Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Vape Holdings, Inc. | Financial_Report.xls |
| EX-31.1 - CERTIFICATION - Vape Holdings, Inc. | f10q0313ex31i_peoplestring.htm |
| EX-32.1 - CERTIFICATION - Vape Holdings, Inc. | f10q0313ex32i_peoplestring.htm |
| EX-32.2 - CERTIFICATION - Vape Holdings, Inc. | f10q0313ex32ii_peoplestring.htm |
| EX-31.2 - CERTIFICATION - Vape Holdings, Inc. | f10q0313ex31ii_peoplestring.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2013
or
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the Transition Period from to .
Commission File Number 333-163290
PEOPLESTRING CORPORATION
(Exact name of registrant as specified in its charter)
|
Delaware
|
90-0436540
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
20301 Ventura Boulevard, Suite 126B, Woodland Hills, California 91364
(Address of principal executive offices) (Zip Code)
(949) 743-3399
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o No x
Indicate by check mark whether the registrant has submitted and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer o
|
Accelerated filer o
|
|
Non-accelerated filer o
|
Smaller reporting company x
|
|
(Do not check if a smaller reporting company)
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
Number of shares of Common Stock outstanding at September 27, 2013:
|
Common Stock, par value $0.00001 per share
|
62,618,500
|
|
|
(Class)
|
(Number of Shares)
|
PEOPLESTRING CORPORATION
FORM 10-Q
MARCH 31, 2013
INDEX TO FORM 10-Q
|
PAGE
|
||
|
1
|
||
|
2
|
||
|
3
|
||
|
4
|
||
|
5
|
||
|
8
|
||
|
10
|
||
|
10
|
||
|
12
|
||
|
12
|
||
|
12
|
||
|
12
|
||
|
12
|
||
|
12
|
||
|
12
|
||
|
13
|
||
|
E-1
|
||
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this Quarterly Report on Form 10-Q and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements in this Quarterly Report on Form 10-Q, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are the availability of working capital to fund our operations, the competitive market in which we operate, the efficient and uninterrupted operation of our computer and communications systems, our ability to generate a profit and execute our business plan, the retention of key personnel, our ability to protect and defend our intellectual property, the effects of governmental regulation and other risks identified in the Registrant’s filings with the Securities and Exchange Commission from time to time.
In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. Although the Registrant believes that the expectations reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Registrant, nor any other person, assumes responsibility for the accuracy and completeness of such statements. The Registrant is under no duty to update any of the forward-looking statements contained herein after the date of this Quarterly Report on Form 10-Q.
Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012 of PeopleString Corporation (“PeopleString” or the “Company”).
The results of operations for the three months ended March 31, 2013 and 2012 are not necessarily indicative of the results of the entire fiscal year or for any other period.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
March 31,
2013
|
December 31,
2012
|
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 10,618 | $ | 14,349 | ||||
|
Accounts receivable - net of allowance of $0 and $300, respectively
|
- | 619 | ||||||
|
Total current assets
|
$ | 10,618 | $ | 14,968 | ||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 30,411 | $ | 8,409 | ||||
|
Accrued expenses
|
- | 16,465 | ||||||
|
Unearned revenue
|
- | 7,500 | ||||||
|
Total current liabilities
|
30,411 | 32,374 | ||||||
|
|
||||||||
|
Stockholders' deficit:
|
||||||||
|
Common stock, $0.00001 par value - authorized 250,000,000 shares; issued and outstanding 39,518,500 and 39,518,500 shares, respectively
|
395 | 395 | ||||||
|
Additional paid-in capital
|
2,198,912 | 2,188,391 | ||||||
|
Accumulated deficit
|
(2,219,100 | ) | (2,206,192 | ) | ||||
|
Total stockholders' deficit
|
(19,793 | ) | (17,406 | ) | ||||
|
Total liabilities and stockholders' deficit
|
$ | 10,618 | $ | 14,968 | ||||
See notes to unaudited consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
For the Three Months Ended
|
||||||||
|
March 31,
|
||||||||
|
2013
|
2012
|
|||||||
|
Revenues
|
$ | 7,970 | $ | 27,601 | ||||
|
Operating expenses:
|
||||||||
|
Cost of revenues
|
- | 3,547 | ||||||
|
Sales and marketing
|
- | 68,929 | ||||||
|
General and administrative
|
20,878 | 249,122 | ||||||
|
Total operating expenses
|
20,878 | 321,598 | ||||||
|
Loss from operations
|
(12,908 | ) | (293,997 | ) | ||||
|
Other income:
|
||||||||
|
Interest income
|
- | 206 | ||||||
|
Loss before provision for income taxes
|
(12,908 | ) | (293,791 | ) | ||||
|
Provision for income taxes
|
- | - | ||||||
|
Net loss
|
$ | (12,908 | ) | $ | (293,791 | ) | ||
|
Net loss per common share:
|
||||||||
|
Basic and diluted
|
$ | (0.00 | ) | $ | (0.01 | ) | ||
|
Weighted average common shares outstanding:
|
||||||||
|
Basic and diluted
|
39,518,500 | 38,128,390 | ||||||
See notes to unaudited consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
For the Three Months Ended
|
||||||||
|
March 31,
|
||||||||
|
2013
|
2012
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$ | (12,908 | ) | $ | (293,791 | ) | ||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Non-cash stock-based compensation
|
10,521 | 46,138 | ||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Decrease in accounts receivable, net
|
619 | 31,452 | ||||||
|
Decrease in prepaid expenses and other current assets
|
- | 675 | ||||||
|
Increase in accounts payable
|
22,002 | 26,554 | ||||||
|
(Decrease) in accrued expenses
|
(16,465 | ) | (19,998 | ) | ||||
|
(Decrease) increase in unearned revenue
|
(7,500 | ) | 1,611 | |||||
|
Net cash used in operating activities
|
(3,731 | ) | (207,359 | ) | ||||
|
Net change in cash and cash equivalents
|
(3,731 | ) | (207,359 | ) | ||||
|
Cash and cash equivalents - beginning of period
|
14,349 | 400,724 | ||||||
|
Cash and cash equivalents - end of period
|
$ | 10,618 | $ | 193,365 | ||||
|
Supplementary information:
|
||||||||
|
Cash paid during the period for:
|
||||||||
|
Interest
|
$ | - | $ | - | ||||
|
Income taxes
|
$ | - | $ | - | ||||
|
Non-cash investing and financing transactions during the periods - none
|
||||||||
See notes to unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
PeopleString was incorporated in the State of Delaware on January 2, 2009. The Company was formed to develop technology that would allow users of social networks to earn incentives through online and offline activities by the user and his or her network. In March 2009, PeopleString’s incentive-based social network was introduced to the market.
RewardString Corporation (“RewardString”), incorporated in the State of Delaware, was formed in late 2010 to develop technology relating to social media marketing. PeopleString currently owns 100% of RewardString’s outstanding common stock.
On May 17, 2013, the Company began the process of winding down the previously existing operations and certain shareholders transferred control of the Company to an unrelated third party. Also see Note 6 for merger agreement entered into on August 9, 2013 which is subject to closing. Upon closing, the Company will spin off its intellectual property.
BASIS OF PRESENTATION
The consolidated balance sheet as of March 31, 2013, and the consolidated statements of operations and cash flows for the periods presented herein have been prepared by PeopleString Corporation (“PeopleString” or the “Company”) and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The information for the consolidated balance sheet as of December 31, 2012 was derived from audited financial statements. The results of operations and cash flows for the three months ended March 31, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013.
These Notes to Unaudited Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of PeopleString and its subsidiary, RewardString, which is a wholly-owned subsidiary. All intercompany transactions and balances have been eliminated.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issues Accounting Standard Updates (“ASUs”) to amend the authoritative literature in Accounting Standards Codification (“ASC”). There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.
NOTE 2. GOING CONCERN
PeopleString’s consolidated financial statements reflect a net loss of $12,908, net cash used in operations of $3,731 and an accumulated deficit of $2,219,100. The Company had limited working capital and was winding down operations effective May 17, 2013, upon transfer of control of the Company. These matters raise substantial doubt about the ability of PeopleString to continue as a going concern. The new control party expects to obtain funding for the new operations for the foreseeable future; however, there are no assurances that the Company will obtain such funding. PeopleString’s consolidated financial statements do not include any adjustments to reflect the possible effects on recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability to continue as a going concern.
NOTE 3. ACCRUED EXPENSES
PeopleString’s incentive-based social network allowed users to earn money based on their online and offline activities. PeopleString made payments to users who had an earned balance of at least $25, had been active users in the past 90 days and selected a payment option. Network earnings were monitored by PeopleString’s management. For the three months ended March 31, 2013 and 2012, PeopleString made payments totaling $0 and $14,800, respectively.
In addition, for active users, PeopleString accrued amounts earned, but not yet paid. Accrued expenses for network earnings at March 31, 2013 and 2012 were $0 and $99,776, respectively. Other accrued expenses at March 31, 2013 and 2012 were $0 and $14,500, respectively, primarily for compensation expenses.
PEOPLESTRING CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. COMMON STOCK
On January 9, 2012, PeopleString issued 200,000 fully vested shares of its common stock, valued at $0.04 per share, in consideration for marketing services provided by two vendors. PeopleString recorded expense of $8,000 in connection with the issuance of these shares. The market value of PeopleString’s common stock on January 9, 2012 was $0.04 per share.
On January 17, 2012, PeopleString issued 400,000 fully vested shares of its common stock, valued at $0.05 per share, in consideration for marketing services provided by three vendors. PeopleString recorded expense of $20,000 in connection with the issuance of these shares. The market value of PeopleString’s common stock on January 17, 2012 was $0.05 per share.
There were issuances of common stock during the three months ended March 31, 2013. See Note 6 for subsequent issuances.
NOTE 5. SHARE-BASED COMPENSATION
Warrants:
Warrant activity during the three months ended March 31, 2013 was as follows:
|
Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Term
|
Aggregate Intrinsic Value
|
|||||||||||||
|
Warrants outstanding at January 1, 2013
|
1,368,000 | $ | 0.70 | 3.4 | $ | - | ||||||||||
|
Warrants granted
|
- | $ | - | |||||||||||||
|
Warrants exercised
|
- | $ | - | |||||||||||||
|
Warrants cancelled/forfeited/expired
|
- | $ | - | |||||||||||||
|
Warrants outstanding at March 31, 2013
|
1,368,000 | $ | 0.70 | 2.9 | $ | - | ||||||||||
|
Warrants exercisable at March 31, 2013
|
1,368,000 | $ | 0.70 | 2.9 | $ | - | ||||||||||
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference between the closing stock prices of the Company’s common stock at the specified dates and the exercise prices for in-the-money warrants) that would have been received by the warrant holders if all in-the-money warrants had been exercised on the specified dates.
There were no warrants were granted, forfeited or exercised during the three months ended March 31, 2013 and 2012.
In May 2011, in connection with the issuance of the purchased shares, the Company also issued to the investors Series A warrants to purchase 1,200,000 shares of common stock at a price of $0.70 per share. Such warrants are currently outstanding and expire May 2016. The warrants contain a provision that the exercise price may be adjusted in the event of a sale of common stock below $0.70 per share. The warrants are accounted for at fair value which, at present, is nominal.
Options:
Option activity during the three months ended March 31, 2013, was as follows:
|
Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Term
|
Aggregate Intrinsic Value
|
|||||||||||||
|
Options outstanding at January 1, 2013
|
5,000,000 | $ | 0.33 | 2.9 | $ | - | ||||||||||
|
Options granted
|
- | $ | - | |||||||||||||
|
Options exercised
|
- | $ | - | |||||||||||||
|
Options cancelled/forfeited/expired
|
- | $ | - | |||||||||||||
|
Options outstanding at March 31, 2013
|
5,000,000 | $ | 0.33 | 2.7 | $ | - | ||||||||||
|
Options exercisable at March 31, 2013
|
4,975,000 | $ | 0.33 | 2.7 | $ | - | ||||||||||
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference between the closing stock prices of PeopleString’s common stock at the specified dates and the exercise prices for in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on the specified dates.
PEOPLESTRING CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
There were no options were granted, forfeited or exercised during the three months ended March 31, 2013 and 2012. For the three months ended March 31, 2013 and 2012, PeopleString recorded stock-based option compensation expense of $10,521 and $18,138, respectively, related to options granted in 2011.
NOTE 6. SUBSEQUENT EVENTS
On April 5, 2013, the board of directors approved, and PeopleString issued to each of three (3) departing officers, 7,700,000, 7,700,000 and 7,700,000 fully vested shares of its common stock, valued at $0.006 per share. PeopleString will record expense of $138,600 in connection with the issuance of these shares during the three months ended June 30, 2013.
On May 10, 2013 the Board of directors approved of the conversion of outstanding debt owed to Anslow & Jaclin, LP in the principal amount of $20,000 into shares of PeopleString common stock at a mutually agreed upon price of no less than $0.001 per share. The Company will account for the value of the beneficial conversion feature on the date such note was issued, record a discount and charge such to operations as the note is due on demand. The note was later purchased by shareholders of Vape Holdings, Inc. (see below).
On May 14, 2013, Echelon Growth Partners, LLC (“EGP’), a California limited liability company, and Darin Myman, Robert DeMeulemeester, Adam Kotkin, Peter Shelus (“Sellers”), entered into four separate stock purchase agreements (the “Stock Purchase Agreements”), pursuant to which EGP acquired a controlling interest in PeopleString. EGP acquired 31,469,200 shares of the Company constituting 50.25% of the issued and outstanding shares of common stock of the Company. Upon closing of the Stock Purchase Agreements on May 17, 2013, the Company effected a change in control with EPG acquiring 50.25% of the outstanding shares of Common Stock and control of the Company. There are no arrangements or understandings among members of both the former and new control groups and their associates with respect to election of officers or other matters.
In connection with the change in control on May 17, 2013, the Sellers resigned as directors and officers of the Company. On May 17, 2013, Mr. Jerome Kaiser was elected by a majority vote of the shareholders of the Company to serve as the director and Chief Executive and Chief Financial Officer of the Company.
On May 17, 2013, the Company began the process of winding down the previously existing operations and certain shareholders transferred control of the Company to an unrelated third party. The discontinued operations will not be reflected until May 17, 2013, the formal date of plan to transfer control of the Company and begin the process of winding down all previously existing operations.
On August 9, 2013, PeopleString, the Company’s wholly-owned subsidiary, RewardString Corporation (“RewardString”), and Vape Holdings, Inc., a Nevada corporation (“Vape”), entered into a Merger and Reorganization Agreement (the “Agreement”) whereby Vape will be merged with RewardString, with Vape being the surviving entity (the “Merger”). In consideration for the merger, the shareholders of Vape will receive a total of 187,381,500 shares of common stock of the Company on a pro rata basis in exchange for 355,000 shares of Vape common stock, representing 100% of the outstanding common stock of Vape. The total shares of the Company being issued on a pro rata basis to Vape shareholders represents 74.95% of the total issued and outstanding common stock of the Company. The merger among PeopleString, RewardString and Vape will be accounted for as a reverse acquisition and change in reporting entity, whereby Vape will be the accounting acquirer. Accordingly, the assets and liabilities of PeopleString and RewardString will be recorded at fair value. The Company’s intellectual property will be spun off at the time of the merger. In addition, the historical results of operations and cash flows of Vape will be reported beginning in the quarter ended September 30, 2013, if closed by such date, for all periods required to be presented.
The Company has provided below information about PeopleString Corporation’s (“PeopleString” or the “Company”) financial condition and results of operations for the three months ended March 31, 2013 and 2012. This information should be read in conjunction with PeopleString’s unaudited consolidated financial statements for the three months ended March 31, 2013 and 2012, including the related notes thereto, which begin on page 1 of this report. These unaudited consolidated financial statements should be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012 of the Company. The following discussion and analysis contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed in the forward-looking statements.
Background
PeopleString was incorporated in the State of Delaware on January 2, 2009. The Company was formed to develop technology that would allow users of social networks to earn incentives through online and offline activities by the user and his or her network. In March 2009, PeopleString’s incentive-based social network was introduced to the market.
RewardString Corporation (“RewardString”), incorporated in the State of Delaware, was formed in late 2010 to develop technology relating to social media marketing. PeopleString currently owns 100% of RewardString’s outstanding common stock.
On May 17, 2013, certain shareholders transferred control of the Company to an unrelated third party and the Company formally began the process of winding down the previously existing operations.
On August 9, 2013, PeopleString, the Company’s wholly-owned subsidiary, RewardString Corporation, and Vape entered into a Merger and Reorganization Agreement (the “Agreement”) whereby Vape will be merged with RewardString, with Vape being the surviving entity (the “Merger”). In consideration for the merger, the shareholders of Vape will receive a total of 187,381,500 shares of common stock of the Company on a pro rata basis in exchange for 100% of the outstanding common stock of Vape. The total shares of the Company being issued on a pro rata basis to Vape shareholders represents 74.95% of the total issued and outstanding common stock of the Company.
Overview
PeopleString formally discontinued operations on May 17, 2013 as a result of the change in control transaction.
Since the last quarterly filing for the period ended September 30, 2012, the Company has maintained limited operations and has continued to move forward into new business opportunities.
The Company plans to design, market, and distribute vaporizers, electronic cigarettes, and e-cigarette “juice” under several unique brands and sales channels. Electronic cigarettes come in a variety of designs ranging from those that look vastly like traditional cigarettes, to larger vaporizer units which are capable of vaporizing liquid with varying viscosity or even herbal products such as lavender or chamomile. The process of vaporization is believed to eliminate the smoke, tar, ash, and other byproducts of traditional smoking by utilizing lower temperatures in a controlled electronic environment.
The Company has completed a competitive analysis, begun the process of planning and designing future products, and begun market research and consumer brand testing.
The Company intends to build revenue lines by participating in multiple aspects of the vaporizer and e-cigarette industry, most notably:
|
|
1)
|
Partnering with existing manufacturers to create new brands for identified niche markets;
|
|
|
2)
|
Acquiring other products, brands, or retail businesses within the e-cigarette and vaporizer industry based upon the Company’s access to capital;
|
|
|
3)
|
Aligning with proven resellers of related products, such as distributors which currently market traditional cigarettes to convenience stores or other targeted retail outlets;
|
|
|
4)
|
ROI-based marketing initiatives intended to drive retail sales which are brand- or demographic-centric;
|
|
|
5)
|
Offering quality OEM / ODM services within 24 months featuring US manufacturing;
|
|
|
6)
|
Creating co-branded products to leverage other brand recognition, such as creating e-cigarettes for casinos or large entertainment venues;
|
|
|
7)
|
Manufacturing domestic e-cigarette “juice” which meets or surpasses imminent industry standards for quality in materials and production;
|
|
|
8)
|
Ensuring the company is abreast of all intellectual property and creating new intellectual property which improves or includes new feature in this emerging industry;
|
|
|
9)
|
Leveraging a base of available engineers which have previously deconstructed competing products with plans to create company prototypes and future products for the Company’s brands;
|
Gross margins for product sales are expected to vary vastly based upon sales avenues: retail (such as sales through the Company website(s) which are currently in development), wholesale (such as sales which are generated through retail accounts at minimum volumes), or distributor relationships (value-added resellers, such as sales which are generated through supply chains which currently feature competing products).
Based upon company and industry research, the vaporizer and e-cigarette industry is poised to exceed over one billion ($1 billion USD) in retail sales in 2013.
Critical Accounting Policies
PeopleString’s discussion and analysis of financial condition and results of operations are based upon PeopleString’s unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited consolidated financial statements requires PeopleString to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. PeopleString evaluated its estimates, including but not limited to those related to such items as costs to complete performance contracts, accruals, depreciable/useful lives, revenue recognition and valuation allowances for deferred tax assets. PeopleString based its estimates on historical experience and on various other assumptions that were believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that were not readily apparent from other sources. Actual results could differ from those estimates. Critical accounting policies are described in PeopleString’ s Form 10-K for the year ended December 31, 2012, to the extent these are still relevant.
The merger among PeopleString, RewardString and Vape will be accounted for as a reverse acquisition and change in reporting entity, whereby Vape will be the accounting acquirer. Accordingly, the assets and liabilities, if any, of PeopleString and RewardString will be recorded at fair value. In addition, the historical results of operations and cash flows of Vape will be reported beginning in the quarter ended September 30, 2013, if closed by such date, for all periods required to be presented.
Results of Operations
For the Three Months Ended March 31, 2013 and 2012
Net Loss. For the three months ended March 31, 2013, net loss was $12,908, as compared to a net loss of $293,791 for the three months ended March 31, 2012. The $280,883 decrease in net loss was primarily attributable to a $300,720 decrease in operating expenses.
Revenues. For the three months ended March 31, 2013, revenues were $7,970, a $19,631 decrease from revenues of $27,601 earned in the three months ended March 31, 2012. Of the revenues generated for the three months ended March 31, 2013, $7,970 was generated from product and service fees and $0 was generated from advertisers and affiliates, as compared to $15,712 from product and service fees and $11,889 from advertisers and affiliates for the three months ended March 31, 2012.
Operating Expenses. For the three months ended March 31, 2013, operating expenses were $20,878, a $300,720 decrease from operating expenses of $321,598 incurred in the three months ended March 31, 2012.
|
·
|
Cost of revenues: Cost of revenues for the three months ended March 31, 2013 were $0, as compared to $3,547for the same prior year period. The decrease in cost was primarily attributable to decreased network fees.
|
|
·
|
Sales and marketing: Sales and marketing expenses for the three months ended March 31, 2013 were $0, as compared to $68,929 for the same prior year period. The decrease in expense was primarily attributable to reduced consultant expenses and marketing expenses.
|
|
·
|
General and administrative: General and administrative expenses for the three months ended March 31, 2013 were $20,878, as compared to $249,122 for the same prior year period. The $228,244 decrease in expense was primarily attributable to reduced professional expenses and staffing expenses.
|
Liquidity and Capital Resources
PeopleString has suffered losses since inception and has limited liquidity as of March 31, 2013. As a result, the Company was sold through a change in control transaction on May 17, 2013. The new control party expects to fund the Vape operations for the foreseeable future; however, there are no assurances that the Company will obtain such funding for the new business. The Company’s independent auditors issued an explanatory paragraph in their report for the year ended December 31, 2012 about substantial doubt about the Company’s ability to continue as a going concern.
PeopleString’s cash balance as of March 31, 2013 was $10,618, which was a decrease of $3,731 from the cash balance of $14,349 as of December 31, 2012. This decrease to the cash balance was primarily attributable to a net loss.
The Company has limited working capital and has begun the process of winding down the previously existing operations effective May 17, 2013.
PeopleString’s current officers and directors have not, as of the date of this filing, loaned any funds to PeopleString. There are no formal commitments or arrangements to advance or loan funds to PeopleString or repay any such advances or loans.
|
|
PeopleString is a smaller reporting company and is therefore not required to provide this information.
|
(a) Evaluation of disclosure controls and procedures.
Management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of PeopleString’s disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, the Company’s chief executive officer and chief financial officer concluded that, as of March 31, 2013, the Company’s disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information the Company is required to disclose in reports that PeopleString files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in internal control over financial reporting.
The Company reviews its system of internal control over financial reporting and makes changes to the Company’s processes and systems to improve controls and increase efficiency, while ensuring that the Company maintains an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
(c) Management’s report on internal control over financial reporting.
Management is responsible for establishing and maintaining adequate control over financial reporting for PeopleString. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal controls over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of PeopleString; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of PeopleString are being made only in accordance with authorizations of management and directors of PeopleString; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of PeopleString’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, with the participation of its principal executive officer and principal financial and accounting officer, conducted an evaluation of the effectiveness of PeopleString’s internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of March 31, 2013.
PeopleString is not a party to, and none of its property is the subject of, any pending legal proceedings. To PeopleString’s knowledge, no governmental authority is contemplating any such proceedings.
PeopleString is a smaller reporting company and is therefore not required to provide this information.
None.
None.
Not Applicable.
None.
See Index of Exhibits commencing on page E-1.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
PeopleString Corporation
|
|
|
Registrant
|
|
|
Dated: September 27, 2013
|
/s/ Jerome S. Kaiser
|
|
Jerome S. Kaiser
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
Dated: September 27, 2013
|
/s/ Jerome S. Kaiser
|
|
Jerome S. Kaiser
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
|
Exhibit No.
|
Description of Exhibit
|
|
|
31.1
|
Section 302 Certification of Chief Executive Officer.
|
|
|
31.2
|
Section 302 Certification of Chief Financial Officer.
|
|
|
32.1*
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|
|
|
32.2*
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
|
|
|
101.INS **
|
XBRL Instance Document
|
|
|
101.SCH **
|
XBRL Taxonomy Schema
|
|
|
101.CAL **
|
XBRL Taxonomy Calculation Linkbase
|
|
|
101.DEF **
|
XBRL Taxonomy Definition Linkbase
|
|
|
101.LAB **
|
XBRL Taxonomy Label Linkbase
|
|
|
101.PRE **
|
XBRL Taxonomy Presentation Linkbase
|
* The certifications attached as Exhibit 32.1 and Exhibit 32.2 accompanying this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of PeopleString Corporation, under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
** Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
E-1