U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ x ] QUARTERLY REPORT UNDER SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _______. Commission file number 0-27453 LOGIO, INC. (Exact name of small business issuer as specified in its charter) Nevada 84-1370590 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 405 East 12450 South, Suite B, Draper, Utah 84020 (Address of Principal Executive Offices) (Zip Code) 801.816.9904 (Issuer's telephone number) (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ As of October 31, 2000 18,425,830 shares of registrant's Common Stock, par value $0.001 per share, were outstanding. PART I: FINANCIAL INFORMATION Item 1. Financial Statements Required by Form 10-Q The accompanying unaudited consolidated financial statements of Logio, Inc., formerly WordCruncher Internet Technologies, Inc. (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the notes herein and the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999, which are incorporated herein by reference. The accompanying financial statements have not been examined by independent accountants in accordance with generally accepted auditing standards, but in the opinion of management, all adjustments (consisting of normal recurring entries) necessary for the fair presentation of the Company's results of operations, financial position and changes therein for the periods presented have been included. The results of operations for the quarter and nine months ended September 30, 2000 may not be indicative of the results that may be expected for the year ending December 31, 2000. Logio, Inc. (a development stage company) CONSOLIDATED BALANCE SHEETS ASSETS September 30, December 31, 2000 1999 ------------- ------------- CURRENT ASSETS (Unaudited) Cash and cash equivalents $ 171,226 $ 1,055,371 Short term investments - 1,462,147 Accounts receivable, net of allowance for doubtful accounts of $6,000 as of September 30, 2000 (none as of December 31, 1999) 28,815 736 Interest receivable - 1,983 Note receivable - 1,955 Prepaid assets 68,748 311,199 ------------- ------------- Total current assets 268,789 2,833,391 ------------- ------------- PROPERTY & EQUIPMENT, net 1,480,493 1,930,335 OTHER ASSETS 5,811 6,011 ------------- ------------- $ 1,755,093 $ 4,769,737 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term capital lease obligations $ 312,880 $ 299,983 Accounts payable (Note 2) 99,866 306,349 Accrued expenses 57,091 86,319 Note payable (Note 2) 96,116 659,682 ------------- ------------- Total current liabilities 565,953 1,352,333 CAPITAL LEASE OBLIGATIONS, less current maturities 38,582 253,350 COMMITMENTS AND CONTINGENCY (Notes 2, 6 and 7) - - STOCKHOLDERS' EQUITY (Notes 3, 4, 5 and 6) 6% preferred stock, par value $0.01; liquidation preference $1,000; authorized 15,000 shares; issued and outstanding none as of September 30, 2000 and 6,300 as of December 30, 1999 - 63 Common stock, par value $0.001; authorized 60,000,000 shares; issued and outstanding 17,270,830 as of September 30, 2000 and 11,891,002 as of December 31, 1999 17,271 11,891 Additional paid-in capital 18,371,258 15,362,028 Accumulated other comprehensive income - 7,940 Deficit accumulated during the development stage (17,237,971) (12,217,868) ------------- ------------- Total stockholders' equity 1,150,558 3,164,054 ------------- ------------- $ 1,755,092 $ 4,769,737 ============= ============= The accompanying notes are an integral part of these financial statements Logio, Inc. (a development stage company) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

~~Logio,~~Cumulative ~~Inc.~~amounts (aThree ~~development~~months ~~stage~~ended ~~company)~~Nine ~~CONSOLIDATED~~months ~~BALANCE~~ended ~~SHEETS~~since ~~ASSETS~~September ~~June~~ 30, ~~Dec~~September 3130, inception 2000 1999 2000 1999 ------------- ------------- ------------- ~~CURRENT~~------------- ~~ASSETS~~------------- ~~(Unaudited)~~Revenues ~~Cash~~Advertising ~~and~~$ ~~cash~~2,180 ~~equivalents~~$ 646 $ ~~333,488~~- $ 12,~~055,371~~180 ~~Short~~$ ~~term~~- ~~investments~~Product ~~354~~130,517 - 1,~~462,147~~213 ~~Accounts~~- ~~receivable 1~~15,~~081~~285 ~~736~~------------- ~~Interest~~------------- ~~receivable~~------------- ------------- ------------- 132,697 646 1,~~983~~213 ~~Note~~2,180 ~~receivable~~15,285 ~~758~~Cost 1of sales 472,~~955~~648 ~~Prepaid~~140,161 ~~assets~~231 ~~173~~440,~~830~~907 ~~311~~4,~~199~~330 ------------- ------------- ------------- ~~Total~~------------- ~~current~~------------- ~~assets~~Gross ~~863,674~~profit 2(loss) (339,~~833,391~~951) ~~PROPERTY & EQUIPMENT~~(139,515) ~~net~~982 1(438,~~686,565~~727) 110,~~930,335~~955 ~~OTHER~~------------- ~~ASSETS~~------------- ~~5,877 6,011~~ ------------- ------------- ------------- $2Research and development 3,~~556~~263,~~116~~488 $113,264 4266,~~769~~379 1,~~737~~672,316 ~~=============~~596,395 ~~==================~~Selling ~~LIABILITIES~~and ~~AND~~marketing ~~STOCKHOLDERS'~~expenses ~~EQUITY~~1,651,787 ~~CURRENT~~28,417 ~~LIABILITIES~~357,046 ~~Current~~658,034 ~~portion~~534,000 ofGeneral ~~long-term~~and ~~capital~~administrative ~~lease~~2,740,861 ~~obligations~~326,393 $252,989 ~~305~~976,~~943~~183 $780,651 ~~299~~Depreciation and amortization 802,~~983~~134 ~~Accounts~~205,137 ~~payable~~42,288 ~~580~~606,~~705~~141 ~~306~~80,~~349~~949 ~~Accrued~~Compensation ~~expenses~~expense ~~104~~for stock options 2,~~541~~083,853 8650,~~319~~400 ~~Notes~~430,801 ~~Payable 405~~631,~~110~~242 ~~659~~1,~~682~~135,988 ------------- ------------- ------------- ------------- ------------- Total ~~current~~operating ~~liabilities~~expenses 110,~~396~~542,~~299~~123 723,611 1,~~352~~349,~~333~~503 ~~CAPITAL~~4,543,916 ~~LEASE~~3,127,983 ~~OBLIGATIONS~~------------- ------------- ------------- ------------- ------------- Loss from operations (10,882,074) ~~less~~(863,126) ~~current~~(1,348,521) ~~maturities~~(4,982,643) ~~119~~(3,~~452~~117,028) ~~253~~Other income (expense) Interest income 261,~~350~~665 ~~NOTES~~20,167 ~~PAYABLE~~61,181 TO55,002 ~~SHAREHOLDERS~~158,428 Financing charges (Note 23) ~~500~~(133,~~000~~703) (133,703) - ~~STOCKHOLDERS'~~(133,703) ~~EQUITY~~- Interest expense (~~Notes~~151,661) 3(33,431) 5(652) ~~and~~(96,422) 6(3,561) ~~Preferred~~Loss ~~stock~~on -disposal 63of ~~Common~~equipment ~~stock~~(2,215) 13(2,~~480~~215) 11- (2,~~891~~215) ~~Additional~~- ~~paid~~-in------------ ~~capital~~------------- 16------------- ------------- ------------- (25,~~943~~914) (149,~~305~~182) 1560,~~362~~529 (177,~~028~~338) ~~Accumulated~~154,867 ~~other~~------------- ~~comprehensive~~------------- ~~income~~------------- ~~13,480~~------------- ~~7,940~~------------- ~~Deficit~~Loss ~~accumulated~~before ~~during~~extraordinary ~~the~~item ~~development~~(10,907,988) ~~stage~~(1,012,308) (161,~~429~~287,~~900~~992) (125,~~217~~159,~~868~~981) (2,962,161) Extraordinary gain (Notes 2 and 3) 204,238 204,238 - 204,238 - ------------- ------------- ------------- ~~Total~~------------- ------------- NET LOSS (10,703,750) (808,070) (1,287,992) (4,955,743) (2,962,161) Deduction for dividends and accretion (6,534,221) - (1,519,113) (64,360) (6,239,007) Net loss attributable to common stockholders' ~~equity~~$(17,237,971) ~~540~~$ (808,~~365~~070) 3$ (2,~~164~~807,~~054~~105) $ (5,020,103) $ (9,201,168) ============= ============= ============= ============= ============= Net loss per common share - basic and diluted (Note 4): Before extraordinary item and deduction for dividends and accretion $ (1.39) $ (0.06) $ (0.11) $ (0.38) $ (0.25) Extraordinary gain 0.03 0.01 - 0.02 - Deduction for dividends and accretion (0.83) - (0.13) (0.01) (0.52) ------------- ------------- ------------- ------------- ------------- Net loss per common share attributable to common stockholders $ (2.19) $ (0.05) $ (0.24) $ (0.37) $ (0.77) ============= ============= ============= ============= ============= Weighted-average number of shares outstanding- basic and diluted 7,~~556~~839,~~116~~426 $16,644,408 411,~~769~~881,~~737~~611 13,509,126 11,879,881 ============= ============= ============= ============= ============= The accompanying notes are an integral part of these financial statements

Logio, Inc. (a development stage company) CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~OPERATIONS~~STOCKHOLDERS' EQUITY Nine months ended September 30, 2000 (~~Unaudited~~unaudited) /and ~~Cumulative~~years ~~amounts~~ended ~~Three~~December ~~months~~31, ~~ended~~1999, ~~June~~1998, 301997, ~~Six~~and ~~months~~period ~~ended~~from ~~June~~November 305, ~~since~~1996 (inception) to December 31, 1996 Deficit Accumulated accumulated Additional other during the Price per Preferred Stock Common Stock paid-in comprehensive development Date share Shares Amount Shares Amount capital income stage ------ --------- --------~~---~~ --------~~-------------------~~ ~~inception 2000 1999 2000 1999~~ -----------~~----~~ -------~~----~~ -------------- ------------ -------------- ~~Revenues~~Balances ~~Advertising~~at $November 15,~~534~~ $1996 ~~1,534~~- $ - - $ ~~1,534~~- - $ - ~~Product~~$ ~~130,517~~- $ - ~~11,190~~$ - ~~14,072~~Net loss - - - - - - -~~--------~~ -~~----------~~ -~~-------------~~ --------~~---~~ --------~~------~~ ~~132,051 1,534 11,190 1,534 14,072 Cost of sales 332,487 300,746 3,849 300,746 4,099~~ -----------~~----~~ -------~~----~~ -------------- ------------ -------------- ~~Gross~~Balances ~~profit~~at ~~(loss)~~December ~~(200~~31,~~436)~~ ~~(299,212)~~1996 ~~7,341~~- ~~(299,212)~~- ~~9,973~~- - -~~-------------~~ -~~----------~~ -~~-------------~~ -~~----------~~ -~~-------------~~ ~~Operating~~Issuance ~~Expenses~~of ~~Research~~stock ~~and~~for ~~development~~cash ~~3,150,224~~to ~~645,983~~organizers ~~204,235~~Jan-97 ~~1,558,834~~0.001 ~~330,068~~- ~~Selling~~- ~~expenses 1~~622,500 623~~,370~~ ~~193,289~~52 ~~88,795~~- ~~629,834~~- ~~176,955~~Issuance ~~General~~of ~~and~~stock ~~administrative~~for ~~2,414,468~~cash ~~359,122~~Feb-97 ~~323,701~~0.001 ~~649,790~~- ~~527,662~~- ~~Depreciation and amortization 596~~67,~~997~~500 ~~205,156~~67 ~~20,283~~8 ~~401,003~~- ~~38,660~~- ~~Compensation~~Issuance ~~expense~~of stock for ~~stock~~licence ~~options~~agreement ~~2,033,453~~Feb-97 ~~214,706~~- ~~454,218~~- ~~580,843~~- ~~705~~110,~~187~~742 ~~---------------~~111 ~~-----------~~(111) -~~-------------~~ -~~----------~~ ~~--------------~~Issuance ~~Total~~of ~~operating~~stock ~~expenses~~to ~~9,818,512~~employees ~~1,618,256~~for ~~1,091,232~~services ~~3,820,304 1,778,532~~ Sep-~~--------------~~97 ~~-----------~~0.333 -~~-------------~~ -~~----------~~ ~~--------------~~252,450 ~~Loss~~252 ~~from operations (10~~83,~~018,948)~~898 ~~(1,917,468)~~- ~~(1,083,891)~~- ~~(4,119,516)~~Issuance ~~(1,768,559)~~of ~~Other~~stock ~~income~~for ~~(expense)~~services ~~Interest~~Aug-97 ~~income~~1.092 ~~241,498~~- ~~9,913~~- 6637,~~278~~875 ~~34,835~~38 9741,~~247~~337 ~~Interest~~- ~~expense~~- ~~(118,229)~~Net ~~(31,417)~~loss ~~(668)~~for ~~(62,991)~~the ~~(2,909)~~year - - - -~~-----------~~ -~~----------~~ -~~-------------~~ -~~----------~~ -~~-------------~~ ~~123,269~~ (21335,~~504~~218) ~~65,610 (28,156) 94,338~~ --------~~-------~~ --------~~---~~ -----------~~---~~ -------~~----~~ -------------- ~~NET LOSS (9,895,679) (1,938,972) (1,018,281) (4,147,672) (1,674,221) Deduction for dividends and accretion (6,534,221)~~ - ~~(2,879,135) (64,360) (4,719,894)~~ -----------~~----~~ ----------- -~~-------------~~ ~~-----------~~Balances ~~--------------~~at ~~Net~~December ~~loss~~31, ~~attributable~~1997 to- ~~common~~- ~~stockholders~~- $- ~~(16~~1,~~429~~091,~~900)~~067 $(1,~~938,972)~~091 ~~$ (3~~125,~~897,416)~~184 ~~$(4,212,032)~~- $ (6335,~~394,115~~218) ~~=============== =========== ============== =========== ============== Net loss per common share - basic and diluted $~~ (~~2.37~~Continued) $ (0.14) $ (0.33) $ (0.32) $ (0.54) (Note 4) =============== =========== ============== =========== ============== Weighted-average number of shares outstanding - basic and diluted 6,925,800 13,479,105 11,877,002 13,035,217 11,877,002 =============== =========== ============== =========== ==============

Logio, Inc. (a ~~Development~~development ~~Stage~~stage ~~Company~~company) CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~CASH~~STOCKHOLDERS' ~~FLOWS~~EQUITY ~~(Unaudited)~~- ~~Cumulative~~CONTINUED ~~Six~~Nine ~~Months~~months ~~amounts~~ ended ~~June~~September 30, ~~since ------------------------------ inception~~ 2000 ~~1999 ------------- ------------- ------------- Increase~~ (~~decrease~~unaudited) ~~in cash~~ and ~~cash~~years ~~equivalents~~ended ~~Cash~~December ~~flows from operating activities Net loss $ (9~~31,~~895,679)~~ ~~$ (4~~1999,~~147,672)~~ ~~$ (1~~1998,~~674,221)~~ ~~Adjustments to reconcile net loss to net cash used in operating activities Depreciation & amortization 596~~1997,~~997~~ ~~401,003 38,660 Issuance of common stock~~ and ~~options~~period ~~for~~from ~~compensation~~November ~~and other expenses 2~~5,~~033,453~~ ~~580,843~~1996 ~~705,187~~(inception) ~~Issuance~~to ofDecember ~~warrants for consulting services 288~~31,~~000~~ ~~30,000~~1996 ~~129,051~~Deficit ~~Changes~~Accumulated inaccumulated ~~assets~~Additional ~~and~~other ~~liabilities~~during ~~Accounts~~the ~~receivable~~Price ~~(1,081)~~per ~~(345)~~Preferred ~~(427)~~Stock ~~Interest~~Common ~~receivable~~Stock paid-in ~~1,983~~comprehensive ~~(7,831)~~development ~~Prepaid~~Date ~~expenses~~share ~~and~~Shares ~~other~~Amount ~~assets~~Shares ~~(173,830)~~Amount ~~137,369~~capital -income ~~Accounts~~stage ~~payable 580,705 274,356 45,076 Accrued expenses 104,541 18,222 20,336~~ ------~~-------~~ ---------~~----~~ --------~~-----~~ ~~Total adjustments 3,428,785 1,443,431 930,052~~ --------~~-----~~ ------------- -------~~------~~ ~~Net cash used in operating activities (6,466,894) (2,704,241) (744,169)~~ ------------- ------------- ------------- ~~Cash~~Issuance ~~flows~~of ~~from~~stock ~~investing~~for ~~activities~~cash ~~Purchases~~Jul-98 of4.17 ~~property~~- ~~and~~- ~~equipment (1~~120,~~399,699)~~000 ~~(91,547)~~120 ~~(329~~499,~~988)~~880 ~~(Increase)~~- ~~decrease in short~~-~~term~~ ~~investments~~Reverse ~~(341,037)~~acquisition ~~1,113,170~~and ~~(1,516,682)~~reorganization ~~Repayment~~adjustment ofJul-98 ~~notes~~- ~~receivable~~- ~~from~~- ~~related parties 116~~9,~~942~~885,435 19,~~197~~886 ~~100~~(8,~~200~~550) ~~Notes~~- ~~receivable~~- ~~issued~~Issuance toof ~~related~~stock ~~parties~~for ~~(117,700)~~cash Jul-98 ~~(2,615)~~0.725 ~~Increase~~- in- ~~deposits (5~~690,~~877)~~000 ~~134~~690 10499,~~152~~310 -~~------------~~ -~~------------~~ ~~-------------~~Issuance ~~Net~~of ~~cash~~stock ~~provided~~for bydebt ~~(used~~conversion ~~in)~~Jul-98 ~~investing~~0.96 ~~activities~~- ~~(1,747,371)~~- 113,~~022,954~~500 (113 12,~~738,933)~~987 -~~------------~~ -~~------------~~ ~~-------------~~Issuance ~~Cash flows from financing activities Proceeds from issuance~~ of ~~common~~ stock ~~2,215,211~~for ~~907,600~~services Oct-98 ~~Proceeds~~1.90 ~~form~~- ~~issuance~~- of39,000 ~~preferred~~39 ~~stock 6~~70,~~300,000~~161 - ~~6,300,000~~- ~~Cash~~Issuance ~~paid~~of stock for ~~fees~~software ~~associated~~technology ~~with~~Oct-98 ~~preferred~~1.80 ~~stock~~- ~~issuance~~- ~~(392~~13,~~100)~~000 -13 ~~(392~~23,~~100)~~387 ~~Proceeds~~- ~~from~~- ~~issuance~~Issuance of ~~notes~~stock ~~payable~~for toinsurance ~~related~~coverage ~~parties~~Nov-98 ~~500,000~~1.00 ~~500,000~~- - ~~Principal payments under capital lease obligations (480~~25,~~468)~~000 ~~(193,624)~~25 (824,~~350)~~975 ~~Proceeds~~- ~~from~~- ~~issuance~~Net ofloss ~~long~~for ~~term~~the ~~obligations~~year ~~and~~- ~~notes~~- ~~payable~~- ~~998,682~~- - - ~~Principal~~- ~~payments of long~~-~~term~~ ~~obligations and notes payable~~ (~~593~~482,~~572~~909) ~~(254,572) (120,000)~~ ------~~-------~~ ---------~~----~~ --------~~-----~~ ~~Net cash provided by financing activities 8,547,753 959,404 5,779,550~~ --------~~-----~~ ------------- -------~~------~~ ~~Net increase (decrease) in cash and cash equivalents 333,488 (721,883) 3,296,448 Cash and cash equivalents at beginning of period~~ - ~~1,055,371 425,702~~ ------------- ------------- ------------- ~~Cash~~Balances ~~and cash equivalents~~ at ~~end~~December ~~of period $ 333~~31,~~488~~ $1998 ~~333,488 $ 3,722,150 ============= ============= ============= Supplemental disclosures of cash flow information: Cash paid for interest $ 112,280 $ 63,152 $ 2,990 Cash paid for income taxes~~ - - - ~~Non~~-~~cash~~ ~~financing activities: During the six months ended June 30~~11, ~~2000 and 1999~~877,002 ~~the Company purchased $65~~11,~~686~~877 ~~and $0~~1, ~~respectively~~247,334 in- ~~property and equipment through capital lease obligations. Also during the six months ended June 30~~(818,127) 2000, a total of 6,300 shares of the Company's convertible preferred stock were converted into 625,000 shares of the Company's common stock. Convertible preferred shareholders were also issued 727,756 and 61,650 shares of the Company's common stock during the three months ended June 30, 2000 for reset provisions and cumulative dividends, respectively (~~Note 3~~continued)~~. The unrealized gain on short-term investments totaled $5,540 for the six months ended June 30, 2000.~~

Logio, Inc. (a development stage company) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ~~Six~~- CONTINUED Nine months ended ~~June~~September 30, 2000 (unaudited) and years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996 Deficit Accumulated accumulated Additional other during the Price per Preferred Stock Common Stock paid-in comprehensive development Date share Shares Amount Shares Amount capital income stage ------~~-------~~ ---------- --------~~---~~ ---------- ------------- -------~~---~~ ~~Balances at November 5, 1996~~ - $ - - $ - - $ - ~~Net loss~~ - - - - - - ----------- -~~---------~~ ------------- ~~----------~~Issuance ~~Balances~~of atwarrants ~~December~~for ~~31,~~consulting ~~1996~~services Jan-99 - - - - - 258,000 - - Issuance of preferred stock for cash, tonet ~~organizers~~of ~~Jan~~offering costs Feb-9799 ~~0.001~~1,000 6,100 61 - - ~~622~~5,~~500~~719,839 ~~623~~- - Issuance of preferred stock for cash, ~~Feb~~net of offering costs Mar-9799 ~~0.001~~1,000 200 2 - - 67187,~~500~~998 67- - Issuance of common stock for ~~licence~~exercise ~~agreement~~of ~~Feb-97~~options Jun-99 0.11 - - ~~110~~2,~~742~~000 ~~111~~2 21,998 - - Issuance of common stock tofor ~~employees~~exercise ~~for~~of ~~services~~options ~~Sep~~Aug-9799 0.~~333~~10 - - ~~252~~4,~~450~~000 ~~252~~4 396 - - Issuance of common stock for ~~services~~conversion ~~Aug~~of debt Dec-9799 13.~~092~~25 - - 378,~~875~~000 388 ~~Net~~25,992 ~~loss for the year~~ - - -Issuance -of -stock -options ~~-----------~~to ~~----------~~employees Jan-~~------------~~ ~~----------~~for ~~Balances~~compensation atDec ~~December~~99 ~~31,~~- ~~1997~~ - - - - 1,~~091~~430,~~067~~610 ~~1,091~~- ~~Issuance~~- Accretion of intrinsic value of preferred Feb- stock ~~for~~Dec ~~cash~~99 ~~Jul~~-98 ~~4.17~~- - - ~~120~~- 6,~~000~~131,944 ~~120~~- (~~Continued~~6,131,944) ~~Deficit~~Dividends ~~Accumulated~~on ~~accumulated~~preferred ~~Additional~~Feb- ~~other~~stock ~~during~~Dec ~~the~~99 ~~paid~~-in ~~comprehensive~~- ~~development~~- ~~capital~~- ~~income~~- ~~stage~~337,917 - (337,917) Unrealized gain on short-term investments - - - - - -~~------~~ -~~----------~~ 7,940 -~~-----------------~~ ~~Balances~~Net atLoss ~~November~~for 5,the ~~1996~~year $- - $- - $ - ~~Net loss~~ - - - (4,929,880) --------~~------~~ --------~~---~~ ----------- ------- ~~Balances at December 31, 1996 Issuance of stock for cash to organizers 52~~ - - ~~Issuance of stock for cash 8~~ - - ~~Issuance of stock for licence agreement (111)~~ - - ~~Issuance of stock to employees for services 83,898~~ - - ~~Issuance of stock for services 41,337~~ - - ~~Net loss for the year~~ - - ~~(335,218)~~ -------------- ----------- -~~-----------------~~ Balances at December 31, ~~1997~~1999 ~~125,184~~- - ~~(335~~6,~~218)~~300 ~~Issuance~~63 of11,891,002 ~~stock~~11,891 ~~for~~15,362,028 ~~cash~~7,940 ~~499~~(12,~~880~~217,868) ~~- -~~(Continued)

Logio, Inc. (a development stage company) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED ~~Six~~Nine months ended ~~June~~September 30, 2000 (unaudited) and years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996 Deficit Accumulated accumulated Additional other during the Price per Preferred Stock Common Stock paid-in comprehensive development Date share Shares Amount Shares Amount capital income stage ------ --------- -------- -------- ----------- ------- --- --------- ------------ ---------- -- ~~Reverse~~Issuance ~~acquisition~~of ~~and~~common ~~reorganization~~stock ~~adjustment~~for ~~Jul-98~~exercise -of options Jan 00 0.10 - - 92,~~885,435~~000 ~~9,886~~2 198 - - Issuance of common stock for ~~cash~~exercise ~~Jul-98~~of 0warrants Jan 00 5.~~725~~00 - - ~~690~~100,000 ~~690~~100 ~~Issuance~~499,900 - - Conversion of preferred stock ~~for~~to ~~debt~~common ~~conversion~~stock ~~Jul-98~~Feb ~~0.96~~00 - ~~- 13~~(2,500) 13(25) 248,016 248 (223) - - Issuance of common stock for ~~services~~exercise ~~Oct-98~~of 1options Mar 00 0.9010 - - 3912,000 3912 1,188 - - Issuance of common stock for ~~software~~exercise ~~technology~~of ~~Oct-98~~warrants 1Mar 00 7.8000 - - 1358,000 1358 ~~Issuance~~405,942 - - Conversion of preferred stock ~~for~~to ~~insurance~~common ~~coverage~~stock ~~Nov-98~~Mar 1.00 - -(3,800) 25(38) 376,~~000~~984 25377 ~~Net~~(339) ~~loss~~- - Issuance of common stock for ~~the~~reset ~~year~~shares -Mar -00 - - - -727,756 728 (728) -~~----------~~ -~~---------~~ ~~-------------~~Dividends ~~----------~~on preferred Jan- ~~Balances~~stock atMar ~~December~~00 ~~31,~~- ~~1998~~ - - - - 1164,~~877,002~~360 ~~11,877~~- (64,360) Issuance of ~~warrants~~common stock for ~~consulting~~preferred ~~services~~dividends ~~Jan~~paid Mar-9900 - - - 61,650 62 (62) - - Issuance of ~~perferred~~common stock for ~~cash,~~exercise ~~net~~ of ~~offering~~options ~~costs~~Apr-00 ~~Feb~~0.10 -99 1- 2,000 ~~6,100~~2 61198 - - Issuance of ~~perferred~~ stock for ~~cash,~~conversion ~~net~~ of ~~offering~~notes ~~costs~~0.20- ~~Mar~~payable (Note 3) Sep-9900 10.2510 - - 3,165,000 ~~200~~3,165 2806,514 - - ~~(Continued)~~Issuance ~~Deficit~~of ~~Accumulated~~stock ~~accumulated~~for ~~Additional~~conversion ~~other~~of ~~during~~notes ~~the~~payable ~~paid-in~~to ~~comprehensive~~shareholders ~~development~~0.81- ~~capital~~(Notes ~~income~~2 ~~stage~~and 3) Sep-~~-------------~~00 0.82 -~~----------~~ -~~-----------------~~ ~~Reverse~~626,422 ~~acquisition~~626 ~~and reorganization adjustment (8~~511,~~550)~~040 - - Issuance of ~~stock~~warrants for ~~cash~~consulting ~~499,310~~May - -services ~~Issuance~~Sep of00 ~~stock~~- ~~for~~- ~~debt~~- ~~conversion~~- 12- 90,~~987~~000 - - Issuance of stock options to employees for ~~services~~Jan 70- compensation Sep 00 - - - - - 631,~~161~~242 - - ~~Issuance~~Unrealized ofgain ~~stock~~on ~~for~~Jan- ~~software~~marketable ~~technology~~securities 23Sep 00 - - - - - - 6,~~387~~071 - Net realized gain on Jan- ~~Issuance~~marketable ofsecurities ~~stock~~Jun ~~for~~00 ~~insurance~~- ~~coverage~~- ~~24,975~~- - - - (14,011) - Net loss for the ~~year~~interim period ended September 30, 2000 - - - - - - - - (~~482~~4,~~909~~955,743) -------- -------- ----------- ------- ------------ ------------ ------------ Balances at ~~December~~September 3130, ~~1998~~2000 ~~1,247,334~~- - ~~(818,127~~- ~~Issuance~~$ of- ~~warrants~~17,270,830 ~~for~~$17,271 ~~consulting services 258~~$18,~~000~~371,258 -$ - ~~Issuance of perferred stock for cash~~$(17,237,971) ~~net~~======== of======== ~~offering~~=========== ~~costs~~======= ~~5,719,839~~============ -============ -============ ~~Issuance~~The ofaccompanying ~~perferred~~notes ~~stock~~are ~~for~~an ~~cash,~~integral ~~net~~part of ~~offering~~this ~~costs~~financial ~~187,998 - - (Continued)~~statement

Logio, Inc. (a development stage company) CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~STOCKHOLDERS'~~CASH ~~EQUITY~~FLOWS ~~- CONTINUED Six months ended June 30, 2000~~ (~~unaudited~~Unaudited) ~~and~~Cumulative ~~years~~amounts ~~ended~~Nine ~~December~~months ~~31,~~since ~~1999,~~ended ~~1998,~~September ~~1997~~30, ~~and period from November 5, 1996 (~~inception) to2000 ~~December~~1999 ~~31, 1996 Price per Common Stock Common Stock Date share Shares Amount Shares Amount~~ ------------- ---------- ---~~--------~~ ---------- ---~~----------~~ ~~----------~~Increase ~~Issuance~~(decrease) ofin ~~common~~cash ~~stock~~and ~~for~~cash ~~exercise~~equivalents ofCash ~~options~~flows ~~Jun-99~~from ~~0.11~~operating -activities -Net 2loss $(10,~~000~~703,750) $ (4,955,743) $ (2,962,161) ~~Issuance~~Adjustments ofto ~~common~~reconcile ~~stock~~net ~~for~~loss ~~exercise~~to net cash used in operating activities Depreciation & amortization 802,134 606,141 80,949 Loss on disposal of ~~options~~equipment ~~Aug-99~~2,215 ~~0.10~~2,215 - -Bad 4debt expense 6,000 46,000 - Financing charge for stock conversion 133,703 133,703 - Issuance of common stock ~~for~~and ~~conversion~~options offor ~~debt~~compensation ~~Dec-99~~and ~~3.25~~other -expenses -2,083,853 8631,~~000~~242 81,135,988 Issuance of ~~stock~~warrants ~~options~~for toconsulting ~~employees~~services ~~for~~348,000 ~~compensation~~90,000 ~~Jan-Dec~~171,552 99Extraordinary -gain -(204,238) -(204,238) - -Changes ~~Accretion~~in ofassets ~~intrinsic~~and ~~value~~liabilities ofAccounts ~~preferred~~receivable ~~stock~~(34,815) ~~Feb~~(34,079) -(1,485) ~~Dec~~Interest 99receivable - -1,983 -(3,840) -Prepaid -expenses ~~Dividends~~and onother ~~preferred~~assets ~~stock~~(68,748) ~~Feb-Dec~~242,451 9915,294 -Accounts -payable -99,866 -(77,336) -56,428 ~~Unrealized~~Accrued ~~gain~~expenses on57,091 ~~short-term~~(14,586) ~~investments~~7,607 - - - ---------- ------------- ------------- ~~Net~~Total ~~Loss~~adjustments ~~for~~3,225,061 ~~the~~1,383,496 ~~year~~1,462,493 - - - - --------- ------------- ------------- Net cash used in operating activities (7,478,689) (3,572,247) (1,499,668) ------------- ------------- ------------- ~~Balances~~Cash atflows ~~December~~from ~~31,~~investing ~~1999~~activities $Purchases ~~6,300~~of 63property 11and equipment (1,~~891~~387,~~002~~428) 11(92,~~891~~829) (~~Continued~~751,981) ~~Deficit~~(Increase) ~~Accumulated~~decrease ~~accumulated~~in ~~Additional~~short-term ~~other~~investments ~~during~~- ~~the~~1,454,207 ~~paid~~(3,065,648) Repayment of notes receivable from related parties 117,700 1,955 - Notes receivable issued to related parties (117,700) - 97,531 (Increase) decrease in ~~comprehensive~~other ~~development~~assets ~~capital~~(5,811) ~~income~~200 ~~stage~~(5,076) -------------- ----------- -- -------------~~---~~ ~~Issuance~~Net ofcash ~~common~~provided ~~stock~~by ~~for~~(used ~~exercise~~in) ofinvesting ~~options~~activities 21(1,~~998~~393,239) 1,363,533 (3,725,174) ------------- ------------- ~~Issuance~~------------- Cash flows from financing activities Proceeds from issuance of common stock ~~for~~2,292,762 ~~exercise~~907,600 22,400 Proceeds form issuance of ~~options~~preferred ~~396~~stock -6,300,000 - ~~Issuance~~6,300,000 ofCash ~~common~~paid ~~stock~~ for ~~conversion~~fees ofassociated ~~debt~~with 25preferred stock issuance (392,~~992~~100) - -(392,100) ~~Issuance~~Proceeds from issuance of ~~stock~~notes ~~options~~payable to ~~employees~~related ~~for~~parties ~~compensation~~1,423,000 1,~~430~~423,~~610~~000 - -Principal ~~Accretion~~payments of ~~intrinsic~~notes ~~value~~payable ~~preferred~~to ~~stock~~related 6parties (250,~~131~~000) (250,~~944~~000) - Principal payments under capital lease obligations (6532,~~131~~401) (267,~~944~~556) ~~Dividends~~(16,006) onProceeds ~~preferred~~from ~~stock~~issuance ~~337~~of long term obligations and notes payable 998,~~917~~682 - ~~(337,917)~~- ~~Unrealized~~Principal ~~gain~~payments onof ~~short~~long-term ~~investments~~obligations -and 7notes payable (796,~~940~~789) (488,475) (120,000) ------------- ------------- ------------- Net ~~Loss~~cash ~~for~~provided ~~the~~by ~~year~~financing -activities -9,043,154 (41,~~929~~324,~~880)~~569 5,794,294 ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents 171,226 (884,145) 569,452 Cash and cash equivalents at beginning of period - 1,055,371 425,702 ------------- ------------- ~~Balances~~------------- Cash and cash equivalents at ~~December~~end 31of period $ 171,226 ~~1999~~$ 15171,~~362~~226 $ 995,~~028~~154 7============= ============= ============= Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 147,~~940~~679 ~~(12~~$ 98,~~217~~551 $ 3,~~868)~~673 ~~(Continued)~~Cash paid during the period for income taxes - - -

Logio, Inc. (a development stage company) CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Unaudited) Non-cash financing activities: During the nine months ended September 30, 2000 and 1999, the Company purchased $65,685 and $3,594, respectively, in property and equipment through capital lease obligations. Also during the nine months ended September 30, 2000, a total of 6,300 shares of the Company's convertible preferred stock were converted into 625,000 shares of the Company's common stock. Convertible preferred shareholders were also issued 727,756 and 61,650 shares of the Company's common stock during the nine months ended September 30, 2000 for reset provisions and cumulative dividends, respectively (Note 3). During the nine months ended September 30, 2000, the Company settled $244,670 in vendor payables for $51,225 in cash and $70,000 in stock. These settlements resulted in $123,445 of forgiven debt and extraordinary gain. During the nine months ended September 30, 2000, the Company settled $290,793 in notes payable and accrued interest for $210,000 in cash. This settlement resulted in $80,793 of forgiven debt and extraordinary gain. During the nine months ended September 30, 2000, the Company converted a total of $676,246 in debt and interest to 3,165,000 shares of the Company's common stock at prices ranging from $0.2012 to $0.2510 per share. The conversions resulted in a financing charge of $133,703 representing those conversions with price differences between fair market values of the common stock on the dates of conversion and the conversion prices. During the nine months ended September 30, 2000, the Company converted a total of $500,000 in notes payable to shareholders and interest of $11,666 into 626,422 shares of the Company's common stock at prices ranging from $0.81 to $0.82 per share. The conversions resulted in an extraordinary gain of $315,909 representing those conversions with price differences between fair market values of the common stock on the dates of conversion and the conversion prices. The accompanying notes are an integral part of these financial statements Logio, Inc. (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 and 1999 (Unaudited) NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION Logio, Inc., formerly WordCruncher Internet Technologies, Inc., (the Company) is a development stage company engaged in the development and marketing of a focused Internet directory and search engine which serves the needs of the business professional. The Company commenced planned principal operations on March 19, 2000 of its Internet portal and directory, but has not produced any significant revenues. On September 29, 2000, the Company changed its focus from its business Internet portal to its continuing developmental efforts on the Logio business directory. The Company was incorporated on November 5, 1996 in the State of Utah under the name of Redstone Publishing, Inc. During July 1998, the Company merged with Dunamis, Inc. a public Company organized in the State of California. The merger was recorded as a reverse acquisition, therefore WordCruncher is the accounting survivor. In connection with the merger, Dunamis, the legal survivor, changed its name to WordCruncher Internet Technologies, Inc. and changed its domicile to the State of Nevada. The Company's headquarters are in Draper, Utah. On April 18, 2000, the Board of Directors approved the change of the Company's name to Logio, Inc. The change was approved by the Company's stockholders in June 2000. The Company also amended its articles of incorporation and filed the appropriate documents with the state of Nevada in June 2000 when the Company officially changed its name to Logio, Inc. The Company conducts its business within one industry segment. The accompanying unaudited consolidated financial statements reflect all adjustments, consisting 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. NOTE 2 - SETTLEMENT OF LIABILITIES During the nine months ended September 30, 2000, the Company settled $244,670 of vendor payables for $51,225 in cash and $70,000 in stock. These settlements resulted in $123,445 of forgiven debt and extraordinary gain. Also during the nine months ended September 30, 2000, the Company settled $290,793 in notes payable and accrued interest for $210,000 in cash. This settlement resulted in $80,793 of forgiven debt and extraordinary gain. Logio, Inc. (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 and 1999 (Unaudited) NOTE 2 - SETTLEMENT OF LIABILITIES (Continued) In June 2000, the Company was loaned $500,000 from three principal shareholders and officers of the Company in exchange for notes payable bearing interest of 8% annually. Principal and interest were due in full on July 1, 2001. The notes were not collateralized. On September 26, 2000 the Company converted the notes and $11,666 of accrued interest into 626,422 of the Company's common stock at $0.81 to $0.82 per share, which represents prices in excess of the fair market value ($0.3125) of the common shares on the date of conversion. The Company was also released from approximately $406,000 of other long-term commitments with certain of its vendors that would have expired through April 2002 by obtaining releases and giving consideration through settlements as discussed above. NOTE 3 - SHAREHOLDERS' EQUITY Preferred stock conversion -------------------------- In February and March 2000, holders of the Company's convertible preferred stock converted 6,300 preferred shares into 625,000 common shares. The preferred stockholders also received 727,756 shares of the Company's common stock in conjunction with the "reset" provisions of the preferred stock agreement. Common stock totaling 61,650 shares were also issued to preferred shareholders representing a six percent cumulative dividend. Stock purchase agreement ------------------------ On July 6, 2000, the Company signed a purchase agreement with five investors for the sale of two million shares of its common stock for a total purchase price of $1.4 million. The terms of the agreement required the deposit of $1.4 million into an escrow account before July 31, 2000. The monies were agreed to be released to the Company upon the effective registration of the shares with the Securities and Exchange Commission on or before October 31, 2000. In September 2000, the Securities and Exchange Commission declared the registration effective. As of September 30, 2000, the investors have not released the funds and are in default of the agreement. Conversion of notes payable to equity ------------------------------------- In September 2000, the Company was advanced a total of $603,000 from various parties to fund the settlement of liabilities in the form of notes payable. Also in September 2000 the Company then converted the notes payable and $2,976 of accrued interest into 2,815,000 of the Company's common stock at prices ranging from $0.2012 to $0.251 per share. The conversion prices did not represent the fair market value of the common shares on the date of conversion. As such, the Company incurred $88,576 in financing charges. Logio, Inc. (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 and 1999 (Unaudited) NOTE 3 - SHAREHOLDERS' EQUITY (Continued) Conversion of notes payable to equity - continued ------------------------------------------------- In September 2000, a corporation assumed $130,045 in liability from one of the Company's vendors. Also in September 2000, the Company converted $70,000 of this liability into 350,000 shares of the Company's common stock and was forgiven of $60,045 in liability by the assuming creditor (as discussed above). The liability was converted at $0.20 per share, which did not represent the fair market value of the Company's common shares on the date of conversion. As such, the Company incurred $45,127 in financing charges. As discussed in Note 2, in September 2000, the Company converted $511,666 of notes payable and interest to shareholders to 626,422 shares of its common stock. The fair market value of the shares on the date of conversion was $0.3125 and the conversion prices ranged from $0.81 to $0.82 per share. NOTE 4 - NET LOSS PER COMMON SHARE

~~Logio,~~Cumulative ~~Inc.~~amounts (aThree ~~development stage company) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED Six~~ months ended ~~June~~Nine ~~30,~~months ~~2000 (unaudited) and years~~ ended ~~December~~since ~~31,~~September ~~1999~~30, ~~1998,~~September ~~1997~~30, ~~and period from November 5, 1996 (~~inception) to2000 ~~December~~1999 ~~31,~~2000 ~~1996~~1999 ~~Price per Preferred Stock Common Stock Date share Shares Amount Shares Amount~~ ------------- ---------- -- --------- ----~~------~~ ------------- ---------- ~~Issuance of common stock for exercise of options Jan 00 0.10~~ - - ~~2,000~~Common 2shares ~~Issuance~~outstanding ofduring ~~common~~the ~~stock~~entire ~~for~~period ~~exercise of warrants Jan 00 5.00~~ - -13,479,408 ~~100~~11,~~000~~879,002 ~~100 Conversion of preferred stock to common stock Feb 00 - (2~~11,~~500)~~891,002 ~~(25) 248~~11,~~016~~879,002 ~~248 Issuance of common stock for exercise of options Mar 00 0.10~~ Weighted-average ~~- 12,000 12 Issuance of~~ common ~~stock~~shares ~~for~~issued ~~exercise~~during ofthe ~~warrants~~period ~~Mar 00~~ 7~~.00 - - 58~~,~~000~~839,426 ~~58 Conversion of preferred stock to common stock Mar 00 - (~~3,~~800)~~165,000 ~~(38) 376~~2,~~984~~609 ~~377 Issuance of common stock for reset shares Mar 00 - - - 727~~1,~~756~~618,124 ~~728~~879 ~~Dividends on preferred stock Jan~~-~~Mar 00~~ - - - - - ~~Issuance of common stock for preferred dividends paid Mar 00~~ - - - ~~61,650 62 Issuance of common stock for exercise of options Apr~~-~~00 0.10~~ - - ~~2,000 2 Issuance of warrants for consulting services May~~-~~Jun 00 Issuance of stock options to employees for compensation Jan~~-~~Jun 00~~ - - - - - ~~Unrealized gain on marketable securities Jan~~-~~Jun 00~~ - - - - - ~~Net loss for the interim period ended June 30, 2000~~ - - - - - ------- ---- ---------- ------------- Weighted-~~---------~~average ~~Balances~~common atshares ~~June~~used ~~30,~~in ~~2000~~basic -EPS -7,839,426 ~~$ - 13~~16,~~479~~644,408 $11,881,611 13,~~480~~509,126 ~~===========~~11,879,881 ~~==========~~Dilutive ~~=============~~effects ~~==========~~of ~~(Contineud)~~potential ~~Deficit~~common ~~Accumulated~~shares ~~accumulated~~- ~~Additional~~- ~~other~~- ~~during~~- ~~the paid~~-in ~~comprehensive development capital income stage~~ -------------- ------------ ------------- ----- ~~Issuance of common stock for exercise of options 198~~ - - ~~Issuance of common stock for exercise of warrants 499,900~~ - - ~~Conversion of preferred stock to common stock (223)~~ - - ~~Issuance of common stock for exercise of options 1,188~~ - - ~~Issuance of common stock for exercise of warrants 405,942~~ - - ~~Conversion of preferred stock to common stock (339)~~ - - ~~Issuance of common stock for reset shares (728)~~ - - ~~Dividends on preferred stock 64,360~~ - ~~(64,360) Issuance of common stock for preferred dividends paid (62)~~ - - ~~Issuance of common stock for exercise of options 198~~ --- Weighted-average ~~Issuance~~number of ~~warrants~~common ~~for~~shares ~~consulting~~and ~~services~~dilutive ~~30,000~~potential ~~Issuance~~common of stock ~~options~~used toin ~~employees~~diluted ~~for~~EPS ~~compensation 580~~7,~~843 - - Unrealized gain on marketable securities - 5~~839,~~540~~426 ~~- Net loss for the interim period ended June 30~~16, ~~2000 - - (4~~644,~~147,672)~~408 ~~-------------- ----------- ------------------ Balances at June 30~~11, ~~2000 $16~~881,~~943,305~~611 $ 13,~~480~~509,126 ~~$ (16~~11,~~429~~879,~~900)~~881 ============ ============ ============= ============= ============

The computation of net loss per common share is based on the weighted-average number of shares outstanding during each period presented. Diluted loss per common share would include the dilutive potential effects of options, warrants, and convertible and reset features of series A preferred stock, but were not included in the calculation of diluted net loss per common share because their effects were anti-dilutive. Logio, Inc. (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 and 1999 (Unaudited) NOTE 5 - EQUITY INCENTIVE PLAN On April 18, 2000, the Board of Directors adopted the Logio, Inc. 2000 Equity Incentive Plan (the Plan). The Plan allows for the granting of awards in the form of stock options, stock appreciation rights or restricted shares to employees, independent directors and certain consultants. The Company may grant awards representing up to 2,500,000 shares of the Company's common stock under the Plan. This includes 1,450,116 options, each to purchase one share of the Company's common stock, outstanding as of September 30, 2000. The Plan was approved by the Company's stockholders in June of 2000. During the nine months ended September 30, 2000, the Company granted 1,283,000 options, each to purchase one share of the Company's common stock to employees, directors and certain consultants at exercise prices ranging from $0.625 to $7.7813 per share. Approximately 886,834 of these options were forfeited during the nine months ended September 30, 2000. Common stock issued in relation to the exercise of warrants and options during the nine months ended September 30, 2000 totaled 174,000 shares. On May 15, 2000, the Company entered into an agreement with a consultant to provide investor relations, public relations, and fulfillment services related to financing in exchange for warrants. A total of 200,000 warrants were issued at an exercise price of $3.00 per share and an additional 200,000 warrants were issued at an exercise price of $4.00 per share under the terms of this agreement. Vesting of the warrants commenced as follows: 25% on agreement date (May 15, 2000), 25% on June 30, 2000, and 50% on September 30, 2000. Consulting charges related to this agreement total $90,000 representing the fair market value of the services performed through September 30, 2000. The agreement terminates on January 15, 2001 when the services are completed. The vested warrants expire on May 15, 2005. NOTE 6 - LETTER OF INTENT On September 29, 2000, the Company entered into a letter of intent with Pacific WebWorks, Inc. (Pweb). The letter outlines, among other things, Pweb's intent to acquire Logio, Inc. for an estimated ratio of one Pweb common share for every 6.6 shares of Logio, Inc., which is estimated to total 2,700,000 Pweb shares. Logio, Inc. and Pweb underwent a 30-day due diligence period to evaluate and conclude the acquisition. NOTE 7 - CONTINGENCY The Company is currently in dispute with one of its vendors for services that were not performed adequately, not received or not requested. The vendor is currently reviewing approximately $130,000 of billings that the Company claims are erroneous. The Company intends to rigorously defend itself against any portion of the over-billings that may be re-submitted by the vendor. NOTE 8 - SUBSEQUENT EVENTS Conversion of note payable to equity ------------------------------------ In October 2000, the Company was advanced $169,300 from a related party to fund the Company through the possible acquisition discussed in Note 6. The Company converted this note into 1,150,000 shares of its common stock. The conversion price did not represent the fair market value of the common shares on the date of conversion. As such, the Company incurred $83,700 in financing charges. Issuance of stock for exercise of options ----------------------------------------- In October 2000, the Company issued 5,000 shares of its common stock to an employee who exercised stock options. Agreement and plan of reorganization ------------------------------------ On October 31, 2000, the Company entered into an Agreement and Plan of Reorganization (Plan) with Pweb. The Plan includes the transfer of 18,425,830 shares of the Company's common stock in exchange for 2,800,000 shares of Pweb's common stock subject to the provisions of the Plan. Pweb has also committed to file a registration statement with the Securities Exchange Commission to cover the 2,800,000 shares issued pursuant to the Plan. Upon approval of the Plan by the Company's stockholders, the Company will be a wholly owned subsidiary of Pweb. Item 2. Management's Discussions and Analysis of Financial Condition and Results of Operations. The purpose of this section is to discuss and analyze the Company's financial condition, liquidity and capital resources and the results of operations. This analysis should be read in conjunction with the unaudited interim financial statements and related footnotes contained herein and with the Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Overview Logio, Inc., formerly WordCruncher Internet Technologies, Inc., is a development stage company engaged in the development and marketing of a focused Internet directory and search engine which serves the needs of the business professional. From November 5, 1996 (inception) to September 30, 2000, the Company's activities related primarily to attracting employees, raising capital, purchasing assets, developing WordCruncher software, the Logio site, search engine, and directory and implementing sales and marketing programs. As such, the reported financial information is not necessarily indicative of the Company's future operating results or of its future financial condition. Content and services found at the Company's web site, logio.com, became available on March 19, 2000, and was tailored to provide, under one roof, a broad spectrum of the information and services that are required by business people in their daily work activities. Information resources included a unique, readily accessible "drill down" directory that organizes thousands of business-oriented web sites and pages according to specific professional discipline and function. The directory is augmented by an advanced search technology that can search either the abstracts or the full text of all sites listed in the directory, and then displays the search results in a "hits-in-context" format. The Company intends to expand the delivery of this full service concept into other forms of commerce such as online business-to-business purchasing, and private labeling of the Company's directory product. In June 2000, the board of directors, due in part to changing market conditions and ongoing operating losses, named Kenneth W. Bell as the new chief executive officer of the Company. Mr. Bell undertook an immediate evaluation of all aspects of the Company's operations, including product development, sales and marketing approaches, product positioning, employees and management, contracts and agreements, and significant costs incurred by the Company. As a result of Mr. Bell's recommendations, the Company repositioned its strategic direction, reduced headcount, re-negotiated and settled contracts, and aggressively pursued new financing sources. Budgets were established for sales and costs related to Logio products and operations. Executive management continually monitored progress related to the Company's sales and cost reduction goals in order to reduce losses and achieve sales growth and profitability. Sales of the Company's directory did not meet budgeted expectations and, despite the measures taken to reduce costs, the Company continued to suffer losses, although at a reduced rate. As a result of these ongoing losses and the continuing decline in the market price for the Company's common stock, the Company's agreed upon funding was withdrawn and other traditional financing sources became unavailable at acceptable terms. Due to the continuing negative trends in the Internet industry and markets, the trading price of the Company's stock continued to decline throughout third quarter 2000. Because of these conditions and the resulting lack of funding, the Company's board of directors approved the pursuit of merger, acquirer, strategic partnership, joint partnership or other forms of continuation that could potentially provide value to the stockholders of the Company. In September 2000, the Company entered into a letter of intent with Pacific WebWorks, Inc. The letter includes Pacific WebWorks' intent to acquire Logio, Inc. for an estimated ratio of one Pacific WebWorks, Inc. common share in exchange for every 6.6 Logio, Inc. shares, which is estimated to total 2,700,000 Pacific WebWorks, Inc. shares. Logio, Inc. and Pacific WebWorks, Inc. underwent a 30-day due diligence period to evaluate and conclude the acquisition. In conjunction with the proposed sale of Logio, Inc. to Pacific WebWorks, Inc., Logio has temporarily discontinued its development activities and preliminary operations related to the Logio business directory. On October 31, 2000, the Company entered into an Agreement and Plan of Reorganization (Plan) with Pacific WebWorks, Inc. The Plan includes the transfer of 18,425,830 shares of the Company's common stock in exchange for 2,800,000 shares of Pacific WebWorks, Inc. common stock subject to the provision of the Plan. Pacific WebWorks, Inc. has also committed to file a registration statement with the Securities Exchange Commission to cover the 2,800,000 shares issued pursuant to the Plan. Upon approval of the Plan by the Company's stockholders, the Company will be a wholly owned subsidiary of Pacific WebWorks, Inc. The proposed sale of Logio, Inc. to Pacific WebWorks, Inc. is subject to the approval of the stockholders of Logio and may not be completed. In such case Logio would not have any current operations and its assets would consist of approximately $1,755,000 in total assets, which includes cash, net accounts receivable, net property and equipment and other assets. Liabilities would consist of approximately $605,000 based on its unaudited September 30, 2000 financial statements. If the sale is not completed, Logio would most likely seek to merge with another entity, sell its operations or net assets, or seek to acquire another business or operations but it may not be able to do so in the near term, if at all, with the resources available. The Company's initial revenue related to the Logio directory has been derived from sales of advertising on the site in second and third quarters 2000. Traffic to the site ultimately drives the ability to generate such revenue. As the Company is in its development stage, it has not yet recognized significant advertising or sponsorship revenues. The Company's current business model pending the sale of the Company to Pacific WebWorks, Inc. is directed towards the generation of revenues from set-up and maintenance fees resulting from the sale of its directory in private label form to certain Internet sites and corporate intranets. The Company is uncertain as to when it will emerge from the development stage. Cost of sales consist primarily of fees paid to third party service providers for use of their content and services, certain costs related to site operations, and costs related to the insertion of banner and other advertisements. Research and development expenses consist primarily of compensation to employees for site development, consulting services and other third party service providers. Selling and marketing expenses relate primarily to compensation to employees for strategic marketing, content, public relations and for other consultants and third party services. The Company has incurred and expects to continue to incur substantial losses and negative cash flows both on an annual basis and for interim periods. In particular, depending on the availability of funding, the Company intends to increase its focus and spending on brand development, sales and marketing, further product development, website content and strategic relationships. The Company has an extremely limited operating history, and its prospects are subject to the risks, costs and difficulties frequently experienced by companies in the new and rapidly changing markets for Internet products and services. To address these risks, the Company must, among other things, continue to respond to competitive forces, recruit, retain and motivate valuable and qualified employees, develop, implement and successfully execute its sales strategies, develop and market additional products and services, upgrade and maintain its technologies, and further market products and services using such technologies. There can be no assurance that the Company will successfully address these risks. As of September 30, 2000, the Company had an accumulated deficit of $17,237,971 that included the effects of dividends and accretion of the beneficial conversion feature of Series A Preferred stock approximating $6,534,221. The extremely limited operating history of the Company makes the prediction of future results of operations difficult and, therefore, the recently reported operations should not be considered indicative of future operating results. Depending on availability of funding or completion of an acquisition of the Company, the Company expects to significantly increase its operating expenses to expand its sales and marketing strategies of its private label product, to fund further site development as well as planned improvements and enhancements to the directory. The Company's operating results may fluctuate significantly in the future as a result of several factors, many of which are not within the Company's control. These factors include, but are not limited to, product demand, product acceptance, Internet usage, intranet usage, seasonal trends in advertising placements and Internet usage, Internet advertisement demand, advertisement budgeting cycles of Internet advertisers, need for capital expenditures and costs relating to Company expansion, introduction of new services or products to the directory, competitive forces, price changes in the industry, technical difficulties to the site, general and industry-wide economic conditions, and the availability of service providers. As a result of changes to the competitive Internet environment, the Company may make certain service changes or acquisitions, including a possible acquisition of the Company by another entity, that could materially affect the Company's business, operations, and financial condition. The Company also expects certain seasonal effects, as it relates to advertising revenues, due to lower usage during the vacation periods and holidays. Due to all of the aforementioned factors, in some future interim periods, the Company's operating results may be adversely affected and fall below the expectations of analysts and investors. The Company also may never emerge from the development stage. In such case, the trading price of the Company's common stock would likely be materially and adversely affected. Early in October 2000, the Company temporarily discontinued substantial development and operations of its directory and search engine products, including a reduction in its headcount, due to funding constraints and its possible acquisition by Pacific WebWorks, Inc. The Company expects, that if acquisition of Logio, Inc. by Pacific WebWorks, Inc. is successful, its development and operational efforts will recommence. Results of Operations Comparison of Three Month Periods. Following is a comparison of the Company's operating results for the three months and ended September 30, 2000 with the three months ended September 30, 1999: Revenues. The Company's revenue of $646 for the three months ended September 30, 2000 represents advertising revenues derived from its logio.com site and decreased $567 from revenues of $1,213 for the three months ended September 30, 1999. This decrease is due to the change in focus from the sales of the Company's PC-based product ("WordCruncher") to focus on the development and operations of its logio.com site and the related Logio directory, which has only recently become available on the marketplace. Cumulative revenues since inception total $132,697 and consist primarily of the sales of the Company's WordCruncher product and related royalties. Cost of Sales. The Company's cost of revenues of $140,161 for the three months ended September 30, 2000 includes the cost of Logio services, hosting, support and monitoring related to the logio.com site. Cost of revenues for the three months ended September 30, 1999 totaled $231 and related to license fees to a university for technology re-sold in the Company's WordCruncher product. The Company has recently shifted its focus on the development and operations of its logio.com site and the related Logio directory, which has only recently become available on the marketplace. Cumulative cost of revenues since inception total $472,648 and consist primarily of the costs of hosting, support and monitoring related to the operations of Logio products and services. Research and Development. Research and development expenses decreased 57.5% to $113,264 for the three months ended September 30, 2000, a decrease of $153,115 from the $266,379 for the three months ended September 30, 1999. The decrease in research and development expenses is due primarily to development consulting contracts that were in effect during the three months ended September 30, 1999 that were completed or terminated by the three month period ended September 30, 2000 and the reduction of development headcount in the second and third quarters 2000. Cumulative research and development costs incurred since inception total $3,263,488 and relate primarily to development efforts associated with the Company's recent release of the Logio site and directory to the marketplace. Selling and Marketing. Selling and marketing expenses decreased 92% to $28,417 for the three months ended September 30, 2000, a decrease of $328,629 from the $357,046 for the three months ended September 30, 1999. The decrease in selling and marketing expenses is due, primarily, to a reduction in sales and marketing efforts in third quarter 2000 in order to cut costs. This decrease also includes the abandonment of branding efforts as a direct result of a change in the Company's business model to a private label approach, and a reduction in headcount from the discontinuation of sales and marketing personnel in Los Angeles, California, both occurring in second and third quarters 2000. The Company has terminated the use of certain consulting services related to branding, the planning of sales strategies, public relations, and the providing of advertising to its logio.com site in the second and third quarters 2000. Cumulative selling and marketing expenses since inception total $1,651,787 and are comprised mostly of consulting services for the planning of marketing and sales strategies, public relations, and employee salaries related to marketing and sales. General and Administrative. General and administrative expenses increased 29% to $326,393 for the three months ended September 30, 2000, an increase of $73,404 from $252,989 for the three months ended September 30, 1999. The increase in general and administrative expenses is primarily due to accounting and legal professional fees related to the Company's public filings, the addition of one employee to the Company's administration efforts, an increase in its leased building space in second quarter 2000, and obtaining additional insurance. Cumulative general and administrative charges since inception total $2,740,861 and relate primarily to professional fees, compensation for management, finance and investor relations employees and other office and leasing charges. Depreciation and Amortization. Depreciation and amortization increased $162,849 to $205,137 for the three months ended September 30, 2000 from $42,288 for the three months ended September 30, 1999. The increase in depreciation and amortization is due to the purchase of computer equipment and software technology required to release and maintain the Logio site and related Logio directory, mostly acquired in November and December 1999, and the related depreciation charge for the three months ended September 30, 2000. Cumulative depreciation and amortization expenses incurred since inception total $802,134. Compensation Expense for Stock Options. Compensation expense for stock options decreased 88.3% to $50,400 for the three months ended September 30, 2000, a decrease of $380,401 from $430,801 for the three months ended September 30, 1999. These charges reflect the intrinsic value of stock options granted to employees and directors recorded as earned by the employee or director over each period. The decrease represents the forfeiture of approximately 886,834 options, management's efforts to discontinue the granting of options at exercise prices less than fair market value in second and third quarters of 2000, and the completion of vesting periods for certain employee options. Total Operating Expenses. The Company's operating expenses decreased 46.4% to $723,611 during the three months ended September 30, 2000 a decrease of $625,892 from $1,349,503 for the three months ended September 30, 1999. This decrease is due primarily to the adjustment of the Logio business plan to a private label or syndication approach to distribution of its business directory. This adjustment resulted in the discontinued use of certain consulting services related to branding, the planning of sales strategies, public relations, and the providing of advertising to the Company's logio.com site in the second and third quarters 2000, as well as reductions in sales and marketing personnel. The Company has also reduced development costs as certain consulting contracts that were in effect during the three months ended September 30, 1999 were completed or terminated by the three month period ended September 30, 2000 and through reductions in development headcount in second and third quarters 2000. Interest Income. Interest income decreased 67% to $20,167 for the three months ended September 30, 2000, a decrease of $41,014 from $61,181 for the three months ended September 30, 1999. The decrease reflects the continued use of cash balances and liquidation of short-term investments over the three months ended September 30, 2000 to fund operations. Interest Expense and Financing Charges. Interest expense totaled $33,431 for the three months ended September 30, 2000 an increase of $32,779 from $652 for the three months ended September 30, 1999. The increase is due primarily to capital leases entered into subsequent to the three months ended September 30, 1999 and other notes payable to vendors and shareholders. Financing charges of $133,703 for the three months ended September 30, 2000 represent the intrinsic value of debt and accrued interest converted to the Company's common stock. In these transactions $1,187,642 of notes payable to shareholders and related accrued interest were converted to approximately 3,165,000 of the Company's common stock at prices ranging from $0.20 to $0.3122 per share. Several of these shares were issued at prices less than the fair market value of the common stock on the dates of conversion and, consequently, financing charges of $133,703 were incurred as an adjustment for the differences in price. Extraordinary Gain. During the three months ended September 30, 2000, the Company settled $244,670 of vendor payables for $51,225 in cash and $70,000 in stock. Also during the three months ended September 30, 2000, the Company settled $290,793 in notes payable to vendors for $210,000 in cash. The forgiven debt from these transactions resulted in $204,238 in extraordinary gain. Net Loss. Net loss decreased 37.3% to $808,070 for the three months ended September 30, 2000 a decrease of $479,922 compared to a net loss of $1,287,992 for the three months ended September 30, 1999. The decrease in net loss is a result of completed sales and marketing consulting contracts, the completion of certain development efforts, concerted efforts to reduce compensation charges from the granting of stock options at a discount to market price, and extraordinary gains from forgiveness of debt achieved through the settlement of certain payables. Net Loss Attributable to Common Stockholders. The accretion of the beneficial conversion feature of the Series A Preferred Stock was fully recognized by fiscal year end 1999. As such, net loss attributable to common shareholders is equivalent to net loss and totaled $808,070 for the three months ended September 30, 2000. Net loss attributable to common stockholders for the three months ended September 30, 1999 totals $2,807,105 after giving effect to the dividends and accretion of the beneficial conversion feature of Series A Preferred Stock recognized for the three months ended September 30, 1999 totaling $1,519,113. This resulted in an increase to additional paid-in capital and a corresponding increase in accumulated deficit during that quarter. Comparison of Nine Month Periods. Following is a comparison of the Company's operating results for the nine months ended September 30, 2000 with the nine months ended September 30, 1999: Revenues. The Company's revenue of $2,180 for the nine months ended September 30, 2000 represents advertising revenues derived from its logio.com site and decreased $13,105 from revenues of $15,285 for the nine months ended September 30, 1999. This decrease is due to the change in focus from the sales of its PC-based product ("WordCruncher") to focus on the development and operations of its logio.com site and the related Logio directory, which has only recently become available on the marketplace. Cost of Sales. The Company's cost of revenues of $440,907 for the nine months ended September 30, 2000 include the cost of Logio services, hosting, support and monitoring related to the logio.com site. Cost of revenues for the nine months ended September 30, 1999 totaled $4,330 and related to license fees to a university for technology re-sold in the Company's WordCruncher product. Research and Development. Research and development expenses increased 180.4% to $1,672,316 for the nine months ended September 30, 2000, an increase of $1,075,921 from the $596,395 for the nine months ended September 30, 1999. The increase in research and development expenses is due primarily to the significant increase in the number of employees and consultants engaged in continued site and directory development and enhancement, and for the retention of other third party service providers related to other site content in first and second quarters 2000. This increase relates to the recent release of the Logio site and the related Logio directory to the marketplace. The Company began reducing headcount and overhead early in the second quarter 2000. By late third quarter 2000, the Company again reduced development headcount significantly due to the recent lack of $1.4 funding that was previously committed by certain investors and subsequently withdrawn. Selling and Marketing. Selling and marketing expenses increased 23.33% to $658,034 for the nine months ended September 30, 2000, an increase of $124,034 from the $534,000 for the nine months ended September 30, 1999. The increase in selling and marketing expenses is due primarily to compensation to employees and consultants related to significant planning of the sales strategies, public relations, and advertising and branding campaigns, mostly, in the first quarter of 2000 related to the release of the Logio site to the marketplace. In August and September 2000, the Company reduced selling and marketing headcount significantly in the Los Angeles, California area due to ineffective sales efforts and the recent lack of $1.4 funding previously committed by certain investors and subsequently withdrawn. General and Administrative. General and administrative expenses increased 25% to $976,183 for the nine months ended September 30, 2000, an increase of $195,532 from the $780,651 for the nine months ended September 30, 1999. The increase in general and administrative expenses is primarily due to accounting and legal professional fees related to contracts, employee equity incentive plan and the Company's public filings, the addition of one employee to its finance department subsequent to third quarter 1999, increasing its leased building space, and obtaining additional insurance. Depreciation and Amortization. Depreciation and amortization increased $525,192 to $606,141 for the nine months ended September 30, 2000 from $80,949 for the nine months ended September 30, 1999. The increase in depreciation and amortization is due to the purchase of computer equipment and software technology required to release and maintain the Logio site and related Logio directory, subsequent to third quarter 1999, and the related depreciation charges for the nine months ended September 30, 2000. Compensation Expense for Stock Options. Compensation expense for stock options decreased 44.4% to $631,242 for the nine months ended September 30, 2000, a decrease of $504,746 from $1,135,988 for the nine months ended September 30, 1999. These charges reflect the intrinsic value of stock options granted to employees and directors recorded as earned by the employee or director over each period. The decrease represents the forfeiture of approximately 886,834 options, management's efforts to discontinue granting of options at an exercise price less than fair market value in second quarter of 2000, and the completion of vesting periods for certain employee options. Total Operating Expenses. The Company's operating expenses increased 45.3% during the nine months ended September 30, 2000 over the nine months ended September 30, 1999. This is due primarily to the continued efforts to develop the infrastructure of the logio.com site and the Logio directory, bring existing products and services to the marketplace and to develop new and innovative ideas for implementation on the site and directory. Interest Income. Interest income decreased 65.3% to $55,002 for the nine months ended September 30, 2000, a decrease of $103,426 from $158,428 for the nine months ended September 30, 1999. The decrease reflects the continued use of cash balances and liquidation of short-term investments over the nine months ended September 30, 2000 to fund operations. Interest Expense and Financing Charges. Interest expense totaled $96,422 for the nine months ended September 30, 2000 an increase of $92,861 from $3,561 for the nine months ended September 30, 1999. The increase is due primarily to capital leases entered into subsequent to the three months ended September 30, 1999 and other notes payable to vendors and shareholders. Financing charges of $133,703 incurred during September 2000 represent the intrinsic value of debt and accrued interest converted to the Company's common stock. In these transactions $1,187,642 of notes payable to shareholders and related accrued interest were converted to approximately 3,165,000 of the Company's common stock at prices ranging from $0.20 to $0.3122 per share. These shares were issued at prices less than the fair market value of the common stock on the dates of conversion and, consequently, financing charges of $133,703 were incurred for the intrinsic values. Extraordinary Gain. During September 2000, the Company settled $244,670 of vendor payables for $51,225 in cash and $70,000 in stock. Also during September 2000, the Company settled $290,793 in notes payable to vendors for $210,000 in cash. The forgiven debt from these transactions resulted in $204,238 in extraordinary gain. Net Loss. Net loss increased 67.3% to $4,955,743 for the nine months ended September 30, 2000 an increase of $1,993,582 compared to a net loss of $2,962,161 for the nine months ended September 30, 1999. The increase in net loss is a result of the Company's increased costs and expenses associated with the continued research, development, marketing and implementation of the Logio website and related directory and their operations. Net Loss Attributable to Common Stockholders. The accretion of the beneficial conversion feature of Series A Preferred Stock was fully recognized by fiscal year end 1999. The remaining cumulative 6% dividend to each of the Series A Preferred stockholders was recognized in the first quarter 2000, totaling $64,360. As such, net loss attributable to common shareholders totaled $5,020,103 for the nine months ended September 30, 2000. Net loss attributable to common stockholders for the nine months ended September 30, 1999 totaled $9,201,168 after giving affect to the dividends and accretion of the beneficial conversion feature of Series A Preferred Stock recognized during the first nine months of 1999, totaling $6,239,007. This transaction resulted in an increase to additional paid-in capital and a corresponding increase in accumulated deficit during the quarters. Liquidity and Capital Resources As a development stage company, the Company has been unable to fund its cash requirements through operations. Since its inception, the Company has funded its cash requirements primarily through debt and equity financings. The Company has used the proceeds of those transactions to fund its investment in the development of its Logio business information site and business directory, to provide working capital and for other general corporate purposes. As of September 30, 2000, the Company had $171,226 in cash, $1,755,093 in total assets and total liabilities of $604,535. As of September 30, 2000, the Company had negative working capital of $297,164, an accumulated deficit of $17,237,971 (a significant portion of which is due to dividends and accretion of the beneficial conversion feature of the Series A Preferred Stock) and total stockholders' equity of $1,l50,558. The Company used $3,572,247 in cash for operations during the nine months ended September 30, 2000 that relates mostly to consulting fees, salaries and other operating transactions. Cash totaling $92,829 was used in investing related activities for purchases of property and equipment during the nine months ended September 30, 2000. Short-term investments were liquidated for cash totaling $1,454,207 during the nine months ended September 30, 2000 in order to fund cash requirements. Cash provided by financing activities during the nine months ended September 30, 2000 includes $907,600 from the exercise of options and warrants. The Company acquired $65,685 of equipment during the nine months ended September 30, 2000 by entering into capital lease agreements. Cash used to pay financing activities for capital leases, notes payable and other long-term obligations totals $1,006,031 during the nine months ended September 30, 2000. The Company paid a cumulative stock dividend of 6% to the Series A Preferred stockholders during the first quarter of 2000 by issuing 61,650 shares of its common stock. As of September 30, 2000, the Company had no material commitments for capital expenditures for the remainder of fiscal year 2000. Its remaining capital lease obligations totaling $351,462 are due through February 2002 and notes payable of $96,116 are currently due to a software company. In June 2000, the Company received $500,000 in cash from three of its major shareholders and officers in exchange for 8% notes payable, which were originally due in July 2001. In September 2000, these notes and accrued interest of $11,666 were converted into 626,422 shares of the Company's common stock. On July 6, 2000, the Company signed a purchase agreement with five investors for the sale of two million shares of its common stock for a total purchase price of $1.4 million. The terms of the agreement required the deposit of $1.4 million into an escrow account before July 31, 2000. The monies were agreed to be released to the Company upon the effective registration of the shares with the Securities and Exchange Commission on or before October 31, 2000. In September 2000, the Securities and Exchange Commission declared the registration effective. As of September 30, 2000, the investors have not released the funds and are in default of the agreement. The Company expects to continue to generate negative cash flows for at least the next several quarters. The Company anticipates that its principal liquidity needs over the next twelve months will be met with proceeds generated from private offerings of its securities, if available. There can be no assurance that the offerings will take place or that the proceeds of such offerings will be adequate to meet the Company's needs. The Company's need to raise external capital in the future will depend on many factors, including, but not limited to, the rate of sales growth and market acceptance of its products and services, the amount and timing of its necessary and continuing research and development expenditures, the amount and timing of its expenditures to sufficiently market and promote is Logio directory and the Logio brand name and the timing of any new product introductions. The Company currently estimates that it will require between $15 and $20 million to continue to develop its products and operate in accordance with its business plan through fiscal 2002. The actual costs will depend on a number of factors, including: * its ability to negotiate favorable prices for purchases of necessary directory components * the number of its customers (traffic) and advertisers * the services for which they subscribe * the nature and success of the services which it offers * regulatory changes, and * changes in technology. In addition, the Company's actual costs and revenues could vary from the amounts it expects or budgets, possibly materially, and those variations are likely to affect how much additional financing the Company will need for its operations. Accordingly, there can be no assurance that the Company's actual financial needs will not exceed the amounts available to it. Expected future uses of cash include continued expansion, development and enhancements of the Logio site, strategic sales and marketing related to private label sales of the Logio directory to corporate intranets and Internet companies, and maintaining the Company's current level of administration and operations. This is expected to be achieved by obtaining additional staffing in the sales and marketing and development departments, and by engaging certain professional services firms. To the extent that the Company acquires the amounts necessary to fund its business plan through the issuance of equity securities or sale of its operations to a potential acquirer, its then-current stockholders may experience dilution in the value per share of their equity securities. The acquisition of funding through the issuance of debt could result in a substantial portion of the Company's cash flows from operations being dedicated to the payment of principal and interest on that indebtedness, and could render it more vulnerable to competitive and economic downturns. Special Note Regarding Forward-Looking Statements Certain statements contained in "Management's Discussion and Analysis" constitute forward-looking statements concerning the Company's operations, economic performance and financial condition. Because those statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements. In addition, any statements that express or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and, accordingly, those statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Accordingly, those types of statements are qualified in their entirety by reference to, and are accompanied by, the factors discussed throughout this report. Among the key factors that have a direct bearing on the Company's results of operations are the potential risk of delay in implementing the Company's business plan; the economic and legal aspects of the markets in which the Company operates; competition; and the Company's need for additional substantial financing. The Company has no control over these factors. The factors described in this report could cause the Company's actual operating results to differ materially from those expressed in any forward-looking statements of the Company made by or on behalf of the Company. Persons reviewing this report, therefore, should not place undue reliance on those forward-looking statements. Further, to the extent this report contains forward-looking statements, they speak only as of the date of this report, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect the occurrence of unanticipated events. New factors may emerge from time to time, and it is not possible for management to predict all of such factors. Further, management cannot assess the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. PART II: OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any proceeding or threatened proceeding as of the date of this quarterly report. Item 2. Changes in Securities In September 2000, the Company issued 3,165,000 shares of its common stock in exchange for relief of certain notes and vendor payables totaling $675,976. Also in September 2000, the Company issued 626,422 shares of its common stock in exchange for relief of notes payable and interest to shareholders totaling $511,666. On October 23, 2000, the Company converted a note payable, obtained in October 2000, totaling $169,300 into 1,150,000 shares of the Company's common stock. The Company is relying on an exemption on the issuance of said shares from registration from the Securities Act of 1933 by reason of Section 4(2) as a private transaction not involving a public distribution. Item 3. Defaults upon Senior Securities None. Item 4. Matters Submitted to a Vote of the Company's Stockholders None. Item 5. Other Information In September 2000, Edward Sullivan resigned from the Company's Board of Directors to pursue other interests. Item 6. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) EXHIBITS. None. (b) REPORTS ON FORM 8-K On September 29, 2000, the Company filed a Current Report of Form 8-K, relating to the Company's execution of a letter of intent to become the wholly-owned subsidiary of Pacific Webworks, Inc., a Nevada corporation. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LOGIO, INC. Date: October 31, 2000 By: /s/ Kenneth W. Bell ---------------------------- Kenneth W. Bell, President and Chief Executive Officer /s/ Thomas R. Eldredge ----------------------------- Thomas R. Eldredge, Sr. Vice President, CFO and Secretary

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