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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2003
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ________
Commission file number 000-26331
PALWEB CORPORATION
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(Exact name of small business issuer as specified in its charter)
OKLAHOMA 75-2954680
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1607 WEST COMMERCE STREET DALLAS, TEXAS 75208
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(Address of principal executive offices) (City, State and Zip Code)
(214)698-8330
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]
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: APRIL 9, 2003 - 5,530,751
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(CHECK ONE): Yes [_] No [X]
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PALWEB CORPORATION
FORM 10-QSB/A
AMENDMENT NO. 1
FOR THE PERIOD ENDED FEBRUARY 28, 2003
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
Condensed Consolidated Balance Sheets as of ..................... 1
February 28, 2003 and May 31, 2002
Condensed Consolidated Statements of Operations ................. 2
For the Nine Month Periods Ended
February 28, 2003 and 2002
Condensed Consolidated Statements of Operations ................. 3
For the Three Month Periods Ended
February 28, 2003 and 2002
Condensed Consolidated Statements of Cash Flows ................. 4
For the Nine Month Periods Ended
February 28, 2003 and 2002
Notes to Condensed Consolidated Financial Statements ............ 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ....... 6
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................ 12
SIGNATURE ................................................................ 13
CERTIFICATIONS ........................................................... 14
This Form 10-QSB/A is being filed to correct certain financial data as a result
of an error in the determination of inventory as of February 28, 2003.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALWEB CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
February 28, May 31,
ASSETS 2003 2002
------ ------------ ------------
CURRENT ASSETS:
Cash $ 58,691 $ 13,521
Accounts receivable 228,020 43,646
Inventory 416,708 204,446
------------ ------------
TOTAL CURRENT ASSETS 703,419 261,613
PROPERTY, PLANT AND EQUIPMENT, at cost 8,424,875 7,453,529
Accumulated depreciation (652,736) (509,199)
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 7,772,139 6,944,330
OTHER ASSETS 157,471 161,396
------------ ------------
TOTAL ASSETS $ 8,633,029 $ 7,367,339
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ -- $ 3,777,700
Note payable-related party 401,952 --
Accounts payable and accrued liabilities 685,193 570,868
Preferred dividends payable -- 211,440
------------ ------------
TOTAL CURRENT LIABILITIES 1,087,145 4,560,008
LONG-TERM DEBT-RELATED PARTY 7,000,000 --
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par, 20,750,000
shares authorized; 750,000 outstanding 75 75
Common stock, $.0001 par value, 5,000,000,000
authorized; outstanding - 5,530,751 and
4,691,625, respectively 553 469
Additional paid-in capital 41,744,782 40,732,767
Deficit (41,199,526) (37,925,980)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 545,884 2,807,331
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,633,029 $ 7,367,339
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
1
PALWEB CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED FEBRUARY 28,
------------------------------
2003 2002
------------ ------------
SALES $ 980,933 $ 48,189
COST OF SALES, including depreciation
of $136,890 and $104,639, respectively 1,953,750 399,814
------------ ------------
GROSS PROFIT (LOSS) (972,817) (351,625)
EXPENSES:
General and administrative expenses 1,051,634 1,059,612
Impairment 310,875 --
Interest expense 262,437 115,943
------------ ------------
Total expenses 1,624,946 1,175,555
------------ ------------
LOSS, BEFORE DISCONTINUED OPERATIONS (2,597,763) (1,527,180)
LOSS FROM DISCONTINUED OPERATION -- (132,224)
------------ ------------
NET LOSS (2,597,763) (1,659,404)
PREFERRED STOCK DIVIDENDS 675,783 --
------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (3,273,546) $ (1,659,404)
============ ============
LOSS PER COMMON SHARE:
LOSS BEFORE DISCONTINUED OPERATIONS $ (0.65) $ (0.33)
DISCONTINUED OPERATIONS -- (0.03)
------------ ------------
LOSS PER COMMON SHARE $ (0.65) $ (0.36)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 5,020,000 4,654,000
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
2
PALWEB CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28,
------------------------------
2003 2002
------------ ------------
SALES $ 407,004 $ 9,401
COST OF SALES, including depreciation
of $27,084 and $46,367, respectively 513,887 84,761
------------ ------------
GROSS PROFIT (LOSS) (106,883) (75,360)
EXPENSES:
General and administrative expense 299,353 425,094
Impairment -- --
Interest expense 126,604 10,849
------------ ------------
Total expenses 425,957 435,943
------------ ------------
LOSS, BEFORE DISCONTINUED OPERATIONS (532,840) (511,303)
LOSS FROM DISCONTINUED OPERATION -- (27,406)
------------ ------------
NET LOSS (532,840) (538,709)
PREFERRED DIVIDENDS 226,849 --
------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (759,689) $ (538,709)
============ ============
LOSS PER COMMON SHARE:
LOSS BEFORE DISCONTINUED OPERATIONS $ (0.15) $ (0.11)
DISCONTINUED OPERATIONS -- (0.01)
------------ ------------
LOSS PER COMMON SHARE $ (0.15) $ (0.12)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 5,179,000 4,665,000
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
3
PALWEB CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28,
------------------------------
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used by continuing operations $ (2,192,442) $ (2,885,145)
Net cash used by discontinued operations -- (38,254)
------------ ------------
Net cash flow used in operations (2,192,442) (2,923,399)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,282,221) (3,905,567)
Decrease in loans receivable -- 617,124
Proceeds from sale of equipment -- --
Other (132,169) --
------------ ------------
Net cash used in investing activities (1,414,390) (3,288,443)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 7,401,952 6,956,820
Payments on notes payable (3,777,700) (185,091)
Payments on savings certificates -- (1,357,306)
Sale of treasury stock -- 1,000,000
Proceeds from issuance of common/preferred stock 27,750 522,676
------------ ------------
Net cash provided by financing activities 3,652,002 6,937,099
------------ ------------
NET INCREASE IN CASH 45,170 725,257
CASH, beginning of period 13,521 80,469
------------ ------------
CASH, end of period $ 58,691 $ 805,726
============ ============
NONCASH ACTIVITIES:
Issuance of common stock for:
Payment of preferred dividends $ 887,223 $ --
Payment of liabilities and claims 97,126 --
Issuance of preferred stock for:
Retirement of debt -- 6,440,579
Acquisition of property -- 725,344
Debt assumed in acquisition of property -- 813,255
Conversion of preferred stock to common -- 55
Amortization of deferred income to
additional paid-in capital -- 82,388
The accompanying notes are an integral part
of these consolidated financial statements.
4
PALWEB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments and reclassifications,
which are of a normal recurring nature, necessary to present fairly its
financial position as of February 28, 2003, and the results of its operations
and its cash flows for the nine month and three month periods ended February 28,
2003 and 2002. These consolidated financial statements should be read in
conjunction with the consolidated financial statements as of and for the year
ended May 31, 2002 and the notes thereto included in the Company's Form 10-KSB.
Certain prior years expense items have been reclassified to conform to the
reporting format used during fiscal 2003.
2. The results of operations for the nine month and three month periods ended
February 28, 2003 and 2002 are not necessarily indicative of the results to be
expected for the full year.
3. The computation of loss per share is computed by dividing the loss
available to common stockholders by the weighted average shares outstanding for
the periods. For the nine month and three month periods ended February 28, 2003,
loss available to common stockholders is determined by adding preferred
dividends for the periods in the amounts of $675,783 and $226,849, respectively,
to the loss from continuing operations and to net loss. There were no preferred
dividends for the comparable periods ended February 28, 2002. For the nine month
periods ended February 28, 2003 and 2002, the average common shares outstanding
are 5,020,000 and 4,654,000, respectively. For the three month periods ended
February 28, 2003 and 2002, the average common shares outstanding are 5,179,000
and 4,665,000, respectively. Convertible preferred stock is not considered as
its effect is antidilutive.
4. PalWeb incurred an expense of $310,875 in fiscal year 2003 to record the
impairment of certain production equipment. PalWeb wrote down the cost of its
original prototype injection molding machine and related molds to the value of
the expected future cash flows.
5. Effective October 17, 2002, PalWeb's Board of Directors authorized the
issuance of 15,584 shares of common stock at the then market rate of $1.50 per
share to Paul Kruger in payment of $23,376 of accrued interest as of October 31,
2002, on notes payable to Mr. Kruger.
6. During the nine month period ended February 28, 2003, the Board of
Directors authorized dividends on the Series 2001 preferred stock in the total
amount of $675,783. Further, the board authorized payment of unpaid preferred
dividends in the form of restricted common stock at the then market rate as
follows:
5
Date of Stock Common
Dividend Amount Price Shares
-------- -------- ----- ------
3/31/02 $211,440 $1.60 132,150
6/31/02 225,000 1.60 140,625
9/30/02 223,934 1.50 148,589
12/31/02 226,849 0.63 360,078
The board also authorized that, until further notice, future dividends on
the Series 2001 preferred stock will be paid in the form of common stock based
on the average stock price as of the date of record.
7. See "Management Discussion and Analysis, Liquidity and Capital Resources,"
for discussion regarding a $500,000, 9% interest, unsecured note payable due
March 4, 2003 and a line of credit provided by Paul Kruger through issuance of a
$7,000,000 note payable at 3% above prime rate of interest, due June 4, 2004.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
---------------------
GENERAL TO ALL PERIODS
The consolidated statements include PalWeb and its wholly-owned subsidiary,
Plastic Pallet Production, Inc. ("PPP").
PalWeb has incurred significant losses from operations, and there is no
assurance that it will achieve profitability or obtain funds necessary to
finance operations. These continuing losses create substantial doubt about our
ability to continue as a going concern. These financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets or the amounts and classification of liabilities that might be
necessary in the event we cannot continue to exist.
SALES
PalWeb's primary business is the manufacturing and selling of plastic
pallets, which is referred to herein as continuing operations. During the period
ended February 28, 2003, PalWeb has continued to explore the possible marketing
of its patent-pending PIPER 600 equipment to third parties; however generating
pallet sales remain the company's main focus. PalWeb's primary marketing efforts
are the development of distributors in key geographic locations and attendance
at material handling trade shows.
PalWeb has a production capacity of approximately 40,000 pallets per month.
During the nine months ended February 28, 2003, pallet production averaged about
10% of capacity. Future production levels will be maintained as sales dictate.
There is no assurance that PalWeb will
6
receive orders for pallets that will maintain, or justify any significant
increase to, PalWeb's current production levels.
PRODUCTS
PalWeb currently has three series of plastic pallets: Hawker, Granada and
Tank. The following is a description of each series and its pallet line.
o HAWKER SERIES PalWeb's Hawker Series pallets are all manufactured
using the Company's proprietary fire retardant plastic blend.
o THE HAWKER 4840 PICTURE-FRAME interlocking pallet is the first in
the Hawker Series. The Hawker 4840 utilizes a patented
inter-locking design featuring CJ2TM fire retardant polymers that
are UL 2335 certified. The Hawker 4840 has a static load capacity
of 25,000 lbs., a dynamic load of 5,000 lbs., and a rackable load
of 2,500 lbs., and weighs approximately 53 lbs.
o GRANADA SERIES The Granada series of pallets are manufactured using a
blend of recycled plastic developed by the Company. The Granada series
features a picture frame, nestable, stackable and three-runner pallet.
o THE GRANADA PICTURE FRAME PALLET utilizes the patented
inter-locking design, and has a dynamic load of 5,000 lbs., a
rackable load of 2,800 lbs., and a static load of 25,000 lbs.,
and weighs approximately 47.5 lbs.
o THE GRANADA STACKABLE PALLET, which consists of the tops of the
Granada Picture Frame, has a dynamic load of 5,000 lbs. and a
static load of 7,000 lbs. The Granada Stackable weighs
approximately 32 lbs.
o THE GRANADA NESTABLE PALLET features a dynamic load of 5,000 lbs.
and a static load of 7,000 lbs. The Granada Nestable weighs
approximately 30 lbs.
o THE GRANADA THREE-RUNNER PALLET with a free-span racking capacity
of 1,200 lbs., features a dynamic load of 5,000 lbs. and a static
load of 12,000 lbs. The Granada Three-Runner which weighs
approximately 41 lbs., utilizes a design that allows for easier
handling by pallet jacks.
o TANK SERIES PalWeb's Tank Series pallets are manufactured using virgin
materials developed by the Company. The Tank Picture Frame Pallet is
the first in the Tank Series.
o The Tank Picture Frame Pallet which features the patented
interlocking design, has a static load of 30,000 lbs., a rackable
load of 3,000 lbs., and a dynamic load of 5,000 lbs., and weighs
approximately 50 lbs.
7
The Hawker 4840, Granada Picture Frame, Granada Three- Runner and Tank
Picture Frame all successfully passed the CONTAINER TECHNOLOGIES LABORATORY
INC., TEST ASTM D1185-98A which included open rack bend, compression, free fall
impact, random vibration and incline impact tests.
PERSONNEL
PalWeb had approximately 18 full-time and 18 temporary employees. Temporary
employees are used to supplement the manufacturing process as necessary.
TAXES
For all years presented, PalWeb's effective tax rate is 0%. PalWeb has
generated net operating losses since inception, which would normally reflect a
tax benefit in the statement of operations and a deferred asset on the balance
sheet. However, because of the current uncertainty as to PalWeb's ability to
achieve profitability, a valuation reserve has been established that offsets the
amount of any tax benefit available for each period presented in the
consolidated statement of operations.
NINE MONTH PERIOD ENDED FEBRUARY 28, 2003, COMPARED TO NINE MONTH PERIOD ENDED
FEBRUARY 28, 2002
Sales for the nine month period ended February 28, 2003, were $980,933
compared to $48,189 in fiscal year 2002, an increase of 1,935 %. The increase of
$932,744 represents PalWeb's ongoing efforts to market its products as described
above. However, sales revenues remain insufficient to cover material and
operating costs.
Cost of sales was $1,953,750 in fiscal year 2003 compared to $399,814 in
2002 for an increase of $1,553,936. This increase is primarily due to a
combination of (1) start-up costs primarily in the first quarter of fiscal year
2003 necessary for the operation of the new production line and upgrade the
original prototype equipment to produce nestable pallets and (2) costs related
to the increased production including the addition of another production shift,
materials, depreciation and utilities. Additional personnel may be required as
sales continue to increase.
General and administrative expenses decreased $7,978 from $1,059,612 in
fiscal year 2002 to $1,051,634 in fiscal year 2003. The general and
administrative costs in fiscal year 2003 include an $83,750 settlement of a
claim by Roger Landress through payment of $50,000 cash and the issuance of
15,000 shares of common stock. Additionally, salaries increased approximately
$144,000 as a result of the increase in production and sales activity offset by
a decreases in rent of about $136,000 due to the purchase of the plant and
certain development costs incurred in fiscal year 2002 of about $130,000.
8
During the period ended February 28, 2003, PalWeb wrote down the cost of
its original prototype injection molding machine and related molds. An expense
of $310,875 was recorded to reduce the cost of this equipment to the expected
future cash flows.
Interest expense increased $146,494 from $115,943 in fiscal year 2002 to
$262,437 in fiscal year 2003. The debt outstanding at November 30, 2001, was
exchanged for preferred stock on January 4, 2002, resulting in essentially no
interest expenses from then through February 28, 2002. Additionally, as
discussed below, effective January 4, 2003, Paul Kruger entered into a loan
agreement providing a $7,000,000 loan at three points above the prime rate of
interest due June 4, 2004.
The loss from continuing operations increased $1,070,583 from $1,527,180
for fiscal year 2002 to $2,597,763 for fiscal year 2003.
After deducting the loss from discontinued operations in fiscal year 2002,
the net loss is $1,659,404 compared to a net loss of $2,597,763 in fiscal year
2003 for an increase of $938,359.
THREE MONTH PERIOD ENDED FEBRUARY 28, 2003, COMPARED TO THREE MONTH PERIOD ENDED
FEBRUARY 28, 2002
Sales for the three month period ended February 28, 2003 were $407,004
compared to $9,401 in 2002. The increase is $397,603 and represents PalWeb's
ongoing sales efforts as described above. During fiscal 2002, PalWeb's primary
emphasis was completion of its new production line.
Cost of sales was $513,887 in fiscal year 2003 compared to $84,761 in 2002
for an increase of $429,126. This increase is primarily due to costs related to
the increased production including the addition of another production shift,
materials, depreciation and utilities. Additional personnel may be required as
sales continue to increase.
General and administrative expenses decreased $125,741 from $425,094 for
fiscal year 2002 to $299,353 for fiscal year 2003. This decrease is principally
due to product development costs incurred in fiscal 2002.
Interest expense increased $115,755 from $10,849 in fiscal year 2002 to
$126,604 in fiscal year 2003. The debt outstanding at November 30, 2001, was
exchanged for preferred stock on January 4, 2002, resulting in essentially no
interest expenses from then through February 28, 2002. Additionally, as
discussed below, effective January 4, 2003, Paul Kruger entered into a loan
agreement providing a $7,000,000 loan at three points above the prime rate of
interest due June 4, 2004.
The loss from continuing operations increased $21,537 from $511,303 in
fiscal year 2002 to $532,840 in fiscal year 2003.
9
After deducting the loss from discontinued operations in fiscal year 2002,
the net loss is $538,709 compared to a net loss of $532,840 in fiscal year 2003
for a decrease of $5,869.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
GENERAL
Currently, PalWeb's management projects that sales of approximately 15,000
pallets per month will generate revenue of approximately $450,000 which should
provide sufficient cash flow to sustain its operations including cash operating
expenses for labor, recurring overhead and interest and material costs. Although
significant sales orders have been executed, there is no assurance that this
sales level will be achieved. Until sales reach this level, PalWeb will remain
dependent on outside sources of cash to fund its operations as its sales
revenues will be insufficient to meet current liabilities.
PalWeb has had difficulty in obtaining financing from traditional financing
sources. As described below, substantially all of the financing that PalWeb has
received through February 28, 2003, has been provided by loans from entities
controlled by Mr. Paul Kruger and entities affiliated with Warren Kruger,
President and a director of PalWeb, and through the offering of 2001 Preferred
Stock described below to the same persons. PalWeb is currently reliant on loans
provided by Paul Kruger and Warren Kruger. There is no assurance that Paul
Kruger or Warren Kruger will continue to provide loans or loan guarantees in the
future. Further, Paul Kruger maintains his position as a primary stockholder of
PalWeb but is no longer an officer or director.
LINE OF CREDIT
Effective December 31, 2002, an affiliated company of Warren Kruger entered
into a loan agreement with PalWeb to provide a $500,000 line of credit at 9% due
March 4, 2003, with automatic 30-day extensions until lender shall have given
notice at least ten days prior to any scheduled maturity. At February 28, 2003,
the outstanding balance due on the note is $401,952.
Effective January 10, 2003, PalWeb and its subsidiary, PPP, entered into a
loan agreement with Paul Kruger providing a line of credit of $7,000,000 at 3%
above the prime rate of interest due June 4, 2004. Proceeds of the loan were
used to pay the outstanding debt of F&M Bank and Trust Company ("F&M") and the
mortgage loan with Texas Capital Bank. Pursuant to the loan agreement, PalWeb
and PPP granted to Mr. Kruger a lien on all PPP assets, and PalWeb has granted
to Mr. Kruger a pledge of its stock in PPP. In addition, Mr. Paul Kruger, along
with an officer and two employees associated with him, and Lyle Miller, a
director, resigned their employment and director positions with PalWeb as of
January 10, 2003 and:
10
(1) Those resigning received extensions on employee common stock options
for a period of five years at the same exercise price.
(2) Mr. Kruger received a distributor agreement to acquire pallets at
PPP's F.O.B. price at PPP's plant, less the greatest discounts or
concessions made to any of PPP's other distributors for similar kinds
and quantities of products. The agreement may be terminated by either
party upon thirty (30) days notice.
(3) Mr. Kruger received an assignment of a $20,000,000 default judgement
that PalWeb holds in its favor against Ullrich Wolfgang, a German
citizen. PalWeb has the option to participate in any or all of the
assignment by electing to pay its pro rata share of the costs
associated with pursuit of collection.
OTHER
PalWeb has accumulated a working capital deficit of approximately $384,000
at February 28, 2003, which includes $402,000 due to Warren Kruger and $685,000
in accounts payable and accrued liabilities. The working capital deficit
reflects the uncertain financial condition of PalWeb resulting from its
inability to obtain long term financing. There is no assurance that PalWeb will
secure such financing.
Because of its need to secure additional funding to sustain its operations,
PalWeb has inquired among the holders of PalWeb's outstanding Series 2001 12%
Cumulative Convertible Senior Preferred Stock ("Series 2001 Preferred Stock") to
assess such holders' interest in participating in a new private preferred stock
offering of up to $5,000,000. The terms of any such offering would be negotiated
and established by PalWeb and any prospective purchasers of the securities if
PalWeb receives positive expressions of interest from holders of the 2001
Preferred Stock, which PalWeb hopes to obtain within the next thirty to sixty
days. In addition, PalWeb has engaged the services of Stonegate Securities,
Inc., as investment advisor, to assist PalWeb to seek additional sources of
private equity financing. PalWeb hopes to receive a report from Stonegate within
the next thirty to sixty days. The terms of any resulting securities offering
would be subject to negotiation with interested investors. There is no certainty
that these efforts will result in the offering and issuance of any additional
securities.
PalWeb continues to be dependent upon Paul Kruger and Warren Kruger to
provide and/or secure additional financing and there is no assurance that either
will do so. As such, there is no assurance that funding will be available for
PalWeb to continue operations.
MATERIAL RISKS
--------------
PalWeb has incurred significant losses from operations and there is no
assurance that it will achieve profitability or obtain funds to finance
continued operations. For other material risks, see PalWeb's Form 10-KSB for the
period ended May 31, 2002, which was filed on September 13, 2002.
11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
11.1 Computation of Loss per Share is in Note 3 in the Notes to
the financial statements.
99.1 Certification of Chief Executive Officer Pursuant to 18
U.S.C.ss.1350 (submitted herewith).
99.2 Certification of Chief Financial Officer Pursuant to 18
U.S.C.ss.1350 (submitted herewith).
12
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be singed on its behalf by the undersigned, thereunto duly
authorized.
PALWEB CORPORATION
--------------------------
(Registrant)
Date: May 19, 2003 /s/ Warren F. Kruger
--------------------------
Warren F. Kruger
President and CEO
13
CERTIFICATIONS
I, Warren F. Kruger, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of PalWeb Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d- 14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
14
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 19, 2003 /s/ Warren F. Kruger
-----------------------------
Warren F. Kruger
President and CEO
(Principal Executive Officer)
15
CERTIFICATIONS
I, William W. Rahhal, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of PalWeb Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d- 14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 19, 2003 /s/ William W. Rahhal
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William W. Rahhal
Chief Financial Officer
(Principal Financial Officer)
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