U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission file number: 000-27453
LOGIO, INC.
(Exact name of registrant as specified in its charter)
Nevada 84-1370590
- ------ -----------
(State or incorporation) (I.R.S. Employer
Identification No.)
180 South 300 West, Suite 400, Salt Lake City, Utah 84101
- ----------------------------------------------------- -------
(Address of principal executive offices) (Zip)
Issuer's telephone number, including area code: (801) 578-9020
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
Check if disclosure of delinquent filers in response to item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
State issuer's revenue for its most recent fiscal year: None
As of March 26, 2002 the registrant had 18,425,830 shares of common stock
outstanding. The registrant is a wholly-owned subsidiary whose voting stock
is beneficially owned by its parent, Pacific WebWorks, Inc.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I
Item 1. Business...........................................................3
Item 2. Properties.........................................................3
Item 3. Legal Proceedings..................................................4
Item 4. Submission of Matters to a Vote of Security Holders ...............4
PART II
Item 5. Market For Common Equity and Related Stockholder Matters...........4
Item 6. Selected Financial Data............................................4
Item 7. Management's Discussion and Analysis and Results of Operations.....5
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........10
Item 8. Financial Statements and Supplementary Data.......................10
Item 9. Changes in and Disagreements With Accountants.....................32
PART III
Item 10. Directors and Executive Officers; Compliance with Section 16(a)...32
Item 11. Executive Compensation............................................33
Item 12. Security Ownership of Certain Beneficial Owners and Management....33
Item 13. Certain Relationships and Related Transactions....................34
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...34
FORWARD LOOKING STATEMENTS
In this annual report, references to "Logio," "we," "us," and "our"
refer to Logio, Inc.
This annual report contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this annual report that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Logio's control. These factors include but are not limited to economic
conditions generally and in the industries in which Logio may participate;
competition within Logio's chosen industry, including competition from much
larger competitors; technological advances and failure by Logio to
successfully develop business relationships.
2
PART I
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ITEM 1: BUSINESS
Overview
Logio, Inc., 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 to serve the needs
of the business professional. Logio launched a web site, logio.com, on March
19, 2000, which was tailored to provide, under one roof, a broad spectrum of
the information and services that are required by business people in their
daily work activities. During the second and third quarters of fiscal year
2000 we realized minimal revenues from sales of advertising on our web site,
and continued to suffer losses.
In June 2000, our board of directors, due in part to changing market
conditions and ongoing operating losses, named Kenneth W. Bell as the new
chief executive officer of Logio. Mr. Bell undertook an immediate evaluation
of all aspects of our operations, including product development, sales and
marketing approaches, product positioning, employees and management, contracts
and agreements, and significant costs incurred by Logio. As a result of Mr.
Bell's recommendations, Logio repositioned its strategic direction, reduced
personnel, re-negotiated and settled contracts, and aggressively pursued new
financing sources.
Budgets were established for sales and costs related to Logio products
and operations. Executive management continually monitored progress related
to our sales and cost reduction goals in an effort to reduce losses and
achieve sales growth and profitability. Sales of Logio's directory did not
meet budgeted expectations and, despite the measures taken to reduce costs,
the company continued to suffer losses, although at a reduced rate. As a
result of these ongoing losses and the continuing decline in the market price
for our common stock, previously agreed upon funding was withdrawn and other
traditional financing sources became unavailable at acceptable terms.
Due to the continuing negative trends in the Internet industry and
markets, the trading price of our stock continued to decline throughout third
quarter 2000. Because of these conditions and the resulting lack of funding,
the board of directors approved the pursuit of a merger, acquisition,
strategic partnership, joint partnership or other forms of continuation that
could potentially provide value to our stockholders.
On October 31, 2000, Logio entered into an Agreement and Plan of
Reorganization ("Plan") with Pacific WebWorks, Inc. to become its wholly owned
subsidiary. The Plan was approved by the stockholders of Logio on January 31,
2001 and Articles of Exchange were filed with the state of Nevada on February
8, 2001. The Plan provided for the transfer of 18,425,830 shares of our
outstanding common stock in exchange for 2,800,000 shares of Pacific WebWorks
common stock. Pacific WebWorks filed a registration statement with the
Securities Exchange Commission to register the 2,800,000 shares issued
pursuant to the Plan. The registration statement was declared effective on
December 20, 2000. In conjunction with the acquisition we ceased our
development activities and preliminary operations related to the Logio
business directory and directory services. At this time Logio is not actively
marketing any products and the production and operation of a portal or
directory have ceased.
ITEM 2: PROPERTIES
We do not currently own or lease any real property. We use office space
at the corporate headquarters of our parent corporation, Pacific WebWorks.
3
ITEM 3: LEGAL PROCEEDINGS
We are involved in various disputes and legal claims arising in the
normal course of our business. In the opinion of management, any resulting
litigation will not have a material effect on our financial position and
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We have not submitted a matter to a vote of our shareholders during the
fourth quarter of the 2001 fiscal year.
PART II
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ITEM 5: MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
We do not have an active public trading market at this time. Our parent
corporation, Pacific WebWorks, is the beneficial owner of all of our
18,425,830 outstanding common shares.
We have not declared dividends on our common stock and do not anticipate
paying dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
The following discussion describes all securities sold by Pacific
WebWorks without registration during the past three years
On October 25, 2000 our Board authorized the issuance of 1,500,000
common shares to Technology Equity Fund Corp. to convert a debt of $240,000
with interest. We relied on an exemption from registration for a private
transaction not involving a public distribution provided by Section 4(2) of
the Securities Act.
ITEM 6: SELECTED FINANCIAL DATA
The financial information set forth below with respect to our statements
of operations for each of the three years ended December 31, 2001, 2000, and
1999 and with respect to our balance sheets at December 31, 2001, 2000, and
1999 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.
Years Ended December 31,
2001 2000 1999
------------- ------------- -------------
Net revenues $ - $ 16,756 $ 23,355
Cost of revenues - 447,072 15,071
------------- ------------- -------------
Gross profit (loss) - (430,316) 8,284
------------- ------------- -------------
Research & development 12,072 1,757,739 1,198,546
4
General & administrative 137,562 1,315,226 1,340,486
Sales & marketing - 660,933 953,708
Depreciation and amortization 370,953 776,824 179,169
Impairment Losses 987,372 - -
Compensation expense for stock options 161,405 660,590 1,452,610
------------- ------------- -------------
Total operating expense 1,669,364 5,171,312 5,124,519
------------- ------------- -------------
Operating loss (1,669,364) (5,601,628) (5,116,235)
Other income (expense)
Interest expense (44,980) (103,399) (9,955)
Interest income 17 42,425 196,310
Financing charges (413) (217,403) -
Other expense - (1,953) -
Loss on disposal of equipment - (2,215) -
------------- ------------- -------------
(45,376) (282,545) 186,355
------------- ------------- -------------
Loss before extraordinary item (1,714,740) (5,884,173) (4,929,880)
Extraordinary gain - 217,180 -
------------- ------------- -------------
Net loss (1,714,740) (5,666,993) (4,929,880)
Deduction for dividends and accretion - (64,360) (6,469,861)
------------- ------------- -------------
Net loss attributable to common
stockholders $ (1,714,740) $ (5,731,353) $(11,399,741)
============= ============= =============
Net loss per common share
attributable to common stockholders $ (0.09) $ (0.39) $ (0.96)
============= ============= =============
Weighted-average number of shares
outstanding - basic and diluted 18,425,537 14,593,455 11,879,919
============= ============= =============
See notes to Financial Statements for information concerning the
computation of per share amounts.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
Results of Operations
Comparison of 2001 and 2000 Year End Periods. Following is a comparison
of our operating results for the year ended December 31, 2001 with the year
ended December 31, 2000:
Revenues. During the fiscal year ended December 31, 2001 we did not
record revenues from the sale of products or services. However, during the
fiscal year ended December 31, 2000 we recorded $16,756 in revenues which were
primarily related to operations of the logio.com site and the related Logio
directory, which became available on the marketplace in April 2000. The
logio.com site, directory product and content services have not
5
been available for sale since November 2000 due to our acquisition by Pacific
WebWorks and our change in business model to facilitate joint content products
with Pacific Webworks.
Cost of Sales. Cost of sales consist primarily of fees paid to third
party service providers for use of their costs related to site operations, and
costs related to the insertion of banner and other advertisements. We had no
cost of sales for the 2001 fiscal year. Our cost of sales of $447,072 for the
year ended December 31, 2000 included the cost of Logio services, hosting,
support and monitoring related to the logio.com site.
Research and Development. Research and development expenses consisted
primarily of compensation to employees for site development, consulting
services and other third party service providers. Research and development
expenses decreased from $1,757,739 for the 2000 year to $12,072 for the 2001
year. The 2000 year expenses were due primarily to the number of employees
and consultants engaged in continued site and directory development and
enhancement, and for the retention of other third party service providers
related to other site content in the first and second quarters 2000. We began
reducing development personnel and overhead early in the second quarter 2000.
By late third quarter 2000, we again reduced development personnel
significantly due to the lack of funding that was previously committed by
certain investors and subsequently withdrawn.
Selling and Marketing. Selling and marketing expenses are related
primarily to compensation to employees for strategic marketing, content,
public relations and for other consultants and third party services. We did
not have any selling and marketing expenses for the 2001 year compared to
$660,933 for 2000 year. We abandoned our selling and marketing efforts in
late September 2000 due to our lack of funding and our planned acquisition by
Pacific WebWorks.
General and Administrative. General and administrative expenses
decreased from $1,315,226 for the 2000 year to $137,562 for the 2001 year.
The decrease in general and administrative expenses is primarily due to our
substantial cost cutting activities in the fourth quarter 2000 related to
administrative personnel, office expenses and the salaries of certain members
of key management.
Depreciation and Amortization. Depreciation and amortization decreased
from $776,824 for the 2000 year to $370,953 for the 2001 year. The decrease
in depreciation and amortization is due to the impairment of long-lived assets
related to the return of computer equipment and software technology to the
vendors.
Compensation Expense for Stock Options. Compensation expense for stock
options decreased to $161,405 for the 2001 year compared to $660,590 for the
2000 year. These charges reflect the intrinsic value of stock options granted
to employees and directors recorded as earned by the employee or director over
each period of service. The decrease represents the forfeiture of options
during 2000, management's efforts to discontinue granting of options at an
exercise price less than fair market value since second quarter of 2000, and
the completion of vesting periods for certain employee options.
Total Operating Expenses. Our operating expenses decreased to
$1,669,364 for the 2001 year compared to $5,171,312 for the 2000 year. This
decrease was due primarily to temporary cessation of product development and
sales of products and services, along with corresponding reductions in
personnel.
Other Income and Expense. Total other expense decreased from $282,545
for the 2000 year to $45,376 for the 2001 year. This decrease was primarily
due to continued use of cash balances and liquidation of short-term
investments over the year ended December 31, 2000 to fund operations and
decreases in financing charges related to the intrinsic value of debt and
accrued interest converted to Logio common stock. We did not conduct these
type of activities during the 2001 year.
6
Net Loss. Net loss decreased from $5,666,993 for the 2000 year to
$1,714,740 for the 2001 year. The decrease is primarily due to an overall
reduction in expenses related to operations and resulted in a decrease in net
loss per share from $0.39 for the 2000 year to $0.09 for the 2001 year.
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:
Revenue. Our initial revenue related to the Logio directory was derived
from sales of advertising on the Logio site in second and third quarters 2000.
Revenues decreased $6,579, from $23,355 for the year ended December 31, 1999,
to $16,756 for the year ended December 31, 2000. This 28.3% decrease is due to
the change in focus from the sales of Logio's PC-based product
("WordCruncher") to a focus on the development and operations of the logio.com
site and the related Logio directory, which became available on the
marketplace in April 2000. The logio.com site, directory product and content
services have not been available for sale since November 2000 due to our
acquisition by Pacific WebWorks and our change in business model to facilitate
joint content products with Pacific Webworks.
Cost of Sales. Cost of sales consist primarily of fees paid to third
party service providers for use of their content and services, certain costs
related to site operations, and costs related to the insertion of banner and
other advertisements. Our cost of sales of $447,072 for the year ended
December 31, 2000 includes the cost of Logio services, hosting, support and
monitoring related to the logio.com site. Cost of sales for the year ended
December 31, 1999 totaled $15,071 and related to license fees to a university
for technology re-sold in the WordCruncher product.
Research and Development. Research and development expenses consisted
primarily of compensation to employees for site development, consulting
services and other third party service providers. Research and development
expenses increased to $1,757,739 for the year ended December 31, 2000, an
increase of $559,193 from the $1,198,546 for the year ended December 31, 1999.
The increase in research and development expenses is due primarily to the
significant increase in the number of employees and consultants engaged in
continued site and directory development and enhancement and for the retention
of other third party service providers related to other site content in first
and second quarters 2000. This increase relates to the recent release of the
Logio site and the related Logio directory to the marketplace. We began
reducing development personnel and overhead early in the second quarter 2000.
By late third quarter 2000, we again reduced development personnel
significantly due to the lack of funding that was previously committed by
certain investors and subsequently withdrawn.
Selling and Marketing. Selling and marketing expenses related primarily
to compensation to employees for strategic marketing, content, public
relations and for other consultants and third party services. Selling and
marketing expenses decreased to $660,933 for year ended December 31, 2000, a
decrease of $292,775 from the $953,708 for the year ended December 31, 1999.
The decrease in selling and marketing expenses is due primarily to our
reduction in sales and marketing employees and consultants in April 2000 and
our complete abandonment of selling and marketing efforts in late September
2000 due to our lack of funding and our planned acquisition by Pacific
WebWorks. The larger amount of spending in 1999 related mostly to the hiring
of several marketing employees and marketing consulting firms for strategic
marketing planning and brand development in fourth quarter 1999.
General and Administrative. General and administrative expenses
decreased to $1,315,226 for the year ended December 31, 2000, a decrease of
$25,260 from the $1,340,486 for the year ended December 31, 1999. The
decrease in general and administrative expenses is primarily due to our
substantial cost cutting activities in the fourth quarter 2000 related to
administrative personnel, office expenses and the salaries of certain members
of key management.
7
Depreciation and Amortization. Depreciation and amortization increased
$597,655 to $776,824 for the year ended December 31, 2000 from $179,169 for
the for the year ended December 31, 1999. The increase in depreciation and
amortization is due to the purchase of computer equipment and software
technology, mostly on capital leases, required to release and maintain the
Logio site and related Logio directory in late 1999, and the related
depreciation charges for the year ended December 31, 1999. In November 2000,
we renegotiated our largest lease for our operational computer equipment and
lengthened the term of our lease by 13 months. This caused the fair value of
our lease to increase substantially and the related depreciation has also
increased for the equipment.
Compensation Expense for Stock Options. Compensation expense for stock
options decreased to $660,590 for the year ended December 31, 2000, a decrease
of $792,020 from $1,452,610 for the year ended December 31, 1999. These
charges reflect the intrinsic value of stock options granted to employees and
directors recorded as earned by the employee or director over each period of
service. The decrease represents the forfeiture of options during 2000,
management's efforts to discontinue granting of options at an exercise price
less than fair market value since second quarter of 2000, and the completion
of vesting periods for certain employee options.
Total Operating Expenses. Our operating expenses increased during the
year ended December 31, 2000 over the year ended December 31, 1999. This was
due primarily to the continued efforts to develop the infrastructure of the
logio.com site and the Logio directory, bringing products and services to the
marketplace and to develop new and innovative ideas for implementation on the
site and directory.
Interest Income. Interest income decreased to $42,425 for the year
ended December 31, 2000, a decrease of $153,885 from $196,310 for the year
ended December 31, 1999. The decrease reflects the continued use of cash
balances and liquidation of short-term investments over the year ended
December 31, 2000 to fund operations.
Interest Expense and Financing Charges. Interest expense totaled
$103,399 for the year ended December 31, 2000, an increase of $93,444 from
$9,955 for the year ended December 31, 2000. The increase is due primarily to
capital leases entered into in late 1999 and early 2000 and other notes
payable to vendors and shareholders. Financing charges of $216,703 incurred
during 2000 represent the intrinsic value of debt and accrued interest
converted to Logio common stock. In these transactions $1,357,642 of notes
payable to shareholders and related accrued interest were converted to
approximately 4,941,422 of our common stock at prices ranging from $0.16 to
$0.25 to per share. These shares were issued at prices less than the fair
market value of the common stock on the dates of conversion and, consequently,
financing charges of $216,703 were incurred for the intrinsic values.
Extraordinary Gain. From September to December 2000, Logio settled
$558,098 of vendor payables for $340,918 cash and stock. The forgiven debt
from these transactions resulted in $217,180 in extraordinary gain for the
year ended December 31, 2000.
Net Loss. Net loss increased to $5,666,993 for the year ended December
31, 2000, an increase of $737,113 compared to a net loss of $4,929,880 for the
year ended December 31, 1999. The increase in net loss is a result of our
increased costs and expenses associated with the continued research,
development, marketing and implementation of the Logio website and related
directory and their operations.
Net Loss Attributable to Common Stockholders. The accretion of the
beneficial conversion feature of Series A Preferred Stock was fully
recognized by fiscal year end 1999. The remaining cumulative 6% dividend to
each of the Series A Preferred stockholders was recognized in the first
quarter 2000, totaling $64,360. As such, net loss attributable to common
shareholders totaled $5,731,353 for the year ended December 31, 2000. Net
loss attributable to common stockholders for the year ended December 31, 1999
totaled $11,399,741 after giving effect to the dividends and accretion of the
beneficial conversion feature of Series A Preferred Stock recognized during
8
the first nine months of 1999 for the year ended December 31,1999, totaling
$6,469,861. This transaction resulted in an increase to additional paid-in
capital and a corresponding increase in accumulated deficit during the
quarters.
Factors Affecting Future Performance
. We currently are unable to finance our operations through revenues
because we have temporarily ceased development of our products and
business plan. As a result, we are unable to meet our current
obligations and required additional financing to fund our operations.
. 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.
. 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.
Liquidity and Capital Resources
At December 31, 2001, we had no cash on hand and no total current assets
compared to $25,850 cash on hand and total current assets of $29,018 at the
year ended December 31, 2000. Our total current liabilities were $844,018 at
the 2001 year end compared to $490,455 at the 2000 year end. Our accumulated
deficit was $19,663,960 at the 2001 year end. We have delayed operations,
have had a limited operating history, have recorded losses since our inception
and have relied upon equity and debt funding to support our operations. We
may be unable to generate positive cash flows from operations in the
foreseeable future. These factors raise substantial doubt that we can
continue as a going concern.
We have no material commitments for capital expenditures for the next
twelve months and our major obligations are related to capital lease
agreements which are in default and $1,067 owed for monthly management fees to
Pacific WebWorks, plus $23,766 due to a bank for an overdraft. Net cash used
in operating activities for the 2001 year was $135,512 compared to $3,956,340
for the 2000 year. Net cash provided by investing was $11,066 for the 2001
year compared to $1,409,110 for the 2000 year. Net cash provided by financing
activities was $98,597 for the 2001 year and was primarily the result of
proceeds from notes payable to our parent company. For the 2000 year
$1,517,708 net cash was provided by financing activities primarily from the
issuance of notes payable for $1,423,000 and proceeds of $908,100 from the
issuance of common stock
In March 2001 we were unable to make payments on our payables and
capital lease agreements related to hardware and our operating infrastructure,
which resulted in defaults under those agreements. Accordingly, we have
recorded impairment losses of $987,372 for the 2001 year. We defaulted on a
licensing agreement with Oracle Corporation and may no longer rely on that
software license and we have recorded an impairment loss of $75,840 to the net
asset and recorded a payable in default of approximately $100,000. We also
defaulted on capital lease agreements with Sun Microsystems Finance from whom
we leased the server equipment necessary to host our web site. We returned
the equipment to Sun Microsystems in May 2001. Accordingly, our financials
show impairment losses of $122,685, representing the cash down payments Logio
made at the beginning of the leases which were amortized over the life of the
lease, and $788,847 related to losses for equipment under capital leases and
related software and equipment. Management intends to negotiate favorable
settlements of the defaults, but cannot ensure that we will be successful in
such negotiations.
9
In addition to defaults approximating $440,000, we are unable to pay
liabilities of approximately $404,000 to various professional services firms,
vendors, Pacific WebWorks and an overdraft in a bank account. In January 2001
we obtained a line of credit of $120,000 from our parent corporation, Pacific
WebWorks. Pursuant to the agreement we would receive advancements up to
$120,000 at 12% interest with the advancements collateralized by all the
business assets of Logio. We owe $135,713 under this line of credit which is
in excess of our agreement. We agreed to pay management fees of $1,067 per
month to Pacific WebWorks and Pacific WebWorks agreed to rent certain of our
fixed assets for $1,422 per month.
Based upon our inability to satisfy our obligations we may be required
to seek bankruptcy protection if we are unable to find another solution.
Management expects to resume development and operations in the future when our
market is improved and sufficient funding is available for specific products;
however, management cannot predict when or if such funding may be obtained.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
10
CHISHOLM & ASSOCIATES
A Professional Certified Public Accountants Office (801)292-8756
Corporation P.O. Box 540216 Fax (801)292-8809
North Salt Lake, Utah 84054
_____________________________________________________________________________
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Logio, Inc.
We have audited the accompanying balance sheets of Logio, Inc. as of December
31, 2001 and 2000 and the related statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well a
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presently fairly,
in all material respects, the financial position of Logio, Inc. as of December
31, 2001 and 2000 and the results of its operations and cash flows for the
years then ended in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Chisholm & Associates
Chisholm & Associates
North Salt Lake, UT
January 31, 2002
11
Logio, Inc.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31,
2001 2000
-------------- -------------
CURRENT ASSETS
Cash and cash equivalents $ - $ 25,850
Short term investments - -
Accounts receivable, net of allowance for
doubtful accounts - 3,168
Prepaid assets - -
-------------- -------------
Total current assets - 29,018
-------------- -------------
PROPERTY & EQUIPMENT, net 91,791 1,485,182
-------------- -------------
$ 91,791 $ 1,514,200
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term capital lease
obligations $ 460 $ 242,417
Capital lease obligations in default 438,373 -
Overdraft in bank 23,766 -
Accounts payable - 20,000
Accounts payable past due 213,688 200,605
Accrued expenses 32,018 27,433
Note payable - parent company 135,713 -
-------------- -------------
Total current liabilities 844,018 490,455
CAPITAL LEASE OBLIGATIONS, less current maturities - 222,546
STOCKHOLDERS' EQUITY
6% preferred stock, par value $0.01;
liquidation preference $1,000; authorized
50,000 shares; issued and outstanding none
as of December 31, 2000 and 6,300 as of
December 30, 1999 - -
Common stock, par value $0.001; authorized
60,000,000 shares; issued 18,425,830 shares;
outstanding 18,425,510 as of December 31, 2001,
issued and outstanding 18,425,830 and
11,891,002 as of December 31, 2000 18,426 18,426
and 1999, respectively
Additional paid-in capital 18,893,398 18,731,993
Accumulated other comprehensive income - -
Deficit accumulated during the
development stage (19,663,960) (17,949,220)
-------------- -------------
Less treasury stock (91) -
-------------- -------------
Total stockholders' equity (752,227) 801,199
-------------- -------------
$ 91,791 $ 1,514,200
============== =============
The accompanying notes are an integral part of these financial statements
12
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
amounts
since Year ended December 31,
inception 2001 2000 1999
------------ ------------- ------------ -------------
<s> <c> <c> <c> <c>
Revenues
Advertising $ 16,756 $ - $ 16,756 $ -
Product 130,517 - - 23,355
------------ ------------- ------------ -------------
147,273 - 16,756 23,355
Cost of sales 478,813 - 447,072 15,071
------------ ------------- ------------ -------------
Gross profit (loss) (331,540) - (430,316) 8,284
Research and development 3,361,201 12,072 1,757,739 1,198,546
Selling and marketing expenses 1,651,787 - 660,933 953,708
General and administrative 3,217,335 137,562 1,315,226 1,340,486
Depreciation and amortization 1,343,771 370,953 776,824 179,169
Impairment losses 987,372 987,372 - -
Compensation expense for
stock options 2,274,605 161,405 660,590 1,452,610
------------ ------------- ------------ -------------
Total operating expenses 12,836,071 1,669,364 5,171,312 5,124,519
------------ ------------- ------------ -------------
Loss from operations (13,167,611) (1,669,364) (5,601,628) (5,116,235)
Other income (expense)
Interest income 249,105 17 42,425 196,310
Financing charges (217,816) (413) (216,703) -
Interest expense (203,617) (44,980) (103,399) (9,955)
Other expense (4,765) - (2,653) -
Loss on disposal of equipment (2,215) - (2,215) -
------------ ------------- ------------ -------------
(179,308) (45,376) (282,545) 186,355
------------ ------------- ------------ -------------
Loss before extraordinary item (13,346,919) (1,714,740) (5,884,173) (4,929,880)
Extraordinary gain 217,180 - 217,180 -
------------ ------------- ------------ -------------
NET LOSS (13,129,739) (1,714,740) (5,666,993) (4,929,880)
Deduction for dividends
and accretion (6,534,221) - (64,360) (6,469,861)
------------ ------------- ------------ -------------
Net loss attributable to
common stockholders $(19,663,960) $ (1,714,740) $(5,731,353) $(11,399,741)
============= ============= ============ =============
Net loss per common share -
basic and diluted:
Before extraordinary item
and deduction for dividends
and accretion $ (1.31) $ (0.09) $ (0.40) $ (0.41)
Extraordinary gain 0.01 - 0.01 -
Deduction for dividends
and accretion (0.65) - - (0.54)
------------ ------------- ------------ -------------
Net loss per common share
attributable to common
stockholders $ (1.94) $ (0.09) $ (0.39) $ (0.96)
============ ============= ============ =============
Weighted-average number of
shares outstanding - basic
and diluted 10,124,031 18,425,537 14,593,455 11,879,919
============ ============= ============ =============
The accompanying notes are an integral part of these financial statements
13
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative
amounts
since Year ended December 31,
inception 2001 2000 1999
------------- ------------- ------------- -------------
<s> <c> <c> <c> <c>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net loss $(13,129,739) $ (1,714,740) $ (5,731,353) $ (4,929,880)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation & amortization 1,343,771 370,953 776,824 179,169
Impairment losses 987,372 987,372 - -
Loss on disposal of equipment 26,215 24,000 2,215 -
Bad debt expense 34,169 3,169 31,000 -
Financing charge for stock conversion 217,403 - 217,403 -
Issuance of common stock, options and warrants
for compensation and other expenses 2,945,773 161,405 829,632 1,710,610
Other adjustment 34,661 34,661 - -
Extraordinary gain (217,180) - (217,180) -
Changes in assets and liabilities
Accounts receivable - - (33,433) (736)
Interest receivable - - 1,983 8,035
Prepaid expenses and other assets - - 311,199 (311,199)
Accounts payable 213,688 (6,917) (85,744) 295,928
Accrued expenses 32,018 4,585 (58,886) 61,827
------------- ------------- ------------- -------------
Total adjustments 5,617,890 1,579,228 1,775,013 1,943,634
------------- ------------- ------------- -------------
Net cash used in operating activities (7,511,849) (135,512) (3,956,340) (2,986,246)
------------- ------------- ------------- -------------
Cash flows from investing activities
Purchases of property and equipment (1,462,392) - (61,003) (1,260,831)
Proceeds from disposal of assets 11,066 11,066 - -
(Increase) decrease in short-term investments - - 1,462,147 (1,454,207)
Repayment of notes receivable from related parties (117,700) - 1,955 110,745
Notes receivable issued to related parties 117,700 - - (12,500)
(Increase) decrease in other assets - - 6,011 -
------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities (1,451,326) 11,066 1,409,110 (2,616,793)
------------- ------------- ------------- -------------
Cash flows from financing activities
Overdraft in bank 23,766 23,766 - -
Proceeds from issuance of common stock 1,909,250 - 908,100 400
Proceeds form issuance of preferred stock 6,300,000 - - 6,300,000
Repurchase of common stock (91) (91) - -
Cash paid for fees associated with
preferred stock issuance (392,100) - - (392,100)
Proceeds from issuance of notes
payable to related parties 2,557,395 135,713 1,423,000 685,682
Principal payments on long-term obligations (1,435,045) (60,791) (813,392) (361,274)
------------- ------------- ------------- -------------
Net cash provided by financing activities 8,963,175 98,597 1,517,708 6,232,708
------------- ------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents - (25,849) (1,029,522) 629,669
Cash and cash equivalents at beginning of period - 25,849 1,055,371 425,702
------------- ------------- ------------- -------------
Cash and cash equivalents at end of period $ - $ - $ 25,849 $ 1,055,371
============= ============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 182,838 $ 21,243 $ 29,888 $ 4,584
Cash paid during the period for income taxes - - - -
Non-cash financing activities:
Purchase of equipment with lease obligations $ 1,059,195 $ - $ 241,018 $ 766,987
Unrealized gain on securities 7,940 - - 7,940
Issuance of common stock for debt conversion 39,000 - 26,000 13,000
Payment of stock dividend to preferred shareholders 64,360 - 64,360 -
14
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 2000, 1999, 1998, 1997,
and period from November 5, 1996 (inception) to December 31, 1996
Accumu-
lated Deficit
other accumulated
Preferred Stock Common Stock Additional compre- during the
Price --------------- ----------------- paid-in Treasury hensive development
Date share Shares Amount Shares Amount capital stock income stage
------ ------- ------- ------- --------- ------- ---------- -------- ----------- -----------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Balances at
November 5, 1996 - $ - - $ - - $ - $ - $ - $ - $ -
Net loss - - - - - - - - - -
------- ------- --------- ------- ---------- -------- ----------- -----------
Balances at
December 31, 1996 - - - - - - - - - -
Issuance of
stock for cash
to organizers Jan-97 0.001 - - 622,500 623 52 - - -
Issuance of
stock for cash Feb-97 0.001 - - 67,500 67 8 - - -
Issuance of
stock for
licence
agreement Feb-97 - - - 110,742 111 (111) - - -
Issuance of
stock to
employees
for services Sep-97 0.333 - - 252,450 252 83,898 - - -
Issuance of
stock for
services Aug-97 1.092 - - 37,875 38 41,337 - - -
Net loss for
the year - - - - - - - - - (335,217)
------- ------- --------- ------- ---------- -------- ----------- -----------
Balances at
December 31, 1997 - - - - 1,091,067 1,091 125,184 - - (335,217)
(continued)
15
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31, 2000, 1999, 1998, 1997,
and period from November 5, 1996 (inception) to December 31, 1996
Accumu-
lated Deficit
other accumulated
Preferred Stock Common Stock Additional compre- during the
Price --------------- ----------------- paid-in Treasury hensive development
Date share Shares Amount Shares Amount capital stock income stage
------ ------- ------- ------- ---------- ------- ---------- -------- ----------- -----------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Issuance of
stock for cash Jul-98 4.17 - - 120,000 120 499,880 - - -
Reverse
acquisition and
reorganization
adjustment Jul-98 - - - 9,885,435 9,886 (8,550) - - -
Issuance of
stock for cash Jul-98 0.725 - - 690,000 690 499,310 - - -
Issuance of
stock for debt
conversion Jul-98 0.96 - - 13,500 13 12,987 - - -
Issuance of
stock for
services Oct-98 1.90 - - 39,000 39 70,161 - - -
Issuance of
stock for
software
technology Oct-98 1.80 - - 13,000 13 23,387 - - -
Issuance of
stock for
insurance
coverage Nov-98 1.00 - - 25,000 25 24,975 - - -
Net loss
for the year - - - - - - - - - (482,909)
------- ------- ---------- ------- ---------- -------- ----------- -----------
Balances at
December 31, 1998 - - - - 11,877,002 11,877 1,247,334 - - (818,127)
(Continued)
16
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31, 2000, 1999, 1998, 1997,
and period from November 5, 1996 (inception) to December 31, 1996
Accumu-
lated Deficit
other accumulated
Preferred Stock Common Stock Additional compre- during the
Price --------------- ----------------- paid-in Treasury hensive development
Date share Shares Amount Shares Amount capital stock income stage
------ ------- ------- ------ ---------- ------- ---------- -------- ----------- ------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Issuance of
warrants for
consulting
services Jan-99 - - - - - 258,000 - - -
Issuance of
preferred stock
for cash, net of
offering costs Feb-99 1,000 6,100 61 - - 5,719,839 - - -
Issuance of
preferred
stock for
cash, net of
offering costs Mar-99 1,000 200 2 - - 187,998 - - -
Issuance of
common stock
for exercise
of options Jun-99 0.11 - - 2,000 2 21,998 - - -
Issuance of
common stock
for exercise
of options Aug-99 0.10 - - 4,000 4 396 - - -
Issuance of
common stock
for conversion
of debt Dec-99 3.25 - - 8,000 8 25,992 - - -
Issuance of
stock options
to employees for Jan -
compensation Dec 99 - - - - - 1,430,610 - - -
Accretion of
intrinsic value
of preferred Feb-
stock Dec 99 - - - - - 6,131,944 - - (6,131,944)
Dividends on Feb -
preferred stock Dec 99 - - - - - 337,917 - - (337,917)
Unrealized gain
on short-term
investments - - - - - - - - 7,940 -
Net Loss for
the year - - - - - - - - - (4,929,880)
------- ------ ---------- ------- ---------- -------- ----------- ------------
Balances at
December 31, 1999 - - 6,300 63 11,891,002 11,891 15,362,028 - 7,940 (12,217,867)
(Continued)
17
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31, 2000, 1999, 1998, 1997,
and period from November 5, 1996 (inception) to December 31, 1996
Accumu-
lated Deficit
other accumulated
Preferred Stock Common Stock Additional compre- during the
Price --------------- ----------------- paid-in Treasury hensive development
Date share Shares Amount Shares Amount capital stock income stage
------ ------- ------- ------- ---------- ------- ----------- -------- -------- -------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Issuance of
common stock
for exercise
of options Jan 00 0.10 - - 2,000 2 198 - - -
Issuance of
common stock
for exercise
of warrants Jan 00 5.00 - - 100,000 100 499,900 - - -
Conversion of
preferred stock
to common stock Feb 00 - (2,500) (25) 248,016 248 (223) - - -
Issuance of
common stock
for exercise
of options Mar 00 0.10 - - 12,000 12 1,188 - - -
Issuance of
common stock
for exercise
of warrants Mar 00 7.00 - - 58,000 58 405,942 - - -
Conversion of
preferred stock
to common stock Mar 00 - (3,800) (38) 376,984 377 (339) - - -
Issuance of
common stock for
reset shares Mar 00 - - - 727,756 728 (728) - - -
Dividends on Jan -
preferred stock Mar 00 - - - - - 64,360 - - (64,360)
Issuance of
common stock
for preferred
dividends paid Mar 00 - - - 61,650 62 (62) - - -
Issuance of
common stock
for exercise April &
of options Oct 00 0.10 - - 7,000 7 693 - - -
Unrealized gain
on marketable Jan -
securities Sep 00 - - - - - - - 6,071 -
Net realized
gain on
marketable Jan -
securities Jun 00 - - - - - - - (14,011) -
Issuance of
stock for
conversion
of notes Sep - 0.16 -
payable Oct 00 0.251 - - 4,315,000 4,315 1,058,364 - - -
Issuance of
stock for
conversion
of notes
payable to Sep & 0.81 -
shareholders Oct 00 0.82 - - 626,422 626 511,040 - - -
Issuance of
warrants for
consulting May -
services Dec 00 - - - - - 169,043 - - -
Issuance of
stock options
to employees for Jan-
compensation Dec 00 - - - - - 660,590 - - -
Net loss for
the year ended
December 31, 2000 - - - - - - - - - (5,666,993)
------- ------- ---------- ------- ----------- -------- -------- -------------
Balances at
September 30, 2000 - - - - 18,425,830 18,426 18,731,993 - - (17,949,220)
------- ------- ---------- ------- ----------- -------- -------- -------------
Repurchase of
stock Feb-01 - - - - - - (91) - -
Issuance of
stock options
to employees for Jan -
compensation Dec 01 - - - - - 161,405 - - -
Net loss for
the year ended
December 31, 2001 - - - - - - - - - (1,714,740)
------- ------- ---------- ------- ----------- -------- -------- -------------
- - - $ - 18,425,830 $18,426 $18,893,398 $ (91) $ - $(19,663,960)
======= ======= ========== ======= =========== ======== ======== =============
The accompanying notes are an integral part of this financial statement
18
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
presentation of the accompanying consolidated financial statements follows.
1. The Company
-----------
Logio, Inc., formerly WordCruncher Internet Technologies, Inc., (the Company)
is a development stage company, historically engaged in the development and
marketing of a focused Internet directory and search engine intended to
service the needs of the business professional.
The Company has temporarily ceased the development and operations of its
products and has not produced any significant revenues to date.
The Company was incorporated on November 5, 1996 in the State of Utah under
the name of Redstone Publishing, Inc. The name was changed from Redstone
Publishing, Inc. to WordCruncher Publishing Technologies, Inc. in early 1997.
During July 1998, the Company merged with Dunamis, Inc. a public Company
organized in the State of California. The merger was recorded as a reverse
acquisition, therefore WordCruncher was the accounting survivor.
In connection with the merger, Dunamis, the legal survivor, changed its name
to WordCruncher Internet Technologies, Inc. and changed its domicile to the
State of Nevada. The Company's headquarters are in Salt Lake City, Utah.
On April 18, 2000, the Board of Directors approved the change of the Company's
name to Logio, Inc. The change was approved by the Company's stockholders in
June 2000. The Company also amended its articles of incorporation and filed
the appropriate documents with the state of Nevada in June 2000 when the
Company officially changed its name to Logio, Inc.
On February 8, 2001, Pacific WebWorks, Inc. completed its acquisition of
Logio, Inc., 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 approximately
$2,450,000 representing the fair value of the Pacific WebWorks shares on the
date of exchange. Logio's results of operations are included in the Pacific
WebWorks, Inc. consolidated results of operations from the acquisition date to
December 31, 2001 and the fair value of its assets and liabilities have also
been recorded on the acquisition date and are included in the Pacific
WebWorks, Inc. consolidated balance sheet.
The Company conducts its business within one industry segment.
19
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
2. Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. Management
believes that the estimates used in preparing the financial statements are
reasonable and prudent; however, actual results could differ from these
estimates.
3. Cash Equivalents
----------------
The Company considers all highly liquid debt instruments with maturity of
three months or less when purchased to be cash equivalents.
4. Depreciation and amortization
------------------------------
Depreciation of property and equipment is provided on the straight-line method
over the estimated useful lives of the assets. Accelerated methods of
depreciation of property and equipment are used for income tax purposes.
5. Fair value of financial instruments
-----------------------------------
The fair value of the Company's cash and cash equivalents, receivables,
accounts payable, accrued liabilities and capital lease obligations
approximate carrying value based on their effective interest rates compared to
current market prices.
6. Impairment of Long-Lived and Intangible Assets
----------------------------------------------
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which requires that impairment losses be recognized
on such assets when indicators of impairment are discovered and estimated
undiscounted future cash flows to be generated from those assets are less than
their carrying value. During the nine months ended September 30, 2001, as a
result of certain events (Notes C and D) and management's assessment of
impaired assets due to the Company's inability to generate cash flows, the
Company recorded $987,372 in losses relating to the impairment of certain
long-lived assets.
20
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
7. Income Taxes
------------
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income tax assets and liabilities are
provided based on the difference between the financial statement and tax bases
of assets and liabilities measured by the currently enacted tax rates in
effect for the years in which these differences are expected to reverse.
Deferred tax expense or benefit is the result of changes in deferred tax
assets and liabilities.
No provision for income taxes has been recorded due to net operating loss
carry forwards totaling approximately $11,850,000 that will be offset against
future taxable income, if any. These carry forwards begin to expire in 2013.
No tax benefit has been reported in the financial statements because the
Company has not yet proven it can generate taxable income.
Deferred tax assets and the valuation account are as follows at December 31,
2001 and 2000:
2001 2000
------------- -------------
Deferred tax asset:
NOL carry forward $ 3,555,000 $ 2,951,162
Valuation allowance (3,555,000) (2,951,162)
------------- -------------
Total $ - $ -
============= =============
8. Net 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 would have been excluded from the
calculation of diluted loss per share because their effects were
anti-dilutive.
9. Stock Split and Change in Par Value
-----------------------------------
In July 1998, the Company authorized a three for one forward stock split.
These financial statements have been retroactively restated to reflect this
split. Pursuant to the reverse merger with Dunamis, the Company's par value
changed to $0.001 which has also been retroactively applied.
21
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
10. Development Stage Company
-------------------------
The Company is a development stage company as defined in Financial Accounting
Standards Board Statement No. 7.
11. Short-Term Investments
----------------------
Short-term investments held during 2000 are comprised of various governmental
securities, commercial paper and other securities maturing in one year or less
and are classified as available-for-sale. Available for sale securities are
measured at fair value with net unrealized gains and losses reported in
equity. During December 2000, all remaining short-term investments were
liquidated and the Company recorded a gain of $14,011 on these securities.
12. Recently Issued Accounting Pronouncements
-----------------------------------------
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business
Combinations" and No. 142 (SFAS 142), "Goodwill and Other Intangible Assets",
which establishes new standards for the treatment of goodwill and other
intangible assets. SFAS 142 is effective for fiscal years beginning after
December 31, 2001. SFAS 142 prescribes that amortization of goodwill will
cease as of the adoption date.
The Company does not believe that SFAS 141 or 142 will have a material impact
on its financial position and results of operations.
In October 2001, the FASB issued Statement of Financial Accounting Standard
No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived
Assets". SFAS replaces Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS 144
prescribes, among other things, an accounting model for long-lived assets to
be disposed of including sales and discontinued operations. The Company is
evaluating the impact of this pronouncement on its financial position and
results of operations in future filings.
22
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE B - MANAGEMENT'S PLANS AND ISSUES AFFECTING LIQUIDITY
The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has a limited operating
history and has sustained losses since inception. In addition the Company had
negative cash flows from operations of $135,512, $3,956,340 and $2,986,246
during the years ended December 31, 2001, 2000, and 1999 respectively. The
company had negative working capital of $844,018 at December 31, 2001 and
$461,437 at December 31, 2000. As a result, the Company has relied
significantly upon equity and debt funding, including loans from its parent
company, to support certain of its development.
In March 2001, the Company became unable to make payment on its payables and
certain of its capital lease agreements related to hardware and
infrastructure. As a result of these defaults, the Company's most significant
debtor obtained possession of the equipment under its lease agreements in May
of 2001 and filed a complaint for the full amount of the lease balance (see
Note H). These events have caused impairments related to the loss of the
equipment under capital leases and other long-lived assets related to the
equipment to be recorded during second quarter 2001 (see Note D). Impairment
losses recorded for these events totaled $987,372 for the nine months ended
September 30, 2001.
The Company may not be able to generate positive cash flows from operations in
the foreseeable future as it is unable to obtain funding from traditional
sources, has ceased operations and development and has no cash balances. In
addition to the lease defaults approximating $440,000, the Company is unable
to pay liabilities approximating $391,500 to various professional services
firms, vendors, the Company's parent and an overdraft in a bank. Based upon
these facts, the Company may be required to seek bankruptcy protection.
There is substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments to reflect
the possible effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the outcome of
this uncertainty.
23
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment includes the following:
December 31, Estimated
2001 2000 useful lives
------------ ------------ ------------
Computer Equipment $ 125,691 $ 1,527,077 3-5
Furniture and fixtures 34,870 58,175 3-7
Software 12,083 872,011 2-3
------------ ------------
172,644 2,457,263
Less Accumulated Depreciation (80,853) (972,081)
------------ ------------
$ 91,791 $ 1,485,182
============ ============
In February 2001, in conjunction with the acquisition of the Company by
Pacific WebWorks, fixed assets were adjusted $266,795, along with
corresponding accumulated depreciation to reflect their estimated fair value
as cost.
NOTE D - IMPAIRMENT LOSSES
As discussed in Note B, in March 2001, the Company was unable to make payment
on some of its capital lease obligations. The Company transferred the
equipment back to the vendor in May 2001. The default on these and other
capital lease obligations, approximating $440,000 at December 31, 2001,
results in impairment losses of $122,685, representing cash down payments by
Logio at the beginning of the leases that were being amortized over the life
of the leases and $788,847 in equipment under capital leases and related
software and equipment. The leases would have expired through December 2002.
In January 2001, the Company was notified by a software vendor that, due to
its default on financing arrangements, the software license was terminated.
The termination of the software license represents an impairment of $75,840
to the net asset and the payable in default of approximately $100,000 is
included in payables past due.
24
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE E - PREFERRED STOCK
On January 19, 1999, the Board of Directors organized a Series A Convertible
Preferred Stock with 15,000 shares authorized. The preferred stock has a
stated value of $1,000 and a cumulative dividend of 6%. The Company issued
6,300 shares of the Series A Convertible Preferred Stock in February and March
1999. Under the terms of the underlying agreement, the shares were
convertible into 624,999 shares of common stock at a conversion rate of $10.08
per share, upon registration of the common stock. The conversion price was
based on the average closing price of the Company's common stock during the 20
period immediately preceding the closing of the preferred issuance. The
preferred shares hold no voting rights and up to 20% of the preferred stock
was available for conversion into common shares during each month following
the effective date of the Company's prospectus.
The preferred stock included a "lock-out" provision which prevented the
preferred shareholders from converting into common stock for a period of five
months after the issuance of the preferred stock. Preferred shareholders had
a limited right to receive additional shares of common stock at certain times
if the market price of the common stock was less than $12.096 per share. On
the tenth trading day after each of July 8, 1999, October 6, 1999 and February
13, 2000, preferred shareholders were entitled to receive the number of shares
of common stock equal to one-third of the purchase price for their Series A
Preferred Stock times the difference between the ten day average closing price
of the common stock and $12.096, divided by the ten day trading average.
On the dates that the Series A Convertible Stock were issued, the intrinsic
values of the beneficial conversion feature totaled $10,995,740 and $31,944,
respectively. The intrinsic value was calculated as the difference between
the conversion price and the market value of the common stock on the day of
the preferred stock issuance, times the number of common shares into which
the preferred stock was convertible. The proceeds received from the sale of
the convertible instruments were $6,100,000 and 200,000, respectively. Since
the intrinsic values of the beneficial conversion feature are greater than the
proceeds, the discounts assigned to the convertible instruments are $6,100,000
and $31,944 respectively, creating a total discount of $6,131,944. This
amount was being accreted over a five month period, which is the period to the
security's earliest conversion date of November 30, 1999, and is reflected in
the statement of operations as a deduction for dividends and accretion.
Offering costs related to the issuance of Preferred Stock total $392,100 and
were netted with the proceeds for reporting purposes. Cumulative dividends
totaled $337,917 as of December 31, 1999.
In February and March 2000, holders of the Company's convertible preferred
stock converted 6,300 preferred shares into 625,000 common shares. The
preferred stockholders also received 727,756 shares of the Company's common
stock in conjunction with the reset provisions of the preferred stock
agreement. Common stock totaling 61,650 shares were also issued to preferred
shareholders in 2000 representing a six percent cumulative dividend.
25
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE F - STOCKHOLDERS' EQUITY
Stock purchase agreement
- ------------------------
On July 6, 2000, the Company signed a purchase agreement with five investors
for the sale of two million shares of its common stock for a total purchase
price of $1.4 million. The terms of the agreement required the deposit of
$1.4 million into an escrow account before July 31, 2000. The monies were
agreed to be released to the Company upon the effective registration of the
shares with the Securities and Exchange Commission on or before October 31,
2000. In September 2000, the Securities and Exchange Commission declared the
registration effective, at which point the investors had not released the
funds and are in default of the agreement.
Conversion of notes payable to common stock
- -------------------------------------------
In October 2000, notes payable totaling $170,000 were converted to 1,150,000
shares of the Company's common stock. The liability was converted at $0.16
per share, which did not represent the fair market value of the Company's
common shares on the date of conversion. As such, the Company recorded
$83,700 as financing charges for this transaction.
In September 2000, the Company was advanced a total of $605,976 from various
parties to fund the settlement of liabilities in the form of notes payable.
Also in September 2000, the Company converted the notes and $2,976 of accrued
interest into 2,815,000 of the Company's common stock at prices ranging from
$0.2012 to $0.251 per share. The conversion prices did not represent the fair
market value of the common shares on the date of conversion. As such, the
Company recorded $88,576 as financing charges for this transaction.
In September 2000, a corporation assumed $130,045 in liability from one of the
Company's vendors. The Company then converted $70,000 of this liability into
350,000 shares of the Company's common stock and was forgiven of $60,045 in
liability by the assuming corporation. The liability was converted at $0.20
per share, which did not represent the fair market value of the Company's
common shares on the date of conversion. As such, the Company recorded
$45,127 as financing charges for this transaction.
As discussed in Note I, in September 2000, the Company converted $511,666 of
notes payable and interest to shareholders and officers to 626,422 shares of
its common stock. The fair market value of the shares on the date of
conversion was $0.3125 and the conversion prices ranged from $0.81 to $0.82
per share.
Acquisition by Pacific WebWorks, Inc.
- -------------------------------------
As discussed in Note A, in February of 2001, the Company was effectively
acquired by Pacific WebWorks, Inc. in a stock-for-stock exchange. Pacific
WebWorks exchanged 2,800,000 shares of its common stock with the Logio common
share holders for 18,425,830 shares of their common stock. Pursuant to this
acquisition, dissention rights were offered to the Logio shareholders previous
to the effective date of acquisition and 320 shares were repurchased as
treasury stock by Logio, Inc. for a total of $91.
26
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE G - STOCK OPTIONS AND WARRANTS
On April 18, 2000, the Company's Board of Directors adopted the Logio, Inc.
Equity Incentive Plan. The Plan allows for the granting of awards in the form
of stock options, stock appreciation rights, and 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. The Plan was approved by the Company's stockholders in June
2000.
In February 2001 and immediately previous to the completion of the acquisition
of Logio, Inc. by Pacific WebWorks, Inc., approximately 90,000 Logio, Inc.
options were accelerated in their vesting terms in accordance with the terms
of the grant agreements. This acceleration resulted in a $161,405 charge for
the remaining, unearned intrinsic value of the options accelerated.
Also, in February 2001, and in conjunction with the acquisition of the Company
by Pacific WebWorks, Inc., the board of directors of the Company's Parent
converted Logio options to Pacific WebWorks options at a rate of one Pacific
WebWorks option for every 6.6 Logio option held on the date the acquisition
was effectively completed (February 8, 2001).
The Company has adopted only the disclosure provisions of the 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
$161,405, $660,590 and $1,452,610 has been recognized for the years ended
December 31, 2001, 2000 and 1999, respectively 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 the methodology set forth by FAS 123, the
Company's net loss and loss per share would have increased to the following
proforma amounts:
2001 2000 1999
------------- ------------- -------------
Proforma net loss
As reported $ (1,714,740) $ (5,731,353) $(11,399,741)
Pro forma (1,714,740) (6,492,228) (11,453,549)
Net loss per common share-
Basic and fully diluted
As reported $ (0.09) $ (0.39) $ (0.96)
Pro forma (0.09) (0.44) (0.96)
27
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE G - STOCK OPTIONS AND WARRANTS - CONTINUED
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 157
percent and 120 percent, respectively; risk free interest rate of 6.5 percent
and 6.5 percent, respectively; and expected life of 1.5 to 3.5 years. The
weighted average fair value of options granted is $1.41 and $4.75 in 2000 and
1999 respectively.
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.
Information with respect to the Company's stock options at December 31, 2001
is as follows:
Weighted-
average
Stock Exercise exercise
options price price
------------ ------------ ------------
Outstanding at January 1, 1999 - $ - $ -
Granted 1,079,000 0.10-5.54 1.79
Exercised (4,000) 0.10 0.10
Forfeited - - -
------------ ------------ ------------
Outstanding at December 31, 1999 1,075,000 0.10-5.54 1.79
Granted 1,283,000 0.63-7.78 1.29
Exercised (21,000) 0.10 0.10
Forfeited (1,048,334) 0.10-7.78 2.40
------------ ------------ ------------
Outstanding at December 31, 2000 1,288,666 0.10-5.88 2.21
Granted - - -
Exercised - - -
Forfeited - - -
Accelerated/Converted (1,288,666) 0.10-5.88 2.21
------------ ------------ ------------
- $ - $ -
============ ============ ============
In May 2000, the Company issued warrants to purchase 400,000 shares purchase
400,000 shares of common stock to its investor relations consultant. A total
of 200,000 of these warrants were issued with an exercise price of $4.00 per
share and 200,000 warrants were issued with an exercise price of $3.00 per
share. The fair value of $0.42 per share was estimated as the value of the
services performed using the Black Scholes model. Consulting expenses
recorded for the value of these warrants totaled $169,042 during the year
ended December 31, 2000.
28
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE G - STOCK OPTIONS AND WARRANTS - CONTINUED
These warrants were cancelled in conjunction with the acquisition of the
Company by Pacific WebWorks, Inc.
In January of 1999, and in conjunction with the sale of Series A Convertible
Preferred Stock, the Company issued warrants to purchase 200,000 shares of the
Company's common stock to its investor relations consultant. The warrants
were issued with an exercise price of $5.50 per share. The fair value of
$1.29 per share was estimated as the value of the services performed.
Consulting expenses recorded for the value of these warrants totaled $258,000
during the year ended December 31, 1999. These warrants were cancelled in
conjunction with the acquisition of the Company by Pacific WebWorks, Inc.
The Company has granted 250,449 warrants in connection with the sale of
Preferred Stock in 1999. The warrants have exercise prices ranging from $7
per share to $8.40 per share and they expire in February 2004.
Logio has no options issued or outstanding as of December 31, 2001.
NOTE H - COMMITMENTS AND CONTINGENCIES
Threatened litigation
- ---------------------
As previously discussed, in March 2001, the Company was unable to make payment
on some of its capital lease obligations. The Company transferred the
equipment back to the vendor in May of 2001. The default on these and other
capital lease obligations totals $440,174. These leases have been classified
as current liabilities in accordance with the terms of default under the lease
agreements. The creditor filed a complaint pursuant to the default seeking
the full amount of the default plus legal fees. This matter was dismissed
without prejudice in the State of Minnesota on September 24, 2001.
The Company is also in default of approximately $100,000 to a software
corporation for a payable that is past due.
The Company is involved in other various disputes 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 recorded.
29
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE H - COMMITMENTS AND CONTINGENCIES - CONTINUED
Line-of-Credit and Intercompany Agreement
- -----------------------------------------
The Company has entered into a Line-of-Credit and Intercompany Agreement with
Pacific WebWorks, Inc. (its only shareholder and parent company). The
Line-of-Credit Agreement, among other things, allows for the advancement of up
to $120,000 as needed at an interest rate of 12%, is collateralized by
substantially all business assets of the Company, and is payable on
demand. The balance of this note exceeds the Line-of-Credit agreement as of
December 31, 2001 and totals $135,713 at that date.
The Company is also charged $1,067 monthly under the Intercompany Agreement
for management related fees and records income of $1,422 monthly for rental of
certain of its fixed assets to the parent company. The equipment may be
rented by Pacific WebWorks until such time as Logio, Inc. re-commences
development of its Internet products.
Intercompany transactions under the Line-of Credit and Intercompany Agreement
during the year ended December 31, 2001 are as follows:
Management fee expense $ 12,804
Rental Income (17,064)
Interest expense 12,902
Other (1,422)
----------
Net intercompany transactions $ 7,220
==========
30
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
NOTE I - SETTLEMENT OF LIABILITIES
During the year ended December 31, 2000, the Company settled $558,098 of
vendor payables for $340,918 in cash and stock. These settlements resulted in
$217,181 of forgiven debt which was recorded as an extraordinary gain.
In June 2000, the Company was loaned $500,000 from three principle
shareholders and officers of the Company in exchange for notes payable bearing
interest at 8% annually. Principal and interest were due in full on July 1,
2001. The note was not collateralized. On September 26, 2000, the Company
converted the notes and $11,666 of accrued interest into 626,422 shares of the
Company's common stock at $0.81 and $0.82 per share, representing prices in
excess of fair market value ($0.3125) of the common shares on the date of
conversion.
The Company was also released from approximately $460,000 of other long-term
debt commitments with certain of its vendors that would have expired through
April 2002 by obtaining releases and giving consideration through settlements
as discussed above.
31
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
As previously reported in March 2001, our Board of Directors authorized
the engagement of Chisholm & Associates, CPA's as our independent certified
public accountants for the fiscal year ended December 31, 2000, and
concurrently, dismissed Grant Thornton LLP, which had served as our
independent accountants since February 2000. As previously reported in
February 2000, our Board of Directors authorized, the engagement of Grant
Thornton LLP as our independent certified public accountants for the fiscal
year ended December 31, 1999, and concurrently, dismissed Crouch Bierwolf &
Chisholm, P.C., which had served as our independent accountants since 1998.
PART III
--------
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(a)
Our executive officers and directors and their respective ages and
positions are set forth below. Biographical information for each of those
persons is also presented below. Our bylaws require three directors who serve
until our next annual meeting or until each is succeeded by another qualified
director who has been elected. Our executive officers are chosen by our Board
of Directors and serve at its discretion. There are no existing family
relationships between or among any of our executive officers or directors.
Name Age Position
- ------------------------------ -------- -----------------------------------
Kenneth W. Bell 52 President, Secretary/Treasurer and
Director
Thomas R. Eldredge 33 Director
James W. Johnston 49 Director
Kenneth W. Bell: Mr. Bell joined Logio as Senior Vice President, Chief
Financial Officer, Secretary and Treasurer and Director in February 1997. On
April 18, 2000, the Board of Directors released Mr. Bell from his
responsibilities as Secretary. On June 2, 2000, our Board of Directors
appointed him as Chief Executive Officer and President of Logio, releasing him
from his responsibilities as Senior Vice President and Chief Financial
Officer. Then in January 2001 he was appointed as our Secretary/Treasurer.
Prior to joining Logio, between April 1990 and December 1996, he served as
President and Chief Financial Officer of Kelmarc Corporation, a financial and
management advisory company. He has over thirty 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. Mr. Bell is a director of Pacific WebWorks, Inc. a
reporting company.
Thomas R. Eldredge: In April of 2000, Mr. Eldredge joined Logio as our
Vice President of Finance and Corporate Secretary. On June 2, 2000, our Board
of Directors appointed Mr. Eldredge as Senior Vice President and Chief
Financial Officer. In January 2001 our Board of Directors appointed him as an
interim director, releasing him from his responsibilities as Senior Vice
President and Chief Financial Officer. 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 is the
President of the Utah Association of Certified Public Accountants - Southern
Chapter.
32
James W. Johnston: Mr. Johnston was a co-founder of WordCruncher
Publishing and has served as our Director since November 1996. He has also
served as Chairman of the Board and Executive Vice President. From December
1990 to November 1996, he was president of Johnston & Company, which published
virtual works using Logio technology, including the Constitution Papers (CD
ROM). Mr. Johnston has over 15 years of expertise in developing and marketing
products involving content presentation, analysis software and virtual
publishing.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and person who own more than ten percent of a
registered class of our equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of our common stock.
Officers, directors and greater than ten-percent beneficial owners are
required by SEC regulations to furnish Pacific WebWorks with copies of all
Section 16(a) reports they file. Based upon review of the copies of such
forms furnished to us during the fiscal year ended December 31, 2001 and
representations from these reporting persons that no Forms 5 were required, we
believe all filing requirements under Section 16(a) were complied with in a
timely manner.
ITEM 11: EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned by our
chief executive officer and our three most highly-compensated executive
officers whose total salary and bonus exceed $100,000 during each of the past
three fiscal years
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------
Annual Compensation Long-Term
Compensation
Awards
----------------------------------- ------------
Other Securities
Annual Underlying
Name and Principal Compen- Options/
Position Year Salary ($) Bonus ($) sation ($) SARs (#)
- --------------------- ------- ------------ --------- ------------ ------------
Kenneth W. Bell 2001 $ 11,500 - - -
President, 2000 94,833 - - 250,000 (1)
Secretary, 1999 120,000 - - -
Director
- --------------------- ------- ------------ --------- ------------ ------------
Thomas R. Eldredge 2001 10,792 - - -
Director 2000 60,542 - - 180,000 (1)
1999 - - - -
- --------------------- ------- ------------ --------- ------------ ------------
James W. Johnston 2001 7,500 - - -
Director 2000 90,833 - - 250,000 (1)
1999 120,000 - - -
- --------------------- ------- ------------ --------- ------------ ------------
(1) Theses underlying securities were converted to Pacific WebWorks
shares after Logio was acquired by Pacific WebWorks. The 250,000 shares
granted to Mr. Bell were converted to 37,879 Pacific WebWorks shares; Mr.
Eldredge's 180,000 shares were converted to 27,273 Pacific WebWorks shares;
and Mr. Johnston's 250,000 shares were converted to 37,879 Pacific WebWorks
shares.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Our parent corporation beneficially owns 100% of our issued and
outstanding shares.
33
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions either we
engaged in during at least the past two years or we propose to engage in
involving our executive officers, directors, 5% stockholders or immediate
family members of those persons:
In June, 2000, Messrs. Johnston, Bell and M. Daniel Lunt, then officers
and directors, loaned us an aggregate of $500,000 in exchange for notes
bearing interest at 8% per annum, unsecured and due and payable on or before
July 1, 2001. On September 26, 2000 these notes and accrued interest of
$11,666 were converted into 626,422 shares of common stock.
PART VI
--------
ITEM 14: EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Exhibit Description
- -------- ------------
2.1 Agreement and Plan of Reorganization between Logio and Pacific
WebWorks, Inc., dated October 31, 2000
3.1 Articles of Incorporation as amended (Incorporated by reference to
exhibit 3.1 to Form 10-Q filed November 14, 2001)
3.2 Bylaws of the Company (Incorporated by reference to exhibit 3.6 of
Form S-1, File No. 333-78537, as amended)
10.1 Employment Agreement between Logio and Kenneth W. Bell, dated
September 1, 1998 (Incorporated by reference to exhibit 10.4 of
Form S-1, File No. 333-78537, as amended)
10.2 Employment Agreement between Logio and James W. Johnston, dated
September 1, 1998 (Incorporated by reference to exhibit 10.5 of
Form S-1, File No. 333-78537, as amended)
10.3 Lease Agreement between Logio and Sun Microsystems Finance, as
amended (Incorporated by reference to exhibit 10.3 of Form 10-Q,
filed May 15, 2001)
10.4 License Agreement between Logio and Oracle Corporation
(Incorporated by reference to exhibit 10.4 of Form 10-Q, filed May
15, 2001)
10.5 Line of Credit and Inter-company Agreement between Logio and
Pacific WebWorks, dated January 2, 2001 (Incorporated by reference
to exhibit 10.5 of Form 10-Q filed August 13, 2001)
Reports on Form 8-K
None.
34
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
8 April 2002
Date_________________ Logio, Inc.
/s/ Kenneth W. Bell
By: ______________________________________
Kenneth W. Bell
President, Secretary/Treasurer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934. This
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
8 Apr 2002 /s/ Thomas R. Eldredge
Date____________________ By: ______________________________________
Thomas R. Eldredge
Director
8 April 2002 /s/ James W. Johnston
Date____________________ By: ______________________________________
James W. Johnston
Director
35