Edgar Filing: W3 GROUP INC

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, 2003

Commission File Number: 0-27083

W3 GROUP, INC.
(Exact name of Registrant as specified in its Charter)

Delaware 84-1108035
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)

444 Madison Avenue, Suite 2904, New York, New York 10022
(Address of principal executive offices) (Zip code)

(212) 750-7878
(Registrant's telephone number, including area code)

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, $.0001 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-KSB. [ ]

Registrant had no revenues during its most current fiscal year.

Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date. At December 31, 2003, 10,392,084
shares of Common Stock, $.0001 par value, were outstanding.

The aggregate market value of the voting stock held by non-affiliates of
registrant on December 31, 2003 was $74,600.

W3 GROUP, INC.
FORM 10-KSB
December 31, 2003

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS 2

PART I

ITEM 1. Business 2
ITEM 2. Properties 4
ITEM 3. Legal Proceedings 4
ITEM 4. Submission of Matters to a Vote of Security Holders 4

PART II

ITEM 5. Market for Registrant's Common Equity
and Related Stockholder Matters 5
ITEM 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
ITEM 7. Financial Statements and Supplementary Data 10
ITEM 8. Disagreements on Accounting and Financial Disclosure 10

PART III

ITEM 9. Directors and Executive Officers of the Registrant 11
ITEM 10. Executive Compensation 12
ITEM 11. Security Ownership of Certain Beneficial
Owners and Management 13
ITEM 12. Certain Relationships and Related Transactions 14

PART IV

ITEM 13. Exhibits, Lists, Schedules, and Reports on Form 8-K 15
ITEM 14. Controls and Procedures 16

PART F/S

Financial Statements F-1 to F-12

SIGNATURES 16

FORWARD-LOOKING STATEMENTS

Some of the information contained in this report may constitute forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Any such forward-looking statements are based on current
expectations and projections about future events. The words estimate, plan,
intend, expect, anticipate and similar expressions are intended to identify
forward-looking statements which involve, and are subject to, known and unknown
risks, uncertainties and other factors which could cause our actual results,
financial or operating performance, or achievements to differ materially from
future results, financial or operating performance, or achievements expressed
or implied by such forward-looking statements. Projections and assumptions
contained and expressed herein were reasonably based on information available
to us 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 our control, and no assurance can be
given that the projections will be realized. Readers are cautioned not to place
undue reliance on any such forward-looking statements, which speak only as of
the date hereof. Careful consideration should be given to those risks and
uncertainties set forth below under the heading "Risk Factors," as well as those
risk factors discussed in our Form 10-KSB for the fiscal year ended December 31,
2002. Actual results that we achieve may differ materially from any forward
looking statements due to such risks and uncertainties, and we undertake 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
------------

Unless otherwise indicated or the context requires otherwise, references to
"W3," "Registrant," "the Company," "we," "us" and "our" are to W3 Group, Inc.

W3 Group, Inc. 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 May 7, 2003, we changed our state of
incorporation to Delaware.

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% 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.

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. As a result of the significant changes in the internet
industry, our focus is no longer on Internet related companies.

Present Overview
----------------

We intend to acquire, finance, and restructure operating companies that are
interested in a business combination. We are seeking to acquire companies that
would become wholly owned, or majority owned, subsidiaries of W3 and intend to
concentrate on existing companies that have proven markets, profitability, and
management. Our 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 expand capital while allowing the
companies to continue management of daily operations.

Our 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, we believe
that our 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.

Our 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 our plan.

As described in the preceding introduction, as a result of the divestiture
of L'Abbigliamento, Ltd., effective March 31, 1999, we essentially have not had
any business operations since that time. While we are seeking acquisition
candidates, there can be no assurance that any acquisition will be consummated.

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.

Our 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 us to new or emerging
technologies and changes in the marketplace.

ITEM 2. PROPERTIES

Facilities
----------

We have utilized the offices and business facilities of Ameristar Group
Incorporated, a privately held corporation principally owned and controlled by
two Directors of the Company, on rent-free basis since January 1, 2002.

Employees
---------

We presently have no fulltime employees. Our officers and directors are
engaged in other business activities and devote so much of their time to our
affairs as is required.

ITEM 3. LEGAL PROCEEDINGS

We do not know of any litigation pending, threatened or contemplated, or
unsatisfied judgments against us, or any proceedings in which we are a party.
We also do not know of any legal action pending or threatened or judgments
entered against any of our Officers or Directors 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

Our 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,
2003 for our Common Stock was 399 and for our Series B Convertible Preferred
Stock was 26 shareholders. There currently are 4 market makers for our Common
Stock and 3 market makers for our Series B Convertible Preferred Stock.

The following tables show for the periods indicated the approximate range
of high and low bid quotes for our 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 - WWWG
2002 2003
----------------- -----------------
High Low High Low
------- ------- ------- -------
Quarter ended March 31 $ 0.033 $ 0.030 $ 0.020 $ 0.020
Quarter ended June 30 $ 0.050 $ 0.033 $ 0.020 $ 0.020
Quarter ended September 30 $ 0.048 $ 0.030 $ 0.020 $ 0.020
Quarter ended December 31 $ 0.035 $ 0.020 $ 0.060 $ 0.010

SERIES B CONVERTIBLE PREFERRED SHARE TRADING HISTORY - WWWGP

2002 2003
----------------- -----------------
High Low High Low
------- ------- ------- -------
Quarter ended March 31 $ 0.040 $ 0.010 $ 0.004 $ 0.004
Quarter ended June 30 $ 0.010 $ 0.010 $ 0.004 $ 0.004
Quarter ended September 30 $ 0.030 $ 0.010 $ 0.004 $ 0.004
Quarter ended December 31 $ 0.010 $ 0.0005 $ 0.030 $ 0.004

We have 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.

On January 10, 2003, the Board of Directors authorized the issuance of
1,499,999 restricted shares of Common Stock to two of our creditors in payment
of their outstanding invoices for services. These shares were issued at the
agreed upon rate of $.03 per share.

On September 30, 2003, the Board of Directors authorized the issuance of
5,000,000 shares of Common Stock and 800,000 shares of Series B Convertible
Preferred Stock to a creditor owned by two of our Directors in payment of a
portion of our outstanding debt for operating expenses, rent and administrative
services since 1996. The shares of Common stock were issued at the agreed upon
rate of $0.02 per share and the shares of Series B Convertible Preferred Stock
were issued at the agreed upon rate of $0.01 per share.

On January 8, 2004, a resolution was passed by the Board of Directors,
which extended the conversion period of the Series B Convertible Preferred Stock
from January 14, 2004 until the close of business on April 14, 2004. Each share
of Series B Preferred Stock may be converted to 0.5 (one half) share of Common
Stock at the election of the shareholder.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Results of Operations
---------------------

We did not have any revenue during the years 2002 or 2003, or in 2004 as of
the date of this Report.

Operating expenses for 2003 was $3,590 compared to $97,877 in 2003, a
decrease of $94,287 from the prior year, resulting primarily from decreased
consulting fees in the amount of $51,561 and decreased professional fees in the
amount of $45,000.

The net loss for the twelve-month period ended December 31, 2003 was $8,390
compared to a net loss of $102,677 for the prior year period, a decrease of
$94,287, reflecting the aforementioned decreased operating expenses.

We had no cash and cash equivalents at December 31, 2003 and December 31,
2002. Accounts payable and accrued expenses at December 31, 2003 totaled
$369,283, compared to $518,693 at December 31, 2002, a decrease of $149,410,
which included a decrease of $45,000 resulting from the issuance of common stock
in exchange for the cancellation of debt. The amount due to Ameristar Group
Incorporated ("Ameristar") at December 31, 2003 decreased $108,000 from the
prior year, resulting from the issuance of stock in exchange for cancellation of
a portion of the debt owing to Ameristar.

We are still pursuing L'Abbigliamento, Ltd. in regard to obtaining payments
toward the loan made by us in the amount of $157,522 and interest in the amount
of $13,140. These amounts were written off during the quarter ended September
30, 2001. No assurances can be given regarding the collection of any payments
from L'Abbigliamento, Ltd.

We are continuing to look for suitable acquisition candidates. As of the
date of this Report, no additional acquisition candidates have been found, and
there no assurance can be given that any candidates will be found.

Liquidity and Capital Resources
-------------------------------

At the end of fiscal 2003, we had no cash. We have received an audit
opinion, which includes a "going concern" risk, which raises substantial doubt
regarding our ability to continue as a going concern. (See Financial
Statements, "Note 10- Going Concern Considerations".) Management is
reevaluating business opportunities and looking for a new business direction.

Risk Factors Affecting the Company

We have not had any business operations since the divestiture of our former
operating subsidiary, L'Abbigliamento, Ltd., effective March 31, 1999. Any
investment in our common stock involves a high degree of risk. You should
consider carefully the following information about the risks, together with the
other information contained in this report, before you decide to buy our common
stock. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our operations. If any of the
following risks actually occur, our business would likely suffer and our results
could differ materially from those expressed in any forward-looking statements
contained in this report. In such case, the trading price of our common stock
could decline, and you may lose all or part of the money you paid to buy our
common stock.

We have no operations and no revenue.

We have no operations or revenue and therefore are subject to all the risks
inherent in such a business venture, many of which are beyond our control,
including the inability to implement successful operations, lack of capital to
finance acquisitions and failure to achieve market acceptance. In addition, we
face significant competition from many companies virtually all of which are
larger, better financed and have significantly greater market recognition than
us.

The ability to attract and retain highly qualified personnel to operate and
manage our business is extremely important and our failure to do so could
adversely affect us.

Presently, we are totally dependent upon the personal efforts of our
current management. The loss of any of our officers or directors could have a
material adverse effect upon our business and future prospects. We do not
presently have key-person life insurance upon the life of any of our officers or
directors. Further, all decisions with respect to management of our affairs
will be made exclusively by current management. We may also employ independent
consultants to provide business and marketing advice. Such consultants have no
fiduciary duty to us or our stockholders, and may not perform as expected. Our
success will, in significant part, depend upon the efforts and abilities of
management, including such consultants as may be engaged in the future.
Additionally, as we implement our planned acquisition of commercial operations,
we will require the services of additional skilled personnel. There can be no
assurance that we can attract persons with the requisite skills and training to
meet our future needs or, even if such persons are available, that they can be
hired on terms favorable to us.

Our financial statements contain a "going concern" qualification and our
operations are dependent upon our ability to raise additional working capital.

We may not be able to operate as a going concern. The independent
auditor's report accompanying our financial statements contains an explanation
that our financial statements have been prepared assuming that we will continue
as a going concern. We are in need to raise funds to implement our plans. As
of December 31, 2003, we had no cash and a total stockholders' deficit of
$430,337. This condition raises substantial doubt about our ability to continue
as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. As a result, our
ability to continue to operate as a going concern will depend upon our ability
to raise additional working capital. Our failure to raise funds would
materially and adversely affect our ability to continue as a going concern.

Our ability to execute our acquisition strategy will require us to obtain
additional working capital.

Our business strategy will require that substantial capital investment and
adequate financing be available to us for the completion of acquisitions,
development and integration of operations and technology as needed. In the
event that we cannot obtain the necessary capital to fund our operations as
planned, we may need to limit our operations and activities. We cannot
guarantee that such capital investment will be available to us at all or on
terms that are acceptable to us. Our failure to obtain the necessary amount of
capital to fund our operations as currently anticipated could have a material,
adverse effect upon our capacity to continue operations.

The means by which we raise capital could cause substantial dilution to
stockholders or result in significant interest expense or restrictive covenants.

Our ability to operate as a going concern and to fund our planned
acquisition activities will require that we obtain substantial capital. We may
raise these funds by selling additional shares of our common stock or by
incurring additional debt. Depending on the terms negotiated with potential
investors, such shares of common stock may be issued at a price per share less
than the trading prices listed for our common stock on the OTC Bulletin Board
and thus may be significantly dilutive to our current stockholders. In
addition, such dilution could likely have a depressive effect on the market
price of our common stock, should a public market continue for our shares of
common stock. In addition, any debt financing that we are able to obtain, if
any, may involve significant interest expense or restrictive covenants that may
limit our activities.

Our business strategy depends upon our ability to acquire operating
companies and our failure to successfully do so would have a material adverse
affect upon our business.

Our acquisition plan depends on our ability to identify suitable
acquisition candidates, effectively integrate acquired companies into our
organization, retain personnel and customers in the acquired companies and
obtain necessary financing on acceptable terms. There can be no assurances that
any transactions will be consummated on the terms proposed. Our failure to
consummate such transactions on the terms proposed could have a material,
adverse effect on our business.

Our failure to successfully integrate any companies that we acquire would
materially and adversely affect our business.

Any acquisition that we complete or will contemplate, is accompanied by
risks which include difficulty assimilating the operations and personnel of
acquired businesses, maximizing our financial and strategic position through the
successful incorporation and integration of acquired personnel and customers,
maintaining uniform standards and preventing the impairment of relationships
with employees and customers. Additionally, as we implement our plan, there can
be no assurance that there will not be substantial unanticipated costs and
expenses associated with the start-up and implementation of such acquisition
plan. Our failure to integrate these businesses satisfactorily or to consummate
such transactions on the terms proposed could have a material, adverse effect on
our business.

The successful implementation of our business strategy depends upon the
ability of our management to monitor and control costs.

With respect to our planned operations, management cannot accurately
project or give any assurance with respect to our ability to control development
and operating costs and/or expenses in the future. Consequently, even if we are
successful in implementing our acquisition plan, of which there can be no
assurance, management still may not be able to control costs and expenses
adequately, and such operations may generate losses.

We may become subject to governmental regulations and oversight, which
could adversely affect our ability to continue or expand our business strategy.

Although our acquisition plans are currently not subject to any
regulations, it is possible that, in the future, such regulations may be
legislated. Although we cannot predict the extent of any such future
regulations, a possibility exists that future or unforeseen changes may have an
adverse impact upon our ability to continue or expand our business as presently
planned.

We do not foresee issuing any cash dividends.

We have not paid any dividends to date nor, by reason of our present
financial status and contemplated financial requirements, do we anticipate
paying any dividends in the foreseeable future.

There is a lack of an active public market for our common stock.

Our 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. There can be no assurances, however, that a market
will develop or continue for our common stock. Our common stock may be thinly
traded, if traded at all, even if we achieve full operation and generate
significant revenue. In addition, our stock is defined as a "penny stock" under
Rule 3a51-1 adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. In general, a "penny stock"
includes securities of companies which are not listed on the principal stock
exchanges or the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or National Market System ("NASDAQ NMS") and have a bid price
in the market of less than $5.00; and companies with net tangible assets of less
than $2,000,000 ($5,000,000 if the issuer has been in continuous operation for
less than three years), or which have recorded revenues of less than $6,000,000
in the last three years. "Penny stocks" are subject to rule 15g-9, which
imposes additional sales practice requirements on broker-dealers that sell such
securities to persons other than established customers and "accredited
investors" (generally, individuals with net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses, or
individuals who are officers or directors of the issuer of the securities). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, this rule may
adversely affect the ability of broker-dealers to sell our common stock, and
therefore, may adversely affect the ability of our stockholders to sell common
stock in the public market.

Sales by our existing stockholders of shares of our common stock could
cause our stock price to decline.

A total of 10,392,084 shares of common stock were issued and outstanding as
of December 31, 2003, of which 8,158,766 shares thereof were "restricted
securities" as that term is defined under the Securities Act of 1933, as
amended. All such restricted shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from
registration becomes available. One exemption which may be available in the
future is Rule 144 adopted under the Securities Act. Generally, under Rule 144
any person holding restricted securities for at least one year may publicly sell
in ordinary brokerage transactions, within a 3 month period, the greater of one
(1%) percent of the total number of a company's shares outstanding or the
average weekly reported volume during the four weeks preceding the sale, if
certain conditions of Rule 144 are satisfied by the company and the seller.
Furthermore, with respect to sellers who are "non-affiliates" of the company, as
that term is defined in Rule 144, the volume sale limitation does not apply and
an unlimited number of shares may be sold, provided the seller meets a holding
period of 2 years.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Audited financial statements for the fiscal years ended December 31, 2003
and 2002 are submitted herein as PART F/S on Pages F-1 to F-12.

ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and directors are as follows:

Name Age Position(s) Held
-------------------- --- -----------------

Robert Gordon 68 Acting President
Martin I. Saposnick 57 Director of Corporate Development and Director
Joseph J. Messina 49 Director
William C. Hayde 43 Secretary and Director

Profiles of our Directors and Officers 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. Our Officers 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 our Annual Meeting of Shareholders. There are no family relationships among
Officers and Directors.

Profiles of Officers and Directors

Robert Gordon is Acting President. From April 2003 to present Mr. Gordon
has been President of Madison Ventures, Inc., Madison Group I, Inc., Madison
Group II, Inc., Madison Group III, Inc., Madison Group IV, Inc., Madison Group
V, Inc., and Madison Group VI, Inc. Mr. Gordon is also Executive Vice-President
of Ameristar Group Incorporated, a privately owned investment banking firm.
From 1999 to August, 2002 Mr. Gordon was President of Lifen, Inc. 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 10. EXECUTIVE COMPENSATION

We did not pay any compensation to any of our Officers and Directors during
the years ended December 31, 2003 and December 31, 2002. There are no written
agreements between us and any of our Officers, and there are no agreements with
Directors for payment of Director fees. As of December 31, 2003, we have
accrued obligations which began in 1996 to Mr. Robert Gordon, Acting President,
in the form of consulting fees totaling $190,733. We do not presently have any
pension plan, profit sharing plan, or similar plans for the benefit of our
Directors, Officers, or employees.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders

The following chart sets forth, as of December 31, 2003, the end of our
fiscal year, information with respect to (1) any person known by us to own
beneficially more than five (5%) percent of our Common Stock, based on
10,392,084 shares issued and outstanding as of December 31, 2003; (2) Common
Stock owned beneficially by each of our Officers or Directors; and (3) the total
of our Common Stock owned beneficially, directly or indirectly, by our Officers
and Directors as a group.

Number of Shares of
Name Common Stock Owned Percentage of Class
--------------------------------- ------------------- -------------------
Sirbu Enterprises, LLLP 525,000 5.05 %
A Colorado Limited Liability
Limited Partnership (4)
16414 Sandstone Dr.
Morrison, CO 80465

Wilmont Holdings Corp.* (5) 630,000 6.06 %
33 Wilputte Place
New Rochelle, NY 10804

Lomar Corp.* (6) 625,000 6.01 %
21 Schermerhorn
Brooklyn, NY 11201

Robert Gordon* 103,667 1.00 %
444 Madison Avenue, Suite 2904
New York, NY 10022

William C. Hayde* 300,100 2.89 %
76 Cliff Road
Belle Terre, NY 11777

Dunhill Limited* (7) 3,334 0.03 %
444 Madison Avenue, Suite 2904
New York, NY 10022

Jeffrey Pearlman (8) 674,283 6.49 %
224 West 30th Street, Suite 701
New York, NY 10001

Ameristar Group Incorporated* (9) 5,000,000 48.11 %
444 Madison Avenue, Suite 2904
New York, NY 10022

Officers and Directors 1,388,677 13.36 %
as a Group (4 Persons)(3)

* 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) Includes 7,617 shares owned by Remsen Group, Ltd., a privately held
corporation principally owned and controlled by the shareholder.
(9) Ameristar Group Incorporated is a privately held corporation principally
owned and controlled by the principals of Lomar Corp. and Wilmont Holdings
Corp., two corporate shareholders of the Registrant.

Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Directors and Officers of the Company and any person who owns ten percent or
more of the Company's common stock are required to report their initial
ownership of the Company's common stock and any subsequent changes in that
ownership to the SEC on Forms 3, 4, and 5. Such reporting persons are also
required by SEC regulations to furnish the Company with copies of all such
reports that they file in accordance with Section 16(a).

To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company and representations made to the Company,
no other reports were required, during and with respect to the period ended
December 31, 2003 and all reporting persons have timely complied with all filing
requirements applicable to such persons.

Conflict of Interest

As discussed herein, all members of the Company's management have other
business interests that require a portion of their time and efforts. Although
management believes that it will be able to devote such time as is necessary for
the proper management of the Company's business, it is possible that their
obligations to these other business interests may interfere with or distract
from the full performance of their duties as management of the Company.
Management is committed to devoting substantially all of their time to the
Company's business at such time, if any, that the Company consummates an
acquisition, at which time they anticipate hiring other members of management.
There can be no assurance that these assumptions will prove accurate or that
suitable personnel will be available to the Company on acceptable terms.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We currently utilize the offices and facilities of Ameristar Group
Incorporated, a privately held corporation principally owned and controlled by
two of our Directors, on rent free basis. (Refer to "PART I, ITEM 2.
PROPERTIES").

On September 30, 2003, the Company issued 5,000,000 shares of Common Stock
in consideration of $0.02 per share and 800,000 shares of Series B Convertible
Preferred Stock in consideration of $0.01 per share, to Ameristar, a creditor
owned by two Directors of the Company for past advances for operating expenses,
rent and administrative services since 1996. These shares were issued in lieu
of $100,000 and $8,000 respectively, such amounts being a portion of the
Company's outstanding obligation of $226,694.

PART IV

ITEM 13. EXHIBITS, LISTS, 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-12.

Auditor's Report of Janet Loss, C.P.A., former Independent Auditor,
dated March 25, 2003, together with;

Auditor's Report of Donahue Associates, L.L.C. dated March 29, 2004;

Balance Sheet as of December 31, 2003 and 2002;

Statement of Operations for the years ended December 31, 2003 and
2002;

Statement of Stockholders' Equity for the years ended December 31,
2003 and 2002;

Statement of Cash Flow for the years ended December 31, 2003 and
2002; and

Notes to Financial Statements.

2. Financial Statement Schedules - None.

All applicable information is contained in the financial statements
or notes thereto.

3. Exhibits and Material Contracts.

Exhibit
Number Description
------- -----------

10.1* Agreement of Merger between W3 Group, Inc., a Delaware
Domestic Corporation and W3 Group, Inc., a Colorado
Corporation entered into on the 30th day of April, 2003.

31 Certification Pursuant to Rule 13a-14 and 15d-14 Under
the Securities Exchange Act of 1934, As Amended.

32 Certification Pursuant To 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley
Act of 2002
________________________________________

* Previously filed as Exhibit 2.1 to the Form 8-K filed with the
Securities and Exchange Commission on May 19, 2003 and incorporated
herein by reference.

(b) Reports on Form 8-K

1. Form 8-K filed on May 19, 2003
Re: Change of domicile from the State of Colorado to the State of
Delaware.

2. Form 8-K filed on February 20, 2004
Re: Change of Registrant's Certifying Accountant.

ITEM 14. CONTROLS AND PROCEDURES

Subsequent to December 31, 2003 and prior to the filing of this Report, we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures under the supervision of and with the
participation of our management, including the Acting President and Principal
Financial Officer. Based on that evaluation, our management, including the
Acting President and Principal Financial Officer, concluded that our disclosure
controls and procedures were effective at December 31, 2003, and during the
period prior to the execution of this report. There have been no significant
changes in our internal controls or in other factors that could significantly
affect internal controls subsequent to December 31, 2003.

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 29, 2004 By: /s/ Robert Gordon
----------------------------------
Robert Gordon
Acting President and
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: March 29, 2004 By: /s/ Martin I. Saposnick
----------------------------------
Martin I. Saposnick
Director of Corporate Development and
Director

Dated: March 29, 2004 By: /s/ Joseph J. Messina
----------------------------------
Joseph J. Messina
Director

Dated: March 29, 2004 By: /s/ William C. Hayde
----------------------------------
William C. Hayde
Secretary and Director

PART F/S

For the Years Ended December 31, 2003 and 2002

Reference
---------

Part F/S Table of Contents F-1

Report of Janet Loss, C.P.A., P.C.,
Former Independent Auditor F-2

Report of Donahue Associates, L.L.C.,
Independent Certified Public Accountant F-3

Balance Sheets F-4

Statements of Operations F-5

Statements of Cash Flows F-6

Statements of Stockholder's Equity F-7

Notes to Financial Statements F-8 to 12

F-1

Janet Loss, C.P.A., P.C.
Certified Public Accountant
1780 South Bellaire Street
Suite 500
Denver, CO 80222

Board of Directors
W3 Group, Inc.
444 Madison Avenue, Suite 2904
New York, New York 10022

I have audited the accompanying balance sheets of W3 Group, Inc. as of
December 31, 2002 and 2001, and the related statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 2002 and
2001. 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, 2002 and 2001, and referred to above present fairly, in all material
respects, the financial position of W3 Group, Inc. as of December 31, 2002 and
2001, and the results of its operations and its cash flows for the years ended
December 31, 2002 and 2001 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.
March 25, 2003

F-2

DONAHUE ASSOCIATES, L.L.C.
27 BEACH ROAD, SUITE CO5-A
MONMOUTH BEACH, NJ 07750
Phone: (732) 229-7723

Independent Auditor's Report

The Shareholders
W3 Group, Inc.

We have audited the accompanying balance sheet of W3 Group, Inc. as of December
31, 2003 and the related statement of operations and statements of changes in
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
financial statements of W3 Group, Inc. as of the year ended December 31, 2003
were audited by another auditor whose unqualified opinion on those financial
statements is included herein.

We conducted our audit in accordance using auditing standards generally accepted
in the United States of America. 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 the 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 respects, the financial position of W3 Group, Inc. as of December
31, 2003 and the related statement of operations and statement of changes in
shareholders' equity and cash flows for the year then ended then ended in
conformity with generally accepted accounting principles generally accepted in
the United States of America.

As more fully discussed in Note 10 to the consolidated financial statements,
there are significant matters concerning the Company that raise substantial
doubt as to the ability of the Company to continue as a going concern.
Management's plans with regard to these matters are also described in Note 10 to
the financial statements. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
or the amounts and classifications of recorded liabilities that might be
necessary in the event that the Company cannot continue in existence.

/s/ Donahue Associates, L.L.C.
Monmouth Beach, New Jersey
March 29, 2004

F-3

W3 GROUP, INC.
BALANCE SHEET
AS OF DECEMBER 31, 2003 AND DECEMBER 31, 2002

ASSETS 2003 2002
------ ---- ----

CURRENT ASSETS:

Cash $ 0 $ 0
------------ ------------
TOTAL CURRENT ASSETS 0 0
------------ ------------
TOTAL ASSETS $ 0 $ 0
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:

Accounts payable & accrued expenses $ 369,283 $ 518,693
------------ ------------
TOTAL CURRENT LIABILITIES $ 369,283 $ 518,693
------------ ------------

Shareholder loan payable 61,054 56,254

SHAREHOLDERS' EQUITY:

Series B preferred stock, two shares
convertible to one share of common;
non-cumulative, non-participating,
authorized 10,000,000 shares,
$.0001 par value, issued and
outstanding 1,499,060 shares at
December 31, 2003 and
699,060 at December 31, 2002 531,891 523,891

Common stock- $.0001 par value,
authorized 40,000,000 shares,
issued and outstanding 10,392,084
at December 31, 2003 and
3,892,085 shares at December 31, 2002 1,039 389

Additional paid in capital 1,592,412 1,448,062

Accumulated deficit (2,555,679) (2,547,289)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (430,337) (574,947)
------------ ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 0 $ 0
============ ============

See the notes to the financial staements.

F-4

W3 GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND DECEMBER 31, 2002

2003 2002
---- ----

REVENUES:
Gross Sales $ 0
Less cost of sales 0
------------ ------------
NET GROSS PROFIT ON SALES $ 0 $ 0

GENERAL AND ADMINISTRATIVE EXPENSES:
Consulting $ 0 $ 51,561
Professional fees 0 45,000
Administration 3,590 1,316
------------ ------------
TOTAL GENERAL $ ADMINISTRATIVE EXPENSES $ 3,590 $ 97,877
------------ ------------

NET LOSS FROM OPERATIONS (3,590) (97,877)

OTHER INCOME AND EXPENSES:
Interest expense (4,800) (4,800)
------------ ------------

NET LOSS BEFORE PROVISION FOR INCOME TAXES (8,390) (102,677)

PROVISION FOR INCOME TAXES 0 0
------------ ------------
NET LOSS $ (8,390) $ (102,677)
============ ============
LOSS PER COMMON SHARE:
BASIC & FULLY DILUTED $ (0.00) $ (0.03)

WEIGHTED AVERAGE OF COMMON SHARES:
BASIC & FULLY DILUTED 6,618,732 3,892,085
============ ============

See the notes to the financial statements.

F-5

W3 GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND DECEMBER 31, 2002

2003 2002
---- ----
OPERATING ACTIVITIES:

Net loss $ (8,390) $ (102,677)

CHANGES IN OTHER OPERATING ASSETS AND LIABILITIES:

Prepaid expenses 0 51,800
Accounts payable & accrued expenses 8,390 46,352
------------ ------------
Net cash used by operations (0) (4,525)
------------ ------------

FINANCING ACTIVITIES:

Shareholder loan 0 4,525
------------ ------------
Net cash provided by financing activities $ 0 $ 4,525
------------ ------------

NET INCREASE (DECREASE)
IN CASH DURING THE PERIOD $ 0 $ 0

CASH BALANCE AT BEGINNING OF THE FISCAL YEAR $ 0 $ 0
------------ ------------
CASH BALANCE AT THE END OF THE FISCAL YEAR $ 0 $ 0
============ ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $ 0 $ 0
Income taxes paid during the period $ 0 $ 0

See the notes to the financial statements.

F-6

W3 GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM JANUARY 1, 2002 TO DECEMBER 31, 2003

Common Common Preferred Preferred Paid in Accumulated
Shares Par Value Shares Value Capital Deficit Total
------------ --------- ----------- ---------- ------------ ------------ ----------

Balance at
January 1, 2002 3,892,085 $ 389 699,060 $ 523,891 $ 1,448,062 $(2,444,612) $(472,270)

Net Loss for
the fiscal year $ (102,677) $(102,677)
------------ --------- ----------- ---------- ------------ ------------ ----------
Balance at
December 31, 2002 3,892,085 $ 389 699,060 $ 523,891 $ 1,448,062 $(2,547,289) $(574,947)

Issued shares for debt 1,499,999 150 44,850 45,000

Issued shares for debt 5,000,000 $ 500 99,500 100,000

Issued preferred
shares for debt 800,000 8,000 8,000

Net Loss for
the fiscal year (8,390) (8,390)
------------ --------- ----------- ---------- ------------ ------------ ----------
Balance at
December 31, 2003 10,392,084 $ 1,039 1,499,060 $ 531,891 $ 1,592,412 $(2,555,679) $(430,337)
============ ========= =========== ========== ============ ============ ==========

See the notes to the financial statements.

F-7

W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003

1. Organization of the Company and Significant Accounting Principles

W3 Group, Inc. (the Company) was incorporated in the State of Colorado in
February 1988. The Company has no business operations at present and its
activities since inception are primarily related to its initial public offering
and merger activities.

In May 2003, the Company changed its state of incorporation to Delaware.

The Company ceased to be a development stage company in 1997.

Use of Estimates- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make reasonable
estimates and assumptions that affect the reported amounts of the assets and
liabilities and disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses at the date of the financial statements and for
the period they include. Actual results may differ from these estimates.

Income taxes- The Company accounts for income taxes in accordance with the
Statement of Accounting Standards No.109 (SFAS No. 109), "Accounting for Income
Taxes". SFAS No. 109 requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between financial statement
and income tax bases of assets and liabilities that will result in taxable
income or deductible expenses in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets and liabilities to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period adjusted for
the change during the period in deferred tax assets and liabilities.

Recent accounting pronouncements- In June 2002, the FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit of Disposal Activities"(SFAS 146).
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities. Under SFAS 146 companies will recognize a cost
associated with an exit or disposal activity when a liability has been incurred.
SFAS 146 also introduces discounting the liability associated with the exit or
disposal activity for the time between the cost being incurred and when the
liability is ultimately settled. Management has concluded that the adoption of
SFAS 146 would not have had a material impact on the Company's fiscal 2004
financial position or results of operations.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions"(SFAS 146). The statement provides guidance on the
accounting for the acquisition of a financial institution where the excess of
the fair value of liabilities assumed over the fair value of tangible and
intangible assets acquired represents goodwill. Management has concluded that
the adoption of SFAS 147 would not have had a material impact on the Company's
fiscal 2004 financial position or results of operations.

F-8

In December 2002, The FASB issued FAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement
No. 123". This statement expands the disclosure requirements with respect to
stock-based compensation. The transition guidance and annual disclosure
provisions of SFAS No. 148 are effective for fiscal years ending after December
15, 2002. The adoption of SFAS No. 148 did not impact the Company's financial
condition or results of operations for fiscal year 2004.

2. Fair Value of Financial Instruments

The value of accounts payables and accrued expenses and shareholder loans
payable are estimated to approximate fair market value at December 31, 2003 and
December 31, 2002.

3. Preferred Stock

The class of preferred stock issued is as follows:

Series B Convertible Preferred Stock: Series B Convertible Preferred Stock has
a par value of $.0001 per share and is non-cumulative and non-participating.
The Series B Convertible Preferred stock is convertible into common stock at a
conversion ratio of two preferred shares for one share of common stock.

4. Issuance of Stock

On January 10, 2003, the Board of Directors authorized the issuance of 1,499,999
restricted shares (the "Shares") of Common Stock to two creditors of the Company
in payment of their outstanding invoices totaling $45,000 for prior consulting
services. The Shares were issued at the agreed upon rate of $0.03 per share.

On September 30, 2003, the Board of Directors authorized the issuance of
5,000,000 shares of Common Stock and 800,000 shares of Series B Convertible
Preferred Stock to a creditor owned by two Directors of the Company in payment
of a $108,000, which was a portion of the Company's outstanding debt for
operating expenses, rent and administrative services since 1996. The shares of
Common stock were issued at the agreed upon rate of $0.02 per share and the
shares of Series B Convertible Preferred Stock were issued at the agreed upon
rate of $0.01 per share.

5. Addendum to the Consolidated Statement of Cash Flows

The following transactions occurring during the fiscal years ended December 31,
2003 and December 31, 2002 were excluded from the calculation of the statement
of cash flows since they did not involve a transfer of cash.

F-9

On September 30, 2003, the Board of Directors authorized the issuance of
5,000,000 shares of Common Stock and 800,000 shares of Series B Convertible
Preferred Stock to a creditor owned by two Directors of the Company in payment
of a $108,000, which was a portion of the Company's outstanding debt for
operating expenses, rent and administrative services since 1996. The shares of
Common stock were issued at the agreed upon rate of $0.02 per share and the
shares of Series B Convertible Preferred Stock were issued at the agreed upon
rate of $0.01 per share.

6. Net Loss per Share

The Company applies SFAS No. 128, "Earnings per Share" to calculate loss per
share. In accordance with SFAS No. 128, basic net loss per share has been
computed based on the weighted average of common shares outstanding during the
years. Fully diluted loss per share includes the dilutive effects of
outstanding common stock equivalents.

The calculation of fully diluted loss per share excludes outstanding common
stock equivalents at December 31, 2003 and December 31, 2002 because their
inclusion would be anti-dilutive.

Other than the Series B Convertible preferred stock discussed in Note 3, there
are no financial instruments outstanding convertible into common stock at
December 31, 2003 and December 31, 2002.

The weighted average of common shares outstanding at December 31, 2003 and
December 31, 2002 has been computed as follows:

2003 2002
------------ ------------
Shares outstanding 10,392,084 3,892,085
============ ============
Weighted average 6,618,732 3,892,085
============ ============

7. Related Party Transactions

During fiscal years 2003 and 2002, Ameristar Group Incorporated, a shareholder
and corporation owned by two Directors of W3 Group, Inc. provided office space
to the Company at no cost.

At December 31, 2003, the balance of the Company's indebtedness to a corporation
owned by two directors of the Company for prior payment of operating expenses
and rent was $116, 694.

At December 31, 2003 and December 31, 2002, the Company is indebted to four
shareholders, including two directors of the Company for notes payable in the
amount of $40,000. The loans are unsecured and due on demand and at 12%
interest. Accordingly, the Company recorded $4,800 interest expense on the loan
for fiscal years 2003 and 2002.

During fiscal year 2003, the Company issued 5,000,000 shares of common stock to
pay $100,000 due to a corporation owned by the two Directors of the Company.

F-10

During fiscal year 2003, the Company issued 800,000 shares of Series B
Convertible Preferred stock to pay $8,000 due to a corporation owned by the two
Directors of the Company.

8. Concentration of Credit Risk

The president and principal shareholder of the Company provides various
administrative services on behalf of the Company in addition to committing to
provide necessary funds to pay for future administrative services. A withdrawal
of the financial support from the president and principal shareholder could have
a material adverse impact on the financial condition of the Company and its
ability to operate as a going concern.

9. Income taxes

Provision for income taxes is comprised of the following:

2003 2002

Net loss before provision for income taxes $ (8,390) $(102,677)
========== ==========
Current tax expense:
Federal $ 0 $ 0
State 0 0
---------- ----------
Total $ 0 $ 0
========== ==========

Less deferred tax benefit:
Timing differences (111,020) (107,614)
Allowance for recoverability 111,020 107,614
---------- ----------
Provision for income taxes $ 0 $ 0
========== ==========

A reconciliation of provision for income taxes at the statutory rate to
provision for income taxes at the Company's effective tax rate is as follows:

Statutory U.S. federal rate 34% 34%
Statutory state and local income tax 10% 10%
Less allowance for tax recoverability -44% -44%
---------- ----------
Effective rate 0% 0%
========== ==========

Deferred income taxes are comprised of the following:

Timing differences $ 111,020 $ 107,614
Allowance for recoverability (111,020) (107,614)
---------- ----------
Deferred tax benefit $ 0 $ 0
========== ==========

Note: The deferred tax benefits arising from the timing differences expires in
fiscal years 2023 to 2023 and may not be recoverable upon the purchase of the
Company under current IRS statutes.

F-11

10. Going Concern Considerations

The accompanying financial statements have been presented in accordance with
generally accepted accounting principals, which assume the continuity of the
Company as a going concern. However, during the twelve months ending December
31, 2003 and in the prior several fiscal years, the Company has experienced, and
continues to experience, certain going concern issues related to profitability.
The Company incurred a net loss of $8,390 in fiscal year 2003 and $102,677 in
fiscal year 2002 and has lost $2,555,679 since its inception.

Management's plans with regard to this matter include the search for an
operating entity for a business combination with the Company. There can be
assurance that management will be successful in finding a candidate suitable for
a business combination or that such business combination could be successfully
consummated.

F-12