Securities and Exchange Commission
Washington, D.C. 20549
_______________
Fourth Amendment to
Form 10
______________
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
PACIFIC WEBWORKS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 87-0627910
(State of incorporation) (I. R. S. Employer Identification No.)
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
(801) 578-9020
(Address and telephone number of registrant's principal executive offices and
principal place of business)
Securities to be registered pursuant to Section 12(b) of the Act:
None
_______________________________________________________
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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BUSINESS
The following description of Pacific WebWorks' business should be read
in conjunction with the information included elsewhere in this registration
statement. This section contains certain forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results discussed in the forward-looking statements as a result of certain of
the risk factors set forth below and elsewhere in this registration statement.
Our Business. We are primarily an engineering and management company
which develops and sells business software technology for the Internet. We
provide software tools for e-commerce, including shopping carts, point of sale,
lead generation, lead distribution, security methods (including encryption), and
search engine technologies. Our products allow businesses to build, manage, and
maintain their own websites, sell products, generate leads, distribute
information, and gain intelligence about their website visitors. We believe that
our products provide business owners with access to such services for a fraction
of the costs typically incurred by large companies for similar services.
Our plans for the last six months of fiscal 1999 are to focus on
development of our sales channels. We will be initiating targeted direct mail
campaigns, business to business seminars in selected cities, and radio and
telemarketing in targeted cities. Our marketing efforts will target both
customers for our products and independent sales organizations to expand our
sales exposure at a projected cost to us of approximately $150,000 through the
end of 1999.
Our operating plans for our next fiscal year call for enhancing and
marketing our initial product (Visual Webtools), establishing multiple
distribution channels to eliminate overdependence on any one channel or
distributor, supporting our newly acquired customers through both design
services and question and answer assistance, and continuing research and
development on future projects to be released in fiscal year 2000.
Our Market. We market our products to small and medium-sized businesses
which want total, one-stop solutions to Internet advertising, marketing, and
sales concerns. Our typical "target" customers are businesses which would prefer
to invest in technologies which allow them to develop functional, interactive
Internet websites, rather than hiring information systems employees to develop
such websites. The Internet is an interactive worldwide network of computers and
data systems which allows users to retrieve data, purchase products, send and
receive communications, and purchase or provide services. The Internet's use has
grown substantially since it was first commercially introduced in the early
1990's. The increase in the number of users has resulted in a rapid increase in
the numbers of advertisers, products, and services on the Internet. For example,
International Data Corporation (IDC) estimates that the number of Internet users
who will make purchases over the internet will grow from approximately 31
million in 1998 to approximately 183 million by 2003, and that the amount of
commerce conducted over the World Wide Web will exceed $1 trillion by 2003. See
"Internet Commerce Will Rocket to More than $1 Trillion by 2003, According to
IDC" at http://www.idc.com/Data/Internet/content/NET062899PR.htm.
The Internet software market is relatively large and continuing to
expand. In our opinion, the vast majority of businesses with successful web
strategies are those which have the financial resources to frequently update and
re-design their websites. Such businesses either hire and retain "information
systems" employees to develop, support, and maintain their websites, or
alternatively purchase Internet services from multiple parties, integrate such
services, and gather or purchase information on their markets to facilitate
website updates. Our market, by contrast, consists of small to medium-sized
businesses which desire the capability to quickly re-design their websites
without incurring substantial costs or relying upon additional employees or
multiple vendors. We believe that our products provide small and medium-sized
businesses with such flexibility, allowing businesses complete control of their
websites.
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Our Product. We have developed software technology which we market
under the name Visual WebTools(TM). Visual WebTools(TM) allows businesses to
create and maintain websites. We believe that Visual Webtools(TM) is powerful,
yet easy and intuitive to use; it allows a small business to quickly and easily
create a website on the Internet, list itself with the major search engines, set
up e-mail, and register a domain name. We also believe that VisualWeb Tools(TM)
provides all the tools needed to edit and maintain a website from any
Internet-capable computer. It allows a user to create an online store front,
generate sales leads, process credit cards, communicate with site visitors, and
collect statistical information about who visits the website and what they do
while they are there. It allows a business to create, manage, and maintain every
aspect of its website at all times. In our opinion this functionality, combined
with our easy to use visual interface, provides a point-and-click total Internet
business solution for approximately three thousand dollars per year.
Visual WebTools(TM) incorporates the following features:
WebWizard. WebWizard allows businesses to quickly and easily create,
update, modify, or enhance their websites. Changes can be made 24 hours a day, 7
days a week from anyplace in the world with an Internet terminal. WebWizard
includes an easy to use but powerful preview interface which is referred to in
the industry as "WYSIWYG" (What You See Is What You Get) which uses familiar
"drag and drop" functions and which allows businesses to make website changes
instantaneously. Changes are updated automatically and placed online within
minutes. WebWizard gives businesses the ability to manipulate their websites'
layout, colors, and content, and to move, resize, and cut and paste text,
graphics, and tables. WebWizard also gives businesses a library of hundreds of
graphics to use throughout the website, and the ability to upload graphics or
files from a local hard drive directly into the website.
WebShopper. WebShopper allows businesses to add "electronic
storefronts" to their websites. We assist businesses in setting up merchant
accounts and in facilitating secure credit card transactions through a
collaboration with joint venture partners. WebShopper also provides a
customizable product database. A business's products and all of its variables,
such as price, color and size, can be entered into a password-protected product
database, which can be updated or edited at any time. Customizable price and
shipping modifiers, receipt options, sale flagging, product option variables and
tax calculations are also available.
WebChannels. WebChannels allows businesses to send e-mail to multiple
clients simultaneously, creating marketing channels directly to customers.
Businesses can send announcements, sales information, product updates,
promotions, newsletters, jokes, or any other correspondence to clients at any
time. WebChannels also allows subscribers to add or remove themselves from the
automated e-mail database.
WebProfiler. WebProfiler allows businesses to gather demographics on
site visitors by creating custom questionnaires which provide direct feedback
from site visitors. With WebProfiler, businesses can obtain information from
target audiences, including, for example, levels of customer satisfaction or
dissatisfaction and customer preferences with regard to new products or
services. We believe that WebProfiler assists businesses in obtaining the
information necessary to improve customer relations, improve products, run
surveys and product specials, and gather additional information.
WebStats. WebStats allows businesses to monitor website visits. It
creates detailed reports about visits to their websites. We believe such reports
may assist businesses in determining the effectiveness of changes to their
websites and identifying the pages on their sites which draw the most interest.
WebStats keeps a detailed two-year history of visits to and activity within our
subscribers' websites, and can generate detailed reports of site activity. For
example, it can generate reports which show year-long sales trends, identify
product purchasers, or track the effectiveness of sales and promotions during
specific time periods or from specific locations. WebStats retains this
information in database format. We intend to develop future versions of WebStats
which will allow our customers to download and manipulate such information.
WebWizard and WebShopper are our basic products and come in three
progressive versions, including "Retail," "Express," and "Pro." The "Express"
and "Pro" versions provide additional product features and support options to
the business. WebStats, WebProfiler, and WebChannels are available to our
customers for an additional license fee.
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Sales and Marketing. We do not believe that our competitors are
effectively targeting our market niche: a totally Internet based, end-to-end
business solution for small and medium sized businesses. We believe that our
products will allow businesses to generate leads, sell products, run sales
promotions, capture demographic information about website visitors, communicate
with website visitors, and obtain intelligent information about who is visiting
their websites and what they are doing while they are there. Our products allow
our customers to stay in complete control of their websites and provide tools
which can facilitate a successful internet experience for them.
We market and sell our products through reseller channels, our internal
sales force, outside sales agents, and strategic partners. We sell our products
to resellers at wholesale, who then mark the products up and sell them at
retail. As of July 15, 1999, we have entered into WebTools Reseller Agreements
with six companies. Each end user must sign a purchase agreement with the
reseller which the reseller must in turn provide to us. We then provide software
to the resellers' own end users which allows such users to create Internet
projects. We provide the initial reseller with training in the use of the
software, but the reseller must provide all product support for the reseller's
end users. The reseller is an independent contractor and is obligated to pay the
amounts due under the agreement even if it does not receive payments from its
end user. Currently, nearly 42% of our sales are originated through our outside
sales agents, while our reseller channels account for approximately 32% of our
sales. The balance of our sales are originated by our internal sales force.
One of our resellers and two of our independent sales organizations
currently account for more than ten percent of our revenues. US Merchant
Systems, a reseller, supplies us with marketing expertise and merchant accounts
with our customers, and accounted for approximately $25,100, or 32% of our
revenue, for the six months ended June 30, 1999. While we entered into a new
Strategic Marketing Agreement with US Merchant Systems on August 30, 1999, the
loss of our relationship with US Merchant Systems would create an immediate loss
of revenue for us and could have a material adverse effect on our operations.
Dillard Internet Consulting, an independent sales organization, accounted for
approximately $7,500, or approximately 10% of our revenue, for the six months
ended June 30, 1999. Global Internet Marketing, also an independent sales
organization, accounted for $14,700, or approximately 19%, of our revenue for
the six months ended June 30, 1999. The loss of either of these central
independent sales organizations would immediately harm our revenues and may have
a material adverse effect on our business. However, we believe that based on the
large number of sales organizations in the market, we would be able to replace
each of these partners in the event our relationships are terminated, although
this may adversely effect our operations and revenues.
We have released and sold WebWizard Pro since late November, 1998, and
WebWizard Express and WebWizard Retail since the first quarter of 1999. Sales
have been conducted primarily by two of our resellers. During 1997 we had 41
clients, two of which accounted for more than 5% of our gross revenue. During
1998 we had a total client base of 85, four of which each accounted for more
than 5% of our gross revenues. As of the second quarter of 1999, we have
continued to increase our client base to several hundred. None of our clients
have provided more than 5% of our gross revenues in 1999.
We believe we may be able to develop a substantial presence in our
target market through a combination of marketing strategy, unique proprietary
technology, technical expertise, and early entry into our target market. We have
also developed a trial version of Visual WebTools(TM), which can be provided to
a business for evaluation purposes free of charge. Our products will allow a
business to create, operate, and maintain a website for an initial one-year
term, after which our customer may maintain its license by paying a monthly
license fee of approximately 6% of the initial purchase price. We are also
pursuing a national advertising campaign which will include television, radio,
and print media.
It is our opinion that in the past, businesses which have attempted to
maintain interactive websites and conduct business on the Internet have either
developed technical expertise themselves, paid employees to create and maintain
their websites, or retained contract "web professionals" to do so. We believe
that Visual WebTools(TM) will allow small businesses, at a relatively small
cost, to participate in Internet commerce by creating and managing their own
Internet storefronts.
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Product Development. We acquired a large amount of source code from
Innovative Research and Animated Design, Inc. ("IRAD") in June of 1997. IRAD
originally developed this technology, which is the underlying technology from
which we program. We believe that this code base provides us with a significant
market advantage with advancements in the areas of Internet business
technologies, including 3D animation and search engine technologies. We intend
to incorporate these technologies into future versions of Visual WebTools(TM).
We announced the release of WebWizard 2.0 in February 1999. WebWizard
2.0 enhances WebWizard, which is Visual WebTools(TM)' base product. WebWizard
2.0 simplifies the tasks of creating and maintaining websites. It incorporates
Microsoft's ActiveX components directly into the interface, making WebWizard as
easy to use as a word processor. The new WebWizard 2.0 supports online "drag and
drop" functions for editing images, tables, and text. WebWizard 2.0 also
supports online text editing, as well as infinite-level "undo" and "redo"
functions. An extensive table editor has been added which allows simple resizing
and quick editing of tables. The new import feature will allow current and older
websites to be converted into the Visual WebTools(TM) environment quickly and
easily. WebWizard 2.0 also includes an updated graphics and animation library,
enhanced navigation support, and increased security.
In February 1999, we also released WebShopper Pro, which includes
support for merchant account functionality, real-time Internet credit card and
personal check settlement, and fraud prevention features. WebShopper Pro
supports and accepts all major credit cards and optional electronic checks on a
real-time basis. We intend to expand the features of the Visual WebTools(TM)
family during the remainder of 1999 by adding 3D animation, new site layout
support, background images, additional graphic libraries, private office
features such as document sharing, and a shopping mall.
We released Visual WebTools(TM) 3.0 on August 1, 1999. WebWizard 3.0
includes multiple features designed to make our product more powerful and easier
to use. These features include scriplets (an embedded code feature which
enhances the effect and appearance of a web page), frames (a function which
allows a user to display multiple pages or portions of pages at one time on a
computer screen), and easier domain registration. Webshopper 3.0 allows for
products to be included in Mainstreetsquare.com(TM).
Through June, 1999, we spent $506,132 in cash, of which approximately
60% was devoted to engineering costs, including research and development
expenses. During 1998 and 1997, we spent approximately $235,000 and $105,000 in
cash, respectively, of which approximately 60% was devoted to engineering costs,
including research and development expenses. Such costs are passed on to
purchasers in the cost of the product.
Material Contracts. We are a party to the following material contracts:
In January, 1998, we entered into an agreement with Electric Lightwave,
Inc. for telecommunications, facilities, and Internet access. We currently pay
$1,725.00 per month for such service. The contract is scheduled to expire
December 31, 2001. We believe that we will be able to extend this contract on
terms which are acceptable to us, but have no assurances that we can do so.
However, we believe that we will be able to enter a new contract with a
different service provider if the contract is not extended.
In April of 1998 we entered into a Development, License, and Service
Agreement with American Home Business Association (the "American Home") for
development of a website for American Home. We agreed to create a website,
customize our software, prepare a first version of the website, and put a
company database on the Internet. We granted an exclusive license to American
Home to use our search engine, "IQuest," for use only within the Internet Home
Business Directory Industry. American Home pays us a $10,000 royalty fee per
year. We provide maintenance for IQuest for a monthly fee of $250. We allow Home
Business to use 4% of our current internet access capacity. We also provide
enhancements to the software which we own. The agreement had a term of two
years. On July 31, 1999, American Home and Pacific Webworks agreed to terminate
this contract. American Home and Pacific WebWorks disagreed on each party's
obligations under the agreement, and the companies mutually agreed to dissolve
their contract for a fee of $2000 paid to Pacific Webworks by American Home on
July 31, 1999.
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In February of 1999, we entered into an agreement with U.S. Merchant
Systems, Inc. and IntelliPay, Inc., both located in Newark, California. U.S.
Merchant Systems, Inc. provides merchant accounts to our clients. IntelliPay
provides software which enables merchant accounts to communicate with Internet
e-commerce applications. We integrated a merchant account and transaction
processing which allows purchasers of Visual WebTools(TM) to accept all major
credit cards and personal checks at point of sale from their website. The term
of this agreement is one year from the date of execution and shall automatically
renew each successive year thereafter, unless cancelled in writing. We are also
leveraging a relationship with a provider of Internet factoring, which will
allow customers to make monthly payments on negotiated terms.
Outstanding Notes. On July 21, 1999, we executed a promissory note in
the amount of $250,000.00 payable to the order of Capital Communications. The
note is secured by our accounts receivable. The note is due on or before July
31, 2000 and includes principal and interest. In the case of default on any
payment , the note and all accrued interest shall, at the holder's option,
become immediately due and payable. Interest is bearing on the principal amount
of the note at a rate of 10% per annum.
Corporate Development. Asphalt Associates, Inc. was incorporated in the
state of Nevada on May 18, 1987. Asphalt Associates never established commercial
business operations. On January 11, 1999 Asphalt Associates merged with Utah
WebWorks, Inc., a Utah corporation (the "Utah WebWorks"). Utah WebWorks, the
accounting acquirer, was organized on April 10, 1997. In conjunction with the
merger, Asphalt Associates changed its name to Pacific WebWorks, Inc. Utah
WebWorks owned a significant portion of the software technology which we
currently use, while Asphalt Associates held approximately $1 million dollars in
cash which could be used for the marketing and improvement of the Utah WebWork's
technology. Each of the companies believed that by combining their assets, the
newly merged company would be able to take advantage of the combination of the
assets more efficiently than either could do alone. In connection with the
merger, the shareholders of Asphalt Associates retained one-half of the issued
and outstanding capital stock of the merged corporation, while the shareholders
of Utah WebWorks acquired the remaining one-half of the issued and outstanding
capital stock of the merged corporation.
Trademark, Licenses and Intellectual Property. On October 9, 1998, Utah
WebWorks filed a trademark application for Visual WebTools(TM) which we acquired
and became responsible for upon our merger with Utah Webworks. In December of
1998 the United States Patent and Trademark Office assigned Serial No. 567,136
to such mark. The trademark is currently pending. On July 9, 1999, we filed a
Trademark application for Mainstreetsquare.com(TM), Cyberhaggle(TM), and
Pricehunter(TM), all features of the online mall currently in development. Our
success will depend, in part, on our ability to obtain and protect our trademark
and trade secrets and operate without infringing upon the proprietary rights of
others in the United States and other countries. If we were to become involved
in a dispute regarding our intellectual property, it could become necessary for
us to participate in interference proceedings before the United States Patent
and Trademark Office to determine whether we have a valid claim to the rights
involved. We could also be forced to seek a judicial determination concerning
the rights in question. Such proceedings could be costly and time consuming,
even if we were to eventually prevail. Should we not prevail, we could be forced
to pay significant damages, obtain a license to the technology in question, or
stop marketing one or more of our products.
All of our technology was developed internally by our engineers and by
the engineers of Utah Webworks. Our products do not rely on any third party
technology, although we have decided to include as an upgrade to our technology
features developed by Intellipay and U.S. Merchant Systems.
We also rely upon trade secrets, proprietary know-how, and
confidentiality provisions in agreements with employees, consultants, and
resellers to protect our intellectual property rights. There are risks that
these other parties may not comply with the terms of their agreements with us,
and that we may not be able to adequately enforce our rights against such
parties.
We have adopted a policy of requiring our employees and resellers to
execute confidentiality agreements when they commence employment with us or
resell our products. These agreements generally provide that all confidential
information developed or made known to the employees or resellers during the
course of their relationships with us is to be kept confidential and not
disclosed to third parties, except under certain specific circumstances. In the
case of employees, the agreements also provide that all inventions conceived by
the employees in the course of their employment will be our exclusive property.
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Employees. We currently employ 21 people, 20 of whom are full-time
employees and one of whom is part-time. Our employees are not presently covered
by any collective bargaining agreement. We believe that our relations with our
employees are good, and we have not experienced any work stoppages.
Reports to Security Holders. Following the effective date of this
registration statement, we will be required to comply with the reporting
requirements of the Securities Exchange Act of 1934 ( the "Exchange Act") and
will file annual, quarterly, and other reports with the Securities and Exchange
Commission (the "SEC"). We also will be subject to the proxy solicitation
requirements of the Exchange Act and, accordingly, will furnish an annual report
with audited financial statements to our stockholders. We currently use an
investor relations firm, Columbia Financial Group, and interested persons may
call at (888) 301-6271. Also, interested persons may visit our website at
http://www.pacificwebworks.com.
Available Information. Copies of this registration statement may be
inspected, without charge, at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Denver Regional offices of the
SEC located at 1801 California Street, Suite 4800, Denver, Colorado 80202. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0300. Copies of this material also should be
available through the Internet by using the SEC's EDGAR Archive, the address of
which is http://www.sec.gov.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
An investment in our common stock is very risky. Potential investors
should carefully consider the factors discussed above, in addition to the
information contained in the remainder of this registration statement, before
purchasing our common stock. This registration statement contains
forward-looking statements that involve risks and uncertainties. Many factors,
including those described below, may cause actual results to differ materially
from anticipated results.
We have a limited operating history and we cannot be certain of future
progress or profitability. We were incorporated in 1987, but did not operate as
a business until 1997. We only recently started marketing our software products
through resellers. We may encounter financial, managerial, technological or
other difficulties as a result of our lack of operating history. Although we
anticipate that our operating revenue will increase in the future based upon the
continuing increases we have noted in our financial statements during our most
recent fiscal quarter, we cannot guarantee that our revenues will exceed our
operating expenses.
Our quarterly results could fluctuate and we cannot be certain that
future results will be similar to past results. We have consistently incurred
losses since our formation. As of June 30, 1999 our accumulated losses totaled
$723,948.83. We have financed ourselves through loans and sales of our
securities. During the coming year, we will have to seek additional equity or
debt financing from third parties to finance our operations, which may not be
available to us or on terms which are acceptable to us. Please refer to the
Liquidity and Capital Resources section on page 14 for a more detailed
description. We are not able to currently finance our operations through our
operations and generated revenues. Our operating results in the future may vary
significantly, depending on factors such as revenue from product sales and
license fees, announcements and launches of new products and services, market
acceptance of new and enhanced versions of Visual WebTools(TM) and related
products, changes in our operating expenses, changes in our business strategy,
and general economic factors. Our revenues will also be difficult to forecast
because the markets for our products and services are evolving and our revenues
in any period could be significantly affected by new product announcements or
launches by our competitors, as well as by our competitors' development of
alternative technologies. We do not believe that period-to-period comparisons of
our results of operations will necessarily provide investors with meaningful
data for the foreseeable future because of our lack of active operations in such
earlier periods.
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Our industry is subject to rapid technological change with which we may
not be able to keep pace. Internet industries change rapidly. Accordingly, our
operating results will depend upon our ability to successfully compete. Our
ability to successfully compete, in turn, will depend upon a number of factors,
including our ability to successfully maintain and sell existing products, our
ability to conceive, develop, improve, and market new products, our ability to
identify and take advantage of emerging technological trends within its target
markets, and our ability to respond effectively to technological changes or new
product announcements by competitors. We believe that we will need to make
continuing significant expenditures for research and development in the future.
Risks exist that we may not be able to successfully develop new products or, if
we do, that such products may not be accepted by the market.
We are subject to intense competition and we may not be able to compete
successfully in the market. Our markets are new, competitive, and subject to
rapid technological change. We face competition in the overall Internet software
market, as well as in the website building market. We expect competition to
persist, increase, and intensify in the future as the markets for our products
and services continue to develop and as additional competitors enter our market.
Currently, in our estimation, few major competitors offer products
comparable to the Visual WebTools(TM) product family. We believe that "Yahoo!
Store(TM)" is our most significant competitor, with its brand name recognition
and significantly greater financial, technical, marketing, and managerial
resources. Yahoo! Store has significantly higher sales and customers than we do
and has entered into a significantly higher number of license agreements with
third parties than we have. Our success in our target market will depend upon
our ability to build name brand recognition and to provide cost-effective
products and services to our customers. We believe that our product provides a
comparable service for a lower price than that provided by Yahoo!Store(TM). In
addition, because we have focused our efforts on small businesses, including
providing Internet tools which allow businesses to develop their own Web sites,
we believe that the generality of the Yahoo!Store(TM) may be inadequately
addressing potential customer needs and that we will be able to address site
development needs. However, we may be unable to compete effectively with current
and future competitors, including Yahoo! Store.
We depend on our management, which may leave us at any time. We depend
upon the efforts and abilities of our officers, directors, and certain key
employees, including the officers and directors listed on pages 20 and 21 under
the heading "Directors and Executive Officers." Should we lose the services of
one or more of these persons, such loss could have a material adverse effect on
our operations.
We depend upon our proprietary rights, none of which can be completely
safeguarded against infringement. Our ability to compete effectively will
depend, in part, upon our ability to protect our proprietary source code and
Visual WebTools(TM) through a combination of licenses and trade secrets.
Competition in our market is intense and our competitors may independently
develop or obtain patents on technologies that are substantially equivalent or
superior to those incorporated into Visual WebTools(TM).
Intellectual property rights, by their nature, are uncertain and
involve complex legal and factual questions. We may unknowingly infringe upon
the proprietary rights of others, thereby exposing us to significant liability
and/or damages. We are not aware of any third party intellectual property rights
which would prevent us from marketing and developing Visual WebTools(TM),
although such rights may exist. If we were to inadvertently infringe upon the
intellectual property of another party, we could be forced to seek a license to
such intellectual property rights, alter the products or processes so they no
longer infringe upon such rights, or engage in litigation. If we were required
to attempt to obtain a license to another party's proprietary rights, such
efforts would be expensive, and might be unsuccessful.
We also rely upon trade secrets with respect to our source code and
functionalities and other unpatented proprietary information in our product
development activities. To the extent we rely upon confidential information to
maintain our competitive position, other parties may independently develop the
same or similar information. We seek to protect trade secrets and proprietary
knowledge in part through confidentiality agreements with our employees,
resellers, and collaborators. Such agreements may not effectively prevent
disclosure of our confidential information and may not provide us with an
adequate remedy in the event of unauthorized disclosure of such information. If
employees or collaborators develop products independently that may be applicable
to our products under development, disputes may arise about ownership of
proprietary rights to those products or services. Protracted and costly
litigation could be necessary to enforce and determine the scope of our
proprietary rights. It would be impossible to predict whether such litigation
might be successful. Our failure to obtain patent and trade secret protection,
for any reason, could have a material adverse effect on our business, financial
position and results of operations.
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We may need additional capital and be unable to raise it. We believe,
based on our current expenditure rate, that we will need additional financing by
the fall of 1999. Therefore, our success will depend upon our ability to access
equity capital markets and borrow on terms that are financially advantageous to
us. We rely upon revenues from resellers, license agreements, and product sales.
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. If
we are unable to obtain additional capital, we may not have sufficient working
capital to develop products, finance acquisitions, pursue business
opportunities, or meet reporting requirements. If we borrow funds, we could be
forced to use a large portion of our cash reserves to repay principal and
interest on such funds. If we issue our securities for capital, the interests of
investors and shareholders could be diluted.
Our products are complex and may be subject to error complaints from
our customers. Visual WebTools(TM) is complex and may contain errors, defects,
and "bugs." We have detected such errors, defects, and bugs in the past and have
corrected them as quickly as possible. Correcting any defects or bugs we may
discover in the future may require us to make significant expenditures of
capital and other resources. Despite our continuing tests, users may find errors
or defects in Visual WebTools(TM) which could cause additional development costs
or result in the loss of (or delays in) the market acceptance of Visual
WebTools(TM). As of this date, we have no knowledge of any errors, defects, or
bugs in our software nor have we experienced any material adverse effect by
reason of an error, defect or bug.
Our stock price is volatile and is not in our control. In recent years
the stock market in general, and the market for shares of high technology
Internet companies in particular, have each experienced extreme price
fluctuations. In many cases these fluctuations have been unrelated to the
operating performance of the affected companies. The trading price of our common
stock may be subject to extreme fluctuations in response to both business
related issues (such as quarterly variations in operating results, announcements
of new products developed by us, or announcements from our competitors) and
stock market-related influences (including, but not limited to, changes in
analysts' estimates, the presence or absence of short selling of our common
stock, and events affecting other companies which the market believes might
affect us).
We may have problems as a result of the year 2000 problem. We rely upon
computer systems, applications, and devices in operating and monitoring all of
the major aspects of our business, including financial systems (such as general
ledger, accounts payable, and payroll modules), customer service, networks,
telecommunications equipment, and developing and manufacturing end products. In
addition, we provide our services and products over the Internet, which is a
computer-based medium. Our internal systems may be materially affected by the
year 2000 problem. Even if our internal systems are not materially affected by
the year 2000 problem, we could be affected by such problems with the operations
of our suppliers, contractors, customers, or other persons or entities with
which we interact. Despite our efforts to minimize the potential impact of the
year 2000 problem on its internal systems and operations, we may suffer a
material disruption of our business as a result of this problem. This could have
a material adverse effect on us.
The future sale of common stock could pose investment risks, including
substantial dilution to our shareholders. The market price of our common stock
could drop as a result of sales of the common stock in the market after the
effective date of this registration statement, or the perception that such sales
could occur. These factors could also make it more difficult for us to raise
funds through future offerings of our common stock. There will be a total of
10,000,000 shares of common stock outstanding immediately after the Effective
Date. The common stock will be freely transferable without restriction or
further registration under the Securities Act of 1933 (the "Securities Act"),
except for any common stock held by our "affiliates," as defined in Rule 144
under the Securities Act. We also have 3,960,000 shares of common stock
outstanding that are freely transferrable without restriction under the
Securities Act. The remaining 6,040,000 shares of common stock outstanding will
be "restricted securities," as defined in Rule 144. The common stock may be sold
in the future without further registration under the Securities Act to the
extent such sales are permitted by Rule 144 or any other exemption under the
federal securities laws.
9
<PAGE>
We have a short market history which does not provide our investors
with extensive information. There has not been a large public market for our
equity securities, and our common stock has traded on the over-the-counter
market only since January of 1999. We do not know the extent to which investor
interest in our stock will lead to the development of an active trading market
for such stock, or how liquid that market might be. Investors may be unable to
resell their common stock at or above the price they pay for the common stock.
We have not paid dividends. We have never paid a dividend on our common
stock. We intend to retain future earnings to finance our growth and development
and do not plan to pay cash dividends in the foreseeable future.
We have a new product in a developing market which may not work
properly. Visual WebTools(TM) is based on software technology which has been
used for approximately two years. We have refined Visual WebTools(TM) by adding
additional functions, including but not limited to e-commerce capabilities. Our
success will depend largely on its ability to further refine and continue to
develop Visual WebTools(TM) and other products. If Visual WebTools(TM) does not
achieve significant market acceptance and usage, we could suffer material
adverse effects in our business.
The primary markets for Visual WebTools(TM) have only recently begun to
develop and are rapidly evolving. As is typical of new and rapidly evolving
industries, demand for (and market acceptance of) products and services that
have been released recently or that are planned for future release are subject
to a high level of uncertainty. If Visual WebTools(TM) does not achieve market
acceptance, we could suffer material adverse effects.
Our markets are highly dependent on the use of the Internet. A number
of critical issues concerning the commercial use of the Internet, including
security, reliability, capacity, taxation, costs, ease of use, access, quality
of service, and acceptance of advertising, remain unresolved and may retard the
growth of the Internet for commercial applications.
We will need to manage our growth, even if we grow quickly. We hope to
achieve rapid growth, both with respect to our sales and operations and with
respect to the number and complexity of our products. Several members of our key
management team only recently joined us. See "Directors and Executive Officers."
Our growth, coupled with the rapid evolution of our markets, has placed, and is
likely to continue to place, significant strains on our administrative,
operational, technical, and financial resources and increased demands on our
internal management systems, procedures, and controls. If we are unable to
manage our growth effectively, our business and our financial condition could
suffer material adverse effects.
We will be dependent upon license renewal which cannot be assured to
occur. We intend to provide small to medium-sized businesses with a relatively
inexpensive, easy-to-use product which will allow them to create and maintain
websites. We expect to derive revenues from user licenses and license renewals
and to increase the brand recognition of Visual WebTools(TM) among users through
such relationships. Our success in establishing Visual WebTools(TM) as a
recognized brand name and achieving its acceptance in the market will depend in
part on our ability to continually engineer and deliver new product technologies
and superior customer service, so that customers renew their licenses year after
year.
To date, none of our customers' licenses have been up for renewal. In
October 1999, our first Visual WebTools customer license will be up for renewal.
Our first customer has already committed to renew its license and purchase an
upgrade. All of our current contracts expire following the original one year
term. However, customers may continue to use the software upon the payment of
their hosting fees, which is due on a monthly basis. Failure to pay the monthly
fee will result in a discontinuance of the license.
10
<PAGE>
We may be subject to increased regulations and may be exposed to
liability for information retrieved from the Internet. Other than the laws and
regulations applicable to businesses generally, we are aware of few laws and
regulations which expressly apply to access and commerce on the Internet. Due to
the increased popularity and use of the Internet, however, it is possible that
new laws and regulations may be adopted with respect to the Internet relating to
issues such as user privacy, pricing and characteristics, and content and
quality of products and services. For example, we may be subject to the
provisions of the Communications Decency Act, which if found to be
constitutional, could expose us to substantial liability. The adoption of any
such laws or regulations could retard the growth or the use of the Internet,
which could adversely affect the demand for our products and services. Such laws
or regulations could also result in significant additional costs and
technological challenges for us in complying with any mandatory requirements.
Further, several states have attempted to tax online retailers and service
providers, even when such parties have no physical presence in the state. The
federal government has imposed a three-year moratorium on taxation of Internet
commerce. We cannot predict what effect the lapse of this three-year period will
have on our business operations. In addition, plaintiffs have brought claims,
and sometimes obtained judgments, against online service providers for
defamation, negligence, copyright or trademark infringement, or under other
theories with respect to materials disseminated through those the Internet. We
may be subject to similar claims.
We may be subject to risks associated with global operations, including
fluctuating currency exchange rates and political instability. We do not
currently have any operations outside of the United States. However, Visual
WebTools(TM) is designed for national and international markets and we plan to
include translation and localization support. As a result, we may derive
substantial portions of its future revenues from customers outside the United
States. Our ability to expand products and services internationally will be
limited by the general acceptance of the Internet in other countries. In
addition, international operations are subject to a number of risks, including
costs of localizing products and services for international markets, dependence
on independent resellers, multiple and conflicting regulations regarding
communications, restrictions on use of data and internet access, longer payment
cycles, unexpected changes in regulatory environments, import and export
restrictions and tariffs, difficulties in staffing and managing international
operations, greater difficulty or delay in accounts receivable collection,
potentially adverse recessionary environments and economies outside the United
States, and political and economic instability. Furthermore, we expect that our
export sales will be denominated predominately in United States dollars.
Therefore, an increase in the value of the United States dollar relative to
other currencies could make our products and services more expensive and
potentially less competitive in international markets.
None of our shareholders is subject to a lock-up, and some of our
shareholders may immediately sell their shares and depress our stock price. Our
current stockholders have not entered into any agreements which restrict their
ability, by contract, to sell or otherwise dispose of their common stock. As a
result, our stockholders will be able to sell any and all of their shares of
common stock, subject to applicable federal securities laws. Sales and
distributions of substantial amounts of our common stock in the public market,
whether by reason of this registration statement or by existing shareholders,
could adversely affect the prevailing market price for our securities.
Our registration statement contains forward-looking statements which
may in the future prove to be inaccurate. We have included forward-looking
statements in this registration statement. The information contained in this
registration statement includes information based on trends or other
forward-looking statements that involve a number of assumptions, risks, and
uncertainties. The actual results of our operations could differ materially from
our historical results of operations and those discussed in the forward-looking
statements. The forward-looking statements are based on our management's
beliefs, as well as assumptions management has made based on currently available
information. Words such as "anticipate," "believe," "estimate," "plan,"
"expect," "intend," and words or phrases of similar import, as they relate to us
or our management, are intended to identify forward-looking statements. The
forward-looking statements should be read in light of these factors and the
factors identified elsewhere in this registration statement.
11
<PAGE>
FINANCIAL INFORMATION
The financial information set forth below with respect to our statements of
operations for each of the years in the two-year period ended December 31, 1998,
and with respect to our balance sheets at December 31, 1997 and 1998, is derived
from financial statements included elsewhere in this registration statement
which have been audited by our independent certified public accountants, Crouch
Bierwolf & Chisholm, and is qualified by reference to such financial statements
and notes related thereto. The accounting acquirer, Utah WebWorks, Inc., had an
inception date of April 10, 1997. The financial data for the six month and three
month periods ended June 30, 1998 and June 30, 1999 are derived from our
unaudited financial statements included elsewhere in this registration statement
and, in the opinion of our management, includes all adjustments (consisting only
of normal, recurring adjustments) necessary to present fairly the information
set forth. The results for the six months and three months ended June 30, 1999
are not necessarily indicative of the results that we can expect for the full
year. The following selected financial data should be read in conjunction with
our financial statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Result of Operation".
12
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended June Year Ended
June 30 30 December 31
1998 1999 1998 1999 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product Sales 150,390 39,130 81,217 34,631 94,014 172,395
Total Revenues 150,390 39,130 81,217 34,631 94,014 172,395
Cost of Sales 84,097 11,369 47,767 10,093 107,332 188,974
Gross Margin 66,293 27,761 33,450 24,538 (13,318) (16,579)
Operating costs and expenses:
General and Administrative $36,045 323,357 20,474 214,123 36,179 80,996
Sales 13,431 103,862 7,629 68,776 13,987 30,180
R&D 5,318 105,274 3,020 69,711 5,523 11,949
Non-recurring charges
Total costs and expenses 54,794 532,493 31,123 352,610 55,689 123,125
Income (loss) from operations 11,499 (504,732) 2,327 (328,072) (69,007) (139,704)
Interest expense (3,500) (10,761)
Interest income and other, net 3,755
Income (loss) from continuing 11,499 (504,732) 2,327 (328,072) (68,752) (150,465)
operations before income
taxes and minority interest
Income tax expense (benefit)
Income (loss) from continuing 11,499 (504,732) 2,327 (328,072) (68,752) (150,465)
operations
Net income (loss) 11,499 (504,732) 2,327 (328,072) (68,752) (150,465)
Per Common Share Amounts:
Income (loss) from continuing
operations
Net income (loss) 0.00 (0.06) 0.00 (0.04) (0.01) (0.03)
Shares used in computing per share 5,001,000 9,166,667 5,001,000 9,166,667 5,001,000 5,001,000
amounts
Balance Sheet Data:
Cash and cash equivalents 21,393 140,141 21,393 140,141 5,440 9,306
Total Assets 99,464 307,036 99,464 307,036 61,092 55,970
Long-term obligations, 131,708 131,708
including current portion
Redeemable convertible
preferred shares
Accumulated deficit (57,253) (723,949) (57,253) (723,949) (68,752) (219,217)
Shareholders' equity (deficit)... (47,253) 286,051 (47,253) 286,051 (58,752) (209,217)
See Notes to Financial Statements for information concerning the computation of per share amounts.
</TABLE>
13
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management Discussion and Analysis of Financial Condition
and Plan of Operations contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including those factors set forth under the section entitled "Risk
Factors" and elsewhere in this registration statement.
Overview. Our products allow small to medium-sized businesses to build,
manage, and maintain their own websites, sell products, generate leads,
distribute information, and gain intelligence about their website visitors.
Originally, we focused on providing professional services for the Internet on an
hourly basis. After April, 1998, management shifted its focus to development and
sale of software products. This decision was based on management's vision of our
company, market conditions, and the type and amount of technology we had already
acquired or developed. In March, 1998, we began development of new Internet
software which was completed by November 1998. We market our software technology
under the brand name "Visual WebTools(TM)", which incorporates proprietary
intellectual property rights which we either own or license. We intend to target
small to medium-size businesses and create a reseller network through licensing
arrangements with other portal or website providers.
Asphalt Associates, Inc., which was our name before we changed it to
Pacific WebWorks, Inc., was a development stage company which did not generate
any revenues. As of July 1, 1999, after our merger with Utah WebWorks, we had an
accumulated loss of approximately $723,949, an amount which accrued during the
development of our technology. We expect our operating losses to continue until
we develop a sufficient reseller network and enter into sufficient licensing
agreements to cover our operating expenses.
Reverse merger treatment. We were incorporated in the state of Nevada
on May 18, 1987, as Asphalt Associates, Inc. Asphalt Associates never
established commercial business operations. On January 11, 1999, Asphalt
Associates completed a merger with Utah WebWorks, Inc., a Utah corporation. We
were the surviving entity in that transaction and, as part of the transaction,
changed our name to "Pacific WebWorks, Inc." At the time of the merger, Utah
WebWorks owned all of the intellectual property which we currently use. As a
result of the merger, the former shareholders of Utah WebWorks obtained 50% of
the voting power of the combined companies. Accordingly, in conformance with
generally accepted accounting principles, the merger has been accounted for as a
"reverse merger" and the accounting survivor is Utah WebWorks. The financial
statements for the fiscal year ended December 31, 1998 are those of Asphalt
Associates because the merger was effected on January 11, 1999. This discussion
will rely on the proforma consolidated unaudited financials for the year ended
December 31, 1998.
Stock Split and Change in Par Value. In December 1998, we authorized a
4-for-1 forward stock split. Unless otherwise noted in this registration
statement all share amounts reflect the forward stock split.
14
<PAGE>
Results of Operations. The following table summarizes the results of
our operations for the years ended December 31, 1997 and 1998 and for the
interim period ended June 30, 1999.
Six Months Ended Year ended December 31,
June 30, 1999 1998 1997
Revenues $ 39,130 $ 172,395 $ 94,014
Cost of Sales 11,369 188,974 107,332
Gross Margin 27,761 (16,579) (13,318)
General & Administrative 323,357 80,996 36,179
Sales 103,862 30,180 13,987
Research and Development 105,274 11,949 5,523
Total Operating Expense 532,493 123,125 55,689
Operating Income/Loss (504,732) (139,704) (69,007)
Interest Expense (10,761) (3,500)
Other Income 3,755
Net Profit/Loss (504,732) (150,465) (68,752)
Our expenses have exceeded our revenues for each fiscal period since
our inception. We have generated $39,130 in revenues from product sales and
licensing fees for our software technology during the first two quarters of
1999. We hope that our revenues will increase as a result of our efforts to
build a larger reseller network to market Visual WebTools(TM). We expect that,
as we implement our business plan, our revenues will grow, along with the
burdens generally associated with larger revenues, including increased burdens
on our managerial, accounting, and technical personnel.
From period to period there have been significant fluctuations in
revenues and expenses. This is due to the fact that there have been major
changes in the nature of our business practice. From year end 1997 to 1998 there
was an increase in revenue and expense. This was due to an increase in services
performed during this period. Expenses increased in the same period due to
growth of the company.
From period 1998 to 1999 there was a significant drop in revenues and
increase in expense. This was because the company changed its practice of
professional services to one of software development. During the year 1998
expenses increased dramatically in the execution stages of our development plan
and revenues dropped due to the fact that our product did not begin selling
until March 1999.
In light of the limited time that Pacific Webworks has been in business
and the fact that neither Asphalt Associates nor Utah Webworks engaged in the
type of business in which Pacific WebWorks participates, we believe that
comparisons with subsequent periods would neither be particularly informative
nor helpful. Based upon our most recent financial statements, we have increased
our revenues each month during the second quarter, and project that by December
31, 1999, we will be able to fund our own operations through revenues.
We have refined and improved our accounting processes during the first
six months of 1999. Although the information contained in our first quarter
reports was not tracked in sufficient detail to break out spending by individual
cost center, our management has implemented Great Plains Dynamics accounting
software. This will allow us to produce detailed cost and accounting information
from July 1, 1999 forward.
15
<PAGE>
Our expenses for the first quarter of 1999 can generally be classified
as either general or administrative expenses. During the first quarter of 1999,
these costs however were almost entirely development. As visual Webtools(TM) was
released to the market we expanded our support and sales departments. Sales grew
from $4,499 in the first quarter to $34,631 in the second quarter. We believe
sales will continue to escalate as brand name awareness for Visual WebTools (TM)
grows and improves.
General and administrative costs for the first six months of 1999 were
$323,357, which includes all officer salaries, general office expenses,
production and shipping expenses. This figure does not include the salary of
Mark Jensen, the Chief Operating Officer, who joined the company in the second
quarter of 1999. Sales expenses for this same period were $103,862. This
includes both selling and marketing expenses. Sales expenses for the second
quarter changed due to the development of an inside sales force, which includes
experienced internet sales people and equipment such as a predictive dialer.
Research and development expenses for the first half of 1999 were $105,274 which
includes all costs for product design, programming, and quality control.
Due to minimal sales in the first six months of 1999, the majority of
financing was derived from investment capital. Please refer to the Section
entitled "Recent Sales of Unregistered Securities" on page 24. We expect sales
to increase in the second half of 1999, and we plan to minimize our reliance on
outside financing as a result of our anticipated sales increases.
Our current liabilities increased from $12,553 at the end of the first
quarter of 1999 to $20,985 at the end of the second quarter. We currently have
no long term debt. The Company does not have any gains or losses from foreign
currency transactions, nor does it have any unrealized gains or losses from
investments.
Quarterly Trends. We do not anticipate significant "seasonal" changes
in our operations. Our product is a software which is designed for internet
commerce and as such we predict that sales will generally remain unchanged
throughout the year. We hope that revenues will grow consistently over the next
five years. We believe that increases (or decreases) in our revenues should be
reasonably steady from quarter to quarter based on the fact that the initial
product development is completed and that we currently maintain fairly steady
and identifiable growth and expenditure rates. We believe our revenues will come
from product sales and licensing agreements with resellers.
Liquidity and Capital Resources. Since our inception, we have funded
our cash requirements through issuances of our common stock. We have used the
funds from those transactions to fund our investments in and development of our
technology, to provide working capital, and for general corporate purposes. In
December, 1998, we sold 840,000 common shares to two accredited investors for
$1,000,000. Please see Pacific WebWorks, Inc. (formerly Asphalt Associates,
Inc.) financial statements as of December 31, 1998. As of the year ended
December 31, 1998, we posted current assets of $1,000,000, with no liabilities,
resulting in a positive net worth of $1,000,000. Our operating losses were
$150,465 in 1998 and were funded primarily by equity transactions. Please see
Utah Webworks, Inc. financial statements as of December 31, 1998.
Pursuant to the merger agreement, Asphalt Associates placed $1 million
in escrow. Asphalt Associates subsequently loaned $250,000 of the $1 million to
Utah WebWorks as a 30 day interest free loan. The entire $1 million was
subsequently converted into 840,000 shares of our common stock in the merged
entity, at which time the $250,000 note was forgiven. The remaining $750,000 was
disbursed to us over the first six months of 1999. Also, the management of
Asphalt Associates resigned and the management and board of Utah WebWorks filled
the vacancies. As a result of these transactions, our financial statements show
total assets of $307,036 for the period ended June 30, 1999, which includes cash
or cash equivalents of $140,141. With total liabilities of $20,985, we showed a
positive net worth of $286,051. We experienced operating losses of $504,732 for
the six months ending June 30, 1999.
16
<PAGE>
A summary of our audited balance sheets for the years ended December
31, 1997 and December 31, 1998 and our interim statements for June 30, 1999 are
as follows:
<TABLE>
<CAPTION>
Six Month Period Ended Year ended Year ended
June 30, 1999 December 31, 1998 December 31, 1997
------------- ----------------- -----------------
<S> <C> <C> <C>
Cash/Cash Equivalents............... $ 140,141 $ 9,306 $ 5,440
Current Assets...................... $ 186,159 $ 20,534 $ 34,551
Total Assets........................ $ 307,036 $ 55,970 $ 61,092
Current Liabilities................. $ 20,985 $ 265,187 $ 119,844
Total Liabilities................... $ 20,985 $ 265,187 $ 119,844
Total Stockholder Equity............ $ 286,051 ($209,217) ($58,752)
Total Liabilities & Stockholder
Equity ....................... $ 307,036 $ 55,970 $ 61,092
</TABLE>
We believe that we have sufficient resources to continue our product
development efforts and to continue our sales, marketing, and promotional
activities for Visual WebTools(TM). However, we operate in a very competitive
industry in which large amounts of capital are required in order to develop and
promote products. Many of our competitors have significantly greater capital
resources than we do. We believe we will need to continue to raise additional
capital, both internally and externally, in order to successfully compete.
While we may be able to fund our operations through our revenues in the
near future, we currently anticipate commencing an offering of our securities to
satisfy our cash requirements in the near future. We have not as of yet
determined the type of offering or the type or number of securities which we
will offer. The current products have been marketed and sold since March of
1999. Actual development costs will depend on a number of factors, including
- our ability to negotiate favorable licensing agreements with
resellers;
- the number of our resellers;
- the software and services for which they subscribe;
- the nature and success of our products and services;
- regulatory changes; and
- changes in technology.
In addition, our actual expenses and revenues could vary materially
from the amounts we anticipate or budget, and such variations may affect the
additional financing needed for our operations. Accordingly, there can be no
assurance that we will be able to obtain the capital that we will require.
We currently estimate that we will require between $1,500,000 and
$2,500,000 to further and fully develop our products and services in accordance
with our business plan. To the extent that we acquire the amounts necessary to
fund our business plan through the issuance of equity securities, our
then-current shareholders 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 vulnerable to competition or economic downturns.
17
<PAGE>
OTC Bulletin Board Eligibility Rule. In January of 1999, the SEC
granted approval to the NASD OTC Bulletin Board Eligibility Rule 6530 which
requires a company listed on the OTC Bulletin Board to be a reporting company
and current in its reports filed with the SEC. As a result of this rule change
we have filed this registration statement in order to become a fully reporting
company and list our common stock on the OTC Bulletin Board. The SEC reporting
requirements will add additional expenses to our operations, including the
expense of filing this registration statement and preparing annual and quarterly
reports. Because the SEC did not reach a position of no comment with regard to
this registration statement prior to August 1999, we have lost our listing on
the OTC Bulletin Board, which has had an adverse impact upon the market for our
common stock. We anticipate trading on the OTC Bulletin Board soon after this
registration statement is declared effective.
Year 2000 Compliance. We have completed a review of our computer
systems and operations to determine the extent to which our business could be
vulnerable to potential errors and failures as a result of the "year 2000"
problem. The year 2000 problem results from the use of computer programs which
were written using only two digits (rather than four digits) to define
applicable years. On January 1, 2000, any clock or date recording mechanism,
including date-sensitive software which uses only two digits to represent the
year, could interpret a date of "00" as the year "1900," rather than the year
"2000." This could result in system failures or miscalculations, causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, provide services or engage in similar
activities. These failures, miscalculations and disruptions could have a
material adverse effect on our business, operations, and financial condition.
We believe, based on our review of our operations and computer systems,
that our significant computer programs and operations will not be materially
affected by the Year 2000 problem, and that we can modify or replace the
programs that will be affected by the end of 1999 at a cost which will not be
significant. Any remediation efforts or costs would be minimal due to the fact
that all of the functions handling dates are handled by technology platforms
such as Microsoft Windows NT server, Microsoft Information Server, Microsoft
ADO, and Oracle 8I server, all of which are year 2000 compliant. Under a
reasonably likely worst case scenario, however, our computer systems and/or
operations could be materially affected by the year 2000 problem, causing a
system failure and resulting in loss of sales, loss of current revenues derived
from current client, and possible loss of vendors, resellers, or sales
representatives.
We have prioritized our year 2000 efforts in an effort to protect, to
the extent possible, our business and operations. Our first priority will be to
protect our critical operations, such as those systems and applications that we
use to provide various resellers and customers with access to Visual
WebTools(TM), from incurring material service interruptions that could occur as
a result of the year 2000 transition. To this end, we have attempted to identify
any element within our business operation (including elements relating to third
party relationships) that could be materially impacted by the year 2000 date
change, and have attempted to determine the risks to our continuing business
operations as a result of an adverse effect resulting from that date change. To
this end we have conducted extensive testing of all of our systems in relation
to all date related functions of our software platforms and servers. During
these tests we identified a single problem with our telephone and voice system.
Both of these systems have been replaced with new systems which are year 2000
compliant at a cost to us of $10,000.
In addition to our own properties and computer systems, we rely on
operations and computer systems of third party customers, financial
institutions, vendors and other parties with or through which we conduct
business (such as utilities, Internet service providers, and the owners of
communications backbones). We generally require our resellers and suppliers to
warrant that they are year 2000 ready. We have purchased most of our
mission-critical systems from such third-party vendors. We have attempted to
identify the resellers and third parties with which we have contractual
relationships which may not be year 2000 compliant by the end of 1999, and we
have adopted contingency plans which we believe will mitigate any adverse impact
to our business operations resulting from those vendors' or third parties'
inability to perform their contractual obligations. Our contingency plans
include preparing and using backup copies of our financial records, determining
the availability and reliability of alternate network and backbone communication
systems, and scheduling additional phone center, repair, support, and
administrative personnel to be on hand on the transition date.
18
<PAGE>
We have had no compliance efforts with respect to financial
institutions, third party customers, or vendors with which we conduct business.
We require no assurances or warranties of our resellers since they have no
material effect on the working nature of our products. We have requested our
only product supplier, Intellipay, Inc., to give us a year 2000 compliance
statement.
We believe that our systems are year 2000 compliant and believe we will
not suffer as a result of the year 2000 problem.
PROPERTIES
We currently lease 8,500 square feet of commercial office space in the
Westgate Business Center in Salt Lake City, Utah 84101. The building has a total
of 200,000 square feet of office and common space and serves as our main office
and production facility. We pay $8,610 each month for our lease and an
additional $720 for parking stalls, which we believe is typical for similar
premises in the area currently available for lease. The current lease is for a
three year term and will expire on December 31, 2001.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of August 31, 1999, the beneficial
ownership of our outstanding common stock of: (i) each person or group known by
us to own beneficially more than 5% of our outstanding common stock, (ii) each
of our executive officers, (iii) each of our directors, and (iv) all executive
officers and directors as a group. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, the persons
named in the table above have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them. The inclusion of
any shares as beneficially owned does not constitute an admission of beneficial
ownership of those shares. The percentage of beneficial ownership is based on
10,000,000 shares of common stock outstanding as of August 31, 1999.
CERTAIN BENEFICIAL OWNERS
Common Stock Beneficially Owned
-------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
- -------------------------------- ------------ -------------------
Net Strategic Investments, LLC(1) 1,117,500 11.175%
1986 E. Falcon Hill Circle
Sandy, Utah 84092
- --------
(1) Christian Larsen's father owns all of the outstanding stock of Net
Strategic Funding, Inc., the corporation which owns all of the interest of Net
Strategic Investments, LLC. Mr. Christian Larsen has disclaimed beneficial
ownership of such shares.
19
<PAGE>
MANAGEMENT
Common Stock Beneficially Owned
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
- -------------------------------- ------------ -------------------
Lamar P. Taylor 1,665,000(2) 16.7%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
Allan E. Oepping 725,000 7.3%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
Eric K. Schmitter 500,000 5.0%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
Benjamin A. Black 500,000 5.0%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101
All executive officers and
directors as a group 3,390,000 33.9%
- --------
(2) Mr. Taylor is one of two members of LVT Associates, LLC and shares
voting and investing power with such LLC.
Currently Christian Larsen does not own any of our stock. Mark Jensen
and Mat Dastrup have options to purchase 150,000 and 60,000 shares,
respectively, none of which are currently exercisable.
DIRECTORS AND EXECUTIVE OFFICERS
Our directors, executive officers and key employees, as of the date
hereof, and their respective ages and positions with us are set forth below.
Biographical information for each of those persons is also presented below. Our
executive officers are chosen by our Board of Directors and serve at their
discretion.
Directors and Officers
Name Age Position Held
---- --- -------------
Christian R. Larsen 25 Director, President, Acting Chief
Executive Officer
Mark S. Jensen 42 Chief Operating Officer,
Acting Secretary
Mat Dastrup 36 Chief Financial Officer
Lamar P. Taylor 37 Director
Allan E. Oepping 24 Director
Eric K. Schmitter 24 Director
Benjamin A. Black 27 Director
Christian R. Larsen: Mr. Larsen serves as President and Acting Chief Executive
Officer of Pacific WebWorks and has done so since April 1999. He will serve as
President until April of 2000. For the two years prior to this he served as
Chief Operating Officer for Pacific WebWorks, Inc. and as a consultant for Utah
WebWorks. In July, 1993 he started Innovative Research and Animated Design, Inc.
(the "IRAD") which developed custom and commercial software for animation and
special effects. He served as President of IRAD from October 1993 until February
1997. IRAD grew to a Company employing 28 individuals. He has seven years'
experience providing computer consulting and business management services. Mr.
Larsen filed a Chapter 7 voluntary bankruptcy petition in May of 1997 in the
District of Utah Central Division of the United States Bankruptcy Court, which
was discharged in September of 1997.
20
<PAGE>
Mark S. Jensen: Mr. Jensen has served as Chief Operations Officer of our company
since he joined us in June, 1999, after spending eighteen years in sales,
operations, and services in the software industry. Prior to Joining Pacific
WebWorks, Inc., he served as Operations Manager for the western U.S. division of
GEAC Commercial Systems, a division of GEAC Computers, Inc., which specializes
in the development and sale of application software. There Mark integrated the
acquired operations of ProMation Inc. and Libra Signature Software. He held this
position from August 1996 to June 1999. Prior to his employment with GEAC, Mark
was the General Manager for ProMation Inc., a construction application software
provider. Mark began his career with ProMation as its Vice President of Sales,
and held that position from 1990 to 1996. Mark graduated with a B.A. in Business
Administration and Marketing from Weber State University in 1981.
Mat Dastrup: Mr. Dastrup serves as Chief Financial Officer and has been with the
company since July, 1999. He brings twelve years of experience including three
years with Price Waterhouse, which firm he left as a senior accountant. He has
over five years experience as CFO for North American Arms, Inc. and for S & S
Power, Inc. He graduated with a B.S. in Accounting and a B.A. in Japanese
Literature from Brigham Young University in 1987.
Lamar P. Taylor: Mr. Taylor was the founder of Utah WebWorks, Inc. He currently
serves as a Director of the Company. He served as President for Utah WebWorks
from April of 1997 until it merged with Pacific WebWorks in April, 1999. Mr.
Taylor then served as President and Chief Executive Officer of Pacific WebWorks
until May, 1999. From 1994 through 1997, Mr. Taylor worked as a senior animator
for IRAD, producing two dimensional and three dimensional computer animation for
television commercials, promotional videos and medical simulations from 1994 to
1997. From 1991 through 1994, Mr. Taylor was employed as the Freelance Technical
Director for Shockwave Entertainment, Inc. There he created interactive video
graphics for feature films including True Lies and Lawnmower Man. He received
his B.A. with Honors from California State University, Los Angeles in 1991.
Allan E. Oepping: Mr. Oepping serves as a Director and as Pacific WebWorks' Vice
President of Engineering. He is a Microsoft Certified Systems Engineer (MCSE)
and has fourteen years' experience working with computer hardware and software.
He started with Utah WebWorks in November of 1997 as an independent consultant,
then became its Technical Director in August of 1998. He was the head programmer
for IRAD for five years. While at IRAD, Allan developed several new
technologies, including a spatial division/isolation technique which speeds up
renderings from 200% to 700%. He attended Salt Lake Community College in Salt
Lake City, Utah during 1994. Mr. Oepping filed a Chapter 7 voluntary bankruptcy
petition on March 2, 1998, in the District of Utah, Central Division of the
United States Bankruptcy Court. The petition was discharged on June 12, 1998.
Eric K. Schmitter: Mr. Schmitter serves as a Director. He started with Utah
WebWorks as the Creative Director in April of 1997. He has two years experience
in animation and two years experience in software sales. He attended the
University of North Texas during 1993 and the University of Utah in 1994. In
1988, Mr. Schmitter filed a Chapter 13 voluntary bankruptcy petition, which
later converted to a Chapter 7, in the District of Utah, Central Division, of
the United States Bankruptcy Court. The petition was subsequently discharged
later that year.
Benjamin A. Black: Mr. Black serves as a Director. He has five years' experience
in software development programming. He has worked as Senior Programmer for Utah
WebWorks since April of 1997. He was lead programmer at IRAD from 1994 through
1997. In 1995 he received his Associate of Science degree in electronics
technology from Salt Lake Community College in Salt Lake City, Utah. He is a
Microsoft Certified Systems Engineer (MCSE) and is experienced in advanced
programming languages including C, C++, and Perl.
Board of Directors: Our Articles of Incorporation provide for a Board
of Directors consisting of at least 3, but no more than 9 persons. Our directors
serve for terms of one year.
21
<PAGE>
EXECUTIVE COMPENSATION
Each executive officer is compensated at different levels, however the
compensation structure for the officers is the same. Executive compensation is
based upon a base salary with bonuses being established upon a percentage of
gross sales. Total salaries and bonuses are also capped. There is also a program
under which executives are compensated in the form of stock options which are
awarded based on sales or performance milestones and can be executed at $2.00 a
share. We determine an executive's availability to participate in the program by
our accomplishment of revenue milestones. Upon reaching a specified milestone as
determined by our Board, each executive can receive a bonus which does not
exceed $150,000 when added to his or her base salary. Executive officers and
employees are treated equally with respect to sick time, paid holidays, and
medical insurance. We value these benefits at approximately $6,100 per year,
based upon an average annual salary of $35,000.
During the past two fiscal years, no executive officer has been paid
compensation which exceeds $100,000. During 1997 no executive officer received
cash compensation, bonuses, stock appreciation rights, long term compensation,
stock awards or long-term incentive rights. In December of 1998, Mr. James R.
Glavas, our former President, received 120,000 common shares, valued at $12,000
($0.10 per share) for services rendered during 1998. None of the current
officers and directors received compensation from us during our last fiscal year
because the merger was not effective until January 11, 1999.
Compensation of Directors. We do not have any standard compensation
arrangements for our directors.
Employment Contracts. We have adopted a policy to enter into employment
agreements with our senior management, and entered into employment agreement
with each of our managers in April of 1999. Each agreement is effective for one
year and will be automatically renewed annually unless terminated. Mr. Larsen,
our Chief Executive Officer, will receive an annual base salary of $60,000 and
bonuses not to exceed an additional $65,000. Mr. Jensen, our highest paid
officer, will receive a base salary of $75,000 and bonuses not to exceed another
$75,000. Each of our senior managers receives medical insurance. Each may be
terminated for cause if he or she acts improperly or negligently in his
position, engages in dishonest or illegal conduct, and/or breaches our policies
and procedures. Each may be terminated for disability if he fails to perform
duties for 90 consecutive days for mental or physical health reasons. Each
promises to not compete with us for a period of one year after his or her
employment expires or terminates, unless he assures us in writing that
confidential and proprietary information will not be jeopardized. All inventions
and improvements in our products or methods of conducting business shall remain
our property. Each agrees not to solicit employees, customers or others for a
period of two years after the termination of his employment. After termination
or resignation, each agrees not to disclose or use confidential or proprietary
information. The agreements provide compensation if we have a change in control
or if the person resigns, or the employment is terminated.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions we have
either engaged in during the past two years or propose to engage in involving
our executive officers, directors, 5% stockholders, or immediate family members
of such persons:
In December of 1998, we issued an aggregate of 200,000 common shares
valued at $20,000 for consulting services we received. Of these shares, 120,000
common shares were issued to James R. Glavas, our president prior to the merger
with Utah WebWorks, and 80,000 shares were issued to Tony Glavas, his son.
Pursuant to the Merger Agreement, $1,000,000 was placed in an escrow
account by Asphalt Associates, our predecessor in interest, to be disbursed to
the merged entity. We were loaned $250,000 of such funds by Asphalt Associates,
Inc. as a 30 day interest free loan in order to allow us to satisfy a debt
pending the merger. The note payable was credited to our value in determining
the number of shares each party's shareholders received. Accordingly, each group
of shareholders received 5,000,000 shares in the merged entity. The balance of
the funds ($750,000) was distributed to us between January and June of 1999.
22
<PAGE>
LEGAL PROCEEDINGS
We are not aware that we are a party to any existing or threatened
legal or administrative proceedings as of the date of this filing.
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
From January, 1999 through August 3, 1999, our common stock traded
over-the-counter and was quoted on the OTC Electronic Bulletin Board under the
symbols "PWEB" and "PWEBE". In January of 1999, the SEC granted approval to the
NASD OTC Bulletin Board Eligibility Rule 6530 which requires a company listed on
the OTC Bulletin Board to be a reporting company and current in its reports
filed with the SEC. As a result of this rule change we have filed this
registration statement in order to become a fully reporting company and list our
common stock on the OTC Bulletin Board. The SEC reporting requirements will add
additional expenses to our operations, including the expense of filing this
registration statement and preparing annual and quarterly reports. Because the
SEC did not reach a position of no comment with regard to this registration
statement prior to August 1999, we have lost our listing on the OTC Bulletin
Board, which has had an adverse impact upon the market for our common stock. We
anticipate trading on the OTC Bulletin Board soon after this registration
statement is declared effective.
There was no trading activity in our common stock during 1997 and 1998.
Standard Transfer Company, located in Salt Lake City, Utah, currently acts as
our transfer agent and registrar for the common stock. The following table
presents the range of the high and low bid prices of our stock as reported by
the NASDAQ Trading and Market Services. Such quotations represent prices between
dealers and may not include retail markups, markdowns, or commissions and may
not necessarily represent actual transactions.
Year Quarter High Low
---- ------- ---- ---
1999 First 20.0 6.875
1999 Second 9.875 5.625
On December 31, 1998, the Board authorized a four-for-one forward stock
split. We currently have 3,960,000 shares of common stock that are freely
tradable (except for such of those shares as may be acquired by our affiliates).
The remaining common stock held by existing shareholders are "restricted
securities" as that term is defined by Rule 144. Restricted securities may be
sold in the public market only if they are registered or if they qualify for
exemption from registration under Rules 144 or 701 under the Securities Act or
otherwise. As of August 31, 1999, we have approximately 142 stockholders of
record.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least one year is entitled to sell, within any three month period,
a number of shares that does not exceed the greater of (i) one percent of the
shares outstanding, or (ii) the average weekly volume of trading in such shares
for the four calendar weeks preceding such sale, subject to the filing of a Form
144 with respect to such sale and certain other limitations and restrictions. In
addition, a person who is not deemed to have been one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, would be entitled to sell
such shares under Rule 144(k) without regard to the volume, manner of sale and
other limitations described above.
An employee or consultant of ours who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permit non-affiliates to sell their Rule
701 shares without having to comply with the public information, holding-period,
volume-limitation, or notice provisions of Rule 144 and permit affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
registration statement.
Dividends. We have not paid dividends on our common stock and do not
intend to do so in the future.
23
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities sold by Pacific
WebWorks within the past three years without registration:
On December 24, 1998, we issued an aggregate of 200,000 common shares
valued at $20,000 for services rendered to us. Of these shares, 120,000 common
shares were issued to James R. Glavas and 80,000 shares were issued to Tony
Glavas, his son, for their services to Asphalt Associates, Inc.
On December 28, 1998, we issued an aggregate of 840,000 common shares
to two accredited investors for $1,000,000, with 440,000 common shares issued to
Capital Communications, Inc. and 400,000 common shares to Mutual Ventures
Corporation. On January 1, 1999 we issued an aggregate of 5,000,000 common
shares to the stockholders of Utah WebWorks, Inc., pursuant to the Merger
Agreement under which that company merged with Asphalt Associates and changed
its name to Pacific WebWorks, Inc.
In February, 1999, we issued a warrant to Columbia Financial Group to
purchase 400,000 shares of our common stock at an aggregate exercise price of
$1,475,000 in exchange for their services to us.
In connection with each of these isolated issuance's of our securities,
we believe that each purchaser
- was aware that the securities had not been registered under
federal securities laws;
- acquired the securities for his/its own account for investment
purposes and not with a view to or for resale in connection with
any distribution for purposes of the federal securities laws;
- understood that the securities would need to be indefinitely held
unless registered or an exemption from registration applied to a
proposed disposition; and
- was aware that the certificate representing the securities would
bear a legend restricting their transfer.
We believe that, in light of the foregoing, the sale of our securities
to the respective acquirers did not constitute the sale of an unregistered
security in violation of the federal securities laws and regulations by reason
of the exemptions provided under Sections 3(b) and 4(2) of the Securities Act of
1933, and the rules and regulations promulgated thereunder.
DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Common Stock. The Board authorized a four-for-one forward common stock
split on December 31, 1998 and changed the authorized capital from 20,000,000 to
50,000,000 common shares, par value $.001. We have not authorized or issued any
preferred stock. Holders of the common stock are entitled to receive, pro rata,
such dividends as may be declared by our Board of Directors out of funds legally
available for such purposes. In the event of our liquidation, dissolution or
winding up, the holders of the common stock are entitled to participate in all
assets remaining after the payment of liabilities. The holders of the common
stock have no preemptive rights and no right to convert the common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock, and all outstanding common stock is fully paid
and non-assessable. The holders of the common stock are entitled to one vote for
each share they hold of record on all matters submitted to a vote of our
stockholders. We have not paid, and do not intend to pay, cash dividends on the
common stock for the foreseeable future.
24
<PAGE>
Anti-Takeover Effective Nevada Law In Certain Provisions. Nevada law
provides that any agreement providing for the merger or consolidation for sale
of all or substantially all of the assets of a corporation be approved by the
owners of at least the majority of the outstanding shares of that corporation,
unless a different vote is provided for in our Articles of Incorporation. Our
Articles of Incorporation do not provide for a super-majority voting requirement
in order to approve any such transactions. Nevada law also gives appraisal
rights for certain types of mergers, plans of reorganization, or exchanges or
sales of all or substantially all of the assets of a corporation. Under Nevada
law, a stockholder does not have the right to dissent with respect to (a) a sale
of assets or reorganization, (b) any plan of merger or any plan of exchange, if
(i) the shares held by the stockholder are part of a class of shares which are
listed on a national securities exchange or the NASDAQ National Market Systems,
or are held of record by not less than 2,000 shareholders and (ii) the
stockholder is not required to accept for his shares any consideration other
than shares of a corporation that, immediately after the effective time of the
merger or exchange, will be part of a class of shares which are listed on a
national securities exchange or the NASDAQ National Market System, or are held
of record by not less than 2,000 holders.
Control Share Acquisition Provision. Under Nevada law, when a person
has acquired or offers to acquire one-fifth, one-third, or a majority of the
stock of a corporation, a stockholders' meeting must be held after delivery of
an "offeror's" statement, at the offeror's expense, so that the stockholders of
the corporation can vote on whether the owner(s) of the shares proposed to be
acquired (the "control shares") can exercise voting rights. Except as otherwise
provided in a corporation's Articles of Incorporation, the approval of the
owner(s) of a majority of the outstanding stock not held by the offerors is
required so that the stock held by the offerors will have voting rights. The
control share acquisition provisions are applicable to any acquisition of a
controlling interest, unless the Articles of Incorporation or by-laws of a
corporation in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provide that the control share
acquisition provisions do not apply. We have not elected out of the control
share acquisition provisions of Nevada law.
Combination Moratorium Provision. Nevada law provides that a
corporation may not engage in any "combinations," which is broadly defined to
include mergers, sales and leases of assets, issuances of securities, and
similar transactions with an "interested stockholder" (which is defined as the
beneficial owner of 10% or more of the voting power of the corporation) and
certain affiliates of their associates for three years after an interested
stockholder's date of acquiring the shares, unless the combination or the
purchase of the shares by the interested stockholder is approved by the Board of
Directors by the date the interested stockholder acquires the shares. After the
initial three-year period, any combination must still be approved by majority of
the voting power not beneficially owned by the interested stockholder or the
interested stockholders' affiliates or associates, unless the aggregate amount
of cash and the market value of the consideration other than cash that could be
received by stockholders as a result of the combination is at least equal to the
highest of: (a) the highest bid per share of each class or series of shares,
including the common shares, on the date of the announcement of the combination
or on the date the interested stockholder acquired the shares; or (b) for
holders of preferred stock, the highest liquidation value of the preferred
stock.
Other Provisions. Under Nevada law, the selection of a period for
achieving corporate goals is the responsibility of the directors. In addition,
the officers, in exercising their respective powers with a view to the interests
of the corporation, may consider (i) the interests of the corporation's
employees, suppliers, creditors, and customers, (ii) the economy of the state
and the nation, (iii) the interests of the economy and of society, and (iv) the
long-term, as well as short-term, interests of the corporation and its
stockholders, including the possibility that those interests may be best served
by the continued independence of the corporation. The directors also may resist
any change or potential change of control of the corporation if the directors,
by majority vote of a quorum, determine that a change or potential change is
opposed to or not in the best interests of the corporation "upon consideration
of the interest of the corporation's stockholders," or for one of the other
reasons described above. The directors may also take action to protect the
interests of the corporations' stockholders by adopting or executing plans that
deny rights, privileges, powers, or authority to a holder of a specific number
of shares or percentage of share ownership or voting power.
25
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither our Articles of Incorporation nor our bylaws provide for the
indemnification of a present or former director or officer. However, pursuant to
Nevada Revised Statutes Section 78.750 and 78.751 we must indemnify a director,
officer, employee, or agent of the corporation who is successful on the merits
or otherwise in defense of any action or suit. Such indemnification shall
include expenses, including attorney's fees actually or reasonably incurred.
Nevada law also provides for discretionary indemnification for each person who
serves as or at the request of the corporation as our officer or director. We
may indemnify such individuals against all costs, expenses, and liabilities
incurred in a threatened, pending, or completed action, suit or proceeding
brought because such individual is our director or officer. Such individual must
have conducted himself in good faith and reasonably believed that his conduct
was in, or not opposed to, our best interests. In a criminal action he must not
have had a reasonable cause to believe his conduct was unlawful.
26
<PAGE>
Pacific WebWorks, Inc.
Financial Statements
March 31, 1999 (unaudited)
and
December 31, 1998 and 1997
27
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Pacific WebWorks, Inc.
We have audited the accompanying balance sheets of Pacific WebWorks, Inc. as of
December 31, 1998 and 1997 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 generally accepted auditing
standards. 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 as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pacific WebWorks, Inc. as of
December 31, 1998 and 1997 and the results of its operations and cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has had recurring operating losses and is
dependent upon financing to continue operations. These factors raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in the Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
CROUCH, BIERWOLF & CHISHOLM
Salt Lake City, Utah
January 26, 1999
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
28
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
Balance Sheets
Assets
March 31, December 31,
1999 1998 1997
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Current assets
Cash $ 549,679 $ 9,306 5,440
Accounts Receivable (net of allowance of $5,849,
$6,600 and $2,545, respectively) 16,885 10,392 28,011
Employee Receivable 909 836 1,100
----------- ----------- -----------
Total Current Assets 567,473 20,534 34,551
----------- ----------- -----------
Property and Equipment (Note 3) 40,270 23,353 17,708
----------- ----------- -----------
Other Assets
Deposits 9,600 5,250 ---
Computer Software Costs (Note 6) 6,333 6,833 8,833
----------- ----------- -----------
Total Other Assets 15,933 12,083 8,833
----------- ----------- -----------
Total Assets $ 623,676 $ 55,970 $ 61,092
=========== =========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 5,607 $ 11,261 $ 9,022
Accrued Expenses 3,946 3,926 6,920
Notes Payable (Note 5) --- 250,000 ---
Notes Payable - Related Party (Note 4) --- --- 103,902
----------- ----------- -----------
Total Current Liabilities 9,553 265,187 119,844
----------- ----------- -----------
Stockholders' Equity
Common Stock, authorized 50,000,000 shares of $.001
par value, issued and outstanding 10,000,000, 1,000
and 1,000 shares, respectively
10,000 1 1
Additional Paid in Capital 1,000,000 9,999 9,999
Retained Deficit (395,877) (219,217) (68,752)
----------- ----------- -----------
Total Stockholders' Equity 614,123 (209,217) (58,752)
----------- ----------- -----------
Total Liabilities and Stockholders, Equity $ 623,676 $ 55,970 $ 61,092
=========== =========== ===========
The accompanying notes are an integral part of these financial statements
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
Statement of Operations
For the Three For the
Months Ended Year Ended
March 31, December 31,
1999 1998 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues: $ 4,499 $ 69,301 $ 172,395 $ 94,014
Cost of Sales 1,276 36,408 188,974 107,332
---------- ---------- ---------- ----------
Gross Margin 3,223 32,893 (16,579) (13,318)
Expenses:
General & Administrative 109,234 15,605 80,996 36,179
Sales 35,086 5,814 30,180 13,987
Research & Development 35,563 2,302 11,949 5,523
---------- ---------- ---------- ----------
Total Expenses 179,883 23,721 123,125 55,689
---------- ---------- ---------- ----------
Income (Loss) from Operations (176,660) 9,172 (139,704) (69,007)
Other Income (Expenses)
Interest Expense --- --- (10,761) (3,500)
Other Income --- --- --- 3,755
---------- ---------- ---------- ----------
Net Income (Loss) $(176,660) $ 9,172 $(150,465) $ (68,752)
========== ========== ========== ==========
Net Income (Loss) Per Share $ (.02) $ 0.02 $ (0.03) $ (0.01)
========== ========== ========== ==========
Weighted average shares outstanding 8,333,500 5,001,000 5,001,000 5,001,000
========== ========== ========== ==========
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
Statement of Stockholders' Equity
Additional
Common Stock Paid-in Retained
Shares Amount Capital Deficit
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at Inception on April 10, 1997 $ --- $ --- $ --- $ ---
April 1997, shares issued for cash
at $10 per share 1,000 1 9,999 ---
Net loss December 31, 1997 --- --- --- (68,752)
---------- ---------- ---------- ----------
Balance, December 31, 1997 1,000 1 9,999 (68,752)
Net loss December 31, 1998 --- --- --- (150,465)
---------- ---------- ---------- ----------
Balance, December 31, 1998 1,000 1 9,999 (219,217)
Reverse merger and Reorganization adjustment 9,999,000 9,999 990,001 ---
Net loss March 31, 1999 --- --- --- (176,660)
---------- ---------- ---------- ----------
Balance, March 31, 1999 10,000,000 $ 10,000 $1,000,000 $(395,877)
========== ========== ========== ==========
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
Statement of Cash Flows
For the Three For the
Months Ended Year Ended
March 31, December 31,
1999 1998 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $(176,660) $ 9,172 $(150,465) $ (68,752)
Adjustments to reconcile net
(loss) to net cash provided
by operations
Depreciation & Amortization 4,942 --- 13,151 5,473
Bad Debt --- --- 4,055 2,545
Change in assets and liabilities:
Accounts receivable (7,591) (4,134) 13,828 (31,656)
Accounts Payable and accrued expenses (5,634) (2,624) (755) 15,942
---------- ---------- ---------- ----------
Net Cash Flows used in Operating Activities (184,943) 2,414 (120,186) (76,448)
---------- ---------- ---------- ----------
Cash Flows from Investing Activities:
Cash paid for property and equipment (20,334) (3,055) (12,675) (22,014)
Cash paid for deposits (4,350) (4,600) (5,250) ---
Cash paid for technology --- --- --- (10,000)
Cash acquired in acquisition 750,000 --- --- ---
---------- ---------- ---------- ----------
Net Cash Paid for Investing Activities 725,316 (7,655) (17,925) (32,014)
---------- ---------- ---------- ----------
Cash Flows from Financing Activities:
Cash from debt financing 210,000 5,000 381,300 108,802
Issuance of stock --- --- --- 10,000
Principle Payments on Debt financing (210,000) --- (239,323) (4,900)
---------- ---------- ---------- ----------
Net Cash Flows from Financing Activities --- 5,000 141,977 113,902
---------- ---------- ---------- ----------
Net increase (decrease) in cash 540,373 (241) 3,866 5,440
---------- ---------- ---------- ----------
Cash, beginning of period 9,306 5,440 5,440 ---
---------- ---------- ---------- ----------
Cash, end of period 549,679 $ 5,198 $ 9,306 $ 5,440
========== ========== ========== ==========
Supplemental Cash Flow Information
Cash Paid for:
Interest $ 14,262 $ ---
Taxes $ --- $ ---
The accompanying notes are an integral part of these financial statements.
</TABLE>
32
<PAGE>
Pacific WebWorks, Inc.
Notes to The Financial Statements
March 31, 1999 (unaudited), December 31, 1998 and 1997
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Pacific WebWorks, Inc., ("the Company") was organized under
the laws of the state of Nevada on May 18, 1987 as Asphalt Associate,
Inc. On December 31, 1998 the board of directors changed the name of
the Company to Pacific Webworks, Inc. On January 11, 1999, the Company
merged with Utah Webworks, Inc., a Utah corporation organized April 10,
1997. The share exchange with Utah Webworls was accounted for as a
reverse merger, therefore all financial information is that of the
accounting survivor being Utah Webworks. Utah Webworks is currently
engaged in developing, selling and servicing computer and internet
related software and hardware products.
b. Accounting Method
The Company recognizes income and expenses on the accrual
basis of accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based
on the weighted average number of shares outstanding at the date of the
financial statements. No fully diluted earnings per share data is
presented because there are no stock equivalents at December 31, 1998.
Pursuant to SFAS 128 earnings per share computations are based on the
aggregate of the weighted average outstanding shares of the combined
businesses.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
e. Provision for Income Taxes
The Company has elected an S-Corp status for income tax
purposes, which provides for all taxable income or loss to pass through
to the shareholders to be taxed on an individual level. Therefore there
is no provision for income taxes at the corporate level and no deferred
tax provision. Due to the merger stated in Note 7, the Company will
lose their S-Election status.
f. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. In these financial statements, assets involve
extensive reliance on management's estimates. Actual results could
differ from those estimates.
33
<PAGE>
g. Revenue Recognition
The Company recognizes income and expense on the accrual basis
of accounting. The Company receives revenues from services provided for
internet software design and engineering. Pursuant to SOP 97-2, revenue
is recorded when the services are completed. The Company also generates
revenues from the sale or access to their internet design software
technology. This product is sold separately without future performance
such as upgrades or maintenance, and is not sold with PCS services,
therefore according to SOP 97-2 revenue is recorded upon the sale and
delivery of or access to the product once an agreement exists, the
price is fixed and collectability is probable.
Revenues generated from our resellers are recorded in the same
manner as to the end user, except delivery is directly to the end user
rather than to the reseller. Revenue is recorded when all terms of SOP
97-2 as mentioned above are achieved.
Trade receivables are due upon receipt of the invoice. An
allowance has been made from potentially uncollectable accounts in the
amounts of $5,849, $6,600 and $2,545 for the periods ended March 31,
1999, December 31, 1998 and 1997, respectively.
h. Depreciation
The provision for depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.
Depreciation expense for the period ended December 31, 1998 and 1997 is
$11,151 and $4,306, respectively
i. Major Customers
During 1998 and 1997 the Company had major customers that
individually accounted for 10% or more of the annual sales. During
1988, four customers generated sales in the amount of $118,744 or 68%
of total sales as follows:
Customer Sales %
-------- ------ ---
A 28,161 16
B 21,271 12
C 24,422 14
D 44,890 26
During 1997, two customers generated sales in the amount of
$50, 274 or 53% of total sales as follows:
Customer Sales %
-------- ------ ---
A 14,204 15
B 36,071 38
NOTE 2 - Going Concern
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
has had recurring operating losses since inception and is dependent on
financing to continue operations. Management has secured a financial
commitment through a reverse merger subsequent to the audit date (see
subsequent events Note 7). This commitment if fulfilled will provide
the Company with sufficient funds to expend business operations in
order to generate sufficient revenues to cover anticipated costs. The
financial statements do not include any adjustment that might result
from the outcome of this uncertainty.
34
<PAGE>
NOTE 3 - Property and Equipment
Property and Equipment consists of the following at December
31, 1998 and 1997:
December 31,
1998 1997
--------- ---------
Computer Equipment $ 32,990 $ 20,315
Furniture and Fixtures 5,820 1,699
--------- ---------
Total 38,810 22,014
Less Accumulated Depreciation (15,457) (4,306)
--------- ---------
23,353 17,708
Depreciation expense for the period ended December 31, 1998
and 1997 was $11,151 and $4,306, respectively.
NOTE 4 - Related Party Transactions
Lamar Taylor, an officer and shareholder of the Company,
advanced funds to the Company for operating capital in the amounts of
$131,300 and $108,800 during the periods ended December 31, 1998 and
1997, respectively. All advances were repaid during 1998 and the
balance at December 31, 1997 totaled $103,902. These advances accrued
interest at a rate of 6%.
NOTE 5 - Notes Payable
The Company borrowed $250,000 from Pacific WebWorks, Inc. a
public corporation, as a 30 day interest free loan pursuant to a merger
agreement which became effective on January 11, 1999. At such time the
note payable was converted to equity in the merged entity. (See Note
7).
NOTE 6 - Computer Software Costs
On May 7, 1997, the Company entered into an agreement for
assignment of a security interest and judgment from a bank for various
software service codes and other technology they held. Pursuant to FASB
86, the Company cap8italized these costs because the purchased software
had alternative future use, being an integral part of the internet
software design product sold to the public. Costs of maintaining the
product is charged to expense when incurred. The Company paid $10,000
for the transfer of these software tools and is amortizing them over a
five year life. Amortization expense is $1,167 and $2,000 for the years
ended December 31, 1997 and 1998, respectively.
NOTE 7 - Subsequent Events/Reverse Merger
Effective January 11, 1999, Pacific Webworks, Inc. (a public
Company) entered into an agreement and Plan of Reorganization with Utah
Webworks, Inc., (a private company). The agreement provides for the
merger of the Company into Utah Webworks to be treated as a reverse
merger, thus making Utah Webworks the accounting survivor. Pursuant to
the agreement the Company issued 5,000,000 shares of common stock to
the shareholders of Utah Webworks for all shares of their Company.
Because the historical financial information in these financial
statements prior to the reverse merger (January 11, 1999) is that of
the accounting acquirer (Utah Webworks), a reverse merger adjustment is
used on the statement of stockholders' equity to bring the pre-merger
equity of Utah Webworks up to the consolidated post-merger equity of
Pacific Webworks. The actual shares issued by the Company to the Utah
Webworks shareholders was 5,000,000 shares. The difference between the
5,000,000 shares issued to the Utah Webworks shareholders and the
9,999,000 reverse merger adjustment represents the 4,999,000 shares
held by the original pre-merger shareholder of the public company
(Pacific). The management of the Company resigned and the management
and board of Utah Webworks filled the vacancy. Utah Webworks is in the
business of software development for computer and internet systems. The
Company had cash in escrow of $750,000 and a note receivable from Utah
Webworks of $250,000 as its only assets. The cash and note receivable
were contributed to Utah Webworks as an investment in subsidiary
advanced for operations.
35
<PAGE>
At December 31, 1998, the Company had outstanding warrants to
purchase 400,000 shares of the Company's common stock at prices ranging
from $2.50 to $6.00 per share. The warrants became exercisable in
January 1999 and expire in January 2004. The warrants are exercisable
as follows:
150,000 warrants at $2.50
100,000 warrants at $3.50
100,000 warrants at $4.50
50,000 warrants at $6.00
The fair value of the warrants granted during 1998 were
determined using the Black-Scholes option pricing model with the
following assumptions: risk-free interest rates of 6.02% expected
option life of 5 years; and volatility of 500% with no dividend yield
expected. The fair value of the warrants issued total $0. The stock
price upon date of issuance was determined to be $10 per share.
NOTE 8 - Unaudited Information
Pacific WebWorks, Inc. (the Company) has elected to omit
substantially all footnotes to the financial statements for the three
months ended March 31, 1999. The information furnished herein was taken
from the books and records of the Company without audit. However, such
information reflects all adjustments which are, in the opinion of
management, necessary to properly reflect the results of the three
months ended March 31, 1999. The information presented is not
necessarily indicative of the results from operations expected for the
full fiscal year.
36
<PAGE>
Asphalt Associates, Inc.
Financial Statements
For the Years Ended December 31, 1997 and 1996
and for the 2 Months Ended February 28, 1998
37
<PAGE>
[members] McGLADREY NETWORK
-----------------
In Independently Owned Member
Worldwide Services Through RSM International
JONES, JENSEN, & COMPANY LLC
----------------------------
Certified Public Accountants and Consultants
American Institute of
Certified Public accountants
Utah association of
Certified Public Accounts
SEC Practice Section
Private Companies Practice Section
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Asphalt Associates, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of Asphalt Associates, Inc. (a
development stage company) as of February 28, 1998 and December 31, 1997 and
1996, and the related statements of operations, stockholders' equity, and cash
flows for the two month period ended February 28, 1998 and for the years ended
December 31, 1997, 1996 and 1995 from inception on May 18, 1987 through February
28, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Asphalt Associates, Inc. (a
development stage company) as of February 28, 1998 and December 31, 1997 and
1996, and the results of its operations and its cash flows for the two month
period ended February 28, 1998 and for the years ended December 31, 1997, 1996
and 1995 and from inception on may 18, 1987 through February 28, 1998 in
conformity with generally accepted accounting principles.
38
<PAGE>
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/S/
Jones, Jensen & Company
March 17, 1998
39
<PAGE>
<TABLE>
<CAPTION>
ASPHALT ASSOCIATES, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
February 28, December 31,
------------------------------------------
1998 1997 1996
------------------- ------------------ -------------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 2,382 $ 2,682 $ 2,950
------------------- ------------------ -------------------
Total Current Assets 2,382 2,682 2,950
------------------- ------------------ -------------------
TOTAL ASSETS $ 2,382 $ 2,682 $ 2,950
=================== ================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ - $ - $ -
------------------- ----------------- --------------------
Total Current Liabilities - - -
------------------- ----------------- --------------------
STOCKHOLDERS' EQUITY
Common stock: 20,000,000 shares
authorized of $0.001 par value, 990,000
shares issued and outstanding
990 990 990
Additional paid-in capital 2,970 2,970 2,970
Deficit accumulated during the (1,578) (1,278) (1,010)
development stage ------------------- ----------------- --------------------
Total Stockholders, Equity 2,382 2,682 2,950
------------------- ----------------- --------------------
TOTAL LIABILITIES AND $ 2,382 $ 2,682 $ 2,950
STOCKHOLDERS EQUITY =================== ================== ====================
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
ASPHALT ASSOCIATES, INC.
(A Development Stage Company)
Statement of Operations
From
For the Two Inception on
Months Ended For the Years Ended May 18, 1987
February 28, December 31, Through
1998 February 28, 1998
----------- -------------------------------------------------- -----------------
1998 1997 1996 1995 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES $ $ $ $ $
------------ ------------ ------------ ------------ ------------
EXPENSES
General and Administrative 300 268 355 -- 1,578
------------ ------------ ------------ ------------ ------------
Total Expenses 300 268 355 -- 1,578
------------ ------------ ------------ ------------ ------------
NET LOSS $ (300) $ (268) $ (355) $ -- $ (1,578)
============ ============ ============ ============ ============
LOSS PER SHARE OF COMMON
STOCK $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============ ============ ============ ============
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
ASPHALT ASSOCIATES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
Additional Deficit
Paid-In Accumulated
Capital During the
Common Stock Development
Shares Amount Stage
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, May 18, 1987 - $ - $ - $ -
Common stock issued for cash 980,000 980 2940 -
$0.004 per share
Common stock issued for services 10,000 10 30 -
at $0.004 per share
Net loss from inception to
December 31, 1994 (655)
---------- ---------- ---------- ----------
Balance, December 31, 1994 990,000 990 2,970 (655)
Net loss for the year ended
December 31, 1995
---------- ---------- ---------- ----------
Balance, December 31, 1995 990,000 990 2,970 (655)
Net loss for the year ended
December 31, 1996 (355)
---------- ---------- ---------- ----------
Balance December 31, 1996 990,000 990 2970 (1,010)
Net loss for the year ended
December 31, 1997 (268)
---------- ---------- ---------- ----------
Balance, December 31, 1997 990,000 990 2,970 (1,278)
Net loss for the two months
ended February 28, 1998 (300)
---------- ---------- ---------- ----------
Balance, February 28, 1998 990,000 $ 990 $ 2,970 (1,578)
========== ========== ========== ==========
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
ASPHALT ASSOCIATES, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception
For the Two on May 18, 1987
Months Ended Through
February 28, For the Years Ended December 31, February 28, 1998
1998 1997 1996 1995 1998
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss from operations $ (300) $ (268) $ (355) $ (-) $ (1,578)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Stock issued for services 40
---------- ---------- ----------- ---------- ----------
Net Cash Used by Operating
Activities $ (300) $ (268) $ (355) $ (1,538)
---------- ---------- ----------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
---------- ---------- ----------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Common stock issued for cash
3,920
---------- ---------- ----------- ---------- ----------
Net Cash Provided by
Financing Activities 3,920
---------- ---------- ----------- ---------- ----------
NET INCREASE (DECREASE IN
CASH AND CASH EQUIVALENTS)
(300) (268) (355) - 2,382
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
2,682 2,950 3,305 3,305
---------- ---------- ----------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD
$ 2,382 $ 2,682 $ 2,950 $ 3,305 $ 2,382
========== ========== ========== ========== ==========
CASH PAID FOR
Interest $ - $ - $ - $ - $ -
Income Taxes $ - $ - $ - $ - $ -
</TABLE>
43
<PAGE>
ASPHALT ASSOCIATES, INC.
(A Development Stage Company)
Notes to the Financial Statements
February 28, 1998 and December 31, 1997 and 1996
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The company was incorporated in the State of Nevada on May 18,
1987.
The Company was organized for the purpose of engaging in any
lawful activity and is classified as a development stage
company.
(b) Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a
calendar year end.
(c) Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
(d) Loss per Share
The computations of loss per share of common stock are based
on the weighted average number of shares outstanding during
the period of the financial statements.
(e) Provision for Taxes
At December 31, 1997, the Company has net operating loss carry
forwards totaling approximately $1,500 that may be offset
against future taxable income through 2012. No tax benefit has
been reported in the 1997 financial statements, because the
Company believes there is a 50% or greater chance the net
operating loss carry forwards will expire unused. Accordingly,
the potential tax benefits of the loss carry forwards are
offset by a valuation allowance of the same amount.
44
<PAGE>
(f) Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Note 2. GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has little cash and has experienced losses from
inception. Without realization of additional adequate financing, it would be
unlikely for the Company to continue as a going concern. The Company intends to
seek a merger with an existing operating company. Until that time, management
has committed to cover all operating costs of the Company.
45
<PAGE>
Pacific WebWorks, Inc.
(Formerly Asphalt Associates, Inc.)
(a Development Stage Company)
Financial Statements
December 31, 1998 and 1997
46
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Pacific WebWorks, Inc. (formerly Asphalt Associates, Inc.)
We have audited the accompanying balance sheet of Pacific WebWorks, Inc., (a
Development Stage Company) as of December 31, 1998 and the related statement of
operations, stockholders' equity and cash flows for the year then ended and from
inception on May 18, 1987 through December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
financial statements of Pacific WebWorks, Inc. for the period from inception at
May 18, 1997 through December 31, 1997 were audited by other auditors whose
report dated March 17, 1998, expressed an unqualified opinion on these
statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pacific WebWorks, Inc. (a
Development Stage Company) as of December 31, 1998 and the results of its
operations and cash flows for the year then ended and from inception on May 18,
1987 through December 31, 1998 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company with no
significant operating results to date. These conditions raise substantial doubt
about its ability to continue as a going concern. Management's plan in regard to
these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
CROUCH, BIERWOLF & CHISHOLM
Salt Lake City, Utah
February 9, 1999
47
<PAGE>
CONTENTS
Independent Auditor's Report..................................................47
Balance Sheets................................................................49
Statements Of Operations......................................................50
Statement Of Stockholders' Equity.............................................51
Statement Of Cash Flows.......................................................52
Notes To The Financial Statements.............................................53
48
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
(Formerly Asphalt Associates, Inc.)
(a Development Stage company)
Balance Sheets
Assets
December 31
1998 1997
----------- --------
<S> <C> <C>
Current assets
Cash $ $ 2,682
Cash in escrow (Note 6) 750,000 -
Current notes receivable (Note 3) 250,000 -
----------- --------
Total Assets $1,000,000 $ 2,682
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ $
Total liabilities - -
Stockholders' Equity
Common Stock, authorized 50,000,000 shares of $.001 par value,
issued and outstanding 5,000,000 shares and 3,960,000 shares
issued and outstanding, respectively
5,000 3,960
----------- --------
Additional Paid-in Capital 1,018,960
----------- --------
Deficit Accumulated During the Development Stage (23,960) (1,278)
----------- --------
Total Stockholders' Equity 1,000,000 2,682
----------- --------
The accompanying notes are an integral part of these financial statements.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
(Formerly Asphalt Associates, Inc.)
(a Development Stage company)
Statements of Operations
From inception On
May 18, 1987 through
December 31,
For the years ended December 31,
1998 1997 1996 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $ $ $ $
Expenses:
General &
Administrative 22,682 268 355 23,960
------------- ------------- ------------- ------------
Total Expenses 22,682 268 355 23,960
------------- ------------- ------------- ------------
Net Loss $ (22,682) $ (268) $ (355) $ (23,960)
------------- ------------- ------------- ------------
Net Loss Per Share
$ (.01) $ (0.00) $ (0.00) $ (0.01)
------------- ------------- ------------- ------------
Weighted average
shares outstanding
4,003,000 3,960,000 3,960.000 3,968,000
------------- ------------- ------------- ------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
(Formerly Asphalt Associates, Inc.)
(a Development Stage company)
Statement of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount Capital Stage
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, May 18, 1997 $ $ $ $
Common stock issued for cash at $0.01
per share 3,920,000 3,920 - -
Common stock issued for services at
$0.01 per share 40,000 40 - -
Net loss from inception to December
31, 1994 (655)
------------- ------------- ------------- -------------
Balance, December 31, 1994 3,960,000 3,960 - (655)
Net Loss for the year ended December
31, 1995 - - - -
------------- ------------- ------------- -------------
Balance December 31, 1995 3,960,000 3,960 - (655)
Net Loss for the year ended December
31, 1996 (355)
------------- ------------- ------------- -------------
Balance, December 31, 1996 3,960,000 3,960 - (1,010)
Net Loss for the year ended December
31, 1997 (268)
------------- ------------- ------------- -------------
Balance, December 31, 1997 3,960,000 3,960 - (1,278)
December 1998 - shares issued for
services at $.10 per share 200,000 200 19,800 -
December 1998 - shares issued for
cash at $1.1905 per share 840,000 840 999,160 -
Net Loss for the year ended December
31, 1998 (22,682)
------------- ------------- ------------- -------------
Balance December 31, 1998 5,000,000 5,000 1,018,960 (23,960)
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
(Formerly Asphalt Associates, Inc.)
(a Development Stage company)
Statement of Cash Flows
From Inception
May 18, 1987
For the years ended December 31, through
December 31,
1998 1997 1996 1998
------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Cash flows form Operating Activities:
Loss from operations $ (22,682) $ (268) $ (355) $ (23,960)
Adjustments to reconcile net loss to
net cash used by operating activities:
Stock issued for services 20,000 - - 20,040
------------------- ----------------- ------------------- -------------------
Net Cash Provided (Used) by Operating
Activities (2,682) (268) (355) (3,920)
------------------- ----------------- ------------------- -------------------
Cash Flows from Investment Activities:
Cash held in escrow (750,000) - - (750,000)
Cash paid for notes receivable (250,000) - - (250,000)
------------------- ----------------- ------------------- -------------------
Net Cash paid for Investing Activities
(1,000,000) - - (1,000,000)
------------------- ----------------- ------------------- -------------------
Cash flows from Financing Activities:
Common stock issued for cash 1,000,000 - - 1,003,920
------------------- ----------------- ------------------- -------------------
Net cash provided by financing
activities 1,000,000 - - 1,003,920
------------------- ----------------- ------------------- -------------------
Net increase (decrease) in cash (2,682) (268) (355) -
Cash beginning of year 2,682 2,950 3,305 -
------------------- ----------------- ------------------- -------------------
Cash end of year - 2,682 2,950 -
------------------- ----------------- ------------------- -------------------
Cash paid during the year for:
Interest - - - -
Income taxes - - - -
The accompanying notes are an integral part of these financial statements.
</TABLE>
52
<PAGE>
Notes to the Financial Statements
December 31, 1998 and 1997
Note 1 - Summary of Significant Accounting Policies
g. Organization
The Company was incorporated in the State of Nevada on May 18, 1987 as Asphalt
Associates, Inc. On December 3, 1998 the Board of Directors changed to the name
of the company to Pacific WebWorks, Inc. The Company was organized for the
purpose of engaging in any lawful activity and is classified as a development
stage company. The Company has been inactive since inception and has yet to
secure business operations.
h. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a calendar year end.
i. Cash and Cash Equivalents
Cash equivalents include short-term highly liquid investments with maturities of
three months or less at the time of acquisition.
j. Loss Per Share
The computations of loss per share of common stock are based on the weighted
average number of outstanding shares during the period of the financial
statements.
k. Provision for Income Taxes
At December 31, 1998, the company has net operating loss carryforwards totaling
approximately $24,000 that may be offset against future taxable income through
2012. No tax benefit has been reported in the 1998 financial statements, because
the Company believes there is a 50% or greater chance the net operating loss
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.
l. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimate.
53
<PAGE>
Pacific WebWorks, Inc.
(Formerly Asphalt Associates, Inc.)
(a Development Stage company)
Note 2 - Going Concern
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has experienced losses from inception. The
Company secured a merger with an existing operating company. (See subsequent
events Note 5). Through this merger management plans to generate sufficient
revenues to cover anticipated costs. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Note 3 - Notes Receivable
Pursuant to the merger agreement described in Note 4, the Company loaned
$250,000 to Utah WebWorks, Inc. as an interest free 30 day note to be converted
to the Company's investment in this subsidiary upon the merger of the Company.
Note 4 - Subsequent Events
Effective January 11, 1999, the company entered into an agreement and Plan of
Reorganization with Utah WebWorks, In., (a private company). The agreement
provides for the merger of the Company into Utah WebWorks to be treated as a
reverse merger, thus making Utah WebWorks the accounting survivor. Pursuant to
the agreement the Company issued 5,000,000 shares of common stock to the
shareholder of Utah WebWorks for all shares of their company. The management of
the Company resigned and the management and board of Utah WebWorks filled the
vacancy. Utah WebWorks is in the business of software development for computer
and internet systems.
Note 5 - Shareholders Equity
In December 1998 the board of directors authorized the issuance of 840,000 (post
split) restricted shares for $1,000,000 in cash from accredited investors and
$200,000 for services rendered to the Company.
On December 31, 1998, the Board of Directors authorized a four for one for the
forward stock split. All per share information in these financial statements
have been retroactively restated to reflect the split. The Board also authorized
a change of the Company's authorized capital to 50,000,000 shares.
54
<PAGE>
Note 6 - Cash in Escrow
Pursuant to the merger agreement an escrow account has been established wherein
investors have placed $1,000,000. $250,000 were disbursed to Utah WebWorks in
December 1998, and the remainder is scheduled to be advanced to the merged
entity through the next nine months. As of February 10, 1999, an additional
$130,000 was distributed from the escrow account.
55
<PAGE>
Pacific WebWorks, Inc.
Financial Statements
(Unaudited)
For the six months and the three months ending June 30, 1999 and 1998
56
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
Balance Sheets
(unaudited)
Assets
As of June 30,
1999 1998
--------------------------- -----------------------------
<S> <C> <C>
Current Assets
Cash 140,141 21,393
Accounts Receivable (net of allowance of $6,600 and $2,545
respectively) 45,680 36,381
Employee Receivable 338 2,436
--------------------------- -----------------------------
Total Current Assets 186,159 60,210
Property and Equipment 111,294 25,821
Other Assets
Deposits 5,250 4,600
Purchased Computer Software 4,333 8,833
--------------------------- -----------------------------
Total Assets 307,036 99,464
=========================== =============================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 13,401 6,709
Accrued Expenses 7,584 8,300
Notes Payable - 131,708
--------------------------- -----------------------------
Total Current Liabilities 20,985 146,717
Stockholders' Equity
Common Stock, authorized 50,000,000 shares of $.001 par
value, issued and outstanding 10,000,000 and 1,000
respectively 10,840 1
Additional Paid in Capital 999,160 9,999
Retained Deficit (723,949) (57,253)
--------------------------- -----------------------------
Total Stockholder's Equity 286,051 (47,253)
Total Liabilities and Stockholders' Equity 307,036 99,464
=========================== =============================
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
Statement of Operations
(unaudited)
For the Six Months Ended For the Three Months Ended
June 30, June 30,
1998 1999 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues: 150,390 39,130 81,217 34,631
Cost of Sales 84,097 11,369 47,767 10,093
Gross Margin 66,293 27,761 33,450 24,438
Expenses:
General and administrative 36,045 323,357 20,474 214,123
Sales 13,431 103,862 7,629 68,776
Development 5,318 105,274 3,020 69,711
--------- --------- --------- ---------
Total Expenses 54,794 532,493 31,123 352,610
Income (Loss) from Operations 11,499 (504,732) 2,327 (328,072)
Other Income (Expenses)
Interest Expense
Other ___ ___ ___ ___
Net Income (Loss) 11,499 (504,732) 2,327 (328,072)
====== ========= ===== =========
Net Income (Loss) Per Share 0.002 (0.055) 0.000 (0.036)
Weighted average shares
outstanding 5,001,000 9,166,667 5,001,000 9,166,667
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Pacific WebWorks, Inc.
Statement of Cash Flows
(unaudited)
For the Six Months Ended
June 30,
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income 2,327 (328,072)
Adjustments to reconcile net income (loss) to net cash
provided by operations
Depreciation and Amortization 10,703 4,031
Bad Debt - -
Change in assets and liabilities:
Accounts Receivable (34,791) (9,706)
Accounts Payable and Accrued Expenses 5,798 (933)
--------- ---------
Net Cash Flows from Operating Activities (15,963) (334,680)
Cash Flows from Investing Activities:
Cash paid for fixed assets (96,144) (12,144)
Cash paid for deposits - (4,600)
Cash paid for purchased software - -
Cash acquired in Acquisition 750,000
--------- ---------
Net Cash Flows from Investing Activities 653,856 (16,744)
Cash Flows from Financing Activities:
Cash from debt financing 250,000 (103,902)
Issuance of Stock - -
Principle Payments on Debt financing (250,000) 131,708
Net Cash Flows from Financing Activities - 27,806
Net increase (decrease) in cash 637,893 (323,618)
Cash, beginning of period 9,306 5,440
--------- ---------
Cash end of period 647,199 (318,178)
========= ========
</TABLE>
59
<PAGE>
Pacific WebWorks, Inc.
Notes to Financial Statements
June 30, 1999
(unaudited)
Note 1 - Reverse Merger
Effective January 11, 1999, Pacific Webworks, Inc. (a public Company) entered
into an agreement and Plan of Reorganization with Utah WebWorks, Inc., (a
private company). The agreement provides for the merger of the Company into Utah
WebWorks to be treated as a reverse merger, thus making Utah WebWorks the
accounting survivor. Pursuant to the agreement the Company issued 5,000,000
shares of common stock to the shareholders of Utah WebWorks for all shares of
their Company. Because the historical financial information in these financial
statements prior to the reverse merger (January 11, 1999) is that of the
accounting acquirer (Utah Webworks), a reverse merger adjustment is used on the
statement of stockholders' equity to bring the pre-merger equity of Utah
Webworks up to the consolidated post-merger equity of Pacific Webworks. The
actual shares issued by the Company to the Utah Webworks shareholders was
5,000,000 shares. The difference between the 5,000,000 shares issued to the Utah
Webworks shareholders and the 9,999,000 reverse merger adjustment represents the
4,999,000 shares held by the original pre-merger shareholder of the public
company (Pacific). The management of the Company resigned and the management and
board of Utah WebWorks filled the vacancy. Utah WebWorks is in the business of
software development for computer and internet systems. The Company had cash in
escrow of $750,000 and a note receivable from Utah WebWorks of $250,000 as its
only assets. The cash and note receivable were contributed to Utah WebWorks as
an investment in subsidiary advanced for operations.
At December 31, 1998 the Company had outstanding warrants to purchase 400,000
shares of the Company's common stock at prices ranging from $2.50 to $6.00 per
share. The warrants became exercisable in January 1999 and expire in January
2004. The warrants are exercisable as follows:
150,000 warrants at $2.50
100,000 warrants at $3.50
150,000 warrants at $4.50
50,000 warrants at $6.00
The fair value of the warrants granted during 1998 were determined using the
Black-Schole option pricing model with the following assumptions: risk-free
interest rates of 6.02%, expected option life of 5 years; and volatility of 500%
with no dividend yield expected. The fair value of the warrants issued total $0.
The stock price upon date of issuance was determined to be $10 per share.
Note 2 - Unaudited Information
60
<PAGE>
Pacific WebWorks, Inc. (the Company) has elected to omit substantially all
footnotes to the financial statements for the six months ended June 30, 1999.
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all adjustments which
are, in the opion of management, necessary to properly reflect the results of
the six months ended June 30, 1999. The information presented is not necessarily
indicative of the results form operations expected for the full fiscal year.
Note 3 - Consolidation Policy
The June 30, 1999 unaudited financial statements are consolidated, to include
the books of Pacific WebWorks, Inc. (Utah) and its parent Pacific WebWorks, Inc.
(Nevada). All inter-company accounts have been eliminated in the consolidation.
61
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits
Exhibit Number Description
2.1* Articles of Merger for Asphalt Associates, Inc., dated
January 6, 1999
2.2* Agreement and Plan of Merger between Asphalt Associates,
Inc., and Utah WebWorks, Inc., dated January 11, 1999
3.1* Articles of Incorporation of Asphalt Associates, Inc.
3.2* Amended and Restated Bylaws of Pacific WebWorks, Inc.
10.1* Master Service Agreement between Electric Lightware,
Inc. and Utah WebWorks, Inc., dated February 2, 1998
10.2* Internet Access Agreement, Addendum to Master Service
Agreement between Electric Lightwaew, Inc. and Utah
WebWorks, Inc., dated February 2, 1998
10.3* Form of Employment Agreement
10.4* Development, License and Service Agreement between
American Home Business Association and Utah WebWorks,
Inc., dated April 15, 1999
10.5* Form of Reseller Agreement
10.6* Lease Agreement between Utah WebWorks and Westgate
Business Center dated January 11, 1999
10.7* Letter Agreement between Utah WebWorks, Inc. and
IntelliPay, Inc.
10.8* Consulting Agreement between Columbia Financial Group
and Pacific WebWorks, Inc., dated January 26, 1999
10.9* Strategic Reseller Agreement with U.S. Merchant Systems
10.10* Amended Form of Reseller Agreement
10.11* Promissory Note issued to Capital Communications, Inc.
11.1* Statement re computation of earnings per share
12.1* Statement re computation of ratios
27.1 Financial Data Schedule June 30, 1999 Update
*Previously Filed
62
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, who is duly authorized.
Date: October 7, 1999 Pacific WebWorks, Inc.
By: /s/
_______________________________
Christian Larsen, President
63
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001086303
<NAME> PACIFIC WEBWORKS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1.0
<CASH> 140,141
<SECURITIES> 0
<RECEIVABLES> 46,018
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 186,159
<PP&E> 134,954
<DEPRECIATION> 23,660
<TOTAL-ASSETS> 307,036
<CURRENT-LIABILITIES> 20,985
<BONDS> 0
0
0
<COMMON> 10,840
<OTHER-SE> 275,211
<TOTAL-LIABILITY-AND-EQUITY> 307,036
<SALES> 39,130
<TOTAL-REVENUES> 39,130
<CGS> 11,369
<TOTAL-COSTS> 532,493
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (504,732)
<INCOME-TAX> 0
<INCOME-CONTINUING> (504,732)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (504,732)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
