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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Event Requiring Report: June 12, 2001
LEGAL ACCESS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 000-19457 87-0473323
- ------ --------- ----------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification #)
2300 West Sahara Avenue, Suite 500, Las Vegas, NV 89102
-------------------------------------------------------
(Address of Principal Executive Offices)
(702) 949-6115
----------------------------------------
(Registrant's telephone number, including area code)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Pursuant to the terms and conditions of our merger agreement with
Tele-Lawyer, Inc. (the "Agreement") immediately following the
execution of the Agreement on June 12, 2001, Jan Wallace and
Grace Sim each resigned their positions as officers and directors
and the following officers and directors of Tele-Lawyer were
appointed as our new officers and directors in the positions
shown below:
Name Age Position Appointment
- ---- --- --------------------
Michael Cane 46 CEO, President, Secretary and Director
Elliot Schear 49 Vice President and Director
Steven Fellows 33 Treasurer and Chief Financial Officer
See Item 2 below.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 12, 2001, we consummated a "merger agreement" in which we
acquired all of the shares of Tele-Lawyer, Inc., a Nevada
Corporation, resulting in Tele-Lawyer becoming our wholly owned
subsidiary. The Agreement called for each of the Tele-Lawyer
shareholders to receive one share of our common stock for each
share of Tele-Lawyer common stock they held. In addition, each
holder of an option or warrant to purchase Tele-Lawyer common
stock under its incentive stock option plan was entitled to
receive an option to purchase the same number of shares of our
common stock under the same terms as provided in their option or
warrant agreement. Articles of Exchange to record this
transaction were filed with the Nevada Secretary of State on June
12, 2001.
As of June 12, 2001, Tele-Lawyer had issued options to purchase
285,000 common shares at $1 per share and options to purchase an
additional 441,231 common shares at $3 per share. In addition,
Tele-Lawyer had issued warrants to purchase 458,880 common shares
at $3 per share.
In addition, as part of the Agreement:
1. Reduction in Debt. We converted over 97% of our outstanding
note holder debt into common stock. Each of the note holder's,
with the exception of one note holder, agreed to convert their
debt obligation into common stock at a rate of $0.15 of debt
for each share of common stock.
2. Reverse Split of Stock. We conducted a reverse split of our
common stock prior to consummation of the Agreement at a rate
of 1 share of new common stock for every 153 shares of issued
stock, effectively reducing our issued and outstanding common
stock (before issuance of shares to the Tele-Lawyer
shareholders) to approximately 490,096 shares (after
adjustments). No fractional shares were issued. Shareholders
received one additional share for any fractional shares
resulting from the reverse split. Shareholders with less than
153 shares were paid the value of their shares based on the
closing price for our common stock on April 30, 2001, the
record date for the
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determination of the shareholder's right to
vote at the annual meeting. The closing price on that date was
$0.01 per share. We thus reduced our issued and outstanding
shares from 74,966,435 to 490,096, or over 99%, prior to
consummation of the Agreement.
3. Issuance of Common Stock to Tele-Lawyer Shareholders. By
operation of the Agreement, Tele-Lawyer shareholders received
approximately 5,354,997 of our common shares in exchange for
all the common stock of Tele-Lawyer. We thus had 5,845,093
shares of common stock outstanding following the acquisition of
Tele-Lawyer, or a reduction of over 92% based on the pre-stock
split number of shares.
4. Name Change. We changed our name from Dynamic Associates, Inc.
to "Legal Access Technologies, Inc." as recommended by Tele-
Lawyer and consistent with the Second Amendment to the Merger
Agreement. This was done through an amendment to our articles
of incorporation, which was approved by our shareholders on
June 11, 2001, and filed with the Nevada Secretary of State on
June 12, 2001.
5. Agreement in Settlement of Debt. On June 13, 2001, we agreed to
settle our debt obligations to our former officers and
directors Grace Sim and Jan Wallace by issuing them the
following number of shares:
No. Of Shares
-------------
Grace Sim 45,264
Jan Wallace 80,875
Grace Sim and Jan Wallace, in consideration for receiving the
shares, agreed to release us from any and all obligation on this
debt.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Jan Wallace and Grace Sim each submitted their resignations as
our officers and directors on June 12, 2001.
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ITEM 7. FINANCIAL STATEMENTS
(a) Financial statements of businesses acquired.
The following financial statements of Tele-Lawyer, Inc. are included:
Page
----
Independent auditors' report F-1
Financial statements:
Balance sheets as of April 30, 2001 and 2000 F-2
Statements of operations - Years Ended
April 30, 2001 and 2000 F-3
Statements of stockholders' equity (deficiency) -
Years Ended April 30, 2001 and 2000 F-4
Statements of cash flows - Years Ended
April 30, 2001 and 2000 F-5
Notes to the financial statements F-6 - F-8
(b) Pro Forma Financial Information.
We will file pro forma information showing the effect of the
share exchange by an amendment to this Report on Form 8-K.
(c) Exhibits.
Exhibit 10.1: Agreement and Plan of Merger (1)
Exhibit 10.2: First Amendment to Merger Agreement (1)
Exhibit 10.3: Second Amendment to Merger Agreement (1)
Exhibit 10.4: Third Amendment to Merger Agreement (1)
Exhibit 10.5: Agreement in Settlement of Debt
- ---------------------
(1) Previously filed as an exhibit to our Proxy Statement on
Schedule DEFR 14A filed on May 30, 2001 and incorporated herein
by reference.
ITEM 8. CHANGE IN FISCAL YEAR
We have decided to adopt Tele-Lawyer's fiscal year end of April
30 as the accounting acquirer under the Agreement. Our previous
fiscal year end was December 31.
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INDEPENDENT AUDITORS' REPORT
Board of Directors
Tele-Lawyer, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of Tele-Lawyer, Inc.
as of April 30, 2001 and 2000, and the related statements of
operations, stockholders' equity and cash flows for the years 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
audits 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
Tele-Lawyer, Inc. as of April 30, 2001 and 2000, and the results of
its operations and cash flows for the years 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 5, the Company's ability to attain profitable operations is
dependant upon raising additional capital and expanding its customer
base of legal services organizations. This condition raises
substantial doubt as to the Company's ability to continue as a going
concern. Management's plans in regard to this matter are also
described in Note 5. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/S/ PIERCY BOWLER TAYLOR & KERN
Certified Public Accountants & Business Advisors
A Professional Corporation
Las Vegas, Nevada
August 22, 2001
F-1
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TELE-LAWYER, INC.
BALANCE SHEETS
APRIL 30, 2001 AND 2000
=============================================================================
ASSETS 2001 2000
Current assets
Cash and cash equivalents $ 1,302 $ 1,041,138
------------- -------------
Accounts receivable 3,715 4,371
------------- -------------
5,017 1,045,509
Property and equipment, net of
accumulated depreciation of $61,339
and $38,704 in 2001 and 2000 126,268 3,394
------------- -------------
$ 131,285 $ 1,048,903
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities
Accounts payable $ 96,983 $ 54,585
Accrued expenses 129,518
------------- -------------
226,501 54,585
Long-term related party debt 55,000
------------- -------------
281,501 54,585
------------- -------------
Stockholders' equity (deficiency)
Common stock,$0.001 par and no par,
25,000,000 shares authorized, 5,354,997
and 5,341,666 shares issued and outstanding 5,355 5,342
Additional paid-in capital 1,599,644 1,419,657
Accumulated deficit (1,755,215) (430,681)
(150,216) 994,318
------------- -------------
$ 131,285 $ 1,048,903
============= =============
F-2
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TELE-LAWYER, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 2001 and 2000
=============================================================================
2001 2000
Legal support services revenues $ 417,334 $ 221,295
------------- -------------
------------- -------------
Operating costs and expenses
Legal support services 196,472 77,491
Software research and development costs 706,551 54,576
Selling, general, and administrative 863,299 137,983
------------- -------------
1,766,322 270,050
------------- -------------
Loss from operations (1,348,988) (48,755)
Other income
Interest 22,053 8,462
Rentals 2,401 1,400
------------- -------------
Net loss $ (1,324,534) $ (38,893)
============= =============
Basic and diluted net loss per common share $ (0.25) $ (0.01)
============= =============
Weighted average common shares outstanding 5,342,691 5,052,564
============= =============
F-3
See notes to financial statements.
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TELE-LAWYER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED APRIL 30, 2001 AND 2000
=============================================================================
Shares
issued Common Addi-
and Stock tional Accumu-
out- par Paid-in lated
standing value Capital Deficit
--------- -------- ---------- -----------
Balance, May 1, 2000 5,341,666 $ 5,342 $1,419,657 $ (430,681)
Net loss (1,324,534)
Capital contributions 140,000
Sale of common shares 13,331 13 39,987
Balance, April 30, 2001 5,354,997 $ 5,355 $1,599,644 $(1,755,215)
========= ======== ========== ===========
Balance, May 1, 1999 1,000 $ $ 400,000 $ (391,787)
--------- -------- ---------- -----------
Net loss (38,894)
Stock split of 5,000 to 1 4,999,000 5,000 (5,000)
Sale of common shares 341,666 342 1,024,657
Balance, April 30, 2000 5,341,666 $ 5,342 $1,419,657 $ (430,681)
========= ======== ========== ===========
--------- -------- ---------- -----------
F-4
See notes to financial statements.
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TELE-LAWYER, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 2001 and 2000
=============================================================================
2001 2000
Operating activities
------------- -------------
Net cash provided by (used in)
operating activities $ (1,129,327) $ 11,321
------------- -------------
Investing activities
Purchase of property and equipment (145,509) (3,395)
------------- -------------
Financing activities
Loans extended, related parties 55,000
Sale of common stock 40,000 1,024,999
Capital contributions 140,000
------------- -------------
235,000 1,024,999
------------- -------------
Net increase (decrease) in cash and
cash equivalents (1,039,836) 1,032,925
Cash and cash equivalents, beginning of year 1,041,138 8,213
------------- -------------
Cash and cash equivalents, end of year $ 1,302 $ 1,041,138
============= =============
Reconciliation of net loss to net cash
provided by (used in) operating
activities
Net loss $ (1,324,534) $ (38,893)
Depreciation 22,635
Increase in operating (assets) liabilities
Accounts receivable 656 (4,371)
Accounts payable 42,398 54,585
Accrued expenses 129,518
------------- -------------
Net cash provided by (used in)
operating activities $ (1,129,327) $ 11,321
============= =============
F-5
See notes to financial statements.
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TELE-LAWYER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2001 AND 2000
=============================================================================
1. Nature of operations and background information:
Business activities. Tele-Lawyer, Inc., a Nevada corporation, (the
Company) is in the business of arranging for the provision of legal
advice and information to consumers of legal services through
licensed attorneys. Other legal support services that the Company
offers include continuing professional education for attorneys and
specialized telephone conferencing services for professionals,
associations and the general public. The Company is in the process of
further expanding its legal support services and geographic coverage
to create a more comprehensive nationwide hub for access to these
services.
On June 12, 2001, the Company consummated a reverse acquisition and
became a wholly-owned subsidiary of Dynamic Associates, Inc., which
contemporaneously changed its name to Legal Access Technologies, Inc.
(see note 6).
Concentrations. Because the Company generates substantial revenue
from relatively few contracts with certain associations, a decline in
the size or number of these arrangements could adversely affect
future operations. For the most recent operating period presented,
one association accounted for approximately 46% of the Company's
revenues. This contract has been continued to the end of 2001 and
can be terminated by either party with a 30 day notice.
2. Summary of significant accounting policies:
Use of estimates. Timely preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported
amounts, some of which may require revision in future periods.
Cash equivalents. Cash equivalents consist of highly liquid
investments purchased with initial maturities of three months or
less.
Property and equipment. Property and equipment are stated at cost.
Depreciation is computed using the straight-line and declining
balance methods over the estimated useful lives of the assets
(generally three to five years).
Revenue recognition. Legal support services revenue is recognized as
the services are provided. Revenue from service contracts is
recognized ratably over the contract term. Customer charges for
service customization are generally recognized when the services are
completed.
Advertising. Advertising (totaling $99,132 and $5,100 for the most
recent and prior year) is expensed as incurred and is included in
selling, general and administrative expenses.
Research and development costs. Costs incurred in creating computer
software to be offered with the Company's products are expensed when
incurred until technological feasibility has been established for the
product. Thereafter, costs are capitalized and amortized over the
remaining expected economic life of the product. No costs for
software research and development were capitalized during the
reporting periods. Subsequent to the most recent balance sheet date
presented, technological feasibility for the Company's software has
been established. The Company allocates certain executive salaries
to research and development costs and general and administrative expense
based on estimates of time devoted to the various activities.
Included in research and development costs for the most recent year
presented is allocated salaries of approximately $180,000 (none in
the prior year).
Stock compensation. The Company accounts for stock-based employee
compensation using the intrinsic value method described in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees.
Net loss per share. Options to purchase 726,231 shares of common
stock and warrants to purchase 458,880 shares of common stock were
not included in the computation of net loss per share because of the
anti-dilutive effect.
3. Equity:
Common stock. In March 2000, pursuant to Rule 506 of Regulation D
of the Securities Act of 1933, the Company sold a total of 341,666
shares of its common stock at $3 per share to two investors. In
April 2001, pursuant to Rule 506 of Regulation D of the Securities
Act of 1933, the Company sold a total of 13,333 shares of its common
stock at $3 per share to five investors. The Company is considering
additional private placements to fund expansion plans, however, there
is no assurance that such funding or the expansion of services will occur.
Stock options and warrants. In December 1999, the Company adopted an
incentive stock option plan. The plan authorizes the Company to
issue options totaling up to 15% of the outstanding shares of the
Company, not to exceed 2,500,000. Of the options granted during
2001, 126,231 were to non-employees for services in connection with
various research and development activities.
The following table summarizes the stock option activity for the
periods indicated:
F-6
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TELE-LAWYER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2001 AND 2000
=============================================================================
Weighted
Number Average
of Exercise
shares Price
--------- ---------
Granted during
2000 and balance
at April 30, 2000 325,000 $ 1.00
Granted 751,231 3.00
Expired (350,000) 2.77
--------- ---------
Balance at
April 30, 2001 726,231 $ 2.22
========= =========
The following table summarizes the stock options outstanding
at April 30, 2001:
Weighted Number Number of
Average of Options
Contractual Options Exer- Exercise
Life Outstanding cisable Price
- ----------- ----------- --------- --------
1.6 years 285,000 285,000 $1.00
2.1 years 441,231 216,231 $3.00
----------- ---------
726,231 501,231
=========== =========
During the most recent year presented, the Company issued warrants to
purchase 450,000 common shares at $3 per share in part to reacquire
the rights to offer its legal support services in certain Midwestern
states from a partnering company. 100,000 of these warrants expire
on June 1, 2005, and 350,000 of these warrants expire on October 18,
2005. The Company also issued warrants associated with raising
equity capital to purchase 8,880 common shares at $3 per share that
expire on April 19, 2002.
The principal assumptions selected to value the options and warrants,
using the Black Scholes option-pricing model for calculating the
"minimum value" (appropriate because the Company's shares are not
traded publicly), included a "risk-free" interest rate of 5%,
expected option life of 3 years, and no expected dividends. The
minimum value calculation resulted in no recognized compensation and
no pro forma effect of the fair value method on reported results due
to immateriality.
4. Income taxes:
The Company's effective tax rate differs from the federal statutory
rate due to a 100% valuation allowance provided for any tax benefits
that may result from net operating losses incurred, because of
uncertainty discussed under Management Plans below.
As of the most recent balance sheet date presented, the Company has
available unused operating loss carryforwards of approximately
$1,700,000 expiring through 2021.
5. Commitments and contingencies:
Leases. The Company has an operating lease commitment for office
facilities expiring in May 2001. Rent expense for the most recent
and prior operating periods presented was approximately $128,000 and
$21,000. Subsequent to the most recent balance sheet date, the
Company entered into a five-year lease commitment for office
facilities expiring May 31, 2006, with the option to terminate the
lease after 36 months with payment of a three-month penalty. Future
minimum lease payments are approximately $212,000 per year through
May 2004. The Company subleases approximately 17% of the space to a
law firm in which an officer / shareholder of the Company is the
managing principal. Minimum related party annual sub-rentals are
approximately $36,000 through May 2004.
Management Plans. To become profitable, the Company plans to expand
its client/affiliate network of Legal Services Organizations (LSO)
nationwide. An LSO is a legal aid foundation, state bar association,
state or federal court or any membership organization that seeks to
provide legal services to its members. The Company generates
revenues through an LSO by providing technology solutions directly
for the LSO as well as by servicing the clients who enter its network
through the LSO. As of the most recent balance sheet date presented,
the Company was servicing a relatively small number of LSOs.
Subsequent to this period, the Company has executed or has pending
agreements with multiple LSOs in seven states that management
believes will have a significant, positive impact on revenues and
profitability.
In order to expand its affiliate network of LSOs, the Company must
raise additional capital to support this growth. On June 12, 2001,
the Company entered into a reverse acquisition (note 6) in which the
Company took over the assets of Dynamic Associates, Inc. and its
subsidiary, Perspectives Healthcare Management Corporation. The
Company anticipates selling some or all of the assets of this
subsidiary. Management believes that the sale of these assets plus
the recovery of all or a portion of the accounts receivable owned by
Perspectives will provide the majority of the financing needed to
expand the affiliate network of LSOs.
If these objectives are accomplished, management believes, but there
is no assurance, that the expansion of the affiliate network of LSOs
will result in profitable operations and positive cash flows. If
unsuccessful, the Company may be unable to continue as a going
concern. The financial statements, however, have been prepared
assuming the Company will continue as a going concern and reflect no
adjustments that might result from the outcome of these
uncertainties.
F-7
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TELE-LAWYER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2001 AND 2000
=============================================================================
6. Acquisition of Legal Access Technologies, Inc:
On June 12, 2001, in a transaction commonly referred to as a reverse
acquisition and accounted for as a purchase, the Company effectively
acquired Dynamic Associates, Inc., which contemporaneously changed
its name to Legal Access Technologies, Inc. (LATI) and the Company
became a wholly-owned subsidiary of LATI. In a reverse acquisition,
the legal acquiree is treated for financial reporting purposes as the
accounting acquirer and, accordingly, future consolidated financial
statements will be prepared as if Tele-Lawyer, Inc. acquired Legal
Access Technologies as of June 12, 2001.
The agreement called for each of the Company's shareholders to
receive one new share of LATI common stock for each common share of
the Company held; accordingly, 5,354,997 shares were issued to the
Company's shareholders. LATI's shareholders received one new share
of LATI common stock for every 153 shares held; accordingly, 490,096
shares were issued to LATI's shareholders. In addition, each holder
of an option or warrant to purchase shares of the Company's common
stock exchanged the options and warrants for the same rights in LATI.
Management has no intention of continuing the pre-merger operations
of Dynamic, but instead will liquidate or sell its assets. The
principal assets of LATI at the time of the reverse acquisition
included certain account receivables and service contracts of its
subsidiary. For purposes of the following proforma, condensed
balance sheet, the Company has classified these assets as "assets
held for sale" and valued them based on subsequent and preliminary
sale negotiations. The following proforma, condensed balance sheet
assumes the merger occurred on April 30, 2001:
Proforma
LATI
Consolidated
(unaudited)
------------
Current assets
Cash $ 1,302
Assets held for sale 3,300,000
Other 3,715
------------
3,305,017
Other assets 126,268
------------
$ 3,431,285
============
Current liabilities $ 269,925
Stockholders' equity 3,161,360
------------
$ 3,431,285
============
Common shares outstanding 5,845,095
============
F-8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Current Report on Form
8-K to be signed on its behalf by the undersigned hereunto duly
authorized.
LEGAL ACCESS TECHNOLOGIES, INC.
By: /s/ Michael A. Cane
Date: August 27, 2001 _______________________
MICHAEL A. CANE
President, Secretary & Director
5