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For the three-months ended October 31, 2008, collision repair management revenue, including glass repair revenue, was approximately $.5 million compared to $1 million for the three-months ended October 31, 2007. This decrease in revenue is the result of circumstances previously described above.
Fleet repair revenue decreased by approximately $20,000 from approximately $200,000 for the three months ended October 31, 2007 to approximately $180,000 for the three months ended October 31, 2008. The decrease in fiscal 2009 is due to fewer claims being processed through normal business fluctuations from our existing fleet customers.
For the three months ended October 31, 2008, fees and other revenue increased approximately $98,000 as compared to the three months ended October 31, 2007. The net increase is primarily the result of license fees received from a client which were not received during the same period in fiscal 2008 offsetting the lower transaction fee revenue received in fiscal 2009 as a result of the loss of fee revenue associated with the claims processed as collision management revenue and described above.
Claims Processing Charges
Claims processing charges include the costs of collision, fleet and glass repairs paid to repair shops within our repair shop network. Claims processing charges for the three-months ended October 31, 2008, were approximately $570,000. This compares to approximately $965,000 for the three-months ended October 31, 2007. Claims processing charges are primarily the costs of collision repairs paid by us to our collision repair shop network and the increase or decrease of these costs is a function of the increase or decrease of the repair and fleet revenues earned during the period.
We are dependent upon our third party collision repair shops for insurance claims repairs. We currently have approximately 2,500 affiliated repair facilities in our network for claims repairs. We electronically and manually audit individual claims processes to their completion using remote digital photographs transmitted over the Internet. However, if the number of shops or the quality of service provided by collision repair shops fall below a satisfactory level leading to poor customer service, this could have a harmful effect on our business.
Selling, General and Administrative (SG&A) Expenses
SG&A expense is mainly comprised of salaries and benefits, facilities related expenses, telephone and internet charges, legal and other professional fees, and travel expenses. SG&A expenses for the three-months ended October 31, 2008 were approximately $800,000. This represents a decrease of approximately 32% from the approximately $1.2 million for the three-months ended October 31, 2007. Payroll and benefit related expenses for the three-months ended October 31, 2008 totaled approximately $500,000 compared to approximately $700,000 for the three-months ended October 31, 2007. The decrease in payroll expense is primarily the result of the implementation of staff reductions relating to the reduction in revenues described above. Additional expense reductions were realized in: travel ($21,000), significant reductions in professional fees ($77,000), reductions of board compensation ($52,000) and the
remainder ($50,000) a result of reductions of miscellaneous expenses.
SG&A expenses also include non-cash charges. For the three-months ended October 31, 2008 these non-cash charges netted to approximately $75,000 which includes $102,000 for depreciation expense and a reduction to non-cash expense of approximately $27,000 as a result of recognizing the gain on our fiscal year 2006 building sale-leaseback transaction. For the three-months ended October 31, 2007 these non-cash charges netted to approximately $138,000. These non-cash charges included approximately $108,000 for depreciation expense, $33,000 of common stock issued to pay fees to directors for services rendered during the period, approximately $25,000 expensed as result of implementing SFAS 123R, which requires expensing of stock options as they become vested and approximately $2,000 amortized for the discount on the notes payable. In addition, reductions to non-cash expense of approximately $27,000 was realized
for the three months ended October 31, 2007 as a result of recognizing the gain on our fiscal year 2006 building sale-leaseback transaction and approximately $3,000 for the change in the allowance for doubtful accounts.
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Also included in the SG&A is interest expense related primarily to capital leases and notes payable. For the three-months ended October 31, 2008, this interest expense totaled approximately $20,000 of which approximately $18,000 was for capital leases and notes payable. This compares to interest expense of approximately $26,000 for the three-months ended October 31, 2007 of which $17,000 was for notes payable.
Net Income/Loss
For the three-months ended October 31, 2008 net loss totaled approximately $358,000. This amount includes approximately $27,000 of the gain recognized on our fiscal year 2006 building sale-leaseback transaction and approximately $102,000 of non-cash charges representing depreciation. For the three months ended October 31, 2007 net loss totaled approximately $651,000. This amount includes approximately $27,000 of the gain recognized on our fiscal year 2006 building sale-leaseback transaction and approximately $165,000 on non-cash charges, including depreciation.
Liquidity and Capital Resources
At October 31, 2008, we had approximately $126,000 in cash and cash equivalents. This is a decrease of approximately $133,000 from July 31, 2008. We have a working capital deficiency of approximately $2.7 million as of October 31, 2008 compared to a deficiency of approximately $2.3 million as of October 31, 2007. Other than working capital generated from operations, our primary source of working capital during the three-months ended October 31, 2008 was from borrowings against the line of credit we had established with our bank. During the period ended October 31, 2008 we borrowed a total of $75,000 against this line of credit, which represented the total amount available to us. At October 31, 2008 we had a balance due on the credit line of $72,864.
We have invested considerable time and resources in the development of our application for the financial services business sector and we expect to receive cash from operations as we deploy this product throughout the remainder of calendar 2009. If revenues grow they will provide working capital, but because revenue growth is not guaranteed, we continue to analyze options for additional financing, including the exercise of outstanding warrants, issuance of additional debt, issuance of additional equity securities and the potential sale or licensing of our Business Process Outsourcing business. We cannot assure you that we will be able to raise such funds or that such funds will be available to us on favorable terms. If we raise additional funds through the issuance of our 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. If we are unable to generate sufficient revenue from operations or obtain additional funding when required, we could be forced to curtail or possibly cease operations. 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 you that our cash resources will be sufficient for anticipated or unanticipated working capital and capital expenditure requirements for this period.
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Debt and Contractual Obligations
Our commitments for debt and other contractual arrangements as of October 31, 2008 are summarized as follows:
|
|
Twelve months ending October 31,
|
|
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property lease
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|
$
|
358,000
|
|
$
|
292,000
|
|
$
|
301,000
|
|
$
|
310,000
|
|
$
|
26,000
|
|
$
|
1,287,000
|
|
Equipment lease
|
|
|
104,000
|
|
|
66,000
|
|
|
4,000
|
|
|
|
|
|
|
|
|
174,000
|
|
Notes payable
|
|
|
523,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
523,000
|
|
Employee compensation
|
|
|
499,000
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
564,000
|
|
|
|
$
|
1,484,000
|
|
$
|
423,000
|
|
$
|
305,000
|
|
$
|
310,000
|
|
$
|
26,000
|
|
$
|
2,548,000
|
|
We lease equipment and facilities under non-cancelable capital and operating leases expiring on various dates through 2013. The main operating lease consists of a 7-year lease for 30,000 square feet of a 62,000 square foot facility. This lease runs through December 2012. Our rent for 2008, including applicable taxes, is $23,005 per month and increases 3% each year through the remaining life of the lease. During fiscal year 2008 we reached an agreement with our landlord whereby we deferred payment of $11,500 per month of our monthly rental until May, 2010. A total of $69,000, representing six months of deferred rent, is included in the schedule above.
Inflation
We believe that the impact of inflation and changing prices on our operations since the commencement of our operations has been negligible.
Seasonality
We typically experience a slow down in revenue during November and December each year. Consumers tend to delay repairing their vehicles during the holidays.
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Not applicable.
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ITEM 4T.
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CONTROLS AND PROCEDURES
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a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of October 31, 2008. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission (SEC) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to eAutoclaims, Inc., and was made known to them by others within those entities, particularly during the period when this report was being prepared.
Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all error and fraud. A control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
b) Changes in internal controls over financial reporting.
In addition, there were no significant changes in our internal control over financial reporting that could significantly affect these controls during the quarter ended October 31, 2008. We have not identified any significant deficiency or material weakness in our internal controls, and therefore there were no corrective actions taken.
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PART II
OTHER INFORMATION
ITEM 1.
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LEGAL PROCEEDINGS
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None.
ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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None.
ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
|
None.
ITEM 4.
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 5.
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OTHER INFORMATION
|
None.
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Exhibits
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
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31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
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|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
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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.
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Date:
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January 21, 2009
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By:
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/s/ Jeffrey Dickson
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|
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Jeffrey Dickson, President and Chief Executive Officer
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|
|
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Date:
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January 21, 2009
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|
By:
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/s/ Larry Colton
|
|
|
|
|
Larry Colton, Chief Financial Officer and
Principal Accounting Officer
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22
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