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: January 31, 1999
Commission File Number: 0-22607
MERCHANTONLINE.COM, INC.
(Exact name of small business issuer as specified in its charter)
TARCYN CORPORATION
(Former name of small business issuer)
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 January 31, 1999, was 17,500,000
shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three month
period ended January 31, 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. It
charges an installation fee of $495, as well as a
transaction/service fee, 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. It 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 June, 1999.
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 three month period ended
January 31, 1999.
Results of Operations
Results of Operations for the three month period ended
January 31, 1999.
CreditCo, the Company's predecessor, did not commence its
operations until January 1, 1998. During the initial month of
operations, no revenues were generated. As such, management
believes that it is impractical to compare the results of
operations for the three month comparable periods.
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During the three month period ended January 31, 1999, the
Company's revenues were $176,498. Of these revenues, $140,256
(79.6%) were generated from merchant sales, which accounted for a
substantial portion of revenues. Costs of Sales was $150,127 (85%
of revenues), including $103,614 (58.7%) in commissions paid to
outside consultants. General and administrative expense totalled
$172,746, which expense included 51,400 (29.1%) in contractor
expense and $51,252 (29%) in salaries and wages. It is expected
that these expenses will 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 $(146,375), or less than $.01 per share.
Liquidity and Capital Resources
At the close of the three month period ended January 31,
1999, the Company had $0 in cash and $7,569 in account receivable.
The Company has two outstanding notes payable to
affiliates, including one note to Tarek Kirschen, President and
Director of the Company, with an outstanding balance of $32,663,
which accrues interest at the rate of 8% per annum and is due on
demand. The remaining outstanding note aggregating $25,000 is
payable to a shareholder pursuant to the same terms and conditions
as Mr. Kirschen's loan. In addition, in September 1998, a
stockholder of the Company loaned the Company $90,000 which bears
interest at the rate of 12% per annum and is due upon demand.
However, this shareholder has agreed to convert this loan into
equity in accordance with the terms of the Company's proposed
private offering described hereinbelow.
Management has recognized the Company's need for
additional operating capital. In response thereto, the Company
intends to commence a private offering of its common stock wherein
it is offering Units, each Unit consisting of 6,250 shares of the
Company's Common Stock, for a price of $25,000 per Unit ($4.00 per
share), for aggregate gross proceeds of up to $2 million. There
can be no assurances that all of the Units to be 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 securities are currently not liquid.
However, an application to list the Company's common stock for
trading on the OTC Bulletin Board operated by the National
Association of Securities Dealers, Inc. will be filed shortly after
the date of this report. While no assurances can be provided,
management believes that the Company's common stock will begin
trading on the Bulletin Board in the near future.
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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.
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 three month period ended January 31, 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
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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
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
January 31, 1999
(unaudited)
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 0
Accounts Receivable 7,569
Employee Advances 6,521
---------
Total Current Assets 14,090
PROPERTY AND EQUIPMENT
Furniture and Equipment 96,209
Less accumulated Depreciation (19,075)
---------
Total Property and Equipment 77,134
Security Deposits 6,565
---------
TOTAL ASSETS $ 97,790
=========
CURRENT LIABILITIES
Due to Bank $ 43,938
Accounts Payable 203,878
Commission Payable 24,501
Notes Payable 57,664
----------
Total Current Liabilities 329,981
Note Payable 90,000
----------
TOTAL LIABILITIES 419,981
----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, Par Value $.001,
100,000,000 shares authorized,
17,500,000 issued and outstanding 50,000
Accumulated deficit (372,191)
---------
Total Stockholders' Deficit (322,191)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 97,790
=========
</TABLE>
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<TABLE>
MerchantOnline. com, Inc.
Statement of Operations
For the Three Months Ended January 31
(unaudited)
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
REVENUES $ 176,498 $ 0
COST & EXPENSES
Cost of Sales 150,127 0
Labor 102,652 0
General & Administrative 70,094 15,255
---------- ----------
Total Cost & Expenses 322,873 15,255
---------- ----------
NET (LOSS) $ (146,375) $ (15,255)
========== ==========
Net loss per share $ (.01) $ (.00)
========== ==========
Weighted shares outstanding 17,500,000 17,500,000
========== ==========
</TABLE>
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<TABLE>
MerchantOnline. com, Inc.
Statement of Cash Flows
For the Three Months Ended January 31, 1999
(unaudited)
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(146,375)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 7,117
(Increase) decrease in current assets:
Account receivable 4,793
Employee advances (6,521)
Increase (decrease) in current liabilities:
Accounts payable 75,350
Due to Bank 43,938
Commissions payable 8,978
---------
Net Cash (used in) Operating Activities $ (12,720)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment
Net Cash (used in) Investing Activities $ (13,417)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short term debt $ 57,664
Payment of loan payable to Stockholder (34,026)
---------
Net Cash provided by Financing Activities $ 23,638
---------
Net decrease in cash $ (2,499)
Cash beginning of period 2,499
---------
Cash end of period $ 0
=========
</TABLE>
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MERCHANTONLINE.COM, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been
prepared in accordance with the instructions for Form 10-QSB
and do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments, consisting only of normal recurring
adjustments considered necessary for a fair presentation,
have been included. Operating results for any quarter are
not necessarily indicative of the results for any other
quarter or for the full year.
2. Basis of Presentation
Business combination/Subsequent Event
On February 16, 1999, pursuant to the terms of an Agreement
and Plan of Reorganization, the Company acquired all of the
outstanding common stock of CreditCo, Inc. ("CreditCo"), a
Delaware corporation. The terms of the transaction involved
the Company undertaking a forward split of its issued and
outstanding common stock whereby 3.5 shares of common stock
were issued in exchange for every share of common stock
outstanding immediately prior to the closing of the
transaction in order to establish the number of issued and
outstanding common shares of the Company at closing to be
1,750,000. Thereafter, the Company issued an aggregate of
15,750,000 shares of its "restricted" common stock,
representing an aggregate of 90% interest in the Company, to
the former shareholders of Creditco in exchange for all of
their stock in Creditco, resulting in a change in control of
the Company. Creditco did not survive the transaction. The
Company also changed its name to "MerchantOnline.com, Inc."
The acquisition of CreditCo has been accounted for as a
reverse acquisition. Under the accounting rules for a reverse
acquisition, CreditCo is considered the acquiring entity. As
a result, historical financial information for periods prior
to the date of the transaction are those of CreditCo. Under
purchase method accounting, balances and results of operations
of CreditCo will be included in the accompanying financial
statements from the date of the transaction, February 16,
1999. The Company recorded the assets and liabilities
(excluding intangibles) at their historical cost basis which
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was deemed to be approximate fair market value. The reverse
acquisition is treated as a non-cash transaction except to the
extent of cash acquired, since all consideration given was in
the form of stock.
Earnings per share
Earnings per share have been computed based on the weighted
average number of common shares outstanding. For the three
month period prior to the reverse acquisition discussed in
the business combination section of Note 2 above, the number
of common shares outstanding used in computing earnings per
share is the number of common shares outstanding as a result
of such reverse acquisition (17,500,000 shares).
In the opinion of management, all adjustments, consisting only
of normal recurring adjustments necessary for a fair statement
of (a) the results of operations for the three month periods
ended January 31, 1999 and January 31, 1998, (b) financial
position at January 31, 1999, and (c) the cash flows for the
three months ended January 31, 1999, have been made.
The results for the three month period ended January 31, 1999,
are not necessarily indicative of the results for the entire
fiscal year ended October 31, 1999.
3. Subsequent Event
Effective February 16, 1999, the Company acquired all of the
issued and outstanding securities of CreditCo, Inc. Prior to
this transaction, the Company had no assets or operating
activity. Accordingly, the transaction has been accounted for
as a reverse merger.
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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: March 18, 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 January 31, 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 THREE MONTH PERIOD ENDED JANUARY 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,569
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,090
<PP&E> 96,209
<DEPRECIATION> 19,075
<TOTAL-ASSETS> 97,790
<CURRENT-LIABILITIES> 329,981
<BONDS> 0
0
0
<COMMON> 50,000
<OTHER-SE> (372,191)
<TOTAL-LIABILITY-AND-EQUITY> 97,790
<SALES> 176,498
<TOTAL-REVENUES> 176,498
<CGS> 150,127
<TOTAL-COSTS> 150,127
<OTHER-EXPENSES> 172,746
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (146,375)
<INCOME-TAX> 0
<INCOME-CONTINUING> (146,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (146,375)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
