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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to ___________
000-30051
-------------------
(Commission File No.)
PAVING STONE CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 88-043120
- -------------------------- -------------------------------------
(State of Incorporation) (I.R.S. EmployerIdentification No.)
1760 N.W. 22nd Court, Pompano Beach, FL 33069
----------------------------------------------
(Address of principal executive offices)
(954) 971-3235
---------------------------
(Registrant's telephone number)
Cottage Investments, Inc.
---------------------------
(Registrant's Former Name)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act). Yes No X
At November 14, 2002, 25,746,682 shares of the Registrant's common stock were
issued and outstanding.
Throughout this Report, the terms "we", "us", "our" and other similar pronouns
refer to the Paving Stone Corporation. The terms "PVNG", the "Company," or
"Registrant" also refer to the Paving Stone Corporation.
See accompanying notes to consolidated financial statements.
PART I: FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
PAVING STONE CORPORATION AND SUBSIDIARIES
CONTENTS
--------
PAGE 1 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2002 (UNAUDITED)
AND DECEMBER 31, 2001
PAGE 2 STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2002 (CONSOLIDATED) AND 2001
(COMBINED) (UNAUDITED)
PAGE 3 STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2002 (CONSOLIDATED) AND 2001 (COMBINED) (UNAUDITED)
PAGES 4 - 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 2002
1
PAVING STONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
September 30,
2002 December 31,
(Unaudited) 2001
------------ ----------
CURRENT ASSETS
Cash $ - $ 35,439
Accounts receivable - net of allowances 4,435,713 5,568,321
Inventories 37,065 37,065
Prepaid expenses 39,493 83,945
Rebate receivable - 330,438
Other receivables 13,800 -
Exchanges 19,276 -
Advance to related party 110,419 18,736
Costs in excess of billings on uncompleted contracts 818,626 504,536
------------ ------------
Total Current Assets 5,474,392 6,578,480
------------ ------------
PROPERTY AND EQUIPMENT - NET 311,216 306,040
------------ ------------
OTHER ASSETS
Security deposits and other assets - net of amortization 40,878 39,553
Other loans / advances receivable 22,972 16,317
------------ ------------
Total Other Assets 63,850 55,870
------------ ------------
TOTAL ASSETS $ 5,849,458 $ 6,940,390
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
CURRENT LIABILITIES
Cash overdraft $ 205,987 $ 326,936
Accounts payable and accrued expenses 4,227,949 3,527,040
Customer deposits payable - 83,641
Billings in excess of cost on uncompleted contracts 230,058 178,976
Note and capital lease obligation payable - current portion 246,301 33,111
Notes payable - stockholder 80,996 395,693
Lines of credit 2,506,362 2,240,271
------------ ------------
Total Current Liabilities 7,497,653 6,785,668
------------ ------------
LONG TERM LIABILITIES
Note and capital lease obligation payable 62,086 76,001
Notes payable - stockholder 67,249 64,353
Total Long-Term Liabilities 129,335 140,354
------------ ------------
TOTAL LIABILITIES 7,626,988 6,926,022
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.00001 par value, 150,000,000 shares authorized,
24,346,682 and 2,260,083 shares issued and outstanding 243 23
Common stock to be issued, 1,520,000 and 19,742,099 shares 15 197
Additional paid-in capital 5,739,110 5,242,603
Accumulated deficit (7,516,898) (5,228,455)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (1,777,530) 14,368
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 5,849,458 $ 6,940,390
============ ============
See accompanying notes to consolidated financial
2
PAVING STONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
(Consolidated) (Combined) (Consolidated) (Combined)
--------------- ------------ --------------- ------------
NET SALES $ 8,643,684 $ 7,521,227 $ 24,494,143 $22,635,810
COST OF SALES 7,633,808 6,133,202 19,633,877 18,433,420
--------------- ------------- --------------- ------------
GROSS PROFIT 1,009,876 1,388,025 4,860,266 4,202,390
--------------- ------------- --------------- ------------
OPERATING EXPENSES
Selling, general and administrative 2,758,114 1,463,538 7,504,763 4,571,664
Common stock issued for services 7,245 - 112,245 -
Common stock issued in settlement - - (615,700) -
--------------- ------------- --------------- ------------
Total Operating Expenses 2,765,359 1,463,538 7,001,308 4,571,664
--------------- ------------- --------------- ------------
LOSS FROM OPERATIONS (1,755,483) (75,513) (2,141,042) (369,274)
--------------- ------------- --------------- ------------
OTHER EXPENSES
Interest expense 55,424 40,284 146,296 115,122
Other expense - 4,042 1,104 7,383
--------------- ------------- --------------- ------------
Total Other Expense 55,424 44,326 147,400 122,505
--------------- ------------- --------------- ------------
NET LOSS $ (1,810,907) $ (119,839) $ (2,288,442) $ (491,779)
- ---------
=============== ============= =============== ==============
Net loss per share - basic and diluted
$ (.07) $ (.01) $ (.09) $ (.03)
=============== ============= =============== ==============
Weighted average shares outstanding
during the period - basic and diluted 25,861,374 16,040,000 24,069,532 16,040,000
=============== ============= =============== ==============
See accompanying notes to consolidated financial statements.
3
PAVING STONE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
------------------------
For the Nine Months Ended For the Nine Months Ended
September 30, 2002 September 30, 2001
(Consolidated) (Combined)
--------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,288,443) $ (491,779)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for services 112,245 -
Stock returned in settlement (615,700) -
Depreciation and amortization 80,032 57,587
Provision for doubtful accounts 643 66,128
Loss on disposal of equipment 1,104 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 1,131,965 (68,263)
Prepaid expense 44,452 6,164
Rebate receivable 330,438 (33,414)
Exchanges (19,276) -
Security deposits and other assets (1,325) (55,883)
Costs in excess of billings on uncompleted contracts (314,090) (584,722)
Other receivables (13,800) -
Increase (decrease) in:
Accounts payable and accrued expenses 700,909 797,608
Cash overdraft (120,949) -
Billings in excess of cost on uncompleted contracts 51,082 218,784
Customer deposits payable (83,641) -
Net Cash Used In Operating Activities (1,004,354) (87,790)
--------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on disposal of equipment 37,828 -
Purchase of property and equipment (54,871) (79,799)
Other loans / advances receivable (6,655) -
--------------- ---------------------
Net Cash Used In Investing Activities (23,698) (79,799)
--------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock issued for cash 1,000,000 -
Proceeds from subscription receivable - (863)
Advances from related parties (91,683) 43,143
Advances to related parties - (490)
Payments on notes and capital leases (69,994) (6,939)
Proceeds from lines of credit 266,091 380,211
Proceeds from note payable 200,000 -
Distributions to stockholders - (234,602)
Shareholder loan payable (311,801) -
--------------- ---------------------
Net Cash Provided By Financing Activities 992,613 180,460
--------------- ---------------------
NET INCREASE (DECREASE) IN CASH (35,439) 12,871
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 35,439 42,698
CASH AND CASH EQUIVALENTS - END OF PERIOD $ - $ 55,569
- -------------------------------------------
=============== ======================
SUPPLEMENTAL DISCLOSURE CASH FLOW INFORMATION:
- ----------------------------------------------
Cash paid for interest $ 95,673 $ 116,306
=============== ======================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
- --------------------------------------------
See accompanying notes to consolidated financial statements.
4
NOTE 1 BASIS OF PRESENTATION
- -------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted
in The United States of America and the rules and regulations of the
Securities and Exchange Commission for interim financial information.
Accordingly, they do not include all the information necessary for a
comprehensive presentation of financial position and results of
operations.
It is management's opinion, however, that all material adjustments
(consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statement presentation. The results for
the interim period are not necessarily indicative of the results to be
expected for the year.
For further information, refer to the financial statements and
footnotes for the year ended December 31, 2001 included in the
Company's Form 10-KSB.
NOTE 2 PRINCIPLES OF CONSOLIDATION
- ------- -----------------------------
The accompanying consolidated financial statements include the
accounts of Paving Stone Corporation and its wholly owned
subsidiaries. All significant inter-company transactions and balances
have been eliminated in consolidation.
NOTE 3 PRINCIPLES OF COMBINATION
- ------- ---------------------------
The 2001 financial statements are presented on a combined basis, which
represents The Paving Stone Company, Inc. and its affiliates, which
include Paving Stone Company of Atlanta, Inc., The Paving Stone
Company of Arizona, Inc., Paving Stone of Nevada, Inc., and The Paving
Stone Company of California, Inc., all of which were owned by one
stockholder. Significant intercompany balances and transactions were
eliminated in the combination.
NOTE 4 INVENTORIES
- ------- -----------
Inventories consist of brick pavers and installation supplies.
Inventories are stated at the lower of cost or market value, as
determined using the first in, first out method.
NOTE 5 SEGMENT REPORTING
- ------- ------------------
The Company has six geographic reportable segments: Florida, Arizona,
Atlanta, Nevada, California and Corporate. Each segment installs
interlocking pavers on driveways and patios for residential and
commercial use. The accounting policies of the segments are the same
as described in the summary of significant accounting policies. The
Company evaluates segment performance based on income from operations.
Sales for each segment are based on the location of the third-party
customer. All intercompany transactions between segments have been
eliminated. The Company's selling, general and administrative expenses
and engineering expenses are charged to each segment based on the
region where the expenses are incurred. As a result, the components of
operating income for one segment may not be comparable to another
segment. Segment results for 2002 and 2001 are as follows:
5
Arizona Georgia/
Florida Texas Mid-Atlantic Nevada California Corporate Total
------------ ----------- ------------- ----------- ------------ ---------- ------------
2002
Net sales $13,265,040 $3,956,170 $ 2,538,728 $1,375,530 $ 2,767,677 $ 590,998 $24,494,143
Income (loss) from operations (1,120,862) 122,194 (97,142) (115,296) (1,115,020) 185,084 (2,141,042)
Depreciation and amortization 64,310 2,552 8,790 1,402 2,978 - 80,032
Assets 3,239,378 960,075 664,739 423,910 322,042 239,314 5,849,458
Capital expenditures 22,372 6,213 42,377 - 37,103 16,075 124,140
2001
------------ ----------- ------------- ----------- ------------ ---------- ------------
Net sales $17,235,007 $1,935,281 $ 2,052,894 $ 695,771 $ 716,857 $ - $22,635,810
Income (loss) from operations (49,740) (26,008) 12,331 (40,696) (265,161) - (369,274)
Depreciation and amortization 49,971 1,659 5,022 935 - - 57,587
Assets 5,274,550 389,020 805,000 251,925 219,895 - 6,940,390
Capital expenditures 62,247 6,666 4,736 - 6,150 - 79,799
------------ ----------- ------------- ----------- ------------ ---------- ------------
NOTE 6 STOCK ISSUANCES
- ------- ----------------
On July 15, 2002, the Company issued 35,000 shares of common stock to
its employees, as consideration for services rendered to the Company.
During September 2002, 500 of these shares were cancelled due to
termination of employment. The shares were valued for financial
accounting purposes at $.21 per share, the fair value at the date of
grant, resulting in net employee benefits expense of $7,245. The
shares were issued to all employees who were employed on or before
December 15, 2001.
NOTE 7 NOTE PAYABLE - RELATED PARTIES
- ------- ----------------------------------
During the three months ended September 30, 2002, the Company entered
into a note payable with a member of the Company's board of directors
of $200,000, secured by the Company's assets and common stock due
November 4, 2002 (See Note 10).
NOTE 8 COMMITMENTS AND CONTINGENCIES
- ------- -------------------------------
The Company is currently in a contractual dispute over agreements to
issue 1,175,119 shares of common stock to former consultants. An
injunction has been filed with the courts to stop the transfer of
395,819 previously issued shares and the remaining 779,300 shares have
not been issued, pending a resolution of this dispute.
NOTE 9 RELATED PARTIES
- ------- ----------------
During the nine months ended September 30, 2002, the Company paid
stockholder loans and advances of $311,801 and $91,683, respectively.
See Notes 7 and 10 regarding a note payable to a related party.
6
NOTE 10 SUBSEQUENT EVENT
- -------- -----------------
During November 2002, the Company entered into a note payable with a
member of the Company's board of directors for an additional $500,000
and refinanced $200,000 of outstanding notes payable. The note accrues
interest at 10% and is secured by the Company's assets and common
stock. The note is due January 31, 2004 (See Note 7).
The Company entered into an investment agreement with a private equity
fund to purchase up to $15,000,000 in common stock over a period of 30
months, beginning after an applicable registration statement becomes
effective. The agreement calls for the stock to be sold at the
discretion of the Company. As of the date of this report, the Company
has not filed a registration statement and no shares have been sold.
In consideration for the institutional investor entering into the
agreement with the Company, the Company issued 1,000,000 shares of its
common stock to such investor.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The following discussion should be read in conjunction with the unaudited
consolidated condensed financial statements and notes thereto included under
Item 1 above. In addition, reference should be made to the Company's audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's most recent Annual Report on Form 10-K.
During the third quarter of 2002, in spite of an unusually high amount of
rain at the beginning of the quarter, we posted a 14.9% increase in net sales
over the third quarter of 2001. In addition, we increased our year-to-date gross
margins up to 19.8% from 18.6% and increased net sales 8.2% over the same period
of 2001. We continue to shift our business away from the high volume and low
margin work (located primarily in Florida), which characterized our company in
prior years. As a result of our expansion into new markets around the country
over the last two years, and our shift towards remodeling work, we are
continuing our deliberate transition into higher priced and more profitable
business with better cash flow.
The third quarter also marked the roll out of our at-home installation
services into 146 Home Depot stores in Florida, Massachusetts, Rhode Island, New
Hampshire and Northern Nevada. We are pleased with the success in new sales
volume and higher gross margins, and expect this program to continue to expand
aggressively and have a positive impact on sales and profit margins in the 4th
quarter and throughout 2003.
Although the worsening economy has not had an impact in our gross margins
or net sales, it has increased our difficulty in collecting certain aged
receivables in our commercial/new construction business divisions. During the
third quarter, we made the decision to increase our accounts receivable reserves
and adjustments and will continue to review our reserves in the fourth quarter.
This resulted in a large charge to net income.
Lastly, during the third quarter, we closed on a $200,000 note payable
financing with a private investor and have received a commitment for an
additional $500,000 from this investor which should be paid later this month.
These amounts are expected to convert to equity financing before year-end. In
addition, on November 4, 2002, we received a $15 million stock purchase
commitment from an institutional investor over a 30-month period. We anticipate
funding will begin in early 2003.
FINANCIAL CONDITION
Total assets as of September 30, 2002 were $5,849,458, a decrease of
$1,090,932 or 15.7%, from total assets of $6,940,390 at December 31, 2001. The
decrease was primarily attributable to a reduction in accounts receivable of
$1,132,608. This decrease was partially a result of increased reserves as
described above totaling $618,601 plus normal seasonal fluctuations.
Current liabilities increased by $711,985, or 10.5%, from $6,785,668 at
December 31, 2001 to $7,497,653 at September 30, 2002. The increase is primarily
attributable to an increase in accounts payable and accrued expenses of
$579,960, brought about by the continued growth of our offices outside of
Florida plus our entry into Home Depot installation services.
Stockholders' equity decreased from $14,368 at December 31, 2001 to a deficit of
$1,777,530 at September 30, 2002, a decrease of $1,791,898. The decrease is
primarily attributable to an increase in paid in capital of $496,507 offset by a
year-to-date net operating loss of $2,288,442.
8
RESULTS OF OPERATIONS
Net sales increased by $1,122,457, or 14.9%, and $1,858,333, or 8.2%, for
the three-month and nine-month periods ended September 30, 2002, respectively,
as compared to the same periods in the prior year. The increases were primarily
due to the continued growth of our offices outside of Florida plus our initial
entry into Home Depot installation services.
Cost of goods sold increased $1,500,606, or 24.5%, and $1,200,457 or 6.5%,
for the three-month and nine-month periods ended September 30, 2002,
respectively, as compared to the same periods in the prior year. The increases
were a result of the increases in sales over the prior year, as described above.
The unusually high increase in the third quarter of 2002 was a result of higher
than expected costs on certain completed jobs.
Selling, general and administrative expenses increased by $1,294,576, or
88.4%, and $2,933,099 or 64.2%, for the three-month and nine-month periods ended
September 30, 2002, respectively, as compared to the same periods in the prior
year. The increases are primarily attributable to the continued growth of the
offices outside of Florida plus the entry into Home Depot installation services.
We incurred a net loss of $1,810,907 for the three-month period ended
September 30, 2002 as compared to a net loss of $119,839 for the three-month
period ended September 30, 2001. The increase in net loss of $1,691,068 was
partially the result of adjustments to accounts receivable during the quarter
totaling $657,656. The remainder of the increase in net loss was due to the
entry into Home Depot installation services and the continued growth of certain
new expansion offices outside of Florida. We incurred a net loss of $2,288,442
for the nine-month period ended September 30, 2002 as compared to a net loss of
$491,779 for the same period in the prior year. The increase in net loss of
$1,796,663 was primarily the result of the accounts receivable adjustments
described above, the entry into Home Depot installation services and the
continued growth of certain new expansion offices outside of Florida.
LIQUIDITY AND CAPITAL RESOURCES
During the nine-month period ended September 30, 2002, operating activities
consumed $1,004,354 of cash as compared to $87,790 for the same period in the
prior year. The increase in cash consumed was primarily due to our entry into
Home Depot installation services plus the continued growth of certain new
expansion offices outside of Florida. In addition, cash inflows decreased over
2001 in our southernmost Florida operation as a result of new construction
declines caused by full saturation of the new construction market. The primary
sources of funding, during the nine-month period ended September 30, 2002, came
from an equity financing with a private investor totaling $1,000,000 in gross
proceeds, note payable financing of $200,000 and an increase in our line of
credit of $250,000, bringing the total credit facility up to $2,500,000.
On November 4, 2002, we received a commitment from an institutional
investor to purchase up to $15,000,000 of common stock over a 30-month period
beginning after an applicable registration statement becomes effective. We
anticipate this to occur in early 2003.
On November 13, 2002, we received a commitment for an additional $500,000 of
note payable financing from a private investor, with funding anticipated within
a month. We continue to monitor our cash situation and will pursue additional
equity funding as needed until we can access the funds from the institutional
investor described above.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Words such as "anticipates", "believes", "forecasts", "plans", "hopes",
9
"predicts", "prognosticates", and the like are meant to indicate that such
statements are forward-looking and not historical in nature, and such statements
contain inherent risks and uncertainties which render them capable of not being
achieved. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which could cause the actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. Such future results are based upon
management's best estimates based upon current conditions and the most recent
results of operations. Such factors include, among others:
* If financing does not become available on favorable terms, then the
Company will not have adequate funds to fulfill its long-term strategic plans.
* The Company may not be able to manage its expansion growth plan.
* The Company may not be able to manage its expanding operations
effectively.
* The Company does not maintain key man life insurance on its principal
employees.
* The Company may not be able to attract, motivate and retain skilled
employees to install pavers, or to engage sufficient outside contractors to meet
the Company's planned expansion needs.
* The Company is dependent upon several key customers and the loss of any of
these key customers could cause a material, negative effect on its financial
condition.
* The Company requires a high volume of quality products that are procured
from, and assembled by, third party suppliers and reliance on suppliers, as well
as industry supply conditions generally, involves several risks, including the
possibility of defective product, shortage of product, increases in costs and
reduced control over delivery schedules, any or all of which could adversely
affect the Company's financial results.
* The Company may not be able to collect accounts receivable or may retain
inadequate reserves for bad debt.
* There can be no assurance that shareholders of the Company will not be
negatively affected by the concentration of ownership of its Common Shares by
the management and directors of the Company.
* The Company faces the risk of default of debt obligations and negative
impacts of restrictive covenants.
* The Company has not and may not pay dividends to shareholders in the
foreseeable future.
* The Company could face claims of product liability, personal injury or
other legal claims.
* Competition may become more intense as a result of the introduction of new
competitors, consolidation, price discounting, and possibly weakening
demand.
* New laws and regulations could negatively impact the paver installation
industry, causing increased costs and decreased revenue earning
opportunities.
* Sales of the Company's common stock in the public market could impair the
market price of our common stock and also impair the ability to
complete successful financing efforts.
10
* The Company may not be able to maintain its listing on the
Over-the-Counter Bulletin Board if it does not continue to meet the
Criteria necessary to maintain such listing.
* The Company must comply with penny stock regulations which may render the
sale of shares of common stock by a stockholder more difficult.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the filing date of this Quarterly Report, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in ensuring that information required to be disclosed
in the reports the Company files and submits under the Exchange Act are
recorded, processed, summarized and reported as and when required.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect such internal controls subsequent
to the date of the evaluation described in the paragraph above, including any
corrective actions with regard to significant deficiencies and material
weaknesses
PART II: OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
The Company knows of no material legal proceedings at this time.
Periodically, the Company becomes party to legal claims that arise in the
ordinary course of business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On July 15, 2002, the company issued 35,000 shares of common stock to all
employees who were employed on or before December 15, 2001, as consideration for
services rendered to the company. During September 2002, 500 of these shares of
common stock were cancelled due to termination of employment. The shares were
valued at $.21 per share, the fair value at the time of grant. The Company
believes that the issuance of the shares was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
11
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
--------
10.1 Common Stock Purchase Agreement dated November 4, 2002 between the
Company and Fusion Capital Fund II, LLC1
10.2 Promissory Note dated November 13, 2002 between the Company and Jack
Hight*
99.1 (CEO) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 (CFO) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
_________________
1. Filed as exhibit to the Company's Form 8-K filed with the SEC on November 8,
2002.
* Filed herewith.
(b) Reports on Form 8-K. The Company did not file any reports on Form
8-K during the fiscal quarter. On November 8, 2002 the Company filed a report
on Form 8-K announcing the signing of a Common Stock Purchase Agreement with
Fusion Capital Fund II, LLC. The signed Common Stock Purchase Agreement and the
form of Registration Rights Agreement were filed as exhibits to the Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PAVING STONE CORPORATION
By: /s/ Jace Simmons
--------------------
Jace Simmons, Executive Vice President-Finance,
Chief Financial Officer and Director
(Duly Authorized Officer and Principal Financial Officer)
Dated: November 14, 2002
12
CERTIFICATION
I, Maurice F. Sigouin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Paving Stone
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 we 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 function):
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
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.
/s/ Maurice F. Sigouin
------------------------------
Maurice F. Sigouin
Date:November 14, 2002 Chief Executive Officer
13
CERTIFICATION
I, Jace Simmons, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Paving Stone
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 we 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 function):
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
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.
/s/ Jace Simmons
-------------------------
Jace Simmons
Date:November 14, 2002 Executive Vice President Finance
and Chief Financial Officer
14
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of the Paving Stone
Corporation (the "Company") for the period ended September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Form
10-Q"), I, Maurice F. Sigouin, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Form 10-Q fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Maurice F. Sigouin
--------------------------
Maurice F. Sigouin
Chief Executive Officer
November 14, 2002
15
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of the Paving Stone
Corporation (the "Company") for the period ended September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Form
10-Q"), I, Jace Simmons, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Form 10-Q fully complies with the requirements of Section 13(a) or
15(d) the Securities Exchange Act of 1934; and
(2) The information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Jace Simmons
-------------------
Jace Simmons
Chief Financial Officer
November 14, 2002