Fuse Group Holding Inc 10-Q for FY2022 Q3
Fuse Group Holding Inc. (FUST)
About this 10-Q
Fuse Group Holding Inc filed this 10-Q on August 12, 2022, covering the quarter ended June 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $150K a year earlier
- Net loss
- $129.63K
- compared with net income of $20.06K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ____ to ____
Commission file number:
(Exact name of registrant as specified in its charter)
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
| Emerging growth company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
The number of shares outstanding of each of the issuer’s classes of common stock, as of August 10, 2022 is as follows:
| Class | Share Outstanding | |
| Common Stock, $0.001 par value per share | |
TABLE OF CONTENTS
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
24 |
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Item 4. |
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PART II. |
OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I. FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
FUSE GROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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JUNE 30, 2022 |
SEPTEMBER 30, 2021 |
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ASSETS |
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CURRENT ASSETS |
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Cash and equivalents |
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Prepaid expenses |
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Total current assets |
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NON-CURRENT ASSETS |
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Property and equipment, net |
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Right-of-use asset, net |
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Total non-current assets |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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CURRENT LIABILITIES |
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Other payables |
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Accrued interest on convertible notes |
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Lease liability |
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Loan payable |
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Total current liabilities |
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NON-CURRENT LIABILITIES |
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Convertible notes |
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Lease Liability |
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Loan payable |
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Total non-current liabilities |
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TOTAL LIABILITIES |
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CONTINGENCIES AND COMMITMENTS |
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STOCKHOLDERS' EQUITY (DEFICIT) |
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| Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity (deficit) |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
$ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
FUSE GROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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FOR THE NINE MONTHS ENDED JUNE 30, |
FOR THE THREE MONTHS ENDED JUNE 30, |
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2022 |
2021 |
2022 |
2021 |
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Revenue |
$ | $ | $ | $ | ||||||||||||
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Cost of revenue |
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Gross profit |
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Operating expenses |
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General and administrative |
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Consulting |
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Total operating expenses |
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Loss from operations |
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Non-operating income (expenses) |
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Interest expense |
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Other income (expenses) |
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Total non-operating income (expenses), net |
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Income (loss) before income tax |
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Income tax |
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Net income (loss) |
$ | ( |
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Basic weighted average shares outstanding |
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Basic loss per share |
$ | ( |
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The accompanying notes are an integral part of these consolidated financial statements.
FUSE GROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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FOR THE NINE MONTHS ENDED JUNE 30, |
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2022 |
2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Amortization of prepaid expense |
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Operating lease expense |
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PPP loan forgiveness |
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Changes in assets and liabilities: |
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Prepaid expenses |
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Other payables |
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Accrued interest |
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Payment of lease liability |
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Net cash used in operating activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from convertible notes |
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Repayment of loan payable |
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Net cash provided by financing activities |
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NET DECREASE IN CASH AND EQUIVALENTS |
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CASH AND EQUIVALENTS, BEGINNING OF PERIOD |
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CASH AND EQUIVALENTS, END OF PERIOD |
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Supplemental cash flow data: |
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Income tax paid |
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Interest paid |
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Supplemental disclosures of non-cash operating activities: |
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Right-of-use assets obtained in exchange for new operating lease liabilities |
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The accompanying notes are an integral part of these consolidated financial statements.
FUSE GROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED JUNE 30, 2022 AND 2021
(UNAUDITED)
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Common Stock |
Additional Paid-in | Accumulated | ||||||||||||||||||
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Shares |
Amount |
Capital |
Deficit |
Total |
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Balance at October 1, 2021 |
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Net income |
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Balance at December 31, 2021 |
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Net loss |
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Balance at March 31, 2022 |
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Net loss |
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Balance at June 30, 2022 |
$ | $ | $ | ( |
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Common Stock |
Additional Paid-in | Accumulated | ||||||||||||||||||
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Shares |
Amount |
Capital |
Deficit |
Total |
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Balance at October 1, 2020 |
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Net loss |
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Balance at December 31, 2020 |
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Net income |
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Balance at March 31, 2021 |
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Net income |
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Balance at June 30, 2021 (restated) |
$ | $ | $ | ( |
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The accompanying notes are an integral part of these consolidated financial statements.
FUSE GROUP HOLDING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 – Organization and Operations
Fuse Group Holding Inc. (the “Company” or “Fuse Group” or “We”) was incorporated under the laws of the State of Nevada on December 24, 2013. Fuse Group currently develops business opportunities in the mining and biotech areas. On December 6, 2016, the Company incorporated Fuse Processing, Inc. (“Processing”) in the State of California. Processing seeks business opportunities in mining and is currently investigating potential mining targets in Asia and North America. Fuse Group is the sole shareholder of Processing.
Fuse Group and Processing provide consulting services to mining industry clients to find mine acquisition targets within the parameters set by the clients, when the mine owner is considering selling its mining rights. The services of Fuse Group and Processing include due diligence on the potential mine seller and mine, such as ownership and whether the mine meets all operational requirements and/or is currently in operation.
In March 2017, Processing acquired
On May 3, 2018, the Company incorporated Fuse Technology Inc. in the State of Nevada, which changed its name to Fuse Biotech Inc. on November 30, 2020. Fuse Group is the sole shareholder of Fuse Biotech Inc. (“Fuse Biotech”). Fuse Biotech seeks business opportunities in the biotech area.
On April 29, 2019, the Board of Directors of the Company approved an amendment to the Company’s Articles of Incorporation (“Amendment”) to change its name from Fuse Enterprises Inc. to Fuse Group Holding Inc. Also on April 29, 2019, stockholders holding a majority of the Company’s outstanding capital stock approved the Amendment. The Amendment was filed with the Secretary of State for the State of Nevada on April 30, 2019 and became effective May 13, 2019. On May 29, 2019, the Company changed its trading symbol on OTC Markets from FNST to FUST.
On February 9, 2021, Fuse Group and Processing entered into a Share Exchange Agreement (the “Agreement”) with
Stock certificates for 14,285,715 shares were prepared for the closing of the Agreement which was entered into by the Company and Processing with the five individuals who own Portafolio on February 9, 2021. The stock certificates were prepared by the Company, but not delivered to the sellers. After reevaluation of the Agreement, the Company determined that the transaction was incorrectly recorded, as such stock certificates remained in the custody of the Company and not delivered (i.e. provided as consideration) to the sellers. On October 20, 2021, the Company cancelled these stock certificates.
On March 11, 2021, Fuse Group and Fuse Biotech entered into a Share Exchange Agreement with E-Mo Biotech Holding Inc., a company incorporated under the laws of Nevada (the “E-Mo Biotech”), Qiyi Xie, a resident of California (“Xie”), Quan Qinghua, a citizen and resident of China (“Quan”), Jing Li, a citizen and resident of China (“Li”) and HWG Capital Sdn Bhd, a company incorporated under laws of Malaysia (“HWG” and hereinafter collectively with Xie, Quan and Li, the “Sellers”). Pursuant to the agreement, the Company agreed to issue the Sellers
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the pandemic has resulted in quarantines, travel restrictions, and the temporary closure of office buildings and facilities in the US. The state of California, where the Company is headquartered, has been affected by COVID-19.
Our business and services and results of operations have been adversely affected and could continue to be adversely affected by the COVID-19 pandemic. The pandemic impacted the Company’s business development, and disrupted or delayed the Company’s current mine projects and services to its clients, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct its business in the ordinary course. Quarantines, travel restrictions, shelter-in-place and other restrictions related to COVID-19 have impacted the Company’s abilities to visit mines in Mexico and in Asian counties as well as to meet with potential clients and mine owners for the Company’s consulting business and for the Company’s own investment in mine projects. The Company’s clients that are negatively impacted by the outbreak of COVID-19 may cancel or suspend their mine acquisition projects, which in turn will reduce their demands for the Company’s services and materially adversely impact the Company’s revenue. Potential impact to our results of operations will also depend on future developments and new information that may emerge regarding COVID-19 and new variants, the efficacy and distribution of COVID-19 vaccines and the actions taken by governmental authorities and other entities to contain COVID-19 and/or mitigate its impact, almost all of which are beyond our control.
The global economy was also negatively affected by COVID-19 and there is continued uncertainty about the duration and intensity of its impacts. The U.S. and global growth forecast is extremely uncertain, which could seriously affect people’s investment desires in mines in Mexico, Asia and internationally. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could negatively affect the Company’s liquidity.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP were not included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, previously filed with the SEC on February 11, 2022.
In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of June 30, 2022, its consolidated results of operations and cash flows for the nine months ended June 30, 2022 and 2021, as applicable, were made.
Basis of Consolidation
The consolidated financial statements include the accounts of Fuse Group and its subsidiaries, Processing, Trading and Biotech. All significant inter-company accounts and transactions and balances were eliminated in consolidation.
Reclassification
Certain prior period’s accounts have been reclassified in conformity with current period’s presentation. These reclassifications had no effect on the reported results of operations.
Cash
The Company considers all highly liquid instruments with an original maturity of three months or less to be considered cash equivalents. The carrying value of these investments approximates fair value. The Company had $
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to the consolidated financial statements.
Fair Value Measurements and Disclosures
The carrying amounts of certain of the Company’s financial instruments, including cash and equivalents, accrued liabilities and accounts payable, approximate their fair value due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial instruments held by the Company. The carrying amounts reported in the balance sheets for current liabilities qualify as financial instruments and are a reasonable estimate of their fair value because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest.
FASB ASC Topic 820, “Fair Value Measurements,” defines fair value, and establishes a three-level valuation hierarchy for disclosures that enhances disclosure requirements for fair value measures. The three levels are defined as follows:
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Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
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Level 2 inputs to the valuation methodology include other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
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Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts receivable, accounts payable and accrued expenses, approximate their fair value because of the short maturity of those instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
As of June 30, 2022 and September 30, 2021, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value on a recurring basis.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Expenditures for maintenance and repairs are expensed as incurred; while additions, renewals and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets and estimated lives as follows:
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Computer and office equipment |
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Office furniture |
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Leasehold decoration and renovation |
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Related Parties
The Company follows subtopic 850-10 of the FASB ASC for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20, related parties include: (a) affiliates of the Company; (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls 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; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions eliminated in the preparation of financial statements is not required in those statements.
The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Contingencies
The Company follows FASB ASC 450-20 to account for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
In assessing loss contingencies related to legal proceedings pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable that a material loss was incurred and the amount of the liability can be reasonably estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Revenue Recognition
The Company follows FASB Accounting Standards Update (“ASC 606”), Revenue from Contracts with Customers.
The core principle underlying FASB ASC 606 is that the Company recognizes revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are recognized when control of goods and services transfers to a customer, in an amount that reflects the consideration it expects to receive for those goods.
The Company recognizes revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. For the Company’s mine information service, revenue is recognized when the mine information is forwarded to the client. The services of Fuse Group and Processing include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
Income Tax
The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
The Company follows FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
Under FASB ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of operations. As of June 30, 2022, the Company had no unrecognized tax benefits and there were no charges during the nine and three months ended June 30, 2022, and accordingly, the Company did not recognize any interest or penalties related to unrecognized tax benefits. There was no accrual for uncertain tax position as of June 30, 2022. The Company files a U.S. income tax return. With few exceptions, the U.S. income tax returns filed for the years ending on September 30, 2019 and thereafter are subject to examination by the relevant taxing authorities.
Earnings (Loss) per Share
Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).
Cash Flows Reporting
The Company follows paragraph 230-10-45-24 of FASB ASC for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect Method”) as defined by paragraph 230-10-45-25 of FASB ASC to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of FASB ASC.
Leases
The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, Right of Use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU assets include adjustments for prepayments and accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
The Company leases premises for office under non-cancellable operating lease. Operating lease payments are expensed over the term of lease. The Company’s current lease does not include options to extend nor any restrictions or covenants. Under the terms of the lease agreements, the Company has no legal or contractual asset retirement obligations at the end of the lease. Operating leases are included in operating lease ROU assets and operating lease liabilities (current and non-current), on the consolidated balance sheets.
A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases.
ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets. ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU assets as of June 30, 2022 and September 30, 2021.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its consolidated financial statements.
Note 3 – Going Concern
The accompanying consolidated financial statements were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $
Management intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering or loans from banks or others.
The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Note 4 – Property and Equipment
Property and equipment at June 30, 2022 and September 30, 2021 consisted of the following:
|
June 30, 2022 |
September 30, 2021 |
|||||||
|
Computer equipment |
$ | $ | ||||||
|
Less accumulated depreciation |
( |
) |
( |
) |
||||
|
Computer equipment, net |
||||||||
|
Office furniture |
||||||||
|
Less accumulated depreciation |
( |
) |
( |
) |
||||
|
Office furniture, net |
||||||||
|
Total property and equipment, net |
$ | $ | ||||||
Depreciation for the nine months ended June 30, 2022 and 2021 was $
Depreciation for the three months ended June 30, 2022 and 2021 was $
Note 5 – Prepaid Expenses
As of June 30, 2022, the Company had current prepaid OTC listing fee of $
Note 6 – Convertible Notes
On February 15, 2022, March 23, 2022 and June 9, 2022, the Company signed
Note 7 – Other Payables
As of June 30, 2022 and September 30, 2021, the Company had other payables of $
Note 8 – Loans Payable
On May 14, 2020, Processing received $
On June 24, 2020, Fuse Biotech received $
As of June 30, 2022, the future minimum principal amount of loan payments to be paid by year are as follows:
|
Year Ending June 30, |
Amount |
|||
|
2023 |
$ | |||
|
2024 |
||||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
Thereafter |
* |
|||
|
Total |
$ | |||
*Includes accrued interest amounting to $
Note 9 – Income Tax
At June 30, 2022 and September 30, 2021, the Company had net operating loss (“NOL”) carryforwards for income tax purposes. For federal income tax purposes, NOLs arising in tax years beginning after 2017 may only reduce 80% of a taxpayer’s taxable income, and may be carried forward indefinitely; for California income tax purposes, the entire NOL can be carried forward up to 20 years. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. The Company estimated NOL carry-forwards for Federal and California income tax purposes of $
Components of deferred tax assets as of June 30, 2022 and September 30, 2021 are as follows:
|
June 30, 2022 |
September 30, 2021 |
|||||||
|
Net deferred tax assets: |
||||||||
|
Expected income tax benefit from NOL carry-forwards |
$ | $ | ||||||
|
Allowance for non-current prepaid expense |
||||||||
|
Lease expense under ASU 842 |
||||||||
|
Less valuation allowance |
( |
) |
( |
) |
||||
|
Deferred tax assets, net of valuation allowance |
$ | $ | ||||||
Income Tax Provision in the Statements of Operations
A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the nine months ended June 30, 2022 and 2021 is as follows:
|
2022 |
2021 |
|||||||
|
Federal statutory income tax expense (benefit) rate |
( |
)% |
( |
)% |
||||
|
Federal income tax rate difference |
% |
% |
||||||
|
Permanent difference |
( |
)% |
% |
|||||
|
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax |
( |
)% |
( |
)% |
||||
|
Change in valuation allowance on net operating loss carry-forwards |
% |
% |
||||||
|
Effective income tax rate |
% |
% |
||||||
A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the three months ended June 30, 2022 and 2021 is as follows:
|
2022 |
2021 |
|||||||
|
Federal statutory income tax expense (benefit) rate |
( |
)% |
( |
)% |
||||
|
Federal income tax rate difference |
% |
% |
||||||
|
Permanent difference |
( |
)% |
( |
)% |
||||
|
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax |
( |
)% |
( |
)% |
||||
|
Change in valuation allowance on net operating loss carry-forwards |
% |
% |
||||||
|
Effective income tax rate |
% |
% |
||||||
Note 10 – Revenue, Cost of Revenue and Major Customers
Fuse Group and Processing provide consulting services to mining industry clients to find mine acquisition targets within the parameters set by the clients, in circumstances in which the mine owner is considering selling its mining rights. The services of Fuse Group and Processing include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
Cost of revenue mainly consisted of the management’s travel expenses to visit these mines and consulting expenses paid for mine expertise during the mine due diligence period.
For the nine months ended June 30, 2022 and 2021, the Company recorded revenue of $
For the three months ended June 30, 2022 and 2021, the Company recorded revenue of $
For the nine months ended June 30, 2022, the Company had one customer which accounted for
For the nine months ended June 30, 2021, the Company had three customers which accounted for
For the three months ended June 30, 2021, the Company had two customers which accounted for
Note 11 – Acquisition of Mining Rights in Mexico
On February 9, 2021, Fuse Group and Processing entered into a Share Exchange Agreement with
Note 12 – Commitments
Lease Commitment
Effective December 1, 2018, the Company entered a three-year lease for an office in the city of Arcadia, California. The monthly base rent is $
The components of lease costs, lease term and discount rate with respect to the office lease with an initial term of more than 12 months are as follows:
|
Nine Months Ended June 30, |
||||||||
|
2022 |
2021 |
|||||||
|
Operating Lease costs |
$ | $ | ||||||
|
Weighted Average Remaining Lease Term |
||||||||
|
Weighted Average Discount Rate |
% |
% |
||||||
|
Three Months Ended June 30, |
||||||||
|
2022 |
2021 |
|||||||
|
Operating Lease costs |
$ | $ | ||||||
|
Weighted Average Discount Rate |
% |
% |
||||||
The following is a schedule of maturities of lease liabilities as of June 30, 2022:
|
For the year ending June 30, |
Operating Leases |
|||
|
2023 |
$ | |||
|
2024 |
||||
|
Thereafter |
||||
|
Total lease payments |
||||
|
Less: imputed interest |
( |
) |
||
|
Total lease liabilities |
||||
|
Less: current portion |
( |
) |
||
|
Lease liabilities – non-current portion |
$ | |||
Consulting and Service Agreements
|
| 1) | On April 1, 2017, the Company entered into a strategic consulting agreement with a consulting company with a term of one year. The consulting company provides the Company the strategic advices on business development and marketing. The compensation to the consulting company is $ |
|
| 2) | Exploratory Drilling Agreement and Related Costs. On April 1, 2018, the Company entered into a contract with an individual owner of a mining concession in Mexico. The mine is located in Mexico, in the state of Sinaloa, Badiraguato municipality, Nocoriba village. The latitude is 25.2520000 and the longitude is -107.225500. The Company started drilling within the concession 10HAAS. For the nine and three months ended June 30, 2022 and 2021, the Company spent $ |
Employment Agreement
On August 22, 2021, the Company entered into an Employment Agreement with Mr. Michael Viotto, the Company’s Chief Financial Officer, to serve in such position for a one-year term, effective August 22, 2021. Under the terms of the Agreement, Mr. Viotto will receive an annual salary of $
Note 13 – Subsequent Events
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has the following subsequent event to disclose in its consolidated financial statements:
On July 1, 2022, the Company signed a convertible promissory notes agreement for the principal of $
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” the negatives of such terms and other terms of similar meaning typically identify forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our Annual Report on Form 10-K for the year ended September 30, 2021 (the “2021 Form 10K) and those set forth from time to time in our other filings with the SEC. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report and in our 2021 Form 10-K.
Overview
Fuse Group Holding Inc. (the “Company” or “Fuse Group” or “we”) was incorporated under the laws of the State of Nevada on December 24, 2013. Fuse Group currently develops opportunities in mining and biotech areas. On December 6, 2016, the Company incorporated Fuse Processing, Inc. (“Processing”) in the State of California. Processing seeks business opportunities in mining and is currently investigating potential mining targets in Asia and North America. Fuse Group is the sole shareholder of Processing. In March 2017, Processing acquired 100% ownership of Fuse Trading Limited (“Trading”) for HKD1 ($0.13). Trading had no operations prior to the acquisition by Processing, and Trading expected to be engaged in mining-related businesses. On April 22, 2022, the Processing transferred 100% ownership of Trading to an unrelated third party for HKD1.On May 3, 2018, the Company incorporated Fuse Technology Inc. in the State of Nevada, which changed its name to Fuse Biotech Inc. on November 30, 2020. Fuse Group is the sole shareholder of Fuse Biotech Inc. (“Fuse Biotech”). Fuse Biotech originally engaged in IMETAL system development. The Company originally planned to operate IMETAL as a platform to facilitate investment and trade in raw metals, find specialized minerals, exploit these opportunities and issue tokens to be used on the platform, subject to compliance with applicable laws and regulations. Due to the development of laws and regulations on token issuance and trading, management discussed its function and compliance issues with the designer of the platform and concluded the project had more issues and costs for compliance than originally expected, on December 23, 2019, the Board decided to terminate the IMETAL project. Currently, Fuse Biotech seeks business opportunities in the biotech area.
Fuse Group and Processing provide consulting services to mining industry clients to find acquisition targets within the parameters set by the clients, when the mine owner is considering selling its mining rights. The services of Fuse Group and Processing include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
On January 4, 2017, Processing entered into a Consulting and Strategist Agreement with a consulting company for a six-month term. On July 3, 2017, Processing and the consulting company extended the Consulting and Strategist Agreement until January 3, 2018 at no additional cost, and the Agreement was subsequently extended to July 3, 2018. The consultant provides Processing with market research, exploration and advise on business development opportunities in certain countries, and other general business advisory services. Processing paid a deposit of $1,325,000 for the consulting fee, of which, $325,000 was expensed as a consulting fee based on the agreement, and the remaining $1,000,000 of which would have been refunded to the Company if the Company had not made an investment and/or entered into a business relationship in Mexico. The consulting company found acquisition targets for the Company, and on June 22, 2018, the Company entered into a Memorandum of Understanding (“MOU”) with a seller to purchase concessions rights to five mineral locations located in different areas of Mexico for $1,000,000. Upon execution of the MOU, the Company acquired the exclusive right to purchase the concessions rights to mines from the seller until September 30, 2018. The parties entered into an oral agreement that the Company would pay a purchase price of $1,000,000 to purchase concessions rights to five mineral locations that would be consolidated into a local company in Mexico upon the approval from the Mexican government allowing the transfer of all mining concession to a Mexican company.
On February 9, 2021, the Company and Processing entered into a Share Exchange Agreement (the “Agreement”) with Choo Keam Hui, Goh Hau Guan, Lim Hui Sing, Teh Boon Nee and Tia Chai Teck (collectively as the “Sellers”). Pursuant to the Agreement, the Company agreed to issue to the Sellers in aggregate of 14,285,715 shares of common stock of the Company (the “Fuse Shares”) in exchange of all the outstanding shares of Portafolio en Investigacion Ambiental S.A. de C.V., a Mexican company ("Portafolio”) owned by the Sellers. Portafolio owns concessions rights to five mineral locations and the five mines have not been explored and have no operations, no existing contracts for the sale of output, no permits or licenses to conduct mining operations. Portafolio only has five concessions to explore for minerals and owns no facilities or equipment. There is no assurance that we will be able to obtain the surface rights and permits that are necessary to extract the minerals from the areas covered by the concessions. The Company is waiting for the Sellers to complete the transfer process for the equity interest of Portafolio to the Processing to complete the transaction.
Stock certificates for 14,285,715 shares were prepared by the Company for the closing of the transaction contemplated in the Agreement but were not delivered to the Sellers. After reevaluation of the Agreement, the Company determined that the transaction was incorrectly recorded, as such stock certificates remained in the custody of the Company and not delivered (i.e. provided as consideration) to the Sellers. On October 20, 2021, the Company cancelled these stock certificates.
On April 29, 2019, the Board of Directors (“BOD”) of the Company approved an amendment to the Company’s Articles of Incorporation (the “Amendment”) to change its name from Fuse Enterprises Inc. to Fuse Group Holding Inc. Also on April 29, 2019, stockholders holding a majority of the Company’s outstanding capital stock approved the Amendment. The Amendment was filed with the Secretary of State for the State of Nevada on April 30, 2019, and became effective on May 13, 2019. On May 29, 2019, the Company changed its trading symbol on OTC Markets from FNST to FUST.
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the pandemic has resulted in quarantines, travel restrictions, and the temporary closure of office buildings and facilities in the US. The state of California, where the Company is headquartered, has been affected by COVID-19.
Our business and services and results of operations have been adversely affected and could continue to be adversely affected by the COVID-19 pandemic. The pandemic negatively impacted our business development, and disrupted or delayed our current mine projects and services to our clients, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.
Quarantines, travel restrictions, shelter-in-place and other restrictions related to COVID-19 have impacted our abilities to visit mines in Mexico and Asian counties as well as to meet with potential clients and mine owners for our consulting business and our own investment in mine projects. Our clients that are negatively impacted by the outbreak of COVID-19 may cancel or suspend their mine acquisition projects, which in turn will reduce their demands for our services and materially adversely impact our revenue. Potential impact to our results of operations will also depend on future developments and new information that may emerge regarding COVID-19 and new variants, the efficacy and distribution of COVID-19 vaccines and the actions taken by governmental authorities and other entities to contain COVID-19 and/or mitigate its impact, almost all of which are beyond our control.
The global economy has also been materially negatively affected by COVID-19 and there is continued severe uncertainty about the duration and intensity of its impacts. The U.S. and global growth forecast is extremely uncertain, which would seriously affect people’s investment desires in mines in Mexico, Asia and internationally.
While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.
We received a $49,600 Paycheck Protection Program loan (“PPP loan”) and a $105,500 Economic Injury Disaster Loan (“EIDL loan”) from US Small Business Administration (“ the SBA”) during the year ended September 30, 2020. The forgiveness of $49,600 PPP loan was approved in June 2021.
We currently believe our financial resources will be adequate to see us through the outbreak. However, in the event that we do need to raise capital in the future, the outbreak-related instability in the securities markets could adversely affect our ability to raise additional capital.
On March 11, 2021, Fuse Group and Fuse Biotech entered into a Share Exchange Agreement with E-Mo Biotech Holding Inc., a company incorporated under the laws of Nevada (the “E-Mo Biotech”), Qiyi Xie, a resident of California (“Xie”), Quan Qinghua, a citizen and resident of China (“Quan”), Jing Li, a citizen and resident of China (“Li”) and HWG Capital Sdn Bhd, a company incorporated under laws of Malaysia (“HWG” and hereinafter collectively with Xie, Quan and Li, the “Sellers”). Pursuant to the Agreement, the Company will issue the Sellers 100,000,000 shares of Company’s common stock (the “Fuse Shares”) for all the issued and outstanding shares of E-Mo Biotech (the “E-Mo Shares”) owned by the Sellers. E-Mo Biotech Holding Inc. is a start-up, development-stage company involving in vaccine, immunological treatment and diagnostic product research and development and currently has no commercial sales of vaccines, treatments, or diagnostic products. The acquisition was not completed and the Fuse Shares were not issued. On September 30, 2021, the Company and Fuse Biotech entered into a Termination Agreement with E-Mo Biotech, the Sellers, effective on September 30, 2021. Pursuant to the Termination Agreement, the parties agreed to terminate the Share Exchange Agreement, which was originally entered into by and among the Company, Fuse Biotech, the Sellers and E-Mo Biotech on March 11, 2021.
Results of operations for the nine months ended June 30, 2022 and 2021
Revenue and Cost of Revenue
We develop our business in mining and investigate potential mining targets in Asia and North America. In addition to our own investment in mining businesses, we provide consulting services to clients which are mining business investors with potential mine acquisition targets within the specific parameters set by those clients, where the mine owner is considering selling its mining rights. Our services include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
For the nine months ended June 30, 2022, we provided two potential mine opportunities in Mexico to a client. For the nine months ended June 30, 2022, the Company recorded revenue of $200,000 for the services provided. Our revenue for the nine months ended June 30, 2021 was $500,000 for providing four potential mine opportunities in Mexico to clients. Our cost of revenues for the nine months ended June 30, 2022 and 2021 was $10,015 and $43,575, respectively, mainly for the consulting expenses paid for mine expertise during the mine due diligence period, resulting in a gross profit of $189,985 and $456,425 for the nine months ended June 30, 2022 and 2021, respectively.
Costs and Expenses
The major components of our expenses for the nine months ended June 30, 2022 and 2021 are in the table below:
|
2022 |
2021 |
Increase (Decrease) |
||||||||||
|
General and administrative |
$ | 451,681 | $ | 452,319 | $ | (638 | ) | |||||
|
Consulting fees |
61,333 | 60,852 | 481 | |||||||||
|
Total operating expenses |
$ | 513,014 | $ | 513,171 | $ | (157 | ) | |||||
Our operating expenses for nine months ended June 30, 2022 was about the same compared to the nine months ended June 30, 2021.
Non-operating income (expenses), net
Net non-operating expense was $5,697 for the nine months ended June 30, 2022, compared to non-operating income of $45,629 for the nine months ended June 30, 2021. For the nine months ended June 30, 2022, non-operating expense mainly consist of interest expense on EIDL of $3,031, interest expense on convertible note of $2,019 and bank service charge of $699. For the nine months ended June 30, 2021, non-operating income mainly consist of PPP Loan forgiveness of $49,600 which was partly offset by interest expense on EIDL of $3,033 and bank service charge of $1,000.
Results of operations for the three months ended June 30, 2022 and 2021
Revenue and Cost of Revenue
For the three months ended June 30, 2022, the Company recorded revenue of $0. Our revenue for the three months ended June 30, 2021 was $150,000. Our cost of revenues for the three months ended June 30, 2022 and 2021 was $0 and $10,005, respectively, mainly for the consulting expenses paid for mine expertise for due diligence for three months ended June 30, 2021, resulting in a gross profit of $0 and $139,995 for the three months ended June 30, 2022 and 2021, respectively.
Costs and Expenses
The major components of our expenses for the three months ended June 30, 2022 and 2021 are outlined in the table below:
|
2022 |
2021 |
Increase (Decrease) |
||||||||||
|
General and administrative |
$ | 108,525 | $ | 153,707 | $ | (45,182 | ) | |||||
|
Consulting fees |
18,920 | 14,590 | 4,330 | |||||||||
|
Total operating expenses |
$ | 127,445 | $ | 168,297 | $ | (40,852 | ) | |||||
The decrease in our operating expenses for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, was mainly due to decreased lawyer fee by $16,026, decreased insurance expense by $8,412, decreased payroll expense by $11,250 and decreased professional fee by $20,683, but was partly offset by increased travel expense by $10,530 and increased consulting fee by $4,330.
Non-operating expenses, net
Net non-operating expenses were $2,186 for the three months ended June 30, 2022, compared to non-operating income $48,360 for the three months ended June 30, 2021. For the three months ended June 30, 2022, non-operating expenses mainly consist of interest on EIDL loan of $1,005, interest expense on convertible note of $1,582 and other income $402. For the three months ended June 30, 2021, non-operating income mainly consist of PPP Loan forgiveness of $49,600 which was partly offset by interest on EIDL loan of $1,021 and bank service charge of $281.
Liquidity and Capital Resources
The table below provides selected working capital information as of June 30, 2022 and September 30, 2021:
|
June 30, 2022 |
September 30, 2021 |
|||||||
|
Total current assets |
$ | 63,559 | $ | 158,385 | ||||
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Total current liabilities |
42,272 | 33,924 | ||||||
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Working capital |
$ | 21,287 | $ | 124,461 | ||||
Liquidity
During the nine months ended June 30, 2022 and 2021, we had net loss of $331,127 and $13,517, respectively. During the three months ended June 30, 2022 and 2021, the Company reported net loss of $129,632 and net income of $20,058, respectively.
If we are not successful in developing the mining business and establishing profitability and positive cash flow, additional capital may be required to maintain ongoing operations. We have explored and continue to explore options to provide additional financing to fund future operations as well as other possible courses of action. Such actions may include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from other third parties or banks, and other similar actions. There can be no assurance we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.
Cash Flows
The table below, for the periods indicated, provides selected cash flow information for the nine months ended June 30, 2022 and 2021:
|
2022 |
2021 |
|||||||
|
Net cash used in operating activities |
$ | (335,380 |
) |
$ | (67,604 |
) |
||
|
Net cash provided by financing activities |
247,881 | - | ||||||
|
Net increase (decrease) in cash |
$ | (87,499 |
) |
$ | (67,604 |
) |
||
Cash Flows from Operating Activities
Our cash used in operating activities for the nine months ended June 30, 2022 and 2021 was $335,380 and $67,604, respectively. The increase in cash outflow during the nine months ended June 30, 2022 was due to an increase in net loss by $317,610, but offset by decreased cash outflow on PPP Loan forgiveness by $49,600.
Cash Flows from Investing Activities
During the nine months ended June 30, 2022 and 2021, we did not have any investing activities.
Cash Flows from Financing Activities
Our cash from financing activities for the nine months ended June 30, 2022 and 2021, was $247,881 and $0, respectively. The increase in cash inflow during the nine months ended June 30, 2022 was due to $250,000 proceeds from issuance of three convertible notes, but partly offset with $2,119 repayment of EIDL loan.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements.
Off Balance Sheet Arrangements
As of June 30, 2022, we did not have any off-balance-sheet arrangements.
|
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
Not applicable.
|
Item 4. |
Evaluation of Disclosure Controls and Procedures |
As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the end of the period covered by this report that our disclosure controls and procedures were not effective due to material weaknesses. The control deficiencies that constituted material weaknesses are as described below.
1. We do not have an Audit Committee. While we are not legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is of the utmost importance for entity-level control over the Company’s financial statements. Currently, the Board of Directors acts in the capacity of an audit committee.
2. We did not implement appropriate information technology controls. As of June 30, 2022, the Company was retaining copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors.
3. We currently lack sufficient accounting personnel with the appropriate level of knowledge, experience and training in U.S. GAAP and SEC reporting requirements. We have one employee assigned to a position that involves processing financial information, resulting in a lack of segregation of duties so that all journal entries and account reconciliations are reviewed by someone other than the preparer, heightening the risk of error or fraud.
We have taken certain actions to remediate the material weakness related to our lack of U.S. GAAP experience. We have engaged an outside CPA with U.S. GAAP knowledge and experience to supplement our current internal accounting personnel and assist us in the preparation of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP.
If we are unable to remediate the material weakness, or other control deficiencies are identified, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner. Due to our small size and the early stage of our business, segregation of duties may not always be possible and may not be economically feasible. We have limited capital resources and have given priority in the use of those resources to our business development efforts. As a result, we have not been able to take steps to improve our internal controls over financial reporting during the quarter ended June 30, 2022. However, we continue to evaluate the effectiveness of internal controls and procedures on an on-going basis. As our operations grow and become more complex, we intend to hire additional personnel in financial reporting and other areas. However, there can be no assurance of when, if ever, we will be able to remediate the identified material weaknesses.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
|
Item 1. |
Legal Proceedings |
We may from time to time be party to litigation and subject to claims incident to the ordinary course of business. As we grow and gain prominence in the marketplace we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows or financial position. We are not currently a party to any legal proceedings.
|
Item 1A. |
Risk Factors |
Not applicable.
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
On June 9, 2022, the Company entered into a Convertible Promissory Notes Purchase Agreement (the “Agreement”) with Liu Marketing (M) Sdn. Bhd., a company organized under the laws of Malaysia (the “Purchaser”). Pursuant to the Agreement, the Company sold a Convertible Promissory Note to the Purchaser with a principal amount of $50,000 (the “Note”). The Note bears interest at the rate of 3% per annum, which are payable on June 9th of 2023 and 2024. The Note will mature on the date that is twenty-four months from the date that the purchase price of the Note is paid to the Company. Any outstanding principal and interest on the Note may be converted to the shares of common stock of the Company at the holder’s option at a conversion price of $0.45 per share at any time until the total outstanding balance of the Note is paid. The Note was sold to the Purchaser pursuant to an exemption from registration under Regulation S, promulgated under the Securities Act of 1933, as amended.
|
Item 3. |
Defaults upon Senior Securities |
None.
|
Item 4. |
Mine Safety Disclosure |
Not applicable.
|
Item 5. |
Other Information |
None.
|
Item 6. |
Exhibits |
|
Exhibit No. |
|
Description |
| 10.1 | Convertible Promissory Notes Purchase Agreement by and between Fuse Group Holding, Inc. and Liu Marketing (M) Sdn. Bhd, dated June 9, 2022* | |
| 10.2 | Convertible Promissory Note, issued by Fuse Group Holding, Inc. to Liu Marketing (M) Sdn. Bhd., dated June 9, 2022* | |
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10.3 |
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10.4 |
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|
31.1 |
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31.2 |
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|
32.1 |
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|
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32.2 |
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|
|
101.INS |
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Inline XBRL Instance Document* |
|
101.SCH |
|
Inline XBRL Schema Document* |
|
101.CAL |
|
Inline XBRL Calculation Linkbase Document* |
|
101.DEF |
|
Inline XBRL Definition Linkbase Document* |
|
101.LAB |
|
Inline XBRL Label Linkbase Document* |
|
101.PRE |
|
Inline XBRL Presentation Linkbase Document* |
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)* |
|
* |
filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
FUSE GROUP HOLDING INC. |
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|
|
|
|
|
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By: |
/s/ Umesh Patel |
|
|
|
Umesh Patel |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
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|
|
|
|
|
|
August 12, 2022 |
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|
|
|
|
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By: |
/s/ Michael Viotto |
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|
|
Michael Viotto |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
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August 12, 2022 |
Exhibit 10.1
CONVERTIBLE PROMISSORY NOTES PURCHASE AGREEMENT
This Convertible Promissory Notes Purchase Agreement ("Agreement") is made and effective the June 9, 2022,
|
BETWEEN: |
Fuse Group Holding Inc. (the "Company"), a corporation organized and existing under the laws of the Nevada, with its head office located at: |
|
|
805 W. Duarte Rd. Suite 102 Arcadia CA 91007 |
||
|
AND: |
Each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”). |
WHEREAS, Purchasers desire to purchase from the Company notes in the aggregate sum of Fifty Thousand Dollars USD ($50,000) be evidenced by 3% Convertible Notes.
In consideration of the mutual covenants and conditions herein contained, the parties hereby agree, represent and warrant as follows:
|
1. |
ISSUE OF NOTES |
|
a. |
The Company will authorize the issue of its 3% Convertible Promissory Notes (hereinafter called "Notes") to the Purchasers in the aggregate principal amount of $50,000 to be dated on June 9, 2022 to mature on that is twenty-four (24) months after the Purchase Price Date, as defined in the Notes, to bear interest on the unpaid principal thereof at the rate of 3% per annum until maturity, payable on June 9th of 2023 and 2024, respectively, commencing on Purchase Price Date, and after maturity at the rate of 3% per annum until Notes are fully paid, and to be substantially in the form of Exhibit A attached hereto. |
|
b. |
For the purposes of calculating interest for any period for which the interest shall be payable, such interest shall be calculated on the basis of a 30-day month and a 365-day year. The Company will promptly and punctually pay to Notes Holders (the “Holders”) the interest on the Notes held by Holders without presentment of the original copies of the Notes. In the event that any of the Holders shall sell or transfer the Notes, it shall notify the Company of the name and address of the transferee and send the assignment notice to the Company for approval. In the event the Company defaults on any installment of interest or principal of any Note and fails to cure such defaults within 90 days after the written notice from such Holder of the Note, then the Holder, at its option, may declare the entire principal and the interest accrued thereon for such Note immediately due and payable and may proceed to enforce the collection thereof. |
|
c. |
The Company will also authorize and reserve sufficient shares of its common stock (hereinafter called "Shares") as may be required for issuance upon conversion of the Notes pursuant to the conversion terms hereinafter stated. |
|
d. |
The Purchasers have the right at any time after the date of this Agreement until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance of the Notes into shares of Common Stock of the Company. Conversion notices in the form attached the Notes (each, a “Conversion Notice”) may be effectively delivered |
Convertible Promissory Note Agreement
|
to the Company by any method set forth in the “Notices” Section of this Agreement. The Company shall deliver the conversion shares from any conversion to Holder in accordance with the Notes. Subject to adjustment as set forth in this Agreement, the price at which the Purchasers have the right to convert all or any portion of the outstanding balance into Common Stock of the Company is $0.45 per share of Common Stock (the “Conversion Price”). |
|
2. |
SALE AND PURCHASE OF NOTES |
The Company will sell the Notes to the Purchasers listed on the signature pages of this Agreement, each of whom agrees to purchase the principal amount of the Notes set opposite his/her/its names, subject to the terms and conditions hereof and in reliance upon the representations and warranties of the Company contained herein, at the purchase price of 100% of the principal amount.
|
2. |
REPRESENTATIONS AND WARRANTIES BY THE COMPANY |
|
a. |
Company is a corporation duly organized and existing in good standing under the laws of the State of Nevada has the corporate power to carry on in the business as it is now being conducted. |
|
b. |
The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and Notes and otherwise to carry out its obligations hereunder and thereunder. |
|
c. |
There is no action or proceeding pending or, to the knowledge of the Company, threatened against the Company before any court or administrative agency, the determination of which might result in any material adverse change in the business of the Company. |
|
d. |
The Company is not a party to any contract or agreement or subject to any restriction which materially and adversely affects its business, property or assets, or financial condition, and neither the execution nor delivery of this Agreement, nor the confirmation of the transactions contemplated herein, nor the fulfillment of the terms hereof, nor the compliance with the terms and provisions hereof and of the Notes, will conflict with or result in the breach of the terms, conditions or provisions or constitute a default, under the Articles of Incorporation of the Company or of any Agreement or instrument to which the Company is now a party. |
|
e. |
The Company has not declared, set aside, paid or made any dividend or other distributions with respect to its capital stock and has not made or caused to be made directly or indirectly, any payment or other distribution of any nature whatsoever to any of the holders of its capital stock except for regular salary payments for services rendered and the reimbursement of business expenses. |
|
f. |
There are no outstanding options or rights to purchase shares of the Company and no outstanding securities with the right of conversion into shares of the Company. |
|
g. |
The Company owns or possesses adequate licenses or other rights to use, all patents, trademarks, trade names, trade secrets, and copyrights used in its business. No one has asserted to the Company that its operations infringe on the patents, trademarks, trade secrets or other rights utilized in the operation of its business. |
|
h. |
The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Notes, will not be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. |
Convertible Promissory Note Agreement
|
3. |
REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS |
Each of the Purchasers represents and warrants that:
|
a. |
Each of the Purchasers is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by the Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms. |
|
b. |
Each of the Purchasers is acquiring the Note for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of the Note or Shares (this representation and warranty not limiting the Purchaser’s right to sell the Note and Shares in compliance with applicable federal and state securities laws). Each of the Purchaser is acquiring the Note as principal, not as nominee or agent, and not with a view to or for distributing or reselling the Note or Shares or any part thereof in violation of the Securities Act or any applicable state securities law. |
|
c. |
Each of the Purchasers is a non-U.S. person (as such term is defined in Rule 902 of Regulation S under the Securities Act) and is not acquiring the Note for the account or benefit of a U.S. person. Each of the Purchasers will not, within one year of the date of the issuance of Note or the Shares to such Purchaser, (i) make any offers or sales of the Note or Shares in the United States or to, or for the benefit of, a U.S. person (in each case, as defined in Regulation S) other than in accordance with Regulation S or another exemption from the registration requirements of the Securities Act, or (ii) engage in hedging transactions with regard to the Shares unless in compliance with the Securities Act. Neither such Purchaser nor any of such Purchaser’s affiliates or any person acting on his/her or their behalf has engaged or will engage in directed selling efforts (within the meaning of Regulation S) with respect to the Note or Shares, and all such persons have complied and will comply with the offering restriction requirements of Regulation S in connection with the offering of the Note or Shares outside of the United States. |
|
d. |
Each of the Purchasers, either alone or together with his/her/its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Note, and has so evaluated the merits and risks of such investment. Each of the Purchasers are able to bear the economic risk of an investment in the Note or the Shares and, at the present time, is able to afford a complete loss of such investment. |
|
e. |
Each of the Purchasers has a net worth in excess of $1,000,000 exclusive of its/his/her residences and that each of the Purchasers is an “accredited investor” as defined in Rule 501(a) under the Securities Act at the time such Purchaser was offered the Note and as of the date hereof. |
|
f. |
Each of the Purchasers hereby represents that he/she/it has satisfied his/her/itself as to the full observance by such Purchaser of the laws of the jurisdictions applicable to such Purchaser in connection with the purchase of the Note or the execution and delivery by such Purchaser. Each of the Purchaser’s subscription and payment for, and continued beneficial ownership of, the Note or the Shares will not violate any securities or other laws of such Purchaser’s jurisdiction applicable to such Purchaser. |
Convertible Promissory Note Agreement
|
g. |
Each of the Purchasers understands that the Note or the Shares have not been, and will not be, registered under the Securities Act or applicable securities laws of any state or country and therefore the Note or the Shares cannot be sold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and applicable state securities laws or exemptions from such registration requirements are available. The Company shall be under no obligation to register the Notes or Shares under the Securities Act and applicable state securities laws, and any such registration shall be in the Company’s sole discretion. |
|
h. |
Each of the Purchasers acknowledges that he/she/it has had the opportunity to review the information of the Company and the SEC reports filed by the Company and has been afforded (i) the opportunity to ask such questions as he/she/it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Note and the merits and risks of investing in the Note; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate his/her/its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment |
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i. |
Each of the Purchasers is not purchasing the Note as a result of any advertisement, article, notice or other communication regarding the Notes published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. |
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4. |
CONVERSION |
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a. |
Upon conversion of the Notes, all accrued and unpaid interest on the principal amount converted shall be paid in cash to the Holder by the Company. |
|
b. |
In case the Company shall at any time divide its outstanding shares of Common Stock of the Company (“Common Stock”) into a greater number of shares, the conversion price in effect immediately prior to such subdivision should be proportionately reduced, and, conversely, in the case of outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the actual conversion price in effect immediately prior to such combination shall be proportionately increased. |
|
c. |
No fractional share of Common Stock shall be issued upon conversion of any of the Notes. If any Holder of the Notes shall have converted all the Notes held by him/her/it other than a principal amount so small that less than a whole share of Common Stock would be issuable upon conversion thereof, the Company may elect to prepay such balance, with interest accrued thereon to the date fixed for prepayment or leave the same outstanding until the maturity of the Note. |
|
d. |
In any reclassification of outstanding shares of Common Stock (other than a change in stated value or from no par to par value) or in the case of any consolidation or merger of the Company with any other company and the other company will be the surviving company, the Company shall place a condition precedent to such transaction, so that each Holder of the Notes then outstanding shall have the right thereafter to convert his/her/its Note into the corresponding amount of shares and other securities upon such reclassification, consolidation or merger as if such Note had been converted immediately prior to such reclassification, consolidation or merger. |
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5. |
COVENANTS |
Convertible Promissory Note Agreement
|
a. |
The Company covenants that so long as the Notes are outstanding, it will deliver to the Holders thereof as soon as practical, the quarterly or annual report of the Company filed with SEC including consolidated financial statements. The public filing with SEC shall be considered that such report has been delivered to the Holders. |
|
b. |
The Company covenants that, so long as any of the Notes are outstanding, it will permit any Holder of the Notes to visit and inspect, at the Holder's expense, any of the property of the Company, including its books and records, and to discuss affairs, finances and accounts with its officers, provided such visit should be in normal business hours with reasonable advance notice. The Holders agree that each of them will keep any business information of the Company in confidence and will not trade the Company’s shares when it has any material non-public information of the Company. |
|
c. |
The Company covenants that, without the written consent of the Holders of more than 51% in principal amount of the Notes, it will not: |
|
i |
Create or suffer to exist any mortgage, pledge, encumbrance, lien or charge of any kind on any of its properties or assets, whether now owned or hereafter acquired except for (i) mortgages, encumbrances, liens or charges which are now in existence; (ii) mortgages, liens, charges and encumbrances (a) for taxes, assessments or governmental charges or levies on property of the Company if the same shall not be due or delinquent or thereafter can be paid without penalty, or being contested in good faith and by appropriate proceedings; (b) of mechanics and material men for sums not yet due or being contested in good faith and by appropriate proceedings; or (c) in connection with workers' compensation, unemployment insurance and other state employment legislation. |
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6. |
EVENT OF DEFAULT |
|
a. |
The default on any installment payment of interest or principal of any Note and fails to cure such default within 90 days after the written notice from the Holder of such Note will be considered as an event of default. The Holder of such Note may, at its option, declare the entire principal and interest accrued thereon immediately due and payable and may proceed with collection due to such event of default. |
|
b. |
If the Company has made a material misrepresentation in connection with this Agreement or with the transactions contemplated by this Agreement, or if any proceeding involving the Company is commenced under any receivership, bankruptcy, insolvency, such event shall be deemed a default which will immediately entitled Holders of the Notes, at their option and without notice, to declare the entire amount of interest accrued thereon immediately due and payable and proceed to enforce the collection thereof. |
|
7. |
MISCELLANEOUS |
|
a. |
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (California time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a business day or later than 5:30 p.m. (California time) on any business day, (c) the second (2nd) business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice |
Convertible Promissory Note Agreement
|
is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. |
|
b. |
This Agreement may not be modified, amended or terminated except by written agreement executed by all the parties hereto. |
|
c. |
The waiver of any breach or default hereunder shall not be considered valid unless in writing and signed by the party such waiver is sought and no waiver shall be deemed a waiver of any subsequent breach or default of same. |
|
d. |
The paragraph headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of such. |
|
e. |
The validity, construction, interpretation and enforceability of this Agreement and the Notes executed pursuant to this Agreement shall be determined and governed by the laws of the State of California. Any disputes that arise under this Agreement, shall be heard only in the state or federal courts located in the City of Los Angeles, State of California. |
|
f. |
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. |
IN WITNESS WHEREOF, the parties hereto have caused this Convertible Promissory Notes Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
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FUSE GROUP HOLDING INC. |
Address for Notice: |
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By: |
/s/Umesh Patel |
Fax: |
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Name: Umesh Patel Title: Chief Executive Officer |
E-mail: |
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOR PURCHASER FOLLOWS]
Convertible Promissory Note Agreement
[PURCHASER SIGNATURE PAGES TO CONVERTIBLE PROMISSORY NOTES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Convertible Promissory Notes Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: Liu Marketing (M) SDN BHD
Signature of Authorized Signatory of Purchaser: /s/Liu Jun
Name of Authorized Signatory: Liu Jun
Title of Authorized Signatory: Chief Executive Officer
Email Address of Authorized Signatory:
Facsimile Number of Authorized Signatory:
Address for Notice to Purchaser: Sunway Velocity, 55100 Kuala Lumpur, Malaysia
Address for Delivery of Notes to Purchaser (if not same as address for notice): Subscription Amount: $50,000
EIN Number: (Malaysia Taxpayer Identification Number)
Convertible Promissory Note Agreement
Exhibit 10.2
CONVERTIBLE PROMISSORY NOTE
|
Effective Date: June 9, 2022. |
U.S. $50,000.00 |
FOR VALUE RECEIVED, FUSE GROUP HOLDING INC., a Nevada corporation (“Borrower”), promises to pay to LIU MARKETING (M) SDN. BHD., a corporation registered in Malaysia, (“Lender”),$50,000 on the date that is twenty-four (24) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of three percent (3%) per annum from the Purchase Price Date until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 365-day year comprised of twelve (12) thirty (30) day months, shall be payable in accordance with the terms of this Note. This Convertible Promissory Note (this “Note”) is issued and made effective as of June 9, 2022 (the “Effective Date”). This Note is issued pursuant to that certain Convertible Notes Purchase Agreement dated June 9, 2022, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
The purchase price for this Note shall be $50,000.00 (the “Purchase Price”) in original principal balance. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds in U.S. Dollars to the designated account by the Borrower.
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1. |
Payment; Prepayment. |
1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose.
1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the Outstanding Balance.
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2. |
Lender Optional Conversion. |
2.1. Conversions. Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be effectively delivered to Borrower by any method set forth in the “Notices” Section of the Purchase Agreement. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 6 below.
2.2. Conversion Price. Subject to adjustment as set forth in this Note, the price at which Lender has the right to convert all or any portion of the Outstanding Balance into Common Stock is $0.45 per share of Common Stock (the “Conversion Price”).
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3. |
Defaults and Remedies. |
3.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal or interest when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee
or other similar official shall be appointed over Borrower, or a material part of its assets and such appointment shall remain uncontested for 90 days or shall not be dismissed or discharged within 180 days. (d) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); (e) an involuntary bankruptcy proceeding is commenced or filed against Borrower.
3.2. Remedies. At any time following the occurrence of any Event of Default and upon written notice given by Lender to Borrower, the Borrower has 45 days (the “Grace Period”) from the date of the notice from Lender to cure such default. If the default is not cured after the Grace Period, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash. For the avoidance of doubt, Lender may continue making Conversions at any time following an Event of Default until such time as the Outstanding Balance is paid in full.
4. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
5. Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 5.1 shall become effective immediately after the effective date of such subdivision or combination.
6. Method of Conversion Share Delivery. On or before the close of business on the tenth (10th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall deliver to Lender via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender. The Conversion Shares shall include a restrictive securities legend on ground that such shares have not been registered with SEC under the Securities Act of 1933 and therefore they cannot be sold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and applicable state securities laws or exemptions from such registration requirements are available.
7. Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference. Any disputes that arise under this Note, shall be heard only in the state or federal courts located in the City of Los Angeles, State of California.
8. Cancellation. After repayment or conversion of the entire Outstanding Balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.
9. Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this Note.
10. Assignments. Borrower may not assign this Note without the prior written consent of Lender, subject to compliance with securities laws and regulations. This Note may not be offered, sold, assigned or transferred by Lender without the consent of Borrower and in compliance with securities laws and regulations.
11. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”
12. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.
[Remainder of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
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BORROWER: FUSE GROUP HOLDING INC. By: /s/Umesh Patel Name: Umesh Patel Title: Chief Executive Officer |
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ACKNOWLEDGED, ACCEPTED AND AGREED: LENDER: LIU MARKETING (M) SDN. BHD. By: By: /s/Liu Jun Name: Liu Jun Title: Chief Executive Officer |
ATTACHMENT 1
DEFINITIONS
For purposes of this Note, the following terms shall have the following meanings:
1. “Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, accrued but unpaid interest under this Note.
2. “Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.
3. “Trading Day” means any day on which the OTC Markets (or such other principal market for the Common Stock) is open for trading.
[Remainder of page intentionally left blank]
Attachment 1 to Convertible Note, Page 1
Exhibit 10.3
CONVERTIBLE PROMISSORY NOTES PURCHASE AGREEMENT
This Convertible Promissory Notes Purchase Agreement ("Agreement") is made and effective the July 1, 2022,
| BETWEEN: |
|
Fuse Group Holding Inc. (the "Company"), a corporation organized and existing under the laws of the Nevada, with its head office located at: |
| 805 W. Duarte Rd. Suite 102 Arcadia CA 91007 | ||
| AND: | Each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”). |
WHEREAS, Purchasers desire to purchase from the Company notes in the aggregate sum of Fifty Thousand Dollars USD ($50,000) be evidenced by 3% Convertible Notes.
In consideration of the mutual covenants and conditions herein contained, the parties hereby agree, represent and warrant as follows:
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1. |
ISSUE OF NOTES |
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a. |
The Company will authorize the issue of its 3% Convertible Promissory Notes (hereinafter called "Notes") to the Purchasers in the aggregate principal amount of $50,000 to be dated on July 1, 2022 to mature on that is twenty-four (24) months after the Purchase Price Date, as defined in the Notes, to bear interest on the unpaid principal thereof at the rate of 3% per annum until maturity, payable on July 1st of 2023 and 2024, respectively, commencing on Purchase Price Date, and after maturity at the rate of 3% per annum until Notes are fully paid, and to be substantially in the form of Exhibit A attached hereto. |
|
b. |
For the purposes of calculating interest for any period for which the interest shall be payable, such interest shall be calculated on the basis of a 30-day month and a 365-day year. The Company will promptly and punctually pay to Notes Holders (the “Holders”) the interest on the Notes held by Holders without presentment of the original copies of the Notes. In the event that any of the Holders shall sell or transfer the Notes, it shall notify the Company of the name and address of the transferee and send the assignment notice to the Company for approval. In the event the Company defaults on any installment of interest or principal of any Note and fails to cure such defaults within 90 days after the written notice from such Holder of the Note, then the Holder, at its option, may declare the entire principal and the interest accrued thereon for such Note immediately due and payable and may proceed to enforce the collection thereof. |
|
c. |
The Company will also authorize and reserve sufficient shares of its common stock (hereinafter called "Shares") as may be required for issuance upon conversion of the Notes pursuant to the conversion terms hereinafter stated. |
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d. |
The Purchasers have the right at any time after the date of this Agreement until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance of the Notes into shares of Common Stock of the Company. Conversion notices in the form attached the Notes (each, a “Conversion Notice”) may be effectively delivered |
Convertible Promissory Note Agreement
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to the Company by any method set forth in the “Notices” Section of this Agreement. The Company shall deliver the conversion shares from any conversion to Holder in accordance with the Notes. Subject to adjustment as set forth in this Agreement, the price at which the Purchasers have the right to convert all or any portion of the outstanding balance into Common Stock of the Company is $0.45 per share of Common Stock (the “Conversion Price”). |
|
2. |
SALE AND PURCHASE OF NOTES |
The Company will sell the Notes to the Purchasers listed on the signature pages of this Agreement, each of whom agrees to purchase the principal amount of the Notes set opposite his/her/its names, subject to the terms and conditions hereof and in reliance upon the representations and warranties of the Company contained herein, at the purchase price of 100% of the principal amount.
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2. |
REPRESENTATIONS AND WARRANTIES BY THE COMPANY |
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a. |
Company is a corporation duly organized and existing in good standing under the laws of the State of Nevada has the corporate power to carry on in the business as it is now being conducted. |
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b. |
The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and Notes and otherwise to carry out its obligations hereunder and thereunder. |
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c. |
There is no action or proceeding pending or, to the knowledge of the Company, threatened against the Company before any court or administrative agency, the determination of which might result in any material adverse change in the business of the Company. |
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d. |
The Company is not a party to any contract or agreement or subject to any restriction which materially and adversely affects its business, property or assets, or financial condition, and neither the execution nor delivery of this Agreement, nor the confirmation of the transactions contemplated herein, nor the fulfillment of the terms hereof, nor the compliance with the terms and provisions hereof and of the Notes, will conflict with or result in the breach of the terms, conditions or provisions or constitute a default, under the Articles of Incorporation of the Company or of any Agreement or instrument to which the Company is now a party. |
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e. |
The Company has not declared, set aside, paid or made any dividend or other distributions with respect to its capital stock and has not made or caused to be made directly or indirectly, any payment or other distribution of any nature whatsoever to any of the holders of its capital stock except for regular salary payments for services rendered and the reimbursement of business expenses. |
|
f. |
There are no outstanding options or rights to purchase shares of the Company and no outstanding securities with the right of conversion into shares of the Company. |
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g. |
The Company owns or possesses adequate licenses or other rights to use, all patents, trademarks, trade names, trade secrets, and copyrights used in its business. No one has asserted to the Company that its operations infringe on the patents, trademarks, trade secrets or other rights utilized in the operation of its business. |
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h. |
The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Notes, will not be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. |
Convertible Promissory Note Agreement
|
3. |
REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS |
Each of the Purchasers represents and warrants that:
|
a. |
Each of the Purchasers is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by the Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms. |
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b. |
Each of the Purchasers is acquiring the Note for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of the Note or Shares (this representation and warranty not limiting the Purchaser’s right to sell the Note and Shares in compliance with applicable federal and state securities laws). Each of the Purchaser is acquiring the Note as principal, not as nominee or agent, and not with a view to or for distributing or reselling the Note or Shares or any part thereof in violation of the Securities Act or any applicable state securities law. |
|
c. |
Each of the Purchasers is a non-U.S. person (as such term is defined in Rule 902 of Regulation S under the Securities Act) and is not acquiring the Note for the account or benefit of a U.S. person. Each of the Purchasers will not, within one year of the date of the issuance of Note or the Shares to such Purchaser, (i) make any offers or sales of the Note or Shares in the United States or to, or for the benefit of, a U.S. person (in each case, as defined in Regulation S) other than in accordance with Regulation S or another exemption from the registration requirements of the Securities Act, or (ii) engage in hedging transactions with regard to the Shares unless in compliance with the Securities Act. Neither such Purchaser nor any of such Purchaser’s affiliates or any person acting on his/her or their behalf has engaged or will engage in directed selling efforts (within the meaning of Regulation S) with respect to the Note or Shares, and all such persons have complied and will comply with the offering restriction requirements of Regulation S in connection with the offering of the Note or Shares outside of the United States. |
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d. |
Each of the Purchasers, either alone or together with his/her/its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Note, and has so evaluated the merits and risks of such investment. Each of the Purchasers are able to bear the economic risk of an investment in the Note or the Shares and, at the present time, is able to afford a complete loss of such investment. |
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e. |
Each of the Purchasers has a net worth in excess of $1,000,000 exclusive of its/his/her residences and that each of the Purchasers is an “accredited investor” as defined in Rule 501(a) under the Securities Act at the time such Purchaser was offered the Note and as of the date hereof. |
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f. |
Each of the Purchasers hereby represents that he/she/it has satisfied his/her/itself as to the full observance by such Purchaser of the laws of the jurisdictions applicable to such Purchaser in connection with the purchase of the Note or the execution and delivery by such Purchaser. Each of the Purchaser’s subscription and payment for, and continued beneficial ownership of, the Note or the Shares will not violate any securities or other laws of such Purchaser’s jurisdiction applicable to such Purchaser. |
Convertible Promissory Note Agreement
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g. |
Each of the Purchasers understands that the Note or the Shares have not been, and will not be, registered under the Securities Act or applicable securities laws of any state or country and therefore the Note or the Shares cannot be sold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and applicable state securities laws or exemptions from such registration requirements are available. The Company shall be under no obligation to register the Notes or Shares under the Securities Act and applicable state securities laws, and any such registration shall be in the Company’s sole discretion. |
|
h. |
Each of the Purchasers acknowledges that he/she/it has had the opportunity to review the information of the Company and the SEC reports filed by the Company and has been afforded (i) the opportunity to ask such questions as he/she/it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Note and the merits and risks of investing in the Note; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate his/her/its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment |
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i. |
Each of the Purchasers is not purchasing the Note as a result of any advertisement, article, notice or other communication regarding the Notes published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. |
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4. |
CONVERSION |
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a. |
Upon conversion of the Notes, all accrued and unpaid interest on the principal amount converted shall be paid in cash to the Holder by the Company. |
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b. |
In case the Company shall at any time divide its outstanding shares of Common Stock of the Company (“Common Stock”) into a greater number of shares, the conversion price in effect immediately prior to such subdivision should be proportionately reduced, and, conversely, in the case of outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the actual conversion price in effect immediately prior to such combination shall be proportionately increased. |
|
c. |
No fractional share of Common Stock shall be issued upon conversion of any of the Notes. If any Holder of the Notes shall have converted all the Notes held by him/her/it other than a principal amount so small that less than a whole share of Common Stock would be issuable upon conversion thereof, the Company may elect to prepay such balance, with interest accrued thereon to the date fixed for prepayment or leave the same outstanding until the maturity of the Note. |
|
d. |
In any reclassification of outstanding shares of Common Stock (other than a change in stated value or from no par to par value) or in the case of any consolidation or merger of the Company with any other company and the other company will be the surviving company, the Company shall place a condition precedent to such transaction, so that each Holder of the Notes then outstanding shall have the right thereafter to convert his/her/its Note into the corresponding amount of shares and other securities upon such reclassification, consolidation or merger as if such Note had been converted immediately prior to such reclassification, consolidation or merger. |
|
5. |
COVENANTS |
Convertible Promissory Note Agreement
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a. |
The Company covenants that so long as the Notes are outstanding, it will deliver to the Holders thereof as soon as practical, the quarterly or annual report of the Company filed with SEC including consolidated financial statements. The public filing with SEC shall be considered that such report has been delivered to the Holders. |
|
b. |
The Company covenants that, so long as any of the Notes are outstanding, it will permit any Holder of the Notes to visit and inspect, at the Holder's expense, any of the property of the Company, including its books and records, and to discuss affairs, finances and accounts with its officers, provided such visit should be in normal business hours with reasonable advance notice. The Holders agree that each of them will keep any business information of the Company in confidence and will not trade the Company’s shares when it has any material non-public information of the Company. |
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c. |
The Company covenants that, without the written consent of the Holders of more than 51% in principal amount of the Notes, it will not: |
|
i |
Create or suffer to exist any mortgage, pledge, encumbrance, lien or charge of any kind on any of its properties or assets, whether now owned or hereafter acquired except for (i) mortgages, encumbrances, liens or charges which are now in existence; (ii) mortgages, liens, charges and encumbrances (a) for taxes, assessments or governmental charges or levies on property of the Company if the same shall not be due or delinquent or thereafter can be paid without penalty, or being contested in good faith and by appropriate proceedings; (b) of mechanics and material men for sums not yet due or being contested in good faith and by appropriate proceedings; or (c) in connection with workers' compensation, unemployment insurance and other state employment legislation. |
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6. |
EVENT OF DEFAULT |
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a. |
The default on any installment payment of interest or principal of any Note and fails to cure such default within 90 days after the written notice from the Holder of such Note will be considered as an event of default. The Holder of such Note may, at its option, declare the entire principal and interest accrued thereon immediately due and payable and may proceed with collection due to such event of default. |
|
b. |
If the Company has made a material misrepresentation in connection with this Agreement or with the transactions contemplated by this Agreement, or if any proceeding involving the Company is commenced under any receivership, bankruptcy, insolvency, such event shall be deemed a default which will immediately entitled Holders of the Notes, at their option and without notice, to declare the entire amount of interest accrued thereon immediately due and payable and proceed to enforce the collection thereof. |
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7. |
MISCELLANEOUS |
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a. |
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (California time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a business day or later than 5:30 p.m. (California time) on any business day, (c) the second (2nd) business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice |
Convertible Promissory Note Agreement
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is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. |
|
b. |
This Agreement may not be modified, amended or terminated except by written agreement executed by all the parties hereto. |
|
c. |
The waiver of any breach or default hereunder shall not be considered valid unless in writing and signed by the party such waiver is sought and no waiver shall be deemed a waiver of any subsequent breach or default of same. |
|
d. |
The paragraph headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of such. |
|
e. |
The validity, construction, interpretation and enforceability of this Agreement and the Notes executed pursuant to this Agreement shall be determined and governed by the laws of the State of California. Any disputes that arise under this Agreement, shall be heard only in the state or federal courts located in the City of Los Angeles, State of California. |
|
f. |
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. |
IN WITNESS WHEREOF, the parties hereto have caused this Convertible Promissory Notes Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| FUSE GROUP HOLDING INC. | Address for Notice: | |
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By: |
/s/Umesh Patel |
Fax: |
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Name: Umesh Patel Title: Chief Executive Officer |
E-mail: |
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOR PURCHASER FOLLOWS]
Convertible Promissory Note Agreement
[PURCHASER SIGNATURE PAGES TO CONVERTIBLE PROMISSORY NOTES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Convertible Promissory Notes Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: Liu Marketing (M) SDN BHD
Signature of Authorized Signatory of Purchaser: /s/Liu Jun
Name of Authorized Signatory: Liu Jun
Title of Authorized Signatory: Chief Executive Officer
Email Address of Authorized Signatory:
Facsimile Number of Authorized Signatory:
Address for Notice to Purchaser: Sunway Velocity, 55100 Kuala Lumpur, Malaysia
Address for Delivery of Notes to Purchaser (if not same as address for notice): Subscription Amount: $50,000
EIN Number: (Malaysia Taxpayer Identification Number)
Convertible Promissory Note Agreement
Exhibit 10.4
CONVERTIBLE PROMISSORY NOTE
| Effective Date: July 1, 2022. | U.S. $50,000.00 |
FOR VALUE RECEIVED, FUSE GROUP HOLDING INC., a Nevada corporation (“Borrower”), promises to pay to LIU MARKETING (M) SDN. BHD., a corporation registered in Malaysia, (“Lender”), $50,000 on the date that is twenty-four (24) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of three percent (3%) per annum from the Purchase Price Date until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 365-day year comprised of twelve (12) thirty (30) day months, shall be payable in accordance with the terms of this Note. This Convertible Promissory Note (this “Note”) is issued and made effective as of July 1, 2022 (the “Effective Date”). This Note is issued pursuant to that certain Convertible Notes Purchase Agreement dated July 1, 2022, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
The purchase price for this Note shall be $50,000.00 (the “Purchase Price”) in original principal balance. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds in U.S. Dollars to the designated account by the Borrower.
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1. |
Payment; Prepayment. |
1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose.
1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the Outstanding Balance.
|
2. |
Lender Optional Conversion. |
2.1. Conversions. Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be effectively delivered to Borrower by any method set forth in the “Notices” Section of the Purchase Agreement. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 6 below.
2.2. Conversion Price. Subject to adjustment as set forth in this Note, the price at which Lender has the right to convert all or any portion of the Outstanding Balance into Common Stock is $0.45 per share of Common Stock (the “Conversion Price”).
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3. |
Defaults and Remedies. |
3.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal or interest when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee
or other similar official shall be appointed over Borrower, or a material part of its assets and such appointment shall remain uncontested for 90 days or shall not be dismissed or discharged within 180 days. (d) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); (e) an involuntary bankruptcy proceeding is commenced or filed against Borrower.
3.2. Remedies. At any time following the occurrence of any Event of Default and upon written notice given by Lender to Borrower, the Borrower has 45 days (the “Grace Period”) from the date of the notice from Lender to cure such default. If the default is not cured after the Grace Period, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash. For the avoidance of doubt, Lender may continue making Conversions at any time following an Event of Default until such time as the Outstanding Balance is paid in full.
4. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
5. Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 5.1 shall become effective immediately after the effective date of such subdivision or combination.
6. Method of Conversion Share Delivery. On or before the close of business on the tenth (10th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall deliver to Lender via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender. The Conversion Shares shall include a restrictive securities legend on ground that such shares have not been registered with SEC under the Securities Act of 1933 and therefore they cannot be sold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and applicable state securities laws or exemptions from such registration requirements are available.
7. Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference. Any disputes that arise under this Note, shall be heard only in the state or federal courts located in the City of Los Angeles, State of California.
8. Cancellation. After repayment or conversion of the entire Outstanding Balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.
9. Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this Note.
10. Assignments. Borrower may not assign this Note without the prior written consent of Lender, subject to compliance with securities laws and regulations. This Note may not be offered, sold, assigned or transferred by Lender without the consent of Borrower and in compliance with securities laws and regulations.
11. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”
12. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.
[Remainder of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
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BORROWER:
FUSE GROUP HOLDING INC.
By: /s/Umesh Patel Name: Umesh Patel Title: Chief Executive Officer |
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ACKNOWLEDGED, ACCEPTED AND AGREED: LENDER: LIU MARKETING (M) SDN. BHD.
By:
By: /s/Liu Jun Name: Liu Jun Title: Chief Executive Officer |
[Signature Page to Secured Convertible Promissory Note]
ATTACHMENT 1
DEFINITIONS
For purposes of this Note, the following terms shall have the following meanings:
1. “Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, accrued but unpaid interest under this Note.
2. “Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.
3. “Trading Day” means any day on which the OTC Markets (or such other principal market for the Common Stock) is open for trading.
[Remainder of page intentionally left blank]
Attachment 1 to Convertible Note, Page 1
Exhibit 31.1
RULE 13a-14(a) CERTIFICATION FOR FORM 10-Q (CEO) CERTIFICATION
I, Umesh Patel, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Fuse Group Holding Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to the Company by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
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Date: August 12, 2022 |
By: |
/s/ Umesh Patel |
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Umesh Patel |
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Chief Executive Officer |
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Exhibit 31.2
RULE 13a-14(a) CERTIFICATION FOR FORM 10-Q (CFO) CERTIFICATION
I, Michael Viotto, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Fuse Group Holding Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to the Company by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
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Date: August 12, 2022 |
By: |
/s/ Michael Viotto |
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Michael Viotto |
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Chief Financial Officer |
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Exhibit 32.1
SECTION 1350 CERTIFICATION (CEO) 1350
FUSE GROUP HOLDING INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fuse Group Holding Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Umesh Patel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 12, 2022 |
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/s/ Umesh Patel |
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Umesh Patel |
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Chief Executive Officer |
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Exhibit 32.2
SECTION 1350 CERTIFICATION (CFO) 1350
FUSE GROUP HOLDING INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fuse Group Holding Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof, the “Report”, I, Michael Viotto, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 12, 2022 |
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/s/ Michael Viotto |
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Michael Viotto |
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Chief Financial Officer |
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