U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
--------------------------------------------------------------------------------
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended April 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
NETWORK USA, INC.
(Exact name of registrant as specified in its charter)
Commission file number: 33-10456
Nevada 76-0192477
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5617 Bissonnet, Suite 215, Houston, Texas 77081
----------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
713-669-9018
------------
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
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 [ ] No [ X ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
Issuer's revenues for the 12 months ended April 30, 2000 were $0.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed at par value of $0.01 per share, as no trading market is
active and no reference is available as to the price paid for the common equity,
on July 24, 2000 was $106,350. As of July 24, 2000, registrant had 10,635,000
shares of Common Stock outstanding.
<PAGE>
PART I
This annual report contains forward-looking statements. These statements
relate to future events or the Company's future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
the Company or its 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 the
forward-looking statements.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events
or results may differ materially.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, it cannot guarantee future results,
levels of activity, performance or achievements. Moreover, neither the Company
nor any other person assumes responsibility for the accuracy and completeness of
these forward-looking statements. The Company is under no duty to update any of
the forward- looking statements after the date of this report to conform its
prior statements to actual results.
ITEM 1. DESCRIPTION OF BUSINESS
Business
The Company has had no business operations since approximately 1988. To the
extent that the Company intends to continue to seek the acquisition of assets,
property or business that may benefit the Company and its stockholders, the
Company is essentially a "shell" company. Because the Company has no assets,
conducts no business and has no employees, management anticipates that any such
acquisition would require the Company to issue shares of its common stock as the
sole consideration for the acquisition. This may result in substantial dilution
of the shares of current stockholders. The Company's Board of Directors shall
make the final determination whether to complete any such acquisition, and the
approval of stockholders will not be sought unless required by applicable laws,
rules and regulations, the Company's Articles of Incorporation or Bylaws, or
contract. Even if stockholder approval is sought, Michael L. Mead and Richard
J. Church, who are directors and Co-President of the Company, beneficially own
approximately eighty-five percent (85%) of the outstanding shares of common
stock of the Company, and could approve any acquisition, reorganization or
merger they deemed acceptable. The Company makes no assurance that any future
enterprise will be profitable or successful.
The Company is not currently engaging in any substantive business activity
and has no plans to engage in any such activity in the foreseeable future. In
its present form, the Company may be deemed to be a vehicle to acquire or merge
with a business or company. The Company does not intend to restrict its search
to any particular business or industry, and the areas in which it will seek out
acquisitions, reorganizations or mergers may include, but will not be limited
to, the fields of high technology, manufacturing, natural resources, service,
research and development, communications, transportation, insurance, brokerage,
finance and all medically related fields, among others. The Company recognizes
that because of its total lack of resources, the number of suitable potential
business ventures which may be available to it will be extremely limited, and
may be restricted to entities who desire to avoid what these entities may deem
to be the adverse factors related to an initial public offering ("IPO"). The
most prevalent of these factors include substantial time requirements, legal
costs, the inability to obtain an underwriter who is willing to publicly offer
and sell shares, limitations on the amount of dilution public investors will
suffer to the benefit of the stockholders of any such entities, along with other
conditions or requirements imposed by various federal and state securities laws,
rules and regulations. Any of these types of entities, regardless of their
prospects, would require the Company to issue a substantial number of shares of
its common stock to complete any such acquisition, reorganization or merger,
usually amounting to between 80 and 95 percent of the outstanding shares of the
Company following the completion of any such transaction; accordingly,
investments in any such private entity, if available, would be much more
favorable than any investment in the Company.
<PAGE>
Risk Factors.
The Company's auditor, Jackson & Rhodes, P.C., has included a "going
concern" paragraph in the Company's audited financials for the years ending
April 30, 2000 and 1999. The auditor states: "The Company's financial
statements have been presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. The Company
is dependent on a merger partner or raising funds in order to provide capital
for the Company to become a going concern." See the Index to Financial
Statements.
In any business venture, there are substantial risks specific to the
particular enterprise and which cannot be ascertained until a potential
acquisition, reorganization or merger candidate has been identified; however, at
a minimum, the Company's present and proposed business operations will be highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, and will include those types of risk factors outlined below.
No Assets; No Source of Revenue.
The Company has no assets and has had no revenue in either of its two most
recent calendar years or to the date hereof. Nor will the Company receive any
revenues until it completes an acquisition, reorganization or merger, at the
earliest. The Company can provide no assurance that any acquired business will
produce any material revenues for the Company or its stockholders or that any
such business will operate on a profitable basis.
Absence of Substantive Disclosure Relating to Prospective Acquisitions.
Because the Company has not yet identified any assets, property or business
that it may potentially acquire, potential investors in the Company will have
virtually no substantive information upon which to base a decision whether or
not to invest in the Company. Potential investors would have access to
significantly more information if the Company had already identified a potential
acquisition or if the acquisition target had made an offering of its securities
directly to the public. The Company can provide no assurance that any investment
in the Company will not ultimately prove to be less favorable than such a direct
investment.
Unspecified Industry and Acquired Business; Unascertainable Risks.
To date, the Company has not identified any particular industry or business
in which to concentrate its acquisition efforts. Accordingly, prospective
investors currently have no basis to evaluate the comparative risks and merits
of investing in the industry or business in which the Company may invest. To the
extent that the Company may acquire a business in a highly risky industry, the
Company will become subject to those risks. Similarly, if the Company acquires a
financially unstable business or a business that is in the early stages of
development, the Company will become subject to the numerous risks to which such
businesses are subject. Although management intends to consider the risks
inherent in any industry and business in which it may become involved, there can
be no assurance that it will correctly assess such risks.
Uncertain Structure of Acquisition.
Management has had no preliminary contact or discussions regarding, and
there are no present plans, proposals or arrangements to acquire any specific
assets, property or business. Accordingly, it is unclear whether such an
acquisition would take the form of an exchange of capital stock, a merger or an
asset acquisition. However, because the Company has no resources as of the date
of this annual report, management expects that any such acquisition would take
the form of an exchange of capital stock, which would have a substantially
dilutive effect on the shareholders of the Company.
Management to Devote Insignificant Time to Activities of the Company.
<PAGE>
Members of the Company's management are not required to devote their full
time to the affairs of the Company. Because of their time commitments, as well
as the fact that the Company has no business operations, the members of
management anticipate that they will devote an insignificant amount of time to
the activities of the Company, at least until such time as the Company has
identified a suitable acquisition target.
Future Sales of Common Stock.
Michael L. Mead currently beneficially owns 4,500,000 shares of the
common stock of the Company or approximately 42.3 percent of its outstanding
voting securities. Pursuant to a purchase from Mr. Mead in May 2000, Richard
J. Church currently beneficially owns 4,500,000 shares of the common stock
of the Company or approximately 42.3 percent of its outstanding voting
securities. Currently, the 4,500,000 shares owned by Mr. Mead have been
beneficially owned for greater than one year, and subject to compliance with
the applicable provisions of Rule 144 of the Securities and Exchange
Commission, Mr. Mead may commence to sell up to one percent of the outstanding
securities of the Company, or currently 106,350, in any three month period. In
addition, as of May 2001, the 4,500,000 shares owned by Mr. Church will been
beneficially owned for greater than one year, and subject to compliance with
the applicable provisions of Rule 144 of the Securities and Exchange
Commission, Mr. Church may commence to sell up to one percent of the outstanding
securities of the Company, or currently 106,350, in any three month period.
Such sales could have a substantial adverse effect on any public market that may
then exist in the Company's common stock. Sales of any of these shares by Mr.
Mead could severely affect the ability of the Company to secure the necessary
debt or equity funding for the Company's proposed business operations.
Dilution.
Depending on the nature and extent of services rendered, the Company may
compensate Michael L. Mead, Richard J. Church or any other third party for any
financial consulting or other services that they may perform for the
Company in the future. Because the Company currently has no resources, and is
unlikely to have any resources until it has completed a merger or acquisition,
management expects that any such compensation would take the form of an
issuance of the Company's stock. Such issuances would further dilute the
holdings of the Company's other stockholders.
Conflicts of Interest; Related Party Transactions.
Although the Company has not identified any potential acquisition target,
the possibility exists that the Company may acquire or merge with a business or
company in which the Company's executive officers, directors, beneficial owners
or their affiliates may have an ownership interest. Such a transaction may occur
if management deems it to be in the best interests of the Company and its
stockholders, after consideration of the above referenced factors. A transaction
of this nature would present a conflict of interest to those parties with a
managerial position and/or an ownership interest in both the Company and the
acquired entity, and may compromise management's fiduciary duties to the
Company's stockholders. An independent appraisal of the acquired company may or
may not be obtained in the event a related party transaction is contemplated.
Furthermore, because management and/or beneficial owners of the Company's common
stock may be eligible for finder's fees or other compensation related to
potential acquisitions by the Company, such compensation may become a factor in
negotiations regarding such potential acquisitions.
Voting Control.
Due to their beneficial ownership of a majority of the shares of the
Company's outstanding common stock, Michael L. Mead and Richard J. Church have
the ability to elect all of the Company's directors, who in turn elect all
executive officers, without regard to the votes of other stockholders.
<PAGE>
No Market for Common Stock; No Market for Shares.
The Company's common stock is not currently listed on the OTC Bulletin
Board of the National Association of Securities Dealers, Inc. (the "NASD"), and
has not been listed on the aforementioned market for the previous five years.
Therefore, there is currently no "established trading market" for such shares,
and there can be no assurance that such a market will ever develop or be
maintained. Any future market price for shares of common stock of the Company
is likely to be very volatile, and numerous factors beyond the control of
the Company may have a significant effect. In addition, the stock markets
generally have experienced, and continue to experience, extreme price and
volume fluctuations which have affected the market price of many small capital
companies and which have been unrelated to the operating performance of these
companies. These broad market fluctuations, as well as general economic and
political conditions, may adversely affect the market price of the Company's
common stock in any market that may develop.
Risks of "Penny Stock".
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00. 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
prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. These disclosure requirements may
have the effect of reducing the level of trading activity in any secondary
market for a stock that becomes subject to the penny stock rules. The Company's
common stock may be subject to the penny stock rules, and accordingly, investors
in the Company's common stock may find it difficult to sell their shares in the
future, if at all.
Number of Employees.
At the present time, Messrs. Mead and Church are the sole employees of the
Company.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has no assets, property or business; its principal executive
office address and telephone number are the business office address and
telephone number of its Co-President, Director, Treasurer, and principal
shareholder, Richard J. Church, and are provided at no cost. Because the
Company has no business, its activities have been limited to keeping itself in
good standing in the State of Nevada and, recently, with preparing this
annual report and the accompanying financial statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding. No federal,
state or local governmental agency is presently contemplating any proceeding
against the Company. No director, executive officer or affiliate of the Company
or owner of record or beneficially of more than five percent of the Company's
common stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock is not currently listed on the OTC Bulletin
Board of the NASD or any other recognized securities market. There has been no
trading symbol or established trading market for shares of the Company's
common stock during 2000 or 1999, and management does not expect any such market
to develop unless and until the Company completes an acquisition or merger. In
any event, no assurance can be given that any established trading market for
the Company's common stock will develop or be maintained. If such a market ever
develops in the future, the sale of unregistered and "restricted" shares of
common stock pursuant to Rule 144 of the SEC by Michael L. Mead and Richard J.
Church may have a substantial adverse impact on any such public market. The
number of record holders of the Company's common stock as of the date of this
annual report is approximately 800.
<PAGE>
Dividends.
There have been no cash dividends declared on any class of common equity
for the last two fiscal years or in any subsequent period that required
financial information. The Company has no plans to issue any dividends for the
foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Plan of Operation.
The Company has not engaged in any material operations or had any revenues
from operations during the last four calendar years. The Company's plan of
operation for the next 12 months is to continue to seek the acquisition of
assets, property or business that may benefit the Company and its stockholders.
Because the Company has no resources, management anticipates that to achieve any
such acquisition, the Company will be required to issue shares of its common
stock as the sole consideration for such acquisition.
During the next 12 months, the Company's only foreseeable cash requirements
will relate to maintaining the Company in good standing or the payment of
expenses associated with reviewing or investigating any potential business
venture, which may be advanced by management or principal stockholders as loans
to the Company. Because the Company has not identified any such venture as of
the date of this annual report, it is impossible to predict the amount of any
such loan. However, any such loan will not exceed $25,000 and will be on terms
no less favorable to the Company than would be available from a commercial
lender in an arm's length transaction. As of the date of this annual
report, the Company has not begun seeking any acquisition.
Because the Company is not currently making any offering of its securities,
and does not anticipate making any such offering in the foreseeable future,
management does not believe that Rule 419 promulgated by the SEC under the
Securities Act of 1933, as amended, concerning offerings by blank check
companies, will have any effect on the Company or any activities in which it may
engage in the foreseeable future.
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS
The financial statements, commencing on page F-1, have been audited by
Jackson & Rhodes, P.C., independent certified public accountants, to the extent
and for the periods set forth in their reports appearing elsewhere herein and
are included in reliance upon such reports given upon the authority of said firm
as experts in auditing and accounting.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None. The Company's relationship with Jackson & Rhodes, P.C. of Dallas,
Texas, has not changed. Prior to the engagement of Jackson & Rhodes, P.C., the
Company had no independent auditor for approximately 12 years. For the auditor's
going-concern opinion, see the Auditor's Opinion letter in the F/S.
<PAGE>
PART III
ITEMS 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The Company's directors and executive officers are:
NAME AGE POSITION
---- --- --------
Michael L. Mead 51 Director, Co-President, and Secretary
Richard J. Church 47 Director, Co-President, and Treasurer
Michael L. Mead has served as the Company's director, co-president, and
secretary since May 2000. Mr. Mead graduated form Abilene Christian
University in May 1971 with a Bachelor of Science in accounting and economics.
He graduated from Texas Tech School of Law in May, 1974 with a Doctor of
Jurisprudence. From 1974 until 1980, Mr. Mead provided financial planning and
investment services to individuals and small businesses. From 1980 to 1992, Mr.
Mead owned and operated M.L. Mead & Company, a business development and
investment banking firm. In 1992, Mr. Mead founded Entrepreneurs Online, an
online community for small business owners, which he sold in 1995. In 1996, Mr.
Mead founded Enterprise Technologies, a business development consulting firm and
"virtual" business incubator.
Richard J. Church has served as the Company's director, co-president, and
secretary since May 2000. Mr. Church graduated from the University of Texas at
Austin, Texas in 1976 with a Bachelor of Science in Electrical Engineering.
From 1977 through 1983, Mr. Church worked for Southwestern Manufacturing Co.,
Inc. first in sales and than as general manager of their valve actuator
division, Pantex Valve Actuators, in Houston, Texas. Since 1986, Mr. Church
co-founded Church Realty, a commercial and investment real estate company. In
addition, Mr. Church is a licensed real estate agent, a consultant in sales and
real estate, and sits on the Board of Directors of Southwestern Manufacturing
Co., Inc.
The Company does not have a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and is not
subject to reporting requirements of Section 16(a) of the Securities Exchange
Act of 1934, as amended.
ITEM 10. EXECUTIVE COMPENSATION.
No cash compensation, deferred compensation or long-term incentive plan
awards were issued or granted to the Company's management, Messrs. Mead and
Church, during the calendar years ended April 30, 1998 or April 30, 1999.
Further, no member of the Company's management has been granted any option or
stock appreciation right; accordingly, no tables relating to such items have
been included within this item.
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No additional
amounts are payable to the Company's directors for committee participation or
special assignments.
There are no arrangements pursuant to which any of the Company's directors
was compensated during the Company's last completed calendar year for any
service provided as director.
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from the Company, with respect to any director
or executive officer of the Company which would in any way result in payments to
any such person because of his or her resignation, retirement or other
termination of employment with the Company or its subsidiaries, any change in
control of the Company, or a change in the person's responsibilities following a
change in control of the Company.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of July 24, 2000 the number and
percentage of outstanding shares of Company common stock owned by (i) each
person known to the Company to beneficially own more than 5% of its outstanding
Common Stock, (ii) each director, (iii) each named executive officer, and (iv)
all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK BENEFICIALLY OWNED OWNERSHIP
------------------------------------------ ------------------------------- --------------
<S> <C> <C>
Michael L. Mead
2997 Chen Way
Soquel, CA 95073 4,500,000 42.3%
Richard J. Church
5617 Bissonnet, Suite 215
Houston, TX 77081 4,500,000 42.3%
All executive officers and directors as a
group (2 persons) 9,000,000 84.6%
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's common stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are to be filed as part of the annual report:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 3.1 Articles of Incorporation of Network USA, Inc.
Exhibit 3.2 Bylaws of Network USA, Inc.
Exhibit 4.1 Common Stock Certificate of Network USA, Inc.
Exhibit 27.1 Financial Data Schedule
(b) There were no reports filed on Form 8-K during the last quarter of the
fiscal year ended April 30, 2000.
<PAGE>
SIGNATURES
----------
In accordance with the Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Network USA, Inc.
By: /s/ Michael L. Mead
----------------------
Michael L. Mead, Co-President, Director, and
Secretary
___________________________
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael L. Mead Co-President, Director, and Secretary July 30, 2000
--------------------
MICHAEL L. MEAD
/s/ Richard J. Church Co-President, Director, and Treasurer July 30, 2000
------------------------
RICHARD J. CHURCH
<PAGE>
NETWORK USA, INC.
AUDITED FINANCIAL INFORMATION
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheets as of
April 30, 2000 and 1999. . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations for the Years Ended
April 30, 2000 and 1999. . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Changes in Shareholder's Deficit
for the Years Ended April 30, 2000 and 1999. . . . . . . . . . . . . . . . F-5
Statements of Cash Flows for the Years Ended
April 30, 2000 and 1999. . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . F-7-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Network USA, Inc.
We have audited the accompanying balance sheets of Network USA, Inc. as of April
30, 2000 and 1999 and the related statements of operations, changes in
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position as of April 30, 2000 and 1999 and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is dependant on a merger partner or raising
funds in order to provide capital for the Company to become a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Jackson & Rhodes P.C.
Dallas, Texas
June 14, 2000
F-2
<PAGE>
NETWORK USA, INC.
BALANCE SHEETS
APRIL 30, 2000 AND 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
---------- ---------
<S> <C> <C>
$ - $ -
========== =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accrued liabilities $ 1,830 $ 1,730
Commitments and contingencies - -
Shareholders' deficit (Note 4):
Preferred stock, $.01 par, 1,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.01 par value, 50,000,000 shares
authorized, 10,635,000 issued and outstanding 106,350 106,350
Accumulated deficit (108,180) (108,080)
---------- ----------
Total shareholders' deficit (1,830) (1,730)
---------- ----------
$ - $ -
========== ==========
</TABLE>
See accompanying notes to financial statements.
F - 3
<PAGE>
NETWORK USA, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 2000 AND 1999
2000 1999
------------ ------------
Expenses:
Filing fees $ 100 $ 100
------------ ------------
Net loss $ (100) $ (100)
============ ============
Basic loss per common share $ (0.00) $ (0.00)
============ ============
Weighted average shares outstanding 10,635,000 10,635,000
============ ============
See accompanying notes to financial statements.
F - 4
<PAGE>
NETWORK USA, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
YEARS ENDED APRIL 30, 2000 AND 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock Total
------------------------------ --------------------------- Accumulated Shareholders'
Shares Amount Shares Amount Deficit Deficit
--------------- ------------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1998 - $ - 10,635,000 $ 106,350 $(107,980) $ (1,630)
Net loss - - - - (100) (100)
--------------- ------------- ----------- -------------- ---------- -------------
Balance, April 30, 1999 - - 10,635,000 106,350 (108,080) (1,730)
Net loss - - - - (100) (100)
--------------- ------------- ----------- -------------- ---------- -------------
Balance, April 30, 2000 - $ - 10,635,000 $ 106,350 $(108,180) $ (1,830)
=============== ============= =========== ============== ========== =============
</TABLE>
See accompanying notes to financial statements.
F - 5
<PAGE>
NETWORK USA, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 2000 AND 1999
2000 1999
---- ----
Cash flows from operating activities:
Net loss $(100) $(100)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Changes in assets and liabilities:
Accounts payable and accrued liabilities 100 100
------ ------
Net cash provided by operating activities - -
------ ------
Net change in cash - -
Cash at beginning of year - -
------ ------
Cash at end of year $ - $ -
====== ======
See accompanying notes to financial statements.
F - 6
<PAGE>
NETWORK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Network USA, Inc. was incorporated in Nevada on August 27, 1987. The
Company is currently considered a "public shell" corporation with no
business operations and is in the process of searching for an operating
business with which to negotiate a "reverse merger."
Basis of Presentation
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company is dependent on a merger partner or raising funds in order to
provide capital for the Company to become a going concern.
Net Loss Per Common Share
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128").
SFAS 128 provides a different method of calculating earnings per share than
was formerly used in APB Opinion 15. SFAS 128 provides for the calculation
of basic and diluted earnings per share. Basic earnings per share includes
no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Dilutive earnings per share reflects the potential dilution
of securities that could share in the earnings of the Company. Because the
Company has no potential dilutive securities, the accompanying presentation
is only of basic loss per share.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.
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NETWORK USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 utilizes the asset and liability method of computing
deferred income taxes. The objective of the asset and liability method is
to establish deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled. Under SFAS 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
2. INCOME TAXES
At April 30, 2000, most of the Company's net operating loss carryforwards
for tax purposes have expired or are limited on an annual basis, rendering
any available carryforwards virtually valueless.
F-8
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