10QSB: Optional form for quarterly and transition reports of small business issuers
Published on May 15, 2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-25097
SWIFTYNET.COM, INC.
(Exact Name of Small Business Issuer in Its Charter)
Florida 65-078-3722
(State or other jurisdiction of (I.R.S. Employer Identi-
incorporation or organization) fication No.)
761 Coral Drive, Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 926-1603
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Check whether the issuer:(1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
The number of shares of the registrant's common stock, par value $.0001 per
share, outstanding as of April 28, 2000 was 10,952,210.
Index to Form 10QSB
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
Balance Sheet March 31, 2000........................................2
Statements of Operations - Three Months
Ended March 31, 1999 and March 31, 2000.............................3
Statements of Cash Flows - Three Months
Ended March 31, 1999 and March 31, 2000.............................4
Notes to Financial Statements.......................................5
Item 2. Management's Discussion and Analysis or Plan of Operation..........10
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds..........................11
Item 6. Exhibits and Reports on Form 8-K...................................12
Signatures..................................................................13
1
Item 1. Financial Statements
SWIFTYNET.COM, INC.
FINANCIAL STATEMENTS
MARCH 31, 2000
SWIFTYNET.COM, INC.
BALANCE SHEET
March 31, 2000
--------------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 2,929
Inventory 7,060
Prepaid expenses 25,500
-----------
Total current assets 35,489
-----------
Property and equipment
Land 312,500
Building 662,358
Equipment 351,173
Software 109,255
-----------
1,435,286
-----------
Less: Accumulated depreciation (83,088)
-----------
Total property and equipment 1,352,198
-----------
Other assets
Goodwill, net 1,469,285
Deposits 32,600
Other assets 13,183
----------
Total other assets 1,515,068
----------
Total Assets $ 2,902,755
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 79,265
Payable to stockholders 73,985
Current maturities of notes payable and long-term debt 59,983
----------
Total current liabilities 213,233
----------
Other liabilities
Notes payable and long-term debt, less current maturities 621,429
Accrued loss from discontinued operations 350,000
---------
Total other liabilities 971,429
---------
Stockholders' equity
Common stock; $.0001 par value; 50,000,000 shares
authorized; 11,069,100 shares issued and outstanding 1,107
Paid in capital 3,711,978
Accumulated deficit (1,994,992)
----------
Total stockholders' equity 1,718,093
----------
Total Liabilities and Stockholders' Equity $ 2,902,755
==========
The accompanying notes are an integral part of the financial statements.
2
SWIFTYNET.COM, INC.
STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
--------------------------
2000 1999
------- ----------
(unaudited) (unaudited)
Revenues
Operating revenues $ - $ -
Interest income 37 2,223
------- -------
Total revenues 37 2,223
------- -------
Expenses
Operational costs 6,183 -
Depreciation and amortization 86,350 -
Other general and administrative 107,782 38,845
-------- --------
200,315 38,845
Total expenses
-------- --------
Loss from continuing operations (200,278) (36,622)
--------- --------
Discontinued operations
Loss from discontinued carwash and
quick-lube operations (56,425) (75,699)
Provision for loss on disposal of
property, equipment
and related assets (350,000) -
--------- --------
Loss from discontinued operations (406,425) (75,699)
---------- ---------
Net loss $ (606,703) $ (112,321)
========= =========
Loss per common share
From continuing operations $ (.02) -
From discontinued operations (.04) (.01)
----------- ----------
Total loss per share $ (.06) $ (.01)
Weighted average common shares outstanding $ 11,011,489 $ 8,404,120
============ ==========
The accompanying notes are an integral part of the financial statements.
3
SWIFTYNET.COM, INC.
STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
-----------------------
2000 1999
-------- -----------
(unaudited) (unaudited)
Cash flows from operating activities
Net loss $ (606,703) $ (112,321)
---------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Contributed services 15,000 -
Depreciation and amortization 101,722 54,115
Increase in interest receivable (1,952)
Decrease in prepaid expenses 19,504 -
Increase in inventory - (5,357)
Increase in accounts payable and
accrued expenses 20,437 28,556
Increase in accrued loss from
discontinued operations 350,000 -
--------- ---------
Total adjustments 506,663 75,362
--------- ---------
Net cash used in operating activities (100,040) (36,959)
--------- ---------
Cash flows from investing activities
Acquisition of property and equipment (4,040) (5,689)
Increase in deposits and other assets - (200)
--------- ---------
Net cash used in investing activities (4,040) (5,889)
--------- ---------
Cash flows from financing activities
Payments on notes payable (14,460) (34,030)
Net proceeds from issuance of stock 34,524 -
Net advances from stockholders 49,320 44,300
--------- -------
Net cash provided by financing activities 69,384 10,270
Net decrease in cash and cash equivalents (34,696) (32,578)
Cash and cash equivalents, beginning of period 37,625 70,686
-------- ------
Cash and cash equivalents, end of period $ 2,929 $ 38,108
The accompanying notes are an integral part of the financial statements.
4
SWIFTYNET.COM, INC.
STATEMENTS OF CASH FLOWS
(Continued)
Supplemental disclosures of noncash investing and financing activities:
In March 1999, the Company issued 10,000 shares of common stock due under a
consulting contract executed in 1998.
In March 2000, the Company issued 125,000 shares of stock for capitalized
software valued at $98,750.
Supplemental disclosure of cash flow information:
The Company paid approximately $15,000 and $14,000 in interest for the three
months ended March 31, 2000 and 1999, respectively.
The accompanying notes are an integral part of the financial statements
5
SWIFTYNET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
The information presented herein as of March 31, 2000 and for the three-months
ended March 31, 2000 and 1999 is unaudited.
(1) Basis of Presentation:
The accompanying financial statements of SwiftyNet.com, Inc. (the Company) have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal required adjustments) considered necessary for a fair
presentation have been included.
Operating results for the three month period ended March 31, 2000, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. For further information, refer to the financial statements
and footnotes included in the Company's annual report of Form 10-KSB for the
year ended December 31, 1999.
(2) Business Acquisition:
On December 17, 1999, the Company purchased all the outstanding stock of
Rankstreet.com, Inc., a development stage enterprise. The Company issued
2,000,000 shares of common stock. The 2,000,000 shares are subject to
cancellation if the Rankstreet.com web site is not functional and available for
interactive customer usage by November 17, 2000. In addition, the Company will
issue an additional 1,000,000 shares at which time the Rankstreet.com web site
is fully functional and available for interactive customer usage. The Company
will issue an additional 1,000,000 shares one year from the date the
Rankstreet.com web site is advertised for use by the general public. These
contingent shares will be recorded when the outcome of the event is determinable
beyond a reasonable doubt. On May 4, 2000, it was determined the website was
functional and the additional 1,000,000 shares are due. The March 31, 2000
financial statements do not reflect the issuance of these additional shares.
In addition, the selling Rankstreet.com shareholders were each issued an option
to purchase as a group 51% of Rankstreet's outstanding common stock for $75,000
as of a date 30 days following a successful initial public offering of
Rankstreet.com, Inc. securities.
In the transaction, accounted for as a purchase, the Company recorded the above
acquisition at $1,562,500, the current market value attributed to the 2,000,000
shares less a 50% discount because the shares are unregistered and are a
significant block of stock for the Company. The $1,562,500 has been classified
as goodwill and software and is being amortized over five years, its estimated
useful life. The Company recorded $78,125 of amortization expense for the
three-months ended March 31, 2000.
Rankstreet.com has no significant results of operations either prior or
subsequent to its acquisition.
The value of the additional 2,000,000 shares will be recorded when their
issuance is assured.
(3) Stock Offering:
---------------
On February 29, 2000 the Company's Board of Directors approved a private
placement pursuant to Regulation D 506 of the Securities Act of 1933 for the
sale of 5,000,000 units. Each unit consists of one share of stock and one
warrant with a price of $1.00 per unit. The warrants carry an exercise price of
$7.25 for an exercise period of two years. The Company sold 36,980 units as of
March 31, 2000.
6
SWIFTYNET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(4) Commitments, Contingencies and Related Party Transactions:
----------------------------------------------------------
The President and Operations Manager performed services for the Company at no
cost. The Board of Directors valued these services at $15,000 and $8,750 for the
three-months ended March 31, 2000 and 1999, respectively and recorded this
amount as an expense and an increase in additional paid-in capital in the
accompanying financial statements. The Operations Manager has an employment
contract through March 2001, with a minimum salary of $25,000 per year.
In connection with the acquisition of Rankstreet.com, Inc. the Company entered
into employee agreements with two individuals for a period ending November 19,
2001. These agreements are automatically renewable for an additional two year
period unless canceled by written notice by either party. The terms of these
agreements call for the payment of a base salary to be determined by the Board
of Directors of Rankstreet.com, Inc. plus a percentage of pre-tax profit or
revenue. The Board of Directors has not determined the amount of base pay. In
the event that the Company terminates these employees, the Company shall pay an
amount equal to 100% of the employee's base salary for the remainder of the
agreement or a period of two years, whichever is less. No amounts were due at
March 31, 2000 under these agreements.
The shareholder advanced the Company funds and the Company owed the shareholder
$18,985 at December 31, 1999. During 2000, the shareholder advanced the Company
an additional $49,300. The Company owed the shareholder $68,285 at March 31,
2000.
On August 8, 1998, the Company entered into a consulting and contracting
agreement with a stockholder whereby the stockholder would explore, investigate,
and locate appropriate parcels of land and supplies of equipment on behalf of
the Company. In addition, the stockholder would provide certain construction
services to the Company. In exchange for these services, the Company would pay
the stockholder between three and five percent of the total costs of projects
which have been negotiated or performed by the stockholder. The Company paid the
stockholder $210,000 to be used on behalf of the Company in connection with this
agreement. In 1999, the stockholder returned 50,000 shares of common stock to
the Company in settlement of this deposit. These shares have been cancelled.
In November 1998, the company entered into a consulting contract with a
stockholder. The contract calls for annual compensation of $72,500 for a period
of three years. During 1999, this contract was amended to allow the consultant
to provide services on an as needed basis for a negotiated amount rather than a
stated amount. No fees have been paid under this contract.
The above related party agreements are not necessarily indicative of the
agreements that would have been entered into by independent parties.
During 1998, the Company entered into an agreement for use of a private suite at
the Raymond James Stadium for the 1998 through 2003 football seasons. Included
in deposits at March 31, 2000 is a $30,000 deposit in accordance with the terms
of this agreement; the Company incurred an expense of $7,530 and $7,500 for the
three-months ended March 31, 2000 and 1999, respectively. The Company is
committed under this agreement for an annual fee of $30,000 through 2003.
During 1998, the Company entered into a three-year advertising, promotion and
publicity agreement and recorded a prepaid expense of $270,400. Each year, the
Company reduces this prepaid asset in amounts equal to the greater of the actual
costs incurred under the agreement or an amount equal to the amortization of the
initial amount over the three year term using the straight line method. The
Company expensed $17,400 and $22,500 for the three-months ended March 31, 2000
and 1999, respectively.
7
SWIFTYNET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(5) Warrants:
At March 31, 2000, the Company had outstanding exercisable warrants to purchase
355,220 shares of the Company's common stock at $7.25 per share. The warrants
expire in 2002.
Prior to expiration, the warrants may be redeemed by the Company at a price of
$.01. As of March 31, 2000 no warrants have been redeemed.
(6) Net Loss Per Common Share:
--------------------------
Net loss per common share is computed in accordance with the requirements of
Statement of Financial Accounting Standards No. 128 (SFAS 128). SFAS 128
requires net loss per share information to be computed using a simple weighted
average of common shares outstanding during the periods presented. In computing
diluted loss per share, warrants exercisable into 355,220 common shares were
excluded because the effect is antidilutive.
(7) Discontinued Operations:
------------------------
On April 19, 2000, the Company sold or disposed of 100% of the assets and
liabilities of its carwash and quick-lube segment. The sale price was $1,000,000
and the Company received approximately $223,000 after selling expenses and
payment of related mortgages. The results of operations for the periods
presented are reported as a component of discontinued operations in the
statements of operations. Additionally, the loss incurred on the sale of the
operations is also presented separately as a component of discontinued
operations. The estimated loss on the disposal of the discontinued operations of
$350,000 represents the estimated loss on sale of the segment assets and
operations through the disposal date.
Summarized results of carwash and quick-lube operations for the three-months
periods ended March 31, 2000 and 1999 are as follows:
Three-Months Ended
--------------------------
March 31, March 31,
2000 1999
------------ ---------
Net sales $ 67,574 $ 40,361
========= ==========
Operating loss $ (56,425) $ (75,699)
========= ==========
Loss from discontinued operations $ (56,425) $ (75,699)
========= ==========
8
SWIFTYNET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(7) Discontinued Operations: (Continued)
------------------------
The assets and liabilities of the carwash segment that were disposed of or sold
consisted of the following in the March 31, 2000 balance sheet:
Assets
Property and equipment, net $ 1,241,653
Loan costs, net 13,183
Other assets 7,060
------------
1,261,896
------------
Liabilities
Note payable, equipment 155,747
Mortgage payable 507,744
Accrued property taxes 11,300
674,791
Net assets to be disposed of ------------
$ 587,105
============
9
Item 2. Management's Discussion and Analysis or Plan of Operations.
The following discussion and analysis should be read in conjunction with the
Condensed Financial Statements and the related Notes thereto included elsewhere
in this report. This report contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. These and
additional risk factors are identified in our annual report to the Securities
and Exchange Commission filed on forms 10-KSB and in other SEC filings.
PLAN OF OPERATION
In April, 2000, the Company sold its car wash and quick lube shop (the Center)
to allow the Company to focus its efforts entirely on its internet business. The
Company plans to focus all its attentions for the next year on its subsidiary
Rankstreet.com, Inc. and other potential acquisitions of Internet related
companies. The sale of the Center resulted in net cash proceeds of approximately
$223,000 which will provide working capital to further the development of the
Company's internet business.
As of March 31, 2000, the Company had a negative working capital position,
before sale of the Center, and had accumulated losses since inception. The
Company's loss from continuing operations for the three months ended March 31,
2000 was $200,278. Of this amount, approximately half consisted of depreciation
and amortization or salaries contributed to the Company. Therefore the cash used
in continuing operations was approximately $100,000. The sale of the car wash
and quick lube shop generated approximately $223,000 in cash after the payoff of
both mortgages on the Center. These funds will be used to reduce accounts
payable and to fund working capital for the next year. After the sale of the
Center, the Company has one note payable totaling approximately $17,000 and
normal recurring accounts payable. Additionally, the Company has few fixed
general and administrative expenses. Since inception, two of the Company
employees have contributed their salaries to the Company, reducing cash
requirements. The other two Company employees are paid from profits only, again
limiting cash requirements. The Company believes that the cash generated from
the Center sale, and continuing stockholder loans as needed, will be sufficient
to meet normal operating requirements.
The Company is actively seeking to raise money to fund expansion plans. Early in
2000, the Company entered into a Regulation D limited offering of its stock, to
raise a maximum of $5,000,000. As of March 31, 2000, $36,980 has been raised
through this offering.
The Company's expansion plans include the launching and marketing of
Rankstreet.com. In December 1999, the Company acquired all the outstanding stock
of Rankstreet.com, Inc. in a stock for stock transaction that required no cash
outflow. Rankstreet.com launched its Web site in early May 2000. This all-in-one
Web site includes a directory, Web counter and business to business Internet
advertising agency. The primary function of the Web site is to provide
comparative statistical analysis of Internet advertising.
The Company is currently sending out e-mails to more than 2.3 million Web
publishers inviting them to list their site on Rankstreet.com. This form of
marketing will be on going. The Company also is running a promotion until
December 31, 2000 to attract more listing on Rankstreet.com. The $3 million
advertising sweepstakes will give three entrants $1 million each in advertising
space on Rankstreet.com. These marketing activities require minimal amounts of
cash.
The software development costs to launch the initial Rankstreet.com web site
have been expended as of March 31, 2000. These costs were funded through
operations and stock sales in December 1999 and the first quarter of 2000.
Additional enhancements to the Web site will take place, as funds are available.
The Company plans to generate revenues from its Web site in several ways.
Revenues will be generated through the sale of banner advertising, commissions
earned from selling advertising for participating web sites, and consulting
related to Internet marketing. The Company will also design banner ads for
advertisers for a fee.
The Company's expansion plans also include acquiring and developing other unique
Internet companies. No businesses have been selected or are under consideration
for acquisition.
The Company does not have any planned major purchases of property and equipment
and does not anticipate any additional debt financing in 2000. The Company is
currently seeking more office space for expanding operations. This includes the
hiring of ad sales professionals, Web designers, software engineers and
administrative personnel.
10
The success and magnitude of the above described expansion plans are dependent
upon the Company's ability to raise funds. In March 2000, the Company entered
into a Regulation D private placement to raise $5,000,000 through the sale of
5,000,000 units. Each unit consists of one common share and one warrant to
purchase common shares at $7.25 through February 2002. If the Company is
successful in raising the $5,000,000, plans are to use the funds for Web
development ($500,000), advertising and marketing ($1,250,000), acquisitions
($2,250,000) and working capital ($1,000,000).
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
On January 3, 2000, the Company authorized the issuance of 60,000 shares of
common shares to Marlene Trupiano and 40,000 common shares to John and Mildred
Martinez in consideration of their services in designing and constructing the
Company's World Wide Web site. The common shares were issued in a private
transaction pursuant to an exemption from registration pursuant to Section 4(2)
of the Securities Act.
11
Item 6. Exhibits and Reports on Form 8-K
Exhibit Description Number
(2)Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession......................................
(3)Articles of Incorporation and By-Laws.....................................
*(3.1)Articles of Incorporation.............................................
**(3.2)By-Laws.............................................. ................
(3.4) Name Change Amendment................................................
(4)Instruments Defining the Rights of Security Holders
*(4.1)Subscription Agreement................................................
*(4.2)Warrant Agreement.....................................................
(4.3)Warranty Agreement 2000
(10)Material Contracts.......................................................
*(10.1)Equipment Purchase Contract..........................................
*(10.2)Construction Contract................................................
*(10.3)Architect Contract...................................................
*(10.4)Consulting Contract-Donald Hughes....................................
*(10.5)Employment Contract-Stanley Rabushka.................. ..............
*(10.6)Promissory Note - Swifty.............................................
*(10.7)Promissory Note - Steele ............................................
*(10.8)Consulting Contract-John Oster ......................................
*(10.9)Raymond Lipsch Contract .............................................
*(10.10)Land Purchase Contract..............................................
**(10.11) Stanley Rabushka Employment and Stock Agreement...................
**(10.12) Tampa Bay Buccaneers Agreement....................................
***(10.13)Edgar Arvelo Consulting Contract...................................
***(10.14)Richard Kleinberg Employment Contract..............................
***(10.15)Vladimir Rafalovich...............................................
***(10.16)Martinez Consulting Contract.......................................
****(10.17)Purchase and Sale Contract between Jim Malak
and/or Assigns and SwiftyNet.com, Inc.
dated April 6, 2000.............................................
(11)Statement re: computation of per share earnings................Note 6 to
Financial
Statements
(15)Letter re: Unaduited Itnerim Financial Information..................None
(16)Letter regarding Changes in Certifying Accountant...................None
(18)Letter on change in accounting principles...........................None
(19)Report Furnished to Security Holders ...............................None
(22)Published report regarding matters submitted to vote................None
(23)Consents of Experts and Counsel.....................................None
(24)Power of Attorney...................................................None
****(27)Financial Data Schedule.................................................
(99)Additional Exhibits.................................................None
* Previously filed fir Form 10-SB on November 23, 1998.
**Previously filed with Form 10-SBA No. 1 on Februiary 2, 1999.
*** Previously filed with Form 10-KSB filed on March 30, 2000.
****Filed herewith.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SWIFTYNET.COM, INC.
SIGNATURE TITLE DATE
/s/Rachel Steele
__________________ President, Secretary May 12, 2000
Rachel Steele
/s/Raymond Lipsch
________________ Chief Executive Officer, Treasurer May 12, 2000
Raymond Lipsch Chief Financial Officer
13