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): January 1,2006
Amended as of June 16, 2006
Commission File Number: 0-29459
PACEL CORP.
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(Exact name of registrant as specified in its charter)
NEVADA 54-1712558
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
7621 Little Ave Suite 101
Charlotte, NORTH CAROLINA 28226
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (704) 643-0676
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
EXPLANATORY NOTE: This amended current report on Form 8-K/A is filed to include
the financial statements of World Wide Personnel of Maine and United Personnel
Services, Inc. and pro forma financial information of Pacel Corp. pursuant to
Item 9.01(a)and (b).
Item 2.01 Completion of Acquisition or Disposition of Assets
On March 7 & 23, Pacel Corporation (the "Company"), acquired 100% of common
stock of United Personnel Services, Inc. & World Wide Personnel Services of
Maine, Inc., respectively. The effective date of the United Personnel Services,
Inc. acquisition was January 1, 2006 and the effective date of the acquisition
of World Wide Personnel of Maine was April 1, 2006.
Upon execution of the Purchase Agreement between Pacel Corp. (the "Company") and
World Wide Personnel Services of Maine, Inc. and United Personnel Services, Inc.
the Company issued 500,000 shares of Series "C" Convertible Preferred Stock
valued at $500,000 of Common Stock, on a fully converted basis.
ABOUT WORLD WIDE AND UNITED
World Wide Personnel Services of Maine and United Personal Services are
professional employment organizations (PEO's) that provide a comprehensive
personnel management system that encompasses a broad range of services,
including benefits and payroll administration, health and workers' compensation
insurance programs, personnel records management, employer liability management,
employee recruiting and selection, employee performance management and employee
training and development services to small and medium sized business within the
State of Maine.
RISK FACTORS
THERE WAS NO FORMAL VALUATION DETERMINING THE FAIRNESS OF THE CONSIDERATION FOR
THE ACQUISITION OF United or World Wide.
The consideration for the acquisition of United and World Wide was
determined by arms' length negotiations between the Company's management and the
management of United and World Wide, but there was no formal valuation of United
or World Wide by an independent third party. The Company did not obtain a
fairness opinion by an investment banking firm or other qualified appraiser.
Since the acquisition of United and World Wide did not require the approval of
the Company's stockholders, the Company is unable to determine whether its
stockholders would have agreed with the determination by the Company's Board of
Directors that the terms of the acquisition were fair and in the best interests
of the stockholders.
THE COMPANY MAY NOT BE ABLE TO EFFECTIVELY INTEGRATE United and World Wide,
WHICH WOULD BE DETRIMENTAL TO THE COMPANY'S BUSINESS.
Acquisitions involve numerous risks, including potential difficulty in
integrating operations, technologies, systems, and products and services of
acquired companies, diversion of management's attention and disruption of
operations, increased expenses and working capital requirements and the
potential loss of key employees and customers of acquired companies. In
addition, acquisitions involve financial risks, such as the potential
liabilities of the acquired businesses, the dilutive effect of the issuance of
additional equity securities, the incurrence of additional debt, the financial
impact of transaction expenses and the amortization of goodwill and other
intangible assets involved in any transactions that are accounted for by using
the purchase method of accounting, and possible adverse tax and accounting
effects. Any of the foregoing could materially and adversely affect the
Company's business.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
World Wide Personnel Service of Maine, Inc. & United Personnel Service,
Inc - Combined Audited Financial Statements for the year ended December
31, 2005 and 2004 and Notes to the Financial Statements.
(b) Pro Forma Financial information
Pacel Corporation and Subsidiaries Unaudited combined Pro Forma Balance
Sheet as of December 31, 2005 and unaudited combined Pro Forma
Statement of Operations for the year ended December 31, 2005 and March
31, 2006.
(c) Exhibits
UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS
On March 7 & 23, Pacel Corporation (the "Company"), acquired 100% of common
stock of United Personnel & World Wide Personnel of Maine. The effective date of
the United Personnel Services, Inc acquisition is January 1, 2006 and the
effective date of the acquisition of World Wide Personnel of Maine is April 1,
2006.
Upon execution of the Purchase Agreement between Pacel Corp. (the "Company") and
World Wide Personnel of Maine and United Personnel Services, the Company issued
500,000 shares of series "C" Convertible Preferred stock valued at $500,000 of
Common Stock.
The following unaudited pro forma combined financial statements of the Company
presents the unaudited combined balance sheet as of December 31, 2005 and the
unaudited combined statements of operations for the year ended December 31, 2005
and March 31, 2006, as if the acquisition of United Personnel of Maine and World
Wide Personnel of Maine had occurred January 1, 2005.
The acquisition will be accounted for as a purchase, with the assets acquired
and the liabilities assumed recorded at fair values.
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 is for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the purchase had been
consummated on such dates, nor is it necessarily indicative of future operating
results or financial position. 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
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Pacel Corporation
BY: /s/ GARY MUSSELMAN
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CEO/President
DATED: June 16, 2006
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INDEX
Part I. COMBINED AUDITED FINANCIAL STATEMENTS OF WORLD WIDE PERSONNEL
SERVICES OF MAINE, INC AND UNITED PERSONNEL SERVICES INC.
Independent Auditors' Report 8
COMBINED FINANCIAL STATEMENTS FOR THE YEARS-ENDED DECEMBER 31,
2005-2004
Combined Balance Sheets 9
Combined Statements of Income and Retained Earnings 10
Combined Statements of Cash Flows 11
Notes to the Combined Financial Statements 12-18
SUPPLEMENTARY INFORMATION
Combined Schedules of General and Administrative Expenses 20
Part II. PRO FORMA FINANCIAL INFORMATION
Pro Forma Financial information as of year ended
December 31, 2005. 21-22
Pro Forma Combined Statements of Operations for the three
months ended March 31, 2006. 23
Notes to the Pro Forma Financial Statements 24
WORLD WIDE PERSONNEL SERVICES OF MAINE, INC. AND
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UNITED PERSONNEL SERVICES, INC.
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AUDIT OF COMBINED FINANCIAL STATEMENTS
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AND SUPPLEMENTARY INFORMATION
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
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Contents
--------
Exhibit
-------
Independent Auditors' Report
Combined Financial Statements
Combined Balance Sheets A
Combined Statements of Income and Retained Earnings B
Combined Statements of Cash Flows C
Notes to the Combined Financial Statements
Supplementary Information
Combined Schedules of General and Administrative Expenses D
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
Austin Associated, p.a.
the Trusted Advisors
INDEPENDENT AUDITORS' REPORT
May 30, 2006
To the Stockholders
World Wide Personnel Services of Maine, Inc.
United Personnel Services, Inc.
Auburn, Maine 04210
We have audited the combined balance sheets of World Wide Personnel Services of
Maine, Inc. (a corporation) and United Personnel Services, Inc. (a corporation)
for the years ended December 31, 2005 and 2004, and the related combined
statements of income and retained earnings, and cash flows for the years then
ended. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the combined
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
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of World Wide
Personnel Services of Maine, Inc. and United Personnel Services, Inc. as of
December 31, 2005 and 2004, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audit was made for the purpose of forming an opinion on the combined basic
financial statements taken as a whole. The supplementary information included in
Exhibit D is presented for the purpose of additional analysis and is not a
required part of the combined basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly presented in all material
respects in relation to the combined basic financial statements taken as a
whole.
Auburn, Maine
May 30, 2006
Two Great Falls Plaza, PO Box 3400. Auburn, Maine 04212-3400
Telephone: 207-783-9111. Fax: 207-783-9130. 800-605-9263 Maine Only
E-mail: cpa@austinpa.com . Website: www.austinpa.com
EXHIBIT A
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES. INC.
COMBINED BALANCE SHEETS
DECEMBER 31: 2005 AND 2004
ASSETS
2005 2004
------------ ------------
CURRENT ASSETS:
--------------
Cash $ 132,066 $ 90,777
Accounts receivable 135,263 8,321
------------ ------------
Total current assets 267,329 99,098
------------ ------------
EQUIPMENT 34,636 34,636
---------
Less--Accumu1ated depreciation 34,636 34,636
------------ ------------
- -
OTHER ASSETS--Deferred income tax assets 33,256 41,555
------------ ------------
Total assets $ 300,585 $ 140,653
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ - $ 5,499
Accrued income taxes 2,529 3,902
Accrued payroll liabilities and employee benefits 271,830 165,306
------------ ------------
Total current liabilities 274,359 174,707
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock--No par value, authorized 2,400 shares,
300 shares issued and outstanding 1,000 1,000
Common stock--No par value, authorized 1,200 shares,
300 shares issued and outstanding 300 300
Additional paid-in capital 439 439
Retained earnings 24,487 (35,793)
------------ ------------
Total stockholders' equity 26,226 (34,054)
------------ ------------
Total liabilities and stockholders' equity $ 300,585 $ 140,653
============ ============
See independent auditors' report.
The accompanying notes are an integral part of this statement.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-9-
EXHIBIT B
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES. INC.
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
DECEMBER 31.2005 AND 2004
2005 2004
------------ ------------
LEASED EMPLOYEE REVENUE $3,223,154 $2,850,039
------------ ------------
DIRECT EXPENSES:
Leased employee benefits 1,350,173 1,119,673
Leased employee payroll taxes 1,373,348 920,475
------------ ------------
2,723,521 2,040,148
GROSS PROFIT 499,633 809,891
GENERAL AND ADMINISTRATIVE EXPENSES 432,427 408,243
------------ ------------
INCOME FROM OPERATIONS BEFORE INCOME
TAX PROVISION (BENEFIT) 67,206 401,648
INCOME TAX (PROVISION)BENEFIT (6,926) 37,653
------------ ------------
NET INCOME 60,280 439,301
ACCUMULATED DEFICIT. BEGINNING OF YEAR (35,793) (475,094)
------------ ------------
RETAINED EARNINGS (ACCUMULATED DEFICIT), END OF YEAR $ 24,487 $ (35,793)
============ ============
See independent auditors' report.
The accompanying notes are an integral part of this statement.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-10-
EXHIBIT C
---------
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES:, INC.
COMBINED STATEMENTS OF CASH FLOWS
DECEMBER 31:, 2005 AND 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
2005 2004
------------ ------------
Net Income $ 60,280 $ 439,301
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation - 12
Deferred income tax assets 8,299 (41,555)
Increase in assets:
Accounts receivable (126,941) (6,654)
Increase (Decrease) in liabilities:
Accounts payable and accrued liabilities 101,024 (381,913)
Accrued income taxes (1,373) 3,902
------------ ------------
(18,991) (426,208)
Net cash provided by operating activities 41,289 13,093
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 41,289 13,093
CASH AND CASH EQUIVALENTS. AT BEGINNING OF YEAR 90,777 77,684
------------ ------------
CASH AND CASH EQUIVALENTS. AT END OF YEAR $ 132,066 $ 90,777
============ ============
See independent auditors' report.
The accompanying notes are an integral part of this statement.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-11-
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES. INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31:. 2005 AND 2004
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NOTE 1: Significant Accounting Policies
-------------------------------
Companies activities:
The Companies are professional employment organizations (PEO's) that
provide a comprehensive personnel management system that encompasses a
broad range of services, including benefits and payroll administration,
health and workers' compensation insurance programs, personnel records
management, employer liability management, employee recruiting and
selection, employee performance management and employee training and
development services to small and medium sized business within the State of
Maine.
Worldwide Personnel Services of Maine, Inc. and United Personnel Services,
Inc. are related corporations through common ownership and management. The
Companies share the same offices and administrative personnel. Worldwide
Personnel Services of Maine, Inc. pays and expenses the rent and
administrative costs of both Companies.
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. 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 options, responsibility for planning, providing and
administering 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's 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 Federal Employer
Identification Number ("FEIN"). The Company assumes the responsibility for
compliance with those employment-related governmental 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, retaining its own policy for the
management of this risk. In all cases, the Company remains heavily involved
with safety and risk management to assist the client in controlling risk
and potentially reducing the cost 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 ~hat are
more closely related to the day-to-day management of work site employees.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-12-
WORLD WIDE PERSONNEL SERVICES OF MAINE, INC. AND
UNITED PERSONNEL SERVICES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31.12005 AND 2004
NOTE 1: Significant Accounting Policies (Continued)
-------------------------------------------
Combination policy:
The accompanying combined financial statements include the accounts of
Worldwide Personnel Services of Maine, Inc. and United Personnel Services,
Inc. Intercompany accounts and transactions have been eliminated from the
combined financial statements.
Cash:
For purposes of the statements of cash flows, the Companies consider all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
The Companies both maintain savings and checking accounts at United
Kingfield Bank which are insured by the FDIC up to $100,000. Worldwide
Personnel Services of Maine, Inc. had cash balances at this Bank in excess
of insured limits in the amount of $59,044 and -$-0 for the years ended
December 31, 2005 and 2004, respectively. United Personnel Services, Inc.
did not have cash balances in excess of the federally insured limits for
either 2005 or 2004.
Trade accounts receivable:
The Companies' trade receivables represent outstanding billings to clients.
Trade accounts receivable are stated at the amount management expects to
collect from balances outstanding at year-end. The Companies have not
established an allowance for doubtful accounts, based on management's
assessment of the credit history with customers having outstanding balances
and current relationships with them.
The Companies generally require that clients pay invoices for service fees
no later than one day prior to the applicable payroll date. As such, the
Companies generally do not require collateral.
Revenue recognition:
The Companies account for their revenues in accordance with Emerging Issues
Task Force ("EITF") 99-19, "Reporting Revenues Gross as a Principal Versus
Net as an Agent". The Companies' revenues are derived from their billings,
which are based on the payroll cost of worksite employees, and fees charged
on the processing and administering of payroll.
The Companies invoice the billings concurrently with each periodic payroll
of their worksite employees.
Revenues, which exclude the payroll cost component of billings, are
recognized each payroll period as worksite employees perform their service
at the client's worksite.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-13-
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31,2005 AND 2004
NOTE 1: Significant Accounting Policies (Continued)
-------------------------------------------
Revenue recognition: (Continued)
The Companies' revenues are primarily dependent on the number of clients
enrolled and the resulting number of worksite employees paid each period.
Revenues are also affected by the payroll cost of work site employees,
which can fluctuate based on the composition of the worksite employee base,
inflationary effects on wage levels and differences in the local economies
of the Companies' markets.
The primary direct costs associated with the Companies' revenues are
employment related taxes ("payroll taxes") and Workers' Compensation costs.
Payroll taxes consist of the employer's portion of Social Security and
Medicare taxes under FICA, federal and state unemployment taxes and
Workers' Compensation premiums. Payroll taxes are generally paid as a
percentage of payroll cost. The federal tax rates are defined by federal
regulations. State unemployment tax rates are subject to claim histories
and vary from state-to state.
The following is a reconciliation of billings to revenue for the years
ended December 31, 2005 and 2004:
2005 2004
------------- ------------
Total Billings $ 16,906,820 $14,402,649
Payroll Cost Component (13,683,666) (11,552,610)
Net Leased Employee Revenue $ 3,223,154 $ 2,850,039
Use of estimates:
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could
differ from those estimates.
Advertising:
The Companies expense advertising as incurred. Advertising expense for
continuing operations was $86 and $1,428 in 2005 and 2004, respectively.
Equipment:
Equipment is carried at cost. Depreciation of equipment is provided using
the straight-line method for financial reporting purposes and the modified
accelerated cost recovery system for income tax purposes. Equipment
consists of five-year property which is fully depreciated.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-14-
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 1: Significant Accounting Policies (Continued)
-------------------------------------------
Income taxes:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to net operating loss carryforward differences
between the financial and tax net income. The deferred taxes represent the
future tax return benefits of those differences, which will not be taxable
when the income is earned. Deferred tax assets represent future tax
benefits from tax credits that will offset future tax liability.
NOTE 2: Pension Plan
------------
World Wide Personnel Services of Maine, mc. sponsors a 401(k) retirement
plan. Employees twenty-one years of age and with one year of service are
entitled to participate. Employees contribute to the plan and there is no
Company match. m 2005, the Company provided a safe harbor contribution to
the 401(k) plan. The contribution is 100% on the first 3% of employee
deferral and 50% of the next 2% of deferral. Total expense for the years
ended December 31,2005 and 2004 was $5,613 and $-0-, respectively.
United Personnel Services, Inc. does not sponsor a pension plan.
NOTE 3: Operating Leases
----------------
The Companies share leased space for their offices. Theses leases are were
signed and paid by Worldwide Personnel Services of Maine, mc. The Companies
leased space from Deedra and Bert Langelier for the period ended June 30,
2004 with monthly lease payments of$1,300. The Companies leased space from
Andy Valley Knights of Columbus Home, mc. under a 60-month lease which
originated in June 2004 and expires in May 2009. Terms of the lease consist
of monthly lease payments of $1 ,200 for the first year and $1,400 per
month beginning on the thirteenth month. Total lease expense for the years
ended December 31,2005 and 2004 was $15,800 and $15,000, respectively.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of December 31, 2005 are:
Years Ending
December 31. Amount
----------
2006 $ 16,800
2007 16,800
2008 16,800
2009 7,000
----------
Total minimum future rental payments $ 57,400
----------
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-15-
WORLD WIDE PERSONNEL SERVICES OF MAINE, INC. AND
UNITED PERSONNEL SERVICES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31:. 2005 AND 2004
NOTE 4: Income taxes
------------
Accrued income tax liabilities in the accompanying balance sheets for
December 31, 2005 and 2004 are related to the activities of United
Personnel Services, Inc. United Personnel Services, Inc. had accrued income
tax liability in the amount of $3,902 for the year ended December 31, 2004.
United Personnel Services, Inc. has a $1,373 refund due to a NOL of $7,423
in 2005. The net income tax liability is $2,529 for the year ended December
31, 2005.
Deferred tax assets in the accompanying balance sheets for December 31,
2005 and 2004 are related to the activities of Worldwide Personnel Services
of Maine, Inc. and include the following components:
2005 2004
---- ----
Federal State Total Federal State Total
---------- ---------- ---------- ---------- ---------- ----------
Deferred tax assets $ 27,833 $ 9,118 $ 36,951 $ 34,778 $ 11,394 $ 46,172
Valuation allowance (2,784) (911) (3,695) (3,478) (1,139) (4,617)
---------- ---------- ---------- ---------- ---------- ----------
$ 25,049 $ 8,207 $ 33,256 $ 31,300 $ 10,255 $ 41,555
Combined income tax benefit (provision) consists of the following:
2005 2004
---- ----
Federal State Total Federal State Total
---------- ---------- ---------- ---------- ---------- ----------
Current income taxes $ - $ - $ - $ (3,160) $ (742) $( 3,902)
Tax benefit from NOL 1,113 260 1,373 - - -
Deferred income taxes (6,139) (2,160) (8,299) 31,300 10,255 41,555
---------- ---------- ---------- ---------- ---------- ----------
Total $( 5,026) $ (1,900) $ (6,926) $ 28,140 $ 9,513 $ 37,653
---------- ---------- ---------- ---------- ---------- ----------
Worldwide Personnel Services of Maine, Inc. has available, as of December
31, 2005, net operating loss carryforwards of $132,536 expiring as follows:
Years Ending
December 31, Amount
2023 $ 132.536
-----------
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-16-
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 5: Retained Earnings
-----------------
Retained earnings, before eliminations, at December 31, 2005 and 2004 is
summarized as follows:
2005 2004
Worldwide Personnel Services of Maine, Inc, $ 13,230 $ (53,100)
United Personnel Services, Inc. 12,476 17,307
------------ ------------
Total owner's equity, before eliminations $ 25,706 $ (35,793)
NOTE 6: Related Party Activities
------------------------
Worldwide Personnel Services of Maine, Inc. pays the lease expense for the
shared office space and pays the administrative personnel costs, including
benefits, of both Worldwide Personnel Services of Maine, Inc. and United
Personnel Services, Inc.
NOTE 7: Subsequent Events
-----------------
The Company's stock has been acquired by an unrelated third party on March
8, 2006. The results of this transaction are that current management will
continue to operate business affairs.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-17-
SUPPLEMENTARY INFORMATION
-------------------------
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-18-
EXHIBIT D
---------
WORLD WIDE PERSONNEL SERVICES OF MAINE. INC. AND
UNITED PERSONNEL SERVICES, INC.
COMBINED STATEMENTS OF GENERAL AND ADMINISTRATIVE EXPENSES
DECEMBER 31, 2005 AND 2004
2005 2004
------------ ------------
Advertising $ 86 $ 1,428
Bank charges 3,110 169
Cleaning expense 1,665 2,203
Conferences and seminars 10,801 11,484
Consulting 6,500 7,611
Depreciation - 12
Dues and publications 487 728
Insurance 45,141 53,712
Pension expense 5,613 -
Office supplies 19,782 27,776
Professional fees 8,394 4,146
Postage 20,338 11,044
Rent 15,800 15,000
Repairs and maintenance 8,181 2,297
Supplies - 10,188
Telephone 8,934 8,539
Travel 1,313 622
Taxes--Payroll 22,803 20,141
Taxes--Other - 220
Utilities - 583
Wages 253,479 230,340
------------ ------------
$ 432,427 $ 408,243
============ ============
See independent auditors' report.
AUSTIN ASSOCIATES, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
-19-
PACEL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 2005
PACEL CORP WORLDWIDE PERSONAL OF
MAINE/UNITED PERSONNEL
SERVICES
AUDITED AUDITED ADJUSTMENTS COMBINED
--------------- -------------------------- ------------- -----------------
Current assets:
Cash and cash equivalents $ 251,595 $132,066 $ 383,661
Accounts receivable - trade 135,263 150,647
15,384
Account receivable - Unbilled 169,749 -0- 169,749
Prepaid Expenses 69,372 -0- 69,372
Workers compensation insurance deposits 26,240 -0- 26,240
Restricted Cash 179,855 -0- 179,855
--------------- -------------------------- ------------- -----------------
Total current assets 267,329 979,524
712,195
Property and equipment, net -0- 10,000 (b) 135,380
125,380
Other assets:
Other receivables 65,127 -0- 65,127
Retirement Plan- Director 162,230 -0- 162,230
Goodwill 368,200 -0- 47,680 (a) 634,254
218,374 (b)
Security deposits 11,152 -0- 11,152
Deferred income tax assets -0- 33,256 (33,256)(c) -0-
--------------- -------------------------- ------------- -----------------
Total other assets 606,709 33,256 -0- 872,763
--------------- -------------------------- ------------- -----------------
Total assets $1,444,284 300,585 242,798 $1,987,667
=============== ========================== ============= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $336,497 -0- $ 336,497
Payroll and payroll related liabilities 1,955,231 271,830 2,227,061
Accrued work site employee payroll expenses 163,626 -0- 163,626
Accrued expenses 1,857,454 2,529 1,859,983
Assumed liabilities 493,133 -0- 493,133
Short term payables 1,081,359 -0- 1,081,359
Current maturities of long term note 27,127 -0- 27,127
--------------- -------------------------- ------------- -----------------
Total current liabilities 5,914,427 274,359 6,188,786
--------------- -------------------------- ------------- -----------------
Long term liabilities:
Notes payable - Non Current portion 218,926 -0- 218,926
Deferred Compensation - Director Payable 335,233 -0- 335,233
--------------- -------------------------- ------------- -----------------
Total long-term 554,159 -0- 554,159
liabilities
Total liabilities 6,468,586 274,359 6,742,945
--------------- -------------------------- ------------- -----------------
Stockholders' equity (deficit)
Preferred stock - 1997 class "A" -.001 par
value
5,000,000 shares authorized
1,000,000 shares issued 1,000 -0- -0- 1,000
Preferred stock - 2006 class "C"- 001 par
value
1,000,000 shares authorized
500,000 shares issued -0- -0- 100 (a)
400 (b) 500
Common stock - .00 par value,
10,000,000,000 shares authorized,
4,430,273 issued 4,430 1300 (300)(a) 4,430
(1000)(b)
Additional Paid in Capital 25,760,994 439 99900 (a) 26,260,494
399,600 (b)
(439)(b)
Cumulative currency translation
adjustment (18,720) (18,720)
Accumulated deficit (30,772,006) 24,487 (52,020)(a) (31,002,982)
(170,187)(b)
(33,256)(c)
--------------- -------------------------- ------------- -----------------
Total shareholders' equity (deficit) (5,024,302) 26,226 242,798 (4,755,278)
--------------- -------------------------- ------------- -----------------
Total liabilities and shareholders' equity $ 1,444,284 $ 300,585 242,798 $ 1,987,667
=============== ========================== ============= =================
See accompanying notes to financial statements
-20-
PACEL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
DECEMBER 31, 2005
PACEL WORLDWIDE
CORPORATION PERSONAL OF
MAINE/UNITED
PERSONNEL
SERVICES OF MAINE
AUDITED AUDITED ADJUSTMENTS COMBINED
----------------- ------------------ --------------- ----------------
Revenue $ 2,240,843 $ 3,223,154 $ 5,463,997
Cost of Sales 1,689,341 2,723,521 4,412,862
----------------- ------------------ --------------- ----------------
Gross Profit 551,502 499,633 1,051,135
Operating costs and expenses:
General and Administrative 2,523,756 432,427 2,956,183
Sales and Marketing 470,090 -0- 470,090
Depreciation and amortization 62,595 -0- 62,595
Loss on impairment of goodwill 229,173 -0- 39,544 (a) 426,893
158,176 (b)
----------------- ------------------ --------------- ----------------
Total operating expenses 3,285,614 432,427 197,720 3,915,761
Other Expenses:
Interest Expense (373,287) -0- (373,287)
Financing costs (619,286) -0- (619,286)
----------------- ------------------ --------------- ----------------
Total other expenses (992,573) -0- (992,573)
Discontinued operations:
Loss form discontinued (Sale of Contracts) (31,707) -0- (31,707)
Loss on sale of contract to Allegro, Inc. (651,651) -0- (651,651)
------------------------------------------------------------------------------
Total Loss on discontinued (683,358) -0- (683,358)
operations
Income Tax (Provision) Benefit -0- (6,926) (33,256) (c) (40,182)
Net (Loss) Gain $ (4,410,043) $ 60,280 $ (230,976) $ (4,580,739)
================= ================== =============== ================
See accompanying notes to financial statements
-21-
PACEL CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
MARCH 31, 2006
PACEL
CORPORATION WORLDWIDE
(INCLUDING PERSONAL OF
UNITED MAINE
PERSONNEL OF
MAINE)
UNAUDITED UNAUDITED ADJUSTMENTS COMBINED
----------------- ------------------ -------------- ----------------
Revenue $ 424,118 $ 1,102,426 $ 1,526,544
Cost of Sales 315,222 993,298 1,308,520
----------------- ------------------ -------------- ----------------
Gross Profit 108,896 109,128 218,024
Operating costs and expenses:
General and Administrative 560,857 94,361 655,218
Sales and Marketing 7,285 -0- 7,285
Depreciation and amortization 14,162 -0- 14,162
Loss on impairment of goodwill -0- -0- -0-
----------------- ------------------ -------------- ----------------
Total operating expenses 582,304 94,361 676,665
Other Expenses:
Interest Expense (64,733) -0- (64,733)
Financing costs (323,794) -0- (323,794)
----------------- ------------------ -------------- ----------------
Total other expenses (388,527) -0- (388,527)
Net (Loss) Gain $ (861,935) $ 14,767 $ (847,168)
================= ================== ============== ================
See accompanying notes to financial statements
-22-
PACEL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS FOR DECEMBER 31,
2005 AND MARCH 31, 2006
(a) Represents the purchase accounting related to the acquisition of 100%
of the stock of United Personnel Services, Inc. on March 7, 2006 with
an effective date of January 1, 2006 for $100,000. As consideration the
Company issued 100,000 shares of the Company's series "C" convertible
preferred stock valued at $100,000 of Common Stock. Consistent with
purchase accounting guideline, the stockholder's equity section of
United Personnel Services was eliminated. The company acquired $32,066
in assets and $19,290 in liabilities, the excess of the purchase price
over the carrying values of the net assets acquired were allocated to
goodwill in the amount of $87,224. Using a discounted cash flow model
with a 20% discount rate and a 3% client attrition rate per year over
the next five years, $39,544 of goodwill was not recognized.
(b) Represents the purchase accounting related to the acquisition of 100%
of the stock of World Wide Personnel Services of Maine on March 23,
2006 with an effective date of April 1, 2006 for $400,000. As
consideration the Company issued 400,000 shares of the Company's series
"C" convertible preferred stock valued at $400,000 of Common Stock.
Consistent with purchase accounting guideline, the stockholder's equity
section of World Wide Personnel Services of Maine was eliminated. The
company acquired $268,519 in assets and $255,069 in liabilities. The
excess of the purchase price over the carrying values of the net assets
acquired (Fixed assets included office and computer equipment and were
valued at $10,000) were allocated to goodwill in the amount of
$376,550, using a discounted cash flow model with a 20% discount rate
and a 3% client attrition rate per year over the next five years
$158,176 of goodwill was not recognized.
(c) Deferred income taxes in the amount of $33,256 attributed to World Wide
Personnel Services of Maine, Inc. was written off.
-23-