UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): November 26, 2002
STRATUS SERVICES GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 001-15789 22-3499261
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(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation File No.) Identification No.)
or organization)
500 Craig Road, Suite 201, Manalapan, New Jersey 07726
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(Address of principal executive offices)
(732) 866-0300
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(Registrant's telephone number including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On November 26, 2002, Stratus Services Group, Inc., a Delaware
corporation ("Stratus" or the "Registrant"), announced that it has acquired,
effective as of December 1, 2002 (the "Effective Date"), substantially all of
the tangible and intangible assets, excluding accounts receivable, of six
offices of Elite Personnel Services ("Elite"), a California corporation. The
Registrant is also taking over Elite's Downey, California office, from which
Elite currently services no accounts but which it utilizes as a corporate
office. The Registrant will continue to utilize the Downey office as a regional
corporate facility. Pursuant to the terms of an Asset Purchase Agreement between
the Registrant and Elite dated November 19, 2002 (the "Asset Purchase
Agreement"), the purchase price payable at closing (the "Base Purchase Price")
for the assets was $1,264,000, all of which was represented by an unsecured
promissory note. In addition to the Base Purchase Price, Elite will also receive
as a deferred purchase price an amount equal to ten percent (10%) of the annual
"Gross Profits," as defined in the Asset Purchase Agreement, of the acquired
business between $2,500,000 and $3,200,00, and fifteen percent (15%) of the
annual Gross Profits of the acquired business in excess of $3,200,000, for a
minimum period of one (1) year from the Effective Date, and for a period of two
(2) years from the Effective Date if Gross Profits during the first year reach
specified levels. The note includes imputed interest at 4% per annum and is
payable over an eight-year period in equal monthly payments beginning 30 days
after the Effective Date. In connection with the transaction, Elite, its
President, Bernard Freedman and other key management members entered into
Non-Competition and Non-Solicitation Agreements pursuant to which they agreed
not to compete with the Registrant in the territories of the acquired business
for periods ranging from twelve (12) months to five (5) years, and to not
solicit the employees or customers of the acquired business for periods ranging
from twelve (12) months to five (5) years. Additionally, Bernard Freedman,
Elite's current President, has also entered into an Employment Agreement, as of
the Effective Date, with Stratus, for a minimum of a one (1) year term. This
term can be extended by Mr. Freedman if certain targeted Gross Profit levels are
attained.
The purchase price was arrived at through arms-length negotiations
between the parties.
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The Elite branches provide temporary light industrial and clerical
staffing in six (6) business locations in the California cities of West Covina,
Bellflower, Culver City and Rancho Cucamonga and the Nevada cities of Henderson
and Las Vegas with estimated 2002 revenues of $30 million.
The Registrant currently intends to continue to operate the business
formerly conducted by Elite at the purchased locations with the purchased assets
for the foreseeable future. The foregoing statement of the Registrant's
intention is a forward looking statement within the meaning of Section 21E of
the Securities Exchange Act of 1934, and is based on certain assumptions,
including among others, general economic conditions, management's expectations
regarding the operating results of the Registrant and the purchased locations,
the capital requirements of continuing Elite's current business and others.
Should these assumptions change, or prove to be inaccurate, the Registrant's
actual future conduct of Elite's business could differ materially from the
intention stated.
The above descriptions of the Asset Purchase Agreement and the
Non-Competition and Non-Solicitation Agreements do not purport to be complete
and are qualified in their entirety by the full text of such documents, which
are attached as exhibits hereto.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
It is not practicable to provide the financial statements required to
be filed as a result of the acquisitions of the assets of Elite described in
Item 2 hereof (the "Financial Statements") on the date that this report is being
filed with the Securities and Exchange Commission. The Financial Statements will
be filed by amendment to this Form 8-K as soon as practicable, but in any event
not later than 60 days after the required filing date of this report. The
Registrant expects to file the Financial Statements no later than January 30,
2003.
(b) PRO FORMA FINANCIAL INFORMATION
It is not practicable to provide the pro forma financial information
required to be filed as a result of the acquisitions of the assets of Elite
described in Item 2 hereof (the "Pro Forma Information"), on the date that this
report is being filed with the Securities and Exchange Commission. The Pro Forma
Information will be filed by amendment to this Form 8-K as soon as practicable,
but in any event not later than 60 days after the required filing date of this
report. The Registrant expects to file the Pro Forma Information no later than
January 30, 2003.
(c) EXHIBITS.
2.1 Asset Purchase Agreement, dated November 19, 2002, by
and between Stratus Services Group, Inc. and Elite
Personnel Services, Inc.
10.1 Non-Competition Agreements, dated December 1, 2002,
between Stratus Services Group, Inc. and each of Elite
Personnel Services, Inc. and Bernard Freedman.
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10.2 Employment Agreement dated December 1, 2002 between
Stratus Services Group, Inc. and Bernard Freedman.
10.3 Promissory Note in the amount of $1,264,000 dated as
of December 1,2002, issued by Stratus Services Group,
Inc. to Elite Personnel Services, Inc.
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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 thereunto duly authorized.
STRATUS SERVICES GROUP, INC.
By: /S/ Joseph J. Raymond
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Joseph J. Raymond
President & CEO
Date: November 26, 2002
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