UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended December 31, 2017June 30, 2021
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ____ to ____
Commission file number: 333-202948
FUSE ENTERPRISESGROUP HOLDING INC.
(Exact name of registrant as specified in its charter)
Nevada | 47-1017473 | |
(State or other jurisdiction of | (I.R.S. Employer |
805 W. Duarte Rd., Suite 105
102
Arcadia, CA 91006
91007
(Address of principal executive offices including zip code)
(626) 210-0000
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section12(b) of the Act:
Title of each class | TradingSymbol(s) | Nameofeachexchangeonwhichregistered | ||
None | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitiondefinitions of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer | Smaller reporting company ☒ |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
The number of shares outstanding of each of the Exchange Act). ☐ Yes ☒ Noissuer’s classes of common stock, as of August 12, 2021 is as follows:
Class | Share Outstanding | |
Common Stock, $0.001 par value per share | 79,063,765 |
TABLE OF CONTENTS
PART I. | FINANCIAL INFORMATION | |
Item 1. | 3 | |
Item 2. | 19 | |
Item 3. | 24 | |
Item 4. | 24 | |
PART II. | OTHER INFORMATION | |
Item 1. | 25 | |
Item 1A. | 25 | |
Item 2. | 25 | |
Item 3. | 25 | |
Item 4. | 25 | |
Item 5. | 25 | |
Item 6. | 25 | |
26 | ||
PART I.FINANCIAL INFORMATION
Financial Statements |
FUSE ENTERPRISESGROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2021 (UNAUDITED) | SEPTEMBER 30, 2020 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and equivalents | $ | 126,866 | $ | 194,470 | ||||
Prepaid expense | 19,628 | 9,825 | ||||||
Total current assets | 146,494 | 204,295 | ||||||
NON-CURRENT ASSETS | ||||||||
Prepayment for acquisition of mining rights | 1,000,000 | 0 | ||||||
Prepaid expense | 1,000,000 | 1,000,000 | ||||||
Property and equipment, net | 4,737 | 6,381 | ||||||
Right-of-use asset, net | 9,219 | 29,117 | ||||||
Total non-current assets | 2,013,956 | 1,035,498 | ||||||
TOTAL ASSETS | $ | 2,160,450 | $ | 1,239,793 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Other payables | $ | 4,643 | $ | 4,499 | ||||
Loans payable - current portion | 2,643 | 50,298 | ||||||
Lease liability | 11,108 | 26,046 | ||||||
Total current liabilities | 18,394 | 80,843 | ||||||
NON-CURRENT LIABILITIES | ||||||||
Lease liability - noncurrent | 0 | 4,465 | ||||||
Loans payable | 106,882 | 105,794 | ||||||
Total non-current liabilities | 106,882 | 110,259 | ||||||
TOTAL LIABILITIES | 125,276 | 191,102 | ||||||
CONTINGENCIES AND COMMITMENTS | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock, par value $0.001 per share, 375,000,000 shares authorized; 79,063,765 and 64,778,050 shares issued and outstanding as of June 30, 2021 and September 30, 2020, respectively | 79,064 | 64,778 | ||||||
Additional paid-in capital | 7,935,431 | 6,949,717 | ||||||
Accumulated deficit | (5,979,321 | ) | (5,965,804 | ) | ||||
Total stockholders' equity | 2,035,174 | 1,048,691 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,160,450 | $ | 1,239,793 | ||||
| DECEMBER 31, 2017 | SEPTEMBER 30, 2017 | |||||||
| (UNAUDITED) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and equivalents | $ | 4,102,537 | $ | 419,093 | ||||
| Deposit | 1,000,000 | 1,000,000 | ||||||
| Notes receivable | - | 3,925,000 | ||||||
| Total current assets | 5,102,537 | 5,344,093 | ||||||
| NON-CURRENT ASSETS | ||||||||
| Property and equipment, net | 12,407 | 12,955 | ||||||
| Total non-current assets | 12,407 | 12,955 | ||||||
| TOTAL ASSETS | $ | 5,114,944 | $ | 5,357,048 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Other payables | $ | 6,750 | $ | 9,465 | ||||
| Note payable | 6,869,818 | 6,869,818 | ||||||
| Total current liabilities | 6,876,568 | 6,879,283 | ||||||
| CONTINGENCIES AND COMMITMENTS | ||||||||
| STOCKHOLDERS' DEFICIT | ||||||||
Common stock, par value $0.001 per share, 375,000,000 shares authorized; 45,150,000 shares issued and outstanding | 45,150 | 45,150 | ||||||
| Additional paid in capital | 47,432 | 47,432 | ||||||
| Accumulated deficit | (1,854,206 | ) | (1,614,817 | ) | ||||
| Total stockholders' deficit | (1,761,624 | ) | (1,522,235 | ) | ||||
| TOTAL LIABILITIES AND DEFICIT | $ | 5,114,944 | $ | 5,357,048 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
FUSE ENTERPRISESGROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, | ||||||||
| 2017 | 2016 | |||||||
| Revenue | $ | - | $ | - | ||||
| Cost of revenue | - | - | ||||||
| Gross profit | - | - | ||||||
| Operating expenses | ||||||||
| General and administrative | 227,791 | 37,370 | ||||||
| Total operating expenses | 227,791 | 37,370 | ||||||
| Loss from operations | (227,791 | ) | (37,370 | ) | ||||
| Non-operating expenses | ||||||||
| Interest income | 41,410 | - | ||||||
| Interest expense | (52,668 | ) | - | |||||
| Financial expense | (340 | ) | (181 | ) | ||||
| Total non-operating loss, net | (11,598 | ) | (181 | ) | ||||
| Loss before income tax | (239,389 | ) | (37,551 | ) | ||||
| Income tax provision | - | - | ||||||
| Net loss | $ | (239,389 | ) | $ | (37,551 | ) | ||
| Basic and diluted weighted average shares outstanding | 45,150,000 | 45,150,000 | ||||||
| Basic and diluted net loss per share | $ | (0.01 | ) | $ | (0.001 | ) | ||
FOR THE NINE MONTHS ENDED JUNE 30, | FOR THE THREE MONTHS ENDED JUNE 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 500,000 | $ | 650,000 | $ | 150,000 | $ | 200,000 | ||||||||
Cost of revenue | 43,575 | 190,416 | 10,005 | 10,015 | ||||||||||||
Gross profit | 456,425 | 459,584 | 139,995 | 189,985 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 452,319 | 399,492 | 153,707 | 135,532 | ||||||||||||
Consulting | 60,852 | 39,081 | 14,590 | 2,333 | ||||||||||||
Total operating expenses | 513,171 | 438,573 | 168,297 | 137,865 | ||||||||||||
Income (loss) from operations | (56,746 | ) | 21,011 | (28,302 | ) | 52,120 | ||||||||||
Non-operating income (expenses) | ||||||||||||||||
Interest expense | (3,033 | ) | 0 | (1,021 | ) | 0 | ||||||||||
Financial expense | (1,000 | ) | (655 | ) | (281 | ) | (120 | ) | ||||||||
Forgiveness of PPP loan | 49,600 | 0 | 49,600 | 0 | ||||||||||||
Other income (expense) | 62 | (200 | ) | 62 | 0 | |||||||||||
Total non-operating income (expenses), net | 45,629 | (855 | ) | 48,360 | (120 | ) | ||||||||||
Income (loss) before income tax | (11,117 | ) | 20,156 | 20,058 | 52,000 | |||||||||||
Income tax | 2,400 | 4,000 | 0 | 0 | ||||||||||||
Net income (loss) | $ | (13,517 | ) | $ | 16,156 | $ | 20,058 | $ | 52,000 | |||||||
Basic weighted average shares outstanding | 71,423,786 | 64,778,050 | 79,063,765 | 64,778,050 | ||||||||||||
Basic income (loss) per share | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | $ | 0.00 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
FUSE ENTERPRISESGROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, | FOR THE NINE MONTHS ENDED JUNE 30, | |||||||||||||||
| 2017 | 2016 | 2021 | 2020 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
| Net loss | $ | (239,389 | ) | $ | (37,551 | ) | ||||||||||
Adjustments to reconcile loss including noncontrolling interest to net cash used in operating activities: | ||||||||||||||||
Net income (loss) | $ | (13,517 | ) | $ | 16,156 | |||||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||||||
| Depreciation | 548 | 189 | 1,644 | 1,644 | ||||||||||||
Amortization of prepaid expense | 23,845 | 12,281 | ||||||||||||||
Amortization of right-of-use asset | 19,897 | 19,152 | ||||||||||||||
Interest on lease liability | 660 | 1,405 | ||||||||||||||
PPP loan forgiveness | (49,600 | ) | 0 | |||||||||||||
| Changes in assets and liabilities: | ||||||||||||||||
| Accounts payable and accrued liabilities | - | (4,539 | ) | |||||||||||||
Accounts receivable | 0 | (50,000 | ) | |||||||||||||
Prepaid expense | (33,648 | ) | (29,474 | ) | ||||||||||||
| Other payables | (2,715 | ) | - | 3,179 | (5,563 | ) | ||||||||||
Payment of lease liability | (20,064 | ) | (19,479 | ) | ||||||||||||
| Net cash used in operating activities | (241,556 | ) | (41,901 | ) | (67,604 | ) | (53,878 | ) | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
| Repayment from notes receivable | 3,925,000 | - | ||||||||||||||
| Net cash provided by investing activities | 3,925,000 | - | ||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
| Capital contribution | - | 11,645 | ||||||||||||||
| Proceeds from issuance of note | - | 6,869,818 | ||||||||||||||
Proceeds from SBA loans | 0 | 155,000 | ||||||||||||||
| Net cash provided by financing activities | - | 6,881,463 | 0 | 155,000 | ||||||||||||
| NET INCREASE IN CASH AND EQUIVALENTS | 3,683,444 | 6,839,562 | ||||||||||||||
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS | (67,604 | ) | 101,122 | |||||||||||||
| CASH AND EQUIVALENTS, BEGINNING OF PERIOD | 419,093 | 8,165 | 194,470 | 102,205 | ||||||||||||
| CASH AND EQUIVALENTS, END OF PERIOD | $ | 4,102,537 | $ | 6,847,727 | $ | 126,866 | $ | 203,327 | ||||||||
| Supplemental cash flow data: | ||||||||||||||||
| Income tax paid | $ | - | $ | - | $ | 2,400 | $ | 4,000 | ||||||||
| Interest paid | $ | - | $ | - | $ | 0 | $ | 0 | ||||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||||||||||
| Liabilities assumed by shareholders | $ | - | $ | 23,470 | ||||||||||||
Supplemental disclosure of non-cash investing activities | ||||||||||||||||
Prepayment for acquisition of mining rights through issuance of shares | $ | 1,000,000 | $ | 0 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
FUSE ENTERPRISESGROUP HOLDING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 2021 AND 2020
(UNAUDITED)
Common Stock | ||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
Balance at October 1, 2020 | 64,778,050 | $ | 64,778 | $ | 6,949,717 | $ | (5,965,804 | ) | $ | 1,048,691 | ||||||||||
Net loss | - | - | - | (79,942 | ) | (79,942 | ) | |||||||||||||
Balance at December 31, 2020 | 64,778,050 | 64,778 | 6,949,717 | (6,045,746 | ) | 968,749 | ||||||||||||||
Shares issued for acquisition of mining rights | 14,285,715 | 14,286 | 985,714 | - | 1,000,000 | |||||||||||||||
Net income | - | - | - | 46,367 | 46,367 | |||||||||||||||
Balance at March 31, 2021 | 79,063,765 | 79,064 | 7,935,431 | (5,999,379 | ) | 2,015,116 | ||||||||||||||
Net income | - | - | - | 20,058 | 20,058 | |||||||||||||||
Balance at June 30, 2021 | 79,063,765 | $ | 79,064 | $ | 7,935,431 | $ | (5,979,321 | ) | $ | 2,035,174 | ||||||||||
Common Stock | ||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
Balance at October 1, 2019 | 64,778,050 | $ | 64,778 | $ | 6,949,717 | $ | (5,914,393 | ) | $ | 1,100,102 | ||||||||||
Net loss | - | - | - | (29,411 | ) | (29,411 | ) | |||||||||||||
Balance at December 31, 2019 | 64,778,050 | 64,778 | 6,949,717 | (5,943,804 | ) | 1,070,691 | ||||||||||||||
Net loss | - | - | - | (6,433 | ) | (6,433 | ) | |||||||||||||
Balance at March 31, 2020 | 64,778,050 | 64,778 | 6,949,717 | (5,950,237 | ) | 1,064,258 | ||||||||||||||
Net income | - | - | - | 52,000 | 52,000 | |||||||||||||||
Balance at June 30, 2020 | 64,778,050 | $ | 64,778 | $ | 6,949,717 | $ | (5,898,237 | ) | $ | 1,116,258 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
FUSE GROUP HOLDING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (UNAUDITED) AND SEPTEMBER 30, 20172020
Note 1 – Organization and Operations
Fuse EnterprisesGroup Holding Inc. (the “Company” or “Enterprises”“Fuse Group” or “We”) was incorporated under the laws of the State of Nevada on December 24, 2013. Enterprises isFuse Group currently a full service online marketing agency, but is exploringexplores opportunities in the mining industry.and biotech areas. On December 6, 2016, the Company incorporated Fuse Processing, Inc. (“Processing”) in the State of California. Processing seeks business opportunities in the mining industry and is currently investigating potential mining targets in Asia and North America. EnterprisesFuse Group is the sole shareholder of Processing. On November 28, 2016, 5,500,000 shares
Fuse Group and Processing provide consulting services to mining industry clients to find mine acquisition targets within the parameters set by the clients, when the mine owner is considering selling his mining rights. The services of Fuse Group and Processing include due diligence on the common stock of Enterprises, potential mine seller and mine, such as ownership and whether the mine meets all operational requirements and/or 60.91% of the Company’s issued and outstanding shares of common stock, were sold by Pavel Mikhalkov and Aleksandr Kriukovis currently in a series of private transactions to a new shareholder for an aggregate purchase price of $55,000 (collectively, the “Stock Sales”). In connection with the Stock Sales, Messrs. Mikhalkov and Kriukov released the Company from certain liabilities and obligations arising out of their service as directors and officers of the Company. operation.
In March 2017, Processing acquired 100% ownership of Fuse Trading Limited (“Trading”) for HKD1 (US$($0.13). Trading had no operations prior to the acquisition by Processing, andProcessing. Trading expects to be engagedseeks mining-related business opportunities in mining-related businesses. Asia.
On May 26, 2017,3, 2018, the Company filed a Certificate of Change withincorporated Fuse Technology Inc. in the State of Nevada, which changed its name to (i) increaseFuse Biotech Inc. on November 30, 2020. Fuse Group is the sole shareholder of Fuse Biotech Inc. (“Biotech”). Biotech engaged in IMETAL system development. The Company planned to operate IMETAL as a platform to facilitate investment and trade in raw metals, find specialized minerals, exploit these opportunities and issue tokens to be used on the platform, subject to compliance with applicable laws and regulations. Considering recent laws and regulations on token issuance and trading, management discussed its authorizedfunction and compliance issues with the designer of the platform and concluded that the project had more issues and costs for compliance than originally expected. On December 23, 2019, the Board decided to terminate the IMETAL project. Currently, Biotech seeks business opportunities in the biotech area.
On April 29, 2019, the Board of Directors of the Company approved an amendment to the Company’s Articles of Incorporation (“Amendment”) to change its name from Fuse Enterprises Inc. to Fuse Group Holding Inc. Also on April 29, 2019, stockholders holding a majority of the Company’s outstanding capital stock approved the Amendment. The Amendment was filed with the Secretary of State for the State of Nevada on April 30, 2019, and became effective May 13, 2019. On May 29, 2019, the Company changed its trading symbol on OTC Markets from FNST to FUST.
On February 9, 2021, Fuse Group and Processing entered into a Share Exchange Agreement with 5 individuals who own Portafolio en Investigacion Ambiental S.A. de C.V., a Mexican company (“Portafolio”). Pursuant to the agreement, the Company issued 14,285,715 shares of Company‘s common stock for all the shares of Portafolio they owned. The Company issued the shares but did not deliver them to the sellers. Portafolio owns five mines in Mexico. The five mines have not been explored and have no operations, no existing contracts for the sale of output, no permits or licenses to conduct mining operations. Portafolio only has five concessions to explore for minerals and owns no facilities or equipment. There is no assurance that we will be able to obtain the surface rights and permits that are necessary to extract the minerals from 75,000,000the areas covered by the concessions. The transfer of shares of Portafolio to 375,000,000Processing are subject to Mexican government approval, which has not happened yet. The Company recorded cost of mining rights of $1,000,000 which was the fair value of 14,285,715 shares at $ 0.07 per share on the date of the Share Exchange Agreement, which is February 9, 2021 (also see Note 5).
On March 11, 2021, Fuse Group and (ii) effectBiotech entered into a corresponding 5-for-1 forwardShare Exchange Agreement with E-Mo Biotech Holding Inc., a company incorporated under the laws of Nevada (the “E-Mo Biotech”), Qiyi Xie, a resident of California (“Xie”), Quan Qinghua, a citizen and resident of China (“Quan”), Jing Li, a citizen and resident of China (“Li”) and HWG Capital Sdn Bhd, a company incorporated under laws of Malaysia (“HWG” and hereinafter collectively with Xie, Quan and Li, the “Sellers”). Pursuant to the Agreement, the Company will issue the seller 100,000,000 shares of Company’s common stock split of(the “Fuse Shares”) for all the issued and outstanding shares of E-Mo (the “E-Mo Shares”) owned by the Sellers. E-Mo Biotech engages in biology research and development business. The acquisition has not been completed yet and the shares have not been issued as of this reporting date.
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the pandemic has resulted in quarantines, travel restrictions, and the temporary closure of office buildings and facilities in the US. The state of California, where the Company is headquartered, has been affected by COVID-19.
Our business and services and results of operations have been adversely affected and could continue to be adversely affected by the COVID-19 pandemic. The pandemic impacted the Company’s common stock (the “Stock Split”). The consolidated financial statements (“CFS”) were retroactively restatedbusiness development, and disrupted or delayed the Company’s current mine projects and services to reflectits clients, the Stock Splitmagnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct its business in the ordinary course. Quarantines, travel restrictions, shelter-in-place and other restrictions related to COVID-19 have impacted the Company’s abilities to visit mines in Mexico and in Asian counties as well as to meet with potential clients and mine owners for the periods presented.Company’s consulting business and for the Company’s own investment in mine projects. The Company’s clients that are negatively impacted by the outbreak of COVID-19 may cancel or suspend their mine acquisition projects, which in turn will reduce their demands for the Company’s services and materially adversely impact the Company’s revenue. Potential impact to our results of operations will also depend on future developments and new information that may emerge regarding COVID-19 and new variants, the efficacy and distribution of COVID-19 vaccines and the actions taken by governmental authorities and other entities to contain COVID-19 and/or mitigate its impact, almost all of which are beyond our control.
The global economy was also negatively affected by COVID-19 and there is continued uncertainty about the duration and intensity of its impacts. The U.S. and global growth forecast is extremely uncertain, which could seriously affect people’s investment desires in mines in Mexico, Asia and internationally. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could negatively affect the Company’s liquidity.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Company’s CFSaccompanying consolidated financial statements (“CFS”) were prepared in accordanceconformity with accounting principles generally accepted in the United States of America (“U.S.US GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
The interim consolidated financial information as of June 30, 2021 and for the nine and three-month periods ended June 30, 2021 and 2020 was prepared without audit. Certain information and footnote disclosures, which are normally included in CFS prepared in accordance with U.S. GAAP were not included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020, previously filed with the SEC on December 16, 2020.
In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of June 30, 2021, its consolidated results of operations and cash flows for the nine months ended June 30, 2021 and 2020, as applicable, were made.
Basis of Consolidation
The CFS include the financial statementsaccounts of the CompanyFuse Group and its subsidiaries.subsidiaries, Processing, Trading and Biotech. All significant inter-company accounts and transactions and balances were eliminated in consolidation.
Cash
For purposes of the FASB Accounting Standards Codification (“ASC”). Althoughstatement of cash flows, the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing its business. All losses accumulated since its inception on December 24, 2013 were considered part of the Company’s development stage activities.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statementsCFS in conformity with U.S.US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s)date of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10carrying amounts of certain of the Company’s financial instruments, including cash and equivalents, accrued liabilities and accounts payable, approximate their fair value ( “FV” ) due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets for disclosures about fair value (“FV”) of itscurrent liabilities qualify as financial instruments and paragraph 820-10-35-37are a reasonable estimate of their FV because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest.
Fair Value Measurements and Disclosures
FASB ASC (“Paragraph 820-10-35-37”) to measure theTopic 820, “Fair Value Measurements,” defines FV, of its financial instruments. Paragraph 820-10-35-37and establishes a frameworkthree-level valuation hierarchy for measuringdisclosures that enhances disclosure requirements for FV in U.S. GAAP, and expands disclosures about FV measurements.
● | Level 1 |
● | Level 2 inputs to the | |
● | Level 3 |
Financial assets are considered Level 3 when their FVs are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The FV hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the FV measurement of the instrument.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts receivable, accounts payable and accrued expenses, approximate their FV because of the short maturity of those instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Accounts Receivable
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. The Company had no$0 accounts receivable or bad debt allowances at December 31, 2017 orJune 30, 2021 and September 30, 2017.2020.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Expenditures for maintenance and repairs are expensed as incurred; while additions, renewals and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets and estimated lives as follows:
Computer and office equipment | 5 years |
Office furniture | 7 years |
Leasehold decoration and renovation | 10 years |
Production machinery | 10 years |
Autos | 5 years |
Related Parties
The Company follows subtopic 850-10 of the FASB ASC for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20, the related parties include: a.(a) affiliates of the Company; b.(b) entities for which investments in their equity securities would be required, absent the election of the FV option under the Fair ValueFV Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c.(c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d.(d) principal owners of the Company; e.(e) management of the Company; f.(f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g.(g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements.
The disclosures shall include: a.(a) the nature of the relationship(s) involved; b.(b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c.(c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d.(d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Contingencies
The Company follows subtopic 450-20 of the FASB ASC 450-20 to report accountingaccount for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable that a material loss has beenwas incurred and the amount of the liability can be reasonably estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of thefollows Accounting Standards Update (“ASU”) 2014-09 (and related amendments subsequently issued in 2016), Revenue from Contracts with Customers (ASC 606).
The core principle underlying FASB ASC 606 is that the Company recognizes revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are recognized when control of goods and services transfers to a customer, in an amount that reflects the consideration it expects to receive for revenue recognition. those goods.
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all ofrevenues following the following criteria are met:five step model prescribed under ASU No. 2014-09: (i) persuasive evidence of an arrangement exists,identify contract(s) with a customer; (ii) identify the product has been shipped orperformance obligations in the services have been rendered tocontract; (iii) determine the customer, (iii)transaction price; (iv) allocate the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Income Tax Provision
The Company accountsuses the asset and liability method of accounting for income taxes under Section 740-10-30 of thein accordance with FASB ASC which requires recognition of deferredTopic 740, “Income Taxes.” Under this method, income tax assets and liabilitiesexpense is recognized for the expected futureamount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of eventstemporary differences resulting from matters that have been includedrecognized in thean entity’s financial statements or tax returns.
The Company follows paragraph 740-10-25FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of the FASB ASC. Paragraph 740-10-25-13 addresses the determination of whethera tax benefits claimedposition taken or expected to be claimed ontaken in a tax return shouldreturn. FASB ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
Under FASB ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be recordedsustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements. Under paragraph 740-10-25-13,statements in the Company may recognize the tax benefit from an uncertain tax position only ifperiod during which, based on all available evidence, management believes it is more likely than not that the tax position will be sustained onupon examination, byincluding the taxing authorities, based onresolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the technical merits of the position. The tax benefits recognized in the financial statements from such a position should bemore-likely-than-not recognition threshold are measured based onas the largest amount of tax benefit that has a greateris more than 50% likelihood50 percent likely of being realized upon ultimate settlement.settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits areis classified as interest expense and penalties are classified in selling, general and administrative expenses in the statementsstatement of income.
Earnings(Loss) per Share
Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).
Cash Flows Reporting
The Company follows paragraph 230-10-45-24 of the FASB ASC for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”Method”) as defined by paragraph 230-10-45-25 of the FASB ASC to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB ASC.
Software Development Costs
The Company incurs costs to develop software programs to be used primarily to meet its internal needs and to market to others. In accordance with FASB ASC 350-40, Internal-Use Software, the Company capitalizes development costs for these software applications once the preliminary project stage is complete and it is probable that the project will be completed, the software will be used to perform the function intended, and the value will be recoverable. In accordance with FASB ASC 985-20-25, costs incurred before product feasibility is established and all design and coding is completed are expensed. Reengineering costs and minor modifications and enhancements that do not significantly improve the overall functionality of the software are expensed as incurred. After considering recent developments of laws and regulations on token issuance and trading that would apply to the platform that the Company has been designing, management discussed its function and compliance issues with the designer of the software platform and concluded that the project had more issues and costs for compliance than originally expected. On December 23, 2019, the Board decided to terminate the project.
Leases
On October 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which superseded the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (“ROU”) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. For information regarding the impact of Topic 842 adoption, see Significant Accounting Policies - Leases and Note 11 – Commitments.
The Company adopted Topic 842 using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after October 1, 2019 are presented under Topic 842, while prior period amounts were not adjusted and continue to be reported in accordance with its historical accounting under Topic 840.
The Company elected the package of practical expedients permitted under the transition guidance, which allowed it to carry forward its historical lease classification, its assessment on whether a contract was or contains a lease, and its initial direct costs for any leases that existed prior to October 1, 2019. The Company also elected to combine its lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.
Upon adoption, the Company recognized total ROU assets of $54,775, with corresponding lease liabilities of $54,775 on its consolidated balance sheets. The ROU assets include adjustments for prepayments and accrued lease payments. The adoption did not impact our beginning retained earnings, or prior year consolidated statements of operations and statements of cash flows.
Under Topic 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
Operating leases are included in operating lease ROU assets and operating lease liabilities (current and non-current), on the consolidated balance sheets.
Recently Issued Accounting Pronouncements
In FebruaryJune 2016, the FASB issued Accounting Standards Update (“ASU”)ASU No. 2016-02, Leases2016-13, Financial Instruments-Credit Losses (Topic 842). The326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted.2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the effect thisimpact that the standard will have on its CFS.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value,FV, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basisbasis. As a smaller reporting company, the standard will be effective for the Company for interim and annual or any interim goodwill impairment testsreporting periods beginning after December 15, 2019. Early2022, with early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.permitted. The Company is currently evaluating the impact of adopting this standard on its CFS.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future CFS.
Note 3 – Going Concern
The accompanying CFS were prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying CFS, the Company had an accumulated deficit of $1,854,206$5.98 million at December 31, 2017, working capital deficit of $1,774,031 andJune 30, 2021, the Company had net loss of $239,389$13,517 for the threenine months ended December 31, 2017, whichJune 30, 2021. In addition, the Company’s business and services and results of operations have been adversely affected and continue to be adversely affect by the COVID-19 (also see the discussion of COVID-19 in Note 1), these raise substantial doubt about the Company’s ability to continue as a going concern.
Management intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.offering or loans from banks or others.
The financial statementsCFS do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Note 4 – Property and Equipment
Property and equipment at December 31, 2017,June 30, 2021 and September 30, 20172020 consisted of the following:
Estimated Useful Lives (Years) | December 31, 2017 | September 30, 2017 | June 30, 2021 | September 30, 2020 | ||||||||||||||||
| Computer equipment | 5 | $ | 1,852 | $ | 1,825 | $ | 1,852 | $ | 1,852 | |||||||||||
| Less accumulated depreciation | (371 | ) | (278 | ) | (1,667 | ) | (1,389 | ) | ||||||||||||
| Computer equipment, net | 1,481 | 1,574 | 185 | 463 | ||||||||||||||||
| Office furniture | 7 | 12,746 | 12,746 | 12,746 | 12,746 | |||||||||||||||
| Less accumulated depreciation | (1,820 | ) | (1,365 | ) | (8,194 | ) | (6,828 | ) | ||||||||||||
| Office furniture, net | 10,926 | 11,381 | 4,552 | 5,918 | ||||||||||||||||
| Total property and equipment, net | $ | 12,407 | $ | 12,955 | $ | 4,737 | $ | 6,381 | ||||||||||||
Depreciation expensefor the nine months ended June 30, 2021 and 2020 was $1,644 and $1,644, respectively.
Depreciation for the three months ended December 31, 2017June 30, 2021 and 20162020 was $548 and $189,$548, respectively.
Note 5 – DepositPrepayment for Acquisition of Mining Rights
On February 9, 2021, Fuse Group and prepaid expensesProcessing entered into a Share Exchange Agreement with 5 individuals who owned Portafolio en Investigacion Ambiental S.A. de C.V., a Mexican company (“Portafolio”). Pursuant to the agreement, the Company issued 14,285,715 shares of common stock of the Company for all the outstanding shares of Portafolio (the “Mexican Shares”). The Company issued the Fuse Shares but did not deliver them to the Sellers. Portafolio owns five mines in Mexico. The five mines have not been explored and have no operations, no existing contracts for the sale of output, no permits or licenses to conduct mining operations. Portafolio only has five concessions to explore for minerals and owns no facilities or equipment. There is no assurance that we will be able to obtain the surface rights and permits that are necessary to extract the minerals from the areas covered by the concessions. This acquisition will be accounted for as the purchase of assets, the FV of the Company’s shares on February 9, 2021 was $0.07; accordingly, the cost for the purchase of five mines’ rights were $1,000,000. However, the acquisition has not been completed yet as of June 30, 2021 as the Company was waiting for the completion of the transfer of Mexican Shares from the sellers to the Processing, and the $1,000,000 was recorded as prepayment for acquisition of mining rights.
Note 6 – Prepaid Expenses(Current and Non-current)
As of December 31June 30, 2021 and September 30, 2017,2020, the Company had a depositcurrent prepaid Director & Officer insurance of $19,628 and $9,825, respectively.
At June 30, 2021 and September 30, 2020, the Company had noncurrent prepaid expense of $1,000,000. On January 4, 2017, Processing entered into a Consulting and Strategist Agreement with a consulting company for a six-month service term. On July 3, 2017, the CompanyProcessing and the consulting company extended the Consulting and Strategist Agreement untilto January 3, 2018 at no additional cost.cost, and the Agreement was subsequently further extended to July 3, 2018. The consultant will provideprovided Processing with market research findings, exploration and adviseadvice on business development opportunities in certain countries, and other general business advisory services. Processing paid a deposit of $1,325,000 for the consulting fee. If Processing doesfee, of which $325,000 was expensed as a consulting fee based on the agreement, and the remaining $1,000,000 of which would have been refunded to the Company if the Company had not make anymade an investment and/or enterentered into a business relationship with a target located in Mexico byMexico. The consulting company found acquisition targets for the end of the service term, the consultant will refund Processing $1,000,000 of the consulting fee. On January 3,Company, and on June 22, 2018, the Company renewedentered into a Memorandum of Understanding (“MOU”) with a seller for the purchase of 5 mines located in different areas of Mexico for an aggregate purchase price of $1,000,000. Upon execution of the MOU, the Company acquired the exclusive right to purchase the mines from the seller, effective until September 30, 2018. The parties entered into an oral agreement until July 3, 2018.that the Company would pay $1,000,000 to purchase all five mines that would be consolidated into a local company in Mexico upon the approval from the Mexican government allowing the transfer of all mining concession to the Mexican company. The Company paid $1,000,000 through the issuance of 14,285,715 shares of the Company in the names of the shareholders of the Mexican company as discussed in Note 5 for the ownership of the Mexican company, which holds the mining rights of five mines in February 2021. However, the acquisition has not been completed, the remaining $1,000,000 of consulting fees, which arises from the acquisition of assets in Mexico, will be part of the asset acquisition costs upon completion of the asset acquisition in accordance with FASB ASC 805-50-30-1.
Note7 – Other Payables
As of SeptemberJune 30, 2017, the Company had notes receivable of $3,925,000. During the three months ended December 31, 2017, the Company collected all the amounts outstanding under the notes receivable, and received interest income of $41,410.
Note 8 – Note payable (related party)Loans Payable
On December 19, 2016,May 14, 2020, Processing received $49,600 from the Company entered into a Convertible Promissory Note Purchase Agreement (the “Original Agreement”Paycheck Protection Program loan (“PPP loan”) with one of its major shareholdersfrom U.S. Small Business Administration (“Purchaser”the SBA”). UnderThe loan was to forgiven if the Agreement,funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 60% of the Company sold a Convertible Promissory Noteforgiven amount must have been used for payroll). The loan amount not forgiven, had annual interest of 1%. Loan payments will be deferred to either (1) the date that SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of $6,869,818the borrower’s loan forgiveness covered period. Loans issued prior to June 5, 2020 have a maturity of two years, loans issued after June 5, 2020 have a maturity of five years. No collateral or personal guarantees are required. A borrower may apply for loan forgiveness any time on or before the maturity date of the loan, including before the end of the Covered Period (either (1) the 24-week (168-day) period beginning on the PPP Loan Disbursement Date, or (2) if the Borrower received its PPP loan before June 5, 2020, the Borrower may elect to use an eight-week (56-day) Covered Period); provided such application for loan forgiveness is made within 10 months after the last day of the covered period, otherwise the loan is no longer deferred and the borrower must begin paying principal and interest. Just recently, the U.S. Treasury and SBA announced a streamlined PPP forgiveness application for loans of $50,000 or less (unless those borrowers together with their affiliates received loans totaling $2 million or more). It requires fewer calculations and may call for less documentation. It does not require borrowers to reduce their loan forgiveness calculations if they reduced full-time equivalent (“FTE”) or salaries. The forgiveness application processing time may also be shorter. Fuse Processing PPP loan forgiveness was approved in June 2021, the Company recorded $49,600 PPP loan forgiveness as other income.
On June 24, 2020, Biotech received $105,400 from the Economic Injury Disaster Loan (“EIDL loan”) from the SBA after deducting $100 Uniform Commercial Code (“UCC”) handling charge and filing fee. This is a low-interest federal disaster loan for working capital to small businesses and non-profit organizations of any size suffering substantial economic injury as a result of the Coronavirus (COVID-19), to help the businesses to meet financial obligations and operating expenses that could have been met had the disaster not occurred. This loan has annual interest of 6% (the “Original Note”).3.75% and is not forgivable. The Original Note was to mature onmaturity of the date thatloan is 2430 years, installment payments including principal and interest of $515 monthly will begin 12 months from the original issue date and any outstanding principal and interest on the Original Note could be converted at any time prior to maturity at the lender’s option at a conversion price of $1.50 per share of the Company’s common stock. There was no beneficial conversion feature forpromissory note. As of June 30, 2021, the Original Note due to the conversion price being higher than the stock price at the time of the issuance of the Original Note.
Year Ending | Amount | |||
06/30/2022 | $ | 2,643 | ||
06/30/2023 | 2,210 | |||
06/30/2024 | 2,294 | |||
06/30/2025 | 2,381 | |||
06/30/2026 | 2,472 | |||
Thereafter | 97,525 | |||
Total | $ | 109,525 | ||
Note and any unpaid interest accrued thereon may become due and payable immediately upon the occurrence of certain events of default, including but not limited to Trading’s insolvency or the institution of bankruptcy proceedings against Trading.9 – Income Tax
At June 30, 2021 and September 30, 2017, the Company had an outstanding balance of $6,869,818 on the New Note. During the three months ended December 31, 2017, the Company incurred interest expense of $52,668, and had interest payable of $0 as of December 31 and September 30, 2017.
Components of deferred tax assets as of June 30, 2021 and September 30, 2020 are as follows:
December 31, 2017 | September 30, 2017 | June 30, 2021 | September 30, 2020 | |||||||||||||
| Net deferred tax assets – Non-current: | ||||||||||||||||
Net deferred tax assets: | ||||||||||||||||
| Expected income tax benefit from NOL carry-forwards | $ | 367,763 | $ | 315,280 | $ | 1,222,185 | $ | 1,218,780 | ||||||||
Lease expense under ASU 842 | 528 | 390 | ||||||||||||||
| Less valuation allowance | (367,763 | ) | (315,280 | ) | (1,222,713 | ) | (1,219,170 | ) | ||||||||
| Deferred tax assets, net of valuation allowance | $ | - | $ | - | $ | 0 | $ | 0 | ||||||||
Income Tax Provisionin the Statements of Operations
A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the nine months ended June 30, 2021 and 2020 is as follows:
2021 | 2020 | |||||||
Federal statutory income tax expense (benefit) rate | (21.00 | )% | 21.00 | % | ||||
Federal income tax rate difference | 0.02 | % | 0.50 | % | ||||
Permanent difference | 5.55 | % | 0.00 | % | ||||
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax | (6.95 | )% | 7.75 | % | ||||
Change in valuation allowance on net operating loss carry-forwards | 43.98 | % | (9.40 | )% | ||||
Effective income tax rate | 21.60 | % | 19.85 | % | ||||
Income Tax Provisionin the Statements of Operations
A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the three months ended December 31, 2017June 30, 2021 and 20162020 is as follows:
| December 31, 2017 | December 31, 2016 | 2021 | 2020 | |||||||||||||
| Federal statutory income tax expense (benefit) rate | (34.00 | )% | (34.00 | )% | (21.00 | )% | 21.00 | % | ||||||||
| Federal income tax rate difference | 19.00 | % | 19.00 | % | 0.00 | % | 0.19 | % | ||||||||
Permanent difference | (1.54 | )% | 0.00 | % | ||||||||||||
| State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax | (7.51 | )% | (7.51 | )% | (6.98 | )% | 7.28 | % | ||||||||
| Change in valuation allowance on net operating loss carry-forwards | 22.51 | % | 22.51 | % | 29.52 | % | (28.47 | )% | ||||||||
| Effective income tax rate | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Note 10 – Revenue, Cost of Revenueand Major Customers
Fuse Group and Processing provide consulting services to mining industry clients to find mine acquisition targets within the parameters set by the clients, in circumstances in which the mine owner is considering selling its mining rights. The services of Fuse Group and Processing include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
Cost of revenue mainly consisted of the management’s travel expenses to visit these mines and consulting expenses paid for mine expertise during the mine due diligence period.
For the nine months ended June 30, 2021 and 2020, the Company recorded revenue of $500,000 and $650,000 for the services provided, respectively. For the three months ended June 30, 2021 and 2020, the Company recorded revenue of $150,000 and $200,000 for the services provided, respectively.
For the nine months ended June 30, 2021, the Company had three customers which accounted for 60%, 20% and 20% of the Company’s revenue. For the nine months ended June 30, 2020, the Company had one customer which accounted for 100% of the Company’s revenue.
For the three months ended June 30, 2021, the Company had two customers which accounted for 67% and 33% of the Company’s revenue. For the three months ended June 30, 2020, the Company had one customer which accounted for 100% of the Company’s revenue.
Note 11 – Commitments
Lease Commitment
Effective JanuaryDecember 1, 2017, Processing, as2018, the Company entered a sublessee, entered into a sublease agreementthree-year lease for an office spacein the city of Arcadia, California. The monthly base rent is $2,115 payable on the first day of each month, with a sublessor for a term of two years. The monthly rent is $1,897. 3% increase each year.
The Company recorded rental expensecost of $5,690$20,557 and $0$20,557 for the nine months ended June 30, 2021 and 2020, respectively. The Company recorded rental cost of $6,787 and $6,853 for the three months ended December 31, 2017June 30, 2021 and 2016,2020, respectively.
The future annual minimumcomponents of lease paymentscosts, lease term and discount rate with respect to the office lease with an initial term of more than 12 months are as follows:
Nine Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Operating Lease costs | $ | 20,557 | $ | 20,557 | ||||
Weighted Average Remaining Lease Term | 0.50 | 1.50 | ||||||
Weighted Average Discount Rate | 4 | % | 4 | % | ||||
Three Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Operating Lease costs | $ | 6,787 | $ | 6,853 | ||||
Weighted Average Discount Rate | 4 | % | 4 | % | ||||
The following is a schedule of maturities of lease liabilities as of December 31, 2017 was: $22,764 for the year ending December 31, 2018.June 30, 2021:
For the 12 months ended | Operating Leases | |||
June 30, 2022 | $ | 11,219 | ||
Less: imputed interest | (111 | ) | ||
Present value of lease liabilities | $ | 11,108 | ||
Consulting and Service Agreements
1) | On April 1, 2017, the Company entered into a strategic consulting agreement with a consulting company with a term of one year. The consulting company provides the Company the strategic advices on business development and marketing. The compensation to the consulting company is $50,000 per year, payable in equal installments at the end of each month. The agreement was extended to March 31, 2022 with the same terms. |
2) | Exploratory Drilling Agreement and Related Costs. On April 1, 2018, the Company entered into a contract with an individual owner of a mining concession in Mexico. The mine is located in Mexico, in the state of Sinaloa, Badiraguato municipality, Nocoriba village. The latitude is 25.2520000 and the longitude is -107.225500. The Company started drilling within the concession 10HAAS. For the nine months ended June 30, 2021 and 2020, the Company spent $0 on this mine. The Company expects to spend an additional $1.56 million on this project as of June 30, 2021. If the project is successful, the Company will receive 3% equity in the mine (which percentage will be paid upon successful completion of exploration and drilling of the mine). The mine owner is currently in discussion with a potential buyer to purchase this mine and the buyer is analyzing the minerals of this mine. The mine owner and Fuse Group have agreed to put exploration on hold until this buyer completes its analysis in preparation for making the acquisition decision. The project is currently on hold due to the COVID-19 pandemic. Negotiations will resume once the analysis of minerals of the mine is completed and accepted by the potential buyer. |
Employment Agreement
The Company currently has an employment agreement with Michael Viotto, the Company'sCompany’s CFO. Pursuant to the terms of his employment agreement, dated August 16, 2017, Mr. ViottoSeptember 1, 2020, the CFO receives annual compensation of $50,000, and the agreement has a term of one year. Mr. Viotto'syear, from August 22, 2020. The CFO’s employment agreement includes typical clauses relating to noncompetition, nonsolicitation and indemnification of Mr. Viottothe CFO in connection with histhe service as the Company'sCompany’s CFO.
Note 12 – Subsequent Events
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company did not have any material subsequent events to disclose in its CFS other than the events discussed above.CFS.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q.
DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS
The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with theour consolidated financial statements and related notes appearing elsewhere in Item I above and with the audited consolidated financial statements and notes, and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K.this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report and those discussed in our most recentthe Annual Report on Form 10-K.10-K, particularly under the heading “Risk Factors.” and those set forth from time to time in our other filings with the SEC.
Overview
Fuse EnterprisesGroup Holding Inc. (the “Company” or “Enterprises”“Fuse Group” or “We”“we”) was incorporated under the laws of the State of Nevada on December 24, 2013. Enterprises isFuse Group currently a full service online marketing agency, but is exploringexplores opportunities in the mining industry.and biotech areas. On December 6, 2016, the Company incorporated Fuse Processing, Inc. (“Processing”) in the State of California. Processing seeks business opportunities in the mining industry and is currently investigating potential mining targets in Asia and North America. EnterprisesFuse Group is the sole shareholder of Processing. On November 28, 2016, 5,500,000 shares of the common stock of Enterprises, or 60.91% of the Company’s issued and outstanding shares of common stock, were sold by Pavel Mikhalkov and Aleksandr Kriukov in a series of private transactions to a new shareholder for an aggregate purchase price of $55,000 (collectively, the “Stock Sales”). In connection with the Stock Sales, Messrs. Mikhalkov and Kriukov released the Company from certain liabilities and obligations arising out of their service as directors and officers of the Company. In March 2017, Processing acquired 100% ownership of Fuse Trading Limited (“Trading”) for HKD1 (US$($0.13). Trading had no operations prior to the acquisition by Processing, and Trading expects to be engaged in mining-related businesses. On May 3, 2018, the Company incorporated Fuse Technology Inc. in the State of Nevada, which changed its name to Fuse Biotech Inc. on November 30, 2020. Fuse Group is the sole shareholder of Fuse Biotech Inc. ("Biotech”). Fuse Biotech originally engaged in IMETAL system development. The Company originally planned to operate IMETAL as a platform to facilitate investment and trade in raw metals, find specialized minerals, exploit these opportunities and issue tokens to be used on the platform, subject to compliance with applicable laws and regulations. Due to the recent development of laws and regulations on token issuance and trading, management discussed its function and compliance issues with the designer of the platform and concluded the project had more issues and costs for compliance than originally expected, on December 23, 2019, the Board decided to terminate the IMETAL project. Currently, Biotech seeks business opportunities in the biotech area.
Fuse Group and Processing provide consulting services to mining industry clients to find acquisition targets within the parameters set by the clients, when the mine owner is considering selling its mining rights. The services of Fuse Group and Processing include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
On January 4, 2017, Processing entered into a Consulting and Strategist Agreement with a consulting company for a six-month term. On July 3, 2017, Processing and the consulting company extended the Consulting and Strategist Agreement until January 3, 2018 at no additional cost, and the Agreement was subsequently extended to July 3, 2018. The consultant provides Processing with market research, exploration and advise on business development opportunities in certain countries, and other general business advisory services. Processing paid a deposit of $1,325,000 for the consulting fee, of which, $325,000 was expensed as a consulting fee based on the agreement, and the remaining $1,000,000 of which would have been refunded to the Company if the Company had not made an investment and/or entered into a business relationship in Mexico. The consulting company found acquisition targets for the Company, and on June 22, 2018, the Company entered into a Memorandum of Understanding (“MOU”) with a seller to purchase five mines located in different areas of Mexico for $1,000,000. Upon execution of the MOU, the Company acquired the exclusive right to purchase the mines from the seller until September 30, 2018. The parties entered into an oral agreement that the Company would pay $1,000,000 to purchase all five mines that would be consolidated into a local company in Mexico upon the approval from the Mexican government allowing the transfer of all mining concession to a Mexican company. On February 9, 2021, the Company, Processing entered into a Share Exchange Agreement (the “Agreement”) with Choo Keam Hui, Goh Hau Guan, Lim Hui Sing, Teh Boon Nee and Tia Chai Teck (collectively as the “Sellers”). Pursuant to the Agreement, the Company agreed to issue to the Sellers in aggregate of 14,285,715 shares of common stock of the Company (the “Fuse Shares”) in exchange of all the outstanding shares of Portafolio en Investigacion Ambiental S.A. de C.V., a Mexican company that owns five mines and owned by the Sellers. The Company have issued the Fuse Shares but have not delivered them to the Sellers. The five mines have not been explored and have no operations, no existing contracts for the sale of output, no permits or licenses to conduct mining operations. Portafolio only has five concessions to explore for minerals and owns no facilities or equipment. There is no assurance that we will be able to obtain the surface rights and permits that are necessary to extract the minerals from the areas covered by the concessions. The Company is waiting for the Sellers to complete the transfer process for the equity interest of Portafolio to the Processing to complete the transaction.
On April 29, 2019, the Board of Directors (“BOD”) of the Company approved an amendment to the Company’s Articles of Incorporation (the “Amendment”) to change its name from Fuse Enterprises Inc. to Fuse Group Holding Inc. Also on April 29, 2019, stockholders holding a majority of the Company’s outstanding capital stock approved the Amendment. The Amendment was filed with the Secretary of State for the State of Nevada on April 30, 2019, and became effective on May 13, 2019. On May 29, 2019, the Company changed its trading symbol on OTC Markets from FNST to FUST.
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the pandemic has resulted in quarantines, travel restrictions, and the temporary closure of office buildings and facilities in the US. The state of California, where the Company is headquartered, has been affected by COVID-19.
Our business and services and results of operations have been adversely affected and could continue to be adversely affected by the COVID-19 pandemic. The pandemic negatively impacted our business development, and disrupted or delayed our current mine projects and services to our clients, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.
Quarantines, travel restrictions, shelter-in-place and other restrictions related to COVID-19 have impacted our abilities to visit mines in Mexico and Asian counties as well as to meet with potential clients and mine owners for our consulting business and our own investment in mine projects. Our clients that are negatively impacted by the outbreak of COVID-19 may cancel or suspend their mine acquisition projects, which in turn will reduce their demands for our services and materially adversely impact our revenue. Potential impact to our results of operations will also depend on future developments and new information that may emerge regarding COVID-19 and new variants, the efficacy and distribution of COVID-19 vaccines and the actions taken by governmental authorities and other entities to contain COVID-19 and/or mitigate its impact, almost all of which are beyond our control.
The global economy has also been materially negatively affected by COVID-19 and there is continued severe uncertainty about the duration and intensity of its impacts. The U.S. and global growth forecast is extremely uncertain, which would seriously affect people’s investment desires in mines in Mexico, Asia and internationally.
While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.
We received a $49,600 Paycheck Protection Program loan (“PPP loan”) and a $105,500 Economic Injury Disaster Loan (“EIDL loan”) from US Small Business Administration (“ the SBA”) during the year ended September 30, 2020. The forgiveness of $49,600 PPP loan was approved in June 2021.
We currently believe our financial resources will be adequate to see us through the outbreak. However, in the event that we do need to raise capital in the future, the outbreak-related instability in the securities markets could adversely affect our ability to raise additional capital.
On March 11, 2021, Fuse Group and Biotech entered into a Share Exchange Agreement with E-Mo Biotech Holding Inc., a company incorporated under the laws of Nevada (the “E-Mo Biotech”), Qiyi Xie, a resident of California (“Xie”), Quan Qinghua, a citizen and resident of China (“Quan”), Jing Li, a citizen and resident of China (“Li”) and HWG Capital Sdn Bhd, a company incorporated under laws of Malaysia (“HWG” and hereinafter collectively with Xie, Quan and Li, the “Sellers”). Pursuant to the Agreement, the Company will issue the Sellers 100,000,000 shares of Company’s common stock (the “Fuse Shares”) for all the issued and outstanding shares of E-Mo (the “E-Mo Shares”) owned by the Sellers. E-Mo Biotech engages in biology research and development business. The acquisition has not been completed yet and the Fuse Shares have not been issued as of this reporting date.
Results of operations for the threenine months ended December 31, 2017June 30, 2021 and 20162020
Revenueand Cost of Revenue
We have historically generated revenue from sales ofdevelop our marketingbusiness in mining and web development services directly to small and medium-sized business. We have acquired customers through direct telemarketing and referrals. We are currently seeking business opportunities in the mining industry and are investigatinginvestigate potential mining targets in Asia and North America. In addition to our own investment in mining businesses, we provide consulting services to clients which are mining business investors with potential mine acquisition targets within the specific parameters set by those clients, where the mine owner is considering selling its mining rights. Our services include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
For the nine months ended June 30, 2021, we provided five potential mine opportunities in Mexico to a client. For the nine months ended June 30, 2021, the Company recorded revenue of $500,000 for the services provided. Our revenue for the nine months ended June 30, 2020 was $650,000. Our cost of revenues for the nine months ended June 30, 2021 and 2020 was $43,575 and $190,416, respectively, mainly for the management’s travel expenses to visit these mines and consulting expenses paid for mine expertise during the mine due diligence period, resulting in a gross profit of $456,425 and $459,584 for the nine months ended June 30, 2021 and 2020, respectively.
Costs and Expenses
The major components of our expenses for the nine months ended June 30, 2021 and 2020 are in the table below:
2021 | 2020 | Increase (Decrease) | ||||||||||
General and administrative | $ | 452,319 | $ | 399,492 | $ | 52,827 | ||||||
Consulting fees | 60,852 | 39,081 | 21,771 | |||||||||
Total operating expenses | $ | 513,171 | $ | 438,573 | $ | 74,598 | ||||||
The increase in our operating expenses for the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020, was mainly due to an increase in consulting fees of $21,771, and increased professional fee of $66,070 which was partly offset by decreased auditing and accounting fees by $18,030.
Non-operating income (expenses), net
Net non-operating income was $45,629 for the nine months ended June 30, 2021, compared to non-operating expense $855 for the nine months ended June 30, 2020. For the nine months ended June 30, 2021, non-operating income mainly consist of PPP Loan forgiveness of $49,600 which was partly offset by interest expense on EIDL of $3,033 and bank service charge of $1,000. For the nine months ended June 30, 2020, non-operating expenses mainly consist of bank service charge of $655 and other expenses of $200.
Results of operations for thethree months endedJune 30, 2021 and 2020
Revenueand Cost of Revenue
We develop our business in mining and investigate potential mining targets in Asia and North America. In addition to our own investment in mining businesses, we provide consulting services to clients which are mining business investors with potential mine acquisition targets within the specific parameters set by those clients, where the mine owner is considering selling its mining rights. Our services include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.
For the three months ended June 30, 2021, we provided two potential mine opportunities in Mexico to a client. For the three months ended June 30, 2021, the Company recorded revenue of $150,000 for the services provided. Our revenue for the three months ended December 31, 2017 and 2016June 30, 2020 was $0, respectively.$200,000. Our cost of revenues for the three months ended December 31, 2017June 30, 2021 and 20162020 was $0,$10,005 and $10,015, respectively, mainly for the consulting expenses paid for mine expertise for due diligence, resulting in a gross profit of $0$139,973 and $189,985 for the three months ended December 31, 2017June 30, 2021 and 2016,2020, respectively. The Company did not generate any revenue because the Company did not receive any new orders for our consulting and website development services. The Company is also in the process of transforming its business by seeking new business opportunities in the mining industry.
Costs and Expenses
The major components of our expenses for the three months ended December 31, 2017June 30, 2021 and 20162020 are outlined in the table below:
2021 | 2020 | Increase (Decrease) | ||||||||||
General and administrative | $ | 153,707 | $ | 135,532 | $ | 18,175 | ||||||
Consulting fees | 14,590 | 2,333 | 12,257 | |||||||||
Total operating expenses | $ | 168,297 | $ | 137,865 | $ | 30,432 | ||||||
| 2017 | 2016 | Increase (Decrease) | ||||||||||
| General and administrative | $ | 227,791 | $ | 37,370 | $ | 190,421 | ||||||
| $ | 227,791 | $ | 37,370 | $ | 190,421 | |||||||
The increase in our operating costsexpenses for the three months ended December 31, 2017,June 30, 2021, compared to the three months ended December 31, 2016,June 30, 2020, was mainly included increased: salary expenses of $49,167, travel expenses of $68,242,due to an increase in professional expense by $17,130 and increased consulting expense of $55,389, and auditing fees of $16,000, as a result of the Company recruiting experienced personnel, advisors and consultants, and becoming more aggressive in seeking business opportunities for its development and expansion. In addition to the online marketing and consulting business, the Company is actively seeking opportunities in the mining industries in Asia and North America.
Non-operating expensesincome (expenses), net
Net non-operating income were $11,598$48,360 for the three months ended December 31, 2017,June 30, 2021, compared to $181non-operating expense $120 for the three months ended December 31, 2016. The increase inJune 30, 2020. For the three months ended June 30, 2021, non-operating expenses wasincome mainly due to increased interest expenseconsist of $52,668 on a note payable to onePPP Loan forgiveness of our major shareholder,$49,600 which was partiallypartly offset by interest incomeon EIDL loan of $41,410 from notes receivables. The Company collected all amounts outstanding under$1,021 and bank service charge of $281. For the notes receivable in December 2017.three months ended June 30, 2020, non-operating expenses mainly consist of bank service charge of $120.
Liquidity and Capital Resources
The table below provides selected working capital information foras of June 30, 2021 and September 30, 2020:
June 30, 2021 | September 30, 2020 | |||||||
Total current assets | $ | 146,494 | $ | 204,295 | ||||
Total current liabilities | 18,394 | 80,843 | ||||||
Working capital | $ | 128,100 | $ | 123,452 | ||||
Liquidity
During the periods indicated:
| As of | As of | |||||||
| December 31, | September 30, | |||||||
| 2017 | 2017 | |||||||
| Total current assets | $ | 5,102,537 | $ | 5,344,093 | ||||
| Total current liabilities | (6,876,568 | ) | (6,879,283 | ) | ||||
| Working capital deficiency | $ | (1,774,031 | ) | $ | (1,535,190 | ) | ||
If we are not successful in expanding our clientele basedeveloping the mining business and establishing profitability and positive cash flow, additional capital may be required to maintain ongoing operations. We have explored and are continuingcontinue to explore options to provide additional financing to fund future operations as well as other possible courses of action. Such actions may include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from other third parties or banks, and other similar actions. There can be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.
Cash Flows
The table below, for the periodperiods indicated, provides selected cash flow information:information for the nine months ended June 30, 2021 and 2020:
2021 | 2020 | |||||||
Net cash used in operating activities | $ | (67,603 | ) | $ | (53,878 | ) | ||
Net cash provided by financing activities | - | 155,000 | ||||||
Net increase (decrease) in cash | $ | (67,603 | ) | $ | 101,122 | |||
| For the Three Months Ended December 31, 2017 | For the Three Months Ended December 31, 2016 | |||||||
| Net cash used in operating activities | $ | (241,556 | ) | $ | (41,901 | ) | ||
| Net cash used in investing activities | 3,925,000 | - | ||||||
| Net cash provided by financing activities | - | 6,881,463 | ||||||
| Net increase (decrease) in cash | $ | 3,683,444 | $ | 6,839,562 | ||||
Cash Used inFlows from Operating Activities
Our cash used in operating activities for the threenine months ended December 31, 2017June 30, 2021 and 20162020 was $241,556$67,603 and $41,901,$53,878, respectively. The increase in net cash used in operating activitiesoutflow during the nine months ended June 30, 2021 was mainly due to increased net loss of $239,389.by $29,673, but partly offset with cash inflow from other payables by $8,743.
Cash Flows from Investing Activities
During the threenine months ended December 31, 2017June 30, 2021 and 2016 was $3,925,000 and $0, respectively. The increase in net cash provided by2020, we did not have any investing activities was mainly due to the collection of outstanding notes receivable of $3,925,000. activities.
Cash Flows from Financing Activities
During the nine months ended June 30, 2021 and 2020, we had cash provided by financing activities of $0 and $155,000, respectively. For the nine months ended June 30, 2020, the cash provided by financing activities consisted of proceeds from SBA loans of $155,000.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements.
Off Balance Sheet Arrangements
As of December 31, 2017,June 30, 2021, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.S-K
Quantitative and Qualitative Disclosures about Market Risk |
Not applicable.
Evaluation of Disclosure Controls and Procedures |
As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the end of the period covered by this report that our disclosure controls and procedures were not effective due to material weaknesses. The control deficiencies that constituted material weaknesses are as described below.
1. We do not have an Audit Committee. While we are not legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is of the utmost importance for entity-level control over the Company’s financial statements. Currently, the Board of Directors acts in the capacity of an audit committee.
2. We did not implement appropriate information technology controls. As of June 30, 2021, the Company was retaining copies of all financial data and material weakness. The material weakness relatesagreements; however there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of the data in the event of theft, misplacement, or loss due to our havingunmitigated factors.
3. We currently lack sufficient accounting personnel with the appropriate level of knowledge, experience and training in U.S. GAAP and SEC reporting requirements. We have one employee assigned to positionsa position that involveinvolves processing financial information, resulting in a lack of segregation of duties so that all journal entries and account reconciliations are reviewed by someone other than the preparer, heightening the risk of error or fraud.
We have taken certain actions to remediate the material weakness related to our lack of U.S. GAAP experience. We have engaged an outside CPA with U.S. GAAP knowledge and experience to supplement our current internal accounting personnel and assist us in the preparation of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP.
If we are unable to remediate the material weakness, or other control deficiencies are identified, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner. Due to our small size and the early stage of our business, segregation of duties may not always be possible and may not be economically feasible. We have limited capital resources and have given priority in the use of those resources to our business development efforts. As a result, we have not been able to take steps to improve our internal controls over financial reporting during the quarter ended December 31, 2017.June 30, 2021. However, we continue to evaluate the effectiveness of internal controls and procedures on an on-going basis. As our operations grow and become more complex, we intend to hire additional personnel in financial reporting and other areas. However, there can be no assurance of when, if ever, we will be able to remediate the identified material weaknesses.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2017June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. |
We may from time to time be party to litigation and subject to claims incident to the ordinary course of business. As we grow and gain prominence in the marketplace we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows or financial position. We are not currently a party to any legal proceedings.
Item 1A. |
Not applicable.
Item 2. |
None.
Item 3. |
None.
Item 4. |
Not applicable.
Item 5. |
None.
Item 6. |
Exhibit No. | Description | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document* | |
101.SCH | Inline XBRL Schema Document* | |
101.CAL | Inline XBRL Calculation Linkbase Document* | |
101.DEF | Inline XBRL Definition Linkbase Document* | |
101.LAB | Inline XBRL Label Linkbase Document* | |
101.PRE | Inline XBRL Presentation Linkbase Document* | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FUSE | ||
By: | /s/Umesh Patel | |
Umesh Patel | ||
Chief Executive Officer | ||
(Principal Executive Officer) | ||
August 16, 2021 | ||
By: | /s/ Michael Viotto | |
Michael Viotto | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
August 16, 2021 | ||