Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
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[X]
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31, 2009.
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[
]
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from ________ to _________
Commission
File No. 0-50274
FUSA
Capital Corporation
(Name of
small business issuer in its charter)
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Nevada
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51-0520296
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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701
Fifth Avenue, Suite 4200, Seattle, Washington
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98104
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(Address
of principal executive offices)
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(Zip
Code)
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Securities
registered under Section 12(b) of the Exchange Act:
None
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, $0.0001 par value
(Title of
Class)
Securities
registered pursuant to Section 12 (b) of the Act: none
Securities
registered pursuant to Section 12 (g) of the Act: 333,333 common
shares par value $0.0001 per share
Indicate
by check mark whether the registrant (l) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes T No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
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Accelerated
filer
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Non-accelerated
filer (Do not check if a smaller reporting
company)
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Smaller
reporting company T
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes No T
The
number of shares of the issuer’s Common Stock outstanding as of April 14,
2010 is 47,623.
Revenues
for the fiscal year ended December 31, 2009 were $17,772.
As at
March 31, 2010, the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the last reported sales
price of such common equity was approximately $52,385.
DOCUMENTS
INCORPORATED BY REFERENCE
None
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Page
Number
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FORWARD
LOOKING STATEMENTS
PART
I
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ITEM
1
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Description
of Business.
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1
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ITEM
1A
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Risk
Factors
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10 |
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ITEM
2
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Description
of Property.
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14
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ITEM
3
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Legal
Proceedings.
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14
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ITEM
4.
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Submission
of Matters to a Vote of Security Holders.
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14
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PART
II
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ITEM
5.
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Market
for Common Equity and Related Stockholder Matters.
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15
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ITEM
7
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Management’s
Discussion and Analysis or Plan of Operation.
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18
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ITEM
8
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Financial
Statements.
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24
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ITEM
9
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Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
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25
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ITEM
9A
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Controls
and Procedures.
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25
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ITEM
9B
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Other
Information.
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25
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PART
III
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ITEM
10.
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Directors,
Executive Officers, Promoters and Control Persons and Corporate
Governance; Compliance With Section 16(a) of the Exchange
Act.
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28
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ITEM
11
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Executive
Compensation.
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30
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ITEM
12
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
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31
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ITEM
13
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Certain
Relationships and Related Transactions, and Director
Independence.
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32
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ITEM
14
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Principal
Accountant Fees and Services.
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33
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| PART IV | ||
| ITEM 15. | Exhibits | 34 |
| Signatures | 35 | |
PART
I
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form
10-K, press releases and certain information provided periodically in writing or
verbally by our officers or our agents contain statements which constitute
forward-looking statements. The words “may”, “would”, “could”, “will”, “expect”,
“estimate”, “anticipate”, “believe”, “intend”, “plan”, “goal”, and similar
expressions and variations thereof are intended to specifically identify
forward-looking statements. These statements appear in a number of places in
this Form 10-K and include all statements that are not statements of historical
fact regarding the intent, belief or current expectations of us, our directors
or our officers, with respect to, among other things: (i) our liquidity and
capital resources; (ii) our financing opportunities and plans; (iii) our ability
to generate revenues; (iv) competition in our business segments; (v) market and
other trends affecting our future financial condition or results of operations;
(vi) our growth strategy and operating strategy; and (vii) the declaration
and/or payment of dividends.
Investors
and prospective investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. The factors that
might cause such differences include, among others, those set forth in Part II,
Item 7 of this annual report on Form 10-K, entitled Management’s Discussion and
Analysis or Plan of Operation, including without limitation the risk factors
contained therein. Except as required by law, we undertake no obligation to
update any of the forward-looking statements in this Form 10-K after the date of
this report.
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 has
been to maintain the media search engine properties and technologies we
currently have and to eventually enhance and grow those properties and
technologies. We have experienced severe cash shortages which have
impacted our ability to maintain and grow our suite of
technologies. We currently operate the website
searchforvideoc.om, and 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. We have had extreme difficulties doing just that this year
and we hope that conditions will improve in 2010.
1
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, 2009 are stated on a
post-dividend basis. Per share amounts have also been restated to reflect the
common share dividend and have also been adjusted for the subsequent reverse
stock split described below.
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 2009, 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 was cancellable after 30 days
notice. We cancelled this agreement in September 2009. We are
currently searching for funds to allow us to maintain and improve our websites
on an ongoing basis.
On June
29, 2009, our Board of Directors resolved to amend the Articles of Incorporation
pursuant to Nevada Revised Statues 78.207 to decrease the number of authorized
shares of our common stock, par value $.0001, from 500,000,000 to 333,333
shares. Correspondingly, our Board of Directors affirmed a reverse split of one
thousand and five hundred (1,500) to one (1) in which each shareholder was
issued one (1) share in exchange for every one thousand and five hundred (1,500)
common shares of their currently issued common stock. The record date for the
reverse split was July 6, 2009.
Our
principal executive offices are located at 701 Fifth Avenue, Suite 4200,
Seattle, Washington 98104. Our phone number is (888)366-6115.
2
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 2009 and we estimate that the
audience for our consumer media portals, which had grown throughout 2007 and
part of 2008 and declined in part of 2008 and all of 2009, will decline in the
absence of additional resources to promote our properties.
OPERATIONS
At
present we maintain day-to-day operations through our correspondence office and
principal executive offices in Seattle, Washington. We have 1
full-time staff member 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
We
conducted virtually no research and development efforts in 2009. As
of December, 2008 we had 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. We did not expend any significant amounts on research and
development in 2009 and these activities were essentially stopped due to lack of
funding.
During
the fiscal year ended December 31, 2009 we incurred expenses of $118 on our
research and development activities. From February 9, 2005 (inception) through
the fiscal year ended December 31, 2009 we incurred research and development
expenses of $1,961,563. We believe that our research and development expenses
will not increase substantially in 2010 as we have virtually no planned research
and development expenses unless our financial situation improves
substantially.
3
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.
In 2008,
we had also just entered the field of participatory media, with the re-launch of
our www.NewstoWatch.com consumer portal which we had hoped would grow in 2009
despite our lack of resources to develop the audience for the
site. 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. We
have not had sufficient resources to develop NewstoWatch to its potential and it
has not developed the traffic that it might otherwise be capable of
developing with adequate resources invested in its development and marketing on
a continuous basis.
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 virtually no 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 in
2009. We were unable to do so. 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 2010 as they have deteriorated
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 renewed our commitment
to in 2009 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.
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4
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. Currently there is virtually
no participation in the site and we have not been able to validate any of our
assumptions about participatory media. In the interim, while our
website has remained stagnant, competitors have evolved and have filled much of
the need for participatory media tools, so it is unclear to us even if we are
able to obtain additional resources, whether or not we will be able to
effectively compete given our lack of progress in 2009.
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
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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.
5
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.
6
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.
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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,
2009, 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.
7
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.
8
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, 2009, 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,
2009, we have executed non-disclosure agreements with all of our key employees,
consultants or advisors.
9
EMPLOYEES
For the
fiscal year ended December 31, 2009, we had one full-time and no part-time
employees. 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. 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, 2009, and losses since inception were
approximately $79,998 and $5,616,984, respectively. The extent to
which we continue to experience losses will depend on a number of factors,
including:
|
●
|
Whether
we can raise additional funds to promote our sites and increase traffic
and revenue;
|
|
●
|
competitive
developments in our market;
|
|
●
|
Costs
of hosting, Internet advertising and
promotion;
|
|
●
|
our
ability to attract, retain and motivate qualified personnel, particularly
sales associates if we have the resources to hire such individuals;
and
|
|
●
|
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.
10
We
only had $6,098 in cash at December 31, 2009, without additional cash
we will fail within 6-12 months.
Even if
we lose only 33% of the $79,998 we lost in 2009, 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, 2009, and as a result of historical operating
losses from prior operations and losses accumulated during our development
stage, our consolidated accumulated deficit was $5,616,984. 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.
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.
11
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
“FCCN”, 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:
|
|
·
|
the
trading volume of our shares;
|
|
|
·
|
the
number of securities analysts, market-makers and brokers following our
common stock;
|
|
|
·
|
changes
in, or failure to achieve, financial estimates by securities
analysts;
|
|
|
·
|
new
products introduced or announced by us or our
competitors;
|
|
|
·
|
announcements
of technological innovations by us or our
competitors;
|
|
|
·
|
actual
or anticipated variations in quarterly operating
results;
|
|
|
·
|
conditions
or trends in our business
industries;
|
|
|
·
|
announcements
by us of significant acquisitions, strategic partnerships, joint ventures
or capital commitments;
|
|
|
·
|
additions
or departures of key personnel;
|
|
|
·
|
sales
of our common stock; and
|
|
|
·
|
general
stock market price and volume fluctuations of publicly-traded, and
particularly microcap, companies.
|
12
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:
|
|
·
|
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;
|
|
|
·
|
provide
the prospective investor with current bid and ask quotations for the penny
stock;
|
|
|
·
|
explain
to the prospective investor the compensation of the broker-dealer and its
salesperson in the transaction;
|
|
|
·
|
provide
investors monthly account statements showing the market value of each
penny stock held in the their account;
and
|
|
|
·
|
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.
13
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. DESCRIPTION OF PROPERTY.
Our
principal executive offices are located at 701 Fifth Avenue, Suite 4200,
Seattle, Washington, 98104. Our telephone number is (206) 274-5107.
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.
ITEM
3. LEGAL PROCEEDINGS.
As of the
date of this annual report on Form 10-K for the fiscal year ended December 31,
2009, 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
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, 2009.
14
PART
II
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 “FCCN”, and on the Berlin 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.
|
Period
|
High*
|
Low*
|
||||||
|
Fiscal
year ended 2006 Quarter ended
|
||||||||
|
March
31, 2006
|
$ | 1,680.00 | $ | 5,250.00 | ||||
|
June
30, 2006
|
$ | 1,515.00 | $ | 2,670.00 | ||||
|
September
30, 2006
|
$ | 885.00 | $ | 1,700.00 | ||||
|
December
31, 2006
|
$ | 1,245.00 | $ | 2,490.00 | ||||
|
Fiscal
year ended 2007 Quarter ended
|
||||||||
|
March
31, 2007
|
$ | 1,110.00 | $ | 2,070.00 | ||||
|
June
30, 2007
|
$ | 1,125.00 | $ | 1,740.00 | ||||
|
September
30, 2007
|
$ | 780.00 | $ | 1,170.00 | ||||
|
December
31, 2007
|
$ | 240.00 | $ | 1,125.00 | ||||
|
Fiscal
year ended 2008 Quarter ended
|
||||||||
|
March
31, 2008
|
$ | 300.00 | $ | 120.00 | ||||
|
June
30, 2008
|
$ | 450.00 | $ | 180.00 | ||||
|
September
30, 2008
|
$ | 375.00 | $ | 75.00 | ||||
|
December
31, 2008
|
$ | 60.00 | $ | 15.00 | ||||
|
Fiscal
year ended 2009 Quarter ended
|
||||||||
|
March
31, 2009
|
$ | 11.99 | $ | 4.65 | ||||
|
June
30, 2009
|
$ | 28.49 | $ | 7.65 | ||||
|
September
30, 2009
|
$ | 14.99 | $ | 3.90 | ||||
|
December
31, 2009
|
$ | 14.99 | $ | 1.10 | ||||
|
*
|
All
stock prices are adjusted to reflect three-for-one common stock dividend
paid on May 13, 2005 to all stockholders of record as of May 3, 2005 and
adjusted to reflect 1500-to-1 reverse stock split for shareholders of
record on July 6, 2009.
|
STOCKHOLDERS
As of
March 31, 2010, there were approximately 61 holders of record of our common
shares.
15
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
|
Date
Securities Issued
|
Securities
Title
|
Issued
to
|
Number
of Securities Issued
|
Consideration *
|
Footnotes
|
|
Common
Stock Issuances
|
|||||
|
Issued for
cash
|
|||||
|
2/16/2006
|
Common
Stock
|
Hypo
Bank
|
267
|
$400,000
|
(A)(1)
|
|
5/24/2006
|
Common
Stock
|
Hypo
Bank
|
134
|
$150,000
|
(A)(2)
|
|
6/5/2006
|
Common
Stock
|
UBS
|
89
|
$100,000
|
(A)(2)
|
|
8/16/2006
|
Common
Stock
|
Investor’s
Link Ventures
|
29
|
$32,000
|
(A)(2)
|
|
8/23/2006
|
Common
Stock
|
Investor’s
Link Ventures
|
63
|
$70,000
|
(A)(2)
|
|
10/20/2006
|
Common
Stock
|
Investor’s
Link Ventures
|
89
|
$100,000
|
(A)(2)
|
|
12/18/2006
|
Common
Stock
|
Investor’s
Link Ventures
|
89
|
$100,000
|
(A)(2)
|
|
2/20/2007
|
Common
Stock
|
Various
|
134
|
$150,000
|
(A)(3)
|
|
5/20/2007
|
Common
Stock
|
Various
|
167
|
$150,000
|
(A)(4)
|
|
07/10/2007
|
Common
Stock
|
Various
|
167
|
$100,000
|
(A)(5)
|
|
8/22/2007
|
Common
Stock
|
Various
|
267
|
$100,000
|
(A)(6)
|
|
11/16/2007
|
Common
Stock
|
Various
|
1,000
|
$150,000
|
(A)(7)
|
|
1/15/2008
|
Common
Stock
|
Various
|
5,000
|
$300,000
|
(A)(8)
|
* There
were no underwriter discounts or commissions associated with these sales of
common stock for cash. These shares have been adjusted for the 1500 to 1 stock
split for shareholders of record as of July 6, 2009.
|
(1)
|
Valued
at $1500.00 per common
share.
|
|
(2)
|
Valued
at $1,125.00 per common
share.
|
|
(3)
|
Valued
at $1,125.00 per common
share.
|
|
(4)
|
Valued
at $900.00 per common share.
|
|
(5)
|
Valued
at $600.00 per common share.
|
|
(6)
|
Valued
at $375.00 per common share.
|
|
(7)
|
Valued
at $150.00 per common share.
|
|
(8)
|
Valued
at $60.00 per common share.
|
16
|
Date
Securities
Issued
|
Securities
Title
|
Issued
to
|
Number
of Securities
Issued
|
Consideration
|
Footnotes
|
||||||
|
Common
Stock Issuances
|
|||||||||||
|
Issued as
compensation to independent contractors
|
|||||||||||
|
5/24/2006
|
Common
Stock
|
Jonathan
Dariyanani, Esq.
|
7
|
14,000
|
(B)(1)
|
||||||
|
12/22/2006
|
Common
Stock
|
Alexander
Khersonski
|
17
|
24,000
|
(B)(2)
|
||||||
|
(1)
|
Issued
as compensation for legal services. Valued at $2,100.00 per common
share.
|
|
(2)
|
Issued
as compensation for services as a member of the board of directors. Valued
at $1,400.00 per common share.
|
|
|
(3)
Adjusted for 1500 to 1 reverse split for shareholders of record on July 6,
2009
|
|
Date
Securities Issued
|
Securities
Title
|
Issued
to
|
Number
of
Securities
Issued
|
Consideration
|
Footnotes
|
||||||
|
Common
Stock Issuances
|
|||||||||||
|
Issued
upon conversion of debt
|
|||||||||||
|
2/2/2006
|
Common
Stock
|
Unrelated
Third-Parties
|
716
|
$
|
985,133
|
(B)(1)
|
|||||
|
(1)
|
Issued
upon conversion of all advances payable included as debt on our December
31, 2005 consolidated balance sheet. Valued at $1,365.00 per common
share.
|
|
(2)
|
Adjusted
for 1500 to 1 reverse split for shareholders of record on July 6,
2009
|
17
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. 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, 2009 and 2008 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 8 and Note 3 respectively of each of
our consolidated financial statements for the fiscal years ended December 31,
2009 and 2008, 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.
18
Accounting
Basis
These
financial statements are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of
America.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
Loss Per
Share
Net
income (loss) per common share is computed based on the weighted average number
of common shares outstanding and common stock equivalents, if not
anti-dilutive. The Company has not issued any potentially dilutive
common shares.
Basic
loss per share is calculated using the weighted average number of common shares
outstanding and the treasury stock method is used to calculate diluted earnings
per share. For the years presented, this calculation proved to be
anti-dilutive.
During
the year ended December 31, 2009, the Company affected a 1500:1 reverse share
split.
Dividends
The
Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
Revenue
Recognition
The
Company recognizes revenue when products are fully delivered or services have
been provided and collection is reasonably assured.
Restricted cash
At
December 31, 2008 current assets included restricted cash of $11,500, which was
held as short term, interest bearing collateral to support a bank credit
facility for the Company. The restrictions were released in 2009.
Income
Taxes
The
Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently. Deferred tax assets are reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be
realized. No provision for income taxes is included in the statement
due to its immaterial amount, net of the allowance account, based on the
likelihood of the Company to utilize the loss carry-forward.
19
Stock-Based
Compensation
The
Company did not issue any stock-based payments to its employees in 2009 or 2008.
The Company uses the modified prospective method of accounting for stock-based
compensation. Under this transition method, stock compensation expense includes
compensation expense for all stock-based compensation awards granted on or after
January 1, 2006, based on the estimated grant-date fair
value.
Recent Accounting
Pronouncements
In May
2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent
Events”. Companies are now required to disclose the date through
which subsequent events have been evaluated by management. Public entities (as
defined) must conduct the evaluation as of the date the financial statements are
issued, and provide disclosure that such date was used for this evaluation. SFAS
165 (ASC 855-10) provides that financial statements are considered “issued” when
they are widely distributed for general use and reliance in a form and format
that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and
annual periods ending after June 15, 2009 and must be applied prospectively. The
adoption of SFAS 165 (ASC 855-10) during the year ended November 30, 2009 did
not have a significant effect on the Company’s financial statements as of that
date. In connection with the preparation of the accompanying financial
statements as of November 30, 2009, management evaluated subsequent events
through the date that such financial statements were issued (filed with the
SEC).
In June
2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC
105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of
authoritative accounting principles recognized by the FASB to be applied by all
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for
financial statements issued for fiscal years ending on or after September 15,
2009 and interim periods within those fiscal years. The adoption of SFAS 168
(ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations
or financial condition. The Codification did not change GAAP, however, it did
change the way GAAP is organized and presented.
As a
result, these changes impact how companies reference GAAP in their financial
statements and in their significant accounting policies. The Company implemented
the Codification in this Report by providing references to the Codification
topics alongside references to the corresponding standards.
With the
exception of the pronouncements noted above, no other accounting standards or
interpretations issued or recently adopted are expected to have a material
impact on the Company’s financial position, operations or cash
flows.
Research and development costs
Pursuant
to SFAS No. 2 (ASC 730-10), "Accounting for Research and Development Costs," our research and
development costs, which relate to the development of software to be used in our
search engine technology, were expensed as technological feasibility of the
software had not been reached as of December 31, 2009.
The cost
of materials and equipment that are acquired for research and development
activities and that have alternative future uses are capitalized when acquired,
such as computer equipment.
Foreign currency transactions
The
business of the Company from Canada involves incurring a substantial number of
operational transactions in Canada for which it transacts payments in Canadian
currency through a bank account maintained for that purpose. Included in such
transactions are payments for salaries, rent, consulting and many other
expenses. At the time of payment, each Canadian disbursement is translated into
the U. S. dollar equivalent amount and an exchange gain or loss on currency is
recorded at that time. As of December 31, 2009, 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.
20
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, but we
have been unable to do so satisfactorily due to a lack of cash. 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. So far, our lack of cash has made it impossible for us to
grow or even maintain traffic on these sites and the sites have experienced
deterioration in user traffic throughout 2009.
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. We do not anticipate that this revenue will cover our
expenses, as it has never done so in the past. 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, and the salary of our chief executive officer,
Jenifer Osterwalder should we have sufficient revenue to return to paying her a
salary.
21
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, 2009
Revenues
Our
revenues decreased $36,960 from $54,732 for the twelve months ended December 31,
2008 to $17,772 for the fiscal year ended December 31, 2009. This decrease was
primarily attributable to decreased advertising revenue.
Research
and Development
Research
and development expenses decreased $54,745 from $54,863 for the twelve months
ended December 31, 2008 to $118 for the fiscal year ended December 31, 2009.
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 $200,160, from $292,179 for the twelve months
ended December 31, 2008 to $92,019 for the fiscal year ended December 31, 2009.
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.
22
LIQUIDITY
AND CAPITAL RESOURCES
As of the
fiscal year ended December 31, 2009 we had $6,098 of cash on hand.
Our net
loss decreased $212,312, from $292,310 for the twelve months ended December 31,
2008 to $79,998 for the fiscal year ended December 31, 2009, and our working
capital surplus decreased $76,998, from a surplus of $18,006 for the twelve
months ended December 31, 2008 to a deficit of $58,992 for the fiscal year ended
December 31, 2009.
Net cash
used in operating activities decreased $238,371, from $308,139 for the twelve
months ended December 31, 2008 to $69,768 for the fiscal year ended December 31,
2009. This decrease was primarily the result of the completion of principal
development activities on our consumer portals, a lower net loss caused by less
research and development and lower payments for wages.
Net cash
provided by financing activities decreased $250,000, from $300,000 for the
twelve months ended December 31, 2008 to $50,000 for the fiscal year ended
December 31, 2009. Net cash provided by financing activities was primarily in
the form money lent to the Company on the basis of a convertible promissory
note.
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, 2009, 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.
23
ITEM
8. FINANCIAL STATEMENTS.
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
TABLE
OF CONTENTS
DECEMBER
31, 2009
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Balance
Sheets as of December 31, 2009 and 2008
|
F-2
|
|
Statements
of Operations for the years ended December 31, 2009 and 2008 and the
period from February 9, 2005 (inception) to December 31,
2009
|
F-3
|
|
Statement
of Stockholders’ Equity (Deficit) as of December 31, 2009
|
F-4
|
|
Statements
of Cash Flows for the years ended December 31, 2009 and 2008 and the
period from February 9, 2005 (inception) to December 31,
2009
|
F-5
|
|
Notes
to the Financial Statements
|
F-6
- F-10
|
24
Silberstein
Ungar, PLLC CPAs and
Business Advisors
Phone
(248) 203-0080
Fax (248)
281-0940
30600
Telegraph Road, Suite 2175
Bingham
Farms, MI 48025-4586
www.sucpas.com
Report of Independent
Registered Public Accounting Firm
To the
Board of Directors of
Fusa
Capital Corporation
Seattle,
Washington
We have
audited the accompanying balance sheets of Fusa Capital Corporation (the
“Company”) as of December 31, 2009 and 2008, and the related statements of
operations, stockholders’ equity (deficit), and cash flows for the years then
ended and for the period from February 9, 2005 (inception) through December 31,
2009. 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 did not audit the financial statements for
the period February 9, 2005 (Inception) through December 31, 2007. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion on the statements of operations, stockholders’ equity (deficit),
and cash flows for the period February 9, 2005 (Inception) through December 31,
2007, insofar as it relates to the amounts for prior periods through December
31, 2007 is based solely on the report of the other auditors.
We
conducted our audits in accordance with the 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. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
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 as of
December 31, 2009 and 2008 and the results of its operations and its cash flows
for the years then ended and the period from February 9, 2005 (inception)
through December 31, 2009 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 8 to the
financial statements, the Company has limited working capital, has not yet
received revenue from sales of products or services, and has incurred losses
from operations. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans
with regard to these matters are described in Note 8. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As
discussed in Note 9 to the financial statements, errors resulting in an
overstatement of revenue and an overstatement of expenses were discovered by
management in 2009. Accordingly, adjustments have been made to the December 31,
2008 financial statements to correct the errors.
/s/ Silberstein Ungar,
PLLC
Bingham
Farms, Michigan
April 14,
2010
F-1
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
AS
OF DECEMBER 31, 2009 AND 2008
|
December
31,
2009
|
December
31, 2008 (Restated)
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 6,098 | $ | 14,366 | ||||
|
Restricted
cash
|
- | 11,500 | ||||||
|
Prepaid
expenses
|
- | 500 | ||||||
|
Total
Current Assets
|
6,098 | 26,366 | ||||||
|
Total
Assets
|
$ | 6,098 | $ | 26,366 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
|
Liabilities
|
||||||||
|
Current
liabilities
|
||||||||
|
Accounts
payable
|
$ | 8,409 | $ | 4,221 | ||||
|
Accrued
expenses
|
6,681 | 4,139 | ||||||
|
Note
payable
|
50,000 | - | ||||||
|
Total
Liabilities
|
65,090 | 8,360 | ||||||
|
Stockholders’
equity (deficit)
|
||||||||
|
Common
stock, par value $0.0001, 333,333 shares authorized, 47,623 shares issued
and outstanding (46,631 – 2008)
|
5 | 5 | ||||||
|
Additional
paid-in capital
|
5,557,987 | 5,556,987 | ||||||
|
Deficit
accumulated during the development stage
|
(5,616,984 | ) | (5,538,986 | ) | ||||
|
Total
Stockholders’ Equity (Deficit)
|
(58,992 | ) | 18,006 | |||||
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$ | 6,098 | $ | 26,366 | ||||
The
accompanying notes are an integral part of these financial
statements.
F-2
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
PERIOD
FROM FEBRUARY 9, 2005 (INCEPTION) TO DECEMBER 31, 2009
|
Year
Ended
December 31, 2009
|
Year
Ended
December
31, 2008 (Restated)
|
Period
from February 9, 2005 (Inception)
To
December
31,
2009
|
||||||||||
|
REVENUES
|
$ | 17,772 | $ | 54,732 | $ | 118,771 | ||||||
|
OPERATING
EXPENSES
|
||||||||||||
|
Selling,
general and administrative
|
58,487 | 98,289 | 2,477,688 | |||||||||
|
Wages
and benefits
|
15,953 | 150,833 | 756,845 | |||||||||
|
Legal
fees
|
17,579 | 43,057 | 279,083 | |||||||||
|
Research
and development
|
118 | 54,863 | 1,961,563 | |||||||||
|
Beneficial
conversion expense
|
- | - | 230,900 | |||||||||
|
Depreciation
and amortization
|
- | - | 21,150 | |||||||||
|
TOTAL
OPERATING EXPENSES
|
92,137 | 347,042 | 5,727,229 | |||||||||
|
LOSS
FROM OPERATIONS
|
(74,365 | ) | (292,310 | ) | (5,608,458 | ) | ||||||
|
OTHER
INCOME (EXPENSE)
|
(3,633 | ) | - | (8,526 | ) | |||||||
|
LOSS
BEFORE INCOME TAXES
|
(79,998 | ) | (292,310 | ) | (5,616,984 | ) | ||||||
|
PROVISION
FOR INCOME TAXES
|
- | - | - | |||||||||
|
NET
LOSS
|
$ | (79,998 | ) | $ | (292,310 | ) | $ | (5,616,984 | ) | |||
|
NET
LOSS PER SHARE: BASIC AND DILUTED
|
$ | (1.70 | ) | $ | (6.28 | ) | ||||||
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
|
47,106 | 46,535 | ||||||||||
The
accompanying notes are an integral part of these financial
statements.
F-3
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS' EQUITY (DEFICIT) (RESTATED)
AS
OF DECEMBER 31, 2009
|
Common
Stock
|
Additional
|
Deficit
Accumulated During the Development
|
Total
Stockholders’
|
|||||||||||||||||
|
Shares
|
Amount
|
Paid
in Capital
|
Stage
|
Equity
(Deficit)
|
||||||||||||||||
|
Balance,
December 31, 2007, as originally reported
|
41,631 | $ | 4 | $ | 5,256,988 | $ | (5,252,623 | ) | $ | 4,369 | ||||||||||
|
Correction
of an accounting error
|
5,947 | 5,947 | ||||||||||||||||||
|
Balance,
December 31, 2007, as Restated
|
41,631 | 4 | 5,256,988 | (5,246,676 | ) | 10,316 | ||||||||||||||
|
Issuance
of common stock for cash @ $0.04 per share
|
5,000 | 1 | 999 | - | 300,000 | |||||||||||||||
|
Net
loss for the year ended December 31, 2008
|
- | - | - | (292,310 | ) | (292,310 | ) | |||||||||||||
|
Balance,
December 31, 2008
|
46,631 | 5 | 5,556,987 | (5,538,986 | ) | 18,006 | ||||||||||||||
|
Conversion
of debt to common stock
|
133 | - | 1,000 | - | 1,000 | |||||||||||||||
|
Reverse
stock split 1500:1 fractional shares issued
|
859 | - | - | - | - | |||||||||||||||
|
Net
loss for the year ended December 31, 2009
|
- | - | - | (77,998 | ) | (77,998 | ) | |||||||||||||
|
Balance,
December 31, 2009
|
47,623 | $ | 5 | $ | 5,557,987 | $ | (5,616,984 | ) | $ | (58,992 | ) | |||||||||
The
accompanying notes are an integral part of these financial
statements.
F-4
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
PERIOD
FROM FEBRUARY 9, 2005 (INCEPTION) TO DECEMBER 31, 2009
|
Year
Ended
December 31, 2009
|
Year
Ended
December
31, 2008 (Restated)
|
Period
from February 9, 2005 (Inception) to December 31,
2009
|
||||||||||
|
CASH
FLOWS USED IN OPERATING ACTIVITIES
|
||||||||||||
|
Net
loss for the period
|
$ | (77,998 | ) | $ | (292,310 | ) | $ | (5,616,984 | ) | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Depreciation
and amortization
|
- | - | 21,150 | |||||||||
|
Common
stock issued for compensation
|
- | - | 2,129,250 | |||||||||
|
Common
stock issued for services
|
- | - | 47,000 | |||||||||
|
Stock
options issued for services
|
- | - | 55,669 | |||||||||
|
Beneficial
conversion feature on warrant issue
|
- | - | 230,900 | |||||||||
|
Loss
on disposal of property and equipment
|
- | - | 5,879 | |||||||||
|
Property
and equipment traded for services
|
- | - | 24,805 | |||||||||
|
(Increase)
decrease in prepaid expenses
|
500 | - | - | |||||||||
|
Increase
(decrease) in accounts payable & accrued expenses
|
7,730 | (15,829 | ) | 4,411 | ||||||||
|
Cash
flows used in operating activities
|
(69,768 | ) | (308,139 | ) | (3,097,920 | ) | ||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
|
Purchase
of property and equipment
|
- | - | (51,327 | ) | ||||||||
|
Proceeds
from disposal of property and equipment
|
- | - | 494 | |||||||||
|
Cash
flows used in investing activities
|
- | - | (50,833 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Cash
received in recapitalization of the Company
|
- | - | 184 | |||||||||
|
Proceeds
from note payable
|
50,000 | - | 50,000 | |||||||||
|
Proceeds
from issuance of common stock
|
- | 300,000 | 2,212,000 | |||||||||
|
Offering
costs from issuance of common stock
|
- | - | (4,000 | ) | ||||||||
|
Net
advances
|
- | - | 896,667 | |||||||||
|
Cash
flows provided by financing activities
|
50,000 | 300,000 | 3,154,851 | |||||||||
|
NET
INCREASE (DECREASE) IN CASH
|
(19,768 | ) | (8,139 | ) | 6,098 | |||||||
|
Cash,
beginning of the period
|
25,866 | 34,005 | - | |||||||||
|
Cash,
end of the period
|
$ | 6,098 | $ | 25,866 | $ | 6,098 | ||||||
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||||||||||
|
Interest
paid
|
$ | - | $ | - | $ | 1,631 | ||||||
|
Income
taxes paid
|
$ | - | $ | - | $ | - | ||||||
|
SUPPLEMENTAL
DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||||||
|
Non-monetary
net liabilities assumed in a recapitalization of the Company on March 7,
2005
|
$ | - | $ | - | $ | 101,956 | ||||||
|
Common
stock issued for debt
|
$ | 1,000 | $ | - | $ | 1,000 | ||||||
The
accompanying notes are an integral part of these financial
statements
F-5
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
1 – NATURE OF OPERATIONS
Galaxy
Championship Wrestling Inc., a development stage company, was incorporated on
September 13, 2000 under the laws of the State of Nevada and changed its name to
Fusa Capital Corporation on June 17, 2005. On March 7, 2005, the
Company acquired all of the issued and outstanding shares of Fusa Technology
Investments, Inc., a development stage Nevada Corporation, formed on February 9,
2005, under the laws of the State of Nevada. For accounting purposes, the
transaction was accounted for as a recapitalization such that the historical
transactions of the acquired Company were carried forward.
The
Company is in the business of developing internet search engine
technology. It has limited revenue and in accordance with SFAS # 7
(ASC 915-10), is considered to be in the development stage.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting
Basis
These
financial statements are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of
America.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
Loss Per
Share
Net
income (loss) per common share is computed based on the weighted average number
of common shares outstanding and common stock equivalents, if not
anti-dilutive. The Company has not issued any potentially dilutive
common shares.
Basic
loss per share is calculated using the weighted average number of common shares
outstanding and the treasury stock method is used to calculate diluted earnings
per share. For the years presented, this calculation proved to be
anti-dilutive.
During
the year ended December 31, 2009, the Company affected a 1500:1 reverse share
split.
Dividends
The
Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
Revenue
Recognition
The
Company recognizes revenue when products are fully delivered or services have
been provided and collection is reasonably assured.
F-6
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Restricted cash
At
December 31, 2008 current assets included restricted cash of $11,500, which was
held as short term, interest bearing collateral to support a bank credit
facility for the Company. The restrictions were released in 2009.
Income
Taxes
The
Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently. Deferred tax assets are reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be
realized. No provision for income taxes is included in the statement
due to its immaterial amount, net of the allowance account, based on the
likelihood of the Company to utilize the loss carry-forward.
Stock-Based
Compensation
The
Company did not issue any stock-based payments to its employees in 2009 or 2008.
The Company uses the modified prospective method of accounting for stock-based
compensation. Under this transition method, stock compensation expense includes
compensation expense for all stock-based compensation awards granted on or after
January 1, 2006, based on the estimated grant-date fair
value.
Recent Accounting
Pronouncements
In May
2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent
Events”. Companies are now required to disclose the date through
which subsequent events have been evaluated by management. Public entities (as
defined) must conduct the evaluation as of the date the financial statements are
issued, and provide disclosure that such date was used for this evaluation. SFAS
165 (ASC 855-10) provides that financial statements are considered “issued” when
they are widely distributed for general use and reliance in a form and format
that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and
annual periods ending after June 15, 2009 and must be applied prospectively. The
adoption of SFAS 165 (ASC 855-10) during the year ended November 30, 2009 did
not have a significant effect on the Company’s financial statements as of that
date. In connection with the preparation of the accompanying financial
statements as of November 30, 2009, management evaluated subsequent events
through the date that such financial statements were issued (filed with the
SEC).
In June
2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC
105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of
authoritative accounting principles recognized by the FASB to be applied by all
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for
financial statements issued for fiscal years ending on or after September 15,
2009 and interim periods within those fiscal years. The adoption of SFAS 168
(ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations
or financial condition. The Codification did not change GAAP, however, it did
change the way GAAP is organized and presented.
As a
result, these changes impact how companies reference GAAP in their financial
statements and in their significant accounting policies. The Company implemented
the Codification in this Report by providing references to the Codification
topics alongside references to the corresponding standards.
With the
exception of the pronouncements noted above, no other accounting standards or
interpretations issued or recently adopted are expected to have a material
impact on the Company’s financial position, operations or cash
flows.
F-7
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and development costs
Pursuant
to SFAS No. 2 (ASC 730-10), "Accounting for Research and Development Costs," our research and
development costs, which relate to the development of software to be used in our
search engine technology, were expensed as technological feasibility of the
software had not been reached as of December 31, 2009.
The cost
of materials and equipment that are acquired for research and development
activities and that have alternative future uses are capitalized when acquired,
such as computer equipment.
Foreign currency transactions
The
business of the Company from Canada involves incurring a substantial number of
operational transactions in Canada for which it transacts payments in Canadian
currency through a bank account maintained for that purpose. Included in such
transactions are payments for salaries, rent, consulting and many other
expenses. At the time of payment, each Canadian disbursement is translated into
the U. S. dollar equivalent amount and an exchange gain or loss on currency is
recorded at that time. As of December 31, 2009, the Canadian bank account
balance, which was the only account balance maintained in foreign currency at
that date was converted into a U. S. dollar equivalent amount.
NOTE
3 – RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2009 in lieu of paying its technology officer his
earned compensation directly of $13,504 (2008 - $ 27,402), it paid it to a
consulting company owned by the Officer. This amount relates principally to his
efforts in furthering the development of the Company’s video and audio search
engine technology.
NOTE
4 – NOTE PAYABLE
The
convertible promissory note payable bears interest at 10% per annum and was due
December 31, 2009. At the option of the note holder, the promissory note payable
balance outstanding, with any accrued interest, may be converted into common
shares of the Company. The number of shares issued will be calculated at a per
share conversion price of $.005.
The
promissory note holder converted accrued interest of $1,000 on the note into
200,000 (133 post-reverse split) common shares of the Company in July, 2009, and
has agreed to extend the due date of the promissory note payable to April 30,
2010.
NOTE
5 – STOCKHOLDERS’ EQUITY
During
the year ended December 31, 2008 the Company issued 7,500,000 (5,000
post-reverse split) shares of common stock for cash consideration of
$300,000
During
the year ended December 31, 2009, the Company issued 200,000 (133 post-reverse
split) shares in settlement of debt of $1,000.
During
the year ended December 31, 2009, the Company affected a 1500:1 reverse share
split.
During
the year ended December 31, 2009, interest in the amount of $ 3,681 was accrued
in respect of the note payable prior to the $1,000 conversion into common
shares.
F-8
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
6 – TECHNOLOGY LICENSE AGREEMENT
During
the year ended December 31, 2008, 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. In August, 2009, the agreement with Minerva
was mutually terminated with no further liability to FUSA due to Minerva’s
inability to deliver the product in a timely fashion.
NOTE
7 – INCOME TAXES
The
provision for Federal income tax consists of the following:
|
December
31, 2009
|
December
31, 2008
|
|||||||
|
Refundable
Federal income tax attributable to:
|
||||||||
|
Current
operations
|
$ | 26,500 | $ | 99,400 | ||||
|
Less:
valuation allowance
|
(26,500 | ) | (99,400 | ) | ||||
|
Net
provision for Federal income taxes
|
$ | - | $ | - | ||||
The
cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
|
December
31, 2009
|
December
31, 2008
|
|||||||
|
Deferred
tax asset attributable to:
|
||||||||
|
Net
operating loss carryover
|
$ | 1,910,000 | $ | 1,883,000 | ||||
|
Less:
valuation allowance
|
(1,910,000 | ) | (1,883,000 | ) | ||||
|
Net
deferred tax asset
|
$ | - | $ | - | ||||
Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards for federal income tax reporting purposes are subject to
annual limitations. Should a change in ownership occur net operating loss carry
forwards may be limited as to use in future years.
NOTE
8 – 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, 2009.
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.
F-9
FUSA
CAPITAL CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
9 – CORRECTION OF ERRORS AND RESTATEMENTS
The
Company has restated its balance sheet and statement of operations at December
31, 2008 to correct errors in its accounting. A receivable in the amount of $280
that was already collected was reversed. Property and equipment were abandoned
in lieu of rent, and equipment was given in lieu of salaries and wages in the
total amount of $23,803. Correspondingly, depreciation expense was reduced by
$9,152. In addition, an accrued liability in the amount of $29,750 was reversed
as the underlying agreement had been terminated with no liability. The net
effect of these adjustments was to reduce the December 31, 2007 accumulated
deficit by $5,947 and reduce the net loss for the year by $8,872.
The
December 31, 2008 balance sheet has been restated to correct the accounts
receivable, property and equipment, and accrued expenses.
The
December 31, 2008 statement of operations has been restated to reflect the
changes in revenues and expenses.
The
following are the before and after balances as restated:
Year
Ended December 31, 2008
| Balance Sheet | ||||
|
Current
Assets
|
|
|||
|
Before
|
$ | 26,646 | ||
|
After
|
$ | 26,366 | ||
|
Property
and Equipment, net of depreciation
|
||||
|
Before
|
$ | 14,654 | ||
|
After
|
$ | 0 | ||
|
Current
Liabilities
|
||||
|
Before
|
$ | 38,113 | ||
|
After
|
$ | 8,360 | ||
|
Stockholders’
Equity
|
||||
|
Before
|
$ | 3,187 | ||
|
After
|
$ | 18,006 | ||
|
Statement
of Operations
|
||||
|
Revenues
|
||||
|
Before
|
$ | 55,016 | ||
|
After
|
$ | 54,732 | ||
|
Operating
Expenses
|
||||
|
Before
|
$ | 356,194 | ||
|
After
|
$ | 347,042 | ||
|
Income
(Loss) from Operations
|
||||
|
Before
|
$ | (301,182 | ) | |
|
After
|
$ | (292,310 | ) | |
|
Net
Income (Loss)
|
||||
|
Before
|
$ | (301,182 | ) | |
|
After
|
$ | (292,310 | ) | |
NOTE
10 – SUBSEQUENT EVENTS
The
Company has analyzed its operations subsequent to December 31, 2009 through the
date these financial statements were filed with the Securities and Exchange
Commission.
F-10
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, 2009. We would, however, like to note that we have
previously provided disclosure on form 8K that on August 27, 2009 the Public
Company Accounting Oversight Board (“PCAOB”) revoked the registration of Moore
and Associates, Chartered (“Moore”) because of violations by Moore of PCAOB
rules and auditing standards in auditing financial statements, violations of
PCAOB rules and quality control standards, violations of Section 10 B and Rule
10(b) 5 thereunder of the Securities Exchange Act of 1934 and non-cooperation
with a PCAOB investigation. Moore, under advice of counsel, has
declined to provide us with a letter to the Securities and Exchange Commission
stating whether it agrees with the statements in this amended
8-K. Moore was the Company's previous independent
auditor. On August 9, 2009 the Company engaged Seale and Beers, CPAs
as its independent auditors but dismissed Seale and Beers, CPAs on September 22,
2009 and appointed Maddox Ungar Silberstein PLLC, now Silberstein Ungar PLLC as
its independent auditors.
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, 2009. 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.
25
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, 2009, 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,
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.
26
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. This
agreement was terminated in September 2009.
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 but has been extended
until April 30, 2010.
On June
29, 2009, our Board of Directors resolved to amend the Articles of Incorporation
pursuant to Nevada Revised Statues 78.207 to decrease the number of authorized
shares of our common stock, par value $.0001, from 500,000,000 to 333,333
shares. Correspondingly, our Board of Directors affirmed a reverse split of one
thousand and five hundred (1,500) to one (1) in which each shareholder was
issued one (1) share in exchange for every one thousand and five hundred (1,500)
common shares of their currently issued common stock. The record date for the
reverse split was July 6, 2009.
27
PART
III
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, 2009:
|
Name
|
Age
|
Position
|
||
|
Jenifer
Osterwalder
|
44
|
Chief
Executive Officer, Principal Accounting Officer, President, Treasurer,
Secretary and Director.
|
||
|
Alexander
Khersonski
|
37
|
Director
|
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.
28
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,
2009, 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,
2009, 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,
2009, 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.
29
The
following table sets for the compliance reporting under Section 16(a) during the
last fiscal year.
|
Number
of
Late
Reports
|
Number
of
Transactions
Not
Timely
Reported
|
Failure
to
File
|
|||
|
Jenifer
Osterwalder
|
0
|
0
|
1
|
||
|
Alexander
Khersonski
|
0
|
0
|
1
|
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
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
Nonqualified
Deferred Compensation Earnings
|
All
Other Compensation
|
Total
|
|||||||||
|
Jenifer
Osterwalder
|
2008
|
$125,000
|
-
|
-
|
-
|
-
|
-
|
-
|
$125,000
|
|||||||||
|
Chief
Executive Officer
|
2009
|
$125,000
|
-
|
-
|
-
|
-
|
-
|
-
|
*$125,000
|
* Due to
lack of funds, Ms. Osterwalder agreed to forgo a substantial portion of her
salary in 2009.
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,
2009, 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, 2009.
30
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, 2009:
|
DIRECTOR
COMPENSATION
|
||||||||||||||||||||||
|
Name
|
Fees
Earned
or
Paid
in
Cash
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
Non-
Qualified
Deferred Compensation Earnings
|
All Other
Compensation
|
Total
|
|||||||||||||||
|
Alexander
Khersonski
|
$
|
0
|
-
|
-
|
-
|
-
|
-
|
$
|
0
|
|||||||||||||
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, 2009.
EQUITY
COMPENSATION PLAN INFORMATION
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
||||
|
Equity
compensation plans approved by security holders
|
--
|
--
|
--
|
|||
|
Equity
compensation plans not approved by security holders
|
304
|
$1,110.00
|
3,697
|
|||
|
Total
|
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 December 31, 2009. 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.
|
31
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 46,735 shares of common stock currently outstanding (reflects a 1500
for 1 common stock dividend of our common shares that occurred for shareholders
of record as of July 6, 2009) and there are 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.
|
Name
|
Amount
and
Nature
of Ownership
|
Percent of
Class*
|
||
|
Jenifer
Osterwalder (1)
|
3,934
|
8.4 %
|
||
|
Tommy
Jo St. John (2)
|
4,292
|
9.2
%
|
||
|
Alexander
Khersonski (3)
|
67
|
0.1%
|
||
|
All
officers, directors, and 5% or greater shareholders as a group (3
persons)
|
8,293
|
17.7%
|
|
(1)
|
Consists
of stock options to acquire up to 3,334 shares of common stock, none of
which are presently exercisable and 600 shares of common stock directly
owned.
|
|
(2)
|
Consists
of 4,292 shares of common stock directly
owned.
|
|
(3)
|
Consists
of stock options to acquire up to 67 shares of common stock, none of which
are presently exercisable.
|
|
(3)
|
Adjusted
for our 1500 to 1 reverse stock split for shareholders of record as of
July 6, 209.
|
During
the year ended December 31, 2009, in lieu of paying our former Chief Technology
Officer, Tommy Jo St. John, his earned compensation of $13,504 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, 2009, in furthering
the development of our audio and video search engine
technology.
32
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:
|
2009
|
2008
|
|||||||
|
Audit
fees
|
$ | 6,250 | $ | 6,000 | ||||
|
Audit-related
fees
|
- | - | ||||||
|
Tax
fees
|
- | - | ||||||
|
All
other fees
|
- | - | ||||||
|
Total
|
$ | 6,250 | $ | 6,000 | ||||
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, 2008 and until August 9, 2009. Seale and
Beers, CPAs were our independent accountants from August 9, 2009 until September
22, 2009. Maddox Silberstein and Ungar PLLC have been our independent
auditors since September 22, 2009 and are now known as Silberstein Ungar
PLLC. We were billed $4,750 by Silberstein and Ungar and $1,500 by
Seale and Beers and nothing by Moore in 2009.
Audit
Fees
Audit
fees billed for professional services rendered by Moore & Associates ,
during the fiscal year ended December 31, 2009 and the twelve months ended
December 31, 2008, 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 $0 and $6,000, respectively.
Audit
fees billed for professional services rendered by Seale and Beers, CPAs , during
the fiscal year ended December 31, 2009 and the twelve months ended December 31,
2008, 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 $1,500 and $0, respectively.
Audit
fees billed for professional services rendered by Silberstein Ungar PLLC ,
during the fiscal year ended December 31, 2009 and the twelve months ended
December 31, 2008, 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 $4,750 and $0, respectively
Audit-Related
Fees
Audit-related
fees billed by Moore & Associates during the fiscal year ended December 31,
2008 and December 31, 2009, respectively, for assurance and related services and
totaled approximately $0 and $0, respectively.
Audit-related
fees billed by Seale and Beers, CPAs during the fiscal year ended December 31,
2008 and December 31, 2009, respectively, for assurance and related services and
totaled approximately $0 and $0, respectively.
Audit-related
fees billed by Silberstein Ungar PLLC during the fiscal year ended December 31,
2008 and December 31, 2009, 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, 2009
and the twelve months ended December 31, 2008, respectively, for tax compliance,
tax advice and tax planning services totaled approximately $0 and $0,
respectively.
Tax fees
billed by Seale and Beers, CPAs during the fiscal year ended December 31, 2009
and the twelve months ended December 31, 2008, respectively, for tax compliance,
tax advice and tax planning services totaled approximately $0 and $0,
respectively.
Tax fees
billed by Silberstein Ungar PLLC during the fiscal year ended December 31, 2009
and the twelve months ended December 31, 2008, 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, 2009 and the twelve months ended December 31, 2008, for services
rendered other than the amounts set forth above.
There
were no fees billed by Seale and Beers, CPAs during the fiscal year ended
December 31, 2009 and the twelve months ended December 31, 2008, for services
rendered other than the amounts set forth above.
There
were no fees billed by Silberstein and Ungar, PLLC during the fiscal year ended
December 31, 2009 and the twelve months ended December 31, 2008, for services
rendered other than the amounts set forth above.
33
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
|
2005
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.
|
|
10.2
|
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 April 15, 2010. 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 April 15, 2010. 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 April 15,
2010. 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 April 15,
2010. FILED HEREWITH.
|
34
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.
|
Date:
April 15, 2010
|
FUSA CAPITAL
CORPORATION
|
|
|
By:
|
/s/ Jenifer
Osterwalder
|
|
|
Jenifer
Osterwalder
|
||
|
Chief
Executive Officer &
Principal
Financial Officer
|
||
35