U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: April 30, 1999
Commission File Number: 0-22607
MERCHANTONLINE.COM, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation or organization)
84-1233073
(IRS Employer Identification No.)
1600 S. Dixie Highway
Boca Raton, FL 33432
--------------------
(Address of principal executive offices)
33432
(Zip Code)
(561) 395-3585
(Issuer's Telephone Number)
Check whether 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 past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days: Yes
__X__ No ____.
The number of shares of the registrant's only class of common stock issued and
outstanding, as of April 30, 1999, was 17,500,000 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the six month period
ended April 30, 1999, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Company's unaudited financial statements and notes thereto included herein.
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this report and in any other statement
made by, or on the behalf of the Company, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company. The Company
disclaims any obligation to update forward looking statements.
OVERVIEW
MerchantOnline.com, Inc., f/k/a Tarcyn Corporation (the
"Company" or "MOL"), was incorporated under the laws of the State of Colorado on
March 19, 1993. On February 16, 1999, pursuant to the terms of an Agreement and
Plan of Reorganization, the Company undertook a forward split of its issued and
outstanding common stock whereby 3.5 shares of common stock were exchanged for
every share then issued and outstanding and thereafter, the Company acquired all
of the issued and outstanding securities of CreditCo, Inc., a Delaware
corporation, in exchange for 15,750,000 (post forward split) "restricted" common
shares of the Company. As a result, the Company was the surviving entity. As
part of the terms of the aforesaid transaction, the Company amended its Articles
of Incorporation, changing its name to its present name, as well as
reincorporating in the State of Florida.
The Company's principal business is to provide a diverse
selection of services which it has developed to allow Internet
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merchants to quickly and easily establish a method of conducting business on the
Internet with a minimal initial investment and with low transaction costs. MOL
intends to attempt to take advantage of the anticipated enormous growth of the
Internet by providing an electronic payment solution for merchants that market
and sell their products and services on the Internet. The electronic commerce
services ("E-commerce") provided by MOL include allowing merchants to accept
credit cards, debit cards and online checks from customers in a secure,
technologically advanced environment. MOL is currently a single source of
customer service which offers a variety of Internet services including
electronic shopping carts, web site development and hosting, merchant accounts
and real-time credit card processing in a single package for one installation
fee and only one, combined monthly billing. To date, most of MOL's revenues have
been generated from credit card transactions. During the six month period ended
April 30, 1999, the Company lowered its existing charges for installation from
$495 to $99, in order to facilitate sign-ups. The Company generates the balance
of its revenues from transaction or service fees, depending upon the nature of
the product and/or service provided.
MOL has developed proprietary real-time credit card processing
programs which it calls MOLcharge, which management believes meets or exceeds
the capabilities of all currently available software. It intends to provide
small and medium sized merchants with a single vendor that furnishes everything
needed to begin participating in E-commerce. Its proposed client base includes
merchants that already have merchant bankcard accounts that require real-time
processing only. CreditCo commenced marketing its business in February 1998 and,
in September 1998, it began offering complete services to allow merchants to
become active on the Internet.
The following information is intended to highlight
developments in the Company's operations to present the results of operations of
the Company, to identify key trends affecting the Company's businesses and to
identify other factors affecting the Company's results of operations for the six
month periods ended April 30, 1999 and 1998.
RESULTS OF OPERATIONS
Results of Operations for the six month periods ended April
30, 1999 and 1998.
During the six month period ended April 30, 1999, the
Company's revenues were $312,209, compared to $79,807 for the similar period in
1998. This increase of $232,402 (390%) was attributable to the growth of the
Company's business, as the Company's customer base increased during this period
from the prior period in 1998 by 780. Costs of sales were $237,654 for the six
month period ended April 30, 1999, compared to $58,266 for the six
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month period ended April 30, 1998, an increase of $179,388 (400%). Relevant
thereto, on April 1, 1999, the Company discontinued its "turnkey" product line
whereby sales for customer websites were reflected on the Company financial
books in sales revenues and commissions paid to customers were reflected in cost
of sales. By discontinuing this product line, both sales and costs of sales will
be reduced proportionately. The remaining product lines of the Company yield
sales revenues by way of fees and charges, with little in the way of cost of
sales related specifically to these revenue items. This shift in product mix
will substantially affect the revenues and costs reflected in the Company's
future financial statements. For the six month period ended April 30, 1999, the
portion of sales revenues that relate to the "turnkey" product line was
$199,813, compared to $51,372 for the six months ended April 30, 1998. For the
six month period ended April 30, 1999, the portion of cost of sales that related
to the "turnkey" product line was $167,918, compared to $43,021 in the six month
period ended April 30, 1998.
During the six month period ended April 30, 1999, general and
administrative expense totalled $336,976, which expense included 125,853 in
independent contractor expense. General and administrative expense in the six
month period ended April 30, 1998 were $90,506, including $40,883 in independent
contractor expense, an increase of $246,470 (370%) from the similar period in
1998. The Company has retained six separate independent contractors who provide
the Company with technical support, website design, public relations and
marketing. General and administrative expense increased during the six month
period ended April 30, 1999 compared to the similar period in 1998 as a result
of the Company moving its principal place of business to a larger facility in
order to accommodate the growth of the business and salaries of the Company's
increased number of employees. It is expected that these expenses will remain
relatively constant or increase in the foreseeable future by reason of
anticipated expanded volume of transactions processed by the Company. As a
result, the Company generated a net loss from operations of $(262,421) during
the six month period ended April 30, 1999 ($.01 per share), compared to a net
loss of $(68,965) for the similar period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
At the close of the three month period ended April 30, 1999,
the Company had $49,717 in cash and $8,314 in accounts receivable. Its accounts
payable and commissions payable were, in the aggregate, $274,792.
The Company has five outstanding notes payable, including two
loans from affiliates, including one note to Tarek Kirschen, President and a
Director of the Company, with an outstanding principal balance of $40,269 and
the other to Steven Landau in the principal amount of $25,000, each of which
accrues interest at the
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rate of 8% per annum and is due on demand. The remaining outstanding notes
aggregate $300,000 and are payable to minority shareholders pursuant to the same
terms and conditions as Mr.
Kirschen's loan.
Management has recognized the Company's need for additional
operating capital. In response thereto, in May 1999, the Company commenced a
private offering of its common stock wherein it is offering shares of its common
stock at a price of $1.00 per share for aggregate gross proceeds of up to $2
million. As of the date of this report, the Company had sold an aggregate of
25,000 shares of its common stock for gross proceeds of $25,000 pursuant to the
offering. While no assurances of closing the maximum dollar amount proposed to
be raised can be provided, it is anticipated that this offering will continue
through the end of August 1999. There can be no assurances that all of the
shares of common stock currently being offered will be sold, or that the Company
will generate sufficient interest in this offering to solve its cash shortage.
It is expected that the proceeds of this offering will be utilized primarily for
advertising the Company's services using electronic banners on the major
internet services, attendance of the Company at trade shows, research and
development and repayment of debt.
The Company's common stock was approved for trading on the OTC
Bulletin Board operated by the National Association of Securities Dealers, Inc.
in the end of April 1999.
TRENDS
Management believes that the Company will continue to operate
the Company's business at a loss for the next several months, but is optimistic
that the Company will begin generating profits from its operations beginning
thereafter. This is based upon numerous opportunities for expansion of the
services offered by the Company with major internet companies, as well as
establishing strategic alliances with existing internet companies. Discussions
have already commenced in this regard, but as of the date of this report no
definitive agreements have been made and there can be no assurances that such
agreements will be consummated in the future. Further, there can be no
assurances that the Company will become profitable within the time parameters
described herein, or at all. The Company is currently processing approximately
20,000 transactions per month and while no assurances can be provided, it has
targeted 100,000 processed transactions per month by September, 1999. The
Company previously reported that it anticipated reaching the aforesaid goals by
June 1999, but to date, the number of sign-ups anticipated by the Company have
been less than anticipated. The Company also does not charge transaction fees
any longer, so management believes that this is irrelevant to revenues and
corresponding profits, if any. Once additional cash becomes available to the
Company from the private offering
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referenced above (of which there can be no assurance), it is anticipated that
the Company's sales campaign will be enhanced.
INFLATION
Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that inflation had a
material affect on the results of operations during the six month period ended
April 30, 1999.
YEAR 2000 DISCLOSURE
Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. As a result, many companies will be required to undertake
major projects to address the Year 2000 issue. The Company presently owns
approximately $83,000 worth of computers and computer related equipment.
However, the Company utilizes Linux servers and Windows 98 personal computers
with the modern ROM BIOS. Both of these technologies are fully Y2K compliant, as
the internal calendars do not use truncated date representations. In addition,
there can be no assurances that the Company's business will not be negatively
affected by other third party failures, should they occur after January 1, 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
Effective February 16, 1999, pursuant to unanimous consent in
lieu of a meeting in accordance with the laws of the State of Colorado, the
Company's shareholders approved (i) the merger between the Company and CreditCo,
Inc., a Delaware corporation; (ii) an amendment to the Company's Articles of
Incorporation, changing the name of the Company from Tarcyn Corporation to
MerchantOnline.com, Inc.; and (iii) a reincorporation of the Company from the
State of Colorado to the State of Florida.
ITEM 5. OTHER INFORMATION - NONE
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
On February 4, 1999, the Company filed a report on Form 8-K,
advising of the execution of a letter of intent between the Company and
CreditCo, Inc., a Delaware corporation, wherein the aforesaid companies had
reached an agreement in principle to engage in a "reverse merger."
On February 19, 1999, the Company filed a report on Form 8-K
advising of the closing of the "reverse merger" between the Company and
CreditCo, Inc., a Delaware corporation, and the change in control of the Company
applicable to said transaction and change in its fiscal year end to coincide
with that of CreditCo, Inc., and the change of independent accountants.
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<TABLE>
MERCHANTONLINE.COM, INC.
BALANCE SHEET
APRIL 30, 1999
(UNAUDITED)
<S> <C>
CURRENT ASSETS
Cash $ 49,717
Accounts Receivable 8,314
Employee Advances 300
---------
Total Current Assets 58,331
PROPERTY AND EQUIPMENT
Furniture and Equipment 165,667
Less accumulated Depreciation (28,255)
---------
Total Property and Equipment 137,412
Security Deposits 6,565
---------
TOTAL ASSETS $ 202,308
=========
CURRENT LIABILITIES
Accounts Payable $ 256,352
Commission Payable 18,440
Notes Payable 365,269
----------
Total Current Liabilities 640,061
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, Par Value $.001,
100,000,000 shares authorized,
17,500,000 issued and outstanding 17,500
Additional paid in capital 32,500
Accumulated deficit (487,753)
---------
Total Stockholders' Deficit (437,753)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 202,308
=========
</TABLE>
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<TABLE>
MERCHANTONLINE.COM, INC.
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
(UNAUDITED)
Three Months Ended Six Months Ended
April 30, April 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 135,711 $ 79,807 $ 312,209 $ 79,807
Cost of Sales 87,527 58,266 237,654 58,266
---------- ---------- ---------- ----------
GROSS PROFIT 48,184 21,541 74,555 21,541
General & Administrative 164,230 75,251 336,976 90,506
---------- ---------- ---------- ----------
NET (LOSS) $ (116,046) $ (53,710) $ (262,421) $ (68,965)
========== ========== ========== ==========
Net loss per share -
Basic and diluted $ (.01) $ (.00) $ (.01) $ (.00)
========== ========== ========== ==========
Weighted shares outstanding 17,181,818 15,750,000 16,450,000 15,750,000
========== ========== ========== ==========
</TABLE>
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<TABLE>
MERCHANTONLINE.COM, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999
(UNAUDITED)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(262,421)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 16,297
(Increase) decrease in current assets:
Account receivable 4,048
Employee advances (300)
Increase (decrease) in current liabilities:
Accounts payable 128,308
Commissions payable 2,917
---------
Net Cash (used in) Operating Activities $(111,151)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment $ (82,874)
---------
Net Cash (used in) Investing Activities $ (82,874)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short term debt $ 241,243
---------
Net Cash provided by Financing Activities $ 241,243
---------
Net decrease in cash $ 47,218
Cash beginning of period 2,499
---------
Cash end of period $ 49,717
=========
</TABLE>
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MERCHANTONLINE.COM, INC.
Notes to Financial Statements (unaudited)
April 30, 1999
Note 1. BASIS OF PRESENTATION
The financial statements presented herein have been prepared by
MerchantOnline.com, Inc. (the "Company"), without audit, and do not include all
of the information and notes required by generally accepted accounting
principles for annual financial statements. These statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
period from November 1, 1997 to October 31, 1998, included in the Company's Form
8-K as filed with the Securities and Exchange Commission.
In the opinion of management, the information included herein reflects all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of results for these interim periods. The results of operations for
the interim periods ended April 30, 1999, are not necessarily indicative of the
results to be expected for the entire fiscal year ending October 31, 1999.
NET LOSS PER SHARE
Basic and diluted loss per share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during each period
giving effect to the 1,750,000 shares referred to in Note 2 as outstanding since
February 15, 1999.
Note 2. REVERSE MERGER
On February 16, 1999, Tarcyn Corporation (Tarcyn) entered into a transaction
whereby Tarcyn acquired all of the issued and outstanding shares of
MerchantOnline.com, Inc. (the "Company") in exchange for 15,750,000 common
shares of Tarcyn stock. Tarcyn had 500,000 shares outstanding prior to the
acquisition. In connection with and prior to this transaction, Tarcyn authorized
a "forward split" whereby three and one-half of common stock were issued for
each share outstanding or an aggregate of 1,750,000 common shares. Accordingly,
the shareholders of the "Company" will own 90% of the Tarcyn issued and
outstanding shares after the acquisition.
Tarcyn had no assets or operating activity, accordingly the transaction is
hereby accounted for as a reverse merger and recapitalization on February 15,
1999, for an additional 1,750,000 shares (the outstanding Tarcyn shares) in
exchange for no assets. As a result the shares issued (15,750,000) for the
"Company" have been treated as if they were issued since the "Company's"
inception (November 20, 1997).
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MERCHANTONLINE.COM, INC.
(Registrant)
Dated: June 21, 1999
By:/s/ Tarek S. Kirschen
----------------------------------
Tarek S. Kirschen,
President
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MERCHANTONLINE.COM, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED APRIL 30, 1999
EXHIBITS Page No.
EX-27 Financial Data Schedule..............................................14
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> APR-30-1999
<CASH> 49,717
<SECURITIES> 0
<RECEIVABLES> 8,314
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,331
<PP&E> 165,667
<DEPRECIATION> 28,255
<TOTAL-ASSETS> 202,308
<CURRENT-LIABILITIES> 640,061
<BONDS> 0
0
0
<COMMON> 17,500
<OTHER-SE> (455,253)
<TOTAL-LIABILITY-AND-EQUITY> 202,308
<SALES> 135,711
<TOTAL-REVENUES> 135,711
<CGS> 87,527
<TOTAL-COSTS> 87,527
<OTHER-EXPENSES> 164,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (116,046)
<INCOME-TAX> 0
<INCOME-CONTINUING> (116,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (116,046)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
