U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ____.
Commission file number 0-27453
LOGIO, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 84-1370590
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 East 12450 South, Suite B,
Draper, Utah 84020
(Address of Principal Executive Offices) (Zip Code)
801.816.9904
(Issuer's telephone number)
WordCruncher Internet Technologies, Inc.
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
As of July 11, 2000, 13,479,408 shares of registrant's Common Stock, par value
$0.001 per share, were outstanding.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements Required by Form 10-Q
The accompanying unaudited consolidated financial statements of Logio,
Inc., formerly WordCruncher Internet Technologies, Inc. (the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial reporting and pursuant to the rules and regulations of the
Securities and Exchange Commission. They do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the notes herein and the consolidated financial statements and notes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1999, which are incorporated herein by reference. The accompanying
financial statements have not been examined by independent accountants in
accordance with generally accepted auditing standards, but in the opinion of
management, all adjustments (consisting of normal recurring entries) necessary
for the fair presentation of the Company's results of operations, financial
position and changes therein for the periods presented have been included. The
results of operations for the quarter and six months ended June 30, 2000 may not
be indicative of the results that may be expected for the year ending December
31, 2000.
<PAGE>
<TABLE>
<CAPTION>
Logio, Inc.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, Dec 31,
2000 1999
------------- ------------------
<S> <C> <C>
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 333,488 $ 1,055,371
Short term investments 354,517 1,462,147
Accounts receivable 1,081 736
Interest receivable - 1,983
Note receivable 758 1,955
Prepaid assets 173,830 311,199
------------- ------------------
Total current assets 863,674 2,833,391
PROPERTY & EQUIPMENT, net 1,686,565 1,930,335
OTHER ASSETS 5,877 6,011
------------- -----------------
$2,556,116 $ 4,769,737
============= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term capital lease obligations $ 305,943 $ 299,983
Accounts payable 580,705 306,349
Accrued expenses 104,541 86,319
Notes Payable 405,110 659,682
------------- ------------------
Total current liabilities 1,396,299 1,352,333
CAPITAL LEASE OBLIGATIONS, less current maturities 119,452 253,350
NOTES PAYABLE TO SHAREHOLDERS (Note 2) 500,000 -
STOCKHOLDERS' EQUITY (Notes 3, 5 and 6)
Preferred stock - 63
Common stock 13,480 11,891
Additional paid-in capital 16,943,305 15,362,028
Accumulated other comprehensive income 13,480 7,940
Deficit accumulated during the development stage (16,429,900) (12,217,868)
------------ ------------------
Total stockholders' equity 540,365 3,164,054
------------- ------------------
$2,556,116 $ 4,769,737
============= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
/
Cumulative
amounts Three months ended June 30, Six months ended June 30,
since --------------------------- ---------------------------
inception 2000 1999 2000 1999
--------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Revenues
Advertising $ 1,534 $ 1,534 $ - $ 1,534 $ -
Product 130,517 - 11,190 - 14,072
--------------- ----------- -------------- ----------- --------------
132,051 1,534 11,190 1,534 14,072
Cost of sales 332,487 300,746 3,849 300,746 4,099
--------------- ----------- -------------- ----------- --------------
Gross profit (loss) (200,436) (299,212) 7,341 (299,212) 9,973
--------------- ----------- -------------- ----------- --------------
Operating Expenses
Research and development 3,150,224 645,983 204,235 1,558,834 330,068
Selling expenses 1,623,370 193,289 88,795 629,834 176,955
General and administrative 2,414,468 359,122 323,701 649,790 527,662
Depreciation and amortization 596,997 205,156 20,283 401,003 38,660
Compensation expense for stock options 2,033,453 214,706 454,218 580,843 705,187
--------------- ----------- -------------- ----------- --------------
Total operating expenses 9,818,512 1,618,256 1,091,232 3,820,304 1,778,532
--------------- ----------- -------------- ----------- --------------
Loss from operations (10,018,948) (1,917,468) (1,083,891) (4,119,516) (1,768,559)
Other income (expense)
Interest income 241,498 9,913 66,278 34,835 97,247
Interest expense (118,229) (31,417) (668) (62,991) (2,909)
--------------- ----------- -------------- ----------- --------------
123,269 (21,504) 65,610 (28,156) 94,338
--------------- ----------- -------------- ----------- --------------
NET LOSS (9,895,679) (1,938,972) (1,018,281) (4,147,672) (1,674,221)
Deduction for dividends and accretion (6,534,221) - (2,879,135) (64,360) (4,719,894)
--------------- ----------- -------------- ----------- --------------
Net loss attributable to common stockholders $ (16,429,900) $(1,938,972) $ (3,897,416) $(4,212,032) $ (6,394,115)
=============== =========== ============== =========== ==============
Net loss per common share - basic and diluted $ (2.37) $ (0.14) $ (0.33) $ (0.32) $ (0.54)
(Note 4) =============== =========== ============== =========== ==============
Weighted-average number of shares outstanding -
basic and diluted 6,925,800 13,479,105 11,877,002 13,035,217 11,877,002
=============== =========== ============== =========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
Logio, Inc.
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative Six Months
amounts ended June 30,
since ------------------------------
inception 2000 1999
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net loss $ (9,895,679) $ (4,147,672) $ (1,674,221)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation & amortization 596,997 401,003 38,660
Issuance of common stock and options
for compensation and other expenses 2,033,453 580,843 705,187
Issuance of warrants for consulting services 288,000 30,000 129,051
Changes in assets and liabilities
Accounts receivable (1,081) (345) (427)
Interest receivable - 1,983 (7,831)
Prepaid expenses and other assets (173,830) 137,369 -
Accounts payable 580,705 274,356 45,076
Accrued expenses 104,541 18,222 20,336
------------- ------------- -------------
Total adjustments 3,428,785 1,443,431 930,052
------------- ------------- -------------
Net cash used in operating activities (6,466,894) (2,704,241) (744,169)
------------- ------------- -------------
Cash flows from investing activities
Purchases of property and equipment (1,399,699) (91,547) (329,988)
(Increase) decrease in short-term investments (341,037) 1,113,170 (1,516,682)
Repayment of notes receivable from related parties 116,942 1,197 100,200
Notes receivable issued to related parties (117,700) - (2,615)
Increase in deposits (5,877) 134 10,152
------------- ------------- -------------
Net cash provided by (used in) investing activities (1,747,371) 1,022,954 (1,738,933)
------------- ------------- -------------
Cash flows from financing activities
Proceeds from issuance of common stock 2,215,211 907,600 -
Proceeds form issuance of preferred stock 6,300,000 - 6,300,000
Cash paid for fees associated with preferred stock issuance (392,100) - (392,100)
Proceeds from issuance of notes payable to related parties 500,000 500,000 -
Principal payments under capital lease obligations (480,468) (193,624) (8,350)
Proceeds from issuance of long term obligations and notes payable 998,682 - -
Principal payments of long-term obligations and notes payable (593,572) (254,572) (120,000)
------------- ------------- -------------
Net cash provided by financing activities 8,547,753 959,404 5,779,550
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 333,488 (721,883) 3,296,448
Cash and cash equivalents at beginning of period - 1,055,371 425,702
------------- ------------- -------------
Cash and cash equivalents at end of period $ 333,488 $ 333,488 $ 3,722,150
============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 112,280 $ 63,152 $ 2,990
Cash paid for income taxes - - -
Non-cash financing activities:
During the six months ended June 30, 2000 and 1999, the Company
purchased $65,686 and $0, respectively, in property and equipment
through capital lease obligations.
Also during the six months ended June 30, 2000, a total of 6,300
shares of the Company's convertible preferred stock were converted
into 625,000 shares of the Company's common stock. Convertible
preferred shareholders were also issued 727,756 and 61,650 shares of
the Company's common stock during the three months ended June 30,
2000 for reset provisions and cumulative dividends, respectively
(Note 3).
The unrealized gain on short-term investments totaled $5,540 for the
six months ended June 30, 2000.
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six months ended June 30, 2000 (unaudited) and years ended December 31, 1999,
1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
Price per Preferred Stock Common Stock
Date share Shares Amount Shares Amount
------------- ---------- ----------- ---------- ------------- ----------
<S> <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
Issuance of stock for cash Feb-97 0.001 - - 67,500 67
Issuance of stock for
licence agreement Feb-97 - - - 110,742 111
Issuance of stock to employees
for services Sep-97 0.333 - - 252,450 252
Issuance of stock for services Aug-97 1.092 - - 37,875 38
Net loss for the year - - - - - -
----------- ---------- ------------- ----------
Balances at December 31, 1997 - - - - 1,091,067 1,091
Issuance of stock for cash Jul-98 4.17 - - 120,000 120
(Continued)
Deficit
Accumulated accumulated
Additional other during the
paid-in comprehensive development
capital income stage
-------------- ----------- ------------------
Balances at November 5, 1996 $ - $ - $ -
Net loss - - -
-------------- ----------- ------------------
Balances at December 31, 1996
Issuance of stock for cash
to organizers 52 - -
Issuance of stock for cash 8 - -
Issuance of stock for
licence agreement (111) - -
Issuance of stock to employees
for services 83,898 - -
Issuance of stock for services 41,337 - -
Net loss for the year - - (335,218)
-------------- ----------- ------------------
Balances at December 31, 1997 125,184 - (335,218)
Issuance of stock for cash 499,880 - -
</TABLE>
(Continued)
<PAGE>
<TABLE>
<CAPTION>
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Six months ended June 30, 2000 (unaudited) and years ended December 31, 1999,
1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
Price per Preferred Stock Common Stock
Date share Shares Amount Shares Amount
------------- ---------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
-
Reverse acquisition and
reorganization adjustment Jul-98 - - - 9,885,435 9,886
Issuance of stock for cash Jul-98 0.725 - - 690,000 690
Issuance of stock for debt conversion Jul-98 0.96 - - 13,500 13
Issuance of stock for services Oct-98 1.90 - - 39,000 39
Issuance of stock for
software technology Oct-98 1.80 - - 13,000 13
Issuance of stock for insurance
coverage Nov-98 1.00 - - 25,000 25
Net loss for the year - - - - - - )
----------- ---------- ------------- ---------- -
Balances at December 31, 1998 - - - - 11,877,002 11,877 )
Issuance of warrants for
consulting services Jan-99 - - - - -
Issuance of perferred stock for
cash, net of offering costs Feb-99 1,000 6,100 61 - -
Issuance of perferred stock for
cash, net of offering costs Mar-99 1,000 200 2 - -
(Continued)
Deficit
Accumulated accumulated
Additional other during the
paid-in comprehensive development
capital income stage
-------------- ----------- ------------------
Reverse acquisition and
reorganization adjustment (8,550) - -
Issuance of stock for cash 499,310 - -
Issuance of stock for debt conversion 12,987 - -
Issuance of stock for services 70,161 - -
Issuance of stock for
software technology 23,387 - -
Issuance of stock for insurance
coverage 24,975 - -
Net loss for the year - - (482,909
-------------- ----------- -----------------
Balances at December 31, 1998
1,247,334 - (818,127
Issuance of warrants for
consulting services 258,000 - -
Issuance of perferred stock for
cash, net of offering costs 5,719,839 - -
Issuance of perferred stock for
cash, net of offering costs 187,998 - -
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Six months ended June 30, 2000 (unaudited) and years ended December 31, 1999,
1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
Price per Common Stock Common Stock
Date share Shares Amount Shares Amount
------------- ---------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
for exercise of options Jun-99 0.11 - - 2,000 2
Issuance of common stock for
exercise of options Aug-99 0.10 - - 4,000 4
Issuance of common stock for
conversion of debt Dec-99 3.25 - - 8,000 8
Issuance of stock options to
employees for compensation Jan-Dec 99 - - - - -
Accretion of intrinsic value of
preferred stock Feb - Dec 99 - - - - -
Dividends on preferred stock Feb-Dec 99 - - - - -
Unrealized gain on
short-term investments - - - - - -
Net Loss for the year - - - - - -
----------- ---------- ------------- ----------
Balances at December 31, 1999 $ 6,300 63 11,891,002 11,891
(Continued)
Deficit
Accumulated accumulated
Additional other during the
paid-in comprehensive development
capital income stage
-------------- ----------- ------------------
Issuance of common stock
for exercise of options 21,998 - -
Issuance of common stock for
exercise of options 396 - -
Issuance of common stock for
conversion of debt 25,992 - -
Issuance of stock options to
employees for compensation 1,430,610 - -
Accretion of intrinsic value
preferred stock 6,131,944 - (6,131,944)
Dividends on preferred stock 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 15,362,028 7,940 (12,217,868)
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Logio, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Six months ended June 30, 2000 (unaudited) and years ended December 31, 1999,
1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
Price per Preferred Stock Common Stock
Date share Shares Amount Shares Amount
------------- ---------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
exercise of options Jan 00 0.10 - - 2,000 2
Issuance of common stock for
exercise of warrants Jan 00 5.00 - - 100,000 100
Conversion of preferred stock
to common stock Feb 00 - (2,500) (25) 248,016 248
Issuance of common stock for
exercise of options Mar 00 0.10 - - 12,000 12
Issuance of common stock for
exercise of warrants Mar 00 7.00 - - 58,000 58
Conversion of preferred stock
to common stock Mar 00 - (3,800) (38) 376,984 377
Issuance of common stock
for reset shares Mar 00 - - - 727,756 728
Dividends on preferred stock Jan-Mar 00 - - - - -
Issuance of common stock
for preferred dividends paid Mar 00 - - - 61,650 62
Issuance of common stock
for exercise of options Apr-00 0.10 - - 2,000 2
Issuance of warrants
for consulting services May-Jun 00
Issuance of stock options to
employees for compensation Jan-Jun 00 - - - - -
Unrealized gain on marketable
securities Jan-Jun 00 - - - - -
Net loss for the interim period
ended June 30, 2000 - - - - -
----------- ---------- ------------- ----------
Balances at June 30, 2000 - - $ - 13,479,408 $ 13,480
=========== ========== ============= ==========
(Contineud)
Deficit
Accumulated accumulated
Additional other during the
paid-in comprehensive development
capital income stage
-------------- ----------- ------------------
Issuance of common stock for
exercise of options 198 - -
Issuance of common stock for
exercise of warrants 499,900 - -
Conversion of preferred stock
to common stock (223) - -
Issuance of common stock for
exercise of options 1,188 - -
Issuance of common stock for
exercise of warrants 405,942 - -
Conversion of preferred stock
to common stock (339) - -
Issuance of common stock
for reset shares (728) - -
Dividends on preferred stock 64,360 - (64,360)
Issuance of common stock
for preferred dividends paid (62) - -
Issuance of common stock
for exercise of options 198 - -
Issuance of warrants
for consulting services 30,000
Issuance of stock options to
employees for compensation 580,843 - -
Unrealized gain on marketable
securities - 5,540 -
Net loss for the interim period
ended June 30, 2000 - - (4,147,672)
-------------- ----------- ------------------
Balances at June 30, 2000 $16,943,305 $ 13,480 $ (16,429,900)
============== =========== ==================
</TABLE>
The accompanying notes are an integral part of this financial statement
Logio, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2000 and 1999
(Unaudited)
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
Logio, Inc., formerly WordCruncher Internet Technologies, Inc. (the Company), is
a development stage company engaged in the development and marketing of a
focused Internet site and directory which serves the needs of the business
professional.
The Company commenced planned principal operations on March 19, 2000 of its
logio.com Internet portal and directory, but has not produced any significant
revenues.
The Company was incorporated on November 5, 1996 in the State of Utah under the
name of Redstone Publishing, Inc. 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 is 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 Draper, 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. The Company conducts its business within one industry
segment.
The accompanying unaudited consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments) which, in the
opinion of management, are necessary for a fair presentation of the results for
the periods shown. The results of operations and cash flows for the six months
ended June 30, 2000 may not be indicative of the results that may be expected
for the year ending December 31, 2000. Certain prior period balances have been
reclassified to conform with current period presentation.
NOTE 2 - NOTES PAYABLE TO SHAREHOLDERS
In June 2000, the Company was loaned $500,000 from three principal shareholders
and officers of the Company in exchange for a note payable bearing interest of
8% annually. Principal and interest are due in full on July 1, 2001. The note is
not collateralized.
NOTE 3 - SHAREHOLDERS' EQUITY
Preferred stock conversion
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 stock
holders 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
representing a six percent cumulative dividend.
Stock options and warrants
During the six months ended June 30, 2000, the Company granted 723,500 options,
each to purchase one share of the Company's common stock to employees, directors
and certain consultants at exercise prices ranging from $1.19 to $7.78 per
share. Approximately 588,000 options were forfeited by employees during the six
months ended June 30, 2000. Common stock issued in relation to the exercise of
warrants and options during the six months ended June 30, 2000 totaled 174,000
shares.
On May 15, 2000, 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 200,000 warrants were issued
at an exercise price of $3.00 per share and an additional 200,000 warrants were
issued at an exercise price of $4.00 per share under the terms of this
agreement. Vesting of the warrants commenced as follows: 25% on agreement date
(May 15, 2000), 25% on June 30, 2000, and 50% on September 30, 2000. Consulting
charges related to this agreement total $30,000 which represents the fair market
value of the services performed through June 30, 2000. The agreement terminates
on January 15, 2001 when the services are completed. The vested warrants expire
on May 15, 2005.
NOTE 4 - NET LOSS PER COMMON SHARE
The computation of net loss per common share is based on the weighted-average
number of shares outstanding during each period presented. Diluted loss per
common share would include the dilutive potential effects of options, warrants,
and convertible and reset features of series A preferred stock, but were not
included in the calculation of diluted net loss per common share because their
effects were antidilutive. As of June 30, 2000, there were 1,189,116 options
outstanding and 749,449 warrants, each to purchase one share of common stock.
NOTE 5- EQUITY INCENTIVE PLAN
On April 18, 2000, the Board of Directors adopted the Logio, Inc. 2000 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 1,189,166 options, each to purchase one share of the
Company's common stock, outstanding as of June 30, 2000. The Plan was approved
by the Company's stockholders in June of 2000.
NOTE 6 - SUBSEQUENT EVENTS
Ticker symbol change
In July 2000, the Company changed its ticker symbol from "WCTI" to "LGIO" to
reflect its name change to Logio, Inc.
Stock purchase agreement
On July 6, 2000, the Company signed a purchase agreement with four investors for
the sale of 2 million shares of its common stock for a total purchase price of
$1.4 million. The terms of the agreement require the deposit of $1.4 million
into an escrow account before July 31, 2000. The monies will be released to the
Company upon the effective registration of the shares with the Securities and
Exchange Commission on or before September 30, 2000.
<PAGE>
Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations.
The purpose of this section is to discuss and analyze the Company's
consolidated financial condition, liquidity and capital resources and the
results of operations. This analysis should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
Overview
Logio, Inc., formerly WordCruncher Internet Technologies, Inc., is a
development stage company engaged in the development and marketing of a focused
Internet site and directory which serves the needs of the business professional.
From November 5, 1996 (inception) to June 30, 2000, the Company's activities
related primarily to attracting employees, raising capital, purchasing assets,
developing the Logio site and directory and implementing sales and marketing
programs. As such, the reported financial information is not necessarily
indicative of the Company's future operating results or of its future financial
condition.
Content and services found at the Company's web site, logio.com, which
became available on March 19, 2000, are 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. Information resources include a unique,
readily accessible "drill down" directory that organizes thousands of
business-oriented web sites and pages according to specific professional
discipline and function. The directory is augmented by an advanced search
technology that can search either the abstracts or the full text of all sites
listed in the directory, and then displays the search results in a
"hits-in-context" format. We couple this information with the services that the
average business professional uses on a daily basis, including travel
arrangements, stock quotes, investment and portfolio information, news, weather,
maps, financial calculators, personal email and calendaring. These services are
provided free-of-charge to the user in our showcase of content at Logio.com.
This combination creates a full service destination portal designed specifically
for the business professional. We intend to expand the delivery of this full
service concept into other forms of commerce such as online business-to-business
purchasing, and private labeling of our directory product. We also intend to
expand the delivery of this concept to other electronic means of communication
such as cell phones, pagers, personal digital assistants and set top boxes. It
is expected that all of the electronic services will be marketed under the brand
name "Logio."
Although there is a great deal of free information accessible over the
Internet, publishers still own valuable content that is not currently available
on the Internet. This information can be very useful to business people.
Examples of information routinely sold in print form to the business communities
include research reports, market analyses, industry specific newsletters and
commentary, and studies produced by analyst and research firms. We believe that
the sales and delivery of this kind of content over the Internet is a logical
step in the development of information distribution channels. Logio expects to
take a leading role in this effort through syndication of our directory.
Our initial revenue related to the Logio site, recorded in second
quarter 2000, was derived from sales of advertising on the site. Traffic to the
site ultimately drives the ability to generate such revenue. As the Company is
in its development stage, it has not yet recognized significant advertising or
sponsorship revenues. Our new business model is directed towards the generation
of revenues from set-up and maintenance fees resulting from the sale of our
directory in private label form to Internet sites and corporate intranets. We
expect to emerge from the development stage in fourth quarter 2000.
Cost of revenues will 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.
Research and development expenses consist primarily of compensation to
employees for site development, consulting services and other third party
service providers.
Selling and marketing expenses relate primarily to compensation to
employees for strategic marketing, content, public relations and for other
consultants and third party services.
The Company has incurred and expects to continue to incur substantial
losses and negative cash flows both on an annual basis and for interim periods.
In particular, the Company intends to increase its focus and spending on brand
development, sales and marketing, further product development, website content
and strategic relationships. The Company has an extremely limited operating
history, and its prospects are subject to the risks, costs and difficulties
frequently experienced by companies in the new and rapidly changing markets for
Internet products and services. To address these risks, the Company must, among
other things, continue to respond to competitive forces, recruit, retain and
motivate valuable and qualified employees, implement and successfully execute
its advertising sales strategies, develop and market additional products and
services, upgrade and maintain its technologies, and further market products and
services using such technologies. There can be no assurance that the Company
will successfully address these risks. As of June 30, 2000, the Company reports
an accumulated deficit of $16,429,900, which includes the effects of dividends
and accretion of the beneficial conversion feature of Series A Preferred stock
approximating $6,534,221. The extremely limited operating history of the Company
makes the prediction of future results of operations difficult or impossible
and, therefore, the recently reported operations should not be considered
indicative of future operating results. The Company currently expects to
significantly increase its operating expenses to expand its sales and marketing
strategies, to fund further site development as well as planned improvements and
enhancements to the site. In the future, other Web sites and distribution
channels may require payments of cash or other consideration from the Company in
order to list Logio on their sites. The Company also plans to invest funds into
further electronic business-to-business commerce capabilities.
The Company's operating results may fluctuate significantly in the
future as a result of several factors, many of which are not within the
Company's control. These factors include, but are not limited to, Internet
usage, seasonal trends in advertising placements and Internet usage, Internet
advertisement demand, advertisement budgeting cycles of Internet advertisers,
need for capital expenditures and costs relating to Company expansion,
introduction of new services or products to the site, competitive forces, price
changes in the industry, technical difficulties to the site, general and
industry-wide economic conditions, and the availability of service providers. As
a result of changes to the competitive Internet environment, the Company may
make certain service changes or acquisitions that could materially affect the
Company's business, operations, and financial condition. The Company also
expects certain seasonal effects, as it relates to advertising revenues, due to
lower traffic during the vacation periods and holidays. Due to all of the
aforementioned factors, in some future interim periods, the Company's operating
results may be adversely affected and fall below the expectations of analysts
and investors. In such case, the trading price of the Company's common stock
would likely be materially and adversely affected.
Results of Operations
Comparison of Three Month Periods. Following is a comparison of our
operating results for the quarter ended June 30, 2000 with the quarter ended
June 30, 1999:
Revenues. The Company's revenue of $1,534 for the three months
ended June 30, 2000 represents advertising revenues derived from our logio.com
site and decreased $9,656 from revenues of $11,190 for the three months ended
June 30, 1999. This decrease is due to the discontinuation of the sales of our
PC-based product ("WordCruncher") to focus on the development and operations of
our logio.com site and the related Logio directory, which has only recently
become available on the marketplace. Cumulative revenues since inception total
$132,051 which consist primarily of the sales of our WordCruncher product and
related royalties.
Cost of Revenues. The Company's cost of revenues of $300,746
for the three months ended June 30, 2000 includes the cost of Logio services,
hosting, support and monitoring related to the logio.com site. Cost of revenues
for the three months ended June 30, 1999 totals $3,849 and relates to license
fees to a university for technology re-sold in our WordCruncher product. This
product has been discontinued in order to focus on the development and
operations of our logio.com site and the related Logio directory, which has only
recently become available on the marketplace. Cumulative cost of revenues since
inception total $332,487 and consist primarily of the cost of hosting, support
and monitoring related to the operations of Logio products and services.
Research and Development. Research and development expenses
increased 216% to $645,983 for the three months ended June 30, 2000, an increase
of $441,748 from the $204,235 for the three months ended June 30, 1999. The
increase in research and development expenses is due primarily to a 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. Cumulative research and
development costs since inception total $3,150,224 and relate primarily to our
recent release of the Logio site and directory to the marketplace.
Selling and Marketing. Sales and marketing expenses increased
118% to $193,289 for the three months ended June 30, 2000, an increase of
$104,494 from the $88,795 for the three months ended June 30, 1999. The increase
in selling and marketing expenses is due primarily to compensation to employees
related to the efforts of our sales team in acquiring contracts for the
syndication of our directory product. We have also continued the use of certain
consulting services related to branding, the planning of sales strategies,
public relations, and the providing of advertising to our logio.com site during
the three months ended June 30, 2000. Cumulative selling and marketing expenses
since inception total $1,623,370 and are comprised of consulting services for
the planning of marketing and sales strategies, public relations, and employee
salaries related to marketing and sales.
General and Administrative. General and administrative
expenses increased 11% to $359,122 for the three months ended June 30, 2000, an
increase of $35,421 from the $323,701 for the three months ended June 30, 1999.
The increase in general and administrative expenses is primarily due to
accounting and legal professional fees related to contracts, employee equity
incentive plan and our public filings, the addition of one employee to our
finance department and increasing our leased building space in second quarter
2000, and obtaining additional insurance. Cumulative general and administrative
charges since inception total $2,414,468 and relate primarily to professional
fees, management, compensation for finance and investor relations employees and
other office and leasing charges.
Depreciation and Amortization. Depreciation and amortization
increased 911% to $205,156 for the three months ended June 30, 2000, an increase
of $184,873 from $20,283 for the six months ended June 30, 1999. The increase in
depreciation and amortization is due to the purchase of computer equipment and
software technology required to release and maintain the Logio site and related
Logio directory, mostly in 1999, and the related depreciation charge for the
three months ended June 30, 2000. Cumulative depreciation and amortization
expenses incurred since inception total $596,997.
Total Operating Expenses. Our operating expenses increased 48%
to $1,618,256 during the three months ended June 30, 2000 an increase of
$527,024 from $1,091,232 for the three months ended June 30, 1999. This is due
primarily to the continued efforts to develop the infrastructure of the
logio.com site and the Logio directory, bring existing products and services to
the marketplace and to develop new and innovative ideas for implementation on
the site and directory. We believe that planned expansion of Logio products,
further improvements and enhancement of the site and directory, and establishing
brand recognition in the professional business arena are all elements of its
future success.
Compensation Expense for Stock Options. Compensation expense
for stock options decreased 53% to $214,706 for the three months ended June 30,
2000, a decrease of $239,512 from $454,218 for the three months ended June 30,
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. The decrease represents the forfeiture of approximately 588,334 options,
management's efforts to discontinue granting of options at an exercise price
less than fair market value in second quarter of 2000, and the completion of
vesting periods for certain employee options.
Interest Income. Interest income decreased 85% to $9,913 for
the three months ended June 30, 2000, a decrease of $56,365 from $66,278 for the
three months ended June 30, 1999. The decrease reflects the continued use of
cash balances and short-term investments over the three months ended June 30,
2000 to fund operations.
Interest Expense. Interest expense totaled $31,417 for the
three months ended June 30, 2000 an increase of $30,749 from $668 for the three
months ended June 30, 1999. The increase is due primarily to capital leases
entered into subsequent to the three months ended June 30, 1999.
Net Loss. Net loss increased 90% to $1,938,972 for the three
months ended June 30, 2000 an increase of $920,691 compared to a net loss of
$1,018,281 for the three months ended June 30, 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 the Series A Preferred Stock was fully
recognized by fiscal year end 1999. As such, net loss attributable to common
shareholders is equivalent to net loss and totals $1,938,972 for the three
months ended June 30, 2000. Net loss attributable to common stockholders for the
three months ended June 30, 1999 totals $3,897,416 after giving effect to the
dividends and accretion of the beneficial conversion feature of Series A
Preferred Stock recognized for the three months ended June 30, 1999 totaling
$2,879,135. This resulted in an increase to additional paid-in capital and a
corresponding increase in accumulated deficit during the quarter.
Comparison of Six Month Periods. Following is a comparison of our
operating results for the six months ended June 30, 2000 with the six months
ended June 30, 1999:
Revenues. The Company's revenue of $1,534 for the six months
ended June 30, 2000 represents advertising revenues derived from our logio.com
site and decreased $12,538 from revenues of $14,072 for the six months ended
June 30, 1999. This decrease is due to the discontinuation of the sales of our
PC-based product ("WordCruncher") to focus on the development and operations of
our logio.com site and the related Logio directory, which has only recently
become available on the marketplace.
Cost of Revenues. The Company's cost of revenues of $300,746
for the six months ended June 30, 2000 include the cost of Logio services,
hosting, support and monitoring related to the logio.com site. Cost of revenues
for the six months ended June 30, 1999 totals $4,099 and relates to license fees
to a university for technology re-sold in our WordCruncher product. This product
has been discontinued in order to focus on the development and operations of our
logio.com site and the related Logio directory, which has only recently become
available on the marketplace.
Research and Development. Research and development expenses
increased 372% to $1,558,834 for the six months ended June 30, 2000, an increase
of $1,228,766 from the $330,068 for the six months ended June 30, 1999. The
increase in research and development expenses is due primarily to a 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. This increase relates to
the recent release of the Logio site and the related Logio directory to the
marketplace.
Selling and Marketing. Sales and marketing expenses increased
256% to $629,834 for the six months ended June 30, 2000, an increase of $452,880
from the $176,955 for the six months ended June 30, 1999. The increase in
selling and marketing expenses is due primarily to compensation to employees and
consultants related to significant planning of the sales strategies, public
relations, and advertising and branding campaigns in the first quarter of 2000
related to the release of the Logio site to the marketplace
General and Administrative. General and administrative
expenses increased 23% to $649,790 for the six months ended June 30, 2000, an
increase of $122,128 from the $527,662 for the six months ended June 30, 1999.
The increase in general and administrative expenses is primarily due to
accounting and legal professional fees related to contracts, employee equity
incentive plan and our public filings, the addition of one employee to our
finance department subsequent to second quarter 1999, increasing our leased
building space, and obtaining additional insurance.
Depreciation and Amortization. Depreciation and amortization
increased 937% to $401,003 for the six months ended June 30, 2000, an increase
of $362,343 from $38,660 for the six months ended June 30, 1999. The increase in
depreciation and amortization is due to the purchase of computer equipment and
software technology required to release and maintain the Logio site and related
Logio directory, mostly in first quarter 2000, and the related depreciation
charge for the six months ended June 30, 2000.
Total Operating Expenses. Our operating expenses increased
significantly during the six months ended June 30, 2000 over the six months
ended June 30, 1999. This is due primarily to the continued efforts to develop
the infrastructure of the logio.com site and the Logio directory, bring existing
products and services to the marketplace and to develop new and innovative ideas
for implementation on the site and directory. We believe that planned expansion
of Logio products, further improvements and enhancement of the site and
directory, and establishing brand recognition in the professional business arena
are all elements of its future success.
Compensation Expense for Stock Options. Compensation expense
for stock options decreased 18% to $580,843 for the six months ended June 30,
2000, a decrease of $124,344 from $705,187 for the six months ended June 30,
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. The decrease represents the forfeiture of approximately 588,334 options,
management's efforts to discontinue granting of options at an exercise price
less than fair market value in second quarter of 2000, and the completion of
vesting periods for certain employee options.
Interest Income. Interest income decreased 64% to $34,835 for
the six months ended June 30, 2000, a decrease of $62,412 from $97,247 for the
six months ended June 30, 1999. The decrease reflects the continued use of cash
balances and short-term investments over the six months ended June 30, 2000 to
fund operations.
Interest Expense. Interest expense totaled $62,991 for the six
months ended June 30, 2000 an increase of $60,082 from $2,909 for the six months
ended June 30, 1999. The increase is due primarily to capital leases entered
into subsequent to the six months ended June 30, 1999.
Net Loss. Net loss increased 148% to $4,147,672 for the six
months ended June 30, 2000 an increase of $2,473,451 compared to a net loss of
$1,674,221 for the six months ended June 30, 1999. The increase in net loss is a
result of our increased costs and expenses associated with the ontinued
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 totals
$4,212,032 for the six months ended June 30, 2000. Net loss attributable to
common stockholders for the six months ended June, 1999 totals $6,394,115 after
giving affect to the dividends and accretion of the beneficial conversion
feature of Series A Preferred Stock recognized during the first six months of
1999 totaling $4,719,894. This resulted in an increase to additional paid-in
capital and a corresponding increase in accumulated deficit during the quarters.
Liquidity and Capital Resources
As a development stage Company, the Company has been unable to fund its
cash requirements through operations. Since our inception, we have funded our
cash requirements through debt and equity financings. We have used the proceeds
of those transactions to fund our investment in the development of our Logio
business information site, to provide working capital and for other general
corporate purposes.
As of June 30, 2000, we had $688,005 in cash and short-term
investments, $2,556,116 in total assets and total liabilities of $2,015,751. As
of June 30, 2000, we have negative working capital of $532,625, an accumulated
deficit of $16,429,900 (a significant portion of which is due to dividends and
accretion of the beneficial conversion feature of the Series A Preferred Stock)
and total stockholders' equity of $540,365.
We used $2,704,241 in cash for operations during the six months ended
June 30, 2000.
Cash totaling $105,364 was used in investing related activities for
purchases of property and equipment during the six months ended June 30, 2000.
Short-term investments were sold for cash totaling $1,113,170 during the six
months ended June 30, 2000.
Cash provided by financing activities during the six months ended June
30, 2000 includes $907,600 from the exercise of options and warrants. We
purchased $51,869 of equipment during the six months ended June 30, 2000 by
entering into capital lease agreements. Cash used to pay financing activities
for capital leases and other long-term obligations totals $448,196 during the
six months ended June 30, 2000. We paid a cumulative stock dividend of 6% to the
Series A Preferred stockholders during the first quarter of 2000 totaling 61,650
shares of our common stock.
As of June 30, 2000, we had no material commitments for capital
expenditures for the remainder of fiscal year 2000. Our capital lease
obligations totaling $425,395 are due through February, 2002.
In June 2000, we received $500,000 in cash from three of our major
shareholders and officers in exchange for an 8% note, which is due in July 2001,
and in July 2000, we completed the private placement of 2,000,000 of our common
shares for $1.4 Million. The purchase price for these shares will be paid to us
at the closing of the transaction, which will occur when the Securities and
Exchange Commission declares a registration statement for the shares effective.
If the registration statement is not declared effective by September 30, 2000,
we are obligated to pay the investors liquidated damages of 5% per month for
every 30-day period the statement is not effective. The investors have the right
to terminate the agreement if the registration statement is not declared
effective by October 31, 2000.
We estimate that the proceeds from the June 2000 loan, the July private
placement of our common shares and the funds that we have on hand will be
sufficient to fund our operations through the end of 2000. We expect to continue
to generate negative cash flows for at least the next several quarters. We
expect that a portion of our cash requirements will be met through revenues from
operations. The Company anticipates that its principal liquidity needs over the
next twelve months will be met with proceeds generated from private offerings of
its securities. There can be no assurance that the offerings will take place or
that the proceeds of such offerings will be adequate to meet the Company's
needs. The Company is currently negotiating with a party to obtain a credit
facility in the event private offerings are not secured. Our need to raise
external capital in the future will depend on many factors, including, but not
limited to, the rate of sales growth and market acceptance of our products and
services, the amount and timing of our necessary and continuing research and
development expenditures, the amount and timing of our expenditures to
sufficiently market and promote our Logio site and the Logio brand name and the
timing of any new product introductions.
We currently estimate that we will require between $15 and $20 million
to continue to develop our products and operate in accordance with our business
plan through 2001. The actual costs will depend on a number of factors,
including:
o Our ability to negotiate favorable prices for purchases of necessary portal
components o the number of our customers (traffic) and advertisers o the
services for which they subscribe o the nature and success of the services which
we offer o regulatory changes, and o changes in technology.
In addition, our actual costs and revenues could vary from the amounts we expect
or budget, possibly materially, and those variations are likely to affect how
much additional financing we will need for our operations. Accordingly, there
can be no assurance that our actual financial needs will not exceed the amounts
available to us.
Expected future uses of cash include continued expansion and
enhancements of the Logio site, strategic sales and marketing related to brand
recognition, obtaining of additional advertisers and sponsors, the driving of
additional traffic to the site and maintaining our current level of
administration and operations. This is expected to be achieved by obtaining
additional staffing in the sales and marketing department and by engaging
certain professional services firms.
To the extent that we acquire the amounts necessary to fund our
business plan through the issuance of equity securities, our then-current
stockholders may experience dilution in the value per share of their equity
securities. The acquisition of funding through the issuance of debt could result
in a substantial portion of our cash flows from operations being dedicated to
the payment of principal and interest on that indebtedness, and could render us
more vulnerable to competitive and economic downturns.
Special Note Regarding Forward-Looking Statements
Certain statements contained in "Management's Discussion and Analysis"
constitute forward-looking statements concerning the Company's operations,
economic performance and financial condition. Because those statements involve
risks and uncertainties, actual results may differ materially from those
expressed or implied by those forward-looking statements.
In addition, any statements that express or involve discussions as to
expectations, beliefs, plans, objectives, assumptions or future events or
performance are not historical facts and may be forward-looking and,
accordingly, those statements involve estimates, assumptions and uncertainties
which could cause actual results to differ materially from those expressed in
the forward-looking statements. Accordingly, those types of statements are
qualified in their entirety by reference to, and are accompanied by, the factors
discussed throughout this report. Among the key factors that have a direct
bearing on the Company's results of operations are the potential risk of delay
in implementing the Company's business plan; the economic and legal aspects of
the markets in which the Company operates; competition; and the Company's need
for additional substantial financing. The Company has no control over these
factors.
The factors described in this report could cause the Company's actual
operating results to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
Persons reviewing this report, therefore, should not place undue reliance on
those forward-looking statements. Further, to the extent this report contains
forward-looking statements, they speak only as of the date of this report, and
the Company undertakes no obligation to update any forward-looking statement or
statements to reflect the occurrence of unanticipated events. New factors may
emerge from time to time, and it is not possible for management to predict all
of such factors. Further, management cannot assess the impact of each such
factor on the Company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any proceeding or threatened proceeding
as of the date of this quarterly report.
Item 2. Changes in Securities
In January 2000, the Company issued 2,000 shares of its common stock
for the exercise of stock options for $200.
In January 2000, the Company issued 100,000 shares of its common stock
for the exercise of warrants for $500,000.
In February 2000, holders of 2,500 shares of the Company's series A
convertible preferred stock converted their holdings into 248,016 shares of the
Company's common stock.
In March 2000, the Company issued 12,000 shares of its common stock for
the exercise of stock options and cash of $1,200.
In March 2000, the Company issued 58,000 shares of its common stock for
the exercise of warrants and cash of $406,000.
In February and March 2000, the Company paid a 6% cumulative dividend
in the form of its common stock, totaling 61,650 shares to holders of its series
A convertible preferred stock.
In March 2000, holders of 3,800 shares of the Company's series A
convertible preferred stock converted their holdings into 376,984 shares of the
Company's common stock.
In March 2000, the Company issued 727,756 shares of the Company's
common stock to holders of the Company's series A convertible preferred stock
pursuant to the reset provisions of the preferred stock agreement.
In April 2000 the Company issued 2,000 shares of its common stock for
the exercise of stock options and cash of $200.
Item 3. Defaults upon Senior Securities
None.
Item 4. Matters Submitted to a Vote of the Company's Stockholders
The following matters were submitted to a vote of the Company's
stockholders during the fiscal quarter ending June 30, 2000:
The election of six directors to the Company's Board of Directors;
The ratification of Grant Thornton, LLP, as the Company's
independent auditors for the fiscal year ending December 31, 2000;
The adoption of the Company's 2000 Equity Incentive Plan; and
The change of the Company's name from "WordCruncher Internet
Technologies, Inc." to "Logio, Inc."
All four of the matters were approved by the requisite vote of the Company's
stockholders.
Item 5. Other Information
None.
Item 6. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) EXHIBITS.
None.
(b). REPORTS ON FORM 8-K
On March 1, 2000, the Company filed a Current Report of Form 8-K,
relating to the engagement of Grant Thornton, LLP as the Company's auditor for
the 1999 fiscal year, and the dismissal of Crouch Bierwolf & Chisholm, P.C.,
which had served as the Company's independent accountants since1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOGIO, INC.
Date: July 26, 2000 By: /s/ Thomas Eldredge
-------------------
Thomas Eldredge, Senior Vice President,
Chief Financial Officer, and Secretary
