UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Oscar Capital Management, 900 Third Ave,
2nd Floor, New York, NY 10022
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(Address of principal executive offices) (Zip Code)
(212) 610-2700
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(Registrant's telephone number, including area code)
3492 W. 109th Circle, Westminster, CO 80030
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(Former address, if changed since last report)
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 and (2) has been
subject to such filing requirements for the past 90 days.
X Yes No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 3,122,254
shares of common stock, par value $.001 per share, as of August 1, 2000.
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FORM 10-Q
CONTENTS
Page Number
PART I -FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet as of June 30, 2000............................
Statements of Operations for the three months ended June 30, 2000
and for the period from January 7, 2000 (inception) to June 30,
2000
Statements of Cash Flows for the period from January 7, 2000
(inception) to June 30, 2000..............................
Notes to Financial Statements................................
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................
Item 3. Quantitative and Qualitative Disclosures about Market Risk...
PART II - OTHER INFORMATION
Item 4Submission of Matters to a Vote of Security Holders....
Item 6Exhibits and Reports on Form 8-K.......................
Signature....................................................
Index to Exhibits............................................
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SWWT Inc.
Balance Sheet
June 30, 2000
(Unaudited)
ASSETS
Cash and cash equivalents $2,505,028
Investment 300,000
Interest receivable 14,829
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Total assets $2,819,857
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable and accrued liabilities $ 596,080
Series B Preferred Stock, $.001 par value;
1,000,000 shares authorized, 757,772 shares
issued and outstanding 3,485,955
Stockholders' deficit:
Common Stock, $.001 par value; 750,000,000 shares authorized,
3,122,254 shares issued and outstanding 3,122
Accumulated deficit (354,345)
Notes receivable (910,955)
Total stockholders' deficit (1,262,178)
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$2,819,857
============
See accompanying notes to financial statements.
SWWT Inc.
Statements of Operations
(Unaudited)
PERIOD FROM
JANUARY 7,
THREE MONTHS 2000
ENDED (INCEPTION) TO
JUNE 30, 2000 JUNE 30, 2000
-----------------------------
Operating expenses:
General and administrative $ 366,052 $ 366,052
Total operating expenses 366,052 366,052
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Other income:
Interest income 14,829 14,829
Net loss $(351,223) $(351,223)
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Net loss per share - basic and diluted $(.11) $(.11)
=============================
See accompanying notes to financial statements.
SWWT Inc.
Statement of Cash Flows
January 7, 2000 (date of inception) to June 30, 2000
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(351,223)
Changes in operating assets and liabilities:
Interest receivable (14,829)
Accounts payable and accrued liabilities 346,080
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Net cash used in operating activities (19,972)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment (300,000)
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Net cash used in investing activities (300,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock 2,825,000
Cash acquired in the SWWT/E-Newco Merger 740,635
Dividend to pre-Merger stockholders (740,635)
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Net cash provided by financing activities 2,825,000
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Net increase in cash and cash equivalents 2,505,028
Cash and cash equivalents at January 7, 2000 -
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Cash and cash equivalents at March 31, 2000 $2,505,028
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See accompanying notes to financial statements.
SWWT, INC.
Notes to Financial Statements (continued)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited interim
consolidated financial statements contain all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the
financial position and cash flows of the Company for the period presented.
The results of operations for the three months ended June 30, 2000 are not
necessarily indicative of the results to be expected for any other interim
period or for the full year.
For further information, refer to the financial statements and footnotes
thereto for E-Newco, Inc. ("E-Newco") included in the SWWT, Inc. Current
Report on Form 8-K/A as filed on May 15, 2000.
As discussed more fully in Note 2, on April 14, 2000, SWWT, Inc. ("SWWT")
and its newly-formed, wholly owned subsidiary, ENWC Acquisition, Inc.
("ENWC") entered into a merger agreement with E-Newco. The merger was
accounted for as a purchase of SWWT by E-Newco in a "reverse acquisition"
because the existing shareholders of SWWT, prior to the merger, do not have
voting control of the combined entity after the merger. In a reverse
acquisition, the accounting treatment differs from the legal form of the
transaction, as the continuing legal parent company, SWWT, is not assumed
to be the acquiror and the financial statements of the combined entity are
those of the accounting acquiror (E-Newco), including any comparative prior
year financial statements presented by the combined entity after the
business combination. Since SWWT, prior to the merger, was a public
corporation without substantial business operations, no pro-forma
information giving effect to the acquisition is required.
Effective August 1, 2000, SWWT filed an Amended and Restated Certificate of
Incorporation increasing the number of authorized shares of common stock
from 8,000,000 to 750,000,000 and preferred stock from 7,000,000 to
50,000,000 (of which 1,000,000 shares have been designated as Series B
Preferred Stock (as defined below)). The accompanying balance sheet at June
30, 2000 reflects this change.
2. MERGER WITH E-NEWCO
On April 14, 2000, SWWT and its newly formed, wholly owned subsidiary, ENWC
entered into a merger agreement (the "Merger Agreement") with E-Newco. In
accordance with the terms of the Merger Agreement, SWWT issued 757.772
shares of its newly designated Series B Convertible Preferred Stock (the
"Series B Preferred Stock"), to the stockholders of E-Newco in exchange for
each share of E-Newco common stock. On April 24, 2000, the stockholders of
E-Newco exchanged all 1,000 shares of issued and outstanding common stock
of E-Newco at that date for an aggregate of 757,772 shares of Series B
Preferred Stock. E-Newco merged with ENWC (the "Merger") and became a
wholly owned subsidiary of SWWT. The terms of the Series B Preferred Stock
provide for automatic conversion into an aggregate of 75,777,162 shares of
common stock, of the Company following the approval by the stockholders of
the Company of the requisite increase to the amount of authorized
SWWT, INC.
Notes to Financial Statements (continued)
(Unaudited)
common stock (which became effective on August 1, 2000) and the receipt by
the Company of additional equity financing of at least $15 million. The
holders of the Series B Preferred Stock vote with the holders of the common
stock on an as converted basis and possess approximately 95.5% of the
voting power of the Company. Upon completion of the Merger, but without
giving effect to the receipt of additional equity financing, the Company
has 79,347,851 shares of common stock outstanding, on an as converted,
fully diluted basis.
If the Company does not receive additional equity financing of at least $15
million within 180 days of the consummation of the Merger, the holders of
the common stock may elect to cause the Company to redeem the outstanding
shares of Series B Preferred Stock at a redemption price equal to a
pro-rata portion of the Company's cash balance, if any, at the date of
redemption. As a result, the Series B Preferred Stock has been excluded
from stockholders' equity.
In May 2000, the Company paid a one-time cash dividend to its pre-Merger
stockholders equal to $740,635. The dividend payment consisted of the cash
on SWWT's balance sheet immediately prior to the consummation of the Merger
less expenses related to the Merger and the settlement of certain claims.
3. INVESTMENTS
On March 16, 2000, the Company used advances received on the issuance of
its common stock to purchase an exchangeable demand promissory note and a
stock purchase warrant for $300,000, which are exchangeable into and
exercisable for shares of capital stock of SchoolNet, Inc., a Delaware
corporation, upon the occurrence of certain events. At June 30, 2000, this
investment is carried at cost which approximates fair value.
4. RELATED PARTY TRANSACTIONS
On March 23, 2000, the Company's CEO issued a $500,000 note receivable
payable on demand to the Company in connection with the purchase of 133.83
shares of E-Newco common stock. Interest accrues at the greater of (i) 6%
or (ii) the applicable federal mid-term rate.
Restricted Common Stock
Effective April 8, 2000, the Company issued 110 shares of E-Newco
restricted common stock for a purchase price of $410,955 to the Company's
CEO in accordance with a Restricted Stock Purchase Agreement. The purchase
price was established based on the fair market value at the date of grant.
These shares were issued subject to certain conditions, and transfer and
other restrictions. The restricted stock vests over a three year period.
Concurrent with the execution of his employment agreement, the Company's
CEO issued to the Company a $410,955 promissory note receivable. The note
bears interest at a rate of 6% per year and the principal plus interest are
due on the earlier of 7 years, termination of employment, or breach of the
agreement governing the restricted shares. The proceeds from the note
receivable were used to purchase the 110 shares of restricted common stock
of E-Newco. The CEO pledged to the Company an interest in the restricted
shares of the Company's common stock as security for the promissory note.
SWWT, INC.
Notes to Financial Statements (continued)
(Unaudited)
5. NET LOSS PER SHARE
Three Months Period from
Ended January 7, 2000
June 30, 2000 (inception) to
June 30, 2000
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Numerator for basic
and diluted loss
per share:
Net loss $(351,223) $(351,223)
=============== ================
Denominator for basic and
diluted loss per share ---
weighted average shares 3,122,254 3,122,254
=============== ================
Basic and diluted net loss per
share $(.11) $(.11)
=============== ================
Diluted loss per share for the three months ended June 30, 2000 and for the
period from January 7, 2000 (inception) to June 30, 2000, does not include
the effect of options and warrants outstanding to purchase 448,435 shares
of common stock, respectively, as the effect of their inclusion is
antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company had no operations for the period ended March 31, 2000. In the
quarter ended June 30, 2000, the Company incurred a net loss of $351,223 or
$.11 per share. General and administrative costs of $366,052 represented
professional fees and payroll expense. Offsetting these costs was other
income of $14, 829 principally related to interest income from the notes
receivable.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in investing activities for the period from January 7, 2000
(inception) through June 30, 2000 was $300,000 which consisted of the
purchase of an exchangeable demand promissory note and a stock purchase
warrant of SchoolNet, Inc. Cash provided by financing activities for the
period from January 7, 2000 (inception) through June 30, 2000 was
$2,825,000 which consisted of the proceeds from the issuance of common
stock. The Company has working capital of $1,908,948 at June 30, 2000.
The Company believes that existing cash balances together with expected
additional equity financing will be sufficient to finance the Company's
currently anticipated working capital requirements and capital expenditure
requirements for at least the next twelve months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
SWWT, INC.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
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Reference is made to SWWT's Definitive Information Statement on Schedule
14C (the "Information Statement"), filed with the SEC on July 10, 2000.
As of May 9, 2000, SWWT had issued and outstanding 3,122,254 shares of its
Common Stock, par value $.001 per share, and 757,772 shares of its Series B
Convertible Preferred Stock, par value $.001 per share, that were
convertible into a total of 75,777,162 shares of Common Stock. The holders
of Series B Preferred Stock generally vote together as a single class with
the holders of the Common Stock on an as-converted basis.
By written consents in lieu of a meeting received by the Company between
May 9, 2000 and June 16, 2000, the stockholders of SWWT approved the
following actions (collectively, the "Stockholder Actions"):
(i) the amendment of SWWT's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from
8,000,000 shares to 750,000,000 shares and the number of
authorized shares of preferred stock from 7,000,000 to
50,000,000 (the "Authorized Capital Amendment"),
(ii) the amendment of SWWT's Certificate of Incorporation to have
SWWT be governed by Section 203 of the Delaware General
Corporation Law ("GCL"),
(iii) the amendment of SWWT's Certificate of Incorporation to provide
for the indemnification of SWWT's directors and officers to the
fullest extent permitted by the GCL,
(iv) the amendment of SWWT's Certificate of Incorporation to create
a classified board of directors,
(v) the amendment of SWWT's Certificate of Incorporation to provide
that stockholders may only adopt, amend, alter or repeal SWWT's
By-Laws by the affirmative vote of the holders of at least 80%
of the shares entitled to vote at an election of directors,
(vi) the amendment of SWWT's Certificate of Incorporation to provide
that stockholders may only amend, alter, change or repeal
certain provisions of SWWT's Certificate of Incorporation by
the affirmative vote of the holders of at least 80% of the
shares entitled to vote at an election of directors,
(vii) the amendment of SWWT's By-Laws to provide for the election of
a classified board of directors,
(viii) the amendment of SWWT's By-Laws to require a stockholder
generally to notify the Company at least sixty days prior to an
annual meeting of stockholders if such stockholder wishes to
properly bring business before the annual meeting of
stockholders,
(ix) the amendment of SWWT's By-Laws to require a stockholder
generally to notify the Company at least sixty days prior to an
annual meeting of stockholders or any special meeting of
stockholders called for the purpose of electing directors if
such stockholder wishes to nominate a person for election to
the Board of Directors,
(x) the adoption of SWWT's 2000 Stock Incentive Plan, and
(xi) the ratification of the change of SWWT's auditors from Arthur
Andersen LLP to Ernst & Young LLP.
The actions described in items (i) through (vi) above are included in, and
represent the material effects of the adoption of, the Amended and Restated
Certificate of Incorporation, the form and terms of which were approved by
the stockholders of Company. The actions described in items (vii) through
(ix) above are in included in, and represent the material effects of the
adoption of, the Amended and Restated By-Laws, the form and terms of which
were approved by the stockholders of the Company.
Holders representing 1,866,603 shares, or approximately 60%, of the issued
and outstanding Common Stock, approved the Authorized Capital Amendment,
and holders representing 757,772 shares of Series B Preferred Stock and
1,866,603 shares of Common Stock, together representing approximately 98%
of the issued and outstanding shares of Common Stock and issued and
outstanding shares of Series B Preferred Stock voting as a single class,
approved all of the Stockholder Actions.
As described in the Information Statement, the Amended and Restated Certificate
of Incorporation, the Amended and Restated By-Laws and the 2000 Stock Incentive
Plan each became effective as of August 1, 2000.
Item 6 - Exhibits and Reports on Form 8-K
(a) See Exhibit Index.
(b) Reports on Form 8-K.
SWWT has filed the following Current Reports on Form 8-K during the
quarter ended June 30, 2000:
1. Form 8-K filed May 5, 2000 - Items 1, 2 and 7.
2. Form 8-K/A filed May 15, 2000 - Item 7.
This report included audited financial statements for E-
Newco, Inc. as of and for the period ended March 31, 2000.
3. Form 8-K filed June 19, 2000 - Items 4 and 7.
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.
SWWT, INC.
(REGISTRANT)
BY /s/ Jonathan V. Diamond
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Name: Jonathan V. Diamond
Title: President, Chief Executive Officer,
and Secretary (Principal Financial Officer)
Date: August 10, 2000
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of April 14, 2000, among
E-Newco, Inc., a Delaware corporation, SWWT, Inc., and ENWC
Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of SWWT, Inc.*
3.1 Amended and Restated Certificate of Incorporation of SWWT, Inc.
3.2 Certificate of Designations of Series B Preferred Stock, par
value $.001 per share, of SWWT, Inc.**
3.3 Amended and Restated By-Laws of SWWT, Inc.
10.1 Employment Agreement, dated as of March 27, 2000, between Jon
V. Diamond and E-Newco, Inc.
10.2 Restricted Stock Purchase Agreement, dated as of May 27, 2000,
between Jon V. Diamond and E-Newco, Inc.
10.3 2000 Stock Incentive Plan of SWWT, Inc.
27.1 Financial Data Schedule.
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* Incorporated by reference to Exhibit 2.1 to SWWT, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1999.
** Incorporated by reference to Exhibit 3.1 to SWWT, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1999.
