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: September 30, 2000
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.)
430 Peninsula Avenue, Suite 1
San Mateo, California
(Address of principal executive offices)
94401
(Zip Code)
(650) 685-9926
(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 November 10, 2000 was 9,241,867 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three month period ended
September 30, 2000, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and notes thereto included herein. In connection with, and because it
desires to take advantage of, the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on the behalf of the Company,
whether or not in future filings with the Securities and Exchange Commission.
Forward looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
Company's control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward looking statements made by, or on behalf of, the Company. The
Company disclaims any obligation to update forward looking statements.
Overview
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,
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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.
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 three month period ended September 30, 2000, the Company
incurred losses of ($101,351) ($0.01 per share). These losses arose from costs
incurred by the Company during the three month period ended September 30, 2000,
including professional and consulting fees of $52,485. Of these fees, a one time
fee of $15,000 was paid to Company attorneys in the Seigelgale litigation
described below under "Part II, Item I - Legal Proceedings." In addition, the
Company had retained two sales consultants and one technical consultant, which
relationships were terminated in July 2000 as a result of management's decision
to discontinue implementation of the Company's business plan, as described in
the Company's Form 10-KSB for the fiscal year ended June 30, 2000, as well as
below herein. These consultants were paid an aggregate of approximately $28,000
during the relevant three month period. The balance of these costs included
office, depreciation and amortization and a write-down of development costs. At
September 30, 2000, the Company had $164,041 in cash and cash equivalents.
At September 30, 2000, the Company had an outstanding loan payable in the
principal amount of $594, 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
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not accrue interest. As of the date of this report, all balances due Mr. Levine
have been paid in full.
As discussed in detail in the Company's Form 10-KSB as filed with the SEC
for the fiscal year ended June 30, 2000, in order to implement the Company's
business plan, management has recognized 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 (business to consumer)
space became unpopular with the investment community. 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, 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 in the Company's
aforementioned Form 10-KSB.
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
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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 three month period ended September 30,
2000.
PART II. OTHER INFORMATION
ITEM 1. 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 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 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, $25,000 of
which is to be paid upon execution of a definitive settlement agreement. The
proposed settlement 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. As of the date of this report, the final settlement
agreement is being prepared and until the agreement is executed and approved by
the court, there can be no assurance that this matter will be resolved in
accordance with the terms described herein.
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
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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
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three month
period ended September 30, 2000.
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED BALANCE SHEETS
September 30, 2000
ASSETS
<CAPTION>
September 30, June 30,
2000 2000
------------ ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 164,041 $ 253,440
Prepaid expenses 12,829 18,533
------------ ------------
Total current assets 176,870 271,973
Office equipment and computer software,
net of accumulated depreciation 22,684 23,839
Other assets 50,000 50,000
------------ ------------
Total assets $ 249,554 $ 345,812
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 196,216 $ 173,539
Loan payable-officer 594 18,178
------------ ------------
Total current liabilities 196,810 191,717
------------ ------------
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 9,242
Additional paid-in capital 1,465,625 1,465,625
Deficit accumulated during the development stage (1,422,123) (1,320,772)
----------- ------------
Total stockholders' equity 52,744 154,095
------------ ------------
Total liabilities and stockholders' equity $ 249,554 $ 345,812
============ ============
</TABLE>
See notes to financial statements
7
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
February 17, 1993
Three-month period ended (inception)
September 30, through
2000 1999 September 30, 2000
----------- ----------- ------------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
----------- ----------- ------------------
Operating expenses:
Write-down of development costs 30,567 - 761,973
Professional and consulting 52,485 23,981 387,558
Research and development - 22,968 93,498
Business development and travel 320 14,046 76,012
Office 18,878 24,487 107,392
Depreciation and amortization 1,155 - 28,493
----------- ----------- ------------------
103,405 85,482 1,454,926
----------- ----------- ------------------
Loss from operations (103,405) (85,482) (1,454,926)
Interest income 2,054 9,899 32,803
----------- ----------- ------------------
Net loss $ (101,351) $ (75,583) $ (1,422,123)
=========== =========== ==================
Basic loss per share $ (0.01) $ (0.01) $ (0.30)
=========== =========== ==================
Weighted average common shares outstanding 9,241,867 9,221,324 4,678,496
=========== =========== ==================
</TABLE>
See notes to financial statements
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
February 17,1993
Three-month period ended (inception)
September 30, through
2000 1999 September 30, 2000
---------- ---------- ------------------
<S> <C> <C> <C>
Net loss $ (101,351) $ (75,583) $ (1,422,123)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-down of development costs 30,567 - 761,973
Depreciation and amortization expense 1,155 4,534 28,493
Expenses of Company paid by officer (17,584) (12,821) 30,932
Obligations assumed by stockholders - - 68,040
Issuance of common stock for services/assets - - 67,154
(Increase) decrease in prepaid expenses 137 (55,667) (8,266)
Increase (decrease) in accounts payable 22,677 7,956 85,198
---------- ---------- ------------------
Net cash used in operating activities (64,399) (131,581) (388,599)
---------- ---------- ------------------
Cash flows from investing activities:
Purchase of applied-for patent - - (10,130)
Capital expenditures (25,000) (276,188) (746,565)
---------- ---------- ------------------
Net cash used in investing activities (25,000) (276,188) (756,695)
---------- ---------- ------------------
Cash flows from financing activities:
Net proceeds from private placement of common stock - 7,500 1,284,335
Loan advances received - - 25,000
---------- ---------- ------------------
Net cash provided by financing activities - 7,500 1,309,335
---------- ---------- ------------------
Net increase (decrease) in cash and equivalents (89,399) (400,269) 164,041
Cash and equivalents, beginning of period 253,440 1,250,408 -
---------- ---------- ------------------
Cash and equivalents, end of period $ 164,041 $ 850,139 $ 164,041
========== ========== ==================
</TABLE>
See notes to financial statements
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RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2000
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, (formerly International Fuel
Solutions, Inc.) and notes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 2000.
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. In July 1998, the Company filed amended articles of
incorporation and changed its name to International Fuel Solutions,
Inc.
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1. Unaudited interim financial statements (continued)
History and business activity (continued)
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 was 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.
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1. Unaudited interim financial statements (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 $736,973
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 September 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.
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.
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1. Unaudited interim financial statements (continued)
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)
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.
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 three-month periods ended September 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.
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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.
Patent application
On July 16, 1999, the Company submitted an application to the U.S.
Patent & Trademark Office to register the mark "RETAIL HIGHWAY.COM".
The application is pending.
Legal proceedings
In August 2000, Seigelgale, Inc. ("S&G"), a company that engages in the
business of brand identity, strategic marketing and information
architecture, commenced a lawsuit against the Company for breach of
contract and related causes of action arising from branding, identity
and website development agreements entered into among the parties in
late 1999 and early 2000. In late August, the Company interposed an
answer denying the allegations of the complaint, interposing numerous
affirmative defenses and asserting counterclaims for breach of contract
and related causes of action arising from S&G's failure to properly and
timely perform under the parties' contracts, resulting in substantial
injury to the Company.
In October 2000, the parties executed a letter agreement containing
settlement terms, which provide for the Company to pay S&G $187,419,
$25,000 of which is to be paid upon execution of a definitive
settlement agreement. The proposed settlement 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. As of the date of this report, the final
settlement agreement is being prepared and until the agreement is
executed and approved by the court, there can be no assurance that this
matter will be resolved in accordance with the terms described herein.
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.
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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: November 13, 2000
By: s/Michael Levine
-------------------------------
Michael Levine,
President and Secretary
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RETAIL HIGHWAY.COM, INC.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended September 30, 2000
EXHIBITS Page No.
EX-27 Financial Data Schedule....................................17
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