SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Quarter Ended: June 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 000-26731
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 principal executive offices and
principal place of business)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
As of August 7, 2000, the Registrant had a total of 14,240,342 shares of
common stock issued and outstanding.
<PAGE>
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements.............................................3
Item 2: Management's Discussion and Analysis or Plan of Operations.......10
PART II: OTHER INFORMATION
Item 2: Changes in Securities and Use of Proceeds.........................14
Item 5: Other Events......................................................14
Item 6: Exhibits and Reports filed on Form 8-K ..........................15
Signatures................................................................16
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Accounting Changes
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB 101 clarifies application of generally accepted accounting
principles to revenue transactions. The Company changed its accounting method
during the third quarter 2000 to conform to the views of the SEC staff as
documented in SAB 101. The change involves that of accounting for up-front
fees and, in accordance with SAB 101, the company is amortizing such fees over
one year, which generally represents the longer of the contractual period or
the expected life of the customer relationship. There is no cumulative effect
adjustment for the change in the first quarter 2000 as there were not
significant up-front fees relating to the change prior to January 1, 2000.
Pursuant to this new accounting policy the company has deferred revenue of
$3,345,896 at June 30, 2000 some of which was reported as revenues in prior
quarters. The Company has also deferred costs paid in connection with the
deferred revenues and has recorded prepaid expenses of $363,509 at June 30,
2000. We have revised our financial statements and amended the discussions in
the "Management's Discussion and Analysis" to reflect the revised financials.
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Pacific Webworks, Inc.
And Subsidiaries
Consolidated Financial Statements
June 30, 2000
<PAGE> 4
Pacific Webworks, Inc.
Consolidated Balance Sheets
June 30 December 31
2000 1999
------------- -------------
(Unaudited)
Assets
Current Assets (unaudited)
Cash and Cash Equivalents $ 180,522 $ 153,898
Accounts Receivable (net of allowance of
$12,798 and $3,798, respectively) 213,309 101,429
Employee Receivable 3,454 4,578
Prepaid Expenses 363,509 16,333
Accounts Receivable - Related Party - 6,800
Notes Receivable - Related Party - 166,046
Note Receivable - -
------------- -------------
Total Current Assets 760,794 449,084
------------- -------------
Property and Equipment 351,286 171,393
------------- -------------
Other Assets
Goodwill, net 4,522,609 -
Deposits 5,250 5,250
Computer Software Costs 411,740 4,832
------------- -------------
Total Other Assets 4,939,599 10,082
------------- -------------
Total Assets $ 6,051,679 $ 630,559
============= =============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 603,289 74,550
Accrued Expenses 218,955 70,177
Notes Payable 233,585 500,000
Deferred Revenue 3,345,896 -
------------- -------------
Total Current Liabilities 4,401,725 644,727
Minority Interest - -
------------- -------------
Stockholders' Equity
Common Stock, authorized 50,000,000 shares of no
par value, issued and outstanding 14,240,342 and
10,395,679 shares 14,241 10,396
Deferred Compensation - (13,216)
Paid in Capital 9,138,275 2,775,404
Retained Deficit (7,502,562) (2,786,752)
------------- -------------
Total Stockholders' Equity 1,649,954 (14,168)
------------- -------------
Total Liabilities and Stockholders' Equity $ 6,051,679 $ 630,559
============= =============
F-2
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Pacific WebWorks, Inc.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30 June 30 June 30 June 30
2000 1999 2000 1999
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 1,217,867 $ 34,631 $ 1,590,839 $ 39,130
COST OF GOODS SOLD 30,671 10,093 96,362 11,369
------------- ------------ ------------ ------------
GROSS PROFIT 1,187,196 24,538 1,494,477 27,761
------------- ------------ ------------ ------------
OPERATING EXPENSES
General And Administrative
Expenses 896,440 251,792 1,604,754 356,584
Sales 2,334,386 68,776 3,765,779 103,862
Research and Development 317,284 28,280 398,400 63,843
------------- ------------ ------------ ------------
TOTAL OPERATING EXPENSES 3,548,110 348,848 5,768,933 524,289
------------- ------------ ------------ ------------
OPERATING INCOME (LOSS) (2,360,914) (324,310) (4,274,456) (496,528)
------------- ------------ ------------ ------------
OTHER INCOME AND (EXPENSES)
Amortization (317,058) (261,324) (333,608) (1,323,641)
Depreciation (31,126) (3,761) (47,419) (8,203)
Interest Expense (45,112) - (60,327) -
Minority Interest - - - -
------------- ------------ ------------ ------------
Total Other Income and (Expenses) (393,296) (265,085) (441,354) (1,331,844)
------------- ------------ ------------ ------------
NET INCOME (LOSS) $ (2,754,210) $ (589,395) $(4,715,810) $(1,828,372)
============= ============ ============ ============
NET INCOME (LOSS) PER SHARE (0. 21) (0.07) (0.41) (0.22)
============= ============ ============ ============
WEIGHTED AVERAGE NUMBER OF 12,865,231 8,333,500 11,632,786 8,333,500
COMMON SHARES ============= =========== ============ ============
F-3
</TABLE>
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Pacific WebWorks, inc.
Consolidated Statements of Cash Flows (Unaudited)
For the six months ended
June 30 June 30
2000 1999
------------- -------------
Cash Flows From Operating Activities
Net income (loss) $ (4,715,810) $ (1,828,372)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities
Depreciation & Amortization 381,027 10,703
Bad Debt 18,000 -
Minority Interest - -
Loss on Investments 25,000 -
Change in Assets and Liabilities (Net of
effects of acquisition of WCN)
(Increase) Decrease in:
Accounts Receivable (77,442) (35,288)
Other Receivables 1,124 498
Prepaid Expenses (347,176) -
Increase/(decrease) in:
Accounts Payable and Accrued Expenses 148,231 5,796
Deferred Expenses - (400,659)
Deferred Revenue 3,098,396 -
------------- -------------
Net Cash Provided (Used) by Operating Activities (1,468,650) (2,247,322)
------------- -------------
Cash Flows from Investing Activities
Cash paid for Notes Receivable - -
Purchase of Property and Equipment (110,461) (96,144)
Cash paid for deposits (500) -
Cash acquired in acquisition 9,718 750,000
------------- -------------
Net Cash Provided (Used) by Investing Activities (101,243) 653,856
------------- -------------
Cash Flows from Financing Activities
Proceeds from debt financing 597,446 210,000
Principal payments on debt financing (929) (210,000)
Proceeds from Issuance of Stock 1,000,000 -
Warrants issued for services - 1,724,300
------------- -------------
Net Cash Provided (Used) by Financing Activities 1,596,517 1,724,300
------------- -------------
Net increase (Decrease) in Cash and
Cash Equivalents 26,624 130,834
------------- -------------
Cash and Cash Equivalents
Beginning of Period 153,898 9,306
------------- -------------
Cash and Cash Equivalents
End of Period $ 180,522 $ 140,140
============= =============
F-4
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Pacific Webworks, Inc.
June 30, 2000
NOTES TO FINANCIAL STATEMENTS
Pacific Webworks, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the six months
ended June 30, 2000, since there have been no material changes (other than
indicated in other footnotes) to the information previously reported by the
Company in their Annual Report filed on Form 10-K for the fiscal year ended
December 31, 1999.
UNAUDITED INFORMATION
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 period presented. The information presented is not
necessarily indicative of the results from operations expected for the full
fiscal year.
ACQUISITION OF WORLD COMMERCE NETWORK, LLC
Effective January 1, 2000, the Company issued 4,663 shares of its
common stock to U.S. Merchant Systems, Inc. for 1% of the outstanding stock of
World Commerce Network, LLC. (WCN) The shares were valued at $9,180. The
issuance increases the Company's ownership in WCN to 51% and WCN therefore
becomes a subsidiary of the Company. The operations of WCN have been
consolidated with the Company's operations effective January 1, 2000. Prior
to the additional 1% purchase, the Company owned 50% of WCN and recorded its
investment using the equity method. The balance at December 31, 1999 was $0.
ACQUISITION OF INTELLIPAY, INC.
On April 4, 2000, the Company completed an Agreement and Plan of
Reorganization between Pacific Webworks, Inc. a public Nevada corporation (the
Company) and Intellipay, Inc. a private Delaware corporation (Intellipay).
The Company issued 2,400,000 shares of common stock valued at $4,320,000 for
all of the outstanding shares of Intellipay. Thereby Intellipay became a
wholly owned subsidiary of the Company. The transaction was recorded using the
purchase method of accounting.
F-5
<PAGE> 8
Pacific Webworks, Inc.
June 30, 2000
COMMON STOCK
On June 30, 2000, the Company's $1,000,000 notes payable and $37,536
accrued interest were converted to 1,040,000 shares of common stock at $1.00
per share.
REVENUE RECOGNITION
The company receives revenue from the sales of access to its web-based
applications, the performance of consulting and training and from the
continual hosting of its client's web sites. The initial term of all
agreements into which the company enters with its clientele for its web-based
applications is one year. The revenues related to these contracts are,
therefore, recognized ratably over the initial term of the contract. The
monthly charges related to hosting and gateway access are recognized when
billed in accordance with SOP 97-2. Any additional consulting fees or
training fees, outside of the initial contract, related to any Visual WebTools
products are recognized as the service is delivered.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB 101 clarifies application of generally accepted accounting
principles to revenue transactions. The Company changed its accounting method
during the third quarter 2000 to conform to the views of the SEC staff as
documented in SAB 101. The change involves that of accounting for up-front
fees and, in accordance with SAB 101, the company is amortizing such fees over
one year, which generally represents the longer of the contractual period or
the expected life of the customer relationship. There is no cumulative effect
adjustment for the change in the first quarter 2000 as there were not
significant up-front fees relating to the change prior to January 1, 2000.
Pursuant to this new accounting policy the company has deferred revenue of
$3,345,896 at June 30, 2000, some of which was reported as revenues in prior
quarters. The Company has also deferred commissions paid in connection with
the deferred revenues and has recorded prepaid expenses of $363,509 at June
30, 2000.
F-6
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In this report references to "Pacific WebWorks," "we," "us," and "our"
refer to Pacific WebWorks, Inc.
FORWARD LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-Q that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate," or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Pacific WebWork's control. These factors include but are not limited to
economic conditions generally and in the industries in which Pacific WebWorks
may participate; competition within Pacific WebWork's chosen industry,
including competition from much larger competitors; technological advances and
failure by Pacific WebWorks to successfully develop business relationships.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
Pacific WebWorks develops business software technologies for Internet
merchants and its wholly-owned subsidiary, IntelliPay, Inc., provides online,
secure, and real-time payment processing. Pacific WebWorks also owns World
Commerce Network, LLC, which promotes and sells products from Pacific
WebWorks, U.S. Merchant Systems, and IntelliPay Inc.
For the six month period ended June 30, 2000, Pacific WebWorks recorded
revenues of $1,590,839. This was a significant increase compared to the
$39,130 in revenues for the six month period ended June 30, 1999. Our net
loss was $2,754,210, or $0.21 per share, for the second quarter of 2000
compared to $589,395, or $0.071 per share, for the second quarter of 1999.
Revenues were low in 1999 because we did not have significant sales of our
products until the third quarter of 1999.
We have posted net losses from our inception and our independent auditors
reported that this history of losses raised doubts about our ability to
continue as a going concern without financing. Management has taken several
steps to restructure our operations with the intent to generate profits within
the next quarter. These steps include consolidation of operations of Pacific
WebWorks and its related companies, reductions in the number of employees, and
continued growth of our sales and marketing channels. Management believes our
current and developing sales channels will be sufficient to support our
existing operations for the short term. Sales projections may be down
throughout the remainder of fiscal 2000 due to the alteration of our
short-term goals.
Acquisitions.
In March of 2000 we acquired an additional 1% interest in World
Commerce Network LLC, a marketing company we formed to promote and sell
products from Pacific WebWorks, U.S. Merchant Systems, and IntelliPay, Inc.
This additional 1% gave us a 51% total interest in World Commerce Network. In
August of 2000, we acquired the remaining 49% of World Commerce Network. Our
initial intent was to partner with companies having experience in seminar
marketing. We believed this would allow us to enter the market quickly and
efficiently by minimizing the time required to develop an effective seminar
marketing strategy and presentation. Management believes World Commerce
Network will continue to improve our revenue generation through the
acquisition of new merchants and through resale opportunities to existing
merchants. World Commerce Network has recently begun an Internet Business
seminar series offering affiliate opportunities to distribute products of
Pacific WebWorks, U.S. Merchant Systems and IntelliPay. World Commerce
Network anticipates it will be able to present Pacific WebWorks products to
over 500 potential purchasers and affiliates during each week of seminars.
On April 4, 2000, we signed a reorganization agreement to acquire all of
the outstanding shares of IntelliPay, Inc., a Delaware corporation. We issued
2,400,000 common shares, valued at $8,400,000, in exchange for 1000 shares of
IntelliPay held by 18 shareholders. IntelliPay became our wholly owned
subsidiary. We have been
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involved in a joint venture with IntelliPay to establish MainStreetSquare.com,
an online shopping portal. Management believes this acquisition will combine
merchant bases of Pacific WebWorks and IntelliPay, which opens up marketing
and revenue opportunities. In addition, IntelliPay will become a key source
of payment technologies for future products of Pacific WebWorks.
Results of Operations.
The following table summarizes the results of our operations for the
three and six months ended June 30, 2000 and 1999. The following discussions
are based on consolidated financial statements of Pacific WebWorks and its
wholly owned subsidiary IntelliPay and include the consolidation of former 51%
interest in World Commerce Networks.
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Sales $ 1,217,867 $ 34,631 $ 1,590,839 $ 39,130
Cost of Goods Sold 30,671 10,093 96,362 11,369
Gross Profit 1,187,196 24,538 1,494,477 27,761
Operating Expenses
General & Administrative 896,440 251,792 1,604,754 356,584
Sales 2,334,386 68,776 3,765,779 103,862
Research and Development 317,284 28,280 398,400 63,843
Total Operating Expenses 3,548,110 348,848 5,768,933 524,289
Net Income (Loss) $(2,754,210) $ (589,395) $(4,715,810) $(1,828,372)
We receive revenues from the sale of access to our software technology
sold by us or by all our resale channels. We also receive revenues from
services provided for website design, training, education and consulting.
During the first quarter we began seeing significant revenues from our joint
venture in World Commerce Network. The success of the initial seminars
conducted early in the first quarter of 2000 led us to expand our seminar
funding to include a second team. Seminars conducted by our second team began
late in the first quarter of 2000. We determined during the second quarter,
the increased benefit of having a partner process all of the lease
documentation and merchant account paperwork was minimized by the difficulties
involved with remote operations. Revenue growth fell short of initial
projections because of the difficulties in getting clients to expedite the
paperwork required for processing their merchant accounts, and leases. We
agreed with our partner, U.S. Merchant Systems, to complete our scheduled
seminars and then Pacific WebWorks would assume the outstanding ownership of
World Commerce Network held by US Merchant Systems and continue forward with
World Commerce Network operations. We discontinued the second team as of
mid-July. We anticipate beginning seminar operations again in September for
one team. We continue to focus on sales growth through all other channels.
Revenue is recognized ratably over the term of the merchant agreement.
Only after merchant account approval and lease funding is revenue recognized.
We generated $ 1,217,867 in sales for the 2000 quarter, compared to $ 34,631
in the same quarter of 1999. Annual revenues as of June 30, 2000 showed
extraordinary growth from $ 39,130 in 1999 to $ 1,590,839 in 2000. This
completes our sixth straight quarter of significant revenue growth. This
growth is due to our marketing efforts through World Commerce Network and the
continued growth of our existing sales channels.
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Cost of goods sold for the second quarter of 2000 decreased to 2.5% of
revenues compared to 29.1% of revenues for the comparable quarter of 1999.
Accordingly, cost of goods sold were 6.1% of revenues for the six month period
of 2000 compared to 29.0% of revenues for the 1999 six month period. The
decrease was primarily due to renegotiated lower prices for merchant accounts
and other third party products.
Our gross profit was 97.5% of revenues for the 2000 second quarter and
93.9% of revenues for the 2000 six month period, compared to 70.9% of revenues
for the 1999 second quarter and 71.0% of revenues for the 1999 six month
period.
Total operating expenses exceeded revenues by $2,330,243 for the 2000
second quarter and by $4,178,094 for the 2000 six month period compared to
$314,217 for the 1999 second quarter and $485,159 for the 1999 six month
period. Total operating expenses for the 2000 six month period included
$1,358,825 in expenses for Pacific WebWorks, $3,933,533 in expenses for World
Commerce Network and $476,575 in expenses for Intellipay.
Consolidated general and administrative costs increased $644,648 in the
second quarter of 2000 compared to the 1999 second quarter. The general and
administrative costs increased $1,248,170 for the 2000 six month period
compared to the 1999 six month period. Growth in general and administrative
costs is primarily attributed to the $693,665 overhead in World Commerce
Network.
Sales expenses, which include both sales and marketing expenses, grew
$2,265,610 in the 2000 second quarter over 1999 and $3,661,917 in the six
month period from the comparable six months in 1999. The 2000 six month period
increase included radio advertising on the Utah Jazz radio network, and direct
mail of approximately 100,000 mail pieces per week. Sales expenses grew due
to investments into World Commerce Network seminar teams and increased
commissions paid to existing Pacific WebWorks sales channels. Over $300,000
of expenses in World Commerce Network for the six month period were dedicated
to funding the second team.
Research and development expenses, including all costs for product
design, programming, and quality control were $289,004 higher for the 2000
second quarter and $334,557 higher for the 2000 six month period compared to
the 1999 second quarter and six month period. The costs were related to
research and development of IDDS , V4 , and BizWiz as well as the ongoing
development and improvements to the IntelliPay gateway.
Our net loss was 226.2% of revenues for the 2000 second quarter and
296.4% for the 2000 six month period compared to 1,701.9% of revenues for 1999
second quarter and 4,672.6% of revenues for the 1999 six month period. The
primary source of our losses relates to our investment in the growth of our
marketing subsidiary, World Commerce Network. Because the seminar expenses in
World Commerce Network were recognized in the period incurred and revenue is
recognized when earned, we expect a significant contribution of profitability
from World Commerce Network in our consolidated third quarter. During the
2000 six month period, the loss attributable to Pacific WebWorks operations
was $0.11 per share, the loss relating to World Commerce Network was $.208 per
share and the loss relating to IntelliPay was $.092 per share.
Liquidity and Capital Resources.
For the quarter ended June 30, 2000, we had $180,552 cash on hand with
total current assets of $760,794 compared to $153,898 cash on hand and total
current assets of $449,084 for the year ended December 31, 1999. 28.0% of the
total current assets for the 2000 six-month period was allocated to accounts
receivable. For the year ended 1999, 36.9% of the total current assets were
allocated to notes receivable from IntelliPay and 22.6% to accounts
receivable. The IntelliPay note receivable represents our commitments to
their operations both during the period we were discussing the potential
acquisition of their operations and the period immediately following the
acquisition. The acquisition was completed in the second quarter of 2000.
Total current liabilities increased $3,756,998 for the 2000 six-month
period from the 1999 year end. Of this total, $233,585 was a note payable to
a minority partner in World Commerce Network. Trade accounts payable of
$603,289 made up 13.7% of these liabilities.
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Net cash used by operating activities for the six months ended June 30,
2000 was $1,468,650. Net cash used by investing activities was $101,243,
which was primarily used for the purchase of capital equipment. Net cash
provided by financing activities was $1,596,517 from both the issuance of
stock and debt financing.
In January 2000, we issued 400,000 warrants to Columbia Financial at a
strike price of $3.50 for investor-relation services to be provided for us
during the year 2000. Currently Columbia holds 800,000 warrants to purchase
our common stock. We entered into a registration rights agreement with
Columbia Financial in February of 2000 and have registered the shares to be
issued upon exercise of these warrants when, and if, Columbia Financial
decides to exercise the warrants. As of the date of this filing, none of the
warrants have been exercised.
In February we agreed to sell 400,000 common shares for $1,000,000 with
warrants for the purchase of an additional 600,000 common shares at strike
prices ranging from $5.00 to $7.50 per share. Upon closing of this
transaction we realized $1 million and may also receive additional proceeds
from the exercise of the warrants in the future. However, the holders of the
warrants have total discretion whether or not they exercise the warrants. We
cannot assure that all of the warrants will be exercised before their
expiration in 2004 and 2005. If all our outstanding warrants are exercised we
would realize $6,375,000 in proceeds. As of the date of this filing, none of
the warrants have been exercised.
In June we entered into an agreement with the holders of a majority of
our debt to convert $1 million of short-term debt and $37,536 accrued
interest to common stock. The debt converted at one dollar per share for a
total of 1,040,000 shares.
Based on our revenues for the 2000 six month period, our management
believes that we have sufficient resources available to continue our product
development efforts and to continue our sales, marketing, and promotional
activities for Visual WebTools . 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 for the
short term, we currently anticipate using private placements of our common
stock. We intend to issue such stock pursuant to exemptions provided by
federal and state securities laws. The purchasers and manner of issuance will
be determined according to our financial needs and the available exemptions.
We also note that if we issue more shares of our common stock our shareholders
may experience dilution in the value per share of their common stock.
Factors Affecting Future Performance
As of July 2000 we have added ten new resellers to our nation wide
reseller group, resulting in 26 total resellers, and we acquired our 30,000th
client. Management believes this growth will result in increased revenues,
however, actual revenue increases 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;
establishing brand recognition of our products; regulatory changes; and
changes in technology.
Additionally, management believes that a trend is developing in the
Internet market where e-commerce technology providers, merchant banks and
payment processors are forming alliances to better serve their clients needs
without one entity attempting to fill all roles. Pacific WebWorks has formed
alliances with such entities as Global Yellow Ads.com, who will market our
software to its clients and Live Person, Inc. to assist in customer support.
IntelliPay has formed an alliance with ROI Direct.com who can provide
e-Business applications for conducting e-commerce.
We currently estimate that we will require between $2,500,000 and
$3,500,000 to further and fully develop our products and services in
accordance with our business plan. Our actual expenses and revenues could
vary materially from the amounts we anticipate or budget, and such variations
may affect the additional financing needed
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for our operations. 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.
PART II: OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
The following discussion describes all securities sold without
regiatration by Pacific WebWorks from April 1, 2000 through June 30, 2000.
On June 29, 2000 we issued 625,000 shares valued at $625,000 to TAD
Ventures, LLC to satisfy a note payable. The issuance of these shares was
exempt from the registration requirements of the Securities Act of 1933 by
reason of Section 4(2) as a private transaction not involving a public
distribution.
On June 30, 2000 we issued 415,000 shares valued at $415,000 to Capital
Communications, Inc. to satisfy a note payable. The issuance of these shares
was exempt from the registration requirements of the Securities Act of 1933 by
reason of Section 4(2) as a private transaction not involving a public
distribution.
ITEM 5: OTHER INFORMATION
On February 22, 2000, we entered into a Registration Rights Agreement,
which required Pacific WebWorks to file a registration statement with the
Securities and Exchange Commission to register for resale an aggregate of
1,800,000 common shares. We agreed to register these shares in connection
with separate agreements between us and the selling stockholders. The SEC
declared the registration statement effective on June 12, 2000. The
registration rights agreement will terminate upon the earliest of the
following: When all of the registered common shares have been sold by the
investors; When the investors obtain an opinion of legal counsel that they may
sell the shares under the provisions of Rule 144; or February 22, 2005, five
years from the closing date.
In April 2000 we released ClipOn Commerce 3.5, which adds e-commerce and
product management features, including inventory, to an existing Web site.
This software also integrates with the Visual WebTools V4 product family.
ClipOn Commerce 3.5 combines our previous ClipOn Commerce software with
Visual WebTools WebShopper software.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Part I Exhibits.
Exhibit Description
------- ------------
27 Financial Data Schedule
(b) Reports on Form 8-K.
On June 19, 2000, Pacific WebWorks, Inc. filed an amended Form 8-K
regarding acquisition of IntelliPay. The audited financial statements of
IntelliPay for the period ended December 31, 1999 were attached, along with
the pro forma consolidated financial statements of Pacific WebWorks for the
period ended March 31, 2000. The pro forma consolidated statements of
operation assumes that the entities were together as of January 1, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pacific WebWorks, Inc.
/s/ Christian Larsen
Date: 10/30/00 By: ________________________________
Christian Larsen, President, C.E.O.
/s/ Matt Dastrup
Date: 10/30/00 By: ________________________________
Mat Dastrup, Chief Financial Officer
