U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
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[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 000-28193
Legal Club of America Corporation
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(Name of Small Business Issuer in its Charter)
Colorado 84-1174969
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(State or other jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
1601 N. Harrison Pkwy., Suite 200
Sunrise, Florida 33323
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(Address of Principal Executive Offices) (Zip Code)
(954) 267-0920
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
------------------------------
(Title of Class)
Check whether the issuer (1) filed all the reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X} No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]
The Registrant had $2.1 million in gross revenue for the year ended June 30,
2000.
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant on September 29, 2000 was $5,884,516, based on the average bid and
asked price of the Common Stock on that date.
As of September 30, 2000, there were issued and outstanding 19,011,594 shares of
the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None.
The Registrant hereby amends Part III, Items 9, 10, 11 and 12 of its Annual
Report on Form 10-KSB for the year ended June 30, 2000, which was filed with the
Commission on September 28, 2000.
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth the names, ages and positions held with respect
to each Director and Executive Officer:
Name of Officer/Director Age Positions With Company
------------------------ --- -------------------------------------------------
Brett Merl.............. 39 Chief Executive Officer and Chairman of the Board
Richard Campanaro ..... 58 President and Chief Operating Officer
Michael Samach.......... 46 Chief Financial Officer
Jason Krouse............ 32 Executive Vice President of Sales and Director
A. Clinton Allen........ 57 Director
Ronald G. Agypt......... 44 Director
Matt Cohen.............. 42 Director
Brett Merl has served as our Chief Executive Officer and Chairman of the Board
since October 1999. From January 1999 to October 1999, he served as our
President, Chief Executive Officer and Director. From January 1997 to January
1999, he served as our Chief Executive Officer. From February 1996 to December
1996, he served in various capacities for the Company. From December 1989 to
January 1996, Mr. Merl was Vice President of Bernstein Zimmerman Financial, Inc.
("BZFI"), an insurance agency specializing in group benefits and pension
planning. BZFI is also a benefits coordinator for three South Florida credit
unions, offering financial services to credit union members and the member
corporations. Mr. Merl received a B.S. degree in Marketing from Long Island
University in 1993.
Richard Campanaro began serving as our President and Chief Operating Officer in
October 1999. From March 1996 to October 1999, he served as Chief Operating
Officer of Scibal Associates, Inc., a third party administration company, and
from March 1995 to March 1996, he acted as consultant for the company. From
March 1993 to March 1996, Mr. Campanaro served as Director and consultant for
Century Industries, Inc. Mr. Campanaro previously served as president and chief
executive officer of Tandem Financial Group, an insurance company jointly owned
by Merrill Lynch and Co. and Equitable Life Assurance Co., now part of Merrill
Lynch Insurance Group. On September 15, 2000, Mr. Campanaro resigned as
President and Chief Operating Officer.
Michael Samach began serving as our Chief Financial Officer in September 1999.
From February 1999 to September 1999, he acted as an independent financial
consultant. From September 1998 to February 1999, Mr. Samach served as the Chief
Financial Officer of Equipnet, Inc., a medical network management company. From
January 1998 to August 1998, he served as the Chief Financial Officer of CHCS,
Inc., also a medical network management company. From January 1996 to November
1997, he served as the Chief Financial Officer and the Chief Operating Officer
of American Medical Healthcare, Inc., a start-up HMO. From May 1993 to January
1996, Mr. Samach served as the Finance Director of the Florida Region for
Foundation Health of Florida. Mr. Samach is a Certified Public Accountant and
holds an M.B.A. and an M.S. degree from the University of Miami. He also holds a
B.S. degree from Florida State University.
Jason Krouse has served as our Executive Vice President of Sales, since August
1998 and as a Director since December 1998. In 1997, Mr. Krouse was employed by
the law firm of Kahl and Associates and in 1996 was associated with the law firm
of Bob, Spier, Ciotelli. Mr. Krouse received a J.D. degree from Nova Southern
Shepard Broad Law Center in 1997 and received his B.S. degree in marketing from
Florida Atlantic University in 1990. Mr. Krouse sits on the board of directors
of the Mass Marketing Insurance Institute and the National Association of
Voluntary Enrollment Specialists.
A. Clinton Allen has served as a Director since 1998. Since 1987, Mr. Allen has
served as vice chairman of Psychemedics Corp. He also serves as a director for
The DeWolfe Companies, Swiss Army Brands, Steinway Musical Response, USA and
DCRI Corp. Mr. Allen was also the first outside director of Blockbuster
Entertainment Corp.
2
<PAGE>
Ronald G. Agypt has served as a Director and the Chairman of the Compensation
Committee since March 1999. Since January 1998, Mr. Agypt has been the National
Sales Manager for Worksite Solutions, a subsidiary of AON, with which we have
entered an agreement for them to market our services through their worksite
markets. From 1997 through 1998, Mr. Agypt served as a Vice President of
Worksite Solutions. From 1990 through 1997, Mr. Agypt served as a Vice President
and Divisional Manager of Combined Insurance Company of America, also a
subsidiary of AON.
Matt Cohen has served as a Director since September 1999. From July 1997 to
August 1999, Mr. Cohen served as our Chief Financial Officer. From 1988 until
July 1997, Mr. Cohen served as vice president and chief financial officer of
Standard Brands of America, a retailer of consumer electronics and appliances.
Mr. Cohen also serves on the Board of Directors of Interactive Technologies.com
Ltd. and UBuy.com
All directors of the Company hold office until the next annual meeting of
stockholders or until their successors are elected and qualified. As
compensation for attending the meetings of our board of directors non-employee
directors receive $2,500 per meeting. Our employee directors do not receive any
additional compensation for attending the meetings.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Federal securities laws require executive officers, directors and persons owning
ten percent or more of the Company's common stock to file reports (Forms 3, 4
and 5) with the Securities and Exchange Commission (SEC) and the NASD OTC
Bulletin Board relating to the number of shares of Company common stock that
they own and any changes in their ownershipDuring the year ended June 30, 2000,
based solely on review of the copies of reports under Section 16 (a) filed by
officers, directors and parties holding 10% or more of the Company's common
stock and furnished to the Company and written representations provided by such
persons to the Company, the Company believes that none of the reports required
to be filed by its executive officers and directors, and
greater-than-ten-percent beneficial owners under Section 16 (a), have been
filed.
ITEM 10. EXECUTIVE COMPENSATION
The following table and notes present for the three years ended June 30, 2000,
the compensation paid by the Company to its Chief Executive Officer and the
Executive Officers who received compensation of at least $100,000 in 2000, 1999
or 1998.
(See following page)
3
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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Annual Compensation Long-Term Compensation
------------------------------------------- ----------------------------------
Awards Payouts
----------------------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/SAR Payouts Compensation
Principal Position Year ($) ($) ($) ($) s(#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h)(1) (i)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brett Merl, 2000 $186,346(2) $ -- $ 8,942 $ -- -- -- $ 2,296
Chairman of the
Board and Chief
Executive Officer
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1999 159,038 50,000(3) 3,000 -- 82,090 -- 163
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1998 58,413 -- -- -- -- -- --
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Richard Campanaro, 2000 123,231 -- -- -- 500,000 -- --
President and
Chief Operating
Officer (4)
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Michael Samach, 2000 100,212 -- 6,346 -- 300,000 -- --
Chief Financial
Officer
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Jason Krouse, Vice 2000 95,536 1,500 7,154 -- -- -- 659
President, Sales
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1999 58,467 -- 1,800 -- 18,269 -- --
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1998 38,014 -- -- -- -- -- --
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Matt Cohen (5) 2000 25,385 -- 2,250 -- -- -- --
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1999 128,077 50,000(3) 3,000 -- 67,164 -- --
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1998 90,796 -- -- -- -- -- --
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</TABLE>
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(1) The Company does not have a Long-Term Incentive Plan.
(2) Includes $37,500 of compensation voluntarily deferred by the employee.
(3) Bonuses voluntarily deferred in fiscal year 1999. Paid in fiscal year 2000.
(4) Richard Campanaro became President and Chief Operating Officer of the
Company in October, 1999 and resigned from these positions on September 15,
2000. None of Mr. Campanaro's options were exercised and all of them were
cancelled upon termination. In connection with his severance arrangements,
however, Mr. Campanaro will receive warrants to purchase 200,000 shares of
common stock exercisable at any time within five years from the date of
grant at an exercise price of $0.35 a share.
(5) Matt Cohen was the Company's Chief Financial Officer until September 1999.
He has been on the Board of Directors since 1997.
4
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
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Individual Grants
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Number of
Securities % of Total
Underlying Options
Options Granted Exercise
Granted to Employees of Base
in Fiscal Price Expiration
Name (1) # (1) (3) Year (2) ($/Sh.) Date
--------------------------------------------------------------------------------
Richard Campanaro 500,000 36.9% $1.00 (4)
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Michael Samach 300,000 22.2% 1.00 11/9/09
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(1) No other named executive officer received any option grants during fiscal
year 2000, except Mr. Campanaro upon becoming President and Chief Operating
Officer, and Mr. Samach upon becoming Chief Financial Officer of the
Company.
(2) Percentages are based upon the total number of options of the Company's
common stock granted during the fiscal year ended June 30, 2000.
(3) The options have a ten-year vesting term and vest cumulatively over three
years at the rate of 33.3%, 66.6% and 100%, beginning November 1999.
(4) Mr. Campanaro resigned as President and Chief Operating Officer of the
Company on September 15, 2000. None of Mr. Campanaro's options were
exercised and all of them were cancelled upon termination. In connection
with his severance arrangements, however, Mr. Campanaro will receive
warrants to purchase 200,000 shares of common stock exercisable at any time
within five years from the date of grant at an exercise price of $0.35 a
share.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexperied
Unexercised In-the-money
Options At Options At
Year-end (#) Year-end ($)(1)
--------------------------------------------------------------------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
--------------------------------------------------------------------------------
Brett Merl -- -- 82,090 / 0 $0 / $0
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Richard Campanaro (2) -- -- 166,667 / 500,000 $0 / $0
--------------------------------------------------------------------------------
Michael Samach -- -- 100,000 / 300,000 $0 / $0
--------------------------------------------------------------------------------
Jason Krouse -- -- 18,269 / 0 $0 / $0
--------------------------------------------------------------------------------
Matt Cohen -- -- 67,164 / 0 $0 / $0
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(1) These year-end values represent the difference between (a) the fair market
value of the Company's common stock underlying the options at June 30, 2000
(bid price of $0.78) and (b) the exercise prices of the options.
"In-the-money" means that the fair market value of the underlying stock is
greater than the option's exercise price on the valuation date, June 30,
2000.
(2) Mr. Campanaro resigned as President and Chief Operating Officer of the
Company on September 15, 2000. None of Mr. Campanaro's options were
exercised and all of them were cancelled upon termination. In connection
with his severance arrangements, however, Mr. Campanaro will receive
warrants to purchase 200,000 shares of common stock exercisable at any time
within five years from the date of grant at an exercise price of $0.35 a
share.
5
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with Richard Campanaro,
effective as of October 18, 1999, engaging him to serve as our President and
Chief Operating Officer. This Employment Agreement has a term of one year, with
an initial annual base salary of $180,000. On September 15, 2000 Mr. Campanaro
resigned his position as President and Chief Operating Officer of the Company.
In connection with his severance from the Company, Mr. Campanaro will receive
warrants to purchase 200,000 shares of common stock exercisable for 5 years from
the date of grant at $.35 a share.
The Company entered into an Employment Agreement with Brett Merl, effective as
of July 1, 1997, engaging him to serve as our Chief Executive Officer. The
Employment Agreement had a term of three years, with an initial annual base
salary of $125,000. In December 1999, the Compensation Committee approved,
effective January 1, 2000, a new employment agreement, to reflect Mr. Merl's
greater responsibilities given the Company's expanded business activities. This
new Employment Agreement has a term of three years, with an initial annual base
salary of $225,000.
The Company entered into an Employment Agreement with Michael Samach, effective
as of September 17, 1999, engaging him to serve as our Chief Financial Officer.
This Employment Agreement has a term of three years, with an initial annual base
salary of $135,000.
The Company entered into an Employment Agreement with Jason Krouse dated
December 12, 1997, engaging him to serve as our Vice President of Sales. This
Employment Agreement has a term of five years, with an initial annual base
salary of $55,000 per year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information with respect to the beneficial ownership
of the our capital stock by (i) each of the directors of the Company, (ii) each
"named executive officer," (iii) each person known by the Company to be the
beneficial owner of five percent or more of each class of our voting securities,
and (iv) all executive officers and directors as a group, as of September 30,
2000. Unless otherwise indicated, the Company believes that the beneficial owner
has sole voting and investment power over such shares.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned of Percentage
Name and Address of Beneficial Owner Designated Class(1) Ownership of Class(1)(2)
------------------------------------- ----------------------------- ------------------------
<S> <C> <C>
Brett Merl 2,003,555 shares common stock 8.1%
Legal Club of America Corp.
1601 N. Harrison Pkway. Bldg. A #200
Sunrise, FL 33323
Richard Campanaro (3)
Legal Club of America Corp.
1601 N. Harrison Pkway. Bldg. A #200
Sunrise, FL 33323
Michael Samach 200,000 shares of common stock 0.8%
Legal Club of America Corp.
1601 N. Harrison Pkway. Bldg. A #200
Sunrise, FL 33323
Jason Krouse 600,519 shares common stock 2.4%
Legal Club of America Corp.
1601 N. Harrison Pkway. Bldg. A #200
Sunrise, FL 33323
A. Clinton Allen 415,000 shares common stock 1.7%
A. C. Allen & Co.
1280 Mass. Ave.
Cambridge, MA 02138
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned of Percentage
Name and Address of Beneficial Owner Designated Class(1) Ownership of Class(1)(2)
------------------------------------- ----------------------------- ------------------------
<S> <C> <C>
Ronald G. Agypt 125,000 shares common stock 0.5%
AON
400 N. Skokie Bldg., Suite 450
Northbrook, IL 60062
Matt Cohen 22,000 shares common stock 0.1%
Interactive Technologies.Com, Ltd.
11336 Wiles Road
Coral Springs, Florida 33076
Storie Partners L.P. 16,667 shares of Series A 7.2%
c/o Howard, Rice, Nemerovsky, Candy, Convertible Preferred Stock (4)
Falk & Rabkin
Three Embarcadero, 7th Floor 1,000 shares of Series B
San Francisco, CA 94111-4065 Convertible Preferred Stock (4)
Bulldog Capital Management 10,000 shares of Series B 5.6%
Convertible Preferred Stock (5)
33 North Garden Ave., Suite 750
390,000 warrants for Common Stock (4)
Clearwater, FL 33755
All Executive Officers and Directors 3,366,074 shares common stock 13.6%
as a group (6 persons) (3)
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</TABLE>
(1) Includes the amount of shares the beneficial owner has the right to acquire
within 60 days from options, warrants or similar rights.
(2) Calculation of total number of shares of outstanding common stock of the
corporation is made on the basis of an assumed conversion or exercise of
all instruments exercisable to purchase or convertible into common stock
within 60 days that are held by the Company's directors, officers, and 10%
or more stockholders, including the Series A Convertible Preferred Stock
and the Series B Convertible Preferred Stock.
(3) Mr. Campanaro resigned as President and Chief Operating Officer of the
Company on September 15, 2000. None of Mr. Campanaro's options were
exercised and all of them were cancelled upon termination. In connection
with his severance arrangements, however, Mr. Campanaro will receive
warrants to purchase 200,000 shares of common stock exercisable at any time
within five years from the date of grant at an exercise price of $0.35 a
share.
(4) Holding consists of 16,667 shares of Series A Convertible Preferred Stock,
which are convertible into 1,666,770 shares of common stock; and 1,000
shares of Series B Convertible Preferred Stock, which are convertible into
100,000 shares of common stock. If both the Series A and Series B preferred
stocks are converted, these shares would represent 7.2% of the fully
diluted common stock.
(5) Holding consists of 10,000 shares of Series B Convertible Preferred Stock,
which are convertible into 1,000,000 shares of common stock; and 390,000
warrants to purchase Common Stock. If the Series B preferred stock is
converted and the warrants are exercised, these shares would represent 5.6%
of the fully diluted common stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Brett Merl and Jason Krouse subscribed for and were issued our common stock in
exchange for promissory notes from each officer in the approximate amount of
$132,000. The notes, together with the interest accrued thereon, are due
December 26, 2003.
Jason Krouse extended the Company a loan on October 27, 1999, in the amount of
$50,000, bearing interest at a rate of 7% per annum and maturing on April 26,
2000. At June 30, 2000, $45,000 was outstanding on the loan.
The Company entered into a Consulting Agreement effective February 16, 1999 with
A.C. Allen & Company, an affiliate of A. Clinton Allen, one of our directors.
Pursuant to this Consulting Agreement, A.C. Allen & Company receives
compensation in the amount of $4,000 per month in exchange for providing
business-consulting services. During the year ended June 30, 2000, the Company
paid A.C. Allen & Company consulting fees totaling $44,000,
7
<PAGE>
The Company entered into an Agreement dated September 1999 with Matthew Cohen,
our former Chief Financial Officer and Brett Merl, our Chief Executive Officer.
Pursuant to this Agreement, among other things, Brett Merl agreed to assume
certain outstanding obligations of Mr. Cohen under a promissory note to the
Company in the principal amount of $132,000, in exchange for receiving 700,000
shares of the Company's common stock from Mr. Cohen.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
LEGAL CLUB OF AMERICA CORPORATION
Dated: October 26, 2000 By: /s/ BRETT MERL
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Brett Merl
Chairman and Chief Executive Officer
Dated: October 26, 2000 By: /s/ MICHAEL SAMACH
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Michael Samach
Chief Financial Officer
Dated: October 26, 2000 By: /s/ ELVIE LAMAR WEBER
------------------------------------
Elvie Lamar Weber
Controller (Chief Accounting Officer)
8
