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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 Identification Number)
incorporation)
1900 E. Golf Road
Schaumburg, Illinois 60173
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 789-3047
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, par value $0.10 per share
Preferred Share Purchase Rights
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 reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. / /
As of March 1, 2001, the number of shares of Common Stock outstanding was
11,382,182. As of such date, the aggregate market value of Common Stock held by
nonaffiliates, based upon the last sale price of the shares as reported on the
NASDAQ SmallCap Market on such date, was approximately $5,634,931 (For this
purpose, the Company has assumed, without determining, that directors, executive
officers, and holders of more than 10% of the Company's shares are affiliates).
Documents Incorporated by Reference -- Portions of the registrant's definitive
proxy statement relating to its 2001 Annual Meeting of Stockholders are
incorporated by reference into Part III.
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EBIX.COM, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
PAGE REFERENCE
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 6
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters..................................................... 8
Item 6. Selected Financial Data..................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 7A. Quantitative and Qualitative Disclosure About Market Risk... 16
Item 8. Financial Statements and Supplementary Data................. 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 43
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 43
Item 11. Executive Compensation...................................... 43
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 43
Item 13. Certain Relationships and Related Transactions.............. 43
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 44
2
PART I
ITEM 1. BUSINESS
ebix.com, Inc. (the "Company"), formerly Delphi Information Systems, Inc.,
was founded in 1976 as Delphi Systems, Inc., a California corporation. In this
report, ebix.com, Inc. is referred to as the "Company" while ebix.com (1) refers
to the Company's website, including the Company's Internet browser-based
products described below. In 1983, Delphi Information Systems, Inc., a Delaware
corporation, was formed and acquired all of the outstanding shares of Delphi
Systems, Inc. in an exchange offer. In June 1987, Delphi Systems, Inc. was
merged into and with Delphi Information Systems, Inc. On July 23, 1996, the
Company acquired a majority interest, and on January 1, 1999, the Company
acquired the remaining minority interest in Complete Broking Systems ("CBS") of
Auckland, New Zealand. On March 23, 1998, the Board of Directors adopted a
resolution to change the Company's fiscal year end to December 31 effective in
April 1998. On October 22, 1999, the Company's shareholders approved a proposal
to amend the Certificate of Incorporation to change the name of the Company from
Delphi Information Systems, Inc. to ebix.com, Inc.
The Company is an international provider of software and Internet-based
solutions for the insurance industry. Historically and during 2000, the
Company's revenue has been derived primarily from the licensing and sale of
software comprised of proprietary software and third-party software (16.7% of
revenue in 2000) and from professional, maintenance, and support services (83.3%
of revenue in 2000). 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.
The Company's software customer list includes a majority of the largest 100
insurance brokerages and top 200 agencies in the United States and Canada, and
many of the largest global brokers. The Company's software operates on
approximately 75,000 workstations and terminals at more than 2,000 customer
sites.
Information on the Company's revenues, fixed assets and goodwill in
different geographic areas is furnished in Note 15 to the Consolidated Financial
Statements, included elsewhere herein.
Since the 1999 launching of the ebix.com website, the Company's development
focus has changed to the development of this website, which includes
transaction-oriented business to consumer and business to business processes
over the Internet.
PRODUCTS--The Company's product strategy focuses on the introduction and the
successful commercialization of ebix.com.
ebix.com is a website designed to meet the insurance needs of both the
consumer and the insurance professional. ebix.com includes a virtual
marketplace, ebix.mall, where consumers can define their desired policy
coverages and seek competitive quotes from a number of agents, brokers and
carriers in a timeframe defined by the consumer. ebix.com also includes
ebix.link, an Internet browser-based product providing electronic information
transmission between insurance carriers and insurance brokers.
ebix.mall generates 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 there were transactions on the website in 2000, the amount of
revenue recognized to date has been immaterial. Transactions have not occurred
on the website for ebix.link.
- ------------------------
(1) ebix.com is a registered trademark of ebix.com, Inc.
3
In connection with the development of the website, the Company, in
August 1999, entered into agreements with Hewlett-Packard and Infospace. See
Notes 11 and 14 to the Consolidated Financial Statements, included elsewhere
herein.
Because the Company does not have the substantial capital necessary at this
time to adequately promote the website, the Company cannot predict whether, when
or how the website will generate substantial revenues. The Company's agreement
with BRiT Insurance Holdings plc is intended to address these concerns. See
Recent Developments, in Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
In January 2001, the Company began marketing the ebixasp product. ebixasp is
a web enabled system for insurance agencies to manage their businesses. This
product is expected to generate revenues through initial registration and
ongoing monthly subscription fees based on the number of personnel accessing the
software on a concurrent basis. As of March 1, 2001, this product has not
generated revenues.
The Company continues to provide the agency management software product line
which is 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, and "ebix.one" (formerly cd.one), a
structured system utilizing many features of the Company's previous products.
The Company also continues to service but no longer sells 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. The Company expects to maintain and support
the legacy products as long as there is adequate economic and strategic
justification. The Company will continue to encourage customers utilizing legacy
products to migrate to newer products.
Since the Company's exit from the hardware sector in the second quarter of
the fiscal year ended March 31, 1997, the Company has continued to receive
commissions from hardware vendors for product referrals although this is not a
material source of revenue for the Company.
The software products offered by the Company range in price from $350 to
$1,700 on a per license basis, but the total contract value for certain
multiple-site global brokers is over $1,000,000. In the fiscal year ended
December 31, 2000 ("Fiscal 2000") and in the nine month transition period ended
December 31, 1998 ("Transition Period 1998"), one domestic customer (including
its foreign subsidiary), a New York Stock Exchange listed multi-national
insurance company, accounted for approximately 12% and 16%, respectively, of
consolidated revenue. There were no accounts receivable relating to this
customer at the end of both Fiscal 2000 and Transition Period 1998. In the
fiscal year ended December 31, 1999 ("Fiscal 1999"), no customer represented
more than 10% of consolidated revenue.
SYSTEM DESIGN AND ARCHITECTURE--The Company's new product offerings utilize
the latest internet based architecture. "ebix.global" is a client/server based
system, which runs on an Oracle relational database software technology.
"ebix.one" is operational on Pervasive database software.
PRODUCT DEVELOPMENT--At December 31, 2000, the Company employed 14 full-time
employees and 20 offshore contract engineers engaged in product development
activities. These activities include research and development of software
enhancements such as adding functionality, improving usefulness, increasing
responsiveness, adapting to newer software and hardware technologies and
developing and maintaining the website.
Product development expenditures were $3,938,000, $5,452,000, and $3,764,000
in Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively.
4
COMPETITION--Management believes its principal competition is represented by
four companies, two of which provide client/server based software systems that
are comparable to those offered by the Company and two of which provide websites
devoted to insurance sales. These companies are larger than the Company and may
have greater financial resources.
The Company is not aware of any other companies that offer software that
specifically addresses the independent agency marketplace. However, certain
large hardware suppliers do sell systems and systems' components to independent
agencies. The Company, to a much lesser extent, also experiences competition
from small, independent or freelance developers and suppliers of software who
sometimes work in concert with hardware companies to supply systems to
independent agencies.
The Company believes that most insurance carriers are in the process of
reducing or eliminating their in-house agency and brokerage efforts.
Nevertheless, some insurance carriers continue to operate subsidiaries which
actively compete with the Company. These carriers have much greater financial
resources than the Company and have in the past subsidized the automation of
independent agencies through various incentives offered to promote the sale of
the carriers' insurance products. Accordingly, there can be no assurances that
insurance carriers will continue to withdraw from competition with the Company.
Key competitive factors in the Company's software and services market are
product technology, features and functions, ease of use, price, reputation,
reliability, effects of insurance regulation, and quality of customer support
and training. Management believes that overall, the Company competes favorably
with respect to these factors.
Key features of the Company's new ebix.com website products that the Company
believes will be of competitive significance include the: (i) ability to
complete end-to-end conversion of data from input to policy issuance,
(ii) offering of both personal and commercial lines, (iii) provision of a new
market to insurance brokers, insurance carriers and agents for expansion of
their business, (iv) affording to insurance customers a marketplace in which
insurance can be priced on an objective competitive basis, and (v) ability to
complete transactions online. Management believes that overall, the Company
competes favorably with respect to these factors.
PROPRIETARY RIGHTS--The Company regards its software as proprietary and
attempts to protect it with copyrights, trade secret laws and restrictions on
disclosure and transferring title. Despite these precautions, it may be possible
for third parties to copy aspects of the Company's products or, without
authorization, to obtain and use information which the Company regards as trade
secrets. Existing copyright law affords only limited practical protection and
the Company's software is unpatented.
DEFERRED REVENUE--The Company traditionally invoices software maintenance
and support on a quarterly or annual basis in advance of providing the service.
The software maintenance fees are recorded as deferred revenue and recognized
ratably over the term of the respective software maintenance agreements.
EMPLOYEES--At December 31, 2000, the Company had 93 employees, including 18
employees in sales and marketing, 14 employees in product development, 43
employees in customer service and operations, and 18 employees in general
management, administration and finance. None of the Company's employees are
presently covered by a collective bargaining agreement. Management believes that
employee relations are good.
RECENT DEVELOPMENTS--See Management's Discussion and Analysis of Financial
Condition and Results of Operations, Recent Developments, in Item 7.
5
EXECUTIVE OFFICERS--The executive officers and senior management of the
Company are as follows:
NAME AGE POSITION
- ---- -------- ----------------------------------------
Robin Raina.......................... 33 President, Chief Executive Officer
Richard J. Baum...................... 62 Senior Vice President-Finance &
Administration, Chief Financial
Officer and Secretary
The executive officers of the Company are elected annually by the Board.
ROBIN RAINA, 33, was elected a director of the Company in February, 2000.
Mr. Raina joined the Company in October 1997 as Vice President--Professional
Services and was promoted to Senior Vice President--Sales and Marketing in
February 1998. Mr. Raina was promoted to Executive Vice President, Chief
Operating Officer in December 1998. Mr. Raina was appointed President effective
August 2, 1999 and Chief Executive Officer effective September 23, 1999. Prior
to joining the Company, from 1990 to 1997, Mr. Raina held senior management
positions for Mindware/BPR serving in Asia and North America. While employed by
Mindware/BPR, an international technology consulting firm, Mr. Raina was
responsible for managing projects for multinational corporations including
setting-up offshore laboratories, building intranets, managing service bureaus
and support centers, providing custom programming, and year 2000 conversions.
Mr. Raina holds an Industrial Engineering degree from Thapar University in
Punjab, India.
Richard J. Baum has been Senior Vice President--Finance & Administration,
Chief Financial Officer and Secretary since July 21,1999, having joined the
Company as Senior Controller in June 1999. Since 1988 he had been President of
Consulting Capabilities Corp., a general business consulting firm specializing
in turnaround and crisis management, which became inactive when he joined the
Company. His prior executive level posts include Chief Financial Officer of
General American Equities (1983-1987), Vice President of American Invesco Corp
(1979-1983), Chief Financial Officer of Norlin Music, Inc. (1977-1979), Chief
Financial Officer and member of the Board of Midas International Corp.,
(1972-1977). He is a CPA and holds an MBA from the University of Chicago.
ITEM 2. PROPERTIES
The Company's corporate headquarters are in Schaumburg (a suburb of
Chicago), Illinois, where it leases approximately 6,000 square feet of office
space. Substantially all corporate executive and administrative functions are
located in Schaumburg. The Schaumburg lease expires in December 2001. The
Company and its subsidiaries lease additional office space of approximately
11,300 square feet in Atlanta, Georgia; approximately 10,000 square feet in
Billerica, Massachusetts, which is currently being subleased; approximately
12,000 square feet in Walnut Creek (San Francisco), California; approximately
5,000 square feet in Pittsburgh, Pennsylvania; approximately 6,000 square feet
in Scarborough, (Toronto) Canada until December 2000 when the office was closed;
approximately 2,800 square feet in Auckland, New Zealand; approximately 2,500
square feet in Sydney, Australia; approximately 1,000 square feet in London,
England until December 2000 when the office was closed; and approximately 1,000
square feet in Singapore. Management believes its facilities are adequate for
its current needs and that suitable additional or substitute space will be
available as needed.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company is a party to various legal
proceedings. The Company does not expect that any currently pending proceedings
will, after giving effect to reserves and insurance, have a material adverse
effect on its business, results of operations or financial condition.
6
On August 11, 2000, the Company was advised that the Securities and Exchange
Commission had issued a formal Order of Investigation and subpoenaed documents
relating to the Company's financial reporting since April 1, 1997, including, in
particular, revenue recognition, software development cost capitalization,
royalty costs, and classification of cash receipts.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders, held on November 20, 2000,
the following members were elected to the Company's Board of Directors, each by
the vote indicated to the right of such nominee's name:
NOMINEE FOR WITHHELD
- ------- ---------- ---------
Yuval Almog........................................... 8,854,737 1,429,989
Douglas C. Chisholm................................... 10,272,850 11,876
Dennis Drislane....................................... 10,272,850 11,876
William R. Baumel..................................... 10,188,863 95,863
Larry G. Gerdes....................................... 10,269,663 15,063
Robin Raina........................................... 10,271,364 13,362
William W. G. Rich.................................... 10,272,850 11,876
Roy L. Rogers......................................... 10,272,850 11,876
Abstentions and broker non-votes were not counted as either a vote for or
withheld from the nominees for director and had no effect in determining the
outcome of the election for directors.
7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The principal market for the Company's Common Stock is the Nasdaq SmallCap
Market. The Company's Common Stock trades under the symbol "EBIX". As of
March 1, 2001, there were 102 stockholders of record.
The Company has not paid dividends on its Common Stock to date. There are no
plans in the foreseeable future to do so.
The following tables set forth the high and low closing bid prices for the
Company's Common Stock for each calendar quarter in Fiscal 2000 and Fiscal 1999.
TWELVE MONTHS ENDED
DECEMBER 31, 2000 HIGH LOW
- ----------------- -------- --------
First quarter............................................... $14.00 $9.00
Second quarter.............................................. 12.38 3.13
Third quarter............................................... 6.25 3.13
Fourth quarter.............................................. 3.50 .47
TWELVE MONTHS ENDED
DECEMBER 31, 1999 HIGH LOW
- ----------------- -------- --------
First quarter............................................... $11.31 $7.56
Second quarter.............................................. 10.50 7.94
Third quarter............................................... 9.75 6.50
Fourth quarter.............................................. 11.19 6.69
As of March 1, 2001 there were 11,382,182 shares of Common Stock
outstanding.
During fiscal 2000, the Company sold securities that were not registered
under the Securities Act of 1933 as follows:
(1) The Company sold a total of 595,700 shares of its Common Stock on various
dates in 2000 for an aggregate consideration of $4,467,750 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.
(2) On various dates in 2000, the Company granted options on 42,000 shares of
Common Stock to directors for no payment in recognition of service under its
Director Stock Option Plan. The exemption claimed from registration under
the Securities Act of 1933 was Section 4(2) thereof, exempting transactions
of an issuer not involving a public offering, based upon the fact that the
options were granted exclusively to the Company's directors, sophisticated
persons with a preexisting relationship with the Company. The options issued
are subject to restrictions on transfer.
8
ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEARS ENDED
YEAR YEAR NINE MONTHS MARCH 31,
ENDED ENDED ENDED -------------------
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 1998 1997
----------------- ----------------- ----------------- -------- --------
RESULTS OF OPERATIONS:
Revenue........................ $ 11,764 $ 12,511 $13,402 $20,926 $27,714
Operating loss................. (11,455) (19,020) (5,346) (4,382) (6,028)
NET LOSS....................... $(11,374) $(19,060) $(5,754) $(3,806) $(6,037)
NET LOSS PER SHARE: (1)
Basic and diluted.............. $ (1.00) $ (2.05) $ (0.78) $ (0.52) $ (0.99)
SHARES USED IN COMPUTING PER
SHARE DATA: (1)
Basic and diluted.............. 11,348 9,279 7,395 7,347 6,093
FINANCIAL POSITION:
Total assets................... $ 6,562 $ 13,389 $ 8,063 $ 9,702 $17,838
Short-term debt................ 106 217 4,032 1,923 1,600
Long-term debt................. -- 106 413 210 --
Stockholders' equity
(deficit).................... $ (3,264) $ 2,983 $(4,517) $ 1,256 $ 4,513
- --------------------------
(1) Net loss per share and share data restated to reflect the one-for-five
reverse stock split effective May 8, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's current product strategy is focused on the design, development
and successful commercialization of ebix.com, the Company's e-commerce insurance
portal, which was launched on September 8, 1999.
ebix.com is a website designed to meet the insurance needs of both the
consumer and the insurance professional, consisting of ebix.mall and ebix.link.
ebix.mall is a virtual marketplace, where consumers can define their desired
policy coverages and seek competitive quotes from a number of agents, brokers
and carriers in a timeframe defined by the consumer. ebix.link, an Internet
browser-based product, provides electronic information transmission between
insurance carriers and insurance brokers.
Although transactions occurred on the website for ebix.mall in 1999 and
2000, and the Company began to generate revenue on ebix.mall in 2000, the amount
of revenue recognized to date has been immaterial. Transactions have not
occurred on the website for ebix.link. ebix.mall generates 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.
In January 2001, the Company began marketing the ebixasp product. ebixasp is
a web enabled system for agencies to manage their business. This product is
expected to generate revenues through initial registration and ongoing monthly
subscription fees based on the number of personnel accessing the software on a
concurrent basis.
Because the Company does not have the substantial capital necessary at this
time to adequately promote the website, the Company cannot predict whether, when
or how the website will generate substantial revenues. The Company's agreement
with BRiT Insurance Holdings plc is intended to address these concerns. See
Recent Developments, below, in this Item 7.
9
The Company continues to provide the agency management software product line
which is 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; and "ebix.one" (formerly cd.one), a
structured system utilizing many features of the Company's previous products.
The Company also continues to service but no longer sells 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. The Company expects to maintain and support
the legacy products as long as there is adequate economic and strategic
justification. The Company will continue to encourage customers utilizing legacy
products to migrate to newer products.
The insurance industry has undergone significant consolidation over the past
several years driven by the need for, and benefits from, economies of scale and
scope in providing low-cost insurance. Consolidation has involved both insurance
brokerages, the Company's primary customers, and insurance companies, and is
directly impacting the manner in which insurance products are distributed.
Management believes the insurance industry will continue to experience
significant changes in the next several years to meet the changing distribution
model. Changes in the insurance industry may create opportunities and challenges
for the Company.
Management believes consolidation will force brokerages to decrease
distribution costs and eliminate labor-intensive tasks via automation.
Competition will force brokerages to increase service levels via improved
automated processes such as quoting and claims processing. Management believes
that the Company can partner with customers to provide integrated information
management solutions, and fully leverage information technology and services.
Management expects the consolidation of the insurance industry to create a
marketplace of fewer yet more sophisticated brokers and agents. In such an
environment, the Company could be subject to heightened effects of competition,
particularly with respect to product functionality, service and price.
RECENT DEVELOPMENTS
On March 30, 2001, the Company entered into an agreement (the "Agreement")
with BRiT Insurance Holdings plc ("BRiT") for BRiT to invest $7,000,000 in cash
in newly issued Company Common Stock at a price of $1.25 per share. BRiT will
also exchange a 28% equity position, approximately half of its ownership, in
Insurance Broadcast Systems, Inc. ("IBS"), a privately held company in the
insurance related electronic education business, for an additional 1,344,000
shares of Company Common Stock. The Agreement also contemplates that the Company
and BRiT will negotiate an agreement, expected to be entered into by May 2001,
for the Company to receive fees for reviewing, developing and servicing BRiT's
e-commerce infrastructure.
The Agreement is contemplated to be consummated in two closings, the first,
a BRiT cash purchase of 2,240,000 shares for $2,800,000, and the second covering
the balance of the cash investment and the exchange for IBS stock. Each closing
is subject to conditions typical in such transactions; the second is also
subject to Company stockholder approval of the transaction and of a charter
amendment authorizing additional shares, and execution of the BRiT e-commerce
strategy agreement. The Company expects the first closing to occur in mid-April,
and the second closing to occur in June. BRiT has the right to designate two
members of the Company's board of directors following the second closing.
After the issuance of Common Stock in both closings pursuant to the
Agreement, BRiT will own approximately 38% of the Company's outstanding Common
Stock. BRiT is entitled to have the Company register its stock for sale. In
connection with the Agreement, the Company terminated its Stockholder Rights
Plan, effective immediately, but BRiT has agreed not to acquire 49% or more of
the Company's Common Stock without the approval of the the Company's Board of
Directors.
10
In October 2000, the Company signed an agreement with the AltaVista Company
to allow ebix.com to own exclusive rights to all advertising and promotional
content on AltaVista's insurance channel as developed by AltaVista and the
Company and included in the AltaVista website beginning December 2000. The term
of the agreement expires December 2001.
In February 2001, the Company signed an agreement with About.com, Inc. to
create and maintain an Insurance Center channel on the About website that will
offer to service the insurance needs of About's users. The agreement, designed
to drive traffic to the co-branded Insurance Center on About.com, comprises
content integration, co-branding, sponsorship and advertising. The term of the
agreement expires on the earlier of the delivery of 500,000 filled application
forms or thirty months from the effective date.
In the interest of making the comparisons of the results of operations in
this report as meaningful as possible (in light of the effects of the change in
the Company's fiscal year), the discussion below focuses on Fiscal 2000 compared
to Fiscal 1999 and on Fiscal 1999 compared to the pro forma twelve months ended
December 31, 1998.
RESULTS OF OPERATIONS
EBIX.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
PRO FORMA
TWELVE TRANSITION
YEAR YEAR MONTHS PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 1998
------------ ------------ ------------ ------------
Revenue:
Software.................................... $ 1,965 $ 1,438 $ 2,613 $ 2,084
Services and other.......................... 9,799 11,073 16,135 11,318
------- ------- ------- -------
Total revenue........................... 11,764 12,511 18,748 13,402
Operating expenses:
Software costs.............................. 84 1,217 486 1,469
Services and other costs.................... 6,309 9,168 7,744 6,190
Product development......................... 3,938 5,452 5,451 3,764
Sales and marketing......................... 5,098 5,416 3,010 2,109
General and administrative.................. 7,552 9,903 6,478 5,026
Amortization................................ 238 375 222 190
------- ------- ------- -------
Total operating expenses................ 23,219 31,531 23,391 18,748
------- ------- ------- -------
Operating loss.............................. (11,455) (19,020) (4,643) (5,346)
TOTAL REVENUE--The Company's revenue has been 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 services revenue.
- Total revenue for Fiscal 2000 decreased $747,000 or 6.0% from Fiscal 1999.
- Total revenue for Fiscal 1999 decreased $6,237,000 or 33.3% from the
comparable prior twelve-month period ended December 31, 1998.
11
SOFTWARE REVENUE--
Software revenue is comprised of revenue from the sale of ebix (formerly
"cd") products, current legacy products, and other third party software.
Subsequent to the Company's exit from the hardware sector in Fiscal 1997, the
Company continues to receive commissions from hardware vendors for product
referrals although this is not a material source of revenue for the Company.
These commissions are included in other income.
- Total software revenue for Fiscal 2000 increased $527,000 or 36.7% from
Fiscal 1999. Software revenue growth was due to the implementation of
additional software seats purchased by existing customers. Substantially
all of the software sold was proprietary software which does not result in
obligations to third party providers.
- Total software revenue for Fiscal 1999 decreased $1,175,000 or 45.0% from
the comparable prior twelve-month period ended December 31, 1998. This
decrease was due to Y2K purchase deferrals and a general decline in the
software market for the Company's products.
SERVICES REVENUE--
- Total services revenue for Fiscal 2000 decreased $1,274,000 or 11.5% from
Fiscal 1999. This decrease is due to a decrease in support revenue
associated with legacy products and decreases in consulting and custom
programming revenue.
- Total services revenue for Fiscal 1999 decreased $5,062,000 or 31.4% from
the comparable prior twelve-month period ended December 31, 1998. 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 cost.
- Total software costs for Fiscal 2000 decreased $1,133,000 or 93.1% from
Fiscal 1999. This decrease is due to a decrease in sales of software
licensed by third party providers and the costs associated with such
sales.
- Total software costs for Fiscal 1999 increased $731,000 or 150.4% from the
comparable prior twelve-month period ended December 31, 1998. This
increase is due to royalties incurred from the sale of third party
software.
SERVICES AND OTHER COSTS--Cost of Services revenue includes costs associated
with support, consulting, implementation and training services.
- Total services and other costs for Fiscal 2000 decreased $2,859,000 or
31.2% from Fiscal 1999. This decrease is related to a reduction in
staffing levels for consultants, trainers and support staff.
- Total services and other costs for Fiscal 1999 increased $1,424,000 or
18.4% from the comparable prior twelve-month period ended December 31,
1998. This increase is due to increased support costs associated with
payments made under royalty agreements to buy back support business from a
competitor.
PRODUCT DEVELOPMENT EXPENSES--
- Total product development expenses for Fiscal 2000 decreased $1,514,000 or
27.8% from Fiscal 1999. This decrease reflects a change in the Company's
focus from the agency management products to the website, which at this
time requires less product development.
12
- Total product development expenses for Fiscal 1999 were comparable to the
prior twelve-month period ended December 31, 1998. This is related to
development efforts associated with transferring the ebix.global and
ebix.one products to the website.
SALES AND MARKETING EXPENSES--
- Total sales and marketing expenses for Fiscal 2000 decreased $318,000 or
5.9% from Fiscal 1999. This decrease is attributable to a reduction in
staffing levels partially offset by the increased warrant expense in 2000
(arising from the fact that it relates to warrants issued in mid 1999 and
outstanding throughout 2000) and to the addition in the fourth quarter
2000 marketing expense, related to the AltaVista arrangement, which is
expected to continue (although at a recently negotiated reduced rate).
- Total sales and marketing expenses for Fiscal 1999 increased $2,406,000 or
79.9% from the comparable prior twelve-month period ended December 31,
1998. This increase is primarily attributable to the ebix.com product
promotion.
GENERAL AND ADMINISTRATIVE EXPENSES--
- Total general and administrative expenses for Fiscal 2000 decreased
$2,351,000 or 23.7% from Fiscal 1999. This decrease is attributable to a
reduction in staffing levels partially offset by (i) professional services
costs related to the restatement of its financial statements for the
transition period ended December 31, 1998 and the fiscal year ended
March 31, 1998, (ii) a $359,000 loss related to the sublease of property,
and (iii) a $285,000 expense related to an arbitration.
- Total general and administrative expenses for Fiscal 1999 increased
$3,425,000 or 52.9% from the comparable prior twelve-month period ended
December 31, 1998. This increase is due to higher expenditures for bad
debts, legal and audit fees, costs associated with the opening of the
London, Singapore, and Atlanta offices, employee benefits, and
compensation expense related to the issuance of stock options and
warrants.
AMORTIZATION
- Total amortization of goodwill for Fiscal 2000 decreased $137,000 or 36.5%
from Fiscal 1999. This decrease is attributable to the cessation of
amortization related to a non-compete agreement in March 2000.
- Total amortization of goodwill for Fiscal 1999 increased $153,000 or 68.9%
from the comparable prior twelve-month period ended December 31, 1998.
This increase is attributable to the inclusion of amortization of the
non-compete agreement which began in January 1999.
LIQUIDITY AND CAPITAL RESOURCES
During Fiscal 2000 the Company experienced negative operating cash flow of
$7,663,000. 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 approximately $4,519,000.
Although the cash proceeds resulting from the exercise of stock warrants and
options have provided the Company with unused sources of capital, the Company
continues to experience operating losses as well as negative cash flows. The
Company is therefore faced with liquidity concerns. In addition, because the
Company does not have the substantial capital necessary at this time to
adequately promote the website, the Company cannot predict whether, when or how
the website will generate substantial revenues. The Company's agreement with
BRiT Insurance Holdings plc is intended
13
to address these concerns (see Recent Developments above) and the Company
believes its cash balances and funds from operations will be sufficient to meet
all of its anticipated cash requirements for at least the next 12 months.
Although transactions have occurred on ebix.mall in 1999 and 2000, and the
Company began to generate revenue on ebix.mall in 2000, the amount of revenue
has not been material. Transactions have not occurred on ebix.link in 2000. The
Company expects to generate increased traffic to its website, having entered
into agreements with AltaVista in Fiscal 2000 and About.com, Inc. in Fiscal
2001. However, there can be no assurance of the volume of traffic or amount of
revenue that the ebix.com website will generate.
In January 2001, the Company began marketing the ebixasp product. ebixasp is
a web enabled system for insurance agencies to manage their business. This
product is expected to generate revenues through initial registration and
ongoing monthly subscription fees based on the number of personnel accessing the
software on a concurrent basis. However, ebixasp has not yet begun generating
revenue and there can be no assurances of the amount of revenue that the ebixasp
product will generate.
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. In light of the presently ongoing Securities
and Exchange Commission investigation (see Item 3. Legal Proceedings), the
Company anticipates that it may incur substantial professional costs in fiscal
2001.
DEFERRED REVENUE AND DEPOSIT LIABILITY--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 December 31, 2000 include deferred revenue of $2,706,000
and deposit liabilities of $1,465,000. These obligations are satisfied through
normal ongoing operations of the Company's service organization and generally
does not require payment to third parties.
PRODUCT DEVELOPMENT--At December 31, 2000, the Company employed 14 full-time
employees and 20 offshore contract engineers engaged in product development and
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 $3,938,000, $5,452,000, and $3,764,000, for Fiscal 2000, Fiscal 1999, and
Transition Period 1998, respectively.
NON-COMPETE NOTE PAYABLE--The Company entered into a non-compete agreement
in connection with a January 1991 acquisition. The final installment of $400,000
was due on January 31, 1997, but was subsequently converted to an 11.75%
interest bearing unsecured note. As of December 31, 2000, the remaining balance
of $119,574 (principal and interest) was due.
REDEEMABLE WARRANTS--The Company received approximately $4,467,750 in cash
from the exercise of common stock warrants in 2000. These funds have been used
to reduce borrowings and fund operating expenses and accounts payable.
OTHER WARRANTS--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. The
Agent's Warrant is not subject to redemption and expires May 1, 2001. At
December 31, 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
14
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
purchased upon exercise of the warrants will be measured based on the
outstanding common stock as of the most recent quarter-end or year-end as
reported on the Company's report on Form 10-Q or Form 10-K. At December 31,
2000, the warrants represent the rights to purchase 557,727 and 512,197 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 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. These warrants
represent 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.
Because the outstanding warrants expire in 2001 and the market price of the
Company's Common Stock has been substantially below the warrant price, the
Company currently expects the warrants to expire without exercise.
COMMON STOCK OPTIONS--During the twelve months ended December 31, 2000, the
Company received approximately $52,000 from the exercise of outstanding stock
options. As of December 31, 2000, there are outstanding vested options to
purchase approximately 455,000 shares of common stock at an average exercise
price of $5.91 per share substantially in excess of recent market price. The
majority of outstanding options have expiration dates in excess of six years
from December 31, 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.
The Company is adopting this standard, effective during the first quarter of
2001. Based on current circumstances and the fact that the Company does not
employ the use of any derivative investments, 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 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
15
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 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.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995--This Annual Report on Form 10-K 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 be successfully
developed and marketed, the possible effects of the Securities and Exchange
Commission's investigation of the Company's financial reporting, 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 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is subject to certain market risks, including foreign currency
and interest rates. The Company has foreign subsidiaries in Australia, Canada,
New Zealand, Singapore and the United Kingdom (UK) that develop and sell
software products and services in those respective countries. The Company is
exposed to potential gains and losses from foreign currency fluctuations
affecting net investments and earnings denominated in foreign currencies. The
Company's primary exposure is to changes in exchange rates for the U.S. Dollar
versus the Australian, Canadian, New Zealand and Singapore Dollars and the
British pound.
In Fiscal 2000, the net change in the cumulative foreign currency
translation adjustment account, which is a component of stockholders equity, was
an unrealized gain of $92,000. Unrealized foreign currency translation loss of
$197,000, and $19,000 were reflected in Fiscal 1999 and the 1998 Transition
Period, respectively.
16
ebix.com's exposure to interest rate risk relates to its debt obligations.
The Company's market risk at December 31, 2000 is the potential loss arising
from adverse changes in interest rates. As further described in Note 7 to the
Consolidated Financial Statements included herein at Item 8, prior to Fiscal
1999 the Company's debt consisted primarily of a floating-rate bank line-of
credit. There were no borrowings on the line of credit between July 1999 and the
loan termination date of January 31, 2001; however, the Company was obligated to
pay the lender minimum interest on the sum of $1,600,000. Interest rate risk is
estimated as the potential increase in pretax loss resulting from a hypothetical
10% increase in interest rates on the Company's debt. However, there is no
current interest rate risk, given the line of credit agreement was terminated on
January 31, 2001 and the Company currently has no outstanding long term debt.
The Company does not currently use any derivative financial instruments.
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ebix.com, Inc.:
We have audited the accompanying consolidated balance sheets of
ebix.com, Inc. and subsidiaries (the Company) as of December 31, 2000 and 1999,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the years then ended. In connection with
our audits of the consolidated financial statements, we also have audited the
consolidated financial statement schedule listed in Item 14(a)2 for the years
ended December 31, 2000 and 1999. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
ebix.com, Inc. and subsidiaries as of December 31, 2000 and 1999 and the results
of their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, the related consolidated financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
herein.
/s/ KPMG LLP
Chicago, Illinois
March 30, 2001
18
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of ebix.com, Inc.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the nine-month period ended
December 31, 1998 of ebix.com, Inc. (formerly known as Delphi Information
Systems, Inc.) (a Delaware Corporation) and Subsidiaries as of December 31,
1998. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ebix.com, Inc. and
Subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the nine-month period ended December 31, 1998 in conformity
with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not a part of the basic financial
statements. This schedule for the nine-month period ended December 31, 1998 has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
May 26, 2000
19
EBIX.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 3,060 $ 7,055
Accounts receivable, less allowances of $1,050 and $1,004
Unbilled receivables...................................... -- 120
Trade receivables......................................... 1,980 2,977
-------- --------
Total accounts receivable............................... 1,980 3,097
-------- --------
Other receivables........................................... 12 332
Other current assets........................................ 204 169
-------- --------
TOTAL CURRENT ASSETS.................................... 5,256 10,653
Property and equipment, net................................. 904 2,059
Purchased software, net..................................... -- 97
Goodwill, net............................................... 313 503
Other assets................................................ 89 77
-------- --------
TOTAL ASSETS................................................ $ 6,562 $ 13,389
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses....................... $ 4,326 $ 3,166
Accrued payroll and related benefits........................ 554 827
Current portion of long-term debt........................... 106 217
Current portion of capital lease obligation................. 132 97
Deposit liability........................................... 1,465 2,324
Deferred revenue............................................ 2,706 3,046
-------- --------
TOTAL CURRENT LIABILITIES............................... 9,289 9,677
Long-term debt, less current portion........................ -- 106
Capital lease obligation, less current portion.............. 317 623
-------- --------
Other liabilities........................................... 220 --
-------- --------
TOTAL LIABILITIES........................................... 9,826 10,406
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible Series D Preferred stock, $.10 par value,
2,000,000 shares authorized, no shares issued and
outstanding at December 31, 2000: 221 shares issued and
outstanding at December 31, 1999.......................... -- 49
Common stock, $.10 par value, 20,000,000 shares authorized,
11,382,182 and 10,763,549 issued and outstanding.......... 1,138 1,076
Additional paid-in capital.................................. 80,586 76,687
Deferred compensation....................................... (426) (1,549)
Accumulated deficit......................................... (84,540) (73,166)
Accumulated other comprehensive loss........................ (22) (114)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)........................ (3,264) 2,983
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........ $ 6,562 $ 13,389
======== ========
See accompanying notes to consolidated financial statements.
20
EBIX.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------ ------------ -----------------
REVENUE:
Software........................................... $ 1,965 $ 1,438 $ 2,084
Services and other................................. 9,799 11,073 11,318
-------- -------- --------
TOTAL REVENUE.................................... 11,764 12,511 13,402
OPERATING EXPENSES:
Software costs..................................... 84 1,217 1,469
Services and other costs........................... 6,309 9,168 6,190
Product development................................ 3,938 5,452 3,764
Sales and marketing................................ 5,098 5,416 2,109
General and administrative......................... 7,552 9,903 5,026
Amortization of intangibles........................ 238 375 190
-------- -------- --------
TOTAL OPERATING EXPENSES......................... 23,219 31,531 18,748
-------- -------- --------
OPERATING LOSS................................... (11,455) (19,020) (5,346)
Interest income.................................... 372 123 --
Interest expense................................... (142) (290) (366)
Minority interest.................................. -- -- (102)
Other income, net.................................. -- 220 308
-------- -------- --------
Loss before income taxes........................... (11,225) (18,967) (5,506)
Income tax provision............................... (149) (93) (248)
-------- -------- --------
Net loss........................................... $(11,374) $(19,060) $ (5,754)
======== ======== ========
Basic and diluted net loss per common share........ $ (1.00) $ (2.05) $ (0.78)
======== ======== ========
Basic and diluted weighted average shares
outstanding...................................... 11,348 9,279 7,395
======== ======== ========
See accompanying notes to consolidated financial statements.
21
EBIX.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------- --------------------- PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
-------- -------- ---------- -------- ---------- ------------ -----------
BALANCE, MARCH 31, 1998........... 221 $ 49 7,395,449 $ 740 $48,717 $ -- $(48,352)
Net loss.......................... -- -- -- -- -- -- (5,754)
Currency translation adjustment... -- -- -- -- -- -- --
Purchase of fractional shares due
to reverse stock split.......... -- -- (35) -- -- -- --
---- ---- ---------- ------ ------- ------- --------
BALANCES, DECEMBER 31, 1998....... 221 49 7,395,414 740 48,717 -- (54,106)
---- ---- ---------- ------ ------- ------- --------
Net loss.......................... -- -- -- -- -- -- (19,060)
Currency translation adjustment... -- -- -- -- -- -- --
Exercise of stock options......... -- -- 231,963 23 1,016 -- --
Exercise of stock warrants........ -- -- 3,113,950 311 22,572 -- --
Acquisition of Delphi Australia... 22,222 2 187 -- --
Short swing profits............... -- -- -- -- 285 -- --
Deferred compensation related to
the issuance of options and
warrants........................ -- -- -- -- 3,910 (1,549) --
---- ---- ---------- ------ ------- ------- --------
BALANCE, DECEMBER 31, 1999........ 221 49 10,763,549 1,076 76,687 (1,549) (73,166)
---- ---- ---------- ------ ------- ------- --------
Net loss.......................... -- -- -- -- -- -- (11,374)
Currency translation adjustment... -- -- -- -- -- -- --
Conversion of preferred stock..... (221) (49) 9,945 1 48
Exercise of stock options......... -- -- 12,988 2 50 --
Exercise of stock warrants........ -- -- 595,700 59 4,408 --
Contribution of equipment......... -- -- -- -- 66 -- --
Deferred compensation and
amortization related to options
and warrants.................... -- -- -- -- (673) 1,123
---- ---- ---------- ------ ------- ------- --------
BALANCE, DECEMBER 31, 2000........ -- -- 11,382,182 $1,138 $80,586 $ (426) $(84,540)
---- ---- ---------- ------ ------- ------- --------
ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
(LOSS) INCOME TOTAL LOSS
------------- -------- -------------
BALANCE, MARCH 31, 1998........... $ 102 $ 1,256
Net loss.......................... -- (5,754) $ (5,754)
Currency translation adjustment... (19) (19) (19)
--------
$ (5,773)
========
Purchase of fractional shares due
to reverse stock split.......... -- --
------ -------
BALANCES, DECEMBER 31, 1998....... 83 (4,517)
------ -------
Net loss.......................... -- (19,060) $(19,060)
Currency translation adjustment... (197) (197) (197)
--------
$(19,257)
========
Exercise of stock options......... -- 1,039
Exercise of stock warrants........ -- 22,883
Acquisition of Delphi Australia... -- 189
Short swing profits............... -- 285
Deferred compensation related to
the issuance of options and
warrants........................ -- 2,361
------ -------
BALANCE, DECEMBER 31, 1999........ (114) $ 2,983
------ -------
Net loss.......................... -- (11,374) $(11,374)
Currency translation adjustment... 92 92 92
--------
$(11,282)
========
Conversion of preferred stock..... --
Exercise of stock options......... -- 52
Exercise of stock warrants........ 4,467
Contribution of equipment......... -- 66
Deferred compensation and
amortization related to options
and warrants.................... 450
------ -------
BALANCE, DECEMBER 31, 2000........ $ (22) $(3,264)
------ -------
See accompanying notes to consolidated financial statements.
22
EBIX.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
YEAR ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------ ------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(11,374) $(19,060) $(5,754)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED
IN OPERATING ACTIVITIES:
Depreciation and amortization of property and
equipment........................................ 1,359 764 841
Amortization of intangibles........................ 287 371 190
Stock-based compensation........................... 450 2,361 --
CHANGES IN ASSETS AND LIABILITIES:
Trade receivable, net.............................. 997 (68) 1,135
Unbilled receivables, other receivables, and other
current assets................................... 393 740 (162)
Accounts payable and accrued expenses.............. 1,160 218 870
Accrued payroll and related benefits............... (273) 645 (237)
Deposit liability, deferred revenue and other
liabilities...................................... (662) 696 1,092
-------- -------- -------
Net cash used in operating activities............ (7,663) (13,333) (2,025)
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................... (138) (894) (184)
Purchase of minority interest...................... -- (50) --
-------- -------- -------
Net cash used in investing activities............ (138) (944) (184)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt................................. (217) (4,120) 2,312
Payments for capital lease obligations............. (588) 389 97
Proceeds from exercise of common stock warrants.... 4,467 22,883 --
Proceeds from exercise of common stock options..... 52 1,039 --
Proceeds from investors short swing profits........ -- 285 --
-------- -------- -------
Net cash provided by financing activities........ 3,714 20,476 2,409
-------- -------- -------
Effect of foreign exchange rates on cash and cash
equivalents...................................... 92 (197) (19)
Net change in cash and cash equivalents.......... (3,995) 6,002 181
Cash and cash equivalents at the beginning of the
period........................................... 7,055 1,053 872
-------- -------- -------
Cash and cash equivalents at the end of the
period........................................... $ 3,060 $ 7,055 $ 1,053
======== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid...................................... $ 141 $ 273 $ 355
Income taxes paid.................................. 47 224 21
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCE
ACTIVITY:
Conversion of preferred stock to common stock...... 49 -- --
See accompanying notes to consolidated financial statements.
23
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS--ebix.com, Inc. (formerly known as Delphi Information
Systems, Inc.) and Subsidiaries, (the "Company") market software to insurance
agents and brokers operating in the insurance industry, and provide customer
support and maintenance services, as well as other implementation and consulting
services such as training, data conversion and installation. The Company
launched ebix.com on September 8, 1999. ebix.com is a website designed to meet
the insurance needs of both the consumer and the insurance professional.
ebix.com includes a virtual marketplace, ebix.mall, where consumers can define
their desired policy coverages and seek competitive quotes from a number of
agents, brokers and carriers in a timeframe defined by the consumer. ebix.com
also includes ebix.link, an Internet browser-based product providing electronic
transmission between insurance carriers and insurance brokers. The Company is
pursuing the successful commercialization of ebix.com. In January 2001, the
Company began marketing the ebixasp product. ebixasp is a web-enabled system for
insurance agencies to manage their business.
FINANCING ISSUES--The Company experienced decreased revenue, and negative
operating cash flow, as well as continuing net losses in the twelve months ended
December 31, 2000 ("Fiscal 2000"). The Company had experienced significant
operating losses in each fiscal year since 1993, along with declining revenue.
During these loss periods, the Company financed its operations through bank
financing and private placements of equity capital. The Company is therefore
faced with liquidity concerns. The Company's agreement with BRiT Insurance
Holdings plc is intended to address these concerns. See Note 17.
Management continues to believe that the Company is well suited to take
advantage of the current market opportunities. The Company will aggressively
market its products and services, fund development and monitor costs to ensure
the Company's products incorporate state-of-the-art technologies and provide
customers with value-added solutions.
CONSOLIDATION--The consolidated financial statements include the accounts of
ebix.com, Inc., ("ebix USA"), its wholly owned subsidiary, Delphi Information
Systems International, Inc., ("Delphi International"), both Delaware
corporations, and all subsidiaries of Delphi International. Foreign operations
delivered software and provided related services to external customers
accounting for approximately 24%, 18%, and 23% of consolidated revenue for
Fiscal 2000 and the year ended December 31, 1999 ("Fiscal 99"), and the
nine-months ended December 31, 1998 ("Transition Period 1998"), respectively.
FISCAL YEAR--Prior to April 1998, the Company's fiscal year consisted of the
twelve months ended March 31st. Effective April 1998, the Company changed its
year-end to December 31st.
RECLASSIFICATION--Certain prior year amounts have been reclassified to
conform to the 2000 presentation.
REVENUE RECOGNITION--The Company recognizes revenue for license fees from
its software products upon delivery, provided that the fee is fixed and
determinable, acceptance has occurred, collectibility is reasonably assured and
persuasive evidence of an arrangement exists. Revenue from third party software
is derived from the licensing of third party software products in connection
with sales of the Company's software licenses, and is generally recognized upon
delivery together with the Company's license revenue. Training, data conversion,
installation and consulting services are generally recognized
24
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
as revenue when the services are performed and collectibility is reasonably
assured. Revenue for maintenance and support service is recognized ratably over
the term of the support agreement. For certain contracts where services are
deemed essential to the functionality of the software and the software has not
been accepted by the customer, the software and related service revenue have not
been recognized. In addition, all costs incurred in connection with these
contracts have been expensed as the Company has been unable to estimate the
total cost to achieve customer acceptance. Deferred revenue primarily includes
maintenance and support payments or billings that have been received or recorded
prior to performance. Deposit liability includes cash that has been received
related to software products for which customer acceptance has not occurred.
Revenue is allocated to each element of multi-element arrangements based on the
price charged for the sale of each element separately. In certain contracts,
maintenance for the first year is bundled with software fees. Unbundling of the
maintenance is based on the price charged for renewal maintenance.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This bulletin provides guidance from the Staff on applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company adopted SAB 101 in the fourth quarter of 2000. The
implementation of SAB 101 did not have a material effect on the financial
position or results of operations of the Company.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments with an original maturity of three months or less at the time of
purchase to be cash equivalents. Such investments are stated at cost which
approximates fair value.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS--Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," requires that long-lived
assets and certain identifiable intangibles to be held and used by any entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If an indication of
a potential impairment exists, recoverability of the respective assets is
determined by comparing the forecasted undiscounted net cash flows of the
operation to which the assets relate, to the carrying amount, including
associated intangible assets, of such operation. If the operation is determined
to be unable to recover the carrying amount of its assets, then intangible
assets are written down first, followed by the other long-lived assets of the
operation, to fair value. Fair value is determined based on discounted cash
flows or appraised values, depending upon the nature of the assets. In
determining the estimated future cash flows, the Company considers current and
projected future levels of income as well as business trends, prospects and
market and economic conditions.
The carrying amount of the Company's long-lived assets at December 31, 2000
and 1999 primarily represents the original amounts invested less the recorded
depreciation and amortization. Management believes the carrying amount of these
investments is not impaired.
COMPUTER SOFTWARE--Effective as of January 1, 1999, the Company has adopted
the provisions of SOP 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". Accordingly, certain costs to develop
internal-use computer software are capitalized provided these costs will be
recoverable. During Fiscal 1999, $323 of costs related to the implementation of
the
25
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
Company's new accounting system were capitalized and will be amortized over the
expected useful life of the new system of 5 years. There were no costs
capitalized during Fiscal 2000.
SOFTWARE DEVELOPMENT COSTS AND PURCHASED SOFTWARE--The Company's policy is
to capitalize internally generated software development costs and purchased
software in compliance with Statement of Financial Accounting Standards ("SFAS")
No. 86, "Accounting for the Costs of Computer Software To Be Sold, Leased or
Otherwise Marketed." Under SFAS No. 86, capitalization of software development
costs begins upon the establishment of technological feasibility for the
product. The establishment of technological feasibility and the ongoing
assessment of the recoverability of these costs consider external factors
including, but not limited to, anticipated future gross product revenues,
estimated economic life and changes in software and hardware technology. During
Fiscal 1999 and Transition Period 1998, the Company's internally developed
software costs were expensed due to the uncertainty of when technological
feasibility was reached and the lack of underlying support. During Fiscal 2000,
the Company did not have any research and development expenses eligible for
capitalization under SFAS No. 86 given that costs incurred were primarily
related to maintenance or were due to the provision of support on previously
released software products.
Purchased software relates to technology acquired in connection with
acquisitions. Prior to Fiscal 1999, purchased software costs were amortized over
60 months. During Fiscal 1999, the amortization period was shortened to
45 months due to the introduction of ebix.com. Amortization expense was $97,
$87, and $360 for Fiscal 2000, Fiscal 1999, and Transition Period 1998,
respectively.
Net purchased software costs at December 31, 2000 and December 31, 1999
consist of the following:
DECEMBER 31, 2000 DECEMBER 31, 1999
------------------ ------------------
Total cost.................................. $ 345 $ 345
Less accumulated amortization............... (345) (248)
----- -----
-- $ 97
===== =====
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the assets' estimated useful lives. Leasehold improvements are amortized over
the shorter of the expected life of the improvements or the lease term. Repairs
and maintenance are charged to expense as incurred and major improvements are
capitalized. Gains and losses resulting from sales or retirements are recorded
as incurred, at which time related costs and accumulated depreciation are
removed from the accounts. The estimated useful lives are as follows:
ASSET CATEGORY LIFE
- -------------- --------
Computer equipment.......................................... 5
Computer software........................................... 3-5
Furniture, fixtures and other leasehold improvements........ 7
GOODWILL--Goodwill is amortized on the straight-line method over 5 years.
Accumulated goodwill amortization was $954, $764, and $581, at December 31,
2000, 1999, and 1998, respectively. Goodwill
26
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
amortization expense was $190, $182, and $190 for Fiscal 2000, Fiscal 1999, and
Transition Period 1998, respectively. Under certain conditions, such as a change
in profitability, the Company estimates the future undiscounted net cash flows
before interest of the operating units to which the goodwill relates in order to
evaluate impairment. If impairment exists, the carrying amount of goodwill is
reduced by the estimated shortfall of cash flows on a discounted basis.
INCOME TAXES--The Company follows the asset and liability method of
accounting for income taxes pursuant to SFAS No. 109, "Accounting for Income
Taxes." Deferred income taxes are recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
EARNINGS (LOSS) PER SHARE--Basic earnings 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 Fiscal 2000, Fiscal 1999, and Transition Period 1998 were
11,348,000, 9,279,000, and 7,395,000 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. At December 31, 2000, the Company's common stock equivalents
consisted of stock options and common stock warrants. At December 31, 1999, and
1998 the Company's common stock equivalents consisted 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 Fiscal 2000, Fiscal 1999, and Transition Period 1998, basic and
diluted EPS are equal because all potentially issuable common shares would be
antidilutive. At December 31, 2000, there were 2,877,720 shares potentially
issuable with respect to stock options and warrants, which could dilute Basic
EPS in the future.
FOREIGN CURRENCY TRANSLATION--The functional currency of the Company's
foreign subsidiaries is the local currency of the country in which the
subsidiary operates. The assets and liabilities of foreign subsidiaries are
translated into U.S. Dollars at the rates of exchange at the balance sheet
dates. Income and expense accounts are translated at the average exchange rates
in effect during the period. Gains and losses resulting from the translation are
deferred and included in the accompanying consolidated statements of
stockholders' equity (deficit).
USE OF ESTIMATES--The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
SEGMENT REPORTING--SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" established reporting standards for
companies operating in more than one business segment. Since the Company manages
its business as a single entity that provides software and related services to a
single industry on a worldwide basis, the Company reports as a single segment.
The applicable enterprise-wide disclosures required by SFAS No. 131 are included
in Note 15.
27
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
CONCENTRATIONS--The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and cash equivalents and
accounts receivable. The Company places its cash and temporary investments with
high quality financial institutions. Temporary investments are valued at the
lower of cost or market and at the balance sheet dates approximate fair market
value. In Fiscal 2000 and in Transition Period 1998, one domestic customer
(including its foreign subsidiary), a New York Stock Exchange listed
multi-national insurance company, accounted for approximately 12% and 16%,
respectively, of consolidated revenue. There were no accounts receivable
relating to this customer at December 31, 2000. In Fiscal 1999 no customer
represented more than 10% of consolidated revenue.
The Company currently utilizes hardware, software and services that support
its website, from two third-party vendors under operating service agreements.
Although there is a limited number of website service companies, management
believes that other vendors could provide the Company with these website
services. The terms of the current operating service agreements provide for
fixed and variable payments, which are based on revenues realized by the
Company.
EMPLOYEE STOCK OPTIONS--The Company accounts for stock options issued to
employees in accordance with Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees." The Company has adopted the
disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," for options and warrants issued to employees. Under APB No. 25,
compensation expense is based on the difference, if any, on the measurement
date, between the estimated fair value of the Company's stock and the exercise
price of options to purchase that stock. Any resulting compensation expense is
amortized on a straight-line basis over the vesting period of the options.
NON-EMPLOYEE STOCK COMPENSATION--The Company accounts for stock compensation
issued to non-employees in accordance with SFAS No. 123 and Emerging Issue Task
Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in conjunction with Selling
Goods or Services." SFAS No. 123 establishes a fair value based method of
accounting for stock-based compensation plans. Under the fair value based
method, compensation cost is measured at the grant date based on the value of
the award, which is calculated using an option pricing model, and is recognized
over the service period, which is usually the vesting period.
ADVERTISING--Advertising costs are expensed as incurred. Advertising costs
amounted to $1,824, $2,035, and $138 in Fiscal 2000, Fiscal 1999, and Transition
Period 1998, respectively, and are included in sales and marketing expenses in
the accompanying consolidated statements of operations.
OTHER INCOME--Other income includes hardware sales and commissions,
reimbursed travel and entertainment expenses, and sublease income. In Fiscal
2000, sublease income of $285 is offset by sublease expenses and sublease loss
of $481 which is included in general and administrative expenses. Sublease
income is offset by expenses incurred by the Company which total, $206 and $246,
in Fiscal 1999 and Transition Period 1998, respectively.
28
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
Other income, net, is comprised of the following:
TRANSITION
FISCAL FISCAL PERIOD
2000 1999 1998
-------- -------- ----------
Hardware............................................ -- $ 9 $378
Sublease income..................................... -- 20 (70)
Gain on APT investment (Note 4)..................... -- 191 --
----- ---- ----
Total............................................... $ -- $220 $308
===== ==== ====
FAIR VALUE OF FINANCIAL INSTRUMENTS--The following disclosures of the
estimated fair value of financial instruments were made in accordance with the
requirements of SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments." The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies.
Cash and cash equivalents, accounts receivable, and accounts payable and
accrued expenses--The carrying amount of these items is a reasonable estimate of
their fair value due to the short maturity of these items.
Notes payable--Rates currently available to the Company for notes payable
with similar terms are used to estimate its fair value. Accordingly, the
carrying amount of notes payable is a reasonable estimate of its fair value.
NOTE 2--QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following is the quarterly unaudited financial information for fiscal
2000 and fiscal 1999.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended December 31, 1999
Total revenues............................ $3,666 $3,717 $3,063 $2,065
Net loss.................................. (2,755) (4,421) (4,433) (7,451)
Net loss applicable to common
stockholders.............................. (2,755) (4,421) (4,433) (7,451)
Net loss per common share
Basic and diluted......................... $(0.35) $(0.51) $(0.43) $(0.76)
Year Ended December 31, 2000
Total revenues............................ 2,855 2,993 2,883 $3,033
Net loss.................................. (2,955) (3,362) (2,475) (2,582)
Net loss applicable to common
stockholders.............................. (2,955) (3,362) (2,475) (2,582)
Net loss per common share
Basic and diluted......................... $(0.26) $(0.30) $(0.22) $(0.23)
29
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 3--STOCKHOLDERS' EQUITY (DEFICIT):
STOCKHOLDER RIGHTS AGREEMENT--On March 23, 1998, the Board of Directors of
the Company adopted a stockholder rights plan (the "Stockholder Rights Plan")
designed to protect the stockholders from certain unfair and coercive tactics.
Pursuant to the Stockholder Rights Agreement (the "Rights Agreement"), the
Company declared a dividend of one preferred share purchase right ("Right") on
each outstanding share of the Company's Common Stock, $.10 par value per share
("Common Shares"), payable to stockholders of record at the close of business on
March 23, 1998. The terms of the Rights may be amended by the Board of Directors
of the Company without the consent of the holders of the Rights, except that
from and after such time as any person becomes an Acquiring Person, no such
amendment may make the Rights redeemable if the Rights are not then redeemable
in accordance with the terms of the Rights Agreement or may adversely affect the
interests of the holders of the Rights. The Board of Directors terminated the
Stockholder Rights Plan effected March 30, 2001 (See Note 17).
REDEEMABLE WARRANTS--The Company received approximately $4,468 in cash from
the exercise of common stock warrants in Fiscal 2000. These funds have been used
to reduce borrowings and fund operating expenses and accounts payable.
OTHER WARRANTS--In connection with a 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. The
Agent's Warrant is not subject to redemption and expires May 1, 2001. For
Transition Period 1998 and Fiscal 1999, there was no activity related to this
warrant. At December 31, 2000, 11,450 shares may still be purchased under this
warrant.
PREFERRED STOCK CONVERSION--On August 1, 2000, the Company's only preferred
shareholder converted the remaining outstanding 221 shares of the Company's
Series D Preferred Stock to 9,945 shares of the Company's common stock.
NOTE 4--INVESTMENT IN APT:
During Transition Period 1998 the Company owned approximately a 20% interest
in the common stock of Alliance for Productive Technology, Inc. ("APT"), a
privately held company formed as an alliance of agency automation vendors,
insurance companies, agents' associations, and insurance industry organizations.
This investment was accounted for using the equity method of accounting until
Fiscal 1999 when the Company no longer exercised significant influence over APT.
The Company's share of the results of operations of APT has been immaterial. The
purpose of APT was to provide non-proprietary interface products and services to
the insurance industry. The investment of $230 was recorded as a long-term other
asset. A portion of the Company's investment was held as security for a note
payable to APT (see Note 7). During Fiscal 1999, the Company's ownership was
diluted to 14.8%. The assets of APT were sold to a third party effective
November 30, 1999. As a result of the sale, the Company received proceeds of
approximately $421, which represented its 14.8% share of the sales proceeds of
APT, before repayment of the Company's note to APT. A gain on investment of $191
was recorded during 1999 and is reflected in other income in the accompanying
consolidated statement of operations.
30
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 5--PURCHASE OF MINORITY INTEREST:
Prior to January 1999, Delphi Information Systems International, Inc., a
wholly-owned subsidiary of the Company, held a fifty-four percent interest in
Complete Broking Systems Australia PTY, Ltd. Effective January 1, 1999, the
Company acquired the remaining forty-six percent interest. The Company paid
approximately $50 and issued 22,222 shares of the Company's common stock in
exchange for the minority interest and a non-compete agreement from the two
former shareholders. The fair market value of the consideration has been
allocated to the non-compete agreement and has been amortized over the
fifteen-month life of the agreement.
NOTE 6--PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 2000 and December 31, 1999 consists
of the following:
2000 1999
-------- --------
Computer equipment and purchased software.................. $1,071 $ 7,667
Leasehold improvements..................................... -- 981
Furniture, fixtures and other.............................. 67 1,841
------ -------
1,138 10,489
Less accumulated depreciation and amortization............. (234) (8,430)
------ -------
$ 904 $ 2,059
====== =======
Depreciation expense was $984, $676, and $481 in Fiscal 2000, Fiscal 1999
and Transition Period 1998, respectively.
During Fiscal 2000, the Company wrote off fully depreciated assets in the
amount of $8,548.
NOTE 7--DEBT:
Notes payable at December 31, 2000 and December 31, 1999, are comprised of
the following:
2000 1999
-------- --------
Bank line-of-credit......................................... $ -- $ --
Non-compete note payable.................................... 106 216
Installment note............................................ -- 107
Less current portion........................................ (106) (217)
----- -----
$ -- $ 106
===== =====
BANK LINE OF CREDIT--Effective January 1997, the Company established a line
of credit up to $4,000 subject to borrowing base limits. Borrowings were secured
by accounts receivable and certain other assets. The agreement provided 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 contained 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.
31
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 7--DEBT: (CONTINUED)
In December 1997, March 1998, and September 1998, the Company executed
amendments to the line of credit agreement extending the maturity date of the
agreement to January 31, 2001, altering the provisions of the early termination
fee, and modifying the criteria for determining the amount available under the
line. In accordance with the agreement, as amended, the Company could borrow one
times average monthly recurring maintenance collections and seventy-five percent
of eligible non-maintenance receivables as defined. In April 1999 and
October 1999, the Company executed additional amendments to the line of credit
agreement. The April 1999 amendment waived the Company's previous default under
the line of credit agreement. The October 1999 amendment provided for a
forbearance period until the maturity date. In July 1999, the Company reduced
the line of credit borrowings to zero. Between July 1999 and the loan
termination date on January 31, 2001, the Company had no borrowings, but the
Company was nevertheless obligated to pay to the lender minimum interest on the
sum of $1,600 at a rate of prime plus 2.5%. During 2000, the Company paid
approximately $93,000 in minimum interest on the unused commitment.
NON-COMPETE NOTE PAYABLE--The Company entered into a non-compete agreement
in connection with an acquisition in 1991. The final installment of $400 was
originally due on January 31, 1997, but was subsequently converted to an 11.75%
interest bearing unsecured note due January 2001. The commitment related to the
non-compete agreement was amortized and expensed ratably over the life of the
agreement.
INSTALLMENT NOTE--The Company was obligated under an installment agreement
for licensed software to pay a total of $203 in quarterly payments of $29, which
included interest at 12%. The note was fully repaid in December 2000.
NOTE 8--ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses at December 31, 2000 and December 31,
1999, consist of the following:
2000 1999
-------- --------
Trade accounts payable...................................... $2,597 $1,350
Accrued royalty............................................. 342 267
Accrued audit and legal..................................... 797 580
Accrued and other liabilities............................... 590 969
------ ------
$4,326 $3,166
====== ======
32
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 9--INCOME TAXES:
Loss before income taxes consisted of:
NINE-MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
Domestic..................... $(11,813) $(18,431) $(5,247)
Foreign...................... 588 (536) (259)
-------- -------- -------
Total........................ $(11,225) $(18,967) $(5,506)
======== ======== =======
The income tax provision consisted of:
NINE-MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
U.S. Federal................. $ -- $-- $ --
State........................ -- -- --
Foreign...................... 149 93 248
---- --- ----
Total........................ $149 $93 $248
==== === ====
The income tax provision at the federal statutory rate differs from the
effective rate because of the following items:
NINE-MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
Statutory rate............... (34.0)% (34.0)% 34.0%
State income tax............. -- -- 4.2
Amortization of intangible
assets relating to acquired
businesses................. -- --
Increase in valuation
allowances................. 34.4 34.0 (38.2)
Other, net................... (0.4) -- 4.5
----- ----- -----
Effective rate............... 0.0% 0.0% 4.5%
===== ===== =====
Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Temporary
33
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 9--INCOME TAXES: (CONTINUED)
differences and carryforwards which give rise to a significant portion of
deferred tax assets and liabilities as of December 31, 2000 and 1999 are as
follows:
DECEMBER 31, 2000 DECEMBER 31, 1999
DEFERRED TAX DEFERRED TAX
---------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
Depreciation.......................... $ -- $151 $ -- $144
Accruals.............................. 333 -- 342 --
Bad debts............................. 343 -- 315 --
NOL carryforwards..................... 23,618 -- 20,261 --
Tax credit carryforwards.............. 746 -- 814 --
-------- ---- -------- ----
25,040 151 21,732 144
Valuation allowance................... (24,889) -- (21,588) --
-------- ---- -------- ----
Total deferred taxes.................. $ 151 $151 $ 144 $144
======== ==== ======== ====
Due to the uncertainty of realizing any of the net deferred tax assets, the
Company has provided a valuation allowance against the entire net amount.
At December 31, 2000, the Company has available domestic net operating loss
carryforwards of approximately $69,500 which are available to offset future
Federal taxable income, if any, through 2020, and investment business tax credit
carryforwards of approximately $746 which are available to offset future Federal
taxable income, if any, through 2010. The utilization of tax credits and net
operating losses may be limited due to changes in ownership and other
restrictions imposed by the Internal Revenue Code.
NOTE 10--COMMITMENTS AND CONTINGENCIES:
Lease Commitments:
The Company leases office space under non-cancelable operating leases with
expiration dates ranging through 2005, with various renewal options. Capital
leases range from three to five years and are primarily for computer equipment.
Assets under capital leases at December 31, 2000 and December 31, 1999 totaled
$500 and $876, respectively, and accumulated depreciation was $93 and $209,
respectively.
34
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 10--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Commitments for minimum rentals under noncancellable leases as of
December 31, 2000 are as follows:
CAPITAL OPERATING
YEAR LEASES LEASES
- ---- -------- ---------
2001...................................................... $ 183 $1,180
2002...................................................... 161 952
2003...................................................... 131 805
2004...................................................... 76 150
2005...................................................... -- 138
------ ------
Total minimum lease commitments........................... $ 551 $3,225
======
Less: sublease income..................................... 1,054
------
Net lease payments........................................ $2,171
======
Less: amount representing interest........................ (102)
------
Present value of obligations under capital leases......... 449
Less: current portion..................................... (132)
------
Long-term obligations under capital leases................ $ 317
======
Rental expense for office facilities and certain equipment subject to
operating leases for Fiscal 2000, Fiscal 1999, and Transition Period 1998 was
$1,067, $709, and $1,326, respectively.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will, after giving effect to reserves of $447 at
December 31, 2000 and insurance, not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
NOTE 11--INTERNET SERVICES AND PROMOTION AGREEMENTS:
On August 20, 1999, the Company entered into a Strategic Supply, Services
and Promotion Agreement with the Hewlett-Packard Company. Pursuant to the terms
of the agreement, the Company is required to pay Hewlett-Packard a variable fee
based on the percentage of revenues generated through the ebix.com website in
exchange for joint marketing, co-branding, Internet services, and hardware and
software provided by Hewlett-Packard to run the ebix.com website. In addition,
the Company has the right to purchase Hewlett-Packard hardware at a discount.
The Company is required to use only Hewlett-Packard hardware, unless it is not
available or functional to meet to Company's needs. The agreement is cancelable
by Hewlett-Packard prior to its August 20, 2002 termination date in the event
the Company does not realize specified levels of revenues through August 31,
2000 or through August 31, 2001. There is no compensation due to either party in
the event of early termination. The Company records expense related to this
agreement in the period incurred. However, as of December 31, 2000, the Company
has not made any payments to Hewlett-Packard or recognized any expense. In
conjunction with the agreement, Hewlett-Packard contributed certain equipment
with a fair value of $66 to the Company.
35
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 11--INTERNET SERVICES AND PROMOTION AGREEMENTS: (CONTINUED)
On August 31, 1999, the Company entered into an Internet Promotion Agreement
with InfoSpace.com. Pursuant to the terms of the agreement, the Company is
required to pay InfoSpace.com the greater of a variable fee based on a
percentage of revenues generated as a result of user traffic via the
InfoSpace.com website or a fixed monthly fee of $25 in exchange for a specified
number of impressions of ebix.com promotional placements on the InfoSpace.com
website. The Company records expense related to this agreement in the period
incurred. In addition, the Company granted warrants to InfoSpace.com for the
purchase of 776,572 shares of common stock (see Note 14). The agreement
terminates on August 31, 2001, unless terminated by either party for cause, as
defined in the Internet Promotion Agreement.
The Company also entered into Content Distribution and Content Provider
Agreements with InfoSpace.com on August 31, 1999. These agreements provide for
the mutual right to place hypertext links on the other party's website,
including the right to reproduce each party's trademarks, and the right for
InfoSpace.com to sell banner advertising. Under this agreement, the Company is
entitled to receive a percentage share in banner advertising revenue received by
InfoSpace.com on the co-branded web pages and the Company in turn must pay to
InfoSpace.com a percentage fee based on revenues received by the Company as a
result of user traffic on the Company's website via any link established by
content page provided by InfoSpace.com. The Company's policy is to record the
revenues or expenses related to these agreements in the period earned or
incurred.
NOTE 12--CASH OPTION PROFIT SHARING PLAN AND TRUST:
Effective January 1, 1988, the Company adopted and implemented a 401(k) Cash
Option Profit Sharing Plan which allows participants to contribute a percentage
of their compensation to the Profit Sharing Plan and Trust up to a maximum of
$10. The Company is under no obligation to contribute to the Plan. The Company's
contributions to the Plan were approximately $67 for Fiscal 2000, $89 for Fiscal
1999 and zero for the Transition Period 1998.
NOTE 13--STOCK OPTIONS:
The Company's 1996 Stock Incentive Plan (the "Plan") provides for the
granting of stock options and stock appreciation rights to officers, directors
and employees. The total number of shares reserved for grant under the 1996
Stock Incentive Plan is 2,700,000 at December 31, 2000. Options granted under
this plan may be incentive stock options as defined under current tax laws or
nonstatutory options. Options are granted at prices determined by the Board of
Directors (not less than 100 percent of the market price of the stock at the
time of grant for incentive stock options and 110 percent with respect to
incentive stock options granted to optionees who own 10 percent or more of the
Company's stock). Stock options under this plan generally become exercisable in
25 percent increments vesting on each of the first through fourth anniversaries
of the date of grant. All options must be exercised within ten years of the date
of grant (with respect to incentive stock optionees owning 10 percent or more of
the Company's stock, the term may be no longer than five years). No stock
appreciation rights have been issued under the Plan or are outstanding at
December 31, 2000.
The Company's 1998 Director Option Plan (the "Director Plan") provides for
granting of options on up to 300,000 shares to non-employee directors. Only
nonstatutory options may be granted under this plan. Options are granted at
prices not less than 100% of the market price of the stock at the time
36
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 13--STOCK OPTIONS: (CONTINUED)
of grant. Stock options under this plan generally become exercisable over
periods ranging from three months to three years. All options must be exercised
within ten years of the date of grant. During 1999, the Company granted a total
of 10,800 options (3,600 options per director) pursuant to the terms of the
Director Plan. During 2000, the Company granted a total of 42,000 options to
directors.
During 2000, the Company granted 10,000 incentive stock options for which
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 1999, the Company granted 466,000 incentive stock options for
which vesting is contingent upon increases in the Company's stock price and
other performance based measures, such as achieving specified revenues for new
products. 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 $1,510 was recognized in 1999 and a recovery of compensation
expense of $880 was recognized in 2000 due to the market price being
significantly less than the exercise price. At December 31, 2000, none of the
incentive options were vested.
The Company has granted nonstatutory and incentive options outside the Plan
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 have a four year vesting period and must be exercised
within ten years of the date of the grant. Included in these options are 35,000
and 43,333 options which the Company granted in 2000 and 1999, respectively, and
1,000 options granted prior to 1999, to persons who were not directors, officers
or employees.
These non-employee options were valued pursuant to 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 price. At December 31, 2000, 20,417 of the non-employee options were
vested. The Company has recognized compensation expense of approximately $189
and $214 related to these options during the years ended December 31, 2000 and
1999. Assumptions used in valuing the options are the same as those described
below for employee options except the 10-year contractual life was substituted
for the expected life of the option as required by SFAS No. 123.
The Company applies APB Opinion 25 and related Interpretations in accounting
for its employee stock-based compensation plans. Had compensation cost for these
stock-based compensation plans been determined based on the fair value method
prescribed by SFAS No. 123, using the Black-Scholes
37
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 13--STOCK OPTIONS: (CONTINUED)
option-pricing model with the assumptions summarized below, the Company's net
loss and net loss per share would have been the pro forma amounts indicated
below:
NINE-MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
Net loss as reported......... $11,374 $19,060 $5,754
Pro forma net loss........... $13,327 $18,100 $6,303
Net loss per share, as
reported................... $ 1.00 $ 2.05 $ 0.78
Net loss per share, pro
forma...................... $ 1.17 $ 1.95 $ 0.85
The pro forma net loss and net loss per share for Fiscal 1999 results are
less than the as reported amounts because the total expense for financial
statement purposes of $1,510 recorded under APB Opinion No. 25 exceeds the total
expense of $550 had such options been recorded pursuant to SFAS No. 123.
The per share weighted-average fair values of stock options granted during
Fiscal 2000, Fiscal 1999 and Transition Period 1998 were $5.43, $4.16, and
$2.38, respectively, on the date of grant. The options were exercisable at
December 31, 2000, 1999 and 1998 for 454,865, 327,877, and 299,031 shares,
respectively. Both the pro forma disclosures and the weighted-average fair value
of stock options on the date of grant were calculated using the Black-Scholes
option-pricing model with the following assumptions:
NINE-MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
Expected volatility.......... 93% 69% 44%
Expected dividends........... None None None
Weighted average risk-free
interest rate.............. 6.09% 5.98% 5.30%
Expected life of stock
options.................... 10 years 4 years 6 years
38
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 13--STOCK OPTIONS: (CONTINUED)
Stock option activity during the last three periods was as follows:
WITHIN PLAN WEIGHTED-
------------------------ AVERAGE
NONSTATUTORY INCENTIVE OUTSIDE EXERCISE EXERCISE
OPTIONS OPTIONS PLAN PRICE RANGES PRICE
------------ --------- -------- ------------ ---------
Options outstanding at March 31, 1998..... 847,008 -- 1,000 3.28 - 33.75 4.77
Option activity:
Granted................................. 548,400 -- -- 3.38 - 5.12 5.07
Exercised............................... -- -- -- -- --
Canceled................................ (318,915) -- -- 3.28 - 33.75 4.59
--------- ------- ------ ------------ ----
Options outstanding at December 31,
1998.................................... 1,076,493 -- 1,000 2.93 - 26.25 4.59
Option activity:
Granted................................. 290,895 432,250 43,333 6.66 - 10.00 7.54
Exercised............................... (229,975) -- -- 6.53 - 11.00 8.13
Canceled................................ (533,113) -- -- 2.94 - 10.00 5.59
--------- ------- ------ ------------ ----
Options outstanding at December 31,
1999.................................... 604,300 432,250 44,333 2.93 - 26.25 6.21
Option activity:
Granted................................. 47,000 10,000 35,000 1.50 - 9.50 5.09
Exercised............................... (12,988) -- -- 3.28 - 8.69 3.97
Canceled................................ (211,893) -- -- 1.50 - 9.63 5.76
--------- ------- ------ ------------ ----
Options outstanding at December 31,
2000.................................... 426,419 442,250 79,333 1.50 - 9.63 6.23
========= ======= ====== ============ ====
The following table summarizes information about stock options outstanding
as of December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- WEIGHTED- -------------------
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------ ----------- ----------- --------- ----------- ---------
$1.500 - 2.906 28,800 9.06 yrs $2.027 15,300 $2.493
2.907 - 3.500 94,600 7.87 3.320 42,950 3.281
3.510 - 5.940 224,305 6.98 5.278 152,305 5.226
5.90 - 6.750 429,197 8.61 6.669 195,059 6.663
6.751 - 9.625 171,100 8.83 8.720 49,251 8.437
------- -------
948,002 454,865
======= =======
39
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 13--STOCK OPTIONS: (CONTINUED)
Effective July 1, 1999, the Company approved the 1999 Stock Purchase Plan
("Purchase Plan"), which provided for eligible employees to acquire an interest
in the Company through the purchase of shares of common stock. The Purchase Plan
had 2,000,000 shares of common stock reserved for sale to employees and is
intended to qualified under Section 423 of the Internal Revenue Code. Under the
Purchase Plan, each employee could choose each year to have up to 10 percent of
his or her base earnings, up to $25, withheld to purchase common stock during
each accumulation period (generally six months). The purchase price of the stock
was 85% of the lower of its beginning-of-accumulation period or
end-of-accumulation period market price. During August 2000, the Plan was
terminated by the Board of Directors and funds were returned to the
participants.
NOTE 14--WARRANTS:
On August 20, 1999, in connection with the Hewlett-Packard Strategic Supply,
Services and Promotion Agreement (see Note 11), 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 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 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
December 31, 2000, the warrants represented rights to purchase 557,727 and
512,198 shares, respectively. For both warrants, if the fair value of the common
stock at the exercise date is greater than the purchase price, Hewlett-Packard
may elect to receive net shares equal to the value of the warrant in lieu of
exercising the warrant with cash.
The Hewlett-Packard warrants were valued pursuant to SFAS No. 123 and EITF
Issue No. 96-18. The fair value of these warrants using the Black-Scholes
option-pricing model and the same assumptions as in Note 13 for employee stock
options, except a contractual life of two years, was approximately $424 and $597
respectively. The compensation expense will be recognized over the contractual
period. In Fiscal 2000 and Fiscal 1999, total expense of $569 and $263 was
recognized.
The Company also issued warrants in connection with the InfoSpace.com
Internet Promotion Agreement dated August 31, 1999 (see Note 11). 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
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 on a fully
diluted basis, including the warrant, at August 31, 1999. These warrants allow
for the purchase of 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.
The InfoSpace.com warrants were valued pursuant to SFAS No. 123 and EITF
Issue No. 96-18. The fair value of these warrants using the Black-Scholes
option-pricing model and the same assumptions as above, except a contractual
life of two years, was approximately $81 and $813, respectively. Compensation
expense for the first warrant will be recognized over the vesting period and
40
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 14--WARRANTS: (CONTINUED)
compensation expense for the second warrant will be recognized over the
contractual period. In Fiscal 2000 and Fiscal 1999, total expense of $570 and
$385 was recognized.
NOTE 15--GEOGRAPHIC INFORMATION:
The following information relates to geographic locations:
Year ended December 31, 2000
DOMESTIC AUSTRALIA OTHER TOTAL
-------- --------- -------- --------
Revenue.................................. $8,994 $1,468 $1,302 $11,764
Fixed assets............................. $ 819 $ 59 $ 26 $ 904
Year ended December 31, 1999
DOMESTIC AUSTRALIA OTHER TOTAL
-------- --------- -------- --------
Revenue.................................... $10,218 $1,486 $806 $12,511
Fixed assets............................... $ 1,941 $ 64 $ 54 $ 2,059
Nine Months ended December 31, 1998
DOMESTIC AUSTRALIA OTHER TOTAL
-------- --------- -------- --------
Revenue.................................... $10,361 $2,381 $660 $13,402
Fixed assets............................... $ 1,738 $ 60 $ 43 $ 1,841
NOTE 16--RELATED PARTY:
The Company incurred royalty expense of approximately $0, $25, and $143
during Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively, to
APT (see Note 4).
NOTE 17--SUBSEQUENT EVENTS:
On March 30, 2001, the Company entered into an agreement (the "Agreement")
with BRiT Insurance Holdings plc ("BRiT") for BRiT to invest $7,000 in cash in
newly issued Company Common Stock at a price of $1.25 per share. BRiT will also
exchange a 28% equity position, approximately half of its ownership, in
Insurance Broadcast Systems, Inc. ("IBS"), a privately held company in the
insurance related electronic education business, for an additional 1,344,000
shares of Company Common Stock. The Agreement also contemplates that the Company
and BRiT will negotiate an agreement, expected to be entered into by May 2001,
for the Company to receive fees for reviewing, developing and servicing BRiT's
e-commerce infrastructure.
The Agreement is contemplated to be consummated in two closings, the first,
a BRiT cash purchase of 2,240,000 shares for $2,800, and the second covering the
balance of the cash investment and the exchange for IBS stock. Each closing is
subject to conditions typical in such transactions; the
41
EBIX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 17--SUBSEQUENT EVENTS: (CONTINUED)
second is also subject to Company stockholder approval of the transaction and of
a charter amendment authorizing additional shares, and execution of the BRiT
e-commerce strategy agreement. The Company expects the first closing to occur in
mid-April, and the second closing to occur in June. BRiT has the right to
designate two members of the Company's board of directors following the second
closing.
After the issuance of Common Stock in both closings pursuant to the
Agreement, BRiT will own approximately 38% of the Company's outstanding Common
Stock. BRiT is entitled to have the Company register its stock for sale. In
connection with the Agreement, the Company terminated its Stockholder Rights
Plan, effective immediately, but BRiT has agreed not to acquire 49% or more of
the Company's Common Stock without the approval of the the Company's Board of
Directors.
42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information regarding directors of the Company required by this item
is incorporated by reference to the information appearing under the captions
"Proposal No. 1, Election of Directors" and "Compliance with Section 16(a) of
the Exchange Act," in the Company's proxy statement for its 2001 Annual Meeting
of Stockholders which will be filed with the Securities and Exchange Commission
by April 30, 2001.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing under
the caption "Executive Compensation" in the Company's proxy statement for its
2001 Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission by April 30, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information appearing under
the caption "Security Ownership of Management and Certain Beneficial Owners" in
the Company's proxy statement for its 2001 Annual Meeting of Stockholders, which
will be filed with the Securities and Exchange Commission by April 30, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing under
the caption "Certain Transactions" in the Company's proxy statement for its 2001
Annual Meeting of Stockholders which will be filed with the Securities and
Exchange Commission by April 30, 2001.
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS.
The following consolidated financial statements and supplementary data of
the Company and its subsidiaries, required by Part II, Item 8 are filed
herewith:
- Reports of Independent Public Accountants
- Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999
- Consolidated Statements of Operations for the Years Ended December 31,
2000 and December 31, 1999, and the nine months ended December 31, 1998.
- Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 2000 and December 31, 1999, and the nine months ended
December 31, 1998.
- Consolidated Statements of Cash Flows for the Years Ended December 31,
2000 and December 31, 1999, and the nine months ended December 31, 1998.
- Notes to Consolidated Financial Statements
(a) 2. FINANCIAL STATEMENTS.
The following financial statement schedule is filed herewith:
Schedule II--Valuation and Qualifying Accounts for the years ended
December 31, 2000 and December 31, 1999, and the nine months ended
December 31, 1998.
Schedules other than those listed above have been omitted because they are
not applicable or the required information is included in the financial
statements or notes thereto.
EXHIBITS
3.1 Certificate of Incorporation, as amended (filed as Exhibit
3.1 to the Company's Registration Statement on Form S-8 (No.
333-23361), and incorporated herein by reference).
3.2* Bylaws of the Company
3.3 Certificate of Amendment of Certificate of Incorporation
(filed as Exhibit 3.1 to the Company's Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by
reference).
3.4 Certificate of Amendment of Certificate of Incorporation
dated November 5, 1999 (filed as Exhibit 3.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999, and incorporated herein by reference).
4.1 Form of Redeemable Warrant to purchase shares of common
stock of Ebix.com, Inc. (filed as Exhibit 4.12 to the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996, and incorporated herein by reference).
4.2 Form of Unit Investment Agreement to purchase common stock
and warrants of Delphi Information Systems, Inc. (filed as
Exhibit 4.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996, and incorporated
herein by reference).
4.3 Form of Warrant to purchase shares of common stock of Delphi
Information Systems, Inc. held by R.J. Steichen & Company
(filed as Exhibit 4.14 to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996, and
incorporated herein by reference).
44
4.4 Rights Agreement between Delphi Information Systems, Inc.
and ChaseMellon Shareholder Services, LLC, as Rights Agent
(filed as Exhibit 99.1 to the Company's Registration of
Certain Classes of Securities on Form 8-A (No. 000-15946)
and incorporated herein by reference).
MATERIAL CONTRACTS
10.1 Delphi Information Systems, Inc. 1983 Stock Incentive Plan,
as amended (filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (No. 33-45153) and
incorporated herein by reference). +
10.2 Delphi Information Systems, Inc. Cash Option Profit Sharing
Plan (filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-8 (No. 33-19310) and incorporated herein
by reference). +
10.3 Delphi Information Systems, Inc. 1989 Stock Purchase Plan
(included in the prospectus filed as part of the Company's
Registration Statement on Form S-8 (No. 33-35952) and
incorporated herein by reference). +
10.4 Delphi Information Systems, Inc. Non-Qualified Stock Option
Plan for Directors (filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the fiscal year ended March
31, 1992, and incorporated herein by reference).
10.5 Delphi Information Systems, Inc. 1996 Stock Incentive Plan
(filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-8 (File No. 33323261), and incorporated
herein by reference). +
10.6 Stock Purchase Warrant dated June 5, 1992, issued by the
Company to Silicon Valley Bank, and related Registration
Rights Agreement (filed as Exhibit 10.12 to the Company's
Registration Statement on Form S-1 (No. 33-45153) and
incorporated herein by reference).
10.7 Lease agreement dated September 1998 between the Company and
Crossroads of Commerce III, relating to premises at 3501
Algonquin Road, Rolling Meadows, IL (filed as Exhibit 10.15
to the Company's Transition Report on Form 10-K for the
transition period from April 1, 1998 to December 31, 1998
and incorporated herein by reference).
10.8 Lease agreement effective October, 1998 between the Company
and 485 Properties LLC relating to premises at Five
Concourse Parkway, Atlanta, Georgia (filed as Exhibit 10.16
to the Company's Transition Report on Form 10-K for the
transition period from April 1, 1998 to December 31, 1998
and incorporated herein by reference).
10.9 Delphi Information Systems, Inc. 1998 Non-Employee
Director's Stock Option Plan (filed as Exhibit A to the
Company's proxy statement dated August 12, 1998, and
incorporated herein by reference).+
10.10 Strategic Supply, Service and Promotion Agreement between
Hewlett-Packard Packard and Company, dated August 20, 1999
(filed as Exhibit 10.19 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference).**
10.11 Related Agreement Number One, Strategic Supply, Services and
Promotion Agreement between Hewlett-Packard and Company,
dated August 20, 1999 (filed as Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).**
10.12 Terms and condition of sale and service between
Hewlett-Packard and Company, dated August 20, 1999 (filed as
Exhibit 10.21 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).**
45
10.13 Warrant to purchase shares of common stock between
Hewlett-Packard and Company, dated August 20, 1999 (filed as
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).
10.14 Internet Content (World Wide Web Site) Distribution
Agreement between Infospace and Company, dated August 31,
1999 (filed as Exhibit 10.23 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference).
10.15 Content Provider Agreement between Infospace and Company,
dated August 31, 1999 (filed as Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).**
10.16 Internet Promotion Agreement between Infospace and Company,
dated August 31, 1999 (filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).**
10.17 Warrant issued to Infospace by the Company (filed as Exhibit
10.26 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by
reference).
10.18 Warrant issued to Infospace by the Company (filed as Exhibit
10.27 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by
reference).
10.19 Agreement dated as of July 15, 1999, between the Company,
Tatum CFO Partners, LLP and Richard J. Baum (filed as
Exhibit 10.28 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference). +
10.20 Sublease agreement dated April 20, 2000 between the Company
and Philips Electronics North American Company relating to
the premises at 1900 Golf Road, Schaumburg, Illinois (filed
as Exhibit 10.29 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).
10.21 Sublease agreement dated April 20, 2000 between the Company
and Pepsi-Cola General Bottlers relating to the premises at
1300 Algonquin Road in Rolling Meadows, Illinois (filed as
Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).
10.22 Sublease agreement dated July 22, 1999 between the Company
and Air Liquid America Corporation relating to the premise
at Walnut Creek California (filed as Exhibit 10.31 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
10.23 First Amendment to the Delphi Information Systems, Inc. 1996
Stock Incentive Plan (filed as Exhibit 10.32 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
10.24 Delphi Information Systems, Inc. 1999 Stock Purchase Plan
(filed as Exhibit 10.33 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference).
10.25 Baum Severance agreement dated October 4, 2000 (filed as
Exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 and incorporated
herein by reference). +
10.26* Sublease agreement dated June 15, 2000, between the Company
and Envoy Networks, Inc., relating to premises at
900 Middlesex Turnpike, Building 8, Second Floor, Billerica,
MA.
46
10.27* Sublease agreement dated October 11, 2000, between the
Company and Eric Swallow and Deborah Swallow, relating to
the premises at 2055 N. Broadway, Walnut Creek, CA.
10.28* Channel Agreement dated October 31, 2000 between the Company
and the Alta Vista Company**
21.1* The subsidiaries of the Company.
23.1* Consent of KPMG LLP
23.2* Consent of Arthur Andersen LLP
- ------------------------
* Filed herewith
** Confidential treatment has been requested for portions of this document. The
redacted material has been filed with the commission pursuant to an
application for confidential treatment.
+ Management Contracts and Compensation Agreements
(b) REPORTS ON FORM 8-K
None
47
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.
ebix.com, Inc.
(Registrant)
By: /s/ ROBIN RAINA
-----------------------------------------
Robin Raina
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AND DIRECTOR
Date: March 31, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROY ROGERS
------------------------------------ Chairman of the Board March 31, 2001
(Roy Rogers)
/s/ ROBIN RAINA President, Chief Executive Officer
------------------------------------ and Director March 31, 2001
(Robin Raina)
/s/ RICHARD J. BAUM Senior Vice President-Finance &
------------------------------------ Administration, Chief Financial March 31, 2001
(Richard J. Baum) Officer, and Secretary
------------------------------------ Director March 31, 2001
(Yuval Almog)
/s/ WILLIAM R. BAUMEL
------------------------------------ Director March 31, 2001
(William R. Baumel)
/s/ DOUG CHISHOLM
------------------------------------ Director March 31, 2001
(Doug Chisholm)
/s/ DENNIS DRISLANE
------------------------------------ Director March 31, 2001
(Dennis Drislane)
/s/ LARRY G. GERDES
------------------------------------ Director March 31, 2001
(Larry G. Gerdes)
/s/ WILLIAM W. RICH
------------------------------------ Director March 31, 2001
(William W. Rich)
48
EXHIBIT INDEX
EXHIBITS
3.1 Certificate of Incorporation, as amended (filed as Exhibit
3.1 to the Company's Registration Statement on Form S-8 (No.
333-23361), and incorporated herein by reference).
3.2* Bylaws of the Company
3.3 Certificate of Amendment of Certificate of Incorporation
(filed as Exhibit 3.1 to the Company's Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by
reference).
3.4 Certificate of Amendment of Certificate of Incorporation
dated November 5, 1999 (filed as Exhibit 3.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
4.1 Form of Redeemable Warrant to purchase shares of common
stock of Ebix.com, Inc. (filed as Exhibit 4.12 to the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996, and incorporated herein by reference).
4.2 Form of Unit Investment Agreement to purchase common stock
and warrants of Delphi Information Systems, Inc. (filed as
Exhibit 4.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996, and incorporated
herein by reference).
4.3 Form of Warrant to purchase shares of common stock of Delphi
Information Systems, Inc. held by R.J. Steichen & Company
(filed as Exhibit 4.14 to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996, and
incorporated herein by reference).
4.4 Rights Agreement between Delphi Information Systems, Inc.
and ChaseMellon Shareholder Services, LLC, as Rights Agent
(filed as Exhibit 99.1 to the Company's Registration of
Certain Classes of Securities on Form 8-A (No. 000-15946)
and incorporated herein by reference).
MATERIAL CONTRACTS
10.1 Delphi Information Systems, Inc. 1983 Stock Incentive Plan,
as amended (filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (No. 33-45153) and
incorporated herein by reference). +
10.2 Delphi Information Systems, Inc. Cash Option Profit Sharing
Plan (filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-8 (No. 33-19310) and incorporated herein
by reference). +
10.3 Delphi Information Systems, Inc. 1989 Stock Purchase Plan
(included in the prospectus filed as part of the Company's
Registration Statement on Form S-8 (No. 33-35952) and
incorporated herein by reference). +
10.4 Delphi Information Systems, Inc. Non-Qualified Stock Option
Plan for Directors (filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the fiscal year ended March
31, 1992, and incorporated herein by reference).
10.5 Delphi Information Systems, Inc. 1996 Stock Incentive Plan
(filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-8 (File No. 33323261), and incorporated
herein by reference). +
10.6 Stock Purchase Warrant dated June 5, 1992, issued by the
Company to Silicon Valley Bank, and related Registration
Rights Agreement (filed as Exhibit 10.12 to the Company's
Registration Statement on Form S-1 (No. 33-45153) and
incorporated herein by reference).
49
10.7 Lease agreement dated September 1998 between the Company and
Crossroads of Commerce III, relating to premises at 3501
Algonquin Road, Rolling Meadows, IL (filed as Exhibit 10.15
to the Company's Transition Report on Form 10-K for the
transition period from April 1, 1998 to December 31, 1998
and incorporated herein by reference).
10.8 Lease agreement effective October, 1998 between the Company
and 485 Properties LLC relating to premises at Five
Concourse Parkway, Atlanta, Georgia (filed as Exhibit 10.16
to the Company's Transition Report on Form 10-K for the
transition period from April 1, 1998 to December 31, 1998
and incorporated herein by reference).
10.9 Delphi Information Systems, Inc. 1998 Non-Employee
Director's Stock Option Plan (filed as Exhibit A to the
Company's proxy statement dated August 12, 1998, and
incorporated herein by reference).+
10.10 Strategic Supply, Service and Promotion Agreement between
Hewlett-Packard Packard and Company, dated August 20, 1999
(filed as Exhibit 10.19 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference).**
10.11 Related Agreement Number One, Strategic Supply, Services and
Promotion Agreement between Hewlett-Packard and Company,
dated August 20, 1999 (filed as Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).**
10.12 Terms and condition of sale and service between
Hewlett-Packard and Company, dated August 20, 1999 (filed as
Exhibit 10.21 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).**
10.13 Warrant to purchase shares of common stock between
Hewlett-Packard and Company, dated August 20, 1999 (filed as
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).
10.14 Internet Content (World Wide Web Site) Distribution
Agreement between Infospace and Company, dated August 31,
1999 (filed as Exhibit 10.23 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference).
10.15 Content Provider Agreement between Infospace and Company,
dated August 31, 1999 (filed as Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).**
10.16 Internet Promotion Agreement between Infospace and Company,
dated August 31, 1999 (filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).**
10.17 Warrant issued to Infospace by the Company (filed as Exhibit
10.26 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by
reference).
10.18 Warrant issued to Infospace by the Company (filed as Exhibit
10.27 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by
reference).
10.19 Agreement dated as of July 15, 1999, between the Company,
Tatum CFO Partners, LLP and Richard J. Baum (filed as
Exhibit 10.28 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).+
10.20 Sublease agreement dated April 20, 2000 between the Company
and Philips Electronics North American Company relating to
the premises at 1900 Golf Road, Schaumburg, Illinois (filed
as Exhibit 10.29 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).
50
10.21 Sublease agreement dated April 20, 2000 between the Company
and Pepsi-Cola General Bottlers relating to the premises at
1300 Algonquin Road in Rolling Meadows, Illinois (filed as
Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein
by reference).
10.22 Sublease agreement dated July 22, 1999 between the Company
and Air Liquid America Corporation relating to the premise
at Walnut Creek California (filed as Exhibit 10.31 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
10.23 First Amendment to the Delphi Information Systems, Inc. 1996
Stock Incentive Plan (filed as Exhibit 10.32 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
10.24 Delphi Information Systems, Inc. 1999 Stock Purchase Plan
(filed as Exhibit 10.33 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference).
10.25 Baum Severance agreement dated October 4, 2000 (filed as
Exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 and incorporated
herein by reference). +
10.26* Sublease agreement dated June 15, 2000, between the Company
and Envoy Networks, Inc., relating to premises at
900 Middlesex Turnpike, Building 8, Second Floor, Billerica,
MA.
10.27* Sublease agreement dated October 11, 2000, between the
Company and Eric Swallow and Deborah Swallow, relating to
the premises at 2055 N. Broadway, Walnut Creek, CA.
10.28* Channel Agreement dated October 31, 2000 between the Company
and the Alta Vista Company**
21.1* The subsidiaries of the Company.
23.1* Consent of KPMG LLP
23.2* Consent of Arthur Andersen LLP
- ------------------------
* Filed herewith
** Confidential treatment has been requested for portions of this document. The
redacted material has been filed with the commission pursuant to an
application for confidential treatment.
+ Management Contracts and Compensation Agreements
(b) REPORTS ON FORM 8-K
None
51
SCHEDULE II
EBIX.COM, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999,
AND THE NINE MONTHS ENDED DECEMBER 31, 1998
Allowance for doubtful accounts receivable
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
Beginning balance............................. $1,004,000 $1,068,000 $ 860,000
Provision for allowance....................... 476,810 -- 699,000
Write-off of accounts receivable against
allowance................................... (430,848) (64,000) (491,000)
---------- ---------- ----------
$1,049,962 $1,004,000 $1,068,000
========== ========== ==========
52