-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NgfhFdzC2cqsM1v2TpWJ2sc8VYK28G3ZMSaDL2TdT6xnzAK60ekT48KXufLuBTyU b62d3w8Dmk5kyA+MmvGGZg== /in/edgar/work/20000602/0000912057-00-027232/0000912057-00-027232.txt : 20000919 0000912057-00-027232.hdr.sgml : 20000919 ACCESSION NUMBER: 0000912057-00-027232 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000602 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PALWEB CORP CENTRAL INDEX KEY: 0001088413 STANDARD INDUSTRIAL CLASSIFICATION: [3559 ] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-26331 FILM NUMBER: 648748 BUSINESS ADDRESS: STREET 1: 1607 W. COMMERCE ST CITY: DALLAS STATE: TX ZIP: 75208 BUSINESS PHONE: 2146988330 MAIL ADDRESS: STREET 1: 1607 W. COMMERCE ST CITY: DALLAS STATE: TX ZIP: 75208 10QSB/A 1 a10qsba.txt 10QSB/A 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 29, 2000 / / 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 - ------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) DELAWARE 75-1984048 - ---------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No. 1607 WEST COMMERCE STREET DALLAS, TEXAS 75208 - ---------------------------------- ---------------------------------- (Address of principal executive offices) (City, State and Zip Code) (214) 698-8330 - ------------------------------------------------------------------------------- (Issuer's telephone number) - ------------------------------------------------------------------------------- (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: February 29, 2000 - 205,456,628 common shares, $0.10 par value. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes No X ----- ----- THIS AMENDMENT NO. 1 IS FILED TO AMEND PART I, ITEMS 1 AND 2 AND PART II, ITEMS 5 AND 6. PALWEB CORPORATION FORM 10-QSB/A FOR THE PERIOD ENDED FEBRUARY 29, 2000 AMENDMENT NO. 1 PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE Statements of Operations For the Nine Month Periods Ended February 29/28, 2000 and 1999 1 Statements of Operations For the Three Month Periods Ended February 29/28, 2000 and 1999 2 Balance Sheets as of February 29, 2000 and May 31, 1999 3 Statements of Cash Flows for the Nine Month Periods Ended February 29/28, 2000 and 1999 4 Notes to Financial Statements 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 6 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION 8 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PalWeb Corporation (a development stage company) Consolidated Statements of Operations (Unaudited)
From Inception Nine Month Period (November 20, 1995) Ended February 29/28, To February 29, ------------------------------ --------------- 2000 1999 2000 ------------ ------------ --------------- Sales $ 6,091 $ 41,510 $ 98,785 Expenses: Research and development -- -- 406,943 General and administrative expenses 2,050,117 4,957,639 9,851,944 Depreciation expense 131,943 115,555 541,057 Impairment -- -- 3,456,231 Interest expense 137,949 199,287 601,140 ------------ ------------ --------------- Total expenses 2,320,009 5,272,481 14,857,315 ------------ ------------ --------------- Other income (expense): Gain on settlement of liabilities 75,027 -- 75,027 Other (6,337) 51,573 270,848 ------------ ------------ --------------- Total other 68,690 51,573 345,875 ------------ ------------ --------------- Loss before discontinued operations and extraordinary items (2,245,228) (5,179,398) (14,412,655) Loss from discontinued operation (7,300) (857,061) Extraordinary gain -- 46,266 68,616 ------------ ------------ --------------- Net Loss $ (2,245,228) $ (5,140,432) $ (15,201,100) ============ ============ =============== Loss Per Common Share: Loss before discontinued operations & extraordinary loss $ (0.01) $ (0.03) Loss from discontinued operation -- -- Extraordinary loss -- -- ------------ ------------ Loss per common share $ (0.01) $ (0.03) ============ ============
See notes to consolidated financial statements. 1 PalWeb Corporation (a development stage company) Consolidated Statements of Operations (Unaudited)
Three Month Period Ended February 29/28, ---------------------------- 2000 1999 ----------- ----------- Sales $ 6,091 $ -- Expenses: Research and development -- -- General and administrative expenses 1,661,598 4,456,038 Depreciation expense 56,243 44,601 Impairment -- -- Interest expense 38,809 90,701 ----------- ----------- Total expenses 1,756,650 4,591,340 ----------- ----------- Other income (expense): Gain on settlement of liabilities 75,027 -- Other -- 4,294 ----------- ----------- Total other 75,027 4,294 ----------- ----------- Loss before discontinued operations and extraordinary items (1,675,532) (4,587,046) Income from discontinued operation -- -- Extraordinary gain -- 122,421 ----------- ----------- Net Loss $(1,675,532) $(4,464,625) =========== =========== Loss Per Common Share: Loss before discontinued operations and extraordinary loss $ (0.01) $ (0.02) Loss from discontinued operation -- -- Extraordinary loss -- -- ----------- ----------- Loss per common share $ (0.01) $ (0.02) =========== ===========
See notes to consolidated financial statements. 2 PalWeb Corporation (a development stage company) Consolidated Balance Sheets (Unaudited)
February 29, May 31, ASSETS 2000 1999 ------------ ------------ Current Assets: Cash $ 322 $ 710 Accounts receivable 3,852 -- Inventory 9,778 9,938 ------------ ------------ Total current assets 13,952 10,648 Property, Plant and Equipment, at cost 2,301,677 2,192,982 Accumulated depreciation (466,205) (373,766) ------------ ------------ Total Property, Plant and Equipment 1,835,472 1,819,216 Other Assets: Intangible assets 67,964 67,964 Accumulated Amortization (10,215) (7,215) Other 30,173 30,173 ------------ ------------ Total other assets 87,922 90,922 ------------ ------------ Total Assets $ 1,937,346 $ 1,920,786 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current Liabilities: Notes and mortgages payable $ 50,000 $ 50,000 Accounts payable and accrued expenses 461,779 1,146,605 Payable to related parties 1,619,422 2,222,992 Customer deposits -- 300,000 ------------ ------------ Total current liabilities 2,131,201 3,719,597 Long-term Debt 340,000 -- Lease Finance Obligation 1,757,958 1,766,958 Stockholders' Deficiency: Preferred stock, $.0001 par, 20,000,000 shares authorized - outstanding 2,885,000 and 880,000, respectively 289 88 Common stock, $.10 par value, 250,000,000 authorized, outstanding - 205,456,628, and 217,981,046, respectively 20,545,663 21,798,105 Additional paid-in capital 6,798,890 2,027,465 Deficit accumulated during development stage (29,636,655) (27,391,427) ------------ ------------ Total stockholders' deficiency (2,291,813) (3,565,769) ------------ ------------ Total Liabilities and Stockholders Deficiency $ 1,937,346 $ 1,920,786 ============ ============
See notes to consolidated financial statement. 3 PalWeb Corporation (a development stage company) Consolidated Statements of Cash Flows (Unaudited)
From Inception Nine Month Period (November 20, 1995) Ended February 29/28, To February 29, ---------------------------- ----------- 2000 1999 2000 ----------- ----------- ----------- Net cash provided from Operating activities $ (179,852) $ 184,408 $ 195,886 Cash Flows from Investing Activities: Purchase of property and equipment (169,536) (115,653) (3,385,109) Proceeds from sale of equipment 18,000 74,995 92,995 Proceeds from lease finance obligation -- -- 149,517 ----------- ----------- ----------- Net cash used by investing activities (151,536) (40,658) (3,142,597) Cash Flows from Financing Activities: Proceeds from notes and mortgage payable 340,000 -- 2,703,807 Payments on notes payable -- (143,750) (239,750) Proceeds from issuance of common stock -- -- 491,976 Other (9,000) -- (9,000) ----------- ----------- ----------- Net cash provided by financing activities 331,000 (143,750) 2,947,033 ----------- ----------- ----------- Net Increase (Decrease) in Cash (388) -- 322 Cash, beginning of period 710 -- -- ----------- ----------- ----------- Cash, end of period $ 322 $ -- $ 322 =========== =========== =========== Supplemental information: Non-cash investing activities - Property released in foreclosure $ -- $ 415,232 Net discontinued assets distri- buted to certain stockholders -- 238,395 Non-cash financing activities - Common and preferred stock issued for services & equipment 1,468,771 4,363,000 Common and preferred stock issued for debt 673,934 100,000 Common stock issued for debt of related party 1,187,479 -- Common stock issued on con- version of preferred stock 208,389 -- Debt contributed to additional paid in capital by related party 189,000 -- Common stock held by related party cancelled by default judgement 4,144,331 --
See notes to consolidated financial statements 4 PALWEB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of the PalWeb Corporation (the "Company" or "PalWeb"), the accompanying unaudited 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 29, 2000, and the results of its operations and its cash flows for the three month and nine month periods ended February 29/28, 2000 and 1999. These consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended May 31, 1999 and the notes thereto included in the Company's Form 10-SB. 2. The results of operations for the three month and nine month periods ended February 29, 2000 are not necessarily indicative of the results to be expected for the full year. 3. The balance sheet as of May 31, 1999 has been restated to reflect a prior period adjustment. During the three month period ended May 31, 1999, the Company issued 3,963,890 shares of preferred stock and 460,000 shares of common stock and recorded a charge for consulting services in the amount of $673,934. Further analysis has determined the shares were issued to satisfy services and liabilities in connection with discontinued operations recorded during the year ended May 31, 1998. The prior period adjustment results in an additional accrual of loss from discontinued operations in the amount of $481,956 for the year ended May 31, 1998 and an increase of $191,978 in the charge to deficits for the spin off of the discontinued operations during the year ended May 31, 1999. The restated deficit account as of May 31, 1999 is as follows: Deficit, as previously reported $(26,717,493) Adjustment for effect of accounting error (673,934) ------------- Deficit, as adjusted $(27,391,427) ============= 4. During the nine month period ended February 29, 2000, the Company issued common and preferred stock as follows:
Number of Shares Value ---------- ----------- Common stock issued for: Consulting services 11,000,000 $1,100,000 Equipment 3,500,210 350,021 Exchange of advances due to related party 11,874,790 1,187,479 Satisfaction of liabilities 460,000 79,350 Conversion of 2,083,890 shares of preferred stock 2,083,890 N/A Preferred stock issued for: Satisfaction of liabilities 3,963,890 594,584 Legal services 125,000 18,750
5 5. Effective April 3, 2000, PalWeb acquired Pace Holding, Inc. and its wholly-owned subsidiary Paceco Financial Services, Inc., from Mr. Paul Kruger, the Chairman and Chief Executive Officer of PalWeb, in exchange for 50,000,000 shares of PalWeb common stock. 6. The computation of earnings per share is based on the weighted average shares outstanding. For the nine month periods ended February 29/28, 2000 and 1999, the average shares outstanding are 184,316,000 and 174,998,000, respectively. For the three month periods ended February 29/28, 2000 and 1999, the average shares outstanding are 198,640,000 and 188,448,000, respectively. Convertible preferred stock is not considered as their effect is antidilutive. ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS GENERAL TO ALL PERIODS Sales for the periods ended February 28, 1999 are occasional sales of prototype plastic pallets of a design which did not meet development standards. Sales for the periods ended February 29, 2000 represent initial sales of the Company's tested product. However, PalWeb has not commenced commercial production of plastic pallets. As of February 29, 2000, PalWeb has for the most part completed development of its plastic pallet to compete with wood pallets and is in the final stages of completion of the prototype injection molding systems to produce plastic pallets for commercial sales. PalWeb has obtained short-term financing to meet its short term working capital needs. PalWeb's new pallet design has been subjected to standard industry tests known as ASTM (American Society for Testing and Materials) Standard D1185-98a, a strength test, and D 4728-91, a vibration test, conducted by Container Technologies Laboratory, Inc., Lenexa, Kansas, an independent testing facility. Container Technologies Laboratory certified PalWeb's plastic pallet as having passed the above referenced tests. The testing procedures found the pallet to be stronger and more versatile than the typical hardwood pallet. Production utilizing prototype production equipment is scheduled to begin about April, 2000, starting at 1,000 pallets per month and increasing to 4,000 per month by about July, 2000 upon completion of a redesign of the heating system which controls the temperature of the raw material. The Company hopes to increase commercial production capacity as soon as practical and is currently seeking funding needed to acquire the necessary production equipment. For all periods 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 which offsets the amount of any tax benefit available for each period presented in the consolidated statement of operations. NINE MONTH PERIOD ENDED FEBRUARY 29, 2000 COMPARED TO THE NINE MONTH PERIOD ENDED FEBRUARY 28, 1999 General and administrative expenses for the nine months ended February 29, 2000 decreased $2,907,522 over February 28, 1999 primarily due to a lower cost of consulting services. Consulting costs were $4,366,500 for the nine months ended February 29, 1999 which is $2,898,028 greater than the nine months ended February 28, 2000. 6 Interest expense declined $61,338 from $199,287 for the nine months ended February 28, 1999 to $137,949 for the nine months ended February 29, 2000. The decrease is attributable to the reduction in notes payable. Management negotiated a settlement of certain delinquent notes payable in the prior period through foreclosure proceedings, cash payments or part cash, part common stock. Other income in the nine months ended February 28, 1999 was primarily rental income from leasing a portion of its plant facilities. The plant was sold to a related party in April 1999 and PalWeb leases back only that portion of the facility it utilizes. Because PalWeb holds an option expiring April 2002 to repurchase the property, the transaction was recorded as a financing arrangement wherein the plant remains an asset on the balance sheet until such time as the option expires without being exercised. The significant item in other income in the nine months ended February 29, 2000, is a gain on settlement of outstanding liabilities. Principally as a result of the above, PalWeb had a net loss of $2,245,228 for the nine months ended February 29, 2000 compared to $5,140,432 for the nine months ended February 28, 1999, a decrease of $2,895,204. THREE MONTH PERIOD ENDED FEBRUARY 29, 2000 TO THREE MONTH PERIOD ENDED FEBRUARY 28, 1999 General and administrative expenses decreased $2,794,440 from $4,456,038 for the period ended February 28, 1999 to $1,661,598 for the period ended February 29, 2000. This decrease is primarily due to reduced cost of consulting services, which were $4,160,500 for the three months ended February 28, 1999 compared to $1,441,723 for the three months ended February 29, 2000. As discussed in the section above comparing the nine months ended February 29, 2000 to the nine months ended February 28, 1999, certain delinquent loans were resolved resulting in an extraordinary gain of $122,421 during three months ended February 28, 1999. As a result of the above, the net loss $1,675,532 for the three months ended February 29, 2000 decreased $2,789,093 from the net loss of $4,464,625 for the three months ended February 28, 1999. LIQUIDITY AND CAPITAL RESOURCES In December 1999, PalWeb secured a line of credit of $500,000 to provide short term working capital. The credit line is being funded at the rate of $100,000 per month beginning December 1, 1999 and reflects an outstanding balance of $340,000 at February 29, 2000. Reference is made to the section above titled "General to All Periods" regarding the need for long term financing to acquire production equipment to attain commercial production levels. As discussed therein, PalWeb has incurred delays in completing its prototype injection molding system which has limited its ability to achieve its anticipated production level of 4,000 pallets per month. PalWeb management projects that a production level of 4,000 pallets per month will provide sufficient cash flow to maintain operations. While this delay has an adverse effect on the cash flows, management feels that a production level of 1,000 per month will provide sales revenue which will cover current expenses. During the three months ended February 29, 2000, Mr. Paul Kruger, the Chairman and Chief Executive Officer of PalWeb, and his affiliated companies received 11,874,790 shares of common stock in exchange for advances and customer deposits as of January 9, 2000, made to PalWeb in the amount of $1,187,479. 7 As discussed in Note 5 to the financial statements, PalWeb acquired all of the outstanding stock of Pace Holding, Inc. and its wholly-owned subsidiary Paceco Financial Services, Inc. on April 3, 2000. Paceco Financial Services, Inc. is engaged in the business of making consumer and small business loans primarily in Oklahoma. PalWeb intends to use Paceco Financial Services, Inc. as a vehicle to offer financing to buyers of its plastic pallets and injection molding equipment. MATERIAL RISKS PalWeb is in the development stage, it 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 Part I, Item 1 of the company's Form 10-SB/A. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION ACQUISITION OF PACECO FINANCIAL On January 21, 2000, PalWeb entered into an agreement to acquire Paceco Financial Services, Inc. ("PFS") by means of a merger of PFS's parent company, Pace Holding, Inc., into a wholly owned subsidiary of PalWeb, PP Financial, Inc. This acquisition was consummated on April 3, 2000. In the acquisition, PalWeb issued 50 million shares of its common stock in exchange for all the outstanding stock of Pace Holding and PFS became an indirect wholly owned subsidiary of PalWeb. All of the outstanding stock of Pace Holding was owned by Paul Kruger, the Chairman and Chief Executive Officer of PalWeb. PFS, in addition to its other assets, owned 43.5 million shares of PalWeb common stock, which by virtue of the acquisition, are treated as treasury stock on PalWeb's records and, accordingly, the acquisition resulted in the issuance of an additional 6.5 million shares of PalWeb common stock. PFS has been in business since 1952 and is engaged in the business of making consumer and small business loans primarily in Oklahoma and is regulated as an "investment certificate issuer" by the Oklahoma Securities Department. For its last fiscal year ended September 30, 1999, PFS had revenues of $790,000, net loss of $2,300,000 and total assets and stockholder's deficiency of $7,000,000 and $1,700,000, respectively. For the six months ended March 31, 2000, PFS had revenues of $370,000, net loss of $800,000 and at such date had total assets of $5,500,000 and stockholder's deficiency of $2,400,000. PFS expects to enter into an agreement with the Oklahoma Securities Department pursuant to which the status of PFS as an "investment certificate issuer" will be terminated within two years. This agreement will require that during such period PFS find additional sources of funding for its activities other than the sale of investment certificates. At March 31, 2000, PFS had $6,700,000 in investment certificates outstanding. PalWeb intends to use PFS as a vehicle to offer financing to buyers of its plastic pallets and injection molding equipment. The historical financial statements of Pace Holding, Inc. and the pro forma financial information required by Section 310 of Regulation SB were filed on June 2, 2000 as a part of PalWeb's Amendment No. 4 to Form 10-SB and are incorporated herein by reference. 8 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. See original filing. B. No reports on Form 8-K were filed by PalWeb Corporation during the quarter ended February 29, 2000 In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PALWEB CORPORATION ---------------------------------------- (Registrant) Date 6/02/00 /s/ PAUL KRUGER ------------------ ---------------------------------------- Chairman of the Board and President 9 EX-27.1 2 ex-27_1.txt EXHIBIT 27.1
5 9-MOS MAY-31-2000 FEB-29-2000 322 0 3,852 0 9,778 13,952 2,301,677 466,205 1,937,346 2,131,201 2,097,958 0 289 20,545,663 (22,837,765) 1,937,346 6,091 6,091 0 0 2,182,060 0 137,949 (2,245,228) 0 (2,245,228) 0 0 0 (2,245,228) (0.01) (0.01)
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