The following discussion and analysis of our financial condition and results of operations contains information that management believes is relevant to an assessment and understanding of our results of operations. You should read this discussion in conjunction with the Financial Statements and Notes included elsewhere in this report and with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Form 10-K for the fiscal year ended September 30, 2014 originally filed with the Securities and Exchange Commission (the "SEC") on January 13, 2015 and Form 10-K/A filed with the SEC on January 16, 2015. Certain statements set forth below constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. See "Special Note Regarding Forward-Looking Statements". References to "Fuse" the "Company," "we," "us" and "our" refer to Fuse Science, Inc. and its consolidated subsidiaries; References to "Spiral" refer to our 51% owned subsidiary, Spiral Energy Tech, Inc.





General

Fuse Science, Inc. ("Fuse", "our", "us", "we" or the "Company") was incorporated in Nevada on September 21, 1988. Prior to 2002, the Company's activities included developing and marketing data communications and networking infrastructure solutions for business, government and education. From 2007 to 2009, the Company was a "business development company" under the Investment Company Act of 1940. From April 2011 through October 1, 2014, the Company's business involved developing and marketing nutraceutical products.

On October 1, 2014, Fuse entered into an Agreement and Plan of Reorganization (the "Merger Agreement") with Spiral, a Nevada corporation, and Spiral Acquisition Sub, Inc., a newly formed, wholly-owned Nevada subsidiary ("Acquisition Sub"). Upon closing of the transactions contemplated under the Merger Agreement (the "Merger") which occurred concurrently with entering into the Merger Agreement, Acquisition Sub merged with and into Spiral, and Spiral, as the surviving entity, became a 51% majority-owned subsidiary of Fuse.

At the closing of the Merger, 51% of the outstanding shares of Spiral (the "Spiral Shares") were acquired by the Company for an aggregate of 15 million newly issued shares of Common Stock, par value $ 0.001 per share, of Fuse (the "Fuse Common Stock") or, at the election of any holder of the Spiral Shares, shares of Series C Convertible Preferred Stock, par value $0.001 per share (the "Series C Preferred Stock") if as a result of receiving Fuse Common Stock in connection with the Merger, such holder would hold in excess of 5% of the issued and outstanding shares of Fuse,. At the closing of the Merger, Fuse issued 3,269,808 shares of Fuse Common stock and 3,500,000 shares of Series C Preferred Stock to the former Spiral shareholders. The Series C Preferred Stock is convertible into 11,730,192 common shares, subject to adjustment.

Since October 1, 2014, Fuse, through its 51% owned subsidiary, Spiral has focused on developing and commercializing its proprietary SkyPorts drone support and Energy Demand Network ("EDEN") technology. This technology seeks to permit a drone to operate predictably many miles outside of a "home range" limitation, defined by the drone's finite battery power, by allowing for a flight path of numerous stops (or waypoints) at recharging stations along the way, thus extending the limit of the drone's useful range. Currently, we do not plan to build or design any drones or autonomous vehicles; rather we intend to employ our technology in non-military drones manufactured by third party commercial manufacturers.









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We have filed patents for technology related to SkyPorts and EDEN technology as follows:

· US Provisional patent application No. 62/075,317; Drone Recharging Station and

Method of Networking

· US Provisional patent application No. 62/145,216; Controlling Autonomous UAV

Delivery Based Fleet Services

Also, through Spiral, we are engaged in developing and commercializing our XTRAX® remote monitoring system, designed to measure the production of solar and other renewable energy systems and to enable transmission of the data via the cellular and radio frequency network (and potentially via microwave transmission network or satellite). On April 25, 2013, we purchased the patents and trademarks relating to the XTRAX® remote monitoring system from Carbon 612 Corporation and one of its creditors. On May 13, 2013, we entered into an agreement with a patent assertion entity, pursuant to which we sold Endeavor the XTRAX® patents and obtained a perpetual, royalty-free, irrevocable, non-exclusive and worldwide license to develop, distribute and sell the products and services covered by the patents and to a portion of the revenues generated by patent enforcement activities. Our principal revenue during the period covered by this report has been amounts paid related to settlement of patent enforcement actions.





Results of Operations



Not applicable

The Company had no operations during the three month period ended December 31, 2015

Liquidity and Capital Resources





Not applicable

Off-Balance Sheet Arrangements

As of December 31, 2015, we had no material off-balance sheet arrangements. Potential Litigation Liabilities

Due to our present lack of unissued authorized capital, we are currently in default of certain provisions under our agreements with the holders of the Series A Convertible Preferred Stock. In May 2015, we held a special shareholder meeting seeking approval of an amendment to our Articles of Incorporation to increase our authorized capital. However, the amendment was not approved by our shareholders. Although we used our best efforts to increase our authorized capital, we remain in default so long as we continue to have insufficient capital to satisfy our obligations to the holders of the Series A Convertible Preferred Stock. While we have no present knowledge of pending or threatened litigation related to this matter, we cannot guarantee future lawsuits will not arise that could have a material adverse effect on our financial position, results of operations or cash flows.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU'") No. 201 5-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods with in those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash flows.







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In February 2015, the FASB issued ASU No. 2015-02. Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations and securitization structures (collateralized debt obligations, col lateralized loan obligations, and mortgage-backed security transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current U.S. GAA P by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity ("VI E"), and changing consolidation conclusions for companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim period s with in those fiscal year, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.

In January 2015, the FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items." This ASU eliminates from U.S. GAA P the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. We do not expect the adoption of ASU 2015-01 to have a material effect on our financial posit ion, results of operations or cash flows.

In November 2014, the FASB issued ASU No. 2014-17, "Business Combinations (Topic 805): Pushdown Accounting." This ASU provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable. ASU 2014- 17 was effective on November 18, 20 14. The adoption of ASU 2014-17 did not have any effect on our financial position, results of operations or cash flows.

In November 2014, the FASB issued ASU 2014- 16, "Derivatives and Hedging (Topic 815)." ASU 2014- 16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We have no outstanding, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adopt ion of ASU 2014-16 to have any effect on our financial position , results of operations or cash flows.

In August 2014, the FASB issued ASU No. 20 14-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)". ASU 2014-15 provides guidance related to management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. We do not expect the adoption of ASU 20 14-15 to have a material effect on our financial position, results of operations or cash flows.

In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 7 18): Accounting for Share- Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period ." This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014- 12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 20 15. We do not expect the adoption of ASU 2014- 12 to have a material effect on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014- 09 is effective for fiscal years, and interim periods with in those fiscal years, beginning after December 15, 2016. We are still evaluating the effect of the adoption of ASU 2014-09. On April 1, 2015, the FASB voted to propose to defer the effective date of the new revenue recognition standard by one year.









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In April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) and Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 amends the definition for what types of asset disposals are to be considered discontinued operations, as well as amending the required disclosures for discontinued operations and assets held for sale. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 20 14. The adoption of ASU 20 14-08 did not have any effect on our financial position, results of operations or cash flows.

Recent accounting pronouncement s issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company's present or future condensed consolidated financial statements.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made, and changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.

Long-lived Assets. Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.

Application of Significant Accounting Policies

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may, therefore, not be comparable to those of companies that comply with such new or revised accounting standards.

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