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): April 22, 2003
(April 7, 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 601
Manassas, Virginia 20109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 257-4759
8870 Rixlew Lane, Suite 201
Manassas, Virginia 20109
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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. STOCK PURCHASE AGREEMENT.
On February 18, 2003 PACEL Corp. ("Buyer"), a Virginia corporation, and MRG
California LLC (MRG), a Nevada Limited Liability Company (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 finalized on April 7,
2003, at which time assets of the company were to be conveyed by MRG to PACEL
Corp. 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, up to a
$100,000,000 of assets of MRG and they shall be free and clear of any
encumbrances other than any permitted herein, and shall include 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"):
(i) a bill of sale for all of the specified Assets in the form of Exhibit
"A" (the "Bill of Sale") executed by Seller;
(ii) an itemized list of specific Assets to be sold to Buyer including
calculation of forecasted annual gross revenue proceeds from Assets;
(iii) all contracts and related material pertaining to specified Assets;
(iv) a certificate executed by a managing partner of the Seller as to the
accuracy of Seller's representations and warranties as of the date of this
Agreement and as of the Closing, and as to Seller's compliance with and
performance of Seller's covenants and obligations to be performed or
complied with at or before the Closing; and
The transfer of the Assets pursuant to the Agreement did not include the
assumption of any liability related to the Assets unless Buyer expressly assumed
that liability as stated in the Agreement.
Excluded Assets:
Notwithstanding anything to the contrary contained in Section 1.1 or elsewhere
in the Agreement, the following assets of Seller (collectively, the "Excluded
Assets") were not part of the sale and purchase contemplated in the Agreement,
and were excluded from the Assets and remained the property of Seller after the
Closing:
(a) all cash, cash equivalents and short-term investments, except those
amounts received from a business for which Seller agreed to provide ASO
services ("Clients") in connection with the performance by Clients of
obligations under their PEO Contracts with Seller and for which Seller had
a corresponding obligation that constituted an Assumed Liability
(a) all minute books, stock Records and corporate seals;
(b) the shares of capital stock of Seller held in treasury;
(c) all personnel records and other records that Seller is required by law
to retain in its possession, in which case, copies were made at Buyer's
request and at Buyer's expense;
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(d) all claims for refund of taxes and other governmental charges of
whatever nature; and
(e) all rights of Seller under this Agreement, the Bill of Sale and the
Assignment and Assumption Agreement.
Consideration
The consideration for the Assets (the "Purchase Price") will be calculated as a
multiple of three (3) times annualized current net profit margin as disclosed in
Seller's Closing Documents. At the Closing, the Purchase Price shall be
delivered by Buyer to Seller by cash or cashier's check or Pacel, Corp. free
trading stock. In addition, Buyer shall pay towards the Buyer's broker's fees a
fee calculated at five percent (5%) of the Purchase Price as provided in
Paragraph 13.1, below.
Copies of the Asset Purchase Agreement are 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.
EXECUTIVE SUMMARY
The Company, a Virginia corporation engages in the Professional Employer
Organization (PEO) business, serving as an off-site, full-service human
resources department for small and medium-sized businesses. The Company offers a
full scope of employment business services, including payroll administration and
management, benefits provision, human resource management, employee leasing and
management and Workman's Comp.
Additionally, the company develops and delivers computer software, manufactures
high-quality, adeptly configured, leading edge computers for corporate networked
environments and stand-alone systems, and provides IT services for clients in
the commercial arena.
The Executive Offices of the Company are as follows:
7900 Sudley Road
Suite 601
Manassas, VA 20109
Phone: (703) 257-4759
Facsimile: (703) 361-6706
Shares Outstanding .....................251,847,656 issued
Contact Person: David E. Calkins, CEO and Chairman
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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".
On February 18, 2003 the Company entered into an Asset Purchase Agreement with
MRG California, LLC a Nevada Limited Liability Corporation that on April 7, 2003
had the initial closing, as described in Exhibit 1.0, attached. The Asset
Purchase Agreement has provided PACEL Corp. with an expanded client base in the
ASO business arena and has expanded the Company's sales and earning capacity.
Introduction
PACEL Corp. engages in the Professional Employment Organization (PEO) arena,
providing clients with full-service human resources. The Company offers a full
scope of employment business services, including payroll administration and
management, benefits provision, human resource management, employee leasing and
management and Workman's Compensation under both PEO (Professional Employee
Outsourcing) and ASO (Administrative Services Outsourcing ) agreements.
These benefits include support to clients with regard to employee termination
and disciplinary procedures, and proper maintenance of employment records and
documentation. In addition, PACEL Corp. develops policy manuals and employee
handbooks that are unique to the needs of our customers. Offered services
include:
o Employment Records Management
o Disciplinary and Termination Procedures
o Dispute/Conflict Resolution
o Forms and Policies
o Employee Relations/Retention
o Worksite Supervisory Training
o Compensation Procedures and Incentive Plans
o Pre-Employment Testing
o Drug Testing
o Personnel Placement
o Performance Review
o Hiring Procedures
o Employment Verification and Background Check
In addition to the PEO 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,
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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.
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.
A PEO offers a broad range of integrated and cost effective personnel management
services to the small business community. Typically the PEO firm manages payroll
and human resource functions and provides administration of health, unemployment
and workers compensation insurance for its clients. This usually takes the form
of the PEO hiring the staff of a client, then "leasing back" staffing services
to the client. Often referred to as "co-employment", the PEO contractually
assumes substantial employer rights, responsibilities, and risks and establishes
long-term, employer relationships with its client's employees. Under a
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co-employment arrangement, both the PEO and the client have an employment
relationship with work site employees. The PEO and client allocate some
responsibilities, and share others. Under the terms of this co-employment
relationship the PEO assumes responsibility for:
o Payroll and employment taxes
o Employee benefits
o Human resource compliance
o Workers' compensation, workplace safety, and risk management
o Employee appraisal services
o Personnel records management
o Employer liability management
o Employee recruiting, screening and selection
o Performance management
o Training and development services
The client retains sole responsibility for such key business functions as
product development, distribution, marketing, sales and service. In this way,
the client manages the specific work product of the employee, while the PEO
manages the human resource and regulatory aspects. This allows the client
businesses to shift legal risk and lower administrative costs, at the same time
freeing the entrepreneur to develop the business rather than deal with human
resource and regulatory issues. Additionally, employees receive better benefits
through lower insurance rates, and a full range of services typically sacrificed
by smaller employers.
The asset purchase of MRG California, LLC contracts establishes a regional PEO
presence in 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
--------------------- ---- ----------------------------------
David E. Calkins 59 Chairman, President and CEO
F. Kay Calkins 44 Director
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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.
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.
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Facilities
The Company maintains its executive offices at 7900 Sudley Road, Suite 601,
Manassas, Virginia 20109. The company has a full service lease that is price
controlled until November 30, 2003. Its telephone number 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 3(a)(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 April 3, 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
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
---------------------------- --------- ------------------- -------
David & Kay Calkins Common 60,000,000 shares ea. 25%ea.
All Executive Officers and
Directors as a Group Common 120,000,000 50%
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(1) The address for each of the above is c/o Pacel Corp. 7900 Sudley Rd. Suite
601, Manassas, VA 20109.
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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 Stock 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
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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.
(Registrant)
Date: April 22, 2003
By: /s/ David E. Calkins
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David E. Calkins, President, CEO and Chairman
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