23
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended April 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-23903
EAUTOCLAIMS.COM, INC.
(Exact name of registrant as specified in charter)
Nevada 95-4583945
------ ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
110 East Douglas Road, Oldsmar, Florida 34677
--------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone Number, including area code: (813) 749-1020
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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.
[ X ] Yes [ ] No
The number of shares outstanding of the Issuer's Common Stock,
$.001 Par Value, as of April 30, 2003 was 21,103,034.
Transitional Small Business Disclosure Format:
[ ] Yes [ X ] No
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
INDEX TO FORM 10-QSB
--------------------------------------------------------------------------------
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 2
Balance Sheets 3
Statements of Operations 4
Statement of Stockholders Deficiency 5
Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Control and Procedures 18
Item 5. Other Information 18
Signatures 20
Certifications 21
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The consolidated financial statements of eAutoclaims.com, Inc. and Subsidiary
(collectively the "Company") included herein were prepared, without audit,
pursuant to rules and regulations of the Securities and Exchange Commission.
Because certain information and notes normally included in financial statements
prepared in accordance with generally accepted accounting principles were
condensed or omitted pursuant to such rules and regulations, these financial
statements should be read in conjunction with the financial statements and notes
thereto included in the audited financial statements of the Company as included
in the Company's Form 10-KSB for the year ended July 31, 2002.
2
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
-----------------------------------------------------------------------------------------------------------------------------
April 30, 2003 July 31, 2002
-----------------------------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
Current Assets:
Cash $ 283,535 $ 44,655
Accounts receivable, less allowance for doubtful accounts
of $280,000 and $400,000, respectively 1,186,508 864,352
Due from related parties 125,221 143,384
Prepaid expenses and other current assets 61,118 233,513
-----------------------------------------------------------------------------------------------------------------------------
Total current assets 1,656,382 1,285,904
Property and Equipment, net of accumulated depreciation
of $910,152 and $543,766, respectively 1,076,055 999,149
Goodwill 1,093,843 1,093,843
Other Assets 44,540 24,930
Deferred Income Tax Asset, net of valuation
allowance of $5,618,000 and $5,649,000, respectively - -
-----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 3,870,820 $ 3,403,826
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and accrued expenses $ 6,957,913 $ 5,307,921
Deferred software subscription revenue 157,103 284,676
Loans payable - stockholders 125,000 135,000
Current portion of capital lease obligation 19,953 17,375
-----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 7,259,969 5,744,972
Capital Lease Obligation 92,995 24,672
-----------------------------------------------------------------------------------------------------------------------------
Total liabilities 7,352,964 5,769,644
Stockholders' Deficiency:
Convertible preferred stock - $.001 par value; authorized 5,000,000 shares,
issued and outstanding 247 shares and 268 shares respectively
aggregate liquidation preference of $1,235,000 and $1,340,000 respectively 1 1
Common stock - $.001 par value; authorized 50,000,000 shares, issued
and outstanding 21,103,034 shares and 18,390,118 shares respectively 21,103 18,390
Additional paid-in capital 17,911,461 17,723,229
Accumulated deficit (21,414,709) (20,107,438)
-----------------------------------------------------------------------------------------------------------------------------
Stockholders' Deficiency (3,482,144) (2,365,818)
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficiency $ 3,870,820 $ 3,403,826
=============================================================================================================================
See Notes to Consolidated Financial Statements
3
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Three-month Three-month Nine-month Nine-month
Period Ended Period Ended Period Ended Period Ended
April 30 April 30 April 30 April 30
2003 2002 2003 2002
------------------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Collision repairs management $ 8,210,985 $ 7,229,585 $ 22,407,237 $ 21,341,121
Glass repairs 182,543 186,377 498,867 786,483
Fleet repairs management 190,971 202,565 597,246 931,215
Fees and other revenue 803,673 430,939 1,884,221 1,162,662
------------------------------------------------------------------------------------------------------------------------------------
Total revenue 9,388,172 8,049,466 25,387,571 24,221,481
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Claims processing charges 7,813,145 6,814,781 21,196,700 20,507,428
Selling, general and administrative 1,268,795 1,965,496 5,054,734 5,506,829
Depreciation and amortization 122,601 145,096 367,016 374,376
Amortization of beneficial conversion
feature on convertible debentures and
fair value of warrants issued in
connection with debentures 555,551
------------------------------------------------------------------------------------------------------------------------------------
Total expenses 9,204,541 8,925,373 26,618,450 26,944,184
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 183,631 $ (875,907) $ (1,230,879) $ (2,722,703)
====================================================================================================================================
Adjustment to net income (loss) to
compute income (loss) per
common share:
Preferred stock dividends (24,212) (37,686) (76,392) (135,977)
Deduction relating to Series A
Convertible Preferred Stock - - (408,000)
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to
common stock $ 159,419 $ (913,593) $ (1,307,271) $ (3,266,680)
====================================================================================================================================
Income (loss) per common share
Basic $ 0.01 $ (0.06) $ (0.07) $ (0.24)
Diluted $ 0.01 $ (0.06) $ (0.07) $ (0.24)
====================================================================================================================================
Weighted-average number of common
shares outstanding
Basic 20,651,859 15,520,183 19,654,826 13,666,098
Diluted 22,022,522 15,520,183 19,654,826 13,666,098
====================================================================================================================================
See Notes to Consolidated Financial Statements
4
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
------------------------------------------------------------------------------------------------------------------------------------
Nine month period ended April 30, 2003 - unaudited
Additional
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Deficiency
------------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 2002 268 1 18,390,118 $18,390 $17,723,229 $(20,107,438) $(2,365,818)
Issuance of common stock upon exercise of 958,850 960 8,630 9,590
options
Issuance of common stock for amounts due
to shareholder 84,034 84 9,916 10,000
Issuance of common stock for services 556,881 557 150,718 151,275
Accrued dividends on preferred stock (76,392) (76,392)
Issuance of common stock upon conversion (21) 928,481 927 (927) -
of preferred stock
Issuance of common stock for preferred 184,670 185 19,895 20,080
stock dividends
Net loss (1,230,879) (1,230,879)
------------------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 2003 247 1 21,103,034 $21,103 $17,911,461 $(21,414,709) $(3,482,144)
====================================================================================================================================
See Notes to Consolidated Financial Statements
5
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
-------------------------------------------------------------------------------------------------------------------
Nine-month Nine-month
Period ended Period ended
April 30, 2003 April 30, 2002
(unaudited) (unaudited)
-------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(1,230,879) $(2,722,703)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 366,386 374,376
Amortization of discount on debentures - 555,551
Common stock issued for services 151,275 116,090
Common stock issued for interest 9,211
Common stock issued for rent and option to purchase facility 43,659
Allowance for doubtful accounts 66,132
Changes in operating assets and liabilities net of acquisition:
(Increase) in accounts receivable (322,156) (594,115)
Decrease (increase) in due from related parties 18,163 (35,228)
Decrease (increase) in prepaid expenses and other current assets 172,395 (1,391)
(Increase) in other assets (19,610) (30,465)
Increase in accounts payable and accrued expenses 1,593,680 2,379,713
(Decrease) increase in deferred software subscription revenue (127,573) 121,085
------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 601,681 281,915
------------------------------------------------------------------------------------------------------------------
Cash flows from investing activity:
Purchases of property and equipment (353,236) (633,718)
------------------------------------------------------------------------------------------------------------------
Net cash used in investing activity (353,236) (633,718)
Cash flows from financing activities:
Proceeds from exercise of stock options 9,590 3,260
Principal payments on capital lease (19,155)
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used) in financing activities (9,565) 3,260
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 238,880 (348,543)
Cash at beginning of period 44,655 485,092
------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 283,535 $ 136,549
==================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 30,008 $ 19,343
Supplemental disclosure of noncash investing and financing activities:
==================================================================================================================
Conversion of debentures to common stock $ 650,000
==================================================================================================================
Issuance of common stock for amount due to shareholders $ 10,000 $ 44,000
==================================================================================================================
Issuance of stock for payment of rent $ 49,373
==================================================================================================================
Issuance of stock for preferred stock dividends $ 20,080 $ 133,490
==================================================================================================================
Accrued dividends on preferred stock $ 76,392
==================================================================================================================
Equipment acquired by capital lease $ 90,055
==================================================================================================================
See Notes to Consolidated Financial Statements
6
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 1 - Basis of presentation
The accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of those of a normal recurring nature) necessary to
present fairly the financial position of eAutoclaims.com, Inc. and it's wholly
owned subsidiary as of April 30, 2003 and its results of operations for the
three and nine-month periods ended April 30, 2003 and 2002 and cash flows for
the nine-month periods ended April 30, 2003 and 2002. Results of operations for
the three and nine -month periods ended April 30, 2003 are not necessarily
indicative of the results that may be expected for the year ending July 31,
2003.
The Company derives revenue primarily from collision repairs, glass repairs and
fleet repairs. Revenue is recognized when an agreement between the Company and
its customer exists, the repair services have been completed, the Company's
revenue is fixed and determinable and collection is reasonably assured.
The Company records revenue gross when the Company is the primary obligor in its
arrangements, the Company has latitude in establishing price, the Company
controls what services are provided and where the services will take place, the
Company has discretion in supplier selection, the Company is involved in the
determination of product or service specifications and the Company has credit
risk. The Company records revenue net when situations occur whereby the supplier
(not the Company) is the primary obligor in an arrangement, the amount the
Company earns is fixed or the supplier (and not the Company) has credit risk.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets", which is required to be applied for fiscal years beginning
after December 15, 2001. The Company has adopted SFAS 142 as of August 1, 2002,
SFAS 142 eliminates the amortization of goodwill and certain other intangible
assets. It also requires eAutoclaims.com, Inc. to complete a test for impairment
of these assets annually, as well as a transitional goodwill impairment test
within six months from the date of adoption. SFAS 142 also requires disclosure
of what net income (loss) would have been in all periods presented had SFAS 142
been in effect. The following table is provided to disclose what net income
(loss) would have been had SFAS 142 been adopted in prior periods:
Three-month Nine-month
period ended period ended
April 30, April 30,
2003 2002 2003 2002
----------------------- --------------------------
Net income (loss) $ 183,631 $(875,907) $(1,230,879) $(2,722,703)
Add back: goodwill
amortization 54,692 164,076
---------------------- --------------------------
Adjusted net income (loss) $ 183,631 $ (821,215) $(1,230,879) $(2,558,627)
====================== ==========================
Income (loss) per common share
-basic as reported $0.01 $(0.06) $(0.06) $(0.20)
====================== ==========================
-diluted as reported $0.01 $(0.06) $(0.06) $(0.20)
====================== ==========================
Adjusted income (loss) per common share
-basic $0.01 $(0.05) $(0.06) $(0.19)
====================== ========================
-diluted $0.01 $(0.05) $(0.06) $(0.19)
====================== ========================
7
The company accounts for its employee incentive stock option plans using the
intrinsic value method in accordance with the recognition and measurement
principles of Accounting Principles Board Opinion No 25, "Accounting for Stock
Issued to Employees," as permitted by SFAS No. 123. Had the Company determined
compensation expense based on the fair value at the grant dates for those awards
consistent with the method of SFAS 123, the Company's net income (loss) per
share would have been increased to the following pro forma amounts:
Three-month Nine-month
period ended period ended
April 30, April 30,
2003 2002 2003 2002
----------------------- --------------------------
Net income(loss) as reported $183,631 $ (875,907) $(1,230,879) $ (2,722,703)
Deduct total stock based
employee compensation expense
determined under fair value
based methods for all awards $(127,076) $ (198,054) $ (503,207) $ (681,322)
----------------------- --------------------------
Pro forma net income (loss) $ 56,555 $(1,073,961) $(1,734,086) $(3,404,025)
======================== ==========================
Basic net income (loss)
per share as reported $.01 $(.06) $(.07) $(.24)
Diluted net income (loss)
per share as reported $.01 $(.06) $(.07) $(.24)
Pro forma basic income
(loss) per share $ --- $(.07) $(.09) $(.25)
Pro forma diluted income
(loss) per share $ --- $(.07) $(.09) $(.25)
Note 2 - Per share calculations
Basic net income (loss) per common share is computed using the weighted-average
number of common shares outstanding for the period. For those periods with net
losses, potential common shares have not been included in diluted loss per share
since the effect would be anti-dilutive. Diluted net income per common share is
computed using the weighted average number of shares outstanding adjusted for
the incremental shares attributed to outstanding options to purchase common
stock.
Note 3 - Equity Transactions
On November 20, 2002, a shareholder and officer of the Company converted $10,000
of debt owed to him by the Company into 84,034 shares of common stock (using a
share price of 12 cents per share).
During the nine-month period ended April 30, 2003, employees exercised 958,850
options to purchase shares of the Company's common stock.
During the nine-month period ended April 30, 2003, the Company issued 412,521
shares of common stock in exchange for $118,525 of legal services. During the
nine-months ended April 30, 2003, the Company issued 50,241 shares of common
stock to three directors in exchange for their services. The Company charged
operations $8,750, which was equal to the fair market value of the shares when
earned.
8
During the nine-month period ended April 30, 2003, the Company issued additional
options to employees and board members to purchase 783,000 shares of common
stock where the exercise prices of the options are equal to or greater than the
fair market value of the Company's common stock on the date of each grant.
Additionally, options to purchase 443,067 shares of common stock were canceled.
In August 2002, the Company entered into a contract with a public relations
consultant for services. This agreement calls for the Company to issue 94,119
shares of common stock. During the nine-month period ended April 30, 2003, all
94,119 shares were earned resulting in a charge to operations of $24,000.
On September 5, 2002, 11 shares of preferred stock with a face value of $55,000,
plus dividends of approximately $10,000 were converted into 327,250 shares of
common stock. On January 15, 2003, 4 shares of preferred stock with a face value
of $20,000, plus dividends of approximately $4,100 were converted into 301,123
shares of common stock. On February 19, 2003, 6 shares of preferred stock with a
face value of $30,000, plus dividends of approximately $6,400 were converted
into 484,778 shares of common stock.
Note 4 - Salary Commitments
During the quarter ended April 30, 2003 the Company entered into new or amended
employment agreements with five of its officers for two years. Minimum annual
commitments under the new agreements are as follows:
Fiscal years ended:
July 31, 2003 $152,500
July 31, 2004 $624,700
July 31, 2005 $436,700
----------
Total $1,213,900
==========
Note 5 - Change in Control
On March 27, 2003 the Board of Directors voted to grant certain key employees a
total of 2,000,000 shares of the Company's common stock and the current and
future board members 1,000,000 shares of common stock if there is a change in
control of greater than 50% ownership of the Company's common shares or
substantially all it's assets.
Note 6 - Additional information
The Company's records and the records of its transfer agent differ with respect
to the number of outstanding shares of the Company's common stock. According to
the transfer agent, the number of shares of common stock outstanding is
approximately 31,500 shares greater than the 21,103,034 indicated by the
Company's records. The Company believes that its records are correct and is in
the process of resolving this difference. The number of shares outstanding
reflected in the Company's financial statements do not include these shares or
any adjustment that might be necessary to resolve this difference.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in this Report on Form 10-QSB, that are not purely
historical, are forward-looking information and statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These include statements regarding our expectations,
intentions, or strategies regarding future matters. All forward-looking
statements included in this document are based on information available to us on
the date hereof. It is important to note that our actual results could differ
materially from those projected in such forward-looking statements contained in
this Form 10-QSB. The forward-looking statements contained herein are based on
current expectations that involve numerous risks and uncertainties. Assumptions
relating to the foregoing involve judgments regarding, among other things, our
ability to secure financing or investment for capital expenditures, future
economic and competitive market conditions, and future business decisions. All
these matters are difficult or impossible to predict accurately and many of
which may be beyond our control. Although we believe that the assumptions
underlying our forward-looking statements are reasonable, any of the assumptions
could be inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this form 10-QSB will prove to be
accurate.
GENERAL
eAutoclaims provide Internet based collision claims services for automobile
insurance companies, Managing General Agents (MGA) and third party claims
administrators (TPA) and self-insured automobile fleet management companies. Our
business strategy is to use the Internet to streamline and lower the overall
costs of automobile repairs and the claims adjustment expenses of our clients.
We believe that our proprietary web-based software products and services make
the management of collision repairs more efficient by controlling the cost of
the repair and by facilitating the gathering and distribution of information
required in the automobile repair process.
eAutoclaims controls the vehicle repair process from the reporting of the
accident through the satisfactory repair of damage. We bring together and
coordinate the activities of the insurance company, its insured, and the various
parties involved in evaluating a claim, negotiating the cost of the repair, and
performing necessary repair services. We have contracted with approximately
2,600 body shops throughout the United States to repair vehicles. These shops,
referred to as our "provider network," provide us 10% to 15% discount on the
vehicle repair because of the volume of repairs we provide to them. Because we
audit every line of every repair estimate and because we share a portion of the
volume discount with our customer, we are able to lower the average cost being
paid by our customer.
Our latest product, eJusterSuite, expands our potential customer base as well as
provides significant new features to our current customer base. This product
provides both outsourcing and ASP (application service provider) solutions. The
outsourcing solution requires eAuto personnel to audit and coordinate the
vehicle repair. The ASP solution allows the customer to use our technology
independent of our personnel; thereby, providing a solution for the largest
insurance companies that already have the staff to process and control the
claims process, while paying us a fee for every transaction that is run through
our system. The ASP model will provide margin without the associated personnel
and operating costs.
eJusterSuite also builds in service partners that can provide the needed
services such as Independent adjustors, car rentals, tow trucks and accident
reporting by only clicking an Icon that is added to the screen of the customer's
desk top in the current system. The system automatically provides the service
partner the information already in our system via the Internet. The service
partner will systematically provided the requested services and pay us a fee for
each assignment they receive through our system. This process significantly
10
reduces the customers' time and cost to process claims as well as reduces the
number of mistakes that occur in a manual process. In most cases it also reduces
the cost of the service partner to obtain and process the transaction, even
after paying our transaction fee. This added revenue will provide additional
margin without the additional personnel and operating costs.
For our outsourcing customers, we approve all repair shops for inclusion in our
network and determine which repair shop will ultimately perform the repairs. We
receive a discount, ranging from 10% to 15%, from repair facilities that are
members of our provider network. The revenues generated from the vehicle repair
facilities through our provider network accounts for 93% of the revenue for the
nine-months ended April 30, 2003. We are paid on a per claims basis from our
insurance and fleet company customers for each claim that we process through our
system. These fees vary from $10 to $60 per claim depending upon the level of
service required. For the nine-months ended April 30, 2003, 7% of the revenue
has been received from claims processing fees and other income.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and the results
of our operations are based upon our consolidated financial statements and the
data used to prepare them. The Company's financials have been prepared in
accordance with accounting principles generally accepted in the United States.
On an ongoing basis we re-evaluate our judgments and estimates including those
related to revenues, bad debts, long-lived assets, and income taxes. We base our
estimates and judgments on our historical experience, knowledge of current
conditions and our beliefs of what could occur in the future considering
available information. Actual results may differ from these estimates under
different assumptions or conditions. Our estimates are guided by observing the
following critical accounting policies.
Revenue recognition
The Company derives revenue primarily from collision repairs, glass
repairs and fleet repairs. Revenue is recognized when an agreement between the
Company and its customer exists, the repair services have been completed, the
Company's revenue is fixed and determinable and collection is reasonably
assured.
The Company records revenue gross in the areas of collision and fleet repairs.
It also records at gross in certain glass repair transactions. Revenue is
recorded at gross in these areas when:
o The Company is the primary obligor in its arrangements. The Company is
responsible for the quality of the repair and must satisfy the
customer if the body shop fails to repair the vehicle properly.
o The Company has latitude in establishing price. The price is
established based on the Company's audit of the repair estimate
submitted by the repair facility. The repair facility cannot begin the
repair until an agreed upon price is established between the facility
and the Company for the repair.
o The Company controls what is repaired as they audit the estimate
submitted by the repair facility. The Company must agree that the
repair is reasonable and necessary before the repair facility is
allowed to proceed with the work being requested.
o The Company has discretion in supplier selection. Through the use of
software, the Company prioritizes which repair facility is used based
on the efficiency and effectiveness of the repair facility, and
o The Company has credit risk. The Company is responsible to pay the
repair facility even if the customer does not pay for the repair.
The Company records revenue net of the repair costs when the supplier, not the
Company, is the primary obligor in an arrangement, the amount the Company earns
is fixed or the supplier has credit risk. This occurs when the repair has been
performed before it is referred to the Company. When they receive notice of the
transaction, they call the glass repair facility to ask them to become part of
11
our network and to negotiate a better price on the repair. If the Company is
able to negotiate a better price for the customer they keep a portion of the
added discount. In that situation the revenue is recorded net of the repair
costs even though the Company pays for the entire claim and are reimbursed by
the insurance company, since they did not have the risk of loss and are not
responsible for the repair.
The Company maintains an allowance for doubtful accounts for losses that they
estimate will arise from the customers' inability to make required payments.
Collectibilty of the accounts receivable is estimated by analyzing historical
bad debts, specific customer creditworthiness and current economic trends. At
April 30, 2003 the allowance for doubtful accounts was $280,000.
Accounting for Income taxes
The Company records a valuation allowance to reduce its deferred tax
assets to the amount that is more likely than not to be realized. While we
consider historical levels of income, expectations and risks associated with
estimates of future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event that
we determine that we would be able to realize deferred tax assets in the future
in excess of the net recorded amount an adjustment to the deferred tax asset
would increase income in the period such determination was made. Likewise,
should we determine that we would not be able to realize all or part of the net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to income in the period such determination was made. We have recorded
valuation allowances against our deferred tax assets of $5,618,000 at April 30,
2003. The valuation allowance consists mainly of net operating losses previously
realized and stock compensation currently not deductible. The valuation
allowance was necessary because the use of these deductions is not reasonably
assured since the company just recently reached profitability.
Valuation of long-lived assets
The Company identifies and records impairment on long-lived assets, including
goodwill, when events and circumstances indicate that such assets have been
impaired. The Company periodically evaluates the recoverability of its
long-lived assets based on expected undiscounted cash flows, and recognizes
impairment, if any, based on expected discounted cash flows. Factors we consider
important which could trigger an impairment review include the following:
o Significant negative industry trends
o Significant underutilization of the assets
o Significant changes in how we use the assets of our plans for their use.
Goodwill was amortized using the straight-line method over 7 years through July
31, 2002. As of August 1, 2002 no additional amortization was recorded as a
result of the change in accounting standards as described below in "recently
issued financial accounting standards." At each balance sheet date, the Company
evaluates the period of amortization of intangible assets. The factors used in
evaluating the period of amortization include: (i) current operating results,
(ii) projected future operating results, and (iii) any other material factors
that effect the continuity of the business. No charge for impairment of this
asset was considered to be necessary as of April 30, 2003.
12
RESULTS OF OPERATIONS
FOR THE NINE AND THREE-MONTHS ENDED APRIL 30, 2003 COMPARED TO THE NINE AND
THREE-MONTHS ENDED APRIL 30, 2002.
REVENUE
Total revenue for the nine-months ended April 30, 2003 was $25.4 million, which
is a 5% increase from the $24.2 million of revenue for the nine-months ended
April 30, 2002. Total revenue for the three-months ended April 30, 2003 was $9.4
million. This represents a 17% increase from the $8.0 million of revenue for
three-months ended April 30, 2002. Collision repair management revenue increased
5% and 14% for the nine and three-months ended April 30, 2003 compared to the
nine and three-months ended April 30, 2002. These increases in total and
collision repair management revenues are primarily the result of fluctuations in
claims experience of our two largest customers and the addition of some new
customers. Additionally, in order to concentrate on profitability, the Company
has made an effort to eliminate customers who are not profitable because they
have not provided the volume committed to in their contract. The Company
continues to pursue Collision repair management outsource business. However, the
Company has placed a greater focus in higher margin products.
Fees and other revenue increased 62% and 86% for the nine and three-months ended
April 30, 2003 compared to the nine and three-months ended April 30, 2002,
respectively. This increase is mainly a result of the increase in the sale of
estimating software to the repair facilities on the eAutoclaims network and an
increase in file handling fess from customers and click fees from service
partners.
Glass repairs revenue decreased 37% and 2% for the nine and three-months ended
April 30, 2003 compared to the nine and three-months ended April 30, 2002,
respectively. This nine-month decrease is a result of the loss of a major
customer due to the maturing and increased competition for the glass repair
business. The customer was offered lower pricing that, at that time, would have
reduced margins below acceptable levels. Later in the fiscal year ended July 31,
2002, we negotiated lower pricing from one of our larger glass vendors, which
will help our competitiveness in this market in the future. The glass repair
business complements our core business and allows our customers to use a single
source for all their repair needs. The Company expects to see some minimal
growth in this product next quarter, the Company recently added a new account
with meaningful potential.
There was a decrease in the fleet repairs management revenue of 36% and 6% for
the nine and three-months ended April 30, 2003 compared to the nine and
three-months ended April 30, 2002, respectively. This decrease is mostly a
result of a lower accident rate experienced by our customers for this period.
During the nine and three-months ended April 30, 2003, we derived 59% and 54% of
our revenues from one customer, respectively. This one customer, with whom we
have a five-year contract, is ranked in the top 25 automobile property and
casualty insurance companies in revenue in the United States. We also have one
customer that accounted for 14% and 12% of total revenue for the nine and
three-months ended April 30, 2003, respectively.
CLAIMS PROCESSING CHARGES
Claims processing charges include the costs of collision and glass repairs paid
to repair shops within our repair shop network. Claims processing charges for
the nine and three-months ended April 30, 2003 was $21.2 million and $7.8
million, respectively. Both these totals were 83% of total revenue, compared to
85% of revenue for both the nine and three-months ended April 30, 2002. Claims
processing charges are primarily the costs of collision repairs paid by
eAutoclaims to its collision repair shop network. This decrease in the
percentage of the claims processing charges compared to total revenue over the
13
same period last year was mostly caused by the increase in fees and other
revenue, including the sale of software to network repair facilities, as well as
file handling and click fee revenue.
We are dependent upon our third party collision repair shops for insurance
claims repairs. eAutoclaims currently has approximately 2600 affiliated repair
facilities in its network for claims repairs. This is a decrease of
approximately 600 shops over the last six months. This decrease is a result of a
combination of late payments made over the last six to nine months, poor
performance of some shop network members and the Company's decision to reduce
network shop coverage in certain geographical areas in order to increase the
number of claims assigned to the best shops in those areas. Management believes
that these shops can be replaced with other qualified shops and has started to
do so. We electronically and manually audit individual claims processes to their
completion using remote digital photographs transmitted over the Internet.
However, if the number of shops or the quality of service provided by collision
repair shops fall below a satisfactory level leading to poor customer service,
this could have a harmful effect on our business.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES
SG&A expense is mainly comprised of salaries and benefits, facilities related
expenses, telephone charges, legal and other professional fees, advertising
costs, and travel expenses. SG&A expenses for the nine-months ended April 30,
2003 totaled $5.1 million compared to $5.5 million for the nine-months ended
April 30, 2002. The decrease in SG&A expenses of approximately $452,000 is a
result of the more efficient use of resources through technology and the
restructuring of the corporate structure in the last nine months which should
produce savings of approximately $1.9 million per year.
SG&A expenses for the three-months ended April 30, 2003 and 2002 totaled
approximately $1.3 million and $2.0 million, respectively. This decrease of
approximately $700,000 is a result of more efficient use of resources through
technology and the restructuring of the corporate structure, as explained in the
preceding paragraph.
Payroll and benefit related expenses for the nine-months ended April 30, 2003
and 2002 totaled approximately $3.3 million and $3.8 million. Payroll and
benefit related expenses for the three-months ended April 30, 2003 totaled
$885,000, which is approximately an 37% decrease from the $1.4 million payroll
and benefit related expenses for the three-months ended April 30, 2002, and an
20% decrease from the three-months ended January 31, 2003 of approximately $1.1
million. This decrease is the result of personnel and salary cuts made at the
end of October of 2002 and January 2003.
SG&A expenses also include non-cash charges of approximately $196,000 for the
nine-month period ended April 30, 2003. These non-cash charges for the
nine-month period ended April 30, 2003 include common stock issued to pay for
services (legal fees, director fee and investor relation fees), loss on disposal
of equipment, increase in the accounts receivable allowance and impairment of
prepaid expenses. Total non-cash charges for the nine-month period ended April
30, 2002 include approximately $44,000 of stock issued to purchase an option to
buy an office facility, approximately $66,000 increase in the allowance for
doubtful accounts and approximately $125,000 of common stock issued to pay
professional fees and board of director fees. Other non-cash charges for the
nine-months ended April 30, 2002 include $555,551 amortization of debenture
discount that was converted into common stock.
SG&A expenses include non-cash charges of approximately $3,000 for the
three-month period ended April 30, 2003. These non-cash charges included an
increase in allowance for accounts receivable and stock issued to directors.
Total non-cash charges of approximately $51,000 for the three-month period ended
April 30, 2002 that were included SG&A expense included debenture interest paid
in stock and charges incurred pertaining to legal, investor relations and board
of director fees.
14
Also included in the SG&A is interest expense related to loans from two
officers/shareholders and capital leases. This interest expense totals
approximately $30,000 and $9,000 for the nine and three-months ended April 30,
2003 compared to approximately $29,000 and $6,000 for the nine and three-months
ended April 30, 2002, respectively. Interest expense for the nine months ended
April 30, 2002 included approximately $9,000 of debenture interest paid in
stock. Interest income from cash reserves totaled approximately $10,000 and
$1,000 for the six and three-months ended January 31, 2003 compared to
approximately $25,000 and $11,000 for the six and three-months ended January 31,
2002, respectively.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment of approximately $367,000 and $123,000
was recognized in the nine and three-month period ended April 30, 2003,
respectively. This is compared to approximately $210,000 and $90,000 for the
nine and three-month periods ended April 30, 2002, respectively.
Amortization of the goodwill associated with the acquisitions of Premier Express
Claims, Inc. totaled approximately $164,000 and $55,000 for the nine and
three-months ended April 30, 2002, respectively. There was no amortization
expense for the nine and three-months ended April 30, 2003 as a result of a
change in the accounting rule on amortization of goodwill.
NET INCOME/LOSS
Income before non-cash expenses for the three-months ended April 30, 2003
totaled approximately $309,000 compared to a loss before non-cash expense of
approximately $338,000 from the three-month period ended January 31, 2002, an
improvement of approximately $647,000. Net income for the three-months ended
April 30, 2003 totaled approximately $184,000 compared to a net loss of
approximately $538,000 for the three-months ended January 31, 2003, an
improvement of approximately $721,000. These amounts include non-cash expenses
of approximately $125,000 and $200,000, respectively.
Net loss for the nine-months ended April 30, 2003 totaled $1.2 million compared
to $2.7 million for the nine-months ended April 30, 2002, a 55% decrease.
Non-cash expenses created approximately $563,000 and $1,165,000 of those losses,
respectively.
Income before non-cash expenses for the three-months ended April 30, 2003
totaled approximately $309,000 compared to a loss before non-cash expenses of
approximately $609,000 for the three-month period ended April 30, 2002, an
improvement of approximately $918,000. Net income for the three-months ended
April 30, 2003 totaled approximately $184,000 compared to a net loss of
approximately $876,000 for the three-months ended April 30, 2002, an improvement
of approximately $1,060,000. These amounts include non-cash expenses of
approximately $125,000 and $267,000, respectively.
Liquidity and Capital Resources
At April 30, 2003, we had approximately $284,000 of cash. This is an increase of
approximately $276,000 from January 31, 2003. We have a working capital
deficiency of approximately $5.6 million. The primary source of our working
capital during the three-month period ended April 30, 2003, was from cash flow
generated by operations. However, there is no assurance that we will be able to
continue to provide cash through operations.
On November 13, 2002 we signed a term sheet on a $10,000,000 equity line of
credit that will allow the Company, once the shares are registered, to access
funds over a 36-month period by selling registered shares of common stock at 94%
15
of the market value of the shares. Under this proposed financing, the amount of
funds available to the Company would be based on the volume of the previous 20
trading days. The purchasing party offering the equity line of credit will
receive warrants for 3% of the shares sold as well as a 2% placement fee. The
Company has deferred its plans on moving forward with the equity line of credit
until it determines that other forms of less dilutive financing are not
available.
On November 12, 2002 we also received a commitment letter from a current
investor to invest an additional $1,000,000-$2,000,000 into eAutoclaims. We
expected this financing and the equity line of credit to cover the operational
cash shortfall if we are not able to maintain profitability. This investor had
problems obtaining liquid assets to fund this commitment, but is working on
resolving this issue so he can honor his commitment.
The Company was profitable in the three-months ended April 30, 2003 as a result
of increased revenues and cost cuts made in October 2002 and January 2003. We
believe that cash generated from operations will be sufficient to meet our
working capital requirements for the next 12 months.
As described above, we have lost some repair shops because of our current
working capital pressures. However, the Company is in the process of replacing
those shops. The loss of shops has not had a significant impact on our revenue
growth. However, if we are not able to honor our commitment to shops it may have
a negative impact on our future operations because it may further decrease the
number of shops available to complete repairs and may hurt our ability to
generate new accounts.
We will need to raise additional capital to pursue other business or technology
acquisitions or if we experience additional losses. Although we will be able to
continue to grow our business base, we will not be able to grow as quickly as
management would like without the infusion of additional capital. We cannot
assure that we will be able to raise such funds or that such funds will be
available to us on favorable terms. If we raise additional funds for the
issuance of our securities, such securities may have rights, preferences or
privileges superior to those of the rights of our Common Stock and our
stockholders may experience additional dilution.
We are currently restricted from raising other additional debt or equity without
the consent of the holders of our Series A Preferred Stock. The Series A
Preferred shareholder has exclusive rights to provide any future equity line
financing agreements through May 31, 2003.
Management expects revenue growth over the next fiscal year, which provides it's
own working capital. However, there is no assurance that we will continue to
sustain our growth. Our business has grown significantly since our inception.
This estimate is a forward-looking statement that involves risks and
uncertainties. The actual time period may differ materially from that indicated
as a result of a number of factors so that we cannot assure that our cash
resources will be sufficient for anticipated or unanticipated working capital
and capital expenditure requirements for this period.
Our principle commitments at April 30, 2003 consist of monthly operating rental
payments, compensation of employees and accounts and notes payable.
Inflation
We believe that the impact of inflation and changing prices on our operations
since the commencement of our operations has been negligible.
Seasonality
eAutoclaims does not deem its revenues to be seasonal.
16
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 2001, the FASB issued Statement no. 142, "Goodwill and Other Intangible
Assets," which we adopted as of August 1, 2002, that changes the accounting for
goodwill from an amortization method to an impairment-only approach. As of
August 1, 2002, eAutoclaims ceased the amortization of goodwill. This statement
also requires companies with goodwill recorded on their financial statements to
evaluate if the goodwill has been impaired and if a charge should be recorded to
write-off any impairment. We do not expect this statement to have an impact on
our financial statements except to cease recording amortization expense of the
goodwill.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 2002, we received a letter from counsel to Body Shops Unlimited, which
included a copy of a complaint filed in a California State Court, which was not
served on us. We then filed and served a complaint upon Body Shops Unlimited,
Case No. 02-7390-CI-02I in and for the Sixth Judicial Circuit for Pinellas
County, Florida. Body Shops claims to have developed and delivered a software
program to us, which remains unpaid. We contend the software does not meet
specifications, and accordingly we are entitled to terminate the contract and
any related maintenance fees. Body Shop alleges it is owed $114,000 plus
potential damages for fraud and unjust enrichment. We dispute these allegations.
Body Shop has moved to have the case dismissed from the Pinellas County, Florida
Circuit Court for lack of jurisdiction. This case is in the early stages.
Although we believe these are meritorious defenses and claims against Body Shops
irrespective of the forum for litigation, it is too early to predict the
ultimate outcome of this dispute.
In August 2002, we were served with a complaint styled David B. Linka vs.
eAutoclaims.com, in and for the Court of Common Place for the Fifteenth Judicial
Circuit of South Carolina, Case No. 2001-CP-26-4726. This case has been removed
to federal court in South Carolina. Mr. Linka is a former employee of ours and
alleges he is due substantial past and future compensation relating to his
alleged improper termination. Mr. Linka advances various legal theories based
upon (i) a claim for wages, (ii) breach of express employment contract, (iii)
breach of contract implied in law and fact (iv) breach of contract accompanied
by fraudulent acts and (v) breach of covenant of good faith and fair dealing.
Essentially, this dispute concerns Mr. Linka's entitlement to approximately $1.4
million of some past, but mostly future commissions relating to an account Mr.
Linka assisted in selling, plus damages for withholding his compensation. We
believe there are meritorious defenses to Mr. Linka's allegations and do not
believe he is entitled to any additional commissions from our accounts. We
further believe that Mr. Linka's computation of damages is unsupportable and
grossly overstated. We plan on vigorously defending this action by Mr. Linka.
Because this dispute is in its preliminary stages, it is too early to predict
with any certainty the ultimate outcome.
In April 2003, we received a letter requiring arbitration in the state of
California on our contract with Decision Support Services. We stopped paying
Decision Support Services because of their inability to deliver an agreed upon
software product that meets required operation standards. No monetary demand has
been made at this time. While we believe that there are meritorious defenses
against this action, it is too early to predict the ultimate outcome of this
dispute.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS.
On November 20, 2002, a shareholder and officer of the Company converted $10,000
of debt owed to him by the Company into 84,034 shares of common stock (using a
share price of 12 cents per share).
During the nine-month period ended April 30, 2003, employees exercised 958,850
options to purchase shares of the Company's common stock.
17
During the nine-month period ended April 30, 2003, the Company issued 412,521
shares of common stock in exchange for $118,525 of legal services. During the
nine-months ended April 30, 2003, the Company issued 50,241 shares of common
stock to three directors in exchange for their services. The Company charged
operations $8,750, which was equal to the fair market value of the shares when
earned.
During the nine-month period ended April 30, 2003, the Company issued additional
options to employees and board members to purchase 783,000 shares of common
stock where the exercise prices of the options are equal to or greater than the
fair market value of the Company's common stock on the date of each grant.
Additionally, options to purchase 443,067 shares of common stock were canceled.
In August 2002, the Company entered into a contract with a public relations
consultant for services. This agreement calls for the Company to issue 94,119
shares of common stock. During the nine-month period ended April 30, 2003, all
94,119 shares were earned resulting in a charge to operations of $24,000.
On September 5, 2002, 11 shares of preferred stock with a face value of $55,000,
plus dividends of approximately $10,000 were converted into 327,250 shares of
common stock. On January 15, 2003, 4 shares of preferred stock with a face value
of $20,000, plus dividends of approximately $4,100 were converted into 301,123
shares of common stock. On February 19, 2003, 6 shares of preferred stock with a
face value of $30,000, plus dividends of approximately $6,400 were converted
into 484,778 shares of common stock.
ITEM 3. Control and Procedures
Within the 90 days prior to this report, the company carried out an evaluation,
under the supervision of our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as defined in the Securities Exchange Act
Rule 15d14(c). Based upon this evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely enabling the Company to record, process,
summarize and report information required to be included in the Company's
periodic SEC filings. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
ITEM 5. Other Information
New Contracts with Executive Officers
On March 27, 2003, the Board of Directors approved an Amended and Restated
Employment Agreement with Mr. Seidel. Mr. Seidel agreed to a salary reduction
from his last contract in order to assist the Company in meeting it's financial
goals. His previous agreement specified a salary of $250,000. His new two (2)
year agreement specifies an annual base salary of $185,000, effective February
1, 2003 through December 31, 2003. From January 1, 2004 through February 1,
2005, his minimum annual base salary will be $200,000. Mr. Seidel receives
bonuses equal to 3% of the Company's earnings before interest, taxes,
depreciation and amortization as defined by generally accepted accounting
principles (GAAP). Mr. Seidel may elect to receive part or his entire bonus, if
any, in shares of our Common Stock valued at 90% of the then current market
value. Each month that the Company is profitable on a GAAP basis, He also has
the right to receive options to purchase 25,000 shares of our common stock, with
a term of five years at a strike price equal to the stock's fair market value at
the date of granting. These options vest over the remaining life of his
contract. He continues his entitlement to reimbursement of ordinary, necessary
and reasonable business expenses incurred in connection with his services. He
continues his right to participate in any retirement, medical, dental, welfare
and stock options plans, life and disability insurance coverage and other
benefits afforded our employees. He is entitled to a $750 per month automobile
allowance and $1,000 of personal allowances. He is entitled 299% of his current
base salary if he loses his position, unless he is terminated for cause. This
contract supercedes the change of control agreement dated April 9, 2001.
18
On March, we entered into an employment agreement with M. Scott Moore, our Chief
Financial Officer. This agreement has a term of two (2) years, and commences on
May 1, 2003. Under this agreement, Mr. Moore is entitled to an annual base
salary of $135,000 through April 30, 2004, and $144,445 through April 30, 2005.
Mr. Moore is entitled to bonus compensation as determined by the Company. Mr.
Moore may elect to receive part or his entire bonus, if any, in shares of our
Common Stock valued at 90% of the then current market value. Mr. Moore is
entitled to reimbursement for ordinary, necessary and reasonable business
expenses in connection with his services. He may participate in any retirement,
medical, dental, welfare and stock options plans, life and disability insurance
coverages and other benefits afforded our employees. He is entitled to an
automobile allowance of $400 per month during the term of his agreement. Mr.
Moore was issued options to purchase 50,000 shares of our Common Stock at $0.13
per share, which was the fair market value of the closing price of our shares as
of the date of his agreement. These options vest in 1/3 installments over each
year of employment. These options have a maximum exercise period of 5 years. All
his options vest if the contract is not renewed or there is a change in control
of the Company. If we elect not to renew this agreement, then he is entitled to
nine (9) months severance pay at his then current base salary. Mr. Moore has
agreed not to compete with us during the term of this agreement and for a period
of two (2) years after termination of this agreement. This agreement supercedes
the "Change of Control Agreement" dated April 9, 2001.
We entered into an employment agreement with Reed Mattingly. Mr. Mattingly is
currently our Executive Vice President in charge of Sales. This agreement was
effective May 1, 2003, and has a term of two (2) years. Under this agreement,
Mr. Mattingly is entitled to an annual base salary of $110,000 through April 30,
2004, and then $115,500 through April 30, 2005. Mr. Mattingly is entitled to
bonus compensation as determined by the Company. Mr. Mattingly may elect to
receive part or his entire bonus, if any, in shares of our Common Stock valued
at 90% of the then current market value. Mr. Mattingly is entitled to
reimbursement for ordinary, necessary and reasonable business expenses in
connection with his services. He may participate in any retirement, medical,
dental, welfare and stock options plans, life and disability insurance coverages
and other benefits afforded our employees. He is entitled to a $700 per month
automobile allowance. During the term of his agreement and for a period of two
(2) years after termination of his agreement, Mr. Mattingly is subject to a
non-competition and restrictive covenant with us. This agreement supercedes the
"Change of Control Agreement" dated April 9, 2001.
We entered into an employment agreement with David Mattingly. Mr. Mattingly is
currently our Chief Information Officer. This agreement was effective May 1,
2003, and has a term of two (2) years. Under this agreement, Mr. Mattingly is
entitled to an annual base salary of $105,000 through April 30, 2004, and then
$110,250 through April 30, 2005. Mr. Mattingly is entitled to bonus compensation
as determined by the Company. Mr. Mattingly may elect to receive part or his
entire bonus, if any, in shares of our Common Stock valued at 90% of the then
current market value. Mr. Mattingly is entitled to reimbursement for ordinary,
necessary and reasonable business expenses in connection with his services. He
may participate in any retirement, medical, dental, welfare and stock options
plans, life and disability insurance coverages and other benefits afforded our
employees. He is entitled to a $400 per month automobile allowance. During the
term of his agreement and for a period of two (2) years after termination of his
agreement, Mr. Mattingly is subject to a non-competition and restrictive
covenant with us. This agreement supercedes the "Change of Control Agreement"
dated April 9, 2001.
19
We entered into an employment agreement with Stacey Adams. Ms. Adams is
currently our Senior Vice President in charge of operations. This agreement was
effective May 1, 2003, and has a term of two (2) years. Under this agreement,
Ms. Adams is entitled to an annual base salary of $75,000 through April 30,
2004, and then $78,750 through April 30, 2005. Ms. Adams is entitled to bonus
compensation as determined by the Company. Ms. Adams may elect to receive part
or his entire bonus, if any, in shares of our Common Stock valued at 90% of the
then current market value. Ms. Adams is entitled to reimbursement for ordinary,
necessary and reasonable business expenses in connection with his services. She
may participate in any retirement, medical, dental, welfare and stock options
plans, life and disability insurance coverages and other benefits afforded our
employees. She is entitled to a $400 per month automobile allowance. During the
term of here agreement and for a period of two (2) years after termination of
his agreement, Ms. Adams is subject to a non-competition and restrictive
covenant with us. This agreement supercedes the "Change of Control Agreement"
dated April 9, 2001.
Change of Control/ Shares
On March 27, 2003 the Board of Directors voted to grant certain key employees a
total of 2,000,000 shares of our common stock and the current and future board
members 1,000,000 shares if there is a change in control of greater than 50%
ownership of the Company or substantially all it's assets.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 3, 2003 By: /s/ Eric Seidel
------------------ --------------------------------------
Eric Seidel, Chief Executive Officer
Date: June 3, 2003 By: /s/ Scott Moore
------------------ --------------------------------------
Scott Moore, Chief Financial Officer
20
CERTIFICATIONS
I certify that:
1. I reviewed this annual report on Form 10-QSB;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
materials respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the period presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Ac 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 annual 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 annual report (the "Evaluation
Date"); and
c) presented in this annual 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 the 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
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors 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: June 3, 2003 /s/ Eric Seidel
------------------ --------------------------
President and C.E.O.
Date: June 3, 2003 /s/ Scott Moore
------------------ ---------------------------
Chief financial Officer
21
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of eAutoclaims.com, Inc. (the
"Company") on Form 10-QSB for the period ending April 30, 2003 as filed with the
Securities and Exchange Commission on June 3, 2003 (the "Report"), I, Eric
Seidel, the President and CEO of the Company, certify, pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of eAutoclaims.com,
Inc.
/s/ Eric Seidel
-------------------------
Print Name: Eric Seidel
Title: President & CEO
June 3, 2003
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of eAutoclaims.com, Inc. (the
"Company") on Form 10-QSB for the period ending April 30, 2003 as filed with the
Securities and Exchange Commission on June 3, 2003 (the "Report"), I, Scott
Moore, the Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of eAutoclaims.com,
Inc.
/s/ Scott Moore
--------------------------------
Print Name: Scott Moore
Title: Chief Financial Officer
June 3, 2003
22
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of eAutoclaims.com, Inc. (the
"Company") on Form 10-KSB for the period ending July 31, 2002 as filed with the
Securities and Exchange Commission on November 13, 2002 (the "Report"), I, Eric
Seidel, the President and CEO of the Company, certify, pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of eAutoclaims.com,
Inc.
/s/ Eric Seidel
----------------------------
Print Name: Eric Seidel
Title: President & CEO
June 3, 2003
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of eAutoclaims.com, Inc. (the
"Company") on Form 10-KSB for the period ending July 31, 2002 as filed with the
Securities and Exchange Commission on November 13, 2002 (the "Report"), I, Scott
Moore, the Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of eAutoclaims.com,
Inc.
/s/ Scott Moore
--------------------------------
Print Name: Scott Moore
Title: Chief Financial Officer
June 3, 2003
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