusemachines was the surviving company and a wholly owned subsidiary of Pubco.
| 6 |
Upon the closing of the Merger:
| ● | In connection with the Business Combination, CSLM Holdings, Inc. was renamed “Fusemachines Inc.” (“Pubco”), and Fusemachines Inc. was renamed “Fusemachines USA, Inc.” |
| ● | On the Closing Date, (a) the shareholders of Fusemachines were issued an aggregate of 19,214,201 shares of New Fusemachines Common Stock, an aggregate of 693,420 shares of New Fusemachines Common Stock were reserved for issuance upon the exercise of stock options, and an aggregate of 122,211 shares of New Fusemachines 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 New Fusemachines Common Stock, (c) all public rights were converted into 1,897,500 shares of New Fusemachines Common Stock; (d) New Fusemachines issued an aggregate of 4,743,750 shares of New Fusemachines Common Stock to private placement investors; (e) New Fusemachines issued an aggregate of 1,184,000 shares of New Fusemachines Common Stock, in connection with the PIPE Financing; and (f) the Sponsor Convertible Notes were exchanged for an aggregate of 408,639 newly-issued shares of New Fusemachines Common Stock. |
| ● | Approximately $ 8.8 million in cash was received for the issuance of 884,000 shares of Fusemachines Pubco Common Stock. In addition, $ 3 million in cash was received under the contingent PIPE investment, resulting in the issuance of an additional 300,000 shares of Fusemachines Pubco Common Stock. Further Fusemachine Inc. received funds from a convertible note with an affiliate of the Sponsor in the principal amount of $2.2 million. On the Closing Date, the note was converted into a number of shares of Fusemachines Inc. Common Stock pursuant to the conversion terms of the convertible note agreement. The overall net proceeds received by Fusemachine Inc. for the issuance is approximately $ 9.4 million. |
| ● | Approximately $11.0 million prepayment was made by CSLM to the Meteora Parties pursuant to the Forward Purchase Agreement, which was funded directly from the Trust Account at Closing. |
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: 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. Other than the proposed private investment in public equity (“PIPE”) offering described in CSLM’s Current Report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on January 23, 2024, we currently do not have any contracts or commitments for additional financing. | |
| ● | 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: We have entered into several convertible debt that gets automatically converted into shares of the Company’s Convertible Preferred Stock upon the closing of the Next Equity Financing as defined in “Note 9. Long-Term Debt” in the Condensed consolidated interim financial statements. Provided that the amounts due have not been repaid by the Company by the Maturity Date, the convertible notes would automatically convert to equity based upon on the occurrence of a specified equity round of funding or corporate transaction, as defined in certain agreements. If we enter into a SPAC business combination agreement at any time while the convertible debt 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 our common stock. |
| 7 |
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.
| 8 |
Results of Operations
The period-to-period comparisons of our results of operations have been prepared using the historical periods included in our condensed consolidated interim financial statements. The following discussion should be read in conjunction with the condensed consolidated interim financial statements and related notes included elsewhere in this proxy statement/prospectus. We have derived this data from our annual condensed consolidated financial statements included elsewhere in this proxy statement/prospectus.
Nine Month ended September 30, 2025, Compared To Nine Month Ended September 30, 2024
| Nine month ended September 30, | ||||||||||||||||
| (In thousands) | 2025 | 2024 | $ Variance | % Variance | ||||||||||||
| (Unaudited) | ||||||||||||||||
| Revenue | $ | 5,779 | $ | 6,641 | $ | (862 | ) | (13 | )% | |||||||
| Cost of revenue (1) | (2,488 | ) | (3,019 | ) | 531 | 18 | % | |||||||||
| Gross profit | 3,291 | 3,622 | (331 | ) | (9 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing (1) | 934 | 1,550 | (616 | ) | (40 | )% | ||||||||||
| General and administrative (1) | 5,131 | 8,170 | (3,039 | ) | (37 | )% | ||||||||||
| Research and development (1) | 489 | 555 | (66 | ) | (12 | )% | ||||||||||
| Total operating expenses | 6,554 | 10,275 | (3,721 | ) | (36 | )% | ||||||||||
| Loss from operations | (3,263 | ) | (6,653 | ) | 3,390 | 51 | % | |||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | (213 | ) | (161 | ) | (52 | ) | (32 | )% | ||||||||
| Loss on extinguishment of convertible notes payable / notes payable | (391 | ) | (549 | ) | 158 | 29 | % | |||||||||
| Loss on extinguishment of payable | - | (70 | ) | 70 | 100 | % | ||||||||||
| Gain/(Loss) on change in fair value of convertible notes and warranty liability | (1,405 | ) | (4,337 | ) | 2,932 | 68 | % | |||||||||
| Other (expense) income | 59 | (91 | ) | 150 | 165 | % | ||||||||||
| Total other expense, net | (1,950 | ) | (5,208 | ) | 3,258 | 63 | % | |||||||||
| Loss before income taxes | (5,213 | ) | (11,861 | ) | 6,648 | 56 | % | |||||||||
| Provision for income tax | - | (72 | ) | (72 | ) | (100 | )% | |||||||||
| Equity in earnings of investee, net of income tax position of $0 and $0, respectively | - | (1 | ) | (1 | ) | (100 | )% | |||||||||
| Net loss | $ | (5,213 | ) | $ | (11,934 | ) | $ | 6,721 | 56 | % | ||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in foreign currency translation adjustment | $ | 8 | $ | 50 | $ | (42 | ) | (84 | )% | |||||||
| Total comprehensive loss | $ | (5,205 | ) | $ | (11,884 | ) | $ | 6,679 | 56 | % | ||||||
| Net loss per share - basic and diluted | $ | (0.46 | ) | $ | (1.14 | ) | $ | 0.68 | 60 | % | ||||||
| Weighted-average common shares outstanding - basic and diluted | 11,255,399 | 10,424,137 | 831,262 | 8 | % | |||||||||||
| (1) | Includes stock-based compensation expense as follows: |
| Nine month ended September 30, | ||||||||||||
| 2025 | 2024 | $Variance | ||||||||||
| General and administrative | $ | 117 | $ | 662 | $ | (545 | ) | |||||
| Cost of revenue | $ | 16 | $ | 38 | $ | (22 | ) | |||||
| Selling and marketing | $ | 28 | $ | 160 | $ | (132 | ) | |||||
| Research and development | $ | 15 | $ | 116 | $ | (101 | ) | |||||
| Total stock-based compensation expense | $ | 176 | $ | 976 | $ | (800 | ) | |||||
| 9 |
Revenue – We derive the majority of our revenue by helping clients build AI solutions. We help clients build AI Solutions by providing our suite of products and services that solve their business problems. Clients may buy our products, services or combination of both products and services. Clients may buy AI Studio and AI Engines and may ask us to help them tune the model which will be part of the services. Clients may just buy AI Studio and not ask for any of our services. Clients may just also buy the services to set up a team and build a bespoke AI solution. The Company’s contracts for AI Solutions have different terms based on the scope and complexity of engagements; mix of products and services. Pricing for the majority of contracts are invoiced monthly on a time-and-materials basis, while some contracts have a fixed-fee or a milestone-based fee. Some contracts which are solely for AI Studio or AI Engines have a licensing fee-based invoices. The value derived from the services correspond to the labor hours expended, thus we measure the progress and recognizes revenue using an effort- based input method. We provide services to customers worldwide, with the majority of revenues being derived from contracts with customers located within the United States. We generate substantially all of our revenue by providing services to clients and the nature of services provided were homogenous in nature.
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).
| Nine month Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Customer locations | ||||||||
| United States | $ | 5,464 | $ | 6,458 | ||||
| Rest of the world | $ | 315 | $ | 183 | ||||
| Total revenue | $ | 5,779 | $ | 6,641 | ||||
The table below presents the breakdown of our revenues, based on the type of services (in thousands).
| Nine month Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Service type | ||||||||
| AI Solutions (Product and Services) | $ | 5,656 | $ | 6,641 | ||||
| AI Education Services | $ | 123 | - | |||||
| Total revenue | $ | 5,779 | $ | 6,641 | ||||
| (1) | The revenue from the AI Solutions - Products is insignificant during the Nine month ended September 30, 2025 and 2024. |
Revenue for the nine month ended September 30, 2025, reduced to $5.78 million as compared to $6.64 million for the Nine month ended September 30, 2024, due to AI Solutions (Products and Services). In United States, although there had been additional deployed resources and new clients for 2025, however the overall revenue decrease is mainly due to reduction in the scope of the project and resources of the contract entered into with the customers leading to a decrease of $0.86 million. Also, contracts amounting to $1.20 million were completed in the year 2024 and decrease in scope with existing customer contracts amounting to $ 0.32 million. This decrease is offset by new contracts with both new and existing customers wherein we entered into 11 new customer contracts amounting to $0.65 million.
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 $0.53 million to $2.49 million for the nine month ended September 30, 2025, compared to $3.02 million for the nine month ended September 30, 2024. The decrease was primarily driven by lower consultancy expenses of $0.12 million and a reduction in payroll expenses of $0.41 million. The decline in consultancy costs was mainly attributable to a decrease in the average cost per consultant, in the United States (US) entity, while the average headcount of billable consultants remained constant at 36 for both years. 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, with the average headcount remaining constant at 4. In contrast, in the Nepal entity, the decrease was mainly due to a decline in average headcount from 155 in 2024 to 86 in 2025, even though the average cost per consultant increased in 2025. Additionally, there was a $0.03 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 $0.33 million to $3.29 million for the nine month ended September 30, 2025, compared to $3.62 million for the nine month ended September 30, 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.
| 11 |
Selling and marketing expenses decreased by $0.62 million, from $1.55 million for the nine months ended September 30, 2024, to $0.93 million for the nine months ended September 30, 2025. The decrease was primarily attributable to lower commission expenses, consulting fees, payroll costs, and stock-based compensation.
Commission expenses decreased by $0.10 million, as the full commission for the vertical head for 2025 will be recorded at year-end, unlike in the prior year. Consulting fees for the selling and marketing team decreased by $0.12 million, mainly because consultants worked fewer hours in 2025 compared to 2024, and one consultant was transitioned to payroll.
Payroll expenses decreased by $0.18 million, primarily due to a reduction in headcount within the selling and marketing function.
In addition, stock-based compensation expenses decreased by $0.13 million, due to the completion of vesting for previously granted awards.
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 $2.82 million, from $7.95 million for the nine months ended September 30, 2024, to $5.13 million for the nine months ended September 30, 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 $2.06 million, primarily due to the termination of contracts related to valuation consultancy services from Centri Business Consulting (CBC), amounting to approximately $1.0 million. The remaining reduction was attributable to lower professional services availed from CFGI Holding LLC in 2025 as compared to 2024, together accounting for approximately $2.0 million. Stock-based compensation expense declined by $0.32 million, primarily due to the completion of vesting for previously granted awards. Additionally, bad debt expense decreased by $0.41 million during the period.
These reductions were partially offset by an increase in payroll expenses of $0.30 million and consultancy expenses of $0.26 million. The increase in consultancy costs was due to changes in staffing mix, as the average cost per consultant decreased in 2025, while the average headcount also declined.
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 nine month ended September 30, 2025, decreased by $0.07 million to $0.49 million as compared to $0.56 million for the nine month ended September 30, 2024. The decrease was primarily due to stock-based compensation of $0.10 million due to the completion of vesting for previously granted awards. This was partially offset by increases in payroll expenses of $0.03 million.
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.
| 12 |
Interest expense increased by $0.05 million to $0.21 million for the nine month ended September 30, 2025, from $0.16 million for the nine month ended September 30, 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.
Loss on extinguishment of debt – Loss on extinguishment of debt for the nine month ended September 30, 2025, was $0.39 million as compared to $0.55 million for the nine month ended September 30, 2024. The Loss on extinguishment of debt during 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 loan 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.
Loss on extinguishment of debt for nine month ended September 30, 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 change in fair value – Loss on change in value represents the changes in fair value related to our convertible notes and warrant liability.
Gain/(Loss) on change in fair value for the nine month ended September 30, 2025 was ($1.41) million as compared to ($4.34 million) for the nine month ended September 30, 2024, resulting in gain of $2.93 million. 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 nine month ended September 30, 2025 and September 30, 2024, respectively. The variance primarily reflects updated fair value measurements as of September 30, 2025, compared to those as of September 30, 2024. In the prior-year period, the Company incurred a loss of $(4.34) million due to a substantial increase in its estimated marketable stock price from $1.28 as of December 31, 2023 to $7.54 as of September 2024, which significantly increased the fair value of the related instruments and the liability associated with the convertible notes. In the current-year period, the loss decreased to $(1.41) million, driven by a decline in the estimated marketable stock price from $7.48 as of December 31, 2024 to $5.90 as of September 30, 2025, resulting in a reduction in the fair value of the related instruments. The Company’s management performed a quantitative assessment of Gain/(Loss) on change in fair value for this 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.
| 13 |
Other income for the nine months ended September 30, 2025, was $0.06 million, compared to other expenses of $(0.09) million for the nine months ended September 30, 2024, representing an improvement of $0.15 million. The prior period (nine months ended September 30, 2024) included a one-time expense of $0.05 million related to penalties from one vendor, with the remaining variance primarily attributable to foreign exchange gains/losses
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.
Provision for income tax is Nil for the for the nine month ended September 30, 2025 and $ 0.07 million for nine month ended September 30, 2024.
Net loss – Net loss for the nine month ended September 30, 2025, was $5.21 million, compared to a net loss of $11.93 million for September 30, 2024. The change was the result of increase in profit on change in fair value of convertible notes and warrant 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.
| 14 |
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.
The reconciliation of our net loss to EBITDA and Adjusted EBITDA for the nine month ended September 30, 2025, and September 30, 2024, is as follows:
| Nine month Ended September 30, | ||||||||
| (In thousands) | 2025 | 2024 | ||||||
| Net loss | $ | (5,213 | ) | $ | (11,934 | ) | ||
| Interest expense | 213 | 161 | ||||||
| Provision for tax | - | 72 | ||||||
| Depreciation and amortization | 139 | 126 | ||||||
| EBITDA | $ | (4,861 | ) | $ | (11,575 | ) | ||
| Stock-based compensation | 176 | 976 | ||||||
| Fair value adjustments (1) | 1,405 | 4,337 | ||||||
| Extinguishment of payable | - | 70 | ||||||
| Extinguishment of debt | 391 | 549 | ||||||
| Adjusted EBITDA | $ | (2,889 | ) | $ | (5,643 | ) | ||
| (1) | Represents change in fair value of convertible notes and warrant liability. |
| 15 |
Liquidity and Capital Resources as of September 30, 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 expenditures.
We formally evaluated our liquidity and cash position most recently in 2025 when preparing our 2025 interim financial statements. As of September 30, 2025, we had cash of approximately $0.11 million and a net working capital deficit of approximately $27.36 million. As of that date, we also had an accumulated deficit of approximately $39.43 million and a net loss of $5.21 million for the nine months 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 unaudited condensed consolidated interim 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 assure.
On October 22, 2025, Merger Sub merged with and into Fusemachines, with Fusemachines continuing as the surviving company and becoming a wholly owned subsidiary of Pubco. In connection with the closing, approximately $14.0 million in cash was received for the issuance of shares of Fusemachines Pubco Common Stock. All convertible notes were settled through the issuance of Fusemachines Common Stock, 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 unaudited condensed consolidated interim 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 unaudited condensed consolidated interim 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.
| 16 |
Cash flows
Interim Period Cash Flows
The following table summarizes our cash flows for the periods presented
| Nine months Ended Sept 30, | ||||||||
| (In thousands) | 2025 | 2024 | ||||||
| Net cash provided by’ (used in): | ||||||||
| Operating activities | $ | (488 | ) | $ | (2,510 | ) | ||
| Investing activities | $ | (80 | ) | $ | (155 | ) | ||
| Financing activities | $ | 175 | $ | 2,565 | ||||
| Effect of exchange rate changes on cash | $ | (1 | ) | $ | - | |||
| Net increase (decrease) in cash | $ | (394 | ) | $ | (100 | ) | ||
Operating Activities
Net cash used in operating activities during the nine month ended September 30, 2025, decreased by $2.02 million, to $0.49 million from $2.51 million in the same period 2024. The decrease in operating cashflow is largely on account of decrease in net loss to $5.21 million for the nine month ended September 30, 2025 from $11.93 million for the nine month ended September 30, 2024 was primarily attributable to the change in fair value of convertible notes, decrease in Selling and marketing expense on account of stock-based compensation due to the completion of vesting for previously granted awards and decrease in working capital changes to $2.43 million from $2.82 million. The $0.49 million net cash used in operating activities in 2025 was primarily related to (i) a net loss of $5.21 million, offset by; (ii) depreciation and amortization of $0.14 million; (iii) provision for credit losses of $0.05 million; (iv) stock-based compensation of $0.18 million; (v) amortization of right-of-use assets of $0.07 million; (vi) Loss on extinguishment of debt of $0.39 million; (vii) Changes in fair value of Convertible Notes at Fair Value of $ 1.50 million; (viii) Change in fair value of common stock warrant liability of $(0.10) million(ix) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.07 million; (x)Working capital changes of $2.44 million.
Net cash used in operating activities for the nine-month ended September 30, 2024, was $2.51 million. This amount was primarily related to (i) a net loss of $11.93 million; offset by (ii) depreciation and amortization of $0.12 million; (iii) provision for credit losses of $ 0.46 million; (iv) stock-based compensation of $0.97 million; (v) Change in fair value of common stock warrant liability of $0.53 million (vi) Changes in fair value of Convertible Notes at Fair Value of $3.81 million; (vii) Amortization of right-of-use assets of $0.09 million; (viii) Loss on extinguishment of debt of $0.55 million (ix) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.06 million (x) Equity method investment obtained in exchange for services of $(0.10) and (xi) working capital changes of $2.82 million.
Investing Activities
Net cash used in investing activities during the nine month ended September 30, 2025, was $0.08 million compared to $0.16 million during the nine month ended September 30, 2024. The $0.08 million net cash used in investing activities in 2025 consisted of $0.07 million in costs capitalized for internally developed software and $0.01 million in purchases of property and equipment.
Net cash used in investing activities for the nine month ended September 30, 2024, was $0.16 million and consisted of purchases of property and equipment of $0.05 million, disposal of property and equipment of $0.003 million, costs capitalized for internally developed software of $0.11 million
| 17 |
Financing Activities
Net cash provided by financing activities was $0.18 million in the nine month ended September 30, 2025, compared to $2.57 million in September 2024, representing a decrease of $2.39 million over the respective periods. The decrease in cash flow from financing activities was primarily due to the absence of financing events in the current period that were present in the prior period (refer below for breakup of cash flow from financing activities in prior period). The $0.18 million net cash provided by financing activities for the nine month ended September 30, 2025 consisted of proceeds from convertible notes payable of $0.18 million.
Net cash provided by financing activities for the nine month ended September 30, 2024, was $2.57 million and consisted of proceeds from (i) proceeds from notes payable of $6.50 million; (ii) proceeds from convertible notes payable of $ 0.46 million ; (iii) proceeds from related party loan payable of $ 0.60 million (iv) payments of notes payable of $3.00 million; (v) payment of deferred transaction costs of $0.002 million; (vi) common stock repurchase of $2 million and (vii) exercise of stock options of $0.01 million.
Contractual Obligations and Commitments
Our contractual cash obligations as of September 30, 2025, are summarized in the table below:
| (in thousands) | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||||||||
| Debt | 700 | - | - | - | - | - | 700 | |||||||||||||||||||||
| Interest | 83 | 83 | 5 | - | - | - | 171 | |||||||||||||||||||||
| Mandatorily redeemable preferred and ordinary stock | - | - | 1,433 | - | - | - | 1,433 | |||||||||||||||||||||
| Common Stock Contingent Obligation | 409 | - | - | - | - | - | 409 | |||||||||||||||||||||
| Operating lease | 39 | 161 | 169 | 177 | 187 | 435 | 1,168 | |||||||||||||||||||||
| Total | 1,231 | 244 | 1,607 | 177 | 187 | 435 | 2,713 | |||||||||||||||||||||
As further discussed in “Note 9. Long-Term Debt” to the notes to the consolidated financial statements contained elsewhere in this prospectus, the Company has an aggregate balance of $18.3 million in convertible notes with various maturity dates (“Maturity Date”). Provided that the amounts due have not been repaid by the Company by the Maturity Date, the convertible notes would automatically convert to equity based upon the occurrence of a specified equity round of funding or corporate transaction, as defined in certain agreements. As of the date of this prospectus, the Company has not repaid any of the convertible notes. See “Note 9. Long- Term Debt” for further discussion of our convertible notes and other long-term- Debt.
| 18 |
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.
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 140,133 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, 2023, the fair value and carrying amount of the Common Stock Warrant Liability was $0.4 million.
During the year ended December 31, 2023, we entered into a line of credit with JPMorgan Chase Bank, N.A. for a principal amount of $0.2 million. The terms of the agreement were five years with an annual interest rate of 2%. During August 2023, the line of credit including principal and interest expense of $2.0 thousand was repaid through the 2023 Notes Payable.
During the year ended December 31, 2023, we entered into a short-term loan agreement of $0.3 million. The terms of the loan was 3 months with an annual interest rate of 13.25%. During August 2023, the short-term loan was repaid through the 2023 Notes Payable.
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.
| 19 |
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.
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 the 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.
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.
During 2024, we have entered into seven separate promissory notes with the CEO for aggregate principal amount of $0.7 million.
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 agreement, 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.
There are also modifications to the terms of existing promissory notes. 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 condensed consolidated financial statements contained elsewhere in this prospectus, for disclosure of our related party transactions.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these condensed 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 condensed consolidated financial statements will be affected.
| 20 |
The critical accounting estimates, assumptions, and judgments that have the most significant impact on our condensed consolidated financial statements are described below. For further information on significant accounting policies, see “Note 2, Summary of Significant Accounting Policies” of our audited condensed 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.
In addition to time-and-materials arrangements, the Company also enters into milestone-based or fixed-fee contracts. For these contracts, revenue is recognized over time using an input method (e.g., labor hours incurred relative to total expected hours) that faithfully depicts performance. If a contract does not meet the criteria for over-time recognition, revenue is recognized at the point in time when control transfers to the customer. During the nine month ended September 30, 2025, and September 30, 2024, the revenues from milestone based or fixed fee contracts were insignificant.
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 nine month ended September 30, 2025, and September 30, 2024, the product revenues were insignificant.
| 21 |
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.
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 condensed 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.
| 22 |
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.
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 & administrative, cost of services, selling & marketing and research & 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.
Because the Company is privately held and there is no public market for its stock, the fair value of the Company’s equity is approved by the Company’s board of directors thereof as of the date stock-based awards are granted. 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 condensed 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.
| 23 |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below have the same meaning as terms defined and included elsewhere in the proxy statement/prospectus, which is a part of the Registration Statement on Form S-4 filed with the SEC on June 24, 2025 (the “Proxy Statement/Prospectus”).
Introduction
The following unaudited pro forma condensed combined financial information and accompanying notes are provided to aid you in your analysis of the financial aspects of the Business Combination, the financing transactions (described in the “Financing Transactions” section below), the “Financing Transactions,” and adjustments for other material events. These other material events are referred to herein as “Other Material Events” and the pro forma adjustments for the Other Material Events are referred to herein as “Adjustments for Other Material Events.” The following information is also relevant to understanding the unaudited pro forma condensed combined financial information contained herein:
| ● | On January 22, 2024, CSLM, Merger Sub, and Fusemachines entered into the Merger Agreement, which was subsequently amended in August 2024 (the First Amendment to the Merger Agreement) and February 2025 (the Second Amendment to Merger Agreement), collectively referred to herein as the Merger Agreement. Pursuant to the terms of the Merger Agreement: |
| ● | Prior to the Closing Date, CSLM underwent the Domestication which involved CSLM merging with and into a newly formed Delaware corporation, CSLM Holdings, Inc or Pubco. Following this merger, CSLM ceased to exist and the newly formed Delaware corporation, Pubco, was the surviving entity. |
| ● | Immediately prior to the effective time of the Domestication, every issued and outstanding CSLM Unit separated into each unit’s individual components of one Pubco Class A Ordinary Share, one-half of one Domesticated Pubco Warrant and one Domesticated Pubco Right, and all CSLM Units ceased to be outstanding and were automatically canceled, retired, and ceased to exist. In connection with the Domestication: (i) each then issued and outstanding CSLM Class A Ordinary Share was converted automatically into one share of common stock, par value $0.0001 per share, of Pubco, each a Pubco Common Share; (ii) each then issued and outstanding CSLM Class B Ordinary Share was converted automatically into one share of common stock, par value $0.0001 per share, of Pubco, each a Pubco Common Share; (iii) each then issued and outstanding CSLM Warrant was converted automatically into one warrant to acquire one share of common stock, par value $0.0001 per share, of Pubco, pursuant to the CSLM warrant agreement, each a Domesticated Pubco Warrant; and (iv) each then issued and outstanding CSLM Right was converted automatically into one right to acquire one-tenth (1/10) of one share of common stock, par value $0.0001 per share, of Pubco upon the Closing Date, pursuant to the terms of the CSLM rights agreement, each a Domesticated Pubco Right. |
| ● | Following the Domestication, pursuant to the terms of the Merger Agreement, upon the consummation of the Business Combination on the Closing Date: |
| ● | Merger Sub merged with and into Fusemachines, the separate corporate existence of Merger Sub ceased to exist and Fusemachines was the surviving company and a wholly owned subsidiary of Pubco. The stockholders of Fusemachines became stockholders of Pubco and Pubco changed its name to “Fusemachines Inc.” (such transaction, the “Business Combination,” and the post-Business Combination entity being referred to herein as “Fusemachines Pubco,” and the shares of Fusemachines Pubco Common stock being referred to herein as “Fusemachines Pubco Common Stock”). |
| ● | Each issued and outstanding Pubco Common Share immediately prior to the Closing was converted into and became one newly issued common share of Fusemachines Pubco Common Stock. Each issued and outstanding Domesticated Pubco Right was converted into and became one right to acquire one-tenth (1/10) of one share of Fusemachines Pubco Common Stock and each issued and outstanding Domesticated Pubco Warrant was converted into and became exercisable for one share of Fusemachines Pubco Common Stock. |
| ● | Each Fusemachines convertible note that was issued and outstanding immediately prior to the Closing was converted into Fusemachines Common Stock in accordance with the applicable convertible note agreement and immediately following such conversion such Fusemachines Common Stock was converted into Fusemachines Pubco Common Stock in accordance with the Conversion Ratio specified in the Merger Agreement. |
| ● | Each share of Fusemachines preferred stock that was issued and outstanding immediately prior to the Closing was converted into Fusemachines Common Stock in accordance with the Fusemachines certificate of incorporation and immediately following such conversion such Fusemachines Common Stock was converted into Fusemachines Pubco Common Stock in accordance with the Conversion Ratio specified in the Merger Agreement. |
| ● | Each share of Fusemachines preferred stock that was issued and outstanding immediately prior to the Closing was converted into Fusemachines Common Stock in accordance with the Fusemachines certificate of incorporation and immediately following such conversion such Fusemachines Common Stock was converted into Fusemachines Pubco Common Stock in accordance with the Conversion Ratio specified in the Merger Agreement. |
| ● | Each share of Fusemachines Common Stock that was issued and outstanding immediately prior to the Closing was converted into the right to receive a number of shares of Fusemachines Pubco Common Stock in accordance with the Conversion Ratio specified in the Merger Agreement. |
| ● | Each Fusemachines Option (whether vested or unvested) and warrant to purchase Fusemachines Common Stock that was outstanding as of immediately prior to the Closing was converted into an option or warrant to acquire the number of shares of Fusemachines Pubco Common Stock (rounded down to the nearest whole share), determined by multiplying the number of shares of Fusemachines Common Stock subject to such Fusemachines Option or warrant to purchase Fusemachines Common Stock as of immediately prior to the Closing by the Conversion Ratio. |
| ● | The Merger Agreement also provides, among other things, that CSLM, the Chief Executive Officer of Fusemachines, and Fusemachines are entering into and delivering an agreement, pursuant to which the Chief Executive Officer of Fusemachines will be entitled to a transaction completion bonus on the Closing Date upon the terms set forth in the agreement. Specifically, the CEO would be eligible to receive a bonus equal to the lesser of (i) 20% of each dollar of Parent Closing Excess Cash in excess of $1,000,000, and (ii) $1.0 million (the “Transaction Bonus”). “Parent Closing Excess Cash” is defined as (i) the amount of cash available in the Trust Account immediately prior to the Effective Time, after deducting the Parent Redemption Amount, plus (ii) the proceeds of any equity investments or debt financing facilities received by CSLM prior to or substantially concurrently with the Closing, excluding the PIPE Investment Amount. As of the Closing Date, the balance remaining in the Trust Account to be released to Fusemachines Pubco did not result in Parent Closing Excess Cash exceeding $1,000,000. As such, no Transaction Bonus was paid to the Chief Executive Officer at Closing. |
| ● | On February 4, 2025, CSLM entered into the Second Amendment to the Merger Agreement to (a) amend the definition of the “PIPE Investment Amount” to mean the sum of (i) $8,840,000, and (ii) the Contingent PIPE Investment Amount, if any; and (b) remove the fees incurred in connection with delivery of Fusemachines’ financial statements. |
| ● | In connection with the Business Combination, CSLM entered into a Subscription Agreement in August 2024 to sell shares of Fusemachines Pubco Common Stock to the Sponsor at a price of $10.00 per share. Additionally, CSLM entered into a second Subscription Agreement with the Sponsor in August 2024, under which the Sponsor committed to invest up to an additional $3,000,000, subject to reduction based on Parent Closing Excess Cash, in exchange for shares of Fusemachines Pubco Common Stock at $10.00 per share. |
On February 4, 2025, pursuant to the Second Amendment to the Merger Agreement, the Subscription Agreement was amended to revise the non-contingent portion of the PIPE investment to $8,840,000.
On the Closing Date, $8,840,000 in cash was received for the issuance of 884,000 shares of Fusemachines Pubco Common Stock. In addition, $3,000,000 in cash was received under the contingent PIPE investment, resulting in the issuance of an additional 300,000 shares of Fusemachines Pubco Common Stock. In total, $11,840,000 in cash was received and 1,184,000 shares of Fusemachines Pubco Common Stock were issued.
| ● | On February 4, 2025, the Second Amended and Restated Promissory Note between CSLM and the Sponsor was amended. Under the terms of the Third Amended and Restated Promissory Note, $1.5 million of the outstanding principal and its accrued and unpaid interest was converted into a number of shares of Fusemachines Pubco Common Stock on the Closing Date pursuant to the terms in the convertible note agreement. The remaining outstanding principal and its accrued and unpaid interest was repaid in cash on the Closing Date. |
| ● | On May 23, 2025, the Third Amended and Restated Promissory Note between CSLM and the Sponsor was amended. Under the terms of the Fourth Amended and Restated Promissory Note, the maximum amount that can be borrowed was increased to $4 million. |
| ● | In connection with the execution of the Merger Agreement, CSLM entered into the Sponsor Support Agreement, pursuant to which the Sponsor forfeited and surrendered to CSLM, 3,971,250 Private Placement Warrants on the Closing Date. The Private Placement Warrants were immediately canceled upon their forfeiture to CSLM on the Closing Date. |
| ● | Immediately prior to the Closing of the Business Combination, Fusemachines issued 45,000 shares of Fusemachines Common Stock to a third-party service provider as settlement of amounts owed, which were converted into shares of Fusemachines Pubco Common Stock upon Closing. Pursuant to the First Amendment to the Merger Agreement, the calculation of the Aggregate Fully Diluted Company Common Stock will not include these 45,000 shares of Fusemachines Common Stock. |
| ● | On November 28, 2023, CSLM, BTIG, and the Sponsor entered into the deferred underwriting fee waiver (the “Deferred Underwriting Fee Waiver”) pursuant to which, upon the condition that the Sponsor agrees to transfer 426,000 CSLM Class A Ordinary Shares to BTIG upon the Closing, BTIG agrees to permanently waive the deferred underwriting fee and any deferred underwriting commissions payable. Concurrently, on November 28, 2023, the Sponsor and BTIG entered into the share transfer agreement (the “Share Transfer Agreement”) pursuant to which the Sponsor agreed to transfer 426,000 CSLM Class A Ordinary Shares to BTIG upon the Closing. |
| ● | On July 31, 2025, in connection with the Business Combination, CSLM, CSLM Holdings, Inc., and Fusemachines entered into a Forward Purchase Agreement (the “Forward Purchase Agreement”) with Meteora Capital Partners, LP (“MCP”), Meteora Select Trading Opportunities Master, LP (“MSTO”), and Meteora Strategic Capital, LLC (“MSC”) (collectively, the “Meteora Parties”). |
In accordance with an October 22, 2025 pricing date notice issued under the terms of the Forward Purchase Agreement, the Meteora Parties retained 891,930 CSLM Class A Ordinary Shares. In consideration, CSLM provided the Meteora Parties a cash prepayment (the “Prepayment Amount”) equal to the product of (i) the 891,930 shares specified in the pricing date notice and (ii) the approximate per-share redemption price of $12.33, which corresponds to the amount payable to redeeming shareholders in connection with the Business Combination. CSLM funded the Prepayment Amount directly from the Trust Account on the Closing Date.
During the three-year term of the Forward Purchase Agreement, beginning on the Closing Date of the Business Combination, the Meteora Parties may sell the covered shares in the Forward Purchase Agreement on the open market. For each share sold, they will remit a termination price of $12.00 per share to CSLM. At the end of the Forward Purchase Agreement’s term, the Meteora Parties will retain any unsold shares and the Meteora Parties will pay CSLM a cash purchase price based on the volume-weighted average price of those retained shares.
| ● | Pursuant to the Forward Purchase Agreement, the Meteora Parties may elect to receive warrants (the “Shortfall Warrants”) exercisable for up to 3,000,000 shares, reduced by the number of shares specified in any pricing date notices. The Shortfall Warrants carry an exercise price equal to the termination price in the Forward Purchase Agreement of $12.00 per share and are exercisable for a period of three years from the closing of the Business Combination. As of the Closing Date, the Meteora Parties have requested 2,108,070 Shortfall Warrants, representing the difference between (i) the 3,000,000 share maximum and (ii) the 891,930 shares specified in the initial pricing date notice. |
The table below presents the exchange of Fusemachines Common Stock for Fusemachines Pubco Common Stock that occurred upon the consummation of the Business Combination.
| Actual Redemptions | ||||||||||||||||||||||||
| Fusemachines
shares outstanding as of September 30, 2025 (Historical) | Conversion of Fusemachines preferred stock into Fusemachines Common Stock | Conversion of convertible notes into Fusemachines Common Stock | Shares issued to Fusemachines vendor for settlement of outstanding vendor invoices | Exercise of Fusemachines stock options for Fusemachines Common Stock | Fusemachines Common Stock assumed outstanding prior to Closing | |||||||||||||||||||
| Series Seed-1, par value $0.00001 per share | 2,013,724 | (2,013,724 | ) | - | - | - | - | |||||||||||||||||
| Series Seed-2, par value $0.00001 per share | 1,402,606 | (1,402,606 | ) | - | - | - | - | |||||||||||||||||
| Series Seed-3, par value $0.00001 per share | 2,681,851 | (2,681,851 | ) | - | - | - | - | |||||||||||||||||
| Series Seed-4, par value $0.00001 per share | 2,945,053 | (2,945,053 | ) | - | - | - | - | |||||||||||||||||
| Common Stock, par value $0.00001 per share | 12,062,805 | 9,043,234 | 8,048,770 | 45,000 | 29,199,809 | |||||||||||||||||||
| Total | 21,106,039 | - | 8,048,770 | 45,000 | - | 29,199,809 | ||||||||||||||||||
| Fusemachines Common Stock assumed outstanding immediately prior to Closing | 29,199,809 | |||||||||||||||||||||||
| Assumed Conversion Ratio | 0.6580 | |||||||||||||||||||||||
| Estimated shares of Fusemachines Pubco Common Stock issued to Fusemachines stockholders upon Closing | 19,214,201 | |||||||||||||||||||||||
The following transactions have been included as Financing Transactions and Other Material Events in accordance with Regulation S-X 210.11-01(a)(8):
Financing Transactions
| ● | In connection with the Business Combination, CSLM entered into a Subscription Agreement in August 2024 to sell shares of Fusemachines Pubco Common Stock to the Sponsor at a price of $10.00 per share. Additionally, CSLM entered into a second Subscription Agreement with the Sponsor in August 2024, under which the Sponsor committed to invest up to an additional $3,000,000, subject to reduction based on Parent Closing Excess Cash, in exchange for shares of Fusemachines Pubco Common Stock at $10.00 per share. |
On February 4, 2025, pursuant to the Second Amendment to the Merger Agreement, the Subscription Agreement was amended to revise the non-contingent portion of the PIPE investment to $8,840,000.
On the Closing Date, $8,840,000 in cash was received for the issuance of 884,000 shares of Fusemachines Pubco Common Stock. In addition, $3,000,000 in cash was received under the contingent PIPE investment, resulting in the issuance of an additional 300,000 shares of Fusemachines Pubco Common Stock. In total, $11,840,000 in cash was received and 1,184,000 shares of Fusemachines Pubco Common Stock were issued.
| ● | Subsequent to September 30, 2025 and prior to the Closing Date, CSLM borrowed an additional $60 thousand of principal on the Fourth Amended and Restated Promissory Note with the Sponsor. CSLM incurred interest expense on the Fourth Amended and Restated Promissory Note in the amount of approximately $11 thousand from October 1, 2025 through the Closing Date. |
| ● | Subsequent to September 30, 2025, Fusemachines incurred interest expense on certain convertible notes held at amortized cost issued in April 2024, June 2024, September 2024, and February 2025 in the amount of approximately $2 thousand through the Closing Date. |
| ● | Subsequent to September 30, 2025, Fusemachines incurred interest expense on certain promissory notes held at amortized cost issued to its Chief Executive Officer in 2024 in the amount of approximately $2 thousand through the Closing Date. The promissory notes principal and accrued and unpaid interest were repaid in cash upon the Closing. |
| ● | Subsequent to September 30, 2025, Fusemachines received funds from a convertible note with an affiliate of the Sponsor in the principal amount of $2.2 million. On the Closing Date the note was converted into a number of shares of Fusemachines Common Stock pursuant to the conversion terms of the convertible note agreement. |
Other Material Events and Background Relevant to Other Material Events
| ● | On July 14, 2025, the second amendment to the Trust Agreement was executed, which, as of the amendment date, requires CSLM to deposit $15 thousand on a bi-monthly basis. Total actual deposits subsequent to September 30, 2025 through the Closing Date aggregated to $30 thousand. |
| ● | Total actual dividends on marketable securities held in the Trust Account subsequent to September 30, 2025 through the Closing Date aggregated to $21 thousand. |
The unaudited pro forma condensed combined financial information has been prepared based on the CSLM and Fusemachines historical financial statements as adjusted to give effect to the Business Combination. The unaudited pro forma condensed combined balance sheet as of September 30, 2025, gives pro forma effect to the Business Combination as if it had occurred on September 30, 2025. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024 reflects adjustments assuming that any adjustments that were made to the unaudited pro forma condensed combined balance sheet as of September 30, 2025 are assumed to have been made on January 1, 2024 for the purpose of adjusting the unaudited pro forma condensed combined statement of operations. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2025 reflects adjustments assuming that any adjustments that were made to the unaudited pro forma condensed combined balance sheet as of September 30, 2025 are assumed to have been made on January 1, 2024 for the purpose of adjusting the unaudited pro forma condensed combined statement of operations.
The unaudited pro forma condensed combined financial information have been derived from and should be read in conjunction with:
| ● | the accompanying notes to the unaudited pro forma condensed combined financial information; |
| ● | the historical audited financial statements of CSLM as of and for the year ended December 31, 2024, and the related notes included elsewhere in the Proxy Statement/Prospectus and incorporated into this Current Report on Form 8-K; |
| ● | the historical unaudited financial statements of CSLM as of and for the nine months ended September 30, 2025, and the related notes included elsewhere in this Current Report on Form 8-K; |
| ● | the historical audited financial statements of Fusemachines as of and for the year ended December 31, 2024, and the related notes included elsewhere in the Proxy Statement/Prospectus and incorporated into this Current Report on Form 8-K; |
| ● | the historical unaudited financial statements of Fusemachines as of and for the nine months ended September 30, 2025 and the related notes included elsewhere in this Current Report on Form 8-K; |
| ● | other information relating to Fusemachines and CSLM contained in this Current Report on Form 8-K “Management’s Discussion and Analysis of Financial Condition and Results of Operations of CSLM”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fusemachines”, and other financial information relating to each of CSLM and Fusemachines included elsewhere in this Current Report on Form 8-K and in the Proxy Statement/Prospectus. |
The unaudited pro forma condensed combined financial information are for illustrative purposes only and are not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination, the Financing Transactions and the Other Material Events taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of Fusemachines Pubco. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information. If the actual facts are different than these assumptions, then the amounts and shares outstanding in the unaudited pro forma condensed combined financial information that follows will be different, and those changes could be material.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2025
| Actual Redemptions | ||||||||||||||||||||||||||||||
| Transaction Accounting Adjustments | ||||||||||||||||||||||||||||||
| (In thousands, except for share data) | CSLM Acquisition Corp. Reclassified (Note 5) | Fusemachines Inc. Historical | Financing Transactions | Notes | Adjustments for Other Material Events | Notes | Other Transaction Accounting Adjustments | Notes | Pro Forma Balance Sheet | |||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 9 | $ | 106 | $ | 11,840 | 3(aaa) | $ | (30 | ) | 3(aa) | $ | (2,343 | ) | 3(a) | $ | 8,728 | |||||||||||||
| - | - | 60 | 3(ccc) | - | 113 | 3(b) | - | |||||||||||||||||||||||
| - | - | 2,193 | 3(ddd) | - | 1 | 3(e) | - | |||||||||||||||||||||||
| - | - | - | - | (2,249 | ) | 3(i) | - | |||||||||||||||||||||||
| - | - | - | - | (227 | ) | 3(l) | - | |||||||||||||||||||||||
| - | - | - | - | - | 3(p) | - | ||||||||||||||||||||||||
| - | - | - | - | (745 | ) | 3(r) | - | |||||||||||||||||||||||
| Accounts receivable, current, net | - | 1,237 | - | - | - | 1,237 | ||||||||||||||||||||||||
| Unbilled revenue | - | 47 | - | - | - | 47 | ||||||||||||||||||||||||
| Deferred transaction costs | - | 1,871 | - | - | (1,871 | ) | 3(o) | - | ||||||||||||||||||||||
| Prepaid expenses and other current assets | 21 | 259 | - | - | 477 | 3(l) | 757 | |||||||||||||||||||||||
| Due from related party | 33 | - | - | - | - | 33 | ||||||||||||||||||||||||
| Marketable securities held in trust account | 12,289 | - | - | 30 | 3(aa) | (113 | ) | 3(b) | - | |||||||||||||||||||||
| - | - | - | 21 | 3(bb) | (1,223 | ) | 3(c) | - | ||||||||||||||||||||||
| - | - | - | - | (11,004 | ) | 3(m) | - | |||||||||||||||||||||||
| Total current assets | 12,352 | 3,520 | 14,093 | 21 | (19,184 | ) | 10,802 | |||||||||||||||||||||||
| Property and equipment, net | - | 274 | - | - | - | 274 | ||||||||||||||||||||||||
| Intangible assets, net | - | 192 | - | - | - | 192 | ||||||||||||||||||||||||
| Deferred Tax Asset | - | 10 | - | - | - | 10 | ||||||||||||||||||||||||
| Operating lease right-of-use assets | - | 775 | - | - | - | 775 | ||||||||||||||||||||||||
| Other assets | - | 12 | - | - | - | 12 | ||||||||||||||||||||||||
| Total assets | $ | 12,352 | $ | 4,783 | $ | 14,093 | $ | 21 | $ | (19,184 | ) | $ | 12,065 | |||||||||||||||||
| Liabilities, convertible preferred stock, and stockholders’ (deficit) equity | ||||||||||||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||||||||||||
| Accounts payable | $ | 351 | $ | 8,517 | $ | - | $ | - | (200 | ) | 3(n) | $ | 8,491 | |||||||||||||||||
| (177 | ) | 3(i) | ||||||||||||||||||||||||||||
| Accrued expenses and other current liabilities | 2,183 | 4,112 | 2 | 3(bbb) | - | (253 | ) | 3(a) | 5,235 | |||||||||||||||||||||
| - | - | 11 | 3(ccc) | - | (1,541 | ) | 3(i) | - | ||||||||||||||||||||||
| - | - | 2 | 3(eee) | - | 300 | 3(k) | - | |||||||||||||||||||||||
| - | - | - | - | 497 | 3(o) | - | ||||||||||||||||||||||||
| - | - | - | - | (45 | ) | 3(r) | - | |||||||||||||||||||||||
| - | - | - | - | (33 | ) | 3(s) | - | |||||||||||||||||||||||
| Related party convertible notes payable, at fair value, current | - | 7,530 | - | - | (8,440 | ) | 3(k) | - | ||||||||||||||||||||||
| - | - | - | - | 910 | 3(t) | - | ||||||||||||||||||||||||
| Convertible notes payable, at fair value, current | - | 9,480 | - | - | 912 | 3(g) | - | |||||||||||||||||||||||
| - | - | - | - | (10,392 | ) | 3(k) | - | |||||||||||||||||||||||
| Convertible notes payable, current | - | 455 | 2,193 | 3(ddd) | - | (2,648 | ) | 3(s) | - | |||||||||||||||||||||
| Related party convertible notes payable, current | 3,665 | - | 60 | 3(ccc) | - | (3,725 | ) | 3(a) | - | |||||||||||||||||||||
| Related party loan payable, current | - | 700 | - | - | (700 | ) | 3(r) | - | ||||||||||||||||||||||
| Notes payable, current | - | - | - | - | 381 | 3(l) | 381 | |||||||||||||||||||||||
| Deferred underwriting commissions | 6,641 | - | - | - | (6,641 | ) | 3(h) | - | ||||||||||||||||||||||
| Operating lease liability, current | - | 82 | - | - | - | 82 | ||||||||||||||||||||||||
| Forward purchase agreement prepayment payable | 11,005 | - | - | - | (11,004 | ) | 3(m) | 1 | ||||||||||||||||||||||
| Forward purchase agreement liability | 18,842 | - | - | - | - | 18,842 | ||||||||||||||||||||||||
| Share redemptions payable | 1,223 | - | - | - | (1,223 | ) | 3(c) | - | ||||||||||||||||||||||
| Total current liabilities | 43,910 | 30,876 | 2,268 | - | (44,022 | ) | 33,032 | |||||||||||||||||||||||
| Convertible notes payable | - | 180 | - | - | (180 | ) | 3(s) | - | ||||||||||||||||||||||
| Warrant liability | - | 850 | - | - | - | 850 | ||||||||||||||||||||||||
| Cumulative mandatorily redeemable common and preferred stock liability | - | 1,034 | - | - | - | 1,034 | ||||||||||||||||||||||||
| Operating lease liability | - | 783 | - | - | - | 783 | ||||||||||||||||||||||||
| Total liabilities | 43,910 | 33,723 | 2,268 | - | (44,202 | ) | 35,699 | |||||||||||||||||||||||
| CSLM Class A Ordinary Shares, ($0.0001 par value; 500,000,000 shares authorized, 901,955 shares subject to redemption as of September 30, 2025) | 11,067 | - | - | (11,118 | ) | 3(b) | - | |||||||||||||||||||||||
| - | - | - | - | 51 | 3(v) | - | ||||||||||||||||||||||||
| Stockholders’ (deficit) equity: | ||||||||||||||||||||||||||||||
| CSLM Preferred shares, ($0.0001 par value; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2025) | - | - | - | - | - | - | ||||||||||||||||||||||||
| CSLM Class A Ordinary Shares, ($0.0001 par value, 500,000,000 shares authorized; 4,743,749 issued and outstanding as of September 30, 2025 | - | - | - | - | - | 3(d) | - | |||||||||||||||||||||||
| CSLM Class B Ordinary Shares, ($0.0001 par value; 50,000,000 shares authorized; 1 share issued and outstanding as of September 30, 2025) | - | - | - | - | - | 3(d) | - | |||||||||||||||||||||||
| Fusemachines Inc. convertible preferred stock ($0.00001 par value, 9,076,734 shares authorized; 9,043,234 issued and outstanding as of September 30, 2025) | - | 7,865 | - | - | (7,865 | ) | 3(j) | - | ||||||||||||||||||||||
| Fusemachines Inc. common stock ($0.00001 par value, 24,200,000 shares authorized; 12,062,805 shares issued and outstanding as of September 30, 2025) | - | 2 | - | - | - | 3(j) | - | |||||||||||||||||||||||
| - | - | - | - | - | 3(k) | - | ||||||||||||||||||||||||
| - | - | - | - | - | 3(n) | - | ||||||||||||||||||||||||
| - | - | - | - | (2 | ) | 3(q) | - | |||||||||||||||||||||||
| - | - | - | - | - | 3(s) | - | ||||||||||||||||||||||||
| Treasury stock, at cost (667,000 as of September 30, 2025) | - | (2,903 | ) | - | - | 2,903 | 3(q) | - | ||||||||||||||||||||||
| Share subscription receivable | (11,005 | ) | - | - | - | - | (11,005 | ) | ||||||||||||||||||||||
| Fusemachines Pubco Common Stock, par value $0.0001 | - | - | - | 3(aaa) | - | - | 3(a) | 2 | ||||||||||||||||||||||
| - | - | - | - | - | 3(b) | - | ||||||||||||||||||||||||
| - | - | - | - | - | 3(d) | - | ||||||||||||||||||||||||
| - | - | - | - | - | 3(f) | - | ||||||||||||||||||||||||
| - | - | - | - | 2 | 3(q) | - | ||||||||||||||||||||||||
| Additional paid in capital | 1,262 | 5,268 | 11,840 | 3(aaa) | - | 1,635 | 3(a) | 28,656 | ||||||||||||||||||||||
| - | - | - | - | 11,118 | 3(b) | - | ||||||||||||||||||||||||
| - | - | - | - | 1,962 | 3(e) | - | ||||||||||||||||||||||||
| - | - | - | - | - | 3(f) | - | ||||||||||||||||||||||||
| - | - | - | - | 6,641 | 3(h) | - | ||||||||||||||||||||||||
| - | - | - | - | 7,865 | 3(j) | - | ||||||||||||||||||||||||
| - | - | - | - | 18,532 | 3(k) | - | ||||||||||||||||||||||||
| - | - | - | - | 200 | 3(n) | - | ||||||||||||||||||||||||
| - | - | - | - | (2,361 | ) | 3(o) | - | |||||||||||||||||||||||
| - | - | - | - | 151 | 3(p) | - | ||||||||||||||||||||||||
| - | - | - | - | (38,267 | ) | 3(q) | - | |||||||||||||||||||||||
| - | - | - | - | 2,861 | 3(s) | - | ||||||||||||||||||||||||
| - | - | - | - | - | 3(u) | - | ||||||||||||||||||||||||
| - | - | - | - | (51 | ) | 3(v) | - | |||||||||||||||||||||||
| Accumulated deficit | (32,882 | ) | (39,430 | ) | (11 | ) | 3(ccc) | 21 | 3(bb) | (1,961 | ) | 3(e) | (41,545 | ) | ||||||||||||||||
| - | - | (2 | ) | 3(bbb) | - | (912 | ) | 3(g) | - | |||||||||||||||||||||
| - | - | (2 | ) | 3(eee) | - | (531 | ) | 3(i) | - | |||||||||||||||||||||
| - | - | - | - | (131 | ) | 3(l) | - | |||||||||||||||||||||||
| - | - | - | - | (7 | ) | 3(o) | - | |||||||||||||||||||||||
| - | - | - | - | (151 | ) | 3(p) | - | |||||||||||||||||||||||
| - | - | - | - | 35,364 | 3(q) | - | ||||||||||||||||||||||||
| - | - | - | - | (910 | ) | 3(t) | - | |||||||||||||||||||||||
| Accumulated other comprehensive income | - | 258 | - | - | - | 258 | ||||||||||||||||||||||||
| Total stockholders’ (deficit) equity | (42,625 | ) | (28,940 | ) | 11,825 | 21 | 36,085 | (23,634 | ) | |||||||||||||||||||||
| Total liabilities, Class A Ordinary Shares subject to possible redemption, and stockholders’ (deficit) equity | $ | 12,352 | $ | 4,783 | $ | 14,093 | $ | 21 | $ | (19,184 | ) | $ | 12,065 | |||||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2025
| Actual Redemptions | ||||||||||||||||||||
| Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2025 | |||||||||||||||||||
| (In thousands, except per share and weighted-average share data) | CSLM Acquisition Corp. Reclassified (Note 5) | Fusemachines Inc. Historical | Other Transaction Accounting Adjustments | Notes | Pro Forma Statement of Operations | Notes | ||||||||||||||
| Revenue | $ | - | $ | 5,779 | $ | - | $ | 5,779 | ||||||||||||
| Cost of revenue | - | (2,488 | ) | - | (2,488 | ) | ||||||||||||||
| Gross profit | - | 3,291 | - | 3,291 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Selling and marketing | - | 934 | - | 934 | ||||||||||||||||
| Research and development | - | 489 | - | 489 | ||||||||||||||||
| General and administrative | 1,802 | 5,131 | 357 | 4(f) | 7,290 | |||||||||||||||
| Total operating expenses | 1,802 | 6,554 | 357 | 8,713 | ||||||||||||||||
| Operating loss | (1,802 | ) | (3,263 | ) | (357 | ) | (5,422 | ) | ||||||||||||
| Other (expense) income, net: | ||||||||||||||||||||
| Loss on extinguishment of debt | (1,823 | ) | (391 | ) | - | (2,214 | ) | |||||||||||||
| Dividends on marketable securities held in Trust Account | 474 | - | (474 | ) | 4(b) | - | ||||||||||||||
| Interest expense | (113 | ) | (213 | ) | 113 | 4(a) | (182 | ) | ||||||||||||
| - | - | (15 | ) | 4(f) | - | |||||||||||||||
| - | - | 25 | 4(l) | - | ||||||||||||||||
| - | - | 21 | 4(k) | - | ||||||||||||||||
| Loss on change in fair value of convertible notes and warranty liability | - | (1,405 | ) | 1,500 | 4(c) | 95 | ||||||||||||||
| Financing expense | (17,573 | ) | - | - | (17,573 | ) | ||||||||||||||
| Change in fair value of forward purchase agreement liability | (1,269 | ) | - | - | (1,269 | ) | ||||||||||||||
| Other income | - | 59 | - | 59 | ||||||||||||||||
| Total other (expense) income, net | (20,304 | ) | (1,950 | ) | 1,170 | (21,084 | ) | |||||||||||||
| Loss before income taxes and equity in earnings of investee | (22,106 | ) | (5,213 | ) | 813 | (26,506 | ) | |||||||||||||
| Provision for income tax | - | - | - | - | ||||||||||||||||
| Equity in earnings of investee, net of income tax provision of $0 | - | - | - | - | ||||||||||||||||
| Net loss | $ | (22,106 | ) | $ | (5,213 | ) | $ | 813 | $ | (26,506 | ) | |||||||||
| CSLM weighted-average Class A Ordinary Shares subject to possible redemption outstanding - basic and diluted | 1,241,554 | - | - | - | ||||||||||||||||
| Basic and diluted net loss per share, CSLM Class A Ordinary Shares subject to redemption | $ | (3.23 | ) | $ | - | $ | - | $ | - | |||||||||||
| CSLM weighted-average non-redeemable Class A Ordinary Shares outstanding - basic and diluted | 4,743,749 | - | - | - | ||||||||||||||||
| Basic and diluted net loss per share, non-redeemable CSLM Class A Ordinary Shares | $ | (3.82 | ) | $ | - | $ | - | $ | - | |||||||||||
| CSLM weighted-average non-redeemable Class B Ordinary Shares outstanding - basic and diluted | 1 | - | - | - | ||||||||||||||||
| Basic and diluted net loss per share, non-redeemable CSLM Class B Ordinary Shares | $ | (3.82 | ) | $ | - | $ | - | $ | - | |||||||||||
| Fusemachines Inc. weighted-average common shares outstanding - basic and diluted | - | 11,255,399 | - | - | ||||||||||||||||
| Basic and diluted net loss per share, Fusemachines Inc. common stock | $ | - | $ | (0.46 | ) | $ | - | $ | - | |||||||||||
| Fusemachines Pubco weighted-average common shares outstanding - basic and diluted | - | - | - | 28,350,031 | 4(m) | |||||||||||||||
| Basic and diluted net loss per share, Fusemachines Pubco Common Stock | $ | - | $ | - | $ | - | $ | (0.93 | ) | 4(m) | ||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2024
| Actual Redemptions | ||||||||||||||||||||||||||
Year Ended December 31, 2024 | Year Ended December 31, 2024 | Transaction Accounting Adjustments | ||||||||||||||||||||||||
| (In thousands, except per share and weighted-average share data) | CSLM Acquisition Corp. Reclassified (Note 5) | Fusemachines Inc. Historical | Financing Transactions | Notes | Other Transaction Accounting Adjustments | Notes | Pro Forma Statement of Operations | Notes | ||||||||||||||||||
| Revenue | $ | - | $ | 8,811 | $ | - | $ | - | $ | 8,811 | ||||||||||||||||
| Cost of revenue | - | (3,976 | ) | - | - | (3,976 | ) | |||||||||||||||||||
| Gross profit | - | 4,835 | - | - | 4,835 | |||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling and marketing | - | 1,966 | - | - | 1,966 | |||||||||||||||||||||
| Research and development | - | 732 | - | - | 732 | |||||||||||||||||||||
| General and administrative | 1,760 | 10,333 | - | 1,961 | 4(e) | 15,351 | ||||||||||||||||||||
| - | - | - | 608 | 4(f) | - | |||||||||||||||||||||
| - | - | - | 151 | 4(i) | - | |||||||||||||||||||||
| - | - | - | 531 | 4(d) | - | |||||||||||||||||||||
| - | - | - | 7 | 4(g) | - | |||||||||||||||||||||
| Total operating expenses | 1,760 | 13,031 | - | 3,258 | 18,049 | |||||||||||||||||||||
| Operating loss | (1,760 | ) | (8,196 | ) | - | (3,258 | ) | (13,214 | ) | |||||||||||||||||
| Other income (expense), net: | ||||||||||||||||||||||||||
| Dividends on marketable securities held in Trust Account | 2,033 | - | - | (2,033 | ) | 4(b) | - | |||||||||||||||||||
| Covenant fees | 505 | - | - | (505 | ) | 4(h) | - | |||||||||||||||||||
| Provision for credit losses | (505 | ) | - | - | 505 | 4(h) | - | |||||||||||||||||||
| Interest expense | (101 | ) | (234 | ) | - | 4(aaa) | 101 | 4(a) | (221 | ) | ||||||||||||||||
| - | - | - | (16 | ) | 4(f) | - | ||||||||||||||||||||
| - | - | - | 19 | 4(l) | - | |||||||||||||||||||||
| - | - | - | 10 | 4(k) | - | |||||||||||||||||||||
| Loss on extinguishment of debt | - | (601 | ) | - | - | (601 | ) | |||||||||||||||||||
| Loss on extinguishment of payable | - | (70 | ) | - | - | (70 | ) | |||||||||||||||||||
| Loss on change in fair value of convertible notes and warranty liability | - | (6,104 | ) | - | 5,589 | 4(c) | (515 | ) | ||||||||||||||||||
| - | - | - | - | 4(j) | - | |||||||||||||||||||||
| Other expense | - | (148 | ) | - | - | (148 | ) | |||||||||||||||||||
| Total other income (expense), net | 1,932 | (7,157 | ) | - | 3,670 | (1,555 | ) | |||||||||||||||||||
| Income (loss) before income taxes | 172 | (15,353 | ) | - | 412 | (14,769 | ) | |||||||||||||||||||
| Provision for income tax | - | (31 | ) | - | - | (31 | ) | |||||||||||||||||||
| Equity in earnings of investee, net of income tax provision of $0 | - | (1 | ) | - | - | (1 | ) | |||||||||||||||||||
| Net income (loss) | $ | 172 | $ | (15,385 | ) | $ | - | $ | 412 | $ | (14,801 | ) | ||||||||||||||
| CSLM weighted-average Class A Ordinary Shares subject to possible redemption outstanding - basic and diluted | 3,527,561 | - | - | - | - | |||||||||||||||||||||
| Basic and diluted earnings per share, CSLM Class A Ordinary Shares subject to redemption | $ | 0.47 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| CSLM weighted-average non-redeemable Class A Ordinary Shares outstanding - basic and diluted | 4,743,749 | - | - | - | - | |||||||||||||||||||||
| Basic and diluted net loss per share, non-redeemable CSLM Class A Ordinary Shares | $ | (0.31 | ) | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| CSLM weighted-average non-redeemable Class B Ordinary Shares outstanding - basic and diluted | 1 | - | - | - | - | |||||||||||||||||||||
| Basic and diluted net loss per share, non-redeemable CSLM Class B Ordinary Shares | $ | (0.31 | ) | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Fusemachines Inc. weighted-average common shares outstanding - basic and diluted | - | 10,574,934 | - | - | - | |||||||||||||||||||||
| Basic and diluted net loss per share, Fusemachines Inc. common stock | $ | - | $ | (1.45 | ) | $ | - | $ | - | $ | - | |||||||||||||||
| Fusemachines Pubco weighted-average common shares outstanding - basic and diluted | - | - | - | - | 28,350,031 | 4(m) | ||||||||||||||||||||
| Basic and diluted net loss per share, Fusemachines Pubco Common Stock | $ | - | $ | - | $ | - | $ | - | $ | (0.52 | ) | 4(m) | ||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
1. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of SEC Regulation S-X, as amended by the final rule, Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses. Release No. 33-10786 replaces the historical pro forma adjustments criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). Management has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. The adjustments presented in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the Business Combination, the Financing Transactions, and the Adjustments for Other Material Events. The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. CSLM and Fusemachines had a historical relationship prior to the Business Combination. Accordingly, pro forma adjustments were required to eliminate activities between CSLM and Fusemachines.
The unaudited pro forma condensed combined balance sheet as of September 30, 2025, was derived from the unaudited historical balance sheet of CSLM as of September 30, 2025, and the unaudited historical balance sheet of Fusemachines as of September 30, 2025, and gives effect to the Business Combination as if it had occurred on September 30, 2025. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024, combines the audited historical statement of operations of CSLM for the year ended December 31, 2024, and the audited historical statement of operations of Fusemachines for the year ended December 31, 2024, and reflects adjustments assuming that any adjustments that were made to the unaudited pro forma condensed combined balance sheet as of September 30, 2025 are assumed to have been made on January 1, 2024 for the purpose of adjusting the unaudited pro forma condensed combined statement of operations. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2025, combines the unaudited historical statement of operations of CSLM for the nine months ended September 30, 2025, and the unaudited historical statement of operations of Fusemachines for the nine months ended September 30, 2025, and reflects adjustments assuming that any adjustments that were made to the unaudited pro forma condensed combined balance sheet as of September 30, 2025 are assumed to have been made on January 1, 2024 for the purpose of adjusting the unaudited pro forma condensed combined statement of operations.
The pro forma adjustments reflecting the consummation of the Business Combination, the Financing Transactions, and the Other Material Events are based on certain currently available information and certain assumptions and methodologies that both CSLM and Fusemachines believe are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the differences may be material. Both CSLM and Fusemachines believe that the assumptions and methodologies provide a reasonable basis for presenting all the significant effects of the Business Combination, the Financing Transactions, and the Other Material Events based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information has been prepared based on the actual exercise of CSLM Public Stockholders’ right to have their CSLM Class A ordinary shares subject to possible redemption (the “CSLM Public Shares”) redeemed for their pro rata share of the Trust Account. 99,187 CSLM Public Shares were redeemed for an aggregate redemption price of $1.2 million out of the Trust Account, at a redemption price of $12.33 per share.
Included in the shares outstanding and weighted-average shares outstanding (for the calculation of pro forma basic and diluted loss per share) as presented in the unaudited pro forma condensed combined financial information are the shares of Fusemachines Pubco Common Stock issued to legacy Fusemachines stockholders on the Closing Date of the Business Combination and the CSLM shares that remained outstanding and represent shares of Fusemachines Pubco Common Stock, which includes the CSLM Public Shares, shares of the Sponsor and related parties of Sponsor, the shares issued in connection with the PIPE Investment, and the shares issued to CSLM stockholders upon the automatic exercise of the outstanding CSLM Rights upon consummation of the Business Combination.
The table directly below presents shares outstanding on the Closing Date as depicted in the unaudited pro forma condensed combined financial information.
| Actual Redemptions | ||||||||
| Shares | % Ownership | |||||||
| Shares held by Fusemachines Stockholders | 14,864,110 | 52 | % | |||||
| Shares held by CSLM public stockholders, Sponsor, and related parties of Sponsor | 12,654,921 | (1) | 45 | % | ||||
| Shares held by unrelated third parties | 831,000 | 3 | % | |||||
| 28,350,031 | 100 | % | ||||||
| 1) | Represents (a) 1,029,836 shares held by an affiliate of the Sponsor resulting from the conversion of the Sponsor Convertible Notes into Fusemachines Common Stock on the Closing Date whereby such common stock was subsequently and immediately exchanged for Fusemachines Pubco Common Stock immediately prior to the Closing, (b) 3,320,241 shares held by an affiliate of the Sponsor resulting from the conversion of a convertible note into Fusemachines Common Stock on the Closing Date whereby such common stock was subsequently and immediately exchanged for Fusemachines Pubco Common Stock immediately prior to the Closing, (c) 406,639 shares held an affiliate of the Sponsor resulting from the partial conversion of the 3rd Amended and Restated Promissory Note into Fusemachines Pubco Common Stock on the Closing Date, (d) 901,955 CSLM Class A Ordinary Shares subject to possible redemption sold in CSLM’s Initial Public Offering that have not been redeemed for cash, (e) 1,897,486 shares issued upon Closing as a result of the automatic exercise of the rights related to 18,975,000 units issued in CSLM’s Initial Public Offering, (f) 1,184,000 shares issued upon Closing as a result of the PIPE Financing, (g) 3,762,750 shares held by Sponsor, and (h) 150,000 shares held by directors of CSLM. |
2. Accounting for the Business Combination
Notwithstanding the legal form, the Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP and not as a business combination under ASC 805. Under this method of accounting, CSLM will be treated as the acquired company for accounting purposes, whereas Fusemachines will be treated as the accounting acquirer. In accordance with this method of accounting, the Business Combination will be treated as the equivalent of Fusemachines issuing shares for the net assets of CSLM, accompanied by a recapitalization. The net assets of Fusemachines will be stated at historical cost, with no goodwill or other intangible assets recorded, and operations prior to the Business Combination will be those of Fusemachines. Fusemachines has been determined to be the accounting acquirer for purposes of the Business Combination based on an evaluation of the following facts and circumstances:
| ● | Legacy Fusemachines stockholders have a majority of the voting interest in Fusemachines Pubco with approximately 52% of the voting interest. |
| ● | Legacy Fusemachines stockholders have a majority of the voting interest in Fusemachines Pubco with approximately 52% of the voting interest.i |
| ● | Following the consummation of the Business Combination, the equity interests of the Fusemachines Chief Executive Officer represent the largest single voting interest in Fusemachines Pubco. Fusemachines’ Chief Executive Officer’s equity interests represent approximately 20% of the voting interest in Fusemachines Pubco. |
| ● | Fusemachines has designated four out of the five members of the Board of Directors of Fusemachines Pubco. |
| ● | The officers of Fusemachines have continued as the officers of Fusemachines Pubco. |
| ● | The intended strategy of Fusemachines Pubco continues to focus on Fusemachines’ core product offerings. |
3. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2025
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro Forma Adjustments for Financing Transactions:
| (aaa) | To reflect the Sponsor PIPE Investment Amount of $11.8 million received on the Closing Date for 1,184,000 shares of Fusemachines Pubco Common Stock at $10.00 per share. This issuance of shares resulted in a $0 thousand adjustment within the Fusemachines Pubco Common Stock, par value $0.0001 line item due to the effect of rounding as the adjustment to record the shares issued at par value was less than $1 thousand. |
| (bbb) | To reflect interest incurred on related party promissory notes issued by Fusemachines to its Chief Executive Officer from October 1, 2025 through the Closing Date. |
| (ccc) | To reflect the (i) interest incurred on the Fourth Amended and Restated Promissory Note with the Sponsor from October 1, 2025 through the Closing Date, (ii) additional drawdowns by CSLM on the Fourth Amended and Restated Promissory Note between CSLM and the Sponsor in the amount of $0.1 million from October 1, 2025 through the Closing Date. |
| (ddd) | To reflect the funds received on a convertible note by Fusemachines from an affiliate of the Sponsor in the principal amount of $2.2 million. |
| (eee) | To reflect interest incurred from October 1, 2025 through the Closing Date on five convertible notes held at amortized cost of approximately $400, $400, $300, $300, and $500, respectively. |
Pro Forma Adjustments for Other Material Events:
| (aa) | To reflect extension payments subsequent to September 30, 2025 by CSLM into the Trust Account in order to extend the amount of time it has available to complete its initial Business Combination through the Closing Date. |
| (bb) | To reflect dividends on marketable securities held in the Trust Account from October 1, 2025 through the Closing Date. |
Pro Forma Other Transaction Accounting Adjustments:
| (a) | To reflect the settlement on the Closing Date of the Fourth Amended and Restated Promissory Note. The Fourth Amended and Restated Promissory Note was settled through a partial repayment in cash as well as an issuance of shares of Fusemachines Pubco Common Stock. Immediately prior to their settlement, these convertible notes (which are carried at amortized cost) had an aggregate carrying value of $3.7 million. This adjustment in Note 3(a) reflects the removal of this carrying value of $3.7 million, removal of accrued and unpaid interest in the amount of $0.3 million, the payment of $2.3 million of cash, an increase to Fusemachines Pubco Common Stock of less than $1 thousand, and an increase to Additional paid in capital of $1.6 million. The conversion of the shares resulted in a $0 thousand adjustment within the Fusemachines Pubco Common Stock, par value $0.0001 line item due to the effect of rounding as the adjustment to record the shares converted at par value was less than $1 thousand. |
| (b) | To reflect the release of the marketable securities held in the Trust Account to Cash, net of (i) actual redemptions by CSLM Public Stockholders for their pro rata share of the Trust Account in the amount of $1.2 million and (ii) the Forward Purchase Agreement prepayment of $11.0 million to the Meteora Parties (see Note 3(m)). Pursuant to the Forward Purchase Agreement, the prepayment was made from the funds available in the Trust Account. Further, to reflect the conversion of 901,955 CSLM Class A Ordinary Shares subject to possible redemption that were not redeemed (see Note 3(c)) into shares of Fusemachines Pubco Common Stock. The conversion resulted in a $0 thousand adjustment, as presented, to the Fusemachines Pubco Common Stock, par value $0.0001 line item, due to the effect of rounding, as the adjustment to reflect the increase in the par value of Fusemachines Pubco Common Stock resulting from the conversion is less than $1 thousand. |
| (c) | To reflect CSLM Public Stockholders’ exercise their redemption rights of 99,187 CSLM Class A Ordinary Shares subject to possible redemption prior to the consummation of the Business Combination at a redemption price of $12.33 per share, resulting in an aggregate cash payment of approximately $1.2 million. |
| (d) | To reflect the conversion of all 4,743,749 and 1 issued and outstanding CSLM Class A Ordinary Shares and CSLM Class B Ordinary Shares not subject to possible redemption, respectively, immediately prior to the Closing Date into shares of Fusemachines Pubco Common Stock. The conversion of the shares resulted in a $0 thousand adjustment within the CSLM Class A Ordinary Shares and CSLM Class B Ordinary Shares line items, respectively, due to the effect of rounding as the adjustments to record the removal of the par value of the converted shares from the CSLM Class A Ordinary Shares and CSLM Class B Ordinary Shares line items were less than $1 thousand, respectively. Additionally, the conversion resulted in a $0 thousand adjustment within the Fusemachines Pubco Common Stock, par value $0.0001 line item as the adjustment to record the conversion into Fusemachines Pubco Common Stock at par value was less than $1 thousand. |
| (e) | To reflect the Sponsor’s transfers and sales of shares of common stock to third-party vendors providing services to CSLM. Management assessed the substance of the share transfers and sales and determined that they represented share-based payments by the Sponsor, which is a holder of an economic interest in Fusemachines Pubco and CSLM, as compensation for services provided by nonemployees in accordance with ASC 718-10-15-4. Based on this determination, management concluded that for the shares that were sold, the excesses of the estimated fair values of such shares on the measurement dates over the purchase prices (the purchase prices of all sales amounted to approximately $1 thousand) represented compensation expense to be recognized over the respective nonemployee vesting periods, in accordance with ASC 718-10-25-2B. Management also concluded that for the shares that were transferred, the estimated fair values of such shares on the measurement dates represented compensation expense to be recognized over the respective nonemployee vesting periods, in accordance with ASC 718-10-25-2B. For purposes of the unaudited pro forma condensed combined financial information, all of the nonemployee vesting periods were determined to be the point-in-time of the closing of the Merger as this is when the expense would have been recognized if cash had been paid for the nonemployees’ services. Management used the quoted market prices of CSLM for the estimated measurement date fair values of all shares transferred and sold. In accordance with ASC 718, for equity-classified awards, the measurement date for purposes of the fair value determination was determined to be the grant date, the date on which the measurement of the award was fixed. For the shares that were sold, management recorded the entirety of the excesses of the grant date fair values over the purchase prices as share-based compensation expense, which increased the Accumulated deficit and Additional paid in capital on the unaudited pro forma condensed combined balance sheet. For the shares that were transferred, management recorded the entire grant date fair values as share-based compensation expense, which increased the Accumulated deficit and Additional paid in capital on the unaudited pro forma condensed combined balance sheet. Refer to Note 4(e) for the impact of these share-based payment awards on the unaudited pro forma condensed combined statement of operations. |
| (f) | To reflect the issuance of 1,897,486 shares of Fusemachines Pubco Common Stock upon the automatic exercise on the Closing Date of the CSLM Rights to acquire one-tenth of one share of Fusemachines Pubco Common Stock. The issuance of the shares resulted in a $0 thousand adjustment within the Fusemachines Pubco Common Stock, par value $0.0001 and Additional paid-in capital line items, respectively, due to the effect of rounding as the adjustment to record the shares at par value and associated adjustment to Additional paid-in capital were less than $1 thousand, respectively. |
| (g) | To reflect the remeasurement to fair value of the Fusemachines convertible notes issued in January 2024 at the Closing Date, as Fusemachines elected the fair value option upon issuance of the notes. The fair value of the convertible notes as of the Closing Date of $10.3 million (historical balance of the notes was $9.5 million plus this remeasurement to fair value of $0.9 million) is based on the number of shares of Fusemachines Common Stock that the convertible notes will convert into. The convertible notes issued in January 2024 were converted into 1,565,053 shares of Fusemachines Common Stock immediately prior to the Closing, and immediately following such conversion such Fusemachines Common Stock was converted into Fusemachines Pubco Common Stock in accordance with the Conversion Ratio. |
The fair value per share of Fusemachines Common Stock used to remeasure the January 2024 notes to fair value on the Closing Date was $6.64. This value has been determined based on an income approach and a market approach in accordance with Internal Revenue Service Ruling 59-60 for compliance with Internal Revenue Code Section 409A. This combination of the income and market approach is consistent with the provisions of the American Institute of Certified Public Accountants (“AICPA”) Accounting and Valuation Guide which are generally recognized as reliable provisions for a valuation methodology.
| (h) | To reflect the BTIG waiver (waiver in connection with Share Transfer Agreement described in Introduction above) of the deferred underwriting fee payable on the Closing Date. |
| (i) | To reflect the payment of transaction costs of CSLM of $2.2 million paid on or prior to the Closing Date, which is comprised of (i) 1.5 million of transaction costs incurred prior to September 30, 2025 within accrued expenses, (ii) $0.2 million in transaction costs incurred prior to September 30, 2025 within accounts payable and other current liabilities, and (iii) $0.5 million in transaction costs incurred subsequent to September 30, 2025. |
| (j) | To reflect the conversion of 9,043,234 shares of Fusemachines Preferred Stock into an equivalent number of shares of Fusemachines Common Stock immediately prior to the Closing Date pursuant to the terms of the Fusemachines certificate of incorporation. The conversion of the shares resulted in a $0 thousand adjustment within the Fusemachines Inc. Common Stock, par value $0.00001 line item due to the effect of rounding as the adjustment to record the shares at par value was less than $1 thousand. |
| (k) | To reflect the settlements on the Closing Date of 1) the Fusemachines convertible notes issued in October 2019 and September 2021 and 2) the Fusemachines convertible notes issued in January 2024. |
| 1) | The October 2019 and September 2021 convertible notes will be settled through a partial repayment in cash as well as an issuance of shares of Fusemachines Common Stock. Immediately prior to their settlement, these convertible notes (which were carried at fair value) had an aggregate carrying value of $8.4 million. This adjustment in Note 3(k) reflects the removal of this carrying value of $8.4 million, the increase to accrued expenses and other current liabilities of $0.3 million to reflect the portion of the convertible note that will be settled in cash, an increase to Fusemachines common stock of less than $1 thousand, and an increase to Additional paid in capital of $8.1 million. |
| 2) | The January 2024 convertible notes were settled through an issuance of shares of Fusemachines Common Stock. Immediately prior to their settlement, these convertible notes (which are carried at fair value) had an aggregate carrying value of $10.3 million. This adjustment in Note 3(k) reflects the removal of this carrying value of $10.3 million, an increase to Fusemachines common stock of less than $1 thousand, and an increase to Additional paid in capital of $10.3 million. |
| (l) | To reflect the payment on the Closing Date of the $0.1 million premium for a six-year prepaid directors’ and officers’ tail policy. Further, to reflect the down payment on the Closing Date of $0.1 million and the recording of $0.4 million to notes payable, current for the deferred charge of the directors’ and officers’ insurance financed over a one-year policy term. |
| (m) | To reflect the $11.0 million prepayment made by CSLM to the Meteora Parties pursuant to the Forward Purchase Agreement, funded directly from the Trust Account at Closing, and the derecognition of the $11.0 million forward purchase agreement prepayment payable from CSLM’s historical balance sheet. |
| (n) | To reflect the settlement of a Fusemachines accounts payable balance through the issuance of 45,000 shares of Fusemachines Common Stock to a Fusemachines vendor immediately prior to the Closing of the Business Combination. Upon the Closing of the Business Combination, the 45,000 newly issued Fusemachines Common Stock were exchanged at the Conversion Ratio of 0.6580 for shares of Fusemachines Pubco Common Stock. The settlement of the accounts payable balance was treated as the settlement of convertible debt that does not contain a bifurcated embedded conversion feature under ASC 815. As such, pursuant to ASC 470-20-40-4, upon conversion, the net carrying amount of the accounts payable is derecognized with the accounts payable net carrying amount credited to additional paid-in capital to reflect the equity shares issued and no gain or loss is recognized. The issuance of the shares resulted in a $0 thousand adjustment within the Fusemachines Inc. Common Stock, par value $0.00001 line item due to the effect of rounding as the adjustment to record the shares at par value was less than $1 thousand. |
| (o) | To reflect (i) the reversal of deferred transaction costs in the historical Fusemachines financial statements as of September 30, 2025 in the amount of $1.9 million that were specific incremental costs directly attributable to the offering of securities. The $1.9 million is recorded as a reduction to deferred transaction costs and additional paid-in capital, (ii) advisory, legal, and other professional fees of $0.5 million incurred subsequent to September 30, 2025 that are specific incremental costs directly attributable to the offering of securities and are recorded as an increase to accrued expenses and other current liabilities and a reduction to additional paid-in capital, and (iii) $7 thousand incurred in connection with the Business Combination subsequent to September 30, 2025 but are not directly attributable to the offering of securities. The $7 thousand in costs incurred subsequent to September 30, 2025 that are not directly attributable to the offering of securities is recorded as an addition to accrued expenses and other current liabilities and accumulated deficit. |
| (p) | To reflect the Sponsor’s sale of shares of Fusemachines Pubco Common Stock to a third-party vendor providing services to Fusemachines. Management assessed the substance of the share sale and determined that it represented a share-based payment awarded by the Sponsor, which is a holder of an economic interest in Fusemachines Pubco, as compensation for services provided by nonemployees in accordance with ASC 718-10-15-4. Based on this determination, management concluded that for the shares that were sold, the excess of the estimated fair value of such shares on the measurement date over the purchase price (the purchase price was less than $1 thousand) represented compensation expense to be recognized over the nonemployee vesting period, in accordance with ASC 718-10-25-2B. For purposes of the unaudited pro forma condensed combined financial information, the nonemployee vesting period was determined to be the point-in-time of the closing of the Merger as this is when the expense would have been recognized if cash had been paid for the nonemployee services. Management used the quoted market price of CSLM for the estimated measurement date fair value of the shares sold. In accordance with ASC 718, for equity- classified awards, the measurement date for purposes of the fair value determination was determined to be the grant date, the date on which the measurement of the award was fixed. For the shares that were sold, management recorded the entirety of the excess of the grant date fair value over the purchase price as share-based compensation expense, which increased the Accumulated deficit and Additional paid in capital on the unaudited pro forma condensed combined balance sheet. Refer to Note 4(i) for the impact of this share-based payment award on the unaudited pro forma condensed combined statement of operations. The sale of shares resulted in a $0 thousand adjustment to cash as presented in the Cash and cash equivalents line item due to the effect of rounding as the adjustment to record the cash received was less than $1 thousand. |
| (q) | To reflect the recapitalization of Fusemachines through the contribution of 28,186,684 shares of Fusemachines Common Stock and the issuance of 19,214,201 shares of Fusemachines Pubco Common Stock, reflecting the Conversion Ratio of 0.6580, and to reflect the derecognition of the accumulated deficit of CSLM which is reversed to additional paid-in capital. |
Notwithstanding the legal form, the Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP and not as a business combination under ASC 805. Under this method of accounting, CSLM, will be treated as the acquired company for accounting purposes, whereas Fusemachines will be treated as the accounting acquirer. In accordance with this method of accounting, the Business Combination will be treated as the equivalent of Fusemachines issuing shares for the net assets of CSLM, accompanied by a recapitalization. The net assets of Fusemachines will be stated at historical cost, with no goodwill or other intangible assets recorded, and operations prior to the Business Combination will be those of Fusemachines.
The reverse recapitalization adjustment is determined as follows (in thousands)
| Derecognition of Fusemachines Common Stock | $ | (2 | ) | |
| Derecognition of Fusemachines treasury stock | $ | 2,903 | ||
| Derecognition of CSLM’s accumulated deficit(1) | $ | 35,364 | ||
| Issuance of Fusemachines Pubco Common Stock in accordance with the Conversion Ratio under the No Additional Redemption Scenario | $ | 2 | ||
| Net reduction of additional paid-in capital due to derecognition of CSLM’s accumulated deficit and Fusemachines’ historical equity and issuance of Fusemachines Pubco Common Stock | $ | (38,267 | ) | |
| (1) | The derecognition of CSLM’s accumulated deficit of $35.4 million is determined as follows (in thousands): |
| Historical accumulated deficit of CSLM as of September 30 2025 | $ | 32,882 | ||
| Interest expense on CSLM related party loan payable, current, see 3(ccc) | 11 | |||
| Dividend income on marketable securities held in Trust Account, see 3(bb) | (21 | ) | ||
| Compensation expense from transfers and sales of shares from the Sponsor to third-party vendors of CSLM, see 3(e) | 1,961 | |||
| Transaction costs of CSLM through the Closing Date, see 3(i) | 531 | |||
| Total adjustment to derecognize CSLM’s accumulated deficit | $ | 35,364 |
| (r) | To reflect the repayment of the outstanding principal and unpaid interest on the seven Fusemachines related party promissory notes on the Closing Date. |
| (s) | To reflect the settlement on the Closing Date of the six Fusemachines convertible notes, one issued in April 2024, one issued in June 2024, two issued in September 2024, one issued in February 2025, and one issued in May 2025. |
These six convertible notes were settled through an issuance of shares of Fusemachines Common Stock. Immediately prior to their settlement, these convertible notes (which are held at amortized cost) had a carrying value of $0.1 million, $0.1 million, $0.1 million, $0.2 million, $0.2 million, and $2.2 million, respectively. This adjustment in Note 3(s) reflects the removal of this aggregate carrying value of $2.9 million, an increase to Fusemachines Inc. Common Stock, par value $0.00001, of less than $1 thousand, and an increase to Additional paid in capital of $2.8 million.
| (t) | To reflect the remeasurement of the Fusemachines convertible notes issued in October 2019 and September 2021 from September 30, 2025 to their estimated fair value at the Closing Date immediately prior to their settlement on the Closing Date (refer to Note 3(k) for an adjustment reflecting the settlement of the convertible notes on the Closing Date). The fair value of the convertible notes as of the Closing Date of $8.4 million is based on the number of shares of Fusemachines Common Stock that the convertible notes were converted into after the partial cash repayment. |
The fair value per share of Fusemachines Common Stock used to remeasure the October 2019 and September 2021 notes to fair value on the Closing Date was $6.64. This value has been determined based on an income approach and a market approach in accordance with Internal Revenue Service Ruling 59-60 for compliance with Internal Revenue Code Section 409A. This combination of the income and market approach is consistent with the provisions of the American Institute of Certified Public Accountants (“AICPA”) Accounting and Valuation Guide which are generally recognized as reliable provisions for a valuation methodology.
| (u) | To reflect the forfeiture of warrants by the Sponsor (with no consideration to Sponsor) pursuant to the terms of the Sponsor Support Agreement. The forfeited warrants were immediately cancelled upon the Closing Date. The adjustment consists solely of an increase and decrease to additional paid-in capital for the historical carrying amount of the warrants. Additional paid-in capital is decreased as the forfeiture was deemed to be specific and incremental to the offering of securities that will be issued upon the Closing Date as the forfeiture was entered into to remove a source of potential dilution to induce parties to the Merger Agreement to consummate the Business Combination. Additional paid-in capital is increased because the forfeiture represents a termination of equity-classified contracts, the contracts being the warrants, and the offsetting entry for a termination of an equity-classified contract is to additional paid- in capital. The net amount of the adjustment to Additional paid-in capital is $0 thousand. |
| (v) | To reflect the change in redemption value of the CSLM Class A Ordinary Shares subject to possible redemption due to the actual income on marketable securities from the Trust Account and extension payments. Changes in the redemption value of stock classified as temporary equity may be recognized immediately as they occur by adjusting the carrying amount of the stock in accordance with ASC 480-10-S99-3A. |
4. Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the Nine Months Ended September 30, 2025 and for the Year Ended December 31, 2024
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro Forma Adjustments for Financing Transactions:
| (aaa) | Notes 3(bbb), 3(ccc), and 3(eee) on the balance sheet reflect the total interest incurred from October 1, 2025 through the Closing Date on the following notes held at amortized cost: (i) the related party promissory notes by Fusemachines to its Chief Executive Officer, (ii) the Fourth Amended and Restated Promissory Note, (iii) and five Fusemachines convertible notes issued in April 2024, June 2024, two issued in September 2024, and February 2025, respectively. As the related party promissory notes held at amortized cost in (i) were repaid in cash on January 1, 2024 for purposes of potentially making pro forma adjustments to the statement of operations, no adjustment to record interest expense has been made on the pro forma statement of operations because the notes are deemed to no longer exist on January 1, 2024 as it is assumed they were repaid on this date resulting in a $0 thousand adjustment within the interest expense line item. As the convertible notes held at amortized cost in (ii), (iii), and (iv) were converted into stock on January 1, 2024 for purposes of potentially making pro forma adjustments to the statement of operations, no adjustment to record interest expense has been made on the pro forma statement of operations because the notes are deemed to no longer exist on January 1, 2024 as it is assumed they converted into stock on this date resulting in a $0 thousand adjustment within the interest expense line item. This is a non-recurring item. |
Pro Forma Transaction Accounting Adjustments:
| (a) | To reflect the elimination of historical interest expense on the CSLM promissory note as it was repaid on the Closing Date. |
| (b) | To reflect the removal of the previously recognized dividend income from CSLM’s marketable securities held in Trust Account which was released upon the Closing of the Business Combination. |
| (c) | To reflect the removal of the previously recognized loss on change in fair value in the historical Fusemachines consolidated statement of operations for the nine months ended September 30, 2025 and for the year ended December 31, 2024 of $1.0 million and $3.1 million, respectively, for the Fusemachines convertible promissory notes issued in October 2019 and September 2021. Additionally, to reflect the removal of the previously recognized loss on change in fair value in the historical Fusemachines consolidated statement of operations for the nine months ended September 30, 2025 and for the year ended December 31, 2024 of $0.5 million and $2.5 million, respectively, for the Fusemachines convertible promissory notes issued in January 2024. The October 2019 and September 2021 convertible notes were partially repaid on the Closing Date and the remainder was converted into Fusemachines Common Stock on the Closing Date. The January 2024 convertible notes were converted into Fusemachines Common Stock on the Closing Date. This is a non-recurring item. |
| (d) | To reflect the actual transaction costs for CSLM for certain accounting, auditing, and other professional fees incurred in connection with the Business Combination. This is a non-recurring item. |
| (e) | To reflect compensation costs associated with the Sponsor’s transfers and sales of shares of Fusemachines Pubco Common Stock to third-party vendors providing services to CSLM. This is a non-recurring item. Refer to Note 3(e) for the impact of these share-based payment awards on the unaudited pro forma condensed combined balance sheet. |
| (f) | To reflect amortization expense and interest expense for the directors’ and officers’ liability insurance policy, interest expense is due to the portion of the policy assumed to be financed, which was entered into upon Closing. |
| (g) | To reflect transaction costs for Fusemachines for certain accounting, auditing, and other professional fees incurred in connection with the Business Combination that are not deemed to be specific incremental costs directly attributable to this proposed offering of securities. This is a non-recurring item. |
| (h) | Reflects the removal of CSLM’s covenant fee income and the associated provision for credit losses for the covenant fee. The covenant fee income and associated provision for credit losses were removed because the Second Amendment to Merger Agreement removed the terms which required Fusemachines to pay CSLM monthly for the delayed delivery of its audited financial statements to CSLM. Pursuant to ASC 610-20 and Section 210.5-03 of Regulation S-X, CSLM initially recorded the income from these fees as Covenant fees within the Other income section of its historical statement of operations for the year ended December 31, 2024 as these fees were a contractual stipulation as part of the Merger Agreement rather than revenue from delivering or producing goods, rendering services, or other activities that constitute an entity’s ongoing major or central operations. |
| (i) | To reflect compensation costs for the Sponsor’s sale of shares of Fusemachines Pubco Common Stock to a third-party vendor providing services to Fusemachines. Refer to Note 3(p) for the impact of this share-based payment award on the unaudited pro forma condensed combined balance sheet. This is a non-recurring item. |
| (j) | Notes 3(k) on the balance sheet reflects the conversion of all convertible notes held at fair value into stock. As these balance sheet adjustments are assumed to have been made on January 1, 2024 for purposes of potentially making pro forma adjustments to the statement of operations, no adjustment to remeasure the notes to fair value has been made on the pro forma statement of operations because the notes are deemed to no longer exist on January 1, 2024 as it is assumed they converted into stock on this date resulting in a $0 thousand adjustment within the Loss on change in fair value of convertibles notes and warrant liability line item. |
| (k) | To reflect the elimination of historical interest expense on five Fusemachines convertible notes held at amortized cost issued prior to September 30, 2025 of approximately $5 thousand, $4 thousand, $3 thousand, $3 thousand, and $5 thousand, respectively, for the nine months ended September 30, 2025, and to reflect the elimination of historical interest expense on four Fusemachines convertible notes held at amortized cost issued prior to December 31, 2024, of approximately $4 thousand, $4 thousand, $1 thousand, and $1 thousand, respectively, for the year ended December 31, 2024. These convertible notes were converted into Fusemachines Common Stock on the Closing Date. |
| (l) | To reflect the elimination of historical interest expense on certain related party promissory notes issued by Fusemachines to its Chief Executive Officer prior to December 31, 2024. These related party promissory notes were repaid on the Closing Date. |
| (m) | The pro forma basic and diluted net loss per share amounts presented in the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2025 and for the year ended December 31, 2024, respectively, are based upon the number of Fusemachines Pubco shares outstanding at the Closing of the Business Combination, assuming the Business Combination occurred on January 1, 2024. |
Pro forma basic and diluted net loss per share is calculated as follows for the nine months ended September 30, 2025:
| Nine
Months Ended September 30, 2025 | ||||
| Actual Redemptions | ||||
| Numerator: | ||||
| Pro forma net loss | $ | (26,506,000 | ) | |
| Denominator: | ||||
| Assume conversion of CSLM Class A Ordinary Shares subject to possible redemption that were not redeemed into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 901,955 | |||
| Assume conversion of non-redeemable CSLM Class A Ordinary Shares into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 4,743,749 | |||
| Assume conversion of non-redeemable CSLM Class B Ordinary Shares into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 1 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock in connection with the PIPE Investment | 1,184,000 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock to an affiliate of the Sponsor due to partial conversion of the 3rd Amended and Restated Promissory Note as a result of assuming closing of the Business Combination on January 1, 2024 | 408,639 | |||
| Assume conversion of 18,975,000 Parent Rights into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 1,897,486 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock to Fusemachines stockholders as a result of assuming closing of the Business Combination on January 1, 2024 | 13,917,879 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock to holders of Fusemachines convertible notes as a result of assuming closing of the Business Combination on January 1, 2024 | 5,296,322 | |||
| Pro forma weighted-average shares outstanding - basic and diluted | 28,350,031 | |||
| Pro forma net loss per share - basic and diluted | $ | (0.93 | ) | |
The following securities were excluded from the computation of pro forma diluted net loss per share for the nine months ended September 30, 2025 because including them would have had an anti-dilutive effect:
| None
Months Ended September 30, 2025 | ||||
| Actual Redemptions | ||||
| Fusemachines Pubco Private Placement Warrants(1) | 4,093,461 | |||
| CSLM Public Warrants(2) | 9,487,500 | |||
| Fusemachines Pubco Common Stock stock options(3) | 693,420 | |||
| Shortfall Warrants(4) | 2,108,070 | |||
| Total anti-dilutive Fusemachines Pubco Common Stock | 16,382,451 | |||
| (1) | Represents 3,971,250 warrants held by CSLM Sponsor, along with 122,211 warrants held by former debt holders of Fusemachines. |
| (2) | Represents warrants held by CSLM Public Stockholders. |
| (3) | Represents options to purchase Fusemachines Pubco Common Stock underlying the conversion rights under the Fusemachines Equity Incentive Plan. |
| (4) | Represents 2,108,070 warrants held by the Meteora Parties issued in connection with the Forward Purchase Agreement. |
Pro forma basic and diluted net loss per share is calculated as follows for the year ended December 31, 2024:
| Year
Ended December 31, 2024 | ||||
| Actual Redemptions | ||||
| Numerator: | ||||
| Pro forma net loss | $ | (14,801,000 | ) | |
| Denominator: | ||||
| Assume conversion of CSLM Class A Ordinary Shares subject to possible redemption that were not redeemed into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 901,955 | |||
| Assume conversion of non-redeemable CSLM Class A Ordinary Shares into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 4,743,749 | |||
| Assume conversion of non-redeemable CSLM Class B Ordinary Shares into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 1 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock in connection with the PIPE Investment | 1,184,000 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock to an affiliate of the Sponsor due to partial conversion of the 3rd Amended and Restated Promissory Note as a result of assuming closing of the Business Combination on January 1, 2024 | 408,639 | |||
| Assume conversion of 18,975,000 Parent Rights into Fusemachines Pubco Common Stock effective January 1, 2024 as a result of assuming closing of the Business Combination on January 1, 2024 | 1,897,486 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock to Fusemachines stockholders as a result of assuming closing of the Business Combination on January 1, 2024 | 13,917,879 | |||
| Assume January 1, 2024 issuance of Fusemachines Pubco Common Stock to holders of Fusemachines convertible notes as a result of assuming closing of the Business Combination on January 1, 2024 | 5,296,322 | |||
| Pro forma weighted-average shares outstanding - basic and diluted | 28,350,031 | |||
| Pro forma net loss per share - basic and diluted | $ | (0.52 | ) | |
The following securities were excluded from the computation of pro forma diluted net loss per share for the year ended December 31, 2024 because including them would have had an anti-dilutive effect:
| Year
Ended December 31, 2024 | ||||
| Actual Redemptions | ||||
| Fusemachines Pubco Private Placement Warrants(1) | 4,093,461 | |||
| CSLM Public Warrants(2) | 9,487,500 | |||
| Fusemachines Pubco Common Stock stock options(3) | 693,420 | |||
| Shortfall Warrants(4) | 2,108,070 | |||
| Total anti-dilutive Fusemachines Pubco Common Stock | 16,382,451 | |||
| (1) | Represents 3,971,250 warrants held by CSLM, along with 122,211 warrants held by former debt holders of Fusemachines.
|
| (2) | Represents warrants held by CSLM Public Stockholders.
|
| (3) | Represents options to purchase Fusemachines Pubco Common Stock underlying the conversion rights under the Fusemachines Equity Incentive Plan.
|
| (4) | Represents 2,108,070 warrants held by the Meteora Parties issued in connection with the Forward Purchase Agreement. |
5. Conforming Accounting Policies and Reclassification Adjustments
During the preparation of this unaudited pro forma condensed combined financial information, Fusemachines performed a preliminary analysis of CSLM’s financial information to identify differences in financial statement presentation as compared to the presentation of Fusemachines. Certain reclassification adjustments have been made to conform CSLM’s historical financial statement presentation to Fusemachines’ historical financial statement presentation. Following the completion of the Business Combination, or as more information becomes available, Fusemachines will finalize the review of financial statement presentation, which could differ from the presentation set forth in the unaudited pro forma condense combined financial information presented herein.
The following items represent certain reclassification adjustments to conform CSLM’s historical balance sheet presentation as of September 30, 2025 to Fusemachines’ historical balance sheet presentation as of September 30, 2025 and to conform CSLM’s historical statement of operations presentation for the nine months ended September 30, 2025 and for the year ended December 31, 2024 to Fusemachines’ historical statement of operations presentation for the nine months ended September 30, 2025 and for the year ended December 31, 2024, which have no impact on net loss for the nine months ended September 30, 2025 and for the year ended December 31, 2024 and are summarized below:
| September 30, 2025 | ||||||||||||||||
| Fusemachines Inc. Historical Balance Sheet Line Items | CSLM Historical Consolidated Balance Sheet Line Items | CSLM Acquisition Corp. (Historical) | Reclassification | Notes | CSLM Acquisition Corp. Reclassified | |||||||||||
| Assets | Assets | |||||||||||||||
| Current assets: | Current assets: | |||||||||||||||
| Cash and cash equivalents | Cash | $ | 9 | $ | - | $ | 9 | |||||||||
| Accounts receivable, current, net | - | - | - | |||||||||||||
| Unbilled revenue | - | - | - | |||||||||||||
| Deferred transaction costs | - | - | - | |||||||||||||
| Prepaid expenses and other current assets | Prepaid expenses | 21 | - | 21 | ||||||||||||
| Due from related party | 33 | - | 33 | |||||||||||||
| Marketable securities held in trust account | 12,289 | - | 12,289 | |||||||||||||
| Total current assets | 12,352 | - | 12,352 | |||||||||||||
| Property and equipment, net | - | - | - | |||||||||||||
| Intangible assets, net | - | - | - | |||||||||||||
| Deferred tax asset | - | - | - | |||||||||||||
| Operating lease right-of-use assets | - | - | - | |||||||||||||
| Other assets | - | - | - | |||||||||||||
| Total assets | Total assets | $ | 12,352 | $ | - | $ | 12,352 | |||||||||
| Liabilities and stockholders’ deficit | Liabilities, Class A ordinary shares subject to possible redemption and shareholders’ deficit | |||||||||||||||
| Current liabilities: | Current liabilities: | |||||||||||||||
| Accounts payable | Accounts payable | $ | 351 | $ | - | $ | 351 | |||||||||
| Accrued expenses and other current liabilities | Accrued expenses | 1,941 | 242 | 5(d) | 2,183 | |||||||||||
| Convertible notes payable, at fair value, current | - | - | - | |||||||||||||
| Related party convertible notes payable, at fair value, current | - | - | - | |||||||||||||
| Related party convertible notes payable, current | - | 3,665 | 5(e) | 3,665 | ||||||||||||
| Convertible notes payable, current | - | - | - | |||||||||||||
| Related party loan payable, current | - | - | - | |||||||||||||
| Promissory note - related party | 3,665 | (3,665 | ) | 5(e) | - | |||||||||||
| Accrued Interest - related party | 242 | (242 | ) | 5(d) | - | |||||||||||
| Deferred underwriting commissions | 6,641 | - | 6,641 | |||||||||||||
| Forward purchase agreement prepayment payable | 11,005 | - | 11,005 | |||||||||||||
| Forward purchase agreement liability | 18,842 | - | 18,842 | |||||||||||||
| Share redemptions payable | 1,223 | - | 1,223 | |||||||||||||
| Operating lease liability, current | - | - | - | |||||||||||||
| Total current liabilities | 43,910 | - | 43,910 | |||||||||||||
| Convertible notes payable | - | - | - | |||||||||||||
| Cumulative mandatorily redeemable common and preferred stock liability | - | - | - | |||||||||||||
| Warrant liability | - | - | - | |||||||||||||
| Operating lease liability | - | - | - | |||||||||||||
| Total liabilities | Total liabilities | 43,910 | - | 43,910 | ||||||||||||
| CSLM Class A Ordinary Shares, ($0.0001 par value; 500,000,000 shares authorized, 901,955 shares issued and outstanding subject to possible redemption as of September 30, 2025) | 11,067 | - | 11,067 | |||||||||||||
| Stockholders’ deficit: | Shareholders’ deficit | |||||||||||||||
| Convertible preferred stock ($0.00001 par value, 9,076,734 shares authorized; 9,043,234 issued and outstanding as of September 30, 2025) | - | - | - | |||||||||||||
| Common stock ($0.00001 par value, 24,200,000 shares authorized; 12,062,805 shares issued and outstanding as of September 30, 2025) | - | - | - | |||||||||||||
| CSLM Preferred shares, ($0.0001 par value; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2025) | - | - | - | |||||||||||||
| CSLM Class A Ordinary Shares, ($0.0001 par value, 500,000,000 shares authorized; 4,743,749 issued and outstanding as of September 30, 2025) | - | - | - | |||||||||||||
| CSLM Class B Ordinary Shares, ($0.0001 par value; 50,000,000 shares authorized; 1 share issued and outstanding as of September 30, 2025) | - | - | - | |||||||||||||
| Share subscription receivable | (11,005 | ) | (11,005 | ) | ||||||||||||
| Treasury stock, at cost (667,000 as of September 30, 2025) | - | - | - | |||||||||||||
| Additional paid in capital | Additional paid in capital | 1,262 | - | 1,262 | ||||||||||||
| Accumulated deficit | Accumulated deficit | (32,882 | ) | - | (32,882 | ) | ||||||||||
| Accumulated other comprehensive income | - | - | - | |||||||||||||
| Total stockholders’ deficit | Total shareholders’ deficit | (42,625 | ) | - | (42,625 | ) | ||||||||||
| Total liabilities and stockholders’ deficit | Total liabilities, Class A ordinary shares subject to possible redemption, and stockholders’ deficit | $ | 12,352 | $ | - | $ | 12,352 | |||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||||
| Fusemachines Inc. Historical Statement of Operations Line Items | CSLM Acquisition Corp. Historical Statement of Income Line Items | CSLM Acquisition Corp. (Historical) | Reclassification | Notes | CSLM Acquisition Corp. Reclassified | |||||||||||
| Revenue | $ | - | $ | - | $ | - | ||||||||||
| Cost of revenue | - | - | - | |||||||||||||
| Gross profit | Gross profit | - | - | - | ||||||||||||
| Operating expenses: | Expenses: | |||||||||||||||
| Selling and marketing | - | - | - | |||||||||||||
| Research and development | - | - | - | |||||||||||||
| General and administrative | - | 519 | 5(b) | 1,802 | ||||||||||||
| - | 1,283 | 5(c) | - | |||||||||||||
| Insurance expense | 135 | (135 | ) | 5(b) | - | |||||||||||
| Legal and accounting expenses | 1,377 | (234 | ) | 5(b) | - | |||||||||||
| - | (1,143 | ) | 5(c) | - | ||||||||||||
| Administrative expenses - related party | 90 | (90 | ) | 5(b) | - | |||||||||||
| Dues and subscriptions | 200 | (60 | ) | 5(b) | - | |||||||||||
| - | (140 | ) | 5(c) | - | ||||||||||||
| Interest, general and administrative expenses | 113 | (113 | ) | 5(a) | - | |||||||||||
| Operating expenses | Operating expenses | 1,915 | (113 | ) | 1,802 | |||||||||||
| Operating (loss) income | Net operating loss | (1,915 | ) | 113 | (1,802 | ) | ||||||||||
| Other (expense) income, net: | Other income (expense): | |||||||||||||||
| Loss on extinguishment of debt | (1,823 | ) | - | (1,823 | ) | |||||||||||
| Dividends on marketable securities held in trust account | 474 | - | 474 | |||||||||||||
| Financing expense | (17,573 | ) | - | (17,573 | ) | |||||||||||
| Change in fair value of forward purchase agreement liability | (1,269 | ) | - | (1,269 | ) | |||||||||||
| Interest expense | - | (113 | ) | 5(a) | (113 | ) | ||||||||||
| Loss on extinguishment of debt | - | - | - | |||||||||||||
| Loss on extinguishment of payable | - | - | - | |||||||||||||
| Loss on change in fair value of convertible notes and warranty liability | - | - | - | |||||||||||||
| Other expense | - | - | - | |||||||||||||
| Total other expense, net | Total other expense | (20,191 | ) | (113 | ) | (20,304 | ) | |||||||||
| Loss before income taxes and equity in earnings of investee | Net loss | (22,106 | ) | - | (22,106 | ) | ||||||||||
| Provision for income tax | - | - | - | |||||||||||||
| Equity in earnings of investee, net of income tax provision of $0 | - | - | - | |||||||||||||
| Net loss | Net loss | $ | (22,106 | ) | $ | - | $ | (22,106 | ) | |||||||
| Year Ended December 31, 2024 | ||||||||||||||||
| Fusemachines Inc. Historical Statement of Operations Line Items | CSLM Acquisition Corp. Historical Statement of Income Line Items | CSLM Acquisition Corp. (Historical) | Reclassification | Notes | CSLM Acquisition Corp. Reclassified | |||||||||||
| Revenue | $ | - | $ | - | $ | - | ||||||||||
| Cost of revenue | - | - | - | |||||||||||||
| Gross profit | Gross profit | - | - | - | ||||||||||||
| Operating expenses: | Expenses: | |||||||||||||||
| Selling and marketing | - | - | - | |||||||||||||
| Research and development | - | - | - | |||||||||||||
| General and administrative | - | 814 | 5(b) | 1,760 | ||||||||||||
| - | 946 | 5(c) | - | |||||||||||||
| Insurance expense | 214 | (214 | ) | 5(b) | - | |||||||||||
| Legal and accounting expenses | 1,255 | (351 | ) | 5(b) | - | |||||||||||
| - | (904 | ) | 5(c) | - | ||||||||||||
| Administrative expenses - related party | 120 | (120 | ) | 5(b) | - | |||||||||||
| Dues and subscriptions | 171 | (129 | ) | 5(b) | - | |||||||||||
| - | (42 | ) | 5(c) | - | ||||||||||||
| Interest expense - related party | 101 | (101 | ) | 5(a) | - | |||||||||||
| Operating expenses | Operating expenses | 1,861 | (101 | ) | 1,760 | |||||||||||
| Operating (loss) income | Net operating loss | (1,861 | ) | 101 | (1,760 | ) | ||||||||||
| Other income (expense), net: | Other income (expense): | |||||||||||||||
| Dividends on marketable securities held in trust account | 2,033 | - | 2,033 | |||||||||||||
| Covenant fees | 505 | - | 505 | |||||||||||||
| Provision for credit losses | (505 | ) | - | (505 | ) | |||||||||||
| Interest expense | - | (101 | ) | 5(a) | (101 | ) | ||||||||||
| Loss on extinguishment of debt | - | - | - | |||||||||||||
| Loss on extinguishment of payable | - | - | - | |||||||||||||
| Loss on change in fair value of convertible notes and warranty liability | - | - | - | |||||||||||||
| Other expense | - | - | - | |||||||||||||
| Total other income (expense), net | Total other income (expense) | 2,033 | (101 | ) | 1,932 | |||||||||||
| Income before income taxes and equity in earnings of investee | Net income | 172 | - | 172 | ||||||||||||
| Provision for income tax | - | - | - | |||||||||||||
| Equity in earnings of investee, net of income tax provision of $0 | - | - | - | |||||||||||||
| Net income | Net income | $ | 172 | $ | - | $ | 172 | |||||||||
| (a) | To reclassify the CSLM historical interest expense out of the Interest Expense line item within operating expenses and into the Interest Expense line item within other income (expense), net. |
| (b) | To reclassify the CSLM historical general and administrative expenses within Insurance Expense, Legal and Accounting Expenses, Administrative Expenses – Related Party, and Dues and Subscriptions into the General and Administrative line item. |
| (c) | To reclassify the CSLM historical transaction related costs within Legal and Accounting Expenses, Dues and Subscriptions, and Formation, General and Administrative Expenses into the General and Administrative line item. |
| (d) | To reclassify CSLM historical Accrued Interest – Related Party balance into the Accrued Expenses and Other Current Liabilities line item. |
| (e) | To reclassify CSLM historical Promissory Note – Related Party balance into the Related Party Convertible Notes Payable, Current line item. |