DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS
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. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results could differ materially from
the results described in or implied by these forward-looking statements as a
result of various factors, including those discussed below and elsewhere in the
Annual Report on Form 10-K, particularly under the heading "Risk Factors." and
those set forth from time to time in our other filings with the SEC.
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, 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.
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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 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.
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Results of operations for the years ended September 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 year ended September 30, 2022, we provided two potential mine
opportunities in Mexico to a client. For the year ended September 30, 2022, the
Company recorded revenue of $200,000 for the services provided. For the year
ended September 30, 2021, we provided seven potential mine opportunities in
Mexico to 3 clients. For the year ended September 30, 2021, the Company recorded
revenue of $700,000 for the services provided. Our cost of revenues for the
years ended September 30, 2022 and 2021 was $10,015 and $81,081, 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 $618,919 for the
years ended September 30, 2022 and 2021, respectively.
Costs and Expenses
The major components of our expenses for the years ended September 30, 2022 and
2021 are in the table below:
Increase
2022 2021 (Decrease)
General and administrative $ 551,236 $ 605,566 $ (54,330 )
Allowance for non-current prepaid expenses - 1,000,000 (1,000,000 )
Consulting fees 72,403 79,128 (6,725 )
Total operating expenses $ 623,639 $ 1,684,694 $ (1,061,055 )
The decrease in our operating expenses for the year ended September 30, 2022,
compared to the year ended September 30, 2021, was mainly due to decreased
allowance for prepaid consulting/finder's fee by $1,000,000, decreased insurance
expense by approximately $22,250, decreased lawyer fee by approximately $31,360,
decreased payroll expenses by approximately $35,410, decreased professional fee
by approximately $23,120, but was partially offset by increased auditing fee by
approximately $35,750.
Non-operating income (expenses), net
Net non-operating expense was $8,438 for the year ended September 30, 2022,
compared to non-operating income of $44,254 for the year ended September 30,
2021. For the year ended September 30, 2022, non-operating expense mainly
consist of interest expense on EIDL of $4,032, interest expense on convertible
note of $4,466. For the year ended September 30, 2021, non-operating income
mainly consist of PPP Loan forgiveness of $49,600 which was partly offset by
interest expense on EIDL of $4,053 and bank service charge of $1,354.
Liquidity and Capital Resources
The table below provides selected working capital information as of September
30, 2022 and September 30, 2021:
September 30, 2022 September 30, 2021
Total current assets $ 45,014 $ 158,385
Total current liabilities 37,573 33,924
Working capital $ 7,441 $ 124,461
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Liquidity
During the years ended September 30, 2022 and 2021, we had net loss of $444,492
and $1,023,921, 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 years ended September 30, 2022 and 2021:
2022 2021
Net cash used in operating activities $ (449,844 ) $ (58,442 )
Net cash provided by financing activities 347,337 (525 )
Net increase (decrease) in cash
$ (102,507 ) $ (58,967 )
Cash Flows from Operating Activities
Our cash used in operating activities for the years ended September 30, 2022 and
2021 was $449,844 and $58,442, respectively. The increase in cash outflow during
the year ended September 30, 2022 was mainly due to increased cash outflow
resulted from net loss after noncash adjustment by $372,202 and increased cash
outflow on other payables by $44,425, but was partly offset by increased cash
inflow on prepaid expenses by $23,922.
Cash Flows from Investing Activities
During the years ended September 30, 2022 and 2021, we did not have any
investing activities.
Cash Flows from Financing Activities
Our cash provided by financing activities for the year ended September 30, 2022
was $347,337 compared to cash used by financing activities for the year ended
September 30, 2021 was $525. For the year ended September 30, 2022, cash
provided by financing activities mainly consisted of proceeding from convertible
notes by $350,000, but was partly offset by repayment to EIDL loan by $ 2,663.
For the year ended September 30, 2021, cash used by financing activities mainly
consisted of repayment to EIDL loan by $525.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements.
Off Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance-sheet arrangements.
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FUSE GROUP HOLDING INC. 
