As filed with the Securities and
Exchange Commission on July 26, 2001 Registration No. 333-38026
==============================================================================

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
POST EFFECTIVE AMENDMENT NO.3
FORM S-1

Registration statement under the Securities Act of 1933

PACIFIC WEBWORKS, INC.
(Name of issuer in its charter)

Commission file No. 000-26731
---------------

Nevada 7372 87-0627910
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)

180 South 300 West, Suite 400
Salt Lake City, Utah 84101
(801) 578-9020
(Address and telephone number of registrant's principal executive offices
and principal place of business)

1760 Fremont Drive
Salt Lake City, Utah 84104
(Former address)

Christian Larsen, President
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
(801) 578-9020
(Name, Address and telephone number of agent for service)
---------------

Copies to:

Cindy Shy, Attorney
Cindy Shy, P.C.
525 South 300 East
Salt Lake City, Utah 84111
(801) 323-2392

Approximate date of commencement of proposed sale to the public:
From time to time following the effectiveness of this registration statement.

If the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ X ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
boxes and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following boxes and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

This registration statement shall become effective in accordance with
Section 8(a) of the Securities Acts of 1933 on such date as the Commission,
acting pursuant to Section 8(a), may determine.

PROSPECTUS

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| This prospectus is a post-effective amendment to the prospectus that |
| was part of a registration statement declared effective by the |
| Securities and Exchange Commission on June 12, 2000. |
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Pacific WebWorks, Inc.
a Nevada corporation

850,000 shares of common stock
______________

Prospectus dated July 17, 2001

TABLE OF CONTENTS

PROSPECTUS SUMMARY.......................................................3

RISK FACTORS.............................................................4

USE OF PROCEEDS..........................................................9

MARKET AND PRICE RANGE OF COMMON STOCK...................................9

SELECTED FINANCIAL DATA................................................. 11

MANAGEMENT'S DISCUSSION AND ANALYSIS.....................................12

BUSINESS.................................................................18

PROPERTIES...............................................................26

LEGAL PROCEEDINGS........................................................26

MANAGEMENT.............................................................. 26

PRINCIPAL STOCKHOLDERS.................................................. 28

DESCRIPTION OF SECURITIES............................................... 30

SELLING STOCKHOLDERS.................................................... 30

PLAN OF DISTRIBUTION.....................................................32

INTERESTS OF NAMED EXPERTS AND COUNSEL...................................33

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY........................................33

AVAILABLE ADDITIONAL INFORMATION.........................................33

CHANGES IN ACCOUNTANTS...................................................34

FINANCIAL STATEMENTS.....................................................34

You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering and
selling the shares only in jurisdictions where offers and sales are
permitted. The information in this prospectus is accurate only as of the date
of this prospectus, regardless of the time of delivery of the prospectus or
any sale of the shares.

PROSPECTUS SUMMARY

Pacific WebWorks, Inc.
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
(801) 578-9020

The Company. Pacific WebWorks, Inc. engineers business software
technology for the Internet based on our proprietary source code. Our premier
products Visual WebTools(TM) and the IntelliPay transaction gateway, allow the
small to medium sized business owner to expand their business onto the
Internet. Our products allow a business to create, manage, maintain and edit
its own web site, as well as process and manage income from Internet
transactions. Further discussions of our business and products can be found
in the "Business" section starting on page 18.

The following table sets forth certain selected financial data of
Pacific WebWorks for the quarter ended March 31, 2001 and the years ended
December 31, 2000, 1999, 1998 and 1997. We have had recurring operating
losses and are dependent on financing to continue operations. However,
management continues to reduce our burn rate, solicit funding and increase
cash sales. The information contained in the following table should be read
in conjunction with the "Management's Discussion and Analysis" starting on
page 12 and the historical financial statements and related notes included
elsewhere in this prospectus.

Three Month
Period Ended
March 31, Year Ended December 31,
2001 2000 1999 1998 1997
------------ ------------ ------------- ------------- --------------

Operations
Revenues $ 1,351,970 $ 4,954,384 $ 305,628 $ 172,395 $ 94,014
Gross profit 1,124,271 4,142,878 262,754 (16,579) (13,318)
Total operating
expenses 1,401,991 9,346,118 2,787,292 123,125 55,689
Net loss (438,273) (5,259,691) (2,567,535) (150,465) (68,752)
Net loss per
common share (0.03) (0.40) (0.27) (0.03) (0.01)

Financial position
Current assets 613,446 698,784 449,084 20,534 34,551
Current
liabilities 3,244,024 3,282,184 644,727 265,187 119,844
Total assets 7,809,482 5,405,022 630,559 55,970 61,092
Stockholder's
equity 4,416,869 2,122,168 (14,168) (209,217) (58,752)
Book value per
weighted
average
per share
outstanding $ 0.26 $ 0.16 $ - $ (0.04) $ (0.01)

The Offering. We are registering 850,000 common shares which will be
sold from time to time and at the total discretion of the selling stockholders
who are identified on page 30. The 850,000 common shares will be issued to
the selling stockholders upon exercise of warrants. We have agreed to
register these shares as a result of a Registration Rights Agreement, dated
February 22, 2000, between us and the selling stockholders. The transactions
related to this registration and the terms of the agreements are described in
more detail in the "Selling Stockholders" section starting on page 30. See,
the "Plan of Distribution" on page 31 for further details on the rights of the
selling stockholders in regards to the manner of any sales.

RISK FACTORS

Potential investors should carefully consider the following risk factors
before deciding to buy our common stock. Each investor should also consider
the other information in this prospectus. If any of the following risks
actually occur, our business, financial condition, operating results or cash
flows, could be materially adversely affected. This could cause the trading
price of our common stock to decline, and the investor may lose part of or all
of your investment.

Risks Related to Our Operations

We have a limited operating history and we cannot be certain of future
progress or profitability. We were incorporated in 1987, but did not operate
as a business until 1997. Starting in 1999, we began to market our software
products through resellers. As of March 31, 2001 our accumulated losses
totaled $8,484,716. We may encounter financial, managerial, technological or
other difficulties as a result of our lack of operating history. Although we
anticipate that our operating revenue will increase in the future based upon
the continuing increases we have noted in our financial statements, we cannot
guarantee that our revenues will exceed our operating expenses.

Our profitability is substantially dependent on continued expansion of
the Internet, which is uncertain. A substantial portion of our services and
products require connectivity through the Internet. Although online usage has
expanded rapidly in recent years, the Internet is still immature and is
evolving rapidly. Critical issues concerning the Internet such as security,
reliability, cost, ease of use and quality of service, remain
unresolved and may limit the growth of electronic commerce. Delays in the
deployment of improvements to the infrastructure for Internet access,
including:
. higher speed modems and other access devices,
. adequate capacity, and
. a reliable network backbone
also could hinder the development of the Internet as a viable commercial
marketplace. For all of these reasons, it remains uncertain whether commerce
over the Internet will continue to grow, whether a significant market for our
products and services will grow or whether our products and services will
become generally adopted. Even if such a market does develop, competitive
pressures may make it difficult, or impossible, for us to operate profitably.

Our industry is subject to rapid technological change with which we may
not be able to keep pace. Internet industries change rapidly. Wide scale
implementation of a new technology or payment method, such as stored-value
cards, electronic cash equivalents or wireless communications, could force us
to modify our payment services or software to remain competitive, and could
potentially render one or more of our services or products obsolete. Risks
exist that we may not be able to successfully develop new products or, if we
do, that those products may not be accepted by the market. The cost of any
adaptations or the loss of revenue from a displaced service or product would
have a material adverse effect on us. Our ability to successfully compete, in
turn, will depend upon a number of factors, including our ability to
successfully maintain and sell existing products, our ability to conceive,
develop, improve, and market new products, our ability to identify and take
advantage of emerging technological trends within our target markets, and our
ability to respond effectively to technological changes or new product
announcements by competitors. We believe that we will need to make continuing
significant expenditures for research and development in the future.

We are subject to intense competition and we may not be able to compete
successfully in the market. Our markets are new, competitive, and subject to
rapid technological change. We face competition in the overall Internet
software market, as well as in the web site building market. We expect
competition to persist, increase, and intensify in the future as the markets
for our products and services continue to develop and as additional
competitors enter our market. In addition, many of our current or potential
competitors, such as Microsoft, have broad distribution channels that they may
use to bundle competing products directly to end-users or purchasers. If
these competitors were to bundle competing products for their customers, it
could adversely affect our ability to market

our services.
Currently, in our estimation, few major competitors offer products
comparable to the Visual WebTools(TM) product family. We believe that "Yahoo!
Store" is our most significant competitor, with its brand name recognition and
significantly greater financial, technical, marketing, and managerial
resources. Yahoo! Store has significantly higher sales and customers than we
do and has entered into a significantly higher number of license agreements
with third parties than we have. Our success in our target market will depend
upon our ability to build name brand recognition and to provide cost-effective
products and services to our customers. We believe that our product provides
a comparable service for a lower price than that provided by Yahoo! Store. In
addition, because we have focused our efforts on small businesses, including
providing Internet tools which allow businesses to develop their own Web
sites, we believe that the generality of the Yahoo! Store may be inadequately
addressing potential customer needs and that we will be able to address site
development needs. However, we may be unable to compete effectively with
current and future competitors, including Yahoo! Store and Microsoft.

We must achieve market acceptance and develop new products and services
to address technological change. Broad acceptance of our products and
services and their use in large numbers is critical to our success because a
large portion of our revenues derive from one-time fees we charge to customers
buying our products and services. In addition, our ability to earn
significant revenues from our Visual WebTools(TM) or IntelliPay transaction
gateway will depend in part on their acceptance by a substantial number of
prominent online businesses. One obstacle to widespread market acceptance for
IntelliPay transaction gateway is that widely adopted technological standards
for accepting and processing payments over the Internet have not yet emerged.
As a result, merchants and financial institutions have been slow to select
which service to use. Until one or more dominant standards emerge, we must
design, develop, test, introduce and support new services to meet changing
customer needs and respond to other technological developments. To be
successful, we must obtain widespread acceptance of our technologies, or
modify our products and services to meet whatever industry standards do
ultimately develop. It is not certain that we will be able to do either.

Our results may suffer if we are unable to attract and maintain
qualified management and technical personnel. Our performance is
substantially dependent on the performance of our executive officers and key
employees. We depend on our ability to retain and motivate high quality
personnel, especially our management and highly skilled development teams.
Should we lose the services of one or more of these persons, their loss could
have a material adverse effect on our operations. Our future successes also
depends on our continuing ability to identify, hire, train and retain other
highly qualified technical and managerial personnel. Competition for these
employees is intense and increasing. We may not be able to attract,
assimilate or retain qualified technical and managerial personnel in the
future, and the failure to do so would have a material adverse effect on our
business.
We depend upon our proprietary rights, none of which can be completely
safeguarded against infringement. Our ability to compete effectively will
depend, in part, upon our ability to protect our proprietary source code,
Visual WebTools(TM) and the IntelliPay transaction gateway, through a
combination of licenses and trade secrets. Competition in our market is
intense and our competitors may independently develop or obtain patents on
technologies that are substantially equivalent.
Intellectual property rights, by their nature, are uncertain and involve
complex legal and factual questions. We may unknowingly infringe upon the
proprietary rights of others, thereby exposing us to significant liability
and/or damages. We are not aware of any third party intellectual property
rights which would prevent us from marketing and developing our technologies,
although such rights may exist. If we were to inadvertently infringe upon the
intellectual property of another party, we could be forced to seek a license
to those intellectual property rights, alter the products or processes so they
no longer infringe upon those rights, or engage in litigation. If we were
required to attempt to obtain a license to another party's proprietary rights,
our efforts would be expensive, and might be unsuccessful.
We also rely upon trade secrets with respect to our source code and
functionalities and other unpatented proprietary information in our product
development activities. To the extent we rely upon confidential information
to maintain our competitive position, other parties may independently develop
the same or similar information. We seek to protect trade secrets and
proprietary knowledge in part through confidentiality agreements with our

employees, resellers, and collaborators. These agreements may not effectively
prevent disclosure of our confidential information and may not provide us with
an adequate remedy in the event of unauthorized disclosure of such
information. If employees or collaborators develop products independently
that may be applicable to our products under development, disputes may arise
about ownership of proprietary rights to those products or services.
Protracted and costly litigation could be necessary to enforce and determine
the scope of our proprietary rights. It would be impossible to predict
whether litigation might be successful. Our failure to obtain trade secret
protection, for any reason, could have a material adverse effect on our
business, financial position and results of operations.

We rely in part on third party technology licenses. We also rely on
certain technology which we license from third parties, including software
which is integrated with internally developed software and used in our
software to perform key functions. We cannot ensure that third party
technology licenses will continue to be available to us on commercially
reasonable terms, or at all. Our inability to maintain any of these
technology licenses could result in delays in distribution of our services,
which could have a material adverse effect on our business, financial
condition or operating results.

We will need additional capital and may be unable to raise it. We
believe, based on our current expenditure rate, that we will need $1 million
additional financing by the fall of 2001. Therefore, our success will depend
upon our ability to access equity capital markets and borrow on terms that are
financially advantageous to us. We may not be able to obtain additional funds
on acceptable terms. If we fail to obtain funds on acceptable terms, we might
be forced to delay or abandon some or all of our business plans. If we are
unable to obtain additional capital, we may not have sufficient working
capital to develop products, finance acquisitions, pursue business
opportunities, or meet reporting requirements. If we borrow funds, we could
be forced to use a large portion of our cash reserves to repay principal and
interest on those funds. If we issue our securities for capital, the
interests of investors and shareholders could be diluted.

We may experience software defects and development delays, damaging
customer relations. Services based on sophisticated software and computing
systems often encounter development delays and the underlying software may
contain undetected bugs, errors or failures when introduced or when the volume
of services provided increases. We may experience delays in the development
of our software products or the software and computing systems underlying our
services. In addition, despite rigorous testing, our software may
nevertheless contain errors. Any material development delays or errors could
damage the reputation of the service or software effected, as well as our
customer relations, which could have a material adverse effect on our
business. We have detected errors, defects, and bugs in the past and have
corrected them as quickly as possible. Correcting any defects or bugs we may
discover in the future may require us to make significant expenditures of
capital and other resources. We believe that we follow industry-standard
practices relating to the identification and resolution of errors, defects, or
bugs encountered in the development of new software and in the enhancement of
existing features in our products. As of this date we have not experienced
any material adverse effect by reason of an error, defect, or bug.

We may experience breakdowns in our hosting services, infrastructure or
payment processing systems, harming our business. We would be unable to
deliver our payment processing services or hosting services if our system
infrastructures break down or are otherwise interrupted. Events that could
cause system interruptions are:
. fire,
. earthquake,
. power loss,
. telecommunications failure, and
. unauthorized entry or other events.
We maintain redundant systems within our operations centers designed to
prevent data loss or other disruption as a result of an internal system
failure. Our IntelliPay operating center is located in secured, climate
controlled areas, including high security, redundant power backups, seismic
reinforcements, redundant fire suppression facilities, redundant Internet
access and 24 hour security monitors. These measures will not necessarily

ensure the continued, uninterrupted operation of our processing capabilities
in the event of a regional natural disaster, power outage, communications
interruption, or other catastrophic event. Finally, although we regularly
back up data from operations, and take other measures to protect against loss
of data, there is still some risk of such losses. A system outage or data
loss could materially and adversely affect our business.
Despite the security measures we maintain, our infrastructure may be
vulnerable to computer viruses, hackers, rouge employees or similar sources of
disruption. Any damage or failure that causes interruptions in our operations
could have a material adverse effect on our business. Any problem of this
nature could result in significant liability to customers or financial
institutions and also may deter potential customers from using our services.
We attempt to limit this sort of liability through back-up systems,
contractual provisions, insurance, and other security measures. However, we
cannot assure you that these contractual limitations on liability would be
enforceable, or that our insurance coverage would be adequate to cover any
liabilities we might sustain.

We will be dependent upon license renewal which cannot be assured to
occur. We expect to derive revenues from user licenses and license renewals
and expect to increase the brand recognition of our products among users
through these types of relationships. In the event that a substantial number
of our customers were to decline to renew their contracts for any reason, we
could experience a substantial drop in revenues. Our success in establishing
our products as a recognized brand name and achieving their acceptance in the
market will depend in part on our ability to continually engineer and deliver
new product technologies and superior customer service, so that customers
renew their licenses year after year.

We may pursue acquisitions of complementary service product lines,
technologies or business which may adversely affect our operations. From time
to time, we evaluate potential acquisitions of businesses, services, products,
or technologies. These acquisitions may result in a potentially dilutive
issuance of equity securities, the incurrence of debt and contingent
liabilities, and amortization of expenses related to goodwill and other
intangible assets. In addition, acquisitions involve numerous risks,
including difficulties in the assimilation of the operations, technologies,
services, and products of the acquired companies, the diversion of
management's attention from other business concerns, risks of entering markets
in which we have no or limited direct prior experience and the potential loss
of key employees of the acquired company. We have no present commitment or
agreement with respect to any material acquisition of other businesses,
services, products, or technologies.

We may be subject to increased regulations and may be exposed to
liability for information retrieved from the Internet. Other than the laws
and regulations applicable to businesses generally, we are aware of few laws
and regulations which expressly apply to access and commerce on the Internet.
Due to the increased popularity and use of the Internet, however, it is
possible that new laws and regulations may be adopted with respect to the
Internet relating to issues such as user privacy, pricing and characteristics,
and content and quality of products and services. The adoption of any new
laws or regulations could retard the growth or the use of the Internet, which
could adversely affect the demand for our products and services. New laws or
regulations could also result in significant additional costs and
technological challenges for us in complying with any mandatory requirements.
Further, several states have attempted to tax online retailers and service
providers, even when those parties have no physical presence in the state. In
addition, plaintiffs have brought claims, and sometimes obtained judgments,
against online service providers for defamation, negligence, copyright or
trademark infringement, or under other theories with respect to materials
disseminated through the Internet. We may be subject to similar claims.

Risks Related to the Offering

The securities offered under this prospectus involve a high degree of
risk. Each prospective investor should consider certain risks and speculative
features inherent in and affecting Pacific WebWorks before purchasing any of
the securities offered hereby. In considering the following risks and
speculative factors, a prospective purchaser should realize that there is a
substantial risk of losing his entire investment. We have granted warrants to
purchase 850,000 common shares related to this prospectus and for the life of
the warrants the selling stockholders are given, at nominal cost, the
opportunity to profit from a rise in the market for our common stock with a
resulting dilution in the interest of security holders.

The nature of our business makes it difficult to predict our revenues
and operating results, which may negatively affect our stock price. We
currently are unable to finance our operations through our generated revenues
and we have consistently incurred losses since our formation. Our revenues
and operating results have varied significantly from period to period. It is
possible that our quarterly operating results from time to time will be below
the expectations of public market analysts and investors. In that case, we
expect that the price of our common stock would be materially and adversely
affected. Although our earnings are becoming more predictable as the market
for our services and products begins to mature, our revenues and operating
results can be expected to fluctuate somewhat for a variety of reasons beyond
our control:
. The burgeoning e-commerce phenomenon is relatively new and rapidly
evolving.
. No reliable data exists upon which to budget for growth and seasonality,
making planning very difficult.
. We are dependent for budget planning purposes on sales information and
other information provided by a large number of intermediary
"resellers," many of whom account for transactions sporadically.
. Many of our distribution channels integrate our services with other
electronic commerce solutions. The timing for these channels to
complete the integration and deploy their solutions into their
distribution channel is unpredictable.
. Our revenues may be adversely affected by new products and technologies
launched by our competitors.
For these reasons, period-to-period comparisons of our results of operations
are not necessarily a reliable indication of future performance.

Our stock price is volatile and is not in our control. In recent years
the stock market in general, and the market for shares of high technology
Internet companies in particular, have each experienced extreme price
fluctuations. In many cases these fluctuations have been unrelated to the
operating performance of the affected companies. The trading price of our
common stock may be subject to extreme fluctuations in response to both
business related issues such as quarterly variations in operating results,
announcements of new products developed by us, or announcements from our
competitors, and stock market-related influences including, but not limited
to, changes in analysts' estimates, the presence or absence of short selling
of our common stock, and events affecting other companies which the market
believes might affect us.

The future sale of common stock could pose investment risks, including
substantial dilution to our shareholders. The market price of our common
stock could drop as a result of sales of the common stock in the market after
the effective date of this registration statement, or the perception that such
sales could occur. These factors could also make it more difficult for us to
raise funds through future offerings of our common stock. As of June 15,
2001 there were approximately 22,626,688 shares of common stock outstanding,
with 9,843,288 shares freely transferable without restriction or further
registration under the Securities Act of 1933 (the "Securities Act"), and
12,783,400 shares which are "restricted securities," as that term is defined
in Rule 144 under the Securities Act. Of the restricted securities, 2,949,867
are held by our "affiliates," as defined in Rule 144. In addition, we have
granted options to purchase 3,941,857 shares exercisable through October 2003
and warrants to purchase 5,850,000 shares which are exercisable through April
2006.

Investors may have difficulty selling our shares. There has not been a
large public market for our equity securities and our common stock has traded
on the over-the-counter market only since January of 1999. We do not know the
extent to which investor interest in our stock will lead to the development of
an active trading market for our stock, or how liquid that market might be.
Investors may be unable to resell their common stock at or above the price
they pay for the common stock.
Also, our stock may qualify as a "penny stock" under the Penny Stock
Suitability Reform Act of 1990. The liquidity of penny stock is affected by
specific disclosure procedures to be followed by all broker-dealers, including
but not limited to, determining the suitability of the stock for a particular
customer, and obtaining a written agreement from the customer to purchase the
stock.

We have not paid dividends. We intend to retain future earnings to
finance our growth and development and do not plan to pay cash dividends in
the foreseeable future.

FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements. We intend to
identify forward-looking statements in this prospectus using words such as
"believes," "intends," "expects," "may," will," "should," "plan," "projected,"
"contemplates," "anticipates," or similar statements. These statements are
based on our beliefs as well as assumptions we made using information
currently available to us. Because these statements reflect our current views
concerning future events, these statements involve risks, uncertainties and
assumptions. Actual future results may differ significantly from the results
discussed in the forward-looking statements. Some, but not all, of the
factors that may cause these differences include those discussed in the Risk
Factors section of this prospectus. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus.

USE OF PROCEEDS

We are registering the shares for the benefit of the selling
stockholders and they will sell the shares from time to time under this
prospectus. We will not receive any of the proceeds from the sale of the
shares, but we will receive the proceeds from the exercise of the warrants.
The selling stockholders are not obligated to exercise their warrants, and
there can be no assurance that they will exercise all or any of them. If they
exercise all of the warrants we would receive a minimum of $3,625,000. We
intend to use the proceeds from the exercise of warrants for general corporate
purposes and for working capital which may include payment of salaries, rent,
research and development, purchase of inventory and marketing expenses.

MARKET AND PRICE RANGE OF COMMON STOCK

Market Information

The principal market for our common stock is the NASD OTC Bulletin Board
and our common shares are traded over the counter under the symbol "PWEB".
There was no trading activity in our common stock prior to the first quarter
of 1999. On March 12, 2001, our common stock was listed on the Berlin
Exchange under the symbol "PWB". The Berlin Exchange lists more than 10,000
companies from 60 different countries. There has been no trading volume in
our stock on this exchange as of the filing date. As of June 15, 2001 we have
approximately 259 stockholders of record of our 22,626,688 common shares
outstanding. The following table presents the range of the high and low bid
prices of our stock as reported by the Nasdaq Trading and Market services.
Such quotations represent prices between dealers and may not include retail
markups, markdowns, or commissions and may not necessarily represent actual
transactions.

Year Quarter Ended High Bid Low Bid
---- ------------- -------- --------
1999 March 31 $15.50 $ 6.88
June 30 9.41 5.00
September 30 6.38 3.81
December 31 4.94 1.25

2000 March 31 $ 6.13 $ 2.31
June 30 4.75 2.13
September 30 3.50 1.63
December 31 3.34 0.59

2001 March 31 $1.45 $0.69

Our shares will be subject to section 15(g) and rule 15g-9 of the
Securities and Exchange Act, commonly referred to as the "penny stock" rule.
The rule defines penny stock to be any equity security that has a market price

less than $5.00 per share, subject to certain exceptions. The rule provides
that any equity security is considered to be a penny stock unless that
security is: registered and traded on a national securities exchange meeting
specified criteria set by the SEC; authorized for quotation from the NASDAQ
stock market; issued by a registered investment company; excluded from the
definition on the basis of price at least $5.00 per share or the issuer's
net tangible assets. If our shares are deemed to be a penny stock, trading in
the shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established
customers and accredited investors. Accredited investors, in general, include
individuals with assets in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with their spouse, and certain institutional
investors.

For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such security and must
have received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, the
rules require the delivery, prior to the first transaction, of a risk
disclosure document relating to the penny stock. A broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, and current quotations for the security. Finally, monthly
statements must be sent disclosing recent price information for the penny
stocks. Consequently, these rules may restrict the ability of broker-dealers
to trade or maintain a market in our common stock and may affect the ability
to shareholders to sell their shares.

Dividends

We have not paid cash or stock dividends and have no present plan to pay
any dividends, intending instead to reinvest our earnings, if any. For the
foreseeable future, we expect to retain any earnings to finance the operation
and expansion of our business. In addition, it is anticipated that the terms
of future debt and/or equity financing may restrict the payment of cash
dividends. Therefore, the payment of any cash dividends on the common stock
is unlikely. However, payment of future dividends will be determined from
time to time by our board of directors, based upon our future earnings,
financial condition, capital requirements and other factors. We are not
presently subject to any restriction on our present or future liability to pay
any dividends.

Determination of Offering Price

We relied on the market price of our common stock at the time of the
transactions for determination of the offering price of the units and the
strike price for the warrants. Due to the volatility in the price of our
common stock and the variations in the trading volume, we surveyed the quoted
trading price of our common stock on the NASD OTC Bulletin Board for
approximately 90 days prior to the transactions and used that information to
establish the price of the units and warrants.

SELECTED FINANCIAL DATA

The financial information set forth below with respect to our statements
of operations for the three months ended March 31, 2001 and 2000 is
unaudited. This financial information, in the opinion of management, includes
all adjustments consisting of normal recurring entries necessary for the fair
presentations of such data. The results of operations for the three months
ended March 31, 2001, are not necessarily indicative of results to be expected
for any subsequent period.

The financial information set forth below with respect to our statements
of operations for each of the four years ended December 31, 2000, 1999, 1998
and 1997 and with respect to our balance sheets at December 31, 2000, 1999,
1998 and 1997 is derived from financial statements that have been audited by
our independent certified public accountants, and is qualified by reference to
their reports and notes related thereto. Our accounting predecessor, Utah
WebWorks, Inc., had an inception date of April 10, 1997 and Utah WebWorks
merged with Pacific WebWorks (then Asphalt Associates, Inc.) on January 11,
1999. The 2000 fiscal year includes consolidation of our wholly owned
subsidiary, IntelliPay, Inc., and includes the consolidation of our former 51%
interest in World Commerce Network, LLC. The following selected financial
data should be read in conjunction with our financial statements and notes
attached to this report and the "Management's Discussion and Analysis," below.

First Quarter Ended
March 31, Year Ended December 31,
------------------------ ---------------------------------------------------
Statement of Operations Data 2001 2000 2000 1999 1998 1997
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------

Net revenues: $ 1,351,970 $ 372,972 $ 4,954,384 $ 305,628 $ 172,395 $ 94,014
Cost of sales 227,700 65,691 811,506 42,874 188,974 107,332
------------ ------------ ------------ ------------ ------------ ------------

Gross profit (loss) 1,124,271 307,281 4,142,878 262,754 (16,579) (13,318)
------------ ------------ ------------ ------------ ------------ ------------
Operating expenses:
Selling expenses 219,792 1,431,393 4,802,397 406,917 30,180 13,987
Research and development 143,095 81,116 1,044,842 320,479 11,949 5,523
General and administrative 451,782 695,099 2,375,252 786,740 67,845 36,179
Depreciation and
amortization 574,422 32,842 1,095,261 30,572 13,151 -
Compensation expense for
options and warrants 12,900 13,216 28,366 1,242,584 - -
------------ ------------ ------------ ------------ ------------ ------------

Total operating expense 1,401,991 2,253,666 9,346,118 2,787,292 123,125 55,689
------------ ------------ ------------ ------------ ------------ ------------

Loss from operations (277,721) (1,946,385) (5,203,240) (2,524,538) (139,704) (69,007)
------------ ------------ ------------ ------------ ------------ ------------
Other income and (expenses)
Interest expense (41,434) (15,215) (70,440) (19,243) (10,761) (3,500)
Interest income 3,566 - 13,989 1,246 - 3,755
Non recurring loss (122,685) - - - - -
Loss on investment - - - (25,000) - -
------------ ------------ ------------ ------------ ------------ ------------

Net Loss $ (438,273) $(1,961,600) $(5,259,691) $(2,567,535) $ (150,465) $ (68,752)
============ ============ ============ ============ ============ ============
Net loss per-share basic
and diluted $ (0.03) $ (0.19) $ (0.40) $ (0.27) $ (0.03) $ (0.01)
============ ============ ============ ============ ============ ============
Shares used in computing
per share amounts 17,132,209 10,400,342 13,140,360 9,632,500 5,000,000 5,000,000
============ ============ ============ ============ ============ ============

See notes to Financial Statements for information concerning the computation of per share amounts.

MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS

Overview

Beginning in the second quarter of 2000, and continuing throughout the
first quarter of 2001, management took several steps to restructure our
operations with the intent to generate profits. These steps included
integration of the operations of Pacific WebWorks and its related companies,
reduction in the number of employees, and continued development of our sales
and marketing channels. Cash from our current sales channels is insufficient
to support our existing operations, however, management believes that the
sales channels we are currently developing will be sufficient to support our
operations by years end. Sales projections may remain down throughout fiscal
year 2001 due to the alteration of our short-term goals and our overall sales
and marketing strategy.

Acquisitions. On April 4, 2000 we completed the acquisition of
IntelliPay, Inc., a Delaware corporation, as a wholly owned subsidiary. In an
arms length transaction, Pacific WebWorks issued 2,400,000 common shares,
valued at $4,320,000, in a stock-for-stock exchange for 1,000 shares of
IntelliPay. The acquisition was accounted for under the purchase method of
accounting. Accordingly, IntelliPay's results of operation have been included
with Pacific WebWorks from the closing date in April 2000 and its consolidated
assets and liabilities have been recorded at their fair values on the same
date. (See, "Business - General Development," below, for further details.)

Pacific WebWorks and U.S. Merchant Systems, Inc., a major customer
during fiscal year 1999, formed World Commerce Network, LLC, in December of
1999 as a joint venture. Originally, we held a 50% interest in World
Commerce, which was held on the equity method of accounting. In March 2000 we
acquired an additional 1% interest in World Commerce for 4,663 shares of
Pacific WebWorks common stock valued at $9,180, which then gave us a 51% total
interest. In the third quarter of 2000, we determined that we would acquire
the remaining 49% of World Commerce. We and U.S. Merchant Systems agreed to
complete our scheduled seminars and then we would assume the outstanding
ownership of World Commerce held by US Merchant Systems and continue forward
with World Commerce operations. As a result we acquired the remaining 49%
interest for $100 in August 2000. The operations of World Commerce are
consolidated with our financials statements as a wholly owned subsidiary of
Pacific WebWorks. (See, "Business - General Development," below, for further
details.)

In February 2001 we completed the acquisition of Logio, Inc., a Nevada
corporation. We acquired Logio in an arms length transaction by issuing
approximately 2.8 million shares of our common stock for 18,425,830 shares of
Logio common stock. This transaction was valued at approximately $2,447,200.
The acquisition was accounted for under the purchase method of accounting
using generally accepted accounting principles. Logio's results of operation
are included with ours from the closing date and its consolidated assets and
liabilities are recorded at their fair values at the same date. (See,
"Business - General Development," below, for further details.)

Comparison of Three Month Periods. Following is a comparison of our
operating results for the three months ended March 31, 2001 and 2000:

Net Revenues. We receive revenues from the sale of access to our
software technology and continuing monthly service and hosting fees.
Additionally, we derive revenues for services provided related to web site
design, training, education and consulting. Revenues are recognized when
persuasive evidence of an agreement exists, delivery has occurred and services
have been rendered, the price is fixed or determined and collectability is
reasonably assured. Up-front fees are non-refundable and are deferred and
recognized systematically over the period the product is delivered and
services are performed, which is generally one year. Monthly fees for our
services are recognized as services are performed.

Revenues increased $978,998, in the 2001 first quarter as compared to
the first 2000 quarter. A total of 82.3% of the first quarter 2001 net
revenues were raised from seminar related activities held during 2000.
However, the seminars were abandoned due to the significant costs involved in
running several seminar teams and the cash flow concerns related to the
seminar marketing operations.

Cost of sales. These include costs of merchant accounts, shipping and
fulfillment costs, and other third party products and services. Cost of sales
increased $162,009 for the 2001 first quarter compared to the 2000 first
quarter.

Operating expenses. Total operating expenses decreased $851,675 in the
2001 first quarter compared to the 2000 first quarter. Total operating
expenses exceeded revenues by $50,021 for the 2001 first quarter and by
$1,880,694 for the 2000 first quarter.

Selling Expenses. Selling expenses consist of both sales and marketing
expenses, including department salaries and benefits, advertising, seminar
costs, and commissions paid to resellers. Our selling expenses decreased
$1,211,601 in the 2001 fiscal quarter compared to the 2000 first quarter. The
decrease is primarily a result of discontinuing our seminar marketing program.

Research and Development Expenses. Research and development consists
primarily of personnel expenses related to product design, programming, and
quality control. Research and development expenses increased $61,979 in the
2001 first quarter compared to the 2000 first quarter. The increase was
primarily due to research and development and completion of IntelliPay's
SmartPages and duplicate payment request detection, and Pacific WebWorks'
Visual WebTools Version 4.1.

General and Administrative Expense. General and administrative expenses
consist of all finance and administrative salaries and benefits, rental of
office space, professional fees and other general office expenses. General
and administrative expenses decreased $243,317 in the 2001 first quarter
compared to the 2000 first quarter due to reductions in personnel,
consolidation of operations, and a concerted effort to reduce administrative
costs where necessary.

Depreciation and amortization. These expenses include depreciation of
property and equipment and amortization of goodwill and other assets. These
expenses increased $541,580 in the 2001 first quarter compared to the 2000
first quarter. We have also amortized goodwill related to our acquisition of
Logio over three years with approximately $88,000 being amortized for the 2001
first quarter. Depreciation expense for the first quarter 2001 includes
$137,088 of Logio depreciation.

Compensation expense for options and warrants. These expenses relate to
stock options earned by employees, directors and consultants. We granted
options to employees in September 2000 and the strike price of these options
was less than the fair value on the date of grant, creating intrinsic value.
We recognized the expense of these options over the one-year vesting period
and recorded $12,900 during the first quarter of 2001.

Total other income (expense). We have recorded a non-recurring loss of
$122,685 related to Logio's failure to make a payment on a capital lease
obligation. This loss is a significant factor for the $145,338 increase in
other expenses for the first quarter of 2001 compared to the 2000 first
quarter.

Net Loss. Our net loss was 32.4% of revenues for the 2001 first quarter
compared to 525.9% of revenues for the 2000 first quarter. During the 2001
first quarter, the loss attributable to our operations was $0.03 compared to
$0.19 per share for the first quarter of 2000. The primary cause of our loss
in the 2001 first quarter related to the acquisition of Logio and its
additional depreciation and non-recurring loss, along with the amortization of
its goodwill. The primary source of our losses in the first quarter of 2000
related to our investment in the growth of our marketing subsidiary, World
Commerce Network.

Comparison of 2000 and 1999 Year End Periods. Following is a comparison
of our operating results for the year ended December 31, 2000 with the year
ended December 31,1999:

Net Revenues: Pacific WebWorks generated $4,954,384 in net revenues, an
increase of $4,648,756, as compared to $305,628 for 1999. A total of 70.7% of
the 2000 net revenues were raised from seminar related

activities held in 2000. However, the seminars were abandoned due to the
significant costs involved in running several seminar teams and the cash flow
concerns related to the seminar marketing operations. A total of 16.8% of the
net revenues were related to IntelliPay monthly gateway service fees and
set-up fees on ePayment Systems and 12.4% were related to product sales and
licensing fees for our software technology and from web site design services
and training.

General and Administrative Expense: General and administrative expenses
increased $1,588,512 from 1999 to 2000. The increase is primarily due to our
growth in 2000 and the resulting increases in finance and administrative
employees, telephone expenses, bank and merchant discount fees, insurance
costs and the renting of the new data center, approximating $30,000 per month
beginning in October of 2000.

Selling Expenses: Our selling expenses increased $4,395,480 in 2000
compared to 1999. These expenses related primarily to seminar related
activities, including outsourced seminar presentation talent, postage and
printing of mailers, travel, trade shows, meeting room facilities, and
internal sales employees.

Research and Development Expenses: Research and development expenses
increased $724,363 in 2000 from 1999. The increase was primarily due our
research and development efforts and completion of IntelliPay's ePayment
System and related products. These expenses are primarily comprised of
employee related charges for up to thirteen engineering personnel and
consulting services related to development.

Total Operating Expenses: The $6,558,826 increase in total consolidated
operating expenses from 1999 to 2000 was due primarily to our seminar related
activities and the development of our software tools and ePayment product. We
completed development of our core products in 2000 and continually work to
improve and maintain them. In second quarter 2000, we shifted our sales and
marketing model from seminar presentations to strategic business development
and reseller distribution channels. This shift caused a reduction in selling
expenses in late 2000.

Compensation Expense for Options and Warrants for Consulting Services.
We grant options from time to time as approved by the board of directors. We
granted options to employees in September 2000 and the strike price of these
options was less than the fair value on the date of grant, creating intrinsic
value. We are recognizing the expense of these options over the one-year
vesting period and have recorded $15,150 during 2000.

We issued warrants to purchase 400,000 common shares to our investors
relations firm for services during 1999. The warrants were exercisable over a
period of time and we recognized the $1,255,800 value of the warrants,
determined on the Black-Scholes model, over the period earned. We recorded
$13,216 in 2000 and $1,242,584 in 1999.

Net Loss. Our consolidated net loss for 2000 was $5,259,691 compared to
a net loss of $2,567,535 for 1999, an increase of $2,692,156. The net loss
increase in 2000 was primarily due to increased operating expenses, related to
seminar sales activity, and increases in employees and administrative costs,
and research and development efforts.

Comparison of 1999 and 1998 Year End Periods. Following is a comparison
of our operating results for the year ended December 31, 1999 with the year
ended December 31, 1998:

Revenues. We generated $305,628 in revenues from product sales and
licensing fees for our software technology during fiscal 1999 compared to
$172,395 for 1998. The increase was primarily attributable to the development
of sales of our software technology by us or through our resellers.

General and Administrative Expenses. These costs increased $718,895
from 1998 compared to 1999. The increase is primarily due to the growth in
the number of administrative employees and general office expenses.

Sales Expenses. Sales expenses increased $376,737 from 1998 compared to
1999. Sales expenses for 1999 increased over the previous years due to the
development of an inside sales force, which included experienced Internet
sales people.

Research and Development Expenses. Research and development expenses
recorded an increase of $308,530 from 1998 to 1999. The increase was
primarily due to continued development of our software technologies and
addition of development employees.

Total Operating Expenses. The $2,664,167 increase in total operating
expenses from 1998 to 1999 was due to the change in the nature of our
operations from selling services to selling software products. Our expenses
increased primarily due to the expense related to execution of our new
development plan.

Warrants for Consulting Services. During 1999 we issued warrants to
purchase 400,000 common shares to our investors relations firm for services
valued at $1,255,800. The warrants were exercisable over a period of time and
for the 1999 period we recognized $1,242,584 of the value, as determined on
the Black-Scholes model.

Net Loss. Our net loss for 1999 was $2,567,535 compared to a net loss
of $150,465 for 1998. The net loss increase of $2,417,070 in 1999 was
primarily due to increased operating expenses related to research and
development efforts, improvement of sales channels, and the amortized expense
for the warrants issued for services.

Comparison of 1998 and 1997 Year End Periods. Following is a comparison
of our operating results for the year ended December 31, 1998 with the year
ended December 31, 1997:

Revenues. We generated $172,395 in revenues from product sales and
licensing fees for our software technology during fiscal 1998 compared to
$94,014 from engineering services for 1997. The increase in revenues of
$78,381 was a result of shifting our business operations from engineering
services to Internet software applications.

General and Administrative Expenses. These costs increased $31,666 from
1997 compared to 1998. The increase was primarily due to increases in general
office expenses.

Sales Expenses. Sales expenses increased $16,193 from 1997 compared to
1998. The increase was primarily due to promotions, including printing of
material related to professional services.

Research and Development. These expenses increased $6,426 from 1997
compared to 1998. The increase was primarily due to the addition of new
development personnel.

Total Operating Expenses. Total operating expenses increased $67,436
from 1997 compared to 1998. These expenses were 59.2% of revenues in 1997
compared to 71.4% of revenues in 1998. These expenses increased as a result
of the major changes in the nature of our business operations.

Net Loss. We recorded a net loss of $68,752 for 1997 and a net loss of
$150,465 for 1998. The increase in the net loss was a result of the operating
expenses associated with our growth and shift in business operations.

Liquidity and Capital Resources

At March 31, 2001, we had $40,786 cash on hand with total current assets
of $613,446 compared to $163,801 cash on hand with total current assets of
$698,784 at December 31, 2000. Total current liabilities were $3,244,024 for
the first quarter of 2001 compared to $3,282,184 at December 31, 2000.
Deferred revenue, which has been deferred in accordance with SAB101 and
recognized on a ratable basis over the period the service revenues are earned,
represented $755,053, or 23.2%, of total current liabilities for the 2001
first quarter. Accounts payable, including past due amounts, accounted for
$663,735, or 20.5% percent, of the total current liabilities for

the 2001 first quarter. Deferred revenues were 55.2% and accounts payable
were 18.6% of the total current liabilities as of December 31, 2000. Our
accumulated deficit totaled $8,484,716 for the 2001 first quarter and we had
negative working capital totaling $2,630,587.

Net cash used in operating activities for the 2001 first quarter was
$698,157. Net cash used in investing activities for the quarter was $67,069,
which was primarily used for the purchase of capital equipment. Net cash
provided by financing activities was $642,211, with $661,664 from the issuance
of notes payable. Financing activities during the first quarter of 2001
included advancements of an aggregate of $661,664 from related parties in
exchange for notes payable. These notes payable have varying interest rates
ranging from 13% to 15% and are due upon the earlier of our receipt of
$2,000,000 in equity funding, or June 1, 2001.

During fiscal year 2000 we entered into agreements with the holders of a
majority of our debt to convert those debts into equity. In June 2000 we
converted notes payable with interest of $2,037,536 into 1,440,000 common
shares of which 400,000 common shares were converted for $1,000,000 along with
warrants for the purchase of an additional 600,000 common shares at strike
prices ranging from $5.00 to $7.50 per share. Then in September 2000 we
converted a $600,000 note payable to 600,000 common shares.

As of January 31, 2001, we had notes payable of $250,000, including
principal and interest. During the first and second quarter of 2001, we
borrowed additional funds resulting in $950,000 of principal and interest.
Subsequently, in June 2001 the $1.2 million of outstanding debt with accrued
interest, which was due and payable to various parties, was assumed by three
investors. We now have new notes payable to AMCAN Services, Inc., State
Management Associates, LC and TAD Ventures, LC. The new notes payable held by
the three investors carry an interest rate of 15% and are payable on the
earlier of September 20, 2001, or at such time as we receive up to $1 million
in equity financing.

Since the quarter ended March 31, 2001 we have sold units for cash and
granted warrants to purchase shares, which may provide an additional source of
funding. In April 2001 we agreed to issue warrants to Columbia Financial
Group to purchase 1,000,000 shares of our common stock at an aggregate
exercise price of $625,000 in exchange for their services to us for one year.
Portions of the warrants vest on a predetermined time schedule and the
warrants expire in April 2006. In May 2001 we sold 4,000,000 units at $.40
per unit for $1,600,000, which has been placed in escrow, to four accredited
investors. Each unit consisted of one common share and a warrant, which
expires May 30, 2003, to purchase one common share at an exercise price of
$0.80 per share. As a result of these and previous transactions, as of June
15, 2001, we had outstanding warrants to purchase 5,850,000 common shares
which may result in maximum proceeds of $7,450,000. However, the holders of
the warrants have total discretion whether or not to exercise the warrants and
we cannot assure that all of the warrants will be exercised before their
expiration through April 2006.

Despite converting debt during fiscal year 2000, our shift in business
strategy has resulted in decreased cash inflow. As a result of our marketing
and sales strategies shifting away from costly seminars to business
development during the fourth quarter 2000, our monthly cash inflow decreased
substantially. Our monthly cash outflows have also caused a similar decrease
during the 2001 first quarter. We have payables past due and accrued
liabilities that, cumulatively, cannot be paid with cash on hand or monthly
cash flows. Thus, we require additional funding sources to meet the
requirements on our existing liabilities and the liabilities of our
subsidiaries.

In addition to our cash shortfalls, our subsidiary, Logio, Inc., has
experienced defaults under certain contractual obligations with Oracle
Corporation and Sun Microsystems Finance. In January 2001, Logio was notified
by Oracle Corporation that it was in default under a licensing agreement. As a
result of this default, Logio may no longer rely on the software license
granted by Oracle. In December 1999, April and October 2000, Logio entered
into capital lease agreements with Sun Microsystems Finance which expire
through December 2002. Under the agreements, Logio leased the server
equipment used to host its web site. In March 2001 Logio was unable to make a
payment due under this agreement. Logio defaulted on this capital lease
agreement totaling $404,000 resulting in a impairment loss of $122,685 for the
period ended March 31, 2001. The $122,685 represents the cash

down payments Logio made at the beginning of the leases which were amortized
over the life of the lease. Logio has returned the equipment to Sun
Microsystems and is currently attempting to negotiate a resolution to this
default. The default will likely result in abandonment losses for our fiscal
second quarter.

We continue to fund our operations with loans and the sale of
unregistered stock where cash flows fall short of requirements. While we have
taken steps to reduce our monthly burn rate and to become cash flow positive,
we believe we will need an additional $1 million to $3 million into 2002 to
continue to keep up with technological improvements and further our business
development strategies during the next twelve months. We operate in a very
competitive industry in which large amounts of capital are required in order
to continually develop and promote products. Many of our competitors have
significantly greater capital resources than we do. We believe we will need
to continue to raise additional capital, both internally and externally, in
order to successfully compete.

While we may be able to fund a portion of our operations through our
revenues for the short term, we currently anticipate using private placements
of our common stock to fund operations over time. We intend to issue such
stock pursuant to exemptions from the registration requirements provided by
federal and state securities laws. The purchasers and manner of issuance will
be determined according to our financial needs and the available exemptions.
We also note that if we issue more shares of our common stock our stockholders
may experience dilution in the value per share of their common stock.

Factors Affecting Future Performance

. We may not be able to obtain additional funds on acceptable terms. If
we fail to obtain funds on acceptable terms, we might be forced to delay
or abandon some or all of our business plans, which could have a
material adverse effect on us.

. Wide scale implementation of a new technology or payment method, such as
stored-value cards, electronic cash equivalents or wireless
communications, could force us to modify our payment services or
software to remain competitive, and could potentially render one or more
of our services or products obsolete

. We currently are unable to finance our operations through our generated
revenues. Our revenues and operating results have varied significantly
from period to period. Although our earnings are becoming more
predictable as the market for our services and products begins to
mature, our revenues and operating results can be expected to fluctuate
somewhat for a variety of reasons beyond our control which may result in
our quarterly operating results from time to time being below the
expectations of public market analysts and investors. In that case, we
expect that the price of our common stock would be materially and
adversely affected.

. We face intense competition that may slow our growth and force our
prices down. We expect this competition to intensify in the future,
with new competitors, and competitive services and products regularly
entering the market. If these competitors were to bundle competing
products for their customers, it could adversely affect our ability to
market our services.

. We may experience software defects and development delays, damaging
customer relations. Or we may experience breakdowns or unauthorized
entry into our hosting services, infrastructure or payment processing
system, harming our business. We would be unable to deliver our payment
processing services or hosting services if our system infrastructures
break down or are otherwise interrupted.

. Breach of our e-commerce security measures could reduce demand for our
services. The e-commerce industry is intensely focused on the need for
Internet security, particularly with respect to the transmission and
storage of confidential personal and financial data. Any compromise or
elimination of our security could erode customer confidence in our
systems and could result in lower demand for our services.

. We depend upon our proprietary rights, none of which can be completely
safeguarded against infringement. Intellectual property rights, by
their nature, are uncertain and involve complex legal and factual
questions. We may unknowingly infringe upon the proprietary rights of
others, thereby exposing us to significant liability and/or damages. To
the extent we rely upon confidential information to maintain our
competitive position, other parties may independently develop the same
or similar information.

. Our stock price is volatile. The price of our common stock has been and
likely will continue to be subject to wide fluctuations in response to a
number of events and factors and these broad market fluctuations may
adversely affect the market price of our common stock, regardless of our
operating performance.

BUSINESS

Historical Development

We were incorporated as Asphalt Associates, Inc. in the state of Nevada
on May 18, 1987. Asphalt Associates never established commercial business
operations and on January 11, 1999, Asphalt Associates merged with Utah
WebWorks, Inc., a Utah corporation (the "Utah WebWorks"), which was
incorporated on April 10, 1997. Utah WebWorks owned a significant portion of
the software technology which we currently use, while Asphalt Associates held
approximately $1 million dollars in cash which could be used for the marketing
and improvement of the Utah WebWork's technology. In conjunction with the
merger, Asphalt Associates changed its name to Pacific WebWorks, Inc. The
shareholders of Asphalt Associates retained one-half of the issued and
outstanding capital stock of the merged corporation, while the shareholders of
Utah WebWorks acquired the remaining one-half of the issued and outstanding
capital stock of the merged corporation.

Pacific WebWorks made several acquisitions during the 2000 fiscal year
which are discussed below, including acquisition of IntelliPay, Inc., a
Delaware corporation, as our wholly owned subsidiary in April 2000. Then in
August of 2000 we acquired World Commerce Network, LLC. Our 2001 fiscal year
began with the acquisition of Logio, Inc. as our wholly owned subsidiary in
February of 2001.

IntelliPay. In April 2000 we acquired IntelliPay. We had been working
closely with IntelliPay for about two years and during 1999 we entered into a
joint venture with IntelliPay to establish MainStreetSquare.com, an online
shopping portal. IntelliPay assists companies in their use of e-commerce web
sites and specializes in providing online, secure and real-time payment
processing services for businesses of all sizes. We refer to its products and
services as the IntelliPay transaction gateway. IntelliPay's transaction
gateway allows a business to accept real time payments from their web site,
Internet appliances, kiosks, phone, fax or storefront. IntelliPay's systems
use industry standard security components and methods, the same standards used
by all major commerce sites, and has been tested under strict banking network
procedures.

The IntelliPay transaction gateway provides ePayment system components
which help a business process and manage its Internet income. Point-of-sale
professionals provide technical support and ePayment professionals can even
help the business locate an Internet-approved merchant account if needed. The
IntelliPay LinkSmart connects the business' web site to IntelliPay's secure
servers. Once customers enter the necessary data on a secure form, IntelliPay
quickly processes the transaction in real-time (2 - 5 seconds) and returns the
customer back to the
business site.

IntelliPay also provides methods for enterprise-level businesses to link
IntelliPay's various products, services and features into their ecommerce web
sites and port live data streams into back-office systems. Additionally,
IntelliPay continues an aggressive research and development campaign designed
to deliver new feature services and payment products to their merchant
customers. Recent releases include:

. Smart Pages, a method of which IntelliPay hosts the business' payment
pages while the business maintains complete control over the "look and
feel" of those pages;
. Duplicate Transaction System which allows merchants to customize
IntelliPay's transaction behaviors based on a detected duplicate
transaction;
. New Address Verification System rules which allow merchants to automate
IntelliPay responses to credit card address verification responses, and
more.

In December 2000 IntelliPay moved into new corporate headquarters
located in Silicon Valley, California and upgraded its data center which
increased its processing capabilities. As of December 2000, more than 8,500
merchants use IntelliPay's products and it has completed certifications of its
proprietary code and connectors with FDC, NDC, NOVA, Vital and FTB. For more
information on IntelliPay, visit www.intellipay.com.

World Commerce Network, LLC. World Commerce Network, LLC was created in
December 1999 as a marketing company. Its mission was to sell the products of
Pacific WebWorks, U.S. Merchant Systems and IntelliPay. From December 1999
through July 2000 World Commerce conducted seminars focused on small business
owners and home business Internet users. At the time World Commerce was
selling products they included Visual WebTools(TM), merchant accounts, the
IntelliPay transaction gateway, as well as education and training. World
Commerce had established contract relationships with Productive Seminars, Inc.
in St. George, Utah. Productive Seminars conducted the seminars throughout
the country for World Commerce. However, World Commerce has ended its
relationship with Productive Seminars and ceased seminar marketing as of July
2000. During the time World Commerce was providing seminars we acquired
approximately 3,000 new customers which are now serviced by Pacific WebWorks.
We currently focus on direct sales and acquisition of reseller and strategic
alliance distribution channels. Management is evaluating the future role of
World Commerce.

Logio, Inc. On October 31, 2000, Pacific WebWorks and Logio entered
into an Agreement and Plan of Reorganization in which Pacific WebWorks agreed
to acquire Logio as a wholly-owned subsidiary through a stock-for-stock
exchange. The acquisition was contingent upon the approval of the
stockholders of Logio and registration of the shares under the Securities Act
of 1933. The registration statement on Form S-4 was declared effective on
December 20, 2000, without review by the SEC and Logio stockholder approval
was obtained in January 2001. We finalized the acquisition on February 8,
2001 when we filed Articles of Exchange with the state of Nevada.

Logio, formerly WordCruncher Internet Technologies, Inc., is a
development stage company historically engaged in the development and
marketing of a focused Internet directory and search engine which serves the
needs of the business professional. Logio launched its web site, logio.com,
on March 19, 2000. The web site was designed to provide a broad spectrum of
the information and services that are required by business people in their
daily work activities. In June 2000, Logio shifted its business model towards
the generation of revenues from set-up and maintenance fees from the sale of
its directory in private label form to certain Internet sites and corporate
Intranets. Subsequently, Logio discontinued the web site, and currently does
not conduct development and marketing activities nor does it have operations.
Our management is evaluating the potential applications for the Logio
technology in our products.

Our Business

Pacific WebWorks is an application service provider that develops
business software technologies for Internet merchants. We specialize in
turn-key applications allowing small to medium-sized business owners to expand
their business onto the Internet. Our product family provides tools for web
site creation, management and maintenance, statistics, reporting, surveys,
marketing, hosting and e-commerce enabling, all within the small to
medium-size business niche.

We initially focused entirely on virtual retailing software solutions,
meaning merchants that do not have a physical store location and would exist
only on the Internet. Due to requests in the marketplace we expanded our
technologies to include features for small to medium-sized physical merchants
in addition to our virtual merchants.

We plan to expand our software family to include features that integrate the
physical store information systems with the Internet store information
systems. This expansion may include features such as Cashier/ POS (point of
sale) management, receiving, ordering, tender, store operations, human
resources, POS peripherals management, inventory and accounting. At the same
time we expect our virtual software will be expanded to include featured items
and benefits, catalog management, order development, advanced 1-to-1 marketing
methods, sophisticated item comparison and selection, and pre-sales
qualification. This is expected to give the merchant a complete solution for
all physical store and Internet concerns and at the same time reduce costs of
operations and introduce new profit centers for the merchant.

Our Market

We market our products to small businesses. We believe small business
spending in the United States on Internet service applications is forecasted
to grow from $197 million in 2000 to $1.5 billion in 2004, or about 200%
calculated average growth rate. This is about half of all small business
application service provider spending, and represents one of the last large
Internet business marketplaces with no established leader in place. The other
half of small business application service provider includes Internet
applications like e-mail.

We also believe total United States spending by all size companies is
forecasted to grow from $960 million in 2000 to $4.25 billion in 2004. Small
companies, with fewer than 100 employees, but not home-based businesses,
represent about 70% of all forecasted application service provider spending.
We believe there were about 7.5 million such United States business in 2000,
and anticipate this business will grow to about 7.9 million in 2004 . Of that
number, we believe about 75,000 companies, or 1%, use application service
provider services today. By 2004, we believe that number will to grow to
three million, or about 38%. We believe the number of companies selling
online in 2000 is 15% and we expect this percentage to grow to 50% by 2004.

Pacific WebWorks' Products and Services

Even though small business typically understands how traditional brick
and mortar businesses operate, we believe they don't necessarily know how to
replicate business processes effectively and economically on the Internet.
Pacific WebWorks assists small businesses in succeeding online through our
software tools, Visual WebTools(TM) and education.

We provide a one-stop solution that includes an integrated suite of
e-commerce software tools, plus hosting, site management, web design services,
and education. By leveraging a shared commerce platform across many
customers, Pacific WebWorks brings economy of scale to our customers. We
believe this structure allows our customers to focus on their business instead
of technology, therefore they can achieve a much faster return on investments
made in technology and succeed on the Internet.

Products

Visual WebTools Version 4.1 ("V4.1") Pacific WebWorks has released its Visual
WebTools V4.1 software. This release is primarily a newly developed user
interface that we believe will be easier for our merchants to use therefore
making our software more appealing to new prospective customers. As part of
this new user interface structure we separated our WebWizard and ClipOn
Commerce Products into stand alone product offerings. This enhances our
strategic alliance and business development efforts by allowing us to offer
low cost products that can be widely distributed to existing clients and we
then have the ability to upgrade those clients into the rest of our software
tools.

Visual WebTools Version 4.0 ("V4") is a suite of software programs that fit
together to perform the basic business functions we believe are the most
effective on the Internet. The V4 tools include:

. WebWizard - Build and maintain a professional-looking web site.

. WebChannels - Deliver your message with this e-mail marketing
tool.
. WebContacts - Organize your contact database.
. Web Profiler Tool - Create forms and questionnaires to gather
demographic data.
. WebStats - Track the activity of your site.
. ClipOn Commerce(TM) - Sell your products and collect payments.

WebWizard. WebWizard is an easy-to-use Web page design program that is simple
enough for the novice, yet powerful enough for Web design professionals. It
incorporates sophisticated site components like tables, frames and multimedia
files in a straightforward, menu driven process. No complicated programming
is required. WebWizard allows our customers to quickly and easily create,
update, modify, and enhance their web sites. Changes can be made 24 hours a
day, 7 days a week from any Internet-connected Windows PC. Changes are
updated automatically and placed online within minutes. Our customers can
manipulate their site's layout, colors, content, tables, and graphics easily.
WebWizard includes a library of hundreds of graphics which are accessible by
our clients.

WebContacts is a contact management program. Our customers can maintain a
list of their web site visitors if the visitor elects to leave behind contact
information. This allows our customers to continue to market to their
customers. We believe our customers have potential to increase sales if they
can continue to communicate with their customers.

WebChannels is an e-mail distribution program that enables our customers to
send customized e-mails to their base of subscribers.

Web profiling tool is a form and survey creation tool that helps capture
feedback and valuable information from customers and web site visitors. Our
clients can create customizable forms, surveys and interactive questionnaires.
Web profiling tool includes a catalog of pre-made questions or the client can
create their own. For example a client could add support for online
subscription services, such as weekly newsletters, coupons and special deals.

WebStats enables our clients to watch what their customers are doing.
WebStats is a statistics program that provides detailed reports on web site
visitors including the path their customers take throughout the web site.
This allows our customers to learn what browsers and operating systems web
site visitors are using, what web sites generate page hits, and what pages are
the most popular. WebStats can produce reports of business information,
including year-long sales trends and the effectiveness of the clients' sites.

ClipOn Commerce(TM) is a e-storefront and product management system,
complete with shopping cart technology. ClipOn Commerce allows our clients to
build an Internet storefront. They can create a complete product catalog,
organize and search products by unlimited categories and import/export to and
from their database. ClipOn commerce has support to include a merchant
account and is integrated with our IntelliPay transaction gateway, which
allows our clients to accept all major credit cards and electronic checks.
ClipOn Commerce also has support for QuickBooks accounting software.

Services

Pacific WebWorks provides more than our Visual WebTools(TM). We also
assist our customers with education and site design services. We believe this
information helps our clients understand how to use the Internet more
effectively.

E-Camp is a three-day training program designed to teach aspects of doing
business on the Internet.

Idea Center Our online Idea Center promotes our customers' success by
providing them with current information related to the Internet and what other
successful business owners are doing online.

Rent-a-Pro offers custom web site design services to clients who elect to hire
Pacific WebWorks to build their web site for them rather than building it
themselves.

Technical Support Pacific WebWorks offers support via online chat or e-mail
from 7 a.m. to 8 p.m. (MST), or by phone from 8 a.m. to 5 p.m.

Hosting Infrastructure Users of Visual WebTools(TM) are not required to own
their Internet technology. Pacific WebWorks customers' web sites are hosted
on behalf of your clients, therefore eliminating the cost of ownership for our
clients.

Place-to-Vacation is a marketing tool that helps our users attract Internet
traffic to their web site by giving away a chance to win a free vacation.

IntelliPay Products

IntelliPay develops and offers payment technologies for
business-to-business and business-to-customer uses on the Internet and in
physical stores. IntelliPay's various products allow our customers to accept
real time payments from their web site, Internet appliances, kiosks, phone,
fax or storefront.

ePayment System. A variety of features and tools gives IntelliPay
merchant customers increased control over their income revenue streams. One
of IntelliPay's missions is to stay in close contact with our business
customers and develop features and products that online businesses actually
need or want. IntelliPay supports all major card types including Visa,
MasterCard, American Express, Discover, Diners Club and JCB. Also, support is
provided for Visa and MasterCard debit (check) cards and Level Two
corporate/commercial cards through various bank networks. Transaction types
include industry standard transactions such as normal authorizations,
pre-authorizations intended for delayed settlement, the so-called "force"
allowing a transaction authorized offline (possibly a voice authorization) to
be settled, credits (for refunds) and IntelliPay innovation "AVS Only",
allowing merchants to retrieve and AVS score and verify the account validity.

IntelliPay's products allow our customers to control transaction level
behavior depending on AVS scores, duplicate transaction attempt detection, and
more. IntelliPay also automatically settles merchant batches nightly so our
customers are freed from forcing settlement via manual or programmatic
methods, which also helps reduce our customer's costs by settling within the
24-hour window mandated by most merchant accounts. IntelliPay's system is
fully transportable meaning that an IntelliPay customer can switch web site
hosting companies, switch between most e-store softwares or switch to or from
almost any merchant account provider. Our system can follow our customer at
no additional charges and minimal technology issues.

ExpertLink(TM). ExpertLink is IntelliPay's proprietary connection
protocol for high-volume Internet businesses requiring reliable, high velocity
real-time transaction authorizations linked to their own secure web site
and/or back office systems. ExpertLink is a standards-based secure
communications method allowing web-developers and application developers to
build in IntelliPay's ePayment processing and various features, including
batch management commands, duplicate transaction detection and management, and
more. Our customers usually purchase ExpertLink or LinkSmart, and both come
with Smart Terminal and the Secure Account Management System.

LinkSmart(TM). LinkSmart gives our online customers IntelliPay's
ePayment features with minimized technical installation on their side. With
LinkSmart, our customer does not need to pay for installation and maintenance
of expensive secure servers since LinkSmart serves the secure, customizable
payment pages for them. LinkSmart offloads many expensive mission-critical
e-commerce hurdles from the merchant. Using IntelliPay's proprietary
SmartPages(TM) technology, which was released during the first quarter 2001,
our client can upgrade and control the entire look and feel of the IntelliPay
hosted payment pages.

Smart Terminal(TM). Smart Terminal allows our customers to securely log
into their IntelliPay account from any Internet browser and authorize manual
transactions and orders they have received through email, voice, fax or other
offline methods. With Smart Terminal most clients do not need to buy expensive
terminal devices. Smart Terminal supports industry-standard transactions
including normal authorizations, authorization-only for delayed settlement,
settlement for non-IntelliPay authorized transactions, credits and more. Most
clients receive Smart Terminal along with LinkSmart or ExpertLink, but Smart
Terminal can also be purchased as a standalone product.

Secure Account Management System ("SAMS"). IntelliPay customers can
securely log into IntelliPay's Secure Account Management System from any web
browser to configure and control various IntelliPay components and behaviors.
They can manage today's authorized transaction batches, control passwords,
enforce transaction data components, control various features such as our new
duplicate transaction detection and management system, control email
transaction receipts, access Smart Terminal, control LinkSmart payment page
contents, target returning live data streams, configure Visa-required invoice
numbering, and more.

In first quarter 2001, IntelliPay released the duplicate payment request
detection and management system which enables online businesses to configure
the detection of and management of duplicate transaction requests from their
ecommerce web site. Duplicate transaction requests can be the result of an
online shopper mistakenly submitting the same purchase twice, but it can also
be a source of online fraud attempts in some cases.

Competition

Our market is relatively new, very competitive and subject to rapid
technological change. We expect competition to persist, increase, and
intensify in the future as the markets for our products and services continue
to develop and as additional companies enter our markets. A number of
companies are now providing Internet services to small businesses. They
include organizations like Microsoft, vJungle, Bigstep.com, Websitepros,
Agillion, Bizfinity, Vista.com, an HostPro.

At the present time, we have not identified any other companies that are
using the same approach as Pacific WebWorks. Nonetheless, there is always the
potential that other, larger interests will choose to enter the market we are
developing or that a new market may emerge. Although we feel the market is
vast enough for many technology providers, we may not be able to compete
effectively with current and future competitors.

Sales and Marketing

We do not believe that our competitors are effectively targeting our
market niche: A totally Internet based, end-to-end business solution for small
and medium-sized businesses. We believe that our products will allow
businesses to generate leads, sell products, run sales promotions, capture
demographic information about web site visitors, communicate with web site
visitors, and obtain intelligent information about who is visiting their web
sites and what they are doing while they are there. Our products allow our
customers to stay in complete control of their web sites and provide tools
which can facilitate a successful Internet experience for them.

We market and sell our products through reseller channels, our internal
sales force and strategic partnerships. We sell our products to partners at
wholesale, who then mark the products up and sell them at retail. We also
sell our products through resellers who are paid a commission for each
merchant who purchases our products. Each merchant must sign a purchase
agreement with the reseller, which the reseller must in turn provide to us. We
then provide software to the resellers' own merchants which allows these users
to create Internet web sites and/or complete e-business solutions. We provide
the initial reseller with training in the use of the software. The reseller
is an independent contractor and is obligated to pay the amounts due under the
agreement even if payments from the merchant are not received.

We believe we may be able to develop a substantial presence in our
target market through a combination of marketing strategy, unique proprietary
technology, technical expertise, and early entry into our target market. It
is

our opinion that in the past, businesses which have attempted to maintain
interactive web sites and conduct business on the Internet have either
developed technical expertise themselves, paid employees to create and
maintain their web sites, or retained contract "web professionals" to do so.
We believe that Visual WebTools(TM) allows small businesses, at a relatively
small cost, to participate in Internet commerce by creating and managing their
own Internet web sites and storefronts.

Major Customers

During fiscal year 1998 our management changed our strategy from
contract programming to focus on development of Internet software applications
and marketing of these Internet tools and de-emphasized contract programming.
We had a total client base of 85 and four major customers who individually
accounted for 10% or more of our total revenues. Internet Yellow Pages
accounted for 26%, or $44,890, of total 1998 revenues. Ex.Sight Co. accounted
for 16%, or $28,161, of total revenue. CUSA Technologies accounted for 12%,
or $21,271, of total revenues. American Home Business contributed 14%, or
$24,422, in sales.

During fiscal year 1999 we increased our client base to several hundred
with two of our sales channels providing 41% of our revenue. Lauman
Enterprise, a reseller, accounted for approximately $60,000, or 20%, of total
revenues in 1999. US Merchant Systems, Inc. supplied us with marketing
expertise and merchant accounts for our customers and accounted for
approximately $65,000, or 21%, of our revenue for 1999. We entered into a
joint venture with US Merchant Systems in December of 1999 to create World
Commerce Network, LLC. World Commerce Network became the seminar marketing
operations for sales of Pacific WebWorks technologies in early 2000.

During fiscal year 2000 we increased our client base to several
thousand. As a result, we no longer are dependent on a limited number of
significant customers or resellers. However, as of June 2001 we have three
major resellers who account for 40%, 20% and 17% of the total hosting customer
base.

Product Development

We continue to improve upon our products and release new products
related to other existing products. As of March 31, 2001, we recorded
research and development expenses of $143,095 and in 2000 we expended
$1,044,842 for research and development for completion of our V4 version of
Visual WebTools(TM). In 1999, we recorded $320,479 for engineering costs,
including research and development expenses. During 1998 we used $11,949 for
engineering costs, including research and development expenses.

Material Contracts

We are a party to the following material contracts:

In January 1998, we entered into an agreement with Electric Lightwave,
Inc. for telecommunications, facilities, and Internet access. We formalized
the agreement in February 1998 and currently pay $2,200 per month for this
service. The contract is scheduled to expire December 31, 2001. We believe
that we will be able to extend this contract on terms, which are acceptable to
us, but have no assurances that we can do so. However, we believe that we
will be able to enter a new contract with a different service provider if the
contract is not extended.

In February of 1999, we entered into an agreement with U.S. Merchant
Systems, Inc. located in Newark, California. U.S. Merchant Systems provides
merchant accounts to our clients. We integrated a merchant account and
transaction processing which allows purchasers of Visual WebTools(TM) to
accept all major credit cards and personal checks at point of sale from their
web sites. The term of this agreement is one year from the date of execution
and shall automatically renew each successive year thereafter, unless canceled
in writing.

Trademark, Licenses and Intellectual Property

On October 9, 1998, Utah WebWorks filed a trademark application for
Visual WebTools(TM) which we acquired and became responsible for upon our
merger with Utah WebWorks. In December of 1998 the United States Patent and
Trademark Office assigned Serial No. 567,136 to this mark. The trademark is
currently pending. In 1999, we filed a trademark application for
MainStreetSquare.com(TM), Cyberhaggle(TM), and Pricehunter(TM), all features
of the online mall. Likewise, in 1999 we filed for trademarks on Pacific
WebWorks(TM), ClipOn Commerce(TM), FreeSiteNow(TM), V4(TM), Overnet
Express(TM) and IDDS(TM). We did not file any trademark applications during
fiscal year 2000.

Our success will depend, in part, on our ability to obtain and protect
our trademark and trade secrets and operate without infringing upon the
proprietary rights of others in the United States and other countries. If we
were to become involved in a dispute regarding our intellectual property, it
could become necessary for us to participate in interference proceedings
before the United States Patent and Trademark Office to determine whether we
have a valid claim to the rights involved. We could also be forced to seek a
judicial determination concerning the rights in question. These proceedings
could be costly and time consuming, even if we were to eventually prevail.
Should we not prevail, we could be forced to pay significant damages, obtain a
license to the technology in question, or stop marketing one or more of our
products.

All of our core technology was developed internally by our engineers and
by the engineers of Utah WebWorks. The performance of our products does not
primarily rely on any third party technology, although we continue to support
as many third party technologies as possible.

We also rely upon trade secrets, proprietary know-how, and
confidentiality provisions in agreements with employees, consultants, and
resellers to protect our intellectual property rights. There are risks that
these other parties may not comply with the terms of their agreements with us,
and that we may not be able to adequately enforce our rights against these
parties.

We have adopted a policy of requiring our employees and resellers to
execute confidentiality agreements when they commence employment with us or
resell our products. These agreements generally provide that all confidential
information developed or made known to the employees or resellers during the
course of their relationships with us is to be kept confidential and not
disclosed to third parties, except under certain specific circumstances. In
the case of employees, the agreements also provide that all inventions
conceived by the employees in the course of their employment will be our
exclusive property.

Employees

We currently have approximately 19 employees. There are approximately
15 employees in our Salt Lake City, Utah, offices; approximately 7 of which
support the operations of all subsidiaries, and four in our Fremont,
California, offices. Of these employees, approximately three are employed on
a part-time basis. Our employees are not presently covered by any collective
bargaining agreement. We believe that our relations with our employees are
good, and we have not experienced any work stoppages.

Reports to Security Holders

We are required to comply with the reporting requirements of the
Securities Exchange Act of 1934 ( the "Exchange Act") and file annual,
quarterly, and other reports with the SEC. We are also subject to the proxy
solicitation requirements of the Exchange Act and, accordingly, furnish an
annual report with audited financial statements to our stockholders.

PROPERTIES

On May 7, 2001 we moved our principal offices back to our former office
location in the Westgate Business Center in Salt Lake City, Utah. We
currently lease 4,500 square feet of commercial office space. This property
serves as our main office and production facility. We pay approximately
$5,800 each month under the lease, which expires on December 31, 2001.

LEGAL PROCEEDINGS

On February 12, 2001, Pacific WebWorks received notice of Charge No.
A1-0184 filed with the State of Utah Labor Commission regarding an allegation
of racial discrimination charged by Andrew Renfro, a former employee. Mr.
Renfro claims that he was forced to resign as our sales manager due to
demotions and pay cuts based on differential treatment based on his race and
color. We have responded to the request for information from the Labor
Commission and have stated that we believe Mr. Renfro was treated fairly while
he was employed by Pacific WebWorks. At this time, Mr. Renfro has not
identified the specific remedy and we are awaiting further action.

On April 16, 2001, One Source, a corporation, filed a complaint in the
Third District Court, Sandy Department, State of Utah, naming World Commerce
Network, LLC and Mat Dastrup, our former CFO, as defendants. One Source
alleges default under a certain Application for Credit and personal Guaranty
and One Source seeks the sum of $64,353.57 with 18% interest from November 15,
2000. Pacific WebWorks' management is defending the claim and believes the
amount should be reduced based upon One Source's performance. We have filed
an answer to the complaint and further litigation is pending.

Although no formal proceedings have been instituted, we are aware of a
threatened copyright infringement claim by Business Software Alliance.
Management believes there is no legal basis for the claim and is determining
the proper course of action at this time.

We are involved in various disputes and legal claims arising in the
normal course of our business. Except for those discussed above, in the
opinion of management, any resulting litigation will not have a material
effect on our financial position and results of operations.

MANAGEMENT

Directors and Executive Officers

The directors and executive officers and key employees of Pacific
WebWorks corporation are listed below. Their respective ages and positions
are listed, as well as, biographical information for each of these persons is
presented below. Our articles of incorporation provide for a board of
directors consisting of at least three, but no more than nine persons. Our
directors serve until our next annual meeting or until each is succeeded by a
qualified director. Our executive officers are chosen by our board of
directors and serve at its discretion. There are no family relationships
between or among any of our directors, executive officers, and key employees.

Name Age Position Held
- --------------------- ------ -----------------------------------------
Christian R. Larsen 26 President and Director
Kenneth W. Bell 51 Chief Executive Officer and Director
Thomas R. Eldredge 33 Secretary/Treasurer, Chief Financial Officer
Allan E. Oepping 25 Director, Vice President of Engineering
Benjamin A. Black 28 Director
Tom J. Hill 48 Director, IntelliPay President and C.E.O.

Christian R. Larsen: Mr. Larsen serves as President and a director of
Pacific WebWorks, Inc. and has done so since April 1999. From April 1999
through January 2001 he served as our Chief Executive Officer. For the two
years prior to April 1999, he served as Chief Operating Officer for Pacific
WebWorks, Inc. and as a consultant for Utah WebWorks. In July 1993, he
started Innovative Research and Animated Design, Inc. ("IRAD") which developed
custom and commercial software for animation and special effects. He served
as President of IRAD from October 1993 until February 1997. IRAD grew to a
Company employing 28 individuals. He has seven years experience providing
computer consulting and business management services. Mr. Larsen filed a
Chapter 7 voluntary bankruptcy petition in May of 1997 in the District of Utah
Central Division of the United States Bankruptcy Court, which was discharged
in September of 1997.

Kenneth W. Bell: Mr. Bell was appointed as our Chief Executive Officer
and interim Director on January 5, 2001. He is President and a Director of
Logio, Inc. and has served in various offices for Logio since February 1997.
From April 1990 to December 1996, he served as President and Chief Financial
Officer of Kelmarc Corporation, a financial and management advisory company.
He has twenty-five years experience in a variety of finance and management
positions, including employment in the commercial banking area for fifteen
years in Utah and California. Mr. Bell received his B.S. from BYU in 1972.

Thomas R. Eldredge: On January 5, 2001 our Board of Directors appointed
Mr. Eldredge as our Secretary/Treasurer and Chief Financial Officer. He also
serves as Secretary/Treasurer and an interim director for Logio, Inc. and has
served in several offices for Logio since April 2000. Mr. Eldredge is a CPA
and has over ten years of experience in accounting, audit and information
technology. He spent over six years with Grant Thornton LLP, one of the
nation's ten largest public accounting firms. Most recently he was a manager
in the assurance department at Grant Thornton. Mr. Eldredge is an adjunct
professor at the University of Utah in the accounting and information
technology departments at the graduate and undergraduate levels and has
instructed students for over four years at the University, Grant Thornton's
National training center and Utah Valley State College. He received both his
Bachelor of Science and Master of Professional Accountancy from the University
of Utah. Mr. Eldredge has served as the President of the Utah Association of
Certified Public Accountants' Southern Chapter. In February 2001, our Board
of Directors appointed Mr. Eldredge as Corporate Secretary.

Allan E. Oepping: Mr. Oepping serves as a Director and as Pacific
WebWorks' Vice President of Engineering. He is a Microsoft Certified
Professional (MCP) and has seven years of professional experience working with
computer hardware and software. He started with Utah WebWorks in November of
1997 as an independent consultant, then became its Technical Director in
August of 1998. He was the head programmer for IRAD for five years. While at
IRAD, Mr. Oepping developed several new technologies, including a spatial
division/isolation technique which speeds up renderings from 200% to 700%. He
attended Salt Lake Community College in Salt Lake City, Utah during 1994. Mr.
Oepping filed a Chapter 7 voluntary bankruptcy petition on March 2, 1998, in
the District of Utah, Central Division of the United States Bankruptcy Court.
The petition was discharged on June 12, 1998.

Benjamin A. Black: Mr. Black serves as a Director. He has seven years
of professional experience in software development programming. He has worked
as Senior Programmer for Utah WebWorks since April of 1997. He was lead
programmer at IRAD from 1994 through 1997. In 1995 he received his Associate
of Science degree in electronics technology from Salt Lake Community College
in Salt Lake City, Utah. He is a Microsoft Certified Professional (MCP) and
is experienced in advanced programming languages including C, C++, and Perl.

Tom J. Hill: Mr. Hill was appointed as a Director for Pacific WebWorks
in May 2000. He is the President and CEO of IntelliPay, Inc., a wholly-owned
subsidiary of Pacific WebWorks. He has held this position with IntelliPay
since February 1998. Prior to his service with IntelliPay, he was the sales
and marketing manager for BobCAD-CAM Inc. in San Jose California. Tom
attended North Texas State University. While at North Texas State, Mr. Hill
studied Public Relations and Journalism.

Executive Compensation

None of the named executive officers have received compensation in
excess of $100,000 during the past fiscal year from Pacific WebWorks or its
subsidiaries. Mr. Larsen, who served as our CEO during fiscal year 2000
received $60,000 in compensation for that year. We do not have any standard
arrangement for compensation of our directors for any services provided as
director, including services for committee participation or for special
assignments.

We currently have an employment contract with Mr. Larsen, our
President. His agreement is effective for one year and is automatically
renewed annually unless terminated. He receives an annual base salary of
$60,000, medical insurance and discretionary bonuses not to exceed an
additional $65,000. He may be terminated for cause if he acts improperly or
negligently in his position, engages in dishonest or illegal conduct, and/or
breaches company policies and procedures. He may be terminated for disability
if he fails to perform duties for 90 consecutive days for mental or physical
health reasons. He promised not to compete with us for a period of one year
after his employment expires or terminates, unless he assures us in writing
that confidential and proprietary information will not be jeopardized. All
inventions and improvements in our products or methods of conducting business
shall remain our property. He agreed not to solicit employees, customers or
others for a period of two years after the termination of his employment.
After termination or resignation, he agreed not to disclose or use
confidential or proprietary information. The agreement provides compensation
if we have a change in control or if the he resigns, or if the employment is
terminated.

Certain Relationships and Related Transactions

The following information summarizes certain transactions we have either
engaged in since the beginning of our past fiscal year or propose to engage in
involving our executive officers, directors, more than 5% stockholders, or
immediate family members of such persons:

On April 4, 2000 we signed a reorganization agreement to acquire all of
the outstanding shares of IntelliPay, Inc., a Delaware corporation. As a
result of this transaction Tom J. Hill, the President of IntelliPay, was
appointed to our board of directors.

On October 31, 2000 we signed a reorganization agreement to acquire all
of the outstanding shares of Logio, Inc. Kenneth W. Bell was President, CEO
and director of Logio and Thomas R. Eldredge was Logio's Chief Financial
Officer. While the acquisition was being completed, Kenneth Bell was
appointed as our Chief Executive Officer and interim director and Thomas
Eldredge was appointed as Secretary/Treasurer and Chief Financial Officer.

In March 2001 our Board approved the conversion of options previously
granted by Logio, Inc. to Kenneth W. Bell and Thomas R. Eldredge, our
director and officers. Logio options granted to Mr. Bell were converted into
options to purchase 37,879 Pacific WebWork shares. Mr. Eldredge's Logio
options were converted into options to purchase 27,273 Pacific WebWorks
shares. The Logio options were converted at a one to 6.6 ratio for the number
of shares granted and the new options have an exercise prices of $0.875.

PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of Pacific
WebWorks outstanding common stock of each person or group known by us to own
beneficially more than 5% of our outstanding common stock; each of our
executive officers; each of our directors; and all executive officers and
directors as a group. Beneficial ownership is determined according to the
rules of the SEC and generally includes voting or investment power with
respect to securities. Except as indicated by footnote, the persons named in
the table below have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them. The inclusion of
any shares as beneficially owned does not constitute an admission of
beneficial ownership of those shares. The percentage of beneficial ownership
is based on 22,626,688 outstanding shares of common stock as of June 15, 2001.

CERTAIN BENEFICIAL OWNERS

Common Stock Beneficially Owned
---------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
- ------------------------ --------------------- -------------------
LVT Associates, LLC
2247 Emerson
Salt Lake City, Utah 84108 1,175,000 5.2%

DIRECTORS AND OFFICERS
----------------------

Common Stock Beneficially Owned
--------------------------------
Name and Address of Number of Shares of Percentage
Beneficial Owners Common Stock Options(1) of Class
- ------------------------ ------------------- ---------- ----------
Christian R. Larsen 978,000 54,166 4.6%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101

Kenneth W. Bell 221,311 (2) 137,879 1.6%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101

Benjamin A. Black 500,000 41,667 2.4%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101

Thomas R. Eldredge 0 77,273 Less than 1%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101

Tom Hill 553,056 50,000 2.7%
39210 State Street, Suite 204
Fremont, CA 94538

Allan E. Oepping 697,500 54,166 3.3%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101

All executive officers and 2,949,867 349,999 14.4%
directors as a group

(1) Represents options granted to each individual under our Incentive Stock
Option Plan.
(2) Includes 80,309 shares held by Mr. Bell and 141,002 shares owned jointly
with his spouse.

DESCRIPTION OF SECURITIES

Our Articles of Incorporation, as amended, authorize 50,000,000 shares
of common stock, par value $0.001. As of June 15, 2001, we had 22,626,688
shares of common stock issued and outstanding held by approximately 259 record
holders. We have approximately 9.8 million common shares which are freely
tradeable, which may include approximately 2.8 million shares which were
registered under a Form S-4 registration statement related to our share
exchange with Logio, Inc. The remaining common shares held by our existing
shareholders are "restricted securities," as that term is defined in Rule 144.
Restricted securities may be sold in the public market only if they are
registered or if they qualify for an exemption from registration under Rules
144 or 701 of the Securities Act or otherwise. In addition, we have granted
warrants exercisable at exercise prices ranging from $0.50 to $6.44 per share
through April 2006 which are convertible into 5,850,000 shares of common
stock. In March 2001 we reserved 5,000,000 shares for our Incentive Stock
Option Plan, which currently has options to purchase 3,941,857 shares
exercisable through October 2003.

Each holder of common stock is entitled to one vote for each share
owned of record on all matters voted upon by stockholders, and a majority vote
of the outstanding shares present at a stockholders' meeting is required for
actions to be taken by stockholders. Directors are elected by a majority
vote. The holders of the common stock do not have cumulative voting rights.
Accordingly, the holders of a majority of the voting power of the shares
voting for the election of directors can elect all of the directors if they
choose to do so. The common stock bears no preemptive rights, and is not
subject to redemption, sinking fund or conversion provisions. Holders of
common stock are entitled to receive dividends out of funds legally available
if, and when, declared by our Board of Directors and (iii) to participate pro
rata in any distribution of assets available for distribution upon liquidation
of Pacific WebWorks. Any dividends declared with respect to shares of common
stock will be paid pro rata in accordance with the number of shares of common
stock held by each stockholder.

SELLING STOCKHOLDERS

The following table identifies the selling stockholders and indicates
their relationship to us within the past three years and the number of shares
of common stock owned by each prior to the offering, the number of shares to
be offered for the selling stockholder's account and number of shares and
percentage of outstanding shares to be owned by each selling stockholder after
the completion of the offering. Since the selling stockholders may sell all,
a portion or none of their shares from time to time, no firm estimate can be
made of the aggregate number of shares that are being offered or that will be
owned by each selling stockholder upon completion of the offering to which
this prospectus relates.

Securities Percentage
owned Number of of class
Name and prior to shares owned after
relationship offering registered(1) offering (2)
- ------------------------------ ----------- ------------- -------------
Columbia Financial Group, Inc. 22 250,000 less than 1%
Investor relations firm

Midwest First National, Inc. 0 300,000 0%
Accredited investor

Condiv Investments, Inc. 0 300,000 0%
Accredited investor

(1) Includes ownership of shares issuable upon exercise of warrants.
(2) The ownership percentage assumes exercise of all of the 850,000

On February 22, 2000, we entered into a Registration Rights Agreement
which required Pacific WebWorks to file a registration statement with the SEC
to register for resale shares held or to be acquired by certain selling
stockholders. We agreed to register these shares in connection with separate
transactions between us and the selling stockholders which are described
below. Pursuant to the registration agreement, we filed a registration
statement on May 30, 2000 which was granted acceleration without review by the
SEC and declared effective on June 12, 2000. We have agreed to use our best
efforts to maintain the effectiveness of the registration statement until its
termination upon the earliest of the following:
. When all of the registered common shares have been sold by the
selling stockholders;
. When the selling stockholders may sell the shares under the
provisions of Rule 144; or
. Five years from the closing date.

The first transaction related to the shares to be registered occurred in
January of 1999. We entered into a Consultant Agreement with Columbia
Financial Group, Inc., who provides consulting and services for investor
relations, public relations, publishing, advertising, fulfillment, as well as,
Internet related services. Columbia Financial generally provides such
services for a term of twelve (12) months for a set fee. Columbia Financial
agreed to accept warrants to purchase 400,000 common shares in consideration
for the services they would provide to Pacific WebWorks as our investors
relations firm. In February of 2000 we agreed to grant registration rights to
the common shares which would be issued upon exercise of the warrants. We
entered into a second agreement with Columbia Financial in January of 2000 and
granted warrants to purchase 400,000 shares. These warrants were subsequently
canceled and the underlying 400,000 shares are removed from registration. In
May 2001 we verbally agreed to amend the exercise price of the 250,000
remaining warrants to $0.50, if, and only if, Columbia Financial exercised the
warrants within the next 90 days. If Columbia Financial elects not to
exercise the warrants by August 31, 2001 the original exercise price will
remain applicable. The warrants issued to Columbia Financial in consideration
for their services were exercisable on the date of the agreement. Columbia
Financial exercised warrants for 150,000 common shares at $2.50 per share in
October 2000.

In February 2000 we entered into purchase agreement with two accredited
investors, Condiv Investment, Inc. and Midwest First National, Inc., for the
purchase by those investors of up to 400,000 units for $1,000,000. Each unit
consisted of one share of our common stock and one "A" Warrant and one "B"
Warrant. The "A" Warrant granted the investor the right to purchase one
additional share at an exercise price of $5.00 and the "B" Warrant grants the
investor the right to purchase 1/2 of one additional share at an exercise
price of $7.50. Upon closing each investor acquired 200,000 common shares,
one "A" Warrant to purchase an additional 200,000 common shares and a "B"
Warrant to purchase an additional 100,000 common shares. Also, each investor
promised not to acquire or own more than 4.99% of Pacific WebWorks'
outstanding common stock at any time. Neither Condiv Investment nor Midwest
First has exercised any warrants as of the date of this filing, however, both
have sold their 200,000 shares issued under the purchase agreement.

The following chart describes the warrants which may be exercised in
connection with the transactions described above.

Date
Selling Warrant Number Exercise Expiration
Stockholder Exercisable of Shares Price Date
- ------------------- ---------------- ------------- ------------ -----------
Columbia Financial 1/26/1999 100,000 $ 3.50* 1/26/2004
" 100,000 4.50* "
" 50,000 6.00* "
- ------------------- ---------------- ------------- ------------ -----------

- ------------------- ---------------- ------------- ------------ -----------
Condiv Investments, 2/22/2000 200,000 5.00 2/22/2005
Inc. " 100,000 7.50 "
- ------------------- ---------------- ------------- ------------ -----------
Midwest First 2/22/2000 200,000 5.00 2/22/2005
National, Inc. " 100,000 7.50 "
- ------------------- ---------------- ------------- ------------ -----------
* May be exercised at $0.50 if exercised prior to August 31, 2001.

PLAN OF DISTRIBUTION

We will not use the services of underwriters or dealers in connection
with the sale of the shares registered under this prospectus. The shares will
be freely transferable, except in the event the shares are sold to affiliates.
We have agreed to register these shares, but the registration of these shares
does not necessarily mean that any of them will be offered or sold by the
selling stockholders. The selling stockholders have absolute discretion as to
whether to exercise the warrants and then will act as principals for their own
accounts and will have total control of the manner and timing of sales of the
shares acquired by the warrants. They may sell, from time to time, all or a
portion of the shares through the NASD OTC Bulletin Board, in negotiated
transactions, in private transactions or otherwise.

The sales may be at prevailing prices or related to the current market
price or at negotiated prices. The shares may be sold directly or through
brokers or dealers, or in a distribution by one or more underwriters on a firm
commitment or best-efforts basis. The methods by which the shares may be sold
include:
. a block trade, which may involve crosses, in which the broker or dealer
will attempt to sell the securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction;
. purchases by a broker or dealer as principal and resale by the broker or
dealer for its own account;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. privately negotiated transactions.

The selling stockholders may deliver all or a portion of the shares to
cover a short sale or sales made after the date of this prospectus, or a call
equivalent position or a put equivalent position entered or established after
the date of this prospectus.

The selling stockholders and any broker-dealers participating in the
distribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any profit on the sale of the shares by the
selling stockholders and any commissions received by any broker-dealers may be
deemed to be underwriting commissions or discounts under the Securities Act.

In the event a particular offer of these shares is made we will
distribute a prospectus supplement, if required, that will identify the name
of any dealers or agents and any commissions and other terms constituting
compensation from the selling stockholders and any other required information.
These shares may be sold at varying prices determined at the time of sale or
at negotiated prices. The selling stockholders will generally not be
restricted as to the number of shares which they may sell at any one time, and
it is possible that a significant number of shares could be resold at anytime.
The selling stockholders and any other person participating in the
distribution of the shares will also be subject to provisions of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
under it, including, without limitation, Regulation M, which may limit the
timing of purchases and sales of the shares by the selling stockholders and
other persons. Further more, Regulation M of the Exchange Act may restrict
the ability of any person engaging in the distribution of the shares to engage
in market-making activities with respect to the particular shares being
distributed for a period of up to five (5) business days prior to the
commencement of the distribution and during the distribution. All of the
foregoing may affect the marketability of the shares and ability of any person
or entity to engage in market-making activities with respect to the shares.

In order to comply with the securities laws of certain states, if
applicable, these shares may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, these shares may not be
sold unless they have been registered or qualified for sale in that state or
an exemption from the registration or qualification requirement of that state
is available and is complied with.

INTERESTS OF NAMED EXPERTS AND COUNSEL

We are not aware of any expert or legal counsel named in this prospectus
who will receive a direct or indirect substantial interest in the offering.
Our counsel, Cindy Shy, P.C., provided an opinion on the legality of the
shares to be issued pursuant to the exercise of the warrants. Our financial
statements for the year ended December 31, 2000, 1999 and 1998 have been
audited by Chisholm & Associates, C.P.A.'s as set forth in their report given
on the authority of that firm as experts in accounting and auditing.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or persons controlling us, we
have been informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

We have agreed to indemnify each selling stockholder for liabilities
arising under the Securities Act. We will indemnify each selling stockholder,
its officers, directors and constituent partners or members, if any, and each
person controlling (within the meaning of the Securities Act) a selling
stockholder, against all claims, losses, damages, liabilities, actions
suffered or incurred by any of them, to the extent these claims, losses,
damages or liabilities arise out of or are based upon:
. any untrue statement or alleged untrue statement of a material fact
contained in any prospectus or any related registration statement
incident to this registration;
. any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements not misleading; or
. any violation by us of any rule or regulation promulgated under the
Securities Act applicable to Pacific WebWorks and relating to actions or
inaction required of us in connection with any registration.
We have agreed to reimburse each selling stockholder, for any reasonable
legal and other expenses incurred in connection with investigating or
defending any action. However, we will not indemnify a selling stockholder if
the untrue statement or omission, or alleged untrue statement or omission, was
provided to Pacific WebWorks in writing by the selling stockholder for use in
the preparation of any registration statement or prospectus, including
amendments thereto.

Each selling stockholder has agreed to indemnify and reimburse Pacific
WebWorks for any actions based on a material misstatement, an omission, or a
violation as described above. Each selling stockholder agreed to indemnify
each of our directors and officers, each placement agent and underwriter, if
any, of our securities covered by this prospectus, each person who controls us
or any underwriter within the meaning of the Securities Act, and each other
selling stockholder.

AVAILABLE INFORMATION

We are subject to certain informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and,
accordingly, file reports, proxy statements and other information with the
Securities

and Exchange Commission. These reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained by
the SEC at Room 1024 of the SEC's office at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, DC 20549. Additional updating information with respect to
the securities covered by this prospectus may be provided in the future to
purchasers by means of amendments to this prospectus.

This prospectus, filed as a part of a post-effective amendment to a
registration statement, does not contain information in or attached as an
exhibit to the registration statement. Purchasers should refer to those
exhibits to the registration statement for the complete text. For further
information concerning Pacific WebWorks and the securities offered, refer to
the registration statement and its exhibits which may be inspected at the
office of the SEC without charge. A copy of the registration statement, any
post-effective amendment and exhibits may be accessed through the SEC's web
site at http://www.sec.gov.

We currently use an investor relations firm, Columbia Financial Group,
Inc. and interested persons may call at (888) 301-6271.

CHANGES IN ACCOUNTANTS

As previously reported, on August 3, 2000, Chisholm & Associates,
C.P.A.'s replaced Crouch, Bierwolf & Chisholm. C.P.A.'s, as our independent
auditor.

FINANCIAL STATEMENTS

UNAUDITED FINANCIAL STATEMENTS OF PACIFIC WEBWORKS FOR PERIOD ENDED MARCH 31,
2001
Balance Sheets.......................................... F-1
Statements of Operations ............................... F-2
Statement of Cash Flows ................................ F-3
Notes .................................................. F-4

FINANCIAL STATEMENTS OF PACIFIC WEBWORKS FOR THE YEARS ENDED DECEMBER 2000,
1999 AND 1998
Chisholm & Associates Independent Auditors' Report...... F-8
Balance Sheets.......................................... F-9
Statements of Operations................................ F-10
Statements of Stockholder's Equity ..................... F-11
Statements of Cash Flows ............................... F-12
Notes .................................................. F-15

Pacific WebWorks, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

ASSETS
March 31, December 31,
2001 2000
------------- -------------
(Unaudited)

CURRENT ASSETS
Cash and cash equivalents $ 40,786 $ 163,801
Receivables
Trade, less allowance for doubtful
receivables of $128,795 in 2001
and $88,487 in 2000 220,757 257,492
Employee - 2,469
Prepaid expenses 351,903 275,022
------------- -------------

Total current assets 613,446 698,784
------------- -------------

PROPERTY AND EQUIPMENT, NET AT COST (Note 4) 1,406,525 374,259

OTHER ASSETS (Note 2 and 3) 5,789,511 4,331,979
------------- -------------

$ 7,809,482 $ 5,405,022
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long- term capital leases $ 278,942 $ 2,425
Accounts payable past due 291,351 -
Accounts payable 372,384 611,950
Accrued liabilities 418,050 390,209
Deferred revenue 755,053 1,811,020
Note payable 216,580 216,580
Notes payable - related party (Note 5 and 8) 911,664 250,000
------------- -------------

Total current liabilities 3,244,024 3,282,184
------------- -------------

Long-term capital lease obligations 148,588 670

COMMITMENTS AND CONTINGENCIES (Notes 4,5,7 and 8)

STOCKHOLDERS' EQUITY (Notes 5,6 & 8)
Common stock - par value $0.001; authorized
50,000,000; issued and outstanding 18,345,200
in 2001 and 15,008,000 in 2000 18,346 15,008
Additional paid-in capital 12,883,240 10,153,603
Accumulated deficit (8,484,716) (8,046,443)
------------- -------------

Total stockholders' equity 4,416,869 2,122,168
------------ -------------

$ 7,809,482 $ 5,405,022
============= =============

The accompanying notes are an integral part of these statements.

F-1

Pacific WebWorks, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended
March 31,
2001 2000
------------- -------------

Revenues, net $ 1,351,970 $ 372,972
Cost of sales 227,700 65,691
------------- -------------

Gross profit 1,124,271 307,281

Selling expenses 219,792 1,431,393
Research and development 143,095 81,116
General and administrative 451,782 695,099
Depreciation and amortization (Note 2) 574,422 32,842
Compensation expense for options and warrants 12,900 13,216
------------- -------------

Total operating expenses 1,401,991 2,253,666
------------- -------------

Loss from operations (277,721) (1,946,385)
------------- -------------
Other income (expense)
Non-recurring loss (Note 4) (122,685)
Interest income and other 3,566 -
Interest expense (41,434) (15,215)
------------- -------------

(160,553) (15,215)
------------- -------------

NET LOSS $ (438,273) $ (1,961,600)
============= =============

Net loss per common share - basic and diluted $ (0.03) $ (0.19)
============= =============

Weighted-average number of shares outstanding
- basic and diluted 17,132,209 10,400,342
============= =============

The accompanying notes are an integral part of these statements.

F-2

Pacific WebWorks, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the
Three Months
Ended March 31,
2001 2000
------------- -------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net loss $ (438,273) $ (1,961,600)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation & amortization 574,422 32,842
Issuance of options for compensation 12,900 -
Impairment loss 122,685 -
Bad debt expense 40,308 9,000
Loss on Investment - (25,000)
Changes in assets and liabilities
(Net of effects of acquisitions)
Receivables 2,065 (300,269)
Prepaid expenses and other assets (2,204) (193,891)
Other assets 1,796 -
Accounts payable 44,111 380,202
Deferred revenue (1,055,967) 1,619,060
------------- -------------

Total adjustments (259,884) 1,521,944

Net cash used in operating activities (698,157) (439,656)
------------- -------------
Cash flows from investing activities
Purchases of property and equipment (72,127) (18,788)
Cash paid for notes receivable - (153,000)
Cash acquired in acquisitions 5,058 5,628
------------- -------------

Net cash used in investing activities (67,069) (166,160)
------------- -------------
Cash flows from financing activities
Proceeds from issuance of notes payable 661,664 579,005
Cash received for contributed capital 1,475 -
Principal payments of long-term obligations (20,928) -
------------- -------------

Net cash provided by financing activities 642,211 579,005
------------- -------------
Net increase decrease in cash and cash
equivalents (123,015) (26,811)

Cash and cash equivalents at beginning of period 163,801 153,898
------------- -------------

Cash and cash equivalents at end of period $ 40,786 $ 127,087
============= =============

Supplemental disclosures of cash flow information:
Cash paid for interest $ 3,401 $ 11,854
Cash paid for income taxes - -
Non-cash financing activities:
Issuance of common stock for deposit and rent $ 268,600 $ -
Purchase of Logio subsidiary for stock 2,450,000 -

The accompanying notes are an integral part of these statements.

F-3

37
Pacific WebWorks, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2001
(Unaudited)

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION

Pacific WebWorks, Inc. and its subsidiaries, engage in the development and
distribution of web tools software, electronic business storefront hosting,
and Internet payment systems for individuals and small to mid-sized
businesses.

The Company conducts its business within one industry segment.

The accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of normal recurring adjustments, which, in the opinion
of management, are necessary for a fair presentation of the results for the
periods shown. Certain prior period balances have been reclassified to conform
with current period presentation.

NOTE 2 - ACQUISITION OF LOGIO, INC.

On February 8, 2001, Pacific WebWorks completed its acquisition of Logio,
Inc., a development stage company, in a stock-for-stock exchange. Pacific
WebWorks exchanged 2,800,000 shares of its common stock for 18,425,830 shares
of common stock. This transaction was accounted for on the purchase method of
accounting using generally accepted accounting principles and valued at
$2,450,000 representing the fair value of the Pacific WebWorks shares on the
date of exchange. Goodwill totaling $1,855,388 will be amortized over three
years and approximately $88,000 was amortized for the period from acquisition
to March 31, 2001. Logio's results of operations are included in the Pacific
WebWorks, Inc. consolidated results of operations from the acquisition date to
March 31, 2001 and it's the fair values of its assets and liabilities have
also been recorded on the acquisition date and are included in the Pacific
WebWorks, Inc. consolidated balance sheet.

NOTE 3 - OTHER ASSETS

Other assets include the following: March 31,
2001 2000
-------------- -------------
Goodwill, net $ 5,568,145 $ 4,041,226
Software development costs, net 213,789 270,495
Other 7,577 20,258
-------------- -------------

$ 5,789,511 $ 4,331,979
============== =============

F-4

Pacific WebWorks, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2001
(Unaudited)

NOTE 4 - NON-RECURRING CHARGE

In March 2001, Logio, Inc., a subsidiary of Pacific WebWorks, Inc., was unable
to make payment on some of its capital lease obligations. Logio, Inc. is
currently attempting a favorable negotiation with the leasing company and
anticipates that the equipment will be transferred back to the vendor. The
default on these obligations, which approximates $404,000 at March 31, 2000,
results in an impairment loss of $122,685 which represents cash down payments
by Logio at the beginning of the leases that were being amortized over the
life of the leases. The leases expire through December 2002.

NOTE 5 - RELATED PARTY TRANSACTIONS

Building deposit and rent
- -------------------------

During January 2001, we entered into an agreement with a related party for
rental of our operations center. Monthly minimum rental payments total
$26,200 and the agreement expires in December 2001. We issued a total of
537,200 common shares to the related party for $268,600 related to a rental
deposit and three months of rental for our operations center in Salt Lake
City, Utah.

Notes Payable
- -------------

In January 2001, the Company was advanced $100,000 from related parties in
exchange for a note payable. The bears interest at 13% per year and is due
upon the earlier of $2,000,000 received in equity funding or June 1, 2001.

In February 2001, the Company was advanced $375,000 from related parties in
exchange for notes payable. The notes bear interest at 15% per year and are
due upon the earlier of $2,000,000 received in equity funding or through May
23, 2001.

In March 2001, the Company was advanced $175,000 in exchange for a notes
payable from related parties. The notes bear interest at 15% per year and are
due upon the earlier of $2,000,000 received in equity funding or through June
27, 2001.

The company is also committed to pay $11,664 in the form of a note payable to
a related party. The note, bears interest at 15% per year and is due upon
demand.

All Notes payable are collateralized by the business assets of the Company.

F-5
39

Pacific WebWorks, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2001
(Unaudited)

NOTE 6 - EQUITY INCENTIVE PLAN

On March 8, 2001, the Board of Directors adopted the Pacific WebWorks, Inc.
2001 Equity Incentive Plan (the Plan). The Plan allows for the granting of
awards in the form of stock options, stock appreciation rights or restricted
shares to employees, independent directors and certain consultants. The
Company may grant awards representing up to 2,500,000 shares of the Company's
common stock under the Plan. This includes 901,858 options, each to purchase
one share of the Company's common stock, outstanding as of March 31, 2001. The
Plan has not been approved by the Company's shareholders as of March 31, 2001

During the three months ended March 31, 2001, the Company granted 195,252
options, each to purchase one share of the Company's common stock to employees
and directors at exercise prices of $0.87 per share, which represents the fair
market value of the common stock on the date of grant. As of March 31, 2001,
583,779 options were exercisable at prices ranging from $0.87 to $3.44 per
share.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Threatened litigation
- ---------------------

The Company is involved in various disputes and legal claims in the normal
course of business. It is not possible to state the ultimate liability, if
any, in these matters. In the opinion of management, any resulting litigation
will have no material effect on the financial position and results of
operations of the Company in excess of amounts accrued.

Consulting contract - European exchanges
- ----------------------------------------

In May 2001, the Company entered into a consulting services agreement in with
a corporation. The agreement provides for, among other things, public
relations services related to the European financial exchanges for six months
of service. The cost of the services totals $150,000 and has been prepaid by
the Company in February and March 2001 and is recognized ratably over the
period in which services are received. As of March 31, 2001, $25,000 has been
recorded as investor relations expense related to this agreement.

F-6

Pacific WebWorks, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2001
(Unaudited)

NOTE 8 - SUBSEQUENT EVENTS

Granting of warrants
- --------------------

On April 25, 2001, the Company entered into an agreement with a consultant to
provide investor relations, public relations, and fulfillment services related
to financing in exchange for warrants. A total of 500,000 warrants were
issued at an exercise price of $0.50 per share under the terms of this
agreement and 500,000 warrants were issued at an exercise price of $0.75 per
share for a total of 1,000,000 warrants granted under this agreement. Vesting
of the warrants commences as follows: 25% immediately, 25% on July 1, 2001
and 50% on November 1, 2001. Deferred consulting charges related to this
agreement approximate $170,000 and represent the fair value of the warrants
using the Black Scholes valuation model. The services under this contract
will be performed through April 25, 2001 and the fair value of the warrants
will be recognized ratably over the service period. The agreement terminates
in April of 2002 when the services are completed.

Issuance of stock
- ------------------

In April 2001, the Company issued a total of 289,166 shares of its common
stock as a prepayment for legal, investment banker, and insurance services
totaling $210,000. The services will be provided to the Company over two
years and related expenses will be recognized over the periods in which the
services are received.

Note payable - related party
- ----------------------------

In April 2001, the Company was advanced $100,000 in exchange for a note
payable from a related party. The note bears interest at 15% per year, is
collateralized by substantially all of the Company's assets and is due upon
the earlier of $2,000,000 received in equity funding or through May 23, 2001.

Stock options
- -------------

On April 4, 2001, the Company's Board of Directors resolved to amend the
Pacific WebWorks, Inc. 2001 Equity Incentive Plan and increased the total
awards that may be granted to up to 5,000,000 options under the Plan.

Also on April 4, 2001, the Company granted a total of 3,055,000 options, each
representing one share of Pacific WebWorks, Inc. common stock. The options
have an exercise price of $0.75, which equals the fair value of the stock on
the date of grant, expire through April 2011 and vest 1/6 on the day of grant
and 1/6 every six months through October 4, 2001.

F-7
41

Pacific WebWorks, Inc. and Subsidiaries

Consolidated Financial Statements

December 31, 2000, 1999 and 1998

CHISHOLM & ASSOCIATES
Certified Public Accountants
A Professional P.O. Box 540216 Office (801)292-8756
Corporation North Salt Lake, Utah 84054 FAX (801) 292-8809
______________________________________________________________________________

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
Pacific WebWorks, Inc.
Salt Lake City, UT

We have audited the accompanying consolidated balance sheets of Pacific
WebWorks, Inc. and Subsidiaries as of December 31, 2000 and 1999 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 2000, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Pacific
WebWorks, Inc. as of December 31, 2000 and 1999 and the consolidated results
of their operations and cash flows for the years ended December 31, 2000,
1999, and 1998 in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has had recurring operating
losses and is dependent upon financing to continue operations. These factors
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in the Note
2. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

/s/ Chisholm & Associates

Chisholm & Associates
North Salt Lake, Utah
March 2, 2001

F-8
43

Pacific WebWorks, Inc. and Subsidiaries
Consolidated Balance Sheets

Assets

December 31,
2000 1999
-------------- -------------
Current assets
Cash and Cash Equivalents $ 163,801 $ 153,898
Accounts Receivable (less allowance of
$88,487 and $3,798 respectively) 257,492 101,429
Employee Receivable 2,469 4,578
Prepaid Expenses 275,022 16,333
Accounts Receivable - Related Party - 6,800
Notes Receivable - Related Party - 166,046
-------------- -------------
Total Current Assets 698,784 449,084
-------------- -------------

Property and Equipment, Net - at cost 374,259 171,393
-------------- -------------
Other Assets
Deposits 17,250 5,250
Goodwill, less accumulated amortization 4,041,226 -
Computer Software Costs, less
accumulated amortization 3,008 4,832
Software Development Costs, less
accumulated amortization 270,495 -
-------------- -------------
Total Other Assets 4,331,979 10,082
-------------- -------------

Total Assets $ 5,405,022 $ 630,559
============== =============

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

F-9
44

Pacific WebWorks, Inc. and Subsidiaries
Consolidated Balance Sheets
(Continued)

Liabilities and Stockholders' Equity

December 31,
2000 1999
-------------- -------------
Current Liabilities
Current Maturities of Long-Term Obligation $ 2,425 $ -
Accounts Payable 611,950 74,550
Accrued Expenses 390,209 70,177
Deferred Revenue 1,811,020 -
Note Payable - Related Party 250,000 -
Notes Payable 216,580 500,000
-------------- -------------
Total Current Liabilities 3,282,184 644,727
-------------- -------------

Capital Lease Obligation, less Current Maturities $ 670 -
-------------- -------------

Stockholders' Equity
Common Stock, authorized 50,000,000 shares of
$.001 par value, issued and outstanding
15,008,342 shares in 2000 and 10,395,679
shares in 1999 15,008 10,396
Additional Paid-in-Capital 10,153,603 2,762,188
Accumulated Deficit (8,046,443) (2,786,752)
-------------- -------------
Total Stockholders' Equity 2,122,168 (14,168)
-------------- -------------

Total Liabilities and Stockholders' Equity $ 5,405,022 $ 630,559
============== =============

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

F-10

Pacific WebWorks, Inc. and Subsidiaries
Consolidated Statements of Operations

For the
Years Ended
December 31,
2000 1999 1998
------------- ------------- -------------
Net Revenues $ 4,954,384 $ 305,628 $ 172,395

Cost of Sales 811,506 42,874 188,974
------------- ------------- -------------

Gross Profit 4,142,878 262,754 (16,579)
------------- ------------- -------------
Expenses:

Selling Expenses 4,802,397 406,917 30,180
Research & Development 1,044,842 320,479 11,949
Depreciation & Amortization 1,095,261 30,572 13,151
Options & Warrants issued for
compensation and services 28,366 1,242,584 -
General & Administrative 2,375,252 786,740 67,845
------------- ------------- -------------

Total Operating Expenses 9,346,118 2,787,292 123,125
------------- ------------- -------------

Loss from Operations (5,203,240) (2,524,538) (139,704)

Other Income (Expenses)

Interest Expense (70,440) (19,243) (10,761)
Interest Income 13,989 1,246 -
Loss on Investment - (25,000) -
------------- ------------- -------------

Net Loss $ (5,259,691) $ (2,567,535) $ (150,465)
============= ============= =============
Net Loss Per Common Share -
Basic and Diluted $ (.40) $ (0.27) $ (0.03)
============= ============= =============

Weighted average shares outstanding 13,140,360 9,632,500 5,000,000
============= ============= =============

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

F-11

Pacific WebWorks, Inc.
Consolidated Statement of Stockholders' Equity
For the Years ended December 31, 2000, 1999 and 1998

Additional
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
------------- ---------- ------------ ------------- -------------

Balance, December 31, 1997 5,000,000 $ 5,000 $ 5,000 $ (68,752) $ (58,752)

Net loss December 31, 1998 - - - (150,465) (150,465)
------------- ---------- ------------ ------------- -------------

Balance, December 31, 1998 5,000,000 5,000 5,000 (219,217) (209,217)

Reverse merger & reorganization
adjustment 5,000,000 5,000 995,000 - 1,000,000

September 1999, shares issued for
insurance policy at $1.43 per
share, valued at $20,000 14,000 14 19,986 - 20,000

December 1999, shares issued for
payment on notes payable of
$500,000 at $1.31 per share 381,679 382 499,618 - 500,000

Consulting compensation for
warrants issued - - 1,242,584 - 1,242,584

Net loss December 31, 1999 - - - (2,567,535) (2,567,535)
------------- ---------- ------------ ------------- -------------

Balance, December 31, 1999 10,395,679 10,396 2,762,188 (2,786,752) (14,168)

January 2000, shares issued for
equity of World Commerce Network,
LLC at $2.00 per share 4,663 4 9,176 - 9,180

April 2000, shares issued to acquire
Intellipay, Inc. at $1.80 per share 2,400,000 2,400 4,317,600 - 4,320,000

June 2000, shares issued for payment
on notes payable of $1,000,000 at
$2.50 per share 400,000 400 999,600 - 1,000,000

June 2000, shares issued for payment
on notes payable of $1,040,000
at $1.00 per share 1,040,000 1,040 1,036,496 - 1,037,536

August 2000, shares issued for
insurance policy at $1.44
per share 18,000 18 25,927 - 25,945

September 2000, shares issued for
payment on notes payable of
$600,000 at $1.00 per share 600,000 600 599,400 - 600,000

October 2000, shares issued for cash
at $2.50 per share 150,000 150 374,850 - 375,000

Consulting Compensation for
warrants issued - - 13,216 - 13,216

Compensation for stock options granted - - 15,150 - 15,150

Net loss December 31, 2000 - - - (5,259,691) (5,259,691)
------------- ---------- ------------ ------------- -------------

Balance, December 31, 2000 15,008,342 $ 15,008 $10,153,603 $ (8,046,443) $ 2,122,168
============== ========== ============ ============= =============

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

F-12

Pacific WebWorks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

For the
Years Ended
December 31,
2000 1999 1998
------------- ------------- -------------
Cash Flows from Operating Activities:
Net Loss $ (5,259,691) $ (2,567,535) $ (150,465)
Adjustments to reconcile net loss
to net cash used in operations
(net of acquisitions of WCN and
Intellipay):
Depreciation & Amortization 1,095,261 30,572 13,151
Warrants & Options issued for
compensation and services 28,366 1,255,800 -
Bad Debt 111,731 - 4,055
Common stock issued for insurance 25,945 20,000 -
Loss on Investment - 25,000 -
Change in assets and liabilities:
Accounts receivable (150,025) (94,779) 13,828
Accounts receivable -
related party 6,800 (6,800) -
Prepaid expenses (258,689) (29,549) -
Accounts Payable and
accrued expenses 478,775 121,064 (755)
Deferred Revenue 1,821,378 - -
------------- ------------- -------------
Net Cash Flows used in Operating
Activities (2,100,149) (1,246,227) (120,186)
------------- ------------- -------------
Cash Flows from Investing Activities:
Cash paid for property and equipment (250,373) (148,135) (12,675)
Cash paid for deposits (12,000) - (5,250)
Cash paid for investment - (25,000) -
Cash acquired in acquisitions 9,718 - -
Cash from escrow - 750,000 -
Cash paid to related party - (166,046) -
------------- ------------- -------------
Net Cash provided by (used in)
Investing Activities (252,655) 410,819 (17,925)
------------- ------------- -------------
Cash Flows from Financing Activities:
Cash from debt financing 2,006,580 980,000 381,300
Issuance of stock for cash 375,000 - -
Principle payments on Debt
financing (18,873) - (239,323)
------------- ------------- -------------
Net Cash Flows provided by
Financing Activities 2,362,707 980,000 141,977
------------- ------------- -------------

Net increase in cash 9,903 144,592 3,866

Cash and Cash Equivalents,
beginning of period 153,898 9,306 5,440
------------- ------------- -------------
Cash and Cash Equivalents,
end of period $ 163,801 $ 153,898 $ 9,306
============= ============= =============

Supplemental Cash Flow Information
Cash Paid for:
Interest $ 29,213 $ 1,400 $ 14,262
Taxes $ - $ - $ -

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

F-13

Pacific WebWorks, Inc.
Consolidated Statements of Cash Flows
(continued)

Supplemental Non-Cash Disclosures:

During 1999, 14,000 shares of common stock were issued at $1.43 per share for
a $20,000 insurance policy.

During 1999, 381,679 shares of common stock were issued at $2.62 per share in
payment of a $500,000 notes payable.

During 1999, 400,000 warrants were issued for non-employee services performed
during the year. These warrants are valued at $1,255,800.

For 1999, the Company's share of the recognized loss in the joint venture is
$25,000.

During 2000, 18,000 shares of common stock were issued at $1.44 per share for
a $25,945 insurance policy.

During 2000, 400,000 shares of common stock were issued to a related party at
$2.50 per share in payment of a $1,000,000 notes payable.

During 2000, 1,640,000 shares of common stock were issued to a related party
at $1.00 per share in payment of $1,637,536 notes payable and accrued
interest.

During 2000, compensation expense of $15,150 was recorded for stock options
granted to employees.

During 2000, compensation expense of $13,216 was recorded for services
received for warrants.

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

F-14

Pacific WebWorks, Inc.
Notes to The Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 1 - Summary of Significant Accounting Policies

a. Organization

Pacific WebWorks, Inc., ("the Company") was organized under the laws
of the state of Nevada on May 18, 1987 as Asphalt Associates, Inc. On
December 31, 1998 the board of directors changed the name of the Company to
Pacific Webworks, Inc. On January 11, 1999, the Company merged with Utah
Webworks, Inc., a Utah corporation organized April 10, 1997. The share
exchange with Utah Webworks was accounted for as a reverse merger, therefore
all financial information prior to January 11, 1999 is that of the accounting
survivor being Utah Webworks. Pacific Webworks is currently engaged in
developing, selling and servicing computer and internet related software and
hardware products.

Acquisition of World Commerce Network, LLC

Effective January 1, 2000, the Company issued 4,663 shares of its
common stock to U.S. Merchant Systems, Inc. for 1% of the outstanding stock
of World Commerce Network, LLC (WCN). The shares were valued at $9,180. The
issuance increased the Company's ownership in WCN to 51% and WCN therefore
became a subsidiary of the Company. In June 2000, the Company paid $100 for
49% of the outstanding shares of WCN, thereby making WCN a wholly owned
subsidiary of the Company. The operations of WCN have been consolidated with
the Company's operations effective January 1, 2000. Prior to the additional
1% purchase, the Company owned 50% of WCN and recorded its investment using
the equity method. The balance at December 31, 1999 was $0.

Acquisition of Intellipay, Inc.

On April 4, 2000, the Company completed an Agreement and Plan of
Reorganization with Intellipay, Inc. a private Delaware corporation
(Intellipay). The Company issued 2,400,000 shares of common stock valued at
$4,320,000 for all of the outstanding shares of Intellipay. Thereby
Intellipay became a wholly owned subsidiary of the Company. The transaction
was recorded using the purchase method of accounting.

b. Accounting Method

The Company recognizes income and expenses on the accrual basis of
accounting.

c. Earnings (Loss) Per Share

The computation of net loss per share of common stock is based on the
weighted average number of shares outstanding during each period presented.
Potentially issuable common shares totaling 1,107,606 from the exercise of
stock options and warrants were excluded from the calculation of diluted loss
per share because their effects were anti-dilutive.

Loss Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------ -----------
For the year ended December 31, 2000:
Income (loss) from operations $(5,203,240)
------------
Basic EPS
Income (loss) to common stockholders $(5,259,691) 13,140,360 $ (.40)
============ ============ ===========

F-15
50

Pacific WebWorks, Inc.
Notes to The Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 1 - Summary of Significant Accounting Policies (continued)

c. Earnings (Loss) Per Share (continued)

Loss Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------ -----------
For the year ended December 31, 1999:
Income (loss) from operations $(2,524,538)
------------
Basic EPS
Income (loss) to common stockholders $(2,567,535) 9,632,500 $ (.27)
============ ============ ===========

For the year ended December 31, 1998:
Income (loss) from operations $ (139,704)
------------
Basic EPS
Income (loss) to common stockholders $ (150,465) 5,000,000 $ (.03)
============ ============ ============

The following is the calculation for Weighted-average common shares
used in basic and dilutive net loss per common share:

Year ended December 31,
2000 1999 1998
------------ ------------ ------------
Common shares outstanding during
the entire period 10,395,679 5,000,000 5,000,000
Weighted-average common shares
issued during the period 2,744,681 4,632,500 -
Weighted-average common shares
used in basic EPS 13,140,360 9,632,500 5,000,000
Dilutive effects of potential
common shares - - -
------------ ------------ ------------
Weighted-average number of common
shares and dilutive potential
common stock used in diluted EPS 13,140,360 9,632,500 5,000,000
------------ ------------ ------------

d. Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.

F-16

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 1 - Summary of Significant Accounting Policies (continued)

e. Provision for Income Taxes

At December 31, 2000, the Company has net operating loss
carryforwards totaling approximately $8,046,443 that may be offset against
future taxable income through 2013. No tax benefit has been reported in the
2000 financial statements since the loss carryforwards are offset by valuation
allowance of the same amount.

Deferred tax assets and the valuation account is as follows at
December 31, 2000 and 1999:

2000 1999
------------- ------------
Deferred tax asset
NOL carryforward $ 2,736,000 $ 947,400
Valuation allowance (2,736,000) (947,400)
------------- ------------
$ - $ -
============= ============

f. Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities, and revenues involve extensive reliance on
management's estimates. Actual results could differ from those estimates.

g. Revenue Recognition

The Company recognizes income and expense on the accrual basis of
accounting. The Company receives revenues from the sales of access to its
web-based applications, the performance of consulting and training and from
the continual hosting of its clients' web sites. The initial term of all
agreements into which the company enters with its clientele for its web-based
applications is one year. The revenues related to these contracts are,
therefore, recognized ratably over the initial term of the contract. The
monthly charges related to hosting and gateway access are recognized when
billed in accordance with SOP 97-2 as services are performed. Any additional
consulting fees or training fees, outside of the initial contract, related to
any Visual WebTools products are recognized as the service is delivered

h. Recently Adopted Accounting Pronouncements/Deferred Revenue

In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accouting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB 101 clarifies application of generally accepted accounting
principles to revenue transactions. The Company changed its accounting method
during 2000 to conform to the views of the SEC staff as documented in SAB 101.
The change involves that of accounting for up-front fees and, in accordance
with SAB 101, the Company is amortizing such fees over one year, which
generally represents the longer of the contractual period or the expected life
of the customer relationship. There is no cumulative effect adjustment for
the change in 2000 as there were not significant up-front fees relating to the
change prior to January 1, 2000. Pursuant to this new accounting policy the
Company has deferred revenue of $1,821,378 at December 31, 2000. The Company
has also deferred commissions paid in connection with deferred revenues and
has recorded prepaid expenses of $275,022 at December 31, 2000.

F-17

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 1 - Summary of Significant Accounting Policies (continued)

i. Depreciation

Depreciation of property and equipment is provided on the
straight-line method over the estimated useful lives of the assets.
Depreciation expense for the periods ended December 31, 2000 and 1999 is
$126,708 and $28,572, respectively.

j. Major Customers

During 1999 and 1998 the Company had major customers that
individually accounted for 10% or more of the annual sales. During 1998, four
customers generated sales in the amount of $118,744 or 68% of total sales as
follows:
Customer Sales %
--------- ------- ------
A 28,161 16
B 21,271 12
C 24,422 14
D 44,890 26

During 1999, two customers generated sales in the amount of $124,344
or 41% of total sales as follows:

Customer Sales %
--------- ------- ------
A 64,535 21
B 59,809 20

During 2000, the Company had no major customers.

k. Impairment of Long Lived Assets

Fixed assets are evaluated periodically by management and if impaired
are written down to the fair market value.

l. Consolidation Policy

The December 31, 2000 financial statements are consolidated financial
statements including the accounts of Pacific Webworks, Inc., World Commerce
Network, LLC, and Intellipay, Inc. All Intercompany transactions and accounts
have been eliminated in the consolidation.

NOTE 2 - Going Concern

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has had
recurring operating losses since inception and is dependent on financing to
continue operations. The financial statements do not include any adjustment
that might result from the outcome of this uncertainty. It is management's
plan to continue to refine its operations by taking steps to reduce the
Company's burn rate, solicit funding, and increase cash sales.

F-18

53
Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 3 - Property and Equipment

Property and Equipment consists of the following at December 31, 2000
and 1999:
Estimated
December 31, Useful
2000 1999 Lives
----------- ------------ ------------
Computer Equipment $ 332,714 $ 82,165 3-5 yrs
Equipment 96,833 39,558 3-5 yrs
Software 74,342 27,894 3 yrs
Furniture and Fixtures 72,090 59,138 7 yrs
Leasehold improvements 6,667 6,667 3 yrs
----------- ------------
Total 582,646 215,422
Less Accumulated Depreciation (208,387) (44,029)
----------- ------------

374,259 171,393
=========== ============

NOTE 4 - Notes Payable

During 1999, the Company received $980,000 cash and $20,000 of
equipment from a company. In December 1999, $500,000 of the note was
converted to 381,679 restricted shares of the company's common stock. The
remaining balance of $500,000 was converted to 500,000 shares of common stock
during 2000.

During 2000, the Company received cash of $216,580 from a
corporation. The note is non-interest bearing and due upon demand.

NOTE 5 - Notes Payable - Related Party

During 2000, the Company received cash of $250,000 from Principal
Funding Group, a shareholder. The note bears interest at 13% and is due
within one year.

NOTE 6 - Lease Obligation

The Company has a capital lease obligation to a corporation for a
copier. The lease requires monthly payments of $286 through April 2002, bears
interest at 10%, and is secured by the copier. The lease obligation due at
December 31, 2000 is $3,095.

Future minimum lease payments are as follows at December 31, 2000:

2001 $ 3,423
2002 1,144
----------
Total Obligation 4,567
Less: Portion representing interest (1,472)
----------
Total Principle Obligation 3,095
Less: Current Maturities (2,425)
----------
Total Long Term Principle Obligation $ 670
==========

F-19

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 7 - Stockholders' Equity

During January 2000, the Company issued 4,663 shares of its common
stock at $2.00 per share for 1% of the outstanding stock of World Commerce
Network, LLC.

During April 2000, the Company issued 2,400,000 shares of its common
stock at $1.80 per share for all of outstanding stock of Intellipay, Inc.

During June 2000, the Company issued 400,000 shares of its common
stock at $2.50 per share for payment on notes payable of $1,000,000.

During June 2000, the Company issued 1,040,000 shares of its common
stock at $1.00 per share for payment on notes payable and accrued interest of
$1,037,536.

During August 2000, the Company issued 18,000 shares of its common
stock at $1.44 per share for an insurance policy valued at $25,945.

During September 2000, the Company issued 600,000 shares of its
common stock at $1.00 per share for payment on notes payable of $600,000.

During October 2000, the Company issued 150,000 shares of its common
stock at $2.50 per share for cash of $375,000. These shares were issued to
honor warrants that were exercised.

NOTE 8 - Computer Software Costs

On May 7, 1997, the Company entered into an agreement for assignment
of a security interest and judgement from a bank for various software service
codes and other technology they held. Pursuant to FASB 86, the Company
capitalized these costs because the purchased software had alternative future
use, being an integral part of the internet software design product sold to
the public. Costs of maintaining the product is charged to expense when
incurred. The Company paid $10,000 for the transfer of these software tools
and is amortizing them over a five year life. Amortization expense is $1,824,
$2,001 and $2,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

NOTE 9 - Software Development Costs

Software development costs represent costs incurred for internally
developed software. Pursuant to SOP 98-1, the Company capitalizes costs
incurred during the application development stage (designing, coding,
installing, and testing) or its software development. Costs incurred during
the preliminary project stage and post-implementation and operation stage are
expensed as incurred. The Company capitalized $772,448 in 1999. The costs
are being amortized over a three year period and amortization expense charged
to operations in 2000 and 1999 was $274,824 and $274,827, respectively.

F-20

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 10 - Reverse Merger / Stock Split

Effective January 11, 1999, Pacific Webworks, Inc. (a public
Company) entered into an agreement and Plan of Reorganization with Utah
Webworks, Inc., (a private company). The agreement provides for the merger of
the Company into Utah Webworks to be treated as a reverse merger, thus making
Utah Webworks the accounting survivor. Pursuant to the agreement the Company
issued 5,000,000 shares of common stock to the shareholders of Utah Webworks
for all shares of their Company. Because the historical financial information
in these financial statements prior to the reverse merger (January 11, 1999)
is that of the accounting acquirer (Utah Webworks), a 5,000 for 1 forward
stock split adjustment has been retroactively applied to the shares of Utah
Webworks, to show the effects of the reverse merger. The 5,000,000 share
reorganization adjustment represents the shares held by the shareholders of
the public company. The management of the Company resigned and the management
and board of Utah Webworks filled the vacancy. Utah Webworks is in the
business of software development for computer and internet systems. The
public company had cash in escrow of $750,000 and a note receivable from Utah
Webworks of $250,000 as its only assets. The cash and note receivable were
contributed to Utah Webworks as an investment in subsidiary advanced for
operations. This business combination was accounted for using the purchase
method.

NOTE 11 - Investment in Joint Venture

During 1999, the Company became a 50% member in World Commerce
Network, LLC (WCN). For 1999, WCN had a net loss of $281,341, of which,
$140,671 should be recognized by the Company. However, since the Company
contributed only $25,000 in capital, the loss on investment was limited to
this amount. The Company's book value in this investment at December 31, 1999
was $0. In January 2000, the Company acquired an additional 1% interest and
began accounting for this investment using the consolidation method and
changed from the equity method. In June 2000 the Company acquired the
remaining 49% of WCN, thus it is a wholly owned subsidiary of the Company at
December 31, 2000. WCN has been consolidated for the entire year 2000.

NOTE 12 - Related Party

During 1999, $166,046 was recognized as a note receivable from World
Commerce Network, LLC (WCN). There was no provision for interest and the
balance was due within the next twelve months. Additionally as of December
31, 1999, there was an accounts receivable of $6,800 due from WCN. However, in
2000, the Company acquired all remaining outstanding stock of WCN and it
became a wholly owned subsidiary of the Company. These receivables became
intercompany and were eliminated in consolidation at December 31, 2000.

During 2000, the Company received cash of $250,000 from Principal
Funding Group, a shareholder. The note bears interest at 13% and is due
within one year.

F-21

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 13 - Stock Warrants

At January 1999, the Company had outstanding warrants to purchase
400,000 shares of the Company's common stock at prices ranging from $2.50 to
$6.00 per share. The warrants became exercisable in January 1999 and expire
in January 2004. The warrants are exercisable as follows:

150,000 warrants at $2.50
100,000 warrants at $3.50
100,000 warrants at $4.50
50,000 warrants at $6.00

The warrants were issued to a public relations firm for promotional
services to be provided for one year from issue date. The Company accounted
for these warrants per FASB 123 using the Black-Scholes model on the date the
warrants became measurable per EITF 96-18. The measurement dates are as
follows: 133,000 warrants on January 28, 1999, 67,000 warrants of July 27,
1999 and the remaining 200,000 on November 27, 1999. The resulting valuation
for the warrants is $1,255,800 of which $1,242,584 was amortized in 1999. The
balance of $13,216 was amortized during the year 2000 and is recorded a
deferred compensation at December 31, 1999. During 2000, warrants were
exercised in the amount of 150,000 shares for cash of $375,000

Pursuant to the 400,000 share stock issuance in June 2000 for the
conversion of $1,000,000 in notes, the Company issued detachable warrants that
were exercisable at February 22, 2000. At December 31, 2000 the following
warrants were outstanding in addition to the above warrants:

400,000 warrants at $5.00 Expiration February 2005
200,000 warrants at $7.50 Expiration February 2005

NOTE 14 - Commitments and Contingencies

The Company is committed to an operating lease for office space.
The lease requires the Company to pay monthly rent of $5,800 and expires in
December 2001.

Future minimum lease payments are as follows:

2001 69,600
-------------
Total $ 69,600
=============

NOTE 15 - Fair Value of Financial Instruments

Unless otherwise indicated, the fair values of all reported assets
and liabilities which represent financial instruments (none of which are held
for trading purposes) approximate the carrying values of such instruments.

F-22

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 16 - Incentive Stock Option Plan

On December 1, 1999, the Company established an Incentive Stock
Option Plan (the Plan). The Plan covers both current and prospective
employees. The Company reserved 1,000,000 shares of common stock under the
plan. The Board of Directors has approved the granting of options under the
plan as follows:

Directors, officers, employees and certain consultants have been
granted options to acquire 706,606 shares of the Company's common stock. The
options were granted at exercise prices ranging from $1.062 - $3.44 per share.
A total of 555,606 options were granted at the market price of the Company's
common stock on the date of grant. A total of 151,000 options were granted at
prices that were approximately 16.3% below fair market value of the Company's
common stock on the date of grant. The options vest periodically through
December 2001. The options expire through September 2005.

Fair Market Value of Options Granted
--------------------------------------

The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" (FAS
123). Therefore, the Company accounts for stock-based compensation under the
Accounting Principles Board Opinion No. 25, under which approximately $15,000
has been recognized for compensation earned related to options issued at
exercise prices that were less than the fair market value of the Company's
stock on the date of grant. Had compensation cost for the stock-based
compensation been determined based upon the fair value of options at the grant
date consistent with methodology set forth by FAS 123, the Company's net loss
and loss per share would have increased to the following proforma amounts:

Pro forma net earnings 2000 1999 1998
------------- -------------- -------------
As reported (5,259,691) (2,567,535) (150,465)
Pro forma (6,140,291) (2,572,861) (150,465)

Net loss per common share -
basic and fully diluted

As reported (.40) (.27) (.03)
Pro forma (.47) (.27) (.03)

The fair value of these options was estimated at the date of grant
using the Black-Scholes American option-pricing model with the following
weighted-average assumptions for 2000 and 1999: expected volatility of 201
percent and 168 percent, respectively; risk free interest rate of 6.5 percent
and 6.75 percent, respectively; and expected life of 3.5 years. The weighted
average fair value of options granted $1.75 and $2.38 in 2000 and 1999,
respectively. There were no options granted in 1998.

Option pricing models require the input of highly sensitive
assumptions, including expected stock volatility. Also, the Company's stock
options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially affect
the fair value estimate. Management believes the best input assumptions
available were used to value the options and that the resulting option values
are reasonable.

F-23

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 16 - Incentive Stock Option Plan (continued)

Information with respect to the Company's stock options at December
31, 2000 is as follows:

Weighted-
Average
Stock Exercise Exercise
Options Price Price
----------- ------------ ------------
Outstanding at January 1, 1998
Granted - - -
Exercised - - -
Forfeited - - -
----------- ------------ ------------
Outstanding at December 31, 1998 - - -

Granted 797,494 $2.00-$3.44 $ 2.38
Exercised - - -
Forfeited - - -
----------- ------------ ------------
Outstanding at December 31, 1999 797,494 $2.00-$3.44 $ 2.38
Granted 281,700 $1.06-$1.75 $ 1.75
Exercised - - -
Forfeited 371,568 $1.06-$3.44 $ 2.39
----------- ------------ ------------
Outstanding at December 31, 2000 707,606 $1.06-$3.44 $ 2.21
=========== ============ ============

Additional information related to stock options outstanding and
exercised at December 31, 2000:

Options Outstanding
-------------------
Weighted-
Weighted- Average
Average Remaining
Exercise Number Exercise Contractual
Price Outstanding Price Life
---------- ------------ ------------ ------------
$ 3.44 87,879 $ 3.44 3 yrs
$ 2.63 162,727 $ 2.63 3 yrs
$ 2.00 255,000 $ 2.00 3 yrs
$ 1.75 151,000 $ 1.75 4.7 yrs
$ 1.06 50,000 $ 1.06 5 yrs
-----------
706,606
===========

Options Exercisable
-------------------
Weighted-
Average
Exercise Number Exercise
Price Exercisable Price
------------- ------------ -------------
$ 3.44 41,918 $ 3.44
$ 2.63 41,609 $ 2.63
$ 2.00 255,000 $ 2.00
$ 1.75 - $ 1.75
$ 1.06 50,000 $ 1.06
-----------
388,527
===========

F-24

Pacific WebWorks, Inc.
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 17 - Goodwill

The Company recorded goodwill in connection with the acquisition of
World Commerce Network, Inc. (WCN) due to the negative equity position of WCN.
A total of $240,521 was recorded upon acquisition and is being amortized over
a 5 year period. The realization of this asset is contingent upon WCN's
ability to generate revenues from their marketing of Pacific Webworks web
tools and future hosting fees related to WCN customers. Amortization expense
related to this acquisition was $52,113 for the year ended December 31, 2000.

The Company also recorded goodwill in connection with the acquisition
of Intellipay, Inc. (IPAY) due to the negative equity position of IPAY. The
Company issued 2,400,000 shares of its common stock valued at $4,320,000. A
total of $4,532,734 was recorded upon acquisition and is being amortized over
a five year period. The realization of this asset is contingent upon IPAY's
ability to generate revenues from their financial transaction processing
process. Amortization expense related to this acquisition was $679,916 for
the year ended December 31, 2000.

NOTE 18 - Subsequent Events

In January 2001, the Company committed to an operating lease for its
data center. The lease requires the Company to pay monthly rent of $26,200
and expires in December 31, 2001.

In February 2001, the Company engaged in a share exchange with
Logio, Inc. (Formerly Wordcruncher Technologies, Inc.) a public Nevada
corporation. The Company issued 2,800,000 shares of its common stock for all
of the outstanding shares of Logio, Inc. The shares were valued at $2,273,600
and the transaction was recorded using the purchase method of accounting.

During the first three months of 2001, the Company secured $475,000
in debt financing.

During 2001, the Company approved a new Stock Incentive Plan. No
more than 2,500,000 shares will be granted under the plan.

F-25

No dealer, salesman or any other person
has been authorized to give any information
or to make any representations not contained
in this prospectus; any information or
representation not contained herein must not
be relied upon as having been authorized by
Pacific WebWorks. This prospectus does not
constitute an offer to sell, or a solicitation Pacific WebWorks, Inc.
of an offer to buy, any securities other than
the securities covered by this prospectus; nor 850,000 Shares
does it constitute an offer to sell, or a
solicitation of an offer to buy, any of the
securities covered by this prospectus by
Pacific WebWorks or any person to whom it is
unlawful for Pacific WebWorks to make such
offer or solicitation. Neither the delivery
of this prospectus nor any sale made hereunder
shall, under any circumstances, create an ___________________
implication that there has been no change in
the affairs of Pacific WebWorks since the date PROSPECTUS
of this prospectus. ___________________

July 17, 2001
____________

TABLE OF CONTENTS
Page

Prospectus Summary......................... 3
Risk Factors............................... 4
Use of Proceeds............................ 9
Market and Price Range of Common Stock..... 9
Selected Financial Data................... 11
Management's Discussion and Analysis...... 12
Business.................................. 18
Properties................................ 26
Legal Proceedings......................... 26
Management................................ 26
Principal Stockholders.................... 28
Description of Securities................. 30
Selling Stockholders...................... 30
Plan of Distribution...................... 32
Interest of Named Expert and Counsel...... 33
Disclosure of Commission Position on
Indemnification for Securities
Act Liability.......................... 33
Available Additional Information.......... 33
Changes in Accountants.................... 34
Financial Statements...................... 34

PART II

ITEM 16: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

No. Exhibit Location
- ---- ------- --------
2.1 Agreement and Plan of Merger between Asphalt Associates (1)
Inc, and Utah WebWorks, Inc., dated January 11, 1999

2.2 Agreement and Plan of Reorganization between Pacific WebWorks (2)
and IntelliPay, dated, April 4, 2000

3.1 Articles of Incorporation of Asphalt Associates, Inc. (1)

3.2 Articles of Merger for Asphalt Associates, Inc., dated (1)
January 6, 1999
3.3 Articles of Share Exchange, filed February 8, 2001. (5)

3.4 Amended and Restated Bylaws of Pacific WebWorks, Inc. (1)

5.1 Opinion of Cindy Shy, P.C. Previously
Filed

10.1 Master Service Agreement between Electric Lightware, (1)
Inc., and Utah WebWorks, Inc., dated February 2, 1998.

10.2 Internet Access Agreement, Addendum to Master Service (1)
Agreement between Electric Lightwave, Inc., and Utah
WebWorks, Inc., dated February 2, 1998

10.3 Employment Agreement between Pacific WebWorks and (1)
Christian R. Larsen

10.4 Form of Reseller Agreement, as amended (1)

10.5 Lease Agreement between Utah WebWorks, Inc., and Westgate (1)
Business Center, dated January 11, 1999

10.6 Consultant Agreement between Columbia Financial Group (1)
and Pacific WebWorks, Inc., dated January 26, 1999

10.7 Strategic Reseller Agreement with U.S. Merchant Systems (1)

10.8 Purchase Agreement between Pacific WebWorks and U.S. (3)
Merchant Systems, dated February 22, 2000

10.9 Registration Rights Agreement between Pacific WebWorks and Previously
Midwest First National, Inc. and Condiv Investments, Inc. Filed
and Columbia Financial Group, dated February 22, 2000

10.10 License agreement between Logio and Oracle Corporation, (6)
as amended

10.11 Lease Agreement between Logio and SunMicrosystems Finance, (6)
as amended (6)

10.12 Consultant Agreement between Columbia Financial Group, Previously
Inc., and Pacific WebWorks, dated April 25, 2001 Filed

10.13 Unit Purchase Agreement between Investors and Pacific Previously
WebWorks, dated May 30, 2001 Filed

21.1 Subsidiaries of Pacific WebWorks (5)

23.1 Consent of Chisholm & Associates, dated May 3, 2001 Previously
Filed

23.2 Consent of Cindy Shy, P.C. (See exhibit 5.1) Previously
Filed

24.1 Power of Attorney Previously
Filed

(1) Incorporated by reference to Pacific WebWork's Form 10, as amended, file
No. 0-26731, filed July 16, 1999.
(2) Incorporated by reference to Pacific WebWork's Form 8-K, filed April 19,
2000
(3) Incorporated by reference to Pacific WebWork's Form 10-K, filed March
10, 2000
(4) Incorporated by reference to Pacific WebWork's Form 10-Q, as amended,
filed May 15, 2000
(5) Incorporated by reference to Pacific WebWork's Form 10-K, filed April 2,
2001
(6) Incorporated by reference to Pacific WebWork's Form 10-Q, filed May 14,
2001.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused the registration statement to be signed on its
behalf by the undersigned, duly authorized, in the city of Salt Lake City,
state of Utah.

PACIFIC WEBWORKS, INC.
a Nevada Corporation

/s/ Christian R. Larsen 7/26/01
By: _______________________________ Date: __________________
Christian R. Larsen
President and Director

Pursuant to the requirements of the Securities Act of 1933, the
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

/s/ Christian R. Larsen 7/26/01
By:____________________________________ Date: ___________________
Christian R. Larsen
President and Director

/s/ Thomas R. Eldredge 7/26/01
By:____________________________________ Date: ___________________
Thomas R. Eldredge
Secretary/Treasurer, Chief
Financial Officer