SECURITIES & EXCHANGE COMMISSION
Washington, D.C., 20549
__________________________
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
of the Securities Exchange Act of 1934
__________________________
For the Fiscal Year Ended December 31, 1999
Commission File Number: 0-27083
W3 GROUP, INC.
(Exact name of Registrant as specified in its Charter)
Colorado 84-1108035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Ident. Number)
444 Madison Avenue, Suite 1710, New York, NY 10022
(Address of principal executive offices) (zip code)
(212) 317-0060
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock, no par value None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X_ No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K [ ]
Indicate the number of shares outstanding of each of issuer's classes of
common stock, as of the latest practicable date. At December 31, 1999,
3,413,582 shares of Common Stock, no par value were outstanding.
The aggregate market value of the voting stock held by non-affiliates of
registrant on March 24, 2000 was
$3,985,860.
FORM 10-KSB
DECEMBER 31, 1999
W3 GROUP, INC.
TABLE OF CONTENTS
Item
No. Description Page
PART I
1. Business 3
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 6
6. Selected Financial Data 7
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
8. Financial Statements 10
9. Disagreements on Accounting and Financial Disclosure 26
PART III
10. Directors and Executive Officers of the Registrant 26
11. Executive Compensation 28
12. Security Ownership of Certain Beneficial Owners
and Management 28
13. Certain Relationships and Related Transactions 29
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 29
Signatures 30
<PAGE>
FORM 10-KSB
W3 GROUP, INC.
December 31, 1999
PART I
ITEM 1. BUSINESS: Introduction
W3 Group, Inc. ("Registrant" or the "Company" or "W3") was formed in 1988
under the laws of the state of Colorado for the purpose of participating,
either through acquisition or merger, in a viable business opportunity.
Registrant has since its inception been evaluating various privately held
companies which management believed could be viable business opportunities.
On September 23, 1996, the Company, then named Concorde Strategies Group,
Inc., entered into an Agreement and Plan of Reorganization pursuant to which
it acquired 100 percent of the issued and outstanding capital stock of
Concorde Management, Ltd. ("CML") and its wholly owned subsidiary,
L'Abbigliamento, Ltd. This acquisition was concluded as of July 1, 1997.
L'Abbigliamento, Ltd. is a New York based distributor of Italian made men's
clothing.
In the beginning of 1999, the Company decided to reorganize and focus its
acquisition efforts on Internet related technology companies. The Internet
industry is going through fundamental and rapid changes as technology
advances, providing significant business growth opportunities. The emergence
of the Internet into homes and offices has provided a powerful new mechanism
for areas such as electronic commerce, communication via E mail, and the
dissemination of information.
Reorganization of Business Operations
As a result of its new business focus, the Company reached agreement in
April, 1999, subsequently approved by shareholders, for the divestiture of
L'Abbigliamento, Ltd., which had been the Company's sole operating
subsidiary. Under the terms of the Termination Agreement, which was effective
as of the close of business on March 31, 1999, L'Abbigliamento, Ltd. resumed
operations as an independent private company. Also, L'Abbigliamento, Ltd.
returned 100 percent of Concorde Class A Preferred Shares in exchange for the
return of 100 percent of the capital stock of L'Abbigliamento, Ltd. held by
the Company. As part of the divestiture, L'Abbigliamento, Ltd. agreed to
repay its outstanding indebtedness to Concorde in the principal amount of
$158,000 in five equal monthly payments of $1,300, plus 55 equal 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 the
aforesaid term equal to the sum of any accrued but unpaid interest due
thereon plus the entire unpaid principal amount. (See" NOTE 12- DIVESTITURE
OF SUBSIDIARY").
In further regard to its reorganization plan, on April 21, 1999, the Company
entered into an Agreement and Plan of Share Exchange ( the "Agreement") with
W3 Group, Inc., a privately held company formed to acquire and develop young
companies whose businesses involve the development of Internet related
technology and applications (see Form 8-K filed on October 15, 1999) . Under
the terms of this Agreement, which was approved by shareholders on August 12,
1999, the Company amended its Articles of Incorporation to change its
corporation name to W3 Group, Inc. Also, under the terms of the Agreement,
the Company effected a reverse split 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
remained unchanged, however, the conversion feature was adjusted to reflect
the reverse split. The number of Series B Convertible Preferred Stock
Purchase Warrants also remained unchanged. Certain present and former
officers and directors of Concorde also had an interest in W3 Group, Inc.
The reverse split of the Company's Common Stock included a special
distribution, post split, of Common Stock Purchase Warrants (the "Common
Warrants")to all securities holders of all classes of capital stock,
including the Series B Convertible Preferred Stock (the "Series B Stock") and
the Series B Convertible Preferred Stock Purchase Warrants (the "B Warrants")
currently outstanding, as of the close of business on September 30, 1999.
The Common Warrants were distributed on the basis of one Warrant for each ten
shares of Common Stock either outstanding or committed to be issued upon the
conversion of the then outstanding Series B Stock and B Warrants. The Common
Warrants so distributed are exercisable for a two year period which expires
on October 1, 2001 and are callable by the Company at a price of $.001 per
Common Warrant upon 30 days prior written notice to all holders thereof. The
Common Warrants may only be called after (1) the Common Stock has traded at
a bid price of at least $7.50 per share for a period of ten consecutive
trading days or (2) a Letter of Intent is entered into with an underwriter
for a public offering of the Company's securities. These Common Warrants
each represent the right to purchase one share of Common Stock at a price of
$6.00 per share during the exercise period, including any notice period, in
the event that the Company elects to call the Common Warrants as permitted
herein.
The Agreement and Plan of Share Exchange transaction is intended to qualify
as a tax free "reorganization" within the meaning of Section 368 (a)(1)(B) of
the Internal Revenue Code of 1986, as amended.
Present Operations
W3 intends to acquire, finance, and restructure profitable companies that can
utilize the Internet to expand their business and distribution channel. These
companies would become wholly owned, or majority owned, subsidiaries of W3.
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. The Company's goal 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.
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, Concorde
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.
As described in the preceding section, "Reorganization of Business
Operations", as a result of the divestiture of L'Abbigliamento, Ltd.,
effective March 31, 1999, the Company essentially has not had any business
operations since that time, pending the completion of future acquisitions, of
which there can be no assurance.
During 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.
Also, during the third quarter of 1999, the Company announced that two prior
proposed acquisition transactions would not proceed. Subsequently, the
proposed transaction with Cross Market Management Company has also expired.
Regulation
Although the Company's planned operations are not subject to any regulations
governing the Internet, services which are provided via the Internet or the
companies which provide such services, it is likely that, in the future, such
regulations will be instituted. Although it is not possible to predict the
extent of any such future regulations, and although management is not aware
of any pending regulations which would be applicable to its planned business
operations, it is possible that future or unforseen changes may have an
adverse impact upon the Company's ability to continue or expand its
operations as presently planned. The extent of such regulations is
impossible to predict, as it is the potential impact upon the business
operations of the Company in accordance with its business plan.
Competition
Registrant is, and is expected to remain, an insignificant entity among a
great many other companies who are engaged in mergers and acquisitions of
other business entities. There are many established venture capital and
financial concerns seeking to attract merger or acquisition candidates,
virtually all of which have significantly greater financial and personnel
resources and technical expertise than the Registrant.
The Internet marketplace is new, rapidly evolving and highly competitive, and
it is expected that this competition will persist and intensify in the
future, New competitors may emerge and rapidly acquire significant market
share. Competitors may be able to respond more quickly than the Company to
new or emerging technologies and changes in the marketplace.
ITEM 2. PROPERTIES
Facilities
The Company utilizes the offices and business facilities of Ameristar Group
Incorporated ("Ameristar"), which has served as a consultant to the Company.
Until October 31, 1997, the Company had the use of these offices and business
facilities rent free. Since November 1, 1997, the Company has paid rent for
use of the office space and related business facilities to Ameristar,
currently at the rate of $3,952 per month.
Employees
The Company's employees consist of its officers. The one outside Director is
engaged in other business activities and devotes so much of his time to the
affairs of the Company as is required.
ITEM 3. LEGAL PROCEEDINGS
The Company knows of no litigation pending, threatened or contemplated, or
unsatisfied judgments against it, or any proceedings in which the Company is
a party. The Company also knows of no legal action pending or threatened or
judgments entered against any officers or directors of the Company in their
capacity as such.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of shareholders was held on August 12, 1999 regarding the
Company's reorganization. Reference is made to Forms 10-QSB for the quarterly
periods ended June 30 and September 30, 1999, Item 4 and Form 8-K filed on
October 12, 1999.
Subsequent to the period covered by this report, a special meeting of
shareholders was held on January 18, 2000. Reference is made to Schedule 14A,
Notice of Special Meeting of Shareholders, and Proxy Statement filed on
November 24, 1999 and Form 8-K filed on January 24, 2000. This special
meeting of shareholders did not involve the election of directors. The only
matter voted on, which was approved by shareholders, was to amend the
issuer's Articles of Incorporation to adjust the conversion right of the
Series B Convertible Preferred Stock from an amount equal to .0416 shares to
an amount equal to .5 (one half) share of Common Stock for each one share of
Series B Convertible Preferred Stock. A total of 2,823,942 votes were cast
for this proposal, 50,156 votes against, 6,220 abstentions, and 7,830 broker
non-votes.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades under the symbol "WWWG" and the Series B
Convertible Preferred Stock trades under the symbol "WWWGP" on the OTC
Electronic Bulletin Board. The number of record shareholders on December 31,
1999 for the Company's Common Stock was 369 and for its Series B Convertible
Preferred Stock was 23 shareholders. There currently are 5 market makers
for the Company's Common Stock and 8 market makers for its Series B
Convertible Preferred Stock.
The following tables show for the periods indicated the range of high and low
bid quotes for the Common Stock and Series B Convertible Preferred Shares
obtained from the OTC Electronic Bulletin Board and are between dealers, do
not include retail mark-ups, mark-downs, or other fees or commissions, and
may not necessarily represent actual transactions.
COMMON STOCK TRADING HISTORY
Fiscal 1998
Quarter ended March 31, 1998 $1.5625 $0.6250
Quarter ended June 30, 1998 $1.0000 $0.4375
Quarter ended September 30, 1998 $0.7500 $0.0313
Quarter ended December 31, 1998 $0.1875 $0.0313
Fiscal 1999
Quarter ended March 31, 1999 $0.6250 $0.0400
Quarter ended June 30, 1999 $0.5000 $0.1563
Quarter ended September 30, 1999 $0.3125 $0.1000
Quarter ended December 31, 1999 $9.5000 $1.2500
<PAGE>
SERIES B CONVERTIBLE PREFERRED SHARE TRADING HISTORY
Fiscal 1998
Quarter ended March 31, 1998 $4.7500 $0.4375
Quarter ended June 30, 1998 $5.0625 $4.1250
Quarter ended September 30, 1998 $5.1250 $0.4375
Quarter ended December 31, 1998 $1.8750 $1.0625
Fiscal 1999
Quarter ended March 31, 1999 $6.0625 $1.5500
Quarter ended June 30, 1999 $6.1250 $2.0625
Quarter ended September 30, 1999 $6.3125 $1.0625
Quarter ended December 31, 1999 $3.0000 $0.9375
In April, 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. The sale of these shares are reflected in the Company's financial
statements.
The Company has not paid any dividends and, there are no plans to pay any
cash dividends in the foreseeable future. The declaration and payment of
dividends in the future, of which there can be no assurance, is determined by
the Board of Directors based upon conditions then existing. There are no
restrictions on the Company's ability to pay dividends.
ITEM 6. SELECTED FINANCIAL INFORMATION
Summary Balance Sheet Data: YEAR ENDED DECEMBER 31,
1999 1998 1997
Total Assets $ 247,263 $3,598,222 $3,440,634
Total Current Assets 228,136 3,454,374 3,341,282
Total Liabilities 287,780 2,041,520 2,276,451
Retained Earnings (Deficit) (1,650,359) (263,995) (111,164)
Stockholders' Equity $ (40,517) $1,556,702 $1,164,183
Summary Earnings Data: YEAR ENDED DECEMBER 31,
1999 1998 1997
Revenues $ 837,486 $3,845,393 $1,827,502
Cost of goods sold 595,713 3,043,546 1,419,701
Selling, general &
administrative expense 1,124,623 899,077 495,162
Income (loss) from operations 882,850 (97,230) (87,361)
Net Income (Loss) $ 869,904 (152,831) (100,361)
Earnings (Loss) per Share (.91) ( 1.32)* (1.64)*
* Adjusted for reverse split of Common Stock on October 1, 1999, on 1-30
basis.
The foregoing is selected financial information only, and is qualified by the
financial statements and the notes thereto, in their entirety, which are set
forth elsewhere in this Report. The selected financial information for 1997
includes the results of the Company's subsidiary, L'Abbigliamento, Ltd. from
July 1, 1997, the effective date of the acquisition. The 1999 totals include
the results of L'Abbigliamento, Ltd. for the first quarter only since the
subsidiary was divested effective March 31, 1999 (See Item 7).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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. L'Abbigliamento, ltd. is a wholesaler of imported
menswear, which does not fit the Company's new direction. The agreement was
approved by shareholders on August 12, 1999.
The following discussion is included only as historical information to comply
with disclosure requirements for the year ended December 31, 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.
Results of Operations
The results of operations for the Company's former subsidiary
L'Abbigliamento, Ltd., have been included in the consolidated results of the
Company for the year ended December 31, 1998. For the year ended December
31, 1999, consolidated results of the Company include the Subsidiary's
results of operations for the three month period ended March 31, 1999, the
effective date of the divestiture of the Subsidiary.
Sales were $837,486 for the twelve month period ended December 31, 1998, all
of which occurred during the first quarter and resulted from the operation of
the Company's subsidiary, L'Abbigliamento, Ltd., which was divested effective
March 31, 1999. Sales for the twelve month period ended December 31, 1998
were $3,845,393, all of which also resulted from operation of
L'Abbigliamento, Ltd. After cost of sales of $595,713, gross profit realized
was $241,773 for the period ended December 31, 1999, (all of which occurred
during the first quarter), compared to cost of sales of $3,043,546 and gross
profit of $801,847 during the prior year.
Consolidated operating expenses for 1999 were $1,124,623 compared to $899,077
in the prior year. The parent company's operating expenses for 1999 were
$950,130 compared to $279,896 in the prior year, an increase of $670,234. The
increase resulted primarily from increases in consulting fees for services
performed in the past (see Note 7- CAPITALIZATION) and merger related
expenses.
The net loss for the twelve month period ended December 31, 1999 was $869,904
compared to a net loss of $152,831 for the comparable period ended December
31, 1998, an increase of $717,073, reflecting the increased operating
expenses.
The total cash and cash equivalents at December 31, 1999 totaled $60,826,
compared to $2,337 at December 31, 1998. Accounts payable at December 31,
1999 totaled $138,307 all of which is current. The Company's accounts payable
represents its normal business overhead expenses and consulting services.
The Company is continuing to look for suitable acquisition candidates in its
new area of concentration, to wit, Internet technology and related companies.
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.
Liquidity and Capital Resources
At the end of fiscal 1999, the Company had cash totaling $60,826, which is
not adequate for working capital requirements. On December 14, 1999, the
Company commenced a private placement of restricted shares of its Common
Stock, and during that month received proceeds totaling $50,000 for the sale
of 20,000 shares. As of the date of this report, the offering is continuing
and no additional proceeds have been received. 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
The Company has reviewed its management information systems and structure for
Year 2000 compliance. The Company utilizes basic software packages and
personal computers only, and it is not anticipated that any system failures
or miscalculations will result from their use. The Company does not
currently have any information regarding the Year 2000 compliance of its
suppliers, nor is it aware of any problems encountered by them, but is not
dependent on any significant supplier in conducting its business. Although
the change in date to the Year 2000 has occurred, no assurance can be made
that all aspects of the Year 2000 issue that may affect the Company,
including those related to suppliers, or other third parties, have been fully
resolved. As of the date of this report, no additional costs have been
incurred by the Company resulting from the Year 2000 issue.
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
On April 21, 1999, Concorde entered into a formal Agreement and Plan of Share
Exchange with W3 Group, Inc. which was approved by shareholders, 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 48.6
percent of the issued and outstanding shares of the capital stock of W3
Group, Inc. Subsequent to the closing of this Agreement, current and former
Officers and Directors of Concorde own 40.78 percent of the issued and
outstanding shares of Common Stock of the new entity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements:
For the Years Ended December 31, 1999 and 1998: Reference
Report of Janet Loss, C.P.A., P.C., Independent
Certified Public Accountant F-11
Report of Jay Fox, C.P.A., Independent Certified
Public Accountant F-12
Consolidated Financial Statements:
Balance Sheets F-13, 14
Statements of Operations F-15
Statements of Cash Flows F-16
Statements of Stockholder's Equity (Deficit) F-17, 18
Notes to Financial Statements F-19, 20, 21, 22,
23, 24, 25
<PAGE>
Janet Loss, C.P.A., P.C.
Certified Public Accountant
1777 S Harrison Street, Suite 2100
Denver, Colorado 80210
Board of Directors
W3 Group, Inc. and Subsidiary
(Formerly Known as Concorde Strategies Group, Inc. and Subsidiary)
444 Madison Avenue, Suite 1710
New York, New York 10022
I have audited the accompanying consolidated balance sheets of W3 Group, Inc.
and subsidiary (Formerly known as Concorde Strategies Group, Inc. and
subsidiary) as of December 31, 1999 and 1998 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years ended December 31, 1999 and 1998. The above-mentioned financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on the consolidated financial statements at December
31, 1999 and 1998 based on my audits. I did not audit the statements of
Company's former subsidiary, L'Abbigliamento, Ltd., as of March 31, 1999 and
December 31, 1998. Also, I did not audit the Company's former subsidiary,
L'Abbigliamento, Ltd., related statements of income, changes in stockholders'
equity and cash flows for the three months ended March 31, 1999 and year ended
December 31, 1998. (See Note 1) The former subsidiary's statements reflect
total revenues of $837,486 for the three months ended March 31, 1999 and total
revenues of $3,845,393 for the year ended December 31, 1998. The subsidiary's
financial statements are included in the consolidated financial statements of W3
Group, Inc. and Subsidiary (Formerly known as Concorde Strategies Group, Inc.
and Subsidiary) until the completion of the divestiture of L'Abbigliamento, Ltd.
at March 31, 1999. The subsidiary's financial statements were audited by other
auditors whose report has been furnished to me, and my opinion in so far as it
relates to the comments of the subsidiary is based solely on the report of such
other auditors I conducted my audits in accordance with generally accepted
accounting standards.
These standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, based upon my audit and the report of other auditors, the
consolidated financial statements at December 31, 1999 and 1998 referred to
above present fairly, in all material respects, the financial position of W3
Group, Inc. and Subsidiary (Formerly known as Concorde Strategies Group, Inc.
and subsidiary) as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998
in conformity with generally accepted accounting principles.
/s/Janet Loss
Janet Loss, C.P.A., P.C.
March 21, 2000
<PAGE>
JAY FOX, C.P.A.
4315 AUSTIN BLVD.
ISLAND PARK, NY 11558
March 31, 1999
To the Board of Directors and Shareholders
L'Abbigliamento, Ltd. and Vista International Ltd.:
We have audited the accompanying consolidated balance sheet of
L'Abbigliamento, Ltd. and Vista International ltd. as of December 31, 1998,
and the related consolidated statements of income and retained earnings and
cash flows for the twelve months then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material aspects, the financial position of L'Abbigliamento, Ltd.
and Vista International Ltd. as of December 31, 1998, and the results of
its operations and its cash flows for the twelve months then ended in
conformity with generally accepted accounting principles.
/s/ Jay Fox
Jay Fox, C.P.A.
<PAGE>
W3 GROUP, INC. AND SUBSIDIARY
(Formerly Concorde Strategies Group, Inc.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 60,826 $ 2,337
Accounts receivable 0 1,361,173
Inventory (as submitted) 0 2,014,517
Prepaid Expenses 0 76,347
Loan Receivable (Note 12) 157,522 0
Interest Receivable (Note 12) 4,740 0
Rent Receivable 5,048 0
TOTAL CURRENT ASSETS: $ 228,136 $ 3,454,374
Fixed assets, net of accumulated
depreciation of 1298 and $26,299 $ 1,198 $ 46,031
Leasehold improvements net of
accumulated amortization of
$2,534 0 57,317
Security Deposits 0 40,500
Deferred Offering Costs $ 17,929 0
TOTAL ASSETS $ 247,263 $ 3,598,222
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1999 1998
CURRENT LIABILITIES:
Accounts payable $ 138,307 $1,340,483
Payroll taxes payable 0 591
Accrued interest 1,854 0
Due to Factor 0 394,185
Bank and other loans payable
(current) 0 46,350
Corporate income taxes payable 0 63,147
Stockholders' loans 40,000 0
Due to Ameristar
Capital Corporation $ 107,619 $ 23,383
TOTAL CURRENT LIABILITIES $ 287,780 $1,868,139
LONG TERM LIABILITIES:
Bank and other loans $ 0 $ 173,381
TOTAL LIABILITIES: $ 287,780 $2,041,520
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value,
100,000,000 shares authorized. 0 0
Series A Convertible, redeemable
Preferred, 0 and 1,000 shares issued
At December 31, 1999 and 1998 0 0
Series B Convertible, non-dividend
bearing, 1,056,000 and 765,00
shares issued and outstanding $ 791,383 $ 209,383
Series B Convertible Preferred
Stock Purchase Warrants issued $ 325,600 $ 325,600
and outstanding
Common stock, no par value,
500,000,000 shares authorized,
3,413,582 and 120,000 shares
issued and outstanding as of $ 408,234 $ 307,839
December 31, 1999 and 1998 *
Common stock issuable 50,000 0
Additional paid-in-capital 34,625 977,875
Retained earnings(Deficit) (1,650,359) (263,995)
TOTAL STOCKHOLDERS' EQUITY (40,517) 1,556,702
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 247,263 $3,598,222
*Adjusted for October 1, 1999 reverse split on shares, 1-30 basis.
The accompanying notes are an integral part of these financial statements.
<PAGE>
W3 GROUP, INC. AND SUBSIDIARY
(Formerly Concorde Strategies Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999 and 1998
December 31, 1999 December 31, 1998
REVENUES
Sales $ 837,486 $ 3,845,393
COST OF GOODS SOLD 595,713 3,043,546
GROSS PROFIT: 241,773 $ 801,847
OPERATING EXPENSES:
Transfer and filing fees $ 8,243 $ 3,004
Insurance 20,430 44,110
Officers' salary 49,413 243,433
Payroll and payroll taxes 23,184 91,112
Rent 58,052 135,622
Utilities and telephone 8,595 16,484
Commissions 10,188 44,656
Auto and travel 9,143 13,482
Entertainment 3,168 12,067
Bank charges, interest
And selling expenses 33,556 36,034
Advertising and Marketing 11,350 17,654
Office Expenses & Postage 6,378 24,223
Repairs and maintenance 729 7,885
Consulting 789,909 104,196
Business Plans 5,200 0
Press Releases 1,580 0
Merger and Acquisition Costs 14,445 0
Professional Fees 27,138 87,778
Depreciation and amortization 3,695 6,926
Printing expenses 4,827 1,421
Freight out 0 8,033
Other expenses 35,400 957
TOTAL OPERATING EXPENSES 1,124,623 899,077
INCOME(LOSS) FROM OPERATIONS (882,850) (97,230)
OTHER INCOME AND (EXPENSES):
INTEREST INCOME 8,722 3,443
EQUIPMENT RENTAL 5,048 0
NET INCOME(LOSS) BEFORE
PROVISION FOR INCOME TAXES (869,080) (93,787)
ESTIMATED PROVISION FOR
INCOME TAXES 824 59,044
NET (LOSS) $ (869,904) $(152,831)
NET (LOSS PER SHARE) $ (0.91) $ (1.32)*
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 945,618 115,000*
*Adjusted for October 1, 1999 reverse split on shares, 1-30 basis.
The accompanying notes are an integral part of these financial statements.
W3 GROUP, INC. AND SUBSIDIARY
(Formerly Concorde Strategies Group, Inc.)
CONSOLIDATED CASH FLOW STATEMENTS
For the Years Ended December 31, 1999 and 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (869,904) $ (152,831)
Adjustments to reconcile
net loss to net cash flow
from operating activities:
Depreciation and amortization 3,695 6,926
Decrease in accounts receivable 1,361,173 13,373
Decrease (Increase)in inventory 2,014,517 (194,821)
Decrease (Increase)in prepaid expenses 76,347 (62,912)
Decrease in Security Deposits 40,500 0
(Increase) in Loan Receivable (157,522) 0
(Increase) in Interest Receivable (4,740) 0
(Increase) in Rent Receivable (5,048) 0
(Increase) in Deferred Offering Costs (17,929) 0
(Decrease)Increase in payables (1,116,678) (212,352)
Increase(Decrease)in corporate income
taxes payable $ (63,147) $ 50,147
Cash Used by Operating Activities $ 1,261,264 $ (552,470)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in fixed assets 41,139 (51,423)
Increase in Leasehold Improvements 57,317 0
Divestiture of Subsidiary (516,460) 0
Net Cash used in investing
activities (418,004) (51,423)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of preferred stock & warrants 582,000 404,350
Proceeds from Common Stock issuable
And issuance of Common Stock 150,395 141,000
(Decrease) in additional Paid-in
Capital (943,250) 0
Increase(Decrease)in amounts
due to factor (394,185) 33,087
Repayment of bank and other loans (219,731) (105,813)
Increase in Stockholders'loans 40,000 0
Net cash provided by
financing activities (784,771) 472,624
Net Increase (Decrease)in Cash $ 58,489 $ (131,269)
CASH, BEGINNING OF THE PERIOD $ 2,337 $ 133,606
CASH, END OF THE PERIOD $ 60,826 $ 2,337
The accompanying notes are an integral part of these financial statements.
<TABLE>
W3 GROUP, INC. AND SUBSIDIARY
(Formerly Concord Strategies Group, Inc.)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1999 and 1998
Preferred Series B
Stock Non- Convertible
Dividend Preferred Common Total
Bearing Stock Stock Common Common Additional Stockholders'
Series B Purchase Number of Stock Stock Paid-in Deficit Equity
Convertible Warrants Shares Amount Issuable Capital Accumulated (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1998 $ 130,633 $ 0 $3,300,000 $ 166,839 0 977,875 $(111,164) $1,164,183
315,000 shares
of Series B
Convertible 78,750 -- -- -- -- -- -- $ 78,750
Preferred Stock
issued for services
January 7, 1998
300,000 shares of
Common Stock issued
for services, -- -- 300,000 141,000 -- -- -- 141,000
June 22, 1998
Private Placement
of Series B -- $325,600 -- -- -- -- -- 325,600
Convertible
Preferred Stock
Purchase Warrants,
for cash issued,
August 12, 1998
Net (loss) for
the Year Ended
December 31, 1998 -- -- -- -- -- -- (152,831) (152,831)
Balance,
December 31, 1998 $209,383 $325,600 3,600,000 $307,839 -- $977,875 $(263,995) $1,556,702
April 1, 1999
Divestiture of
Subsidiary,
L'Abbigliamento, Ltd.
(Note 12) -- -- -- -- -- $(976,000) (516,460) $(1,492,460)
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 issued
for consulting services -- -- 199,995 64,995 -- -- -- 64,995
116,000 shares of series
B Convertible Preferred
issued for services,
September 30, 1999$232,000 -- -- -- -- -- -- 232,000
1-30 reverse split on
October 1, 1999 -- -- (3,673,213) -- -- -- --
October 1, 1999,
issuance of 3,275,000
shares, post reverse
split, for acquisition
of W3 Group, Inc.
(Note 13) -- -- 3,275,000 -- 32,750 -- 32,750
October 16, 1999
Issued to original
private placements
investors -- -- 11,800 35,400 -- -- -- 35,400
Cash received for
private placements -- -- -- -- 50,000 -- -- 50,000
December 1999
Net loss for the year
ended December 31,1999 -- -- -- -- -- -- $(869,904) $ (869,904)
Balance,
December 31,1999 $791,383 $325,600 3,413,582 $408,234 $50,000 $34,625 $(1,650,359) $ (40,517)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
W3 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.
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., as of the close of business
on March 31, 1999, the accounts receivable are listed as zero balances.
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
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.
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 (3,25.000) 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 Stick 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 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 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.
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.
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 $171,833 to its Executive Vice
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 inter-company accounts and transactions have been eliminated.
Due to the divestiture of the subsidiary, effective April 1, 1999, the
financial statements from April 1, 1999 reflect financial data of the parent
company and its wholly owned subsidiary, W3 Group, Inc. (Delaware).
Note 12 - 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 100 percent of the Class A Preferred Shares in
exchange for which the Company delivered 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 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
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. Series B Convertible Preferred Stock
may be converted to Common Stock at the election of the shareholder until
October 14, 2002.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
NAME Age POSITION(S) HELD
P. Richard Sirbu
56
Chairman and Chief Executive Officer and
Director
Thomas C. Hushen
56
Senior Vice President, Chief Technology
Officer, Secretary and Director
Robert Gordon
64
Executive Vice President
Martin I.
Saposnick
53
Director of Corporate Development and
Director
Joseph J. Messina
44
Director
Profiles of the directors and officers of the Company are set forth below.
All directors hold office until the next annual shareholders meeting or until
their death, resignation, retirement, removal, disqualification or until
their
successors have been elected and qualified. Vacancies in the Board may be
filled by majority vote of the remaining directors. Officers of the Company
serve at the will of the Board of Directors. There is no Executive Committee
or other committee of the Board of Directors. Election to the Board of
Directors is for a period of one year or until the next shareholder's meeting
and elections are ordinarily held at the Company's Annual Meeting of
Shareholders. There are no family relationships among officers and
directors.
Profiles of Officers and Directors
P. Richard Sirbu is Chairman, Chief Executive Officer, and a Director of the
Company. Mr. Sirbu has a strong track record of building profitable companies
and emerging technologies. His many strengths include the ability to develop
comprehensive strategic and tactical directions and implement plans for
results, analyze and solve complex problems, organizational development, and
a bottom-line orientation.
Previously, Mr. Sirbu was President of On Money Financial Service Corp. an
Internet subsidiary of AmeriTrade Holding Corporation. Mr. Sirbu initiated
and sold Internet based programs to firms that provided for the launch with
access to 25 million consumers.
Mr. Sirbu was also President of AmeriTrade Clearing, Inc., a subsidiary of
AmeriTrade Holding Corporation, and created the first Internet "financial
services mall" for financial professionals. He created a new strategic
direction for the company that resulted in a very significant reduction of
corporate asset risk, a six fold increase in customer accounts, and a
substantial increase in pre-tax profits. He created and managed a staff of
500 technology, marketing and finance personnel.
With international experience spanning 38 countries, Mr. Sirbu's background
includes industries such as the Internet, Computer, Telecommunications,
Office Automation and Manufacturing. He has been involved with the public
offering of several companies, and turn-around and start-up situations. Mr.
Sirbu previously held positions as President of SFI, Divisional Director of
Tenex Corporation, and President of Datawave, Inc.
Thomas C. Hushen is Senior Vice President, Chief Technology Officer,
Secretary, and a Director of the Company. Mr. Hushen has broad based
technology and management experience, with a record of creating sustained
growth and delivery, exploiting emerging technologies, exceptional team
building skills and customer orientation, while focusing on profitability.
He is very experienced in developing and implementing strategic plans for
information technology systems, and has been involved in starting up new
organizations and turn-around projects. Mr. Hushen was responsible for the
over-all technology implementation of the first professional financial
services mall on the Internet.
Previously, Mr. Hushen was Director - General Manager for Gateway 2000 and
responsible for the development and implementation of their Internet
strategy. The web site developed is generating significant daily order
revenue and experiencing over two million hits daily, and the system includes
over 300 private Extranet sites.
Prior to Gateway 2000, Mr. Hushen was Vice President and Chief Information
Officer for AmeriTrade Holding Corporation, and was responsible for all
aspects of technology and corporate management information systems. He
implemented the company's first Web server providing on-line securities
trading and establishing AmeriTrade as an Internet leader in the brokerage
industry. He also managed the company's legacy systems to facilitate a
ten-fold increase in business, with 85 per cent of the business conducted
over the Internet.
Mr. Hushen was also Vice President and Chief Information Officer of Southwest
Securities, a regional brokerage firm. Mr. Hushen was Director of Information
Technology for SABRE division of American Airlines, where he held several
management positions. Mr. Hushen has 18 years of diverse technology
experience with major airline carriers. Mr. Hushen was President of Compudata
Systems, Inc., a business software development firm. Mr. Hushen has a B.S. in
Business Administration from the University of New Hampshire.
Robert Gordon is Executive Vice President. Previously, Mr. Gordon was
President and a Director of Concorde Strategies Group, Inc. and formerly
Executive Vice President of Contex, Inc., an investment banking and
consulting firm in Naples, Florida. Previously, as Managing Director of a
specialty apparel company, he was responsible for marketing and sales,
finance, manufacturing, retail and mail order operations, MIS, strategic
planning, organizational development, and re-structuring the business. Mr.
Gordon was President and Chief Operating Officer of a public company that
manufactured precision parts and performed engineering design services, and
conducted technology research and development. Previously, he was Executive
Vice President of a financial services firm, responsible for administration,
business operations, and organizational development. Mr. Gordon also had a
management consulting practice and performed broad based professional
services which included strategic and financial planning, marketing and
growth studies, business re-structuring, acquisition plans, implementation of
new business strategies, MIS development, and training programs. Previously,
Mr. Gordon was Director of MIS for Kinney Shoe Corporation.
Mr. Gordon has conducted numerous business seminars and made presentations at
many conferences. He received an Achievement Award from the International
Association of Systems Management in recognition of his contribution to the
business systems profession, and is also a past Chapter President. He was an
advisor to Guidance International, a professional association of computer
users. Mr. Gordon has a B.A. in Economics form Union College.
Martin I. Saposnick is Director of Corporate Development and a Director of
the Company. Mr. Saposnick is also President of Ameristar Group
Incorporated, a private investment and financial consulting firm specializing
in "micro cap" and "small cap" companies, and was a Director of Concorde
Strategies Group, Inc. until February, 1999. Previously Mr. Saposnick was
President of Remsen Group, an independent investment banking and financial
consulting services company. Prior to Remsen Group, Mr. Saposnick was
Chairman of the Board and President of Marsan Securities Co., Inc., a
financial services firm, which was a wholly owned subsidiary of Marsan
Capital Corporation, a publicly held company. Mr. Saposnick was also
Chairman of the Board and President of Marsan Capital Corporation. In 1985,
Mr. Saposnick entered into a consent decree with the Commission; the
agreement ended administrative proceedings initiated by the Commission in
connection with Mr. Saposnick's alleged participation in the initial public
offering of securities of North Atlantic Airlines, Inc. Previously, Mr.
Saposnick was Vice President of Chestman Securities, Co., Inc. and had been
Assistant Manager of Specialist Surveillance Division of the New York Stock
Exchange. Mr. Saposnick is a graduate of Hunter College and completed
graduate studies in Finance and Investments at Baruch College.
Joseph J. Messina is a Director. He is also Chairman and CEO of both
Ameristar Capital Corporation, a lease financing and asset based lender and
Ameristar Group Incorporated, an investment banking and financial consulting
firm specializing in "small cap" companies. Mr. Messina is a former Director
of Concorde Strategies Group, Inc. Mr. Messina was previously President and
Chief Operating officer of Vendor Funding Co., Inc. a subsidiary of Bank of
Ireland First Holdings. Vendor Funding, a national middle market lessor and
asset based lender, was co-founded by Mr. Messina and subsequently sold to
First NH Banks of Manchester, New Hampshire. Mr. Messina is a Director of
Credit America Venture Capital, an entity formed to acquire the manufacturing
and distribution network of Mako Marine International, Inc. He is a former
Director of Mako Marine International, Inc., a publicly held corporation, and
past President of the Eastern Association of Equipment Lessors.
ITEM 11. EXECUTIVE COMPENSATION
Robert Gordon, Executive Vice President of the Company, currently receives
consulting fees of $52,000.00 per year. As of December 31, 1999, consulting
fees of $29,900.00 remain unpaid. In 1998, Robert Gordon was President of the
Company and received wages of $30,330.00 and consulting fees of $15,000.00.
As of December 31, 1999, the Company has accrued obligations for payments to
Mr. Gordon of $81,733.00. No other officers or directors received
compensation during 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following chart sets forth, at the date of this report, information with
respect to (1) any person known by the Company to own beneficially more than
five (5%) percent of the Company's Common Stock (2) Common Stock owned
beneficially by each officer or director of the Company and (3) the total of
the Company's Common Stock owned beneficially, directly or indirectly, by the
Company's officers and directors as a group.
<TABLE> <C> <C>
Name Number of Shares Percentage of Class
Common Stock Owned
Sirbu Enterprises, LLLP 525,000 15.38%
a Colorado Limited Liability
Limited Partnership (4)*
16414 Sandstone Dr.
Morrison, CO 80465
Wilmont Holdings Corp.(5)* 630,000 18.46%
33 Wilputte Place
New Rochelle, NY 10804
Lomar Corp.(6)* 625,000 18.31%
21 Schermerhorn
Brooklyn, NY 11201
Thomas C. Hushen* 500,000 14.65%
33278 Bluebell Circle
Evergreen, CO 80439
Robert Gordon* 103,667 3.04%
201 East 19th Street
New York, NY 10003
Dunhill Limited (7)* 3,333 0.010%
444 Madison Avenue
New York, NY 10022
Remsen Group Ltd. (8)* 7,617 0.22%
21 Schermerhorn Street
Brooklyn, NY 11201
Ameristar Group Incorporated 22,500 0.66%
(9)*
444 Madison Avenue
New City, NY 10022
Officers and Directors
as a Group (5 Persons)(3)
2,417,117
70.81%
</TABLE>
* Officer and/or Director
__________________________
(1) Persons beneficially owning more than 5% of the Company's Common Stock.
(2) Common Stock beneficially owned by each officer and director of the
Company.
(3) Beneficially Owned, directly or indirectly, by the Company's officers and
directors as a group.
(4) Sirbu Enterprises, LLLP, a Colorado Limited Liability Limited Partnership,
is privately owned and controlled equally by P. Richard Sirbu, Chairman,
CEO and President of the Company, and his wife, Karen K. Sirbu. The total
shares reflect a donation of 100,000 shares to a charitable trust in late
1999. Mr. Sirbu is not affiliated with the trust.
(5) Wilmont Holdings Corp. is a privately held corporation principally owned
and controlled by Joseph J. Messina, a Director of the Company.
(6) Lomar Corp. is privately held corporation principally owned and controlled
by Martin I. Saposnick, a Director of the Company.
(7) Dunhill Limited is privately held corporation principally owned and
controlled by Joseph J. Messina and Martin I. Saposnick, Directors of the
Company.
(8) Remsen Group, Ltd. is a privately held corporation principally owned and
controlled by Martin I. Saposnick, a Director of the Company.
(9) Ameristar Group Incorporated is a privately held corporation principally
owned and controlled by Joseph J. Messina and Martin I. Saposnick,
Directors of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The following documents are filed as a part of this report:
Financial Statements
Auditors Report of Janet Loss, C.P.A., P.C. dated March 21, 2000
together with;
Auditors Report of Jay Fox, C.P.A. dated March 31, 1999;
Consolidated Balance Sheets as of December 31, 1999 and 1998;
Consolidated Statements of Income and Retained Earnings for the
years ended December 31, 1999 and 1998;
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1999 and 1998;
Consolidated Statements of Cash Flows for the years ended December
31, 1999 and 1998;
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules.
All applicable information is contained in the financial statements
or notes thereto.
3. Exhibits - incorporated by reference are:
Form 8A and exhibits filed on October 14, 1999
Schedule 14A - Preliminary Proxy Statement dated November 24, 1999
(b) Form 8-K filings:
May 21, 1999 re: resignation of Martin I. Saposnick as a Director.
October 12, 1999 re: Agreement and Plan of Share Exchange
December 13, 1999 re: Audited financial statements (Form 8-K/A)
January 24, 2000 re: Special meeting of shareholders
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
W3 GROUP, INC.
Dated: March 31, 2000 By: /s/ P. Richard Sirbu
P. Richard Sirbu
Chairman and Chief Executive Officer
By:/s/ Robert Gordon
Robert Gordon
Executive Vice President
Principal Financial Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 31, 2000 By: /s/ P. Richard Sirbu
P. Richard Sirbu
Chairman and Chief Executive Officer
and Director
Dated: March 31, 2000 By: /s/ Thomas C. Hushen
Thomas C. Hushen
Senior Vice President, Chief
Technology Officer, Secretary and
Director
Dated: March 31, 2000 By: /s/ Martin I. Saposnick
Martin I. Saposnick
Director of Corporate Development
and Director
Dated: March 31, 2000 By: /s/ Joseph J. Messina
Joseph J. Messina
Director
<PAGE>
[ARTICLE] 5
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] YEAR YEAR
[FISCAL-YEAR-END] DEC-31-1999 DEC-31-1998
[PERIOD-END] DEC-31-1999 DEC-31-1998
[CASH] 60,826 2,337
[SECURITIES] 0 0
[RECEIVABLES] 167,310 1,361,173
[ALLOWANCES] 0 0
[INVENTORY] 0 2,014,517
[CURRENT-ASSETS] 17,929 116,847
[PP&E] 2,496 132,181
[DEPRECIATION] (1,298) 28,833)
[TOTAL-ASSETS] 247,263 3,598,222
[CURRENT-LIABILITIES] 287,780 2,041,520
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 1,116,983 534,983
[COMMON] 408,234 307,839
[OTHER-SE] (1,565,734) 713,880
[TOTAL-LIABILITY-AND-EQUITY] 247,263 3,598,222
[SALES] 837,486 3,845,393
[TOTAL-REVENUES] 837,486 3,845,393
[CGS] 595,713 3,043,546
[TOTAL-COSTS] 595,713 3,043,546
[OTHER-EXPENSES] 1,111,304 863,043
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] (451) 32,591
[INCOME-PRETAX] (869,080) (93,787)
[INCOME-TAX] 824 59,044
[INCOME-CONTINUING] 0 0
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (869,904) (152,831)
[EPS-BASIC] (0.91) (1.32)
[EPS-DILUTED] 0 0
<F1>
<FN>
<F1>The accompanying notes are an integral part of these financial
statements.
</FN>
</TABLE>
