U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: March 31, 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 March 31, 2000 was 9,221,867 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the nine month period ended March
31, 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
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 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 (the "Assets") 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
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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.
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, and FES tendered back to the Company's treasury an aggregate of
12,500,000 "restricted" common shares issued pursuant to the acquisition. FES
also agreed to repay a former principal of the Company for certain loans made to
the Company application to the rescission and other related activities of the
Company. The principal reason for this rescission was the anticipated time and
costs associated with bringing the product to market.
Thereafter, 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. In
addition, the Company's shareholders approved an amendment to the Company's
Articles of Incorporation, changing the name of the Company to "Retail
Highway.com, Inc." The then management of the Company resigned their respective
positions with the Company and were replaced by the Company's current
management.
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.
Plan of Operation
The Company generated no revenues during the nine month period ended March
31, 2000. While no assurances can be provided, as of the date of this report it
is not anticipated that the Company will commence generating revenues until
completion of its proposed web site as detailed below.
The Company's business 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
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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.
As of the date of this report, the Company has completed an agreement with
Siegel & Gale, Inc. ("S&G"), a top ten interactive and branding agency, whereby
S&G agreed to provide the Company with web site design and market posturing
services. The applicable agreement required the Company to pay S&G the sum of
One Hundred Seventy Five Thousand ($175,000) Dollars in incremental payments and
as of the date of this report, the Company owes S&G the balance of $35,000.
In addition, in October 1999, the Company executed a contract with 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. In
exchange for the same, the Company paid the sum of One Hundred Twenty Six
Thousand ($126,000) Dollars and agreed to issue to QS an aggregate of 116,677
shares of its common stock, 20,000 of which was to be issued upon execution of
the agreement and an aggregate of 96,677 additional restricted shares of the
Company's common stock subject to completion of phases of services to be
performed as more fully detailed in the agreement, including (i) completion of
design project, which is almost done (13,333 shares); (ii) start of
implementation project, which is expected to begin in February 2000 (25,000
shares); (iii) beta site launch (25,000 shares); and (iv) production of site
launch (33,334 shares).
Web site specifications have been completed and site development has
commenced. It is anticipated that the Company's site development will be ready
for beta testing by the end of June 2000. It is also continuing to negotiate
with BAM retailer partners for their inclusion on the Company's web site. The
Company has initiated exploratory discussions with a select group of retailer
candidates and begun development of strategic relationships with retail industry
organizations. In the second calendar quarter of 2000, the Company will launch a
public relations campaign targeting the retail industry, placing ads in retailer
publications and participating in trade events. The objective will be to
generate awareness and inquiries and accelerate the addition of new retailers
after initial site launch. The campaign will also focus on corporations with
multiple chains of branded stores, such as Federated Stores and Williams-
Sonoma/Pottery Barn. Management believes that these prospective retailer clients
have received the Company's concept in a positive manner; however, they have
indicated that they wished to review how
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the prospective web site will operate before they commit to contracting with the
Company.
To the best knowledge of management, there are no other virtual malls which
exclusively possess the brand name "bricks and mortar" retailers. Most of the
virtual malls simply offer hyperlinks to a retailer's web site. The Company,
through its web site, expects to be able to provide Internet shoppers access to
a collection of what management perceives as the best retailers in the world,
fast access to the products which consumers want to purchase and a responsive
customer service environment. In order to draw shoppers to the Company's web
site, the Company will implement an aggressive combination of marketing
strategies, including both standard advertising, Internet solutions and mass
media.
The Company concurs with industry analysts that BAM retailers will
ultimately be the big winners in online shopping. With existing high levels of
brand-awareness, huge bases of loyal and trusting customers and, in many cases,
efficient mail-order infrastructures in place, BAM retailers are poised to
capitalize on the e-commerce boom.
BAM Retailers are continually seeking high-traffic locations for new
stores, and the Company intends to provide them with a unique and compelling
opportunity. In addition to directing large numbers of shoppers to its BAM
partners, the Company's highly targeted advertising will ensure that site
visitors have a high propensity for spending online. Transaction rates will be
enhanced by featuring a wide variety of product information and entertainment
content on the site, including product reviews, lifestyle articles, music, movie
and game downloads, category- specific news, "how-to" segments, e-mail,
messaging and more. This featured content will keep shoppers on-site longer and
continually provide reasons to buy. Additionally, listings of retailers'
physical store locations will provide benefits by building incremental traffic
at the BAM stores. The ability for customers to pick up orders, make returns or
exchanges, and capitalize on synergistic online/real-world promotions will
provide BAM retailers with a significant advantage over their online-only
competition.
According to ComputerWorld, the average cost of an e-commerce web site is
now more than $1 million. RetailHighway offers retailers a turnkey solution at
no cost other than a fee paid on each sale made. The Company absorbs all
operational costs for marketing, advertising, site development and hosting, and
where necessary will provide consultation on fulfillment and other supply-chain
requirements.
As noted by Ernst & Young, Goldman Sachs, Jupiter Research and other
leading researchers, BAM retailers have in general been late in developing an
Internet presence. Without strong initiatives in
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this relatively new arena, they face significant competitive pressures from
online-only merchants. BAM retailers are currently making a shift to this
multichannel strategy. The Company intends to provide a turnkey solution to BAM
retailers by becoming a primary aggregation point for online store extensions
and high levels of consumer traffic. The Company believes that both wired and
non-wired retailers should benefit from a cost-efficient e- commerce solution
that will allow them to sell online while maintaining their individual brand
imagery. This is expected to be achieved through:
- Single-site shopping at a broad range of quality Bricks and Mortar
retailers. The Company intends to represent only branded Bricks and
Mortar Retailers. As a result, customers will have a unique sense of
familiarity, comfort and security.
- Turnkey e-commerce solutions for those BAM retailers not yet online.
The Company expects to be the only shopping site on the Internet which
will not require retailers to have their own web site as a
pre-requisite for participation.
- Fast intuitive shopping without "click-throughs" to individual
retailer sites. All retailer product data will reside at
RetailHighway.com and customers will make multiple purchases at
different stores without ever leaving the site. The risk of becoming
"lost in cyberspace" is eliminated.
- A single shopping cart for all stores on the site. Shoppers will use a
single multi-vendor shopping cart and single check-out transaction,
regardless of the number of stores from which purchases are made.
- A one-time, highly secure credit card transaction process.
- Rich entertainment and information content to generate traffic,
increase purchases and build community among shoppers. The Company
intends to provide extensive entertainment, news/information and
community-building features to establish itself as the "one-stop
shopping and lifestyle destination."
- Online chat, e-mail and other portal services.
- Toll-free phone customer service features coordinated with
participating Retailers.
While no assurances can be provided, by providing these features and
benefits, management believes that the Company's site
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should become a preferred online equivalent of physical mall locations. The
primary revenue source will be transaction fees charged to retailers as a
percentage of gross sales, equivalent to those paid to real-world mall
operators. Additional revenues will be derived from advertising on the site.
The Company's web site is expected to be populated exclusively by retailers
with physical real-world store locations. While early adopters of online
shopping have been primarily price-driven, management believes that the larger,
emerging wave of online consumers is predisposed to the same quality, selection
and trust that they currently enjoy at their favorite real-world retailers. This
is fundamental to the Company's strategy of providing familiar
cyber-environments designed to enhance the comfort and security of shoppers.
What the Company will provide is convenient access to the familiar
"One-Stop-Shopping At Your Favorite Stores."
The Company will operate as a facilitator and will neither invest in
product inventory nor provide product fulfillment services. Industry analysts
call this model the "sweet spot" in consumer e-commerce. While RetailHighway.com
will transact all orders, the individual BAM retailers will handle product
shipment.
At present Web sites such as iMall and Shop.com offer web site building and
hosting for companies wishing to establish an e- commerce presence on the
Internet. In addition, click-through sites such as fashionmall.com will, for a
fee, direct traffic from their site to the e-commerce site of a retailer or
e-tailer. In all cases, retailers wishing to sell on the Internet are required
to dedicate significant financial resources to an Internet e-commerce strategy.
Management believes that the Company's competitive advantage will come from its
ability to offer aggregation of a large number of shoppers drawn by its unique
combination of great stores, speed, convenience, and information/entertainment
content to those BAM retailers already online and to provide a turnkey solution
for non-wired BAM retailers to implement an e-commerce strategy without the need
for their own web site.
Key objectives of the Company's retailer acquisition plan include: (i)
broad product coverage to position the Company as the "one-stop" online shopping
destination; (ii) an initial complement (at site launch) of high-quality BAM
partners which provides a basis for growth in traffic and transactions; and
(iii) rapid addition of BAM Retailer partners to realize competitive ownership
of key product categories.
The Company has secured the expertise of key advisors from the retail
sector to develop the business-to-business sales strategy. Given the importance
of time-to-market, particular emphasis will be put on identifying
category-specific retailers who have fully embraced online selling, can make
fast partnering decisions and whose product content can easily be integrated
into the Company's
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database. The Company believes that a successful site launch will require an
initial store count of 30-50 with a balanced mix of key product categories.
Initially only a subset of a particular retailer's inventory may be available so
that more stores will be on-site early, with their remaining products to be
added after site launch.
As of the date of this report, the Company is continuing exploratory
discussions with a select group of retailer candidates. A demonstrator model of
the site will be completed for use in formal retailer presentations. The Company
has also begun development of strategic relationships with industry
organizations such as the National Retail Federation. The Company intends to
launch a public relations campaign targeting the retail industry, placing ads in
retailer publications and participating in trade events in the near future. The
objective will be to generate awareness and inquiries and accelerate the
addition of new retailers after initial site launch. The campaign will also
focus on corporations with multiple chains of branded stores, such as Federated
Stores and Williams-Sonoma/Pottery Barn.
Key selection criteria for targeted retailers include category leadership,
effective product-fulfillment infrastructure, broad brand-awareness and quality
image, ease of database conversion, quality customer service, broad product
selection, progressive corporate culture and aggressive marketing. Prospective
BAM partners currently conducting mail order, catalogue or Internet operations
will receive the highest priority. Prospective retailers will also be evaluated
for their adherence to high standards in customer service, problem resolution,
product return, and customer privacy practices.
Promotional incentives being considered to foster rapid engagement of
initial BAM retailers include a period of reduced or eliminated transaction fees
on customer purchases, credits for on- site advertising as visitor traffic
reaches threshold levels, prominent mentions in the Company's consumer
advertising campaign and limited-time exclusivity in specific product
categories.
Management believes that a strong brand presence is crucial to the
aggregation of consumer traffic. The Company's goal of category dominance
requires it to quickly and effectively establish powerful brand recognition by
consumers. To accomplish this, management has designed a marketing and
communications strategy that relies on both online impressions as well as strong
real-world initiatives. All advertising will focus on inextricably linking the
Company's URL with "shopping" in the mind of the consumer and establishing the
Company as the site which replicates the real- world shopping experience online.
Specific brand attributes such as speed, ease of navigation, security and fun
will also be emphasized. The Company's consumer marketing plan employs
strategies designed to achieve high levels of visitors at
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introduction and sustaining traffic to generate a long-term reach of 4.5% among
the rapidly growing audience of online households, significant transaction fee
revenues derived from exceeding the industry-standard "look-to-buy" ratio
(currently 2%) and above- average "time-on-site" metrics, increasing store
visits and significant revenues from both advertising and transaction fees.
Management also believes that the simplicity of the Company's message is
conducive to efficient media spending. Many online shopping sites spend enormous
advertising budgets to establish their reason-for-being and develop brand
imagery. RetailHighway believes that it can spend proportionately less to
achieve its objectives because its message is straightforward and directly
addresses the primary motivators of online shoppers: speed, value, convenience,
choices and fun. In addition, the highly memorable and relevant name of those
BAM's anticipated to be part of the Company's web site should allow easy
recognition and allow for efficient media spending with a cost-effective mix of
ad unit sizes, combining larger print and longer broadcast ads to educate the
public with high-frequency insertions of smaller and shorter ads to maximize
share-of-mind. The inclusion of high-quality branded retailers is expected to
enhance consumer recall, accelerate response rates and help to mitigate security
concerns for online shoppers.
Advertising will target both men and women with equal weight, an age range
of 25-54, and households with incomes greater than $50,000. These demographics
are consistent with those of current online shoppers. RetailHighway will closely
monitor online user data to ensure that advertising continues to be precisely
targeted.
To verify that advertising spending is optimized for the lowest cost of
customer acquisition, frequent market tests of media mix and spending levels
will be conducted. This testing will be executed within multiple markets to
continually tune national spending levels. Likewise, ad campaign concepts will
be subjected to focus group and market-testing research prior to broad
deployment. The objective of this testing is to define the combination of ad
designs and media spending which generates the lowest ratio of sales to
marketing cost.
The Company intends to implement a disciplined geographical rollout plan
designed to measure consumer-response rates and identify system performance
issues. Introduction of the Company's service will be initiated via Beta test in
early Summer 2000 in three major markets, including Chicago, Illinois, San
Francisco, California and Dallas, Texas and will span a two-month market
measurement period. This should provide ample time for advertising awareness to
build. Additional markets will be added over the ensuing months building to
top-20 market coverage. During this rollout period, national coverage will be
achieved through targeted advertising on the Internet and Cable TV to reach
upper-income
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Internet users. Media will run at heavier weights in these top 20 "wired"
markets, which contain over 80% of America's Internet- connected homes. These
markets include the top US areas of dominant influence ("ADI's"). San
Francisco/San Jose will receive added local emphasis in order to significantly
penetrate the Silicon Valley community. New York will also be targeted to impact
the Wall Street financial community.
Concurrent with this effort, research tracking studies measuring consumer
awareness, attitudes and response rates will be conducted. Findings from this
introductory phase will be used to make required adjustments to advertising
messages, media mix and spending levels. System performance-tuning requirements
will also be identified and addressed during this period.
The Company's advertising campaign is designed to generate broad awareness
of the RetailHighway.com brand while establishing its compelling consumer
proposition. Media selection will be based on the target audience of upwardly
mobile consumers, busy but Internet-literate, who use the Net for information as
well as entertainment. The plan will target "purchasers" as well as "shoppers"
with limited leisure time who are looking for a fast, easy, secure and efficient
way to shop online. The technology sector, including users and investors, will
also be targeted.
Media selection will include both national and local components. The
national component will enable the message to be communicated to all users of
online services. The focus of local advertising will be on the twenty key
"wired" markets where the majority of online users reside.
Relevant to the Company's national media plan, it is anticipated that this
will involve cable television, rather than the broadcast networks, which
management believes will target key consumers more effectively and efficiently.
Cable networks under consideration include CNN, CNBC, MSNBC, Headline News,
Bloomberg Business Report, and CNNfn. The campaign will use 10-second spots to
promote the RetailHighway.com URL in very high-frequency rotation. The plan
includes as many as 200 spots per station over the launch period in the
early-morning, prime time and late-night dayparts. Additionally, national
magazines skewed to the Internet user, business and investor class will also be
used. Publications under consideration include Fast Company, Business Week,
Industry Standard, Forbes, Fortune, Red Herring and Wired. Other national
publications including The Wall Street Journal, USA Today, Time, Newsweek, GQ,
Details, Maxim, Cosmopolitan and the New Yorker, which provide broader reach to
the Company's target market are also expected to be utilized.
Internet advertising will be used for continuity of brand presence among
Internet users currently adopting cybershopping and the new consumers coming to
the Internet. Given that the cost of
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banner ads on well-trafficked sites is very expensive and average click-through
rates have fallen to below 1%, the Company will conduct frequent "run-of-net"
testing to evaluate which sites are best for ad placements. These evaluations
will be based on cost- per-converted-lead versus traditional cost-per-thousand
views.
Direct-mail initiatives tied to credit card and participating- retailer
account mailings will target a defined demographic segment of online shoppers.
Special offers and incentives will be available to consumers via the direct-mail
campaign.
Liquidity and Capital Resources
During the nine month period ended March 31, 2000, the Company incurred
losses of ($309,735) ($.03 per share) as a result of incurring research and
development costs related to its current business plan described herein and
other general and administrative expenses.
In order to implement the business plan described herein, management has
recognized the need for additional operating capital. In response to this need
and as of the date of this report, the Company intends to commence a private
offering of its securities, whereby the Company, on its own behalf, is offering
up to 2,000,000 Units (the "Units" or a "Unit"), to US accredited investors only
(as that term is defined under the Securities Act of 1933), as well as non-US
residents, each Unit consisting of one share of the Company's non-voting Series
A Convertible Preferred Stock, each convertible into one share of the Company's
common stock and one Class "A" Common Stock Purchase Warrant, (the "Warrants" or
a "Warrant"), each Warrant exercisable to purchase one share of the Company's
Common Stock. The Units are being offered at an offering price of $5.00 per Unit
for aggregate gross proceeds of $5 million (minimum) and $10 million (maximum).
The minimum investment is $100,000.
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 anticipated that
current management will begin receiving nominal salaries in the near future.
During the three month period ended March 31, 2000, the Company repaid an
outstanding loan tendered by Michael Levine, President and a director of the
Company, which loan had a balance due of $3,375. This loan was non-interest
bearing and was due upon demand. However, during the period ended March 31,
2000, Mr. Levine incurred expenses on behalf of the Company of $2,131, which
balance remained outstanding on March 31, 2000. This balance has subsequently
been repaid by the Company.
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The Company's securities are currently not liquid. There are no market
makers in the Company's securities. However, the Company has filed an
application to list its common stock for trading on the OTC Bulletin Board
operated by the NASD. However, there can be no assurances that the Company's
common stock will be approved for trading.
YEAR 2000 DISCLOSURE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the recent change in the century. If not corrected, many computer
applications were expected to fail or create erroneous results by or at the Year
2000. As a result, many companies were required to undertake major projects to
address the Year 2000 issue. We did not incur any negative impact as a result of
this problem and no problems in this regard are anticipated in the 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 nine month period ended March 31, 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
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(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the nine month
period ended March 31, 2000.
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED BALANCE SHEETS
ASSETS
<CAPTION>
March 31, June 30,
2000 1999
(Unaudited)
----------- ----------
<S> <C> <C>
Current assets:
Cash and equivalents $ 401,033 $1,250,408
Prepaid expenses 35,233 10,369
----------- ----------
Total current assets 436,266 1,260,777
Office equipment and computer software, 512,064 -
----------- ----------
Total assets $ 948,330 $1,260,777
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 21,626 $ 18,756
Loan payable-officer 2,131 15,213
----------- ----------
Total current liabilities 23,757 33,969
----------- ----------
Stockholders' equity:
Common stock, $.001 par value
50,000,000 shares authorized
9,221,867 shares issued and outstanding at March
9,211,867 shares issued and outstanding at June 9,222 9,212
Additional paid-in capital 1,450,645 1,443,155
Deficit accumulated during the development stage (535,294) (225,559)
----------- ----------
Total stockholders' equity 924,573 1,226,808
----------- ----------
Total liabilities and stockholders' equity $ 948,330 $1,260,777
=========== ==========
</TABLE>
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
February 17, 1993
Nine-month period ended (inception)
March 31, through
2000 1999 March 31, 2000
----------- ---------- ----------
<S> <C> <C> <C>
Revenues $ - $ - $ -
----------- ---------- ----------
Operating expenses:
Professional and consulting 130,631 46,164 220,926
Research and development 51,782 20,688 145,280
Business development and travel 36,324 8,091 66,732
Office 47,570 10,635 64,307
Software maintenance 44,533 - 44,533
Depreciation and amortization 20,504 39 20,504
----------- ---------- ----------
331,344 85,617 562,282
----------- ---------- ----------
(331,344) (85,617) (562,282)
Interest income (expense) 21,609 (1,895) 26,988
----------- ---------- ----------
Net loss $ (309,735) $ (87,512) $ (535,294)
=========== ========== ==========
Basic loss per share $ (0.03) $ (0.02) $ (0.12)
=========== ========== ==========
Weighted average common shares 9,221,685 5,000,000 4,342,521
=========== ========== ==========
</TABLE>
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three-month period ended
March 31,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ - $ -
---------- ----------
Operating expenses:
Professional and consulting 70,071 536
Research and development 7,000 10,129
Business development and travel 12,429 -
Office 17,878 1,768
Software maintenance 16,700 -
Depreciation and amortization (1,303) 39
---------- ----------
122,775 12,472
---------- ----------
(122,775) (12,472)
Interest income (expense) 5,822 (39)
---------- ----------
Net loss $ (116,953) $ (12,511)
========== ==========
Basic loss per share $ (0.01) $ (0.00)
========== ==========
Weighted average common shares 9,221,867 5,000,000
========== ==========
</TABLE>
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<TABLE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
February 17, 1993
Nine-month period ended (inception)
March 31, through
2000 1999 March 31, 2000
------------ ----------- --------------
<S> <C> <C> <C>
Net loss $ (309,735) $ (87,512) $ (535,294)
Adjustments to reconcile net loss to net cash
Depreciation and amortization 20,504 39 20,504
Expenses of Company paid by officer (13,082) 77,300 32,469
Loan obligations assumed by stockholders - - 68,040
Issuance of common stock for services/assets - - 52,154
Increase in prepaid expenses (24,864) - (25,103)
Increase in accounts payable and accrued expenses 2,870 (9,206) 21,626
------------ ----------- --------------
Net cash used in operating activities (324,307) (19,379) (365,604)
------------ ----------- --------------
Cash flows from investing activities:
Purchase of applied-for patent - - (10,130)
Purchase of office equipment and computer software (532,568) (775) (532,568)
------------ ----------- --------------
Net cash used in investing activities (532,568) (775) (542,698)
------------ ----------- --------------
Cash flows from financing activities:
Loan advances - 46,667 -
Loans paid-by shareholder on behalf of company - (31,667) -
Net proceeds from private placement of
common stock 7,500 - 1,284,335
Monies received from loan advances - (15,000) 25,000
------------ ----------- --------------
Net cash provided by financing activities 7,500 - 1,309,335
------------ ----------- --------------
Net increase (decrease) in cash and equivalents (849,375) (20,154) 401,033
Cash and equivalents, beginning of period 1,250,408 20,150 -
------------ ----------- --------------
Cash and equivalents, end of period $ 401,033 $ (4) $ 401,033
============ =========== ==============
</TABLE>
17
<PAGE>
RETAIL HIGHWAY.COM, INC.
(formerly International Fuel Solutions, Inc.)
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 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, Inc. (formerly International Fuel
Solutions, Inc.) and notes thereto included in the Company's Annual
Report on Form 10-KSB for the nine-month periods ended March 31, 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.
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.
18
<PAGE>
1. Unaudited interim financial statements (continued)
History and business activity (continued)
Effective as of March 31, 1999, the Company and FES entered into a
Rescission Agreement, whereby the Company and FES agreed to rescind the
FES Acquisition FES tendered back to the Company's treasury an
aggregate of 12,500,000 "restricted" common shares issued pursuant to
the acquisition and the Company returned the patent application rights
it had acquired. FES also agreed to repay certain balances incurred by
the Company applicable to the recession and other related activities.
On March 31, 1999, the Company entered into a letter of intent with an
unrelated party, whereby the Company agreed, in principle, 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 acquisition was successfully
consummated effective April 17, 1999, and 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.
The Company is currently accepting bids from among what management
believes are the best web site builders and Internet hosting companies
currently in existence, to construct a web site in accordance with the
Company's technical specifications. While no assurances can be
provided, management estimates that a final contract will be completed
in this regard on or before October 31, 1999, with the web site
becoming fully functional on or before August 30, 2000.
As of the date on this report, management has initiated discussions
with several major retailers in order to establish their interest in
becoming a member of the Company's "mall" concept. To the best
knowledge of management, there are no other virtual malls which possess
the brand name "bricks and mortar" retailers. Most of the virtual malls
simply offer hyperlinks to a retailer's web site. The Company, through
its web site, expects to be able to provide Internet shoppers access to
a collection of what management perceives as the best retailers in the
world, fast access to the products which consumers want to purchase and
a responsive customer service environment. In order to draw shoppers to
the Company's web site, the Company will implement an aggressive
combination of marketing strategies, including both standard
advertising, Internet solutions and mass media.
19
<PAGE>
1. Unaudited interim financial statements (continued)
Development stage
The Company has been a development stage company since its inception on
February 17, 1993. Currently, the Company is seeking to establish an
"Internet shopping portal" as described above.
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.
Basic loss per common share has been restated for the nine-month period
ended March 31, 1999, to give retroactive effect to the Stock
Rescission Agreement described in Note 2.
Research and development
Research and development costs are charged to operations when incurred
and are included in operating expenses.
Reclassifications
Certain reclassifications have been made to the financial statements
for the nine-month period ended March 31, 1999 and the period February
17, 1993 (inception) through March 31, 2000, to conform to the
presentation for the nine-month period ended March 31, 2000.
2. Stockholders' equity (deficit)
1998 share issuance and subsequent rescission
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 Rescission
Agreement whereby the 12,500,000 shares were returned to the Company's
treasury. The number of shares outstanding at September 30, 1998 and
for the period from the original issuance of the shares (June 18, 1998)
through the effective date of the Rescission (March 31, 1999) have been
restated to give retroactive effect to the Rescission 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 nine-month
period ended March 31, 1999, has also been restated.
In conjunction with the Rescission 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 during the quarter ended March 31, 1999.
20
<PAGE>
2. Stockholders' equity (deficit) (continued)
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 nine-month periods ended March 31, 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.
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 capitalized the license fee which it will amortize over
a five-year period representing the software's estimated useful life.
The support and maintenance fee is being expensed ratably over the
one-year term of the support agreement.
21
<PAGE>
4. Commitments (continued)
Patent application
On July 16, 1999, the Company submitted an application to the U.S.
Patent & Trademark Office to register the mark "RETAIL HIGHWAY.COM".
Brand development
During October 1999, the Company entered into an agreement with a
marketing firm to develop the Retail Highway.com brand. The fees for
the project total $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.
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 are payable at the commencement of the project
with the balance of the payments in cash and stock payable over the
term of the project which is not expected to exceed five months.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RETAIL HIGHWAY.COM, INC.
(Registrant)
Dated: May 15, 2000
By:s/ Michael Levine
--------------------
Michael Levine,
President and Secretary
23
<PAGE>
RETAIL HIGHWAY.COM, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
EXHIBITS Page No.
EX-27 Financial Data Schedule.....................................25
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDED MARCH 31, 2000,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 401,033
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 436,266
<PP&E> 532,568
<DEPRECIATION> (20,504)
<TOTAL-ASSETS> 948,330
<CURRENT-LIABILITIES> 23,757
<BONDS> 0
0
0
<COMMON> 9,222
<OTHER-SE> 915,351
<TOTAL-LIABILITY-AND-EQUITY> 948,330
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 331,344
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (309,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> (309,735)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (309,735)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
