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: March 31, 2002
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)
(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 May 15, 2002 was 9,241,867 shares.
1
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the nine month period ended March
31, 2002, 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 our unaudited
Financial Statements and notes thereto included herein. In connection with, and
because it desires to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company cautions readers
regarding certain forward looking statements in the following discussion and
elsewhere in this report and in any other statement made by, or on the behalf of
the Company, whether or not in future filings with the Securities and Exchange
Commission. Forward looking statements are statements not based on historical
information and which relate to future operations, strategies, financial results
or other developments. Forward looking statements are necessarily based upon
estimates and assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond the Company's control and many of which, with respect to future business
decisions, are subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ materially from
those expressed in any forward looking statements made by, or on behalf of, the
Company. The Company disclaims any obligation to update forward looking
statements.
OVERVIEW
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
2
common stock equal to ownership of approximately 33% of our then 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, 2001, 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 nine month periods ended March 31,
2002 and 2001
We generated no revenues during the nine month periods ended March 31, 2002
and 2001 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.
Selling, general and administrative expenses were $43,775 during our nine
month period ended March 31, 2002, compared to $175,362 during the comparable
period in 2001, a decrease of $131,587 (75%). This decrease was attributable to
our discontinuance of our former business plan as described herein. The expenses
incurred during the nine month period ended March 31, 2002, arose primarily from
professional and consulting fees ($19,995) 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
($20,807).
As a result, we incurred a net loss of $(43,166) during the nine month
period ended March 31, 2002 (less than $0.01 per share) as compared to our net
loss of $(171,052) ($.02 per share) during the comparable period in 2001.
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.
3
We have no full time employees. Our Chief Executive Officer, President and
Secretary has agreed to allocate a portion of his 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 "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.
4
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 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
5
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 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. Ongoing discussions between us
and Cryptometrics have determined that we will issue approximately 85-90%
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 June 15,
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
6
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 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.
7
We will participate in a business opportunity only after the negotiation
and execution of appropriate written agreements. 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 March 31, 2002, we had $20,951 in cash and cash equivalents. Also at
March 31, 2002, we had accounts payable in the amount of $39,221 and an
outstanding loan payable in the principal amount of $1,657, 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 not sufficient
to meet our current obligations. Furthermore, as we continue operations we
expect to incur additional costs and expenses related to the implementation of
our business plan described above. To meet these 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
8
directors, management believes that we will be able to continue operations
through the foreseeable future. However, because of our working capital deficit,
stockholders' deficit and history of operating losses, there is substantial
doubt about our ability to continue as a going concern. It is further
anticipated that we will continue to incur expenses without corresponding
revenues during the foreseeable future.
Inflation
Although management expects that our operations will be influenced by
general economic conditions, we do not believe that inflation had a material
effect on our results of operations during the nine month period ended March 31,
2002.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There were no new legal proceedings filed or threatened involving our
company during the nine month period ended March 31, 2002.
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
March 31, 2002.
9
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED BALANCE SHEETS
ASSETS
------
March 31, June 30,
2002 2001
------------- -----------
(unaudited)
Current assets:
Cash and cash equivalents $ 20,951 $ 71,355
Prepaid expenses 1,444 2,887
------------- -----------
Total current assets 22,395 74,242
------------- -----------
Office equipment and computer software,
net of accumulated depreciation 6,936 8,341
------------- -----------
TOTAL ASSETS $ 29,331 $ 82,583
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Accounts payable $ 39,221 $ 48,874
Loan payable-officer 1,657 2,090
------------- -----------
Total current liabilities 40,878 50,964
------------- -----------
Stockholders' equity (deficit):
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 (1,486,414) (1,443,248)
----------- ----------
Total stockholders' equity (deficit) (11,547) 31,619
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 29,331 $ 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)
Nine-month period ended February 17, 1993
March 31, (inception)
----------------------- through
2002 2001 March 31, 2002
---------- --------- --------------
Revenues $ - $ - $ -
---------- ---------- --------------
Operating expenses:
Professional and consulting 19,995 86,167 444,140
Research and development - - 93,498
Business development and travel 1,568 2,768 80,848
Office 20,807 41,907 161,627
Write-down of development costs - 30,567 811,973
Cancellation of indebtedness - - (111,018)
Loss on sale of office equipment - 11,115 11,115
Depreciation and amortization 1,405 2,838 31,968
---------- ---------- --------------
Total operating expenses 43,775 175,362 1,524,151
---------- ---------- --------------
Loss from operations (43,775) (175,362) (1,524,151)
Interest income 609 4,310 36,293
---------- ---------- --------------
NET LOSS $ (43,166) $ (171,052) $ (1,487,858)
========== ========== ==============
Basic loss per share $ (0.00) $ (0.02) $ (0.02)
========== ========== ==============
Weighted average common shares outstanding 9,241,867 9,241,867 5,452,500
========== ========== ==============
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
March 31,
-------------------------
2002 2001
---------- ----------
Revenues $ - $ -
---------- ----------
Operating expenses:
Professional and consulting 7,851 12,869
Research and development - -
Business development and travel 126 (5,808)
Office 8,206 10,812
Loss on sale of office equipment - 11,115
Depreciation and amortization 468 528
---------- ----------
Total operating expenses 16,651 29,516
---------- ----------
Loss from operations (16,651) (29,516)
Interest income 49 652
---------- ----------
NET LOSS $ (16,602) $ (28,864)
========== ==========
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)
Nine-month period ended February 17, 1993
March 31, (inception)
----------------------- through
2002 2001 March 31, 2002
-------- --------- --------------
Cash flows from operating activities:
Net loss $(43,166) $(171,052) $ (1,486,414)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-down of development costs - 30,567 811,973
Loss on sale of office equipment - 11,115 11,115
Depreciation and amortization 1,405 2,838 31,968
Cancellation of indebtedness - - (111,018)
Expenses of Company paid by officer - - 48,516
Obligations assumed by stockholders - - 68,040
Issuance of common stock for services/assets - - 67,154
(Increase) decrease in prepaid expenses 1,443 4,248 3,119
Increase (decrease) in accounts payable (9,653) (31,239) 14,221
-------- --------- --------------
Net cash used in operating activities (49,971) (153,523) (541,326)
-------- --------- --------------
Cash flows from investing activities:
Purchase of applied-for patent - - (10,130)
Proceeds from sale of office equipment - 5,123 5,123
Capital expenditures - (3,965) (725,969)
-------- --------- --------------
Net cash provided by (used in) investing activities - 1,158 (730,976)
-------- --------- --------------
Cash flows from financing activities:
Net proceeds from private placement of common stock - - 1,284,335
Repayment of loans payable-officer (433) (10,410) (16,082)
Loan advances received - - 25,000
-------- --------- --------------
Net cash provided by (used in) financing activities (433) (10,410) 1,293,253
-------- --------- --------------
Net increase (decrease) in cash and cash equivalents (50,404) (162,775) 20,951
Cash and cash equivalents- beginning 71,355 253,440 -
-------- --------- --------------
CASH AND CASH EQUIVALENTS- ENDING $ 20,951 $ 90,665 $ 20,951
======== ========= ==============
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)
March 31, 2002
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.
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.
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.
14
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2002
NOTE 1- UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
- ----------------------------------------------------------
History and business activity (continued)
- -----------------------------------------
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.
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.
15
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2002
NOTE 1- UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
- ----------------------------------------------------------
History and business activity (continued)
- -----------------------------------------
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.
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.
16
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2002
NOTE 1- UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
- ----------------------------------------------------------
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.
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.
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.
17
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2002
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. Effective April 1, 2002, the Company is on a month to month
arrangement with the same monthly lease payments. Half of the security deposit
will be applied to the last month of the lease.
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.
18
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2002
NOTE 4- COMMITMENTS (CONTINUED)
- -------------------------------
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: May 20, 2002
By:s/ Michael Levine
-------------------------------------
Michael Levine,
President and Secretary
20