Fusemachines (FUSE) risk factors, FY2025 10-K

Risks Related to Business, Industry, and Operations

1. 01The market for our enterprise AI services and products is relatively new, and may decline or experience limited growth, and our business is dependent on our clients’ continuing adoption and use of its services and products
2. 02We have experienced moderate growth in the past several years, and if we fail to effectively manage our growth, then our business, results of operations and financial condition could be adversely affected
3. 03Our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable. These fluctuations may negatively impact our results of operations and financial condition
4. 04If we do not successfully develop and deploy new technologies to address the needs of its customers, its business and results of operations could suffer
5. 05Our ability to sell its products and satisfy its customers is dependent on the quality of our services, and our failure to offer high quality services could have a material adverse effect on its sales and results of operations
6. 06If we are not able to maintain and enhance its brand and reputation, our relationships with our customers, partners, and employees may be harmed, and its business and results of operations may be adversely affected
7. 07If the market for our platforms and services develops more slowly than we expect, our growth may slow or stall, and our business, financial condition, and results of operations could be harmed
8. 08Issues raised by the use of AI (including machine learning) in our platforms may result in reputational harm or liability
9. 09Real or perceived errors, failures, defects, or bugs in our products, or platforms could adversely affect our results of operations and growth prospects
10. 10We had a comprehensive loss of approximately $0.93 million and $15.3 million for the years ended December 31, 2025 and December 31, 2024, respectively
11. 11We require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available, may require Fusemachines to delay, limit, reduce or cease its operations
12. 12We face intense competition within our industry and are subject to the effects of technological change
13. 13Our proprietary products and services and service delivery may not operate properly, which could damage its reputation, give rise to claims against us, or divert application of its resources from other purposes, any of which could harm its business and operating results
14. 14If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities
15. 15We depend on key information systems and third party service providers
16. 16Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our competitive position
17. 17We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our solutions. Our efforts to protect and enforce our intellectual property rights and prevent third parties from violating its rights may be costly
18. 18We rely on proprietary information (such as trade secrets, know-how and confidential information) to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress or service mark protection
19. 19Algorithms embedded in AI solutions, and AI datasets, often suffer from lack of transparency, bias, and risks of inadvertent disclosure of information, which could subject us to adverse consequences
20. 20Use of open source software creates inherent risk and could subject us to adverse consequences
21. 21Claims by others that we infringe upon their intellectual property could force us to incur significant costs or revise the way we conduct our business
22. 22We depend on our management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect its business
23. 23We are subject to evolving laws and regulations that could impose substantial costs, legal prohibitions or unfavorable changes upon our operations or products, and may be a party to material legal proceedings in the future
24. 24Our management team has limited experience managing a public company and regulatory compliance may divert their attention from the day-to-day management of our business
25. 25Material adverse developments in domestic and global economic conditions, or the occurrence of other world events, could materially adversely affect our revenue and results of operations
26. 26Our business is heavily dependent upon our international operations, particularly in Nepal, and any disruption to those operations would adversely affect us
27. 27We have significant fixed costs related to lease facilities
28. 28Our sites operate on leasehold property, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our results of operations
29. 29Catastrophic events, including those which impact third parties on which we materially rely, could materially adversely affect our business, results of operations and/or financial condition
30. 30As a privately-held company, Fusemachines was not required to evaluate its internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act
31. 31Management expects to address these deficiencies by implementing remediation measures, including those that have already been taken to date
32. 32Changes in accounting principles or their application to Fusemachines could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects
33. 33If our judgments or estimates relating to its critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in its stock price
34. 34Our results of operations could be affected by currency fluctuations
35. 35Fusemachines has limited insurance which may not cover claims by third parties against Fusemachines or its officers and directors
36. 36Fusemachines could be subject to additional tax liabilities
37. 37Ongoing and escalating political volatility in Nepal may adversely affect our business, financial condition, and results of operations

Risks Related to Ownership of Our Securities

1. 38The price of our Common Stock may be volatile
2. 39Our executive officers and directors exercise significant control over the company, which may limit your ability to influence corporate matters and could delay or prevent a change in corporate control
3. 40This stockholder may have interests, with respect to his Common Stock, which are different from those of the public investors and the concentration of voting power among this stockholder may have an adverse effect on the price of the Common Stock
4. 41The requirements of being a public company may strain the Company’s resources and distract management and we will incur substantial costs as a result of being a public company
5. 42Sales of a substantial amount of Common Stock in the public market, particularly sales by our executive officers, directors and significant stockholders, or the perception that these sales could occur, could cause the market price of the Common Stock to decline
6. 43A decline in the price of the Common Stock could affect the company’s ability to raise working capital and adversely impact the company’s ability to continue operations
7. 44Fusemachines does not intend to pay any cash dividends in the foreseeable future and, therefore, any return on your investment in the company’s capital stock must come from increases in the fair market value and trading price of the capital stock
8. 45If the price of the Common Stock fluctuates, you could lose a significant part of your investment
9. 46The public stockholders will experience immediate dilution as a consequence of future issuances of Common Stock pursuant to the Fusemachines Equity Incentive Plan
10. 47The exercise price for the outstanding Public Warrants is $11.50 per share. There can be no assurance that the Public Warrants will be in the money prior to their expiration and as such, the Public Warrants may expire worthless
11. 48The Company may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless
12. 49The Public Warrants generally may not be exercised on a “cashless basis”, except as described below. In contrast, the Private Placement Warrants, for so long as they are held by the Sponsor and certain permitted transferees, may be exercised on a “cashless basis”
13. 50The historical financial results of Legacy Fusemachines may not be indicative of what the Company’s actual financial position or results of operations would have been
14. 51We may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in connection with redemptions of shares of public common stock
15. 52Delaware law and the Company’s Organizational Documents contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable
16. 53The provisions of the Certificate of Incorporation requiring exclusive forum in the Court of Chancery of the State of Delaware and the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers

Risks Related to Being a Public Company

1. 54We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies , which could adversely affect our business , financial condition , and results of operations
2. 55These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers
3. 56If we fail to maintain an effective system of disclosure controls and internal control over financial reporting , our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
4. 57Our business , financial condition , and results of operations may fluctuate on a quarterly and annual basis , which may result in a decline in our stock price if such fluctuations result in a failure to meet the expectations of securities analysts or investors
5. 58Changes in accounting principles may cause previously unanticipated fluctuations in our financial results , and the implementation of such changes may impact our ability to meet our financial reporting obligations
6. 59If our estimates or judgments relating to our critical accounting policies prove to be incorrect , our business , financial condition , and results of operations could be adversely affected

Risks Related to an Investment in Our Securities

1. 60There may not be an active trading market for our securities, which may make it difficult to sell shares of our common stock or warrants
2. 61The market price of our securities may be volatile, which could cause the value of your investment to decline
3. 62There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq
4. 63Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject us to additional trading restrictions
5. 64Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it
6. 65Sales of a substantial number of shares of our Common Stock in the public market could cause our stock price to fall
7. 66Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall
8. 67Our management has limited experience in operating a public company