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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 March 31, 2000
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
SWWT, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1167603
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3492 W. 109th Circle, Westminster, CO 80030
(Address of principal executive offices) (Zip Code)
(303) 460-8017
(Registrant's telephone number, including area code)
(Former name, 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
------- -------
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 April 11, 2000.
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INDEX
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheet as of March 31, 2000.............................
Statement of Cash Flows for the period from January 7,
2000 (inception) to March 31, 2000.............................
Notes to Financial Statements..................................
Item 2. Management's Discussion and Analysis of Financial Condition ...
Item 3. Quantitative and Qualitative Disclosures of Market Risk........
PART II - OTHER INFORMATION
Item 1: Legal Proceedings......................................
Item 2: Changes in Securities..................................
Item 3: Defaults upon Senior Securities........................
Item 4: Submission of Matters to a Vote of Security Holders....
Item 5: Other Information......................................
Item 6: Exhibits and Reports on Form 8-K.......................
Signature ....................................................
Index to Exhibits..............................................
Exhibit 27: Financial Data Schedule............................
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SWWT Inc.
Balance Sheet
March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $2,525,000
Investment 300,000
-----------------
Total assets $2,825,000
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued stock issuance costs $ 250,000
Stockholders' equity:
Series B Preferred Stock, $.001 par value; 1,000,000
shares authorized, 674,417 shares issued and outstanding 674
Common Stock, $.001 par value; 8,000,000 shares authorized,
no shares issued and outstanding -
Additional paid-in capital 3,074,326
Notes receivable (500,000)
------------------
Total stockholders' equity 2,575,000
------------------
$2,825,000
==================
See accompanying notes to financial statements.
SWWT Inc.
Statement of Cash Flows
January 7, 2000 (date of inception) to March 31, 2000
(Unaudited)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment $ (300,000)
-----------------
Net cash used in investing activities (300,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock 2,825,000
-----------------
Net cash provided by financing activities 2,825,000
-----------------
Net increase in cash and cash equivalents 2,525,000
Cash and cash equivalents at January 7, 2000 -
-----------------
Cash and cash equivalents at March 31, 2000 $2,525,000
=================
See accompanying notes to financial statements.
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.
For further information, refer to the financial statements and footnotes
thereto for E-Newco included in the SWWT, Inc. 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, Inc.
("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. Consequently, the March 31, 2000
interim financial statements included herein are those of E-Newco as
adjusted for the recapitalization described below. 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.
In accordance with the reverse acquisition accounting treatment, the
capital accounts of E-Newco as of March 31, 2000 have been recapitalized to
give effect to the merger exchange ratio (757.772 shares of Series B
Convertible Preferred Stock of SWWT for each share of common stock of
E-Newco).
The Company has not initiated operations as of March 31, 2000.
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. The accompanying March 31, 2000 financial statements give
effect to the exchange of the then outstanding 890 shares of E-Newco common
stock issued and outstanding at March 31, 2000 for an aggregate of 674,417
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 common stock 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 at a redemption price equal to a pro-rata
portion of the Company's cash balance, if any, at the date of redemption.
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. E-NEWCO EQUITY TRANSACTIONS
On March 23, 2000, the Company issued 890 shares of common stock for
$3,325,000, of which 133.83 shares were purchased by the Company's Chief
Executive Officer ("CEO") through the issuance of a $500,000 note
receivable payable on demand. As described in Notes 1 and 2 above, the
accompanying March 31, 2000 financial statements reflect the Company's
capital accounts as recapitalized to give effect to the Merger.
4. 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 March 31, 2000, this
investment is carried at cost which approximates fair value.
5. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company had no operations for the period ended March 31, 2000. Cash
used in investing activities for the period ended March 31, 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 ended March 31, 2000 was
$2,825,000 which consisted of the proceeds from the issuance of common
stock. The Company has working capital of $2,575,000 at March 31, 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 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
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) See Exhibit Index.
(b) Reports on Form 8-K. None
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
---------------------------------
Name: Jonathan V. Diamond
Title: President, Chief Executive
Officer and Secretary
(Principal Financial Officer)
Date: May 15, 2000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-2000
<CASH> 2,525,000
<SECURITIES> 300,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,825,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,825,000
<CURRENT-LIABILITIES> 250,000
<BONDS> 0
0
674
<COMMON> 0
<OTHER-SE> 2,574,326
<TOTAL-LIABILITY-AND-EQUITY> 2,825,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
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