================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB
(Mark One)

[X]          QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

             FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2001


[_]          TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM _______ TO ________

Commission file number      000-26331
                       -------------------

                               PALWEB CORPORATION
                               ------------------
        (Exact name of small business issuer as specified in its charter)

               DELAWARE                                         75-2954680
               --------                                         ----------
    (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: NOVEMBER 30, 2001 - 232,473,244

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(CHECK ONE):

Yes  [_]          No  [X]

================================================================================
<PAGE>



                               PALWEB CORPORATION

                                   FORM 10-QSB
                     FOR THE PERIOD ENDED NOVEMBER 30, 2001

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS                                               PAGE

              Statements of Operations
              For the Six Month Periods Ended
              November 30, 2001 and 2000                                      1

              Statements of Operations
              For the Three Month Periods Ended
              November 30, 2001 and 2000                                      2

              Balance Sheets as of November 30,
              2001 and May 31, 2001                                           3

              Statements of Cash Flows for the
              Six Month Periods Ended November 30,
              2001 and 2000                                                   5

              Notes to Financial Statements                                   6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION            8

PART II.  OTHER INFORMATION

ITEM 1.  LITIGATION                                                          18

ITEM 5.  OTHER INFORMATION                                                   18

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                    20
<PAGE>

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                       PALWEB CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE><CAPTION>
                                                            Six Months Ended             From Inception
                                                              November 30,                (November 20,
                                                    --------------------------------         1995) to
                                                         2001               2000           Nov.30, 2001
                                                    -------------      -------------      -------------
<S>                                                 <C>                <C>                <C>
MANUFACTURING:
  Sales                                             $      38,788      $      33,429      $     234,706

  Expenses:
   Research and development                                48,000               --              549,943
   Salaries and benefits                                  216,887            113,061          1,875,304
   General and administrative
    expenses                                              623,912            479,284         10,289,560
   Depreciation expense                                    60,772            104,398            879,275
   Impairment                                                --                 --            3,456,231
   Interest expense                                       105,094            158,368          1,057,558
                                                    -------------      -------------      -------------
           Total expenses                               1,054,665            855,111         18,107,871
                                                    -------------      -------------      -------------
  Other income (expense):
   Gain on settlement
    of liabilities                                           --               38,784          1,599,262
   Other                                                     --                 --              272,308
                                                    -------------      -------------      -------------
           Total other income (expense)                      --               38,784          1,871,570
                                                    -------------      -------------      -------------

           LOSS FROM MANUFACTURING OPERATIONS          (1,015,877)          (782,898)       (16,001,595)

FINANCE:
  Revenues -
   Interest and fees on loans                              38,687            155,934            285,173
   Other income                                              --                3,092              4,992
   Gain (loss) on sale of assets                             --               28,581             17,365
                                                    -------------      -------------      -------------
           Total Revenues                                  38,687            187,607            307,530
                                                    -------------      -------------      -------------
  Expenses -
   Interest on thrift accounts and
    time certificates                                     105,672            197,413            497,567
   Interest on notes payable                                4,329              9,817             24,988
   Salaries and benefits                                     --               40,340             57,175
   Other operating expenses                                33,504            150,195            411,169
   Provision for credit losses                               --              173,426            353,426
   Depreciation and amortization                             --              782,398            888,308
                                                    -------------      -------------      -------------
           Total expenses                                 143,505          1,353,589          2,232,633
                                                    -------------      -------------      -------------

           LOSS FROM FINANCE OPERATIONS                  (104,818)        (1,165,982)        (1,925,103)
                                                    -------------      -------------      -------------

LOSS FROM TOTAL OPERATIONS, BEFORE DISCONTINUED
 AND EXTRAORDINARY ITEMS                               (1,120,695)        (1,948,880)       (17,926,698)
LOSS FROM DISCONTINUED OPERATION                             --               11,578           (792,648)
EXTRAORDINARY GAIN                                           --                 --               68,616
                                                    -------------      -------------      -------------

NET LOSS                                            $  (1,120,695)     $  (1,937,302)     $ (18,650,730)
                                                    =============      =============      =============

LOSS PER COMMON SHARE                               $       (0.01)     $       (0.01)
                                                    =============      =============
WEIGHTED AVERAGE SHARES OUTSTANDING                   232,200,000        242,528,000
                                                    =============      =============

The accompanying notes are an integral part of this consolidated financial statement.
</TABLE>

                                        1
<PAGE>

                       PALWEB CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE><CAPTION>
                                                          Three Months Ended
                                                              November 30,
                                                    --------------------------------
                                                         2001               2000
                                                    -------------      -------------
<S>                                                 <C>                <C>
MANUFACTURING:
  Sales                                             $      26,547      $      19,850

  Expenses:
   Research and development                                48,000               --
   Salaries and benefits                                  128,641             48,415
   General and administrative
    expenses                                              306,137            178,985
   Depreciation expense                                    30,386             50,200
   Impairment                                                --                 --
   Interest expense                                        50,941             93,958
                                                    -------------      -------------
           Total expenses                                 564,105            371,558
                                                    -------------      -------------
  Other income (expense):
   Gain on settlement
    of liabilities                                           --               38,784
   Other                                                     --                 --
                                                    -------------      -------------
           Total other income (expense)                      --               38,784
                                                    -------------      -------------
           LOSS FROM MANUFACTURING
            OPERATIONS                                   (537,558)          (312,924)

FINANCE:
  Revenues -
   Interest and fees on loans                              12,934             67,723
   Other income                                              --                1,503
   Gain (loss) on sale of assets                             --               28,821
                                                    -------------      -------------
           Total Revenues                                  12,934             98,047
                                                    -------------      -------------
  Expenses -
   Interest on thrift accounts and
    time certificates                                      56,473             84,505
   Interest on notes payable                                2,423              4,829
   Salaries and benefits                                     --               18,209
   Other operating expenses                                18,131             41,858
   Provision for credit losses                               --              173,426
   Depreciation and amortization                             --              585,479
                                                    -------------      -------------
           Total expenses                                  77,027            908,306
                                                    -------------      -------------

           LOSS FROM FINANCE OPERATIONS                   (64,093)          (810,259)
                                                    -------------      -------------
LOSS FROM TOTAL OPERATIONS, BEFORE DISCONTINUED
 AND EXTRAORDINARY ITEMS                                 (601,651)        (1,123,183)

LOSS FROM DISCONTINUED OPERATION                           (4,624)
EXTRAORDINARY GAIN                                           --                 --
                                                    -------------      -------------

NET LOSS                                            $    (601,651)     $  (1,127,807)
                                                    =============      =============

LOSS PER COMMON SHARE                               $       (0.01)     $       (0.01)
                                                    =============      =============
WEIGHTED AVERAGE SHARES OUTSTANDING                   232,473,000        242,528,000
                                                    =============      =============

The accompanying notes are an integral part of this consolidated financial statement.
</TABLE>

                                        2
<PAGE>

                       PALWEB CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                   November 30,        May 31,
                                                       2001             2001
                                                   -----------      -----------
           ASSETS
           ------
<S>                                                <C>              <C>
MANUFACTURING:
  Current Assets:
   Cash                                            $     3,480      $    10,923
   Accounts receivable                                  69,018           72,788
   Inventory                                           157,512          142,689
   Prepaid Expenses                                     95,000           95,000
                                                   -----------      -----------
           Total current assets                        325,010          321,400

  Property, plant and equipment                      7,003,188        2,730,654
  Accumulated depreciation                            (465,942)        (405,171)
                                                   -----------      -----------
           Total property, plant and equipment       6,537,246        2,325,483

  Other Assets                                          73,791           76,031
                                                   -----------      -----------

           TOTAL MANUFACTURING ASSETS                6,936,047        2,722,914
                                                   -----------      -----------

FINANCE:
  Cash                                                 250,294           69,546
  Loans receivable, net of allowance for
   doubtful accounts                                   614,058          814,349
                                                   -----------      -----------

           TOTAL FINANCE ASSETS                        864,352          883,895
                                                   -----------      -----------

TOTAL ASSETS                                       $ 7,800,399      $ 3,606,809
                                                   ===========      ===========

The accompanying notes are an integral part of this consolidated financial statement.
</TABLE>
                                        3
<PAGE>

                       PALWEB CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                             November 30,         May 31,
                                                                 2001              2001
                                                             ------------      ------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
<S>                                                          <C>               <C>
MANUFACTURING:
  Current Liabilities:
   Note payable                                              $  4,939,297      $  1,536,559
   Notes payable - related party                                1,266,282           947,200
   Accounts payable and accrued liabilities                     3,330,255         1,823,064
                                                             ------------      ------------
           Total current liabilities                            9,535,834         4,306,823

  Deferred Income                                                 636,340           707,044
                                                             ------------      ------------

           TOTAL MANUFACTURING LIABILITIES                     10,172,174         5,013,867
                                                             ------------      ------------
FINANCE:
  Thrift accounts and time certificates                         5,107,257         5,107,257
  Accrued interest payable
   and other liabilities                                          309,733           204,061
  Notes payable                                                   151,438           171,836
                                                             ------------      ------------

           TOTAL FINANCE LIABILITIES                            5,568,428         5,483,154
                                                             ------------      ------------
STOCKHOLDERS' DEFICIENCY:
  Preferred stock, $.0001 par, 20,000,000 shares
   authorized - outstanding - 1,980,000 and 2,525,000                 198               253
  Common stock, $.10 par value, 250,000,000
   authorized, outstanding - 232,473,244 and 231,928,244       23,247,325        23,192,825
  Additional paid-in capital                                    9,741,945         9,725,686
  Deficit accumulated during development stage                (36,379,405)      (35,258,710)
                                                             ------------      ------------
                                                               (3,389,937)       (2,339,946)
  Treasury stock, 43,500,000 shares common                     (4,550,266)       (4,550,266)
                                                             ------------      ------------
           TOTAL STOCKHOLDERS' DEFICIENCY                      (7,940,203)       (6,890,212)
                                                             ------------      ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY               $  7,800,399      $  3,606,809
                                                             ============      ============

The accompanying notes are an integral part of this consolidated financial statement.
</TABLE>
                                        4
<PAGE>

                       PALWEB CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE><CAPTION>
                                                 Six Months Ended           From Inception
                                                    November 30,            (November 20,
                                            ----------------------------       1995) to
                                                2001             2000        Nov.30, 2001
                                            -----------      -----------      -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                         <C>              <C>              <C>
Net cash provided by (used)
  operating activities                      $   519,028      $  (751,352)     $   182,671

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment          (4,272,534)          (4,665)      (9,525,387)
 Net liabilities from acquisition
  of finance and real estate                       --               --            230,724
 Proceeds from sale of equipment                   --             26,798        1,456,456
 Decrease in loans receivable                   225,389          486,512        1,695,251
 Proceeds from lease finance obligation            --               --            149,517
                                            -----------      -----------      -----------
           Net cash provided by (used)
       investing activities                  (4,047,145)         508,645       (5,993,439)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from notes payable                  3,721,820          532,200        7,086,886
 Payments on notes payable                      (20,398)         (45,618)      (1,312,378)
 Decrease in savings certificates                  --            (66,329)      (1,551,942)
 Proceeds from mortgage payable -
  related party                                    --               --          1,350,000
 Proceeds from issuance of common stock            --               --            491,976
                                            -----------      -----------      -----------
           Net cash provided (used) by
      financing activities                    3,701,422          420,253        6,064,542
                                            -----------      -----------      -----------

NET INCREASE (DECREASE) IN CASH                 173,305          177,546          253,774
CASH, beginning of period                        80,469          267,882             --
                                            -----------      -----------      -----------

CASH, end of period                         $   253,774      $   445,428      $   253,774
                                            ===========      ===========      ===========

The accompanying notes are an integral part of this consolidated financial statement.
</TABLE>
                                        5
<PAGE>

                               PALWEB CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.         In the opinion of the Company, 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 November 30, 2001, and
           the results of its operations and its cash flows for the six month
           periods and three month periods ended November 30, 2001 and 2000.
           These consolidated financial statements should be read in conjunction
           with the consolidated financial statements as of and for the year
           ended May 31, 2001 and the notes thereto included in the Company's
           Form 10-KSB.

2.         The results of operations for the six month period and three month
           period ended November 30, 2001 are not necessarily indicative of the
           results to be expected for the full year.

3.         Segment of Business - The Company's business has two reportable
           segments - manufacturing and finance. The manufacturing segment is
           the production of plastic pallets and is separately presented in the
           accompanying financial statements. The finance segment, also
           presented separately in the accompanying financial statements, was
           acquired on April 3, 2000 and is in the business of lending money.
           The accounting policies are the same as those described in the
           summary of significant accounting policies. Intersegment transactions
           are not significant.

4.         Interest expense of $146,005 and $99,732 was capitalized during the
           six month period and three month period ended November 30, 2001,
           respectively, in connection with the construction of a new production
           line.

5.         The computation of earnings per share is based on the weighted
           average shares outstanding. For the six month periods ended November
           30, 2001 and 2000, the average shares outstanding are 232,200,000 and
           242,528,000, respectively. For the three month periods ended November
           30, 2001 and 2000, the average shares outstanding are 232,473,000 and
           242,528,000, respectively. Convertible preferred stock is not
           considered as their effect is antidilutive.

6.         During the six month period ended November 30, 2001, 545,000 shares
           of preferred stock were converted into common stock on a one-for-one
           basis.

7.         Deferred income is being amortized over sixty months. Since the
           deferred income results from a transaction with a related party, the
           amount of $70,704 is amortized in fiscal year 2002 to additional
           paid-in capital. For more information relating to the deferred
           income, see PalWeb's Form 10-KSB for the period ended May 31, 2001
           filed on September 13, 2001.

                                        6
<PAGE>

8.         Effective January 4, 2002, PalWeb issued 697,732 shares of Series
           2001, 12% Cumulative Convertible Senior Preferred Stock, par value
           $0.0001, and warrants to purchase up to 209,319,660 shares of PalWeb
           common stock in exchange for a total consideration of $6,977,324. The
           ability to convert the preferred stock and exercise the warrants
           depends on PalWeb amending its capital structure to authorize
           additional capital and reduce the par value of its common stock. See
           "Liquidity and Capital Resources" in Part I, Item 2, "Management
           Discussion and Analysis or Plan of Operation."

9.         Effective December 11, 2001, PalWeb through its subsidiary, Plastic
           Pallet Production, Inc., entered into a revolving note payable with
           F&M Bank and Trust Company for a $3,000,000 line of credit at prime
           plus 0.25%, due December 31, 2002.

10.        In October, 2001, a former employee of PalWeb filed a cause of action
           for certain payments and stock options valued in excess of $1,000,000
           related to an employment agreement dated September 1, 1996 when
           PalWeb's name was Cabec Energy. See Part II, Item 1, "Litigation."












                                        7

<PAGE>

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS
---------------------

GENERAL TO ALL PERIODS

           PalWeb Corporation ("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.

           PalWeb's primary business is the manufacturing and selling of plastic
pallets referred herein as manufacturing. It also indirectly owns a subsidiary
finance company, Paceco Financial Services, Inc. ("PFS"), acquired in April
2000. As described below, the finance activities have been curtailed until PFS
is able to repay outstanding investment certificate liabilities and in December
2000, the real estate activities were discontinued.

           As of November 30, 2001, production of plastic pallets utilizing
prototype production equipment has been approximately 800 pallets per month and
the current production capacity of the prototype machine is approximately 4,000
pallets per month. As of November 30, 2001, PalWeb had 10 full-time employees
and a production capacity of approximately 2,000 pallets per month. Production
levels of approximately 4,000 pallets per month can be attained by adding
approximately two more shifts. Management has initiated the construction and
installation of a new production line to manufacture plastic pallets at an
estimated cost of approximately $5,500,000. Substantially all major components
of the new production line have been ordered and installation was in process at
November 30, 2001. PalWeb has financed the construction through a combination of
accounts payable (approximately $1,436,000 at November 30, 2001 relating
directly to the construction project) and interim financing from Yorktown
Management and Financial Services, LLC as discussed below in "Liquidity and
Capital Resources." The production line is expected to be in operation during
the third quarter of fiscal year 2002, and PalWeb expects that it will have a
capacity of approximately 40,000 pallets per month. Pending completion of the
production line, management anticipates that it will produce pallets as needed
to fill orders up to 40,000 pallets per month. However, there is no assurance
that PalWeb will receive orders to fill any or all of the additional production
capacity of the new production line.

           Inventory levels at November 30, 2001 include approximately 2,458
stackable and 2,787 rackable pallets. PalWeb's marketing efforts have generated
several leads with customers who are considering sizable orders of pallets.
There is no assurance that PalWeb will secure any sizable orders of pallets or,
if it does, that PalWeb have the inventory or production capacity to immediately
fill such orders.

           Gravity Management, an engineering firm in Tulsa, Oklahoma, has been
engaged to engineer and oversee the construction and installation of the
production line. According to the U. S. Forest Service as printed in a National
Wooden Pallet and Container Association publication, the United States market
for new pallets, both wooden and plastic, is, at a minimum, approximately
400,000,000 annually. Projected sales of 40,000 pallets per month, or 480,000
pallets per year, is

                                        8
<PAGE>

less than 1/10th of 1% of the total new pallet market, and it appears that the
market trend is moving toward the use and purchase of plastic pallets.

           PalWeb continues to test and improve its pallet with respect to
strength, durability and fire retardency. In August 2001, PalWeb received its
test results from the Virginia Polytech Institute & State University's
("Virginia Tech") Fastrack Evaluation, which in the opinion of PalWeb further
demonstrates the strength and durability of PalWeb's pallets. The Virginia Tech
Fastrack Evaluation is a private test that was conducted at PalWeb's request.
Although the Virginia Tech Fastrack Evaluation is not an industry standard,
PalWeb believes that the results of the Fastrack Evaluation will be useful in
marketing PalWeb's pallets. In addition, PalWeb has embarked in developing its
own patented formula for fire retardency. Dr. James E. Pritchard, a respected
Ph.D. chemist and technical advisor in the area of custom polymer formulations,
has been retained to oversee this project on behalf of PalWeb. During November,
2001, PalWeb submitted its plastic pallets manufactured from its prototype
equipment to Underwriters Laboratory for UL certification with respect to fire
retardency. PalWeb's pallets successfully passed the UL test for commodity
storage; however, before the UL testing can be completed, pallets from the new
production line must also be successfully tested. PalWeb anticipates that it
will submit pallets produced on its new production line to the Underwriters
Laboratory in January, 2002, in an attempt to complete the UL certification.
This UL certification is a requirement of certain major purchasers of plastic
pallets and, accordingly, is necessary for PalWeb to market its pallets which
will be known as the "Hawker" series. There is no assurance that PalWeb will
complete the UL certification process in a timely manner, if at all.

           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.

           The consolidated statements include PalWeb Corporation and its
wholly-owned subsidiaries Plastic Pallet Production, Inc. ("PPP") and PFS. PPP
represents the manufacturing segment of PalWeb and PFS represents the financial
segment.

SIX MONTH PERIOD ENDED NOVEMBER 30, 2001 COMPARED TO SIX MONTH PERIOD ENDED
---------------------------------------------------------------------------
NOVEMBER 30, 2000
-----------------

           MANUFACTURING

           Sales for the six month period ended November 30, 2001 were $38,788
compared to $33,429 in the six month period ended November 30, 2000. Sales in
fiscal year 2002 are approximately 38% of management's goal of 2,000 pallets per
quarter. Management believes the lower than expected sales are attributable to
the diversion of PalWeb's resources and personnel during the building of its
fully functional production line.

                                        9
<PAGE>

           Salary and benefits expense of $216,887 in the first six months of
fiscal year 2002 increased from $113,061 in the first six months of fiscal year
2001. This increase of $103,826 was primarily due to the addition of three
employees plus overtime expenses incurred in preparing pallets for fire
retardency testing.

           The general and administrative expenses for the manufacturing segment
during the first six months of fiscal year 2002 and 2001 were $623,912 and
$479,284, respectively, an increase of $144,628, or 31%. This increase resulted
from increased rental expense at the company's manufacturing facility of
approximately $100,000 and testing expense of approximately $45,000 related to
the UL certification for fire retardency.

           Interest expense was $105,094 and $158,368 for the six months ended
November 30, 2001 and 2000, respectively, for a decrease of $53,274. Effective
May 1, 2001, PalWeb terminated its option to purchase the plant facility and,
accordingly, rents that were previously classified as interest expense for
financial statement reporting purposes in the six months ended November 30, 2000
were reported as rent expense in the six months ended November 30, 2001. In
addition during fiscal year 2002, $146,005 of interest cost was capitalized as
cost of construction of a new production line. Total interest expense during the
first half of fiscal 2002, including capitalized interest, was $251,099, an
increase of $92,731 over the first half of fiscal 2001, reflecting the
additional borrowings primarily for construction.

           The loss from the manufacturing segment in the first six months of
fiscal year 2002 and 2001 was $1,015,877 and $782,898, respectively. The
increase from 2001 to 2002 of $232,979 was primarily due to the increases in
expenses described above.

           FINANCE

           PalWeb plans to use its finance operation primarily for pallet
financing activities. Due to regulatory issues with the Oklahoma Department of
Securities in connection with its investment certificates and the redemption
thereof, management has not engaged in any new financing activities.

           Interest income in for the first half of fiscal year 2002 was $38,687
compared to $155,934 in the first half of fiscal 2001. The decrease of $117,247
was due to the reduction of outstanding loans. Interest income in 2002 is based
on cash payments as substantially all loans at November 30, 2001 are on a
nonaccrual status. In addition, as discussed in the preceding paragraph,
management is not making new loans at the present time.

           Total expenses in the first six months of fiscal year 2002 were
$143,505 compared to $1,353,589 in the comparable period of fiscal 2001. The
decrease of $1,210,084 was primarily due to (i) no depreciation and amortization
in fiscal year 2002 due to the write-off of good will in 2001, (ii) the
liquidation of thrift savings accounts and a reduction of interest on the
accounts to passbook savings rate of 5%, and (iii) a general reduction of
operating expenses in connection with the latent activity of the segment.

                                       10
<PAGE>

           The net loss of $104,818 in fiscal year 2002 compared to $1,165,982
in 2001 was a decrease of $1,061,164 is primarily due to the reductions in
expenses described above.

           COMBINED

           The consolidated net loss for the first half of fiscal year 2002 was
$1,120,695, or $0.01 per share, compared to a net loss of $1,937,302, or $0.01
per share, in the first half of fiscal 2001 for a decrease of $816,607.

THREE MONTH PERIOD ENDED NOVEMBER 30, 2001 COMPARED TO THREE MONTH PERIOD ENDED
-------------------------------------------------------------------------------
NOVEMBER 30, 2000
-----------------

           MANUFACTURING

           Sales for the three month period ended November 30, 2001 were $26,547
compared to $19,850 in the three month period ended November 30, 2000. Sales of
approximately 1,000 pallets in the current year period did not meet management's
goal 2,000 pallets per quarter; however, sales did increase over the first
quarter.

           Salary and benefits expense of $128,641 in the three months ended
November 30, 2001 increased from $48,415 in the comparable period of the prior
year. This increase of $80,226 was primarily due to the addition of three
employees and overtime incurred in preparation of pallets for fire retardency
testing.

           The general and administrative expenses for the manufacturing segment
for the three months ending November 30, 2001 and 2000 were $306,137 and
$178,985, respectively, for a increase of $127,152. This increase resulted from
increased rental expense at the company's manufacturing facility of
approximately $80,000 and testing expense of approximately $45,000 related to
the UL certification for fire retardency

           Interest expense was $50,941 and $93,958 in the three months ended
November 30, 2001 and 2000, respectively, a decrease of $43,017. Effective May
1, 2001, PalWeb terminated its option to purchase the plant facility and,
accordingly, rents that were previously classified as interest expense for
financial statement reporting purposes in the three months ended November 30,
2000 were reported as rent expense in the three months ended November 30, 2001.
In addition, during the three months ending November 30, 2001, $99,732 of
interest expense was capitalized as cost of construction of the new production
line. Total interest expense during the second quarter of fiscal 2002, including
capitalized interest, was $150,673, an increase of $56,715 over the second
quarter of fiscal 2001, reflecting the additional borrowings primarily for
construction.

           The loss from the manufacturing segment in the second quarter of
fiscal year 2002 and 2001 was $537,558 and $312,924, respectively. The increase
from 2001 to 2002 of $224,634 was primarily due to the increases in expenses
described above.

                                       11
<PAGE>

           FINANCE

           PalWeb plans to use its finance operation primarily for pallet
financing activities. Due to regulatory issues with the Oklahoma Department of
Securities in connection with its investment certificates and the redemption
thereof, management has not engaged in any new financing activities.

           Interest income in the second quarter fiscal year 2002 was $12,934
compared to $67,723 in the second quarter of fiscal year 2001. The decrease of
$54,789 was due to the reduction of outstanding loans. Interest income in fiscal
year 2002 was based on cash payments as substantially all loans at November 30,
2001 are on a nonaccrual status. In addition, as discussed in the preceding
paragraph, management is not making new loans at the present time.

           Total expenses in the three months ended November 30, 2001 were
$77,027 compared to $908,306 in the three months ended November 30, 2000. The
decrease of $831,279 was primarily due to (i) no depreciation and amortization
in the three months ended November 30, 2001 due to the write-off of good will in
prior period, (ii) the liquidation of thrift savings accounts and a reduction of
interest on the accounts to passbook savings rate of 5%, and (iii) a general
reduction of operating expenses in connection with the latent activity of the
segment.

           The net loss of $64,093 in the second quarter of fiscal year 2002
compared to $810,259 in the second quarter of fiscal year 2001 was a decrease of
$746,166, primarily due to the reasons described above.

           COMBINED

           The consolidated net loss for the second quarter of fiscal year 2002
was $601,651, or $0.01 per share, compared to a net loss of $1,127,807, or $0.01
per share, for the second quarter of fiscal year 2001, a decrease of $526,156.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

           GENERAL

           The statement of cash flows for the six month period ended November
30, 2001, reflects net cash provided by operations in the amount of $519,028.
This is not reflective of ongoing cash flows because it results from PalWeb's
use of accounts payable to finance the construction of its new production line
as discussed in "General to All Periods." The net cash provided by operations
resulting from the increase in accounts payable directly related to the
construction is approximately $1,507,000.

           As of November 30, 2001, PalWeb's management projects that sales of
approximately 4,000 pallets per month are necessary to break-even. Sales at this
level will provide revenues of approximately $200,000 and will provide
sufficient cash flow to sustain manufacturing operations, which includes cash
operating expenses for labor, recurring overhead, and interest of approximately
$100,000 per month and material costs of approximately 50% of sales, or
$100,000. Upon

                                       12
<PAGE>

completion of the new production line, management estimates the break-even level
will increase to 12,000 pallets per month due to increased costs associated with
dividend payments, interest expense, labor costs, and utility costs. There is no
assurance that these break-even levels will be achieved. Until sales reach such
break-even levels, PalWeb will remain dependent on outside sources of cash to
fund its operations as its sales revenues will be insufficient to meet current
liabilities.

           Due to its development stage status, PalWeb has had difficulty in
obtaining financing from traditional financing sources. As described below,
substantially all of the financing that PalWeb has received through November 30,
2001 has been provided by loans from entities controlled by Mr. Paul A. Kruger,
the Company's Chairman and Chief Executive Officer and from entities affiliated
with Warren F. Kruger, Paul A. Kruger's brother, in each case with security
equivalent to that which a bank would require.

           As of November 30, 2001, Paul A. Kruger's affiliated entities had
loaned PalWeb approximately $1,266,282, pursuant to various notes with face
amounts aggregating a total of $2,000,000. Paul A. Kruger is not obligated to
make further advances under these notes. The maturity of all of these notes has
been extended to January 15, 2002, and bear interest at the rate of 12% per
year. These loans are secured by substantially all of the assets of PalWeb and
PPP, including equipment, furniture, fixtures, inventory, accounts receivables
and patents. As described below, on January 4, 2002, these loans were converted
into preferred stock and warrants.

           Beginning on March 1, 2001, PalWeb began to receive financing in the
form of loans from Yorktown Management and Financial Services, LLC,
("Yorktown"), which is principally owned by Warren F. Kruger. Through November
30, 2001, Yorktown had advanced a total of $4,939,297 pursuant to various notes
bearing interest at 12% and maturing on January 15, 2002. These notes are
secured, subordinate to the lien described above, by substantially all of the
assets of PalWeb and PPP, including equipment, furniture, fixtures, inventory,
accounts receivables and patents. PalWeb has used and continues to use the
proceeds principally for the acquisition of a new production line of
manufacturing equipment. PalWeb also used $300,000 of these proceeds to settle
certain litigation involving Ralph Curton, Jr. For more information regarding
the litigation with Ralph Curton, Jr. and the subsequent settlement, see
PalWeb's Form 10-KSB for the period ended May 31, 2001 filed on September 13,
2001. As described below, on January 4, 2002, these loans were converted into
preferred stock and warrants.

           PREFERRED STOCK FINANCING

           On May 8, 2001, PalWeb announced that it had signed a letter of
intent (the "Letter of Intent") for a private placement of 500,000 shares of
convertible preferred stock and warrants to purchase 150,000,000 shares of
common stock for a total of $5,500,000. The letter of intent was with Westgate
Capital Company, L.L.C., a private limited liability company of which Warren
Kruger, Paul Kruger's brother, is a manager ("WCC"), and Hidalgo Trading
Company, LC ("Hildalgo"), which is 100% owned by Paul A. Kruger.

           The financing provided by Yorktown described above was provided in
partial reliance on the Letter of Intent. Subsequent to the signing of the
Letter of Intent, WCC required as an additional condition to its equity
investment that PalWeb acquire the land and building in which its

                                       13
<PAGE>

manufacturing facilities are located (the "Building") from Onward, LLC, an
entity that is 100% owned by Paul A. Kruger ("Onward"), subject to existing debt
in exchange for additional shares of convertible preferred stock and additional
warrants on the same terms as described in the Letter of Intent. Hildalgo and
Onward are sometimes referred to as the "Paul A. Kruger Controlled Entities."

           On January 4, 2002, PalWeb entered into a Securities Purchase
Agreement (the "Purchase Agreement") with Hildalgo, Westgate Investments, L.P.,
an Oklahoma limited partnership of which WCC is general partner ("Westgate"),
and Onward (collectively, the "Purchasers") in accordance with the terms of the
Letter of Intent. Pursuant to the Purchase Agreement, PalWeb issued 697,732
shares of Series 2001 12% Cumulative Convertible Senior Preferred Stock of
PalWeb, par value $0.0001 (the "Preferred Stock"), and warrants to purchase up
to 209,319,660 shares (the "Warrants") of PalWeb's common stock to Purchasers in
exchange for total consideration of $6,977,324. The consideration consisted of
the conversion of $6,440,579 of existing indebtedness owed to Yorktown and the
Paul A. Kruger Controlled Entities and $536,745 of equity in the Building, based
on an agreed value of $1,350,000, less indebtedness assumed by PalWeb of
$813,255. Based on the number of common shares outstanding as of January 4,
2002, the purchasers will have obtained in connection with this private
placement the right to acquire approximately 66.1% of the common shares of
PalWeb upon the amendment to the capital structure described below. Pursuant to
the Purchase Agreement, Westgate acquired 521,430 shares of Preferred Stock and
156,429,000 Warrants and the Paul A. Kruger Controlled Entities acquired 176,302
shares of Preferred Stock and 52,890,660 Warrants.

           The ability to convert the preferred stock and exercise the warrants
depends on PalWeb amending its capital structure to authorize additional shares
of common stock and reduce the par value of its common stock. In the first half
of calender year 2002, PalWeb intends to submit to its shareholders a proposal
to amend its capital structure that will allow for the conversion of the
Preferred Stock and the exercise of the Warrants.

           The terms of the Preferred Stock and Warrants are the same as those
announced in May of 2001 when the Letter of Intent was signed; however, the
total amount of Preferred Stock and Warrants offered was increased to account
for additional indebtedness that was incurred and the transfer of the Building
from Onward to PalWeb. Each share of the Preferred Stock has a stated value of
$10 per share and is convertible at any time into 350 shares of common stock of
the Company or a total of 244,206,200 shares, which is an effective conversion
price of $0.0286 per share. Holders of the Preferred Stock are also entitled to
cumulative dividends of 12% per annum, $1.20 per share, or a total of $837,278.
The Warrants are exercisable at a price of $0.10 per share for a period of four
years, subject to acceleration of the expiration date for three separate 25%
tranches of the total Warrants, if PalWeb's common stock trades at prices of
$0.15, $0.20 and $0.25 per share, respectively.

           The certificate of designation of the Preferred Stock provides, among
other things:

o          The Preferred Stock is prior to the Company's common stock and
           existing outstanding convertible preferred stock.

                                       14
<PAGE>

o          The Preferred Stock has liquidation preference of $10 per share over
           any class of stock of PalWeb ranking junior to the Preferred Stock.

o          The Preferred Stock is not entitled to vote, except: (i) as may be
           required by law and, (ii) under certain circumstance when PalWeb
           fails to declare and pay dividends on the Preferred Stock on two
           consecutive dividend payment dates, to elect additional members to
           the board of directors so that at least 60% of the members of the
           Board of Directors of PalWeb are elected by the holders of the
           Preferred Stock.

o          So long as any shares of the Preferred Stock are outstanding, no
           dividends (other than a dividend payable in common stock) shall be
           declared or paid upon any common stock or any other class of stock
           ranking junior to the Preferred Stock.

o          The conversion price of the Preferred Stock is subject to adjustment
           upon the subdivision or combination of any outstanding common stock
           of PalWeb.

o          If the common stock issuable upon the conversion of the Preferred
           Stock is changed by certain capital reorganizations or
           reclassifications, the holders of the Preferred Stock shall be
           entitled to certain rights in parity with the rights of the holders
           of the common stock.

o          The Preferred Stock is not to be subject to any sinking fund for the
           purchase or redemption of the shares.

           In connection with the Purchase Agreement, PalWeb and the Purchasers
entered into a Shareholders and Voting Agreement dated January 4, 2002 (the
"Shareholders Agreement") whereby the parties agreed, among other things, that
Westgate shall have the right to:

o          designate at least two-thirds of the members of the Board of
           Directors of PalWeb for as long as Westgate holds at least 5% of the
           Preferred Stock or Common Stock of PalWeb;

o          designate one of the Westgate designees for appointment on every
           committee of the Board of Directors of PalWeb for as long as Westgate
           continues to have one or more designees serving on the board of
           Directors of PalWeb; and

o          routinely consult with, and advise, the management of PalWeb
           regarding PalWeb's operations.

In addition, the Shareholders Agreement provides that the following actions may
not be taken without the prior approval of 60% of the members of the Board of
Directors of PalWeb:

o          amend the certificate of incorporation or bylaws of PalWeb;

o          consolidate with, or merge with or into, any entity, except for
           certain mergers of wholly owned subsidiaries of PalWeb with or into
           PalWeb;

                                       15
<PAGE>

o          make certain sales, leases, transfers or dispositions of the
           properties or assets of the PalWeb;

o          change the general nature of the business of PalWeb;

o          make certain acquisitions or issuances of shares of PalWeb;

o          enter into certain commitments or obligations for the grant of
           options, warrants or rights to acquire or issue shares of PalWeb;

o          incur any funded indebtedness, except for indebtedness incurred as
           contemplated by an annual budget, incurred under PalWeb's primary
           credit facility described below, or in an aggregate amount not
           exceeding $250,000;

o          make any investment by PalWeb in any entity other than a wholly-owned
           subsidiary in an amount exceeding $100,000;

o          pay any dividends on common shares of PalWeb;

o          file any petition seeking to reorganize PalWeb pursuant to, or to
           obtain relief under, any federal or state bankruptcy or insolvency
           law;

o          dissolve, liquidate or wind-up of the affairs of PalWeb;

o          appoint or dismiss the chief executive officer, the president, the
           chief operating officer, the chief financial officer or any senior
           vice president of PalWeb; or

o          make any capital expenditures not approved in an annual budget in an
           aggregate amount exceeding $250,000 in any fiscal year.

           Effective upon the closing of the Purchase Agreement and in
connection with the Shareholders Agreement, the Board of Directors of PalWeb
increased the number of members of the Board of Directors to six, and appointed
Warren F. Kruger, William W. Pritchard, Bradley C. Shoup and Bryan R. Kirchmer
as Westgate designees to fill such directorships to serve until their successors
are elected and qualified. Mark Kidd, a former director of PalWeb, resigned on
January 2, 2002. Mr Kidd's resignation was not related to the Preferred Stock
financing.

           LINE OF CREDIT

           On December 11, 2001, PalWeb through its subsidiary, PPP, entered
into a loan agreement with The F&M Bank and Trust Company ("F&M") dated December
11, 2001 (the "Loan Agreement") whereby PPP issued a revolving note due December
31, 2002 in exchange for a $3,000,000 line of credit at prime plus 0.25%. In
connection with the Loan Agreement, PPP has agreed not to, among other things:

                                       16
<PAGE>

o          create, assume or suffer to exist certain liens, charges or
           encumbrances on the properties encumbered to F & M;

o          sell, assign, transfer, convey, or encumber its assets;

o          create, assume or suffer to exist any indebtedness in excess of
           $100,000 in any single year without the prior consent of F & M;

o          make certain loans, advances or extensions of credit;

o          merge, consolidate, enter into certain business combinations, or
           acquire substantially all of the assets of any other corporation
           without the prior consent of F & M;

o          engage in any business activities substantially different from or
           unrelated to its present or proposed business activities; or

o          declare or pay certain cash or asset dividends.

As additional inducements for F&M to establish the line of credit, Paul A.
Kruger executed an unlimited guaranty and a pledge, assignment and security
agreement pursuant to which he pledged certain shares of Precis, Inc. common
stock owned by him, and Warren F. Kruger executed a limited guaranty in the
amount of $1,000,000. Also in connection with this line of credit, PPP and F&M
entered into a security agreement dated December 11, 2001 (the "Security
Agreement"). Pursuant to the Loan Agreement and the Security Agreement, PPP
granted F&M a first and paramount security interest in all of the assets of PPP.
Proceeds of this line will be used to pay certain accounts payable, complete the
production line installation, and provide working capital.

           PalWeb continues to be dependent upon Paul A. Kruger and Warren F.
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.

           OTHER

           The Company had accumulated a working capital deficit of $9,210,000
at November 30, 2001 in connection with its manufacturing operations, which
includes $1,266,282 in loans due to Paul A. Kruger or his affiliates, $4,939,000
in notes payable to Yorktown, and $3,330,000 in accounts payable and accrued
liabilities. This deficit reflects the uncertain financial condition of the
Company resulting from its inability to obtain long term financing to progress
beyond the development stage. There is no assurance that the Company will secure
such financing. The Preferred Stock financing described above significantly
reduced this deficit.

           As of November 30, 2001, PalWeb occupied its facility under a lease
with Onward, LLC, an affiliate of Paul A. Kruger. Effective May 1, 2001, the
lease provides for a one year term with four one-year renewal options. As of
January 4, 2002, this facility was transferred to PalWeb in connection with the
private placement described above.

                                       17
<PAGE>

           On December 20, 2001, PFS made a payment of $357,000 in connection
with the redemption of its depositors' passbook savings accounts and time
certificates. For more information on this transaction, see "Paceco Financial
Services, Inc." under Part II, Item 5 of this Form 10-QSB.

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 PalWeb's Form 10-KSB for the period ended May 31, 2001,
which was filed on September 13, 2001.

PART II.  OTHER INFORMATION

ITEM 1.  LITIGATION

Roger Landress v. PalWeb Corporation f/k/a Cabec Energy Corporation, Cause No.
01-08731, filed in the 192nd Judicial District, District Court of Dallas County,
Texas on October 8, 2001.

           Roger Landress has asserted that he is due certain payments and stock
options from PalWeb, valued in excess of $1,000,000, in connection with an
employment agreement that was allegedly entered into between Mr. Landress and
PalWeb on September 1, 1996, at a time when PalWeb's name was Cabec Energy
Corporation. PalWeb disputes the allegations contained in Mr. Landress's
petition, has asserted affirmative defenses, and plans to vigorously defend the
lawsuit. The Company believes that Mr. Landress terminated his employment prior
to November 1998, when the Company's oil and gas activities were spun off to the
Union Group. The Union Group indemnified the Company for all liabilities
associated with the prior oil and gas activities and may be responsible for
indemnifying the Company from these claims. As of November 30, 2001, this
lawsuit was in the early stages of discovery.

ITEM 5.  OTHER INFORMATION

PACECO FINANCIAL SERVICES, INC.
-------------------------------

           As has been previously reported in various filing with the Securities
and Exchange Commission, PalWeb entered into a negotiated arrangement with the
Oklahoma Department of Securities in late 2000 whereby a plan (the "Plan") was
devised for redeeming depositors' passbook savings accounts and time
certificates (collectively referred to herein as "Deposits") of PFS. In general,
the Plan provided a method for redeeming the outstanding Deposits through the
transfer of 43,500,000 shares of PalWeb common stock owned by PFS ("PFS Shares")
to an independent trustee and the sale of the PFS Shares by the trustee on or
before December 31, 2004 either through open market or private sales or by
exercise of an option to put the shares to Paul A. Kruger, the Company's Chief
Executive Officer, with the net sales proceeds being used to redeem the
Deposits. Pursuant to that certain put agreement (the "Put Agreement") by and
between Paul Kruger, Bill J. English, as Trustee (the "Trustee"), and PFS dated
December 20, 2000, the percentage of PFS shares to be purchased by Mr. Kruger
shall be the difference between the amount payable to Deposit

                                       18
<PAGE>

holders each year (20% of account balances outstanding on December 1, 2000; 25%
of account balances outstanding on January 1, 2001; 331/3% of account balances
outstanding on January 1, 2002; 50% of account balances outstanding on January
1, 2003; and 100% of account balances outstanding on January 1, 2004, or such
other amount as shall cause the account balances to equal zero at December 31,
2004) and the amount distributed to Deposit holders each year from sources other
than the put, as a percentage of the outstanding account balances.

           In accordance with the Put Agreement and the Plan, on December 20,
2001, PFS made a payment of $357,000 to the Trustee and Paul A. Kruger purchased
8,850,000 shares of the PFS shares from the Trustee for $1,000,000 in order to
redeem 331/3% of account balances outstanding as of January 1, 2002. This is the
first time that any PFS Shares have been put to Mr. Kruger. Accordingly, as of
December 20, 2001, there were 34,650,000 PFS Shares held by the Trustee.

CHANGE IN CONTROL OF PALWEB
---------------------------

           In connection with the Purchase Agreement and the Shareholders
Agreement, as of January 4, 2002, Westgate has the right to designate two-thirds
of the members of the Board of Directors of PalWeb for as long as Westgate holds
at least 5% of the Preferred Stock or Common Stock of PalWeb. In addition, in
connection with the Shareholders Agreement, PalWeb and the Purchasers have
agreed that PalWeb will not take certain actions without the approval of 60% of
the Board of Directors of PalWeb. Westgate's voting and other rights in
connection with the Purchase Agreement and Shareholders Agreement constitute a
change in control of PalWeb. For more information on the Shareholders Agreement
and the transaction resulting in this change in control, see "Liquidity and
Capital Resources" in Part I, Item 2 of this Form 10-QSB.

           Westgate is a private Oklahoma limited partnership, whose general
partner is WCC, a private limited liability company whose managers are Warren F.
Kruger and William W. Pritchard. By virtue of their authority to control
Westgate, WCC, Warren F. Kruger and William W. Pritchard may be deemed to be in
control of PalWeb.

           Based on the number of common shares of PalWeb outstanding as of
January 4, 2002, Paul A. Kruger, or his affiliated entities, beneficially own
26.1% of the common shares of PalWeb. At the same date, Warren F. Kruger and his
affiliated entities beneficially owned 2.3% of the common shares of PalWeb. Upon
the amendment to the capital structure described in "Liquidity and Capital
Resources" in Part I, Item 2 of this Form 10-QSB, Paul A. Kruger and his
affiliated entities will have obtained in connection with the Purchase Agreement
the right to acquire approximately 16.7% of the fully-diluted outstanding common
shares of PalWeb. Likewise, Westgate, WCC, Warren F. Kruger and William W.
Pritchard will have the right to obtain or acquire 49.4% of the fully-diluted
outstanding common shares of PalWeb. Consequently, based on the number of common
shares of PalWeb outstanding as of January 4, 2002 and assuming that all the
Warrants will be exercised and all the shares of Preferred Stock will be
converted, Paul A. Kruger and Warren F. Kruger, or their affiliated entities,
will beneficially own 25.5% and 50.2% of the common shares of PalWeb,
respectively.

                                       19
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         A.  Exhibits

               4.1      Certificate of Designation, Preferences, Rights and
                        Limitations of PalWeb Corporation Series 2001 12%
                        Cumulative Convertible Senior Preferred Stock

               10.1     Pallet Production, Inc. Loan Agreement by and between
                        Plastic Pallet Production, Inc. and The F&M Bank and
                        Trust Company dated December 11, 2001

               10.2     Security Agreement by and between Plastic Pallet
                        Production, Inc. and The F&M Bank and Trust Company
                        dated December 11, 2001

               10.3     Plastic Pallet Production, Inc. Revolving Note in the
                        amount of $3,000,000 dated December 11, 2001

               10.4     Paul Kruger Guaranty dated December 11, 2001

               10.5     Pledge Assignment and Security Agreement by and between
                        Paul A. Kruger and The F&M Bank and Trust Company dated
                        December 11, 2001

               10.6     Warren Kruger Limited Guaranty dated December 12, 2001

               10.7     Securities Purchase Agreement by and among PalWeb
                        Corporation and certain purchasers dated January 4, 2002

               10.8     Shareholders and Voting Agreement by and among PalWeb
                        Corporation and certain shareholders dated January 4,
                        2002

               10.9     Form of Common Stock Purchase Warrant used in connection
                        with Securities Purchase Agreement by and among PalWeb
                        Corporation and certain purchasers dated January 4, 2002

               11.1     Computation of Loss per Share is in Note 5 in the Notes
                        to the financial statements

           B.  Reports on Form 8-K

               No reports on Form 8-K were filed by PalWeb Corporation during
 the three months ended November 30, 2001.

                                       20
<PAGE>

           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        01/14/02                       /s/ Paul A. Kruger
           --------------------            -------------------------------------
                                           Paul A. Kruger
                                           Chairman of the Board and President























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