U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-20277
WORLD SHOPPING NETWORK, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-2872782
(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
1530 Brookhollow Drive, Suite C, Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 427-0760
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value; Class A Warrants; Class B
Warrants; Units
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes No X.
As of March 31, 2001, the Registrant had 32,355,202 shares
of common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 3
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
MARCH 31, 2001 AND MARCH 31, 2000 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
MARCH 31, 2001 AND MARCH 31, 2000 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8
ITEM 2. PLAN OF OPERATION 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 22
ITEM 5. OTHER INFORMATION 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURE 23
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
WORLD SHOPPING NETWORK, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 2001
ASSETS
CURRENT ASSETS
Cash and cash equivalents 454,448
Accounts receivable 12,699
Prepaid expenses and other current assets 9,649
Deferred tax asset, net of valuation allowance -
476,796
PROPERTY AND EQUIPMENT, net 9,810
486,606
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses 33,339
NOTES PAYABLE 111,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 32,355
Additional paid-in capital 1,115,104
Accumulated deficit during development stage (805,192)
342,267
486,606
The accompanying notes are an integral part of these financial statements
WORLD SHOPPING NETWORK, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The For The
Three Months Nine Months Cumulative
Ended March Ended March August
31 31 14 1987
2001 2000 2001 2000 (date of
Inception
to March 31
2001
SERVICE AND FEE INCOME 15,839 16,539 59,366 26,120 101,646
EXPENSES
Selling, general and
administrative 70,323 83,450 241,346 263,566 886,402
Depreciation 1,250 - 3,750 - 274,484
71,573 83,450 245,096 263,566 1,160,886
OTHER INCOME (EXPENSE)
Interest income 5,307 - 13,307 20,196 285,156
Interest expense (3,396) - (13,896) - (18,417)
1,911 - (589) 20,196 266,739
INCOME (LOSS) BEFORE
INCOME TAX (53,823) (66,911) (186,319) (217,250) (792,501)
INCOME TAX PROVISION
(BENEFIT)
State - - 800 - 8,952
- - 800 - 12,691
NET LOSS (53,823) (66,911) (187,119) (217,250) (805,192)
BASIC AND DILUTED LOSS
PER SHARE OF COMMON STOCK (0.00) (0.01) (0.01) (0.02)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 31,666,322 12,574,278 27,460,197 10,770,272
The accompanying notes are an integral part of these financial statements
WORLD SHOPPING NETWORK, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Nine Months Cumulative
Ended Ended August 14
March 31 March 31 1987
2001 2000 (Date of
Inception)
to March
31 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) (187,119) (217,250) (805,192)
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Depreciation 3,750 - 26,089
Common stock issued for services 7,644 - 80,659
(Increase) decrease in accounts
receivable (9,022) (9,117) (12,699)
(Increase) decrease in prepaid
expenses and other current assets - 2,273 (9,649)
Increase (decrease) in accounts
payable and accrued expenses 32,988 34,437 33,339
(151,759) (189,657) (687,453)
CASH FLOWS FROM INVESTING ACTIVITIES
Net reverse merger transactions - 125,242 125,242
Acquisition of property and equipment (2,748) (9,482) (12,230)
(2,748) 115,760 113,012
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sales or debt
conversion of common stock 68,771 - 837,889
Net proceeds from notes payable 60,000 81,000 191,000
128,771 81,000 1,028,889
NET INCREASE (DECREASE) IN CASH (25,736) 7,103 454,448
BEGINNING CASH AND CASH EQUIVALENTS 480,184 454,540 -
ENDING CASH AND CASH EQUIVALENTS 454,448 461,643 454,448
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for income taxes 800 800 21,787
The accompanying notes are an integral part of these financial statements
WORLD SHOPPING NETWORK INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
World Shopping Network, Inc., formerly known as 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, the
Company is a development stage company, since it has not
commenced its planned principal operations. Since its inception,
WSN 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 ("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.
Management accounted for the merger as a capital stock
transaction (as opposed to a business combination, as that term
is defined by generally accepted accounting principles) because
the reorganization is a "reverse acquisition" involving a public
shell entity. Accordingly, the merger will be reported as a
reorganization of WSN, which is considered the acquirer for
accounting purposes.
On May 10, 1999, USAG caused the incorporation of Growth Net Inc.
("GNI"), which was formed in anticipation of the reorganization
of USAG. For its fiscal year ended April 30, 2000, GNI
experienced a net loss.
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. 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 March 31, 2001.
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 December 31, 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. 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.
Reclassification
Certain reclassifications have been made to the 2000 financial
statements to conform to the classifications issued in 2001.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which defines derivatives, requires that all
derivatives be carried at fair value, and provides for hedging
accounting when certain conditions are met. The Company is
required to adopt this statement in the first quarter of fiscal
year 2001, with early adoption permitted. Although the Company
has not fully assessed the implications of this new statement, it
does not believe adoption of this statement will have a material
impact on the Company's future financial position or results of
operations.
In December 1999, the Securities and Exchange Commission ("SEC")
released Staff Accounting Bulletin ("SAB") No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements". This bulletin
summarizes certain interpretations and practices followed by the
Division of Corporation Finance and the Office of the Chief
Accountant of the SEC in administering the disclosure
requirements of the Federal securities laws in applying generally
accepted accounting principles to revenue recognition in
financial statements. Application of the accounting and
disclosures desired in the bulletin is required by the second
quarter of 2000. The Company is in compliance with SAB 101
revenue recognition requirements.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 ("FIN 44") "Accounting for Certain
Transactions involving Stock Compensation" an interpretation of
APB Opinion No. 25. FIN 44 clarifies the application of Opinion
25 for (a) the definition of employee for purposes of applying
Opinion 25, (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting
consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an
exchange of stock compensation awards in a business combination.
FIN 44 is effective July 1, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998, or
January 12, 2000. The Company believes that FIN 44 will not have
a material effect on its financial position or results of operations.
Going Concern
These interim consolidated financial statements have been
prepared on a going concern basis in accordance with United
States generally accepted accounting principles. The going
concern basis of presentation assumes the Company will continue
in operation for the foreseeable future and will be able to
realize its assets and discharge its liabilities and commitments
in the normal course of business. Certain conditions, as
discussed below, currently exist which raise substantial doubt
upon the validity of this assumption. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
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
Public Offering
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, 2002.
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, 2002.
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 131,000 (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 value of $6,045 to three
officers as compensation for past services performed. During the
nine months ended March 31, 2001, the Company issued 12,879,640
shares for various services and cash, and 856,284 shares in
exchange for the outstanding loans of $146,468. See Note 8.
NOTE 5: MERGERS AND ACQUISITIONS
Merger
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.
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.
Contingent Acquisition
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 ("FCC")'s approval. In February 2001,
the FCC approved the acquisition, and the Company is in process
of finalizing the agreement. The Company anticipates operating
the radio station by end of the fiscal year.
NOTE 6: INCOME TAXES
For the period from inception to March 31, 2001, 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 March 31, 2001; the estimated income tax effect of such
differences approximated $210,000.
As of March 31, 2001, the Company's federal and state net
operating loss ("NOL") and capital loss carryforwards for income
tax purposes were approximately $470,000 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 $800,000
at March 31, 2001. The related deferred tax asset arising in
2001 and 2000 approximated $243,000 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 March 31, 2001 balance of this deferred tax asset.
NOTE 7: PROPERTY AND EQUIPMENT
The Company's property and equipment consists of the following at
March 31, 2001:
Computer equipment $ 79,130
Office equipment 7,373
Furniture and fixtures 1,453
87,956
Less: Accumulated depreciation (78,146)
9,810
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 January 1, 2001. The Company is currently negotiating
new terms. Included in accounts payable and accrued expenses is
$6,000 in interest payable to these parties.
The Company borrowed an additional $143,000 from two other non-
related sources. These notes bear annual interest rate of 10%,
with maturities from December 2000 through June 30, 2001. The
Company is in negotiations to convert these loans to common
stock. In December 2000, the Company converted these notes
including interest to common stock.
During the three months ended March 31, 2001, the Company
borrowed an additional $60,000 from these sources. These notes
bear annual interest rate of 10%, with maturities through June
30, 2001. The Company is in negotiations to convert these loans
to common stock.
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 expired on March 24, 2001. The Company is
currently on a month-to-month lease.
NOTE 9: GOING CONCERN
The Company is a development stage company, as defined in the
SFAS No. 7. It is the Company's belief that it will continue to
incur losses for at least the next 12 months. The Company
incurred a net loss of $187,119 for the nine months ended March
31, 2001. The Company does not have sufficient working capital
to sustain operations until the end of the current fiscal year
ended June 30, 2001. Additional debt or equity financing will be
required and may not be available or may not be available on
reasonable terms. Operations have primarily been financed
through the issuance of common stock. During the three month
period ended March 31, 2001, units for common shares and warrants
were subscribed for cash proceeds to finance the operations of
the Company. The continued existence of the Company is dependent
upon its ability to meet future financing requirements, and the
success of future operations.
These factors create an uncertainty about the Company's ability
to continue as a going concern. The Company's management has
developed a plan, which includes working to secure market
acceptance of its services and to secure strategic partnerships.
The Company will also seek additional sources of capital through
the issuance of debt equity financing.
ITEM 2. 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 March 31,
2000. 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 4 employees. Members of the
management team and support personnel that were previously
treated as independent contractors became employees in October
2000. 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
quarter ended March 31, 2001.
Current Developments.
(a) Acquisition Agreement with Delphi Communications, Inc.
On November 8, 2000, the Registrant entered into a
definitive agreement with Delphi Communications, Inc. whereby the
Registrant will acquire certain of the assets of this company
(which includes the license for the AM radio station KMET) (see
Exhibit 10.3 to this Form 10-QSB). This agreement replaced and
superceded a binding letter of intent for this transaction which
was entered into by the parties on September 19, 2000. KMET
carries live broadcasts of Los Angeles Dodgers baseball. In
addition, KMET airs the popular, nationwide one-on-one sports-
talk radio program. When not broadcasting sports content, KMET
airs country western music.
Under the terms of this agreement, the Registrant has agreed to
pay to Delphi 7,415,254 restricted shares of common stock of the
Registrant (valued on the date of the transaction at $1,750,000).
This agreement is subject to approval by the Federal
Communications Commission of the transfer of the license for this
radio station owned by Delphi. In February 2001, the FCC
approved the acquisition, and the Registrant is in process of
finalizing the agreement. The Registrant anticipates operating
the radio station by end of the fiscal year (June 30, 2001).
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 2001 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 20% 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.
The 6,562,500 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.
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."
PART II - OTHER INFORMATION
ITEM 1. 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Sales of Unregistered Securities.
There were no sales of unregistered securities in the
quarter ended March 31, 2001.
Use of Proceeds.
On July 6, 2000, the Registrant filed a Form SB-2 with the SEC
under Rule 415 (self offering) to register an aggregate amount of
50,000,000 shares of common stock (aggregate offering price of
$7,000,000 under Rule 457(c)) (File No. 0-20277). This offering
has been used primarily for consulting services for the
Registrant, and commenced on the effective date of this
registration statement (July 18, 2000). To March 31, 2001, a
total of 13,595,924 shares of common stock have been issued out
of this registration statement; 9,203,000 have been for
consulting services to the Company, and 4,392,924 have been sold
for cash under two common stock purchase agreements (see form of
common stock purchase agreement set forth in Exhibit 4.5 to this
Form 10-QSB):
(a) Shares of common stock under this offering have been sold
under a common stock purchase agreement, dated September 11,
2000, entered into between the Registrant and The David Andrew
Trust. Under this agreement, this trust has agreed to purchase
shares of common stock of the Registrant at 80% of the average of
the closing bid prices for the five trading days immediately
after the put notice. The Registrant has done two put notices
under this agreement prior to March 31, 2001 resulting in the
sale of 856,284 shares in October 2000 at $0.18 per share, for a
total consideration of $154,131.06, 2,203,311 shares in December
2000 at $0.125 per share, for a total consideration of
$220,311.10, and 1,083,329 shares in January 2001 at $0.03216,
for a total consideration of $34,839.87.
(b) Shares of common stock under this offering have been sold
under a common stock purchase agreement, dated November 15, 2000,
entered into between the Registrant and Alliance Equitiest.
Under this agreement, this trust has agreed to purchase shares of
common stock of the Registrant at 80% of the average of the
closing bid prices for the five trading days immediately after
the put notice. The Registrant has done one put notice under
this agreement prior to December 31, 2000 resulting in the sale
of 250,000 shares in December 2000 at $0.10 per share, for a
total consideration of $25,000.
The expenses involved with this offering to date have been
approximately $28,500. The net cash proceeds from this offering
(gross proceeds of $434,282 less offering expenses) of $405,782
have been used for working capital for the Registrant.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In March 2001, the Registrant received the consent of a majority
of the outstanding shares of common stock for the Registrant to
do the following: (a) file an Amendment to the Certificate of
Incorporation with the Delaware Secretary of State changing the
name of the Company to WSN Group, Inc., a Delaware Corporation;
(b) increase the authorized common stock of the Company to
500,000,000 in such amendment; and (c) approve the Agreement and
Plan of Merger by and between the newly named WSN Group, Inc.
(Delaware) and WSN Group, Inc. (Nevada). None of such actions
will be done until a date which is at least twenty days after the
filing of a Definitive Information Statement on Schedule 14C with
the Securities and Exchange Commission on May 2, 2001.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits.
Exhibits included or incorporated by reference herein: See
Exhibit Index.
Reports on Form 8-K.
No reports on Form 8-K were filed during the third quarter of the
fiscal year covered by this Form 10-QSB.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
World Shopping Network, Inc.
Dated: May 14, 2001 By: /s/ John J. Anton
John J. Anton, President
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).
3,2 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).
10.1 Joint Venture Agreement between the Registrant and American
Consumer Network, dated August 3, 2000 (incorporated by reference
to Exhibit 10.1 of the Form 10-QSB filed on November 20, 2000).
10.2 Joint Venture Agreement between the Registrant and Preferred
Dental Plan, dated September 27, 2000 (incorporated by reference
to Exhibit 10.2 of the Form 10-QSB filed on November 20, 2000).
10.3 Agreement between the Registrant and Delphi Communications,
Inc., dated November 8, 2000 (incorporated by reference to
Exhibit 2 to the Form 8-K filed on January 12, 2001)
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).