<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15946
ebix.com, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0021975
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 E. GOLF ROAD
SCHAUMBURG, IL 60173
----------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-789-3047
------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date. 11,372,237 Shares
as of August 9, 2000.
<PAGE>
ebix.com, Inc. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 2000
(unaudited) and December 31, 1999.......................................3
Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2000 and 1999
(unaudited).............................................................4
Consolidated Statements of Stockholders Equity (Deficit) for the Three and
Six Months Ended June 30, 2000 (unaudited)..............................5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 (unaudited)................................6
Notes to Consolidated Financial Statements (unaudited).......................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk..........................................................17
PART II - OTHER INFORMATION
Item 2. Changes to Securities and Use of Proceeds...............................17
Item 6. Exhibits and Reports on Form 8-K......................................18
SIGNATURES...........................................................................18
</TABLE>
2
<PAGE>
ebix.com, Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share amounts)
<TABLE>
<CAPTION>
(Unaudited)
JUNE 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $6,501 $7,055
Accounts receivable, less allowance of $935 and $1,004
Unbilled receivables 120 120
Trade receivables 3,135 2,977
-------------- -----------------
Total accounts receivable 3,255 3,097
-------------- -----------------
Other receivables 118 332
Other current assets 191 169
-------------- -----------------
TOTAL CURRENT ASSETS 10,065 10,653
Property and equipment, net 1,634 2,059
Purchased software, net 49 97
Goodwill, net 408 503
Other assets 63 77
-------------- -----------------
TOTAL ASSETS $12,219 $13,389
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long term debt $214 $217
Accounts payable and accrued expenses 3,528 3,166
Accrued payroll and related benefits 713 827
Current portion of capital lease obligation 211 97
Deposit liability 2,249 2,324
Deferred revenue 2,805 3,046
-------------- -----------------
TOTAL CURRENT LIABILITIES 9,720 9,677
Long term debt, less current portion - 106
Long term capital lease obligation, less current portion 343 623
-------------- -----------------
TOTAL LIABILITIES 10,063 10,406
-------------- -----------------
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible Series D Preferred stock, $.10 par value, 2,000,000
shares authorized, 221 shares issued and outstanding 49 49
Common stock, $.10 par value,
20,000,000 shares authorized,
11,372,237 and 10,763,548 issued and
outstanding, respectively 1,137 1,076
Additional paid-in capital 81,441 76,687
Deferred compensation (881) (1,549)
Accumulated deficit (79,483) (73,166)
Accumulated other comprehensive loss (107) (114)
-------------- -----------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 2,156 2,983
-------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $12,219 $13,389
============== =================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ebix.com, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE:
Software $469 $745 $835 $1,097
Services and other 2,524 2,972 5,013 6,286
------------ ---------- --------- -----------
TOTAL REVENUE 2,993 3,717 5,848 7,383
OPERATING EXPENSES:
Software costs 108 109 178 304
Services and other costs 1,647 2,333 3,343 4,977
Product development 1,033 1,593 2,102 2,551
Sales and marketing 1,409 976 2,741 1,606
General and administrative 2,196 2,956 3,778 4,742
Amortization of goodwill
and non-compete agreement 47 94 142 188
------------ ---------- --------- -----------
TOTAL OPERATING EXPENSES 6,440 8,061 12,284 14,368
------------ ---------- --------- -----------
OPERATING LOSS (3,447) (4,344) (6,436) (6,985)
Interest income 183 - 244 -
Interest expense 36 59 50 166
------------ ---------- --------- -----------
Loss before income taxes (3,300) (4,403) (6,242) (7,151)
Income tax provision 62 18 75 25
------------ ---------- --------- -----------
Net loss ($3,362) ($4,421) ($6,317) ($7,176)
============ ========== ========= ===========
Basic and Diluted net loss per common share ($0.30) ($0.51) ($0.56) ($0.87)
============ ========== ========= ===========
Basic and Diluted Weighted average shares
outstanding: 11,371 8,657 11,317 8,247
============ ========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ebix.com, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share amounts)
(unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ACCUMULATED
--------------- --------------- ADDITIONAL OTHER
PAID-IN DEFERRED ACCUMULATED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT (LOSS) INCOME TOTAL
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999 221 $49 10,763,549 $1,076 $76,687 ($1,549) ($73,166) ($114) $2,983
-------------------------------------------------------------------------------------------
Net loss -- -- -- -- -- -- (2,955) -- (2,955)
Translation adjustment--other
comprehensive loss -- -- -- -- -- -- -- (5) (5)
Exercise of stock options -- -- 6,875 1 22 -- -- 23
Exercise of stock warrants -- -- 595,700 59 4,408 -- 4,467
Deferred compensation related to the
issuance of options and warrants 683 278 961
------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2000 (UNAUDITED) 221 $49 11,366,124 $1,136 $81,800 ($1,271) ($76,121) ($119) $5,474
------------------------------------------------------------------------------------------
Net loss -- -- -- -- -- -- (3,362) -- (3,362)
Translation adjustment--other
comprehensive loss -- -- -- -- -- -- -- 12 12
Exercise of stock options -- -- 6,113 1 28 -- -- 29
Exercise of stock warrants -- -- -- -- -- -- -
Deferred compensation and amortization
related to options and warrants (387) 390 3
------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 2000 (UNAUDITED) 221 $49 11,372,237 $1,137 $81,441 ($881) ($79,483) ($107) $2,156
------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
ebix.com, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($6,317) ($7,176)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 425 503
Amortization of purchased software 48 44
Amortization of goodwill 95 95
Amortization of non-compete agreement 48 48
Stock based compensation 964 --
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable, net (158) 516
Unbilled receivables, other receivables, and other current assets 158 (339)
Accounts payable and accrued expenses 362 (182)
Accrued payroll and related benefits (114) 116
Deposit liability and deferred revenue (316) 102
--------- -------
--------- -------
Net cash used in operating activities (4,805) (6,273)
--------- -------
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (294)
Purchase of minority interest -- (50)
--------- -------
Net cash used in investing activities - (344)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt (109) (2,343)
Repayments of capital lease obligation (166) (22)
Proceeds from exercise of common stock warrants 4,467 19,125
Proceeds from exercise of common stock options 52 597
--------- -------
Net cash provided by financing activities 4,244 17,357
--------- -------
Effect of foreign exchange rates on cash 7 (44)
Net change in cash and cash equivalents (554) 10,696
Cash and cash equivalents at the beginning of the period 7,055 1,053
--------- -------
Cash and cash equivalents at the end of the period 6,501 11,749
--------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $27 $189
Income taxes paid 14 7
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
ebix.com, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All dollar amounts in thousands, except share data)
Note 1. BASIS OF PRESENTATION
These financial statements are unaudited and reflect all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results of the interim periods.
These financial statements should be read in conjunction with the consolidated
financial statements, and accompanying notes thereto, included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
The results of operations for the current interim period are not necessarily
indicative of results to be expected for the entire current year.
Certain prior period amounts have been reclassified to conform to the current
presentation. These changes had no impact on previously reported results of
operations or stockholders' equity (deficit).
Note 2. RESTATEMENT
In its Form 10-K for the fiscal year ended December 31, 1999 ("Fiscal 1999"),
the Company restated and reclassified its consolidated financial statements
for the nine month transition period ended December 31, 1998 ("Transition
Period 1998") and the fiscal year ended March 31, 1998 ("Fiscal 1998").
Unaudited quarterly financial data for Fiscal 1999 has been restated and
reclassified. The effect of such reclassifications and the restatements on the
second quarter of Fiscal 1999 statement of operations line items is shown in the
following table:
<TABLE>
<CAPTION>
Q2 Q2
AS FILED RESTATED
6/30/99 ADJ 6/30/99
<S> <C> <C> <C>
REVENUE:
Software $652 (93) (a) $745
Services and other 3,203 231 2,972
------------ ---------------
TOTAL REVENUE 3,855 3,717
OPERATING EXPENSES:
Software costs 640 (531) 109
Services and other costs 2,333 -- 2,333
Product development 1,567 26 1,593
Sales and marketing 976 -- 976
General and administrative 3,010 (54) 2,956
Amortization of goodwill, customer lists and --
noncompete agreements 48 46 94
------------ ---------------
TOTAL OPERATING EXPENSES 8,574 8,061
------------ ---------------
OPERATING LOSS (4,719) (4,344)
Interest expense 59 59
------------ ---------------
Income loss before income taxes (4,778) (4,403)
Income tax provision 18 18
------------ ---------------
Net loss ($4,796) ($4,421)
============ ===============
Basic and Diluted net loss per common share ($0.55) ($0.51)
============ ===============
Basic and Diluted Weighted average shares
outstanding: 8,657 8,657
============ ===============
</TABLE>
(a) ($27) of this adjustment represents the reversal of revenue which was
reflected in the Company's 1999 Form 10-K as reversed in the first and third
quarters of 1999 rather than the second quarter of 1999.
Note 3. WARRANTS
In conjunction with the May 1996 and January 1997 private equity placements and
conversion of a $1,500 outstanding promissory note, the Company issued units,
each consisting of one share of common stock and one redeemable warrant to
purchase one share of common stock at an exercise price of $7.50 per share,
subject to certain anti-dilutive adjustments.
Between January 1, 2000 and January 16, 2000, all remaining such warrants, which
were due to expire on January 16, 2000, were exercised for 595,700 shares of
common stock generating approximately $4,467 in cash.
In connection with the May 1996 private equity placement described above, the
Company issued a warrant to the placement agent (the "Agent's Warrant") to
purchase 200,000 shares of the Company's common stock at $5.00 per share. The
Agent's Warrant is not subject to redemption
7
<PAGE>
and expires May 1, 2001. At June 30, 2000, 11,450 shares may still be purchased
under this warrant.
Note 4 - STOCK OPTIONS AND WARRANTS
During 1999, the Company granted selected executives and key employees 466,000
incentive stock option awards whose vesting is contingent upon increases in the
Company's stock price and other performance based measures, such as achieving
specified revenues for new products. During 2000, the Company granted an
additional 40,000 stock option incentive awards. For these options, vesting
generally occurs when the Company's stock price equals $9.00, $12.00, $15.00 and
$20.00 per share. The exercise price of each option, which has a ten year life,
is equal to the market price of the Company's stock on the date of grant.
Compensation cost is measured and recorded for these options using variable plan
accounting as prescribed by APB Opinion No. 25 at the end of each quarterly
reporting period and is subsequently adjusted for increases or decreases in the
Company's stock price until the exercise date. Compensation expense related to
these incentive options of approximately $22 was recognized during the six month
period ended June 30, 2000. At June 30, 2000, 196,125 of the incentive options
were vested.
The Company has granted nonstatutory and incentive options outside the Company's
stock option plan to persons who were not directors, officers or employees to
purchase up to an aggregate of 79,333 shares. These options are granted at
prices determined by the Board of Directors (no less than 100 percent of the
market price). The options are exercisable within ten years of the date of the
grant. Included in these options are 5,000 options which the Company granted in
the second quarter of 2000, 30,000 options which the Company granted in the
first quarter of 2000, 43,333 options which the Company granted in 1999, and
1,000 options granted prior to 1999.
These non-employee options were valued using the fair value method as perscribed
by SFAS No. 123. The majority of these options are performance based awards,
with no service commitment and subject to vesting only if the Company's stock
price reaches a certain level. At June 30, 2000, 69,958 of the non-employee
options were vested. The Company has recognized compensation expense of
approximately $217 related to these options during the six month period ended
June 30, 2000.
On August 20, 1999, the Company granted a two year warrant to Hewlett-Packard
to purchase 4.9% of the Company's outstanding common stock for $15.00 per
share during the first year of the warrant and $20.00 per share during the
second year of the warrant. The Company also granted a second warrant to
Hewlett-Packard under the same agreement for the purchase of 4.5% of the
Company's outstanding common stock during the second year of the term of the
agreement for $20.00 per share. The number of shares eligible to be purchased
upon exercise of the warrants will be measured based on the outstanding
common stock as of the most recent quarter or year-end as reported on the
Company's report on Form 10-Q or Form 10-K. At June 30, 2000, the warrants
issued to Hewlett - Packard represent the rights to purchase 556,940 and
511,476 shares, respectively. For both warrants, if the fair value of the
common stock is greater than the purchase price, Hewlett-Packard may elect to
receive shares equal to the value of the warrant in lieu of exercising the
warrant with cash.
8
<PAGE>
The Company also issued warrants in connection with the InfoSpace.com Internet
Promotion Agreement dated August 31, 1999. The first warrant is for the purchase
of 250,000 shares of the Company's common stock at a price of $15.00 per share
if exercised during the first year of the agreement or $20.00 per share if
exercised during the second year of the agreement. The warrant vested 62,500
shares on September 30, 1999, 62,500 shares on December 31, 1999 and 125,000
shares on March 31, 2000. The Company also granted a second warrant to
InfoSpace.com under the same agreement for the purchase of 4.9% of the Company's
outstanding common stock at August 31, 1999, on a fully diluted basis including
conversion of this warrant. This warrant issued to Infospace.com represents the
rights to purchase 526,572 shares at a price of $15.00 per share if exercised
during the first year of the agreement or $20.00 per share if exercised during
the second year of the agreement. The second warrant is exercisable in lieu of
the Company paying invoices rendered by InfoSpace.com.
Expense of $725 was recognized during the six month period ended June 30, 2000
related to these warrants.
Note 5. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share ("EPS") is equal to net income (loss) divided
by the weighted average number of shares of common stock outstanding for the
period. The weighted average number of common shares outstanding for the
three and six months ended June 30, 2000 were 11,371,196 and 11,316,736,
respectively. The weighted average number of common shares outstanding for
the three and six months ended June 30, 1999 were 8,657,147 and 8,247,205,
respectively. Diluted EPS recognizes the dilutive effect of common stock
equivalents and is equal to net income divided by the sum of the weighted
average number of shares outstanding and common stock equivalents. The
Company's common stock equivalents consist of stock options, common stock
warrants, and convertible preferred stock. Consistent with previous
standards, SFAS No. 128 prohibits inclusion of the impact of common stock
equivalents in the calculation of EPS when inclusion results in antidilution.
Accordingly, for the three and six months ended June 30, 2000 and June 30,
1999, basic and diluted EPS are equal because all potentially issuable common
shares would be antidilutive. As of June 30, 2000, there were 2,871,080
shares potentially issuable with respect to stock options, warrants and
convertible preferred stock, which could dilute Basic EPS in the future.
Note 6. COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---------- ------------ --------- --------
<S> <C> <C> <C> <C>
Net loss ($3,362) ($4,421) ($6,317) ($7,176)
Other comprehensive income (loss):
Foreign currency translation adjustment 12 (50) 7 (44)
---------- ------------ --------- --------
Comprehensive loss ($3,350) ($4,471) ($6,310) ($7,220)
========== ============ ========= ========
</TABLE>
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the unaudited
financial statements and the notes thereto included in Part 1 Item 1 of this
Quarterly Report and the financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K, for the fiscal
year ended December 31, 1999. All dollar amounts in this Management Discussion
and Analysis are in thousands. As more fully described in the Notes to the
Consolidated Financial Statements, certain financial information in this filing
has been restated to correct previously issued financial statements. The
discussion in this item reflects those restatements.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2000 the Company experienced negative
operating cash flow of $4,805. The Company funded cash used in operating
activities and investing activities primarily through the use of cash proceeds
from the exercise of stock warrants and employee stock options of $4,519.
Although the cash proceeds resulting from the exercise of stock warrants and
options provide the Company with unused sources of capital, the Company
continues to experience operating losses as well as negative cash flows. In
addition, the Company's current product strategy has added the design and
development of ebix.com, which was launched on September 8, 1999; the Company is
pursuing the successful commercialization of this e-commerce insurance portal.
Although transactions have occurred on the website in 1999 and 2000, because the
Company has not processed the charges, which are de minimis in amount, no
revenue has been recognized to date. Transactions have not occurred on the
website for ebix.link. Because the Company does not have sufficient capital at
this time to adequately promote the website, the Company cannot predict whether,
when or how the product will generate substantial revenues.
The Company believes its cash balances, available credit facility and funds from
operations will be sufficient to meet all of its anticipated cash requirements
for at least the next 12 months. However, the Company is currently faced with
liquidity concerns. In order to meet the projected cash requirements of the
business, it will be necessary for the Company to increase its revenue sources
beyond those accessed during the past two years or secure financing sources,
beyond those currently available, in order to continue as a going concern after
the next twelve months.
Management believes that the required financing sources to operate the business
as a going concern will be secured, although there can be no assurances that
such financing will be available or that it will be available on terms
satisfactory to the Company.
Management believes that there may be additional infusions of cash from the
exercise of outstanding stock warrants although recent declines in the Company's
stock price make this improbable. Management will endeavor to secure the
necessary financing from other sources.
10
<PAGE>
Such sources could include one or more equity investors. Management intends
to seek the required financing sources that are necessary in order to
continue to operate the business.
PROFESSIONAL SERVICE COSTS - The Company has incurred substantial
professional services costs related to the restatement of its financial
statements for the transition period ended December 31, 1998 and fiscal year
ended March 31, 1998 as filed on June 1, 2000 in the Company's Form 10-K for
the year ended December 31, 1999. Such costs, which totaled approximately
$1,100, were recognized in the second quarter of 2000.
DEFERRED REVENUE - The Company traditionally invoices software maintenance and
support in advance of providing the service. The software maintenance fees are
recorded as deferred revenue and recognized ratably over the term of the
software maintenance agreement. The Company's current liabilities at June 30,
2000 include deferred revenue of $2,805 and deposit liabilities of $2,249. The
liability is satisfied through normal ongoing operations of the Company's
service organization and generally does not require payment to third parties.
PRODUCT DEVELOPMENT - At June 30, 2000, the Company employed 23 full-time
employees engaged in product development activities. These activities include
research and development of software enhancements, improving usefulness,
adaptation to newer software and hardware technologies, and increasing
responsiveness. Product development expenditures were $1,033 and $2,102 for the
three and six month periods ended June 30, 2000, respectively.
BANK LINE OF CREDIT - Effective January 1997, the Company established a line of
credit up to $4,000, subject to borrowing base limits. Borrowings are secured by
accounts receivable and certain other assets. The agreement provides for a
minimum monthly interest at the bank's prime lending rate plus two and one-half
percent (2.5%) on the greater of the actual amount outstanding or $1,600. The
agreement contains certain covenants including the maintenance of a minimum net
worth of $2,000, and restrictions upon certain activities by the Company without
the approval of the bank including the incurrence of senior debt, certain
mergers or acquisitions, and the payment of dividends. The October 1999
amendment to the bank line of credit provides for a forbearance period until the
maturity date. Since July 1999 the Company has had no borrowings under the bank
line of credit but the Company is nevertheless obligated, until the January 31,
2001 maturity date, to pay to the lender minimum interest on the sum of $1,600
at prime plus 2.5%.
NON-COMPETE NOTE PAYABLE - The Company, in the first quarter of 2000 paid a $120
installment (principal and interest) on an 11.75% interest bearing unsecured
note. The remaining installment of $120 is due in the first quarter of 2001.
WARRANTS - Between January 1, 2000 and January 16, 2000, the remaining warrants
related to the January 1997 private placement issue of warrants to acquire
1,126,100 shares of common stock, which were due to expire on January 16, 2000,
were exercised resulting in the issuance of 595,700 shares of common stock
generating approximately $4,467 in cash.
In connection with a May 1996 private equity placement, the Company issued a
warrant to the placement agent (the "Agent's Warrant") to purchase 200,000
shares of the Company's common stock at $5.00 per share.
11
<PAGE>
The Agent's Warrant is not subject to redemption and expires May 1, 2001. At
June 30, 2000, 11,450 shares may still be purchased under this warrant.
On August 20, 1999, the Company granted a two year warrant to Hewlett
-Packard to purchase 4.9% of the Company's outstanding common stock for
$15.00 per share during the first year of the warrant and $20.00 per share
during the second year of the warrant. The Company also granted a second
warrant to Hewlett-Packard under the same agreement for the purchase of 4.5%
of the Company's outstanding common stock during the second year of the term
of the agreement for $20.00 per share. The number of shares eligible to be
purchased upon exercise of the warrants will be measured based on the
outstanding common stock as of the most recent quarter or year-end as
reported in the Company's report on Form 10-Q or Form 10-K. At June 30, 2000,
the warrants issued to Hewlett-Packard represent the rights to purchase
556,940 and 511,476 shares, respectively. For both warrants, if the fair
value of the common stock is greater than the purchase price, Hewlett-Packard
may elect to receive shares equal to the value of the warrant in lieu of
exercising the warrant with cash.
The Company also issued warrants in connection with the InfoSpace.com Internet
Promotion Agreement dated August 31, 1999. The first warrant is for the purchase
of 250,000 shares of the Company's common stock at a price of $15.00 per share
if exercised during the first year of the agreement or $20.00 per share if
exercised during the second year of the agreement. The warrant vested 62,500 on
September 30, 1999, 62,500 on December 31, 1999 and 125,000 on March 31, 2000.
The Company also granted a second warrant to InfoSpace.com under the same
agreement for the purchase of 4.9% of the Company's outstanding common stock at
August 31, 1999, on a fully diluted basis including conversion of this warrant.
This warrant issued to Infospace.com represents the rights to purchase 526,572
shares at a price of $15.00 per share if exercised during the first year of the
agreement or $20.00 per share if exercised during the second year of the
agreement. The second warrant is exercisable in lieu of the Company paying
invoices rendered by InfoSpace.com.
COMMON STOCK OPTIONS - During the six months ended June 30, 2000, the Company
received approximately $52 from the exercise of outstanding stock options. As of
June 30, 2000, there are outstanding vested options to purchase approximately
485,061 shares of common stock at an average exercise price of $5.81 per share.
The majority of outstanding options have expiration dates in excess of five
years from June 30, 2000.
NEW ACCOUNTING STANDARDS - In June 1999, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133 ("Statement
133"), "Accounting for Derivative Instruments and Hedging Activities." This
standard requires that an entity recognize derivatives as either assets or
liabilities on its balance sheet and measure those instruments at fair value. As
a result of Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of Statement 133," the Company will adopt this standard in the first quarter of
2001. Based on current circumstances, the Company does not believe that the
application of Statement 133 will have a material effect on the Company's
financial condition or results of operations.
EURO CONVERSION - Effective January 1, 1999, eleven of the fifteen member
countries of the European Union (the "participating countries") have agreed to
adopt a new common legal
12
<PAGE>
currency (the "euro"). The participating countries established fixed
conversion rates between their existing sovereign currencies (the "legacy
currencies") and the euro. Following the introduction of the euro, the legacy
currencies are scheduled to remain legal tender in the participating
countries as denominations of the euro between January 1, 1999 and January 1,
2002 (the "transition period"). During the transition period transactions may
be settled using either the euro or the participating country's legacy
currency on a "no compulsion, no prohibition" basis. Conversion rates will no
longer be computed directly from one legacy currency to another but rather
will utilize a "triangulation" method specified by European Union regulations
whereby payments made in a legacy currency are converted to the euro and
subsequently converted to the recipient's desired legacy currency. Beginning
January 1, 2002, the participating countries will issue new euro-denominated
bills and coins for use in cash transactions. No later than July 1, 2002, the
participating countries will withdraw all bills and coins denominated in
legacy currencies such that legacy currencies will no longer be legal tender
for any transactions, completing the euro conversion.
The Company currently has no bank accounts denominated in any legacy currency
and has not entered into any material transactions denominated in any legacy
currency. The Company has produced enhancements to certain software products
marketed in Europe to accommodate the euro conversion process (the "euro
module"). The cost to develop the euro module was not material and it will be
provided at minimal cost to existing customers under maintenance agreements.
Management believes the euro module allows for the continued marketing and sale
of the Company's products to customers requiring euro conversion capabilities.
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
TOTAL REVENUE - The Company's revenue is derived from the licensing and sale of
proprietary software and third party software ("Software") and from professional
services, maintenance services, and support services ("Services"). Professional
services include consulting, implementation, training and project management
provided to the Company's customers with installed systems and those in the
process of installing systems. Total revenue is comprised of software revenue
and service revenue. No revenue has yet been recorded for the Company's ebix.com
website.
Total revenue for the quarter ended June 30, 2000 decreased $724 or 19.5% from
the comparable quarter of the prior year.
SOFTWARE REVENUE - The Company's current product strategy is centered on a new
generation of products, collectively referred to as the ebix (formerly "cd")
product line and are comprised of ebix.global (formerly "cd.global"), a modular,
state of the art, agency management solution providing flexibility and the
ability to handle unstructured data and complex risk, ebix.com, a website, and
ebix.one (formerly "cd.one"), a structured system utilizing many features of the
Company's previous products.
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The Company also has six "legacy" products including: INfinity, INSIGHT,
PC-ELITE, Insurnet, SMART, and Vista. The legacy products provide basic
functions such as policy administration, claims handling, accounting, and
financial reporting. Current legacy products will be maintained and supported as
long as there is adequate economic and strategic justification. Customers
utilizing legacy products will continue to be encouraged to migrate to newer
products.
Software revenue is comprised of revenue from the sale of ebix (formerly "cd")
products, current legacy products, and other third party software. During the
second quarter of Fiscal 1997, the Company discontinued the sale and marketing
of computer hardware. The sale of hardware was discontinued in order to focus
the Company's resources on the development and sale of software and services.
Subsequent to the Company's exit from the hardware sector, the Company continues
to receive commissions from hardware vendors for product referrals although this
is not a material source of revenue for the Company. This commission is included
in other income.
ebix.mall is expected to generate revenues through transaction fees and
acceptance fees (currently, charges payable by an agent, broker or carrier,
as the case may be, are $1.00 upon quoting and $20.00 upon processing a sale
of a policy through the Company's site). ebix.link is expected to generate
revenues through transaction fees. Although transactions have occurred on the
website in 2000, because the Company has not processed the charges, which are
de minimis in amount, no revenue has been recognized to date. Transactions
have not occurred on the website for ebix.link.
Total software revenue for the quarter decreased $276 or 37.1% from the
comparable quarter of the prior year. This decrease reflects the shifting of
the Company's focus away from the agency management legacy products and
towards the website which has not yet begun generating revenues.
SERVICES REVENUE - Total services revenue for the quarter decreased $448 or 15.1
% from the comparable quarter of the prior year. This decrease is due to a
decrease in support revenue associated with legacy products and decreases in
consulting and custom programming revenue.
SOFTWARE COSTS - Cost of Software revenue includes the cost of third party
software and the amortization of purchased software.
Total software costs for the quarter decreased 1.0% from the comparable quarter
of the prior year.
SERVICES AND OTHER COSTS - Cost of Services revenue includes costs associated
with support, consulting, implementation and training services.
Total services and other costs for the quarter decreased $686 or 29.4% from the
comparable quarter of the prior year. This decrease is related to the reduction
in staffing levels for consultants, trainers and support staff.
PRODUCT DEVELOPMENT EXPENSES - Total product development expenses for the
quarter decreased $560 or 35.2% from the comparable quarter of the prior year.
This decrease reflects a change in the Company's focus from the agency
menagement products to the website which results in less product development.
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SALES AND MARKETING EXPENSES - Total sales and marketing expenses for the
quarter increased $433 or 44.4 % from the comparable quarter of the prior year.
This increase is attributable to $282 of expense associated with warrants issued
to third parties during 1999 and the ebix.com product promotion.
GENERAL AND ADMINISTRATIVE EXPENSES -Total general and administrative expenses
for the quarter decreased $760 or 25.7 % from the comparable quarter of the
prior year. This decrease is due to a reduction in staffing levels partially
offset by professional services costs related to the restatement of its
financial statements for the transition period ended December 31, 1998 and
fiscal year ended March 31, 1998 as filed on June 1, 2000 in the Company's Form
10-K for the year ended December 31, 1999.
AMORTIZATION OF GOODWILL AND NON-COMPETE AGREEMENT -Total amortization of
goodwill and non-compete agreement for the quarter decreased $47 or 50.0% from
the comparable quarter of the prior year. This decrease is due to the
non-compete agreement being fully amortized as of March 31, 2000.
INTEREST INCOME - Total interest income of $183 for the quarter represents
income earned on the Company's investment of surplus cash in short term
investments. There was no interest income for the comparable quarter of the
prior year.
INTEREST EXPENSE - Interest expense decreased $23 from the comparable quarter of
the prior year. This decrease is attributable to the fact that the Company had
borrowings under its bank line of credit agreement in the 1999 period but
incurred only minimum interest in the 2000 period because it had no borrowings
under the bank line of credit in that period.
SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
TOTAL REVENUE - Total revenue for the six month period ended June 30, 2000
decreased $1,535 or 20.8% from the comparable period of the prior year.
SOFTWARE REVENUE - Total software revenue for the six month period decreased
$262 or 23.9% from the comparable quarter of the prior year. This decrease
reflects the shifting of the Company's focus away from the agency management
legacy products and towards the website which has not yet begun generating
revenues.
SERVICES REVENUE - Total services revenue for the period decreased $1,273 or
20.25 % from the comparable period of the prior year. This decrease is due to a
decrease in support revenue associated with legacy products and decreases in
consulting and custom programming revenue.
SOFTWARE COSTS - Total software costs for the period decreased $126 or 41.45%
from the comparable period of the prior year. This decrease is due to a decrease
in third party sales and the costs associated with such sales.
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<PAGE>
SERVICES AND OTHER COSTS - Total services and other costs for the period
decreased $1,634 or 32.8% from the comparable period of the prior year. This
decrease is related to the reduction in staffing levels for consultants,
trainers and support staff.
PRODUCT DEVELOPMENT EXPENSES - Total product development expenses for the period
decreased $449 or 17.6% from the comparable period of the prior year. This
decrease reflects a change in the Company's focus from the agency menagement
products to the website which results in less product development.
SALES AND MARKETING EXPENSES - Total sales and marketing expenses for the period
increased $1,135 or 70.7 % from the comparable period of the prior year. This
increase is attributable to $725 of expense associated with warrants issued to
third parties during 1999 and the ebix.com product promotion.
GENERAL AND ADMINISTRATIVE EXPENSES -Total general and administrative expenses
for the quarter decreased $964 or 20.3% from the comparable period of the
prior year. This decrease is due to a reduction in staffing levels partially
offset by professional services costs related to the restatement of its
financial statements for the transition period ended December 31, 1998 and
fiscal year ended March 31, 1998 as filed on June 1, 2000 in the Company's Form
10-K for the year ended December 31, 1999.
AMORTIZATION OF GOODWILL AND NON-COMPETE AGREEMENT -Total amortization of
goodwill and non-compete agreement for the period decreased $46 or 24.5% from
the comparable period of the prior year. This decrease is due to the non-compete
agreement being fully amortized as of March 31, 2000.
INTEREST INCOME - Total interest income of $244 for the period represents income
earned on the Company's investment of surplus cash in short term investments.
There was no interest income for the comparable period of the prior year.
INTEREST EXPENSE - Interest expense decreased $116 from the comparable period of
the prior year. This decrease is attributable to the fact that the Company had
borrowings under its bank line of credit agreement in the 1999 period but
incurred only minimum interest in the 2000 period because it had no borrowings
under the bank line of credit in that period.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995 - This Quarterly Report on Form 10-Q contains various
forward-looking statements and information that are based on management's
beliefs as well as assumptions made by and information currently available to
management, including statements regarding future economic performance and
financial condition, liquidity and capital resources, acceptance of the
Company's products by the market and management's plans and objectives. Such
statements are subject to various risks and uncertainties which could cause
actual results to vary materially from those stated. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated,
expected or projected. Such risks and uncertainties include the Company's
ability to overcome its recent history of operating losses and declining
revenues, the availability and amount of future sources of capital and the terms
thereof, the extent to which the Company's ebix.com website can
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be successfully developed and marketed, the effects of the restatement of the
Company's financial statements on the availability and terms of future
sources of capital, the effects of such restatement on the market for the
Company's common stock, the risks associated with future acquisitions, the
willingness of independent insurance agencies to outsource their computer and
other processing needs to third parties, the Company's ability to continue to
develop new products to effectively address market needs in an industry
characterized by rapid technological change, the Company's dependence on the
insurance industry (and in particular independent agents), the highly
competitive and rapidly changing automation systems market, the Company's
ability to effectively protect its applications software and other
proprietary information, the Company's ability to attract and retain quality
management, and software, technical sales and other personnel, the risks of
disruption of the Company's Internet connections or internal service
problems, the possibly adverse effects of a substantial increase in volume of
traffic on the Company's website, mainframe and other servers, possible
security breaches on the Company's website, and the possible effects of
insurance regulation on the Company's business. Certain of these as well as
other risks and uncertainties are described in more detail in the Company's
Registration Statement on Form S-3 filed under the Securities Act of 1933,
Registration No. 333-12781, and the Company's periodic filings pursuant to
the Securities Exchange Act of 1934. The Company undertakes no obligation to
update any such factors or to publicly announce the results of any of the
forward-looking statements contained herein to reflect future events or
developments.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's market risk during the six
months ended June 30, 2000. For additional information on market risk, refer to
the "Quantitative and Qualitative Disclosures About Market Risk" section of the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
Part II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During Fiscal 2000, the Company sold securities (all in the first quarter of
Fiscal 2000 unless otherwise noted) that were not registered under the
Securities Act of 1933 as follows:
The Company sold a total of 595,700 shares of its common stock on various dates
in the first quarter of 2000 for an aggregate consideration of $4,467,000 to
persons who held warrants issued in private placements by the Company in 1996
and 1997. The consideration paid per share consisted of the surrender of a
warrant with respect to one share and $7.50 in cash. The exemption claimed from
registration under the Securities Act of 1933 was Section 4(2) thereof,
exempting transactions by an issuer not involving a public offering, based upon
the fact that the sales were made exclusively to holders of warrants that had
been issued in an earlier private placement. The shares issued on exercise of
the warrants were subject to restrictions on resale.
Options were granted to consultants to the Company to purchase 30,000 shares
of the Company's common stock at per share exercise prices of $9.25 and in
the second quarter of Fiscal 2000 5,000 shares of the Company's common stock
at a per share exercise prices of $5.09.
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The consideration for such option issuances is services to the Company. The
exemption claimed from registration under the Securities Act of 1933 was
Section 4(2) thereof, exempting transactions by an issuer not involving a
public offering, based on the fact that these transactions involved sales to
an institution and a single consultant, respectively, in private transactions.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See exhibit index.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements 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.
ebix.com, Inc.
Date: August 11, 2000 By /s/ Richard J. Baum
--------------------------------------------
Richard J. Baum
Chief Financial Officer
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EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
------------------ ----------------------------------------
<S> <C>
27.1 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed -
June 30, 2000.
27.2 Restated Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed -
June 30, 1999.
</TABLE>
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