<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>logio10q.txt
<TEXT>
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, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 000-26731
Logio, 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)
1760 Fremont Avenue, Salt Lake City, Utah 84104
(Former address)
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 April 27, 2001 the Registrant had a total of 18,425,828 shares of
common stock issued and outstanding, which are beneficially owned by its
parent corporation, Pacific WebWorks, Inc.
<PAGE>
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements..............................................3
Item 2: Management's Discussion and Analysis or Plan of Operations........8
PART II: OTHER INFORMATION
Item 1: Legal Proceedings.................................................10
Item 2: Changes in Securities and Use of Proceeds.........................10
Item 3: Defaults on Senior Securities.....................................10
Item 4: Results of Votes of Security Holders..............................10
Item 5: Other Information.................................................10
Item 6: Exhibits and Reports filed on Form 8-K ..........................11
Signatures................................................................12
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
The financial information set forth below with respect to our statements
of operations for the three months ended March 31, 2001 and 2000 is unaudited.
This financial information, in the opinion of management, includes all
adjustments consisting of normal recurring entries necessary for the fair
presentations of such data. The results of operations for the three months
ended March 31, 2001, are not necessarily indicative of results to be expected
for any subsequent period.
<PAGE> 2
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, Dec 31,
2001 2000
------------- -------------
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ - $ 25,849
Short term investments - -
Accounts receivable - 3,169
Interest receivable - -
Note receivable - -
Prepaid assets - -
------------- -------------
Total current assets - 29,018
------------- -------------
PROPERTY & EQUIPMENT, net 1,069,730 1,485,182
------------- -------------
OTHER ASSETS - -
------------- -------------
$ 1,069,730 $ 1,514,200
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term capital lease
obligations (Note 2) $ 276,833 $ 242,417
Payables - past due (Note 2) 222,579 215,720
Accounts payable - 4,885
Accrued expenses 12,529 27,433
Note payable -parent company 98,502 -
------------- -------------
Total current liabilities 610,443 490,455
------------- -------------
CAPITAL LEASE OBLIGATIONS, less current maturities 148,589 222,546
STOCKHOLDERS' EQUITY (Note 3)
Preferred stock - -
Common stock 18,426 18,426
Additional paid-in capital 18,893,398 18,731,993
Deficit accumulated during the development stage (18,601,035) (17,949,220)
Treasury stock (91) -
------------- -------------
Total stockholders' equity 310,698 801,199
------------- -------------
$ 1,069,730 $ 1,514,200
============= =============
The accompanying notes are an integral part of these financial statements
F-1
<PAGE> 3
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
amounts
since Three months ended March 31,
inception 2001 2000
------------- ------------- --------------
Net revenues $ 147,273 $ - $ -
------------- ------------- --------------
Cost of sales 478,813 - -
------------- ------------- --------------
Gross profit (loss) (331,540) - -
------------- ------------- --------------
Research and development 3,361,101 11,972 836,782
Selling and marketing expenses 1,651,786 - 468,874
General and administrative 3,149,737 67,152 334,192
Depreciation and amortization 1,181,924 209,106 195,847
Compensation expense for
stock options (Note 2) 2,274,605 161,405 366,355
------------- ------------- --------------
Total operating expenses 11,619,153 449,635 2,202,050
------------- ------------- --------------
Loss from operations (11,950,693) (449,635) (2,202,050)
------------- ------------- --------------
Other income (expense)
Interest income 249,105 18 21,400
Interest expense (165,555) (6,918) (31,574)
Impairment losses (Note 3) (198,525) (198,525) -
Finance charges (217,403) - -
Other (923) 3,245 3,522
------------- ------------- --------------
(333,301) (202,180) (6,652)
------------- ------------- --------------
Loss before extraordinary item (12,283,994) (651,815) (2,208,702)
------------- ------------- --------------
Extraordinary gain 217,180 - -
NET LOSS (12,066,814) (651,815) (2,208,702)
Deduction for dividends
and accretion (6,534,221) - -
------------- ------------- --------------
Net loss attributable to common
stockholders (18,601,035) (651,815) (2,208,702)
============= ============= ==============
Net loss per common share -
basic and diluted
Before extraordinary item
and deduction for dividends
and accretion (1.34) (0.04) (0.18)
Extraordinary gain 0.02 0.00 0.00
Deduction for dividends
and accretion (0.71) 0.00 0.00
------------- ------------- --------------
$ (2.03) $ (0.04) $ (0.18)
============= ============= ==============
Weighted-average number of shares
outstanding - basic and diluted 9,165,025 18,425,830 12,431,687
============= ============= ==============
The accompanying notes are an integral part of these financial statements
F-2
<PAGE> 4
<TABLE>
<CAPTION>
Logio, Inc.
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
amounts Three months
since ended March 31,
inception 2001 2000
------------- ------------- --------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net loss $(12,066,814) $ (651,815) $ (2,208,702)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation & amortization 1,181,924 209,106 195,847
Issuance of common stock and options
for compensation and other expenses 2,518,730 161,405 366,355
Issuance of warrants for consulting services 427,042 - -
Impairment losses 198,525 198,525 -
Bad debt expense 34,169 3,169 -
Loss (gain) on disposal of assets (1,030) (3,246) -
Finance charges for stock conversion 217,403 - -
Extraordinary gain( (217,180) - -
Changes in assets and liabilities
Accounts receivable - - -
Interest receivable - - 1,983
Prepaid expenses and other assets - - 38,353
Accounts payable 222,579 1,974 85,969
Accrued expenses 12,530 (14,903) 47,835
------------- ------------- --------------
Total adjustments 4,594,692 556,030 736,342
------------- ------------- --------------
Net cash used in operating activities (7,472,122) (95,785) (1,472,360)
------------- ------------- --------------
Cash flows from investing activities
Purchases of property and equipment (1,462,392) - (49,411)
Proceeds from diposal of assets 11,066 11,066 -
(Increase) decrease in short-term investments - - 583,143
Repayment of notes receivable from related parties 117,700 - 474
Notes receivable issued to related parties (117,700) - -
Increase in deposits - - -
------------- ------------- --------------
Net cash provided by (used in)
investing activities (1,451,326) 11,066 534,206
------------- ------------- --------------
Cash flows from financing activities
Proceeds from issuance of common stock 1,909,250 - 907,400
Proceeds from issuance of preferred stock 6,300,000 - -
Repurchase of common stock (91) (91) -
Cash paid for fees associated with preferred
stock issuance (392,100) - -
Proceeds from issuance of notes payable
to related parties 1,521,502 98,502 -
Principal payments under capital
lease obligations (617,006) (39,541) (97,608)
Proceeds from issuance of long term
obligations and notes payable 998,682 - -
Principal payments of long-term
obligations and notes payable (796,789) - (70,689)
------------- ------------- --------------
Net cash provided by financing activities 8,923,448 58,870 739,103
------------- ------------- --------------
Net increase (decrease) in cash and
cash equivalents - (25,849) (199,051)
Cash and cash equivalents at beginning of period - 25,849 1,055,371
------------- ------------- --------------
Cash and cash equivalents at end of period $ - $ - $ 856,321
============= ============= ==============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 85,890 $ 6,874 $ 29,799
Cash paid for income taxes - - -
Non-cash financing activities:
Purchase of equipment with lease obligations $ 997,824 $ - $ 13,817
Conversion of preferred stock to common stock 63 - 63
Unrealized gain on investments - - 3,472
Dividends on preferred stock 402,277 - 64,360
Issuance of common stock for debt conversion 1,613,345 - -
The accompanying notes are an integral part of these financial statements
F-3
</TABLE>
<PAGE> 5
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
Logio, Inc., formerly WordCruncher Internet Technologies, Inc., (the Company)
is a development stage company, historically engaged in the development and
marketing of a focused Internet directory and search engine intended to
service the needs of the business professional.
The Company has temporarily ceased the development and operations of its
products and has not produced any significant revenues.
The Company was incorporated on November 5, 1996 in the State of Utah under
the name of Redstone Publishing, Inc. During July 1998, the Company merged
with Dunamis, Inc. a public Company organized in the State of California. The
merger was recorded as a reverse acquisition, therefore WordCruncher was the
accounting survivor.
In connection with the merger, Dunamis, the legal survivor, changed its name
to WordCruncher Internet Technologies, Inc. and changed its domicile to the
State of Nevada. The Company's headquarters are in Salt Lake City, Utah.
On April 18, 2000, the Board of Directors approved the change of the Company's
name to Logio, Inc. The change was approved by the Company's stockholders in
June 2000. The Company also amended its articles of incorporation and filed
the appropriate documents with the state of Nevada in June 2000 when the
Company officially changed its name to Logio, Inc.
On February 8, 2001, Pacific WebWorks, Inc. completed its acquisition of
Logio, Inc., in a stock-for-stock exchange. Pacific WebWorks, Inc. exchanged
2,800,000 shares of its common stock for 18,425,830 shares of common stock.
This transaction was accounted for on the purchase method of accounting using
generally accepted accounting principles and valued at $2,450,000 representing
the fair value of the Pacific WebWorks, Inc. shares on the date of exchange.
Logio's results of operations are included in the Pacific WebWorks, Inc.
consolidated results of operations from the acquisition date to March 31, 2001
and it's the fair values of its assets and liabilities have also been recorded
on the acquisition date and are included in the Pacific WebWorks, Inc.
consolidated balance sheet.
The Company conducts its business within one industry segment.
The accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of normal recurring adjustments, which, in the opinion
of management, are necessary for a fair presentation of the results for the
periods shown. Certain prior period balances have been reclassified to conform
with current period presentation.
F-4
<PAGE> 6
Logio, Inc.
A wholly owned subsidiary of Pacific WebWorks, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)
NOTE 2 - IMPAIRMENT LOSSES
In March 2001, the Company was unable to make payment on some of its capital
lease obligations. The Company is currently attempting a favorable
negotiation with the leasing company and anticipates that the equipment will
be transferred back to the vendor. The default on these obligations, which
approximates $404,000 at March 31, 2000, results in an impairment loss of
$122,685 which represents cash down payments by the Company at the beginning
of the leases that were being amortized over the life of the leases. The
leases expire through December 2002.
In January 2001, the Company was notified by a software vendor that, due to
its default on financing arrangements, the software license was terminated.
The termination of the software license represents an impairment of $75,840
to the net asset and the payable in default of approximately $100,000 is
included in payables past due.
NOTE 3 - STOCK OPTIONS AND WARRANTS
In February 2001 and immediately previous to the completion of the acquisition
of Logio, Inc. by Pacific WebWorks, Inc., approximately 90,000 Logio, Inc.
options were accelerated in their vesting terms in accordance with the terms
of the grant agreements. This acceleration resulted in a $161,405 charge for
the remaining, unearned intrinsic value of the options accelerated.
Also, in February 2001, and in conjunction with the acquisition of the Company
by Pacific WebWorks, Inc., the board of directors of the Company's Parent
converted Logio options to Pacific WebWorks options at a rate of one Pacific
WebWorks option for every 6.6 Logio option held on the date the acquisition
was effectively completed (February 8, 2001).
F-5
<PAGE> 7
In this report references to "Logio," "we," "us," and "our" refer to
Logio, 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
Logio's control. These factors include but are not limited to economic
conditions generally and in the industries in which Logio may participate;
competition within Logio's chosen industry, including competition from much
larger competitors; technological advances and failure by Logio to
successfully develop business relationships.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Logio, Inc., formerly WordCruncher Internet Technologies, Inc., is the
wholly owned subsidiary of Pacific WebWorks, Inc. We were acquired by Pacific
WebWorks in February 2001 and in conjunction with the acquisition we ceased
our development activities and preliminary operations related to the Logio
business directory and directory services. We are not actively marketing any
products and the production and operation of a portal or directory have
ceased. We are working with Pacific WebWorks to develop directory and content
related products for Pacific WebWorks'customers.
Results of Operations
The following table summarizes the results of our operations for the
three months ended March 31, 2001 and 2000. The following discussions are
based on financial statements of Logio.
Years Ended March 31,
2001 2000
------------- --------------
Net revenues $ - $ -
Cost of sales - -
------------- --------------
Gross profit (loss) - -
------------- --------------
Research & development 11,972 836,782
General & administrative 67,152 334,192
Sales & marketing - 468,874
Depreciation and amortization 209,106 195,847
Compensation expense for stock options 161,405 366,355
------------- --------------
Total operating expense 449,635 2,202,050
------------- --------------
Operating loss $ (449,634) $ (2,202,050)
<PAGE> 8
Total other income (expense) $ (202,180) $ (6,652)
Net loss $ (651,815) $ (2,208,702)
Revenue. We had no revenues for either the 2001 or 2000 first quarter
ended March 31. We had no revenues for the first quarter of 2000 because the
logio.com site and the related Logio directory did not become available on the
marketplace until April 2000. No revenues were recorded in the first quarter
2001 as we have ceased operations of our portal and directory services and the
logio.com site. Accordingly, we did not record any cost of sales or gross
profit for these time periods.
Operating expenses. Our total operating expenses have dropped to
$449,635 for the first quarter of 2001 compared to $2,202,050 in the first
quarter of 2000.
Research and development expenses. Research and development consists
primarily of personnel expenses related to product design, programming, and
quality control. The decrease of $824,810 in the 2001 first quarter compared
to the 2000 quarter was due to the fact that the research and development
expenses for the 2001 first quarter were only for the six week period before
our acquisition by Pacific WebWorks.
General and administrative expense. General and administrative expenses
consist of all finance and administrative salaries and benefits, rental of
office space, professional fees and other general office expenses. Again, the
substantial drop in these expenses reflected a six week period rather than a
full quarter.
Depreciation and amortization. These expenses were 46.5% of our total
operating expenses for the 2001 first quarter compared to 8.9% of total
operating expenses for the 2000 first quarter. The depreciation and
amortization expense is related to the purchase of computer equipment and
software technology, mostly on capital lease agreements, and the related
depreciation charges. The computer equipment and software were required to
launch and maintain the Logio site and related Logio directory and we remain
obligated under these agreements even though we have ceased these activities.
Compensation expense for stock options. Compensation expense for stock
options decreased to $161,405 in the 2001 first quarter compared to $366,355
for the 2000 first quarter. These expenses were 35.9% of our total operating
expenses for the 2001 first quarter compared to 16.6% of total operating
expenses for 2000 first quarter. These charges reflect the intrinsic value of
stock options granted to employees and directors recorded as earned by the
employee or director over each period of service. The $161,405 charge for the
2001 first quarter relates to options to purchase 90,000 Logio common shares
which were accelerated per the terms of the grant agreements prior to the
completion of our acquisition by Pacific WebWorks. This charge reflects the
unearned intrinsic value of the accelerated options. The overall decrease in
compensation expenses for stock options represents the forfeiture of options
during 2000, management's efforts to discontinue granting of options at an
exercise price less than fair market value, and the completion of vesting
periods for certain employee options.
Other income or expense. For the first quarter 2001 we recorded total
other expenses of $202,180 compared to $6,652 for the 2000 first quarter.
Other expenses of $198,525 for the 2001 quarter were primarily the result of
impairment losses of $122,685 related to a default under a capital lease
obligation and $75,840 related to default on financing arrangements with a
software vendor (See, Part II, Item 3, below).
Net loss. Net loss decreased $1,556,887 for the quarter ended March 31,
2001, compared to the 2000 first quarter. The decrease in net loss is
primarily a result of our cessation of development and product sales. We
<PAGE> 9
recorded a net loss per share of $0.04 in the 2001 quarter compared to a loss
of $0.18 per share in the 2000 quarter.
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
We are involved in various disputes and legal claims arising in the
normal course of our business. In the opinion of management, any resulting
litigation will not have a material effect on our financial position and
results of operations over amounts recorded.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
In February 2001, in conjunction with our acquisition by Pacific
WebWorks, options to purchase 90,000 Logio common shares were accelerated per
the terms of the grant agreements. In addition, Pacific WebWorks' Board
granted conversion of Logio options held on the date of acquisition, February
8, 2001, to Pacific WebWorks' options. A total of Logio options to purchase
1,288,666 Logio common shares were converted to options to purchase 195,252
Pacific WebWorks common shares. The rate of conversion was one Pacific
WebWorks option for every 6.6 Logio options held on February 8, 2001.
ITEM 3: DEFAULTS ON SENIOR SECURITIES
In January 2001 we were notified by Oracle Corporation that we were in
default under our licensing agreement. As a result of this default, our
software license with Oracle was terminated and resulted in an impairment of
$75,840 to the net asset and included the default of the $100,000 payable was
allocated to payables past due.
In March 2001 we were unable to make a payment on a capital lease
obligation to Sun Microsystems Finance related to leases of certain computer
equipment. The default of approximately $404,000 resulted in a impairment
loss of $122,685 which represents the cash down payments we made at the
beginning of the leases which were amortized over the life of the lease. The
leases expire through December 2002. We are currently attempting to negotiate
a resolution to this default and anticipate returning the equipment to Sun
Microsystems.
ITEM 4: RESULTS OF VOTES OF SECURITY HOLDERS
On January 31, 2001 at a special meeting of the stockholders of Logio,
Inc., the stockholders approved the Agreement and Plan of Reorganization,
dated October 31, 2000, between Logio and Pacific WebWorks, Inc. As a result,
Logio became the wholly-owned subsidiary of Pacific WebWorks, Inc. Of the
18,425,830 shares entitled to vote for approval of the agreement, 11,110,010
were represented at the meeting and 11,060,733, or 60.0% of outstanding
shares, voted in favor; 25,457, or 0.14%, of the outstanding shares, voted
against, and 23,820, or 0.13%, abstained.
ITEM 5: OTHER INFORMATION
On May 7, 2001 we moved with Pacific WebWorks to a 4,500 square foot
office in the Westgate Business
<PAGE> 10
Center located in Salt Lake City, Utah. The building has a total of 200,000
square feet of office and common space and the office serves as our main
office and production facility.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Part II Exhibits.
Exhibit Description
-------- -----------
2.1 Agreement and Plan of Reorganization between WordCruncher
Technologies and WordCruncher Publishing Technologies, Inc., dated
July 14 1998 (Incorporated by reference to exhibit 2.1 of Form S-1,
File No. 333-78537, as amended)
2.2 Agreement and Plan of Reorganization between Logio and Pacific
WebWorks, Inc., dated October 31, 2000
3.1 Articles of Incorporation of the Company (Incorporated by reference
to exhibit 3.1 of Form S-1, File No. 333-78537, as amended)
3.2 Articles of Merger, filed June 20, 1998 (Incorporated by reference
to exhibit 3.2 of Form S-1, File No. 333-78537, as amended)
3.3 Articles of Merger, filed July 15, 1998 (Incorporated by reference
to exhibit 3.3 of Form S-1, File No. 333-78537, as amended)
3.4 Articles of Merger (Incorporated by reference to exhibit 3.4 of Form
S-1, File No. 333-78537, as amended)
3.5 Certificate of Amendment, filed February 1, 1999 (Incorporated by
reference to exhibit 3.5 of Form S-1, File No. 333-78537, as
amended)
3.6 Articles of Exchange filed February 8, 2001. (Incorporated by
reference to exhibit 3.6 to Form 10-K, filed April 17, 2001)
3.7 Bylaws of the Company (Incorporated by reference to exhibit 3.6 of
Form S-1, File No. 333-78537, as amended)
10.1 Employment Agreement between Logio and Kenneth W. Bell, dated
September 1, 1998 (Incorporated by reference to exhibit 10.4 of Form
S-1, File No. 333-78537, as amended)
10.2 Employment Agreement between Logio and James W. Johnston, dated
September 1, 1998 (Incorporated by reference to exhibit 10.5 of Form
S-1, File No. 333-78537, as amended)
10.3 Lease Agreement between Logio and Sun Microsystems Finance, as
amended
10.4 License Agreement between Logio and Oracle Corporation.
(b) Reports on Form 8-K.
On February 5, 2001 we filed a Current Report on Form 8-K under Item 1
announcing the Logio shareholder approval of the acquisition of Logio by
Pacific WebWorks at a special meeting of the stockholders held on January 31,
2001.
On March 16, 2001 we filed a Current Report on Form 8-K under Item 4
announcing the engagement of Chisholm & Associates as our independent auditors
and the concurrent dismissal of Grant Thornton LLP as our auditors.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Logio, Inc.
5/14/01 /s/ Kenneth W. Bell
Date:_______________ By: ______________________________________________
Kenneth W. Bell, President and Director
5/14/01 /s/ Thomas R. Eldredge
Date:_______________ By: ______________________________________________
Thomas R. Eldredge, Secretary/Treasurer and
Director
</TEXT>
</DOCUMENT>