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于2026年10月6日向证券交易委员会提交

注册编号 333-[_]

美国

证券交易委员会

华盛顿特区 20549

表格\nS-1

注册声明

根据

1933年证券法

FUSEMACHINES\nINC.

(注册人章程中指定的全称)

\n \n \n \n \n \n \n \n \n \n \n \n \n

特拉华州

7373

98-1602789

(成立或组织地)

或其它司法管辖区

(主要标准行业分类)

代码编号)

(美国国税局\n 雇主)

识别号码)

西41街200号, 21层

纽约, 纽约 10036

(347)\n212-5075

(注册人的主要执行办公室地址，包括邮编和电话号码，包括区号)

Sameer\nMaskey

Fusemachines\nInc.

200 West 41st Street, 21st Floor

New York, New York 10036

(347)\n212-5075

(服务代理人姓名，地址，包括邮编，电话号码，包括区号)

副本发送至：

Ilan\nKatz, Esq.

Brian\nLee, Esq.
\nGrant Levine, Esq.

Dentons\nUS LLP

1221\nAvenue of the Americas

New\nYork, NY 10020-1089

(212)\n768-6700

拟向公众出售的近似开始日期：在本注册声明生效后尽快。

如果本表上注册的任何证券将根据《1933年证券法》第415条以延迟或连续方式出售，请勾选以下方框。 ☒

如果本表用于根据《证券法》第462(b)条注册额外证券的发行，请勾选以下方框，并列出同一发行的先前有效注册声明的证券法注册声明编号。\n☐

如果本表是根据《证券法》第462(c)条提交的生效后修订，請勾選以下方框，并列出同一發行的先前有效註冊聲明的證券法註冊聲明編號。 ☐

如果本表是根据《证券法》第462(d)条提交的生效后修订，请勾选以下方框，并列出同一发行的先前有效注册声明的证券法注册声明编号。 ☐

通过勾选方框，表明注册人是大型加速申报者、加速申报者、非加速申报者、较小报告公司或新兴成长公司。请参见《交易法》第12b-2条中“大型加速申报者”、“加速申报者”、“较小报告公司”和“新兴成长公司”的定义。 ☐

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

大型加速申报者：	☐	加速申报者：	☐
非加速报盘者:	☒	较小报告公司:	☒
		新兴成长公司:	☒

如果为新兴成长公司，请通过复选框表明注册人是否已选择不使用根据《证券法》第7(a)(2)(B)条提供的任何新修订的财务会计标准的延长过渡期。 ☐

注册人在此修订此注册声明，以在必要时延迟其生效日期，直至注册人提交进一步修订，该修订明确表示此注册声明将在根据《1933年证券法》第8(a)条的规定生效，或直至委员会根据该第8(a)条的规定确定的日期使该注册声明生效。

本初步招股说明书中的信息不完整，可能会被更改。在向证券交易委员会提交的注册声明生效之前，不得出售这些证券。本初步招股说明书不是出售这些证券的要约，也不是在任何禁止要约或出售的司法管辖区内征求购买这些证券的要约。

\n \n \n \n

初步招股说明书

待完成，日期为2026年10月6日

最多 7,549,411 股普通股

$\"\"$

Fusemachines\nInc.

本招股说明书涉及Fusemachines Inc.（一家特拉华州公司，“公司”、“我们”或“我们”）最多7,549,411股面值为0.0001美元的普通股（“普通股”）的出售和再出售，由本招股说明书中所列的出售股东（统称为“出售股东”）进行。

本招股说明书所出售的普通股包括：(i) 最多1,190,476股普通股，根据2026年8月2日签署的《证券购买协议》（“2026年8月2日SPA”）发行的可转换票据（“票据”）可转换而成，这代表了在初始固定转换价格为4.20美元/股的情况下，目前可全额转换的普通股最大数量的200%，以考虑根据此类票据条款可能发生的价格调整；(ii) 最多4,100,000股普通股，根据2026年8月2日SPA发行的认股权证（“2026年8月2日认股权证”）可行使而产生，这代表了在初始固定行权价格为4.20美元/股的情况下，目前可全额行权的普通股最大数量的200%，以考虑根据此类认股权证条款可能发生的价格调整；(iii) 2,138,935股普通股，根据2026年9月10日签署的《证券购买协议》（“供应商SPA”及此类股票称为“供应商股票”）向公司的某些供应商发行；以及(iv) 120,000股普通股，根据公司与Retail Volts之间的2026年9月21日签署的《市场营销服务协议》（“Retail Volts MSA”及此类股票称为“Retail Volts股票”）向Fulcrum New Amsterdam LLC（全名Retail Volts）发行。

我们\n在此招股说明书下不出售任何证券，也不会从销售股票的出售方出售股票中获得任何收益。然而，我们可能会从行权中获得收益，前提是这些认股权证以现金行权。\n

出售方可能会以多种不同的方式和不同的价格出售或以其他方式处置普通股。参见“分配计划”。\n

我们的普通股和公开认股权证分别在纳斯达克全球市场上市，股票代码分别为“FUSE”和“FUSEW”。\n

投资\n我们的证券涉及高度风险。您应仔细阅读本招股说明书第5页开始的“风险因素”部分中描述的风险和不确定性，以及本招股说明书任何修订或补充中的类似标题下的内容。

美国证券交易委员会（“SEC”）或任何州证券委员会均未批准或否决这些证券，也未对本招股说明书的准确性或充分性进行审查。与此相反的任何陈述均为刑事犯罪。

本招股说明书的日期为 [ ]，2026。

关于\n 本招股说明书		ii
关于前瞻性声明的特别说明		iii
招股说明书摘要		1
本次发行		4
风险因素		5
募集资金的使用		34
股息政策		35
管理层对财务状况和经营成果的讨论与分析		36
业务		62
管理层		66
高管薪酬		71
主要股东		79
与关联方及关联交易		81
证券描述		85
出售方		100
分配计划		101
美国联邦所得税的重要后果		103
专家		109
法律事项		109
您可获取更多信息的地点		109
财务报表索引		F-1

您应仅依赖本招股说明书或任何招股说明书补充或修订中包含的信息。我们未授权任何人向您提供与本招股说明书内容不同或补充的信息。如果有人向您提供不同或不一致的信息，您不应依赖它。我们不对其他人可能向您提供的任何其他信息的可靠性负责，也无法对此提供任何保证。您应假设本招股说明书或任何自由文本招股说明书中的信息仅在本招股说明书日期时是准确的，无论本招股说明书的交付时间或我们证券的销售时间如何。自该日期以来，我们的业务、财务状况、经营成果和前景可能已发生变化。我们不在任何非法提供证券的司法管辖区进行证券的发行。

在任何美国境外的司法管辖区，目前均未采取任何措施以允许我们证券的公开发行，或在该司法管辖区持有或分发本招股说明书。在美国境外获得本招股说明书的人士必须了解并遵守该司法管辖区适用于此次公开发行及本招股说明书分发的任何限制。

关于本招股说明书

本招股说明书是本公司向证券交易委员会（“SEC”或“委员会”）提交的注册声明的一部分，该声明依据《证券法》提交。根据本招股说明书，出售股票的股东可能在任何时候根据本招股说明书所述，在一项或多项交易中出售本招股说明书所述的本公司普通股。本招股说明书向您提供了出售股票的股东所发行证券的一般描述。任何招股说明书补充文件也可能添加、更新或更改本招股说明书中的信息。我们在此招股说明书中所做的任何陈述，可能被我们在招股说明书补充文件中做出的不一致陈述修改或取代。

我们还可能提供一份招股说明书补充文件或注册声明的生效后修正案，以添加信息，或更新或更改本招股说明书中的信息。如果本招股说明书中的信息与适用的招股说明书补充文件或生效后修正案之间存在不一致，您应依据适用的招股说明书补充文件或生效后修正案。您应将本招股说明书和任何适用的招股说明书补充文件或注册声明的生效后修正案一起阅读，并参考“您可获取更多信息的地方”部分中提到的附加信息。

您应仅依据本招股说明书以及我们为此次发行向SEC提交的任何招股说明书补充文件中的信息。我们或出售股票的股东均未授权任何人向您提供不同的或额外的信息。我们对其他人向您提供的任何其他信息不承担任何责任，也无法保证其可靠性。本招股说明书和任何适用的招股说明书补充文件中的信息仅在各自封面的日期准确。自该日期以来，我们的业务、财务状况、经营成果和前景可能已发生变化。出售股票的股东仅在允许进行此类发行和销售的司法管辖区出售我们的证券，并寻求购买要约。

对于美国以外的投资者：我们或出售股票的股东并未采取任何行动，以允许此次发行或在任何其他需要为此目的采取行动的司法管辖区持有或分发本招股说明书，除了在美国。在美国以外地区获得本招股说明书的人士必须了解并遵守有关在美国境外发行证券和分发本招股说明书的任何限制。

在本招股说明书及任何招股说明书补充文件中，除非另有说明或上下文另有指示，“Fusemachines”、“公司”、“我们”、“我们”、“我们的”以及类似表述均指Fusemachines Inc.，一家特拉华州公司。

Fusemachines的标志和其他商标在本招股说明书中出现，是Fusemachines Inc.的财产。本招股说明书中出现的其他商标、服务标志和商号是其各自所有者的财产。我们已根据适用情况省略了®和™标识。

关于前瞻性声明的特别说明

本招股说明书包含“前瞻性声明”。前瞻性声明反映了我们对未来事件的当前观点。当在本招股说明书中使用时，“预期”、“相信”、“估计”、“期望”、“未来”、“打算”、“计划”或这些词的否定形式以及与我们或我们的管理层相关的类似表达，均标识出前瞻性声明。此类声明包括但不限于本招股说明书中有关我们业务策略、未来经营结果及流动性与资本资源前景的声明。前瞻性声明基于我们目前的预期和假设，涉及我们的业务、经济和其他未来状况。由于前瞻性声明涉及未来，因此它们受到固有的不确定性、风险和难以预测的情况变化的影响。我们的实际结果可能与前瞻性声明所设想的有重大差异。它们不是关于历史事实的陈述，也不是对未来表现的保证。因此，我们提醒您不要依赖任何这些前瞻性声明。可能导致实际结果与前瞻性声明中所述有重大差异的重要因素包括但不限于：

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	我们有效运营各业务部门的能力；

	●	我们管理研究、开发、扩张、增长和运营费用的能力；

	●	我们评估和衡量我们的业务、前景和绩效指标的能力；

	●	我们在高度竞争且不断变化的行业中直接和间接竞争并取得成功的能力；

	●	我们对技术变化和客户行为变化做出回应和适应的能力；

	●	我们保护知识产权并开发、维护和提升强大品牌的能力；以及

	●	其他因素（包括本招股说明书中题为“风险因素”的章节中所含的风险）涉及我们的行业、我们的运营和经营成果。

如果这些风险或不确定性中的一个或多个成为现实，或者如果基础假设被证明不正确，实际结果可能与预期、相信、估计、期望、意图或计划有显著差异。

可能造成我们的实际结果与预期不同的因素或事件可能会随时出现，我们无法预测所有因素。我们不能保证未来的结果、活动水平、表现或成就。除适用法律要求外（包括美国证券法），我们无意更新任何前瞻性声明以使这些声明符合实际结果。

iii

招股说明书摘要

本摘要提供我们业务和证券的关键方面的简要概述。读者应仔细阅读整个招股说明书，特别是“风险因素”部分中讨论的我们普通股投资的风险。招股说明书中的一些陈述，包括“摘要”和“风险因素”部分中的陈述，属于前瞻性声明，可能涉及许多风险和不确定性。我们的实际结果和未来事件可能因多种因素而显著不同。读者不应过度依赖本文件中的前瞻性声明，这些声明仅反映本招股说明书封面上的日期。

公司概览

Fusemachines 是一家领先的 AI 解决方案提供商，为企业的提供创新的 AI 产品和服务。凭借十多年的经验，我们帮助企业无缝地将 AI 集成到其运营中，提高效率，降低成本，并推动创新。我们的产品和服务由一个全球人才库独特支持，主要来自未被充分服务的社区，使我们能够以规模提供高质量的 AI 解决方案，同时履行我们使 AI 民主化的使命。

我们的多样化客户群涵盖包括消费品牌、医疗保健、媒体、科技、政府等行业的客户。这些客户使用我们的 AI 解决方案来解决关键的业务挑战，例如提高销售预测的准确性，消除手动数据输入错误，自动化招聘流程，并实时检测欺诈。我们专注于实现可衡量的业务成果，使我们能够与客户建立长期关系，并将 Fusemachines 定位为他们在 AI 驱动转型努力中的合作伙伴。

除了我们的企业 AI 解决方案外，我们还致力于教育和人才发展。我们的 AI 培训计划，包括我们的 AI 联合培养计划，旨在通过提供真实世界 AI 应用的实践经验来提升学生和专业人士的技能。迄今为止，我们在美国、尼泊尔和多米尼加共和国已认证了数百名 AI 联合培养者。这些计划有助于扩大全球 AI 人才库，并解决日益增长的熟练 AI 专业人员短缺问题。

主要风险因素

● 我们在企业 AI 服务的相对较新的和不断发展的市场中运营，如果市场采用速度低于预期或出现下滑，我们的业务、财务状况和运营结果可能会受到不利影响。

● 我们的发展依赖于吸引新客户、扩大与现有客户的合作关系以及成功开发和部署新技术，我们可能无法实现或维持盈利。

●\n我们的销售周期漫长且不可预测，我们依赖为数不多的大客户来获得收入的大部分，\n企业客户的采购决策常常受到我们无法控制的因素影响。

●\n我们面临激烈的竞争和快速的技术变革，如果我们无法创新、保持服务质量并保护我们的声誉和品牌，\n可能会损害我们的业务。

●\n我们的业务依赖于我们平台、技术和第三方服务提供商的性能、可靠性和安全性，\n任何错误、缺陷、网络安全事件、数据泄露或服务中断都可能导致责任、声誉损害和\n客户流失。

●\n我们的业务依赖于知识产权、专有技术、商业秘密和开源软件，如果我们无法保护\n我们的知识产权或避免侵犯他人的权利，可能会对我们的业务产生不利影响。

●\n使用人工智能技术存在风险，包括潜在的偏见、缺乏透明度、监管审查，\n声誉损害和责任。

●\n我们需要大量额外资金来资助我们的运营，我们有亏损的历史并收到持续经营的审计意见，我们的\n债务和固定成本可能对我们的财务状况产生不利影响。

●\n我们目前不符合纳斯达克上市标准，因此我们可能被纳斯达克摘牌，这将限制投资者交易我们证券的能力，并使我们面临额外的交易限制，摘牌也会导致我们违约。

●\n我们的业务受到与国际运营相关的风险影响，特别是在尼泊尔，包括政治不稳定、经济\n状况、货币波动和运营中断。

●\n我们已识别出财务报告内部控制的重大缺陷，并且之前曾延迟提交报告，如果我们\n无法保持有效的披露控制和内部控制，投资者信心和我们的股价可能会受到不利影响。

●\n我们受不断变化的法律和法规、潜在诉讼、税务责任和会计变更的影响，这可能会增加\n我们的成本并对我们的经营成果产生不利影响。

●\n我们的管理团队在管理上市公司方面经验有限，作为上市公司的成本和要求可能会压垮\n我们的资源并分散管理层的注意力。

●\n我们证券的市场价格可能波动，可能没有活跃的交易市场，未来发行证券可能导致\ndilution，我们可能无法维持纳斯达克上市。

●\n我们的高管和董事对我们有重大控制权，反收购条款和专属论坛条款可能\n限制股东影响公司事务的能力。

●\n我们短期内无意支付股息，投资者可能会损失全部或部分投资。

●\n我们的认股权证包含可能使其价值降低的条款，包括赎回条款、无现金行权特征和专属\n论坛条款。

作为新兴成长公司和小型报告公司的含义

我们是根据《1933年证券法》定义的“新兴成长公司”，该定义已由《2012年振兴美国创业公司法案》（“JOBS法案”）进行了修改。因此，我们有资格并打算利用某些豁免条款，以符合适用于其他非新兴成长公司的公开公司报告要求，只要我们仍然是新兴成长公司，包括（i）根据《2002年萨班斯法案》第404(b)条关于财务报告内部控制的审计师鉴证要求的豁免，或《萨班斯法案》；（ii）关于薪酬表决、频率表决和金色降落伞表决要求的豁免；以及（iii）在我们的定期报告和代理声明中减少关于高管薪酬的披露义务。

我们将继续是新兴成长公司，直到以下较早发生的情况：（1）（a）CSLM首次公开募股（IPO）后的第五个财年的最后一天，（b）我们年度总收入达到至少12.35亿美元的财年，或（c）我们被认定为大型加速申报者，这意味着截至上一财年第二财季结束时，我们普通股非关联方持有的市值超过7亿美元；以及（2）在前三年内，我们发行的不可转换债务证券超过10亿美元的日期。

此外，《JOBS法案》规定，新兴成长公司可以利用更长的过渡期来遵守新的或修订的会计准则。这使新兴成长公司可以延迟采用某些会计准则，直到这些准则适用于私营公司。我们已选择利用这一延长的过渡期，因此，我们可能会在非上市公司需要采用这些准则的相关日期，而不是其他上市公司需要采用的日期，来采用新的或修订的会计准则。

我们也是根据《1934年证券交易法》第12b-2条定义的“较小报告公司”。即使我们不再是新兴成长公司，我们仍可能继续是较小报告公司，并在我们不再符合较小报告公司资格的财年之后，继续利用较小报告公司可获得的某些简化披露信息。只要满足以下条件之一，我们将继续作为较小报告公司：（i）我们普通股非关联方持有的市值在我们最近完成的第二财季最后一个营业日的市值低于2.5亿美元，或（ii）我们最近完成的财年收入低于1亿美元，且我们普通股非关联方持有的市值在我们最近完成的第二财季最后一个营业日的市值低于7亿美元。

可供信息

Fusemachines\n（以前称为CSLM Holdings Inc.）完成了与Fusemachines USA Inc.（以前称为Fusemachines Inc.）的业务合并，后者成立于2012年11月16日。自那时以来，Fusemachines已发展成为全球人工智能解决方案提供商。我们的主要办公地址位于纽约州纽约市西41^st街21^st层，邮编10036。我们还在www.fusemachines.com设有网站，您可以在此找到有关我们公司和解决方案的更多信息。本网站上包含的信息或可通过本网站访问的信息，既不是本招股说明书的一部分，也不构成其引用内容，您不应将本网站上的信息视为本招股说明书的一部分。

本次发行

我们正在注册由出售股东不定期转售的最多7,549,411股普通股，包括最多4,100,000股普通股，这些普通股可在行权认股权证时发行，1,190,476股普通股可在可转换债券转换时发行，2,138,935股普通股已发行给公司的某些供应商，以及120,000股普通股已发行给Retail Volts。任何对本招股说明书所列证券的投资都是投机性的，涉及高度风险。您应仔细考虑本招股说明书第5页“风险因素”中列出的信息。

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

普通股的转售

出售股东可能出售和销售的普通股		最多7,549,411股普通股，其中包括（i）2,258,935股已发行和流通的普通股，以及（ii）最多5,290,476股普通股，这些普通股将在行权认股权证或转换可转换债券时发行，这代表了目前认股权证完全行权和可转换债券完全转换时可发行的普通股最大数量的200%，以考虑可能发生的行权价格和转换价格的某些调整。

本次发行的条款		出售股东将自行决定何时以及如何处置根据本招股说明书注册的任何普通股。

本次发行前流通的普通股		32,544,711 股普通股。

本次发行后流通的普通股		37,835,187\n股，假设出售所有在此招股说明书中提供的普通股，这假设（i）行权并随后转售4,100,000股认股权证项下的普通股，以及（ii）转换并随后转售1,190,476股可转换债券转换后发行的普通股，这代表了目前认股权证完全行权和可转换债券完全转换时可发行的普通股最大数量的200%，以考虑可能发生的行权价格和转换价格的某些调整。

募集资金的用途		我们不会从销售股票的出售股东的普通股中获得任何收益。关于认股权证下普通股的收益，我们不会从这些股票中获得任何收益，除非我们根据这些认股权证的行权获得金额，且该认股权证是以现金行权的。关于可转换债券下普通股的收益，我们不会从这些债券的转换中获得任何收益，但这些债券的转换将满足并解除其下的本金义务。有关我们预期从这些认股权证的行权中获得的收益以及我们预期从这些债券转换中获得的本金义务的满足和解除的更多信息，请参见下面的“资金用途”。

风险因素		投资我们的普通股涉及高度风险，我们的普通股购买者可能会损失全部或部分投资。请参见本招股说明书第5页开始的“风险因素”，以及本招股说明书包含或引用的其他信息，以了解在投资我们的证券前应仔细考虑的风险。

Nasdaq\n 全球市场代码		“FUSE”。\n

流通中的普通股数量基于2026年10月2日流通中的32,544,711股普通股，并排除了：

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	最多9,487,500股普通股，可根据每股11.50美元的行权价行使公开认股权证；
	●	最多3,971,250股普通股，可根据每股11.50美元的加权平均行权价行使私人认股权证；
	●	最多2,108,070股普通股，可根据行权价根据《前进购买协议》（以下简称“前进购买协议”）条款定期重置的行权价行使与前进购买协议相关的不足认股权证（以下简称“不足认股权证”）；
	●	最多92,211股普通股，可根据每股0.70美元的行权价行使认股权证；
	●	最多30,000股普通股，可根据每股11.50美元的行权价行使认股权证；
	●	最多589,192股普通股，可根据每股3.16美元的加权平均行权价行使期权；
	●	1,785,155股普通股，根据2026年10月2日的2025年综合股权激励计划下未实现的限制性股票单位结算发行；
	●	1,164,371股普通股，根据2026年10月2日的2025年综合股权激励计划预留用于未来发行；以及
	●	最多500,000股普通股，可能根据2026年8月11日的《战略股份发行协议》向Qintess Holding e Participações Ltda.发行。

风险因素

我们的业务会受到许多风险和不确定性的影响，这可能会影响我们未来的财务表现。我们的业务和财务表现可能会受到不利影响，实际结果可能与我们的预期有较大差异，我们股票的价格可能会下跌，由于这些风险，我们的证券投资者可能会损失全部或部分投资。以下讨论的风险和不确定性并不是我们面临的所有风险。可能还有其他我们目前未知或目前认为不重要的风险和不确定性，这些都可能对我们的业务和财务表现产生不利影响。在做出投资决策之前，请仔细考虑以下风险，以及本招股说明书中包含的所有其他信息，包括我们的财务报表和相关附注。本招股说明书中不是历史事实的陈述是前瞻性陈述，这些陈述受可能导致实际结果与前瞻性陈述中所述或暗示的结果有重大差异的风险和不确定性的约束。

与业务、行业和运营相关的风险

我们企业AI服务和产品的市场相对较为新，可能会下降或增长有限，而我们的业务依赖于客户持续采用和使用我们的服务和产品。

企业AI的使用仍然相对较为新，客户可能无法认识到我们的服务和产品的必要性或好处。如果客户无法认识到我们的服务和产品的必要性或好处，那么他们可能会选择采用其他服务来满足其业务需求。为了扩大我们的业务并扩大我们的市场地位，Fusemachines计划专注于向潜在客户宣传我们的服务和产品的优势，扩大我们的服务范围，并将新技术推向市场，以提高我们平台的市场接受度和使用率。我们扩展我们的服务和产品所针对的市场的能力取决于多个因素，包括我们的服务和产品的成本、性能和感知价值。由于缺乏接受度、技术挑战、竞争性服务、当前和潜在客户支出减少、经济状况恶化等原因，我们的服务和产品的市场可能不会显著增长，或者对我们的服务和/或产品的需求可能会减少。如果企业AI市场没有持续显著增长，或者对其服务和/或产品的需求下降，那么我们的业务、财务状况和经营成果可能会受到不利影响。

我们在过去几年中经历了适度增长，如果我们无法有效管理增长，那么我们的业务、经营成果和财务状况可能会受到不利影响。

自2012年成立以来，我们的业务经历了适度增长。这种增长已经并且可能继续对我们的企业文化、运营基础设施和管理提出重大要求。如果无法以保持其文化和服务关键方面的形式管理预期的增长和组织变化，可能会对我们的整体未来成功产生不利影响，包括其招聘和留住人员的能力，以及有效关注和追求其企业目标的能力。反过来，这可能会影响其业务、财务状况和运营结果。

此外，我们管理其运营和未来增长的能力将需要我们继续改进其运营、财务和管理控制、遵守多项和不断变化的国际法律和法规的合规计划以及报告系统。我们可能无法高效或及时地实施改进，并可能发现现有控制、计划、系统和程序中的缺陷，这可能对其业务、声誉、运营结果和财务状况产生不利影响。

我们的销售工作需要大量时间和费用，我们的销售周期通常很长且不可预测。这些波动可能对我们的运营结果和财务状况产生负面影响。

我们的运营结果可能会因销售工作的密集性质以及销售周期的长度和不可预测性而波动。从初步评估到付款，我们的销售周期通常持续六个月到八个月，但对某些客户而言可能长达一年或更久。作为销售工作的一部分，我们投入大量时间和费用来评估潜在客户的特定组织需求，并向这些潜在客户介绍我们产品和服务的技术能力和价值。

我们的销售策略由两个主要组成部分构成：我们的直销团队和我们的渠道合作伙伴。我们的直销团队负责在现有垂直领域获取客户，并在扩张性市场中获取新的渠道合作伙伴。我们利用渠道合作伙伴在新的垂直领域和地理区域产生潜在客户，然后通过我们的直销团队进行扩展。我们的销售团队由拥有深厚技术专业知识的工程师支持，这些工程师负责售前技术支持、为客户解决工程问题以及为渠道合作伙伴提供技术培训。我们通过营销计划和渠道合作伙伴关系来产生客户潜在客户、加速销售机会并建立品牌知名度。我们的营销计划针对公司内部的业务部门，而不是采购、人力资源或行政部门，以通过展示我们产品功能对结果的影响来推动销售。我们的主要营销计划包括网络研讨会、路演、赞助展览和活动、与渠道合作伙伴的联合营销活动，以及使用我们的网站。

我们的运营结果取决于向商业企业组织的销售，这些组织在一定程度上或完全根据与平台功能无直接关系的因素或感知因素做出产品采购决策，包括但不限于客户对业务增长的预测、对宏观经济状况的不确定性（包括自然灾害、大流行病、地缘政治紧张局势（尤其是与中华人民共和国有关的局势）、军事冲突、通胀和利率上升或货币政策变化）、资本预算、我们平台实施带来的预期成本节约、客户对内部开发软件解决方案的潜在偏好、对我们业务和平台的感知、潜在竞争对手提供的更有利的条款，以及以往的技术投资。此外，我们潜在客户内部的某些决策者和其他利益相关者往往有持续使用内部开发或现有软件的既得利益，这可能使我们更难销售我们的平台和服务。由于这些及其他因素，我们的销售工作通常需要在整个客户组织中进行大量努力，需要大量的人力、费用和时间投入，包括我们的高级管理人员，且不能保证我们能够成功向潜在客户销售产品。如果针对潜在客户的销售工作未能产生足以证明我们的投资（包括我们不断壮大的直销团队）合理的收入，我们的业务、财务状况和运营结果可能会受到不利影响。

少数客户占我们收入的很大一部分。如果现有客户不再从我们这里购买产品或续签与我们的合同，或者我们与最大客户的合作关系受到损害或终止，我们的收入可能会下降，运营结果将受到不利影响。

我们相当大一部分收入来自于那些与我们扩展关系的现有客户。扩大现有客户的部署规模和数量是我们增长战略的重要组成部分。我们可能无法有效地执行这一战略或其任何其他方面。

截至2025年和2024年12月31日的财年，公司有三家和两家客户，其收入分别占公司合并收入的至少10%。这些客户在各自期间的总收入中分别占约42.2%和23.9%。失去一个或多个重要客户，或从任何此类客户处获得的收入减少，可能会对我们业务、财务状况和运营结果产生重大不利影响。我们的收入最高客户是长期客户。有时，我们可能会失去一个主要客户。我们无法预测我们的大客户未来对我们平台和应用的需求水平。

我们通常提供最长一年的合同条款，这些条款可能不包含自动续订，并可能要求客户主动选择以延长合同期限。在现有协议到期后，我们的客户没有义务续签、升级或扩大与我们的协议。此外，我们许多客户合同允许客户在通知期为60至90天的情况下终止与我们的合同。如果我们的一个或多个客户终止与我们的合同，无论出于便利、因我们违约而终止，还是根据我们合同中规定的其他原因；如果我们的客户选择不续签与我们的合同；如果我们的客户与我们续签的合同长度更短或范围更小；或者如果我们的客户以对我们不利的条款重新谈判其现有协议的条款，我们的业务和经营成果可能会受到不利影响。对于那些占我们收入或业务运营重要部分的客户，这种不利影响会更加明显。

由于多种因素，我们续约或扩展客户关系的能力可能会下降或有所不同，包括客户对我们平台和服务的满意或不满意程度、软件和实施错误的频率和严重程度、我们平台的可靠性、我们的定价、总体经济状况的影响、竞争性产品或替代方案，或客户支出水平的下降。如果我们的客户不与我们续约或扩展协议，或者他们以较短的期限或对我们不利的其他条款续约，我们的收入可能增长不如预期或出现下降，我们的业务将受到损害。如果我们难以从客户处收回应收账款，我们的业务、财务状况和经营成果也将受到不利影响。

实现续约或扩展部署可能需要我们越来越多地参与复杂且成本高昂的销售工作，而这些工作可能不会带来额外的销售。此外，我们的客户决定扩展我们平台的部署取决于多种因素，包括总体经济状况、我们平台的运行情况、我们派驻现场的工程师帮助客户识别新用例的能力、加快快速构建应用程序的简化和加速能力，以及客户对我们服务的满意度。如果我们在现有客户群中扩展的努力不成功，我们的业务将受到损害。

如果我们未能成功开发和部署新技术以满足客户的需求，其业务和经营成果可能会受到损害。

我们的成功一直建立在我们设计产品的能力上，这些产品使我们的客户能够快速开发、部署和运营大规模的企业AI应用。我们投入大量时间和资金进行研究和开发新技术以及现有功能的增强版本，以满足客户和潜在客户不断变化的需求。不能保证我们对平台的改进或我们的新产品功能、能力或产品，会对我们的客户具有吸引力或获得市场认可。如果我们的研究和开发投资未能准确预测客户需求，或者我们未能以及时且成本效益的方式开发平台，我们可能会无法留住现有客户或增加对我们平台的需求。

竞争对手推出新产品和服务，或开发完全替代现有产品的新技术，可能导致我们的平台过时，或对我们业务、财务状况和经营成果产生不利影响。我们在软件开发、设计或营销方面可能会遇到困难，从而延迟或阻止我们开发、推出或实施新平台、功能或能力。我们过去曾经历过内部计划的新功能和能力发布日期的延迟，不能保证新平台、功能或能力会按计划发布。任何延迟都可能导致负面宣传、收入或市场接受度下降，或客户对我们提出的索赔，所有这些都可能损害我们的业务。此外，新平台或我们现有平台的新功能和能力的设计和开发可能需要大量投资，我们无法保证这些投资会取得成功。如果客户没有广泛采用我们的新平台、体验、功能和能力，我们可能无法实现投资回报，我们的业务、财务状况和经营成果可能会受到不利影响。

我们的新旧平台以及我们现有平台的更改可能由于多种原因无法获得足够的市场接受度，包括：

	●	我们在产品功能方面未能准确预测市场需求，并未能及时提供满足这一需求的产品；

	●	产品缺陷、错误或故障，或我们无法满足客户的服务级别要求；

	●	关于我们的平台或产品增强功能的安全性、性能或有效性的负面宣传或负面私人声明；

	●	我们新产品的上市或预期上市延迟；

	●	我们的竞争对手推出或预期推出竞争性平台或功能；

	●	我们的平台或产品增强功能无法扩展和执行以满足客户需求；

	●	在安全或渗透测试、认证或审计方面收到合格或不利意见，例如与IT控制和安全标准及框架或合规性相关的意见；

	●	我们的客户业务状况不佳，导致他们推迟软件采购；

	●	客户对购买专有软件产品的抵触情绪；

	●	我们的客户对购买由我们的供应商托管的产品以及/或此类供应商的服务中断的抵触情绪；以及

	●	客户对购买包含开源软件的产品的抵触情绪。

如果我们无法及时且以具有成本效益的方式识别客户面临的问题，并为我们的平台开发、许可或收购新功能和能力，或者如果这些增强功能未能获得市场认可，我们的业务、财务状况、经营成果和前景可能会受到损害，我们预期的收入增长可能无法实现。由于我们目前的收入，且预计将继续主要来自客户购买我们的平台和产品，这些平台和产品的市场接受度，以及对其任何增强或更改，对我们来说至关重要。

我们销售其产品并满足客户的能力取决于我们服务的质量，如果我们无法提供高质量的服务，可能会对销售和经营成果产生重大不利影响。

一旦我们的平台部署并与客户的现有信息技术投资和数据集成，客户将依赖我们的支持和维护服务来解决与我们平台相关的问题。将来，我们的平台可能会部署在大规模、复杂的技术环境中，我们认为我们的未来成功将取决于我们增加在这些部署中使用的平台销售的能力。此外，我们提供有效持续服务的能力，或以及时、高效或可扩展的方式提供这些服务的能力，可能部分取决于客户的环境以及他们升级到我们平台的最新版本并参与我们的集中式平台管理和服务。

此外，我们提供有效服务的能力在很大程度上取决于我们吸引、培训和留住具有支持我们这类平台的客户经验的合格人员的能力。我们可能无法迅速应对客户对我们服务的短期需求增加。我们也可能无法调整未来服务的范围和交付方式，以与竞争对手提供的服务变化竞争。客户对支持的需求增加，而没有相应的收入，可能会增加成本并对我们业务和经营成果产生负面影响。

我们的客户未来可能需要培训，以正确使用我们的平台以及了解可以从我们的平台中获得的各种好处，以充分发挥我们平台的潜力。如果我们无法有效部署、更新或升级我们的平台，成功帮助客户快速解决部署后的问题，并提供有效的持续服务，我们向现有客户销售更多产品和服务的能力可能会受到不利影响，我们可能会面临负面宣传，我们与潜在客户的关系可能会受到损害。因此，我们无法维持高质量的服务可能会对我们的业务、财务状况、经营成果和增长前景产生重大不利影响。

如果我们无法维持并提升其品牌和声誉，我们与客户、合作伙伴和员工的关系可能会受到损害，其业务和运营结果可能会受到不利影响。

我们认为，维护和提升我们的品牌标识和声誉对于与客户、合作伙伴、投资者和员工的关系，以及吸引和留住他们至关重要。我们品牌成功的推广取决于我们继续提供高质量软件的能力，同时与客户、社区和其他人保持良好的关系，并成功地将我们的平台与竞争对手的平台区分开来。不利的媒体报道可能会对我们的品牌和声誉产生不利影响。我们预计，随着我们的市场竞争日益激烈，维护和提升我们的品牌可能会变得越来越困难和昂贵。如果我们无法成功维护和提升我们的品牌标识和声誉，我们可能会无法吸引和留住员工、客户、投资者或合作伙伴，无法扩大业务或维持定价能力，所有这些都可能对我们的业务、财务状况、运营结果和增长前景产生不利影响。此外，尽管我们有内部保障措施并努力避免，但我们无法保证客户不会最终将我们的平台用于与我们公司价值观不一致的目的，此类用途可能会损害我们的品牌和声誉。

如果我们的平台和服务的市场需求发展速度比我们预期的要慢，我们的增长可能会放缓或停滞，我们的业务、财务状况和运营结果可能会受到损害。

我们平台的市场正在迅速演变。我们未来的成功在很大程度上将取决于该市场的增长和扩展，而这一市场难以预测，并且依赖于多个因素，包括客户采用情况、客户需求变化、竞争产品的进入、现有竞争产品的成功、潜在客户对采用替代方法开发、部署和运营企业AI的意愿，以及他们在对遗留软件进行重大投资后，是否愿意投资新软件。用于计算我们市场机会的估计值和假设可能会随时间而变化，无法保证我们市场机会估计所涵盖的任何特定数量或百分比的组织会完全支付我们的平台和服务，或为我们带来任何特定水平的收入。即使我们所处的市场达到规模估计和增长预测，由于我们无法控制的多种原因，包括我们行业中的竞争，我们的业务可能无法达到我们预期的增长水平，甚至无法增长。此外，如果我们或其他企业AI公司发生安全漏洞或事件、客户数据丢失、损坏或不可用、未经授权的访问、交付中断或其他问题，整个市场（包括我们的平台）可能会受到负面影响。如果解决我们所应对挑战的软件未能广泛采用，或者由于缺乏客户接受度、技术挑战、经济状况恶化（包括自然灾害、大流行、地缘政治紧张局势（尤其是与中华人民共和国有关的）、军事冲突、通货膨胀和利率上升以及货币政策变化）、安全或隐私担忧、竞争技术和产品、企业支出减少或其他原因导致需求下降，或者，或者，如果市场发展但由于我们平台相关的成本、性能和感知价值，我们无法继续渗透该市场，或其他因素，这可能导致收入减少，我们的业务、财务状况和经营成果可能受到不利影响。

在我们平台中使用人工智能（包括机器学习）可能引发的问题可能导致声誉损害或责任。

AI 由我们的技术平台提供支持或集成到其中，是我们的业务的重要组成部分。与许多发展中的技术一样，AI 会带来风险和挑战，这可能会影响其进一步的发展、采用和使用，从而影响我们的业务。AI 算法可能存在缺陷。AI 训练、开发或运营中的数据集可能不足、质量差或反映不必要的偏见。数据科学家、工程师和我们系统最终用户的数据实践不当或存在争议，或其实践反映出固有的偏见，可能会损害 AI 解决方案的接受度。如果 AI 应用程序协助生成的建议、预测或分析存在缺陷或不准确，我们可能会遭受竞争损害、潜在的法律责任，包括在包括美国和欧洲联盟在内的司法管辖区新提出的监管 AI 法律法规下，以及品牌或声誉损害。欧盟已颁布《欧盟人工智能法案》，该法案对人工智能系统的提供者施加了重大合规义务，包括对高风险人工智能应用的透明度、人工监督和符合性评估要求。在美国，各州已颁布或提出了针对人工智能的法规，联邦机构正在加强对人工智能治理的关注。遵守这些不断演变且可能相互冲突的监管框架可能需要大量投资于合规基础设施、修改我们的产品和服务，并可能限制我们提供某些人工智能功能的能力。未能遵守适用的人工智能法规可能导致重大罚款、对我们的业务的限制、声誉损害以及民事或刑事责任。

Some\nAI scenarios present ethical issues. Though our technologies and business practices are designed to mitigate many of these risks, if\nwe enable or offer AI solutions that are controversial or problematic because of their purported or real impact on human rights, privacy,\nemployment, or other social issues, we may experience brand or reputational harm, as well as regulatory or legal scrutiny.

Real\nor perceived errors, failures, defects, or bugs in our products, or platforms could adversely affect our results of operations and growth\nprospects.

Because\nwe offer complex technology products, undetected errors, defects, failures, or bugs may in the future occur, especially when products\nor capabilities are first introduced or when new versions or other product or infrastructure updates are released. Our platforms are\noften installed and used in large-scale computing environments with different operating systems, software products and equipment, and\ndata source and network configurations, which may cause errors or failures in our platforms or may expose undetected errors, failures,\nor bugs in our platforms. Despite testing by us, errors, failures, or bugs may not be found in new software or releases until after commencement\nof platform implementation. Errors may affect the performance of our platforms and may also delay the development or release of new platforms\nor capabilities or new versions of platforms, adversely affect our reputation and our customers’ willingness to buy platforms from\nus, and adversely affect market acceptance or perception of our platforms. Many of our customers use our platforms in applications that\nare critical to their businesses or missions and may have a lower risk tolerance to defects in our platforms than to defects in other,\nless critical, software products. Any errors or delays in releasing new software or new versions of platforms or allegations of unsatisfactory\nperformance, errors, defects, or failures in released software could cause us to lose revenue or market share, increase our service costs,\ncause us to incur substantial costs in redesigning the software, cause us to lose significant customers, subject us to liability for\ndamages and divert our resources from other tasks, any one of which could materially and adversely affect our business, results of operations\nand financial condition. In addition, our platforms could be perceived to be ineffective for a variety of reasons outside of our control.\nHackers or other malicious parties could circumvent our or our customers’ security measures, and customers may misuse our platforms\nresulting in a security breach or perceived product failure. Alleviating any of these problems could require additional significant expenditures\nof our capital and other resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us\nto lose existing or potential customers and could adversely affect our business, financial condition, results of operations, and growth\nprospects.

We\nhave not been profitable in the past and may not achieve or maintain profitability in the future.

We\nhad a comprehensive loss of approximately $0.93 million and $15.3 million for the years ended December 31, 2025 and December 31, 2024,\nrespectively.

There\ncan be no assurance that Fusemachines will ever achieve the level of revenues needed to be profitable in the future and if profitability\nis achieved, that it will be sustained. Our revenues have fluctuated and are likely to continue to fluctuate significantly from quarter\nto quarter and from year to year. Fusemachines will need to obtain additional capital and increase sales to become profitable.

We\nrequire substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available, may\nrequire Fusemachines to delay, limit, reduce or cease its operations.

We\nhave limited financial resources. There can be no assurance that sufficient funding will be available to us to fund our operating expenses\nand to further develop our business. Unless we achieve substantial profitability, we anticipate that we will likely need to raise additional\ncapital to fund our operations while we implement and execute our business plan. We currently do not have any contracts or commitments\nfor additional financing. In addition, any additional equity financing may involve substantial dilution to our existing shareholders.\nThere can be no assurance that such additional capital will be available on a timely basis or on terms that will be acceptable to us.\nFailure to obtain such additional financing could result in delay or indefinite postponement of operations or the further development\nof our business. If adequate funds are not available or are not available on acceptable terms, we may not be able to further fund our\nbusiness or the expansion thereof, take advantage of strategic acquisitions or investment opportunities or respond to competitive pressures.\nSuch inability to obtain additional financing when needed could have a material adverse effect on our business, results of operations,\ncash flow, financial condition and prospects.

Our\nindependent registered public accounting firm’s report for the year ended December 31, 2025 contains an explanatory\nparagraph that expresses substantial doubt about our ability to continue as a “going concern” and our unaudited\ncondensed consolidated interim financial statements as of and for the three and six months ended June 30, 2026 include similar disclosure.

As\nof December 31, 2025, we had cash of approximately $4,221 thousand. For the year ended December 31, 2025, we used approximately $5,529\nthousand in cash for operating activities. Historically, we have incurred recurring net losses from operations and negative cash flows\nfrom operating activities. As of December 31, 2025, we had an accumulated deficit of approximately $35,145 thousand. As of June 30,\n2026, the Company had cash of approximately $368 thousand. For the six months ended June 30, 2026, the Company used approximately $(3,511)\nthousand in cash for operating activities. Historically, the Company has incurred recurring net losses from operations and negative cash\nflows from operating activities. As of June 30, 2026, the Company had an accumulated deficit of approximately $(38,950) thousand.\nThese factors raise substantial doubt regarding our ability to continue as a going concern within one year of the date these consolidated\nfinancial statements were issued.

The continuation\nof the Company as a going concern is dependent upon the continued financial support from its stockholders and debt holders. Specifically,\ncontinuation is contingent on the Company’s ability to obtain necessary equity to continue operations, and ultimately the Company’s\nability to generate profit from sales and positive operating cash flows, which is not assured.

Our\nindebtedness could adversely affect our business and growth prospects.

We\nhave existing indebtedness, and we may be able to incur additional debt from time to time to finance working capital, capital expenditures,\ninvestments or acquisitions, or for other purposes.

We\nmay be unable to repay the Notes, and a delisting of our Common Stock or other event of default could accelerate them, which could materially\nand adversely affect our financial condition.

On\nAugust 2, 2026, we issued convertible notes to certain purchasers pursuant to the August 2026 SPA. They have an aggregate original\nprincipal amount of $2,500,000, for which we received $2,050,000. They mature on February 12, 2027 and must then be repaid in cash.\nThe Notes are convertible at $4.20 per share, and our Common Stock has recently traded below $1.00 per share, so holders may not\nconvert. Because there is substantial doubt about our ability to continue as a going concern, we may be unable to repay or refinance\nthe Notes at maturity.

The\nNotes’ events of default include the following:

\n\n \n \n \n\n \n \n \n\n \n \n \n\n \n \n \n

	●	our Common Stock ceasing\n to be listed on a Nasdaq or the New York Stock Exchange, or being suspended from trading for three consecutive trading days;
	●	failure to file this registration statement, or to have it declared effective or keep it effective,\n within the deadlines in the August 2026 SPA;
	●	failure to remain current\n in our Exchange Act reporting;
	●	acceleration of other\n indebtedness of more than $250,000.

On\nSeptember 24, 2026, Nasdaq notified us that our securities are subject to delisting unless we request a hearing before the Nasdaq\nHearings Panel. On October 1, 2026, we requested a hearing. Nasdaq granted our request for a hearing, which is scheduled for November\n3, 2026. However, there can be no assurance that the Panel will grant continued\nlisting.

Upon\nan event of default, the holders may declare the Notes immediately due and payable in cash. The Notes would then bear interest at 18%\nper annum, and we would also owe the holders’ costs of collection. The Notes also limit our access to capital. While they\nare outstanding, 33% of the net proceeds of any financing, and 33% of any proceeds we receive under the Forward Purchase Agreement (defined\nbelow), must be used to repay the Notes.

Without\nthe holders’ consent, we also may not:

\n\n \n \n \n\n \n \n \n\n \n \n \n

	●	incur indebtedness other than permitted indebtedness;
	●	issue securities senior to or pari passu with the\n Notes;
	●	enter into variable rate transactions with third parties, including equity lines of credit and at-the-market offerings.

These restrictions will limit our ability to\nraise funds from other debt and equity facilities. Although we entered into the Roth Committed Equity Facility before issuing the\nNotes, these restrictions will limit our ability to sell shares under the facility without the noteholders’ consent, and 33%\nof the net proceeds of any such sales must be used to repay the Notes.

If\nwe fail to deliver conversion shares on time, we must pay the holders cash liquidated damages and buy-in amounts.

Finally,\nany conversion of the Notes, or exercise of the related warrants for up to 2,050,000 shares, will dilute our stockholders. The Notes\nrequire us to reserve 200% of the shares issuable on conversion and exercise. The conversion price is not subject to price-based resets,\nbut our board may reduce it at any time.

We\nface intense competition within our industry and are subject to the effects of technological change.

The\nindustry in which we are engaged is subject to rapid and significant technological change. There can be no assurance that our systems\ncan be upgraded to meet future innovations in the industry or that new technologies will not emerge, or existing technologies will not\nbe improved, which would render our offerings obsolete or non-competitive. Many of the companies we compete with enjoy significant competitive\nadvantages over us, including greater name recognition; greater financial, technical and service resources; established networks; additional\nproduct offerings; and greater resources for product development and sales and marketing. In addition, there can be no assurance that\nother established technology companies, any of which would likely have greater resources than Fusemachines, will not enter the market.\nThere can be no assurance that Fusemachines will be able to compete successfully against any of its competitors.

Our\nproprietary products and services and service delivery may not operate properly, which could damage its reputation, give rise to claims\nagainst us, or divert application of its resources from other purposes, any of which could harm its business and operating results.

We\nmay encounter supply chain, human, or technical obstacles that prevent our products and services from operating properly. If our offerings\ndo not function reliably or fail to achieve customer expectations in terms of performance, customers could assert liability claims against\nus or cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers. We cannot\nassure you that material performance problems or defects in our products will not arise in the future. Errors may result from receipt\nand interpretation of customer data or from interface of our services. These defects and errors and any failure by us to identify and\naddress them could result in loss of revenue or market share, liability to customers or others, failure to achieve market acceptance\nor expansion, diversion of development resources, injury to our reputation, and increased service and maintenance costs. The costs incurred\nin correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our\noperating results.

If\ncritical components used in our products become scarce or unavailable, we may incur delays in delivering our products and providing services,\nwhich could damage its business. We rely on a sustainable supply chain. Any issues with this supply chain could adversely affect daily\nbusiness operations and profitability.

We\ndepend on third party providers, suppliers and licensors to supply some of the hardware, software and support necessary to provide some\nof our products and services. We obtain these materials from a limited number of vendors, some of which do not have a long operating\nhistory, or which may not be able to continue to supply the equipment, supplies, and services we desire. If demand exceeds these vendors’\ncapacity or if these vendors experience operating or financial difficulties or are otherwise unable to provide the equipment or services\nwe need in a timely manner, at our specifications and at reasonable prices, our ability to provide some services might be materially\nadversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability\nto serve our customers. These events could materially and adversely affect our ability to retain and attract customers, and have a material\nnegative impact on our operations, business, financial results and financial condition.

If\nour security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived\nas insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.

Our\nservices involve the web-based and data storage and transmission of customers’ information. We rely on proprietary and commercially\navailable systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage\nof such information. Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the\neffectiveness of our security efforts is very important. If our security measures are breached or fail as a result of third-party action,\nacts of terror, social unrest, employee error, malfeasance or for any other reasons, someone may be able to obtain unauthorized access\nto customer data. Improper activities by third-parties, advances in computer and software capabilities and encryption technology, new\ntools and discoveries and other events or developments may facilitate or result in a compromise or breach of our security systems. Our\nsecurity measures may not be effective in preventing unauthorized access to the customer data stored on our servers. If a breach of our\nsecurity occurs, we could face damages for contract breach, penalties for violation of applicable laws or regulations, possible lawsuits\nby individuals affected by the breach and significant remediation costs and efforts to prevent future occurrences. In addition, whether\nthere is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be\nharmed and we could lose current or potential customers.

We\ndepend on key information systems and third party service providers.

We\ndepend on key information systems to transact our business accurately and efficiently. These systems and services are vulnerable to interruptions\nor other failures resulting from, among other things, pandemics, epidemics, natural disasters, terrorist attacks, software or equipment\nfailures, processing errors, computer viruses, other security issues or supplier defaults. Security, backup and disaster recovery measures\nmay not be adequate or implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services\ncould cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss\nof customers or other business disruptions, all of which could negatively affect our business and financial performance.

As\ncybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and\nexternal parties’ intent on extracting confidential information, disrupting business processes or corrupting information. These\nrisks could arise from external parties or from acts or omissions of internal or service provider personnel. Such unauthorized access\ncould disrupt our business and could result in the loss of assets, litigation, remediation costs, damage to our reputation and failure\nto retain or attract customers following such an event, which could adversely affect our business.

Cyber-attacks\nand security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our competitive position.

Increased\nsophistication and activities of perpetrators of cyber-attacks have resulted in an increase in information security risks in recent years.\nHackers develop and deploy viruses, worms, and other malicious software programs that attack products and services and gain access to\nnetworks and data centers. If we experience difficulties maintaining existing systems or implementing new systems, we could incur significant\nlosses due to disruptions in our operations. Additionally, these systems contain valuable proprietary and confidential information and\nmay contain personal data of our customers. A security breach could result in disruptions of our internal systems and business applications,\nharm to our competitive position from the compromise of confidential business information, or subject us to liability under laws that\nprotect personal data. As cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance\nour information security measures and/or to investigate and remediate any information security vulnerabilities. Any of these consequences\nwould adversely affect our revenue and margins.

We\nmay not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse\nengineering our solutions. Our efforts to protect and enforce our intellectual property rights and prevent third parties from violating\nits rights may be costly.

The\nsuccess of our services and its business depends, in part, on our ability to obtain patents and other intellectual property rights and\nmaintain adequate legal protection for its products in the United States and other international jurisdictions. We cannot be certain\nthat the steps it has taken will prevent unauthorized use of its technology or the reverse engineering of its technology. Moreover, others\nmay independently develop technologies that are competitive to Fusemachines or infringe our intellectual property.

Protecting\nagainst the unauthorized use of our intellectual property, products and other proprietary rights is expensive and can be difficult, particularly\nwith respect to international jurisdictions. Unauthorized parties may attempt to copy or reverse engineer our solutions or certain aspects\nof our solutions that are considered proprietary. Litigation may be necessary in the future to enforce or defend our intellectual property\nrights, to prevent unauthorized parties from copying or reverse engineering our solutions, to determine the validity and scope of the\nproprietary rights of others or to block the importation of infringing products into the U.S. Any such litigation, regardless of merit,\ncould be costly, divert the attention of management and may not ultimately be resolved in our favor.

Effective\npatent, trademark, service mark, copyright and trade secret protection may not be available or applied for in every country in which\nour products are available and competitors based in other countries may sell infringing products in one or more markets. An inability\nto adequately protect and enforce our intellectual property and other proprietary rights or an inability to prevent authorized parties\nfrom copying or reverse engineering its technology solutions or certain aspects of its solutions that we considers proprietary could\nadversely affect its business, operating results, financial condition and prospects.

We\nrely on unpatented proprietary information, trade secrets, processes and know-how, as well as open source software in certain instances.\nOur failure to protect our confidential information, trade secrets, processes and know-how, and our reliance on open source solutions,\ncould negatively impact our business and results of operations.

We\nrely on proprietary information (such as trade secrets, know-how and confidential information) to protect intellectual property that\nmay not be patentable or subject to copyright, trademark, trade dress or service mark protection.

We\ngenerally seek to protect this proprietary information by entering into confidentiality agreements, or consulting, services or employment\nagreements that contain non-disclosure and non-use provisions with its employees, consultants, contractors and third parties. However,\nwe may fail to enter into the necessary agreements and, even if entered into, these agreements may be breached or may otherwise fail\nto prevent disclosure, third-party infringement or misappropriation of its proprietary information, may be limited as to their term and\nmay not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. Fusemachines has limited\ncontrol over the protection of trade secrets used by its current or future manufacturing partners and suppliers and could lose future\ntrade secret protection if any unauthorized disclosure of such information occurs. In addition, our proprietary information may otherwise\nbecome known or be independently developed by its competitors or other third parties. To the extent that its employees, consultants,\ncontractors, advisors and other third parties use intellectual property owned by others in their work for us, disputes may arise as to\nthe rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine\nthe scope of our proprietary rights, and failure to obtain or maintain protection for its proprietary information could adversely affect\nits competitive business position. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford limited\nor no protection for its trade secrets.

We\nalso rely on physical and electronic security measures to protect its proprietary information, but it cannot provide assurance that these\nsecurity measures will not be breached or that these measures will provide adequate protection. There is a risk that third parties may\nobtain and improperly utilize our proprietary information to its competitive disadvantage. We may not be able to detect or prevent the\nunauthorized use of such information or take appropriate and timely steps to enforce our intellectual property rights.

In\naddition, while the majority of our algorithms utilized for its products are proprietary, including those most critical to the company’s\nproducts, certain algorithms which form a part of these products are made available under “open source” licenses. We expect\nto continue to incorporate open source software in the company’s solutions in the future. Open source software is typically freely\navailable, but is licensed under various requirements that bind the licensee. While the use of open source software may reduce development\ncosts and speed up the development process, it may also present certain risks, that may be greater than those associated with the use\nof third-party commercial software, including but not limited to potential non-compliance with these licenses. Further, depending on\nthe manner in which such licenses were interpreted and applied to software code that combines proprietary and open source software and\nsource code, companies have in the past faced restrictions on their ability to commercialize certain of our products, and it is possible\nthat we could be subject to similar restrictions in the future.

Algorithms\nembedded in AI solutions, and AI datasets, often suffer from lack of transparency, bias, and risks of inadvertent disclosure of information,\nwhich could subject us to adverse consequences.

AI\nsystems are created with a variety of tools including machine learning, natural language processing, computer vision, and neural networks.\nAI systems are capable of behaving in ways that mimic human capabilities, and AI therefore refers to the ability of computers to emulate\nhuman thought and perform tasks that are usually performed by humans; it refers to the technologies and algorithms that enable systems\nto identify patterns, make decisions and could learn from data without being explicitly programmed. Challenges related to AI are numerous,\nand include biases and lack of transparency embedded in AI solutions, and inadvertent disclosure of information.

Many\ncurrent AI models are closed, meaning it is unclear how they are trained, and even where open-source AI models are used, the risk of\nbias and inadvertent disclosure of information can remain, depending on the humans developing the models and the way in which these models\nare used. Use of closed AI models, where such a lack of transparency exists as to sources of data used to train or develop such technologies\nor how inputs are converted to outputs, may make it difficult to fully validate the process and can raise issues with trust, accountability,\nand ethics. Whether or not AI systems are closed, or open-source and available to review, the algorithms and models utilized in AI systems\nmay have limitations, including biases, vulnerabilities, errors, or inability to handle certain data types or scenarios. Any deficiencies\ncould, despite our efforts, undermine the decisions, predictions or analysis AI applications produce, or give rise to risks related to\nharmful content, accuracy, bias, discrimination, toxicity, intellectual property infringement or misappropriation, defamation, data privacy,\nand cybersecurity, among others. Any cybersecurity incidents related to our use of AI applications to analysis personal data could adversely\naffect our reputation and results of operations.

Further,\nAI solutions and models are part of a new and expanding industry, and our use and implementation of such models now and in the future,\ncould subject us to any of the foregoing, or additional risks, which could impact our business, results of operations, or result in brand\nor reputational harm, competitive harm, or legal liability.

Use\nof open source software creates inherent risk and could subject us to adverse consequences.

The\nuse of open source software, including algorithms, involves a number of risks, many of which cannot be eliminated and could negatively\naffect our business. For example:

\n \n \n \n \n

●

The\n terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could\n be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. By the terms\n of certain open source licenses, if we combine our proprietary software with open source software in a certain manner, we could be\n required to release the source code of our proprietary software and to make our proprietary software available under open source\n licenses.

\n \n \n \n \n \n \n \n \n \n \n \n \n

	●	We\n may face claims alleging noncompliance with open source license terms or misappropriation or other violation of open source technology.\n These claims could result in litigation, damage our reputation in the open-source community, or require us to purchase a costly license,\n devote additional research or development resources to re-engineer our products or services, discontinue the sale of our products\n if re-engineering could not be accomplished on a timely or cost-effective basis, require us to make the source code of our proprietary\n code generally available, or result in us being enjoined from the offering of components of our platform that contained the open\n source software, any of which would have a negative effect on our business and operating results.

	●	We\n also could be subject to lawsuits from other parties claiming ownership of what we believe to be open source software. Litigation\n could be costly for us to defend, have a negative effect on our operating results or financial condition, and could require us to\n devote additional research and development resources to re-engineer our platform. In addition to risks related to license requirements,\n usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally\n do not provide warranties or controls on the origin of the software.

Claims\nby others that we infringe upon their intellectual property could force us to incur significant costs or revise the way we conduct our\nbusiness.

Our\ncompetitors protect their proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property.\nWe have not conducted an independent review of patents and other intellectual property issued to third-parties (often referred to as\na freedom to operate search), who may have patents or patent applications relating to our proprietary technology. We may receive letters\nfrom third parties alleging, or inquiring about, possible infringement, misappropriation or violation of their intellectual property\nrights. Any party asserting that we infringe, misappropriate or violate proprietary rights may force us to defend ourselves, and potentially\nour customers, against the alleged claim. These claims and any resulting lawsuit, if successful, could subject us to significant liability\nfor damages and/or invalidation of our proprietary rights or interruption or cessation of our operations. Any such claims or lawsuit\ncould:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	be\n time-consuming and expensive to defend, whether meritorious or not;

	●	require\n us to stop providing products or services that use the technology that allegedly infringes the other party’s intellectual property;

	●	divert\n the attention of our technical and managerial resources;

	●	require\n us to enter into royalty or licensing agreements with third-parties, which may not be available on terms that we deem acceptable;

	●	prevent\n us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which\n could be difficult and expensive and may make the performance or value of our product or service offerings less attractive;

	●	subject\n us to significant liability for damages or result in significant settlement payments; or

	●	require\n us to indemnify our customers.

Furthermore,\nduring the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery\nrequests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation\ncould materially adversely affect our business. Some of our competitors may be able to sustain the costs of intellectual property litigation\nmore effectively than we can because they have substantially greater resources. In addition, any litigation could significantly harm\nour relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse\neffect on our business, operating results and financial condition.

We\ndepend on our management team and other key employees, and the loss of one or more of these employees or an inability to attract and\nretain highly skilled employees could adversely affect its business.

Our\nfuture success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services\nof any of our key personnel, the inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly\nin engineering and sales, may seriously and adversely affect our business, financial condition and results of operations. Although we\nhave entered into employment or consulting agreements with our personnel, their employment is generally for no specific duration.

Our\nfuture performance also depends on the continued services and continuing contributions of our senior management team, including Sameer\nMaskey, our Chief Executive Officer, to execute on our business plan and to identify and pursue new opportunities and product innovations.\nThe loss of services of our senior management team, particularly our Chief Executive Officer, could significantly delay or prevent the\nachievement of our development and strategic objectives, which could adversely affect our business, financial condition and results of\noperations.

We\nare subject to evolving laws and regulations that could impose substantial costs, legal prohibitions or unfavorable changes upon our\noperations or products, and may be a party to material legal proceedings in the future.

We\nare or will be subject to complex laws and regulations at numerous jurisdictional levels in the U.S., and other locations abroad. New,\nor changes in such regulations or rules could also lead to increased costs of compliance, including remediations of any discovered issues\nin our products, and changes to our operations, which may be significant, and any failures to comply could result in significant expenses,\ndelays or fines. In addition, we may become a party to material legal proceedings, or governmental investigations, in the future. If\nwe are unable to successfully defend ourselves in such proceedings or government investigations, it may harm our brand, ability to attract\nand retain qualified employees, business and financial condition.

Our\nmanagement team has limited experience managing a public company and regulatory compliance may divert their attention from the day-to-day\nmanagement of our business.

Our\nmanagement team has limited experience managing a publicly-traded company and limited experience complying with the increasingly complex\nlaws pertaining to public companies. These obligations typically require substantial attention from our senior management and could divert\ntheir attention away from the day-to-day management of our business.

Material\nadverse developments in domestic and global economic conditions, or the occurrence of other world events, could materially adversely\naffect our revenue and results of operations.

Various\nfactors contribute to the uncertain economic environment, the occurrence of natural disasters, pandemics, geopolitical tensions (particularly\nthose relating to the People’s Republic of China), military conflicts, the increase in, and volatility of, interest rates, high\ninflation, an actual recession or fears of a recession, trade policies and tariffs and geopolitical tensions. Our inability to offset\nprice inflation in our materials, components, shipping, or labor through increased prices to customers with long-term fixed contracts\nand formula-based or long-term fixed price contracts with suppliers could adversely affect our business, financial condition and results\nof operations. Global supply chain and labor market challenges could also negatively affect our performance as well as the performance\nof our suppliers. Interest rate increases have also created financial market volatility and could further negatively impact financial\nmarkets, lead to an economic downturn or recession or have an adverse effect on our operating results. In addition, geopolitical risks\ncould affect our customers’ budgets and policies. These and other factors may adversely affect customer demand and ability to pay,\ncause decrease in sales, and negatively impact the realizability of our accounts and notes receivable and contract assets.

Our\nbusiness is heavily dependent upon our international operations, particularly in Nepal, and any disruption to those operations would\nadversely affect us.

Our\nbusiness and future growth depend largely on continued demand for our services performed from Nepal. Various factors, such as changes\nin the governments, could trigger significant changes in Nepal’s economic liberalization and deregulation policies and disrupt\nbusiness and economic conditions in Nepal generally and our business in particular. Our business and our international operations may\nalso be affected by actual or threatened trade war or tariffs or other trade controls. If we are unable to continue to leverage the skills\nand experience of our international workforce, particularly in Nepal, we may be unable to provide our solutions at an attractive price\nand our business could be materially and negatively impacted.

We\nhave significant fixed costs related to lease facilities.

We\nhave made and continue to make significant contractual commitments related to our leased facilities. These expenses will have a significant\nimpact on our fixed costs, and if we are unable to grow our business and revenue proportionately, our operating results may be negatively\naffected.

Our\nsites operate on leasehold property, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect\nour results of operations.

Our\nsites operate on leasehold property. Our leases are subject to renewal and we may be unable to renew such leases on commercially acceptable\nterms or at all, which may have an adverse impact on our operations. In addition, in the event of non-renewal of our leases, we may be\nunable to locate suitable replacement properties for our sites or we may experience delays in relocation that could lead to a disruption\nin our operations.

Catastrophic\nevents, including those which impact third parties on which we materially rely, could materially adversely affect our business, results\nof operations and/or financial condition.

A\ndisruption or failure of our systems or operations, or the systems or operations of a third party on which we materially rely, such as\nin the event of a major earthquake, weather event, fire, explosion, failure to contain hazardous materials, industrial accident, utility\nfailure, cyber-attack, IT failure, terrorist attack, public health crisis, pandemic, or other catastrophic event could cause delays in\ncompleting sales, providing services, or performing other mission-critical functions. A catastrophic event that results in the destruction\nor disruption of any of our critical business or information technology systems could harm our ability to conduct normal business operations\nand our operating results as well as expose us to claims, litigation and governmental investigations and fines.

If\nour backup and mitigation plans are not sufficient to minimize business disruption, our financial results could be adversely affected.\nWe are continuously monitoring our operations and intend to take appropriate actions to mitigate the risks arising from catastrophic\nevents, but there can be no assurances that we will be successful in doing so.

We\nhave identified material weaknesses and significant deficiencies related in our internal control over financial reporting. If we fail\nto remediate these material weaknesses, maintain effective internal control over financial reporting or identify additional material\nweakness or significant deficiency in its internal control over financial reporting, our ability to report our financial condition and\nresults of operations in a timely and accurate manner could be adversely affected, investor confidence in our company could diminish,\nand the value of our stock may decline.

Preparing\nour consolidated financial statements involves a number of complex manual and automated processes, which are dependent upon individual\ndata input or review and require significant management judgment. One or more of these processes may result in errors that may not be\ndetected and could result in a material misstatement or other errors of our consolidated financial statements. Such errors may be more\nlikely to occur when implementing new systems and processes, particularly when implementing evolving and complex accounting rules. The\nSarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that as a publicly-traded company we\ndisclose whether our internal control over financial reporting and disclosure controls and procedures are effective. While we continually\nundertake steps to improve our internal control over financial reporting as our business changes, we may not be successful in making\nthe improvements and changes necessary to be able to identify and remediate control deficiencies or material weaknesses on a timely basis.\nIf we are unable to successfully remediate any current or future material weaknesses in our internal control over financial reporting,\nthe accuracy and timing of our financial reporting may be adversely affected; our liquidity, access to capital markets and perceptions\nof our creditworthiness may be adversely affected; we may be unable to maintain compliance with securities laws, stock exchange listing\nrequirements and debt instruments covenants regarding the timely filing of periodic reports; we may be subject to regulatory investigations\nand penalties; investors may lose confidence in our financial reporting; we may suffer defaults under our debt instruments; and our stock\nprice may decline.

As\na privately-held company, Fusemachines was not required to evaluate its internal control over financial reporting in a manner that meets\nthe standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act.

In\nconnection with the preparation and audit of our consolidated financial statements as of and for the years ended December 31, 2025 and\n2024, material weaknesses were identified in its internal control over financial reporting. A material weakness is a deficiency, or combination\nof deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement\nof the financial statements will not be prevented or detected on a timely basis. The following material weaknesses were identified:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	Fusemachines\n did not maintain a sufficient complement of personnel with accounting knowledge, experience and training to appropriately analyze,\n record and disclose accounting matters to provide reasonable assurance of preventing material misstatements.

	●	Fusemachines\n did not maintain an effective process over the revenue cycle, including not properly maintaining adequate books and records over\n client projects and billing which ultimately resulted in improper revenue recognition.

	●	Fusemachines\n did not maintain effective controls over certain information technology (“IT”) general controls for information\n systems that are relevant to the preparation of its consolidated financial statements. Specifically, Fusemachines currently relies\n on QuickBooks for its books and records as well as financial reporting needs. Because QuickBooks lacks robust financial reporting\n capabilities as well as certain controls, the close process was manually intensive. This process resulted in significant delays and\n errors in the preparation of its consolidated financial statements. In addition, Fusemachines did not design and maintain user access\n controls to ensure appropriate segregation of duties and restrict user access to its financial applications to appropriate company\n personnel.

Management\nexpects to address these deficiencies by implementing remediation measures, including those that have already been taken to date.

We\nfiled a Quarterly Report on Form 10-Q for the period ended September 30, 2025 later than required, and any failure to timely file our\nperiodic reports in the future could adversely affect our compliance with securities laws and exchange listing standards, impair our\naccess to capital, increase regulatory scrutiny and litigation risk, and negatively impact our business and the market price of our securities.

We\nare required to file periodic reports with the SEC within prescribed deadlines. We did not file our Quarterly Report on Form 10-Q for\nthe period ended September 30, 2025 within the required timeframe.

Delayed\nSEC filings can result in non-compliance with applicable stock exchange listing requirements, and our securities exchange may issue deficiency\nnotices or take other actions, including initiating delisting procedures, if we do not timely cure any reporting delinquency. A late\nfiling can also adversely affect our eligibility to use short-form registration statements on Form S-3, limit our status under shelf\nregistration rules, and restrict our ability to access the capital markets efficiently. In addition, late or incomplete filings can trigger\ncontractual penalties, liquidated damages, or other remedies under registration rights, financing agreements, and other commercial contracts\nthat require us to maintain effective registration statements or timely reports, which could increase our costs or limit our financing\nflexibility. Delays in reporting may also elevate the risk of restatements, material weaknesses in internal control over financial reporting,\nand increased audit fees and remediation expenses.

Further,\nfailure to timely file periodic reports may subject us to heightened SEC scrutiny and enforcement risk, harm investor and analyst confidence,\nand increase the likelihood of stock price volatility, securities class actions, and derivative litigation. The reputational impact of\na late filing can be significant, particularly for companies that have recently merged with a SPAC, which commonly face greater market\nand regulatory attention. If we experience additional delays in future filings, or if our remediation efforts are not effective, we could\nface additional compliance challenges, suffer reduced liquidity and a higher cost of capital, and our business, financial condition,\nresults of operations, and the market price of our securities could be materially and adversely affected.

Changes\nin accounting principles or their application to Fusemachines could result in unfavorable accounting charges or effects, which could\nadversely affect our results of operations and growth prospects.

We\nprepare our consolidated financial statements in accordance with GAAP. In particular, we make certain estimates and assumptions related\nto the adoption and interpretation of these principles including the recognition of our revenue and the accounting for our provision\nfor income taxes. If these assumptions turn out to be incorrect, our financial results and position could materially differ from our\nexpectations and could be materially adversely affected. A change in any of these principles or guidance, or in their interpretations\nor application to us, may have a significant effect on our reported results, as well as our processes and related controls, and may retroactively\naffect previously reported results or our forecasts, which may negatively impact our financial statements.

If\nour judgments or estimates relating to its critical accounting policies are based on assumptions that change or prove to be incorrect,\nour results of operations could fall below expectations of securities analysts and investors, resulting in a decline in its stock price.

The\npreparation of our financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that\naffect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience\nand on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s\nDiscussion and Analysis of Financial Condition and Results of Operations” the results of which form the basis for making judgments\nabout the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from\nother sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those\nin our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors,\nresulting in a decline in the trading price of the combined company’s securities. Significant judgments, estimates, and assumptions\nused in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition and\nincome taxes.

Our\nresults of operations could be affected by currency fluctuations.

Our\nglobal operations are conducted predominantly in U.S. dollars. While revenue is generated in U.S. dollars, Fusemachines incurs expenses\nin other currencies, principally, Nepalese rupees and Canadian dollars. The Company’s international operations expose it to risk\nof adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities\n(both third-party and intercompany) and translation of earnings and cash flows into U.S. dollars. Accordingly, the results of our operations\nare subject to currency exchange risks. To date, we have not engaged in any formal hedging program to mitigate these risks. The fluctuations\nin currency exchange rates may significantly impact our financial position and results of operations in the future.

Fusemachines\nhas limited insurance which may not cover claims by third parties against Fusemachines or its officers and directors.

We\nhave directors’ and officers’ liability insurance and commercial liability insurance policies. Claims, however, by third\nparties against us may exceed policy amounts and we may not have amounts to cover these claims. Any significant claims would have a material\nadverse effect on our business, financial condition and results of operations. In addition, our limited directors’ and officers’\nliability insurance may affect our ability to attract and retain directors and officers.

Fusemachines\ncould be subject to additional tax liabilities.

We\nare subject to federal, state, and local income taxes in the United States and foreign jurisdictions. Determining our provision for income\ntaxes requires significant management judgment, and the ultimate tax outcome may be uncertain. In addition, our provision for income\ntaxes is subject to volatility and could be adversely affected by many factors, including, among other things, changes to our operating\nor holding structure, changes in the amounts of earnings in jurisdictions with differing statutory tax rates, changes in the valuation\nof deferred tax assets and liabilities, and changes in U.S. and foreign tax laws. Moreover, we are subject to the examination of our\nincome tax returns by tax authorities in the United States and various foreign jurisdictions, which may disagree with our calculation\nof research and development tax credits, cross-jurisdictional transfer pricing, or other matters and assess additional taxes, interest\nor penalties. While we regularly assess the likely outcomes of these examinations to determine the adequacy of our provision for income\ntaxes and we believe that our financial statements reflect adequate reserves to cover any such contingencies, there can be no assurance\nthat the outcomes of such examinations will not have a material impact on our results of operations and cash flows. If U.S. or other\nforeign tax authorities change applicable tax laws, our overall taxes could increase, and our financial condition or results of operations\nmay be adversely impacted.

Provisions\nenacted by the 2017 Tax Cuts and Jobs Act related to the capitalization for tax purposes of research and experimental (“R&E”)\nexpenditures became effective on January 1, 2022. Beginning January 1, 2022, all U.S. and non-U.S. based R&E expenditures must be\ncapitalized and amortized over five years and 15 years, respectively.

The\nCompany capitalizes certain costs related to internal use software acquired, modified, or developed related to the Company’s services.\nThese capitalized costs are primarily related to salaries and other personnel costs. Costs incurred in the preliminary stages of development\nare expensed as incurred. Once the application development stage has been reached, internal and external costs, if direct and incremental,\nare capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of\nall substantial testing. Maintenance and training costs are expensed as incurred. Capitalized software is amortized on a straight-line\nbasis over its useful life.

Ongoing\nand escalating political volatility in Nepal may adversely affect our business, financial condition, and results of operations.

Nepal\nhas experienced significant governmental turnover since the 2008 abolition of the country’s monarchy government. Beginning on September\n8, 2025, thousands of demonstrators converged on central Kathmandu to protest alleged entrenched corruption, high unemployment, and perceived\ndemocratic backsliding. Security forces responded violently. Parallel and subsequent protests, demonstrations, and work stoppages have\ndisrupted transportation and public services nationwide. Should similar or further unrest occur, we could face, among other things: restrictions\non the movement of personnel and goods; interruptions to supply chains; delays in permitting or licensing; selective enforcement or abrupt\nchanges in tax, labor, foreign-exchange, or investment regulations; increased security costs; and reputational damage. There can be no\nassurance that Nepal’s government will stabilize, that further violent protests will not occur, or that new regulations or emergency\ndecrees will not materially impair our operations in the country. Any of the foregoing events, individually or in the aggregate, could\nhave a material adverse effect on our business, financial condition, and results of operations.

Risks\nRelated to Ownership of Our Securities

The\nprice of our Common Stock may be volatile.

The\nmarket price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various factors,\nmany of which are beyond our control, including the following:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	the\n concentration of the ownership of our shares by a limited number of affiliated stockholders may limit interest in our securities;

	●	limited\n “public float” with a small number of persons whose sales or lack of sales could result in positive or negative pricing\n pressure on the market price for the Common Stock;

	●	additions\n or departures of key personnel;

	●	loss\n of a strategic relationship;

	●	variations\n in operating results from the expectations of securities analysts or investors;

	●	announcements\n of new products or services by us or our competitors;

	●	reductions\n in the market share of our products;

	●	announcements\n by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

	●	investor\n perception of our industry or prospects;

	●	insider\n selling or buying;

	●	investors\n entering into short sale contracts;

	●	regulatory\n developments affecting our industry;

	●	changes\n in our industry;

	●	competitive\n pricing pressures;

	●	our\n ability to obtain working capital financing;

	●	sales\n of the Common Stock;

	●	our\n ability to execute our business plan;

	●	operating\n results that fall below expectations;

	●	revisions\n in securities analysts’ estimates or reductions in security analysts’ coverage; and

	●	economic\n and other external factors.

Many\nof these factors are beyond our control and may decrease the market price of the Common Stock, regardless of our operating performance.\nWe cannot make any predictions or projections as to what the prevailing market price for the Common Stock will be at any time, including\nas to whether the Common Stock will sustain current market prices, or as to what effect that the sale of shares or the availability of\nthe Common Stock for sale at any time will have on the prevailing market price.

In\naddition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the\noperating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of\nthe Common Stock.

Our\nexecutive officers and directors exercise significant control over the company, which may limit your ability to influence corporate matters\nand could delay or prevent a change in corporate control.

Sameer\nMaskey, our Chief Executive Officer, beneficially owns approximately 18.33% of the combined voting power for the election of directors\nto the Company’s board of directors. As a result, this stockholder will be able to influence our management and affairs and control\nthe outcome of matters submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation,\nor sale of all or substantially all of our assets.

This\nstockholder may have interests, with respect to his Common Stock, which are different from those of the public investors and the concentration\nof voting power among this stockholder may have an adverse effect on the price of the Common Stock.

In\naddition, this concentration of ownership might adversely affect the market price of the Common Stock by: (1) delaying, deferring or\npreventing a change of control; (2) impeding a merger, consolidation, takeover or other business combination involving us; or (3) discouraging\na potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

The\nrequirements of being a public company may strain the Company’s resources and distract management and we will incur substantial\ncosts as a result of being a public company.

The\nCompany is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Securities Act. These rules, regulations\nand requirements are extensive. We will incur significant costs associated with our public company corporate governance and reporting\nrequirements. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business\nand operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures\nand internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures\nand internal control over financial reporting to meet this standard, significant resources and management oversight may be required.\nAs a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and\noperating results. We may need to hire more corporate employees to comply with these requirements or engage outside consultants, which\nwould increase our costs and expenses. This may divert management’s attention from other business concerns, which could have a\nmaterial adverse effect on our business, financial condition and results of operations. These applicable rules and regulations may make\nit more difficult and more expensive for us to obtain director and officer liability insurance and it may be required to accept reduced\npolicy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult\nfor us to attract and retain qualified individuals to serve on the Company’s board of directors or as executive officers.

In\naddition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for\npublic companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations\nand standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application\nin practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty\nregarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to\ninvest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative\nexpenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our\nefforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due\nto ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business\nmay be adversely affected.

As\na result of disclosure of information in this prospectus and in the filings that we are required to make as a public company,\nour business, operating results and financial condition have become more visible, which may result in threatened or actual litigation,\nincluding by competitors and other third parties. If any such claims are successful, our business, operating results and financial condition\ncould be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time\nand resources necessary to resolve them, could divert the resources of our management and adversely affect our business, operating results\nand financial condition.

Sales\nof a substantial amount of Common Stock in the public market, particularly sales by our executive officers, directors and significant\nstockholders, or the perception that these sales could occur, could cause the market price of the Common Stock to decline.

Sales\nof a substantial number of shares of Common Stock in the public market, particularly sales by our executive officers, directors and principal\nstockholders, or the perception that these sales might occur, could cause the market price of the Common Stock to decline. Holders of\na substantial number of shares of the Common Stock following the Business Combination are subject to lock-up provisions in our bylaws,\nas amended and restated (the “Bylaws”) in that, for a period of at least one year from the date of closing of the Business\nCombination, subject to certain exceptions, prohibit them from offering for sale, selling, contracting to sell, granting any option for\nthe sale of, transferring or otherwise disposing of any shares of the Common Stock and of any securities convertible into or exercisable\nfor the Common Stock, unless waived, amended, or repealed by the Company’s board of directors.

When\nthe applicable lock-up periods expire, our security holders subject to the lock-up provisions will be able to sell shares of Common Stock\nin the public market. In addition, the Company’s board of directors may, in its discretion, permit our security holders to sell\nshares prior to the expiration of the restrictive provisions contained in the Bylaws. Pursuant to Section 7.14(d) of the Bylaws, the\nCompany’s board of directors may also waive, amend or repeal the terms of the lock-up provision in the Bylaws for any reason, including\nin order to meet or maintain the Nasdaq listing requirements, which would allow the holders of any securities held by the parties to\nsuch lock-up agreements to sell our shares without restriction, subject to applicable securities laws. Sales of a substantial number\nof such shares upon expiration of the lock-up provisions, the perception that such sales may occur or early release of these provisions\ncould cause our market price to fall or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.

In\naddition, we may file a registration statement to register shares reserved for future issuance under our equity compensation plans. Subject\nto the satisfaction of applicable vesting requirements and expiration of the lock-up provisions referred to above, the shares issued\nupon exercise of outstanding stock options would be available for immediate resale in the open market.

A\ndecline in the price of the Common Stock could affect our ability to raise working capital and adversely impact the company’s ability\nto continue operations.

A\nprolonged decline in the price of the Common Stock could result in a reduction in the liquidity of the common stock and a reduction in\nour ability to raise capital. A decline in the price of the Common Stock could be especially detrimental to our liquidity, operations\nand strategic plans. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect\non our business plan and operations, including our ability to develop new products and services and continue current operations. If the\nCommon Stock’s price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from\noperations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have\nthe resources to continue our normal operations.

Fusemachines\ndoes not intend to pay any cash dividends in the foreseeable future and, therefore, any return on your investment in the company’s\ncapital stock must come from increases in the fair market value and trading price of the capital stock.

We\nhave not paid any cash dividends on the Common Stock and do not intend to pay cash dividends on the Common Stock in the foreseeable future.\nWe intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements,\nwhich we may enter into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the future\nwill be at the discretion of the Company’s board of directors and will be dependent upon our financial condition, results of operations,\ncapital requirements and any other factors that the Company’s board of directors decides is relevant. Therefore, any return on\nyour investment in our capital stock must come from increases in the fair market value and trading price of the capital stock.

If\nthe price of the Common Stock fluctuates, you could lose a significant part of your investment.

The\nmarket price of the Common Stock could be subject to wide fluctuations in response to, among other things, the risk factors described\nherein, and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable\nto us. Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market\nprices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance\nof those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, such\nas the occurrence of natural disasters, pandemics, geopolitical tensions (particularly those relating to the People’s Republic\nof China), military conflicts, recessions, inflation, interest rate changes or international currency fluctuations, may negatively affect\nthe market price of our common stock. In the past, many companies that have experienced volatility in the market price of their stock\nhave been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation\nagainst us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously\nharm our business.

The\npublic stockholders will experience immediate dilution as a consequence of future issuances of Common Stock pursuant to the Fusemachines\nEquity Incentive Plan.

Fusemachines\nemployees and consultants hold, and in the future may be granted, equity awards under equity incentive plans. You will experience additional\ndilution when those equity awards and purchase rights become vested and settled or exercisable, as applicable, for shares of the Common\nStock.

The\nfuture exercise of registration rights may adversely affect the market price of the Common Stock.

Pursuant\nto the Amended and Restated Registration Rights Agreement (as defined below), the Company has agreed to register for resale, pursuant\nto Rule 415 under the Securities Act, certain shares of Common Stock and other equity securities of the Company that are held by the\nSelling Stockholder, from time to time.

The\nregistration of these securities will permit the public resale of such securities, subject to any applicable contractual lock-up obligation.\nThe registration and availability of a significant number of securities for trading in the public market may have an adverse effect on\nthe market price of the Common Stock.

The\nPublic Warrants may never be in the money, and they may expire worthless and the terms of the warrants may be amended in a manner adverse\nto a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment.

The\nexercise price for the outstanding Public Warrants is $11.50 per share. There can be no assurance that the Public Warrants will be in\nthe money prior to their expiration and as such, the Public Warrants may expire worthless.

The\nPublic Warrants were issued in registered form under a Warrant Agreement between us and Continental Stock Transfer & Trust Company,\nas warrant agent, originally executed January 12, 2022 between the warrant agent and CSLM Acquisition, Corp. (CSLM ) (“now known\nas Fusemachines Inc.”) and amended at Closing (the “Warrant Agreement”). The Warrant Agreement provides that the terms\nof the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires\nthe approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that increases the exercise price\nor shortens the exercise period of the Public Warrants.

Accordingly,\nwe may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public\nWarrants approve of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of\nthe then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the\nexercise price of the warrants, shorten the exercise period or decrease the number of shares of Common Stock purchasable upon exercise\nof a warrant.

The\nCompany may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your\nPublic Warrants worthless.

We\nhave the ability to redeem outstanding Public Warrants at any time and prior to their expiration, at a price of $0.01 per warrant, provided\nthat the closing price of the Common Stock equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations,\nreorganizations, recapitalizations and the like) for any twenty (20) trading days within a thirty (30) trading-day period ending on the\nthird trading day prior to the date on which we give proper notice of such redemption to the warrants holders and provided certain other\nconditions are met. We will not redeem the Public Warrants unless an effective registration statement under the Securities Act covering\nthe shares issuable upon exercise of the warrants is effective and a current prospectus relating to those shares is available throughout\nthe thirty (30)-day redemption period, except if we elect to require the warrants to be exercised on a cashless basis and such cashless\nexercise is exempt from registration under the Securities Act. If and when the Public Warrants become redeemable by us, we may exercise\nour redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities\nlaws. Redemption of the outstanding warrants could force you to accept the nominal redemption price which, at the time the outstanding\nwarrants are called for redemption, is likely to be substantially less than the market value of your warrants, if you do not otherwise\nexercise your warrants, as permitted under the Warrant Agreement, before the redemption date. None of the Private Placement Warrants\nwill be redeemable by us so long as they are held by the CSLM’s sponsor, Consilium Acquisition Sponsor I LLC (the “Sponsor”)\nor any of its permitted transferees.

In\naddition, we have the ability to redeem the outstanding Public Warrants at any time prior to their expiration, at a price of $0.01 per\nwarrant upon a minimum of 30 days’ prior written notice of redemption if the closing price of the Common Stock equals or exceeds\n$18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any\ntwenty (20) trading days within a thirty (30) day trading-day period ending on the third day prior to proper notice of such redemption\nand provided that certain other conditions are met, including that holders will be able to exercise their warrants on a cashless basis\nprior to redemption for a number of shares of Common Stock determined based on the redemption date and fair market value of the Common\nStock. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had been\nable to exercise their warrants at a later time at which the underlying share price is higher and (2) may not compensate the holders\nfor the value of the warrants. In addition, such redemptions may occur at a time when the Public Warrants are “out-of-the-money,”\nin which case holders thereof would lose any potential embedded value from a subsequent increase in the value of the Common Stock had\nsuch Public Warrants remained outstanding. If the price of the Common Stock is less than $18.00 and we seek redemption of the Public\nWarrants, we must call the Private Placement Warrants for redemption on the same terms.

In\nthe event that the Company determines to redeem the Public Warrants when the closing price of the shares of Common Stock equals or exceeds\n$18.00 per share, pursuant to Section 6.2 of the Warrant Agreement, respectively, the Company will fix a date for the redemption. Notice\nof redemption will be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the redemption\ndate to the registered holders of the Public Warrants to be redeemed at their last addresses as they appear on the registration books.\nAny notice mailed in the manner herein provided will be conclusively presumed to have been duly given whether or not the registered holder\nreceived such notice.

Public\nWarrant holders will only be able to exercise their Public Warrants on a “cashless basis” under certain circumstances, and\nif they do so, they will receive fewer shares of Common Stock from such exercise than if such warrants were exercised for cash.

The\nPublic Warrants generally may not be exercised on a “cashless basis”, except as described below. In contrast, the Private\nPlacement Warrants, for so long as they are held by the Sponsor and certain permitted transferees, may be exercised on a “cashless\nbasis”.

The\nWarrant Agreement provides that in the following circumstances holders of Public Warrants who seek to exercise their Public Warrants\nwill not be permitted to do for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of\nthe Securities Act: (i) if the Common Stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance\nwith the terms of the Warrant Agreement; (ii) if we have so elected and the Common Stock are at the time of any exercise of a warrant\nnot listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section\n18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the Public Warrants for redemption. If you exercise your\nPublic Warrants on a cashless basis, you would pay the warrant exercise price by surrendering the warrants for that number of shares\nof Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Public\nWarrants, multiplied by the excess of the “fair market value” of the shares of Common Stock (as defined in the next sentence)\nover the exercise price of the warrants by (y) the fair market value. The “fair market value” is the average reported closing\nprice of the shares of Common Stock for the ten (10) trading days ending on the third trading day prior to the date on which the notice\nof exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable.\nAs a result, a holder of Public Warrants would receive fewer shares of Common Stock from such exercise than if such warrants were exercised\nfor cash.

The\nWarrant Agreement will designate the courts of the State of New York or the United States District Court for the Southern District of\nNew York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of the warrants,\nwhich could limit the ability of warrant holders to obtain a favorable judicial forum for disputes.

The\nWarrant Agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating\nin any way to the Warrant Agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New\nYork or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction,\nwhich jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive\njurisdiction and that such courts represent an inconvenient forum.

Notwithstanding\nthe foregoing, these provisions of the Warrant Agreement will not apply to suits brought to enforce any liability or duty created by\nthe Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive\nforum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and\nto have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the\nforum provisions of the Warrant Agreement, is filed in a court other than a court of the State of New York or the United States District\nCourt for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall\nbe deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection\nwith any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service\nof process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign\naction as agent for such warrant holder.

This\nchoice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for\ndisputes, which may discourage such lawsuits and result in increased costs to warrant holders to bring a lawsuit. Alternatively, if a\ncourt were to find this provision of our Warrant Agreement inapplicable or unenforceable with respect to one or more of the specified\ntypes of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could\nmaterially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and\nresources of our management and board.

The\nhistorical financial results of Legacy Fusemachines may not be indicative of what the Company’s actual financial position or results\nof operations would have been.

The\nhistorical financial results of Legacy Fusemachines included in this prospectus do not reflect the financial condition, results\nof operations or cash flows they would have achieved as a standalone public company during the periods presented or those the Company\nwill achieve in the future. This is primarily the result of the following factors: (i) the Company will incur additional ongoing costs,\nincluding costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act; and (ii) the Company’s\ncapital structure is different from that reflected in Legacy Fusemachines’ historical financial statements. The Company’s\nfinancial condition and future results of operations could be materially different from amounts reflected in its historical financial\nstatements included elsewhere in this prospectus, so it may be difficult for investors to compare the Company’s future results\nto historical results or to evaluate its relative performance or trends in its business.

We\nare currently an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and to the extent\nwe have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting\ncompanies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with\nother public companies.

We\nare currently an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we\nmay take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not\nemerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section\n404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,\nand exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any\ngolden parachute payments not previously approved. Additionally, we are a “smaller reporting company” as defined in Item\n10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among\nother things, providing only two years of audited financial statements. As a result, our shareholders may not have access to certain\ninformation they may deem important. We cannot predict whether investors will find our securities less attractive because we will rely\non these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading\nprices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and\nthe trading prices of our securities may be more volatile.

Further,\nSection 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting\nstandards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do\nnot have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting\nstandards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements\nthat apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended\ntransition period, which means that when a standard is issued or revised and it has different application dates for public or private\ncompanies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised\nstandard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company\nnor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential\ndifferences in accountant standards used. Once we lose our “emerging growth company” and “smaller reporting company”\nstatus, we will no longer be able to take advantage of certain exemptions from reporting, and we will also be required to comply with\nthe auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We will incur additional expenses in connection with such\ncompliance and our management will need to devote additional time and effort to implement and comply with such requirements.

We are also\na “smaller reporting company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934. Even after we are no longer\nan emerging growth company, we may continue to be a smaller reporting company and take advantage of certain of the scaled disclosures\navailable to smaller reporting companies until the fiscal year following the determination that we no longer qualify as a smaller reporting\ncompany. We will qualify as a smaller reporting company for so long as either (i) the market value of our common stock held by non-affiliates\nis less than $250 million, measured on the last business day of our most recently completed second fiscal quarter, or (ii) our annual\nrevenues are less than $100 million during our most recently completed fiscal year and the market value of our common stock held by non-affiliates\nis less than $700 million, measured on the last business day of our most recently completed second fiscal quarter.

We\nwill remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary\nof the closing of CSLM’s IPO, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which\nwe are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds\n$700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than\n$1.0 billion in non-convertible debt securities during the prior three-year period.

We\nmay be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in connection with redemptions of shares of public common\nstock.

The\nInflation Reduction Act of 2022 imposes a 1% U.S. federal excise tax on certain repurchases (including redemptions) of stock by publicly\ntraded U.S. corporations beginning January 1, 2023. Because we are a Delaware corporation and our common stock is publicly traded, we\nare a “covered corporation” for purposes of the excise tax.

Although\nredemptions of our common stock that occurred in connection with the business combination closed in October 2025 may be netted against\nequity issuances occurring during the same taxable year, we could nevertheless incur excise tax liability for the 2025 taxable year.\nIn addition, any future repurchases or redemptions of our common stock, whether conducted through open-market repurchases, tender offers,\nredemptions, net settlements of equity awards, or other transactions, may also be subject to the excise tax, unless an exemption applies.

The\nU.S. Department of the Treasury has finalized certain procedural regulations but the substantive rules governing the computation of the\ntax remain in proposed form and are subject to change. As a result, the application of the excise tax is uncertain and could materially\nincrease the cost of future share repurchases or other capital-allocation strategies.

Delaware\nlaw and the Company’s Organizational Documents contain certain provisions, including anti-takeover provisions that limit the ability\nof stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

The\nCompany’s amended and restated certificate of incorporation, as amended and restated (the “Certificate of Incorporation”)\nand Bylaws (together, the “Organizational Documents”), and the DGCL, contain provisions that could have the effect of rendering\nmore difficult, delaying, or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders\nmight otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay\nin the future for shares of our common stock, and therefore depress the trading price of the Common Stock. These provisions could also\nmake it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members\nof the Company’s board of directors or taking other corporate actions, including effecting changes in our management. Among other\nthings, the Organizational Documents include provisions regarding:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	the\n ability of the Company’s board of directors to issue shares of preferred stock, including “blank check” preferred\n stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval,\n which could be used to significantly dilute the ownership of a hostile acquirer;

	●	the\n Certificate of Incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders\n to elect director candidates;

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	the\n limitation of the liability of, and the indemnification of, the Company’s directors and officers;

	●	the\n ability of the Company’s board of directors to amend the Bylaws, which may allow the Company’s board of directors to\n take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate\n an unsolicited takeover attempt; and

	●	advance\n notice procedures with which stockholders must comply to nominate candidates to the Company’s board of directors or to propose\n matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual\n or special meetings of stockholders and delay changes in the Company’s board of directors and also may discourage or deter\n a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise\n attempting to obtain control of the Company.

These\nprovisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Company’s board\nof directors or management.

The\nprovisions of the Certificate of Incorporation requiring exclusive forum in the Court of Chancery of the State of Delaware and the federal\ndistrict courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors\nand officers.

The\nCompany’s Certificate of Incorporation provides that, to the fullest extent permitted by law, and unless the Company consents in\nwriting to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Chancery\nCourt does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware)\nwill be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on the Company’s behalf, (ii) any\naction, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Company\nto the Company or the Company’s stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the DGCL\nor the Organizational Documents (as each may be amended from time to time), (iv) any action, suit or proceeding as to which the DGCL\nconfers jurisdiction on the Court of Chancery of the State of Delaware, or (v) any action, suit or proceeding asserting a claim against\nthe Company or any current or former director, officer or stockholder governed by the internal affairs doctrine.

Section\n22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability\ncreated by the Securities Act or the rules and regulations thereunder. Accordingly, both state and federal courts have jurisdiction to\nentertain such Securities Act claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or\ncontrary rulings by different courts, among other considerations, the Certificate of Incorporation provides that, unless the Company\nconsents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of\nthe United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under\nthe Securities Act; however, there is uncertainty as to whether a court would enforce such provision, and investors cannot waive compliance\nwith federal securities laws and the rules and regulations thereunder. Notwithstanding the foregoing, the Certificate of Incorporation\nprovides that the exclusive forum provision will not apply to suits brought to enforce any cause of action arising under the Securities\nExchange Act of 1934 (the “Securities Exchange Act”), any duty or liability created by the Exchange Act or\nany other claim for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction\nover all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.

These\nprovisions may have the effect of discouraging lawsuits against the Company’s directors and officers. The enforceability of similar\nchoice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is\npossible that, in connection with any applicable action brought against the Company, a court could find the choice of forum provisions\ncontained in the Certificate of Incorporation to be inapplicable or unenforceable in such action.

Risks\nRelated to Being a Public Company

We\nwill incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies,\nwhich could adversely affect our business, financial condition, and results of operations.

As\na public company, we are and will continue to be subject to the reporting requirements of the Exchange Act, the listing standards of\nNasdaq and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue\nto increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and\nplace significant strain on our personnel, systems, and resources. For example, the Exchange Act requires, among other things, that we\nfile annual, quarterly, and current reports with respect to our business and results of operations. As a result of the complexity involved\nin complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other\nbusiness concerns, which could harm our business, financial condition, and results of operations, although we have already hired additional\nemployees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants,\nwhich will increase our operating expenses.

In\naddition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for\npublic companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations\nand standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application\nin practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty\nregarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to\ninvest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general\nand administrative expenses and a diversion of management’s time and attention from business operations to compliance activities.\nIf our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies\ndue to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our\nbusiness may be harmed.

These\nfactors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve\non our audit committee and compensation committee, and qualified executive officers.

As\na result of disclosure of information in filings required of a public company, our business and financial condition will become more\nvisible, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties.\nIf such claims are successful, our business, financial condition, and results of operations could be harmed, and even if the claims do\nnot result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert\nthe resources of our management and harm our business, financial condition, and results of operations.

If\nwe fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce\ntimely and accurate financial statements or comply with applicable regulations could be impaired.

As\na public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations\nof the applicable listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase\nour legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant\nstrain on our personnel, systems and resources.

The\nSarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over\nfinancial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure\nthat information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and\nreported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the\nExchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our\ninternal control over financial reporting, which includes hiring additional accounting and financial personnel to implement such processes\nand controls. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over\nfinancial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related\ncosts and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience\nmaterial weaknesses in our controls.

Our\ncurrent controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further,\nweaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop\nor maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations\nor cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.\nAny failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of\nperiodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness\nof our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be\nfiled with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors\nto lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of\nour common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.\nWe are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not\nrequired to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public\ncompany, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting\ncommencing with our second annual report on Form 10-K.

Our\nindependent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial\nreporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent\nregistered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal\ncontrol over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal\ncontrol over financial reporting could have an adverse effect on our business and results of operations and could cause a decline in\nthe price of our common stock.

Our\nbusiness, financial condition, and results of operations may fluctuate on a quarterly and annual basis, which may\nresult in a decline in our stock price if such fluctuations result in a failure to meet the expectations of securities analysts or investors.

Our\noperating results have in the past and could in the future vary significantly from quarter-to-quarter and year-to-year and may fail to\nmatch our past performance, our projections or the expectations of securities analysts because of a variety of factors, many of which\nare outside of our control and, as a result, should not be relied upon as an indicator of future performance. As a result, we may not\nbe able to accurately forecast our operating results and growth rate. Any of these events could cause the market price of our common\nstock to fluctuate. Factors that may contribute to the variability of our operating results include, but are not limited to: our ability\nto attract new clients and partners, retain existing clients and partners and maximize engagement and enrollment with existing and future\nclients; changes in our sales and implementation cycles, especially in the case of our large clients; new solution introductions and\nexpansions, or challenges with such introductions; changes in our pricing or fee policies or those of our competitors; the timing and\nsuccess of new solution introductions by us or our competitors or announcements by competitors or other third parties of significant\nnew products or acquisitions or entrance into certain markets; any other change in the competitive landscape of our industry, including\nconsolidation among our competitors; increases in operating expenses that we may incur to grow and expand our operations and to remain\ncompetitive; our ability to successfully expand our business, whether domestically or internationally; breaches of security or privacy;\nchanges in stock-based compensation expenses; the amount and timing of operating costs and capital expenditures related to the expansion\nof our business; adverse litigation judgments, settlements, or other litigation-related costs; changes in the legislative or regulatory\nenvironment, including with respect to privacy or data protection, or enforcement by government regulators, including fines, orders,\nor consent decrees; the cost and potential outcomes of ongoing or future regulatory investigations or examinations, or of future litigation;\nchanges in our effective tax rate; our ability to make accurate accounting estimates and appropriately recognize revenue for our solutions\nfor which there are no relevant comparable products; changes in accounting standards, policies, guidance, interpretations, or principles;\ninstability in the financial markets; general economic conditions, both domestic and international; volatility in the global financial\nmarkets; political, economic, and social instability, including terrorist activities and health epidemics (including the outbreak of\nCOVID-19), and any disruption these events may cause to the global economy; and changes in business or macroeconomic conditions. The\nimpact of one or more of the foregoing or other factors may cause our operating results to vary significantly.

Changes\nin accounting principles may cause previously unanticipated fluctuations in our financial results, and the implementation of such\nchanges may impact our ability to meet our financial reporting obligations.

We\nprepare our financial statements in accordance with GAAP, which are subject to interpretation or changes by the FASB, the SEC, and other\nvarious bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting\nprinciples have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results.\nFurthermore, any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems,\ncould cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’\nconfidence in us.

If\nour estimates or judgments relating to our critical accounting policies prove to be incorrect, our business, financial\ncondition, and results of operations could be adversely affected.

The\npreparation of financial statements in conformity with GAAP and our key metrics require management to make estimates and assumptions\nthat affect the amounts reported in the consolidated financial statements and accompanying notes and amounts reported in our key metrics.\nWe base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,\nas provided in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”\nThe results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the\namount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing\nour consolidated financial statements include those related to allowance for doubtful accounts, assessment of the useful life and recoverability\nof long-lived assets, fair value of guarantees included in revenue arrangements and fair values of stock-based awards, warrants, contingent\nconsideration, and income taxes. Our results of operations may be adversely affected if our assumptions change or if actual circumstances\ndiffer from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts\nand investors, resulting in a decline in the trading price of our common stock.

Risks\nRelated to an Investment in Our Securities

Sales\nof a substantial number of shares of our Common Stock by the Selling Stockholders, or the perception that such sales may occur, could\ncause the market price of our Common Stock to decline significantly.

This\nprospectus covers the resale of up to 7,549,411 shares of Common Stock. These shares consist of:

\n\n\n\n\n \n \n \n\n\n

	●	up\n to 1,190,476 shares issuable upon conversion of the Notes;
	●	up\n to 4,100,000 shares issuable upon exercise of the August 2026 Warrants;
	●	2,138,935\n Vendor Shares; and
	●	120,000\n shares issued to Retail Volts.

The\nregistered shares represent approximately 23.2% of our 32,544,711 shares of Common Stock outstanding as of October 2, 2026.

The\nSelling Stockholders may sell all or any portion of the shares issued to them. Some Selling Stockholders received their shares in satisfaction\nof accrued fees or for services rather than for cash. Others may acquire shares at a fixed conversion or exercise price of $4.20 per\nshare. Depending on our trading price, these holders may have an incentive to sell even when other stockholders would incur a loss.

Our\nCommon Stock has historically traded in limited volumes. Resales of a significant number of shares, or the expectation of such resales,\ncould depress the market price of our Common Stock. Such sales could also increase volatility and impair our ability to raise capital\nthrough the sale of equity securities on acceptable terms, or at all.

There\nmay not be an active trading market for our securities, which may make it difficult to sell shares of our common stock or warrants.

It\nis possible that an active trading market for our securities will not develop or, if developed, that any market will not be sustained.\nThis would make it difficult for you to sell our securities at an attractive price or at all.

The\nmarket price of our securities may be volatile, which could cause the value of your investment to decline.

The\nprice of our securities may fluctuate significantly due general market and economic conditions. An active trading market for our securities\nmay not develop or, if developed, it may not be sustained. In addition, fluctuations in the price of our securities could contribute\nto the loss of all or part of your investment. Even if an active market for our securities develops and continues, the trading price\nof our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.\nAny of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade\nat prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover\nand may experience a further decline. Factors affecting the trading price of our securities may include, but are not solely limited to,\nthe risk factors identified herein.

In\naddition, the stock market in general, and Nasdaq and technology and growth companies in particular, have experienced extreme price and\nvolume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market\nand industry factors may negatively affect the market price of our common stock, regardless of its actual operating performance. In the\npast, securities class action litigation has often been instituted against companies following periods of volatility in the market price\nof a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s\nattention and resources, which would harm our business, operating results or financial condition.

There\ncan be no assurance that we will be able to comply with the continued listing standards of Nasdaq.

If\nNasdaq delists our securities from trading on its exchange for failure to meet their continued listing standards, the Company and its\nstockholders could face significant negative consequences including:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	Limited\n availability of market quotations for the Company securities;

	●	A\n determination that our common stock is a “penny stock” which will require brokers trading in our securities to adhere\n to more stringent rules;

	●	Possibly\n resulting in a reduced level of trading activity in the secondary trading market for shares of our common stock;

	●	A\n limited amount of analyst coverage; and

	●	A\n decreased ability to issue additional securities or obtain additional financing in the future.

Nasdaq\nmay delist our securities from trading on its exchange, which could limit investors’ ability to trade our securities and\nsubject us to additional trading restrictions.

Currently,\nour common stock and public warrants are listed on the Nasdaq Global Market under the symbols “FUSE” and “FUSEW.”\nIn order to continue the listing of these securities on the Nasdaq Global Market, we are required to maintain certain financial,\ndistribution and stock price levels. On January 15, 2026, we received a notification letter from the staff of the Listing Qualifications\nDepartment of The Nasdaq Stock Market (the “Nasdaq Staff”) indicating that we were not in compliance with the continued listing\nrequirement to maintain a minimum Market Value of Publicly Held Shares (“MVPHS”) of $15,000,000 for the Nasdaq Global Market,\nas set forth in Nasdaq Listing Rule 5450(b)(2)(C). In accordance with Nasdaq Listing Rule 5810(c)(3)(D), we had 180 calendar days, or\nuntil July 14, 2026, to regain compliance with the MVPHS requirement. On July 7, 2026, Nasdaq notified us that we had regained compliance\nwith the MVPHS requirement under Nasdaq Listing Rule 5450(b)(1)(C), closing out the notification letter we had received from Nasdaq on\nJanuary 15, 2026. On July 24, 2026, we received a new notification letter from Nasdaq indicating that we were not in compliance with\nthe MVPHS requirement of $15,000,000 under Nasdaq Listing Rule 5450(b)(2)(C), based on our MVPHS having been below $15,000,000 for the\n30 consecutive business days from June 10, 2026 through July 23, 2026. In accordance with Nasdaq Listing Rule 5810(c)(3)(D), we have\n180 calendar days, or until January 20, 2027, to regain compliance. If at any time before January 20, 2027, our MVPHS closes at or above\n$15,000,000 for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation of compliance. Further, on March\n27, 2026, we received a deficiency notice from the Nasdaq Staff notifying us that for the last 30 consecutive business days our securities\nhad not maintained the minimum Market Value of Listed Securities (“MVLS”) of $50,000,000 required by the continued listing\nrequirements of Nasdaq Listing Rule 5450(b)(2)(A). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have 180 calendar days, or\nuntil September 23, 2026, to regain compliance with the MVLS requirement. If at any time before September 23, 2026, our MVLS closes at\nor above $50,000,000 for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation that we have regained compliance.\nOn September 24, 2026, Nasdaq notified the Company that, based upon the Company’s continued non-compliance with the MVLS requirement\nas of September 23, 2026, the Company’s securities were subject to delisting from Nasdaq unless the Company requests a hearing\nbefore the Nasdaq Hearings Panel (the “Panel”). On October 1, 2026, the Company requested a hearing before\nthe Panel, which request will stay any further suspension or delisting action by Nasdaq at least until a hearing is held and any extension\nthat the Panel may grant to the Company following the hearing has expired. Nasdaq granted our request for a hearing, which is scheduled\nfor November 3, 2026. There can be no assurance that the Panel will grant the Company’s request for continued listing. Although\nthe Company is considering all available options to regain compliance with the MVLS Requirement, there can be no assurance that the Company\nwill be able to do so.

Additionally, on September 18, 2026, we received a notification letter from Nasdaq notifying us that, because the\nclosing bid price for our common stock had been below $1.00 per share for at least 30 consecutive business days, we were not in compliance\nwith the minimum bid price requirement for continued listing on The Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(a)(1).\nIn accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days from September 18, 2026, or until March 17, 2027, to regain\ncompliance with this requirement. If at any time before March 17, 2027, the closing bid price of our common stock closes at or above $1.00\nper share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that we have regained compliance. The\nnotification has no immediate effect on the listing or trading of our securities. If we do not regain compliance during the compliance\nperiod, we may transfer to The Nasdaq Capital Market and be afforded an additional 180-day compliance period, subject to meeting applicable\ninitial listing standards. There can be no assurance that we will be able to regain compliance with any of the foregoing Nasdaq listing\nrequirements within the applicable compliance periods, or at all.

If\nNasdaq delists our securities from trading on its exchange and we are not able to list its securities on another national securities\nexchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material\nadverse consequences, including:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	a\n limited availability of market quotations for our securities;
	●	reduced\n liquidity for our securities;
	●	a\n determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere\n to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
	●	a\n limited amount of news and analyst coverage; and
	●	a\n decreased ability to issue additional securities or obtain additional financing in the future.

The\nNational Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the\nsale of certain securities, which are referred to as “covered securities.” Since our common stock and public warrants are\nlisted on the Nasdaq Global Market, they are covered securities. However, if our securities were no longer listed on the Nasdaq Global\nMarket, they would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

Because\nwe have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment\nunless you sell your common stock for a price greater than that which you paid for it.

We\nmay retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends\nfor the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion\nof our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements,\ncontractual restrictions and other factors that our board of directors may deem relevant. As a result, you may not receive any return\non an investment in our Common Stock unless you sell the Common Stock for a price greater than that which you paid for it.

Sales\nof a substantial number of shares of our Common Stock in the public market could cause our stock price to fall.

Sales\nof a substantial number of shares of our Common Stock in the public market or the perception that these sales might occur, could depress\nthe market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities.\nWe are unable to predict the effect that sales may have on the prevailing market price of our Common Stock. Sales of significant number\nof shares of our Common Stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and\nprice that it deems reasonable or appropriate, and make it more difficult for you to sell shares of our common stock. Certain holders\nof our securities are entitled to rights with respect to the registration of the shares of our Common Stock under the Securities Act.\nAny sales of securities by these stockholders could have a material adverse effect on the trading price of our Common Stock.

Future\nsales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity plans, could result in additional\ndilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We\nexpect that significant additional capital may be needed in the future to continue our planned operations, commercialization efforts,\nexpanded research and development activities and costs associated with operating as a public company. To raise capital, we may sell Common\nStock, convertible securities or other equity securities in one or more transactions at prices and in a manner it determines from time\nto time. We may also sell our Common Stock as part of entering into strategic alliances, creating joint ventures or collaborations or\nentering into additional licensing arrangements with third parties that we believe will complement or augment its development and commercialization\nefforts. If we sell Common Stock, convertible securities or other equity securities, investors may be materially diluted by subsequent\nsales. Such sales may also result in material dilution to existing stockholders, and new investors could gain rights, preferences and\nprivileges senior to the holders of our Common Stock.

Our\nmanagement has limited experience in operating a public company.

Our\nexecutive officers have limited experience in the management of a publicly traded company subject to significant regulatory oversight\nand reporting obligations under federal securities laws. Our management team may not successfully or effectively manage our transition\nto a public company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a\nsignificant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result\nin less time being devoted to our management and growth. We may not have adequate personnel with the appropriate level of knowledge,\nexperience and training in the accounting policies, practices or internal controls over financial reporting required of public companies\nin the United States. It is possible that will be required to expand its employee base and hire additional employees to support our operations\nas a public company, which will increase its operating costs in future periods.

USE\nOF PROCEEDS

All\nof the shares of Common Stock and warrants offered by the Selling Stockholders will be sold by them for their respective accounts. We\nwill not receive any of the proceeds from these sales. We will receive up to an aggregate of approximately $8.61 million from the exercise\nof all August 2026 Warrants assuming the exercise in full of all such warrants for cash (not accounting for any adjustments to\nthe exercise price that may occur pursuant to the terms of such warrants).

Unless\nwe inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of\nthe August 2026 Warrants for general corporate purposes which may include acquisitions or other strategic investments.

The\nSelling Stockholders will pay any underwriting fees, discounts, selling commissions, stock transfer taxes and certain legal expenses\nincurred by such Selling Stockholders in disposing of their shares of securities, and we will bear all other costs, fees and expenses\nincurred in effecting the registration of such securities covered by this prospectus, including, without limitation, all registration\nand filing fees, Nasdaq listing fees and fees and expenses of our counsel and our independent registered public accountants.

The\nSelling Stockholders will pay all underwriting discounts, selling commissions and expenses incurred by them for brokerage, accounting,\ntax or legal services or any other expenses incurred by the selling stockholders in connection with the sale of the shares, if any. We\nwill bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including,\nwithout limitation, all registration and filing fees, listing fees and fees and expenses of our counsel and our accountants.

DIVIDEND\nPOLICY

We\nhave not declared any cash dividends since inception and we do not anticipate paying any dividends in the foreseeable future. Instead,\nwe anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth\nand development of our business. The payment of dividends is within the discretion of the Board and will depend on our earnings, capital\nrequirements, financial condition, prospects, applicable Delaware law, which provides that dividends are only payable out of surplus\nor current net profits, and other factors our Board might deem relevant. There are no restrictions that currently limit our ability to\npay dividends on our Common Stock other than those generally imposed by applicable state law.

MANAGEMENT’S\nDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion\nand analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related\nnotes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties.\nOur actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements\nas a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Company\nOverview

We\nare a leading provider of agentic AI solutions, offering innovative AI products and services to businesses. With over a decade of experience,\nwe help enterprises seamlessly integrate AI into their operations, enhancing efficiency, reducing costs, and driving innovation. Our\nproducts and services are uniquely supported by a global talent pool, primarily sourced from underserved communities, allowing us to\ndeliver high- quality AI solutions at scale while fulfilling our mission of democratizing AI.

Our\nclients have successfully utilized our AI solutions to solve critical business challenges such as improving sales forecasting accuracy\nand eliminating manual data entry errors. Our commitment to delivering measurable business value has enabled us to build enduring partnerships\nwith these organizations, positioning Fusemachines as a trusted partner in their AI-driven transformation journeys.

In\naddition to our agentic AI solutions, we are deeply invested in education and talent development. Our AI training programs, particularly\nour flagship AI Fellowship Program, are designed to upskill students and professionals, providing them with hands-on experience in real-world\nAI applications. To date, we have certified hundreds of AI Fellows across the United States, Nepal, and the Dominican Republic. These\nprograms not only empower individuals but also contribute to the global AI talent pool, which is critical given the current shortage\nof AI professionals.

We\nwere originally incorporated under the name CSLM Acquisition Corp. (“CSLM”), as a Cayman Islands exempted Company, as a special\npurpose acquisition company (“SPAC”) formed for the purpose of effecting a merger, share exchange, asset acquisition, share\npurchase, reorganization or similar business combination with one or more businesses or entities.

In\nJanuary 2024, the Company entered into an Agreement and Plan of Merger (as amended in August 2024 and February 2025, the “Business\nCombination Agreement”) with CSLM Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CSLM (“Merger Sub”),\nand Fusemachines USA, Inc. (formerly Fusemachines Inc.) (“Legacy Fusemachines”). On October 22, 2025, the Company consummated\nthe business combination whereby (a) CSLM merged with and into CSLM Holdings, Inc., a Delaware corporation and wholly owned subsidiary\nof CSLM at which time the separate existence of CSLM ceased and CSLM Holdings became the surviving corporation (“Pubco”)\nin accordance with the Delaware General Corporation Law (“DGCL”), the Cayman Islands Companies Act (As Revised) (the “Companies\nAct”), the Certificate of Merger, (the “Certificate of Merger”), and the amended and restated memorandum and articles\nof association of CSLM (the “Domestication”); (b) the merger (the “Merger”) of Merger Sub with and into\nLegacy Fusemachines, pursuant to which, at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”),\nthe separate corporate existence of Merger Sub ceased and Legacy Fusemachines became the surviving corporation and a wholly-owned subsidiary\nof Pubco, pursuant to the terms of the Business Combination Agreement and in accordance with the laws of the State of Delaware, as more\nfully described elsewhere in the Proxy Statement/Prospectus; and (c) the other transactions contemplated by the Business Combination\nAgreement and documents related thereto (such transactions, together with the Domestication and the Merger, the “Business Combination”).\nIn connection with the Business Combination, Pubco was renamed “Fusemachines Inc.” (the “Company”) and Fusemachines\nInc. was renamed “Fusemachines USA, Inc.” (“Legacy Fusemachines”).

Recent\nDevelopments

Restricted\nstock units (RSUs)

In\nJanuary 2026, 1,217,210 awards had been granted as Restricted stock units under the 2025 Plan,\nwhose impact has been considered on the Company’s unaudited condensed consolidated interim financial statements as of that date.\nRestricted stock units are valued on the date of grant and have no purchase price for the recipient. Restricted stock units typically\nvest over period ranging from one to four years corresponding to anniversaries of the grant date.

Forward\nPurchase Agreement

The\nCompany entered into an amendment on February 3, 2026 to the Prepaid Forward Purchase Agreement originally entered into on July 31, 2025\n(the “Forward Purchase Agreement” or “FPA”) with Meteora Capital Partners, LP, Meteora Select Trading Opportunities\nMaster, LP and Meteora Strategic Capital, LLC (collectively, the “Meteora Parties”). The amendment replaces the\nagreement’s previously fixed Termination Price of $12.00 per share with a weekly-reset Termination Price equal to the lower of\n(a) $12.00 and (b) the volume-weighted average price (“VWAP”) of the Shares for the immediately preceding week (as\nreported by Bloomberg L.P.), subject to Reset Price Floors applied on a tranche basis (50% of the Shares: $2.50 floor; 50% of the Shares:\n$5.00 floor). On August 2, 2026, the Company and the Meteora Parties entered into a Second Forward Purchase Agreement Confirmation\nAmendment, which deleted the Reset Price Floors in their entirety. As a result, the Termination Price now resets on the first scheduled\ntrading day of each calendar week to the lower of $12.00 and the prior week’s VWAP, with no floor. Following early terminations\neffective as of August 4, 2026 (793,566 Terminated Shares) and September 28, 2026 (38,564 Terminated Shares), in each case in connection\nwith sales of such shares by the Meteora Parties, the number of shares of Common Stock under the FPA was reduced from 891,930 to 59,800.\nThe effect of the February 3, 2026 amendment is reflected in the change in fair value of forward purchase derivative liabilities\n(refer to Note 3 - Fair value measurements of unaudited condensed consolidated interim financial statement).

Shortfall\nWarrant

On\nFebruary 3, 2026, the Company entered into an amendment to the Common Stock Purchase Warrant (the “Warrant Amendment”) originally\nissued to the Meteora Parties on October 22, 2025 in connection with the Business Combination (the “Shortfall Warrants”). Pursuant\nto the Warrant Amendment, the exercise price of the warrant was reduced from $12.00 to $10.00 per share of the Company’s Common\nStock, subject to customary adjustments as set forth in the warrant agreement. The Shortfall Warrants are exercisable for up to\n2,108,070 shares of Common Stock. As a result of the reduction in exercise price, the Company recognized a deemed dividend equal\nto the incremental fair value of the Shortfall Warrants resulting from the Warrant Amendment, measured as of February 3, 2026. The deemed\ndividend amounting to $84.1 thousand has been recorded as a charge to accumulated deficit with a corresponding credit to additional paid-in\ncapital and, while it does not affect net loss, is deducted from net income (loss) attributable to common stockholders for purposes of\ncomputing net loss per share. On August 2, 2026, the Company and the Meteora Parties entered into a Second Common Stock Purchase Warrant\nAmendment, pursuant to which the exercise price of the Shortfall Warrants was amended to equal the greater of (i) the Termination Price,\nas reset from time to time under the FPA, and (ii) $0.85 per share, subject to adjustment.

Litigation

On\nApril 10, 2026, the Company and a vendor under a Work Labor & Services agreement entered into a settlement agreement pursuant to\nwhich the Company agreed to pay a total of $32.9 thousand, including the $7.5 thousand previously paid in escrow account, in full and\nfinal settlement of all claims. The Company paid the agreed remaining amount to the vendor and subsequently on April 17, 2026, the vendor\nfiled a Satisfaction of Judgment with the Kings County Clerk, confirming full satisfaction and extinguishment of the judgment. Accordingly,\nthe Company has no remaining exposure related to this matter as of June 30, 2026.

On August 3, 2026, the Civil Court of the City of New York, Small\nClaims Part, issued a notice of claim against the Company in an action brought by Gary S. Kreissman of Group PRM relating to allegedly\nunpaid consulting fees. The claim sought approximately $9.6 thousand, including interest, plus court costs. Group PRM was issued shares\nof Common Stock pursuant to the Vendor SPA in consideration for its unpaid consulting fees, and the Company expects to settle the action\nbrought by Mr. Kreissman following the registration of the Vendor Shares.

Departure\nof Chief Financial Officer

On\nAugust 31, 2026, Christine Chambers, Chief Financial Officer of the Company, departed the Company to pursue other opportunities. Ms.\nChambers indicated to the Company that her separation was not a result of any disagreement with the Company, the Company’s board\nof directors, or the Company’s management on any matter relating to the Company’s operations, policies, or practices.

Appointment\nof Fractional Chief Financial Officer

The\nBoard of Directors appointed David R. Wells as the Company’s Fractional Chief Financial Officer, Principal Financial Officer,\nand Principal Accounting Officer effective as of August 30, 2026. In connection with Mr. Wells’s appointment, the Company\nentered into a Services Agreement, dated as of August 30, 2026, with Atlas Bookkeeping, LLC (“Atlas”), pursuant to\nwhich Atlas will provide chief financial officer services to the Company, with Mr. Wells serving as the individual designated by Atlas\nto perform such services. Pursuant to the Services Agreement, the Company will pay Atlas a monthly advisory fee of $14,500 for CFO advisory\nservices. In addition, the Company paid Atlas a one-time retainer of $10,000 upon execution of the Services Agreement. Additionally,\nthe Company will issue to Mr. Wells (or such other designee of Atlas) monthly grants of 10,000 restricted stock units under the Company’s\n2025 Omnibus Equity Incentive Plan, with each such grant fully vesting on the date of grant. Mr. Wells will serve as Fractional\nChief Financial Officer until the termination of the Services Agreement or his earlier replacement, resignation, or removal. Ms. Christine\nChambers, the Company’s former Chief Financial Officer, separated from the Company in August 2026.

Nasdaq\nListing Notices

On\nMarch 27, 2026, we received a deficiency notice from the Nasdaq Staff notifying us that for the last 30 consecutive business days our\nsecurities had not maintained the minimum Market Value of Listed Securities (“MVLS”) of $50,000,000 required by the continued\nlisting requirements of Nasdaq Listing Rule 5450(b)(2)(A). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have 180 calendar\ndays, or until September 23, 2026, to regain compliance with the MVLS requirement. If at any time before September 23, 2026, our MVLS\ncloses at or above $50,000,000 for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation that we have regained\ncompliance.

On\nJuly 24, 2026, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”)\nindicating that the Company was not in compliance with the minimum Market Value of Publicly Held Shares (“MVPHS”) requirement\nof $15,000,000 for continued listing on The Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(b)(2)(C). In accordance with\nNasdaq Listing Rule 5810(c)(3)(D), the Company has 180 calendar days, or until January 20, 2027, to regain compliance with the MVPHS\nrequirement.

On\nSeptember 18, 2026, the Company received an additional notification letter from Nasdaq notifying the Company that, because the closing\nbid price for the Company’s common stock had been below $1.00 per share for at least 30 consecutive business days, the Company\nwas not in compliance with the minimum bid price requirement for continued listing on The Nasdaq Global Market, as set forth in Nasdaq\nListing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the\nCompany has 180 calendar days from September 18, 2026, or until March 17, 2027, to regain compliance with the Minimum Bid Price Requirement.\nIf at any time before March 17, 2027, the closing bid price of the Company’s common stock closes at or above $1.00 per share for\na minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has regained compliance. The notification\nhas no immediate effect on the listing or trading of the Company’s securities on The Nasdaq Global Market. The Company intends\nto actively monitor the bid price for its common stock and evaluate available options to regain compliance within the compliance period.

On September 24, 2026, Nasdaq notified the Company\nthat, based upon the Company’s continued non-compliance with the MVLS requirement as of September 23, 2026, the Company’s\nsecurities were subject to delisting from Nasdaq unless the Company requests a hearing before the Nasdaq Hearings Panel (the “Panel”).\nOn October 1, 2026, the Company has requested a hearing before the Panel, which request will stay any further suspension or delisting action by Nasdaq\nat least until a hearing is held and any extension that the Panel may grant to the Company following the hearing has expired. Nasdaq granted our request for a hearing, which is scheduled for November\n3, 2026. There can\nbe no assurance that the Panel will grant the Company’s request for continued listing. Although the Company is considering all\navailable options to regain compliance with the MVLS Requirement, there can be no assurance that the Company will be able to do so.

August\n2026 Meteora Warrant and Convertible Note Issuance

On\nAugust 2, 2026, the Company entered into Securities Purchase Agreements with affiliates of Meteora Capital Partners, LP, Boothbay Absolute\nReturn Strategies, LP, Boothbay Diversified Alpha Master Fund LP, and Cinctive Global Master Fund Ltd. (collectively, the “August\n2026 Purchasers”), pursuant to which the Company issued (i) 18% Original Issue Discount Senior Unsecured Convertible Promissory\nNotes due February 12, 2027 in the aggregate original principal amount of $2,500,000, for an aggregate purchase price of $2,050,000,\nreflecting an 18% original issue discount, and (ii) Common Stock Purchase Warrants to purchase up to an aggregate of 2,050,000 shares\nof our common stock at a fixed exercise price of $4.20 per share. The Notes are convertible into shares of our common stock at\na fixed conversion price of $4.20 per share, with no ratchets, resets, or variable pricing. The warrants are exercisable at any time\nfrom the date of issuance until the fifth anniversary thereof and are exercisable solely for cash.

August\n2026 Qintess Strategic Share Issuance Agreement and Master License and Services Agreement

The\nCompany entered into a Strategic Share Issuance Agreement dated August 11, 2026 (the “Share Issuance Agreement”) with\nQintess Holding e Participações Ltda., a Brazilian limited liability company (“Qintess”). Concurrently, the\nCompany entered into a Master License and Services Agreement (the “MSA”) with Qintess, pursuant to which Qintess has agreed\nto purchase a minimum of $6,500,000 of the Company’s products and services (the “Committed Services Spend”) over a\nthree-year term. In connection with the MSA and subject to the achievement of the Committed Services Spend, under the Share Issuance\nAgreement the Company agreed to issue to Qintess up to an aggregate of 1,250,000 shares of Common Stock in three tranches: (i) 750,000\nshares within 10 business days of the effective date of the Share Issuance Agreement; (ii) 250,000 shares on the second anniversary of\nthe effective date, subject to Qintess having purchased at least $4,500,000 of the Committed Services Spend; and (iii) 250,000 shares\non the third anniversary of the effective date, subject to Qintess having purchased at least $6,500,000 of the Committed Services Spend.\nEach issuance is subject to Qintess not being in material breach of its obligations under the Share Issuance Agreement or the MSA. The\nCompany and Qintess agree to enter into a Registration Rights Agreement requiring the Company to file a resale registration statement\non Form S-1, or other appropriate form, within 60 days of closing covering the resale of such shares.

September\n2026 Vendor Share Issuance

On\nSeptember 10, 2026, the Company entered into a Securities Purchase Agreement with certain vendors and service providers of the Company,\npursuant to which the Company agreed to issue and sell to the purchasers an aggregate of up to 2,138,935 shares of Common Stock\nin satisfaction of an aggregate of approximately $1.31 million in accrued and unpaid fees and other amounts owed by the Company\nto such purchasers. The per share purchase price for the shares was $0.6103, calculated as the volume-weighted average price of the common\nstock on The Nasdaq Global Market for the five consecutive trading days ending on and including the trading day immediately preceding\nthe closing date. No cash consideration was received by the Company; the sole consideration for the shares was the satisfaction and cancellation\nof the accrued fees. The shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities\nAct and Rule 506(b) of Regulation D promulgated thereunder.

September 2026 Retail Volts Marketing Services\nAgreement

On September 21, 2026, the Company entered into the Retail Volts MSA with Retail Volts which supersedes and restates\na July 1, 2026 agreement between the parties. Retail Volts provides retail investor communications and marketing services through Gatewatch.AI\nsentiment monitoring across Reddit, X, Stocktwits and Discord and RetailVolts Media Agency, including investor subreddit management,\nomnichannel content, due diligence reports and analyst interviews, delivered in successive one-month service blocks. The Company placed\na purchase order for four service blocks, payable in advance at 30,000 shares per service block, for an aggregate of 120,000 shares.\nOn October 1, 2026, the Company issued the 120,000 shares of Common Stock to Retail Volts.

Financial\nPerformance

For\nthe three months ended June 30, 2026, and June 30, 2025, we generated revenues of $1.79 million and $2.03 million and reported a net\nloss of $2.85 million and $3.79 million, respectively. For the six months ended June 30, 2026, and June 30, 2025, we generated revenues\nof $3.67 million and $3.99 million and reported a net loss of $3.72 million and $4.04 million, respectively. Net cash used in operating\nactivities was $3.51 million for the six months ended June 30, 2026, and $0.15 million for the six months ended June 30, 2025. As noted\nin our unaudited condensed consolidated interim financial statements, we had an accumulated deficit of $38.95 million as of June 30,\n2026 and $35.15 million as of December 31, 2025.

Key\nFactors and Trends Affecting Results of Operations

We\nbelieve the following factors and trends may cause previously reported financial information not to be necessarily indicative of future\noperating results or future financial conditions:

●\nMarket Competition: The AI industry is highly competitive and is changing rapidly with numerous players vying for market share.\nWe attempt to mitigate this risk by continuously innovating and differentiating our offerings, as we have been delivering AI solutions\nfor well over a decade and have deep institutional capabilities to stand apart in terms of our ability to provide value to our customers\nand scale. Nevertheless, increasing competition could result in loss of business or pressure on margins for Fusemachines.

●\nTechnological Changes: Rapid technological advancements in AI can impact our offering, dilute our value proposition and require\nus to pivot in different directions. However, given our broad spectrum of AI solutions, coupled with our ability to produce AI talent,\nour deep investment in research and development, and a culture of continuous learning, we have been able to navigate these changes effectively.

●\nAdequate Capital Raise: On April 17, 2026, Fusemachines Inc. entered into a Common Stock Purchase Agreement (the “Purchase\nAgreement”) and a related Registration Rights Agreement with Roth Principal Investments, LLC (“Roth Principal Investments”),\nan affiliate of Roth Capital Partners, LLC. Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to\nsell to Roth Principal Investments up to $20,000,000 in aggregate gross proceeds of shares of common stock (par value $0.0001 per share)\nfrom time to time over a 36-month commitment period, at the Company’s sole discretion. Although we entered into the Purchase Agreement\nduring 2026, we expect that additional capital will be required to fund operations, support product development, expand selling and marketing\nactivities, and meet our working capital requirements.

We\nmay seek to raise additional funds through equity offerings, debt financings, strategic investments, or other capital sources. However,\nthere can be no assurance that sufficient funding will be available to us to fund our operating expenses and to further develop our business.\nUnless we achieve substantial profitability, we anticipate that we will likely need to raise additional capital to fund our operations\nwhile we implement and execute our business plan.

●\nAbility to manage costs and expenses while achieving revenue growth: Our results of operations may fluctuate, in part, because\nof the intensive nature of our sales efforts and the length and unpredictability of our sales cycle. As part of our sales efforts, we\ninvest considerable time and expense evaluating the specific organizational needs of our potential customers and educating these potential\ncustomers about the technical capabilities and value of our platforms and services. As part of our sales efforts, we also provide our\nplatforms to potential customers at no or low cost initially to them for evaluation purposes through short-term pilot deployments of\nour platforms, and there is no guarantee that we will be able to convert customers from these short-term pilot deployments to full revenue\ngenerating contracts.

●\nFinance costs: Historically, the Company issued certain convertible promissory notes to finance its operations, as further described\nin “Note 5 - Long-Term Debt” to the unaudited condensed consolidated interim financial statements. These instruments bore\ninterest and were subject to automatic conversion. In connection with the consummation of the Business Combination during 2025, the outstanding\nprincipal and accrued interest under these convertible notes were converted into equity securities in accordance with their contractual\nterms. As a result, no convertible promissory notes remained outstanding as of June 30, 2026 other than related party note payable related\nto Dolma Impact Fund I (“Dolma”) amounting to $300 thousand. Following the conversion, the Company no longer incurs interest\nexpense related to these instruments, which has reduced ongoing finance costs compared to prior periods.

Emerging\nGrowth Company and Smaller Reporting Company Status

Section\n102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to\ncomply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act\nregistration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934,\nas amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a Company can elect\nto opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such\nelection to opt out is irrevocable. While the Company is considered to be an emerging growth company, the Company has elected not to\nopt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application\ndates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time\nprivate companies adopt the new or revised standard.

We are also a “smaller\nreporting company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934. Even after we are no longer an emerging\ngrowth company, we may continue to be a smaller reporting company and take advantage of certain of the scaled disclosures available to\nsmaller reporting companies until the fiscal year following the determination that we no longer qualify as a smaller reporting company.\nWe will qualify as a smaller reporting company for so long as either (i) the market value of our common stock held by non-affiliates\nis less than $250 million, measured on the last business day of our most recently completed second fiscal quarter, or (ii) our annual\nrevenues are less than $100 million during our most recently completed fiscal year and the market value of our common stock held by non-affiliates\nis less than $700 million, measured on the last business day of our most recently completed second fiscal quarter.

Segment\nReporting

We\noperate as one operating segment with a focus on data engineering, artificial intelligence consulting, and technical services. Our Chief\nExecutive Officer (“CEO”), as our chief operating decision maker, manages and allocates resources to the operations of the\nCompany on a consolidated basis. This enables our CEO to assess the overall level of available resources and determine how best to deploy\nthese resources across service lines in line with our long-term company-wide strategic goals.

Results\nof Operations

The\nperiod-to-period comparisons of results of operations have been prepared using the historical periods included in our unaudited condensed\nconsolidated interim financial statements. The following discussion should be read in conjunction with the unaudited condensed consolidated\ninterim financial statements and related notes included elsewhere in this registration statement. We have derived this data from\nour unaudited condensed consolidated interim financial statements included elsewhere in this registration statement.

Three\nmonths ended June 30, 2026, compared to Three Months Ended June 30, 2025

	Three months ended June 30,
(In thousands)	2026			2025			$ Variance		% Variance

Revenue	$	1,794			$	2,034		$	(240	)	(12	)%
Cost of revenue ⁽¹⁾	$	(831	)		$	(828	)	$	(3	)	0	%
Gross profit	$	963			$	1,206		$	(243	)	(20	)%
						$\n			$\n
Operating expenses:						$\n			$\n
Selling\n and marketing ⁽¹⁾	$	383			$	333		$	50		15	%
General\n and administrative ⁽¹⁾	$	2,978			$	1,566		$	1,412		90	%
Research\n and development ⁽¹⁾	$	292			$	159		$	133		84	%
Total operating expenses	$	3,653			$	2,058		$	1,595		78	%
Loss from operations	$	(2,690	)		$	(852	)	$	(1,838	)	216	%

Interest expense	$	(52	)		$	(73	)	$	21		(29	)%
Loss on extinguishment of convertible notes payable	$	0			$	0		$	0
Gain on extinguishment of payable	$	8			$	0		$	8		100	%
Gain on change in fair value of convertible notes, and warrant liability	$	(10	)		$	(2,860	)	$	2,850		(100	)%
Gain on change in fair value of forward purchase derivative liability	$	20			$	0		$	20		100	%
Other (expense) income	$	(125	)		$	(1	)	$	(124	)	12,400	%

Total other expenses, net	$	(159	)		$	(2,934	)	$	2,775		(95	)%
Loss before income taxes	$	(2,849	)		$	(3,786	)	$	937		(25	)%
Provision for income tax	$	0			$	0		$	0
Net loss	$	(2,849	)		$	(3,786	)	$	937		(25	)%
Deemed dividend related to Shortfall Warrants modification	$	0			$	0		$	-
Net loss attributable to common stakeholders (i)	$	(2,849	)		$	(3,786	)	$	937

Weighted-average common shares outstanding - basic and diluted (ii)		28,965,344				7,270,964

Net loss per common share - basic and diluted (i)/(ii)	$	(0.10	)		$	(0.52	)

Comprehensive income (loss):
Net Loss	$	(2,849	)		$	(3,786	)	$	937		(25	)%
Change in foreign currency translation adjustment	$	0				0		$	0
Total comprehensive loss	$	(2,849	)		$	(3,786	)	$	937		(25	)%

(1)\n(a) Includes stock-based compensation expense as follows:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Three months ended June 30,
	2026		2025			$ Variance
General and administrative	$	37		$	40		$	3
Cost of revenue	$	5		$	4		$	(1	)
Selling and marketing	$	4		$	8		$	4
Research and development	$	6		$	1		$	(5	)
Total stock-based compensation expense	$	52		$	53		$	1

(b)\nIncludes restricted stock unit expense as follows:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Three months ended June 30,
	2026		2025			$ Variance
General and administrative	$	399		$	-		$	(399	)
Cost of revenue	$	6		$	-		$	(6	)
Selling and marketing	$	7		$	-		$	(7	)
Research and development	$	8		$	-		$	(8	)
Total restricted stock unit expense	$	420		$	-		$	(420	)

Six\nmonths ended June 30, 2026, compared to Six Months Ended June 30, 2025

	Six months ended June 30,
(In thousands)	2026			2025			$ Variance		% Variance

Revenue	$	3,673			$	3,987		$	(314	)	(8	)%
Cost of revenue ⁽¹⁾	$	(1,762	)		$	(1,692	)	$	(70	)	4	%
Gross profit	$	1,911			$	2,295		$	(384	)	(17	)%

Operating expenses:
Selling\n and marketing ⁽¹⁾	$	795			$	641		$	154		24	%
General\n and administrative ⁽¹⁾	$	6,251			$	3,499		$	2,752		79	%
Research\n and development ⁽¹⁾	$	590			$	324		$	266		82	%
Total operating expenses	$	7,636			$	4,464		$	3,172		71	%
Loss from operations	$	(5,725	)		$	(2,169	)	$	(3,556	)	164	%

Other (expense) income:
Interest expense	$	(106	)		$	(139	)	$	33		(24	)%
Loss on extinguishment of convertible notes payable	$	0			$	(391	)	$	391		(100	)%
Gain on extinguishment of payable	$	507			$	0		$	507		100	%
Gain on change in fair value of convertible notes, and warrant liability		49				(1,344	)		1,393		(104	)%
Gain on change in fair value of Forward Purchase derivative liability	$	1,608			$	0		$	1,608		100	%
Other (expense) income	$	(50	)		$	4		$	(54	)	(1,350	)%

Total other (expense)/income, net	$	2,008			$	(1,870	)	$	3,878		(207	)%
Loss before income taxes	$	(3,717	)		$	(4,039	)	$	322		(8	)%
Provision for income tax	$	(4	)		$	0		$	(4	)
Net loss	$	(3,721	)		$	(4,039	)	$	318		(8	)%
Deemed dividend related to Shortfall Warrants modification	$	(84	)		$	0		$	(84	)	100	%
Net loss attributable to common stakeholders (i)	$	(3,805	)		$	(4,039	)	$	234		(6	)%

Weighted-average common shares outstanding - basic and diluted (ii)		28,952,133				7,270,964

Net loss per common share - basic and diluted (i)/(ii)	$	(0.13	)		$	(0.56	)

Comprehensive income (loss):
Net Loss	$	(3,721	)		$	(4,039	)	$	318		(8	)%
Change in foreign currency translation adjustment	$	9			$	0		$	9		100	%
Total comprehensive loss	$	(3,712	)		$	(4,039	)	$	327		(8	)%

(1)\n(a) Includes stock-based compensation expense as follows:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Six months ended June 30,
	2026		2025			$ Variance
General and administrative	$	74		$	78		$	4
Cost of revenue	$	10		$	10		$	0
Selling and marketing	$	7		$	19		$	12
Research and development	$	16		$	11		$	(5	)
Total stock-based compensation expense	$	107		$	118		$	11

(b)\nIncludes restricted stock unit expense as follows:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Six months ended June 30,
	2026		2025			$ Variance
General and administrative	$	741		$	-		$	(741	)
Cost of revenue	$	8		$	-		$	(8	)
Selling and marketing	$	10		$	-		$	(10	)
Research and development	$	12		$	-		$	(12	)
Total restricted stock unit expense	$	771		$	-		$	(771	)

For\nRevenue recognition policy refer note details under “Critical accounting policies and estimates” section.

We\nprovide services to customers worldwide, with the majority of revenues being derived from contracts with customers located within the\nUnited States. The table below presents the breakdown of our revenues, based on the customer’s location (in thousands).

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Three months ended June 30,		Six months ended June 30,
	2026		2025			2026		2025
Customer Locations
United States	$	1,701		$	1,842		$	3,525	$	3,723
Rest of the world	$	93		$	192		$	148	$	264
Total revenue	$	1,794		$	2,034		$	3,673	$	3,987

The\ntable below presents the breakdown of our revenues, based on the type of services (in thousands).

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Three months ended June 30,		Six months ended June 30,
	2026		2025			2026		2025
Service type
AI Solutions (Product and Services) *	$	1,784		$	1,913		$	3,656	$	3,866
AI Education Services	$	10		$	121		$	17	$	121
Total revenue	$	1,794		$	2,034		$	3,673	$	3,987

*AI\nSolutions (Products and Services) includes both software product revenues and related services. Product revenue represents an insignificant\nportion of total revenue for the periods presented and, accordingly, has not been separately disclosed.

Revenue\nfor the three months ended June 30, 2026, reduced to $ 1.79 million as compared to $ 2.03 million for the three months ended June 30,\n2025, primarily due to lower revenue from AI Solutions (Products and Services) of $0.13 million and AI Education Service of $0.11 million.\nOverall revenue decreased by $0.24 million during the period. The decrease is attributable to net decrease in total clients for the period.

Revenue\nfor the six months ended June 30, 2026, reduced to $ 3.67 million as compared to $ 3.99 million for the six months ended June 30, 2025,\nprimarily due to lower revenue from AI Solutions (Products and Services) of $0.21 million and AI Education Service of $0.10 million.\nOverall revenue decreased by $0.31 million during the period. The decrease is attributable to net decrease in total clients for the period.

Cost\nof revenue - Cost of revenue primarily consists of consulting and payroll expenses that are assigned to building AI solutions. Cost\nof revenue increased by $0.003 million, to $0.83 million for the three months ended June 30, 2026, compared to $0.83 million for the\nthree months ended June 30, 2025. The increase was primarily driven by annual salary increments.

Cost\nof revenue increased by $0.07 million, to $1.76 million for the six months ended June 30, 2026, compared to $1.69 million for the six\nmonths ended June 30, 2025. The increase was primarily driven by annual salary increments.

Gross\nprofit - Gross profit is calculated as revenue less total cost of revenue. Our gross profit in future periods will depend on a variety\nof factors, including market conditions that may impact our pricing, sales mix changes among our service agreements, and product mix\nchanges between established services and new services.

Gross\nprofit decreased by $0.24 million, to $0.96 million for the three months ended June 30, 2026, compared to $1.21 million for the three\nmonths ended June 30, 2025. Gross profit decreased by $0.39 million, to $1.91 million for the six months ended June 30, 2026, compared\nto $2.30 million for the six months ended June 30, 2025.

Selling\nand marketing expenses - Selling and marketing expenses represent spending associated with promoting and selling of our services.\nThese expenses comprise of personnel costs, travel and accommodation expenses, as well as advertising and consulting costs related to\nsuch activities.

Selling\nand marketing expenses increased by $0.05 million, from $0.33 million for the three months ended June 30, 2025, to $0.38 million for\nthe three months ended June 30, 2026. The increase was primarily attributable to higher consulting fees and advertising expenses.

Selling\nand marketing expenses increased by $0.15 million, from $0.64 million for the six months ended June 30, 2025, to $0.79 million\nfor the six months ended June 30, 2026. The increase was primarily attributable to higher consulting fees and advertising expenses.

General\nand administrative expenses - General and administrative expenses consist of expenses associated with general and administrative\nfunctions of the business such as the costs of salaries, IT infrastructure, bad debt, travel, legal and accounting services, insurance,\nrent, software and tools, meals, other professional services activities, and certain non-income taxes.

General\nand administrative expenses increased by $1.41 million, from $1.57 million for the three months ended June 30, 2025, to $2.98 million\nfor the three months ended June 30, 2026. The increase was primarily driven by a rise in stock-based compensation expense of $0.40 million\nattributable to the issuance of restricted stock units (“RSUs”) during the current period, which did not exist in the prior\nyear quarter. Further, the Professional services costs increased by $0.47 million, driven by an increment in audit and consulting fees.\nIn 2025, $0.15 million of the professional service cost was capitalized as IPO transaction cost in 2025 whereas it is NIL in 2026. In\naddition, other general expenses, payroll increased by $0.26 million due to annual salary increments, insurance policy by $0.11 million,\nother operating expenses by $0.10 million and BOD’s compensation by $0.07 million.

General\nand administrative expenses increased by $2.75 million, from $3.5 million for the six months ended June 30, 2025, to $6.25\nmillion for the six months ended June 30, 2026. The increase was primarily driven by a rise in stock-based compensation expense of $0.74\nmillion attributable to the issuance of restricted stock units (“RSUs”) during the current period, which did not exist in\nthe prior year quarter. Further, the Professional services costs increased by $0.97 million, driven by an increment in audit and consulting\nfees. In 2025, $0.14 million of the professional service cost was capitalized as IPO transaction cost whereas as it is NIL in 2026. In\naddition, other general expenses, payroll increased by $0.55 million due to annual salary increments, insurance policy by $0.21 million,\nother operating expenses by $0.15 million and BOD’s compensation by $0.13 million.

Research\nand development expenses - Research and development expenses include costs associated with software product development, testing, quality\nassurance, documentation, enhancements and upgrades for existing customers under maintenance.

Research\nand development expenses for the three months ended June 30, 2026, increased by $0.13 million to $0.29 million as compared to\n$0.16 million for the three months ended June 30, 2025. The increase was primarily due to increase in payroll expenses.

Research\nand development expenses for the six months ended June 30, 2026, increased by $0.27 million to $0.59 million as compared to $0.32 million\nfor the six months ended June 30, 2025. The increase was primarily due to increase in payroll expenses.

Interest\nexpense - Interest expense represents interest payable on our borrowings, as well as debt financing and equity issuance costs that are\namortized to interest expense.

Interest\nexpense decreased by $0.02 million to $0.05 million for the three months ended June 30, 2026, from $0.07 million for the three months\nended June 30, 2025.

Interest\nexpense decreased by $0.03 million to $0.11 million for the six months ended June 30, 2026, from $0.14 million for the six months ended\nJune 30, 2025. The decrease for both three months ended and six months ended June 30, 2026 was primarily due to a lower outstanding balance\nof promissory notes, as pursuant of the consummation of the Business Combination on October 22, 2025, substantially all Fusemachines\nconvertible notes that were issued and outstanding immediately prior to the Closing were converted into shares of Legacy Fusemachines\ncommon stock in accordance with the respective convertible note agreements. As a result of the conversions and exchanges, no convertible\nnotes or related-party notes payable remained outstanding as of June 30, 2026 other than related party note payable related to Dolma\namounting to $300 thousand.

Loss\non extinguishment of debt - Loss on extinguishment of debt for the three months ended June 30, 2026 and 2025 was Nil. Loss on extinguishment\nof debt for the six months ended June 30, 2026 was Nil as compared to $0.39 million for the six months ended June 30, 2025, represents\n$0.1 million related to April 2024 Convertible Note, $0.1 million related to June 2024 Convertible Note and $0.2 million related to September\n2024 Convertible Notes. Loss on extinguishment of debt are related to modification of the aforementioned loans on account of change in\nconversion price from $4.94 to $3.15 was accounted for under the substantial premium model in accordance with ASC 470, Debt where the\nexcess above the fair value of these notes was recorded as loss on extinguishment of debt.

Gain\non extinguishment of payable - During the three months ended June 30, 2026 , gain on extinguishment of payable of $0.01 million and\nthree months ended June 30, 2025 gain on extinguishment of payable was NIL. During the six months ended June 30, 2026, the Company recognized\na gain on extinguishment of payable of $0.51 million, with no corresponding amount recorded in the six months ended June 30, 2025.

The\ndifference between the carrying value of the original obligation recorded on the Company’s books and the agreed settlement amount\nwas recognized as a gain on extinguishment of payable in the current quarter in accordance with applicable accounting guidance.

Gain/(Loss)\non change in fair value - Gain/(Loss) on change in Fair value represents the changes in fair value related to our convertible notes,\nwarrant liability and forward purchase derivative liability.

Gain\non change in fair value for the three months ended June 30, 2026 was $0.01 million as compared to loss of $2.86 million for the three\nmonths ended June 30, 2025. Out of the aforementioned gain for the three months ended June 30, 2026, gain of $0.02 million related to\nfair value of forward purchase derivative liability and remaining loss in fair value of $0.01 million related to common stock warrant\nliability. This loss in fair value of common stock warrant liability was primarily driven by changes in key valuation inputs,\nincluding the Company’s relatively low share price of $1.05, elevated equity volatility of 65.0%, and the remaining contractual\nterm of approximately 7.16 years. These factors increased the probability-weighted value of the potential share settlement under the\narrangement. In addition, gain of approximately $0.02 million in the fair value of forward purchase derivative liability is driven by\nchanges in key valuation inputs, including the Company’s relatively Volume weighted average price (VWAP) of $1.06, elevated equity\nvolatility of 65%, and the remaining contractual term of approximately 2.32 years. These factors increased the probability-weighted value\nof the potential share settlement under the arrangement. Further impacted by adjustments for counterparty credit risk of 6.6%.

Gain\non change in fair value for the six months ended June 30, 2026 was $1.66 million as compared to loss of $1.34 million for the\nsix months ended June 30, 2025. Out of the aforementioned gain for the six months ended June 30, 2026, gain of $1.61 million related\nto fair value of forward purchase derivative liability and remaining gain in fair value of $0.05 million related to common stock warrant\nliability.

In\nconnection with the consummation of the Business Combination on October 22, 2025, substantially all outstanding convertible notes were\neither converted into equity or repaid during the year ended December 31, 2025. Accordingly, no fair value changes were recognized during\nthe three months ended June 30, 2026.

Upon\nconversion, the carrying amount of the convertible debt is reclassified to equity, and no gain or loss is recognized in earnings, as\nthe conversion is executed in accordance with the original terms of the instruments The Company’s management performed a quantitative\nassessment of Gain/(Loss) on change in fair value for prior period, and in doing so, considered an independent fair valuation report\nobtained by management.

For\nthe quarter ended June 30, 2025, loss in fair value of $2.86 million which primarily represents related to change in fair value of convertible\nnotes. We qualified for and elected to account for the convertible notes under the fair value option and, in doing so, bypassed the analysis\nof potential embedded derivative features. As a result, the convertible notes were recorded at fair value upon issuance and recorded\nas gain and loss on change in fair value in the unaudited condensed consolidated interim statements of operations and comprehensive loss,\nfor the three months ended June 30, 2025.

Other\n(expense) income - Other (expense) income consists of our proportional share of earnings and losses related to foreign exchange, and\nother miscellaneous expenses and income.

Other\nloss for the three months ended June 30, 2026, was $125 thousand, compared to other loss of $1 thousand for the three months ended June\n30, 2025, representing other loss primarily related to foreign exchange.

Other\nloss for the six months ended June 30, 2026, was $50 thousand, compared to other income of $4 thousand for the six months ended\nJune 30, 2025, representing other loss primarily related to foreign exchange.

Provision\nfor income tax - Provision for income tax is accounted for using the asset and liability method, which requires the recognition of deferred\ntax assets and liabilities for the expected future tax consequences of events that have been recognized in our unaudited condensed consolidated\ninterim financial statements or tax returns. In addition, deferred tax assets are recorded for all future benefits including, but not\nlimited to, net operating losses, research and development credit carryforwards, and basis differences with certain assets and liabilities.

Provision\nfor income tax is Nil thousand for the three months ended June 30, 2026 and Nil for the three months ended June 30, 2025.

Provision\nfor income tax is $4 thousand for the six months ended June 30, 2026 and Nil for the six months ended June 30, 2025.

Net\nloss - Net loss for the three months ended June 30, 2026 was $2.85 million, compared to a net loss of $3.79 million for three months\nended June 30, 2025. The change was the result of increase in selling and marketing expenses, general and administrative, research and\ndevelopment in the current period. These unfavorable items were partially offset by a gain on extinguishment of payable, lower interest\nexpense, combined with a gain on the change in fair value of the forward purchase derivative liability and the absence of a loss on extinguishment\nof convertible notes payable that was recorded in the prior year period.

Net\nloss for the six months ended June 30, 2026 was $3.72 million, compared to a net loss of $4.04 million for six months ended June 30,\n2025. The change was the result of increase in selling and marketing expenses, general and administrative, research and development in\nthe current period. These unfavorable items were partially offset by a gain on extinguishment of payable, lower interest expense, combined\nwith a gain on the change in fair value of the forward purchase derivative liability and the absence of a loss on extinguishment of convertible\nnotes payable that was recorded in the prior year period.

Non-GAAP\nFinancial Measures

Our\nunaudited condensed consolidated interim financial statements are prepared in accordance with accounting principles generally accepted\nin the United States (“GAAP”). We report certain key financial measures that are not required by, or presented in accordance\nwith GAAP, and these non-GAAP financial measures should not be considered as an alternative to the information prepared in accordance\nwith GAAP. In addition, the Company’s management reviews performance by focusing on several key performance indicators not prepared\nin conformity with GAAP. We believe these non-GAAP financial measures provide a useful measure of our operating results, a meaningful\ncomparison with historical results and with the results of other companies, and insight into our ongoing operating performance. Further,\nwe utilize these measures, in addition to GAAP measures, when evaluating and comparing our operating performance against internal financial\nforecasts and budgets.

However,\nthere are several limitations related to the use of non-GAAP financial measures because it excludes significant expenses or credits that\nare required by GAAP to be included in our financial statements. In addition, other companies may calculate non-GAAP measures differently\nor may use other measures to calculate their financial performance. Therefore, non-GAAP measures may not be directly comparable to similarly\ntitled measures of other companies.

The\nCompany defines adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) as net loss before interest\nexpense, income tax expense (benefit), depreciation and amortization, as adjusted to exclude stock-based compensation, fair value changes\nand gain or loss on extinguishment of debt and payable.

Non-GAAP\nReconciliations

We\nuse the non-GAAP measures EBITDA and adjusted EBITDA to help us evaluate our business, identify trends affecting our business, formulate\nbusiness plans and financial projections, and make strategic decisions. Also, we exclude depreciation and amortization, stock-based compensation\nand fair value changes, which are non-cash expenses, from these non-GAAP financial measures because we believe that excluding these items\nprovides meaningful supplemental information regarding operational performance and provides useful information to investors and others\nin understanding and evaluating our operating results in the same manner as our management team.

Our\ndefinitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies\nmay not publish these or similar metrics. Further, these metrics have certain limitations, as they do not include the impact of certain\nexpenses that are reflected in our unaudited condensed consolidated interim statements of operations and comprehensive loss. Thus, our\nnon-GAAP EBITDA and adjusted EBITDA should be considered in addition to, not as a substitute for, or in isolation from, measures prepared\nin accordance with GAAP.

We\ncompensate for these limitations by providing reconciliations of these non-GAAP measures to the most comparable GAAP measures. We encourage\ninvestors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single\nfinancial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

The reconciliation of\nour net loss to EBITDA and Adjusted EBITDA for the three months ended June 30, 2026, and June 30, 2025, as well as for six months ended\nJune 30, 2026, and June 30, 2025, are as follows:

	Three months ended June 30,			Six months ended June 30,
(In thousands)	2026			2025			2026		2025
Net loss	$	(2,849	)		$	(3,786	)	$	(3,721	)	$	(4,039	)
Interest expense	$	52			$	73		$	106		$	139
Provision for tax	$	0			$	0		$	4		$	0
Depreciation and amortization	$	61			$	47		$	117		$	92
EBITDA	$	(2,736	)		$	(3,666	)	$	(3,494	)	$	(3,808	)
Stock-based compensation	$	52			$	53		$	107		$	118
Restricted stock unit expense	$	420			$	-		$	771		$	0
Fair value adjustments ⁽¹⁾	$	(10	)		$	2,860		$	(1,657	)	$	1,344
Extinguishment of payable	$	(8	)		$	0		$	(507	)	$	0
Extinguishment of debt	$	-			$	-		$	-		$	391
Adjusted EBITDA	$	(2,282	)		$	(753	)	$	(4,780	)	$	(1,955	)

(1)\nRepresents change in fair value of convertible notes, warrant liability and forward purchase derivative liability.

Year\nended December 31, 2025, Compared To Year Ended December 31, 2024

	Year ended December 31,
(In thousands)	2025			2024			$Variance		% Variance

Revenue	$	7,714			$	8,811		$	(1,097	)	(12	)%
Cost of revenue ⁽¹⁾		(3,407	)			(3,976	)		569		(14	)%
Gross profit		4,307				4,835			(528	)	(11	)%

Operating expenses:
Selling and marketing ⁽¹⁾		1,365				1,964			(599	)	(30	)%
General and administrative ⁽¹⁾		8,176				10,333			(2,157	)	(21	)%
Research and development ⁽¹⁾		720				732			(12	)	(2	)%
Total operating expenses		10,261				13,029			(2,768	)	(21	)%
Loss from operations		(5,954	)			(8,194	)		2,240		27	%

Other (expense) income:
Interest expense		(268	)			(234	)		(34	)	15	%
Loss on extinguishment of convertible notes payable / notes payable		(391	)			(601	)		210		(35	)%
Loss on extinguishment of payable		-				(70	)		70		100	%
Gain/(Loss) on change in fair value of convertible notes, and warrant liability		6,544				(6,104	)		12,648		(207	)%
Gain/(Loss) on change in fair value of forward purchase derivative liability		(1,076	)			-			(1,076	)	(100	)%
Other (expense) income		220				(148	)		368		(249	)%

Total other expense, net		5,029				(7,157	)		12,186		(170	)%
Loss before income taxes		(925	)			(15,351	)		14,426		(94	)%
Provision for income tax		(3	)			(31	)		28		90	%
Equity in earnings of investee, net of income tax position of $0 and $0, respectively		-				(1	)		1		(100	)%
Net loss	$	(928	)		$	(15,383	)	$	14,455		94	%

Other comprehensive income (loss):
Change in foreign currency translation adjustment	$	10			$	57		$	(47	)	(82	)%
Total comprehensive loss	$	(918	)		$	(15,326	)	$	14,408		(94	)%

Net loss per share - basic and diluted	$	(0.08	)		$	(2.21	)	$	2.13		96	%
Weighted-average common shares outstanding - basic and diluted		11,525,384				6,958,570

(1)\nIncludes stock-based compensation expense as follows:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Year ended December 31,
	2025		2024			$Variance
General and administrative	$	154		$	723		$	(569	)
Cost of revenue	$	21		$	44		$	(23	)
Selling and marketing	$	38		$	170		$	(132	)
Research and development	$	18		$	130		$	(112	)
Total stock-based compensation expense	$	231		$	1,067		$	(836	)

For\nRevenue recognition policy refer note details under “Critical accounting policies and estimates” section

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Year Ended December 31,
	2025		2024
Customer locations
United States	$	7,342		$	8,544
Rest of the world	$	372		$	267
Total revenue	$	7,714		$	8,811

The\ntable below presents the breakdown of our revenues, based on the type of services (in thousands).

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Year Ended December 31,
	2025		2024
Service type
AI Solutions (Product and Services) *	$	7,581		$	8,811
AI Education Services	$	133			-
Total revenue	$	7,714		$	8,811

Revenue\nfor the year ended December 31, 2025, reduced to $7.71 million as compared to $8.81 million for the year ended December 31, 2024, due\nto AI Solutions (Products and Services). Overall revenue decreased by $1.10 million mainly due to termination of 12 customers and reduction\nin contract size of 16 customers which resulted in loss of revenue by $2.99 million. This decrease was partially offset by 11 new customer\ncontracts and increase in contract size of 9 customers adding $1.91 million of revenue.

Cost\nof revenue – Cost of revenue primarily consists of consulting and payroll expenses that are assigned to building AI solutions.

Cost\nof revenue decreased by $0.57 million to $3.40 million for the year ended December 31, 2025, compared to $3.97 million for the year ended\nDecember 31, 2024. The decrease was primarily driven by lower consultancy expenses of $0.22 million and a reduction in payroll expenses\nof $0.37 million. The decline in consultancy costs was mainly attributable to a decrease in the average cost per consultant which is\n$50K in year 2024 and $48K in year 2025, in the United States (US) entity, while the average headcount of billable consultants also decreases\nfrom 39 in year 2024 to 35 in year 2025. In the Nepal entity, the decrease was due to the offboarding of two consultants who were engaged\nin client projects during 2024 but not in 2025. The reduction in payroll expenses was driven by a combination of factors. In the US entity,\nthe average cost per employee decreased slightly from $139k in year 2024 to $130k in year 2025, with the average headcount remaining\nconstant at 8. In contrast, in the Nepal entity, the decrease was mainly due to a decline in average headcount from 327 in 2024 to 270\nin 2025 as there was reduction in billable resource and employee resignation, even though the average cost per consultant increased in\n2025. Additionally, there was a $0.02 million decrease in cost of revenue related to stock-based compensation, primarily due to the completion\nof vesting for previously granted awards.

Gross\nprofit – Gross profit is calculated as revenue less total cost of revenue. Our gross profit in future periods will depend on\na variety of factors, including market conditions that may impact our pricing, sales mix changes among our service agreements, and product\nmix changes between established services and new services.

Gross\nprofit decreased by $0.53 million to $4.31 million for the year ended December 31, 2025, compared to $4.84 million for the year ended\nDecember 31, 2024, as a result of lower sales.

Selling\nand marketing expenses – Selling and marketing expenses represent spending associated with promoting and selling of our services.\nThese expenses comprise of personnel costs, travel and accommodation expenses, as well as advertising and consulting costs related to\nsuch activities.

Selling\nand marketing expenses decreased by $0.59 million, from $1.96 million for the year ended December 31, 2024, to $1.37 million for the\nyear ended December 31, 2025. The decrease was primarily attributable to lower commission expenses, consulting fees, payroll costs, and\nstock-based compensation.

Commission\nexpenses decreased by $0.06 million, as only few business deal brought on by sales team in current year 2025, unlike in the prior year.\nConsulting fees for the selling and marketing team decreased by $0.06 million, mainly because consultants worked fewer hours in 2025\ncompared to 2024, and one consultant was transitioned to payroll.

Payroll\nexpenses decreased by $0.11 million, primarily due to a reduction in headcount as three employees resigned and one shifted to consultant\nin, in the United States (US) entity, additionally the average costs has slightly decreased $142 thousand in year 2024 to $131 thousand\nin year 2025.

In\naddition, stock-based compensation expenses decreased by $0.13 million, due to the completion of vesting for previously granted awards.

General\nand administrative expenses – General and administrative expenses consist of expenses associated with general and administrative\nfunctions of the business such as the costs of salaries, IT infrastructure, bad debt, travel, legal and accounting services, insurance,\nrent, software and tools, meals, other professional services activities, and certain non-income taxes.

General\nand administrative expenses decreased by $2.15 million, from $10.33 million for the year ended December 31, 2024, to $8.18 million for\nthe year ended December 31, 2025. The decrease was primarily driven by lower professional charges, stock-based compensation, and bad\ndebt expenses, partially offset by higher payroll and consultancy expenses.

Professional\ncharges decreased by approximately $2.5 million compared to the prior year, primarily driven by management’s conscious efforts\nto optimize and reduce operational costs, resulting in lower professional expenses during the period. Further Stock-based compensation\nexpense declined by $0.57 million, primarily due to the completion of vesting for previously granted awards. Additionally, bad debt expense\nhas been decreased by $0.48 million during the period as allowances were provided for the long outstanding Accounts receivables in the\nprevious year. Further, there has been decrease in consultancy expense for approximately $0.30 million as in US entity there has been\ndecrease in headcount from 16 in year 2024 to 10 in year 2025 and there has also been decrease in IT infrastructure expense due to significant\ndecrease of utilization for Amazon Web, Google Suite and termination of Meta Workspace.

These\nreductions were partially offset by an increase in payroll expenses of $0.49 million and payout of incentive linked to business combination\namounting to $1.0 million. The payroll expense has been increasing as in US entity the average head count has increased from 9 in year\n2024 to 11 in year 2025 and there is an increment of insurance cost due to increase in premium amount of Director and officer.

Research\nand development expenses – Research and development expenses include costs associated with software product development, testing,\nquality assurance, documentation, enhancements and upgrades for existing customers under maintenance.

Research\nand development expenses for the year ended December 31, 2025, decreased by $0.01 million to $0.72 million as compared to $0.73 million\nfor the year ended December 31, 2024. The decrease was primarily due to stock-based compensation of $0.11 million due to the completion\nof vesting for previously granted awards. This was partially offset by increases in payroll expenses of $0.08 million as the headcount\nincreased from 36 in year 2024 to 44 in year 2025.

Interest\nexpense – Interest expense represents interest payable on our borrowings including the debt discount that is being amortized,\nas well as debt financing and equity issuance costs that are amortized to interest expense.

Interest\nexpense increased by $0.03 million to $0.27 million for the year ended December 31, 2025, from $0.23 million for the year ended December\n31, 2024. The increase was primarily due to a higher outstanding balance of promissory notes reflecting the issuance of a new promissory\nnotes between the periods. Further Pursuant consummation of the Business Combination on October 22, 2025, substantially all Fusemachines\nconvertible notes that were issued and outstanding immediately prior to the Closing were converted into shares of Legacy Fusemachines\ncommon stock in accordance with the respective convertible note agreements. As a result of the conversions and exchanges, no convertible\nnotes or related-party notes payable remained outstanding as of December 31, 2025 other than related party note payable related to Dolma\namounting $300 thousand.

Loss\non extinguishment of debt – Loss on extinguishment of debt for the year ended December 31, 2025 represents $0.1 million related\nto April 2024 Convertible Note, $0.1 million related to June 2024 Convertible Note and $0.2 million related to September 2024 Convertible\nNotes. Loss on extinguishment of debt are related to modification of the aforementioned loans on account of change in conversion price\nfrom $4.94 to $3.15 was accounted for under the substantial premium model in accordance with ASC 470, Debt where the excess above the\nfair value of these notes was recorded as loss on extinguishment of debt.

Loss\non extinguishment of debt for year ended December 31, 2024 represents the repayment of the 2023 Notes Agreement. In August 2023, we entered\ninto a loan and security agreement with a lender (the “2023 Notes Agreement”) that will make available to us the loans in\nan aggregate principal amount of up to $4.0 million in three separate tranches. In January 2024, we repaid the entire aggregate outstanding\nprincipal on the 2023 Notes Payable along with an additional payment for interest, prepayment fees, and lender fees. These payments resulted\nin a loss, recorded in loss on extinguishment of debt.

Loss\non extinguishment of debt for the year ended December 31, 2025, was $0.39 million as compared to $0.60 million for the year ended December\n31, 2024.

Loss\non change in fair value – Loss on change in value represents the changes in fair value related to our convertible notes, warrant\nliability and forward purchase derivative liability.

Gain/(Loss)\non change in fair value for the year ended December 31, 2025 was a gain of $5.47 million as compared to ($6.10 million) for the year\nended December 31, 2024. We qualified for and elected to account for the convertible notes under the fair value option and, in doing\nso, bypassed the analysis of potential embedded derivative features. As a result, the convertible notes were recorded at fair value upon\nissuance and recorded as gain and loss on change in fair value in the consolidated statements of operations and comprehensive loss, for\nthe year ended December 31, 2025 and December 31, 2024, respectively.

In\nconnection with the consummation of the Business Combination on October 22, 2025, substantially all outstanding convertible notes were\neither converted into equity or repaid, and therefore fair value changes were recognized only up to the closing date of the Business\nCombination. During this period, the Company recorded a net increase of approximately $5.72 million in gains related to changes in the\nfair value of the convertible notes. The increase in fair value promissory note was primarily driven by a decline in the estimated market\nprice of the Company’s underlying equity, which decreased from approximately $7.48 per share as of December 31, 2024 to approximately\n$3.40 per share immediately prior to the Business Combination, resulting in a corresponding reduction in the fair value of the convertible\ninstruments.

In\naddition, the Company recorded an increase of approximately $1.08 million in the fair value of forward purchase derivative liability.\nThis increase was primarily driven by changes in key valuation inputs, including the Company’s relatively low share price of $1.65,\nelevated equity volatility of 65.0%, and the remaining contractual term of approximately 2.81 years. These factors increased the probability-weighted\nvalue of the potential share settlement under the arrangement. Further, the fair value was further impacted by adjustments for counterparty\ncredit risk of 6.3%. The remaining changes in fair value during the period primarily relate to the re-measurement of the warrant liability.

Other\n(expense) income – Other (expense) income consists of our proportional share of earnings and losses related to our equity method\ninvestment as well as impairment loss, penalties and settlements, and other miscellaneous expenses.

Other\nincome for the year ended December 31, 2025, was $0.22 million, compared to other expenses of $(0.15) million for the year ended December\n31, 2024, representing an improvement of $0.37 million. The improvement was primarily attributable one time impairment loss booked last\nyear amounting $0.12 million and balance pertains to forex exchange gain and other income as compared to last year

Provision\nfor income tax – Provision for income tax is accounted for using the asset and liability method, which requires the recognition\nof deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated\nfinancial statements or tax returns. In addition, deferred tax assets are recorded for all future benefits including, but not limited\nto, net operating losses, research and development credit carryforwards, and basis differences with certain assets and liabilities.

Provision\nfor income tax is $0.003 million for the for the year ended December 31, 2025 and $0.03 million for year ended December 31,2024.

Net\nloss – Net loss for the year ended December 31, 2025, was $0.93 million, compared to a net loss of $15.38 million for December\n31, 2024. The change was the result of increase in profit on change in fair value of convertible notes, warrant liability and forward\npurchase derivative liability, decrease in General and administrative and Selling and Marketing expense and due to decrease in stock-based\ncompensation due to the completion of vesting for previously granted awards, payroll expenses and decrease in Loss on extinguishment\nof debt.

The\nreconciliation of our net loss to EBITDA and Adjusted EBITDA for the year ended December 31, 2025, and December 31, 2024, is as follows:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Year Ended December 31,
(In thousands)	2025			2024
Net loss	$	(928	)		$	(15,383	)
Interest expense		268				234
Provision for tax		3				31
Depreciation and amortization		189				179
EBITDA	$	(468	)		$	(14,939	)
Stock-based compensation		231				1,067
Fair value adjustments ⁽¹⁾		(5,468	)			6,104
Extinguishment of payable		-				70
Extinguishment of debt		391				601
Adjusted EBITDA	$	(5,314	)		$	(7,097	)

(1)\nRepresents change in fair value of convertible notes, warrant liability and forward purchase derivative liability.

Liquidity\nand Capital Resources

Liquidity\nis the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate\non an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable\nand accounts payable and capital expenditure.

As of June 30, 2026, we had cash\nof approximately $0.37 million and a net working capital deficit of approximately $16.75 million. As of June 30, 2026,\nwe had an accumulated deficit of $38.95 million and a net loss of $3.72 million for the six months ended June 30, 2026.

As of December 31, 2025, we had\ncash of approximately $4.22 million and a net working capital deficit of approximately $13.30 million. As of that date, we had an\naccumulated deficit of approximately $35.15 million and a net loss of $0.93 million for the year then ended.

As\nof December 31, 2024, we had cash of approximately $0.50 million and a net working capital deficit of approximately $16.18 million. As\nof December 31, 2024, we had an accumulated deficit of $34.22 million and a net loss of $15.38 million for the year ended December 31,\n2024.

The continuation of the Company as\na going concern is dependent upon the continued financial support from its stockholders and debt holders. Specifically, continuation\nis contingent on the Company’s ability to obtain necessary equity to continue operations, and ultimately the Company’s ability\nto generate profit from sales and positive operating cash flows, which is not assured.

On April 17, 2026, the Company entered\ninto a Common Stock Purchase Agreement with Roth Principal Investments, LLC providing for up to $20,000,000 in additional equity financing\n(the “Roth Committed Equity Facility” or “CEF”). While the CEF improves the Company’s access\nto capital, no proceeds have been received as of the date of issuance and draws remain at the Company’s sole discretion. However,\nwhile the Notes are outstanding, our ability to sell shares under the CEF is restricted by the variable rate transaction covenant in\nthe Notes, and 33% of the net proceeds of any such sales must be applied to repay the Notes. See “Risk Factors—We may\nbe unable to repay the Notes, and a delisting of our Common Stock or other event of default could accelerate them, which could materially\nand adversely affect our financial condition.”

As of the date on which these unaudited\ncondensed consolidated interim financial statements were available to be issued, we believe that our existing cash on hand, together\nwith the potential availability of additional capital under the Purchase Agreement and other potential equity or debt financing arrangements,\nmay not, on their own, be sufficient to meet the Company’s working capital and capital expenditure requirements for at least the\nnext twelve months. Management currently expects that the Company will be able to access additional sources of capital, including through\nissuances of equity securities (such as under the Purchase Agreement) and/or additional borrowings, as and when required to fund the\nCompany’s operating and investing activities over the next year; however, there can be no assurance that such financing will be\navailable on acceptable terms or at all. Accordingly, the Company’s ability to continue as a going concern remains dependent on\nthe successful execution of these financing plans. These unaudited condensed consolidated interim financial statements do not include\nany adjustments to the recoverability and classification of recorded asset amounts or to the classification of liabilities that might\nbe necessary should the Company be unable to continue as a going concern.

Cash\nflows

Quarterly\nCash Flows

The\nfollowing table summarizes our cash flows for the periods presented

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Six months ended June 30,
(In thousands)	2026			2025
Net cash provided by (used in):
Operating activities	$	(3,511	)		$	(149	)
Investing activities	$	(115	)		$	(60	)
Financing activities	$	(223	)		$	180
Effect of exchange rate changes on cash	$	(4	)		$	-
Net increase (decrease) in cash	$	(3,853	)		$	(29	)

Operating\nActivities

Net\ncash used in operating activities for the six months ended June 30, 2026 increased by $3.36 million to $3.51 million, compared to $0.15\nmillion in the same period in 2025. This increase was primarily driven by an increase in Selling and marketing expenses, General and\nadministrative, Research and development, Gain on extinguishment of payable and decrease in Interest expense, Gain/loss on change in\nfair value. Further, changes in working capital decreased to $1.32 million from $1.8 million in the prior year. The $3.51 million net\ncash used in operating activities in 2026 was primarily related to (i) a net loss of $3.72 million, offset by; (ii) depreciation and\namortization of $0.12 million; (iii) provision for credit losses of ($0.04) million; (iv) stock-based compensation and restricted stock\nunit compensation of $0.88 million; (v) amortization of right-of-use assets of $0.04 million; (vi) Changes in fair value of common stock\nwarrant liability and forward purchase derivative liability at fair value of ($1.61) million (vii) Accretion of cumulative mandatorily\nredeemable common and preferred stock liability of $0.06 million; (viii) Gain on extinguishment of payable of ($0.51) million (ix) Working\ncapital changes of $1.3 million.

Net\ncash used in operating activities during the six months ended June 30, 2025 was $0.15 million. The $0.15 million net cash used in operating\nactivities in 2025 was primarily related to (i) a net loss of $4.04 million, offset by; (ii) depreciation and amortization of $0.09\nmillion; (iii) provision for credit losses of $0.06 million; (iv) stock-based compensation of $0.12 million; (v) amortization\nof right-of-use assets of $0.04 million; (vi) changes in fair value of convertible notes and common stock warrant liability ($1.34)\nmillion; (vii) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.05 million; (viii)\nLoss on extinguishment of convertible note payable of $0.39 million and (ix) Working capital changes of $1.8 million.

Investing\nActivities

Net\ncash used in investing activities during the six months ended June 30, 2026, was $(0.12) million compared to ($0.06) million during the\nsix months ended June 30, 2025. The $0.12 million net cash used in investing activities in 2026 consisted of $0.09 million in costs capitalized\nfor internally developed software and $0.03 million in purchases of property and equipment.

Net\ncash used in investing activities for the six months ended June 30, 2025 was $(0.06) million and consisted of purchases of property and\nequipment of $0.006 million, costs capitalized for internally developed software of $0.05 million.

Financing\nActivities

Net\ncash used in financing activities was $(0.22) million in the six months ended June 30, 2026, compared to $0.18 million in June 30, 2025,\nrepresenting a decrease of $0.40 million over the respective periods. The decrease in cash flow from financing activities was primarily\ndue to payments of director and officer insurance liability of $0.28 million.

Net\ncash provided by financing activities was $0.18 million in the six months ended June 30, 2025. The $0.18 million net cash provided by\nfinancing activities in 2025 consisted of Proceeds from convertible notes payable of $0.18 million.

Year\nEnd Cash Flows

The\nfollowing table summarizes our cash flows for the periods presented

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Year Ended Dec 31,
(In thousands)	2025			2024			Variance
Net cash provided by (used in):
Operating activities	$	(5,529	)		$	(2,201	)	$	(3,328	)
Investing activities	$	(165	)		$	(176	)	$	11
Financing activities	$	9,418			$	2,612		$	6,806
Effect of exchange rate changes on cash	$	(3	)		$	(1	)	$	(2	)
Net increase (decrease) in cash	$	3,721			$	234		$	3,487

Operating\nActivities

Net\ncash used in operating activities for the year ended December 31, 2025 increased by $3.32 million to $5.53 million, compared to $2.2\nmillion in the same period in 2024. This increase was primarily driven by a reduction in non-cash gains, as net loss decreased to $0.93\nmillion for the year ended December 31, 2025 from $(15.38) million in 2024, largely due to changes in the fair value of convertible notes,\nwarrant liability and forward purchase derivative liabilities. Additionally, selling and marketing expenses decreased due to lower stock-based\ncompensation following the completion of vesting for previously granted awards. Further, changes in working capital decreased to $0.21\nmillion from $4.39 million in the prior year. The $5.53 million net cash used in operating activities in 2025 was primarily related to\n(i) a net loss of $(0.93) million, offset by; (ii) depreciation and amortization of $0.19 million; (iii) provision for credit losses\nof $0.06 million; (iv) stock-based compensation of $0.23 million; (v) amortization of right-of-use assets of $0.09 million; (vi) Loss\non extinguishment of debt of $0.39 million; (vii) Changes in fair value of Convertible Notes at Fair Value and Forward Purchase derivative\nliability of $(6.54) million; (viii) Change in fair value of common stock warrant liability of $1.08 million (ix) Accretion of cumulative\nmandatorily redeemable common and preferred stock liability of $0.10 million; (x) Working capital changes of $(0.21) million.

Net\ncash used in operating activities during the year ended December 31, 2024 was $2.2 million. The $2.2 million net cash used in operating\nactivities in 2024 was primarily related to (i) a net loss of $15.4 million, offset by; (ii) depreciation and amortization of $0.18\nmillion; (iii) provision for credit losses of $0.5 million; (iv) stock-based compensation of $1.1 million; (v) amortization\nof right-of-use assets of $0.1 million; (vi) changes in fair value of convertible notes and common stock warrant liability totaling\n$6.1 million ($5.6 million and $0.5 million, respectively); (vii) Accretion of cumulative mandatorily redeemable common and preferred\nstock liability of $0.1 million; (viii) Loss on extinguishment of debt and payable of $0.7 million ($0.6 million and $0.1 million,\nrespectively) and (ix) Working capital changes of $4.4 million.

Investing\nActivities

Net\ncash used in investing activities during the year ended December 31, 2025, was $0.17 million compared to $0.18 million during the year\nended December 31, 2024. The $0.17 million net cash used in investing activities in 2025 consisted of $0.11 million in costs capitalized\nfor internally developed software and $0.05 million in purchases of property and equipment.

Net\ncash used in investing activities for the year ended December 31, 2024 was $0.18 million and consisted of purchases of property and equipment\nof $0.02 million, costs capitalized for internally developed software of $0.14 million.

Financing\nActivities

Net\ncash provided by financing activities was $9.42 million in the year ended December 31, 2025, compared to $2.61 million in December 2024,\nrepresenting an increase of $6.81 million over the respective periods. The increase in cash flow from financing activities was primarily\ndue to i) proceeds from reverse capitalization of $9.43 million; (ii) proceeds from the issuance of shares pursuant to PIPE transaction\nof $1.00 million; (iii) proceeds from convertible notes payable of $0.18 million (iv) payments of related party notes payable of $(0.70)\nmillion. Balance $0.84 million pertains to payment of deferred transaction cost and $0.34 million relates to proceeds received and payments\nmade in connection with directors’ and officers’ insurance during the current period.

Net\ncash provided by financing activities was $2.6 million in the year ended December 31, 2024. The $2.6 million net\ncash provided by financing activities in 2024 consisted of (i) proceeds from convertible notes at fair value of $6.5 million; (ii)\nproceeds from convertible notes payable of $0.5 million; (iii) proceeds from related party loan payable of $0.7 million, offset\nby (iv) payments on notes payable of $3.0 million; (v) common stock repurchase of $2.0 million; and partially offset by (vi)\nexercise of stock options and payment of deferred transaction costs

Contractual\nObligations and Commitments

Our contractual cash obligations as\nof June 30, 2026, are summarized in the table below:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

(in thousands)	2026		2027			2028		2029	2030		Thereafter			Total
Debt (1)	$	300		$	0		$	0	$	0		$	0		$	0	$	300
Interest	$	40		$	5		$	0	$	0		$	0		$	0	$	45
Mandatorily redeemable preferred and ordinary stock	$	0		$	1,486		$	0	$	0		$	0		$	0	$	1,486
Operating lease	$	76		$	159		$	167	$	175		$	184		$	225	$	986
Legal counsel fee arrangement	$	625		$	0		$	0	$	0		$	0		$	0	$	625
Professional service arrangement	$	1,834		$	199		$	0	$	0		$	0		$	0	$	2,033
Total	$	2,875		$	1,849		$	167	$	175		$	184		$	225	$	5,475

Our\ncontractual cash obligations as of December 31, 2025, are summarized in the table below:

(in thousands)	2026		2027		2028	2029	Thereafter		Total
Debt (1)		300		-		-		-		-	300
Interest		83		5		-		-		-	88
Mandatorily redeemable preferred and ordinary stock		-		1,433		-		-		-	1,433
Common Stock Contingent Obligation (2)		-		-		-		-		-	-
Operating lease		167		175		185		193		452	1,172
Legal counsel arrangement		650		-		-		-		-	650
Consulting arrangement		238		159		-		-		-	397
Total		1,438		1,772		185		193		452	4,040

(1)\nAs discussed in Note 10, Long-Term Debt, pursuant to business combination substantially all convertible debt and related party debt has\nbeen settled either in cash or equity as per the terms of respective debt agreements. Accordingly, no convertible notes or related-party\nnotes payable remained outstanding as of December 31, 2025, other than related party note payable related to Dolma amounting $300 thousand.

(2) Upon\nthe closing of the business combination, the Company settled its obligation under the Second Agreement through the issuance of 29,610\nshares of Fusemachines Inc. common stock, reflecting the application of the 0.6580 conversion ratio to the 45,000 shares of the Company’s\ncommon stock, and a partial cash payment of approximately $110 thousand. The remaining $98 thousand obligation is still outstanding and\nis reflected in accounts payable as of December 31, 2025.

Debt\nFinancing Arrangements

On\nOctober 15, 2019, we entered into a convertible promissory note agreement with a lender and issued a convertible promissory note for\na principal amount of $2.0 million (the “2019 Convertible Note Agreement”). On September 7, 2021 a second convertible promissory\nnote was issued to the same lender for a principal amount of $0.5 million (the “2021 Convertible Note Agreement”), collectively\nwith the 2019 Convertible Note Agreement referred to as the “Convertible Notes Agreements”. On December 22, 2022, the Convertible\nNotes Agreements were amended (the “2022 Amended Convertible Notes Agreements”) to extend the maturity date to December 23,\n2023, increase the interest rate to 15% for the period from December 22, 2022, to December 22, 2023, adding a prepayment option, amending\none of the conversion scenarios, and amending the definition of a next equity financing to require a sale of equity securities to result\nin gross proceeds of $7.5 million (the “Next Equity Financing”). The 2022 Amended Convertible Notes Agreements also added\na partial payment of the interest accrued and outstanding on the note of $0.4 million due no later than March 22, 2023. Failure to pay\nby the payment deadline obligated the Company to pay interest at a rate of twenty percent (20%) per annum, compounded quarterly, on the\noutstanding $0.4 million. On December 20, 2023, the 2022 Amended Convertible Notes Agreements were amended again (the “2023 Amended\nConvertible Notes Agreements”), extending the maturity date of both notes to January 22, 2024. In January 2024, these convertible\nnotes were amended again (the “2024 Amended Convertible Notes Agreements”), extending the maturity date to January 2025.\nThe amendment also added a provision surrounding conversion in the case we complete the business combination mentioned above. On January\n31, 2025, the company entered into an amendment agreement of the convertible note payable pursuant to which the maturity date was revised\nto February 28, 2026. The 2021, 2022, 2023 and 2025 amendments were accounted for as debt modifications, prospectively, with any change\nin fair value from the new terms incorporated into future valuations. The 2024 amendment is accounted for as an extinguishment of debt.

On\nAugust 24, 2023, we entered into a loan and security agreement with a lender (the “2023 Notes Agreement”) that will make\navailable to us loans in an aggregate principal amount of up to $4.0 million in three separate tranches. On that day, we withdrew $3.0\nmillion (the “First Tranche”). We additionally had the opportunity to request, subject to the terms of the 2023 Notes Agreement,\nan additional tranche of $0.5 million on or before March 31, 2024 (the “Second Tranche”) and a third tranche of $0.5 million\non or before September 30, 2024 (the “Third Tranche”) (the First Tranche, Second Tranche and Third Tranche are collectively\nreferred to as the “2023 Notes”). The 2023 Notes bear interest at a rate of 13.25% per annum, compounded annually, payable\nat maturity. The 2023 Notes are secured by substantially all of our assets. The 2023 notes mature on August 24, 2027. In January 2024,\nwe repaid the entire aggregate outstanding principal on the 2023 Notes Payable in the amount of $3.0 million along with an additional\npayment of $0.1 million for interest, prepayment fees, and lender fees. These payments resulted in a 0.6 million loss, recorded in loss\non extinguishment of debt, in the consolidated statements of operations and comprehensive loss.

In\nconnection with the 2023 Notes Agreement, we issued to the lender common stock warrants (the “Common Stock Warrants”) to\npurchase up to 92,211 shares of the Company’s common stock, exercisable immediately, with an exercise price of $0.46 per share\nwith a contractual term of 10 years. As of December 31, 2025, the fair value and carrying amount of the Common Stock Warrant Liability\nwas $0.02 million.

In\nJanuary 2024, we entered into two convertible promissory note agreements (the “January 2024 Convertible Notes Agreements”)\nwith a lender for the principal amounts of $2.0 million (“January 2024 Convertible Note A”) and $4.5 million (“January\n2024 Convertible Note B”), respectively, payable at maturity (the “January 2024 Convertible Notes”). The January 2024\nConvertible Notes mature in January 2025.

On\nFebruary 4, 2025, the maturity date of January 2024 convertible note was extended to July 12, 2025 pursuant to the second amendment.

In\nApril 2024, we entered into a convertible note agreement (the “April 2024 Convertible Note Agreement”) with a lender for\nthe aggregate principal amount of $0.1 million and is convertible to common stock (the “April 2024 Convertible Note”). The\nApril 2024 Convertible Promissory Note matures in April 2025.

Upon\nthe conversion of the April 2024 Convertible Note to common stock, we shall issue the holder a warrant to purchase 7,500 shares of common\nstock of CSLM with a per share exercise price of $11.50.

On\nFebruary 5, 2025, the conversion price of the April 2024 Convertible Promissory Notes with principal amount of $125,000 was amended to\n$3.15 from the original conversion price of $4.94. Further these were once again amended in April 2025 and based on the amendment\nthe maturity date was revised from April 5, 2025 to April 5, 2026 pursuant to the second amendment.

In\nJune 2024, we entered into a convertible note agreement (the “June 2024 Convertible Note Agreement”) with a lender for the\nprincipal amount of $0.1 million and is convertible to common stock (the “June 2024 Convertible Note”). The June 2024 Convertible\nPromissory Note matures in June 2025. Upon the conversion of June 2024 Convertible Note to common stock of CSLM, we shall issue the holder\na warrant to purchase 7,500 shares of common stock with a per share exercise price of $11.50.

On\nFebruary 5, 2025, the conversion price of the June 2024 Convertible Promissory Note with principal amount of $130,000 was amended to\n$3.15 from the original conversion price of $4.94. Further, these were once again amended in July 2025 and based on the amendment,\nthe maturity date was revised from June 17, 2025, to June 17, 2026, pursuant to the amendment.

In\nSeptember 2024, we entered into two convertible note agreements (the “September 2024 Convertible Notes Agreements”) with\ntwo lenders, each for the principal amount of $100,000 (the “September 2024 Convertible Notes”). The 2024\nSeptember Convertible Notes mature in September 2026. Upon the conversion of the September 2024 Convertible Notes to common stock, we\nshall issue the holders each a warrant to purchase 7,500 shares of common stock with a per share exercise price of $11.50.

On\nFebruary 5, 2025, the conversion price of the two September 2024 Convertible Promissory Notes with principal amount of $100,000 each\nwas amended to $3.15 from the original conversion price of $4.94.

During\n2024, we have entered into seven separate promissory notes with Sameer Maskey, the Company CEO for aggregate principal amount of\n$0.7 million. On February 12, 2025, an amendment to the seven promissory notes was entered into between the company and the CEO, Mr.\nSameer Maskey. As per the original agreement, the maturity date was earlier of (1) the occurrence of an Event of Default and (2) December\n31, 2024. Pursuant to the amendment agreement, the maturity date was extended to earlier of (1) the occurrence of an Event of Default\nand (2) December 31, 2025.

On\nFebruary 24, 2025, the Company entered into a convertible promissory note (“February 2025 Convertible Notes”) amounting\nto $180,000 with an interest rate of 4.71% and maturity date of February 19, 2028. Upon closing of the merger, the Note shall automatically\nconvert into the number of shares of common stock equal to the then outstanding Obligations under the note divided by the applicable\nConversion Price i.e., $3.15.

In\nconnection with the consummation of the Business Combination on October 22, 2025, each Legacy Fusemachines convertible note, including\nboth related-party and non-related-party convertible notes, that was issued and outstanding immediately prior to the Closing was converted\ninto an aggregate of 8,048,770 shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements.\nImmediately following such conversions, all shares of Legacy Fusemachines common stock issued upon conversion were exchanged for shares\nof Fusemachines common stock based on the exchange ratio specified in the Business Combination Agreement, As a result of the conversions\nand exchanges, no convertible notes or related-party notes payable remained outstanding as of December 31, 2025, other than related party\nnote payable related to Dolma amounting $300 thousand. Refer to the section entitled ‘Recent Developments’ for details.

Equity\nfinancing, if obtained, could result in dilution to our then-existing stockholders and/or require such stockholders to waive certain\nrights and preferences. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay,\nscale back, or eliminate the development of business opportunities and our operations and financial condition may be materially adversely\naffected.

Off-Balance\nSheet Arrangements

We\ndo not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to\nhave a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures\nor capital resources.

Related\nParty Transactions

Refer\nto Note 19, “Related Parties” of the consolidated financial statements contained elsewhere in this prospectus, for\ndisclosure of our related party transactions.

Critical\nAccounting Policies and Estimates

Our\nconsolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements\nrequires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related\ndisclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the\ncircumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results could differ materially from those estimates\ndue to risks and uncertainties, including uncertainty in the current economic environment. To the extent that there are material differences\nbetween these estimates and our actual results, our future consolidated financial statements will be affected.

The\ncritical accounting estimates, assumptions, and judgments that have the most significant impact on our consolidated financial statements\nare described below. For further information on significant accounting policies, see “Note 2, Summary of Significant Accounting\nPolicies” of our audited consolidated financial statements included herein.

Revenue\nRecognition

The\nCompany recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC\n606, the Company recognizes revenue when (or as) customers obtain control of promised goods or services, in an amount that reflects the\nconsideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the\nfive-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the\ncontract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract;\nand (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company applies the provisions of ASC 606\nto an arrangement when a substantive contract exists and collectability is probable.

The\nCompany derives the majority of its revenue from AI Solutions (Products and Services) that largely represents the professional services\nFusemachines provides to its customers to help them achieve any AI-related goals within their organization. Standard contractual arrangements\nare governed by Master Services Agreements (“MSAs”), which set out general terms including payment, termination rights, and\nintellectual property ownership. Detailed scope, pricing, and performance obligations are defined in Statements of Work (“SOWs”),\nwhich are executed for each engagement or project phase. The Company’s contracts for AI Services have different terms based on\nthe scope and complexity of engagements; pricing for the majority of contracts are invoiced monthly on a time-and-materials basis. The\nCompany notes that its contracts meet the requirements for over-time revenue recognition, as the customer is simultaneously receiving\nthe benefits and able to consume the benefits of the services being provided. For professional services that are distinct and billed\non a time-and-materials basis, revenue is generally recognized as the services are provided, which is reflective of the transfer of the\nservices to the customer. The Company elected the “right to invoice” practical expedient based on the Company’s right\nto invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

The\nCompany also provides AI Education Services which represents a customized curriculum of educational services provided to train the customer’s\nC-suite on AI for Business. The Company provides AI Education Services over time as the course proceeds and the students retain knowledge\nover time. Thus, the customer receives and consumes benefits as the Company performs the AI Education Services, and revenue is recognized\nover time.

Company’s\nAI Solutions includes product revenues primarily comprising software license fees from sales of term-based license contracts, under which\nwe grant customers the license right to use the software for a specified period (i.e. when the customer can access, use, and benefit\nfrom the software license). Term software licenses are satisfied at a point in time and associated revenue is recognized upon the later\nof 1) delivery of the software, or 2) the beginning of the period in which the customer has received the license right to use the software.\nFor customer contracts that include software license fees, implementation and/or other consulting services, the portion of the transaction\nprice allocated to software licenses is generally recognized when delivered. Implementation, customization, or model tuning services\nif applicable, when included, are evaluated as separate performance obligations when they are distinct from the software and not highly\ninterdependent. These services are generally satisfied over time as the work progresses. During the year ended December 31, 2025, and\nDecember 31, 2024, the product revenues were insignificant.

For\nmost contracts, the Company uses a Master Services Agreements (“MSA”) to govern the overall relevant terms and conditions\nof the business agreement, and a Statement of Work (“SOW”) to specify the services delivered and the associated prices. Performance\nobligations specific to each individual contract are defined within the terms of each SOW. Each performance obligation is identified\nbased on the services that will be transferred to our customer that are both capable of being distinct and are distinct within the context\nof the contract. The transaction price is determined based on the consideration to which the Company will be entitled and expect to receive\nin exchange for transferring services to the customer.

Consideration\nfor some contracts may include variable consideration including volume discounts and rebates. If the consideration promised includes\na variable amount, the Company only includes estimated amounts of consideration in the transaction price to the extent it is probable\nthat a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration\nis resolved. These estimates require management judgments and estimates. The determination of whether to constrain consideration in the\ntransaction is based on historical, current, and forecasted information that is reasonably available to the Company, taking into consideration\nthe type of customer, the transaction, and specific facts and circumstances of each arrangement. The Company uses judgement to determine\nif collectability of consideration is uncertain, and accordingly, revenue recognition is deferred until the uncertainty is resolved and\ncash is collected.

Payment\nterms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice\ndate. In certain arrangements, the Company will receive payment from a customer either before or after the performance obligation to\nwhich the invoice relates has been satisfied. As a practical expedient, the Company does not account for significant financing components\nif the period between when it transfers the promised good or service to the customer and when the customer pays for the product or service\nwill be one year or less.

For\ncontracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation\nbased on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company\nseparately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using other\nobservable inputs. As Fusemachines Inc. is the sole reportable segment, all revenues are attributed to the sole segment.

Income\nTaxes

The\nprovision for income taxes includes federal, state, local and foreign taxes. Deferred tax assets and liabilities are recognized for the\nestimated future tax consequences of temporary differences between the consolidated financial statements carrying amounts and their respective\ntax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in\nwhich the temporary differences are expected to be reversed. Changes to enacted tax rates would result in either increases or decreases\nin the provision for income taxes in the period of changes.

The\nrealizability of deferred tax assets is primarily dependent on future earnings. The Company evaluates the realizability of deferred tax\nassets and recognizes a valuation allowance when it is more likely than not that all, or a portion of, deferred tax assets will not be\nrealized. A reduction in estimated forecasted results may require that we record valuation allowances against deferred tax assets. Once\na valuation allowance has been established, it will be maintained until there is sufficient positive evidence to conclude that it is\nmore likely than not that the deferred tax assets will be realized. A pattern of sustained profitability will generally be considered\nas sufficient positive evidence to reverse a valuation allowance. If the allowance is reversed in a future period, the income tax provision\nwill be correspondingly reduced. Accordingly, the increase and decrease of valuation allowances could have a significant negative or\npositive impact on future earnings.

The\nUnited States subjects corporations to taxes on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries.\nThe Company elected to provide for the tax expense related to GILTI in the year the tax is incurred.

Stock-Based\nCompensation

Stock-based\ncompensation expense attributable to equity awards granted to employees and non-employees is measured at the grant date based on the\nfair value of the award. For employee awards, the expense is recognized on a straight-line basis over the requisite service period for\nawards that actually vest, which is generally the period from the grant date to the end of the vesting period. For non-employee awards,\nthe expense for awards that actually vest is recognized based on when the goods or services are provided.

The\nCompany records stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”).\nThis standard requires all equity-based payments to employees and non-employees, including grants of employee stock options and restricted\nstock awards, to be recognized in the consolidated statements of operations and comprehensive loss based on the grant date fair value\nof the award. The stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award,\nwhich is generally the period from the accounting grant date to the end of the vesting period. The Company elected to account for forfeitures\nof awards as they occur.

Since\nthe adoption of ASU 2018-07, Improvements to Nonemployee Stock-Based Payment Accounting, the measurement date for non-employee awards\nis the date of grant, and stock-based compensation costs are recognized in the same period and in the same manner as if the entity had\npaid cash for the goods or services. Stock-based compensation expense is classified as general and administrative, cost of revenue, selling\nand marketing and research and development expenses in the consolidated statements of operations and comprehensive loss.

The\nCompany estimates the fair value of stock option awards granted using the Black Scholes Merton option pricing formula (the “Black-Scholes\nModel”). This model requires various significant judgmental assumptions in order to derive a final fair value determination for\neach type of award, including the expected term, expected volatility, expected dividend yield, risk-free interest rate and fair value\nof the Company’s stock on the date of grant. The expected option term for options granted is calculated using the “simplified\nmethod”. This election was made based on the lack of sufficient historical exercise data to provide a reasonable basis upon which\nto estimate the expected term. The simplified method defines the expected term as the average of the contractual term and the vesting\nperiod. Estimated volatility is based on similar entities whose stock prices are publicly traded. The Company uses the historical volatilities\nof similar entities due to the lack of sufficient historical data for the Company’s common stock price. The Company estimates volatility\nbased upon the observed historical volatilities of comparable companies over a lookback period commensurate with the estimated holding\nperiod, adjusted for relative leverage using the Black-Scholes-Merton formula. Dividend yields are based on the Company’s history\nand expected future actions. The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such,\nthe dividend yield has been estimated to be zero. The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury\nbond on the date the stock option award was granted with a maturity equal to the expected term of the stock option award. All grants\nof stock options generally have an exercise price equal to or greater than the fair market value of the Company’s common stock\non the date of grant.

The\nfair value of the shares of common stock underlying the stock options has historically been determined by the Company’s Board of\ndirectors as there was no public market for the underlying common stock prior to October 22, 2025. In estimating the fair value of its\nstock, the Company uses a third-party valuation specialist and considers factors it believes are material to the valuation process, including\nbut not limited to, the price at which recent equity was issued by the Company to independent third parties or transacted between third\nparties, any indications of value from offers to acquire the Company, actual and projected financial results, risks, prospects, economic\nand market conditions, and estimates of weighted average cost of capital. The Company believes the combination of these factors provides\nan appropriate estimate of the expected fair value of the Company and reflects the best estimate of the fair value of the Company’s\ncommon stock at each grant date.

Recent\nAccounting Pronouncements

For\nfurther information on recent accounting pronouncements, see “Note 2, Summary of Significant Accounting Policies” of our\naudited consolidated financial statements included herein

Quantitative\nand Qualitative Disclosures About Market Risk

We\nare a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise\nrequired under this item.

BUSINESS

Fusemachines\nis a leading provider of AI solutions, offering innovative AI products and services to enterprises. With over a\ndecade of experience, we help enterprises seamlessly integrate AI into their operations, enhancing efficiency, reducing\ncosts, and driving innovation. Our products and services are uniquely supported by a global talent pool, primarily sourced\nfrom underserved communities, allowing us to deliver high- quality AI solutions at scale while fulfilling our mission of\ndemocratizing AI.

Our\ndiverse client base spans industries including consumer brands, healthcare, media, technology, government, and others. These clients\nuse our AI solutions to address critical business challenges such as improving sales forecasting accuracy, eliminating manual data entry\nerrors, automating recruitment processes, and detecting fraud in real time. Our focus on delivering measurable business outcomes has\nenabled us to build long-term relationships with our clients and position Fusemachines as a partner in their AI driven transformation\nefforts.

In\naddition to our enterprise AI solutions, we are committed to education and talent development. Our AI training programs, including our\nAI Fellowship Program, are designed to upskill students and professionals by providing hands-on experience with real world AI applications.\nTo date, we have certified hundreds of AI Fellows across the United States, Nepal, and the Dominican Republic. These programs help expand\nthe global AI talent pool and address the growing shortage of skilled AI professionals.

AI\nSolutions

At\nFusemachines, we develop industry focused and problem specific AI solutions that combine software products with implementation services\nto address complex business challenges. Our core platform, AI Studio, enables experimentation, model training, deployment, and lifecycle\nmanagement of AI systems. Built on top of AI Studio, AI Engines provide specialized AI capabilities for targeted use cases such as fraud\ndetection in food and beverage transactions or information extraction from loan documents. We also offer AI Agents that can assist with\nor automate operational tasks such as interviewing candidates during the hiring process.

Our\nservices complement these products and include activities such as customizing and fine tuning models, integrating AI systems into existing\nenterprise workflows, and developing bespoke solutions tailored to specific client needs. Clients can choose to engage with Fusemachines\nthrough software, services, or a combination of both depending on their requirements.

Products

Our\nproduct suite consists of our platform AI Studio, outcome-specific AI Engines, and advanced interactive AI Agents, designed to help organizations\nbuild, deploy, and operationalize AI solutions at scale.

AI\nStudio

AI\nStudio is the foundational platform that powers Fusemachines’ AI solutions, enabling organizations to build, deploy, and manage\nAI applications at scale. By providing a unified environment for data scientists, engineers, and business teams, AI Studio simplifies\nthe process of developing and operationalizing AI solutions.

AI\nStudio is structured into four integrated layers that enable organizations to operationalize AI solutions efficiently. The Business Layer\nsits at the top and contains the business applications, workflows, and AI-powered use cases that organizations deploy to support decision-making\nand operations. Beneath it, the AI Hub provides the environment for developing, integrating, and managing AI models, engines, and agents\nthat power these applications. The Data Layer connects and organizes enterprise data from various sources, enabling AI systems to access\nand process both structured and unstructured data. Supporting all layers is the Governance Layer, which ensures secure deployment, monitoring,\ncompliance, and lifecycle management of AI systems across the platform.

AI\nEngines

AI\nEngines are specialized AI software solutions built on top of AI Studio that are designed to deliver industry- and pain point–specific\noutcomes. Each engine focuses on solving targeted business challenges within particular domains by leveraging advanced AI technologies\nsuch as large language models (LLMs), computer vision, machine learning, and deep learning. By addressing clearly defined operational\nproblems, AI Engines enable organizations to automate processes, improve efficiency, and generate actionable insights that directly support\nbusiness objectives. For example, AI Engines can be used to extract information from complex documents, generate accurate answers and\nsummaries from large datasets, or detect suspicious activities and patterns in financial transactions at retail outlets. By combining\ntechnologies such as document understanding, Retrieval Augmented Generation (RAG), and predictive analytics, these engines enable organizations\nto automate workflows, improve operational efficiency, and gain deeper insights from their data.

AI\nEngines are designed to be highly customizable and adaptable to the needs of different industries such as finance, legal, healthcare,\nand enterprise operations. They can operate within a customer’s existing infrastructure while maintaining strong data security,\ngovernance, and access control.

AI\nAgents

AI\nAgents are intelligent systems built on top of AI Engines and AI Studio that automate complex workflows and interact with users or systems\nto accomplish specific tasks. These agents combine capabilities such as reasoning, retrieval, API execution, data processing, and decision\nsupport, enabling organizations to deploy AI systems that actively assist employees and customers in real-time operations.

For\ninstance, an AI Agent designed for recruitment can act as an interview assistant, assisting recruiters by asking role-specific questions\nand evaluating responses. The agent can analyze candidate answers, generate summaries of strengths and areas for improvement, and produce\nstandardized evaluation reports for hiring teams. By automating parts of the interview and evaluation process, such agents help organizations\nstreamline hiring workflows, improve consistency in candidate assessments, and reduce manual effort for recruiters and hiring managers.

Services

Our\nservices are delivered by Forward Deployed Engineers (FDEs) who work closely with customer teams to design, implement, and operationalize\nAI solutions built on top of AI Studio. These services provide hands-on support for organizations that require deeper technical collaboration\nto successfully deploy AI within their environments. Leveraging the capabilities of AI Studio, our teams help customers customize and\ndeploy AI Engines, integrate AI into existing systems, and develop bespoke solutions that address complex challenges across AI, data,\nand software systems.

Customization,\nModel Tuning, and Deployment:

We\nassist clients in customizing our AI Engines or AI Agents to meet their specific needs. This includes fine-tuning models, configuring\nworkflows, and deploying solutions through AI Studio. Our teams also support the integration of these engines and agents into the client’s\nexisting business workflows, data pipelines, and enterprise systems to ensure seamless operation and alignment with business objectives.

Bespoke\nAI Solutions:

For\norganizations with specific requirements where existing AI Engines may not fully address their needs, we develop custom AI Engines and\nAI Agents tailored to their specific business challenges. This may involve designing new models, building specialized AI capabilities,\nand integrating them with enterprise data systems and workflows to deliver solutions that align closely with the client’s operational\nrequirements.

To\nmanage these engagements at scale, we developed Squadery, an internal platform that supports multiple teams within Fusemachines. Squadery\ncentralizes operational data from various sources including our CRM and HR systems to streamline project management, resource allocation,\nand delivery coordination across service engagements.

Intellectual\nProperty

Intellectual\nproperty (IP) is a critical asset for Fusemachines, and we take significant measures to protect our innovations. Our IP portfolio includes\npatents, trademarks, copyrights, and trade secrets, all of which are designed to safeguard our technology and maintain our competitive\nedge.

\n \n \n \n \n \n \n \n \n \n \n \n \n

	●	*Patent Portfolio*:\n As of December 31, 2025, Fusemachines holds 8 patent applications. These patents cover a range of technologies that are central to\n our AI solutions, and we continue to pursue additional IP protection as we develop new products and solutions.

	●	*IP Strategy*:\n We rely on a combination of IP protection strategies, including license agreements, intellectual property assignment agreements,\n confidentiality agreements, and non-disclosure agreements. These measures help us secure our intellectual property rights and ensure\n that they are respected globally.

For\nmore information, please see “Risk Factors – Risks Related to Business, Industry, and Operations”.

Competition\nand Market Opportunity

Competition

The\nAI and digital transformation landscape is highly competitive, with a wide range of players offering various solutions. Fusemachines\nfaces competition from several sources, including:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	Corporate\n IT organizations that develop internal AI solutions.

	●	Commercial\n enterprise and point solution software providers that offer specialized AI tools.

	●	Open-source\n software platforms with data management, machine learning, and analytics capabilities.

	●	Public\n cloud providers offering discrete tools and microsolutions for AI and analytics.

	●	System\n integrators that provide custom software solutions tailored to specific business needs.

Market\nOpportunity

The\nglobal AI market is set for substantial growth, with the global AI market itself is expected to reach nearly $1.4 trillion by 2029, and\nthe AI software segment is anticipated to generate around $791.5 billion in revenue by 2025. However, this expansion is challenged by\na global shortage of AI talent, with 63% of businesses citing AI and machine learning as their biggest skills gap.

We\nbelieve we are well-positioned to capitalize on this market opportunity. With over a decade of experience in developing AI solutions,\nwe have gained valuable insights into addressing customer challenges. Our solutions, including AI Studio and AI Engines, along with our\ncomprehensive AI services, allow us to provide highly specialized and problem-specific solutions that deliver substantial ROI. Moreover,\nour AI talent development programs, such as the AI Fellowship program, support our ability to cultivate skilled talent as needed, fueling\nour growth and helping us capture a significant share of the market in the years ahead.

Our\nCorporate History

We\nwere originally organized as CSLM Acquisition Corp. (“CSLM”), a Cayman Islands exempted company. CSLM was formed as a special\npurpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization\nor similar business combination with one or more businesses. CSLM closed its IPO (the “CSLM IPO”) in January 2022, generating\ngross proceeds of $189,750,000.

On\nJanuary 22, 2024, CSLM, entered into a business combination agreement, as amended on August 27, 2024, by and among CSLM, CSLM Merger\nSub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of CSLM (“Merger Sub”), Fusemachines Inc., a Delaware\ncompany (“Legacy Fusemachines”), and CSLM Holdings, Inc. (“CSLM Holdings”) (as amended, the “Business Combination\nAgreement”).

On\nOctober 22, 2025, (a) CSLM merged with and into CSLM Holdings, at which time the separate existence of CSLM ceased and CSLM Holdings\nbecame the surviving corporation (the “Company” or “Fusemachines”) (such transactions, the “Business Combination”).\nIn connection with the Business Combination, the Company was renamed “Fusemachines Inc.” and Legacy Fusemachines was renamed\n“Fusemachines USA, Inc.”

Legal Proceedings

While we may become\ninvolved in legal proceedings from time to time, such as intellectual property disputes or employment-related matters, we are not currently\na party to any actions that would have a major adverse effect on our business, financial condition, or results of operations. We remain\nvigilant in protecting our business interests and are prepared to address any legal challenges that may arise.

Implications of Being an Emerging Growth\nCompany and a Smaller Reporting Company

We are an “emerging growth company”\nas defined in the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible\nto take, and intend to take, advantage of certain exemptions from various reporting requirements applicable to other public companies\nthat are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from\nthe auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley\nAct of 2002, or the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements\nand (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of CSLM’s\nIPO, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated\nfiler, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior\nfiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.0 billion in non-convertible debt\nsecurities during the prior three-year period.

In addition, the JOBS Act provides that an\nemerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This\nallows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to\nprivate companies. We have elected to avail ourselves of this extended transition period and, as a result, we may adopt new or revised\naccounting standards on the relevant dates on which adoption of such standards is required for non-public companies instead of the dates\nrequired for other public companies.

We are also a “smaller reporting\ncompany” as defined in the Securities Exchange Act of 1934. We may continue to be a smaller reporting company and take\nadvantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the\ndetermination that we no longer qualify as a smaller reporting company, even after we are no longer an emerging growth company. We\nwill qualify as a smaller reporting company for so long as either (i) our voting and non-voting common stock held by non-affiliates\nis less than $250 million measured on the last business day of our second fiscal quarter, or (ii) our annual revenues are less than\n$100 million and our voting and non-voting common stock held by non-affiliates is less than $700 million, in each case measured on\nthe last business day of our second fiscal quarter.

Human\nCapital

As\nof December 31, 2025, we had more than 270 full-time employees. As of December 31, 2025, none of our employees were represented by labor\nunions or covered by collective bargaining agreements. We consider our relationship with our employees to be good. We emphasize several\nmeasures and objectives in managing our human capital assets, including, among others, (i) employee safety and wellness, (ii) talent\nacquisition and retention, (iii) employee engagement, development, and training, (iv) diversity and inclusion and (v) compensation. These\ntargeted ideals may include annual bonuses, stock-based compensation awards, a 401(k) plan, healthcare, and insurance benefits, health\nsavings and flexible spending accounts, paid time off, family leave, family care resources, and/or employee assistance programs. We also\nprovide our employees with access to various innovative, flexible, and convenient health and wellness programs. We designed these programs\nto support employees’ physical and mental health by providing tools and resources to improve or maintain their health status and\nencourage engagement in healthy behaviors.

Available Information

Our principal offices are located at 200\nWest 41st Street, 21st Floor, New York, New York 10036. We also maintain a website at www.fusemachines.com and https://ir.fusemachines.com/,\nwhere additional information about our company and solutions can be found. Information contained on or that can be accessed through our\nwebsite is neither a part of, nor incorporated by reference into, this prospectus, and you should not consider information on our website\nto be part of this prospectus.

MANAGEMENT

Executive\nOfficers

The\nfollowing table sets forth certain information, as of the date of this prospectus, concerning our executive officers:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Name		Position
Sameer\n Maskey		Chief\n Executive Officer, Class III Director
David R. Wells		Fractional\n Chief Financial Officer
Parag\n Shrestha		Head\n of Strategy
Robert\n Traghetto		Head\n of AI Services
Anish Joshi		Head of Technology

The\nfollowing is a biographical summary of the experience of our named executive officers, and other officers of the Company.

Sameer\nMaskey is Fusemachines’ Founder and Chief Executive Officer, and has served as a member of the Company’s board of directors\nsince January 2013. Dr. Maskey has over 18 years of experience in artificial intelligence, natural language processing, machine learning,\nand data science. Since 2019, Dr. Maskey has been an Adjunct Associate Professor at Columbia University, where he teaches several courses\nin machine learning, programming and natural language processing. In 2008, Dr. Maskey completed his PhD in Computer Science from Columbia\nUniversity. Prior to obtaining his PhD, Dr. Maskey served as part of the research team at IBM Watson Research Center where he invented\nvarious statistical algorithms to improve speech-to-speech translation and question answering systems. Dr. Maskey is an inventor of 15\ngranted or pending United States patents and has authored over 20 publications. He holds a B.S. in Math and Physics from Bates College.\nDr. Maskey is qualified to serve on our board of directors due to the perspective and experience he brings as Chief Executive Officer\nand from his extensive technology experience.

Parag\nShrestha has served as Fusemachines’ Head of Strategy since January 2021, where he leads the company’s distributed team\nacross South Asia. From September 2019 to January 2021, he held roles of increasing seniority with Fusemachines including Business Development\nExecutive & Product Executive, and Enterprise Executive. Prior to joining Fusemachines, Mr. Shrestha held senior engineering and\nconsulting roles with organizations including 360insights, Salesforce, Fidelity National Information Service. Initiate Systems, and Aon\nHewitt. Mr. Shrestha holds a B.S. in Computer Science from the University of Windsor.

Robert\nTraghetto has served as Fusemachines’ Head of AI Services since March 2021, where he leads AI Service strategy, talent\nacquisition, employee development, and service delivery. Mr. Traghetto has over 20 years of experience in software and product engineering.\nFrom August 2018 to March 2021, he held roles of increasing seniority with Fusemachines including Director of Technology, and Senior\nArchitect. Mr. Traghetto was the co-founder of Rake, a talent acquisition and candidate engagement platform, which was acquired by Fusemachines\nin April 2018. Prior to Fusemachines and Rake, Mr. Traghetto held senior engineering and technology roles with organizations including\nYingo Yango, The Institute for Integrative Nutrition, and TMP Worldwide. Mr. Traghetto holds a Bachelor of Technology in Computer Systems\nfrom the New York City College of Technology and an M.S. in Computer Science from the City College of New York.

Anish\nJoshi has served as Fusemachines’ Head of Technology since January 2020, where he manages the company’s engineering\nteam, technology planning and product development. Mr. Joshi has over 16 years of technology and product development experience. He is\nalso responsible for leading the company’s AI Support Services team and motivating them to build innovative solutions. Mr. Joshi\njoined Fusemachines in January 2013 and held roles of increasing seniority between that time and January 2020, including VP of Technology,\nDirector of Technology, and Sr. Technology Manager. Mr. Joshi holds a Bachelor of Information Management from Prime College.

David R. Wells has served\nas Fusemachines’ Fractional Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer since\nSeptember 2026. Mr. Wells has more than 30 years of experience in finance, operations and administrative positions, primarily with medical\nand technology companies. Since July 2021, Mr. Wells has been the owner of Atlas Bookkeeping, LLC, a Nevada limited liability company,\nwhere he provides CFO-level advisory services to public and private companies. Since December 2025, Mr. Wells has served as an Advising\nCFO to Functional Brands Inc. From August 2023 to May 2025, Mr. Wells served as Chief Financial Officer of Envoy Medical, Inc. (Nasdaq:\nCOCH). From June 2021 to September 2022, Mr. Wells served as Chief Financial Officer of GHS Investments, LLC. Since December 2022, Mr.\nWells has served as a member of the Board of Directors of HeartSciences, Inc. (Nasdaq: HSCS). Mr. Wells has a bachelor’s degree\nin finance and entrepreneurship from Seattle Pacific University and a master of business administration from Pepperdine Graziadio Business\nSchool.

Non-Employee\nDirectors

We\ncurrently have five members of our board of directors. The following table and summaries set forth certain information, as of the date\nof this prospectus, concerning our non-employee directors. The biographical information for Sameer Maskey is set forth under the section\n“Management – Executive Officers.”

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Name	Age	Position
Bharat\n Krish	50	Class\n I Director
Tim\n Gocher	54	Class\n I Director
Julia\n Hirschberg	79	Class\n II Director
Salman\n Alam	43	Class\n I Director

Bharat\nKrish has served as a member of Fusemachines’ board of directors since January 2025. Mr. Krish is a customer focused\nbusiness leader, entrepreneur and innovator with over 20 years of experience in product leadership and innovation with top media and\nretail companies, and in building streaming and AI enterprise SaaS startups from the ground up. Products he has helped build are used\nby millions of users. Mr. Krish has acted as Chief Product Officer of Newsweek since December 2023, has held leadership positions with\nTechstars since March 2023, and has been a board advisor of Gaia Ventures, an early stage venture capital firm since January 2023. From\nMay 2020 to December 2022, he held roles with TIME, including President of Digital and Chief Technology Officer. Prior to TIME, he held\nC-suite positions at various media and retail companies. Mr. Krish received a masters in Technology Management from Columbia University,\na masters in Computer Engineering from Syracuse University, and a bachelors in Computer Science and Engineering from Coimbatore Institute\nof Technology. We believe Mr. Krish’s qualifications to serve on our board of directors include his extensive leadership and advisory\nexperience working with innovative technology companies.

Tim\nGocher has served as a member of Fusemachines’ board of directors since 2018. Mr. Gocher founded Dolma Impact Fund, an active\nprivate equity fund focused on technology, healthcare, and renewable energy, and has acted as CEO since the fund’s founding in\nMay 2012. Since June 2003, Mr. Gocher has also served as Chairman of Dolma Foundation, a non-profit organization focused on alleviating\npoverty by investing in sustainable businesses, education, and healthcare. Previously, he served in senior roles with global organizations\nacross Europe and Asia including Living Planit SA, Nettleton Global Asia, Interregnum-Parkmead Group, and E.ON UK. Mr. Gocher holds an\nMBA from London Business School and an honorary Doctor of Laws from the University of Nottingham. Mr. Gocher is qualified to serve as\na member of our Board of Directors based on his executive leadership experience in the technology industry and his senior leadership\nexperience.

Julia\nHirschberg has served as a member of Fusemachines’ board of directors since May 2026. Dr. Hirschberg brings two Ph.D.s\nand decades of expertise in artificial intelligence, natural language processing, speech technology, conversational AI, and human-computer\ninteraction. She is the Percy K. and Vida L. W. Hudson Professor of Computer Science at Columbia University, where she previously served\nas Chair of the Department of Computer Science. A globally recognized AI researcher and educator, she has made foundational contributions\nto spoken language processing, speech synthesis, and conversational technologies. Before joining Columbia, she held leadership roles\nat Bell Laboratories and AT&T Labs Research, where she founded the Human-Computer Interface Research Department. Her honors include\nelection to the National Academy of Engineering, the American Academy of Arts and Sciences, National Academy of Artificial Intelligence\nand the American Philosophical Society, as well as fellowships from ACL, ACM, AAAI and IEEE. She is also a recipient of the prestigious\nISCA Medal for Scientific Achievement.

Salman\nAlam has served as a member of the board of directors since October 2025 and previously served as a member of the board of directors\nof CSLM Acquisition Corp since 2022. Mr. Alam is Vice President, Legal, at Sandisk, a leading provider of data storage technologies,\nwhere he has been responsible for worldwide product development and go-to-market technology legal issues since 2016. With over 19 years\nof legal experience in the corporate legal sector, he has deep experience in emerging product regulatory issues within the data ecosystem\nin markets across the world, including in artificial intelligence, licensing, and data privacy. Mr. Alam previously served in roles of\nincreasing responsibility at Western Digital, including Vice President, from May 2013 to February 2025. Prior to Western Digital, Mr.\nAlam has served as a legal executive to technology startups, as well as a corporate transactional attorney at Newmeyer & Dillion,\nLLP, where he represented emerging and established companies in corporate transactions, M&A, capital markets, and corporate governance\nmatters. Mr. Alam received a B.A. from the University of California, Berkeley, and a law degree from the University of California, College\nof the Law, San Francisco. We believe Mr. Alam’s qualifications to serve on our board of directors include his extensive experience\nin legal and governance matters, particularly with technology companies as part of the broader artificial intelligence ecosystem.

Family\nRelationships

There\nare no family relationships among any of our directors or executive officers.

Board\nof Directors

We\ncurrently have five members of our board of directors. Our board of directors is classified board, divided into three classes, designated\nas Class I, Class II and Class III. Our Class I directors will hold office for a term expiring at the first annual meeting of stockholders\nfollowing the consummation of the Business Combination; our Class II directors will hold office for a term expiring at the second annual\nmeeting of stockholders following the consummation of the Business Combination; and our Class III directors will hold office for a term\nexpiring at the third annual meeting of stockholders following the consummation of the Business Combination. The Class I directors, whose\nterms will expire at the annual meeting of stockholders to be held in 2029, are Bharat Krish, Tim Gocher, and Salman Alam, the\nClass II director, whose term will expire at the annual meeting of stockholders to be held in 2027, is Julia Hirschberg; and the Class\nIII director, whose term will expire at the annual meeting of stockholders to be held in 2028, is Sameer Maskey.

When\nconsidering whether directors have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors\nto satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily\non each person’s background and experience as reflected in the information discussed in each of the directors’ individual\nbiographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and\nnature of our business.

Director\nIndependence

The\nlisting rules of Nasdaq require us to maintain a board of directors comprised of a majority of independent directors, as determined affirmatively\nby our board of directors. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of\nour audit, compensation and nominating and corporate governance committees must be independent. Audit committee members and compensation\ncommittee members must also satisfy the independence criteria set forth in Rule 10A-3 and Rule 10C-1, respectively, under Exchange Act.\nUnder the Nasdaq listing rules, a director will only qualify as an “independent director” if, in the opinion of our Board,\nthe director does not have a relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities.

Our\nboard of directors has undertaken a review of the independence of our directors and considered whether any director has a material relationship\nwith us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based\nupon information requested from and provided by each director concerning his or her background, employment and affiliations, including\nfamily relationships, our board of directors has determined that none of our non-employee directors (representing four of our five directors),\nhas a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director\nand that they each are an “independent director” as that term is defined under the Nasdaq listing rules.

In\nmaking these determinations, our board of directors considered the relationships that each nonemployee director has with us and all other\nfacts and circumstances our board of directors deemed relevant in determining their independence, including consulting relationships,\nfamily relationships and the beneficial ownership of our capital stock by each non-employee director.

Role\nof the Board in Risk Oversight

Our\nBoard’s extensive involvement in the oversight of risk management related to the Company’s and its business and accomplishes\nthis oversight through the regular reporting to the board by the audit committee. The audit committee represents the board by periodically\nreviewing the Company’s accounting, reporting and financial practices, including the integrity of its financial statements, the\nsurveillance of administrative and financial controls and its compliance with legal and regulatory requirements. Through its regular\nmeetings with management, including the finance, legal, internal audit and information technology functions, the audit committee reviews\nand discusses all significant areas of the Company’s business and summarizes for the board all areas of risk and the appropriate\nmitigating factors. In addition, the board receives periodic detailed operating performance reviews from management.

Committees\nof our Board of Directors and Meetings

In\nOctober 2025, our board of directors established an audit committee, a compensation committee and a nominating and corporate governance\ncommittee, each of which operates pursuant to a charter adopted by our board of directors. Our board of directors may also establish\nother committees from time to time to assist the board of directors. The composition and functioning of all of our committees complies\nwith all applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. Each committee’s charter is available\non our website at https://fusemachines.com.

Directors\nwill be expected to attend board meetings, the Annual Meeting of Stockholders and meetings of the committees on which they serve, with\nthe understanding that on occasion a director may be unable to attend a meeting.

Audit\nCommittee

The\nmembers of our audit committee consist of Salman Alam, Julia Hirschberg and Bharat Krish. Salman Alam is the chair of the audit\ncommittee. Our board of directors has determined that each member of the audit committee is “independent” as that term is\ndefined in Nasdaq rules and has sufficient knowledge in financial and auditing matters to serve on the audit committee. In addition,\nour board of directors has determined that each member of the audit committee meets the heightened independence requirements for audit\ncommittees required under Section 10A of the Exchange Act and related SEC and Nasdaq rules. Finally, the board of directors has determined\nthat Salman Alam is deemed an “audit committee financial expert.”

The\npurpose of the audit committee is to prepare the audit committee report required by the SEC to be included in Company’s proxy statement\nand to assist the board in overseeing and monitoring (1) the quality and integrity of the financial statements, (2) compliance with legal\nand regulatory requirements, (3) the Company’s independent registered public accounting firm’s qualifications and independence,\n(4) the performance of the Company’s internal audit function and (5) the performance of the Company’s independent registered\npublic accounting firm.

Compensation\nCommittee

The\nmembers of our compensation committee consist of Salman Alam, Julia Hirschberg and Bharat Krish. Julia Hirschberg is the\nchair of the compensation committee. Our board of directors has determined that each member of the compensation committee is “independent”\nas that term is defined in Nasdaq rules and is a “non-employee director” under Rule 16b-3 under the Exchange Act. In addition,\nour board of directors has determined that each member of the compensation committee meets the heightened independence requirements for\ncompensation committee purposes under Section 10C of the Exchange Act and related SEC and Nasdaq rules.

The\npurpose of the compensation committee is to assist the board in discharging its responsibilities relating to (1) setting the Company’s\ncompensation program and compensation of its executive officers and directors, (2) monitoring the Company’s incentive and equity-based\ncompensation plans and (3) preparing the compensation committee report required to be included in Company’s proxy statement under\nthe rules and regulations of the SEC.

Nominating\nand Corporate Governance Committee

The\nmembers of our nominating and corporate governance committee consist of Bharat Krish, Julia Hirschberg and Salman Alam. Bharat\nKrish is the chair of the nominating and corporate governance committee. Our board of directors has determined that each member of the\nnominating and corporate governance committee is “independent” as defined in Nasdaq rules.

The\npurpose of the nominating and corporate governance committee is to assist the board in discharging its responsibilities relating to (1)\nidentifying individuals qualified to become board members, consistent with criteria approved by the board of directors, (2) reviewing\nthe qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the\nboard selects, the director nominees for the next annual meeting of stockholders, (3) identifying board members qualified to fill vacancies\non any Company board committee and recommending that the board appoint the identified member or members to the applicable committee,\n(4) reviewing and recommending to the board corporate governance principles applicable to the Company, (5) overseeing the evaluation\nof the board and management and (6) handling such other matters that are specifically delegated to the committee by the board from time\nto time.

Code\nof Conduct

In\nOctober, 2025, we adopted a written code of business conduct that applies to all of our directors, officers and employees, including\nour principal executive officer, principal financial officer and principal accounting officer. A current copy of the code will be posted\non our website at https://fusemachines.com. If we make any substantive amendments to, or grant any waivers from, the code of business\nconduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current\nreport on Form 8-K.

EXECUTIVE\nCOMPENSATION

The\nfollowing is a discussion and analysis of compensation arrangements of the Company’s named executive officers. This discussion\nmay contain forward-looking statements that are based on the Company’s current plans, considerations, expectations and determinations\nregarding future compensation programs. The actual compensation programs that the Company adopts may differ materially from the currently\nplanned programs that are summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are\nnot required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements\napplicable to emerging growth companies.

Summary\nCompensation Table

The\nfollowing table sets forth information concerning the compensation of our named executive officers for the years ended December 31, 2025\nand 2024:

Name and Principal Position	Year		Salary ($)(1)		Bonus ($)(2)	Option Awards ($)(3)	Total ($)
Sameer Maskey Chief Executive Officer		2025		418,357		1,000,000		—	1,418,357
		2024		400,000		—		—	400,000
Christine Chambers⁽⁴⁾ Former\n Chief Financial Officer		2025		132,000		—		—	132,000
		2024		—		—		—	—
Anish Joshi Head of Technology		2025		250,000		—		—	250,000
		2024		223,750		30,188		142,879	396,817
Parag Shrestha Head of Strategy, MD South Asia		2025		113,787		—		—	113,787
		2024		116,526		—		142,879	259,405
Robert Traghetto Head of AI Services		2025		200,000		—		—	200,000
		2024		185,833		28,999		71,439	286,271

\n \n \n \n \n \n \n \n \n \n \n \n \n

(1)	The amounts in this column\n reflect the base salary and the remuneration paid and accrued, to the named executive officers for the financial years ended December\n 31, 2025 and 2024.
(2)	The amounts in this column\n represent the amount of discretionary bonus payments earned by each named executive officers in respect of the financial year ended\n December 31, 2025 and 2024.
(3)	The amounts in this column\n represent the aggregate grant date fair value of option awards granted to each named executive officer. These amounts do not include promissory notes provided to the named executive officers to exercise these awards.
(4)	Ms.\n Chambers was appointed Chief Financial Officer in 2025 and as such received no compensation in 2024. Ms. Chambers separated from\n the Company in August 2026.

Director\nCompensation

The compensation disclosed in the “Summary\nCompensation Table” above represents the total compensation received by our officers, and the table below represents the compensation\nreceived by our non-employee directors.

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Name	Fees Earned or Paid in Cash $		Option Awards ($)		All Other Compensation ($)	Total ($)
Julia Hirschberg⁽¹⁾		—		—		—	—
Tim Gocher		12,500		—		—	12,500
Bharat Krish		17,500		—		—	17,500
Salman Alam		17,500		—		—	17,500
Sanjay Shrestha⁽²⁾		17,500		—		—	17,500

\n\n\n \n \n \n

	(1)	Julia\n Hirschberg was appointed as a director in May 2026, and so received no compensation during\n the year ended December 31, 2025.
	(2)	On May 31, 2026, in connection with the appointment\n of Ms. Hirschberg, Mr. Shrestha resigned as a member of the Board, as the chair of the Compensation Committee, and as a member of\n each of the Audit Committee and the Nominating Committee.

Outstanding\nEquity Awards as of the Year Ended December 31, 2025

The\nfollowing table summarizes the number of shares of Fusemachines common stock underlying outstanding equity incentive plan awards for\neach named executive officer as of December 31, 2025.

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Option Awards		Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options(#) Unexerciseable		Option Exercise Price ($)	Option Expiration Date	Number of Shares That Have Not Vested (#)		Market Value of Shares That Have Not Vested ($)
Sameer Maskey Chief Executive Officer		—		—		—		—		—	—
Christine Chambers Former\n Chief Financial Officer⁽¹⁾		—		—		—		—		—	—
Anish Joshi Head of Technology		20,563		12,339		1.95		12-19-2033		—	—
		20,048		12,852		6.78		01-19-2034
Parag Shrestha Head of Strategy, MD South Asia		20,048		12,852		6.78		01-19-2034
		16,451		9,871		1.95		12-19-2033
Robert Traghetto Head of AI Services		10,024		6,426		6.78		01-19-2034		—	—

\n \n \n \n

(1)	Ms. Chambers was appointed\n Chief Financial Officer in 2025 and as such received no compensation in 2024. Ms. Chambers separated from the Company in August 2026.\n

Executive\nOfficer Employment Arrangements

CEO\nAgreement

On\nthe Closing Date, the Company entered into an executive employment agreement (the “CEO Agreement”) with Sameer Maskey, the\nCompany’s Chief Executive Officer (referred to in this section titled CEO Agreement, “Executive”). The CEO Agreement\nprovides, among other things, that Executive shall be entitled to a base salary of $495,000 and shall be eligible for an annual cash\nbonus equal to up to 100% of his base salary (subject to meeting target performance goals each year). Executive is also eligible to participate\nin the Company’s equity compensation plans. Upon the Executive’s termination of employment for any reason outside of the\nChange of Control Period (as defined in the CEO Agreement), the Executive (or his Beneficiary following the Executive’s death)\nshall receive (i) a lump sum payment on the Date of Termination in an amount equal to the sum of the Executive’s earned but unpaid\nBase Salary through his Date of Termination plus his accrued but unused vacation days at the Executive’s Base Salary in effect\nas of his Date of Termination; plus (ii) any other benefits or rights the Executive has accrued or earned through his Date of Termination\nin accordance with the terms of the applicable fringe or employee benefit plans and programs of the Company’s. In addition to the\ncompensation and benefits payable above, if the Executive’s employment is terminated by the Company without Cause or by the Executive\nfor Good Reason outside of the Change of Control Period, and the Executive returns an executed Release to the Company, which becomes\nfinal, binding and irrevocable within sixty (60) days following the Executive’s Date of Termination, the Executive (or his Beneficiary\nfollowing the Executive’s death) shall receive: (i) Executive’s accrued but unpaid Annual Bonus, if any, for the fiscal year\nended prior to his Date of Termination payable at the same time annual bonuses for such fiscal year are paid to other key Employees of\nthe Company pursuant to the terms of the Bonus Plan, (ii) a severance payment payable in a single lump sum within five (5) business days\nafter the Executive’s Release becomes final, binding and irrevocable, in an amount equal to 12 months of Base Salary, and (iii)\nreimbursement of the COBRA premiums, if any, paid by the Executive for continuation coverage for the Executive, his spouse and dependents\nunder the Company’s group health, dental and vision plans for a 12 month period from the Date of Termination. Capitalized terms\nused and not defined herein shall have the meanings ascribed to them in the CEO Agreement. The CEO Agreement includes customary indemnification\nprovisions.

CFO\nAgreement

On\nJuly 21, 2025, the Company entered into an offer letter agreement (the “CFO Agreement”) with Christine Chambers, the\nCompany’s Chief Financial Officer (referred to in this section titled CFO Agreement, “Executive”). The CFO Agreement\nprovides, among other things, that Executive will receive a base salary equal to $360,000, with a bonus structure to be determined at\na later date. Executive is also eligible to participate in the Company’s equity compensation plans, and is entitled to an initial\naward of 100,000 shares of the Company’s equity units, which shall be stock options or restricted stock units, to be determined\nat a later date upon mutual agreement of the Company and Executive. The CFO Agreement includes customary indemnification provisions.\nMs. Chambers separated from the Company in August 2026.

Fractional\nCFO Services Agreement

On August 30, 2026,\nthe Company entered into a Services Agreement (the “Services Agreement”) with Atlas Bookkeeping, LLC (“Atlas”),\npursuant to which Atlas will provide chief financial officer services to the Company, with David R. Wells serving as the individual designated\nby Atlas to perform such services. Pursuant to the Services Agreement, the Company will pay Atlas a monthly advisory fee of $14,500 for\nCFO advisory services. In addition, the Company paid Atlas a one-time retainer of $10,000 upon execution of the Services Agreement. Additionally,\nthe Company will issue to Mr. Wells (or such other designee of Atlas) monthly grants of 10,000 restricted stock units under the Company’s\n2025 Omnibus Equity Incentive Plan, with each such grant fully vesting on the date of grant. The Services Agreement commences upon execution\nand continues until terminated. Either party may terminate the Services Agreement upon 30 days’ written notice, or upon 15 days’\nwritten notice in the case of an uncured material breach. Atlas provides services to the Company as a general contractor, and neither\nAtlas nor Mr. Wells are employees of the Company.

2025\nOmnibus Equity Incentive Plan

On\nOctober 22, 2025, the Company’s board of directors approved the Company 2025 Omnibus Equity Incentive Plan (the “Equity Plan”),\nand the reservation of 1,500,000 shares of Common Stock thereunder. As a result, the Company’s board of directors is authorized\nto approve grants of awards under the Equity Plan to eligible participants, subject to various limitations. On June 9, 2026, the Company’s\nstockholders approved an amendment to the Equity Plan at the Company’s 2026 Annual Meeting of Stockholders to increase the number\nof shares of common stock available to Equity Plan participants by 2,000,000 shares, for a total of up to 3,500,000 shares of common\nstock.

The\nfollowing paragraphs provide a summary of the principal features of the Equity Plan and its operation. However, this summary is not a\ncomplete description of all of the provisions of the Equity Plan and is qualified in its entirety by the specific language of the Equity\nPlan.

Purposes\nof the Equity Plan

The\npurposes of the Equity Plan are to advance the interests of the Company’s stockholders by enhancing its ability to attract, retain\nand motivate persons who make (or are expected to make) important contributions to the company by providing such persons with equity\nownership opportunities and thereby better aligning the interests of such persons with those of its stockholders.

Eligibility

The\nEquity Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986,\nas amended (the “Code”), to employees of the Company or any of its parent corporations or subsidiary corporations, and for\nthe grant of nonstatutory stock options, restricted stock, restricted stock units, and other stock-based awards to employees, directors\nand consultants of the Company or any corporation or other entity, including but not limited to partnerships, limited liability companies\nand joint ventures, with respect to which the Company, directly or indirectly, owns as applicable (a) stock possessing more than fifty\npercent (50%) of the total combined voting power of all classes of stock entitled to vote, or more than fifty percent (50%) of the total\nvalue of all shares of all classes of stock of such corporation, or (b) an aggregate of more than fifty percent (50%) of the profits\ninterest or capital interest of a non-corporate entity.

Authorized\nShares

The\nmaximum number of 3,500,000 shares of Common Stock, will be authorized for issuance pursuant to awards granted under the Equity\nPlan.

Generally,\nif any award expires or lapses or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole\nor in part (including as the result of shares of common stock subject to such award being repurchased by the Company at or below the\noriginal issuance price), the unused common stock covered by such award shall again be available for the grant of awards under the Equity\nPlan. Further, shares of common stock delivered to the Company by a participant to satisfy the applicable exercise or purchase price\nof an award and/or to satisfy any applicable tax withholding obligation (including shares retained by the Company from the award being\nexercised or purchased and/or creating the tax obligation) shall be added to the number of shares of common stock available for the grant\nof awards under the Equity Plan. However, in the case of incentive stock options (as hereinafter defined), the foregoing provisions shall\nbe subject to any limitations under the Code.

If\nthe Administrator determines that any dividend or other distribution (whether in the form of cash, common stock, other securities, or\nother property), reorganization, merger, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale,\ntransfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of common stock\nor other securities of the Company, issuance of warrants or other rights to purchase common stock or other securities of the company,\nor other similar corporate transaction or event, as determined by the Administrator, affects the common stock such that an adjustment\nis determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits\nintended by the Company to be made available under the Equity Plan or with respect to any Award, the Administrator will adjust the number\nand class of shares that may be delivered under the Equity Plan and/or the number, class, and price of shares covered by each outstanding\naward, and the numerical share limits contained in the Equity Plan.

In\nconnection with a merger or consolidation of another entity with or into the Company or a subsidiary of the Company or the acquisition\nby the Company or a subsidiary of the Company of property or stock of another entity, the Administrator may grant awards in substitution\nfor any options or other stock or stock-based awards granted prior to such merger or consolidation by such other entity or its affiliate.\nSubstitute awards may be granted on such terms as the Administrator deems appropriate in the circumstances, notwithstanding any limitations\non Awards contained in the Equity Plan. Substitute Awards shall not count against the overall share limit described above, except as\nmay be required by reason of Section 422 of the Code or applicable securities exchange rules.

Equity\nIncentive Plan Administration

The\nCompany’s board of directors or a committee appointed by Company’s board of directors administers the Equity Plan and are\nreferred to as the Administrator. The Administrator may delegate certain duties and authorities of the Administrator to officers of the\nCompany but the full board of directors must approve the grant of any award to a non-employee director. Grants to executive officers\nof the Company must be approved by the full board of directors or by a committee comprised of “non-employee directors” under\nRule 16b-3 of the Securities Exchange Act.

Subject\nto the terms of the Equity Plan and applicable laws, the Administrator shall have authority to determine which employees, non-employee\ndirectors and consultants will receive Awards, to grant Awards and to set all terms and conditions of Awards (including, but not limited\nto, vesting, exercise and forfeiture provisions). In addition, the Administrator shall have the authority to take all actions and make\nall determinations contemplated by the Equity Plan and to adopt, amend and repeal such administrative rules, guidelines and practices\nrelating to the Equity Plan as it shall deem advisable. The Administrator may correct any defect or ambiguity, supply any omission or\nreconcile any inconsistency in the Equity Plan or any Award in the manner and to the extent it shall deem necessary or appropriate to\ncarry the Equity Plan and any Awards into effect, as determined by the Administrator. The Administrator shall make all determinations\nunder the Equity Plan in the Administrator’s sole discretion and all such determinations shall be final and binding on all persons\nhaving or claiming any interest in the Equity Plan or in any Award.

No\nRepricings

The\nterms of any outstanding option may not be amended to reduce the exercise price of such option or cancel any outstanding option in exchange\nfor other options with an exercise price that is less than the exercise price of the cancelled option or for any cash payment (or shares\nof common stock with a market value) that exceeds the excess of the market value of the shares underlying such cancelled options over\nthe aggregate exercise price of such options or for any other award, without stockholder approval.

Stock\nOptions

Options\nto purchase Common Stock may be granted under the Equity Plan. Subject to the provisions of the Equity Plan, the Administrator will determine\nthe terms and conditions of options, including when such options vest and when they become exercisable (and the Administrator will have\nthe discretion to accelerate the time at which such options will vest and/or become exercisable) and the acceptable forms of consideration\nfor exercising an option. The per share exercise price of any option generally must be at least 100% of the fair market value of a share\non the date of grant, and the term of an incentive stock option may not be more than 10 years. However, with respect to any incentive\nstock option granted to an individual who owns 10% of the voting power of all classes of stock of the Company or any of its parent or\nsubsidiary corporations, the term of such option must not exceed 5 years, and the per share exercise price of such incentive stock option\nmust be at least 110% of the fair market value of a share on the grant date.

As\nrequired by the Code, the aggregate fair market value (determined at the time an incentive stock option is granted) of company stock\nwith respect to which such employee’s incentive stock options may become exercisable by such employee for the first time during\nany calendar year under all incentive stock options granted under any incentive stock option plan maintained by the Company or any parent\nor subsidiary corporation may not exceed $100,000. To the extent that an option designated as an incentive stock option exceeds the $100,000\nthreshold, it will be treated as a non-qualified stock option.

After\na participant’s service terminates, he or she generally may exercise the vested portion of his or her option for the period of\ntime stated in his or her option agreement. In no event may an option be exercised later than the expiration of its term, except in certain\ncircumstances where the expiration occurs during a period where exercise is not permitted under applicable law. An option designated\nas an incentive stock option will cease to constitute an incentive stock option and will be treated as a non-qualified stock option to\nthe extent that it is exercised more than three months after the employee’s termination of employment (or more than one year in\nthe case of death or disability).

Subject\nto the provisions of the Equity Plan, the Administrator will determine the other terms of options, including but not limited to the acceptable\nforms of consideration for exercising an option.

Restricted\nStock

Restricted\nstock may be granted under the Equity Plan. Restricted stock awards are grants of shares of Common Stock that vest in accordance with\nterms and conditions established by the Administrator. The Administrator will determine the number of shares of restricted stock granted\nto any employee, director or consultant. The Administrator may impose prior to grant whatever conditions to vesting it determines to\nbe appropriate (for example, the Administrator may set restrictions based on the achievement of specific performance goals or continued\nservice to us or members of the Company Group), and the Administrator will have the discretion to accelerate the time at which any restrictions\nwill lapse or be removed at any time. Recipients of restricted stock awards generally will have voting and have the right to receive\ndividends with respect to such shares, unless the award agreement provides otherwise. Except as otherwise provided by the Administrator,\nto the extent that dividends are paid in stock or property other than cash, such non-cash dividends will be subject to the same vesting\nand forfeiture conditions applicable to the restricted shares and will be delivered no later than the 15^th day of the third\ncalendar month following the later of (i) the date the dividends are paid to the Company’s stockholders or (ii) the date such dividends\nare no longer subject to a substantial risk of forfeiture.

Shares\nof restricted stock as to which the restrictions have not lapsed upon the recipient’s termination of service or when the Administrator\ndetermines that satisfaction of performance-based vesting conditions are no longer possible are subject to our right of repurchase or\nforfeiture.

Restricted\nStock Units

Restricted\nstock units may be granted under the Equity Plan pursuant to terms and conditions established by the Administrator. A restricted stock\nunits is a bookkeeping entry representing an amount equal to the fair market value of one share of Common Stock. The Administrator will\ndetermine the terms and conditions of restricted stock units including the vesting criteria (which may include accomplishing specified\nperformance criteria or continued service to us or members of the Company Group or both) and the form and timing of payment. The Administrator\nwill have the discretion to accelerate the time at which any restrictions will lapse or be removed and to settle earned restricted stock\nunits in cash, shares, or a combination of both.

The\naward agreement may provide participants with a right to receive dividend equivalents with respect to their restricted stock units. Such\ndividend equivalents may be paid in cash or in shares of our common stock may be subject to the same vesting conditions applicable to\nthe restricted stock units.

Other\nStock-Based Awards

The\nAdministrator may grant other stock-based awards under the Equity Plan pursuant to terms and conditions established by the Administrator\nand set forth in the award agreement. The Administrator will have the discretion to settle other stock-based award in the form of cash,\nshares of Common Stock, or a combination of both.

Non-Transferability\nof Awards

Unless\nthe Administrator provides otherwise, the Equity Plan generally does not allow awards under the Equity Plan to be sold, transferred,\nassigned, pledged or otherwise encumbered by the participant either voluntarily or by operation of law, except by will or the laws of\ndescent and distribution. Any unauthorized transfer will be void.

Merger\nor Change in Control

The\nEquity Plan provides that if there is a “change in control” (as defined under the Equity Plan) of the Company and the awards\nunder the Equity Plan are not continued, converted, assumed or replaced with substantially similar awards by the Company or the successor\nentity or its parent and provided that the participant has not terminated service prior to such change in control, then immediately prior\nto such change in control, such awards shall become fully vested, exercisable and/or payable, as applicable, and forfeiture, repurchase\nand other restrictions on such awards shall lapse. Each such award shall be cancelled upon the consummation of such change in control\neach such outstanding award will be cancelled of such change in control in exchange for the change in control consideration payable to\nother holders of common stock with respect to the shares of common stock underlying such award (net of any applicable exercise price).\nSuch change in control consideration may be payable on the same terms and conditions applicable to other holders of our common stock\nor on such terms and conditions as the Administrator may provide. To the extent that the award constitutes “non-qualified deferred\ncompensation” for purposes of Section 409A of the Code, the timing of any payment in settlement of such award in connection with\nsuch change in control will be governed by the terms of such award to avoid subjecting the participant to penalties under Section 409A.\nIf the amount of the change in control consideration the participant would receive with respect to the shares subject to any outstanding\noption is less than or equal to the exercise price of such option, such option will be terminated without payment upon consummation of\nsuch change in control.

Forfeiture\nand Clawback

All\nawards granted under the Equity Plan will be subject to recoupment under any clawback policy that we are required to adopt under applicable\nlaw or listing standards. In addition, the Administrator may impose such other clawback, recovery or recoupment provisions in an award\nagreement as the Administrator determines necessary or appropriate, including without limitation to any reacquisition right regarding\npreviously acquired shares or other cash or property. In addition, the Administrator may provide in an award agreement that the recipient’s\nrights, payments, and benefits with respect to such award shall be subject to reduction, cancellation, forfeiture, or recoupment upon\nthe occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an award.

Amendment\nor Termination

The\namendment and restatement of the Equity Plan will become effective upon and subject to the Closing and stockholder approval of the amendment\nand restatement of the Equity Plan and will continue in effect until the tenth (10th) anniversary of the earlier of the date the amendment\nand restatement of the Equity Plan was approved by the Board or the date its adoption is approved by the Company’s stockholders.\nThe Company’s board of directors has the authority to amend, suspend, or terminate the Equity Plan, but such action generally\nmay not materially impair the rights of any participant with respect to any award that is outstanding at the time such amendment, suspension\nor termination of the Equity Plan is approved by the Board without the participant’s written consent.

Summary\nof U.S. Federal Income Tax Consequences

The\nfollowing summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the Equity Plan.\nThe summary is based on existing U.S. laws and regulations as of the date hereof, and there can be no assurance that those laws and regulations\nwill not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s\ndeath, or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside. As\na result, tax consequences for any particular participant may vary based on individual circumstances.

Incentive\nStock Options

A\nparticipant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an option that qualifies\nas incentive stock option under Section 422 of the Code. If a participant exercises the option, holds the stock until the later of second\nanniversary of the date on which the incentive stock option was granted or the first anniversary of the date such incentive stock option\nwas exercised (the “applicable holding period”) and then later sells or otherwise disposes of the shares acquired upon exercise\nof the option, the participant will recognize a capital gain or loss equal to the difference between the sale price of the shares and\nthe exercise price, and we will not be entitled to any deduction for federal income tax purposes.

However,\nif the participant disposes of such shares before the end of the applicable holding period (a “disqualifying disposition”),\nany gain up to the excess of the fair market value of the shares on the date of exercise (or, if less, the amount received upon sale\nof such shares) over the exercise price generally will be taxed as ordinary income, unless the shares are disposed of in a transaction\nin which the participant would not recognize a gain (such as a gift). Any gain in excess of that amount will be a capital gain. If a\nloss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant\nupon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the\nextent such deduction is limited by applicable provisions of the Code.

For\npurposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the shares on\nthe exercise date is treated as an adjustment item in computing the participant’s alternative minimum taxable income in the year\nof exercise. In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying dispositions of the shares\nor provide certain basis adjustments or tax credits for purposes.

Non-Qualified\nStock Options

A\nparticipant generally recognizes no taxable income as the result of the grant of such an option. However, upon exercising a non-qualified\nstock option, the participant normally recognizes ordinary income equal to the amount that the fair market value of the shares on such\ndate exceeds the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income\nand FICA taxes.

Upon\nthe sale of the shares acquired by the exercise of a non-qualified stock option, any gain or loss (based on the difference between the\nsale price and the fair market value on the exercise date) will be taxed as capital gain or loss. Any ordinary income recognized by the\nparticipant upon exercise of non-qualified option generally should be deductible by us for federal income tax purposes, except to the\nextent such deduction is limited by applicable provisions of the Code. No tax deduction is available to us with respect to the grant\nof a non-qualified stock option or the sale of the shares acquired through the exercise of the non-qualified stock option.

Restricted\nStock Awards

A\nparticipant acquiring shares of restricted stock generally will recognize ordinary income equal to the fair market value of the shares\non the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and FICA taxes.\nThe participant may elect, pursuant to Section 83(b) of the Code, to accelerate the ordinary income tax event to the date of acquisition\nby filing an election with the IRS no later than thirty days after the date the shares are acquired. Upon the sale of shares acquired\npursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the\ndate the ordinary income tax event occurs, will be taxed as capital gain or loss. Any ordinary income recognized by the participant upon\nvesting in shares of restricted stock (or upon filing an election under Section 83(b) of the Code) generally should be deductible by\nus for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted\nStock Unit Awards or Cash or Shares Issuable upon Settlement of an Other Stock-Based Award

There\nare no immediate tax consequences of receiving an award of restricted stock units or another stock-based award. A participant who is\nawarded restricted stock units or another stock-based award generally will be required to recognize ordinary income in an amount equal\nto the amount of cash and/or the fair market value of shares issued to such participant at the end of the applicable vesting period or,\nif later, the settlement date elected by the Administrator or a participant in such award agreement. Any additional gain or loss recognized\nupon any later disposition of any shares received would be capital gain or loss. Any ordinary income recognized by the participant upon\nthe issuance of shares pursuant to a restricted stock unit award or other stock-based award generally should be deductible by us for\nfederal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

Section\n409A

Section\n409A of the Code provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s\ndeferral and distribution elections and permissible distribution events. Awards granted under the Equity Plan with a deferral feature\nwill be subject to the requirements of Section 409A of the Code. If an award is subject to and fails to satisfy the requirements of Section\n409A of the Code, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested,\nwhich may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Code Section\n409A fails to comply with the requirements of Code Section 409A, the participant will incur an additional federal income tax penalty\nequal to 20% of the compensation recognized as ordinary income, as well as interest on such deferred compensation.

Tax\nEffect for the Company

The\nCompany generally will be entitled to a tax deduction in connection with an award under the Equity Plan in an amount equal to the ordinary\nincome realized by a participant and at the time the participant recognizes such income (for example, the exercise of a non-qualified\nstock option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit the deductibility\nof compensation paid to our chief executive officer and certain “covered employees” as determined under Section 162(m) of\nthe Code and applicable guidance. Under Section 162(m) of the Code, the annual compensation paid to any of these specified individuals\nwill be deductible only to the extent that it does not exceed $1,000,000.

THE\nFOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY WITH RESPECT TO AWARDS UNDER\nTHE EQUITY PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX\nCONSEQUENCES OF A PARTICIPANT’S DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY\nIN WHICH THE PARTICIPANT MAY RESIDE.

PRINCIPAL\nSTOCKHOLDERS

The\nfollowing table sets forth certain information, as of October 2, 2026, with respect to the holdings of (1) each person\nwho is the beneficial owner of more than 5% of Company voting stock, (2) each of our directors, (3) each executive officer, and (4) all\nof our current directors and executive officers as a group.

Beneficial\nownership is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security\nif that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or\n“investment power,” which includes the power to dispose of or to direct the disposition of the security, or has the right\nto acquire such powers within 60 days.

The beneficial\nownership of shares of Common Stock is calculated based on 32,544,711 shares of Common Stock of the Company outstanding as of\nOctober 2, 2026.

To\nthe best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power\nwith respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with\na spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. To our\nknowledge, there is no arrangement, including any pledge by any person of securities of the Company, the operation of which may at a\nsubsequent date result in a change in control of the Company.

Beneficial\n Owner	Number\n of Shares Beneficially Owned			Percentage\n of Common Stock Beneficially Owned
*Five\n Percent Stockholders*
Consilium\n Entities⁽¹⁾		11,944,765	⁽²⁾		33.81	%
Charles\n Cassel⁽¹⁾		13,104,866	⁽³⁾		36.48	%
Jonathan\n Binder⁽¹⁾		13,104,864	⁽⁴⁾		36.48	%
Sameer\n Maskey		6,010,280	⁽⁵⁾		18.33	%
Funds and accounts managed by Meteora Capital, LLC		3,605,402	⁽⁶⁾		9.99	%
Dolma\n Impact Fund I		2,677,293	⁽⁷⁾		8.23	%
*Executive\n Officers and Directors*
Sameer\n Maskey		6,010,280	⁽⁵⁾		18.33	%
Anish\n Joshi		228,045	⁽⁸⁾		*	%
Parag\n Shrestha		170,262	⁽⁹⁾		*	%
Robert\n Traghetto		86,293	⁽¹⁰⁾		*	%
Bharat\n Krish		25,000	⁽¹¹⁾		*	%
Tim\n Gocher		44,740	⁽¹²⁾		*	%
Julia\n Hirschberg		-			*	%
Salman\n Alam		75,000	⁽¹³⁾		*	%
David R. Wells		10,000	⁽¹⁴⁾		*	%
All\n Fusemachines directors and executive officers as a group (9 individuals)		6,649,620			20.15	%

\n \n \n \n \n \n \n \n \n \n

*	Less than 1%.

(1)	Consilium Extended Opportunities\n Fund and Consilium Frontier Equity Fund are managed by Mr. Cassel and Mr. Binder (together with their affiliates, the “Consilium\n Entities”). Therefore Mr. Cassel and Mr. Binder may be deemed to beneficially own the shares held by Sponsor.

\n \n \n \n

(2)\n

Includes (i) 4,072,414\n shares of Common Stock held by Consilium Extended Opportunities Fund, (ii) 5,092,476 shares of Common Stock held by Consilium Frontier\n Equity Fund, and (iii) 2,779,875 shares of Common Stock issuable upon the exercise of private placement warrants held by Consilium\n Frontier Equity Fund. By virtue of their shared control over the Consilium Entities, Mr. Cassel and Mr. Binder may be deemed to beneficially\n own the shares held by Consilium Extended Opportunities Fund LP and Consilium Frontier Equity Fund LP.

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

(3)	Includes\n (i) 564,413 shares of Common Stock held directly by Mr. Cassel and Mr. Cassel’s spouse, (ii) 595,688 shares of Common\n Stock issuable upon the exercise of private placement warrants held directly by Mr. Cassel and Mr. Cassel’s spouse, and (iii)\n the securities held by Consilium Extended Opportunities Fund and Consilium Frontier Equity Fund. By virtue of their shared control\n over the Consilium Entities, Mr. Cassel and Mr. Binder may be deemed to beneficially own the shares held by Consilium Extended Opportunities\n Fund LP and Consilium Frontier Equity Fund LP.

(4)	Includes\n (i) 564,412 shares of Common Stock held directly by Mr. Binder, (ii) 595,687 shares of Common Stock issuable upon the exercise\n of private placement warrants, and (iii) the securities held by Consilium Extended Opportunities Fund and Consilium Frontier Equity\n Fund. By virtue of their shared control over the Consilium Entities, Mr. Cassel and Mr. Binder may be deemed to beneficially own\n the shares held by Consilium Extended Opportunities Fund LP and Consilium Frontier Equity Fund LP.

(5)	Includes (i) 4,127,708 shares of Common Stock held directly\n by Sameer Maskey, (ii) 237,500 shares of Common Stock that Mr. Maskey has the right to acquire within 60 days of October 2, 2026,\n (iii) 329,014 shares held by Sameer Maskey’s spouse and (iv) 658,029 and 658,029 shares are held of record by Maskey Everest\n Trust and Maskey Annapurna Trust, respectively. Sameer Maskey exercises voting or dispositive control over any of the securities\n held by Maskey Everest Trust and Maskey Annapurna Trust. As such, Mr. Maskey may be deemed to be the beneficial owner of all shares\n held by Maskey Everest Trust and Maskey Annapurna Trust.

(6)	Represents securities held by Meteora Select Trading Opportunities Master,\nLP, Meteora Strategic Capital, LLC, Boothbay Absolute Return Strategies, LP, Boothbay Diversified Alpha Master Fund LP and Cinctive Global\nMaster Fund Ltd., for each of which Meteora Capital, LLC acts as investment manager with respect to the Company’s securities. Boothbay\nAbsolute Return Strategies, LP, Boothbay Diversified Alpha Master Fund LP and Cinctive Global Master Fund Ltd., are not affiliates of\nthe Meteora Parties, and their holdings are aggregated solely by reason of Meteora Capital, LLC’s investment management authority.\nAs a group, these entities hold or have the right to acquire within 60 days, 4,813,308 shares of Common Stock, which equals approximately\n12.90% of the Company’s issued and outstanding Common Stock as of October 2, 2026 (which includes 60,000 shares owned directly and\nassumes the issuance of all 4,753,308 shares of Common Stock associated with the Notes, August 2026 Warrants and Shortfall Warrants).\nHowever, the terms of the Notes and August 2026 Warrants prohibit the holder and its affiliates and attribution parties from beneficially\nowning more than 9.99% of the Company’s outstanding shares of Common Stock and the Shortfall Warrants prohibit the holder and its\naffiliates and attribution parties from beneficially owning more than 9.9% of the Company’s outstanding shares of Common Stock.\nAccordingly, in the table above, we have shown the ownership of this group, as capped at 9.99%. Without applying the 9.99% cap, the holdings\ninclude: (i) 60,000 shares held directly, including 44,816 shares by Meteora Select Trading Opportunities Master, LP and 15,184 shares\nby Meteora Strategic Capital, LLC, of which 59,800 shares remain subject to the FPA and 200 shares held by Meteora Strategic Capital,\nLLC are held outright; (ii) 595,238 shares of Common Stock issuable upon conversion of the Notes, including 380,595 shares to Meteora\nSelect Trading Opportunities Master, LP, 94,286 shares to Boothbay Absolute Return Strategies, LP, 47,143 shares to Boothbay Diversified\nAlpha Master Fund LP, and 73,214 shares to Cinctive Global Master Fund Ltd.; (iii) 2,050,000 shares of Common Stock issuable upon exercise\nof the August 2026 Warrants, including 1,310,770 shares to Meteora Select Trading Opportunities Master, LP, 324,720 shares to Boothbay\nAbsolute Return Strategies, LP, 162,360 shares to Boothbay Diversified Alpha Master Fund LP, and 252,150 shares to Cinctive Global Master\nFund Ltd.; and (iv) 2,108,070 shares of Common Stock issuable upon exercise of the Shortfall Warrants, including 1,574,939 shares to Meteora\nSelect Trading Opportunities Master, LP and 533,131 shares to Meteora Strategic Capital, LLC. The shares of Common Stock associated with\nthe Notes and warrants are not owned by the parties unless and until the Notes are converted or the warrants are exercised.

(7)	Represents 2,677,293 shares of Common Stock held\n by Dolma Impact Fund I. Dolma Impact Fund I has voting and dispositive power over the shares. Tim Gocher, a director of the Company,\n serves as Chief Executive Officer of Dolma.

(8)	Includes\n (i) 177,667 shares of Common Stock owned by Mr. Joshi directly, as well as (ii) vested stock incentive options exercisable\n for 50,378 shares of Common Stock that Mr. Joshi has the right to acquire within 60 days of October 2, 2026.

(9)	Includes\n (i) 125,025 shares of Common Stock owned by Mr. Shrestha directly, as well as (ii) vested stock incentive options exercisable\n for 45,237 shares of Common Stock that Mr. Shrestha has the right to acquire within 60 days of October 2, 2026.

(10)	Includes (i) 73,699 shares of Common Stock owned\n by Mr. Traghetto directly, as well as (ii) vested stock incentive options exercisable for 12,594 shares of Common Stock that\n Mr. Traghetto has the right to acquire within 60 days of October 2, 2026.

(11)	Represents 25,000 shares of Common Stock that Mr. Krish\n has the right to acquire within 60 days of October 2, 2026.

(12)	Includes\n (i) vested stock incentive options exercisable for 19,740 shares of Common Stock, (ii) 25,000 shares of Common Stock that Mr. Gocher\n has the right to acquire within 60 days of October 2, 2026. Excludes 2,677,293 shares of Common Stock held by Dolma Impact Fund I. Mr. Gocher\n serves as Chief Executive Officer of Dolma but does not have voting or dispositive power over such shares.

(13)	Includes (i) 50,000 shares of Common Stock owned by Mr.\n Alam directly, and (ii) 25,000 shares of Common Stock that Mr. Alam has the right to acquire within 60 days of October 2, 2026.

(14)	Represents 10,000 shares of Common Stock that Mr. Wells\n has the right to acquire within 60 days of October 2, 2026.

CERTAIN\nRELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The\nfollowing is a summary of transactions or series of transactions since inception, or currently proposed transactions or series of transactions,\nto which we were, or will be, a party, in which the amount involved exceeded, or will exceed, $120,000, and in which any of our directors,\nexecutive officers, or to our knowledge, beneficial owners of 5% or more of our capital stock, or any member of the immediate family\nof, or entities affiliated with, any of the foregoing persons, had, or will have, a direct or indirect material interest, other than\nemployment agreements and compensation payable to our executive officers and members of the Board. For more information see “Director\nCompensation” and “Executive Officer Compensation”.

CSLM\nAcquisition Corp./CSLM Holdings Inc.

Founder\nShares

In\nJuly 2021, the CSLM’s sponsor, Consilium Acquisition Sponsor I LLC (the “Sponsor”) purchased 4,743,750 shares\nof CSLM’s Class B ordinary shares (the “Founder Shares”) for an aggregate purchase price of $25,000. The Founder Shares\nincluded an aggregate of up to 618,750 shares subject to forfeiture by the Sponsor to the extent that the underwriter’s overallotment\nwas not exercised in full or in part, so that the number of Founder Shares collectively represented approximately 20% of CSLM’s\nissued and outstanding shares after the CSLM IPO. In August 2021, the Sponsor transferred 50,000 Founder Shares to each of CSLM’s\nindependent director nominees. Effective as of July 13, 2023, pursuant to the terms of the CSLM’s then current charter, the Sponsor\nelected to convert 4,743,749 outstanding Class B ordinary share held by it on a one-for-one basis into Class A ordinary shares of CSLM,\nwith immediate effect.

In\nconnection with the Business Combination, the Sponsor has entered into the Sponsor Support Agreement (the “Sponsor Support Agreement”).\nPursuant to the Sponsor Support Agreement, 3,971,250 Private Placement Warrants were forfeited by the Sponsor.

Related\nParty Loans

In\norder to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain\nof CSLM’s officers and directors may, but are not obligated to, loan CSLM any funds as may be required (“Working Capital\nLoans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business\nCombination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of\na Business Combination into private placement-equivalent units at a price of $10.00 per unit. Such units would be identical to the CSLM\nPrivate Placement Units.

Prior to the Business Combination, the Company\nissued convertible notes to Dolma Impact Fund I (“Dolma”), a related party. In January 2025, the Company amended the note\nto extend its maturity date to February 28, 2026. In connection with the Business Combination, the note was not converted or otherwise\nsettled and was reclassified from a convertible note to a related-party note payable on demand. As of June 30, 2026, $300,000 remained\noutstanding under the notes.

On\nFebruary 28, 2023, CSLM issued an unsecured promissory note to the Sponsor (the “Working Capital Note”),\npursuant to which CSLM may borrow up to an aggregate principal amount of $1,500,000. The Working Capital Note bears interest at a rate\nof 4.75% per annum and is payable on the earlier of the date by which CSLM has to complete a business combination or the effective date\nof a business combination. CSLM drew an aggregate of $2,750,000 and $1,230,000 and has accrued $129,630 and $28,288 of interest on principal\namounts outstanding as of December 31, 2024 and 2023, respectively. On January 18, 2024 the Working Capital Note was increased to $2,000,000.\nOn August 18, 2024, the Working Capital Note was amended and restated to increase the amount to $2,750,000.

On\nFebruary 4, 2025, CSLM issued the 3rd A&R Note to increase the amount the Company may borrow from $2,750,000 to $3,000,000. The 3rd\nA&R Note bears interest at a rate of 4.75% per annum, and is payable on the earlier to occur of (i) the date by which the Company\nhas to complete a business combination or (ii) the effective date of a business combination. In the event of a Business Combination,\nthe outstanding balance payable may be repaid as follows: $1,491,000 of the Principal and its accrued and unpaid interest shall be converted\ninto CSLM’s Class A ordinary shares at a share price of Four Dollars ($4.00), and the balance shall be payable in cash at the closing\nof the Business Combination. On May 23, 2025, CSLM amended the 3rd A&R Note solely to increase the amount the Company may borrow\nfrom $3,000,000 to $4,000,000.

In February 2025, in connection with the second\namendment to the Business Combination Agreement, Consilium Frontier Equity Fund, LP, an affiliate of the Sponsor and a related party,\nprovided $2.16 million of financing to the Company in exchange for a convertible note. The note was convertible into common stock at\n$0.44 per share automatically upon the Business Combination (or, alternatively, at the holder’s option on July 12, 2025). The proceeds\nwere placed in escrow and released upon consummation of the Business Combination. On October 22, 2025, the note converted into common\nstock pursuant to its terms.

At\nthe closing, the outstanding working capital notes issued by the Sponsor to CSLM were exchanged for an aggregate of 408,639 newly-issued\nshares of Common Stock

Administrative\nServices Agreement

CSLM\nentered into an agreement that provides that, commencing on effective date of the Initial Public Offering, CSLM agreed to pay the Sponsor\n$10,000 per month for office space, utilities, secretarial and administrative support services. CSLM ceased paying these monthly upon\nthe completion of a Business Combination. During the twelve months ended December 31, 2024 and 2023, CSLM recorded $120,000 and $240,000,\nrespectively, of such fees.

Old\nFusemachines Inc.

Related\nParty Convertible Notes

In\nOctober 2019 and September 2021, Old Fusemachines entered into two convertible promissory note agreements (the “Related Party Convertible\nNotes Payable”) with a lender. As of September 30, 2025 and December 31, 2024, the lender was considered a principal owner of the\nCompany because it held greater than 10% of voting common stock of Old Fusemachines. The related party convertible notes payable were\n$7,530.0 thousand and $6,524.0 thousand, as of September 30, 2025 and December 31, 2024, respectively.

2021\nInvestment Agreement

In\nJanuary 2021, Fusemachines Nepal Private Limited entered into an investment agreement with a related party, Gyanu Maskey (“Mrs.\nMaskey”), an immediate family member of Sameer Maskey (the “January 2021 Related Party Investment Agreement”) and Mrs.\nMaskey agreed to subscribe to 433,728 shares of Fusemachines Nepal Private Limited ordinary shares (the “January 2021 Subscription\nShares”) over a term of three years (the “Completion Date”) and provided an advance amount of $376.4 thousand to Fusemachines\nNepal Private Limited during 2021. According to the terms of the January 2021 Related Party Investment Agreement, Old Fusemachines could\nopt to refund Mrs. Maskey prior to the Completion Date without having to issue the January 2021 Subscription Shares. In 2021, Old Fusemachines\nopted to refund Mrs. Maskey, not issue the January 2021 Subscription Shares, and agreed to provide a refund in monthly payments. The\nJanuary 2021 Related Party Investment Agreement was completed in February 2023.

BO2\nPurchase Agreement

Repurchase\nand Repayment of 2023 Promissory Notes

In\nJanuary 2024, Old Fusemachines repurchased 667,000 shares of its common stock from Mr. Maskey, at a price of $4.352 per share for a total\nof $2,902.7 thousand. Out of this amount, $902.7 thousand was applied towards repayment of Mr. Maskey’s 2023 Promissory Note including\naccrued interest and balance of the Repurchase Consideration amounting to $2,000.0 thousand that was paid in cash to Mr. Maskey.

January\n2024 Related Party Pledge Agreement

In\nJanuary 2024, Mr. Maskey entered into a pledge agreement (the “January 2024 Related Party Pledge Agreement”) with Consilium\nExtended Opportunities Fund, LP (“Consilium”). As per the terms of the January 2024 Related Party Pledge Agreement, Mr. Maskey\nagreed to assign a security interest to Consilium of 3,600,000 shares of common stock held by Mr. Maskey to fully secure the Company’s\nobligations under the January 2024 Convertible Notes.

2024\nRelated Party Promissory Notes

During\n2024, Old Fusemachines entered into seven separate promissory notes with Sameer Maskey, the CEO of the Company for aggregate principal\namount of $700.0 thousand.

Fusemachines\nInc.

December\n2025 Private Placement

On\nDecember 23, 2025, the Company entered into a securities purchase agreement with Consilium Frontier Equity Fund LP (“CSLM Fund”),\nwhereby the Company issued and sold to CSLM Fund 588,235 shares of common stock at a price of $1.70 per share, for gross proceeds of\n$1 million (the “December 2025 Offering”).

Shrestha Global EPG Advisory LLC

On July 28, 2026, the Company entered into an\nengagement agreement with Independent Investment Bankers, Corp. (“IIB”), a registered broker-dealer and FINRA member,\nand Shrestha Global EPG Advisory, LLC (“Shrestha Global”) for financial advisory services in connection with equity or\ndebt financings. Sanjay Shrestha is the founder and CEO of Shrestha Global. He is an investment banker licensed with FINRA and an\nindependent contractor of IIB. Mr. Shrestha served as a director of the Company, chair of the Compensation Committee, and a member\nof the Audit and Nominating Committees until his resignation on May 31, 2026. Shrestha Global began providing services to the\nCompany after his resignation. Pursuant to the Vendor SPA, the Company issued Shrestha Global 247,158 shares of common stock in\nsatisfaction and cancellation of approximately $150,000 in accrued advisory fees.

Closing\nof Business Combination

On\nOctober 22, 2025, the Business Combination was consummated whereby (a) Merger Sub merged with and into Fusemachines with Old Fusemachines\nas the surviving corporation and becoming a wholly-owned subsidiary of the Company; (b) the issued and outstanding shares of Old Fusemachines\nwere exchanged for $200,000,000 in the form of newly-issued shares of Common Stock at a price of $10 per share. On the Closing Date,\n(a) the shareholders of Old Fusemachines were issued an aggregate of 19,214,201 shares of Common Stock, an aggregate of 693,420 shares\nof Common Stock were reserved for issuance upon the exercise of stock options, and an aggregate of 122,211 shares of Common Stock were\nreserved for issuance upon the exercise of common stock warrants; (b) the public shareholders of CSLM received an aggregate of 901,955\nshares of Common Stock, (c) all public rights were converted into 1,897,500 shares of Common Stock; (d) the Company issued an aggregate\nof 4,743,750 shares of Common Stock to private placement investors; (e) the Company issued an aggregate of 1,184,000 shares of Common\nStock, in connection with the PIPE financing; and (f) the outstanding working capital notes issued by the Sponsor to CSLM were exchanged\nfor an aggregate of 408,639 newly-issued shares of Common Stock.

Indemnification\nAgreements

We\nhave entered into agreements to indemnify our directors and executive officers. These agreements, among other things, require us to indemnify\nthese individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred\nby such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person\non behalf of our company or that person’s status as a member of our board of directors to the maximum extent allowed under Delaware\nlaw.

Insofar\nas indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling\nthe Company pursuant to provisions of the State of Delaware, the Company has been informed that, in the opinion of the Securities and\nExchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable.

Related\nParty Transactions Policy

The\nCompany has adopted a written Related Party Transaction Policy that set forth its policies and procedures for the review and approval\nor ratification of related person transactions. A related person includes directors, executive officers, beneficial owners of 5% or more\nof any class of the Company’s voting securities, and immediate family members of any of the foregoing persons. Under the Related\nParty Transaction Policy, if a transaction involving an amount in excess of $120,000 has been identified as a related person transaction,\nincluding any transaction that was not a related person transaction when originally consummated or any transaction that was not initially\nidentified as a related person transaction prior to consummation, information regarding the related person transaction must be reviewed\nand approved by the Company’s audit committee.

In\nconsidering related person transactions, the Company’s audit committee will take into account the relevant available facts and\ncircumstances including, but not limited to:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	the related person’s\n interest in the related person transaction;

	●	the approximate dollar\n value of the amount involved in the related person transaction;

	●	the approximate dollar\n value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;\n

	●	whether the transaction\n was undertaken in the ordinary course of business of the Company;

	●	whether the transaction\n with the related person is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have\n been reached with an unrelated third party;

	●	the purpose of, and the\n potential benefits to the Company of, the transaction; and

	●	any other information regarding\n the related person transaction or the related person in the context of the proposed transaction that would be material to investors\n in light of the circumstances of the particular transaction.

The\nRelated Party Transaction Policy requires that, in determining whether to approve, ratify or reject a related person transaction, the\naudit committee must review all relevant information available to it about such transaction, and that it may approve or ratify the related\nperson transaction only if it determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, the\nbest interests of the Company.

DESCRIPTION\nOF SECURITIES

Authorized\nand Outstanding Stock

The\nCompany’s Certificate of Incorporation authorizes the issuance of 505,000,000 shares, consisting of:

\n \n \n \n \n \n \n \n \n \n \n \n \n

	●	500,000,000\n shares of Common Stock; and

	●	5,000,000\n shares of preferred stock, par value $0.0001 per share (“Preferred Stock”).

Common\nStock

As\nof October 2, 2026, there were 32,544,711 shares of Common Stock issued and outstanding and no shares of Preferred Stock\nissued and outstanding. As of October 2, 2026, the Company has not designated any series of preferred stock.

Voting\nrights. Each holder of Common Stock is entitled to one vote for each share of Common Stock held of record by such holder on all matters\non which stockholders generally are entitled to vote. The holders of Common Stock do not have cumulative voting rights in the election\nof directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors,\nby a plurality) of the votes entitled to be cast by all stockholders present in person or represented by proxy, voting together as a\nsingle class.

Dividend\nRights. Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of shares of Common Stock are\nentitled to receive ratably such dividends, if any, as may be declared from time to time by the Company’s board of directors, out\nof funds legally available for such purposes.

Liquidation\nRights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, the holders\nof Common Stock are entitled to share ratably in all assets remaining after payment of the Company’s debts and other liabilities,\nsubject to prior distribution rights of the Preferred Stock or any class or series of stock having a preference over the Common Stock,\nthen outstanding, if any.

Other\nrights. The holders of Common Stock have no pre-emptive or conversion rights or other subscription rights. There are no redemption\nor sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of holders of the Common Stock are\nsubject to those of the holders of any shares of the Preferred Stock that the Company may issue in the future.

Preferred\nStock

The\nCertificate of Incorporation authorizes the Company’s board of directors to establish one or more series of Preferred Stock. Unless\nrequired by law or any stock exchange, the authorized shares of Preferred Stock will be available for issuance without further action\nby the holders of Common Stock. The Company’s board of directors has the discretion to determine the powers, preferences and relative,\nparticipating, optional and other special rights, including voting rights, dividend rights, conversion rights, redemption privileges\nand liquidation preferences, of each series of Preferred Stock. The issuance of Preferred Stock may have the effect of delaying, deferring\nor preventing a change in control of the Company without further action by the stockholders. Additionally, the issuance of Preferred\nStock may adversely affect the holders of Common Stock by restricting dividends on the Common Stock, diluting the voting power of the\nCommon Stock or subordinating the liquidation rights of the Common Stock. As a result of these or other factors, the issuance of Preferred\nStock could have an adverse impact on the market price of the Common Stock, restricting dividends on the Company’s capital stock,\ndiluting the voting power of the Common Stock, impairing the liquidation rights of the Company’s capital stock, or delaying or\npreventing a change in control of the Company. At present, there are no plans to issue any Preferred Stock.

Warrants

Public\nWarrants

Each\nwhole Public Warrant will entitle the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject\nto adjustment as discussed below, at any time commencing 30 days after the Closing, provided that the Company has an effective registration\nstatement under the Securities Act covering the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus\nrelating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis under the circumstances\nspecified in the Warrant Agreement) and such shares of Common Stock are registered, qualified or exempt from registration under the securities,\nor blue sky, laws of the state of residence of the holder. Pursuant to the Warrant Agreement, a warrant holder may exercise its Public\nWarrants only for a whole number of shares of Common Stock. This means only a whole Public Warrants may be exercised at a given time\nby a warrant holder. The Public Warrants will expire five years after the Closing, at 5:00 p.m., New York City time, or earlier upon\nredemption or liquidation.

The\nCompany will not be obligated to deliver any shares of Common Stock pursuant to the exercise of a Public Warrant and will have no obligation\nto settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying\nthe Public Warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described\nbelow with respect to registration. No Public Warrants will be exercisable and the Company will not be obligated to issue a share of\nCommon Stock upon exercise of an Public Warrant unless the Common Stock issuable upon such warrant exercise has been registered, qualified\nor deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that\nthe conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such Public\nWarrant will not be entitled to exercise such Public Warrant and such Public Warrant may have no value and expire worthless. In no event\nwill the Company be required to net cash settle any Public Warrant.

The\nPublic Warrants became exercisable 30 days after the Closing. However, because the Public Warrants will be exercisable until their expiration\ndate of up to five years after the Closing, in order to comply with the requirements of Section 10(a)(3) of the Securities Act following\nthe Closing, under the terms of the Warrant Agreement, the Company has agreed that the Company will use its best efforts to file this\nregistration statement to register the Common Stock issuable upon exercise of the Public Warrants and thereafter the Company will use\nits best efforts to cause the same to become effective and to maintain the effectiveness of such post-effective amendment or registration\nstatement, and a current prospectus relating thereto, until the expiration or redemption of the Public Warrants in accordance with the\nprovisions of the Warrant Agreement. If such post-effective amendment or registration statement covering the Common Stock issuable upon\nexercise of the Public Warrants is not effective by the sixtieth (60^th) business day after the Closing, warrant holders may,\nuntil such time as there is an effective post-effective amendment or registration statement and during any period when the Company will\nhave failed to maintain an effective registration statement, exercise Public Warrants on a “cashless basis” in accordance\nwith Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Common Stock is at the time of any\nexercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security”\nunder Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants\nto do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so\nelects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not\nso elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption\nis not available. In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares\nof Common Stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Common Stock\nunderlying the Public Warrants, multiplied by the excess of the “fair market value” (as defined below) over the exercise\nprice of the Public Warrants by (y) the fair market value and (B) 0.361. The “fair market value” as used in this paragraph\nshall mean the average reported closing price of the Common Stock for the 10 trading days ending on the trading day prior to the date\non which the notice of exercise is received by the warrant agent.

Redemption\nof Public Warrants when the price per share of the Common Stock equals or exceeds $18.00.

Once\nthe Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants:

\n \n \n \n \n\n\n \n \n \n\n \n \n \n

	●	in\n whole and not in part;

	●	at\n a price of $0.01 per warrant;

\n \n \n \n \n \n \n \n \n \n \n \n \n

	●	upon\n not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder;\n and

	●	if,\n and only if, the closing price of the shares of Common Stock equals or exceeds $18.00 per share (as adjusted for adjustments to the\n number of shares issuable upon exercise or the exercise price of a Public Warrant as described under the heading “—\n Warrants — Public Warrants — Anti-Dilution Adjustments”) for any 20 trading days within a 30-trading day period\n ending three business days before we send to the notice of redemption to the warrant holders (which we refer to as the “Reference\n Value”).

The\nCompany will not redeem the Public Warrants as described above unless a registration statement under the Securities Act covering the\nissuance of the Common Stock issuable upon exercise of the Public Warrants is then effective and a current prospectus relating to those\nshares of Common Stock is available throughout the 30-day redemption period. If and when the Public Warrants become redeemable, the Company\nmay exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable\nstate securities laws.

We\nhave established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the\ncall a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption\nof the Public Warrants, each warrant holder will be entitled to exercise his, her or its Public Warrant prior to the scheduled redemption\ndate. However, the price of the Common Stock may fall below the $18.00 redemption trigger price (as adjusted for adjustments to the number\nof shares issuable upon exercise or the exercise price of an Public Warrant described under the heading “— Anti-dilution\nAdjustments”) as well as the $11.50 warrant exercise price after the redemption notice is issued.

Redemption\nof Public Warrants when the price per share of the Common Stock equals or exceeds $10.00

Once\nthe Public Warrants become exercisable, the Company may redeem the outstanding warrants:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n\n \n \n \n

	●	in\n whole and not in part;

	●	at\n a price of $0.10 per warrant;

	●	upon\n not less than 30 days’ prior written notice of redemption, provided that holders will be able to exercise their Public Warrants\n on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the\n redemption date and the “fair market value” (as defined below) of Common Stock except as otherwise described below;

	●	if,\n and only if, the Reference Value equals or exceeds $10.00 per share of Common Stock (as adjusted for adjustments to the number of\n shares issuable upon exercise) or the exercise price of a warrant as described under the heading “— Anti-dilution\n Adjustments”; and

	●	if\n the Reference Value is less than $18.00 per share, the Private Placement Warrants must also be concurrently called for redemption\n on the same terms as the outstanding Public Warrants, as described above.

Beginning\non the date the notice of redemption is given until the Public Warrants are redeemed or exercised, holders may elect to exercise their\nPublic Warrants on a cashless basis. The numbers in the table below represent the number of shares of Common Stock that a warrant holder\nwill receive upon such cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair\nmarket value” of Common Stock on the corresponding redemption date (assuming holders elect to exercise their Public Warrants and\nsuch warrants are not redeemed for $0.10 per warrant), determined for these purposes based on the volume weighted average price of the\nCommon Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants,\nand the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the\ntable below. The Company will provide warrant holders with the final fair market value no later than one business day after the 10-trading\nday period described above ends.

The\nshare prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable\nupon exercise of a Public Warrant or the exercise price of a Public Warrant is adjusted as set forth under the heading “—\nAnti-dilution Adjustments” below. If the number of shares issuable upon exercise of Public Warrants is adjusted, the adjusted\nshare prices in the column headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator\nof which is the number of shares deliverable upon exercise of an Public Warrant immediately prior to such adjustment and the denominator\nof which is the number of shares deliverable upon exercise of a Public Warrant as so adjusted. The number of shares in the table below\nshall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a Public Warrant. If the\nexercise price of a warrant is adjusted, (a) in the case of an adjustment pursuant to the fifth paragraph under the heading “—\nAnti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price\nmultiplied by a fraction, the numerator of which is the higher of the Market Value and the Newly Issued Price as set forth under the\nheading “— Anti-dilution Adjustments” and the denominator of which is $10.00 and (b) in the case of an adjustment\npursuant to the second paragraph under the heading “— Anti-dilution Adjustments” below, the adjusted share prices\nin the column headings will equal the unadjusted share price less the decrease in the exercise price of a warrant pursuant to such exercise\nprice adjustment.

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Redemption Date (period\n to	Fair\n Market Value of Common Stock
expiration\n of warrants)	≤10.00		11.00		12.00	13.00	14.00		15.00		16.00	17.00	≥18.00
60 months		0.261		0.281		0.297		0.311		0.324		0.337		0.348	0.358	0.361
57 months		0.257		0.277		0.294		0.310		0.324		0.337		0.348	0.358	0.361
54 months		0.252		0.272		0.291		0.307		0.322		0.335		0.347	0.357	0.361
51 months		0.246		0.268		0.287		0.304		0.320		0.333		0.346	0.357	0.361
48 months		0.241		0.263		0.283		0.301		0.317		0.332		0.344	0.356	0.361
45 months		0.235		0.258		0.279		0.298		0.315		0.330		0.343	0.356	0.361
42 months		0.228		0.252		0.274		0.294		0.312		0.328		0.342	0.355	0.361
39 months		0.221		0.246		0.269		0.290		0.309		0.325		0.340	0.354	0.361
36 months		0.213		0.239		0.263		0.285		0.305		0.323		0.339	0.353	0.361
33 months		0.205		0.232		0.257		0.280		0.301		0.320		0.337	0.352	0.361
30 months		0.196		0.224		0.250		0.274		0.297		0.316		0.335	0.351	0.361
27 months		0.185		0.214		0.242		0.268		0.291		0.313		0.332	0.350	0.361
24 months		0.173		0.204		0.233		0.260		0.285		0.308		0.329	0.348	0.361
21 months		0.161		0.193		0.223		0.252		0.279		0.304		0.326	0.347	0.361
18 months		0.146		0.179		0.211		0.242		0.271		0.298		0.322	0.345	0.361
15 months		0.130		0.164		0.197		0.230		0.262		0.291		0.317	0.342	0.361
12 months		0.111		0.146		0.181		0.216		0.250		0.282		0.312	0.339	0.361
9 months		0.090		0.125		0.162		0.199		0.237		0.272		0.305	0.336	0.361
6 months		0.065		0.099		0.137		0.178		0.219		0.259		0.296	0.331	0.361
3 months		0.034		0.065		0.104		0.150		0.197		0.243		0.286	0.326	0.361
0 months		—		—		0.042		0.115		0.179		0.233		0.281	0.323	0.361

The\nexact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between\ntwo values in the table or the redemption date is between two redemption dates in the table, the number of shares of Common Stock to\nbe issued for each Public Warrant exercised will be determined by a straight-line interpolation between the number of shares set forth\nfor the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or 366-day year,\nas applicable. For example, if the volume weighted average price of Common Stock during the 10 trading days immediately following the\ndate on which the notice of redemption is sent to the holders of the warrants is $11.00 per share, and at such time there are 57 months\nuntil the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for\n0.277 shares of Common Stock for each whole warrant. For an example where the exact fair market value and redemption date are not as\nset forth in the table above, if the volume weighted average price of Common Stock during the 10 trading days immediately following the\ndate on which the notice of redemption is sent to the holders of the warrants is $13.50 per share, and at such time there are 38 months\nuntil the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for\n0.298 shares of Common Stock for each whole warrant. In no event will the Public Warrants be exercisable on a cashless basis in connection\nwith this redemption feature for more than 0.361 shares of Common Stock per warrant (subject to adjustment). Finally, as reflected in\nthe table above, if the Public Warrants are out of the money and about to expire, they cannot be exercised on a cashless basis in connection\nwith a redemption by us pursuant to this redemption feature, since they will not be exercisable for any shares of Common Stock.

This\nredemption feature is structured to allow for all of the outstanding Public Warrants to be redeemed when the Common Stock is trading\nat or above $10.00 per share, which may be at a time when the trading price of the Common Stock is below the exercise price of the Public\nWarrants. We have established this redemption feature to provide us with the flexibility to redeem the Public Warrants without the Public\nWarrants having to reach the $18.00 per share threshold set forth above under “— Redemption of Public Warrants when the\nprice per share of Common Stock equals or exceeds $18.00.” Holders choosing to exercise their Public Warrants in connection\nwith a redemption pursuant to this feature will, in effect, receive a number of shares for their warrants based on an option pricing\nmodel with a fixed volatility input as of the date of the prospectus. This redemption right provides us with an additional mechanism\nby which to redeem all of the outstanding warrants, and therefore have certainty as to our capital structure as the warrants would no\nlonger be outstanding and would have been exercised or redeemed and we will be required to pay the applicable redemption price to warrant\nholders if we choose to exercise this redemption right and it will allow us to quickly proceed with a redemption of the Public Warrants\nif we determine it is in our best interest to do so. As such, we would redeem the Public Warrants in this manner when we believe it is\nin our best interest to update our capital structure to remove the warrants and pay the applicable redemption price to the warrant holders.

As\nstated above, we can redeem the Public Warrants when the Common Stock is trading at a price starting at $10.00, which is below the exercise\nprice of $11.50, because it will provide certainty with respect to our capital structure and cash position while providing warrant holders\nwith the opportunity to exercise their Public Warrants on a cashless basis for the applicable number of shares. If we choose to redeem\nthe Public Warrants when the Common Stock is trading at a price below the exercise price of the Public Warrants, this could result in\nthe warrant holders receiving fewer shares than they would have received if they had chosen to wait to exercise their warrants for shares\nof Common Stock if and when the Common Stock was trading at a price higher than the exercise price of $11.50.

No\nfractional shares of Common Stock will be issued upon exercise. If, upon exercise, a holder would be entitled to receive a fractional\ninterest in a share, we will round down to the nearest whole number of the number of shares to be issued to the holder. If, at the time\nof redemption, the Public Warrants are exercisable for a security other than shares of Common Stock pursuant to the Warrant Agreement,\nthe Public Warrants may be exercised for such security. At such time as the Public Warrants become exercisable for a security other than\nCommon Stock, the Company will use its commercially reasonable efforts to register under the Securities Act the security issuable upon\nexercise of the warrants.

Redemption\nProcedures

In\nthe event that the Company determines to redeem the Public Warrants when the closing price of the shares of Common Stock equals or exceeds\n$18.00 per share or $10.00 per share, pursuant to Section 6.1 or Section 6.2 of the Warrant Agreement, respectively, the Company will\nfix a date for the redemption. Notice of redemption will be mailed by first class mail, postage prepaid, by the Company not less than\nthirty (30) days prior to the redemption date to the registered holders of the Public Warrants to be redeemed at their last addresses\nas they appear on the registration books. Any notice mailed in the manner herein provided will be conclusively presumed to have been\nduly given whether or not the registered holder received such notice.

Beneficial\nOwnership Limitations

A\nholder of a Public Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have\nthe right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s\naffiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.9% (as specified by the holder)\nof the Common Stock outstanding immediately after giving effect to such exercise.

Anti-dilution\nAdjustments.

If\nthe number of outstanding shares of Common Stock is increased by a share capitalization payable in shares of Common Stock, or by a sub-division\nof shares or other similar event, then, on the effective date of such share capitalization, sub-division or similar event, the number\nof shares of Common Stock issuable on exercise of each Public Warrant will be increased in proportion to such increase in the outstanding\nshares. A rights offering made to all or substantially all holders of securities entitling holders to purchase shares of Common Stock\nat a price less than the fair market value will be deemed a share capitalization of a number of shares equal to the product of (i) the\nnumber of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights\noffering that are convertible into or exercisable for Common Stock) and (ii) the quotient of (x) the price per share of Common Stock\npaid in such rights offering and (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible\ninto or exercisable for Common Stock, in determining the price payable for Common Stock, there will be taken into account any consideration\nreceived for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume\nweighted average price of Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first\ndate on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right\nto receive such rights.

In\naddition, if the Company, at any time while the Public Warrants are outstanding and unexpired, pay a dividend or make a distribution\nin cash, securities or other assets to all or substantially all of the holders of the Common Stock on account of such Common Stock (or\nother securities into which the Public Warrants are convertible), other than (a) as described above or (b) any cash dividends or cash\ndistributions which, when combined on a per share basis with all other cash dividends and cash distributions paid on the Common Stock\nduring the 365-day period ending on the date of declaration of such dividend or distribution does not exceed $0.50 (as adjusted to appropriately\nreflect any other adjustments and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price\nor to the number of shares of Common Stock issuable on exercise of each warrant) but only with respect to the amount of the aggregate\ncash dividends or cash distributions equal to or less than $0.50 per share, then the warrant exercise price will be decreased, effective\nimmediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets\npaid on each share of Common Stock in respect of such event.

If\nthe number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse share sub-division or reclassification\nof Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse share sub-division, reclassification\nor similar event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be decreased in proportion to\nsuch decrease in outstanding shares of Common Stock.

Whenever\nthe number of shares of Common Stock purchasable upon the exercise of the Public Warrants is adjusted, as described above, the warrant\nexercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the\nnumerator of which will be the number of shares purchasable upon the exercise of the warrants immediately prior to such adjustment, and\n(y) the denominator of which will be the number of shares so purchasable immediately thereafter.

In\ncase of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely\naffects the par value of such shares), or in the case of any merger or consolidation of us with or into another corporation (other than\na consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization\nof our issued and outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the\nassets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders\nof the Public Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified\nin the Public Warrants and in lieu of the Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights\nrepresented thereby, the kind and amount of shares or other securities or property (including cash) receivable upon such reclassification,\nreorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Public Warrants\nwould have received if such holder had exercised their Public Warrants immediately prior to such event. However, if such holders were\nentitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation\nor merger, then the kind and amount of securities, cash or other assets for which each Public Warrant will become exercisable will be\ndeemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively\nmake such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders under circumstances in\nwhich, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of\nRule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within\nthe meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part,\nown beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the issued and outstanding Common Stock,\nthe holder of an Public Warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder\nwould actually have been entitled as a shareholder if such warrant holder had exercised the Public Warrant prior to the expiration of\nsuch tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had been purchased pursuant to such\ntender or exchange offer, subject to adjustment (from and after the consummation of such tender or exchange offer) as nearly equivalent\nas possible to the adjustments provided for in the Warrant Agreement. If less than 70% of the consideration receivable by the holders\nof Common Stock in such a transaction is payable in the form of shares in the successor entity that is listed for trading on a national\nsecurities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following\nsuch event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure\nof such transaction, the warrant exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes Warrant\nValue (as defined in the warrant agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value\nto holders of the Public Warrants when an extraordinary transaction occurs during the exercise period of the Public Warrants pursuant\nto which the holders of the warrants otherwise do not receive the full potential value of the Public Warrants.

The\nPublic Warrants are issued in registered form under a Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant\nagent, and CSLM. The Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder\nfor the purpose of (i) curing any ambiguity or to correct any defective provision or mistake, including to conform the provisions of\nthe Warrant Agreement to the description of the terms of the Public Warrants and the Warrant Agreement, (ii) adjusting the provisions\nrelating to cash dividends on shares as contemplated by and in accordance with the Warrant Agreement or (iii) adding or changing any\nprovisions with respect to matters or questions arising under the Warrant Agreement as the parties to the Warrant Agreement may deem\nnecessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the Public Warrants,\nprovided that the approval by the holders of at least 50% of the then-outstanding Public Warrants is required to make any change that\nadversely affects the interests of the registered holders of Public Warrants, and, solely with respect to any amendment to the terms\nof the Private Placement Warrants, 50% of the then outstanding Private Placement Warrants. You should review a copy of the Warrant Agreement,\nwhich is filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms\nand conditions applicable to the Public Warrants.

The\nPublic Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant\nagent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full\npayment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number\nof warrants being exercised. The warrant holders do not have the rights or privileges of holders of shares of Common Stock and any voting\nrights until they exercise their warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise\nof the Public Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.

No\nfractional shares will be issued upon exercise of the Public Warrants. If, upon exercise of the Public Warrants, a holder would be entitled\nto receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Common\nStock to be issued to the warrant holder.

Exclusive\nForum

The\nWarrant Agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating\nin any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New\nYork or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction,\nwhich jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive\njurisdiction and that such courts represent an inconvenient forum.

Private\nPlacement Warrants

The\nPrivate Placement Warrants (including shares of Common Stock issuable upon exercise of such warrants) will not be transferable, assignable\nor salable until 30 days after the Closing (except, among other limited exceptions, to CSLM’s officers and directors and other\npersons or entities affiliated with the Sponsor) and they will not be redeemable by the Company so long as they are held by the Sponsor,\nmembers of the Sponsor or their permitted transferees (except as set forth under “— Warrants — Public Warrants —\nRedemption of Public Warrants when the price per share of Common Stock equals or exceeds $10.00”). The Sponsor or its permitted\ntransferees have the option to exercise the Private Placement Warrants on a cashless basis. Except as described below, the Private Placement\nWarrants have terms and provisions that are identical to those of the warrants sold as part of the Units in CSLM’s IPO. If the\nPrivate Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will\nbe redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units sold in CSLM’s\nIPO.

Except\nas described above under “— Public Warrants — Redemption of Public Warrants when the price per share of Common Stock\nequals or exceeds $10.00,” if holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would\npay the exercise price by surrendering his, her or its warrants for that number of shares of Common Stock equal to the quotient obtained\nby dividing (x) the product of the number of shares underlying the Public Warrants, multiplied by the excess of the “fair market\nvalue” of the Common Stock (as defined below) over the exercise price of the warrants by (y) the fair market value. The “fair\nmarket value” means the average reported closing price of the Common Stock for the 10 trading days ending on the third trading\nday prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these\nwarrants will be exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees is because it was\nnot known at the time of CSLM’s IPO whether the Sponsor would be affiliated with us following a business combination. If the Sponsor\nremains affiliated with the Company, its ability to sell Company securities in the open market will be significantly limited. The Company\nhas policies in place that prohibit insiders from selling securities except during specific periods of time. Even during such periods\nof time when insiders will be permitted to sell Company securities, an insider cannot trade in Company securities if he or she is in\npossession of material non-public information. Accordingly, unlike public stockholders who could exercise their Public Warrants and sell\nthe shares received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be\nsignificantly restricted from selling such securities.

Convertible\nNotes

On\nAugust 2, 2026, the Company issued Original Issue Discount Senior Unsecured Convertible Promissory Notes due February 12, 2027 (each,\na “Note” and collectively, the “Notes”), in the aggregate original principal amount of $2,500,000, for an aggregate\npurchase price of $2,050,000, reflecting an 18% original issue discount, to the August 2026 Purchasers pursuant to the August 2026 SPA.

Conversion.\nThe Notes are convertible into shares of Common Stock, in whole or in part, at the option of the holder at any time on or after the original\nissue date. The number of shares issuable upon conversion is determined by dividing the principal amount being converted by the conversion\nprice. The conversion price is $4.20 per share, subject to adjustment as described below (the “Conversion Price”). The Conversion\nPrice is not subject to reset, ratchet or variable-rate adjustment of any kind.

No\nInterest; Default Premium. The Notes are zero-coupon notes issued with original issue discount and do not bear interest,\nexcept that upon an Event of Default the outstanding principal will bear simple interest at an annual rate of 18% until\nrepaid.

Ranking.\nEach Note is a senior unsecured obligation of the Company. The company shall not, without prior written consent, incur any indebtedness,\nsenior to, or pari passu with, the Notes in right of payment, other than certain permitted indebtedness described in the Notes.

Maturity.\nThe Notes mature on February 12, 2027, unless earlier converted or repaid in accordance with its terms.

Optional\nPrepayment. The Company may prepay the Notes, in whole or in part, at any time without premium or penalty, upon not less than five\nbusiness days’ prior written notice to the holder. Each holder retains the right to convert their Note prior to the date of any such\nprepayment.

Mandatory\nPrepayment. For so long as a Note remains outstanding, 33% of all proceeds received by the Company under the Forward Purchase Agreement\nand 33% of the net proceeds of each financing transaction consummated by the Company must be applied to repayment of the outstanding\nprincipal amount of the Note at 100% of face value, until the Note is repaid in full.

Beneficial\nOwnership Limitation. The Company may not effect any conversion, and the holder may not convert any portion of a Note, to the extent\nthat, after giving effect to the conversion, the holder, together with its affiliates and attribution parties, would beneficially own\nin excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.

Exchange\nCap. The Company may not issue shares of Common Stock upon conversion of the Notes or exercise of the Warrants (or any related securities)\nin an aggregate amount exceeding the number of shares that the Company may issue without breaching the rules or regulations of The Nasdaq\nStock Market, including Nasdaq Listing Rule 5635(d), unless the Company obtains stockholder approval or a legal opinion that such approval\nis not required.

Anti-Dilution\nAdjustments. The Conversion Price is subject to equitable adjustment in the event the Company, while the Notes are outstanding: (i)\npays a stock dividend or makes a distribution payable in shares of Common Stock; (ii) subdivides outstanding shares of Common Stock into\na larger number of shares; (iii) combines outstanding shares of Common Stock into a smaller number of shares, including by way of a reverse\nstock split; or (iv) issues shares of capital stock in connection with a reclassification of shares of Common Stock. In each case, the\nConversion Price is multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately\nbefore such event (excluding treasury shares) and the denominator of which is the number of shares outstanding immediately after such\nevent.

Subsequent\nRights Offerings. If the Company grants, issues or sells any Common Stock equivalents or rights to purchase stock, warrants, securities\nor other property pro rata to the holders of any class of Common Stock, the holder of a Note will be entitled to acquire, upon the terms\napplicable to such rights, the aggregate rights which the holder could have acquired if it had held the number of shares of Common Stock\nacquirable upon complete conversion of the Note immediately before the applicable record date.

Fundamental\nTransactions. If the Company effects any merger or consolidation, sale of all or substantially all of its assets, tender or exchange\noffer, or reclassification or compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or\nproperty, the holder will have the right to receive, upon any subsequent conversion, the same kind and amount of consideration that it\nwould have been entitled to receive if it had held the applicable shares of Common Stock immediately prior to such transaction.

Events\nof Default. Events of Default under the Notes include, among others: failure to pay principal or other amounts when due; failure\nto deliver conversion shares within five trading days after a conversion date; failure to observe material covenants under the Notes\nor specified provisions of the August 2026 SPA; material breach of representations or warranties; bankruptcy events; cross-defaults involving\nindebtedness exceeding $250,000; failure of the Common Stock to remain listed on a qualifying trading market for three consecutive trading\ndays; failure to file or maintain the effectiveness of the registration statement within the deadlines specified in the August 2026 SPA;\nfailure to maintain the required share reserve; failure to remain current in Exchange Act reporting; and a Change of Control Transaction\nin which the Notes are not assumed or repaid. Upon an Event of Default, the holder may accelerate the outstanding principal and all other\namounts due under the Notes, and the outstanding principal will bear simple interest at an annual rate of 18% until repaid.

Negative\nCovenants. For so long as a Note remains outstanding, the Company may not, without the applicable holder’s prior written consent:\n(i) enter into any variable rate transaction, as defined in the Notes; (ii) incur additional indebtedness other than permitted indebtedness;\n(iii) create or reclassify any security senior to or pari passu with the Notes, other than specified permitted indebtedness; or (iv)\namend its charter documents in a manner that materially and adversely affects the holder’s rights.

Voluntary\nConversion Price Reduction. Notwithstanding the foregoing, subject to the rules and regulations of the principal market, the Company\nmay, at any time and upon prior written notice to the holder, reduce the then-current Conversion Price to any amount and for any period\nof time deemed appropriate by the board of directors of the Company.

August\n2026 Warrants

Concurrently\nwith the issuance of the Notes, the Company issued the August 2026 Warrants to the August 2026 Purchasers to purchase up\nto an aggregate of 2,050,000 shares of Common Stock, pursuant to the August 2026 SPA.

Exercise.\nThe August 2026 Warrants are exercisable at any time on or after the initial exercise date and on or prior to 5:00 p.m. (New York City\ntime) on the date that is five years following the initial exercise date. The August 2026 Warrants are exercisable solely by payment\nof the aggregate exercise price in cash; in no event may the August 2026 Warrants be exercised on a cashless, net-share or “net”\nexercise basis.

Exercise\nPrice. The exercise price per share of Common Stock under the August 2026 Warrants is $4.20 per share, subject to adjustment as described\nbelow (the “Exercise Price”).

Beneficial\nOwnership Limitation. The Company may not effect any exercise, and the holder may not exercise any portion of an August 2026 Warrant,\nto the extent that, after giving effect to such exercise, the holder, together with its affiliates and attribution parties, would beneficially\nown in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise.

Anti-Dilution\nAdjustments. The Exercise Price and the number of shares issuable upon exercise are subject to proportional adjustment if the Company,\nwhile the August 2026 Warrants are outstanding: (i) pays a stock dividend or makes a distribution payable in shares of Common Stock or\nCommon Stock equivalents; (ii) subdivides outstanding shares of Common Stock into a larger number of shares; (iii) combines outstanding\nshares of Common Stock into a smaller number of shares, including by way of a reverse stock split; or (iv) issues shares of capital stock\nin connection with a reclassification of shares of Common Stock. In each case, the Exercise Price is multiplied by a fraction, the numerator\nof which is the number of shares of Common Stock outstanding immediately before such event (excluding treasury shares) and the denominator\nof which is the number of shares outstanding immediately after such event, and the number of shares issuable upon exercise is proportionately\nadjusted such that the aggregate exercise price of the August 2026 Warrant remains unchanged.

Subsequent\nRights Offerings. If the Company grants, issues or sells any Common Stock equivalents or rights to purchase stock, warrants, securities\nor other property pro rata to the record holders of any class of Common Stock, the holder of an August 2026 Warrant will be entitled\nto acquire, upon the terms applicable to such rights, the aggregate rights which the holder could have acquired if it had held the number\nof shares of Common Stock acquirable upon complete exercise of the August 2026 Warrant immediately before the applicable record date.

Voluntary\nExercise Price Reduction. Subject to the prior receipt of any required stockholder approval and the rules and regulations of the\nprincipal market, the Company may at any time during the term of the August 2026 Warrants reduce the then-current Exercise Price to any\namount and for any period of time deemed appropriate by the board of directors of the Company.

Transferability.\nThe August 2026 Warrants and all rights thereunder are transferable, subject to compliance with applicable securities laws, upon the\nprior written consent of the Company and surrender of the warrant together with a written assignment and any required transfer tax payment.

Survival.\nThe August 2026 Warrants survive, and remain outstanding and unaffected by, any prepayment, repayment or conversion of the Note.

No\nRights as Stockholder. The August 2026 Warrants do not entitle the holder to any voting rights, dividends or other rights as a stockholder\nof the Company prior to exercise.

Dividends

The\nCompany does not intend to pay cash dividends after the completion of the Business Combination. The payment of cash dividends in the\nfuture will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion\nof the Business Combination. The payment of any cash dividends subsequent to the Business Combination will be within the discretion of\nthe Company’s board of directors at such time. If we incur any indebtedness, our ability to declare dividends may be limited by\nrestrictive covenants we may agree to in connection therewith.

Our\nTransfer Agent and Warrant Agent

The\ntransfer agent for the Common Stock and warrant agent for our Public Warrants is Continental Stock Transfer & Trust Company.\nWe have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents\nand each of its shareholders, directors, officers and employees against all claims and losses that may arise out of acts performed or\nomitted for its activities in that capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified\nperson or entity. Continental Stock Transfer & Trust Company has agreed that it has no right of set-off or any right, title, interest\nor claim of any kind to, or to any monies in, the Trust Account, and has irrevocably waived any right, title, interest or claim of any\nkind to, or to any monies in, the Trust Account that it may have now or in the future. Accordingly, any indemnification provided will\nonly be able to be satisfied, or a claim will only be able to be pursued, solely against us and our assets outside the Trust Account\nand not against the any monies in the Trust Account or interest earned thereon.

Certain\nAnti-Takeover Provisions of the Certificate of Incorporation, the Bylaws and Certain Provisions of Delaware Law

The\nOrganizational Documents and the DGCL contain provisions, which are summarized in the following paragraphs, which are intended to enhance\nthe likelihood of continuity and stability in the composition of the Company’s board of directors and to discourage certain types\nof transactions that may involve an actual or threatened acquisition of the Company. These provisions are intended to avoid costly takeover\nbattles, reduce the Company’s vulnerability to a hostile change of control or other unsolicited acquisition proposal, and enhance\nthe ability of the Company’s board of directors to maximize stockholder value in connection with any unsolicited offer to acquire\nthe Company. However, these provisions may have the effect of delaying, deterring or preventing a merger or acquisition of the Company\nby means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including\nattempts that might result in a premium over the prevailing market price for the shares of Common Stock. The Certificate of Incorporation\nprovides that any action required or permitted to be taken by the Company’s stockholders must be effected at a duly called annual\nor special meeting of stockholders and may not be effected by any consent in writing by such holders, except that any action required\nor permitted to be taken by holders of any series of Preferred Stock, voting separately as a series or separately as a class with one\nor more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly permitted\nto do so by the certificate of designation relating to one or more series of Preferred Stock, if a consent or consents, setting forth\nthe action so taken, are signed by the holders of outstanding shares of the relevant class or series having not less than the minimum\nnumber of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were\npresent and voted and are delivered to the Company in accordance with the applicable provisions of the DGCL.

Authorized\nbut Unissued Capital Stock

Delaware\nlaw does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of Nasdaq, which would\napply if and so long as the Common Stock remains listed on Nasdaq, require stockholder approval of certain issuances equal to or exceeding\n20% of the then outstanding voting power or then outstanding number of shares of Common Stock. Additional shares that may be issued in\nthe future may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate\nacquisitions. One of the effects of the existence of unissued and unreserved Company capital stock may be to enable the Company’s\nboard of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage\nan attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise and thereby protect the continuity\nof management and possibly deprive stockholders of opportunities to sell their shares of Common Stock at prices higher than prevailing\nmarket prices.

Election\nof Directors and Vacancies

The\nCertificate of Incorporation provides that the Company’s board of directors will determine the number of directors who will serve\non the board. The exact number of directors will be fixed from time to time by a majority of the Company’s board of directors.\nWe currently have five members of our board of directors. Our board of directors is classified board, divided into three classes, designated\nas Class I, Class II and Class III. Our Class I directors will hold office for a term expiring at the first annual meeting of stockholders\nfollowing the consummation of the Business Combination; our Class II directors will hold office for a term expiring at the second annual\nmeeting of stockholders following the consummation of the Business Combination; and our Class III directors will hold office for a term\nexpiring at the third annual meeting of stockholders following the consummation of the Business Combination.

In\naddition, the Certificate of Incorporation provides that any vacancy on the Company’s board of directors, including a vacancy that\nresults from an increase in the number of directors or a vacancy that results from the removal of a director with cause, may be filled\nonly by a majority of the directors then in office, subject to any rights of the holders of Preferred Stock.

Quorum

The\nBylaws provide that at any meeting of the Company’s board of directors, a majority of the total number of directors then in office\nconstitutes a quorum for the transaction of business.

No\nCumulative Voting

Under\nDelaware law, the right to vote cumulatively does not exist unless the certificate of incorporation expressly authorizes cumulative voting.\nThe Certificate of Incorporation does not authorize cumulative voting.

Special\nMeetings of Stockholders

The\nCertificate of Incorporation provides that special meetings of stockholders may be called only by or at the direction of the Company’s\nboard of directors, the Chairperson of Company’s board of directors, the Chief Executive Officer or President, in each case, in\naccordance with the Bylaws.

Requirements\nfor Advance Notification of Stockholder Meetings, Nominations and Proposals

The\nBylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors,\nother than nominations made by or at the direction of the Company’s board of directors or a committee of the Company’s board\nof directors. For any matter to be “properly brought” before a meeting, a stockholder will have to comply with advance notice\nrequirements and provide the Company with certain information. Generally, to be timely, a stockholder’s notice must be received\nat the Company’s principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of\nthe immediately preceding annual meeting of stockholders (for the purposes of the first annual meeting of the stockholders of the Company\nfollowing the adoption of the Bylaws, the date of the preceding annual meeting will be deemed to be in 2026). The Bylaws allow the Company’s\nboard of directors to adopt rules and regulations for the conduct of a meeting of the stockholders as it deems appropriate, which may\nhave the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions\nmay also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own\nslate of directors or otherwise attempting to influence or obtain control of the Company.

Supermajority\nProvisions

The\nOrganizational Documents provide that the Company’s board of directors is expressly authorized to adopt, amend or repeal, in whole\nor in part, the Bylaws without a stockholder vote in any matter not inconsistent with the laws of the State of Delaware or the Certificate\nof Incorporation. The stockholders of the Company also will have the power to adopt, amend or repeal the Bylaws by the affirmative vote\nof the holders of at least a majority of the voting power of all of the then outstanding shares of stock of the Company entitled to vote\ngenerally in an election of directors, voting together as a single class, subject to any vote of the holders of any class or series of\nstock of the Company required by applicable law or by the Certificate of Incorporation (including any certificate of designation in respect\nof any series of Preferred Stock) or the Bylaws.

The\nDGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote thereon, voting together as\na single class, is required to amend a corporation’s certificate of incorporation, unless the certificate of incorporation requires\na greater percentage. The Certificate of Incorporation provides that the following provisions therein may be amended, altered, repealed\nor rescinded only by the affirmative vote of the holders of at least 66 and 2/3% in voting power all the then outstanding shares of Company’s\nstock entitled to vote thereon, voting together as a single class:

	●	the\n provision regarding the Company’s board of directors being authorized to establish one or more series of Preferred Stock with\n such powers, preferences and relative, participating, optional and other special rights, including voting rights, dividend rights,\n conversion rights, redemption privileges and liquidation preferences as the Company’s board of directors may determine;

	●	the\n provisions regarding removal of directors;

	●	the\n provisions regarding filling vacancies on the Company’s board of directors and newly created directorships;

	●	the\n provision regarding the Company’s board of directors being authorized to amend the Bylaws without a stockholder vote;

	●	the\n provisions regarding stockholder action by written consent;

	●	the\n provisions regarding calling special meetings of stockholders;

	●	the\n provisions regarding stockholder nominations for the election of directors and of other business proposed to be brought by stockholders\n before any meeting of the stockholders;

	●	the\n provisions regarding limitation on liability and indemnification of the Company’s directors and officers;

	●	the\n provisions regarding the Company electing not to be governed by Section 203 of the DGCL;

	●	the\n provisions adopting Delaware as the exclusive forum for certain stockholder litigation and adopting the federal district courts of\n the United States as the exclusive forum for resolving complaints asserting a cause of action under the Securities Act;

	●	the\n provisions regarding the Company renouncing its interest or expectancy in any corporate opportunity offered to any of its non-employee\n directors or principal stockholders and their affiliates; and

	●	the\n amendment provision requiring that the above provisions be amended only with a 66 and 2/3% supermajority vote.

These\nprovisions may have the effect of deterring hostile takeovers or delaying or preventing changes in control of the Company or its management,\nsuch as a merger, reorganization or tender offer. These provisions are intended to enhance the likelihood of continued stability in the\ncomposition of the Company’s board of directors and its policies and to discourage certain types of transactions that may involve\nan actual or threatened acquisition of the Company. These provisions are designed to reduce the Company’s vulnerability to an unsolicited\nacquisition proposal. The provisions are also intended to discourage certain tactics that may be used in proxy fights. However, such\nprovisions could have the effect of discouraging others from making tender offers for Common Stock and, as a consequence, may inhibit\nfluctuations in the market price of Common Stock that could result from actual or rumored takeover attempts. Such provisions may also\nhave the effect of preventing changes in management.

Exclusive\nForum

The\nCertificate of Incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, the Court\nof Chancery of the State of Delaware (or, if and only if the Court of Chancery lacks subject matter jurisdiction, any state court located\nwithin the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for\nthe District of Delaware) and any appellate court thereof shall, to the fullest extent permitted by law, be the sole and exclusive forum\nfor the following claims or causes of action under the Delaware statutory or common law: (i) any derivative action, suit or proceeding\nbrought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current\nor former director, officer or other employee of the Company to the Company or the Company stockholders, (iii) any action, suit or proceeding\nagainst the Company or any current or former director, officer or other employee of the Company arising pursuant to any provision of\nthe DGCL or the Certificate of Incorporation or the Bylaws (as each may be amended from time to time), (iv) any claim or cause of action\nseeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws (as each may be amended\nfrom time to time, including any right, obligation, or remedy thereunder), (v) any action, suit or proceeding as to which the DGCL confers\njurisdiction on the Chancery Court, or (vi) any action, suit or proceeding asserting a claim against the Company or any current or former\ndirector, officer or other employee of the Company governed by the internal affairs doctrine or otherwise related to the Company’s\ninternal affairs, in all cases to the fullest extent permitted by law and subject to the court having personal jurisdiction over the\nindispensable parties named as defendants. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring\nor holding any interest in shares of capital stock of the Company will be deemed to have notice of and consented to the forum provisions\nin the Certificate of Incorporation. The Certificate of Incorporation further provides that unless the Company consents in writing to\nthe selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States will\nbe the exclusive forum for the resolutions of any complaint asserting a cause of action arising under the Securities Act. This provision\nin the Certificate of Incorporation does not apply to any claim or action arising under the Exchange Act or any other claim for which\nthe federal courts of the United States have exclusive jurisdiction; however, Section 27 of the Exchange Act creates exclusive federal\njurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.\nHowever, it is possible that a court could find the Company’s forum selection provisions to be inapplicable or unenforceable. The\nprovision may have the effect of discouraging lawsuits against the Company’s directors and officers.

Conflicts\nof Interest

Delaware\nlaw permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the\ncorporation or its officers, directors or stockholders. The Certificate of Incorporation, to the maximum extent permitted from time to\ntime by Delaware law, renounces any interest or expectancy that the Company has in, or right to be offered an opportunity to participate\nin, specified business opportunities that are from time to time presented to a member of the Company’s board of directors who is\nnot an employee of the Company or its subsidiaries, or the principal stockholders of the Company and their affiliates. The Certificate\nof Incorporation does not renounce the Company’s interest in any business opportunity that is expressly offered to a non-employee\ndirector solely in his or her capacity as a director or officer of the Company.

Limitations\non Liability and Indemnification of Officers and Directors

The\nDGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary\ndamages for breaches of directors’ fiduciary duties, subject to certain exceptions.

The\nCertificate of Incorporation includes a provision that eliminates the personal liability of directors and officers for monetary damages\nfor any breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation thereof is\nnot permitted under the DGCL. The effect of these provisions is to eliminate the rights of the Company and its stockholders, through\nstockholders’ derivative suits on the Company’s behalf, to recover monetary damages from a director or officer for breach\nof fiduciary duty as a director or officer, including breaches resulting from grossly negligent behavior. However, exculpation does not\napply to any director or officer if the director or officer has acted in bad faith, knowingly or intentionally violated the law, authorized\nillegal dividends or redemptions or derived an improper benefit from his or her actions as a director or officer.

The\nlimitation of liability provision in the Certificate of Incorporation and the Bylaws may discourage stockholders from bringing a lawsuit\nagainst directors or officers for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood\nof derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit the Company\nand its stockholders. In addition, your investment may be adversely affected to the extent the Company pays the costs of settlement and\ndamage awards against directors and officers pursuant to any indemnity agreements that may be entered into.

Insofar\nas indemnification for liabilities arising under the Securities Act may be permitted to the Company’s directors, officers and controlling\npersons pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification\nis against public policy as expressed in the Securities Act and is, therefore, unenforceable.

There\nis currently no pending material litigation or proceeding involving any of the Company’s directors, officers or employees for which\nindemnification is sought.

Listing

Our\nCommon Stock and Public Warrants are listed on the Nasdaq Global Market under the symbols “FUSE” and “FUSEW”,\nrespectively.

SELLING\nSTOCKHOLDERS

We\nare registering the shares of Common Stock in order to permit the Selling Stockholders to offer the shares for resale from time to time.\nExcept as described below, the Selling Stockholders have not had any material relationship with us within the past three years.

On\nJuly 31, 2025, CSLM Acquisition Corp. entered into the Forward Purchase Agreement with the Meteora Parties. On October\n22, 2025, upon the consummation of the Business Combination, the Company issued Shortfall Warrants to the Meteora Parties in connection\nwith the FPA. On February 3, 2026, the Company entered into an amendment to the FPA and an amendment to the Shortfall Warrants with the\nMeteora Parties.

On\nAugust 2, 2026, the Company entered into a Securities Purchase Agreement with the August 2026 Purchasers, pursuant to which it\nissued the Notes and August 2026 Warrants. The shares registered for resale by the August 2026 Purchasers in this prospectus\nconsist of shares issuable upon conversion of the Notes and exercise of the August 2026 Warrants.

On\nAugust 3, 2026, the Company entered into a Second Forward Purchase Agreement Confirmation Amendment and a Second Common Stock\nPurchase Warrant Amendment amending the Company’s pre-existing Forward Purchase Agreement and Shortfall Warrants with the Meteora\nParties.

On\nSeptember 10, 2026, the Company entered into the Vendor SPA with certain vendors and service providers of the Company (the “Vendors”),\npursuant to which the Company agreed to issue and sell to the Vendors an aggregate of up to 2,138,935 shares of Common Stock in satisfaction\nof an aggregate of approximately $1.31 million in accrued and unpaid fees and other amounts owed by the Company to the Vendors.\nNo cash consideration was received by the Company; the sole consideration for the Vendor Shares was the satisfaction and cancellation\nof the accrued fees. Shrestha Global EPG Advisory LLC, which was issued 247,158 shares pursuant to the Vendor SPA, is affiliated with\nSanjay Shrestha, who served as a member of the Board, as the\nchair of the Compensation Committee, and as a member of each of the Audit Committee and the Nominating Committee until his resignation\non May 31, 2026.

On\nSeptember 21, 2026, the Company entered into the Retail Volts MSA with Retail Volts, pursuant to which Retail Volts provides for retail\ninvestor communications and marketing services through Gatewatch.AI and RetailVolts Media Agency, delivered in successive one-month service\nblocks. The Company placed a purchase order for four service blocks, payable in advance at 30,000 shares per service block, for an aggregate\nof 120,000 shares of Common Stock. No cash consideration was received by the Company. The sole consideration for the Retail Volts Shares\nwas the four service blocks.

For\nmore information regarding the foregoing transactions, see “Description of Securities,” “Recent Developments,”\nand Notes 14, 15 and 17 to the unaudited condensed consolidated interim financial statements included elsewhere in this prospectus.

The\ntable below lists the Selling Stockholders and other information regarding the beneficial ownership of shares of Common Stock by the\nSelling Stockholders. The second column lists the number of shares of Common Stock beneficially owned by the Selling Stockholders as\nof October 2, 2026, assuming the exercise of 200% of the August 2026 Warrants and conversion of the Notes as of such date.\nThe third column lists the shares of Common Stock being offered by this prospectus by the Selling Stockholders. The fourth column lists\nthe shares of Common Stock held by the Selling Stockholders after completion of this offering, assuming the exercise of 200% of\nthe August 2026 Warrants and conversion of the Notes. The fifth column lists the percentage ownership held by the Selling Stockholders\nafter completion of this offering if such percentage exceeds 1% of the total number of shares of Common Stock outstanding at that time.\nThe information presented regarding the Selling Stockholders is based, in part, on information the Selling Stockholders provided to us\nin writing specifically for use in this prospectus. The Selling Stockholders may sell all, some or none of their shares in this offering.\nSee “Plan of Distribution.”

In\naddition to the assumptions described above, beneficial ownership is determined in accordance with the rules of the SEC and generally\nincludes voting or investment power over securities. To our knowledge, unless otherwise indicated, the stockholder named in the table\nbelow has sole voting and investment power with respect to its shares of Common Stock. Percentage of beneficial ownership before the\noffering is based on 32,544,711 shares of our Common Stock outstanding as of October 2, 2026.

Name of Selling Stockholders	Number of \n Shares of \n Common \n Stock Owned \n Prior to \n Offering (including shares underlying the August 2026 Warrants and Notes, Vendor Shares and Retail Volts Shares)		Maximum \n Number of \n Shares of \n Common \n Stock to be \n Sold \n Pursuant to \n this \n Prospectus (including shares underlying the August 2026 Warrants and Notes, Vendor Shares and Retail Volts Shares)		Number \nof Shares \nof \nCommon \nStock \nOwned \nAfter \nOffering	Percentage \nof Shares of \nCommon \nStock \nOwned \nAfter \nOffering (to \nthe extent \ngreater than \n1%)
Meteora Select Trading Opportunities Master, LP		3,427,546		3,382,730	⁽¹⁾	44,816	*
Boothbay Absolute Return Strategies, LP		838,012		838,012	⁽²⁾	0	*
Boothbay Diversified Alpha Master Fund LP		419,006		419,006	⁽³⁾	0	*
Cinctive Global Master Fund Ltd.		650,728		650,728	⁽⁴⁾	0	*
Group PRM		5,042		5,042	⁽⁵⁾	0	*
Landmark Ventures, Inc.		230,441		230,441	⁽⁶⁾	0	*
Uniqus Consultech Inc.		552,323		552,323	⁽⁷⁾	0	*
Rabi Karki Advisory		115,340		115,340	⁽⁸⁾	0	*
Shrestha Global EPG Advisory LLC		247,158		247,158	⁽⁹⁾	0	*
Dentons US LLP		988,631		988,631	⁽¹⁰⁾	0	*
Fulcrum New Amsterdam LLC		120,000		120,000	⁽¹¹⁾	0	*

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

*	Less than 1%.
(1)	Consists of 200% of (i) 380,595 shares of Common Stock issuable\n upon conversion of a convertible note, (ii) 1,310,770 shares of Common Stock issuable upon exercise of warrants, issued pursuant\n to the August 2026 SPA, and excludes 44,816 shares of Common Stock held directly and 1,574,939\nshares issuable upon exercise of Shortfall Warrants, which are not being registered hereunder.
(2)	Consists of 200% of (i) 94,286 shares of Common Stock issuable\n upon conversion of a convertible note and (ii) 324,720 shares of Common Stock issuable upon exercise of warrants, issued pursuant\n to the August 2026 SPA.
(3)	Consists of 200% of (i) 47,143 shares of Common Stock issuable\n upon conversion of a convertible note and (ii) 162,360 shares of Common Stock issuable upon exercise of warrants, issued pursuant\n to the August 2026 SPA.
(4)	Consists of 200% of (i) 73,214 shares of Common Stock issuable\n upon conversion of a convertible note and (ii) 252,150 shares of Common Stock issuable upon exercise of warrants, issued pursuant\n to the August 2026 SPA.
(5)	Consists of Vendor Shares issued pursuant to the Vendor SPA.
(6)	Consists of Vendor Shares issued pursuant to the Vendor SPA.
(7)	Consists of Vendor Shares issued pursuant to the Vendor SPA.
(8)	Consists of Vendor Shares issued pursuant to the Vendor SPA.
(9)	Consists of Vendor Shares issued pursuant to the Vendor SPA.
(10)	Consists of Vendor Shares issued pursuant to the Vendor SPA.
(11)	Consists of 120,000 Retail Volts Shares issued pursuant to the Retail Volts MSA.

100

PLAN\nOF DISTRIBUTION

We\nare registering the shares of Common Stock to permit the resale of these shares of Common Stock by the Selling Stockholders from time\nto time after the date of this prospectus. We will not receive any of the proceeds from the sale by the Selling Stockholders of the shares\nof Common Stock.

We\nare required to pay all fees and expenses incident to the registration of the securities to be offered and sold pursuant to this prospectus.\nThe Selling Stockholders will bear all commissions and discounts, if any, attributable to their sale of securities.

We\nwill not receive any of the proceeds from the sale of the securities by the Selling Stockholders. We will receive proceeds from August\n2026 Warrants exercised in the event that such warrants are exercised for cash. We will not receive any proceeds from the conversion\nof such Convertible Notes, except that the conversion of such notes will satisfy and discharge the principal obligations thereunder.\nWe will not receive proceeds from the sale of Vendor Shares, except that the issuance of shares satisfied approximately $1.31\nmillion in accrued and unpaid fees and other amounts owed by the Company to the Vendors. We will not receive any proceeds from the\nissuance of the Retail Volts Shares, which were issued as compensation for marketing services. The aggregate proceeds to the Selling\nStockholders will be the purchase price of the securities less any discounts and commissions borne by such Selling Stockholders.

The\nshares of Common Stock beneficially owned by the Selling Stockholders covered by this prospectus may be offered and sold from time to\ntime by the Selling Stockholders. The term “Selling Stockholders” includes donees, pledgees, transferees or other successors\nin interest selling securities received after the date of this prospectus from a Selling Stockholder, as a gift, pledge, partnership\ndistribution or other transfer. The Selling Stockholders will act independently of us in making decisions with respect to the timing,\nmanner and size of each sale. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices\nand under terms then prevailing or at prices related to the then current market price or in negotiated transactions. The Selling Stockholders\nmay sell their securities by one or more of, or a combination of, the following methods:

	●	purchases\n by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus;

	●	ordinary\n brokerage transactions and transactions in which the broker solicits purchasers;

	●	block\n trades in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the\n block as principal to facilitate the transaction;

	●	an\n over-the-counter distribution in accordance with the rules of Nasdaq;

	●	through\n trading plans entered into by a Selling Stockholder pursuant to Rule 10b5-1 under the Exchange Act that are in place at the time\n of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of their\n securities on the basis of parameters described in such trading plans;

	●	short\n sales;

	●	distribution\n to employees, members, limited partners or stockholders of the Selling Stockholders;

	●	through\n the writing or settlement of options or other hedging transaction, whether through an options exchange or otherwise;

	●	by\n pledge to secured debts and other obligations;

	●	delayed\n delivery arrangements;

	●	to\n or through underwriters or broker-dealers;

	●	in\n “at the market” offerings, as defined in Rule 415 under the Securities Act, at negotiated prices, at prices prevailing\n at the time of sale or at prices related to such prevailing market prices, including sales made directly on a national securities\n exchange or sales made through a market maker other than on an exchange or other similar offerings through sales agents;

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\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	in\n privately negotiated transactions;

	●	in\n options transactions; or

	●	any\n other method permitted pursuant to applicable law.

In\naddition, any securities that qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus.

In\naddition, a Selling Stockholder that is an entity may elect to make an in-kind distribution of securities to its members, partners or\nstockholders pursuant to the registration statement of which this prospectus is a part by delivering a prospectus with a plan of distribution.\nSuch members, partners or stockholders would thereby receive freely tradeable securities pursuant to the distribution through a registration\nstatement. To the extent a distributee is our affiliate (or to the extent otherwise required by law), we may, at our option, file a prospectus\nsupplement in order to permit the distributees to use the prospectus to resell the securities acquired in the distribution.

To\nthe extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In\nconnection with distributions of the securities or otherwise, the Selling Stockholders may enter into hedging transactions with broker-dealers\nor other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short\nsales of the securities in the course of hedging the positions they assume with Selling Stockholder. The Selling Stockholders may also\nsell the securities short and redeliver the securities to close out such short positions. The Selling Stockholders may also enter into\noption or other transactions with broker-dealers or other financial institutions that require the delivery to such broker-dealer or other\nfinancial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may\nresell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Stockholders may also pledge\nsecurities to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution,\nmay effect sales of the pledged securities pursuant to this prospectus (as supplemented or amended to reflect such transaction).

In\neffecting sales, broker-dealers or agents engaged by the Selling Stockholders may arrange for other broker-dealers to participate. Broker-dealers\nor agents may receive commissions, discounts or concessions from the Selling Stockholders in amounts to be negotiated immediately prior\nto the sale.

In\noffering the securities covered by this prospectus, the Selling Stockholders and any broker-dealers who execute sales for the Selling\nStockholders may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. Any\nprofits realized by the Selling Stockholders and the compensation of any broker-dealer may be deemed to be underwriting discounts and\ncommissions.

In\norder to comply with the securities laws of certain states, if applicable, the securities must be sold in such jurisdictions only through\nregistered or licensed brokers or dealers. In addition, in certain states, the securities may not be sold unless they have been registered\nor qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is\ncomplied with.

We\nhave advised the Selling Stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of securities\nin the market and to the activities of the Selling Stockholders and their affiliates. In addition, we will make copies of this prospectus\navailable to the Selling Stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The Selling\nStockholders may indemnify any broker-dealer that participates in transactions involving the sale of the securities against certain liabilities,\nincluding liabilities arising under the Securities Act.

At\nthe time a particular offer of securities is made, if required, a prospectus supplement will be distributed that will set forth the number\nof securities being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase price\npaid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed\nor reallowed or paid to any dealer, and the proposed selling price to the public.

We\nhave agreed to indemnify the Selling Stockholders against certain liabilities, including liabilities under the Securities Act and state\nsecurities laws, relating to the registration of the shares of Common Stock offered by this prospectus.

We\nhave agreed with the Selling Stockholders to keep the registration statement of which this prospectus constitutes a part effective until\nsuch time as all of the securities covered by this prospectus have been disposed of pursuant to and in accordance with the registration\nstatement or such securities have been withdrawn.

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MATERIAL\nUNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material U.S. federal income tax considerations\nof the acquisition, ownership, and disposition of our Common Stock acquired in this offering and/or our Warrants, but does not purport\nto be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the U.S.\nInternal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, administrative rulings, and judicial\ndecisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income\ntax consequences different from those set forth below. We have not sought, and do not intend to seek, any ruling from the U.S. Internal\nRevenue Service, or IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no\nassurance that the IRS or a court will agree with such statements and conclusions.

This\nsummary also does not address the tax considerations arising under the laws of any non-U.S., state, or local jurisdiction, under U.S.\nfederal gift and estate tax rules, or under any applicable tax treaty. In addition, this discussion does not address tax considerations\napplicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without\nlimitation:

	●	banks,\n insurance companies, or other financial institutions;

	●	regulated\n investment companies or real estate investment trusts;

	●	persons\n subject to the alternative minimum tax or the Medicare contribution tax on net investment income;

	●	tax-exempt\n accounts, organizations, or governmental organizations;

	●	pension\n plans and tax-qualified retirement plans;

	●	controlled\n foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income\n tax;

	●	brokers\n or dealers in securities or currencies;

	●	traders\n in securities that elect to use a mark-to-market method of accounting for their securities holdings;

	●	persons\n that own, or are deemed to own, more than 5% (by vote or value) of our Common Stock or Warrants (except to the extent specifically\n set forth below);

	●	certain\n former citizens or long-term residents of the United States;

	●	partnerships\n (or entities or arrangements classified as such for U.S. federal income tax purposes), other pass-through entities, and investors\n therein;

	●	persons\n who hold our Common Stock or Warrants as a position in a hedging transaction, “straddle,” “conversion transaction,”\n or other risk reduction transaction;

	●	persons\n who hold or receive our Common Stock or Warrants pursuant to the exercise of any option or otherwise as compensation;

	●	persons\n subject to special tax accounting rules as a result of any item of gross income with respect to our Common Stock or Warrants being\n taken into account in an “applicable financial statement” as defined in Section 451(b) of the Code;

	●	persons\n who hold our Common Stock or Warrants not as a capital asset within the meaning of Section 1221 of the Code (generally, as property\n held for investment); or

	●	persons\n deemed to sell our Common Stock or Warrants under the constructive sale provisions of the Code.

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In\naddition, if a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes) or other\nflow-through entity holds our Common Stock or Warrants, the tax treatment of a partner in the partnership or owner of other such entity\ngenerally will depend on the status of the partner or owner and upon the activities of the partnership or other such entity. A partner\nin a partnership, or owner of other such entity, that will hold our Common Stock or Warrants should consult his, her, or its own tax\nadvisor regarding the tax consequences of the ownership and disposition of our Common Stock or Warrants through the partnership or other\nsuch entity, as applicable.

You\nare urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation,\nas well as any tax consequences of the purchase, ownership, and disposition of our Common Stock or Warrants arising under the U.S. federal\ngift or estate tax rules or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.

For\npurposes of this discussion, you are a “U.S. holder” if you are a beneficial owner of our Common Stock or Warrants that,\nfor U.S. federal income tax purposes, is not a partnership (including any entity or arrangement treated as a partnership and the equity\nholders therein) and is:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	an\n individual who is a citizen or resident of the United States;

	●	a\n corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States\n or any political subdivision thereof, or otherwise treated as such for U.S. federal income tax purposes;

	●	an\n estate whose income is subject to U.S. federal income tax regardless of its source; or

	●	a\n trust (1) whose administration is subject to the primary supervision of a U.S. court and that has one or more U.S. persons who have\n the authority to control all substantial decisions of the trust or (2) that has made a valid election under applicable Treasury Regulations\n to be treated as a “United States person” within the meaning of the Code.

For\npurposes of this discussion, a “non-U.S. holder” is a beneficial owner of our securities that is neither a U.S. holder nor\na partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) for U.S. federal income\ntax purposes.

Tax\nConsiderations Applicable to U.S. Holders

Distributions

If\nwe make distributions on our Common Stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent\npaid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those\ndistributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return of capital and will\nfirst reduce your basis in our Common Stock (determined separately with respect to each share of our Common Stock), but not below zero,\nand then will be treated as gain from the sale of stock as described below in “—Tax Considerations Applicable to U.S.\nHolders—Gain on Disposition of Common Stock.”

Dividends\nwe pay to a U.S. Holder that is a corporation or other entity taxable as a corporation generally will qualify for the dividends received\ndeduction if the requisite holding period is satisfied. With certain exceptions (including dividends treated as investment income for\npurposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to\na non-corporate U.S. holder generally will constitute “qualified dividends” that under current law will be subject to tax\nat long-term capital gains rates. If the holding period requirements are not satisfied, a corporation may not be able to qualify for\nthe dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate holders may be\nsubject to tax on such dividend at ordinary income tax rates instead of the preferential rates that apply to qualified dividend income.

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Gain\non Disposition of Common Stock

You\ngenerally will recognize gain or loss on the sale, exchange or other taxable disposition of our Common Stock. Any such gain or loss will\nbe capital gain or loss and will be long-term capital gain or loss if your holding period for the Common Stock so disposed of exceeds\none year. The amount of gain or loss recognized generally will be equal to the difference between (1) the sum of the amount of cash and\nthe fair market value of any property received in such disposition and (2) your adjusted tax basis in its Common Stock so disposed of.\nYour adjusted tax basis in its Common Stock generally will equal your acquisition cost for such Common Stock (or, in the case of Common\nStock received upon exercise of a Warrant, your initial basis for such Common Stock, as discussed below), less any prior distributions\ntreated as a return of capital. Long-term capital gains recognized by non-corporate U.S. holders generally are eligible under current\nlaw for reduced rates of tax. If your holding period for the Common Stock so disposed of is one year or less, any gain on a sale or other\ntaxable disposition of the shares would be subject to short-term capital gain treatment and would be taxed at ordinary income tax rates.\nThe deductibility of capital losses is subject to limitations.

Exercise\nof a Warrant

Except\nas discussed below with respect to the cashless exercise of a Warrant, you generally will not recognize taxable gain or loss upon the\nexercise of a Warrant for cash. Your initial tax basis in the share of our Common Stock received upon exercise of the Warrant generally\nwill be an amount equal to the sum of your acquisition cost of the Warrant and the exercise price of such Warrant. It is unclear whether\nyour holding period for the Common Stock received upon exercise of the Warrant would commence on the date of exercise of the Warrant\nor the day following the date of exercise of the Warrant; however, in either case, the holding period will not include the period during\nwhich you held the Warrants.

In\ncertain circumstances, the Warrants may be exercised on a cashless basis. The U.S. federal income tax treatment of an exercise of a Warrant\non a cashless basis is not clear and could differ from the consequences described above. It is possible that a cashless exercise could\nbe a taxable event, a non-realization event, or a tax-free recapitalization within the meaning of Section 368(a)(1)(E) of the Code. If\na cashless exercise is not treated as a realization event, it is unclear whether a U.S. holder’s holding period for Common Stock\nwould commence on the date of exercise of the Warrant or the following day. If, however, a cashless exercise is treated as a recapitalization,\nthe holding period of Common Stock would include the holding period of the Warrant.

If\na cashless exercise were treated as a taxable exchange, a U.S. holder could be deemed to have surrendered a number of Warrants having\nan aggregate fair market value equal to the aggregate exercise price of the total number of Warrants being exercised. The U.S. holder\nwould recognize capital gain or loss in an amount equal to the difference between the fair market value of the Warrants deemed surrendered\nand the U.S. holder’s tax basis in such Warrants. Such gain or loss would be long-term or short-term depending on the U.S. holder’s\nholding period in the Warrants deemed surrendered. In this case, a U.S. holder’s tax basis in Common Stock received would equal\nthe sum of the U.S. holder’s initial investment in the Warrants exercised, the amount of any constructive distributions included\nin income by such U.S. holder (as described below under “Possible Constructive Distributions”) and the exercise price\nof such Warrants. It is unclear whether a U.S. holder’s holding period for Common Stock would commence on the date of exercise\nof the Warrant or the day following the date of exercise of the Warrant.

Because\nof the absence of authority on the U.S. federal income tax treatment of a cashless exercise, you are urged to consult your tax advisors\nas to the consequences of an exercise of a Warrant on a cashless basis, including with respect to your holding period and tax basis in\nthe Common Stock received upon exercise of the Warrant.

Sale\nor other Disposition of a Warrant

Upon\na sale, exchange (other than by exercise), redemption, or expiration of a Warrant, you will recognize taxable gain or loss in an amount\nequal to the difference between (1) the amount realized upon such disposition or expiration and (2) your adjusted tax basis in the Warrant.\nYour adjusted tax basis in its Warrants generally will equal your acquisition cost of the Warrant, increased by the amount of any constructive\ndistributions included in income by you (as described below under “Tax Considerations Applicable to U.S. Holders—Possible\nConstructive Distributions”). Such gain or loss generally will be treated as long-term capital gain or loss if the Warrant\nis held by the U.S. holder for more than one year at the time of such disposition or expiration.

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If\na Warrant is allowed to lapse unexercised, you generally will recognize a capital loss equal to your adjusted tax basis in the Warrant.\nAny such loss generally will be a capital loss and will be long-term capital loss if the Warrant is held for more than one year. The\ndeductibility of capital losses is subject to certain limitations.

Possible\nConstructive Distributions

The\nterms of each Warrant provide for an adjustment to the number of shares of Common Stock for which the Warrant may be exercised or to\nthe exercise price of the Warrant in certain events, as discussed in the section of this prospectus captioned “Description of\nCapital Stock—Warrants.” An adjustment which has the effect of preventing dilution generally should not be a taxable\nevent. Nevertheless, a U.S. holder of Warrants would be treated as receiving a constructive distribution from us if, for example, the\nadjustment increases the holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the\nnumber of shares of Common Stock that would be obtained upon exercise or an adjustment to the exercise price of the Warrant) as a result\nof a distribution of cash to the holders of shares of our Common Stock that is taxable to such holders as a distribution. Such constructive\ndistribution would be subject to tax as described above under “Tax Considerations Applicable to U.S. Holders—Distributions”\nin the same manner as if such U.S. holder received a cash distribution from us on Common Stock equal to the fair market value of such\nincreased interest.

Tax\nConsiderations Applicable to Non-U.S. Holders

Distributions

If\nwe make distributions on our Common Stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent\npaid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those\ndistributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return of capital and will\nfirst reduce your basis in our Common Stock (determined separately with respect to each share of our Common Stock), but not below zero,\nand then will be treated as gain from the sale of stock as described below in “—Tax Considerations Applicable to Non-U.S.\nHolders—Gain on Disposition of Common Stock and Warrants.”

Subject\nto the discussions below on effectively connected income and in “—Backup Withholding and Information Reporting”\nand “—Tax Considerations Applicable to Non-U.S. Holders-Foreign Account Tax Compliance Act (FATCA),” any dividend\npaid to you generally will be subject to U.S. federal withholding tax either at a rate of 30% of the gross amount of the dividend or\nsuch lower rate as may be specified by an applicable income tax treaty between the United States and your country of residence. Under\napplicable Treasury Regulations, the applicable withholding agent may withhold up to 30% of the gross amount of the entire distribution\neven if the amount constituting a dividend, as described above, is less than the gross amount. In order to receive a reduced treaty rate,\nyou must provide the applicable withholding agent with a properly executed IRS Form W-8BEN or W-8BEN-E or other appropriate version of\nIRS Form W-8 certifying qualification for the reduced rate. If you hold our Common Stock through a financial institution or other agent\nacting on your behalf, you generally will be required to provide appropriate documentation to the agent, which then may be required to\nprovide certification to us or our paying agent, either directly or through other intermediaries. If you are eligible for a reduced rate\nof U.S. federal withholding tax pursuant to an income tax treaty, you may obtain a refund of any excess amounts withheld by timely filing\nan appropriate claim for refund with the IRS. You should consult your tax advisor regarding your entitlement to benefits under any applicable\ntax treaty.

Dividends\nreceived by you that are treated as effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable\nincome tax treaty, are attributable to a permanent establishment or fixed base maintained by you in the United States) are generally\nexempt from the 30% U.S. federal withholding tax, subject to the discussions below in “—Backup Withholding and Information\nReporting” and “—Tax Considerations Applicable to Non-U.S. Holders-Foreign Account Tax Compliance Act (FATCA).”\nIn order to obtain this exemption, you must provide the applicable withholding agent with a properly executed IRS Form W-8ECI or other\napplicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to U.S. federal\nwithholding tax, are taxed at the same rates applicable to U.S. persons, net of certain deductions and credits and subject to an applicable\nincome tax treaty providing otherwise. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively\nconnected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a permanent\nestablishment or fixed base maintained by you in the United States) may also be subject to a branch profits tax at a rate of 30% or such\nlower rate as may be specified by an applicable income tax treaty between the United States and your country of residence. You should\nconsult your tax advisor regarding any applicable tax treaties that may provide for different rules.

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Exercise\nof a Warrant

The\nU.S. federal income tax treatment of your exercise of a Warrant generally will correspond to the U.S. federal income tax treatment of\nthe exercise of a Warrant by a U.S. holder, as described under “—Tax Considerations Applicable to U.S. Holders—Exercise\nof a Warrant” above, although to the extent a cashless exercise results in a taxable exchange, the tax consequences to you\nwould be the same as those described below in “—Tax Considerations Applicable to Non-U.S. Holders-Gain on Disposition\nof Common Stock and Warrants.”

Gain\non Disposition of Common Stock and Warrants

Subject\nto the discussions in “—Backup Withholding and Information Reporting” and “—Tax Considerations\nApplicable to U.S. Holders—Foreign Account Tax Compliance Act (FATCA),” you generally will not be required to pay U.S.\nfederal income tax on any gain realized upon the sale or other disposition of our Common Stock or Warrants unless:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	the\n gain is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty,\n the gain is attributable to a permanent establishment or fixed base maintained by you in the United States);

	●	you\n are an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year\n in which the sale or disposition occurs and certain other conditions are met; or

	●	our\n Common Stock constitutes a United States real property interest by reason of our status as a “United States real property holding\n corporation,” or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding\n your disposition of our Common Stock or Warrants or your holding period for our Common Stock or Warrants, or the applicable testing\n period.

If\nyou are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the gain derived from the sale or other\ndisposition of our Common Stock or Warrants (net of certain deductions and credits) under regular U.S. federal income tax rates, and\na corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such\nlower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet\nabove, you will be subject to tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on the gain derived\nfrom the sale or other disposition of our Common Stock or Warrants, which gain may be offset by U.S. source capital losses for the year,\nprovided you have timely filed U.S. federal income tax returns with respect to such losses. You should consult your tax advisor regarding\nany applicable income tax or other treaties that may provide for different rules.

We\nbelieve that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion\nso assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property\ninterests relative to the fair market value of our U.S. and worldwide real property interests plus our other business assets, there can\nbe no assurance that we will not become a USRPHC in the future. However, even if we are or become a USRPHC, our Common Stock and Warrants\nwill not constitute a United States real property interest if (i) our Common Stock is regularly traded on an established securities market\nand you hold no more than 5% of our outstanding Common Stock, directly, indirectly, or constructively, at all times during the applicable\ntesting period or (ii) provided that our Warrants are regularly traded on an established securities market, you have not owned, actually\nor constructively, more than 5% of our Warrants at any time within the relevant period. It is unclear how your ownership of Warrants\nwill affect the determination of whether you own more than 5% of our Common Stock. In addition, special rules may apply in the case of\na disposition of Warrants if our Common Stock is considered to be regularly traded but our Warrants are not considered to be publicly\ntraded. If we are a USRPHC at any time within the applicable testing period and either our Common Stock and/or Warrants are not regularly\ntraded on an established securities market or you hold more than 5% of our outstanding Common Stock and/or Warrants, directly, indirectly,\nor constructively, at any time during the applicable testing period, you will generally be taxed on any gain realized upon the sale or\nother disposition of our Common Stock and/or Warrants in the same manner as gain that is effectively connected with the conduct of a\nU.S. trade or business, except that the branch profits tax generally will not apply. If we are a USRPHC at any time within the applicable\ntesting period and our Common Stock and/or Warrants are not regularly traded on an established securities market, your proceeds received\non the disposition of shares will also generally be subject to withholding at a rate of 15%. You are encouraged to consult your own tax\nadvisors regarding the possible consequences to you if we are, or were to become, a USRPHC.

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Possible\nConstructive Distributions

The\nterms of each Warrant provide for an adjustment to the number of shares of Common Stock for which the Warrant may be exercised or to\nthe exercise price of the Warrant in certain events, as discussed in the section of this prospectus captioned “Description of\nCapital Stock—Warrants.” An adjustment that has the effect of preventing dilution generally should not be a taxable event.\nNevertheless, you would be treated as receiving a constructive distribution from us if, for example, the adjustment increases your proportionate\ninterest in our assets or earnings and profits (e.g., through an increase in the number of shares of Common Stock that would be obtained\nupon exercise or an adjustment to the exercise price of the Warrant) as a result of a distribution of cash to the holders of shares of\nour Common Stock that is taxable to such holders as a distribution. You would be subject to U.S. federal income tax withholding as described\nabove under “Tax Considerations Applicable to Non-U.S. Holders—Distributions” under that section in the same\nmanner as if you received a cash distribution from us on Common Stock equal to the fair market value of such increased interest.

Foreign\nAccount Tax Compliance Act (FATCA)

Subject\nto the following paragraph, the Foreign Account Tax Compliance Act, Treasury Regulations issued thereunder and official IRS guidance\nwith respect thereto, or, collectively, FATCA, generally impose a U.S. federal withholding tax of 30% on dividends on and the gross proceeds\nfrom a sale or other disposition of our Common Stock or Warrants paid to a “foreign financial institution” (as specially\ndefined under these rules), unless otherwise provided by the Treasury Secretary or such institution (i) enters into an agreement with\nthe U.S. government to, among other things, withhold on certain payments and to collect and provide to the U.S. tax authorities substantial\ninformation regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution,\nas well as certain account holders that are foreign entities with U.S. owners) or (ii) otherwise establishes an exemption. Subject to\nthe following paragraph, FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on and the gross proceeds from\na sale or other disposition of our Common Stock or Warrants paid to a “non-financial foreign entity” (as specially defined\nunder these rules), unless otherwise provided by the Treasury Secretary or such entity provides the withholding agent with a certification\nidentifying the substantial direct and indirect U.S. owners of the entity, certifies that it does not have any substantial U.S. owners,\nor otherwise establishes an exemption. The withholding tax will apply regardless of whether the payment otherwise would be exempt from\nU.S. nonresident and backup withholding tax, including under the other exemptions described above. Under certain circumstances, a non-U.S.\nholder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable\nforeign country may modify the requirements described in this section. Prospective investors should consult with their own tax advisors\nregarding the application of FATCA withholding to their investment in, and ownership and disposition of, our Common Stock or Warrants.

The\nU.S. Treasury Department has issued proposed Treasury Regulations that, if finalized in their present form, would eliminate withholding\nunder FATCA with respect to payments of gross proceeds from a sale or other disposition of our Common Stock or Warrants. In the preamble\nto such proposed Treasury Regulations, the Treasury Secretary stated that taxpayers may generally rely on the proposed Treasury Regulations\nuntil final regulations are issued.

Backup\nWithholding and Information Reporting

Generally,\nwe or the applicable agent must report annually to the IRS the amount of dividends paid to you, your name, your address and the amount\nof tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS\nmay make these reports available to tax authorities in your country of residence.

Payments\nof dividends on or of proceeds from the disposition of our Common Stock or Warrants made to you may also be subject to backup withholding\n(currently at a rate of 24%) and additional information reporting unless you establish an exemption, for example, by providing\na properly completed IRS Form W-9 certifying your exemption from backup withholding or by certifying your non-U.S. status on a properly\ncompleted IRS Form W-8BEN or Form W-8BEN-E or another appropriate version of IRS Form W-8.

Backup\nwithholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be\nreduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained\nfrom the IRS, provided that the required information is furnished to the IRS in a timely manner.

The\npreceding discussion of U.S. federal tax considerations is for general information only. It is not tax advice to investors in their particular\ncircumstances. Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local, and\nnon-U.S. tax considerations of purchasing, holding, and disposing of our Common Stock or Warrants, including the consequences of any\nproposed change in applicable laws.

108

EXPERTS

The\nconsolidated financial statements of Fusemachines Inc. as of December 31, 2025 and 2024, and for each of the two years in the period\nended December 31, 2025, included in this prospectus, have been included in reliance on the report of KNAV CPA LLP, an independent registered\npublic accounting firm, given on the authority of said firm as experts in auditing and accounting.

LEGAL\nMATTERS

Certain\nlegal matters with respect to the validity of the securities being offered by this prospectus will be passed upon by Dentons US LLP,\nNew York, New York. Dentons US LLP and its members currently own shares of our Common Stock with a market value in excess of $50,000.

WHERE\nYOU CAN FIND MORE INFORMATION

We\nhave filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities offered\nby this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information\nset forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules\nand regulations of the SEC. For further information with respect to us and our securities, we refer you to the registration statement,\nincluding the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents\nof any contract or any other document is not necessarily complete. If a contract or document has been filed as an exhibit to the registration\nstatement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract\nor document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains\nreports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website\nis www.sec.gov.

We\nare subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, are required to file\nperiodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information\nare available at the website of the SEC referred to above. We also maintain a website at https://fusemachines.com. You may access these\nmaterials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information\ncontained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive\ntextual reference only.

109

FUSEMACHINES\nINC.

INDEX\nTO FINANCIAL STATEMENTS

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Page
Fusemachines Inc. Audited Annual Financial Statements
Report\nof Independent Registered Public Accounting Firm (PCAOB ID 2983)	F-2
Financial Statements:
Consolidated\nBalance Sheets as of December 31, 2025, and 2024	F-3
Consolidated\nStatements of Operations and Comprehensive Loss for the Years Ended December 31, 2025, and 2024	F-4
Consolidated\nStatements of Convertible Preferred Stock and Stockholders’ Deficit for the Years Ended December 31, 2025, and 2024	F-5
Consolidated\nStatements of Cash Flows for the Years Ended December 31, 2025, and 2024	F-7
Notes\nto the Consolidated Financial Statements	F-8

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Page
Fusemachines Inc. Unaudited Condensed\n Consolidated Interim Financial Statements
Financial Statements:
Condensed\nConsolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025	F-55
Condensed Consolidated Statement of Operations and Comprehensive Loss for the Three\nand Six Months Ended June 30, 2026 and 2025 (Unaudited)	F-56
Condensed\nConsolidated Interim Statements of Stockholders’ Deficit	F-57
Condensed\n Consolidated Statements of Cash Flows for the Three and Six Months Ended June, 2026 and 2025 (Unaudited)	F-59
Notes\nto Condensed Consolidated Financial Statements (Unaudited)	F-60

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To\nthe Board of Directors and Stockholders of

Fusemachines\nInc. and its subsidiaries

Opinion\non the consolidated financial statements

We\nhave audited the accompanying consolidated balance sheets of Fusemachines Inc. and its subsidiaries (the Company) as of December 31,\n2025 and December 31, 2024 and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit\nand cash flows for each of the years in the two-year period ended December 31, 2025 and the related notes (collectively referred to as\nthe consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,\nthe financial position of the Company as of December 31, 2025 and December 31, 2024, and the results of its operations and its cash flows\nfor each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in\nthe United States of America.

Substantial\ndoubt about the Company’s ability to continue as a going concern

The\naccompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As\ndiscussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses, has an accumulated deficit\nand stockholders’ deficit. The continuation of the Company as a going concern is dependent upon the continued financial\nsupport from its stockholders and debt holders including management’s plan to raise additional capital from issuance of equity\nor receive additional borrowings to fund the Company’s operating and investing activities over the next year. These conditions raise substantial doubt about the\nCompany’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to\nthe recoverability and classification of recorded asset amounts and classification of liabilities that might be\nnecessary should the Company be unable to continue as a going concern.

Basis\nfor opinion

These\nconsolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion\non the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public\nCompany Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company\nin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission\nand the PCAOB.

We\nconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain\nreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.\nThe Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part\nof our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing\nan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our\naudits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether\ndue to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence\nregarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles\nused and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.\nWe believe that our audit provides a reasonable basis for our opinion.

/s/\nKNAV CPA LLP

KNAV\nCPA LLP

We\nhave served as the Company’s auditor since 2023.

Atlanta,\nGeorgia

March\n27, 2026

PCAOB\nID – 2983

F-2

Fusemachines\nInc. and Subsidiaries

Consolidated\nBalance Sheets

(all\namounts in USD, in thousands, except number of shares and per share data)

	December\n 31, 2025			December\n 31, 2024
Assets
Current assets:
Cash and cash equivalents		4,221			500
Accounts receivable, current, net		1,264			1,427
Unbilled revenue		16			113
Deferred transaction costs		-			1,865
Prepaid expenses and other current assets		753			219
Total current assets		6,254			4,124
Property and equipment, net		305			348
Intangible assets, net		206			187
Accounts receivable, net		-			4
Deferred tax asset		11			10
Operating lease right-of-use assets		744			870
Other assets		16			5
Total assets		7,536			5,548
Liabilities and stockholders’\n deficit
Current liabilities:
Accounts payable		5,012			6,537
Accrued expenses and other current liabilities		4,618			3,700
Deferred revenue		-			54
Convertible notes payable, at fair value, current		-			8,986
Convertible notes payable, current		-			255
Related party loan payable, current		300			700
Operating lease liability, current		85			74
Forward purchase derivative liability		9,692			-
Short term debt		342
Total current liabilities		20,049			20,306
Accounts payable non-current		143
Related party convertible notes payable, at\n fair value		-			6,524
Convertible notes payable		-			200
Warrant liability		121			945
Cumulative mandatorily redeemable common and\n preferred stock liability		1,048			1,000
Operating lease liability		751			878
Total liabilities		22,112			29,853
Commitments and Contingencies (Note 17)
Stockholder’s deficit:
Convertible preferred stock ($0.0001 par\n value, 5,000,000 and 5,972,716 shares authorized as of December 31,2025 and December 31, 2024, respectively; Nil and 5,950,673 shares issued\n as of December 31, 2025 and December 31, 2024, respectively; Nil and 5,950,673 shares outstanding as of December 31, 2025 and December\n 31, 2024)		-			7,865
Common stock ($0.0001 par value, 500,000,000\n shares and 15,924,202 shares authorized as of December 31,2025 and December 31, 2024; 29,377,169 and 7,709,867 shares issued as of\n December 31,2025 and December 31,2024 respectively; 28,938,266 shares and 7,264,192 shares outstanding as of December 31,2025 and\n December 31, 2024, respectively)		3			1
Additional paid in capital		31,311			4,699
Treasury stock, at cost (Nil and 438,903 as\n of December 31,2025 and December 31, 2024, respectively)		-			(2,903	)
Share subscription receivable		(11,005	)		-
Accumulated deficit		(35,145	)		(34,217	)
Accumulated other comprehensive income		260			250
Total stockholders’\n deficit		(14,576	)		(24,305	)
Total liabilities and stockholders’\n deficit		7,536			5,548

The\naccompanying notes are an integral part of these consolidated financial statements.

F-3

Fusemachines\nInc. and Subsidiaries

Consolidated\nStatements of Operations and Comprehensive Loss

(all\namounts in USD, in thousands, except number of shares and per share data)

	Year\n ended \n December 31, 2025			Year\n ended December\n 31, 2024

Revenue		7,714			8,811
Cost of revenue		(3,407	)		(3,976	)
Gross Profit		4,307			4,835
Operating expenses:
Selling and marketing		1,365			1,964
General and administrative		8,176			10,333
Research and development		720			732
Total operating expenses		10,261			13,029
Loss from operations		(5,954	)		(8,194	)
Other (expense) income:
Interest expense		(268	)		(234	)
Loss on extinguishment of convertible notes payable		(391	)		-
Gain on extinguishment of\n payable
Loss on extinguishment of notes payable					(601	)
Loss on extinguishment of payable		-			(70	)
Gain/(Loss) on change in fair value of convertible\n notes and warranty liability		6,544			(6,104	)
Gain/(Loss) on change in fair value of forward purchase derivative liability		(1,076	)		-
Other (expense) income		220			(148	)
Total other expense/(income),\n net		5,029			(7,157	)
Loss before income taxes\n and equity in earnings of investee		(925	)		(15,351	)
Provision for income tax		(3	)		(31	)
Net\n loss
Deemed\n dividend related to Shortfall Warrants modification
Net\n loss attributable to common stockholders (i)
Equity in earnings of investee,\n net of income tax provision of $0 and $0, respectively		-			(1	)
Net loss		(928	)		(15,383	)
Other comprehensive income\n (loss)
Change in foreign currency translation adjustment		10			57
Total comprehensive loss		(918	)		(15,326	)
Net loss per share - basic\n and diluted		(0.08	)		(2.21	)
Weighted-average common\n shares outstanding - basic and diluted		11,525,384			6,958,570

The\naccompanying notes are an integral part of these consolidated financial statements.

F-4

Fusemachines\nInc. and Subsidiaries

Consolidated\nStatements of Stockholders Deficit

(all\namounts in USD, in thousands, except number of shares and per share data)

	Shares			Amount			Shares	Amount		Amount		Shares			Amount	Amount		Amount			Amount			Amount
	Convertible \n Preferred Stock*			Common\n stock*			Additional \n paid-in \n capital	Treasury\n stock*		Share \n Subscription \n Receivable		Accumulated \n deficit			Accumulated \n other \n comprehensive \n Income	\n Total \n stockholders’ \n deficit
	Shares			Amount			Shares	Amount		Amount		Shares			Amount	Amount		Amount			Amount			Amount
Balance at December\n 31, 2024		5,950,673			$	7,865		7,264,192		$	1		$	4,699		438,903		$	(2,903	)			-		$	(34,217	)	$	250	$	(24,305	)
Stock-based compensation		-				-		-			-			231		-			-				-			-			-		231
Net loss		-				-		-			-					-			-				-			(928	)		-		(928	)
Issuance of shares upon repayment\n and forgiveness of 2023 Promissory Notes		-				-		6,772			-			3		-			-							-			-		3
Issuance of common stock upon\n cashless exercise of stock option		-				-		745,896			-			707																	707
Shares withheld related to\n cashless exercise of stock option		-				-		(79,234	)		-			(707	)																(707	)
Issuance of common stock upon\n the reverse recapitalization, net of issuance costs (refer note 20)		-						12,456,071			1			8,507												-					8,508
Issuance of shares as a result of Conversion of convertible\n notes		-						1,976,050			-			10,157																	10,157
Shares issued to a vendor of\n Legacy Fusemachines to settle outstanding invoices.		-						29,611			-			198																	198
Transfer of Fusemachines Inc. common stock to a third party vendor								-			-			151																	151
Conversion of convertible preferred\n stock into common stock in connection with the reverse recapitalization		(5,950,673	)			(7,865	)	5,950,673			1			7,864																	-
Treasury stock cancellation\n upon reverse recapitalization		-												(2,903	)	(438,903	)		2,903												-
Prepaid forward purchase\n agreement		-																					(11,005	)							(11,005	)
Issuance of shares pursuant\n to PIPE transaction (refer note 23)		-						588,235			-			1,000																	1,000
Issuance of warrants related\n to forward purchase agreement and convertible note agreement (refer note 10 &22 )		-												1,013																	1,013
Loss for extinguishment of\n convertible notes payable		-				-		-			-			391		-			-				-			-			-		391
Foreign\n currency translation		-				-		-			-			-		-			-				-			-			10		10
Balance\n at December 31, 2025		-			$	-		28,938,266		$	3		$	31,311		-		$	-			$	(11,005	)	$	(35,145	)	$	260	$	(14,576	)

F-5

Fusemachines\nInc. and Subsidiaries

Consolidated\nStatements of Stockholders Deficit

(all\namounts in USD, in thousands, except number of shares and per share data)

	Convertible \n preferred stock*			Common\n stock*			Additional \n paid-in \n capital	Treasury\n stock*		Share \n Subscription \n Receivable			Accumulated \n deficit			Accumulated \n other \n comprehensive \n income	Total \n stockholders’ \n deficit
	Shares			Amount			Shares	Amount		Amount			Shares			Amount	Amount	Amount			Amount		Amount

Balance at\n December 31, 2023		9,043,234			$	7,865		9,220,534		$	2			$	2,307		-	$	-			-		$	(18,834	)	$	193	$	(8,467	)
Retroactive application of\n recapitalization (a)(b)		(3,092,561	)			-		(3,153,193	)		(1	)			(1	)			-			-			-			-		-
Balance at December 31,\n 2023		5,950,673			$	7,865		6,067,341		$	1			$	2,308		-		-			-		$	(18,834	)	$	193	$	(8,467	)
Balance		5,950,673			$	7,865		6,067,341		$	1			$	2,308		-		-			-		$	(18,834	)	$	193	$	(8,467	)
Stock-based compensation		-				-		-			-				1,067		-		-			-			-			-		1,067
Net loss		-				-		-			-				-		-		-						(15,383	)		-		(15,383	)
Common stock repurchase		-				-		(438,903	)		-				-		438,903		(2,903	)		-			-			-		(2,903	)
Exercise of stock options		-				-		17,205			-				12		-		-			-			-			-		12
Gain on extinguishment recorded\n as a capital transaction		-				-		-			-				343		-		-			-			-			-		343
Issuance of shares upon repayment\n of 2023 Promissory Notes		-				-		1,618,549			-				899		-		-			-			-			-		899
Premium from extinguishment\n of payable		-				-		-			-				70		-		-			-			-			-		70
Foreign\n currency translation		-				-		-			-				-		-		-			-			-			57		57
Balance\n at December 31, 2024		5,950,673			$	7,865		7,264,192		$	1			$	4,699		438,903	$	(2,903	)		-		$	(34,217	)	$	250	$	(24,305	)
Balance		5,950,673			$	7,865		7,264,192		$	1			$	4,699		438,903	$	(2,903	)		-		$	(34,217	)	$	250	$	(24,305	)

\n\n\n\n\n\n\n

*	The\nnumber of shares of convertible preferred stock and common stock issued and outstanding prior to the Merger have been retroactively adjusted\nby the Exchange Ratio to give effect to the reverse recapitalization treatment of the Merger.

*	In\n connection with the consummation of the business combination, the Company adopted a new capital structure and amended the par value\n of its common stock from $0.00001\n per share to $0.0001\n per share. Accordingly, the historical equity presentation has been adjusted to reflect the revised par value of the Company’s\n common stock. The change resulted in a reclassification of amounts within stockholders’ equity from additional paid-in capital\n to common stock to reflect the increased par value per share. This reclassification had no impact on total stockholders’\n equity.

The\naccompanying notes are an integral part of these consolidated financial statements.

F-6

Fusemachines\nInc. and Subsidiaries

Consolidated\nStatements of Cash Flows

(all\namounts in USD, in thousands)

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025			2024
	Year ended December 31,
	2025			2024

Cash flows from operating activities
Net Loss		(928	)		(15,383	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment		96			109
Amortization of intangible asset		93			70
Provision for credit losses		55			540
Stock-based compensation		231			1,067
Amortization of right-of-use assets		88			110
Changes in fair value of convertible notes at fair value, warranty liability and forward purchase agreement liability		(6,544	)		6,104
Change in fair value of forward purchase derivative liability		1,076
Accretion of cumulative mandatorily redeemable common and preferred stock liability		99			80
Equity method investment obtained in exchange for services		-			(122	)
Impairment of Equity investments		-			120
Equity in earnings of investee		-			2
Loss on extinguishment of convertible notes payable		391			601
Gain\n on extinguishment of payable
Loss on extinguishment of payable		-			70
Unrealized foreign exchange gain/(loss)		27			49
Deferred income taxes		(2	)		(11	)
Changes in operating assets and liabilities:
Accounts receivable, current, net		47			(904	)
Unbilled revenue		82			(39	)
Prepaid expenses and other current assets		(74	)		(85	)
Accounts receivable, net		4			18
Other assets		22			(2	)
Accounts payable		(200	)		3,715
Operating lease liabilities		(73	)		(87	)
Accrued expenses and other current liabilities		34			1,744
Deferred revenue		(54	)		33
Net cash used in operating activities		(5,529	)		(2,201	)
Cash flows from investing activities
Costs capitalized for internally developed software		(112	)		(144	)
Purchases of property and equipment		(53	)		(15	)
Payment made to Capital Creditors		-			(20	)
Disposal of property and equipment		-			3
Net cash used in investing activities		(165	)		(176	)
Cash flows from financing activities
Proceeds from convertible notes payable		180			455
Payment\n of premium financing obligation
Proceeds\n from premium financing obligation
(Repayment)/ Proceeds from related party loan payable		(700	)		700
Proceeds from convertible note payable, at fair value		-			6,500
Payments on notes payable, net of penalty and lender fees		-			(3,000	)
Payment of deferred transaction costs		(836	)		(2	)
Common stock repurchase		-			(2,000	)
Proceeds from reverse recapitalization		9,432
Proceeds from issuance of shares pursuant to PIPE transaction		1,000
Debt Extinguishment cost paid		-			(53	)
Exercise of stock options		-			12
Proceeds from director and officer insurance funding (short term debt)		382
Payment of director and officer insurance funding (short\nterm debt)		(40	)
Net cash provided by financing activities		9,418			2,612
Effect of exchange rate changes on cash and cash equivalents		(3	)		(1	)
Net change in cash and cash equivalents		3,721			234
Cash and cash equivalents at beginning of the period		500			266
Cash and cash equivalents at end of the period		4,221			500
Supplemental disclosures of cash flow information
Cash paid for interest		-			26
Cash paid for income taxes		31			10
Non-cash investing and financing activities:
Purchase of property and equipment through capital advances		-			38
Common Stock issued upon cashless exercise of stock options		707			-
Unpaid deferred transaction costs as of the end of the period		242			1,684
Waiver of deferred transaction costs as of the end of the period		1,177			-
Issuance of shares vested upon repayment and forgiveness of 2023 Promissory Notes		3			899
Issuance of subscription receivable		(11,005	)
Settlement of non-recourse 2023 promissory note in exchange for common stock repurchase consideration		-			903
Issuance of shares as a result of conversion of related party convertible notes at fair value		4,168
Issuance of shares as a result of conversion of convertible notes at fair value		5,321
Issuance of shares as a result of conversion of convertible notes		668
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization		7,864
Treasury stock repurchase cancellation upon reverse recapitalization		(2,903	)
Shares issued to a vendor of Legacy Fusemachines to settle outstanding invoices.		198
(Loss)/Gain on extinguishment of debt (Refer Note no. 10 - Long Term Debt)		(391	)
Extinguishment of debt (Refer Note no. 10 - Long Term Debt and Note no.17 - Commitments and Contingencies)					4,091
Settlement of vendor payable by SPAC sponsor accounted as a capital contribution		137
Issuance of warrants related to forward purchase agreement and convertible note agreement(refer\nnote 10 &22)		1,013
Recognition of debt at fair value (Refer Note no. 10 - Long Term Debt and Note no.17 - Commitments and\n Contingencies)		-			3,818
Investment in Equity securities					122
Transfer of Fusemachines Inc. common stock to third party purchaser		151

The\naccompanying notes are an integral part of these consolidated financial statements.

F-7

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n1. Organization

Fusemachines\nInc. (“Company” or “Pubco”) provide enterprise artificial intelligence solutions and services across North America,\nLatin America and Asia. The Company was originally incorporated on April 13, 2021 under the name CSLM Acquisition, Corp. (“CSLM”),\nas a Cayman Islands exempted Company, a special purpose acquisition company (“SPAC”) formed for the purpose of effecting\na merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses\nor entities. Upon consummation of the Business Combination, Fusemachines USA, Inc. (“Legacy Fusemachines”) became the surviving\ncorporation and a wholly-owned subsidiary of the Company. The Company operated through the following legal entities and branch:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	Fusemachines\n USA, Inc (Wholly Owned Subsidiary)
	●	Fusemachines\n Nepal Inc. (Wholly Owned Holding Company)
	●	Fusemachines\n Nepal Private Ltd. (Majority Owned Subsidiary)
	●	Fusemachines\n Canada Inc (Wholly Owned Subsidiary)
	●	Fusemachines\n India Inc. (Dormant Holding Company)
	●	Fusemachine\n Inc. Dominican Republic (Wholly Owned Branch)

Business\nOxygen Private Limited (“BO2”), a company domiciled in Nepal, holds certain redeemable common and preferred stock of Fusemachines\nNepal Private Ltd. (see Note 8 — Cumulative Mandatorily Redeemable Financial Instruments).

Merger\nAgreement and Business Combination

On\nJanuary 2024, the Company entered into an Agreement and Plan of Merger (as amended in August 2024 and February 2025, the\n“Business Combination Agreement”) with CSLM Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CSLM\n(“Merger Sub”), and Fusemachines USA, Inc. (formerly Fusemachines Inc.) (“Legacy Fusemachines”). On October 22, 2025, the Company consummated the business combination whereby\n(a) CSLM merged with and into CSLM Holdings, Inc., a Delaware corporation and wholly owned subsidiary of CSLM at which time the separate\nexistence of CSLM ceased and CSLM Holdings became the surviving corporation (“Pubco”) in accordance with the Delaware\nGeneral Corporation Law (“DGCL”), the Cayman Islands Companies Act (As Revised) (the “Companies Act”), the\nCertificate of Merger, (the “Certificate of Merger”), and the amended and restated memorandum and articles of\nassociation of CSLM (the “Domestication”); (b) the merger (the “Merger”) of Merger Sub with and into Legacy\nFusemachines, pursuant to which, at the closing of the transactions contemplated by the Business Combination Agreement (the\n“Closing”), the separate corporate existence of Merger Sub ceased and Legacy Fusemachines became the surviving\ncorporation and a wholly-owned subsidiary of Pubco, pursuant to the terms of the Business Combination Agreement and in accordance\nwith the laws of the State of Delaware, as more fully described elsewhere in the Proxy Statement/Prospectus; and (c) the other\ntransactions contemplated by the Business Combination Agreement and documents related thereto (such transactions, together with the\nDomestication and the Merger, the “Business Combination”). In connection with the Business Combination, Pubco was\nrenamed “Fusemachines Inc.” (the “Company”) and Fusemachines Inc. was renamed “Fusemachines USA,\nInc.” (“Legacy Fusemachines”).

The\ncommon stock of the Company began trading on The Nasdaq Stock Market (Nasdaq Global Market) under the symbol “FUSE”, and\nthe warrants trade under the symbol “FUSEW”, beginning on October 23, 2025. The Merger between CSLM and Legacy Fusemachines\nwas accounted for as a reverse recapitalization. See Note 20 - Reverse Recapitalization for more information.

Throughout\nthe notes to the consolidated financial statements, unless otherwise noted or the context otherwise requires, the term “Company”\nrefers to Legacy Fusemachines and its subsidiaries prior to the consummation of the Business Combination, and to Fusemachines Inc. (the\npublicly traded parent company) and its subsidiaries after the consummation of the Business Combination.

F-8

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Covenant\nFees

Pursuant\nto the Business Combination Agreement, the Company was covenanted to deliver to CSLM its audited financial statements for the year ended December 31,\n2023 and 2022 for inclusion in the registration statement on Form S-4 to be filed by CSLM in connection with the Merger, and that such\naudited financial statements had been prepared in conformity with GAAP applied on a consistent basis and in accordance with the requirements\nof the Public Company Accounting Oversight Board for public companies. The Company had covenanted to provide the audited financial statements\nno later than February 29, 2024, or incur delay fees in the amount equal to $35.0 thousand for the first one-month delay to March 31,\n2024 (pro-rated for a partial month), $50.0 thousand for the second one-month delay to April 30, 2024, and thereafter $70.0 thousand\nfor each subsequent one-month delay (pro-rated for any partial month). The Company provided the audited financial statements to CSLM\nin September 2024. As such, the Company has recorded $505 thousand of deferred transaction costs on the audited consolidated balance\nsheets as of December 31, 2024. On February 4, 2025, the company entered into a second amendment of the original agreement wherein the\nabove-mentioned delay fee provision is deleted and provides the Company with relief from future penalties related to the delivery of\nthe 2023 financial statements. Accordingly, the company recorded waiver in the year ended December 31, 2025 which have no impact in the\nconsolidated Statements of Operations and Comprehensive Loss as the amount of provision was eliminated from the deferred transaction\ncost and from the Accounts Payable, Accrued expense and other current liabilities in the consolidated balance sheets.

Note\n2. Summary of Significant Accounting Policies

Basis\nof Presentation and Principles of Consolidation

The\nCompany prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S.\nGAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the\n“SEC”) regarding financial reporting. The consolidated financial statements include the financial statements of\nFusemachines Inc. and its subsidiaries. Investments in entities where we hold at least a 20% ownership interest and have the ability\nto exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. All\nintercompany balances and transactions have been eliminated. These consolidated financial statements are presented in United States\nDollars (“USD” or $), which is the functional currency of the Parent Company. The consolidated financial statements as\nof and for the year ended December 31, 2024, included herein was derived from the audited consolidated financial statements of\nLegacy Fusemachines (now known as Fusemachines USA, Inc.).

Prior\nPeriod Reclassifications

Certain\namounts in prior periods have been reclassified to conform with current period presentation.

Use\nof Estimates

The\npreparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These\nestimates and assumptions affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at\nthe date of the consolidated financial statements, as well as revenues and expenses during the reporting period. On an ongoing basis,\nthe Company evaluates its estimates and assumptions, including those related to the valuation of operating lease right-of-use assets,\nconvertible notes, cumulative mandatorily redeemable common and preferred stock liability, common stock warrants, common and convertible\npreferred stock, current expected credit losses (“CECL”), stock-based compensation, useful lives of property and equipment\nand intangible assets, impairment of long-lived assets, capitalization of software development costs, forward purchase derivative liability,\nequity method investments and income taxes.

The\nCompany bases its estimates and judgments on historical experience, knowledge of current conditions and its beliefs of what could occur\nin the future, given available information. Actual results could differ from those estimates, and such differences may be material to\nthe consolidated financial statements. Changes in facts and circumstances may cause the Company to revise its estimates.

Cash\n& cash equivalents

The\nCompany considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. These\ninvestments are carried at cost, which approximates fair value.

F-9

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Accounts\nReceivable and Related Allowance for Expected Credit Losses

The\nCompany classifies its right to consideration in exchange for deliverables as an accounts receivable. A receivable is a right to consideration\nthat is unconditional (i.e., only the passage of time is required before payment is due) regardless of whether the amounts have been\nbilled. Accounts receivable represents amounts due from the Company’s customers for AI solutions (products and services). The Company\nreceives payments from customers based upon agreed-upon contractual terms. The timing of revenue recognition may differ from the timing\nof invoicing to customers.

Account\nreceivables are stated net of allowance for expected credit losses. Outstanding receivables are reviewed periodically, and allowances\nare provided for the estimated amount of receivables that may not be collected. The allowance for expected credit loss is based on the\nprobability of future collection determined by applying a loss-rate method using the Company’s historical loss experience. The\nCompany also considers reasonable and supportable current and future conditions in determining its estimated loss rates, such as external\nforecasts, macroeconomic trends or other factors including customer specific credit risk characteristics. The adequacy of the allowance\nis evaluated on a regular basis. Account balances are written off after all means of collection are exhausted and the balance is deemed\nuncollectible, which occurs when balances reach 365 days past due. Subsequent recoveries are credited to the allowance. Changes in the\nallowance are recorded as adjustments to bad debt expense in the period incurred.

Bad\ndebt expense is included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Property\nand Equipment, net

Property\nand equipment acquired in the ordinary course of the Company’s operations are stated at cost, net of accumulated depreciation.\nDepreciation is calculated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized\non a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Maintenance and repairs\nare expensed as incurred

Depreciation\nexpense is included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Depreciable\nlives by major classification generally are as follows:

Schedule\nof Property and Equipment, Net

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

		Useful\n life
Computers and other hardware		5-8 years
Vehicles and other fixed assets (excluding\n computers)		2-10 years
Office, furniture, and equipment		2-10 years
Leasehold improvements - shorter of lease term\n of estimated useful life		2-10 years

Intangible\nassets, net

Intangible\nassets consists of internally developed capitalized software, which will help in the management of the AI solutions business and will\nbe sold on a license basis.

Internal\nuse software

The\nCompany capitalizes certain costs related to internal use software acquired, modified, or developed related to the Company’s services\nin accordance with ASC 350, Internal use software. These capitalized costs are primarily related to salaries and other personnel costs.\nCosts incurred in the preliminary stages of development and the post implementation phase are expensed as incurred. The company adopts\nagile method of software development which is generally characterized as an iterative and more dynamic process where the planning, design\nand coding are less distinct and performed in short sprints. The Company analyses the nature of the development and implementation activities\n- i.e. whether Subtopic 350-40 characterizes them as capitalizable application development stage activities - when deciding whether the\ncosts of those activities should be capitalized or expensed as incurred. Maintenance and training costs are expensed as incurred. The\namortization expense is recorded in “General and administration” on the consolidated statements of operations and comprehensive\nloss.

Software\ncosts that are expensed are recorded in “Research and Development” on the consolidated statements of operations and comprehensive\nloss.

F-10

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Software\ndeveloped for sale

The\ncosts incurred for the development of computer software to be sold, leased or otherwise marketed are capitalized in accordance with ASC\n985, Costs of Software to be sold, leased or marketed, when technological feasibility has been established. Technological feasibility\ngenerally occurs when all planning, designing, coding and testing activities are completed that are necessary to establish that the product\ncan be produced to meet its design specifications, including functions, features, and technical performance requirements. These capitalized\ncosts are primarily related to salaries and other personnel costs.

Schedule\nof Intangible Assets, Net Useful Lives

\n \n \n \n \n \n \n

		Useful\n life
Internally developed software		3 years

Segment\nreporting

Under\nTopic 280, an operating segment is defined as a component of a public entity that engages in business activities from which it may recognize\nrevenues and incur expenses, has operating results that are regularly reviewed by the CODM to make decisions about resources to be allocated\nto the segment and assess its performance, and has discrete financial information available.

The\nCompany operates as one operating segment with a focus on data engineering, AI consulting, and technical services. The Company’s\nChief Executive Officer (“CEO”), as the Company’s chief operating decision maker, manages and allocates resources to\nthe operations of the Company on a consolidated basis. This enables the Company’s CEO to assess the overall level of available\nresources and determine how best to deploy these resources across service lines in line with the Company’s long-term company-wide\nstrategic goals.

The\nCODM considers the Company’s net income/(loss), expenses and the components of total assets to assess the segment’s performance\nand make resource allocation decisions for the Company’s single segment which is consistent with that presented within these financial\nstatements.

As\nthe Company’s operations are comprised of a single reporting segment, the Company’s segment assets are reflected on the accompanying\nconsolidated balance sheet as “total assets” and its significant segment expenses and net loss are listed on the accompanying\nConsolidated Statements of Operations and Comprehensive loss.

Impairment\nof Long-Lived Assets

Long-lived\nassets, such as property and equipment and finite-lived intangible assets, are reviewed for impairment whenever events or changes in\ncircumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses the straight-line method of depreciation\nand amortization. When the carrying value of an asset is more than the sum of the undiscounted expected future cash flows, an impairment\nis recognized. An impairment loss is measured as the excess of the asset’s carrying amount over its fair value. Intangible assets\nthat have finite useful lives are amortized over their estimated useful lives on a straight-line basis. Factors that would necessitate\nan impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse\nchange in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable\nmarket value of an asset, among others.

The\nCompany holds long-lived assets in two countries worldwide. The table below presents the breakdown of the Company’s long-lived\nassets, based on geographic region (in thousands).

Schedule of Long-lived Assets, Based on Geographic Region

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025		2024
	Long\n lived assets as of
	December 31,		December 31,
	2025		2024
Nepal	$	247		$	286
United States		264			249
Total long-lived assets	$	511		$	535

F-11

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Fair\nValue Option (“FVO”) Election

The\nCompany entered into related party convertible notes payable, at fair value in October 2019, September 2021, and Convertible Notes\npayable at fair value in January 2024, (the “Convertible Notes at Fair Value”). (Refer to “Note 10 –\nLong-Term Debt”). As permitted under ASC 825, Financial Instruments (“ASC 825”), the Company elected the FVO to\naccount for the Convertible Notes at Fair Value and Related Party Convertible notes at Fair Value. In accordance with ASC 825, the\nCompany recorded them at fair value. The FVO may be applied instrument by instrument, but it is irrevocable. Subsequent changes in\nfair value would be recorded as a separate line in the consolidated statements of operations and comprehensive loss. As a result of\napplying the FVO, direct costs and fees related to the Convertible Notes at Fair Value and Related Party Convertible notes at Fair\nValue were expensed as incurred. The Company concluded it was appropriate to apply the FVO to Convertible Notes at Fair Value and\nRelated Party Convertible notes at Fair Value because they are liabilities that are not, in whole or in part, classified as a\ncomponent of stockholders’ equity. In addition, the Convertible Notes at Fair Value and Related Party Convertible notes at\nFair Value met other applicable criteria for electing the FVO under ASC 825.

Accumulated\nOther Comprehensive Income

Accumulated\nother comprehensive income consists of changes in the cumulative foreign currency translation adjustments.

Revenue\nRecognition

The\nCompany derives the majority of its revenue from AI Solutions (Products and Services) that largely represents professional services the\nCompany provides to its customers to help them achieve any AI-related goals within their organization. Standard contractual arrangements\nare governed by Master Services Agreements (“MSAs”), which set out general terms including payment, termination rights, and\nintellectual property ownership. Detailed scope, pricing, and performance obligations are defined in Statements of Work (“SOWs”),\nwhich are executed for each engagement or project phase. The Company’s contracts for AI Services have different terms based on\nthe scope and complexity of engagements; pricing for the majority of contracts are invoiced monthly on a time-and-materials basis. The\nCompany notes that its contracts meet the requirements for over-time revenue recognition, as the customer is simultaneously receiving\nthe benefits and able to consume the benefits of the services being provided. For professional services that are distinct and billed\non a time-and-materials basis, revenue is generally recognized as the services are provided, which is reflective of the transfer of the\nservices to the customer. The Company elected the “right to invoice” practical expedient based on the Company’s right\nto invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

Company’s\nAI Solutions includes product revenues primarily comprising of software license fees from sales of term-based license contracts, under\nwhich we grant customers the license right to use the software for a specified period (i.e. when the customer can access, use, and benefit\nfrom the software license). Term software licenses are satisfied at a point in time and associated revenue is recognized upon the later\nof 1) delivery of the software, or 2) the beginning of the period in which the customer has received the license right to use the software.\nFor customer contracts that include software license fees, implementation and/or other consulting services, the portion of the transaction\nprice allocated to software licenses is generally recognized when delivered. Implementation, customization, or model tuning services\nif applicable, when included, are evaluated as separate performance obligations when they are distinct from the software and not highly\ninterdependent. These services are generally satisfied over time as the work progresses. During the year ended December 31, 2025 and\nDecember 31, 2024, the product revenues were insignificant.

F-12

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

For\nmost contracts, the Company uses a Master Service Agreements (“MSA”) to govern the overall relevant terms and conditions\nof the business agreement, and a Statement of Work (“SOW”) to specify the services delivered and the associated prices. Performance\nobligations specific to each individual contract are defined within the terms of each SOW. Each performance obligation is identified\nbased on the services that will be transferred to our customer that are both capable of being distinct and are distinct within the context\nof the contract. The transaction price is determined based on the consideration to which the Company will be entitled and expect to receive\nin exchange for transferring services to the customer.

Contract\nBalances

Differences\nin timing between revenue recognition and cash collection result in contract assets and contract liabilities. The Company classifies\nthese assets as unbilled revenue; the liabilities are classified as deferred revenue.

Deferred\nrevenue represents the amounts billed or cash payments received in advance of revenue recognition at the end of the reporting period.\nThese amounts are recorded in deferred revenue until revenue is recognized through delivery of service or upon meeting the performance\nobligation. The Company’s deferred revenue represents contract liabilities. Generally, when billing occurs subsequent to revenue\nrecognition, the Company reports unbilled revenue on the consolidated balance sheets.

Cost\nof Revenue

Consists\nprincipally of consulting and payroll expenses as well as stock-based compensation expense that are assigned to customer projects.

Selling\nand Marketing Expenses

Selling\nand marketing expenses represent costs incurred to promote the Company’s services offered, including salaries, benefits and related\ncosts of our sales and marketing personnel, and represent costs of advertising and other selling and marketing expenses. All sales and\nmarketing costs are expensed as incurred.

General\nand Administrative Expenses

Consists\nof expenses associated with general and administrative functions of the business such as the costs of salaries, stock-based compensation\nexpense, Information Technology (“IT”) infrastructure, allowance for expected credit losses, travel, legal and accounting\nservices, insurance, rent, software and tools, meals, other professional services activities, and certain non-income taxes.

Defined\nContribution Plan

Contributions\nto defined contribution plans are expensed in the period in which services are rendered by the covered employees. The Company recognizes\nits liabilities for compensated absences dependent on whether the obligation is attributable to employee services already rendered, relates\nto rights that vest or accumulate and payment is probable and estimable.

F-13

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Stock-Based\nCompensation

Notes\nReceivable from Stockholders

From\ntime to time the Company has entered into promissory note agreements with certain employees for the purpose of financing the early exercise\nof the Company’s stock options. Although the shares of common stock purchased by the employees in exchange for the promissory notes\nare considered legally issued, the Company does not consider them outstanding for accounting purposes. Instead, the Company treats them\nas restricted until the options are fully vested and the outstanding principal and accrued interest on the notes are repaid in full.\nUnvested shares for which the promissory notes are fully satisfied are recorded as a share repurchase liability and as shares vest are\nrecognized to additional paid-in capital in the Consolidated Balance Sheets.

Advertising\nCost

Advertising\ncosts are expensed as incurred. Advertising costs were $61.8\nthousand and $126.2\nthousand for the years ended December 31, 2025, and 2024, respectively, which are included in selling and marketing costs on the\nconsolidated statements of operations and comprehensive loss.

F-14

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Income\nTaxes

Accordingly,\nthe increase and decrease of valuation allowances could have a significant negative or positive impact on future earnings

Deferred\nTransaction Costs

The\nCompany records deferred transaction costs, which consist of legal, accounting, and other fees related to the preparation of the Merger.\n(Refer to “Note 1 – Organization”). The deferred transaction costs will be offset against proceeds from the transaction\nupon the effectiveness of the Business Combination. Fusemachines Inc. incurred transaction cost of $1,873\nthousands, consisting of deferred transaction cost, banking\nfees, legal fees, and other professional fees as at October 22, 2025, which has been recorded as a reduction to Additional paid-in capital\nas a direct and incremental cost of the reverse recapitalization.

Convertible Preferred Stock

The Company applies the guidance\nenumerated in ASC Subtopic 480-10,

Distinguishing Liabilities from Equity-Overall (“ASC\n480-10”),\nwhen determining the classification and measurement of convertible preferred stock. Convertible preferred stock subject to mandatory\nredemption are classified as liability instruments and are initially measured at fair value in accordance with ASC 480-10 and accreted\nto their redemption value under the effective interest method. All other issuances of convertible preferred stock are subject to the\nclassification and measurement principles of ASC 480-10. Accordingly, the Company classifies conditionally redeemable preferred stock\n(if any), which includes preferred stock that feature redemption rights that are either within the control of the holder or subject to\nredemption upon the occurrence of uncertain events not solely within the Company’s\ncontrol, as temporary equity. At all other times, the Company classifies its convertible preferred stock in stockholder’s deficit.

Research\nand Development Costs

The\nCompany accounts for research and development costs in accordance with the ASC 730, Research and Development. Under ASC 730, all research\nand development costs are expensed as incurred, with the exception of certain software development costs discussed above. Our research\nand development costs consist primarily of payroll costs associated with software product development, testing, quality assurance, documentation,\nenhancements and upgrades for existing customers under maintenance.

\n\nResearch and Development costs were $720\nthousand and $732\nthousand for the years ended December 31, 2025 and 2024 respectively, which are included in the consolidated statements of\noperations and comprehensive loss.

Net\nLoss per Share

The\nCompany applies the two-class method to compute basic and diluted net loss per share attributable to common shareholders, when shares\nmeet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating\nsecurities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires\nincome (loss) available to common shareholders for the period to be allocated between common and participating securities based upon\ntheir respective rights to share in the earnings as if all income (loss) for the period had been distributed. The Company reported a\nnet loss attributable to common shareholders for the year ended December 31, 2025 and 2024.

Basic\nnet loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of shares\nof common stock outstanding during the year. Diluted net loss per share is computed by dividing the net loss attributable to common shareholders\nby the weighted average number of shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the potential\nexercise of warrants or options, and the potential conversion of preferred stock or convertible notes, into common stock, under the if-converted\nmethod. Due to the net losses for the year ended December 31, 2025 and 2024, basic and dilutive net loss per share were the same, as\nthe effect of potentially dilutive securities would have been anti-dilutive

F-15

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Warrants

The Company accounts for warrants as either equity-classified\nor liability-classified instruments based on an assessment of the specific terms of the instruments in accordance with FASB ASC Topic\n480, Distinguishing Liabilities from Equity (“ASC 480”) and FASB ASC Topic 815, Derivatives and Hedging (“ASC\n815”).

Shortfall warrants, public and private warrants, and\nwarrants issued in connection with convertible notes were evaluated under ASC 480 and ASC 815-40 and determined not to meet the criteria\nfor liability classification. These warrants are indexed to the Company’s own stock and meet the requirements for equity classification.\nAccordingly, such warrants are recorded within stockholders’ equity and are not subsequently remeasured.

All other warrants that do not meet the criteria for\nequity classification are accounted for as liabilities and measured at fair value, with changes in fair value recognized in the consolidated statement of operations and comprehensive loss in each reporting period.

Commitments\nand Contingencies
\n

The\nCompany may at times be involved in litigation in the ordinary course of business. The Company will, from time to time, when\nappropriate in management’s estimation, record adequate reserves in the Company’s consolidated financial statements for\npending litigation. Currently there are no material\npending or threatened litigation matters that management believes require accrual or disclosure in addition to those presented in\nthe Note on Litigation (refer Note 17 – Commitments and Contingencies).

Foreign\nCurrency Translation and Remeasurement

Assets\nand liabilities of consolidated foreign subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. dollars\nat period-end exchange rates and revenues and expenses are translated into U.S. dollars using average exchange rates during the year.\nEquity transactions are translated using historical exchange rates. The adjustment resulting from translating the consolidated financial\nstatements of such foreign subsidiaries into U.S. dollars is reflected as a cumulative translation adjustment and reported as a component\nof Accumulated other comprehensive loss.

Risks\nand Uncertainties

As\na result of its global operations, the Company may be subject to certain inherent risks.

Concentration\nof Credit - Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash\nand cash equivalents, and accounts receivable. The Company maintains cash and cash equivalents with financial institutions. The Company\nbelieves its credit policies reflect normal industry terms and business risk and there is no expectation of non-performance by the counterparties.\nAccounts receivables are generally dispersed across many customers operating in different industries; therefore, concentration of\ncredit risk is limited. If any of the Company’s customers enter bankruptcy protection or otherwise take steps to alleviate their\nfinancial distress, the Company’s credit losses and write-offs of receivables could increase, which would negatively impact its\nresults of operations.

Significant\nCustomers and Suppliers — The concentration of credit risk with respect to accounts receivable is primarily limited to certain\ncustomers to which the Company makes substantial sales. To minimize credit risk related to accounts receivable, the Company maintains\nallowances for potential credit losses based on historical loss patterns as well as future expectations. As of December 31, 2025 and\nDecember 31, 2024, the Company had three and four customers whose accounts receivable balance accounted for at least 10% of the Company’s\nconsolidated accounts receivables, respectively. These customers accounted for approximately 47.64% and 61.6% of the Company’s\nreceivables at the end of the respective periods. For the year ended December 31, 2025 and 2024, the Company had three and two customers\nwhose revenue accounted for at least 10% of the Company’s consolidated revenue, respectively. These customers accounted for approximately\n42.2 % and 23.9 % of the Company’s total revenue at the end of the respective periods.

The\nCompany pays its suppliers on normal commercial terms and does not believe that there is any significant supply risk from its suppliers.\nAs of December 31, 2025, and December 31, 2024, the Company had three and three suppliers whose account payable accounted for at least\n10% of the Company’s consolidated account payables, respectively. These suppliers accounted for approximately 57.0% and 61.4% of\nthe Company’s total payables at the end of the respective periods.

Foreign\ncurrency risk - The Company’s global operations are conducted predominantly in U.S. dollars. While revenue is generated in\nU.S. dollars, the Company incurs expenses in other currencies, principally, Nepalese rupees and Canadian dollars. The Company’s\ninternational operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign\ncurrency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash flows into U.S.\ndollars.

Interest\nrate risk - The Company is exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily\nfrom variable rates related to cash, short-term investments, and the Company’s borrowings. The Company does not believe it is exposed\nto material direct risks associated with changes in interest rates related to these deposits, investments and borrowings.

Geopolitical risks -\nAs a result of its global operations, the Company is exposed to geopolitical risks, including ongoing and potential wars, terrorism,\nsanctions and trade disputes. These developments may disrupt supply chains and data flows, restrict access to critical technology and\ninfrastructure (including AI-enabling hardware and cloud services), and increase cybersecurity and compliance risks. As a result of its\nglobal operations, the Company may be subject to certain inherent risks.

F-16

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Leases

The\nCompany’s lease portfolio includes one real estate leases under operating lease agreements. At the inception of a contract, the\nCompany assesses whether the contract is, or contains, a lease. The Company’s assessment is based on whether: (i) the contract\ninvolves the use of a distinct identified asset, (ii) the Company obtains the right to substantially all the economic benefit from the\nuse of the asset throughout the term of the contract, and (iii) the Company has the right to direct the use of the asset.

Upon\nthe adoption of ASC 842, the Company elected the package of practical expedients to not (i) reassess whether any expired or existing\ncontracts are or contain a lease, (ii) reassess historical lease classifications for existing leases, and (iii) reassess initial direct\ncosts for existing leases. The Company also elected the practical expedient to account for lease and non-lease components as a single\nlease component. Accordingly, the Company shall include non-lease components with lease payments for the purpose of calculating lease\nassets and liabilities to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable\nlease payments

The\nCompany exempts leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combines\nnon-lease components with lease components. Lease assets are tested for impairment in the same manner as long-lived assets used in operations.

The\nCompany evaluates the classification of its leases as either finance leases or operating leases. A lease is classified as a finance lease\nif any one of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease\ncontains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the\nremaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value\nof the asset, or (v) the leased asset is of such a specialized nature that it is expected to have no alternative use to the lessor at\nthe end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria.

The\nCompany recognizes right-of-use assets and lease liabilities based on the present value of lease payments over the lease term at the\ncommencement date of the lease (or January 1, 2022, for existing leases upon the adoption of Topic 842). The discount rate implicit within\nthe Company’s leases is generally not determinable; therefore, the Company determines the discount rate using its incremental\nborrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The\nCompany records rent expense for short-term leases and operating leases, some of which have escalating rent payments, on a straight-line\nbasis over the lease term

For\nadditional information regarding the Company’s lease arrangements, refer to “Note 18 - Leases”

Related\nParties

Parties\nare considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are\ncontrolled by, or are under common control with the Company. Related party also include principal owners of the Company, its management,\nmembers of the immediate families of principal owners of the Company and its management and other parties with which the Company may\ndeal with if one party control or can significantly influence the management or operating policies of the other to an extent that one\nof the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related\nparty transactions.

F-17

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Going\nConcern

The\nCompany’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the\nrealization of assets and the satisfaction of liabilities in the normal course of business.

As\nof December 31, 2025, the Company had cash of approximately $4,221 thousand. For the years ended December 31, 2025, the Company used\napproximately $5,529 thousand in cash for operating activities. Historically, the Company has incurred recurring net losses from operations\nand negative cash flows from operating activities. As of December 31, 2025, the Company had an accumulated deficit of approximately $35,145\nthousand. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern within one year\nof the date these consolidated financial statements were issued.

The\ncontinuation of the Company as a going concern is dependent upon the continued financial support from its stockholders and debt holders.\nSpecifically, continuation is contingent on the Company’s ability to obtain necessary equity to continue\noperations, and ultimately the Company’s ability to generate profit from sales and positive operating cash flows, which is not\nassured.

On\nOctober 22, 2025, Merger Sub merged with and into Legacy Fusemachines, with Legacy Fusemachines continuing as the surviving company and\nbecoming a wholly owned subsidiary of Fusemachines Inc. In connection with the closing, approximately $14.0 million in cash was received\nfor the issuance of shares of Fusemachines Inc. common stock. All convertible notes were settled through the issuance of Fusemachines\nInc. common stock, and certain promissory notes were repaid in cash upon closing. Following the business combination, the net balance\nof cash and cash equivalents was approximately $9.4 million. The Company’s trade payables, accrued expenses, and other current\nliabilities exceed the net cash and cash equivalents balance. Management is evaluating initiatives to streamline operations through reductions\nin headcount and consultant costs, and continued negotiations with vendors to achieve more favorable terms. In addition, the Company’s\nbusiness plan anticipates a measured growth trajectory supported by new client acquisitions and expansion of existing customer relationships.\nWhile these actions are expected to enhance the Company’s financial position and extend its operational runway once implemented,\nthey remain in the planning and negotiation stages.

As\nof the date on which these consolidated financial statements were available to be issued, we believe that the cash on hand, and additional\ninvestments available through issuance of new common stock, will be inadequate to satisfy the Company’s working capital and capital\nexpenditure requirements for at least the next twelve months. The ability of the Company to continue as a going concern is dependent\nupon management’s plan to raise additional capital from issuance of equity or receive additional borrowings to fund the Company’s\noperating and investing activities over the next year. These consolidated financial statements do not include any adjustments to the\nrecoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company\nbe unable to continue as a going concern.

Investment\nin Equity Securities

The\nCompany’s equity investment comprises of investments in equity securities of private Companies. These equity investments are accounted\nfor under the equity method, and initially recorded at estimated fair value, less any impairment. The Company’s share of gains\nand losses if any from these equity method investments are included in the consolidated statements of operations and comprehensive loss,\nnet of income tax provision. Equity investments are reviewed regularly to determine whether there is a decline in estimated fair value\nbelow the carrying amount. If there is a decline that is other-than-temporary, the investment is written down to estimated fair value.\nWhen evaluating the equity investment for impairment, the Company performs a qualitative and quantitative assessment to evaluate whether\na decline in estimated fair value below the carrying amount is other-than- temporary. The qualitative assessment includes a review of\nmacroeconomic conditions, industry and market considerations, the investee’s recent operating results and trends, recent acquisitions\nand sales of the investee securities, and other publicly available data, among other factors. If the Company determines that the decline\nis other-than-temporary, the Company records an impairment loss to write the equity investment to the estimated fair value.

Treasury\nStock

The\nCompany records treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock.\nThe Company’s accounting policy upon the formal retirement of treasury stock is to deduct the par value from the Company’s\ncommon stock and to reflect any excess cost over par value as a reduction to additional paid-in capital (to the extent created by previous\nissuances of the shares) and then retained earnings.

In\nconnection with the consummation of the Business Combination on October 22, 2025, treasury shares previously held by the Company totaling\n438,903 shares, with an aggregate carrying value of approximately $2.9 million, were excluded from the share exchange and did not participate\nin the reverse recapitalization. As treasury shares are not considered outstanding, these shares were effectively retired in connection\nwith the transaction and accordingly are not reflected as outstanding shares of common stock following the closing of the Business Combination.

F-18

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Emerging\nGrowth Company (EGC)

The\nCompany is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our\nBusiness Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting\nrequirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not\nbeing required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations\nregarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding\nadvisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved

Further,\nSection 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting\nstandards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do\nnot have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting\nstandards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements\nthat apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of\nsuch extended transition period which means that when a standard is issued or revised and it has different application dates for public\nor private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies\nadopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public\ncompany which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition\nperiod difficult or impossible because of the potential differences in accounting standards used.

Embedded\nDerivatives

ASC\n815 requires companies to bifurcate certain features from their host instruments and account for them as free-standing derivative\nfinancial instruments should certain criteria be met. We evaluate our financial instruments to determine whether such instruments are\nderivatives or contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host\ncontract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives\ndepends on the nature of the host contract and the features of the derivatives. Bifurcated embedded derivatives are recognized at fair\nvalue, with changes in fair value recognized in the consolidated statements of operations each period. Bifurcated embedded derivatives\nare classified with the related host contract in our consolidated balance sheets. The classification of derivative instruments, including\nwhether such instruments should be recorded as liabilities or as equity is re-assessed at the end of each reporting period.

F-19

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Recent\nAccounting Pronouncements

New\nAccounting Pronouncements Not Yet Adopted

The\nCompany considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting\nStandards Board. Management periodically reviews newly issued accounting standards to determine their potential impact on the Company’s\nconsolidated financial statements and related disclosures.

ASU\n2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures- In December 2023, the FASB issued this ASU to update income\ntax disclosure requirements, primarily related to the income tax rate reconciliation and income taxes paid information. This update is\neffective on a prospective basis for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently\nevaluating the impact that the adoption of this standard will have on its consolidated financial statements.

In\nMarch 2024, the SEC issued its final climate disclosure rules (Rule 1), which require the disclosure of climate-related information in\nannual reports and registration statements, beginning with annual reports for the year ending December 31, 2025. The rules require disclosure\nin the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial\nthresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material. We are currently\nevaluating the impact of the new rules and continue to monitor the status of the related legal challenges.

ASU\n2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. In November 2024, the FASB issued\nthis ASU that requires more detailed disclosure about certain costs and expenses presented in the income statement, including inventory\npurchases, employee compensation, selling expense and depreciation expense. The new guidance is effective for annual reporting periods\nbeginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The\nguidance does not affect recognition or measurement in our consolidated financial statements.

ASU\n2024-04 Debt - Debt with Conversion and Other Options - Induced Conversions of Convertible Debt Instruments. In November 2024, the\nFASB issued this ASU which clarifies the requirements for determining whether certain settlements of convertible debt instruments should\nbe accounted for as induced conversions or extinguishments. The amendments in this update are effective for all entities for annual reporting\nperiods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted\nfor all entities that have adopted the amendments in Update 2020-06. We are currently evaluating the impact this guidance will have on\nour consolidated financial statements.

In\nMay 2025, the FASB issued Accounting Standards Update No. 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue\nfrom Contracts With Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer (“ASU 2025-04”).\nASU 2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and\nclarifies that the variable consideration constraint in Topic 606 does not apply to share-based consideration payable to customers. The\nnew guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting\nconditions and ensuring alignment with Topic 606 and Topic 718. ASU 2025-04 is effective for fiscal years beginning after December 15,\n2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact\nof adopting this new accounting guidance on its financial statements and related disclosures.

In\nSeptember 2025, the FASB issued ASU 2025-06- Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted\nImprovements to the Accounting for Internal-Use Software (ASU 2025-06), which is intended to simplify the capitalization guidance for\ninternal-use software by removing references to project stages and clarifying when the capitalizing of eligible costs is required. ASU\n2025-06 is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption\nis permitted. The Company is in the process of evaluating the impact of this new guidance on its disclosures.

In\nDecember 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance\nin Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures\nand introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have\nhad a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods\nwithin those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.

The\nCompany does not believe any other new accounting pronouncements issued by the FASB that have not become effective will have a material\nimpact on its consolidated financial statements.

New Accounting Pronouncements Adopted

In May 2025, the FASB issued Accounting Standards Update No. 2025-03, Business Combinations (Topic 805) and Consolidation\n(Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU 2025-03”). ASU 2025-03\nchanges how companies determine the accounting acquirer in certain business combinations involving variable interest entities. The new\nguidance requires considering the factors used for other acquisition transactions to assess which party is the accounting acquirer. ASU\n2025-03 is effective for the Company’s annual reporting periods beginning on January 1, 2027. The Company has early adopted ASU\n2025-03. Accordingly, even if the acquired entity meets the definition of a VIE under ASC 810, the determination of the accounting acquirer\nis based on an evaluation in accordance with ASC 805-10 and ASC 805-50. The adoption of this guidance did not have a material impact on\nthe Company’s financial statements. Further, the adoption did not change the Company’s overall accounting conclusions with\nrespect to the identification of the accounting acquirer.

F-20

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n3. Fair Value Measurements

The\nauthoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements\nas follows:

Level\n1 - Quoted prices for identical assets or liabilities in active markets.

Level\n2 - Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets\nthat are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices\nsuch as interest rates or yield curves.

Level\n3 - Unobservable inputs reflecting management’s view about the assumptions that market participants would use in pricing the asset\nor liability.

Assets\nand liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the\nfair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its\nentirety requires management to make judgments and consider factors specific to the asset or liability.

The\ncarrying values of the Company’s accounts receivable, unbilled revenue, prepaid expenses and other current assets, other assets,\naccounts payable, transaction costs, accrued expenses and other current liabilities and cumulative mandatorily redeemable common and\npreferred stock liability approximate their fair values based on the instrument’s relative short-term nature.

As of\nDecember 31, 2025, the Company does not have any outstanding convertible notes payable or related party loan payable, as these\ninstruments were either converted or settled during the year other than related party note payable related to Dolma Impact Fund\nI (“Dolma”) amounting $300 thousand, which were reclassified from a convertible note to a related party note payable on demand. Accordingly, no fair value estimation is required for such\ninstruments as of the reporting date. As of December 31, 2024, the estimated fair values of these instruments approximated their\ncarrying values due to their relatively short maturities.

Financial\nInstruments Recorded at Fair Value

The\nfollowing tables present the Company’s fair value hierarchy for its financial liabilities that are measured at fair value on a\nrecurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine\nsuch fair value (in thousands):

Schedule of Financial Instruments Recorded at Fair Value on a Recurring Basis

\n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Level\n 1		Level\n 2			Level\n 3		Total
	Fair\n Value Measurements at December 31, 2025
	Level\n 1		Level\n 2			Level\n 3		Total
Liabilities:
Related Party convertible\nNotes Payable, at fair value (Refer Note 10. Long-Term Debt)
Convertible Notes at Fair\nValue (Refer Note 10. Long-Term Debt)
Warrant liability		-			-		$	121	$	121
Forward\n Purchase derivative liability (Refer Note 21. Forward Purchase agreement)		-			-		$	9,692	$	9,692
Liabilities	$	-		$	-		$	9,813	$	9,813

\n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Level\n 1		Level\n 2			Level\n 3		Total
	Fair Value\n Measurements at December 31, 2024
	Level\n 1		Level\n 2			Level\n 3		Total
Liabilities:
Related Party\n convertible Notes Payable, at fair value (Refer Note 10. Long-Term Debt)	$	-		$	-		$	6,524	$	6,524
Convertible Notes at Fair\n Value (Refer Note 10. Long-Term Debt)		-			-		$	8,986	$	8,986
Warrant\n liability		-			-		$	945	$	945
Liabilities	$	-		$	-		$	16,455	$	16,455

F-21

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Warrant\nLiabilities

The\nfollowing table shows the change in the fair value of the warrant liability (in thousands):

Schedule of Change in Fair Value of Warrant Liability

\n \n \n \n \n \n \n \n \n \n \n \n \n

	Amount
Balance as of December 31, 2023	$	430
Change in fair value of warrant liabilities		515
Balance as of December\n 31, 2024	$	945

\n \n \n \n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n

	Amount
Balance as of December 31, 2024	$	945
Warrant liability, beginning balance	$	945
Change in fair value of warrant liabilities	$	(824	)
Balance as of December\n 31, 2025	$	121
Warrant liability, ending Balance	$	121

Forward\nPurchase Derivative Liability

The\nforward purchase derivative liability was recognized at Closing on October 22, 2025. The fair value as of December 31, 2025, was $9,692\nthousand. The following table presents a reconciliation of the Forward Purchase Derivative Liability (in thousands):

Schedule\nof Reconciliation of the Forward Purchase Derivative Liability

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Amount
Balance as of December 31, 2024		Nil
Forward purchase derivative recognized\n in connection with the merger on October 22, 2025		8,616
Change in fair value of\n forward purchase derivative liabilities		1,076
Balance as of December\n 31, 2025		9,692

The\nfair value of the forward purchase derivative liability was estimated using a Monte Carlo simulation approach. The key assumptions used\nin valuation as of December 31, 2025: a risk-free rate of 3.53%,\na valuation term of 2.81\nyears, and annualized volatility of 65.0%.\nThe Company’s common share price was simulated with daily time steps for a range of various possible scenarios. The breadth of\nall possible scenarios was captured in an estimate of volatility, based on comparable companies’ historical equity volatilities,\nconsidering differences in their capital structure. The simulated prices were compared against the settlement adjustment features of\nthe Forward Purchase Agreements. Under each simulated scenario of future stock price, the Company calculated the value of the forward\npurchase derivative liability arrangement. The average value across this range of possible scenarios, discounted to present using the\nrisk-free rate, was used as the fair value of the forward purchase derivative liability.

The\nfollowing unobservable assumptions were used in determining the fair value of the forward purchase derivative liability at Closing

Schedule\nof Unobservable Assumptions Were Used in Determining the Fair Value of the Forward Purchase Derivative Liability

\n \n \n \n

Equity volatility

Convertible\nnotes payable and forward purchase derivative liability

The\nfollowing table shows the change in the fair value of the Convertible Notes measured at Fair Value and forward purchase derivative\nliability (in thousands):

Schedule of Change in Fair Value of the Convertible Notes at Fair Value

	Related\n party Convertible Note payable at fair value			January\n 2024 Convertible\n Notes			Forward\n Purchase Derivative Liability
Balance as of December 31, 2023	$	3,764			$	-			-
Forward purchase derivative recognized in\n connection with the merger on October 22, 2025
Conversion into Fusemachines Inc. common stock\nto give effect of reverse capitalization of the merger (Refer Note 20)
Reclassification from convertible note payable*
Issuance of convertible notes at fair value		-			$	6,500			-
Gain on extinguishment of debt recorded\n as a capital transaction		(343	)			-			-
Change in fair value of related party note and convertible notes at fair value		3,103				2,486			-
Balance as of December\n 31, 2024	$	6,524			$	8,986			-

Balance as of December\n 31, 2024	$	6,524			$	8,986
Convertible notes at fair value, beginning balance	$	6,524			$	8,986
Forward purchase derivative recognized in\n connection with the merger on October 22, 2025									8,616
Change in fair value of Related Party\n Convertible note, Convertible Notes at Fair Value and Forward Purchase derivative liability		(2,056	)			(3,664	)		1,076
Conversion into Fusemachines Inc. common\n stock to give effect of reverse capitalization of the merger (Refer Note 20)		(4,168	)			(5,322	)		-
Reclassification from convertible note payable*		(300	)
Balance as of December\n 31, 2025	$	-			$	-		$	9,692
Convertible notes at fair value, ending balance	$	-			$	-		$	9,692

\n\n

In connection with the Business Combination on October 22, 2025, all outstanding convertible notes,\n including both related party and third-party balances, were converted into equity in accordance with their respective terms.\n Accordingly, no convertible notes remained outstanding as of December 31, 2025, except for the note related to Dolma Impact Fund I\n (“Dolma”) amounting to $300 thousand, which was reclassified from a convertible note to a related party note payable on\n demand.

Common\nStock Warrant Liability

The\nCompany estimates the fair value of the common stock warrant liability (refer to “Note 10 – Long-term Debt”) using an\noption pricing model and assumptions that are based on the individual characteristics of the warrants on the valuation date, as well\nas assumptions for fair value of the underlying common stock expected volatility, expected life, dividends, and risk-free interest rate.

The\nwarrant liability is classified as Level 3 as there were no quotable prices for identical assets or quoted prices for similar. The warrant\nliabilities are measured using a Black-Scholes Model. The fair value of the warrant liability as of December 31, 2025 was determined\nusing the following assumptions: a dividend yield of 0.0%, a risk-free rate of 3.99%, a stock price of $1.65, a term of 7.65 years, and\nannualized volatility of 62.0%. The fair value of the warrant liability as of December 31, 2024 was determined using the following assumptions:\na dividend yield of 0.0%, a risk-free rate of 4.5%, a stock price of $7.48, a term of 8.65 years, and annualized volatility of 65.0%.

F-22

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Related\nParty Note payable at Fair Value and Convertible Notes at Fair Value

The\nCompany accounts for certain long-term debt (also refer to “Note 10 - Long-term Debt”) under the fair value option. At the\nissuance date of the Convertible Notes at Fair Value, the Company determined that the fair value approximated the principal amount.

The\nmeasurement of fair value of the Convertible Notes at Fair Value as of December 31,2024 was estimated based on significant inputs not\nobservable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based analysis\nto incorporate estimates and assumptions concerning the Company’s prospects and market indications into a model to estimate the\nvalue of the Convertible Notes at Fair Value. The most significant estimates and assumptions used as inputs are those concerning timing,\nprobability of possible scenarios for conversion or settlement of the Convertible Notes at Fair Value. The Convertible Notes at Fair\nValue are classified as Level 3 as there were no quotable prices for identical assets or quoted prices for similar

In\nconnection with the consummation of the business combination on October 22, 2025, which was accounted for as a reverse\nrecapitalization, each convertible note of Legacy Fusemachines, including both related party and other convertible notes, that was\nissued and outstanding immediately prior to the closing was converted into an aggregate of 8,048,770\nshares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements. Immediately following such\nconversion, all such shares of Legacy Fusemachines common stock were exchanged for shares of Fusemachines Inc. common stock based on\nthe Exchange Ratio specified in the Merger Agreement. As a result of the foregoing, no convertible notes or related party notes\npayable remained outstanding as of December 31, 2025 other than related party note payable related to Dolma Impact Fund I\n(“Dolma”) amounting $300\nthousand.

The\nCompany has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment,\nand they are recorded at fair value only when an impairment is recognized. These assets include property and equipment and amortizable\nintangible assets.

The\nfollowing table sets forth the significant inputs to the probability-weighted valuation model used to value the Convertible Notes at\nFair Value as of December 31, 2024:

Schedule of Probability-Weighted Valuation Model Used to Value the Convertible Notes at Fair Value

2019\nand 2021 Convertible Notes

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Type\n of Events	Expected\n Date	Probability\n of Event			Discount\n rate
SPAC\n transaction	4/3/2025		75	%		54	%
Maturity	2/28/2026		10	%		54	%
Default\n feature	NA		15	%		54	%

January 2024 Convertible Notes

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Type of Events	Expected\n Date	Probability\n of Event			Discount\n rate
SPAC\n transaction	4/3/2025		75	%		45	%
Maturity	7/12/2025		10	%		45	%
Default\n feature	7/12/2025		15	%		45	%

F-23

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n4 Accounts receivable, net

Accounts\nreceivable, net consisted of the following (in thousands):

Schedule of Accounts Receivable, Net

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,			December 31,
	2025			2024
Accounts receivable, current	$	1,386			$	2,015
Accounts receivable		-				4
Total accounts receivable	$	1,386			$	2,019

Less: Allowance for credit\n losses	$	(122	)		$	(588	)
Total\n accounts receivable, net	$	1,264			$	1,431

In\nsome contracts with customers, the Company agreed to instalment payments exceeding 12 months. The present value of these contracts is\nrecorded as a receivable as the revenue is recognized in accordance with GAAP, and profit is recognized to the extent the present value\nis in excess of cost. The present value of long-term receivables is Nil, and the face value is Nil as of December 31, 2025. The present\nvalue of long-term receivables is $4 thousand, and the face value is $5.0 thousand as of December 31, 2024.

The\nfollowing table sets forth the activity in the Company’s allowance for credit losses (in thousands):

Schedule of Allowance for Credit Losses

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31, \n 2025			December 31, \n 2024
Beginning balance	$	588			$	368
Provision for credit losses		55				540
Write-offs		(521	)			(320	)
Ending balance	$	122			$	588

Unbilled\nrevenue for the year ended December 31, 2025 was $15.0 thousand and $113.0 thousand for the year ended December 31, 2024.

Note\n5 Prepaid Expenses and Other Current Assets

Prepaid\nexpenses and other current assets consisted of the following (in thousands):

Schedule of Prepaid Expenses and Other Current Assets

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,		December 31,
	2025		2024
Value added tax receivable	$	98		$	96
Prepaid expenses		571			88
Advance to vendors		3			13
Contract asset, current		19			22
Other current\n assets		62			-
Total prepaid expenses and\n other current assets	$	753		$	219

F-24

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n6(A). Property and Equipment, net

Property\nand equipment, net consisted of the following (in thousands):

Schedule\nof Property and Equipment

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,			December 31,
	2025			2024
Computers and other hardware	$	504			$	504
Office, furniture, and equipment		160				167
Leasehold improvements		90				94
Vehicles and other fixed\n assets (excluding computers)		80				35
Property and equipment, Gross		834				800
Less: accumulated depreciation		(529	)			(452	)
Total\n property and equipment, net	$	305			$	348

The\nCompany recognized depreciation expense related to property and equipment in the consolidated statements of operations and comprehensive\nloss of $96.8 thousand and $108.6 thousand during the year ended December 31, 2025 and 2024 respectively.

Note\n6(B). Intangible Assets, net

Intangible\nassets subject to amortization consisted of the following (in thousands):

Schedule\nof Intangible Assets Subject to Amortization

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,			December 31,
	2025			2024
Internally developed capitalized\n software	$	386			$	274
Less: accumulated amortization		(180	)			(87	)
Total\n intangible assets, net	$	206			$	187

The\nCompany recognized amortization expense related to capitalized software in the consolidated statements of operations and comprehensive\nloss of $93.4 thousand and $70.0 thousand during the year ended December 31, 2025 and December 31, 2024, respectively.

F-25

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note 7. Investment in Equity Securities

In January 2024, the Company reached an agreement\nwith one of its customers, Campaign Brain, Inc. (“Campaign Brain”), to provide AI Solutions. The total amount owed to the\nCompany is to be satisfied through the issuance of 1,000,000 shares of Campaign Brain’s restricted stock to the Company with a determinable\nestimated fair value of $0.122 per share as of the issuance date. Of the 1,000,000 shares issuable, 450,000 shares of Campaign Brain’s\nrestricted stock were vested on January 17, 2024, and 50,000 shares of Campaign Brain’s restricted stock are to be vested each month\nfrom February 15,2024 to December 15, 2024. The Company had approximately 10% and 20% ownership in Campaign Brain, respectively, on January\n17, 2024 and December 31, 2024. The Company recognized revenue when Campaign Brain obtained control of promised services over the service\nperiod. At the time of the issuance, the estimated fair value of the shares was determined to be representative of the standalone selling\nprice of the services rendered in exchange for the non-cash consideration in the form of restricted stock of Campaign Brain, or $122.0\nthousand. The acquisition of Campaign Brain’s restricted stock did not have a major impact on the Company’s operations as\nthe asset test, investment test and income test under the significance tests of the Securities Exchange Commission Regulation S-X Rule\n1-02 (w) does not exceed 20%.

The transaction represents an equity investment in\na private company for which the Company has the ability to exercise significant influence. Since the equity investment is accounted for\nunder the equity method and does not qualify for the net asset value practical expedient, the Company measured the estimated fair value\nof the equity instrument received at contract inception, minus impairment, if any, with equity method investment gains and losses included\nin other (expense) income, net on the consolidated statements of operations and comprehensive loss. For the year ended December 31, 2024,\nthe financial figures related to Campaign Brain including revenue, operating expenses and income tax provision were insignificant. The\nCompany’s equity method investment losses derived from the vested portion of the investment were $1.9 thousand, recorded in equity\nin earnings of investee, net of income tax provision in the consolidated statement of comprehensive loss during the year ended December\n31, 2024. As the equity investment is subject to vesting criteria, the Company records the vested portion of the investment at the estimated\nfair value received at contract inception on each reporting date

In the previous year ended December 31, 2024, the\nCompany recognized an impairment loss of $120.13 thousand on its investment in Campaign Brain Inc., which is an equity security classified\nunder “Investments in Equity Securities.” The impairment was triggered due to the inability of Campaign Brain Inc. to generate\nearnings with expected future losses and deteriorating financial performance.

As of December 31, 2024, the fair value of the\ninvestment in Campaign Brain Inc. has been assessed to be nil.\nThis assessment is based on the deteriorating financial performance of the entity, including minimal revenue during the year,\nnegative net worth, low bank balance as of December 31, 2024, negative cashflows and lack of future projections. Additionally, the\nentity has no current or foreseeable plans to generate future revenue, which further supports the conclusion that the fair value is\nnil. Consequently, no value has been assigned to this investment in the financial statements. Since the investment had already been\nfully written down to nil\nas of December 31, 2024, there was no financial impact recognized in the consolidated financial statements for the year ended\nDecember 31, 2025 related to this investment.

Note\n8. Cumulative Mandatorily Redeemable Financial Instruments

In\nJuly 2021, Fusemachines Nepal Private Ltd entered into a Share Purchase Agreement between Fusemachines Nepal Inc., and BO2 (the “BO2\nPurchase Agreement”) in which BO2 agreed to invest $964.2 thousand in Fusemachines Nepal Private Ltd. Fusemachines Nepal Private\nLtd issued 39,750 Ordinary Shares with a par value of 100 Nepalese rupees and also issued 1,110,250 cumulative and compulsory redeemable\nPreference Shares with a par value of 100 Nepalese rupees. The Preference Shares contain an annual coupon rate of 10% with the option\nto convert the Preference Shares into Ordinary Shares. The Preference Shares and Ordinary Shares are mandatorily redeemable five years\nfrom the date of issuance at a redemption price equal to 200% of the purchase price. Any dividends paid on these shares will reduce the\nultimate redemption price. Management determined that these shares represent mandatorily redeemable financial instruments under ASC 480\nand thus are liability-classified. These liabilities are recorded in cumulative mandatorily redeemable common and preferred stock liability\nwithin the consolidated balance sheets, and accretions to the redemption value are recorded within interest expense in the consolidated\nstatements of operations and comprehensive loss. The effective interest rate is 13.7%, the accrued interest was $304.4 thousand and $238.3\nthousand at December 31, 2025 and December 31, 2024 respectively, and is recorded in accrued expenses and other current liabilities in\nthe consolidated balance sheets, and the issuance cost incurred was $13.7 thousand.

The\noutstanding balance of the Cumulative Mandatorily Redeemable Financial instruments were $1,048 thousand and $1,000 thousand for the year\nended December 31, 2025 and December 31, 2024 respectively

The\nfollowing summarizes the key terms and provisions of the Preference Shares and Ordinary Shares:

Preference\nShares

Rights\nand privileges - Preference Shares will be paid dividends before the Ordinary Shares. Preference shareholders will receive a\n10% percent annual dividend on Preference Shares. Apart from this, Preference Shares will not receive any kind of dividend or profit.\nIf the Company fails to make a profit in any year or if the Company decides not to distribute dividends, then the dividends to be received\nby the Preference Shares will be cumulated and those amounts must be returned to the preference shareholders in a lump sum in the year\nwhen the dividends are distributed or when the Company withdraws the Preference Shares. Preference Shares will be given priority when\nthe amount of shares is returned in case of liquidation of the Company. Preference Shares will not have voting rights in the general\nmeeting of the Company. The preference share amount is redeemable after a certain period.

Redemption\n- In terms of return, no Preference Share can be redeemed until the price of the issued Preference Share is fully paid. The amount of\nPreference Shares cannot be returned from any amount other than the amount of profit that can be distributed as dividends or the amount\nreceived from the new shares issued by the Company for the purpose of returning the shares.

The\nrate per share for redeeming Preference Shares shall be as per share purchase and sale agreement or shareholder agreement and shall be\nredeemed at the same rate. In case any Preference Shares issued for return are to be returned along with the premium, a separate fund\nof appropriate amount shall be arranged from the Company’s profit or the Company’s share premium account for that purpose.\nIn this way, except in the case where the amount of the Preference Shares is returned from the amount received by issuing new shares,\nin accordance with the law, when the amount of the Preference Shares is returned, an amount equal to the face value of the returned shares\nfrom the amount that can be received to distribute dividends from the Company’s profits shall be deposited in a separate account.\nAny preference share returned in accordance with this regulation shall be deemed to have been automatically forfeited after the completion\nof the return process. If the Company redeems or proposes to redeem any Preference Shares, it may issue new shares equal to the face\nvalue of the shares so redeemed or to be redeemed.

Ordinary\nShares

Rights\nand privileges - The shareholders of this category will have voting rights and other rights according to the prevailing law.

Redemption\n- The Ordinary Shares will be redeemed if the Company fails to withdraw the Preference Shares issued by the Company to be redeemed. If\nthe Preference Shares have to be converted into ordinary shares, it shall be done according to the decision of the general meeting of\nthe Company.

Additional\nprovisions related to Preference Shares shall be in accordance with the shareholders’ agreement between them.

F-26

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n9. Accrued Expenses and Other Current Liabilities

Accrued\nexpenses and other current liabilities consisted of the following (in thousands):

Schedule of Accrued Expenses and Other Current Liabilities

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,		December 31,
	2025		2024
Wages payable	$	3,858		$	2,525
Covenant fees		-			435
Interest payable (Note 8)		304			238
Legal expenses		-			141
Deposit liability for early exercised options		-			3
Accrued expenses		456			358
Total\n accrued expenses and other current liabilities	$	4,618		$	3,700

Note\n10. Long-Term Debt Debt

Long-term\ndebt consists of the following (in thousands):

Schedule\nof Long-Term Debt

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December\n 31, 2025		December\n 31, 2024
	Current		Noncurrent			Total		Current	Noncurrent		Total
2024 Convertible Notes	$	-		$	-		$	-	$	255		$	200	$	455
2024 Convertible Notes at fair value		-			-			-		8,986			-		8,986
Related party convertible notes payable at\n fair value		-			-			-		-			6,524		6,524
Related party loan payable		300			-			300		700			-		700
Total	$	300		$	-		$	300	$	9,941		$	6,724	$	16,665

F-27

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Convertible\nNotes at Fair Value

Related\nparty convertible notes payable at fair value

In\nOctober 2019, the Company entered into a convertible promissory note agreement (the “2019 Convertible Note Agreement”) with\na lender and issued a convertible promissory note for the principal amount of $2,000.0 thousand (the “2019 Convertible Note”).\nThe 2019 Convertible Note bears interest at a rate of 10% per annum, compounded quarterly. The 2019 Convertible Note matured in September\n2022

In\nSeptember 2021, the Company entered into a second convertible promissory note agreement (the “2021 Convertible Note Agreement”)\n(the 2019 Convertible Note Agreement and the 2021 Convertible Note Agreement collectively referred to as the “2019 and 2021 Convertible\nNotes Agreements”) with the same lender and issued a convertible promissory note for the principal amount of $450.0 thousand (the\n“2021 Convertible Note”) (the 2019 Convertible Note and the 2021 Convertible Note collectively, the “2019 and 2021\nConvertible Notes”). The 2021 Convertible Note was issued with the same terms as the 2019 Convertible Note, except with a maturity\ndate of October 2022.

Effective\nDecember 2022, the 2019 and 2021 Convertible Notes Agreements were amended (the “2022 Amended Convertible Notes Agreements”)\nto extend the maturity date for the 2019 and 2021 Convertible Notes to December 2023, increase the interest rate to 15% for the period\nfrom December 2022 through December 2023, adding a prepayment option, amending one of the conversion scenarios, and amending the definition\nof a next equity financing to require a sale of equity securities to result in gross proceeds of $7,500.0 thousand (the “Next Equity\nFinancing”). The 2022 Amended Convertible Notes Agreements also added a partial payment of the interest accrued and outstanding\non the note of $386.4 thousand due no later than March 2023. Failure to pay by the payment deadline obligated the Company to pay interest\nat a rate of twenty percent (20%) per annum, compounded quarterly, on the outstanding $386.4 thousand.

In\nDecember 2023, the 2022 Amended Convertible Notes Agreements were amended again (the “2023 Amended Convertible Notes Agreements”),\nextending the maturity date of the 2019 and 2021 Convertible Notes to January 2024.

In\nJanuary 2024, the 2023 Amended Convertible Notes Agreements were amended again (the “2024 Amended Convertible Notes Agreements”),\nextending the maturity date to January 2025. The amendment also added a provision surrounding conversion in the case the Company completes\nthe merger (see “SPAC PIPE financing” below) (also see “Note 1 –Organization”), an additional table depicting\nprincipal and interest on the 2019 and 2021 Convertible Notes to be redeemed in connection with the merger, and additional definitions\nrelated to the merger

The\n2021, 2022 and 2023 amendments were accounted for as debt modifications, prospectively, with any change in fair value from the new terms\nincorporated into future valuations. The 2024 amendment was deemed as capital transaction as per ASC 470-50-40-2 and is accounted for\nas an extinguishment of debt, with a gain on extinguishment of debt of $343.0 thousand recorded in additional paid in capital in the\nconsolidated balance sheet for the year ended December 31, 2024, with any change in subsequent fair value incorporated into future valuations\nand any amendment fees or third-party costs to be expensed at the time of the amendment, and the amended terms to be incorporated into\nthe valuations at each subsequent balance sheet date.

On\nJanuary 31, 2025, the Company entered into an amendment agreement of the convertible note payable to Dolma. Pursuant to the amendment\nagreement, the maturity date was revised to February 28, 2026. Further, it was agreed that if the Company enters into a SPAC Business\nCombination Agreement at any time while the Notes are outstanding, any portion of the Aggregate Notes Amount that is not redeemed or\nrepaid in connection or prior to the closing of the SPAC Transaction will convert, without any required action by the Holder, into shares\nof Common Stock immediately prior to the consummation of the SPAC Transaction contemplated by the SPAC Business Combination Agreement\nat a conversion rate that is derived from a Company valuation of $85,000.0 thousands on a fully-diluted basis (provided that the Notes will\nbe deemed have converted simultaneously with all other convertible notes being converted in connection the SPAC Transaction).

The\nCompany evaluated the above amendment agreement entered on January 31, 2025, under the guidance in ASC 470-50 Debt - Modifications and\nExtinguishments, and it was determined terms of the amendment were not substantially different than the terms of the convertible notes\nprior to the Amendment. Accordingly, the aforesaid amendment was accounted for as a debt modification.

The\n2019 and 2021 Convertible Notes, contain the following conversion features:

Conversion\nupon next equity financing – The conversion balance will be automatically converted into shares of the Company’s Convertible\nPreferred Stock upon the closing of the Next Equity Financing. The number of Convertible Preferred Stock to be issued upon the conversion\nwill be equal to the quotient of the outstanding principal and, if so elected by the Company, any accrued and unpaid interest on the\ndate of the conversion, divided by the conversion price calculated as the product of (a) 100% minus the discount rate, times (b) the\nprice paid per share for equity securities by the investor in the Next Equity Financing. The aggregate liquidation preference of the\nConvertible Preferred Stock issued upon conversion shall be equal to the aggregate conversion balance

F-28

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Maturity\n– If the Next Equity Financing or a corporate transaction (as defined below) has not occurred on or before the Maturity Date,\nand if the outstanding balance is not repaid by the Company in full on the Maturity Date, then the conversion balance shall automatically\nbe converted into (i) the conversion balance on the Maturity Date, divided by (ii) $2.235 price per share.

Corporate\ntransaction – In the event of a (i) closing of the sale, transfer or other disposition of all or substantially all of the Company’s\nassets, (ii) the consummation of the merger or consolidation of the Company with or into another entity, (iii) the closing of the transfer\n(whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated\npersons (other than an underwriter of the Company’s securities), of the Company’s securities if, after such closing, such\nperson or group of affiliated persons would hold at least a majority of the outstanding voting stock of the Company (or the surviving\nor acquiring entity) (the “Corporate Transaction”), or (iv) a liquidation, dissolution or winding up of the Company prior\nto full payment of either of the Convertible Notes or prior to the time when either of the Convertible Notes are converted as provided\nin a Next Equity Financing or a Maturity Conversion, then the conversion balance shall automatically be converted into that number of\nconversion shares immediately prior to the closing of such Corporate Transaction obtained by dividing the conversion balance by 75% of\nthe price per share of the corporate transaction.

SPAC\nPIPE Financing – Aggregate redemption amount of the 2019 and 2021 Convertible Notes will be redeemed in connection with the\nconsummation of a SPAC transaction to be issued by the SPAC (a “SPAC PIPE Financing”). The aggregate redemption amount ranges\nfrom $300.0 thousand to $4,000.0 thousand and the corresponding SPAC PIPE Financing amount ranges from $15,000.0 thousand to $40,000.0\nthousand.

If\nthe Company enters into a SPAC business combination agreement at any time while the 2019 and 2021 Convertible Notes are outstanding,\nthen any portion of the aggregate outstanding amounts that are not redeemed or repaid in connection with the closing of a SPAC\ntransaction will convert into shares of the Company’s common stock at a conversion valuation of $115,000.0\nthousand, on a fully-diluted basis. Further as per the amendment dated January 31, 2025, the Company valuation to be used for calculating the conversion\nrate, which shall be changed from $115,000.0 thousand to $85,000.0 thousand,

The\nCompany qualified for and elected to account for the 2019 and 2021 Convertible Notes under the fair value option and, in doing so, bypassed\nthe analysis of potential embedded derivative features. The Company believes that the fair value option better reflects the underlying\neconomics of the 2019 and 2021 Convertible Notes. As a result, the 2019 and 2021 Convertible Notes were recorded at fair value upon issuance

The\nCompany recorded a gain/charge of $4,468.0 thousand $3,103.3 thousand related to changes in fair value for both the 2019 Convertible\nNote and 2021 Convertible Note, which is recorded as Gain/(loss) on change in fair value in the consolidated statements of operations\nand comprehensive loss, for the year ended December 31, 2025 and 2024, respectively.

As\nof December 31, 2024, the lender of the 2019 and 2021 Convertible Notes was considered a principal owner of the Company, because it held\ngreater than 10% of voting common stock of the Company (also see “Note 19 - Related Parties).

2024\nConvertible Notes at fair value

In\nJanuary 2024, the Company entered into two convertible promissory note agreements (the “January 2024 Convertible Notes Agreements”)\nwith a lender for the principal amounts of $2,000.0 thousand (“January 2024 Convertible Note A”) and $4,500.0 thousand (“January\n2024 Convertible Note B”), respectively, that each bear interest at a rate of 4.863% per annum, payable at maturity (the “January\n2024 Convertible Notes”). The January 2024 Convertible Notes mature in January 2025.

On\nFebruary 4, 2025, the maturity date of January 2024 convertible note was extended to July 12, 2025 pursuant to the second amendment

The\nJanuary 2024 Convertible Notes contain the following conversion features:

Optional\nconversion upon a qualifying financing – Before the maturity date in January 2025, if the company plans to go through a significant\nfunding round of the issuance of preferred stock resulting in gross proceeds of at least $5,000.0 thousand (the “January 2024 Notes\nQualifying Financing”), it will let the holder know at least 10 days before this funding round is set to happen. The holder then\nhas the option to turn any outstanding obligations from the January 2024 Convertible Notes into shares of preferred stock when the funding\nround closes, based on all of the outstanding obligations under the January 2024 Convertible Notes (the “Conversion Amount”),\ndivided by a specific price calculated as the lower of two figures: (i) either the maximum share price (the share price cap as discussed\nbelow) or (ii) 80% of the price at which other investors are buying the preferred stock in the funding round (the “Conversion Price”).\nHowever, if this funding round also counts as a company sell-off or shutdown the holder can choose the optional conversion upon a liquidation\nevent (as described in the “optional conversion upon a liquidation event” section below).

F-29

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Automatic\nconversion into common stock - If the company completes the plan of merger as per the Merger Agreement (as defined in “Note\n1 - Organization) before the January 2024 Convertible Notes maturity date in January 2025, the Company must notify the lender at least\n5 days before the merger is finalized. Immediately preceding the merger, any outstanding amounts the Company owes under the January 2024\nConvertible Notes will automatically turn into shares of the Company’s common stock. The number of shares converted is based on\nthe Conversion Amount, divided by the Conversion Price, which will be capped at a maximum value (the share price cap as discussed below).

Optional\nconversion into preferred stock or common stock – After the maturity date of this note in January 2025, the holder can choose\nto turn the Conversion Amount into shares. There are two scenarios: (i) if converted in conjunction with the January 2024 Convertible\nNotes Qualifying Financing after the maturity date of January 2025, the conversion will be to preferred stock. The number of shares will\nbe the Conversion Amount divided by the Conversion Price, or (ii) if converted at any other time that is not tied to a Qualifying Financing\nafter the maturity date of January 2025, the conversion will be to common stock. The number of shares will be based on the Conversion\nAmount, divided by the maximum share price (the share price cap as discussed below).

Optional\nconversion upon a liquidation event – Before the maturity date in January 2025, or before the January 2024 Convertible Notes\nconvert into shares according to the optional conversion upon a qualifying financing, automatic conversion into common stock, or optional\nconversion into preferred or common stock as discussed above, if the Company plans to sell off its assets or dissolve (when not part\nof a merger, a “Liquidation Event”), the holder can: (i) choose to convert any Conversion Amount into common stock immediately\nprior to the Liquidation Event. The number of shares to be calculated as the Conversion Amount, divided by a set price per share (the\nshare price cap as discussed below), or (ii) alternatively, choose to be paid in cash, which would be the Conversion Amount, payable\nprior to the Liquidation Event. The Company must notify the holder at least 10 days before the Liquidation Event is expected to occur.

Liquidation\nPreference Upon Conversion – If the January 2024 Convertible Notes convert in the January 2024 Notes Qualifying Financing,\nthey will be converted into preferred stock such that the liquidation preference shall equal the Conversion Price.

January\n2024 Convertible Note A specific terms – Upon the occurrence of a default (as defined in the January 2024 Notes Agreement and\ndiscussed below), the holder can declare all amounts due and outstanding to be paid immediately. The proceeds received under the January\n2024 Convertible Note A are to be used to repurchase 667,000 shares of common stock held by Sameer Maskey, CEO of the Company. The share\nprice cap is $3.00 per share.

January\n2024 Convertible Note B specific terms – Upon the occurrence of a default (as defined in the January 2024 Notes Agreement and\ndiscussed below), the holder can declare all amounts due and outstanding be paid immediately, including a termination fee of $1,000.0\nthousand as defined in the January 2024 Notes Agreement). The proceeds received under the January 2024 Convertible Note B are to be used\nto repay third-party debt of the Company and for working capital purposes. The share price cap is $5.798.

The\nJanuary 2024 Convertible Notes will default if the Merger Agreement (as defined in “Note 1 – Organization”) is terminated\nand also has other customary events of default. The January 2024 Convertible Notes are fully secured by 3,600,000 shares of common stock\nheld by Sameer Maskey, the CEO of the Company (refer to “Note 19 – Related Parties”).

The\nCompany qualified for and elected to account for the January 2024 Convertible Notes under the fair value option and, in doing so, bypassed\nthe analysis of potential embedded derivative features. The Company believes that the fair value option better reflects the underlying\neconomics of the January 2024 Convertible Notes. As a result, the January 2024 Convertible Notes were recorded at fair value upon issuance

The\nCompany evaluated the amendment agreement entered on February 4, 2025, under the guidance in ASC 470-50 Debt - Modifications and Extinguishments,\nand it was determined terms of the amendment were not substantially different than the terms of the convertible notes prior to the Amendment.\nAccordingly, the aforesaid amendment was accounted for as a debt modification.

The\nCompany recorded a gain and charge of $3,664.0 thousand and $2,486 related to changes in fair value for the January 2024 Convertible\nNotes, which is recorded as Gain/(loss) on change in fair value in the consolidated statements of operations and comprehensive loss,\nfor the year ended December 31, 2025, and December 31, 2024 respectively.

The\nJanuary 2024 Convertible Notes were once again amended in July 2025 and basis the amendment the maturity date was revised from July 12,\n2025, to October 18, 2025, pursuant to the third amendment. The Company applied the 10% cash flow test pursuant to ASC 470 to calculate\nthe difference between the present value of the amended note’s cash flows and the present value of the original remaining cash\nflow and concluded that the results didn’t exceed the 10% factor, the debt modification is not considered substantially different\nand therefore did not apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC\n470.

F-30

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

2023\nNotes Payable

In\nAugust 2023, the Company entered into a loan and security agreement with a lender (the “2023 Notes Agreement”) that will\nmake available to the Company loans in an aggregate principal amount of up to $4,000.0 thousand in three separate tranches. In that month,\nthe Company withdrew $3,000.0 thousand (the “First Tranche”). The Company additionally had the opportunity to request, subject\nto the terms of the 2023 Notes Agreement, an additional tranche of $500.0 thousand in or before March 2024 (the “Second Tranche”)\nand a third tranche of $500.0 thousand in or before June 2024 (the “Third Tranche”) (the First Tranche, Second Tranche and\nThird Tranche are collectively referred to as the “2023 Notes”). The 2023 Notes bear interest at a rate of 13.25% per annum,\ncompounded annually, payable at maturity. The effective interest rate was 23%. The 2023 Notes were secured by substantially all of the\nCompany’s assets.

In\nJanuary 2024, the Company repaid the entire aggregate outstanding principal on the 2023 Notes Payable in the amount of $3,000.0 thousand\nalong with an additional payment of $78.5 thousand for interest, prepayment fees, and lender fees. The Company recorded a loss of $601.1\nthousand on extinguishment of debt, in the consolidated statements of operations and comprehensive loss for the year ended December 31,\n2024

Common\nStock warrant

In\nconnection with the 2023 Notes Agreement, the Company issued to the lender common stock warrants (the “Common Stock Warrants”)\nto purchase up to 92,211 shares of the Company’s common stock, exercisable immediately, with an exercise price of $0.70 per share\nwith a contractual term of 10 years. The Company determined that the Common Stock Warrants are freestanding financial instruments and\nwere determined to be within the scope of ASC 480-10, and accordingly, are liability classified. As of December 31, 2025 and December\n31, 2024, the fair value and carrying amount of the Common Stock Warrant Liability was $121.0 thousand and $945.0 thousand, respectively\n(refer to “Note 3 - Fair Value Measurements”).

The\nCompany recorded a gain of $824.0 thousand and a charge of $515.0 thousand related to changes in fair value, which is recorded as loss\non change in fair value in the consolidated statements of operations and comprehensive loss, for the year ended December 31, 2025 and\n2024, respectively.

April\n2024 Convertible Note

In\nApril 2024, the Company entered into a convertible note agreement (the “April 2024 Convertible Note Agreement”) with a lender\nfor the aggregate principal amount of $125.0 thousand, that bears interest at a rate of 4.71% per annum and is convertible to common\nstock (the “April 2024 Convertible Note”). The April 2024 Convertible Promissory Note matures in April 2025.

Automatic\nconversion into common stock – If on or before the maturity date in April 2025, the Company closes the plan of merger as described\nin the Merger Agreement (as defined in “Note 1 – Organization”), the Company will notify the holder of the April 2024\nConvertible Note five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding obligations\nof the April 2024 Convertible Note will automatically convert into the number of common shares equal to the outstanding amount divided\nby $4.94.

Warrant\nissuance – Upon the conversion of the April 2024 Convertible Note to common stock, the Company shall issue the holder a warrant\nto purchase 7,500 shares of common stock of CSLM with a per share exercise price of $11.50. With respect to classification and initial\nrecognition of warrants as of the date of closing of the merger, refer note on accounting of warrants issuance pursuant to conversion\nof convertible note.

Subordination\n– Upon the occurrence of any event of default (as described in the April 2024 Convertible Note Agreement and discussed below),\nthe April 2024 Convertible Note shall become junior and subordinate to the January 2024 Convertible Notes.

The\nApril 2024 Convertible Note has customary events of default, are fully secured by the assets of the Company and because the conversion\nfeature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the April 2024 Convertible\nNote will be used for working capital purposes.

On\nFebruary 5, 2025, the conversion price of the April 2024 Convertible Promissory Notes with principal amount of $125 thousand was amended to\n$3.15 from the original conversion price of $4.94.

The\nCompany evaluated the conversion feature of April 2024 Convertible Note offering for embedded derivatives in accordance with ASC\n815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on this assessment, separate\naccounting for the conversion feature was not required and the instrument was accounted for under the substantial\npremium model. Accordingly, the excess of the consideration over the fair value amounting to $113.0\nthousand was recorded as loss on extinguishment of debt, with a corresponding adjustment recorded\n in additional paid-in-capital debit, in\nthe consolidated statement of profit and loss for the year ended December 31, 2025.

F-31

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

The\nApril 2024 Convertible Notes were once again amended in April 2025 and basis the amendment the maturity date was revised from April 5,\n2025 to April 5, 2026 pursuant to the second amendment. The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the\ndifference between the present value of the amended note’s cash flows and the present value of the original remaining cash flow\nand concluded that the results didn’t exceed the 10% factor, the debt modification is not considered substantially different and\ntherefore did not apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC 470.

June\n2024 Convertible Note

In\nJune 2024, the Company entered into a convertible note agreement (the “June 2024 Convertible Note Agreement”) with a lender\nfor the principal amount of $130.0 thousand, that bears interest at a rate of 4.71% per annum and is convertible to common stock (the\n“June 2024 Convertible Note”). The June 2024 Convertible Promissory Note matures in June 2025.

Automatic\nconversion into common stock – If on or before the maturity date in June 2025, the Company closes the plan of merger as described\nin the Merger Agreement (as defined in “Note 1 – Organization”), the Company will notify the holder of the June 2024\nConvertible Note five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding obligations\nof the June 2024 Convertible Note will automatically convert into the number of common shares equal to the outstanding amount divided\nby $4.94.

Warrant\nissuance – Upon the conversion of the June 2024 Convertible Note to common stock, the Company shall issue the holder a warrant\nto purchase 7,500 shares of common stock of CSLM with a per share exercise price of $11.50. With respect to classification and initial\nrecognition of warrants as of the date of closing of the merger, refer note on accounting of warrants issuance pursuant to conversion\nof convertible note.

Subordination\n– Upon the occurrence of any event of default (as described in the June 2024 Convertible Note Agreement and discussed below), the\nJune 2024 Convertible Note shall become junior and subordinate to the January 2024 Convertible Notes.

The\nJune 2024 Convertible Note has customary events of default, are fully secured by the assets of the Company and because the conversion\nfeature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the June 2024 Convertible\nNote will be used for working capital purposes.

On\nFebruary 5, 2025, the conversion price of the June 2024 Convertible Promissory Note with principal amount of $130 thousand was amended to\n$3.15 from the original conversion price of $4.94.

The\nCompany evaluated the conversion feature of June 2024 Convertible Note offering for embedded derivatives in accordance with ASC 815,\nDerivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on the assessment, separate accounting\nfor the conversion feature was not required, and the instrument was accounted for under\nthe substantial premium model. Accordingly, the excess of the consideration over the fair value amounting to $114.0 thousand was recorded as loss on extinguishment\nof debt, with a corresponding adjustment in additional paid-in-capital, in the consolidated statement of profit and loss for the year ended\nDecember 31, 2025.

The\nJune 2024 Convertible Note were once again amended in July 2025 and basis the amendment, the maturity date was revised from June 17, 2025,\nto June 17, 2026, pursuant to the amendment. The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the difference\nbetween the present value of the amended note’s cash flows and the present value of the original remaining cash flow and concluded\nthat the results didn’t exceed the 10% factor, the debt modification is not considered substantially different and therefore did\nnot apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC 470.

F-32

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

September\n2024 Convertible Notes

In\nSeptember 2024, the Company entered into two convertible note agreements (the “September 2024 Convertible Notes Agreements”)\nwith two lenders, each for the principal amount of $100.0 thousand (the “September 2024 Convertible Notes”). The September\n2024 Convertible Notes bear interest at a rate of 4.71% per annum. The 2024 September Convertible Notes mature in September 2026.

Automatic\nconversion into common stock – If on or before the maturity date in September 2026, the Company closes the plan of merger as\ndescribed in the Business Combination Agreement (as defined in “Note 1 – Organization”), the Company will notify the holders of the\nSeptember 2024 Convertible Notes five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding\nobligations of the September 2024 Convertible Notes will automatically convert into the number of common shares equal to the outstanding\namount divided by $4.94.

Warrant\nissuance – Upon the conversion of the September 2024 Convertible Note to common stock, the Company shall issue the holder a\nwarrant to purchase 7,500 shares of common stock of CSLM with a per share exercise price of $11.50. With respect to classification and\ninitial recognition of warrants as of the date of closing of the merger, refer note on accounting of warrants issuance pursuant to conversion\nof convertible note.

Subordination\n– Upon the occurrence of any event of default (as described in the September 2024 Convertible Notes Agreements and discussed below),\nthe September 2024 Convertible Notes shall become junior and subordinate to the January 2024 Convertible Notes.

The\nSeptember 2024 Convertible Notes have customary events of default, are fully secured by the assets of the Company and because the conversion\nfeature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the September 2024 Convertible\nNotes will be used for working capital purposes.

On\nFebruary 5, 2025, the conversion price of the two September 2024 Convertible Promissory Notes with principal amount of $100 thousand each\nwas amended to $3.15 from the original conversion price of $4.94.

The\nCompany evaluated the conversion feature of September 2024 Convertible Notes offering for embedded derivatives in accordance with\nASC 815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on the assessment,\nseparate accounting for the conversion feature was not required, and the instrument was accounted for under the substantial premium\nmodel. Accordingly, the excess of the consideration over fair value amounting to $164.0\nthousand was recorded as loss on extinguishment of debt, with a corresponding adjustment in additional paid-in-capital in\nthe consolidated statement of Operations and Comprehensive Loss for the year ended December 31, 2025.

February\n2025 Convertible Notes

On\nFebruary 24, 2025, the Company entered into a convertible promissory note amounting to $180,000 with an interest rate of 4.71% and maturity\ndate of February 19, 2028. Upon closing of the Merger, the Note shall automatically convert into the number of shares of Common\nStock equal to the then outstanding Obligations under the note divided by the applicable Conversion Price i.e., $3.15.

Automatic\nconversion into common stock – If on or before the maturity date in February 2028, the Company closes the plan of merger as\ndescribed in the Business Combination Agreement (as defined in “Note 1 – Organization”), the Company will notify the holders of the\nFebruary 2025 Convertible Notes five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding\nobligations of the September 2024 Convertible Notes will automatically convert into the number of common shares equal to the outstanding\namount divided by $3.15.

Subordination\n– Upon the occurrence of any event of default (as described in the February 2025 Convertible Notes Agreements and discussed below),\nthe February 2025 Convertible Notes shall become junior and subordinate to the January 2024 Convertible Notes.

The\nFebruary 2025 Convertible Note has customary events of default, are fully secured by the assets of the Company and because the conversion\nfeature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the February 2025 Convertible\nNote will be used for working capital purposes.

Related\nParty loan payable

During\nthe previous year ended December 31, 2024, the Company entered into seven separate promissory notes with Mr. Maskey for an aggregate\nprincipal amount of $700.0 thousand (the “2024 Related Party Promissory Notes”). The 2024 Related Party Promissory Notes\nbear interest at a rate of 4.71% per annum and mature in December 2025. Upon an event of default, the 2024 Related Party Promissory Notes\nshall become junior and subordinate to the January 2024 Convertible Notes (also see “Note 19 - Related Parties”), and any\namounts owed will bear interest at 10% per annum until the obligations are satisfied in full. The 2024 Related Party Promissory Notes\nhave customary events of default. As of December 31, 2025, no balance is outstanding of the 2024 Related Party Promissory notes, as in\nconnection with the consummation of the Business Combination on October 22, 2025, the Company settled the outstanding principal and accrued\ninterest under the 2024 Related Party Promissory Notes in cash.

On\nFebruary 12, 2025, an amendment to the seven promissory notes was entered into between the company and the CEO, Mr. Sameer Maskey. As\nper the original agreement, the maturity date was earlier of (1) the occurrence of an Event of Default and (2) December 31, 2024. Pursuant\nto the amendment agreement, the maturity date was extended to earlier of (1) the occurrence of an Event of Default and (2) December 31,\n2025.

The\nCompany evaluated the amendment in maturity date under the guidance in ASC 470-50 Debt - Modifications and Extinguishments, and it was\ndetermined that there was no gain/loss to be recorded in the consolidated statements of operations and comprehensive loss, for the year\nended December 31, 2025.

The\nCompany incurred interest expense on promissory notes held at amortized cost and subsequently the promissory notes principal and accrued\nand unpaid interest were repaid in cash upon the Closing of merger.

F-33

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Others-\nFebruary 2025 Convertible Notes

In\nconnection with the second amendment to the Business Combination Agreement, Consilium Frontier Equity Fund, LP provided financing to Fusemachines Inc.\nin the amount of $2,160,000, in exchange for a convertible note which note shall convert into shares of Fusemachines Inc. common stock\nof at a price of $0.44 per share (a) automatically at the time of the Business Combination, or (b) on July 12, 2025 at the option of\nthe holder, if not, then payable in cash.

Pursuant\nto the terms of the Note and related Escrow Agreement, the proceeds are required to be deposited into an escrow account and will be released\nto the Company only upon the consummation of the Business Combination.

Further,\nper Section 4.2 of the Escrow Agreement “Upon the Closing, the Company, Investor and Fusemachines shall jointly deliver a Joint\nRelease Notice to the Escrow Agent directing the Escrow Agent to disburse all Funds held in the Escrow Account to the Fusemachines Inc.”\nAccordingly, the escrowed funds are not freely available to the Company prior to joint instruction by the Investor, Fusemachines and\nthe Company.

On\nMay 22, 2025, the proceeds from Consilium Frontier Equity Fund, LP have been received into an escrow account. Upon closing of\nthe merger, these funds were subsequently released and received in the bank account of Fusemachines Inc.

Impact\nof reverse capitalization on convertible note

Convertible\nnotes that are exchanged for equity pursuant to their original contractual terms are accounted for in accordance with ASC 470-20, Debt\nwith Conversion and Other Options. Upon conversion, the carrying amount of the convertible debt is reclassified to equity, and no gain\nor loss is recognized in earnings, as the conversion is executed in accordance with the original terms of the instruments.

Immediately\nfollowing such conversions, all shares of Legacy Fusemachines common stock issued upon conversion were exchanged for shares of Fusemachines\nInc. common stock based on the exchange ratio specified in the Business Combination Agreement.

As\na result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of December 31,\n2025, other than related party note payable related to Dolma amounting $300 thousand.

Accounting\nof warrants issuance pursuant to conversion of convertible note.

The\nwarrants issuable upon conversion of the April 2024, June 2024, September 2024 Convertible Note are classified as equity warrants,\nbased on an assessment of the instruments’ specific terms and applicable authoritative guidance in FASB ASC Topic 480, “Distinguishing\nLiabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).\nThese warrants are measured at fair value on the issuance date (Day 1), which is the merger closing date of October 22, 2025, and\nshould not be subsequently remeasured, with no recurring fair value adjustments recognized in earnings. The Company recorded a loss of\n$4.2 thousand due to initial recognition of warrants, which is recorded as Other (expense) income in the consolidated statements of operations and\ncomprehensive loss, for the year ended December 31, 2025. These warrants have same terms and provisions as public warrant. Refer note\n24-’Public and private warrants’ for details with respect to terms of public warrants.

F-34

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n11. Convertible Preferred Stock

Effective\nFebruary 2023, the Company amended the Third Amended and Restated Certificate of Incorporation of Fusemachines Inc. (the “Restated\nCertificate”) to increase the number of shares of series seed preferred stock (“Convertible Preferred Stock”) that\nthe Company is authorized to issue from 5,947,706 to 5,972,716 (including 3,580 authorized shares of preferred stock not assigned to\na particular series) and increase the authorized shares of series seed-2 preferred stock (“Series Seed-2 Convertible Preferred\nStock”).

On\nOctober 22, 2025, upon the consummation of the business combination, which was accounted for as a reverse recapitalization,\n9,043,234 shares of Legacy Fusemachines convertible preferred stock were converted into Legacy Fusemachines common stock in\naccordance with the applicable conversion terms. Subsequently, in connection with the Business Combination, all such Legacy\nFusemachines common shares were exchanged for shares of common stock of Fusemachines Inc. (the “Company” or\n“PubCo”) based on the exchange ratio specified in the Business Combination Agreement. After giving effect to the\nexchange ratio, an aggregate of 5,950,673 shares of the Company’s common stock were issued.

As a result of these transactions, no shares of Convertible Preferred Stock remained outstanding as of December 31,\n2025.

The\nauthorized, issued and outstanding shares of Convertible Preferred Stock, along with the related liquidation preferences and carrying\nvalues, after giving effect to the conversion ratio applied in connection with the merger (reverse capitalization), as of December 31,\n2024, were as follows (in thousands, except share numbers)

Schedule\nof Convertible Preferred Stock

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	As\n of December 31, 2024
Series	Authorized\n Shares		Issued\n and Outstanding Shares		Liquidation\n Preferences		Carrying\n Value
Seed-1		1,328,371		1,325,081		$	1,350	$	1,323
Seed-2		922,925		922,950		$	940		940
Seed-3		1,776,667		1,764,724		$	2,515		2,515
Seed-4		1,941,173		1,937,918		$	3,100		3,087
Total		5,969,136		5,950,673				$	7,865

Rights,\npreferences and privileges of the Convertible Preferred Stock (Historical)

The\nfollowing summarizes the rights, preferences, and privileges of the Convertible Preferred Stock prior to its conversion at Closing

Dividends.\nThe Company may not pay dividends on other classes or series of stock (excluding dividends in common stock) before unless the holders\nof the Company’s Convertible Preferred Stock receive, at the same time or before, a dividend on each of their shares. Upon the\ndeclaration of a dividend for another class or series of stock (excluding common stock), the holders of the Convertible Preferred Stock\nare entitled to receive dividends based on the equivalent amount if the other stocks were converted into common stock, times the number\nof common stock shares that each Convertible Preferred Stock share could be converted into (as adjusted for stock splits, combinations\nand reorganizations). No dividends have been declared to date.

Conversion.\nThe series seed preferred stock is convertible, at the option of the holder, at any time and from time to time, into such number of fully\npaid and nonassessable shares of common stock as is determined by dividing the series seed original issue price by the series seed conversion\nprice in effect at the time of conversion.

Voting\nrights. The holders of Convertible Preferred Stock are entitled to that number of votes on all matters presented to stockholders\nequal to the number of shares of common stock then issuable upon conversion of such preferred stock. The holders of Convertible Preferred\nStock are entitled to elect one director of the Company.

Liquidation.\nIn the event of any sale of substantially all of the assets, a merger, or liquidation, dissolution or winding up of the Company, the\nholders of series seed-4 Convertible Preferred Stock then outstanding will be entitled to receive, in preference to the holders of all\nother series of Convertible Preferred Stock and common stock, an amount equal to or greater than (a) $1.0553 per share (as adjusted for\nstock splits, combinations, and reorganizations) plus declared and unpaid dividends, if any, or (b) such amount per share as would have\nbeen payable had all shares of series seed-4 Convertible Preferred Stock had been converted to common stock immediately prior to such\nliquidation, dissolution or winding up or deemed liquidation event. Given that deemed liquidation event is within the control of the\ncommon stockholders, the Convertible Preferred Stock is recognized as permanent equity within the consolidated statements of stockholders’\ndeficit.

F-35

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

After\nthe payment of all preferential amounts required to the paid to the holders of shares of series seed-4 Convertible Preferred Stock, the\nholders of series seed 3, 2, and 1 Convertible Preferred Stock will be entitled to receive, on a pari passu basis and in preference to\nthe holders of common stock, $0.9379, $0.6704, and $0.6704, respectively, per share plus declared and unpaid dividends, if any. After\nthe payment of all preferential amounts required to be paid to the holders of series seed-4 Convertible Preferred Stock, then the holders\nof series seed 3, 2 and 1 Convertible Preferred Stock, shall be entitled to be paid out of the assets of the Company. After distributing\nto all preferred stockholders, the remaining assets of the Company will be distributed ratably to the holders of the common stock on\na pro rata basis.

Note\n12. Stockholder’s Deficit

Common\nStock

In\nconnection with the Restated Certificate, the number of shares of Fusemachine Inc. common stock that the Company is authorized to issue\nis 500,000,000 shares and 15,924,202 shares as of December 31, 2025 and December 31, 2024 respectively.

The\nCompany’s reserved shares of common stock for future issuance related to potential conversion of the Convertible Preferred Stock,\nexercise of Common Stock Warrants and exercise of stock options are as follows:

Schedule of Reserved Shares of Common Stock for Future Issuance

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	As\n of December 31, 2025		As\n of December 31, 2024
Convertible preferred stock (as\n converted to common stock)		-		5,950,673
Common stock warrants		92,211		92,211
Common stock contingent obligation		-		29,611
Stock options		686,880		1,700,058
Equity shares warrant (refer note 22)		2,108,070		-
SPAC public and private placement warrants\n (refer note 24)		13,458,750		-
Issuance of warrants pursuant to conversion of convertible note.(refer note 10)		30,000		-
Reserved shares of common\n stock for future issuance		16,375,911		7,772,553	⁽¹⁾

\n\n

(1)

Includes 6,772\nstock options as of December 31, 2024 that were legally exercised prior to meeting the service base vesting requirements in exchange\nfor nonrecourse promissory notes (Refer to “The Promissory Notes Transactions” in “Note 14 - Stock-based Compensation\n”).

Convertible\nPreferred Stock

In\nconnection with the Restated Certificate, the number of shares of Convertible Preferred Stock that the Company is authorized to issue\nis 5,000,000 as at December 31, 2025 (Refer to “Note 11 - Convertible Preferred Stock “).

Warrants

As\nof December 31, 2025 and December 31, 2024 the Company had Common Stock Warrants outstanding to purchase up to 92,211\nshares of the Company’s common stock at an exercise price\nof $0.46\nper share and have a contractual term of 10\nyears. The Common Stock Warrants were issued in August 2023.\n(Refer to “Note 3 - Fair Value Measurements”).

Common\nStock Contingent Obligation

As\nof December 31, 2025, the Company had a Nil contingent obligation upon closing of the Merger Shares issued to Legacy Fusemachines vendor\nfor settlement of outstanding vendor invoices.

F-36

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note 13.\nRevenue

Under\nASC 606, revenue is recognized throughout the life of the executed agreement. The Company measures revenue based on consideration specified\nin a contract with a customer. Furthermore, the majority of the Company’s revenues are recognized over time as services are performed.\nThe Company recognizes revenue when a performance obligation is satisfied by transferring control of the product or service to the customer

The\nCompany provides services to customers worldwide, with the majority of revenues being derived from contracts with customers located within\nthe United States. The table below presents the breakdown of the Company’s revenues, based on the customer’s location (in\nthousands).

Schedule\nof Revenues, Based on the Customer’s Location

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025		2024
	Year Ended December 31,
	2025		2024
Customer locations
United States		7,342		8,544
Rest of the world		372		267
Total revenue		7,714		8,811

The\ntable below presents the breakdown of the Company’s revenues, based on the customer’s service type (in thousands).

Schedule\nof Revenues, Based on the Customer’s Service Type

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025		2024
	Year Ended December 31,
	2025		2024
Service type
AI Solutions (Products and Services)*		7,581		8,811
AI Education Services		133		-
Total revenue		7,714		8,811

\n\n

*	AI Solutions (Products and Services) includes both software product revenues and related services.\n Product revenue represents an insignificant portion of total revenue for the periods presented and, accordingly, has not been\n separately disclosed.

F-37

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Service\nType

During\nthe year ended December 31, 2025 and 2024, the Company had one significant service type, AI Solutions (products and services). For the\nyear ended December 31, 2025 and 2024, there were $7,581 thousand and $8,811 thousand of AI Solutions (products and services) revenue.\nThe company had insignificant revenue from AI Solutions – Products for the year ended December 31, 2025, and 2024, respectively.\nThe revenue recognized for AI education services were $133 thousand and Nil during the year ended December 31, 2025, and 2024.

Deferred\nRevenue

During\nthe year ended December 31, 2025, the Company recognized revenue of $53.7 thousand from the deferred revenue balance as of December 31,\n2024. During the year ended December 31, 2024, the Company recognized revenue of $20.6 thousand from the deferred revenue balance as\nof December 31, 2023.

Contract\nCosts

The\nCompany recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets\nthat the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representatives\nas a result of obtaining service contracts and contract renewals, are recoverable and therefore the Company’s consolidated balance\nsheets included capitalized balances in the amount of $18.9 thousand and $21.9 thousand as of December 31, 2025 and December 31, 2024\nwhich represents the current portion and is included within prepaid expenses and other current assets, respectively and $3.2 thousand\nand $5 thousand, as of December 31, 2025 and December 31, 2024, respectively, which are included within other assets. Capitalized commission\nfees are amortized on a straight-line basis over the average period of service contracts of approximately two years and are included\nin selling and marketing in the accompanying consolidated statements of operations and comprehensive loss. Amortization recognized during\nthe year ended December 31, 2025 and 2024 was $31.1 thousand and $36.2 thousand, respectively.

Transaction\nprice allocated to remaining performance obligations

The\nCompany elected to apply the practical expedient for the right to invoice and does not disclose performance obligations that have original\nexpected durations of one year or less.

The\nopening and closing balances of contract assets, deferred revenue and unbilled revenue are as follows (in thousands):

Schedule\nof Contract Assets, Deferred Revenue and Unbilled Revenue

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Contract Assets			Deferred revenue			Unbilled Revenue
Ending balance as of December 31, 2023	$	22			$	21		$	80
Increase/(decrease), net		5				33			33
Ending balance as of December 31, 2024		27				54			113
Increase/(decrease), net		(5	)			(54	)		(97	)
Ending balance as of December 31, 2025	$	22				-		$	16

F-38

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n14. Stock-based Compensation

Effective\nJune 2014, the Company adopted an equity-based compensation plan, the 2014 Equity Incentive Plan (the “2014 Plan”), which\nallows for the grant of stock options, stock issuances and other equity interests in the Company to the Company’s officers, directors,\nemployees and consultants. The 2014 Plan is administrated by the Company’s Board of Directors, or a committee appointed by the\nBoard. In February 2023, the Company’s board of directors and stockholders adopted the 2023 Equity Incentive Plan (the “2023\nPlan”), which provides for the grant of incentive stock options, restricted stock awards and restricted stock units (“RSUs”)\nto eligible employees, directors and consultants of the Company. With the introduction of the 2023 Plan, shares are no longer available\nfor future grants under the 2014 Plan. Awards outstanding under the 2014 Plan will be governed by the 2023 Plan.3,258,230 shares of Common\nStock were authorized for issuance under the 2023 Plan to officers, directors, employees and consultants of the Company.

The\n2023 Plan was amended and approved by the stockholders of the Company in December 2023 to increase the number of shares of the Company’s\nCommon Stock reserved for issuance under the Fusemachines Inc. 2023 Amended and Restated Equity Plan (the “2023 Equity Incentive\nPlan”) by 391,525 to 3,649,755 shares of common stock.

In\nconnection with the Business Combination, which was accounted for as a reverse recapitalization, the number of shares under the 2023\nEquity Incentive Plan was adjusted to reflect the exchange ratio established in the business combination agreement. Accordingly, all\nshare and per share amounts under the plan have been retrospectively adjusted to reflect the conversion of Legacy Fusemachines equity\ninto the Company’s common stock

As\nof December 31, 2025, no\nshares of Common Stock were available for future grant under the 2023 Plan, as the 2023 Plan was replaced in its entirety by the 2025 Plan which was adopted in connection with the Business\nCombination.

The\nstock-based compensation expense during the year ended December 31, 2025, and 2024 are reported in the following consolidated financial\nstatement line items (in thousands):

Schedule\nof Stock-based Compensation Expense

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025		2024
	Year ended December 31,
	2025		2024
General and administrative	$	154		$	723
Cost of revenue		21			44
Selling and marketing		38			170
Research and development		18			130
Total stock-based compensation expense	$	231		$	1,067

Stock\nOptions

The\nCompany’s stock options outstanding consist primarily of time-based options to purchase common stock, the majority of which\nvest over a 2\ntwo-to-four- year 4\nperiod and have a 10 ten-year contractual term. These awards are subject to the risk of forfeiture until vested by virtue of\ncontinued employment or service to the Company.

The\nfollowing table summarizes the stock option activity for options with service-based vesting conditions during the year ended December\n31, 2025:

Schedule\nof Stock Option Activity for Options with Service-based Vesting

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Number of \n Options			Weighted Average \n Exercise\n Price		Weighted Average Remaining \n Contractual \n Term (Years)	Aggregate \nIntrinsic Value (In thousands)
Outstanding balance as of December 31, 2024		1,700,058			1.88		6.50	$	11,885
Granted		-			-		-		-
Exercised		(6,772	)		0.70		-		-
Forfeited		(14,892	)		5.34		-		-
Cashless exercise (1)		(745,896	)		0.95		-		-
Expired		(245,618	)		0.72		-		-
Outstanding balance as of December 31, 2025		686,880			3.25		6.88	$	234
Options vested and exercisable as of December 31, 2025		523,632			2.93		6.52		230

\n\n

(1)

During the year\nended 31st December 2025, employees have performed cashless exercise of 745,896 options

F-39

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

During\nthe year ended December 31, 2025 and 2024, the Company recorded stock-based compensation expense of $231 thousand and $1,067 thousand,\nrespectively. As of December 31, 2025, total stock-based compensation expense not yet recognized related to unvested stock options was\n$438.1 thousand, which is expected to be recognized over a weighted-average period of 1.91 years.

The\ntotal intrinsic value of options exercised was $6,036.4 thousand and $10,647.5 thousand during the year ended December 31, 2025 and year\nended December 31, 2024, respectively.

The\nweighted average grant-date fair value per share of stock options granted during the year ended December 31, 2025 and year ended December\n31, 2024 was Nil and $4.26, respectively The Company estimated the fair value of stock options using the Black-Scholes Model on the date\nof grant. The assumptions used in the Black-Scholes Model were as follows:

Schedule\nof Assumptions Used in the Black-Scholes Model

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,
	2025 (1)		2024
Weighted average expected term (years)		0		5.79
Weighted average expected volatility		0.00		66.90	%
Risk-free interest rate		0.00		4.08%-4.10	%
Dividend yield		0		0

\n\n

(1)

There were no stock\noptions granted during the year ended December 31, 2025.

Cashless\nExercise of Stock Options

In\nAugust 2025, certain Fusemachines employees exercised 745,896 options to purchase Fusemachines Inc. Common Stock. The exercise prices\nfor the 745,896 options were paid on a cashless basis via net share settlement resulting in the net share issuance of 666,662 shares\nof Fusemachines Inc. Common Stock. The transaction has been accounted under the guidance of ASC 718 - Stock Compensation. The cashless\nexercise mechanism does not change the substantive terms or fair-value-based measure of the awards and therefore does not constitute\na modification under ASC 718.

The\nPromissory Notes Transaction

Early\nExercise of Stock Options

The\nCompany permits certain employees and directors to exercise stock options granted under the 2023 Plan prior to vesting. In February 2023,\nthe Company’s Chief Executive Officer, Mr. Maskey and other three executives early exercised a total of 1,625,321 stock options\nprior to vesting (The February Options Awards); however, in lieu of the cash consideration required to exercise the stock options,\nthese individuals each provided a 3.82% interest bearing non-recourse note (the “2023 Promissory Notes”), for an aggregate\nprinciple of $1,136.2 thousand. The notes are scheduled to mature in February 2030.

The\nnonrecourse nature of the loan secured by the shares pledged as collateral essentially provides the employee with rights like that of\nan option and thus no receivable for amounts due under the 2023 Promissory Notes was recorded on the Company consolidated balance sheets.\nWhile the shares of common stock purchased by the employees in exchange for the 2023 Promissory Notes are considered legally issued,\nthe shares are not deemed, for accounting purposes, outstanding and are considered restricted until all of the options are fully vested\nand the outstanding principal and accrued interest due on the note is repaid in full.

The\nissuance of the 2023 Promissory Notes resulted in an additional stock-based compensation expense of Nil and $11.7 thousand for the year\nended December 31, 2025 and 2024, respectively, based on the grant-date fair value of the Promissory Notes, which was determined using\nthe Black-Scholes Model.

The\nassumptions used in deriving the grant-date fair value of the 2023 Promissory Notes via the Black-Scholes Model were as follows: (i)\na stock price of $0.88 per share, (ii) an exercise price of $0.70 per share, (iii) an estimated risk-free interest rate of 4.02%, (iv)\nan expected term of 3.50 years, (v) volatility of 75%, and (vi) a dividend yield of 0%. These assumptions resulted in a grant-date fair\nvalue of approximately $0.53 per option.

F-40

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

The\nCompany continues to recognize expenses for the original option award of 1,625,321 shares granted in February 2023 (the “February\nOption Awards”), which were early exercised in exchange for Promissory Notes. The early exercise is not considered substantive\nfor accounting purposes until the vesting requirements are met through continued employment and service to the Company. As of December\n31, 2025 and 2024, the Company recognized Nil and $41.4 thousand, respectively, in stock-based compensation expense related to the February\nOption Awards. The unrecognized stock-based compensation expense related to the February Option Awards was Nil. The weighted-average\ngrant-date fair value per share of the February Option Awards was $0.50.

Repayment\nof the Promissory Notes

In\nJanuary 2024, the Company repurchased 438,903 shares of common stock from Sameer Maskey, the CEO, at a price of $6.61 per share, totalling\n$2,902.7 thousand (the “Repurchase Consideration”). Mr. Maskey applied $902.7 thousand of the Repurchase Consideration toward\nrepayment of his 2023 Promissory Note to the Company. Upon repayment, the 2023 Promissory Note, along with any accrued interest, was\nsettled, and the vested shares pledged under the 2023 Promissory Notes are now considered exercised. As of the December 31, 2025, there\nwere no shares which were subject to vesting.

Forgiveness\nof Promissory Notes

In\nAugust 2024, the Company’s board of directors approved the forgiveness of the 2023 Promissory Notes totaling $262.2 thousand (excluding\ninterest) for three of its executives. The forgiveness of these 2023 Promissory Notes effectively modified the strike price to zero,\nallowing the executives to retain shares at no cost.

In\naccordance with ASC 718, the incremental value of the modification was calculated as the difference between the fair value of the modified\naward and the fair value of the original award immediately before the modification. As of December 31, 2024, the Company recognized $227.2\nthousand in stock based compensation expense related to this modification.

Adoption\nof 2025 Omnibus Equity Incentive Plan

On\nOctober 22, 2025, the Board of Directors of the Company approved the 2025 Omnibus Equity Incentive Plan (the “2025 Plan”).\nThe 2025 Plan provides for the grant of equity-based awards to employees, directors, officers, and other eligible service providers of\nthe Company and its subsidiaries.

In\nconnection with the adoption of the 2025 Plan, an aggregate of 1,500,000 shares of the Company’s Common Stock were reserved for\nissuance pursuant to awards granted under the 2025 Plan. The types of awards that may be granted under the 2025 Plan include, but are\nnot limited to, stock options, restricted stock, restricted stock units, stock appreciation rights, performance-based awards, and other\nstock-based awards, as determined by the Board of Directors or a designated committee thereof.

No\nawards had been granted under the 2025 Plan as of period ended December 31, 2025. Accordingly, the adoption of the 2025 Plan did not\nhave any impact on the Company’s consolidated financial statements as of that date.

F-41

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n15. Net loss per share

Basic\nand diluted net loss per share attributable to common stockholders was calculated as follows (in thousands except for share and per share\namounts-

Schedule\nof Basic and Diluted Net Loss Per Share

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025			2024
	Year Ended December 31,
	2025			2024
Numerator:
Net loss	$	(928	)		$	(15,383	)
Denominator:
Weighted-average common shares outstanding - basic and diluted		11,525,384				6,958,570
Net loss per share attributable to Fusemachines Inc. common stockholders - basic and diluted		(0.08	)			(2.21	)

The\nfollowing outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for\nthe periods presented because including them would have been antidilutive:

Schedule\nof Outstanding Shares of Potentially Dilutive Securities

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,		December 31,
	2025		2024
Convertible Preferred Stock (as converted to common stock)		-		5,950,673
Common Stock Warrants		92,211		92,211
Stock options (1)		686,880		1,700,058
SPAC public and private placement warrants (2) (refer note\n 24)		13,458,750		-
Equity Share warrant (refer note 22)		2,108,070		-
Issuance of warrants pursuant to conversion of convertible note (refer note 10)		30,000		-
Antidilutive securities\n excluded from computation of earnings per share, amount		16,375,911		7,742,942

\n\n

(1)

Includes 6,772\nstock options as of December 31, 2024, that were early exercised in exchange for non-recourse promissory notes. (Refer to “Note\n14 - Stock-based Compensation “).

\n\n

(2)

The SPAC public\nand private placement warrants were outstanding at CSLM Acquisition Corp. prior to the business combination and were classified as equity\nand included in APIC in CSLM’s historical financial statements. The warrants became exercisable for shares of Fusemachines Inc.\ncommon stock 30 days after the consummation of the business combination and were excluded from diluted net loss per share as their inclusion\nwould have been antidilutive

The\nConvertible Notes were also outstanding as of December 31, 2024, which could obligate the Company to issue preferred shares upon the\noccurrence of various future events at prices and in amounts that are not determinable until the occurrence of those future events. Because\nthe necessary conditions for the conversion of the Convertible Notes have not been satisfied as of December 31, 2024, the Company has\nexcluded the Convertible Notes from the table above and the calculation of diluted net loss per share. (Refer to “Note 10 - Long-Term\nDebt “)

The\nCompany has also entered into a contingent obligation to issue 45,000\nshares of its common stock to a certain vendor in connection\nwith an outstanding accounts payable balance as part of a settlement agreement (refer to “Note 17 - Commitment and Contingencies”).\nThe issuance of common stock is contingent upon the completion the Merger (refer to “Note 1 - Organization”). As the Merger\nhad not taken place as of December 31, 2024, the conditions for the issuance of common stock have not been satisfied. Accordingly, the\nCompany has excluded the common stock shares arising from this contingent obligation from the table above and the calculation of diluted\nnet loss per share. Upon the closing of the business combination, the Company settled its obligation under the Second Agreement through\nthe issuance of 29,610 shares of Fusemachines Inc. common stock, reflecting the application of the 0.6580 conversion ratio to the 45,000\nshares of the Company’s common stock, and a partial cash payment of approximately $110 thousand. The remaining $98 thousand obligation\nis still outstanding and is reflected in accounts payable as of December 31, 2025.

F-42

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n16. Income Taxes

The\nprovision for income taxes consists of the following (in thousand):

Schedule\nof Provision for Income Taxes

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,			December 31,
	2025			2024
Current provision:
Federal		-				-
State		16				-
Foreign		(21	)			(42	)
Total current provision		(4	)			42
Deferred:
Federal						-
State						-
Foreign		1				11
Total deferred provision		1				11
Total provision for income taxes		(3	)		$	(31	)

Deferred\nincome taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s\nassets and liabilities. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and\nliabilities are presented below (in thousands):

Schedule\nof Deferred Income Taxes

	2025			2024
Deferred tax assets:
U.S. federal and state net operating loss carry forwards		4,961			3,608
Research and development Tax Credits		60
Allowance for credit losses		34			232
Research and development		1,148			1,305
Amortization					-
Accrued expenses and other current liabilities		1,132			740
Stock-based compensation		74			273
Operating lease liability		105			119
Total deferred tax assets		7,514			6,277
Deferred tax liabilities:
Amortization		(60	)		(54	)
Property and equipment, net		(14	)		(13	)
Uncertain Tax Positions
Operating lease right-of-use assets		(93	)		(109	)
Total deferred tax liabilities		(167	)		(176	)
Valuation allowance		(7,336	)		(6,091	)
Net deferred tax assets after valuation allowance		11			10

F-43

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Upon\nadoption of ASU 2023-09, Improvements to Income Tax Disclosures the reconciliation of taxes at the federal statutory rate to our provision\nfor (benefit from) income taxes for the year ended December 31, 2025 was as follows (in thousands, except for percentages):

Schedule\nof Income Tax Rate Reconciliation

	2025
	Amount			Percentage
U.S. federal statutory tax rate		(195	)		21.00	%
Foreign tax effects
Nepal
Statutory tax rate difference between Nepal and United states		(4	)		0.38	%
Other		14			(1.51	)%
Canada
Statutory tax rate difference between Canada and United States		44			(4.73	)%
Changes in valuation allowances		110			(11.83	)%
Tax credits		(19	)		2.01	%
Changes in valuation allowances		824			(88.96	%)
Nontaxable or nondeductible items
Change in fair value		(1,147	)		123.83	%
Stock-based compensation		(26	)		2.81	%
Loss on extinguishment of debt		82			(8.86	)%
162(m) Limitation		88			(9.48	)%
Other		58			(6.23	)%
Changes in unrecognized tax benefits		4			(0.41	)%
Other adjustments
Stock-based compensation–related deferred tax asset adjustments		139			(15.04	)%
Prior year true ups		31			(3.31	)%
Provision for Income tax		3			(0.35	)%

\nThe reconciliation of taxes at the federal statutory rate to the provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows (in thousands):\n

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2024
	Amount			Percentage
Loss before income taxes		(15,352	)
Federal tax at statutory rate		(3,224	)		21.00	%
Foreign rate differential		20			(0.13	)%
State taxes, net of federal benefit		(357	)		2.33	%
Permanent differences		132			(0.86	)%
Change in fair value		1,282			(8.35	)%
Stock based compensation		450			(2,93	)
Tax Credits		(62	)		0.40	%
Others		(43	)		0.28	%
Change in valuation allowance		1,834			(11.94	)
Provision for Income Tax		31			(0.20	)

The utilization of the Company’s net operating loss carryforwards and research tax credit carryovers could\nbe subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”),\ndue to ownership change limitations that may have occurred previously or that could occur in the future. These ownership changes limit\nthe amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and\ntax, respectively. In general, an ownership change, as defined by Section 382 and 383 of the Code, results from transactions increasing\nownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period.\nThe Company has not completed an analysis of an ownership change under Section 382 of the Code. To the extent that a study is completed\nand an ownership change is deemed to occur, the Company’s net operating losses and tax credits could be limited.

The\nultimate realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in\nwhich those temporary differences become deductible. Management has considered all positive and negative evidence in connection with\nthe realization of the deferred tax assets based on projected future taxable income and tax planning strategies. Based upon the level\nof projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is\nmore likely than not the Company will not realize the benefits of these deductible differences. Therefore, the Company continues to record\na 100% valuation allowance against all deferred tax assets as of December 31, 2025 and 2024.

The\nvaluation allowance for the year ending December 31, 2025 increased by $1,000.0 thousand.

As\nof December 31, 2025, the Company had federal net operating loss carryforward of approximately $15,680 thousand of which approximately\n$1,163 thousand will begin to expire in 2037 for federal tax purposes, and approximately $14,517 thousand in federal net operating loss\ncarryforward can be carried forward indefinitely. While these federal NOLs do not expire, the Tax Cuts & Jobs Act of 2017 limits\nthe amount of federal net operating loss utilized each year after December 31, 2017 to 80% of taxable income. As at December 31, 2025,\nthe Company has state net operating loss carryforward of approximately $24,630 thousand that start expiring in 2026. In addition, the\nCompany has foreign net operating loss carryforward of $2,104 thousand that start expiring in 2042.

ASC 740-10 prescribes a comprehensive model for the\nrecognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected\nto be taken on a tax return. As of December 31, 2025 and 2024, the Company had unrecognized tax benefits (“UTBs”) of approximately\n$21 thousand and $22 thousand, respectively. The amount of unrecognized tax benefits is not expected to significantly change over the\nnext twelve months. No amounts, outside of valuation allowance, would impact the effective tax rate on the continuing operations. The\nbeginning and ending unrecognized tax benefits amounts is as follows:

Schedule\nof Unrecognized Tax Benefits

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,			December 31,
	2025			2024
Beginning Balance	$	22			$	22
Change related to prior year provisions		(6	)
Change related to current year provisions		5
Ending balance	$	21			$	22

F-44

Fusemachines Inc. and Subsidiaries\nNotes to the Consolidated Financial Statements

Income tax returns are filed in the United States\nand various state jurisdictions. The Company is not currently under examination by income tax authorities in US federal or state jurisdictions.\nFusemachines Nepal Private Limited is currently under examination by local Nepal tax authorities for FY 2023-24.

Due to\nnet operating loss carryforward, the Company’s returns remain open for all prior years.

Note\n17. Commitment and Contingencies

Consulting\nAgreement

In\nDecember 2020, the Company entered into a consulting agreement with a certain vendor, whereby they agreed to help develop and implement\nsales strategies for the Company for $10.0 thousand per month as well as a commission fee as defined in the agreement.

In\nAugust 2024, the Company entered into a second agreement (the “Second Agreement”) with the same vendor mentioned above whereby\nthe Company and vendor acknowledged an outstanding accounts payable balance of $408.9 thousand owed to the vendor for services provided.\nThe Second Agreement stipulates that in full and final satisfaction of this balance, the Company will: (i) issue 45,000 shares of its\ncommon stock to the vendor immediately prior to and contingent upon the consummation of the Merger (see “Note 1 – Organization”), and (ii) pay $208.9 thousand in cash to the vendor within ten days after the closing of the Merger. If the Merger does not\nclose the $408.9 thousand will be payable to the vendor in cash.

The\nCompany evaluated the feature in the Second Agreement whereby the closing of the Merger triggers the obligation to issue 45,000 shares\nof the Company’s common stock (the “Conversion Feature”) to determine whether the feature should be considered a freestanding\nfinancial instrument (as defined in ASC 480-10-20) or whether it should be considered embedded. The Company determined that the Conversion\nFeature should be considered embedded because it did not meet the definition of a freestanding financial instrument because it was neither\ni) entered into separately and apart from any of the entity’s other financial instruments, nor was it ii) separately exercisable.

After\ndetermining that the Conversion Feature should be considered embedded, the Company determined that it did not require bifurcation as\nan embedded derivative under ASC 815-15 because it did not meet the net settlement criterion to be considered a derivative.

Subsequent\nto determining that derivative bifurcation for the Conversion Feature was not required, the Company evaluated its obligations to the\nvendor under the Second Agreement to determine whether the Second Agreement should be accounted for as an extinguishment (in accordance\nwith ASC 470-50) of the Company’s initial obligations (those obligations prior to the Second Agreement under the initial consulting\nagreement) and an immediate recognition of the new obligations specified in the Second Agreement. The Company determined that the Second\nAgreement should be accounted for as an extinguishment because the Conversion Feature represented the addition of a substantive conversion\noption, as that term is used in ASC 470-50-50-10 (and as it is defined in ASC 470-20-40-7). As the Company determined that the Second\nAgreement should be accounted for as an extinguishment, it calculated a loss on extinguishment (in accordance with ASC 470-50-40-4) equal\nto the reacquisition price of the new obligations under the Second Agreement less the net carrying amount of the initial obligation under\nthe initial consulting agreement. The reacquisition price was equal to the fair value of the new obligations on the effective date of\nthe Second Agreement, which was determined to be $478.6\nthousand, and the net carrying amount of the initial obligation\nwas $408.9\nthousand, which resulted in a loss on extinguishment of $69.7\nthousand, which is recorded in loss on extinguishment of payable\nin the consolidated statement of operations and comprehensive loss for the year ended December 31, 2024. In accordance with ASC 470-20-25-13,\nthe offset to the loss on extinguishment of $69.7\nthousand was recorded as an increase to additional paid-in\ncapital as the premium associated with the new obligations issued under the Second Agreement was determined to be substantial. The $408.9 thousand obligation incurred under the initial consulting agreement, which is described in the Second\nAgreement, is recorded in accounts payable in the consolidated balance sheet as of December 31, 2024.

The\nfair value of the new obligations used to determine the loss on extinguishment was determined using a probability-weighted expected return\nmethod/scenario-based method. The significant inputs to the valuation method were an estimate of the probability of the Merger closing,\nan estimate of the date the Merger will close, an estimate of the fair value of the Fusemachines shares (estimate based on an income\napproach and market approach in accordance with Internal Revenue Service Ruling 59-60 for compliance with Internal Revenue Code Section\n409A) to be issued upon the closing of the Merger, and an estimated discount rate. As the method for estimating the fair value of the\nnew obligations used significant unobservable inputs, it was determined to represent a Level 3 fair value measurement.

Upon\nthe closing of the business combination, the Company settled its obligation under the Second Agreement through the issuance of 29,610\nshares of Fusemachines Inc. common stock, reflecting the application of the 0.6580 conversion ratio to the 45,000 shares of the Company’s\ncommon stock, and a partial cash payment of approximately $110 thousand. The remaining $98 thousand obligation is still outstanding and\nis reflected in accounts payable as of December 31, 2025.

Legal counsel fee arrangement

In connection with the Business Combination, the Company\nincurred legal fees payable to its external legal counsel, totaling $1,307,653. Pursuant to an agreement\nentered into in December 2025, Counsel agreed to reduce the outstanding deal-related fees to $600,000, which was fully paid in October\n2025. Under the same agreement, the Company committed to pay for ongoing legal services, including ordinary course SEC filings,\nan S-1 registration statement, review of non-disclosure agreements and letters of intent, and attendance at board and committee meetings,\ncovering the period from November 1, 2025 through December 31, 2026, in monthly instalments of $25,000 from January through May 2026 and\n$75,000 from June through December 2026, totaling $700,000. The Company’s remaining obligation under this arrangement as of December\n31, 2025 is $650,000. The Company is also obligated to reimburse such counsel for all out-of-pocket expenses.

F-45

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Consulting arrangements

In\nDecember 2025, the Company entered into a Payment Plan Agreement with a service provider to settle outstanding\nobligations of $1,032 thousand related to services rendered in connection with the Company’s S-4 registration statements. Under\nthe agreement, the service provider agreed to discount the past-due balance by $555 thousand, resulting in a negotiated settlement amount of $476 thousand.

The Company made an initial payment of $125 thousand\nin December 2025, which included $45 thousand relating to a one-year subscription for Active disclosure, a software service. The remaining balance is payable in equal monthly installments of $26 thousand, commencing in April 2026 through June 2027.

As of December 31, 2025, the current portion of the\nsettlement obligation (amounts due within twelve months) is classified within accounts payable under current liabilities, with the remaining\nbalance classified as non-current within accounts payable in the balance sheet

Guarantees\nand Indemnifications

In\nthe normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification.\nThe Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the\nfuture. To date, the Company has not paid any claims or has been required to defend any action related to its indemnification obligations.\nAs of December 31, 2025 and December 31, 2024, the Company does not have any material indemnification claims that were probable or reasonably\npossible and consequently has not recorded related liabilities.

Litigation

Legacy\nFusemachines received a legal notice dated March 27, 2025, requiring payment of $76.3 thousand to a vendor under a Work Labor & Services\nagreement due to alleged non-fulfilment of payment obligations. Based on its assessment of the services received and contractual terms,\nmanagement believes that the amount payable is $41.3 thousand, which has been recognized in its consolidated balance sheet as of December\n31, 2025, and intends to contest the remaining portion of the claim. Although there can be no assurance of the outcome of such legal\nactions, in the opinion of management, the Company does not have a potential liability related to any current legal proceeding or claim\nthat would individually or in the aggregate materially affect its results of operations, financial condition, or cash flows.

Lease\nobligations

Refer\nto “Note 18 – Leases” for a description of the Company’s lease obligations as of December 31, 2025 and December\n31, 2024.

F-46

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n18. Leases

The\nCompany has operating leases for office space. These leases have expected remaining lease terms ranging from less than one year to 7\nyears. The Company currently has two leases with an initial term of 12 months or less that are accounted for as short-term leases. The\nCompany does not separate lease and fixed non-lease components of lease contracts. The Company’s lease terms may include options\nto extend or terminate the lease. These options are included in the lease term only when it is reasonably certain that the Company will\nelect the option.

There\nare no material residual guarantees associated with any of the Company’s leases, and there are no significant restrictions or covenants\nincluded in the Company’s lease agreements. Certain leases include variable payments related to common area maintenance and property\ntaxes, which are billed by the landlord, as is customary with these types of charges for office space.

There\nwas no sublease rental income for the year ended December 31, 2025 and 2024, and the Company is not the lessor in any lease arrangement.\nThere were no related party lease arrangements during the year ended December 31, 2025, and 2024.

The\ntable below presents certain information related to the Company’s lease costs for the period ended (in thousands):

Schedule\nof Lease Costs

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025		2024
	For the Year Ended December 31,
	2025		2024
Operating lease expense	$	171		$	204
Short-term lease cost		98			122
Variable lease cost		18			17
Total lease cost	$	287		$	343

Lease Position

Operating\nlease right-of-use assets and operating lease liabilities were recorded in the consolidated balance sheets as follows (in thousands):

Schedule\nof Operating Lease Right-of-Use Assets and Liabilities

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,		December 31,
	2025		2024
Assets
Operating lease right-of-use assets	$	744		$	870
Liabilities
Current liabilities:
Operating lease liability, current		85			74
Noncurrent liabilities:
Operating lease liability		751			878
Total operating lease liability	$	836		$	952

The\ntable below presents certain information related to the weighted-average remaining lease term and the weighted-average discount rate\nfor the Company’s operating leases:

Schedule of Operating Leases Weighted Average Remaining Lease Term and Discount Rate

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	December 31,			December 31,
	2025			2024
Weighted average remaining lease term (in years) - operating leases		6.17			7.17
Weighted average discount rate - operating leases		9.25	%		9.25	%

Cash Flows

The\ntable below presents certain information related to the cash flows for the Company’s operating leases for the period ended (in\nthousands):

Schedule\nof Cash flows for the Operating Leases

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2025			2024
	For the Year Ended December 31,
	2025			2024
Amortization of right-of-use assets	$	88			$	111
Change in operating lease liability	$	(73	)		$	(87	)

Future\nminimum lease payments required under operating leases are as follows (in thousands):

Schedule\nof Future Minimum Lease Payments

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Period Ended December 31,	Future Minimum Rents
2026	$	159
2027		167
2028		175
2029		185
2030 and thereafter		430
Total minimum lease payments		1,116
Less: effects of discounting		(280	)
Present value of future minimum lease payments	$	836

F-47

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n19. Related Parties

Related\nParty Convertible Notes

In October 2019 and September 2021, the Company entered\ninto two convertible promissory note agreements with a lender (the “Convertible Notes Payable”). As of December 31, 2024,\nthe lender was considered a principal owner of the Company because it held greater than 10% of the voting common stock. The convertible\nnotes payable, recorded in “Convertible Notes Payable, at Fair Value” in the consolidated balance sheet, amounted to $6,524.0\nthousand as of December 31, 2024.

As of December 31, 2025, the obligation under these\nnotes was classified as a related party payable, with a balance of $300 thousands, and is recorded in “Related Party Payable”\nin the consolidated balance sheet. Refer to “Note 10 – Long-Term Debt,” “Convertible Notes at Fair Value”\nsection for further details.

BO2\nPurchase Agreement

In\nJuly 2021, Fusemachines Nepal Private Limited entered into the BO2 Purchase Agreement with a related party, BO2, and Mr. Maskey. According\nto the terms of the BO2 Purchase Agreement, BO2 agreed to invest up to $964.2\nthousand in Fusemachines Nepal Private Limited to support the\ndevelopment and growth of the business. (Refer to “Note 8 – Cumulative Mandatorily Redeemable Financial Instruments”).\nIn addition, the BO2 Purchase Agreement also included terms and conditions of regulating the management and operation of Fusemachines\nNepal Private Limited, their relationship with each other, certain aspects of the business and affairs of, and their dealings with, Fusemachines\nNepal Private Limited and BO2’s exit from Fusemachines Nepal Private Limited. The BO2 Agreement required Fusemachines Nepal Private\nLimited to pay BO2 a one-time arrangement fee of 1.5%\nexclusive of value added tax (“VAT”) of the BO2’s total investment, and an annual monitoring fee. Fusemachines Nepal\nPrivate Limited incurred an initial arrangement fee of $13.7\nthousand which was recorded as a reduction to cumulative mandatorily\nredeemable common and preferred stock liability in the consolidated balance sheet for the periods ended December 31, 2025, and December\n31, 2024. Additionally, Fusemachines Nepal Private Limited incurred $5.0\nthousand as an annual monitoring fee for the year ended\nDecember 31, 2025 and 2024.

Repurchase\nand Repayment of 2023 Promissory Notes

In\nJanuary 2024, the Company repurchased 667,000 shares of its common stock from Mr. Maskey, at a price of $4.352 per share for a total\nof $2,902.7 thousand. Out of this amount, $902.7 thousand was applied towards repayment of Mr. Maskey’s 2023 Promissory Note including\naccrued interest and balance of the Repurchase Consideration amounting to $2,000.0 thousand that was paid in cash to Mr. Maskey (see\n“Note 14 – Stock-based Compensation “).

January\n2024 Related Party Pledge Agreement

2024\nRelated Party Promissory Notes

During\n2024, the Company entered into seven separate promissory notes with Sameer Maskey, the CEO of the Company for aggregate principal amount\nof $700.0 thousand (refer to “Note 10 – Long-Term Debt “).

Dolma Impact Fund I

In January 2025, the Company amended the convertible\nnote payable to Dolma Impact Fund I (“Dolma”). Pursuant to the amended terms, the maturity date was extended to February 28,\n2026. As of December 31, 2025, the related party note payable to Dolma remained outstanding in the amount of $300 thousand and is presented\nin “Related party notes payable, at fair value, current” in the consolidated balance sheets.

F-48

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Private Investment in Public Equity (“PIPE”)\nFinancing

On December 23, 2025, Fusemachines Inc. (the “Company”)\nentered into a Securities Purchase Agreement with Consilium Frontier Equity Fund LP, a related party, pursuant to which the Company issued\nand sold 588,235 shares of its common stock, par value $0.0001 per share, at a purchase price of $1.70 per share in a private placement\ntransaction (the “PIPE Financing”), resulting in aggregate gross proceeds of $1,000 thousand.

The\nproceeds were received in cash at closing and the issuance was recorded within stockholders’ equity as permanent equity (refer\nNote 23 Private Investment in Public Equity (“PIPE”) Financing).

Note\n20. Reverse Recapitalization Reverse Capitalization

Upon\nconsummation of the transaction on October 22, 2025, Fusemachines Inc. (the “Company”) was determined to be the\naccounting acquirer, and the transaction was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Accordingly, the historical financial\nstatements of Legacy Fusemachines became the historical financial statements of the registrant.

Accordingly,\nthe following disclosure on “Reverse Recapitalization” is presented to summarize the common stock issued at Closing, the\napplication of the exchange ratio, and the resulting additional paid-in-capital recognized in connection with the recapitalization.

The\noverall voting interest on closing date is summarized below:

Schedule\nof Overall Voting Interest on Closing Date

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Particulars	Shares		%Ownership
Shares held by Fusemachines Inc. Stockholders		14,864,110		52	%
Shares held by CSLM public stockholders, Sponsor, and related parties of Sponsor		12,654,921		45	%
Shares held by unrelated third parties		831,000		3	%
Total		28,350,031		100	%

On\nOctober 22, 2025, all holders of 29,199,809 issued and outstanding Legacy Fusemachines common stock received shares of Fusemachines Inc\ncommon stock at a par value $0.0001 per share after giving effect to the exchange ratio of 0.6580 (the “Conversion Ratio”)\nresulting in 19,214,201 shares of Fusemachines Inc. common stock issued and outstanding as of the Closing. The issuance reflects the\nfollowing events contemplated by the Business Combination Agreement:

(a) 9,043,234\nshares of Legacy Fusemachines convertible preferred stock were converted into shares of Legacy Fusemachines common stock in\naccordance with the applicable conversion terms. Subsequently, in connection with the Business Combination, all such shares of\nLegacy Fusemachines common stock were exchanged for shares of common stock of Fusemachines Inc. (the “Company” or\n“PubCo”) based on the exchange ratio specified in the Business Combination Agreement. After giving effect to the\nexchange ratio, an aggregate of 5,950,673 shares of the Company’s common stock were issued.

(b)\nThe surrender and exchange of all 29,199,809 issued and outstanding shares of Legacy Fusemachines common stock (including shares issued\nupon conversion of preferred stock) into 19,214,201 shares of Fusemachines Inc. common stock as adjusted by the Exchange Ratio;

(c)\nThe other related events that occurred in connection with the Closing are summarized below:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	Upon the closing date, there is settlement of sponsor convertible note amounting to $ 3,978 thousand which was\neffected through a combination of $2,343 thousand in cash and balance through issuance of 408,639 common stock of Fusemachines Inc.
	●	Public\n shareholders of CSLM received an aggregate of 901,955 shares of Fusemachines Inc. common stock.
	●	All\n public rights were converted into 1,897,486 shares of Fusemachines Inc. common stock.
	●	1,184,000\n shares of Fusemachines Inc. common stock issued in connection with the PIPE Financing.
	●	Issuance\n of 4,743,750 shares of Fusemachines Inc common stock upon conversion of non-redeemable CSLM Class A & Class B Ordinary Shares.
	●	Fusemachines\n Inc. received funds from a convertible note with an affiliate of the Sponsor in the principal amount of $2,193 thousand. On the Closing\n Date, the note was converted into a share of Fusemachines Inc. common stock pursuant to the conversion terms of the convertible note\n agreement.
	●	Approximately\n $11,005 thousand prepayment made by CSLM to the Meteora Parties pursuant to the Forward Purchase Agreement funded from the Trust\n Account.
	●	Repayment\n of approximately $745 thousand (principal and accrued interest) on promissory notes issued to the Chief Executive Officer.
	●	Each\n Convertible note of Legacy Fusemachines (including both related party and other convertible notes) outstanding immediately prior to\n the Closing was converted into shares of Legacy Fusemachines common stock of 8,048,770\n shares in accordance with the applicable convertible note agreement and immediately thereafter exchanged into 5,296,271 shares of\n Fusemachines Inc. common stock in accordance with the Conversion Ratio specified in the Business Combination Agreement accordingly\n as a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of\n December 31, 2025, other than related party note payable related to Dolma amounting $300\n thousand.
	●	\n\n Upon the closing of the business combination, the\nCompany settled its obligation under the Second Agreement through the issuance of 29,610 shares of Fusemachines Inc. common stock, reflecting\nthe application of the 0.6580 conversion ratio to the 45,000 shares of the Company’s common stock, and a partial cash payment of\napproximately $110 thousand. The remaining $98 thousand obligation is still outstanding and is reflected in accounts payable as of December\n31, 2025. (refer Note 17 - Commitments and Contingencies). \n
	●	Upon\n the conversion of the April 2024, June 2024 and September 2024 Convertible Note to common stock, the Company shall issue the holder\n a warrant to purchase 7,500 shares of common stock of CSLM with a per share exercise price of $11.50. The warrants issuable upon\n conversion of the April 2024, June 2024 and September 2024 Convertible Notes are classified as equity instruments.

\n\n\n\n\n

	●	The assumption of the public and private warrants, as described in Note 24 “Public and\nprivate warrants”.
	●	The Company’s amended and restated certificate of incorporation and amended and restated bylaws\nwere adopted.
	●	The Company adopted the 2025 equity incentive plan.

F-49

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Schedule\nof Reverse Recapitalization

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Particulars	Shares
Partial conversion of the 3rd Amended and Restated Promissory Note into Fusemachines Inc. common stock on the Closing Date		408,639
CSLM Class A ordinary Shares not redeemed for cash and converted into Fusemachines Inc. common stock		901,955
Automatic exercise of the rights related to 18,975,000 units issued in CSLM’s Initial Public Offering		1,897,486
Shares issued in connection with the PIPE Financing		1,184,000
Conversion of non-redeemable CSLM Class A & Class B Ordinary Shares into Fusemachines Inc. common stock		4,743,749
Share issued to Consilium Frontier Equity Fund in connection with conversion of convertible note on\n the closing date		3,320,241
Total shares of Fusemachines Inc. common stock issued to CSLM security holders		12,456,071
Conversion of Legacy Fusemachines convertible notes (as adjusted by the Exchange Ratio)		1,976,050
Conversion of Legacy Fusemachines convertible preferred stock into common stock in connection with the reverse Recapitalization (as adjusted by the Exchange Ratio)		5,950,673
Shares issued to Legacy Fusemachines stockholders (as adjusted by the Exchange Ratio)		7,967,237
Total shares of Fusemachines Inc. common stock outstanding immediately after the Merger		28,350,031

Below\ntable presents the Fund flow reconciliation (in thousands):

Schedule\nof Fund Flow Reconciliation

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

Particulars	(Amount In Thousands)
Trust balance as of Closing date		11,118
Proceeds from CSLM loan		2,193
PIPE Proceeds		11,840
Transfer of cash & cash equivalent of CSLM		9
Total Available Cash (A)		25,160
CSLM transaction costs		(2,249	)
Payment of Director & Officer insurance premium		(131	)
Prepayment under Forward Purchase Agreement		(11,005	)
Settlement of sponsor convertible note of CSLM		(2,343	)
Total Payments as of the closing date (B)		(15,728	)
Funds going to Fusemachines Inc. (classified under financing activities under Consolidated Statements of Cash Flows) (A+B)		9,432
Operating assets assumed		531
Operating\nliabilities assumed		(1,100	)
Initial fair value of forward purchase derivative liability		(8,616	)
Issuance\nof share subscription receivable		11,005
Initial fair value of equity classified warrant		(1,009	)
Legacy\nFusemachines transaction cost		(1,873	)
Others		137
Net equity impact of reverse recapitalization		8,507

The\nreverse recapitalization accounting treatment was primarily determined based on the fact that the stockholders of Legacy Fusemachines\nheld a relative majority of the voting power of Fusemachines and had the ability to nominate a majority of the members of the Board of\nDirectors. In addition, the senior management of Legacy Fusemachines becomes the senior management of Fusemachines, and the strategy\nand operations of Legacy Fusemachines prior to the merger represent the ongoing operations of the combined Company.

Accordingly,\nfor accounting purposes, the financial statements of Fusemachines represent a continuation of the financial statements of Legacy Fusemachines,\nwith the Merger being treated as the equivalent of Legacy Fusemachines issuing shares for the net assets of CSLM, accompanied by a recapitalization.\nThe net assets of CSLM were recognized at their historical carrying amounts as of the Closing date, and no goodwill or other intangible\nassets were recorded. Operations prior to the Merger are presented as those of Legacy Fusemachines and the accumulated deficit of Legacy\nFusemachines has been carried forward after Closing.

Fusemachines Inc. incurred transaction costs of $1,873 thousands, consisting of deferred transaction cost, banking fees, legal fees, and other professional fees, which has been\nrecorded as a reduction to additional paid-in capital as a direct and incremental cost of the reverse recapitalization.

All\nperiods presented prior to the Merger have been retrospectively adjusted to reflect the Exchange Ratio for the equivalent number of shares\nof Fusemachines Inc. common stock outstanding immediately after the Closing in order to effect the reverse recapitalization.

F-50

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n21. Forward Purchase agreement Forward Purchase Agreement

On\nJuly 31, 2025, CSLM and Legacy Fusemachines (CSLM prior to the Merger and the Company after the Merger, (the\n“Counterparty”), entered into an over-the-counter\n(OTC) equity prepaid forward confirmation (the “Forward Purchase Agreement” or “FPA”) with Meteora Capital\nPartners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the\n“Sellers”)

Upon\nthe consummation of the Merger on October 22, 2025, the Sellers (Meteora) delivered a Pricing Date Notice (as defined in the Forward\nPurchase Agreement). Based on this notice, the applicable Prepayment Amount (as defined in the Forward Purchase Agreement) became\ndeterminable and was subsequently funded by the Counterparty from the Trust Account (as defined in the Forward Purchase Agreement)\nin accordance with the Forward Purchase Agreement.

Under\nthe material terms of the FPA:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	The\n Sellers committed (in one or more Pricing Date Notices) to provide up to a maximum of 3,000,000 shares of Class A common stock for\n the Transaction.

	●	The\n Counterparty agreed to pay the Sellers a Prepayment Amount equal to the Number of Shares (as defined in the Forward Purchase\n Agreement) specified in each Pricing Date Notice multiplied by the per-share redemption price (the “Initial Price” as\n defined in the Counterparty’s organizational documents). The Prepayment Amount is payable from the Counterparty’s Trust\n Account and subject to receipt of a Pricing Date Notice, will be wired no later than the earlier of (a) one Local Business Day after\n the Closing Date and (b) the date any Trust Account assets are disbursed in connection with the Business Combination.

	●	The\n Sellers waived any rights to the Trust Account funds in respect of the FPA and agreed not to seek recourse against the Trust Account\n except as expressly provided in the FPA.

	●	Settlement\n is by cash settlement at the end of the agreement: on the Valuation Date (generally three years after the Closing Date unless\n earlier determined under specified events as set forth in the SPA) the Seller will pay the Counterparty a cash amount equal to the\n Number of Shares as of the Valuation Date multiplied by the VWAP over the Valuation Period; the cash settlement payment date is the tenth local business day following the end of the Valuation Period.

	●	The\n FPA includes an early termination mechanism: where Sellers sell (terminate) specified shares after closing, Sellers must pay an\n Early Termination Obligation (as defined in the Forward Purchase Agreement) to Counterparty equal to the number of Terminated Shares\n (as defined in the Forward Purchase Agreement) multiplied by the Termination Price of $12.00\n per share (payable on the first local business day following settlement of the sale).

	●	The\n Sellers may, at their election, request “Shortfall Warrants” (refer note 22) exercisable for a number of shares of\n common stock equal to the difference between the Maximum Number of Shares (as defined in the Forward Purchase Agreement) and the\n number of shares of common stock specified in a Pricing Date Notice; such warrants have exercise terms and an exercise price as set\n forth in the FPA.

	●	Payment\n dates for periodic reporting / accounting purposes are the last day of each calendar quarter (or next local business day), until\n the Valuation Date; the FPA also contains customary provisions addressing indemnities, representations, Calculation Agent rights,\n and compliance with tender-offer and SEC rules.

The\nForward Purchase Agreement includes escrow arrangements pursuant to which the Prepayment Amount funded from the CSLM trust account is\nheld in escrow for the benefit of the Meteora Parties until settlement or release in accordance with the terms of the Forward Purchase\nAgreement. The Company does not have unconditional access to the funds held in escrow, and such funds are not available to satisfy the\nclaims of the Company’s creditors.

Accordingly,\nthe Company recorded the prepayment amount $11,005\nthousand as a contra-equity\nshare subscription receivable, presented as a reduction of stockholders’ equity (APIC), as the escrowed funds represent conditional\nconsideration receivable from shareholders that is subject to future settlement under the Forward Purchase Agreement. The Prepayment\nAmount was determined based on 891,930 shares of common stock at a per share price equal to the SPAC per-share redemption price (the\n“Initial Price”), as defined in the Forward Purchase Agreement

F-51

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

The\nForward Purchase Agreement contains features that meet the definition of a derivative under ASC 815, including an underlying based on\nthe Company’s Class A common stock, a notional amount, payment provisions, and provisions that require or permit net cash settlement.\nAccordingly, at the Closing, the Company recognized a derivative liability measured at fair value, representing the portion of the escrowed\nPrepayment Amount that may be payable to the Forward Counterparty based on conditions existing as of the Closing Date.

The\nshare subscription receivable and the derivative liability, when considered together, represent management’s estimate of the portion\nof the escrowed funds that the Company expects to ultimately retain. Subsequent changes in the fair value of the derivative liability\nassociated with the Forward Purchase Agreement are recognized in earnings at each reporting date.

Upon receipt of consideration related to the sale\nof any shares sold by Meteora, the Company will record the receipt of funds as an increase to cash and a decrease to the share subscription\nreceivable previously recorded as contra-equity.

The Company incurred no transaction costs that were directly related to issuance of the Forward Purchase Agreement.

Further\nsubsequent to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026 to the Prepaid Forward\nPurchase Agreement (the “Amendment”) originally entered into on July 31, 2025 with Meteora Capital Partners and\naffiliates, for detail refer to Note 25 - Subsequent events.

As\nof December 31, 2025, the value of the Forward purchase derivative liability is $9,692\nthousand disclosed as Current Liability in the Consolidated\nBalance Sheets. Further the derivative liability is measured at fair value on a recurring basis using Level 3 inputs, refer to\nNote 3 – Fair Value Measurements for further information on the valuation techniques and significant unobservable inputs\nused in determining the fair value of this instrument.

Further, the derivative liability has been classified as current as the Company does not have an unconditional right\nto defer settlement beyond twelve months. The Forward Purchase Agreement includes provisions for early termination upon sale of shares\nby the Sellers, which can result in cash settlement within the next twelve months, as well as periodic settlement features, thereby requiring\ncurrent classification

Note\n22. Shortfall warrants Shortfall warrant

In\nconnection with the execution of the Forward Purchase Agreement the Company agreed to issue “Shortfall Warrants”\nto the Sellers (Meteora) for shares not elected under the Forward Purchase Agreement, representing the difference between the\nmaximum number of shares subject to the FPA and the number of shares ultimately elected by the Forward Counterparty.

\nSeller\nin its sole discretion may request (in one or more requests) warrants of the Counterparty exercisable for Shares in an amount equal to\n(i) the Maximum Number of Shares less (ii) the Number of Shares specified in the Pricing Date Notice (the “Shortfall Warrants,”\nand the Shares underlying the Shortfall Warrants, the “Shortfall Warrant Shares”). The Shortfall Warrants shall have an exercise\nprice equal to the termination price which is defined $12 in the forward purchase agreement and is subject to reset in accordance\nwith the pricing provisions of that agreement, and this termination\nprice has subsequently been amended; for further details, refer to Note 25 – Subsequent Events.

The\nwarrants grant the holders the right to purchase a fixed number of shares (2,108,070)\nat a fixed exercise price/termination price. The Shortfall Warrants are exercisable for shares of common stock and were issued\nconcurrently with the consummation of the Business Combination on October 22, 2025 (the “Initial Exercise Date”) and are\nexercisable at any time from the Initial Exercise Date until 5:00 p.m. (New York City time) on October 22, 2028 (the “Termination\nDate”). No shortfall warrants have been exercised as at December 31, 2025.

The Shortfall Warrants contain a beneficial ownership\nlimitation that, subject to certain limited exceptions, restricts a holder from exercising the Shortfall Warrants to the extent that,\nfollowing such exercise, the holder, together with its affiliates and certain related parties, would beneficially own more than 9.9% of\nthe Company’s outstanding common stock. A holder may increase or decrease this beneficial ownership limitation upon notice to the\nCompany, provided that any increase will not be effective until the 61st day after such notice and in no event may the beneficial ownership\nlimitation exceed 9.9%.

The exercise price and the number of Shortfall Warrant\nShares are subject to customary anti-dilution adjustments for stock dividends and other distributions on the Company’s common stock,\nstock splits, reverse stock splits, reclassifications and certain rights offerings. In addition, subject to any required shareholder approvals\nand applicable stock exchange rules, the Company may, in its discretion, reduce the exercise price of the Shortfall Warrants for any period\nof time.

The Shortfall Warrants and the rights thereunder are\ntransferable, in whole or in part, with the prior written consent of the Company and subject to compliance with applicable securities\nlaws and payment of any applicable transfer taxes. The warrants may be divided or combined into new warrants, and, if properly assigned,\nmay be exercised by a permitted transferee without the issuance of a new warrant certificate.

The\nCompany evaluated the Shortfall Warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives\nand Hedging, including the guidance in ASC 815-40 related to contracts indexed to, and potentially settled in, an entity’s own\nequity.

In\nmaking this assessment, the Company considered, among other factors:

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	whether\n the Shortfall Warrants are freestanding financial instruments,
	●	whether\n the warrants are indexed to the Company’s own stock,
	●	whether\n settlement is required to be in shares rather than cash, and
	●	whether\n any provisions could require net cash settlement under circumstances outside the Company’s control.

Accordingly, in connection with the reverse recapitalization,\nthe Company recognized the Shortfall Warrants at their initial fair value of $1,009 thousands, which is included within additional paid-in\ncapital in the stockholders’ equity section of the consolidated balance sheet.

Based\non this assessment, the Company concluded that the Shortfall Warrants meet all of the criteria for equity classification under ASC 815-40.\nAccordingly, the Shortfall Warrants are classified as equity and are not subject to subsequent remeasurement.

Note\n23. Private Investment in Public Equity (“PIPE”) Financing

On\nDecember 23, 2025, Fusemachines Inc. (the “Company”) entered into and consummated a Securities Purchase Agreement with an\naccredited investor pursuant to which the Company issued and sold shares of its common stock, par value $0.0001 per share, in a private\nplacement transaction (the “PIPE Financing”).

In\nconnection with the PIPE Financing, the Company issued 588,235\nshares of its common\nstock at a purchase price of $1.70\nper share, resulting\nin aggregate gross proceeds of $1,000\nthousand. The shares\nwere issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or\nRegulation D promulgated thereunder.

The\nproceeds from the PIPE Financing were received in cash at closing. For accounting purposes, the issuance of common stock was recorded\nwithin stockholders’ equity as permanent equity.

F-52

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

Note\n24. Public and private warrants Public and Private Warrants

As\nof December 31, 2025, there were 3,971,250\nPrivate Warrants and 9,487,500\nPublic Warrants outstanding. There are no warrants exercised as at December 31, 2025.

Public\nwarrants

Each\nPublic Warrant entitles the holder to purchase one whole share of the Company’s common stock. Public Warrants are exercisable only\nfor whole warrants; no fractional warrants will be issued upon separation of the units, and only whole warrants will trade. The Public\nWarrants became 30 days after the completion\nof the Business Combination.

The\nCompany will not be obligated to deliver Class A common shares upon exercise of a Public Warrant (and will have no obligation to settle\na Public Warrant exercise) unless a registration statement under the Securities Act, covering the shares issuable upon exercise, is then\neffective and a prospectus relating thereto is current, or a valid exemption from registration is available. If the conditions for registered\nissuance are not satisfied, holders will not be able to exercise those Public Warrants for registered shares until such time as an effective\nregistration statement is available; in such circumstances the Company may permit (or require, as described below) cashless exercise\npursuant to Section 3(a)(9) or other available exemption

Each whole Public Warrant is\nexercisable for one share of the Company’s Class A common stock at an exercise price of $11.50 per share, subject to the customary\nanti-dilution and other adjustment provisions set forth in the warrant agreement. The Public Warrants became exercisable 30 days after the completion of the initial Business Combination and expire five years after the completion of an initial Business Combination or earlier upon redemption or liquidation,\nin each case in accordance with the warrant agreement.

The Public Warrants contain customary terms and features for contracts in the Company’s own equity, including\n(i) anti-dilution adjustments to the exercise price and the number of shares issuable upon exercise for share capitalizations, sub-divisions,\ncombinations, reclassifications, certain rights offerings and Extraordinary Dividends, as described in Section 4 of the warrant agreement;\n(ii) the Alternative Issuance provisions in Section 4.5 of the warrant agreement, pursuant to which, upon specified reclassifications,\nreorganizations, mergers, consolidations, tender offers or similar change-of-control transactions, each Public Warrant becomes exercisable\nfor the same form and amount of cash, securities or other property that a holder would receive as a common shareholder on an as-if-exercised\nbasis immediately prior to the transaction; and (iii) an optional beneficial ownership limitation in Section 3.3.5 of the warrant agreement\nthat permits a holder, at its election, to limit the number of Class A common shares issuable upon exercise of its warrants such that,\nimmediately after giving effect to such exercise, the holder’s beneficial ownership of the Company’s outstanding Class A common\nshares does not exceed a specified “Maximum Percentage” (initially 9.8% or such other percentage specified by the holder).\nPublic Warrants are issued in registered form, may be held in book-entry form through The Depository Trust Company and are transferable\nin accordance with the procedures set forth in Section 5 of the warrant agreement, subject to applicable securities law restrictions.\nThe warrant agreement also provides that the Company is not required to net cash settle the Public Warrants and that, other than the fixed\ncash redemption price described above, settlement of the Public Warrants occurs through the issuance of equity or the delivery of the\nAlternative Issuance consideration specified in the contract.

The Company may call the Public Warrants for redemption

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	●	in\n whole and not in part;
	●	at\n a price of $0.01 per warrant;
	●	upon\n not less than 30 days’ prior written notice of redemption to each warrant holder; and
	●	if,\n and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a\n 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders

If\nand when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to\nregister or qualify the underlying securities for sale under all applicable state securities laws.

In addition, if (x) the Company\nissues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of\na Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A ordinary shares (with such\nissue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of\nany such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such\naffiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from\nsuch issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business\nCombination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average\ntrading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which\nthe Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, then the\nexercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the\nNewly Issued Price and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of\nthe higher of the Market Value and the Newly Issued Price.

As of December 31, 2025, if\nholders elect to exercise Public Warrants for cash, the Company would deliver one Class A common share for each Public Warrant exercised\nand would receive cash equal to the fixed exercise price per share. The aggregate fair value of the shares issued upon such cash exercise\nwould vary directly with the then-current market price of the Company’s Class A common stock, whereas the per-warrant exercise price\nand resulting cash proceeds to the Company remain fixed in accordance with the warrant agreement.

When Public Warrants are exercised\non a cashless basis in accordance with the warrant agreement, each warrant is settled through the issuance of a reduced number of Class\nA common shares determined by reference to the then-current “Fair Market Value” of the Class A common stock and the fixed\nexercise price. As the market price of the Company’s Class A common stock increases above the exercise price, the number of shares\nissued per Public Warrant and the aggregate fair value of the shares delivered on cashless exercise increase; conversely, as the market\nprice approaches or falls below the exercise price, the number of shares issued per Public Warrant and the aggregate fair value of the\nshares delivered decrease, and no shares would be delivered if the Public Warrants are out-of-the-money.

If and when the Public Warrants\nbecome redeemable and the Company elects to redeem them for cash in accordance with the warrant agreement, the Company would be obligated\nto pay the fixed contractual redemption price per Public Warrant and the Public Warrants would be cancelled without the issuance of any\nClass A common shares. Although the fixed redemption price per warrant does not change with the market price of the Company’s Class\nA common stock, the Company may only exercise this redemption alternative if the Reference Value of the Class A common stock equals or\nexceeds the specified redemption trigger, which is based on the trading price of the Company’s shares.

F-53

Fusemachines\nInc. and Subsidiaries Notes to the Consolidated Financial Statements

In the event of certain reclassifications, reorganizations, mergers, consolidations, tender offers or similar transactions\nthat result in a change of control, the Public Warrants provide for an “Alternative Issuance” under which each Public Warrant\nbecomes exercisable for the cash, securities or other property that the holder would have been entitled to receive if the holder had exercised\nthe Public Warrant and participated in the transaction as a common shareholder immediately prior to its consummation, as described in\nthe warrant agreement. Accordingly, the amount and form of consideration delivered upon settlement under this alternative will generally\nchange in direct proportion to the per-share consideration (whether in cash, stock or other property) payable to the Company’s common\nshareholders in the underlying transaction, which reflects the then-current fair value of the Company’s equity shares.

Private\nwarrants

The\nPrivate Placement Warrants are substantially identical to the Public Warrants, except that (i) the Private Placement Warrants may be\nexercised for cash or on a cashless basis, at the holder’s option; (ii) the Private Placement Warrants and the Class A common shares\nissuable upon their exercise are subject to certain transfer restrictions pursuant to the letter agreement between the Company, the Sponsor\nand other parties thereto, as amended from time to time, including that any permitted transferee must agree to be bound by such transfer\nrestrictions; (iii) the Private Placement Warrants are not redeemable by the Company; and (iv) the holders of the Private Placement Warrants\n(including the Class A common shares issuable upon exercise thereof) may be entitled to certain registration rights. The Private Placement\nWarrants will not become Public Warrants upon any transfer and shall remain non-redeemable.

As of December 31, 2025, if holders elect to exercise\nthe Private Placement Warrants for cash, the Company would deliver one Class A common share for each Private Placement Warrant exercised\nand would receive cash equal to the fixed exercise price per share. Consistent with the Public Warrants, the aggregate fair value of the\nshares issued upon such cash exercise of the Private Placement Warrants would vary directly with the then-current market price of the\nCompany’s Class A common stock, while the per-warrant exercise price and resulting cash proceeds to the Company remain fixed in\naccordance with the warrant agreement.

When Private Placement Warrants are exercised on a\ncashless basis in accordance with the warrant agreement, each warrant is settled through the issuance of a reduced number of Class A common\nshares determined by reference to the “Sponsor Exercise Fair Market Value” of the Class A common stock and the fixed exercise\nprice. As the market price of the Company’s Class A common stock increases above the exercise price, the number of shares issued\nper Private Placement Warrant and the aggregate fair value of the shares delivered on cashless exercise increase; conversely, as the market\nprice approaches or falls below the exercise price, the number of shares issued per Private Placement Warrant and the aggregate fair value\nof the shares delivered decrease, and no shares would be delivered if the Private Placement Warrants are out-of-the-money.

The Alternative Issuance provisions described above for the Public Warrants\nalso apply to the Private Placement Warrants such that, upon the specified reclassification, reorganization, merger, consolidation, tender\noffer or similar change-of-control transactions, each Private Placement Warrant becomes exercisable for the same form and amount of cash,\nsecurities or other property that would be received by a common shareholder on an as-if-exercised basis immediately prior to the transaction,\nand the settlement amount therefore varies directly with the per-share consideration payable to the Company’s common shareholders.

Classification\nand accounting: The Company evaluated the terms of the Public and Private Warrants under the relevant U.S. GAAP guidance for freestanding\nfinancial instruments and derivative accounting and concluded that both the Public Warrants and the Private Warrants meet the criteria\nfor equity classification. In connection with the reverse recapitalization transaction, the Public Warrants and Private Warrants that were outstanding\nimmediately prior to the transaction were initially recorded through the reverse recapitalization and are presented within stockholders’\nequity on the consolidated balance sheet as part of additional paid-in capital (rather than as a separate warrant liability line item).\nBecause the Public Warrants and Private Warrants are classified in equity, there is no subsequent remeasurement required after initial\nrecognition and changes in the fair value of the Company’s common stock do not give rise to gains or losses in the statement of\noperations related to these warrants.

Note\n25. Subsequent Events

\n\n \n \n \n

●

Subsequently\n to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026 to the Prepaid Forward Purchase Agreement\n (the “Amendment”) originally entered into on July 31, 2025 with Meteora Capital Partners and affiliates. The Amendment\n replaces the agreement’s previously fixed Termination Price of $12.00 per share with a weekly-reset Termination Price equal to\n the lower of (a) $12.00 and (b) the volume-weighted average price (VWAP) of the Shares for the immediately preceding week (as reported\n by Bloomberg L.P.), subject to Reset Price Floors applied on a tranche basis (50% of the Shares: $2.50 floor; 50% of the Shares: $5.00\n floor). The Company is currently evaluating the accounting and financial reporting implications of this Amendment, including\nits impact, if any, on the valuation of the related derivative instrument.

\n\n \n \n \n\n \n \n \n\n \n \n \n

	●	Subsequent\n to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026, to the Common Stock Purchase Warrant\n (the “Warrant Amendment”) originally issued on October 22, 2025 in connection with the Business Combination with Meteora\n Capital Partners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the\n “Holder”). Pursuant to the Warrant Amendment, the exercise price of the warrant was amended such that the exercise price\n per share of the Company’s common stock is $10.00,\n subject to customary adjustments as set forth in the warrant agreement. All other terms and conditions of the warrant remain\n unchanged and continue in full force and effect. The Company is currently evaluating the accounting and financial reporting\n implications of the Warrant Amendment, including its impact, if any, on the classification and valuation of the warrant.

	●	On July 28, 2025, the Board of Directors and shareholders of the Company approved the Fusemachines Inc. 2025 Omnibus\nEquity Incentive Plan (the “Plan”). The Plan authorizes the Company to issue up to 1,500,000 shares of the Company’s\ncommon stock, par value $0.0001 per share, to eligible employees, directors, and consultants in the form of stock options, restricted\nstock, restricted stock units, or other equity-based awards. Subsequent to December 31, 2025, the Company is in the process of granting awards under\nthe Plan to certain employees. As the awards were not granted and no shares were issued under the Plan as of December 31, 2025, no amounts\nhave been recognized in the accompanying consolidated financial statements.

\n\n \n \n \n

●

Further\n the Company has evaluated any other subsequent events through the date of issuance of these consolidated financial statements and determined\n that there have been no events that have occurred that would require adjustments to disclosures in the consolidated financial statements.

F-54

Fusemachines\nInc. and Subsidiaries

Condensed\nConsolidated Interim Balance Sheets

(all\namounts in USD, in thousands, except number of shares and per share data)

	June\n 30, 2026			December\n 31, 2025
	(Unaudited)
Assets
Current\n assets:
Cash and cash\n equivalents		368			4,221
Accounts receivable, net		1,134			1,264
Unbilled revenue		16			16
Prepaid\n expenses and other current assets		469			753
Total current\n assets		1,987			6,254
Property and equipment, net		270			305
Intangible assets, net		226			206
Deferred tax assets		11			11
Operating lease right-of-use\n assets		664			744
Other\n assets		14			16
Total\n assets		3,172			7,536
Liabilities\n and stockholders’ deficit
Current\n liabilities:
Accounts payable		5,173			5,012
Accrued expenses and other\n current liabilities		4,972			4,618
Related party loan payable		300			300
Operating lease liability,\n current		89			85
Forward purchase derivative\n liability		8,084			9,692
Short\n term debt		119			342
Total current\n liabilities		18,737			20,049
Accounts payable non-current		-			143
Warrant liability		72			121
Cumulative mandatorily redeemable\n common and preferred stock liability		1,050			1,048
Operating\n lease liability		667			751
Total\n liabilities		20,526			22,112
Commitments and Contingencies		-
Stockholder’s\n deficit:
Convertible preferred stock\n ($0.0001 par value, 5,000,000 shares authorized as of June 30, 2026 and December 31, 2025, respectively; Nil shares issued as of\n June 30, 2026 and December 31, 2025, respectively ; Nil shares outstanding as of June 30, 2026 and December 31, 2025)		-			-
Common stock ($0.0001 par\n value, 500,000,000 shares authorized as of June 30,2026 and December 31, 2025; 28,985,302 shares and 28,938,266 shares issued and\n outstanding as of June 30,2026 and December 31, 2025 respectively)		3			3
Additional\npaid in capital		32,329			31,311
Share subscription receivable		(11,005	)		(11,005	)
Accumulated deficit		(38,950	)		(35,145	)
Accumulated\n other comprehensive income		269			260
Total\n stockholders’ deficit		(17,354	)		(14,576	)
Total liabilities\n and stockholders’ deficit		3,172			7,536

The\naccompanying notes are an integral part of these condensed consolidated interim financial statements.

F-55

Fusemachines\nInc. and Subsidiaries

Unaudited\nCondensed Consolidated Interim Statements of Operations and Comprehensive Loss

(all\namounts in USD, in thousands, except number of shares and per share data)

	2026			2025		2026	2025
	Three\n Month ended, June 30			Six\n Month ended, June 30
	2026			2025		2026	2025
	(Unaudited)			(Unaudited)
Revenue		1,794			2,034		3,673		3,987
Cost of revenue		(831	)		(828	)	(1,762	)	(1,692	)
Gross\n Profit		963			1,206		1,911		2,295
Operating\n expenses:
Selling and marketing		383			333		795		641
General and administrative		2,978			1,566		6,251		3,499
Research\n and development		292			159		590		324
Total\n operating expenses		3,653			2,058		7,636		4,464
Loss\n from operations		(2,690	)		(852	)	(5,725	)	(2,169	)
Other (expense)\n income:
Interest expense		(52	)		(73	)	(106	)	(139	)
Loss on extinguishment of\n convertible notes payable		-			-		-		(391	)
Gain on extinguishment of\n payable		8			-		507		-
Gain/(loss) on change in fair\n value of convertible notes and warrant liability		(10	)		(2,860	)	49		(1,344	)
Gain/(loss) on change in fair\n value of forward purchase derivative liability		20			-		1,608		-
Other\n (expense) income		(125	)		(1	)	(50	)	4
Total\n other (expense)/income, net		(159	)		(2,934	)	2,008		(1,870	)
Loss before income taxes		(2,849	)		(3,786	)	(3,717	)	(4,039	)
Provision\n for income tax		-			-		(4	)	-
Net\n loss		(2,849	)		(3,786	)	(3,721	)	(4,039	)
Deemed\n dividend related to Shortfall Warrants modification		-			-		(84	)	-
Net\n loss attributable to common stockholders (i)		(2,849	)		(3,786	)	(3,805	)	(4,039	)

Weighted-average\n common shares outstanding - basic and diluted (ii)		28,965,344			7,270,964		28,952,133		7,270,964
Net loss\n per common share - basic and diluted (i/ii)		(0.10	)		(0.52	)	(0.13	)	(0.56	)

Comprehensive\n income (loss)
Net\n loss		(2,849	)		(3,786	)	(3,721	)	(4,039	)
Change\n in foreign currency translation adjustment		-					9		-
Total\n comprehensive loss		(2,849	)		(3,786	)	(3,712	)	(4,039	)

The\naccompanying notes are an integral part of these condensed consolidated interim financial statements.

F-56

Fusemachines\nInc. and Subsidiaries

Unaudited\nCondensed Consolidated Interim Statements of Stockholder’ Deficit

(all\namounts in USD, in thousands, except number of shares and per share data)

Three\n months ended June 30, 2026	Shares		Amount*		Shares	Amount*	Additional \n paid-in\n capital \n Amount		Shares		Amount*	Share\n Subscription Receivable \n Amount	Accumulated \n deficit \n Amount		other \n comprehensive\n Income \n Amount			Total \n stockholders’\n deficit \n Amount
	Convertible \n preferred\n stock*		Common\n stock *			Treasury\n stock*					Accumulated
Three\n months ended June 30, 2026	Shares		Amount		Shares	Amount	Additional \n paid-in\n capital \n Amount		Shares		Amount	Share\n Subscription Receivable \n Amount	Accumulated \n deficit \n Amount		other \n comprehensive\n Income \n Amount			Total \n stockholders’\n deficit \n Amount
Balance at March\n 31, 2026		-		-		28,939,240	$	3		31,801		-	$	-		$	(11,005	)	$	(36,101	)	269	(15,033	)
Stock-based compensation		-		-		-		-		472		-		-			-			-		-	472
Net loss		-		-		-		-		-		-		-			-			(2,849	)	-	(2,849	)
Issuance of common stock upon\n exercise of stock option		-		-		26,321		-		18		-		-			-			-		-	18
Issuance of common stock upon\n cashless exercise of stock option		-		-		19,741		-		38		-		-			-			-		-	38
Foreign\n currency translation		-		-		-		-		-		-		-			-			-		-	-
Balance\n at June 30, 2026 (unaudited)		-		-		28,985,302		3		32,329		-		-			(11,005	)		(38,950	)	269	(17,354	)

	Convertible \n preferred\n stock*		Common\n stock *			Treasury\n stock*					Accumulated
Three\n months ended June 30, 2025	Shares		Amount		Shares	Amount	Additional \n paid-in\n capital \n Amount		Shares		Amount	Share\n Subscription Receivable \n Amount	Accumulated \n deficit \n Amount			other \n comprehensive\n Income \n Amount		Total \n stockholders’\n deficit \n Amount
Balance at March\n 31, 2025		5,950,673		7,865		7,270,964		1		5,158		438,903		(2,903	)		-		(34,470	)	250	(24,099	)
Stock-based compensation		-		-		-		-		53		-		-			-		-		-	53
Net loss		-		-		-		-				-		-			-		(3,786	)		(3,786	)
Balance\n at June 30, 2025 (unaudited)		5,950,673		7,865		7,270,964		1		5,211		438,903		(2,903	)		-		(38,256	)	250	(27,832	)

F-57

Fusemachines\nInc. and Subsidiaries

Unaudited\nCondensed Consolidated Interim Statements of Stockholder’ Deficit

(all\namounts in USD, in thousands, except number of shares and per share data)

Six\n months ended June 30, 2026	Shares		Amount*		Shares	Amount*		Additional \n paid-in\n capital \n Amount		Shares		Amount*	Share\n Subscription Receivable \n Amount	Accumulated \n deficit \n Amount		other \n comprehensive\n Income \n Amount		Total \n stockholders’\n deficit \n Amount
	Convertible \n preferred\n stock*		Common\n stock *			Treasury\n stock*						Accumulated
Six\n months ended June 30, 2026	Shares		Amount		Shares	Amount		Additional \n paid-in\n capital \n Amount		Shares		Amount	Share\n Subscription Receivable \n Amount	Accumulated \n deficit \n Amount		other \n comprehensive\n Income \n Amount		Total \n stockholders’\n deficit \n Amount
Balance at December\n 31, 2025		-		-		28,938,266			3		31,311		-		-		(11,005	)	(35,145	)	260	(14,576	)
Stock-based compensation		-		-		-			-		878		-		-		-		-		-	878
Net loss		-		-		-			-		-		-		-		-		(3,721	)	-	(3,721	)
Issuance of common stock upon\n cashless exercise of stock option		-		-		21,456			-		39		-		-		-		-		-	39
Shares withheld related to\n cashless exercise		-		-		(741	)		-		(1	)	-		-		-		-		-	(1	)
Deemed dividend related to\n Shortfall Warrants modification ( refer note 15 )		-		-		-			-		84		-		-		-		(84	)	-	-
Issuance of common stock upon\n exercise of stock option		-		-		26,321			-		18		-		-		-		-		-	18
Foreign\n currency translation		-		-		-			-		-		-		-		-		-		9	9
Balance at June 30, 2026\n (unaudited)		-		-		28,985,302			3		32,329		-		-		(11,005	)	(38,950	)	269	(17,354	)

	Convertible \n preferred\n stock*			Common\n stock *			Treasury\n stock*							Accumulated
Six\n months ended June 30, 2025	Shares			Amount		Shares	Amount		Additional \n paid-in\n capital \n Amount			Shares		Amount	Share\n Subscription Receivable \n Amount		Accumulated \n deficit \n Amount			other \n comprehensive\n Income \n Amount		Total \n stockholders’\n deficit \n Amount
Balance at December\n 31, 2024		9,043,234			7,865		11,039,388			2			4,698		667,000			(2,903	)		-		(34,217	)	250	(24,305	)
Retroactive application of\n recapitalization		(3,092,561	)		-		(3,775,196	)		(1	)		1		(228,097	)		-			-		-		-	-
Balance at December 31, 2024		5,950,673			7,865		7,264,192			1			4,699		438,903			(2,903	)		-		(34,217	)	250	(24,305	)
Balance		5,950,673			7,865		7,264,192			1			4,699		438,903			(2,903	)		-		(34,217	)	250	(24,305	)
Stock-based compensation		-			-		-			-			118		-			-			-		-		-	118
Net loss		-			-		-			-			-		-			-			-		(4,039	)	-	(4,039	)
Loss for extinguishment of\n convertible notes payable		-			-		-			-			391		-			-			-		-		-	391
Issuance\n of shares upon repayment of 2023 Promissory Notes		-			-		6,772			-			3		-			-			-		-		-	3
Balance at June 30, 2025\n (unaudited)		5,950,673			7,865		7,270,964			1			5,211		438,903			(2,903	)		-		(38,256	)	250	(27,832	)
Balance		5,950,673			7,865		7,270,964			1			5,211		438,903			(2,903	)		-		(38,256	)	250	(27,832	)

\n\n \n \n\n\n \n \n\n \n \n

*	The\n number of shares of convertible preferred stock, common stock and treasury stock issued and outstanding prior to the Merger have been\n retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Merger.

*	In\n connection with the consummation of the business combination, the Company adopted a new capital structure and amended the par value\n of its common stock from $0.00001 per share to $0.0001 per share. Accordingly, the historical equity presentation has been adjusted\n to reflect the revised par value of the Company’s common stock. The change resulted in a reclassification of amounts within stockholders’\n deficit from additional paid-in capital to common stock to reflect the increased par value per share. This reclassification had no\n impact on total stockholders’ deficit.

The\naccompanying notes are an integral part of these condensed consolidated interim financial statements.

F-58

Fusemachines\nInc. and Subsidiaries

Unaudited\nCondensed Consolidated Interim Statements of Cash Flows

(all\namounts in USD, in thousands)

	2026			2025
	Six\n months ended June 30,
	2026			2025
	(Unaudited)
Cash flows\n from operating activities
Net\n Loss		(3,721	)		(4,039	)
Adjustments\n to reconcile net loss to net cash used in operating activities:
Depreciation of property and\n equipment		50			50
Amortization of intangible\n assets		67			42
Provision for credit losses		(44	)		61
Stock-based compensation		878			118
Amortization of right-of-use\n assets		43			43
Changes in fair value of convertible\n notes at fair value and warrant liability		(49	)		1,344
Change in fair value of forward\n purchase derivative liability		(1,608	)		-
Accretion of cumulative mandatorily\n redeemable common and preferred stock liability		55			47
Loss on extinguishment of\n convertible notes payable		-			391
Gain\n on extinguishment of payable		(507	)		-
Unrealized\n foreign exchange gain/(loss)		-			(1	)
Changes\n in operating assets and liabilities:
Accounts\n receivable, current, net		109			285
Unbilled\n revenue		(16	)		1
Prepaid\n expenses and other current assets		289			37
Accounts\n receivable, net		-			4
Other\n assets		1			(6	)
Accounts\n payable		550			1,589
Operating\n lease liabilities		(39	)		(34	)
Accrued\n expenses and other current liabilities		431			(27	)
Deferred\n revenue		-			(54	)
Net\n cash used in operating activities		(3,511	)		(149	)
Cash flows\n from investing activities
Costs capitalized for internally\n developed software		(88	)		(54	)
Purchases\n of property and equipment		(27	)		(6	)
Net\n cash used in investing activities		(115	)		(60	)
Cash flows\n from financing activities
Proceeds from convertible\n notes payable		-			180
Payment\n of premium financing obligation		(251	)		-
Proceeds\n from premium financing obligation		28			-
Net\n cash (used in) / provided by financing activities		(223	)		180
Effect\n of exchange rate changes on cash and cash equivalents		(4	)		-
Net change\n in cash and cash equivalents		(3,853	)		(29	)
Cash\n and cash equivalents at beginning of the period		4,221			500
Cash\n and cash equivalents at end of the period		368			471
Supplemental\n disclosures of cash flow information
Cash paid for income taxes		19			15
Interest paid on the short-term debt (premium financing)		8			-
Non-cash\n investing and financing activities:
Deemed dividend\n related to shortfall warrant modification		84			-
Unpaid deferred transaction\n costs as of the end of the period		-			364
Waiver of deferred transaction\n costs as of the end of the period		-			505
Issuance of shares vested\n upon repayment and forgiveness of 2023 Promissory Notes		-			3
(Loss)/Gain\n on extinguishment of debt		-			(391	)
Common Stock issued upon cashless exercise of stock options		39			-

The\naccompanying notes are an integral part of these condensed consolidated interim financial statements.

F-59

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Note\n1. Organization

Fusemachines\nInc. (“Company” or “Pubco”) provide enterprise artificial intelligence solutions and services across North America,\nLatin America, Asia and Europe. The Company was originally incorporated on April 13, 2021, under the name CSLM Acquisition, Corp. (“CSLM”),\nas a Cayman Islands exempted Company, a special purpose acquisition company (“SPAC”) formed for the purpose of effecting\na merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses\nor entities. Upon consummation of the Business Combination, Fusemachines USA, Inc. (“Legacy Fusemachines”) became the surviving\ncorporation and a wholly-owned subsidiary of the Company. The Company operated through the following legal entities and branch:

\n\n \n \n \n\n\n \n \n \n\n\n \n \n \n\n\n \n \n \n\n\n \n \n \n\n\n \n \n \n

	●	Fusemachines\n USA, Inc (Wholly Owned Subsidiary)
	●	Fusemachines\n Nepal Inc. (Wholly Owned Holding Company)
	●	Fusemachines\n Nepal Private Ltd. (Majority Owned Subsidiary)
	●	Fusemachines\n Canada Inc (Wholly Owned Subsidiary)
	●	Fusemachines\n India Inc. (Dormant Holding Company)
	●	Fusemachine\n Inc. Dominican Republic (Wholly Owned Branch)

Business\nOxygen Private Limited (“BO2”), a Company domiciled in Nepal holds certain redeemable common and preferred stock of Fusemachines\nNepal Private Ltd.

Merger\nAgreement and Business Combination

In\nJanuary 2024, the Company entered into an Agreement and Plan of Merger (as amended in August 2024 and February 2025, the “Business\nCombination Agreement”) with CSLM Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CSLM (“Merger Sub”),\nand Fusemachines USA, Inc. (formerly Fusemachines Inc.) (“Legacy Fusemachines”). On October 22, 2025, the Company consummated\nthe business combination whereby (a) CSLM merged with and into CSLM Holdings, Inc., a Delaware corporation and wholly owned subsidiary\nof CSLM at which time the separate existence of CSLM ceased and CSLM Holdings became the surviving corporation (“Pubco”)\nin accordance with the Delaware General Corporation Law (“DGCL”), the Cayman Islands Companies Act (As Revised) (the “Companies\nAct”), the Certificate of Merger, (the “Certificate of Merger”), and the amended and restated memorandum and articles\nof association of CSLM (the “Domestication”); (b) the merger (the “Merger”) of Merger Sub with and into Legacy\nFusemachines, pursuant to which, at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”),\nthe separate corporate existence of Merger Sub ceased and Legacy Fusemachines became the surviving corporation and a wholly-owned subsidiary\nof Pubco, pursuant to the terms of the Business Combination Agreement and in accordance with the laws of the State of Delaware, as more\nfully described elsewhere in the Proxy Statement/Prospectus; and (c) the other transactions contemplated by the Business Combination\nAgreement and documents related thereto (such transactions, together with the Domestication and the Merger, the “Business Combination”).\nIn connection with the Business Combination, Pubco was renamed “Fusemachines Inc.” (the “Company”) and Fusemachines\nInc. was renamed “Fusemachines USA, Inc.” (“Legacy Fusemachines”).

Throughout\nthe notes to the unaudited condensed consolidated interim financial statements, unless otherwise noted or the context otherwise requires,\nthe term “Company” refers to Legacy Fusemachines Inc. and its subsidiaries prior to the consummation of the Business Combination,\nand to Fusemachines Inc. (the publicly traded parent company) and its subsidiaries after the consummation of the Business Combination.

F-60

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Note\n2. Summary of Significant Accounting Policies

There\nhave been no significant changes to the accounting policies during the three and six months period ended June 30, 2026, as compared\nto the significant accounting policies described in Note 2 of the Notes to Consolidated Financial Statements in the Company’s\naudited consolidated financial statements for the year ended December 31, 2025.

Basis\nof Presentation and Principles of Consolidation

The\nCompany prepares its unaudited condensed consolidated interim financial statements in accordance with U.S. Generally Accepted Accounting\nPrinciples (“U.S. GAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission\n(the “SEC”) regarding financial reporting. The unaudited condensed consolidated interim financial statements include the\nfinancial statements of Fusemachines Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. These\nunaudited condensed consolidated interim financial statements are presented in United States Dollars (“USD” or $), which\nis the functional currency of the Parent Company.

Unaudited\nInterim Financial Information

In\nthe opinion of the Company, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments, consisting\nof only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes\nin stockholders’ deficit and cash flows. Certain information and note disclosures normally included in the financial statements\nprepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet\nat December 31, 2025, was derived from audited annual financial statements but does not contain all of the footnote disclosures from\nthe annual financial statements. The accompanying unaudited condensed consolidated interim financial statements and related financial\ninformation should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal\nyear ended December 31, 2025, which provides a more complete discussion of the Company’s accounting policies and certain other\ninformation. The interim results for the three and six months ended June 30, 2026, are not necessarily indicative of the results to be\nexpected for the year ending December 31, 2026, or for any future periods.

Use\nof Estimates

The\npreparation of unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make estimates\nand assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and the disclosure of contingent assets\nand liabilities at the date of unaudited condensed consolidated interim financial statements, as well as revenues and expenses during\nthe reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to the valuation\nof operating lease right-of-use assets, convertible notes, cumulative mandatorily redeemable common and preferred stock liability, common\nstock warrants, common and convertible preferred stock, current expected credit losses (“CECL”), stock-based compensation,\nuseful lives of property and equipment and intangible assets, impairment of long-lived assets, capitalization of software development\ncosts, forward purchase derivative liability and income taxes.

The\nCompany bases its estimates and judgments on historical experience, knowledge of current conditions and its beliefs of what could occur\nin the future, given available information. Actual results could differ from those estimates, and such differences may be material to\nthe unaudited condensed consolidated interim financial statements. Changes in facts and circumstances may cause the Company to revise\nits estimates.

Segment\nreporting

The\ncompany operates as one operating segment with a focus on data engineering, AI consulting, and technical services. The Company’s\nChief Executive Officer (“CEO”), as the Company’s chief operating decision maker, manages and allocates resources to\nthe operations of the Company on a consolidated basis. This enables the Company’s CEO to assess the overall level of available\nresources and determine how best to deploy these resources across service lines in line with the Company’s long-term company-wide\nstrategic goals.

As\nthe Company’s operations are comprised of a single reporting segment, the Company’s segment assets are reflected on the accompanying\nunaudited condensed consolidated interim balance sheet as “total assets” and its significant segment expenses and net loss\nare listed on the accompanying unaudited condensed consolidated interim statements of operations and comprehensive loss.

F-61

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Impairment\nof Long-Lived Assets

The\nCompany holds long-lived assets in two countries, Nepal and the United States. The table below presents the breakdown of the Company’s\nlong-lived assets, based on geographic region (in thousands).

Schedule of Long-lived Assets, Based on Geographic Region

\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	June\n 30,		December\n 31,
	Long\n lived assets as of
	June\n 30,		December\n 31,
	2026		2025
Nepal		200		247
United States		296		264
Total long-lived\n assets		496		511

Revenue\nRecognition

The\nCompany derives the majority of its revenue from AI Solutions (Products and Services) that largely represents professional services the\ncompany provides to its customers to help them achieve any AI-related goals within their organization. Standard contractual arrangements\nare governed by Master Services Agreements (“MSAs”), which set out general terms including payment, termination rights, and\nintellectual property ownership. Detailed scope, pricing, and performance obligations are defined in Statements of Work (“SOWs”),\nwhich are executed for each engagement or project phase. The Company’s contracts for AI Services have different terms based on\nthe scope and complexity of engagements; pricing for the majority of contracts are invoiced monthly on a time-and-materials basis. The\nCompany notes that its contracts meet the requirements for over-time revenue recognition, as the customer is simultaneously receiving\nthe benefits and able to consume the benefits of the services being provided. For professional services that are distinct and billed\non a time-and-materials basis, revenue is generally recognized as the services are provided, which is reflective of the transfer of the\nservices to the customer. The Company elected the “right to invoice” practical expedient based on the Company’s right\nto invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

For\nfixed-fee arrangements that include distinct, milestone-based deliverables (for example, discrete design, architecture, or\nplatform-development phases), where either of the criterion laid down in ASC 606-10-25-27(a), (b) or (c) are met, the Company\nrecognizes revenue over time under a percentage-of-completion (“POC”) method, rather than the right-to-invoice practical expedient. Further the progress toward completion\nof these arrangements is measured using the output method i.e. based on the deliverables completed and accepted by the customer relative\nto total contractual deliverables for that performance obligation.

Company’s\nAI Solutions includes product revenues primarily comprising of software license fees from sales of term-based license contracts, under\nwhich we grant customers the license right to use the software for a specified period (i.e. when the customer can access, use, and benefit\nfrom the software license). Term software licenses are satisfied at a point in time and associated revenue is recognized upon the later\nof 1) delivery of the software, or 2) the beginning of the period in which the customer has received the license right to use the software.\nFor customer contracts that include software license fees, implementation and/or other consulting services, the portion of the transaction\nprice allocated to software licenses is generally recognized when delivered. Implementation, customization, or model tuning services\nif applicable, when included, are evaluated as separate performance obligations when they are distinct from the software and not highly\ninterdependent. These services are generally satisfied over time as the work progresses. During the period ended June 30, 2026 and June\n30, 2025 the product revenues were insignificant.

F-62

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Contract\nBalances

Stock-Based\nCompensation

The\nCompany records stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”).\nThis standard requires all equity-based payments to employees and non-employees, including grants of employee stock options and restricted\nstock awards, to be recognized in the unaudited condensed consolidated interim statements of operations and comprehensive loss based\non the grant date fair value of the award. The stock-based compensation expense is recognized on a straight-line basis over the requisite\nservice period of the award, which is generally the period from the accounting grant date to the end of the vesting period. The Company\nelected to account for forfeitures of awards as they occur.

Since\nthe adoption of ASU 2018-07, Improvements to Nonemployee Stock-Based Payment Accounting, the measurement date for non-employee awards\nis the date of grant, and stock-based compensation costs are recognized in the same period and in the same manner as if the entity had\npaid cash for the goods or services. Stock-based compensation expense is classified as general and administrative, cost of revenue, selling\nand marketing and research and development expenses in the unaudited condensed consolidated interim statements of operations and comprehensive\nloss.

Advertising\nCost

Advertising\ncosts are expensed as incurred. Advertising costs for the period three months ended June 30, 2026 and 2025 were $ 22 thousand and $ 11\nthousand, whereas for six months ended June 30, 2026 and 2025 were $ 54 thousand and $ 20 thousand , respectively, which are\nincluded in selling and marketing costs on the unaudited condensed consolidated interim statements of operations and comprehensive loss.

F-63

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Commitments\nand Contingencies

The\nCompany may at times be involved in litigation in the ordinary course of business. The Company will, from time to time, when appropriate\nin management’s estimation, record adequate reserves in the Company’s unaudited condensed consolidated interim financial\nstatements for pending litigation. Currently there are no pending or threatened litigation matters that management believes require accrual\nor disclosure in addition to those presented in the Note on Litigation (refer Note 11 – Commitment and Contingencies).

Risks\nand Uncertainties

As\na result of its global operations, the Company may be subject to certain inherent risks.

Significant\nCustomers and Suppliers — The concentration of credit risk with respect to accounts receivable is primarily limited to certain\ncustomers to which the Company makes substantial sales. To minimize credit risk related to accounts receivable, the Company maintains\nallowances for potential credit losses based on historical loss patterns as well as future expectations. As of June 30, 2026 and December\n31, 2025 the Company had three customers whose accounts receivable balance accounted for at least 10% of the Company’s consolidated\naccounts receivables, respectively. These customers accounted for approximately 45.5% and 47.6% of the Company’s receivables\nat the end of the respective periods. For the six-month ended June 30,2026 and 2025, the Company had three and four customers whose revenue\naccounted for at least 10% of the Company’s consolidated revenue, respectively. These customers accounted for approximately 36.3%\nand 52.9% of the Company’s total revenue at the end of the respective periods.

The\nCompany pays its suppliers on normal commercial terms and does not believe that there is any significant supply risk from its suppliers.\nAs of June 30, 2026 and December 31, 2025, the Company had one and two suppliers respectively whose account payable accounted for at\nleast 10% of the Company’s consolidated account payables, respectively. These suppliers accounted for approximately 30.1% and 57.0%\nof the Company’s total payables at the end of the respective periods.

Geopolitical\nrisks - As a result of its global operations, the Company is exposed to geopolitical risks, including ongoing and potential wars,\nterrorism, sanctions and trade disputes. These developments may disrupt supply chains and data flows, restrict access to critical technology\nand infrastructure (including AI-enabling hardware and cloud services), and increase cybersecurity and compliance risks. As a result\nof its global operations, the Company may be subject to certain inherent risks.

F-64

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Going\nConcern

The\nCompany’s unaudited condensed consolidated interim financial statements have been presented on the basis that it is a going concern,\nwhich contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Liquidity\nis the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate\non an ongoing basis. Significant factors in the management of liquidity include funds generated from operations, levels of accounts receivable\nand accounts payable, and capital expenditure requirements.

As\nof June 30, 2026, the Company had cash of approximately $ 368 thousand. For the six months ended June 30, 2026, the Company used approximately\n$ (3,511) thousand in cash for operating activities. Historically, the Company has incurred recurring net losses from operations and\nnegative cash flows from operating activities. As of June 30, 2026, the Company had an accumulated deficit of approximately $ (38,950)\nthousand. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern within one year\nof the date these unaudited condensed consolidated interim financial statements were issued.

The\ncontinuation of the Company as a going concern is dependent upon the continued financial support from its stockholders and debt holders.\nSpecifically, continuation is contingent on the Company’s ability to obtain necessary equity to continue operations, and ultimately\nthe Company’s ability to generate profit from sales and positive operating cash flows, which is not assured.

As\nof the date on which these unaudited condensed consolidated interim financial statements were available to be issued, we believe that\nour existing cash on hand and other potential\nequity or debt financing arrangements, may not, on their own, be sufficient to meet the Company’s working capital and capital expenditure\nrequirements for at least the next twelve months. Management currently expects that the Company will be able to access additional sources\nof capital, including through issuances of equity securities and/or additional borrowings, as\nand when required to fund the Company’s operating and investing activities over the next year; however, there can be no assurance\nthat such financing will be available on acceptable terms or at all. Accordingly, the Company’s ability to continue as a going\nconcern remains dependent on the successful execution of these financing plans. These unaudited condensed consolidated interim financial\nstatements do not include any adjustments to the recoverability and classification of recorded asset amounts or to the classification\nof liabilities that might be necessary should the Company be unable to continue as a going concern.

Net\nLoss per Share

Basic\nnet loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of shares\nof common stock outstanding during the year. Diluted net loss per share is computed by dividing the net loss attributable to common shareholders\nby the weighted average number of shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the potential\nexercise of warrants or options, and the potential conversion of preferred stock or convertible notes, into common stock, under the if-converted\nmethod. Due to the net losses for the three and six-month period ended June 30, 2026 and 2025, basic and dilutive net loss per share\nwere the same, as the effect of potentially dilutive securities would have been anti-dilutive.

Forward purchase derivative liability

The Company evaluates\nits Forward Purchase Agreement (“FPA”) with the Meteora Parties under ASC 815, Derivatives and Hedging, to\ndetermine whether the arrangement meets the definition of a derivative and qualifies for any scope exception, including the\nown-equity exception under ASC 815-40. As the FPA has an underlying (the Company’s common stock), a notional, little or no initial\nnet investment, and net-settlement provisions, and is not designated as a hedge, it is recorded as a free-standing derivative\nliability, with an offsetting contra-equity share subscription receivable recorded for the unrecognized portion of the escrowed\nPrepayment Amount. The derivative liability is remeasured to fair value at each reporting date using a Monte Carlo simulation model\n(Level 3), with changes in fair value recognized in the condensed consolidated statements of operations and comprehensive loss. The\nderivative liability is classified as current given the Company’s ability to settle the instrument, in whole or in part, within\ntwelve months.

Emerging\nGrowth Company (EGC)

The\nCompany is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our\nBusiness Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements\nthat are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required\nto comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding\nexecutive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory\nvote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further,\nSection 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting\nstandards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do\nnot have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting\nstandards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements\nthat apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of\nsuch extended transition period which means that when a standard is issued or revised and it has different application dates for public\nor private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies\nadopt the new or revised standard. This may make comparison of the Company’s unaudited condensed consolidated interim financial\nstatements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out\nof using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

F-65

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Recent\nAccounting Pronouncements

Recently\nAdopted Accounting Pronouncements

In\nJuly 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2025-05, Financial Instruments\n– Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets The ASU provides an optional\npractical expedient for estimating future credit losses based on current conditions as of the balance sheet date and assuming those conditions\ndo not change over the remaining life of the accounts receivable. This standard is effective January 1, 2026. The Company did not elect\nthe optional practical expedient provided by this standard. The adoption did not have a material impact on the unaudited condensed consolidated\ninterim financial statements.

New\nAccounting Pronouncements Not Yet Adopted

The\nCompany considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting\nStandards Board. Management periodically reviews newly issued accounting standards to determine their potential impact on the Company’s\nunaudited condensed consolidated interim financial statements and related disclosures.

In\nMarch 2024, the SEC issued its final climate disclosure rules (Rule 1), which require the disclosure of climate-related information in\nannual reports and registration statements, beginning with annual reports for the period ending December 31, 2025. The rules\nrequire disclosure in the audited consolidated financial statements of certain effects of severe weather events and other natural conditions\nabove certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material.\nWe are currently evaluating the impact of the new rules and continue to monitor the status of the related legal challenges.

ASU\n2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. In November 2024, the FASB issued this\nASU that requires more detailed disclosure about certain costs and expenses presented in the income statement, including inventory purchases,\nemployee compensation, selling expense and depreciation expense. The new guidance is effective for annual reporting periods beginning\nafter December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance\ndoes not affect recognition or measurement in our unaudited condensed consolidated interim financial statements.

ASU\n2024-04 Debt - Debt with Conversion and Other Options - Induced Conversions of Convertible Debt Instruments. In November 2024, the FASB\nissued this ASU which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be\naccounted for as induced conversions or extinguishments. The amendments in this update are effective for all entities for annual reporting\nperiods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted\nfor all entities that have adopted the amendments in Update 2020-06. We are currently evaluating the impact this guidance will have on\nour unaudited condensed consolidated interim financial statements.

In\nMay 2025, the FASB issued Accounting Standards Update No. 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from\nContracts With Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer (“ASU 2025-04”).\nASU 2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and\nclarifies that the variable consideration constraint in Topic 606 does not apply to share-based consideration payable to customers. The\nnew guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting\nconditions and ensuring alignment with Topic 606 and Topic 718. ASU 2025-04 is effective for fiscal years beginning after December 15,\n2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact\nof adopting this new accounting guidance on its unaudited condensed consolidated interim financial statements and related disclosures.\n

In\nSeptember 2025, the FASB issued ASU 2025-06- Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements\nto the Accounting for Internal-Use Software (ASU 2025-06), which is intended to simplify the capitalization guidance for internal-use\nsoftware by removing references to project stages and clarifying when the capitalizing of eligible costs is required. ASU 2025-06 is\neffective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted.\nThe Company is in the process of evaluating the impact of this new guidance on its disclosures.

In\nDecember 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in\nTopic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures\nand introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have\nhad a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods\nwithin those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.

The\nCompany does not believe any other new accounting pronouncements issued by the FASB that have not become effective will have a material\nimpact on its unaudited condensed consolidated interim financial statements.

F-66

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Note\n3. Fair Value Measurements

The\nauthoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements\nas follows:

Level\n1 - Quoted prices for identical assets or liabilities in active markets.

Level\n3 - Unobservable inputs reflecting management’s view about the assumptions that market participants would use in pricing the asset\nor liability.

As\nof June 30, 2026, the Company does not have any outstanding convertible notes payable or related party loan payable, as these instruments\nwere either converted or settled during the year ended December 31, 2025 other than related party note payable related to Dolma Impact\nFund I (“Dolma”) amounting $ 300 thousand, which were reclassified from a convertible note to a related party note payable\non demand. Accordingly, no fair value estimation is required for such instruments as of the reporting date. As of December 31, 2025,\nthe estimated fair values of these instruments approximated their carrying values due to their relatively short maturities.

Financial\nInstruments Recorded at Fair Value

Schedule of Financial Instruments Recorded at Fair Value on a Recurring Basis

\n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Level\n 1		Level\n 2			Level\n 3		Total
	Fair\n Value Measurements at June 30, 2026
	Level\n 1		Level\n 2			Level\n 3		Total
Liabilities:
Warrant liability		-			-			72		72
Forward\n Purchase derivative liability		-			-			8,084		8,084
Liabilities	$	-		$	-		$	8,156	$	8,156

\n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Level\n 1		Level\n 2			Level\n 3		Total
	Fair\n Value Measurements at December 31, 2025
	Level\n 1		Level\n 2			Level\n 3		Total
Liabilities:
Warrant Liability		-			-			121		121
Forward\n purchase Derivative liability		-			-			9,692		9,692
Liabilities	$	-		$	-		$	9,813	$	9,813

Warrant\nLiabilities

The\nfollowing table shows the change in the fair value of the warrant liability (in thousands):

Schedule of Change in Fair Value of Warrant Liability

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Amount
Balance as of\n December 31, 2024	$	945
Change\n in fair value of warrant liabilities	$	26
Balance\n as of March 31, 2025 \n	$	971
Change in fair value of warrant liabilities		(122	)
Balance\n as of June 30, 2025	$	849

\n \n \n \n \n \n \n\n \n \n\n \n \n\n \n \n\n \n \n \n \n \n \n \n \n

	Amount
Balance as of\n December 31, 2025	$	121
Change in fair value of warrant liabilities	$	(59	)
Balance as of March 31, 2026	$	62
Warrant liability, beginning balance	$	62
Change\n in fair value of warrant liabilities		10
Balance\n as of June 30, 2026	$	72
Warrant liability, ending balance	$	72

Forward\nPurchase Derivative Liability

The\nforward purchase derivative liability was recognized at Closing on October 22, 2025. The fair value as of June 30, 2026 was $8,084 thousand.\nThe following table presents a reconciliation of the Forward Purchase Derivative Liability (in thousands):

Schedule of Reconciliation of the Forward Purchase Derivative Liability

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Amount
Balance as of\n December 31, 2025		9,692
Change\n in fair value of forward purchase derivative liabilities		(1,588	)
Balance as of March 31, 2026 \n		8,104
Change in fair value of forward purchase derivative liabilities		(20	)
Balance\n as of June 30, 2026		8,084

The\nfair value of the forward purchase derivative liability was estimated using a Monte Carlo simulation approach. The key assumptions used\nin valuation as of June 30, 2026: a risk-free rate of 4.14%, a valuation term of 2.32 years, and annualized volatility of 65.0%, whereas key assumptions used in valuation as of December 31, 2025: a risk-free rate of 3.53%, a valuation\nterm of 2.81 years, and annualized volatility of 65.0%. The\nCompany’s common share price was simulated with daily time steps for a range of various possible scenarios. The breadth of all\npossible scenarios was captured in an estimate of volatility, based on comparable companies’ historical equity volatilities, considering\ndifferences in their capital structure. The simulated prices were compared against the settlement adjustment features of the Forward\nPurchase Agreements. Under each simulated scenario of future stock price, the Company calculated the value of the forward purchase derivative\nliability arrangement. The average value across this range of possible scenarios, discounted to present using the risk-free rate, was\nused as the fair value of the forward purchase derivative liability.

F-67

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Convertible\nnotes payable

The\nfollowing table shows the change in the fair value of the Convertible Notes measured at Fair Value (in thousands):

Schedule of Change in Fair Value of the Convertible Notes at Fair Value

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	Related\n party Convertible Note\n payable at\n fair value			January\n 2024 Convertible\n Notes			Total
Balance\n as of December 31, 2024	$	6,524			$	8,986		$	15,510
Change in fair value of related party convertible note, convertible notes at fair value		(548	)			(994	)		(1,542	)
Balance as of March 31,\n 2025	$	5,976			$	7,992		$	13,968
Change\n in fair value of related party convertible note, convertible notes at fair value		1,804				1,178			2,982
Balance\n as of June 30, 2025	$	7,780			$	9,170		$	16,950

Balance\n as of December 31, 2025	$	-			$	-		$	-
Change\n in fair value of related party convertible note, convertible notes at fair value		-				-			-
Balance\n as of March 31, 2026		-				-			-
Convertible notes at fair value, beginning balance		-				-			-
Change in fair value of related party convertible\n note, convertible notes at fair value		-				-			-
Balance as of June 30, 2026	$	-			$	-		$	-
Convertible notes at fair value, ending balance	$	-			$	-		$	-

Common\nStock Warrant Liability

The\nCompany estimates the fair value of the common stock warrant liability (refer to “Note 5 – Debt “) using an option\npricing model and assumptions that are based on the individual characteristics of the warrants on the valuation date, as well as assumptions\nfor fair value of the underlying common stock expected volatility, expected life, dividends, and risk-free interest rate.

The\nwarrant liability is classified as Level 3 as there were no quotable prices for identical assets or quoted prices for similar. The warrant\nliabilities are measured using a Black-Scholes Model. The fair value of the warrant liability as of June 30, 2026 was determined using\nthe following assumptions: a dividend yield of 0.0%, a risk-free rate of 4.31%, a stock price of $1.05, a term of 7.16 years, and annualized\nvolatility of 65.0%. The fair value of the warrant liability as of December 31, 2025 was determined using the following assumptions:\na dividend yield of 0.0%, a risk-free rate of 3.99%, a stock price of $1.65, a term of 7.65 years, and annualized volatility of 62.0%.\n

Related\nParty Convertible Note payable at Fair Value and Convertible Notes at Fair Value

The\nCompany accounts for certain short-term debt (also refer to “Note 5 - Debt “) under the fair value option. At\nthe issuance date of the Convertible Notes at Fair Value, the Company determined that the fair value approximated the principal amount.\n

In\nconnection with the consummation of the business combination on October 22, 2025, which was accounted for as a reverse\nrecapitalization, each convertible note of Legacy Fusemachines Inc. , including both related party and other convertible notes, that\nwas issued and outstanding immediately prior to the closing was converted into an aggregate of 8,048,770\nshares of Legacy Fusemachines Inc. common stock in accordance with the respective convertible note agreements. Immediately following\nsuch conversion, all such shares of Legacy Fusemachines common stock were exchanged for shares of Fusemachines Inc. common stock\nbased on the Exchange Ratio specified in the Merger Agreement. As a result of the foregoing, no convertible notes or related party\nnotes payable remained outstanding as of June 30, 2026 and December 31, 2025 other than related party note payable to Dolma $ 300\nthousand.

F-68

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Note\n4. Accrued Expenses and Other Current Liabilities

Accrued\nexpenses and other current liabilities consisted of the following (in thousands):

Schedule of Accrued Expenses and Other Current Liabilities

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	June\n 30,		December\n 31,
	2026		2025
Wages payable	$	3,827		$	3,858
Interest payable		325			304
Legal expenses		200			-
Accrued\n expenses		620			456
Total\n accrued expenses and other current liabilities	$	4,972		$	4,618

Note\n5. Debt

Debt\nconsists of the following (in thousands):

Schedule\nof Long-Term Debt

Loans\nPayable

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	June\n 30, 2026		December\n 31, 2025
	Current		Noncurrent			Total		Current	Noncurrent		Total
Related party\n loan payable		300			-			300		300			-		300
Total	$	300		$	-		$	300	$	300		$	-	$	300

For\na full description of the terms, conversion features, and amendment history of each convertible note, refer to Note 10 in the Company’s\nAnnual Report on Form 10-K for the year ended December 31, 2025.

Impact\nof Reverse Recapitalization on Convertible Notes

In\nthe prior fiscal year, on October 22, 2025, the Company consummated a Business Combination (accounted for as a reverse recapitalization).\nIn connection with that transaction, each Legacy Fusemachines convertible note that was issued and outstanding immediately prior to closing\n— including both related-party and non-related-party convertible notes (comprising the 2019 and 2021 Convertible Notes, the January\n2024 Convertible Notes, and the April 2024, June 2024, September 2024, and February 2025 Convertible Notes) — were converted into\nan aggregate of 8,048,770 shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements.

In\naccordance with ASC 470-20, Debt with Conversion and Other Options, convertible notes exchanged for equity pursuant to their original\ncontractual terms are accounted for by reclassifying the carrying amount of the convertible debt to equity, with no gain or loss recognized\nin earnings.

As\na result, no convertible notes or related-party notes payable remained outstanding as of June 30, 2026, other than the related party\nloan payable to Dolma of $300 thousand, which was not converted in connection with the Business Combination and continues to remain outstanding\nas of the date of this filing.

Warrant\nIssuance Upon Conversion at Reverse Recapitalization

Upon\nconversion of the April 2024, June 2024, and September 2024 Convertible Notes in connection with the Business Combination on October\n22, 2025, warrants to purchase 7,500 shares of Fusemachines Inc. common stock at an exercise price of $11.50 per share were issued to\neach respective noteholder. These warrants are classified as equity warrants under ASC 480 and ASC 815, were measured at fair value on\nthe issuance date (October 22, 2025) and are not subject to subsequent remeasurement through earnings. These warrants carry the same\nterms and provisions as the Company’s Public Warrants (refer to Note 16 – Public and Private Warrants).

Common\nStock Warrant Liability

In\nconnection with the 2023 Notes Agreement, the Company issued common stock warrants (the “Common Stock Warrants”) to purchase\nup to 92,211 shares of the Company’s common stock at an exercise price of $0.70 per share, with a contractual term of 10 years.\nThese warrants are liability-classified under ASC 480-10 and continue to be remeasured at fair value each reporting period.

As\nof June 30, 2026 and December 31, 2025, the fair value and carrying amount of the Common Stock Warrant Liability was $ 72 thousand and\n$ 121 thousand, respectively (refer to Note 3 – Fair Value Measurements).

Related\nParty Loan Payable

The\n$300 thousand related party loan payable as of June 30, 2026 and December 31, 2025 represents the outstanding balance under the promissory\nnote with Dolma, which was not converted or settled in connection with the Business Combination and remains outstanding as of the date\nof this report.

In\nconnection with the Business Combination on October 22, 2025, the Company separately settled the outstanding principal and accrued interest\nunder the 2024 Related Party Promissory Notes with Mr. Sameer Maskey, CEO, in cash; accordingly, no balance remains outstanding under\nthose notes as of June 30, 2026.

F-69

Fusemachines\nInc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements

Note\n6. Stockholder’s Deficit

Common\nStock

In\nconnection with the Restated Certificate, the number of shares of Fusemachines Inc. common stock that the Company is authorized to issue\nis 500,000,000 shares as of June 30, 2026 and December 31, 2025 respectively.

Schedule of Reserved Shares of Common Stock for Future Issuance

\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	As\n of June\n 30, 2026		As\n of December 31, 2025
Common stock warrants		92,211		92,211
Stock options		589,192		686,880
SPAC public and private placement\n warrants (Refer note 16)		13,458,750		13,458,750
Equity share warrant (Refer\n note 15)		2,108,070		2,108,070
Issuance of warrants pursuant\n to conversion of convertible note (refer note 5)		30,000		30,000
Restricted\n stock units (RSU) (Refer note 8)		1,217,210		-
Reserved shares of common\n stock for future issuance		17,495,433		16,375,911

Convertible\nPreferred Stock

In\nconnection with the Restated Certificate, the number of shares of Convertible Preferred Stock that the Company is authorized to issue\nis 5,000,000 as at June 30, 2026.

Warrants

As\nof June 30, 2026 and December 31, 2025 the Company had Common Stock Warrants outstanding to purchase up to 92,211 shares of the Company’s\ncommon stock at an exercise price of $0.70 per share and have a contractual term of 10 years. The Common Stock Warrants were issued in\nAugust 2023. (Refer to “Note 3 - Fair Value Measurements”).

Note\n7. Revenue

Schedule\nof Revenues, Based on the Customer’s Location

\n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2026		2025		2026	2025
	Three\n Months Ended June 30,		Six\n Months Ended June 30,
	2026		2025		2026	2025
Customer\n locations
United States		1,701		1,842		3,525	3,723
Rest of the world		93		192		148	264
Total revenue		1,794		2,034		3,673	3,987

The\ntable below presents the breakdown of the Company’s revenues, based on the customer’s service type (in thousands).

Schedule\nof Revenues, Based on the Customer’s Service Type

\n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n

	2026		2025		2026	2025
	Three\n Months Ended June 30,		Six\n Months Ended June 30,
	2026		2025		2026	2025
Service\n type
AI\n Solutions (Products and Services) *		1,784		1,913		3,656