U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended December 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _______ to _______
COMMISSION FILE NUMBER: 000-28657
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PEOPLESWAY.COM, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0374559
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(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
2969 Interstate Street, Charlotte, North Carolina 28208
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(Address of principal executive offices)
(704) 393-7591
--------------
(Issuer's telephone number)
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 [ ]
Number of shares of common stock outstanding as of
February 14, 2002: 13,419,469
INDEX TO FORM 10-QSB
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Page No.
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PART I
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Item 1. Financial Statements
Balance Sheets - December 31, 2001 and March 31, 2001 3
Statements of Operations - Three and Nine Months
Ended December 31, 2001 and 2000 4
Statements of Cash Flows - Nine Months Ended
December 31, 2001 and 2000 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 7-17
PART II
- -------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
PEOPLESWAY.COM, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 2001 AND MARCH 31,2001
(Unaudited)
December 31, 2001 March 31, 2001
ASSETS -----------------------------------
- --------------------------------------------------------------
CURRENT ASSETS:
- --------------------------------------------------------------
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . $ 16,056 $ 1,392
Due from related parties . . . . . . . . . . . . . . . . . . . 110,933 53,631
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 104,305 105,110
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . 231,294 160,133
------------------- ----------------
FIXED ASSETS:
- --------------------------------------------------------------
Furniture and office equipment . . . . . . . . . . . . . . . . 16,321 16,321
Accumulated depreciation . . . . . . . . . . . . . . . . . . . (4,325) (3,125)
NET FIXED ASSETS . . . . . . . . . . . . . . . . . . . . . . . 11,996 13,196
----------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 243,290 $ 173,329
------------------- ----------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
- --------------------------------------------------------------
CURRENT LIABILITIES:
- --------------------------------------------------------------
Accounts payable and accrued expenses. . . . . . . . . . . . . $ 84,176 $ 48,267
Excess of outstanding checks over bank balance . . . . . . . . 10,894 10,894
Deferred revenue - prepaid certificate . . . . . . . . . . . . 204,693 209,215
Due to related parties . . . . . . . . . . . . . . . . . . . . 43,341 56,894
Note payable - stockholder . . . . . . . . . . . . . . . . . . 7,000 7,000
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . . 350,104 332,270
------------------- ----------------
LONG-TERM LIABILITIES:
- --------------------------------------------------------------
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . 139,838 115,000
TOTAL LONG-TERM LIABILITIES. . . . . . . . . . . . . . . . . . 139,838 115,000
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 489,942 447,270
------------------- ----------------
STOCKHOLDERS' DEFICIT:
- --------------------------------------------------------------
Common stock ($.001 par value, 100,000,000 shares authorized;
13,389,469 issued and outstanding at December 31, 2001) . . . 13,389 12,932
Additional paid-in-capital . . . . . . . . . . . . . . . . . . 91,193 46,000
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . (351,234) (332,873)
TOTAL STOCKHOLDERS' DEFICIT. . . . . . . . . . . . . . . . . . (246,652) (273,941)
------------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT. . . . . . . . . . $ 243,290 $ 173,329
------------------- ----------------
The accompanying notes are an integral part of these financial statements
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PEOPLESWAY.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Dec 31, 2001 Dec 31, 2000 Dec 31, 2001 Dec 31, 2000
REVENUES AND RELATED COSTS:
- --------------------------------------
Retail sales . . . . . . . . . . . . . $ 127,102 $ 318,889 $ 430,978 $ 777,031
Less: Distributor allowances on
product purchases. . . . . . . . . . . (26,162) (95,667) (117,560) (233,109)
100,940 223,222 313,418 543,922
-------------- -------------- -------------- --------------
Other revenue. . . . . . . . . . . . . -0- 7,199 3,587 58,627
NET REVENUES . . . . . . . . . . . . . 100,940 230,421 317,005 602,549
-------------- -------------- -------------- --------------
COST OF RETAIL SALES . . . . . . . . . (21,623) (117,883) (108,578) (348,114)
GROSS PROFIT . . . . . . . . . . . . . 79,317 112,538 208,427 254,435
-------------- -------------- -------------- --------------
EXPENSES:
- --------------------------------------
Selling, general and administrative. . 105,931 130,024 219,267 341,923
TOTAL EXPENSES . . . . . . . . . . . . 105,931 130,024 219,267 341,923
OPERATING (LOSS) . . . . . . . . . . . (26,614) (17,486) (10,840) (87,488)
-------------- -------------- -------------- --------------
OTHER EXPENSES:
- --------------------------------------
Interest expense . . . . . . . . . . . (2,757) -0- (7,521) -0-
NET (LOSS) . . . . . . . . . . . . . . $ (29,371) $ (17,486) $ (18,361) $ (87,488)
-------------- -------------- -------------- --------------
Net (loss) per share -
basic and fully diluted. . . . . . . $ ** $ ** $ ** $ **
Weighted average shares outstanding. 13,161,219 12,932,969 13,009,052 13,144,910
============== ============== ============== ==============
** Less than $.01
The accompanying notes are an integral part of these financial statements
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PEOPLESWAY.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
- --------------------------------------------------------------------
Net (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(18,361) $(87,488)
Adjustments to reconcile net (loss) to net cash (used in) operating
activities:
Common stock issued for services . . . . . . . . . . . . . . . . . . 45,650 -0-
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 -0-
(Increase) decrease in prepaid expenses. . . . . . . . . . . . . . . 805 (4,121)
Increase in accounts payable and accrued expenses. . . . . . . . . . 35,909 27,199
Increase (decrease) in deferred revenue - prepaid certificate. . . . (4,522) 15,131
(Increase) in due from related parties . . . . . . . . . . . . . . . (70,855) (50,356)
--------- ---------
NET CASH (USED IN) OPERATING ACTIVITIES. . . . . . . . . . . . . . . (10,174) (99,635)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
- --------------------------------------------------------------------
Proceeds from notes payable. . . . . . . . . . . . . . . . . . . . . 24,838 102,152
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . . . . . . . 24,838 102,152
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . 14,664 2,517
--------- ---------
CASH AND CASH EQUIVALENTS:
BEGINNING OF THE PERIOD. . . . . . . . . . . . . . . . . . . . . . . 1,392 636
END OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,056 $ 3,153
--------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
- --------------------------------------------------------------------
Common stock issued for services . . . . . . . . . . . . . . . . . . $ 45,650 $ -
--------- ---------
The accompanying notes are an integral part of these financial statements
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NOTES TO FINANCIAL STATEMENTS
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PEOPLESWAY.COM, INC.
December 31, 2001 (UNAUDITED)
ITEM 1.
- -------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the unaudited financial statements contain
all adjustments consisting only of normal recurring accruals considered
necessary to present fairly the Company's financial position at December 31,
2001 (unaudited) and March 31, 2001, the results of operations for the nine
months ended December 31, 2001 and 2000, and cash flows for the nine months
ended December 31, 2001 and 2000. The results for the nine months ended December
31, 2001, are not necessarily indicative of the results to be expected for the
entire fiscal year ending March 31, 2002.
NOTE 2 - (LOSS) PER SHARE
- ------------------------------
The following represents the calculation of (loss) per share:
Three Three Nine Nine
Months Ended Months Ended Months Ended Months Ended
BASIC & FULLY DILUTED Dec. 31, 2001 Dec. 31, 2000 Dec.31, 2001 Dec.31, 2000
- -------------------------------------------------------------------------------
Net (loss) $ (29,371) $ (17,486) $ (18,361) $ (87,488)
Less- preferred stock dividends -0- -0- -0- -0-
------------------------------------------------------
Net (loss) $ (29,371) $ (17,486) $ (18,361) $ (87,488)
Weighted average number
of common shares
outstanding 13,161,219 12,932,969 13,009,052 13,144,910
------------------------------------------------------
Basic & Fully Diluted
(Loss) per share $ ** $ ** $ ** $ **
======================================================
** Less than $0.01
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------
With the exception of historical facts stated herein, the matters discussed
in this report are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future sales
and earnings from operations of the Company. Readers of this report are
cautioned not to put undue reliance on "forward looking" statements, which are,
by their nature, uncertain as reliable indicators of future performance. The
Company disclaims any intent or obligation to publicly update these "forward
looking" statements, whether as a result of new information, future events, or
otherwise. In addition the uncertainties include, but are not limited to
competitive conditions involving E-commerce, and the sales of cosmetics,
flowers, beauty and fragrance products over the Internet.
General Description of Business
- ----------------------------------
Peoplesway.Com, Inc. ("Peoplesway") is an electronic commerce and Internet
services company that maintains an Internet destination called "Peoplesway,"
located at www.peoplesway.com. The Peoplesway Web site offers goods and services
for sale, including: cosmetics and beauty products, health supplements, jewelry,
and flowers, which can be obtained directly through the Web site, or by calling
our customer service team members. The majority of our goods and services are
available through an alliance with DRM, Inc. and its member network of
approximately 14,000 independent contractors who may purchase and sell
Peoplesway products and services through the use of our Web site. We do not
retain an inventory of any product we sell. Payment comes directly to Peoplesway
from customers through a secure Internet server that accepts credit card
transactions. We then forward these orders to DRM or other vendors, who then
will drop ship products to customers as orders are received through our
Peoplesway Web sites.
Recent History
- ---------------
Peoplesway, Inc., a closely-held North Carolina corporation incorporated in
August 1999, was acquired by Prospector Energy, Inc. ("Prospector") in a reverse
acquisition, as a wholly-owned subsidiary on September 1, 1999 in a stock for
stock tax free exchange, whereby all outstanding shares of Peoplesway were
exchanged for 12,500,000 shares of Prospector. At inception, Prospector was
authorized to issue 30,000,000 shares of common voting stock, par value one cent
($0.01) per share. Pursuant to the acquisition of Peoplesway and resulting
amendments to the articles of incorporation, the authorized shares of common
stock increased to 100,000,000, the par value was changed to $.001, a 400 to 1
reverse split of Prospector's common stock was effected, resulting in 107,328
shares being issued and outstanding immediately prior to the acquisition, and
the company changed its name to Peoplesway.Com, Inc. Following the conversion of
a convertible debenture, there are an additional 3,000,000 shares outstanding,
for a total of 15,607,969 shares of common stock outstanding. During November
2000, 2,675,000 of these shares were sent back to the Company's treasury and
retired.
All references in this document to "Peoplesway", "the Company" or "us",
"we" or "our", refer to the Nevada parent, formerly known as Prospector Energy,
Inc., and the North Carolina subsidiary. The principal offices of Peoplesway are
located at 2969 Interstate Street, Charlotte, North Carolina 28208, and its
phone number is (704) 393-7591.
Prior History
- --------------
Peoplesway was organized as a Utah corporation on October 30, 1980, for the
purpose of purchasing, owning, holding, selling, disposing of and otherwise
dealing in the oil and gas business and other natural resources. It became a
public company through an offering of common stock to residents of the State of
Utah, pursuant to an exemption from registration under then-existing Rule 147,
Securities Act of 1933. Following the offering, Prospector acquired an interest
in Four Winds Mineral Venture, a Louisiana partnership that held a 66% interest
in a Costa Rican oil and gas company, in exchange for the issuance 11,250,000
shares of common stock. This acquisition proved unsuccessful, and thereafter
business operations ceased and the company was dormant from 1983 until 1997,
when it actively began seeking a merger or acquisition candidate, which it
accomplished in 1999 when it entered into the Acquisition Agreement with
Peoplesway. As Prospector never left the development stage and was dormant until
1997, we have re-designated our inception date to be January 1, 1997.
Charter Amendments
- -------------------
The following amendments to the Articles of Incorporation have been effected
since we were organized:
- - Effected a name change from Prospector Energy, Inc. to Peoplesway.Com,
Inc., effective September 13, 1999.
- - Effected a 400 to 1 reverse split of the common stock, effective September
22, 1999.
- - Increased the authorized capital to 100,000,000 shares, effective
September 22, 1999.
- - Changed domicile from the State of Utah to the State of Nevada on
September 24, 1999.
Copies of the initial Articles of Incorporation, these amendments and the Bylaws
are attached hereto and incorporated herein by reference.
Internet Commerce
- ------------------
The Internet is a worldwide series of interconnected electronic and/or
computer networks. Individuals and companies have recently recognized that the
technological capabilities of the Internet provide a medium for not only the
promotion and communication of ideas and concepts, but also for the presentation
and sale of information, goods and services. According to statistics reported by
the Computer Industry Almanac, there are projected to be 110 million Internet
users in the United States by the end of 1999, and nearly 14 million users in
Canada by year-end. Of this number, approximately 25% purchase goods and
services online, according to a December 1999 study by Scarborough Research.
Historically, the Internet has been accessible principally through personal
computers. Recently, several companies have announced "Web TV" products designed
for attachment to television sets for the purpose of allowing access to the
Internet without the need for a personal computer. Although these products do
not permit the full range of functions provided by personal computers, they do
permit many of the features of the Internet to be viewed on television sets.
Management believes that the new Web TV products are expected to substantially
increase the number of people who will shop online by accessing the Internet.
Already, online purchases have increased 100% in the past year, according to a
November, 1999 study by Yankelovich Partners, Inc.
The term "Internet commerce" encompasses the use of the Internet for
selling goods and services. The use of the Internet as a marketing and
advertising tool is enhanced by the ability to communicate information through
the Internet to a large number of individuals, businesses and other entities.
Because of the "virtual" nature of electronic commerce, the online presence
for certain merchants can significantly reduce or eliminate the costs of
maintaining a physical retail facility. Online merchants can also achieve
significant savings by eliminating traditional product packaging, print
advertising and other point of purchase materials. Marketing on the Internet can
be especially advantageous for smaller companies because it removes many
physical and capital barriers to entry and serves to level the competitive
playing field by allowing smaller companies to effectively compete with larger
companies.
Internet Security
- ------------------
One of the largest barriers to a potential customer's willingness to
conduct commerce over the Internet is the perceived ability of unauthorized
persons to access and use personal information about the user, such as credit
card account numbers, social security numbers and bank account information.
Concerns about the security of the Internet include the authenticity of the user
(i.e., is the user accurately identified), verification and certification
methods of who these users are, and privacy protection for access to private
information transmitted over the Internet. However, recent advances in this area
have greatly reduced the possibility of such unauthorized access or use. IMC
Worldwide, Inc. provides our Unix-based computer system and hosts our Web site
and our independent contractor Web sites, employing state-of-the-art encryption
software to ensure the privacy and protection of our customers. We have not
experienced any occasion in which a user's credit card was misappropriated while
transacting business on Peoplesway.
Alliance with DRM
- -------------------
The majority of our goods and services are available through an alliance
with DRM, Inc. and its subsidiaries, RMC Group, Inc. and RMC Group Canada, Ltd.
("DRM"). DRM began offering health and beauty products in 1982, and its sales
from inception have exceeded $250,000,000 from both U.S. and Canada operations.
It has a member network of approximately 14,000 independent contractors who may
purchase and sell Peoplesway products and services through the use of our Web
site. Peoplesway has established agreements with DRM to market and sell to DRM
independent contractors. RMC Group, Inc. was established in 1993 and took over
the distribution rights for the United States from DRM. In 1998 RMC became a
subsidiary of DRM. RMC Group Canada, Ltd. was established in 1987 as a
subsidiary of DRM. It was established to service the Canadian market. We soon
intend to expand our current agreement with DRM, Inc. by signing an exclusive
license agreement to market and sell the DRM product lines in North America.
Products and Services
- -----------------------
Products and services currently offered by Peoplesway include:
Health and beauty products. Peoplesway offers products through DRM from
their Rose Marie Collection, including cosmetics, personal hygiene products,
skin care, hair care, and bath products. In addition, DRM supplies Body
Management System nutritional products, including weight loss and anti-aging
supplements. DRM manufactures and packages these products through a licensing
agreement with a health and beauty product manufacturer.
Flowers. Peoplesway also sells fresh flowers and arrangements delivered to
your door, through an arrangement with Proflowers.Com, Inc.
Marketing and Advertising
- ---------------------------
By leveraging the DRM sales force, we are simultaneously opening Internet
Web sites and marketing the current Peoplesway product lines. Each independent
contractor is encouraged by Peoplesway and DRM to open a sub-Web site at
Peoplesway.com. For example, John Doe would have a site address of
www.peoplesway.com/johndoe. John Doe will advertise his site and will receive a
commission for each sale ordered on his site. John Doe's only responsibility is
to advertise his site. Inventory, shipping, merchant accounts, payments and
customer service will be handled by Peoplesway its subsidiaries and affiliates.
It is envisioned that thousands of site owners will individually advertise to
thousands of Internet shoppers to come and shop at their site. As of December
31, 2001, after twenty-seven months of operations, we have added 1,400 new
members and have more than 500 sub websites.
Risk Factors.
- --------------
Additional Capital Requirements.
Peoplesway has limited capital. Our primary sales are derived from the sale
of a limited number of goods and services online to limited markets, and these
sales are presently dependent upon the services provided by our alliance with
DRM and a small number of employees. If this alliance ends, it is likely that we
cannot continue as a going concern. We have limited capital to increase our
sales force or to expand operations; accordingly, without additional capital,
growth will be limited.
Economic Considerations.
Any substantial downturn in economic conditions could significantly depress
discretionary consumer spending and have a material adverse effect on
Peoplesway's business operations. At any given time, because of the search and
comparison-shopping capabilities using the Internet, it is possible to locate
items similar to that sold by Peoplesway at competitive or lower prices.
Inflation may also affect the future availability of favorable terms or
financing rates for Peoplesway or its customers, and deflation may also affect
sales derived from these operations.
Reliance on Existing Management.
Peoplesway's operations are primarily dependent upon the experience and
expertise of Donald R. "Pete" Monroe, Chairman; Matthew M. Monroe, President;
and Eugene M. Johnston, CEO and Secretary/Treasurer. The loss of any of our
management may have a material adverse effect on our present and contemplated
business operations. Our success is also dependant upon our ability to attract
and retain qualified management, administrative and sales personnel to support
our anticipated future growth, of which there can be no assurance. Peoplesway
does not carry key man insurance upon the lives of any of our directors or
executive officers.
Reliance on Existing Alliance
Peoplesway's operations are primarily dependent upon the existence of the
alliance with DRM and its subsidiaries, and the contracts that exist between DRM
and vendors. Formal written agreements have been established with DRM and their
subsidiaries such that all goods and service, which DRM or its subsidiaries
offer for sale, are listed on, and for sale through, the Peoplesway website.
However, the loss of this alliance or a downturn in the business of DRM would
have a material adverse effect on our present and contemplated business
operations.
Lack of Dividends.
We have not paid and do not expect to pay any cash dividends with respect
to our common stock in the foreseeable future. We presently have limited
revenues and capital. Without substantial increases in revenues and capital, it
would be impossible to pay cash dividends.
Limited Market for Common Stock.
There is currently a limited trading market for our shares of common stock,
and there can be no assurance that a more substantial market will ever develop
or be maintained. Any market price for shares of common stock of Peoplesway is
likely to be very volatile, and numerous factors beyond our control may have a
significant adverse effect. In addition, the stock markets generally have
experienced, and continue to experience, extreme price and volume fluctuations
which have affected the market price of many small capital companies and which
have often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic and political conditions,
may also adversely affect the market price of our common stock. Further, there
is no correlation between the present limited market price of Peoplesway's
common stock and our revenues, book value, assets or other established criteria
of value. The present limited quotations of our common stock should not be
considered indicative of the actual value of Peoplesway or our common stock.
Shares Eligible for Future Sales.
Sales of unrestricted securities may also have an adverse effect on any
market that may develop in Peoplesway's common stock. Of the 13,389,469
outstanding shares of Peoplesway's common stock, 107,328 have satisfied the
two-year "holding period" requirements of Rule 144(k), meaning that they can
presently be sold. In addition, of the 13,389,469 shares, 12,500,000 were
issued on October 18, 1999, and under Rule 144 of the Securities Act of 1933, if
certain conditions are satisfied, a limited number of these shares, up to 1% of
the total issued and outstanding shares, approximately 129,000 of these shares
up to 1% of the issued and outstanding shares of the Company, could be sold
during any three month period. Once these shares enter the market, their sale
may have a depressive effect on the market price of our stock.
Conflicts of Interest.
Peoplesway's directors and officers are directors, executive officers,
controlling stockholders and/or partners of DRM and its related subsidiaries.
Thus, there exist potential conflicts of interest including, among other things,
time, effort and corporate opportunity, involved in participation with other
potential business opportunities.
Risks Associated with Execution of Growth Strategy.
A principal component of Peoplesway's growth strategy is to partner with
additional merchants and service providers that will allow their goods and
services to be sold through Peoplesway's Web site, and to attract additional
customers. Peoplesway's ability to execute its growth strategy depends on a
number of factors including, (i) Peoplesway's ability to acquire these goods and
services and related opportunities on economically feasible terms; (ii) our
ability to obtain the capital necessary to finance the expansion and to pay any
necessary sales, marketing and operational expenditures; and (iii) our
ability to manage potentially rapidly growing operations effectively and in a
manner which will result in significant customer satisfaction. There can be no
assurance that we will be successful in any of these respects.
Internet and Information Systems
We rely upon the accuracy and proper utilization of our Internet and
information system to provide timely distribution services, manage our sales and
track our customers' purchase and sale information. To manage our growth, we are
continually evaluating the adequacy of our existing systems and procedures and
continue to update and integrate critical functions. We anticipate that we will
regularly need to make capital expenditures to upgrade and modify our Internet
and information systems, including software and hardware, as we grow and the
needs of our business changes. There can be no assurance that we will anticipate
all of the demands that our expanding operations will place on our information
system. The occurrence of a significant system failure or our failure to expand
or successfully implement its systems could have a material adverse effect on
our operations and financial results.
Dependence On Technical Employees
The success of our Internet services business depends in large part upon
our ability to attract and retain highly skilled technical employees in
competitive labor markets. There can be no assurance that we will be able to
attract and retain sufficient numbers of skilled technical employees. The loss
of existing technical personnel or difficulty in hiring or retaining technical
personnel in the future could have a material adverse effect on our operations
and financial results.
Delivery Time
Peoplesway does not have a significant backlog of business since our
vendors normally deliver and/or install products and services purchased by our
customers within one to seven days from the date of order. Accordingly, backlog
is not material to our business or indicative of future sales. From time to
time, we may experience difficulty in obtaining products from our major vendors
as a result of general industry conditions. In addition, in the Internet
industry, one to three day delivery options are becoming commonplace. If we are
unable to deliver products to our customers within a short time period, we may
experience loss of sales.
Rapid Technological Change
As with all Internet companies, our success will depend in part on our
ability to develop Internet solutions that keep pace with continuing changes in
information technology, evolving industry standards and changing client
preferences. There can be no assurance that we will be successful in adequately
addressing these developments on a timely basis or that, if these developments
are addressed, we will be successful in the marketplace. In addition, there can
be no assurance that products or technologies developed by others will not
render our services noncompetitive or obsolete. Our failure to address these
developments could have a material adverse effect on our operating results and
financial condition.
Competition; Low Barriers to Entry.
Peoplesway expects competition to persist, intensify and increase in the
retail Internet industry in the future. There are thousands of individuals and
companies that sell goods and services similar to those offered by Peoplesway.
Almost all of our current and potential competitors have longer operating
histories, larger installed customer bases, longer relationships with clients
and vendors, and significantly greater financial, technical, marketing and
public relation resources than Peoplesway. As a strategic response to changes
in the competitive environment, Peoplesway may from time to time make certain
pricing, service technology or marketing decisions or business or technology
acquisitions that could have a material adverse effect on our business,
financial condition, results of operations and prospects, and similar actions by
competitors could materially adversely affect our present and proposed business
operations, results of operations, financial condition and prospects.
In addition, our ability to generate customers will depend to a significant
degree on the uniqueness and quality of our products and services and our
reputation among our customers and potential customers, compared with the
quality of similar services provided by, and the reputations of, Peoplesway's
competitors. To the extent that we lose customers to our competitors because of
dissatisfaction with our services, or our reputation is adversely affected for
any other reason, our business, results of operations, financial condition and
prospects could be materially adversely affected.
There are relatively low barriers to entry into Peoplesway's targeted
business. Anyone can attempt to purchase and sell the goods and services, which
Peoplesway purchases and markets. Accordingly, we are likely to face additional
competition from new entrants into the market in the future. There can be no
assurance that existing or future competitors will not develop or offer services
that provide significant performance, price, creative or other advantages over
those offered by Peoplesway, which could have a material adverse effect on our
business, financial condition, results of operations and prospects.
Acquisitions
We may consider acquiring the assets and operations of other companies in
order to expand our business. Integration of acquisitions may involve a number
of risks that could have a material adverse effect on our operating results and
financial condition, including: restructuring charges associated with the
acquisitions and other expenses associated with a change of control;
non-recurring acquisition costs such as accounting and legal fees; investment
banking fees; amortization of acquired intangible assets; recognition of
transaction-related obligations and various other acquisition-related costs;
diversion of management's attention; difficulties with retention, hiring and
training of key personnel; and risks of incurring unanticipated problems or
legal liabilities. To date, we have not entered into any such acquisition
agreements.
Although we would conduct due diligence, hire outside independent financial
and accounting consultants, and generally require representations, warranties
and indemnifications from the former owners of any acquisition candidates, there
can be no assurance that such owners will have accurately represented the
financial and operating conditions of their companies. If an acquired company's
financial or operating results were misrepresented, or the acquired company
otherwise failed to perform as anticipated, the acquisition could have a
material adverse effect on the operating results and financial condition of
Peoplesway.
Risks of "Penny Stock."
Peoplesway's common stock may be deemed to be "penny stock" as that term
is defined in Rule 3a51-1 of the Securities and Exchange Commission. Penny
stocks are stocks (i) with a price of less than $5.00 per share; (ii) that are
not traded on a "recognized" national exchange; (iii) whose prices are not
quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must
still meet requirement (i) above); or (iv) in issuers with net tangible assets
less than $2,000,000 (if the issuer has been in continuous operation for at
least three years) or $5,000,000 (if in continuous operation for less than three
years), or with average sales of less than $6,000,000 for the last three years.
Until November 1999, there had been no "established public market" for
Peoplesway's common stock during the last five years. While our stock has
traded between $.15 and $5.36 per share since November 1999, there is no
assurance that this price level will continue, as there has thus far been low
volume, and our stock may be deemed to be penny stock at any time. Section 15(g)
of the Securities Exchange Act of 1934, as amended, and Rule 15g-2 of the
Securities and Exchange Commission require broker/dealers dealing in penny
stocks to provide potential investors with a document disclosing the risks of
penny stocks and to obtain a manually signed and dated written receipt of the
document before effecting any transaction in a penny stock for the investor's
account. Potential investors in our common stock are urged to obtain and read
such disclosure carefully before purchasing any shares that are deemed to be a
"penny stock."
Moreover, Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stocks to that investor.
This procedure requires the broker/dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker/dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
Peoplesway's common stock to resell their shares to third parties or to
otherwise dispose of them.
Patents, Trademarks, Licenses, Franchisees, Concessions, Royalty Payments or
Vendor Contracts.
Peoplesway has applied for a federal trademark of "Peoplesway" and
"Peoplesway.Com." However, as of this date, these federal trademarks have not
been granted. We have secured the use of Peoplesway.Com on the Internet, which
cannot be used to access any other Web site as long as we remain current with
our Internet registration of the name. Agreements and licenses with our vendors
are directly between DRM and our vendors, other than Proflowers.com, with which
we have an oral agreement, cancelable upon notice by either party. We have no
direct control over the cancellation of these contracts, and if they are
canceled, it may hinder our ability to be profitable or to continue operations.
NASD OTC Bulletin Board Quotations.
Our common stock is currently quoted on Over the Counter Bulletin Board
(OTC BB) under the ticker symbol 'PLWY.'.
RESULTS OF OPERATIONS
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For the Three and Nine Months Ended December 30, 2001 and 2000.
Retail Sales and Net Revenues
- ---------------------------------
Retail sales and net revenues for the nine months ended December 31,
2001 were $430,978 and $313,418, respectively, versus retail sales and net
revenues of $777,031 and $543,922, respectively for the comparable period in
2000, a decrease of 44% and 42%, respectively. This decrease in net revenues was
primarily attributable to an overall decline in business due to the World Trade
Center terrorist attacks and disaster on September 11, 2001. Net revenues
consisted of product sales, monthly service fees and business aid sales. We plan
to accelerate growth of sales in 2002 by increasing expenditures on marketing
and growing public awareness of products.
Expenses
--------
Selling, general and administrative expenses for the nine-month period
ended December 31, 2001 were $219,267, versus $341,923 for the comparable period
in 2000, a decrease of 36%. Notable expense decreases for the nine months ended
December 31, 2001 include overall labor costs and rent that decreased. Such
decreases were primarily attributable to management's attempt to streamline
operations during the period ended December 31, 2001. We anticipate incurring
approximately the same amount of these expenses during the remainder of the
current fiscal year. This decrease in expenses would have been greater since we
incurred $45,650 in non-cash expenses attributable to the issuance of common
shares in exchange for services received for the quarter ending December 31,
2001.
We also expect increases in certain expenses such as advertising
through fiscal 2002 as the Company moves toward increasing development and
marketing of our products.
Cost of Sales
- ---------------
One of the largest factors in the variations in the cost of sales as a
percentage of net revenues is the cost of products.
Cost of sales for the nine months ended December 31, 2001 was $108,578
versus $348,114 for the same period in 2000. The decrease was due to the
decrease in the Company's sales during the period. Gross product margins and
product prices remained relatively constant during the year.
Impact of Inflation
- ---------------------
We believe that inflation has had a negligible effect on operations
during the year. We believe that we can offset inflationary increases in the
cost of sales by increasing sales and improving operating efficiencies.
Trends, Events, and Uncertainties
- ------------------------------------
Demand for our products will be dependent on, among other things, market
acceptance of the Peopleway.com concept, the quality of our Web site and general
economic conditions, which are cyclical in nature. Inasmuch as a major portion
of our activities is the receipt of revenues from the sales of its products, our
business operations may be adversely affected by our competitors and prolonged
recessionary periods.
Liquidity and Capital Resources
- ----------------------------------
For the Nine Months Ended December 31, 2001 and 2000.
Cash flows used in operations were $10,174 for the nine months ended
December 31, 2001 versus cash used of $99,635 for the same period in 2000.
Management believes this represents a significant achievement in operations from
the prior year period.
Cash flows provided by financing activities was $24,838 for the nine
months ended December 31, 2001 versus cash generated of $2,517 in the same
period in 2000. The cash flows used in financing activities during the nine
months ended December 31, 2001 reflected $24,838 in additional notes payable
issued by the Company.
We have funded our cash needs from inception through December 31, 2001
with a series of related party, debt, and equity transactions, including private
placements.
We will substantially rely on the existence of revenue from product
sales and from the projected revenues of www.Peoplesway.com. We project that we
will need additional capital to fund operations over the next 12 months. If the
projected revenues of www.Peoplesway.com fall short of needed capital, the
Company will not be able to sustain its capital needs for more than six months.
We will then need to obtain additional capital through equity or debt financing
to sustain operations for an additional year. A lack of significant revenues
beginning in the second six months of fiscal 2002 will significantly affect the
cash position of the Company and move the us toward a position where the raising
of additional funds through equity or debt financing will be necessary.
On a long-term basis, liquidity is dependent on continuation and expansion
of operations, receipt of revenues, additional infusions of capital and debt
financing. We are considering launching a wide scale marketing and advertising
campaign. Our current available capital and revenues are not sufficient to fund
such a campaign. If we choose to launch such a campaign it well require
substantially more capital. If necessary, we plan to raise this capital through
an additional follow-on stock offering. The funds raised from this offering will
be used to develop and execute the marketing and advertising strategy, which may
include the use of television, radio, print and Internet advertising. However,
there can be no assurance that we will be able to obtain additional equity or
debt financing in the future, if at all. If we are unable to raise additional
capital, our growth potential will be adversely affected. Additionally, we will
have to significantly modify our plans.
PART II. OTHER INFORMATION
- --------
Item 1. Legal Proceedings
- -------
The Company is not a party to any legal proceedings, nor, to the best of
its knowledge, are any such proceedings threatened or contemplated.
Item 2. Changes in Securities
- -------
None.
Item 3. Defaults upon Senior Securities
- -------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- -------
None.
Item 5. Other Information
- -------
None.
Item 6. Exhibits and Reports on Form 8-K
- -------
(a) Exhibits
--------
3. Articles of Incorporation with amendments and bylaws are incorporated by
reference to Exhibit No. 1 of Form 10-SB as amended filed November 2000.
(b) Reports on Form 8-K
----------------------
None.
--SIGNATURE PAGE FOLLOWS--
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PEOPLESWAY.COM, INC.
(Registrant)
Date: February 14, 2002 /s/Gene Johnston
----------------
Gene Johnston
Chief Executive Officer