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 October 31, 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
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2708 Alt. 19 N., Suite 604, Palm Harbor, Florida 34683
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(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 October 31, 2001 was 13,130,707.
Transitional Small Business Disclosure Format:
[ ] Yes [ X ] No
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
INDEX TO FORM 10-QSB
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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 9
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
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, 2001.
2
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
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October 31, 2001 July 31, 2001
(unaudited)
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ASSETS
Current Assets:
Cash $ 498,944 $ 485,092
Accounts receivable, less allowance for doubtful accounts
of $60,000 1,440,758 1,208,409
Due from related parties 162,854 154,853
Prepaid expenses and other current assets 141,914 126,693
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Total current assets 2,244,470 1,975,047
Property and Equipment, net of accumulated depreciation
of $288,593 and $231,920, respectively 537,186 545,015
Goodwill, net of accumulated amortization
of $295,730 and $241,037, respectively 1,257,922 1,312,615
Other Assets 414,313 365,000
Deferred Income Tax Asset, net of valuation
allowance of $4,588,000 and $4,171,000 respectively - -
-----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 4,453,891 $ 4,197,677
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 3,991,270 $ 3,074,653
Deferred software subscription revenue 150,933 111,670
Convertible debentures, net of unamortized discount of $555,551 - 94,449
Loans payable - stockholders 135,000 179,000
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Total current liabilities 4,277,203 3,459,772
Stockholders' Equity:
Convertible preferred stock - $.001 par value; authorized 5,000,000 shares,
issued and outstanding 520 shares
aggregate liquidation preference of $2,600,000 1 1
Common stock - $.001 par value; authorized 50,000,000 shares, issued
and outstanding 13,130,707 shares and 11,711,877 shares respectively 13,131 11,712
Additional paid-in capital 17,287,800 16,051,679
Accumulated deficit (17,124,244) (15,325,487)
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Stockholders' equity 176,688 737,905
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Total Liabilities and Stockholders' Equity $ 4,453,891 $ 4,197,677
=============================================================================================================================
See Notes to Consolidated Financial Statements
3
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
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Three-month Three-month
Period ended Period ended
October 31, 2001 October 31, 2000
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(unaudited) (unaudited)
Revenue:
Collision repairs management $ 6,624,155 $ 1,311,896
Glass repairs 426,049 543,682
Fleet repairs management 321,474 234,924
Fees and other revenue 319,243 128,765
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Total revenue 7,690,921 2,219,267
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Expenses:
Claims processing charges 6,493,842 1,769,742
Selling, general and administrative 1,868,491 1,348,496
Depreciation and amortization 111,365 91,082
Amortization of beneficial conversion feature on convertible debentures and fair 555,551
value of warrants issued in connection with debentures
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Total expenses 9,029,249 3,209,320
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Net loss (1,338,328) (990,053)
Less: Preferred stock dividends (52,429) (16,153)
Deduction relating to Series A Convertible Preferred Stock (408,000) (1,916,382)
-----------------------------------------------------------------------------------------------------------------------------------
Net loss applicable to common stock $ (1,798,757) $ (2,922,588)
===================================================================================================================================
Loss per common share - basic and diluted $ (0.15) $ (0.26)
===================================================================================================================================
Weighted-average number of common shares outstanding - basic and diluted 12,257,787 11,133,179
===================================================================================================================================
See Notes to Consolidated Financial Statements
4
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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Three month period ended October 31, 2001
Additional
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
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Balance at July 31, 2001 520 $ 1 11,711,877 $11,712 $16,051,679 $(15,325,487) $ 737,905
Issuance of common stock
in conjunction with lease 97,927 98 92,933 93,031
Issuance of common stock
for services 94,381 94 40,495 40,589
Issuance of common stock
upon exercise of options 192,000 192 1,728 1,920
Issuance of common stock
for amounts due to shareholders 91,667 92 43,908 44,000
Accrued dividend on
preferred stock (52,429) (52,429)
Issuance of common stock
upon conversion of debentures 942,855 943 649,057 650,000
Recognition of beneficial conversion
feature of convertible preferred stock 408,000 (408,000) -
Net loss (1,338,328) (1,338,328)
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Balance at October 31, 2001 520 $ 1 13,130,707 $13,131 $17,287,800 $(17,124,244) $ 176,688
====================================================================================================================================
See Notes to Consolidated Financial Statements
5
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
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Three-month Three-month
Period ended Period ended
October 31, 2001 October 31, 2000
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(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (1,338,328) $ (990,053)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 111,365 91,082
Amortization of discount on debentures 555,551
Common stock issued for services 40,589 98,420
Common stock issued for rent and option to purchase facility 43,659
Common stock to be issued for services 28,240
Increase in allowance for doubtful accounts 30,000
Changes in operating assets and liabilities net of acquisition:
Increase in accounts receivable (232,349) (242,318)
(Increase) decrease in due from related parties (8,001) 51,066
(Increase) decrease in prepaid expenses and other current assets 34,151 (33,130)
Increase in other assets (49,313) (2,179)
Increase in accounts payable and accrued expenses 864,188 447,598
Increase in deferred software subscription revenue 39,263
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Net cash provided by (used in) operating activities 60,775 (521,274)
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Cash flows from investing activity:
Purchases of property and equipment (48,843) (107,777)
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Cash used in investing activity (48,843) (107,777)
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Cash flows from financing activities:
Net proceeds from issuance of preferred stock 659,944
Proceeds from exercise of stock options 1,920 -
Issuance of compensatory stock options 280
Principal payments on stockholder loans (27,200)
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Cash provided by financing activities 1,920 633,024
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Net increase in cash 13,852 3,973
Cash at beginning of period 485,092 239,979
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Cash at end of period $ 498,944 $ 243,952
========================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 19,664 $ 2,394
========================================================================================================================
Supplemental disclosure of noncash investing and financing activities:
Conversion of debentures to common stock $ 650,000
========================================================================================================================
Issuance of common stock for amounts due to shareholders $ 44,000
========================================================================================================================
Issuance of stock for payment of rent $ 49,372
========================================================================================================================
See Notes to Consolidated Financial Statements
6
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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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 October 31, 2001 and its results of operations and its
cash flows for the three-month period ended October 31, 2001 and the three-month
period ended October 31, 2000. Results of operations for the three-month period
ended October 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending July 31, 2002.
Note 2 - 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.
Note 3 - Equity Transactions
----------------------------
On July 31, 2001, 100 shares of preferred stock were redeemable at the Company's
option at 120% of face value, plus accrued dividends by August 15, 2001. Since
the Company did not redeem the preferred stock, its terms became identical to
the Company's other preferred stock. An increase to accumulated deficit and the
net loss available to common shareholders of $100,000 was recorded during the
year ended July 31, 2001 and $408,000 has been recorded during the three-month
period ended October 31, 2001 representing the beneficial conversion feature.
On September 20, 2001, two shareholders and officers of the Company converted
$44,000 of debt owed to them by the Company into 91,667 shares of common stock.
During the three-month period ended October 31, 2001 $650,000 of debentures
which were issued in June and July of 2001 were converted into 942,855 shares of
common stock in accordance with the debenture agreements. During the three-month
period ended October 31, 2001 the Company charged operations $389,400,
representing the amortization of the beneficial conversion feature attributable
to the debentures and $166,151 representing the amortization of the fair value
of the warrants attached to the debentures.
During the three-month period ended October 31, 2001, the Company entered into
an agreement for the lease of a new office facility that called for the issuance
of 97,927 shares of common stock for the first three months rent and a five year
purchase option of the property at a pre-established price. During the
three-month period ended October 31, 2001, $43,659 was charged to operations for
the stock issued relating to the purchase option. The $49,372 associated with
the rent was recorded as prepaid rent and will be charged to operations as the
rent expense is incurred.
During the three-month period ended October 31, 2001, the Company issued 83,741
shares of common stock in exchange for $35,589 of legal services.
During the three-month period ended October 31, 2001, the Company issued
additional options to employees and members of the Company's Board of Directors
7
EAUTOCLAIMS.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
to purchase 506,000 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, during the three month
period ended October 31, 2001 options to purchase 44,400 shares of common stock
issued to former employees were canceled.
During the three-month period ended October 31, 2001, the Company issued 10,640
shares of common stock to four directors in exchange for their services. The
Company charged operations $5,000, which was equal to the fair market value of
the shares when earned.
On October 1, 2001 the Company entered into a contract with a public relations
consultant for services. This agreement calls for the Company to issue options
to purchase 21,429 shares of stock on November 1, 2001.
Note 4 - 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 13,130,707 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.
8
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.
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 over 3,100 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.
We have just announced the release of our new product line - eJusterSuiteTM.
eJusterSuite expands our potential customer base as well as provides significant
new features to our current customer base. The Bricks-to-Clicks product is an
outsourcing solution that requires eAuto personnel to audit and coordinate the
vehicle repair. The new eJusterSuite allows the outsourcing solution as well as
provides for a true application service provider (ASP) solution whereby the
insurance company can use our technology independent of our personnel. The ASP
solution allows us to market our product to 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 provides significant new features to our current customers
because it builds in service partners that can provide the needed services such
as car rental, 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 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
9
and process the transaction, even after paying our transaction fee. This added
revenue would provide additional margin without the additional personnel and
operating costs. Since this product was not released until after October 31,
2001 there are no related revenues in the attached quarter financial statements.
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 96% of the revenue for the
three-months ended October 31, 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 three-month period ended October 31, 2001, 4% of the
revenue has been received from claims processing fees and other income.
RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED OCTOBER 31, 2001 COMPARED TO THE THREE-MONTH
PERIOD ENDED OCTOBER 31, 2000.
REVENUE
Total revenue for the three-month period ended October 31, 2001 was $7,690,921,
which consists of $6,624,155 in collision repairs management for insurance
companies, $426,049 in glass repairs, $321,474 in fleet repairs management, and
$319,243 in other revenue and fees. Revenues increased $5,471,654 or 247%
compared to three-month period ended October 31, 2000 with total revenues of
$2,219,267. This increase is primarily the result of growth in revenues
attributed to our core collision repairs management business. Collision repairs
management revenues increased 405% from $1,311,896 in the three months ended
October 31, 2000 to $6,624,155 for the three months ended October 31, 2001.
During the three-month period ended October 31, 2001, we derived 26% of our
revenues from one customer. We have terminated the agreement with this customer
for breach of contract. The loss of this customer has been mitigated with the
addition of a larger customer. We have entered into a five-year Claims
Management Service and License Agreement with Royal Indemnity Company (Royal &
SunAlliance), which is ranked in the top 25 automobile property and casualty
insurance companies in revenue in the United States. In the three-months ended
October 31, 2001 this new customer accounted for 51% of our revenue.
EXPENSES
Claims processing charges for the three-month period ended October 31, 2001 were
$6,493,842, or 85% of revenues which increased 5% from 80% of revenues in the
three-month period ended October 31, 2000. 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 October 31, 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
eJusterSuite and click fees associated with uploading information from our
network.Claims processing charges increased $4,724,100, or 267%, from $1,769,742
in the period ended October 31, 2000.
10
We are dependent upon our third party collision repair shops for insurance
claims repairs. eAutoclaims currently includes over 3,100 repair vendors'
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
October 31, 2001 were $1,868,491 or 24% of revenue compared to $1,348,496 or 61%
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 October 31, 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 included non-cash charges
of $84,248 for the three-month period ended October 31, 2001. Non-cash charges
include $43,659 of stock issued to purchase an option to buy an office facility
and $40,589 of stock to pay board of director and professional fees. Other
non-cash charges include $555,551 amortization of debenture discount that was
converted into common stock. During the three-month period ended October 31,
2001 we incurred payroll related expenses of $1,272,669 compared to $637,006 for
the three-months ended October 31, 2000, or a 100% increase.
Depreciation and amortization was $111,365 for the three-month period ended
October 31, 2001. The Depreciation of fixed assets represented $56,673.
Amortization expense of $54,692 reflects the amortization of goodwill associated
with our Premier Express Acquisition.
In addition to the non-cash debenture items described above, interest expense of
$15,757 and interest income of $8,729 is included in selling, general and
administrative expenses for the three-month period ended October 31, 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
We recorded a net loss of $1,338,328 for the three-month period ended October
31, 2001. Our net loss increased by $348,275 or 35% from the three-month period
ended October 31, 2000. Included in the Company's October 31, 2001 loss were
non-cash charges of $639,799 which includes $555,551 of debenture discount
amortization. Non-cash charges also include $43,659 of stock issued to purchase
an option to buy an office facility and $40,589 of stock to pay board of
director and professional fees. This loss represents a $198,768 decrease from
the $1,537,096 loss for the three-months ended July 31, 2001. It is expected
that we will break-even between the second and third quarter of this fiscal
year, however there are no assurances that we will be able to meet this
objective or obtain future profitability.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2001, we had cash of $498,944, a $13,852 increase over July 31,
2001, and a working capital deficiency of $2,032,733. The primary source of our
working capital during the three-month period ended October 31, 2001, was from
cash flow generated by operations. However, there is no assurance that we will
be able to continue to provide cash through operations.
11
Convertible debentures, totaling $650,000 were converted into equity as of
September 30, 2001. We are also working on additional equity funding of
approximately $2,000,000. If we are unable to obtain this funding, we will not
be able to add the sales personnel to increase our growth as rapidly as we have
planned. 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 the year ended July 31, 2002. There is no assurance that we will be able
to obtain this funding.
We believe that, assuming that this funding closes, the net proceeds from this
funding, 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.
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 for two years.
eAutoclaims' operations provided cash of $60,775 for the three-month period
ended October 31, 2001, and management expects a significant source 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 through at least July 31, 2002. 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.
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.
Our principle commitments at October 31, 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.
SEASONALITY
eAutoclaims does not deem its revenues to be seasonal.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to a 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.
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.
On September 20, 2001, two shareholders and officers of the Company converted
$44,000 of debt owed to them by eAutoclaims to 91,667 shares of stock.
During the three-month period ended October 31, 2001, $650,000 of debentures
were issued in June and July of 2001 were converted to 942,855 shares of common
stock in accordance with the debenture agreements.
During the three-month period ended October 31, 2001, the Company entered into
an agreement for the lease of a new office facility that called for the issuance
of 97,927 shares of stock for the first three months rent and a five year
purchase option of the property at a pre-established price. During the
three-month period ended October 31, 2001, $43,659 was charged to operations for
the stock issued relating to the purchase option. At October 31, 2001, the
remaining shares have not been earned.
During the three-month period ended October 31, 2001, the Company issued 83,741
shares of common stock in exchange for $35,589 of legal services.
During the three-month period ended October 31, 2001, the Company issued
additional options to employees and members of the Company's Board of Directors
to purchase 506,000 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 44,400
shares of common stock were canceled.
During the three-month period ended October 31, 2001, the Company issued 10,640
shares of common stock to four directors in exchange for their services. The
Company charged operations $5,000, which was equal to the fair market value of
the shares when earned.
On October 1, the Company entered into a contract with a public relations
consultant for services. This agreement calls for the Company to issue options
to purchase 21,429 shares of stock on November 1, 2001.
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ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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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: December 12, 2001 By: /s/ Eric Seidel
--------------------------------------
Eric Seidel, Chief Executive Officer
By: /s/ Scott Moore
--------------------------------------
Scott Moore, Chief Financial Officer
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