SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 18, 2001
PACEL CORP.
(Exact Name of Registrant as Specified in Charter)
Virginia 000-29459 54-1712558
(STATE OR OTHER JURISDICTION (COMMISSION FILE NO.) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
8870 Rixlew Lane
Suite 201
Manassas, Virginia 20109 (703) 257 - 4759
(ADDRESS OF PRINCIPAL (ZIP CODE) (TELEPHONE NUMBER)
EXECUTIVE OFFICES)
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
FINANCIAL STATEMENTS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Advantage Systems Inc.: Audited Balance sheet for the year ended
September 30, 2000; Audited Statements of operations for the
year ended September 30, 2000; Audited Statements of Changes in
Stockholders' Equity for the year ended September 30, 2000;
Audited Statement of cash Flows for the year ended September 30,
2000 and Notes to the Financial Statements.
(b) Pro Forma Financial information
Pacel Corp. and Subsidiaries Unaudited combined Pro Forma
Balance Sheet as of June 30, 2001, unaudited combined Pro Forma
statement of Operations for the six months ended June 30, 2001;
unaudited combined Pro Forma statement of Operations for the
year ended December 31, 2000.
UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS
On September 4, 2001, Pacel Corp. (the "Company") acquired all of the stock
(90,000 shares) of Advantage Systems Inc. a California corporation
(`Advantage"). For $70,000 cash.
The following unaudited pro forma combined financial statements of the Company
presents the unaudited combined balance sheet as of June 30, 2001 and the
unaudited combined statements of operations for the year ended December 31,2000,
and the six months ended June 30, 2001, as if the acquisition of Advantage had
occurred January 1, 2000.
The acquisition will be accounted for as a purchase, with the assets acquired
and the liabilities assumed recorded at fair values, and the results of
Advantage's operations included in the Company's combined financial statements
as of January 1, 2000.
The pro forma adjustments represent, in the opinion of management, all
adjustments necessary to present the Company's pro forma combined financial
position and results of its combined operations in accordance with Article 11 of
SEC Regulation S-X based upon available information and certain assumptions
considered reasonable under the circumstances.
The unaudited pro forma combined financial statements presented herein do not
purport to present what the Company's combined financial position or results of
its combined operations would actually have been had the events leading to the
pro forma adjustments in fact occurred on the date or at the beginning of the
period indicated or to project the Company's combined financial position or
results of its combined operations for any future date or period.
The unaudited pro forma combined financial statements should be read in
conjunction with the audited financial statements of the Company and the notes
thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this Report to be signed on its behalf by the
undersigned herein duly authorized.
Pacel Corp.
Date: December 18, 2001 By; /s/ David Calkins
---------------------------
David Calkins President
ADVANTAGE SYSTEMS INC.
INDEX TO FINANCIAL STATEMENTS
PAGES
-----
AUDITED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS 1
BALANCE SHEET AS OF SEPTEMBER 30, 2000 2
STATEMENT OF OPERATIONS FOR THE YEAR ENDED
SEPTEMBER 30, 2000 3
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUTY
FOR THE YEAR ENDED SEPTEMBER 30, 2000 4
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
SEPTEMBER 30, 2000 5
NOTES TO FINANCIAL STATEMENTS 6-8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors
Advantage Systems Inc..
We have audited the accompanying balance sheet of Advantage Systems
Inc, as of September 30, 2000 and the related statement of operations,
stockholders' equity (deficit), and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Advantage Systems
Inc. as of September 30, 2000, and results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 (K) to the
financial statements, the Company has had losses since inception and requires
additional capital to continue operations. These conditions raise substantial
doubt about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Peter C. Cosmas Co., CPAs
370 Lexington Ave.
New York, NY 10017
December 12 , 2001
-1-
ADVANTAGE SYSTEMS INC.
BALANCE SHEET
SEPTEMBER 30, 2000
Current assets:
Cash $ 12,468
Accounts receivable 73,265
Inventories 17,513
---------
Total Current assets 103,246
Equipment, net of accumulated depreciation
of $8,778 7,222
---------
Total assets $ 110,468
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of Credit $ 57,273
Accounts payable 124,532
Loans payable officers - Stockholders 29,500
Loans to affiliates 194,636
Accrued expenses 12,570
---------
Total current liabilities 418,511
---------
Commitments:
Stockholders' equity (deficit)
Common stock, $.01 par value 10,000,000 shares 900
authorized, 90,000 shares outstanding
Additional paid in capital 201,311
Deficit (510,254)
---------
Total stockholders' equity (deficit) (308,043)
---------
Total liabilities and stockholders' equity $ 110,468
=========
See accompanying notes to financial statements
-2-
ADVANTAGE SYSTEMS INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
Sales $ 986,464
Cost of goods sold 820,919
---------
Gross profit 165,545
---------
Operating costs and expenses
Sales and Marketing 31,007
Intrest expense 9,093
General and administrative 497,004
---------
Total operating costs and expenses 537,104
---------
Net (loss) $(371,559)
=========
See accompanying notes to financial statements
-3-
ADVANTAGE SYSTEMS INC.
STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED SEPTEMBER 30, 2000
ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
Balance at September 30, 1999 90,000 $ 900 $ 201,311 (138,695) $ 63,516
Net Loss September 30, 2000 (371,559) (371,559)
------------ --------- ------------- ----------- ----------------
Balance September 30, 2000 90,000 $ 900 $ 201,311 $ (510,254) $ (308,043)
============ ========= ============= =========== ================
See accompanying notes to financial statements
-4-
ADVANTAGE SYSTEMS INC.
STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 2000
Cash flows from operating activities:
Net loss $(371,559)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amoritzation 2,717
Allowance for doubtful accounts 110,000
Changes in assets and liabilities:
Accounts receivable 37,658
Inventories 13,693
Accounts payable (16,861)
Accrued expenses 12,570
Loans payable officers-stockholders 29,500
---------
Cash used in operating activities (182,282)
Cash flows from investing activities-
Equipment purchases (7,499)
---------
Cash used in investing activities (7,499)
Cash flows from financing activities:
Long-term debt 7,613
Loan from affiliate 194,636
---------
Cash provided from financing activities 202,249
Net increase in cash 12,468
Cash at beginning of period --
---------
Cash at end of period $ 12,468
=========
Supplemental disclosure of cash flow information
Cash paid for interest 9,093
Cash paid for taxes 1,682
See accompanying notes to financial statements
-5-
ADVANTAGE SYSTEMS INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. Summary of Significant Accounting Policies and Practices
(A) Nature of Business and Basis of Presentation
Advantage Systems Inc. (the "Company) was incorporated on September 3,
1996 to design, manufacture and market customized personal computer products.
In September 1998 the Company was acquired by Advantage Technologies, Inc.
(formerly Simulator Systems, Inc.)
(B) Cash and Cash Equivalents
The Company considers short-term, highly liquid investment with an
original maturity of three months or less to be cash equivalents. Cash and
cash equivalents include cash in banks.
(C ) Revenue and Cost of Revenue
Revenue from product sales is recognized upon execution of a contract
and the completion of all delivery obligations provided that there are no
uncertainties regarding customer acceptance and collectibility is deemed
probable.
Costs of revenues include the costs of manufacturing the Company's
products, inventory obsolescence costs, and overhead related to the Company's
manufacturing.
(D) Inventory
Inventory is stated at the lower of cost (first-in, first-out) or
market (net realizable value).
(E) Property and Equipment
Equipment is carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the depreciable
assets, which range from three to seven years.
(F) Recovery of Long-Lived Assets
The Company's policy is to review its long-lived assets, including
goodwill and other intangibles, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. The Company recognizes an impairment loss when the sum of the
expected future undiscounted cash flows is less than the carrying amount of
the asset. The measurement of the impairment losses to be recognized is based
upon the difference between the fair value and the carrying amount of the
asset.
-6-
(H) Research and Development
Research and development costs are expensed as incurred.
(I) Income Taxes
The company accounts for income taxes under the asset and liability
method. Deferred income tax assets and liabilities are provided annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future.
Deferred income taxes are computed based on enacted tax laws and rates
applicable to the periods in which the differences are expected to effect
taxable income.
Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expenses is the
tax payable or refundable for the period plus or minus the change during the
year in deferred tax assets and liabilities.
(J) Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ.
(K) Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
had losses from inception to September 30, 2000. These factors indicate that
the Company's continuation, as a going concern is dependent upon its ability
to obtain adequate financing.
-7-
2. Inventory
Raw materials $17, 513
3. Property and Equipment
Computer Equipment $16,000
Less accumulated depreciation 8,778
Total Computer equipment $ 7,222
4. Notes payable Stockholders
A stockholder and officer of the Company, advanced working capital to
the Company in exchange for an unsecured note bearing an interest rate of
17%. On September 30, 2000 the amount of the note was $29,500.
5. Line of Credit
The Company has two lines of credit one for $50,000 and the other for
$10,000 that bear interest rates of 12.5% and 9.25% respectively. At
September 30, 2000 the Company has used $57,273 of the available lines of
credit.
6. Income taxes
The Company had net operating loss carryovers of approximately $500,00
as of September 30, 2000 available to offset future taxable income if any. If
not utilized against future taxable income, the tax loss carryovers will
expire in 2020.
7. Common Stock
The Company has authorized 10,000,000 shares of $.01 par value of which
90,000 shares are outstanding at September 30,2000.
8. Subsequent events
On September 4, 2001 the Company was acquired by Pacel Corp. for
$70,000.
-8-
PACEL CORP. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
PACEL ADVANTAGE PROFORMA
AUDITED UNAUDITED ADJUSTMENTS COMBINED
Sales $ 244,971 $ 1,082,393 $ 1,327,364
Cost of Goods Sold 0 840,509 840,509
------------ ------------ ------------ ------------
Gross Profit 244,971 241,884 0 486,855
------------ ------------ ------------ ------------
Operating costs and expenses:
Research and development 969,971 0 969,971
Depreciation & Amortization 30,530 2,894 33,424
Interest expense 63,284 24,111 13,600 100,995
Sales and Marketing 622,525 30,998 653,523
Financing Expenses -- --
General and Administrative 1,895,948 514,362 200,000 2,610,310
------------ ------------ ------------ ------------
Total operating costs and expenses 3,582,258 572,365 213,600 4,368,223
------------ ------------ ------------ ------------
Other Income 5,093 0 0 5,093
------------ ------------ ------------ ------------
Net (loss) $ (3,332,194) $ (330,481) $ (213,600) (3,876,275)
============ ============ ============ ============
Net (loss) per common share
Basic (0.15)
Diluted (0.15)
Weighted Average shares outstanding
Basic 26,609,704
Diluted 26,609,704
See accompanying note to combined financial statements
-9-
PACEL CORP. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 2001
ASSETS
PACEL ADVANTAGE PRO FORMA PRO FORMA
UNAUDITED UNAUDITED ADJUSTMENTS COMBINED
----------- ------------ ------------- --------------
Current assets:
Cash and cash equivalents $ 1,867 $ 9,988 $ 100,000 $ 111,855
Accounts receivable, net 131,570 45,161 176,731
Inventory 18,699 48,384 67,083
Other receivables 60,003 3,982 63,985
Prepaid expenses 4,267 -- 4,267
----------- ----------- ----------- -----------
Total current assets 216,406 107,515 100,000 423,921
----------- ----------- ----------- -----------
Property and equipment, net 132,723 5,051 137,774
----------- ----------- ----------- -----------
Non-current assets:
Note receivable 71,000 -- 71,000
Goodwill 7,565 -- 493,018 500,583
Security deposits 9,089 1,500 10,589
----------- ----------- ----------- -----------
Total non-current assets 87,654 1,500 493,018 582,172
----------- ----------- ----------- -----------
Total assets $ 436,783 $ 114,066 $ 593,018 $ 1,143,867
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 757,630 $ 126,407 $ $ 884,037
Accrued expenses 71,093 76,562 170,945 318,600
Loans payable officers-Stockholders 142,969 45,000 187,969
Notes payable convertible debenture 1,049,690 -- 170,000 1,219,690
Notes payable bank 50,000 50,000
Lines of credit -- 51,912 51,912
Loan from affiliate 202,504 202,504
----------- ----------- ----------- -----------
Total current liabilities 2,071,382 502,385 340,945 2,914,712
----------- ----------- ----------- -----------
Long term liabilities: --
Equipment leases -- 73,563 -- 73,563
----------- ----------- ----------- -----------
Total long term liabilities -- 73,563 -- 73,563
----------- ----------- ----------- -----------
Total liabilities 2,071,382 575,948 340,945 2,988,275
Minority interest
Commitments:
Stockholders' equity (deficit)
Preferred stock, no par value,
no liquidation value, 5,000,000 shares
authorized, issued 1,000,000 shares
1997 class A convertible preferred stock 11,320 11,320
Common stock - no par value,
150,000,000 shares authorized,
55,936,220 shares outstanding 5,625,346 202,211 (102,211) 5,725,346
Cumulative currency translation adjustment (9,921) (9,921)
Deficit (7,261,344) (664,093) 354,284 (7,571,153)
----------- ----------- ----------- -----------
Total stockholders' equity (deficit) (1,634,599) (461,882) 252,073 (1,844,408)
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 436,783 $ 114,066 $ 593,018 $ 1,143,867
=========== =========== =========== ===========
See accompanying note to combined financial statements
-10-
PACEL CORP. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
PACEL ADVANTAGE PROFORMA
UNAUDITED UNAUDITED ADJUSTMENTS COMBINED
--------- --------- ----------- --------
Sales $ 429,088 $ 556,396 $ 985,484
Cost of Goods Sold 299,107 437,654 736,761
------------ ------------ ------------ ------------
Gross Profit 129,981 118,742 248,723
------------ ------------ ------------ ------------
Operating costs and expenses:
Research and development 219,285 0 219,285
Depreciation & Amortization 13,041 1,447 14,488
Interest expense 25,634 22,546 7,345 55,525
Sales and Marketing 68,091 10,615 78,706
Financing Expenses 81,100 -- 81,100
General and Administrative 981,268 218,392 50,000 1,249,660
------------ ------------ ------------ ------------
Total operating costs and expenses 1,388,419 253,000 57,345 1,698,764
------------ ------------ ------------ ------------
Other Income 1,864 0 0 1,864
------------ ------------ ------------ ------------
Net (loss) $ (1,256,574) $ (134,258) $ (57,345) $ (1,448,177)
============ ============ ============ ============
Net (loss) per common share
Basic (0.03)
Diluted (0.03)
Weighted Average shares outstanding
Basic 46,449,205
Diluted 46,449,205
See accompanying note to combined financial statements
-11-