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, 2001
[ ] 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.)
2708 Alt. 19 N., Suite 604, Palm Harbor, Florida 34683
------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone Number, including area code: (727) 781-0414
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, 2001 was 11,252,278.
Transitional Small Business Disclosure Format:
[ ] Yes [ X ] No
TRANSFORMATION PROCESSING, INC.
------------------------------
(Former name or former address, if changed since last report)
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
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 Equity 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 16
Item 2. Changes in Securities 16
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The consolidated financial statements of eAutoclaims.com, Inc. and Subsidiaries
(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, 2000.
2
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------------------
April 30, July 31,
2001 2000
-----------------------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 346,432 $ 239,979
Accounts receivable, less allowance for doubtful accounts
of $60,000 and $30,000, respectively 1,107,366 578,729
Due from related parties 182,742 182,684
Prepaid expenses and other current assets 91,089 81,686
-----------------------------------------------------------------------------------------------------------------------------
Total current assets 1,727,629 1,083,078
Property and Equipment, net of accumulated depreciation
of $174,806 and $55,731, respectively 555,794 285,212
Goodwill, net of accumulated amortization
of $186,344 and $7,019, respectively 1,367,308 1,534,633
Deferred offering costs 148,224 -
Other Assets 131,646 11,661
Deferred Income Tax Asset, net of valuation
allowance of $3,410,000 and $1,121,000, respectively - -
-----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 3,930,601 $ 2,914,584
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 3,022,915 $ 778,265
Advances for the issuance of preferred stock - 500,000
Common stock to be issued for acquisition - 1,200,000
Loans payable - stockholders 179,000 218,365
-----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,201,915 2,696,630
Loans Payable - stockholders, net of current maturities - 66,635
-----------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,201,915 2,763,265
-----------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Convertible preferred stock - $.001 par value; authorized 5,000,000 shares,
issued and outstanding 420 and -0- shares, respectively,
aggregate liquidation preference of $2,100,000 1 -
Common stock - $.001 par value; authorized 50,000,000 shares, issued
and outstanding 11,252,278 and 10,790,367 shares, respectively 11,252 10,790
Additional paid-in capital 13,473,092 3,216,286
Accumulated deficit (12,755,659) (3,075,757)
-----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 728,686 151,319
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 3,930,601 $ 2,914,584
=============================================================================================================================
See Notes to Consolidated Financial Statements
3
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------
Period from
December 7,
Three-month Three-month Nine-Month 1999
period ended period ended period ended (inception)
April 30, 2001 April 30, 2000 April 30, 2001 to April 30, 2000
----------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue:
Collision repairs management $ 5,521,511 $ 400,772 $10,904,535 $ 451,358
Glass repairs 554,054 - 1,523,842 -
Fleet repairs management 398,917 195,041 927,582 329,244
Other revenue and fees 204,876 17,179 477,522 20,340
-----------------------------------------------------------------------------------------------------------------
Total revenue 6,679,358 612,992 13,833,481 800,942
-----------------------------------------------------------------------------------------------------------------
Expenses:
Claims processing charges 5,624,181 499,276 11,481,692 659,124
Selling, general and administrative 5,418,519 2,306,179 8,154,219 2,387,476
Depreciation and amortization 111,096 13,549 298,400 13,549
-----------------------------------------------------------------------------------------------------------------
Total expenses 11,153,796 2,819,004 19,934,311 3,060,149
-----------------------------------------------------------------------------------------------------------------
Net loss $(4,474,438) $(2,206,012) $(6,100,830) $(2,259,207)
=================================================================================================================
Loss per common share - basic and diluted $ (0.40) $ (0.21) $ (0.87) $ (0.23)
=================================================================================================================
Weighted-average number of common
shares outstanding - basic and diluted 11,236,149 10,520,000 11,189,990 9,901,027
=================================================================================================================
See Notes to Consolidated Financial Statements
4
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
Nine-month period ended April 30, 2001 (unaudited)
Additional
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 2000 - - 10,790,367 10,790 3,216,286 (3,075,757) 151,319
(unaudited)
Shares of common stock issued
in acquisitions - - 322,372 322 1,211,678 - 1,212,000
Issuance of common stock for services - - 139,539 140 360,201 - 360,341
Issuance of preferred stock 420 $ 1 - - 1,849,943 - 1,849,944
Recognition of beneficial conversion
feature of convertible preferred stock - - - - 1,715,198 (1,715,198) -
Proceeds from stock options - - - - 750 - 750
Accrued dividend on preferred stock - - - - - (88,838) (88,838)
Fair value of warrants issued in
connection with the preferred stock - - - - 1,775,036 (1,775,036) -
Issuance of compensatory stock options - - - - 3,344,000 - 3,344,000
Net loss - - - - - (6,100,830) (6,100,830)
------------------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 2001 (unaudited) 420 $ 1 11,252,278 $ 11,252 $13,473,092 $(12,755,659) $ 728,686
====================================================================================================================================
See Notes to Consolidated Financial Statements
5
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------------------------------------------------------
Period from
December 7,
Nine-Month 1999
period ended (inception)
April 30, 2001 to April 30, 2000
----------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (6,100,830) $ (2,259,207)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 298,400 13,549
Common stock issued for services 332,554 -
Issuance of compensatory stock options 3,344,000 -
Allowance for doubtful accounts 30,000 -
Changes in operating assets and liabilities:
Increase in accounts receivable (558,637) (406,200)
Increase in due from related parties (58) (153,705)
Increase in prepaid expenses and other current assets (9,403) -
Increase in other assets (119,985) (744)
Increase in accounts payable and accrued expenses 2,183,600 329,202
----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (600,359) (2,477,105)
----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (389,657) (199,651)
----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from stock options 750 -
Net proceeds from issuance of preferred stock 1,349,944 -
Increase in deferred offering costs (148,225) -
Net proceeds from issuance of common stock - 3,038,931
Principal payments on stockholder loans (106,000) -
----------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 1,096,469 3,038,931
----------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 106,453 362,175
Cash and cash equivalents at beginning of period 239,979 -
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 346,432 $ 362,175
============================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 14,334 $ -
============================================================================================================================
Supplemental disclosure of noncash investing and financing activities:
============================================================================================================================
Contribution of fixed assets for common stock $ - $ 68,930
============================================================================================================================
Accrued dividends on convertible preferred stock $ 88,838 $ -
============================================================================================================================
See Notes to Consolidated Financial Statements
6
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 1 - Basis of presentation
------------------------------
The accompanying consolidated financial statements reflect the operations of
eAutoclaims.com, Inc. and its wholly owned Subsidiaries for the three-month and
nine-month periods ended April 30, 2001 and the three-month period ended April
30, 2000 and the period from December 7, 1999 (inception) to April 30, 2000.
eAutoclaims.com, Inc. and Transformation Processing, Inc. completed a reverse
merger on May 25, 2000. Prior to the reverse merger, Transformation Processing,
Inc. had ceased operations. The Company began operations on December 7, 1999.
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 the Company as of April 30, 2001 and
its results of operations and its cash flows for the three-month and nine-month
periods ended April 30, 2001 and the three-month period ended April 30, 2000 and
the period from December 7, 1999 (inception) to April 30, 2000. Results of
operations for the three-month and nine-month periods ended April 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ending July 31, 2001.
Note 2 - Deferred offering costs
--------------------------------
Deferred offering costs represent costs attributable to a proposed public
offering. The Company intends to offset these costs against the proceeds from
the transaction. In the event that such offering is not completed, these costs
will be charged to the Company's operations.
Note 3 - Per share calculations
-------------------------------
Basic loss per share is computed as net loss divided by the weighted-average
number of common shares outstanding for the period. Diluted loss per share
reflects the potential dilution that could occur from common shares issuable
through stock-based compensation including stock options, restricted stock
awards, warrants and convertible securities. Potential common shares have not
been included in diluted loss per share since the effect would be anti-dilutive.
The calculation of basic and diluted loss per common share is as follows:
Period from
December 7,
Three-month Three-month Nine-Month 1999
period ended period ended period ended (inception) to
April 30, 2001 April 30, 2000 April 30, 2001 April 30, 2000
----------------------------------------------------------------------------------------------------------------
Net loss $ (4,474,438) $ (2,206,012) $(6,100,830) $ (2,259,207)
Less: Preferred stock dividends (42,000) - (88,838) -
Deduction related to Series A convertible
preferred stock - - (3,490,234) -
-------------- --------------- ------------- ----------------
Net loss applicable to common stock $ (4,516,438) $ (2,206,012) $(9,679,902) $ (2,259,207)
============== =============== ============= ================
Basic and diluted:
Weighted average number of
common shares outstanding 11,236,149 10,520,000 11,189,990 9,901,027
============== =============== ============= ================
Basic and diluted loss per common share $ (0.40) $ (0.21) $ (0.87) $ (0.23)
============== =============== ============= ================
7
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 4 - Equity Transactions
----------------------------
As of July 31, 2000, the Company had not issued any shares of preferred stock
but had received $500,000 in cash toward shares of preferred stock. During the
nine-month period ended April 30, 2001, the Company issued 420 shares of
preferred stock and received an additional $1,349,944 in cash that was net of
$250,056 of offering costs.
In connection with the issuance of convertible preferred stock, the Company
issued warrants to purchase 818,165 shares of common stock. The warrants are
exercisable at prices ranging from $1.4625 to $4.50 per share, are exercisable
upon issuance, and expire in five years. The fair value of $1,775,036
attributable to the warrants has been treated as a cost associated with the
issuance of the convertible preferred stock, and has been recorded as an
increase to accumulated deficit and an increase in the net loss available to
common shareholders.
On the date of issuance of the convertible preferred stock, a beneficial
conversion feature of the convertible stock existed represented by the intrinsic
value of that feature. That amount is calculated as the difference between the
conversion price and the fair value of the common stock into which the preferred
stock is convertible, multiplied by the number of shares into which the
preferred stock is convertible. This amount has been recorded as an increase to
accumulated deficit and an increase in the net loss available to common
shareholders. The aggregate amount attributable to the beneficial conversion
feature is $1,715,198.
During the nine-month period ended April 30, 2001, the company issued 2,372
shares of restricted common stock on the acquisition of SalvageConnection.com,
Inc. These shares were valued at the fair market value at the date of issuance
that totaled $12,000.
During the nine-month period ended April 30, 2001, the Company entered into
agreements with three consultants to provide services to the Company. These
consultants will receive cash and 86,136 shares of the Company's common stock
for these services. The Company will record a charge to operations when the
services are performed based on the fair market value of the shares of common
stock on the date in which the services are performed. During the nine-month
period ended April 30, 2001, approximately $151,335 was charged to operations as
a result of these agreements. At April 30, 2001, 81,693 common shares have been
earned.
After renegotiation of a consulting agreement, 200,000 shares of stock that were
issued in fiscal year ended July 31, 2000 were cancelled as the services were
not performed. During April 2001, the Company issued 200,000 shares of common
stock to a member of the Company's board of directors who provided those
consulting services. As a result of these transactions the Company recorded a
net charge to operations of $106,000, which was equal to the difference in the
fair market value of the shares at the dates of original issuance and the
subsequent new issuance.
During the nine-month period ended April 30, 2001, the Company agreed to issue
50,000 shares of common stock in exchange for $100,000 of legal services. As of
April 30, 2001, $100,000 in legal services had been invoiced (of which $42,280
had been treated as a cost of issuance of the equity) and all 50,000 common
shares have been earned.
During the nine-month period ended April 30, 2001, the Company issued options to
employees and members of the Company's Board of Directors to purchase 1,292,700
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.
8
EAUTOCLAIMS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
During the nine-month period ended April 30, 2001, the Company issued 7,846
shares of common stock to directors in exchange for their services. The Company
charged operations $17,500, which was equal to the fair market value of the
shares when earned.
During April 2001, the Company issued options to purchase 2,200,000 shares of
common stock to officers, directors and employees of the Company at $.01 per
share. Accordingly, the Company recorded a charge to operations of $3,344,000,
representing the difference between the exercise price of the options and the
market price of the Company's common stock at the time of issuance related to
these issuances.
Note 5 - Acquisitions
---------------------
On August 1, 2000, the Company acquired the outstanding shares of
SalvageConnection.com, Inc. for the issuance of 2,372 shares of restricted
common stock. These shares were valued at the fair market value at the date of
issuance that totaled $12,000. SalvageConnection.com is an Internet-based
procurement network for recycled and remanufactured automobile parts.
SalvageConnection.com was incorporated in December 1999 had no significant
assets and liabilities and has not had any substantial operations since
incorporation. The acquisition has been accounted for as a purchase with the
entire consideration recorded as goodwill, to be amortized over 7 years.
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 11,252,278 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.
Note 7 - Subsequent Events
--------------------------
On June 6, 2001 the Company received $440,000, net of $60,000 of expenses, for
100 shares of convertible preferred stock from Governors Road, LLC, an affiliate
of Thomson Kernaghan. This stock is redeemable at the Company's option at 120%
of face value plus accrued interest on $500,000 upon the earlier of the closing
of the proposed public offering or August 15, 2001. The preferred stock cannot
be converted within this period. If the preferred stock is not redeemed by the
Company within this period, its terms become identical to the Company's other
convertible preferred stock.
In connection with the recent issuance of 100 shares of preferred stock, the
Company was required to enter into a Restated Master Modification Agreement with
the holders of the series A preferred stock. See Item 2 of this Form 10-QSB for
a full description of that modified agreement.
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
We provide Internet based collision claims administration services for
automobile insurance 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 facilitating the gathering and distribution of information required
in the automobile repair process. We manage the entire collision claims process
and are responsible for paying the repair bills and charges of our network of
vendors who repair the automobile under contract with us.
We provide an infrastructure that links automobile insurance companies and
self-insured fleet owners with thousands of collision repair shops and support
facilities located throughout the United States. Our services provide our
automobile insurance companies and self-insured fleet owner customers with a
means of monitoring repairs and controlling expenses incurred in the process of
evaluating and paying collision claims. We derive our revenues from fees paid by
our customers and by sharing in discounts received by our customers from parts
and service providers when processing collision work through our system. We
receive revenues from insurance companies for repairs completed by members of
our network of repair shops. 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 and
glass repair facilities through our provider network accounts for 97% of the
revenue for the nine months ended April 30, 2001. 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-month period ended April 30,
2001, 3% of the revenue has been received from claims processing fees and other
income.
Our business model is similar to that of health maintenance organizations
("HMO's") and preferred provider organizations ("PPO's"). HMO's and PPO's seek
to control the cost of medical services by bringing the various health care
providers, such as doctors and hospitals, together in a single organization,
thereby exerting control over the costs of services paid for by the HMO or PPO.
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 parts and
services, and performing necessary repair services. We monitor the performance
10
of parts and service providers from our home office with a staff of professional
body shop experts to help assure that the expectations of the insurance company
for quality, timeliness and cost are being met. As HMO's and PPO's have
relationships with many providers, we have established relationships with over
2,600 body shops and 5,300 glass shops throughout the United States. These shops
are referred to as our "provider network." Because of these relationships, we
are typically able to obtain lower cost parts and services for insurance
companies and increase the volume of work for repair shops that are part of our
provider network.
During the three months ended April 30, 2001 we experienced a significant
increase in losses when compared to the previous quarter. The increase in losses
is a result of (i) a non-cash expense from the issuance of stock options and
common stock as a management incentive and compensation to consultant, (ii) a
charge resulting from a stockholder modification agreement that extended the
filing deadline for registration of shareholder stock, and (iii) additional
payroll and infrastructure costs incurred to prepare to serve new customers,
including Royal Indemnity Company, a top 25 insurance company in revenue in the
United States,
RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED APRIL 30, 2001 COMPARED TO THE THREE-MONTH
PERIOD ENDED APRIL 30, 2000.
REVENUE
Total revenue for the three-month period ended April 30, 2001 was $6,679,358,
which consists of $5,521,511 in collision repairs management for insurance
companies, $554,054 in glass repairs, $398,917 in fleet repairs management, and
$204,876 in other revenue and fees. Revenues increased $6,066,366 or 990%
compared to three-month period ended April 30, 2000 total revenues of $612,992.
This increase is primarily the result of growth in revenues attributed to our
core collision repairs management business. Collision repairs management
revenues increased 1,278% from $400,772 in the three months ended April 30, 2000
to $5,521,511 for the three months ended April 30, 2001. During the three-month
period ended April 30, 2001, we derived 81% of our revenues from one customer.
The loss of this customer or a significant reduction in the amount of business
it provides us would substantially reduce our revenues and adversely affect our
operations. We have entered into a Claims Management Service and License
Agreement with Royal Indemnity Company, which is ranked in the top 25 insurance
companies in revenue in the United States. This new customer is expected to
process claims that will exceed revenues for our current largest customer and
thereby significantly reduce our revenue concentrations with our existing
largest customer.
EXPENSES
Claims processing charges for the three-month period ended April 30, 2001 were
$5,624,181, or 84% of revenues which increased 3% from 81% of revenues in the
three-month period ended January 31, 2001. This increase is caused by volume
discounts extended to our largest customers that caused claims processing
charges as a percentage of collision repairs management revenues to increase in
the period ended April 30, 2001. Claims processing charges include the costs of
collision repairs paid by eAutoclaims to its collision repair shop network. We
expect margins on claims repairs to remain low in the near future as we use
favorable pricing as a means to obtain increased market share. However, we
expect our margins as a whole to increase by supplementing our collision repairs
management revenues with new complimentary higher margin product lines such as
the sale of estimating software to independent adjustors and appraisers and
click fees associated with uploading information from our network. Claims
processing charges increased $5,124,905 or 1,026% from $499,276 in the period
ended April 30, 2000.
11
We are dependent upon our third party collision repair shops for insurance
claims repairs. eAutoclaims currently includes over 2,600 affiliated repair and
5,300 auto glass vendor facilities in its network for insurance claims repairs.
We electronically and manually audit individual claims processes to their
completion using remote digital photographs transmitted over the Internet.
However, if the quality of service provided by a collision repair shop falls
below a satisfactory standard leading to poor customer service, this could have
a harmful effect on our business. We control our service requirements by
continually monitoring customer service levels and providing staff inspections
of our network shops and, if required, establish similar relationships with
other collision repair shops.
Selling, general and administrative expenses for the three-month period ended
April 30, 2001 were $5,418,519 or 81% of revenue compared to $2,306,179 or 376%
of revenue for the same period of 2000. Selling, general and administrative
expenses have decreased significantly as a percentage of revenues when compared
to the three-month period ended April 30, 2000 which is attributed to our
substantial revenue growth and the economies of scale realized from our
established infrastructure. Selling, general and administrative expenses
consisted of salaries and other personnel related expenses, facilities related
expenses, legal and other professional fees, advertising costs, and travel
expenses. Selling, general and administrative expenses consisted of non-cash
charges of $3,513,620 for the three-month period ended April 30, 2001. Non-cash
charges included $3,344,000 for options to purchase 2,200,000 shares of common
stock issued to our officers, directors and employees at $.01 per share. Other
non-cash charges included $169,620 incurred pertaining to consulting agreements
for investor relation services, legal, and professional consultants. During the
three-month period ended April 30, 2001 we incurred payroll related expenses of
$1,119,385.
Depreciation and amortization was $111,096 for the three-month period ended
April 30, 2001. Depreciation of fixed assets represented $51,321. Amortization
expense of $59,775 reflects the amortization of goodwill associated with our
Premier Express Acquisition.
In the event that we continue to acquire other companies, amortization of
goodwill will continue to have an impact on our results of operations in the
future. Based on our previous acquisitions, future amortization of goodwill will
reduce net income from operations by approximately $55,000 in each quarter
through 2007.
Interest expense of $5,098 and interest income of $11,587 is included in
selling, general and administrative expenses for the three-month period ended
April 30, 2001. This is compared to $4,604 of interest income and no interest
expense in selling general and administrative expense for the three-month period
ended April 30, 2000. Interest expense related primarily to interest on
shareholder loans and capital leases and interest income resulted primarily form
interest earned on our cash reserves.
NET LOSS
We recorded a net loss of $4,474,438 for the three-month period ended April 30,
2001. Our net loss increased by $3,838,099 or 603% from the three-month period
ended January 31, 2001. Included in the Company's April 30, 2001 expense was
$280,000 resulting from a stockholder modification agreement that extended the
filing deadline for registration of shareholder stock. After adjusting the April
30, 2001 loss for non-cash charges of $3,513,620 and the $280,000, the loss
increased by $44,479 from the three-month period January 31, 2001. This
represents a decrease in the percentage of loss to revenue from 13% to 10%.
Additionally the Company purposely increased its payroll related costs by
approximately $87,000 during the three-months ended April 30, 2001 in order to
prepare itself to serve a new customer, Royal & Sun Alliance, a top 25 insurance
company in revenue in the United States.
Net loss increased $2,268,426 or 103% from $2,206,012 in the three-month period
ended April 30, 2000. Management is continuing to develop its infrastructure to
support its rapid growth and we believe that our business operations will
benefit in the long-term by supporting higher levels of claims processing
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charges leading to increased revenues. It is expected that we will break-even on
a cash flow basis (excluding non-cash charges which could be material) between
the fourth quarter of this fiscal year and the second quarter of fiscal year
2002, however there are no assurances that we will be able to meet this
objective or obtain future profitability.
FOR THE NINE-MONTH PERIOD ENDED APRIL 30, 2001 COMPARED TO THE PERIOD FROM
DECEMBER 7, 1999 (INCEPTION) TO APRIL 30, 2000.
REVENUE
Total revenue for the nine-month period ended April 30, 2001 was $13,833,481,
which consists of $10,904,535 in collision repairs management for insurance
companies, $1,523,842 in glass repairs, $927,582 in fleet repairs management,
and $477,522 in other repairs and fees. Revenues for the three-month period
ended April 30, 2001 represented 48% of revenues in the nine-month period ended
April 30, 2001. Revenues increased $13,032,539 or 1,627% for the nine month
period ended April 30, 2001 as compared to the period from December 7, 1999
(inception) to April 30, 2000.
During the nine-month period ended April 30, 2001, we derived 73% of our
revenues from one customer. The loss of this customer or a significant reduction
in the amount of business it does with us would substantially reduce our
revenues and adversely affect our operations. We have entered into a Claims
Management Service and License Agreement with Royal Indemnity Company, which is
ranked in the top 25 insurance companies in revenue in the United States. This
new customer is expected to process claims that will exceed revenues for our
current largest customer and thereby significantly reduce our revenue
concentrations with our existing largest customer.
EXPENSES
Claims processing charges for the nine-month period ended April 30, 2001 were
$11,481,692, or 83% of revenues. Of this percentage, claims management costs
represented 69%, while glass and other costs represented 14% of total claims
processing charges during this period. Claims processing charges are primarily
the costs of collision repairs paid by eAutoclaims to its collision repair shop
network. We expect margins on claims repairs to remain low in the near future as
we use favorable pricing as a means to obtain increased market share. However,
we expect our margins as a whole to increase by supplementing our collision
repairs management revenues with new complimentary higher margin product lines
such as the sale of estimating software to independent adjustors and appraisers
and click fees associated with uploading information from our network. Claims
processing charges increased $10,822,568 or 1,641% from $659,124 in the period
from December 7, 1999 (inception) to April 30, 2000.
We are dependent upon our third party collision repair shops for insurance
claims repairs. eAutoclaims currently includes over 2,600 affiliated repair and
5,300 auto glass vendor facilities in its network for insurance claims repairs.
We electronically and manually audit individual claims processes to their
completion using remote digital photographs transmitted over the Internet.
However, if the quality of service provided by collision repair shops fall below
a satisfactory standard leading to poor customer service, this could have a
harmful effect on our business. We control our service requirements by
continually monitoring customer service levels and providing staff inspections
of our network shops and, if required, establish similar relationships with
other collision repair shops.
Selling, general and administrative expenses for the nine-month period ended
April 30, 2001 were $8,154,219 or 59% of revenue compared to $2,387,476 or 298%
of revenue for the period from December 7, 1999 (inception) to April 30, 2000.
Selling, general and administrative expenses consisted of non-cash charges of
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$3,713,411 for the nine-month period ended April 30, 2001. Non-cash charges
included $3,344,000 for options to purchase 2,200,000 shares of common stock to
our officers, directors and employees at $.01 per share. Other non-cash charges
included $369,411 incurred pertaining to consulting agreements for investor
relation services, legal, and professional consultants. During the nine-month
period ended April 30, 2001 we incurred payroll related expenses of $2,693,364.
Depreciation and amortization was $298,400 for the nine-month period ended April
30, 2001. Depreciation of fixed assets represented $119,075. Amortization
expense of $179,325 reflects the amortization of goodwill associated with our
Premier Express Acquisition.
In the event that we continue to acquire other companies, amortization of
goodwill will continue to have an impact on our results of operations in the
future. Based on our previous acquisitions, future amortization of goodwill will
reduce net income from operations by approximately $55,000 in each quarter
through 2007.
Interest income of $15,790 is included in selling, general and administrative
expenses, net of interest expense of $14,334 for the nine-month period ended
April 30, 2001. Interest expense related primarily to interest on shareholder
loans and capital leases and interest income resulted primarily form interest
earned on our cash reserves.
NET LOSS
Net loss for the nine-month period ended April 30, 2001 was $6,100,830 or 44% of
revenues. Net loss before non-cash charges incurred pertaining to consulting
agreements for investor relations services, legal, and professional consultants
was $2,387,419 or 17% of revenues for the nine-month period ended April 30,
2001. Net loss increased $3,841,623 or 170% from $2,259,207 in the period from
December 7, 1999 (inception) to April 30, 2000. We expect our year-to-date net
loss to narrow as we experience higher revenues that will increasingly absorb
our fixed costs associated with our infrastructure.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 2001, we had cash and cash equivalents of $346,432 and a working
capital deficiency of $1,474,286. The primary source of our working capital
during the nine-month period ended April 30, 2001, was from the sale of shares
of our series A Preferred Stock.
If we are unable to obtain financing through our current proposed public
offering, we will curtail our current growth plans. In such event, we believe
that our current cash resources, along with working capital from operations will
be sufficient to fund our business at least through 2001. If additional funds
from our proposed public offering or other financing arrangements are not
available on favorable terms to us, we will not be able to continue our rapid
growth.
We believe that, assuming that our current public offering closes, the net
proceeds from this offering, together with cash generated from operations, will
be sufficient to meet our anticipated cash needs for working capital and capital
expenditures for the next 18 months and will allow us to continue the rapid
expansion of our business. However, we may need to raise additional funds as we
pursue other business or technology acquisitions or experience operating losses
that exceed our current expectations. We cannot assure you that we will be able
to raise such funds or such funds will be available to us on favorable terms. If
we raise additional funds through the issuance of our equity for debt
securities, such securities may have rights, preferences or privileges senior to
those of the rights of our Common Stock and our stockholders may experience
additional dilution.
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We are currently restricted from raising other additional debt or equity without
the consent of the holders of our Series A Preferred Stock. Thomson Kernaghan
has exclusive rights to provide any future equity line financing agreements for
two years after the date of this prospectus.
On June 6, 2001 we received $440,000, net of $60,000 of expenses, for 100 shares
of Series A Convertible Preferred stock from Governors Road, LLC, one of our
current holders of our Series A Preferred Stock. This stock is redeemable at our
option at 120% of face value plus accrued dividends on $500,000 upon the earlier
of the closing of our proposed public offering or August 15, 2001. If we do not
redeem the preferred stock its term becomes identical to our other convertible
preferred stock. We also issued our warrants as part of this funding in
accordance with the terms of the preferred stock agreements.
eAutoclaims' operations used cash of $600,359 the nine-month period ended April
30, 2001, and management expects a significant use of cash during the upcoming
fiscal quarter as it funds its operating businesses. There is no assurance we
will continue to sustain our growth. Our business has grown significantly since
our inception. We believe that our current cash resources, access to capital and
cash flow from operations will be sufficient to sustain our operations for at
least 12 months. 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. In order to
sustain our growth, we will require substantial additional capital. If we raise
additional funds through the issuance of our securities, these securities may
have rights, preferences or privileges senior to those of our Common Stock, and
our stockholders may experience additional dilution to their equity ownership.
As of July 31, 2000, we had not issued any shares of preferred stock but had
received $500,000 in cash toward the purchase of shares of preferred stock.
During the nine-month period ended April 30, 2001, we received an additional
$1,349,944 in cash that was net of $250,056 of offering costs and issued 420
shares of preferred stock for total gross cash received of approximately
$2,100,000. We have an obligation to register these shares of Common Stock
underlying the Preferred Stock to provide these investors future liquidity of
their investment. In connection with the issuance of the preferred stock, we
also issued, to purchasers of the preferred stock, warrants to purchase 818,165
shares of Common Stock. These warrants are immediately exercisable at prices
ranging from $1.4625 to $4.50 per share and expire five years from the date of
issue. In addition, we agreed to pay the preferred shareholders $280,000
resulting from these preferred shareholders extending the filing deadline for
registration of the underlying common stock.
We will need capital to implement our business objectives. We cannot provide any
assurance that we will be successful in raising such capital, and such
undertakings are difficult to complete. Although management is optimistic that
we will be successful in obtaining future financing, there is no assurance that
such financing will be available to meet our needs.
Our principle commitments at April 30, 2001 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.
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SEASONALITY
eAutoclaims does not deem its revenues to be seasonal.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to a number of lawsuits and claims arising out of the
conduct of its business. Management believes that the probable resolution of
such matters will not materially affect the financial position, results of
operations or cash flows of the Company.
In July 2000, EAUTO, LLC, a Texas entity, asserted that the Company's use of its
EAUTOCLAIMS.COM mark and website violated its federally registered EAUTO service
mark. The Company denied this assertion on the grounds that the marks are
different, the services offered by the Company are different than those offered
by EAUTO, Inc. and there is no likelihood of confusion among relevant consumers.
In May of 2001 EAUTOCLAIMS.COM received a favorable judgment that declared that
there was no service mark violation. The judgment further dismissed EAUTO's
registered service mark.
On or about October 23, 2000, we received a demand letter from a website
developer for $135,000 alleging breach of contract. Our management believes that
we are entitled to a refund of $15,000. A complaint has been filed in Pinellas
County Circuit Court regarding this dispute. It is too early to predict the
ultimate outcome of this dispute. Management believes we have meritorious
defenses to this action. We believe that there are no other claims or actions
pending or threatened against us, the ultimate disposition of which would have a
material adverse effect on us.
We believe that there are no other claims or actions pending or threatened
against us, the ultimate disposition of which would have a material adverse
effect on us.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS.
As of July 31, 2000, we had not issued any shares of preferred stock but had
received $500,000 in cash toward the purchase of shares of preferred stock.
During the nine-month period ended April 30, 2001, we received an additional
$1,349,944 in cash that was net of $250,056 of offering costs and issued 420
shares of preferred stock for total gross cash received $2,100,000. We have an
obligation to register these shares of Common Stock underlying the Preferred
Stock to provide these investors future liquidity of their investment. In
connection with the issuance of the preferred stock, we also issued, to
purchasers of the preferred stock, warrants to purchase 818,165 shares of Common
Stock. These warrants are immediately exercisable at prices ranging from $1.4625
to $4.50 per share and expire five years from the date of issue.
During the nine-month period ended April 30, 2001, the Company issued 2,372
shares of restricted common stock on the acquisition of SalvageConnection.com,
Inc. These shares were valued at the fair market value at the date of issuance
that totaled $12,000.
During the nine-month period ended April 30, 2001, the Company entered into
agreements with three consultants to provide services to the Company. These
consultants will receive cash and 86,136 shares of the Company's common stock
for these services. The Company will record a charge to operations when the
services are performed based on the fair market value of the shares of common
stock on the date in which the services are performed. During the nine-month
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period ended April 30, 2001, approximately $151,335 was charged to operations as
a result of these agreements. At April 30, 2001, 81,693 common shares have been
earned.
After renegotiation of a consulting agreement, one of these consultants agreed
to cancel 200,000 shares of stock that were issued in fiscal year ended July 31,
2000 as the services were not performed. During April 2001, we issued an
additional 200,000 shares of common stock to a member of our board of directors
who provided those consulting services. As a result of these transactions we
recorded a net charge to operations of $106,000, which was equal to the
difference in the fair market value of the shares at the dates of original
issuance and subsequent new issuance.
During the nine-month period ended April 30, 2001, the Company agreed to issue
50,000 shares of common stock in exchange for $100,000 of legal services. As of
April 30, 2001, $100,000 in legal services had been invoiced (of which $18,900
had been treated as a cost of issuance of the preferred stock) and all 50,000
common shares have been earned.
During the nine-month period ended April 30, 2001, the Company issued options to
employees and members of the Company's Board of Directors to purchase 1,292,700
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.
During the nine-month period ended April 30, 2001, the Company issued 7,846
shares of common stock to directors in exchange for their services. The Company
charged operations $17,500, which was equal to the fair market value of the
shares when earned.
During April 2001, the Company issued options to purchase 2,200,000 shares of
common stock to officers, directors and employees of the Company at $.01 per
share. Accordingly, the Company recorded a charge to operations of $3,344,000,
representing the difference between the exercise price of the options and the
market price of the Company's common stock at the time of issuance related to
these issuances.
On June 6, 2001 we received $440,000, net of $60,000 of expenses, for 100 shares
of Convertible Preferred stock from Governors Road, LLC, one of our current
holders of our Series A Preferred Stock. This stock is redeemable at the our
option at 120% of face value plus accrued dividend on $500,000 upon the earlier
of the closing of our proposed public offering or August 15, 2001. If we do not
redeem the preferred stock its term becomes identical to our convertible
preferred stock. We also issued our warrants as part of this funding in
accordance with the terms of the preferred stock agreements.
In connection with the recent issuance of 100 shares of our Series A Preferred
Stock to Governors Road, LLC, we were required to enter into a Restated Master
Modification Agreement with the holders of our Series A Preferred Stock. The
Restated Master Modification Agreement amends the Securities Purchase Agreement,
the Registration Rights Agreement, Security Agreement, Certificate of
Designation for our Series A Preferred, Purchasers Warrant and Agents Warrant.
These agreements are collectively referred to sometimes as the "Preferred Stock
Agreements." The Restated Master Modification Agreement modifies certain
provisions of the Preferred Stock Agreement as follows:
o Holders of our Series A Preferred Stock and certain other of our
shareholders agreed to enter into certain lock-up restrictions relating
to the sale of our Common Stock. Notwithstanding the foregoing, we have
agreed that up to 200,000 of our Common Stock held by Dominion Capital,
Ltd., or Southshore Capital Fund, Ltd., otherwise subject to the terms
of lock-up agreements, will be permitted to be sold at the equal to ten
percent (10%) of the prior day's average trading daily volume. These
shares are currently freely tradable without restriction or further
registration under the Securities Act pursuant to Rule 144(k).
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o The conversion rate for our Series A Preferred Stock was set at $.75
per share. We have reserved a total of 2,800,000 shares of our Common
Stock underlying the conversion rights of our Series A Preferred Stock.
If our proposed public offering does not close by June 30, 2001, the
conversion price on the Preferred Stock shall be reduced from $.75 to
the lesser of 75% of the market value at the time of conversion of a
share of our common stock or $.62.5.
o The penalty provisions contained in the original Registration Rights
Agreement for failure to register underlying shares on a timely basis
has been waived subject to us making a cash payment of $280,000 to the
holders of our Series A Preferred Stock on or before June 30, 2001.
o The holders of our Series A Preferred Stock will not convert if the
effect of conversion is to increase their beneficial ownership in our
securities to greater than 9.9%. All remaining Series A Preferred Stock
will be converted at such time as the total amount of outstanding
Series A Preferred Stock is less than 250,000 (i.e. 50 shares).
o Prior to our decision to proceed with our proposed public offering we
had negotiated the terms and conditions of an equity line financing
agreement with the Agent. We agreed that the Agent would have exclusive
rights to provide any future equity line financing agreements for a
period of two (2) years.
o Certain of our shareholders agreed to waive the requirement that
$2,000,000 of their common shares be sold as part of our proposed
public offering.
o We were granted an extension until June 30, 2001 to close our proposed
public offering. If this offering does not close by June 30, 2001, then
the lock-up agreements are terminated and the penalty provisions of the
Registration Rights Agreement would apply on a retroactive basis to
April 30, 2001.
o We agreed to issue CALP II, LP, an affiliate of Thomson Kernaghan,
24,500 shares of our Common Stock in consideration of extending the
required closing date of our proposed public offering from April 30,
2001 to June 30, 2001.
o We amended the Certificate of Designation for our Series A Preferred
Stock to increase the number of Series A Preferred Stock from 500 to
600 shares.
o We are obligated to redeem the 100 shares of our Series A Preferred
Stock purchased by Governors Road, LLC in June, 2001, at 120% of the
face amount ($600,000) plus accrued and unpaid dividends upon the
earlier of August 15, 2001 or the closing of our proposed public
offering. If we do not redeem the 100 shares of our Series A Preferred
Stock issued to Governors Road, LLC, then the amended conversion
features set forth above shall apply.
o If the public offering closes, the agent warrants and purchaser
warrants shall be automatically amended on such closing date to provide
for an exercise price equal to the lower or (i) the existing exercise
prices of the purchaser's warrants and agent's warrants, or (ii) the
lowest exercise price of the warrants included in the units of our
public offering.
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o We agreed to pay Greenfield Investments, an affiliate of Governors
Road, LLC, the sum of $50,000 as consideration for investment banking
services in connection with the placement of our Series A Preferred
Stock to Governor Road, LLC in June 2001.
o We released the holders of our Series A Preferred Stock, the agent as
well as her officers, directors, attorneys, employees and
representatives from any and all actions, claims, liabilities or any
matter whatsoever relating to the Preferred Stock Agreements, the
Restated Master Modification Agreement and/or the sale of our Series A
Preferred Stock to Governors Road, LLC.
We may not be able to close our proposed public offering on or before June 30,
2001. There is no assurance we will be able to negotiate reasonable extension
terms with the agent, the holders of our Series A Preferred Stock or other
shareholders who have agreed to lock-up provisions contingent upon a closing
date of June 30, 2001. The failure to close this public offering and negotiate
extensions of our lock-up arrangements and other understandings with certain of
our current shareholders may have an adverse effect on the price of our Common
Stock and financial performance.
ITEM 5. OTHER INFORMATION
On April 9, 2001, our board of Directors authorized us to enter into Change of
Control and Termination Agreements with Eric Seidel, Randal K. Wright, Scott
Moore and Gabriel Powers. If there is a change of control and our executives are
terminated without cause, then the executive shall be entitled to receive a lump
sum payment equal to 299% of the executive's last 12 months base salary. In
addition, all stock options issued to the executive shall immediately vest and
be exercisable in full at any time of the remaining term of the stock options. A
change of control is defined to mean any merger, combination, consolidation of
other business transactions in which the holders of our common stock immediately
prior to such transaction are not the holders of a majority of our voting
securities after the transaction, the closing of any sale of all or
substantially all of our assets or a change in the composition of our Board of
Directors such that the current members of the board of directors are no longer
the majority in number of the Board of Directors. These arrangements constitute
an anti-takeover device since the obligations that are triggered upon a change
of control may thwart or make any change of control transaction more difficult
to accomplish because of the liabilities that are triggered upon the change of
control.
On April 9, 2001, the Board of Directors also approved us entering into
Indemnifications Agreements with each of our officers and directors. The
Indemnification Agreements provide indemnification to the maximum extent
authorized by Nevada State corporation law and specifically authorize the
reimbursement of our directors and officers of legal fees on a monthly basis
during the existence of any action naming our officers and directors unless it
becomes apparent that such individual is not entitled to payment of expenses. In
such event our officers and directors are required within 30 days to reimburse
us for all amounts previously advanced or paid.
In May 2001, Randy Wright was appointed as our Chief Development Officer and
Reed Mattingly was appointed as our Chief Operating Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a Current Report Form 8-K Amendment No.2 dated July 20, 2000
with the Securities and Exchange Commission amending the Form 8-K/A Amendment
No.1 filed on August 15, 2000 regarding the financial statements and the pro
forma financial information for Premier Express Claims, Inc.
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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 14, 2001 By: /s/ Eric Seidel
-----------------------------------------------
Eric Seidel, Chief Executive Officer
By: /s/ Scott Moore
-----------------------------------------------
Scott Moore, Chief Financial Officer
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