SPECTRAL CAPITAL Corp - Quarter Report: 2010 March (Form 10-Q)
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
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SECURITIES
EXCHANGE ACT OF 1934
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For the
quarterly period ended March 31, 2010
OR
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[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE
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SECURITIES
EXCHANGE ACT OF 1934
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For the
transition period from ________ to ________
Commission
File No. 000-50274
FUSA
Capital Corporation
(Exact
name of Registrant as specified in its charter)
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Nevada
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510520296
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification Number)
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701 Fifth Avenue,
Suite 4200, Seattle, WA
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98104
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(Address
of principal executive offices)
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(Zip/Postal
Code)
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(206)
274-5107
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(Telephone
Number)
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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
April 30, 2010, there are issued and outstanding only common equity shares in
the amount of 47,623 shares, par value $0.0001, of which there is only a single
class.
TABLE
OF CONTENTS
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PART
I.
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FINANCIAL
INFORMATION
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|
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Item
1.
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Financial
Statements:
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4 |
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InInterim
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December
31, 2009 (audited)
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F-1
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|
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Interim
Consolidated Statements of Operations for the three months ended March 31,
2010 and March 31, 2009 and cumulative from inception on February 9,
2005 through March 31, 2010 (unaudited)
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F-2
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|
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Interim
Consolidated Statement of Stockholders’ Deficit from inception on February
9, 2005 through March 31, 2010 (unaudited)
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F-3
|
|
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Interim
Consolidated Statement of Cash Flows for the three months ended March 31,
2010 and March 31, 2009 and cumulative from inception on February 9, 2005
through March 31, 2010 (unaudited)
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F-4
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|
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Notes
to Financial Statements (unaudited)
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F-5
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Item
2.
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Plan
of Operation
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5
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Item
3.
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Quantitative
and Qualitative Disclosures about market risk
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11
|
|
Item
4.
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Controls
and Procedures
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11 |
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PART
II.
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OTHER
INFORMATION
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|
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Item
1.
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Legal
Proceedings
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12
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|
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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12
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Item
3.
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Defaults
Upon Senior Securities
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12
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Item
4.
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Submission
of Matters to a Vote of Security Holders.
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12
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Item
5.
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Other
Information
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12
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Item
6.
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Exhibits
& Signature
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13 |
2
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.
3
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
FINANCIAL
STATEMENTS
MARCH
31, 2010
4
FUSA
CAPITAL CORP.
(AN
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
AS
OF MARCH 31, 2010 AND DECEMBER 31, 2009
|
March
31,
2010
(unaudited)
|
December
31,
2009
(audited)
|
|||||||
|
ASSETS
|
||||||||
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Current
assets
|
||||||||
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Cash
and cash equivalents
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$ | 4,659 | $ | 6,098 | ||||
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Total
Current Assets
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4,659 | 6,098 | ||||||
|
Total
Assets
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$ | 4,659 | $ | 6,098 | ||||
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LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
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Liabilities
|
||||||||
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Current
liabilities
|
||||||||
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Accounts
payable
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$ | 15,457 | $ | 8,409 | ||||
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Accrued
expenses
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9,431 | 6,681 | ||||||
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Due
to related parties
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- | - | ||||||
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Note
payable
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50,000 | 50,000 | ||||||
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Total
Liabilities
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74,888 | 65,090 | ||||||
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Stockholders’
deficit
|
||||||||
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Common
stock, par value $0.000, 333,333 shares authorized, 47,623 shares issued
and outstanding
|
5 | 5 | ||||||
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Additional
paid-in capital
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5,557,987 | 5,557,987 | ||||||
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Deficit
accumulated during the development stage
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(5,628,221 | ) | (5,616,984 | ) | ||||
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Total
Stockholders’ Deficit
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(70,229 | ) | (58,992 | ) | ||||
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Total
Liabilities and Stockholders' Deficit
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$ | 4,659 | $ | 6,098 | ||||
The
accompanying notes are an integral part of these financial
statements.
F-1
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
PERIOD
FROM AUGUST 25, 2003 (INCEPTION) TO MARCH 31, 2010
(unaudited)
|
Three
Months
Ended
March
31,
2010
|
Three
Months
Ended
March
31,
2009
(Restated)
|
Period
from
August
25,
2003
(Inception)
To
March
31,
2010
|
||||||||||
|
REVENUES
|
$ | 287 | $ | 7,813 | $ | 119,058 | ||||||
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OPERATING
EXPENSES
|
||||||||||||
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Selling,
general and administrative
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4,033 | 15,289 | 2,481,721 | |||||||||
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Wages
and benefits
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- | 10,091 | 756,845 | |||||||||
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Legal
fees
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6,241 | 3,600 | 285,324 | |||||||||
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Research
and development
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- | - | 1,961,563 | |||||||||
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Beneficial
conversion expense
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- | - | 230,900 | |||||||||
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Depreciation
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- | - | 21,150 | |||||||||
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TOTAL
OPERATING EXPENSES
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10,274 | 28,980 | 5,737,503 | |||||||||
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LOSS
FROM OPERATIONS
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(9,987 | ) | (21,167 | ) | (5,618,445 | ) | ||||||
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OTHER
INCOME (EXPENSE)
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(1,250 | ) | - | (9,776 | ) | |||||||
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LOSS
BEFORE INCOME TAXES
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(11,237 | ) | (21,167 | ) | (5,628,221 | ) | ||||||
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PROVISION
FOR INCOME TAXES
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- | - | - | |||||||||
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NET
LOSS
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$ | (11,237 | ) | $ | (21,167 | ) | $ | (5,628,221 | ) | |||
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NET
LOSS PER SHARE: BASIC AND DILUTED
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$ | (0.24 | ) | $ | (.45 | ) | ||||||
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WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED, restated for
1,500:1 reverse split
|
46,631 | 46,631 | ||||||||||
The
accompanying notes are an integral part of these financial
statements.
F-2
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS' DEFICIT
AS
OF MARCH 31, 2010
(unaudited)
|
Common
Stock
|
Additional
|
Deficit
Accumulated
During
the
Development
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Total
Stockholders’
Equity
|
|||||||||||||||||
|
Shares
|
Amount
|
Paid
in Capital
|
Stage
|
(Deficit)
|
||||||||||||||||
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Balance,
December 31, 2007, as originally reported
|
41,631 | $ | 4 | $ | 5,256,988 | $ | (5,252,623 | ) | $ | 4,369 | ||||||||||
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Correction
of an accounting error
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5,947 | 5,947 | ||||||||||||||||||
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Balance,
December 31, 2007, as Restated
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41,631 | 4 | 5,256,988 | (5,246,676 | ) | 10,316 | ||||||||||||||
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Issuance
of common stock for cash @ $0.04 per share
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5,000 | 1 | 299,999 | - | 300,000 | |||||||||||||||
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Net
loss for the year ended December 31, 2008
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- | - | - | (292,310 | ) | (292,310 | ) | |||||||||||||
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Balance,
December 31, 2008
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46,631 | 5 | 5,556,987 | (5,538,986 | ) | 18,006 | ||||||||||||||
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Conversion
of debt to common stock
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133 | - | 1,000 | 1,000 | ||||||||||||||||
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Reverse
stock split 1,500:1, fractional shares issued
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859 | - | - | - | - | |||||||||||||||
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Net
loss for the year ended December 31, 2009
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- | - | - | (77,998 | ) | (77,998 | ) | |||||||||||||
|
Balance,
December 31, 2009
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47,623 | 5 | 5,557,987 | (5,616,984 | ) | (58,992 | ) | |||||||||||||
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Net
loss for the period ended March 31, 2010
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- | - | - | (11,237 | ) | (77,998 | ) | |||||||||||||
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Balance,
March 31, 2010
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47,623 | $ | 5 | $ | 5,557,987 | $ | (5,628,221 | ) | $ | (136,990 | ) | |||||||||
The
accompanying notes are an integral part of these financial
statements.
F-3
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
PERIOD
FROM AUGUST 25, 2003 (INCEPTION) TO MARCH 31, 2010
(unaudited)
|
Three
Months
Ended
March
31,
2010
|
Three
Months
Ended
March
31,
2009
(Restated)
|
Period
from
August
25, 2003
(Inception)
to
March
31,
2010
|
||||||||||
|
CASH
FLOWS USED IN OPERATING ACTIVITIES
|
||||||||||||
|
Net
loss for the period
|
$ | (11,237 | ) | $ | (21,167 | ) | $ | (5,628,221 | ) | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
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Depreciation
and amortization
|
- | - | 21,150 | |||||||||
|
Common
stock issued for compensation
|
- | - | 2,129,250 | |||||||||
|
Common
stock issued for services
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- | - | 47,000 | |||||||||
|
Stock
options issued for services
|
- | - | 55,669 | |||||||||
|
Beneficial
conversion feature on warrant issue
|
- | - | 230,900 | |||||||||
|
Loss
on disposal of property and equipment
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- | - | 5,879 | |||||||||
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Property
and equipment traded for services
|
- | - | 24,805 | |||||||||
|
(Increase)
decrease in accounts receivable
|
- | 280 | - | |||||||||
|
Increase
(decrease) in accounts payable & accrued expenses
|
9,798 | (1,068 | ) | 14,209 | ||||||||
|
Cash
flows used in operating activities
|
(1,439 | ) | (21,955 | ) | (3,099,359 | ) | ||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
|
Purchase
of property and equipment
|
- | - | (51,327 | ) | ||||||||
|
Proceeds
on disposal of capital assets
|
494 | |||||||||||
|
Cash
flows used in investing activities
|
- | - | (50,833 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Cash
received in recapitalization of the Company
|
- | 184 | ||||||||||
|
Proceeds
from note payable
|
- | 50,000 | 50,000 | |||||||||
|
Proceeds
from issuance of common stock
|
- | - | 2,212,000 | |||||||||
|
Offering
costs from issuance of common stock
|
- | - | (4,000 | ) | ||||||||
|
Net
advances
|
- | - | 896,667 | |||||||||
|
Cash
flows provided by financing activities
|
- | 50,000 | 3,154,851 | |||||||||
|
NET
INCREASE (DECREASE) IN CASH
|
(1,439 | ) | 28,045 | 4,659 | ||||||||
|
Cash,
beginning of the period
|
6,098 | 25,866 | - | |||||||||
|
Cash,
end of the period
|
$ | 4,659 | $ | 53,911 | $ | 4,659 | ||||||
|
Cash
summary
|
||||||||||||
|
Cash
|
$ | 4,659 | $ | 42,411 | $ | 4,659 | ||||||
|
Restricted
cash
|
- | 11,500 | - | |||||||||
| $ | 4,659 | $ | 53,911 | $ | 4,659 | |||||||
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||||||||||
|
Interest
paid
|
$ | - | $ | - | $ | - | ||||||
|
Income
taxes paid
|
$ | - | $ | - | $ | - | ||||||
|
SUPPLEMENTAL
DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||||||
|
Non-monetary
net liabilities assumed in recapitalization of the Company on March 7,
2005
|
$ | - | $ | $ | 101,956 | |||||||
|
Shares
issued to settle debt
|
$ | - | $ | - | $ | 1,000 | ||||||
The
accompanying notes are an integral part of these financial
statements.
F-4
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2010
NOTE
1 – NATURE OF OPERATIONS AND BASIS OF REPORTING
The
accompanying unaudited interim 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 financial statements should be read in
conjunction with the audited financial statements of the Company for the fiscal
year ended December 31, 2009.
The
results of operations for the three months ended March 31, 2010 are not
indicative of the results that may be expected for the full year.
Galaxy
Championship Wrestling Inc., a development stage company was incorporated on
September 13, 2000 under the laws of the State of Nevada and changed its name to
Fusa Capital Corporation on June 17, 2005. On March 7, 2005, the
Company acquired all of the issued and outstanding shares of Fusa Technology
Investments, Inc. a development stage Nevada Corporation, formed on February 9,
2005 under the laws of the State of Nevada. For accounting purposes,
the transaction was accounted for as a recapitalization such that the historical
transactions of the acquired Company were carried forward.
The
Company is in the business of developing internet search engine
technology. It has limited revenue and in accordance with SFAS # 7
(ASC 915-10), is considered to be in the development stage
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting
Basis
These
financial statements are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of
America.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles of the United States 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 financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
F-5
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2010
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per
Share
Net
income (loss) per common share is computed based on the weighted average number
of common shares outstanding and common stock equivalents, if not
anti-dilutive. The Company has not issued any potentially dilutive
common shares.
Basic
loss per share is calculated using the weighted average number of common shares
outstanding and the treasury stock method is used to calculate diluted earnings
per share. For the years presented, this calculation proved to be
anti-dilutive.
Dividends
The
Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
Revenue
Recognition
The
Company recognizes revenue when products are fully delivered or services have
been provided and collection is reasonably assured
Income
Taxes
The
Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently. Deferred tax assets are reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be
realized. No provision for income taxes is included in the statement
due to its immaterial amount, net of the allowance account, based on the
likelihood of the Company to utilize the loss carry-forward.
Stock-Based
Compensation
The
Company did not issue any stock-based payments to its employees in 2009 or 2008.
The Company uses the modified prospective method of accounting for stock-based
compensation. Under this transition method, stock compensation expense includes
compensation expense for all stock-based compensation awards granted on or after
January 1, 2006, based on the estimated grant-date fair
value.
Recent Accounting
Pronouncements
In May
2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent
Events”. Companies are now required to disclose the date through
which subsequent events have been evaluated by management. Public entities (as
defined) must conduct the evaluation as of the date the financial statements are
issued, and provide disclosure that such date was used for this evaluation. SFAS
165 (ASC 855-10) provides that financial statements are considered “issued” when
they are widely distributed for general use and reliance in a form and format
that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and
annual periods ending after June 15, 2009 and must be applied prospectively. The
adoption of SFAS 165 (ASC 855-10) during the year ended November 30, 2009 did
not have a significant effect on the Company’s financial statements as of that
date. In connection with the preparation of the accompanying financial
statements as of November 30, 2009, management evaluated subsequent events
through the date that such financial statements were issued (filed with the
SEC).
F-6
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2010
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In June
2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC
105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of
authoritative accounting principles recognized by the FASB to be applied by all
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for
financial statements issued for fiscal years ending on or after September 15,
2009 and interim periods within those fiscal years. The adoption of SFAS 168
(ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations
or financial condition. The Codification did not change GAAP, however, it did
change the way GAAP is organized and presented.
As a
result, these changes impact how companies reference GAAP in their financial
statements and in their significant accounting policies. The Company implemented
the Codification in this Report by providing references to the Codification
topics alongside references to the corresponding standards.
With the
exception of the pronouncements noted above, no other accounting standards or
interpretations issued or recently adopted are expected to have a material
impact on the Company’s financial position, operations or cash
flows.
Research and development
costs
Pursuant
to SFAS No. 2 (ASC 730-10), “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
March 31, 2010. 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.
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. As of March 31, 2010, 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.
NOTE
3 – RELATED PARTY TRANSACTIONS
During
the period ended March 31, 2010, in lieu of paying its technology officer his
earned compensation directly of $ nil, (2009-$8,001) it paid it to a consulting
company owned by the Officer. This amount relates principally to his
efforts in furthering the development of the Company’s video and audio search
enging technology.
NOTE
4 – NOTE PAYABLE
The
convertible promissory note payable bears interest at 10% per annum and was due
December 31, 2009. At the option of the note holder, the promissory
note payable balance outstanding with any accrued interest, may be converted
into common shares of the Company. The number of shares issued will
be calculated at a per share conversion price of $.005
The promissory note holder converted
accrued interest of $1,000 on the note into 200,000 (133 post-reverse split)
common shares of the Company in July 2009 and has agreed to extend the due date
of the promissory note payable to April 30, 2010.
F-7
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2010
NOTE
5 – INCOME TAXES
The
provision for Federal income tax consists of the following:
|
March 31,
2010
|
March
31
2009
|
|||||||
|
Refundable
Federal income tax attributable to:
|
||||||||
|
Current
operations
|
$ | 3,800 | $ | 7,200 | ||||
|
Less:
valuation allowance
|
(3,800 | ) | (7,200 | ) | ||||
|
Net
provision for Federal income taxes
|
$ | - | $ | - | ||||
The
cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
|
March 31,
2010
|
||||
|
Deferred
tax asset attributable to:
|
||||
|
Net
operating loss carryover
|
$ | 1,913,600 | ||
|
Less:
valuation allowance
|
(1,913,600 | ) | ||
|
Net
deferred tax asset
|
$ | - | ||
Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards for federal income tax reporting purposes are subject to
annual limitations. Should a change in ownership occur net operating loss carry
forwards may be limited as to use in future years.
NOTE
6 – GOING CONCERN
The
Company's 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 begun to generate revenues, and has incurred a significant operating
loss as of March 31, 2010.
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, or the achievement of profitable operations, it would be unlikely for
the Company to continue as a going concern.
NOTE
7 – CORRECTION OF ERRORS AND RESTATEMENTS
The
Company restated its balance sheet and statement of operations at December 31,
2008 to correct errors in its accounting. Property and equipment were disposed
of with a net book value of $8,824. Correspondingly, depreciation expense was
reduced by $7,089. In addition, accrued liabilities in the amount of $15,913
were reversed. Also, an expense paid in 2008 in the amount of $59,004 related to
a prior period. The net effect of these adjustments was to increase the December
31, 2007 accumulated deficit by $59,004 and reduce the net loss for the year by
$66,092.
The
December 31, 2008 balance sheet has been restated to correct the property and
equipment, accounts payable and accrued expenses, and
stockholders’deficit.
F-8
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2010
NOTE
7 – CORRECTION OF ERRORS AND RESTATEMENTS (continued)
The
December 31, 2008 statement of operations has been restated to reflect the
changes in expenses.
The March
31, 2009 statement of operations has been restated to reflect the reduction of
depreciation expense in the amount of $1,629.
The
following are the before and after balances as restated:
|
Balance
Sheet
|
Year
Ended
December
31, 2008
|
|||
|
Property
and Equipment, net of depreciation
|
||||
|
Before
|
$ | 8,824 | ||
|
After
|
$ | 0 | ||
|
Current
Liabilities
|
||||
|
Before
|
$ | 154,250 | ||
|
After
|
$ | 138,337 | ||
|
Stockholders’
Equity
|
||||
|
Before
|
$ | (141,719 | ) | |
|
After
|
$ | (134,630 | ) | |
|
Statement
of Operations
|
||||
|
Operating
Expenses
|
||||
|
Before
|
$ | 2,756,922 | ||
|
After
|
$ | 2,733,620 | ||
|
Other
Income (Expense)
|
||||
|
Before
|
$ | 0 | ||
|
After
|
$ | (16,214 | ) | |
|
Income
(Loss) from Operations
|
||||
|
Before
|
$ | (2,756,922 | ) | |
|
After
|
$ | (2,690,830 | ) | |
|
Net
Income (Loss)
|
||||
|
Before
|
$ | (2,756,922 | ) | |
|
After
|
$ | (2,690,830 | ) | |
|
Three
Months Ended
March
31, 2009
|
||||
|
Statement
of Operations
|
||||
|
Operating
Expenses
|
||||
|
Before
|
$ | 30,609 | ||
|
After
|
$ | 28,980 | ||
|
Income
(Loss) from Operations
|
||||
|
Before
|
$ | (22,796 | ) | |
|
After
|
$ | (21,167 | ) | |
|
Net
Income (Loss)
|
||||
|
Before
|
$ | (22,796 | ) | |
|
After
|
$ | (21,167 | ) | |
F-9
FUSA
CAPITAL CORP.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2010
NOTE
8 – SUBSEQUENT EVENTS
The
Company has analyzed its operations subsequent to March 31, 2010 through the
date these financial statements were filed with the Securities and Exchange
Commission.
F-10
|
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.
5
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.
6
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.
On June
29, 2009, our Board of Directors resolved to amend the Articles of Incorporation
pursuant to Nevada Revised Statues 78.207 to decrease the number of authorized
shares of our common stock, par value $.0001, from 500,000,000 to 333,333
shares. Correspondingly, our Board of Directors affirmed a reverse split of one
thousand and five hundred (1,500) to one (1) in which each shareholder was
issued one (1) share in exchange for every one thousand and five hundred (1,500)
common shares of their currently issued common stock. The record date for the
reverse split was July 6, 2009. On July 23, 2009, we filed a
Certificate of Change pursuant to NRS 89.209 in connection with the transaction
with the Nevada Secretary of State for the decrease in authorized shares and
reverse split. Under the Nevada Revised Statutes, shareholder approval was not
required.
Our
principal executive offices are located at 701 Fifth Avenue, Suite 4200,
Seattle, Washington 98104. Our phone number is (206) 274-5107.
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,
2010, the Company generated $119,058 in revenues and posted a net loss of
$5,628,221 resulting from costs of general and administrative expenses, website
development stock compensation and interest expenses. The Company is considered
a development stage company.
The
Company had its independent auditors re-audit its December 31, 2008 financial
statements and the Company restated its financial statements for the period
ending March 31, 2008 in its 10K for the period ended December 31,
2009.
7
Cash and Working
Capital
The
Company's cash balance as of March 31, 2010 was $4,659, as compared to the cash
balance of $6,098 as of December 31, 2009.
Three Month Period Ending
March 31, 2010 and March 31, 2009 and from Inception to March 31,
2010
Operating
expenses for the three month period ended March 31, 2010 totaled $10,274, for
the three month period ended March 31, 2009 $28,890 and from inception to the
period ended March 31, 2010 totaled $5,737,503. The company experienced a net
loss of $11,237, $21,167and $5,628,221 for the three month period ended March
31, 2010, March 31, 2009 and from inception to period ended March 31, 2010,
respectively, against $287 in revenues from operations for the three month
period ending March 31, 2010, $7,813 for the three month period ended March 31,
2009 and $119,058 in revenue from the period since inception. 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
2009. 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 $0.24 for the three month period ended March 31, 2010, which reflects our
1500 to 1 reverse split as of the record date of July 6, 2009.
For the
three month period ended March 31, 2010, net cash used in operating activities,
consisting mostly of loss from operations was $1,439. For the period from
inception to March 31, 2010, net cash used in operating activities, consisting
mostly of loss from operations net of non-cash compensation, was
$3,099,359.
For the
period from inception to March 31, 2010, net cash resulting from financing
activities was in the amount of $3,154,851. There were no financings
during the period.
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.
8
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, 2009. 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
and the salary of our chief executive officer, Jenifer
Osterwalder. We are currently unable to pay the salary of our chief
executive officer, who has nevertheless continued to serve in that
capacity.
9
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.
|
10
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, 2010 and March 31, 2009
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,
2009. Accordingly, we concluded that our
disclosure controls and procedures were not effective as of December
31, 2009.
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, 2009
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.
11
PART
II OTHER INFORMATION
Item
1. Legal Proceedings
Not
Applicable
Item
2. Unregistered Sales of Securities and Use of Proceeds
None.
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
None.
12
Item
6. Exhibits
EXHIBITS
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
|
|
31.2
|
Certification
of Chief Financial and Principal Accounting 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
|
|
32.2
|
Certification
of the Company’s Chief Financial and Principal Accounting Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
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:
May 17, 2010
13