U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Amendment No. 2)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY
31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-20277
USA GROWTH, INC. (1)
(Exact name of registrant as specified in its charter)
Delaware 11-2872782
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1530 Brookhollow Drive, Suite C, Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 427-0760
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value;
Class A Warrants; Class B Warrants; Units
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes No X .
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 II
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 July 31, 1999: Common Stock,
par value $0.001 per share -- $5,084,400. As of July 31, 1999,
the Registrant had 13,500,000 shares of common stock issued and
outstanding.
(1) Effective September 30, 1999, the name of the Registrant was
changed to World Shopping Newtork, Inc.
TABLE OF CONTENTS
PART I PAGE
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 3
ITEM 3. LEGAL PROCEEDINGS 3
ITEM 4. SUBMISSION TO MATTERS TO VOTE OF SECURITY HOLDERS 4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 4
ITEM 6. PLAN OF OPERATION 5
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 6
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 6
ITEM 10. EXECUTIVE COMPENSATION 7
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 8
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 8
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES,
AND REPORTS ON FORM 8-K 9
SIGNATURES 9
PART I.
ITEM 1. BUSINESS.
(a) Business Development.
USA Growth, Inc., a Delaware corporation ("Registrant"), was
originally incorporated on August 14, 1987 in the State of
Delaware, and has adopted a July 31 year-end. At July 31, 1999,
the Registrant was a development stage company, since it has not
commenced its planned principal operations.
(b) Business of Registrant.
Since its inception in August 1987, the Registrant has not
generated any operating revenues. The Registrant engages in
research, either by itself and/or through the use of independent
consultants, to determine what types of business can be
established by a new venture which would have potentially high
profits.
(c) Competition.
There are inherent difficulties for any new company seeking to
enter an established field. With regard to the proposed business
of the Registrant, namely the origination of presently unknown
subsidiaries and the operation of such subsidiaries, these
difficulties are compounded since there are numerous firms which
are more experienced, better established and better financed
than the Registrant in the originating of profitable
subsidiaries.Additionally, many of these firms have personnel
experienced in running such subsidiaries, unlike the Registrant.
Furthermore, the Registrant's present capital will only permit
the Registrant to organize relatively few subsidiaries which
will face competition from firms which are larger, more
experienced and better established than these subsidiaries.
Additionally, small "start-up" firms such as the Registrant,
with insignificant resources, are at a very serious disadvantage
against established competitors.
(d) Employees.
At the present time, the Registrant has no employees and does not
have any present intention to hire any. Each of the
Registrant's officers devotes ten percent or less of his time
to the affairs of the Registrant, and does not receive any
remuneration.
ITEM 2. PROPERTIES.
None.
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 company has been threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information.
The Registrant's common stock is traded in the over-the-counter
market and the range of closing bid prices shown below is as
reported by the Over the Counter Bulletin Board. 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 July 31, 1999
High Low
First Quarter 0.13 0.12
Second Quarter 0.13 0.10
Third Quarter 0.11 0.10
Fourth Quarter 0.59 0.10
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended July 31, 1998
High Low
First Quarter 0.47 0.23
Second Quarter 0.28 0.08
Third Quarter 0.13 0.08
Fourth Quarter 0.125 0.11
(b) Holders of Common Equity
As of July 31, 1999, there were 71 shareholders of record of the
Registrant's common stock.
(c) Dividends
The Registrant has not declared or paid a cash dividend to
stockholders since it became a "C" corporation. 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.
(d) Equity Securities Sold Without Registration
On June 29, 1999, the Company issued 2,400,000 (200,000 post-split)
shares to three existing shareholders for $48,000 in cash. This
transaction was accomplished pursuant to Rule 506 under Regulation D
promulgated under Section 4(2) of the Securities Act of 1933. No
discounts or commissions 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.
Plan of Operation.
The Registrant can satisfy its cash requirements for
approximately one year with the cash available at July 31, 1999.
The Registrant will need to raise additional capital in the next
12 months from July 31, 1999 in order to meet its continuing
requirements.
The Registrant intends to expand its existing business lines
during the next 12 months. In addition, it intends to seek one
or more suitable candidates for merger with the Registrant. The
Registrant will seek merger candidates that have an existing
business that compliments the existing plan of business of the
Registrant. The Registrant does not expect to significantly
change its number of employees during the next 12 months.
Capital Expenditures.
There were no material capital expenditures during the 1999
fiscal year.
Year 2000 Issue.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from
minor errors to significant system failure which could affect the
Company's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be certain that all aspects of the Year 2000 issue affecting the
Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The 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 consumers 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 Management's Discussion and Analysis 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 July 31,
1999, and for the year ended
July 31, 1998 are presented in a separate section of this report
following Part IV.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.
(a) Directors and Executive Officers.
Robert Scher, President/Treasurer/Chairman of the Board.
Mr. Scher, age 56, has been President and Chairman of the
Board of the Company since July 10, 1995. In addition, he has
been President, Treasurer and Chairman of the Board of two
publicly held corporations, Hunter Industrial Facilities, Inc.
and World Television Inc. He graduated in 1963 from the City
University of New York, Baruch College, with a B.A. in
Accounting. He has been an Associate Accountant with the
Health and Hospital Corporation of New York since 1971. He has
been a private investor for approximately thirty years. Mr.
Scher will devote such time to the Company as the Board of
Directors may require. It is believed that he will devote
approximately 10% of his time to the affairs of the Company.
J. Peter Hans. Secretary/Director.
Mr. Hans, age 53, has been a Director of the Company since its
inception and since 1995 has been its Secretary. Since June
1994, Mr. Hans has been self employed as a financial
consultant. From January 1990 to June 1994, Mr. Hans was
employed by UMB Bank and Trust Company and most recently as
Vice President in the Private Banking Division. From 1979 to
1990, Mr. Hans was employed by Bank Leumi Trust Company of New
York in various positions. Mr. Hans has completed advance
graduate work in International Economics and Finance.
The Company does not have standing audit, nominating or
compensation committees of the Board of Directors, or
committees performing similar functions. During the last fiscal
year, the Board of Directors met on two occasions.
(b) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Registrant's directors, certain officers and persons holding 10%
or more of the Registrant's common stock to file reports
regarding their ownership and regarding their acquisitions and
dispositions of the Registrant's common stock with the Securities
and Exchange Commission. The Registrant is unaware that any
required reports were not timely filed.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Other Securities
Name and annual under- All
Principal Year compen Restricted lying other
Position Salary Bonus sation stock options LTIP compen
($) ($) ($) award(s) SARs pay sation
($) (#) outs ($)
($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Robert 1999 0 0 0 0 0 0 0
Scher, 1998 0 0 0 0 0 0 0
President, 1997 0 0 0 0 0 0 0
Treasurer
J.Peter 1999 0 0 0 0 0 0 0
Hans, 1998 0 0 0 0 0 0 0
Secretary 1997 0 0 0 0 0 0 0
There are no annuity, pension or other benefits, including
long-term compensation, proposed to be paid to the named officers
of the Registrant as there is no plan currently existing which
provides for such payments by the Registrant or any of its
subsidiaries.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding
the beneficial ownership of shares of common stock as of July 31,
1999 (issued and outstanding common stock of 13,500,000,
8,000,000 Class A Warrants (currently exercisable at $0.17 per
share until December 31, 1999) and 8,000,000 Class B Warrants
(currently exercisable at $0.25 per share until December 31,
1999), for a total issued and outstanding shares of 29,500,000)
by (i) all stockholders known to the Company to be beneficial
owners of more than 5% of the outstanding common stock; and (ii)
all officers and directors of the Company (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 of
Class Beneficial Owner Beneficial Ownership (1) Class
Common Robert Scher 20,000 0.07%
Stock 900 West 190th Street
New York, NY 10040
Common J. Peter Hans 100,000 0.34%
Stock 110-50 71st Road
Forest Hills, NY 11375
Common Shares of all Directors 120,000 0.41%
Stock and executive officers
as a group (2 persons)
(1) Other than as footnoted, none of these security holders has
the right to acquire any amount of the Shares from options,
warrants, rights, conversion privilege, or similar obligations.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) Index to Financial Statements and Schedules Page
Report of Independent Accountants 10
Balance Sheet of the Registrant as
of July 31, 1999 11
Statements of Operations for the year ended
July 31, 1999 and the year ended July 31, 1998 12
Statements of Shareholders' Equity for the year
ended July 31, 1999 and the year ended July 31, 1998 13
Statements of Cash Flows for the year ended
July 31, 1999 and the year ended July 31, 1998 14
Notes to Financial Statements 15
(b) 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.
(c) Exhibits included or incorporated by reference herein: See
Exhibit Index
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.
(formerly know as USA Growth, Inc.)
Dated: February 22, 2000 By: /s/ John J. Anton
John J. Anton, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated:
Signature Title Date
/s/ John J. Anton President, Chief February 22, 2000
John J. Anton Executive Officer,
Director
/s/ John Moore Vice President,
Information Systems February 22, 2000
Director
/s/ Martin Bloomenstein Vice President, Finance February 22, 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 July 31, 1999, and the related consolidated
statements of operations, and cash flows for the period August
14, 1987 (date of inception) to July 31, 1999, and for the years
ended July 31, 1999 and 1998, and stockholders' equity for the
years ended July 31, 1999 and 1998. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present
fairly, in all material respects, the financial position of the
Company as of July 31, 1999, and the results of its operations and
its cash flows for the period August 14, 1987 (date of inception)
to July 31, 1999 and for the years ended July 31,1999 and 1998, 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 8 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 8 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.
KEYHAN COMPANY
AN ACCOUNTANCY CORPORATION
December 28, 1999
WORLD SHOPPING NETWORK, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS U.S.A. GROWTH, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JULY 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 454,540
Income taxes receivable 2,273
Deferred tax asset, net of valuation
Allowance of $71,000 -
$ 456,813
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,222
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.001 per share,
authorized 100,000,000 shares, issued
and outstanding 1,125,000 $ 13,500
Paid in capital 768,843
Accumulated deficit during development
Stage (326,752)
455,591
$ 456,813
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
August 14, 1987
Year ended July 31 (Date of Inception)
1999 1998 to July 31, 1999
INTEREST AND DIVIDEND
INCOME $ 18,708 $ 21,041 $ 251,654
EXPENSES
Selling, general
and administrative 14,295 28,399 293,591
Expenses incurred as a
result of rescinded
investment - - 270,734
14,295 28,399 564,325
INCOME (LOSS) BEFORE
INCOME TAX 4,413 (7,358) (312,671)
INCOME TAX PROVISION
(BENEFIT
Federal - - 3,739
State (1,023) - 10,342
(1,023) - 14,081
NET INCOME (LOSS) 5,436 (7,358) (326,752)
BASIC INCOME (LOSS)
PER SHARE OF COMMON
STOCK 0.01 (0.01) (0.39)
WEIGHTEDAVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 932,692 919,583 834,144
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 STOCKHOLDERS' EQUITY
Accumulated
Deficit During
Common Stock Paid in Development
Shares Amount Capital Stage
BALANCES,
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 (332,188)
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)
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
August 14, 1987
(Date of
Year Ended July 31 Inception) to
1999 1998 July 31, 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (loss) $ 5,436 $ (7,358) $ (326,752)
Adjustments to
reconcile net income
(loss) to net cash
provided (used by
operating activities
Increase in accounts
receivable (1,123) (150) (2,273)
Increase (decrease) in
accounts payable and
accrued expenses (3,228) 1,780 1,222
1,085 (5,728) (327,803)
CASH FLOWS FROM
FINANCING ACTIVITIES
Common stock issued
for services - 10,400 11,100
Net proceeds from sale
of common stock 48,000 - 771,243
48,000 10,400 782,343
NET INCREASE IN CASH
AND CASH EQUIVALENTS 49,085 4,672 454,540
BEGINNING CASH AND
CASH EQUIVALENTS 405,455 400,783 -
ENDING CASH AND
CASH EQUIVALENTS 454,540 405,455 454,540
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.)
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 has adopted a July 31 year-end. At
July 31, 1999, USAG was 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.
In September 1999 USAG entered into a merger agreement with World
Shopping Network, Inc. ("WSN") (a development stage company). WSN
operates an Internet shopping mall and other Internet related
services. As a result of the merger, USAG changed its name to
World Shopping Network, Inc. ("Company"), and will change its
fiscal year-end to June 30. See Note 9.
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 July 31, 1999.
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 July 31, 1999 and 1998, 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.
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
franchisor 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, 1999.
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.
NOTE 5: MERGERS AND ACQUISITIONS
During May and June 1999, the Company acquired 13.5 million shares
of Growth Net Inc. (GNI) common stock for $455,583 in cash. This
transaction was accounted for as a purchase. Accordingly, the
accompanying consolidated financial statements include the
accounts of GNI, a wholly-owned non-operating subsidiary of the
Company. As memorialized in the Share Exchange Agreement dated
August 15, 1999, all of the current assets of the Company of
July 31, 1999, a total of 456,813, were transferred to GNI for the
benefit of the shareholders of the Company as of June 30, 1999.
In September 1999, USAG entered into a merger agreement with World
Shopping Network, Inc. (WSN) (a development stage company),
whereby these entities would merge and operate as WSN. See Note
9.
NOTE 6: INCOME TAXES.
For the period from inception to July 31, 1999, 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 differences
at July 31, 1999; the estimated income tax effect of such
differences approximated $71,000.
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
July 31, 1999 July 31, 1998 July 31, 1999
$ 0 $2,000 $69,000
As of July 31, 1999, the Company's federal and state net
operating loss ("NOL") and capital loss carryforwards for income
tax purposes were approximately $90,000 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 2003.
The Company's accounting NOL carryforward approximates $325,000
at July 31, 1999. The related deferred tax asset arising in 1998
and 1997 approximated $0 and $7,500, 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 July 31, 1999 balance of this deferred tax asset.
A summary of the activity in the valuation allowance for the
deferred tax asset for the years ended July 31, 1999 and 1998 is
presented below:
Amount
Balance at August 1, 1997 $ 69,000
Adjustment for 1997 deferred tax asset 2,000
Balance at July 31, 1998 71,000
Adjustment for 1998 deferred tax asset -
Balance at July 31, 1999 $ 71,000
NOTE 7: SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes of $500 were paid during the year ended July 31,
1999. The cumulative tax payment from August 17, 1987 (date of
inception) through July 31, 1999 was $20,987.
NOTE 8: 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 9: SUBSEQUENT EVENT
In September 1999, USAG entered into a merger agreement with World
Shopping Network, Inc. (WSN) (a development stage company),
whereby such entities would merge and operate as WSN. The merger
agreement provides for WSN to be merged with and into USAG, which
is the surviving corporation. The merger is tax free under
Internal Revenue Code 361. This merger also resulted in the
following stock splits: (a) of the total 93,450,000 issued and
outstanding shares of the Registrant prior to the merger, they
were subject to a reverse split of 12 to 1, resulting in issued
and outstanding shares of 7,787,500; and (b) of the total
4,556,162 issued and outstanding shares of WSN prior to the
merger, they were first subject to a reduction of 2,665,000 due to
a Share Exchange Agreement, resulting in a total of 1,891,162,
which was then subject to a forward split of 2.5 to 1, resulting
in issued and outstanding shares of 4,727,905. The total issued
and outstanding shares of common stock after the merger was
12,515,405. The issued and outstanding Class A Warrants totaling
16,000,000 were subject to a reverse split of 12 to 1, resulting
in a total of 1,333,333.
Effective September 30, 1999, 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.
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 accompanying financial statements do not reflect any
adjustments as a result of this merger. The financial statements
of WSN have been audited for the years ended June 30, 1999 and
1998.
By a resolution of the Board of Directors in December 1999, the
exercise period for the Class A Warrants and the Class B Warrants
was extended to December 31, 2000.
The following unaudited proforma information is based on the
aforementioned financial statements.
WSN
HISTORICAL PRO FORMA
Cash and cash equivalents $ 122,532 $ 577,072
Other assets 39,267 41,540
Accounts payable and accrued expenses 23,869 25,090
Stockholders' equity 137,930 595,522
Revenues 40,984 57,201
Expenses 334,430 348,725
Net loss (293,446) (288,010)
The above historical column represents WSN financial information
as of the year ended June 30, 1999. In the pro forma
presentation, the historical column has been added to the
Company's July 31, 1999 financial information, and the combined
data have been adjusted assuming that (a) the merger occurred on
July 31, 1999 and (b) all of WSN's stockholders elected to convert
their shares. WSN's July 1999 financial activity is not material
to the pro forma presentation.
If the merger had occurred on August 1, 1997, the pro forma effect
on basic and diluted income/loss per share for fiscal 1998 and
1999 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 10: COMMITMENTS AND CONTINGENCIES
As of December 28, 1999, the Company was delinquent on several
filing requirements to the SEC. These filings include Form 10-KSB
for the year ended July 31, 1999, Form 10-Q for the quarter ended
October 31, 1999, and Form 8-K's to announce the consummation of
the merger and a 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 11: 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
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 of the Form 10-K filed on November 5, 1996).
3.2 Bylaws (incorporated by reference to Exhibit 3.2 of the Form 10-K
filed on November 5, 1996)
27 Financial Data Schedule (see below).
<TABLE> <S> <C>
<S> <C>
<PAGE>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-KSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 454,540
<SECURITIES> 0
<RECEIVABLES> 5
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 456,813
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 456,813
<CURRENT-LIABILITIES> 1,222
<BONDS> 0
0
0
<COMMON> 13,500
<OTHER-SE> 455,591
<TOTAL-LIABILITY-AND-EQUITY> 456,813
<SALES> 0
<TOTAL-REVENUES> 18,708
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,413
<INCOME-TAX> (1,023)
<INCOME-CONTINUING> 5,436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,436
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
