ITEM 1. DESCRIPTION OF BUSINESS.
OVERVIEW
We are a development stage technology company focused on the refinement and marketing of a comprehensive suite of media search engine technologies. Our objective is to maintain the media search engine properties and technologies we currently have and to eventually enhance and grow those properties and technologies. We currently operate the website newstowatch.com. Newstowatch.com is a breaking news discovery service that programatically reads thousands of current news stories and intelligently categorizes, organizes and ranks the most popular stories and topics from around the web. We also operate the consumer media search websites searchforvideo.com, podanza.com and iheard.com. We hope to be able to maintain our existing suite of on-line properties and technologies through the current challenging financial environment and to eventually be able to expand and grow our web properties and technologies in the future.
CORPORATE HISTORY AND DEVELOPMENT
We were incorporated in the State of Nevada on September 13, 2000 as Galaxy Championship Wrestling, Inc., a media and entertainment company focused on developing, producing and marketing live entertainment in the professional wrestling sphere.
On March 31, 2004, unable to generate sufficient revenues to sustain our professional wrestling business, we ceased operations in this field and began exploring other business opportunities.
Also on March 31, 2004 our controlling shareholders entered into a certain private stock purchase agreement, wherein they sold an aggregate of 5,750,000 of our common shares, representing a sixty-two and seventeen twentieths percent (62.85%) controlling interest, to an unrelated third party.
By certificate of amendment filed June 17, 2004, we changed our name from Galaxy Championship Wrestling, Inc. to FUSA Capital Corporation.
During the period from March 31, 2004 until March 7, 2005 we had no meaningful operations and did not carry on any active business, focusing instead on identifying and evaluating the merits of alternative potential business and acquisition opportunities which might allow us to restart operations.
On March 7, 2005 we entered into a certain plan and agreement of reorganization with FUSA Technology Investments Corp. ("FTIC"), a Nevada corporation engaged in the emerging growth field of audio and video search engine technology, whereby we acquired all of the issued and outstanding capital stock of FTIC in addition to obtaining certain intellectual property concepts related to search engine technology as developed by FTIC and its principals.
On April 22, 2005, our board of directors declared a three-for-one common stock dividend, wherein each holder of record of our common shares as of May 3, 2005 received two additional shares for each common share then held. Unless otherwise noted, all references to the number of common shares included in this annual report on Form 10-K for the fiscal year ended December 31, 2008 are stated on a post-dividend basis. Per share amounts have also been restated to reflect the common share dividend.
Since April, 2005, we have been engaged continuously in the development and operation of consumer focused media search engine technologies and portals. During the last six months of 2008, we began to substantially curtail our operations and ongoing technology development as a consequence of (i) having completed a substantial portion of our planned principal technology development work and (ii) being unable to raise sufficient funds through revenue or sales of debt or equity securities to continue our previous levels of operation and development.
We have consistently lost money on our on-line consumer media properties due to the expenses involved in hosting, promotion, development and management of those sites. In an effort to maintain as much traffic as possible on our most popular media site, www.searchforvideo.com, which is also responsible for a large proportion of our expenses, we contracted with Brass Consulting Ltd. to maintain the site in exchange for net revenue produced from the site. This agreement is cancellable after 30 days notice. This agreement allows us to maintain www.searchforvideo.com in the absence of adequate personnel or financial resources and to preserve its value for the future when we may have sufficient resources to maintain the site ourselves and grow its user base and revenue potential.
Our principal executive offices are located at 701 Fifth Avenue, Suite 4200, Seattle, Washington 98104. Our phone number is (888)366-6115.
PRINCIPAL PRODUCTS AND SERVICES
The proliferation of audio and video files on the Internet, as well as in intranets, corporate and university environments and on individual desktop computers, has created an enormous volume of available media sources. Audio and video files themselves contain vast amounts of valuable information and are readily in demand by consumers and businesses as sources of current news, information and entertainment, as well as sources of archival media. Any sizable quantity of information is only as useful as individual users can efficiently sort through and identify desired data. This identification traditionally takes place via the gradual collection of metadata about information sources, which is then quickly searched to obtain desired data. For example, a newspaper article might be associated with metadata (or information about the data) as to its author, subject, number of words, keywords and date. Metadata has a long history of use in information management; library card catalogues containing author, title and subject information and a Dewey Decimal number were forms of metadata about books.
Because the Internet and information technology has created an exponential increase in the amount of available data that can be delivered to the individual user, metadata has been transformed from a helpful method to make book and periodical retrieval more efficient, to an absolutely essential element of the ability to find and consume information. Indeed, because of the amount of information currently available, such information has virtually no value to an individual user without appropriate metadata and a mechanism or search engine to comb through that metadata to find desired information
Our technology provides customers and consumers with comprehensive search engine solutions, consisting of multiple modules. The search engine solution modules work together providing a complete search engine system to discover, scrape, index and generate metadata in RSS (Really Simple Syndication) format for syndication to any internet enabled device.
In 2007, we had developed and relaunched our consumer website, NewstoWatch.com, with significant technological upgrades. In March of 2008, we completed additional upgrades to the site. We believe these technological upgrades and site feature enhancements provide us with an opportunity to gain traffic and exposure with its unique combination of software and community participation. Newstowatch.com is a breaking news discovery service that programatically reads tens of thousands current news stories and intelligently categorizes, organizes and ranks the most popular stories and topics from around the web.
NewstoWatch makes it easy for users to participate in shaping the news. Along with the algorithmic news editor, users influence the rank and importance of news stories by their consumption and contributing new stories into the NewstoWatch news network.
In June of 2008, we completed the A-Z RSS (Really Simple Syndication) discovery directory for NewstoWatch, which makes it easier for users to find the news they are looking for.
We did not launch any new consumer media portals during 2008 and we estimate that the audience for our consumer media portals, which had grown throughout 2007 and part of 2008, will decline in the absence of additional resources to promote our properties.
OPERATIONS
At present we maintain day-to-day operations from the home of our chief executive officer in Vancouver, Canada and through our correspondence office and principal executive offices in Seattle, Washington. We have 1 full-time staff member and 2 consultants actively engaged in the development of our products and business, consisting primarily in the maintenance of our consumer web properties and in maintaining our corporate books and records and compliance with our public company responsibilities.
RESEARCH AND DEVELOPMENT
As of December, 2008 we have discontinued substantially all of our research and development efforts due to a combination of having achieved our initial development goals and a lack of funding to continue to our subsequent development goals. We have the need to expend some additional resources to continue to develop our search engine products and services, but are currently unable to do so due to funding constraints. We may need to expend significant resources in customization or in meeting customer requirements as well as continuing to respond to competition and competitive developments in the marketplace, which we are currently unable to fund.
During the fiscal year ended December 31, 2008 we incurred expenses of $54,862 on our research and development activities. From February 9, 2005 (inception) through the fiscal year ended December 31, 2008 we incurred research and development expenses of $1,991,195. We believe that our research and development expenses will decrease substantially in 2009 as we have virtually no planned research and development expenses unless our financial situation improves substantially. We also signed an agreement in 2007 to license the Argon Search Engine technology and related technologies which may improve and optimize aspects of our core search engine and consumer media portal technologies. In April of 2009, we elected to discontinue and cancel our license and development of the Argon Search Engine technology due to lack of acceptable progress by our development partner and lack of financial resources to continue to develop and deploy the technology.
PRINCIPAL MARKETS
We are not currently marketing our search engine solutions to companies operating Internet websites with news, video clip, music and sports content, but have done so in the past and would like to do so in the future once we have the personnel and financial resources to pursue such marketing. We currently offer consumers direct search engine capabilities through our various Internet websites, which we continue to maintain but have ceased actively marketing due to funding constraints.
We had just begun to seek customers for our technology prior to running out of funds for substantial marketing efforts and, although we have some content relationships in place, we are not yet generating substantial revenues from our customers. Although we have the capability of deriving significant revenue from our search engine portals, current user traffic levels are not yet sufficient to produce significant revenue.
We have also just entered the field of participatory media, with the re-launch of our www.NewstoWatch.com consumer portal. Unlike traditional news, which is static and unidirectional (from news-organization to consumer), the technology, which powers NewstoWatch.com facilitates user participation in the development of news related content. Our tools allow users to rank stories and to shape the prominence of news within the NewstoWatch.com portal. Freshness, relevance and number of viewers contribute to the rank of a story on the portal, which means that the featured content is dynamically shifting in response to the behavior of the portal community combined with site algorithms.
In addition, while there are finite resources available to us to scan the Internet for the freshest and most relevant news content, there is a vastly larger body of news that our portal community members are exposed to. Our programmatic editor allows users to post their own stories, giving them editorial control and a sense of ownership and participation within the portal community. In addition, the sheer diversity and volume of the stories that can be posted by our users eclipses the variety of content we would be able to access ourselves without this type of community support. At the moment, we have very little posting by our user community, but we expect that this would change if we were to have resources to more effectively promote the site.
ADVERTISING AND MARKETING
We have been deriving a small amount of advertising revenue from sales of ads on our consumer media portals as they were in development. In 2008, as we concluded major development on our consumer media portals, we had hoped to significantly expand the revenue stream from these portals. A combination of lack of funds to sufficiently market our properties to increase user traffic and a very difficult financial environment for aspiring Internet advertising portals has led to weaker advertising revenues than we had anticipated or hoped for. We believe that without additional financial resources to properly market our Internet properties, we anticipate that user traffic and advertising revenue will deteriorate throughout 2009. If we were to be successful in obtaining additional financing resources, which seems unlikely in the near term, we would like to pursue the three point marketing plan that we developed for 2008 and beyond which consists of:
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Driving Traffic - Driving traffic of consumers to our websites, which will ultimately enable us to sell advertising on all of our websites;
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Gathering Data - Developing a valuable library of consumer usage data from our websites that will provides potential commercial licensors of our technology with current, cutting edge information about how their audio and video content is being used by real consumers;
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Content Partnerships - Developing relationships and partnerships with a variety of content owners who want their content promoted through the company’s various websites.
In addition to the above marketing plan, we believe that the nature of the participatory media experience itself as embodied within NewstoWatch.com provides a powerful marketing tool to expand usage of the site. Every time one of our users adds a story to NewstoWatch, they are increasing their own ties to the portal community. Unlike traditional news sites, which allow users to email stories to friends but not to determine the content of the site, www.NewstoWatch.com allows those users to refer their friends to a news community that they themselves are shaping. We think that this type of relationship can make our users much more likely to spread the word about www.NewstoWatch.com and can supply us with a type of marketing which we cannot buy through traditional advertising spend…that is an emotional connection, sense of belonging and sense of ownership and participation within the portal community. We believe that this participation could result in significant growth in the website without substantial increases in our advertising expenditures, however, in order for this to occur, www.newstowatch.com would have to reach a certain critical mass threshold of users, which we have been unable to reach to date. We do not believe we will be able to reach this critical mass without substantial additional resources for promoting the site. Therefore, without additional resources, we believe that the site will not reach its potential and will not unleash the power of participatory media as described herein.
DISTRIBUTION
We distribute our products and services via the Internet for our consumer websites. We have historically also made in person efforts by our business development personnel to develop marketing and content relationships. We are not currently pursuing any of these in person efforts, but hope to resume them should we be successful in obtaining additional resources. Our chief executive officer does engage in answering queries from companies interested in partnering with us, but we have yet to receive a query that represents an opportunity to materially improve our business and that we would have the resources to pursue.
Consumer Websites
We are the owner of numerous distinctive and easy-to-remember group of URLs including:
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www.searchforvideo.com;
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www.searchforaudio.com;
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www.searchfortv.com;
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www.searchforipod.com;
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www.searchformedia.com;
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www.searchforpodcasts.com; and
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www.newstowatch.com
In addition, we also own the URLs for www.iheard.com and www.podanza.com. We believe that these websites, when sufficiently promoted and advertised, can become attractive websites for consumers to find relevant content that meets their needs. We believe that consumers’ use of our search technology through these sites can provide us with valuable data regarding actual consumer usage patterns for material on the Internet as well as catapult us into the position of a suite of leading search engines. This brand awareness and valuable consumer data could form the basis for our discussions regarding revenue opportunities through advertising and content partnerships. However, currently, we lack the resources to promote these sites in any meaningful way and therefore have minimal traffic on them.
COMPETITION
Overview
Some of the largest, best known and most technologically sophisticated companies in the world compete in the search engine space. Google™, Yahoo!®, AOL®, Microsoft®, AltaVista® and Lycos® represent some of our most well-financed and established competitors. Additionally, we face competition from a number of start-ups and new market entrants in the audio/video search subspecialty within the search engine space.
The search engine industry can really be divided into two separate industries. These are, broadly speaking, the web portal/web service or consumer directed search engine tool and the software based enterprise licensed search tool. All search engines have in common their primary function of connecting people with useful information. Our industry has functioned traditionally through three primary revenue/business models, consisting of search portal advertising, keyword advertising and software solution sales. As the audio/video search engine business is just developing, it will probably foster the development of additional revenue models. For instance, relationships between audio search engines and music download services may provide a more direct model for search engine revenue than currently exists, meaning that music download sites may wish to sponsor audio search engines and then seamlessly integrate purchase capabilities for those search result songs which exist in their libraries.
The methods of competition in the search engine industry tend to involve competition on the basis of speed, number of pages or data indexed, currency of metadata or indexed information, number of users, ease of use, downloads of embedded toolbars and search tools and range of deployment amongst affiliated websites. Search engines compete against each other by offering consumers higher quality, faster results and on ease of use and ease of access.
In addition, as we are now competing in the field of participatory media, there are a number of sophisticated competitors that compete fiercely within this space. Digg.com, youtube.com, facebook.com, LinkedIn.com and others offer tools that allow users to shape, develop and post the content that makes the site appealing and valuable to other users. We believe that www.NewstoWatch.com cannot compete successfully in spite of its focus on the most relevant, international news content and its proprietary algorithmic tools due to our lack of funding to promote the site, but even with funding the site’s success will ultimately be determined by how it competes in the area of creating a relationship with the members of the portal community that causes them to invest time on an individual basis posting news content to the community, as they have done with other types of content on our competitors’ sites. These competitors all have significantly more financial and human resources than we have and currently operate large and sophisticated media companies. Right now we cannot compete effectively in this field.
Failure of Competitors
We anticipate that many of our smaller competitors will face similar challenges to us during this difficult economic time and that many will fail. This will provide an even more significant competitive advantage to the larger players within the space, further consolidating their user base and making it more difficult for newer or smaller entrants, such as FUSA, to compete in this market.
Our Competitive Position
Many websites are currently offering functional, beta versions of audio/video search engines that produce inconsistent results, as this technology has not yet been deployed on any large scale. While the search engine industry itself is robust, competitive and well developed, the audio/video search engine industry is relatively new, and, although our position is one of vulnerable, new entrant, we believe that the possibility of commercial success does not currently exist for us in this field without additional resources, but if we were to acquire these resources, there are some factors which would help us, such as:
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we believe our technology is competitive with any publicly available audio/video search engine technology, as long as we have resources to develop and improve it;
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If we were to have a business development capability, our “agnostic” independent, non-affiliated status in this field would be attractive to customers who may not wish to align themselves with search engine vendors who have competitive products to their own or whose corporate parents are direct or indirect competitors; and
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as has been established by the success of Google, search engine technology is sufficiently powerful and disruptive that it can create enormous value in a short period of time, displacing large, well-financed and established market leaders.
We believe that our competitive position versus other new entrants to the space is exceptionally weak due to our lack of financial resources. However, we believe that we could become a strong competitor if we had additional resources because of the flexibility, simplicity and ease of deployment of our technology as well as our relatively low overhead, anticipated responsiveness to customer demands and our expertise in the area of Real Simple Syndication (an HTML programming language which is optimal for the deployment of this kind of search engine technology). IF we had additional resources, we would rely on what we believe to be our superior technology and we would retain experienced management to compete within the search engine industry. However, we may not be able to effectively compete in this intensely competitive industry as many of our competitors have longer operating histories, larger customer bases and greater financial, marketing, service, support, technical and other resources than we do.
Many companies also operate websites that compete in the participatory media space that we have just entered through www.NewstoWatch.com. We do not believe we can compete effectively in this space due to a lack of resources, however, we would have strong possibilities as a competitor if we had additional resources because of the flexibility and innovative design embodied in the proprietary features of the website. We also believe that our particular position within the highly competitive field of participatory media is an underserved sub-segment in which no brand has yet achieved dominance and in which our easy-to-remember, intuitive URL is a possible competitive advantage.
SIGNIFICANT CUSTOMERS AND SUPPLIERS
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, we are not and do not anticipate becoming dependent upon any single or group of major customers. This may, however, change should we be selected by a substantial media concern as the preferred search engine across its properties as such a relationship might involve a substantial degree of dependence, but no such relationships exist to date and are very unlikely to be developed unless we are successful in securing additional resources.
REGULATIONS
We are subject to a number of United States and foreign laws and regulations that affect companies conducting business on the internet, and which could subject us to claims or other remedies based on the nature and content of the audio or video data searched for or displayed by our search engine solutions and could consequently limit our ability to provide audio or video content regarding regulated industries and products.
The laws relating to the liability of providers of online services for the activities of their users and other third parties are currently unsettled both within the United States and abroad, and are being tested by a number of claims, including actions for defamation, libel, invasion of privacy and other data protection claims, tort, unlawful activity, copyright or trademark infringement and other theories based on the nature and content of the materials searched for or the content generated by users. From time to time we may receive notices from individuals who do not want their names or websites to appear in our audio/video web search results. It is also possible that we may be held accountable for obscene or libelous material provided over the web should such audio or video content appear in our web search results. Any such complaints, should they arise, may result in liability to us, could be potentially costly, encourage similar such lawsuits, distract management and harm our reputation and possibly our business. Furthermore, the application to us of existing federal, state and international laws regulating obscenity or obscene materials, including metadata results which could be perceived as obscene, could also cause us significant liability or technological problems and costs associated with identifying and complying with any applicable laws and regulations.
Several other federal laws could also have an impact on our business. For example, the Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, our liability for listing or linking to third-party websites that include materials that infringe copyrights or other rights. The Children’s Online Protection Act and the Children’s Online Privacy Protection Act restrict the distribution of materials considered harmful to children and impose additional restrictions on the ability of online services to collect information from children under the age of 13. In addition, the Protection of Children from Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances. The costs of complying with these laws may increase in the future as a result of changes in interpretation, and any failure on our part to comply with these laws may subject us to significant liabilities.
Likewise we are also subject to federal, state and foreign laws regarding privacy and protection of user data. The interpretation and application of data protection laws in Europe and other foreign jurisdictions is still uncertain and in flux. It is possible that these laws may be interpreted and applied in conflicting ways from country to country and in a manner that is inconsistent with our planned data protection practices. Complying with these varying international requirements could cause us to incur additional costs and force us to change our business practices. Moreover, any failure by us to protect our users’ privacy and data, in addition to the possibility of fines, could result in an order requiring that we change our planned data practices, which in turn could have a material adverse effect on our business.
In addition, laws and regulations relating to user privacy, freedom of expression, content, advertising, information security and intellectual property rights are being debated and considered for adoption by many states within the United States and foreign countries throughout the world. We face risks from proposed legislation that could be passed in the future which may subject us to additional compliance costs or may materially impact our ability to conduct our business as currently planned.
INTELLECTUAL PROPERTY
Overview
We rely for our business on a combination of pending trademarks and trade secrets in order to protect our intellectual property. Our pending trademarks and trade secrets are among the most important assets we possess in our ability to generate revenue and profits and we will depend significantly on these intellectual property assets in being able to effectively compete in our markets.
We cannot be certain that the precautions we have taken to safeguard pending trademarks and trade secrets will provide meaningful protection from unauthorized use. If we must pursue litigation in the future to enforce or otherwise protect our intellectual property rights, or to determine the validity and scope of the proprietary rights of others, we may not prevail and will likely have to make substantial expenditures and divert valuable resources in the process. Moreover, we may not have adequate remedies if our intellectual property is appropriated or our trade secrets are disclosed.
Trademarks
We have applied for registration of a number of our trademarks with the United States Patent and Trademark Office in order to establish and protect our brand names as part of our intellectual property assets. As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, all of our registrations are either completed or in the preliminary stages of the application process or remain pending.
Trade Secrets
Whenever we deem it important for purposes of maintaining competitive advantages, we require parties with whom we share, or who otherwise are likely to become privy to, our trade secrets or other confidential information to execute and deliver to us confidentiality and/or non-disclosure agreements. Among others, this may include employees, consultants and other advisors, each of whom may require to execute such an agreement upon commencement of their employment, consulting or advisory relationships. These agreements generally provide that all confidential information developed or made known to the individual by us during the course of the individual’s relationship with us is to be kept confidential and not to be disclosed to third parties except under specific circumstances.
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, we have executed non-disclosure agreements with all of our key employees, consultants or advisors.
EMPLOYEES
For the fiscal year ended December 31, 2008, we had one full-time and no part-time employees, and two consultants. We do not intend to significantly expand our staff over the next twelve months, as we have completed principal development on our suite of media portals and do not have the resources currently to continue improvements on an on-going basis or to hire business development or sales personnel, though we think that the competitive position of our company will be dependent on our ability to do so at some point in the future.
We are not subject to any collective bargaining agreements and believe that our relationships with our employees are good.
Item 1A.
Item 1A. RISK FACTORS
In addition to the other information included in this annual report, the following factors should be carefully considered in evaluating our business, financial position and future prospects. Any of the following risks, either alone or taken together, could materially and adversely affect our business, financial position or future prospects. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we have projected.
We have incurred losses since inception and anticipate that, we will continue to incur losses throughout the foreseeable future.
We have operated continuously at a loss since inception and may be unable to continue as a going concern. We expect to experience continuing financial losses. Losses for the fiscal year ended December 31, 2008, and losses since inception were approximately $301,182 and $5,553,805, respectively. The extent to which we continue to experience losses will depend on a number of factors, including:
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Whether we can raise additional funds to promote our sites and increase traffic and revenue;
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competitive developments in our market;
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Costs of hosting, Internet advertising and promotion;
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our ability to attract, retain and motivate qualified personnel, particularly sales associates if we have the resources to hire such individuals; and
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the continued use of our portals by customers in spite of our lack of spending on marketing, promotion or improvements of our sites.
Our sites may never achieve the scale of users necessary for us to become profitable. In addition, we may never obtain or sustain positive operating cash flow, generate net income or ultimately achieve cash flow levels sufficient to support our operations.
We only had $14,366 in cash at December 31, 2008, without additional cash we will fail within 6-12 months.
Even if we lose only 33% of the $301,182 we lost in 2008, we will run out of cash in 6-12 months. We may not be able to obtain equity or debt financing by this time and may need to cease business operations.
Our accumulated deficit makes it more difficult to borrow funds.
As of the fiscal year ended December 31, 2008, and as a result of historical operating losses from prior operations and losses accumulated during our development stage, our consolidated accumulated deficit was $5,553,805.. Lenders generally regard an accumulated deficit as a negative factor in assessing creditworthiness, and for this reason, the extent of our accumulated deficit coupled with our historical operating losses will negatively impact our ability to borrow funds if and when required. Any inability to borrow funds, or a reduction in favorability of terms upon which we are able to borrow funds, including the amount available to us, the applicable interest rate and the collateralization required, may affect our ability to meet our obligations as they come due, and adversely affect on our business, financial condition, and results of operations, raising substantial doubts as to our ability to continue as a going concern.
We are utterly dependent on our chief executive officer, Jenifer Osterwalder, who is our only full-time employee. If she were to resign or otherwise leave us, it is very likely that we would immediately cease operations.
Jenifer Osterwalder is currently responsible for every aspect of our business, except certain legal, accounting and site hosting functions. If she were to leave, the Company would most likely cease operations. It would be very difficult to replace her given the Company’s lack of resources, negative cash flow, expenses and deteriorating levels of user traffic.
Our sites will continue to deteriorate without maintenance and promotion and could eventually become virtually unused, destroying the value within our Company.
We do not have resources to maintain or promote our properties. Internet communities are dynamic and features, such as search, continue to evolve. If we are not able to obtain resources to maintain and promote our properties, the user base will continue to shrink, the technology will continue to become outdated and the value of our assets will be destroyed thereby.
If we fail to pay our consultant in a timely fashion, we could lose the domain name www.searchforvideo.com, our most valuable asset.
Under our agreement with Brass Consulting Ltd, dated December 1, 2008, if we fail to make payments due thereunder to Brass for operating www.searchforvideo.com, the agreement provides that Brass can seize the www.searchforvideo.com domain name.
Our Promissory Note of April 10, 2009 could cause substantial dilution to our shareholders
Our Promissory Note of April, 2009 provides that $50,000 advanced to us by shareholders can be converted at their option into our common shares at the per share price of our next financing or at our 30 day trailing average stock price, whichever is lower. This means that there is no way to anticipate in advance how many shares may be issued on conversion of this note and our current shareholders could see their holdings substantially diluted or diluted to the point of being worthless.
Unless an active trading market develops for our securities, you may not be able to sell your shares.
Although, we are a reporting company and our common shares are listed on the OTC Bulletin Board (owned and operated by the Nasdaq Stock Market, Inc.) under they symbol “FSAC”, there is currently a volatile and thinly traded market for our common stock which may not be maintained. Failure to develop maintain adequate trading volumes and price stability in the stock will have a generally negative affect on the price of our common stock, and you may be unable to sell your common stock or any attempted sale of such common stock may have the affect of lowering the market price and therefore your investment could be a partial or complete loss.
Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
Since our common stock is thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including:
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the trading volume of our shares;
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the number of securities analysts, market-makers and brokers following our common stock;
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changes in, or failure to achieve, financial estimates by securities analysts;
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new products introduced or announced by us or our competitors;
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announcements of technological innovations by us or our competitors;
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actual or anticipated variations in quarterly operating results;
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conditions or trends in our business industries;
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announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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additions or departures of key personnel;
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sales of our common stock; and
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general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies.
You may have difficulty reselling shares of our common stock, either at or above the price you paid, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, securities class action litigation has often been initiated following periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the OTC Bulletin Board and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.
Trading in our common stock on the OTC Bulletin Board may be limited thereby making it more difficult for you to resell any shares you may own.
Our common stock trades on the OTC Bulletin Board (owned and operated by the Nasdaq Stock Market, Inc.). The OTC Bulletin Board is not an exchange and, because trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a national exchange or on the Nasdaq National Market, you may have difficulty reselling any of the shares of our common stock that you may own.
Our common stock is subject to the “penny stock” regulations, which are likely to make it more difficult to sell.
Our common stock is considered a “penny stock,” which generally is a stock trading under $5.00 and not registered on a national securities exchange or quoted on the Nasdaq National Market. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. These rules generally have the result of reducing trading in such stocks, restricting the pool of potential investors for such stocks, and making it more difficult for investors to sell their shares once acquired. Prior to a transaction in a penny stock, a broker-dealer is required to:
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deliver to a prospective investor a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market;
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provide the prospective investor with current bid and ask quotations for the penny stock;
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explain to the prospective investor the compensation of the broker-dealer and its salesperson in the transaction;
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provide investors monthly account statements showing the market value of each penny stock held in the their account; and
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make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject to the penny stock rules. Since our common stock is subject to the penny stock rules, investors in our common stock may find it more difficult to sell their shares.
We do not intend to pay any common stock dividends in the foreseeable future.
We have never declared or paid a dividend on our common stock and, because we have very limited resources and a substantial accumulated deficit, we do not anticipate declaring or paying any dividends on our common stock in the foreseeable future. Rather, we intend to retain earnings, if any, for the continued operation and expansion of our business. It is unlikely, therefore, that the holders of our common stock will have an opportunity to profit from anything other than potential appreciation in the value of our common shares held by them. If you require dividend income, you should not rely on an investment in our common stock.
Future issuances of our common stock may depress our stock price and dilute your interest.
We may issue additional shares of our common stock in future financings or grant stock options to our employees, officers, directors and consultants under our stock incentive plan. Any such issuances could have the affect of depressing the market price of our common stock and, in any case, would dilute the percentage ownership interests in our company by our shareholders. In addition, we could issue serial preferred stock having rights, preferences and privileges senior to those of our common stock, including the right to receive dividends and/or preferences upon liquidation, dissolution or winding-up in excess of, or prior to, the rights of the holders of our common stock. This could depress the value of our common stock and could reduce or eliminate amounts that would otherwise have been available to pay dividends on our common stock (which are unlikely in any case) or to make distributions on liquidation.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY.
Our principal executive offices are located at 701 Fifth Avenue, Suite 4200, Seattle, Washington, 98104. Our telephone number is (888)-366-6115. We lease this space on a month-to-month basis.
We had previously leased space in Vancouver under a long-term lease. We were able to terminate this lease. We also operate from the home of our Chief Executive Officer in Vancouver and from the offices of our consultants, for which we do not pay rent.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, there were no pending material legal proceedings to which we were a party and we are not aware that any were contemplated. There can be no assurance, however, that we will not be made a party to litigation in the future. Any finding of liability imposed against us is likely to have an adverse effect on our business, our financial condition, including liquidity and profitability, and our results of operations
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of our stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended December 31, 2008.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock is quoted on the OTC Bulletin Board, a service provided by the Nasdaq Stock Market Inc., under the symbol “FSAC”, and on the Frankfurt Stock Exchange under the symbol “F3S”.
The following table sets forth the high and low bid prices for our common stock as reported each quarterly period within the last four fiscal years on the OTC Bulletin Board, and as obtained from investopedia.com. The high and low prices reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.
STOCKHOLDERS
As of March 31, 2009, there were approximately 60 holders of record of our common shares.
DIVIDENDS
From our inception we have never declared or paid any cash dividends on shares of our common stock and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The decision to declare any future cash dividends will depend upon our results of operations, financial condition, current and anticipated cash needs, contractual restrictions, restrictions imposed by applicable law and other factors that our board of directors deem relevant. Although it is our intention to utilize all available funds for the development of our business, no restrictions are in place that would limit our ability to pay dividends. The payment of any future cash dividends will be at the sole discretion of our board of directors.
RECENT SALES OF UNREGISTERED SECURITIES
* There were no underwriter discounts or commissions associated with these sales of common stock for cash.
(1)
Valued at $1.00 per common share.
(2)
Valued at $0.75 per common share.
(3)
Valued at $0.75 per common share.
(4)
Valued at $0.60 per common share.
(5)
Valued at $0.40 per common share.
(6)
Valued at $0.25 per common share.
(7)
Valued at $0.10 per common share.
(8)
Valued at $0.04 per common share.
(1)
Issued as compensation for legal services. Valued at $1.40 per common share.
(2)
Issued as compensation for services as a member of the board of directors. Valued at $0.96 per common share.
(1)
Issued upon conversion of all advances payable included as debt on our December 31, 2005 consolidated balance sheet. Valued at $0.91 per common share.
General Footnotes
(A)
We relied in each case for these unregistered sales on the private offering exemption of Section 4(2) of the Securities Act and/or the private offering safe harbor provision of Rule 506 of Regulation D promulgated thereunder based on the following factors: (i) the number of offerees or purchasers, as applicable, (ii) the absence of general solicitation, (iii) representations obtained from the acquirors relative to their accreditation and/or sophistication (or from offeree or purchaser representatives, as applicable), (iv) the provision of appropriate disclosure, and (v) the placement of restrictive legends on the certificates reflecting the securities coupled with investment representations obtained from the acquirors.
(B)
We relied in each case for these unregistered sales on the private offering exemption of Section 4(2) of the Securities Act based on the following factors: (i) the number of offerees, (ii) the absence of general solicitation, (iii) representations obtained from the acquirors relative to their sophistication (or from offeree representatives, as applicable), (iv) the provision of appropriate disclosure, and (v) the placement of restrictive legends on the certificates reflecting the securities coupled with investment representations obtained from the acquirors.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis of our financial condition, results of operations and liquidity should be read in conjunction with our consolidated financial statements for the fiscal years ended December 31, 2008 and 2007 and the related notes appearing elsewhere in this annual report. Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles, contemplate that we will continue as a going concern, and do not contain any adjustments that might result if we were unable to continue as a going concern, however, our independent registered public accounting firms have added explanatory paragraphs in Note 3 of each of our consolidated financial statements for the fiscal years ended December 31, 2008 and 2007, respectively, raising substantial doubt as to our ability to continue as a going concern.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies, including the assumptions and judgments underlying those policies, are more fully described in the notes to our consolidated financial statements. We have consistently applied these policies in all material respects. Investors are cautioned, however, that these policies are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially. Set forth below are the accounting policies that we believe most critical to an understanding of our financial condition, results of operations and liquidity.
Use of Estimates
The preparation of our consolidated financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in our consolidated financial statements and the accompanying notes. We evaluate our estimates on an ongoing basis, and make our estimates and assumptions based on actual historical experience which we believe to be reasonable under the circumstances at that time. Actual results may differ materially from our current estimates.
Research and Development Costs
We account for research and development expenses in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 2,“Accounting for Research and Development Costs”. Our research and development costs, which include expenses relating to the development of software to be used in our search engine technology, are expensed in the period in which they are incurred.
We capitalize the cost of materials and equipment acquired for research and development activities that have alternative future uses, such as computer equipment, in the period in which they are acquired.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment are provided over the estimated useful lives of the related assets using the straight-line method and the half-year convention.
Impairment Long-lived Assets
We test long-lived assets 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 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 value is less than the undiscounted future cash flows, an impairment loss is recognized.
Income Taxes
We determine deferred tax liabilities and assets 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
We incur a substantial number of operational transactions in Canada which we carry out in Canadian currency through a bank account maintained for that purpose. Included among such transactions are payment of salaries, rent, consulting and other related expenses. At the time of such payment each Canadian disbursement is translated into U.S. dollar equivalents and an exchange gain or loss on currency is recorded.
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.
PLAN OF OPERATIONS
Over the next six to twelve months we intend to maintain our current web properties and make whatever modest efforts we are capable of, given our limited resources, to slow the deterioration of user traffic on these properties while we search for additional financing to allow us to promote and update our properties. We believe our sites, www.newstowatch.com, www.searchforvideo.com, www.iheard.com and www.podanza.com, will continue to deteriorate in spite of consumers recognizing the unique content, ease-of-use, speed of search tools and quality of indexed content due to lack of promotion and updating of the properties. We will not be able to expand our participatory media offerings over the course of the year due to lack of resources. It is believed that the combination of the growth of our participatory media website, www.Newstowatch.com and the organic growth of our other consumer portals could increase the company’s overall value by increasing its assets and marketability if we had the resources to promote and update our properties. In the absence of additional resources, our properties are likely to continue to have their user traffic deteriorate.
We currently produce a small amount of advertising revenue that we have derived during the principal development phase of our various consumer portals. Not only will this revenue not be enough to make us cash flow positive, we have also signed an agreement where virtually all of our small revenues will go to Brass Consulting Ltd. in exchange for maintaining www.searchforvideo.com. Of course, we can cancel this agreement at any time and we hope to do so, as soon as financing and market conditions improve and we can raise the resources necessary to service, promote and update our sites. There can be no assurance such resources will be forthcoming and we have no understandings with any potential investors or partners regarding the same.
We also anticipate spending much less on operations and salaries and costs related to marketing and no money related to research and development over the course of the next twelve months now that principal development on our consumer portals has been completed and we lack the resources to improve or promote our properties . We anticipate our largest expenses will be hosting, administrative, legal and accounting expenses, payments of our www.searchforvideo.com revenue to Brass Consulting Ltd. and the salary of our chief executive officer, Jenifer Osterwalder.
Our twelve-month plan requires us to accomplish the following steps:
·
Minimizing the deterioration of user traffic on our websites;
·
Raise additional funds in order to promote and improve our sites;
·
Compile usage statistics for our websites;
·
Raise funds to enhance our participatory media capabilities and to promote the associated community of www.Newstowatch.com;
·
Develop rapport with likely strategic partners ; and
·
Terminate our consulting arrangement with Brass Consulting Ltd. and take back the operation of www.searchforvideo.com as soon as we have sufficient resources.
RESULTS OF OPERATIONS FROM FEBRUARY 9, 2005 (INCEPTION) AND THE FISCAL YEAR ENDED DECEMBER 31, 2008
Revenues
Our revenues increased $20,440 from $34,553 for the twelve months ended December 31, 2007 to $55,012 for the fiscal year ended December 31, 2008. This increase was primarily attributable to increased advertising revenue.
Research and Development
Research and development expenses decreased $91,342 from $146,204 for the twelve months ended December 31, 2007 to $54,862 for the fiscal year ended December 31, 2008. This decrease was primarily attributable to the completion of principal development of our web properties and also because of our lack of resources to continue development and improvement of our properties.
General and Administrative Expenses
General and administrative expenses principally include salary expenses, professional fees, investor relations fees, rent and general corporate overhead. General and administrative expenses decreased $306,610, from $599,173 for the twelve months ended December 31, 2007 to $292,563 for the fiscal year ended December 31, 2008. This decrease is primarily attributable to a decrease in the amount of administrative overhead due to our completion of principal development on our consumer portals and due to lack of resources to hire additional personnel to promote and improve our properties.
LIQUIDITY AND CAPITAL RESOURCES
As of the fiscal year ended December 31, 2008 we had $14,366 of cash on hand.
Our net loss decreased $424,877, from $726,059 for the twelve months ended December 31, 2007 to $301,182 for the fiscal year ended December 31, 2008, and our working capital surplus decreased $1,182, from $4,369 for the twelve months ended December 31, 2007 to $3,187 for the fiscal year ended December 31, 2008.
Net cash used in operating activities decreased $508,758, from $1,217,179 for the twelve months ended December 31, 2006 to $708,421 for the fiscal year ended December 31, 2007. This increase was primarily the result of the completion of principal development activities on our consumer portals.
Net cash provided by financing activities decreased $350,000, from $650,000 for the twelve months ended December 31, 2007 to $300,000 for the fiscal year ended December 31, 2008. Net cash provided by financing activities was primarily in the form of sales of our common stock and the difference attributable to lower proceeds from the sale of common stock.
Although we have borrowed an additional $50,000 from shareholders in March, 2008, we do not believe that our current financial resources are sufficient to meet our working capital needs over the next twelve months and, accordingly, we will need to secure additional external financing to continue our operations. We may seek to raise additional capital though private equity or debt financings and further shareholder loans. As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, we have not obtained, any commitments, verbal or otherwise, from our security holders to make further investments in our company; and there can be no assurance that those further investments, if and when made, will be sufficient to sustain our required level of operations. Moreover, there can be no assurance that we will be able to secure additional external financing, or, if we are able to secure such external financing, that it will be on terms favorable, or even acceptable, to us. If necessary, we may explore strategic alternatives, including a merger, asset sale, joint venture or other comparable transactions. Any inability to achieve or sustain profitability or otherwise secure external financing or locate a strategic partner would have a material adverse effect on our business, financial condition, and results of operations, raising substantial doubts as to our ability to continue as a going concern, and we may ultimately be forced to seek protection from creditors under the bankruptcy laws or cease operations.
Our short-term prospects are challenging considering our lack of financial resources. In the absence of additional financing, sales of our products or services, or locating a strategic partner willing to finance our further development, our short-term and long-term prospects for growth are minimal over and above incremental sales of our existing products and services.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS.
FUSA CAPITAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
FUSA Capital Corporation
(A Development Stage Company)
We have audited the accompanying balance sheets of FUSA Capital Corporation (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2008, 2007 and since inception on February 9, 2005 through December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FUSA Capital Corporation (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2008, 2007 and since inception on February 9, 2005 through December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has not commenced its planned principal operations, has not generated significant revenues and has incurred significant operating loss to date, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
Moore & Associates, Chartered
Las Vegas, Nevada
April 1,
6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
FUSA CAPITAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 2008 AND DECEMBER 31, 2007
The accompanying notes are an integral part of the financial statements
FUSA CAPITAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of the financial statements
FUSA CAPITAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of the financial statements
FUSA CAPITAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
The accompanying notes are an integral part of the financial statements
FUSA CAPITAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
Note 1 - General Organization and Business
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, is considered to be in the development stage.
Note 2 - Significant accounting policies
Use of estimates
The preparation of 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 December 31, 2008 current assets include restricted cash of $11,500 (2007-$28,750), 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 Financial Statements
December 31, 2008
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 year December 31, 2008 within this category, which are included in selling, general and administrative expense, amounted to approximately $1,297 ( 2007-93,796).
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 2007 financial statements, and permits varying transition methods including retroactive adjustment of prior periods or prospective application beginning in 2007. The Company will adopt SFAS 123R using the modified prospective method effective January 1, 2007. Under this transition method the Company began recording stock option expense prospectively, starting in first quarter 2007.
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 December 31, 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 Consolidated Financial Statements
December 31, 2008
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:
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 year ended December 31, 2008, the currency exchange transactions resulted in a (loss) gain of $ 383 (2007 -$(4,430). As of December 31, 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 revenues when products are fully delivered or services have been provided and collection is reasonably assured.
FUSA CAPITAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
Note 3 - 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 commenced its planned principal operations and has not generated significant revenues. It has incurred a significant operating loss as of December 31, 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.
Note 4 - Related party transactions
During the year ended December 31, in lieu of paying its technology officer’s his earned compensation directly of $27,402 ( 2007- $ 30,234), it paid it to a consulting company owned by the Officer. This amount relates principally to his efforts through December 31, 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
A summary of property and equipment as of December 31, 2008 follows:
FUSA CAPITAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
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, 2007.
The office in Seattle is leased under a month to month rental.
Lease and rental expense included in selling and administrative expenses for the year totaled $3,562. ( 2007 - $ 11,543)
Note 7 - Issuance of Common Stock
In February 2006, all of the advances included as debt on the December 31, 2005 consolidated balance totaling $985,133 were converted to equity through the issuance of a total of 1,073,507 shares of restricted common stock.
During the year ended December 31, 2007, the company issued 2,600,000 (2006-1,209,346) shares of common stock for proceeds of $ 650,000 ( 2006-$952,000).
During the year ended December 31, 2007, the company issued nil (2006-10,000) shares of common stock for services rendered. The resulting value of stock compensation of $ nil ( 2006-$14,000) has been included in selling, general and administrative expenses and also included as a component of shareholders’ equity as at December 31, 2007.
During the year ended December 31, 2007, the company issued nil (2006-25,000) shares of common stock to a director of the company for services rendered. The resulting value of stock compensation of nil ( 2006-$ 24,000) has been included in selling, general and administrative expenses and also included as a component of shareholders’ equity as at December 31, 2007.
In addition during the year ended December 31, 2007, the company cancelled nil (2006-600,000) shares of common stock which had previously been issued for services rendered. The previously recorded value of stock compensation of nil ( 2006-$ 722,000) has been credited to research and development expenses and included as a component of shareholders’ equity as at December 31, 2007.
During the year ended December 31, 2008 the company issued 7,500,000 shares of common stock for cash consideration of $ 300,000
Note 8 - Deferred Tax Assets
The following table summarizes the significant components of the Company's deferred tax assets:
FUSA CAPITAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
The amount taken into income as deferred tax assets must reflect that portion of the income tax loss carryforwards that is likely to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carryforwards regardless of their expiry
Note 9 - Income Taxes
No provision for income taxes has been provided for in these financial statements due to the net loss. At December 31, 2008, the Company has a net operating loss carryforward which expires commencing in 2025, totaling approximately $5,554,000 the benefit of which has not been recorded in the financial statements.
Note 10 - Technology License Agreement
During the period, 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.
Note 11 Recent Accounting Pronouncements
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial position and results of operations if adopted.
In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its consolidated financial position, results of operations or cash flows.
FUSA CAPITAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for “plain vanilla” share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations’. This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
FUSA CAPITAL CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities-Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS No. 159 beginning March 1, 2008 and is currently evaluating the potential impact the adoption of this pronouncement will have on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company will adopt this statement March 1, 2008, and it is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AN ACCOUNTING FINANCIAL DISCLOSURE.
There were no previously unreported events under this Item 9 during the fiscal year ended December 31, 2008.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2008. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Principal Financial and Accounting Officer, as well as outside consultants. In assessing the effectiveness of our internal control over financial reporting we utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission as published in "Internal Control over Financial Reporting - Guidance for Smaller Public Companies." Based on that evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer found material weaknesses in our disclosure controls and procedures and therefore concluded that our disclosure controls and procedures as of the end of the period covered by this report were ineffective.
The determination of ineffective internal control is based upon the lack of separation of duties. Our entire management is comprised of one individual. It is impossible to create a system of checks and balances with oversight in this circumstance. It is management’s intention to bring additional people into the management team. Once there are more members of management, responsibilities can be divided and oversight roles created. Although the Company does not currently have sufficient financial resources to hire additional management, the Company hopes to have such resources, make such hires and create segregation of duties and proper oversight within 12 months. The Company estimates the annual costs of such remediation efforts in the form of additional management will be $150,000 per year.
We understand that remediation of disclosure controls is a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of the material weaknesses described above is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary. As of the date of this report, our management believes that our efforts will remediate the material weaknesses in internal control over financial reporting as described above.
Notwithstanding these material weaknesses which are described below, our management performed additional analyses, reconciliations and other post-closing procedures and has concluded that the Company’s consolidated financial statements for the periods covered by and included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with generally accepted accounting principles in the U.S. for each of the periods presented herein.
Inherent Limitations Over Internal Controls
The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Management does not expect that the Company's internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Management, consisting of our Chief Executive Officer and Principal Accounting and Financial Officer, is responsible for establishing and maintaining adequate internal control over the Company's financial reporting.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008, utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission as published in "Internal Control over Financial Reporting - Guidance for Smaller Public Companies." Based on the assessment by management, we determined that our internal control over financial reporting was ineffective as of December 31, 2008.
As a non-accelerated smaller reporting filer, management's assessment of the effectiveness of our internal control over financial reporting as of December 31, 2008 is not required to be audited by Moore & Associates, Chartered, our independent registered public accountant until our fiscal year ending December 31, 2009.
Changes in Internal Control of Financial Reporting
During the fiscal year ended there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
On December 1, 2008, the Company signed a consulting agreement with Brass Consulting Ltd. The agreement can be cancelled at 30 days notice and provides that Brass will service and support the www.searchforvideo.com site in exchange for the net revenue that the site produces from advertising after expenses. The agreement provides that the domain name www.searchforvideo.com will become property of Brass in the event that the Company does not pay the amounts due under the contract in a timely fashion.
In addition, on April 10, 2009, the Company notified Minerva Technology Ltd. that it was cancelling the Technology License Agreement of August 23, 2007 due to non-performance by Minerva and lack of resources by the Company to pursue development of the Argon search engine technology. The Company will not issue the 23,000,000 shares under the agreement nor will it utilize the Argon technology.
Furthermore, in March, 2009, the Company borrowed $50,000 from various shareholders at 10% annual interest. The debt is convertible at the option of the holder into the Company’s common stock at the per share price of the Company’s next financing or at 30 day average closing price of the Company’s stock, whichever is lower. The debt is due by December 31, 2009.
PART III
ITEM 10
ITEM 10 . DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table sets forth our directors and executive officers and their ages as of the fiscal year ended December 31, 2008:
Jenifer Osterwalder - Chief Executive Officer, Principal Accounting Officer, President, Treasurer, Secretary and Director
Jenifer Osterwalder has served as our Chief Executive Officer, Principal Accounting Officer, President, Treasurer, Secretary and as a director since March 7, 2005. Previously, from January 2005 to March 2005, Ms. Osterwalder served as President, Chief Executive Officer, Treasurer, Secretary and as a director FUSA Technology Investments Corp. From January 2000 to January 2005 she served as an consultant investment banker to Five Seas Securities, Ltd., a securities firm in British Columbia, Canada. From August 2004 to December 2004 Ms. Osterwalder served as a consultant Manger to International Conference Services, Ltd., a conference and destination management firm in British Columbia, Canada. From January 2003 to December 2003, she served as a consultant Investment Liaison and Marketing Director for Terrikon Corporation, in British Columbia, Canada. Ms. Osterwalder received her Bachelor of Science in Business Administration in marketing and logistics from Ohio State University.
Alexander Khersonski - Director
Alexander Khersonski has served as one of our directors since March 7, 2005. In addition, Mr. Khersonski currently serves as a Senior Accountant for Service Corporation International (formerly Alderwood Group, Inc.), a provider of funeral, cremation and cemetery services throughout North America, a position which he has held since November 2004. From August 2004 to October 2004 Mr. Khersonski served as Assistant Controller for Scorpio Mining Corporation, a publicly traded mineral exploration company in British Columbia, Canada. From September 2003 to July 2004 he served as a Corporate Accountant in client services at Dawn Pacific Management Corporation, an accounting and regulatory maintenance services firm in British Columbia, Canada. From January 2000 to August 2000 he served as a consultant to ICC International Business Services Ltd., in British Columbia, Canada. Additionally, from September 2000 to August 2003 Mr. Khersonski served as a Senior Accountant for the Jewish Community Centre of Greater Vancouver. Mr. Khersonski received holds a Certified General Accountant Designation from the Certified General Accountants Association of British Columbia, Canada. He received his Bachelor of Science in economics and management from Chelyabinsk State Technical University, Chelyabinsk, Russia.
FAMILY RELATIONSHIPS
There are no family relationships, by blood or marriage, among any of our directors or executive officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, none of our directors, executive officers and control persons have been involved in any of the following events:
·
any bankruptcy petition filed by or against any business of which such person was an executive officer either at the time of the bankruptcy or within two years prior to that time;
·
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and
·
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
BOARD OF DIRECTORS COMMITTEES
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, we have no standing committees and our entire board of directors serves as our audit, compensation and nominating committees. Our board of directors has determined that Alexander Khersonski, a member of our board, qualifies as an audit committee financial expert (as defined in Regulation 228.407(d)(5)(ii) of Regulation S-B).
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, there have been no material changes to the procedures by which our security holders may recommend nominees to our board of directors.
CODE OF ETHICS
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, we have not yet adopted a code of ethics for our principal executive officer, principal financial officer or principal accounting officer. We are, however, in the process of drafting such a code of ethics and, upon adoption, it we will provide a copy of our code of ethics, without charge, to any person who so requests a copy, in writing, at: FUSA Capital Corporation., 1420 Fifth Avenue, 22nd Floor, Seattle, Washington 98101.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities of ours. Officers, directors and greater than ten percent stockholders are required by the SEC’s regulations to furnish us with copies of all Section 16(a) forms they filed.
The following table sets for the compliance reporting under Section 16(a) during the last fiscal year.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the total compensation awarded to, earned by, or paid to our Chief Executive Officer during each of the last two completed fiscal years. No other individuals are employed by us or have earned a total annual salary and bonus in excess of $100,000 during any of the last two completed fiscal years.
SUMMARY COMPENSATION TABLE
EMPLOYMENT AGREEMENTS
Ms. Osterwalder is employed pursuant to a month to month employment agreement, which commenced on April 26, 2005. The agreement originally provided for an annual base salary of $51,000 with a potential for an annual bonus equal to 150% of the base salary, however, in 2007 the annual base salary was increased to $125,000. The agreement also provides for the issuance of options to purchase up 3,000,000 common shares subject to vesting to be determined by the board of directors. Since the agreement was entered into, the Board of Directors elected to grant Ms. Osterwalder options to purchase 5,000,000 common shares in lieu of the 3,000,000 that had been specified in her employment agreement. In the event Ms. Osterwalder is terminated by us, other than for cause, we are required to pay her severance of up to 150% of her base salary plus the acceleration of all then outstanding options.
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2008, we have no other employment agreements in place with any of our other executive officers, directors or employees.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
There were no unexercised options, stock that had not vested, or equity incentive plan awards outstanding for our Chief Executive Officer as of the end of the fiscal year ended December 31, 2008.
COMPENSATION OF DIRECTORS
Pursuant to authority granted under our Article II, Section 2.16 of our bylaws, directors are entitled to such compensation as our board of directors shall from time to time determine. The following table sets forth the compensation of our directors for the fiscal year ended December 31, 2008:
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information with respect to compensation plans under which our equity securities are authorized for issuance as of the end of the fiscal year ended December 31, 2008.
EQUITY COMPENSATION PLAN INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2008. The information in these tables provides ownership information for:
·
each person known by us to be the beneficial owner of more than a 5% of our common stock
·
each of our directors and executive officers; and
·
all of our directors and executive officers as a group.
Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock and those rights to acquire additional shares within sixty days. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares of common stock indicated as beneficially owned by them, except to the extent such power may be shared with a spouse. Common stock beneficially owned and percentage ownership are based on 69,947,083 shares of common stock currently outstanding (reflects a three-for-one common stock dividend of our common shares that occurred on April 22, 2005) and no additional shares potentially acquirable within sixty days. The address of each person listed is care of FUSA Capital Corporation., 701 Fifth Avenue, Suite 4200, Seattle, Washington, 98104.
(1)
Consists of stock options to acquire up to 5,000,000 shares of common stock, none of which are presently exercisable and 900,000 shares of common stock directly owned.
(2)
Consists of 7,510,000 shares of common stock directly owned.
(3)
Consists of stock options to acquire up to 100,000 shares of common stock, none of which are presently exercisable.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
During the year ended December 31, 2008, in lieu of paying our former Chief Technology Officer, Tommy Jo St. John, his earned compensation of $27,402 directly, we paid it instead to a consulting company owned by Mr. St John. This amount relates principally to Mr. St John’s efforts, through December 31, 2008, in furthering the development of our audio and video search engine technology.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the aggregate amount of various professional fees billed by our principal accountants with respect to our last two fiscal years:
All audit fees are approved by our board of directors. Moore & Associates, Chartered (“Moore”) were our principal accountants for the fiscal year ended December 31, 2007 and December 31, 2008, they did not provide any non-audit services to us.
Audit Fees
Audit fees billed for professional services rendered by Moore & Associated, during the fiscal year ended December 31, 2008 and the twelve months ended December 31, 2007, respectively, for the audit of our annual consolidated financial statements, review of the consolidated financial statements included in our quarterly reports on Form 10-Q, and any services provided in connection with statutory and regulatory filings or engagements for those years ended, totaled approximately $6,000 and $6,000, respectively.
Audit-Related Fees
Audit-related fees billed by Moore & Associates during the fiscal year ended December 31, 2007 and December 31, 2008, respectively, for assurance and related services and totaled approximately $0 and $0, respectively.
Tax Fees
Tax fees billed by Moore & Associates during the fiscal year ended December 31, 2008 and the twelve months ended December 31, 2007, respectively, for tax compliance, tax advice and tax planning services totaled approximately $0 and $0, respectively.
All Other Fees
There were no fees billed by Moore & Associates during the fiscal year ended December 31, 2008 and the twelve months ended December 31, 2007, for services rendered other than the amounts set forth above.
ITEM 15.
ITEM 15. EXHIBITS.
No.
Description of Exhibit
2.1
Plan and Agreement of Reorganization by and between FUSA Capital Corporation and FUSA Technology Investment Corporation, dated March 7, 2005, incorporated by reference to Exhibit 2.1 on Form 8-K filed March 8, 2005.
3(i)(1)
Articles of Incorporation of FUSA Capital Corporation, dated September 13, 2000, incorporated by reference to Exhibit 3(a) on Form 10-SB filed May 1, 2003.
3(i)(2)
Certificate of Amendment to Articles of Incorporation of FUSA Capital Corporation, dated June 17, 2007, incorporated by reference to Exhibit 2.1 on Form 8-K filed July 7, 2004.
3(ii)
By-laws of FUSA Capital Corporation, dated September 14, 2000, incorporated by reference to Exhibit 3(b) on Form 10-SB filed May 1, 2003.
10.1
Technology License Agreement between the registrant and Minerva Technologies, Ltd. Dated August 23, 2007 and incorporated by reference to Exhibit 10.1to Form 8K filed on August 23, 2007.
10.2
Stock Option Plan, dated April 18, 2005, incorporated by reference to Exhibit 99.1 on Form 8-K filed April 19, 2005.
10.3
Consulting Agreement with Brass Consulting Ltd., dated December 1, 2008.
10.4
Convertible Promissory Note for $50,000 dated April 11, 2009 issued to FSAC Investment Partners.
31.1
Certification of FUSA Capital Corporation Chief Executive Officer, Jenifer Osterwalder, required by Rule 13a-14(a) or Rule 15d-14(a), dated March 31, 2007. FILED HEREWITH
31.2
Certification of FUSA Capital Corporation Chief Financial Officer, Jenifer Osterwalder, required by Rule 13a-14(a) or Rule 15d-14(a), dated March 31, 2007. FILED HEREWITH
32.1
Certification of FUSA Capital Corporation Chief Executive Officer, Jenifer Osterwalder, required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), dated March 28, 2007. FILED HEREWITH.
32.2
Certification of FUSA Capital Corporation Chief Financial Officer, Jenifer Osterwalder, required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), dated March 28, 2007. FILED HEREWITH.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.