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UNITED STATES
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 September 30, 2003.
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transaction Period from _______ to _______
Commission File Number: 0-27083
W3 GROUP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 84-1108035
------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
444 Madison Avenue, Suite 2904, New York, New York 10022
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 750-7878
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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 [ ]
10,392,084 shares of Common Stock, $.0001 par value, outstanding on September
30, 2003.
--------------------------------------------------------------------------------
W3 GROUP, INC.
Form 10-QSB Quarterly Report
For Quarterly Period Ended September 30, 2003
Table of Contents
Page
----
PART I -- FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
Unaudited Balance Sheet at September 30, 2003 and
Audited Balance Sheet at December 31, 2002 1
Unaudited Statements of Operations
For Three and Nine Months Ended
September 30, 2003 and September 30, 2002 2
Unaudited Statements of Cash Flows
For Nine Months Ended
September 30, 2003 and September 30, 2002 3
Unaudited Statements of Stockholders' Equity
For Nine Months Ended September 30, 2003 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 3. Controls and Procedures 16
PART II -- OTHER INFORMATION 17
SIGNATURE 17
EXHIBIT INDEX 18
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
W3 GROUP, INC.
BALANCE SHEETS
--------------
Sept. 30, 2003 December 31, 2002
(Unaudited) (Audited)
----------------- -----------------
ASSETS
------
Current Assets:
Total Current Assets: $ 0 $ 0
----------------- -----------------
TOTAL ASSETS: $ 0 $ 0
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities:
Accounts Payable $ 248,999 $ 293,999
Accrued Interest 19,854 16,254
Stockholders' Loans 40,000 40,000
Due to Ameristar Group Incorporated 116,694 224,694
----------------- -----------------
Total Current Liabilities: $ 425,547 $ 574,947
----------------- -----------------
Stockholders' Equity (Deficit):
Preferred Stock, $.0001 par value,
100,000,000 shares authorized
(See Note 11) - -
Series B Convertible Preferred,
non-dividend bearing,
1,499,060 and 699,060 shares
issued and outstanding $ 523,901 $ 523,891
Common Stock, $.0001 par value,
40,000,000 shares authorized,
10,392,084 and 3,892,085 shares
issued and outstanding
as of September 30, 2003 and
December 31, 2002 (See Note 11) 1,088,187 1,088,226
Additional Paid-in-capital
(See Note 11) 513,254 360,225
Retained Earnings (Deficit) (2,550,889) (2,547,289)
----------------- -----------------
Total Stockholders' Equity (Deficit) (425,547) (574,947)
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 0 $ 0
================= =================
The accompanying notes are an integral part of these financial statements.
1
W3 GROUP, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
------------------------------------
FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30
--------------------------------------------
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues: $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- -----------
Operating Expenses:
Consulting $ 0 $ 0 $ 0 $ 51,561
Depreciation and Amortization 0 0 0 239
Transfer and Filing Fees 0 578 0 767
----------- ----------- ----------- -----------
Total Operating Expenses $ 0 $ 578 $ 0 $ 52,567
----------- ----------- ----------- -----------
(Loss) From Operations: $ 0 $ (578) $ 0 $ (52,567)
----------- ----------- ----------- -----------
Other Income and (Expenses):
Interest Income $ 0 $ 0 $ 0 $ 0
Interest (Expense) (1,200) (1,200) (3,600) (3,600)
----------- ----------- ----------- -----------
Total Other Income
and (Expenses) $ (1,200) $ (1,200) $ (3,600) $ (3,600)
----------- ----------- ----------- -----------
Net (Loss) Before
Provision for Income Taxes $ (1,200) $ (1,778) $ (3,600) $ (56,167)
Provision for Income Taxes 0 0 0 0
----------- ----------- ----------- -----------
Net (Loss) $ (1,200) $ (1,778) $ (3,600) $ (56,167)
----------- ----------- ----------- -----------
Net (Loss) Per Share $ 0.00 $ 0.00 $ 0.00 $ (0.014)
=========== =========== =========== ===========
Weighted Average Number of
Shares Outstanding 5,392,084 3,892,085 5,392,084 3,892,085
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
2
W3 GROUP, INC.
CASH FLOW STATEMENTS (UNAUDITED)
--------------------------------
FOR NINE MONTHS ENDED SEPTEMBER 30
----------------------------------
2003 2002
----------------- -----------------
Cash Flows From Operating Activities:
Net loss $ (3,600) $ (56,167)
Adjustments to reconcile net loss to net
cash flow from operating activities:
Depreciation and amortization 0 239
Decrease (Increase) in prepaid expenses 0 51,561
Increase in accrued interest 3,600 3,600
(Decrease) Increase in payables (45,000) 767
(Decrease) Increase in due to
Ameristar Capital Incorporated (108,000) 0
----------------- -----------------
Cash Used By Operating Activities: $ (153,000) $ 0
----------------- -----------------
Cash Flows From Financing Activities:
Issuance of Common Stock for Services $ 45,000 $ 0
Issuance of Common Stock in exchange
for cancellation of debt 100,000 0
Issuance of Series B Preferred Stock
in exchange for cancellation of debt 8,000 0
----------------- -----------------
Net Cash Provided (Used)
By Financing Activities $ 153,000 $ 0
----------------- -----------------
Net Increase (Decrease) In Cash $ 0 $ 0
Cash, Beginning of the Period 0 0
================= =================
Cash, End of the Period $ 0 $ 0
================= =================
The accompanying notes are an integral part of these financial statements.
3
W3 GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
----------------------------------------------
FOR NINE MONTHS ENDED SEPTEMBER 30, 2003
----------------------------------------
Preferred
Stock Non- Common Total
Dividend Stock Stock-
Bearing Number Common Additional holders'
Series B of Stock Paid-in- Deficit Equity
Convertible Shares Amount Capital Accumulated (Deficit)
----------- ----------- ----------- ----------- ------------ -----------
Balance,
January 1, 2003 $ 523,891 3,892,085 $1,088,226 $ 360,225 $(2,547,289) $ (574,947)
==================== =========== =========== =========== =========== ============ ===========
January 10, 2003
Issuance of Common
Stock for Services 1,499,999 $ 45,000 $ 45,000
Adjustment for
change in par value-
May, 2003-
See Note 11 $ (70) $ (539) $ 609
September 30, 2003
Issuance of Common
Stock in exchange
for cancellation
of debt 5,000,000 $ 500 $ 99,500 $ 100,000
September 30, 2003
Issuance of Series
B Preferred Stock in
exchange for
cancellation of debt $ 80 $ 7,920 $ 8,000
Net loss for
Nine months ended
September 30, 2003 $ (3,600) $ (3,600)
Balance,
September 30, 2003 $ 523,901 10,392,084 $1,088,187 $ 513,254 $(2,550,889) $ (425,547)
==================== =========== =========== =========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
4
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
The accompanying financial statements of W3 Group, Inc. (the "Company")
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. In the opinion of
management, the financial statements reflect all adjustments considered
necessary for a fair presentation. For further information, refer to the
financial statements and footnotes thereto included in our annual report for the
year ended December 31, 2002 as filed with the Securities and Exchange
Commission on March 31, 2003.
Note 1 - Organization and History
---------------------------------
The Company was originally incorporated in the State of Colorado and had
been in the development stage since its formation on February 12, 1988. The
Company was formed to seek potential business acquisitions and its activities
since inception are primarily related to its initial public offering and merger
activities. On May 7, 2003 the Company changed its state of incorporation to
Delaware (See Note 11).
Upon the completion of the acquisition of Concorde Management, Ltd. and its
wholly owned subsidiary, L'Abbigliamento, Ltd., the Company had ceased being a
development stage company. This acquisition was effective July 1, 1997.
L'Abbigliamento, Ltd. is a New York State corporationwhich was incorporated
in March, 1992. L'Abbigliamento, Ltd. commenced operations in August of 1992 as
an importer of fine men's clothing. In October of 1995 Vista International Ltd.,
incorporated in the Cayman Islands, was organized to acquire raw material and to
sell finished goods to areas outside the United States. Effective July 1, 1997
L'Abbigliamento, Ltd. and Vista International Ltd. were acquired through an
exchange of stock by Concorde Strategies Group, Inc. As a result of the
Company's changed focus, an agreement for the divestiture of L'Abbigliamento,
Ltd. effective March 31, 1999, was approved by shareholders on August 12, 1999,
(see "Note 7 - Divestiture of Subsidiary" and "Note 8 - Merger and
Acquisitions") and the divestiture was completed.
On April 21, 1999, the Company entered into an Agreement and Plan of Share
Exchange with W3 Group, Inc. a Delaware corporation which was formed to acquire
and develop young companies whose businesses involved the development of
internet related technology and applications. Effective October 1, 1999, the
agreement was completed and the Company changed its name to W3 Group, Inc. (See
"Note 8 - Merger and Acquisitions".)
Note 2 - Summary of Significant Accounting Policies
---------------------------------------------------
Accounting Method
-----------------
The Company records income and expenses on the accrual method.
5
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand, cash on deposit and highly
liquid investments with maturities generally of three months or less.
Deferred Offering Costs
-----------------------
Costs associated with the Company's private offerings have been charged to
the proceeds of the offering. If the offerings are unsuccessful, the costs are
charged to operations.
Sales and Expenses
------------------
Sales and expenses are recorded using the accrual basis of accounting.
Fixed Assets and Accumulated Depreciation
-----------------------------------------
Fixed assets are stated at cost less accumulated depreciation, which is
provided for by charges to operations over the estimated useful lives of the
assets.
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 revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Note 3 - Capitalization
-----------------------
In April 1996, the Company undertook a private placement of its securities
pursuant to the provisions of Rule 504 under Regulation D under the Securities
Act of 1933, as amended, whereby it issued 9,000,000 shares of its Common Stock
in exchange for the satisfaction of $45,000 in debts owed by the Registrant.
Also in April 1996, the Company effected a 1-for-10 reverse split of its Common
Stock as the result of which the Company had, following the aforesaid private
offering, 1,200,000 shares issued and outstanding. This reverse split was
effected in anticipation of management's renewed efforts to find a suitable
business opportunity for the Company.
In June 1997, the Company issued 300,000 shares of Common Stock to certain
parties who had performed services on behalf of the Company. The shares were
issued in consideration for the cancellation of payments owed by the Company at
the agreed upon rate of $.10 per share and were sold through a private placement
pursuant to the exemption provided by Rule 504 of Regulation D under the
Securities Act of 1933, as amended.
6
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
On October 24, 1997, the Company completed a private placement offering of
450,000 non-dividend bearing, no par value, Series B Convertible Preferred
Shares. All of the shares were sold by the Company and no placement agent was
involved in this offering. The shares were sold at a purchase price of $.3125
per share and the Company realized proceeds of $130,633 from the offering, net
of offering expenses in the amount of $9,992. The shares were sold through a
private placement pursuant to the exemption provided by Rule 504 of Regulation
D under the Securities Act of 1933, as amended. Each Preferred Share was
originally convertible into one and one quarter (1.25) shares of the Company's
Common Stock, no par value, at the election of the Preferred Shareholder at any
time after thirteen months from the date of issuance thereof and for a period of
four years thereafter, ending on October 14, 2002. This date was extended by the
Board of Directors on September 23, 2003 until April 14, 2003; on April 2, 2003
until July 14, 2003; on June 16, 2003 until October 14, 2003; and on September
30, 2003 until January 14, 2004. As discussed below, the conversion right of the
Series B Preferred Shares was adjusted as a result of a 1-for-30 reverse split
of the Company's Common Stock on October 1, 1999. Also, as discussed below, the
conversion right was further adjusted on January 18, 2000 so that each share of
Series B Preferred Stock may be converted to 0.5 (one half) share of Common
Stock at the election of the shareholder.
On January 7, 1998, the Company issued 315,000 shares of Series B
Convertible Preferred Shares to certain parties who had performed services on
behalf of the Company, including two companies which are principally owned by
two Directors of the Company. The shares were issued by the Company in
consideration for the cancellation of debt owed by the Company at the agreed
upon rate of $.25 per share and were sold through a private placement pursuant
to the exemption provided by Rule 504 of Regulation D under the Securities Act
of 1933, as amended.
On June 22, 1998, the Registrant issued 300,000 shares of Common Stock to a
company which has performed services on behalf of the Registrant. The shares
were issued pursuant to an option in the consulting agreement to pay for the
consulting fees through the issuance of restricted shares of Common Stock at the
agreed upon rate of $.47 per share.
On August 12, 1998, the Company completed a private placement of 337,600
Series B Convertible Preferred Stock Purchase Warrants ("B Warrants"). All of
the B Warrants were sold by the Company and no placement agent was involved in
this offering. The B Warrants were sold at a purchase price of $1.00 per Warrant
and the Company realized proceeds of $325,600 from the offering, net of offering
expenses in the amount of $12,000. The B Warrants were sold through a private
placement pursuant to the exemption provided by Rule 504 of Regulation D under
the Securities Act of 1933, as amended. Each B Warrant entitled the holder
thereof to purchase one Series B Convertible Preferred Share at a price of $3.00
per share during the period commencing thirteen months after the date of the
issuance thereof and continuing until February 1, 2002. None of the 337,600 B
Warrants were exercised and all of them expired on February 1, 2002.
7
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
On April 1, 1999, the Company sold 175,000 shares of Series B Convertible
Preferred Stock to certain parties who had performed services on behalf of the
Company, including one company which is principally owned by a Director of the
Company. The shares were sold by the Company in consideration for the
cancellation of payments owed by the Company at the agreed upon rate of $2.00
per share and were sold through a private placement pursuant to the exemption
provided by Rule 504 of Regulation D under the Securities Act of 1933, as
amended.
On May 21, 1999, 199,995 restricted shares of Common Stock were sold to a
principal of L'Abbigliamento, Ltd. who had performed consulting services on
behalf of the Registrant. These shares were issued in October, 1999 in
consideration for the cancellation of payments in the total amount of $64,995
owed by the Registrant for said services.
In October, 1999, the Company issued 116,000 shares of the Series B
Convertible Preferred Stock to three shareholders in satisfaction of a
previously existing obligation relating to consulting services performed on
behalf of the Company by an independent third party.
Effective October 1, 1999, the Agreement and Plan of Share Exchange (the
"Agreement") with W3 Group, Inc. a privately owned company, was completed. (See
"Note 8 - Merger and Acquisitions".) Under the terms of this Agreement, Concorde
acquired one hundred (100%) percent of the capital stock of W3 Group, Inc. in
exchange for an equal number of shares (3,250,000) of Concorde's post split
Common Stock. W3 Group, Inc, became a wholly owned subsidiary of Concorde, and
Concorde changed its corporation name to W3 Group, Inc.
Also, on October 1, 1999, the reverse split of Concorde's Common Stock on
the basis of one new share for each 30 existing shares was effected. The number
of outstanding shares of Concorde's Series B Convertible Preferred Stock and
Series B Convertible Preferred Stock Purchase Warrants remained unchanged,
however, the conversion feature was adjusted to reflect the reverse split.
As per the Agreement, a special distribution of 520,056 Common Stock
Purchase Warrants was made on October 4, 1999 to holders of the Registrant's
Common Stock, Series B Convertible Preferred Stock, and Series B Convertible
Preferred Stock Purchase Warrants. The special distribution was made on the
basis of one Common Stock Purchase Warrant for each ten shares of Common Stock
(pre-reverse split) either outstanding as of September 30, 1999 or committed to
be issued upon conversion of the then outstanding Preferred Shares, or the
currently outstanding Warrants to purchase Preferred Shares. The Common Stock
Purchase Warrants are callable and each represents the right to purchase one
share of Common Stock at a price of $6.00 per share during the exercise period,
which is from the date of their issuance until October 1, 2001. None of the
Common Stock Purchase Warrants were exercised during the exercise period and all
such Warrants expired on October 1, 2001.
8
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
On October 16, 1999, the Company issued 11,800 shares of Common Stock to
the original investors in Series B Convertible Preferred Stock and Series B
Convertible Preferred Stock Purchase Warrants to adjust for the effect of the
Company's restructuring.
At a special meeting of shareholders on January 18, 2000, shareholders
approved amending the Articles of Incorporation to adjust the conversion right
of the Series B Convertible Preferred Stock from an amount equal to 0.0416
shares to 0.5 (one half) share of Common Stock for each one share of Series B
Convertible Preferred Stock.
On April 27, 2000, the Registrant issued 300,000 restricted shares of
Common Stock to a former Director of the Company in consideration for services
being performed on behalf of the Registrant. The shares were issued in lieu of
cash payment at the agreed upon rate of $1.375 per share.
The Company withdrew its private placement offering which had commenced on
December 14, 1999, and returned the private placement proceeds of $50,000 to the
subscribers on May 3, 2000.
On October 1, 2001, all of the 520,056 Common Stock Purchase Warrants then
outstanding expired. These Warrants had been issued by the Company on October 4,
1999 and none had been exercised.
On January 10, 2003, the Board of Directors authorized the issuance of
1,499,999 restricted shares (the "Shares") of Common Stock to two creditors of
the Company in payment of their outstanding invoices for services. The Shares
were issued at the agreed upon rate of $0.03 per share.
On September 30, 2003, the Board of Directors authorized the issuance of
5,000,000 shares of Common Stock and 800,000 shares of Series B Convertible
Preferred Stock to a creditor owned by two Directors of the Company in payment
of a portion of the Company's outstanding debt for operating expenses, rent and
administrative services since 1996. The shares of Common stock were issued at
the agreed upon rate of $0.02 per share and the shares of Series B Convertible
Preferred Stock were issued at the agreed upon rate of $0.01 per share.
Note 4 - Provision for Taxes on Income
--------------------------------------
The estimated provision for income taxes is based on the statutory federal
and state income tax rates.
Note 5 - Leases and Other Commitments
-------------------------------------
None. As of January 1, 2002, office space has been provided by Ameristar
Group Incorporated ("Ameristar"), an affiliated Company, on a rent free basis.
9
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
Note 6 - Related Party Transactions
-----------------------------------
The Company has received advances of monies for its operating expenses from
Ameristar. W3 leased office space from Ameristar on a monthly rental, commencing
on November 1, 1997 for a term of three years and eleven (11) months, ending on
September 30, 2001, and thereafter on a month to month basis. As of January 1,
2002, office space has been provided to the Company by Ameristar on a rent free
basis.
The Company has incurred consulting fees of $236,833 to its Acting
President, and $45,000 to Ameristar since the beginning of 1996. No such
consulting fees have been incurred since December 31, 2001.
In June, 1997 the Company issued 200,000 shares of Common Stock to two
related privately owned companies in consideration of $.10 per share for
consulting services performed on behalf of the Company. (See "Note 3 -
Capitalization")
On January 7, 1998, the Company issued 315,000 shares of Series B
Convertible Preferred Stock to certain parties who had performed services on
behalf of the Company. Of that total, 222,000 shares were issued to two related
privately owned companies in consideration of $.25 per share.
On June 22, 1998, the Registrant issued 300,000 shares of its Common Stock
to a company principally owned by a Director of the Registrant in consideration
of $.47 per share for consulting services performed on behalf of the Registrant.
(See "Note 3 - Capitalization")
On April 1, 1999, the Registrant issued 71,666 of its preferred stock to a
company principally owned by a Director of the Registrant in consideration of
$2.00 per share for consulting services performed on behalf of the Registrant.
(See "Note 3 - Capitalization")
On May 21, 1999, 199,995 restricted shares of Common Stock were sold to a
principal of L'Abbigliamento, Ltd. who had performed consulting services on
behalf of the Registrant. These shares were issued in October, 1999 in
consideration for the cancellation of payments in the total amount of $64,995
owed by the Registrant for said services.
On September 30, 2003, the Company issued 5,000,000 shares of Common Stock
in consideration of $0.02 per share and 800,000 shares of Series B Convertible
Preferred Stock in consideration of $0.01 per share, to Ameristar, a creditor
owned by two Directors of the Company for past advances for operating expenses,
rent and administrative services since 1996. These shares were issued in lieu
of $100,000 and $8,000 respectively, such amounts being a portion of the
Company's outstanding obligation of $226,694.
10
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
Note 7 - Divestiture of Subsidiary
----------------------------------
A termination agreement was executed on May 5, 1999, for the divestiture of
L'Abbigliamento, Ltd., the Company's sole operating subsidiary and was ratified
by shareholders on August 12, 1999. Under the terms of the Agreement, (1)
management of both companies mutually elected to rescind and cancel the
acquisition of L'Abbigliamento, Ltd. by the Company, effective as of the close
of business on March 31, 1999; (2) L'Abbigliamento, Ltd. returned to the Company
one hundred (100%) percent of the Class A Preferred Shares in exchange for which
the Company delivered one hundred (100%) percent of the L'Abbigliamento, Ltd.
capital stock held by it; (3) L'Abbigliamento, Ltd. will repay its outstanding
indebtedness to the Company in the principal amount of $158,000 in five equal
monthly payments of $1,300, plus 55 monthly payments of $1,700, which payments
shall be inclusive of interest at the rate of six (6%) percent per annum, to be
followed by a final payment at the end of aforesaid term equal to the sum of any
accrued but unpaid interest due thereon plus the entire unpaid principal amount;
(4) On January 10, 2001, L'Abbigliamento, Ltd. paid off the balance due on its
loan from State Bank of Long Island, ending the Company's liability for said
loan pursuant to a guarantee of payment previously made by the Company.
Note 8 - Merger and Acquisitions
--------------------------------
On April 21, 1999, the Company entered into an Agreement and Plan of Share
Exchange with W3 Group, Inc., which was approved by shareholders on August 12,
1999, whereby Concorde acquired 100 percent of the Common Stock of W3 Group,
Inc. in exchange for the issuance of 3,275,000 shares of post reverse split
Common Stock of Concorde, at the rate of one Concorde share for one W3 share.
Upon completion of the exchange of shares, effective October 1, 1999, W3 Group,
Inc. became a wholly owned subsidiary of Concorde and Concorde amended its
Articles of Incorporation to change its corporation name to W3 Group, Inc.
Concorde conducted a meeting of shareholders on August 12, 1999 to ratify the
Agreement and certain other matters which had been approved by its Board of
Directors.
Note 9 - Write off of Bad Debt
------------------------------
Pursuant to SFAS-5, "Accounting for Contingencies," the Company has written
off the loan receivable in the amount of $157,522 and related interest
receivable in the amount of $13,140 during the quarter ended September 30, 2001,
and charged a total of $170,662 to bad debt expense. Said loan had been made to
the Company's former operating subsidiary, L'Abbigliamento, Ltd., and had been
in default for over two years. (See "Note 7 - Divestiture of Subsidiary")
Repayment of the loan and related interest cannot be reasonably assured.
11
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
----------------------------------------
Note 10 - Going Concern
-----------------------
As of September 30, 2003, the Company had stockholders' deficit of $533,547
and no cash. The audit report accompanying the Company's financial statements
for the year ended December 31, 2002 contains a going concern qualification
because the Company has no operations, has incurred recurring losses and has no
cash. As a result, substantial doubt exists about the Company's ability to
continue as a going concern. These financial statements have been prepared on
the going concern basis under which an entity is considered to be able to
realize its assets and satisfy its liabilities in the ordinary course of
business. Refer to the audit report contained in "PART F/S" of Form 10-KSB for
the year ended December 31, 2002. Operations to date have been primarily
financed by equity transactions. Management is re-evaluating business
opportunities and looking for a new direction for the Company. The financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
Note 11 - Change of Company's Domicile
--------------------------------------
Effective May 7, 2003, the Company changed its domicile from the State of
Colorado to the State of Delaware. This change in its state of incorporation had
been previously approved by a vote of the requisite number of holders of the
Company's outstanding shares of Common Stock.
On the effective date, the Company merged into W3 Group, Inc., a newly
formed Delaware corporation for the purpose of changing its domicile to
Delaware. There was no change in the number of issued and outstanding shares of
the Company as a result. The Certificate of Incorporation and By Laws of W3
Group, Inc., a Delaware corporation, became the Certificate of Incorporation and
By laws of the Company. As a result, the Company's total number of authorized
shares of Preferred Stock was changed from 100,000,000 shares to 10,000,000
shares, and the number of authorized shares of Common Stock was changed from
500,000,000 shares to 40,000,000 shares. Also, the par value for both the
Preferred Stock and Common Stock was changed from no par value to $.0001 par
value per share. This change resulted in adjustments to the Company's unaudited
Balance Sheet at June 30, 2003, consisting of an increase in the amount of $609
to Additional Paid-in Capital and a decrease in the amount of $539 to Common
Stock, based on 5,392,084 shares of Common Stock issued and outstanding and a
decrease in the amount of $70 to Preferred Stock, based on 699,060 shares of
Series B Convertible Preferred Stock issued and outstanding as of June 30, 2003.
12
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
The following discussion and analysis should be read in conjunction with
the unaudited financial statements and notes thereto included in Part I, Item 1
of this report, and Management's Discussion and Analysis of Financial Conditions
and Results of Operations and General Risk Factors Affecting the Company
contained in the Company's annual report for the year ended December 31, 2002 as
filed with the Securities and Exchange Commission on March 31, 2003.
Forward-Looking Statements
Some of the information contained in this report may constitute forward-
looking statements or statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Any such forward-looking statements are based on
current expectations and projections about future events. The words estimate,
plan, intend, expect, anticipate and similar expressions are intended to
identify forward-looking statements which involve, and are subject to, known and
unknown risks, uncertainties and other factors which could cause the Company's
actual results, financial or operating performance, or achievements to differ
materially from future results, financial or operating performance, or
achievements expressed or implied by such forward-looking statements.
Projections and assumptions contained and expressed herein were reasonably based
on information available to the Company at the time so furnished and as of the
date of this filing. All such projections and assumptions are subject to
significant uncertainties and contingencies, many of which are beyond the
Company's control, and no assurance can be given that the projections will be
realized. Readers are cautioned not to place undue reliance on any such forward-
looking statements, which speak only as of the date hereof. Careful
consideration should be given to the General Risk Factors contained in the
Company's Form 10-KSB for the year ended December 31, 2002. The Company
undertakes no obligation to publicly release any revisions to these forward-
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of
operation is based on our financial statements, which we prepare in conformity
with accounting principles generally accepted in the United States of America.
The preparation of our financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. These
estimates and assumptions are based on historical experience and on various
other factors that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
These estimates and assumptions also require the application of certain
accounting policies, many of which require us to make estimates and assumptions
about future events and their impact on amounts reported in our financial
statements and related notes. We periodically review our accounting policies and
estimates and make adjustments when facts and circumstances dictate.
13
Results of Operations
The Company did not have any revenue during the three month period ended
September 30, 2003, or during the comparable period for the prior year, and has
not had any revenue since the first quarter of 1999.
The Company had no operating expenses for the three month period ended
September 30, 2003, a decrease of $578 from the prior year period.
The net loss for the three month period ended September 30, 2003 was $1,200
compared to a net loss of $1,778 for the comparable period in the prior year, a
decrease of $578. The net loss for the nine month period ended September 30,
2003 was $3,600, compared to a net loss of $56,167 for the prior year comparable
period, resulting from a decrease in consulting expenses of $51,561, a decrease
in depreciation expense of $239 and a decrease in transfer fees of $767.
The Company had no cash at September 30, 2003 and at December 31, 2002.
Accounts payable at September 30, 2003 totaled $248,999, a decrease of $45,000
from December 31, 2002, resulting from the payment of two creditors by the
issuance of the Company's Common Stock. (See Financial Statements, "Note 3 -
Capitalization.") The liability to Ameristar decreased $108,000 to $116,694
during the quarter ended September 30, 2003 as a result of the issuance of the
Company's Common Stock and Series B Convertible Preferred Stock in partial
satisfaction of the Company's obligation to Ameristar (See Financial Statements,
"Note 3- Capitalization" and "Note 6- Related Party Transactions").
On January 10, 2003, the Board of Directors authorized the issuance of
1,499,999 restricted shares (the "Shares") of Common Stock to two creditors of
the Company in payment of their outstanding invoices for services. The Shares
were issued at the agreed upon rate of $0.03 per share.
On June 16, 2003, a Resolution was passed by the Board of Directors, which
extended the conversion period of the Series B Convertible Preferred Stock from
July 14, 2003 until the close of business on October 14, 2003. On September 30,
2003, the Board of Directors passed a Resolution to extend the conversion period
to January 14, 2004. Each share of Series B Preferred Stock may be converted to
0.5 (one half) share of Common Stock at the election of the shareholder. (See
Financial Statements, "Note 3 - Capitalization.")
The Company is still pursuing L'Abbigliamento, Ltd., the Company's former
operating subsidiary, in regard to obtaining payments toward the loan, which was
written off in 2001. (See Financial Statements, "Note 7 - Divestiture of
Subsidiary and "Note 9 - Write Off of Bad Debt.") No assurance can be made
regarding any such payments.
The Company is continuing to look for suitable acquisition candidates. As
of the date of this Report, no additional acquisition candidates have been
found, and there is no assurance that any additional candidates will be found.
14
Present Overview
W3 intends to acquire, finance, and restructure profitable companies that
can utilize the internet to expand their business and distribution channel. As a
result of the significant changes in the internet industry, the Company's focus
is no longer on internet related companies. The Company is seeking to acquire
companies that would become wholly owned, or majority owned, subsidiaries of W3.
W3 intends to concentrate on existing companies that have proven markets,
profitability, and management. The Company's goal is to provide a platform for
selected companies to expand their markets, strengthen internal functions by
providing consulting services and professional management support, and expansion
capital, while allowing the companies to continue management of daily
operations.
W3's objective is to better meet the needs of growing companies that may
have had difficulty obtaining capital from traditional sources such as banks,
large asset based lenders, and the public securities markets. Also, W3 believes
that its opportunity is enhanced because of the consolidation in the commercial
banking industry and the emphasis in investment banking toward increasingly
larger financings. The resulting diminishing of available capital has affected
the flow to smaller companies, where the need for capital is the most critical.
W3's approach is to develop "partnerships" with companies having
exceptional management in order to improve the long term value of a business.
The participation of management through equity based compensation and stock
ownership is a crucial ingredient of W3's plan.
Liquidity and Capital Resources
At September 30 2003, the Company had no cash. The Company has received an
audit opinion, which includes a "going concern" risk, which raises substantial
doubt regarding the Company's ability to continue as a going concern. (See
"Note 10 to Financial Statements). Management is re-evaluating business
opportunities and looking for a new direction for the Company.
General Risk Factors Affecting the Company
Various factors could cause actual results of the Company to differ
materially from those indicated by forward-looking statements made from time to
time in news releases, reports, proxy statements, registration statements and
other written communications (including the preceding sections of this
document), as well as oral statements made from time to time by representatives
of the Company. Except for historical information, matters discussed in such
oral and written communications are forward-looking statements that involve
risks and uncertainties, including, but not limited to the following:
. Rapidly changing business environment.
. Intense competition within the market place.
15
. Many well established companies and smaller entrepreneurial companies
have significant resources that will compete with the Company's limited
resources in the acquisition of companies.
. There can be no assurance that the Company will be able to compete
successfully in the acquisition of subsidiary companies.
. The management of growth is expected to place significant pressure on
the Company's managerial, operational, and financial resources.
. The Company will not be able to accomplish its growth strategy if it is
not able to consummate future acquisitions and raise capital.
. The Company may not be able to operate as a going concern. Refer to
independent auditor's report accompanying the Company's financial
statements included in the Company's annual report on Form 10-KSB for
the year ended December 31, 2002 and Note 10 to Financial Statements.
Item 3. Controls and Procedures
Based on his evaluation, as of a date within 90 days of the filing of this
Form 10-QSB, the Company's Acting President and Principal Financial Officer has
concluded the Company's disclosure controls and procedures (as defined in Rules
13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective.
There have been no significant changes in internal controls or in other
factors that could significantly affect these controls subsequent to the date of
his evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
16
PART II
OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Change in Securities. None
Item 3. Defaults Upon Senior Securities. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports of Form 8-K. None
(a) Exhibits
Exhibit No. Description
31.1 Certification under Section 302 of the Sarbanes-
Oxley Act of 2002 of Acting President and Principal
Financial Officer
32.1 Certification under Section 906 of the Sarbanes-
Oxley Act of 2002 of Acting President and Principal
Financial officer
(b) Reports on Form 8-K.
None
SIGNATURE
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed in
its behalf by the undersigned, thereunto duly authorized.
Date: November 12, 2003 By: /s/ Robert Gordon
-----------------------------------
Robert Gordon
Acting President
Principal Financial Officer
17
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
31.1 Certification under Section 302 of the Sarbanes-
Oxley Act of 2002 of Acting President and Principal
Financial Officer
32.1 Certification under Section 906 of the Sarbanes-
Oxley Act of 2002 of Acting President and Principal
Financial officer
18