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 June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 August 1, 1999, 3,122,254 shares of Registrant's Common Stock,
par value $.001 per share, were outstanding.
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SWWT, Inc.
Table of Contents
Page
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Part I. Financial Information
Item 1. Financial Statements
Balance Sheets-
June 30, 1999 and December 31, 1998...................3
Statements of Operations-
Three and six months ended June 30, 1999 and 1998.....4
Statements of Cash Flows
Six months ended June 30, 1999 and 1998...............5
Notes to Financial Statements.........................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................8
Part II. Other Information...................................................9
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SWWT, INC.
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<TABLE>
<CAPTION>
BALANCE SHEETS
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(Unaudited)
-----------
June 30, December 31,
1999 1998
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<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents ......................................... $ 1,212,308 $ 1,251,257
Prepaids and other current assets ................................. 12,000 --
------------ ------------
Total current assets .............................. 1,224,308 1,251,257
Total Assets ...................................... $ 1,224,308 $ 1,251,257
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ............................ $ 6,325 $ 15,424
------------ ------------
Total liabilities ................................................... $ 6,325 $ 15,424
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COMMITMENTS AND CONTINGENCIES ....................................... -- --
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STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 8,000,000 shares authorized;
3,122,254 shares issued and outstanding at
June 30, 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 ................................................. (11,225,325) (11,207,475)
----------- -----------
Total Stockholders' Equity ........................ 1,217,983 1,235,833
------------ ------------
Total Liabilities and Stockholders' Equity ........ $ 1,224,308 $ 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 For the Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES ......................... $ -- $ -- $ -- $ --
OPERATING EXPENSES:
Sales and Marketing ............. --
Research and development ........ --
General and administrative ...... 23,840 26,200 46,275 131,062
----------- ----------- ----------- -----------
Total operating expenses . 23,840 26,200 46,275 131,062
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS ..... (23,840) (26,200) (46,275) (131,062)
OTHER INCOME, NET ................. 13,980 17,203 28,425 29,763
----------- ----------- ----------- -----------
NET (LOSS) ........................ $ (9,860) $ (8,997) $ (17,850) $ (101,299)
=========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE-
BASIC AND DILUTED
Net (loss) ............... $ (0.00) $ (0.00) $ (0.01) $ (0.03)
----------- ----------- ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING 3,122,254 3,122,254 3,122,254 3,121,198
=========== =========== =========== ===========
</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)
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For the Six Months Ended
June 30, 1999
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss .................................................................... $ (17,850) $ (101,299)
Adjustments to reconcile net 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 ......................................... (12,000) 2,476
Accounts payable and accrued liabilities .................................. (9,099) (240,613)
Accrued salaries and other current liabilities ............................ -- (165,620)
Accrued loss for disposal of discontinued operations ...................... -- (156,997)
----------- -----------
Net cash used in operating activities ....................................... (38,949) (656,734)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets, net of costs ................................ -- 970,497
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Net cash provided by investing activities ................................... 970,497
CASH FLOWS FROM FINANCING ACTIVITIES ........................................ -- --
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ........................ (38,949) 313,763
CASH AND CASH EQUIVALENTS, beginning of period .............................. 1,251,257 968,076
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CASH AND CASH EQUIVALENTS, end of period .................................... $ 1,212,308 $ 1,281,839
=========== ===========
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 June 30,
1999 and the results of operations and cash flows for the three months
ended June 30, 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
--------
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.
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<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 LOSS PER COMMON SHARE - BASIC AND DILUTED
---------------------------------------------
Net loss per common share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during
each period presented. At both June 30, 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 $1.2 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 June 30, 1999 and 1998
Net loss increased by $863 from a loss of $8,997 or $.00 per share for
the three months ended June 30, 1998 to a loss of $9,860 or $0.00 per share for
the three months ended June 30, 1999. The increased loss was primarily due to
lower investment income offset by reduced general and administrative expenses
Six months ended June 30, 1999 and 1998
Net loss decreased by $83,449 from a loss of $101,299 or $.03 per share
for the six months ended June 30, 1998 to a loss of $17,850 or $0.01 per share
for the six months ended June 30, 1999. The decreased loss was primarily due to
the reduced general and administrative expenses as a result of the sale of the
Company's operating business, which was completed in February 1998. Other income
decreased 5% from $29,763 to $28,425 in the three months ended June 30, 1998 and
1999, respectively.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $38,949 or 3% to $1,212,308 at
June 30, 1999 due to the payment of prior years accrued expenses and prepayment
of current years insurance expense.
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 may be 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 financing by the Company
will depend on numerous considerations including the Company's capital
requirements, its perceived ability to service such debt and
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<PAGE>
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.
PART II. OTHER INFORMATION
Items 1-2 None
Item 3 None
Item 4 None
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibits
(27) Financial Data Schedule
(B) Reports on Form 8-K - None.
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.
SWWT, Inc.
(Registrant)
Dated: August 12, 1999 By: /s/ Patrick E. Thomas
---------------------
Patrick E. Thomas
President and
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
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(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,212,308
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,224,308
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,224,308
<CURRENT-LIABILITIES> 6,325
<BONDS> 0
0
0
<COMMON> 3,122
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,214,983
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 46,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (28,425)
<INCOME-PRETAX> (17,850)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,850)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,850)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
