UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 13, 2003 (April 25, 2003)
PACEL Corp.
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(Exact name of registrant as specified in its charter)
Virginia 000-31935 54-171-2558
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
7900 Sudley Road, Suite 619
Manassas, Virginia 20109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 257-4759
N/A
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(Former name or former address, if changes since last report)
Copy of Communications to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Phone: (561) 832-5696
Fax: (561) 659-5371
ITEM 1. ASSET PURCHASE AGREEMENT.
On April 28, 2003, The Resourcing Solutions Group, Inc. ("TRGS"), a Nevada
corporation and wholly-owned subsidiary of PACEL Corp. ("Buyer"), a Virginia
corporation, and Asmara, Inc., a North Carolina corporation (Seller") entered
into an Asset Purchase Agreement ("Agreement") for the consideration and on the
terms set forth in the Agreement. Closure of the Agreement was concurrent with
the execution of the agreement, at which time assets of the company were
conveyed by the Seller to TRSG as described below.
Sale and Transfer of Assets.
ASSETS TO BE SOLD. Upon the terms and subject to the conditions set forth in
this Agreement, at the Closing, Seller shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and
clear of any encumbrances other than any permitted herein, all of Seller's
right, title and interest in and to all of Seller's property and assets, real,
personal or mixed, tangible and intangible, of every kind and description,
wherever located, including the following (the "Assets"):
(a) all tangible personal property, as listed in Exhibit "A" (the "Tangible
Personal Property");
(b) all cash on deposit, cash equivalents and short-term investments on
hand prior to consummation of this transaction, including those amounts
received from a business for which Seller has agreed to provide PEO
services ("Clients") in connection with the performance by Clients of
obligations under their PEO Contracts with Seller and for which Seller has
a corresponding obligation that constitutes an Assumed Liability and all
funds on deposit or in restricted accounts for the purpose of securing
insurance coverage.
(c) all accounts receivable, as listed in Exhibit "B" (the "Accounts
Receivable");
(d) all contracts with customers and suppliers, as listed in Exhibit "C",
which includes all outstanding offers or solicitations made by or to Seller
to enter into any contract (the "Contracts");
(e) all Governmental Authorizations and all pending applications therefor
or renewals thereof, as listed in Exhibit "D" (the "Governmental
Authorizations");
(f) all insurance programs being offered by Seller to its PEO (Professional
Employer Organization) customers, as listed in Exhibit "E" (the "Insurance
Programs");
(g) all interest in and securities owned of all subsidiary operations and
corporations as listed in Exhibit "F";
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(h) all claims for refund of taxes and other governmental charges of
whatever nature; and
(i) all data and records related to the operations of Seller, including
client and customer lists and records, referral sources, market research
reports, financial and accounting records, advertising materials,
promotional materials, correspondence and other similar documents and
records, which shall be preserved by Buyer as provided in Paragraph 10.8,
below;
(j) all of the intangible rights and property of Seller, including
intellectual property assets, telephone, telecopy and e-mail addresses and
listings;
(k) all claims of Seller against third parties relating to the Assets; and
(l) all rights of Seller relating to deposits and prepaid expenses, claims
for refunds and rights to offset in respect thereof.
The transfer of the Assets pursuant to this Agreement shall not include the
assumption of any liability related to the Assets unless Buyer expressly
assumes that liability herein.
1.2 EXCLUDED ASSETS: Notwithstanding anything to the contrary contained in
Section 1.1 or elsewhere in this Agreement, the following assets of Seller
(collectively, the "Excluded Assets") are not part of the sale and purchase
contemplated hereunder, are excluded from the Assets and shall remain the
property of Seller after the Closing:
(a) all minute books, stock Records and corporate seals;
(b) the shares of capital stock of Seller held in treasury;
(c) all affiliated company receivables from other organizations and
corporations owned by the sole shareholder of the Seller.
(d) all personnel records and other records that Seller is required by law
to retain in its possession, in which case, copies will be made at Buyer's
request and at Buyer's expense; and
(e) all rights of Seller under this Agreement, the Bill of Sale and the
Assignment and Assumption Agreement.
1.3 CONSIDERATION: The consideration for the Assets (the "Purchase Price") will
be $1,965,000 in the assumption of certain liabilities as specified in Section
1.4(a), following (the Assumed Liabilities). At the Closing, the Purchase Price
shall be delivered by Buyer to Seller as follows:
(a) five thousand dollars ($5,000.00) by cash or company check; and
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(b) the assumption of the Assumed Liabilities through the execution and
delivery of the Assignment and Assumption Agreement.
Thereafter, the Buyer shall cause the following options to be delivered annually
to W. Revel Bellamy:
(c) Options on 500,000 shares of the common stock of the Buyer, at a strike
price of $0.03 per share, should Asmara achieve an average EBITDA of
greater than one percent (1%) and less than two percent (2%) of sales
during the 24 months following the closing.
(d) Options on 1,000,000 shares of the common stock of the Buyer, at a
strike price of $0.03 per share, should Asmara achieve an average EBITDA of
greater than two percent (2%) of sales or greater over the 24 months
following the closing.
The Asset Purchase Agreement is filed herewith as Exhibit 1.0, and are
incorporated herein by reference. The foregoing descriptions are qualified in
their entirety by reference to the full text of such agreements.
In addition, concurrent with the execution of the Asset Purchase Agreement, TRSG
and W. Revel Bellamy, the sole shareholder of Asmara, Inc. entered into a Stock
Purchase Agreement ("Agreement") for 100% of the outstanding stock of Woodstock
Lumber Sales, Inc., an Oklahoma corporation, owned by Mr. Bellamy but utilized
in the PEO business along with Asmara for operations in South Carolina,
Tennessee and Oklahoma., for the consideration and on the terms set forth in the
Agreement. Closure of the Agreement was concurrent with the execution of the
agreement, at which time stock of the company was conveyed by the Seller to TRSG
as described below.
Sale and Purchase of Shares.
Subject, of course, to the terms and conditions of this Agreement,
(a) Seller hereby agrees to sell to the Buyer that number of Shares set
forth on Exhibit 2.1 opposite his name, free and clear of all Liens, and
(b) the Buyer hereby agrees to purchase all such Shares.
The Purchase Price; Adjustment to the Purchase Price.
(a) The price (the "Base Purchase Price") for the Shares shall be the
$35,000.00 of debt being assumed.
(b) Accordingly, at Closing, the Buyer shall pay to the Seller the sum of
$1,000.00 with a Cashier's Check or by a Wire Transfer (the "Down payment")
and the Seller shall deliver (a) Certificate(s) representing all of the
Shares to the Buyer; provided, however, that if the Seller has not duly
completed all the Exhibits or Schedules which are a part of this Agreement,
the Down payment shall be held in the Escrow Account by the Escrow Agent
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until they are duly completed, but the Certificates shall, nevertheless, be
delivered to the Buyer and further provided that all of the shares to be
delivered by Seller shall be delivered to the Escrow Agent and held in
escrow until final payment for all of said shares is made pursuant to the
terms hereof.
Notwithstanding anything in subparagraph (b) to the contrary, if Buyer does not
serve written notice to Seller of any alleged failure by Seller to duly complete
all Exhibits or Schedules within thirty (30) days from the date of Closing then
it shall be conclusively presumed for purposes of this Contract that Seller has
duly completed all such Exhibits and Schedules and any funds deposited with
Escrow Agent shall be released to Seller.
The Stock Purchase Agreement is filed herewith as Exhibit 1.1, and are
incorporated herein by reference. The foregoing descriptions are qualified in
their entirety by reference to the full text of such agreements.
EXECUTIVE SUMMARY
The Company is engaged in the Professional Employer Organization (PEO) industry.
Through its PEO business unit, the Company markets to its clients, typically
small to medium-sized businesses with between five and one hundred employees, a
broad range of products and services that provide an outsourced solution for the
clients' human resources ("HR") needs. The Company's products and services will
initially include benefits administration, payroll administration, governmental
compliance, risk management, unemployment administration, and health, welfare
and retirement benefits.,
The Executive Offices of the Company are as follows:
7900 Sudley Road
Suite 619
Manassas, VA 20109
Phone: (703) 257-4759
Facsimile: (703) 361-6706
Shares Outstanding ............. 304,954,516 outstanding
Contact Person: David E. Calkins, CEO and Chairman
DESCRIPTION OF BUSINESS
The Company is a Virginia corporation incorporated on May 3, 1994, and is a
reporting company with the Securities and Exchange Commission. It currently
trades on the OTC Bulletin Board under the trading symbol "PACC".
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Introduction
In 2002, Pacel completed an evaluation of its business model and the potential
success in its existing business initiatives. It was determined that the Company
should, as part of that review, evaluate other potential business markets that
could provide the potential for success. In September 2002, Pacel announced its
intention to enter the Professional Employer Organization ("PEO") industry. In
addition, the Company plans to provide Administrative Service Organization
("ASO") services. The Company will provide human capital management solutions to
small business clients within the United States. Subsequent to December 31,
2002, the Company successfully completed the acquisition of two PEO
organizations and one ASO organization and is evaluating additional
opportunities with the potential for organic growth in order to secure its
position as an industry leader. The Company sees this initiative in these
industries as an opportunity to tap into the lucrative small business market in
the United States and intends to compliment its activities with information
technology services, business consulting and financial services at a future
time. The focus of the Company in 2003 and early 2004 will be on its PEO/ASO
business unit, integrating is completed and planned acquisitions, developing
leading vendor relationships and establishing itself as an industry leader.
Through its PEO/ASO business unit, the Company will market to its clients,
typically small to medium-sized businesses with between five and one hundred
employees, a broad range of products and services that provide an outsourced
solution for the clients' human resources ("HR") needs. The Company's products
and services will initially include benefits administration, payroll
administration, governmental compliance, risk management, unemployment
administration, and health, welfare and retirement benefits. The Company is
currently working to establish the necessary national vendor relationships in
order to effectively and competitively provide such services to a broad range of
clients.
By allowing the management of these small to medium size business clients to
focus on the "business of business" rather than complicated and time consuming
administrative tasks, the Company, in delivering its services, should be well
positioned to improve the efficiency of its clients' businesses and enhancing
their ability to be profitable in their chosen marketplace. Additionally, such
initiatives as improving the ability to attract and retain talent, improving the
planning and management of payroll cash flows and managing employment risks
should enhance the success of the Company's clients.
In addition to the PEO/ASO services offered, PACEL's IT Services group engages
in the business of software development and delivery. The Company has programmed
and supplied a number of COTS and custom developed software products to a
variety of clients including local government, major utility companies, NASA,
and numerous small-business clients. Examples of these software products include
the Visual Writer suite for development and implementation of electronic
documents, JDH, a custom developed facilities management software, and
ChildWatch,a family friendly program that allows parents to manage a child's
online computer use.
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The IT Services group is also builds high-quality, computers designed to meet
customer-specific requirements. The category of hardware products include
rack-mounted systems, Ultraserv Platforms, CT-Server Platforms, TFT-LCD and KVM
Subsystems, Single Board Computers (SBC), SBC backplane and fibre channel
components. The engineering team is proficient in various operating systems
including Windows XP, NT, 2000, LINUX, and DOS and are experienced in Internet
connectivity and configuration of network devices.
PEO Opportunity
In 1999 the PEO industry collectively served approximately 3.5 million work site
employees in the United States. The target market for the PEO industry are
companies with less than 100 employees. According to the United States Small
Business Administration (SBA), the nation has over 6 million small businesses,
representing over 99% of all businesses. According to the U.S. Census Bureau,
small businesses are the fastest growing segment of the U.S. employment and
commerce. Small businesses employ nearly one-half of the United States
workforce, generating an estimated annual payroll of $1.4 trillion.
Despite their position in the business market, small businesses and emerging
growth companies face several major obstacles that impede their opportunity for
growth and success. These obstacles include lack of capital, professional
management, and other critical operating infrastructure systems. In many
sectors, dominated by large multinational competitors, smaller businesses find
it difficult to attract financial resources, service providers, and quality
employees. Further challenges to the small business and emerging growth
companies are regulatory and compliance requirements of federal, state, and
local government agencies.
In a PEO relationship, the client transfers certain employment-related risks and
liabilities to the Company and retains other risks and liabilities. In this
context, the client and the Company are each viewed as and become a
"co-employer" of the client's worksite employees. In order to enter into a
co-employer relationship, the Company operates as a Professional Employer
Organization ("PEO").
As a co-employer, employment-related liabilities are contractually allocated
between the Company and the client under a written Professional Services
Agreement. Under the Professional Services Agreement, the Company assumes
responsibility for and manages the risks associated with each client's worksite
employee payroll obligations, including the liability for payment of salaries
and wages (including payroll taxes) to each worksite employee and, at the
client's option, responsibility for providing group health, welfare and
retirement benefits to such individuals. These obligations of the Company are
fixed, whether or not the client makes timely payment of the associated service
fee. In this regard, it is important to understand that, unlike payroll
processing service providers, the Company issues to each of the client's
worksite employees Company payroll checks drawn on the Company bank accounts.
The Company also reports and remits all required employment information and
taxes to the Internal Revenue Service ("IRS") and issues a Federal Form W-2 to
each worksite employee under the appropriate Company FEIN. The Company assumes
the responsibility for compliance with those employment-related governmental
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regulations that can be effectively managed away from the client's worksite. In
many cases, the Company provides the employee workers' compensation insurance
coverage under the Company's insurance policy. The client may elect, or the
workers' compensation carrier may require, to retain its own policy for the
management of this risk. In those cases, the Company remains heavily involved
with safety and risk management to assist the client in controlling risk and
potentially reducing the costs of such coverage. The client contractually
retains the general day-to-day responsibility to direct, control, hire,
terminate and manage each of the client's worksite employees. The worksite
employee services are performed for the exclusive benefit of the client's
business. The client also remains responsible for compliance with those
employment-related governmental regulations that are more closely related to the
day-to-day management of worksite employees.
In an ASO relationship, the client retains all employment-related risks and
liabilities and the Company provides outsourced solutions to meet the
administrative and HR needs of the client.
The Company charges its clients a service fee that is designed to yield a profit
to the Company and to cover the cost of certain employment-related taxes,
workers' compensation insurance coverage and administrative and field services
provided by the Company to the client. The component of the service fee related
to administration varies according to the size of the client, the amount and
frequency of the payroll payments, whether a PEO or an ASO client and the method
of delivery of such payments. In a PEO relationship, the component of the
service fee related to workers' compensation and unemployment insurance is
based, in part, on the client's historical claims experience. In addition, the
client may choose to offer certain health, welfare and retirement benefits to
its worksite employees. In addition to the service fee and cost of selected
benefit plans, billings to each client also include the wages and other
employment related taxes of each worksite employee. The gross billings are
invoiced at the time of delivery of each periodic payroll delivered to the
client.
Currently, the Company provides workers' compensation insurance coverage for its
worksite employees through a variety of vendor arrangements. It's two acquired
PEO business units have workers' compensation programs in place for the coverage
of their respective worksite employees. The third acquisition is an ASO and,
accordingly, offers no workers' compensation coverage, although it may assist
the client in the management of its existing carrier relationship. The Company
is currently in talks with three carriers in order to secure a national workers'
compensation plan for all of its recent and planned PEO acquisitions. Once such
a program has been developed, the Company will pay the premiums for this
coverage and pass along to its clients some or all of the costs attributable to
the coverage for their respective worksite employees. The Company does not act
as an insurance company. However, as part of a recent acquisition and in an
effort to manage its workers' compensation and benefit programs in 2003, the
Company acquired a wholly owned North Carolina based insurance company. The
Company does assume certain workers' compensation risk as a result of providing
its services.
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The Company has an incentive to minimize its workers' compensation and
unemployment tax costs because the Company bears the risk that its actual costs
will exceed those billed to clients, and conversely, the Company profits on
these components of its service offerings in the event that it effectively
manages such costs.
The Company's purchase of BeneCorp, Asmara and MRG establishes regional
presences in Texas, North Carolina, Florida and California for PACEL and
represents a major step toward realizing the opportunities that have been
identified in the PEO industry.
Directors, Executive Officers, Promoters and Control Persons
(a) Set forth below are the names, ages, positions, with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
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David E. Calkins 59 Chairman, President and CEO
F. Kay Calkins 44 Director
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary to perform their responsibilities as executive officers and/or
directors of the Company.
Family Relationships
David E. Calkins and F. Kay Calkins are husband and wife.
Business Experience
David E. Calkins, President, Chief Executive Officer and Chairman
David E. Calkins founded PACEL in 1994 and is its acting Chairman, President and
Chief Executive Officer. From 1992 until founding PACEL, Mr. Calkins was the
Regional Manager of three divisions of Pacific Nuclear, now known as Vectra
Technologies, Inc., an engineering and information services company and a NASDAQ
Stock Market listed company. Vectra Technologies provides power plant
modifications, maintenance support and nuclear fuel handling to utility
companies and the United States Department of Energy. >From 1987 to 1993, Mr.
Calkins served as Project Manager, Program Director, Vice President-Operations,
and Executive Vice President Business Development for PRC Inc., an information
systems development and Services Company. PRC provides support services to the
Federal government and the utility industry. Mr. Calkins served from 1981 to
1986 as Manager of Engineering and Construction for the Zack Company, a Chicago,
Illinois mechanical contractor to the utility industry. Mr. Calkins was also a
Manager of Quality Engineering, and Startup Engineer for Westinghouse. From 1972
to 1981, Mr. Calkins served as an Executive Engineer and Consultant for NUS
Corporation, a consulting firm for domestic and international utilities, The
United States Nuclear Regulatory Commission and Department of Energy. Mr.
Calkins is the spouse of F. Kay Calkins.
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F. Kay Calkins, Director
F. Kay Calkins is President of EBStor.com, Inc., an Internet and web development
company. In her capacity of president, Ms. Calkins is responsible for oversight
of all operations of the company. Ms. Calkins is experienced in management of
technology companies and has utilized this experience in the start-up and growth
of the company. EBStor offers a wide range of Internet and web services
including design, web site development, database development, ColdFusion
development and hosting.
Prior to her position with EBStor, Ms. Calkins was Vice President/COO of PACEL
Corp. where she oversaw the day-to-day operations of the company and managed the
development and deployment of software systems. Ms. Calkins has 15+ years of
experience in technology-related companies. Before accepting the positions with
PACEL Ms. Calkins was President of CMC Services, a marketing and consulting
Virginia based corporation.
Facilities
The Company leases facilities and maintains its executive offices at 7900 Sudley
Road, Suite 619, Manassas, Virginia 20109. The telephone number for the Company
is (703) 257-4759 and its facsimile number is (703) 361-6706.
Executive Compensation
Annual Annual Annual LT Comp LT All
Comp Comp Comp Rest Comp LTIP Other
Name and Post Year Salary (1) Bonus ($) Other Stock Options Payouts (1)
----------------- ---- ---------- --------- ------ ------- ------- ------- ------
David E. Calkins, 2001 $175,000* 0 0 0 0 0 0
Chairman, 2002 $175,000* 0 0 0 100,000,000**shares 0
President and CEO 2003 $175,000* 0 0 120,000,000*** 0 0 0
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* = salary accumulated on the books but not paid
** = 100,000,000 stock options provided to pay for prior loans, stock options
used to finance co.
*** = 120,000,000 shares paid to Dave and Kay Calkins to repay loan to company
as part of a)3)10) filing.
(1) All other compensation includes certain health and life insurance benefits
paid by the Company on behalf of its employees.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of May 23, 2003 (post-split),
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five percent (5%) of its
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outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the share of Common Stock
beneficially owned.
Name and Address Title Amount and Nature Percent
of of of of
Beneficial Owner Class Beneficial Owner Class
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David & Kay Calkins Common 60,000,000 shares ea. 25%ea.
All Executive Officers and
Directors as a Group Common 120,800,000 50%
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(1) The address for each of the above is c/o Pacel Corp., 7900 Sudley Road,
Suite 619, Manassas, Virginia 20109.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
(1) Financial statements of PACEL Corp., a Virginia corporation, will be filed
by amendment to this Form 8-K not later than sixty (60) days from the day this
report is due.
(b) Pro forma financial information.
(1) Pro forma financial information regarding the Asset Purchase will be filed
by amendment to this Form 8-K not later than sixty (60) days from the day this
report is due.
(c) Exhibits
Exhibit No. Description
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1.0 [1] Asset Purchase Agreement
1.1 [2] Stock Purchase Agreement
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
PACEL Corp.
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(Registrant)
Date: May 29, 2003
By: /s/ David E. Calkins
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David E. Calkins, President, CEO and Chairman
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