SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                            -------------------------

                                   FORM 10 - K

              [X] ANNUAL REPORT PURSUANT TO SECTION l3 OR l5(d) OF
                       THE SECURITIES EXCHANGE ACT OF l934

For the fiscal year ended December 31, 1998       Commission file number 0-25942

                                       OR

                  [ ] TRANSITION REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from _____ to ______.

                                   SWWT, INC.
             (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, Colorado       80030
       (Address of principal executive offices)      (Zip Code)

       Registrant's telephone number, including area code: (303) 460-8017

Securities registered pursuant to Section 12(b) of the Act:

   Title of each class                 Name of exchange on which registered
   -------------------                 ------------------------------------
          None                                    Not Applicable  

Securities registered pursuant to Section l2(g) of the Act:

                     Common Stock, par value $.001 per share
                         ------------------------------

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section l3 or l5(d) of the  Securities  Exchange  Act of
l934  during  the  preceding  l2 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 ___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_

     The  aggregate  market value of voting stock held by  nonaffiliates  of the
registrant on March 12, 1999, was approximately $323,911. On such date, the last
sale price of registrant's common stock was $0.28 per share.

     Indicate number of shares  outstanding of each of the registrant's  classes
of common stock, as of March 12, 1999.

              Class                                Outstanding on March 12, 1999
              -----                                -----------------------------
Common Stock, par value $.001 per share                      3,122,254

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>

                                     PART I
ITEM 1.  BUSINESS

General

         SWWT,  Inc.,  formerly  known as  SweetWater,  Inc.  (the  "Company" or
"SWWT"),  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  ("Cascade"),  pursuant  to an Asset
Purchase  Agreement  dated  as of  October  21,  1997  for a  purchase  price of
$1,633,425 in cash (the "Sale").  The Company's  principal  office is located at
3492 W. 109th Circle,  Westminster,  Colorado 80030 and its telephone  number is
303/460-8017.

         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 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
(a  "Business  Combination"),  with a  privately-held  business  which the Board
believes may have  significant  growth  potential.  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.  If a Business  Combination  is effected,  the
success  of the  Company  will  depend  to a  great  extent  on the  operations,
financial condition,  management and prospects of the entity, if any, with which
the  Company  may  merge  or  which  it  may  acquire.  As  the  Company  has no
arrangement,  agreement or understanding with a particular  business entity, the
specific  risks  presented by such  business  cannot be described or assessed at
this  time.  Such  business  may  involve an  unproven  product,  technology  or
marketing  strategy,  the  ultimate  success of which cannot be assured and such
business may be in competition with larger, more established firms over which it
will have no competitive  advantage.  The Company's new business opportunity may
be highly  illiquid  and  could  result in a total  loss to the  Company  if the
opportunity  is  unsuccessful.  Given the  Company's  limited  resources,  it is
expected  that the Company will not be in a position to  diversify  this risk by
acquiring an interest in more than one business.

         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  financings  by the  Company  will depend on
numerous  considerations  including  the  Company's  capital  requirements,  its
perceived  ability  to  service  such  debt  and  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.  If the
Company issues  additional equity to raise capital or to acquire a new business,
the  percentage  ownership of the current  shareholders  could be reduced and an
"ownership  change"  could occur for tax purposes.  An "ownership  change" could
adversely   affect  the  Company's   ability  to  use  its  net  operating  loss
carryforwards.

                                       2
<PAGE>
         Although the Company is subject to regulation  under the Securities Act
of 1933,  as  amended,  and the  Securities  Exchange  Act of 1934,  as amended,
management  believes  the  Company  is  not  subject  to  regulation  under  the
Investment  Company  Act of 1940,  as amended  (the  "Investment  Company  Act")
insofar as the Company is not engaged in the business of investing or trading in
securities.  In the event the  Company  engages in business  combinations  which
result  in the  Company  holding  passive  investment  interests  in a number of
entities  or in the  event  the  Company  is unable  to  consummate  a  Business
Combination  for a substantial  period of time,  the Company could be subject to
regulation under the Investment Company Act. In such event, the Company would be
required to  register  as an  investment  company,  and could incur  significant
registration and compliance costs and would be subject to extensive regulation.

Description of Prior Business

         Prior to the  Sale,  the  Company  was  engaged  in  manufacturing  and
distributing  portable water filtration and purification devices for outdoor use
(the "Outdoor Business").  Since its inception, the Company engaged primarily in
product  development and incurred  operating  losses resulting in an accumulated
deficit of approximately  $11,000,000 as of December 31, 1998.  Operating losses
increased  in 1996 as a result  of the  Company's  efforts  to  develop  a water
filtration and purification device for the home use market. Although the Company
and SBC Warburg Dillon Read ("Dillon Read"),  the Company's  financial  advisor,
actively  pursued a joint strategic  alliance to manufacture and market the home
use  product,  the  Company  was unable to locate an  industry  partner for this
product.  Accordingly,  the Company  suspended  its efforts to  manufacture  and
market  the  home  use  product  and  sold the  plans,  designs  and  technology
associated therewith in April 1997.

         During  1997,  the Company  reduced  its  personnel,  discontinued  its
research and  development  efforts and initiated a cost  containment  program to
reduce  general and  administrative  expenses,  conserve its cash  resources and
enable the Company to  concentrate  its resources on its Outdoor  Business which
consisted of three  primary  devices:  two  microfilters  (the  Guardian and the
WalkAbout) and one purifier (the  Guardian+Plus) and several accessory products.
In July 1997,  the Board  reviewed the  financial  results for the quarter ended
June 30, 1997, the moderate growth rate in the market for the Company's  outdoor
product in the 1997  selling  season,  the  increased  competition  within  such
market, the increased market share of Recovery Engineering,  Inc., the Company's
principal  competitor,  and the potential  for the Outdoor  Business to generate
sufficient  revenue to enable the  Company to achieve  profitability.  The Board
then  authorized  Dillon Read,  together with members of management,  to contact
entities  which they  believed  may have an interest in  purchasing  the Outdoor
Business.  As a result of such process,  the Board  approved the Sale to Cascade
which was approved by the shareholders and completed in February 1998.

         In May 1997,  the Company  entered into an agreement  (the  "Management
Agreement")  with Eric M.  Reynolds,  Patrick E.  Thomas  and Jerry L.  Cogdill,
(collectively,  "Management") pursuant to which Management agreed to remain with
the Company through January 31, 1998 in exchange for certain performance bonuses
and a right of first refusal to purchase the Outdoor Business which would become
effective  in the event (i) certain  performance  targets  were met and (ii) the
Company elected to sell such business  within a specified  period after December
31, 1997. As a result of the Sale, the three members of Management,  as a group,
received an aggregate bonus equal to $523,000.  As the determination to sell the
Outdoor Business was made prior to December 31, 1997, the right of first refusal
was not available to Management under the terms of the Management Agreement.

                                       3
<PAGE>
Employees

         At December 31, 1998,  the Company had no full-time  employees  and one
part-time employee.

ITEM 2.  FACILITIES

         The  Company's  administrative  offices  are  located  at 3492 W. 109th
Circle,  Westminster,  Colorado 80030 in space  supplied by the Company's  Chief
Executive Officer at no cost to the Company.

ITEM 3.  LEGAL PROCEEDINGS

         In February 1996,  three former  employees of the Company filed charges
of age discrimination  against the Company with the Equal Employment Opportunity
Commission  ("EEOC").  Two of these charges were  disallowed by the EEOC and the
remaining charge was withdrawn by the employee in the fourth quarter of 1998.

         In 1996,  the Company  received a  communication  from a patent holder,
which was a competitor  of the  Company,  offering to license such patent to the
Company with respect to an accessory part of the Guardian and the Guardian+Plus.
Although the Company did not believe the competitor's  patent would be upheld if
judicially tested,  given the potential costs associated with patent claims, the
Company  elected to redesign  the  accessory  part in a manner which it believed
should  avoid  potential  claims  with  respect to future  products  sold by the
Company. Although the Company notified the competitor of its actions and has not
received  a  response  thereto  no  assurance  can be  given  that a  claim  for
infringement will not be made against the Company.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters  submitted to a stockholder  vote during the last
quarter of the fiscal year ended December 31, 1998.

                                     PART II

ITEM 5.           MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED 
                  STOCKHOLDER MATTERS

         Trading  in the Common  Stock has been  sporadic  and in small  volumes
since its initial public offering in January 1994. The Company cannot be assured
that an  established  public  trading  market will develop or be sustained.  The
Common  Stock has been trading in the  over-the-counter  market under the symbol
"SWWT" since May 14, 1997.  Prior  thereto,  the Common Stock was trading on the
NASDAQ  Small Cap Market,  with the  exception  of the period from June 22, 1995
through  March 1, 1996,  when the Common Stock was delisted  from such market as
the Company had fewer than 300 shareholders.  The following table sets forth for
the periods indicated the range of high and low bid quotations for the Company's
Common Stock since January 1, 1997 as reported by NASDAQ for the period in which
the Common Stock traded  thereon and as reported by dealers  appearing as market
makers on the OTC  Bulletin  Board for the  periods  in which the  Common  Stock
traded on the over-the-counter  market. These quotations represent  inter-dealer
prices, without retail mark-up,  mark-down or commissions and do not necessarily
represent  actual  transactions.   The  Company  believes  that  the  number  of
beneficial owners was at least 300 as of March 12, 1999.

                                       4

<PAGE>
                    1998                       HIGH        LOW
                    First Quarter              1.37          0.50
                    Second Quarter             0.50          0.50
                    Third Quarter              0.72          0.34
                    Fourth Quarter             0.34          0.31

                    1997
                    First Quarter              0.75       0.50
                    Second Quarter             0.75       0.50
                    Third Quarter              0.25       0.125
                    Fourth Quarter             0.75       0.10

         The Company has never paid a dividend and does not  anticipate  payment
of dividends in the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

        The selected financial data presented below for the years ended December
31, 1994 through December 31, 1998 are derived from the financial  statements of
the Company.  No dividends have been paid for any of the periods presented.  The
financial data set forth below should be read in conjunction  with the financial
information included elsewhere herein and "Management's  Discussion and Analysis
of Financial Condition and Results of Operations".

                                       5
<PAGE>
<TABLE>
<CAPTION>
                             SUMMARY FINANCIAL DATA
                      (in thousands, except per share data)



                                                          Year Ended December 31,
                                           ------------------------------------------------------
                                            1998        1997        1996        1995        1994
                                            ----        ----        ----        ----        ----
<S>                                            <C>         <C>         <C>         <C>         <C>
Statement of Operations Data:
Net Sales ...........................          0           0           0           0           0
Costs and Expenses:
   General & Administrative .........        203         289         628         249         248
   Sales & Marketing ................       --            56         267        --          --
   Research & Development ...........       --           237         908        --          --
Operating Income (Loss) .............       (203)       (582)     (1,803)       (249)       (248)
Other Income, net ...................         62         246         128          29         139
Net (Loss) from Continuing Operations       (141)       (336)     (1,675)       (220)       (109)
Net (Loss) from Continuing ..........   $  (0.05)   $  (0.11)   $  (0.55)   $  (0.11)   $  (0.06)
    Operations per Common
    Share - Basic and Diluted
Weighted Average number of ..........      3,122       3,094       3,065       1,949       1,789
    common shares outstanding (1)

                                                          Year Ended December 31,
                                           ------------------------------------------------------
                                            1998        1997        1996        1995        1994
                                            ----        ----        ----        ----        ----
Balance Sheet Data:
Working Capital .....................   $  1,251    $  1,372    $  2,178    $  5,487    $  3,661

Total Assets ........................      1,251       1,941       3,309       7,506       5,114
Long Term Debt ......................       --          --          --           208         371

Total Liabilities ...................         15         569         617         616         910
Accumulated earnings (deficit) ......    (11,207)    (11,066)     (9,724)     (5,492)     (2,887)
Stockholder's equity ................      1,236       1,372       2,693       6,890       4,204
<FN>
(1) See Note 2 to  financial  statements  for  information  with  respect to the
calculation of share and per share data.
</FN>
</TABLE>

                                       6
<PAGE>
ITEM  7.          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 including herein.

General

         On February 6, 1998,  the Company  completed the sale of  substantially
all of its assets to Cascade.  The selected  financial  data for the years ended
December 31, 1994 through December 31, 1998, have been restated under Accounting
Principles  Board  Opinion  No.  30, as a result of the  execution  of the Asset
Purchase Agreement and shareholder approval obtained on February 5, 1998.

         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 this Form 10-K.

Results of Operations

1998 Compared to 1997 - Continuing Operations

         Net loss from continuing  operations  decreased from a loss of $336,000
or $0.11 per share,  to a loss of  $141,000 or $0.05 per share in 1997 and 1998,
respectively. The decreased loss was primarily due to reduced operating expenses
as a result of the sale of substantially all the assets of the Company.

1998 Compared to 1997 - Discontinued Operations

         Net  loss on  discontinued  operations  decreased  100%  from a loss of
$849,000 or $0.27 per share in 1997 to zero in 1998 as a result of the  disposal
of  discontinued  operations in February 1998 and the recognition of a 1998 loss
on disposal of  discontinued  operations of $157,000 in the year ended  December
31, 1997.

1997 Compared to 1996 - Continuing Operations

         Net loss from continuing operations decreased by $1,339,000 from a loss
of $1,675,000 or $0.55 per share for the year ended  December 31, 1996 to a loss
of $336,000 or $0.11 per share for the year ended December 31, 1997 primarily as
a result  of the  suspension  of the  Company's  efforts  to  develop a home use
product and the  resulting  sale of assets  associated  with such product in the
second quarter of 1997. Sales and marketing  expense decreased 79% from $267,000
to $56,000,  research and  development  expense  decreased  74% from $908,000 to
$237,000,  and other income increased 92% from $128,000 to $246,000, in the year
ended  December  31, 1996 and 1997,  respectively.  General  and  administrative
expense decreased 54% from $628,000 to $289,000,  in the year ended December 31,
1996 and 1997, respectively.

                                       7
<PAGE>
1997 Compared to 1996 - Discontinued Operations

         Loss on discontinued  operations decreased 67% from $2,557,000 or $0.83
per share to  $849,000 or $0.27 per share for the year ended  December  31, 1996
and 1997,  respectively,  primarily as a result of the cost containment  program
implemented in 1997. In addition, a loss on disposal of discontinued  operations
of $157,000 was recorded in year ended  December 31, 1997  primarily as a result
of a $50,000 estimated loss on discontinued  operations through the closing date
of  the  Sale,  and  $665,000  accrued  transaction  costs  plus  severance  and
management value  appreciation  bonus partially  offset by a $558,000  estimated
gain on sale of assets.

         During the year ended  December  31,  1997,  the  Company  had sales of
$1,638,000,  a decrease of 21%, compared to sales in the year ended December 31,
1996 of  $2,064,000.  This is primarily  due to decreased  sales of the Guardian
partially offset by higher sales of the WalkAbout.

         The  gross  margin  of  $340,000  or 21% of sales  for the  year  ended
December  31, 1997 was higher than the prior year gross margin of $103,000 or 5%
of sales,  primarily due to lower  manufacturing  overhead costs  primarily as a
result of the cost containment program implemented in 1997.

         Sales and marketing  expenses for the year ended December 31, 1997 were
$468,000,  a decrease of 57%, compared to $1,079,000 for the year ended December
31, 1996.  This  decrease was due to reduced  staffing  costs as a result of the
cost containment program and reduced advertising and sales expense.

         There were no research and development expenses related to the portable
outdoor water filtration market for the year ended December 31, 1997, a decrease
of $121,000  compared to the year ended December 31, 1996. This decrease was due
to the  Company's  suspension of efforts to design new products for the portable
outdoor water filtration market.

         General and  administrative  expenses  for the year ended  December 31,
1997 were  $771,000  compared to $774,000 for the year ended  December 31, 1996.
Lower staffing costs in 1997 were offset by severance costs  associated with the
reduction in personnel,  the costs associated with terminating  contingent lease
obligations,  and the  allocation of excess  manufacturing  facilities  space to
general and administrative expense.

Liquidity and Capital Resources

         Cash and cash equivalents and short term  investments  increased by 29%
from $968,000 at December 31, 1997 to $1,251,000 at December 31, 1998  primarily
due to the proceeds from the sale of assets, net of costs.

         Since its inception,  the Company has been engaged primarily in product
development  and has  incurred  operating  losses  resulting  in an  accumulated
deficit of approximately  $11,000,000 as of December 31, 1998.  Operating losses
increased  in 1996 as a result  of the  Company's  efforts  to  develop  a water
filtration  and  purification  device  for the  home  use  market.  The  Company
suspended  its  efforts to  manufacture  and market  this  product,  reduced its
personnel and initiated a cost  containment  program  designed to reduce general
and  administrative  costs,  and conserve its cash reserves.  In April 1997, the
Company  sold the plans,  designs and  technology  associated  with the home use
product and realized net proceeds of approximately  $210,000.  In February 1998,
the Company sold the Outdoor Business,

                                       8
<PAGE>
which  represented  substantially  all of its assets,  to Cascade  and  realized
proceeds of approximately $1,633,425.  Immediately after the closing of the Sale
and payment of related  and  retained  liabilities,  the  Company's  assets were
approximately $1.4 million.

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  financings  by the  Company  will depend on
numerous  considerations  including  the  Company's  capital  requirements,  its
perceived  ability  to  service  such  debt  and  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.

ITEM 8.  FINANCIAL STATEMENTS


<PAGE>
                          INDEX TO FINANCIAL STATEMENTS




                                                               Page
                                                               ----

Report of Independent Public Accountants                       F-2

Balance Sheets                                                 F-3

Statements of Operations                                       F-4

Statements of Stockholders' Equity                             F-5

Statements of Cash Flows                                       F-6

Notes to Financial Statements                                  F-7





                                      F-1
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To SWWT, Inc.:



We have  audited  the  accompanying  balance  sheets  of  SWWT,  INC.  (formerly
SweetWater, Inc.) (a Delaware corporation) as of December 31, 1998 and 1997, and
the related  statements of operations,  stockholders'  equity and cash flows for
each of the three years in the period ended December 31, 1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of SWWT, Inc. as of December 31,
1998 and 1997,  and the results of its operations and its cash flows for each of
the three years in the period  ended  December  31,  1998,  in  conformity  with
generally accepted accounting principles.







Denver, Colorado                             ARTHUR ANDERSEN LLP
March 26, 1999




                                      F-2
<PAGE>


                                   SWWT, INC.
                                   ----------
<TABLE>
<CAPTION>
                                 BALANCE SHEETS
                                 --------------

                                                                                  December 31,
                                                                             1998             1997
                                                                             ----             ----
                                 ASSETS
                                 ------

CURRENT ASSETS:
<S>                                                                    <C>             <C>         
     Cash and cash equivalents .....................................   $  1,251,257    $    968,076
     Prepaids and other current assets .............................           --             2,476
     Net assets of discontinued operations .........................           --           970,497
                                                                       ------------    ------------

                  Total assets .....................................   $  1,251,257    $  1,941,049
                                                                       ============    ============



                  LIABILITIES AND STOCKHOLDERS' EQUITY
                  ------------------------------------

CURRENT LIABILITIES:
     Accounts payable and accrued liabilities ......................   $     15,424    $    246,464
     Accrued salaries and employee benefits ........................           --           165,620
     Accrued loss for disposal of discontinued operations ..........           --           156,997
                                                                       ------------    ------------
              Total liabilities ....................................   $     15,424         569,081

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
     Common stock, $.001 par value; 8,000,000 shares authorized;
       3,122,254 and 3,115,918 shares issued and outstanding at
       December 31, 1998 and 1997, after deducting 71,734 and 78,070
       shares held in treasury, respectively .......................          3,122           3,116
     Additional paid-in capital ....................................     12,440,186      12,434,873
     Accumulated deficit ...........................................    (11,207,475)    (11,066,021)
                                                                       ------------    ------------
                Total stockholders' equity .........................      1,235,833       1,371,968
                                                                       ------------    ------------
                Total liabilities and stockholders' equity .........   $  1,251,257    $  1,941,049
                                                                       ============    ============
</TABLE>

           The accompanying  notes to financial  statements are an integral part
of these balance sheets.


                                      F-3
<PAGE>


                                   SWWT, INC.
                                   ----------
<TABLE>
<CAPTION>
                            STATEMENTS OF OPERATIONS
                            ------------------------



                                                             For the Years Ended December 31,
                                                          1998               1997            1996
<S>                                                <C>            <C>            <C>      
NET SALES ......................................   $      --      $      --      $      --
OPERATING EXPENSES:
  Sales and marketing ..........................          --           55,910        267,332
  Research and development .....................          --          236,673        907,945
  General and administrative ...................       203,918        289,429        627,794
                                                   -----------    -----------    -----------

         Total operating expenses ..............       203,918        582,012      1,803,071
                                                   -----------    -----------    -----------

INCOME (LOSS) FROM OPERATIONS ..................      (203,918)      (582,012)    (1,803,071)
                                                   -----------    -----------    -----------

OTHER INCOME (EXPENSE)
  Gain on sale of technology and fixed assets ..          --          202,497           --
  Interest income ..............................        62,464         46,870        161,222
  Interest expense and other ...................          --           (3,536)       (33,138)
                                                   -----------    -----------    -----------
                                                        62,464        245,831        128,084
                                                   -----------    -----------    -----------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS ...      (141,454)      (336,181)    (1,674,987)

(LOSS) FROM DISCONTINUED OPERATIONS ............          --         (848,872)    (2,557,288)

(LOSS) FROM DISPOSAL OF DISCONTINUED OPERATIONS,
including provision of $50,000 for operating
losses during period prior to completion
of sale ........................................          --         (156,997)
                                                   -----------    -----------    -----------



NET (LOSS) .....................................   $  (141,454)   $(1,342,050)   $(4,232,275)

INCOME (LOSS) PER COMMON SHARE-
         BASIC AND DILUTED
         Net (loss) ............................   $      (.05)   $     (0.43)   $     (1.38)
         (Loss) from continuing operations .....   $      (.05)   $     (0.11)   $     (0.55)
         (Loss) from discontinued operations ...          --      $     (0.27)   $     (0.83)
         (Loss) from disposal of discontinued ..   $      --      $     (0.05)   $      --   
           operations ..........................          --             --             --

WEIGHTED AVERAGE SHARES OUTSTANDING ............     3,121,726      3,094,330      3,065,311
</TABLE>



        The accompanying  notes to financial  statements are an integral part of
these financial statements.


                                      F-4
<PAGE>


                                   SWWT, INC.
                                   ----------
<TABLE>
<CAPTION>
                       STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
              ----------------------------------------------------

                                                                                                              Additional 
                                                                       Common Stock              Deferred      Paid-in   
                                                                  Shares           Amount     Compensation     Capital      
                                                                  ------           ------     ------------     -------      
<S>                                                            <C>          <C>             <C>             <C>         
BALANCES, December 31, 1995 .............................      3,064,529    $      3,065    $    (28,854)   $ 12,407,300
   Common stock issued to 401(k) Plan ...................          9,969              10            --            31,903
   Amortization of deferred compensation expense ........           --              --            16,488            --   
   Treasury stock purchase on September 13, 1996, at cost         (7,116)             (7)           --              (420)
   Common stock issuance cost ...........................           --              --              --           (13,000)
   Net loss .............................................           --              --              --              --   
                                                            ------------    ------------    ------------    ------------

BALANCES, December 31, 1996 .............................      3,067,382           3,068         (12,366)     12,425,783

   Common stock issued to 401(k) Plan ...................         50,871              50            --            21,594
   Treasury stock purchase, at cost .....................         (2,335)             (2)           --              (138)
   Unearned balance of deferred compensation ............           --              --            12,366         (12,366)
   Net loss .............................................           --              --              --              --   
                                                            ------------    ------------    ------------    ------------

BALANCES, December 31, 1997 .............................      3,115,918           3,116            --        12,434,873

   Common stock issued to 401(k) Plan ...................          6,336               6            --             5,313
   Net loss .............................................           --              --              --              --   
                                                            ------------    ------------    ------------    ------------

BALANCES, December 31, 1998 .............................      3,122,254    $      3,122    $       --      $ 12,440,186
                                                            ============    ============    ============    ============


                                                              Accumulated
                                                                Deficit          Total
                                                                -------          -----

<S>                                                         <C>             <C>         
BALANCES, December 31, 1995 .............................   $ (5,491,696)   $  6,889,815
   Common stock issued to 401(k) Plan ...................           --            31,913
   Amortization of deferred compensation expense ........           --            16,488
   Treasury stock purchase on September 13, 1996, at cost           --              (427)
   Common stock issuance cost ...........................           --           (13,000)
   Net loss .............................................     (4,232,275)     (4,232,275)
                                                            ------------    ------------

BALANCES, December 31, 1996 .............................     (9,723,971)      2,692,514

   Common stock issued to 401(k) Plan ...................           --            21,644
   Treasury stock purchase, at cost .....................           --              (140)
   Unearned balance of deferred compensation ............           --              --
   Net loss .............................................     (1,342,050)     (1,342,050)
                                                            ------------    ------------

BALANCES, December 31, 1997 .............................    (11,066,021)      1,371,968

   Common stock issued to 401(k) Plan ...................           --             5,319
   Net loss .............................................       (141,454)       (141,454)
                                                            ------------    ------------

BALANCES, December 31, 1998 .............................   $(11,207,475)   $  1,235,833
                                                            ============    ============

</TABLE>

             The accompanying notes to financial statements are an integral part
of these statements.



                                      F-5
<PAGE>


                                   SWWT, INC.
                                   ----------
<TABLE>
<CAPTION>
                            STATEMENTS OF CASH FLOWS

                                                                                   For the Years Ended
                                                                                       December 31,
                                                                           1998           1997            1996
                                                                           ----           ----            ----
<S>                                                                   <C>            <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Loss ......................................................   $  (141,454)   $(1,342,050)   $(4,232,275)
    Adjustments to reconcile net loss to net cash used in operating
    activities
      Depreciation and amortization ...............................          --          174,783        442,948
      Impairment loss .............................................          --             --          685,838
      Gain on sale of technology and fixed assets .................          --         (202,497)          --
      Amortization of deferred compensation expense ...............          --             --           16,488
      Issuance of treasury stock to 401(k) Plan ...................         5,319         21,644         31,913
      Accrued loss for disposal of discontinued operations ........      (156,997)       156,997           --
  Changes in assets and liabilities-
   Accounts receivable ............................................          --             --          (74,624)
   Inventory ......................................................          --             --          429,832
   Prepaids and other current assets ..............................         2,476         48,812         54,130
   Deposits and other .............................................          --             --          (13,762)
   Accounts payable and accrued liabilities .......................      (231,040)      (246,892)       235,191
   Accrued salaries and employee benefits .........................      (165,620)        72,638         66,300
   Accrued warranty costs and other ...............................          --             --           15,524
   Net change in operating assets of discontinued operations ......          --          171,294           --
                                                                      -----------    -----------    -----------
      Net cash used in operating activities .......................      (687,316)    (1,145,271)    (2,342,497)
                                                                      -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of fixed assets ......................................          --             --         (379,784)
   Purchase of fixed assets related to discontinued operations ....          --          (36,183)          --
   Proceeds from sale of technology ...............................          --          229,074           --
   Proceeds from sales of short-term investments ..................          --          440,659      4,020,238
   Proceeds from sale of assets, net of costs .....................       970,497           --             --
                                                                      -----------    -----------    -----------
      Net cash provided by investing, activities ..................       970,497        633,550      3,640,454
                                                                      -----------    -----------    -----------


CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments on borrowings under term loan agreement ..............   $      --      $      --      $  (315,924)
    Proceeds from issuance of common stock, net of stock issuance .          --             --          (13,000)
    costs
    Repurchase of common stock ....................................          --             (140)          (427)
                                                                      -----------    -----------    -----------
         Net cash used in financing activities ....................          --             (140)      (329,351)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ..............       283,181       (511,861)       968,606
CASH AND CASH EQUIVALENTS, BEGINNING of period ....................       968,076      1,479,937        511,331
CASH AND CASH EQUIVALENTS, end of period ..........................   $ 1,251,257    $   968,076    $ 1,479,937

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
     ACTIVITIES:
     Cash paid for interest .......................................   $      --      $     3,536    $    29,875
                                                                      ===========    ===========    ===========
     Unearned balance of deferred compensation plan ...............   $      --      $    12,366    $      --
                                                                      ===========    ===========    ===========
</TABLE>



             The accompanying notes to financial statements are an integral part
of these statements.

                                      F-6
<PAGE>


                                   SWWT, INC.
                                   ----------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                                DECEMBER 31, 1998
                                -----------------


(1)      BUSINESS, DISCONTINUED OPERATIONS, ASSET
         ----------------------------------------
         IMPAIRMENT AND CONTINUING OPERATIONS
         ------------------------------------

SWWT, Inc., formerly known as SweetWater,  Inc. (the "Company"),  specialized in
the development, marketing and sale of water filtration and purification devices
and technologies to address health concerns  resulting from the  microbiological
contamination  of  drinking  water.  The  Company's  products  were  principally
marketed to outdoor supply  retailers  across the United  States.  A significant
portion of the  Company's  revenues  were  derived  from  sales to one  national
outdoor supply retailer (Note 6).

Since its inception,  the Company has incurred significant  operating losses and
cash flow deficits  resulting in an accumulated  deficit of approximately  $11.2
million as of December 31, 1998. Operating losses increased in 1996, as a result
of the Company's  efforts to develop a water filtration and purification  device
for the  home  use  market.  During  1996,  the  Company  actively  pursued  the
establishment  of a joint strategic  alliance to manufacture and market the home
use product;  however,  the Company was not  successful  in locating an industry
partner to  manufacture  and market this  potential  product.  Accordingly,  the
Company  suspended its efforts to manufacture and market this product,  sold the
plans,  designs and technology  associated  therewith in April 1997 and realized
net proceeds of approximately  $210,000.  The Company had no amounts capitalized
related to this product.

During 1997, the Company  reduced its personnel,  discontinued  its research and
development  efforts and initiated a cost containment program designed to reduce
general and  administrative  costs,  conserve  its cash  reserves and enable the
Company to concentrate its resources on the manufacture and sale of its portable
water filtration and purification products (the "Outdoor Business").

         Discontinued Operations
         -----------------------

On October 21, 1997, the Company and Cascade Design, Inc.  ("Cascade")  executed
an Asset Purchase Agreement (the "Sale Agreement") pursuant to which the Company
agreed to sell  substantially  all the  operations  and operating  assets of the
Company related to the manufacture and distribution of portable water filtration
and purification  products for outdoor use, to Cascade (the "Sale Transaction"),
for cash. The Sale  Transaction was approved by the  shareholders of the Company
on February 5, 1998,  and closing of the sale occurred on February 6, 1998.  The
effect  of the sale is  detailed  in the Pro  Forma  Balance  Sheet  information
included in Note 10. Upon closing, the Company changed its name to SWWT, Inc.

In May 1997,  the  Company  and Eric M.  Reynolds  (President,  Chief  Executive
Officer and a director of the  Company),  Patrick E. Thomas (Vice  President and
Chief  Financial  Officer  of the  

                                      F-7
<PAGE>
Company),   and  Jerry  L.  Cogdill   (Chief  of  Operations  for  the  Company)
(collectively,   "Management"),  entered  into  an  agreement  (the  "Management
Agreement")  pursuant  to which  Management  agreed to remain  with the  Company
through  January 31,  1998,  in exchange for certain  performance  bonuses and a
right  of  first  refusal  to  purchase  the  Outdoor   Business  under  certain
conditions.  The right of first  refusal  did not occur.  Management  received a
bonus, based on the price paid by Cascade, of approximately  $523,000,  of which
approximately  $114,000  was earned and accrued at December  31,  1997,  and the
remainder  is factored  into the  "accrued  loss for  disposal  of  discontinued
operations."

The Company had net sales with respect to its  discontinued  operations  for the
years  ended  1998,  1997,  and  1996  of  approximately  $0,  $1,638,000,   and
$2,064,000, respectively.

         Impairment Loss Recognized in 1996
         ----------------------------------

Long-lived  assets held and used in the Company's  portable water filtration and
purification  business,  including certain  manufacturing  equipment and related
intangible  assets,  were  reviewed for possible  impairment  because  events or
changes in the Company's circumstances, as described above, indicated that their
carrying  amounts may not be recoverable.  An impairment loss was recognized and
the net book value of such assets was reduced based on the Company's estimate of
the fair market  value of such  assets.  The  Company's  estimate of fair market
value was based on third party  estimates as well as the  Company's  estimate of
future  cash flows to be  generated  from the use of such  assets.  As a result,
during 1996, the Company  recorded an impairment  loss of $685,838.  The related
assets were reflected in the accompanying balance sheets at their estimated fair
market value of $475,000 as of December 31, 1996.

         Continuing Operations
         ---------------------

Upon closing the Sale  Transaction and paying related and retained  liabilities,
the Company's assets were limited to cash and cash equivalents.  The Company has
no further operating business and its management and  administrative  staff have
been  reduced to a minimum  required  to maintain  and to fulfill its  reporting
obligations.  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,   with  a
privately-held  business  which the Board believes may have  significant  growth
potential.

In the statements of operations for the years ending December 31, 1997 and 1996,
the remaining  financial statement balances for sales and marketing and research
and development  represent the operating  expenses  incurred to develop the home
use water purification  technology which was sold in the second quarter of 1997.
The remaining  financial  statement balances represent the Company's general and
administrative overhead not attributable to either the portable Outdoor Business
or the  indoor  home use  products  and  technology.  Salaries  attributable  to
corporate general and administrative expenses were $64,000,  $70,000 and $70,000
for the years ended December 31, 1998, 1997, and 1996, respectively.

                                      F-8
<PAGE>
(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

         Basis of Presentation
         ---------------------

The balance sheet as of December 31, 1997,  and the statements of operations for
the three years ending  December 31, 1998,  have been restated under  Accounting
Principles  Board  Opinion  No.  30 as a  result  of the  execution  of the Sale
Agreement and shareholder approval obtained on February 5, 1998.

         Cash and Cash Equivalents
         -------------------------

For purposes of the statements of cash flows, the Company considers all cash and
highly liquid  investments with an original  maturity of three months or less to
be cash  equivalents.  As of December  31,  1998,  the  Company's  cash and cash
equivalents consisted of demand deposits, and money market accounts in banks and
other financial  institutions and  governmental  securities with maturities less
than  90  days,  which  approximated  market  value.   Governmental   Securities
classified  as Cash  Equivalents  as of December  31, 1998 were  $1,218,830  and
matured at January 7, 1999 for $1,220,000.

         Inventory
         ---------

Inventory is stated at the lower of cost  (first-in,  first-out) or market,  and
consists  primarily of component parts,  including  filter  accessories and pump
assemblies.  Finished  goods include  material  costs,  labor and  manufacturing
overhead.  Inventory,  included  in net  assets of  discontinued  operations  at
December 31, 1997, consists of the following:

                                                        1997
                                                        ----

        Raw materials                                 $382,371
        Finished goods                                 436,729
                                                       819,000
        Less-Reserve for obsolescence                 (185,000)

                                                      $634,100
                                                      ========

         Fixed Assets
         ------------

Depreciation of fixed assets is computed on a straight-line  basis over a period
of one to three years.  Replacements,  renewals and improvements are capitalized
and costs for repairs and maintenance are expensed as incurred.

         Revenue Recognition
         -------------------

Revenue is generally recorded upon passage of title when the product is shipped.

                                      F-9
<PAGE>
         Research and Development
         ------------------------

Research and development costs are expensed as incurred and consist primarily of
salaries, supplies, depreciation and contract services.

         Income Taxes
         ------------

The Company  accounts for income taxes  according to the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No.
109).  SFAS No.  109  requires  recognition  of  deferred  income tax assets and
liabilities  for the  expected  future  income  tax  consequences  of  temporary
differences  between  the  financial  reporting  and tax  bases  of  assets  and
liabilities and  carryforwards.  Such deferred income tax assets and liabilities
are based on enacted tax laws. 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 (Note 7).

         Treasury Stock
         --------------

Treasury  stock  purchases  are  accounted  for at cost,  and are reflected as a
reduction of common stock and  additional  paid-in  capital in the  accompanying
balance sheets.

         Loss Per Share
         --------------

In February  1997,  the Financial  Accounting  Standards  Board  (FASB),  issued
Statement of Financial  Accounting  Standards No. 128,  Earnings Per Share. This
statement  establishes  new standards for computing and presenting  earnings per
share and, as  required,  has been adopted  retroactively  by the Company in the
accompanying  financial  statements.  Adoption of the  standard  had no material
impact  on  reported  earnings  per  share  and  required  financial   statement
disclosures.  Outstanding  options and warrants for the  Company's  common stock
have been  excluded  from the  computations  of  earnings  per share as they are
antidilutive for the periods presented.

         Comprehensive Income
         --------------------

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No.  130
"Reporting  Comprehensive  Income",  effective  January 1, 1998.  This statement
establishes standards for the reporting and display of comprehensive income (net
income plus all other  changes in net assets  from  non-owner  sources)  and its
components in financial  statements.  For the years ended  December 31, 1998 and
1997,  the  Company  had  no  other  comprehensive   income  items,   therefore,
comprehensive income is net income.

         Use of Estimates
         ----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires  management to make estimates and  assumptions.
Such  estimates  and  

                                      F-10
<PAGE>
assumptions  affect the reported  amounts of assets and  liabilities  as well as
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements, and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.

         Asset Impairment
         ----------------

The  Financial  Accounting  Standards  Board  (FASB)  has  issued  Statement  of
Financial  Accounting  Standards  No.  121,  Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of (SFAS No. 121).
The Company  reviews  its assets for  impairment  whenever  events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  For assets which are held and used in operations,  the asset would
be impaired if the  undiscounted  future cash flows related to the asset did not
exceed  the net book  value.  As  discussed  more  fully in Note 1, the  Company
reviewed its long-lived assets for impairment and recorded an impairment loss of
$685,838 for the year ended  December 31, 1996 related to its equipment  used in
operations and intangible  assets. The impairment charge is included in the loss
from discontinued operations for 1996.

(3)      STOCKHOLDERS EQUITY
         -------------------


         Preferred Stock
         ---------------

The  Company  is  authorized  to issue  6,462,500  shares  of $.001  par  value,
preferred  stock.  Shares of preferred  stock may be issued from time to time in
one or more  series,  with the rights and powers of each series set by the Board
of Directors.

(4)      STOCK OPTIONS AND WARRANT
         -------------------------

In October 1993,  the Company  adopted a Stock Option Plan (the Plan) to provide
directors, officers, employees and consultants options to purchase up to 250,000
shares of the Company's common stock.  Under the terms of the Plan, the Board of
Directors may grant either nonqualified or incentive stock options as defined by
the Internal Revenue Service.  The purchase price of shares subject to incentive
stock options is the fair market value of the Company's common stock on the date
of grant. The purchase price of a nonqualified  option must not be less than the
par value of the stock.  If the grantee owns more than 10% of the total combined
voting power or value of all classes of stock on the date of grant, the purchase
price of an  incentive  stock  option  must be at least 110% of the fair  market
value at the date of grant and the exercise  term cannot  exceed five years from
the date of grant.  All other options  granted under the Plan are exercisable up
to 10 years from the date of grant.  The Board of Directors has determined  that
the options outstanding will vest 25% over the first year with the remaining 75%
vesting on a straight-line basis over the remaining 36 months. If the employment
of a participant  is terminated  for any reason other than death or  disability,
any stock options then held by the participant  which are currently  exercisable
shall remain  exercisable  after the  termination  of employment for a period of
three months, but no later than the specified expiration date.

                                      F-11
<PAGE>
In addition to the Stock Option Plan, the Company has issued non-plan options to
certain  directors,  officers,  employees and consultants since 1993. As part of
the form S-8 Registration  Statement filed in April 1996, the Company registered
an aggregate  382,915 shares  reserved for issuance  pursuant to non-plan option
agreements  with certain named  individuals as well as the 250,000 shares of the
Plan.  The  non-plan  options  primarily  vest over a  four-year  period with an
approximate  20% to 60% vesting on the date of grant with the remaining  vesting
on a straight-line basis.

In conjunction with the Sale Transaction,  all unexercised stock options held by
employees,  directors  and  consultants  expired on February  6, 1998.  No stock
options were exercised subsequent to yearend.

In February  1998,  the Board granted each of Messrs.  Bailey,  Barnds,  Barron,
Effron,  Gilson and Hack an option  entitling  him to purchase  60,000 shares of
Common  Stock at an exercise  price of $1.3125 per share,  which option is fully
vested but is not exercisable until February 5, 2000.
<TABLE>
<CAPTION>
                                            Number of Shares
                                     -----------------------------
                                          Officers     Employees                        
                                            and           and        Per Share
                                         Directors      Others    Exercise Price
                                         ---------      ------    --------------

<S>                                       <C>           <C>        <C>     
Balance, December 31, 1995 ..........     481,916       88,526     $.47-$8.125

       Granted ......................      50,000       53,400     $        4.00
       Exercised ....................        --           --                --
       Canceled .....................     (31,000)      (5,776)    $        4.00
                                         --------     --------     -------------
Balance, December 31, 1996 ..........     500,917      136,150     $ .47-$8.125

       Granted ......................      25,000          500     $ .50-$4.00
       Exercised ....................        --           --                --
       Canceled .....................     (42,667)    (105,561)    $ 47-$8.125

Balance, December 31, 1997 ..........     483,250       31,089     $ .50-$8.125
                                         --------     --------     -------------
       Cancelled ....................    (483,250)     (31,089)    $ .50-$8.125
       Granted ......................     360,000         --       $      1.3125
                                         --------     --------     -------------

Balance, December 31, 1998 ..........     360,000         --       $      1.3125
                                         ========     ========     =============

Exercisable at December 31, 1998 ....        --           --   
                                         ========     ========
</TABLE>

The Company accounts for its stock-based  compensation plan and non-plan options
under APB No. 25, under which no compensation  expense is recognized for options
granted with an exercise  price equal to the fair value of the Company's  common
stock  on the  date  of  grant.  The  Company  adopted  Statement  of  Financial
Accounting Standards No. 123, "Accounting for Stock-Based  Compensation," ("SFAS
123") for disclosure purposes in 1996. For SFAS 123 

                                      F-12
<PAGE>
purposes,  the fair value of each option grant and stock purchase right has been
estimated as of the date of grant using the  Black-Scholes  option pricing model
with the following weighted average assumptions:
<TABLE>
<CAPTION>

                                                      Year Ended December 31,
                                                      -----------------------

                                             1998           1997           1996
                                             ----           ----           ----
<S>                                          <C>            <C>            <C>  
Risk-free interest rate ............         5.41%          5.36%          5.96%
Dividend rate ......................          0.0%           0.0%           0.0%
Expected volatility ................        18.95%        116.26%        116.26%
Expected Life ......................      3.0 years     3.0 years      3.0 years
</TABLE>

Using these  assumptions,  the fair value of the stock options  granted in 1998,
1997 and 1996 was approximately $0 or $0 per option, $9,401 or $0.37 per option,
and  $263,575 or $2.55 per option,  respectively,  which would be  amortized  as
compensation  expense over the vesting period of the options.  Had  compensation
cost  been  determined  consistent  with  SFAS 123,  utilizing  the  assumptions
detailed  above,  the  Company's net loss and earnings per share would have been
reduced to the  following  pro forma  amounts  (in  thousands,  except per share
data).
<TABLE>
<CAPTION>

                                                 Year Ended December 31,
                                                 -----------------------
                                           1998            1997            1996
                                           ----            ----            ----
<S>                                     <C>           <C>             <C>       
Net loss:
    As reported ..................      $  (141)      $  (1,342)      $  (4,232)
    Pro forma ....................      $  (141)      $  (1,607)      $  (4,476)
Net loss per common share:
    As reported ..................      $ (0.05)      $   (0.43)   $      (1.38)
    Pro forma ....................      $ (0.05)      $    (.52)   $      (1.46)
</TABLE>

In  September  1995,  the Company  issued a warrant  for the  purchase of 88,435
shares  of  common  stock in  connection  with the  issuance  of the  $1,500,000
Convertible Promissory Note (Note 5).

(5)      RELATED PARTY TRANSACTIONS
         --------------------------

In September 1995, a stockholder purchased a $1,500,000 Convertible Subordinated
Promissory  Note and a Warrant to purchase  88,435  shares of common stock at $4
per share for a total purchase  price of $1,500,000.  In November 1995, the note
and  related  interest  accrued at the prime rate were  converted  into  378,828
shares of common stock in connection with the private placement of common stock.
The warrant has not been exercised and expires in September 2000.

In 1996,  the Company  retained a financial  advisor as its  exclusive  agent to
pursue certain financial and strategic  objectives of the Company. A director of
the Company is also a managing director of this financial advisor.  Amounts paid
to this financial advisor during 1996 totaled approximately $350,000.

                                      F-13
<PAGE>
(6)      MAJOR CUSTOMERS AND SUPPLIERS-DISCONTINUED OPERATIONS
         -----------------------------------------------------

During 1998, 1997 and 1996 sales to one customer  represented  approximately 0%,
37%, and 31% of total sales for those years, respectively.

(7)      INCOME TAXES
        ------------

As of December  31, 1998 and 1997,  the Company had net  operating  loss ("NOL")
carryforwards  for tax  purposes  of  approximately  $9,700,000  and  $9,600,000
respectively.  Based on an  effective  tax rate of 38%,  the  Company's  related
deferred tax assets were approximately  $3,700,000 and $3,600,000 as of December
31, 1998 and 1997,  respectively.  The NOL carryovers  expire from the year 2006
through the year 2011. The Tax Reform Act of 1986 contains  provisions which may
limit the net operating loss and credit  carryovers  available to be used in any
given year upon the occurrence of certain events,  including significant changes
in ownership interests.

The Company has determined that  approximately  $3,700,000 and $3,600,000 of net
deferred  tax assets as of  December  31,  1998 and 1997,  respectively,  do not
satisfy the realization criteria set forth in SFAS No. 109. Recognition of these
benefits  requires future taxable income,  the attainment of which is uncertain.
Accordingly,  a valuation  allowance has been recorded to fully offset these net
deferred tax assets.

The  components of the net deferred tax assets as of December 31, 1998 and 1997,
were as follows:
<TABLE>
<CAPTION>
                                                   1998                1997
                                                   ----                ----
<S>                                             <C>                <C>       
Net operating loss carry forward                $3,700,000         $3,600,000
Capitalization of organization and
Start up costs for tax purposes                          -             42,000
Depreciation                                             -             14,000
Accruals not deducted for tax purposes                   -            148,000
Asset impairment                                         -            261,000
Loss on disposal for discontinued options                -             60,000
Less-Valuation allowance                        (3,700,000)        (4,125,000)
                                                -----------        -----------

                                              $          -   $             -
                                              =============        ===========
</TABLE>

(8)      401(K) 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 has agreed
to contribute matching  contributions in the form of Company common stock at the
rate of 50% of the first 8% of employee 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  portion are  allocated to the  remaining  employees in the plan
proportionately,  based upon current year  compensation.  During 1998,  1997 and
1996, the Company issued 6,336, 50,871 and 9,969, respectively, shares of common
stock  to the  401(k)  plan.  The  401(k)  Plan  was  terminated  in  1998.  

                                      F-14
<PAGE>
(9)      COMMITMENTS AND CONTINGENCIES
         -----------------------------

In August 1997,  the Company  entered into a new lease which  commenced  October
1997. Upon consummation of the Sale Transaction,  the lease was assigned to, and
assumed by, Cascade. The Company's new Corporate headquarters is 3492 West 109th
Circle, Westminster, Colorado 80030.

The Company  retained all  liabilities  related to its  operations  prior to the
closing  of the  Sale  Transaction,  with  the  exception  of  product  warranty
liabilities,  which were  assumed by Cascade.  The  liabilities  retained by the
Company  include,  among  others,  product  liabilities  and  any  environmental
liabilities  arising out of the  Company's  operations  prior to the Sale or its
prior  leases of  facilities.  The Company  has  product  and general  liability
insurance on an  occurrence  basis which  provides up to $11 million in coverage
for  occurrences  up to the  date of the Sale  Transaction  and $1  million  for
occurrence after the date of the Sale Transaction.  The Company has not incurred
any product liabilities since its inception.

(10)     PRO FORMA FINANCIAL INFORMATION

In the table below the February 6, 1998 balance sheet  information,  gross sales
proceeds and  estimated  gain on sale of assets has been  provided as additional
information. Under the Sale Agreement, accounts receivable, inventories, prepaid
expenses,  deposits, fixed assets and other assets were sold at book value as of
February 6, 1998, plus $300,000.  Liabilities  assumed include  equipment leases
and product warranties.
<TABLE>
<CAPTION>
                                                             February 6, 1998
                                                          ----------------------

<S>                                                               <C>    
         Accounts receivable                                    $  77,386
         Inventory                                                634,100
         Prepaid expenses                                           7,172
         Fixed assets                                             309,823
         Deposits and other                                         6,436
                                                                ---------

         Subtotal assets to be sold                             1,034,917
         Liabilities to be assumed                                 64,420
                                                                ---------

         Net assets to be sold                                    970,497
         Gross sales proceeds                                   1,528,500
                                                                ---------

         Gain on sale of assets                                   558,003
         Severance, management bonuses and
         transaction costs                                        665,000
         Expected loss on operations prior
         To sale of assets                                         50,000
                                                                ---------

         December 31, 1997 accrued loss for disposal of                            
         discontinued operations                                $(156,997)
                                                                ========= 
</TABLE>

Trade  payables and other  accrued  expense in the  ordinary  course of business
remained liabilities of the Company.

                                      F-15


<PAGE>

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
                  AND FINANCIAL DISCLOSURE

There  have  been  no  disagreements   with  the  Company  and  its  independent
accountants  on any matter of  accounting  principles  or practice or  financial
statement disclosure during 1998.

                                                     PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following  table set forth certain  information  regarding the directors and
executive officer of the Company:

Name                     Position With the Company       Age     Director Since
----                     -------------------------       ---     --------------
Peter W. Gilson          Chairman of the Board           59      1993
Thomas Barnds            Director                        30      1998
Clarke H. Bailey         Director                        44      1998
Thomas A. Barron         Director                        47      1993
Blair W. Effron          Director                        36      1995
Randall A. Hack          Director                        51      1995
J. Merrick Taggart       Director                        48      1998
Patrick E. Thomas        Chief Executive Officer         44      N/A

     Peter W. Gilson has served as a director since June 1993 and as Chairman of
the  Board  since  February  1998.  Mr.  Gilson  served as  President  and Chief
Executive Officer of Physician Support Systems,  Inc. a company  specializing in
the management of physician and hospital  practices,  from 1991 through December
1997.  From 1989 to the present,  Mr. Gilson has also served as Chief  Executive
Officer of the Warrington  Group,  Inc., a manufacturer of safety products which
was  previously  a division of The  Timberland  Company.  From 1987 to 1988,  he
served as Chief Operating Officer of The Timberland  Company,  a manufacturer of
footwear and outdoor clothing.  From 1978 to 1986, he served as President of the
Gortex Fabrics Division of W. L. Gore  Associates.  Mr. Gilson is a director and
Chairman of Swiss Army  Brands,  Inc.  and a director of Glenayre  Technologies,
Inc. and of New Hope Foundation.

     Thomas C.  Barnds has  served as a  director  since  February  1998.  Since
October  1998,  Mr. Barnds has served as a Managing  Director at Nassau  Capital
L.L.C., which manages a $2 billion portfolio of investments in private companies
and assets on behalf of Princeton  University's  endowment.  From August 1996 to
October 1998, Mr. Barnds served as an Associate at Nassau  Capital L.L.C.  Prior
to  joining  Nassau  Capital,  Mr.  Barnds  was  the  manager  of  new  business
development for McGaw,  Inc., a healthcare  company,  and a financial analyst at
Alex. Brown & Sons, an investment  banking firm. Mr. Barnds received a B.A. from
Princeton University in 1990 and an M.B.A. from Stanford University in 1996.

     Clarke H.  Bailey has served as a director of the  Company  since  February
1998. Mr. Bailey has served as Chairman,  Chief Executive Officer and a director
of National Fulfillment,  Inc., a leading provider of literature fulfillment and
other marketing  services,  since January 1999.  Since February 1995, Mr. Bailey
has served as  Co-Chairman  of the Board and a director of Hudson River  Capital
LLC,  a  private  equity  firm  specializing  in  middle  market   acquisitions,
recapitalizations  and expansion capital investments.  Mr. Bailey also served as
Chairman,  Chief Executive Officer and a director of Arcus 

                                       10
<PAGE>
Technology  Services,  Inc., the leading  national  provider of secure  off-site
computer  data  storage  and  related  disaster  recovery  services  as  well as
information  technology staffing solutions,  from February 1995 until its merger
with Iron Mountain  Incorporated  in January 1998. He served as Chief  Executive
Officer and a director of Glenayre  Technologies,  Inc., a paging and  messaging
infrastructure  technology  firm, from December 1990 until March 1994 and as its
Vice Chairman of the Board from November 1992 to July 1996. Mr. Bailey is also a
director of Swiss Army Brands, Inc., Iron Mountain Incorporated and Connectivity
Technologies, Inc.

     Thomas A. Barron has served as a director  since June 1993.  From  November
1995 until February 1998, he served as Chairman of the Board of the Company. Mr.
Barron is an author and has been  Chairman  of  Evergreen  Management  Corp.,  a
private investment firm, since January 1990. From November 1983 through November
1989, Mr. Barron was President,  Chief  Operating  Officer and a director of The
Prospect  Group,  Inc.,  a publicly  held New York based  holding  company  that
conducted its major operations  through  subsidiaries and affiliates  engaged in
the railroads and specialized  consumer  products  industries.  Prior to that he
served as a  general  partner  of Sierra  Ventures,  a venture  capital  limited
partnership. Mr. Barron also serves as a director of Swiss Army Brands, Inc. Mr.
Barron, a Rhodes Scholar, has served as a Trustee of Princeton  University,  and
on  national  and  regional  boards of The  Wilderness  Society  and The  Nature
Conservancy.

     Blair W. Effron has served as a director  since  November  1995. Mr. Effron
joined Dillon Read & Co.,  Inc., a New York based  investment  bank now known as
SBC Warburg  Dillon Read, in 1987 and currently  serves as a Managing  Director.
Since 1993,  Mr.  Effron has been head of the firm's  consumer  products  group,
where  he  has  responsibility  for  several  clients  including  Anheuser-Busch
Companies,  Inc., General Mills, Inc., H. J. Heinz Company, and Playtex Products
Inc. Mr. Effron also heads the Financial  Sponsor  Group.  Mr. Effron has been a
founding investor in several consumer products related enterprises including USA
Detergents,  Inc. and American  Value  Brands,  Inc. a processor and marketer of
value brand food products for mass  merchandisers.  Mr.  Effron  received a B.A.
from  Princeton  University in 1984 and an M.B.A.  from  Columbia  University in
1987.

     Randall A. Hack has served as a director since November 1995. Since January
1995,  Mr.  Hack has  served as a senior  managing  director  of Nassau  Capital
L.L.C., an investment firm which he founded. Nassau Capital manages a $2 billion
portfolio of investments  in private  companies and real estate assets on behalf
of Princeton University's endowment.  From 1990 to January 1995, Mr. Hack served
as President and Chief Executive Officer of the Princeton University  Investment
Company,  which has  overall  management  responsibility  for  Princeton's  $5.5
billion  endowment fund. From 1988 to 1990, Mr. Hack was the President and Chief
Executive Officer of Capstone Equities,  Inc. and, from 1979 to 1988,  President
and Chief  Executive  Officer of Matrix  Development  Company,  a commercial and
industrial real estate  development  firm in New Jersey,  which he founded.  Mr.
Hack received a B.A.  degree summa cum laude from  Princeton  University in 1969
and an M.B.A.  from  Harvard  University  in 1972.  He serves as a  Director  of
OmniCell  Technologies,  Inc.,  KMC Telecom  Inc.,  Crown  Castle  International
Corporation, Cornerstone Properties, and Acacia Capital Corp.

     J. Merrick  Taggart has served as a director of the Company since May 1998.
Mr.  Taggart has served as a director  and as  President  of Swiss Army  Brands,
Inc.,  the exclusive  United  States and Canadian  importer and  distributor  of
Victorinox Original Swiss Army Knives and professional  cutlery as well as other
products,  since  December  1995.  From 1993 to November  1995,  Mr. Taggart was
President of Duofold,  Inc., a sports apparel  company,  and Pringle of Scotland
U.S.A.,  an  apparel  company.  From 1990 to  November  1992,  Mr.  Taggart  was
President of O'Brien International,  a manufacturer and marketer of water sports
equipment.  Prior to that,  Mr.  Taggart  was Senior Vice  President  of Product
Development  for the  Timberland  Company.  Mr. Hart is also a director of Swiss
Army Brands, Inc.

                                       11
<PAGE>
     Patrick E. Thomas,  CPA has served as President and Chief Executive Officer
of the Company  since  February 1998 and as Vice  President and Chief  Financial
Officer  since  November  1994.  Mr. Thomas has served as President and Managing
Member of Total Beverage LLC, a private limited liability  company  specializing
in retail  beverage  sales,  since April 1998.  Mr.  Thomas was Chief  Financial
Officer for Bird  Medical  Technologies,  Inc.,  a $50 million  publicly  traded
medical  products  manufacturer  from  1990 to 1993.  From  1993 to 1994 he held
positions as Vice  President of Finance for Head Sports USA,  Inc. a $50 million
sporting goods  manufacturer and distributor,  and then Chief Accounting Officer
and Controller for Synergen,  Inc., a 600 employee publicly traded biotechnology
pharmaceutical  development  company.  Mr. Thomas also served as Chief Financial
Officer and  Director for LIFECARE  International,  Inc., a privately  owned $20
million  international  medical  products  manufacturer  from 1984 to 1990.  Mr.
Thomas  received his B.S. in Accounting from University of Illinois in 1976. Mr.
Thomas is a director of Great Trango Holdings, Co. and MT Ideas, LLC.

         Directors  of the Company are elected  annually to serve until the next
annual  meeting of  shareholders  or until their  successors  are duly  elected.
Hudson River Capital LLC. and Nassau  Capital  Partners L.P. each have the right
to nominate one person to serve on the  Company's  Board of  Directors,  and the
Company has agreed to use its best  efforts to secure the  election of each such
nominee to the Board of  Directors.  Clarke H.  Bailey and  Randall A. Hack were
nominated  by Hudson  River  Capital LLC.  and Nassau  Capital  Partners,  L.P.,
respectively,  pursuant  to such  arrangements.  The  Company  knows of no other
arrangements  or  understandings  between a director  or  nominee  and any other
person  pursuant to which he has been  selected as a director or nominee.  There
are no  family  relationships  between  any of the  directors  or the  executive
officer of the Company.  The  Company's  only  executive  officer  serves at the
discretion of the Board of Directors.


                                       12
<PAGE>
ITEM 11.          EXECUTIVE COMPENSATION

The following table sets forth certain information  regarding  compensation paid
by the Company to its Chief Executive  Officers for the years ended December 31,
1998,  1997 and 1996 and to the  additional  executive  officers who received in
excess of $100,000 in compensation for 1998 :
<TABLE>
<CAPTION>
                                                           Long Term Compensation
                                   -----------------------------------------------------------------------
                                          Annual Compensation                  Awards           Payouts
                                   ----------------------------------- ----------------------- -----------
                                                                  Other                                                 All other
                                                                 Annual      Restricted                                  compen-
                                      Salary                     Compen-        Stock       Options/        LTIP         sation
Name & Principal Position    Year      ($)(1)      Bonus ($)   sation ($)     Award ($)     SARs ($)     Payouts ($)     ($)(2)
-------------------------    ----      ------      ---------   ----------     ---------     --------     -----------     ------
<S>                          <C>      <C>         <C>               <C>           <C>           <C>           <C>         <C>  
ERIC M. REYNOLDS             1998     $53,330     $136,188(3)      -0-           -0-           -0-           -0-          $ 804
Chief Executive Officer
until February 1998
                             1997     $95,000     $38,000(4)       -0-           -0-           -0-           -0-         $3,800
                             1996     $95,000         -0-          -0-           -0-           -0-           -0-         $3,106

PATRICK E. THOMAS            1998     $116,924    $136,188(3)      -0-           -0-           -0-           -0-         $1,053
Chief Executive Officer
since February 1998; Vice
President - Finance prior
thereto
                             1997     $85,000     $38,000(4)       -0-           -0-           -0-           -0-         $3,400
                             1996     $85,000         -0-          -0-           -0-           -0-           -0-         $3,400

JERRY COGDILL                1998     $57,874     $136,188(3)      -0-           -0-           -0-           -0-          $ 708
Chief of Operations


                             1997     $85,000     $38,000(4)       -0-           -0-           -0-           -0-         $3,400
                             1996     $85,000         -0-          -0-           -0-           -0-           -0-         $3,400
<FN>
         (1) Amounts  reported for 1998 include  three months of severance  plus
accrued  vacation  pay. The amount set forth below for Mr.  Thomas for 1998 also
includes  $64,000,  or $6,000 per month,  paid to Mr.  Thomas in his capacity as
President and Chief Executive Officer.

         (2) Represents the Company's  Contribution  to the executive  officer's
401(k) account.

         (3)  Represents  the  balance of the  performance  bonus paid under the
terms of the Management  Agreement  described  below under the heading  "Certain
Relationships and Related  Transactions." This bonus,  together with the accrued
bonus of $38,000, was paid to each executive officer in February 1998.

         (4) Represents the performance bonus accrued at December 31, 1997 under
the terms of the Management Agreement described below under the heading "Certain
Relationships and Related  Transactions." This accrued bonus,  together with the
additional bonus of $136,188 earned under such agreement as a result of the sale
of  substantially  all of the assets of the Company,  was paid to each executive
officer in February 1998.
</FN>
</TABLE>

Option/SAR Grants in Last Fiscal Year; Aggregated Option/SAR Exercises in Last
Fiscal Year and Fiscal Year-End Option/SAR Values

         No stock options were granted to, or exercised by,  executive  officers
in 1997. As a result of the Sale to Cascade,  all unexercised  outstanding stock
options  to  executive  officers,   directors  and  employees  were  terminated.
Accordingly,  as of the end of the  Company's  1998 fiscal  year,  there were no
outstanding stock options held by the Company's executive officer.

         SWWT, Inc. Profit Sharing Plan and Trust

         Pursuant to the  SweetWater,  Inc. 401(k) Profit Sharing Plan and Trust
(the  "401(k)  Plan"),  which was  established  effective  January 1, 1995,  the
Company contributed  matching  contributions in the form of Company common stock
at the rate of 50% of the first 8% of employee salary deferral. Under the 401(k)

                                       13
<PAGE>
Plan,  the  Company  could  also  elect  to  make  discretionary  contributions.
Employees  vested in Company  contributions  over six years of service  with the
Company.  Forfeitures  of the unvested  portion were  allocated to the remaining
employees in the plan proportionately based upon current year compensation.  The
Company terminated the 401(k) Plan in 1998.

Director's Compensation Fees

         In 1998,  Directors of the Company did not receive  fees for  attending
board  meetings or  committee  meetings.  Directors  were  reimbursed  for their
out-of-pocket  expenses,  including travel, incurred in the performance of their
duties as directors.  As a result of the Sale to Cascade,  all outstanding stock
options,  including  options  issued to  directors  of the  Company,  expired on
February 6, 1998. In February  1998,  the Board granted each of Messrs.  Bailey,
Barnds,  Barron,  Effron,  Gilson and Hack an option  entitling them to purchase
60,000 shares of Common Stock at an exercise  price of $1.3125 per share,  which
option is fully vested but is not exercisable until February 5, 2000.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following tables sets forth information  regarding the beneficial  ownership
of the  Company's  Common  Stock as of March 1, 1999 by (i) each  person  who is
known by the Company to own  beneficially  more than 5% of the Company's  Common
Stock,  (ii) each director and the executive  officer of the Company,  and (iii)
all directors and the executive  officer as a group.  Except as otherwise noted,
the Company knows of no agreements among its shareholders which relate to voting
or investment power over its Common Stock.


                                       14
<PAGE>
<TABLE>
<CAPTION>
        Beneficial Owner                            Shares Beneficially Owned(1)
        ----------------                            ----------------------------
                                                        Number         Percent
                                                        ------         -------
        Directors:
<S>                                              <C>                   <C>                   
           Clarke H. Bailey                             28,000               *
           Thomas Barnds                            621,845(2)           19.9%
           Thomas A. Barron                             34,583            1.1%
           Blair W. Effron                              18,750               *
           Peter W. Gilson                               7,792               *
           Randall A. Hack                          635,799(3)           20.4%
           J. Merrick Taggart                                -               -
        Executive Officer                               12,942               *
        Executive officer & directors as a
        group (includes 8 persons)
                                                       738,113           23.6%
        Other 5% Shareholders:
        Nassau Capital Partners L.P.                   621,598           19.9%
        22 Chambers Street
        Princeton, NJ  08542
        Equities Enterprises, Inc.                  609,150(4)           19.5%
        160 Madison Avenue
        Third Floor
        New York, New York  10016
        Hudson River Capital LLC                    420,536(5)           13.1%
        667 Madison Avenue
        Suite 2500
        New York, NY  10021
        Charles Elsener                                197,500            6.3%
        CH-6438
        Ibach, Switzerland

         * Less than 1%
<FN>
(1)      Unless  otherwise  indicated,  the persons named in the table have sole
         voting  and  investment  power  with  respect  to all  shares  shown as
         beneficially  owned by them,  subject to community  property laws where
         applicable. With respect to information regarding 5% shareholders,  the
         Company has relied on information provided in publicly-filed  documents
         and, in certain cases,  on  supplementary  information  provided by the
         shareholder.
(2)      Includes  621,598 shares held by Nassau  Capital  Partners L.P. and 247
         shares  which  represent  Mr.  Barnds'  interest in shares  directly or
         indirectly held by NAS Partners I L.L.C., a limited  liability  company
         in which he is a member.  Mr.  Barnds is an employee of Nassau  Capital
         L.L.C.,  which  serves as the sole  general  partner of Nassau  Capital
         Partners L.P. Mr. Barnds disclaims  beneficial ownership of shares held
         by Nassau Capital Partners L.P.
(3)      Includes  621,598 shares held by Nassau Capital Partners L.P. and 1,701
         shares which  represent Mr. Hack's  interest in shares held directly or
         indirectly  by NAS Partners I L.L.C.,  a limited  liability  company in
         which he is a member. Mr. Hack is one of four members of Nassau Capital
         L.L.C.  which  serves as the sole  general  partner  of Nassau  Capital
         Partners,  L.P. Mr. Hack disclaims  beneficial ownership of shares held
         by Nassau Capital Partners L.P.
(4)      Shares are held by  Equities  Holdings  LLC, a  wholly-owned subsidiary
         of Equities Enterprises, Inc.
</FN>
</TABLE>
                                       15
<PAGE>


ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In May 1997,  the  Company and Messrs.  Reynolds,  Thomas and  Cogdill,
members of the  Company's  senior  management  ("Management"),  entered  into an
agreement (the "Management  Agreement")  pursuant to which the Management agreed
to remain with the  Company  through  January  31, 1998 in exchange  for certain
performance  bonuses  and a right of first  refusal to  purchase  the  Company's
Outdoor  Business  in the event  certain  performance  targets  were met and the
Company elected to sell such business  within a specified  period after December
31, 1997. Specifically, the Management Agreement provided that, Management, as a
group, under certain  circumstances,  would receive a Performance Bonus equal to
50% of the  amount  by  which  cash  and cash  equivalents  as set  forth on the
Company's  audited  balance  sheet as of December 31,  1997,  subject to certain
adjustments  ("Year End Cash") exceeded  $1,000,000.  In addition,  in the event
Year End Cash  exceeded a specified  target  (which was lower than  $1,000,000),
Management had a right of first refusal in the event the Company elected to sell
the  Outdoor  Business  to a third  party.  If  such  right  was not  exercised,
Management,  as a group, would receive a Value Enhancement Bonus equal to 30% of
the  excess of the third  party  purchase  price over the  Management  Price (as
defined below) less the amount of the  Performance  Bonus,  if any. In the event
the Company elected to sell the Outdoor  Business to Management,  Management had
the  right  to  purchase  the  Outdoor  Business  for  a  specified  price  (the
"Management Price") and the assumption of the Outdoor Business liabilities.  The
Management Price was subject to certain adjustments, and would have been reduced
by the amount by which Year End Cash  exceeded  the target  amount.  If Year End
Cash  equaled or exceeded  $1,000,000,  the  Management  Price would have been a
nominal amount.

         Under the terms of the Management  Agreement,  Management,  as a group,
earned a Performance  Bonus equal to $114,000 and a Value  Enhancement  Bonus of
$408,563,  as a result of the sale of the Outdoor  Business to Cascade  Designs,
Inc., which amounts were paid upon the completion of such sale in February 1998.

         In 1996, the Company  retained  Dillon,  Read & Co., Inc., now known as
SBC Warburg  Dillon Read,  as its exclusive  agent to arrange a joint  strategic
alliance involving either a new equity investment or the acquisition of stock or
assets of the Company.  Mr.  Effron,  a director of the  Company,  is a Managing
Director of SBC Warburg Dillon Read.


                                                      PART IV
ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON 
                  FORM 8-K

Documents filed as part of this Report:
---------------------------------------

         Financial  Statements and Financial  Statement Schedules - See Index to
         Financial  Statements  and Financial  Statement  Schedules at Item 8 of
         this  report.  All other  financial  statement  schedules  are  omitted
         because they are not required,  are inapplicable or the information has
         been included elsewhere in the financial statements or notes thereto.

         a)       Reports on Form 8-K:
                  --------------------

         No reports on Form 8-K were filed in the fourth quarter of fiscal 1998.

         b)       Exhibits:
                  ---------
                  Reference is made to the accompanying Index of Exhibits.


<PAGE>
                                     PART V

SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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)


                                  /s/ Patrick E. Thomas                       
                                  ------------------------
                                  Patrick E. Thomas
                                  President and Chief Executive Officer

                                  Date:    March 31, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the Registrant and in the
capacities and on the dates indicated.

/s/ Patrick E. Thomas                             March 31, 1999
------------------------------------
Patrick E. Thomas
Chief Executive Officer, President,
Chief Financial Officer
(Principal Financial Officer)


/s/ Clarke H. Bailey                              March 31, 1999
------------------------------------
Clarke H. Bailey
Director

/s/ Thomas Barnds
------------------------------------              March 29, 1999
Thomas Barnds
Director

/s/ Thomas A. Barron                              March 31, 1999
------------------------------------
Thomas A. Barron
Director

/s/ Blair W. Effron                               March 31, 1999
------------------------------------
Blair W. Effron
Director

/s/ Peter Gilson                                  March 31, 1999
------------------------------------
Peter Gilson
Chairman of the Board
Director

                                       17
<PAGE>
/s/ Randall A. Hack
------------------------------------              March 31, 1999
Randall A. Hack
Director

------------------------------------              March __, 1999
J. Merrick Taggart
Director


                                       18
<PAGE>



                                INDEX OF EXHIBITS

No.               Exhibit Document                               Exhibit No.
---               ----------------                               -----------
(2)               Not Applicable

(3)               Articles of Incorporation and by-laws

         (A)      Certificate of Incorporation, as amended12

         (B)      By-laws1

(4)               Instruments defining the rights of security holders, including
                  indentures

         (A)      Excerpts from the Certificate of Incorporation, as amended12

         (B)      Excerpts from the By-laws1

         (C)      Specimen stock certificate2

(9)               Not Applicable

(10)              Material Contracts

                    (a) Form of Stock  Purchase  Agreement  by and  between  the
                    Company and The  Forschner  Group,  Inc.(now  known as Swiss
                    Army Brands, Inc.)1

                    (b) Form of Stock  Purchase  Agreement  by and  between  the
                    Company and certain purchasers of Series A Preferred Stock1

                    (c) 1993 Stock Option Plan, as amended2,11

                    (d) Form of Non-Incentive Stock Option Agreement for options
                    which were not issued under the 1993 Stock Option Plan2,11

                    (e) Lease  Agreement  dated  December  12, 1994  between the
                    Company and Pratt Land Limited Liability Company3

                    (f) Note and Warrant Agreement dated September 26, 19956

                    (g)  Common  Stock  Purchase  Warrant  issued  to  Forschner
                    Enterprises, Inc. (now known as Hudson River Capital LLC)6

                    (h)  Subscription  Agreement  by and between the Company and
                    Nassau Capital  Partners in connection with the 1995 private
                    placement of shares of Common Stock;7

                    (i) Form of Subscription  Agreement  executed by the Company
                    and certain  investors in  connection  with the 1995 private
                    placement of shares of Common Stock.7

                    (j) Form of Director's Stock Option Agreement.7

                    (k) Letter  Agreement  dated  April 17,  1997 by and between
                    SweetWater, Inc. and American Standard Inc.8

                    (l)  Agreement  dated  as  of  May  9,  1997  by  and  among
                    SweetWater,  Inc. and Eric M.  Reynolds,  Patrick Thomas and
                    Jerry Cogdill8

                    (m) Termination of Lease Agreement dated May 29, 1997 by and
                    between SweetWater, Inc. and Pratt Land Company, LLC.9

                    (n) Lease  agreement  dated  August  1, 1997 by and  between
                    SweetWater, Inc. and Edwin Kanemoto, Dale Kanemoto and Karen
                    K. Wood.9 .

                    (o) Asset  Purchase  Agreement  dated as of October 21, 1997
                    (the "Asset Purchase  Agreement") by and between SweetWater,
                    Inc., a Delaware corporation,  and Cascade Designs,  Inc., a
                    Washington  corporation  ("Purchaser").  (A list of exhibits
                    and schedules to the Purchase Agreement is attached thereto.
                    The   Registrant   agrees  to  furnish  to  the   Commission
                    supplementally, upon request, a copy of any such exhibits or
                    schedules not otherwise filed herewith.)10

(11.1)            Not Applicable

(12)              Not Applicable

(13)              Not Applicable

                                       19
<PAGE>
(16)              Not Applicable

(18)              Not Applicable

(21)              Not Applicable

(22)              Not Applicable

(23)              
                  23      Consent of experts and counsel

(24)              Not Applicable

(27)             
                  27      Financial Data Schedule

(28)              Not Applicable

(99)              Not Applicable

         1 These  exhibits were filed as exhibits to the Company's  Registration
Statement on Form S-1,  Registration No. 33-71036, as filed on October 29, 1993,
and are incorporated herein by reference.

         2 These  exhibits  were filed as  exhibits  to  Amendment  No. 1 to the
Company's  Registration  Statement on Form S-1,  Registration No.  33-71036,  as
filed on December 13, 1993, and are incorporated herein by reference.

         3 These  exhibits were filed as exhibits to the Company's Form 10-K for
the  year  ended  December  31,  1994,  as  filed on  March  30,  1995,  and are
incorporated herein by reference.

         4 These  exhibits were filed as exhibits to the Company's Form 10-Q for
the quarter ended March 31, 1995, as filed on May 12, 1995, and are incorporated
herein by reference.

         5 These  exhibits were filed as exhibits to the Company's Form 10-Q for
the  quarter  ended  June 30,  1995,  as  filed  on  August  12,  1995,  and are
incorporated herein by reference.

         6 These  exhibits were filed as exhibits to the  Company's  Form 8-K as
filed on October 2, 1995, and are incorporated herein by reference.

         7 These  exhibits were filed as exhibits to the Company's Form 10-K for
the  year  ended  December  31,  1995,  as  filed in  March  29,  1996,  and are
incorporated herein by reference.

         8 These  exhibits were filed as exhibits to the Company's Form 10-Q for
the quarter ended March 31, 1997, as filed on May 16, 1997, and are incorporated
herein by reference.

         9 These  exhibits were filed as exhibits to the Company's Form 10-Q for
the  quarter  ended  June  30,  1997,  as  filed  on  August  11  1997,  and are
incorporated herein by reference.

         10 These  exhibits were filed as exhibits to the Company's Form 8-K, as
filed on February 19, 1998, and are incorporated herein by reference.

         11  Constitutes  a  "management   contract  or  compensatory   plan  or
arrangement" required to be filed pursuant to Item 14 (c) of the Form 10-K.

         12 These exhibits were filed as exhibits to the Company's Form 10-K, as
filed on March 31, 1998, and are incorporated herein by reference.


                                       20
<PAGE>


                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

         As   independent   public   accountants,   we  hereby  consent  to  the
incorporation  by reference of our report dated March 26, 1999  included in this
Form 10-K, into the Company's  previously filed Registration  Statement File No.
33-33704 and to all references to our firm included in this Form 10-K.

Denver, Colorado                             ARTHUR ANDERSEN LLP
March 26, 1999