U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 30, 1999
WORLD SHOPPING NETWORK, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or jurisdiction of incorporation) or organization)
000-20277
(Commission File Number)
11-2872782
(I.R.S. Employer Identification Number)
1530 Brookhollow Drive, Suite C, Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 427-0760
(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OF ASSETS.
The Registrant's Board of Directors unanimously approved the
following actions at a meeting duly held and called on August 17,
1999: (i) the merger of World Shopping Network, Inc., a Wyoming
corporation ("WSN"), with and into the Registrant ("Merger");
(ii) a reverse split of the issued and outstanding shares of the
Common Stock on a one-for-twelve (1:12) basis ("Reverse Stock
Split"); (iii) an amendment ("Share Amendment") to the
Certificate of Incorporation of the Registrant to implement the
Reverse Stock Split and to change the name of the Registrant to
World Shopping Network, Inc.; and (iv) the election of new
directors of the Registrant.
Under applicable Delaware Law, approval of the Merger and the
Share Amendment requires an affirmative vote of a majority of the
outstanding shares of Common Stock. On August 17, 1999, holders
of a majority of the issued and outstanding shares of Common
Stock approved the Merger and the Share Amendment by written
consent in accordance with and as permitted by Section 228 of the
General Corporation Law of the State of Delaware ("Delaware
Law").
An Information Statement was furnished by the Board of Directors
of the Registrant to the holders of record at the close of
business on August 16, 1999, of the Registrant's outstanding
common stock, par value $0.001 per share pursuant to Rule 14c-2
promulgated under the Securities Exchange Act of 1934, as
amended. The Merger was completed upon the terms and conditions
provided in the Agreement and Plan of Merger dated as of
September 15, 1999 by and among the Registrant, WSN and the
principal stockholders of the Registrant. The Merger Agreement
provides for WSN to be merged with and into the Registrant, with
the Registrant being the surviving corporation.
The merger is tax free under Internal Revenue Code 361.
This merger also resulted in the following stock splits: (a) of
the total 93,450,000 issued and outstanding shares of the
Registrant prior to the merger, they were subject to a reverse
split of 12 to 1, resulting in issued and outstanding shares of
7,787,500; and (b) of the total 4,556,162 issued and outstanding
shares of WSN prior to the merger, they were first subject to a
reduction of 2,665,000 due to a Share Exchange Agreement,
resulting in a total of 1,891,162, which was then subject to a
forward split of 2.5 to 1, resulting in issued and outstanding
shares of 4,727,905. The total issued and outstanding shares of
common stock after the merger was 12,515,405. The issued and
outstanding Class A Warrants totaling 16,000,000 were subject to a
reverse split of 12 to 1, resulting in a total of 1,333,333.
Effective September 30, 1999, the Registrant changed its name to
World Shopping Network, Inc.
Management accounted for the merger as a capital stock
transaction (as opposed to a business combination, as that term
is defined by generally accepted accounting principles) because
the reorganization is a "reverse acquisition" involving a public
shell entity. Accordingly, the merger was reported as a
reorganization of WSN, which is considered the acquirer for
accounting purposes.
There are certain restrictions on the sale or other transfer of the
Registrant's common stock issued under the merger. Such stock, generally
referred to as "Rule 144 stock", was not registered under the Securities Act
of 1933, as amended (the "Act"), in reliance upon an exemption from its
requirements. Each exchanging shareholder agreed to (1) acquire such stock
for his/her own account and (2) hold the stock for investment purposes only.
In addition, the stock certificates are required to contain a legend (a)
documenting these restrictions and (b) requiring a legal opinion that any
proposed sale is exempt from registration under the Act.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The Exhibits attached to this Form 8-K are set forth in the
Exhibit Index below. The following audited financial statements
on World Shopping Network, Inc., a Wyoming corporation, are set
forth as follows:
INDEPENDENT AUDITOR'S REPORT
Board of Directors
World Shopping Network, Inc.
We have audited the accompanying consolidated balance sheet of
World Shopping Network, Inc. and subsidiary (the "Company"), a
development stage company, as of June 30, 1999, and the related
consolidated statements of operations, and cash flows for the
cumulative period October 2, 1996 (date of inception) to June 30,
1999, and for the years ended June 30, 1999 and 1998, and
stockholders' equity for the years ended June 30, 1999 and 1998.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit 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 audit
provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present
fairly, in all material respects, the financial position of World
Shopping Network, Inc. (a development stage company) as of June
30, 1999, and the results of its operations and its cash flows for
the cumulative period October 2, 1996 (date of inception) to June
30, 1999 and for the years ended June 30,1999 and 1998, in
conformity with generally accepted accounting principles.
As described in Note to the financial statements, the Company
completed reorganization with a publicly held entity in September
1999. Because the transaction was a "reverse acquisition" and the
Company is considered the acquirer for accounting purposes, the
Company is now required to comply with the Security Exchange
Commission Act of 1934. Among other things, this law requires the
timely filing of proxy statements, quarterly financial statements,
and annual audited financial statements.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in
Note 8 to the financial statements, the Company has been in the
development stage since its inception on October 2, 1996. The
Company is devoting substantially all of its present efforts in
establishing its business. Management's plans regarding the
matters which raise doubts about the Company's ability to continue
as a going concern are disclosed in Note 8 to the financial
statements. Realization of certain assets is dependent upon the
Company's ability to meet its future financing requirements, and
the success of future operations. These factors raise substantial
doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KEYHAN COMPANY
AN ACCOUNTANCY CORPORATION
December 28, 1999
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
ASSETS
CURRENT ASETS
Cash and cash equivalents $ 122,532
Accounts receivable 4,894
Inventory 7,984
Prepaid expenses and other assets 1,474
Deferred tax asset, net of valuation allowance of $ -
$ 136,881
PROPERTY AND EQUIPMENT 24,918
$161,799
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 23,869
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value, authorized
5,000,000 shares $ -
Common stock, no par value, authorized
5,000,000 shares, issued and outstanding
4,551,162 shares 1,210,677
Deficit accumulated during development
Stage (1,072,747)
$ 137,930
161,799
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
October 2, 1996
Year ended June 30 (Date of Inception)
1999 1998 to June 30, 1999
SERVICE AND FEE INCOME $ 40,984 $ 38,732 $ 104,013
GENERAL & ADMINISTRATIVE
EXPENSE 317,157 472,759 1,084,624
OPERATING LOSS (276,173) (434,027) (980,611)
OTHER INCOME (EXPENSE)
Interest income - 1,229 1,894
Interest expense (17,273) - (18,030)
Write off f property
And equipment - - (76,000)
(17,273) 1,229 (92,136)
INCOME (LOSS) BEFORE
INCOME TAX PROVISION (293,446) (432,798) (1,072,747)
INCOME TAX PROVISION
(BENEFIT)
Federal - - -
State - - -
- - -
NET INCOME (LOSS) (293,446) (432,798) (1,072,747)
NET LOSS PER SHARE
OF COMMON STOCK (0.14) (0.51) (0.72)
WEIGHTEDAVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 2,148,631 842,903 1,488,652
The accompanying notes are an integral part of these financial
Statements.
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Deficit During
Common Stock Preferred Stock Development
Shares Amount Shares Amount Stage
COMMON STOCK ISSUED
In exchange for
100% of outstanding
common stock of
World Shopping
Network, Inc.(CA)
October 15, 1996 665,000 $ 86,045 - $ - $ -
STOCK ISSUED FOR
CASH - - 492,500 433,500 -
STOCK ISSUED FOR
SERVICES 118,000 59,000 - - -
NET LOSS - - - - (346,503)
BALANCES
JUNE 30, 1997 783,000 145,045 492,500 433,500 (345,503)
STOCK ISSUED FOR
CASH 68,500 22,833 416,836 232,939 -
STOCK ISSUED FOR
SERVICES 700,500 701 - - -
NET LOSS - - - - (432,798)
BALANCES
JUNE 30, 1998 1,552,000 168,579 909,336 666,439 (779,301)
STOCK ISSUED FOR
CASH 1,854,421 356,126 74,850 19,533 -
STOCK ISSUED FOR
DIVIDENDS 160,555 - - - -
PREFERRED STOCK
CONVERSION 984,186 685,972 (984,186) (685,972) -
NET INCOME (LOSS) - - - - (293,446)
BALANCE
JUNDE 30, 1999 4,551,162 1,210,677 - - (1,072,747)
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative
October 2, 1996
(Date of
Year Ended June 30 Inception) to
1999 1998 June 30, 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (loss) $ (293,446) $ (432,798) $ (1,072,747)
Adjustments to
reconcile net income
(loss) to net cash
provided (used by
operating activities
Common stock issued
For services - 701 59,701
Depreciation and
Amortization 10,875 22,442 53,054
(Increase) decrease in
accounts receivable 31,761 2,447 (19,391)
Inventory - 79 (7,984)
Employee receivable - 7,536 -
Prepaid expenses and
Other assets 14,500 1,721 10,780
Increase (decrease) in
Accounts payable and
Accured expense (10,832) 31,755 23,869
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of equipment (7,839) (18,078) (75,726)
CASH FLOWS FROM
FINANCING ACTIVITIES
Net proceeds from sale
of stock 375,659 384,695 1,831,399
Offering costs - (128,923) (680,423)
Loan proceeds - - 13,500
Loan repayments (288) (7,212) (13,500)
Officer loan proceeds - 1,000 1,000
Officer loan repayments (1,000) - (1,000)
374,371 249,560 1,150,976
NET INCREASE (DECREASE
IN CASH AND CASH
EQUIVALENTS 119,390 (134,635) 122,532
BEGINNING CASH AND
CASH EQUIVALENTS 3,142 137,777 -
ENDING CASH AND
CASH EQUIVALENTS 122,532 3,142 122,532
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Organization and Nature of Operations
World Shopping Network, Inc. (the "Company") was incorporated on
October 2, 1996 in the state of Wyoming, and has adopted a June 30
year-end. At June 30, 1999, the Company was a development stage
company, because it has not commenced meaningful operations.
Since its inception the Company has engaged in research, either by
itself and/or through the use of independent consultants, to
determine what type of business could be established by a new
venture which would have potentially high profits.
Accounting Method
The Company uses the accrual method of accounting for financial
statement and tax return purposes.
Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, WSN-CA, a
California corporation. Intercompany transactions have been
eliminated in the consolidation.
Purchase Method
Investments in companies have been included in the financial
statements using the purchase method of accounting.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
an original maturity of three moths or less to be cash
equivalents.
Inventories
Inventories are stated at the lower of cost or estimated market,
using the first in-first out method.
Revenue Recognition
Revenues from sales to distributors and resellers are recognized
when related products are shipped.
Organization Costs
Organization costs are recorded at cost, less accumulated
amortization. Amortization is computed using the straight-line
method over60 months.
Concentration of Credit Risk
Accounts at each institution are insured by the Federal Deposit
Insurance Corporation ("FDIC") up to $100,000. The Company
monitors the financial condition of the financial institutions on
a regular basis in order to keep the potential risk to a minimum.
Income Taxes
The Company complies with statement of financial standards No.
109, "Accounting for Income Taxes", which requires an asset and
liability approach to financial accounting for the reporting of
income taxes. Deferred income tax assets and liabilities are
computed for differences between the financial statements and tax
bases of assets and liabilities that will result in taxable or
deductible amounts in the future. Deferred tax assets and
liabilities are based on enacted tax laws and rates applicable to
the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when
necessary, to reduce the deferred income tax assets to the amount
expected to be realized.
The Company has an accounting net operating loss carry-forwards of
approximately $1.1 million.
Loss per Common Share
The computations of loss per share of common stock are based on
the weighted average number of shares outstanding during the
period.
NOTE 2: STOCKHOLDERS' EQUITY
Stock Issuances
On October 14, 1996, the Company issued 665,000 shares of common
stock in exchange for 100% of the common stock of World Shopping
Network, Inc., a California Corporation, at net book value of
their common stock, or $86,045.
The Company issued 492,500 shares of preferred stock at $2 per
share pursuant to a private placement memorandum (PPM) dated
October 15, 1996, for $985,000, less offering cost of $551,500.
On June 6, 1997, the Company issued 118,000 shares of common stock
for services valued at $59,000, in connection with the
aforementioned PPM.
During the July-September 1997 period, the Company issued
additional 133,750 shares of preferred stock, at $2 per share, for
$267,500, less offering costs of $128,923.
The Company further issued 283,086 shares of preferred stock, at
$0.33 per share, for $94,362.
In June 1998, the Company issued 700,500 shares of common stock
for services valued at $0.001 per share. The Company also issued
68,500 shares of common stock for cash, at $0.33 per share for
$22,833.
During the year ended July 31, 1999, the Company issued 2,014,976
shares of common stock, of which 160,555 represent dividends on
the preferred stock, and 994,186 represent shares issued as a
result of preferred stock conversion.
Reverse Stock Split
On July 2, 1999, the Company declared a 2.5 to 1 reverse stock
split at which time the Company's issued and outstanding shares
amounted to 4,556,162. As a result of the reverse split, the
Company's issued and outstanding shares of common stock are
4,556,162, at June 30, 1999.
NOTE 3: RELATED PARTY TRANSACTIONS
On October 15, 1996, the Company issued 118,000 shares of common
stock with a value of $59,000 to a related party as compensation
for services provided, in connection with the aforementioned PPM.
On June 5, 1998, the Company issued 700,500 shares of common stock
to three existing shareholders, for services valued at $701.
NOTE 4: LEASE COMMITMENTS
The Company leases approximately 1,300 square feet of office
space, located at 1530 Brookhollow Drive, in Santa Ana, California
92705. The terms of the lease call for monthly payments of
approximately $1,400 from March 1997 through February 1998, $1,500
from March 1998 through March 1999, and $1,700 from April 1998
through March 1999. The lease expires on March 24, 2000. Future
minimum payments due under the operating lease are approximately
$15,000 for the year ending June 30, 2000.
NOTE 5: MERGERS AND ACQUISITIONS
In September 1999, the Company entered into a merger agreement
with USA Growth, Inc., a Delaware corporation, whereby these
entities would merge. See Note 9.
NOTE 6: PROPERTY AND EQUIPMENT
The Company's property and equipment consists of the following at
June 30, 1999:
Computer equipment $ 66,900
Office equipment 7,373
Furniture and fixtures 1,453
75,726
Less: Accumulated depreciation (50,808)
$ 24,918
NOTE 7: GOING CONCERN
The Company is a development stage company, as defined in the Financial
Accounting Standards Board No. 7. The Company is devoting substantially all
of its present efforts in securing and establishing a new business, and has
not generated any significant revenues. It is the Company's belief that it
will continue to incur losses for at least the next 12 months, and as a result
will require additional funds from equity investments to meet such needs.
Realization of certain assets is dependent upon the Company's ability to meet
its future financing requirements, and the success of future operations.
These factors raise substantial doubt about the Company's ability to continue
as a going concern.
NOTE 8: YEAR 2000 COMPLIANCE (UNAUDITED)
The management is utilizing both internal and external resources,
as appropriate, to ensure that all mission critical systems will
be Y2K compliant. Management has also taken reasonable steps to
assess the Y2K compliance of its significant third parties.
Management believes that all necessary actions have been taken to
address this issue, although there can be no assurance as to the
outcome of the conversion efforts
NOTE 9: SUBSEQUENT EVENT
In September 1999, USAG entered into a merger agreement with the
Company, whereby such entities would merge and operate as USAG.
The merger agreement provides for WSN to be merged with and into
USAG, which is the surviving corporation. The merger is tax free
under Internal Revenue Code 361. This merger also resulted in
the following stock splits: (a) of the total 93,450,000 issued and
outstanding shares of USAG prior to the merger, they were subject
to a reverse split of 12 to 1, resulting in issued and outstanding
shares of 7,787,500; and (b) of the total 4,556,162 issued and
outstanding shares of the Company prior to the merger, they were
first subject to a reduction of 2,665,000 due to a Share Exchange
Agreement, resulting in a total of 1,891,162, which was then
subject to a forward split of 2.5 to 1, resulting in issued and
outstanding shares of 4,727,905. The total issued and outstanding
shares of common stock after the merger was 12,515,405. The
issued and outstanding Class A Warrants totaling 16,000,000 were
subject to a reverse split of 12 to 1, resulting in a total of
1,333,333.
Effective September 30, 1999, USAG changed its name to World
Shopping Network, Inc. The certificate of incorporation and bylaws
of USAG will continue to govern the operation of the Company.
ITEM 8. CHANGE IN FISCAL YEAR.
By a resolution of the Board of Directors of the Registrant
dated November 22, 1999, the determination was made to change the
fiscal year end of the Registrant to June 30, effective on
December 31, 1999.
SIGNATURE
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.
World Shopping Network, Inc.
Dated: February 29, 2000 By: /s/ John J. Anton
John J. Anton, President
EXHIBIT INDEX
Number Exhibit Description
2 Agreement and Plan of Merger (incorporated by reference to
the Definitive Information Statement filed on October 1, 1999)
