SPECTRAL CAPITAL Corp - Quarter Report: 2008 September (Form 10-Q)

fusa10q093008.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File No. 000-50274

FUSA Capital Corporation

(Exact name of Registrant as specified in its charter)

Nevada	510520296
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)


1420 Fifth Avenue, 22nd Floor, Seattle, WA	98101
(Address of principal executive offices)	(Zip/Postal Code)


(206) 274-5107
(Telephone Number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] YES [ ] NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [ ] Accelerated Filer [ ]

Non Accelerated Filer [ ] (Do not check if smaller reporting company)

Smaller Reporting Company [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) [ ] Yes [ X ] No

As of October 31, 2008, there are issued and outstanding only common equity shares in the amount of 69,947,083 shares, par value $0.0001, of which there is only a single class.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Interim Consolidated Balance Sheet September 30, 2008 (unaudited) and December 31, 2007	4

	Interim Consolidated Statements of Operations for the three months and nine months ended September 30, 2008 and September 30, 2007 and cumulative from inception on February 9, 2005 through September 30, 2008.	5

	Interim Consolidated Statement of Cashflows for the nine months ended September 30, 2008 and September 30, 2007 and cumulative from inception on February 9, 2005 through September 30, 2008.	6

	Interim Consolidated Statement of Stockholders’ equity from inception on February 9, 2005 through September 30, 2008	7

	Notes to Financial Statements (unaudited)	8

Item 2.	Plan of Operation	15

Item 3.	Quantitative and Qualitative Disclosures about market risk	17

Item 4.	Controls and Procedures	17

Item 4T.	Controls and Procedures	18

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3.	Defaults Upon Senior Securities	19

Item 4.	Submission of Matters to a Vote of Security Holders.	19

Item 5.	Other Information	19

Item 6.	Exhibits & Signature	20

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Report contains forward-looking statements. Such forward-looking statements are generally accompanied by words such as "intends," "projects," "strategies," "believes," "anticipates," "plans," and similar terms that convey the uncertainty of future events or outcomes. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in ITEM 2 of this Report, the section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof and are in all cases subject to the Company's ability to cure its current liquidity problems. There is no assurance that the Company will be able to generate sufficient revenues from its current business activities to meet day-to-day operation liabilities or to pursue the business objectives discussed herein.

The forward-looking statements contained in this Report also may be impacted by future economic conditions. Any adverse effect on general economic conditions and consumer confidence may adversely affect the business of the Company.

FUSA Capital Corporation undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission.

FUSA CAPITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

INTERIM CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

Unaudited

	September			December 31
	2008			2007
				(audited)
ASSETS

CURRENT ASSETS
Cash	$	78,092		$	5,255
Restricted cash-Note 2		11,500			28,750
Accounts receivable		280			-
Prepaid expenses		500			500

Total Current Assets		90,372			34,505

Property and equipment-Note 5		16,753			23,806

Lease deposits		-			-

Total Assets	$	107,125		$	58,311

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	47,063		$	53,942

Total Current Liabilities		47,063			53,942


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred stock, $.0001 par value, 5,000,000
Shares authorized, none issued		-			-

Common stock, par value $.0001, 500,000,000
Shares authorized, 69,947,083 issued and outstanding
(2007-62,447,083 issued and outstanding)		6,993			6,243
Paid in capital		5,549,999			5,250,749
Deficit accumulated during the development stage		(5,496,930	)		(5,252,623	)

Total Stockholders’ Equity (Deficit)		60,062			4,369

	$	107,125		$	58,311

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

FUSA CAPITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

INTERIM CONSOLIDATED STATEMENT OF OPERATIONS

for the three months and nine months ended September 30, 2008 and September 30, 2007

for the period February 9, 2005 (Inception) to September 30, 2008

	Three months			Three months			Nine months			Nine months			February 9, 2005
	ended			ended			ended			ended			(Inception) to
	September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007			September 30, 2008


REVENUE
Sales	$	19,684		$	12,140		$	48,492			17,056		$	94,759
Interest		-			392			-			1,055			2,561
		19,684			12,532			48,492			18,111			97,320

EXPENSES
Selling, general and administrative		80,960			149,867			233,002			409,281			3,338,616
Research and development-Note 4		15,695			40,198			52,744			88,078			1,989,077
Beneficial conversion expense		-			-			-			-			230,900
Interest		-			-			-			-			1,631
Loss on disposal of property and equipment		-			-			-			-			1,393
Foreign exchange loss		-			-			-			-			4,430
Depreciation and amortization		2,358			2,442			7,053			7,327			28,203

Total Expenses		99,013			192,507			292,799			504,686			5,594,250

NET INCOME (LOSS)	$	(79,329	)	$	(179,975	)	$	(244,307	)	$	(486,575	)	$	(5,496,930	)

NET LOSS PER COMMON SHARE, BASIC	$	0.00		$	(0.00	)	$	(0,00	)	$	(0.00	)

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING		69,947,083			60,813,750			69,947,083			60,335,972

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

FUSA CAPITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

for the Nine months ended September 30, 2008 and September 30, 2007

for the period from February 9, 2005 (Inception) to September 30, 2008

	Nine months			Nine months			February 9, 2005
	Ended			Ended			(Inception) to
	September 30, 2008			September 30, 2007			September 30, 2008
OPERATING ACTIVITIES
Net loss from operations	$	(244,307	)	$	(486,575	)	$	(5,496,930	)

Adjustments to reconcile net loss to net
Cash (used) by operating activities:
Common stock issued (cancelled) for compensation		-			-			2,129,250
Common stock issued for services		-			-			47,000
Stock options issued for services		-			-			55,669
Beneficial conversion feature on warrant issuance		-			-			230,900
Depreciation and amortization		7,053			7,327			28,203
Loss on disposal of property and equipment		-			-			5,879

Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses		-			(39,448	)		(500	)
Decrease (increase) in accounts payable and accrued liabilities		(6,879	)		15,548			36,383
Increase in accounts receivable		(280	)		-			(280	)
Decrease in lease deposits		-			2,155			-

Total adjustments		(106	)		(14,418	)		2,532,504

Net cash (used by) operating activities		(244,413	)		(500,993	)		(2,964,426	)

INVESTING ACTIVITIES
Proceeds on disposal of property and equipment		-			-			494
(Increase) in property and equipment		-			(5,742	)		(51,327	)

Net cash (used by) investing activities		-			(5,742	)		(50,833	)

FINANCING ACTIVITIES
Cash received in recapitalization of the company		-			-			184
Proceeds from issuance of common stock		300,000			500,000			2,212,000
Offering costs from issuance of stock		-			-			(4,000	)
Increase (decrease) in advances payable		-			-			896,667

Net cash provided by financing activities		300,000			500,000			3,104,851

Net increase (decrease) in cash		55,587			(6,735	)		89,592

Cash, beginning of period		34,005			97,673			-

Cash, end of period	$	89,592		$	90,938		$	89,592

Cash Summary, June 30
Cash	$	78,092		$	62,188		$	78,092
Restricted Cash		11,500			28,750			11,500

Total	$	89,592		$	90,938		$	89,592

SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND FINANCING ACTIVITIES
Non-monetary net liabilities assumed in a recapitalization of
the Company on March 7, 2005:
Liabilities assumed	$	-		$	-		$	102,140
Less cash received		-			-			184
Total non-monetary net liabilities assumed	$	-		$	-		$	101,956

Interest paid	$	-		$	-		$	1,631

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

FUSA CAPITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

										Deficit
	Common Stock									Accumulated
										During			Total
							Paid-in			Development			Stockholders’
	Shares			Amount			Capital			Stage			Equity

Inception, Feb 9, 2005, Stock issued for services @ $.0001 per share		27,000,000		$	2,700		$	6,300		$	-		$	9,000

Net (Loss), for the period ended March 6, 2005											(11,605	)		(11,605	)
Balances, March 6, 2005		27,000,000		$	2,700		$	6,300		$	(11,604	)	$	(2,605	)
Net (Loss), for the period ended March 7, 2005		27,447,564			2,744			(104,701	)					(101,957	)

Shares issued for cash in a private Placement
March 9, 2005 Stock issued for cash @ $.34 per share		300,000			30			99,970						100,000
March 31, 2005 Stock issued for cash @ $.34 per share		390,000			39			129,961						130,000
April 5, 2005 Stock issued for cash @ $.34 per share		60,000			6			19,994						20,000
April 15, 2005 Stock issued for cash $.34 per share		120,000			12			39,988						40,000
April 21, 2005 Stock issued for cash @ $.34 per share		60,000			6			19,994						20,000
Offering costs								(4,000	)					(4,000	)

Beneficial conversion feature - 930,000 warrants issued in above PPM								230,900						230,900

Shares issued as compensation
June 15, 2005 Stock issued @ FMV of $.89 per share		1,200,000			120			1,066,380						1,066,500
July 29, 2005 Stock issued @ FMV of $1.02 per share		900,000			90			917,910						918,000
September 21, 2005 Stock issued @ FMV of $1.22 per share		600,000			60			731,940						732,000
September 22, 2005 Stock issued @ FMV of $1.21 per share		50,000			5			60,495						60,500
October 26, 2005 Stock issued @ FMV of $1.19 per share		25,000			3			29,748						29,750
November 10, 2005 Stock issued @ FMV of $.89 per share		50,000			5			54,495						54,500

Stock options issued for Compensation to non-employees
April 18, 2005 120,000 options vested @ FMV of $.32 per share								38,298						38,298
April 18, 2005 21,819 options vested @ FMV of $.40 per share								8,643						8,643

Loss for the period from March 6, 2005 to March 31, 2006											(4,079,552	)		(4,079,552	)

Balances, December 31, 2005		58,202,564		$	5,820		$	3,346,315		$	(4,091,157		$	(739,022	)

Stock options issued for Compensation to non-employees
January 1, 2006 7,273 options vested @ FMV $.41 per share								2,996						2,996
April 7, 2006, 21,819 options vested @ FMV of $.40 per share								8,728						8,728

Shares issued for services to non- employees
May 24, 2006, stock issued for FMV of $1.40		10,000			1			13,999						14,000
December 11, 2006, stock issued for FMV of $ .96		25,000			3			23,997						24,000

Shares issued for cash in a private placement
February 16, 2006 Stock issued for cash @ $1.00 per share		400,000			40			399,960						400,000
May 24, 2006 Stock issued for cash @ $.75 per share		200,000			20			149,980						150,000
June 5, 2006 Stock issued for cash @ $.75 per share		133,334			13			99,987						100,000
August 16, 2006 Stock issued for cash @ $.75 per share		42,670			4			31,996						32,000
August 23, 2006 Stock issued for cash @ $.75 per share		93,340			9			69,991						70,000
October 20, 2006 Stock issued for cash @$.75 per share		133,334			13			99,987						100,000
December 18,2006 Stock issued for cash @.75 per share		133,334			13			99,987						100,000

Shares exchanged for debt
February 2, 2006 Stock issued for cash @ $.91 per share		1,073,507			107			985,026						985,133

Cancellation of share issued as compensation to employees		(600,000	)		(60	)		(731,940	)					(732,000	)

Loss for the period ended December 31, 2006											(435,407	)		(435,407	)

Balances, December 31, 2006		59,847,083		$	5,983		$	4,601,009		$	(4,526,564	)	$	80,428

Shares issued for cash in a private placement

Shares issued for cash in a private placement
February 20, 2007 Stock issued for cash @ $.75 per share		200,000			20			149,980						150,000
May 20, 2007 Stock issued for cash @ $.60 per share		250,000			25			149,975						150,000
July 10, 2007 Stock issued for cash @ $.40 per share		250,000			25			99,975						100,000
August 22, 2007 Stock issued for cash @ $.25 per share		400,000			40			99,960						100,000
November 16, 2007 Stock issued for Cash @ $.10 per share		1,500,000			150			149,850						150,000

Loss for the year ended December 31, 2007											(726,059	)		(726,059	)

Balances, December 31, 2007		62,447,083		$	6,243		$	5,250,749		$	(5,252,623	)	$	4,369

Shares issued for cash in a private placement
January 15, 2008 Stock issued for cash @ $.04 per share		7,500,000			750			299,250						300,000

Loss for the period September 30, 2008											(244,307	)		(244,307	)

Balances, September 30, 2008		69,947,083		$	6,993		$	5,549,999		$	(5,496,930	)	$	60,062

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

FUSA CAPITAL CORPORATION

(A Development Stage Company)

Notes to Interim Consolidated Financial Statements

September 30, 2008

(Unaudited)

Note 1 – Interim Reporting

The accompanying unaudited interim consolidated financial statements have been prepared by FUSA Capital Corporation (the “ Company”) pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the fiscal year ended December 31, 2007.

The results of operations for the nine months ended September 30, 2008 are not indicative of the results that may be expected for the full year.

Note 2 – Significant accounting policies

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Restricted cash

At September 30, 2008 current assets include restricted cash of $11,500, which is held as short term, interest bearing collateral to support a bank credit facility for the Company.

Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Financial instruments

The fair value of cash, accounts payable and accrued liabilities are comparable to the carrying amounts thereof given their short-term maturity.

Concentrations of credit risk

The Company is subject to concentrations of credit risk on their temporary cash investments due to the use of a limited number of banking institutions. The Company mitigates this risk by placing temporary cash investments with major financial institutions, which have all been accorded high ratings by primary rating agencies.

FUSA CAPITAL CORPORATION

(A Development Stage Company)

Notes to Interim Consolidated Financial Statements

September 30, 2008

(Unaudited)

Comprehensive Income

The Company has adopted SFAS 130 “Reporting Comprehensive Income” which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.

Advertising Costs

We expense all advertising, promotion and marketing costs as they so far have not included any direct- response advertising costs requiring capitalization. Non direct and related costs incurred during the nine months and three months ended September 30, 2008 within this category, which are included in selling, general and administrative expense, amounted to approximately $1,287 ( 2007-$71,389) and $nil (2007-$24,489) respectively.

Stock-based compensation

As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the Company has elected to follow Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock-based compensation to employees. Under APB No. 25, when the exercise price of the Company’s employee stock options is equal to or greater than the fair value of the underlying stock on the date of grant, no compensation expense is recognized.

In December 2004, the FASB issued SFAS 123R, Share Based Payments. SFAS 123R is applicable to transactions in which an entity exchanges its equity instruments for goods and services. It focuses primarily on transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R supersedes the intrinsic value method prescribed by APB No. 25, requiring that the fair value of such equity instruments be recorded as an expense as services are performed. Prior to SFAS 123R, only certain pro forma disclosures of accounting for these transactions at fair value were required. SFAS 123R will be effective for the first quarter 2006 consolidated financial statements, and permits varying transition methods including retroactive adjustment of prior periods or prospective application beginning in 2006. The Company adopted SFAS 123R using the modified prospective method effective January 1, 2006. Under this transition method the Company began recording stock option expense prospectively, starting in first quarter 2006.

For stock based compensation to non-employees, the Company is required to follow SFAS No. 123, which requires that stock awards granted to directors, consultants and other non-employees be recorded at the fair value of the award granted.

Research and development costs

Pursuant to SFAS No. 2, "Accounting for Research and Development Costs," our research and development costs, which relate to the development of software to be used in our search engine technology, were expensed as technological feasibility of the software had not been reached as of September 30, 2008.

The cost of materials and equipment that are acquired for research and development activities and that have alternative future uses are capitalized when acquired, such as computer equipment.

FUSA CAPITAL CORPORATION

(A Development Stage Company)

Notes to Interim Consolidated Financial Statements

September 30, 2008

(Unaudited)

Property and equipment

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method and the half year convention. Estimated useful lives for property and equipment categories are as follows:

Furniture and fixtures	7 years
Computer systems	5 years
Leasehold improvements	Lease term

Long lived assets are tested for impairment whenever events or changes in circumstances indicate their carrying amount may not be recoverable. The determination of any impairment loss includes a comparison of estimated undiscounted future cash flows anticipated to be generated during the remaining life of the asset or group of assets to the net carrying value of the asset or group of assets. Where the net carrying amount of the asset or the group of assets is less than the undiscounted future cash flows, an impairment loss is recognized.

Income taxes

Deferred tax liabilities and assets are determined based on the differences between the book values and the tax bases of assets and liabilities, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset any deferred tax asset if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Foreign currency transactions

The business of the Company from Canada involves incurring a substantial number of operational transactions in Canada for which it transacts payments in Canadian currency through a bank account maintained for that purpose. Included in such transactions are payments for salaries, rent, consulting and many other expenses. At the time of payment, each Canadian disbursement is translated into the U. S. dollar equivalent amount and an exchange gain or loss on currency is recorded at that time. During the three months and nine months ended September 30, 2008, the currency exchange transactions resulted in a (loss) gain of ($2,025 (2007 –$1,992) and $2,074 (2007 - $435). As of September 30, 2008, the Canadian bank account balance, which was the only account balance maintained in foreign currency at that date was converted into a U. S. dollar equivalent amount.

Revenue Recognition

The company recognizes revenue when persuasive evidence of an arrangement exists, service has been provided, the sales price is fixed or determinable and collectibility is probably.

Note 3 - Going concern

The Company's consolidated financial statements are prepared using the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has not commenced its planned principal operations and has not generated revenues. It has incurred a significant operating loss as of September 30, 2008.

The Company is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful. Without sufficient financing, completion of the technology and achievement of profitable operations thereby, it would be unlikely for the Company to continue as a going concern. Management’s plan is to complete the development of its video and audio search engine technology and to utilize it as an internet service for profit.

FUSA CAPITAL CORPORATION

(A Development Stage Company)

Notes to Interim Consolidated Financial Statements

September 30, 2008

(Unaudited)

Note 4 – Related party transactions

During the 9-month period, in lieu of paying its technology officer’s his earned compensation directly of $19,942 ( 2007- $ 1,358), it paid it to a consulting company owned by the Officer. This amount relates principally to his efforts through September 30, 2008, in furthering the development of the Company’s video and audio search engine technology, accordingly, the entire amount was included in research and development expense.

Note 5 - Property and equipment

			Accumulated		Net Book Value
	Cost		Amortization
					September		December
						30, 2008	2007

Computer equipment	$	26,713	$	14,728	$	11,985	$	15,992
Furniture and fixtures		8,228		3,929		4,299		5,180
Leasehold improvements		8,621		8,142		479		2,634
	$	43,562	$	26,799	$	16,753	$	23,806

Note 6 – Commitments and contingencies

Operating Leases

The Company conducts its operations from two separate office facilities in Vancouver, Canada and one office in Seattle, Washington. One of the facilities in Vancouver is leased under a three-year operating lease expiring in October 2008. The other lease is short term as of March 31, 2006.

The office in Seattle is leased under a month to month rental.

The following is a schedule of future minimum lease payments, exclusive of all executory costs, required under the long-term operating lease above as of September 30, 2008 for the fiscal years ended:

2008

$2,359

Note 7 – Issuance of Common Stock

During the period, the company issued 7,500,000 shares of common stock for cash consideration of $ 300,000.

Note 8 – Technology License Agreement

During the year ended December 31, 2007, the company entered into a technology license agreement with Minerva Technologies Pvt. Ltd. to acquire a perpetual, fully-paid, royalty free exclusive license to technology Minerva has related to the Argon Search Engine Software. As consideration for the license, the company has agreed to pay Minerva a one-time license fee of 23,000,000 shares of common stock of the company. As at September 30, 2008, FUSA has not issued any shares related to the technology license agreement.

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 audio and video search engine technologies. Our objective is to become the leading innovator of search engine technologies for online consumers as well as digital content providers. To that end we currently operate and market the website searchforvideo.com which is an online video clip directory that aggregates and indexes video clips through relationships with online video providers as well as using advanced search technology to uncover videos from various sites across the web. In addition, the company also operates the websites www.newstowatch.com, www.podanza.com and www.iheard.com, each of which presents innovative search technology to consumers to enable them to easily find the content of their choice. It is the intention of the company to expand the number of sites that the company develops, operates and markets in the future, although the capital markets environment has been very challenging In the event that financing is not forthcoming to expand our business as planned, we believe that there are a number of potential strategic business options that would still this technology to continue to be commercialized and developed. During the current unfavorable market conditions for obtaining financing, we have chosen not to take on debt, but instead to institute additional streamlining and cost cutting measures to allow us to continue to operate our websites, improve their performance and cut costs.

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.

Since April, 2005 we have been actively engaged in the business of developing innovative multimedia search engine technologies for consumers and digital content providers. We operate a portfolio of consumer search services including the video search engine www.searchforvideo.com, news discovery service www.newstowatch.com, internet radio search engine www.iheard.com and podcast search engine www.podanza.com.

On August 23, 2007, we entered into a Technology License Agreement with Minerva Technologies Pvt. Ltd., an Indian corporation ("Minerva"), whereby we received a perpetual, fully-paid, royalty free exclusive license to technology Minerva has related to the Argon Search Engine Software ("ASES") Technology and MyWorld Service powered by its Artificial Intelligence Text Mining (AITM) engine in exchange for 23,000,000 of our common shares. We have not proceeded with the completion of this transaction and are not certain if the transaction will ever be concluded.

Our principal executive offices are located at 1420 Fifth Avenue, 22nd Floor, Seattle, Washington 98101. Our phone number is (206) 274-5107.

The Company’s fiscal year end is December 31.

RESULTS OF OPERATIONS

Financial Condition and Liquidity

Overview

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 September 30, 2008, the Company generated no significant revenues and posted a net loss of $5,496,930 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 September 30, 2008 was $78,092, as compared to the cash balance of $5,255 as of December 31, 2007.

Three Month Period Ending September 30, 2008

Operating expenses for the three month period ended September 30, 2008 totaled $99,013 and from inception to the period ended September 30, 2008 totaled $5,594,250. The company experienced a net loss of $79,329 and $5,496,930 for the three month period ended September 30, 2008 and from inception to period ended September 30, 2008, respectively, against $97,320 in revenue, $94,759 from operations and $2,561 from interest in the entire period and $19,684 in revenue, consisting of $19,684 in revenues from sales and $0 in interest for the three month period ending September 30, 2008. The major expenses during this three month period were for general and administrative expenses, research and development expenses on our websites and legal and accounting fees.

Revenues increased during the period as compared with comparable periods in 2007. In contrast to our performance over the same 3 month period ending September 30, 2007, where revenues from operations were $12,140, revenues from operations in the three month period ending September 30, 2008 were $19,684 or an increase of approximately 61%.

Expenses were lower when compared with comparable periods in 2007. In contrast to our performance over the same 3 month period ending September 30, 2008, where expenses were $99,013, expenses in the nine month period ending September 30, 2007 were $192,507, representing a significant decrease. This decrease is attributable to lower general and administrative expenses and lower research and development expenses. This represents a decrease of approximately 51%.

The earnings per share (fully diluted -- weighted average) consisted of a net loss of $0.00 for the three month period ended September 30, 2008.

Liquidity and Capital Resources

For the nine month period ended September 30, 2008, net cash used in operating activities, consisting mostly of loss from operations was $244,413. For the period from inception to September 30, 2008, net cash used in operating activities, consisting mostly of loss from operations was $2,964,426.

For the period from inception to September 30, 2008, net cash resulting from financing activities was in the amount of $3,104,851. Cash proceeds from the sale of common stock during the nine month period ending September 30, 2008 were $300,000.

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, 2007. 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

The current capital markets environment presents significant challenges for any emerging growth technology business and our business is no exception. In light of the expense and difficulty involved in raising or borrowing additional capital, we have elected to cut expenses and increase revenues as we work toward sustainable break-even. Achievement of this goal would make us well-positioned to grow significantly once the capital markets improve and growth capital is available at more reasonable terms. Over the next eighteen to twenty-four months we intend to focus on streamlining the technology that runs our websites in an effort to continue to reduce costs and increase revenues. If we can continue to reduce costs and increase revenues at the rate that we have over the past 12-24 months, we should be at sustainable break even within 12-18 months.

Our strategy involves enticing potential clients with the richness of our consumer data and the substantial traffic on our websites interest and use we hope to have already generated with our websites and size of potential revenue returns that our software can provide to these clients via enhancements in the way that they market video and audio content, while at the same time automating as much as possible the procedures involved in operating our business and increasing revenue such that we continue to lower costs.

We have already begun to produce a small amount of revenue, which has been increasing over time. We do not know if our revenue will continue to increase over comparable periods. We believe that we are just beginning to monetize the traffic in our consumer search engine network, we could grow substantially as that traffic continues to yield revenue.

We also anticipate spending no more than $400,000 on operations and salaries and costs related to marketing and research and development over the course of the next twelve months. In addition to the payments for office space, we believe that we will have to spend approximately $100,000 for our servers and network administration costs. This is of course dependent on our ability to raise additional funds, which is very challenging in the current capital environment. These plans could be delayed indefinitely due to lack of funding. Nevertheless, if funding were available, we would be able to grow more aggressively than to just sustainable break-even. With additional funds, we would pursue the following plan:

Our twelve-month plan requires us to accomplish the following steps with sufficient funding:

· Increase traffic to all websites by focusing on retention of current users and driving traffic for significant increases in new users to all websites.

· Continue to add cutting edge video content through additional relationships with video publishers;

· Continue to develop our www.podanza.com, www.newstowatch.com and www.iheard.com search engine websites to maximize their reach, technology, offerings and impact

· Continue to develop our technical team;

· Continue to compile usage statistics for our websites;

· Continue to identify our most likely customers from amongst content providers;

· Continue to develop rapport with likely content customers;

· Present content customers with sales presentation;

· Add at least one additional site under the “searchformedia” umbrella; and

· Architect and begin development of subsequent versions and upgrades to core technology.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 September 30, 2008 and 2007 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, 2007.

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 amended annual report on Form 10-KSB for the year ended December 31, 2007 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 September 30, 2008. 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 consolidated financial statements included in this report fairly present, in all material

respects, our consolidated financial position and results of operations as of and for the period ended September 30, 2008.

Remediation of Material Weakness

As discussed in Management's Annual Report on Internal Control over Financial Reporting, as of December 31, 2007, as amended, 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, 2007 and September 30, 2008. 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 September 30, 2008, 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 September 30, 2008, the company issued 7,500,000 restricted shares of common stock for cash consideration of $300,000 or $0.04 per share.

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

List of 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
31.2	Certification of Chief Financial 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
32.1	Certification of the Company’s Chief Financial 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: November 3, 2008