FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ____________________
Commission file number 0-25942
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SWWT, INC.
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(Exact name of registrant as specified in its charter)
Delaware 84-1167603
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3492 W. 109th Circle, Westminster, CO 80030
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(Address of principal executive offices) (Zip Code)
(303) 460-8017
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(Registrant's telephone number, including area code)
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 _____
As of March 31, 1999, 3,122,254 shares of Registrant's Common Stock, par
value $.001 per share, were outstanding.
<PAGE>
SWWT, Inc.
Table of Contents
Page
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Part I. Financial Information
Item 1. Financial Statements
Balance Sheets-
March 31, 1999 and December 31, 1998.....................3
Statements of Operations-
Three months ended March 31, 1999 and 1998...............5
Statements of Cash Flows
Three months ended March 31, 1999 and 1998...............6
Notes to Financial Statements............................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................11
Part II. Other Information..................................................13
<PAGE>
SWWT, INC.
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<TABLE>
<CAPTION>
BALANCE SHEETS
--------------
(Unaudited)
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 1,247,567 $ 1,251,257
------------ ------------
Total current assets ................................... 1,247,567 1,251,257
Total Assets ........................................... $ 1,247,567 $ 1,251,257
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ................................. $ 19,724 $ 15,424
------------ ------------
Total liabilities ...................................... $ 19,724 $ 15,424
============ ============
COMMITMENTS AND CONTINGENCIES ............................................ -- --
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 8,000,000 shares authorized;
3,122,254 shares issued and outstanding at March 31, 1999 and
December 31, 1998, after deducting 71,734 shares held in treasury 3,122 3,122
Additional paid-in capital ............................................... 12,440,186 12,440,186
Accumulated deficit ...................................................... (11,215,465) (11,207,475)
------------ ------------
Total Stockholders' Equity ............................. 1,227,843 1,235,833
------------ ------------
Total Liabilities and Stockholders' Equity ............. $ 1,247,567 $ 1,251,257
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets
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<PAGE>
SWWT, INC.
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<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
------------------------
(Unaudited)
For the Three Months Ended
March 31,
------------------------------
1999 1998
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<S> <C> <C>
OPERATING EXPENSES:
General and administrative ............... 22,435 104,862
----------- -----------
Total operating expenses .......... 22,435 104,862
----------- -----------
INCOME (LOSS) FROM OPERATIONS .............. (22,435) (104,862)
OTHER INCOME, NET .......................... 14,445 12,560
----------- -----------
NET INCOME (LOSS) .......................... $ (7,990) $ (92,302)
=========== ===========
INCOME (LOSS) PER COMMON SHARE-
BASIC AND DILUTED
$ (0.00) $ (0.03)
----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING ........ 3,122,254 3,120,142
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements
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<PAGE>
SWWT, INC.
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<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
For the Three Months Ended
March 31,
---------------------------
1999 1998
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) .......................................................... $ (7,990) $ (92,302)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Issuance of treasury stock to 401(k) plan ................................ -- 5,319
Changes in assets and liabilities:
Prepaids and other current assets ........................................ -- 2,476
Accounts payable and accrued liabilities ................................. 4,300 (197,252)
Accrued salaries and other current liabilities ........................... -- (165,620)
Accrued loss for disposal of discontined operations ...................... -- (156,997)
----------- -----------
Net cash used in operating activities ............................. (3,690) (604,376)
Proceeds from sale of assets, net of costs ............................... -- 970,497
----------- -----------
Net cash provided by investing activities ......................... 970,497
CASH FLOWS FROM FINANCING ACTIVITIES ....................................... -- --
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .............. (3,690) 366,121
CASH AND CASH EQUIVALENTS, beginning of period ............................. 1,251,257 968,076
=========== ===========
CASH AND CASH EQUIVALENTS, end of period ................................... $ 1,247,567 $ 1,334,197
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid for interest ............................................ $ -- $ --
=========== ===========
Termination of deferred compensation plan ......................... $ -- $ --
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements
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<PAGE>
SWWT, Inc.
Notes to Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
---------------------
In the opinion of management, the accompanying unaudited balance sheet,
statements of operations and cash flows contain all adjustments,
consisting only of normal recurring items, necessary to present fairly
the financial position of SWWT, Inc. (the "Company") as of March 31,
1999 and the results of operations and cash flows for the three months
ended March 31, 1999 and 1998.
The unaudited financial statements presented herein have been prepared
in accordance with Securities and Exchange Commission regulations and
do not include all the information and note disclosures required by
generally accepted accounting principles. These financial statements
should be read in conjunction with the audited financial statements and
notes thereto contained in the Company's annual report on Form 10-K for
the year ending December 31, 1998.
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income" as of January 1, 1998. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The
adoption of this statement had no impact on the Company's financial
statements.
2. BUSINESS
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The Company was incorporated in Colorado in March 1991 and
re-incorporated in Delaware in September 1993. Prior to February 1998,
the Company was engaged in the manufacture and sale of portable water
filtration and purification devices. On February 6, 1998, the Company
sold substantially all of its assets to Cascade Designs, Inc., a
Washington corporation, pursuant to an Asset Purchase Agreement dated
as of October 21, 1997, for a purchase price of $1,633,425 in cash (the
"Sale"). As a result of the Sale, the Company's only significant asset
is cash and cash equivalents of approximately $1.3 million, after
payment of expenses related to the Sale and management and severance
bonuses. The Company has no further operating business, and has reduced
its management and administrative staff to one part-time employee. The
Company plans to use its cash to pay ongoing general and administrative
expenses, which are anticipated to be minimal, and to seek acquisition
candidates. The Board of Directors is exploring opportunities to effect
an acquisition whether by merger, exchange or issuance of capital
stock, acquisition of assets, or other similar business combination. As
the Company competes for desirable acquisition candidates with a large
number of entities with significantly greater financial resources and
technical expertise than the Company, the Company cannot be assured
that it will succeed in its efforts to conclude a business combination.
-6-
<PAGE>
3. INCOME TAXES
------------
SFAS No. 109 requires recognition of deferred tax assets for the
expected future effects of all deductible temporary differences, loss
carryforwards and tax credit carryforwards. Deferred tax assets are
then reduced, if deemed necessary, by a valuation allowance for the
amount of any tax benefits which, more likely than not, based on
current circumstances, are not expected to be realized. The Company has
determined that under SFAS 109, any previously unrecognized tax
benefits do not satisfy the realization criteria set forth therein.
Therefore, a valuation allowance has been recorded against the entire
net deferred tax asset.
4. NET INCOME (LOSS) PER COMMON SHARE
----------------------------------
Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of shares of common stock
outstanding during each period presented. At both March 31, 1999 and
1998, options on no shares have been treated as outstanding common
stock equivalents.
5. PROFIT SHARING PLAN AND TRUST
-----------------------------
Pursuant to the Company's 401(k) Profit Sharing Plan and Trust (the
"401(k) Plan"), which was established effective January 1, 1995, the
Company agreed to contribute matching contributions in the form of
Company common stock at the rate of 50% of the first 8% of employees
salary deferral. Under the 401(k) Plan, the Company may also elect to
make discretionary contributions. Employees vest in Company
contributions over six years of service with the Company. Forfeitures
of the unvested prorated portion are allocated to the remaining
employees in the plan proportionately, based upon current years
compensation.
Effective February 28, 1998, the plan has been terminated and a
favorable determination letter has been issued by the Internal Revenue
Service.
6. COMMITMENTS AND CONTINGENCIES
-----------------------------
None.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion contains, in addition to historical
information, forward-looking statements. The forward-looking statements were
prepared on the basis of certain assumptions which relate, among other things,
to the estimated expenses of the Company. Even if the assumptions on which the
projections are based prove accurate and appropriate, the actual results of the
Company's operations in the future may vary widely from the forward-looking
statements included herein.
General
On February 6, 1998, the Company completed the sale of substantially
all of its assets to Cascade Designs, Inc. for a purchase price of $1,633,425 in
cash (the "Sale"). As a result of the Sale, the Company's only significant asset
is cash and cash equivalents of approximately $1.3 million, after payment of
expenses related to the Sale and management and severance bonuses. The Company
has no further operating business, and has reduced its management and
administrative staff to one part-time employee. The Company plans to use its
cash to pay ongoing general and administrative expenses, which are anticipated
to be minimal, and to seek acquisition candidates.
The following discussion and analysis of financial condition and
results of operations should be read in conjunction with the Company's Financial
Statements and the Notes thereto included in the Annual Report on Form 10-K for
the year ended December 31, 1998.
Results of Operations
Three months ended March 31, 1999 and 1998
Net loss decreased by $84,312 from a loss of $92,302 or $.03 per share
for the three months ended March 31, 1998 to a loss of $7,990 or $0.00 per share
for the three months ended March 31, 1999. The decreased loss was primarily due
to the reduced general and administrative expenses as a result of the sale of
its operating business which was completed in February 1998. Other income
increased 15% from $12,560 to $14,445, in the three months ended March 31, 1998
and 1999, respectively.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $3,690 or less than 1%, to
$1,247,567 at March 31, 1999.
The Company plans to use its cash to pay ongoing general and
administrative expenses, which are anticipated to be minimal, and to seek
acquisition candidates. Depending on the size and nature of the entity, if any,
which maybe acquired, the Company may utilize cash, equity, debt or a
combination thereof to increase the amount of capital available for a business
combination or to finance the operation of the acquired business. Although the
Company believes additional capital may be required, the necessity for and the
amount and nature of any future borrowings or other financings by the Company
will depend on numerous considerations including the Company's capital
requirements, its perceived ability to service such debt and prevailing
conditions in the financial markets and the general economy. No assurance can be
made that additional capital will be available on terms acceptable to the
Company.
-8-
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities and Use of Proceeds. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(A) Reports on Form 8-K . None.
(B) Exhibits.
(27) Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SweetWater, Inc.
(Registrant)
Dated: May 14, 1999 By: /s/ Patrick E. Thomas
---------------------
Patrick E. Thomas
President,
Vice President of Finance
and Administration, Chief
Financial Officer
(principal financial
officer and chief
accounting officer)
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<PAGE>
EXHIBIT INDEX
Exhibit Exhibit Description Page(s) of this Form
- ------- ------------------- --------------------
Number
- ------
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,247,567
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,247,567
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,247,567
<CURRENT-LIABILITIES> 19,724
<BONDS> 0
0
0
<COMMON> 3,122
<OTHER-SE> 1,224,721
<TOTAL-LIABILITY-AND-EQUITY> 1,247,567
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 22,435
<OTHER-EXPENSES> (14,445)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,990)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,990)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,990)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
