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 June 30, 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.)
201 East Kennedy Boulevard, Suite 520, Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 221-1387
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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 August 8, 2000 was 12,514,120.
Index to Form 10QSB
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
Balance Sheet June 30, 2000.........................................4
Statements of Operations - Six Months
Ended June 30, 1999 and June 30,2000................................5
Statements of Cash Flows - Six Months
Ended June 30, 1999 and June 30, 2000...............................6
Notes to Financial Statements.......................................8
Item 2. Management's Discussion and Analysis or Plan of Operation..........11
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds........................None
Item 6. Exhibits and Reports on Form 8-K...................................13
Signatures..................................................................14
2
Item 1. Financial Statements
SWIFTYNET.COM, INC.
FINANCIAL STATEMENTS
June 30, 2000
3
SWIFTYNET.COM, INC.
BALANCE SHEET
June 30, 2000
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(unaudited)
ASSETS
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Current assets
Cash and cash equivalents $ 182,350
Prepaid expenses 17,970
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Total current assets 200,320
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Property and equipment
Equipment 16,062
Software 216,755
------------
232,817
Less: Accumulated depreciation 27,647
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Total property and equipment 205,170
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Other assets
Goodwill, net 2,341,264
Deposits 30,000
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Total other assets 2,371,264
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Total Assets $ 2,776,754
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 48,460
Payable to stockholders 86,940
Current maturities of notes payable 4,000
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Total current liabilities 139,400
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Other liabilities
Note payable 13,018
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Stockholders' equity
Common stock; $.0001 par value; 50,000,000 shares
authorized; 12,526,100 shares issued and outstanding 1,252
Paid in capital 5,101,623
Accumulated deficit (2,478,539)
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Total stockholders' equity 2,624,336
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Total Liabilities and Stockholders' Equity $ 2,776,754
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The accompanying notes are an integral part of the financial statements.
4
SWIFTYNET.COM, INC.
STATEMENTS OF OPERATIONS
Six-Months Ended Three-Months Ended
June 30 June 30,
----------------------------------- ------------------------------
2000 1999 2000 1999
-------------- ------------- ------------ -------------
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES
Operating revenues $ -- $ -- $ -- $ --
Interest income 2,217 3,594 2,180 1,371
-------------- ------------ ------------- -------------
Total revenues 2,217 3,594 2,180 1,371
-------------- ------------ ------------- -------------
EXPENSES
Operational costs 29,434 -- 23,251 --
Depreciation and amortization 232,434 -- 146,084 --
Other general and administrative 424,143 88,426 316,361 49,581
Interest expense 660 -- 660 --
-------------- ------------ ------------- -------------
Total expenses 686,671 88,426 486,356 49,581
-------------- ------------ ------------- -------------
LOSS FROM CONTINUING OPERATIONS (684,454) (84,832) (484,176) (48,210)
-------------- ------------ ------------- -------------
DISCONTINUED OPERATIONS
Income (loss) from discontinued
carwash and quick-lube operations (55,796) (180,860) 629 (105,161)
Loss on disposal of property,
equipment and related assets (350,000) -- -- --
-------------- ------------ ------------- -------------
LOSS FROM DISCONTINUED OPERATIONS (405,796) (180,860) 629 (105,161)
-------------- ------------ ------------- -------------
NET LOSS $ (1,090,250) $ (265,692) $ (483,547) $ (153,371)
============== ============ ============= =============
LOSS PER COMMON SHARE
From continuing operations $ (.06) $ (.01) $ (.04) $ (.01)
Discontinued operations:
Loss from operations (.01) (.02) -- (.01)
Loss on disposal (.03) -- -- --
-------------- ------------ ------------- -------------
Total loss per share $ (.10) $ (.03) $ (.04) $ (.02)
============== ============ ============= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 11,378,152 8,504,120 11,742,956 8,604,120
============== ============ ============= =============
The accompanying notes are an integral
part of the financial statements.
5
SWIFTYNET.COM, INC.
STATEMENTS OF CASH FLOWS
Six-Months Ended
June 30,
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2000 1999
-------------------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,090,250) $ (265,692)
--------------- ---------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for services 273,540 -
Contributed services 23,750 -
Depreciation and amortization 247,806 106,811
Loss from disposal of assets from
discontinued operations 350,000 -
Decrease in prepaid expenses 7,030 -
Increase in interest receivable - (3,139)
Decrease in inventory - (5,613)
Increase in accounts payable and
accrued expenses 30,928 2,437
--------------- ---------------
Total adjustments 933,054 100,496
--------------- ----------------
Net cash used in operating activities (157,196) (165,196)
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (5,187) (10,545)
Decrease in deposits and other assets 2,600 550
Net proceeds from sale of discontinued
business segment 223,071 -
---------------- ---------------
Net cash provided by (used in)
investing activities 220,484 (9,995)
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable (15,363) (1,886)
Net proceeds from issuance of stock 34,524 200,000
Net advances from (to) stockholder 62,275 (47,444)
--------------- ---------------
Net cash provided by financing activities 81,436 150,670
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 144,724 (24,521)
CASH AND CASH EQUIVALENTS, beginning of period 37,626 70,686
--------------- ----------------
CASH AND CASH EQUIVALENTS, end of period $ 182,350 $ 46,165
=============== ================
6
SWIFTYNET.COM, INC.
STATEMENTS OF CASH FLOWS
(Continued)
Supplemental disclosures of noncash investing and financing activities:
The Company issued 1,235,000 shares of stock for goodwill and capitalized
software valued at $1,206,250 during the six months ended June 30, 2000.
The Company issued 297,000 shares of stock for contributed services valued at
$273,540 during the six months ended June 30, 2000.
The Company issued 10,000 shares of common stock due under a consulting contract
executed in 1998 valued at $62,500 during the six months ended June 30, 1999.
Supplemental disclosure of cash flow information:
The Company paid approximately $33,000 in interest for both six months ended
June 30, 2000 and 1999.
7
SWIFTYNET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
The information presented herein as of June 30, 2000, and for the six and
three-months ended June 30, 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 six and three-month periods ended June 30, 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.
During the three months ended June 30, 2000, it was determined the
Rankstreet.com web site was fully functional and available for interactive
customer use and the additional 1,000,000 shares were issued. The Company
recorded the issuance at $1,000,000, the current market value attributed to the
1,000,000 shares less a 50% discount because the shares are unregistered and are
a significant block of stock for the Company. The Company capitalized the
$1,000,000 value as goodwill, which is being amortized over five years, its
estimated useful life. The Company recorded $206,146 of amortization expense for
the six-months ended June 30, 2000.
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.
Rankstreet.com has no significant results of operations either prior or
subsequent to its acquisition.
The value of the remaining 1,000,000 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
June 30, 2000.
8
(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 $23,750 and $17,500 for
the six-months ended June 30, 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
June 30, 2000 under these agreements.
During 2000, certain shareholders advanced the Company $62,275. The Company owed
the shareholders $86,940 at June 30, 2000.
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. The Company issued 67,000 shares of common stock to the
consultant and recorded $61,744 in expense, the current market value attributed
to the 67,000 shares less a 50% discount because the shares are unregistered,
for the three and six-months ending June 30, 2000.
The above related party agreements are not necessarily indicative of the
agreements that would have been entered into by independent parties.
During the six months ended June 30, 2000, the Company issued 235,000 shares of
common stock to consultants for website design services. The transactions were
valued at $206,250, the current market value attributed to the 235,000 shares
less a 50% discount because the shares are unregistered. The Company capitalized
the $206,250 as software.
During the three months ended June 30, 2000, the Company issued 230,000 shares
of common stock to certain consultants for services. The transactions were
valued at $212,060, the current market value attributed to the 230,000 shares
less a 50% discount because the shares are unregistered. The Company expensed
the $212,060.
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 June 30, 2000 is a $30,000 deposit in accordance with the terms
of this agreement. The Company incurred an expense of $15,060 and $15,000 for
the six-months ended June 30, 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 $45,000 for the six-months ended June 30, 2000 and
1999, respectively. This amount was fully amortized at March 31, 2000.
9
(5) Warrants:
At June 30, 2000, the Company had outstanding exercisable warrants to purchase
318,240 shares of the Company's common stock at $7.50 per share. The warrants
expire in 2002.
At June 30, 2000, the Company also had exercisable warrants to purchase 36,980
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 June 30, 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 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.
Summarized results of carwash and quick-lube operations for the six and
three-month periods ended June 30, 2000 and 1999 are as follows:
Six-Months Ended Three-Months Ended
---------------- ------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
--------------- --------------- --------------- ---------------
Net sales $ 82,191 $ 85,207 $ 14,617 $ 47,069
=============== =============== =============== ==============
Operating income (loss) $ (55,796) $ (180,860) $ 629 $ (105,161)
=============== =============== =============== ==============
Income (loss) from
discontinued operations $ (55,796) $ (180,860) $ 629 $ (105,161)
=============== =============== =============== ===============
10
Item 2. Management's Discussion and Analysis or Plan of Operations.
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 attention 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 June 30, 2000, the Company had a positive working capital position, but
continued to have losses from continuing operations. The Company's loss from
continuing operations for the six months ended June 30, 2000 was $684,454. Of
this amount, approximately one-third consisted of depreciation and amortization
or salaries contributed to the Company, and one-half consisted of stock issued
for services. Therefore the cash used in continuing operations was approximately
$194,000 for the six months ended June 30, 2000. The sale of the Center
generated approximately $223,000 in cash after the payoff of both mortgages
which encumbered the Center. These funds are going to be used to fund operations
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's employees have contributed their salaries
to the Company, reducing cash requirements. The other two current Company
employees are paid from profits only, again limiting cash requirements.
Additionally, many of the Company's consultants have been willing to accept
stock for services. 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 began a limited offering of its stock, pursuant to Regulation
D, to raise a maximum of $5,000,000. As of June 30, 2000, $36,980 has been
raised through this offering. During July 2000, the Company raised an additional
$72,500. The Company is now pursuing this fund raising more vigorously to
continue the progress being made with Rankstreet.com.
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 Rankstreet.com
website is now fully functional and operational. Approximately 800 websites are
currently being ranked. The focus is now to increase the number of websites
ranked and to sell advertising on the Rankstreet website.
The Company is currently sending 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 ongoing. The Company also is running a promotion until December 31, 2000 to
attract more listings on Rankstreet.com. The $3 million advertising sweepstakes
will give three entrants $1 million each in advertising space on Rankstreet.com.
Additionally the Company is "banner swapping" with other websites for more
exposure. 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 June 30, 2000. These costs were funded through
operations and stock sales in December 1999 and the first quarter of 2000 and
through the issuance of stock in the second 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 is now beginning to sell advertising.
11
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.
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 began
private placement pursuant to Regulation D 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 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).
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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.............................................. ................
(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...............................................15
(99)Additional Exhibits.................................................None
* Previously filed with 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.
**** Previously filed with Form 10-QSB filed May 15, 2000.
+ Filed herewith.
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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.
Dated: August 9, 2000 By: /S/ Rachel Steele
--------------------------
RACHEL STEELE, President
Dated: August 9, 2000 By: /S/ Raymond Lipsch
--------------------------
RAYMOND LIPSCH, Treasurer
Chief Financial Officer
14