UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 For the Fiscal Year Ended December 31, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 000-27715
MERCHANTPARK COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
Nevada 88-0441332
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2921 N. Tenaya Way, Suite 216, Las Vegas, NV 89128
(Address of principal executive offices) (Zip Code)
Issuers telephone no.: (702) 947-4877
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Check whether the issuer (1) filed all reports required to be filed in
Section 13 or 15(d) of the Exchange Act 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 in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State the issuers revenues for its most recent fiscal year. $ 153,284.00
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock as of a specified date within 60 days.
$525,000.00 (based on price of $0.15 per share as of February 26, 2002.)
State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date.
Class Outstanding as of December 31 2001
Common Stock, $.001 Par Value 18,160,400
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format. Yes [x] No [ ]
MERCHANTPARK COMMUNICATIONS
TABLE OF CONTENTS
PART I Page
Item 1. Description of Business 3-7
Item 2. Description of Property 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matter to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters 7-9
Item 6. Managements Discussion and Analysis or Plan of
Operation 9-12
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 12
PART III
Item 9. Directors, Executive Officers, Promoters and Control persons;
Compliance with Section 16(a) of the Exchange Act 12-15
Item 10. Executive Compensation 15-16
Item 11. Security Ownership of Certain Beneficial Owners and
Management 16-17
Item 12. Certain Relationships and Related Transactions 17
Item 13. Exhibits and Reports on Form 8-K 17-18
SIGNATURES S-1
PART I
This document includes statements that may constitute forward-looking statements
made pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. The Company would like to caution readers regarding certain
forward-looking statements in this document and in all of its communications to
shareholders and others, press releases, securities filings, and all other
communications. Statements that are based on managements projections, estimates
and assumptions are forward-looking statements. The words believe, expect,
anticipate, intend, and similar expressions generally identify forward-looking
statements. While the Company believes in the veracity of all statements made
herein, forward-looking statements are necessarily based upon a number of
estimates and assumptions that, while considered reasonable by the Company, are
inherently subject to significant business, economic and competitive
uncertainties and contingencies and known and unknown risks. Many of the
uncertainties and contingencies can affect events and the Companys actual
results and could cause its actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company.
Item 1. Description of Business
The Company was incorporated October 14, 1999 in the State of Nevada as
Westnet Communications Group, Inc., for the purpose of developing a special
interest worldwide web site as a development stage company. In mid 2000, the
Company realized it needed additional capital to further its business plan
either from sale of equities or an industry affiliate.
In February of 2001 the Company signed a Letter of Intent to acquire
Merchantpark Communications, Inc., a Nevada corporation. Merchantpark appeared
to have much larger capital availability and in the e-2b & e-2e business
solution business.
Westnet agreed to acquire Merchantpark with a Plan of Reorganization by
issuing 14,244,690 shares of common stock for the trade style and assets subject
to the liabilities of that company. Westnet issued 14,244,690 shares of common
stock to the shareholders of Merchantpark in exchange for 14,244,690 shares of
common stock Merchantpark had outstanding. The transaction was ratified by the
Westnet shareholders at a meeting on March 29, 2001. The Westnet name was
changed to Merchantpark Communications, Inc., at the same meeting. The stock was
issued on April 15, 2001. Pursuant to the reverse merger reorganization Westnet
was the legal survivor and Merchantpark was the accounting survivor. The
consolidated Companies filed the appropriate Forms 8-K, 8-KAs and subsequent
10-Qs for June 30 and September 30, 2001.
As of December 31, 2001 the Company has 18,160,400 shares of common stock
outstanding.
The Company owns two subsidiaries:
1. Merchantpark Communications.COM, a Delaware corporation. This Company was
originally designated to implement the business plan of Merchantpark
Communications. (currently inactive)
2. Caged Iron, Inc, a Nevada corporation. This Company provides various web
based services for individuals and corporations.
Product
The Company has developed a user friendly web application software brand
name Distribution 1. Distribution 1 is a web services delivery platform that
offers a variety of web-based Internet applications that can be personalized to
each individual client and is developed to work with any applications running on
any operating system. The web based operating system that is Distribution 1 is
available via any web-enabled device wired or wireless. The platform is fully
managed, brandable, cost-efficient and a therefore attractive feature urgently
required by service providers, who are currently struggling under severe
competitive pressures. Distribution 1 has been designed with an open
architecture to allow the technology the ability to easily integrate third-party
applications with any API (Application Program Interface) or through direct
software connection, a CRM system, and document manager are to be delivered as
standard applications. Merchantpark is currently working with several key
software developers to integrate unified communications, commerce, collaboration
and media streaming applications as well as many other web based applications
into Distribution 1. Merchantpark, in turn, manages all aspects of the platform,
including branding, provisioning, billing, support and training for its
partners.
Merchantpark Communication is a web services Delivery Company, a service
carrier in essence, that will deliver user-selected suite of applications to the
end user though a network of service providers and associations. The Company is
currently directing its efforts to co-inside with the expected rapid adoption of
Internet business application by North Americans approximately 50 million SMEs.
Targeting the large number of small businesses who have yet to fully utilize the
Internets efficiencies. Merchantpark enables select service providers,
communications providers and associations to offer Internet based business
applications under their own brand to their new and existing small and medium
enterprise clients.
Distribution 1 is a proprietary platform that delivers applications and
content through a series of dynamically created user-specific operating windows
or administration portals. SMEs that join the portal group are immediately given
a merchant administration portal (MAP), a demonstration of each available
solution, and a list of recommend services according to the needs of their
business. Merchantpark instantly delivers and provisions each user-requested
application to the MAP and bills the customer on a monthly and usage based term.
In visual terms, Merchantpark will act as a delivery funnel, aggregating
various disparate services and applications and funneling them though its
Distribution 1 application management platform and then delivering them through
trusted service providers and associations to the vast collection of their
existing SME clients.
Also, through their Caged Iron subsidiary the Company offers various web
based services. The Company offers web architecture, web site creation, web
support for clients, bandwidth. Caged Iron also offers comprehensive packages
for clients to help develop a brand on the internet. Caged Iron can take this
brand creation, develop the web based architecture, the web site design and
can support this platform through their professional services expertise.
Market
It is believed by IDC research that the US alone will see close to 210
million users by 2004, with Canada and parts of Europe rapidly catching up in
terms of proportionate population in Internet users. In all, according to
Deliotte Consulting, it is expected that the number of Web users will surpass
320 million worldwide by 2002. Because business is often at the forefront of
such change, it can be surmised that the online population of business users
will grow proportionately.
Converging with this trend are changes in the overall internet business
market. The majority of SMEs use client server software such as Microsoft
Officer, or Quickbooks but the more web-enabled Application Service Provider
(ASP) model has been evolving rapidly. Indeed, pioneers such as Merchantpark and
Microsoft have been concentrating heavily on the ASP model (.NET) and most other
software providers are moving to it as well.
However, business does not exist in isolation and like other parts of
society is increasingly going online. It has been estimated that nearly 50
percent of the US small businesses have some online capability, although for the
most part, it is merely for email and mild research purposes. At the same time
80 percent of small business owners say they do use the Internet to help their
companies grow. Only 21 percent of small businesses are connected on a regular
basis to the Internet and only 9 percent have their own web site. A mere 5
percent conduct sales online.
At the same tine, within the Internet and telecommunications realms in
general, there has been a convergence of services by larger service providers; a
tendency by service providers to add value (Telcos providing Internet access,
or financial services, for example); a move from the concept of free to pay
for play (payment for use of valued web services instead of free services
cluttered with banner ads); a trend among SMEs to retain the use of one trusted
provider for all business services; and a growing recognition that a mere
web-presence is not enough for most businesses. This trend along with the
continued movement of business to web based applications and services bodes very
well for companies positioned to capture this movement.
Marketing
The Company is in the process of developing a detailed tactical marketing
plan. The Companys marketing plan will consist of the following marketing at
tradeshows, presentation and direct email. All marketing development will take
place in-house.
The Company will take advantage of business partners and will likely
co-market through existing customers of the business partner, business partner
events and partner based web site advertising.
Merchantpark Communications, Inc. has key relationships with:
o Oracle, for use of Oracle Application Server and database
infrastructure.
o Sun Microsystems, for use of Sun Enterprise servers.
o Portal, for use of Portal infranet, the highest level of billing
management solutions available in the market today. Portal
infranet is the billing solution of choice for both AOL and Microsoft.
o CardService, for the use of their real-time payment solutions and
merchant services.
o 3com, for integration of their NBX 100 system into our call center.
Competition
Due to the emergence of the internet from free to pay to play in the post
boom climate currently existing, this is a very young sector. Therefore, in
managements opinion this is a very fractured but growing field. The competition
is starting to take notice of this transition the players that have seen this
trend early on in the post boom era and are developing an offering to allow the
SME market to transition their business to the web will capture the market and
prosper in the years to come.
Research and Development
The Company has completed beta testing of its Distribution 1 software which
became fully functional in the first quarter of
2002.
Patents and Trademarks
The Company has no trademarks in the United States or any other
jurisdictions. The Company has the Internet domain names of CagedIron.COM and
Merchantpark Communications.COM.
Employees
Currently the Company has 6 full time employees and 2 part time employees
in British Columbia, Canada. Management intends to hire additional consultants
only as needed and as funds are available. In such cases, compensation will be
consistent with prevailing wages for the services rendered. It is not
anticipated that the Company will have to increase payroll expenditures until
such time as revenues exceed $250,000 per month. The Company does not anticipate
in the immediate future to offer any employees a bonus profit sharing or
deferred compensation plan nor are there any employment contracts with any
director or employee. Management intends to hire additional qualified personal
as business conditions warrant. In addition to full time employees, the Company
may use the services for certain outside consultants and advisors as needed on a
contractual basis.
Item 2. Description of Property
The Company rents a 2,500 square foot project development and operation
office on a month to month lease for $500.00(US) per month. The office is
located at 318-1008 Homer Street, Vancouver, BC. The Company also maintains a
400 square foot office in Nevada located at 2912 N. Tenaya Way, Las Vegas, NV
89128 on a month to month basis for $200.00 (US) per month. The Company keeps
some of their servers and equipment at a data center at 851 Coho Way, Suite 205,
Bellingham, Washington 92226.
Item 3. Legal Proceedings
The Company is not subject to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year covered by this report, no
matters were submitted to a vote of security holders.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
As of December 31, 2001, no market information is available.
As of December 31, 2001, the Company had issued and outstanding 18,160,400
shares of common stock outstanding and there were approximately 103 shareholders
of record.
The ability of an individual shareholder to trade their shares in a
particular state may be subject to various rules and regulations of that state.
A number of states require that an issuers securities be registered in their
state or appropriately exempted from registration before the securities are
permitted to trade in that state. Presently, the Company has no plans to
register its securities in any particular state. Further, most likely the Common
Stock will be subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the Exchange Act), commonly
referred to as the penny stock rule. Section 15(g) sets forth, certain
requirements for transactions in penny stock and Rule 15g-9(d) (1) incorporates
the definition of penny stock as that term is used in Rule 3a51-1 of the
Exchange Act
The Securities and Exchange Commission (the Commission generally defines
penny stock to be any equity security that has a market price less than $5.00
per share, subject to certain exception. Rule 3a51-1 provides that any equity
security is considered to be a penny stock unless that security is: registered
and traded on a national securities exchange meeting specified criteria set by
the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a
registered investment company; excluded from the definition on the basis of
price (at least $5.00 per share), or the issuers net tangible assets; or
exempted form the definition by the Commission. If the Companys shares are
deemed to be a penny stock, trading in the shares will be subject to additional
sales practice requirements, on broker-dealers, who, sell penny stocks to person
other than established customers and accredited investors, generally persons
with assets in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 together with spouse.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchasers written consent to the transaction prior to the
purchase. Additionally, for any transaction involving penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker dealer
must also disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in the Companys Common Stock and may affect the
ability of shareholders to sell their shares.
Sale of Unregistered Securities
On January 3, 2001 the Company issued 1,500,000 shares of common stock at
$.001 per share for consideration of $1,500 to 5 individuals for 100% of the
shares of Merchantpark.COM. These shares were issued under Section 4(2) of the
1933 Securities Act and bear a restrictive legend.
On January 10, 2001 the Company issued 2,000,000 shares of common stock at
$.10 per share for consideration of $200,000 to 5 individuals for 100% of the
shares of Merchantpark.COM. These shares were issued under Section 4(2) of the
1933 Securities Act. On the same date the Company also issued 100,000 shares at
$.10 per share for consideration of $1,000 to one entity for services rendered.
On January 30, 2001 the Company issued 285,000 shares of common stock at
$.10 per share for cash and total consideration of $28,500. The Company also
issued 959,000 shares of common stock at $.10 per share for debt and
consideration of $95,400. On the same day the Company issued 2,000,000 shares of
common stock at $.10 to acquire one hundred percent of Caged Iron Technologies.
The Company also issued 3,000,000 shares of common stock at $.10 per share for
assets totaling $300,000. The above shares were issued under Regulation 504 D
and bear a restrictive legend.
On February 25, 2001 the Company issued 304,000 shares of common stock at
$.25 per share for consideration of $76,000. On the same day the Company issued
30,400 shares of common stock at $.25 per share for consideration of $7,600 for
services rendered. The above shares were issued under Regulation 504D and bear a
restrictive legend.
On March 23, 2001 the Company issued 82,000 common shares at $.50 per share
for consideration of $41,000. On the same day the company issued 25,000 shares
of common stock at $.50 per share for services rendered. The above shares were
issued under Regulation 504D and bear a restrictive legend.
On April 1, 2001 the company issued 375,000 shares of common stock at $.50
for consideration of $187,500 for services rendered. These shares were issued
under Section 4(2) of the 1933 Securities Act and bear a restrictive legend.
As of December 31, 2001 the company had 18,160,400 shares of common stock
outstanding.
Dividends
The Company has not declared or paid cash dividends or made distributions
in the past, and the Company does not anticipate that it will pay cash dividends
or make distributions in the foreseeable future.
Item 6. Managements Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
Form 10-KSB.
The companys current capital was provided by the sale of common stock.
Shareholders have loaned the Company $22,488 in the past year. To fully
implement the Companys business plan management anticipates outside funding
will be necessary. Management will explore debt or equity transactions. There is
no assurance that the company will be able to secure future financing. However,
the company has been successful in the past.
Existing staff will be sufficient for operations through 2002
It should be noted that the Companys auditors HJ & Associates, LLC. have
expressed in their financial statements that there are substantial doubt about
the Companys ability to continue as a growing concern.
Liquidity and Capital Resources
The Companys financial statements present a severe impairment of liquidity.
The Company has an approximate 1:13 current ratio. The Company has $2,335 in
current assets compared to $30,315 in current liabilities. The current assets
are comprised of solely cash, while the current liabilities are comprised of
$5,873 accounts payable, $22,488 in loans payable and $1,954 in accrued
interest.
Therefore, the Companys auditors consider the Company to be a going
concern. This contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established revenues to cover its operating costs in the Internet gaming
industry and has changed their operating focus to software development to allow
it to continue as a going concern. Management believes that the Company will
soon be able to generate revenues sufficient to cover its operating costs
through its business development.
Net Operating Loss
The Company has accumulated $(425,863) of net operating losses as of
December 31, 2001, which may used to reduce taxes in future years through 2021.
The use of these losses to reduce future income taxes will depend on the
generation of sufficient taxable income prior to the expiration of the net
operating loss carry forwards.
In the event of certain changes in control of the Company, there will be an
annual limitation on the amount of the net operating loss carry forwards which
can be used. The potential tax benefit of the net operating loss carry forwards
have been offset by a valuation allowance of the same amount.
Results of Operations
For the year ended December 31, 2001 the company had a net loss of
$(417,873) compared to a net loss of $(8,901) for the same period the year
before. The company has net revenues of $153,284 for the year ended December 31,
2001 compared to a $0 the year before. Consulting expenses jumped to $269,975
mostly due to the company merging and becoming operational. General and
administrative costs soared to $101,537 from $8,901 for the same reason. The
same can be said for Depreciation and Amortization increasing to $133,420 in
2001. The company also had software development costs of $55,812 in conjunction
with their Distribution 1 software platform.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting (SFAS), No. 133, Accounting for Derivative Instruments. SFAS No. 133
provides a different method for accounting for derivative instruments embedded
in other contracts and hedging activities. Derivative instruments represent
rights or obligations that meet the definition of assets or liabilities and
should be reported in the financial statements. Fair value is the most relevant
measure for financial statements and the only relevant measure for derivative
instruments. Derivative instruments should be measured at fair value and
adjustments to the Companys derivative of hedging items should reflect changes
in their fair value that are attributable to the risk being hedged and that
arise while the hedge is in effect. SFAS. No. 133 is effective for financial
statements ending after June 15, 1999. SFAS No. 133 implementation did not have
a material effect on the financial statements.
The Financial Accounting Standards Board has also issued 44PB Opinion No.
25). APN No. 25 APB Opinion No. 25 APB Opinion No. 25, Accounting for Stock
Issued to Employees, was issued in October 1972. Since its issuance, questions
have been raised about its application and diversity in practice has developed.
During its consideration of the accounting for stock-based compensation, which
leads to the issuance of SFAS No. 123, Accounting for Stock Based Compensation,
the Board decided not to address practice issues related to Opinion 25 because
the Board had planned to supersede Opinion 25. However, Statement 123 permits
entities to continue applying Opinion 25 to stock compensation involving
employees. Consequently, questions remain about the application of Opinion 25 in
a number of different circumstances.
This Interpretation clarifies the application of Opinion 25 for only
certain issues. It does not address any issued related to the application of the
fair value method in Statement 123. The issues addressed herein were selected
after receiving input from members of both the FASB Emerging Issues Task Force
and the task force on stock compensation that assisted in the development of
Statement 123. Among other issues, this Interpretation clarifies (a) the
definition of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualified as a non-compensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination.
FIN44 is effective for financial statements issued for periods ending after
July 1, 2000. The implementation of FIN 44 did not have a material affect on the
financial statement.
Inflation
In the opinion of management, inflation will not have a material effect on
the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
Company wished to advise readers that actual result may differ substantially
from such forward-looking statements, Forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
those expressed in or implied by the statements, including, but not limited to,
the following: the ability of the Company to complete development of its primary
products and its ability to successfully market its product if and when
developed and other risks detailed in the Companys periodic report filings with
the Securities and Exchange Commission.
Item 7. Financial Statements
See the financial statements annexed to this report.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On April 15, 2001 the accountants from the surviving accounting entity, HJ
& Associates CPAs became the consolidated companys independent auditors. An
appropriate 8K was filed.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The directors and officers of the Company are as follows:
Name Age Position
Scott Thomasson 34 President/Director
Rahim Fazal 20 Secretary/Director
Shawn Balaghi 32 Treasurer/Director
Husein Kaba 21 Vice President/Director
Peter Matousek 38 Director
Scott Thomasson, President/Director
Mr. Thomasson brings over 13 years extensive experience in business
operations, ownership and management to our team. Mr. Thomasson is currently
completing his MBA and has successfully completed the first three levels of the
CGA program. Starting in 1988 at age 19, Mr. Thomasson founded and served as CEO
of a leading Cedar manufacturing company. Mr. Thomasson successfully built
annual revenues totaling over $500,000 and worked with 10 employees within 2
years.
In 1993, Mr. Thomasson moved into the home building industry as the owner
and operator of a General Contracting company. Over the next 3 years he designed
and built homes realizing over 1 million in revenues annually. Mr. Thomasson got
involved in the Internet industry in 1995 while running his construction company
and worked to adapt new Internet technologies to the construction industry.
Mr. Thomasson joined NetNation Communications Inc., a market leader in the
web hosting industry, in January 1999. As the Sales and Business Development
manager he helped the company grow from 15 to 75 people in a year and a half.
Scott took on all aspects of the operation as well as building the sales team
and company revenue streams. After being promoted to Director of Sales, his team
quadrupled sales and revenues in less that a year. The strategic alliances and
relationships that Mr. Thomasson created during this time at NetNation with
companies like Cobalt networks and Miva, Entrust etc. are considered a big part
of the companys early success, and many of these alliances continue to this
day. The Company went public on NASDAQ in April 1999 (NASDAQ: NNCI). Mr.
Thomasson contributed his valuable input to the business planning and the S1
filing, during this transition.
Mr. Thomasson brings many years of experience in business operations to
this venture. His passion, experience and relationships in the Internet industry
bode well for continued success in the future.
Rahim Fazal, Secretary/Director
Mr. Fazal as one of the pair of heavily publicized teenaged dot.com
millionaires; Mr. Fazal is constantly in the publics eye and is well known in
most Canadian households. In 1999, Mr. Fazal co-founded MailBC.Com, a small
business community, which provided small and home-based businesses with free web
solutions to take their companies online. Mr. Fazal single-handedly increased
traffic upwards of 5,000,000 a month and gained membership of 25,000 clients
worldwide on a $500 a month marketing budget. In June 2000, Mr. Fazal and his
partner sold MailBC.Com to a California based Media Company for the sum of $1.5
million. Mr. Fazal has appeared in the front cover of The Vancouver Sun and in
The Vancouver Province, Toronto Star, Ottawa Citizen, MacLeans magazine, Global
Television, CTV News Network, Toronto News Headlines and Canadian Press,
Mr. Fazal recently headlined the SOHO Small Business Conference in
Vancouver, British Columbia and spoke in the topic of e-commerce in the small
business market to over 3,000 people. Mr. Fazal will be speaking next in
Seattle, Washington.
Prior to establishing MailBC.Com, Mr. Fazal served as the youngest ever
Support Technician Canadas largest Internet Service Provider, Canada Internet
Direct. Between 1998 and 1999, Mr. Fazal was the recipient of two-multi national
commendations for his expertise.
Mr. Fazal brings is his fresh cutting edge vision, unparalleled media
exposure, marketability and proven business experience in the industry. We are
fortunate to add his diverse strengths to our team.
Shawn Balaghi, Treasurer/Director
Mr. Balaghi has served for five years as the Executive Vice President of
Novak Capital Corporation, an internationally focused organization specializing
in assisting companies generate market awareness as well as attracting capital
investment from the financial community. As a senior partner, Mr. Balaghi has
developed a strong understanding of public companies, corporate finance, and
corporate communications. The majority of these public companies have been in
the US and as a result Mr. Balaghi has participated in all aspects of the
process of taking a company public and has maintained an excellent relationship
with investors, brokers, investment banks, and venture capital firms around the
world. In addition to his experience assisting public companies, Mr. Balaghi has
also worked at every level of the financial industry for over 7 years.
Husein Kaba, Vice President/Director
Mr. Kaba, as a business partner of Rahim Fazal for over 5 years, Mr. Kaba
has provided every project operated between the two, with his superior technical
expertise and undying dedication to his work.
Mr. Kaba began working at Look Communication in 1998, and provided his
knowledge of connectivity, operating systems programming and system
administration to thousands of customers a month. Handling technical assistance
over both the phone, e-mail and on site, Mr. Kaba became a Senior Technical
Representative in late 1999 and led the team in all areas of productivity. With
a large responsibility on his shoulders, Husein trained many new employees and
served as the point contact for all advanced technical support situations with
many of the companys largest business partners and clients.
In 1999, Mr. Kaba helped develop MailBC.Com, and single handedly setup,
maintained and operated all network operations for the large web solutions
provider. Helping to provide tens of thousands of customers with unsurpassed
technical assistance and customer care, Husein allowed MailBC.Com to become
synonymous with the highest quality of customer service in the free-web hosting
industry.
In 2000, MailBC.com was sold for over a million and half dollars US, and
continues to be one of the leading providers of cost free business solutions on
the Internet. Gaining continuous widespread media attention, Husein is regularly
featured at conferences, on television, and in print, serving as role model to
entrepreneurs and veterans alike.
Husein Kaba brings is his uncanny perseverance, sound knowledge of network
and system administration, technical support, customer care and media following
our team.
Peter Matousek, Director
Mr. Matousek, is an internationally seasoned consultant and entrepreneur
with a European background. Mr. Matousek has worked extensively within the
public sector for companies in the United States, Canada and Europe. During this
time he cultivated relationships with investors, investment advisors and Venture
Capital firms. With over 10 years of experience in the financial industry, Mr.
Matousek has utilized his in-depth knowledge and skills in fostering repeated
success in the public arena. His numerous global contacts, financial expertise
and solid experience working with start-up and public companies are a huge asset
to the venture.
All directors hold office until the next annual meetings of stockholders,
or until their successors have been duly qualified. There are no agreements with
respect to the election of directors. The Company has not compensated its
directors for service on the Board of Directors or any committee thereof. Any
non-employee director of the Company shall be reimbursed for expenses incurred
for attendance at meetings of the Board of Directors and any committee of the
Board of Directors. The executive committee, of the Board of Directors, to the
extent permitted under Nevada law, consists of three directors and exercises all
the power and authority of the Board of Directors in the management of the
management of the business and affairs of the Company between meetings of the
Board of Directors. Each executive officer is appointed by and serves at the
discretion of the Board of Directors.
None of the officers and/or directors of the Company, are officers and
directors of any other publicly traded corporation, nor have any of the
directors and/or officers, nor any of the affiliates or promoters of the Company
filed any bankruptcy petition, been convicted in or has been the subject of any
pending criminal proceedings, or the subject to any order, judgment, or decree
involving the violation of any state or federal securities laws within the past
five years.
Section 16(a) Beneficial Ownership Reporting Compliance
Each of the Companys officers and directors are required to tile a Form 3,
Annual Statement of Changes in Beneficial Ownership on or before the 45th day
after the end of the fiscal year. These reports have not yet been filed on a
timely basis and have recently been filed.
Item 10. Executive Compensation
Scott Thomasson, President/Director $23,650
Rahim Fazal Secretary/Director 15,100
Shawn Balaghi Treasurer/Director 22,000
Husein Kaba Vice President/Director 15,100
Peter Matousek Director 16,500
There are no annuity, pension or retirement benefits proposed to pay to
officers, directors or employees of the Corporation in the event of retirement
date pursuant to any presently existing plan provided or contributed to by the
Corporation or any of its subsidiaries.
An employee stock option plan has been proposed, but it is subject to
shareholder approval at the Annual Meeting in May of 2002.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, to the best knowledge of the
Company as of December 31, 2001 with respect to each director and officer and
management as a group and any holder owning more than 5% of the outstanding
common stock.
Name and Position Title of Amount of Percentage (1)
Address Class Shares
Scott Thomasson President/ Common 1,420,400 7.08%
228 E. 53rd Avenue Director
Vancouver, BC V5X1H9
Rahim Fazal Secretary/ Common 1,350,000 7.04%
4778 Laurel Wood Pl. Director
Burnaby, BC V5G4B2
Shawn Balaghi Treasurer/ Common 1,390,000 7.7%
565 Bernard Ave. Director
Kelowna, BC V1Y8R4
Husein Kaba Vice-Pres/ Common 1,350,000 7.4%
5283 Smith Ave. Director
Burnaby, BC V5H2K5
Peter Matousek Director Common 1,380,000 12.9%
3933 So. 9th St. (2) 959,000
Gresham, OR 97030
Management as a Group 7,849,000 43%
Others of record own 5% or more
Hadi Tabatabaei (1)1,000,000 5.5%
P.O. Box 1159
108-4800 Kingsway St.
Burnaby, BC V5H4J2
(1) Based on 18,160,400 shares of common stock outstanding as of December
31, 2001. (2) Peter Matousek is the President of Novak Capital, Inc. and as such
can vote its 959,000 shares.
Item 12. Certain Relationships and Related Transactions
The Companys officers and directors are subject to the doctrine of
corporate opportunities only insofar as it applies to business opportunities in
which the Company has indicated an interest, either through its proposed
business plan or by way of an express statement of interest contained in the
Companys minutes. If directors are presented with business opportunities that
may conflict with business interests identified by the Company, such
opportunities must be promptly disclosed to the Board of Directors and made
available to the Company. In the event the Board shall reject an opportunity to
presented and only in that event, any of the Companys officers and directors
may avail themselves of such an opportunity. Every effort will be made to
resolve any conflicts that may arise in favor of the Company. There can be no
assurance, however, that these efforts will be successful.
The officers, directors and control shareholders received their shares as a
result of the March 29, 2001 meeting of Westnet pursuant to an Acquisition &
Plan of Reorganization by and between Westnet Communication Group, Inc. and
Merchantpark Communications, Inc.
It should be noted that Peter Matousek is the President of Novak Capital,
Inc., and Shawn Balaghi is the Executive Vice President of Novak Capital who
provide consulting services for Merchantpark.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Articles of Incorporation and By-Laws of Westnet Communication Group, Inc.,
filed as reference to Exhibit in Form 10-SB on February 18, 2000. Articles of
Incorporation and By-Laws of Merchantpark Communications, Inc., filed as
reference to Exhibit in Form 8-K
Agreement & Plan of Reorganization, March 29, 2001, filed as reference to
Exhibit in Form 8-K
Notice of Meeting of Shareholders- Westnet Communication, Inc., filed as
reference to Exhibit in Form 10-SB
(b) Reports on Form 8-K & 8-KA
No reports, on Form 8K were filed during the last quarter covered by this report
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act. The Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merchantpark Communications, Inc.
By: /S/ Scott Thomasson
Scott Thomasson
President/Director
Dated: ___________, 2002
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
/S/ Scott Thomasson President/Director March 28, 2002
/S/ Rahin Fazal Secretary/Director March 28, 2002
/S/ Husein Kaba Vice President/Director March 28, 2002
S-1
MERCHANTPARK COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
C O N T E N T S
Independent Auditors Report................................................ 3
Consolidated Balance Sheet................................................ 4
Consolidated Statements of Operations and Other Comprehensive Income...... 5
Consolidated Statements of Stockholders Equity (Deficit)................... 6
Consolidated Statements of Cash Flows....................................... 8
Notes to the Consolidated Financial Statements............................. 9
INDEPENDENT AUDITORS REPORT
Board of Directors
Merchantpark Communications, Inc. and Subsidiaries
Vancouver, B.C.
We have audited the accompanying consolidated balance sheet of Merchantpark
Communications, Inc. and Subsidiaries as of December 31, 2001 and the related
consolidated statements of operations and other comprehensive income,
stockholders equity (deficit) and cash flows for the year ended December 31,
2001 and for the period from December 5, 2000 (inception) through December 31,
2000. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated 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 consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Merchantpark Communications, Inc. and Subsidiaries as of December 31, 2001, and
the consolidated results of their operations and their cash flows for the year
ended December 31, 2001 and for the period from December 5, 2000 (inception)
through December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has generated a significant
loss for the year ended December 31, 2001, raising substantial doubt about its
ability to continue as a going concern. Managements plans in regard to these
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
HJ & Associates, LLC
Salt Lake City, Utah
March 15, 2002
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
December 31,
2001
CURRENT ASSETS
Cash and cash equivalents $ 2,335
Total Current Assets 2,335
PROPERTY AND EQUIPMENT, NET (Notes 1 and 3) 282,206
TOTAL ASSETS $ 284,541
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,873
Loan from related party (Note 4) 22,488
Accrued interest 1,954
Total Current Liabilities 30,315
Total Liabilities 30,315
STOCKHOLDERS EQUITY
Common stock: 50,000,000
shares authorized of $0.001
par value,
18,160,400 shares issued
and outstanding 18,160
Additional paid-in capital 661,929
Accumulated deficit (426,774)
Other comprehensive income 911
Total Stockholders Equity 254,226
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 284,541
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Other Comprehensive Income
From
December 5,
For the 2000 (inception)
Year Ended through
December 31, December 31,
2001 2000
GROSS SALES $ 153,284$ -
COST OF GOODS SOLD - -
NET SALES 153,284 -
EXPENSES
Depreciation and
amortization 133,420 -
Consulting 269,975 -
General and
administrative 110,438 8,901
Software development
costs (Note 5) 55,812 -
Total Expenses 569,645 8,901
LOSS BEFORE OTHER INCOME (416,361) (8,901)
OTHER INCOME
Interest income 442 -
Interest expense (1,954) -
Total Other Income (1,512) -
NET LOSS (417,873) (8,901)
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation 911 -
NET COMPREHENSIVE
LOSS $ (416,962) $ (8,901)
BASIC LOSS
PER SHARE $ (0.03) $ (0.00)
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 16,545,053 4,000,000
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders Equity
Additional
Paid
Common Stock Capital
Shares Amount (Deficit)
Balance, December 5, 2000
(Inception) - $ - $ -
Common stock issued to founders
for cash at $0.001 per share 4,000,000 4,000 -
Net loss for the period ended
December 31, 2000 - - -
Balance, December 31, 2000 4,000,000 4,000 -
Common stock issued in
exchange for 100% of shares
of Merchantpark.com 1,500,000 1,500 (1,500)
Common stock issued for cash 2,671,000 2,671 162,829
Common stock issued for services 1,030,400 1,030 257,570
Common stock issued in exchange
for 100% of shares of Caged Iron
Technologies 2,000,000 2,000 100,472
Common stock issued for debt 459,000 459 45,441
Common stock issued for assets 3,000,000 3,000 297,000
Stock offering costs - - (12,600)
Recapitalization 3,500,000 3,500 (187,283)
Cash received for payment of stock
subscription receivable - - -
Services rendered for payment of
stock subscription receivable - - -
Assets received for payment of stock
subscription receivable - - -
Currency translation adjustment - - -
Net loss for the year ended
December 31, 2001 - - -
Balance, December 31, 2001 18,160,400 $ 18,160 $ 661,929
Stock Other
Subscription Comprehensive Accumulated
Receivable Income Deficit
Balance, December 5, 2000
(Inception) $ - $ - -
Common stock issued to founders
for cash at $0.001 per share - - -
Net loss for the period ended
December 31, 2000 - - (8,901)
Balance, December 31, 2000 - - (8,901)
Common stock issued in
exchange for 100% of shares
of Merchantpark.com - - -
Common stock issued for cash (34,634) - -
Common stock issued for services - - -
Common stock issued in exchange
for 100% of shares of Caged Iron
Technologies
Common stock issued for debt - - -
Common stock issued for assets - - -
Stock offering costs - - -
Recapitalization - - -
Cash received for payment of stock
subscription receivable 23,517 - -
Services rendered for payment of
stock subscription receivable 7,117 - -
Assets received for payment of stock
subscription receivable 4,000 - -
Currency translation adjustment - 911 -
Net loss for the year ended
December 31, 2001 - - (417,873)
Balance, December 31, 2001 $ - $ 911 (426,774)
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
From
December 5,
For the 2000 (inception)
Year Ended through
December 31, December 31,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (417,873) $ (8,901)
Adjustments to reconcile
net loss to net cash
flows used by
operating activities:
Depreciation and
amortization 133,420 -
Common stock issued
for services 78,217 -
Changes in operating
assets and liabilities:
Decrease in prepaids
and other assets 45,900 -
Increase in accrued
interest 1,954 -
Increase in accounts
payable 873 5,000
Net Cash Flows (Used)
by Operating Activities (157,509) (3,901)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed
assets (9,154) -
Net Cash Flows (Used)
by Investing Activities (9,154) -
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued
for cash 137,866 4,000
Stock offering costs (12,600) -
Cash acquired in r
everse acquisition 3,717 -
Stock subscription
receivable 16,517 -
Proceeds from loans
from related party 22,488 -
Net Cash Flows Provided
by Financing Activities 167,988 4,000
FOREIGN CURRENCY
TRANSLATION ADJUSTMENT 911 -
NET INCREASE IN CASH 2,236 99
CASH AT BEGINNING
OF PERIOD 99 -
CASH AT END OF PERIOD $ 2,335 $ 99
CASH PAID DURING
THE YEAR FOR:
Interest $ - $ -
Income taxes $ - $ -
NON-CASH TRANSACTIONS
Common stock issued
for assets $ 402,472 $ -
Common stock issued
for services $ 78,217 $ -
Common stock issued
for prepaid expenses $ 45,900 $ -
Common stock issued
for stock subscription receivable $ 16$ -
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2001 and 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements presented are those of Merchantpark
Communications, Inc. and its wholly-owned subsidiaries (the Company).
The Company provides second-generation E-Business technologies to the small
and medium enterprise markets. During the year ended December 31, 2001, the
Company started generating revenue from its website development and hosting
operations.
Merchantpark Communications, Inc. (MCPI) was incorporated on December 5,
2000 under the laws of the State of Nevada.
On January 3, 2001, an agreement was authorized allowing the Company to
exchange 1,500,000 shares of common stock for 100% of the outstanding common
stock of Merchantpark.com, Inc. (MP.com). At the time of the agreement, MP.com
was a start-up corporation with no operations and no assets. The acquisition was
accounted for as a purchase. This agreement made MP.com a wholly-owned
subsidiary of the Company.
On January 30, 2001, MPCI acquired substantially all of the assets of Caged
Iron Technologies, Inc. (CIT) in exchange for 2,000,000 shares of the Companys
common stock. The acquisition was accounted for as a purchase between entities,
with a common officer. The assets of CIT are recorded at their historical cost.
CIT became a wholly-owned subsidiary of the Company.
Westnet Communications Group, Inc. (Westnet) was incorporated on October
14, 1999 to engage in or transact any and all lawful activities or business
permitted under the laws of the State of Nevada. Westnet was exploring various
business opportunities and had not yet commenced operations.
On April 1, 2001, Westnet and MPCI completed and Agreement and Plan of
Reorganization whereby Westnet issued 14,285,400 shares of its common stock in
exchange for all of the outstanding common stock of MPCI. Immediately prior to
the Agreement and Plan of Reorganization, Westnet had 3,500,000 shares of common
stock issued and outstanding. The acquisition was accounted for as a
recapitalization of MPCI because the shareholders of MPCI controlled Westnet
after the acquisition. MPCI was treated as the acquiring entity for accounting
and presentation purposes and Westnet was the acquiring entity for legal
purposes. Costs of approximately $187,500 associated with this transaction were
expensed as incurred prior to the acquisition. The costs prior to the
acquisition were paid by issuing 375,000 shares of common stock. The costs
associated with this acquisition were eliminated in the recapitalization.
On April 5, 2001, Westnet, the legal entity, changed its name to
Merchantpark Communications, Inc.
b. Accounting Method
The Companys consolidated financial statements are prepared using the
accrual method of accounting. The Company has elected a December 31 year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2001 and 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Basic Loss per Share
From
December 5,
For the 2000 (inception)
Year Ended through
December 31, December 31,
2001 2000
Loss (numerator) $ (417,873) $ (8,901)
Shares (denominator) 16,545,053 4,000,000
Per share amount $ (0.03) $ (0.00)
The computations of basic loss per share of common stock are based on the
weighted average number of shares outstanding during the period of the
consolidated financial statements. Common stock equivalents have not been
included in the calculation as their effect is antidilutive for the period
presented.
e. Provision for Taxes
At December 31, 2001, the Company had an accumulated deficit of
approximately $352,500 which includes net operating loss carryforwards that may
be offset against future taxable income through 2021. No tax benefit has been
reported in the consolidated financial statements as the Company believes there
is a 50% or greater chance the net operating loss carryforwards will expire
unused. Accordingly, the potential tax benefits of the net operating loss
carryforwards are offset by a valuation allowance of the same amount.
The income tax benefit differs from the amount computed at the federal
statutory rates of approximately 38% as follows: From December 5, For the 2000
(inception) Year Ended through December 31, December 31, 2001 2000
Income tax benefit at statutory rate $ 130,578 $ 3,382
Change in valuation allowance (130,578) (3,382)
$ -$ -
Deferred tax assets (liabilities) are comprised of the following:
Income tax benefit at statutory rate $ 133,960 $ 3,382
Change in valuation allowance (133,960) (3,382)
$ - $ -
Due to the change in ownership provisions of the Tax Reform Act of 1986,
net operating loss carryforwards for federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net operating
loss carryforwards may be limited as to use in the future.
12
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2001 and 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. 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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
g. Property and Equipment
Property and equipment are stated at cost. Expenditures for small tools,
ordinary maintenance and repairs are charged to operations as incurred. Major
additions and improvements are capitalized. Depreciation is computed using the
straight-line method over estimated useful lives as follows:
Computer software 3 to 5 years
Websites 3 to 5 years
Computer equipment 3 to 5 years
Office furniture and equipment 3 to 5 years
Depreciation expense for the year ended December 31, 2001 and from December
5, 2000 (inception) through December 31, 2000 was $133,420 and $-0-,
respectively.
h. Revenue Recognition
The Company recognizes revenues services when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collection of the resulting receivable is probable. Amounts invoiced and
collected in advance of product delivery are recorded as deferred revenue. The
Company earns its revenues from different contracts with small and medium
business customers. The Company recognizes the revenue when it is earned and the
contract is complete.
i. Other Comprehensive Income
In March 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. This standard requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balances of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position.
j. Long Lived Assets
The Company reviews long-lived assets and identifiable intangibles whenever
events or circumstances indicate that the carrying amounts of such assets may
not be fully recoverable. The Company evaluates the recoverability of long-lived
assets by measuring the carrying amounts of the assets against the estimated
undiscounted cash flows associated with these assets. At the time such
evaluation indicates that the future undiscounted cash flows of certain
long-lived assets are not sufficient to recover the assets carrying value, the
assets are adjusted to their fair values (based upon discounted cash flows).
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2001 and 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Newly Issued Accounting Pronouncements
SFAS No.s 141 and 142 -- In June 2001, the Financial Accounting Standards
Board (FASB) adopted Statement of Financial Accounting Standards SFAS No. 141 is
effective as to any business combination occurring after June 30, 2001 and
certain transition provisions that affect accounting for business combinations
prior to June 30, 2001 are effective as of the date that SFAS No.142 is applied
in its entirety, which was September 30, 2001.
SFAS No. 141 provides standards for accounting for business combinations.
Among other things, it requires that only the purchase method of accounting be
used and that certain intangible assets acquired in a business combination (i.e.
those that result from contractual or other legal rights or are separable) be
recorded as an asset apart from goodwill. The transition provisions require that
an assessment be made of previous business combinations and, if appropriate,
reclassifications be made to or from goodwill to adjust the recording of
intangible assets such that the criteria for recording intangible assets apart
from goodwill is applied to the previous business combinations The adoption of
this principle had no material effect on the companys financial statements.
SFAS No. 142 provides, among other things, that goodwill and intangible
assets with indeterminate lives shall not be amortized. Goodwill shall be
assigned to a reporting unit and annually assessed for impairment. Intangible
assets with determinate lives shall be amortized over their estimated useful
lives, with the useful lives reassessed continuously, and shall be assessed for
impairment under the provisions of SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets to be Disposed of. Goodwill is also assessed for
impairment on an interim basis when events and circumstances warrant. Upon
adoption of SFAS No. 142, the Company will assess whether an impairment loss
should be recognized and measured by comparing the fair value of the Areporting
unit to the carrying value, including goodwill. If the carrying value exceeds
fair value, then the Company will compare the implied fair value of the goodwill
(as defined in SFAS No. 142) to the carrying amount of the goodwill. If the
carrying amount of the goodwill exceeds the implied fair value, then the
goodwill be adjusted to the implied fair value.
SFAS No. 143 -- On August 16, 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations, which is effective for fiscal
years beginning after June 15, 2002. It requires that obligations associated
with the retirement of a tangible long-lived asset be recorded as a liability
when those obligations are incurred, with the amount of the liability initially
measured at fair value. Upon initially recognizing for an accrued retirement
obligation, an entity must capitalize the cost by recognizing an increase in the
carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain o loss upon settlement.
While the Company has not completed the process of determining the effect
of this new accounting pronouncement on its consolidated financial statements,
the Company currently expects that the effect of SFAS No. 143 on the Companys
financial statements, when it becomes effective, will not be significant.
l. Foreign Currency Translation
All transactions in currencies other than the United States dollar during
the year are translated at the exchange rates on the transaction dates. Monetary
assets and liabilities denominated in a foreign currency are translated at the
prevailing year-end rates of exchange. Exchange gains or losses are included in
the consolidated statements of income (loss) and retained earnings.
m. Principles of Consolidation
The consolidated financial statements include those of Merchantpark
Communications, Inc. (MPCI) and its wholly-owned subsidiaries, Caged Iron
Technologies, Inc. (CIT), Merchantpark.Com, Inc. (MP.Com), and Merchantpark
Communications (MPC). All significant intercompany accounts and transactions
have been eliminated.
MERCHANTPARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2001 and 2000
NOTE 2 - GOING CONCERN
The Companys consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses for the years ended December 31, 2001
and 2000 which has resulted in an accumulated deficit of approximately $426,000
at December 31, 2001 which raises substantial doubt about the Companys ability
to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result from the outcome of this uncertainty. It is the
intent of the management to seek additional financing through new stock
issuances and lines of credit. The Company plans to continue generating revenues
through sales of dedicated servers and professional services that include
consulting web design, system architecture and server management. The Company
also plans to generate recurring monthly subscription based revenue when it
launches its white label ASP platform.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and Equipment consisted of the following:
December 31,
2001
Computer software $ 200,000
Websites 36,250
Computer equipment 90,876
Office furniture and equipment 88,500
415,626
Accumulated depreciation (133,420)
$ 282,206
NOTE 4 - NOTES PAYABLE - RELATED PARTY
Loans from shareholders are non-interest bearing and have no fixed terms of
repayments. The total amount owed to shareholders at December 31, 2001 and 2000
was $22,488 and $-0-, respectively.
NOTE 5 - SOFTWARE DEVELOPMENT COSTS
The Company is in the process of developing software to be sold, leased, or
otherwise marketed. According to FAS 86, the development stage of the software
must be technologically feasible in order to meet the capitalization criteria.
The technologically feasibility of a computer software product is established
when the Company has completed all the planning, designing, coding, and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications including functions, features, and technical
performance requirements.
It was determined that the development stage of the software was not
technologically feasible at the year ended December 31, 2001. Therefore, the
costs associated with the developing of the software were expensed.
Software development costs for the year ended December 31, 2001 and the
period ended December 31, 2000 were $55,812 and $-0-, respectively.