| Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements.
OVERVIEW
We are a development stage technology company focused on the refinement and marketing of a comprehensive suite of media search engine technologies. Our objective is to maintain the media search engine properties and technologies we currently have and to eventually enhance and grow those properties and technologies. We currently operate the website newstowatch.com. Newstowatch.com is a breaking news discovery service that programatically reads thousands of current news stories and intelligently categorizes, organizes and ranks the most popular stories and topics from around the web. We also operate the consumer media search websites searchforvideo.com, podanza.com and iheard.com. We hope to be able to maintain our existing suite of on-line properties and technologies through the current challenging financial environment and to eventually be able to expand and grow our web properties and technologies in the future.
CORPORATE HISTORY AND DEVELOPMENT
We were incorporated in the State of Nevada on September 13, 2000 as Galaxy Championship Wrestling, Inc., a media and entertainment company focused on developing, producing and marketing live entertainment in the professional wrestling sphere.
On March 31, 2004, unable to generate sufficient revenues to sustain our professional wrestling business, we ceased operations in this field and began exploring other business opportunities.
Also on March 31, 2004 our controlling shareholders entered into a certain private stock purchase agreement, wherein they sold an aggregate of 5,750,000 of our common shares, representing a sixty-two and seventeen twentieths percent (62.85%) controlling interest, to an unrelated third party.
By certificate of amendment filed June 17, 2004, we changed our name from Galaxy Championship Wrestling, Inc. to FUSA Capital Corporation.
During the period from March 31, 2004 until March 7, 2005 we had no meaningful operations and did not carry on any active business, focusing instead on identifying and evaluating the merits of alternative potential business and acquisition opportunities which might allow us to restart operations.
On March 7, 2005 we entered into a certain plan and agreement of reorganization with FUSA Technology Investments Corp. ("FTIC"), a Nevada corporation engaged in the emerging growth field of audio and video search engine technology, whereby we acquired all of the issued and outstanding capital stock of FTIC in addition to obtaining certain intellectual property concepts related to search engine technology as developed by FTIC and its principals.
On April 22, 2005, our board of directors declared a three-for-one common stock dividend, wherein each holder of record of our common shares as of May 3, 2005 received two additional shares for each common share then held. Unless otherwise noted, all references to the number of common shares included in this annual report on Form 10-K for the fiscal year ended December 31, 2008 are stated on a post-dividend basis. Per share amounts have also been restated to reflect the common share dividend.
Since April, 2005, we have been engaged continuously in the development and operation of consumer focused media search engine technologies and portals. During the last six months of 2008, we began to substantially curtail our operations and ongoing technology development as a consequence of (i) having completed a substantial portion of our planned principal technology development work and (ii) being unable to raise sufficient funds through revenue or sales of debt or equity securities to continue our previous levels of operation and development.
We have consistently lost money on our on-line consumer media properties due to the expenses involved in hosting, promotion, development and management of those sites. In an effort to maintain as much traffic as possible on our most popular media site, www.searchforvideo.com, which is also responsible for a large proportion of our expenses, we contracted with Brass Consulting Ltd. to maintain the site in exchange for net revenue produced from the site. This agreement is cancellable after 30 days notice. This agreement allows us to maintain www.searchforvideo.com in the absence of adequate personnel or financial resources and to preserve its value for the future when we may have sufficient resources to maintain the site ourselves and grow its user base and revenue potential.
Our principal executive offices are located at 701 Fifth Avenue, Suite 4200, Seattle, Washington 98104. Our phone number is (888)366-6115.
The Company’s fiscal year end is December 31.
RESULTS OF OPERATIONS
Financial Condition and Liquidity
Our financial statements contained herein have been prepared on a going concern basis, which assumes that we will be able to realize our assets and discharge our obligations in the normal course of business. We have limited capital resources. In the period from February 9, 2005 (Date of Inception) to March 31, 2009, the Company generated $111,653 in revenues and posted a net loss of $5,576,601 resulting from costs of general and administrative expenses, website development stock compensation and interest expenses. The Company is considered a development stage company.
Cash and Working Capital
The Company's cash balance as of March 31, 2009 was $42,411, as compared to the cash balance of $14,366 as of December 31, 2008.
Three Month Period Ending March 31, 2009
Operating expenses for the three month period ended March 31, 2009 totaled $30,609 and from inception to the period ended March 31, 2009 totaled $5,688,254. The company experienced a net loss of $22,796 and $5,576,601 for the three month period ended March 31, 2009 and from inception to period ended March 31, 2009, respectively, against $111,653 in revenue, $109,092 from operations and $2,561 from interest in the entire period and $7,813 in revenue, consisting of $7,813 in revenues from sales and $0 in interest for the three month period ending March 31, 2009. The major expenses during this three month period were for general and administrative expenses, legal and accounting fees.
Revenues decreased during the period as compared with comparable periods in 2008. We believe this was due to a lack of funds to pay for marketing to support traffic to our Internet websites. Less traffic leads to less revenue from advertising on our sites.
The earnings per share (fully diluted -- weighted average) consisted of a net loss of $0.00 for the three month period ended March 31, 2009.
For the three month period ended March 31, 2009, net cash used in operating activities, consisting mostly of loss from operations was $21,955. For the period from inception to March 31, 2009, net cash used in operating activities, consisting mostly of loss from operations was $3,050,107.
For the period from inception to March 31, 2009, net cash resulting from financing activities was in the amount of $3,154,851. Cash proceeds from the sale of common stock during the three month period ending March 31, 2009 were $50,000.
Our capital resources have been limited. We have not yet generated sufficient revenues to cover our expenses, and to date have relied on the sale of equity and related party loans for cash required for our activities. No investment banking agreements are in place and there is no guarantee that the company will be able to raise capital in the future should that become necessary.
Future Financings
We anticipate that if we pursue any additional financing, the financing would be an equity financing achieved through the sale of our common stock. We do not have any arrangement in place for any debt or equity financing. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our company.
Off Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Significant Contingencies
Our financial statements have been prepared assuming we will continue as a going concern. Our independent auditors have made reference to the substantial doubt about our ability to continue as a going concern in their report of independent registered public accounting firm on our audited financial statements for the year ended December 31, 2008. Our continuation is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that the Company will be able to continue as a going concern.
PLAN OF OPERATION
Over the next six to twelve months we intend to maintain our current web properties and make whatever modest efforts we are capable of, given our limited resources, to slow the deterioration of user traffic on these properties while we search for additional financing to allow us to promote and update our properties. We believe our sites, www.newstowatch.com, www.searchforvideo.com, www.iheard.com and www.podanza.com, will continue to deteriorate in spite of consumers recognizing the unique content, ease-of-use, speed of search tools and quality of indexed content due to lack of promotion and updating of the properties. We will not be able to expand our participatory media offerings over the course of the year due to lack of resources. It is believed that the combination of the growth of our participatory media website, www.Newstowatch.com and the organic growth of our other consumer portals could increase the company’s overall value by increasing its assets and marketability if we had the resources to promote and update our properties. In the absence of additional resources, our properties are likely to continue to have their user traffic deteriorate.
We currently produce a small amount of advertising revenue that we have derived during the principal development phase of our various consumer portals. Not only will this revenue not be enough to make us cash flow positive, we have also signed an agreement where virtually all of our small revenues will go to Brass Consulting Ltd. in exchange for maintaining www.searchforvideo.com. Of course, we can cancel this agreement at any time and we hope to do so, as soon as financing and market conditions improve and we can raise the resources necessary to service, promote and update our sites. There can be no assurance such resources will be forthcoming and we have no understandings with any potential investors or partners regarding the same.
We also anticipate spending much less on operations and salaries and costs related to marketing and no money related to research and development over the course of the next twelve months now that principal development on our consumer portals has been completed and we lack the resources to improve or promote our properties . We anticipate our largest expenses will be hosting, administrative, legal and accounting expenses, payments of our www.searchforvideo.com revenue to Brass Consulting Ltd. and the salary of our chief executive officer, Jenifer Osterwalder.
Our twelve-month plan requires us to accomplish the following steps:
| | · | Minimizing the deterioration of user traffic on our websites; |
| | · | Raise additional funds in order to promote and improve our sites; |
| | · | Compile usage statistics for our websites; |
| | · | Raise funds to enhance our participatory media capabilities and to promote the associated community of www.Newstowatch.com; |
| | · | Develop rapport with likely strategic partners ; and |
| | · | Terminate our consulting arrangement with Brass Consulting Ltd. and take back the operation of www.searchforvideo.com as soon as we have sufficient resources. |
Foreign Currency and Credit Risk. The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company’s reporting currency is the US Dollar. We do undertake software development expenses in Canada which must be paid in Canadian dollars and are subject to cost variations based in currency rate fluctuations.
Fair Value of Financial Instruments. The carrying value of the Company's financial instruments, including prepaid expenses, related party receivables, accounts payable and accrued liabilities at March 31, 2009 and 2008 approximates their fair values due to the short-term nature of these financial instruments.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). As a result of this evaluation, we identified material weaknesses in our internal control over financial reporting as of December 31, 2007. Accordingly, we concluded that our disclosure controls and procedures were not effective as of December 31, 2008.
As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer has concluded that our disclosure controls and procedures are not effective in timely alerting them to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of the deficiency in our internal control over financial reporting discussed below.
The material weakness identified in our annual report on Form 10-K for the year ended December 31, 2008 was related to a lack of an accounting staff resulting in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 4T. CONTROLS AND PROCEDURES
Management's Quarterly Report on Internal Control over Financial Reporting.
Management's assessment of the effectiveness of the registrant's internal control over financial reporting is as of the period ended March 31, 2009. Based on the evaluation, management concluded that there is a material weakness in our internal control over financial reporting. The material weakness relates to the monitoring and review of work performed by contracted accounting personnel in the preparation of audit and financial statements, footnotes and financial data provided to FUSA’s registered public accounting firm in connection with the annual audit. Our lack of an accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control.
A material weakness is a control deficiency, or combination of control deficiencies, in ICFR such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis by employees in the normal course of their assigned functions.
Notwithstanding this material weakness, we believe that the financial statements included in this report fairly present, in all material respects, our financial position and results of operations as of and for the period ended March 31, 2009.
Remediation of Material Weakness
As discussed in Management's Annual Report on Internal Control over Financial Reporting, as of December 31, 2008, there were material weaknesses in our internal control over financial reporting. We are in the process of analyzing our processes for all business units and the establishment of formal policies and procedures with necessary segregation of duties, which will establish mitigating controls to compensate for the risk due to lack of segregation of duties. In addition, we are evaluating the necessary steps to improve our controls over financial reporting and we are in the initial planning phase of upgrading, where possible, certain of our information technology systems impacting financial reporting.
Through these steps, we believe we are addressing the deficiencies that affected our internal control over financial reporting as of December 31, 2008 and March 31, 2009. However, the effectiveness of any system of internal controls is subject to inherent limitations and there can be no assurance that our internal control over financial reporting will prevent or detect all errors. Because the remedial actions require hiring of additional personnel, upgrading certain of our information technology systems, and relying extensively on manual review and approval, the successful operation of these controls for at least several quarters may be required before management may be able to conclude that the material weakness has been remediated.
The aggregate costs of remediation are estimated to be $150,000 or more on an annual basis to hire the requisite accounting staff.
Changes in Internal Control Over Financial Reporting.
There was no change in our internal control over financial reporting that occurred during the period ended March 31, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Unregistered Sales of Securities and Use of Proceeds
During the nine month period ending March 31, 2009, the Company borrowed $50,000 from various shareholders at 10% annual interest. The debt is convertible at the option of the holder into the Company’s common stock at the per share price of $0.005. The debt is due by December 31,2009.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) LIST OF EXHIBITS
Exhibits | |
| 3.1 | Articles of Incorporation of the Company filed September 13, 2000 and Amendments thereto, incorporated by reference to the Registration Statement on Form 10-SB, as amended, previously filed with the SEC. |
| 3.2 | By-Laws of the Company adopted September 13, 2000 , incorporated by reference to the Registration Statement on Form 10-SB, as amended, previously filed with the SEC. |
| 10.1 | Technology License Agreement between the Company and Minerva Technologies Pvt. Ltd. Dated August, 23, 2007, incorporated by reference to the Company’s Current Report on Form 8K, previously filed with the SEC on August 27, 2007. |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(b) REPORTS ON FORM 8-K
None.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | FUSA Capital Corporation |
| | |
| | /s/ Jenifer Osterwalder |
| | Jenifer Osterwalder |
| | Chief Executive Officer |
| | (Duly Authorized Officer and Principal |
| | Financial and Accounting Officer) |
| | |
| | |
Dated: June 3, 2009
