Edgar Filing: W3 GROUP INC

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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, 2004

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 1800, 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, 2004, 23,264,145
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, 2004 was $123,092.

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W3 GROUP, INC.
FORM 10-KSB
December 31, 2004

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS 2

PART I

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

PART II

ITEM 5. Market for Equity and Related Stockholder Matters 4
ITEM 6. Management's Discussion and Analysis of Operations 5
ITEM 7. Financial Statements 10
ITEM 8. Changes in and Disagreements with Accountants 10
ITEM 8A. Controls and Procedures 10

PART III

ITEM 9. Directors and Executive Officers of the Registrant 10
ITEM 10. Executive Compensation 12
ITEM 11. Security Ownership of Certain Beneficial
Owners and Management 12
ITEM 12. Certain Relationships and Related Transactions 14
ITEM 13. Exhibits, Lists, Schedules, and Reports on Form 8-K 14

SIGNATURES 16

PART F/S

Financial Statements F-1 to F-12

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,
2004. 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. DESCRIPTION OF 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.

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.

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 2. DESCRIPTION OF PROPERTIES

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.

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 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,
2004 for our Common Stock was 391 and for our Series B Convertible Preferred
Stock was 27 shareholders. There currently are 8 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
2003 2004
----------------- -----------------
High Low High Low
------- ------- ------- -------
Quarter ended March 31 $ 0.020 $ 0.020 $ 0.060 $ 0.020
Quarter ended June 30 $ 0.020 $ 0.020 $ 0.060 $ 0.040
Quarter ended September 30 $ 0.020 $ 0.020 $ 0.040 $ 0.025
Quarter ended December 31 $ 0.060 $ 0.010 $ 0.055 $ 0.025

SERIES B CONVERTIBLE PREFERRED SHARE TRADING HISTORY - WWWGP

2003 2004
----------------- -----------------
High Low High Low
------- ------- ------- -------
Quarter ended March 31 $ 0.004 $ 0.004 $ 0.050 $ 0.005
Quarter ended June 30 $ 0.004 $ 0.004 $ 0.010 $ 0.010
Quarter ended September 30 $ 0.004 $ 0.004 $ 0.010 $ 0.010
Quarter ended December 31 $ 0.030 $ 0.004 $ 0.010 $ 0.010

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 5, 2004, 159 shares of Series B Convertible Preferred Stock were
converted to 79 shares of Common Stock.

During the second quarter of 2004, the Board of Directors authorized the
issuance of 5,314,216 shares of Common Stock to a creditor owned by two
directors of the Company in payment of the Company's outstanding debt for
operating expenses since 1996, and the assumption of certain accounts payable.
The shares were issued at the agreed upon rate of $.03 per share.

During the second quarter of 2004, the Board of Directors authorized the
issuance of 6,357,766 shares of Common Stock to the Company's Acting President,
in payment of the Company's outstanding obligation for business and management
services rendered since 1996. The shares were issued at the agreed upon rate of
$.03 per share.

Also, during the second quarter of 2004, the Board of Directors authorized
the issuance of 1,200,000 shares of Common Stock to a director of the Company in
lieu of cash payment for past services performed at the agreed upon rate of $.03
per share.

On January 10, 2005, 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, 2005. 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 2003 or 2004 or in 2005 as of
the date of this Report.

Operating expenses for 2004 were $41,726 compared to $3,590 in 2003, an
increase of $38,136 from the prior year, resulting primarily from increased
consulting fees in the amount of $36,000, and increased transfer agent fees and
miscellaneous expenses.

The net loss for the twelve-month period ended December 31, 2004 was
$46,526 compared to a net loss of $8,390 for the prior year period, an increase
of $38,136 reflecting the aforementioned increased consulting fees and operating
expenses.

We had no cash and cash equivalents at December 31, 2004 and December 31,
2003. Accounts payable and accrued expenses at December 31, 2004 totaled $24,850
compared to $369,283 at December 31, 2003, a decrease of $344,433, which
resulted from the issuance of common stock in exchange for the cancellation of
debt and the assumption of accounts payable totaling $38,445 by Ameristar Group
Incorporated. See Item 12 "Certain Relationships and Related Transactions",
Statement of Changes in Shareholders' Equity, and Note 4 to Financial
Statements.

On January 19, 2005, the Company entered into a Letter of Intent to acquire
100 percent of the issued and outstanding capital stock of Cristina Acquisition
Corp. ("CAC"), a wholly owned subsidiary of privately held Signal Companies,
Inc. The Letter of Intent was amended on February 7, 2005 to provide CAC with
additional time to comply with the condition of completing funding arrangements
for the acquisition of an operating business in the oil and gas industry. Since
the condition was not met by the extended deadline of March 2, 2005, the Letter
of Intent expired on that date and is of no further force and effect. (Refer to
Forms 8-K filed on January 20, 2005, February 9, 2005, March 3, 2005 and
exhibits thereto).

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

Liquidity and Capital Resources

At the end of fiscal 2004, 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, 2004, we had no cash and a total stockholders' deficit of
$90,704. 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 23,264,145 shares of common stock were issued and outstanding as
of December 31, 2004, of which 21,034,082 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, 2004
and 2003 are submitted herein as PART F/S on Pages F-1 to F-12.

ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

Subsequent to December 31, 2004 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, 2004, 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, 2004.

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 70 Acting President and Director as of March 24, 2005
Martin I. Saposnick 58 Director of Corporate Development and
Director until March 24, 2005
Joseph J. Messina 50 Director
William C. Hayde 44 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. On March 24, 2005, following the end
of our fiscal year, Martin I Saposnick resigned as an officer and director of
the Company and Robert Gordon was elected to fill the vacancy caused by his
resignation.

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 and was appointed a Director by the Board
of Directors on March 24, 2005. Mr. Gordon is an independent business
consultant. 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 was Executive Vice-President of Ameristar Group Incorporated, a
privately owned investment banking firm from 1996 to 2004. 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. Previously, Mr.
Gordon held senior management positions with several companies. He also had a
management consulting practice and provided 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.

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 was a Director of Corporate Development and a Director
of the Company until March 24, 2005 when he resigned for personal reasons.
Since 1992, Mr. Saposnick has also been President of Ameristar Group
Incorporated, an investment banking and financial consulting firm specializing
in "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 registered principal at Brockington Securities, a broker-
dealer specializing in wholesale and institutional trading, mergers and
acquisitions, and equity and debt financings. Mr. Hayde is Chairman of the
Board of Toscana Group, Inc., a venture capital and consulting company. Mr.
Hayde is also a partner in a research firm, Waterville Investment Research Inc.
A paid for research and information company which provides its services to
public company's primarily traded over the counter and Nasdaq. Mr. Hayde has
been active in the brokerage business since 1983.

ITEM 10. EXECUTIVE COMPENSATION

We did not pay any compensation to any of our officers and directors during
the years ended December 31, 2004 and December 31, 2003. There are no written
agreements between us and any of our officers, and there are no agreements with
directors for payment of director fees. 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, 2004, 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
23,264,145 shares issued and outstanding as of December 31, 2004; (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
--------------------------------- ------------------- -------------------

Ameristar Group Incorporated* (4) 10,314,216 44.34 %
60E. 42nd Street
Suite 1163
New York, NY 10165

Mabery Group, Inc. (5) 6,461,433 27.77 %
60E. 42nd Street
Suite 1163
New York, NY 10165

William C. Hayde* 1,500,100 6.45 %
76 Cliff Road
Belle Terre, NY 11777

Wilmont Holdings Corp.* (6) 630,000 2.71 %
33 Wilputte Place
New Rochelle, NY 10804

Lomar Corp.* (7) 625,000 2.69 %
21 Schermerhorn
Brooklyn, NY 11201

Dunhill Limited* (8) 3,334 0.01 %
444 Madison Avenue, Suite 1800
New York, NY 10022

Officers and Directors 13,072,650 56.19 %
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) 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.
(5) The President of Mabery Group, Inc. is also Acting President of the Issuer,
however, he disclaims beneficial ownership of these shares and the shares
of Mabery Group, Inc.
(6) Wilmont Holdings Corp. is a privately held corporation principally owned
and controlled by Joseph J. Messina, a Director of the Company.
(7) Lomar Corp. is privately held corporation principally owned and controlled
by Martin I. Saposnick, a Director of the Company until March 24, 2005 when
he resigned.
(8) Dunhill Limited is privately held corporation principally owned and
controlled by Joseph J. Messina, currently a Director of the Company and
Martin I. Saposnick, a Directors of the Company until March 24, 2005 when
he resigned.

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, 2004 and all reporting persons have 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").

ITEM 13. EXHIBITS, LISTS 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 Donahue Associates, L.L.C. dated March 2, 2005;
Balance Sheet as of December 31, 2004 and 2003;
Statement of Operations for the years ended December 31, 2004 and
2003;
Statement of Stockholders' Equity for the years ended December 31,
2004 and 2003;
Statement of Cash Flow for the years ended December 31, 2004 and
2003; 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
------- -----------

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

99.1 Letter of Resignation from Martin I. Saposnick, a
Director of the Company

(b) Reports on Form 8-K

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

Form 8-K filed subsequent to the fiscal period covered by this
Report on January 20, 2005 Re: Letter of Intent executed to acquire
Cristina Acquisition Corp.

Form 8-K filed subsequent to the fiscal period covered by this
Report on February 9, 2005 Re: amendment to the Letter of Intent
signed on January 19, 2005.

Form 8-K filed subsequent to the fiscal period covered by this
Report on March 3, 2005 Re: expiration of Letter of Intent.

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, 2005 By: /s/ Robert Gordon
----------------------------------
Robert Gordon
Acting President,
Principal Financial Officer and
Director since March 24, 2005

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, 2005 By: /s/ Martin I. Saposnick
----------------------------------
Martin I. Saposnick
Director of Corporate Development and
Director until March 24, 2005

Dated: March 29, 2005 By: /s/ Joseph J. Messina
----------------------------------
Joseph J. Messina
Director

Dated: March 29, 2005 By: /s/ William C. Hayde
----------------------------------
William C. Hayde
Secretary and Director

PART F/S

For the Years Ended December 31, 2004 and 2003

Reference
---------

Part F/S Table of Contents F-1

Report of Donahue Associates, L.L.C.,
Independent Certified Public Accountant F-2

Balance Sheets F-3

Statements of Operations F-4

Statements of Cash Flows F-5

Statements of Stockholder's Equity F-6

Notes to Financial Statements F-7

F-1

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 sheets of W3 Group, Inc. as of December
31, 2004 and December 31, 2003 and the related statements 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.

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 positions of W3 Group, Inc. as of December
31, 2004 and December 31, 2003 and the related statements of operations and
statements 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 financial statements, there are
ignificant 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 2, 2005

F-2

W3 GROUP, INC.
BALANCE SHEET
AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003

ASSETS 2004 2003
------ ---- ----

CURRENT ASSETS:

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

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

CURRENT LIABILITIES:

Accounts payable & accrued expenses $ 24,850 $ 369,283
------------ ------------
TOTAL CURRENT LIABILITIES $ 24,850 $ 369,283
------------ ------------

Shareholder loan payable 65,854 61,054

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 1,498,901 shares at
December 31, 2004 and
1,499,060 at December 31, 2003 531,835 531,891

Common stock- $.0001 par value,
authorized 40,000,000 shares,
23,264,145 issued and outstanding
at December 31, 2004 and
10,392,084 shares at December 31, 2003 2,326 1,039

Additional paid in capital 1,977,340 1,592,412

Accumulated deficit (2,602,205) (2,555,679)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (90,704) (430,337)
------------ ------------

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

See the notes to the financial staements.

F-3

W3 GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND DECEMBER 31, 2003
AND FROM INCEPTION TO DECEMBER 31, 2004

Inception
to Date
2004 2003 (Unaudited)
---- ---- -----------

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

GENERAL AND ADMINISTRATIVE EXPENSES:
Administration $ 41,726 $ 3,590 $ 2,576,351
------------ ------------ ------------
TOTAL GENERAL $ ADMINISTRATIVE EXPENSES $ 41,726 $ 3,590 $ 2,576,351
------------ ------------ ------------

NET LOSS FROM OPERATIONS (41,726) (3,590) (2,576,351)

OTHER INCOME AND EXPENSE:
Interest expense (4,800) (4,800) (25,854)
------------ ------------ ------------

NET LOSS BEFORE PROVISION FOR INCOME TAXES (46,526) (8,390) (2,602,205)

PROVISION FOR INCOME TAXES 0 0 0
------------ ------------ ------------
NET LOSS $ (46,526) $ (8,390) $(2,602,205)
============ ============ ============
LOSS PER COMMON SHARE:
BASIC & FULLY DILUTED $ (0.00) $ (0.00)

WEIGHTED AVERAGE OF COMMON SHARES:
BASIC & FULLY DILUTED 18,397,477 6,618,732
============ ============ ============

See the notes to the financial statements.

F-4

W3 GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND DECEMBER 31, 2003
AND FROM INCEPTION TO DECEMBER 31, 2004

Inception
to Date
2004 2003 (Unaudited)
---- ---- -----------

OPERATING ACTIVITIES:
Net loss $ (46,526) $ (8,390) $(2,602,205)

ADJUSTMENTS TO RECONCILE NET INCOME ITEMS
NOT REQUIRING THE USE OF CASH:
Administration expense 2,555,679

CHANGES IN OTHER OPERATING ASSETS AND LIABILITIES:
Accounts payable & accrued expenses 46,526 8,390 46,526
------------ ------------ ------------
Net cash used by operations 0 0 0
------------ ------------ ------------

FINANCING ACTIVITIES:
Shareholder loan 0 0 0
------------ ------------ ------------
Net cash provided by financing activities 0 0 0
------------ ------------ ------------
NET INCREASE (DECREASE)
IN CASH DURING THE PERIOD $ 0 $ 0 $ 0

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

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

See the notes to the financial statements.

F-5

W3 GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM JANUARY 1, 2002 TO DECEMBER 31, 2004

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)

Preferred shares
converted to common 79 0 (159) (56) 56 0

Issued shares for debt 5,314,216 531 158,895 159,426

Issued shares to
consultant 6,357,766 636 190,097 190,733

Issued shares to
the director 1,200,000 120 35,880 36,000

Net loss for
the fiscal year (46,526) (46,526)
------------ --------- ----------- ---------- ------------ ------------ ----------
Balance at
December 31, 2004 23,264,145 $ 2,326 1,498,901 $ 531,835 $ 1,977,340 $(2,602,205) $ (90,704)
============ ========= =========== ========== ============ ============ ==========

See the notes to the financial statements.

F-6

W3 GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2004

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.

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.

Development Stage Company- the Company has had no operations or revenues since
its inception and therefore qualifies for treatment as a development stage
company as per Statement of Financial Accounting Standards (SFAS) No. 7. As per
SFAS No.7, financial transactions are accounted for as per generally accepted
accounted principles. Costs incurred during the development stage are
accumulated in "losses accumulated during the development stage" and are
reported in the Stockholders' Equity section of the balance sheet.

Recent Accounting Pronouncements-

EITF 03-16: In March 2004, the EITF reached a consensus regarding Issue
No. 03-16, "Accounting for Investments in Limited Liability Companies" ("EITF
03-16"). EITF 03-16 requires investments in limited liability companies ("LLCs")
that have separate ownership accounts for each investor to be accounted for
similar to a limited partnership investment under Statement of Position
No. 78-9, "Accounting for Investments in Real Estate Ventures." Investors are
required to apply the equity method of accounting to their investments at a much
lower ownership threshold than the 20% threshold applied under APB No. 18, "The
Equity Method of Accounting for Investments in Common Stock." The adoption of
EITF 03-16 did not have a material impact on the financial condition or results
of operations.

F-7

EITF 04-1: In September 2004, the EITF reached a consensus regarding Issue
No. 04-1, "Accounting for Preexisting Relationships Between the Parties to a
Business Combination" ("EITF 04-1"). EITF 04-1 requires an acquirer in a
business combination to evaluate any preexisting relationship with the acquiree
to determine if the business combination in effect contains a settlement of the
preexisting relationship. A business combination between parties with a
preexisting relationship should be viewed as a multiple element transaction.
EITF 04-1 is effective for business combinations after October 13, 2004, but
requires goodwill resulting from prior business combinations involving parties
with a preexisting relationship to be tested for impairment by applying the
guidance in the consensus. The adoption of EITF 04-1 did not have a material
impact on the financial condition or results of operations.

SFAS No. 123R: In December 2004, the FASB issued SFAS No. 123 (revised 2004),
"Share-Based Payment" ("SFAS No. 123R"), which replaces SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") and supercedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements based on their fair
values, beginning with the first interim or annual period after June 15, 2005,
with early adoption encouraged. In addition, SFAS No. 123R will cause
unrecognized expense (based on the amounts in our pro forma footnote disclosure)
related to options vesting after the date of initial adoption to be recognized
as a charge to results of operations over the remaining vesting period. The
adoption of SFAS No. 123R did not have a material impact on the financial
condition or results of operations.

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, 2004 and
December 31, 2003.

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.

In fiscal 2004, 159 shares of preferred stock were converted to 79 shares of
common stock.

On January 10, 2005, 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, 2005. 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.

F-8

4. Issuance of Common Stock

On January 5, 2004, a preferred B shareholder converted 159 shares of preferred
B stock to 79 shares of common stock.

On May 18, 2004, the Company issued 5,314,216 shares of common stock valued at
$159,426 to vendors and consultants to settle unpaid debt.

On May 18, 2004, the Company issued 6,357,766 shares of common stock valued at
$190,733 to a consultant to settle unpaid debt.

On May 18, 2004, the Company issued 1,200,000 shares of common stock valued at
$36,000 to a director of the Company for services performed.

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,
2004 and December 31, 2003 and were excluded from the calculation of the
statement of cash flows since they did not involve a transfer of cash.

On May 18, 2004, the Company issued 5,314,216 shares of common stock valued at
$159,426 to vendors and consultants to settle unpaid debt.

On May 18, 2004, the Company issued 6,357,766 shares of common stock valued at
$190,733 to a consultant to settle unpaid debt.

On May 18, 2004, the Company issued 1,200,000 shares of common stock valued at
$36,000 to a director of the Company for services performed.

F-9

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, 2004 and December 31, 2003 because their
inclusion would be anti-dilutive.

Other than the Series B Convertible preferred stock discussed in Note 3, there
are no other financial instruments outstanding convertible into common stock at
December 31, 2004 and December 31, 2003.

The weighted average of common shares outstanding at December 31, 2004 and
December 31, 2003 has been computed as follows:

2004 2003
------------ ------------
Shares outstanding 23,264,145 10,392,084
============ ============
Weighted average 18,397,477 6,618,732
============ ============

7. Related Party Transactions

During fiscal years 2004 and 2003, 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, 2004 and December 31, 2003, 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 2004 and 2003.

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:

2004 2003

Net loss before provision for income taxes $ (46,526) $ (8,390)
========== ==========
Current tax expense:
Federal $ 0 $ 0
State 0 0
---------- ----------
Total $ 0 $ 0
========== ==========

Less deferred tax benefit:
Timing differences (129,909) (111,020)
Allowance for recoverability 129,909 111,020
---------- ----------
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 $ 129,909 $ 111,020
Allowance for recoverability (129,909) (111,020)
---------- ----------
Deferred tax benefit $ 0 $ 0
========== ==========

Note: The deferred tax benefits arising from the timing differences expires in
fiscal years 2022 to 2024 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, 2004 and 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 $2,602,288
since its inception and has no cash balances and no business operations.

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