U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: December 31, 2001
Commission File Number: 0-23485
RETAIL HIGHWAY.COM, INC.
------------------------
(Exact name of small business issuer as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0177646
(IRS Employer Identification No.)
1408-33 Harbour Square
Toronto, Ontario, Canada
(Address of principal executive offices)
M5J 2G2
(Zip Code)
430 Peninsula Ave.
Suite 1
San Mateo, California 94401
(Former Address)
(416) 367-3213
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes X No .
---- ----
The number of shares of the registrant's only class of common stock issued and
outstanding, as of February 12, 2002 was 9,241,867 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the six month period ended December
31, 2001, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and notes thereto included herein. In connection with, and because it
desires to take advantage of, the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on the behalf of the Company,
whether or not in future filings with the Securities and Exchange Commission.
Forward looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
Company's control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward looking statements made by, or on behalf of, the Company. The
Company disclaims any obligation to update forward looking statements.
OVERVIEW
We were incorporated on February 17, 1993, under the name "LBF Corporation"
pursuant to the laws of the State of Nevada to engage in any lawful corporate
purpose. In December 1997, we filed a registration statement with the United
States Securities and Exchange Commission on Form 10-SB, registering our common
stock under the Securities Exchange Act of 1934, as amended (the "34 Act"). Our
intention at that time was to seek to acquire assets or shares of an entity
actively engaged in business which generated revenues or provided a business
opportunity, in exchange for our securities. In effect, this filing caused us to
be a full "reporting company" under the 34 Act.
Effective April 17, 1999, we acquired certain assets owned by Michael
Levine, including a proposed electronic commerce web site and the right to
certain business names, including "Shopshopshopping.com," "Retailhighway.com"
and "Greatestmall on earth.com" (the "Assets"). We issued 2,500,000 shares of
our common stock equal to ownership of approximately 33% of our then
2
outstanding shares, in exchange for all of the Assets. In addition, our
shareholders approved an amendment to our Articles of Incorporation changing our
name to "Retail Highway.com, Inc." Our then management resigned their respective
positions and were replaced by our current management.
As a result of this acquisition, our principal business objective was
changed to becoming a primary portal and transaction point for online extensions
of "Bricks and Mortar" ("BAM") retail stores. As described hereinbelow, as well
as in our Form 10-KSB for our fiscal year ended June 30, 2000, we have abandoned
this business plan and are currently seeking to merge with or otherwise acquire
another business, or otherwise proceed in accordance with the disclosure below.
Results of Operations
Comparison of Results of Operations for the six month periods ended
December 31, 2001 and 2000
We generated no revenues during the six month periods ended December 31,
2001 and 2000 and it is not anticipated that we will be able to generate any
revenues in the foreseeable future unless we engage in a business combination,
as described herein. We had no costs of sales.
Operating expenses were $27,124 during our six month period ended December
31, 2001, compared to $145,846 in 2000, a decrease of $118,722 (81.4%). This
decrease was attributable to our discontinuance of our former business plan as
described herein. The expenses incurred during the six month period ended
December 31, 2001, arose primarily from professional and consulting fees
($12,144) relating to costs associated with our being a reporting company under
the Securities Exchange Act of 1934, as amended, as well as costs associated
with possible acquisitions and office costs ($12,601).
As a result, we incurred a net loss of $(26,564) during the six month
period ended December 31, 2001 (less than $0.01 per share) as compared to our
net loss of $(142,188) ($.02 per share) during the comparable period in 2000.
Plan of Operation
We intend to seek to acquire assets or shares of an entity actively engaged
in business which generates revenues, in exchange for its securities. We have no
particular acquisitions in mind but as of the date of this Report, we have
entered into discussions regarding such a business combination.
We have no full time employees. Our Chief Executive Officer, President and
Secretary has agreed to allocate a portion of his
3
time to our business activities, without compensation. He anticipates that our
business plan can be implemented by his devoting minimal time per month to our
business affairs and, consequently, conflicts of interest may arise with respect
to the limited time commitment by such officer.
General Business Plan
Our purpose is to seek, investigate and, if such investigation warrants,
acquire an interest in business opportunities presented to us by persons or
firms who or which desire to seek the perceived advantages of an Exchange Act
registered, trading corporation. We will not restrict our search to any specific
business, industry, or geographical location and we may participate in a
business venture of virtually any kind or nature. This discussion of the
proposed business is purposefully general and is not meant to be restrictive of
our virtually unlimited discretion to search for and enter into potential
business opportunities. Management anticipates that we may be able to
participate in only one potential business venture because we have nominal
assets and limited financial resources. See "Part II, Item 7 - Financial
Statements." This lack of diversification should be considered a substantial
risk to our shareholders because it will not permit us to offset potential
losses from one venture against gains from another.
We may seek a business opportunity with entities which have recently
commenced operations, or which wish to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all shareholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
We have, and will continue to have, a limited amount of capital with which
to provide the owners of business opportunities with any significant cash or
other assets. However, management
4
believes we will be able to offer owners of acquisition candidates the
opportunity to acquire a controlling ownership interest in a publicly
registered, trading company without incurring the cost and time required to
conduct an initial public offering. The owners of the business opportunities
will, however, incur significant legal and accounting costs in connection with
acquisition of a business opportunity, including the costs of preparing Form
8-K's, 10-K's or 10-KSB's, agreements and related reports and documents. The
Securities Exchange Act of 1934 (the "34 Act") specifically requires that any
merger or acquisition candidate comply with all applicable reporting
requirements, which include providing audited financial statements to be
included within the numerous filings relevant to complying with the 34 Act.
Nevertheless, our officers and directors have not conducted market research and
are not aware of statistical data which would support the perceived benefits of
a merger or acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, our officers and directors, none of whom is a professional
business analyst. Management intends to concentrate on identifying preliminary
prospective business opportunities which may be brought to their attention
through present associations of our officers and directors, or by our
shareholders. In analyzing prospective business opportunities, management will
consider such matters as the available technical, financial and managerial
resources; working capital and other financial requirements; history of
operations, if any; prospects for the future; nature of present and expected
competition; the quality and experience of management services which may be
available and the depth of that management; the potential for further research,
development, or exploration; specific risk factors not now foreseeable but which
then may be anticipated to impact our proposed activities; the potential for
growth or expansion; the potential for profit; the perceived public recognition
of acceptance of products, services, or trades; name identification; and other
relevant factors. Our officers and directors expect to meet personally with
management and key personnel of the business opportunity as part of their
investigation. To the extent possible, we intend to utilize written reports and
personal investigation to evaluate the above factors. We will not acquire or
merge with any company for which audited financial statements cannot be obtained
within a reasonable period of time after closing of the proposed transaction.
Management, while not especially experienced in matters relating to our new
business, shall rely upon their own efforts and, to a much lesser extent, the
efforts of our shareholders, in accomplishing our business purposes. It is not
anticipated that we will utilize any outside consultants or advisors to
effectuate our business purposes described herein. However, if we do retain such
an outside consultant or advisor, any cash fee earned by such party
5
will need to be paid by the prospective merger/acquisition candidate, as we have
no cash assets with which to pay such obligation. There have been no contracts
or agreements with any outside consultants and none are anticipated in the
future.
We will not restrict our search for any specific kind of firms, but may
acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
impossible to predict at this time the status of any business in which we may
become engaged, in that such business may need to seek additional capital, may
desire to have its shares publicly traded, or may seek other perceived
advantages which we may offer.
In our continued attempts to identify either a merger or acquisition
candidate, on November 21, 2001, we executed a non- binding letter of intent to
either acquire all of the issued and outstanding securities of Cryptometrics,
Inc., or otherwise acquire all of the assets of Cryptometrics. Cryptometrics is
engaged in the business of development of biometric software applications. If
this transaction is consummated, of which there can be no assurance, it is
anticipated that our current management will resign and be replaced by those
persons designated by Crypotmetrics upon closing. Initial discussions between us
and Cryptometrics have determined that we will issue approximately 75-80%
interest in our company to Cryptometrics if the proposed transaction is
successfully consummated. As of the date of this report, we are continuing our
due diligence efforts. It is anticipated that, if the proposed transaction with
Crypotmetrics is successfully consummated, it will close on or about March 31,
2002. If this proposed transaction is not successfully consummated, we intend to
continue to seek out and acquire another business entity or its assets.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We may also acquire
stock or assets of an existing business. On the consummation of a transaction,
it is probable that our present management and shareholders will no longer be in
control of our company. In addition, our directors may, as part of the terms of
the acquisition transaction, resign and be replaced by new directors without a
vote of our shareholders.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, we may agree to register all or a part of
such
6
securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after we have
successfully consummated a merger or acquisition and we are no longer considered
a "shell" company. Until such time as this occurs, we will not attempt to
register any additional securities. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
our securities may have a depressive effect on the value of the our securities
in the future, if such a market develops, of which there is no assurance.
While the actual terms of a transaction to which we may be a party cannot
be predicted, it may be expected that the parties to the business transaction
will find it desirable to avoid the creation of a taxable event and thereby
structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, our shareholders would retain less than 20% of the issued
and outstanding shares of the surviving entity, which would result in
significant dilution in the equity of such shareholders.
As part of our investigation, our officers and directors will meet
personally with management and key personnel, may visit and inspect material
facilities, obtain independent analysis of verification of certain information
provided, check references of management and key personnel, and take other
reasonable investigative measures, to the extent of our limited financial
resources and management expertise. The manner in which we participate in an
opportunity will depend on the nature of the opportunity, the respective needs
and desires of us and other parties, the management of the opportunity and our
relative negotiation strength and such other management.
With respect to any merger or acquisition, negotiations with target company
management is expected to focus on the percentage of stock which the target
company shareholders would acquire in exchange for all of their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, our shareholders will in all likelihood hold a
substantially lesser percentage ownership interest following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event we acquire a target company with substantial assets. Any merger or
acquisition effected by us can be expected to have a significant dilutive effect
on the percentage of shares held by our then shareholders.
We will participate in a business opportunity only after the negotiation
and execution of appropriate written agreements.
7
Although the terms of such agreements cannot be predicted, generally such
agreements will require some specific representations and warranties by all of
the parties thereto, will specify certain events of default, will detail the
terms of closing and the conditions which must be satisfied by each of the
parties prior to and after such closing, will outline the manner of bearing
costs, including costs associated with our attorneys and accountants, will set
forth remedies on default and will include miscellaneous other terms.
As stated hereinabove, we will not acquire or merge with any entity which
cannot provide independent audited financial statements within a reasonable
period of time after closing of the proposed transaction. We are subject to all
of the reporting requirements included in the 34 Act. Included in these
requirements is the affirmative duty to file independent audited financial
statements as part of our Form 8-K to be filed with the Securities and Exchange
Commission upon consummation of a merger or acquisition, as well as our audited
financial statements included in its annual report on Form 10-KSB. If such
audited financial statements are not available at closing, or within time
parameters necessary to insure our compliance with the requirements of the 34
Act, or if the audited financial statements provided do not conform to the
representations made by the candidate to be acquired in the closing documents,
the closing documents will provide that the proposed transaction will be
voidable, at the discretion of our present management. If such transaction is
voided, the agreement will also contain a provision providing for the
acquisition entity to reimburse us for all costs associated with the proposed
transaction.
Liquidity and Capital Resources
At December 31, 2001, we had $34,791 in cash and cash equivalents and
$37,445 in accounts payable. Also at December 31, 2001, we had an outstanding
loan payable in the principal amount of $2,582, which was due to Mr. Levine and
arose out of expenses incurred by Mr. Levine on our behalf. This loan was
unsecured, due upon demand and did not accrue interest. As of the date of this
Report, all balances due Mr. Levine have been paid in full.
As of the date of this Report, our current cash position is sufficient to
meet our current obligations. However, as we continue operations we expect to
incur additional costs and expenses related to the implementation of our
business plan described above. To meet thse obligations, it is anticipated that
current management may need to make loans to us, or otherwise make other
arrangements with these creditors. Because we are not currently required to pay
salaries to any of our officers or directors, management believes that we will
be able to continue operations through the foreseeable future. It is further
8
anticipated that we will continue to incur expenses without corresponding
revenues during the foreseeable future.
Inflation
Although management expects that the operations of the Company will be
influenced by general economic conditions once the Company commences generating
revenues, the Company does not believe that inflation had a material effect on
the results of operations during the six month period ended December 31, 2001.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There were no new legal proceedings filed or threatened involving our
company during the three month period ended December 31, 2001.
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits - none
(b) Reports on Form 8-K
We did not file any reports on Form 8-K during the three month period ended
December 31, 2001.
9
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED BALANCE SHEETS
ASSETS
December 31, June 30,
2001 2001
------------ -----------
(unaudited)
Current assets:
Cash and equivalents $ 34,791 $ 71,355
Prepaid expenses 2,887 2,887
------------ -----------
Total current assets 37,678 74,242
Office equipment and computer software,
net of accumulated depreciation 7,404 8,341
------------ -----------
Total assets $ 45,082 $ 82,583
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,445 $ 48,874
Loan payable-officer 2,582 2,090
------------ -----------
Total current liabilities 40,027 50,964
------------ -----------
Stockholders' equity:
Common stock, $.001 par value
50,000,000 shares authorized
9,241,867 shares issued and outstanding
25,000,000 preferred shares authorized 9,242 9,242
Additional paid-in capital 1,465,625 1,465,625
Deficit accumulated during the development stage (1,469,812) (1,443,248)
------------ -----------
Total stockholders' equity 5,055 31,619
------------ -----------
Total liabilities and stockholders' equity $ 45,082 $ 82,583
============ ===========
See notes to financial statements.
10
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six-month period ended February 17, 1993
December 31 (inception)
---------------------- through
2001 2000 December 31, 2001
--------- --------- -----------------
Revenues $ - $ - $ -
--------- --------- -----------------
Operating expenses:
Write-down of development costs - 30,567 811,973
Professional and consulting 12,144 73,298 436,289
Research and development - - 93,498
Business development and travel 1,442 8,576 80,722
Office 12,601 31,095 151,977
Cancellation of indebtedness - - (111,018)
Loss on sale of furniture and equipment - - 11,115
Depreciation and amortization 937 2,310 31,500
--------- --------- -----------------
27,124 145,846 1,506,056
--------- --------- -----------------
Loss from operations (27,124) (145,846) (1,506,056)
Interest income 560 3,658 36,244
--------- --------- -----------------
Net loss $ (26,564) $(142,188) $ (1,469,812)
========= ========= =================
Basic loss per share $ (0.00) $ (0.02) $ (0.28)
========= ========= =================
Weighted average common shares outstanding 9,241,867 9,241,867 5,343,715
========= ========= =================
See notes to financial statements.
11
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three-month period ended
December 31,
------------------------
2001 2000
----------- -----------
Revenues $ - $ -
----------- -----------
Operating expenses:
Professional and consulting 7,042 20,813
Research and development - -
Business development and travel 919 8,256
Office 6,230 12,217
Depreciation and amortization 469 1,155
----------- -----------
14,660 42,441
----------- -----------
Loss from operations (14,660) (42,411)
Interest income 167 1,604
----------- -----------
Net loss $ (14,493) $ (40,837)
=========== ===========
Basic loss per share $ (0.00) $ (0.00)
=========== ===========
Weighted average common shares outstanding 9,241,867 9,241,867
=========== ===========
See notes to financial statements.
12
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six-month period ended February 17, 1993
December 31, (inception)
---------------------- through
2001 2000 December 31, 2001
--------- --------- -----------------
Net loss $ (26,564) $(142,188) $ (1,469,812)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-down of development costs - 30,567 811,973
Depreciation and amortization expense 937 2,310 31,500
Expenses of Company paid by officer 492 (17,922) 49,008
Obligations assumed by stockholders - - 68,040
Issuance of common stock for services/assets - - 67,154
(Increase) decrease in prepaid expenses - 137 1,676
Increase (decrease) in accounts payable (11,429) 32,698 12,445
Cancellation of indebtedness - - (111,018)
Loss on sale of furniture and equipment - - 11,115
--------- --------- -----------------
Net cash used in operating activities (36,546) (94,398) (527,919)
--------- --------- -----------------
Cash flows from investing activities:
Purchase of applied-for patent - - (10,130)
Processed from sale of furniture and equipment - - 5,123
Capital expenditures - (25,000) (725,969)
--------- --------- -----------------
Net cash used in investing activities - (25,000) (730,976)
--------- --------- -----------------
Cash flows from financing activities:
Repayment of loans payable-officer - - (15,649)
Net proceeds from private placement of common stock - - 1,284,335
Loan advances received - - 25,000
--------- --------- -----------------
Net cash provided by financing activities - - 1,293,686
--------- --------- -----------------
Net increase (decrease) in cash and equivalents (36,564) (119,398) 34,791
Cash and equivalents, beginning of period 71,355 253,440 -
--------- --------- -----------------
Cash and equivalents, end of period $ 34,791 $ 134,042 $ 34,791
========= ========= =================
See notes to financial statements.
13
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2001
NOTE-1. UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-QSB and do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments, consisting only of normal
recurring adjustments considered necessary for a fair presentation,
have been included. Operating results for any quarter are not
necessarily indicative of the results for any other quarter or for the
full year.
These statements should be read in conjunction with the financial
statements of Retail Highway.com, Inc. and notes thereto included in
the Company's Annual Report on Form 10-KSB for the year ended June 30,
2001.
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 financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
History and business activity
The Company was incorporated on February 17, 1993 under the name "LBF
Corporation" pursuant to the laws of the State of Nevada to engage in
any lawful corporate purpose. In December 1997, the Company filed a
registration statement with the US Securities and Exchange Commission
on Form 10-SB, registering its common stock under the Securities and
Exchange Act of 1934, as amended (the "34 Act"). The Company's
intention at that time was to seek to acquire assets or shares of an
entity actively engaged in business, which generated revenues or
provided a business opportunity, in exchange for its securities. In
effect, this filing caused the Company to be a full "reporting
company" under the 34 Act.
14
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2001
NOTE-1. UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
History and business activity (continued)
Effective June 19, 1998, the Company acquired certain patent
application rights from FES Innovations, Inc., a British Columbia,
Canada corporation ("FES"). The relevant terms of the transaction
provided for the Company to (i) undertake a "forward split" of its
common stock, whereby 10 shares of common stock were issued in
exchange for each share of common stock issued and outstanding, in
order to establish the number of issued and outstanding common shares
of the Company at Closing to be 5,000,000 shares; and (ii) issue to
FES and its assigns an aggregate of 12,500,000 "restricted" common
shares (post split), representing approximately 71.4% of the Company's
outstanding common stock. In July 1998, the Company filed amended
articles of incorporation and changed its name to International Fuel
Solutions, Inc.
Effective as of March 31, 1999, the Company and FES entered into a
Rescission Agreement, whereby the Company and FES agreed to rescind
the FES Acquisition FES tendered back to the Company's treasury an
aggregate of 12,500,000 "restricted" common shares issued pursuant to
the acquisition and the Company returned the patent application rights
it had acquired. FES also agreed to repay certain balances incurred by
the Company applicable to the recession and other related activities.
Effective April 17, 1999, the Company entered into an agreement with
an unrelated party, whereby the Company agreed to acquire certain
assets owned by the seller, including the concept for an electronic
commerce web site and the rights to business and domain names,
including "Shopshopshopping.com", "Retail Highway.com" and
"Greatestmallonearth.com" (the "Assets"). In exchange for the Assets,
the Company agreed to issue 2,500,000 shares of its common stock,
equal to ownership of approximately 33% of its outstanding shares, in
exchange for all of the Assets. The Company changed its name to
"Retail Highway.com, Inc."
The Company's plan is to establish an "Internet shopping portal" by
providing personalized, intuitive, interactive shopping features
combined with entertainment, community news and information services.
Management intends to utilize the latest Internet technologies to
support multi-vendor shopping carts, powerful search capabilities,
streaming multimedia entertainment and personalized content. The
graphic design and navigation features of the proposed site are
expected to provide a clean and simple user-friendly interface free of
cluttered displays and information overload. Revenues are expected to
be derived from the sales of advertising and a percentage of sales
from its vendor partners.
15
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2001
NOTE-1. UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
History and business activity (continued)
Despite these agreements and the progress made by the Company in
implementing its business plan, during the fiscal year ended June 30,
2001, management developed serious questions concerning the viability
of the Company's proposed business plan. In order to implement the
business plan, management estimated that up to $30 million in capital
would be necessary to successfully develop and implement the Company's
core business and launch its website.
Previously, in April 1999, the Company successfully consummated a
private offering of its common stock pursuant to Regulation S and
Regulation D promulgated under the Securities Act of 1933, as amended,
whereby the Company sold 1,721,867 shares of its common stock at an
offering price of $.75 per share, for total proceeds of approximately
$1,291,400, which funds were utilized for working capital and
commencement of the business plan. During February 2000, the Business
to Consumer ("B2C") space became unpopular with the investment
community. Management, knowing that additional cash investment was
required by the Company, continued its attempts to raise private
funding. While potential investors showed interest in the Company's
business model, the failure of numerous e commerce companies, as well
as depressed stock prices of similar businesses whose securities were
publicly traded, made access to additional capital virtually
impossible.
As a result, in July 2000, management decided that without additional
funding, implementation of the Company's business plan was impossible.
The Company elected to cease retailer acquisition activities and
terminate the two sales consultants, as well as office personnel, in
order to conserve the Company's remaining cash. Management expects to
seek out other private entities seeking to enter the public arena in
order to either enter into a joint venture, or otherwise merge with
these yet unidentified entities.
Based upon the above-mentioned facts, the Company has taken
write-downs of $811,973 in costs related to the development of the
software, website and branding in order to reduce the costs to the
estimated net realizable value.
16
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2001
NOTE-1. UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
Going concern
Since inception, the Company has incurred losses from administrative
expenses and from costs incurred in connection with its business
development. The Company has been dependent upon capital raised from
the sale of common stock to implement its business plan. During the
fiscal year ended June 30, 2001, the Company's management has
developed serious questions regarding the viability of its business
plan. The Company anticipates that it will require additional capital
to continue as a going concern. There can be no assurance, however,
that sufficient capital will be available. These issues raise
substantial doubt about the Company's ability to continue as a going
concern. As a result of these uncertainties, software, web-site
development and branding costs have been adjusted to reflect estimated
net realizable value.
Development stage
The Company has been a development stage company since its inception
on February 17, 1993. Management has determined that implementation of
the Company's original business plan has become improbable. The
Company is seeking to consummate a business combination, which will
provide a business opportunity.
Cash and equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an
original maturity date of three months or less to be cash equivalents.
Basic loss per common share
Basic loss per common share is computed by dividing the net loss
applicable to common shareholders by the weighted average number of
shares outstanding during the period. Diluted loss per share amounts
are not presented because they are anti-dilutive.
Research and development
Research and development costs are charged to operations when incurred
and are included in operating expenses.
17
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2001
NOTE-2. STOCKHOLDERS' EQUITY
Private placement
During May through July 1999, the Company conducted a private
placement under which it issued a total of 1,721,867 shares of its
common stock at a purchase price of $0.75 per share. As of June 30,
1999, a total of $1,711,867 of such shares had been issued with total
proceeds of $1,283,900 received. The remaining 10,000 shares were
issued and $7,500 of proceeds received in July 1999.
NOTE- 3. RELATED PARTY TRANSACTIONS
Loan payable-officer represents an unsecured, non-interest bearing
loan which arose from expenses paid on behalf of the Company by its
president. Such loans are repaid in the ordinary course of business.
NOTE- 4. COMMITMENTS
Software license agreement
On August 10, 1999, the Company entered into an agreement whereby it
purchased a non-exclusive, perpetual and non-transferable license to
utilize certain software. Such software is to be used to enable
on-line users to access information about, and to order
electronically, products and services offered by the Company on its
web site. The Company paid a total of $317,300, consisting of $250,500
in net license fees and $66,800 in first year support and maintenance
fees.
The Company has written off the license fee and the support and
maintenance fee to reflect its net realizable value.
Leasing agreements
Effective April 1, 2001, the Company entered into an operating lease
agreement for the rental of office space. In connection therewith, the
Company paid a $2,887 security deposit. Such deposit is to be applied,
in part, to future rental payments with the balance to be held as a
refundable security by the landlord. The monthly lease amount is
$1,444 for a one year term ending March 31, 2002.
18
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2001
NOTE- 4. COMMITMENTS (CONTINUED)
Patent application
On July 16, 1999, the Company submitted an application to the U.S.
Patent & Trademark Office to register the mark "RETAIL HIGHWAY.COM".
The application is pending.
Legal proceedings
In August 2000, Seigelgale, Inc. ("S&G"), a company that engages in
the business of brand identity, strategic marketing and information
architecture, commenced a lawsuit against the Company for breach of
contract and related causes of action arising from branding, identity
and website development agreements entered into among the parties in
late 1999 and early 2000. In late August, the Company interposed an
answer denying the allegations of the complaint, interposing numerous
affirmative defenses and asserting counterclaims for breach of
contract and related causes of action arising from S&G's failure to
properly and timely perform under the parties' contracts, resulting in
substantial injury to the Company.
In October 2000, the parties executed a letter agreement containing
settlement terms, which provide for the Company to pay S&G $187,419.
In February 2001, a definitive settlement agreement was executed,
which required the Company to pay $25,000. The settlement further
provides for the balance to be paid over the following two years if
the Company successfully closes either a debt or equity financing. If
this financing closes, the Company will be obligated to pay 3% of the
offering proceeds to S&G, up to a maximum of $162,419. However, if the
Company does not successfully close such a financing within the
established time period, the balance of the settlement amount is
forgiven and S&G will release the Company from any further liability.
System design
During October 1999, the Company also entered into agreement with a
computer systems design and consulting firm to plan and design systems
to support Internet-based electronic commerce, customer service,
fulfillment interfaces and content management. It was originally
estimated that the fees for such services would total $525,000 plus
116,667 shares of the Company's common stock. Fees of $60,000 plus
20,000 shares of the Company's common stock were paid at the
commencement of the project with the balance of the payments in cash
and stock payable over the term of the project. During the year ended
June 30, 2001, the consulting firm agreed to the cancellation of all
debt it was owed by the Company. As a result, the Company recognized
$111,018 in gain from cancellation of indebtedness it had recorded.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RETAIL HIGHWAY.COM, INC.
(Registrant)
Dated: February 14, 2002
By:s/ Michael Levine
-----------------------------------
Michael Levine,
President and Secretary
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