U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE
30, 2000
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 X No .
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X].
The aggregate market value of the voting stock held by non-
affiliates of the Registrant as of June 30, 2000: Common Stock,
par value $0.001 per share -- $1,457,917. As of June 30, 2000,
the Registrant had 18,619,278 shares of common stock issued and
outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X.
TABLE OF CONTENTS
PART I.
PAGE
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTY 13
ITEM 3. LEGAL PROCEEDINGS 13
ITEM 4. SUBMISSION TO MATTERS TO VOTE OF SECURITY HOLDERS 13
PART II.
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 13
ITEM 6. PLAN OF OPERATION 14
ITEM 7. FINANCIAL STATEMENTS 22
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 22
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16 (A)
OF THE EXCHANGE ACT 22
ITEM 10. EXECUTIVE COMPENSATION 24
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 24
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 25
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 26
SIGNATURES 28
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development.
USA Growth, Inc., a Delaware corporation ("Registrant"), was
originally incorporated on August 14, 1987 in the State of
Delaware. At July 31, 1999, the Registrant was a development
stage company, since it had not commenced its planned principal
operations.
Pursuant to a share exchange agreement dated as of August 15,
1999, among the Registrant, TriStar Diversified Ventures,
L.L.C., 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, for an
aggregate of 79,950,000 newly issued shares of common stock of
the Registrant. As a result of this exchange:
TriStar held 54,000,000 shares of common stock, which represented
approximately 58% of the issued and outstanding common stock
John J. Anton held 15,000,000 shares of the common stock, which
represented approximately 16% of the issued and outstanding
common stock
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 Wyoming
corporation and this corporation was a majority owned subsidiary
of the Registrant.
The Registrant's board of directors unanimously approved the
following actions at a meeting duly held and called on August 17,
1999:
the merger of World Shopping Network, Inc., a Wyoming
corporation, with and into the Registrant
a reverse split of the issued and outstanding shares of the
common stock on a one-for-twelve (1:12) basis
an amendment to the certificate of incorporation of the
Registrant to implement this reverse stock split and to change
the name of the Registrant to World Shopping Network, Inc.
the election of new directors of the Registrant.
Under applicable Delaware Law, approval of the merger and the
amendment to the certificate of incorporation required 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 amendment by written consent in accordance with and as
permitted by Section 228 of the General Corporation Law of the
State of Delaware.
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 pursuant to Rule 14c-2 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, the Wyoming
corporation, and the principal stockholders of the Registrant.
The merger agreement provides for the Wyoming corporation to be
merged with and into the Registrant, with the Registrant being
the surviving corporation. Effective on November 22, 1999, the
fiscal year of the Registrant was changed to June 30 from July
31. The Registrant's common stock is currently traded on the
Over the Counter Bulletin Board under the ticker symbol "WSHP".
Business of the Registrant.
(a) Registrant Overview.
To date, the primary business of the Registrant has been as
an Internet website host with over 125 customers. These services
include website development, hosting, maintenance, linking, and
access. Many businesses wish to create an on-line presence
without the investment into the hardware and software necessary
to maintain their own servers. The Registrant has invested over
$100,000 into the development of its hardware and has dual-
redundant T1 line capability. It maintains sufficient access
lines so that if a server becomes busy, the next available server
will receive and process the customer's request. Over time the
capacity of the Registrant's equipment has grown, and will
continue to grow with new servers being added to accommodate new
customers and their ever increasing needs.
In addition to providing Internet services to others, the
Registrant has established its own Internet shopping mall, "World
Shopping Network Mall" which can be accessed at
http://www.wsnetwork.com. This site offers a range of goods and
services for sale to consumers over the Internet through a
variety of vendors. Vendors are showcased on the Registrant's
website's main page, with each vendor displaying a banner link to
a separate vendor "store" hosted on our website. In this way the
Registrant provides value to both the end-user and to its vendors
by providing many goods and services in one easy-to-access
location. Consumers can fulfill most, if not all, of their
shopping needs at one location, and vendors have increased
traffic due to consumers seeing their banner advertisement while
browsing for an unrelated product.
Finally, the Registrant has begun designing and hosting
Internet shopping malls for individual suppliers or
manufacturers. The Registrant offers a turn-key approach to
those wishing to establish their own shopping malls. Once
general content is designated by the customer, the Registrant
designs, hosts, and maintains the site.
(b) Industry Background.
The Internet is a worldwide series of interconnected electronic
and/or computer networks. Individuals and companies recently
have recognized that the technological capabilities of the
Internet provide a medium not only for the promotion and
communication of ideas and concepts, but also for the
presentation and sale of information, goods and services. The
Internet is accessible principally through personal computers,
"Web TV" and hand-held wireless products designed to provide
access to the Internet through alternative devices. The
Registrant believes that these alternative devices will serve to
increase the number of individuals who shop online.
The Internet began in the late 1960's as an experiment in the
design of robust computer networks. Basically, the Internet is a
collection of computer networks - a network of networks - that
allows anyone to connect with their computer to the Internet and
immediately communicate with other computers and users across the
world. Its use for decades was primarily limited to defense
contractors and academic institutions. With the advent of high-
speed modems for digital communication over common telephone
lines, some individuals and organizations began connecting to and
taking advantage of the Internet's advanced global communications
ability.
Because the Internet has experienced rapid growth, it has
developed into a significant tool for global communications,
commerce and media, enabling millions of people to share
information and transact business electronically. Advances in
online security and payment mechanisms have also prompted more
businesses and consumers to engage in electronic commerce.
The terms electronic commerce and Internet commerce encompass the
use of the Internet for selling goods and services. The use of
the Internet as a marketing and advertising tool is enhanced by
the ability to communicate information through the Internet to a
large number of individuals, businesses and other entities. The
unique characteristics of the Internet create numerous advantages
for online retailers and provides a convenient and unique means
for consumers to order products and services. The virtual nature
of Internet commerce by way of website accessibility for
merchants can reduce or even eliminate the costs associated with
maintaining a physical retail facility. Online merchants may
also realize significant savings by eliminating traditional
product packaging, print advertising and other point of purchase
materials. Marketing on the Internet can be especially
advantageous for smaller companies by removing the traditional
barrier of location and essentially, leveling the playing field
to allow smaller companies to compete with larger companies
effectively.
The unique characteristics of the Internet create a number of
advantages for online retailers and have dramatically affected
the manner in which companies distribute goods and services.
Specifically, online retailers use the Internet to: provide
consumers with a broad selection of products and services,
increased information and enhanced convenience; operate with
reduced overhead costs and greater economies of scale; frequently
adjust featured selections, editorial content and pricing,
providing significant merchandising flexibility; display a larger
number of products than traditional retailers at lower cost; and
obtain demographic and behavioral data about customers,
increasing opportunities for direct marketing and personalized
services.
The Internet also provides a powerful and convenient means for
consumers to order products and services. As a result of the
increased use of the Internet and the benefits of online
retailing, the Registrant believes consumer spending on the
Internet will grow rapidly.
(c) Strategy.
The Registrant expects the number of suppliers and
manufacturers selling their products and services over the
Internet to grow in a geometric rather than linear fashion over
the next five years. This growth will create a great need both
for web hosting of companies wishing to establish an Internet
presence, and for hosting of on-line shopping malls. As more
consumers discover the ease of shopping on-line, demand for on-
line malls will increase. It is the Registrant's strategy to
help meet that demand.
The Registrant is positioning itself to be a leader in its
industry with the following four-pronged approach:
Through image development, infomercials, radio advertising, and a
constant trade show presence, create brand recognition of the
World Shopping Network name.
Aggressively market its own on-line shopping mall, World Shopping
Network Mall.
Springboard off increased brand recognition created by 1 and 2
above to significantly increase revenues attributable to web
hosting, and on-line shopping mall design and maintenance.
Strategically identify and acquire local and regional web hosting
competitors.
(d) Products And Services.
When first formed, the Registrant's principal activities were
primarily 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. These goals
have been attained and the Registrant operates in high technology
and e-commerce business under a dual-tier model with the
following components:
WSN Mall
World Access Network.
Technology.
The Registrant utilizes a Dell Power Edge as its main server with
dual processors equipped with RAID5 disk array. This system is
supported by dual power supplies. The WSN Mall uses Active
Service Pages interacting with Microsoft SQL Server as its
database engine. Further, the World Access Network employs
Microsoft Site Server Commerce Edition to provide e-mail, chat
service, and all other customer and community support, and
Microsoft Internet Information Server to provide Internet access
to members.
The Registrant's management team has made a priority of
establishing many redundant systems to insure that customers are
never delayed, left without service, or experience failures of
any kind. Such development and maintenance of redundant systems
are the result of the expertise of the members of the management
team and their years of experience building computer networks.
WSN Mall.
Present
The WSN Mall operates as a 24-hour worldwide Internet based
online service providing for the direct sale and delivery of a
wide variety of competitively priced consumer products and
services. WSN Mall is also the exclusive seller of several
items, unavailable through any other site. The Registrant
supplies products sold on WSN Mall through an agreement with
Ingram Micro and additionally, utilizes Specialty Merchandise
Corporation and Tech Data. The Registrant does not generally
warehouse any inventory for resale. Arrangements are made with
each individual vendor, or strategic partner to package, ship and
notify the Registrant of sale and delivery. The Registrant
obtains payment from customers and pays the strategic partner
directly for the products. Products are shipped by Federal
Express, the U.S. Postal Service or United Parcel Service to the
consumer.
The Registrant's primary 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. 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 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 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, 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.
Following is a chart of the WSN Mall order fulfillment procedure:
Order received Transfer of Strategic Payment made
order to partner fills to strategic
strategic order provides partner
partner notification
One of the Registrant's objectives remains that of becoming
a dominant international retailer of consumer goods and services
with the primary goal of facilitating the ease, efficiency and
advantages of online shopping. The initial implementation of the
WSN Mall has been successful in generating revenue despite the
extremely competitive environment in which it has operated.
Sales have been consistent, but in order to create a
distinguishable business method along with a viable, long-term
future, the Registrant seeks to develop a new and innovative
online shopping experience to operate in conjunction with its
business hosting and website development services.
As the e-commerce market is relatively new and competitive, the
Registrant expects that competition may continue to increase.
The Registrant currently competes against other companies with e-
commerce sites, including, but certainly not limited to
Amazon.com, Inc., Buy.com, Inc., Yahoo, Intermallamerica.com,
iVillage.com and many other companies marketing and selling goods
over the Internet. Most of these competitors have significantly
greater resources than the Registrant which may provide them with
a greater ability to market their products more effectively.
Future of WSN Mall
It is the intent of the Registrant to create an online shopping
mall showcasing products aimed at the 20-35 year old, active
consumer. The Registrant seeks to implement a theme-based
shopping experience, selling products geared toward image-
conscious and active adult consumer population. New and
innovative marketing techniques will be utilized to expand the
brand recognition of the site and also to generate interest in
the mall. In addition, the Registrant plans to expand its
operations by acquiring technology related businesses so as to
operate under a three tier model.
World Access Network
Present
In addition to operating the WSN Mall, the Registrant also
provides a full-range of Internet services through World Access
Network ("WAN"), a division of the Registrant. This includes
website development and hosting for businesses and other
organizations wishing to create an online presence without the
cost and hassle associated with maintaining their own servers and
hardware. Additionally, WAN provides Internet access to
businesses and consumers.
WAN currently serves over 125 customers, primarily in the
Southern California market, providing for all of their Internet
service needs including website development, hosting and
maintenance, linking and access. The Registrant has invested
over $100,000 of capital into the development of its hardware and
has dual-redundant T1 line capability. The Registrant maintains
sufficient access lines so that if a server becomes busy, the
next available server will receive and process the customer's
request. As requests grow beyond the capacity of the equipment,
new servers will be added to the rotation. This arrangement
makes growth easy and accommodates the risk of failure.
Additionally, WAN offers turn-key mall opportunities to its
clients, enabling the establishment and maintenance of their own
shopping malls. WAN currently provides this service to eight of
its existing customers and hopes to expand the offering of the
service.
The Registrant and WAN anticipate that, as with the WSN Mall, the
competition in the area of web hosting and development will
continue to increase. The web development and hosting market is
extremely competitive and WAN expects competition to only
intensify in the future. WAN's current competitors include
companies such as Network Solutions, Inc., Creative Business
Solutions Co. and numerous other companies engaged in the
business of web development and hosting.
Future of World Access Network
In the future the Registrant expects its Web Development Services
to offer superior connectivity to both new and existing
customers. The Registrant will continue to service its existing
customers, upgrading their current operations to offer increased
marketing exposure.
Vision for the Future of the Registrant
While the Registrant has achieved and is maintaining a steady
level of success with regard to the WSN Mall and its web services
divisions, it seeks to implement a plan to further increase its
market share, particularly with young, active consumers through
the development of a highly interactive shopping and educational
experience.
Long-term viability of the Registrant is a priority. The
Registrant does not wish to follow the path of many of its
competitors by striving only to amass a large market share with
the primary goal of becoming a viable buy-out target. Its
philosophy remains that of developing and maintaining a
profitable balance between successful operations with regard to:
locating and maintaining market share
web development services and Internet access
the ultimate acquisition of businesses, technologies, services
and/or products to further expand the business.
Strategic Relationships
The Registrant has established strategic partnerships with three
specialty catalog warehouse companies: Specialty Merchandise,
Ingram Micro, and Tech Data. Each of these companies have
extensive catalogs listing thousands of products ranging from
extremely inexpensive novelty items to computers and other
electronic products costing thousands of dollars. The Registrant
has established open purchase orders with each of these partners.
Currently, the Registrant listed over 4,700 products listed in
the catalogs of these three companies on the WSN Mall. Only the
limited personnel resources of the Registrant has prevented it
from adding additional products. It is the intention of the
Registrant to utilize the proceeds from this offering to add
employees and increase its product offerings. In addition, the
Registrant will pursue strategic relationships with additional
catalog companies to increase the variety of its product
offerings thus attracting a broader range of web traffic.
Advertising and Promotion
Success or failure in this highly competitive industry, where
consumers can change shopping locations with a click of their
mouse, and can easily ignore advertising and promotion that is
not compelling or eye-catching, will be determined by the
Registrant's ability to capture the attention of consumers
"surfing" the Internet.
The Registrant will continue to market and effectuate its current
operations while developing new features. In order to create a
more stimulating and engaging online shopping experience, the
Registrant foresees the development of an extremely interactive
shopping experience. In furtherance of that goal, current
efforts are being directed toward the development of the
Registrant's image around an animation-created celebrity. The
Registrant intends to create an animated celebrity who will guide
shoppers through the site for a shopping experience with an
Internet edge, much like that of a video game. In addition, the
animated celebrity will engage in educational encounters with
shoppers informing them about computers and the Internet.
Image Development
The Registrant foresees that the development of the animated
celebrity will distinguish it from the other e-commerce sites and
attract youthful, active and financially sound visitors and
shoppers. The Registrant anticipates that in addition to
implementing the animated celebrity on the website, a line of
merchandise with the animated celebrity's image will be
developed. Potential media include the development of a comic
book series, an animated series for television as well as
wearable merchandise such as t-shirts, sweatshirts and hats.
Infomercials
To further market the site, the Registrant also seeks to develop
an infomercial educating the public as to why the Internet should
be a part of their lives and why they should be online, and
further, why the Registrant's sites should be a part of their
lives. The Registrant currently offers unprecedented convenience
and benefits. The Registrant seeks not only to improve upon and
increase those benefits, but also to educate about the Internet,
its uses, values and benefits.
Radio Advertising
In addition to the infomercial, the Registrant intends to
purchase radio air time to advertise in an effort to create name
recognition and additionally, maintain a visible presence at
industry events such as trade shows and seminars.
Competition
The Internet and e-commerce market is extremely competitive and
can be significantly affected by many factors, including changes
in local, regional or national economic conditions, changes in
consumer preferences, brand name recognition and marketing, and
the development of new and competing technologies. The
Registrant's current or potential competitors include:
e-commerce solution providers that provide shopping cart based
transaction products such as: Yahoo/Viaweb, Icat, and Pandesic
web developers that incorporate e-commerce products in their
solutions such as Mercantec, Hiway, and Simplenet
on-line shopping malls and auction houses such as The Internet
Mall, Branch Mall, iMall, the Yahoo Store, Amazon.com, eBay, and
Zauction
product search software and comparison shopping sites such as
Excite's Jengo, Yahoo Junglee, MSN's Sidewalk.com, and
Webmarket.com.
In terms of the web hosting portion of its business, the
Registrant anticipates competition from Internet service
providers who offer a variety of connection features and speeds
of access. Some use telephone lines, some use television cable
systems, and others offers satellite focused services. There are
numerous providers of these services and no one provider
dominates the market. Many service providers are affiliated with
telephone or cable television companies which provide capital
resources and customer marketing opportunities unavailable to the
Registrant.
The Registrant believes the principal competitive factors in
this market are brand recognition, selection, personalized
services, convenience, price, accessibility, customer service,
quality of search tools, quality of editorial and other site
content, reliability, and speed of fulfillment. Although the
Registrant is one of the pioneers in this industry, most of its
competitors have larger customer bases, greater brand
recognition, and significantly greater financial, marketing, and
other resources available to them. Some of its competitors may
be able to secure merchandise from vendors on more favorable
terms, devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing or inventory
availability policies, and devote substantially more resources to
web site and systems development. Nevertheless, the Registrant
has and believes it can continue to remain competitive in this
industry due to its delivery of quality products and services on
an extremely cost competitive basis. Compared to many of its
competitors, the Registrant has an exceedingly lean overhead and
cost base. This lean overhead and cost base has not compromised
the quality of the Registrant's products and services. On the
contrary, the Registrant believes the quality of its products and
services are equal to or better than its larger competitors.
Government Regulation
There are currently few laws or regulations directly applicable
to access to or commerce on the Internet. Therefore, the
Registrant is not directly subject to any special regulation
outside of those rules and regulations concerning commerce in
general. Nevertheless, the Registrant believes that dramatically
increasing Internet usage will eventually result in additional
government regulation.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant currently owns or controls the following
property in connection with its operations:
The Registrant leases its corporate offices at 1530 Brookhollow
Drive, Suite C, Santa Ana, California 92705. This space is
deemed adequate for the immediate future. In addition, the
Registrant currently owns approximately $85,000 in computers,
office equipment, and furniture at its offices.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Registrant has been threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Registrant's shares of common stock are traded on the Over
the Counter Bulletin Board (under the symbol "WSHP") and the
range of closing bid prices shown below is as reported by that
exchange. The quotations shown reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on June 30, 2000
High Low
Quarter Ended October 31, 1999 * 0.43 0.25
Quarter Ended December 31, 1999 ** 2.81 0.25
Quarter Ended March 31, 2000 0.81 0.37
Quarter Ended June 30, 2000 0.44 0.10
* The shares only trading on one day during the month of October
1999.
** The fiscal year of the Registrant was changed to June 30,
effective on November 22, 1999.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on July 31, 1999
High Low
Quarter Ended October 31, 1998 0.13 0.12
Quarter Ended January 31, 1999 0.13 0.10
Quarter Ended April 30, 1999 0.12 0.10
Quarter Ended July 31, 1999 0.50 0.10
Holders of Common Equity
As of June 30, 2000, there were approximately 268 shareholders of
record of the Registrant's common stock.
Dividend Information
The Registrant has not declared or paid a cash dividend to
stockholders since it was incorporated. The Board of Directors
presently intends to retain any earnings to finance Registrant
operations and does not expect to authorize cash dividends in the
foreseeable future. Any payment of cash dividends in the future
will depend upon the Registrant's earnings, capital requirements
and other factors.
Sales of Unregistered Securities
The Registrant made the following sales of unregistered
securities during the fiscal year ended on June 30, 2000:
(a) On April 19, 2000, the Registrant issued a total of
3,425,000 shares of its common stock to the Directors of the
Registrant in exchange for consulting services previously
rendered to the company.
(b) On April 19, 2000, the Registrant issued 500,000 shares of
its common stock to a company for consulting work for the
Registrant
These transactions were accomplished pursuant to Rule 506
under Regulation D promulgated under Section 4(2) of the
Securities 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 6. PLAN OF OPERATION
The following discussion should be read in conjunction with the
financial statements of the Registrant and notes thereto
contained elsewhere in this report.
Twelve-Month Plan of Operation
The following discussion should be read in conjunction with the
financial statements of the Registrant and notes thereto
contained elsewhere in this registration statement.
The Registrant's principal activities have focused on:
the development and implementation of an Internet shopping model,
the "WSN Mall"
the development of proprietary technology to support such model
an analysis of products and services to be offered
relationship development with providers of such products and
services
the design, development and implementation of proprietary
merchandising and marketing techniques to support the WSN Mall model
the development of full-range of Internet services through World
Access Network, a division of the Registrant
the identification and building of a management team.
The Registrant can satisfy its cash requirements for
approximately six months with the cash available at June 30, 2000
(the Registrant borrowed a total of $36,000 in March 2000 under
two unsecured promissory notes, bearing interest at the rate of
10% and due in one year). The Registrant will need to raise
additional capital in the next 12 months in order to meet its
continuing requirements, including any acquisitions that the
Registrant may undertake. Management expects that such
acquisitions, although not determined at this time, will take at
least $1,000,000 in capital to accomplish.
The Registrant currently has no employees. Members of the
management team and several support personnel are treated as
independent contractors at this time. It is the intention of the
Registrant to establish a payroll and benefits with some of the
working capital from this offering for these individuals. Other
than this, the Registrant does not expect to increase employees
over the next twelve months.
Capital Expenditures
There were no material capital expenditures during the
fiscal year ended June 30, 2000.
Risk Factors Connected with Plan of Operation
(a) Limited Prior Operations.
The Registrant has only had limited prior operations and has
embarked on a new business direction within the past twelve
months. Thus, the Registrant is subject to all the risks
inherent in the creation of a new business. The likelihood of
the success of the Registrant must be considered in the light of
the problems, expenses, difficulties, complications, and delays
frequently encountered in connection with the expansion of a
business and the competitive environment in which the Registrant
operates. Unanticipated delays, expenses and other problems such
as setbacks in product development, and market acceptance are
frequently encountered in connection with the expansion of a
business.
Consequently, there is only a limited operating history upon
which to base an assumption that the Registrant will be able to
achieve its business plans. In addition, the Registrant has only
limited assets. As a result, there can be no assurance that the
Registrant will generate significant revenues in the future; and
there can be no assurance that the Registrant will operate at a
profitable level. If the Registrant is unable to obtain
customers and generate sufficient revenues so that it can
profitably operate, the Registrant's business will not succeed.
As a result of the fixed nature of many of the
Registrant's expenses, the Registrant may be unable to adjust
spending in a timely manner to compensate for any unexpected
delays in the development and marketing of the Registrant's
products or any capital raising or revenue shortfall. Any such
delays or shortfalls will have an immediate adverse impact on the
Registrant's business, operations and financial condition.
(b) Significant Working Capital Requirements.
The working capital requirements associated with the
plan of business of the Registrant will continue to be
significant. The Registrant anticipates, based on currently
proposed assumptions relating to its operations (including with
respect to costs and expenditures and projected cash flow from
operations), that it cannot generate sufficient cash flow to
continue its operations for an indefinite period at the current
level without requiring additional financing. The Registrant
will need to raise additional capital in the next six months,
through debt or equity, to implement fully implement its sales
and marketing strategy and grow. In addition, the Registrant
currently plans one or more acquisitions over the next twelve
months and will need financing of at least $1,000,000 during the
year 2000 in order to pay for these anticipated acquisitions and
to sustain the Registrant. In the event that the Registrant's
plans change or its assumptions change or prove to be inaccurate
or if cash flow from operations proves to be insufficient to fund
operations (due to unanticipated expenses, technical
difficulties, problem or otherwise), the Registrant would be
required to seek additional financing sooner than currently
anticipated or may be required to significantly curtail or cease
its operations.
(c) Registrant Only Has Limited Assets.
The Registrant has only limited assets. As a result, there can
be no assurance that the Registrant will generate significant
revenues in the future; and there can be no assurance that the
Registrant will operate at a profitable level. If the Registrant
is unable to obtain customers and generate sufficient revenues so
that it can profitably operate, the Registrant's business will
not succeed.
(d) Success of Registrant Dependent on Management.
The Registrant's success is dependent upon the hiring of key
administrative personnel. None of the Registrant's officers,
directors, and key employees have an employment agreement with
the Registrant; therefore, there can be no assurance that these
personnel will remain employed by the Registrant after the
termination of such agreements. Should any of these individuals
cease to be affiliated with the Registrant for any reason before
qualified replacements could be found, there could be material
adverse effects on the Registrant's business and prospects. In
addition, management has no experience is managing companies in
the same business as the Registrant.
In addition, all decisions with respect to the management of
the Registrant will be made exclusively by the officers and
directors of the Registrant. Investors will only have rights
associated with minority ownership interest rights to make
decision which effect the Registrant. The success of the
Registrant, to a large extent, will depend on the quality of the
directors and officers of the Registrant. Accordingly, no person
should invest in the shares unless he is willing to entrust all
aspects of the management of the Registrant to the officers and
directors.
(e) Control of the Registrant by Officers and Directors.
The Registrant's officers and directors beneficially
own approximately 29% of the outstanding shares of the
Registrant's common stock. As a result, such persons, acting
together, have the ability to exercise significant influence over
all matters requiring stockholder approval. Accordingly, it
could be difficult for the investors hereunder to effectuate
control over the affairs of the Registrant. Therefore, it should
be assumed that the officers, directors, and principal common
shareholders who control the majority of voting rights will be
able, by virtue of their stock holdings, to control the affairs
and policies of the Registrant.
(f) Limitations on Liability, and Indemnification, of
Directors and Officers.
Although neither the articles of incorporation nor the
bylaws of the Registrant provide for indemnification of officer
or directors of the Registrant, the Delaware General Corporation
Law provides for permissive indemnification of officers and
directors and the Registrant may provide indemnification under
such provisions. Any limitation on the liability of any
director, or indemnification of directors, officer, or employees,
could result in substantial expenditures being made by the
Registrant in covering any liability of such persons or in
indemnifying them.
(g) Potential Conflicts of Interest Involving Management.
Currently, the officers and directors of the Registrant devote
100% of their time to the business of the Registrant. However,
conflicts of interest may arise in the area of corporate
opportunities which cannot be resolved through arm's length
negotiations. All of the potential conflicts of interest will be
resolved only through exercise by the directors of such judgment
as is consistent with their fiduciary duties to the Registrant.
It is the intention of management, so as to minimize any
potential conflicts of interest, to present first to the board of
directors to the Registrant, any proposed investments for its
evaluation.
(h) Acceptance And Effectiveness Of Internet Electronic
Commerce.
The Registrant's success in establishing an e-commerce
business web site will be dependent on consumer acceptance of e-
retailing and an increase in the use of the Internet for e-
commerce. If the markets for e-commerce do not develop or
develop more slowly than the Registrant expects, its e-commerce
business may be harmed. If Internet usage does not grow, the
Registrant may not be able to increase revenues from Internet
advertising and sponsorships which also may harm both our retail
and e-commerce business. Internet use by consumers is in an early
stage of development, and market acceptance of the Internet as a
medium for content, advertising and e-commerce is uncertain. A
number of factors may inhibit the growth of Internet usage,
including inadequate network infrastructure, security concerns,
inconsistent quality of service, and limited availability of
cost-effective, high-speed access. If these or any other factors
cause use of the Internet to slow or decline, our results of
operations could be adversely affected.
(i) Competition In Internet Commerce.
Increased competition from e-commerce could result in
reduced margins or loss of market share, any of which could harm
both our retail and e-commerce businesses. Competition is likely
to increase significantly as new companies enter the market and
current competitors expand their services. Many of the
Registrant's present and potential competitors are likely to
enjoy substantial competitive advantages, including larger
numbers of users, more fully-developed e-commerce opportunities,
larger technical, production and editorial staffs, and
substantially greater financial, marketing, technical and other
resources. If the Registrant does not compete effectively or if
it experiences any pricing pressures, reduced margins or loss of
market share resulting from increased competition, the
Registrant's business could be adversely affected.
(j) Unreliability Of Internet Infrastructure.
If the Internet continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements, the
Internet infrastructure may not be able to support these
increased demands or perform reliably. The Internet has
experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and could face
additional outages and delays in the future. These outages and
delays could reduce the level of Internet usage and traffic on
the Registrant website. In addition, the Internet could lose its
viability due to delays in the development or adoption of new
standards and protocols to handle increased levels of activity.
If the Internet infrastructure is not adequately developed or
maintained, use of the Registrant website may be reduced. Even
if the Internet infrastructure is adequately developed, and
maintained, the Registrant may incur substantial expenditures in
order to adapt its services and products to changing Internet
technologies. Such additional expenses could severely harm the
Registrant's financial results.
(k) Transactional Security Concerns.
A significant barrier to Internet e-commerce is the secure
transmission of confidential information over public networks.
Any breach in our security could cause interruptions in the
operation of our website and have an adverse effect on the
Registrant's business.
(l) Governmental Regulation Of The Internet.
There are currently few laws that specifically regulate
communications or commerce on the Internet. Laws and regulations
may be adopted in the future, however, that address issues
including user privacy, pricing, taxation and the characteristics
and quality of products and services sold over the Internet. An
increase in regulation or the application of existing laws to the
Internet could significantly increase our costs of operations and
harm the Registrant's business.
(m) Influence of Other External Factors on Prospects for
Registrant.
The industry of the Registrant in general is a speculative venture
necessarily involving some substantial risk. There is no certainty
that the expenditures to be made by the Registrant will result in
a commercially profitable business. The marketability of its
products will be affected by numerous factors beyond the control
of the Registrant. These factors include market fluctuations, and
the general state of the economy (including the rate of
inflation, and local economic conditions), which can affect
companies' spending. Factors which leave less money in the hands
of potential customers of the Registrant will likely have an
adverse effect on the Registrant. The exact effect of these
factors cannot be accurately predicted, but the combination of
these factors may result in the Registrant not receiving an
adequate return on invested capital.
(n) No Cumulative Voting
Holders of the shares are not entitled to accumulate their votes
for the election of directors or otherwise. Accordingly, the
holders of a majority of the shares present at a meeting of
shareholders will be able to elect all of the directors of the
Registrant, and the minority shareholders will not be able to
elect a representative to the Registrant's board of directors.
(o) Absence of Cash Dividends
The board of directors does not anticipate paying cash dividends
on the shares for the foreseeable future and intends to retain
any future earnings to finance the growth of the Registrant's
business. Payment of dividends, if any, will depend, among other
factors, on earnings, capital requirements, and the general
operating and financial condition of the Registrant, and will be
subject to legal limitations on the payment of dividends out of
paid-in capital.
(p) Limited Public Market for Registrant's Securities.
There has been only a limited public market for the shares of
common stock of the Registrant. There can be no assurance that
an active trading market will develop or that purchasers of the
shares will be able to resell their securities at prices equal to
or greater than the respective initial public offering prices.
The market price of the shares may be affected significantly by
factors such as announcements by the Registrant or its
competitors, variations in the Registrant's results of
operations, and market conditions in the retail, electronic
commerce, and internet industries in general. The market price
may also be affected by movements in prices of stock in general.
As a result of these factors, investors in the Registrant may not
be able to liquidate an investment in the shares readily, or at
all.
(q) No Assurance of Continued Public Trading Market; Risk
of Low Priced Securities.
There has been only a limited public market for the
common stock of the Registrant. The common stock of the
Registrant is currently quoted on the Over the Counter Bulletin
Board. As a result, an investor may find it difficult to dispose
of, or to obtain accurate quotations as to the market value of
the Registrant's securities. In addition, the common stock is
subject to the low-priced security or so called "penny stock"
rules that impose additional sales practice requirements on
broker-dealers who sell such securities. The Securities
Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure in connection with any trades involving a
stock defined as a penny stock (generally, according to recent
regulations adopted by the U.S. Securities and Exchange
Commission, any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions), including
the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the
risks associated therewith. The regulations governing low-
priced or penny stocks sometimes limit the ability of broker-
dealers to sell the Registrant's common stock and thus,
ultimately, the ability of the investors to sell their securities
in the secondary market.
(r) Effects of Failure to Maintain Market Makers.
If the Registrant is unable to maintain a National
Association of Securities Dealers, Inc. member broker/dealers as
market makers, the liquidity of the common stock could be
impaired, not only in the number of shares of common stock which
could be bought and sold, but also through possible delays in the
timing of transactions, and lower prices for the common stock
than might otherwise prevail. Furthermore, the lack of market
makers could result in persons being unable to buy or sell shares
of the common stock on any secondary market. There can be no
assurance the Registrant will be able to maintain such market
makers.
(s) Shares Eligible For Future Sale.
All of the 5,400,000 shares of common stock which are currently
held, directly or indirectly, by management have been issued in
reliance on the private placement exemption under the Securities
Act of 1933. Such shares will not be available for sale in the
open market without separate registration except in reliance upon
Rule 144 under the Securities Act of 1933. In general, under
Rule 144 a person (or persons whose shares are aggregated) who
has beneficially owned shares acquired in a non-public
transaction for at least one year, including persons who may be
deemed affiliates of the Registrant (as that term is defined
under that rule) would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1%
of the then outstanding shares of common stock, or the average
weekly reported trading volume during the four calendar weeks
preceding such sale, provided that certain current public
information is then available. If a substantial number of the
shares owned by these shareholders were sold pursuant to Rule 144
or a registered offering, the market price of the common stock
could be adversely affected.
(t) Uncertainty Due to Year 2000 Problem.
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 Registrant'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 Registrant, including those related to the efforts
of customers, suppliers, or other third parties, will be fully
resolved.
The Registrant 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 Registrant
may experience serious unanticipated negative consequences (such
as significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of customers may be affected by Year 2000
issues. The Registrant does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Registrant's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Plan of Operation contains "forward looking
statements" within the meaning of Rule 175 of the Securities Act
of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934,
as amended, including statements regarding, among other items,
the Registrant's business strategies, continued growth in the
Registrant's markets, projections, and anticipated trends in the
Registrant'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 Registrant's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond the
Registrant's control. The Registrant 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
Registrant's products, competitive pricing pressures, changes in
the market price of ingredients used in the Registrant's products
and the level of expenses incurred in the Registrant'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
Registrant disclaims any intent or obligation to update "forward
looking statements."
ITEM 7. FINANCIAL STATEMENTS
Financial statements as of and for the year ended June 30,
2000, and for the year ended June 30, 1999 are presented in a
separate section of this report following Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
(a) Effective on September 10, 1999, the independent
accountant who was previously engaged as the principal accountant
to audit the Registrant's financial statements, Rothstein, Kass &
Company, P.C., was dismissed by Registrant. This accountant's
report on the financial statements for the past two years neither
contained an adverse opinion or a disclaimer of opinion, nor was
qualified or modified as to uncertainty, audit scope, or
accounting principles. The decision to change accountants was
approved by the board of directors.
During the Registrant's two most recent fiscal years and any
subsequent interim period preceding such resignation, there were
no disagreements with the former accountant on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. In addition, there
were no "reportable events" as described in Item
304(a)(1)(iv)(B)1 through 3 of Regulation S-B that occurred
within the Registrant's two most recent fiscal years and the
subsequent interim period preceding the former accountant's
dismissal.
(b) Effective on September 15, 1999, the firm of Keyhan Company
has been engaged to serve as the new principal accountant to
audit the Registrant's financial statements. During the
Registrant's two most recent fiscal years, and the subsequent
interim period prior to engaging that accountant, neither the
Registrant (nor someone on its behalf) consulted the newly
engaged accountant regarding any matter.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors and Executive Officers.
The names, ages, and respective positions of the directors and
executive officers of the Registrant are set forth below; there
are no promoter and control persons of the Registrant. The
Directors named below will serve until the next annual meeting
of the Registrant's stockholders or until their successors are
duly elected and have qualified. Directors are elected for a
one-year term at the annual stockholders' meeting. Officers
will hold their positions at the will of the Board of Directors,
absent any employment agreement, of which none currently exist or
are contemplated. There are no arrangements, agreements or
understandings between non-management shareholders and management
under which non-management shareholders may directly or
indirectly participate in or influence the management of the
Registrant's affairs. The Directors and Executive Officers of
the Registrant are not a party to any material pending legal
proceedings and, to the best of their knowledge, no such action
by or against them has been threatened.
John J. Anton , President/Chief Executive Officer/Director.
Mr. Anton, age 72, is a 40-year veteran of the motion picture and
television industry working for all three major television
networks. For the last 22 years, Mr. Anton has been a member of
the Directors Guild and of the International Alliance of
Theatrical Stage Employees. During his career in the motion
picture and television industry Mr. Anton produced special shows
for the Ford Motor Company as well as shows with Tony Bennett,
the Kingston Trio, and the Smothers Brothers. He also
coordinated special events including major college bowl games and
the Academy Awards. Further, Mr. Anton was instrumental in the
opening of the Santa Monica Civic Center as a consultant. Mr.
Anton retired from National Broadcasting Company, Inc. (NBC) in
1993 as Sports Operations Producer for the West Coast. Since
that time, he has been active as an independent businessman and
consultant. Mr. Anton has been with the Registrant since its
inception in 1995 and became its president in 1996. Mr. Anton
attended Saint Ambrose Academy, Iowa, the Don Martin School of
Broadcasting in Hollywood and NBC Business and Technical
Operations College in Burbank, California.
John Moore, Vice President of Information Systems/Secretary/Director
Mr. Moore, age 30, has been Vice President of Information Systems
for the Registrant since 1995 where he has designed, developed,
and managed all of the Registrant's systems. In this capacity,
Mr. Moore built one of the original Windows based Bulletin Board
systems. This system serviced approximately 350 users from all
over Southern California, had roughly 80 advertisers, and was one
of the first to show images and was therefore easily transformed
into an Internet presence.
Prior to his service with the Registrant, Mr. Moore taught
Computer Science at Glendale College, California and coordinated
the Internet activities for the Computer Science and Information
Systems Department. In the Network Administrator there he
supervised a small service group that was responsible for 350
computers on a campus with a student population of 10,000. Mr.
Moore also has worked as a programmer in the Information Systems
departments for several local governments and as a technical
consultant to a variety of business and political agencies.
Mr. Moore received a Bachelor of Arts in Journalism and a
Bachelor of Arts in Political Science from California State
University, Humboldt, a Masters Degree in International Relations
from the University of San Diego (where he taught professors how
to use the Internet in exchange for his tuition), and an
Associate of Arts in German from the Monterey Institute of
International Studies. Mr. Moore has been using the Microsoft
operating system since its inception and is familiar with each
subsequent revision. This has resulted in Mr. Moore becoming a
member of the Microsoft Developers network, a member of the
Microsoft Site Builder Program, and a member of the Microsoft NT
Users Group.
Martin Bloomenstein, Vice President of Finance/Treasurer/Director.
Mr. Bloomenstein, age 64, has been the Vice President of Finance
for the Registrant since 1996. Prior to that time, he was an
officer, director and consultant of APN, Inc., a SMR development
company. Mr. Bloomenstein has been a certified public accountant
(CPA) for over 35 years. He received his Bachelor of Science
degree from New York University.
Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers and directors, and persons who beneficially
own more than 10% of any class of the Registrant's equity
securities to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors and beneficial owners of
more than 10% of any class of the Registrant's equity securities
are required by SEC regulations to furnish the Registrant with
copies of all Section 16(a) forms they file.
Based solely on a review of the with respect to the fiscal year
ended June 30, 2000 and subsequently, the Registrant is unaware
that any required reports were not timely filed.
ITEM 10. EXECUTIVE COMPENSATION.
(a) The current officers and directors have not received
any compensation to date in such capacities. They will not be
remunerated until the Registrant turns profitable.
(b) There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors, or employees of the
Registrant in the event of retirement at normal retirement date
as there is no existing plan provided for or contributed to by
the Registrant.
(c) No remuneration is proposed to be paid in the future
directly or indirectly by the Registrant to any officer or
director since there is no existing plan which provides for such
payment, including a stock option plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding the
beneficial ownership of shares of the Registrant's common stock
as of June 30, 2000 (18,619,278 issued and outstanding) (the
Registrant also currently has 666,667 Class A Warrants
outstanding, exercisable at $2.04 per share until December 31,
2002, and 666,667 Class B Warrants outstanding, currently
exercisable at $3.00 per share until December 31, 2002) by (i)
all stockholders known to the Registrant to be beneficial owners
of more than 5% of the outstanding common stock; and (ii) all
officers and directors of the Registrant, individually and as a
group (each person has sole voting power and sole dispositive
power as to all of the shares shown as beneficially owned by
them):
Title of Name and Address of Amount of Percent
Class Beneficial Owner Beneficial of
Ownership(1) class
Common Tri-Star Diversified Ventures, 4,500,000 24.17%
Stock L.L.C.
1601 East Flamingo Rd., Suite 18
Las Vegas, Nevada 89119
Common John J. Anton 3,250,000 17.45%
Stock 1530 Brookhollow Drive, Suite C
Santa Ana, California 92705
Common John Moore 2,000,000 10.74%
Stock 1530 Brookhollow Drive, Suite C
Santa Ana, California 92705
Common Marcine Aniz Uhler 1,200,000 6.44%
Stock 3402 Bimini Lane, #3-F
Coconut Creek, Florida
33066-2049
Common Martin Bloomenstein 150,000 0.81%
Stock 1530 Brookhollow Drive, Suite C
Santa Ana, California 92705
Common Shares of all directors and 5,400,000 29.00%
Stock executive officers as a group (3
persons)
(1) None of these security holders has the right to acquire any
amount of the shares within sixty days from options, warrants,
rights, conversion privilege, or similar obligations.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since the beginning of the Registrant's last fiscal year, there
have not been any transaction that have occurred between the
Registrant and its officers, directors, and five percent or
greater shareholders, except as follows:
Share Exchange Agreement.
Pursuant to a share exchange agreement dated as of August 15,
1999, among the Registrant, Tri-Star Diversified Ventures,
L.L.C., 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, for an
aggregate of 79,950,000 newly issued shares of common stock of
the Registrant. As a result of this exchange (a) Tri-Star 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 Wyoming corporation and this
corporation was a majority owned subsidiary of the Registrant.
Consulting Agreement.
On April 26, 2000, the Registrant entered into a consulting
agreement with Marcine Aniz Uhler wherein she agreed to perform
for the Registrant services and consulting related to structuring
and producing radio programs, and associated publicity items.
Consulting services include, but are not limited to, providing
information, evaluation, and analysis with regard to the
publicity needs of the Registrant, including the possible
production of one or more radio programs concerning the e-
commerce in general and the business of Registrant in particular.
Under the terms of this agreement, Ms. Uhler received, as
consideration for services provided, 1,200,000 shares of common
stock of the Registrant which have been issued under the
Registrant's retainer stock plan for non-employee directors and
consultants, which shares have been registered under a Form S-8
filed and effective with the U.S. Securities and Exchange
Commission on May 2, 2000.
Consulting Services.
On April 19, 2000, the Registrant issued a total of
3,425,000 shares of its common stock to the directors of the
Registrant in exchange for consulting services previously
rendered to the company (not in their capacity as officers and
directors of the Registrant). These services were rendered prior
to and subsequent to the merger which took place in September
1999.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits.
Exhibits included or incorporated by reference herein are set
forth under the Exhibit Index.
Reports on Form 8-K.
There were no reports on Form 8-K filed during the last quarter
of the fiscal year covered by this report.
Index to Financial Statements and Schedules Page
Report of Independent Accountants 29
Consolidated Balance Sheet as of June 30, 2000 30
Consolidated Statements of Operations for the year
ended June 30, 2000 and the year ended June 30, 1999 31
Consolidated Statements of Shareholders' Equity for the year
ended June 30, 2000 and the year ended June 30, 1999 32
Consolidated Statements of Cash Flows for the year
ended June 30, 2000 and the year ended June 30, 1999 33
Notes to Consolidated Financial Statements 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
World Shopping Network, Inc.
Dated: October 11, 2000 By: /s/ John J. Anton
John J. Anton, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date
indicated:
Signature Title Date
/s/ John J. Anton President, Chief Executive October 11, 2000
John J. Anton Officer, Director
/s/ John Moore Vice President, Information October 11, 2000
John Moore Systems, Director
/s/ Martin Bloomenstein Vice President, Finance October 11, 2000
Martin Bloomenstein (principal financial and
accounting officer), Director
INDEPENDENT AUDITOR'S REPORT
Board of Directors
World Shopping Network, Inc. (formerly known as U.S.A. Growth, Inc.)
We have audited the accompanying consolidated balance sheet
of World Shopping Network, Inc. and subsidiary (formerly known as
U.S.A. Growth, Inc.) (the "Company"), a development stage
company, as of June 30, 2000, and the related consolidated
statements of operations, and cash flows for the period August
14, 1987 (date of inception) to June 30, 2000, and for the years
ended June 30, 2000 and 1999, and stockholders' equity for the
years ended June 30, 2000 and 1999. 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 the Company as of June 30, 2000, and the results of its
operations and its cash flows for the period August 14, 1987 (date
of inception) to June 30, 2000 and for the years ended June
30,2000 and 1999, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As
discussed in Note 11 to the financial statements, the Company has
been in the development stage since its inception. The Company is
devoting substantially all of its present efforts in establishing
its business. Management's plans regarding the matters which
raise doubt about the Company's ability to continue as a going
concern are also disclosed in Note 11 to the financial statements.
The continued existence of the Company is dependent upon its
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 going concern. The
accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Keyhan Company
Keyhan Company
An accountancy corporation
September 20, 2000
Irvine, California
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 480,194
Accounts receivable 3,677
Prepaid expenses and other current assets 9,649
Deferred tax asset, net of valuation allowance
of $210,000 -
493,510
PROPERTY AND EQUIPMENT, NET 12,062
$ 505,572
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 66,327
NOTES PAYABLE 131,000
COMMITMENTS AND CONTINGENCIE
STOCKHOLDERS' EQUITY
Common stock, par value $.001 per share,
authorized 100,000,000 shares, issued and
outstanding 18,619,278 $ 18,619
Paid in capital 907,699
Accumulated deficit during development stage (618,073)
308,245
$ 505,572
The accompanying notes are an integral part of these financial
Statements.
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
For the year For the year August 14, 1987
Ended ended (Date of
2000 1999 Inception to
June 30, 2000
SERVICE AND FEE INCOME $ 42,280 $ - $ 42,280
EXPENSES
Selling, general and
administrative 351,465 14,295 645,056
Expenses incurred as a
result of rescinded
investments - - 270,734
351,465 14,295 915,790
OTHER INCOME (EXPENSE)
Interest income 20,195 18,708 271,849
Interest expense (4,521) - (4,521)
15,674 18,708 267,328
INCOME (LOSS) BEFORE
INCOME TAX (293,511) 4,413 (606,182)
INCOME TAX PROVISION
(BENEFIT)
Federal - - 3,739
State (2,190) (1,023) 8,152
(2,190) (1,023) 11,891
NET INCOME (LOSS) (291,321) 5,436 (618,073)
BASIC INCOME (LOSS)
PER SHARE OF COMMON
STOCK (0.03) 0.00
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 10,518,177 2,331,730
The accompany notes are an integral part of these financial statements.
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Common Stock Paid In Deficit During
Shares Amount Capital Development Stage
BALANCE
August 14, 1987
(Inception) - - - -
COMMON STOCK ISSUED
TO FOUNDING
STOCKHOLDERS 2,550,000 2,550 (2,550) -
COMMON STOCK ISSUED
AT INITIAL PUBLIC
OFFERING 8,000,000 8,000 715,523
COMMON STOCK ISSUED
FOR SERVICES 420,000 420 - -
NET LOSS - - - (324,830)
BALANCES
July 31, 1997 10,970,000 10,970 712,973 (324,830)
COMMON STOCK ISSUED
FOR SERVICES 130,000 130 10,270 -
NET LOSS - - - (7,358)
BALANCES
July 31, 1998 11,100,000 11,100 723,243 (322,188)
COMMON STOCK ISSUED
FOR CASH 2,400,000 2,400 45,600 -
NET INCOME - - - 5,436
13,500,000 13,500 768,843 (326,752)
12 to 1 REVERSE SPLIT /12 - - -
BALANCES
July 31, 1999 1,125,000 13,500 768,843 (326,752)
COMMON STOCK ISSUED
PRIOR TO MERGER
(Split Adjusted) 6,662,500 79,950 (79,950)
COMMON STOCK ISSUED
FOR SERVICES 6,045,000 6,045 - -
WSN SHARE EXCHANGE
2.5-1 FORWARD STOCK
SPLIT 4,786,778 (80,876) 218,806 -
NET LOSS - - - (291,321)
18,619,278 18,619 907,699 (618,073)
The accompanying notes are an integral part of these financial statements.
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative
Year Ended Year Ended August 14, 1987
July 31 July 31 (Date of
2000 1999 Inception to
July 31, 1999
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss) $(291,321) $ 5,436 $ (618,073)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities:
Depreciation 22,339 - 22,339
Common stock issued for services 6,045 - 17,145
Increase in accounts receivable (1,404) (1,123) (3,677)
Decrease in accounts receivable
(WSN) 14,348 - 14,348
Increase in prepaid expenses and
other current assets (9,649) (1,123) (9,649)
Decrease in accounts receivable
(WSN) - - -
Increase (decrease) in accounts
payable and accrued expenses 65,105 (3,228) 66,327
Decrease in accounts payable and
accrued expenses (WSN) (23,869) - (23,869)
(218,406) (38) (535,109)
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property and
equipment (9,482) - (9,482)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from sales of
common stock - 48,000 771,243
Net proceeds from notes payable 131,000 - 131,000
131,000 42,488 902,243
NET INCREASE (DECREASE) IN CASH (96,888) 42,450 357,652
BEGINNING CASH AND CASH
EQUIVALENTS (WSN) 122,532 - 122,532
BEGINNING CASH AND CASH
EQUIVALENTS (USAG) 454,540 405,455 -
ENDING CASH AND CASH
EQUIVALENTS 480,184 447,905 480,184
The accompany notes are an integral part of these financial statements.
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Organization and Nature of Operations
U.S.A. Growth, Inc. ("USAG") was incorporated on August 14, 1987
in the state of Delaware, and had adopted a July 31 year-end.
Currently, USAG is a development stage company, since it has not
commenced its planned principal operations. Since its inception,
USAG has engaged in research, internally and 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.
On May 10, 1999, USAG caused the incorporation of Growth Net Inc.
("GNI"). On May 11, 1999, USAG subscribed for 1,000 shares
common stock, par value $.001 per share, of GNI (the "Common
Stock"). On June 30, 1999, USAG subscribed for an additional
13,499,000 shares of Common Stock (such shares, together with the
original 1,000 shares, are hereinafter referred to as the "GNI
Shares"). As payment for the GNI Shares, USAG transferred to GNI
all of USAG's assets as of June 30, 1999, which assets were
comprised solely of cash and cash equivalents and, at such date,
amounted to approximately $456,000. Also on June 30, 1999, USAG
declared a distribution to the holders of the shares of common
stock of USAG of record as of that same date (the "USAG Holders")
of one share of Common Stock for each share of common stock of
USAG held. Such distribution was payable on or about August 25,
2000 (10 business days following the effective date of the
registration statement filed on August 14, 2000). As of the
record date, all of the USAG Holders held 13,500,000 shares of
common stock of USAG. 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 Company.
GNI was formed in anticipation of the reorganization of USAG.
From its inception, the Company has been a development stage
company and has not generated any revenues from operations. For
its fiscal year ended April 30, 2000, GNI experienced a net loss.
GNI's authorized capital stock consists of 200,000,000 shares of
Common Stock and 10,000,000 shares of blank check Preferred
Stock, par value $.001 per share. Both prior to and upon
completion of the distribution, 13,500,000 shares of Common Stock
will be issued and outstanding.
In September 1999, USAG entered into a merger agreement with
World Shopping Network (WSN), whereby such entities would merge
and operate as World Shopping Network, Inc. (the "Company"). WSN
was incorporated on October 2, 1996 in the state of Wyoming, and
had adopted a June 30 year-end. The merger agreement provides
for WSN to be merged with and into USAG, which is the surviving
corporation.
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.
Reverse Stock Split
On July 2, 1999, the Company declared a 12 to 1 reverse stock
split. As a result, the Company's retroactive issued and
outstanding shares of common stock as of July 31, 1999 were 1,125,000.
Accounting Method
The Company 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 Company 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 Company 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 several banks. Accounts at each
institution are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to $100,000.
Cash equivalents include approximately $400,000 in a Dreyfus
money market fund, which invests exclusively in a diversified
portfolio of short-term marketable securities (which are direct
obligations of the U.S. Government) and is not insured by FDIC.
The fair market value of such fund approximates the related
carrying value at June 30, 2000.
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.
Income Taxes
The Company 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 Company 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 June 30, 2000 and 1999, the company 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 Note3.
Reclassification
Certain reclassifications have been made to the 1999 financial
statements to conform to the classifications issued in 2000.
NOTE 2: RESCINDED INVESTMENTS AND TERMINATED MERGERS
In 1988, the Company 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
franchiser of general merchandise stores. In accordance with the
agreement, the Company 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 Company. The Company 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 Company 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 Company entered into an agreement with World
Wide Web Casinos, Inc. (WWWC), whereby the Company and WWWC would
merge into WWWC Acquisition Corporation, in a tax-free
transaction. On January 28, 1998, WWWC informed the Company 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 Company 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 $.17 ($2.04 post split), one share of common stock and one
Class B common stock purchase warrant, through December 31, 1999.
The Company 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, 2000.
Reverse Stock Split
On July 2, 1999, the Company declared a 12 to 1 reverse stock
split at which time the Company's issued and outstanding shares
amounted to 13,500,000. As a result of the reverse split, the
Company's issued and outstanding shares of common stock as of July
31, 1999 were 1,125,000.
NOTE 4: RELATED PARTY TRANSACTIONS
On February 2, 1998, the Company 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
Company issued 2,400,000 (200,000 post-split) shares to three
existing shareholders for $48,000 in cash. On April 19, 2000,
the Company issued 3,425,000 shares with a value of $6,045 to
three officers as compensation for past services performed.
NOTE 5: MERGERS AND ACQUISITIONS
In September 1999, USAG entered into a merger agreement with World
Shopping Network, Inc. (WSN) (a development stage company),
whereby these entities would merge and operate as World Shopping
Network, Inc.
The merger is tax free under Internal Revenue Code 361. The
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 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.
Management will account 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 will be 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 Company'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.
The following unaudited pro forma information is based on the June
30, 1999 financial statements.
USAG WSN
HISTORICAL HISTORICAL PRO FORMA
Cash and cash equivalents $454,540 $122,532 $577,072
Other assets 2,273 39,267 41,540
Accounts payable and accrued expenses 1,222 23,869 25,090
Stockholders' equity $455,591 137,930 595,522
The above historical column represents WSN financial information
as of or for the year ended June 30, 1999. In the pro forma
presentation, the historical column has been added to the
Company's June 30, 1999 financial information, and the combined
data have been adjusted assuming that (a) the merger occurred on
June 30, 1999.
If the merger had occurred on August 1, 1998, the pro forma effect
on basic and diluted income/loss per share for fiscal 1999 and
2000 would not have been significant.
Since the merger is not a business combination, additional pro
forma financial information otherwise required by the rules and
regulations of the Securities and Exchange Commission ("SEC") has
not been presented.
NOTE 6: INCOME TAXES
For the period from inception to June 30, 2000, the Company is
considered a start-up entity for federal and state income tax
purposes. As a result, start-up expenses are capitalized for tax
purposes; all such costs are expensed as incurred for financial
reporting purposes. In addition, as discussed in Note 2, the
Company has incurred capital losses as a result of a rescinded
investment. These are the only significant temporary difference
at June 30, 2000; the estimated income tax effect of such
differences approximated $210,000.
The reported income tax benefit differs from the amount that
would result from applying the federal statutory rate to the pre-
tax loss because of the state income tax effect at a rate of
approximately 9%. The components of the deferred income tax
benefit are set forth below:
Inception to
June 30, 2000 June 30, 1999 June 30, 2000
$ 139,000 $ 0 $210,000
As of June 30, 2000, the Company's federal and state net
operating loss ("NOL") and capital loss carryforwards for income
tax purposes were approximately $380,000 and $250,000,
respectively. If not utilized, the federal net operating loss
carryforwards will begin to expire in 2008, and the state net
operating loss carryforwards will begin to expire in 2010.
The Company's accounting NOL carryforward approximates $600,000
at June 30, 2000. The related deferred tax asset arising in 2000
and 1999 approximated $139,000 and $0, respectively. Because the
Company is a development stage enterprise and there is no
reasonable assurance that such asset will be realized in future
year, the Company has recorded a 100% valuation allowance against
the June 30, 2000 balance of this deferred tax asset.
A summary of the activity in the valuation allowance for the
deferred tax asset for the years ended June 30, 2000 and 1999 is
presented below:
Amount
Balance at July 1, 1998 $ 71,000
Adjustment for deferred tax asset -
Balance at June 30, 1999 71,000
Adjustment for deferred tax asset 139,000
Balance at June 30, 2000 $210,000
NOTE 7: PROPERTY AND EQUIPMENT
The Company's property and equipment consists of the following at
June 30, 1999:
Computer equipment $ 76,383
Office equipment 7,373
Furniture and fixtures 1,453
85,209
Less: Accumulated depreciation (73,147)
$ 12,026
NOTE 8: COMMITMENTS AND CONTINGENCIES
Notes Payable
At various times during the year the Company obtained financing of
$45,000 from a major shareholder (Tristar diversified, LLC) to
assist in day to day operations. The terms of these loans call
for 10% annual interest rate, with full principal and interest
payable on November 1, 2000.
The company borrowed an additional $86,000 from two other non-
related sources. These notes bear annual interest rate of 10%,
with maturities from December 2000 through June 30, 2001.
Included in accounts payable and accrued expenses is $4,521 in
interest payable to these parties.
Office Lease
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, $1,700 from April 1998
through March 2000, and $1,800 from April 2000 through March 2001.
The lease expires on March 24, 2001.
Future minimum payments due under the operating lease for the year
ending June 30, 2001 is approximately $16,500.
Other
During the year ended June 30, 2000, the Company was late on
several filing requirements to the SEC. These filings included
Form 10-KSB for the year ended July 31, 1999, Form 10-Q for the
quarter ended October 31, 1999, and Form 8-K to announce the
consummation of the merger, file WSN's June 30, 1999 audited
financial statements, and report the change in the Company's
fiscal year-end to June 30.
As of December 28, 1999, the sanctions (if any) that could be
imposed by the SEC, the National Association of Securities
Dealers, and/or any state securities commission as a result of
the matters described in the preceding paragraph are unknown.
Possible sanctions may include as enforcement action and/or
suspension of (1) trading in the Company's stock and/or warrants
and (2) the ability of securities dealers to make a public market
in the Company's securities.
NOTE 9: SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes of $2,445 were paid during the year ended June 30,
2000. The cumulative tax payment from August 17, 1987 (date of
inception) through June 30, 2000 was $23,432.
NOTE 10: SUBSEQUENT EVENT
In September 2000, the Company signed a letter of intent to
acquire Delphi Communications Inc. (an operating company) for
stock. The agreement is contingent upon an appraisal and Federal
Communication Commission's approval.
NOTE 11: GOING CONCERN
The Company is a development stage company, as defined in the
SFAS No. 7. The Company 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 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. The continued
existence of the Company is dependent upon its ability to meet
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 12: 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.
EXHIBIT INDEX
Number Exhibit Description
2 Agreement and Plan of Merger between the Registrant and
World Shopping Network, Inc., dated September 15, 1999
(incorporated by reference to the Schedule 14C 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).
Certificate of Merger (which includes amendment to Articles of
Incorporation) (incorporated by reference to Exhibit 3.2 of the
Form 10-QSB for the period ended October 31, 1999 - filed on
February 28, 2000).
3.3 Bylaws (incorporated by reference to Exhibit 3.2 of the Form 10-K
filed on November 5, 1996).
4.1 Share Exchange Agreement between the Registrant, Tri Star
Diversified Ventures, L.L.C., Nick Markulis, and John J. Anton,
dated August 15, 1999 (incorporated by reference to Exhibit 4 of
the Form 10-QSB for the period ended October 31, 1999 - filed on
February 28, 2000).
4.2 Retainer Stock Plan for Non-Employee Directors and
Consultants, dated April 25, 2000 (incorporated by reference to
Exhibit 4.1 of the Form S-8 filed on May 2, 2000).
4.3 Consulting Services Agreement between the Registrant and
Laurel-Jayne Yapel Manzanares, dated April 25, 2000 (incorporated
by reference to Exhibit 4.2 of the Form S-8 filed on May 2, 2000).
4.4 Consulting Services Agreement between the Registrant and
Marcine Aniz Uhler, dated April 26, 2000 (incorporated by
reference to Exhibit 4.3 of the Form S-8 filed on May 2, 2000).
4.5 Form of Common Stock Purchase Agreement between the
Registrant and institutional investors (incorporated by reference
to Form SB-2 filed on July 6, 2000).
16 Letter on change in certifying accountant (incorporated by
reference to Exhibit 16 of the Form 8-K/A filed on March 9, 2000).
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).
