---

|UNITED STATES                     
|----------------------------------
|SECURITIES AND EXCHANGE COMMISSION
|Washington, D.C. 20549            
|                                  
|Form 10-QSB                       

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30,
2007

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT

For the transition period from __________to __________

Commission file number 333-120382

FSONA SYSTEMS CORP.(Exact
name of small business issuer as specified in its charter)

|Nevada                                                               | N/A                              
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)

11120 Horseshoe Way, Suite 140, Richmond, British
Columbia, Canada V7Q 5H7(Address of principal executive offices)

604.273.6333(Issuer's telephone number)

Not Applicable(Former name, former address and
former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such 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
[X] No [ ]

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 39,278,905
common shares issued and outstanding as of November 16, 2007

Transitional Small Business Disclosure Format (Check one): Yes [
] No [X]

---

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

It is the opinion of management
that the interim consolidated financial statements for the quarter ended
September 30, 2007, includes all adjustments necessary in order to ensure that
the interim consolidated financial statements are not misleading.

Our interim consolidated
financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting principles.

---

Consolidated Financial Statements

Fsona Systems Corp. (formerly
Matrix Ventures, Inc.)     (expressed in US
dollars) September 30, 2007 and December 31, 2006

---

- 1 -

|Fsona Systems Corp.                 
|------------------------------------
|(formerly Matrix Ventures, Inc.)    
|CONSOLIDATED BALANCE SHEETS         
|(See Basis of Presentation - Note 1)
|(expressed in US dollars)           

|                                  |  | Sept. 30,   |  |  | December 31, | 
|--------------------------------- |  | ----------- |  |  | ------------ | 
|                                  |  | 2007        |  |  | 2006         | 
|                                  |  | **$**       |  |  | $            | 
|                                  |  | (Unaudited) |  |  |              | 
|                                  |  |             |  |  |              | 
|ASSETS                            |  |             |  |  |              | 
|Current assets                    |  |             |  |  |              | 
|Cash                              |  | 2,917       |  |  | 187,474      | 
|Accounts receivable               |  | 97,955      |  |  | 566,784      | 
|Goods and services tax refundable |  | 50,663      |  |  | 14,520       | 
|Prepaid and other current assets  |  | 33,225      |  |  | 104,680      | 
|Deferred cost of sales            |  | -           |  |  | 43,313       | 
|Inventory [note
      4]          |  | 697,386     |  |  | 499,130      | 
|Total current assets              |  | 882,146     |  |  | 1,415,901    | 
|Inventory [note 4]                |  | -           |  |  | 519,520      | 
|Property, plant and equipment     |  | 17,766      |  |  | 19,547       | 
|                                  |  | 899,912     |  |  | 1,954,968    | 

|LIABILITIES AND CAPITAL DEFICIT                 |  |            |   |  |            |  
|----------------------------------------------- |  | ---------- | - |  | ---------- | -
|Current liabilities                             |  |            |   |  |            |  
|Accounts payable                                |  | 373,906    |   |  | 398,080    |  
|Accrued liabilities                             |  | 468,478    |   |  | 483,216    |  
|Accrued royalty                                 |  | 67,967     |   |  | 54,840     |  
|Deferred tax liability                          |  | 56,608     |   |  | 223,950    |  
|Current portion of loans payable [note
      5] |  | 1,729,198  |   |  | 4,353,962  |  
|Customer deposits
      and deferred revenue    |  | 379,027    |   |  | 444,011    |  
|Total liabilities                               |  | 3,075,184  |   |  | 5,958,059  |  
|                                                |  |            |   |  |            |  
|Capital deficit                                 |  |            |   |  |            |  
|Capital stock [note 6]                          |  | 39,079     |   |  | 20,076     |  
|Additional paid-in capital                      |  | 3,491,543  |   |  | 251,345    |  
|Accumulated other comprehensive loss            |  |            |   |  |            |  
|-cumulative
      translation adjustment        |  | (595,695   | ) |  | (65,126    | )
|Accumulated
      deficit                       |  | (5,110,199 | ) |  | (4,209,386 | )
|Total capital deficit                           |  | (2,175,272 | ) |  | (4,003,091 | )
|                                                |  | 899,912    |   |  | 1,954,968  |  

SEE ACCOMPANYING NOTES

---

- 2 -

|Fsona Systems Corp.                                               
|------------------------------------------------------------------
|(formerly Matrix Ventures, Inc.)                                  
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
      LOSS
|(Unaudited - expressed in US dollars)                             

|                                                        | Three Months Ended**Sept 30** |   | **Nine Months Ended
      Sept. 30** |         
|------------------------------------------------------- | ----------------------------- | - | ------------------------------------ | --------
|                                                        | 2007                          |   | 2006                                 | **2007**
|                                                        | $                             |   | $                                    |         
|                                                        |                               |   |                                      |         
|Sales[note 7]                                           | 226,711                       |   | 633,707                              |         
|Cost of sales[note
      4]                             | 637,836                       |   | 458,582                              |         
|Gross profit (loss)                                     | (411,125                      | ) | 175,125                              |         
|                                                        |                               |   |                                      |         
|Operating expenses                                      |                               |   |                                      |         
|Sales and marketing                                     | 111,970                       |   | 440,592                              |         
|Research and development                                | 148,893                       |   | 136,721                              |         
|General and administrative                              | 101,742                       |   | 233,249                              |         
|Depreciation of property, plant and equipment           | 1,998                         |   | 1,043                                |         
|Gain on disposal of
      property, plant and equipment | -                             |   | (359                                 | )       
|Total operating expenses                                | 364,603                       |   | 811,246                              |         
|                                                        |                               |   |                                      |         
|Loss from operations                                    | (775,728                      | ) | (636,121                             | )       
|                                                        |                               |   |                                      |         
|                                                        |                               |   |                                      |         
|Other income (expense)                                  |                               |   |                                      |         
|Interest income                                         | 321                           |   | 3,274                                |         
|Interest and bank charges                               | (842                          | ) | (636                                 | )       
|Foreign exchange gain                                   | 101,016                       |   | 52                                   |         
|Total other income                                      | 100,495                       |   | 2,690                                |         
|                                                        |                               |   |                                      |         
|Loss for period before income tax                       | (675,233                      | ) | (633,431                             | )       
|                                                        |                               |   |                                      |         
|Deferred income
      taxes recovery                    | 143,098                       |   | 33,431                               |         
|                                                        |                               |   |                                      |         
|Loss for the period                                     | (532,135                      | ) | (600,000                             | )       
|                                                        |                               |   |                                      |         
|Foreign currency
      translation                      | (125,824                      | ) | 11,259                               |         
|Comprehensive loss                                      | (657,959                      | ) | (588,741                             | )       
|                                                        |                               |   |                                      |         
|Loss per share  basic and diluted                      | (0.01                         | ) | (0.07                                | )       
|                                                        |                               |   |                                      |         
|Weighted average shares outstanding                     |                               |   |                                      |         
|                                                        | 39,078,904                    |   | 8,904,880                            |         

SEE ACCOMPANYING NOTES

---

- 3 -

|Fsona Systems Corp.                                        
|-----------------------------------------------------------
|(formerly Matrix Ventures, Inc.)                           
|CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
      DEFICIT
|(Unaudited - expressed in US dollars)                      

|                                                     |              |  |         |  | Additional  |   | Cumulative  |   |            |   | Total      |  
|---------------------------------------------------- | ------------ |  | ------- |  | ----------- | - | ----------- | - | ---------- | - | ---------- | -
|                                                     | Common stock |  | Paid In |  | Translation |   | Accumulated |   | Capital    |  
|                                                     | Shares       |  | Amount  |  | Capital     |   | Adjustment  |   | Deficit    |   | Deficit    |  
|                                                     | #            |  | $       |  | $           |   | $           |   | $          |   | $          |  
|                                                     |              |  |         |  |             |   |             |   |            |   |            |  
|Balance at January 1, 2007                           | 8,904,860    |  | 8,905   |  | 262,516     |   | (65,126     | ) | (4,209,386 | ) | (4,003,091 | )
|                                                     |              |  |         |  |             |   |             |   |            |   |            |  
|Adjustment for the issuance of common stock
      on |              |  |         |  |             |   |             |   |            |   |            |  
|recapitalization (notes
      3 and 6)               | 11,170,975   |  | 11,171  |  | (11,171     | ) | -           |   | -          |   | -          |  
|                                                     | 20,075,835   |  | 20,076  |  | 251,345     |   | (65,126     | ) | (4,209,386 | ) | (4,003,091 | )
|Adjustment to capital deficit of the Company at the  |              |  |         |  |             |   |             |   |            |   |            |  
|recapitalization date (note 3)                       | 19,003,070   |  | 19,003  |  | (71,803     | ) | -           |   | -          |   | (52,800    | )
|                                                     | 39,078,905   |  | 39,079  |  | 179,542     |   | (65,126     | ) | (4,209,386 | ) | (4,055,891 | )
|Foreign exchange translation adjustment              | -            |  |         |  | -           |   | (530,569    | ) | -          |   | (530,569   | )
|Net loss for the period                              | -            |  | -       |  | -           |   | -           |   | (900,813   | ) | (900,813   | )
|Debt extinguishment (note 5(i))                      | -            |  | -       |  | 3,312,001   |   | -           |   | -          |   | 3,312,001  |  
|                                                     | 39,078,905   |  | 39,079  |  | 3,491,543   |   | (595,695    | ) | (5,110,199 | ) | (2,175,272 | )

SEE ACCOMPANYING NOTES

---

- 4 -

|Fsona Systems Corp.                  
|-------------------------------------
|(formerly Matrix Ventures, Inc.)     
|CONSOLIDATED STATEMENTS OF CASH FLOWS
|(Unaudited - expressed in US dollars)

|                                                                                 | For the nine-      |   | For the nine       |  
|-------------------------------------------------------------------------------- | ------------------ | - | ------------------ | -
|                                                                                 | month period ended |   | month period ended |  
|                                                                                 | Sept. 30,          |   | Sept. 30,          |  
|                                                                                 | 2007               |   | 2006               |  
|                                                                                 | **$**              |   | **$**              |  
|OPERATING ACTIVITIES                                                             |                    |   |                    |  
|Net loss                                                                         | (900,813           | ) | (1,295,515         | )
|Adjustments to reconcile net loss to net cash used in operating
      activities |                    |   |                    |  
|Depreciation of property, plant
      and equipment                              | 5,260              |   | 2,322              |  
|Provision for warranties                                                         | 44,215             |   | 16,186             |  
|Issuance of common stock for services                                            | -                  |   | 271,420            |  
|Write-down of amounts due from related party                                     | -                  |   | 32,654             |  
|Write-down of inventory                                                          | 477,440            |   | -                  |  
|Deferred income taxes                                                            | (155,220           | ) | (31,341            | )
|Gain on disposal of property,
      plant and equipment                          | -                  |   | (1,501             | )
|Foreign exchange gain                                                            | (498,998           | ) | (159,792           | )
|Changes in operating assets and liabilities                                      |                    |   |                    |  
|Accounts receivable                                                              | 509,118            |   | (65,666            | )
|Goods and services tax receivable                                                | (30,269            | ) | 1,955              |  
|Prepaid and other current assets                                                 | 80,326             |   | 34,162             |  
|Deferred cost of sales                                                           | 43,313             |   | -                  |  
|Inventory                                                                        | (31,351            | ) | 508,001            |  
|Accounts payable                                                                 | (83,136            | ) | (235,106           | )
|Accrued liabilities                                                              | (179,746           | ) | (60,994            | )
|Customer deposits and deferred
      revenue                                     | (126,939           | ) | 167,726            |  
|Accrued
      royalty                                                            | 3,349              |   | 6,176              |  
|Net cash used in operating activities                                            | (843,451           | ) | (809,313           | )
|INVESTING ACTIVITIES                                                             |                    |   |                    |  
|Acquisition of property, plant and equipment                                     | (638               | ) | (19,713            | )
|Net cash used in
      investing activities                                      | (638               | ) | (19,713            | )
|FINANCING ACTIVITIES                                                             |                    |   |                    |  
|Proceeds
      from loans payable                                                | 686,445            |   | 881,568            |  
|Net cash provided by financing activities                                        | 686,445            |   | 881,568            |  
|                                                                                 |                    |   | )                  |  
|Effect of foreign exchange rate on changes
      in cash                         | (26,913            | ) | 162,139            |  
|Increase (decrease) in cash                                                      | (157,644           | ) | 52,542             |  
|Cash at the beginning of the period                                              | 187,474            |   | 278,379            |  
|Cash, at the end of
      the period                                             | 2,917              |   | 493,060            |  
|                                                                                 |                    |   |                    |  
|Supplementary information                                                        |                    |   |                    |  
|Cash interest paid                                                               | 2,760              |   | 2,352              |  
|Cash interest received                                                           | 2,992              |   | 5,159              |  
|Non-cash investing and financing activities:                                     |                    |   |                    |  
|Shares issued for services                                                       | -                  |   | 271,420            |  
|Debt extinguishment                                                              | 3,312,001          |   | -                  |  

SEE ACCOMPANYING NOTES

---

- 5 -

|Fsona Systems Corp.                       
|------------------------------------------
|(formerly Matrix Ventures, Inc.)          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|(Unaudited - expressed in US dollars)     

September 30, 2007 and December 31, 2006

|1. | NATURE OF BUSINESS AND BASIS OF
      PRESENTATION
|-- | --------------------------------------------------

Nature of business

Matrix was incorporated under the laws of the State of Nevada,
on February 2, 2004 as Matrix Ventures Inc. On February 9, 2007 the Company
closed the transaction contemplated in the Share Exchange Agreement (the
Agreement) dated February 8, 2007 with Fsona Systems Corp. (Fsona), a
company incorporated under the laws of the state of Nevada on August 10, 2005.
Under the Agreement, the Company agreed to acquire all of the issued and
outstanding shares of Fsona in exchange for 20,075,835 common shares of the
Company. As of the closing date, the former stockholders of Fsona held
approximately 51% of the issued and outstanding common shares of the Company.
The acquisition of Fsona was recorded as a reverse acquisition for accounting
purposes. Fsona, the acquired entity, is regarded as the predecessor entity as
of February 9, 2007 and the Company adopted the year end of Fsona, being
December 31. In accordance with the provisions governing the accounting for
reverse acquisitions (Note 3), the comparative figures presented as at December
31, 2006 and September 30, 2006 are those of Fsona.

The Company previously focused its business efforts on the
acquisition, exploration, development and exploitation of mineral and oil and
gas properties. In contemplation of the share exchange transaction with Fsona,
the Company abandoned its original business plan. As of the closing date of the
Agreement, the Company commenced the business of developing, manufacturing and
marketing Free Space Optical (FSO) communication devices to be used in various
communications applications. The Company plans to continue to generate revenues
through sales of its FSO communication devices.

Effective April 13, 2007, the Company completed a merger with
its subsidiary, Fsona Systems Corp. As a result, the Company has changed its
name from Matrix Ventures, Inc. to Fsona Systems Corp. to better reflect the
direction and business of the Company subsequent to the closing of the share
exchange agreement that was entered into among, the Company, Fsona Systems
Corp., and the shareholders of Fsona Systems Corp., as reported on the current
report on Form 8-K filed on February 13, 2007.

On April 13, 2007, the Company rolled forward the issued and
outstanding shares of the Company on an 8.23 for one basis. The effect of the
stock split has been applied on a retroactive basis to all related disclosures
and calculations in these consolidated financial statements.

Basis of presentation

These interim consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America, and include the accounts of the Company and its wholly-owned
subsidiary, Fsona Systems (Operating) Inc. All significant inter-company
transactions have been eliminated on consolidation.

These accompanying interim consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization
of assets and satisfaction of liabilities and commitments in the normal course
of business. At September 30, 2007, the Company has negative working capital and
has a consolidated accumulated deficit of $5,110,199 as at September 30, 2007.
The continuation of the Company is dependent upon the continuing financial
support of creditors and stockholders obtaining additional long-term financing,
as well as achieving and maintaining a profitable level of operations. The
Company plans to raise additional equity and debt capital as necessary to
finance the operating and capital requirements of the Company.

---

6

|Fsona Systems Corp.                       
|------------------------------------------
|(formerly Matrix Ventures, Inc.)          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|(Unaudited - expressed in US dollars)     

September 30, 2007 and December 31, 2006

|1. | NATURE OF BUSINESS AND BASIS OF PRESENTATION
      (contd)
|-- | ------------------------------------------------------------

The Company had cash on hand of $2,917 at September 30, 2007.
Management anticipates that it requires approximately $750,000 over the next
twelve months ended September 30, 2008 to carry out its plans. While the Company
is expending its best efforts to achieve the above plans, there is no assurance
that any such activity will generate funds for operations To the extent that
cash needs are not achieved from operating cash flow or existing cash on hand,
the Company plans raise necessary cash through equity issuances and/or debt
financing. The Company plans to manage its resources and assets on hand and
pursue opportunities for further long-term financing, as well as achieving and
maintaining a profitable level of operations. Assets on hand and any additional
amounts raised will be used for further development of Companys products and
for other working capital purposes. There is no assurance that further financing
or profitable business will be achieved, accordingly, there is substantial doubt
about the Companys ability to continue as a going concern. The Companys
financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that may be necessary should Company be unable to
continue in existence.

Interim Financial Statements

The interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management, are necessary for
fair presentation of the information contained therein. It is suggested that
these interim financial statements be read in conjunction with the audited
financial statements of Fsona for the years ended December 31, 2006 and 2005
included in the Companys Current Report on Amendment No. 1 to Form 8-K. The
Company follows the same accounting policies in the preparation of interim
reports.

Results of operations for the interim periods are not
necessarily indicative of annual results.

|2. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

Recent accounting pronouncements

SFAS No. 155

In February 2006, FASB issued SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments  an Amendment of FASB Statements No. 133
and 140. Among other things, SFAS No. 155 permits the election of fair value
remeasurement for certain hybrid financial instruments that would otherwise
require bifurcation under Statement 133, Accounting for Derivative Instruments
and Hedging Activities. These hybrid financial instruments would include both
assets and liabilities. SFAS No. 155 is effective for fiscal years beginning
after September 15, 2006. There was no material impact to the Companys
consolidated financial statements upon adoption of this new pronouncement.

---

7

|Fsona Systems Corp.                       
|------------------------------------------
|(formerly Matrix Ventures, Inc.)          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|(Unaudited - expressed in US dollars)     

September 30, 2007 and December 31, 2006

|2. | SIGNIFICANT ACCOUNTING POLICIES
      (contd)
|-- | -----------------------------------------------

SFAS No. 157

In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard (SFAS) No. 157,
Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of FAS 157 are effective fiscal years beginning after November
15, 2007. The Company is currently evaluating the impact of the provisions of
SFAS No. 157.

FIN 48

In June 2006, FASB issued interpretation No. 48, Accounting
for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FAS
No. 109) (FIN 48). This interpretation prescribes a recognition threshold and
measurement attribute for tax positions taken or expected to be taken in a tax
return. This interpretation also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 uses a two-step approach for evaluating tax
positions. The first step, recognition, occurs when an enterprise concludes that
a tax position, based solely on its technical merits, is more likely than not to
be sustained upon examination. The second step, measurement, is only addressed
if the recognition threshold is met; under this step, the tax benefit is
measured as the largest amount of the benefit, determined on a cumulative
probability basis, that is more likely than not to be realized upon settlement.
FIN 48s use of the term more likely than not represents a greater than 50
percent likelihood of occurrence.

The cumulative effect of applying the provisions of this
Interpretation shall be reported as an adjustment to the opening balance of
retained earnings for fiscal years in which the enterprise adopts the
Interpretation. FIN 48 is effective for fiscal years beginning after December
15, 2006. Earlier application is permitted if the reporting enterprise has not
publicly issued financial statements, including interim financial statements,
for that fiscal year. Accordingly, the Company has adopted the provisions of
this Interpretation in the nine month period ended September 30, 2007. There was
no material impact to the Companys consolidated financial statements upon
adoption of this new pronouncement.

SFAS No. 159

In February 2007, the FASB issued FAS No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities-Including an amendment of
FASB Statement No. 115", ("FAS 159") which permits entities to choose to measure
many financial instruments and certain other items at fair value at specified
election dates. A business entity is required to report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. This statement is expected to expand the use of
fair value measurement. FAS 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years, and is applicable beginning in the Company's first quarter of
2009. The Company is currently evaluating the impact that FAS 159 will have on
its consolidated financial statements

---

8

|Fsona Systems Corp.                       
|------------------------------------------
|(formerly Matrix Ventures, Inc.)          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|(Unaudited - expressed in US dollars)     

September 30, 2007 and December 31, 2006

|**3.** | RECAPITALIZATION
|------ | ----------------

On February 8, 2007, the Company entered into a Share Exchange
Agreement (the Agreement), among the Company, Fsona, and the former
stockholders of Fsona.

The closing of the transactions contemplated in the Agreement
and the acquisition of all of the issued and outstanding common stock of Fsona
occurred on February 9, 2007. In accordance with the closing of the share
exchange agreement, the Company issued 20,075,835 common shares to the former
stockholders of Fsona for all of the 8,904,860 issued and outstanding common
shares of Fsona on the basis of 2.2544805 common shares of the Company for every
one common share of Fsona.

The acquisition was accounted for using the purchase method of
accounting as applicable to reverse acquisitions, as the former stockholders of
Fsona controlled approximately 51% of Matrix's common stock immediately upon
conclusion of the transaction, representatives of Fsona are now Matrix's sole
directors and officers and the continuing business is that of Fsona. The share
exchange is deemed to be a reverse acquisition for accounting purposes. Fsona,
the acquired entity, is regarded as the predecessor entity as of February 9,
2007. Matrix was largely inactive prior to the transaction. The post-acquisition
entity is accounted for as a recapitalization of Fsona. The value assigned to
the common shares was valued based on the fair value of net liabilities of
Matrix at the recapitalization date which approximated carry over basis of
$52,800.

In accordance with provisions governing the accounting for
reverse acquisition, the figures presented as at December 31, 2006 and September
30, 2006 are those of Fsona Systems Corp.

At the time of the transaction, Fsona Systems Corp. (formerly
Matrix Ventures Inc.) had no assets and $52,800 of accounts payable and accrued
liabilities (included $28,300 owed to a shareholder of Matrix), which continues
to be outstanding, at September 30, 2007.

Unaudited pro-forma revenue, net loss and loss per share
assuming the transaction had been completed on January 1, 2006 is as follows:

|                                 |   | Unaudited       |   |   | Unaudited       |   |   | Unaudited      |  
|-------------------------------- | - | --------------- | - | - | --------------- | - | - | -------------- | -
|                                 |   | proforma for    |   |   | proforma for    |   |   | proforma for   |  
|                                 |   | the three-month |   |   | the three-month |   |   | the nine-month |  
|                                 |   | period ended    |   |   | period ended    |   |   | period ended   |  
|                                 |   | Sept. 30,       |   |   | Sept. 30,       |   |   | September 30,  |  
|                                 |   | 2007            |   |   | 2006            |   |   | 2006           |  
|Revenue                          | $ | 226,711         |   | $ | 633,707         |   | $ | 1,652,882      |  
|Net loss for the period          | $ | (538,351        | ) | $ | (608,092        | ) | $ | (1,314,278     | )
|Basic and diluted loss per share | $ | (0.01           | ) | $ | (0.07           | ) | $ | (0.22          | )

---

9

|Fsona Systems Corp.                       
|------------------------------------------
|(formerly Matrix Ventures, Inc.)          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|(Unaudited - expressed in US dollars)     

|**4.** | INVENTORY
|------ | ---------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Sept. 30, |  |  | December 31, | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- |  |  | ------------ | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 2007      |  |  | 2006         | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | **$**     |  |  | **$**        | 
|Raw materials                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 573,093   |  |  | 919,510      | 
|Work in progress                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 52,456    |  |  | 75,582       | 
|Finished goods                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 71,837    |  |  | 23,558       | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 697,386   |  |  | 1,018,650    | 
|Less: current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 697,386   |  |  | 499,130      | 
|Long term portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | -         |  |  | 519,520      | 
|During the three-month period ended September 30, 2007
      the Company recorded a $477,440 write-down of raw materials inventory, due
      to slow-moving inventory components. This write-down has been recorded as
      part of cost of sales in the Consolidated Statement of Operations. As a
      result of this write-down, all of the Companys inventory is now expected
      to be consumed within the twelve-month period ending September 30, 2008.
      As at December 31, 2006, included in raw materials inventory were
      components that were not expected to be consumed within the twelve-month
      period following the Balance Sheet date and hence were disclosed as long
      term inventory. | 

|**5**. | LOANS PAYABLE
|------ | -------------

The loans payable represent amounts outstanding as at:

|                                                                              |  | Sept. 30  |  |  | December 31 | 
|----------------------------------------------------------------------------- |  | --------- |  |  | ----------- | 
|                                                                              |  | 2007      |  |  | 2006        | 
|                                                                              |  | $         |  |  | $           | 
|                                                                              |  |           |  |  |             | 
|Loan payable to Everona Limited (the Companys controlling
      stockholder) |  |           |  |  |             | 
|non-interest bearing, no terms
      of repayment and                         |  |           |  |  |             | 
|collateralized by a general security agreement
      covering all             |  |           |  |  |             | 
|present and after acquired
      assets of the Company                        |  | 605,686   |  |  | 605,686     | 
|                                                                              |  |           |  |  |             | 
|Amounts payable to Crown Capital Partners
      S.A. (Crown)                |  |           |  |  |             | 
|(former controlling stockholder of the Company),
      non-interest bearing,  |  |           |  |  |             | 
|unsecured and no terms of repayment                                           |  | 1,123,512 |  |  | 436,275     | 
|                                                                              |  |           |  |  |             | 
|Amounts payable to Crown by Everona upon
      change of control,             |  |           |  |  |             | 
|interest bearing,
      unsecured and have no terms of repayment [i]          |  | -         |  |  | 3,312,001   | 
|                                                                              |  | 1,729,198 |  |  | 4,353,962   | 
|                                                                              |  |           |  |  |             | 
|Less: current portion                                                         |  | 1,729,198 |  |  | 4,353,962   | 
|Long-term portion                                                             |  | -         |  |  | -           | 

|[i] | On March 28, 2006, Crown entered into an agreement with
      Everona Limited (Everona) to sell to Everona its 100% interest (823
      shares) in the Company and $3,312,001 of amounts previously advanced to
      the Company in exchange for an interest-bearing promissory note from
      Everona to Crown equal to $3,312,001.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

10

|Fsona Systems Corp.                       
|------------------------------------------
|(formerly Matrix Ventures, Inc.)          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|(Unaudited - expressed in US dollars)     

September 30, 2007 and December 31, 2006

|5. | LOANS PAYABLE (contd)
|-- | ----------------------

Following the acquisition, in March 28, 2006 Everona entered
into an agreement with the Company to convert the amounts owed to it by the
Company in exchange for 18,552,680 shares of the Companys common stock. During
the period ended September 30, 2007, management believes the transaction between
stockholders principally involving amounts previously advanced by Crown has
fully satisfied conditions for debt extinguishment. Accordingly, the amount
owing from Everona to Crown that was carried on the Companys balance sheet as a
liability has been reclassified as equity of the Company.

|[ii] | Subsequent to September 30, 2007 Crown advanced the
      Company an additional $45,000. The loan is non-interest bearing,
      unsecured, and bears no terms of repayment.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | CAPITAL STOCK
|-- | -------------

Authorized

On April 13, 2007 the Company effected an eight point
twenty-three (8.23) for one (1) forward stock split of the authorized, issued
and outstanding common stock. As a result, authorized capital has increased from
75,000,000 shares of common stock with a par value of $0.001 to 617,250,000
shares of common stock with a par value of $0.001. The effect of the stock split
has been applied on a retroactive basis to all related disclosure and
calculations in these consolidated financial statements.

|7. | SEGMENTED INFORMATION
|-- | ---------------------

The Company operates in one primary operating segment, that
being the design, manufactures and sale of optical wireless equipment.

Three months
    Three months
    Nine months
    Nine monthsended
    ended
    ended
    endedSept. 30, 2007
    Sept. 30, 2006
    Sept. 30 , 2007
    Sept. 30 , 2006$
    $
    $
    $RevenuesCanada
    4,222
    714
    3,991
    25,976United States
    47,228
    275,764
    337,863
    563,117Asia-Pacific
    363
    74,594
    96,976
    74,138Central andLatin
    49,600
    208,804
    
    547,119America
    
    
    119,840Europe
    40,222
    15,407
    198,567
    57,634Middle East and Africa
    85,076
    58,424
    212,900
    384,898226,711
    633,707
    970,137
    1,652,882


No single customer accounted for revenues in excess of 10% of
the total revenue for the nine month period ended September 30, 2007. Two
customers accounted for 10% and 20% of revenue for the nine month period ended
September 30, 2006). Substantially all of the Companys assets are located in
Canada and are denominated in Canadian dollars.

---

11

|Fsona Systems Corp.                       
|------------------------------------------
|(formerly Matrix Ventures, Inc.)          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|(Unaudited - expressed in US dollars)     

September 30, 2007 and December 31, 2006

|8. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

|a] | TPC audit
|-- | ---------

In January 2004, Technologies Partnership Canada (TPC)
commissioned an audit of Fsonas predecessor company (fSONA Communications Ltd.)
prior claims for TPC funding. TPC indicated that Fsona Communications Ltd. had
potentially overstated prior expenditures eligible for funding by approximately
$2,192,024 (CDN$2,180,625) which equates to a potential assessment against the
Company of $730,600 (CDN$726,801). The Company vigorously disagrees with TPCs
preliminary findings, with the exception of a possible $203,393 (CDN$202,335)
overstatement. As the final determination of the TPC audit result has not been
made, the likelihood of repayment and the ultimate amount, if any, are not
determinable at this time. Accordingly, with the exception of the possible
$203,393 (CDN$202,335) overstatement which has been accrued in accrued
liabilities, no amount has been recorded in these financial statements. There
has been additional $13,978 (CDN$13,905) accrued to the TPC contingency in
recognition of fSONAs portion of cost of the 2004 TPC compliance. Beginning in
May 2007 a twelve month payment plan was initiated to pay off the costs accrued
for the TPC compliance audit. As of September 30 2007, $6,292 (CDN$6,953) of the
$13,978 (CDN$13,905) has been paid.

|b] | Litigation
|-- | ----------

During the normal course of business activity, the Company was
involved in litigation proceedings as at September 30, 2007. While the outcome
of these matters is subject to future resolution, management's evaluation and
analysis of such matters indicates that, individually and in the aggregate, the
probable ultimate resolution of such matters will not have a material adverse
effect on the Company's financial statements. The outcome of these matters is
presently indeterminable. Any settlement resulting from resolution of these
contingencies will be accounted for in the period of settlement.

|9. | SUBSEQUENT EVENT
|-- | ----------------

|a] | On October 16, 2007 the Company issued a private
      placement of 200,000 units at $0.50 per share for gross proceeds of $100,000.
      Each unit consists of one common share and one share purchase warrant entitling
      the purchaser to purchase an additional common share at $0.50 per share.
      The share purchase warrants expire on October 15, 2009.                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|b] | In November 2007, the Company
        received $250,000 in connection with a private placement of 500,000 units
        at $0.50 per share. The units are in the process of being issued. Each
        unit will consist of one common share and one share purchase warrant entitling
        the purchaser to purchase an additional common share at $0.50 per share.
        The share purchase warrants expire on November 15, 2009.

---

12

|Item 2. Management's Discussion and Analysis or Plan of
      Operation.
|------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS

This quarterly report contains
forward-looking statements as that term is defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may", "should", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled "Risk Factors", which
may cause our or our industry's actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our interim consolidated
financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting principles. The
following discussion should be read in conjunction with our interim consolidated
financial statements and the related notes that appear elsewhere in this
quarterly report. The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include those discussed below and
elsewhere in this quarterly report, particularly in the section entitled "Risk
Factors" of this quarterly report.

In this quarterly report, unless
otherwise specified, all dollar amounts are expressed in United States dollars.
All references to "CDN$" refer to Canadian dollars and all references to "common
shares" refer to the common shares in our capital stock.

As used in this quarterly report,
the terms "we", "us", "our" and "fSONA" mean fSONA Systems Corp. and our wholly
owned subsidiary fSONA Systems (Operating) Corp., unless otherwise
indicated.

Corporate History

Our company was incorporated in
the State of Nevada on February 2, 2004. On April 5, 2007, we incorporated a
wholly-owned Nevada subsidiary for the sole purpose of effecting a name change
through a merger with our subsidiary. On April 13, 2007, we merged our
subsidiary with and into our company, with our company continuing on as the
surviving corporation under the name fSONA Systems Corp. Our name change was
effected with NASDAQ on April 19, 2007 and our common shares became quoted on
the OTC Bulletin Board on April 19, 2007 under the new stock symbol of "FSON".
In addition, on April 13, 2007 we effected an eight point twenty-three (8.23)
for one (1) forward stock split of our authorized, issued and outstanding common
stock. As a result, our authorized capital increased from 75,000,000 shares of
common stock to 617,250,000 shares of common stock.

On February 8, 2007, we entered
into a share exchange agreement with FSona Systems Corp. (now known as fSONA
Systems (Operating) Corp.) and the shareholders of FSona Systems. The share
exchange agreement contemplated our company acquiring all of the issued and
outstanding common shares of FSona Systems in exchange for the issuance by our
company of 2,439,348 common shares. The closing of the transactions contemplated
in the share exchange agreement and the acquisition of all of the issued and
outstanding shares of FSona Systems occurred on February 9, 2007. As of the
closing date, the former shareholders of FSona Systems held approximately 51.4%
of the issued and outstanding common shares of our company. The acquisition of
FSona Systems is deemed to be a reverse acquisition for accounting purposes.
FSona Systems, the acquired entity, is regarded as the predecessor entity as of
February 9, 2007. Starting with the periodic report for the quarter in which the
acquisition was consummated, our company will file annual and quarterly reports
based on the December 31

---

13

fiscal year end of FSona Systems. Such financial statements
will depict the operating results of FSona Systems, including the acquisition of
our company, from February 9, 2007.

Following incorporation, we
commenced the business as a company engaged in the acquisition and disposition
of mineral properties. On April 21, 2004, we obtained an exclusive option to
acquire a 100% interest in a mineral claim known as the Wanapitei River Property
pursuant to the terms of an agreement with Terry Loney. We were not successful
in implementing our business plan as a company engaged in the acquisition and
disposition of mineral properties. As management of our company investigated
opportunities and challenges in the business of being a mineral based company,
management realized that the business did not present the best opportunity for
our company to realize value for our shareholders. Accordingly, we abandoned our
mineral business and elected not to exercise the option to acquire the interest
in the Wanapitei River Property. We identified the business previously operated
by FSona Systems as a private entity and entered into the share exchange
agreement as a means to change our business.

Current Business

As of the closing date of the
share exchange agreement on February 9, 2007, our company commenced the business
of providing point-to-point broadband wireless connectivity solutions.
Specifically, we manufacture and sell wireless transceivers that transfer data
between two points using infrared laser beams, such as voice, data, video,
internet messages and large computer files. Our products offer a point-to-point,
line of sight, wireless high-speed communications link established between two
transceiver units, which are "linked" wirelessly through the alignment of our
SONAbeam products which transmit data via a laser beam. Our transceiver units
are designed to provide wireless link transmission of data at speeds of up to
2.5 gigabits per second, with transmission similar to those obtained with fiber,
and to transmit that data at distances of up to 7 km in clear weather
conditions. In addition, our SONAbeam products can be rapidly installed and
redeployed. Our business strategy is to generate revenues through the
commercialization of our technologies. Our target customers include the
military, government, carriers, service providers, private enterprise and other
entities seeking wireless communication solutions. Our products operate based on
eye-safe 1550 nanometer wavelength free space optics technology, and could
potentially be similar in data rates to fiber optic cable. Free space optics
operates when a laser transmitter generates focused light waves that carry data
through the atmosphere to an optical receiver that recognizes those light
waves.

Managements Discussion and Analysis

You should read the following
discussion of our financial condition and results of operations together with
the unaudited interim consolidated financial statements and the notes to the
unaudited interim consolidated financial statements included in this quarterly
report. This discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results may differ materially from
those anticipated in these forward-looking statements.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2007 AND 2006

Our net loss for the three months
ended September 30, 2007 was $532,135 as compared to a net loss of $600,000 for
the three months ended September 30, 2006.

Sales and Cost of Sales

Sales for the three months ended
September 30, 2007 were $226,711, which represents a 64% decrease from sales of
$633,707 for the three months ended September 30, 2006. The decrease in sales
revenue during this period was primarily attributable to a lengthening of the
sales cycle in the Middle Eastern region and reduction and refocusing of the US
sales force in an effort to cut operating costs. Subsequent to September 30,
2007, we received an additional $175,000 in new orders increasing our current
order backlog to $445,000. Management believes that we will be able t o fulfill
certain of our order backlog by raising a modes amount of capital for sales
related expenditures. We expect to meet our capital requirements through sales
of our equity securities and/or debt financing, if and when available, on
commercially acceptable terms.

---

14

Cost of sales for the three
months ended September 30, 2007 was $637,836 an increase of 39% from cost of
sales of $458,582 for the three months ended September 30, 2006. Cost of sales
for the three months ended September 30, 2007 was 281% of total sales compared
with 72% of total sales for the three months ended September 30, 2006. This
increase can be attributable to a one-time write-down of slow moving inventory
of $477,440 during the three month period ended September 30, 2007. Aside from
the write-down, other cost of sales for the three month period ended September
30, 2007 was $160,396 or 70% compared to 72% from the same period in 2006. Cost
of sales reductions are anticipated as we continue to increase our sales backlog
and implement purchasing advantages of increase quantities inventory buys.
Direct labour costs and overhead expenses related to our manufacturing are not
expected to increase materially as we believe our current facility has the
capacity to meet forecasted demand.

Operating Expenses

Total operating expenses for the
three months ended September 30, 2007 were $364,603, which represents a 55%
decrease in total operating expenses of $811,246 for the three months ended
September 30, 2006. Sales and marketing expenses, research and development
expenses as well as general and administrative expenses constitute the major
components of our total operating expenses.

Sales and marketing expenses for
the three months ended September 30, 2007 were $111,970, which represents a
74.6% decrease in sales and marketing expenses of $440,592 for the three months
ended September 30, 2006. Management anticipates that sales and marketing
expenses will increase as we market our products, hire new sales personnel, and
support and expand our partner programs.

General and administrative
expenses for the three months ended September 30, 2007 were $101,742, which
represents a 56.4% decrease in general and administrative expenses of $233,249
for the three months ended September 30, 2006. Management believes that these
costs are projected to rise through the remainder of the fiscal year ended 2007
and into 2008, as we re-build our operations in our Richmond offices.

Research and development expenses
for the three months ended September 30, 2007 were $148,893, which represents a
8.9% increase in research and development expenses of $136,721 for the three
months ended September 30, 2006. Management anticipates that these costs will
increase through the remainder of the 2007 fiscal year and into the 2008 year.
We intend to increase research and development expenses to $625,000 and $825,000
for our 2007 and 2008 fiscal years, respectively. Our research and development
efforts have been focused on the completion of our 1250 E product this quarter.
Other developments, active tracking on our SONAbeam E product line, the
development of lower cost, higher bandwidth products in addition to other
product and software upgrades, will continue in the last quarter of 2007 into
2008.

Other Income and Expenses

During the three months ended
September 30, 2007, we recognized a foreign exchange rate gain of $101,016, as
compared to a foreign exchange gain of $52 during the three months ended
September 30, 2006. Such gains are principally the result of the strengthening
Canadian dollar on our net liability position.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2007 AND 2006

Our net loss for the nine months
ended September 30, 2007 was $900,813 as compared to a net loss of $1,295,515
for the nine months ended September 30, 2006.

Sales and Cost of Sales

Sales for the nine months ended
September 30, 2007 were $970,137 which represents a 41% decrease from sales of
$1,652,882 for the nine months ended September 30, 2006. The decrease in sales
revenue during this period was primarily attributable to a lengthening of the
sales cycle in the Middle East and reduction and refocusing of the US sales
force in an effort to cut operating costs. Subsequent to September 30, 2007, we
received an additional $175,000 in new orders increasing our current order
backlog to $445,000. Management believes that we will be

---

15

able to fulfill certain of our order backlog by raising a
modest amount of capital for sales related expenditures. We expect to meet our
capital requirements through sales of our equity securities and/or debt
financing, if and when available, on commercially acceptable terms. Cost of
sales for the nine months ended September 30, 2007 was $1,212,082, a decrease of
5.5% from cost of sales of $1,283,248 for the nine months ended September 30,
2006. Cost of sales for the nine months ended September 30, 2007 was 125% of
total sales compared with 77.6% of total sales for the nine months ended
September 30, 2006. This increase can be attributable to a one-time write-down
of slow moving inventory of $477,440 during the nine month period ended
September 30, 2007. Aside from the write-down, other cost of sales for the nine
month period ended September 30, 2007 was $734,642 or 75.7% compared to 77.6%
from the same period in 2006. Cost of sales reductions are anticipated as we
continue to increase our sales backlog and implement purchasing advantages of
increase quantities inventory buys. Direct labour costs and overhead expenses
related to our manufacturing are not expected to increase materially as we
believe our current facility has the capacity to meet forecasted demand.

Operating Expenses

Total operating expenses for the
nine months ended September 30, 2007 were $1,313,318, which represents a 29.4%
decrease in total operating expenses of $1,859,089 for the nine months ended
September 30, 2006. Sales and marketing expenses, research and development
expenses as well as general and administrative expenses constitute the major
components of our total operating expenses.

Sales and marketing expenses for
the nine months ended September 30, 2007 were $441,961, which represents a 52.5%
decrease in sales and marketing expenses of $930,172 for the nine months ended
September 30, 2006. Management anticipates that sales and marketing expenses
will increase as we market our products, hire new sales personnel, and support
and expand our partner programs.

General and administrative
expenses for the nine months ended September 30, 2007 were $420,104, which
represents a 17.1% decrease in general and administrative expenses of $506,977
for the nine months ended September 30, 2006. Management believes that these
costs are projected to rise to $625,000 and $775,000 in our fiscal years ended
2007 and 2008, respectively, as we re-build our operations in our Richmond and
offices.

Research and development expenses
for the nine months ended September 30, 2007 were $445,993, which represents a
5.9% increase in research and development expenses of $421,119 for the nine
months ended September 30, 2006. Management anticipates that these costs will
increase through the remainder of the 2007 fiscal year and into 2008. We intend
to increase research and development expenses to $625,000 and $825,000 for our
2007 and 2008 fiscal years, respectively. Our research and development efforts
have been focused on the completion of our 1250 E product this quarter. Other
developments, active tracking on our SONAbeam E product line, the development of
lower cost, higher bandwidth products in addition to other product and software
upgrades, will continue in the last quarter of 2007 into 2008.

Other Income and Expenses

During the nine months ended
September 30, 2007, we recognized a foreign exchange rate gain of $498,998, as
compared to a foreign exchange gain of $159,792 during the nine months ended
September 30, 2006. Such gains are principally the result of the strengthening
Canadian dollar on our net liability position.

LIQUIDITY AND CAPITAL RESOURCES

Our company's principal cash
requirements are for operating expenses, including inventory purchases, which we
anticipate will rise as a result of the increase in our sales backlog. We
anticipate that compensation expense will require a greater percentage of our
cash requirements in the future due to our anticipated increase in our sales and
marketing efforts.

---

16

Capital Resources

As of September 30, 2007, we had
cash of $2,917. As of September 30, 2007, we had a working capital deficiency of
$2,193,038 compared with a working capital deficiency of $4,542,158 as of
December 31, 2006, which represents a decrease in working capital deficiency of
$2,349,120. The decrease in the working capital deficiency is largely due to the
settlement of debt ($3,312,001) during the nine month period ended September 30,
2007.

We have suffered recurring
losses. The ability of our company to meet our financial liabilities and
commitments is primarily dependent upon the continued extension of credit by our
creditors, the continued financial support of our directors and shareholders,
the continued issuance of equity to new shareholders, and our ability to achieve
and maintain profitable operations.

Management believes that our
company's cash and cash equivalents and cash provided by operating activities
will not be sufficient to meet our working capital requirements for the next
twelve month period. We estimate that we will require approximately $750,000
over the next twelve month period ending September 30, 2008 to fund our
operating cash shortfall. Our company plans to raise the capital required to
satisfy our immediate short-term needs and additional capital required to meet
our estimated funding requirements for the next twelve months primarily through
the private placement of our equity securities and/or debt financing. There is
no assurance that our company will be able to obtain further funds required for
our continued working capital requirements.

There is substantial doubt about
our ability to continue as a going concern as the continuation of our business
is dependent upon obtaining further long-term financing, successful and
sufficient market acceptance of our current product offerings and any new
product offerings that we may introduce, the continuing successful development
of our product offerings and related technologies, and, finally, achieving a
profitable level of operations. The issuance of additional equity securities by
us could result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.

Due to the uncertainty of our
ability to meet our current operating and capital expenses, in their report on
our audited financial statements for the year ended December 31, 2006, our
independent auditors included an explanatory paragraph regarding substantial
doubt about our ability to continue as a going concern. Our financial statements
contain additional note disclosures describing the circumstances that lead to
this disclosure by our independent auditors.

Cash Flow Used in Operating Activities

Operating activities used cash of
$843,451 for the nine months ended September 30, 2007 as compared to $809,313
for the nine months ended September 30, 2006. The cash used in operating
activities for the nine month period ended September 30, 2007, was primarily
attributable to our net loss for the period.

We anticipate that operating
expenses will increase through the remainder of the 2007 fiscal year and into
2008. We intend to incur higher operating costs to fund increased sales and
marketing activities over the next two years.

Cash Flow Used in Investing Activities

Investing activities used cash of
$638 for the nine months ended September 30, 2007 as compared to providing cash
of $19,713 for the nine months ended September 30, 2006. The decrease in cash
used in investing activities during the period was due to a lack of investing
activities during the period.

---

17

Cash Flow Provided by Financing Activities

Financing activities provided
cash of $686,445 for the nine months ended September 30, 2007 as compared to
$881,568 for the nine months ended September 30, 2006. The cash received during
the respective periods were proceeds from certain loans payable.

On March 28, 2006, fSONA Systems
underwent a change in control as a result of the sale of all of fSONA Systems'
common shares and a transfer of debt owing by Fsona Systems in the aggregate
amount of $3,312,001 between two shareholders. The intercompany debt of
$3,312,001was subsequently converted into 18,552,518 shares of Fsona Systems
following the transfer. During the nine month period ended September 30, 2007,
management believes the transaction between stockholders principally involving
amounts previously advanced by Crown has fully satisfied conditions for debt
extinguishment. Accordingly, the amount owing from Everona to Crown that was
carried on our balance sheet as a liability has been reclassified as equity of
our company.

Capital Expenditures

We do not have any material
commitments for capital expenditures and management does not anticipate that our
company will spend additional material amounts on capital expenditures in the
near future.

Off-Balance Sheet Arrangements

Our company has no outstanding
derivative financial instruments, off-balance sheet guarantees, interest rate
swap transactions or foreign currency contracts. Our company does not engage in
trading activities involving non-exchange traded contracts.

SIGNIFICANT ACCOUNTING POLICIES

Our discussion and analysis of
our financial condition and results of operations are based upon our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.

We believe that the estimates,
assumptions and judgments involved in the accounting policies described below
have the greatest potential impact on our financial statements, so we consider
these to be our critical accounting policies. Because of the uncertainty
inherent in these matters, actual results could differ from the estimates we use
in applying the critical accounting policies. Certain of these critical
accounting policies affect working capital account balances, including the
policies for revenue recognition, allowance for doubtful accounts, inventory
reserves and income taxes. These policies require that we make estimates in the
preparation of our financial statements as of a given date.

Within the context of these
critical accounting policies, we are not currently aware of any reasonably
likely events or circumstances that would result in materially different amounts
being reported.

Revenue Recognition

Revenues are predominantly
derived from sales of products and extended warranties. Revenues also consist of
installation, training and post contract customer support services which are not
considered material.

We recognize revenue in
accordance with Staff Accounting Bulletin No. 104 Revenue Recognition and
Statement of Position (SOP) 97-2. Our company sells a broad line of optical
wireless products for use in communication networks which include computer
hardware and software. Revenue from the sales of these wireless products, which
include hardware and software, is recognized when the complete system including
the software is delivered, the fees are fixed and determinable, the resulting
receivable is deemed collectible by management and any uncertainties with regard
to customer acceptance are insignificant. Software licenses are not sold
separately. In an

---

18

arrangement with multiple deliverables, as the fee for the
undelivered post-contract customer support ("PCS") is included with the initial
licensing fee, the support period is less than one year, the estimated cost of
providing PCS during the arrangement is insignificant and there is no offer of
unspecified upgrades or enhancements, the revenue associated with the PCS are
recognized at the time when revenue from the sales of the products are
recognized. Amounts collected prior to satisfying the above revenue recognition
criteria are reflected as customer deposits. Where any of the above criteria is
not met, our company defers the revenue until such time as it is appropriate to
recognize revenue. The associated costs incurred on the revenue are also
deferred until the revenue is recognized. Our company defers revenue from
separately priced warranty contracts and recognizes it in income on a
straight-line basis over the contract period.

Where rights of return exist and
the criteria of Statement of Financial Accounting Standard (SFAS) 48
Revenue Recognition When Right of Return Exists are not met, revenues
are not recognized until such time that all of the criteria are met. We consider
factors including customer type, fixed or determinable fees and the ability to
reasonably estimate returns.

Allowance for Doubtful Accounts

We make ongoing estimates
relating to the collectability of our accounts receivable and maintain a reserve
for estimated losses resulting from the inability of specific customers to meet
their financial obligations to us. In determining the amount of the reserve, we
consider our historical level of credit losses and make judgments about the
creditworthiness of significant customers based on ongoing credit evaluations.
Since we cannot predict future changes in the financial stability of our
customers, actual future losses from uncollectible accounts may differ from our
estimates. If the financial condition of our customers were to deteriorate,
resulting in their inability to make payments, a larger reserve may be required.
In the event we determined that a smaller or larger reserve was appropriate, we
would record a credit or a charge to selling and administrative expense in the
period in which we made such a determination.

Inventory Reserves

We also make ongoing estimates
relating to the market value of inventories, based upon our assumptions about
future demand and market conditions. If we estimate that the net realizable
value of our inventory is less than the cost of the inventory recorded on our
books, we record a reserve equal to the difference between the cost of the
inventory and the estimated net realizable market value. This reserve is
recorded as a charge to cost of goods sold. If changes in market conditions
result in reductions in the estimated market value of our inventory below our
previous estimate, we would increase our reserve in the period in which we made
such a determination and record a charge to cost of goods sold. During the three
month period ended September 30, 2007, we recognized a $477,440 write-down on
certain raw materials inventory.

Income Taxes

As part of the process of
preparing our financial statements, we are required to estimate our income taxes
in each of the jurisdictions in which we operate. This process involves us
estimating our actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items, such as deferred
revenue, for tax and accounting purposes. These differences result in deferred
tax assets and liabilities, which are included in our balance sheets. We must
then assess the likelihood that our deferred tax assets will be recovered from
future taxable income and, to the extent we believe that recovery is not likely,
we must establish a valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we must include an expense
within the tax provision in the Statement of Operations.

Significant management judgment
is required in determining our provision for income taxes, deferred tax assets
and liabilities and any valuation allowance recorded against our net deferred
tax assets. Management continually evaluates our deferred tax asset as to
whether it is likely that the deferred tax assets will be realized. If
management ever determined that our deferred tax asset was not likely to be
realized, a write-down of that asset would be required and would be reflected in
the provision for taxes in the accompanying period.

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19

Debt Extinguishment

On March 28, 2006, Crown Capital
(our companys former 100% stockholder) entered into an agreement with Everona
Limited to sell to Everona its 100% interest in our company and $3,312,001 of
the loan in exchange for an interest-bearing promissory note from Everona to
Crown Capital equal to $3,312,001. Following the acquisition, Everona entered
into an agreement with our company to convert the amounts owed to it by our
company in exchange for 18,552,518 shares of our company's common stock. During
the nine month period ended September 30, 2007, management believes the
transaction between stockholders principally involving amounts previously
advanced by Crown has fully satisfied conditions for debt extinguishment.
Accordingly, the amount owing from Everona to Crown that was carried on our
balance sheet as a liability has been reclassified as equity of our company.

Recently Issued Accounting Standards

For a discussion of recently
issued accounting standards relevant to our financial performance, see Note 2 of
Notes to our September 30, 2007 unaudited interim consolidated financial
statements included elsewhere in this quarterly report.

RISK FACTORS

Much of the information included
in this quarterly report includes or is based upon estimates, projections or
other "forward looking statements". Such forward looking statements include any
projections or estimates made by us and our management in connection with our
business operations. While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding the direction of our business, actual results will almost
always vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested herein.

Such estimates, projections or
other "forward looking statements" involve various risks and uncertainties as
outlined below. We caution the reader that important factors in some cases have
affected and, in the future, could materially affect actual results and cause
actual results to differ materially from the results expressed in any such
estimates, projections or other "forward looking statements". Prospective
investors should consider carefully the risk factors set out below.

RISKS RELATED TO OUR BUSINESS

We have had negative cash flows from operations since
inception. We will require significant additional financing, the availability of
which cannot be assured, and if our company is unable to obtain such financing,
our business may fail.

To date, we have had negative
cash flows from operations and have depended on sales of our equity securities
and debt financing to meet our cash requirements. Our ability to develop and
commercialize our technologies will be dependent upon our ability to raise
significant additional financing. If we are unable to obtain such financing, we
will not be able to fully develop our business. Specifically, we will need to
raise additional funds to:

- support our planned growth and carry out our
  business plan;
- continue progress in our research and development
  programs;
- protect our intellectual property;
- hire top quality personnel for all areas of our
  business;
- address competing technological and market
  developments;
- establish additional collaborative relationships;
  and

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20

- market and develop our technologies.

We may not be able to obtain
additional equity or debt financing on acceptable terms as required. Even if
financing is available, it may not be available on terms that are favorable to
us or in sufficient amounts to satisfy our requirements. If we require but are
unable to obtain additional financing in the future, we may be unable to
implement our business plan and our growth strategies, respond to changing
business or economic conditions, withstand adverse operating results and compete
effectively. More importantly, if we are unable to raise further financing when
required, we may be forced to scale down our operations and our ability to
generate revenues may be negatively affected.

We have a history of losses which raise substantial doubt
about our ability to continue as a going concern.

We incurred net losses of
$990,813 for the nine months ended September 30, 2007. At September 30, 2007,
the accumulated deficit was $5,110,199 We can offer no assurance that we will
operate profitably or that we will generate positive cash flow in the future. In
addition, our operating results in the future may be subject to significant
fluctuations due to many factors not within our control, such as the level of
competition and general economic conditions.

Due to the nature of our business
and the early stage of our development, our securities must be considered highly
speculative. We are engaged in the business of manufacturing and selling
SONAbeam systems, or wireless transceivers that transfer data, voice and video
between two points using infrared laser beams. The technology is referred to as
free space optics or optical wireless. We have not realized a profit from our
operations to date and there is little likelihood that we will realize any
profits in the near future. Any profitability in the future from our business
will be dependent upon the successful commercialization of our core technology,
which itself is subject to numerous risk factors as set forth herein.

We expect to continue to incur
development costs and operating costs. Consequently, we expect to incur
operating losses and negative cash flows until our technology gains market
acceptance sufficient to generate a sustainable level of income from the
commercialization of our technology. Our history of losses raise substantial
doubt about our ability to continue as a going concern, as described in the
explanatory paragraph in the independent registered public accounting firm's
report on the financial statements of our company for the year ended December
31, 2006. If the going concern assumption was not appropriate for these
financial statements, then adjustments would be necessary to the carrying value
of assets and liabilities, the reported loss and the balance sheet
classification used.

Technological changes in the broadband wireless industry
could render our optical wireless products uncompetitive or obsolete, which
could prevent us from achieving market share and sales.

Failure to refine our technology
and to develop and introduce new products could cause our products to become
uncompetitive or obsolete, which could prevent us from achieving market share
and sales. The broadband and optical wireless industry is rapidly evolving and
highly competitive. We will need to invest significant financial resources in
research and development to keep pace with technological advances in the
industry and to compete in the future and we may be unable to secure such
financing. We believe that a variety of competing broadband and optical wireless
technologies may be under development by other companies that could result in
lower manufacturing costs or higher product performance than those expected for
our products. Our development efforts may be rendered obsolete by the
technological advances of others, and other technologies may prove more
advantageous for the commercialization of such products.

Our company relies upon the successful research and
development of new products and technologies but we can offer no assurance that
our research and development efforts will produce positive results or keep pace
with our competitors.

Research and development
activities are inherently uncertain, and we could encounter practical
difficulties in commercializing our research and development results. Our
expenditures on research and development may not produce corresponding benefits.
Other companies are developing a variety of competing technologies that could

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21

produce products that prove more cost-effective or have better
performance than our current or future SONAbeam products. As a result, our
technology may be rendered obsolete by the technological advances of others,
which could reduce our net sales and market share.

The rate at which potential customers are willing to
purchase our products could be slowed by negative prior experiences they may
have had with previously existing point-to-point wireless technologies.

Potential customers within our
target market may have had negative prior experiences with previously existing
wireless point-to-point technologies, such as inadequate transmission capacity
or service outages due to weather conditions. Accordingly, it could take
significant time to educate the market as to the unique attributes of our
products that enable our products to overcome the types of problems that
prevented prior wireless technologies from serving as viable alternatives to
traditional communication methods.

Our customers' failure to obtain the access rights necessary
to install our equipment could adversely affect our ability to expand our
business.

Our customers may not be able to
obtain, from building owners or managers, access rights to buildings, rooftops
or towers to successfully install and service our equipment as planned. If our
customers do not have access to a window from which to transmit, our customers
will require access rights to the building and rooftop where our products will
be placed in order to install our equipment. Our customers' failure to obtain
access rights at the pace and locations necessary could have an adverse affect
on our business and financial condition. In addition, customers may need to
obtain zoning or other governmental approvals in order to place our products on
a particular building or in a particular area. They may not be able to obtain
these approvals in a timely manner, or at all.

It could prove costly for us to effectively compete in the
intensely competitive telecommunications equipment industry, which failure could
negatively impact our financial results.

Both the telecommunications
equipment industry in general and the wireless communications equipment industry
in particular are intensely competitive. Companies operating in the
telecommunications equipment industry are always seeking to develop viable
wireline and wireless high-speed communications products and services, whether
it is by:

- developing technologies that improve the
  performance of existing copper alternatives;
- developing methods for lowering the cost of fiber
  optic cable; or
- developing new and improved point-to-point and wide
  area wireless solutions.

The wireless communications
industry in which we principally compete has attracted substantial media and
other attention in recent years in part due to the ability of newly developed
equipment to provide wireless connectivity simply, quickly, and efficiently.
These factors have led numerous companies to develop or commence developing
products that compete or could compete with ours. The large number of companies
offering products that may be perceived to be similar or even interchangeable
with our products could have the effect of reducing the prices at which we are
able to sell our products. In turn, this could reduce our gross margins and
negatively impact our general financial results.

Exchange rate risk may negatively affect our cost of sales
and gross margins, and could result in exchange losses.

Although our reporting currency
is the United States dollar, we manufacture and incur costs in the currency of
the Canadian dollar. As a result, we are subject to exchange rate risk. Changes
in exchange rates between the United States dollar and the Canadian dollar could
affect our cost of sales and gross margins, and could result in exchange losses.
We cannot accurately predict the impact of future exchange rate fluctuations on
our results of operations. Currently, we do not engage in any exchange rate
hedging activities and, as a result, any volatility in currency exchange rates
may have an immediate adverse effect on our financial condition and results of
operations.

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22

Our international operations subject us to a number of
risks, including unfavourable political, regulatory, labor and tax conditions in
foreign countries.

Our international operations
subject us to the legal, political, social and regulatory requirements and
economic conditions of many jurisdictions. Risks inherent to international
operations include the following:

- difficulty in enforcing agreements in foreign legal
  systems;
- foreign countries may impose additional withholding
  taxes or otherwise tax our foreign income, impose tariffs or adopt other
  restrictions on foreign trade and investment, including currency exchange
  controls;
- fluctuations in exchange rates may affect product
  demand and may adversely affect our profitability in United States dollars to
  the extent the price of our products and cost of raw materials is denominated
  in a foreign currency;
- inability to obtain, maintain or enforce
  intellectual property rights;
- changes in general economic and political
  conditions in the countries in which we operate;
- unexpected adverse changes in foreign laws or
  regulatory requirements, including those with respect to export duties and
  quotas;
- difficulty with staffing and managing widespread
  operations;
- trade barriers such as export requirements,
  tariffs, taxes and other restrictions and expenses, which could increase the
  prices of our products and make us less competitive in some countries; and
- difficulty of and costs relating to compliance with
  the different commercial and legal requirements of the overseas markets in
  which we offer and sell our products.

Our international operations
require us to respond to rapid changes in market conditions in these countries.
The success of our international operations depends, in part, on our ability to
succeed in differing legal, regulatory, economic, social and political
conditions. We may not be able to develop and implement policies and strategies
that will be effective in each location where we do business.

We may lose our competitiveness if we are not able to
protect our proprietary technology and intellectual property rights against
infringement, and any related litigation may be time-consuming and
costly.

Our success and ability to
compete depends to a significant degree on our proprietary technology. If any of
our competitors copy or otherwise gain access to our proprietary technology or
develop similar technologies independently, we may not be able to compete as
effectively. The measures we have implemented to protect our proprietary
technology and other intellectual property rights are currently based upon a
combination of provisional patent applications, patents, trademarks and trade
secrets. These measures, however, may not be adequate to prevent the
unauthorized use of our proprietary technology and our other intellectual
property rights. Further, the laws of foreign countries may provide inadequate
protection of such intellectual property rights. We may need to bring legal
claims to enforce or protect such intellectual property rights. Any litigation,
whether successful or unsuccessful, may result in substantial costs and a
diversion of our company's resources. In addition, notwithstanding our rights to
our intellectual property, other persons may bring claims against us alleging
that we have infringed on their intellectual property rights or claims that our
intellectual property rights are not valid. Any claims against us, with or
without merit, could be time consuming and costly to defend or litigate, divert
our attention and resources, result in the loss of goodwill associated with our
business or require us to make changes to our technology.

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23

Our products may subject us to product liability exposure
and our product liability insurance may not be sufficient to cover these
claims.

Use of our products may expose us
to product liability claims in the event they cause injury or harm our customers
or third parties' businesses. Although we have product liability insurance, it
is possible that our insurance coverage could be insufficient to fully cover
potential claims. Due to our limited financial resources, we may not be able to
satisfy any liability resulting from these claims, which would negatively affect
our financial condition.

If we fail to effectively manage the growth of our company
and the commercialization of our technology, our future business results could
be harmed and our managerial and operational resources may be strained.

As we proceed with the
development of our technology and the expansion of our marketing and
commercialization efforts, we expect to experience significant growth in the
scope and complexity of our business. We will need to add staff to market our
services, manage operations, handle sales and marketing efforts and perform
finance and accounting functions. We anticipate that we will be required to hire
additional personnel in order to successfully advance our operations. This
growth is likely to place a strain on our management and operational resources.
The failure to develop and implement effective systems, or to hire and retain
sufficient personnel for the performance of all of the functions necessary to
effectively service and manage our potential business, or the failure to manage
growth effectively, could have a material adverse effect on our business and
financial condition.

RISKS RELATED TO OUR COMMON STOCK

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our ability to
continue operations.

A prolonged decline in the price
of our common stock could result in a reduction in the liquidity of our common
stock and a reduction in our ability to raise capital. Because a significant
portion of our operations have been and will be financed through the sale of
equity securities, a decline in the price of our common stock could be
especially detrimental to our liquidity and our operations. Such reductions may
force us to reallocate funds from other planned uses and may have a significant
negative effect on our business plan and operations, including our ability to
develop new products and continue our current operations. If our stock price
declines, we can offer no assurance that we will be able to raise additional
capital or generate funds from operations sufficient to meet our obligations. If
we are unable to raise sufficient capital in the future, we may not be able to
have the resources to continue our normal operations.

The market price for our common
stock may also be affected by our ability to meet or exceed expectations of
analysts or investors. Any failure to meet these expectations, even if minor,
may have a material adverse effect on the market price of our common stock.

If we issue additional shares in the future, it will result
in the dilution of our existing shareholders.

Our certificate of incorporation,
as amended, authorizes the issuance of up to 617,250,000 shares of common stock
with a par value of $0.001. Our board of directors may choose to issue some or
all of such shares to acquire one or more businesses or to provide additional
financing in the future. The issuance of any such shares will result in a
reduction of the book value and market price of the outstanding shares of our
common stock. If we issue any such additional shares, such issuance will cause a
reduction in the proportionate ownership and voting power of all current
shareholders. Further, such issuance may result in a change of control of our
corporation.

Trading of our stock may be restricted by the Securities
Exchange Commission's penny stock regulations, which may limit a stockholder's
ability to buy and sell our stock.

The Securities and Exchange
Commission has adopted regulations which generally define "penny stock" to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and

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24

"accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the Securities and Exchange Commission, which provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must 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 disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a stockholder's ability
to buy and sell our stock.

In addition to the "penny stock"
rules described above, FINRA has adopted rules that require that in recommending
an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.

Our common stock is illiquid and the price of our common
stock may be negatively impacted by factors which are unrelated to our
operations.

Our common stock currently trades
on a limited basis on the OTC Bulletin Board. Trading of our stock through the
OTC Bulletin Board is frequently thin and highly volatile. There is no assurance
that a sufficient market will develop in our stock, in which case it could be
difficult for shareholders to sell their stock. The market price of our common
stock could fluctuate substantially due to a variety of factors, including
market perception of our ability to achieve our planned growth, quarterly
operating results of our competitors, trading volume in our common stock,
changes in general conditions in the economy and the financial markets or other
developments affecting our competitors or us. In addition, the stock market is
subject to extreme price and volume fluctuations. This volatility has had a
significant effect on the market price of securities issued by many companies
for reasons unrelated to their operating performance and could have the same
effect on our common stock.

|Item 3. Controls and Procedures.
|--------------------------------

As of September 30, 2007, our
company carried out an evaluation, under the supervision and with the
participation of our company's management, including our company's principal
executive and financial officer, of the effectiveness of the design and
operation of our company's disclosure controls and procedures pursuant to Rule
13a-14 of the Securities and Exchange Act of 1934 (the Exchange Act). Based
upon that evaluation, our company's principal executive and financial officer
concluded that as of September 30, 2007, our company's disclosure controls and
procedures were not effective. There has not been any change in our internal
control over financial reporting identified in connection with the foregoing
evaluation that occurred during our quarter ended September 30, 2007 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

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25

Our company does not have an
adequate number of independent board members nor an independent audit committee.
In addition, the lack of employees results in our company's inability to have a
sufficient segregation of duties within its accounting and financial activities.
These absences constitute material weaknesses in our company's corporate
governance structure and internal controls.

Our company is currently
addressing our board member composition, and hopes to remedy the situation by
December 31, 2007.

PART II - OTHER INFORMATION

|Item 1. Legal Proceedings.
|--------------------------

During the normal course of
business activity, our company is involved in a litigation proceeding as at
September 30, 2007. While the outcome of these matters is subject to future
resolution, management's evaluation and analysis of such matters indicates that,
individually and in the aggregate, the probable ultimate resolution of such
matters will not have a material adverse effect on our financial statements. The
outcome of these matters is presently indeterminable. Any settlement resulting
from resolution of these contingencies will be accounted for in the period of
settlement.

|Item 2. Unregistered Sales of Equity Securities and Use
      of Proceeds
|-------------------------------------------------------------------------

On October 16, 2007 we entered
  into an offshore Private Placement Subscription Agreement with an offshore subscriber,
  whereby we agreed to issue 200,000 units at a price of US$0.50 per unit, for
  aggregate proceeds of US$100,000. Each unit consists of one common share in
  the capital of our company and one common share purchase warrant, which warrant
  entitles the holder to purchase one additional common share in the capital of
  our company, at a price of US$0.50 per share, for a period of two years.

We issued the units to a non-U.S.
  person (as that term is defined in Regulation S of the Securities Act of 1933),
  in offshore transactions relying on Regulation S and/or Section 4(2) of the
  Securities Act of 1933.

On November 16, 2007 we entered
  into an offshore Private Placement Subscription Agreement with an offshore subscriber,
  whereby we agreed to issue 500,000 units at a price of US$0.50 per unit, for
  aggregate proceeds of US$250,000. Each unit consists of one common share in
  the capital of our company and one common share purchase warrant, which warrant
  entitles the holder to purchase one additional common share in the capital of
  our company, at a price of US$0.50 per share, for a period of two years. The
  units are in the process of being issued.

|Item 3. Defaults Upon Senior Securities.
|----------------------------------------

None.

|Item 4. Submission of Matters to a Vote of Security
      Holders
|-----------------------------------------------------------------

None.

|Item 5. Other Information
|-------------------------

None.

|Item 6. Exhibits
|----------------

ExhibitNumber
    Description(2)
    Plan of Purchase, Sale,
      Reorganization, Arrangement, Liquidation or Succession2.1
    Share Exchange Agreement dated February 8,
      2007, among our company, FSona Systems and the


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26

ExhibitNumber
      Descriptionformer shareholders of FSona
        Systems (incorporated by reference from our Current Report on Form 8-
        K filed on February 1, 2007)(3)
      Articles of Incorporation and Bylaws3.1
      Articles of Incorporation (incorporated
        by reference from our Registration Statement on Form SB-2 filed on November
        12, 2004)3.2
      Bylaws (incorporated by reference from our Registration
        Statement on Form SB-2 filed on November 12, 2004)Articles of Merger filed with
        the Secretary of State of Nevada on April 10, 2007 and which is effective
        April 13, 2007 (incorporated by reference from our Current Report on Form
        8-K filed on May 11, 2007)Certificate of Change filed with the Secretary
        of State of Nevada on April 10, 2007 and which is effective April 13,
        2007 (incorporated by reference from our Current Report on Form 8-K filed
        on May 11, 2007)(10)
      Material Contracts10.1
      Property Option Agreement dated April 21, 2004
        (incorporated by reference from our Registration Statement on Form SB-2/A
        filed on January 10, 2005)10.2
      Property Option Amending Agreement
        dated December 31, 2005 (incorporated by reference from our Registration
        Statement on Form SB-2/A filed on January 20, 2005)10.3
      Loan Agreement (incorporated by reference from
        our Registration Statement on Form SB-2/A filed on January 20, 2005)10.4
      Employment Agreement dated March
        22, 2005 between FSona Systems and Sunny Taylor(incorporated by reference from our Current
        Report on Form 8-K filed on February 1, 2007)(14)
      Code of Ethics14.1
      Code of Ethics (incorporated by reference from
        our Current Report on Form 8-K filed on February 1, 2007)(21)
      Subsidiaries of the Small
        Business IssuerFSona Systems (Operating) Corp., a private Nevada
        corporation (incorporated by reference from our Current Report on Form
        8-K filed on February 1, 2007)(31)
      Rule 13a-14(a)/15d-14(a) Certifications31.1*
      Section 302 Certification
        under Sarbanes-Oxley Act of 2002 of Andrew Grieve(32)
      Section 1350 Certifications32.1*
      Section 906 Certification
        under Sarbanes-Oxley Act of 2002 of Andrew Grieve


* Filed herewith

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27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

FSONA SYSTEMS CORP.

By: /s/ Andrew GrieveAndrew Grieve, President, Secretary
and Treasurer(Principal Executive Officer and Principal Financial Officer
and Principal Accounting Officer) November 19, 2007

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