U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

            For the transition period from ___________ to ___________

                         Commission file number 0-22607

                            MERCHANTONLINE.COM, INC.
                 ----------------------------------------------
                 (Name of Small Business issuer in its charter)


                FLORIDA                                84-1233073
    ---------------------------------            ----------------------
      (State or Other Jurisdiction                   (IRS Employer
    of Incorporation or Organization)            Identification Number)

  1600 S. DIXIE HIGHWAY, SUITE 300 BOCA RATON, FLORIDA        33432
  ----------------------------------------------------      ---------
           (Address of Principal Executive Offices)         (Zip Code)

         Issuer's Telephone Number, Including Area Code: (561) 395-3585
                                                         --------------
                                 ---------------
        Securities registered pursuant to Section 12(b) of the Act: None

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

         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 [ ]

         Check if there is no disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:  $ 204,106

The aggregate market value of the issuer's common stock,  $.001 par value,  held
by non-affiliates on January 31, 2000 was approximately $74,928,750.

On January 31, 2000,  there were 23,860,000  shares of the issuer's common stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
None

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                                TABLE OF CONTENTS

                            FORM 10-KSB ANNUAL REPORT

                            MERCHANTONLINE.COM, INC.

                                                                            PAGE

PART I
Item 1.      Description of Business..........................................3
Item 2.      Description of Property.........................................14
Item 3.      Legal Proceedings...............................................15
Item 4.      Submission of Matters to a Vote of Security Holders.............15

PART II
Item 5.      Market for the Registrant's Common Equity and Related
             Stockholder Matters.............................................16
Item 6.      Management's Discussion and Analysis of Financial Condition
             and Results of  Operations......................................17
Item 7.      Financial Statements............................................31
Item 8.      Changes in and Disagreements on Accounting
             and Financial Disclosure........................................31

PART III
Item 9.      Directors, Executive Officers, Promoters and Control Persons,
             Compliance with Section 16(a) of the Exchange Act...............33
Item 10.     Executive Compensation..........................................34
Item 11.     Security Ownership of Certain Beneficial Owners and Management..35
Item 12.     Certain Relationships and Related Transactions..................36

PART IV
Item 13.     Exhibits and Reports of Form 8-K................................36

SIGNATURES...................................................................38

<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

OVERVIEW

         We are a developer  and  provider of real-time  e-commerce  transaction
services.  We offer products and services to online  merchants as an economical,
easy-to-install service that allows merchants to accept and fill orders over the
Internet in a manner in which it is obvious to the merchants and their customers
that the transaction is secure. We have developed a proprietary real-time credit
card  processing  program,  MOL E-CHARGE,  which we believe meets or exceeds the
capabilities of all currently available  software.  Our goal is to provide small
and medium sized merchants with a single vendor that furnishes everything needed
to begin participating in E-commerce.  Our target client base includes merchants
that already have merchant bankcard  accounts that require real-time  processing
only.

OUR HISTORY

         Tarcyn Corporation was incorporated on March 13, 1993 under the laws of
the State of Colorado to engage in any lawful corporate undertaking,  including,
but not limited to, selected  mergers and  acquisitions.  Tarcyn had been in the
developmental  stage since  inception and had no operations  prior to the merger
with MerchantOnline.com. As such, Tarcyn was defined as a "shell" company, whose
sole purpose at the time was to locate and  consummate  a merger or  acquisition
with a private entity.

         Effective  February  16,  1999,  Tarcyn  acquired all of the issued and
outstanding securities of Creditco Inc. d/b/a MerchantOnline.com, for 15,750,000
shares of "restricted"  common stock of Tarcyn.  Subsequent to the  acquisition,
Tarcyn changed its name to MerchantOnline.com, Inc., changed its jurisdiction of
incorporation  from  Colorado to  Florida.  and changed its fiscal year end from
March 31,  to  October  31, in order to  coincide  with the  fiscal  year end of
Creditco.

         On January 15, 2000, we completed the  acquisition of  Approve.net  and
ChargeSolutions, which had previously provided much of our technical support and
back office operations, for 2,000,000 shares of our common stock.

INDUSTRY BACKGROUND

THE RAPID GROWTH OF INTERNET COMMERCE

         As the Internet  has become an  increasingly  important  communications
medium,  merchants and  consumers  have begun using the Internet to buy and sell
goods  and  services.   The  number  of  Internet  users   worldwide  has  grown
dramatically  and is  expected  to grow  significantly  in the next  few  years.
Increasingly, these Internet users are becoming online consumers.  International
Data  Corporation has forecasted that the actual number of Web buyers  worldwide
will  expand  from 48 million in 1999 to  approximately  183 million in 2003 and

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that the amount of worldwide  commerce conducted over the Web will increase from
$111 billion in 1999 to approximately $1.3 trillion in 2003.

         E-commerce offers both merchants and consumers numerous benefits:

o    Merchants  and  consumers  can  interact  24  hours  a day,  7 days a week,
     regardless of their respective locations.
o    Merchants can customize Web site content to match the needs and preferences
     of individual users by personalizing content for users.
o    The  online  store  enables  merchants  to readily  increase  the number of
     products and services  offered,  thereby  enhancing  the product  selection
     available to customers.
o    Online merchants can avoid investments in physical retail locations.
o    Much of the interaction  between  merchants and consumers can be automated,
     resulting in reduced operating costs.

         These benefits allow  merchants to focus on growing their customer base
and to market and sell their products around the world in a  cost-effective  and
efficient manner.

         The early adopters of e-commerce were often Internet-centric companies,
such as Amazon.com and Beyond.com,  which were founded  specifically to transact
business on the Internet.  Today, many businesses consider it essential to offer
their  goods  and  services  online,  and  many  traditional  retailers  such as
department  stores,  car dealers,  and toy stores have opened  online  stores to
supplement their traditional  retail models. An increasingly  broad selection of
products  is now being sold  online,  ranging  from the initial  online  product
offerings of books, music,  computers and software to more traditional  consumer
goods  such  as  clothes,  movie  tickets,   vitamins  and  prescription  drugs.
Accordingly,  the need for online transaction  processing is affecting virtually
all industries.

TRANSACTION PROCESSING DEMANDS

         To succeed  online,  a merchant must attract  customers to its Web site
and provide an appealing and easy-to-use  environment that encourages  customers
to place an order by clicking on the "buy" button.  Once the customer  places an
order,  the  merchant  must  process the order by  effectively  and  efficiently
executing numerous transactions. With the rapid increase in the number of online
merchants and the vast array of products and services becoming available online,
competition  among  online  merchants  is  increasingly  intense.  Due to  these
competitive  pressures,  merchants  must focus  their  resources  on  attracting
customers to their Web sites and providing  compelling content to keep customers
in their online stores.  However,  as a merchant succeeds in these efforts,  the
increased number of resulting orders creates another set of complex  challenges.
These challenges include:

o    Payment  processing.  The vast  majority of online  consumer  purchases are
     conducted  using credit  cards.  These credit card  transactions  should be
     processed  in  real-time  to confirm an order while the customer is online.
     Increasingly,  merchants are also seeking to process  transactions in local
     currencies around the world.

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o    Fraud prevention.  Because of the anonymity offered by the Internet and the
     speed  with  which one can make  purchases,  the  opportunity  for fraud is
     significant.  In  e-commerce  transactions,  because the credit card is not
     present, a merchant is generally held liable by its bank for the full value
     of  the   transaction  in  the  event  of  credit  card  fraud  even  if  a
     pre-authorization  had been  obtained.  Online  merchants must find ways to
     combat  this  fraud to avoid  losing  both the  product  being sold and the
     related revenue.

The online  merchant  must often  address  these  demands  while the customer is
waiting  online.  Information  that a traditional  retailer can collect during a
period of hours,  such as fraud  screen,  often must be  available to the online
merchant immediately.  In addition,  the merchant must have an e-commerce system
that scales as the  business  grows,  provides a high level of  reliability  and
handles peak loads.  The  merchant's  e-commerce  system  should also  integrate
smoothly  into its existing  business and  technology  and must support  secure,
authenticated messaging.

EVOLUTION OF E-COMMERCE TRANSACTION PROCESSING SYSTEMS

         Early adopters of e-commerce business models typically developed custom
transaction  processing systems.  Merchants that built these systems often faced
long  development  cycles,  which  delayed  their  time-to-market.  These custom
systems  often  had  limited  functionality  and  scalability  and high  ongoing
maintenance costs.

         More  recently,  online  merchants  have  attempted  to  address  their
transaction  processing  needs by  either  purchasing  or  outsourcing  discrete
systems.  Merchants  that turn to discrete  systems like payment  processing are
still faced with the need to address other potentially costly and time-consuming
transaction  processing  issues  like  fraud  screening  or export  control.  In
addition,  merchants  that purchase  discrete  systems often discover that these
systems cannot scale as their business grows.

         As the  Internet  has become an essential  marketplace,  merchants  are
increasingly  turning to  e-commerce  service  providers  with the  expertise to
deliver a comprehensive solution that shortens  time-to-market and maximizes the
value of their  investment.  These  transaction  processing  solutions should be
available at a low initial and overall  cost and, at the same time,  be scalable
to support the growth of the online  business.  A solution should also allow the
merchant to maintain control over its online content and customer  relationships
and to integrate new services easily.

THE MERCHANTONLINE.COM SOLUTION

         MerchantOnline.com  began with the concept of offering real-time credit
card processing  services to support  e-commerce.  A relatively  small number of
e-commerce   solution   providers   targeted   to   smaller   merchants   exist.
MerchantOnline.com's competitive advantages over the competition include:

o        Lower Fees
o        Automated Order Fulfillment
o        User Friendly Processing
o        Ease of Installation

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         MerchantOnline.com offers its e-commerce solution to merchants that are
able to acquire  their own bank  merchant  account  and require  only  real-time
credit card processing.  MerchantOnline.com  has  relationships  with banks that
allows it to assist clients in obtaining merchant accounts for a fee.

         MerchantOnline.com's MOL E-CHARGE product provides real-time processing
service for clients that have or can acquire a merchant account. This economical
service can  literally  put the  merchant in  business on the  Internet.  For an
installation  fee of $99 plus a monthly  service fee, a customer with a web site
can be accepting  credit card  transactions  within 48 hours of  submitting  its
application.  MerchantOnline.com  downloads a credit card processing web page to
the merchant and provides the processing  necessary to administer  orders.  This
allows  clients to accept  credit card orders and payments  entered  directly by
consumers on their web sites.  MerchantOnline.com  software obtains the approval
or rejection  of the credit card  transaction  and performs  routines to protect
against fraud.

         The fraud protection routines include address  verification,  comparing
the credit card to a negative  database,  and  determining  that the  individual
ordering has a valid email address. If any problems occur with these checks, the
orders  are not  approved.  For all  transactions,  both  the  consumer  and the
merchant  receive  electronic  receipts.  MerchantOnline.com  also  provides its
merchants  with a  manual  screen  in  which  they can  enter  transactions  not
submitted over the Internet. This allows them to use the MOL E-CHARGE system for
telephone/fax orders.

         In addition,  MerchantOnline.com  offers an electronic  shopping  cart,
called MOL E-CART to  merchants  that offer  several  products or services  that
customers may order at one time.  An  "electronic  shopping  cart" refers to the
ability to combine the purchases of many items from the Internet on one invoice.
MOL E-CART allows consumers to order several items, calculates applicable taxes,
totals the order,  and accepts a credit card as payment.  The merchant  provides
the online catalog of items to put in the shopping cart.

The  technology  underlying  our e-commerce  transaction  services  provides the
following benefits:

o        SCALABILITY. Our services allow merchants to deliver consistent quality
         of service as their  transaction  volumes grow, and to handle daily and
         seasonal  peak  periods.  As a result,  merchants do not have to expand
         these areas of their  transaction  processing  infrastructure  as their
         businesses grow.

o        HIGH   RELIABILITY.   Our  systems  are   engineered  to  provide  high
         reliability,  and we provide  transaction  processing 24 hours a day, 7
         days a week.  In addition,  we offer our  merchants  support 24 hours a
         day, 7 days a week.

o        SECURE MESSAGING.  All communications between the merchant's Web server
         and our system are facilitated by an encrypted protocol that allows for
         digital  signature   processing,   message   integrity,   and  identity
         verification of all communications between the merchant and us.

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o        REAL-TIME  RESPONSES.  Because our services enable online  merchants to
         process  e-commerce  transactions  in real-time,  merchants can improve
         their level of customer  satisfaction and reduce their support costs by
         avoiding  delayed  responses  and  minimizing  the need  for  follow-up
         communications.

STRATEGY

         Our  objective  is to be the leading  worldwide  provider of  real-time
e-commerce  transaction  services.  Key  elements  of our  strategy  include the
following:

o        ENHANCE AND EXTEND OUR SUITE OF E-COMMERCE SERVICES. We intend to build
         upon our scalable,  state-of-the-art  transaction processing systems to
         enhance  and  extend  the suite of  services  we  currently  offer.  By
         continuing  to  invest  resources  in our core  transaction  processing
         engine,  we intend to further  improve  availability,  reliability  and
         scalability.  Based on input from our  merchants,  we plan to introduce
         new services to solve e-commerce  problems as they emerge. We also plan
         to develop  support  for other  payment  methods in  addition to credit
         cards,  as market demand for such services  emerges.  To supplement our
         internal development  efforts, we will consider strategic  acquisitions
         or  form  partnerships  to  acquire   complementary   technologies  and
         companies.

o        EXPAND MERCHANT  CUSTOMER BASE THROUGH  IMPROVED BRAND  RECOGNITION AND
         INCREASED MARKETING.  To date, we have made significant  investments in
         marketing  and  branding.  We  substantially  increased  our  sales and
         marketing  expenses in 1999 from 1998 levels and plan to continue to do
         so in 2000.  We also  intend to increase  the size of our direct  sales
         force and enter into additional collaborative relationships to generate
         new merchant customers as well as to increase the number of transaction
         services used by our existing merchants.

o        OFFER NEW PRODUCTS. MerchantOnline.com has agreed to acquire a company,
         which  has  developed  a  patented  encryption  hardware  and  software
         product.  This  device  can be used  for  debit  card  and  smart  card
         transactions  thereby  reducing or  eliminating  charge-back  issues of
         using    credit    cards.    MerchantOnline.com    believes    that   a
         hardware/software solution including a smart card reader, magnetic card
         reader, a PIN pad, and "point-of-entry" encryption are crucial elements
         for e-commerce to become widely accepted.

o        UTILIZE  PARTNERSHIPS  TO DRIVE  TRANSACTIONS.  We  intend  to  utilize
         relationships with our channel partners  including  resellers and banks
         to increase our transaction volume and create new markets. We intend to
         enter into  additional  relationships  with other  companies that offer
         similar benefits.

o        INCREASE INTERNATIONAL PRESENCE AND OPERATIONS. We intend to expand the
         availability  and brand  recognition  of our  services  throughout  the
         world.  We plan to enhance  these and similar  relationships  that will
         allow us to offer payment  processing  services in all major currencies
         and sales tax/VAT services in all major nations.  We intend to continue
         building our sales,  marketing and operational  presence outside of the
         United States to serve merchants worldwide.

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MERCHANTONLINE.COM SERVICES

         We  provide a suite of  e-commerce  transaction  services  designed  to
simplify  merchants'  operations  and  allow  them to  focus  on  marketing  and
merchandising  tasks  required  for their  online  businesses.  Our services are
transparent to the merchant's  customers.  We also offer digital  product rights
management and professional services.

PRODUCTS AND SERVICES

         MerchantOnline.com  provides merchants that use the Internet with three
types of services:

              1.       MOL E-CHARGE credit card processing capabilities;
              2.       MOL E-MERCHANT merchant accounts for bank clearings; and
              3.       MOL E-CART electronic shopping carts.

         The  basic  service   relating  to  credit  cards  involves   real-time
processing of  transactions.  This is for clients that have or can obtain credit
card merchant bank accounts.  MerchantOnline.com  provides a seamless connection
to credit card approval and completes the  processing of the  transactions.  For
this,  MerchantOnline.com  receives  a  competitive  one-time  setup  fee plus a
monthly service fee.

         The real-time processing system, provides its clients with a wide range
of services. These include obtaining approval of the credit card transaction and
completing fraud checks that relate to the cardholder's physical address, credit
card  number,   and  e-mail   address.   An  electronic  mail  message  then  is
automatically  sent to the merchant and the customer to confirm the transaction.
MerchantOnline.com  provides  a back  office  system  that  supports  merchants'
efforts to fulfill  orders  received.  The  confirmation  sent to customers  has
reduced the chargebacks as problems are identified and resolved immediately.

         MerchantOnline.com previously served as an agent for banks that provide
credit  card   deposit   accounts   for   Internet   merchants.   This   allowed
MerchantOnline.com  to market to  clients  seeking a merchant  account  and earn
revenue from both real-time  processing  fees and charges  relating the merchant
account (setup fees,  percentage of transaction  amounts,  and recurring monthly
fees). Currently,  the Company seeks to provide its services to customers who do
not require merchant accounts.

PROPOSED ACQUISITION

         MerchantOnline.com has a letter of intent to acquire 90.1% of a company
which produces a patented  encryption  hardware  magnetic swipe  card/smart card
device in exchange  for  5,000,000  shares of common stock and $500,000 in cash.
The closing is expected to occur in late February 2000.

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         MerchantOnline.com  believes  that  a  hardware/software  "swipe"  card
solution  including a smart card reader,  magnetic  card reader,  a PIN pad, and
"point-of-entry" encryption are crucial elements for e-commerce to become widely
accepted.   Our  management   believes  that  this  product  provides  the  only
simple-to-install  and low-cost  solution for secure  PC-based  transactions  of
credit,  debit,  and smart cards.  The  combination  of a PIN pad with  built-in
secure  encryption,  magnetic  stripe  reading  ability and smart card interface
mirrors an automatic  teller  machine when  augmented with the power of a PC and
the Internet connection to the ATM networks.

         This  technology is patented in the U.S. and 125 other  countries under
patents  and  patent  cooperation  treaties.   Additionally,  two  more  related
significant utility patent applications have been filed. Finally,  approximately
30 international patent applications are in process.

SALES AND MARKETING

         Target  customers  for  our  e-commerce  transaction  services  include
Internet-centric   merchants,   including   those  who  have  developed   custom
transaction processing systems and established retailers that have opened online
stores to supplement their  traditional  retail models. We reach these merchants
worldwide  through a direct  sales  force as well as through an  indirect  sales
channel that leverages existing sales and marketing infrastructures developed by
our partners. In addition to our direct and indirect sales efforts, we work with
several strategic partners to promote our e-commerce transaction services. As of
January 31, 2000,  we had a total of 3 persons in sales and  marketing  and over
100 resellers throughout the world.

SALES STRATEGY

         MerchantOnline.com's  products and services are marketed through direct
and indirect  channels.  All products and services are also offered  directly by
MerchantOnline.com.   MerchantOnline.com's   efforts   in  direct   selling   is
accomplished in four ways:

o        its web sites;
o        banners placed on other web sites;
o        direct sales by its own staff; and
o        tradeshows.

         For its indirect  sales efforts,  MerchantOnline.com  uses a network of
resellers.   Reseller  organizations  can  offer  all  of   MerchantOnline.com's
services.  These third party sales  organizations are either already involved in
marketing credit card merchant account services or are developers of websites or
Internet   Service   Providers.   Those  in  the   reseller   program   purchase
MerchantOnline.com  services at a discounted rate and then re-sell them to their
clients.  They can either use  MerchantOnline.com  to bill their  customers  for
these services or invoice their customers under their own name.

         MerchantOnline.com  has recently finalized  agreements with a number of
independent selling organizations to resell  MerchantOnline.com's  services. For
resellers, the key element is residual, transaction-based income. Resellers that
manage the entire  transactions will receive a per transaction fee, plus sign-up

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fees if the reseller uses  MerchantOnline.com's  suggested retail pricing.  Many
resellers actually charge higher prices when the market will bear it. The use of
resellers  allows  MerchantOnline.com  to  leverage  its  resources  to maximize
revenues.  By working with companies as resellers who market  merchant  accounts
and web sites to their customers,  MerchantOnline.com  strategically develops an
outside sales organization that already has sound,  existing  relationships with
merchants.  These  resellers  recognize that income derived from  MerchantOnline
installation  fees  and  recurring  transaction  charges  provide  them  with  a
significant  revenue  potential.  Most  competitors sell products using a direct
sales force.  MerchantOnline.com believes that using a combination of direct and
indirect  sales  efforts  will allow it to expand  more  rapidly  while  holding
expenses for salaries, computers, and facilities, at below budget.

         We use a variety of marketing  activities to increase market  awareness
of our  services  and  educate  our target  audience.  In  addition  to building
awareness of our brand,  our marketing  activities focus on generating leads for
our sales  efforts.  To build  awareness  and attract new  merchants  we conduct
marketing and  partnership  programs  including  advertising,  public  relations
activities,  referral  programs,  co-branded  initiatives,  virtual seminars and
trade shows. We also co-sponsored an Indy car racing team with Yahoo!

MERCHANT SUPPORT

         We  provide  a range of  merchant  activation  and  sustaining  support
services to ensure a high level of  performance  and  reliability  and to enable
merchants  to get to market  more  quickly.  We offer two levels of rapid  start
implementation  and two levels of  sustaining  support  services  in addition to
basic account  activation:  standard support and premier  support.  All of these
services include transaction reporting,  fraud list updating and notification of
scheduled and unscheduled  system downtime and self-help  merchant support tools
on our Web site.  Merchants may select any combination of implementation  and/or
sustaining support packages, according to their needs.

         ACCOUNT  ACTIVATION.  Our account  activation level service is intended
for use by merchants that receive technical support from a technically qualified
third party, an organization that resells the  MerchantOnline  Internet Commerce
Suite, or by those merchants with sufficient in-house technical expertise.

         Account  activation  allows merchants to connect to the  MerchantOnline
Internet  Commerce  Suite,  configure all merchant IDs and account  information,
access test services,  gain secure access to our online merchant  support center
and next business day e-mail support.

         IMPLEMENTATION AND SUPPORT.  Our service is designed to provide support
to merchants  during regular  business hours. It provides all of the services of
account activation as well as toll free telephone support from 8 a.m. to 6 p.m.,
Eastern Time,  Monday  through  Friday,  from our merchant  support group with a
guaranteed two hour response time during business hours.

         Through  toll-free  telephone  numbers,  our  merchants  can  reach our
support desk professionals around the clock.

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TECHNOLOGY

         Our  proprietary   transaction  processing  system  employs  a  modular
architecture  that was  designed  to scale  rapidly  and handle the  transaction
processing demands of our merchants across the Internet. This system is composed
of multiple  groups of servers and routers  acting as a single  point of contact
for our merchants'  transaction  processing  requirements.  This system utilizes
industry standards to maximize our compatibility with our merchants'  e-commerce
systems.

E-TRANSACTION DATABASE ARCHITECTURE

         Three primary  databases  form the core of our  transaction  processing
system: the transaction process database which maintains  information  necessary
to process each individual  transaction;  the decision support  database,  which
processes   reports  and  provides   detailed   information   about   merchants'
transactions and the digital products rights management database,  which manages
and reports on the digital  property rights that customers have  purchased.  Our
transaction services rely on these databases to store the information  necessary
to process transactions. For example, our fraud prevention service relies upon a
proprietary database of millions of transactions to assess the risk of fraud.

INTERNET COMMERCE SERVICES APPLICATIONS

         We have  developed  a set of  software  applications  that  perform the
services in our products.  These services  include  global  payment  processing,
fraud prevention,  tax calculation,  export  compliance,  territory  management,
delivery address  verification and fulfillment  management.  These  applications
contain the rules and logic  necessary  to provide our  transaction  services to
merchants. The applications share resources with the databases which allow us to
efficiently add new application services to meet our customers needs.

INDUSTRY STANDARDS

         The  implementation  of our  architecture is based on and complies with
widely accepted industry  standards.  Adherence to industry  standards  provides
compatibility  with  existing  applications,  enables ease of  modification  and
reduces the need for software modules to be rewritten over time, thus protecting
our merchants' investments.

DATA CENTERS AND NETWORK ACCESS

         Our data  centers  are  located  at leased  facilities  in Boca  Raton,
Florida  and San  Diego,  California.  A data  center is a  facility  containing
servers, modem banks, network circuits and other physical equipment necessary to
connect  users to the  Internet.  These data  centers  have  multiple  levels of
redundant connectivity to the Internet, back-up power, fire suppression, seismic
reinforcement and security surveillance 24 hours a day, 7 days a week.

                                       11
<PAGE>

PRODUCT DEVELOPMENT

         Our product development team is responsible for the design, development
and release of our core  infrastructure  and  services.  We have a  well-defined
software development  methodology that we believe enables us to deliver services
that satisfy real business needs for the global market while meeting  commercial
quality  expectations.  We emphasize quality  assurance  throughout our software
development  lifecycle.  We believe that a strong  emphasis  placed on analysis,
design and rapid  prototyping  early in the project lifecycle reduces the number
and  costs  of  defects  that may be found  in  later  stages.  Our  development
methodology  focuses  on  delivery  of  product  to a  global  market,  enabling
localization into multiple languages,  multi-currency payment processing, global
fraud detection, and local regulatory compliance from a single code base.

         When  appropriate,  we utilize third parties to expand the capacity and
technical  expertise  of  our  internal  product  development  organization.  On
occasion,  we have  licensed  third-party  technology  that we feel provides the
strongest  technical  alternative.  We believe this approach  shortens  time-to-
market  without  compromising  our  competitive  position,  product  quality  or
service.

INTELLECTUAL PROPERTY

         Our  success  depends  upon our  proprietary  technology.  We rely on a
combination   of  patent,   copyright,   trademark  and  trade  secret   rights,
confidentiality  procedures and licensing  arrangements to establish and protect
our proprietary rights.

         We believe that numerous patent  applications  relating to the Internet
commerce  field have been filed or have issued as patents.  From time to time in
the ordinary course of business, we become aware of one or more patents of third
parties that we choose to evaluate for a variety of purposes. These purposes may
include determining the general contents of patents, reviewing the technological
developments  of their  assignees,  and  determining  whether our technology may
overlap.  We have not  conducted  any  search to  determine  whether  any of our
services or  technology  could be alleged to infringe  upon any patent rights of
any third party. We cannot assure you that none of our products,  services,  and
technology infringes any patent of any third party.

         As part of our  confidentiality  procedures,  we  generally  enter into
non-disclosure  agreements  with  our  employees,  distributors,  and  corporate
partners and into license agreements with respect to our software, documentation
and other  proprietary  information.  Despite these  precautions,  third parties
could  reverse  engineer,  copy  or  otherwise  obtain  our  technology  without
authorization, or develop similar technology independently.  While we police the
use of our services and  technology  through  online  monitoring  and  functions
designed into our products,  an unauthorized  third-party may nevertheless  gain
unauthorized  access to our  services or pirate our  software.  We are unable to
determine  the extent to which piracy of our  intellectual  property or software
exists.  Software  piracy is a  prevalent  problem  in our  industry.  Effective
protection of  intellectual  property  rights may be  unavailable  or limited in
foreign  countries.  We cannot assure you that the protection of our proprietary
rights will be adequate or that our competitors will not  independently  develop
similar  technology,  duplicate our services or design  around any  intellectual
property rights we hold.

                                       12
<PAGE>


COMPETITION

         The market for our  services is  intensely  competitive  and subject to
rapid  technological  change. We expect  competition to intensify in the future.
Our primary source of competition comes from online merchants who develop custom
systems.  These online  merchants  who have made large  initial  investments  to
develop  custom  systems may be less likely to adopt an  outsourced  transaction
processing  strategy.  We also face competition from developers of other systems
for e-commerce  transaction  processing  such as  Cybersource,  Clear  Commerce,
CyberCash, Digital River, Hewlett-Packard (VeriFone), HNC Software, Open Market,
PaylinX,  ShopNow.com and Signio. In addition,  companies,  including  financial
services  and  credit  companies  such as First  Data  Corporation,  AT&T and GE
Capital,  may enter the  market for our  services.  In the  future,  we also may
compete with large Internet-centric  companies that derive a significant portion
of their revenues from  e-commerce and may offer,  or provide a means for others
to offer, e-commerce transaction services.

         Many of our competitors have longer operating histories,  substantially
greater  financial,  technical,  marketing or other  resources,  or greater name
recognition than we do. Our competitors may be able to respond more quickly than
we can to new or emerging  technologies  and  changes in customer  requirements.
Competition  could seriously  impede our ability to sell additional  services on
terms  favorable to us. Our current and  potential  competitors  may develop and
market new  technologies  that render our existing or future services  obsolete,
unmarketable or less competitive. Our current and potential competitors may make
strategic  acquisitions or establish cooperative  relationships among themselves
or with other e-commerce  transaction service providers,  thereby increasing the
ability of their services to address the needs of our prospective customers. Our
current and  potential  competitors  may  establish  or  strengthen  cooperative
relationships with our current or future channel partners,  thereby limiting our
ability to sell services  through these  channels.  Competitive  pressures could
reduce our market share or require the  reduction of the prices of our services,
either of which could materially and adversely  affect our business,  results of
operations or financial condition.

         We compete on the basis of certain factors, including:
o        system reliability;
o        product performance;
o        breadth of service offering;
o        ease of implementation;
o        time to market;
o        customer support; and
o        price.

         We believe that we presently  compete favorably with respect to each of
these factors.  However,  the market for our services is still rapidly evolving,
and we may not be able to compete  successfully  against  current and  potential
future competitors.

                                       13
<PAGE>


REGULATIONS

         The following regulations can impact our business now or in the future:

         FAIR CREDIT  REPORTING ACT. Because our Internet fraud screening system
assesses the probability of fraud in an Internet credit card transaction, we may
be deemed a consumer  reporting agency under the Fair Credit Reporting Act. As a
precaution,  we are implementing changes to our systems and processes so that we
will be in  compliance  with the act.  Complying  with this act  requires  us to
provide  information  about  personal data stored by us.  Failure to comply with
this act could result in claims being made  against us by  individual  consumers
and the Federal Trade Commission.

         EXPORT CONTROL REGULATIONS. Current export control regulations prohibit
the export of strong encryption technology without a license, thereby preventing
us from using  stronger  encryption  technology  to protect the security of data
being  transmitted to and from Internet  merchants outside of the United States.
We have  obtained  a  license  to use  168-bit  encryption  technology  with our
international  merchants, and have applied for a license to use higher levels of
encryption  technology.  We  cannot  be sure that the  license  to use  stronger
encryption  technology will be issued.  If our application is denied, we will be
unable to use stronger than 168-bit encryption technology with our international
merchants.

         INTERNET TAX FREEDOM ACT. Enacted in October 1998 and effective through
October 2001, the act bars state or local  governments  from imposing taxes that
would subject buyers and sellers of electronic  commerce to taxation in multiple
states.  The act also bars state and local  governments  from imposing  taxes on
Internet  access  through  October  2001.  When the act expires or if the act is
repealed,  Internet  access  and sales  across  the  Internet  may be subject to
additional  taxation  by  state  and  local  governments,  thereby  discouraging
purchases over the Internet and adversely affecting our business.

EMPLOYEES

         As of January 31, 2000  MerchantOnline.com  had 9 full time  employees.
None of our employees is represented by a labor union, and we consider  employee
relations to be good.

ITEM 2.  DESCRIPTION OF PROPERTY

         MerchantOnline.com's  executive  offices  are  located at 1600 S. Dixie
Highway - Suite 300, Boca Raton, Florida. MerchantOnline.com rents approximately
3,500  square  feet on a month to month  basis at the rate of $4,770  per month.
Management believes that this space will meet MerchantOnline.com's needs for the
foreseeable future.

         MerchantOnline.com's  technical  back office  operations are located at
3465 Camino Del Rio South, Suite 250, San Diego, California, where we rent 3,300
square  feet at a rate of  $4,950  per  month  pursuant  to a three  year  lease
expiring in 2003.

         We also lease space at Level III  Communication's  secured  data center
for our servers for $2,100 per month.

                                       14
<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

         In January 2000,  MerchantOnline.com was served with a lawsuit entitled
Global  Guarantee  Corporation vs.  MerchantOnline.com,  Inc., Los Angeles State
Court - Case No. BC222369.  Global  Guarantee  Corporation is seeking to collect
$195,000 of  outstanding  notes.  MerchantOnline.com  has not yet  answered  the
complaint and intends to contest  jurisdiction in California State Court as well
as to  challenge  the merits of the claim.  MerchantOnline.com  also  intends to
contest  the  claimed  amount  and may also  file  counterclaims  in  excess  of
plaintiffs claims.

         MerchantOnline.com   is  not  a  party  to  any  other  material  legal
proceedings

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

         None

                                       15
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

         On May 10, 1999 MerchantOnline.com's  common stock began trading on the
OTC Bulletin Board under the symbol "MRTO".  The following  table sets forth the
high and low bid prices of MerchantOnline.com's  common stock as reported on the
OTC Bulletin Board for each quarter from May 10, 1999 through  October 31, 1999.
The  following  quotations  are  over-the-market  quotations  and,  accordingly,
reflect inter-dealer prices, without retail mark-up,  markdown or commission and
may not represent actual transactions.


                                               High Bid                Low Bid
                                               --------                -------
May 10, 1999 through July 31, 1999             $   8.50                $   .87
August 1, 1999 through October 31, 1999        $   3.82                $   .25

         On January 31,  2000,  the  closing  bid price for the common  stock as
reported on the OTC Bulletin  Board was $9.75.  As of December  31, 1999,  there
were approximately 1,000 holders of MerchantOnline.com's common stock.

DIVIDENDS

         MerchantOnline.com  has not paid any cash dividends on its common stock
since its  inception.  MerchantOnline.com  presently  intends  to retain  future
earnings,  if any,  to  finance  the  expansion  of its  business  and  does not
anticipate  that  any cash  dividends  will be paid in the  foreseeable  future.
Future dividend  policy will depend on  MerchantOnline.com's  earnings,  capital
requirements, expansion plans, financial condition and other relevant factors.


SALES OF UNREGISTERED SECURITIES

         In February  1999,  an aggregate of  15,750,000  shares of common stock
were issued to Tarek Kirschen,  Stephen Landau, Douglas Blantz and Kenneth Merkt
in connection with the reverse merger of Creditco into Tarcyn.

         In May 1999,  MerchantOnline.com  sold 25,000  shares to an  accredited
investor for $1.00 per share.

         In September  1999,  MerchantOnline.com  issued an aggregate of 500,000
shares of common stock to three parties in connection with the  restructuring of
its  marketing  agreement  with Pagan Lewis Motors and an  additional  1,000,000
shares of common  stock to a software  developer in exchange  for  services.  An
additional  aggregate of 1,500,000 shares was issued to two consulting firms for
services rendered.

                                       16
<PAGE>

         From September 1999 through January 2000,  MerchantOnline.com issued an
aggregate of 900,000 shares of common stock to 12 accredited investors in a Rule
506 private offering.

         Effective November 30, 1999  MerchantOnline.com  issued an aggregate of
2,000,000  shares  of  common  stock  in  connection  with  its  acquisition  of
Approve.net, Inc.

         In December  1999,  MerchantOnline.com  issued an  aggregate of 490,000
warrants to purchase  common stock to Swartz  Private  Equity LLC in  connection
with the execution of a letter of intent with respect to financing.

         From September through December 1999, an aggregate of 2,580,000 options
to purchase stock have been granted to seven employees and two consultants.

         In  January  2000,  MerchantOnline.com  issued an  aggregate  of 85,000
shares of common stock upon the conversion of outstanding convertible notes held
by two accredited investors.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The  following   discussion   should  be  read  in   conjunction   with
MerchantOnline.com's  audited  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,  MerchantOnline.com  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 MerchantOnline.com,  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  MerchantOnline.com'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,  MerchantOnline.com.
MerchantOnline.com   disclaims  any   obligation  to  update   forward   looking
statements.

         MerchantOnline.com, f/k/a Tarcyn Corporation 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,  MerchantOnline.com
undertook a 3.5 - 1 forward split of its issued and outstanding common stock and
thereafter,  MerchantOnline.com  acquired  all of  the  issued  and  outstanding
securities  of CreditCo,  Inc. in exchange for  15,750,000  "restricted"  common
shares of MerchantOnline.com.  As a result, MerchantOnline.com was the surviving
entity.  As part of the terms of the aforesaid  transaction,  MerchantOnline.com
amended its articles of incorporation, changing its name to its present name, as
well as reincorporating in the State of Florida.

                                       17
<PAGE>


         MerchantOnline.com's   principal  business  is  to  provide  a  diverse
selection  of services  which it has  developed to allow  Internet  merchants to
quickly and easily  establish a method of  conducting  business on the  Internet
with  a   minimal   initial   investment   and  with  low   transaction   costs.
MerchantOnline.com  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  or  e-commerce  provided  by  MerchantOnline.com
include allowing merchants to accept credit cards, debit cards and online checks
from   customers   in   a   secure,    technologically   advanced   environment.
MerchantOnline.com 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 MerchantOnline.com's revenues have been generated from
credit card transactions and set up fees.

         MerchantOnline.com  has  developed  proprietary  real-time  credit card
processing programs which it calls MOL E-CHARGE, 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.  MerchantOnline.com  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.

RESULTS OF  OPERATIONS  FOR THE YEAR ENDED  OCTOBER 31, 1999 AND THE PERIOD FROM
NOVEMBER 20, 1997 (INCEPTION) TO OCTOBER 31, 1998

         During   the   year   ended    October   31,   1999   (fiscal    1999),
MerchantOnline.com's revenues were $204,106, compared to $168,748 for the period
from November 20, 1997  (inception)  to the period ended October 31, 1998.  This
increase was attributable to the growth of  MerchantOnline.com's  business. Cost
of revenue  was  $111,064  for fiscal  1999,  compared to $43,074 for the period
ended October 31, 1998.  Gross margins  decreased from 74% in fiscal 1998 to 46%
for fiscal 1999 due to competitive  pressures in the marketplace  which required
MerchantOnline.com  to lower its  initial  setup  fees and  monthly  maintenance
charges to its customers.

         During the year ended  October 31, 1999,  sales and  marketing  expense
totaled  $1,296,774,  compared to $143,964 in the period ended October 31, 1998.
The large increase was due to $765,000  expensed for sponsorship of a car-racing
team. General and  administrative  expense for fiscal 1999 was $721,023 compared
to $195,853 for the period ended  October 31, 1998.  General and  administrative
expense  increased during the year ended October 31, 1999 compared to the period
ended  October 31, 1998 as a result of  MerchantOnline.com  moving its principal
place of business to a larger facility in order to accommodate the growth of the
business and salaries of  MerchantOnline.com's  increased  number of  employees.
MerchantOnline.com retained nine separate independent contractors in fiscal 1999
who provided  MerchantOnline.com with technical support,  website design, public
relations  and  marketing.  In fiscal 1999,  there was also  $325,000 of noncash
compensation   due  to  stock   issuances   for   services.   In   fiscal   1999
MerchantOnline.com also recognized

                                       18
<PAGE>

a  settlement  expense of $455,000  relating to the  issuance of common stock to
satisfy certain advertising obligations.

         It is expected  that these  expenses  will  continue to increase in the
foreseeable  future by reason of  anticipated  expanded  volume of  transactions
processed by MerchantOnline.com and development of the swipe card business.

         As a result,  MerchantOnline.com  generated a net loss of  $(2,440,328)
during the year ended  October 31, 1999 ($.13 per share)  compared to a net loss
of $(225,332) for the period ended October 31, 1998 ($.01 per share).

LIQUIDITY AND CAPITAL RESOURCES

         At October 31, 1999, MerchantOnline.com had current assets of $5,148 in
cash, $1,472,500 in prepaid consulting services, $63,170 in prepaid advertising,
and $500,000 in deferred  advertising.  MerchantOnline.com  also had $914,184 in
property  and  equipment,  net of  depreciation.  Current  liabilities  included
accounts  payable of $263,808,  accrued  advertising  liabilities of $1,402,500,
accrued liabilities of $96,029, other liabilities of $226,564, and notes payable
of $330,000, of which $195,000 were satisfied subsequent to year end through the
issuance of 160,000 shares of common stock. As a result,  MerchantOnline.com had
a working capital deficit of $307,063.

         In May 1999,  MerchantOnline.com  entered into an agreement  with Pagan
Lewis Motors, Inc.(PLM) to purchase Internet advertising blocks and to sponsor a
car-racing  team with  Yahoo!.MerchantOnline.com  was required to make bi-weekly
payments but did not have  sufficient  cash.  An agreement  has reached with PLM
such that this  amount  would be paid in 12 monthly  installments,  starting  in
September 1999, and PLM would release the advertising on Yahoo! in amounts equal
to what the Company  has paid to PLM.  MerchantOnline.com  is not  current  with
these  payments  and  currently  has  a  verbal  agreement  to  restructure  the
arrangement such that accelerated  payments of $375,000 will be made in February
2000 and full  payment  will be made by  August  2000.  MerchantOnline.com  sold
approximately  $306,000  of this  advertising  in May  1999  and  has  collected
approximately  $216,000 of such amount. The $306,000 of sold advertising may not
be used until the buyer makes all of its payments and has  accordingly  recorded
this amount as a liability.

         During  the  year  ended  October  31,  1999,  MerchantOnline.com  used
$558,887  of cash in  operating  activities.  Net  cash  provided  by  financing
activities  was $585,534,  consisting of proceeds from notes and stock issued in
private placements.

         MerchantOnline.com  had five outstanding  notes payable,  including two
loans   from    affiliates,    including    one   note   to   Tarek    Kirschen,
MerchantOnline.com's  President, with an outstanding principal balance of $4,560
which bears interest at 1% per month on the outstanding balance and the other to
Steven Landau in the principal amount of $25,000,  which accrues interest at the
rate of 8% per annum and both are due on demand.  The Landau note was  converted
subsequent  to year end into  25,000  shares  of  common  stock.  The  remaining
outstanding  notes aggregate  $330,000 and are payable to minority  shareholders
pursuant to the same terms and conditions as Mr. Kirschen's loan.

                                       19
<PAGE>

         MerchantOnline.com  has operated with limited cash flow for the last 12
months and has  recognized  the need for additional  operating  capital.  In May
1999,  MerchantOnline.com  commenced a private offering of its common stock at a
price of $1.00 per share for aggregate  gross  proceeds of up to $2 million,  of
which an aggregate of 25,000  shares were sold. A second  offering for $2.00 per
share  commenced  in September  1999 which  raised an  aggregate  of  $1,800,000
through January 31, 2000. It is expected that the proceeds of this offering will
be utilized  primarily  for funding the  proposed  acquisition  and  operations,
advertising  MerchantOnline.com's services using electronic banners on the major
internet services, attendance of MerchantOnline.com at trade shows, research and
development,  and   repayment   of  debt.   In   addition,    in  January   2000
MerchantOnline.com  entered  into a  investment  agreement  with Swartz  Private
Equity LLC to provide up to $35 million of equity, as described below.

         In  January  2000,  Swartz  also  entered  into a letter  of  intent to
purchase  up to $3  million  of  common  stock in a private  placement  upon the
request of MerchantOnline.com  until such time as the registration statement for
this $35 million placement is effective.

         We have  incurred  operating  losses  for all  periods  from  inception
through October 31, 1999, and therefore have not recorded a provision for income
taxes.  We have  recorded a valuation  allowance  for the full amount of our net
deferred  tax assets,  as the  realizability  of the  deferred tax assets is not
currently predictable.

         Since MerchantOnline.com does not have a definitive alternate financing
arrangement in place in the event the proceeds from private  equity  financings,
described  above,  are not sufficient to fund its working  capital needs through
the date that cash proceeds would be available  under the investment  agreement,
described below,  there is substantial doubt about  MerchantOnline's  ability to
continue as a going concern.

CHANGES IN ACCOUNTING POLICIES

         In December 1999, the Securities and Exchange  Commission  staff issued
Staff  Accounting  Bulletin  (SAB) No. 101,  REVENUE  RECOGNITION  IN  FINANCIAL
STATEMENTS.  The SAB establishes certain criteria for net versus gross recording
of sales  transactions  and  requires  companies to comply with the SAB no later
than the first fiscal  quarter of the fiscal year  beginning  after December 15,
1999   and   to   retroactively    reclassify   for   all   periods   presented.
MerchantOnline.com  has decided to early adopt the SAB. Prior to  implementation
of the SAB,  MerchantOnline.com recorded gross revenues from customers that used
its merchant accounts and recorded corresponding  expenses, net of its fees, for
distribution to its customers.  The 1998 audited financial  statements have been
reclassified  to comply  with this SAB.  Revenues,  net  includes  approximately
$21,000  and  $25,700  for the year ended  October  31, 1999 and the period from
November 20, 1997 (inception) through October 31, 1998, respectively, related to
fees earned under these arrangements.

SEASONALITY

         Due to the methods in which MechantOnline.com charges its customers for
its  services,  there is not a significant  variation in the Company's  revenues
during the year.

                                       20
<PAGE>


SWARTZ INVESTMENT AGREEMENT

         OVERVIEW.  On January 5, 2000, we entered into an investment  agreement
with Swartz Private Equity,  LLC. The investment  agreement entitles us to issue
and sell, at our option,  our common stock for up to an aggregate of $35 million
from time to time during a three-year period commencing on the effective date of
a registration statement. This is also referred to as a put right.

         PUT RIGHTS.  In order to invoke a put right,  we must have an effective
registration statement on file with the SEC registering the resale of the common
shares which may be issued as a consequence of the invocation of that put right.
Additionally,  we must give at least ten but not more than twenty business days'
advance notice to Swartz of the date on which we intend to exercise a particular
put right and we must indicate the number of shares of common stock we intend to
sell to Swartz.  At our option, we may also designate a maximum dollar amount of
common stock (not to exceed $2 million)  which we will sell to Swartz during the
put and/or a minimum  purchase price per common share,  if applicable,  at which
Swartz may purchase shares during the put. The designated minimum purchase price
per common  share  shall be no greater  than 80% of the closing bid price of our
common stock on the advanced put notice date.  The number of common  shares sold
to Swartz in a given put may not exceed the lesser of:

    o    15% of the aggregate daily reported trading volume  (excluding  certain
         block  trades)  during  a  period  which  begins  on the  business  day
         immediately  following the day we invoked the put right and ends on and
         includes the day which is ten  business  days after the date we invoked
         the put right  (excluding  certain  days where the common  shares trade
         below a Company specified minimum price),

    o    the intended put amount,

    o    the number of our shares which when  multiplied  by the put share price
         equals $5 million,

    o    9.9% of our common stock outstanding upon completion of the put.

    o    For each  common  share,  Swartz  will pay us the  lesser of the market
         price for the  applicable  pricing  period,  minus $.10,  or 91% of the
         market price for the applicable pricing period. Market price is defined
         as the lowest  inter-day  trade price for the common  stock  during the
         applicable  pricing  period,  one of  which  is the ten  business  days
         following  the date  notice of the put was  provided  to Swartz and the
         other of which is the ten business  days  following  the first  pricing
         period. However, the purchase price may not be less than the designated
         minimum per share price, if any, that we indicated in our notice.

         WARRANTS.  We have  delivered  to Swartz  warrants to purchase  490,000
shares of our common  stock at anytime  for five years at an  exercise  price of
$1.93.  Within five business days after the end of the second pricing period for
each put, we are required to issue and deliver to Swartz a warrant to purchase a
number of shares of common  stock  equal to 10% of the common  shares  issued to
Swartz in the applicable  put. Each warrant will be exercisable at a price which
will  initially  equal  110% of the  average  closing  bid  price  for five days
immediately  preceding the put date.  The warrants will have  semi-annual  reset

                                       21
<PAGE>


provisions.  Each  warrant  will  be  immediately  exercisable  and  have a term
beginning on the date of issuance and ending five years thereafter.

         NON-USAGE FEE. On the last business day of each six-month period, if we
have not put  $1,000,000  of our stock to  Swartz,  we will be  required  to pay
Swartz a non-usage fee equal to the difference  between  $100,000 and 10% of the
aggregate put amounts to Swartz during such six month period.

         TERMINATION OF INVESTMENT AGREEMENT. We may also terminate our right to
initiate further puts or terminate the investment  agreement by providing Swartz
with notice of such intention to terminate;  however,  any such termination will
not affect any other rights or  obligations  we have  concerning  the investment
agreement or any related agreement.

         RIGHT OF FIRST REFUSAL. During the term of the investment agreement and
for 90 days after its termination, we are prohibited from issuing or selling any
capital  stock or  securities  convertible  into our  capital  stock for cash in
private  capital  raising  transactions,  without  obtaining  the prior  written
approval of Swartz  which  Swartz has agreed to not  unreasonably  withhold.  In
addition,  Swartz has the option for 10 days after receiving  notice to purchase
such  securities on the same terms and  conditions.  This right of first refusal
shall not apply to acquisitions, option plans or primary offerings of our common
stock.

         YEAR 2000 DISCLOSURE

         MerchantOnline.com  believes  that it is  Year  2000  compliant.  Costs
incurred in compliance were not material. Nonetheless we may experience material
unexpected  costs caused by undetected  errors or defects in the technology used
in our  systems or because of the  failure of a material  vendor to be Year 2000
compliant.

         Notwithstanding  our Year 2000  compliance  efforts,  the  failure of a
material system or vendor, or the Internet generally,  to be Year 2000 compliant
could harm the  operation of our systems or prevent or delay the delivery of our
service  being   offered,   or  produce  other   unforeseen   material   adverse
consequences.

         FACTORS THAT MAY AFFECT FUTURE RESULTS

         YOU  SHOULD  CAREFULLY  CONSIDER  THE  FOLLOWING  RISKS  IN  EVALUATING
MERCHANTONLINE.COM.  THE  RISKS  DESCRIBED  BELOW  ARE NOT THE ONLY ONES THAT WE
FACE. ADDITIONAL RISKS THAT WE DO NOT YET KNOW OF OR THAT WE CURRENTLY THINK ARE
IMMATERIAL  MAY ALSO IMPAIR OUR BUSINESS  OPERATIONS.  OUR  BUSINESS,  OPERATING
RESULTS OR FINANCIAL CONDITION COULD BE MATERIALLY  ADVERSELY AFFECTED BY ANY OF
THE FOLLOWING  RISKS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO
ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.  YOU SHOULD
ALSO REFER TO THE OTHER  INFORMATION  SET FORTH IN THIS  REPORT,  INCLUDING  OUR
FINANCIAL STATEMENTS AND THE RELATED NOTES.

         MERCHANTONLINE.COM  CAUTIONS READERS THAT CERTAIN IMPORTANT FACTORS MAY
AFFECT  MERCHANTONLINE.COM'S  ACTUAL  RESULTS AND COULD  CAUSE THOSE  RESULTS TO
DIFFER SIGNIFICANTLY FROM ANY FORWARD-LOOKING  STATEMENTS MADE IN THIS REPORT OR
OTHERWISE MADE BY OR ON BEHALF OF MERCHANTONLINE.COM.

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<PAGE>


WE ARE A NEW BUSINESS OPERATING IN A DYNAMIC BUT TOTALLY NEW MARKET AND HAVE NOT
YET SHOWN A PROFIT

         We  commenced  operations  in 1998  and we have not yet  operated  at a
profit.  Our limited  history and the lack of history  regarding  both  Internet
business and online credit card processing offers little information on which to
base projections of future profitability. Consideration should be given to risks
inherent to start up businesses and the volatility of emerging  technology.  Our
viability  will  depend on our  ability  to  anticipate  changes  in  e-commerce
technology  and avoid  the  pitfalls  associated  with new  businesses.  Ongoing
concerns include:

         o    The need to implement a sales and marketing strategy.

         o    The  need  to  obtain  and  maintain  a  strong  management  team.
              Management  must be decisive to realize  our growth  strategy  but
              flexible to deal with the tactical needs of a company competing in
              a constantly changing market place.

         o    Our ability to attract new customers.

         o    Our ability to implement new technologies.

         o    The need to assemble and maintain a programming staff.

         o    The need to keep our  system  compatible  with  computer  hardware
              advances without alienating our installed user base.

         o    The need to develop and manage strategic relationships to maximize
              public recognition of our products and services.

         o    The need to attract and maintain qualified employees.

         o    The need to raise additional capital if necessary.

If we do not succeed in  addressing  these risks,  our  business  will likely be
adversely affected.

WE MAY  CONTINUE TO  EXPERIENCE  LOSSES,  WHICH COULD  DECREASE THE VALUE OF OUR
STOCK

         As of October 31, 1999, we had an accumulated deficit of $2,665,660 and
losses have continued  since then.  Since we started our business,  our revenues
have been small  compared to our expenses.  Our ability to generate  significant
revenue remains  uncertain.  We expect to continue to incur operating  losses at
least through 2000, and perhaps for some time thereafter.  We may never achieve,
or be able to sustain, profitability.

         Our lack of an extensive  operating  history makes prediction of future
operating results difficult. As a result, you should not rely on the results for
any period as an indication of our future performance. There can be no assurance
that we will generate significant  revenues. We currently intend to increase our
operating expenses in order to implement  additional  e-commerce  services,  end

                                       23
<PAGE>


user technical support, advertising, and marketing services. As a result, we may
experience significant losses on a quarterly and annual basis.

THE FURTHER DEVELOPMENT OF A MARKET FOR OUR PRODUCTS IS UNCERTAIN

The market for our  services  is changing  and  evolving  rapidly as  e-commerce
business develops.  Our business growth is predicated upon growth of e-commerce,
since our current  business model is to receive  transaction  fees on e-commerce
transactions.  Aspects of Internet  commerce  including  security,  reliability,
cost,  ease of use,  and  quality of service,  are  ongoing  issues that must be
resolved to enable  Internet  business to  flourish.  There are also  continuing
infrastructure  concerns that could limit the bandwidth necessary to provide the
graphic and multimedia  interactive  content that Internet consumers expect from
Internet vendors. Additionally,  competitive pressures may make it difficult, or
impossible, for us to operate profitably. An increasing number of companies have
introduced or are developing  competing  products and services to enable payment
transactions over the Internet.

THE MARKET FOR OUR PRODUCTS AND SERVICES MAY NOT GROW FAST ENOUGH TO SUPPORT OUR
LEVEL OF INVESTMENT

Our growth depends upon acceptance of our products and services by a broad cross
section of the buying public and merchants which sell to these  customers.  This
is especially true of our e-charge service,  our primary e-commerce vehicle. The
success of this service  will depend on our ability to network  with  collateral
service vendors,  including merchant banks, developers of server and client side
software  applications,  and  shopping  cart  integrators,  to have the  service
accepted by Internet  merchants  as a means of buying and selling  goods via the
Internet. In addition, our ability to convince merchants to use our service will
depend on consumer  acceptance  of our interface and their trust of the Internet
in  general.  Our  failure  to  accomplish  these  goals,  or our  inability  to
accomplish  them in a  timely  manner,  would  have  an  adverse  effect  on our
business.

OUR QUARTERLY OPERATING RESULTS WILL VARY WIDELY

Our quarterly  operating results have varied and probably will continue to do so
because of circumstances beyond our control:

    o    Our setup fees have varied widely as market  conditions  have driven us
         to deeply  discount  our  services to compete  while  establishing  our
         market  share.  The timing of the  recognition  of fees  varies,  which
         contributes to quarterly  fluctuations  in revenues.  In addition,  our
         resellers often integrate our services with their e-commerce solutions.
         The realization of these income streams is therefore unpredictable.

    o    Our e-commerce  service is relatively  new, and the pricing  structures
         and timing of revenues is likewise unpredictable.

                                       24
<PAGE>


    o    In  addition,  as part of a long-term  strategy of forgoing  short-term
         gains, we may make pricing, marketing,  licensing or decisions that may
         adversely  affect our  quarterly  revenues or increase our costs in the
         short run.

    o    Extraordinary events such as litigation or acquisitions could adversely
         affect our operating results from one reporting period to the next.

For  these  reasons,  quarterly  results  will  not  necessarily  be a  reliable
indication   of   future   performance.   Because   of  all  of  the   foregoing
considerations,   it  is  likely  that  our  quarterly   operating  results  may
intermittently  be  below  the  expectations  of  market  analysts,   which  may
negatively affect the value of our common stock.

COMPETITION IS INTENSE

         We have  identified  at least  ten  companies,  many of which are still
relatively small, that provide real-time credit card processing on the Internet.
Currently, there are no providers of this service that are dominating leaders in
the market.  Large  organizations  that are  technology-  or  banking-based  are
entering the  industry.  Most of which offer credit card  processing as the core
service.  Many  offer  related  products  typically  by  partnering  with  other
companies to provide  services that the credit card  processor  does not provide
in-house.  Internet e-commerce is new, dynamic, and rapidly evolving.  We expect
competition  to intensify,  as the viability of Internet  business  becomes more
apparent to the buying public.

         Most of our competitors  have operating  histories,  name  recognition,
installed  customer  bases,  financial  resources,   technical  resources,   and
marketing  resources  that  exceed  ours.  Furthermore,  many  of our  potential
competitors,  including Microsoft,  have established  distribution channels that
they will undoubtedly use to bundle  competing  products.  If these  competitors
bundle  competing  products for their  customers,  it could adversely affect our
ability to market our services.

         Competition  could very well compel us to reduce prices.  Profitability
could  thus  only be  maintained  as a result  of an  increase  in  volume  or a
reduction of operating costs, which may not be feasible.

WE MUST ACHIEVE MARKET PENETRATION AND KEEP PACE WITH TECHNOLOGICAL ADVANCES

         Broad  acceptance  of our market  offerings  is critical to our success
because most of our revenues derive from one-time fees charged to customers.  In
addition,  our ability to realize revenues from our e-charge service will depend
on its acceptance by prominent  online  merchants.  One impediment to widespread
acceptance  is  that  standards  for  hardware,  data  transmission,   and  user
interfaces,   are  still  emerging.   As  a  result,   merchants  and  financial
institutions  have been slow to select which  service to use.  Until one or more
standards emerge,  our development plans must be contingent on a multiplicity of
possible standards.  Our technologies have not been accepted as standard.  To be
successful, we must obtain widespread acceptance of our technologies,  or modify
our products  and services to meet  whatever  industry  standards do  ultimately
develop. It is not certain that we will be able to do either.

                                       25
<PAGE>


WE MAY DAMAGE CUSTOMER RELATIONS IF WE EXPERIENCE  SOFTWARE DEFECTS OR DELAYS IN
PRODUCT DEVELOPMENT

         Internet  commerce  applications  are complex and rely on sophisticated
software,   technologically   advanced   hardware,   and  the   integration   of
often-incompatible  operating systems. For this reason, system development often
encounters   developmental  delays.  Software  may  contain  undetected  errors.
Systematic  failure may occur when  revisions are brought on line or when demand
for  services  increases.   We  may  experience   unanticipated  delays  in  the
development  of  our  software  or  implementation  on  systems  underlying  our
services. Despite testing by potential customers, and us it is possible that our
software may nevertheless  contain errors, and this could have an adverse effect
on our business.

WE MAY EXPERIENCE BREAKDOWNS IN OUR PAYMENT PROCESSING SYSTEM

         Our business systems depend on the smooth operation of computer systems
that may be  affected by  circumstances  beyond our  control.  Events that could
cause system interruptions are:

    o    Fire
    o    Earthquake
    o    Hurricane
    o    Power Loss
    o    Telecommunications Failure
    o    Unauthorized Entry or Other Events

         We have  established  two  separate  operations  centers in Florida and
California  that provide backup support for our services.  If one of these sites
should cease operations  because of a power outage,  fire, or natural  disaster,
the  others  should  be able to take over  with  only a  minimal  disruption  in
service. However, we have not been able to test the transfer of operations under
emergency  conditions,  and we  cannot  be  sure  that  the  transfer  would  be
successful.  In addition,  we have experienced  growing transaction volumes that
have  occasionally  exceeded our ability to process them. There is a possibility
that our existing systems may be inadequate if demand  increases  substantially.
Finally, although we back up data as a matter of course, and take other measures
to  protect  against  loss,  there is still some risk of such  losses.  A system
outage or data loss could adversely affect our business.

         Despite  the  security  measures  we  maintain,   our  systems  may  be
vulnerable to computer viruses,  hackers,  rogue employees or similar sources of
disruption.  Any  interruptions  in our operations could have a material adverse
effect on our business.  Any problem of this nature could result in  significant
liability  to  customers  or  financial  institutions  and may  deter  potential
customers  from using our  services.  We attempt to limit this sort of liability
through  back-up  systems,  contractual  provisions and insurance.  However,  we
cannot assure you that these contractual  limitations  would be enforceable,  or
that our insurance  coverage would be adequate to cover any liabilities we might
sustain.

                                       26
<PAGE>


OUR  RESULTS  MAY  SUFFER  IF WE ARE  UNABLE TO  ATTRACT  AND  RETAIN  QUALIFIED
MANAGEMENT AND TECHNICAL PERSONNEL

         Our  performance  is  dependent  on the  performance  of our  executive
officers and key employees. We depend on our ability to retain and motivate high
quality  personnel,  both management and technical.  We do not have "key person"
life insurance policies on any of our employees. The loss of the services of any
of our key  employees,  particularly  our founder and Chief  Executive  Officer,
Tarek Kirschen,  could have a material  adverse effect on us. Our future success
also depends on our continuing ability to identify, hire, train and retain other
highly  qualified  technical and  managerial  personnel.  Competition  for these
employees is intense and increasing.  We may not be able to attract,  assimilate
or retain qualified  technical and managerial  personnel in the future,  and the
failure of us to do so would have a material adverse effect on our business.

WE HAVE A LIMITED SALES FORCE AND OUR DISTRIBUTION CHANNELS ARE NEW

         We have only a limited  number of sales and  marketing  employees  and,
therefore,  we rely heavily on distribution  channels for sales of our products.
Because of the rapidly evolving nature of Internet business,  we are not certain
that the established distribution channels will be an adequate network for us to
achieve our goals, or that we will be able to develop alternative channels.

OUR COMPETITORS MAY DUPLICATE OUR PRODUCTS AND SERVICES

         Our success is somewhat  dependent on proprietary  technology.  We rely
primarily  on  copyright,   trade  secret  and  trademark  law  to  protect  our
technology. We intend to file patent applications on inventions that we may make
in the  future.  There can be no  assurance  that any of these  patents  will be
granted,  or that if granted such  patents  would  survive a legal  challenge to
their validity, or provide meaningful levels of protection.

MOST OF THE AGREEMENTS ARE SHORT TERM AND WE CAN LOSE CLIENTS

         Our standard  customer  agreement are  short-term and can be terminated
without cause by the either party. We expect that there will be terminations and
non-renewals  from  time to time and that we may not be able to  replace  all of
these  clients.  Our  financial  performance  could be damaged by a  significant
number of terminations or non-renewals.

WE MAY HAVE DIFFICULTY IN MANAGING GROWTH

         We expect to  experience  rapid  growth and  change due to our  planned
growth, which will place a significant strain on our working capital,  personnel
and  other  resources.  There  can be no  assurance  that  we  will  be  able to
successfully implement our business strategy,  that our operations will generate
sufficient cash flow, or that adequate financing will be available on acceptable
terms to fund continuing  growth,  or that management will  successfully  manage
continued growth.  The failure to manage growth  effectively may have a material
adverse effect on our business, financial condition and results of operations.

                                       27
<PAGE>


WE INTEND TO ACQUIRE  VARIOUS  COMPANIES,  WHICH  WILL  SUBJECT US TO ALL OF THE
RISKS ASSOCIATED WITH A GROWING COMPANY.

         We will use a portion of the net proceeds from our private offering and
future financings to acquire healthcare and e-commerce businesses.  There can be
no assurance that suitable  acquisitions  will be available or that acquisitions
can be  negotiated  on  acceptable  terms,  or that the  operations  of acquired
businesses can be integrated  effectively  into our operations.  Competition for
suitable  acquisition  candidates  is  expected  to be  intense  and many of our
competitors  will have greater  resources than we have. Our failure to implement
our acquisition  strategy could have a material  adverse effect on our financial
performance  and,  moreover,  the attendant risks of expansion could also have a
material adverse effect on our business.

WE ARE  DEPENDANT ON THE  CONTINUED  GROWTH OF THE  INTERNET AS A  COMMUNICATION
MEDIUM AND AS A VEHICLE FOR COMMERCE

          Use of the  Internet  by  businesses  and  consumers  as a medium  for
commerce  is at an early  stage  of  development.  It is  therefore  subject  to
uncertainty. E-commerce is a relatively recent development. We cannot be certain
that  acceptance  and use of the  Internet  will  continue  to develop or that a
sufficiently  broad base of merchants and consumers will adopt,  and continue to
use, the Internet to exchange goods and services.

         The  development of the Internet as a commercial  marketplace may occur
more slowly than anticipated. Factors influencing its growth include development
of the necessary network infrastructure and associated  technologies.  Delays in
the  development  or adoption of new standards and protocols  required to handle
increased  levels of Internet  activity  could also have a  detrimental  effect.
These factors could result in slower response times or adversely affect usage of
the  Internet,  resulting  in  lower  numbers  of  e-commerce  transactions  and
decreased demand for our services.

INTERNET  TECHNOLOGY IS RAPIDLY  CHANGING,  AND WE MUST ADAPT QUICKLY TO COMPETE
EFFECTIVELY

         The market for Internet products and services is in a constant state of
flux,  characterized by rapid  technological  developments and changing industry
standards.  New products are introduced constantly as bandwidth becomes cheaper.
As Internet  access  becomes more widely  available,  we may be required to make
significant  changes to the design and  content of our  products  and  services.
Failure to effectively  adapt to these or any other  technological  developments
could adversely affect our business, operating results and financial condition.

WE MAY NOT BE ABLE TO PROTECT  OUR  TRADENAMES  AND  DOMAIN  NAMES  AGAINST  ALL
INFRINGERS,  WHICH COULD  DECREASE  THE VALUE OF OUR BRAND NAME AND  PROPRIETARY
RIGHTS.

         We currently hold the Internet domain name "merchantonline.com" as well
as various  other  related  names and we use  "MerchantOnline"  as a  tradename.

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<PAGE>


Domain  names  generally  are  regulated by Internet  regulatory  bodies and are
subject to change and may be superseded,  in some cases, by the laws,  rules and
regulations  governing the  registration  of tradenames and trademarks  with the
United States  Patent and Trademark  Office and certain other common law rights.
In the event, the domain registrars are changed,  new ones are created or we are
deemed to be  infringing  upon  another's  tradename or  trademark,  we could be
unable to prevent third parties from acquiring or using, as the case may be, our
domain name,  tradenames or trademarks  which could  adversely  affect our brand
name and other proprietary rights.

OUR LIMITED  MARKETING AND SALES  RESOURCES  COULD  PREVENT US FROM  EFFECTIVELY
MARKETING OUR PRODUCTS AND SERVICES.

         We have limited  internal  marketing and sales resources and personnel.
In order to market any products  and  services we may  develop,  we will have to
develop a marketing and sales force with  technical  expertise and  distribution
capability (or outsource such duties to independent  contractors).  There can be
no  assurance  that  we  will  be  able  to  establish  sales  and  distribution
capabilities or that we will be successful in gaining market  acceptance for any
products or services we may develop.  There can be no assurance  that we will be
able to  recruit  and  retain  skilled  sales,  marketing,  service  or  support
personnel,  that  agreements  with  distributors  will  be  available  on  terms
commercially  reasonable  to us,  or at all,  or that our  marketing  and  sales
efforts will be successful.  Failure to  successfully  establish a marketing and
sales  organization,  whether  directly or through third  parties,  would have a
material adverse effect on our business,  financial  condition,  cash flows, and
results of  operations.  To the extent  that we  arrange  with third  parties to
market our products or services,  the success of such  products and services may
depend on the efforts of such third parties.  There can be no assurance that any
of our proposed marketing schedules or plans can or will be met.

WE MAY NOT BE ABLE TO PROTECT  OUR  PATENTS AND  PROPRIETARY  TECHNOLOGY,  WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

         Our  ability to compete  effectively  in the  e-commerce  industry  may
depend on our success in  developing  and  marketing  our  products and services
and/or  acquiring  other suitable  e-commerce  businesses  and protecting  their
proprietary  technology,  both in the  United  States  and  abroad.  The  patent
positions of technology  companies  generally  involve complex legal and factual
questions.  There can be no assurances that any patent that we apply for will be
issued,  or that any patents  issued  will not be  challenged,  invalidated,  or
circumvented, or that the rights granted thereunder will provide any competitive
advantage.  We may incur  substantial  costs in defending  any patent or license
infringement suits or in asserting any patent or license rights, including those
granted  by third  parties,  the  expenditure  of which we might  not be able to
afford.

         Although we have and will  continue to enter into  confidentiality  and
invention  agreements  with  our  employees  and  consultants,  there  can be no
assurance  that  such  agreements  will  be  honored  or that we will be able to
adequately  protect our rights to our  non-patented  trade secrets and know-how.
Moreover,  there can be no assurance that other individuals or entities will not
independently  develop  substantially  equivalent  proprietary  information  and
techniques  or  otherwise  gain  access to our trade  secrets and  know-how.  In
addition,  we may be required to obtain licenses to patents or other proprietary

                                       29
<PAGE>


rights from third parties.  There can be no assurance that any licenses required
under any patents or  proprietary  rights would be made  available on acceptable
terms,  if at all. If we do not obtain  required  licenses,  we could  encounter
delays in product development or find that the development, manufacture, or sale
of products requiring such licenses could be foreclosed.

OUR STOCK PRICE IS EXTREMELY VOLATILE

         The trading  price of our common  stock has been,  and in the future is
expected to be, volatile and we expect to experience further market fluctuations
as a result of a number of factors.  These factors include,  but are not limited
to,  current and  anticipated  results of  operations  as well as changes in our
business,  operations or financial results,  the timing of sales of common stock
by selling shareholders, prospects of general market and economic conditions and
other factors.

WE DO NOT ANTICIPATE PAYING DIVIDENDS

         We have never paid any cash dividends on our common stock and we do not
anticipate paying cash dividends on our common stock in the foreseeable  future.
The future payment of dividends is directly  dependent upon our future earnings,
capital requirements,  financial requirements and other factors to be determined
by our Board of Directors.  For the foreseeable  future,  it is anticipated that
earnings,  if any, which may be generated  from our  operations  will be used to
finance  our  growth,  and  that  cash  dividends  will  not be paid  to  common
shareholders.

SHARES OF OUR COMMON STOCK THAT MAY BE SOLD IN THE FUTURE

         Of the  23,860,000  shares of our  common  stock  currently  issued and
outstanding, approximately 21 million shares are "restricted securities" as that
term is defined  under the  Securities  Act and may only be sold  pursuant to an
effective  registration statement under the Securities Act or in compliance with
Rule 144 under the Securities Act or other exemption from registration. Rule 144
provides that a person  holding  restricted  securities for a period of one year
may sell such  securities  during  any  three-month  period,  subject to certain
exceptions,  in  limited  amounts.  Future  sales of shares  of common  stock by
existing  shareholders  under  Rule 144 could  materially  adversely  affect the
market price of our common  stock.  We cannot  predict the effect,  if any, that
market sales of common stock or the  availability of such shares for future sale
will have on the market price of the common stock prevailing from time to time.

WE MAY USE PREFERRED STOCK TO RESIST TAKEOVERS

         Our Articles of Incorporation  authorize 25,000,000 shares of preferred
stock, none of which are issued and outstanding.  As provided in our Articles of
Incorporation, preferred stock may be issued by our Board of Directors from time
to time  without  any  action of the  shareholders.  The Board of  Directors  is
empowered, without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting  power or the right of the  holders of our common  stock.  The  preferred
stock  could  be  utilized,   under  certain  circumstances,   as  a  method  of
discouraging,  delaying or  preventing a change in control.  Although we have no

                                       30
<PAGE>


present intention to issue any additional  shares of preferred stock,  there can
be no assurance that we will not do so in the future.

OUR COMMON STOCK IS TRADED ON THE OTC BULLETIN BOARD

         Our common stock is currently  traded on the OTC Bulletin  Board and is
not  listed  for  trading  on the Nasdaq  system.  An issuer  must meet  certain
quantitative  criteria relating to its total assets, its capital and the trading
prices of its securities to be included on the Nasdaq system.  In addition,  the
Nasdaq staff may consider other factors, such as the issuer's management and the
circumstances  surrounding the issuer's operations,  when determining whether to
approve an issuer's application for inclusion in the Nasdaq system. We intend to
apply for Nasdaq when we meet the listing criteria. We cannot guarantee you that
we will ever by listed.  As a result,  you may find it more difficult to dispose
of, or to obtain adequate quotations as to, the prices of the common stock.

WE HAVE NEVER FILED A REGISTRATION STATEMENT

         We have never filed a  registration  statement  with the SEC and cannot
assure you that once filed, that it we be declared  effective on a timely basis,
which  would  not  permit  us to  exercise  Puts  under  the  Swartz  Investment
Agreement.

ITEM 7.  FINANCIAL STATEMENTS

         The Financial Statements are located after the signature page.

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

         On   January   19,   2000,    Millward   &   Co.   was   dismissed   as
MerchantOnline.com's    principal    accountant.    Millward   had   served   as
MerchantOnline.com's principal accountant since October 1, 1998.

         The report of Millward on MerchantOnline.com's financial statements for
the past fiscal year ended  October 31, 1998 did not contain an adverse  opinion
or a disclaimer  of opinion and was not  qualified or modified as to audit scope
or accounting principles.  The report however, was modified as to an uncertainty
of MerchantOnline.com's ability to continue as a going concern.

         In connection with the audit of the 1999 financial statements, Millward
did not commence any audit  procedures  and there are no  disagreements  between
MerchantOnline.com  and  Millward  for the  period  since it was  engaged as the
auditor,  on any  matters of  accounting  principles  and  practices,  financial
statement disclosure,  or auditing scope and procedure which, if not resolved to
the  satisfaction  of Millward,  would have caused Millward to make reference to
the matter in their report.

         MerchantOnline.com  requested  Millward  to  furnish  it with a  letter
addressed to the  Securities  and  Exchange  Commission  stating  whether or not
Millward  agrees with the statements made by  MerchantOnline.com  in response to
this  Item 4 and,  if not,  stating  the  respects  in which it does not  agree.
MerchantOnline.com  delivered  a copy of its  Form 8-K  report  to  Millward  on
January 19, 2000.

                                       31
<PAGE>

         On January 24, 2000  MerchantOnline's  engaged Ernst & Young LLP as its
independent  public  accountant  for the fiscal year ended October 31, 1999. The
decision  to  change  accountants  was  approved  by  MerchantOnline's  Board of
Directors.

                                       32
<PAGE>


PART III

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

         The following  table sets forth the names,  ages and positions held for
MerchantOnline.com's directors, executive officers and significant employees.

--------------------------------------------------------------------------------
NAME                   AGE  POSITION
--------------------------------------------------------------------------------
Tarek Kirschen         38   President and Chief Executive Officer and Director

Jim Gitney             44   Chief Operating Officer

Angel Rodriguez        50   Vice President/ Credit/Debit Card Operations

SIGNIFICANT EMPLOYEES

Donald Hughes          46   Vice  President  and Chief  Operations  Officer-West
                            Coast Technical Operations Center

Jim Terhune            32   Vice   President   of  IT   Development-West   Coast
                            Technical Operation Center

         TAREK S. KIRSCHEN has been President and Chief Executive  Officer since
February  1999.  Previously,  and since its  inception in November  1997, he was
founder and served as President and CEO of CreditCo, Inc.,  MerchantOnline.com's
predecessor  company.  Mr.  Kirschen  is  an  entrepreneur  with  experience  in
marketing and management of technology-based  companies. Prior thereto, from May
1997  through   November  1997,  Mr.  Kirschen  was  employed  as  President  of
Worldnetcard,  Inc.,  Ft.  Lauderdale,  Florida,  a company  which issued secure
credit  cards over the  Internet.  From January  1997  through  April 1997,  Mr.
Kirschen was  self-employed  as a consultant to Net-Tel,  Inc., Ft.  Lauderdale,
Florida, a long distance telephone reseller. From February 1993 through December
1996,  Mr.  Kirschen was Vice President of Marketing for Worldtel  Saver,  Inc.,
Miami,  Florida,  a company,  which sold pre-paid  telephone  calling cards. Mr.
Kirschen  is  a  member  of  the  FISPA  (Florida   Internet   Service  Provider
Association),  ISOC (The Internet  Society),  and is a trustee of the Boca Raton
Chamber of Commerce.

         JIM GITNEY has been Chief  Operating  Officer since January 2000.  From
1998 to 1999 he was vice  president of operations,  household  division and from
1997 to 1998 vice president outdoor manufacturing for Sunbeam Corporation.  From
1988  to 1996 he  held  several  management  positions  with  Black  and  Decker
including plant manager for its U.S. housewares division.  Prior to that he also
worked for  General  Electric  Company  for 10 years  including  as a manager of
production engineering for a manufacturing facility.

         ANGEL M.  RODRIGUEZ  has  been  Vice  President  of  Credit/Debit  Card
Operations since February 2000. He joined  MerchantOnline.com in January 1999 as
operations manager. Prior to joining MerchantOnline.com,  Mr. Rodriguez was Vice
President of Operations,  Latin America for MasterCard International for over 10
years.  Prior  to  MasterCard,  Mr.  Rodriguez  served  as a Vice  President  of
Security/Risk Management for Citicorp.

                                       33
<PAGE>


SIGNIFICANT EMPLOYEES

DONALD D. HUGHES has been the Vice President and Chief  Operations  Officer-West
Coast  Technical   Operations   Center  since  August  1999.  Prior  to  joining
MerchantOnLine.com.,   Mr.  Hughes  was  one  of  the  principal  developers  of
Approve.net, ChargeSolutions.com and CS-VPOS Payment Processing Software. Before
entering the  e-commerce  world,  Mr.  Hughes was an industry  leader and design
engineer for the security  market with  innovative  designs  including  advanced
vehicle security, bomb detection and surveillance devices for law enforcement.

JAMES  A.  TERHUNE  has been the Vice  President  of IT  Development-West  Coast
Technical    Operation    Center   since   August   1999.   Prior   to   joining
MerchantOnLine.com.,   Mr.  Hughes  was  one  of  the  principal  developers  of
Approve.net,  ChargeSolutions.com and CS-VPOS Payment Processing Software He was
also one of the creators of the acclaimed  IPOSS  Internet Point Of Sale payment
processing system used by many Internet  processing  centers.  His technical and
computer  sciences  background  extends  for 14  years,  including  Director  of
Technical Services positions, Software Engineering and the United States Navy in
Computer Sciences and Avionics.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         To  MerchantOnline.com's  knowledge,  based  solely  on a review of the
copies of such reports furnished to  MerchantOnline.com  and on  representations
that no other  reports were  required,  a Form 3 for Tarek  Kirschen and Stephen
Landau were not timely filed during fiscal 1999 as required  under Section 16(a)
of the Securities Exchange Act of 1934.

ITEM 10. EXECUTIVE COMPENSATION

         The   following   table   summarizes   all   compensation   accrued  by
MerchantOnline.com    in   each   of   the   last   three   fiscal   years   for
MerchantOnline.com's  chief executive  officer and each other executive  officer
serving  as such whose  annual  compensation  exceeded  $100,000.  Directors  of
MerchantOnline.com do not receive compensation for serving in such capacity.

                                                                      Long Term
                                 Annual Compensation                Compensation
  Name and                       -------------------                ------------
  Principal Position       Year    Salary($)(1)(2)    Bonus  Other     Options
  -----------------------  ----  -------------------  -----  ------ ------------

  Tarek Kirschen,          1999         $92,912          0   $6,600        0
  President                1998         $52,000          0   $6,600        0

EMPLOYMENT AGREEMENTS

         In December 1999,  MerchantOnline.com and Tarek Kirschen entered into a
new five-year  employment  agreement  effective  January 1, 2000.  The agreement
provides  for a base  salary of  $250,000  per year,  periodic  bonuses  and the
granting of 1,500,000  options to purchase common stock,  which have an exercise
price of $2.00  per  share  and vest  over the  five-year  term.  The  agreement
provides for additional payments upon a change of control or termination without
cause.

                                       34
<PAGE>

MerchantOnline  is preparing a three year  employment  agreement  for Jim Gitney
that will provide for a base salary of $125,000 per year,  periodic  bonuses and
the granting of 300,000  options to purchase common stock with an exercise price
of $10.00  per share  which  was the price on his first day of  employment.  The
agreement  provides  for  additional  payments  upon  a  change  of  control  or
termination without cause.

CONSULTING AGREEMENTS

         In December 1999, MerchantOnline.com entered into a one-year consulting
agreement  with  Robert  Hausman  providing  for an annual fee of  $125,000  and
options to purchase  300,000  shares of common  stock with an exercise  price of
$1.87 per share.

         In September 1999, MerchantOnline.com entered into a one-year financial
consulting  agreement with Excel  Communications  providing for  compensation of
1,000,000 shares of restricted common stock and a one-year financial  consulting
agreement with SBZ Investments  providing for  compensation of 500,000 shares of
restricted common stock.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         As of January 31,  2000 there were  23,860,000  shares of common  stock
issued and  outstanding.  The  following  table sets  forth,  as of the close of
business on January 31, 2000 (a) the name,  address and number of shares of each
person known by MerchantOnline.com to be the beneficial owner of more than 5% of
our  common  stock and (b) the  number of shares  owned by each  director,  each
director nominee and all officers and directors as a group,  together with their
respective percentage holdings of such shares before and after the exchange:

   Name of Beneficial Owner         Number of Shares         Percentage of Class
   ------------------------         ----------------         -------------------

   Tarek Kirschen                      9,450,000 (1)                 39.6%

   Stephen Landau                      4,725,000                     19.8%
   5440 Little Neck Pkwy
   Little Neck, N.Y.  11362

(1) Does not include options to purchase up to 1,500,000  shares of common stock
not currently exercisable.

                                       35
<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Prior  to  the  merger  with  MerchantOnline.com,  Creditco  had  three
shareholders.  Tarek Kirschen owned 60% of the  outstanding  shares,  Doug Blanz
owned 35%, and Kenneth Merkt owned 5%. In a private transaction, Stephen Landau,
who is the father in law of Tarek Kirschen,  acquired a 30% interest in Creditco
from Doug Blanz, who retained a 5% interest in Creditco.

         MerchantOnline.com  has five outstanding  notes payable,  including two
loans   from    affiliates,    including    one   note   to   Tarek    Kirschen,
MerchantOnline.com's  President, with an outstanding principal balance of $4,560
that bears interest at 1% per month on the outstanding balance, and the other to
Steven Landau in the principal amount of $25,000,  which accrues interest at the
rate of 8% per annum  and is due on  demand.  The  remaining  outstanding  notes
aggregate $330,000 and are payable to minority shareholders pursuant to the same
terms and conditions as Mr. Kirschen's loan.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits

2.4      Agreement and Plan of  Reorganization  between  MerchantOnline.com  and
         Creditco,  Inc. are hereby  incorporated  by reference to the Report on
         Form 8-K as filed  with  the  Securities  and  Exchange  Commission  on
         February 24, 1999.

2.5      Merger   Agreement  dated  as  of  November  30,  1999,  by  and  among
         Approve.net,  Inc., a California  corporation,  Kim Wilson, Jim Terhune
         and Vince  Mazziotti  and  MerchantOnline.com,  Inc.,  incorporated  by
         reference to the Form 8-K filed January 19, 2000

3.1      Articles   of   Incorporation   and   Amendments   thereto  are  hereby
         incorporated  By reference to the report filed by Tarcyn Corp.  on Form
         10-SB with the Securities and Exchange Commission on May 27, 1997.

3.2      Bylaws are hereby  incorporated  by  reference  to the report  filed by
         Tarcyn  Corp.  on  Form  10SB12G  with  the   Securities  and  Exchange
         Commission on May 27, 1997.

3.3      Articles of  Incorporation  reincorporating  MerchantOnline.com  in the
         State of Florida are hereby  incorporated by reference to the Report on
         Form 8-K as filed  with  the  Securities  and  Exchange  Commission  on
         February 24, 1999.

3.4      Certificate of Designation for Series A Preferred Stock incorporated by
         reference  to the Report on Form 8-K as filed with the  Securities  and
         Exchange Commission on October 19, 1999.

10.1     Consulting Agreement with SBZ Investments, incorporated by reference to
         the Form S-8 filed December 23, 1999

                                       36
<PAGE>


10.2     Employment  Agreement between Don Hughes and  MerchantOnline.com,  Inc.
         dated August 1, 1999,  incorporated  by reference to the Form 8-K filed
         January 19, 2000

10.3     Employment Agreement between Jim Terhune and  MerchantOnline.com,  Inc.
         dated August 1, 1999,  incorporated  by reference to the Form 8-K filed
         January 19, 2000

10.4     Employment  Agreement  between Vince Mazziotti and  MerchantOnline.com,
         Inc. dated February 1, 2000,  incorporated by reference to the Form 8-K
         filed January 19, 2000

10.5     Employment  Agreement  between  Tarek  Kirschen and  MerchantOnline.com
         dated December 3, 1999.

10.6     Investment  Agreement  dated  January 5, 2000  between  Swartz  Private
         Equity LLC and MerchantOnline.com.

10.7     Registration  Rights  Agreement  dated  January 5, 2000 between  Swartz
         Private Equity LLC and MerchantOnline.com.

10.8     Form of Swartz Private Equity LLC Warrant

10.9     Consulting Agreement dated December 1, 1999 between  MerchantOnline.com
         and Robert Hausman

27.0     Financial Data Schedule

(b)      Reports on Form 8-K

         During the three  months  ended  October 31,  1999,  MerchantOnline.com
filed a Report on Form 8-K with the Securities and Exchange Commission

         On  October  19,  1999,  MerchantOnline.com  filed a Report on Form 8-K
disclosing  under Item 5 information  relating to the proposed  conversion  from
common stock to preferred stock by the two principal shareholders.

                                       37
<PAGE>


                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934, the Registrant has caused its Annual Report on Form 10-KSB to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                             MERCHANTONLINE.COM, INC.

Date: February 14, 2000                      By:  /s/ Tarek Kirschen
                                                  -----------------------------
                                                      Tarek Kirschen, President



         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated:

     SIGNATURE                   TITLE                         DATE
     ---------                   -----                         ----

/s/ TAREK KIRSCHEN        Chairman of the Board          February 14, 2000
------------------        President and Director
    Tarek Kirschen        (Chief Financial and
                          Accounting Officer)

                                       38
<PAGE>

                         Index to Financial Statements

Report of Independent Certified Public Accountants...........................F-2
Report of Independent Certified Public Accountants...........................F-3
Balance Sheet................................................................F-4
Statements of Operations.....................................................F-5
Statements of Shareholders' Equity...........................................F-6
Statements of Cash Flows.....................................................F-7
Notes to Financial Statements................................................F-9


                                      F-1
<PAGE>

               Report of Independent Certified Public Accountants

Board of Directors and Shareholders
MerchantOnline.com, Inc.

We have audited the accompanying balance sheet of MerchantOnline.com, Inc. as of
October 31, 1999 and the related statements of operation, shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MerchantOnline.com, Inc. at
October 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming
MerchantOnline.com, Inc. will continue as a going concern. As more fully
described in Note 2, the Company has sustained operating losses since inception
and had negative cash flow from operations of approximately $558,900 for the
year ended October 31, 1999 and negative working capital at October 31, 1999 of
approximately $307,063. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.



West Palm Beach, Florida                     /s/ ERNST & YOUNG, LLP
February 7, 2000

                                      F-2

<PAGE>
To the Stockholder
Creditco, Inc. d/b/a MerchantOnline.com, Inc.
Boca Raton, Florida


                   Report of Independent Certified Accountants

We have audited the statements of operation, and shareholders' equity
(accumulated deficit), and cash flows for the period from inception (November
20, 1997) to October 31, 1998 of Creditco, Inc. d/b/a MerchantOnline.com, Inc.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on those financial statements based
on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of Creditco, Inc. d/b/a MerchantOnline.com,
Inc. operations and its cash flows for the initial period then ended in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred a net loss
from operations of $225,332, and has a net capital deficiency of $175,332, and a
working capital deficiency of $162,732 as of October 31, 1998, which raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. Management's plans as to these matters are included
in Note 2.


/s/ MILLWARD & CO. CPAs
------------------------------
Millward & Co. CPAs
Fort Lauderdale, Florida
December 22, 1999


                                       F-3
<PAGE>

                            MerchantOnline.com, Inc.

                                 Balance Sheets

                                October 31, 1999


ASSETS
Current assets:
   Cash                                                           $     5,148
   Prepaid consulting services                                      1,472,500
   Prepaid advertising                                                 63,750
   Deferred advertising                                               500,000
                                                                  -----------
Total current assets                                                2,041,398

Property and equipment, net                                           914,184
Deferred advertising                                                  201,250
Other assets                                                            9,269
                                                                  -----------
Total assets                                                      $ 3,166,101
                                                                  ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                               $   263,808
   Accrued advertising liability                                    1,402,500
   Other accrued liabilities                                           96,029
   Notes payable                                                      270,000
   Note payable and convertible note payable to shareholders           29,560
   Convertible note payable                                            60,000
   Other liabilities                                                  226,564
                                                                  -----------
Total current liabilities                                           2,348,461

Commitments and contingencies

Shareholders' equity:
Preferred stock, $0.01 par value--25,000,000 shares authorized,
   no shares issued and outstanding                                        --
Common stock, $0.001 par value--100,000,000 shares authorized,
   21,025,000 shares issued and outstanding                            21,025
Additional paid-in capital                                          4,137,275
Subscriptions receivable                                             (675,000)
Accumulated deficit                                                (2,665,660)
                                                                  -----------
Total shareholders' equity                                            817,640
                                                                  -----------
Total liabilities and shareholders' equity                        $ 3,166,101
                                                                  ===========

SEE ACCOMPANYING NOTES.

                                      F-4
<PAGE>


                            MerchantOnline.com, Inc.

                            Statements of Operations


                                                       PERIOD FROM
                                                    NOVEMBER 20, 1997
                                       YEAR ENDED      (INCEPTION)
                                       OCTOBER 31,   TO OCTOBER 31,
                                          1999            1998
                                      ------------  -----------------

Revenues, net                         $    204,106    $    168,748

Costs and expenses:
   Cost of revenues                        111,064          43,074
   Sales and marketing                   1,296,774         143,195
   General and administrative              721,023         195,853
   Depreciation and amortization            30,649          11,958
   Interest expense                         29,924              --
   Other expenses--settlement              455,000              --
                                      ------------    ------------
Total costs and expenses                 2,644,434         394,080
                                      ------------    ------------

Net loss                              $ (2,440,328)   $   (225,332)
                                      ============    ============

 Net loss per share                   $       (.13)   $       (.01)
                                      ============    ============

Weighted average shares outstanding     18,223,249      15,750,000
                                      ============    ============

SEE ACCOMPANYING NOTES.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                                                    MerchantOnline.com, Inc.

                                               Statements of Shareholders' Equity


                                                          COMMON STOCK      ADDITIONAL                                TOTAL
                                                   ------------------------   PAID-IN    SUBSCRIPTIONS ACCUMULATED SHAREHOLDER'S
                                                      SHARES       AMOUNT     CAPITAL     RECEIVABLE     DEFICIT      EQUITY
                                                   ---------------------------------------------------------------------------
<S>                                                  <C>        <C>         <C>          <C>          <C>          <C>
Balance at November 20, 1997 (inception)             15,750,000 $    15,750 $    34,250  $        --  $        --  $    50,000
   Net loss                                                  --          --          --           --     (225,332)    (225,332)
                                                   ---------------------------------------------------------------------------
Balance at October 31, 1998                          15,750,000      15,750      34,250           --     (225,332)    (175,332)
   Issuance of stock in reverse merger                1,750,000       1,750      (1,750)          --           --           --
   Issuance of stock in a private placement              25,000          25      24,975           --           --       25,000
   Issuance of stock in settlement of advertising
     obligation                                         500,000         500     434,500           --           --      435,000
   Issuance of stock in exchange for consulting
     services                                         1,500,000       1,500   1,318,500           --           --    1,320,000
   Issuance of stock for web site development         1,000,000       1,000     849,000           --           --      850,000
   Issuance of stock in private placement               500,000         500     999,500     (675,000)          --      325,000
   Stock options granted to employees                        --          --      53,300           --           --       53,300
   Stock options granted to nonemployees                     --          --     425,000           --           --      425,000
   Net loss                                                  --          --          --           --   (2,440,328)  (2,440,328)
                                                   ---------------------------------------------------------------------------
Balance at October 31, 1999                          21,025,000 $    21,025 $ 4,137,275  $  (675,000) $(2,665,660) $   817,640
                                                   ===========================================================================

SEE ACCOMPANYING NOTES

                                      F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                     MerchantOnline.com, Inc.

                                     Statements of Cash Flows


                                                                                 PERIOD FROM
                                                                               NOVEMBER 20, 1997
                                                                   YEAR ENDED    (INCEPTION)
                                                                   OCTOBER 31,  TO OCTOBER 31,
                                                                     1999            1998
                                                                  ------------ -----------------
<S>                                                               <C>            <C>
OPERATING ACTIVITIES
Net loss                                                          $(2,440,328)   $  (225,332)
Adjustments to reconcile net loss to net cash
   used in operating activities:
     Depreciation and amortization                                     30,649         11,958
     Issuance of stock and stock options for services                 325,800             --
     Issuance of stock
        for settlement of advertising obligation                      435,000             --
     Changes in operating assets and liabilities:
       Accounts receivable                                             12,362        (12,362)
       Prepaid advertising                                            (63,750)            --
       Deferred advertising                                          (701,250)            --
       Other assets                                                    (2,704)        (6,565)
       Accounts payable                                               135,764        128,044
       Accrued advertising liability                                1,402,500             --
       Other accrued liabilities                                       96,029             --
       Other liabilities                                              211,041         15,523
                                                                  -----------    -----------
Net cash used in operating activities                                (558,887)       (88,734)

INVESTING ACTIVITY
Purchases of property and equipment                                   (23,998)       (82,793)
                                                                  -----------    -----------
Net cash used in investing activity                                   (23,998)       (82,793)

FINANCING ACTIVITIES
Proceeds from note payable                                            295,000             --
Proceeds from Convertible Note Payable                                     --         90,000
Proceeds from capital contributions                                        --         50,000
Proceeds from stock issued in private placements                      350,000             --
Borrowings from shareholder                                                --         34,026
Payments on note payable to shareholder                               (29,466)            --
Payments on convertible notes payable                                 (30,000)            --
                                                                  -----------    -----------
Net cash provided by financing activities                             585,534        174,026

                                      F-7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                      MerchantOnline.com, Inc.

                                Statements of Cash Flows (continued)


                                                                                     PERIOD FROM
                                                                                  NOVEMBER 20, 1997
                                                                      YEAR ENDED     (INCEPTION)
                                                                      OCTOBER 31,   TO OCTOBER 31,
                                                                         1999           1998
                                                                      ----------- -----------------
<S>                                                                        <C>            <C>
Net increase in cash                                                       2,649          2,499
Cash at beginning of the year                                              2,499             --
                                                                      ----------     ----------
Cash at end of the year                                               $    5,148     $    2,499
                                                                      ==========     ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest                                                $    3,503     $    3,106
                                                                      ==========     ==========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for development of web site                  $  850,000     $       --
                                                                      ==========     ==========

Issuance of common stock for prepaid consulting services              $1,515,000     $       --
                                                                      ==========     ==========

SEE ACCOMPANYING NOTES.

                                      F-8
</TABLE>
<PAGE>


                            MerchantOnline.com, Inc.

                          Notes to Financial Statements

        Year Ended October 31, 1999 and the Period from November 20, 1997
                         (inception) to October 31, 1998


1. NATURE OF BUSINESS

MerchantOnline.com, Inc. (f/k/a Creditco) (the Company) is a successor to Tarcyn
Corporation. Tarcyn Corporation was incorporated on March 13, 1993 under the
laws of the State of Colorado to engage in lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. Tarcyn had
been in the development stage since inception and had no operations prior to the
merger with MerchantOnline.com. As such, Tarcyn was defined as a "shell"
company, whose sole purpose at the time was to locate and consummate a merger or
acquisition with a private entity.

Effective February 16, 1999, Tarcyn acquired all of the issued and outstanding
securities of Creditco Inc. d/b/a MerchantOnline.com, for 15,750,000 shares of
"restricted" common stock of Tarcyn. Subsequent to the acquisition, Tarcyn
changed its name to MerchantOnline.com, Inc., changed its jurisdiction of
incorporation from Colorado to Florida and changed its fiscal year end from
March 31, to October 31 in order to coincide with the fiscal year end of
Creditco. (See Note 11)

The primary business of the Company is to provide real time processing of
eCommerce transactions by hosting a server that allows eBusinesses to execute
transactions such as online processing of credit cards, debit cards and online
checks over the Internet. The Company charges initial set-up fees and monthly
fees for these services. During the period from March 1998 through March 1999,
the Company also allowed merchants to use its merchant account for a percentage
of gross receipts plus transaction fees.

                                      F-9
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)

2.  MANAGEMENT'S PLANS AND ISSUES AFFECTING LIQUIDITY

The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has a limited operating history
and had sustained losses since inception. In addition the Company had negative
cash flow from operations of approximately $558,900 during the year ended
October 31, 1999 and had negative working capital of approximately $307,063 at
October 31, 1999. As a result, the Company had to rely principally on private
equity funding to continue its activities to date. The Company intends to
significantly increase its operational expenses in fiscal year 2000 to expand
its product offering and sales and marketing activities.

On January 5, 2000, the Company entered into an investment agreement for the
sale of up to $35 million of common stock upon the exercise of certain Put
Rights. The Put Rights become available upon the effectiveness of a registration
statement to be filed with the Securities and Exchange Commission to register
the stock that will be sold under the Agreement (See Note 12). Additionally, the
same investor has entered into a letter of intent to purchase up to $3 million
of common stock in a private placement upon the request by the Company, until
such time as the registration statement is effective. Also, subsequent to
October 31, 1999, and through February 7, 2000, the Company has received
approximately $1,475,000 in connection with private placements of its common
stock (see Note 11 and 12). Management intends to use these proceeds to fund its
operations and expansion.

Since the Company does not have a definitive alternative financing arrangement
in place in the event that the proceeds from private equity financings are not
sufficient to fund working capital needs through the effectiveness of the
registration statement described above, there is substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments to reflect the possible effects on the
recoverability and classification of liabilities that may result from the
outcome of this uncertainty.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets.

In March 1998, the AICPA issued Statement of Position (SOP) 98-1, ACCOUNTING FOR
THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. The

                                      F-10
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SOP requires capitalization of certain costs incurred in connection with
developing or obtaining internal use software. The Company has capitalized
$850,000 of web site development costs pursuant to this SOP, which is included
in property and equipment on the accompanying balance sheet.

REVENUE RECOGNITION AND PRESENTATION

Revenues from set-up fees are deferred and recognized on a straight-line basis
over a twelve-month period. Revenues from monthly fees, transaction fees and
commissions are recorded when earned.

In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS.
The SAB establishes certain criteria for net versus gross recording of sales
transactions and requires companies to comply with the SAB no later than the
first fiscal quarter of the fiscal year beginning after December 15, 1999 and to
retroactively reclassify for all periods presented. The Company has decided to
early adopt the SAB. Prior to implementation of the SAB, the Company recorded
gross revenues from customers that used its merchant accounts and recorded
corresponding expenses, net of its fees, for distribution to its customers. The
1998 audited financial statements have been reclassified to comply with this
SAB. Revenues, net includes approximately $21,000 and $25,700 for the year ended
October 31, 1999 and the period from November 20, 1997 (inception) through
October 31, 1998, respectively, related to fees earned under these arrangements.

ADVERTISING EXPENSE

The Company accounts for its advertising expense in accordance with SOP 93-7,
Reporting on Advertising Costs, which requires advertising costs to be expensed
as incurred or at the time of first showing. Advertising costs for the year
ended October 31, 1999 and the period from November 20, 1997(inception) through
October 31, 1998 were approximately $833,000 and $9,400, respectively.

Prepaid advertising relates to available Internet advertising blocks, which have
been prepaid by the Company. Deferred advertising relates to Internet

                                      F-11
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)

advertising blocks, which will become available to the Company upon the payment
of the Company's liability under an advertising agreement. (See Note 5)

LOSS PER SHARE

The Company computes loss per share pursuant to SFAS No. 128, EARNINGS PER
SHARE. Weighted average shares outstanding do not include any contingently
issuable shares. The dilutive effect of convertible debt has not been
considered, as its effect would be antidilutive.

                                      F-12
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)


STOCK-BASED COMPENSATION

SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, defines a fair value
method of accounting for issuance of stock options and other equity investments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service period,
which is usually the vesting period. Pursuant to SFAS No. 123, companies are
encouraged, but not required, to adopt the fair value method of accounting for
employee stock-based transactions. Companies are also permitted to continue to
account for such transactions under Accounting Principles Board (APB) Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, but are required to disclose
in a note to the financial statements pro forma net income amounts as if the
Company had applied the new method of accounting.

The Company accounts for employee stock-based compensation under APB No. 25 and
has complied with the disclosure requirements of SFAS No. 123.

INCOME TAXES

The Company accounts for income taxes under SFAS No. 109, ACCOUNTING FOR INCOME
TAXES. Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation allowance is recorded
when it is more likely than not that some portion or all of a deferred tax asset
will not be realized.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Management believes that the estimates utilized in preparing its financial
statements are reasonable and prudent; however, actual results could differ from
these estimates.

                                      F-13
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)


RECLASSIFICATION

Certain amounts in prior period's financial statements have been reclassified to
conform with the current year's presentation

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at October 31, 1999:

                                                USEFUL LIVES
                                                   (YEARS)
                                                ------------

         Furniture and fixtures                      5-7              $  12,636
         Computer hardware and software               3                  92,015
         Web-site development                         3                 852,140
                                                                      ---------
                                                                        956,791
         Less accumulated depreciation
            and amortization                                             42,607
                                                                      ---------
                                                                      $ 914,184
                                                                      =========

5. DEFERRED ADVERTISING AND ADVERTISING LIABILITY

In May 1999, the Company entered into an agreement with an unrelated party that
provided for the Company to receive advertising in the form of sponsorship of a
car-racing team and certain Internet advertising blocks for a $1,530,000 fee,
which was payable in bi-weekly installments beginning June 10, 1999. The Company
allocated $765,000 of the fee to the sponsorship and expensed this amount during
fiscal 1999 over the term of the sponsorship season. The Company has the right
to use the Internet advertising blocks through December 31, 2000. Accordingly,
the Company has recorded deferred advertising of $701,250 at October 31, 1999,
$500,000 of which is classified as a current asset and $201,250 is a long term
asset to be used in fiscal year 2001.

The Company did not make the payments as provided in the agreement and entered
into a workout agreement on September 8, 1999 in order to preserve its rights to
the Internet blocks and settle its remaining obligation under the agreement. The
settlement provided for the Company to:

                                      F-14
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)


(1) pay $20,000 in cash, (2) issue 500,000 shares of the Company's common stock
to the car-racing team and, (3) make monthly payments of approximately $127,500
for twelve consecutive months beginning on the September 1, 1999. In addition,
the President of the Company was required to place 500,000 of his shares of the
Company's common stock in escrow as collateral for the monthly payments. As of
October 31, 1999 the Company made only one monthly payment related to this
obligation. Currently, the Company has a verbal agreement to restructure the
arrangement such that certain accelerated payments of $375,000 will be made in
February 2000 and full payment will be made by August 2000.

The fair value of the shares issued in settlement on September 8, 1999 was
determined by management to be $435,000 and is recorded in other expenses -
settlement in the October 31, 1999 statement of operations. The Company has the
right to repurchase these shares any time prior to September 8, 2000 for $3 per
share.

On May 21, 1999, the Company entered into an agreement to sell approximately
$306,000 of the aforementioned Internet advertising blocks to an unrelated
party. As of October 31, 1999, the Company has collected approximately $216,000
pursuant to this agreement and has recorded this amount in other liabilities in
the accompanying balance sheet. The unrelated party does not have the right to
use this advertising until the $306,000 is paid in full. In the event that the
remaining amount is not received by the expiration of the Internet advertising
blocks in December 2000, the unrelated party will forego the right to use such
advertising.

6. NOTE PAYABLE

The Company had notes payable of $270,000 payable to several individuals at
October 31, 1999, bearing interest at 8% per annum. All of the notes payable
were due and payable prior to October 31, 1999. Subsequent to October 31, 1999,
the Company entered into an agreement with a note holder and issued 100,000
common shares in settlement of the outstanding obligation. (See Note 9)

The Company had a note payable of $60,000 bearing interest at 1% per month on
the monthly average outstanding balance. The note was due and payable in
December 1998. The note is convertible into common stock at $1 per share at the
option of the note holder. Subsequent to October 31, 1999, the note holder
converted the note to common stock.

                                      F-15
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)

Interest expense incurred on the aforementioned notes was approximately $26,400
for the year ended October 31, 1999. The Company did not incur any interest
charges during the period from November 20, 1997 (inception) through October 31,
1998.

7. NOTE PAYABLE AND CONVERTIBLE NOTE PAYABLE

At October 31, 1999, the Company had two notes payable to shareholders of
approximately $30,000 in the aggregate. The $25,000 note payable bears interest
at 8% per annum and was due and payable on December 31, 1999. The note and
related accrued interest were converted to 25,000 shares of common stock
subsequent to October 31, 1999. The other note of $4,560 bears interest at 1%
per month on the average monthly outstanding balance. The Company incurred
interest expense of $4,970 on these notes for the year ended October 31, 1999.

8. INCOME TAXES

The Company has not recorded a provision (benefit) for income taxes for the year
ending October 31, 1999 and the period from November 20, 1997(inception) through
October 31, 1998.

The significant components of the Company's net deferred income taxes as of
October 31, 1999 are as follows:

         Deferred tax assets:
            Nonqualified stock options                            $    58,784
            Accrued vacation                                           15,721
            Net operating loss carryforwards                          905,266
                                                                  -----------
                                                                      979,771
         Less valuation allowance                                    (976,376)
                                                                  -----------
         Total deferred tax assets                                      3,394

         Deferred tax liabilities:
            Fixed assets                                               (3,394)
                                                                  -----------
         Net deferred income taxes                                $        --
                                                                  ===========

                                      F-16
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)


The differences between the effect of applying the federal statutory income tax
rate and the effective income tax rate are summarized below:

                                                                 October 31,
                                                            --------------------
                                                              1999        1998
                                                           ---------   ---------
         Tax at federal statutory rates                       (34.00)%   (34.00)
         State income taxes, net of federal benefit            (3.52)%    (3.63)
         Nondeductible items                                    0.98%        --
         Change in valuation allowance                         36.54%     37.63
                                                           ---------   ---------
                                                                  --%        --%

SFAS 109  requires  a  valuation  allowance  to reduce the  deferred  tax assets
reported  if,  based on the weight of the  evidence,  it is more likely than not
that some portion or all of the deferred tax assets will not be realized.  After
consideration  of all the evidence both positive and  negative,  management  has
determined that a $975,376 valuation  allowance at October 31, 1999 is necessary
to reduce the  deferred  tax assets to the amount  that will more than likely be
realized.

The change in the valuation allowance for the year ended October 31, 1999 was an
increase of approximately $891,584 resulting primarily from net operating losses
generated during the period.

At October 31, 1999, the Company has  approximately  $2,405,702 in net operating
loss  carryforwards  for U.S. federal income tax purposes that expire in various
amounts through 2019.

9. COMMITMENTS AND CONTINGENCIES

The Company leases its office space under a month-to-month agreement. Rental
expense amounted to approximately $57,200 and $18, 600 for the year ended
October 31, 1999 and the period from November 20, 1997 (inception) to October
31, 1998, respectively.

The Company is involved in a litigation regarding an outstanding note payable
and is currently negotiating a settlement that is not expected to be materially
in excess of the amounts recorded as of October 31, 1999. This matter is not
expected to have a material adverse effect on the Company's financial position
or its results of operations.

                                      F-17
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)

10. STOCK OPTIONS

The Company granted stock options to certain employees during 1999. The stock
options are immediately vested and are exercisable over a three-year period at a
price of $0.50 per share. The fair value of the underlying stock on the grant
date exceeded the exercise price of all options; therefore, the Company recorded
compensation expense of approximately $53,300.

Pro forma information regarding net loss is required by SFAS No. 123 and has
been determined as if the Company has accounted for its employee stock options
under the fair value method of that statement. The fair value of outstanding
options was estimated at the date of grant using the Black Scholes method with
the following assumptions: expected volatility of 254%, risk-free interest rate
of 4.99%, no expected dividends; and weighted average expected life of the
options was three years.

The effect of applying the fair value method prescribed by SFAS No. 123 to the
Company's options results in pro forma net loss of $2,502,728 for the year ended
October 31, 1999.

No options were exercised or expired during 1999. A summary of the Company's
stock option activity and related information is as follows:

         Outstanding at beginning of year                         --
            Granted                                          630,000
            Forfeited                                             --
                                                         -----------
         Outstanding at end of year                          630,000
                                                         ===========

         Exercisable at end of year                          630,000
                                                         ===========

         Average fair value of options
            granted during the year                           $ 0.91
                                                         ===========

The average remaining contractual life of options outstanding at October 31,
1999 was 3 years.

11. COMMON STOCK

On February 16, 1999, pursuant to the terms of an agreement and plan of
reorganization, MerchantOnline.com undertook a 3.5 - 1 forward split of its
issued and outstanding common stock and thereafter, MerchantOnline.com acquired
all of the issued and outstanding securities of CreditCo, Inc. in exchange for
15,750,000 "restricted" common shares of MerchantOnline.com. As a result,
MerchantOnline.com was the surviving entity. This transaction has been accounted
for as a reverse merger with a nonoperating public "Shell".

On February 9, 1999, the shareholders of Tarcyn effectively received 1,750,000
shares of the combined company in exchange for the "shell" which had no net
monetary assets. Shareholders' equity has been retroactively restated to reflect
the effective recapitalization of the 15,750,000 shares of common stock.

During September 1999, the Company issued 1,500,000 of its common shares in
exchange for certain consulting services related to two contracts that extended
over twelve-month periods. The value of the services was determined based on the
fair value of the common shares, as determined by an independent appraisal, at
the date of the transactions. During 1999, the Company recorded approximately
$169,600 of expense and at October 31, 1999 $1,150,400 of prepaid consulting
services related to these transactions.

                                      F-18
<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)


On September 15, 1999, the Company issued 1,000,000 common shares to an
unrelated party in exchange for the development of a web site. The value of the
service was determined based on the fair value of the common stock, as
determined by an independent appraisal at the date of the transaction. The
Company recorded an asset of $850,000 in connection with this transaction.

The Company also issued 500,000 stock options to nonemployees during the year
for services. In accordance with SFAS No. 123, the Company estimated the value
of the stock options on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions; annual dividends of
$0.00, expected volatility of 254%, risk-free interest rate of 4.99%, and
expected life of three years for all grants. The weighted-average fair value of
the stock options granted during the year was $0.85.

In May 1999, MerchantOnline.com commenced a private offering of its common stock
at a price of $1.00 per share for aggregate gross proceeds of up to $2 million,
of which an aggregate of 25,000 shares were sold. A second offering for $2.00
per share commenced in September 1999 which raised an aggregate of $1,800,000
through January 31, 2000.

At October 31, 1999, the Company had a subscription receivable of approximately
$675,000 related to the September 1999 private placement.

At October 31, 1999, the Company had 630,000 shares of common stock reserved for
issuance for outstanding stock options.

                                      F-19

<PAGE>

                            MerchantOnline.com, Inc.

                    Notes to Financial Statements (continued)

12. SUBSEQUENT EVENTS

On December 3, 1999, the Company entered into an employment agreement with the
President of the Company. The agreement provides for annual compensation of
$250,000 and the issuance of 1,500,000 of stock options at an exercise price of
$2 per share, which vest over five years.

On December 6, 1999, the Company entered into a one year consulting agreement
that is renewable for one-year terms upon the mutual agreement of both parties.
The agreement pays compensation of $125,000 per year payable monthly.
Additionally, in connection there with, the Company has granted 300,000 stock
options at a exercise price of $1.87 per share.

On December 7, 1999, the Company sold 250,000 common shares in a private
placement transaction at $2 per share.

On January 5, 2000, the Company entered into an investment agreement that
entitles the Company to issue and sell, at its option, its common stock, under
certain Put Rights, for up to an aggregate of $35 million from time to time
during a three-year period, commencing on the effective date of a registration
statement.

In order to invoke a Put Right, the Company must have an effective registration
statement on file with the SEC registering the resale of the common shares which
may be issued as a consequence of the invocation of that Put Right. In
connection with this Agreement, the Company issued warrants to purchase 490,000
shares of common stock at $1.93 per share, which may be exercised anytime over a
five-year period. The invocation of a Put Right is subject to a predefined
formula. The agreement provides for the imposition of a nonusage fee, as
defined, if the Company does not put $1,000,000 of its common stock to the
investor within each six-month period.

On January 11, the Company entered into a letter of intent with the investor to
purchase up to $3 million of common stock in a private placement until such time
as the registration statement is effective.

On January 12, 2000, the Company entered into of letter on intent with a company
to purchase approximately 90% of the outstanding capital stock of a company in
exchange for cash and a predetermined amount of the Company's common stock. In
connection with the letter of intent, the Company paid a $50,000 nonrefundable
deposit.

On January 15, 2000, the Company acquired 100% of the common stock of
Approve.Net, Inc. for 2,000,000 shares of the Company's common stock.
Approve.Net, Inc. is engaged in the business of on-line credit card processing.

                                      F-20