U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
__________to__________
Commission File Number 0-27083
W3 GROUP, INC.
(Formerly known as Concorde
Strategies Group, Inc.)
(Exact name of small business issuer as specified in its charter)
Colorado 84-1108035
(State or other jurisdiction of (IRS Employer
Identification No.)
incorporation or organization)
444 Madison Avenue, Suite 1710, New York, NY 10022
(Address of principal executive offices)
(212) 317-0060
(Issuer's telephone number)
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
Currently 3,413,582 shares of Common Stock, no par value,
outstanding; at September 30, 1999, 3,600,000 shares, no par
value, outstanding
W3 GROUP, INC.
(Formerly known as Concorde Strategies Group, Inc.)
Form 10-QSB Quarterly Report
For Period Ended September 30, 1999
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Consolidated Balance Sheets at
September 30, 1999 and December 31, 1998 (audited) 4-5
Unaudited Consolidated Statement of Operations
For Three and Nine Months Ended September 30, 1999
and September 30, 1998 6
Unaudited Consolidated Statement of Cash Flows For Nine
Months Ended September 30, 1999 and September 30, 1998 7
Statement of Stockholders' Equity (Deficit) 8
Notes to Financial Statements 9-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 16
PART II -- OTHER INFORMATION 19
SIGNATURES 20
Item 1. Financial Statements:
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are
presented in accordance with generally accepted accounting
principles for interim financial information and the instructions
to Form 10-QSB and item 310 under subpart A of Regulation S-B. In
the opinion of management, all adjustments considered necessary for
a fair presentation have been included. The results of operations
for the quarterly period covered by this report do not include the
results of the Company's subsidiary which was divested, effective
March 31, 1999. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of results that
may be expected for the year ending December 31, 1999. For further
information, refer to the consolidated financial statements and
footnotes, thereto included in the Company's annual report on form
10-KSB for the year ended December 31, 1998. Effective October 1,
1999, Concorde Strategies Group, Inc. changed its corporation name
to W3 Group, Inc.
<PAGE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
BALANCE SHEET AND CONSOLIDATED BALANCE SHEET
Consolidated
Balance Sheet Balance Sheet
(Unaudited) Audited
September 30, December 31,
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,464 $ 2,337
Accounts receivable 0 1,361,173
Inventory (as submitted) 0 2,014,517
Prepaid Expenses $ 17,625 $ 76,347
TOTAL CURRENT ASSETS: $ 19,089 $ 3,454,374
Fixed assets, net of accumulated
depreciation of
$1,098 and $26,299 $ 1,398 46,031
Leasehold improvements net of
accumulated amortization
of $0 and $2,534 - 57,317
Security Deposits - $ 40,500
Loan Receivable (Note 12) $ 157,522 -
Rent Receivable (Note 12) $ 3,394 $ -
TOTAL ASSETS $ 181,403 $ 3,598,222
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) Audited
September 30, December 31,
1999 1998
CURRENT LIABILITIES:
Accounts payable $ 107,042 $ 1,340,483
Payroll taxes payable 0 591
Due to Factor 0 394,185
Bank and other loans payable
(current) 0 46,350
Corporate income taxes payable 0 63,147
Due to Ameristar
Capital Corporation $ 99,927 $ 23,383
TOTAL CURRENT LIABILITIES $ 206,969 $ 1,868,139
LONG TERM LIABILITIES:
Bank and other loans $ 0 $ 173,381
TOTAL LIABILITIES: $ 206,969 $ 2,041,520
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value,
100,000,000 shares authorized.
Series A Convertible, redeemable
Preferred, 0, June 30, 1999 and
1,000 December 31, 1998 shares
issued and outstanding
Series B Convertible,non-dividend
bearing, 1,056,000 and 765,000 shares
issued or issuable and outstanding $ 791,383 $ 209,383
Series B Convertible Preferred
Stock Purchase Warrants $ 325,600 $ 325,600
Common stock, no par value,
500,000,000 shares authorized,
3,600,000 shares
issued and outstanding $ 307,839 $ 307,839
Common stock issuable,
199,995 shares $ 64,995 0
Additional paid-in-capital $ 1,875 977,875
Retained earnings(Deficit) (1,517,258) (263,995)
TOTAL STOCKHOLDERS' EQUITY (25,566) 1,556,702
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 181,403 $ 3,598,222
The accompanying notes are an integral part of these financial statements.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND
STATEMENT OF OPERATIONS (Unaudited)
Statement of Consolidated Statements of Operations
Operations For the
For the Three Three Months For the Nine
Months Ended Ended Months Ended
Sept. 30, Sept. 30, September 30,
REVENUES 1999 1998 1999 1998
Sales $ 0 $ 853,492 $ 837,486 $2,785,295
COST OF GOODS SOLD $ 0 $ 648,125 $ 595,713 $2,101,683
GROSS PROFIT: $ 0 $ 205,367 $ 241,773 $ 683,612
OPERATING EXPENSES:
Transfer and filing fees $ 2,810 1,323 5,690 2,909
Insurance $ 1,180 16,455 19,638 35,484
Payroll and payroll taxes - 87,465 71,976 245,912
Other taxes - - - 476
Rent 11,538 32,229 46,514 6,687
Utilities and telephone 716 6,007 7,733 19,352
Commissions - 9,507 10,188 30,428
Auto and travel - 12,112 8,062 26,397
Entertainment - 3,734 3,168 8,528
Bank charges, interest and
Selling expenses 68 16,720 31,529 39,934
Credit and charges - 4,684 - 7,757
Advertising - - 7,400 1,400
Office Expenses 554 23,485 2,416 37,805
Repairs and maintenance - 1,169 729 5,632
Consulting 262,625 21,825 746,284 74,575
Professional Fees 9,725 8,520 20,297 60,152
Depreciation and amortization 200 6,415 3,495 10,728
Dues - 362 - 1,862
Other expenses $ - $ 341 $ 533 $ 1,422
TOTAL OPERATING EXPENSES $ 289,416 $ 252,353 $ 985,652 $ 707,440
INCOME(LOSS) FROM OPERATIONS $ (289,416)$ (46,986)$(743,879) $ (23,828)
OTHER INCOME AND (EXPENSES):
EQUIPMENT RENTAL 3,394 - 3,394 -
INTEREST INCOME $ 2,389 $ 5,383 $ 3,982 $ 6,505
TOTAL OTHER INCOME (EXPENSES):$ 5,783 5,383 7,376 6,505
NET INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES$(283,633) (41,603)$(736,503) $ (17,323)
ESTIMATED PROVISION (REFUND)
INCOME TAXES $ 300 $ (2,793)$ 7,099 $ 3,277
NET INCOME (LOSS) $ (283,933)$ (38,810)$(743,602) $ (20,600)
NET (LOSS) PER SHARE $ (.08) $ (.01) $ (.21) $ .01
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,600,000 3,600,000 3,600,000 3,411,100
The accompanying notes are an integral part of these financial statements.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CASH FLOW STATEMENTS
For the Nine Months Ended September 30, 1999 and 1998 (Unaudited)
Consolidated Cash Flow Statements
September 30, 1999 September 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (743,602) $ (20,600)
Adjustments to reconcile net loss to
net cash flow from operating activities:
Depreciation and amortization 3,495 10,728
Decrease in accounts receivable 1,361,173 269,000
Decrease (Increase)in inventory 2,014,517 (428,474)
Increase in prepaid expenses 58,722 (81,590)
Decrease in security deposits 40,500 0
(Increase) in loan receivable (157,522) 0
(Increase) in interest receivable (3,394) 0
(Decrease) in accounts payable (1,234,033) (237,854)
Increase (Decrease)in advances due
to Ameristar Capital Corporation 76,544 (66,000)
(Increase) in deferred offering costs - (12,000)
(Decrease) in corporate
income taxes payable $ (63,147) $ (6,423)
Cash Provided (Used)
by Operating Activities $ 1,353,253 $ (573,213)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in fixed assets 41,139 (2,496)
Decrease (Increase) in leasehold
improvements 57,317 (9,328)
Divestiture of Subsidiary (509,661) 0
Net Cash used in investing activities (411,205) (11,824)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
preferred stock and warrants 582,000 416,350
Proceeds from common stock issuable
and issuance of common stock 64,995 141,000
Reduction in additional paid in
capital (976,000) 0
Reduction in amount due
to factor - net (394,185) (28,330)
Repayment of bank and other loans (219,731) (39,917)
Net Cash Provided by
Financing Activities $ (942,921) $ 489,103
Net (Decrease) Increase in Cash $ (873) $ (95,934)
CASH, BEGINNING OF THE PERIOD $ 2,337 $ 133,606
CASH, END OF THE PERIOD $ 1,464 $ 37,672
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONCORDE STRATEGIES GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Consolidated Statement of Stockholders' Equity
for the Nine Months Ended September 30, 1999
<TABLE>
Preferred Series B Preferred Stock
Stock Non- Convertible No Par Value
Dividend Preferred Series A Common Total
Bearing Stock Convertible Stock Common Common Additional Stockholders'
Series B Purchase Redeemable Number of Stock Stock Paid-in Deficit Equity
Convertible Warrants Shares Shares Amount Issuable Capital Accumulated (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1999 $209,383 $325,600 1,000 3,600,000 $307,839 $977,875 $(263,995) $ 1,556,702
April 1, 1999
Divestiture of
subsidiary,
L'Abbigliamento, Ltd.
(Note 12) (1,000) $(976,000) (509,661) $(1,485,661)
175,000 shares
of Series B
Convertible
Preferred Stock
issued for services
April 1, 1999 $350,000 350,000
May 21, 1999,
199,995 shares to
be issued for
consulting services 64,995 64,995
116,000 shares to
be issued for
consulting services for
period ended
September 30, 1999 232,000 232,000
Net (loss)for
the Nine Months
Ended September 30,
1999 -- -- -- -- -- -- -- $(743,602) $(743,602)
Balance,
September 30, 1999 $791,383 $325,600 0 3,600,000 $307,839 $64,995 $ 1,875 $(1,517,258) $ (25,566)
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED September 30, 1999
Note 1 - ORGANIZATION AND HISTORY
The Company is a Colorado corporation 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.
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 corporation which 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. An agreement for the divestiture of L'Abbigliamento,
Ltd. effective March 31, 1999, was approved by shareholders on August 12,
1999 (see Note 12 and Item 2), and the divestiture has been 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 involve 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 Notes 13 and 14).
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, cash on deposit and highly
liquid investments with maturities generally of three months or less to
L'Abbigliamento, Ltd.
Organization Costs
Costs incurred in organizing the Company are being amortized over a sixty-
month period.
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
will be charged to operations.
Sales and expenses
Sales and expenses are recorded using the accrual basis of accounting.
Inventory shipped on consignment is recorded as a sale when it is sold by the
customer.
Inventory
Inventory is stated at the lower of first-in first-out; cost or market and
is based upon physical counts taken by management at December 31, 1998.
Fixed assets and accumulated depreciation
Fixed assets consist of a computer system and are stated at cost less
accumulated depreciation which is provided for by charges to operations over
the estimated useful lives of the assets. The assets are depreciated over
five years utilizing Internal Revenue Code Section 179 expense deduction of
$17,500 annually with the remaining basis, when applicable, being depreciated
using an accelerated cost revenue method.
Leasehold improvements and accumulated amortization
Leasehold improvements are stated at cost less accumulated amortization which
is provided for by charges to operations over 31.5 years using a straight
line method.
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 - AGING OF ACCOUNTS RECEIVABLE AND PAYABLE
The percentage aging of trade accounts receivable and accounts payable at
December 31, 1998 is as follows:
Accounts Receivable Accounts Payable
Current 25% 100%
30-60 days 25%
over 60 days 50%
100%
Due to the divestiture of L'Abbigliamento, Ltd., effective as of the close
of business on March 31, 1999, the accounts receivable and accounts payable
are listed as zero balances as of June 30, 1999.
Note 4 - INVENTORY
Estimated inventory at December 31, 1998 was as follows:
Raw material (fabric) $ 826,000
Finished goods 1,188,517
Total $2,014,517
Effective October 1, 1997, L'Abbigliamento, Ltd. entered into consignment
sales arrangement with two mass merchandisers of men's clothing. During the
first quarter of 1999, L'Abbigliamento, Ltd. added two additional consignment
customers. Management believes that this marketing strategy will improve
sales, profit margins and collection cycles.
Note 5 - FACTORING OF ACCOUNTS RECEIVABLE
The subsidiary has entered into a non-recourse agreement with an independent
factor. The balances advanced by the factor bear a one-time fee of 5% of the
invoice and is secured by post dated checks issued by the customer.
Note 6 - BANK LOAN
At December 31, 1998, the subsidiary had outstanding debt in the amount of
$219,731 ($46,350 - current) with interest related thereto at 2% - 7% over
the prime rate. These obligations mature over the next five years with a
remaining balloon payment of $40,000 due at that time. The bank
loan is secured by inventory and accounts receivable.
Note 7 - 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.
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 is 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.
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. All of the Warrants
were sold by the Company and no Placement Agent was involved in this
Offering. The 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 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 warrant
entitles 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 thirty (30)
months thereafter. The warrants are redeemable by the Company at any time
after thirteen months after their issuance and prior to their expiration at
a price of $0.05 per warrant, upon 30 days prior written notice, provided
that the closing sale price of the shares as reported on the NASD Electronic
Bulletin Board shall have been at least $4.80 (160% of the exercise price of
the warrants) on each of the 20 consecutive trading days ending on the tenth
day prior to the day on which the notice of redemption is given.
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.
Note 8 - PROVISION FOR TAXES ON INCOME
The estimated provision for income taxes are based on the statutory federal
and state income tax rates. The State of New York does not allow a foreign
company to offset its income by the parent company's losses.
Note 9 - LEASES AND OTHER COMMITMENTS
The parent company leases its premises from Ameristar, an affiliated company,
for the following annual rent expenses.
(eleven months) November 1, 1997 thru September 30, 1998 $41,173
October 1, 1998 thru September 30, 1999 46,152
October 1, 1999 thru September 30, 2000 47,424
October 1, 2000 thru September 30, 2001 48,732
Total Rent Commitment $183,481
Note 10 - RELATED PARTY TRANSACTIONS
The Company has received advances of monies for its operating expenses from
an affiliated company, Ameristar Group Incorporated. That company
("Ameristar") also serves as a consultant to Concorde. Concorde Strategies
Group, Inc. is leasing office space from Ameristar on a monthly rental,
commencing on November 1, 1997 for a term of three years and eleven (11)
months. (see note 9)
The Company has incurred consulting fees of $158,833 to its President, and
$45,000 to "Ameristar" (an affiliate corporation) since the beginning of
1996.
The Company has 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 7. - 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 cents 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 7 - 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 7 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.
Note 11 - CONSOLIDATION OF FINANCIAL INFORMATION
The consolidated financial statements of the Company for the period ended
March 31, 1999 include the results of the acquisition of Concorde Management,
Ltd. and its wholly owned subsidiary, L'Abbigliamento, Ltd.
All material intercompany accounts and transactions have been eliminated.
Due to the divestiture of the subsidiary, effective April 1, 1999, the
financial statements from April 1, 1999 thru September 30, 1999 reflect
financial data of the parent company only, or Concorde Strategies Group, Inc.
Note 12 - DIVESTITURE OF SUBSIDIARY
A Termination Agreement was executed on May 5, 1999, for the divestiture of
L'Abbigliamento, Ltd., Concorde'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 Concorde, effective as of the close
of business on March 31, 1999; (2) L'Abbigliamento, Ltd. returned to
Concorde 100 percent of the Class A Preferred Shares in exchange for which
Concorde delivered 100 percent of the L'Abbigliamento, Ltd. capital stock
held by it; (3) L'Abbigliamento, Ltd. will repay its outstanding
indebtedness to Concorde 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 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.
Note 13 - 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 Strategies Group, Inc., 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 14 - SUBSEQUENT EVENTS
Subsequent to the period covered by this report, 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 13). Under the terms
of this Agreement, Concorde acquired 100 percent of the capital stock of W3
Group, Inc. in exchange for an equal number of shares (3,275,000)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 has been adjusted to reflect the reverse
split.
As per the Agreement, a special distribution of 520,056 Common Stock Purchase
Warrants was made in October, 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 the 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 represent 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.
In October, 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.
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial Conditions and
Results of Operations:
Divestiture of L'Abbigliamento, Ltd.
The Company has developed a new business strategy which is focused on seeking
acquisition opportunities with Internet related technology companies. As the
first step in its reorganization process, the Company reached an agreement
in April, 1999 for the divestiture of L'Abbigliamento, Ltd., Concorde's sole
operating subsidiary, effective March 31, 1999. L'Abbigliamento, Ltd. is a
wholesaler of imported menswear, which did not fit the Company's new
direction. The agreement was approved by shareholders, at a special meeting
of shareholders on August 12, 1999 (See note 12 and Form 10-QSB for the
quarterly period ended June 30, 1999).
Investors and shareholders should bear in mind that the Company's only
operating subsidiary was fully divested effective March 31, 1999, the end of
the first quarter of fiscal 1999. Since March 31, 1999, the Company
essentially has not had any business operations, pending the completion of
future acquisitions, of which there can be no assurance.
Results of Operations
The results of operations for the three month period ended September 30, 1999
reflect the divestiture of the Company's operating subsidiary, effective
March 31, 1999, and thus the Company did not have any revenue for the current
period being reported. A discussion of operating results for the Company's
subsidiary was included in the quarterly report (Form 10-QSB) for March 31,
1999 and annual report (Form 10-KSB) for December 31, 1998.
Operating expenses for the parent company only were $289,416 for the three
month period ended September 30, 1999, an increase of $37,063 from the three
month period ended September 30, 1998. This increase was a result of
consulting fees of $262,625 incurred by the Company for services performed
in the past (see Note 7 - Capitalization). For the nine month period ended
September 30, 1999, operating expenses for the parent company were $811,159,
an increase of $604,654 from the same period in 1998. This increase also
resulted from the aforementioned consulting fees recorded in the three month
period ended September 30, 1999.
The parent Company had total cash of $1,464 at September 30, 1999 compared
to $37,672 at September 30, 1998, a decrease of $36,208.
The parent Company's Accounts Payable at September 30, 1999 was $107,042
compared to $71,495 at September 30, 1998, an increase of $35,547, reflecting
the Company's lack of working capital needed for normal overhead expenses.
Reorganization of Business Operations
As previously reported in the Company's quarterly report for the period ended
June 30, 1999, its new business strategy is to focus its attention on
acquiring Internet related technology companies. In this regard, the Company
completed an Agreement and Plan of Share Exchange (the "Agreement") with W3
Group, Inc., effective October 1, 1999 (see Note 13, Form 10-QSB for the
quarterly period ended June 30, 1999, and Form 8-K filed on October 15,
1999). The Agreement was approved by shareholders on August 12, 1999. Under
the terms of the Agreement, the Company's name was changed to W3 Group, Inc.,
a reverse split was effected of its Common Stock on the basis of one new
share for each 30 existing shares, after which 3,275,000 new shares (post
reverse split) of Common Stock were issued to W3 shareholders in exchange for
100 percent of the capital stock of W3 Group, Inc. The number of outstanding
shares of Concorde's Series B Convertible Preferred Stock and Series B
Convertible Preferred Stock Purchase Warrants remain unchanged, however, the
conversion feature will be adjusted to reflect the reverse split. Upon
consummation of the exchange of shares, W3 Group, Inc. became a wholly owned
subsidiary of Concorde Strategies Group, Inc. which changed its corporation
name to W3 Group, Inc., effective October 1, 1999. Certain former officers
and directors of Concorde also have an interest in W3 Group, Inc.
A special distribution of Common Stock Purchase Warrants was also approved
by shareholders on August 12, 1999 and was made in October, 1999 to holders
of record as of September 30, 1999, of Concorde'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 10 shares of Common Stock either then outstanding
or committed to be issued upon the conversion of the then outstanding
Preferred Shares, or the then outstanding Warrants to purchase Preferred
Shares. The Common Stock Purchase Warrants are redeemable by the Company
under certain conditions. Each Warrant represents the right to purchase one
share of Common Stock at a price of $6.00 per share during the exercise
period, which is a two year period expiring on October 1, 2001. All of the
foregoing was approved by shareholders at the special meeting of shareholders
on August 12, 1999.
In the third quarter of 1999, the Company upgraded its reporting status with
the Commission to full 12(g) registration status and has been issued SEC file
number 0-27083.
During the quarterly period covered by this report, the Company announced
that two prior proposed acquisition transactions would not proceed, but that
a new potential acquisition was in final negotiations with Cross Market
Management Company. No acquisition contract has been signed as of the date
of the filing of this report.
W3 Group, Inc. intends to acquire, finance, and restructure profitable
companies that can utilize the Internet to expand their business and
distribution channel. W3's plan is based on analysis and evaluation of the
current industry environment, trends, and perceived opportunities in certain
industries within the Internet. W3 intends to focus on existing companies
that have proven markets, profitability, and management. W3's objective is
to provide a platform for selected companies to expand their markets via use
of the Internet, strengthen internal functions by providing consulting
services and professional management support, and expansion capital, while
allowing the companies to continue management of daily operations.
Effective October 1, 1999, P. Richard Sirbu and Thomas C. Hushen were elected
new directors of the registrant, Joseph J. Messina remained as a director,
Martin I. Saposnick was re-elected as a director and Robert Gordon resigned
as a director.
The officers of W3 Group, Inc., effective October 1, 1999, are:
P. Richard Sirbu, Chairman, Chief Executive Officer, President
Thomas C. Hushen, Senior Vice President, Chief Technology
Officer,
Secretary
Robert Gordon, Executive Vice President
Martin I. Saposnick, Director of Strategic Planning
Liquidity and Capital Resources
At September 30, 1999, the Company had an insignificant amount of cash, which
is not adequate for working capital requirements. At present, the Company
is wholly dependent upon the willingness of management and Ameristar Group
Incorporated to advance to the Company adequate funds to cover any expenses
incurred in its operations until such time, if ever, as the Company is able
to raise the amount of capital needed to meet its working capital needs.
There is no assurance that the Company will be able to raise the amount of
capital needed to meet its working capital needs.
Year 2000 Compliance
Many currently installed computer systems, software programs and embedded
chips were designed to use only a two digit date field. These date code
fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. Until the date fields are updated, systems
and programs could fail or give erroneous results when referencing dates
following December 31, 1999. Such failures or errors could occur prior to
the actual turn of the century. The Company will rely on computer
applications to manage and monitor accounting, sales, development and
administrative functions. The Company does not anticipate that any system
failures or miscalculations will result from the use of its computer and
software applications. In addition, the Company's suppliers and service
providers are reliant upon computer applications, some of which may contain
technology which will fail as a result of the upcoming change in century,
although the Company is not dependent on any one supplier in conducting its
business. Such failures could affect the interactions of these third parties
with the Company. While management does not believe the Company's computer
systems, applications or embedded technologies will be materially adversely
affected by the upcoming change in century, the Company and its technology
may be adversely affected by the Year 2000 change. Thus, failure of our
software, hardware or embedded technology or that of the Company's suppliers
or service providers could have a material adverse impact on our business,
financial condition and results of operations.
Further, the Company will evaluate each prospective acquisition candidate and
assess its Year 2000 compliance and where necessary resolve any Year 2000
problems prior to such acquisition and integration into the Company's
operations. However, there can be no assurance that all Year 2000 problems
will be discovered, nor that these problems will not cause any interruption
of business activities.
General Risk Factors Affecting the Company and its Subsidiary
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:
Continued growth, use, and acceptance of the Internet as a business
medium, and development of the required infrastructure to support
Internet
growth
Rapidly changing technology
Intense competition within the Internet marketplace
Many well established companies and smaller entrepreneurial companies
have
significant resources that will compete with the Company's limited
resources in the acquisition of Internet technology 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
Change in Control
Effective October 1, 1999, Concorde completed a formal 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 capital stock
of W3 Group, Inc. in exchange for shares of Concorde's Common Stock. Prior
to the closing of this Agreement, current and former Officers and Directors
of Concorde owned approximately 41.2 percent of the issued and outstanding
shares of the capital stock of W3 Group, Inc. Subsequent to the closing of
this Agreement, which was approved by shareholders on August 12, 1999,
current and former Officers and Directors of Concorde own approximately 40.8
percent of the issued and outstanding shares of Common Stock of the new
entity.
OTHER INFORMATION
Item 1. Legal Proceedings. Not Applicable.
Item 2. Change in Securities. There has been a change in control of the
Company after the close of the period
covered by this report, as disclosed in the Form 8-K
report
filed on October 15, 1999.
(a) and (b) The registrant's Common Stock has been
subjected to a
reverse split on the basis of one new share for each
30 existing
shares, effective October 1, 1999.
Each share of the registrant's Series B
Convertible
Preferred Stock was originally convertible into 1.25
shares of
Common Stock. After the 1 for 30 reverse split of the
Common
Stock, each share of Series B Preferred Stock is
convertible
into .0416 shares of Common Stock. Based on a Board
of
Directors resolution, which requires shareholder
approval, each
share of Series B Preferred Stock would convert into
.5 shares
of Common Stock.
This new conversion rate, if approved by
shareholders,
would result in the issuance of 484,070 more shares
of Common
Stock than the current conversion rate, assuming that
all of the
outstanding shares of Series B Preferred Stock are
converted
into Common Stock. Plans are currently being made for
a special
meeting of shareholders to be held as soon as
practicable to
vote on this prospective conversion ratio.
The registrant issued a total of 520,056
Common Stock
Purchase Warrants, as described in Item 4, (c) 4
below.
Item 3. Defaults Upon Senior Securities. Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) A special meeting of shareholders was held on August
12, 1999.
Reference is made to Form 10- QSB for the quarterly
period
ended June 30, 1999, Item 4 and Form 8-K filed on October
12,
1999.
(b) The special meeting of shareholders did not involve
the
election of directors.
(c) The following matters were approved at the
aforementioned
special meeting of shareholders:
1. Divestiture of the registrant's operating
subsidiary,
L'Abbigliamento, Ltd., effective as of March 31,
1999.
2. The Agreement and Plan of Share Exchange with W3
Group,
Inc., effective October 1, 1999. Reference is
made to Item
2 of this report, "Reorganization of Business
Operations"
and Form 8-K filed on October 15, 1999.
3. Reverse split of the registrant's Common Stock
on the basis
of one new share for each 30 existing shares,
effective
October 1, 1999.
4. A special distribution of Common Stock Purchase
Warrants 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 in October, 1999 to the holders of
record as of
September 30, 1999 on the basis of one Common
Stock
Purchase Warrant for each ten shares of Common
Stock either
held on the record date or committed to be
issued upon the
conversion of the Series B Preferred Shares, or
the Series
B Preferred Warrants. The Common Stock Purchase
Warrants
are redeemable by the Company under certain
conditions and
each Warrant represents the right to purchase
one share of
Common Stock at a price of $6.00 per share
during a two
year exercise period which expires on October
1, 2001.
Item 5. Other Information. None
Item 6. Exhibits and Reports of Form 8-K. Form 8-K was filed on October
15, 1999 re: Change in control of registrant, acquisition of
W3 Group, Inc. (Delaware) as
a wholly owned subsidiary,
and divestiture of its
former operating subsidiary,
L'Abbigliamento, Ltd.
Financial statements of the
acquired company, W3 Group,
Inc. (Delaware) and pro
forma financial information
will be filed before
December 15, 1999.
Exhibit 27 - Financial Data Schedule (Electronic filing only)
SIGNATURES
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:
W3 GROUP, INC.
By: /s/ Robert Gordon
Robert Gordon
Executive Vice President
[ARTICLE] 5
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 9-MOS YEAR
[FISCAL-YEAR-END] DEC-31-1999 DEC-31-1998
[PERIOD-START] JAN-01-1999 JAN-01-1998
[PERIOD-END] SEP-30-1999 DEC-31-1998
[CASH] 1464 2337
[SECURITIES] 0 0
[RECEIVABLES] 160916 1361173
[ALLOWANCES] 0 0
[INVENTORY] 0 2014517
[CURRENT-ASSETS] 17625 116847
[PP&E] 2496 132181
[DEPRECIATION] (1098) (28833)
[TOTAL-ASSETS] 181403 3598222
[CURRENT-LIABILITIES] 206969 2041520
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 1116983 534983
[COMMON] 372834 307839
[OTHER-SE] (1515383) 713880
[TOTAL-LIABILITY-AND-EQUITY] 181403 3598222
[SALES] 837486 0
[TOTAL-REVENUES] 837486 0
[CGS] 595713 0
[TOTAL-COSTS] 595713 0
[OTHER-EXPENSES] 985652 0
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] (7376) 0
[INCOME-PRETAX] (736503) 0
[INCOME-TAX] 7099 0
[INCOME-CONTINUING] 0 0
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (743602) 0
[EPS-BASIC] 0.00 0.00
[EPS-DILUTED] 0.00 0.00<F1>
<FN>
<F1>The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
