UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                           FORM 10-KSB

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the fiscal year ended December 31, 2004

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      AND EXCHANGE ACT OF 1934

                Commission file number:  000-26731

                      PACIFIC WEBWORKS, INC.
      (Exact name of registrant as specified in its charter)

            Nevada                           87-0627910
    (State of incorporation)       (I.R.S. Employer Identification No.)

180 South 300 West, Suite 400, Salt Lake City, Utah           84101
(Address of principal executive offices)                      (Zip code)

Issuer's telephone number, including area code: (801) 578-9020

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock

The issuer (1) 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 [_]

Disclosure of delinquent filers in response to item 405 of Regulation S-B is
not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB. [_]

State issuer's revenue for its most recent fiscal year:   $3,617,486

As of February 9, 2005 the registrant had 28,517,622 shares of common stock
outstanding.  The aggregate market value of the shares of voting stock held by
non-affiliates as of that date was approximately $2,330,896.

Documents incorporated by reference:  None

Transitional Small Business Disclosure Format: Yes [_] No [X]

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                        TABLE OF CONTENTS

                              PART I

Item 1.  Description of Business........................................3
Item 2.  Description of Property........................................9
Item 3.  Legal Proceedings..............................................9
Item 4.  Submission of Matters to a Vote of Security Holders............9

                             PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.......9
Item 6.  Management's Discussion and Analysis..........................11
Item 7.  Financial Statements..........................................17
Item 8.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure...........................37
Item 8A. Controls and Procedures.......................................37
Item 8B. Other Information.............................................37

                             PART III

Item 9.  Directors, Executive Officers, Promoters and Control
         Persons, Compliance with Section 16(a) of the Exchange Act... 37
Item 10. Executive Compensation........................................38
Item 11. Security Ownership of Certain Beneficial Owners and
         Management and Related Stockholder Matters....................40
Item 12. Certain Relationships and Related Transactions................41
Item 13. Exhibits......................................................41
Item 14. Principal Accountant Fees and Services........................42
Signatures.............................................................43




In this annual report references to "Pacific WebWorks," "we," "us," and "our"
refer to Pacific WebWorks, Inc. and its subsidiaries.

                    FORWARD LOOKING STATEMENTS

The Securities and Exchange Commission ("SEC") encourages companies to
disclose forward-looking information so that investors can better understand
future prospects and make informed investment decisions.  This report contains
these types of statements.  Words such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "project," or "continue" or comparable terminology
used in connection with any discussion of future operating results or
financial performance identify forward-looking statements.  You are cautioned
not to place undue reliance on the forward-looking statements, which speak
only as of the date of this report.  All forward-looking statements reflect
our present expectation of future events and are subject to a number of
important factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.

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                              PART I
                             -------

                 ITEM 1.  DESCRIPTION OF BUSINESS

Historical Development

The company was incorporated in the state of Nevada on May 18, 1987, as
Asphalt Associates, Inc. and changed its name to Pacific WebWorks, Inc. in
January 1999.  Pacific WebWorks has four wholly-owned subsidiaries,
Intellipay, Inc., TradeWorks Marketing, Inc., FundWorks, Inc, which are
Delaware corporations, and World Commerce Network, LLC.  Intellipay
specializes in providing online, secure and real-time payment processing
services for businesses of all sizes.  TradeWorks Marketing was incorporated
in Delaware on July 17, 2003, to mass market our products and services.
FundWorks, Inc. was incorporated on August 5, 2003, to provide operating lease
arrangements for certain TradeWorks' customers.  World Commerce Network, LLC
is a non-operating, discontinued operation.

Pacific WebWorks' Business

Pacific WebWorks is an application service provider and software development
firm that develops business software technologies and services for business
merchants and organizations using Internet and other technologies.  We
specialize in turn-key applications allowing small- to medium-sized businesses
to expand over the Internet.  Our product family provides tools for web site
creation, management and maintenance; electronic business storefront hosting
and Internet payment systems for the small- to medium-sized business and
organization.

We initially focused entirely on virtual retailing software solutions, meaning
merchants that do not have a physical store location and would exist only on
the Internet.  Due to requests in the marketplace, we expanded our
technologies to include features for small- to medium-sized physical "brick
and mortar" entities, in addition to our virtual merchants. This is expected
to give these businesses and other organizations a complete solution for all
physical store and Internet concerns and at the same time reduce the costs of
operations and introduce new profit centers for them.

Products

Even though small business, including small office/home office, typically
understands how traditional brick and mortar businesses operate, we believe
they need assistance in order to replicate business processes effectively and
economically using the Internet.  Pacific WebWorks assists small businesses in
succeeding online through our Visual WebTools(TM) software, the Intellipay
payment systems, education and hosting services.

We provide a comprehensive one-stop solution that incorporates our integrated
suite of e-commerce software tools, plus hosting, site  management, web design
services, and education.  By leveraging a shared commerce platform across many
customers, we bring economies of scale to our customers.  We believe this
structure allows our customers to focus on their business instead of
technology, enabling them to achieve a much faster return on investments made
in technology and to experience more success on the Internet.

Visual WebTools Version 4.1 ("V4.1") -  V4.1 is a suite of software programs
that fit together to perform the basic business functions we  believe are the
most effective on the Internet.  The following products are included as part
of this suite.

..   WebWizard  is an easy-to-use web page design program that possesses a
    simple user interface and templates for the novice, yet it has a very
    powerful additional functionality for web design professionals.  It
    incorporates sophisticated site components like tables, frames, flash and
    other multimedia capabilities in a straightforward, menu driven process.
    No complicated programming skills are required to use the WebWizard tool.
    Our customers can manage their sites' layout, colors, contents, tables,
    and graphics easily. WebWizard includes a library of hundreds of graphics
    that are freely accessible by our customers.  WebWizard allows our
    customers to quickly and easily create, update, modify, and enhance their
    web sites.  Changes can be uploaded to our servers within minutes 24 hours
    a day, 7 days a week from any Internet-

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    connected Microsoft Windows  computer.

..   ClipOn Commerce(TM) is an e-storefront and product management system,
    complete with shopping cart technology.  ClipOn Commerce allows our
    customers to build an Internet storefront.  They can create a complete
    product catalog, organize and search products by unlimited categories and
    import/export to and from their database.  ClipOn Commerce is designed to
    function with a third party merchant account and is integrated with our
    Intellipay payment system, which allows our clients to accept all major
    credit cards online.  ClipOn Commerce has support for QuickBooks
    accounting software enabling our customers to update between their
    accounting records and Internet storefront.  ClipOn Commerce also features
    UPS shipping integration.

..   WebContacts is a contact management program.  Companies that use our
    system can utilize WebContacts to organize information about all the
    entities they do business with, including customers, suppliers,
    distributors, potential customers, etc.  WebContacts will also enable them
    to capture information about people who visit their website, if those
    visitors elect to supply contact information at the site.  This database
    functionality enables our customers to be more effective when using the
    web as a marketing and communications tool.

..   WebChannels is an e-mail distribution program that enables our customers
    to send customized e-mails in either plaintext or HTML format to their
    WebContacts database of visitors.  Since email is the most popular
    activity on the web, and one of the most effective forms of Internet
    marketing, WebChannels provides our customers with a practical tool with
    which to promote their businesses.  For example, by using WebChannels, a
    client could easily send out a weekly newsletter, coupons or special
    offers to an entire customer base, certain visitor types or to a segment
    of their customers

..   Web profiling tool is a form and survey creation tool that helps capture
    feedback and valuable demographic information from customers and web site
    visitors.  Our clients can create customizable forms, surveys and
    interactive questionnaires. The web profiling tool includes a catalog of
    pre-designed questions, such as education level, hobbies, satisfaction
    level, etc.  The profiling forms may also be custom created by our
    customers.

..   WebStats enables our customers to analyze visitor activities on their
    websites in order to track pages viewed, hits, time of access, etc.
    WebStats is a statistics program that provides detailed reports and graphs
    related to referring pages, geographic location of visitors, browsers and
    the operating systems web site visitors are using, what web pages generate
    hits, and what pages are the most popular.  WebStats can produce reports
    of business information, including year-long trends and the effectiveness
    of the clients' sites.

..   Auction Connection is a module that allows Visual WebTools customers to
    list inventory items with Ebay at the click of a button.

Intellipay Payment System -  This group of products offers payment
technologies for business-to-business and business-to-customer uses on the
Internet and in physical store locations.  They allow our customers to accept
real time credit card payments from their web site, Internet appliances,
kiosks or at remote locations through their Nextel cell phone or at the
physical point of sale.  The Intellipay products use the same standards used
by all major commerce sites, industry standard security components and
methods, and has been tested under strict banking network procedures.
Point-of-sale professionals provide technical support and ePayment
professionals can even help the business locate an Internet-approved merchant
account if needed.  Once customers enter the necessary data in a secure form,
Intellipay quickly processes the transaction in real-time (2 - 5 seconds) and
returns the customer back to the business site.  Intellipay also provides
methods for enterprise-level businesses to link Intellipay products, services
and features into their ecommerce web sites and transmit transactional data
for use in back-office systems.

..   ePayment System  supports all major card types including Visa,
    MasterCard, American Express, Discover, Diners Club and JCB.  Also,
    support is provided for Visa and MasterCard debit (check) cards and Level
    Two corporate/commercial cards through various bank networks.  Transaction
    types include industry

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    standard transactions such as normal authorizations, pre-authorizations
    intended for delayed settlement, the so-called "force" allowing a
    transaction authorized offline (possibly a voice authorization) to be
    settled, credits for refunds and Intellipay's innovative address
    verification system allows merchants to retrieve a score and verify the
    account validity.

    This Intellipay product allows our customers to control transaction level
    behavior depending on AVS scores, duplicate transaction attempt detection,
    and more.  Intellipay also automatically settles merchant batches nightly
    so our customers are freed from forcing settlement via manual or
    programmatic methods, which also helps reduce our customer's costs by
    settling within the 24-hour window mandated by most merchant accounts.
    The Intellipay system is fully transportable meaning that a customer can
    switch web site hosting companies, move between most e-commerce software
    programs or change to or from many merchant account providers.  Our
    products can grow and change with our customer at little or no additional
    charges and with minimal technology issues.

..   ExpertLink(TM)  is Intellipay's proprietary connection protocol for
    high-volume Internet businesses requiring reliable, high velocity
    real-time transaction authorizations linked to their own secure web site
    and/or back office systems. ExpertLink is a standards-based secure
    communications method allowing web-developers and application developers
    to build in the ePayment processing and various features, including batch
    management commands, duplicate transaction detection and management, and
    more.  Our customers usually purchase ExpertLink or LinkSmart, and both
    come with Smart Terminal and the Secure Account Management System.

..   LinkSmart(TM)  gives our online customers the ePayment features with
    minimal technical installation on their side. With LinkSmart, our customer
    does not need to pay for installation and maintenance of expensive secure
    servers since LinkSmart serves the secure, customizable payment pages for
    them.  LinkSmart offloads many expensive mission-critical e-commerce tasks
    from the merchant.

..   Smart Terminal(TM)  allows our customers to securely log into their
    Intellipay account from any Internet browser and authorize manual
    transactions and orders they have received through offline methods.  Smart
    Terminal supports industry-standard transactions including normal
    authorizations, authorization-only for delayed settlement, settlement for
    non-Intellipay authorized transactions, credits, partial credits and more.
    Most clients receive Smart Terminal along with LinkSmart or ExpertLink,
    but Smart Terminal can also be purchased as a stand alone product.

..   Secure Account Management System ("SAMS") allows Intellipay customers to
    securely log into Intellipay's Secure Account Management System from any
    web browser to configure and control various Intellipay components and
    behaviors. They can manage today's authorized transaction batches, control
    passwords, enforce transaction data components, control various features
    such as our new duplicate transaction detection and management system,
    control email transaction receipts, access Smart Terminal, control
    LinkSmart payment page contents, target returning live data streams,
    configure Visa-required invoice numbering, and more.  Customers can also
    view transaction histories for any day in the past 180 day period.

..   IntelliPay Desktop Terminal ("IDT")  IntelliPay Desktop Terminal brings
    all of the functionality of a Virtual Terminal application to your desktop
    while supporting hardware such as a card reader and receipt printer.  This
    allows merchants to receive a qualified discount rate on their
    transactions and save hundreds of dollars in equipment and processing
    fees.  They can also take advantage of sharing printers on their network
    allowing several terminals to print to the same receipt printer, reducing
    the amount of hardware they need to purchase.

..   IntelliPay Wireless Terminal ("IWT") IntelliPay is now submitting
    wireless transactions with retail qualifications using Nextel data
    service.  This allows a merchant to accept either swiped or keyed
    transactions using a Nextel Cellular / Data phone using a card reader. The
    merchant has all of the benefits of retail rates with the added value of
    visual batch management and settlement process.  IntelliPay Wireless
    Terminal is the perfect solution for all mobile merchants that also use a
    cellular phone.


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Education Services -  We provide more than our software, we also assist our
customers with education and site design services.  We believe this
information helps our clients understand how to use the Internet more
effectively.

..   Coaching Services are personalized electronic/telephonic instruction on
    the use of our product technologies.  These services are directed towards
    assisting clients in making their virtual operations successful. We
    recommend eight to twelve, one-half hour training sessions for our new
    customers.

..   Retreats are workshops that are held one to two times per year for certain
    TradeWork's customers for informative direction on Internet marketing
    strategies.

Rent-a-Pro offers custom web site design services to clients who elect to hire
Pacific WebWorks to build their web site for them rather than building it
themselves.

Technical Support is offered via online chat or e-mail from 8 a.m. to 9 p.m.
(MST), or by phone from 8 a.m. to 5 p.m. (MST).

Hosting Infrastructure allows us to host our customers' web sites, therefore
eliminating the cost of hardware investment and maintenance for them.

Domain Names are offered to customers online at retail prices.  These include
".com," ".org," ".biz," ".net," ".us" and ".info."

     Sales and Marketing

In July 2003 we incorporated TradeWorks Marketing to conduct marketing events
in locations throughout the United States. TradeWorks Marketing's product
offerings include Intellipay Virtual Terminal Software, Pacific WebWorks
Visual WebTools Web site manager and builder, including integration with
ebay(TM).com. TradeWorks Product Club and training.  TradeWorks Marketing also
has entered into factoring arrangements with an outside leasing company with
recourse for certain sales of e-commerce software and merchant accounts.

In August 2003 we incorporated FundWorks, Inc. to provide operating lease
arrangements for certain TradeWorks' customers.  The operating lease
agreements are for the purchase of e-commerce software and merchant accounts
over 36 months for the price of $59.95 per month.  The customers relying on
these operating lease agreements have a higher credit risk.

We do not believe that our competitors are effectively targeting our market
niche: A totally Internet based, end-to-end business solution for small- and
medium-sized businesses.  We believe that our products will allow businesses
to generate leads, sell products, run sales promotions, capture demographic
information about web site visitors, communicate with web site visitors, and
obtain intelligent information about who is visiting their web sites and what
they are doing while they are there.  Our products allow our customers to stay
in complete control of their web sites and provide tools that can facilitate a
successful Internet experience for them.

We market and sell our products primarily through reseller channels, including
our wholly-owned reseller TradeWorks Marketing, our own internal sales force
and strategic partnerships.  We sell our products to our partners at
wholesale.  The partners then mark the products up and sell them at retail.
We also sell our products through resellers who are paid a commission for each
merchant who purchases our products and subsequent services.  Each merchant
must sign a purchase agreement with the reseller, which the reseller must in
turn provide to us. We then provide software to the resellers' customers,
allowing them to create Internet web sites and/or complete e-business
solutions. We provide the initial reseller with training in the use of the
software.

We believe we may be able to develop a substantial presence in our target
market through a combination of broad channels of distribution, marketing
strategy, unique proprietary technology, technical expertise, and training and
education in the use of our products.  It is our opinion that in the past,
businesses which have attempted to maintain interactive web sites and conduct
business on the Internet have either developed technical expertise themselves,
paid employees to create and maintain their web sites, or retained contract
"web professionals" to do so. We believe our products allow small businesses
to participate in Internet commerce by creating and managing their own
Internet

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web sites and storefronts at a reasonable cost.

     Competition

Our market is quickly evolving, very competitive and subject to rapid
technological change.  We expect competition to persist, increase, and
intensify in the future as the markets for our products and services continue
to develop and as additional companies enter our markets.  A number of
companies are now providing Internet services to small businesses.  They
include organizations like Microsoft, Yahoo!, Bigstep, Zyweb, Register.com,
GoDaddy, Bizfinity, MeZine.com and many others.  Our success in our target
market will depend upon our ability to build name brand recognition and to
provide quality, cost-effective products and services to our customers.

At the present time, we have not identified any other companies that are using
an identical approach to ours.  Nonetheless, it is probable that larger
interests will choose to enter the market we are developing or that a new
market may emerge.  Although we feel the market is vast and should accommodate
many technology providers, we may not be able to compete effectively with
current and future competitors.

In our estimation, few major competitors currently offer products comparable
to the Visual WebTools(TM) product family.  We believe that "Yahoo! Store" is
our most significant competitor, with its brand name recognition and
significantly greater financial, technical, marketing, and managerial
resources. Yahoo! Store has significantly higher sales and customers than we
do and has entered into a significantly higher number of license agreements
with third parties.  We believe that our product provides a comparable service
for a lower price than that provided by Yahoo! Store.  In addition, because we
have focused our efforts on small businesses, including providing Internet
tools which allow businesses to develop their own Web sites, we believe that
the generality of the Yahoo! Store may be inadequately addressing potential
customer needs and that we will be better able to address their site
development needs.

Our Intellipay payment system competes with AuthorizeNet products and certain
VeriSign products, along with other companies that provide e-commerce
solutions.

Our ability to successfully compete will depend upon a number of factors,
including:
..     our ability to successfully maintain and sell existing products;
..     our ability to conceive, develop, improve, and market new products;
..     our ability to identify and take advantage of emerging technological
      trends within our target markets;
..     our ability to respond effectively to technological changes or new
      product announcements by competitors;  and
..     our ability to recruit resellers who can market and sell our products
      and services in significant volumes to the market.
We believe that we will need to make significant expenditures for research and
development and marketing in the future to compete effectively.


     Major Customers

Our client base includes approximately 8,500 active paying customer accounts.
We rely on the efforts of third party resellers, including our wholly-owned
reseller, TradeWorks Marketing,  to add accounts to our customer base.  A
significant portion of our customer accounts were provided by previous Pacific
WebWorks and Intellipay resellers who no longer resell our products and
services.  While we continue to add additional and significant resellers, we
are dependent upon these resellers.  If we lose them, then we expect our
revenues to be adversely affected by attrition in our customer account
portfolios if there is not immediate replacement.  During the year ended
December 31, 2004, we experienced continued declines in hosting and payment
processing revenues, although at a significantly reduced rate from the
previous year, due to the loss of resellers and general attrition.  We expect
to see the decline in hosting and payment processing revenues to continue to
decrease through year end 2005.

     Trademark, Licenses and Intellectual Property

On October 9, 1998 Utah WebWorks filed a trademark application for Visual
WebTools(TM) that we acquired and

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became responsible for upon our merger with Utah WebWorks.  In December of
1998 the United States Patent and Trademark Office assigned Serial No. 567,136
to this mark.  In addition we have trademarks for   Pacific WebWorks(TM) and
ClipOn Commerce(TM).

On October 25, 2002 we received notice of acceptance and acknowledgment from
the U.S. Department of Commerce Patent and Trademark Office validating our
registration of a trademark for Intellipay through October 29, 2006.  The mark
may be renewed one year prior to its expiration.

Our success will depend, in part, on our ability to obtain and protect our
trademark and trade secrets and operate without infringing upon the
proprietary rights of others in the United States and other countries.  If we
were to become involved in a dispute regarding our intellectual property, it
may become necessary for us to participate in interference proceedings before
the United States Patent and Trademark Office to determine whether we have a
valid claim to the rights involved.  We could also be forced to seek a
judicial determination concerning the rights in question.  These proceedings
could be costly and time consuming, even if we were to eventually prevail.
Should we not prevail, we could be forced to pay significant damages, obtain a
license to the technology in question, or stop marketing one or more of our
products.

All of our core technology was developed internally by either our engineers or
by the engineers of Utah WebWorks and Intellipay.  Other than Internet
connectivity and other information technology infrastructure, the performance
of our products does not significantly rely on any third party technology,
although we continue to support as many third party technologies as possible.

We also rely upon trade secrets, proprietary know-how, and confidentiality
provisions in agreements with employees, consultants, and resellers to protect
our intellectual property rights.  There are risks that these other parties
may not comply with the terms of their agreements with us, and that we may not
be able to adequately enforce our rights against these parties.  We have
adopted a policy of requiring our employees and resellers to execute
confidentiality agreements when they commence employment with us or resell our
products.  These agreements generally provide that all confidential
information developed or made known to the employees or resellers during the
course of their relationship with us is to be kept confidential and not
disclosed to third parties, except under certain specific circumstances.  In
the case of employees, the agreements also provide that all inventions
conceived by the employees in the course of their employment will be our
exclusive property.

     Research and Development

We continue to improve our existing products and release new related products.
We recorded research and  development expenses of $242,012 for the year ended
December 31, 2004 primarily related to the development of the Intellipay
Wireless Terminal product and maintenance of our core products.  During the
year ended December 31, 2003, we recorded research and development expense of
$164,999, primarily related to development of our online auction connector
product, Intellipay Desktop Terminal, and the updating of our core products.

     Material Contracts

We initially entered into an informal agreement with Electric Lightwave, Inc.
for telecommunications and Internet access in January 1998.  We formalized the
agreement in February 1998 and negotiated an extension in November 2001, which
terminated in January 2004.  As of the date of this filing, this contract is
on a month-to-month basis.  The extension agreement requires that we pay
approximately $4,300 per month for a dedicated DS3 Internet and telephone
connection, and a redundant T-1.

     Employees

As of the date of this filing we have 20 employees.  We have six employees in
administration, two in sales/marketing, seven in operations and five
development engineers.  Our employees are not presently covered by any
collective bargaining agreement.  We have not experienced any work stoppages
and believe that our relations with our employees are good.

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                 ITEM 2.  DESCRIPTION OF PROPERTY

Our principal offices are located in the Westgate Business Center, which is
located in Salt Lake City, Utah.  This property serves as our main office and
data center.  We believe this property will be adequate for our near term
needs.  We lease approximately 8,000 square feet of commercial office space
and pay approximately $8,400 per month until the lease expires in December
2006.

                    ITEM 3.  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 from these disputes and claims will not have a material effect on
our financial position and results of operations.

   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We have not submitted a matter to a vote of our shareholders during the fourth
quarter of the 2004 fiscal year.

                             PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


Market Information

The principal market for our common stock is the NASD OTC Bulletin Board and
our common shares are traded over-the-counter under the symbol "PWEB."  The
following table presents the range of the high and low bid of our common stock
for each quarter for the past two years, as reported by the OTC Bulletin Board
Historical Data Service.  These quotations represent prices between dealers
and may not include retail markups, markdowns, or commissions and may not
necessarily represent actual transactions.

       Year    Quarter Ended   High Bid   Low Bid
       ----    -------------   --------   --------

       2003    March 31        $ 0.14     $ 0.06
               June 30           0.15       0.08
               September 30      0.45       0.125
               December 31       0.32       0.15

       2004    March 31        $ 0.18     $ 0.11
               June 30           0.13       0.09
               September 30      0.10       0.052
               December 31       0.10       0.06

Our shares are subject to Section 15(g) and Rule 15g-9 of the Securities and
Exchange Act, commonly referred to as the "penny stock" rule.  The rule
defines penny stock to be any equity security that has a market price less
than $5.00 per share, subject to certain exceptions.  The rule provides that
any equity security is considered to be a penny stock unless that security is:
registered and traded on a national securities exchange meeting specified
criteria set by the SEC; authorized for quotation from the NASDAQ stock
market; issued by a registered investment company; excluded from the
definition on the basis of price (at least $5.00 per share) or the issuer's
net tangible assets.  If our shares are deemed to be a penny stock, trading in
the shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established
customers and accredited investors.  Accredited investors, in general, include
certain institutional investors and individuals with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with their
spouse.

For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of our securities and must have
received the purchaser's written consent to the transaction prior to the
purchase.  Additionally, for any transaction involving a penny stock, the
rules require the delivery, prior to the first

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transaction, of a risk disclosure document relating to the penny stock.  A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for
the security.  Finally, monthly statements must be sent to the purchaser
disclosing recent price information for the penny stocks.  Consequently, these
rules may restrict the ability of broker-dealers to trade or maintain a market
in our common stock and may affect the ability of shareholders to sell their
shares.

Holders

As of February 9, 2005, we had approximately 399 stockholders of record of our
common stock, which does not include "street accounts" of securities brokers.

Dividends

We have not paid cash or stock dividends and have no present plan to pay any
dividends.  Instead, we intend to retain any earnings to finance the operation
and expansion of our business.  We are not presently subject to any
restriction on our present or future ability to pay any dividends, but the
payment of any cash dividends on our common stock is unlikely.

Recent Sales of Unregistered Securities

The following discussion describes all securities sold by Pacific WebWorks
during the fourth quarter of 2004 through the date of this filing that have
not been previously disclosed.

On December 1, 2004, we issued 1,215,000 shares of common stock to Nikki Group
for $85,050.  We relied on an exemption from registration for a private
transaction not involving a public distribution provided by Section 4(2) of
the Securities Act.

On December 20, 2004, we issued 1,215,000 shares of common stock to Broad
Investments Partners for $85,050.  We relied on an exemption from registration
for a private transaction not involving a public distribution provided by
Section 4(2) of the Securities Act.

On December 22, 2004, we issued 1,200,000 shares of common stock to Liberty
Partners for $79,200.  We relied on an exemption from registration for a
private transaction not involving a public distribution provided by Section
4(2) of the Securities Act.

On February 15, 2005 we agreed to issue 20,000 shares valued at $1,800 to
Winks Design, Inc. as partial consideration for a recurring fee-based customer
portfolio and software package valued at $6,800.  We relied on an exemption
from registration for a private transaction not involving a public
distribution provided by Section 4(2) of the Securities Act.

In connection with each of these isolated issuances of our securities, we
believe that each purchaser:
..    was aware that the securities had not been registered under federal
     securities laws;
..    acquired the securities for his/hers/its own account for investment
     purposes and not with a view to or for resale in connection with any
     distribution for purposes of the federal securities laws;
..    understood that the securities would need to be held indefinitely unless
     registered or an exemption from registration applied to a proposed
     disposition; and
..    was aware that the certificate representing the securities would bear a
     legend restricting their transfer.

Issuer Purchase of Securities

None.


                                10

<PAGE>

          ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

Executive Overview

During the past year management has continued to focus on marketing and
distribution channels, which, while costly, are believed to be the most
effective current short term solution to increase sales.  Management is in the
process of diversifying our marketing and distribution strategy between
several of our product offerings and we are seeing some success from these
plans, as evidenced by our growth during 2004.

Our revenues for the year 2004 came primarily from the sale of access to our
software technology, financial services and continuing monthly service and
hosting fees.  Additionally, we derived revenues for services related to web
site design, training, education and consulting.  During the year ended
December 31, 2004 ("2004") we increased overall revenues by 61.7% over the
previous year.  This represents an increase from $2,237,197 for the year ended
December 31, 2003 ("2003") to $3,617,486 for 2004.  For the 2004 fourth
quarter revenues of $1,046,321 were up from the 2003 fourth quarter revenues
of $697,846.  This growth is primarily related to the sales and training
events conducted in locations throughout the United States through our
subsidiary, TradeWorks Marketing.  These events focus on the sales of Pacific
WebWorks and Intellipay products and the training necessary to properly
utilize these products.

Pacific WebWorks and IntelliPay have a great potential in the marketplace.
However, hurdles exist, such as identifying and implementing effective product
distribution channels, economic changes generally, gaining marketplace
acceptance and addressing shifting public attitudes for technology products
that could pose a threat to our success.

It is critical for us to continue to develop new and better technologies.
Intellipay introduced two new products to the market during 2004.  The
Intellipay Desktop Terminal brings all of the functionality of a Virtual
Terminal application to your desktop computer, reducing costs and allowing the
merchant to receive a qualified discount rate.  The Intellipay Wireless
Terminal allows you to process remote wireless transactions through your
Nextel cell phone, which we believe is a must for all mobile merchants.

Our greatest challenges for the next twelve months include:
..    increased and intense competition;
..    the identification and implementation of new distribution channels and
     sales and marketing techniques;
..    the need to stay ahead of the curve in the development of our
     technologies; and
..    the need for more capital and resources.

Liquidity and Capital Resources

Our monthly cash outflows are primarily related to our marketing and operating
expenses.  These cash outflows can exceed monthly cash inflows based on timing
differences between marketing campaigns and sales.  In addition, we are
dependent on the efforts of our resellers, independent sales representatives
and our in-house sales personnel to increase our revenues, while we continue
to work to control expenses.

As of December 31, 2004 we had negative working capital of $313,680.
Accordingly, we are unable to satisfy our total current liabilities, including
those of our discontinued operations, with our current assets and must
continue to negotiate favorable settlements for certain of these liabilities.
We expect to generate positive cash flows through further development of our
business and distribution channels and we plan to address only the liabilities
of our operating subsidiaries with our current cash balances and inflows.  It
should be noted that 46.1% of our current liabilities are made up of deferred
revenues that will be recognized over the next 12 months and do not require a
specific cash outlay, but only that we remain a going concern.  It is further
noted that cash and cash equivalents plus restricted cash amounts increased to
$589,502 at year end 2004, up from $551,663 at year end 2003.

We rely on the cash inflows from our sales efforts to fund our continuing
operations.  Net cash provided by continuing operations was $87,455 for 2003
compared to net cash used in continuing operating activities of

                                11


<PAGE>

$190,195 for 2004.  The net cash used by operations for 2004 was primarily the
result of increased advertising expense and commissions paid to obtain
revenues for our products and services and the related timing differences in
recognition of those deferred revenues, along with non-recurring expenditures
for enhancement of our data center and security features related to our online
credit card transaction processing product.

Net cash provided by investing activities was $75,495 for 2003 compared to net
cash used by investing activities of $107,534 for 2004.   Investing activities
for 2003 consisted primarily of the purchase of property and equipment,
establishing a cash reserve with a bank, the sale of a subsidiary, and the
liquidation of a certificate of deposit.  Investing activities for 2004 were
primarily related to purchases of property and equipment and cash placed on
reserve with a financial institution related to TradeWorks Marketing's
merchant account.

Financing

We operate in a very competitive industry in which large amounts of capital
are required in order to continually develop and promote products.  Many of
our competitors have significantly greater capital resources than we have.  We
believe that we may need an additional $1 to $2 million during the next twelve
months to continue to keep up with technological improvements and further our
business development strategies.  We believe this additional funding may be
obtained through additional debt arrangements or equity offerings.  However,
if we are unable to obtain additional funds on acceptable terms, then we might
be forced to delay or abandon some or all of our product development,
marketing or business plans and growth could be slowed, which may result in
declines in our operating results and common stock market price.

Net cash used in financing activities for 2003 was $24,557 and was primarily
related to a payment on a note payable to our largest reseller.  Net cash
provided by financing activities of $250,000 for 2004 were related to sales of
our common stock for cash in the amount of $250,000.  (See, Part II, Item 5,
"Recent Sales of Unregistered Securities," above.)

If we rely on equity offerings for funding, then we will likely use private
placements of our common stock pursuant to exemptions from the registration
requirements provided by federal and state securities laws.  The purchasers
and manner of issuance will be determined according to our financial needs and
the available exemptions.  We also note that if we issue more shares of our
common stock our stockholders may experience dilution in the value per share
of their common stock.

Commitments and Contingent Liabilities

Our operating commitments consist of our operating lease for our Salt Lake
City office that approximates $8,400 per month.  Future minimum lease payments
under this lease are $101,760 per year through 2006.  As of December 31, 2004,
we had an accrued liability of $90,357 related to the Intellipay's operating
lease default.  Intellipay defaulted on its operating lease in May 2002 after
we closed Intellipay's physical office, located in Fremont, California, and
moved its technological infrastructure and operations to Salt Lake City in
February 2002.  The Intellipay lease required approximately $6,000 per month,
plus late fees and interest, through December 2003.  The accrued liability has
been reduced for time that the property was leased to a third party by the
property manager.

Our total current liabilities at December 31, 2004, were comprised of accounts
payable, accrued liabilities, deferred revenue and net current liabilities
from discontinued operations.  Accounts payable totaled $89,164 and were
related to operating costs such as advertising expenses, professional fees and
seminar expenses.  Our accrued liabilities of $180,809 were primarily the
result of the operating lease default for the Intellipay office space,
contingent reseller commissions, payroll liabilities, and estimated refunds
and factoring obligations.  Deferred revenues included up-front fees received
for license fees, software services and education not yet performed or
delivered and totaled $431,578 as of December 31, 2004.  Current liabilities
from discontinued operations were $235,274 and are discussed in more detail
below.

The operations of World Commerce Network, LLC, our subsidiary, are ceased and
discontinued.  Management is attempting to negotiate settlements of World
Commerce Network's accrued liabilities.  As of December 31, 2004, World
Commerce Network's accrued liabilities included estimated contingent recourse
obligations and attorneys

                                12

<PAGE>

fees approximating $95,000 related to pending litigation, approximately
$56,000 for estimated customer refunds, and approximately $65,000 plus
interest for an alleged default of application for credit and personal
guaranty made by a former officer of Pacific WebWorks.  We continue to work
through various matters related to these liabilities and management believes
the recorded liabilities are sufficient to cover any resulting liability.
There has been no activity on any of these accounts for over two years.

Certain customers of TradeWorks Marketing entered into operating leases to
purchase e-commerce software and merchant account agreements that were
assigned by TradeWorks Marketing to FundWorks, our subsidiary.  The customers
pay $59.95 per month for the operating lease agreement and the agreements have
a term of 36 months and are non-cancelable.  Related revenues are recorded
monthly as earned.  The future annual minimum lease receipts for FundWorks'
operating leases as of December 31, 2004 are $177,692 through December 31,
2005, $173,196 through December 31, 2006 and $87,347 through December 31,
2007.  Collectability of future minimum lease receipts cannot be assured
because the customers placed in these operating leases have a higher credit
risk.

Off-balance Sheet Arrangements

None.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes.  Estimates of
particular significance in our financial statements include goodwill and the
annual tests for impairment, deferred revenue calculations, and liabilities
accrued as estimates for probable litigation and other contingencies.

Goodwill related to Intellipay is assessed annually for impairment by
comparing the fair values of Intellipay to its carrying amount, including
goodwill.  The fair value of Intellipay is estimated using both cash flow
information from internal budgets and multiples of revenue.  In the event that
an impairment indicator arises prior to our annual impairment test of
goodwill, we will provide a full test relative to the indicator in the period
that the indicator is present.

Our ability to avoid impairment of the goodwill related to Intellipay is
largely dependent on Intellipay's ability to further generate revenues and
cash flows in accordance with budgeted amounts.  We currently do not expect
impairment to occur for the Intellipay business unit in the near term;
however, if an impairment occurs it would have a material effect on our
financial condition by resulting in a net decrease in our consolidated assets
and consolidated net earnings.  We performed a goodwill impairment test during
2004 and concluded there was no impairment of goodwill.

Our consolidated financial statements include estimates for contingent
liabilities that are considered probable.  Material estimates for contingent
liabilities include approximately $123,000 for our operating companies and
approximately $151,000 in net current liabilities of our discontinued
operations.  From a liquidity standpoint, any settlement or judgment received
by us from pending or threatened litigation may have a direct affect on our
cash balances of $452,983 at December 31, 2004.  Any judgments that may be
received by us for pending or threatened litigation related to discontinued
operations may not have a direct affect on our assets as management does not
intend to satisfy such claims with the assets of our operating companies.
Management believes that all amounts estimated and recorded as contingent
liabilities approximate the amount of liabilities that will be owed to parties
in the form of settlement or in judgment.  Any settlements that might occur
below amounts accrued would result in a favorable impact to our earnings and
working capital.

Recent Accounting Announcements

In December 2004, FASB issued SFAS No. 123(R) which requires compensation
costs relating to share-based payment transactions to be recognized in
financial statements and that the costs will be measured based on the fair
value of the instruments issued.  We will be required to apply this statement
as of the first interim reporting period

                                13

<PAGE>

that begins after June 15, 2005.  Accordingly, we will adopt this new
statement in the third quarter of 2005.  In the meantime we will continue to
account for stock options under APB Opinion No. 25, under which no
compensation is recognized.  SFAS No. 123(R) provides alternative methods of
transition for voluntary change to the fair value base method of accounting
for stock-based compensation and Note 14 to our financial statements
illustrates the effect on net losses and loss per share if we had applied the
fair value recognition of SFAS No. 123(R) for the 2003 and 2004 years.

Results of Operations

The following discussions are based on the consolidated financial statements
for the year ended December 31, 2003 and 2004 for Pacific WebWorks,
Intellipay, TradeWorks Marketing, Fundworks and the discontinued operations of
World Commerce Network, LLC, a non-operating company.  The financial
statements for the year ended December 31, 2003 also include the accounts of
Logio, Inc., a non-operating, development stage company, through the date of
its sale in July 2003.  The following discussions are a summary of our
financial statements for the years ended December 31, 2003 and 2004 and should
be read in conjunction with the financial statements, and notes thereto,
included with this report at Item II, Part 7, below.

        Comparison of 2003 and 2004 Fiscal Year Operations
        --------------------------------------------------

                                                2003               2004
                                             ------------     ------------

Revenues, net                                $ 2,237,197      $ 3,617,486

Cost of sales                                    541,026        1,071,241

Gross profit                                   1,696,171        2,546,245

Total operating expenses                       2,050,161        3,036,640

Loss from operations                            (353,990)        (490,395)

Other income and (expense), net                    6,086            2,068

Income taxes                                         300              300

Net income (loss) from continuing operations    (348,204)        (488,627)

Total gain on discontinued operations            274,778                -

Net earnings (loss)                              (73,426)        (488,627)

Net earnings (loss) per share                $     (0.00)      $    (0.02)

We recognize hosting, maintenance, transaction and processing fees in the
period in which fees are fixed or determinable and the related products or
services are provided to the user.  Revenues from up-front fees from customers
are recorded on the balance sheets as deferred revenues and are recognized
over the period services are performed.  Fees for the set-up of merchant
accounts are deferred and recognized as services are delivered, which is
generally two months.  Training and design revenues are recognized as the
related services are performed.  Sales decreased during the first half of 2003
primarily due to steady attrition of our monthly hosting and payment
processing service portfolios coupled with no significant replacement of
monthly paying customers through December 31, 2003.  In addition, new
marketing plans and strategies implemented in the last quarter of 2003
resulted in the deferral of certain revenues until the earnings process was
deemed completed.  Even with the deferral of a significant amount of our 2004
sales, our sales increased by over 61% for the year ended December 31, 2004.
Increases were primarily as a result of sales and training events conducted by
our subsidiary, TradeWorks Marketing.

                                14

<PAGE>

Cost of sales include fulfillment, customer service, certain royalties and
commissions, amortization of purchased customer portfolios, service personnel,
telecommunications and data center costs.  The increase in cost of sales for
2004 was primarily related to our new marketing strategy and related increases
in reseller fees and commissions.  In spite of our increased cost of sales as
a result of our significant increase in sales, our gross profit increased 50%
for 2004 compared to 2003.

Total operating expenses increased 48.1% from 2003 to 2004.  Selling expenses
for 2004 more than doubled from 2003, research and development expenses
increased 46.7%, and general and administrative expenses increased 2.4%.
However, depreciation and amortization decreased 44.9% and we did not record
any compensation expense related to options and warrants in 2004.  The 2003
compensation expenses related to warrants granted to consultants in 2001 and
2002, that expired through May 2004.  The compensation expense represents the
fair market value of the warrants, estimated on the date of grant.

Net other income for 2003 and 2004 was primarily related to interest income
earned on certificates of deposit.

Our financial statements for 2003 include the accounts of Logio, Inc., our
former non-operating subsidiary, as discontinued operations through the date
of its sale on June 27, 2003.  We sold all of the shares we held in Logio for
$50,000 cash and the purchasers' assumption of Logio's current liabilities.
The disposal resulted in the realization of  $274,778 in gain from the sale of
discontinued operations, which was realized during the second quarter 2003.

As a result of the above items, we recorded a net loss per share of $0.02 for
2004 and $0 for 2003.

Balance Sheet -  Other than increased deferred revenue balances that increased
our total current liabilities for the 2004 year, we did not record significant
changes in assets and liabilities for the 2004 year compared to the 2003 year.

      Comparison of 2003 and 2004 Fiscal Year Balance Sheet
      -----------------------------------------------------

                                               2003              2003
                                           --------------   -------------

Cash and cash equivalents                  $     500,712    $     452,983

Total current assets                             596,630          623,445

Total assets                                   3,762,015        3,799,588

Total current liabilities                        687,646          937,125

Accumulated deficit                          (12,238,400)     (12,726,727)

Total stockholders equity                  $   3,074,369    $   2,862,762


Factors Affecting Future Performance

We are currently dependent on the efforts of our internal business development
team and those of resellers, including our subsidiary, TradeWorks Marketing,
and outsourced marketing alliances for our continued growth.  We must continue
to recruit additional resellers and find other methods of distribution to
materially add to our portfolios of customers and cover attrition.  Many of
our previously significant resellers have become inactive or dormant.  We
expect overall sales to remain constant for the next six months due to
developing marketing activities and deferral of revenue.  We are actively
recruiting additional resellers and sales channels to replace inactive or
dormant resellers in order to continue acquisition and growth of monthly
recurring revenues, hosting and payment processing service fees.

We have introduced our products and services to markets using aggressive
marketing and sales methods which are

                                15

<PAGE>

highly regulated and pose financial risks.  These include seminar sales and
operating lease agreements with high credit-risk customers.  The regulation
over these types of marketing and sales techniques are rigid and heavily
enforced.  We also enter into factoring arrangements with third party
financing companies for the sale of our lease agreements for cash.  We may
encounter increased costs and may be exposed to other financial risks in order
to obtain revenues and to collect on accounts, including the resulting high
customer return rates and other collections factors from these markets.

Our revenues and operating results can be expected to fluctuate which may
adversely affect the price of our common stock.  These fluctuations may occur
for a variety of reasons beyond our control, including GAAP accounting
practices related to deferred revenues, and they may result in our quarterly
operating results being below the expectations of public market analysts and
investors from time to time.  In that case, we expect that the price of our
common stock would be materially and adversely affected.

We are dependent upon our merchant accounts to accept payment for services
from a large number of our customers and if we lose these merchant accounts,
it would have an adverse affect on our ability to collect on sales, which
would reduce our working capital, cash inflow and earnings, or increase
losses.

Wide scale implementation of a new technology or payment methods could
potentially render one or more of our services or products obsolete.  In the
event that stored-value cards, electronic cash equivalents or wireless
communications are implemented on a wide scale, then we could be forced to
modify our payment services or software to remain competitive.

We face intense competition that may slow our growth and force our prices
down.  We expect this competition to intensify in the future, with new
competitors, and competitive services and products regularly entering the
market.  If these competitors were to bundle competing products for their
customers, it could adversely affect our ability to market our services.

We may experience software defects and development delays that might damage
customer relations.  We may experience breakdowns or unauthorized entry into
our hosting services, infrastructure or payment processing system, harming our
business.  We would be unable to deliver our payment processing services or
hosting services if our system infrastructures break down or are otherwise
interrupted or compromised.

Any breach of our e-commerce security measures could reduce demand for our
services.  The e-commerce industry is intensely focused on the need for
network and Internet security, particularly with respect to the transmission
and storage of confidential personal and financial data.  We have met the
requirements for certification and approval by Visa and MasterCard security
programs.  Any compromise or elimination of our security could erode customer
confidence in our systems and could result in lower demand for our services.

We depend upon our proprietary rights, none of which can be completely
safeguarded against infringement.  Intellectual property rights, by their
nature, are uncertain and involve complex legal and factual questions.  We may
unknowingly infringe upon the proprietary rights of others, thereby exposing
us to significant liability and/or damages.  To the extent we rely upon
confidential information to maintain our competitive position, other parties
may independently develop the same or similar information.

ITEM 7: FINANCIAL STATEMENTS

Index to financial statements for Pacific WebWorks, Inc. and Subsidiaries for
the  years ended December 31, 2003 and 2004.

     Independent Auditor's Report ............................F-1
     Balance Sheet ...........................................F-2
     Statements of Operations ................................F-3
     Statements of Stockholders' Equity ......................F-4
     Statements of Cash Flows ..... ..........................F-5
     Notes to the Financial Statements .......................F-6



                                16

<PAGE>


   Chisholm,
     Bierwolf &                                 533 West 2600 South, Suite 250
       Nilson, LLC                                       Bountiful, Utah 84010
                                                         Office (801) 292-8756
Certified Public Accountants                                Fax (801) 292-8809
______________________________________________________________________________


                   INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders
of Pacific Webworks, Inc.

We have audited the accompanying consolidated balance sheets of Pacific
Webworks, Inc. as of December 31, 2004 and 2003 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
then ended.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public
Accounting Oversight Board (United States).  Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.  The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Pacific Webworks, Inc. as of December 31, 2004 and 2003 and the results of
its operations and cash flows for the years then ended in conformity with U.S.
generally accepted accounting principles.




/s/ Chisholm, Bierwolf & Nilson

Chisholm, Bierwolf & Nilson, LLC
Bountiful, UT
February 3, 2005





                               F-1
<PAGE> 17



             Pacific WebWorks, Inc. and Subsidiaries

                   CONSOLIDATED BALANCE SHEETS


                              ASSETS
                                                         December 31,
                                                     2003          2004
                                                 ------------- -------------
CURRENT ASSETS
  Cash and cash equivalents                      $    500,712  $    452,983
  Receivables
    Trade, less allowance for doubtful
     receivables of $72,000 in 2003
     and $127,421 in 2004                              29,649        96,260
  Prepaid expenses                                     66,269        74,202
                                                 ------------- -------------

    Total current assets                              596,630       623,445
                                                 ------------- -------------

PROPERTY AND EQUIPMENT, NET AT COST                    98,152        70,382
RESTRICTED CASH                                        50,951       136,519
GOODWILL                                            2,946,253     2,946,253
OTHER ASSETS, NET                                      70,029        22,988
                                                 ------------- -------------

                                                 $  3,762,015  $  3,799,588
                                                 ============= =============

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                               $     52,538  $     89,164
  Accrued liabilities                                 194,233       181,109
  Deferred revenue                                    205,601       431,578
  Current liabilities from discontinued operations    235,274       235,274
                                                 ------------- -------------

    Total current liabilities                         687,646       937,125
                                                 ------------- -------------
STOCKHOLDERS' EQUITY
  Common stock - par value $0.001; authorized
    50,000,000; issued and outstanding
    24,587,622 shares in 2003 and
    28,517,622 shares in 2004                          24,588        28,518
  Additional paid-in capital                       15,288,181    15,560,971
  Accumulated deficit                             (12,238,400)  (12,726,727)
                                                 ------------- -------------

    Total stockholders' equity                      3,074,369     2,862,762
                                                 ------------- -------------

                                                 $  3,762,015  $  3,799,888
                                                 ============= =============

 The accompanying notes are an integral part of these statements.

                               F-2


<PAGE> 18
             Pacific WebWorks, Inc. and Subsidiaries

              CONSOLIDATED STATEMENTS OF OPERATIONS

                                                         Year ended
                                                         December 31,
                                                      2003         2004
                                                 ------------- -------------
Revenues, net
  Software, access and license fees              $    149,373  $    655,440
  Hosting, gateway and maintenance fees             1,693,359     1,430,328
  Training and education                              187,725       817,197
  Merchant accounts, design and other                 206,740       714,521
                                                 ------------- -------------
                                                    2,237,197     3,617,486

Cost of sales                                         541,026     1,071,241
                                                 ------------- -------------
    Gross profit                                    1,696,171     2,546,245

Selling expenses                                      566,808     1,516,567
Research and development                              164,999       242,012
General and administrative                          1,199,925     1,228,324
Depreciation and amortization                          90,285        49,736
Compensation expense for options and warrants          28,144             -
                                                 ------------- -------------
    Total operating expenses                        2,050,161     3,036,640
                                                 ------------- -------------

    Net loss from operations                         (353,990)     (490,395)
                                                 ------------- -------------
Other income (expense)
  Interest income                                       7,924         3,054
  Other income (expense), net                          (1,838)         (986)
                                                 ------------- -------------
                                                        6,086         2,068
                                                 ------------- -------------
  Net income (loss) from continuing operations
   before income taxes                               (347,904)     (488,327)
                                                 ------------- -------------
Income Taxes                                              300           300
                                                 ------------- -------------
  Net income (loss) from continuing operations       (348,204)     (488,627)

Discontinued operations
  Gain (loss) from operations (net of income tax)           -             -
  Gain on disposal (net of income tax)                274,778             -
                                                 ------------- -------------
    Total gain(loss) from discontinued operations     274,778             -

    NET LOSS                                     $    (73,426) $   (488,627)
                                                 ============= =============
Net loss per common share - basic and dilutive
  Net income loss from continuing operations     $      (0.01) $      (0.02)
  Gain from discontinued operations                      0.01             -
                                                 ------------- -------------
  Net earnings (loss)                            $          -  $      (0.02)
                                                 ============= =============
Weighted-average number of shares outstanding
  Basic                                            23,916,510    24,853,964
                                                 ============= =============
  Dilutive                                         24,008,185    25,165,075
                                                 ============= =============

The accompanying notes are an integral part of these financial statements.

                               F-3
<PAGE> 19
<TABLE>

             Pacific WebWorks, Inc. and Subsidiaries

          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                             Additional
                         Price per        Common Stock         Paid-in     Accumulated
                           share       Shares      Amount      Capital       Deficit       Totals
                         ---------- ------------ ---------- ------------- ------------- -------------

                      <c>        <c>          <c>        <c>           <c>           <c>

Balances at
 January 1, 2003         $       -   23,359,473  $  23,360  $ 15,148,940  $(12,164,974) $  3,007,326

Warrants exercised       $    0.5     1,000,000      1,000        49,000             -        50,000

Issuance of stock for
 insurance policies      $    0.27      228,149        228        62,097             -        62,325

Consulting compensation
 recognized for warrants
 granted                 $       -            -          -        28,144             -        28,144

Net loss 2003            $       -            -          -             -       (73,426)      (73,426)
                                    ------------ ---------- ------------- ------------- -------------
Balances at
 December 31, 2003                   24,587,622     24,588    15,288,181   (12,238,400)    3,074,369

Issuance of stock for
 insurance policies      $   0.089      300,000        300        26,420             -        26,720

Issuance of common
 stock for cash          $    0.07    3,630,000      3,630       246,370             -       250,000

Net loss 2004            $       -            -          -             -      (488,627)     (488,627)
                                    ------------ ---------- ------------- ------------- -------------
Balances at
 December 31, 2004                   28,517,622  $  28,518  $ 15,560,971  $(12,727,027) $  2,862,462
                                    ============ ========== ============= ============= =============




       The accompanying notes are an integral part of these statements.

                                      F-4

</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>


                    Pacific WebWorks, Inc. and Subsidiaries

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                For the
                                                               year ended
                                                               December 31,
                                                             2003          2004
                                                         ------------- -------------

                                                      <c>           <c>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
  Net earnings (loss)                                    $    (73,426) $   (488,627)
  Less: Gain from discontinued operations (net of taxes)     (274,778)            -
                                                         ------------- -------------
  Earnings (loss) from continuing operations                 (348,204)     (488,627)

  Adjustments to reconcile net earnings (loss)
   to net cash used in operating activities
     Depreciation & amortization                               90,285        49,736
     Issuance of options and warrants For compensation         28,144             -
     Bad debt expense                                         380,532       512,914
  Changes in assets and liabilities
     Receivables                                             (374,118)     (579,525)
     Prepaid expenses and other assets                        133,910        65,827
     Accounts payable and accrued liabilities                  43,617        23,502
     Deferred revenue                                         133,289       225,977
                                                         ------------- -------------

      Total adjustments                                       435,659       298,431
                                                         ------------- -------------

      Net cash provided by continuing operating activities     87,455      (190,195)
                                                         ------------- -------------
Cash flows from investing activities
  Purchases of property and equipment                         (25,090)      (21,966)
  Cash on reserve with bank                                   (50,951)      (85,568)
  Cash received for sale of subsidiary                         50,000             -
  Sale (purchase) of certificate of deposit                   101,536             -
                                                         ------------- -------------

     Net cash provided by (used in) investing activities       75,495      (107,534)
                                                         ------------- -------------
Cash flows from financing activities
  Payment on note payable to reseller                         (74,557)            -
  Proceeds on issuance of stock                                     -       250,000
  Proceeds on exercise of warrants                             50,000             -
                                                         ------------- -------------

     Net cash used in financing activities                    (24,557)      250,000
                                                         ------------- -------------
     Net increase in cash and cash equivalents                138,393       (47,729)

  Cash and cash equivalents at beginning of period            362,319       500,712
                                                         ------------- -------------

  Cash and cash equivalents at end of period             $    500,712  $    452,983
                                                         ============= =============

  Supplemental disclosures of cash flow information:
    Cash paid for interest                               $      1,076  $          -
    Cash paid for income taxes                           $        500  $        800

  Non-cash financing activities:
    Issuance of stock for prepaid insurance policies     $     62,325  $     26,720
    Reseller note settlement                             $     37,740  $          -


       The accompanying notes are an integral part of these statements.

                                      F-5
</TABLE>
<PAGE> 21
             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies consistently applied in the
presentation of the accompanying consolidated financial statements follows.

1. The Company
   -----------

Pacific WebWorks, Inc. and its subsidiaries (Company), engages in the
development and distribution of web tools software, electronic business
storefront hosting, and Internet payment systems for individuals and small to
mid-sized businesses.  The company also provides website development and
training for its customers.

The Company was organized under the laws of the state of Nevada on May 18,
1987 as Asphalt Associates, Inc.  On December 31, 1998, the board of directors
changed the name of the Company to Pacific WebWorks, Inc.  On January 11,
1999, the Company merged with Utah Webworks, Inc., a Utah corporation
organized April 10, 1997.  The share exchange with Utah Webworks was accounted
for as a reverse merger; therefore, all financial information prior to January
11, 1999 is that of the accounting survivor, Utah Webworks.

TradeWorks Marketing, Inc. and FundWorks, Inc. were organized in the state of
Delaware in July and August of 2003, respectfully.  TradeWorks began
operations in August 2003 and engages in the marketing and sales of Pacific
WebWorks and Intellipay products.  FundWorks began operations in December 2003
and provides operating leases for customers with higher credit risk.

2. Principles of Consolidation
   ---------------------------

The accompanying consolidated financial statements include the accounts of
Pacific WebWorks, Inc. and its wholly owned subsidiaries, Intellipay, Inc.,
TradeWorks Marketing, Inc., FundWorks, Inc. and the discontinued operations of
World Commerce Network, LLC. (a non-operating company).  The financial
statements also include the accounts of Logio, Inc. (a non-operating,
development company) through the date of its sale in July 2003.  All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Certain prior period balances have been reclassified to conform with current
period presentation.

3. Use of Estimates
   ----------------

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes.  Management
believes that the estimates used in preparing the financial statements are
reasonable and prudent; however, actual results could differ from these
estimates.  Significant estimates include the allowance for doubtful accounts,
impairment assessments of goodwill, and certain accrued liabilities such as
contingent liabilities.

                               F-6
<PAGE> 22

             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.  Cash Equivalents
    ----------------

The Company considers all highly liquid instruments maturing in three months
or less when purchased to be cash equivalents.

5.  Depreciation and amortization
    -----------------------------

Depreciation of property and equipment is provided on the straight-line method
over the estimated useful lives of the assets.  Accelerated methods of
depreciation of property and equipment are used for income tax purposes.

6.  Goodwill
    --------

The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, in
2002. Under SFAS No. 142, goodwill is no longer amortized, but is tested for
impairment at a reporting unit level on an annual basis and between annual
tests if an event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying amount.
Events or circumstances which could trigger an impairment review include a
significant adverse change in legal factors or in the business climate, an
adverse action or assessment by a regulator, unanticipated competition, a loss
of key personnel, significant changes in the manner of our use of the acquired
assets or the strategy for our overall business, significant negative industry
or economic trends or projected future results of operations. For purposes of
financial reporting and impairment testing in accordance with SFAS No. 142,
the Company's Intellipay business unit operates in one principal business
segment, a provider of online credit card gateway services.

In testing for a potential impairment of goodwill, the estimated fair value of
the business unit is compared with book value, including goodwill. If the
estimated fair value exceeds book value, goodwill is considered not to be
impaired and no additional steps are necessary. If, however, the fair value of
the Company is less than book value, then the carrying amount of the goodwill
is compared with its implied fair value. The estimate of implied fair value of
goodwill may require independent valuations of certain internally generated
and unrecognized intangible assets such as our paying monthly gateway
portfolio, software and technology and trademarks. If the carrying amount of
our goodwill exceeds the implied fair value of that goodwill, an impairment
loss would be recognized in an amount equal to the excess. In accordance with
SFAS No. 142, the Company performed a goodwill impairment test during 2004 and
concluded there was no impairment of goodwill.

7.  Fair value of financial instruments
    -----------------------------------

The fair value of the Company's cash and cash equivalents, receivables,
accounts payable, accrued liabilities and capital lease obligations
approximate carrying value based on their effective interest rates compared to
current market prices.

                               F-7
<PAGE> 23


             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

8.  Revenue Recognition
    -------------------

The Company recognizes revenue in accordance with the Securities and Exchange
Commission, Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements" and its revisions in SAB No. 104.  SAB 101 and 104
clarify application of generally accepted accounting principles related to
revenue transactions.  The Company also follows American Institue of Certified
Public Accountants Statement of Position ("SOP") 97-2, as amended by SOP 98-9.
The company also applies EITF Issue No. 00-21, Revenue Arrangements with
Multiple Deliverables ("EITF Issue No. 00-21").

The Company recognizes revenues when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists, (2) delivery of products and
services has occurred, (3) the fee is fixed or determinable and (4)
collectibility is reasonably assured.

In an arrangement with multiple deliverables, the delivered item(s) are be
considered a separate unit of accounting if all of the following criteria are
met: (1) the delivered item(s) has value to the customer on a standalone
basis, (2) there is objective and reliable evidence of the fair value of the
undelivered item(s), and (3) if the arrangement includes a general right of
return, delivery or performance of the undelivered item(s) is considered
probable and substantially in the control of the vendor. If all the conditions
above are met and there is objective and reliable evidence of fair value for
all units of accounting in an arrangement, the arrangement consideration is
allocated to the separate units of accounting based on their relative fair
values.

Revenues from up-front fees are deferred and recognized over the period
services are performed (which is generally one year).  Fees for the set-up of
merchant accounts are deferred and recognized as services are completed (which
is generally two months).  Revenues from monthly hosting, maintenance,
transaction and processing fees are recorded when earned. Operating lease
revenues for merchant accounts and software are recorded as they become due
from customers.

9.  Cost of sales
    -------------

Cost of sales includes costs related to fulfillment, customer service, certain
royalties and commissions, amortization of purchased customer portfolios,
service personnel, telecommunications and data center costs.

10.  Sales and marketing costs
     -------------------------

Sales and marketing expenses include advertising expenses, seminar expenses,
commissions and personnel expenses for sales and marketing. The Company has
expended significant amounts on sales and marketing, including national
television, radio, and print advertising. Marketing and advertising costs to
promote the Company's products and services are expensed in the period
incurred.

                               F-8
<PAGE> 24

             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

11.  Research and development costs
     ------------------------------

Product development expenses include expenses for the maintenance of existing
software and the development of new or improved software and technology,
including personnel expenses for the product engineering department.  Costs
incurred by the Company to develop, enhance, manage, monitor and operate the
Company's technology services are generally expensed as incurred.

12.  General and administrative costs
     --------------------------------

General and administrative expenses include personnel expenses for executive,
finance, and internal support personnel. In addition, general and
administrative expenses include fees for bad debt costs, professional legal
and accounting services, insurance, office space, banking and merchant fees,
and other overhead-related costs.

13.  Income taxes
     ------------

The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income tax assets and liabilities are
provided based on the difference between the financial statement and tax bases
of assets and liabilities measured by the currently enacted tax rates in
effect for the years in which these differences are expected to reverse.
Deferred tax expense or benefit is the result of changes in deferred tax
assets and liabilities.

14.  Stock-based compensation
     -------------------------

The Company has applied the disclosure provisions of Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based Compensation
Transition and Disclosure   An amendment of FASB Statement No. 123," for the
years ended December 31, 2003 and 2004.  This Statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based compensation.  In addition, this Statement amends
the disclosure requirements of SFAS No. 123 to require prominent disclosures
in both interim and annual financial statements about the method of accounting
for stock-based compensation and the effect of the method on reported results.
As permitted by SFAS No. 148, the Company continues to account for stock
options under APB Opinion No. 25, under which no compensation has been
recognized.

                               F-9


<PAGE> 25

             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004

15.  Stock-based compensation
      ------------------------

The following table illustrates the effect on net losses and loss per share if
the Company had applied the fair value recognition provisions of SFAS No. 123,
as amended by SFAS 148 to stock-based compensation:

                                                   Year Ended December 31,
                                                     2003         2004
                                                 ------------- ------------
Net loss
 From continuing operations
                                   As reported   $   (348,204) $  (488,327)
                                   Pro forma       (1,085,245)    (809,358)

Gain from discontinued operations
                                   As reported   $    274,778  $         -
                                   Pro forma          274,778            -

Net earnings (loss)
                                   As reported   $    (73,426)    (488,327)
                                   Pro forma         (810,467)    (809,358)

Net earnings (loss) per common
  share from continuing operations
  basic and fully diluted          As reported   $      (0.01)  $    (0.02)
                                   Pro forma            (0.05)       (0.03)

Gain (loss) from discontinued
  operations basic and fully
  diluted                          As reported   $       0.01   $        -
                                   Pro forma             0.01            -
Net earnings (loss) per common
  share                            As reported   $          -   $    (0.02)
                                   Pro forma            (0.04)       (0.03)


The fair value of these options was estimated at the date of grant using the
Black-Scholes American option-pricing model with the following
weighted-average assumptions for options granted in 2003 and 2004: expected
volatility of 158 percent and 101 percent, respectively; risk-free interest
rate of 5.00 percent and 4.00 percent, respectively; and expected life of 3.25
and 3.5 years, respectively.  The weighted-average fair value of options
granted was $0.19 and $0.05 in 2003 and 2004, respectively.

Option pricing models require the input of highly sensitive assumptions,
including expected stock volatility.  Also, the Company's stock options have
characteristics significantly different from those of traded options, and
changes in the subjective input assumptions can materially affect the fair
value estimate.  Management believes the best input assumptions available were
used to value the options and that the resulting option values are reasonable.

                               F-10

<PAGE> 26

             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004

15.  Net Loss Per Share
     ------------------

The computation of net loss per share of common stock is based on the weighted
average number of shares outstanding during each period presented. The Company
utilizes the treasury stock method to calculate loss per share.  Potentially
issuable common shares totaling 4,783,695 related to options and 1,300,000
related to warrants were excluded from the calculation of diluted loss per
share because their effects were anti-dilutive for the year ended December 31,
2003.  Potentially issuable common shares totaling 5,334,424 related to
options were excluded from the calculation of diluted loss per share because
their effects were anti-dilutive for the year ended December 31, 2004.


The following is the calculation for weighted average common shares used in
basic and dilutive net earnings (loss) per share:

                                                   Year ended December 31,
                                                     2003          2004
                                                ------------- -------------

Common shares outstanding during the period        23,359,473    24,587,622
Weighted average common shares issued                 557,037       266,342
                                                ------------- -------------
Weighted average common shares used
 in basic earnings (loss) per share                23,916,510    24,853,964
                                                ------------- -------------
Dilutive effects of potentially issuable
 common shares (warrants)                              91,675       311,111
                                                ------------- -------------
Weighted average number of common shares
  and dilutive potential common stock used
   in diluted earnings (loss) per share            24,008,185    25,165,075
                                                ============= =============

16.  Recent Accounting Pronouncements
     --------------------------------

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment".
This Statement revises SFAS No. 123, "Accounting for Stock-Based Compensation"
and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."
SFAS No. 123(R) requires that the compensation cost relating to share-based
payment transactions be recognized in financial statements.  The cost will be
measured based on the fair value of the instruments issued.  The Company will
be required to apply SFAS No. 123(R) as of the first interim reporting period
that begins after June 15, 2005.  Accordingly, the Company will adopt SFAS No.
123(R) in the third quarter of 2005.  Management is currently evaluating the
impact SFAS No. 123(R) will have on the Company's results of operations as a
result of adopting this new Standard.

                               F-11
<PAGE> 27

             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004

NOTE B - PROPERTY AND EQUIPMENT

Property and equipment includes the following:
                                                                 Estimated
                                               December 31,      useful
                                             2003       2004     life (years)
                                       ------------ ------------ ------------
      Computer Equipment               $   334,722  $   340,760      3-5
      Equipment                            102,197      116,710      2-10
      Software                              93,283       93,958      1-3
      Furniture and Fixtures                86,087       86,780      3-10
      Leasehold Improvements                 4,598        4,598  Life of lease
                                       ------------ ------------
                                           620,887      642,806
      Less Accumulated Depreciation       (522,735)    (572,424)
                                       ------------ ------------
                                       $    98,152  $    70,382
                                       ============ ============
NOTE C - OTHER ASSETS

Other assets include the following:           December 31,
                                           2003         2004
                                       ------------ -------------

      Purchased customer portfolio     $   232,360  $    278,309
      Deposits                               7,672         9,672
                                       ------------ -------------
                                           240,032       287,981
                                       ------------ -------------

      Accumulated amortization            (170,003)     (264,992)
                                       ------------ -------------
                                       $    70,029  $     22,989
                                       ============ =============

Pacific WebWorks, Inc. has entered into agreements with resellers for the
purchase of residual interests in customer hosting and terminal portfolios.
These definite-life intangible assets are being amortized over the period of
expected future cash flows these charges are included in cost of sales.


NOTE D - ACCRUED AND OTHER LIABILITIES


Accrued liabilities consist of the following:            December 31,
                                                      2003         2004
                                                 ------------- -------------

      Payroll related liabilities                $     37,774  $     38,130
      Sales contractor commissions                      5,205         6,766
      Contingent reseller commissions                  39,790        39,790
      Operating lease in default                       83,364        90,357
      Refunds and factor                               27,610         4,426
      Income tax payable                                  300         1,200
      Other                                               190           440
                                                 ------------- -------------
                                                 $    194,233  $    181,109
                                                 ============= =============

                               F-12


<PAGE> 28


             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004

NOTE E - OPERATING LEASE REVENUES

During the years ended December 31, 2003 and 2004, certain customers of
TradeWorks entered into operating lease agreements that were assigned to
FundWorks to purchase e-commerce software and merchant accounts over 35 months
for approximately $59.95 per month.  The leases are non-cancelable and related
revenue is recorded monthly as earned.

Future annual minimum lease receipts for FundWorks operating leases as of
December 31, 2004 are estimated as follows:

                  2005                $  177,692
                  2006                   173,196
                  2007                    87,347
                  Thereafter                   -
                                      ----------
                                      $  438,235
                                      ==========

Collectability of future minimum lease receipts cannot be assured as the
customers placed in operating leases are of a higher credit risk.

TradeWorks also enters into factoring arrangements for certain sales of
e-commerce software and merchant accounts to an outside leasing company with
recourse.  Estimated recourse amounts are reduced from the amount funded to
the company and netted against sales for reporting purposes as they are not
considered realizable.  Additional amounts due under the factoring
arrangements are estimated and recorded as an accrued liability (Note D).

NOTE F - STOCKHOLDERS' EQUITY

1.  Equity Incentive Plan
    ---------------------

On March 8, 2001, the Board of Directors adopted the Pacific WebWorks, Inc.
2001 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 7,500,000 shares of the Company's
common stock under the Plan.  The Plan has not been approved by the Company's
shareholders as of December 31, 2004

Directors, officers, and employees have been granted options to acquire
5,334,424 shares of the company's common stock and 3,934,424 of the options
are exercisable as of December 31, 2004. The options were granted at exercise
prices ranging from $0.14 - $2.00 per share.  The options vest periodically
through April 2005 and expire through April 2011.

                               F-13

<PAGE> 29


             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004

NOTE F - STOCKHOLDERS' EQUITY (CONTINUED)

1.  Equity Incentive Plan  - Continued
    ----------------------------------

Information with respect to the Company's stock options follows:

                                                              Weighted-average
                                Stock options  Exercise price  exercise price
                                -------------- -------------- ----------------
Outstanding at January 1, 2002     3,845,409     $0.14-$3.44     $0.78
   Granted                         1,625,000         0.23         0.23
   Exercised                             -             -             -
   Forfeited                         774,107      0.14-3.44       1.07
                                -------------- --------------- --------------
Outstanding at December 31, 2003   4,696,302     $0.14-$2.00     $0.54
   Granted                         1,400,000         0.07         0.07
   Exercised                               -            -            -
   Forfeited                         761,878      0.14-2.00       0.82
                                -------------- --------------- --------------
Outstanding at December 31, 2004   5,334,424     $0.07-$1.75     $0.37
                                ============== =============== ==============


Options outstanding


                                                          Weighted-
                     Number       Weighted-average    average remaining
Exercise price     outstanding      exercise price  contractual life (years)
------------------ -------------- ----------------- -----------------------
      1.75               4,500              1.75              0.75
      0.87              67,424              0.87                 6
      0.75           1,887,500              0.75              5.75
      0.23             450,000              0.23               2.5
      0.14           1,525,000              0.14              3.75
      0.07           1,400,000              0.07              4.75
                  -------------
                     5,334,424
                  =============

Options exercisable

                                                          Weighted-
                     Number       Weighted-average    average remaining
Exercise price      exercisable    exercise price   contractual life (years)
------------------ -------------- ----------------- -----------------------
      1.75               4,500             1.75              0.75
      0.87              67,424             0.87              6
      0.75           1,887,500             0.75              5.75
      0.23             450,000             0.87              2.5
      0.14           1,525,000             0.14              3.75
      0.07                   -             0.07              4.75
                   -------------
                     3,934,424
                   =============


                               F-14
<PAGE> 30


             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE F - STOCKHOLDERS' EQUITY (CONTINUED)

2.  Issuance of stock
    -----------------

In July 2003, the Company's Board of Directors resolved to adjust the price
certain of the Company's warrants to purchase 1,000,000 shares of its common
stock from an exercise price $0.75 and $0.50 per share to an exercise price of
$0.05 per share.  All of the warrants were exercised in July 2003 for $50,000
in cash.

In October 2003, the company issued a total of 228,149 shares of its common
stock in exchange for $62,325 of insurance premiums for one year.

In October 2004, the company issued a total of 300,000 shares of its common
stock in exchange for $26,270 of insurance premiums for one year.

In December 2004, the company issued a total of 3,630,000 shares of its common
stock to three separate companies for $250,000 in cash as a private offering.

NOTE G - DISCONTINUED OPERATIONS

The following includes the combined net current liabilities for the Company's
discontinued operations as of December 31, 2003 and 2004


                                                   World
                                                   Commerce
                                                   Network, LLC
                                                   ------------
        ASSETS
        Current assets                             $        -
        Long-term assets                                    -
                                                   ----------
        Total assets                               $        -
                                                   ==========
        LIABILITIES
        Payables past due                              64,010
        Accrued liabilities                           171,264
                                                   ----------
        Total current liabilities                  $  235,274
                                                   ==========

        Net current liabilities                    $  235,274
                                                   ==========



                               F-15
<PAGE> 31




             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE G - DISCONTINUED OPERATIONS (CONTINUED)

1.  Discontinued subsidiary - Logio, Inc.
    -------------------------------------

Sale of Logio, Inc.

In July 2003, the Company sold all of its shares in Logio, Inc. for $50,000
cash to a group of 11 investors.  The disposal resulted in the realization of
approximately $274,000 in gain from the sale of discontinued operation, during
the second quarter 2003.

2.  Discontinued subsidiary - World Commerce Network, LLC
    -----------------------------------------------------
In July 2002, the Board of Directors of Pacific WebWorks, Inc. resolved to
discontinue World Commerce Network, LLC and set forth a formal plan of
disposal.  Negotiations and settlements of World Commerce liabilities are
currently underway as the LLC is phasing out its operations.  World Commerce
Network became a consolidated entity with the Company in March 2000.

Other current liabilities

Other current liabilities of World Commerce Network, LLC consist of estimated
customer refunds approximating $56,000 and estimated contingent liabilities
from the legal matter noted below approximating $95,000 as of December 31,
2004.

Pending litigation

In September 2002, World Commerce Network, LLC received a complaint from a
customer financing company for recourse obligations funded for customer leases
during 2000 for seminar related activities.  The agreement between World
Commerce Network and the leasing company provides for recourse on leases in
which customers have not made first payment.  Estimated recourse obligations
and related attorney's fees for World Commerce Network approximate $95,000 at
December 31, 2003 and 2004 and have been recorded as a net current liability
of discontinued operations.  Management believes that the recorded liability
for this matter is sufficient to cover any resulting judgment from this claim.

In April 2001, one of World Commerce Network's former vendors filed a
complaint alleging default under a certain application for credit and personal
guaranty made by a former officer of World Commerce Network.  The vendor seeks
approximately $65,000 plus interest.  World Commerce Network believes the
amount should be reduced based upon the vendor's performance and other
disputes.  World Commerce Network has filed an answer to the complaint and
further litigation is pending.   The Company has recorded amounts in net
current liabilities of discontinued operations.  Management believes that the
amount recorded is sufficient to cover the resulting liability from this
complaint.

                               F-16
<PAGE> 32



             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE H - COMMITMENTS AND CONTINGENCIES

1.  Operating lease in default
    -------------------------
In June 2002, in conjunction with the migration of the Intellipay operations
to our Salt Lake City facilities, Intellipay, Inc. defaulted on its operating
lease for office space in Fremont, California.  The lease agreement required
payment of approximately $6,000 per month plus applicable late fees and
interest through December 2004.

As of December 31, 2004, Intellipay, Inc. has recorded an accrued liability of
$90,357 related to the months of office lease under default, less months
re-leased by the property manager, including all interest and late fees.

2.  Operating leases
    ----------------
The Company has entered into a lease agreement for the lease of office space
for its operations in Salt Lake City, Utah.  The lease requires $8,400 per
month from January 2005 through expiration in December 2006.  Rent expense for
the Salt Lake offices for the years ended December 31, 2003 and 2004
approximates and $99,000 and $100,000 respectively.  The following is a
schedule of future minimum lease payments under the operating lease:

         Year ended      Lease
         December 31,    Commitment
         ------------    ----------
            2005         $  101,760
            2006            101,760
         Thereafter               -
                          -----------
                          $  203,520
                          ===========



                               F-17
<PAGE> 33



             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE I - INCOME TAXES

The tax effects of temporary differences giving rise to deferred tax assets
and liabilities are as follows:

                                                2003             2004
                                            ------------   ------------
Deferred tax assets
   Allowance for doubtful accounts          $    15,099    $    92,288
   Net operating loss carryforwards           2,458,309      3,360,209
   Excess book depreciation and amortization     65,162         71,615
   Capital loss carryforwards                   590,081        240,838
   Other, net                                    30,505         31,142
                                            ------------   ------------
                                              3,159,157      3,796,091

    Less valuation allowance                 (3,159,157)    (3,796,091)
                                            ------------   ------------
    Net tax assets                          $         -    $         -
                                            ============   ============

There were no deferred tax assets of income tax benefits recorded in the
financial statements for net deductible temporary differences or net operating
loss carryforwards because the likelihood of realization of the related tax
benefits cannot be established.  Accordingly, a valuation allowance has been
recorded to reduce the net deferred tax asset to zero.  The decrease in the
valuation allowance was $3,174,337 for the year ended December 31, 2003 and
increased $636,934 for the year ended December 31, 2004.

As of December 31, 2004, the Company has net operating loss carryforwards for
tax reporting purposes of approximately $9,200,000 expiring through 2023.  As
of December 31, 2004, the Company had a capital loss carryforward for tax
reporting purposes of approximately $650,000 expiring in 2008.



                               F-18
<PAGE> 34




             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE J - SEGMENT REPORTING

Although the Company operates in one business segment, the production and
distribution of business e-commerce software, management reports by individual
business unit.

Segment reporting by business unit follows:


<TABLE>
<CAPTION>

Year ended             Pacific                    Trade       Fund-      Discontinued
December 31, 2003(a)   WebWorks     Intellipay    Works       Works      Operations(b)
--------------------   ------------ ------------- ----------- ---------- -------------

                    <c>          <c>           <c>         <c>        <c>
Revenues, net          $ 1,299,996  $    554,878  $  377,857  $   4,466  $          -

Income (loss) from
continuing operations      (71,879)       64,784    (335,629)    (5,480)            -

Gain (loss) from
discontinued operations    274,778             -           -          -             -

Net income (loss)      $   202,899  $     64,784  $ (335,629) $  (5,480) $          -
____________________________________________________
(a) Amounts include all intercompany receivables, payables, revenues and expenses
    prior to elimination for consolidation.
(b) Includes Logio, Inc. through June 27, 2002 and World Commerce Network, LLC,
    non-operating, discontinued subsidiaries.

</TABLE>
<TABLE>
<CAPTION>

Year ended             Pacific                    Trade        Fund-      Discontinued
December 31, 2004(a)   WebWorks     Intellipay    Works        Works      Operations(b)
--------------------   ------------ ------------- ------------ ---------- -------------

                    <c>          <c>           <c>          <c>        <c>
Revenues, net          $ 1,081,088  $    484,339  $ 1,936,246  $ 115,812  $          -

Income (loss) from
continuing operations     (176,259)       75,635     (402,077)    11,233             -

Gain (loss) from
discontinued operations          -             -            -          -             -

Net income (loss)      $  (174,247) $     75,565  $  (401,951) $  12,306  $          -
____________________________________________________
(a)  Amounts include all intercompany receivables, payables, revenues and expenses prior
     to elimination for consolidation.
(b)  Includes World Commerce Network, LLC, a non-operating, discontinued subsidiary.


                                F-19

</TABLE>
<PAGE> 35


             Pacific WebWorks, Inc. and Subsidiaries

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004


NOTE K - MARKET RISK

We rely on the efforts of third party resellers to add accounts to our
customer base.  A significant portion of our customer accounts were provided
by previous Pacific WebWorks and Intellipay resellers who no longer resell our
products and services.  While we continue to add additional resellers,
including the Company's TradeWorks Marketing subsidiary, we are primarily
dependent upon further addition of reseller distribution channels for future
sales growth.


NOTE L - SUBSEQUENT EVENT

In February 2004, the Company agreed to purchase software technology and a
recurring fee-based customer portfolio for $6,800.  The purchase was made with
20,000 shares of the Company's common stock, valued at $0.09 per share on the
date of the agreement and $5,000 in cash.

                                20







<PAGE> 36

     ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE

In our current report dated February 9, 2004, we reported that our independent
auditors, Chisholm & Associates, Certified Public Accountants, resigned as our
independent auditors and we engaged Chisholm, Bierwolf & Nilson, LLC to serve
as our independent auditors.

                ITEM 8A.  CONTROLS AND PROCEDURES

Our Chief Executive Officer, who also acts in the capacity of principal
financial officer, has reevaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report and
determined that there continued to be no significant deficiencies in these
procedures.  Also, there were no changes made or corrective actions to be
taken related to our internal control over financial reporting.

                   ITEM 8B.  OTHER INFORMATION
None.


                             PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors and Executive Officers

The directors and executive officers of Pacific WebWorks are listed below,
with their respective ages, positions and biographical information.  Our
articles of incorporation provide for a board of directors consisting of at
least three, but no more than nine persons.  Our directors serve until our
next annual meeting or until each is succeeded by a qualified director. Our
executive officers are chosen by our board of directors and serve at its
discretion.  R. Brett Bell is the son of Kenneth W. Bell.

Name                 Age  Position Held                        Director since
-------------------  ---- ------------------------------------ --------------
Christian R. Larsen  30   President and Director                  April 1999
Kenneth W. Bell      55   Chairman of the Board, Chief Executive  January 2001
                          Officer, Treasurer, and Director
R. Brett Bell        29   Secretary and Controller


Christian R. Larsen - Mr. Larsen currently serves as our President and he
served as our Chief Executive Officer from April 1999 through January 2001.
Prior to 1999 he served as Chief Operating Officer of Pacific WebWorks and as
a consultant for Utah WebWorks.  He has over eight years experience providing
computer consulting and business management services.

Kenneth W. Bell -  On April 14, 2004, our board of directors appointed Kenneth
W. Bell as Chairman of the Board. On July 15, 2004, our board of directors
appointed Kenneth W. Bell to serve in the capacity of Treasurer.

Kenneth W. Bell has served as our Chief Executive Officer since January 2001.
He formerly served as President and Chief Financial Officer of Kelmarc
Corporation, a financial and management advisory company.  He has over thirty
years experience in a variety of finance and management positions, including
employment for fifteen years in the commercial banking industry in Utah and
California.  Mr. Bell received a bachelors degree from Brigham Young
University in 1972.

R. Brett Bell - On April 14, 2004 our board of directors appointed Robert
Brett Bell as Secretary of the company.  He has been employed as a controller
for Pacific WebWorks since 2001.  Prior to becoming a controller for Pacific
WebWorks, he held positions in Investor Relations and Accounting with Logio,
Inc. from 1998 to 2001.  He studied Economics and Finance at the University of
Utah.

                                37

<PAGE>

Audit Committee Financial Expert

We do not currently have an audit committee and, accordingly, we do not have
an audit committee financial expert serving on an audit committee.

Compliance with Section 16(a)

Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
executive officers and person who own ten percent or more of our common stock
to file initial reports of ownership and reports of changes in ownership of
our common stock with the SEC.  Officers, directors and greater than
ten-percent beneficial owners are required by SEC regulations to furnish
Pacific WebWorks with copies of all Section 16(a) reports they file.  Based
upon review of the copies of such forms furnished to us during the fiscal year
ended December 31, 2004 and representations from these reporting persons that
no Forms 5 were required, we believe R. Brett Bell filed late a Form 3.

Code of Ethics

We have not adopted a code of ethics for our principal executive and financial
officers.  However, our management intends to promote honest and ethical
conduct, full and fair disclosure in our reports to the SEC, and compliance
with applicable governmental laws and regulations.

                 ITEM 10.  EXECUTIVE COMPENSATION

The following table shows the compensation paid to our named executive
officers in all capacities during the past three fiscal years.


                    SUMMARY COMPENSATION TABLE
                                                             Long Term
                       Annual Compensation                   Compensation
                       --------------------                  ------------
                                                             Securities
Name and principal                                           underlying
position               Year       Salary ($)      Bonus ($)  Options/SAR's (#)
---------------------  -----      ----------      --------   --------------
Christian R. Larsen    2004       $ 70,396        $ 5,000     250,000
President              2003         67,896          4,000     275,000
                       2002         60,708          2,500      50,000

Kenneth W. Bell        2004       $ 94,250        $ 5,000     250,000
CEO, Treasurer         2003         90,917          4,000     300,000
                       2002         81,708          2,500      50,000

R. Brett Bell          2004       $ 58,458        $ 2,000     175,000
Secretary              2003         52,107          1,500     100,000
Controller             2002         44,657              0      35,000




                                38


<PAGE>

              OPTION/SAR GRANTS IN LAST FISCAL YEAR

                        Individual Grants
                        -----------------

                                    Percent of
                     Number of      total
                     securities     options/SARs
                     underlying     granted to     Exercise or
                     Options/SAR's  employees in   base price  Expiration
     Name            granted(#)     fiscal year      ($/sh)    date
-------------------  -------------  -------------- ----------- ------------
Christian R. Larsen     250,000        15.3%         0.07       10/20/09
Kenneth W. Bell         250,000        15.3%         0.07       10/20/09
R. Brett Bell           175,000        10.7%         0.07       10/20/09


(1)  One half of the options granted vest six months after the date of grant
     and the remaining half of the options granted vest after twelve months.

Employment Contracts

On April 1, 2004 we entered into employment agreements with Kenneth W. Bell
and Christian R. Larsen.  Mr. Bell was employed as the Chief Executive Officer
of Pacific WebWorks with a salary of $96,000 a year and will devote 80% of his
working time to the business of the company.  Mr. Larsen was employed as the
President of Pacific WebWorks with a salary of $72,000 per year and will
devote 100% of his working time to the business of the company.  The remaining
material terms of the employment agreements are identical.

The employment agreements terminate on March 31, 2006.  Each year the salary
shall be increased at a rate determined by the board of directors or in the
amount of 6%.  Each executive is entitled to yearly bonuses as determined by
the board of directors, along with health and medical insurance and four weeks
vacation time.  Each executive agreed not to disclose company confidential
information to third parties.  If the executive resigns his position, he will
be entitled to compensation for services rendered only.  The company may
terminate his employment for cause; but if his employment is terminated other
than for cause, then he will receive a lump sum payment of his salary and
incentive compensation within 30 days of the termination.  Upon termination
each executive shall have continued coverage under the insured employee
benefit plan.  Each executive promised to not release any proprietary
information about the company for a period of two years after his termination
of employment.

In the event the executive's employment is terminated due to a change in
control of the company, as defined in the agreement, then he will receive two
times the average sum of amounts paid to him for salary, bonus and profit
sharing for the five fiscal years immediately preceding the date of change in
control.  If the executive suffers disability while employed, then he is
entitled to a portion of his salary for an 18 month period.  If he dies during
his employment, then the company will pay one year's salary and incentives to
his estate.  Each executive is entitled to request by written notice that any
shares he holds be registered, subject to itemized limitations in the
employment agreement, when the company files certain registration statements.

Compensation of Directors

We do not have any standard arrangement for compensation of our directors for
any services provided as director, including services for committee
participation or for special assignments.  Under our 2001 Equity Incentive
Plan, an independent director is eligible to receive 5,000 shares of our
common stock or options to acquire our common stock each year in which they
serve as a member of our board of directors and 10,000 options upon joining
our board of directors.  At this time we do not have any independent
directors.

                                39

<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  AND RELATED STOCKHOLDER MATTERS

Securities Authorized Under Equity Compensation Plans

The following table lists the securities authorized for issuance under any
equity compensation plans approved by our shareholders and any equity
compensation plans not approved by our shareholders.

               EQUITY COMPENSATION PLAN INFORMATION
----------------------------------------------------------------------------
                                                            Number of
                                                            securities
                                                            remaining
                                                            available for
                                                            future issuance
                                                            under equity
                 Number of securities   Weighted-average    compensation
                 to be issued upon      exercise price of   plans (excluding
                 exercise of out-       outstanding         securities
                 standing options,      options, warrants   reflected
Plan category    warrants and rights    and rights          in column (a))
                        (a)                (b)                  (c)
---------------- ---------------------- ------------------- ---------------
Equity
compensation
plans approved
by security
holders                  0              $   0.00                  0
---------------- ---------------------- ------------------- ---------------
Equity
compensation
plans not
approved by
security
holders               5,334,424             0.37               2,165,576
---------------- ---------------------- ------------------- ---------------

Total                 5,334,424         $   0.37               2,165,576
---------------- ---------------------- ------------------- ---------------

2001 Equity Incentive Plan - On March 8, 2001, Pacific WebWorks' board of
directors adopted the Pacific WebWorks, Inc. 2001 Equity Incentive Plan.
Under this plan we may grant stock options, stock appreciation rights or
restricted shares to employees, independent directors and certain consultants.
The board of directors amended the plan in 2003 to reserve 7,500,000 shares
for this plan subject to periodic adjustments for changes in the outstanding
common stock occasioned by stock splits, stock dividends, recapitalizations or
other similar changes.  In the event of a merger, consolidation or plan of
exchange to which we are a party or a sale of all, or substantially all, of
our assets the committee may continue, assume, substitute, accelerate or
settle the outstanding awards.

All of Pacific WebWorks and our subsidiaries' employees, are eligible for
incentive stock options.  Employees, independent directors and consultants are
eligible for restricted shares, non-qualified stock options and stock
appreciation rights.  We currently have twenty employees, officers and
directors eligible to participate in the plan.  An independent director is
eligible to receive 5,000 shares of our common stock or options to acquire our
common stock each year in which he or she serves as a member of our board of
directors and 10,000 options upon joining our board of directors.  As of the
date of this filing, we do not have any independent directors.

The plan is administered by a committee which is responsible for determining
the type, amount and terms of any consideration awarded to a recipient.  Under
the plan any options granted to a recipient are exercisable in accordance with
the terms of the agreement governing the grant.  If the option is an incentive
stock option, those terms must be consistent with the requirements of the
Internal Revenue Code, as amended, and applicable regulations, including the
requirement that the option price not be less than the fair market value of
the common stock on the date of the grant.  If the option is not an incentive
stock option, the option price may be any price determined by the committee.

As of December 31, 2004, the board of directors has granted options to acquire
5,334,424 shares of common stock with exercise prices ranging from $0.07 to
$1.75 per share.  The options vest periodically through October 2005 and
expire through April 2011.  The plan continues in effect until March 8, 2011,
unless terminated by the board of directors.  The board of directors may
suspend or terminate the plan at any time.

                                40
<PAGE>


Beneficial Ownership

The following table lists the beneficial ownership of Pacific WebWorks
outstanding common stock for each of our executive officers and directors.  We
are unaware of any person or group that owns beneficially more than 5% of our
outstanding common stock.  Beneficial ownership is determined according to the
rules of the SEC and generally includes voting or investment power with
respect to securities.  Based on these rules, two or more persons may be
deemed to be the beneficial owners of the same securities.  Except as
indicated by footnote, the persons named in the table below have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them.  The percentage of beneficial ownership is based
on 28,517,622 outstanding shares of common stock as of February 9, 2005, and
any shares the each of the following persons may acquire within 60 days by the
exercise of warrants and/or options.

                            MANAGEMENT

Name and Address of            Number of Shares of                  Percentage
Beneficial Owners              Common Stock           Options (1)   of Class
-----------------------------  ---------------------  ------------  ----------

Christian R. Larsen               878,000 (2)            775,000      5.6%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101

Kenneth W.  Bell                  217,311 (3)          1,112,878      7.2%
180 South 300 West, Suite 400
Salt Lake City, Utah 84101


R. Brett Bell                           0                259,737      Less
180 South 300 West, Suite 400                                         than 1%
Salt Lake City, Utah 84101

All executive officers and      1,095,311              2,147,615      10.5%
directors as a group

   (1)    Represents options exercisable within the next 60 days.
   (2)    Represents 878,000 shares held by Net Strategic Investments LLC of
          which Mr. Larsen is an affiliate.
   (3)    Includes 76,309 shares held by Mr. Bell and 141,002 shares owned
          jointly with his spouse.


     ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have not engaged in any transactions in excess of $60,000 during the past
two years involving our executive officers, directors, 5% or more stockholders
or immediate family members of such persons.

                        ITEM 13.  EXHIBITS

No.    Description

3.1    Articles of Incorporation, as amended (Incorporated by reference to
       exhibit No. 3.1 for Form 10-Q filed November 13, 2001)
3.2    Amended and Restated Bylaws of Pacific WebWorks, Inc. (Incorporated by
       reference to exhibit No. 3.2 for Form 10, as amended, file No. 0-26731,
       filed July 16, 1999.)
10.1   Master Service Agreement between Electric Lightwave, Inc., and Utah
       WebWorks, Inc., dated February 2, 1998  (Incorporated by reference to
       exhibit No. 10.1 for Form 10, as amended, file No. 0-26731, filed July
       16, 1999.)
10.2   Internet Access Agreement, Addendum to Master Service Agreement between
       Electric Lightwave, Inc., and Pacific WebWorks, Inc., dated January 1,
       2002 (Incorporated by reference to exhibit No. 10.2 for Form
       10-K, filed March 26, 2002)

                                41
<PAGE>

10.3   Lease Agreement between Pacific WebWorks, Inc. and Westgate Business
       Center, dated November 20, 2003 (Incorporated by reference to exhibit
       10.3 for Form 10-KSB, filed March 22, 2004)
10.4   Strategic Reseller Agreement with U.S. Merchant Systems (Incorporated
       by reference to exhibit No. 10.9 for Form 10, as amended, File No.
       0-26731, filed July 16, 1999)
10.5   Form of employment agreement for executive officers, dated April 1,
       2004
21.1   Subsidiaries of Pacific WebWorks (Incorporated by reference to exhibit
       21.1 for Form 10-QSB, filed November 13, 2003)
31.1   Chief Executive Officer Certification
31.2   Principal Financial Officer Certification
32.1   Section 1350 Certification


         ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for each of the last two fiscal years for
professional services rendered by our principal account for the audit of our
annual financial statement and review of financial statements included in
quarterly reports and services normally provided by the accountant in
connection with statutory and regulatory filings or engagements were $9,508
for fiscal year ended 2003 and $2,840 for fiscal year ended 2004.

Audit-Related Fees

Our auditor did not bill any fees in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit or review of our financial statements
that are not reported above.

Tax Fees

The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advise, and tax planning were $4,325 for fiscal year ended 2003 and $4,740
for fiscal year ended 2004.

All Other Fees

The aggregate fees billed for each of the last two fiscal years for products
and services provided by the principal accountant, other than the services
reported above were $0 for fiscal year ended 2003 and $6,920 for fiscal year
ended 2004.

Pre-approval Policies

We do not have an audit committee currently serving and as a result our board
of directors performs the duties of an audit committee.  Our board of
directors will evaluate and approve in advance, the scope and cost of the
engagement of an auditor before the auditor renders audit and non-audit
services.  We do not rely on pre-approval policies and procedures.

                                42

<PAGE>

                            SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                      Pacific WebWorks, Inc.


                                       /s/ Christian R. Larsen
Date: March 29, 2005               By:_____________________________________
                                      Christian R. Larsen, President


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

                                      /s/ Christian R. Larsen
Date: March 29, 2005                  _____________________________________
                                      Christian R. Larsen
                                      President and Director

                                      /s/ Kenneth W. Bell
Date: March 29, 2005                  _____________________________________
                                      Kenneth W.  Bell
                                      Chairman of the Board, Chief Executive
                                      Officer,  Principal Financial and
                                      Accounting Officer and Treasurer

                                      /s/ R. Brett Bell
Date: March 29, 2005                    _____________________________________
                                      R. Brett Bell
                                      Secretary and Controller



                                43