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”) 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 910 – 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 havewere not been 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. At March 31, 2020, the ROU was $42,067.

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 January 2017,June 2016, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test,No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires a hypothetical purchase price allocation. A goodwill impairment will now beentities to measure all expected credit losses for financial assets held at the amount by which a reporting unit’s carrying value exceeds its FV, not to exceeddate based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its CFS.

In June 2018, the FASB issued ASU 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of ASC 718 to non-employee awards except for specific guidance on inputs to an option pricingexisting incurred loss model and is applicable to the attributionmeasurement of credit losses on financial assets measured at amortized cost. The amendments specify that ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The newThis guidance is effective for SEC filers for fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its CFS.

In December 2019, (i.e., January 1,the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for calendarall periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year entities). Early adoption is permitted.of adoption. The Company is evaluating the effects of the adoption ofimpact this guidance.update will have on its CFS.

Note 3 – Going Concern

The accompanying CFS were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the accompanying CFS, the Company had an accumulated deficit of $5.95$6.05 million at MarchDecember 31, 2020, andthe Company had net loss of $35,844$79,942 and $111,916 for the six months ended March 31, 2020 and 2019, net loss of $6,433 and $49,586$29,411 for the three months ended MarchDecember 31, 2020 and 2019, respectively, whichrespectively. 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. Also see the discussion of COVID-19 in Note 1.

Management intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others.  While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The CFS 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 MarchDecember 31, 2020 and September 30, 20192020 consisted of the following:

Depreciation for the six months ended March 31, 2020 and 2019 was $1,096 and $1,096, respectively. 

Depreciation for the three months ended MarchDecember 31, 2020 and 2019 was $548 and $548, respectively. 

Note 5 – Prepaid expensesExpenses 

As of MarchDecember 31, 2020, the Company had current prepaid Director & Officer insurance of $24,561.$2,456.

At MarchDecember 31, 2020 and September 30, 2019,2020, 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 term.  On July 3, 2017, Processing and the consulting company extended the Consulting and Strategist Agreement to January 3, 2018 at no additional cost, and the Agreement was subsequently further extended to July 3, 2018. The consultant provided Processing with market research findings, exploration and advice 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 for the purchase of 5 mines located in different areas of Mexico for an aggregate purchase price of $1,000,000. Upon the 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 pursuant to whichthat the Company willwould pay $1,000,000 to purchase all five mines that would be consolidated into a local company in Mexico upon  the $1,000,000 purchase price upon receiving approvalsapproval from the Mexican government allowing for the transfer of all mining concession to the mining concession.Mexican company. The transfer request has beenwas submitted to, and is being processed by, the Mexican government, but that processing was originally delayed due to elections and new administration and then COVID-19 pandemic in MexicoMexico. In January 2021, the Company received three certificates of transfer from the seller and is waiting for the COVID-19 pandemic.certificates for the transfer of remaining two mines which are expected to be issued soon . The Company was not able to provide an estimated timewill acquire all the equity interest of the Mexican company after it receives certificates of the transfer for the approval at this report date.all five mines. The remaining $1,000,000 of consulting fees, which relates toarises 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 805-5-30-1.

Note 6 – Other payablesPayables 

As of MarchDecember 31, 2020, and September 30, 2019,2020, the Company had other payables of $8,879$9,280 and $10,675,$4,499, respectively. Other payables mainly consisted of salary and payroll tax payables.

Note 7 – Loans Payable

On May 14, 2020, Fuse Processing received $49,600 from the Paycheck Protection Program loan (“PPP loan”) from U.S. Small Business Administration (“the SBA”). The loan will be forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 60% of the forgiven amount must have been used for payroll). The loan amount not forgiven, will have 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 the 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 have reduced full-time equivalent (“FTE”) or salaries. The forgiveness application processing time may also be shorter. Fuse Processing applied PPP loan forgiveness in January 2020, and is currently waiting for the approval.

On June 24, 2020, Fuse Tech 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 3.75% and is not forgivable. The maturity of the loan is 30 years, installment payments including principal and interest of $515 monthly will begin 12 months from the date of the promissory note. As of December 31, 2020, the future minimum principal amount of loan payments to be paid by year are as follows:

Note 78 – Income Tax

The President of the United StatesU.S. signed into law H.R. 1Tax Cut and Jobs Act (the “Tax Reform Law”). on December 22, 2017. The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United StatesUS tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduced the federal corporate tax rate from 34% to 21% effective October 1, 2018 for the Company.

For most taxpayers, NOLs arising in tax years ending after 2017 can only be carried forward. At MarchDecember 31, 2020 and September 30, 2019,2020, the Company had net operating loss (“NOL”) carryforwardNOL carryforwards for income tax purposes; forpurposes. For federal income tax purposes, the NOLNOLs arising in tax years beginning after 2017 may only reduce 80% of a taxpayer’s taxable income, and may be carried forward indefinitely; for California income tax purposes, the entire NOL can be carried forward up to 20 years. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. The Company has estimated NOL carry-forwards for Federal and California income tax purposes of $4.13$4.44 million and $4.07$4.36 million at MarchDecember 31, 2020 and September 30, 2019,2020, respectively. No tax benefit was reported with respect to these NOL carry-forwards in the accompanying CFS because the Company believes the realization of the Company’s net deferred tax assets for the NOL for both federal and California State of approximately $1.22$1.24 million as of MarchDecember 31, 2020, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.

Components of deferred tax assets as of MarchDecember 31, 2020 and September 30, 20192020 are as follows:

The recently issued Coronavirus Aid, Relief and Economic Security Act (the CARES Act or the Act), provides four relief provisions for corporate taxpayers as follows:

Income Tax Provision in the Statements of Operations

A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the six months ended March 31, 2020 and 2019 is as follows:

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 MarchDecember 31, 2020 and 2019 is as follows:

Note 89 – Revenue, Cost of Revenue and Major Customers

Fuse Group and Processing provide consulting services to mining industry clients to find mine acquisition targets within the parameters set by the clients, in circumstances in which the mine owner is considering selling its mining rights.  The services of Fuse Group and Processing include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.

Cost of revenue mainly consisted of the management’s travel expenses to visit these mines and consulting expenses paid for mine expertise during the mine due diligence period.

For the sixthree months ended MarchDecember 31, 2020 and 2019, the Company recorded revenue of $450,000 and $766,000 for the services provided, respectively.

For the three months ended March 31, 2020 and 2019, the Company recorded revenue of $200,000$100,000 and $250,000 for the services provided, respectively.

For the six and three months ended MarchDecember 31, 2020 and 2019, the Company had one customer which accounted for 100% of the Company’s total revenue. For the six and three months ended March 31, 2019, the Company had one customer which accounted for 95% and 100% of the Company’s total revenue.

Note 910 – Commitments

Acquisition commitmentCommitment

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 provided Processing with market research findings, exploration and advice on business development opportunities in certain countries, and other general business advisory services. The consulting company found acquisition targets for the Company, and on June 22, 2018, the Company entered into a 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 the 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 pursuant to whichthat the Company willwould pay $1,000,000 to purchase all five mines that would be consolidated into a local company in Mexico upon the $1,000,000 purchase price upon receiving approvalsapproval from the Mexican government allowing for the transfer of all mining concession to the mining concession.Mexican company. The transfer request was submitted to, and is being processed by, the Mexican government, but that processing was originally delayed due to elections and new administration then COVID-19 in Mexico and the COVID-19 pandemic  (see Note 5),. In January 2021, the Company was not able to provide an estimated timereceived three certificates of transfer from the seller and is waiting for the approval at this report date.certificates for the transfer of remaining two mines which are expected to be issued soon . The Company will acquire all the equity interest of the Mexican company after it receives certificates of the transfer for all five mines. 

Lease Commitment

Effective January 1, 2017, Processing, as a sublessee, entered into a sublease agreement for office space with a sublessor for a term of two years. The monthly rent was $1,897, and increased to $1,949 starting in January 2018. The lease expired on December 31, 2018.

Effective April 16, 2018, the Company entered a one-year lease for an office in the City of Diamond Bar, California. The monthly rent was approximately $1,500.  The Company did not renew the lease at expiration.

Effective December 1, 2018, the Company entered a three-year lease for an office in the city of Arcadia, California. The monthly base rent is $2,115 payable on the first day of each month, with a 3% increase each year.

The Company recorded rental cost of $13,705$6,852 and $27,718$6,852 for the sixthree months ended MarchDecember 31, 2020 and 2019, respectively. 

The Company recorded rental cost of $6,853 and $10,903 for the three months ended March 31, 2020 and 2019, respectively. 

The components of lease costs, lease term and discount rate with respect to the office lease with an initial term of more than 12 months are as follows:

The operating lease cost for the three months ended March 31, 20202 was $6,853.

The following is a schedule of maturities of lease liabilities as of MarchDecember 31, 2020:

Consulting and Service Agreements

Pursuant to the terms of the Contract, Prime King is providing services to the Company relating to the development, installation and debugging of a software system called IMETAL. 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 (the “Project”).

Prime King shall also provide training to the Company’s staff per the Company’s request as well as maintenance for the Project for one year after the completion of the Project, in each case free of charge.

Under the Contract, the Company shall pay Prime King $3,000,000, of which 50% was paid within 10 days of the execution of the Contract, and the remaining 50% was to be paid within 10 days of the completion of the Project after inspection and approval by the Company. The service was required to be completed in three months, however, on July 17, 2018, the deadline was extended until October 17, 2018, and the Company agreed to extend the deadline further, due to changes in technical requirements requested by the Company. Up to September 30, 2018, the Company paid Prime King $1.5 million, which was recorded as software development costs. The Company has not paid anything to Prime King since September 30, 2018. The Company previously expected the project to be completed by March 31, 2019. However, the process was delayed because the Company wanted to evaluate certain functions of this platform and regulatory compliance requirements for such functions before determining whether to include them in the platform. After considering 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 that the project has more issues and costs for compliance than originally expected. On December 23, 2019, the Board decided to terminate the IMETAL project.

Employment Agreement

The Company currently has an employment agreement with Michael Viotto, the Company’s CFO.  Pursuant to the terms of his employment agreement, dated August 21, 2019,September 1, 2020, Mr. Viotto receives annual compensation of $50,000, and the agreement has a term of one year.year, from August 22, 2020.  Mr. Viotto’s employment agreement includes typical clauses relating to noncompetition, nonsolicitation and indemnification of Mr. Viotto in connection with his service as the Company’s CFO.

Note 1011 – 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. 

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 our consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in the Annual Report on Form 10-K, particularly under the heading “Risk Factors.” and those set forth from time to time in our other filings with the SEC.

Overview

Fuse Group Holding Inc. (the “Company” or “Fuse Group” or “we”) was incorporated under the laws of the State of Nevada on December 24, 2013.  Fuse Group currently explores opportunities in mining. On December 6, 2016, the Company incorporated Fuse Processing, Inc. (“Processing”) in the State of California. Processing seeks business opportunities in mining and is currently investigating potential mining targets in Asia and North America.  Fuse Group is the sole shareholder of Processing.  In March 2017, Processing acquired 100% ownership of Fuse Trading Limited (“Trading”) for HKD1 ($0.13). Trading had no operations prior to the acquisition by Processing, and Trading expects to be engaged in mining-related businesses. On May 3, 2018, the Company incorporated Fuse Technology Inc. (“Technology”) in the State of Nevada.Nevada, which changed its name to Fuse Biotech Inc. on November 30, 2020.  Fuse Group is the sole shareholder of Technology. Technology wasFuse Biotech Inc. ("Fuse Biotech”). Fuse Biotech mainly 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 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, Fuse Biotech is seeking 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 the 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 pursuant to whichthat the Company willwould pay $1,000,000 to purchase all five mines that would be consolidated into a local company in Mexico upon  the $1,000,000 purchase price upon receiving approvalsapproval from the Mexican government allowing for the transfer of all mining concession to the mining concession.Mexican company. The transfer request was submitted to, and is being processed by, the Mexican government, but that processing was originally delayed due to elections and new administration then COVID-19 in Mexico and the COVID-19 pandemic, such thatMexico. In January 2021, the Company was not able to provide an estimated timereceived three certificates of transfer from the seller and is waiting for the approval at this report date.certificates for the transfer of remaining two mines which are expected to be issued soon. The Company will acquire all the equity interest of the Mexican company after it receives certificates of the transfer for all five mines.  

On May 26, 2017, the Company filed a Certificate of Change with the State of Nevada to (i) increase its authorized shares of common stock from 75,000,000 to 375,000,000 and (ii) effect a corresponding 5-for-1 forward stock split of the issued and outstanding shares of the Company’s common stock (the “Stock Split”).

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 December 2019, a novel strain of coronavirus, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S. government imposedpandemic has resulted in quarantines, travel restrictions, on travel betweenand the United States, China,temporary closure of office buildings and certain other countries.facilities in the US. The state of California, where the Company is headquartered, has been affected by COVID-19. The Governor

Our business and services and results of operations have been adversely affected and could continue to be adversely affected by the COVID-19 pandemic. Substantially all of our workforce is now working from home either all or substantially all of the time. The effects of the stay-at-home order and our work-from-home policies havepandemic 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.

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.

Further, as we do not have access toWe received a revolving credit facility, there can be no assurance that we would be able to secure commercial debt financing in$49,600 Paycheck Protection Program loan (“PPP loan”) and a $105,500 Economic Injury Disaster Loan (“EIDL loan”) from US Small Business Administration (“ the future inSBA”) during the event that we require additional capital. year ended September 30, 2020.

We currently believe that 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.  

Results of operations for the three months ended MarchDecember 31, 2020 and 2019

Revenue and Cost of Revenue

We develop our business in mining and investigate potential mining targets in Asia and North America. In addition to our own investment in mining businesses, we provide consulting services to clients which are mining business investors with potential mine acquisition targets within the specific parameters set by those clients, where the mine owner is considering selling its mining rights. Our services include due diligence on the potential mine seller and the mine, such as ownership of the mine and whether the mine meets all operation requirements and/or is currently in operation.

For the three months ended MarchDecember 31, 2020, we provided twoone potential mine acquisition opportunities in Mexico to a client,client. For the three months ended MarchDecember 31, 2020, the Company recorded revenue of $200,000$100,000 for the services provided. Our revenue for the three months ended MarchDecember 31, 2019 was $250,000. Our cost of revenues for the three months ended MarchDecember 31, 2020 and 2019 was $48,063$10,035 and $88,759,$132,498, 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 $151,937$89,965 and $161,241$117,502 for the three months ended MarchDecember 31, 2020 and 2019, respectively. 

Costs and Expenses

The major components of our expenses for the three months ended MarchDecember 31, 2020 and 2019 are outlined in the table below:

The decreaseincrease in our operating costsexpenses for the three months ended MarchDecember 31, 2020, compared to the three months ended MarchDecember 31, 2019, was due to decreased insurance expensean increase in consulting fees of $18,286 and decreased travel expense of $38,567, which was partly offset by increased payroll expense of $8,300. During the three months ended March 31, 2020, the Company had$20,104 including $12,500 to a few outstanding consulting agreementscompany for advisory services on business development strategy in the Far East, including in Hong Kong and Russia, and acquisition opportunitiesreferring us potential mine investment targets in Mexico, and North America. Mostincreased employee remuneration expense of the consulting agreements entered in prior periods expired during the year ended September 30, 2019.$3,000.

Non-operating expenses, net

Net non-operating expense was $240expenses were $1,385 for the three months ended MarchDecember 31, 2020, compared to $207$495 for the three months ended MarchDecember 31, 2019.  

Results of operations forFor the sixthree months ended MarchDecember 31, 2020, non-operating expenses mainly consist of interest of $1,001 and 2019

Revenueand Costbank service charge 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.

$384. For the sixthree months ended March 31, 2020, we provided five potential mine acquisition opportunities to a client, with one mine located in Asia and four mines located in North America. For the six months ended March 31, 2020, the Company recorded revenue of $450,000 for the services provided. Our revenue for the six months ended MarchDecember 31, 2019, was $766,000. Our costnon-operating expenses mainly consist of revenues for the six months ended March 31, 2020bank service charge of $295 and 2019 was $180,401 and $177,519, respectively, mainly for the management’s travelother expenses to visit these mines and consulting expenses paid for mine expertise during the mine due diligence period, resulting in a gross profit of $269,599 and $588,481 for the six months ended March 31, 2020 and 2019, respectively. $20.

Costs and Expenses

The major components of our expenses for the six months ended March 31, 2020 and 2019 are outlined in the table below:

The decrease in our operating costs for the six months ended March 31, 2020, compared to the six months ended March 31, 2019, was due to a decrease in consulting fees of $338,037, decreased office rent of $14,014 and decreased profession fee of $40,448 of Processing. During the six months ended March 31, 2020, the Company had a few outstanding consulting agreements for advisory services on business development strategy in the Far East, including in Hong Kong and Russia, and acquisition opportunities in Mexico and North America. Most of the consulting agreements entered in prior periods expired during the year ended September 30, 2019.

Non-operating expenses, net

Net non-operating expense was $735 for the six months ended March 31, 2020, compared to $666 for the six months ended March 31, 2019. 

Liquidity and Capital Resources

The table below provides selected working capital information as of MarchDecember 31, 2020 and September 30, 2019:2020:

Liquidity

During the six months ended March 31, 2020 and 2019, the Company reported net loss of $35,844 and $111,916, respectively. During the three months ended MarchDecember 31, 2020 and 2019, the Company reportedwe had net loss of $6,433$79,942 and $49,586,net loss of $29,411, respectively.  We received $49,600 from the PPP loan and $105,500 from the EIDL loan during the year ended September 30, 2020 for paying the Company’s payroll and other operating expenses during the COVID-19 pandemic.

If we are not successful in developing the mining business and establishing profitability and positive cash flow, additional capital may be required to maintain ongoing operations. We have explored and continue to explore options to provide additional financing to fund future operations as well as other possible courses of action. Such actions may include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from other third parties or banks, and other similar actions. There can be no assurance we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.

Cash Flows

The table below, for the periods indicated, provides selected cash flow information for the sixthree months ended MarchDecember 31, 2020 and 2019: 

Cash Flows from Operating Activities

Our cash used in operating activities for the sixthree months ended MarchDecember 31, 2020 and 2019 was $60,345$65,924 and $39,412,$31,168, respectively.  DuringThe increase in cash outflow during the sixthree months ended MarchDecember 31, 2019, we had a2020 was due to increased net loss of $111,916,by $50,531, which was partiallypartly offset by non-cashincreased amortization of prepaid insurance expense of $75,262. During the six months ended March 31, 2020, even though we had a decreased net loss of $35,844, we hadby $7,368 and increased cash outflow on prepaid expenseinflow of $29,474, and accordingly increased cash outflow in operating activities.other payables by $8,534.

Cash Flows from Investing Activities  

During the sixthree months ended MarchDecember 31, 2020 and 2019, we did not have any investing activities.

Cash Flows from Financing Activities

During the sixthree months ended MarchDecember 31, 2020 and 2019, we did not have any financing activities.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements.

Off Balance Sheet Arrangements

As of MarchDecember 31, 2020, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Not applicable.

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 MarchDecember 31, 2020, the Company was retaining copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors. 

3.   We currently lack sufficient accounting personnel with the appropriate level of knowledge, experience and training in U.S. GAAP and SEC reporting requirements. We have one employee assigned to a position that involves processing financial information, resulting in a lack of segregation of duties so that all journal entries and account reconciliations are reviewed by someone other than the preparer, heightening the risk of error or fraud.

We have taken certain actions to remediate the material weakness related to our lack of U.S. GAAP experience. We have engaged an outside CPA with U.S. GAAP knowledge and experience to supplement our current internal accounting personnel and assist us in the preparation of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP.

If we are unable to remediate the material weakness, or other control deficiencies are identified, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner. Due to our small size and the early stage of our business, segregation of duties may not always be possible and may not be economically feasible. We have limited capital resources and have given priority in the use of those resources to our business development efforts. As a result, we have not been able to take steps to improve our internal controls over financial reporting during the quarter ended MarchDecember 31, 2020. 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 MarchDecember 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

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.

Not applicable.

None.

None.

None.

None.

Not applicable.

None.

None.

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.