<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of earliest event reported: August 23, 2000
------------
STONEPATH GROUP, INC. (formerly known as NET VALUE HOLDINGS)
------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-26929 65-0867684
-------- ------- ----------
State of Incorporation (Commission File Number) (IRS Employer
Identification No.)
1085 Mission Street, San Francisco, CA 94103
---------------------------------------------
(Address of principal executive offices) (Zip Code)
(415) 335-4700
--------------
(Registrant's telephone number)
<PAGE>
GENERAL EXPLANATION
The purpose of this Report is to amend the registrant's Current Report
on Form 8-K dated August 31, 2000 and filed September 1, 2000, relative to the
acquisition of an interest in the Series B and Series C Convertible Preferred
Stock of SwapIt.com, Inc. This Report amends the information provided under
Items 7(a) and 7(b).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Acquired Business
SWAPIT.COM, INC.
Independent Auditors' Report
Balance Sheets as of December 31, 1999 and June 30, 2000
(unaudited)
Statements of Operations for the period from October 28, 1999
(date of inception) through December 31, 1999, the six months
ended June 30, 2000 (unaudited) and the period from October 28,
1999 (inception) through June 30, 2000 (unaudited)
Statements of Stockholders' Equity for the period from October
28, 1999 (date of inception) through December 31, 1999 and the
six months ended June 30, 2000 (unaudited)
Statements of Cash Flows for the period from October 28, 1999
(date of inception) through December 31, 1999, the six months
ended June 30, 2000 (unaudited) and the period from October 28,
1999 (inception) through June 30, 2000 (unaudited)
Notes to Financial Statements
(b) Pro Forma Condensed Consolidated Financial Statements (Unaudited)
Basis of Presentation
Pro Forma Condensed Consolidated Balance Sheet as of June 30,
2000
Pro Forma Condensed Consolidated Statement of Operations for the
six months ended June 30, 2000
Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1999
(c) Exhibits (referenced to Item 601 of Regulation S-K)
10.53 Preferred Stock Purchase Agreement by and among Net Value
Holdings, Inc. and SwapIt.com, Inc., as of August 18,
2000.*
10.54 Investor Rights Agreement as of August 22, 2000 by and
between SwapIt.com, Inc. and Net Value Holdings, Inc.*
10.55 Stockholders' Agreement as of August 18, 2000 by and among
SwapIt.com, Inc., Net Value Holdings, Inc., Howard
Schneider and Winston Kevin Wells.*
10.56 Certificate of Amendment of Restated Certificate of
Incorporation of SwapIt.com, Inc.*
10.57 Settlement Agreement as of August 17, 2000 by and between
Net Value Holdings, Inc. and Strategicus Partners, Inc.,
Douglas Spink, Merus Partners and Ater Wynne, LLP (as
Escrow Agent).*
* Filed as part of the Registrant's Current Report on Form 8-K
dated August 31, 2000, filed September 1, 2000, and
incorporated herein by reference.
1
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
STONEPATH GROUP, INC.
Dated: October 12, 2000 By: /s/ Andrew P. Panzo
-------------------
Andrew P. Panzo
Chief Executive Officer
2
<PAGE>
FINANCIAL STATEMENTS PROVIDED UNDER ITEM 7(A)
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholders of
SWAPIT.COM, INC.
We have audited the accompanying balance sheet of SwapIt.com, Inc. (A
Development Stage Company) as of December 31, 1999 and the related statement of
operations, stockholders' equity and cash flows for the period October 28, 1999
(Inception) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of SwapIt.com, Inc. (A Development
Stage Company) as of December 31, 1999, and the results of their operations and
their cash flows for the period October 28, 1999 (Inception) to December 31,
1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note E to the
financial statements, the Company has incurred losses in its development stage,
and will need to raise additional capital to complete its development
activities. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note E. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ MORGENSTERN & ASSOCIATES
Voorhees, NJ
February 10, 2000
3
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
BALANCE SHEETS
December 31, 1999 and June 30, 2000
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
December 31, June 30,
1999 2000
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,212,381 $ 45,692
Inventory -- 431,307
Prepaid expenses 56,106 29,950
----------- -----------
Total current assets 1,268,487 506,949
PROPERTY AND EQUIPMENT, NET 75,866 564,533
INTANGIBLE ASSET, NET OF AMORTIZATION 9,762 9,048
DEPOSITS 37,943 37,943
----------- -----------
TOTAL ASSETS $ 1,392,058 $ 1,118,473
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 69,378 $ 740,268
Notes payable - related party -- 2,725,000
Customer deposits -- 315,072
Accrued expenses 19,295 100,516
Accrued payroll tax liabilities 24,317 --
----------- -----------
Total current liabilities 112,990 3,880,856
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE E)
STOCKHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock, $0.001 par value; 495,899 shares
authorized, 495,899 shares issued and outstanding 50 50
Common stock, $0.00025 par value; 6,504,101 shares authorized,
3,900,000 and 4,022,000 shares issued and outstanding 975 1,006
Additional paid-in capital 1,502,325 1,502,828
Deferred compensation (1,947) (2,218)
Deficit accumulated during the development stage (222,336) (4,264,049)
----------- -----------
Total stockholders' equity (deficit) 1,279,067 (2,762,383)
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 1,392,058 $ 1,118,473
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From October 28, 1999 (Inception) to December 31, 1999,
Six months ended June 30, 2000,
and Period from October 28, 1999 (Inception) through June 30, 2000
<TABLE>
<CAPTION>
(Unaudited)
Period from Period from
October 28, 1999 (Unaudited) October 28, 1999
(Inception) Six months (Inception)
through ended through
December 31, 1999 June 30, 2000 June 30, 2000
----------------- -------------- ---------------
<S> <C> <C> <C>
REVENUES $ -- $ 227,070 $ 227,070
COST OF GOODS SOLD -- 706,508 706,508
------------ ------------ ------------
GROSS PROFIT -- (479,438) (479,438)
OPERATING EXPENSES
Amortization 238 714 952
Bank charges 152 3,624 3,776
Compensation and related expenses 89,431 999,364 1,088,795
Consulting -- 212,582 212,582
Depreciation 1,385 56,000 57,385
Dues and subscriptions 1,074 101,293 102,367
Employee benefits 2,700 49,569 52,269
Equipment rental 236 2,518 2,754
Insurance 671 4,373 5,044
Interest -- 85,656 85,656
Marketing 1,800 1,512,687 1,514,487
Office 5,592 105,382 110,974
Professional fees 103,275 245,974 349,249
Rent 10,383 69,664 80,047
Tax and licenses 2,264 891 3,155
Travel and entertainment 4,190 98,914 103,104
Telecommunications 2,110 27,413 29,523
------------ ------------ ------------
Total operating expenses 225,501 3,576,618 3,802,119
------------ ------------ ------------
LOSS FROM OPERATIONS (225,501) (4,056,056) (4,281,557)
------------ ------------ ------------
OTHER INCOME
Interest income 3,165 14,343 17,508
------------ ------------ ------------
NET LOSS $ (222,336) $ (4,041,713) $ (4,264,049)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
From October 28, 1999 (Inception) to December 31, 1999
and Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Additional During the
--------------- ---------------- Paid-In Deferred Development
Shares Amount Shares Amount Capital Compensation Stage Total
-------- ------ --------- ------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 28, 1999 -- -- -- -- -- -- -- --
Common stock issued to founders -- -- 3,420,000 $ 855 $ 14,145 -- -- $ 15,000
Common stock granted for services -- -- 480,000 120 1,980 $ (2,100) -- --
Amortization of deferred compensation -- -- -- -- -- 153 -- 153
Preferred stock issued 495,899 $ 50 -- -- 1,486,200 -- -- 1,486,250
Net loss for period from October 28, 1999
(Inception) to December 31, 1999 -- -- -- -- -- -- $ (222,336) (222,336)
-------- ------ --------- ------ ----------- ------------ ----------- -----------
Balance at December 31, 1999 495,899 $ 50 3,900,000 $ 975 $ 1,502,325 $ (1,947) $ (222,336) $ 1,279,067
======== ====== ========= ====== =========== ============ =========== ===========
Common stock granted for services
(unaudited) -- -- 122,000 31 503 (534) -- --
Amortization of deferred compensation
(unaudited) -- -- -- -- -- 263 -- 263
Net loss for period from January 1, 2000
to June 30, 2000 (unaudited) -- -- -- -- -- -- (4,041,713) (4,041,713)
-------- ------ --------- ------ ----------- ------------ ----------- -----------
Balance at June 30, 2000 (unaudited) 495,899 $ 50 4,022,000 $1,006 $ 1,502,828 $ (2,218) $(4,264,049) $(2,762,383)
======== ====== ========= ====== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period from October 28, 1999 (Inception) to December 31, 1999,
Six months ended June 30, 2000,
and Period from October 28, 1999 (Inception) through June 30, 2000
<TABLE>
<CAPTION>
(Unaudited)
Period from Period from
October 28, 1999 (Unaudited) October 28, 1999
(Inception) Six months (Inception)
through ended through
December 31, 1999 June 30, 2000 June 30, 2000
----------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (222,336) $ (4,041,713) $ (4,264,049)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation/amortization 1,623 56,714 58,337
Compensatory common stock and stock
options issued 153 263 416
Changes in assets and liabilities:
Inventory -- (431,307) (431,307)
Prepaid expenses (56,106) 26,156 (29,950)
Intangible assets (10,000) -- (10,000)
Deposits (37,943) -- (37,943)
Accounts payable 69,378 670,890 740,268
Customer deposits -- 315,072 315,072
Accrued expenses 43,612 56,904 100,516
------------ ------------ ------------
Net cash used by operating activities (211,618) (3,347,021) (3,558,639)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (77,251) (544,667) (621,918)
------------ ------------ ------------
Net cash used by investing activities (77,251) (544,667) (621,918)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable -- 2,725,000 2,725,000
Proceeds from the issuance of common stock 15,000 -- 15,000
Proceeds from the issuance of preferred stock 1,486,250 -- 1,486,250
------------ ------------ ------------
Net cash provided by financing activities 1,501,250 2,725,000 4,226,250
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,212,381 (1,166,688) 45,692
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0 1,212,381 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,212,381 $ 45,692 $ 45,692
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
From October 28, 1999 (Inception) to December 31, 1999
(Information Relating to June 30, 2000
And The Six Months Ended June 30, 2000 Is Unaudited)
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
SwapIt.com, Inc. (the "Company"), a Delaware corporation, was
incorporated on October 28, 1999. SwapIt.com, Inc. is a development
stage company which intends to create an electronic barter exchange
marketplace on the Internet. The Company intends to make available for
barter, music CDs, movies, and books, and plans to initially target
their website to college students. The Company intends to generate
revenue from its website through the following sources: transaction
fees, advertising revenues, commissions on referrals, and direct sales.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial information as of June 30, 2000 and for the six
months ended June 30, 2000 is unaudited. The information reflects all
adjustments, consisting only of normal recurring adjustments that, in
the opinion of management, are necessary to fairly present the
financial position and results of operations of the Company for the
periods indicated. Results of operations for the interim periods are
not necessarily indicative of the results of operations for a full
fiscal year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments having original
maturities of three months or less to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that subject the Company to potential
concentrations of credit risk consist principally of cash. Cash
consists of deposits with a large United States financial institution
that is insured by the Federal Deposit Insurance Company up to a
maximum of $100,000 per account. At December 31, 1999, the Company had
an uninsured cash balance of $1,111,704.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and cash
equivalents, prepaid expenses, intangible assets, and accounts
payables, are carried at cost, which approximates fair value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method for financial
reporting purposes at rates based on the following estimated useful
lives:
Computer equipment 3 years
Furniture and fixtures 7 years
8
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
From October 28, 1999 (Inception) to December 31, 1999
(Information Relating to June 30, 2000
And The Six Months Ended June 30, 2000 Is Unaudited)
(Continued)
INTANGIBLE ASSET
Intangible asset is comprised of a web site domain name, which will be
amortized over its estimated useful life of seven years.
REVENUE RECOGNITION
The Company recognizes revenues when earned or when services are
performed.
ADVERTISING AND MARKETING
The cost of advertising and marketing is expensed as incurred.
Advertising costs for the period from October 28, 1999 (Inception) to
December 31, 1999 amounted to $1,800.
START-UP COSTS
In accordance with AICPA Statement of Position 98-5, "Reporting on the
Cost of Start-up Activities", the Company expenses all start-up
activities, including organizational costs, as they are incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes". SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the financial statement
carrying amounts and tax basis of assets and liabilities and operating
losses available to offset future taxable income, using enacted tax
rates in effect in the years in which the differences are expected to
reverse. A valuation allowance related to a deferred tax asset is
recorded when it is more likely than not that some portion or all of
the deferred tax asset will not be realized.
DEFERRED COMPENSATION
The Company has issued common stock to certain employees and
consultants in exchange for future services. The Company has recorded
the aggregate amount of the total fair market value of the stock issued
as deferred compensation. The amounts recorded as deferred compensation
are then amortized over the appropriate vesting period (generally four
years).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
CONCENTRATIONS
Concentrations not disclosed elsewhere in the financial statements are
as follows:
The Company plans to generate income from various sources that utilizes
the same medium. Lack of product (website) development or customer
interest could have a materially adverse effect on the Company.
9
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
From October 28, 1999 (Inception) to December 31, 1999
(Information Relating to June 30, 2000
And The Six Months Ended June 30, 2000 Is Unaudited)
(Continued)
B. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
Computer equipment $55,135
Furniture and fixtures 22,116
-------
77,251
Less accumulated depreciation (1,385)
-------
$75,866
=======
Depreciation expense for the period October 28, 1999 (Inception)
through December 31, 1999 was $1,385.
C. DEPOSITS
The Company has a rental deposit of $37,943 related to its office
lease.
D. INCOME TAXES
For Federal income tax purposes, start-up costs must be amortized over
not less than 60 months. The Company has recognized a deferred tax
benefit for start-up costs to be amortized over 60 months for tax
purposes. However, as it is more likely than not that the deferred tax
asset will not be utilized, management has established a reserve of
approximately $40,000.
E. COMMITMENTS AND CONTINGENCIES
GOING CONCERN:
Since October 28, 1999 (Inception), the Company has been in the
development stage and the principal activities have consisted of
raising capital. The Company is still in the process of developing its
website.
The accompanying financial statements have been prepared on the basis
of a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company is not yet generating revenues and, at December 31, 1999, had
accumulated a deficit from its operating activities. Continuation of
the Company as a going concern is dependent upon, among other things,
obtaining additional capital, achieving market acceptance of its
product and achieving satisfactory levels of profitable operations. The
financial statements do not contain any adjustments relating to the
realization of assets and liquidation of liabilities that may be
necessary should the Company be unable to continue as a going concern.
LEASES:
The Company currently leases its office facility under an operating
lease signed on December 2, 1999.
The lease has a term of five years, expiring on December 31, 2004. The
monthly rental cost is approximately $12,700. Future minimum annual
lease payments for the next five years are as follows:
2000 $151,800
2001 $151,800
2002 $151,800
2003 $151,800
2004 $151,800
10
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
From October 28, 1999 (Inception) to December 31, 1999
(Information Relating to June 30, 2000
And The Six Months Ended June 30, 2000 Is Unaudited)
(Continued)
F. STOCKHOLDERS' EQUITY
STOCK SPLIT:
On January 14, 2000, the Company's Board of Directors approved a
four-for-one (4:1) common stock split. The effective date of the split
was January 20, 2000. All references in the financial statements to
shares issued, shares outstanding, and related prices in the
accompanying financial statements have been restated to reflect this
stock split.
SERIES A CONVERTIBLE PREFERRED STOCK:
The Company's Articles of Incorporation, as amended, authorizes the
issuance of 495,899 shares of "Series A Convertible Preferred Stock",
$0.001 par value per share, of which 495,899 shares were outstanding as
of December 31, 1999. The preferred shares are cumulative at an annual
dividend rate of 8%. Holders of each share of "Series A Convertible
Preferred Stock" are entitled to vote on all matters at stockholder's
meetings. Holders of each share of the "Series A Convertible Preferred
Stock" shall convert their shares to common stock at the earliest of:
their own option or upon the first underwritten public offering
pursuant to an effective registration statement filed under the
Securities Act of 1933. The conversion price varies as stated in the
Amended and Restated Articles of Incorporation. The conversion price at
December 31, 1999 was $0.769.
The Company issued 132,941 shares of "Series A Convertible Preferred
Stock" at $3.761 per share on November 23, 1999 for a total purchase
price of $500,000. On December 20, 1999, at the conclusion of the first
round offering, the Company issued an additional 29,649 shares of
"Series A Convertible Preferred Stock" to an investor per their initial
10% fully diluted agreement. The additional issuance of stock changed
the per share purchase price to $3.075.
The Company issued 252,014 shares of "Series A Preferred Stock" at
$3.075 per share on December 17, 1999 for a total purchase price of
$775,000.
The Company issued 81,295 shares of "Series A Preferred Stock" at
$3.075 per share on December 20, 1999 for a total purchase price of
$250,000.
Cumulative preferred dividends at December 31, 1999 amounted to $7,145
or $0.014 per share.
Cumulative preferred dividends at June 30, 2000 (unaudited) amounted to
$67,978 or $0.045 per share.
COMMON STOCK:
The Company's Articles of Incorporation, as amended authorizes the
issuance of 6,504,101 shares of Common Stock, $0.00025 par value per
share, of which 3,900,000 were outstanding as of December 31, 1999.
Holders of shares of Common Stock are entitled to one vote for each
share on all matters to be voted on by the stockholders.
The Company issued 3,420,000 shares of common stock at $0.0044 per
share on November 12, 1999 to its founders for an aggregate purchase
price of $15,000.
The Company issued 480,000 shares of common stock at $0.0044 per share
on November 12, 1999 to various employees and contractors in exchange
for future services. The rights associated with the common stock shares
(i.e. - voting, dividends, etc.) were subsequently assigned back to the
Company. The common stock shares will revert back to each person based
on a bi-annual-four-year vesting schedule. Upon termination of
services, all unvested shares shall be forfeited to the Company. The
fair market value of the stock, on the grant date, was valued at
$0.0044 per share. The Company has treated the aggregate amount of
$2,100 as deferred compensation (see NOTE A) with respect to the
assignment of shares.
11
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
From October 28, 1999 (Inception) to December 31, 1999
(Information Relating to June 30, 2000
And The Six Months Ended June 30, 2000 Is Unaudited)
(Continued)
G. STOCK OPTION PLAN
The Company accounts for its stock option plan in accordance with the
provisions of APB Opinion No. 25, "Accounting for Stock Issued to
Employees". The exercise price of options granted under the Option Plan
is determined at the discretion of the Company, and in the case of
Incentive Stock Options, the amount will not be less than 100% of the
fair market value on the date of grant. The Company has reserved
620,000 shares to be offered through the plan. Compensation expense is
recognized when the exercise price of options is less than the fair
value of the underlying stock on the date of grant. Since the exercise
price is based on estimated fair value, no compensation cost has been
recognized.
While the Company continues to apply APB Opinion No. 25, Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation", requires the Company to provide pro-forma
information regarding net income (loss) as if compensation cost for the
Company's stock option plan had been determined in accordance with the
fair value based method prescribed by SFAS No. 123. The Company
estimates the fair value of stock options at the grant date by using
the minimum value method with the following assumptions used for the
grants in 1999: dividend yield of 0%; risk-free interest rate of 6.2%;
and an expected life of 10 years for all plan options.
Under the accounting provisions of SFAS 123, the Company's net loss
would have been increased to the pro forma amounts indicated below:
1999
As reported $ (222,336)
============
Pro forma $ (232,512)
============
The following summarizes information about the Company's stock options
at December 31, 1999 and June 30, 2000 (unaudited):
(a) EMPLOYEE OPTIONS
During the period from October 28, 1999 (Inception) to December 31,
1999 the Company granted options to employees. A summary of the status
of the Company's stock options as of December 31, 1999 and June 30,
2000, and changes during the period is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVG
SHARES EXERCISE PRICE
-------- --------------
<S> <C> <C>
Outstanding at October 28, 1999 0 $ 0.00
Granted 20,000 $ 0.13
Exercised 0 $ 0.00
Forfeited 0 $ 0.00
-------- ------
Outstanding at December 31, 1999 20,000 $ 0.13
======== ======
Granted (unaudited) 151,450 $ 0.13
Exercised (unaudited) 0 $ 0.00
Forfeited (unaudited) (11,500) $ 0.13
-------- ------
Outstanding at June 30, 2000 (unaudited) 159,950 $ 0.13
======== ======
Options exercisable at December 31, 1999 0 $ 0
======== ======
Options exercisable at June 30, 2000 (unaudited) 0 $ 0
======== ======
</TABLE>
12
<PAGE>
SwapIt.com, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
From October 28, 1999 (Inception) to December 31, 1999
(Information Relating to June 30, 2000
And The Six Months Ended June 30, 2000 Is Unaudited)
(Continued)
(b) NON-EMPLOYEE OPTIONS
During the period from October 28, 1999 (Inception) to December 31,
1999 the Company granted options to certain non-employees. A summary of
the status of the Company's stock options as of December 31, 1999 and
June 30, 2000, and changes during the period is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVG
SHARES EXERCISE PRICE
-------- --------------
<S> <C> <C>
Outstanding at October 28, 1999 0 $ 0.00
Granted 169,600 $ 0.13
Exercised 0 $ 0.00
Forfeited 0 $ 0.00
-------- ------
Outstanding at December 31, 1999 169,600 $ 0.13
======== ======
Granted (unaudited) 20,000 $ 0.39
Exercised (unaudited) 0 $ 0.00
Forfeited (unaudited) 0 $ 0.00
-------- ------
Outstanding at June 30, 2000 (unaudited) 189,600 $ 0.15
======== ======
Options exercisable at December 31, 1999 169,600 $ 0.13
======== ======
Options exercisable at June 30, 2000 (unaudited) 189,600 $ 0.15
======== ======
</TABLE>
Stock Options during the period from October 28, 1999 (Inception) to
December 31, 1999; and June 30, 2000 (unaudited) are summarized as
follows:
<TABLE>
<CAPTION>
WEIGHTED-AVG
SHARES EXERCISE PRICE
-------- --------------
<S> <C> <C>
Outstanding at October 28, 1999 0 $ 0.00
Granted 189,600 $ 0.13
Exercised 0 $ 0.00
Forfeited 0 $ 0.00
-------- ------
Outstanding at December 31, 1999 189,600 $ 0.13
======== ======
Granted (unaudited) 171,450 $ 0.16
Exercised (unaudited) 0 $ 0.00
Forfeited (unaudited) (11,500) $ 0.13
-------- ------
Outstanding at June 30, 2000 (unaudited) 349,550 $ 0.14
======== ======
Options exercisable at December 31, 1999 169,600 $ 0.13
======== ======
Options exercisable at June 30, 2000 (unaudited) 189,600 $ 0.15
======== ======
</TABLE>
13
<PAGE>
FINANCIAL STATEMENTS PROVIDED UNDER ITEM 7(B)
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
On August 23, 2000, Stonepath Group acquired an additional equity interest in
SwapIt.com, Inc. for total consideration of $4,233,945, consisting of $300,000
cash and cancellation of outstanding promissory notes in the principal amount of
$3,800,000 plus accrued interest of $133,945.
The following unaudited pro forma balance sheet at June 30, 2000 presents our
acquisition of additional equity interests in SwapIt as if it had occurred on
June 30, 2000. The unaudited pro forma statement of operations for the year
ended December 31, 1999 and the six months ended June 30, 2000 presents our
acquisition of additional equity interests in SwapIt as if it had occurred on
January 1, 1999 and excludes the historical effect of discontinued operations.
The detailed assumptions used to prepare the unaudited pro forma financial
information are contained herein. The unaudited pro forma financial information
reflects the use of the purchase method of accounting for the acquisition, which
for purposes of this presentation, encompasses the purchase of an equity
interest in a business accounted for by the equity method.
The unaudited pro forma condensed consolidated financial information is
presented for illustrative purposes only and is not necessarily indicative of
the financial position or results of operations which would have actually been
reported had the transactions been consummated at the dates mentioned above or
which may be reported in the future. This unaudited pro forma condensed
consolidated financial information is based upon the respective historical
financial statements of Stonepath Group and SwapIt.com and should be read in
conjunction with those statements and the related notes.
14
<PAGE>
STONEPATH GROUP, INC. and SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2000
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Assets Historical Adjustments Balance
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increases Decreases
Current assets:
Cash and cash equivalents $ 38,674,084 $ -- (300,000)(a) $ 38,374,084
Available-for-sale securities 406,728 -- -- 406,728
Interest receivable 99,785 -- (85,625)(a) 14,160
Loans receivable 170,645 -- -- 170,645
Prepaid expenses and other current assets 131,625 -- -- 131,625
------------ ----------- ------------ -----------
Total current assets 39,482,867 -- -- 39,097,242
Ownership interests in and advances to Affiliate Companies 14,583,040 4,185,625 (a) (3,800,000)(a) 14,968,665
Goodwill, net 2,611,647 -- -- 2,611,647
Furniture and equipment, net 183,607 -- -- 183,607
Other assets 128,923 -- -- 128,923
------------ ----------- ------------ -----------
$ 56,990,084 $ 4,185,625 $ (4,185,625) $ 56,990,084
============ =========== ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 281,576 $ -- -- $ 281,576
Net liabilities of discontinued operations 1,014,526 -- -- 1,014,526
------------ ----------- ------------ -----------
Total current liabilities 1,296,102 -- -- 1,296,102
------------ ----------- ------------ -----------
Accrued preferred stock dividend, Series C 1,295,834 -- -- 1,295,834
------------ ----------- ------------ -----------
1,295,834 -- -- 1,295,834
------------ ----------- ------------ -----------
Stockholders' equity:
Convertible preferred stock, Series C 4,167 -- -- 4,167
Common stock, Net Value Inc. 1,098 -- -- 1,098
Common stock, Stonepath Group 19,411 -- -- 19,411
Additional paid-in capital 214,442,605 -- -- 214,442,605
Deferred compensation (140,062,076) -- -- (140,062,076)
Accumulated deficit (19,840,561) -- -- (19,840,561)
Net unrealized gains on available-for-sale securities 161,651 -- -- 161,651
Treasury stock, Net Value Inc. (17,500) -- -- (17,500)
Treasury stock, at cost (310,647) -- -- (310,647)
------------ ----------- ------------ -----------
Total stockholders' equity 54,398,148 -- -- 54,398,148
------------ ----------- ------------ -----------
$ 56,990,084 $ -- $ -- $ 56,990,084
============ =========== ============ ============
Pro Forma Adjustment Legend
(a) Amounts represent the consideration paid to acquire our additional equity interest in SwapIt.
Consideration paid:
-------------------
Cash Paid $ 300,000
Interest accrued prior to June 30, 2000 on notes to SwapIt 85,625
Cancellation of loans to SwapIt 3,800,000
-----------
4,185,625
Interest accrued subsequent to June 30, 2000 on notes to SwapIt 48,320
-----------
$ 4,233,945
===========
</TABLE>
15
<PAGE>
STONEPATH GROUP, INC. and SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended June 30, 2000
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Balance
----------- ------------- ----------
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Operating expenses:
Stock-based compensation 13,366,749 -- 13,366,749
General and administrative 4,417,203 -- 4,417,203
----------- ---------- -----------
Total operating expenses 17,783,952 -- 17,783,952
Interest income 915,946 -- 915,946
Interest expense 84,627 -- 84,627
Other losses 957,101 -- 957,101
----------- ---------- -----------
Loss before equity in losses of Affiliate Companies 17,909,734 -- 17,909,734
Equity in losses of Affiliate Companies 2,665,756 1,769,151 (a) 4,434,907
----------- ---------- -----------
Net loss from continuing operations 20,575,490 1,769,151 22,344,641
----------- ---------- -----------
Preferred stock dividends 44,012,625 -- 44,012,625
----------- ---------- -----------
Net loss to common shareholders $64,588,115 $1,769,151 $66,357,266
=========== ========== ===========
Basic and diluted net loss per common share - continuing operations $ (3.91) $ (3.91)
=========== ===========
Shares used in per share calculation 16,521,162 16,521,162
=========== ===========
Pro Forma Adjustment Legend
(a) Amount represents adjustment to Equity in losses of Affiliate Companies as follows:
Our proportionate share of SwapIt's net loss $ 1,065,653
Amortization of the excess investment cost over our
equity in SwapIt's net assets 703,498
-----------
$ 1,769,151
===========
</TABLE>
16
<PAGE>
STONEPATH GROUP, INC. and SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Balance
----------- ----------- ----------
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Operating expenses:
Stock-based compensation $ 7,320,695 -- 7,320,695
General and administrative 3,719,497 -- 3,719,497
----------- ---------- -----------
Total operating expenses 11,040,192 -- 11,040,192
Interest income 60,526 -- 60,526
Interest expense 12,380,157 -- 12,380,157
Financing fees 523,601 -- 523,601
----------- ---------- -----------
Loss before equity in losses of Affiliate Companies 23,883,424 -- 23,883,424
Equity in losses of Affiliate Companies 79,559 1,514,919 (a) 1,594,478
----------- ---------- -----------
Net loss from continuing operations 23,962,983 1,514,919 25,477,902
----------- ---------- -----------
Preferred stock dividends 6,605,261 -- 6,605,261
----------- ---------- -----------
Net loss to common shareholders from continuing operations $30,568,244 $1,514,919 $32,083,163
=========== ========== ===========
Loss per common share from continuing operations $ (2.90) $ (3.04)
=========== ===========
Shares used in per share calculation 10,557,953 10,557,953
=========== ===========
Pro Forma Adjustment Legend
(a) Amount represents adjustment to Equity in losses of Affiliate Companies as follows:
Our proportionate share of SwapIt's net loss $ 107,921
Amortization of the excess investment cost over our
equity in SwapIt's net assets 1,406,998
-----------
$ 1,514,919
===========
</TABLE>
17
