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
[ ] Transitional Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 2000
Commission File No. 0-23485
RETAIL HIGHWAY.COM, INC.
(Name of small business issuer in its charter)
Nevada 98-0177646
------ ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
430 Peninsula Avenue, Suite One
San Mateo, California 94401
(650) 685-9926
(Address, including zip code and telephone number, including area
code, of registrant's executive offices)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
------------
(Title of class)
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 preceding 12
months (or for such shorter period that the Company 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 disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X
Issuer's revenues for its most recent fiscal year: $ -0-
(Continued on Following Page)
<PAGE>
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 asked prices of such stock, as of a specified date within the past 60
days: As of October 16, 2000: $2,209,785.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of October 16, 2000 there were
9,241,867 shares of the Company's common stock issued and outstanding.
Documents Incorporated by Reference: None
This Form 10-KSB consists of Thirty-Nine pages.
Exhibit Index is Located at Page Thirty-Eight.
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
RETAIL HIGHWAY.COM, INC.
PAGE
Facing Page
Index
PART I
Item 1. Description of Business................................... 4
Item 2. Description of Property................................... 9
Item 3. Legal Proceedings......................................... 9
Item 4. Submission of Matters to a Vote of
Security Holders...................................... 10
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters....................... 10
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................ 10
Item 7. Financial Statements...................................... 13
Item 8. Changes in and Disagreements With
Accountants on Accounting
and Financial Disclosure.............................. 29
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act..................... 29
Item 10. Executive Compensation.................................... 31
Item 11. Security Ownership of Certain Beneficial
Owners and Management................................. 32
Item 12. Certain Relationships and Related
Transactions.......................................... 34
PART IV
Item 13. Exhibits and Reports on Form 8-K.......................... 35
SIGNATURES........................................................... 36
EXHIBIT INDEX ....................................................... 37
3
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Retail Highway.com, Inc., f/k/a International Fuel Solutions, Inc., f/k/a
LBF Corporation (the "Company"), was incorporated on February 17, 1993 under the
laws of the State of Nevada to engage in any lawful corporate purpose. Effective
April 17, 1999, the Company 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"). The Company issued 2,500,000 shares
of its common stock equal to ownership of approximately 33% of its then
outstanding shares, in exchange for all of the Assets.
As a result of this acquisition, the Company's principal business objective
was changed to becoming a primary portal and transaction point for online
extensions of "Bricks and Mortar" ("BAM") retail stores.
During the fiscal year ended June 30, 2000, the Company completed a
demonstration model of its website, which is currently available on the
Internet. In this regard, the Company completed various agreements related to
its website development and market development activities, including agreements
with (i) Q Strategies, LLC. ("QS"), a West Coast based customizing company that
specializes in Interworld Commerce Exchange packages, whereby QS has agreed to
provide the Company with planning and systems design services and integration of
third party support services to support the Company's Internet-based electronic
commerce; (ii) InterWorld Corporation ("Interworld"), which provides
comprehensive capabilities for product merchandising, account management and
order management; and (iii) Siegel & Gale, Inc. ("S&G"), a top ten interactive
and branding agency, whereby S&G agreed to provide the Company with web site
development and market posturing services. Management of the Company believes
that its relationship with Interworld is particularly important for the
Company's development in accommodating the wide range of requirements imposed by
the need to interface to a large number of different retailer systems. In
addition, Interworld also supports personalizing the customer experience based
on user preferences, registration profiles, geographic location and other data.
As of the date of this report, the Company is engaged in a dispute with S&G and
this agreement has been terminated. See "PART I, ITEM 3, LEGAL PROCEEDINGS."
Despite these agreements and the progress made by the Company in
implementing its business plan, during the fiscal year ended June 30, 2000,
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
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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. Other factors also contributed to the inability of the
Company to raise additional capital, including:
- In January 2000, the Company filed an application to list its
common stock for trading on the OTC Bulletin Board operated by
the National Association of Securities Dealers, Inc. While the
Company did finally obtain approval of its application, such
approval was not received until August 2000. Potential investors
advised that they would not be interested in investing in the
Company unless there was a market for the Company's securities.
While speculative, management believes that a more timely
approval would have made the Company more attractive to potential
investment.
- S&G, who the Company had contracted to create the front end of
the Company's website, failed to create a logo or website
acceptable to the Company's use, which resulted in delaying the
beta launch of the Company's functioned website. This delay
caused a credibility problem with both potential investors and
retail partners.
- Despite the negative impact that e-commerce businesses
experienced during the Spring of 2000, the Company was able to
execute letters of intent with potential retailers for the
Company's website, including Software, Inc. and Fredericks of
Hollywood. However, other retailers expressed doubt about the
effectiveness of their Internet strategies, which had a negative
impact on the Company's ability to attract retailers to its
website.
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
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office personnel, in order to conserve the Company's remaining cash. As of the
date of this report, management is still actively pursuing relationships that
will allow the continued development of the system that could be licensed to a
suitable end user. However, there can be no assurances that this will occur. In
the event this does not occur, 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.
Employees
The Company presently has one (1) employee, including its President,
Michael Levine, who does not receive a salary. See "PART III, ITEM 9, DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS" below. The Company intends to
employ additional persons if the Company implements its existing business plan.
If sufficient capital resources are obtained by the Company to allow it to
proceed as planned and while no assurances can be provided that additional
employees will be retained in the future, management has projected that the
Company will require approximately 40 new employees, including employees in
technology, sales, advertising, promotions, customer service, accounting and
other support staff persons. If the Company is unable to accomplish this
objective, no new employees are expected to be hired by the Company.
Competition
Consumers are confronted with a wide range of options when shopping online,
including Online-only Stores, such as Amazon.com and CDNow; Online Extensions of
BAM Retailers, including L.L. Bean, Barnes & Noble and Toys R Us; "Horizontal"
Portals, including AOL, Yahoo and MSN; and Dedicated Shopping Destinations,
including iMall.com and fashionmall.com. Many of the sites operate largely or
entirely on the click-through model, essentially offering product information
and search capabilities but not selling products directly.
Online-only Stores are largely responsible for driving the recent growth of
the e-commerce industry. These destinations generally focus on a single product
category, although Amazon, for example, is attempting to broaden its reach. They
provide a consumer-friendly experience and in many cases are technically
excellent. Using aggressive promotion and marketing, a few of these online-only
stores have been extremely successful. For example, Amazon.com is competitive
with the top horizontal portals in online market reach (10%) This success is
measured in category dominance, phenomenal growth and huge market valuations,
but not necessarily in profitability. IPO capital has funded expansion through
acquisition and the addition of new product categories.
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However, ongoing (and anticipated future) operating losses are the result of
very high expenses associated with brand building and cutthroat price
competition within their commodity categories.
Horizontal Portals leverage their extremely heavy traffic to generate
click-throughs from their shopping "channels." Typically, visitors click-through
to individual retailer sites. After a purchase is made, the shopper must then
navigate back to the shopping channel to visit another store. Portals derive
revenue from a combination of click-through charges and commissions on each
transaction. The major portals also charge their retailing partners large rental
fees for prominent positions on their site.
Dedicated Shopping destinations operate in a similar way to the horizontal
portals, except that the sites are shopping- specific. The business proposition
is aggregation of traffic to provide click-throughs to retailer sites in return
for fees and commissions. These sites also spend heavily in advertising to
generate traffic on behalf of their affiliated retailers. Many of these sites
promote the large number of retailers they represent without any apparent
concern for quality or brand prominence. For example, imall.com features in
their store listings for electronics such household names as Eddie & Mac's
Discount Electronics and FM Sounds In-the-Ear Radio.
If the Company is able to proceed with its business plan, management
believes that there are four important differences between the Company and
competitive online shopping sites including:
(i) The Company will represent only BAM Retailers. As a
result, customers will have a sense of familiarity, comfort and
security.
(ii) The Company will not operate on the click-through model.
All retailer product data will reside with the Company and customers
can make multiple purchases at different stores without ever leaving
the site and becoming "lost in cyberspace." Product searches should be
faster and more effective, resulting in higher visitor retention rates,
transaction size and look-to-buy ratio.
(iii) Shoppers will use a multi-vendor shopping cart and
single checkout transaction, regardless of the number of stores from
which purchases are made.
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(iv) The Company will provide extensive entertainment,
news/information and community-oriented features to establish the
"one-stop lifestyle destination."
The Company believes that these advantages will make its web site a
compelling destination for online shoppers across a broad demographic range and
attract quality BAM Retailer partners to establish or enhance their online
presence. The key factors for competitive insulation are a successful and timely
launch, fast growth and the development of a commanding brand presence. No
assurances can be provided that the Company will successfully establish these
factors within the time parameters described herein, or at all.
However, despite the aforesaid discussion, the industry is highly
competitive. The Company has and will continue to encounter competition from
numerous other firms and established institutions, many of which are larger,
have longer histories of operations and have greater financial, marketing and
other resources than that of the Company. No assurances can be provided that the
Company will be successful in its efforts to maintain market acceptance or that,
even if successful, will be able to attract sufficient sales to make its
operations commercially profitable.
Trademarks
The Company holds the rights to the names "Shopshopshopping.com,"
"Retailhighway.com" and "Greatestmall on earth.com." In addition, on July 16,
1999, the Company submitted an application to the US Patent and Trademark office
to register the mark "RetailHighway.com." Subsequently, the US Patent and
Trademark Office assigned the serial number 75/755804 to the Company's
application. The Company's initial application was rejected but a new
application was refiled under different criteria for acceptance. As of the date
of this report, this new application is pending. The Company does not utilize
any other trademarks or patent rights in its business.
Government Regulations
The Company is not currently subject to direct federal, state, or local
regulation and laws or regulations applicable to access to, or commerce on, the
Internet, other than regulations applicable to business generally. However, due
to the increasing popularity and use of the Internet and other on-line services,
it is possible that a number of laws and regulations may be adopted with respect
to the Internet or other on-line services covering issues such as user privacy,
"indecent" materials, freedom of expression, pricing, content and quality of
products and services, taxation,
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advertising, intellectual property rights and information security. The adoption
of any such laws or regulations might also decrease the rate of growth of
Internet use, which in turn could decrease the demand for the Company's products
and services or increase the cost of doing business or in some other manner have
a material adverse affect on the Company's business, results of operations and
financial condition. In addition, applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, libel, obscenity and personal privacy is uncertain.
The vast majority of such laws were adopted prior to the advent of the Internet
and related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. The Company does not
believe that such regulations, which were adopted prior to the advent of the
Internet, govern the operations of the Company's business nor have any claims
been filed by any state implying that the Company is subject to such
legislation. There can be no assurance, however, that a state will not attempt
to impose these regulations upon the Company in the future or that such
imposition will not have a material adverse affect on the Company's business,
results of operations and financial condition.
ITEM 2. DESCRIPTION OF PROPERTY
Facilities. The Company's principal place of business located at 430
Peninsula Avenue, Suite One, San Mateo, California 94401, which consists of
approximately 800 square feet of executive office space. This space is provided
to the Company on a rent free basis by Joseph Owens, a director of the Company.
In addition, the Company also maintains an office at 478 Queen St. East,
Toronto, Ontario, Canada M5A 1T7, which consists of approximately 3,200 square
feet of executive office space. It pays a monthly rent of $5,096 (CDN) pursuant
to a written lease which expires in August 2004. The cost for this location
increases by $1.00 per square foot per year (CDN) each year of the lease term.
The Company's principal office's telephone number is (650) 685-9926 and
facsimile number is (650) 685-9930.
The Company neither owns nor leases any other properties, either real or
personal.
ITEM 3. LEGAL PROCEEDINGS
In August 1999, Siegel & Gale Inc. ("S&G"), a company that engages in the
business of brand identity, strategic marketing and information architecture,
commenced a lawsuit in the United States District Court for the Southern
District of New York against the Company for breach of contract and related
causes of action arising from branding, identity and website development
agreements entered
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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. The matter is currently pending.
There are no other material legal proceedings which are pending or have
been threatened against the Company of which management is aware.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three month period ended June 30, 2000, no matters were
presented to the Company' shareholders for approval.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
(a) Market Information. In January 2000, the Company filed an application
to trade its common stock on the OTC Bulletin Board operated by the NASD. The
Company's application was approved in August 2000. As of the date of this
report, the price of the Company's common stock was $.51 bid, $1.00 asked. Its
trading symbol is "RHWY."
(b) Holders. There are 97 holders of the Company's Common Stock, not
including those persons who hold their securities in "street name."
(c) Dividends. The Company has not paid any dividends on its Common Stock
since its inception. The Company does not foresee that the Company will have the
ability to pay a dividend on its Common Stock in the fiscal year ended June 30,
2001.
ITEM 6. 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
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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
In April 1999, the Company successfully consummated an acquisition of
certain assets owned by Michael Levine, including an electronic commerce web
site and the rights to business and domain names, including
"Shopshopshopping.com," "Retailhighway.com" and "Greatestmall on earth.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 acquisition was
successfully consummated effective April 17, 1999, and the Company changed its
name to "Retail Highway.com, Inc."
Plan of Operation
The Company generated no revenues during the fiscal year ended June 30,
2000 and it is not anticipated that it will be able to generate any revenues in
the foreseeable future, unless sufficient funding to allow the Company to
completely develop its website and solicit BAM retailers is obtained. As of the
date of this report, management is doubtful about the Company's ability to raise
these funds. See "Liquidity and Capital Resources" below.
Under the assumption that the Company will not be able to raise the
necessary capital, management is currently contemplating seeking out other
Internet companies in order to establish a relationship that will allow the
continued development of the Company's system. If the system is developed,
management is reviewing the possibility of licensing the system to a suitable
end user. However, as of the date of this report, no such entity has been
identified and there are no agreements between the Company and any other entity
which may lead an investor to believe that such a relationship will be
forthcoming in the foreseeable future.
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If, after due course, management is unable to implement the Company's
business plan, or otherwise license the existing system to an end user, it may
be probable that management will attempt to seek out, investigate and, if such
investigation warrants, acquire an interest in business opportunities presented
to it by persons or firms who or which desire to seek the perceived advantages
of an Exchange Act registered corporation which trades its securities. However,
as of the date of this report, management has had no discussions with any other
entity in this regard and this is considered a last resort by management in
order to provide the opportunity to the Company's investors for liquidity in
their investment.
Liquidity and Capital Resources
During the fiscal year ended June 30, 2000, the Company incurred a net loss
of ($436,449) ($.05 per share) as a result of its incurring ongoing research and
development costs related to the implementation of the Company's business plan,
as well as other general and administrative expenses. At June 30, 2000, the
Company had $253,440 in cash.
At June 30, 2000, the Company had an outstanding loan payable in the
principal amount of $18,178, which was due to Mr. Levine and arose out of
expenses incurred by Mr. Levine on behalf of the Company. 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 previously discussed in Part I, Item 1, above, in order to implement the
Company's business plan, management recognizes the need for additional operating
capital. Previously, in April 1999, the Company successfully consummated a
private offering of its common stock 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. From these funds the Company was able to begin
development of its website. However, management has estimated that, in order to
fully implement the Company's business plan, it will be necessary for the
Company to raise additional funds of up to $30 million, in either debt, equity
or a combination of the same. To date, management has undertaken discussions
with various investment bankers and venture capitalists who have expressed an
interest in providing this funding to the Company, but no definitive agreement
has been reached between the Company and any other entity to provide such
funding to the Company and no assurances can be provided that such an agreement
will be reached in the future. Management believes that this is due, in large
part, to the fact that during February 2000, the B2C space became unpopular with
the investment community. See "PART I, ITEM 1, DESCRIPTION OF BUSINESS," While
potential investors showed
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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, has made access to additional capital virtually
impossible. Other factors also contributed to the inability of the Company to
raise additional capital, which are described above in "PART I, ITEM 1,
DESCRIPTION OF BUSINESS."
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. As of the date of this report, management is still
actively pursuing relationships that will allow the continued development of the
system that could be licensed to a suitable end user. However, there can be no
assurances that this will occur. In the event this does not occur, 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.
Because the Company is not currently required to pay salaries to any of its
officers or directors, management believes that the Company has sufficient funds
to continue operations through the foreseeable future. It is further anticipated
that the Company 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 fiscal year ended June 30, 2000.
ITEM 7. FINANCIAL STATEMENTS
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RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report F-2
Balance sheet F-3
Statements of operations F-4
Statement of stockholders' equity (deficit) F-5 - F-6
Statements of cash flows F-7
Notes to financial statements F-8 - F-15
F-1
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Retail Highway.com, Inc.
San Mateo, California
We have audited the accompanying balance sheet of Retail Highway.com, Inc.
(formerly International Fuel Solutions, Inc.) (a development stage company), as
of June 30, 2000 and the related statements of operations, shareholders' equity
(deficit), and cash flows for the years ended June 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Retail Highway.com, Inc. (formerly
International Fuel Solutions, Inc.) for the period February 17, 1993 (inception)
through June 30, 1998, were audited by other auditors whose report dated
September 10, 1998, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Retail Highway.com, Inc.
(formerly International Fuel Solutions, Inc.) (a development stage company) at
June 30, 2000 and the results of its operations and its cash flows for the year
then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Retail
Highway.com, Inc. will continue as a going concern. As more fully described in
Note 1, the Company has incurred operating losses. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustment to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
HORTON & COMPANY, L.L.C.
Wayne, New Jersey
October 12, 2000
F-2
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
BALANCE SHEET
June 30, 2000
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and equivalents $ 253,440
Prepaid expenses 18,533
---------
Total current assets 271,973
Office equipment and computer software,
net of accumulated depreciation 23,839
Other assets 50,000
---------
Total assets $ 345,812
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 173,539
Loan payable-officer 18,178
---------
Total current liabilities 191,717
---------
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
Additional paid-in capital 1,465,625
Deficit accumulated during the development stage (1,320,772)
---------
Total stockholders' equity 154,095
---------
Total liabilities and stockholders' equity $ 345,812
=========
See notes to financial statements
</TABLE>
F-3
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
STATEMENTS OF OPERATIONS
<CAPTION>
February 17, 1993
Year ended June 30, (inception)
------------------------- through
2000 1999 June 30, 2000
------------ ----------- -------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
------------ ----------- -------------
Operating expenses:
Write-down of development costs 731,406 - 731,406
Professional and consulting 244,778 51,971 335,073
Research and development - 48,784 93,498
Business development and travel 45,284 26,457 75,692
Office 71,777 15,809 88,514
Depreciation and amortization 27,338 - 27,338
------------ ---------- ------------
1,120,583 143,021 1,351,521
------------ ---------- ------------
Loss from operations (1,120,583) (143,021) (1,351,521)
Interest income 25,370 5,379 30,749
------------ ---------- ------------
Net loss $ (1,095,213) $ (137,642) $ (1,320,772)
============ ========== ============
Basic loss per share $ (0.12) $ (0.02) $ (0.29)
============ ========== ============
Weighted average common shares outstanding 9,235,337 5,792,129 4,516,149
============ ========== ============
See notes to financial statements
</TABLE>
F-4
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
Deficit
Accumulated
Number of Additional During the
Shares Common Paid-in Development
Common Stock Stock Capital Stage Total
------------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at February 17, 1993 - $ - $ - $ - $ -
Stock issued for cash advances made on behalf of the
Company and services provided at $.0002 per share 1,500,000 1,500 (1,200) - 300
Net loss - - - (300) (300)
------------ ------ ---------- ----------- -----------
Balance at June 30, 1993 and 1994 1,500,000 1,500 (1,200) (300) -
Stock issued for cash advances made on behalf of the
Company and services provided at $.00006 per share 3,500,000 3,500 (3,290) - 210
Net loss - - - (210) (210)
------------ ------ ---------- ----------- -----------
Balance at June 30, 1995 5,000,000 5,000 (4,490) (510) -
Expenses paid by shareholders on behalf of the Company - - 10,000 - 10,000
Net loss - - - (10,000) (10,000)
------------ ------ ---------- ----------- -----------
Balance at June 30, 1996 and 1997 5,000,000 5,000 5,510 (10,510) -
Patent and related costs contributed at $.004 per share - - 51,644 - 51,644
Net loss - - - (77,407) (77,407)
------------ ------ ---------- ----------- -----------
Balance at June 30, 1998 5,000,000 $5,000 $ 57,154 $ (87,917) $ (25,763)
============ ====== ========== =========== ===========
See notes to financial statements
</TABLE>
F-5
18
<PAGE>
<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
Deficit
Accumulated
Number of Additional During the
Shares Common Paid-in Development
Common Stock Stock Capital Stage Total
------------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1998 5,000,000 $5,000 $ 57,154 $ (87,917) $ (25,763)
Obligations assumed by shareholders on behalf of the
Company - - 113,378 - 113,378
Stock issued to acquire intangible assets 2,500,000 2,500 (2,500) - -
Stock issued in private placement 1,711,867 1,712 1,282,188 - 1,283,900
Costs incurred in connection with private placement - - (7,065) - (7,065)
Net loss - - - (137,642) (137,642)
----------- ------ ---------- ----------- -----------
Balance at June 30, 1999 9,211,867 9,212 1,443,155 (225,559) 1,226,808
Stock issued in private placement 10,000 10 7,490 - 7,500
Stock issued for professional services 20,000 20 14,980 - 15,000
Net loss - - - (1,095,213) (1,095,213)
----------- ------ ---------- ----------- -----------
Balance at June 30, 2000 9,241,867 $9,242 $1,465,625 $(1,320,772) $ 154,095
=========== ====== ========== =========== ===========
See notes to financial statements
</TABLE>
F-6
19
<PAGE>
<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
STATEMENTS OF CASH FLOWS
<CAPTION>
February 17,1993
Year ended June 30, (inception)
----------------------- through
2000 1999 June 30, 2000
----------- --------- -------------
<S> <C> <C> <C>
Net loss $(1,095,213) $(137,642) $ (1,320,772)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-down of development costs 731,406 - 731,406
Depreciation and amortization expense 27,338 - 27,338
Expenses of Company paid by officer 2,965 15,213 48,516
Obligations assumed by stockholders - 68,040 68,040
Issuance of common stock for services/assets 15,000 - 67,154
Increase in prepaid expenses (8,164) (239) (8,403)
Increase in accounts payable 43,765 8,051 62,521
----------- --------- -------------
Net cash used in operating activities (282,903) (46,577) (324,200)
----------- --------- -------------
Cash flows from investing activities:
Purchase of applied for patent - - (10,130)
Capital expenditures (721,565) - (721,565)
----------- --------- -------------
Net cash used in investing activities (721,565) - (731,695)
----------- --------- -------------
Cash flows from financing activities:
Net proceeds from private placement of common stock 7,500 1,276,835 1,284,335
Loan advances received - - 25,000
----------- --------- -------------
Net cash provided by financing activities 7,500 1,276,835 1,309,335
----------- --------- -------------
Net increase (decrease) in cash and equivalents (996,968) 1,230,258 253,440
Cash and equivalents, beginning of period 1,250,408 20,150 -
----------- ---------- -------------
Cash and equivalents, end of period $ 253,440 $1,250,408 $ 253,440
=========== ========== =============
See notes to financial statements
</TABLE>
F-7
20
<PAGE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
1. Summary of significant accounting policies
This summary of significant accounting policies of Retail Highway.com,
Inc. (hereinafter "Retail Highway" or the "Company") is presented to
assist in understanding the financial statements. The financial
statements and notes are representations of the management of Retail
Highway which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
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.
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.
F-8
21
<PAGE>
1. Summary of significant accounting policies (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,
2000, 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.
F-9
22
<PAGE>
1. Summary of significant accounting policies (continued)
History and business activity (continued)
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. As of the date of this
report, management is still actively pursuing relationships that will
allow the continued development of the system that could be licensed to
a suitable end user. However, there can be no assurances that this will
occur. In the event this does not occur, 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 a $731,406
write-down of 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, 2000, 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. Despite the fact that implementation at the
Company's original business plan has become improbable, the Company is
seeking to further develop its system for licensing purposes.
Concentration of credit risk
The Company currently maintains cash balances with one bank in excess
of limits insured by the Federal Deposit Insurance Corporation (FDIC).
At June 30, 2000, the Company's cash balance exceeded the FDIC insured
limit by approximately $149,000. The Company also maintains cash in a
money market account with an investment fund company. The Company has
not experienced any losses in such accounts and believes they are not
exposed to any significant credit risk on cash.
F-10
23
<PAGE>
1. Summary of significant accounting policies (continued)
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.
2. Stockholders' equity (deficit)
Capitalization
The Company initially authorized 2,500 shares of no par value common
stock. In May 1993, the Company issued 300 shares of common stock
valued at $300 or $1.00 per share for services and cash advances paid
on behalf of the Company. In October 1995 the Company issued 700 shares
of common stock valued at $210 or $.30 per share for services and cash
advances paid on behalf of the Company.
In August 1996 the Company's board of directors and shareholders
authorized an increase in the Company's authorized stock to 50,000,000
shares of $.001 par value common stock and 25,000,000 shares of $.001
par value preferred stock with preferences to be determined by the
board of directors at the time of issuance. The Secretary of the State
of Nevada issued a Certificate of Amendment to the Articles of
Incorporation in September 1997 relative to the increase in the
authorized shares of stock.
In August 1997, the board of directors of the Company approved a 500 to
1 forward split making the outstanding common stock equal to 500,000
shares.
On June 19, 1998, the board of directors of the Company approved a 10
to 1 forward split making the outstanding common stock equal to
5,000,000 shares.
F-11
24
<PAGE>
2. Stockholders' equity (deficit) (continued)
1998 share issuance and subsequent recission
On June 19, 1998 the Company purchased certain patent application
rights from an unrelated party in exchange for 12,500,000 shares of its
common stock. The transaction was valued at predecessor cost of $51,644
or $.004 per share.
Effective March 31, 1999, the Company entered into a Recission
Agreement whereby the 12,500,000 shares were returned to the Company's
treasury. The number of shares outstanding at June 30, 1998 and for the
period from the original issuance of the shares (June 18, 1998) through
the effective date of the Recission (March 31, 1999) have been restated
to give retroactive effect to the Recission Agreement. As a result, the
Company's stockholders' equity is presented as if the shares had never
been issued. Basic loss per share for the year ended June 30, 1998, has
also been restated.
In conjunction with the Recission agreement, certain shareholders
agreed to assume obligations incurred on behalf of the Company. The
assumption of Company obligations was recorded as a capital
contribution, resulting in an increase in additional paid-in capital of
$113,378.
1999 share issuance
On April 17, 1999, the Company issued 2,500,000 shares of its common
stock to acquire certain assets, including an electronic commerce web
site and the rights to business and domain names (Note 1). No assets
were recorded in the transaction because the seller had incurred only
nominal costs for the assets and had no operations.
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.
The Company anticipates using the proceeds of the private placement to
fund the development of its web site and related operating and
marketing expenses.
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.
During the years ended June 30, 2000 and 1999, and since inception, the
Company has maintained a mailing address at a shareholder's place of
business at no cost to the Company.
F-12
25
<PAGE>
4. Income taxes
The Company accounts for income taxes using the ability method in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under this method, deferred tax assets
and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured
using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. There were no significant
temporary differences leading to deferred tax assets or liabilities as
of June 30, 2000.
As of June 30, 2000, the Company has a deferred tax asset of $460,000
which arises from a net operating loss carryforward of approximately
$1,320,000. Because of the uncertainty of the Company's ability to
generate taxable income in the future to utilize the net operating loss
carryforward, such deferred tax asset has been fully reserved through a
valuation allowance.
The net change in the valuation allowance for the years ended June 30,
2000 and 1999 was $415,000 and $27,510, respectively.
The Company's net operating loss carryforward expires in the years 2006
through 2020.
5. 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 in the current year to reflect its net realizable
value.
Leasing agreements
Effective August 1, 1999, the Company entered into an operating lease
agreement for the rental of office space. In connection therewith, the
Company paid a $10,233 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 lease is for a five year and
two month term ending September 30, 2004.
F-13
26
<PAGE>
5. Commitments (continued)
Leasing agreements (continued)
Future minimum payments under this operating lease are as follows:
Year ending
June 30,
-----------
2001 $ 41,222
2002 43,491
2003 45,760
2004 48,030
Thereafter 12,055
--------
$190,558
========
In addition, the Company is obligated for certain increases in the
landlord's operating costs and real estate taxes.
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.
Brand development
During October 1999, the Company entered into an agreement with a
marketing firm to develop the Retail Highway.com brand. The original
fees for the project totaled $175,000 with $70,000 to be paid upon
commencement of the project and the balance to be paid within
approximately 60 to 90 days. To date, the marketing firm has billed a
total of $514,838 of which $140,000 has been paid by the Company. The
Company disputes the amount due and has initiated a legal action
against the marketing firm as described in the following paragraph.
Legal proceedings
The Company has initiated a legal action against the marketing firm in
connection with the brand development services described above. The
Company alleges that the marketing firm did not deliver its work on a
timely basis and did not deliver a logo and identity package, which was
acceptable to the Company. In addition, the Company alleges that the
delay and inability to deliver an acceptable product has caused the
Company considerable damages. While the outcome of the action cannot be
determined at this time, management believes that the matter will be
settled on terms favorable to the Company.
F-14
27
<PAGE>
5. Commitments (continued)
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 is estimated that the
fees for such services will 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.
F-15
28
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next annual meeting
of shareholders and until their successors are duly elected and qualified.
Officers continue in office at the pleasure of the Board of Directors.
The Directors and Officers of the Company as of the date of this report are
as follows:
Name Age Position
---- --- --------
Michael Levine 51 CEO, President, Secretary
and Director
Joseph T. Owens 50 Director
Louis Mann 50 Director
Phillip Pearce 71 Director
All Directors of the Company will hold office until the next annual meeting
of the shareholders and until successors have been elected and qualified.
Officers of the Company are elected by the Board of Directors and hold office
until their death or until they resign or are removed from office.
There are no family relationships among the officers and directors. There
is no arrangement or understanding between the Company (or any of its directors
or officers) and any other person pursuant to which such person was or is to be
selected as a director or officer.
29
<PAGE>
(b) Resumes:
Michael Levine, Chief Executive Officer, President, Secretary and a
director of the Company, assumed his positions with the Company in April 1999.
In addition to his positions with the Company, since 1976, Mr. Levine has also
been President of Golden Groove Production, Inc., Toronto, Canada, a privately
held Canadian corporation which is engaged in the collection of royalties and
contract administration for record albums. Also, in May 2000, Mr. Levine became
Chairman of RadioTower.com, Inc., a publicly held Nevada corporation based in
Vancouver, British Columbia, Canada and engaged in providing an Internet radio
directory. From June 1995 through the present, Mr. Levine has been a partner in
TRC Records, Mississauga, Ontario, Canada, where he negotiates worldwide
distribution contracts of pre-recorded discs and coordinated the company's
manufacturing process. Mr. Levine received a OAC degree from Sir J.A. MacDonald
Collegiate in 1966. He currently devotes approximately 50% of his time to the
business of the Company.
Joseph T. Owens, director, assumed his position with the Company in April
1999. In addition, since February 1995, Mr. Owens has been President of Owens &
Associates, Inc., San Mateo, California, a privately held marketing consultant
firm which developed strategies for interactive entertainment and Internet
companies such as Sega, Electronic Arts, Crystal Dynamics, Yahoo and others.
Also, in June 2000, Mr. Owens was appointed as a director of RadioTower.com,
Inc., a publicly held Nevada corporation engaged in providing an Internet radio
directory. From February 1994 through February 1995, Mr. Owens was Senior Vice
President of RC2, a division of Rogers/Cowan, Inc. a public relations firm
located in New York, Los Angeles and San Mateo, California, where his principal
activities were in marketing. He is the author of "Welcome to the Jungle"
(Harper-Collins, 1994), a marketing handbook for the music industry, and is a
frequent speaker at interactive and entertainment industry events and
conferences. Mr. Owens received a Bachelor of Arts degree from York University
in 1972. He devotes only such time as necessary to the business of the Company.
Louis Mann, director, assumed his position with the Company in April 1999.
In addition, since October 1988, Mr. Mann has been a Senior Vice-President of
Capital Records, Inc., Hollywood, California, one of the music industry's
premiere recording companies and in June 1999, he became the President of the
Media Properties division of House of Blues International. Mr. Mann received a
Bachelor of Arts degree in Communications from the University of Maryland in
1973 and a Masters in Business Administration degree from UCLA in 1992. Mr. Mann
provides advice in the areas of entertainment content and content acquisition
for
30
<PAGE>
the Company and he devotes only such time as necessary to the business of the
Company.
Phillip E. Pearce, director, was appointed as a director of the Company in
January 2000. In addition to his position with the Company, since 1988 Mr.
Pearce has been employed by Phil E. Pearce & Associates, Charlotte, NC, where
Mr. Pearce provides financial and investment banking consulting services to
various public and private companies. Mr. Pearce currently sits as a director of
various publicly held companies, including RadioTower.com, Inc., Starbase, Inc.,
Xybernaut Corp. and China Premium, Inc. During his career, Mr. Pearce served as
President of G.H. Crawford & Co., Executive Partner of R. S. Dickinson, Sr. Vice
President of E.F. Hutton, among other investment banking firms. In 1968-69, Mr.
Pearce was Chairman of the NASD Board of Governors. He also was a contributing
author and editor of The Dow Jones Publication of the Stock Market Handbook and
was a member of the advisory counsel to the SEC on The Institute Study of Stock
Markets and was a member of the NYSE Board of Governors. He devotes only such
time as necessary to the business of the Company.
ITEM 9B. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and person who own more than 10% of the Company's Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. All of the aforesaid persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Mr. Pearce filed his initial statement of his holdings in the Company
late. Further, no changes in the holdings of any officer, director or other
person took place and therefor, no other reports were required to be filed.
ITEM 10. EXECUTIVE COMPENSATION.
Remuneration
The following table reflects all forms of compensation for services to the
Company for the fiscal years ended June 30, 2000 and 1999, of the Chief
Executive Officer of the Company.
31
<PAGE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
--------------------- -------------------- -------
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
---------- ---- ------ ----- ------ -------- ------- ------- ------
Michael
Levine, 2000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
President & 1999 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Director
-------------------------------------------------------------------------------
The Company maintains a policy whereby the directors of the Company may be
compensated for out of pocket expenses incurred by each of them in the
performance of their relevant duties. The Company reimbursed Mr. Levine for out
of pocket expenses during the fiscal years ended June 30, 2000 and 1999 in the
amounts of $39,777.12 and $3,079.11, respectively.
None of the Company's officers or directors serves pursuant to any
employment agreement and it is not anticipated that the Company will offer such
an agreement to any present officer or director in the immediate future.
Stock Plan
There are no bonus or incentive plans in effect, nor are there any
understandings in place concerning additional compensation to the Company's
officers and/or directors. It is anticipated that the Company will adopt a stock
option plan in the near future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
32
<PAGE>
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as by all directors and officers of the
Company. Unless otherwise indicated, the shareholders listed possess sole voting
and investment power with respect to the shares shown.
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Ownership Class
----- ----- --------- -----
Common Michael Levine(1) 2,360,000 25.5%
25 Cavell Ave.
Toronto, Ontario,
Canada M4K 1L5
Common Marshall Naify 1,900,000 20.6%
Revocable Trust DTD 2,3
172 Golden Gate Ave.
San Francisco, CA 94102
Common Temple Trust Co. 725,000 7.8%
2001 Leeward Hwy.
McLean Building
P.O. Box 62
Providenciales, Turk & Caicos
British West Indies
Common Joseph T. Owens(1) 675,000 7.3%
430 Peninsula Ave., #1
San Mateo, CA 94401
Common Betsy Heard 595,000 6.4%
3665 E. Bay Drive
Largo, FL 33771
Common Louis Mann(1) 10,000 *
23911 Aspen Way
Calabasas, CA 91302
33
<PAGE>
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Ownership Class
----- ----- --------- -----
Common Phillip Pearce(1) 50,000 *
6624 Glenleaf Ct.
Charlotte, NC 28270
Common All Officers & 3,095,000 33.5%
Directors as a Group
(4 persons)
----------------------
* Less than 1%
(1) Officer and director of the Company as of the date of this
report.
The balance of the Company's outstanding Common Shares are held by 90
persons, not including those persons who hold their shares in "street name."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Joseph Owens, a director of the Company, provides office space to the
Company on a rent free basis.
As of June 30, 2000, the Company owed Mr. Michael Levine, an officer and
director of the Company, the balance of $18,178, which loan arose out of
expenses incurred by Mr. Levine on behalf of the Company. The loan was
unsecured, due on demand and non-interest bearing. As of the date of this
report, all balances due Mr. Levine have been paid in full.
Additionally, from inception of the Company through April 1999, RD Capital,
Inc., a corporation owned and controlled by Devinder Randhawa, former President,
Secretary and a director of the Company, loaned monies to the Company in order
to allow the Company to pay its accounts. These loans were made pursuant to
verbal agreements between the Company and Mr. Randhawa, were unsecured,
non-interest bearing and due upon demand. The Company believes that the terms of
these loans are more favorable to the Company than would have been available to
the Company through more established financial institutions. As of the date of
this report, all obligations owed to RD Capital, Inc. have been paid in full.
34
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PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
The following Exhibits were filed with the Securities and Exchange
Commission in the Exhibits to Form 10-SB, filed on December 2, 1997 and are
incorporated by reference herein:
3.1 Certificate and Articles of Incorporation and Amendments thereto.
3.2 Bylaws
The following exhibits were filed with the SEC in the exhibits section to
the Company's Form 8-K dated April 17, 1999:
2.4 Purchase and Sale Agreement between the Company and Michael Levine
3.3 Certificate of Amendment to Articles of Incorporation
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three month
period ended June 30, 2000.
35
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on October 16, 2000.
RETAIL HIGHWAY.COM, INC.
(Registrant)
By:s/ Michael Levine
----------------------------
Michael Levine,
President and Secretary
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
indicated on October 16, 2000.
s/ Michael Levine
-------------------------------
Michael Levine, Director
s/ Joseph T. Owens
-------------------------------
Joseph T. Owens, Director
s/ Louis Mann
-------------------------------
Louis Mann, Director
s/ Phillip Pearce
-------------------------------
Phillip Pearce, Director
36
<PAGE>
RETAIL HIGHWAY.COM, INC.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED JUNE 30, 2000
EXHIBITS Page No.
EX-27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . 38
37
