INFORMATION HIGHWAY COM INC, 10QSB, 2000-04-14

INFORMATION HIGHWAY COM INC
10QSB, 2000-04-14
BUSINESS SERVICES, NEC

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<PAGE>

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2000
-----------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from_________________to__________________

Commission File No. 0-25773
---------

INFORMATION HIGHWAY.COM, INC.

(Exact name of small business issuer as specified in its charter)

Florida 65-0154103
- ------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

185-10751 Shellbridge Way, Richmond, BC Canada V6X 2W8
-------------------------------------------------------
(Address of principal executive offices)

(604) 278-5996
--------------
(Issuer's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 _________
----------

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of April 10, 2000 - 7,838,017
shares of common stock, $.0001 par value were outstanding and 95,817 shares paid
for have not been issued but are allotted. A further 45,000 common shares, not
yet issued, are allotted pursuant to a share exchange agreement. Total shares
outstanding and allotted as of April 10, 2000 is 7,978,834.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>

INDEX

PART I -- Financial Information Page
<TABLE>
<CAPTION>

<S> <C> <C>
Item 1. Consolidated Financial statements (Unaudited)........................................... 2
- ------- ---------------------------------

Consolidated Balance Sheets as of February 29, 2000 and May 31, 1999.................................. 3

Consolidated Statements of Operations for the three months and
nine months ended February 29, 2000 and February 28, 1999......................................... 4

Consolidated Statements of Cash Flows for the nine months
ended February 29, 2000 and February 28, 1999..................................................... 5

Notes to the Consolidated Financial Statements......................................................... 6-9

Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.... 10-18
- ------- -------------------------------------------------------------------------------------

PART II -- Other Information........................................................................... 19-20

Signatures............................................................................................. 21

</TABLE>

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<PAGE>

PART I - Financial Information

Item 1. Consolidated Financial statements
- ------- ---------------------------------

-2-
<PAGE>

Information Highway.com, Inc.

Consolidated Balance Sheets

<TABLE>
<CAPTION>
February 29, May 31,
2000 1999
(unaudited) (audited)
$ $
Assets
<S> <C> <C>
Current Assets
Cash 498,175 37,622
Accounts receivable 5,031 -
Inventory (Note 5) 31,241 9,695
Prepaid expenses and deposits 106,747 70,487
Due from related parties (Note 5) 47,752 -
- -----------------------------------------------------------------------------------------------------------
688,946 117,804
Property, Plant and Equipment (Note 3) 471,439 270,092
Goodwill - 134,848
- -----------------------------------------------------------------------------------------------------------
Total Assets 1,160,385 522,744
===========================================================================================================
Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable 307,404 267,279
Accrued liabilities 136,117 65,151
Deferred revenues 48,997 34,049
Advances from related parties (Note 5) - 65,186
Current portion of capital lease obligations (Note 4) 33,494 -
- -----------------------------------------------------------------------------------------------------------
526,012 431,665
Long-term Liabilities
Long-term portion of capital lease obligations (Note 4) 62,528 -
- -----------------------------------------------------------------------------------------------------------
588,540 431,665
- -----------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common Stock (Note 6), 50,000,000 shares authorized, par value $.0001
per share, 7,876,767 and 6,469,951 issued and outstanding respectively 788 647
Additional paid in capital 3,845,001 1,698,351
Warrants issued for cash (Note 6) 57,000 -
Value of Warrants issued for services (Note 6) 418,620 -
Common stock allotted for cash pursuant to private placements (Note 6)
(95,817 shares at $4.00 per share and 35,000 shares
at $0.75 per share respectively) 383,268 50,000
- -----------------------------------------------------------------------------------------------------------
4,704,677 1,748,998
Preferred Stock, 10,000,000 shares authorized, par value
$.0001 per share, none issued - -
Translation adjustments (5,878) (1,145)
Accumulated Deficit (4,126,954) (1,656,774)
- -----------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 571,845 91,079
- -----------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 1,160,385 522,744
===========================================================================================================
</TABLE>
(See accompanying notes)

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<PAGE>

Information Highway.com, Inc.

Consolidated Statements of Operations

(Unaudited)
<TABLE>
<CAPTION>

Three months ended Nine months ended
February 29, February 29,
--------------------- ---------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
$ $ $ $

Revenues 334,751 254,853 1,001,549 752,470

Cost of Revenues 485,007 176,927 926,565 522,389
- ---------------------------------------------------------------------------------------------
Gross Profit (Loss) (150,256) 77,926 74,984 230,081
- ---------------------------------------------------------------------------------------------
Operating Expenses
Marketing and sales 126,077 47,412 318,008 142,814
General and administrative 809,783 143,621 1,914,339 432,613
Product development 64,260 32,787 183,677 98,761
Portal costs for US expansion (Note 8) 48,364 129,141
- ---------------------------------------------------------------------------------------------
Total Operating Expenses 1,048,484 223,820 2,545,165 674,188
- ---------------------------------------------------------------------------------------------
Net loss (1,198,740) (145,894) (2,470,180) (444,107)
=============================================================================================
Historical basic and dilutive net
loss per share (0.16) (0.03) (0.34) (0.04)
=============================================================================================
Weighted average shares used to
compute basic and historical
net loss per share 7,667,000 5,500,000 7,247,000 5,000,000
=============================================================================================
</TABLE>
Diluted loss per share has not been presented separately as the result is anti
dilutive.
(See accompanying notes)

-4-
<PAGE>

Information Highway.com, Inc.

Consolidated Statements of Cash Flows

(Unaudited)
<TABLE>
<CAPTION>

Nine months Nine months
ended ended
February 29, February 28,
------------ ------------
2000 1999
$ $
<S> <C> <C>
Cash Flows to Operating Activities
Net loss (2,470,180) (444,107)
Adjustments to reconcile net loss to cash
Depreciation and amortization 72,407 41,717
Amortization of goodwill 134,848 119,811
Shares and warrants issued for services rendered 899,314 -
Change in non-cash working capital items
Decrease in accounts receivable (5,031) (12,202)
Increase in prepaid expenses (36,260) (3,580)
Increase in inventory (21,546) -
Increase in accounts payable and accruals 111,091 4,046
Increase in unearned revenue 14,948 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (1,300,409) (294,315)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Flows from (to) Financing Activities
Increase in common stock 2,034,365 601,697
Decrease in advances from related parties (112,938) (261,784)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Cash from Financing Activities 1,921,427 339,913
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Flows to Investing Activities
Increase in property, plant and equipment (155,732) (3,831)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Cash to Investing Activities (155,732) (3,831)
- ---------------------------------------------------------------------------------------------------------------------------------
Translation Adjustments (4,733) 5,759
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in Cash During the Period 460,553 47,526
Cash - Beginning of Period 37,622 35,699
- ---------------------------------------------------------------------------------------------------------------------------------
Cash - End of Period 498,175 83,225
- ---------------------------------------------------------------------------------------------------------------------------------
Non-Cash Financing Activities - See Note 6 for shares and warrants issued for services rendered
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information:
Cash paid for interest 2,632 5,786
Cash paid for income taxes - -
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See accompanying notes)

-5-
<PAGE>

Information Highway.com, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

Florida Venture Fund, Inc. (the "Company" or "FVFI") was incorporated
December 5, 1988 in the state of Florida. During 1997, the Company's common
stock was submitted for quotation on the OTC Bulletin Board System. From
incorporation to February 17, 1999 the Company did not engage in any business
activity other than initial organization, initial financing and some business
investigation activities.

Pursuant to a letter agreement dated February 17, 1999, the Company completed
an Agreement and Plan of Reorganization with Information Highway, Inc.,
herein "IHI", whereby a business combination was completed and all of the
outstanding common stock of Information Highway, Inc. was, or will be,
exchanged for common shares of the Company representing a change of control
of the Company by way of reverse takeover. As part of the Plan of
Reorganization the Company's name was changed to Information Highway.com,
Inc.

IHI was incorporated in the State of Washington on October 15, 1996. Prior to
the reverse takeover IHI acquired three Canadian operating subsidiaries in
the business of providing access to the Internet and providing services,
including on-line publishing, to individual and corporate subscribers.

2. Basis of Presentation

Consolidated Financial Statements

These consolidated financial statements include the accounts of the Company
and its wholly owned US subsidiary, Information Highway, Inc. which owns
three consolidated, wholly-owned, Canadian subsidiaries. As IHI was the
acquirer in a reverse takeover business combination culminating on February
17, 1999, its fiscal year-end of May 31 is the Company's new fiscal year-end
and the business of IHI will be the continuing business reported for all
comparative purposes, including the statements of operations and cash flows.
Prior to the reverse takeover the Company's fiscal year end was December 31.

Estimates and Assumptions

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 in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Reclassification

Certain amounts in the financial statements have been reclassified to be
consistent and comparable from year-to-year.

Adjustments

These interim financial statements include all adjustments which in the
opinion of management are necessary in order to make the financial statements
not misleading.

-6-
<PAGE>

3. Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortization.

2000
Accumulated Net Book
Depreciation and Value
Cost Amortization (unaudited)
<S> <C> <C> <C>
$ $ $
Computer equipment - capital lease 96,022 5,335 90,687
Computer equipment 359,269 183,891 175,378
Computer software 180,079 30,726 149,353
Office furniture and equipment 52,347 19,586 32,761
Production equipment 25,000 10,125 14,875
Leasehold improvements 11,567 3,182 8,385
- ----------------------------------------------------------------------------------------------
724,284 252,845 471,439
==============================================================================================
</TABLE>

4. Capital Lease Obligation

The Company has acquired computer equipment by way of a capital lease with
monthly payments of $2,667 over a three year period ending February 28, 2003.

5. Related Party Transactions

(a) Amounts owing from/to related parties and affiliates are related to
common expenses paid by the Company on behalf of affiliates and are due
on demand, unsecured and non-interest bearing. These amounts were
recorded at their exchange amounts.

(b) Pursuant to a Management Agreement dated December 1, 1998, with a company
related to the President of the Company, the Company is committed to pay
management fees of $2,500 per month and rent and secretarial fees of
$1,500 per month for a term of three years expiring December 1, 2001.

(c) A partnership, of which a director of the Company is a partner, was paid
$73,790 for legal services rendered during the nine months ended February
29, 2000.

(d) A bonus of $100,000 was declared payable to the President of the Company.

(e) Finished goods inventory of $31,241 was acquired from a public company
with common Presidents pursuant to a Marketing Agreement dated January
20, 1999. The Company has the exclusive worldwide rights to market the
product over the Internet. The agreement is for five years subject to
minimum annual sales criteria.

6. Common Stock Issuances and Related Commitments

Private Placements

Prior to becoming public the Company approved and completed two private
placements of units and issued 814,150 units at $0.75 per unit to raise
$610,612. These units were issued in December, 1998 and contained one share
and one warrant to acquire one additional share at $1.00 if exercised by
December 30, 1999, some of which were extended to February 18, 2000. Of the
814,150 warrants issued, 805,350 warrants were exercised by February 18, 2000
for proceeds of $805,350. Warrants with respect to 8,800 shares expired. No
amount was allocated to warrants as there was no market for the stock prior
to becoming a public company.

The Company offered units pursuant to an Offering Memorandum. Each unit
consisted of one common share, one Series "A" Warrant to acquire one
additional share at $4.00 per share expiring April 30, 2000, and one Series
"B" Warrant to acquire one additional share at $6.00 per share expiring April
30, 2001. The offering was completed on August 11, 1999. On completion of the
offering, a total of 129,750 units were issued at $4.00 per unit for total
proceeds of $519,000. All warrants are currently outstanding. The proceeds of
this private placement were allocated on the following basis: $462,000 to
common shares, $47,000 to Series A Warrants and $10,000 to Series B Warrants.

-7-
<PAGE>

6. Common Stock Issuances and Related Commitments (continued)

Shares issued for services

In July, 1999 the Company issued 125,000 shares to IP Equity, Inc. pursuant
to a Marketing and Financial Consulting Agreement dated June 23, 1999. These
shares were valued at $4.69 per share or $440,000 in total. In October, 1999
the Company issued an additional 50,000 shares to IP Equity, Inc. These
shares were valued at $4.778 per share or $238,900 in total. These amounts,
totalling $678,900, were charged to operations during the nine months ended
February 29, 2000. Pursuant to this Agreement the Company was committed to
file a Registration Statement registering these securities by November 6,
1999. IP Equity, Inc. and the Company have agreed to pay interest of $23,226
until such time as the commitment is met. During the most recent quarter a
total of $87,478 was paid and/or accrued and charged to operations.

In July, 1999 the Company issued 2,500 shares valued at $8.80 per share or
$22,000 in total in connection with the successful completion of the
Company's Internet portal telephony project. This amount was capitalized.

In November, 1999 the Company issued 20,000 shares to World of Internet.com,
a European investor relations company. These shares were valued at $3.631 per
share or $72,614 in total which has all been charged to operations.

Warrants issued for services

On November 15, 1999 the Company paid $20,000 and issued 400,000 warrants to
acquire up to 400,000 shares exercisable at $3.50 per share expiring November
15, 2000 for a three month marketing and advertising program including banner
ads, news group coverage and press release distribution. The Company must
also pay $20,000 in December, 1999 and $20,000 in January, 2000. The value of
the warrants on the date of issue was $147,800. Total compensation expense of
$207,800 was recognized during the nine months ended February 29, 2000.

On December 1, 1999, Garry Savage and the Company entered into an Agreement
related to private placement financing and investor relations. The Agreement
calls for a 10% finders fee to be paid pursuant to a private placement of
units at $4.00 per unit. A total of $36,327 has been paid to February 29,
2000. In addition, 100,000 warrants were issued to acquire 100,000 shares
exercisable at $4.00 per share expiring December 1, 2002. The value of these
warrants was $270,820 which was charged to additional paid in capital.

Stock Option Plan

On June 30, 1997, amended on May 21, 1999 and then amended and restated
February 8, 2000, the Company has reserved 2,500,000 common shares pursuant
to a stock option plan expiring May 31, 2007. During the year the Company
granted certain employees and directors stock options to acquire up to
710,000 shares at $4.00 per share, up to 325,000 shares at $5.00 per share,
and up to 35,000 shares at $6.00 per share all expiring between May and
December, 2004.

Stock option activity during the nine months ended February 29, 2000
<TABLE>
<CAPTION>
May 31, Price Granted Exercised (E) February 29, Expiry Date
1999 $ # Cancelled (C) 2000
# #
<S> <C> <C> <C> <C> <C>

370,000 0.50 - 231,750 (E) 138,250 January 26, 2003
267,666 0.75 - 177,666 (E) 90,000 August, 2003 to February, 2004
600,000 4.00 710,000 100,000 (E) 1,210,000 May to November, 2004
5.00 325,000 150,000 (C) 174,900 June to November, 2004
100 (E)
6.00 35,000 - 35,000 December, 2004
--------- --------- -------- ---------
1,237,666 1,070,000 659,516 1,648,150
========= ========= ======== =========
</TABLE>

Options are granted for services to be provided to the Company. Statement of
Financial Accounting Standards No. 123 ("SFAS 123") requires that an
enterprise recognize, or at its option, disclose the impact of the fair value
of stock options and other forms of stock based compensation in the
determination of income. The Company has elected under SFAS 123 to continue
to measure compensation cost on the intrinsic value basis set out in APB
Opinion No. 25. As options are granted at exercise prices based on the market
price of the Company's shares at the date of grant, no compensation cost is
recognized. However, under SFAS 123, the impact on net income and income per
share of the fair value of stock options must be measured and disclosed on a
fair value based method on a pro forma basis.

-8-
<PAGE>

6. Common Stock Issuances and Related Commitments (continued)

The fair value of the employee's purchase rights under SFAS 123, was
estimated using the Black-Scholes model with the following assumptions used
for grants on January 26, 1998: risk free interest rate was 5.47%, expected
volatility of 20%, an expected option life of six months and no expected
dividends; and for grants between August 14, 1998 and February 23, 1999, as a
group: risk free interest rate was 5.27%, expected volatility of 20%, an
expected option life of six months and no expected dividends; and for grants
between May 19, 1999 and December 1, 1999, as a group: risk free interest
rate was 5.27%, expected volatility of 20%, an expected option life of six
months and no expected dividends.

If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for the three months and nine
months ended February 29, 2000 and February 28, 1999 would have been as
follows:

Three months ended Nine months ended
February 29, February 29,
--------------------- ------------------------
2000 1999 2000 1999
$ $ $ $
<S> <C> <C> <C> <C>
Net loss
As reported (1,198,740) (145,894) (2,470,180) (444,107)
Pro forma (1,381,476) (150,636) (3,163,854) (459,897)
Basic net loss per share
As reported (0.16) (0.03) (0.34) (0.04)
Pro forma (0.18) (0.03) (0.44) (0.04)

</TABLE>
7. Contingent Liability - Lawsuit

A Writ of Summons and Statement of Claim was filed against the Company in the
Supreme Court of British Columbia in April 1999 by a former employee and
spouse of the employee (the "Plaintiffs"). The employee was retained by the
Company as a consultant on or about December 1996 and was subsequently
terminated for cause by the Company in December 1997. The Plaintiffs are
seeking monetary damages related to the alleged remuneration pursuant to the
agreement and a stock option between the Company and the employee. The total
damages claimed amounts to $597,000 including alleged unpaid remuneration and
a stock option benefit. The plaintiff's are also claiming 5% of business
revenue from the operating subsidiary in Vancouver, Canada. This subsidiary
operated at a net loss from operations during the period from acquisition in
December 1996 to date. Management believes that the Plaintiff's alleged claim
is without legal or factual basis and therefore have not accrued any
potential losses resulting from this claim except for legal fees paid in
establishing the defence. The Company intends to vigorously defend this
action.

8. Segmented Information

The Company has adopted SFAS No. 131 Disclosure About Segments of an
Enterprise and related information.

The business of the Company is carried on in one industry segment being the
provision of access to the Internet and providing services, including on-line
publishing, to individual and corporate subscribers.

Up until May 31, 1999 the Company operated in one geographic segment, being
Canada, located in Vancouver, BC and Toronto, Ontario. Subsequent to May 31,
1999 the Company began expansion of its ISP business into 22 cities in the
United States by setting up Virtual ISP's. The Company has switched on 50
ports (minimum per agreement with Level 3 Communications) in each of 7 cities
which enables the Company to service up to 500 customers in each city. The
cost of these portals for the nine months ended February 29, 2000 was
$129,141. There was no revenue generated during the period.

The Company's head office is in Richmond, BC, Canada. The head office does
not conduct any business specifically related to the Internet. Its sole
purpose is to provide administration, investor relations services and
services relating to being a public company. Included in general and
administrative expenses and net loss is $1,616,432 relating to such
activities. The net loss relating to Internet activities in Canada amounted
to $853,748.

-9-
<PAGE>

INFORMATION HIGHWAY.COM, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
-------------

This report contains forward-looking statements. The words, "anticipate",
"believe", expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions are intended to identify forward-looking
statements. The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and Notes thereto and other financial
information included elsewhere in this report which contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in the Company's Form 10-KSB filed with the Securities and
Exchange Commission.

Overview

The Company serves as an Internet Service Provider (referred to as an "ISP" in
the industry) for companies and individuals that need access to the Internet in
exchange for a recurring fee. The Company intends to provide ISP services to a
steadily growing number of cities in North America as a "Virtual ISP". A Virtual
ISP provides Internet access to its customers using the underlying
telecommunications infrastructure of another company, such as a telephone
company. The Virtual ISP business model should enable the Company to avoid
purchasing and installing "backbone" communications equipment and infrastructure
in each city where it plans to offer ISP services.

The Company's goal is to expand its ISP business throughout North America by
negotiating access to Virtual ISP "backbone" facilities and then repackaging
that access for sale to its customers and resellers (licensees). The Company has
entered into agreements that permit it to market access to the Internet in the
Northeast United States and 20 cities (some in the Northeast) across the United
States, and in Canada. The Company's Northeast United States Internet access
agreements permit it to provide Digital Subscriber Line ("DSL") access, which
enables users to remain connected to the Internet 24 hours a day, eliminating
annoying busy signals, as well as the time and cost of waiting to connect,
without disrupting the subscriber's normal telephone service. Toronto, Ontario
is the first market in which the Company provided ISP services, beginning about
four years ago.

The Company believes that Internet users will begin to base their selection of
an ISP in part on the value-added services that their ISP provides. Through its
"Executive Site" compilation of Internet-based services and information, the
Company provides localized and portal content catering to business
professionals. Through research, design, programming, co-branding, and
licensing, the Company has compiled Internet services and content in its
Executive Site that it believes are useful to companies, associations and
professionals. Executive Site web pages are designed specifically for targeted
user groups, and the Company believes they provide friendly, easy to navigate
interfaces. The Company's basic Executive Site may be accessed through the
Internet at www.theexecutive.com. Other Executive Sites are customized to the
needs of specific Internet subscriber groups (whether by geographic location or
entity affiliation) and have different Internet addresses.

References in this report to the "Executive Site" mean the basic Executive Site
as well as all customized Executive Sites, unless the discussion refers
specifically to basic or customized Executive Sites.

The Company plans to market the Executive Site throughout North America,
starting with its Virtual ISP locations. It also licenses to other ISPs
customized Executive Sites in certain markets. The Company also offers its
commercial clients the ability to market their products and services to
Executive Site users through its newly developed Virtual Mall.

The Company believes the Executive Site will be popular because most business
professionals don't want to spend their own time searching the Internet for the
information that they need. The Executive Site has assembled a functional
business site to enable users to immediately find what they need. Executive Site
users will be able to:

. monitor and research the stock market;
. plan and book their next business trip;
. check the local news and weather;
. participate in online forums;
. carry out electronic transactions via e-commerce; and

-10-
<PAGE>

. find a suitable restaurant in their area.

The Company does not plan to charge a fee for access to the basic Executive
Site. It does charge a design fee and a recurring user fee for Executive Sites
that it customizes for companies or associations. It also charges a monthly fee
when it allows other ISPs to display a customized Executive Site. The Company
expects to receive advertising and e-commerce commission revenues from the
Executive Site.

The Company conducts its operations through one wholly-owned US subsidiary and
three wholly-owned Canadian subsidiaries.

Information Highway, Inc. ("IHI"), a Washington corporation, actually acquired
these subsidiaries. Then, in February 1999, IHI engaged in a reverse takeover of
Florida Venture Fund, Inc., a Florida corporation. As a result of the reverse
takeover, the shareholders of IHI came to own approximately 95% of the
outstanding shares of Florida Venture Fund, Inc. In connection with the reverse
takeover, Florida Venture Fund, Inc. changed its name to Information
Highway.com, Inc. and is now the ultimate parent company whose shares are traded
on the OTC bulletin board (symbol: IHWY).

In mid-March, the Company commenced trading on the newly created "High Risk
Market" on the Hamburg Stock Exchange. This market is a market segment that
features predominantly US companies that are listed on the OTC Bulletin Board or
the NASDAQ Exchange. In order to ensure a high standard of quality for the
Hamburg Stock Exchange, the Boerinmakler Schnigge AG and the World of
Internet.com AG has created a set of strict admission rules for all companies.

Effect of Reorganization During Fiscal 1999

The reverse takeover was conducted pursuant to an Agreement and Plan of
Reorganization entered into on February 17, 1999 and completed on February 23,
1999 between the Company, IHI and certain shareholders of IHI. The Company
acquired 3,235,000 common shares of IHI out of a total of 5,639,650 issued and
outstanding common shares in exchange for 3,235,000 common shares of the
Company. It is the Company's intention to complete the exchange of shares of its
common stock for the remaining and outstanding common shares of IHI on a one for
one basis. As of April 10, 2000, 2,359,650 of the remaining 2,404,650 IHI shares
had been exchanged for the same number of Company shares. In total, to April 10,
2000, approximately 99% of IHI shares had been exchanged. The Company has
allotted 45,000 shares in anticipation of the remaining shares being exchanged.
As part of the Agreement and Plan of Reorganization the Company caused 1,659,833
of its 1,979,500 common shares that were issued and outstanding prior to the
closing to be cancelled and assumed the obligations of IHI to issue common
shares pursuant to warrants and stock options issued by IHI.

For accounting purposes the acquirer was the legal subsidiary, IHI, as
approximately 95% of the issued and outstanding common shares of the Company at
the time of the reverse takeover were owned by the shareholders of IHI and the
Board of Directors of IHI now comprises the Board of Directors of the Company.
As IHI is the legal subsidiary of the Company the nature of the business
combination is a reverse takeover whereby the control of the assets and the
business of the Company was acquired by IHI and the consolidated financial
statements are issued under the name of the Company but is a continuation of IHI
and not the Company. The legal capital structure remains that of the Company but
the stated shareholders' equity of IHI has replaced the stated shareholders'
equity of the Company. Similarly, the Company's statements of operations and
cash flows represent a continuation of IHI's consolidated financial statements.

Factors Affecting Ongoing Operations

Prior to acquiring IHI in February, 1999, the Company had not conducted any
business since inception in 1988. The following discussion relates to IHI's
continuing operations and not that of the Company prior to the reverse takeover.

Although planned principal activities have started producing significant
revenues, in its effort to rapidly expand infrastructure and network services
and develop the Executive Site(TM), the Company has suffered net losses each
quarter to February 29, 2000. At February 29, 2000, its accumulated deficit was
$4,126,954 and its working capital was $162,934. The Company expects to incur
substantial operating losses, net losses and negative operating cash flow for
the near term.

Revenues

-11-
<PAGE>

Revenue consists of mainly the provision of Internet dial-up services. The
Company receives limited revenue from banner advertisements, web-site
development and hosting, e-commerce commission revenue and the resale of
products over the Internet.

The Company completed a license agreement with ISP Power Corporation in early
December. ISP Power Corporation's PRISM Software provides integrated billing and
customer care software solutions. The PRISM software will consolidate all of
the Company's billing and customer related management needs into one powerful,
flexible and automated package that will help reduce costs and increase profits
for the Company.

The PRISM software integrates into the Microsoft Commercial Internet System
(MCIS), which enables the Company to provide up-to-the-minute billing
information to customers. In addition, the Company will be able to co-brand its
billing system for Virtual ISP's, thereby allowing them to retain their own
identity, even when it relates directly to the billing of their customers.

Revenue is recognized at the time services are provided. All related costs are
recognized in the period in which they occur. Customer deposits for Internet
dial-up services to be provided in the future are treated as deferred revenues.

The following factors affect the Company's revenue:

. Service Offering - The Company derives most of its operating revenue from
the ISP service it provides to its customers;

. Penetration of Target Markets - The Company selects certain target markets
in which it will offer its services and commit corresponding resources for
marketing and infrastructure. The Company bases its target market assessment
on four years of research and development through its involvement in the
Internet industry. Its ability to achieve market penetration in the target
markets it selects to serve has a significant effect on the Company's
ability to maintain and increase its revenues;

. Turnover - Maintaining market penetration successes by minimizing customer
turnover also has a significant effect on the Company's ability to maintain
and increase its revenues. To date, customer turnover has been minimal. The
Company expects customer turnover to increase in the future as competition
intensifies. The Company expects that service quality (i.e., data
transmission speed and periods of down time) and price will be the major
factors that influence ISP customers to switch their ISP;

. Executive Site(TM) - Executive Site(TM) revenues, which to date are mostly
from advertising, are not yet material to the Company's total revenues. The
Company expects that advertising and e-commerce commission revenues related
to the Executive Site(TM), as well as fee-based revenues from customized
Executive Site licensees, will grow in the future, both in dollar amount and
as a percentage of the Company's total revenues.

Cost of Revenues

Cost of revenues consists primarily of the cost of serving the Company's
Internet dial-up service customers and the cost of developing web-sites for
customers. These costs include salaries for technical support and customer
service, depreciation of Internet dial-up and web-site hosting equipment,
license fees, equipment leasing costs, telephone line costs and rent to house
equipment and staff directly involved in serving customers.

The Company's network and service costs have historically included equipment
installation and ongoing service and maintenance charges. As the Company
introduces its Virtual ISP presence in additional cities, each city will
represent an increased lease charge under the Company's agreements with Internet
access providers due to the need to add bandwidth to accommodate the customer
base in the new market. The Company has entered into agreements that permit it
to market access to the Internet in the Northeast United States and 20 cities
(some in the Northeast) across the United States, and in Canada. The Company's
Northeast United States Internet access agreements permit it to provide Digital
Subscriber Line ("DSL") access, which enables users to remain connected to the
Internet 24 hours a day, eliminating annoying busy signals, as well as the time
and cost of waiting to connect, without disrupting the subscriber's normal
telephone service. As the Company expands its presence in a particular market,
it will require additional increases in bandwidth depending on data transmission
volumes.

Other Operating Expenses

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<PAGE>

The Company's other operating expenses include Executive Site(TM) development
and maintenance, information systems, billing and collections, general
management and overhead, and administrative functions. Head count in functional
areas, such as customer service, engineering and operations, along with
expansion of the Executive Site(TM) and the locations in which the Company
provides ISP services and increases in the number of its customers, will drive
increases in expenses.

Results of Operations for the Three Months Ended February 29, 2000 as Compared
to the Three Months Ended February 28, 1999

Revenues

Revenues increased by $80,000 (31%) to $335,000 from $255,000 in the comparative
quarter. This increase was due to an increased subscriber base in Vancouver and
Toronto. Based on assumptions about demand for its ISP services and the
Executive Site(TM), the Company anticipates that the dollar amount of future
revenues will continue to increase over current levels. During the first six
months ended November 30, 1999, the Company has switched on 50 ports (minimum
per agreement with Level 3 Communications) in each of 7 cities which enables the
Company to service up to 500 customers in each city. The cost of these portals
for the three months ended February 29, 2000 was $48,364. There was no revenue
generated during the quarter from these ports.

The Company is beginning to receive small amounts of revenue from banner
advertisements, developing web-sites for customers, reselling Executive Site
information and service modules pursuant to license agreements and reselling
product over the Internet. The Company has also sold product over the Internet
pursuant to a Resellers Agreement. Sales from this source were $10,000 and costs
were $8,000.

Cost of Revenues

Cost of revenues increased by $308,000 (174%) to $485,000 from $177,000 in the
comparative quarter. One-time "catchup" Internet and telephone charges,
totalling $220,000, were paid or accrued during the quarter. These are not
expected to occur in future. The largest components of cost of revenues are
telephone costs and Internet and license fees. The increases in these costs are
reflective of the increase in the Company's subscriber base. Sales increased by
31% while cost of revenues increased by 50% not including the one-time "catchup"
charges. The Company realizes some economy of scale because some of the fixed
cost of revenue relating to equipment and rent.

The Company completed a license agreement with Virtual Plus Technologies, LLC to
sell dial-up, ADSL Internet access service, web design and hosting and e-
commerce solutions to the Washington, DC area in addition to a non-exclusive
license in the Baltimore, Maryland area. The Company also licensed its
customized portal site http://www.theexecutive.com site to Virtual Plus
Technologies for use in Washington, DC. The agreement represents the first step
of the Company's North American roll out, in which the Company will license its
services to other virtual Internet partners on an exclusive or non-exclusive
basis utilizing Level 3 Communications' advanced fibre optic network. The
Company plans to aggressively market its services to several other major US
cities including Seattle, Dallas, Boston, Chicago, Atlanta, Cincinnati, Detroit,
Los Angeles, Miami, New York, Orlando, Philadelphia, San Diego, San Jose, Tampa
and New Jersey.

Gross Profit

After deducting the effect of the one-time catchup charges discussed under "Cost
of Revenues" gross profit decreased by $8,000 (10%) to $70,000 from $78,000 in
the comparative quarter. As a percentage of sales gross profit decreased to 21%
from 30% in the comparative quarter. Increased competition in the Internet
Service Provider industry increases pressure of fee reduction for new
subscribers and renewing subscribers. The Company intends to decrease the cost
of telephone and Internet switching fees with new agreements with backbone or
bandwidth providers.

Marketing and Sales Expenses

Marketing and sales expenses have increased by $79,000 (168%) to $126,000 from
$47,000 in the comparative quarter. The major component of this increase was a
result of a marketing plan to increase advertisements in industry specific
publications throughout Canada. The Company had very little marketing and sales
effort in the comparative quarter.

General and Administrative Expenses

General and administrative expenses for corporate overhead and Internet business
related activities combined have increased by $666,000 to $810,000 from $144,000
in the comparative quarter.

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<PAGE>

General and administrative expenses relating to corporate overhead activities,
and not Internet business-related activities, have increased by $634,000 to
$703,000 from $69,000 in the comparative quarter. As a result of the reverse
takeover during February, 1999, the Company now is incurring expenses relating
to being an active operating public company and is incurring additional expenses
relating to investor relations and financial consulting.

Investor relations and financial consulting increased by $400,000 to $431,000 as
compared to $31,000 in the comparative quarter. Part of this increase was
$79,000 paid in shares (in the previous quarter) to IP Equity, Inc. for
Internet-based marketing and financial consulting services. Pursuant to this
Agreement the Company was also committed to file a Registration Statement
registering these securities by November 6, 1999. IP Equity, Inc. and the
Company have agreed to pay interest of $23,000 until such time as the commitment
is met. During the current quarter a total of $87,000 was paid and/or accrued
and charged to operations. A company was paid $60,000 and was issued warrants in
the previous quarter valued at $147,800 for a marketing and advertising program
including banner ads, newsgroup coverage and press release distribution. A total
of $153,000 of these costs were charged to operations this quarter. A company
was issued 20,000 shares valued at $73,000 for European investor relations of
which $50,000 was charged to operation during this quarter.

Professional fees increased by $60,000 to $74,000 from $14,000 in the
comparative quarter. These additional costs relate to a number of security
issuances and regulatory matters.

Another one-time charge was a $100,000 bonus declared payable to the President
of the Company for all prior services rendered.

General and administrative expenses relating to Internet business related
activities increased by $32,000 to $107,000 from $75,000 in the comparative
quarter. The major components of these expenses were: amortization of goodwill
of $43,000, salaries and consulting fees of $39,000 (up by $19,000) and
telephone costs of $11,000.

Product Development Expenses

Product development costs consist of expenses incurred by the Company in the
development and creation of its Executive Site(TM) web-site. Product development
costs include compensation and related expenses for programmers, depreciation of
computer hardware and software, rent, telephone and costs incurred in developing
features and functionality of the service. Product development costs are
expensed as incurred.

Product development expenses increased by $31,000 (94%) to $64,000 from $33,000
in the comparative quarter. The major component of the increase in product
development expenses was salaries and consulting fees of $50,000 as the Company
continues to expand its services and improve its products.

Depreciation and Amortization Expenses

Depreciation and amortization expense has been allocated to cost of revenues,
marketing and sales, general and administrative, and product development based
on the use of each capital asset. Approximately 60% of capital assets was used
in cost of revenues, 15% in marketing and sales, 10% in general and
administrative and 15% in product development. Depreciation and amortization of
capital assets increased by $15,000 to $25,000 as compared to $10,000 in the
comparative quarter.

Purchased goodwill was amortized at $15,000 per month over its estimated useful
life of three years. The estimated useful life of three years was chosen to
reflect the short-term life of the related business because of increased
competition, the lack of a universal presence and technological advancements and
obsolescence in the industry. Amortization expense has been allocated to general
and administrative expense for the Internet business. Goodwill was fully
amortized by the end of the quarter.

The Company anticipates entering into operating leases for any network equipment
and software in the future to minimize capital expenditures.

Net Loss for the Three Months Ended February 29, 2000 as Compared to the Three
Months Ended February 28, 1999

The Company's net losses have come mainly from investor relations activities and
overhead costs associated with organization, restructuring and financing
operations in Toronto and Vancouver, Canada and costs of developing new and

-14-
<PAGE>

improved services and expanding its marketing plan into other North American
markets. The Company has switched on 50 ports (minimum per agreement with Level
3 Communications) in each of 7 cities which enables the Company to service up to
500 customers in each city. The cost of these portals for the three months ended
February 29, 2000 was $48,364. There was no revenue generated during the period
from these portals. Other operating activities conducted in the United States
were expenses incurred for investor relations and professional fees. The
Company's head office is in Richmond, BC, Canada, which does not conduct any
business related to the Internet. Its sole purpose is to provide administration,
investor relations services and services relating to being a public company.

Results of Operations for the Nine Months Ended February 29, 2000 as Compared to
the Nine Months Ended February 28, 1999

Revenues

Revenues increased by $249,000 (33%) to $1,003,000 from $752,000 in the
comparative period. This increase was due to an increased subscriber base in
Vancouver and Toronto. Based on assumptions about demand for its ISP services
and the Executive Site(TM), the Company anticipates that the dollar amount of
future revenues will increase over current levels. The Company has switched on
50 ports (minimum per agreement with Level 3 Communications) in each of 7 cities
which enables the Company to service up to 500 customers in each city. The cost
of these portals for the nine months ended February 29, 2000 was $129,141. There
was no revenue generated during the period from these ports.

Cost of Revenues

Cost of revenues increased by $405,000 (77%) to $927,000 from $522,000 in the
comparative period. One-time "catchup" Internet and telephone charges, totalling
$220,000, were paid or accrued during the period. These are not expected to
occur in future. The largest components of cost of revenues are telephone costs
and Internet and license fees. The increases in these costs are reflective of
the increase in the Company's subscriber base. Sales increased by 33% while cost
of revenues increased by 35% not including the one-time "catchup" charges. The
Company realizes some economy of scale because some of the fixed cost of revenue
relates to equipment and rent.

The Company completed a license agreement with Virtual Plus Technologies, LLC to
sell dial-up, ADSL Internet access service, web design and hosting and e-
commerce solutions to the Washington, DC area in addition to a non-exclusive
license in the Baltimore, Maryland area. The Company also licensed its
customized portal site http://www.theexecutive.com site to Virtual Plus
Technologies for use in Washington, DC. The agreement represents the first step
of the Company's North American rollout, in which the Company will license its
services to other virtual Internet partners on an exclusive or non-exclusive
basis utilizing Level 3 Communications' advanced fiber optic network. The
Company plans to aggressively market its services to several other major US
cities including Seattle, Dallas, Boston, Chicago, Atlanta, Cincinnati, Detroit,
Los Angeles, Miami, New York, Orlando, Philadelphia, San Diego, San Jose, Tampa
and New Jersey.

Gross Profit

After deducting the effect of the one-time catchup charges discussed under "Cost
of Revenues" gross profit increased by $65,000 (28%) to $295,000 from $230,000
in the comparative period. As a percentage of sales gross profit stayed the same
at 30%. Increased competition in the Internet Service Provider industry
increases pressure of fee reduction for new subscribers and renewing
subscribers. The Company intends to decrease the cost of telephone and Internet
switching fees with new agreements with backbone or bandwidth providers.

Marketing and Sales Expenses

Marketing and sales expenses have increased by $175,000 (122%) to $318,000 from
$143,000 in the comparative period. The major component of this increase was a
result of a marketing plan to increase advertisements in industry specific
publications throughout Canada. The Company had very little marketing and sales
effort in the comparative period.

General and Administrative Expenses

-15-
<PAGE>

General and administrative expenses for corporate overhead activities and
Internet business-related activities combined have increased by $1,481,000 to
$1,914,000 from $433,000 in the comparative period.

General and administrative expenses relating to corporate overhead activities,
and not Internet business-related activities, have increased by $1,416,000 to
$1,616,000 from $210,000 in the comparative period. As a result of the reverse
takeover during February, 1999, the Company now is incurring expenses relating
to being an active operating public company and is incurring additional expenses
relating to investor relations and financial consulting.

Investor relations and financial consulting increased by $1,066,000 to
$1,153,000 as compared to $87,000 in the comparative period. Part of this
increase was $679,000 paid in shares to IP Equity, Inc. for Internet-based
marketing and financial consulting services. Pursuant to this Agreement the
Company was also committed to file a Registration Statement registering these
securities by November 6, 1999. IP Equity, Inc. and the Company have agreed to
pay interest of $23,000 until such time as the commitment is met. During the
current quarter a total of $87,000 was paid and/or accrued and charged to
operations. A company was paid $60,000 and was issued warrants in the previous
quarter valued at $147,800 for a marketing and advertising program including
banner ads, newsgroup coverage and press release distribution. A company was
issued 20,000 shares valued at $73,000 for European investor relations.

Professional fees increased by $91,000 to $138,000 from $47,000 in the
comparative period. These additional costs relate to a number of security
issuances and regulatory matters.

Another one-time charge was a $100,000 bonus declared payable to the President
of the Company for all prior services rendered.

General and administrative expenses relating to Internet business related
activities increased by $75,000 to $298,000 from $223,000 in the comparative
period. The major components of these expenses were: amortization of goodwill of
$135,000, salaries and consulting fees of $101,000 (up by $41,000) and telephone
costs of $22,000.

Product Development Expenses

Product development expenses increased by $86,000 (87%) to $184,000 from $99,000
in the comparative period. The major component of the increase in product
development expenses was salaries and consulting fees of $100,000 as the Company
continues to expand its services and improve its products.

Depreciation and Amortization Expenses

Depreciation and amortization expense has been allocated to cost of revenues,
marketing and sales, general and administrative, and product development based
on the use of each capital asset. Approximately 60% of capital assets was used
in cost of revenues, 15% in marketing and sales, 10% in general and
administrative and 15% in product development. Depreciation and amortization of
capital assets increased by $35,000 to $72,000 as compared to $37,000 in the
comparative period.

The Company anticipates entering into operating and capital leases for any
network equipment and software in the future to minimize capital expenditures.

Net Loss for the Nine Months Ended February 29, 2000 as Compared to the Nine
Months Ended February 28, 1999

-16-
<PAGE>

Up until May 31, 1999 the Company operated in one geographic segment, being
Canada, located in Vancouver, BC and Toronto, Ontario. Subsequent to May 31,
1999 the Company began expansion of its ISP business into 22 cities in the
United States by setting up Virtual ISP's. The Company has switched on 50 ports
(minimum per agreement with Level 3 Communications) in each of 7 cities which
enables the Company to service up to 500 customers in each city. The cost of
these portals for the nine months ended February 29, 2000 was $129,000. There
was no revenue generated during the period from these portals.

The Company's head office is in Richmond, BC, Canada. The head office does not
conduct any business specifically related to the Internet . Its sole purpose is
to provide administration, investor relations services and services relating to
being a public company. Included in general and administrative expenses and net
loss is $1,616,000 relating to such activities. The net loss relating to
Internet activities in Canada amounted to $854,000.

The Company's net losses have come mainly from investor relations activities and
overhead costs associated with organization, restructuring and financing start-
up operations in Toronto and Vancouver, Canada and costs of developing new and
improved services and expanding its marketing plan into other North American
markets. Other operating activities conducted in the United States thus far were
expenses incurred including investor relations and professional fees.

Liquidity and Financial Resources

The Company has historically satisfied its capital needs by borrowing from
affiliates in the short-term and by issuing equity securities.

It has also used these sources to provide a portion of its operating cash
requirements to make up for a cash shortfall from operating activities. During
the nine months ended February 29, 2000, the Company used $2,034,000, generated
by issuing equity securities, to fund its operating cash shortfall of $1,300,000
to repay borrowings from affiliates of $113,000, to make capital expenditures of
$156,000 and to increase its cash position by $461,000 to $498,000. The
operation, development and expansion of the Company's business will likely
require additional capital infusions for the foreseeable future.

The Company has working capital, as at February 29, 2000, of $163,000, and will
require additional funds to finance its ongoing operating activities for the
foreseeable future and will need some funds for capital expenditures. The
Company plans to manage its payables balances and satisfy its operating and
capital needs partially by generating cash (although at a shortfall) through its
operating activities and partially through issuing equity securities.

The Company will require additional financing in order to carry out its business
plan as proposed. The Company's capital requirements may vary based upon: the
timing and success of its roll out and as a result of regulatory, technological
and competitive developments; demand for the Company's services or its
anticipated cash flow from operations is less or more than expected; the
Company's development plans or projections changing or proving to be inaccurate;
it engaging in any acquisitions; or it accelerating deployment of its network
services or otherwise altering the schedule or targets of its roll out plan. The
Company is not presently considering any specific business acquisition.

The Company will need additional funds to continue in business and to implement
its business plan as proposed. In addition to working capital as at February 29,
2000 of $163,000 the Company has raised a further $100,000 pursuant to a private
placement of 25,000 units at $4.00 per unit. On March 7, 2000 the Company
received gross proceeds of $1,500,000 (net proceeds of $1,332,727 after a
commission of $150,000 and legal fees of $17,273 were paid) pursuant to the
issuance of the Company's $1,500,000 principal amount of 5% Convertible
Debentures. The Company also issued to the Debenture holder a warrant to acquire
225,000 shares of the Company exercisable at $6.22875 expiring March 3, 2002.

The principal capital expenditures incurred to date related to putting networks
in place in Toronto and Vancouver. The majority of the networking equipment has
been acquired in previous periods, and new equipment will be leased under
operating leases. The Company's strategy now is to create Virtual ISP presences
in new markets (i.e., North American cities) pursuant to its agreements with
Internet access providers, so that it will not have to commit to capital
expenditures to build out a network in each new market. The Company may need to
commit working capital, however, to fund increased lease payments to Internet
access providers until revenues from new subscribers begin to cover the increase
in monthly

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<PAGE>

lease costs attributable to the new market. The Company has switched
on 50 ports (minimum per agreement with Level 3 Communications) in each of 7
cities which enables the Company to service up to 500 customers in each city.
The cost of these portals for the nine months ended February 29, 2000 was
$129,000. There was no revenue generated during the period from these portals.
The Company expects its capital expenditures to continue at a modest rate in
future periods as necessary, arising primarily from the purchase of some
infrastructure equipment necessary for the development and expansion of its
defined markets. The Company made capital expenditures of $156,000 in the
current period, principally to acquire hardware related to the development and
maintenance of the Executive Site. Included in this is $96,000 of computer
equipment acquired by way of a capital lease.

The Company has arranged a 30 day contract with eQuest Technologies, Inc. a
Microsoft Certified Solution Provider to implement Microsoft's Commercial
Internet System (MCIS). eQuest Technologies, Inc. and ISP Power Corporation will
also install and integrate PRISM's billing and accounting package for the
Company. In addition eQuest can provide to the Company the installation of
network infrastructure, security, custom and application development.

The first phase has commenced at the Company's network operations center in
Vancouver BC, which entails the installation/integration of IBM's servers and
MCIS 2.5 components. The second phase will consist of the integration and
customization of the PRISM billing system.

Year 2000 Issues

The Company cannot provide assurance that it will not experience unanticipated
negative consequences from year 2000 problems, including material costs caused
by undetected errors or defects in the technology used in its internal systems
as it operates in the Year 2000.

The Company did not experience any problems with its systems or service
providers during the Year 2000 rollover period.

The Company's online services and their associated and supporting tools, Web
sites and infrastructure were designed and developed to be year 2000 compliant.
Its internal systems, including those used to deliver its services, utilize
third-party hardware and software. Based on vendors' representations received
thus far and its experience with the Year 2000 rollover, the Company believes
that the third-party hardware and software it uses is year 2000 compliant.

To date, the Company spent an estimated $100,000, in part to address year 2000
issues. These expenditures consisted mainly of purchases of new year 2000-
compliant computer equipment, and some of these purchases would have been made
in the ordinary course of replacing aging equipment. The Company presently
estimates that the total remaining cost of addressing year 2000 issues will not
be material. These estimates were derived utilizing a number of assumptions,
including the assumption that the Company has already identified any significant
year 2000 issues. However, these assumptions may not be accurate, and actual
results could differ materially from those anticipated. In view of the Company's
year 2000 review and remediation efforts to date, the recent development of its
services, the recent installation of its information technology equipment and
systems, the Company does not consider contingency planning to be necessary at
this time.

The Company believes that any lingering Year 2000 problems will occur in the
processing of financial transactions. The Company believes that its billing
systems will accurately invoice its subscribers and licensees. The Company will
remain vigilant in its review of invoices from its vendors to detect potential
Year 2000 errors in their charges to the Company.

If the Company discovers that certain of its services need modification, or
certain of its third-party hardware and software is not year 2000 compliant, it
will try to make modifications to its services and systems on a timely basis.
The Company does not believe that the cost of these modifications will
materially affect its operating results. However, the Company cannot provide
assurance that it will be able to modify these products, services and systems in
a timely, cost-effective and successful manner, and the failure to do so could
have a material adverse effect on its business and operating results.

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<PAGE>

PART II Other Information

Item 2. Changes in Securities and Use of Proceeds
- ------- -----------------------------------------

Recent Sales of Unregistered Securities.

Set forth below is information regarding the issuance and sales of
securities of the Company without registration during the quarter ended
February 29, 2000. No such sales involved the use of an underwriter and
no commissions were paid in connection with the sale of any securities.

(1) In connection with the reorganization of the Company in February
1999, the Company assumed contractual obligations of one of its
subsidiaries under outstanding warrants to issue shares of common
stock for $1.00 per share. During the quarter ended February 29,
2000, the Company issued 339,700 shares pursuant to warrants
exercised at $1.00 per share for total proceeds of $339,700. The
sale of the shares was exempt from registration under Regulation S
and under Rule 506 and under Section 4(2) of the Securities Act of
1933. The Company provided disclosure to each of the warrant
holders in connection with the reorganization of Information
Highway, Inc. (IHI) and the Company and pursuant to its filings
with the Commission. Each of the warrant holders owned shares of
IHI that they have now exchanged for shares of the Company. During
the quarter ended February 29, 2000, the Company issued shares to
27 purchasers of which 6 were accredited investors and 10 were
foreign citizens whose purchases were covered by Regulation S. On
September 30, 1999, the Company had temporarily halted the
exercise of its warrants until it could further verify the
accredited investor status of some of its warrant holders and
shareholders who had previously exercised similar warrants. Upon
further investigation, the Company determined that through
February 29, 2000, in connection with the exercise of all $1.00
warrants assumed in connection with the reorganization of the
Company in February 1999, the Company issued shares to 76
purchasers, of which 23 were accredited investors and 18 were
foreign citizens whose purchases were covered by Regulation S. All
of the shares issued pursuant to the warrant exercises bear a
legend indicating that they are restricted securities. $193,000 of
these sales were exempt under Regulation S under the Securities
Act of 1933, as amended, due to the foreign nationality of the
relevant purchasers.

(2) During the quarter ended February 29, 2000, the Company issued
79,350 shares pursuant to options exercised at between $0.50 and
$5.00 per share for total proceeds of $187,625. The sale of the
shares was exempt from registration under Rule 701 under Section
3(b) of the Securities Act of 1933. The sales were made on
exercise of grants under the Company's written stock option plan,
a copy of which the Company has provided to its participants.

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<PAGE>

Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits.

Exhibit No. Description
----------- ---------------------------------------------------
4.1 Agreement with Garry Savage (Promoter Agreement)
4.2 Form of Warrants (100,000 shares at $4.00)
27.1 Financial Data Schedule

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<PAGE>

Signature
---------

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized.

Dated: April 14, 2000 INFORMATION HIGHWAY.COM, INC.

By: /s/ John G. Robertson
-------------------------------------------
John G. Robertson, President
(Principal Executive Officer)

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<PAGE>

EXHIBIT 4.1

THIS AGREEMENT is dated for reference the 1/st/ day of December, 1999.

BETWEEN:
INFORMATION HIGHWAY.COM, INC.
#185, 10751 Shellbridge Way
Richmond, B.C. V6X 2W8

(hereinafter referred to as "IHWY")

OF THE FIRST PART
AND:
GARRY N. SAVAGE
362 North Main Street
Huron, Ohio 44839
(hereinafter referred to as "Savage")

OF THE SECOND PART

WHEREAS:

A. IHWY wishes to raise funds for marketing its 20-City roll out program for
the Virtual Internet service using the Level 3 fibre optic backbone and for
marketing the ADSL service in the Eastern United States (Bell Atlantic
area). and has agreed to enter into an agreement with Savage whereby Savage
will assist in the customer relations and assist in raising up to
$4,000,000.00 for IHWY.;

NOW THEREFORE in consideration of the mutual covenants and conditions set forth
herein, the parties hereto agree as follows:

1. Savage agrees to assist IHWY with its customer relations and will assist in
raising up to $4,000,000.00 by way of a private placement financing within
90 days of execution of this agreement.

2. In consideration for Savage assisting IHWY in raising funds up to
$4,000,000.00, IHWY agrees to pay a finder's fee equal to 10% of the
proceeds raised, which proceeds shall be paid to IHWY upon the successful
completion of the private placement and issuance of securities.

3. In consideration for Savage assisting IHWY in successfully raising up to
$4,000,000.00 by way of a private placement, IHWY agrees to grant to Savage
share purchase warrants to purchase up to an aggregate of 100,000 shares of
IHWY, which warrants shall be exercisable for a period of three years from
the date of issuance, exercisable at a price of $4.00 per share.

4. In consideration for Savage assisting IHWY in customer relations, IHWY
agrees to grant to Savage share purchase warrants over a two year period,
which warrants shall be exercisable for a period of five years from the
date of issuance, and shall be exercisable as follows:
(a) during the first year of service share purchase warrants to purchase
up to an aggregate of 150,000 shares of common stock at a price of
$4.00 per share; and
(b) during the second year of service additional share purchase warrants
to purchase up to an aggregate of 150,000 shares of common stock at a
price of $5.00 per share.

5. The term of this Agreement is three years from the date of execution. This
Agreement may be terminated by IHWY with 30 days written notice to Savage
in the event that Savage is unsuccessful in assisting IHWY in raising the
financing within 90 days and/or carrying out customer relations to the
satisfaction of the Board of Directors of IHWY, to be reviewed every thirty
days during the term of this Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.

INFORMATION HIGHWAY.COM, INC.

/s/ Garry N. Savage /s/ John Robertson
- --------------------------------------------------------------------------------
GARRY N. SAVAGE Signature

John Robertson
--------------------------------------------
Print Name

President
- --------------------------------------------------------------------------------
Title

<PAGE>

EXHIBIT 4.2

INFORMATION HIGHWAY.COM, INC.

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT ARE TRANSFERABLE ONLY IN ACCORDANCE WITH PARAGRAPH H HEREOF.

Void after 5:00 P.M., Vancouver Time, on December 1, 2002

WARRANT TO PURCHASE 100,000 SHARES OF COMMON STOCK

This is to certify that, FOR VALUE RECEIVED, Garry Savage, of 362 North Main
Street, Huron, Ohio, 44839, (the "Holder") is entitled to purchase, subject to
the provisions of this Warrant, from Information Highway.com, Inc., a company
organized under the laws of the State of Florida, having an office at #185,
10751 Shellbridge Way, Richmond BC Canada V6X 2W8 (the "Company"), the number
of shares set forth above (the "Warrant Shares") of the Company's Common Stock,
$.001 par value ("Common Stock") at a price of $4.00 per share at any time on or
after December 1, 1999 until 5:00 P.M. Vancouver Time, on December 1, 2002. The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for a share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".

A. EXERCISE OF WARRANT. Subject to the following conditions precedent
-------------------
this Warrant may be exercised in whole or in part at any time or from time
to time on or after December 1, 1999, and before 5:00 P.M. Vancouver Time
on December 1, 2002, or, if either such day is a day on which banking
institutions are authorized by law to close, then on the next succeeding
day which shall not be such a day, by presentation and surrender hereof to
the Company at any office maintained by it in British Columbia, Canada,
with the Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of shares specified in such
form. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance
of the shares purchasable hereunder.

B. RESERVATION OF SHARES. The Company hereby agrees that at all times
---------------------
there shall be reserved for issuance and/or delivery upon exercise
of this Warrant such number of shares of its Common Stock as shall
be required for issuance of delivery upon exercise of this Warrant.

C. FRACTIONAL SHARES. No fractional shares shall be issued upon the
-----------------
exercise of this Warrant. With respect to any fraction of a share
called for upon exercise hereof, the Company shall issue to the
Holder the next whole share.

D. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable,
---------------------------------------
without expense, at the option of the Holder, upon presentation and
surrender hereof to the Company for other Warrants of different
denominations entitling the holder thereof to purchase in aggregate the
same number of shares of Common Stock purchasable hereunder. The term
Warrant as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant
of like tenor and date.

E. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
--------------------
entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent
set forth herein.

F. DEATH OF HOLDER. In the event of the death of the Holder, the
---------------
Warrant terminates on the earlier of (I) six months after the date of death
of the Holder, or (ii) the expiration date of the Warrant. In such case,
the Warrant will be exercisable at any time prior to such termination by
the Holder's estate, or by such person or persons who have acquired the
right to exercise the Warrant by bequest or by inheritance or by reason of
the death of the Holder.

1
<PAGE>

G. HOLDING PERIOD. The Warrant Shares obtained upon exercise of the
--------------
Warrant may be sold by the Holder only pursuant to the following
schedule:

(a) Up to 25% of the Warrant Shares may be sold during the 90 days
following exercise (or partial exercise) of the Warrant;

(b) Up to 50% of the Warrant Shares may be sold during the 180 days
following exercise (or partial exercise) of the Warrant;

(c) Up to 75% of the Warrant Shares may be sold during the 270 days
following exercise (or partial exercise) of the Warrant; and

(d) All of the Warrant Shares may be sold during the 365 days following
exercise of the Warrant.

H. NON-TRANSFERABILITY OF WARRANTS. The Warrant may not be sold,
-------------------------------
pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Warrant, only the Holder or as set
forth herein.

I. STOCK DIVIDENDS, RECLASSIFICATION, REORGANIZATION, ANTI-DILUTION
----------------------------------------------------------------
PROVISIONS, ETC. This Warrant is subject to the following further
----------------
provisions:

1. In case, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall issue any shares of its Common Stock as a
stock dividend or subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such cases,
the Exercise Price per share of the Warrant Shares purchasable
pursuant to this Warrant in effect at the time of such action shall be
proportionately reduced and the number of Warrant Shares at that time
purchasable pursuant to this Warrant shall be proportionately
increased; and conversely, in the event the Company shall contract the
number of outstanding shares of Common Stock by combining such shares
into a smaller number of shares, then, in such case, the Exercise
Price per share of the Warrant Shares purchasable pursuant to this
Warrant in effect at the time of such action shall be proportionately
increased and the number of Warrant Shares at that time purchasable
pursuant to this Warrant shall be proportionately decreased.

2. In case, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall be recapitalized by reclassifying its
outstanding Common Stock, $.001 par value, into stock with a different
par value or by changing its outstanding Common Stock with par value
to stock without par, the Company or a successor corporation shall be
consolidated or merge with or convey all or substantially all of its
or of any successor corporation's property and assets to any other
corporation or corporations (any such corporation being included
within the meaning of the term successor corporation in the event of
any consolidation or merger of any such corporation with, or the sale
of all or substantially all of the property of any such corporation
to, another corporation or corporations), in exchange for stock or
securities of a successor corporation, the holder of this Warrant
shall thereafter have the right to purchase upon the terms and
conditions and during the time specified in this Warrant, in lieu of
the Warrant Shares theretofore purchasable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities
receivable upon such recapitalization or consolidation, merger or
conveyance by a holder of the number of shares of Common Stock which
the holder of this Warrant might have purchased immediately prior to
such recapitalization or consolidation, merger or conveyance.

3. Upon the occurrence of each event requiring an adjustment of the
Exercise Price and of the number of Warrant Shares purchasable at such
adjusted Exercise Price by reason of such event in accordance with the
provisions of this Section F, the Company shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares purchasable
at such adjusted Exercise Price by reason of such event in accordance
with the provisions of this Section F, and shall prepare a certificate
setting forth such adjusted Exercise Price and the adjusted number of
Warrant Shares and showing in detail the facts upon which such
conclusions are based. The Company shall mail forthwith to each holder
of this Warrant a copy of such certificate, and thereafter said
certificate shall be conclusive and shall be binding upon such holder
unless contested by such holder by written notice to the Company
within thirty (30) days after receipt of the certificate by such
holder.

2
<PAGE>

4. In case:

(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend
or any other distribution in respect of the Common Stock
(including cash), pursuant to without limitation, any spin-off,
split-off or distribution of the Company's assets; or

(b) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or
purchase any shares of stock of any class or to receive any
other rights; or

(c) of any classification, reclassification or other reorganization
of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, or conveyance of
all or substantially all of the assets of the Company; or

(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, and in any such case, the
Company shall mail to the Holder, at least twenty (20) days
prior thereto, a notice stating the date or expected date on
which a record is to be taken for the purpose of such dividend
or distribution of rights, or the date on which such
classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation, or
winding up is to take place, as the case may be. Such notice
shall also specify the date or expected date, if any is to be
fixed, as of which holders of Common Stock of record shall be
entitled to participate in said dividend on distribution of
rights, or shall be entitled to exchange their shares of Common
stock for securities or other property deliverable upon such
classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation, or
winding up, as the case may be. The failure to give such notice
shall not affect the validity of any such proceeding or
transaction and shall not affect the right of the holder of
this Warrant to participate in said dividend, distribution of
rights, or any such exchange and acquire the kind and amount of
cash, securities or other property as the Holder would have
been entitled to acquire if it was the record holder of the
Warrant Shares which could be obtained upon the exercise of the
Warrants immediately before such proceeding or transaction;
provided that, the Holder exercises the Warrants within 10 days
after discovery that such action or proceeding has taken place.

5. In case the Company at any time while this Warrant shall remain
unexpired and unexercised, shall dissolve, liquidate, or wind up its
affairs, the holder of this Warrant may thereafter receive upon
exercise hereof in lieu of each share of Common Stock of the Company
which it would have been entitled to receive, the same kind and amount
of any securities or assets as may be issuable, distributable or
payable upon any such dissolution, liquidation or winding up with
respect to each share of Common Stock of the Company.

J. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
---------------------
required by the provisions of the foregoing Section, the Company shall
forthwith file in the custody of its Secretary at its principal office, an
officer's certificate showing the adjusted Exercise Price determined as
therein provided, setting forth in reasonable detail the facts requiring
such adjustment, including a statement of the number of additional shares
of Common Stock, if any, the consideration for such shares, determined as
provided in such Section F, and such other facts as shall be necessary to
show the reason for and the manner of computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the holder and the Company shall, forthwith after each such
adjustment, mail a copy of such certificate to the holder.

K. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. Neither this Warrant,
--------------------------------------------------
the Warrant Shares, nor any other security issued or issuable upon exercise
of this Warrant may be sold or otherwise disposed or except as follows:

1. to a person who, in the opinion of counsel reasonably satisfactory
to the Company, is a person to whom the Warrant or Warrant Shares
may legally be transferred without registration and without the
delivery of a current prospectus under the Securities Act of 1933,
as amended (the "Act") with respect thereto and then only against
receipt of an agreement of such person to comply with the provisions
of this Section H with respect to any resale or other disposition of
such securities; or

2. to any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering
thereof for such sale or disposition.

3
<PAGE>

L. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
---------------------------------------------
warrants to the holder as follows:

1. The Company is duly organized and, as of the date of the original
issuance hereof, validly existing and in good standing under the
laws of the State of Florida.

2. Warrant Shares, when issued and paid for in accordance with the
terms of this Warrant, will be fully paid and not assessable.

3. This Warrant has been duly authorized and approved by all required
corporate action by the Company and does not violate the certificate
of incorporation or by-laws of the Company.

INFORMATION HIGHWAY.COM, INC.

/s/ John G. Robertson
By: ________________________________
John G. Robertson, President
Dated: December 1, 1999

4
<PAGE>

PURCHASE FORM
TO BE EXECUTED
UPON EXERCISE OF WARRANTS

TO: Information Highway.com, Inc.
#185, 10751 Shellbridge Way
Richmond BC Canada V6X 2W8

The undersigned hereby exercises, according to the terms and conditions thereof,
the right to purchase _____________ Shares of Common Stock, evidenced by the
within Warrant Certificate, and herewith makes payment of the purchase price in
full.

Dated:
_________________________________________________________

Name:
__________________________________________________________

Address:
__________________________________________________________

Signature:
__________________________________________________________

UPON EXERCISE OF THIS WARRANT PAYMENT SHOULD BE MADE TO THE ORDER OF
INFORMATION HIGHWAY.COM, INC.

<PAGE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 498,175
<SECURITIES> 0
<RECEIVABLES> 5,031
<ALLOWANCES> 0
<INVENTORY> 31,241
<CURRENT-ASSETS> 688,946
<PP&E> 724,284
<DEPRECIATION> (252,845)
<TOTAL-ASSETS> 1,160,385
<CURRENT-LIABILITIES> 526,012
<BONDS> 0
0
0
<COMMON> 4,704,677
<OTHER-SE> (5,878)
<TOTAL-LIABILITY-AND-EQUITY> 1,160,385
<SALES> 1,001,549
<TOTAL-REVENUES> 1,001,549
<CGS> 926,565
<TOTAL-COSTS> 926,565
<OTHER-EXPENSES> 2,545,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,470,180)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,470,180)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,470,180)
<EPS-BASIC> (0.34)
<EPS-DILUTED> (0.34)

</TABLE>