UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 31, 2003
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission File Number: 000-19457
LEGAL ACCESS TECHNOLOGIES, INC.
-------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Nevada 87-0473323
- ------ ----------
(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
2300 W. Sahara Ave., Suite 500
Las Vegas, NV 89102
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (702) 949-6115
Indicate by a check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,088,732 shares of Common Stock as
of January 31, 2003.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B and,
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders' equity (deficiency) in conformity with generally accepted
accounting principles. For further information, please refer to the annual
financial statements of the Company and related notes included within the
Company's Annual Report on Form 10KSB for the fiscal year ended April 30, 2002,
previously filed with the Securities and Exchange Commission, from which the
information as of April 30, 2002 is derived.
In the opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature. Operating
results for the three and nine months ended January 31, 2003 are not necessarily
indicative of the results that can be expected for the year ending April 30,
2003.
The financial statements present the activities of Legal Access Technologies,
Inc. ("LATI") and its subsidiaries Tele-Lawyer, Inc. ("Tele-Lawyer") and
Perspectives Health Management Corp. ("Perspectives"). All significant
inter-company balances and transactions have been eliminated in the
consolidation.
GENERAL
The Company's consolidated financial statements included with this Form 10QSB
are as follows:
(A) Balance sheets as of January 31, 2002 (unaudited) and April 30, 2002
(B) Statements of operations for the three and nine months ended January 31,
2003 and 2002 (unaudited)
(C) Statements of cash flows for the nine months ended January 31, 2003 and
2002 (unaudited)
2
LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2003 AND APRIL 30, 2002
================================================================================
January 31, 2003
(Unaudited) April 30, 2002
----------------------------------
ASSETS
Current Assets
Cash and cash
equivalents $ 139,277 $ 1,145,512
Accounts receivable,
trade 28,011 316,912
Accounts receivable,
discontinued business
segment, net of
allowances 985,739 1,229,363
Prepaid expenses
and other 4,392 22,140
----------------------------------
1,157,419 2,713,927
Property and equipment,
net of accumulated
depreciation of
$139,778 and $112,702 178,310 160,031
Software license,
net 181,880 213,147
----------------------------------
$ 1,517,609 $ 3,087,105
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 156,173 $ 79,735
Accrued expenses 151,378 155,686
----------------------------------
307,551 235,421
Long-term liabilities
Convertible notes and accrued interest 264,550 249,288
----------------------------------
572,101 484,709
----------------------------------
Stockholders' equity
Common stock,
$0.001 par value,
100,000,000 shares
authorized, 6,088,732 and
6,071,232 shares issued
and outstanding 6,088 6,071
Additional paid-in
capital 6,049,097 6,031,614
Deficit (5,109,677) (3,435,289)
----------------------------------
945,508 2,602,396
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$ 1,517,609 $ 3,087,105
==================================
See notes to consolidated financial statements
3
LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED JANUARY 31, 2003 AND 2002 (Unaudited)
================================================================================
Three Months Three Months Nine Months Nine Months
ended ended ended ended
January 31, January 31, January 31, January 31,
2003 2002 2003 2002
----------------------------------------------------
Revenues $ 162,763 $ 238,549 $ 499,087 $ 343,212
----------------------------------------------------
Operating costs and expenses
Legal support services 138,891 122,818 462,964 176,928
Software research and
development 132,076 319,502 579,266 778,084
Selling, general, and
administrative 501,943 294,275 1,122,267 787,039
----------------------------------------------------
772,910 736,595 2,164,497 1,742,051
----------------------------------------------------
Loss from operations (610,147) (498,046) (1,665,410) (1,398,839)
Other income (expense)
Interest (4,707) 5,417 (10,378) (16,102)
Rentals 200 600 1,400 1,801
----------------------------------------------------
Loss from continuing operations (614,654) (492,029) (1,674,388) (1,413,140)
Income from operations of
discontinued business segment 46,308
----------------------------------------------------
Net loss $ (614,654) $ (492,029) $(1,674,388) $(1,366,832)
====================================================
Basic and diluted income (loss)
per common share:
Continuing operations $ (0.10) $ (0.08) $ (0.28) $ (0.24)
Discontinued operations 0.01
----------------------------------------------------
Net $ (0.10) $ (0.08) $ (0.28) $ (0.23)
=========== =========== ============ ============
Weighted average common
shares outstanding 6,088,732 6,071,232 6,078,232 5,917,985
=========== =========== ============ ============
See notes to consolidated financial statements
4
LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JANUARY 31, 2003 AND 2002 (Unaudited)
================================================================================
Nine Months ended Nine Months ended
January 31, 2003 January 31, 2002
---------------------------------------
- ---
Operating activities
Net cash used in operating
activities $ (1,164,550) $(1,076,413)
------------------------------------------
Investing activities
Purchase of software license (1,250) (26,812)
Purchase of property and
equipment (84,059) (35,359)
------------------------------------------
Net cash used in investing
activities (85,309) (62,171)
------------------------------------------
Financing activities
Proceeds from promissory note 150,000
Repayment of promissory note (150,000)
Proceeds from loans, related parties 257,000
Repayment of loans, related parties (312,000)
Net cash received from
disposal of discontinued
business segment 2,935,231
Collection of accounts
receivable of a discontinued
business segment 243,624 294,145
------------------------------------------
Net cash provided by
financing activities 243,624 3,174,376
------------------------------------------
Net increase (decrease) in
cash and cash equivalents (1,006,235) 2,035,792
Cash and cash equivalents,
beginning of period 1,145,512 1,302
------------------------------------------
Cash and cash equivalents,
end of period $ 139,277 $ 2,037,094
==========================================
Reconciliation of net loss
to net cash used in
operating activities
Net loss (1,674,388) (1,366,832)
Non-cash items:
Depreciation and amortization 98,297 35,532
Common stock issued for services 17,500 100,000
Increase in operating
(assets) liabilities
Accounts receivable 288,901 (37,010)
Prepaid expenses and other 17,748 (22,196)
Accounts payable 76,438 127,793
Accrued expenses (4,308) 86,300
Accrued interest 15,262
------------------------------------------
Net cash used in
operating activities $ (1,164,550) $(1,076,413)
==========================================
See notes to consolidated financial statements
5
LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JANUARY 31, 2003 (UNAUDITED)
================================================================================
Common
stock Additional
Shares issued par paid-in
and outstanding value Capital Deficit
---------------------------------------------
Balances, May 1, 2002 6,071,232 $6,071 $6,031,614 $(3,435,289)
Common Stock issued 17,500 $ 17 $ 17,483
Net loss (1,674,388)
---------------------------------------------
Balances, January 31, 2003 6,088,732 $6,088 $6,049,097 $(5,109,677)
=============================================
See notes to consolidated financial statements
6
LEGAL ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. Bad Debt Expense.
In the most recent quarter, the Company recorded bad debt expense totaling
approximately $316,000 primarily related to the termination of one contract for
case management systems that was determined to be not technologically feasible
to complete in a reasonable amount of time, and the project was discontinued.
The parties have agreed to return certain collateral that originally secured the
Company's receivable in a mutual release settlement.
2. Going concern contingency.
As more fully discussed in Item 2, Management's Discussion and Analysis or Plan
of Operations, management estimates that without additional financing, the
Company's cash resources will likely be exhausted by June 2003. This condition
indicates that the Company may be unable to continue as a going concern.
Management's plans in this regard are also described in Item 2 herein. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Current Plan of Operations
Historically, as part of the Tele-Lawyer operations, we have been in the
business of arranging for the provision of legal advice and information to
consumers of legal services through licensed attorneys. We also produce and
sell specialized phone conferencing applications to professionals and
associations. The specialized phone conference applications are most often in
the form of continuing education programs for attorneys called "Tele-Seminars".
Over the past few years, we changed our business focus by concentrating on sales
of technology and services to, and the development of strategic partnerships
with, various non-profit associations and government agencies in order to create
a number of statewide hubs for access to legal services. This process has
involved the expansion of our product and service offerings, as well as our
geographic coverage.
Unfortunately, our plans to set up these statewide hubs through strategic
partnerships and vendor arrangements with existing legal aid groups, bar
associations and state and federal courts ("Legal Service Organizations") have
taken longer than expected. Management attributes the delays to the difficulties
encountered in the development of the software, slow response by our clients and
insufficient resources necessary to support the development and hosting of our
products. As a result of these problems and the delays, we have largely
exhausted our cash reserved and have been seeking additional funding. In our
efforts to conserve our cash resources, we have temporarily suspended efforts to
expand our client/affiliate network of Legal Service Organizations nationwide
and are currently evaluating our long-term strategy for this component of our
business. We currently service Legal Service Organizations in Nevada, Ohio,
Illinois, Pennsylvania, Tennessee, Kentucky, Florida and Maryland. We have also
cut costs and reduced our staff by 60%. However, without additional financing,
we estimate that our cash resources will likely be exhausted by June 2003. These
conditions indicate that the Company may be unable to continue as a going
concern.
Management's plans to overcome these obstacles include continuing to follow up
on our existing business plan and seeking other business opportunities. As a
result, over the reported quarter and throughout the fourth quarter, management
has investigated, and expects to continue investigate and test, several new
business opportunities outside of the legal services arena, including certain
expanded uses of our existing technology. The structure and the terms of any
such financing have not yet been determined. If a financing is completed,
management believes, but there is no assurance, that we will be able to complete
the development of our products and services. Management does not believe that
we will have profitable operations or positive cash flow prior to our fiscal
year end.
Technology Development
During the most recent quarter, we have continued to be involved in testing and
stabilizing our products and services with clients. This implementation and
testing period has taken longer than we expected but is not yet complete with
regard to certain clients. We expect this period to extend through the fourth
quarter.
8
Management continues to investigate, review and discuss opportunities to acquire
or partner in technology development and deployment that enhance the delivery of
legal services and support the operation of Legal Service Organizations.
Financial Position
The decrease in cash since April 30, 2002 is due to the development of our case
management system and problems that have arisen during the development and
implementation cycles of these systems. We have experienced numerous delays in
the launching of our case management system and generating revenue. Management
believes these problems are being resolved and that upon implementation of the
systems over the coming months, revenues will be increased.
At January 31, 2003, trade accounts receivable was $28,011 as compared with
$316,912 as of April 30, 2002. The decrease reflects our write off of
approximately $316,000 of accounts receivable due to the termination of one
contract for our technology because management determined that it was
technologically infeasible to complete this contract in a reasonable amount of
time. We have agreed with the other party to return certain collateral that
originally secured our receivable in a mutual release settlement.
Not included in these accounts receivable are those of Perspectives, which are
labeled as "Accounts receivable, discontinued business segment, net of
allowances".
Equipment purchased during the nine months ended January 31, 2003 totaled
approximately $84, 059.
The increase in accounts payable since April 30, 2002 was attributable to a
contract obligation to a client.
Critical Accounting Policies
Revenue recognition. Legal support services revenue is recognized as the
- --------------------
services are provided. Revenue from service contracts is recognized over the
contract term. Revenue from contracts to develop software modifications are
generally recognized when the services are completed. Revenue from more
significant or longer term arrangements to produce custom software applications
are generally recognized using the percentage-of-completion method, except when
collectibility is not reasonably assured in which case profit is realized using
the installment method. The percentage of completion is determined based upon
labor hours expended compared to total expected development hours. Development
hours associated with the production of the core software is included in the
measurement of the contract's progress toward completion as the software is
customized. Hours contemporaneously expended for routine enhancements of the
core software, however, are excluded from the calculation.
Research and development costs. Expenditures relating to the development of new
- -------------------------------
products and processes, including significant improvements and refinements to
existing products, are expensed as incurred.
9
Results of Operations
Revenue growth has been slowed by the longer than expected time to develop and
implement our technology products and services. In addition, we experienced a
significant reduction in third quarter sales of our Tele-Seminars products.
Although the case management system has been completed, due to the longer than
expected testing and implementation periods and time required to stabilize the
product, many of our legal service organization clients have not been fully
activated and some have cancelled their contracts with us. General and
Administrative Expenses were $501,943 and $1,122,267 during the three and nine
months ended January 31, 2003 and $294,275 and $787,039 during the same periods
in the prior year. The increase in these expenses for the comparative periods
reflects the Company's write off of approximately $316,406 of bad debt expense.
We incurred $132,076 and $579,266 in software research and development costs
during the three and nine months ended January 31, 2003, and $319,502 and
$778,084 during the same periods in the prior year. As a result, we showed a
net loss of $614,654 or $.10 per share in this quarter, as compared to a loss of
$492,029 or $.08 per share in the third quarter last year, and a net loss of
$1,674,388 or $.28 per share for the nine months ended January 31, 2003 and
$1,366,832 or $.23 per share for the nine months ended January 31, 2002.
We have stopped making any substantial investment in the development of our
software products, focusing on the implementation of the web-based systems for
Legal Service Organizations and new business opportunities. During the fourth
quarter of the current fiscal year, we expect revenues to decline slightly due
to our re-evaluation of our business plan and refocus on new business
opportunities.
Liquidity and Capital Resources
We expect our negative cash flows to decrease over the coming quarter due to a
number of cost cutting actions taken by our management, including a reduction in
personnel and the subleasing of a larger portion of our office space. However,
we also expect to continue negative cash flows from our operating activities and
expect our cash resources to be exhausted by June 2003 without additional debt
or equity financing. The cash requirements for any expansion in the short-term
will need to be obtained by outside financing. Management is currently working
to raise additional capital through the sale of our equity securities, while
continuing cost cutting measures.
Forward Looking Statements
The information contained in this section and elsewhere may at times represent
management's best estimates of our future financial and technological
performance, based upon assumptions believed to be reasonable. Management makes
no representation or warranty, however, as to the accuracy or completeness of
any of these assumptions, and nothing contained in this document should be
relied upon as a promise or representation as to any future performance or
events. Our ability to accomplish these objectives and whether or not it will
be financially successful is dependent upon numerous factors, each of which
could have a material effect on the results obtained. Some of these factors are
within the discretion and control of management and others are beyond
management's control. Management considers the assumptions and hypothesis used
in preparing any forward looking assessments of profitability contained in this
document to be reasonable; however, we cannot assure investors that any
projections or assessments contained in this document, or otherwise made by
management, will be realized or achieved at any level.
10
ITEM 3. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the
"Exchange Act"), we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures within the 90 days prior
to the filing date of this report. This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are adequate in timely alerting management to material information relating to
us that is required to be included in our periodic SEC filings. There have been
no significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the date we carried out our
evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 1, 2002, a suit was filed by an individual against us and two of our
officers regarding a portion of a note converted to common stock prior to the
reverse acquisition in June of 2001. On November 25, 2002, we filed a
counterclaim against the individual based on an $18,500 debt that was assigned
to us by the beneficial holder of the note in question. Management does not
believe that this matter will have a material adverse effect on our financial
position, results of operations or cash flows.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
99.1 Officers' Certification under Section 906 of the Sarbanes-Oxley Act of
2002
(b) Reports on Form 8-K: None
12
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 thereunto duly authorized.
LEGAL ACCESS TECHNOLOGIES, INC.
Date: March 20, 2003
/s/ MICHAEL A. CANE
_______________________
MICHAEL A. CANE
Chief Executive Officer
President, Secretary & Director,
Principal Executive Officer
/s/ STEVEN D. FELLOWS
_______________________
STEVEN D. FELLOWS
Chief Financial Officer &
Principal Accounting Officer,
Principal Financial Officer
13
CERTIFICATIONS
The undersigned, Michael Cane and Steven D. Fellows, Chief Executive Officer and
Chief Financial Officer of Legal Access Technologies, Inc. (the "Registrant"),
each certify that;
(1) I have reviewed this quarterly report on Form10-QSB of Legal Access
Technologies, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report;
(4) The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(5) The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
14
(6) The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other facts that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 20, 2003
By: /s/ Michael Cane
-----------------------
Name: Michael Cane
Title: Chief Executive Officer
By: /s/ Steven D. Fellows
-----------------------
Name: Steven D. Fellows
Title: Chief Financial Officer
15