10QSB 1 form10qsb.txt U. S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended February 28, 2002 ----------------- [ ] TRANSITION REPORT UNDER 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. --------------------------------------------- (Name of Small Business Issuer in its Charter) Florida 65-0154103 ------- ---------- (State or Other Jurisdiction of (I.R.S. Employer incorporation or organization) Identification No) #120 - 3011 Viking Way Richmond, BC V6V 1W1 Canada --------------------------------------------- (Address of Principal Executive Offices) (604) 278-5996 --------------------------------------------- Issuer's Telephone Number #185 - 10751 Shellbridge Way Richmond, BC V6X 2W8 Canada --------------------------------------------- (Former Name or Former Address, if changed since last Report) 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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No (2) Yes X No ----- ----- ----- ----- (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Not applicable (APPLICABLE ONLY TO CORPORATE ISSUERS) State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date: January 18, 2002 Common - 9,382,352 shares DOCUMENTS INCORPORATED BY REFERENCE A description of any "Documents Incorporated by Reference" is contained in Item 6 of this Report. Transitional Small Business Issuer Format Yes No X ----- ----- Information Highway.com, Inc. INDEX Part I Financial Information Item 1. Financial Statements Balance Sheet as of February 28, 2002 Statement of Operations for the quarter and three months ended February 28, 2002 Statement of Cash Flows for three months ended February 28, 2002 Notes to Financial Statements Item 2. Management's Discussion and Analysis or Plan of Operation PART II - Other Information INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED FINANCIAL STATEMENTS February 28, 2002 (Stated in U.S. Dollars) ---------------------- INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED BALANCE SHEET February 28, 2002 (Unaudited) (Stated in U.S. Dollars) ---------------------- (Unaudited) (Audited) February 28, May 31, ASSETS 2002 2001 ------ ---- ---- Current Cash $ 10,147 $ - Accounts receivable - 20,424 Inventory - 24,921 Prepaid expenses 1,164 13,680 ------------ ------------ 11,311 59,025 Capital assets, net - Note 4 99,301 288,981 ------------ ------------ $ 110,612 $ 348,006 ============ ============ LIABILITIES ----------- Current Bank overdraft $ 14,514 $ 2,117 Bank loan - 55,613 Accounts payable and accrued liabilities 957,792 775,289 Deferred revenues 20,000 52,986 Due to related parties - Note 6 288,469 236,387 Convertible debentures - Note 5 1,340,000 1,297,964 Current portion of obligations under capital lease - 31,611 ------------ ------------ 2,620,777 2,451,967 Obligations under capital leases - 22,192 ------------ ------------ 2,620,777 2,474,159 ------------ ------------ STOCKHOLDERS' EQUITY -------------------- Stockholders' equity Preferred stock $0.0001 par value, none issued and outstanding - - Common stock $0.0001 par value; authorized 50,000,000 shares; 10,431,053 and 9,148,500 issued and outstanding 1,043 914 Additional paid in capital - common stock 5,264,485 5,086,269 Additional paid in capital - stock warrants 651,120 651,120 Common stock paid for but unissued - 46,500 ------------ ------------ 5,916,648 5,784,803 Cumulative translation adjustments 15,218 (5,805) Deficit (8,442,031) (7,905,151) ------------ ------------ Total stockholders' equity (2,510,165) (2,126,153) ------------ ------------ $ 110,612 $ 348,006 ------------ ------------ SEE ACCOMPANYING NOTES INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT for the three and nine month periods ended February 28, 2002 and 2001 (Unaudited) (Stated in U.S. Dollars) ----------------------
Three months ended Nine months ended February 28, February 28, 2002 2001 2002 2001 ---- ---- ---- ---- Revenues $ - $ 1,868 $ - $ 17,956 Cost of revenues - 370,104 - 537,810 ------------- ------------- ------------- ------------- Gross profit (loss) - (368,236) - (519,854) ------------- ------------- ------------- ------------- Operating Expenses Marketing and sales - 1,572 - 59,663 General and administrative (recovery) 232,648 (151,111) 428,702 772,025 Product development - 17,191 - 150,044 ------------- ------------- ------------- ------------- Total operating expenses (recovery) 232,648 (132,348) 428,702 981,732 ------------- ------------- ------------- ------------- Loss from continuing operations (232,648) (235,880) (428,702) (1,501,586) ------------- ------------- ------------- ------------- Discontinued Operations Loss from operations from YESIC Communications, Inc. - (18,233) - (512,642) Loss from operations from Pavlik Travel Services Ltd. - 456 (108,178) (11,094) Loss from operations from Blue Crow Internet Co. Ltd. (31,170) (13,578) - (94,017) ------------- ------------- ------------- ------------- Loss from discontinued operations (31,170) (31,355) (108,178) (617,753) Net loss for the period (263,818) (267,243) (536,880) (2,119,339) Deficit, beginning of period (8,178,213) (7,643,415) (7,905,151) (5,791,319) ------------- ------------- ------------- ------------- Deficit, end of period $ (8,442,031) $ (7,910,658) $ (8,442,031) $ (7,910,658) ============= ============= ============= ============= Basic loss from continuing operations $ (0.01) $ (0.08) $ (0.02) $ (0.15) Basic loss from discontinued operations $ (0.00) $ (0.04) $ (0.01) $ (0.07) ------------- ------------- ------------- ------------- Basic and diluted loss per share $ (0.01) $ (0.12) $ (0.03) $ (0.22) ============= ============= ============= ============= Weighted average shares used to compute basic loss per share 9,382,000 8,512,000 9,285,000 8,178,000 ============= ============= ============= =============
SEE ACCOMPANYING NOTES INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine month period ended February 28, 2002 and 2001 (Unaudited) (Stated in U.S. Dollars) ---------------------- Nine months ended February 28, 2002 2001 ---- ---- Cash Flows used in Operating Activities Net loss $ (536,880) $ (2,119,339) Add items not affecting cash Amortization and capital assets written off 108,203 117,319 Amortization of convertible debenture valuation allowance 57,036 - Amortization of goodwill - 11,698 Shares and warrants issued for services rendered - 41,388 Interest on conversion of debentures - 5,811 Imputed interest on valuation of warrants - 74,590 (Gain) loss on sale of capital assets 18,735 (1,952) Write-off of inventory 24,921 - Net changes in non-cash working capital items Accounts receivable 20,424 (9,549) Inventory - 1,017 Prepaid expenses 12,516 121,945 Accounts payable and accrued liabilities 184,862 437,575 Deferred revenue (32,986) 39,907 ------------ ------------ Net cash used in operating activities (143,169) (1,279,590) ------------ ------------ Cash Flows from Financing Activities Increase (repayment of) bank loan (55,613) 61,669 Proceeds from common shares issued 10,000 6,250 Increase (decrease) in advances from related parties 157,838 320,763 Increase (decrease) in capital lease obligations - (25,788) Share subscriptions in subsidiary - 119,629 Share subscriptions - 14,000 ------------ ------------ Net cash from financing activities 112,225 496,523 ------------ ------------ Cash flows used in Investing Activities Acquisition of capital assets (2,495) (45,417) Restricted cash - (26,042) Proceeds from sale of capital assets 10,166 6,250 Purchase of subsidiary - (56,148) ------------ ------------ Cash flows from (used in) investing activities 7,671 (121,357) ------------ ------------ /Cont'd. SEE ACCOMPANYING NOTES INFORMATION HIGHWAY.COM, INC. Continued INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine month period ended February 28, 2002 and 2001 (Unaudited) (Stated in U.S. Dollars) ---------------------- Nine months ended February 28, 2002 2001 ---- ---- Translation adjustments 21,023 7,877 ------------ ------------ Net decrease in cash (2,250) (896,547) Cash and cash equivalents, (deficiency) beginning of period (2,117) 857,949 ------------ ------------ Cash and cash equivalents deficiency, end of period $ (4,367) $ (38,598) Cash and cash equivalents deficiency consists of: Cash $ 10,147 $ - Bank overdrafts (14,514) (38,598) ------------ ------------ $ (4,367) $ (38,598) ============ ============ Supplementary disclosure of cash flow information Cash paid for: Interest $ 111,166 $ 173,037 ------------ ------------ Income taxes $ - $ - ============ ============ Supplementary disclosure of non-cash operating and financing activities: Value of common shares issued for share subscriptions $ 46,500 $ - ============ ============ Value of common shares issued for services $ - $ 41,388 ============ ============ Conversion of convertible debentures into common shares $ 16,066 $ 150,811 ============ ============ Return of assets under capital lease applied against lease obligations $ 53,803 $ - ============ ============ Value of common shares issued and applied against amounts due to related parties $ 105,756 $ - ============ ============ SEE ACCOMPANYING NOTES INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) for the nine months ended February 28, 2002 and for the year ended May 31, 2001 (Unaudited) (Stated in U.S. dollars) ----------------------
Par Value Additional Additional Stock paid Cumulative Number of $0.001 Paid-in Paid-in but not Translation Shares Issued Amount Capital Warrants Issued Adjustment Deficit Total ------------- ------ ------- -------- ------ ---------- ------- ----- Balance, as at May 31, 2000 (audited) 8,141,334 $ 814 $4,812,920 $ 651,120 $ - $ (11,572) $(5,791,319) $ (338,037) Shares issued for cash pursuant to stock options exercised 12,500 1 6,249 - - - - - Shares issued pursuant to conversion of debentures 664,666 66 150,745 - - - - - Shares issued for services 330,000 33 116,355 - - - - - Shares subscriptions received - - - - 46,500 - - - Net income for the year ended May 31, 2001 - - - - - (5,805) (2,113,832) - ---------- ---------- ---------- ---------- ---------- ---------- ----------- ------------ Balance, as at May 31, 2001 (audited) 9,148,500 914 5,086,269 651,120 46,500 (5,805) (7,905,151) (2,126,153) Shares issued pursuant to conversion of debentures 233,852 23 16,066 - - - - - Shares issued for cash 1,048,701 106 162,150 - (46,500) - - - Net income for the nine month period ended February 28, 2002 - - - - - 21,023 (536,880) - ---------- ---------- ---------- ---------- ---------- ---------- ----------- ------------ Balance, as at February 28, 2002 (unaudited) 10,431,053 $ 1,043 $5,264,485 $ 651,120 $ - $ 15,218 $(8,442,031) $ (2,510,165) ========== ========== ========== ========== ========== ========== =========== ============
SEE ACCOMPANYING NOTES INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS February 28, 2002 (Unaudited) (Stated in U.S. Dollars) ---------------------- Note 1 Continuance of Business ----------------------- The Company has not achieved profitable operations since inception and has accumulated losses of $8,442,031, has a working capital deficit of $2,609,466, and has sold or disposed of all significant continuing operations as at February 28, 2002. These factors raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon its successful efforts to raise additional equity financing over the next twelve months and/or acquire a profitable business. Note 2 Interim Reporting ----------------- While the information presented in the accompanying interim three months consolidated financial statements is unaudited, it includes all adjustment which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company's May 31, 2001 annual consolidated financial statements. Note 3 Discontinued Operations ----------------------- (a) Acquisition and Disposition of Pavlik Travel Services Ltd. (i) On September 27, 2000 the Company completed an agreement to purchase a travel agency located in British Columbia, Canada. Total consideration paid was CDN$125,000. The purchase was accounted for as an acquisition, and the excess purchase price over the fair market value of net assets acquired, being CDN$84,390, was allocated to goodwill and was being amortized over two years. (ii) On February 28, 2001 the Company entered into an agreement to sell the travel agency to a private company under the President's control at a fair value of CDN$125,000. The private company paid a bank loan in the amount of $85,922 and the balance of $39,078 was paid in cash. The Company realized revenue of $23,276 for the period September 27, 2000 through February 28, 2001. Pursuant to the agreement the Company wrote off its shareholder loans receivable of $19,863 to operations at February 28, 2001. (b) Disposition of YESIC Communications, Inc. On April 23, 2001, pursuant to a share purchase agreement, the Company sold its 100% interest in YESIC Communications, Inc. ("YESIC") a subsidiary of the Company operating in the business of providing access to the Internet in the Province of Ontario. Total consideration received was CDN$10. In addition the Company was to receive contingent additional amounts as a repayment of shareholder's loans but subsequent to the sale, YESIC declared bankruptcy and as a result the shareholders loans receivable totalling $712,963 from YESIC were written off to operations at May 31, 2001. INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS February 28, 2002 (Unaudited) (Stated in U.S. Dollars) ---------------------- Note 3 Discontinued Operations - (cont'd) ----------------------- (c) Disposition of dial-up and webhosting business of Blue Crow Internet, Inc. On September 19, 2001, the Company's wholly-owned subsidiary, Blue Crow Internet Company, Inc., entered into an agreement to sell its dial-up and webhosting customer base to PCNet International Inc. The sale was completed on October 1, 2001 and included the bluecrow.com domain name and several pieces of computer equipment. The Company has received CDN$10,000 and could receive a monthly amount based on the sold assets net monthly cash flow as outlined in the agreement over an 18 month period to a maximum CDN$120,000. To date, the Company has received CDN$23,813. Note 4 Property, Plant and Equipment ----------------------------- (Unaudited) (Audited) 2002 2001 ------------------------------------------- ------------ Accumulated Cost Amortization Net Net ---- ------------ --- --- Computer equipment $ 273,307 $ 174,335 $ 98,972 $ 197,232 Office furniture and equipment 329 - 329 19,408 Production equipment - - - 10,412 Leasehold improvements - - - 9,283 Assets under capital lease - - - 52,646 ---------- ---------- ---------- ---------- $ 273,636 $ 174,335 $ 99,301 $ 288,981 ========== ========== ========== ========== Note 5 Convertible Debentures ---------------------- The Company issued, to one investor, three $500,000, two year convertible debentures bearing interest at 5%. Warrants to purchase 225,000 common shares exercisable at $6.2287 and expiring March 3, 2002 were also issued. The maturity date is March 3, 2002. The Company received $1,332,728 after paying to the Agent a 10%, or $150,000, financing fee and legal costs of $17,272. The debenture holders can convert their debentures into common shares based on the face value plus accrued interest divided by the lesser of the fixed price of $6.22875 and the average closing price for the 20 days prior to conversion. No amount has been allocated to the conversion feature in accordance with APB 14. Debt issue costs of $167,272 have been charged to operations and the value of the detachable share purchase warrants, totaling $175,500, was deducted from the proceeds of the convertible debenture as a valuation allowance and is being amortized to operations over two years. The Company has the right to redeem with cash. During the year ended May 31, 2001 convertible debentures of $145,000 plus accrued interest of $5,811 were converted into 664,646 common shares. During the quarter ended August 31, 2001, convertible debentures of $15,000 plus accrued interest of $1,089 were converted into 233,852 shares. INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS February 28, 2002 (Unaudited) (Stated in U.S. Dollars) ---------------------- Note 6 Related Party Transactions -------------------------- (Unaudited) (Audited) February 28, May 31, 2002 2001 ---- ---- (i) Amounts owing to the President of the Company and private companies under the President's control are from short-term cash loans, are due on demand, unsecured and non-interest bearing. $ 296,034 $ 223,892 (ii) Amounts owing to (from) public companies that share office premises and have President's in common are from expenses paid by these companies on behalf of the Company, are due on demand, unsecured, and non-interest bearing. (7,565) 12,495 ----------- ----------- Total $ 288,469 $ 236,317 =========== =========== (iii) Included in accounts payable is $42,354 owing to a company controlled by the President (iv) Included in deferred revenues is $20,000 from a related party for future website development work. Note 7 Common Stock ------------ Warrants Outstanding: 100,000 warrants to acquire 100,000 common shares at $4.00 per share exercisable to December 1, 2002 are outstanding. INFORMATION HIGHWAY.COM, INC. INTERIM CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS February 28, 2002 (Unaudited) (Stated in U.S. Dollars) ---------------------- Note 7 Common Stock - (cont'd) ------------ Stock Option Plan Pursuant to a stock option plan amended and restated February 8, 2000 and expiring May 31, 2007, the Company has reserved 3,000,000 common shares for future issuance. The weighted average number of shares under option and option price for the period ended February 28, 2002 is as follows:
Weighted Average Shares Weighted Remaining Under Average Life of Option Option Options Number Price $ (Months) ------ ------- -------- Beginning of period 1,564,400 .25 Granted - - Exercised - - Cancelled - - Lapsed - - --------- 1,564,400 .25 30 ========= === ==
Effective January 17, 2001 the exercise price of all outstanding stock options was reduced to $.25. Note 8 Contingent Liability -------------------- 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 will vigorously defend this action. Any settlement resulting from the resolution of this contingency will be recorded in the period of settlement. Item 2. Management's Discussion and Analysis of Financial Condition and ------------------------------------------------------------------------- Results of Operations --------------------- Forward Looking Statements -------------------------- 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 our Financial Statements and the 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. Our 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 this report. Overview Through our portal sites we provide information which we believe is useful to companies, associations and professionals. Portal site web pages are designed specifically for targeted user groups, and we believe they provide friendly, easy to navigate interfaces. Our new investment portal site www.stock-tracker.net, through this portal site we provide information we believe is usefull to companies (see: www.USA.theexecutive.com) and we believe that our portal site will provide friendly, easy to navigate interfaces. Our new portal site www.stocktracker.net provides investment information on public companies, such as news releases, stock quotations and company profiles. Other portal sites are customized to the needs of specific Internet subscriber groups (whether by geographic location or entity affiliation) and have different Internet addresses. Information Highway.com, Inc.'s executive offices are located at 3011 Viking Way, Suite 120, Richmond, British Columbia V6V 1W1, Canada, our telephone number is (604) 278-5996 and our facsimile number is (604) 278-3409. On September 27, 2000 we completed an agreement to purchase Pavlik Travel Services Ltd., a retail travel agency, located in a suburb of Vancouver, British Columbia, Canada. On February 28, 2001, we subsequently sold Pavlik to SMR Investments Ltd. for CDN$125,000 whereby SMR paid CDN$85,921.77 to pay a bank loan, with the balance of CDN$39,078.23 paid to us. On April 24, 2001 we completed a share purchase agreement through which we disposed of all the assets, liabilities and shares of our wholly-owned subsidiary, YesIC Communications, Ltd., a Toronto-based ISP, to a private Ontario corporation. BUSINESS DEVELOPMENT -------------------- Information Highway.com was incorporated in Florida in December 1988 as Florida Venture Fund, Inc. Florida Venture Fund had not conducted any business prior to February, 1999, when it engaged in a reverse takeover with Information Highway, Inc., a Washington corporation. Information Highway, Inc. was formed in October, 1996. It began to build the basis for the current business of the Company by undertaking the following acquisitions: - YesIC Communications, Inc., acquired in February, 1997; - World Tel Internet (Toronto) Ltd., acquired in February, 1997; and - Blue Crow Internet Company, Ltd., acquired in December, 1996. In a reverse takeover, the shareholders of an acquired company generally end up owning all or most of the resulting combined company. The reverse takeover of Florida Venture Fund, Inc. by Information Highway, Inc. was conducted pursuant to an Agreement and Plan of Reorganization entered into on February 17, 1999 and closed on February 23, 1999 between Florida Venture Fund, Inc., Information Highway, Inc. and certain shareholders of Information Highway, Inc. Florida Venture Fund, Inc. acquired 3,235,000 common shares of Information Highway, Inc. (out of a total of 5,639,650 issued and outstanding common shares) in exchange for 3,235,000 common shares of Florida Venture Fund, Inc. In connection with the reverse takeover, FloridaVenture Fund, Inc. changed its name to Information Highway.com, Inc. It is our intention to complete the exchange of shares of Information Highway.com common stock for the remaining and outstanding common shares of Information Highway, Inc. on a one for one basis. As of May 11, 2000 (date of exchange offering closing), 2,359,650 of the remaining 2,404,650 Information Highway, Inc. shares had been exchanged for the same number of Information Highway.com shares. Information Highway.com has allotted 33,000 shares in anticipation of the remaining shares of Information Highway, Inc. being exchanged in the future. As part of the Agreement and Plan of Reorganization, Information Highway.com 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 Information Highway, Inc. to issue common shares pursuant to warrants and stock options issued by Information Highway, Inc. Information Highway, Inc. paid $100,000 to the controlling shareholder of Information Highway.com to effect the Agreement and Plan of Reorganization including the cancellation of 1,659,833 shares. In total, to January 10, 2000, approximately 99% of Information Highway, Inc. shares had been exchanged. Information Highway.com has allotted 33,000 shares in anticipation of the remaining shares being exchanged. As part of the Agreement and Plan of Reorganization, Information Highway.com 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 Information Highway, Inc. to issue common shares pursuant to warrants and stock options issued by Information Highway, Inc. Information Highway, Inc. paid $100,000 to the controlling shareholder of Florida Venture Fund, Inc. as a finder's fee and to effect the Agreement and Plan of Reorganization. On April 24, 2001 by way of share purchase agreement, we disposed of YesIC Communications, Ltd., our Toronto-based ISP which was an ISP only, in order to focus on our Vancouver-based center. On September 19, 2001, the Company's wholly-owned subsidiary, Blue Crow Internet Company, Inc., entered into an agreement to sell its dial-up and webhosting customer base to PCNet International Inc. for maximum consideration of Cdn$120,000. The sale was completed on October 1, 2001 and included the bluecrow.com domain name and several pieces of computer equipment. Our Portal Sites Through our portal site compilation of application-based services and information, we provide localized and portal content designed to cater to business professionals. Through research, design, programming, co-branding, and licensing, we have compiled ASP services and content in our portal sites that we believe are useful to companies, associations and professionals. Portal site web pages are designed specifically for targeted user groups, and we believe they provide friendly, easy to navigate interfaces. Our two basic portal sites may be accessed through the Internet at www.USA.theexecutive.com and www.stock-tracker.net. Other portal sites are customized to the needs of specific Internet subscriber groups (whether by geographic location or entity affiliation) and have different Internet addresses. The www.stock-tracker.net portal site has assembled a functional portal site which will be a valuable research tool for investors and brokers. The main features of the site will consist of: - stock profile of feature companies; - stock charts; - quotation service; - view up to date news releases; - order press packages from feature companies; - create a portfolio and track performance of stock. We have committed significant resources to the development of the portal sites. Our portal sites can be customized to function as a dedicated service for dial-up communities, interest groups, associations, and companies, who in turn sell dial-up access to the service to their users, members, associates, or employees. In other words, the portal sites make available comprehensive services such as stock quote systems, and then adds information and directories unique to any given group or organization. In some cases, its networks may even form the backbone of a corporate Intranet. Because of the modular nature of the portal sites' information and service components, we can offer businesses and associations the components that they want as the basis of their customized intranets or executive sites. An initial development and licensing fee, together with monthly maintenance fees, will be charged for the development of a customized portal site. The modular nature of the portal site's information and service components will also facilitate establishing local customized portal sites in those markets where we, or one of our licensees, seek to establish or maintain a presence on the world wide web. Progress Report from May 31, 2001 to February 28, 2002 On September 19, 2001, the Company's wholly-owned subsidiary, Blue Crow Internet Company, Inc., entered into an agreement to sell its dial-up and webhosting customer base to PCNet International Inc. for maximum consideration of Cdn$120,000. The sale was completed on October 1, 2001 and included the bluecrow.com domain name and several pieces of computer equipment. Revenues Revenues are not presented in the current financial period as we are in a development phase pending the launch of new services. Cost of Revenues All costs related to revenues are recorded as revenue as recognized. Cost of revenues are not presented in the current financial period as we are in a development phase pending the launch of new services. Other Operating Expenses Operating expenses include compensation, depreciation, rent and telephone costs incurred and are included in general and administrative expenses in the current year. We have recently scaled down our operations in order to reduce overhead through reduction in staffing and amalgamation of offices. Results of Operations for the Nine Months Ended February 28, 2002 as Compared to the Nine Months Ended February 28, 2001 General and Administrative Expenses ----------------------------------- General and administrative expenses relating to corporate overhead activities, and not Internet business-related activities, have decreased by $1,072,884 to $428,702 from $1,501,586 in 2001. Expenses relating to being an active operating public company including investor relations and financial consulting have been curtailed. Expenses relating to being an active operating public company including investor relations and consulting have been curtailed. Bank and Interest charges decreased by $63,121 to $111,916 from $175,037 in 2001. Partial costs in 2001 included penalty interest charges. The Company was incurring penalties pursuant to a Registration Rights Agreement with the debenture holder in the amount of $30,000 per month until a registration statement for selling shareholders was declared effective by the SEC. Depreciation and Amortization Expenses Depreciation and amortization expense has been allocated to cost of general and administrative expense. Net Loss for the Nine Months Ended February 28, 2002 as Compared to the Nine Months Ended February 28, 2001 Our 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. General and administrative expenses relating to corporate overhead activities have decreased by $1,072,884 to $428,702 from $1,501,586 in 2001. Expenses relating to being an active operating public company including investor relations and consulting have been curtailed. Liquidity and Financial Resources at February 28, 2002 We have historically satisfied our capital needs by borrowing from affiliates in the short-term and by issuing equity securities and entering into capital leases. During 2002 we financed our operations by receiving financial support from companies affiliated with our president in the amount of $157,838. These amounts are unsecured, non-interest bearing and due on demand Overall, our cash position has decreased by $2,250 from negative $2,117 to negative $4,367. We had a working capital deficit, as at February 28, 2002, of ($2,609,466), and will require additional funds to finance our ongoing operating activities for the foreseeable future and will need some funds for capital expenditures. We plan to manage our payables balances and satisfy our operating and capital needs partially by generating cash (although at a shortfall) through our operating activities and partially through issuing equity securities. We have not achieved profitable operations since our inception and have suffered mounting losses of $8,442,031 to February 28, 2001. PART II Other Information Item 1. Legal Proceedings --------------------------- None Item 2. Changes in Securities ------------------------------- Refer to Notes to Financial statements attached hereto. Item 3. Defaults upon Senior Securities ----------------------------------------- None Item 4. Submissions of Matters to a Vote of Security Holders -------------------------------------------------------------- None Item 5. Other Information --------------------------- None Item 6. Exhibits and Reports on Form 8-K ------------------------------------------ None Signature --------- In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, hereto duly authorized. Dated : May 21, 2002 -------------------- INFORMATION HIGHWAY.COM, INC. ----------------------------- By: /s/ John G Robertson -------------------------- ------------------------ John G. Robertson, President (Principal Executive Officer) By: /s/ James Vandeberg ------------------------- ________________________ ------------------------ James Vandeberg, Chief Financial Officer (Principal Financial Officer)