Registration of Securities of a Small-Business Issuer — Form 10-SB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10SB12G Registration Statement 35 153K
2: EX-2.1 Articles of Incorporation 18 43K
3: EX-2.2 By-Laws 8 19K
4: EX-3.1 Form of Unsecured Convertible Note 10 36K
5: EX-6.1 Loan Agreement 5 21K
6: EX-6.1(A) Merger Agreement 22 101K
7: EX-6.2(4) Lease 2 7K
8: EX-12 Articles of Merger 3 13K
As filed with the Securities and Exchange Commission on November 15, 1999
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-SB
REGISTRATION STATEMENT FOR SMALL BUSINESS ISSUER UNDER
SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------
MERCANTILE FACTORING CREDIT ONLINE CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 88-0335710
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1250 BOUL. RENE-LEVESQUE OUEST
BUREAU 2925
MONTREAL, QUEBEC
H3B4W8, CANADA
(514)937-8118
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
--------------------
STANLEY MOSKOWITZ, ESQ
MOSKOWITZ ALTMAN & HUGHES LLP
11 EAST 44TH STREET, SUITE 504
NEW YORK, NEW YORK, 10017
(212) 953-1121
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
Copies to:
DOMINIQUE M. BELLEMARE
PRESIDENT
1495 RIDGEVIEW DRIVE. SUITE 220
RENO, NEVADA, 89509
(775) 827-6300
Securities to be registered under Section 12(g) of the Exchange Act:
Title of Each Class:
Common Stock, $0.001 par value
TABLE OF CONTENTS
PART I
ITEM 6 DESCRIPTION OF BUSINESS
ITEM 7 DESCRIPTION OF PROPERTY
ITEM 8 DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
ITEM 9 REMUNERATION OF DIRECTORS AND OFFICERS
ITEM 10 SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN SECURITY HOLDERS
ITEM 11 INTEREST OF MANAGEMENT AND OTHERS IN
CERTAIN TRANSACTIONS
ITEM 12 DESCRIPTION OF SECURITIES
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
ITEM 2 LEGAL PROCEEDINGS
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
PART F/S
FINANCIAL STATEMENTS
PART III
ITEM 1 INDEX TO EXHIBITS
ITEM 2 DESCRIPTION OF EXHIBITS
1
PART I
The Registrant has elected to report under Disclosure Alternative 2 of Form
10-SB.
ITEM 6 DESCRIPTION OF THE BUSINESS
Company Background
Mercantile Factoring Credit Online Corp. (the "Company"), a Nevada corporation,
has its principal offices at 1250 Boul. Rene-Levesque Ouest, Bureau 2925,
Montreal, Quebec, H3B4W8, Canada. The telephone number is (514) 937-8118.
Through October 15, 1999 the Company has generated no revenues from operations.
The Company was incorporated in March 1995 under the name of Truco, Inc. and was
to engage in the business of manufacturing, selling and marketing a product
described as the "Belt Wallet." However, soon thereafter the Company elected not
to proceed with its intended business objective of marketing and selling the
"Belt Wallet" but instead elected to change its focus to the area of developing
proprietary technology and services using smart and remote memory cards and
wireless and land-line networks in the fields of commerce, publishing, and
network-based systems. The Company entered into a licensing agreement for the
exclusive right to market and manufacture a technology known as the "ARCard,
ARCommerce Reader, ARCinternet Computer", and its application programming
bundled together as the "ARCommerce Kit" as a way of doing business over the
Internet's World-Wide Web (the "Web"). On March 22, 1996, the Company changed
its name to "Web Tech Incorporated".
Subsequently, on November 30, 1996, in an effort to diversify its product and
manufacturing base, the Company acquired all the issued and outstanding shares
of Geo-Ram, Inc., a Texas corporation, by issuing 6,000,000 shares of the
Company's common stock to the shareholders of Geo-Ram, Inc. Geo-Ram, Inc. was in
the business of manufacturing geophysical equipment which included a new drill
bit, the "Duckbill Bit", designed to implant explosive charges and geophones for
seismic surveys in harsh and environmentally fragile geographic areas known as
transition zones. On March 18, 1997 the Company changed its name to "Cynergy,
Inc.".
However, the Company was neither able to (i) successfully develop and market the
"ARCommerce Kit", or (ii) provide any further funding for the growth and
development of the geophysical equipment business. Consequently, the Company did
not continue its licensing of the "ARCommerce Kit" and further, on March 24,
1998, the Company entered into a Recission Agreement with the shareholders of
Geo-Ram, Inc. whereby the shareholders of Geo-Ram, Inc. returned the 6,000,000
shares that the Company issued in connection with the November 30, 1996
acquisition.
On September 22, 1999, the Company (i) entered into an Agreement and Plan of
Merger with Mercantile Factoring & Credit Corp., a Nevada corporation, (the
"Merger"), (ii) changed its name to " Mercantile Factoring Credit Online Corp.",
(iii) effected a reverse stock split of the Company's issued and outstanding
shares of common stock on a basis of one (1) new share for every 17.784 old
shares, and (iv) elected four (4) new directors to the Company's board of
directors (the "Board"). The Merger became effective upon the filing of the
Articles of Merger on September 29, 1999.
Strategy
Consumer credit has always represented a problem for a great many people having
no established credit rating or having ruined their credit rating though past
dealings. The Company believes that it has developed a collateral pledge system
that secures (i) repayment of capital to money lenders (the "Lender"), and (ii)
needed capital to money borrowers (the "Borrower"), as set forth below. The
pledging of accounts receivables, real estate, and other acceptable assets as
collateral will serve to secure the Lender full repayment of the loan and
provide the Borrower with capital to which it may not otherwise have access.
The Company, a development stage company, intends to offer a way for both
Borrowers and Lenders to take advantage of the global network that the Internet
offers. The Company's main objective is to provide an Internet web-site where
(i) Borrowers can post their offers to borrow money secured by pledged
collateral (primarily accounts receivable and real estate), and (ii) Lenders can
competitively bid to supply the money, with the competition being in the form of
the amount of money the Lender is willing to lend and the interest rate at which
the Lender is willing to supply the money. To accomplish this objective, the
Company is in the process of creating a multilingual online loan exchange which
will act as an Electronic Loan Center for individuals and small to medium size
businesses (the "Online Loan Exchange"). The Online Loan Exchange will allow
Borrowers to post their borrowing requirements online and to observe online the
amounts and interest rates that Lenders worldwide are willing to lend money to
them.
The Company believes that many potential Borrowers who have problems with their
credit ratings, or otherwise cannot access traditional lending institutions for
needed funds, have accounts receivables or other assets that can be used as
2
collateral. The Company also believes that many potential Lenders would be
willing to supply funds to Borrowers, on a secured basis, but do not have access
to potential Borrowers.
The Company intends to launch its Online Loan Exchange when the final design of
the web-site is completed and tested. The Company believes that the web-site
will be ready for operation in approximately April of 2000. The Company will
administrate the Online Loan Exchange and will derive revenues from
administrative fees and from commissions charged to Lenders.
The Online Loan Exchange will initially be operative only in Europe and
available only to European based Borrowers and Lenders. North America will be
included when the Company has assessed and complied with North American
Regulating Authorities. The Company intends to apply for the licenses in the
Province of Quebec, Canada so as to be able to offer a wide scope of financing
and mortgage facilities to its local clients.
Also, the Company believes that the Online Loan Exchange will make the Secured
Loan industry, easily available and accessible to all Borrowers in an efficient
and competitive manner. The Company believes that the Secured Loan business is
growing at tremendous rates in Europe. However, the application procedures
remains cumbersome. It is the Company's belief that its online step-by-step
guide, along with listed possibilities and simple methods of execution, will
make it easy, quick, and efficient for both Borrowers and Lenders. For example,
the smallest manufacturer or professional, such as an architect or a doctor in
need of funds, who may consider himself too small or unable to afford the
interest rates demanded by lending institutions, could (i) freely consult our
listing of monies available for short or long term secured loans and (ii) place
a bid on the interest rates they are prepared to pay for accelerated payment
after delivery or completion of their services.
The web-site will be administered by Mercantile Clearing Center JMBH, a Swiss
Corporation located in Zug, Switzerland.
Products and Services
The Company will provide a multilingual loan exchange on the Web, which will
allow Lenders to bid on available offers from Borrowers to borrow money for
either a short term (one(1) year or less), or a long term, (one(1) year or
more).
The Company is in the process of creating a sophisticated and ergonomically
designed web-site for the above purposes. Internet will be the principal channel
used for conducting business. However, phone services and toll-free numbers will
also be made available from start-up.
Services for Borrowers
The Online Loan Exchange will be multilingual from inception (English, French,
German, Spanish, Italian, Portuguese, Dutch, Swedish, and Norwegian). The site's
basic content will be divided into categories of (i) Short Term Secured Loans
(loans that mature within one (1) year from the date of the loan) ("Short Term
Loans") and (ii) Long Term Secured Loans (loans that mature more than one (1)
year from the date of the loan) ("Long Term Loans"), each to be divided into
further sub-categories as needed.
o Procedure for obtaining a Short Term Secured Loan
The Borrower must submit to the Company a "Offer" for the amount of money the
Borrower wants to borrow with a description of the collateral and a limit on the
interest rate that the Borrower would accept. Offers to borrow money are
submitted on forms provided by the Company on the Web. All Offers must be
accompanied with a payment of fifty U.S. dollars ($50.00) which will be returned
to the Borrower in the event the Borrower's Offer is not accepted. However, in
the event the Borrower cancels an Offer after acceptance by a Lender, the fifty
U.S. dollars ($50.00) will be not be refunded. If the Borrower's loan is
processed, the fifty U.S. dollars ($50.00) may be applied as part of the costs
of processing the loan.
In the event the Offer is accepted by a Lender, the Borrower must secure the
loan by pledging collateral. Before any funds are delivered to the Borrower, the
Borrower must present evidence of ownership of the rights to the pledged
collateral. In the event the pledged collateral is in the form of an accounts
receivable, the Borrower must (i) verify that the delivery of goods or
performance of services was completed, (ii) enter into a Pledge Agreement
pledging to the Company the borrower's rights to the accounts receivable, (iii)
assign to the Company the borrower's rights to collect the accounts receivable,
(iv) execute a Right of Collection Agreement in favor of the Company, (v)
execute a Lockbox Agreement for deposit of the accounts receivable when paid,
and (vi) obtain an acknowledgment from the payor of the accounts receivable of
the assignment of the Borrower's rights to collect the account receivable. If
the collateral consists of some other tangible assets, then appropriate steps
will be taken to secure such collateral.
3
o Procedure for obtaining a Long Term Secured Loan
In the case of Long Term Loans, the procedure is the same as with Short Term
Loans except that (i) the application fee shall be two hundred and fifty U.S.
dollars ($250.00), and (ii) all long term loans must be secured by either (a)
real estate, (either by first or second mortgages) which will depend on the
equity in the property, or (b) other collateral acceptable to the Company.
In the event the Offer is accepted by a Lender, the Borrower secures the loan by
pledging real property, and then, before any funds are delivered to the
Borrower, the Borrower must (i) advance to the Company, sufficient monies to pay
the Company's expenses in completing the funding process, (ii) present evidence
of ownership of the real property (either by certified copy or original, title
or deed to the property), and (iii) enter into a Mortgage Agreement with the
Lender. The Company will (a) require a property search, and (b) appoint a legal
representative in the Borrower's locality to prepare all the legal documents
and, if necessary, to record the mortgage with the appropriate governmental
division in the jurisdiction.
If the information on the Borrowers application form is found to be false or
does not correspond with the information listed in the land registry office of
the property's jurisdiction, the Borrower's Offer will be canceled and the two
hundred and fifty U.S. dollars ($250.00) will be used for costs and damages.
In the event an Offer for a Long Term Loan is accepted by a Lender, and the
Borrower secures the loan by collateral acceptable to the Company (other than
real estate), the Borrower must provide a complete description of the collateral
before the loan is fully processed. If the Borrower's bid has been accepted, the
Company will inform the Borrower where the pledged collateral will be held until
the loan has been paid.
Services for the Lender
The Company, through the Online Loan Exchange intends to provide Lenders (i) an
up-to-date database of potential Borrowers and their offerings, (ii)
administrative services to process and administrate the loan, (iii) a medium
(the Online Loan Exchange) to bid on making the loans, and (iv) the ability to
aggregate their funds with the funds of other Lenders willing to lend money on
identical terms.
o Procedure for Making a Secured Loan
The potential Lender will observe the "Offerings to Borrow" listed on the Online
Loan Exchange. If the Lender wishes to lend funds to a listed Borrower, the
Lender must submit a form to the Company which will indicate to the Company,
among other things, the Lender's ability and desire to provide funds to the
Borrower at a given interest rate. The Company would then request that the
Lender transmit to the Company, by wire transfer or other method, sufficient
funds to make the selected loan. If the funds were sufficient to make the entire
loan, then the Company would take the necessary action to secure the collateral
and thereafter advance the funds to the Borrower. The Company would then
administrate the loan on behalf of the Lender.
The Company believes that many non-traditional lenders will make use of the
Online Loan Exchange because of the expected higher interest rates (returns on
investment) that will be available as compared to savings accounts, certificates
of deposit, and other instruments issued by financial institutions or
governments. Further, the Company believes that its ability to aggregate a
number of Lenders that are willing to lend money upon identical terms to a
specific Borrower will provide Lenders with relatively small amounts of money to
lend, the ability to earn higher interest rates that are generally available
only to secured lenders who lend large amounts of money.
Once a loan is agreed to by the Borrower and Lender, and all documentation and
verification is complete, the Company will collect the funds from the Lender(s)
and advance the funds to the Borrower. Thereafter the Company will collect the
installment and final payment amounts from the Borrower and pay the Lender(s)
less any commissions earned by the Company. In the event of the default by the
Borrower, the Company will oversee collection activities and if necessary
foreclose on the collateral.
o Database of Potential Borrowers
The database of potential Borrowers who post their offers to borrow money on the
Company's web-site will be updated on a regular basis, and will be available to
Lenders 24-hours a day.
o Administrative Services Provided by the Company
The Company believes that it will assist Lenders by providing administrative
services to Lenders in administrating Loans for which services it will receive
processing fees as well as a commission for each transaction completed. The
Company intends to provide (i) a Technical Support Center to handle inquires
from both Lenders and Borrowers, (ii) an application form to be completed online
by all Borrowers which contains all the pertinent information required by the
Company, (iii)
4
all agreements to properly secure Borrowers' collateral, and (iv) sub-contractor
services, for an additional fee, to verify the offered collateral.
o Potential Customers
The Company's target Borrowers will be individuals, proprietorships, new
businesses, and small and mid-size corporations. The Company believes that the
current weakness of the EURO, along with the growth potential of the secured
lending business and the relatively ease of entry into the business, make Europe
the Company's most desirable targeted region. For the purposes of this
paragraph, the "EURO" means the common currency adopted by members of the
European Union.
Competition
The market for the origination of secured loans is rapidly evolving, both online
and through traditional channels, and competition for borrowers is intense and
is expected to increase significantly in the future. The Company faces
competition from companies directly competing by offering secured loans or other
financing services over the Internet. Traditional lenders, including Banks and
Finance Companies, also provide access to their loan offerings and over the
Internet. Increased competition, particularly online competition, could result
in price reductions or reduced margins, either of which should adversely affect
the Company's business. Further, there can be no assurance that the Company's
competitors and potential competitors, will not develop services and products
that are equal or superior to those of the Company or that achieve greater
market acceptance than the Company's products and services.
The Company believes that the primary competitive factors in creating a
financial services resource on the Internet are functionality, brand
recognition, customer loyalty, ease-of-use, quality of service, reliability and
critical mass. Competition is likely to increase significantly as new companies
enter the market and current competitors expand their services. Many of these
potential competitors are likely to enjoy substantial competitive advantages
including longer operating histories, greater name recognition, larger
established customer bases, and substantially greater financial, marketing,
technical and other resources.
Source of Revenue
The Company's source of revenues will come from both Lenders and Borrowers. Its
revenues will be derived from (i) a commission of two (2%) percent of the total
interest earned by Lenders, (ii) application fees charged to the Borrower for
placing their offers on the Online Loan Exchange, and (iii) administrative fees
charged to Borrowers and Lenders. The Company's objective will be to try to
increase the lending capital.
Government Regulation
The financing industry is highly regulated in certain of the European countries
where the Company intends to offer its services. In those highly regulated
countries, the Company's business must comply with extensive and complex rules
and regulations of, and licensing and examination by, various government
authorities. These rules impose obligations and restrictions on the Company's
loan brokering activities. In particular, these rules may (i) limit the broker
fees, interest rates, finance charges and other fees the Company may assess,
(ii) require extensive disclosure to the Company's customers, and (iii) impose
multiple qualification and licensing obligations on the Company. Failure to
comply with these requirements may result, among other things, in the (i)
revocation of required licenses or registrations, (ii) loss of approved status,
(iii) voiding of the loan contracts or security interests, (iv) indemnification
liability or the rescission of secured loans, and (v) administrative enforcement
actions and civil and criminal liability. The Company intends to be in
substantial compliance with these rules and regulations when it commences its
lending service activities.
As a loan services company doing business exclusively through the Internet, the
Company faces an additional level of regulatory risk given the fact that the
statutes and regulations governing financing transactions have not been
substantially revised or updated to fully accommodate electronic commerce. Most
of the European Countries' laws, rules and regulations governing secured loans
contemplate or assume paper-based transactions and do not currently address the
delivery of required disclosures and other documents through electronic
communications. Until the applicable laws, rules and regulations are revised to
clarify their applicability to transactions through e-commerce, any company
offering secured loans through the Internet or other means of e-commerce will
face uncertainty as to compliance. In addition, there is no assurance that
revisions to the laws, rules and regulations will be adopted and, if adopted,
will be timely or adequate to eliminate this uncertainty. Nonetheless, the
Company intends to take prudent steps to mitigate these risks in offering its
loan services through the Web.
5
When and if the Company decides to offer its services in the United States, the
Company will have to comply with all Federal and State licensing rules and
regulations and be subject to all Federal and State laws involving the extension
of credit. In addition, Lenders may also be subject to such rules and
regulations and may also be subject to individual licensing requirements.
Intellectual Property
Trademarks and other proprietary rights will be important to the Company's
competitive position. The Company does not currently have copyrights or patents
but intends to obtain a trademark for the logo "MFCO." There can be no assurance
that this trademark is available in the countries in which the Company will
operate or even if available, that the Company will have exclusive rights to
MFCO.
The Company intends to enter into confidentiality or license agreements with its
employees, consultants and corporate partners, and generally control access to
and distribution of its technologies, documentation and other proprietary
information. Despite its efforts to protect its proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
the Company's rights. The steps the Company intends to take may not prevent
misappropriation of its proprietary rights, particularly in countries where laws
or law enforcement practices may not protect the Company's proprietary rights as
fully as in the United States.
Advertising
The Company intends to advertise their unique financing services in leading
newspapers, financial magazines and journals, inviting interested parties to
visit our web-site and take advantage of our very unique service. The Company
intends to use four of the major media advertising agencies in covering Europe:
o Citigate Albert Frank Limited, London, UK
o Doremus Advertising Agency, London, UK
o Publicitas, Zurich, Switzerland
o Net Zed, Paris, France
They are Europe's premium communication companies with affiliates all over the
world's major financial centers. These agencies represent firms such as CIBC
World Markets, Schroders, Rothschild, Bank von Ernst, Halifax, Morgan Grenfell
Asset Management, Banker's Trust, Fidelity Investments, J P Morgan, Hill Samuel,
Bridgewater, Royal London Insurance, Credit Suisse, Hawk Point Partners, and
Bloomberg Personal Finance. They have Omnicom offices in 76 countries and
specialize in international and digital transmission of advertising.
Because of the particularities and attributes of the French language, a part of
the Company's marketing activities will be conducted in the French language. The
Company has identified a special agency, Net Zed of Paris, France, to prepare
the different advertisements.
Financial Information
On July 30, 1999, the Company had entered into a loan agreement with Worldnet
Connections, Inc.("Worldnet"), a Nevada corporation. The loan agreement provides
a credit facility to the Company for all the necessary start-up capital it
requires. The Company agreed to allow Worldnet the right of first refusal to
provide funds to the Company in multiples of $100,000 upon 15 day notice by the
Company. In the event Worldnet advances the funds, the Company will issue
unsecured convertible notes ("Unsecured Notes"), with a five (5) year term that
bears interest at eight (8%) percent per annum, each $100,000 Unsecured Note
will be convertible into 60,000, $.001 par value common shares of the Company
("Company Shares").
As of September 30, 1999, Worldnet had made advances to the Company totaling
$293,880.
Projected Start-Up Costs and Capitalization
ESTIMATED START-UP COST Subtotals
----------------------- ---------
General and administrative
Legal and accounting U.S. $ 100,000
6
Rental Deposits 25,000
Prepaid Insurance 20,000
Pre-opening salaries 25,000
Telephone 2,000
Total General and
Administrative Expenses: U.S. $ 172,000
Sales and marketing
Advertising 200,000
Promotion 50,000
Printing 10,000
Total Sales and Marketing
Expenses: U.S. $260,000
Computer and Software
Web-Site 50,000
Program 250,000
Total Computer and Software
Expenses: U.S. $300,000
Office Equipment
Furniture 45,000
Computer Hardware 100,000
Office Machines 30,000
Office Material 6,000
Total Office Equipment
Expenses: U.S. $181,000
Additional Working Capital* U.S. $1,587,000
Total Estimated Start- Up
Cost: U.S. $2,500,000
===============
*If necessary
Staffing Requirements
o SALES/SUPPORT STAFF
Currently, the Company does not have any full-time employees. Upon sufficient
funding and appropriate timing after the Company has completed the web-site
design and development, the Company intends to hire full-time employees.
Additionally, the Company intends to establish a Technical Support Center (the
"Center") using sub-contractors, which is intended to be operated 24-hours a
day/ 7 days a week. The purpose of the Center will be to (i) provide online
support
7
to both Lenders and Borrowers, (ii) allow the Company to provide customer
service online, (iii) allow the Company to maintain independent Borrower and
Lender relationships, and (iv) provide a high level of customer satisfaction.
However, the Company will not hire any sales staff or establish a technical
support center unless the Company receives funding.
o KEY EMPLOYEES
Dominique M. Bellemare, Jean-Guy Hudon, Rita S. Dickson and Yvan Guillemin are
the officers and directors of the Company. None of them are currently being paid
a salary. Upon receiving funding, the Company intends to commence the payment of
salaries. The Company relies heavily on these officers to complete and
successfully market and implement the Online Loan Exchange and its other
services. Each officer either has or will sign a Confidentiality and
Non-Disclosure Agreement with the Company. The unavailability of any of Messrs.
Bellemare, Hudon, or Guillemin would set back the developmental time of the
Online Loan Exchange business and would have a materially adverse effect on the
Company's business, financial position and proposed operations.
o MANAGEMENT
The Company's management team is comprised of individuals who have many years of
experience in developing, managing, building and growing technology companies in
the competitive national and international environments. The Company intends to
use contract workers whenever possible. The Company currently maintains a staff
of three (3) officers (the "Officers") (See Item 8 below describing the
Officers), some of whom are presently serving on a part-time basis. Upon
additional funding, it is anticipated that the Company will hire additional
personnel within the upcoming year.
Year 2000 Compliance
There are issues associated with the programming code in existing computer
systems as the year 2000 approaches. The "year 2000 problem" ("Y2K") is complex
as virtually every computer operation will be affected in some way by the
rollover of the two-digit year value to 00. The issue is whether computer
systems will properly recognize date sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. After a complete assessment of
potential Y2K issues, the Company has made a determination that presently, and
in the near future, it will not be adversely affected by Y2K compliance issues.
The Company's Y2K assessment was based on the following: (i) as a development
stage company, the Company has no computer hardware or software systems to
update or replace; and (ii) the Company does not have any significant third
party relationships. As the Y2K problem is applied to the Company, the Y2K
problem does not present and will not present a material event or uncertainty
for the Company. Presently, the Company estimates that its web-site will be
ready in approximately April of 2000, and Y2K compliant. In addition, when the
purchase of computer systems and the making of third party relationships become
a necessity for the Company, the Company will take every measure to insure Y2K
compliancy by (i) purchasing computer systems from only known Y2K compliant
vendors, and (ii) sending questionnaires to, and obtaining written assurance of,
Y2K compliancy from potential third party vendors, suppliers, or subcontractors.
ITEM 7 DESCRIPTION OF PROPERTY
The Company maintains offices at:
1250 Boul. Rene-Levesque Ouest, Bureau 2925
Montreal, Quebec, H3B 4W8, Canada.
The Offices are subleased from Credit Mutuel De Montreal CCM Inc. ("Credit
Mutuel"), an affiliated party. The Company pays rent at the rate equal to twenty
(20%) percent of the total rent paid by Credit Mutuel which currently equals Cd.
(Canadian Dollars) $9,069.87 per month. The lease expires on January 31, 2003.
ITEM 8 DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
Name Age Position
---- --- --------
Dominique M. Bellemare 40 President/ Director
Jean-Guy Hudon 58 Vice President/ Director
Rita S. Dickson 49 Secretary/ Director
Yvan Guillemin 51 Director
8
The Board will be the governing body of the Company and will set goals and
establish policies, will retain qualified executive leadership and will oversee
the performance of that leadership for the organization. The Board will be
active in that it will meet formally at least once annually. The full Board may
choose to delegate some authority to an executive committee that will meet more
frequently and will exercise interim policy making and oversight authority.
Each director will be elected to hold office until the next annual meeting of
shareholders and until his successor has been qualified and elected. The
following sets forth certain information as well as a brief account of business
experience during the past five years of each director and executive officer of
the Company.
Current Officers, Directors and Key Employees
o Dominique M. Bellemare
Dominique M. Bellemare has been serving as the Company's President and Director
since being elected to the Company's board of directors at a special meeting of
the Company's shareholders in September of 1999. Mr. Bellemare currently devotes
a percentage of his time to the business of the Company. Upon additional
funding, Mr. Bellemare will devote a greater percentage of his time to the
business of the Company. Mr. Bellemare is an attorney qualified to practice law
in the Province of Quebec. Since 1998, Mr. Bellemare has been serving as Senior
Vice-President and Senior Counsel for Credit Mutuel. Prior to that from the
period of 1991 through 1998, Mr. Bellemare was a partner at the Law Firm of
Bloomfield Bellemare.
o Jean-Guy Hudon
Jean- Guy Hudon has been serving as the Company's Vice President and Director
since being elected to the Company's board of directors at a special meeting of
the Company's shareholders in September of 1999. Mr. Hudon started his career as
an educator in Quebec. He later was elected to the Canadian Parliament where he
served for two terms. During his two terms, he was appointed by the Prime
Minister of Canada to the post of Parliamentary Secretary to the Right and
Honorable Joe Clark and minister of Foreign Affairs.
Mr. Hudon chaired various international committees and represented the Canadian
Government in different committees with international heads of state such as
Francois Mitterrand (the President of France), George Bush (former President of
U.S.), and his Holiness Pope Jean-Paul II. In 1993, Mr. Hudon retired from the
Parliament and in 1997 took an executive position with Credit Mutuel, a private
corporation.
o Rita S. Dickson
Rita S. Dickson has been serving as the Company's Secretary and Director since
being elected to the Company's board of directors at a special meeting of the
Company's shareholders in September of 1999. Ms. Dickson currently devotes a
percentage of her time to the business of the Company. Upon additional funding,
Ms. Dickson will devote a greater percentage of her time to the business of the
Company. Ms. Dickson is also currently serving as the Secretary and Treasurer of
Worldnet. Additionally, she has been employed for over 10 years as a Legal
Assistant to Michael J. Morrison, Esq. and currently remains employed by Mr.
Morrison.
o Yvan Guillemin
Yvan Guillemin has been serving as a Company Director since being elected to the
Company's board of directors at a special meeting of the Company's shareholders
in September of 1999. Mr. Guillemin graduated from the Paris School of Commerce
and directed a series of businesses in Paris, France. Mr. Guillemin is the
President of Polo Conseil, whose principal business is to organize equestrian
sporting events and the importation and distribution of polo sporting goods. He
has a personal stable of two hundred fully trained polo ponies which are rented
to various industrialists throughout Europe. Mr. Guillemin maintains a staff of
over ten people to deal with the business of organizing equestrian sporting
events and the distribution of polo sporting goods in Europe and Argentina. In
addition, Mr. Guillemin was also a pioneer in developing and manufacturing the
stretch material used in equestrian clothing which is used today in over 50% of
all riding clothes manufactured in Europe. Mr. Guillemin is the sole shareholder
of Worldnet which company has provided all of the financing of the Company and
which has the right of first refusal to provide additional funding. (See Item 6
"Financial Information" above)
ITEM 9 REMUNERATION OF DIRECTORS AND OFFICERS
To date, the Company has not paid any compensation to any of its officers or
directors. It is the Company's intention, upon acquiring additional funding in
the upcoming year, to compensate certain officers of the Company on a reasonable
basis in keeping with industry standards.
Directors of the Company who are not employees of the Company do not receive any
compensation for attending meetings
9
of the Board. Directors are reimbursed for their expenses in attending such
meetings. The following table sets forth the compensation for the three (3)
officers of the Company.
Summary Compensation Table
Annual Expected
Name and Compensation Total Compensation
Principal Position Year Salary Compensation for 2000
------------------ ---- ------ ------------ --------
Dominique M. Bellemare 1999 $0 $0 To be determined
President
Jean-Guy Hudon 1999 $0 $0 To be determined
Vice-President
Rita S. Dickson 1999 $0 $0 To be determined
Secretary
ITEM 10 SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
As of September 30, 1999, the Company had 4,892,655 shares of common stock
issued and outstanding. The following table sets forth certain information with
respect to the beneficial ownership of the Company's common stock as of
September 30, 1999 by (i) each of the Company's directors, (ii) each of the
executive officers, (iii) each person or entity who is known to the Company to
beneficially own three (3%) percent or more of the outstanding common stock, and
(iv) all directors and executive officers of the Company as a group.
[Enlarge/Download Table]
Number of Shares Percentage of Class
Name and Address of Beneficial Owner(2) Beneficially Owned(1) Beneficially Owned
--------------------------------------- --------------------- ------------------
Worldnet Connections, Inc. (3) ........... 176,328 3.5%
All Officers and Directors as a group .... See Note (3) See Note (3)
Mercantile Online Ltd
28 Pflug Strasse,
Vaduz, Liechtenstein ..................... 4,500,000 93%
Jean-Marc Jacobson ....................... See Note (4) See Note (4)
--------
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, as amended. Generally, a person is
deemed to be the beneficial owner of a security if he has the right to
acquire voting or investment power within 60 days of the date of this
Registration Statement. Except as otherwise noted, each individual or
entity has sole voting and investment power over the securities listed.
(2) The address of the Officers and Directors is c/o Mercantile Factoring
Credit Online Corp., 1495 Ridgeview Drive, Suite 220, Reno, Nevada 89509.
(3) Yvan Guillemin, a director of the Company, owns all the issued and
outstanding shares of Worldnet's common stock. Worldnet owns Unsecured
Notes issued by the Company which are convertible into 176,328 Company
Shares. If the Unsecured Notes were to be converted, Worldnet would own a
total of 176,328 Company Shares representing approximately three and one
half (3.5 %) percent of the total outstanding Company Shares.
(4) Jean-Marc Jacobson owns all the issued and outstanding shares of
Mercantile Online Ltd's common stock.
Changes in Control
10
The Company is not aware of any arrangements, including the pledge by any person
of securities of the Company, which may at a subsequent date result in a change
in control of the Company.
ITEM 11 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Mr. Yvan Guillemin, a director of the Company, owns all of the issued and
outstanding shares of Worldnet's common stock. On July 30, 1999, the Company and
Worldnet had entered into a loan agreement allowing Worldnet the right of first
refusal to provide funds to the Company upon 15 day notice by the Company. In
the event Worldnet advances the funds, the Company will issue an Unsecured Note,
with a five (5) year term and bear interest at eight (8%) percent per annum,
which is convertible into 60,000 Company Shares for each $100,000 borrowed by
the Company. As of September 30, 1999, Worldnet has made advances to the Company
totaling $293,880.
Mr. Dominique M. Bellemare, the President and a director of the Company, is
currently serving as Senior Vice-President and Senior Counsel for Credit Mutuel,
the subleasor of the Company's offices located at 1250 Boul. Rene-Levesque
Ouest, Bureau 2925, Montreal, Quebec, H3B 4W8, Canada. Credit Mutuel is owned by
Caroline Investments, a private company owned by Jean-Marc Jacobson.
In addition to Caroline Investments, Mr. Jean-Marc Jacobson owns all the issued
and outstanding shares of Mercantile Online Ltd's common stock. Mercantile
Online Ltd., a Saint Vincent corporation, is the principal shareholder of
Company Shares (See Item 10 above).
Ms. Rita S. Dickson, the Secretary and a director of the Company, is also
currently serving as the Secretary and Treasurer of Worldnet.
No other member of the Board or officer of the Company, to the Company's
knowledge, has any material interest resulting from any relationship or business
affiliation with the Company.
ITEM 12 DESCRIPTION OF SECURITIES
Description of Securities
The Company, a Nevada corporation, had an initial authorization of 300,000,000
shares all of which will be common stock, $.001 par value. As of September 30,
1999, 4,892,655 Company Shares were issued and outstanding.
Common Stock
All shares are fully paid and non-assessable. All shares are equal to each other
with respect to voting, liquidation, and dividend rights. Special shareholder
meetings may be called by the officers or directors, or upon the request of
holders of at least one-tenth (1/10) of the outstanding shares. Holders of
shares are entitled to one vote at any shareholder's meeting for each share they
own as of the record date set by the Board. Holders of shares, are entitled to
receive dividends as may be declared by the Board, out of funds legally
available, and upon liquidation are entitled to participate in a distribution of
assets available for such a distribution to shareholders. There are no
conversion, preemptive or other subscription rights or privileges with respect
to any share. Reference is made to the Company's Articles of Incorporation and
its Bylaws as well as to the applicable Statutes of the State of Nevada for a
more complete description of the rights and liabilities of holders of shares. It
should be noted that the Bylaws may be amended by the Board without notice to
the shareholders. The Company Shares do not have cumulative voting rights, which
means that the holders of more than fifty percent (50%) of the shares voting for
election of directors may elect all the directors if they choose to do so. In
such event, the holders of the remaining shares aggregating less than fifty
percent (50%) will not be able to elect directors.
Dividend and Stock Buy Back Policy
The Company is a new business and no assurance can be given that it will
generate earnings from which cash dividends can be paid. However, if earnings
are generated, management may follow a policy of retaining all earnings for the
expansion of the capital base of its business. Such a policy could be maintained
as long as necessary to provide funds for the Company's expansion of capital
base. Any dividends that may be paid in the future will be
11
dependent upon the earnings and financial requirements of the Company and all
other relevant factors. At such time as the Company has accumulated profits not
needed to sustain operations or planned for expansion, the Company may choose to
implement a share buy-back program, if such a program is deemed to be the most
cost efficient method of delivering a capital return to its shareholders. If
such a program is implemented, and if some shareholders choose to sell a portion
of their shares to the Company and others do not, the proportion of ownership of
the Company held by participating and nonparticipating shareholders will be
effected. The Company has not paid any dividends on its common stock to date.
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER STOCKHOLDER MATTERS
Market for Common Stock
Prior to this Registration, (i) no public trading market for the Company Shares
exist, and (ii) there can be no assurance that a public trading market will
develop at the conclusion of this Registration, or even if such a trading market
should develop, that the Company Shares may be resold at or near the original
purchase price. Any market for the Company Shares that may develop, in all
likelihood, will be a substantially limited one.
Dividend Policy
The Company does not have a policy of paying dividends, and it is currently
anticipated that no cash dividends will be paid. Any future decision to pay cash
dividends will be made on the basis of earnings, alternative needs for funds and
other conditions existing at the time.
ITEM 2 LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings or claims that it believes
will have, individually or in the aggregate, a material adverse effect on the
Company's business, financial condition or results of operations.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants since
the Company's incorporation.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
Within the last three (3) years, the Company has issued unregistered securities
to a limited number of persons. On August 15, 1998, the Company issued 1,500,000
unregistered pre-split Company shares for $15,000 cash.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitation on Liability; Indemnification of Directors and Officers
The Company's Articles of Incorporation and Bylaws includes certain provisions
whereby officers and directors of the Company shall be indemnified against
certain liabilities to the Company or its stockholders.
The Articles of Incorporation limits a director's and /or an officer's liability
to the Company and its stockholders for damages resulting from the breach of
fiduciary duty of care as a director or officer involving any act or omission of
any such director or officer, except when such breach results from (i) acts or
omissions which involve intentional misconduct, fraud or knowing violation of
law, or (ii) the unlawful payments of dividends in violation of Section 78.300
of the Nevada Revised Statutes.
The Bylaws provides for the indemnification of all past and present directors
and officers of the Company for all expenses actually and necessarily incurred
by them in connection with the defense of any action, suit or proceeding in
12
which they, or any of them, are made parties, or a party by reason of being or
having been a director or an officer of the Company, except in relation to
matters as to which any such director or officer shall be adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of a duty or duties.
The Company believes that these provisions will facilitate the Company's ability
to continue to attract and retain qualified individuals to serve as directors
and officers of the Company.
PART F/S FINANCIAL STATEMENT
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
- INTERIM FINANCIAL STATEMENTS -
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
SEPTEMBER 30, 1999
CONTENTS
PAGE
INTERIM FINANCIAL STATEMENTS
Balance Sheet I
Statement of Operations II
Statement of Stockholders' Equity (Deficit) III
Statement of Cash Flows IV
Notes to Financial Statements V-VIII
PAGE I
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM BALANCE SHEET
(U.S. Funds)
(Unaudited)
ASSETS
CURRENT
Cash $ 25,335
=========
LIABILITIES
CURRENT
Accounts payable $ 341,500
Loans payable (Note 6) 293,880
---------
635,380
---------
STOCKHOLDERS' EQUITY
AUTHORIZED
300,000,000 Common stock at $0.001 par value
ISSUED AND OUTSTANDING
4,892,655 Common shares 25,155
ADDITIONAL PAID-IN CAPITAL 13,345
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE (648,545)
---------
(610,045)
---------
$ 25,335
=========
See accompanying notes to financial statements.
PAGE II
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM STATEMENT OF OPERATIONS
(U.S. Funds)
(Unaudited)
For the From Inception
Nine Month on March 28,
Period Ended 1995 to Sep-
September 30 tember 30
1999 1999
----------- -----------
REVENUE $ -- $ --
EXPENSES 393,475 357,570
----------- -----------
NET LOSS FROM OPERATIONS $ (393,475) $ (357,570)
=========== ===========
Weighted average number of shares outstanding 4,501,438
===========
Basic loss per share $ (0.09)
===========
See accompanying notes to financial statements.
PAGE III
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(U.S. Funds)
(Unaudited)
FOR THE PERIOD FROM THE DATE OF INCEPTION
MARCH 28, 1995 TO SEPTEMBER 30, 1999
[Enlarge/Download Table]
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
# $ $ $
Inception on March 28, 1995 -- -- -- --
Common stock issued for offers
at $0.029 per share 370,108 -- -- --
Common stock issued for cash
at $0.167 per share 372,469 -- -- --
Net loss for the period ended December 31, 1995 -- -- -- --
--------- ------ ------ --------
Balance, December 31, 1995 742,577 -- -- --
Net loss for the year ended December 31, 1996 -- -- -- (1,500)
--------- ------ ------ --------
Balance, December 31, 1996 742,577 -- -- (1,500)
Net loss for the year ended December 31, 1997 -- -- -- (535)
--------- ------ ------ --------
Balance, December 31, 1997 742,577 -- -- (2,035)
Common stock issued for cash
at $0.178 per share (Note 4) 84,346 -- -- --
Net loss for the year ended December 31, 1998 -- -- -- (3,035)
--------- ------ ------ --------
Balance, December 31, 1998 826,923 -- -- (5,070)
Common stock cancelled (Note 4) (5,623) -- -- --
Common stock cancelled (Note 3) (506,923) -- -- (250,000)
Common stock cancelled (Note 4) (76,722) -- -- --
Common stock issued in exchange
for all issued and outstanding
common shares of MFCC (Note 3) 4,500,000 25,000 (2,000) --
Common stock issued for professional
fees at $0.10 per share (Note 4) 155,000 155 15,345 --
Net loss for the nine months ended
September 30, 1999 -- -- -- (393,475)
--------- ------ ------ --------
Balance, September 30, 1999 4,892,655 25,155 13,345 (648,545)
========= ====== ====== ========
See accompanying notes to financial statements.
PAGE IV
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM STATEMENT OF CASH FLOWS
(U.S. Funds)
(Unaudited)
[Download Table]
For the From Inception
Nine Month on March 28,
Period Ended 1995 to Sep-
September 30 tember 30
1999 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations $(393,475) $(398,545)
Increase in accounts payable 339,000 341,500
--------- ---------
(54,475) (57,045)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Amount paid for the acquisition of Cynergy shares (250,000) (250,000)
Accounts payable acquired on merger (2,000) (2,000)
--------- ---------
(252,000) (252,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 15,500 40,500
Loans payable 293,880 293,880
--------- ---------
309,380 334,380
--------- ---------
INCREASE (DECREASE) IN CASH 2,905 25,335
CASH, beginning of period 22,430 --
--------- ---------
CASH, end of period $ 25,335 $ 25,335
========= =========
SUPPLEMENTAL DISCLOSURES
Interest paid $ -- $ --
========= =========
Income taxes paid $ -- $ --
========= =========
See accompanying notes to financial statements.
PAGE V
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Mercantile Factoring Credit Online Corp. ("MFCOC" or the "Company")
(formerly Cynergy, Inc.) was incorporated under the laws of the state of
Nevada on March 28, 1995 under the name of Truco, Inc. The shareholders
approved a name change on March 22, 1996, March 18, 1997 and September 13,
1999 to Web Tech, Inc., Cynergy, Inc. and to its present name.
Prior to the Merger (Note 3), the Company's activities had been in the
development of proprietary technology and services using smart and remote
memory cards and wireless and landline networks in the fields of commerce,
publishing and network based systems.
The Company, a development stage company, intends to offer a way for both
money borrowers ("Borrowers") and money lenders ("Lenders") to take
advantage of the global network that the Internet offers. The Company's
main objective is to provide an Internet web-site where Borrowers can post
their offers to borrow money, secured by pledged collateral, primarily
accounts receivable and real estate, and where Lenders can competitively
bid to supply the money, the competition being in the form of the amount
of money the Lender is willing to lend and the interest rate at which the
Lender is willing to supply the money. To accomplish their objective, the
Company is in the process of creating a multilingual online loan exchange
which will act as an Electronic Loan Center for individuals and small to
medium size businesses (the "Online Loan Exchange"). The Online Loan
Exchange will initially be operative only in Europe with North America to
be included when the Company has assessed and complied with North American
Regulating Authorities. The Online Loan Exchange will allow Borrowers to
post their borrowing requirements online and to observe online the amounts
and interest rates that lenders worldwide are willing to lend money to
them.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
(b) Income Taxes
No provision for income taxes has been made due to the inactive
status of the Company. The Company has net operating loss
carry-forwards of approximately $449,000, including Cynergy's net
operating loss carry-forward of $92,000 at the time of merger, which
expire up to 2014. The potential tax benefit of the loss
carry-forwards has been offset in full by a valuation allowance.
PAGE VI
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the reported period. These estimates
are reviewed periodically, and, as adjustments become necessary,
they are reported in earnings in the period in which they become
known.
(d) Basic Loss per Common Share
Basic loss per common share has been calculated based on the
weighted average number of shares of common stock outstanding during
the period.
(e) Unaudited Financial Statements
The accompanying financial statements for the nine month period
ended September 30, 1999 were unaudited and include all of the
adjustments which, in the opinion of management, are necessary for a
fair presentation. Such adjustments are of a normal recurring
nature.
3. BUSINESS COMBINATION
On September 29, 1999, Cynergy and Mercantile Factoring & Credit Corp.
("MFCC") completed their agreement to merge upon the filing of the
Articles of Merger with the Secretary of State of the State of Nevada (the
"Merger").
Pursuant to a separate transaction (prior to the Merger), MFCC bought
506,923 shares of the Company (61.3%) from the shareholders for cash of
$250,000, and immediately upon the closing of the Merger, contributed
those shares to the Company for cancellation.
In accordance with the merger agreement, the Company issued 4,500,000 post
merger shares to the former owner of MFCC in consideration for all of the
issued and outstanding common shares of MFCC. As the former shareholder of
MFCC obtained control (91.97%) of the Company through the share exchange,
this transaction has been accounted for in these financial statements as a
reverse takeover and the purchase method of accounting has been applied.
Under reverse takeover accounting, MFCC is considered to have acquired
Cynergy with the results of Cynergy's operations included in these
financial statements from the date of acquisition. Cynergy is considered
the continuing entity and consequently, the comparative figures are those
of MFCC. MFCC was then merged into Cynergy.
PAGE VII
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
4. STOCK TRANSACTIONS
In March 1995, the Company issued 370,108 shares of common stock to
individuals at $0.029 per share for cash.
At the end of 1995, the Company completed a public offering. A total of
372,469 shares of common stock were issued at $0.167 per share. The stock
offering costs were offset against the proceeds of the common stock. On
January 10, 1996, the Company effected a 10 for 1 reverse stock split. On
March 28, 1996, the Company effected a 6 for 1 forward stock split and
changed its par value from $0.01 per share to $0.001 per share.
The authorized shares were 300,000,000 after these amendments. The
financial statements reflect the stock splits on a retroactive basis.
On March 24, 1998, the Company entered into a Rescission Agreement with
the shareholders of Geo Ram, Inc. whereby the shareholders of Geo Ram,
Inc. returned the 6,000,000 shares issued in connection with the Share
Exchange Agreement dated November 30, 1996. The rescission has been
reflected on a retroactive basis.
Per a letter of understanding, dated May 25, 1998, the Company acquired
the rights to purchase a 100% working interest, subject to a 21% royalty
(79% net revenue interest), in oil and gas leases consisting of 960 acres
for a total of $240,000. The leases were located in the San Joaquin
Valley, Kern County, California.
The Company decided not to proceed with the option. No further payments
were made and the option expired. The initial payment of $15,000 was paid
by shareholders who were issued 84,346 shares of common stock at $0.178
per share.
On September 3, 1999, the Company cancelled 5,623 common stock and
credited the paid-in capital for the original par value.
On September 13, 1999, the Company effected a 17.784 for 1 reverse stock
split. The financial statements reflect the stock splits on a retroactive
basis.
On September 22, and 23, 1999, the Company cancelled 506,923, and 76,722,
common stock, respectively, and credited the paid-in capital for the
original par value.
In accordance with the merger agreement (Note 3), the Company issued
4,500,000 common shares at $0.001 per share to the former owner of MFCC in
exchange for all issued and outstanding shares of MFCC.
The Company issued 80,000 and 75,000 common shares at $0.10 per share in
September 1999 as finders' and legal fees, respectively, in connection
with the Merger.
PAGE VIII
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
5. GOING CONCERN
The Company financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The Company has not established revenues sufficient to cover
its operating costs and allow it to continue as a going concern. The
Company is seeking a merger with an existing, operating company. In the
interim, management is committed to covering all operating and other costs
until a merger is completed.
6. COMMITMENTS
Financing Agreement
On July 30, 1999, the Company entered into an agreement with Worldnet
Connections Corp. ("Worldnet"), a company incorporated under the laws of
the state of Nevada, United States of America. Worldnet agreed to provide
funds up to US$2,500,000, to be issued in multiples of $100,000, upon a 15
day notice by the Company. These funds will be considered as unsecured
loans and will be provided to the Company on an as needed basis. Worldnet
will have the option to immediately transform these loans into
convertible, unsecured, 6% debentures. The holders of the debentures will
have the option at any time after August 31, 1999 to convert such
debentures into common stock of the Company at the rate of 20% of the
Company's issued and outstanding shares after the merger.
These debentures are redeemable at any prior to their maturity dates at a
redemption price equivalent to the principal amount plus accrued and
unpaid interest up to the redemption date.
Subsequently, certain terms of the agreement were amended as follows:
(a) Worldnet removed the limit of funds to be loaned by the Company,
which was $2,500,000;
(b) The Company agreed to allow Worldnet the right of first refusal to
provide funds in multiples of $100,000;
(c) In the event that Worldnet advances the funds, the Company will issue
a 5 year, 8%, unsecured convertible note which is convertible into 60,000
common shares for each $100,000 tranche.
As of September 30, 1999, Worldnet had made advances to the Company
totalling $293,880.
Lease
The Company entered into a sublease agreement with an affiliated company
for the use of its office space. The amount of rent payable is equal to
20% of the total rent paid by that affiliated company (approximately US
$6,200 per month). The lease expires on January 31, 2003.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year Date-sensitive systems may
recognize the year 2000 as 1900 or some other date resulting in errors
when information using year dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved
ADVANCED MEDICAL TECHNOLOGIES
RESEARCH CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
(U.S. Funds)
DECEMBER 31, 1998 and 1997
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
DECEMBER 31, 1998 and 1997
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT I
FINANCIAL STATEMENTS
Balance Sheets II
Statements of Operations III
Statements of Stockholder's Equity IV
Statements of Cash Flows V
Notes to Financial Statements VI-VII
PAGE I
JULITO F. LONGKINES
Certified Public Accountant
3160 Steeles Avenue East, Suite 300
Markham, Ontario L3R 3Y2
Telephone - 905-475-2222
Member, American Institute of
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
To the Sole Shareholder of
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
I have audited the balance sheets of ADVANCED MEDICAL TECHNOLOGIES RESEARCH
CORP. (A DEVELOPMENT STAGE COMPANY) as at December 31, 1998 and 1997 and the
statements of operations, stockholder's equity and cash flows for the years then
ended and for the period from inception, July 26, 1996 to December 31, 1998.
These financial statements are the responsibility of the company's management.
My responsibility is to express an opinion on these financial statements based
on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. I believe that my
audits provide a reasonable basis for my opinion.
In my opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1998 and 1997
and the results of its operations and its cash flows for the years then ended
and for the period from inception, July 26, 1996 to December 31, 1998 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the company is a development stage company with no significant
operating revenues to date. Because the company has no significant sources of
revenue, there is substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ JULITO F. LONGKINES
JULITO F. LONGKINES
Certified Public Accountant
Markham, Ontario
September 7, 1999
PAGE II
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
BALANCE SHEET
(U.S. Funds)
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
-------- --------
CURRENT
Cash $ 22,430 $ 22,965
======== ========
LIABILITIES
CURRENT
Accounts payable $ 2,500 $ --
-------- --------
STOCKHOLDER'S EQUITY
AUTHORIZED
25,000,000 Common stock at $0.001 par value
ISSUED AND OUTSTANDING
25,000,000 Common shares 25,000 25,000
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (5,070) (2,035)
-------- --------
19,930 22,965
-------- --------
$ 22,430 $ 22,965
======== ========
See accompanying notes to financial statements.
PAGE III
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(U.S. Funds)
[Download Table]
From Inception on
For the Years Ended July 31, 1996 to
December 31 December 31
1998 1997 1998
---- ---- ----
REVENUE $ -- $ -- $ --
EXPENSES 3,035 535 5,070
------- ------- -------
NET LOSS FROM OPERATIONS $(3,035) $ (535) $(5,070)
======= ======= =======
See accompanying notes to financial statements.
PAGE IV
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
(U.S. Funds)
FOR THE PERIOD FROM THE DATE OF INCEPTION
JULY 26, 1996 TO DECEMBER 31, 1998
[Enlarge/Download Table]
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
# $ $ $
Inception on July 26, 1996 -- -- -- --
Common stock issued for cash 25,000,000 25,000 -- --
Net loss for the period ended December 31, 1996 -- -- -- (1,500)
---------- ------ ---- ------
Balance, December 31, 1996 25,000,000 25,000 -- (1,500)
Net loss for the year ended December 31, 1997 -- -- -- (535)
---------- ------ ---- ------
Balance, December 31, 1997 25,000,000 25,000 -- (2,035)
Net loss for the year ended December 31, 1998 -- -- -- (3,035)
---------- ------ ---- ------
Balance, December 31, 1998 25,000,000 25,000 -- (5,070)
========== ====== ==== ======
See accompanying notes to financial statements.
PAGE V
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(U.S. Funds)
[Download Table]
From Inception on
For the Years Ended July 31, 1996 to
December 31 December 31
1998 1997 1998
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations $ (3,035) $ (535) $ (5,070)
Increase in accounts payable 2,500 -- 2,500
-------- -------- --------
Net cash used by operating activities (535) (535) (2,570)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITY
Issuance of common stock for cash -- -- 25,000
-------- -------- --------
INCREASE (DECREASE) IN CASH (535) (535) 22,430
CASH, beginning of year 22,965 23,500 --
-------- -------- --------
CASH, end of year $ 22,430 $ 22,965 $ 22,430
======== ======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid $ -- $ -- $ --
Income taxes paid -- -- --
See accompanying notes to financial statements.
PAGE VI
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(U.S. Funds)
DECEMBER 31, 1998 and 1997
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
On July 26, 1996, Advanced Medical Technologies Research Corp. ("company")
was incorporated under the laws of the state of Nevada, U.S.A. On the date
of incorporation, 25,000,000 shares of $0.001 par value common stock were
authorized. The company has been inactive since incorporation and is
presently creating an online loan exchange allowing the use of
collectibles as collateral and will act as a combination of an electronic
financial loan centre for individual and factoring purposes, as well as
that of an original pawning and auction centre.
Subsequent to the year-end, the company changed its name to Mercantile
Factoring & Credit Corp.
The company has elected a calendar year-end.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Accounting Method
The company's financial statements are prepared using the accrual
method of accounting.
(b) Income Taxes
No provision for income taxes has been made due to the inactive
status of the company. The company has net operating loss
carry-forwards of approximately $5,000 which expire up to 2013. The
potential tax benefit of the loss carry-forwards has been offset in
full by a valuation allowance.
(c) Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the reported period. These estimates
are reviewed periodically, and, as adjustments become necessary,
they are reported in earnings in the period in which they become
known.
3. GOING CONCERN
The company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The company has not established revenues sufficient to cover
its operating costs and allow it to continue as a going concern.
PAGE VII
4. SUBSEQUENT EVENTS
(a) On July 30, 1999, the company entered into an agreement with
Worldnet Connections Corp. ("Worldnet"), a company incorporated
under the laws of the state of Nevada, United States of America.
Worldnet agreed to provide funds up to US$2,500,000, to be issued in
multiples of $100,000, upon a 15 day notice by the company. These
funds will be considered as unsecured loans and will be provided to
the company on an as needed basis. Worldnet will have the option to
immediately transform these loans into convertible, unsecured, 6%
debentures. The holders of the debentures will have the option at
any time after August 31, 1999 to convert such debentures into
common stock of the company at the rate of 20% of the company's
issued and outstanding shares after the merger (Note 4(b)).
These debentures are redeemable at any time prior to their maturity
dates at a redemption price equivalent to the principal amount plus
accrued and unpaid interest up to the redemption date.
(b) Plan of Merger
The company is presently negotiating a merger with Cynergy, Inc., a
Nevada corporation. Under the proposed merger, Cynergy, Inc. will be
the surviving corporation ("Cynergy"). All outstanding common stock
of the company will be converted into 4,500,000 new Cynergy shares
and the current stockholders of Cynergy will receive 320,000 new
Cynergy shares. This plan of merger is subject to approval of
various parties.
(c) Cancellation and Issuance of Shares
On July 31, 1999, the company cancelled the stock certificate
covering all of the issued and outstanding 25,000,000 shares of
common stock with a par value of $0.001 and returned the amount of
$25,000 to the shareholder. Thereafter, 25,000,000 shares of common
stock with a par value of $0.001 per share were issued for
proprietary software valued at $800,000.
Subsequently, this transaction was rescinded.
PART III
ITEM 1 INDEX TO EXHIBITS
Exhibit No. Exhibit Name
----------- ------------
2.1 Articles of Incorporation of Registrant
2.2 By-laws of Registrant
3.1 Form of Unsecured Convertible Note
6.1 Loan Agreement
6.1a The Merger Agreement
6.2.4 Office Space Lease for principal office: 1250
Boul. Rene-Levesque Ouest, Bureau 2925, Montreal,
Quebec H3B 4W8, Canada.
12 Articles of Merger
ITEM 2 DESCRIPTION OF EXHIBITS
See Item 1 above
13
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MERCANTILE FACTORING CREDIT ONLINE CORP.
Date: November 12, 1999 By: \s\ Dominique M. Bellemare
----------------- ------------------------------
Dominique M. Bellemare
President
14
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that the persons whose signatures
appear below each severally constitutes and appoints Dominique M. Bellemare as
true and lawful attorney-in-fact and agent, with full powers of substitution and
resubstitution, for them in their name, place and stead, in any and all
capacities, to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, any registration
statement relating to the same offering as this Registration Statement that is
to be effective upon filing pursuant to Section 12 under the Securities Exchange
Act of 1934, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all which said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do,
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
\s\ Dominique M. Bellemare
-------------------------------
Dominique M. Bellemare
President and Director Date: November 12, 1999
-----------------------
\s\ Jean-Guy Hudon
-------------------------------
Jean-Guy Hudon
Vice-President and Director Date: November 12, 1999
-----------------------
\s\ Rita S. Dickson
-------------------------------
Rita S. Dickson
Secretary and Director Date: November 12, 1999
-----------------------
\s\ Yvan Guillemin
-------------------------------
Yvan Guillemin
Director Date: November 12, 1999
-----------------------
15
Dates Referenced Herein and Documents Incorporated by Reference
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