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 March 31, 2000
[ ] 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.
(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
3,426,899 shares of Common Stock, no par value, outstanding on March
31, 2000.
W3 GROUP, INC. and SUBSIDIARY
Form 10-QSB Quarterly Report
For Period Ended March 31, 2000
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Independent Accountant's Review Report 4
Unaudited Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999 5 - 6
Unaudited Consolidated Statements of Operations
For Three Months Ended March 31, 2000 and 7
March 31, 1999
Unaudited Consolidated Statements of Cash Flows For Three
Months Ended March 31, 2000 and March 31, 1999 8
Statement of Stockholders' Equity (Deficit) 9
Notes to Financial Statements 10 - 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
three months ended March 31, 1999 include results of the Company's
former operating subsidiary which was divested effective March 31,
1999. Operating results for the three months ended March 31, 2000 are
not necessarily indicative of results that may be expected for the year
ending December 31, 2000. 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, 1999.
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Board of Directors and Stockholders of W3 Group, Inc. and Subsidiary
(Formerly known as Concorde Strategies Group, Inc. and Subsidiary)
I have received the accompanying consolidated balance sheet of W3 Group, Inc,
and subsidiary (formerly known as Concorde Strategies Group, Inc. and
subsidiary) as of March 31, 2000 and the related consolidated statements of
income and cash flows for the three-month periods ended March 31, 2000 and
1999. These financial statements are the responsibility of the Company's
management.
I conducted my review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of the
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters.
It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that
should be made to the financial statements referred to above for them
to be in conformity with generally accepted accounting principles.
Janet Loss, C.P.A., P.C.
May 12, 2000
<PAGE>
W3 GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited) Audited
March 31, December 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 52,600 $ 60,826
Loan Receivable (Note 12) 157,522 157,522
Interest Receivable (Note 12) 7,104 4,740
Rent Receivable $ 5,048 $ 5,048
TOTAL CURRENT ASSETS: $ 222,274 $ 228,136
Fixed assets, net of accumulated
depreciation of 1418 and $1,298 $ 1,078 1,198
Deferred Offering Costs $ 0 17,929
TOTAL ASSETS $ 223,352 $ 247,263
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) Audited
March 31, December 31,
2000 1999
CURRENT LIABILITIES:
Accounts payable $ 152,925 $ 138,307
Accrued interest 3,054 1,854
Stockholders' loans 40,000 40,000
Due to Ameristar
Capital Corporation $ 119,475 $ 107,619
TOTAL CURRENT LIABILITIES $ 315,454 $ 287,780
LONG TERM LIABILITIES: 0 0
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value,
100,000,000 shares authorized 0 0
Series B Convertible, non-dividend
bearing, 1,030,128 and 1,056,000
shares issued and outstanding $ 771,979 $ 791,383
Series B Convertible Preferred
Stock Purchase Warrants issued $ 325,600 $ 325,600
and outstanding
Common stock, no par value,
500,000,000 shares authorized,
3,426,899 and 3,413,582 shares
issued and outstanding as of
March 31, 2000 and
December 31, 1999 $ 427,638 $ 408,234
Common stock issuable (Note 10) 50,000 50,000
Additional paid-in-capital 34,625 34,625
Retained earnings(Deficit) (1,701,944) (1,650,359)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (92,102) (40,517)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 223,352 $ 247,263
The accompanying notes are an integral part of these financial statements.
<PAGE>
W3 GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three
Months Ended March 31,
2000 1999
REVENUES
Sales $ 0 $ 837,486
COST OF GOODS SOLD $ 0 $ 595,713
GROSS PROFIT: $ 0 $ 241,773
OPERATING EXPENSES:
Operating expenses of
divested subsidiary
L'Abbigliamento, Ltd. $ 0 181,292
Consulting $ 13,000 30,125
Depreciation expense $ 120 200
Insurance $ 1,197 393
Office expenses and postage $ 1,363 2,547
Legal and accounting expenses $ 23,827 2,594
Rent expense $ 11,856 11,538
Transfer and filing fees $ 696 536
TOTAL OPERATING EXPENSES $ 52,059 $ 229,225
NET INCOME(LOSS) BEFORE
OTHER EXPENSES $ (52,059) $ 12,548
OTHER INCOME AND (EXPENSES):
Interest Income 2,363 2,148
Interest (Expense) (1,200) 0
TOTAL OTHER INCOME AND (EXPENSES) 1,163 2,148
NET INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (50,896) 14,696
ESTIMATED PROVISION FOR
INCOME TAXES 689 0
NET INCOME (LOSS) $ (51,585) $ 14,696
NET INCOME (LOSS) PER SHARE $ (.015) $ .122
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,420,240 120,000 (1)
(1) Adjusted for 1-30 reverse split on October 1, 1999
The accompanying notes are an integral part of these financial statements.
<PAGE>
W3 GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CASH FLOW STATEMENTS
For the Three Months Ended March 31, 2000 and 1999 (Unaudited)
Consolidated Cash
Flow Statements
March 31, 2000 March 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (51,585) $ 14,696
Adjustments to reconcile
net loss to net cash flow
from operating activities:
Depreciation and amortization 120 3,096
(Increase)in receivable (2,364) (10,355)
(Increase)in inventory 0 (149,126)
Decrease in prepaid expenses 0 12,779
Increase in due to Ameristar
Capital Corporation 11,856 11,538
(Decrease) in deferred
offering costs 17,929 0
Increase in payables 14,618 72,819
Increase in accrued interest 1,200 0
Increase in corporate income
taxes payable $ 0 $ 4,235
Cash Used by Operating Activities $ (8,226) $ (40,318)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in fixed assets 0 (2,625)
Increase in leasehold improvements 0 0
Net Cash used in investing
activities 0 (2,625)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) of amounts
due to factor 0 53,104
(Decrease) in Bank and other loans 0 (9,068)
Net Cash Provided by
Financing Activities $ 0 $ 44,036
Net Increase (Decrease)in Cash $ (8,226) $ 1,093
CASH, BEGINNING OF THE PERIOD $ 60,826 $ 2,337
CASH, END OF THE PERIOD $ 52,600 $ 3,430
The accompanying notes are an integral part of these financial statements.
<TABLE>
W3 GROUP, INC. AND SUBSIDIARY
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Consolidated Statement of Stockholders' Equity
for the Three Months Ended March 31, 2000
<CAPTION>
Preferred Series B
Stock Non- Convertible
Dividend Preferred Total
Bearing Stock Common 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, 2000 $791,383 $325,600 3,413,582 $408,234 $50,000 $34,625 $(1,650,359) $(40,517)
25,872 shares of
Series B Convertible
Preferred Stock
converted to
Common Stock (19,404) 13,317 19,404 0
Net loss for the
Three Months Ended
March 31, 2000 -- -- -- -- -- -- (51,585) $(51,585)
Balance,
March 31, 2000 $771,979 $325,600 3,426,899 $427,638 $50,000 $34,625 $(1,701,944) $(92,102)
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
W3 GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED March 31, 2000
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 8), 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 9).
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.
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 - 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 (3,250,000) of Concorde's post split Common Stock. W3
Group, Inc, became a wholly owned subsidiary of Concorde, and Concorde
changed its corporation name to W3 Group, Inc.
Also, on October 1, 1999, the reverse split of Concorde's Common Stock on
the basis of one new share for each 30 existing shares was effected. The
number of outstanding shares of Concorde's Series B Convertible Preferred
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.
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.
Note 4 - 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 5 - 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 6 - RELATED PARTY TRANSACTIONS
The Company has received advances of monies for its operating expenses
from an affiliated company, Ameristar Group Incorporated. Ameristar also
serves as a consultant to W3 Group, Inc. W3 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 5)
The Company has incurred consulting fees of $184,833 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 3. -
Capitalization)
On January 7, 1998, the Company issued 315,000 shares of Series B
Convertible Preferred Stock to certain parties who had performed services
on behalf of the Company. Of that total, 222,000 shares were issued to
two related privately owned companies in consideration of $.25 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 3 - Capitalization).
On April 1, 1999, the Registrant issued 71,666 of its preferred stock to
a company principally owned by a Director of the Registrant in
consideration of $2.00 per share for consulting services performed on
behalf of the Registrant. (See Note 3 Capitalization).
On May 21, 1999, 199,995 restricted shares of common stock were sold to a
principal of L'Abbigliamento, Ltd. who had performed consulting services
on behalf of the registrant. These shares were issued in October, 1999 in
consideration for the cancellation of payments in the total amount of
$64,995 owed by the registrant for said services.
Note 7 - 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 8 - 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 9 - 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 10 - SUBSEQUENT EVENTS
On April 27, 2000, the registrant issued 300,000 restricted shares of
Common Stock to a former director of the Company in consideration for
services being performed on behalf of the registrant. The shares were
issued in lieu of cash payment at the agreed upon rate of $1.375 per
share.
The Company has withdrawn its private placement offering which had
commenced on December 14, 1999, and returned the private placement
proceeds of $50,000 to the subscribers on May 3, 2000.
ITEM 2: Management's Discussion and Analysis of Financial Conditions and
Results of Operations:
Results of Operations
The following discussion includes historical information to comply with
disclosure requirements for the quarterly period ended March 31, 2000.
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. The results of operations for the
Company's divested subsidiary have been included in the consolidated
results of the Company for the three month period ended March 31, 1999.
The Company did not have any revenue during the three month period ended
March 31, 2000. For the three month period ended March 31, 1999, revenue
totalled $837,486 and gross profit realized was $241,773, all of which
resulted from the operation of the Company's former operating subsidiary,
L'Abbigliamento, Ltd.
Consolidated operating expenses for three month period ended March 31,
2000 were $52,059, a decrease of $177,166 from the prior year's period,
which included total operating expenses of $181,292 for L'Abbigliamento,
Ltd. Excluding L'Abbigliamento, Ltd., the current period's operating
expenses of $52,059 increased $4,126 from the prior year's period.
The net loss for the three month period ended March 31, 2000 was $51,585
compared to net income of $14,696 for the comparable period in the prior
year, a decrease of $66,281 in net income. .
The total cash and cash equivalents at March 31, 2000 totalled $52,600,
compared to $60,826 at December 31, 1999, a decrease of $8,226.
Accounts Payable at March 31, 2000 totalled $152,925 compared to $138,307
at December 31, 1999, an increase of $14,618.
The Company is continuing to look for suitable acquisition candidates. As
of the date of this Report, no additional acquisition candidates have been
found, and there is no assurance that any additional candidates will be
found.
Business Objectives
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.
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.
Special Meeting of Shareholders
A special meeting of shareholders was held on January 18, 2000. The only
matter voted on, which was approved by shareholders, was to amend the
Company'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 (See OTHER INFORMATION, Item
4).
Liquidity and Capital Resources
At March 31, 2000, the Company had cash totalling $52,600, which is not
adequate for working capital requirements, 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, and 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
<PAGE>
OTHER INFORMATION
Item 1. Legal Proceedings. Not Applicable.
Item 2. Change in Securities. None
Item 3. Defaults Upon Senior Securities. Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) A special meeting of shareholders was held on January
18,
2000.
(b) The special meeting of shareholders did not involve the
election of directors.
(c) 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
0.0416 shares to an amount equal to 0.5 (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.
Item 5. Other Information. None
Item 6. Exhibits and Reports of Form 8-K.
January 24, 2000 re: Special Meeting of Shareholders
Exhibit 27- Financial Data Schedules (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: May 12, 2000 By:/s/ Robert Gordon
Robert Gordon
Executive Vice President
Principal Financial Officer
<PAGE>
[ARTICLE] 5
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 3-MOS YEAR
[FISCAL-YEAR-END] DEC-31-2000 DEC-31-1999
[PERIOD-START] JAN-01-2000 JAN-01-1999
[PERIOD-END] MAR-31-2000 DEC-31-1999
[CASH] 52600 60826
[SECURITIES] 0 0
[RECEIVABLES] 169674 167310
[ALLOWANCES] 0 0
[INVENTORY] 0 0
[CURRENT-ASSETS] 0 17929
[PP&E] 2496 2496
[DEPRECIATION] (1418) (1298)
[TOTAL-ASSETS] 223352 247263
[CURRENT-LIABILITIES] 315454 287780
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 1097579 1116983
[COMMON] 427638 408234
[OTHER-SE] (1617319) (1565734)
[TOTAL-LIABILITY-AND-EQUITY] 223352 247263
[SALES] 0 837486
[TOTAL-REVENUES] 0 837486
[CGS] 0 595713
[TOTAL-COSTS] 0 595713
[OTHER-EXPENSES] 52059 1111304
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] (1163) (451)
[INCOME-PRETAX] (50896) (869080)
[INCOME-TAX] 689 824
[INCOME-CONTINUING] 0 0
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (51585) (869904)
[EPS-BASIC] (.015) (0.91)
[EPS-DILUTED] 0.00 0.00<F1>
<FN>
<F1>The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
