UNITED STATES
SECURITIES AND 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, 2001
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 Identification Number)
incorporation or organization)
444 Madison Avenue, Suite 2904, New York, New York 10022
(Address of principal executive offices) (zip code)
(212) 750-7878
(Registrant's telephone number, including area code)
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 March 15, 2002, 3,892,085 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 15, 2002 was $71,115.
FORM 10-KSB
December 31, 2001
W3 GROUP, INC.
TABLE OF CONTENTS
Item
No. Description Page
FORWARD LOOKING STATEMENTS
PART I
1. Business 1
2. Properties 3
3. Legal Proceedings 3
4. Submission of Matters to a Vote of Security Holders 3
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 4
6. Selected Financial Information 5
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
8. Financial Statements 7
9. Disagreements on Accounting and Financial Disclosure 7
PART III
10. Directors and Executive Officers of the Registrant 8
11. Executive Compensation 10
12. Security Ownership of Certain Beneficial Owners and Management 10
13. Certain Relationships and Related Transactions 11
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 12
Signatures 13
PART F/S F-1 to F-15
FORWARD LOOKING STATEMENTS
Some of the information contained in this report may constitute forward-
looking statements or statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward looking statements are based on
current expectations and projections about future events. The words "estimate",
"plan", "intend", "expect", "anticipate" and similar expressions are intended to
identify forward-looking statements which involve, and are subject to, known and
unknown risks, uncertainties and other factors which could cause the Company's
actual results, financial or operating performance, or achievements to differ
from future results, financial or operating performance, or achievements
expressed or implied by such forward-looking statements. Projections and
assumptions contained and expressed herein were reasonably based on information
available to the Company at the time so furnished and as of the date of this
filing. All such projections and assumptions are subject to significant
uncertainties and contingencies, many of which are beyond the Company's control,
and no assurance can be given that the projections will be realized. Potential
investors are cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release any revisions to these forward looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
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.("Concorde"), 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., a New York based distributor of Italian made men's
apparel, was later divested by the Company, effective March 31, 1999 (Refer to
"Note 7 - DIVESTITURE OF SUBSIDIARY").
In 1999, the Company decided to reorganize and focus its acquisition
efforts on Internet related technology companies. Accordingly, Concorde entered
into an Agreement and Plan of Share Exchange with W3 Group, Inc., a privately
held company, and said Agreement became effective on October 1, 1999, after
approval by shareholders. At that time, Concorde changed its corporation name
to W3 Group, Inc. (Refer to Form 8-K filed on October 15, 1999).
Present Overview
W3 intends to acquire, finance, and restructure profitable companies
that can utilize the Internet to expand their business and distribution channel.
As a result of the significant changes in the Internet industry, the Company's
focus is no longer on Internet related companies. The Company is seeking to
acquire companies that would become wholly owned, or majority owned,
subsidiaries of W3. W3 intends to concentrate on existing companies that have
proven markets, profitability, and management. The Company's goal is to provide
a platform for selected companies to expand their markets, strengthen internal
functions by providing consulting services and professional management support,
and expansion capital, while allowing the companies to continue management of
daily operations.
W3's objective is to better meet the needs of growing companies that
may have had difficulty obtaining capital from traditional sources such as
banks, large asset based lenders, and the public securities markets. Also, W3
believes that its opportunity is enhanced because of the consolidation in the
commercial banking industry and the emphasis in investment banking toward
increasingly larger financings. The resulting diminishing of available capital
has affected the flow to smaller companies, where the need for capital is the
most critical.
W3's approach is to develop "partnerships" with companies having
exceptional management in order to improve the long term value of a business.
The participation of management through equity based compensation and stock
ownership is a crucial ingredient of W3's plan.
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.
Competition
The 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 Company's intended marketplace is rapidly changing 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 utilized the offices and business facilities of Ameristar
Group Incorporated ("Ameristar"), a privately held corporation principally
owned and controlled by two Directors of the Company, at a monthly rental of
$4,061 until September 30, 2001, and thereafter on a month to month basis at a
monthly cost of $2,500. (See "Note 5 - LEASES AND OTHER COMMITMENTS".)
Employees
The Company's employees consist of its officers. The outside Directors
are engaged in other business activities and devotes so much of their 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
None.
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,
2001 for the Company's Common Stock was 399 and for its Series B Convertible
Preferred Stock was 26 shareholders. There currently are 10 market makers for
the Company's Common Stock and 7 market makers for its Series B Convertible
Preferred Stock.
The following tables show for the periods indicated the approximate
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
2000 2001
High Low High Low
Quarter ended March 31 $8.5000 $1.5000 $0.1000 $0.0800
Quarter ended June 30 $1.5000 $0.7500 $0.0500 $0.0400
Quarter ended September 30 $1.2500 $0.2500 $0.0500 $0.0400
Quarter ended December 31 $1.2500 $0.3750 $0.0400 $0.0300
SERIES B CONVERTIBLE PREFERRED SHARE TRADING HISTORY
2000 2001
High Low High Low
Quarter ended March 31 $2.1250 $0.5000 $0.0500 $0.0400
Quarter ended June 30 $0.7000 $0.1875 $0.0400 $0.0300
Quarter ended September 30 $0.1875 $0.0625 $0.0300 $0.0100
Quarter ended December 31 $0.1250 $0.0625 $0.0300 $0.0100
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.
All of the Company's issued and outstanding 520,056 Common Stock
Purchase Warrants expired on October 1, 2001 and none of such Warrants had been
exercised. (See "Reorganization of Business Operations" and "Note 3 -
CAPITALIZATION".)
Subsequent to the period covered by this report, on February 1, 2002,
all of the Company's then outstanding 337,600 Series B Convertible Stock
Purchase Warrants expired, with none of said Warrants having been exercised.
(See "Note 3 - CAPITALIZATION" and "Note 10 - SUBSEQUENT EVENT".)
ITEM 6. SELECTED FINANCIAL INFORMATION
Summary Balance Sheet Data: YEAR ENDED DECEMBER 31,
2001 2000 1999 1998 1997
Total Assets $ 51,800 $ 440,375 $ 247,263 $3,598,222 $3,440,634
Total Current
Assets 51,561 439,656 228,136 3,454,374 3,341,282
Total Liabilities 524,070 421,915 287,780 2,041,520 2,276,451
Retained Earnings
(Deficit) (2,444,612) (1,953,882) (1,650,359) (263,995) (111,164)
Stockholders'
Equity $ (472,270) $ 18,460 $ (40,517) $1,556,702 $1,164,183
Summary Earnings Data: YEAR ENDED DECEMBER 31,
2001 2000 1999 1998 1997
Revenues $ 0 $ 0 $ 837,486 $3,845,393 $1,827,502
Cost of
goods sold 0 0 595,713 3,043,546 1,419,701
Selling,
general &
administrative
expense 477,022 327,398 1,124,623 899,077 495,162
Income (Loss) from
operations (477,022) (327,398) (882,850) (97,230) (87,361)
Net Income (Loss) (481,822) (312,431) (869,904) (152,831) (100,361)
Earnings (Loss)
per Share (0.125) (.085) (.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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Company did not have any revenue during the year 2000 or 2001.
Pursuant to SFAS-5, "Accounting for Contingencies", the Company has
written off the outstanding loan receivable and related interest receivable
from its former operating subsidiary, L'Abbigliamento, Ltd., since the loan has
been in default for over two years, and repayment of said loan cannot be
reasonably assured. A total of $177,751 was written off to bad debt expense
during the quarter ended September 30, 2001, consisting of the loan balance of
$157,522 and interest receivable in the amount of $20,229 (See "Note 7 -
DIVESTITURE OF SUBSIDIARY" and "Note 9 - WRITE OFF OF BAD DEBT".)
The Company is still pursuing L'Abbigliamento, Ltd. in regard to
obtaining payments toward the loan but no assurances can be made regarding any
such payments.
Operating expenses for 2001 were $477,022 compared to $327,398 in 2000,
an increase of $149,624 from the prior year, resulting primarily from increased
consulting fees and the write off of the loan to L'Abbigliamento, Ltd. as
described above.
The net loss for the twelve month period ended December 31, 2001 was
$481,822 compared to a net loss of $312,431 for the prior year period, an
increase of $169,391, reflecting the increased operating expenses.
The Company had no cash and cash equivalents at December 31, 2001,
compared to $120 at December 31, 2000. Accounts payable at December 31, 2001
totaled $252,447, compared to $201,641 at December 31, 2000, an increase of
$50,806 resulting from expenses accrued for rent and consulting fees.
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 candidates will be found.
Liquidity and Capital Resources
At the end of fiscal 2001, the Company had no cash. The Company has
received an audit option which includes a "going concern" risk, which raises
substantial doubt regarding the Company's ability to continue as a going
concern. Management is re-evaluating business opportunities and looking for a
new direction for the Company.
General Risk Factors Affecting the Company
Various factors could cause actual results of the Company to differ
materially from those indicated by forward-looking statements made from time to
time in news releases, reports, proxy statements, registration statements and
other written communications (including the preceding sections of this
document), as well as oral statements made from time to time by representatives
of the Company. Except for historical information, matters discussed in such
oral and written communications are forward-looking statements that involve
risks and uncertainties, including, but not limited to the following:
* Rapidly changing business environment.
* Intense competition within the market place.
* Many well established companies and smaller entrepreneurial
companies have significant resources that will compete with the
Company's limited resources in the acquisition of companies.
* There can be no assurance that the Company will be able to
compete successfully in the acquisition of subsidiary companies.
* The management of growth is expected to place significant
pressure on the Company's managerial, operational, and
financial resources.
* The Company will not be able to accomplish its growth strategy
if it is not able to consummate future acquisitions and raise
capital.
* The Company may not be able to operate as a going concern.
Refer to independent auditor's report accompanying the Company's
financial statements and Note 10 to financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited financial statements for the fiscal years ended August 31, 20001
and 2000 are submitted herein as PART F/S on Pages F-1 to F-14.
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
Robert Gordon 66 Executive Vice President
Martin I. Saposnick 55 Director of Corporate Development and Director
Joseph J. Messina 47 Director
William C. Hayde 41 Secretary, 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
Robert Gordon is Acting President and Executive Vice President. From
1996-1999, Mr. Gordon was President and a Director of Concorde Strategies
Group, Inc. and from 1993-1996, Executive Vice President of Contex, Inc., an
investment banking and consulting firm in Naples, Florida. From 1990-1993, 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. From 1988-1989, Mr. Gordon was President and Chief Operating Officer
of a public company that manufactured precision parts, 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 from Union
College.
Martin I. Saposnick is Director of Corporate Development and a Director
of the Company. Since 1992, Mr. Saposnick has also been 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. From 1983-1993, Mr.
Saposnick provided independent investment banking and financial consulting
services and, as President, founded Remsen Group, Ltd. Previously, 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. In 1992, he became 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 was a Director of
Concorde Strategies Group, Inc. From 1978-1992, Mr. Messina was 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.
William C. Hayde is a Director and also Secretary. Mr. Hayde is an
investment banker and co-owner of Brockington Securities, a broker-dealer
specializing in wholesale and institutional trading, mergers and acquisitions,
and equity and debt financings. Mr. Hayde is also President of B.R.Equities,
which owns and operates an electronic trading room, as well as Chairman of the
Board of Toscana Group, Inc., a venture capital and consulting company. Mr.
Hayde, who has been active in the brokerage business since 1983, was previously
Director of Corporate Finance for Aegis Capital. He has a Bachelor's Degree in
Psychology from Stony Brook University.
ITEM 11. EXECUTIVE COMPENSATION
The Company accrued consulting fees of $1,000 per week for Mr. Robert
Gordon, Executive Vice President, through December 31, 2001. In 1998, Robert
Gordon was President of the Company and received wages of $30,330 and consulting
fees of $15,000. As of December 31, 2001, the Company has accrued obligations
for payments to Mr. Gordon of $190,733. No other officers or directors received
compensation during 2001.
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, based
on 3,892,085 shares issued and outstanding as of December 31, 2001; (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.
Number of shares of
Name Common Stock Owned Percentage of Class
Sirbu Enterprises, LLLP
A Colorado Limited Liability
Limited Partnership (4)
16414 Sandstone Dr.
Morrison, CO 80465 525,000 13.49%
Wilmont Holdings Corp.(5)*
33 Wilputte Place
New Rochelle, NY 10804 630,000 16.19%
Lomar Corp.(6)*
21 Schermerhorn
Brooklyn, NY 11201 625,000 16.06%
Thomas C. Hushen
33278 Bluebell Circle
Evergreen, CO 80439 500,000 12.85%
William C. Hayde*
76 Cliff Road
Belle Terre, NY 11777 300,100 7.71%
Robert Gordon*
201 East 19th Street
New York, NY 10003 103,667 2.66%
Dunhill Limited (7)*
444 Madison Avenue
New York, NY 10022 3,333 0.08%
Remsen Group Ltd. (8)*
21 Schermerhorn Street
Brooklyn, NY 11201 7,617 0.20%
Officers and Directors
as a Group (4 Persons)(3) 1,669,717 42.90%
* 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, former Officer and Director 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently utilizes the offices and facilities of Ameristar
Group Incorporated ("Ameristar"), a privately held corporation principally
owned and controlled by two directors of the Company, on a month to month basis
at a monthly rate of $2,500. The Company did not make any payments to Ameristar
during the current year ended December 31, 2001. (Refer to "PART I, ITEM 2.
PROPERTIES").
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. The following documents are filed in PART F/S, as a part of this
report on pages F-1 to F-14.
PART F/S
Financial Statements;
Auditors Report of Janet Loss, C.P.A., P.C. dated April 25, 2002
together with;
Balance Sheet as of December 31, 2001 and 2000;
Statement of Operations for the years ended December 31, 2001 and 2000;
Statement of Stockholders' Equity for the years ended December 31, 2001
and 2000;
Statement of Cash Flow for the years ended December 31, 2001 and 2000; and
Notes to Financial Statements.
2. Financial Statement Schedules.
All applicable information is contained in the financial statements or
notes thereto.
3. Exhibits: None.
(b) Form 8-K filings: None.
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: April 25, 2002 By: /s/ Robert Gordon
----------------------------------------------
Robert Gordon
Acting President and Executive Vice President
Principal Financial Officer
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: April 25, 2002 By: /s/ Martin I. Saposnick
----------------------------------------------
Martin I. Saposnick
Director of Corporate Development and
Director
Dated: April 25, 2002 By: /s/ Joseph J. Messina
----------------------------------------------
Joseph J. Messina
Director
Dated: April 25, 2002 By: /s/ William C. Hayde
----------------------------------------------
William C. Hayde
Director
PART F/S
For the Years Ended December 31, 2001 and 2000
Reference
Report of Janet Loss, C.P.A., P.C.,
Independent Certified Public Accountant F-2
Balance Sheets F-3
Statements of Operations F-5
Statements of Cash Flows F-6
Statements of Stockholder's Equity F-7
Notes to Financial Statements F-9 to F-14
Janet Loss, C.P.A., P.C.
Certified Public Accountant
1780 S Bellaire Drive, Suite 500
Denver, Colorado 80222
Board of Directors
W3 Group, Inc.
444 Madison Avenue, Suite 2904
New York, New York 10022
I have audited the accompanying balance sheet of W3 Group, Inc.
as of December 31, 2001 and 2000, and the related statements of operations,
changes in stockholders' equity and cash flows for the years ended December 31,
2001 and 2000. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted
accounting standards in the United States of America. 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, the financial statements at December
31, 2001 and 2000, and referred to above present fairly, in all material
respects, the financial position of W3 Group, Inc. as of December 31, 2001 and
2000, and the results of its operations and its cash flows for the years ended
December 31, 2001 and 2000 in conformity with generally accepted accounting
principles applied on a consistent basis.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has incurred recurring losses from operations
and has no cash. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan in regard to these
matters is also described in Note 10. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Janet Loss
Janet Loss, C.P.A., P.C.
April 25, 2002
W3 GROUP, INC.
BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
ASSETS
2001 2000
CURRENT ASSETS:
Cash and cash equivalents $ 0 $ 120
Prepaid Expenses 5 1,561 257,813
Loan Receivable (Note 8 and 10) 0 157,522
Interest Receivable (Note 8 and 10) 0 14,191
Rent Receivable 0 1,102
TOTAL CURRENT ASSETS: $ 51,561 $ 430,748
Fixed assets, net of accumulated
depreciation of 2,257and 1,777 $ 239 $ 719
TOTAL ASSETS $ 51,800 $ 431,467
W3 GROUP, INC.
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
CURRENT LIABILITIES:
Accounts payable $ 252,447 $ 201,641
Accrued interest 11,454 6,654
Stockholders' loans 40,000 40,000
Due to Ameristar Group, Inc. $ 220,169 $ 173,620
TOTAL CURRENT LIABILITIES $ 524,070 $ 421,915
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value, 100,000,000
shares authorized
Series B Convertible, non-dividend
bearing, 699,060 and 793,360 shares issued
and outstanding $ 523,891 $ 594,560
Series B Convertible Preferred Stock
Purchase Warrants issued and outstanding 325,600 325,600
Common stock, no par value, 500,000,000
shares authorized, 3,892,085 and 3,844,935
shares issued and outstanding as of
December 31, 2001 and 2000 1,088,226 1,017,557
Additional paid-in-capital 34,625 34,625
Retained earnings (Deficit) (2,444,612) (1,962,790)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (472,270) 9,552
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 51,800 $ 431,467
W3 GROUP, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
REVENUES: $ 0 $ 0
OPERATING EXPENSES:
Consulting $ 258,252 $ 206,688
Depreciation and amortization 480 479
Insurance 0 2,393
Office 1,320 5,639
Legal and Accounting 0 28,102
Rent 44,049 47,751
Transfer and filing fees 2,259 2,783
Marketing 0 33,563
Bad Debt Expense 170,662 0
TOTAL OPERATING EXPENSES $ (477,022) $ 327,398
(LOSS) FROM OPERATIONS (477,022) (327,398)
OTHER INCOME AND (EXPENSES):
INTEREST INCOME 0 9,451
INTEREST (EXPENSE) (4,800) (4,800)
FORGIVENESS OF DEBT 0 11,005
TOTAL OTHER INCOME AND (EXPENSES) (4,800) 15,656
NET (LOSS) BEFORE PROVISION FOR INCOME TAXES (481,822) (311,742)
PROVISION FOR INCOME TAXES 0 689
NET (LOSS) $ (481,822) $ (312,431)
NET (LOSS PER SHARE) $ (0.125) $ (0.085)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,871,222 3,681,357
W3 GROUP, INC.
CASH FLOW STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (481,822) $ (312,431)
Adjustments to reconcile net loss to
net cash flow from operating activities:
Depreciation and amortization 480 479
Decrease (Increase) in prepaid expenses 206,252 (257,813)
Increase in Due to Ameristar Group 46,549 66,001
Decrease in Loan Receivable 157,522 0
Decrease (Increase) in Interest Receivable 14,191 (9,451)
Decrease (Increase) in Rent Receivable 1,102 3,946
(Increase) in Deferred Offering Costs 0 17,929
(Decrease) Increase in payables 55,606 68,134
CASH USED BY OPERATING ACTIVITIES (120) (423,206)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds and (Return) of
Common Stock Issuable 0 (50,000)
Proceeds from Issuance of Common Stock and
conversion of Preferred Stock to Common Stock 70,669 532,025
Decrease in Preferred Stock
due to Conversion to Common Stock (70,669) (119,525)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 0 362,500
NET INCREASE (DECREASE) IN CASH (120) (60,706)
CASH, BEGINNING OF THE PERIOD 120 60,826
CASH, END OF THE PERIOD $ 0 $ 120
W3 GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Preferred Series B
Stock Convertible
Non-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)
------------ ------------ ------------ ------------ ------------ ------------ ------------ -------------
Balance, January 1, 2000 $ 791,383 $ 325,600 3,413,582 $ 408,234 50,000 $ 34,625 $(1,650,359) $ (40,517)
25,812 shares of Series B
converted to Common Stock
(first quarter) $ (19,344) 13,317 $ 19,344
300,000 shares issued for
consulting services on
April 27, 2000 300,000 $ 412,500 $ 412,500
Return of Private Placement
Proceeds on May 3, 2000 (50,000) $ (50,000)
190,428 shares of Series B
Convertible Preferred Stock
converted to Common Stock
(second quarter) $ (142,707) 94,836 $ 142,707
6,400 shares of Series B
Convertible Preferred Stock
converted to Common Stock
(third quarter) $ (4,796) 3,200 $ 4,796
40,000 shares of Series B
convertible Preferred Stock
converted to Common Stock
(fourth quarter $ (29,976) 20,000 $ 29,976
Net Loss for the year ended
December 31, 2000 ------------ ------------ ------------ ------------ ------------ ------------ $ (312,431) $ (312,431)
Balance, December 31, 2000 $ 594,560 $ 325,600 3,844,935 $ 1,017,557 0 $ 34,625 $(1,962,790) $ 9,552
2001
87,000 shares of Series B
Convertible Preferred Stock
converted to Common Stock
(first quarter) $ (65,198) 43,500 $ 65,198
7,300 shares of Series B
Convertible Preferred Stock
converted to Common Stock
(fourth quarter) $ (5,471) 3,650 $ 5,471
Net Loss for the year ended
December 31, 2001 ------------ ------------ ------------ ------------ ------------ ------------ $ (481,822) $ (481,822)
Balance, December 31, 2001 $ 523,891 $ 325,600 3,892,085 $ 1,088,226 0 $ 34,625 $(2,444,612) $ (472,270)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 2001
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.
As a result of the Company's changed focus, an agreement for the divestiture of
L'Abbigliamento, Ltd. effective March 31, 1999, was approved by shareholders
on August 12, 1999, (see "Note 7 - DIVESTITURE OF SUBSIDIARY" and "Note 8 -
MERGER AND ACQUISITIONS") and the divestiture was completed.
On April 21, 1999, the Company entered into an Agreement and Plan of
Share Exchange with W3 Group, Inc. a Delaware corporation which was formed to
acquire and develop young companies whose businesses involved the development of
Internet related technology and applications. Effective October 1, 1999, the
Agreement was completed and the Company changed its name to W3 Group, Inc.
(See "Note 8 - MERGER AND ACQUISITIONS".)
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
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
are charged to operations.
Sales and expenses
Sales and expenses are recorded using the accrual basis of accounting.
Fixed assets and accumulated depreciation
Fixed assets 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.
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, ending on October 14, 2002. As discussed below, the conversion
right of the Series B Preferred Shares has been adjusted as a result of a one
for thirty reverse split of the Company's Common Stock on October 1, 1999.
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 entitled the holder thereof to purchase one
Series B Convertible Preferred Share at a price of $3.00 per share during the
period commencing thirteen months after the date of the issuance thereof and
continuing until February 1, 2002. (See "Note 10 - SUBSEQUENT EVENT".)
On April 1, 1999, the Company sold 175,000 shares of Series B
Convertible Preferred stock to certain parties who had performed services on
behalf of the Company, including one company which is principally owned by a
Director of the Company. The shares were sold by the Company in consideration
for the cancellation of payments owed by the Company at the agreed upon rate
of $2.00 per share and were sold through a Private Placement pursuant to the
exemption provided by Rule 504 of Regulation D under the Securities Act of 1933,
as amended.
On May 21, 1999, 199,995 restricted shares of Common Stock were sold to
a principal of L'Abbigliamento, Ltd. who had performed consulting services on
behalf of the registrant. These shares were issued in October, 1999 in
consideration for the cancellation of payments in the total amount of $64,995
owed by the registrant for said services.
In October, 1999, the Company issued 116,000 shares of the Series B
Convertible Preferred Stock to three shareholders in satisfaction of a
previously existing obligation relating to consulting services performed on
behalf of the Company by an independent third party.
Effective October 1, 1999, the Agreement and Plan of Share Exchange
(the "Agreement") with W3 Group, Inc. a privately owned company, was completed.
(See "Note 8 - MERGER AND ACQUISITIONS".) Under the terms of this Agreement,
Concorde acquired 100 percent of the capital stock of W3 Group, Inc. in exchange
for an equal number of shares (3,250,000) of Concorde's post split Common Stock.
W3 Group, Inc, became a wholly owned subsidiary of Concorde, and Concorde
changed its corporation name to W3 Group, Inc.
Also, on October 1, 1999, the reverse split of Concorde's Common Stock
on the basis of one new share for each 30 existing shares was effected. The
number of outstanding shares of Concorde's Series B Convertible Preferred Stock
and Series B Convertible Preferred Stock Purchase Warrants remained unchanged,
however, the conversion feature 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. None of the
Common Stock Purchase Warrants were exercised during the exercise period and
all such Warrants expired on 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.
On April 27, 2000, the registrant issued 300,000 restricted shares of
Common Stock to a former director of the Company in consideration for services
being performed on behalf of the registrant. The shares were issued in lieu of
cash payment at the agreed upon rate of $1.375 per share.
The Company withdrew its private placement offering which had commenced
on December 14, 1999, and returned the private placement proceeds of $50,000 to
the subscribers on May 3, 2000.
On October 1, 2001, all of the 520,056 Common Stock Purchase Warrants
then outstanding expired. These Warrants had been issued by the Company on
October 4, 1999 and none had been exercised.
On February 1, 2002, subsequent to the period covered by this report,
all of the 337,600 Series B Convertible Stock Purchase Warrants then
outstanding expired. These Warrants had been sold by the Company on August
12, 1998 and none had been exercised. (See "Note 11 - SUBSEQUENT EVENT".)
Note 4 - PROVISION FOR TAXES ON INCOME
The estimated provision for income taxes are based on the statutory
federal and state income tax rates.
Note 5 - LEASES AND OTHER COMMITMENTS
The 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
October 1, 2001 thru December 31, 2001 7,500
Total Rent Commitment $ 190,981
As of October 1, 2001, the Company is renting space from Ameristar on
a month to month basis at a monthly cost of $2,500.
Note 6 - RELATED PARTY TRANSACTIONS
The Company has received advances of monies for its operating expenses
from an affiliated company, Ameristar Group Incorporated. W3 leased office space
from Ameristar on a monthly rental, commencing on November 1, 1997 for a term of
three years and eleven (11) months, ending on September 30, 2001, and thereafter
on a month to month basis. (See "Note 5 - LEASES AND OTHER COMMITMENTS".)
The Company has incurred consulting fees of $236,833 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 - 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; (4) On January 10,
2001, L'Abbigliamento, Ltd. paid off the balance due on its loan from State Bank
of Long Island, ending the Company's liability for said loan pursuant to a
guarantee of payment previously made by the Company.
Note 8 - MERGER AND ACQUISITIONS
On April 21, 1999, the Company entered into an Agreement and Plan of
Share Exchange with W3 Group, Inc., which was approved by shareholders on August
12, 1999, whereby Concorde acquired 100 percent of the Common Stock of W3 Group,
Inc. in exchange for the issuance of 3,275,000 shares of post reverse split
Common Stock of Concorde 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 9 - WRITE OFF OF BAD DEBT
Pursuant to SFAS-5, "Accounting for Contingencies," the Company has
written off the Loan Receivable in the amount of $157,522 and related Interest
Receivable in the amount of $13,140 during the quarter ended September 30,
2001, and charged a total of $170,662 to bad debt expense (see Statement of
Operations). Said loan had been made to the Company's former operating
subsidiary, L'Abbigliamento, Ltd., and has been in default for over two years.
(See "Note 7 - DIVESTITURE OF SUBSIDIARY".) Repayment of the loan and related
interest cannot be reasonably assured.
Note 10 - GOING CONCERN
As of December 31, 2001, the Company had a stockholders' deficit of
$2,444,379, and no cash. As a result, substantial doubt exists about its
ability to continue as a going concern. These financial statements have been
prepared on the going concern basis under which an entity is considered to be
able to realize its assets and satisfy its liabilities in the ordinary course
of business. Operations to date have been primarily financed by equity
transactions. Management is re-evaluating business opportunities and looking
for a new direction for the Company. The financial statements do not include
any adjustments that might be necessary should the Company be unable to continue
as a going concern.
Note 11 - SUBSEQUENT EVENT
On February 1, 2002, subsequent to the period covered by this report,
all of the 337,600 Series B Convertible Stock Purchase Warrants then outstanding
expired. These Warrants had been sold by the Company on August 12, 1998 and
none had been exercised. (See "Note 3 - CAPITALIZATION".)