SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Quarter Ended: March 31, 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 May 9, 2000, the Registrant had a total of 12,800,342 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.......................................................15
Item 6: Exhibits and Reports filed on Form 8-K............................15
Signatures.................................................................17
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Pacific Webworks, Inc.
And Subsidiary
Consolidated Financial Statements
March 31, 2000
<PAGE>
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Office (801) 363-1175
Fax (801) 363-0615
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Pacific Webworks Inc.
Salt Lake City, Utah
We have reviewed the accompanying condensed consolidated balance sheet of
Pacific Webworks, Inc. and subsidiary as of March 31, 2000 and the related
condensed consolidated statements of income and cash flows for the period then
ended. These financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1999, and the related
statements of income, retained earnings, and cash flows for the year then
ended (not presented herein); and in our report dated January 31, 2000, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed balance sheet
as of December 31, 1999, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
The accompanying statements of operations and cash flows for the period ended
March 31, 1999 were not audited or reviewed by us and, accordingly, we do not
express an opinion on them.
/s/ Crouch, Bierwolf & Chisholm
Crouch, Bierwolf & Chisholm
May 3, 2000
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Pacific Webworks, Inc.
Consolidated Balance Sheets
Assets
March 31 December 31
2000 1999
------------ ------------
Current Assets(unaudited)
Cash and Cash Equivalents $ 127,087 $ 153,898
Accounts Receivable (net of allowance of
$12,798 and $3,798, respectively) 433,010 101,429
Employee Receivable 7,474 4,578
Prepaid Expenses 9,022 16,333
Accounts Receivable - Related Party - 6,800
Notes Receivable - Related Party - 166,046
Note Receivable 153,000 -
------------ ------------
Total Current Assets 729,593 449,084
------------ ------------
Property and Equipment 183,127 171,393
------------ ------------
Other Assets
Goodwill, net 237,687 -
Deposits 5,250 5,250
Computer Software Costs 4,333 4,832
------------ ------------
Total Other Assets 247,270 10,082
------------ ------------
Total Assets $ 1,159,990 $ 630,559
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 415,152 $ 74,550
Accrued Expenses 127,123 70,177
Notes Payable 1,178,730 500,000
------------ ------------
Total Current Liabilities 1,721,005 644,727
------------ ------------
Minority Interest - -
------------ ------------
Stockholders' Equity
Common Stock, authorized 50,000,000 shares of no
par value, issued and outstanding 10,400,342 and
10,395,679 shares 10,400 10,396
Deferred Compensation - (13,216)
Paid in Capital 2,759,080 2,775,404
Retained Deficit (3,330,495) (2,786,752)
------------ ------------
Total Stockholders' Equity (561,015) (14,168)
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,159,990 $ 630,559
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Pacific Webworks, Inc.
Consolidated Statements of Operations
For the three For the three
months ended months ended
March 31 March 31
2000 1999
-------------- -------------
SALES $ 1,992,032 $ 4,499
COST OF GOODS SOLD 266,893 1,276
-------------- -------------
GROSS PROFIT 1,725,139 3,223
-------------- -------------
OPERATING EXPENSES
General And Administrative Expenses 741,157 142,567
Sales 1,431,393 35,086
Research and Development 81,116 35,563
-------------- -------------
TOTAL OPERATING EXPENSES 2,253,666 213,216
-------------- -------------
OPERATING INCOME (LOSS) (528,527) (209,993)
-------------- -------------
OTHER INCOME AND (EXPENSES)
Interest Expense (15,215) -
Minority Interest - -
-------------- -------------
Total Other Income and (Expenses) (15,215) -
-------------- -------------
NET INCOME (LOSS) $ (543,742) $ (209,993)
============== =============
NET INCOME (LOSS) PER SHARE$ (.05) $ (.03)
============== =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 10,400,342 8,333,500
============== =============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Pacific Webworks, Inc.
Consolidated Statements of Cash Flows
For the three For the three
months ended months ended
March 31 March 31
2000 1999
-------------- -------------
Cash Flows From Operating Activities
Net income (loss) $ (543,742) $ (209,993)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation & Amortization 32,842 4,942
Bad Debt 9,000 -
Minority Interest - -
Loss on Investments (25,000) -
Change in Assets and Liabilities (Net of
effects of acquisition of WCN)
(Increase) Decrease in:
Accounts Receivable (297,373) (7,591)
Other Receivables (2,896) -
Prepaid Expenses 7,311 -
Increase/(decrease) in:
Accounts Payable and Accrued Expenses 380,202 (2,634)
Deferred Expenses - (166,667)
-------------- -------------
Net Cash Provided (Used) by
Operating Activities (439,656) (381,943)
-------------- -------------
Cash Flows from Investing Activities
Cash paid for Notes Receivable (153,000) -
Purchase of Property and Equipment (18,788) (23,334)
Cash paid for deposits - (4,350)
Cash acquired in acquisition 5,628 50,000
-------------- -------------
Net Cash Provided (Used) by
Investing Activities (166,160) 22,316
-------------- -------------
Cash Flows from Financing Activities
Proceeds from debt financing 579,005 210,000
Principal payments on debt financing - (210,000)
Warrants issued for services - 200,000
-------------- -------------
Net Cash Provided (Used) by
Financing Activities 579,005 200,000
-------------- -------------
Net Increase (Decrease) in Cash and
Cash Equivalents (26,811) 540,373
-------------- -------------
Cash and Cash Equivalents
Beginning 153,898 9,306
-------------- -------------
Ending $ 127,087 $ 549,679
============== =============
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ - $ -
============== =============
Cash payments for income taxes $ - $ -
============== =============
Supplemental Schedule of Noncash Investing and Financing Activities
Common shares issued for services $ - $ -
============== =============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Pacific Webworks, Inc.
March 31, 2000
NOTES TO FINANCIAL STATEMENTS
Pacific Webworks, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the three months
ended March 31, 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-KSB 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.
<PAGE>
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. During the first quarter of 2000 we recorded revenues of
$1,992,032, this was a significant increase compared to the first quarter of
1999 revenues of $4,499. Our net loss was $543,742, or $0.05 per share, for
the first quarter of 2000 compared to$209,993, or $0.03 per share, for the
first quarter of 1999.
We have posted net losses from our inception and our independent
auditors, Crouch, Bierwolf & Chisholm report that this history of losses
raises doubt about our ability to continue as a going concern without
financing. However, management believes our current and developing sales
channels will be sufficient to support our existing operations for the short
term.
Acquisitions.
In March of 2000 we acquired an additional 1% interest in World
Commerce Network LLC, which is 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. World Commerce Network has recently begun an Internet Business
Opportunity 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 each week.
Management believes World Commerce Network will continue to improve our
revenues through the acquisition of new merchants and resale opportunities to
existing merchants.
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 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 months ended March 31, 2000 and 1999.
Three Months Ended March 31
2000 1999
-------------- --------------
Sales 1,992,032 4,499
Cost of Goods Sold 266,893 1,276
Gross Profit 1,725,139 3,223
Operating Expenses
General & Administrative 741,157 142,567
Sales 1,431,393 35,086
Research and Development 81,116 35,563
Total Operating Expense 2,253,666 213,216
Operating Income (Loss) (528,527) (209,993)
Net Income (Loss) (543,742) (209,993)
We receive revenues for sale or access to our software technology sold by
us or by our resellers. We also receive revenues from services provided for
website design. 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. Recognized revenue follows
approximately three weeks after the sale is written at the seminar. Only
after merchant account approval and lease approval is revenue recognized.
We generated $ 1,992,032 in sales for the 2000 quarter, an increase of
$1,797,685 or 925% over the fourth quarter of 1999. This completes our fourth
straight quarter of over 100% per quarter growth. This growth is due to our
marketing efforts through World Commerce Network and the continued growth of
our existing sales channels.
Cost of goods sold for the 2000 quarter decreased to 13.3 % of revenues, or
costs of $ 266,993, in comparison to 28.4% of revenues in the 1999 quarter.
The decrease was primarily due to renegotiated lower prices for merchant
accounts. Accordingly our gross profit was 86.7 % of revenues for the 2000
quarter compared to 71.6 % of revenues for the 1999 quarter.
Total operating expenses were 113 % of revenues, or $2,253,666, for the
2000 quarter as compared to $213,216, or 4,379 %, of revenues in the 1999
quarter. This includes $557,717 in expenses for Pacific WebWorks and
$1,695,949 in expenses for World Commerce Network. Because of the delay in
revenue recognition as discussed above, these costs appear abnormally high as
a percentage of revenues. Consolidated general and administrative costs
increased to $741,157 in the 2000 quarter from $142,567 in the 1999 quarter.
Growth in general and administrative costs is primarily attributed to the
overhead in World Commerce Network.
Sales expenses, which include both sales and marketing expenses, grew
$1,396,307 compared to the 1999 quarter. This 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
were dedicated to funding the second team.
Research and development expenses, including all costs for product design,
programming, and quality control, were $45,553 higher for the 2000 quarter
compared to the 1999 quarter. As a percentage of sales, the actual costs
decreased from 790% in 1999 to 4% in the same quarter in 2000.
Our operating loss was 26.5% of revenues for the 2000 quarter compared to
466.7% of revenues for 1999 quarter. The primary source of our losses
relates to our investment in the growth of our marketing subsidiary, World
Commerce Network. The loss attributable to Pacific WebWorks operations was
$.01 per share, while the loss relating to World Commerce Network was $.04 per
share.
Liquidity and Capital Resources.
For the quarter ended March 31, 2000, we had $127,087 cash on hand and
total current assets of $729,593, compared to $153,898 cash on hand and total
current assets of $449,084 for the year ended December 31, 1999. This
increase in total current assets was primarily due to the increase in accounts
receivable related to the increase in sales in the quarter. $433,010 was
recorded for accounts receivable and a $153,000 note receivable was recorded
from IntelliPay, Inc. The IntelliPay note receivable represents our
commitments to their operations during the period we were discussing the
potential acquisition of their operations. The acquisition was completed in
the second quarter of 2000, as discussed above.
Total current liabilities increased to $1,721,005 for the first quarter
compared to $644,727 for the 1999 year end. Of this total, $986,650 related
to notes payable to Capital Communications. An additional $192,080 of the
notes were with the minority partner in World Commerce Network. Trade
accounts payable of $415,152 made up 42.6% of these liabilities.
Net cash used by operating activities for the 2000 quarter was $439,656.
Net cash used by investing activities was $166,160, primarily due to cash paid
on the note receivable from IntelliPay, Inc. Net cash provided by financing
activities for the 2000 quarter was $579,005 and proceeds from debt financing.
Based on our revenues for the 2000 quarter, management believes that we
have sufficient resources available to us 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.
In January 2000, we issued 400,000 warrants to Columbia Financial at a
strike price of $3.50 for investor relations services to be provided for us
during the year 2000. Currently Columbia holds 800,000 warrants to purchase
our common stock.
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 will realize the $1 million and may also receive additional
proceeds from the exercise of the warrants. 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.
Factors Affecting Future Performance
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; establishing brand
recognition of our products; 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 $2,500,000 and
$3,500,000 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.
PART II: OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) On March 16, 2000 we issued 4,663 common shares valued at $9,180 to U.S.
Merchant Systems, Inc. for an additional 1% interest in World Commerce
Network, L.L.C. The issuance of such shares was exempt from registration
under the Securities Act of 1933 by reason of Section 4(2) as a private
transaction not involving a public distribution.
On January 10, 2000 we granted warrants for the purchase of 400,000 common
shares at a $3.50 per share strike price to Columbia Financial Group in
consideration for investor relation services. These warrants expire on
January 10, 2005. The issuance of these warrants was exempt from registration
under 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.
In January of 1999 and again in January of 2000 we entered into a
Consultant Agreement with Columbia Financial Group, Inc. Under each agreement
Columbia Financial accepted warrants to purchase 400,000 common shares in
consideration for the services they would provide to Pacific WebWorks as its
investors relations firm. In February of 2000 we agreed to include these
warrants to purchase 800,000 common shares in the Registration Rights
Agreement. The warrants issued to Columbia Financial in consideration for
their services were exercisable on the date of each agreement. None of the
warrants issued have been exercised as of the date of this filing.
In February 2000 we entered into purchase agreement with two accredited
investors for the purchase by those investors of up to 400,000 units for
$1,000,000. Each unit consisted of one share of our common stock and one "A"
Warrant and one "B" Warrant. The "A" Warrant grants the investor the right to
purchase one additional share at an exercise price of $5.00 and the "B"
Warrant grants the investor the right to purchase 1/2 of one additional share at
an exercise price of $7.50. Upon closing each investor will acquire 200,000
common shares, one "A" Warrant to purchase an additional 200,000 common shares
and a "B" Warrant to purchase an additional 100,000 common shares.
The registration agreement requires Pacific WebWorks to file a registration
statement by April 15, 2000, however, we have been granted an extension to May
30, 2000. We agreed to use our best efforts to cause the registration
statement to be effective by July 1, 2000. Also, each investor has promised
not to acquire or own more than 4.99% of Pacific WebWorks' outstanding common
stock at any time. The registration 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
five years from the closing date.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Part I Exhibits.
Exhibit Description
- ------ -----------
10.1 Consultant Agreement between Columbia Financial Group and Pacific
WebWorks, dated January 10, 2000.
24 Consent of Crouch, Bierwolf & Chisholm, dated May 3, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K.
On March 2, 2000 Pacific WebWorks, Inc. filed a Form 8-K regarding the
signing of a letter of intent between Pacific WebWorks, Inc. and IntelliPay
for the acquisition of IntelliPay as a wholly owned subsidiary. No financial
statements were filed.
On March 10, 2000 Pacific WebWorks filed a Form 8-K regarding the
acquisition of an additional 1% interest in World Commerce Network. No
financial statements were filed.
On April 19, 2000 Pacific WebWorks, Inc. filed a Form 8-K regarding the
signing of an agreement for acquisition of IntelliPay. No financial
statements were filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pacific WebWorks, Inc.
May 10, 2000 /s/ Christian Larsen
Date: ___________________________ By: ________________________________
Christian Larsen, President, C.E.O.
5/10/00 /s/ Mat Dastrup
Date: ___________________________ By: ________________________________
Mat Dastrup,
Chief Financial Officer
CONSULTANT AGREEMENT
Columbia Financial Group is an investor relations, direct marketing,
publishing, public relations and advertising firm with expertise in the
dissemination of information about publicly traded companies. Also in the
business of providing investor relations services, public relations services,
publishing, advertising services, fulfillment services, as well as Internet
related services.
Agreement made this 10th day of January, 2000, between Pacific WebWorks,
Inc. (hereinafter referred to as "Corporation"), and Columbia Financial
Group, Inc. (hereinafter referred to as "Consultant"), (collectively referred
to as the "Parties"):
Recitals:
The Corporation desires to engage the services of the Consultant to
perform for the Corporation consulting services regarding all phases of the
Corporation's "Investor Relations" to include direct investor relations and
broker/dealer relations as such may pertain to the operation of the
Corporation's business.
The Consultant desires to consult with the Board of Directors, the
Officers of the Corporation, and certain administrative staff members of the
Corporation, and to undertake for the Corporation consultation as to the
company's investor relations activities involving corporate relations and
relationships with various broker/dealers involved in the regulated securities
industry.
AGREEMENT
1. The respective duties and obligations of the contracting Parties
shall be for a period of twelve (12) months commencing on the date first
appearing above. This Agreement may be terminated by either parties only in
accordance with the terms and conditions set forth in Paragraph 8.
Services Provided by Consultant
2. Consultant will provide consulting services in connection with the
Corporation's "investor relations" dealings with NASD broker/dealers and the
investing public. (At no time shall the Consultant provide services which
would require Consultant to be registered and licensed with any federal or
state regulatory body or self-regulating agency.) During the term of this
Agreement, Consultant will provide those services customarily provided by an
investor relations firm to a Corporation, including but not limited to the
following:
-1-
<PAGE>
Columbia Financial Group
(a) Aiding the Corporation in developing a marketing plan directed
at informing the investing public as to the business of the Corporation; and
(b) Providing assistance and expertise in devising an advertising
campaign in conjunction with the marketing campaign as set forth in (1) above;
and
(c) Advise the Corporation and provide assistance in dealing with
institutional investors as it pertains to the Corporation's offerings of its
securities; and
(d) Aid and assist the Corporation in the Corporation's efforts to
secure "market makers" which will trade the Corporation's stock to the public
by providing such information as may be required; and
(e) Aid and advise the Corporation in establishing a means of
securing nationwide interest in the Corporation's securities; and
(f) Aid and assist the Corporation in creating an "institutional
site program" to provide ongoing and continuous information to fund managers;
and
(g) Aid and consult with the Corporation in the preparation and
dissemination of press releases and news announcements; and
(h) Aid and consult with the Corporation in the preparation and
dissemination of all "due diligence" packages requested by and furnished to
NASD registered broker/dealers, the investing public, and/or other
institutional and/or fund managers requesting such information from the
Corporation.
Compensation
3. In consideration for the services provided by Consultant to the
Corporation, the Corporation shall on behalf of the Consultant cause to be
vested, (hereinafter "delivered") at the signing of this Agreement 25% or one
quarter of the warrants as set forth below, and the balance of the warrants
will be delivered on or before the beginning of the third quarter of the
Agreement. All such warrants delivered shall have a term of five years and
shall have preferred, "piggy back" registration rights. The warrants shall
be issued at the following exercise price:
400,000 warrants at $3.50 per share.
-2-
<PAGE>
Columbia Financial Group
Compliance
4. At the time consultants give notice to the Company or execution of
the Warrants referred to in #3, Compensation above, common shares underlying
the warrants, delivered by Corporation to Consultant will, at that particular
time be fee trading, or if not, the shares shall be incorporated in the next
registration statement filed by the Corporation. The warrants shall have
"piggy pack" registration rights and will, at the expense of the corporation,
be included in said registration statement in a timely manner.
Representation of Corporation
5. (a). The Corporation, upon entering this Agreement, hereby
warrants and guarantees to the best knowledge of the Officers and Directors of
the Corporation, all statements, either written or oral, made by the
Corporation to the Consultant are true and accurate, and contain no
misstatements of a material fact. Consultant acknowledges that estimates of
performance made by Corporation are based upon the best information available
to Corporation officers at the time of said estimates of performance. The
Corporation acknowledges that the information it delivers to the Consultant
will be used by the Consultant in preparing materials regarding the Company's
business, including but not necessarily limited to, its financial condition,
or dissemination to the public. Therefore, in accordance with Paragraph 6,
below, the Corporation shall hold harmless the Consultant from any and all
errors, omissions, misstatements, except those made in a negligent or
intentionally misleading manner in connection with all information furnished
by Corporation to Consultant.
(b). Consultant shall agree to release information only with
written or verbal approval of the company.
6. Pacific WebWorks, Inc.
1. Authorized: 50,000,000 shares
2. Issued: 10,395,679 shares
3. Outstanding: 10,395,679 shares
4. Free trading (float): 3,960,000 shares (approx.)
5. Shares subject to Rule 144 restrictions: 6,435,679 shares
(approx).
-3-
<PAGE>
Columbia Financial Group
Limited Liability
7. With regard to the services to be performed by the Consultant
pursuant to the terms of this Agreement, the Consultant shall not be liable to
the Corporation, or to anyone who may claim any right due to any relationship
with the Corporation, for any acts or omissions in the performance of services
on the part of the Consultant, except when said acts or omissions of the
Consultant are due to its willful misconduct or culpable negligence.
Termination
8. This Agreement may be terminated by either party upon the giving
of not less than thirty (30) days written notice, delivered to the parties at
such address or addresses as set forth in Paragraph 9, below. In the event
this Agreement is terminated by the Corporation, compensation paid by
Corporation pursuant to paragraph 3 above, to the Consultant to the date of
termination (or through the end of the month during which notice of
termination is delivered). In the event this Agreement is terminated by
consultant, compensation shall be reimbursed to Corporation as follows:
The Agreement will be divided into four equal quarters. If termination
occurs within the first quarter or initial ninety (90) days of the Agreement
the Consultants will have no obligation to return any of the initial
compensation of the contract pursuant to paragraph 3 above. Each and every
subsequent quarter of the Agreement will have an equal amount of compensation.
If termination occurs within any quarter of the Agreement the Consultants will
return a pro rata amount based on a 90 day quarter.
The valuation of said shares for purposes of repayment of shares, shall
be the bid price of said shares as of the date shares are tendered back to the
Corporation. If there is no bid price, then the price shall be agreed to, by
separate writing to be determined by the parties upon the execution of this
agreement.
Notices
9. Notices to be sent pursuant to the terms and conditions of
this Agreement, shall be sent as follows:
Timothy J. Rieu Christian Larsen
Columbia Financial Group, Inc. Pacific WebWorks, Inc.
1301 York Road, Ste. 400 180 South 300 West, Ste. 220
Lutherville, Maryland 21093 Salt Lake City, UT 84101
-4-
<PAGE>
Columbia Financial Group
Attorney's Fees
In the event any litigation or controversy, including arbitration, arises
out of or in connection with this Agreement between the Parties hereto, the
prevailing party in such litigation, arbitration or controversy, shall be
entitled to recover from the other party or parties, all reasonable attorney's
fees expenses and suit costs, including those associated within the appellate
or post judgement collection proceedings.
Arbitration
10. In connection with any controversy or claim arising out of or
relating to this Agreement, the Parties hereto agree that such controversy
shall be submitted to arbitration, in conformity with the Federal Arbitration
Act (Section 9 U.S. Code Section 901 et seq), and shall be conducted in
accordance with the Rules of the American Arbitration Association. Any
judgement rendered as a result of the arbitration of any disputes herein,
shall upon being rendered by the arbitrators be submitted to a Court of
competent jurisdiction with the state of Maryland, in initiated by Consultant,
or in the state of Utah if initiated by the Corporation.
Governing Law
11. This Agreement shall be construed under and in accordance with
the laws of the State of Utah, and all parties hereby consent to Utah as the
proper jurisdiction for said proceeding provided herein.
Parties Bound
12. This Agreement shall be binding on and inure to the benefit of
the contracting parties and their respective heirs, executors, administrators,
legal representatives, successors, and assigns when permitted by this
Agreement.
Legal Construction
13. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, the invalidity, illegality, or unenforceability
shall not affect any other provision, and this Agreement shall be construed as
if the invalid, illegal, or unenforceable provision had never been contained
in it.
Prior Agreements Superseded
14. This Agreement constitutes the sole and only Agreement of the
contracting parties and supersedes any prior understandings or written or oral
agreements between the respective parties. Further, this Agreement may only
be modified or changed by written agreement signed by all the parties hereto.
-5-
<PAGE>
Columbia Financial Group
Multiple Copies or Counterparts of Agreement
15. The original and one or more copies of this Agreement may be
executed by one or more of the parties hereto. In such event, all of such
executed copies shall have the same force and effect as the executed original,
and all of such counterparts taken together shall have the effect of a fully
executed original. Further, this Agreement may be sighed by the parties and
copies hereof delivered to each party by way of facsimile transmission, and
such facsimile copies shall be deemed original copies for all purposes if
original copies of the parties' signatures are not delivered.
Liability of Miscellaneous Expenses
16. The Corporation shall be responsible to any miscellaneous fees
and costs approved in writing prior by the Corporation or its agents to
commitment that are unrelated to the agreement made between the Parties.
Headings
17. Headings used throughout this Agreement are for reference and
convenience, and in no way define, limit or describe the scope or intent of
this Agreement or effect its provisions.
IN WITNESS WHEREOF, the Parties have set their hands and seal as of the
date written above.
/s/ Timothy J. Rieu
BY: __________________________
Timothy J. Rieu, President
Columbia Financial Group, Inc.
/s/ Christian Larsen
BY: __________________________
Christian Larsen, President
Pacific WebWorks, Inc.
-6-
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated May 3, 2000, in this
quarterly report on Form 10-QSB for Pacific Webworks, Inc.
/s/ Crouch, Bierwolf & Chisholm
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
May 3, 2000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 127,087
<SECURITIES> 0
<RECEIVABLES> 606,282
<ALLOWANCES> (12,798)
<INVENTORY> 0
<CURRENT-ASSETS> 729,593
<PP&E> 227,156
<DEPRECIATION> 44,029
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,159,900
<SALES> 1,992,032
<TOTAL-REVENUES> 1,992,032
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<NET-INCOME> (543,742)
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