U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
OCTOBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-20277
WORLD SHOPPING NETWORK, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2872782
(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
1530 Brookhollow Drive, Suite C, Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 427-0760
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value; Class A Warrants; Class B
Warrants; Units
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes No X .
As of October 31, 1999, the Registrant had 12,515,405 shares
of common stock issued and outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF OCTOBER 31, 1999
AND OCTOBER 31, 1998 3
STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED OCTOBER 31, 1999
AND OCTOBER 31, 1998 5
STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED OCTOBER 31, 1999 AND
OCTOBER 31, 1998 7
NOTES TO FINANCIAL STATEMENTS 8
ITEM 2. PLAN OF OPERATION 12
PART II
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 15
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURE 16
PART I.
ITEM 1. FINANCAL STATEMENTS.
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS (Unaudited)
October 31, 1999 October 31, 1998
ASSETS
Current Assets
Checking/Savings
Cash and Cash Equivalents 11,102 357
Restricted Cash 454,540 0
Total Checking/Savings 465,642 357
Accounts Receivable
Accounts Receivable, Net 6,180 38,308
Total Accounts Receivable 6,180 38,308
Other Current Assets
Inventory Asset 7,984 7,984
Stock Subscription
Receivable 0 14,500
Total Other Current Assets 7,984 22,484
Total Current Assets 479,806 61,149
Fixed Assets
Fixed Assets, Net 33,672 27,173
Total Fixed Assets 33,672 27,173
Other Assets
Other Assets, Net 1,474 2,256
Total Other Assets 1,474 2,256
TOTAL ASSETS 514,952 90,578
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable, Net 16,416 26,402
Total Accounts Payable 16,416 26,402
Total Current Liabilities 16,416 26,402
Long Term Liabilities
Long Term Liability, Net 0 (35)
Total Long Term Liabilities 0 (35)
Total Liabilities 16,416 26,367
Equity
Capital Stock 544,238 202,612
Investments -
GrowthNet Inc. 455,583 0
Preferred Stock 666,439 666,439
Retained Earnings (1,072,347) (779,301)
Net Income (95,377) (25,539)
Total Equity 498,536 64,211
TOTAL LIABILITIES & EQUITY 514,952 90,578
See Accompanying Notes to Unaudited Financial Statement
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Three Months Ended
October 31, 1999 October 31, 1998
Ordinary Income/Expense
Income
Discounts 0 0
Fee Income 7,641 12,287
Mall Sales 36 0
Uncategorized Income 2,692 442
Total Income 10,369 12,729
Gross Profit 10,369 12,729
Expense
Advertising 975 609
Automobile Expense 2,900 425
Bank Service Charges 113 89
Client Processing 0 116
Commissions 4,525 1,200
Equipment Rental 725 0
Insurance 1,000 736
Leases 105 295
Miscellaneous 2,230 0
Office Supplies 460 836
Payroll Expenses 0 710
Postage and Delivery 39 86
Printing and Reproduction 500 0
Professional Fees 55,863 11,525
Rent 5,081 3,195
Reseller Expense 334 0
Service Bureau 380 2,121
Supplies 277 27
Taxes 1,361 60
Telephone 4,670 5,982
Travel & Ent 70 0
Total Expense 81,608 28,012
Net Ordinary Income (71,239) (15,283)
Other Income/Expense
Other Expense
Other Expenses 0 3,700
Total Other Expense 0 3,700
Net Other Income 0 (3,700)
Net Income (71,239) (18,983)
See Accompanying Notes to Unaudited Financial Statement
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Three Months Ended
October 31, 1999 October 31, 1998
OPERATING ACTIVITIES
Net income (71,238) (18,983)
Adjustments to reconcile net
Income to net cash provided
by operations:
Accounts receivable (1,040) 2,302
Accounts Payable (6,555) (5,825)
Net cash provided by operating
Activities (78,833) (27,109)
INVESTING ACTIVITIES
Fixed assets, computer
Equipment (902)
Net cash provided by
investing activities (902)
FINANCING ACTIVITIES
Long term liability,
Foothill Bank loan (801)
Capital stock 22,000
Net cash provided by
financing activities 21,199
Net cash increase for period (79,736) (5,910)
Cash at beginning of period 144,879 6,268
Cash at end of period 65,144 357
See Accompanying Notes to Unaudited Financial Statement
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Organization and Nature of Operations
The Registrant was originally was incorporated as USA Growth, Inc.
on August 14, 1987 in the state of Delaware. In September 1999
the Registrant entered into a merger agreement with World Shopping
Network, Inc., a Wyoming corporation ("WSN") (a development stage
company). WSN operates an Internet shopping mall and other
Internet related services. As a result of the merger, the
Registrant changed its name to World Shopping Network, Inc.
Accounting Method
The Registrant uses the accrual method of accounting for financial
statement and tax return purposes.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Registrant and its wholly-owned subsidiary, Growth
Net Inc., a Nevada corporation. Intercompany transactions have
been eliminated in the consolidation.
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 Registrant considers all highly liquid instruments purchased
with an original maturity of three moths or less to be cash
equivalents.
Concentration of Credit Risk.
Cash balances are maintained at one bank. Accounts at each
institution are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to $100,000.
Income Taxes
The Registrant complies with Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", which
requires an asset and liability approach to financial 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 deferred income tax assets to the amount
expected to be realized.
Income (Loss) per Common Share
Effective July 31, 1998, the Registrant adopted SFAS No. 128,
"Earnings Per Share". SFAS No. 128 requires dual presentation of
basic and diluted earnings per share for all periods presented.
Basic earnings/loss per share is computed by dividing income
(loss) applicable to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted
earnings/loss per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the
issuance of common stock that shared in the earnings of the
entity. At July 31, 1999 and 1998, the Registrant has unexercised
common stock warrants to purchase 16,000,000 (1,333,333 post-
split) shares. Such warrants were not included in the
computations of diluted loss per share because their effect would
have been antidilutive. See Note 3.
The computations of income or loss per share of common stock are
based on the weighted average number of shares outstanding during
the period, retroactively adjusted for the stock split discussed
in Note 3.
NOTE 2: RESCINDED INVESTMENTS AND TERMINATED MERGERS
In 1988, the Registrant issued 3,500,000 (291,667 post-split)
restricted shares of common stock, for all of the outstanding
common stock of Factory Outlets of America, Inc. (FOA), a
franchisor of general merchandise stores. In accordance with the
agreement, the Registrant contributed $250,000 to FOA's additional
paid-in capital. In 1990, this agreement was rescinded as FOA
failed to achieve the specified profit levels, and 3,080,000
(256,667 post-split) shares of restricted stock were returned to
the Registrant. The Registrant issued the remaining 420,000
(35,000 post-split) shares to the underwriter as compensation for
services rendered. As a result of this transaction, the
Registrant incurred total expenses of $270,734, which consisted of
acquisition and organization costs of $20,734, and the write-off
of its investment in FOA of $250,000.
On July 1, 1997, the Registrant entered into an agreement with
World Wide Web Casinos, Inc. (WWWC), whereby the Registrant and
WWWC would merge into WWWC Acquisition Corporation, in a tax-free
transaction. On January 28, 1998, WWWC informed the Registrant
that it was unable to provide audited financial statements, which
was one of the conditions for consummating the merger. As a
result, WWWC terminated the merger.
NOTE 3: STOCKHOLDERS' EQUITY
On February 16, 1988, the Registrant successfully completed its
public offering and sold 8,000,000 (666,666 post-split) units at
$.10 per unit. Each unit consists of one share of restricted
common stock and one Class A redeemable common stock purchase
warrant. Each Class A warrant entitles the holder to purchase,
for $0.17 ($2.04 post split), one share of common stock and one
Class B common stock purchase warrant, through December 31, 1999.
The Registrant has the right to redeem the unexercised warrants
on thirty days written notice for $.001 per warrant. Each Class
B warrant entitles the holder to purchase one share of common
stock at $.25 ($3.00 post-split) per share and is exercisable
through December 31, 1999.
NOTE 4: RELATED PARTY TRANSACTIONS
On February 2, 1998, the Registrant issued 130,000 (10,833 post-
split) shares with value of $10,400 to a related party as
compensation for services provided.
On June 29, 1999, the Registrant issued 2,400,000 (200,000 post-
split) shares to three existing shareholders for $48,000 in cash.
NOTE 5: MERGERS AND ACQUISITIONS
During May and June 1999, the Registrant acquired 13.5 million
shares of Growth Net Inc. (GNI) common stock for $455,583 in
cash. This transaction was accounted for as a purchase.
Accordingly, the accompanying consolidated financial statements
include the accounts of GNI, a wholly-owned non-operating
subsidiary of the Registrant. As memorialized in the Share
Exchange Agreement dated August 15, 1999, all of the current
assets of the Company of July 31, 1999, a total of 456,813, were
transferred to GNI for the benefit of the shareholders of the
Company as of June 30, 1999.
In September 1999, the Registrant entered into a merger agreement
with WSN (a development stage company), whereby such entities
would merge and operate as WSN. The merger agreement provides for
WSN to be merged with and into the Registrant, 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 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.
NOTE 6: SUPPLEMENTAL CASH FLOW INFORMATION
The cumulative tax payment from August 17, 1987 (date of
inception) through October 31, 1999 was $20,987.
NOTE 7: GOING CONCERN
The Registrant is a development stage company, as defined in the
SFAS No. 7. The Registrant is devoting substantially all of its
present efforts in securing and establishing a new business, and
has not generated any operating revenues. It is the Registrant'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. The continued
existence of the Registrant is dependent upon its ability to meet
future financing requirements, and the success of future
operations. These factors raise substantial doubt about the
Registrant's ability to continue as a going concern.
NOTE 8: COMMITMENTS AND CONTINGENCIES
As of October 31, 1999, the Registrant was delinquent on several
filing requirements to the SEC. These filings include Form 10-KSB
for the year ended July 31, 1999, and a Form 8-K to announce the
consummation of the merger. Possible sanctions may include as
enforcement action and/or suspension of (1) trading in the
Registrant's stock and/or warrants and (2) the ability of
securities dealers to make a public market in the Registrant's
securities.
NOTE 9: 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements of the Company and notes thereto contained
elsewhere in this report.
Plan of Operation.
The Registrant can satisfy its cash requirements for
approximately nine months with the cash available at October 31,
1999. The Registrant will need to raise additional capital in
the next 12 months from October 31, 1999 in order to meet its
continuing requirements. The Registrant does not intend to
expand its employees during the next twelve months.
The Registrant is an early development stage. The Registrant is
engaged in providing 24-hour, seven-day worldwide Internet-based
service on-line for the direct sale and delivery of a wide
variety of competitively priced consumer products and services.
The Registrant's objective is to become a dominant international
electronics retailer.
The Registrant's principal activities have focused on: (a) the
development and implementation of an Internet shopping model, the
"WSN Mall"; (b) the development of proprietary technology to
support such model; (c) an analysis of products and services to
be offered; (d) relationship development with providers of such
products and services; (e) the design, development and
implementation of proprietary merchandising and marketing
techniques to support the WSN Mall model; and (f) the
identification and building of a management team.
The Registrant's primary marketing objective is to make it
convenient for the e-commerce consumer to purchase a broad range
of products and services at prices that are highly competitive
with traditional mail order and electronic retail channels. To
accomplish this objective the the Registrant has developed a
nontraditional retail model, its the WSN Mall Internet Department
Store. The WSN Mall differs from most other shopping sites on
the Internet because it is a true retail "store." Most other
shopping sites on the Internet are "Malls." When a consumer
visits the Malls, they are in most cases actually reviewing a
list of manufacturers and resellers who have their own separate
web sites. The consumer must then link to one of these other
sites by actually leaving the Mall location.
Most of these manufacturers and resellers do not have the
capability of selling their products directly over the Internet,
so once at the new site, the consumer must call an 800 number to
place an order separately by phone. In other cases, the
manufacturer or reseller will present a list of local "dealers"
the consumer can visit. As a result, most Malls on the Internet
essentially become electronic advertising agencies.
Consequently, no unique advantage to the telephone-mail order
format is provided to the consumer.
The WSN Mall, on the other hand, is a true retailer. When a
consumer comes "into" the the WSN Mall store, he or she has the
capability of purchasing any product presented directly, without
having to go to another site or call an 800 number. By dealing
directly with the WSN Mall, the consumer is assured of the
overall satisfaction and convenience of purchasing from a "one
stop" shopping source. In addition, the WSN Mall offers a value-
added shopping experience by featuring the ability to process the
transaction conveniently, while presenting a broad range of
products at exceptional prices in a global format for any shopper
who can access the Internet.
The WSN Mall model is based on demand for convenient purchases of
a broad range of consumer products and services. Its revenues
are primarily generated by the sale of the products and services
offered through its web site. Consequently, the WSN Mall has a
vested interest in ensuring those products and services are
purchased. The Internet Malls have little or no such incentive
to sell products and services because their revenues are
generated by advertising others' web sites.
In dealing directly with the WSN Mall, manufacturers and other
product suppliers are assured of a low-cost distribution channel
to a large potential customer base by working with an
organization that is highly motivated to sell those suppliers'
products and services. Other advantages to this supplier include
increasing market share without increasing personnel,
administrative and advertising costs. Products are promoted
globally without increasing advertising expenditures. By
presenting products and services under the the WSN Mall
advertising umbrella, promotion of product is assured in each
advertising vehicle the WSN Mall undertakes.
By increasing market share without additional associated costs
(normally 15% to 40% of total product costs) the suppliers can
offer their products and services at a reduced cost to the WSN
Mall. In turn, the WSN Mall intends to pass these cost savings
on to its customers. The Registrant also offers a frequent buyer
program that rewards customer loyalty by providing the
opportunity to accrue points for purchases. Such points are then
redeemed for additional discounts and sales incentives at later
dates.
Capital Expenditures.
No material capital expenditures were made during the quarter
ended on October 31, 1999.
Year 2000 Issue.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000, and if
not addressed, the impact on operations and financial reporting
may range from minor errors to significant system failure which
could affect the Company's ability to conduct normal business
operations. This creates potential risk for all companies, even
if their own computer systems are Year 2000 compliant. It is not
possible to be certain that all aspects of the Year 2000 issue
affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully
resolved.
The Company currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Company may
experience serious unanticipated negative consequences (such as
significant downtime for one or more of its web site properties)
or material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of advertisers may be affected by Year 2000
issues as companies expend significant resources to correct their
current systems for Year 2000 compliance. The Company does not
currently have any information about the Year 2000 status of its
advertising customers. However, these expenditures may result in
reduced funds available for web advertising or sponsorship of web
services, which could have a material adverse effect on its
business, results of operations, and financial condition. The
Company's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis, and the
discussion set forth under "Item 5 Other Information," contain
"forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and as contemplated under the
Private Securities Litigation Reform Act of 1995, including
statements regarding, among other items, the Company's business
strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and
the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and
similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control.
The Company cautions that these statements are further qualified
by important factors that could cause actual results to differ
materially from those in the forward looking statements,
including, among others, the following: reduced or lack of
increase in demand for the Company's products, competitive
pricing pressures, changes in the market price of ingredients
used in the Company's products and the level of expenses incurred
in the Company's operations. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire or prove to
be accurate. The Company disclaims any intent or obligation to
update "forward looking statements".
PART II.
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Pursuant to a Share Exchange Agreement dated as of August 15,
1999, among the Registrant, TriStar Diversified Ventures, L.L.C.
("TriStar"), John J. Anton, and Nick Markulis, TriStar and
Messrs. Anton and Markulis exchanged all of their shares of
common stock of World Shopping Network, Inc., a Wyoming
corporation ("WSN"), for an aggregate of 79,950,000 newly issued
shares of common stock of the Registrant ("Exchange"). As a
result of the Exchange (a) TriStar held 54,000,000 shares of
common stock, which represented approximately 58% of the issued
and outstanding common stock, (b) John J. Anton held 15,000,000
shares of the Common Stock, which represented approximately 16%
of the issued and outstanding common stock, and (c) Nick Markulis
held 10,950,000 shares of common stock, which represented
approximately 12% of the issued and outstanding common stock. As
a result of the Share Exchange Agreement the Registrant owned
approximately 59% of the issued and outstanding shares of WSN and
WSN was a majority owned subsidiary of the Registrant.
This transaction was accomplished pursuant to Rule 506 under
Regulation D promulgated under Section 4(2) of the Securitie Act
of 1933. No discounts or commission were paid in connection with
these sales. The class of persons to whom these sales were made
is sophisticated investors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. The following reports on Form 8-K was filed
during the first quarter of the fiscal year covered by this Form
10-QSB:
(1) Form 8-K filed on August 26, 1999 to reflect a change in control
of the Registrant as a result of the Share Exchange Agreement.
(2) Form 8-K filed on October 20, 1999 reflecting the dismissal of
the former certifying accountant for the Registrant, Rothdtein,
Kass & Company, effective September 10, 1999.
(3) Form 8-K filed on October 20, 1999 reflecting the retention of
Keyhan Company as the new certifying accountant for the
Registrant, effective September 15, 1999.
(b) Exhibits included or incorporated by reference herein: See
Exhibit Index.
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 24, 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)
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 of the Form 10-K filed on November 5, 1996).
3.2 Certificate of Merger (which includes amendment to Articles of
Incorporation) (see below).
3.3 Bylaws (incorporated by reference to Exhibit 3.2 of the Form
10-K filed on November 5, 1996).
4 Share Exchange Agreement (see below).
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 to the Form 10-KSB/A filed on February 25, 2000).
27 Financial Data Schedule (see below).
CERTIFICATE OF MERGER OF
WORLD SHOPPING NETWORK.INC. INTO U.S.A. GROWTH INC.
The undersigned corporation does hereby certify that:
FIRST: The name and state of incorporation of each of the
constituent corporations of the merger to which this Certifies
relates is as follows:
NAME STATE OF INCORPORATION
World Shopping Network Inc. Wyoming
U.S.A. Growth Inc. Delaware
SECOND: The Agreement and Plan of Merger (the "Agreement")
providing for the merger of World Shopping Network, Inc. with and
into U.S.A. Growth Inc. (the "Merger") has been approved,
adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of
Section 252 of the General Corporation Law of the State of
Delaware.
THIRD: The name of the surviving corporation of the Merger is
U.S.A. Growth Inc., which shall be changed to World Shopping
Network. Inc., a Delaware corporation.
FOURTH: The Certificate of Incorporation of U.S.A. Growth Inc.
shall be the Certificate of Incorporation of the Surviving
corporation, which Shall be amended as follows:
1. Article FIRST of the Certificate of Incorporation shall be
amended to read in full as follows:
"FIRST. The name of this corporation is World Shopping Network,
Inc."
2. Article FOURTH of the Company's Certificate of
Incorporation is amended to read in full as follows:
"FOURTH. The amount of the total authorized capital stock of this
Corporation is 100,000,000 shares, par value $.001 per share.
Simultaneously with the effective date of this Amendment
("Effective Date"), all outstanding shares of common stock held
by each holder of record on the Effective Date shall be
automatically combined at the rate of one-for-twelve without any
further action on the part of the holders thereof or this
corporation. No fractional shares shall be issued. All fractional
shares for one-half share or more shall be increased to the next
higher whole number of shares and all fractional shares of less
than one-half share shall be decreased to the next lower whole
number of shares, respectively."
FIFTH. The executed Agreement of Merger is on file at the
principal place of business of the surviving corporation, the
address of which is 1530 Brookhollow Drive, Suite C, Santa Ana.
California 92705.
SIXTH. A copy of the Agreement of Merger will be furnished by the
surviving corporation, on request and without cost, to any
stockholder of any constituent corporation.
DATED: September 30. 1999
U.S.A. Growth Inc.
/s/ John J. Anton
John J. Anton, President
SHARE EXCHANGE AGREEMENT
This agreement is made and entered as of August 15,1999 by and
between USA GROWTH, INC. ("USAG") a publicly traded Delaware
Corporation with it's principal place of business located at 900
West 190 Street, New York, New York and TRI STAR DIVERSIFIED
VENTURES, LLC ( Charles Woods, CEO), Nick Markulis, John Anton,
(collectively hereinafter "WSN SHAREHOLDERS").
RECITALS
WHEREAS, "USAG" is a publicly traded Delaware Corporation with
capital stock of One Hundred Million (100,000,000) shares of
common stock ( the USAG "Common Stock") authorized of which
13,500,000 shares are issued and outstanding as of the signing of
this agreement and 8,000,000 in "Class A " warrants and is
conducting a exchange of the USAG common stock;
WHEREAS, WORLD SHOPPING NETWORK, INC. (hereinafter "WSN") is a
privately held Wyoming corporation with its principal place of
business in California with authorized capital stock of five
hundred million (500,000,000) shares of Common Stock, $0 par
value per share, of the which four million five hundred forty
three thousand four hundred and two (4,543,402) shares were
issued and outstanding as of June 1,1999 (the "WSN Common
Stock");
WHEREAS, WSN Shareholders are desirous of exchanging their shares
of WSN Common Stock as majority shareholders, in the following
amounts: Tri Star Diversified Ventures, LLC (1,800,000), John
Anton (500,000) and Nick Markulis (365,000) for shares of USAG
upon the terms and conditions and for the consideration
hereinafter set forth; and
WHEREAS, it is the intention of USAG and the WSN Shareholders
that the transactions contemplated hereby constitute a tax-free
"reorganization" as defined in Section 368.et.al of the Internal
Revenue Code of 1986, as amended and that all the terms and
provisions of this Agreement be interpreted, construed and
enforced to effectuate this intent.
Definitions
"Act" means the Securities Act of 1933, as amended.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Act of 1934.
"Balance Sheet" has the meaning of financial statement set forth
in Section 4.8 and 5.7 below.
"Closing" has the meaning set forth in Section 3.1 below.
"Closing Documents" has the meaning set forth in Section 2.2 and
2.3 below.
"Closing Date" has the meaning set forth in Section 3.1 below.
"Code," means the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"Conversion Ratio" has the meaning set forth in Section 2.1
below.
"GAAP" means United States generally accepted accounting
principals as in effect from time to time and consistently
applied.
"Independent Public Accountant" has the meaning set forth in
Section 4.8 and 5.7 below.
"IRS" means the Internal Revenue Service.
"Intellectual Property" means any patent, trade name, trademark,
copyright, trade secret or other intangible asset.
"Knowledge" means actual knowledge after reasonable
investigation.
"Ordinary Course of Business" means the ordinary course of
business consistent with past customs and practice (including
with respect to quantity and frequency).
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a
trust, and a joint venture.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage; pledge, lien,
encumbrance, charge, or other security interest whatsoever.
"USAG" has the meaning set forth in the recitals above.
"USAG Shares" means any share of common stock, $.001 par value
per share, of USAG.
"USAG Shareholders" means any Person whom or which holds any USAG
Share.
"USAG Warrants" shall mean an aggregate of 16,000,000 warrants of
USAG consisting of one (1) 8,000,000 Class A Warrants,
exercisable at $.17 per warrant to purchase one (1) USAG Share
and one (1) Class B Warrant, (ii) 8,000,000 Class B warrants,
exercisable at $.25 per warrant to purchase one (1) USAG Share.
"WSN" has the meaning set forth in the recitals above.
"WSN Shares" shall mean the shares of World Shopping Network Inc.
Common Stock.
"WSN Shareholders" shall have for the purposes of this agreement,
the following individuals and entities: Tri Star Diversified
Ventures, LLC, Nick Markulis, and John Anton.
NOW THEREFORE, in consideration of the following, the parties
agree as follows:
Article 1
EXCHANGE
1.1 Exchange of Stock. At the closing date, in accordance with
the provisions of this agreement and applicable law, WSN
Shareholders shall transfer and USAG shall acquire 2,665,000
Shares of WSN Common Stock, which constitutes all of the WSN
Common Stock owned by the WSN Shareholders" (the "Purchased
Shares") herein.
Article 2
CONSIDERATION
2.1 Exchange. WSN Shareholders and USAG agree that all of the
WSN shares owned by WSN Shareholders shall be exchanged with USAG
for USAG shares for Common Stock of WSN on a 30:1 ratio, (30 USAG
shares for 1 share of WSN). Such stock shall be issued in
certificates of such denominations, amounts as may be requested
by Shareholders, as follows:
WSN SHAREHOLDER WSN Common Stock for USAG Common Stock
Tri Star Diversified
Ventures 1,800,000 54,000,000
Nick Markulis 365,000 10,950,000
John Anton 500,000 15,000,000
2.2 Investment Intent Each of the WSN Shareholders represents
and warrants that they are acquiring USAG Common Stock for
investment purposes only and not with a view towards resale or
redistribution in violation of state and federal securities laws.
Each WSN Shareholder agrees to deliver to USAG at the closing, a
letter setting forth an agreement that said shares are being
acquired for investment purposes only and will not be sold except
in compliance with the Securities Act of 1933, as amended, and
the Rules and Regulations promulgated thereunder.
Each of the certificates representing shares of USAG issued to
WSN Shareholders as provided for herein shall bear substantially
the following legend:
The securities represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The securities may not be offered for sale, sold or
otherwise transferred except pursuant to an effective regist-
ration statement under the Act or pursuant to an exemption from
registration under the Act, the availability of which is to the
satisfaction of the Corporation.
2.3 Delivery. At said closing, WSN Shareholders shall deliver
certificates for the Purchased Stock, duly endorsed in negotiable
form, with signatures guaranteed, free and clear from all claims
and encumbrances.
Article 3
THE CLOSING
3.1 The Closing. The closing of the transactions provided for
herein (the "Closing") shall take place at the offices of WSN on
a date to be mutually agreed upon by the parties, which date
shall be on or before June, 1999 or at such other time and place
as the parties shall mutually agree.
Article 4
REPRESENTATIONS AND WARRANTIES OF WSN SHAREHOLDERS
As an inducement to USAG to enter into this Agreement and to
consummate the transactions contemplated herein, and with
knowledge that USAG will rely therein, WSN Shareholders represent
and warrant as follows to USAG and the individuals representing
it:
4.1 Organization. WSN is a corporation duly organized, validly
existing and in good standing under he laws of Wyoming, is duly
qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which its failure to be so
qualified and in good standing would have a materially adverse
effect on its financial condition or business and it has the
corporate power and authority to own, lease or operate its
properties and to carry on its business as now conducted.
4.2 Capital Structure. The authorized capital of WSN is as set
forth in the Recitals above. WSN and WSN Shareholders represent
and warrant, both severally and jointly that all of the
outstanding shares of "WSN Shareholders" stock are validly
issued, fully paid and non-assessable and were issued in
transactions that were either exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), or
were properly registered thereunder. There are no existing
options, warrants, calls, preemptive rights or commitments of any
kind relating to the capital stock of WSN and the stock of WSN
Shareholders.
4.3 Articles of Incorporation, Bylaws and Minutes. WSN
Shareholders have caused WSN to deliver to USAG a true and
complete copies of its (i) Articles of Incorporation (certified
by the Secretary of State of Wyoming), (ii) Bylaws (certified by
its corporate secretary) as in effect on the date hereof, and
(iii) minutes of all meetings of its Board of Directors and
Shareholders.
4.4 Books and Records. The corporate minute books, stock
certificate books, stock registers and other corporate records of
WSN are correct and complete in all material respects, and the
signatures appearing on all documents contained therein are the
true signatures of the person purporting to have signed the same.
All actions reflected in said books and records were duly and
validly taken in compliance with the laws of Wyoming, WSN does
not have any of its record, systems, controls, data or
information recorded, stored, maintained, operated or otherwise
wholly or partially dependent upon or held by any means,
including any electronic, mechanical or photographic process,
whether computerized or not, which, including all means of access
thereto and therefrom, are not under the exclusive ownership and
direct control of WSN Shareholders.
4.5 Title to WSN Common Stock. WSN Shareholders have full power
and authority to transfer and convey, free and clear of all
liens, encumbrances, restrictions and claims of every kind, the
WSN Common Stock to USAG as contemplated by the Agreement.
4.6 Authority. WSN Shareholders have full power and authority
to execute and deliver the Agreement and the other Closing
Documents and to carry out the transactions contemplated hereby
and WSN Shareholders have taken all requisite corporate action to
authorize the execution, delivery and performance of the Closing
Documents. The Closing Documents, when executed, will be valid
and binding agreements of WSN Shareholders enforceable in
accordance with the terms thereof. No consent, authorization or
approval of, or declaration, filing or registration with, any
governmental or regulatory authority or any consent,
authorization or approval of any other third party is required to
enable WSN Shareholders to enter into and perform any of its
obligations under the Closing Documents, and neither the
execution and delivery of the closing documents nor the
consummation of the transactions contemplated thereby will:
(i) Violate the Articles of Incorporation or Bylaws or constitute a
breach of any evidence of indebtedness or agreement to which WSN
Shareholders are a party or by which it is bound;
ii. Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which the WSN Shareholders or WSN are
subject or under any contract to which WSN Shareholders are a party
or permit the termination of any such contract by another person;
iii. Result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon the property or assets of WSN
Shareholders or WSN under any agreement or commitment to which the WSN
Shareholders or WSN are bound;
iv. Accelerate, or constitute an event, entitling, or which would,
on notice or lapse of time or both, entitle the holder of any
indebtedness of WSN Shareholders or WSN to accelerate the maturity
of any such indebtedness;
v. Conflict with or result in the breach of any writ, injunction or
decree of any court or governmental instrumentality; or
vi. Violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation relates to WSN Shareholders or WSN or
the securities, properties or business of WSN Shareholdersor WSN.
4.7 Financial Statement. WSN Shareholders have furnished, or
will prior to the Closing Date furnish USAG with the following
financial statements:
i. True and complete copies of the balance sheets, related
statements of operations and retained earning and related
statements of shareholders' deficiency cash flows of WSN as of
and for the year ended June 30, 1998, prepared in accordance with
generally accepted accounting principles ("GAAP") and audited by
WSN's independent public accountants; and
ii. True and complete copies of the unaudited balance sheet as
of March 31, 1999 and related statements of operations and
retained earnings and related statements of cash flows of WSN as
of March 31, 1999.
Hereinafter, the financial statements referred to in subsections
(i) and (ii), together with the footnotes and supporting
schedules thereto, are referred to as the "WSN Financial
Statements." The audited WSN Financial statements, including the
footnotes thereto, have been prepared by WSN in accordance with
GAAP and present fairly the financial condition of WSN at the
dates thereof and reflect all material claims against, and all
material debts and liabilities of, WSN, fixed or contingent, as
at the dates thereof and the statements of income and retained
earnings which are a part of the audited WSN Financial Statements
present fairly the results of the operations of WSN and cash
flows for the periods indicated, the WSN Financial statements and
the Exhibits and Schedules hereto. WSN Shareholders shall make
available to USAG and WSN's independent public accountants, its
work papers and those of its independent public accountants
related to the WSN Financial Statements.
4.8 No Undisclosed Liabilities. WSN does not have any material
liability or obligation, absolute or contingent, including
without limitation, liabilities for federal, state, local or
foreign taxes which (i) is not reflected on the WSN Financial
Statements, or (ii) has arisen since March 31, 1999, and which is
materially adverse to the business, assets or operations of WSN,
or (iii) is not referred to elsewhere in this Agreement or the
Schedules hereto.
4.9 Title of Assets; Permitted Encumbrances. WSN has good and
indefeasible title, or valid leasehold rights in the case of
leased assets, to all of it's assets reflected on the WSN
Financial Statements and all of the assets thereafter acquired by
it (except to the extent that such assets have thereafter been
disposed of in the ordinary course of business or otherwise in
accordance with this Agreement), subject to no mortgages, liens,
security interests or encumbrances, except:
i. minor defects in title and encumbrances, none of which,
individually or in the aggregate, materially interferes with the use
or value of such property;
ii. liens and security interests under operating agreements for
amounts not yet delinquent or which are being contested in good
faith;
iii. liens for fees, taxes, levies, imposts, duties or other
governmental charges of any kind which are not yet delinquent or are
being contested in good faith by appropriate proceedings; and
iv. liens created in the ordinary course of business in connection
with the leasing or financing of office, computer and related
equipment and supplies.
4.10 Condition of Property. All of the tangible personal
property of WSN is, in accordance with industry standards, in
operating condition and repair, reasonable wear and tear excepted
except for such property the condition of which does not
materially adversely affect the business of WSN.
4.11 Insurance. Set forth in Schedule A, is a list of all
insurance policies carried by WSN (showing as to each policy, the
carrier, policy number, coverage limits, expiration dates, and a
general description of the type of coverage provided) and such
policies are in full force and effect and the premiums due and
owing therefore have been paid in full and will be so paid to the
Closing Date.
4.12 Patents and Trademarks. WSN owns or possesses adequate and
enforceable licenses or other rights to use all patents,
trademarks, trade names and copyrights now used in the conduct of
its business.
4.13 Conduct of Business. Since June 1, 1999, there has not
occurred any of the following events, other than changes in the
ordinary course of business, none of which has had a material
adverse effect on such business, operations or financial
condition of WSN:
i Any change in the business, operations or financial condition or
the manner of conducting the business of WSN;
ii Any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the business operations
of financial condition of WSN;
iii Any authorization or issuance of any shares of capital stock of
WSN;
iv Any declaration, setting aside or payment of dividends or other
distribution in respect of the capital stock of WSN;
v Any direct or indirect redemption, purchase or other acquisition
of any shares of capital stock of WSN;
vi Any increase in the compensation by WSN of its directors, officers
or employees over their compensation as disclosed in the WSN Financial
Statements;
vii Any employment agreement for a fixed term or any deferred
compensation agreement entered into between WSN and any of its
directors, officers or other employees or consultants;
viii Any amendment or termination by WSN of any material contract
agreement, license, or other agreement other than in the ordinary
course of business; or
ix Any indebtedness incurred WSN or any commitment to borrow money
entered into by WSN.
4.14 Litigation. There is no action, suit or proceeding pending
before any court, administrative agency or other governmental
body or arbitrator, or threatened against WSN. WSN is not a party
or subject to, or bound by, any injunction, judgement, order or
decree, whether or not still subject to appeal, of any court,
administrative agency or other governmental body or arbitrator.
4.15 Tax Matters. WSN has paid all federal, state, county,
local, foreign and othertaxes, including, without limitation, income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, employment and payroll related taxes,
property taxes and import duties, whether or not measured in
whole or in part by net income (individually, a "Tax" and
collectively, the "Taxes"), and all deficiencies or other
additions to any Tax, interest and penalties owed by it in
connection with any Tax required to be paid by it relating to WSN
or any of its assets or business through the date hereof. WSN
shall have paid timely, prior to the Closing Date, all Taxes
relating to it or its business or assets, including additions,
interest, penalties and estimated payments, required to be paid
by it under applicable law after the date hereof.
4.16 No Tax Liens. None of the assets of WSN is subject to any
lien in favor of the united States pursuant to Section 6321 of
the Internal Revenue Code of 1986, as amended (the "Code"), for
nonpayment of federal taxes, or any lien in favor of any state
under any comparable provision of state law.
4.17 Compliance with Laws; Permits. WSN is not in violation of
any applicable order, judgement, injunction, award or decree
relating to its business or assets. WSN is not in violation of
any federal, state, local or foreign law, ordinance or regulation
or any other requirement of any governmental of regulatory body,
court or arbitrator applicable to its business' or assets.
Without limiting the generality of the foregoing, (a) there is
not pending or threatened, any notification of any governmental
authority the WSN is not in compliance with applicable laws and
regulations respecting employment and employment practices,
occupational safety and health laws and regulations, and laws or
regulations relating to the quality of the environment and WSN
knows of no basis therefor, and (b) WSN has not received any such
notification of past violations of such laws or regulations. WSN
holds all licenses, permits, orders and approvals of any federal,
state or local governmental or regulatory bodies (collectively,
"Permits") that are material to or necessary for the conduct of
its business. All Permits are in full force and effect and no
proceeding to revoke or limit any of such Permits is pending or,
to the knowledge of WSN, threatened.
4.18 Contracts and Other Agreements. There have been delivered
to USAG true and complete copies of all of the contracts and
other agreements. All of such contracts and other agreements are
valid and binding upon WSN in accordance with their terms, and
WSN is not in default nor has it received a notice of default
under, or with respect to, any such contracts and /or other
agreements. No approval or consent of any person is needed in
order that the contracts and other agreements se forth thereon
will continue in full force and effect following the consummation
of the transactions contemplated by this Agreement. There are no
contracts to which WSN is party or by or to which it or its
assets or properties are bound or subject, including, without
limitation, any (a) contract for the employment of any officer or
individual employee, (b) contract with any union, (c) back loan
or other credit agreement, (d) bonus, deferred compensation,
profit sharing, pension or retirement arrangement, (e)
partnership or joint venture agreement, or (f) other material
contract, agreement or commitment.
4.19 Real Property. WSN owns no direct, indirect, legal,
equitable or beneficial interest in any real property and
possesses no rights to acquire the same.
4.20 Liabilities. Except as forth in this Agreement of any
Schedule hereto, WSN has no direct or indirect Liabilities, other
than Liabilities fully and adequately reflected or reserved
against in the WSN Financial Statements.
4.21 Employee Benefit Plans. WSN does not maintain or contribute
to, and has never maintained or contributed to, any employee
pension benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended.
4.22 Curtailment of Operations. No labor disputes or work
stoppages involving WSN are pending or threatened which, either
singly or in the aggregate, will have a material adverse effect
on the business of WSN. To the knowledge of WSN, no material
customer of or supplier to WSN is involved in, or affected by,
any dispute, arbitration, lawsuit, or administrative proceedings
which could materially adversely affect its business, operations,
properties, assets or condition, financial or otherwise.
4.23 Employee Relations. WSN is not a party to a collective
bargaining agreement and is in compliance with all applicable
federal, state or other laws, domestic or foreign, respecting
employment and employment practices, terms and conditions o
employment (including issues related to independent contractor
status of personnel) and wages and hours, and has not and is not
engaged in any unfair labor practice. There have been no
organization efforts by any trade unions within the last 12 months.
4.24 Restrictive Documents. Except as otherwise disclosed in
this Agreement or any Schedule or Exhibit hereto, WSN is not
subject to, or a party to, any charter, bylaw, mortgage, lien,
lease, license, permit, agreement, contract, instrument, or any
law, rule, ordinance, regulation, order, judgement or decree, or
any other restriction of any kind or character, which would
prevent consummation of the transaction contemplated by this
Agreement, or the continued operation of the business on
substantially the same basis as heretofore operated.
4.25 Relationships. No officer or director of WSN possesses,
directly or indirectly, any financial interest in, or is a
director, officer, shareholder or employee of, any corporation,
firm, association or business organization which is a manufacture
for or client supplier, customer, lessor, lessee, or competitor
or potential competitor of, WSN. WSN is not indebted to any
officer, director or employee of WSN or to any entity in which
any such person has a financial interest.
4.26 No Changes Prior to Closing Date. During the period from
the date of this Agreement to and including the Closing Date,
other than as expressly set forth on one or more of the Schedules
hereto, WSN will not have:
i. Incurred any liability or other obligations of any nature
(whether accrued, absolute, contingent or otherwise) which affects
or may affect its assets or business, except in the ordinary course of
business;
ii. Permitted any of its assets to be subject to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge
of any kind;
iii. Sold, transferred or otherwise disposed of any of its assets,
except in theordinary course of business;
iv. Made any capital expenditure or commitment therefore in excess
of $5,000;
v. Made any bonus or profit sharing contribution or distribution,
except in the ordinary course of business;
vi. Increased its indebtedness for borrowed money, except current
borrowings form banks in the ordinary course of business, or made any
loan to any person;
vii. Written off as uncollectible any notes or accounts receivable
except writeoffs in the ordinary course of business charge to
applicable reserves, none of which, individually or in the
aggregate, materially and adversely affects its assets or business;
viii. Granted any increase in the rate of wages, salaries, bonuses
or other compensation of any executive employee or other employees of
WSN, except in the ordinary course of business;
ix. Canceled or waived any claims or rights, except in the ordinary
course ofbusiness;
x. Made any change in any method of accounting or auditing practice;
xi. Otherwise conducted its business or entered into any transaction
except in the usual and ordinary manner and in the ordinary course of
business;
xii. Entered into any agreements with any affiliates; or
xiii. Agreed, whether or not in writing, to do any of the
foregoing.
4.27 Disclosure. Neither this Agreement nor any Schedule,
Exhibit or certificate delivered in accordance with the terms
hereof, or any document or statement in writing which has been
supplied by or on behalf of WSN or by any of WSN directors or
officers, material fact, or omits any statement of a material
fact necessary in order to make the statements contained herein
or therein not misleading. There is no fact or circumstance known
to WSN Shareholders which materially and adversely affects or
which may materially and adversely affect its business, prospects
or financial condition or its assets, which has not been set
forth in this Agreement, the Schedules, Exhibits, certificates or
statements furnished in writing to USAG in connection with the
transactions contemplated by this Agreement.
4.28 Broker's or Finder's Fees Except for Havkit Corporation, no
broker, finder or similar intermediary is entitled to fees in
connection with the transactions contemplated by this Agreement
by virtue of any action or agreement of WSN.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF USAG
As an inducement to WSN Shareholders to enter into this Agreement
and to consummate the transactions contemplated herein, and with
knowledge that WSN Shareholders will rely thereon, USAG
represents and warrants as follows to WSN Shareholders and the
individuals representing those parties:
5.1 Organization. USAG is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which
its failure to be so qualified and in good standing would have a
materially adverse effect on its financial condition or business
and it has the corporate power and authority to own, lease or
operate its properties and to carry on its business as now
conducted
5.2 Capital Structure. The authorized capital of USAG is as set
forth in the RECITALS above. All of the outstanding shares of
USAG Stock are and will be validly issued, fully paid and
nonassessable and were issued in transactions that were either
exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act'), or were properly registered
thereunder. A list of USAG shareholders of record at August
16, 1999, certified by USAG's transfer agent, is annexed as a
Schedule. There are no existing options, warrants calls,
preemptive rights or commitments of any kind relating to the
capital stock of USAG other than those listed therein.
5.3 Title to USAG Common Stock. USAG has full power and authority
to issue and convey, free and clear of all liens, encumbrances,
restrictions and claims of every kind, the USAG Common Stock
issuable to WSN Shareholders as contemplated by this Agreement
and, when issued, said USAG Common Stock shall be validly issued,
fully paid and nonassessable.
5.4 Authority. USAG has full power and authority to execute and
deliver this Agreement and the other agreements required to be
executed and delivered hereunder and to carry out the
transactions contemplated hereby and USAG has taken all requisite
corporate action to authorize the execution, delivery and
performance.
5.5 No Undisclosed Liabilities. USAG does not have any material
liability or obligations, absolute or contingent, including
without limitation, liabilities for federal, state, local or
foreign taxes which (i) is not reflected on the USAG Financial
Statements, or (ii) has arisen since April 30, 1999 and which is
materially adverse to the business, assets or operations of USAG
other than as disclosed on Schedule , or (iii) is not referred to
elsewhere in this Agreement or the Schedules hereto.
5.6 Compliance with Laws; Permits. USAG is not in violation of
any applicable order, judgment, injunction, award or decree
relating to its business or assets. USAG is not in violation of
any federal, state, local or foreign law, ordinance or regulation
or any other requirement of any governmental or regulatory body,
court or arbitrator applicable to its business or assets. Without
limiting the generality of the foregoing, (a) there is no pending
or threatened, any notification of any governmental authority
that USAG is not in compliance with applicable laws and
regulations respecting employment and employment practices,
occupational safety and health laws and regulations and laws or
regulations relating to the quality of the environment and USAG
knows of no basis therefor and (b) USAG has not received any such
notification of past violations of such laws or regulations. USAG
holds all licenses, permits, orders and approvals of any federal,
state or local governmental or regulatory bodies (collectively,
"Permits") that are material to or necessary for the conduct of
its business. All Permits are in full force and effect and no
proceeding to revoke or limit any of such Permits is pending or,
to the knowledge of USAG, threatened.
5.7 Disclosure. Neither this Agreement nor any Schedule, Exhibit
or certificate delivered in accordance with the terms hereof, or
any document or statement in writing which has been supplied by
or on behalf of USAG or by any ofUSAG's directors or officers,
material fact, or omits any statement of a material fact
necessary in order to make the statements contained herein or
therein not misleading. There is no fact or circumstance known to
USAG which materially and adversely affects or which may
materially and adversely affect its business, prospects or
financial condition or its assets, which has not been set forth
in this Agreement, the Schedules, Exhibits, certificates or
statements furnished in writing to WSN and Shareholders in
connection with the transactions contemplated by this Agreement.
5.8 Broker's or Finder's Fees. Except for Havkit Corporation, no
broker, finder or similar intermediary is entitled to fees in
connection with the transactions contemplated by this Agreement
by virtue of any action or agreement of USAG.
Article 6
MISCELLANEOUS
6.1 Approval By Counsel. All actions and proceedings hereunder
and all documents and other papers required to be delivered by
USAG hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters
shall have been reasonably approved by counsel to USAG.
6.2 Litigation. There is no action, suit or proceeding pending
before any court, administration agency or other governmental
body or arbitrator, threatened against USAG . USAG is not a party
or subject to, or bound by, any injunction, judgment, order or
decree, whether or not still subject to approval, of any court,
administrative agency or other governmental body or arbitrator.
6.3 Tax-Free Exchange. The transaction contemplated by this
Agreement shall have been accomplished on a tax-free basis.
6.4 Transfer/Assignment. This agreement is personal to the
Parties herein and shall not be assigned or transferred without
the prior written consent of USAG. This agreement is personal to
USAG and shall not be assigned or transferred without the written
consent ofWSN Shareholders. This agreement shall be binding upon
and inure to the benefit of all of the parties hereto and their
successor and assigns.
6.5 Severability. Nothing contained herein shall be construed to
require the commission of any act contrary to law. Should there
be any conflict between any provisions hereof and any present or
future statute, law, ordinance, regulation, or other
pronouncement having the force of law, the latter shall prevail,
but the provision of this Agreement affected thereby shall be
curtailed and limited only to the extent necessary to bring it
within the requirements of the law, and the remaining provisions
of this agreement shall remain in full force and effect.
6.6 Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the
subject matter hereof and supercedes all prior oral or written
agreements, arrangements, and understandings with respect
thereto. No representation, promise, inducement, statement or
intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged
representation, promise, inducement, or statement not so set
forth herein. This agreement is made under and shall be construed
pursuant to the laws of the State of California.
6.7 Modification. This Agreement may be modified, amended,
superseded, or cancelled, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived,
only by a written instrument executed by both parties to be bound
by an such modification, amendment, suppression, cancellation, or
waiver. The Waiver by either of the parties, express or implied,
of any right under this Agreement or any failure to perform under
this Agreement by the other party, shall not constitute or be
deemed as a waiver of any other right under this Agreement or of
any other failure to perform under this Agreement by the other
party, whether or a similar or dissimilar nature.
6.8 Attorneys Fees. The WSN Shareholders will pay all reasonable
direct and indirect legal fees of USAG in the preparation and
consummation of this purchase agreement, as well as the
subsequent merger of WSN and USAG. In the event of any dispute
arising out of the subject matter of this Agreement, the
prevailing party shall recover, in addition to any other damages
assessed, its' reasonable attorney's fees and costs incurred in
litigating or otherwise settling or resolving such dispute
whether or not an action is brought or prosecuted to judgment.
6.9 Cumulative Remedies. Each and all of the several rights and
remedies provided in this Agreement, or by law or in equity,
shall be cumulative, and no one of them shall be exclusive of any
other right or remedy, and the exercise of any one or such rights
or remedies shall not be deemed a waiver of, or an election to
exercise, any other such right or remedy.
6.10 Counterparts. The agreement may be executed in several
counterparts and when so executed shall constitute one agreement
binding on all the Parties, notwithstanding that all the Parties
are not signatory to the original and same counterpart.
6.11 Post Effective Amendments. (a) It is contemplated by the
Parties herein, after Closing, the new management will arrange
for filing a post effective amendment to permit USAG warrants to
be exercised providing for additional funding for the expansion
of the corporation, as well as the registration of 2.4 Million
recently exercised Underwriter Warrants. (b) It is expressly
agreed that USAG will have no assets or liabilities at the time
of Closing. Any current assets will be transferred prior to
Closing to an affiliated entity and will be for the benefit of
the current shareholders of USAG and not the selling WSN
Shareholders. WSN Shareholders will have no interest in the
affiliated entity.
6.12 Captions. The caption headings contained in this Agreement
are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
6.13 Survival Of Representations And Warranties. All covenants,
agreements, statements, certifications, indemnification's in,
representations and warranties made by the Sellers or the
Purchaser this Agreement or in any document, exhibit, schedule or
certificate furnished pursuant hereto or in connection herewith,
shall survive the Closing, irrespective of any investigation made
by or on behalf of any party, (a) with respect to the
representations and warranties of the Sellers herein contained,
for a period of 3 i/2 years and (b) in all other instances for a
period of 18 months. Any claim made in writing prior to the
expiration of the applicable period and the rights of indemnity
with respect thereto shall survive such expiration until resolved
or judicially determined.
6.14 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall
be in writing and shall be deemed to have been given when
received, if delivered in persons, or three (3) business days
following the mailing thereof, if mailed by certified first class
mail, postage prepaid, return receipt requested, as follows:
If to USAG
USA GROWTH, INC.
900 West 190 Street
New York, N.Y. 10040
Attn: Robert Scher,
President
If to WSN
World Shopping Network Inc.
1530 Brookhollow Drive, #C
Santa Ana,CA. 92705
Attn: John Anton, Nick Markulis
If to Tri Star Diversified:
Tri Star Diversified Ventures, LLC
575 Anton Blvd, 4th Floor
Costa Mesa, CA.9262
Attn: Charles Woods, CEO
With a copy to
McLaughlin & Stern, LLP
260 Madison Ave
New York. New York 10016
Attn: David W. Sass, Esq.
Or at such other address or addresses as any party may have
advised in the manner provided in this Section.
U.S.A. Growth Inc.
/s/ Robert Scher
Robert Scher, President
Tri Star Diversified Ventures, L.L.C.
/s/ Charles Woods
Charles Woods, CEO
Nick Markulis
/s/ Nick Markulis
John Anton
/s/ John Anton
<TABLE> <S> <C>
<S> <C>
<PAGE>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 465,642
<SECURITIES> 0
<RECEIVABLES> 6,180
<ALLOWANCES> 0
<INVENTORY> 7,984
<CURRENT-ASSETS> 479,806
<PP&E> 33,672
<DEPRECIATION> 0
<TOTAL-ASSETS> 514,952
<CURRENT-LIABILITIES> 16,416
<BONDS> 0
0
666,439
<COMMON> 544,238
<OTHER-SE> 498,536
<TOTAL-LIABILITY-AND-EQUITY> 514,952
<SALES> 7,677
<TOTAL-REVENUES> 10,369
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 81,607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (71,238)
<INCOME-TAX> 0
<INCOME-CONTINUING> (71,238)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,238)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
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