10KSB 1 j10k030729filing.txt 10KSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB ------------------------------------------------------------------------------- [ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED APRIL 30, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 NETWORK USA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) COMMISSION FILE NUMBER: 33-10456 NEVADA 76-0192477 ------ ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 6720 SANDSPOINT, SUITE 204, HOUSTON, TEXAS 77074 ----------------------------------------- ----- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) 713-669-9018 ------------ (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT: NONE CHECK WHETHER THE ISSUER: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [ X ] NO [ ] CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM 405 OF REGULATION S-B IS NOT CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY AMENDMENT TO THIS FORM 10-KSB. [ X ] ISSUER'S REVENUES FOR THE 12 MONTHS ENDED APRIL 30, 2003 WERE $0. THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT ON JULY 21, 2003 WAS APPROXIMATELY $213,336, BASED ON THE LAST CLOSING PRICE OF $1.20 OF SUCH STOCK PRECEDING JULY 21, 2003. AS OF APRIL 30, 2003, REGISTRANT HAD 1,915,378 SHARES (POST SPLIT) OF COMMON STOCK OUTSTANDING. PART I THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS. THESE STATEMENTS RELATE TO FUTURE EVENTS OR THE COMPANY'S FUTURE FINANCIAL PERFORMANCE AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE COMPANY OR ITS INDUSTRY'S ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD- LOOKING STATEMENTS. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECTS," "PLANS," "ANTICIPATES," "BELIEVES," "ESTIMATES," "PREDICTS," "POTENTIAL," OR THE NEGATIVE OF THESE TERMS OR OTHER COMPARABLE TERMINOLOGY. THESE STATEMENTS ARE ONLY PREDICTIONS. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOREOVER, NEITHER THE COMPANY NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THESE FORWARD-LOOKING STATEMENTS. THE COMPANY IS UNDER NO DUTY TO UPDATE ANY OF THE FORWARD- LOOKING STATEMENTS AFTER THE DATE OF THIS REPORT TO CONFORM ITS PRIOR STATEMENTS TO ACTUAL RESULTS. ITEM 1. DESCRIPTION OF BUSINESS BUSINESS FOR A NUMBER OF YEARS, THE COMPANY HAD BEEN DORMANT FROM AN OPERATIONAL STANDPOINT, AND HAD EXISTED AS A PUBLIC "SHELL" CORPORATION PLANNING ON MERGER WITH A PRIVATELY HELD BUSINESS. THE COMPANY CONTINUES TO HAVE MINIMAL ASSETS AND OPERATIONS. ON APRIL 30, 2002 THE COMPANY INITIATED OPERATION AS A REAL ESTATE INVESTMENT AND DEVELOPMENT COMPANY THROUGH THE EXCHANGE OF COMPANY STOCK FOR SHARES IN A PRIVATE REAL ESTATE CORPORATION, ONE GENESIS, INC., AND THE SUBSEQUENT SALE OF THE ACQUIRED PRIVATE CORPORATE SHARES, THE COMPANY RECEIVED $120,000.00 U.S. DOLLARS. THE COMPANY IS NOW DIRECTING ITS EFFORTS TOWARDS THE INVESTMENT AND DEVELOPMENT OF REAL ESTATE, INITIALLY IN THE HOUSTON, TEXAS MARKET. HOWEVER, THE COMPANY CONTINUES TO CONSIDER POSSIBLE TRANSACTIONS IN WHICH A PRIVATELY HELD BUSINESS WOULD MERGE INTO THE COMPANY IN A TRANSACTION IN WHICH CONTROL OF THE COMPANY WOULD CHANGE HANDS. DURING FISCAL 2003, THE COMPANY ENTERED INTO A LETTER OF INTENT WITH AEROSPACE TECHNOLOGIES LTD. WITH REGARD TO SUCH A TRANSACTION. HOWEVER, THE COMPANY AND AEROSPACE TECHNOLOGIES LTD. EVENTUALLY TERMINATED THIS LETTER OF INTENT. BECAUSE THE COMPANY HAS LIMITED RESOURCES, MANAGEMENT ANTICIPATES THAT TO ACQUIRE MAJOR ACQUISITIONS, THE COMPANY WILL BE REQUIRED TO ISSUE SHARES OF ITS COMMON STOCK AS SIGNIFICANT ITS COMMON STOCK AS SIGNIFICANT CONSIDERATION FOR SUCH ACQUISITION. THIS MAY RESULT IN SUBSTANTIAL DILUTION OF THE SHARES OF CURRENT STOCKHOLDERS. THE COMPANY'S BOARD OF DIRECTORS SHALL MAKE THE FINAL DETERMINATION WHETHER TO COMPLETE ANY SUCH ACQUISITION, AND THE APPROVAL OF STOCKHOLDERS WILL NOT BE SOUGHT UNLESS REQUIRED BY APPLICABLE LAWS, RULES AND REGULATIONS, THE COMPANY'S ARTICLES OF INCORPORATION OR BYLAWS, OR CONTRACT. EVEN IF STOCKHOLDER APPROVAL IS SOUGHT, MICHAEL L. MEAD AND RICHARD J. CHURCH, WHO ARE DIRECTORS, VICE PRESIDENT AND PRESIDENT OF THE COMPANY, RESPECTIVELY, BENEFICIALLY OWN APPROXIMATELY NINETY PERCENT (90%) OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY, AND COULD APPROVE ANY ACQUISITION, REORGANIZATION OR MERGER THEY DEEMED ACCEPTABLE. THE COMPANY MAKES NO ASSURANCE THAT ANY FUTURE ENTERPRISE WILL BE PROFITABLE OR SUCCESSFUL. THE COMPANY IS NOT CURRENTLY ENGAGING IN ANY SUBSTANTIVE BUSINESS ACTIVITY EXCEPT THE (1) DEVELOPMENT OF RELATIONSHIPS WITH INVESTORS, ARCHITECTS, CONTRACTORS, LENDERS AND REAL ESTATE BROKERS AND (2) IS SEEKING SUITABLE REAL ESTATE PROPERTY FOR INVESTMENT. IN ITS PRESENT FORM, THE COMPANY IS CAPABLE OF ACQUIRING OR DEVELOPING SMALL COMMERCIAL PROPERTIES. THE COMPANY MAY ALSO BE DEEMED TO BE A VEHICLE TO ACQUIRE OR MERGE WITH A BUSINESS OR COMPANY, AND THE COMPANY WILL CONSIDER ENGAGING IN A ACQUISITION OR MERGER IF THE RIGHT OPPORTUNITY PRESENTED ITSELF. THE COMPANY DOES NOT INTEND TO RESTRICT ITS CONSIDERATION OF MERGER CANDIDATES TO ANY PARTICULAR BUSINESS OR INDUSTRY, AND THE AREAS IN WHICH IT WILL CONSIDER ACQUISITIONS, REORGANIZATIONS OR MERGERS MAY INCLUDE, BUT WILL NOT E LIMITED TO, THE FIELDS OF REAL ESTATE, HIGH TECHNOLOGY, MANUFACTURING, NATURAL RESOURCES, SERVICE, RESEARCH AND DEVELOPMENT, TRANSPORTATION, INSURANCE, BROKERAGE, FINANCE AND ALL MEDICALLY RELATED FIELDS, AMONG OTHERS. THE COMPANY RECOGNIZES THAT BECAUSE OF ITS LIMITED RESOURCES, THE NUMBER OF SUITABLE POTENTIAL BUSINESS VENTURES WHICH MAY BE AVAILABLE TO IT WILL BE EXTREMELY LIMITED, AND MAY BE RESTRICTED TO ENTITIES WHO DESIRE TO AVOID WHAT THESE ENTITIES MAY DEEM TO BE THE ADVERSE FACTORS RELATED TO AN INITIAL PUBLIC OFFERING ("IPO"). THE MOST PREVALENT OF THESE FACTORS INCLUDE SUBSTANTIAL TIME REQUIREMENTS, LEGAL COSTS, THE INABILITY TO OBTAIN AN UNDERWRITER WHO IS WILLING TO PUBLICLY OFFER AND SELL SHARES, LIMITATIONS ON THE AMOUNT OF DILUTION PUBLIC INVESTORS WILL SUFFER TO HE BENEFIT OF THE STOCKHOLDERS OF ANY SUCH ENTITIES, ALONG WITH OTHER CONDITIONS OR REQUIREMENTS IMPOSED BY VARIOUS FEDERAL AND STATE SECURITIES LAWS, RULES AND REGULATIONS. ANY OF THESE TYPES OF ENTITIES, REGARDLESS OF THEIR PROSPECTS, WOULD REQUIRE THE COMPANY TO ISSUE A SUBSTANTIAL NUMBER OF SHARES OF ITS COMMON STOCK TO COMPLETE ANY SUCH ACQUISITION, REORGANIZATION OR MERGER, USUALLY AMOUNTING TO BETWEEN 80 AND 95 PERCENT OF THE OUTSTANDING SHARES OF THE COMPANY FOLLOWING THE COMPLETION OF ANY SUCH TRANSACTION; ACCORDINGLY, INVESTMENTS IN ANY SUCH PRIVATE ENTITY, IF AVAILABLE, WOULD BE MUCH MORE FAVORABLE THAN ANY INVESTMENT IN THE COMPANY. RISK FACTORS. SPECULATIVE INVESTMENT. IN ANY BUSINESS VENTURE, THERE ARE SUBSTANTIAL RISKS SPECIFIC TO THE PARTICULAR ENTERPRISE WHICH CANNOT BE ASCERTAINED UNTIL REGULAR INCOME IS GENERATED, OR A POTENTIAL ACQUISITION, REORGANIZATION OR MERGER CANDIDATE HAS BEEN IDENTIFIED; HOWEVER, AT A MINIMUM, THE COMPANY'S PRESENT AND PROPOSED BUSINESS OPERATIONS WILL BE HIGHLY SPECULATIVE AND SUBJECT TO THE SAME TYPES OF RISKS INHERENT IN ANY NEW OR UNPROVEN VENTURE, AND WILL INCLUDE THOSE TYPES OF RISK FACTORS OUTLINED BELOW. REAL PROPERTY INVESTMENT RISKS IN GENERAL. ALL REAL PROPERTY INVESTMENTS ARE SUBJECT TO SOME DEGREE OF RISK. THE COMPANY'S REAL ESTATE INVESTMENTS WILL BE SUBJECT TO RISKS SUCH AS ADVERSE CHANGES IN GENERAL ECONOMIC CONDITIONS OR LOCAL CONDITIONS, SUCH AS EXCESSIVE BUILDING RESULTING IN AN OVERSUPPLY OF EXISTING SPACE OR A DECREASE IN EMPLOYMENT REDUCING THE DEMAND FOR REAL ESTATE IN THE LOCATIONS IN WHICH THE PROPERTIES ARE SITUATED. THE COMPANY'S REAL ESTATE INVESTMENTS WILL ALSO BE SUBJECT TO OTHER FACTORS AFFECTING REAL ESTATE VALUES, INCLUDING THE ATTRACTIVENESS OF THE PROPERTIES AND THE NEIGHBORHOOD TO PURCHASERS AND TENANTS. IDENTIFYING SUITABLE REAL ESTATE ACQUISITIONS. THE COMPANY MAY NOT BE SUCCESSFUL IN IDENTIFYING SUITABLE REAL ESTATE PROPERTIES OR OTHER ASSETS THAT MEET THE COMPANY'S ACQUISITION CRITERIA OR CONSUMMATING ACQUISITIONS OR INVESTMENTS ON SATISFACTORY TERMS. FAILURES IN IDENTIFYING OR CONSUMMATING ACQUISITIONS WOULD IMPAIR THE PURSUIT OF THE COMPANY'S BUSINESS PLAN. SHAREHOLDERS ULTIMATELY MAY NOT LIKE THE LOCATION LEASE TERMS OR OTHER RELEVANT ECONOMIC AND FINANCIAL DATA OF ANY REAL PROPERTIES, OTHER ASSETS OR OTHER COMPANIES THAT THE COMPANY MAY ACQUIRE IN THE FUTURE. IF THE COMPANY ACQUIRES ANY BUSINESSES, IT WILL BE REQUIRED TO ASSIMILATE THE OPERATIONS AND PERSONNEL OF THE ACQUIRED BUSINESS AND TRAIN, RETAIN AND MOTIVATE ANY KEY PERSONNEL FROM THE ACQUIRED BUSINESS. NO ASSURANCE OF REAL ESTATE APPRECIATION OR COMPANY PROFITS. THERE IS NO ASSURANCE THAT THE COMPANY'S REAL ESTATE INVESTMENTS WILL APPRECIATE IN VALUE OR WILL EVER BY SOLD AT A PROFIT. THE MARKETABILITY AND VALUE OF THE PROPERTIES WILL DEPEND UPON MANY FACTORS BEYOND THE CONTROL OF THE COMPANY'S MANAGEMENT. THERE IS NO ASSURANCE THAT THERE WILL BE A READY MARKET FOR THE PROPERTIES, SINCE INVESTMENTS IN REAL PROPERTY ARE GENERALLY NON- LIQUID. THIS ILLIQUIDITY MAY IMPAIR THE COMPANY'S ABILITY TO SELL PROMPTLY PROPERTIES HEREAFTER IN THE COMPANY'S PORTFOLIO IN RESPONSE TO CHANGING ECONOMIC, FINANCIAL AND INVESTMENT CONDITIONS. THE REAL ESTATE MARKET IS AFFECTED BY MANY FACTORS, SUCH AS GENERAL ECONOMIC CONDITIONS, AVAILABILITY OF FINANCING, INTEREST RATES AND OTHER FACTORS INCLUDING SUPPLY AND DEMAND, THAT ARE BEYOND THE COMPANY'S CONTROL. THE COMPANY CANNOT PREDICT WHETHER IT WILL BE ABLE TO SELL ANY PROPERTY FOR THE PRICE OR ON THE TERMS SET BY IT, OR WHETHER ANY PRICE OR OTHER TERMS OFFERED BY A PROSPECTIVE PURCHASER WOULD BE ACCEPTABLE TO THE COMPANY. WE ALSO CANNOT PREDICT THE LENGTH OF TIME NEEDED TO FIND A WILLING PURCHASER AND TO CLOSE THE SALE OF A PROPERTY. MOREOVER, THE COMPANY MAY BE REQUIRED TO EXPEND FUNDS TO CORRECT DEFECTS OR TO MAKE IMPROVEMENTS BEFORE A PROPERTY CAN BE SOLD. THE COMPANY CANNOT ASSURE ANY PERSON THAT IT WILL HAVE FUNDS AVAILABLE TO CORRECT THOSE DEFECTS OR TO MAKE THOSE IMPROVEMENTS. IN ACQUIRING A PROPERTY, THE COMPANY MAY AGREE TO LOCKOUT PROVISIONS THAT MATERIALLY RESTRICT IT FROM SELLING THAT PROPERTY FOR A PERIOD OF TIME OR IMPOSE OTHER RESTRICTIONS, SUCH AS A LIMITATION ON THE AMOUNT OF DEBT THAT CAN BE PLACED OR REPAID ON THAT PROPERTY. THESE LOCKOUT PROVISIONS WOULD RESTRICT THE COMPANY'S ABILITY TO SELL A PROPERTY. THESE FACTORS AND ANY OTHERS THAT WOULD IMPEDE THE COMPANY'S ABILITY TO RESPOND TO ADVERSE CHANGES IN THE PERFORMANCE OF THE COMPANY'S PROPERTIES COULD SIGNIFICANTLY HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS. COMPETITION FOR THE ACQUISITION OF REAL ESTATE PROPERTIES. THE COMPANY COMPETES WITH MANY OTHER ENTITIES ENGAGED IN REAL ESTATE INVESTMENT ACTIVITIES FOR ACQUISITIONS OF DESIRABLE PROPERTIES. THESE COMPETITORS MAY DRIVE UP THE PRICE THE COMPANY MUST PAY FOR REAL ESTATE PROPERTIES; OTHER ASSETS OR OTHER COMPANIES THAT THE COMPANY SEEKS TO ACQUIRE OR MAY SUCCEED IN ACQUIRING THOSE COMPANIES OR ASSETS THEMSELVES. IN ADDITION, THE COMPANY'S POTENTIAL ACQUISITION TARGETS MAY FIND THE COMPANY'S COMPETITORS TO BE MORE ATTRACTIVE SUITORS BECAUSE THEY MAY HAVE GREATER RESOURCES, MAY BE WILLING TO PAY MORE, OR MAY HAVE A MORE COMPATIBLE OPERATING PHILOSOPHY. IN PARTICULAR, REIT'S MAY ENJOY SIGNIFICANT COMPETITIVE ADVANTAGES THAT RESULT FROM, AMONG OTHER THINGS; A LOWER COST OF CAPITAL AND ENHANCED OPERATING EFFICIENCIES. IN ADDITION, THE NUMBER OF ENTITIES AND THE AMOUNT OF FUNDS COMPETING FOR SUITABLE INVESTMENT PROPERTIES MAY INCREASE. THIS WILL RESULT IN INCREASED DEMAND FOR THESE ASSETS AND THEREFORE INCREASED PRICES PAID FOR THEM. IF THE COMPANY PAYS HIGHER PRICES FOR PROPERTIES, ITS PROFITABILITY WILL BE REDUCED, AND SHAREHOLDERS MAY EXPERIENCE A LOWER RETURN ON THEIR INVESTMENT. DISRUPTIONS IN BUSINESS AND STOCKHOLDER DILUTION. ACQUISITIONS MAY CAUSE DISRUPTIONS IN THE COMPANY'S OPERATIONS AND DIVERT MANAGEMENT'S ATTENTION AWAY FROM DAY-TO-DAY OPERATIONS. THE ISSUANCE OF EQUITY SECURITIES FOR ANY ACQUISITIONS COULD BE SUBSTANTIALLY DILUTIVE TO THE COMPANY'S SHAREHOLDERS. IN ADDITION, THE COMPANY'S PROFITABILITY MAY SUFFER BECAUSE OF ACQUISITION-RELATED COSTS AND OTHER INTANGIBLE ASSETS. UNINSURED LOSSES. THE COMPANY MAY PURCHASE COMPREHENSIVE INSURANCE, INCLUDING LIABILITY AND EXTENDED COVERAGE. THERE ARE CERTAIN TYPES OF LOSSES, WHICH MAY BE EITHER UNINSURABLE OR NOT ECONOMICALLY INSURABLE. SUCH EXCLUDED RISKS GENERALLY INCLUDE WAR, EARTHQUAKES, FLOODS AND PUNITIVE DAMAGES. SHOULD AN UNINSURED LOSS OCCUR, THE COMPANY MIGHT SUFFER A LOSS OF INVESTED CAPITAL AND ANY PROFITS WHICH MIGHT BE ANTICIPATED FROM ITS REAL ESTATE INVESTMENT AND MIGHT ALSO BE UNABLE TO MEET ITS OBLIGATIONS. NOT A REAL ESTATE INVESTMENT TRUST OR INVESTMENT COMPANY. THE COMPANY IS NOT A REAL ESTATE INVESTMENT TRUST AND ENJOYS A BROADER RANGE OF PERMISSIBLE ACTIVITIES. THE COMPANY IS ALSO NOT, AND IT IS INTENDED THAT IT WILL OPERATE IN SUCH MANNER AS NOT TO BE CLASSIFIED AS, AN "INVESTMENT COMPANY" WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940. THE MANAGEMENT AND THE INVESTMENT PRACTICES AND POLICIES OF THE COMPANY ARE NOT SUPERVISED OR REGULATED BY ANY FEDERAL OR STATE AUTHORITY. FORECLOSURE. IF, AFTER THE COMPANY'S PURCHASE OF ANY REAL ESTATE PROPERTY IS CONCLUDED, THE COMPANY CANNOT MEET THE PERIODIC PAYMENTS REQUIRED BY THE COMPANY'S OUTSIDE FINANCING, THE COMPANY MAY BE REQUIRED TO SELL OR REFINANCE THE PROPERTY TO MEET ITS OBLIGATIONS. IF REFINANCING IS NOT OBTAINED OR A SALE IS NOT CONSUMMATED, THE COMPANY COULD DEFAULT IN ITS OBLIGATIONS. THE REMEDY OF THE OUTSIDE FINANCIER WOULD BE, AMONG OTHER THINGS, TO INSTITUTE FORECLOSURE PROCEEDINGS AGAINST THE RELATED PROPERTY, WHICH COULD RESULT IN THE PARTIAL OR TOTAL LOSS OF ANY EQUITY IN SUCH PROPERTY. LIMITED ASSETS; NO SOURCE OF REVENUE. THE COMPANY HAS LIMITED ASSETS AND HAS HAD NO REVENUE IN EITHER OF ITS TWO MOST RECENT FISCAL YEARS OR TO THE DATE HEREOF. NOR WILL THE COMPANY RECEIVE ANY REVENUES UNTIL IT ACQUIRES, LEASES AND/OR SELLS A REAL ESTATE PROPERTY, OR COMPLETES A BUSINESS ACQUISITION, REORGANIZATION OR MERGES WITH ANOTHER COMPANY. THE COMPANY CAN PROVIDE NO ASSURANCE THAT ANY ACQUIRED BUSINESS WILL PRODUCE ANY MATERIAL REVENUES FOR THE COMPANY OR ITS STOCKHOLDERS OR THAT ANY SUCH BUSINESS WILL OPERATE ON A PROFITABLE BASIS. ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE ACQUISITIONS. BECAUSE THE COMPANY HAS NOT YET IDENTIFIED ANY ASSETS, PROPERTY OR BUSINESS THAT IT MAY POTENTIALLY ACQUIRE, POTENTIAL INVESTORS IN THE COMPANY WILL HAVE VIRTUALLY NO SUBSTANTIVE INFORMATION UPON WHICH TO BASE A DECISION WHETHER OR NOT TO INVEST IN THE COMPANY. POTENTIAL INVESTORS WOULD HAVE ACCESS TO SIGNIFICANTLY MORE INFORMATION IF THE COMPANY HAD ALREADY IDENTIFIED A POTENTIAL ACQUISITION OR IF THE ACQUISITION TARGET HAD MADE AN OFFERING OF ITS SECURITIES DIRECTLY TO THE PUBLIC. THE COMPANY CAN PROVIDE NO ASSURANCE THAT ANY INVESTMENT IN THE COMPANY WILL NOT ULTIMATELY PROVE TO BE LESS FAVORABLE THAN SUCH A DIRECT INVESTMENT. UNSPECIFIED INDUSTRY AND ACQUIRED BUSINESS; UNASCERTAINABLE RISKS. TO DATE, THE COMPANY HAS NOT IDENTIFIED ANY PARTICULAR INDUSTRY OR BUSINESS IN WHICH IT MIGHT CONSIDER A MERGER OR AN ACQUISITION. ACCORDINGLY, PROSPECTIVE INVESTORS CURRENTLY HAVE NO BASIS TO EVALUATE THE COMPARATIVE RISKS AND MERITS OF INVESTING IN THE INDUSTRY OR BUSINESS IN WHICH THE COMPANY MAY INVEST. TO THE EXTENT THAT THE COMPANY MAY ACQUIRE REAL ESTATE OR BUSINESSES IN A HIGHLY RISKY MARKET OR INDUSTRY, THE COMPANY WILL BECOME SUBJECT TO THOSE RISKS. SIMILARLY, IF THE COMPANY ACQUIRES A FINANCIALLY UNSTABLE PROPERTY OR BUSINESS OR A BUSINESS THAT IS IN THE EARLY STAGES OF DEVELOPMENT, THE COMPANY WILL BECOME SUBJECT TO THE NUMEROUS RISKS TO WHICH SUCH BUSINESSES ARE SUBJECT. ALTHOUGH MANAGEMENT INTENDS TO CONSIDER THE RISKS INHERENT IN ANY INDUSTRY AND BUSINESS IN WHICH IT MAY BECOME INVOLVED, THERE CAN BE NO ASSURANCE THAT IT WILL CORRECTLY ASSESS SUCH RISKS. UNCERTAIN STRUCTURE OF ACQUISITION. MANAGEMENT HAS HAD NO PRELIMINARY CONTACT OR DISCUSSIONS AND THERE ARE NO PRESENT PLANS, PROPOSALS OR ARRANGEMENTS TO ACQUIRE ANY SPECIFIC ASSETS, PROPERTY OR BUSINESS. ACCORDINGLY, IT IS UNCLEAR WHETHER SUCH AN ACQUISITION WOULD TAKE THE FORM OF AN EXCHANGE OF CAPITAL STOCK, A MERGER OR AN ASSET ACQUISITION. HOWEVER, BECAUSE THE COMPANY HAS LIMITED RESOURCES AS OF THE DATE OF THIS ANNUAL REPORT, MANAGEMENT EXPECTS THAT ANY SUCH ACQUISITION WOULD TAKE THE FORM OF AN EXCHANGE OF CAPITAL STOCK, WHICH WOULD HAVE A SUBSTANTIALLY DILUTIVE EFFECT ON THE SHAREHOLDERS OF THE COMPANY. MANAGEMENT TO DEVOTE INSIGNIFICANT TIME TO ACTIVITIES OF THE COMPANY. MEMBERS OF THE COMPANY'S MANAGEMENT ARE NOT REQUIRED TO DEVOTE THEIR FULL TIME TO THE AFFAIRS OF THE COMPANY. BECAUSE OF THEIR TIME COMMITMENTS, AS WELL AS THE FACT THAT THE COMPANY HAS LIMITED BUSINESS OPERATIONS, THE MEMBERS OF MANAGEMENT ANTICIPATE THAT THEY MAY DEVOTE A LIMITED AMOUNT OF TIME TO THE ACTIVITIES OF THE COMPANY, AT LEAST UNTIL SUCH TIME AS THE COMPANY HAS IDENTIFIED A SUITABLE PROPERTY FOR DEVELOPMENT OR ACQUISITION. FUTURE SALES OF COMMON STOCK. MICHAEL L. MEAD CURRENTLY BENEFICIALLY OWNS 500,000 SHARES OF THE COMMON STOCK OF THE COMPANY OR APPROXIMATELY 26.1% PERCENT OF ITS OUTSTANDING VOTING SECURITIES. PURSUANT TO A PURCHASE FROM MR. MEAD IN MAY 2000 AND A TRADE OF PERSONAL SHARES IN A PRIVATE REAL ESTATE CORPORATION IN APRIL 2002, RICHARD J. CHURCH CURRENTLY BENEFICIALLY OWNS 1,222,222 SHARES OF THE COMMON STOCK OF THE COMPANY OR APPROXIMATELY 63.82% PERCENT OF ITS OUTSTANDING VOTING SECURITIES. CURRENTLY, THE 500,000 SHARES OWNED BY MR. MEAD HAVE BEEN BENEFICIALLY OWNED FOR GREATER THAN ONE YEAR, AND SUBJECT TO COMPLIANCE WITH THE APPLICABLE PROVISIONS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, MR. MEAD MAY COMMENCE TO SELL UP TO ONE PERCENT OF THE OUTSTANDING SECURITIES OF THE COMPANY, OR CURRENTLY 5,000 IN ANY THREE-MONTH PERIOD. IN ADDITION, AS OF APRIL 2003, 1,222,222 SHARES OWNED BY MR. CHURCH HAVE BEEN BENEFICIALLY OWNED FOR GREATER THAN ONE YEAR, AND SUBJECT TO COMPLIANCE WITH THE APPLICABLE PROVISIONS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, MR. CHURCH MAY COMMENCE TO SELL UP TO ONE PERCENT OF THE OUTSTANDING SECURITIES OF THE COMPANY, OR CURRENTLY 12,222 IN ANY THREE MONTH PERIOD. SUCH SALES COULD HAVE A SUBSTANTIAL ADVERSE EFFECT ON ANY PUBLIC MARKET THAT MAY THEN EXIST IN THE COMPANY'S COMMON STOCK. SALES OF ANY OF THESE SHARES BY MR. MEAD OR MR. CHURCH COULD SEVERELY AFFECT THE ABILITY OF THE COMPANY TO SECURE THE NECESSARY DEBT OR EQUITY FUNDING FOR THE COMPANY'S PROPOSED BUSINESS OPERATIONS. DILUTION. DEPENDING ON THE NATURE AND EXTENT OF SERVICES RENDERED, THE COMPANY MAY COMPENSATE MICHAEL L. MEAD, RICHARD J. CHURCH OR ANY OTHER THIRD PARTY FOR ANY FINANCIAL CONSULTING OR OTHER SERVICES THAT THEY MAY PERFORM FOR THE COMPANY IN THE FUTURE. BECAUSE THE COMPANY CURRENTLY HAS LIMITED RESOURCES, AND IS UNLIKELY TO GENERATE INCOME UNTIL IT HAS ACQUIRED REAL ESTATE OR COMPLETED A MERGER OR ACQUISITION, MANAGEMENT EXPECTS THAT ANY SIGNIFICANT COMPENSATION WOULD TAKE STOCK. SUCH ISSUANCES WOULD FURTHER DILUTE THE HOLDINGS OF THE COMPANY'S OTHER STOCKHOLDERS. CONFLICTS OF INTEREST; RELATED PARTY TRANSACTIONS. IN APRIL 2002, THE COMPANY EXCHANGED 722,222 SHARES OF ITS COMMON STOCK WITH RICHARD J. CHURCH, THE PRESIDENT AND A DIRECTOR AND MAJOR STOCKHOLDER OF THE COMPANY, FOR 200 SHARES IN ONE GENESIS, INC A PRIVATE TEXAS CORPORATION. SINCE THERE IS NO MARKET FOR THE COMPANY'S COMMON STOCK, THERE IS NO ASSURANCE THAT THIS EXCHANGE WAS AT FAIR MARKET VALUE. ALTHOUGH THE COMPANY HAS NOT IDENTIFIED ANY POTENTIAL REAL ESTATE PROPERTY OR ACQUISITION TARGET, THE POSSIBILITY EXISTS THAT THE COMPANY MAY ACQUIRE SUCH REAL ESTATE PROPERTY IN THE NEAR FUTURE OR MERGE WITH A BUSINESS OR COMPANY IN WHICH THE COMPANY'S EXECUTIVE OFFICERS, DIRECTORS, BENEFICIAL OWNERS OR THEIR AFFILIATES MAY HAVE AN OWNERSHIP INTEREST. SUCH A TRANSACTION MAY OCCUR IF MANAGEMENT DEEMS IT TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AFTER CONSIDERATION OF THE ABOVE REFERENCED FACTORS. A TRANSACTION OF THIS NATURE WOULD PRESENT A CONFLICT OF INTEREST TO THOSE PARTIES WITH A MANAGERIAL POSITION AND/OR AN OWNERSHIP INTEREST IN BOTH THE COMPANY AND THE ACQUIRED ENTITY, AND MAY COMPROMISE MANAGEMENT'S FIDUCIARY DUTIES TO THE COMPANY'S STOCKHOLDERS. AN INDEPENDENT APPRAISAL OF THE ACQUIRED COMPANY MAY OR MAY NOT BE OBTAINED IN THE EVENT A RELATED PARTY TRANSACTION IS CONTEMPLATED. FURTHERMORE, BECAUSE MANAGEMENT AND/OR BENEFICIAL OWNERS OF THE COMPANY'S COMMON STOCK MAY BE ELIGIBLE FOR FINDER'S FEES OR OTHER COMPENSATION RELATED TO POTENTIAL ACQUISITIONS BY THE COMPANY, SUCH COMPENSATION MAY BECOME A FACTOR IN NEGOTIATIONS REGARDING SUCH POTENTIAL ACQUISITIONS. VOTING CONTROL. DUE TO THEIR BENEFICIAL OWNERSHIP OF A MAJORITY OF THE SHARES OF THE COMPANY'S OUTSTANDING COMMON STOCK, MICHAEL L. MEAD AND RICHARD J. CHURCH HAVE THE ABILITY TO ELECT ALL OF THE COMPANY'S DIRECTORS, WHO IN TURN ELECT ALL EXECUTIVE OFFICERS, WITHOUT REGARD TO THE VOTES OF OTHER STOCKHOLDERS. MARKET FOR COMMON STOCK. THE COMPANY'S COMMON STOCK IS CURRENTLY LISTED ON THE OTC BULLETIN BOARD OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (THE "NASD"). HOWEVER, THE VOLUME OF SHARES TRADED HAS BEEN MINIMAL AND VERY VOLATILE AND THEREFORE CANNOT BE CONSIDERED AS A RELIABLE VALUATION FOR THE TOTAL NUMBER OF SHARES OUTSTANDING. ANY FUTURE MARKET PRICE FOR SHARES OF COMMON STOCK OF THE COMPANY IS LIKELY TO CONTINUE TO BE VERY VOLATILE, AND NUMEROUS FACTORS BEYOND THE CONTROL OF THE COMPANY MAY HAVE A SIGNIFICANT EFFECT. IN ADDITION, THE STOCK MARKETS GENERALLY HAVE EXPERIENCED, AND CONTINUE TO EXPERIENCE, EXTREME PRICE AND VOLUME FLUCTUATIONS WHICH HAVE AFFECTED THE MARKET PRICE OF MANY SMALL CAPITAL COMPANIES AND WHICH HAVE BEEN UNRELATED TO THE OPERATING PERFORMANCE OF THESE COMPANIES. THESE BROAD MARKET FLUCTUATIONS, AS WELL AS GENERAL ECONOMIC AND POLITICAL CONDITIONS, MAY ADVERSELY AFFECT THE MARKET PRICE OF THE COMPANY'S COMMON STOCK IN ANY MARKET THAT MAY DEVELOP. RISKS OF "PENNY STOCK". THE SEC HAS ADOPTED RULES THAT REGULATE BROKER-DEALER PRACTICES IN CONNECTION WITH TRANSACTIONS IN "PENNY STOCKS." PENNY STOCKS GENERALLY ARE EQUITY SECURITIES WITH A PRICE OF LESS THAN $5.00. THE PENNY STOCK RULES REQUIRE A BROKER-DEALER, PRIOR TO A TRANSACTION IN A PENNY STOCK NOT OTHERWISE EXEMPT FROM THE RULES, TO DELIVER A STANDARDIZED RISK DISCLOSURE DOCUMENT PREPARED BY THE SEC THAT PROVIDES INFORMATION ABOUT PENNY STOCKS AND THE NATURE AND LEVEL OF RISKS IN THE PENNY STOCK MARKET. THESE DISCLOSURE REQUIREMENTS MAY HAVE THE EFFECT OF REDUCING THE LEVEL OF TRADING ACTIVITY IN ANY SECONDARY MARKET FOR A STOCK THAT BECOMES SUBJECT TO THE PENNY STOCK RULES. THE COMPANY'S COMMON STOCK MAY BE SUBJECT TO THE PENNY STOCK RULES, AND ACCORDINGLY, INVESTORS IN THE COMPANY'S COMMON STOCK MAY FIND IT DIFFICULT TO SELL THEIR SHARES IN THE FUTURE, IF AT ALL. NUMBER OF EMPLOYEES. AT THE PRESENT TIME, MESSRS. MEAD AND CHURCH ARE THE ONLY EMPLOYEES OF THE COMPANY. ITEM 2. DESCRIPTION OF PROPERTY THE COMPANY CURRENTLY OWNS NO PROPERTY AND HAS NOT YET CONDUCTED BUSINESS, WHICH WOULD LEAD TO THE GENERATION OF INCOME. ITS PRINCIPAL EXECUTIVE OFFICE ADDRESS AND TELEPHONE NUMBER ARE THE BUSINESS OFFICE ADDRESS AND TELEPHONE NUMBER OF ITS PRESIDENT, DIRECTOR, TREASURER, AND PRINCIPAL SHAREHOLDER, RICHARD J. CHURCH, AND ARE PROVIDED FOR GENERAL OFFICE EXPENSES. BECAUSE THE COMPANY HAS NO SIGNIFICANT BUSINESS AT THIS TIME, ITS ACTIVITIES HAVE BEEN LIMITED TO (1) NEGOTIATING THE EXCHANGE OF COMPANY STOCK FOR CASH (AS GIVEN ABOVE), (2) TRADING MARKETABLE SECURITIES (3) KEEPING ITSELF IN GOOD STANDING IN THE STATE OF NEVADA, (4) PREPARING THIS ANNUAL REPORT AND THE ACCOMPANYING FINANCIAL STATEMENTS, (5) REVIEWING POSSIBLE REAL ESTATE PROPERTIES FOR ACQUISITION OR DEVELOPMENT (6) ESTABLISHING RELATIONSHIPS IN THE REAL ESTATE COMMUNITY, AND (7) REVIEWING AND NEGOTIATING POSSIBLE MERGER CANDIDATES. ITEM 3. LEGAL PROCEEDINGS THE COMPANY IS NOT A PARTY TO ANY PENDING LEGAL PROCEEDING. NO FEDERAL, STATE OR LOCAL GOVERNMENTAL AGENCY IS PRESENTLY CONTEMPLATING ANY PROCEEDING AGAINST THE COMPANY. NO DIRECTOR, EXECUTIVE OFFICER OR AFFILIATE OF THE COMPANY OR OWNER OF RECORD OR BENEFICIALLY OF MORE THAN FIVE PERCENT OF THE COMPANY'S COMMON STOCK IS A PARTY ADVERSE TO THE COMPANY OR HAS A MATERIAL INTEREST ADVERSE TO THE COMPANY IN ANY PROCEEDING. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS THE COMPANY'S COMMON STOCK IS CURRENTLY LISTED ON THE OTC BULLETIN BOARD OF THE NASD. THE TRADING SYMBOL FOR THE COMPANY IS NUSA. NO ASSURANCE CAN BE GIVEN THAT ANY ESTABLISHED TRADING MARKET FOR THE COMPANY'S COMMON STOCK WILL BE MAINTAINED. ALSO, THE SALE OF UNREGISTERED AND "RESTRICTED" SHARES OF COMMON STOCK PURSUANT TO RULE 144 OF THE SEC BY MICHAEL L. MEAD AND RICHARD J. CHURCH MAY HAVE A SUBSTANTIAL ADVERSE IMPACT ON ANY SUCH PUBLIC MARKET. THE NUMBER OF RECORD HOLDERS OF THE COMPANY'S COMMON STOCK AS OF THE DATE OF THIS ANNUAL REPORT IS APPROXIMATELY 762. DIVIDENDS. THERE HAVE BEEN NO CASH DIVIDENDS DECLARED ON ANY CLASS OF COMMON EQUITY FOR THE LAST TWO FISCAL YEARS OR IN ANY SUBSEQUENT PERIOD THAT REQUIRED FINANCIAL INFORMATION. THE COMPANY HAS NO PLANS TO ISSUE ANY DIVIDENDS FOR THE FORESEEABLE FUTURE. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS THE INFORMATION IN THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED; INCLUDING, WITHOUT LIMITATION, STATEMENTS CONCERNING THE COMPANY'S COMMENCEMENT OF A NEW BUSINESS PLAN, AND ITS ABILITY TO RAISE FUNDS IN CONNECTION WITH SUCH PLAN. SUCH STATEMENTS ARE BASED UPON CURRENT EXPECTATIONS THAT INVOLVE RISKS AND UNCERTAINTIES. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACTS MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. FOR EXAMPLE, WORDS SUCH AS, "MAY," "WILL," "SHOULD," "ESTIMATES," "PREDICTS," "POTENTIAL," "CONTINUE," "STRATEGY," "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS," "INTENDS," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENT. FACTORS THAT MIGHT CAUSE OR CONTRIBUTE TO SUCH A DISCREPANCY INCLUDE, BUT ARE NOT LIMITED TO THE RISKS DISCUSSED IN THE COMPANY'S OTHER SEC FILINGS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN ITS EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED. THE COMPANY HAS NOT ENGAGED IN ANY MATERIAL OPERATIONS SINCE APPROXIMATELY 1988. DURING THE FISCAL YEAR COVERED BY THIS ANNUAL REPORT, THE COMPANY RECEIVED NO REVENUE AND HAD MINIMAL EXPENSES. IN APRIL 2002, THE COMPANY TRADED 722,222 NETWORK USA, INC. SHARES WITH RICHARD J. CHURCH, THE PRESIDENT AND A DIRECTOR AND MAJOR STOCKHOLDER OF THE COMPANY, FOR 200 SHARES OF ONE GENESIS, INC. ON JULY 31, 2002, NETWORK USA, INC. ENTERED INTO AN AGREEMENT WITH SAGA LAND, INC. TO SELL THE ACQUIRED 200 SHARES IN ONE GENESIS, INC. TO SAGA LAND, INC. FOR A TOTAL OF $120,000.00 U.S. DOLLARS. ON AUGUST 7, 2002 THE TRANSACTION WAS EFFECTED AND NETWORK USA, INC. RECEIVED $120,000.00 U.S. DOLLARS FOR ITS 200 ACQUIRED SHARES OF ONE GENESIS, INC. THE PURPOSE OF THE TRADE AND SALE WAS TO PROVIDE WORKING CAPITAL TO THE COMPANY, REPAY OUTSTANDING DEBT AND TO PROVIDE INVESTMENT CAPITAL FOR OPPORTUNITIES IN THE HOUSTON, TEXAS REAL ESTATE MARKET. DURING FISCAL 2002, THE COMPANY GRANTED TO MR. CHURCH OPTIONS TO PUT 722,222 SHARES OF THE COMPANY'S COMMON STOCK, AT $0.18 PER SHARE, EFFECTIVE IF THE COMPANY ACHIEVES ELIGIBILITY FOR TRADING ON THE NASD OTC BULLETIN BOARD AND THEN LOSES SUCH ELIGIBILITY BETWEEN APRIL 1, 2002 AND DECEMBER 31, 2003. THE OPTIONS WILL BE EXERCISABLE FROM DECEMBER 31, 2002 THROUGH DECEMBER 31, 2005. PLAN OF OPERATION. THE COMPANY'S PLAN OF OPERATION FOR THE NEXT 12 MONTHS IS TO SEEK THE ACQUISITION OF REAL ESTATE, PROPERTY OR BUSINESSES THAT MAY BENEFIT THE COMPANY AND ITS STOCKHOLDERS AND TO CONSIDER POSSIBLE TRANSACTIONS IN WHICH A PRIVATELY HELD BUSINESS WOULD MERGE INTO THE COMPANY IN A TRANSACTION IN WHICH CONTROL OF THE COMPANY WOULD CHANGE HANDS. BECAUSE THE COMPANY HAS LIMITED RESOURCES, MANAGEMENT ANTICIPATES THAT TO ACHIEVE ACQUISITIONS GREATER THAN $300,000 IN VALUE, THE COMPANY WILL BE REQUIRED TO ISSUE SHARES OF ITS COMMON STOCK AS SIGNIFICANT CONSIDERATION FOR SUCH ACQUISITIONS. DURING THE NEXT 12 MONTHS, THE COMPANY'S OPERATING CASH REQUIREMENTS WILL RELATE TO (1) REVIEWING AND ACQUIRING REAL ESTATE FOR INVESTMENT OR DEVELOPMENT (2) MAINTAINING THE COMPANY IN GOOD STANDING (3) TRADING MARKETABLE SECURITIES EXPENSES ASSOCIATED WITH REVIEWING OR INVESTIGATING IN ANY POTENTIAL BUSINESS VENTURE; AND IT IS BELIEVED THAT THERE SHOULD BE ADEQUATE CASH AVAILABLE TO MEET THESE REQUIREMENTS. ADDITIONALLY, . BECAUSE THE COMPANY HAS NOT IDENTIFIED ANY PROPERTIES FOR ACQUISITION, AS OF THE DATE OF THIS ANNUAL REPORT, IT IS IMPOSSIBLE TO PREDICT THE AMOUNT OF ANY CASH OR COMPANY ISSUANCE OF STOCK SALE THAT MAY BE REQUIRED IN AN ACQUISITION. BECAUSE THE COMPANY IS NOT CURRENTLY MAKING ANY OFFERING OF ITS SECURITIES, AND DOES NOT ANTICIPATE MAKING ANY SUCH OFFERING IN THE FORESEEABLE FUTURE, MANAGEMENT DOES NOT BELIEVE THAT RULE 419 PROMULGATED BY THE SEC UNDER THE SECURITIES ACT OF 1933, AS AMENDED, CONCERNING OFFERINGS BY BLANK CHECK COMPANIES, WILL HAVE ANY EFFECT ON THE COMPANY OR ANY ACTIVITIES IN WHICH IT MAY ENGAGE IN THE FORESEEABLE FUTURE. REAL ESTATE ACQUISITION AND MARKET SELECTION WE ARE SEEKING TO ACQUIRE ATTRACTIVE REAL ESTATE PROPERTIES IN SOLID MARKETS. WHEN SPECIFIC MARKETS ARE SELECTED, WE SEEK A CONVENIENT AND EASILY ACCESSIBLE LOCATION WITH ABUNDANT PARKING FACILITIES, PREFERABLY OCCUPYING THE DOMINANT CORNER, CLOSE TO RESIDENTIAL COMMUNITIES, WITH EXCELLENT VISIBILITY FOR OUR TENANTS AND EASY ACCESS FOR NEIGHBORHOOD SHOPPERS. REAL ESTATE GEOGRAPHIC FOCUS OUR ACQUISITION ACTIVITIES ARE FOCUSED PRIMARILY IN HOUSTON, TEXAS. IN GENERAL, OUR STRATEGY IS TO TARGET HIGHER INCOME GEOGRAPHIC AREAS. WE ALSO CONSIDER OPPORTUNITIES TO EXPAND INTO OTHER GEOGRAPHIC MARKETS WHERE THE OPPORTUNITY TO ACQUIRE ATTRACTIVE PROPERTIES AT BELOW MARKET PRICES IS AVAILABLE. WE WILL CONTINUE TO EVALUATE ALL POTENTIAL ACQUISITIONS ON A PROPERTY-BY-PROPERTY AND MARKET-BY-MARKET BASIS. WE WILL EVALUATE EACH MARKET BASED ON DIFFERENT CRITERIA, INCLUDING: - STABLE OR GROWING POPULATION BASE; - POSITIVE JOB GROWTH; - DIVERSE ECONOMY; AND - OTHER COMPETITIVE FACTORS. ITEM 7. FINANCIAL STATEMENTS THE FINANCIAL STATEMENTS, COMMENCING ON PAGE F-1, HAVE BEEN AUDITED BY MALONE & BAILEY, INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, TO THE EXTENT AND FOR THE PERIODS SET FORTH IN THEIR REPORTS APPEARING ELSEWHERE HEREIN AND ARE INCLUDED IN RELIANCE UPON SUCH REPORTS GIVEN UPON THE AUTHORITY OF SAID FIRM. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE WHITLEY PENN (FORMERLY JACKSON & RHODES, P.C.) AUDITED THE FINANCIAL STATEMENTS OF THE COMPANY FOR THE YEARS ENDED APRIL 30, 2002 AND 2001. THE BOARD OF DIRECTORS OF THE COMPANY DETERMINED THAT IT WOULD BE IN THE BEST INTERESTS OF THE COMPANY TO ENGAGE A NEW AUDITOR. WHITLEY PENN (REFERRED TO HEREINAFTER AS THE "PRIOR AUDITOR") WAS DISMISSED ON JUNE 17, 2003. SIMULTANEOUSLY THE COMPANY ENGAGED MALONE & BAILEY, PLLC AS THE NEW INDEPENDENT AUDITOR. DURING THE COMPANY'S TWO MOST RECENT FISCAL YEARS AND BETWEEN MAY 1, 2003 THROUGH JUNE 17, 2003, THERE WERE NO DISAGREEMENTS BETWEEN THE COMPANY AND THE PRIOR AUDITOR WHETHER RESOLVED OR NOT RESOLVED, ON ANY MATTER OF ACCOUNTING PRINCIPLES OR PRACTICES, FINANCIAL STATEMENT DISCLOSURE OR AUDITING SCOPE OR PROCEDURE, WHICH, IF NOT RESOLVED, WOULD HAVE CAUSED IT TO MAKE REFERENCE TO THE SUBJECT MATTER OF THE DISAGREEMENT IN CONNECTION WITH ITS REPORT. THE COMPANY HAS AUTHORIZED THE PRIOR AUDITOR TO RESPOND FULLY TO INQUIRIES FROM MALONE & BAILEY, PLLC REGARDING THE PRECEDING DISCLOSURE THE REPORT OF THE PRIOR AUDITOR FOR THE TWO MOST RECENT FISCAL YEARS DID NOT CONTAIN ANY ADVERSE OPINION OR DISCLAIMER OF OPINION AND WAS NOT QUALIFIED OR MODIFIED AS TO UNCERTAINTY, AUDIT SCOPE OR ACCOUNTING PRINCIPLES. THE DECISION TO CHANGE PRINCIPAL ACCOUNTANTS WAS RECOMMENDED AND APPROVED BY THE COMPANY'S BOARD OF DIRECTORS AND MADE AT ITS REQUEST. DURING THE COMPANY'S TWO MOST RECENT FISCAL YEARS AND BETWEEN MAY 1, 2003 THROUGH JUNE 17, 2003, THE PRIOR AUDITOR HAS NOT ADVISED THE COMPANY THAT ANY OF THE FOLLOWING EXIST OR ARE APPLICABLE: (1) THAT THE INTERNAL CONTROLS NECESSARY FOR THE COMPANY TO DEVELOP RELIABLE FINANCIAL STATEMENTS DO NOT EXIST; (2) THAT INFORMATION HAS COME TO ITS ATTENTION THAT HAS LEAD IT TO NO LONGER BE ABLE TO RELY ON MANAGEMENT'S REPRESENTATIONS, OR THAT HAS MADE THEM UNWILLING TO BE ASSOCIATED WITH THE FINANCIAL STATEMENTS PREPARED BY MANAGEMENT; OR (3) THAT THE COMPANY NEEDS TO EXPAND SIGNIFICANTLY THE SCOPE OF ITS AUDIT, OR THAT INFORMATION HAS COME TO ITS ATTENTION THAT IF FURTHER INVESTIGATED MAY MATERIALLY IMPACT THE FAIRNESS OR RELIABILITY OF A PREVIOUSLY ISSUED AUDIT REPORT OR THE UNDERLYING FINANCIAL STATEMENTS OR ANY OTHER FINANCIAL PRESENTATION, OR THE FINANCIAL STATEMENTS ISSUED OR TO BE ISSUED COVERING THE FISCAL PERIOD(S) SUBSEQUENT TO THE DATE OF THE MOST RECENT AUDITED FINANCIAL STATEMENTS (INCLUDING INFORMATION THAT MIGHT PRECLUDE THE ISSUANCE OF AN UNQUALIFIED AUDIT REPORT). THE PRIOR AUDITOR HAS PROVIDED A LETTER ADDRESSED TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION S-B ITEM 304 AS TO WHETHER THE PRIOR AUDITOR AGREES WITH THE PRECEDING DISCLOSURE. NEITHER THE COMPANY NOR ANYONE ACTING ON ITS BEHALF CONSULTED MALONE & BAILEY, PLLC REGARDING THE APPLICATION OF ACCOUNTING PRINCIPLES TO A SPECIFIC COMPLETED OR CONTEMPLATED TRANSACTION, OR THE TYPE OF AUDIT OPINION THAT MIGHT BE RENDERED ON THE COMPANY'S FINANCIAL STATEMENTS. THE COMPANY HAS PROVIDED THE PRECEDING DISCLOSURE TO MALONE & BAILEY, PLLC AND HAS GIVEN MALONE & BAILEY, PLLC AN OPPORTUNITY TO PROVIDE A LETTER ADDRESSED TO THE SECURITIES AND EXCHANGE COMMISSION IF DESIRED. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS ARE: NAME AGE POSITION ---- --- -------- RICHARD J. CHURCH 50 DIRECTOR, PRESIDENT, AND TREASURER MICHAEL L. MEAD 54 DIRECTOR, VICE-PRESIDENT, AND SECRETARY RICHARD J. CHURCH HAS SERVED AS THE COMPANY'S DIRECTOR, TREASURER AND CO-PRESIDENT SINCE MAY 2000, AND PRESIDENT SINCE APRIL 2002. MR. CHURCH GRADUATED FROM THE UNIVERSITY OF TEXAS AT AUSTIN, TEXAS IN 1976 WITH A BACHELOR OF SCIENCE IN ELECTRICAL ENGINEERING. IN 1986, MR. CHURCH CO-FOUNDED CHURCH REALTY, A COMMERCIAL AND INVESTMENT REAL ESTATE COMPANY. MR. CHURCH IS A LICENSED REAL ESTATE AGENT AND SITS ON THE BOARD OF DIRECTORS OF SOUTHWESTERN MANUFACTURING CO., INC. MICHAEL L. MEAD HAS SERVED AS THE COMPANY'S DIRECTOR, SECRETARY AND CO-PRESIDENT SINCE MAY 2000, AND VICE-PRESIDENT, SINCE APRIL 2002. MR. MEAD GRADUATED FORM ABILENE CHRISTIAN UNIVERSITY IN MAY 1971 WITH A BACHELOR OF SCIENCE IN ACCOUNTING AND ECONOMICS. HE GRADUATED FROM TEXAS TECH SCHOOL OF LAW IN MAY, 1974 WITH A DOCTOR OF JURISPRUDENCE. FROM 1974 UNTIL 1980, MR. MEAD PROVIDED FINANCIAL PLANNING AND INVESTMENT SERVICES TO INDIVIDUALS AND SMALL BUSINESSES. FROM 1980 TO 1992, MR. MEAD OWNED AND OPERATED M.L. MEAD & COMPANY, A BUSINESS DEVELOPMENT AND INVESTMENT BANKING FIRM. IN 1992, MR. MEAD FOUNDED ENTREPRENEURS ONLINE, AN ONLINE COMMUNITY FOR SMALL BUSINESS OWNERS, WHICH HE SOLD IN 1995. IN 1996, MR. MEAD FOUNDED ENTERPRISE TECHNOLOGIES, A BUSINESS DEVELOPMENT CONSULTING FIRM AND "VIRTUAL" BUSINESS INCUBATOR. THE COMPANY DOES NOT HAVE A CLASS OF SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND IS NOT SUBJECT TO REPORTING REQUIREMENTS OF SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ITEM 10. EXECUTIVE COMPENSATION. CASH COMPENSATION OF $6,000 WAS PROVIDED TO MR. CHURCH FROM MAY 1, 2002 THROUGH APRIL 30, 2003. NO DEFERRED COMPENSATION OR LONG-TERM INCENTIVE PLAN AWARDS WERE ISSUED OR GRANTED TO THE COMPANY'S MANAGEMENT, MESSRS. MEAD AND CHURCH, DURING THE FISCAL YEARS ENDED APRIL 30, 1999, APRIL 30, 2000, APRIL 30, 2001 OR APRIL 30, 2002. FURTHER, NO MEMBER OF THE COMPANY'S MANAGEMENT HAS BEEN GRANTED ANY OPTION OR STOCK APPRECIATION RIGHT EXCEPT AS SET FORTH HEREIN. BECAUSE SUCH LIMITED INFORMATION ABOUT EXECUTIVE COMPENSATION IS REQUIRED TO BE DISCLOSED, THE TABLES GENERALLY REQUIRED HAVE NOT BEEN INCLUDED WITHIN THIS ITEM. DURING FISCAL 2002, THE COMPANY GRANTED TO MICHAEL L. MEAD (A DIRECTOR AND CO-PRESIDENT OF THE COMPANY DURING MOST OF FISCAL 2002) OPTIONS TO PURCHASE 722,222 SHARES OF THE COMPANY'S COMMON STOCK, EFFECTIVE ON THE DATE THE COMPANY'S COMMON STOCK BECOMES ELIGIBLE FOR TRADING ON THE NASD OTC BULLETIN BOARD. IN JUNE 2003 MR. MEAD RELINQUISHED THESE OPTION RIGHTS. DURING FISCAL 2002, THE COMPANY GRANTED TO RICHARD J. CHURCH (A DIRECTOR AND CO-PRESIDENT OF THE COMPANY DURING MOST OF FISCAL 2002) OPTIONS TO PURCHASE 722,222 SHARES OF THE COMPANY'S COMMON STOCK, AT $0.18 PER SHARE, EFFECTIVE IF THE COMPANY'S COMMON STOCK DOES NOT BECOME ELIGIBLE FOR TRADING ON THE NASD OTC BULLETIN BOARD BY DECEMBER 31, 2002. SINCE THE COMPANY'S STOCK WAS RELEASED FOR TRADING IN OCTOBER 2002 THE OPTIONS WERE RELINQUISHED BY MR. CHURCH. THERE ARE NO STANDARD ARRANGEMENTS PURSUANT TO WHICH THE COMPANY'S DIRECTORS ARE COMPENSATED FOR ANY SERVICES PROVIDED AS DIRECTOR. NO ADDITIONAL AMOUNTS ARE PAYABLE TO THE COMPANY'S DIRECTORS FOR COMMITTEE PARTICIPATION OR SPECIAL ASSIGNMENTS. THERE ARE NO ARRANGEMENTS PURSUANT TO WHICH ANY OF THE COMPANY'S DIRECTORS WAS COMPENSATED DURING THE COMPANY'S LAST COMPLETED CALENDAR YEAR FOR ANY SERVICE PROVIDED AS DIRECTOR. THERE ARE NO EMPLOYMENT CONTRACTS, COMPENSATORY PLANS OR ARRANGEMENTS, INCLUDING PAYMENTS TO BE RECEIVED FROM THE COMPANY, WITH RESPECT TO ANY DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY WHICH WOULD IN ANY WAY RESULT IN PAYMENTS TO ANY SUCH PERSON BECAUSE OF HIS OR HER RESIGNATION, RETIREMENT OR OTHER TERMINATION OF EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES, ANY CHANGE IN CONTROL OF THE COMPANY, OR A CHANGE IN THE PERSON'S RESPONSIBILITIES FOLLOWING A CHANGE IN CONTROL OF THE COMPANY." ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. THE FOLLOWING TABLE SETS FORTH, AS OF APRIL 30, 2003 THE NUMBER AND PERCENTAGE OF OUTSTANDING SHARES OF COMPANY COMMON STOCK OWNED BY (I) EACH PERSON KNOWN TO THE COMPANY TO BENEFICIALLY OWN MORE THAN 5% OF ITS OUTSTANDING COMMON STOCK, (II) EACH DIRECTOR, (III) EACH NAMED EXECUTIVE OFFICER, AND (IV) ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP.
NUMBER OF SHARES OF PERCENTAGE OF NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK BENEFICIALLY OWNED OWNERSHIP ------------------------------------------ ---------------------------------- -------------- MICHAEL L. MEAD 5644 WESTHEIMER, SUITE 123 HOUSTON, TX. 77056 500,000 26.3% RICHARD J. CHURCH 5617 BISSONNET, SUITE 215 HOUSTON, TX 77081 1,222,222 64.2% ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (2 PERSONS) 1,722,222 90.5%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. THERE HAVE BEEN NO MATERIAL TRANSACTIONS, SERIES OF SIMILAR TRANSACTIONS, CURRENTLY PROPOSED TRANSACTIONS, OR SERIES OF SIMILAR TRANSACTIONS, TO WHICH THE COMPANY WAS OR IS TO BE A PARTY, IN WHICH THE AMOUNT INVOLVED EXCEEDED $60,000 AND IN WHICH ANY DIRECTOR OR EXECUTIVE OFFICER, OR ANY SECURITY HOLDER WHO IS KNOWN TO THE COMPANY TO OWN OF RECORD OR BENEFICIALLY MORE THAN FIVE PERCENT OF THE COMPANY'S COMMON STOCK, OR ANY MEMBER OF THE IMMEDIATE FAMILY OF ANY OF THE FOREGOING PERSONS, HAD A MATERIAL INTEREST, EXCEPT (1) AS GIVEN ABOVE UNDER ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND (2) AND INCLUDED IN NOTES TO FINANCIAL STATEMENTS. . ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (A) THE FOLLOWING EXHIBITS ARE TO BE FILED AS PART OF THE ANNUAL REPORT: (I) EXHIBIT A - SARBANES-OXLEY ACT OF 2002 (B) ON MARCH 12, 2003, THE COMPANY FILED A CURRENT REPORT ON FORM 8-K WITH THE SEC disclosing the Company signed a letter of intent to merge with International Aerospace Technologies Ltd. However, the letter of intent expired and the merger did not occur. INDEX TO FINANCIAL STATEMENTS PAGE INDEPENDENT AUDITORS' REPORT........................................... F-1 INDEPENDENT AUDITORS' REPORT........................................... F-2 BALANCE SHEET.......................................................... F-3 STATEMENTS OF OPERATIONS............................................... F-4 STATEMENTS OF STOCKHOLDERS' EQUITY..................................... F-5 STATEMENTS OF CASH FLOWS............................................... F-6 NOTES TO FINANCIAL STATEMENTS.......................................... F-7 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS NETWORK USA, INC. HOUSTON, TEXAS WE HAVE AUDITED THE ACCOMPANYING BALANCE SHEET OF NETWORK USA, INC. AS OF APRIL 30, 2003, AND THE RELATED STATEMENTS OF OPERATIONS, STOCKHOLDERS' EQUITY, AND CASH FLOWS FOR THE YEAR THEN ENDED. THESE FINANCIAL STATEMENTS ARE THE RESPONSIBILITY OF THE COMPANY'S MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE FINANCIAL STATEMENTS BASED ON OUR AUDIT. WE CONDUCTED OUR AUDIT IN ACCORDANCE WITH AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. 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 NETWORK USA, INC. AS OF APRIL 30, 2003, AND THE RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR THE YEAR THEN ENDED, IN CONFORMITY WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. MALONE & BAILEY, PLLC HOUSTON, TEXAS WWW.MALONE-BAILEY.COM JUNE 26, 2003 INDEPENDENT AUDITORS' REPORT BOARD OF DIRECTORS NETWORK USA, INC. WE HAVE AUDITED THE ACCOMPANYING STATEMENTS OF NETWORK USA'S OPERATIONS, CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT), AND CASH FLOWS FOR THE YEAR ENDED APRIL 30, 2002. THESE FINANCIAL STATEMENTS ARE THE RESPONSIBILITY OF THE COMPANY'S MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE FINANCIAL STATEMENTS BASED ON OUR AUDIT. WE CONDUCTED OUR AUDIT IN ACCORDANCE WITH AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. 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 RESULTS OF NETWORK USA'S OPERATIONS, STOCKHOLDERS' EQUITY AND ITS CASH FLOWS FOR THE YEAR THEN ENDED IN CONFORMITY WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. WHITLEY PENN DALLAS, TEXAS AUGUST 13, 2002 NETWORK USA, INC. BALANCE SHEET April 30, 2003
ASSETS Current assets Cash $ 22,596 Investment in marketable securities 71,627 --------- $ 94,223 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 20 --------- Total current liabilities 20 STOCKHOLDERS' EQUITY Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued and outstanding - Common stock, $.01 par value, 5,555,555 shares authorized, 1,915,378 shares issued and outstanding (722,222 shares are puttable, see note 5) 19,153 Additional paid in capital 208,197 Accumulated deficit (133,147) --------- Total Stockholders' Equity 94,203 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 94,223
See accompanying summary of accounting policies and notes to financial statements. NETWORK USA, INC. STATEMENTS OF OPERATIONS Years Ended April 30, 2003 and 2002
Years ended April 30, 2003 2002 General and administrative $ 28,699 $ 5,958 Other income (expense): Realized gains on marketable securities 22,105 - Unrealized loss on marketable securities (2,373) - ---------- ---------- Total other income (expense) 19,732 - Net loss $ (8,967) $ (5,958) Net loss per share: Basic and diluted $ (0.00) $ (0.00) Weighted average shares outstanding: Basic and diluted 1,915,378 1,211,759
See accompanying summary of accounting policies and notes to financial statements. NETWORK USA, INC. STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended April 30, 2003 and 2002
Additional paid in capital Common stock Accumulated Deficit Total Shares Amount Balance, April 30, 2001 1,182,045$ 11,820$ 94,530 $(118,222) $ (11,872) Shares issued for purchase of investment 722,222 7,222 112,778 - 120,000 Net loss - - - (5,958) (5,958) Balance, April 30, 2002 1,904,267 19,042 207,308 (124,180) 102,170 Issuance of common stock for services 11,111 111 889 - 1,000 Net loss - - - (8,967) (8,967) ---------- ------ -------- ---------- ---------- Balance, April 30, 2003 1,915,378$ 19,153$ 208,197 $(133,147) $ 94,203
See accompanying summary of accounting policies and notes to financial statements. NETWORK USA, INC. STATEMENTS OF CASH FLOWS Years Ended April 30, 2003 and 2002
Years ended April 30, 2003 2002 CASH FLOWS FROM OPERATING ACTIVITES: Net loss $ (8,967) $ (5,958) Adjustments to reconcile net loss to cash used in operating activities: Unrealized loss on marketable securities 2,373 - Realized gain on marketable securities (22,105) - Issuance of common stock for services 1,000 - Changes in current assets and liabilities: Prepaid expenses - 1,951 Accounts payable and accrued interest - 20 ---------- -------- NET CASH USED IN OPERATING ACTIVITIES (27,699) (3,987) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of real estate investment 120,000 - Investment in marketable securities (95,000) - Proceeds from sale of marketable securities 43,105 - ---------- -------- NET CASH FROM INVESTING ACTIVITIES 68,105 - CASH FLOWS FROM FINANCING ACTIVITIES: Payable to stockholder (17,810) 3,987 ---------- -------- NET INCREASE (DECREASE) IN CASH 22,596 - Cash, beg. of period - - Cash, end of period $ 22,596 $ - Supplemental information: Income taxes paid $ - $ - Interest paid $ - $ -
See accompanying summary of accounting policies and notes to financial statements. NETWORK USA, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF ACCOUNTING POLICIES Network USA, Inc. was incorporated in Nevada on August 27, 1987. Network USA is currently considered a "public shell" corporation with no business operations and is in the process of searching for an operating business with which to negotiate a "reverse merger." Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash and all highly liquid financial instruments with purchased maturities of three months or less. Marketable Securities Network USA's investments in marketable securities consist of stocks traded in the public market, all of which are classified as trading. Trading securities are recorded at fair value with unrealized holding gains and losses included in earnings. Realized gains and losses are accounted for on the specific identification method. Purchases and sales are recorded on a trade date basis. Income Taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Basic Loss Per Share Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period. Recent Accounting Pronouncements Network USA does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Network USA's results of operations, financial position or cash flow. NOTE 2 - Investment in Real Estate On April 9, 2002, Network USA acquired 200 shares (20%) of One Genesis, Inc. (a private Texas real estate Corporation) from one of the Network USA's principal stockholders through the issuance of 6,500,000 (722,222 after the 1 for 9 split discussed in Note 5) shares of common stock. The shares of One Genesis, Inc. were sold on July 31, 2002 for $120,000 in cash. Due to the lack of trading in the Network USA's common stock from which to value the purchase, at April 30, 2002 the investment was valued at $120,000, the amount of the subsequent sale which resulted in no gain or loss on the sale in 2002. NOTE 3 - Income Taxes Network USA has not yet realized income as of the date of this report, therefore, no provision for income taxes has been made. At April 30, 2003, most of the Company's net operating loss carryforwards for tax purposes have expired or are limited on an annual basis, rendering any available carryforwards virtually valueless. NOTE 4 - Related Party Transactions A stockholder funded Network USA's operations during the past two fiscal years, which resulted in a payable to the stockholder at April 30, 2002 of $17,810. The entire balance was paid in fiscal 2003. As mentioned above, Network USA issued 6,500,000(722,222 after the 1 for 9 split discussed in Note 5) common shares to a principal stockholder for an investment in One Genesis, Inc. (See Note 2 above). NOTE - 5 Common Stock and Options On March 13, 2003, Network USA's board of directors approved a 1 for 9 reverse stock split. All per share data included in the accompanying financial statement have been adjusted retroactively to reflect the split. During the year ended April 30, 2003, Network USA issued 100,000 shares (11,111 after the 1 for 9 split discussed in Note 5) of common stock for services valued at $1,000. In April 2002, Network USA issued certain common stock options to an officer/director. The options were contingent upon future events that never occurred resulting in expiration of the options. In addition, in April 2002 Network USA issued Richard Church a put option which would require Network USA to repurchase 722,222 of common stock at $.18 per share. The initial put date is if Network USA loses eligibility for trading on the OTC Bulletin Board between April 1, 2002 and December 31, 2003. The final put date is December 31, 2005. CERTIFICATIONS Richard J. Church and Michael L. Mead certify that: 1. I have reviewed this annual report on Form 10-KSB of Network USA, Inc. 2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 29, 2003 /s/ Richard J. Church --------------------- Richard J. Church, President and Treasure /s/ Michael L. Mead --------------------- Michael L. Mead, CFO and Secretary See accompanying summary of accounting policies and notes to financial statements. Exhibit A CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Netowrk USA, Inc. (the "Company") on Form 10-KSB for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Date: July 29, 2003 /s/ Richard J. Church --------------------- Richard J. Church, President and Treasurer /s/ Michael L. Mead ------------------------- Michael L. Mead, CFO and Secretary See accompanying summary of accounting policies and notes to financial statements.