**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

| **ý**                                                 |   | **QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE  ACT OF 1934**        |
|------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|
|                                                       |   |                                                                                           |
| **For the quarterly period ended September 30, 2003** |
|                                                       |
| **OR**                                                     |
|                                                       |   |                                                                                           |
| **o**                                                      |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF 1934** |

 

**Commissionfile number 0-15946**

 

**ebix.com, Inc.**

(Exact name of registrant as specified in itscharter)

 

| **DELAWARE**                                                                                |   | **77-0021975**                       |
|---------------------------------------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of  incorporation or  organization)                            |   | (I.R.S. Employer Identification No.) |
|                                                                                        |   |                                 |
| **1900 E. GOLF ROAD  SCHAUMBURG, IL**                                                       |   | **60173**                            |
| (Address of principal executive offices)                                                    |   | (Zip Code)                           |
|                                                                                        |   |                                 |
| Registrant’s telephone number, including  area code:   **847-789-3047** |

 

Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ýNo o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  ý

 

As of November 7, 2003, the number of shares of Common Stockoutstanding was 2,291,143.

 

 

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**ebix.com,Inc. and Subsidiaries**

 

FORM 10-Q

 

FOR THE QUARTER ENDED SEPTEMBER 30, 2003

 

INDEX

 
| Part I — FINANCIAL INFORMATION                                                                                     |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                    |   |
| Item 1.   Consolidated Financial Statements                                                                        |   |
|                                                                                                                    |   |
| Consolidated Balance Sheets at September 30, 2003 (unaudited)  and December 31, 2002                          | 3      |
|                                                                                                                    |   |
| Consolidated Statements of Operations for  the Three and Nine Months ended September 30, 2003 and 2002 (unaudited) | 4      |
|                                                                                                                    |   |
| Consolidated Statements of Cash Flows for  the Nine Months ended September 30, 2003 and 2002 (unaudited)           | 5      |
|                                                                                                                    |   |
| Notes to Consolidated Financial Statements  (unaudited)                                                                 | 6      |
|                                                                                                                    |   |
| Item 2.   Management’s Discussion and Analysis of Financial Condition and  Results of Operations              | 10     |
|                                                                                                                    |   |
| Item 3.   Quantitative and Qualitative Disclosures About  Market Risk                                         | 21     |
|                                                                                                                    |   |
| Item 4.  Controls and  Procedures                                                                                  | 21     |
|                                                                                                                    |   |
| PART II — OTHER INFORMATION                                                                                        | 21     |
|                                                                                                                    |   |
| Item 6.  Exhibits and Reports  on Form 8-K                                                                         | 21     |
|                                                                                                                    |   |
| SIGNATURES                                                                                                              | 22     |

 

2

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**ebix.com, Inc. and SubsidiariesConsolidated Balance Sheets**

(In thousands, except for share amounts)

 
|                                                                                                                 |   | **September 30,  2003** |   | **December 31,  2002** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|-----------------------------|--------|
|                                                                                                                 |   | **(Unaudited****)**          |   |                        |   |
| **ASSETS**                                                                                                           |   |                         |   |                        |   |
| **Current assets:**                                                                                                  |   |                         |   |                        |   |
| Cash and cash equivalents                                                                                            |   | $                            | 7,170  |                        | $      | 4,993 |   |
| Accounts receivable, less allowance of $641  and $634                                                                |   | 1,822                        |   | 2,863                       |   |
| Other current assets                                                                                                 |   | 473                          |   | 340                         |   |
| **Total  current assets**                                                                                            |   | 9,465                        |   | 8,196                       |   |
| Property and equipment, net                                                                                          |   | 1,355                        |   | 1,131                       |   |
| Capitalized software, net                                                                                            |   | 136                          |   | 218                         |   |
| Other assets                                                                                                         |   | 538                          |   | 421                         |   |
| **Total assets**                                                                                                     |   | $                            | 11,494 |                        | $      | 9,966 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                        |   |                         |   |                        |   |
| **Current liabilities:**                                                                                             |   |                         |   |                        |   |
| Accounts payable and accrued expenses                                                                                |   | $                            | 2,046  |                        | $      | 1,833 |   |
| Accrued payroll and related benefits                                                                                 |   | 862                          |   | 342                         |   |
| Current portion of capital lease  obligations                                                                        |   | 103                          |   | 114                         |   |
| Deferred revenue                                                                                                     |   | 2,549                        |   | 2,879                       |   |
| **Total  current liabilities**                                                                                       |   | 5,560                        |   | 5,168                       |   |
| Capital lease obligation, less current  portion                                                                      |   | —                       |   | 73                          |   |
| **Total liabilities**                                                                                                |   | 5,560                        |   | 5,241                       |   |
| **Stockholders’ equity:**                                                                                       |   |                         |   |                        |   |
| Convertible Series D Preferred stock, $.10  par value, 2,000,000 shares authorized, no shares issued and outstanding |   | —                       |   | —                      |   |
| Common stock, $.10 par value, 40,000,000 shares  authorized, 2,291,143 shares issued and outstanding                 |   | 229                          |   | 229                         |   |
| Additional paid-in capital                                                                                           |   | 88,532                       |   | 88,441                      |   |
| Deferred compensation                                                                                                |   | (430                         | )      | (366                        | )      |
| Accumulated deficit                                                                                                  |   | (82,739                      | )      | (83,920                     | )      |
| Accumulated other comprehensive income                                                                               |   | 342                          |   | 341                         |   |
| **Total stockholders’ equity**                                                                                  |   | 5,934                        |   | 4,725                       |   |
| **Total liabilities and stockholders’ equity**                                                                  |   | $                            | 11,494 |                        | $      | 9,966 |   |

 

See accompanying notes to consolidated financial statements.

 

3

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**ebix.com, Inc. and SubsidiariesConsolidated Statements ofOperations**

(In thousands, except per share data)

(Unaudited)

 
|                                        |   | **Three  Months Ended  September 30,** |   | **Nine  Months Ended  September 30,** |   |
|---------------------------------------------|--------|---------------------------------------------|--------|--------------------------------------------|--------|
|                                        |   | **2003**                                    |   | **2002**                                   |   | **2003** |   | **2002** |   |
|                                        |   |                                        |   |                                       |   |   |   |   |   |
| **Revenue:**                                |   |                                        |   |                                       |   |   |   |   |   |
| Software                                    |   | $                                           | 373    |                                       | $      | 583 |   | $ | 1,141 |   | $ | 1,567 |   |
| Services and other                          |   | 3,795                                       |   | 3,093                                      |   | 9,934 |   | 8,179 |   |
| **Total  revenue**                          |   | 4,168                                       |   | 3,676                                      |   | 11,075 |   | 9,746 |   |
| **Operating expenses:**                     |   |                                        |   |                                       |   |   |   |   |   |
| Services and other costs                    |   | 1,230                                       |   | 1,147                                      |   | 3,008 |   | 2,873 |   |
| Product development                         |   | 408                                         |   | 347                                        |   | 1,198 |   | 1,395 |   |
| Sales and marketing                         |   | 411                                         |   | 431                                        |   | 1,371 |   | 1,214 |   |
| General and administrative                  |   | 1,460                                       |   | 1,286                                      |   | 3,999 |   | 3,490 |   |
| **Total  operating expenses**               |   | 3,509                                       |   | 3,211                                      |   | 9,576 |   | 8,972 |   |
| **Operating  income**                       |   | 659                                         |   | 465                                        |   | 1,499 |   | 774 |   |
| Interest income                             |   | 22                                          |   | 27                                         |   | 57 |   | 66 |   |
| Interest expense                            |   | (4                                          | )      | (9                                         | )      | (14 | ) | (32 | ) |
| Foreign exchange gain (loss)                |   | 1                                           |   | 2                                          |   | (56 | ) | — |   |
| Income before income taxes                  |   | 678                                         |   | 485                                        |   | 1,486 |   | 808 |   |
| Income taxes                                |   | (103                                        | )      | 17                                         |   | (305 | ) | (92 | ) |
| **Net income**                              |   | $                                           | 575    |                                       | $      | 502 |   | $ | 1,181 |   | $ | 716 |   |
|                                        |   |                                        |   |                                       |   |   |   |   |   |
| Basic net income per common share           |   | $                                           | 0.25   |                                       | $      | 0.22 |   | $ | 0.52 |   | $ | 0.31 |   |
| Diluted net income per common share         |   | $                                           | 0.24   |                                       | $      | 0.22 |   | $ | 0.51 |   | $ | 0.31 |   |
| Basic weighted average shares outstanding   |   | 2,291                                       |   | 2,291                                      |   | 2,291 |   | 2,291 |   |
| Diluted weighted average shares outstanding |   | 2,351                                       |   | 2,291                                      |   | 2,304 |   | 2,291 |   |

 

See accompanying notes to consolidated financial statements.

 

4

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**ebix.com,Inc. and Subsidiaries**

**ConsolidatedStatements of Cash Flows**

(In thousands)

(Unaudited)

 
|                                                                                                |   | **Nine  Months Ended September 30,** |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                |   | **2003**                                  |   | **2002** |   |
|                                                                                                |   |                                      |   |   |   |
| **Cash flows from operating activities:**                                                           |   |                                      |   |   |   |
| Net income                                                                                          |   | $                                         | 1,181  |   | $ | 716 |   |
| **Adjustments to reconcile net income to net****cash provided by (used in)  operating activities:** |   |                                      |   |   |   |
| Depreciation and amortization                                                                       |   | 315                                       |   | 278 |   |
| Stock-based compensation                                                                            |   | 27                                        |   | 10 |   |
| Provision for doubtful accounts                                                                     |   | 7                                         |   | 261 |   |
| **Changes in assets and liabilities:**                                                              |   |                                      |   |   |   |
| Accounts receivable                                                                                 |   | 914                                       |   | 51 |   |
| Other current assets                                                                                |   | (133                                      | )      | (427 | ) |
| Accounts payable and accrued expenses                                                               |   | 213                                       |   | (883 | ) |
| Accrued payroll and related benefits                                                                |   | 520                                       |   | (248 | ) |
| Deferred revenue                                                                                    |   | (330                                      | )      | (126 | ) |
| Net cash provided by (used in) operating activities                                                 |   | 2,714                                     |   | (368 | ) |
| **Cash flows from investing activities:**                                                           |   |                                      |   |   |   |
| Capital expenditures                                                                                |   | (454                                      | )      | (237 | ) |
| Net cash used in investing activities                                                               |   | (454                                      | )      | (237 | ) |
| **Cash flows from financing activities:**                                                           |   |                                      |   |   |   |
| Repayments of debt                                                                                  |   | —                                    |   | (87 | ) |
| Principal payments under capital lease  obligations                                                 |   | (84                                       | )      | (111 | ) |
| Net cash used in financing activities                                                               |   | (84                                       | )      | (198 | ) |
| Effect of foreign exchange rates on cash                                                            |   | 1                                         |   | 137 |   |
| Net change in cash and cash equivalents                                                             |   | 2,177                                     |   | (666 | ) |
| Cash and cash equivalents at the beginning of the period                                            |   | 4,993                                     |   | 6,167 |   |
| Cash and cash equivalents at the end of the period                                                  |   | $                                         | 7,170  |   | $ | 5,501 |   |
|                                                                                                |   |                                      |   |   |   |
| **Supplemental disclosures of cash flow  information:**                                             |   |                                      |   |   |   |
| Interest paid                                                                                       |   | $                                         | 14     |   | $ | 29 |   |
| Income taxes paid                                                                                   |   | $                                         | 40     |   | $ | — |   |
| Intangible asset received in settlement of  accounts receivable                                     |   | $                                         | 120    |   | $ | — |   |

 

See accompanying notes to consolidated financial statements.

 

5

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ebix.com, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 1.  BASIS OF PRESENTATIONAND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

**Basis of presentation**– These consolidated financial statements of ebix.com, Inc. and subsidiaries(collectively the “Company” or “ebix”) are unaudited and reflect alladjustments (consisting only of normal recurring adjustments) which are, in theopinion of management, necessary for a fair presentation of the results of theinterim periods.

 

These consolidated financial statements should be read in conjunctionwith the consolidated financial statements, and accompanying notes thereto,included in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2002.

 

The results of operations for the current interim period are notnecessarily indicative of results to be expected for the entire current year.

 

Certain prior period amounts have been reclassified to conform to thecurrent presentation.

 

**Summary ofsignificant accounting policies—**

 

**Revenuerecognition** -Weapply the provisions of Statement of Position (“SOP”) 97-2, “Software RevenueRecognition,” as amended by Statement of Position 98-9, “Modification of SOP97-2, Software Revenue Recognition, With Respect to Certain Transactions,” totransactions involving the sale of software.

 

The Company recognizes revenue for licensefees from its software products upon delivery, provided that the fee is fixedand determinable, delivery has occurred, collectibility is reasonably assuredand persuasive evidence of an arrangement exists.  Revenue from third party software is derived from the licensingof third party software products in connection with sales of the Company’ssoftware licenses, and is generally recognized upon delivery together with theCompany’s license revenue.  Training,data conversion, installation, and consulting services are generally recognizedas revenue when the services are performed and collectibility is reasonablyassured.  Revenue for maintenance andsupport service is recognized ratably over the term of the support agreement.

 

For software arrangements accounted for underSOP 97-2 containing multiple elements, revenue is recognized on deliveredelements when vendor-specific objective evidence (VSOE) of fair value has beenestablished on the undelivered elements, applying the residual method of SOP98-9.  Fair value is determined for eachundelivered element based on the price charged for the sale of each elementseparately.  In contracts that containfirst year maintenance bundled with software fees, the deferral of maintenancerevenue is based on the price charged for renewal maintenance.

 

Revenues related to hosting arrangements,including ebixASP, are recognized ratably over the term of the agreement,including monthly fees and any initial registration fees and related customprogramming.  ebix.mall referral,acceptance and transaction fees are recognized as revenue as the transactionsoccur and revenue is earned.  Revenue isonly recognized when collectiblity is reasonably assured.

 

Deferred revenue includes maintenance andsupport, amounts received under multi-element arrangements for which VSOE ofundelivered elements does not exist, and initial registration fees and relatedservice fees under hosting agreements. Revenue is recognized when VSOE of the undelivered elements isestablished, the elements are delivered, or the obligation to deliver theelements is extinguished.

 

Software arrangements involving significantcustomization, modification or production are accounted for in accordance withAmerican Institute of Certified Public Accountants Statement of Position 81-1,“Accounting for Performance on Construction-Type and Certain Production-TypeContracts,” using the percentage-of-completion method.  The Company recognizes revenue using actualhours worked as a percentage of total expected hours required by thearrangement, provided that the fee is fixed and determinable and collection ofthe receivable is considered probable.

 

6

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**Stock options-**AtSeptember 30, 2003, the Company had three stock-based employee compensationplans. The Company accounts for stock options issued to employees in accordancewith Accounting Principles Board (“APB”) Opinion No. 25, “Accounting forStock Issued to Employees.” The Company has adopted the disclosure onlyprovisions of Statement of Financial Accounting Standards (“SFAS”)No. 123, “Accounting for Stock-Based Compensation,” for options andwarrants issued to employees, as well as the requirement of SFAS No. 148,“Accounting for Stock Based Compensation — Transition and Disclosure.” UnderAPB Opinion No. 25, compensation expense is based on the difference, ifany, on the measurement date, between the estimated fair value of the Company’sstock and the exercise price of options to purchase that stock. Any resultingcompensation expense is amortized on a straight-line basis over the vestingperiod of the options.

 

While the Company applies APB Opinion No. 25 and related Interpretationsin accounting for its employee stock-based compensation plans, had compensationcost for these stock-based compensation plans been determined based on the fairvalue method prescribed by SFAS No. 123, the Company’s net income andearnings per share would have been the pro forma amounts indicated below:

 
|                                                                                                                                          |   | **Three  Months Ended**      |    | **Nine  Months Ended**       |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|------------------------------|--------|
|                                                                                                                                          |   | **September 30,  2003** |    | **September 30,  2002** |   | **September 30,  2003** |   | **September 30,  2002** |   |
|                                                                                                                                          |   |                         |    |                         |   |   |   |   |   |
| Net income as reported                                                                                                                        |   | $                            | 575,000 |                         | $      | 502,000 |   | $ | 1,181,000 |   | $ | 716,000 |   |
| Add: Stock-based employee compensation  expense included in reported net income, net of related tax effects                                   |   | 4,000                        |    | —                       |   | 4,000 |   | — |   |
| Deduct: Total stock-based employee  compensation expense determined under fair value based method for all awards,  net of related tax effects |   | (226,000                     | )       | (209,000                     | )      | (679,000 | ) | (581,000 | ) |
| Pro forma net income                                                                                                                          |   | $                            | 353,000 |                         | $      | 293,000 |   | $ | 506,000 |   | $ | 135,000 |   |
|                                                                                                                                          |   |                         |    |                         |   |   |   |   |   |
| Basic earnings per share, as reported                                                                                                         |   | $                            | 0.25    |                         | $      | 0.22 |   | $ | 0.52 |   | $ | 0.31 |   |
| Diluted earnings per share, as reported                                                                                                       |   | $                            | 0.24    |                         | $      | 0.22 |   | $ | 0.51 |   | $ | 0.31 |   |
| Basic earnings per share, pro forma                                                                                                           |   | $                            | 0.15    |                         | $      | 0.13 |   | $ | 0.22 |   | $ | 0.06 |   |
| Diluted earnings per share, pro forma                                                                                                         |   | $                            | 0.15    |                         | $      | 0.13 |   | $ | 0.22 |   | $ | 0.06 |   |

 

7

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Note 2.  STOCK OPTIONS

 

During the first and second quarters of 2003, the Company did not grantany stock options. During the third quarter of 2003, the Company grantedoptions to purchase 122,000 shares of the Company’s common stock to employees underthe Company’s 1996 Stock Incentive Plan. During the third quarter of 2003, the Company granted options topurchase 25,000 shares of the Company’s common stock to an employee inconnection with his joining the Company, which were not granted under theCompany’s 1996 Stock Incentive Plan. These options were granted with an exercise price below the fair marketvalue of the Company's common stock on the date of approval.  Accordingly, the Company incurred a chargeof $4,000 during the quarter related to these options and will incur $6,000 ineach future quarter over the next four years.

 

The Company has granted options outside the Company’s stock optionplans to non-employees to purchase up to an aggregate of 32,000 shares, ofwhich options to purchase 16,875 shares were outstanding at September 30,2003.  These options were granted atprices determined by the Board of Directors (at no less than 100 percent of themarket price on the date of grant).  Theoptions have a four-year vesting period and must be exercised within ten yearsof the date of the grant. These non-employee options were valued using the fairvalue method as prescribed by SFAS No. 123, using the following assumptions:volatility of 146%, risk free interest rate of 4.16%, 0% dividend rate and a 10year term. Options issued prior to 2001 are performance-based awards, with noservice commitment and subject to vesting only if the Company’s stock pricereaches a specified level. Options issued in 2001 vest over 4 years, butvesting accelerates if a performance target is achieved.  At September 30, 2003, non-employeeoptions to purchase 13,583 shares were vested. The Company recognized a creditto compensation expense of approximately $1,000 related to these options duringthe three-month period ended September 30, 2003. The Company recognizedcompensation expense of approximately $10,000 related to these options duringthe three-month period ended September 30, 2002. The Company recognizedcompensation expense of approximately $23,000 and $10,000 related to theseoptions during the nine-month periods ended September 30, 2003 andSeptember 30, 2002, respectively.

 

Note 3.  EARNINGS PER SHARE

 

Basic earnings per share (“EPS”) is equal to net income divided by theweighted average number of shares of common stock outstanding for the period.Diluted EPS is calculated as if the Company had additional common stockoutstanding from the beginning of the year or the date of grant for all commonstock equivalents, net of assumed repurchased shares using the treasury stockmethod.  Diluted EPS recognizes thedilutive effect of common stock equivalents and is equal to net income dividedby the weighted average of the sum of the number of shares outstanding andcommon stock equivalents. For the three and nine months ended September 30,2003 and the three months ended September 30, 2002, the Company’s common stockequivalents consisted entirely of stock options. For the nine months endedSeptember 30, 2002, the Company’s common stock equivalents consisted ofstock options and warrants. For the three and nine months endedSeptember 30, 2003, the effect of the calculation resulted in an increasein the weighted average number of shares outstanding of 59,593 and 13,090,respectively. For the three months ended September 30, 2002, there was noeffect on the weighted average number of shares outstanding. For the ninemonths ended September 30, 2002, the effect of the calculation resulted inan increase in the weighted average number of shares outstanding of 36. For thethree and nine months ended September 30, 2003, there were 424,632 and 642,191shares potentially issuable with respect to outstanding stock options, whichcould dilute Basic EPS in the future. For the three and nine months ended September 30, 2002, there were556,995 and 555,082 shares potentially issuable with respect to outstandingstock options, which could dilute Basic EPS in the future.

 

Note 4.  COMPREHENSIVE  INCOME

 
|                                                                       |   | **Three  Months Ended  September 30,** |    | **Nine  Months Ended  September 30,** |   |
|----------------------------------------------------------------------------|--------|---------------------------------------------|---------|---------------------------------------|--------|
|                                                                       |   | **2003**                                    |    | **2002**                              |   | **2003** |   | **2002** |   |
|                                                                       |   |                                        |    |                                  |   |   |   |   |   |
| Net income                                                                 |   | $                                           | 575,000 |                                  | $      | 502,000 |   | $ | 1,181,000 |   | $ | 716,000 |   |
| Other comprehensive income – foreign  currency translation adjustment |   | 73,000                                      |    | (3,000                                | )      | 1,000 |   | 137,000 |   |
| Comprehensive income                                                       |   | $                                           | 648,000 |                                  | $      | 499,000 |   | $ | 1,182,000 |   | $ | 853,000 |   |

 

Note 5.  RELATED PARTYTRANSACTIONS

 

At September 30, 2003, BRiT Insurance Holdings PLC (“BRiT”) held930,163 shares of the Company's common stock, representing an equity ownershipof 40.6 percent.

 

During 2002 and 2003, the Company entered into various software andservice agreements with BRiT and its affiliates. For the three and nine monthsended September 30, 2003, approximately $1,502,000 and $2,486,000, respectivelywas recognized as revenue from BRiT and its affiliates. For the three and ninemonths ended September 30, 2002, approximately $588,000 and $1,231,000,respectively was recognized as revenue from BRiT and its affiliates. Totalaccounts receivable from BRiT and its affiliates at September 30, 2003were $224,000.

 

8

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Note 6.  REVERSE STOCK SPLIT

 

On October 1, 2002, the Company’s common stock began trading on a1-for-8 reverse split basis. The Company’s stockholders approved the reversesplit at a special meeting of stockholders held on September 30,2002.  The reverse split was intended toreturn the Company to compliance with the continued listing standards of theNASDAQ SmallCap Market, in particular the minimum bid price requirement.  All 2002 share and share-related informationin these consolidated financial statements and footnotes, and elsewhere in thisQuarterly Report has been retroactively adjusted to reflect the reverse stocksplit.

 

9

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Item 2.  MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following information should be read in conjunction with theunaudited consolidated financial statements and the related notes included inPart 1, Item 1 of this Quarterly Report, and the audited consolidated financialstatements and the related notes thereto and Management’s Discussion andAnalysis of Financial Condition and Results of Operations contained in theCompany’s Annual Report on Form 10-K for the year ended December 31, 2002,as filed with the Securities and Exchange Commission.

 

**Critical AccountingPolicies**

 

The Company’s “critical accounting policies” are those that requireapplication of management’s most difficult, subjective or complex judgements,often as a result of the need to make estimates about matters that areinherently uncertain and may change in future periods. The Company hasidentified the following as its critical accounting policies: revenuerecognition and estimating the allowance for doubtful accounts receivable. Fora discussion of these policies, see “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Critical Accounting Policies”in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2002, as filed with the Securities and Exchange Commission.

 

**Liquidity and CapitalResources**

 

The Company had cash and cash equivalents of $7,170,000 atSeptember 30, 2003, compared to $4,993,000 at December 31, 2002.

 

During the nine months ended September 30, 2003, the Companyexperienced positive operating cash flow of $2,714,000. This increase in cashflow from operations resulted primarily from net income for the period of$1,181,000, $349,000 of non-cash items, receivables collected of $914,000, anincrease in payables of $213,000 and an increase in accrued payroll and relatedbenefits of $520,000, partially offset by an increase in other current assetsof $133,000 and a decrease in deferred revenue of $330,000.

 

Cash used in investing activities of $454,000 in the first nine monthsof 2003 represented capital expenditures made primarily as a result of theCompany’s investment in operations in India and the related purchase of assetsfor that location.  Cash used infinancing activities of $84,000 in the first nine months of 2003 resulted fromthe Company’s repayment of capital lease obligations.

 

The Company believes that future revenue growth will come from servicesassociated with development projects, ebixASP and call center operations. TheCompany believes its cash balances and funds from operations will be sufficientto meet all of its anticipated cash requirements for at least the next 12months.

 

# **The following summarizes the Company’s contractual obligations atSeptember 30, 2003, and the effect such obligations are expected to haveon the Company’s liquidity and cash in future periods (in thousands):**

# ** **

|                               |   |      |   | **Payments  Due by Period** |   |
|------------------------------------|--------|-----------|--------|-----------------------------|--------|
| **Contractual Obligations:**       |   | **Total** |   | **Less Than  1 Year**       |   | **1 - 3  Years** |   | **After  3 Years** |   |
|                               |   |      |   |                        |   |   |   |   |   |
| Non-compete note payable           |   | $         | 106    |                        | $      | 106 |   | $ | — |   | $ | — |   |
|                               |   |      |   |                        |   |   |   |   |   |
| Non-cancelable operating leases    |   | 2,253     |   | 451                         |   | 955 |   | 847 |   |
|                               |   |      |   |                        |   |   |   |   |   |
| Non-cancelable capital leases      |   | 103       |   | 103                         |   | — |   | — |   |
|                               |   |      |   |                        |   |   |   |   |   |
| Total contractual cash obligations |   | $         | 2,462  |                        | $      | 660 |   | $ | 955 |   | $ | 847 |   |

 

10

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**Results of Operations**

 

**Three-Month PeriodEnded September 30, 2003 Compared to the Three-Month Period EndedSeptember 30, 2002**

 

**Total Revenue**- The Company’s revenue is derived from the licensing and sale of proprietarysoftware and third party software (“Software”) and from the sale ofprofessional services and support services (“Services”). Professional servicesinclude consulting, implementation, training and project management provided tothe Company’s customers with installed systems and those in the process ofinstalling systems. Also included in Services are fees for software licensemaintenance, initial registration and ongoing monthly subscription fees for theebixASP product, and transaction fees generated from the ebix.mall website, aswell as software development and call center revenue. Total revenue for thequarter ended September 30, 2003 increased $492,000, or 13.4%, to$4,168,000 from $3,676,000 for the comparable quarter of the prior year.

 

**Software Revenue**- Software revenue is comprised of revenue from the sale of ebix (formerly“cd”) products, legacy products, and other third party software.  Total software revenue for the third quarterof 2003 decreased $210,000, or 36.0%, from $583,000 from the comparable quarterin the prior year. As the Company has changed its focus to e-commerce productsand services which included ebixASP, the Company expects the substantialmajority of future revenue to consist of revenue from Services.

 

**Services Revenue**— Total services revenue for the third quarter of 2003 increased $702,000, or22.7%, from $3,093,000 for the comparable quarter of the prior year.  This increase was due to increases in callcenter revenue of $243,000, hosted ebixASP revenue of $242,000, consultingrevenues of $622,000, and ebix.mall revenues of $27,000, offset by a decreasein INS-Site revenue of $48,000 and a decrease in support revenue associatedwith legacy products of $384,000.

 

Support revenue associated with the Company’s legacy products is decreasingdue to a trend of declining renewals for these older product offerings. TheCompany expects that future services revenue will be derived from this support,as well as ebixASP registration and monthly fees, software development,conversion, training, call center and all transaction revenues from ebix.malland ebixExchange (INS-Site).

 

During the third quarters of 2003 and 2002, approximately $1,502,000and $588,000, respectively, was recognized as services revenue from BRiTInsurance Holdings PLC (“BRiT”) and its affiliates related to call center anddevelopment projects.  BRiT ownedapproximately 41% of the Company’s common stock as of September 30, 2003.

 

**Services and othercosts**- Cost of servicesrevenue includes costs associated with support, call center, consulting,implementation and training services. Total services and other costs for the quarter increased $83,000, or7.2%, from $1,147,000 for the comparable quarter of the prior year.  This increase was due to the increase inservices revenue.  Due to a change inthe product mix comprising Services, products with higher costs represented alower percentage of the total, resulting in total services costs rising at asignificantly lower rate than sevices revenue.

 

**Product DevelopmentExpenses**- Total productdevelopment expenses for the third quarter of 2003 increased $61,000, or 17.6%,from $347,000 for the comparable quarter of the prior year.  This increase was due to an increase insalary costs as a result of an increase in headcount in India.

 

**Sales and MarketingExpenses**- Total sales andmarketing expenses for the third quarter of 2003 decreased $20,000, or 4.6%,from $431,000 for the comparable quarter of the prior year.  This decrease was attributable to a decreasein salary costs as a result of a decrease in headcount in this salesdepartment.

 

**General andAdministrative Expenses** —Total general andadministrative expenses for the quarter increased $174,000, or 13.5%, from$1,286,000 for the comparable quarter of the prior year.  This increase was due to an increase inexecutive management bonus accruals, partially offset by a decrease in bad debtand professional fees.

 

**Nine Month PeriodEnded September 30, 2003 Compared to the Nine Month Period EndedSeptember 30, 2002**

 

**Total Revenue**- Total revenue for the nine-month period ended September 30, 2003 increased$1,329,000, or 13.6%, to $11,075,000 from $9,746,000 for the comparable periodof the prior year.

 

**Software Revenue**- Total software revenue for the nine-month period ended September 30,2003 decreased $426,000, or 27.2%, from $1,567,000 for the comparable period ofthe prior year as a result of the decrease in sales of legacy products.

 

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**Services Revenue**— Total services revenue for the nine-month period ended September 30,2003 increased $1,755,000, or 21.5%, from $8,179,000 for the comparable periodof the prior year.  This increase wasdue to increases in call center revenue of $577,000, self hosted ebixASPrevenue of $202,000, hosted ebixASP revenue of $591,000, consulting revenues of$1,378,000, and ebix.mall revenues of $57,000, offset by a decrease in INS-Siterevenue of $277,000 and a decrease in support revenue associated with legacyproducts of $773,000.

 

During the nine-month periods ended September 30, 2003 and 2002,approximately $2,486,000 and $1,231,000, respectively, was recognized asservices revenue from BRiT and its affiliates related to call center anddevelopment projects.

 

**Services and othercosts**- Total services andother costs for the nine-month period ended September 30, 2003 increased$135,000, or 4.7%, from $2,873,000 for the comparable period of the prioryear.  This increase was due to theincrease in services revenue.  Due to achange in the product mix comprising Services, products with higher costsrepresented a lower percentage of the total.

 

**Product DevelopmentExpenses**- Total productdevelopment expenses for the nine-month period ended September 30, 2003decreased $197,000, or 14.1%, from $1,395,000 for the comparable period of theprior year. The Company has established a wholly-owned subsidiary located inDelhi, India.  In May 2002, theCompany began to redirect product development activities to this subsidiarythat were previously outsourced, resulting in lower development costs in thefirst six months of 2003 compared to the same period of the prior year.

 

**Sales and MarketingExpenses**- Total sales andmarketing expenses for the nine-month period ended September 30, 2003increased $157,000, or 12.9%, from $1,214,000 for the comparable period of theprior year. This increase was attributable to increased tradeshow and usergroup association expenses.

 

**General andAdministrative Expenses** —Total general andadministrative expenses for the nine-month period ended September 30, 2003increased $509,000, or 14.6%, from $3,490,000 for the comparable period of theprior year.  This increase was due to anincrease in executive management bonus accruals and an increase in costsrelated to the Company’s operations in India, which were established in May2002.

 

**Safe Harbor forForward-Looking Statements under the Securities Litigation Reform Act of 1995**- This Quarterly Report on Form 10-Q contains various forward-lookingstatements and information that are based on management’s beliefs, as well asassumptions made by, and information currently available to, management,including statements regarding future economic performance and financialcondition, liquidity and capital resources, acceptance of the Company’s productsby the market and management’s plans and objectives. The Company has tried toidentify such forward-looking statements by use of words such as “expects,”“intends,” “anticipates,” “plans,” and “believes” and similar expressions, butthese words are not the exclusive means of identifying such statements. Theforward-looking statements included in this Quarterly Report are subject tovarious risks, uncertainties and other factors which could cause actual resultsto vary materially from those expressed in, or implied by, the forward-lookingstatements.  Such risks, uncertaintiesand other factors include those discussed in “Risk Factors” below. Except asexpressly required by the federal securities laws, the Company undertakes noobligation to update or revise any such factors or any of the forward-lookingstatements contained herein to reflect changed circumstances or future eventsor developments or for any other reason.

 

**Recently Issued Accounting Pronouncements** -In May 2003, the FASB’s Emerging IssuesTask Force reached consensus on EITF Issue No. 00-21, *“Revenue Arrangements with Multiple Deliverables”*(EITF00-21).  EITF 00-21’s criteria governhow to identify whether goods or services or both that are to be deliveredseparately in a bundled sales arrangement should be accounted forseparately.  Specifically, the purposeof EITF 00-21 is to determine if separation is necessary and, if so, how tomeasure and allocate the arrangement consideration.  For publicly traded companies, EITF 00-21 is applicable forrevenue arrangements entered into in periods beginning after June 15,2003.  Accordingly, the Company adoptedEITF 00-21 on July 1, 2003 for all new revenue arrangements.  The adoption of EITF 00-21 did not have asignificant impact on the Company’s financial position, results of operationsor cash flows.

 

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**Risk Factors**

 

You should carefully consider the risks, uncertainties and otherfactors described below because they could materially and adversely affect ourbusiness, financial condition, operating results and prospectus, and/or themarket price of our common stock. This risk factors section is written inresponse to the Securities and Exchange Commission’s “plain English”guidelines. In this section, the words “we,” “us,” “our” and “ours” refer onlyto the Company and its subsidiaries and not any other person.

 

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***RisksRelated To Our Business and Our Industry***

 

**Youmay have difficulty evaluating our business because of our limited history ofoperating Internet, call center and other business process outsourcing.**

 

Although our predecessor began operations in 1976, we did not begin anyInternet operations until September 1999 and did not begin generatingrevenues from these operations until the fourth quarter of 2000.  We did not begin any call center operationsor other business process outsourcing or begin generating revenues from theseoperations until the first quarter of 2003. Accordingly, we have a limited history in operating our Internet, callcenter and other business process outsourcing on which you can evaluate ourCompany and prospects. We cannot be certain that our Internet, call center andother business process outsourcing strategies will be successful, because thesestrategies are new. Our early-stage Internet, call center and other businessprocess outsourcing will be particularly susceptible to the risks anduncertainties described in these risk factors and likely to incur the expensesassociated with addressing them. Our prospects must be considered in light ofthe risks, uncertainties, expenses and difficulties frequently encountered bycompanies in a transitional stage of development, particularly companies in newand rapidly evolving markets, such as electronic commerce, and using new andunproven business models.

 

**Becausethe support revenue that we have traditionally relied upon has been steadilydeclining, it is important that new sources of revenue continue to bedeveloped.**

 

Our revenue from the support services we offer in connection with ourlegacy software products has been decreasing significantly over the course ofthe past few years. This decline can be attributed to the fact that many of oursupport clients are not renewing their support agreements with us, in manycases because they are no longer using our legacy software. Even if they arecontinuing to use our legacy software, our support clients may choose not torenew their support agreements if their legacy software products no longerrequire support or they use third party support. In addition, some of theclients who use our support services have reduced the level of support that weprovide them, which in turn reduces our support revenue. This downward trend inour support revenue makes us particularly dependent upon our other sources ofrevenue. The new product lines and service offerings of our business areproducing revenue but at a slower growth rate due to current economicconditions.

 

**Onecustomer currently provides a significant percentage of our total revenue.**

 

Revenues from one customer, BRiT Insurance Holdings PLC, which ownsapproximately 41% of our common stock, represented approximately 15% of ourtotal revenue in 2002 and approximately 18% in the nine months endedSeptember 30, 2003. If revenues from this customer were to discontinue,our operating results could be adversely affected.

 

**Adverseinsurance industry economics could adversely affect our revenues.**

 

We are dependent on the insurance industry, which may be adverselyeffected by current economic and world conditions.

 

**Ouroperating results may fluctuate dramatically.**

 

Our quarterly operating results may fluctuate significantly in thefuture due to a variety of factors that could affect our revenues or ourexpenses in any particular quarter. You should not rely on our results ofoperations during any particular quarter as an indication of our results for afull year or any other quarter. Factors that may affect our quarterly resultsinclude:

 

•                                          Changesin insurance agents’ and carriers’ consumer acceptance of Internet commerce.

 

•                                          Lossof a significant insurance agent, carrier or broker relationship or the mergerof any of our participating insurance carriers with one another.

 

•                                          Technicaldifficulties for our e-commerce services that hamper an agent’s ability to runits agency system hosted by us.

 

Our operating expenses are based in part on our expectations of ourfuture revenues and are relatively fixed in the short term. We may be unable toadjust spending quickly enough to offset any unexpected revenue shortfall.

 

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**Wecould be subject to civil fines and penalties as a result of the SEC’sinvestigation of our financial reporting.**

 

On August 11, 2000, we were advised that the SEC had issued aformal Order of Investigation and subpoenaed documents relating to ourfinancial reporting since April 1, 1997, including, in particular, revenuerecognition, software development cost capitalization, royalty costs andclassification of cash receipts. We have submitted documents to the SEC uponthe SEC’s request as part of the investigation. It is possible that the SECcould impose civil fines and penalties against us. An adverse finding againstus by the SEC could negatively impact our stock price. In addition, we maycontinue to incur expenses associated with responding to this investigation,regardless of its outcome, and this investigation may divert the efforts andattention of our management team from normal business operations.

 

**Wecannot predict our future capital needs and we may not be able to secureadditional financing when we need it.**

 

We may need to raise additional funds in the future to fund moreaggressive brand promotion or more rapid expansion, to develop new or enhancedservices, to respond to competitive pressures or to make acquisitions. Anyrequired additional financing may not be available on terms favorable to us, orat all. If adequate funds are not available on acceptable terms, we may be unableto meet our business or strategic objectives or compete effectively. Ifadditional funds are raised by our issuing equity or equity-linked securities,stockholders may experience dilution of their ownership interests, and thenewly issued securities may have rights superior to those of our common stock.If additional funds are raised by our issuing debt, we may be subject tolimitations on our activities.

 

**Anyacquisitions that we undertake could be difficult to integrate, disrupt ourbusiness, dilute stockholder value and harm our operating results.**

 

We may acquire or make investments in complementary businesses,technologies, services or products if appropriate opportunities arise. Theprocess of integrating any acquired business, technology, service or productinto our business and operations may result in unforeseen operatingdifficulties and expenditures. Integration of an acquired company also mayconsume much of our management’s time and attention that could otherwise beavailable for ongoing development of our business. Moreover, the anticipatedbenefits of any acquisition may not be realized. Furthermore, we may be unableto identify, negotiate or finance future acquisitions successfully. Futureacquisitions could result in potentially dilutive issuances of equitysecurities or the incurrence of debt, contingent liabilities or amortizationexpenses related to intangible assets.

 

**Wemay not be able to continue to develop new products to effectively adjust forrapid technological changes.**

 

To be successful, we must adapt to rapidly changing technological andmarket needs, by continually enhancing our website and introducing new productsand services to address our users’ changing demands.

 

Our segment in the internet market place is characterized by:

 

•                                          rapidlychanging technology;

 

•                                          evolvingindustry standards;

 

•                                          frequentnew product and service introductions;

 

•                                          shiftingdistribution channels; and

 

•                                          changingcustomer demands.

 

Our future success will depend on our ability to adapt to this rapidly evolvingmarketplace. We could incur substantial costs if we need to modify our servicesor infrastructure in order to adapt to changes affecting our market, and we maybe unable to adapt to these changes.

 

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**Themarkets for our products are highly competitive and are likely to become morecompetitive, and our competitors may be able to respond more quickly to new oremerging technology and changes in customer requirements.**

 

We operate in highly competitive markets. In particular, the onlineinsurance distribution market, like the broader electronic commerce market, israpidly evolving and highly competitive. Our software business also experiencessome competition from certain large hardware suppliers that sell systems andsystems’ components to independent agencies and from small, independent orfreelance developers and suppliers of software, who sometimes work in concertwith hardware vendors to supply systems to independent agencies. Our Internetbusiness may also face indirect competition from insurance carriers that havesubsidiaries which perform in-house agency and brokerage functions.

 

Some of our current competitors have longer operating histories, largercustomer bases, greater brand recognition and significantly greater financial,marketing and other resources than we do. In addition, we believe we will faceincreasing competition as the online financial services industry develops andevolves. Our current and future competitors may be able to:

 

•                                          undertakemore extensive marketing campaigns for their brands and services;

 

•                                          devotemore resources to website and systems development;

 

•                                          adoptmore aggressive pricing policies; and

 

•                                          makemore attractive offers to potential employees, online companies and third-partyservice providers.

 

**Ifwe are unable to protect our intellectual property, our reputation andcompetitiveness in the marketplace may be materially damaged.**

 

We regard our intellectual property in general and our software inparticular as critical to our success. It may be possible for third parties tocopy aspects of our products or, without authorization, to obtain and useinformation which we regard as trade secrets. Existing copyright law affordsonly limited practical protections, and our software is unpatented.

 

**Ifwe infringe on the proprietary rights of others, we may be at a competitivedisadvantage, and any related litigation could be time consuming and costly.**

 

Third parties may claim that we have violated their intellectualproperty rights. Any of these claims, with or without merit, could subject usto costly litigation and divert the attention of key personnel. To the extentthat we violate a patent or other intellectual property right of a third party,we may be prevented from operating our business as planned, and we may berequired to pay damages, to obtain a license, if available, or to use anon-infringing method, if possible, to accomplish our objectives.

 

**Wedepend on the continued service of our senior management and our ability toattract and retain other key personnel**.

 

Our future success is substantially dependent on the continued serviceand continuing contributions of our senior management and other key personnel,particularly Robin Raina, our President and Chief Executive Officer, andRichard J. Baum, our Executive Vice President—Finance &Administration, Chief Financial Officer and Secretary. The loss of the serviceof any of our executive officers or other key employees could harm ourbusiness. We have no long-term employment agreements with any of our keypersonnel, nor do we maintain key man life insurance policies on any of our keyemployees.

 

Our future success depends on our continuing to attract, retain andmotivate highly skilled employees. If we are not able to attract and retain newpersonnel, our business will be harmed. Competition for personnel in ourindustry is intense. We may be unable to retain our key employees or attract,assimilate or retain other highly qualified employees in the future.

 

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**Ourinternational operations are subject to a number of risks that could affect ourincome and growth.**

 

We market our software internationally and plan to expand our Internetservices to locations outside of the United States. In addition, commencing in2002 we began development activities, call center services and other operationsin India. Our international operations may not produce enough revenue tojustify our investments in establishing them and are subject to other inherentrisks, including:

 

•                                          theimpact of recessions in foreign economies on the level of consumers’ insuranceshopping and purchasing behavior;

 

•                                          greaterdifficulty in collecting accounts receivable;

 

•                                          difficultiesand costs of staffing and managing foreign operations;

 

•                                          reducedprotection for intellectual property rights in some countries;

 

•                                          seasonalreductions in business activity during the summer months in Europe and otherparts of the world;

 

•                                          burdensomeregulatory requirements, other trade barriers and differing business practices;

 

•                                          fluctuationsin exchange rates;

 

•                                          potentiallyadverse tax consequences; and

 

•                                          politicaland economic instability.

 

Furthermore, our entry into additional international markets couldrequire significant management attention and financial resources, which couldlessen our ability to manage our existing business effectively.

 

**Lawsand regulations that govern the insurance industry could expose us or theagents, brokers and carriers who participate in our online marketplace to legalpenalties.**

 

We perform functions for licensed insurance agents, brokers andcarriers and are, therefore, required to comply with a complex set of rules andregulations that often vary from state to state. These rules and regulations canbe difficult to comply with and are ambiguous and open to interpretation. If wefail to properly interpret and/or comply with these rules and regulations, we,the insurance agents, brokers or carriers doing business with us, our officers,or agents with whom we contract could be subject to various sanctions,including censure, fines, cease-and-desist orders, loss of license or otherpenalties. This risk, as well as other laws and regulations affecting ourbusiness and changes in the regulatory climate or the enforcement orinterpretation of existing law, could expose us to additional costs, includingindemnification of participating insurance agents, brokers or carriers fortheir costs, and could require changes to our business or otherwise harm ourbusiness. Furthermore, because the application of online commerce to theconsumer insurance market is relatively new, the impact of current or futureregulations on our business is difficult to anticipate. To the extent thatthere are changes in the rules and regulations regarding the manner in whichinsurance is sold, our business could be adversely affected.

 

**Our call center business could be adverselyaffected by equipment or system interruptions at one or more of our callcenters.**

 

Our callcenter business is dependent upon our ability to protect our call centers,including the computer and telecommunications equipment and software systems atthose centers, against damage from fire, power loss, telecommunicationsinterruption or failure, natural disaster and other similar events. In theevent we experience a temporary or permanent interruption at one or more of ourcall centers, through casualty, operating malfunction or otherwise, ourbusiness could be materially adversely affected.

 

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**Governmental regulation of the telemarketingindustry may increase our costs and restrict the operation and growth of ourcall center business.**

 

Thetelemarketing industry and, therefore, our call center business are subject toan increasing amount of governmental regulation.  In particular, telemarketers are now barred from contactingpersons who have registered their phone numbers on the new National Do Not CallRegistry maintained by the Federal Trade Commission.  We could be subject to a variety of enforcement or privateactions for our failure or the failure of our clients to comply with theseregulations.  Furthermore, our costs mayincrease as a result of having to comply with these regulations, and theseregulations may limit our call center activities or reduce the demand for ourcall center services.

 

**The outsourcing of business processes toforeign countries may be perceived negatively, which may reduce the demand forour services and lead to governmental regulation of these activities.**

 

We enablecompanies to outsource certain business processes, including softwaredevelopment activities and call center services, to our operations inIndia.  Particularly in the currenteconomic climate, there may be some negative perceptions of the outsourcing ofsuch processes from the U.S. to India, which may reduce the demand for theseservices and may lead to governmental regulation affecting such activities.

 

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***RisksRelated to Our Conduct of Business on The Internet***

 

**Anydisruption of our internet connections could affect the success of our internetbased products**.

 

Any system failure, including network, software or hardware failure,that causes an interruption in our network or a decrease in responsiveness ofour website could result in reduced user traffic and reduced revenue. Continuedgrowth in Internet usage could cause a decrease in the quality of Internetconnection service. Websites have experienced service interruptions as a resultof outages and other delays occurring throughout the Internet networkinfrastructure. In addition, there have been several incidents in whichindividuals have intentionally caused service disruptions of major e-commercewebsites. If these outages, delays or service disruptions occur frequently inthe future, usage of our website could grow more slowly than anticipated ordecline, and we may lose revenues and customers.

 

If the computer hardware operations that host our website were toexperience a system failure, the performance of our website would be harmed.These systems are also vulnerable to damage from fire, floods, earthquakes,acts of terrorism, power loss, telecommunications failures, break-ins andsimilar events. Our property and business interruption insurance coverage maynot be adequate to compensate us for all losses that may occur. In addition,our users depend on Internet service providers, online service providers andother website operators for access to our website. Each of these providers hasexperienced significant outages in the past, and could experience outages,delays and other difficulties due to system failures unrelated to our systems.

 

**Concernsregarding security of transactions or the transmission of confidentialinformation over the Internet or security problems we experience may prevent usfrom expanding our business or subject us to legal exposure.**

 

If we do not offer sufficient security features in our online productand service offerings, our products and services may not gain marketacceptance, and we could be exposed to legal liability. Despite the measuresthat we may take, our infrastructure will be potentially vulnerable to physicalor electronic break-ins, computer viruses or similar problems. If a personcircumvents our security measures, that person could misappropriate proprietaryinformation or disrupt or damage our operations. Security breaches that resultin access to confidential information could damage our reputation and subjectus to a risk of loss or liability. We may be required to make significantexpenditures to protect against or remedy security breaches. Additionally, ifwe are unable to adequately address our customers’ concerns about security, wemay have difficulty selling our goods and services.

 

**Uncertaintyin the marketplace regarding the use of Internet users’ personal information,or proposed legislation limiting such use, could reduce demand for our servicesand result in increased expenses.**

 

Concern among consumers and legislators regarding the use of personalinformation gathered from Internet users could create uncertainty in themarketplace. This could reduce demand for our services, increase the cost ofdoing business as a result of litigation costs or increased service deliverycosts, or otherwise harm our business. Legislation has been proposed that wouldlimit the users of personally identifiable information of Internet usersgathered online or require online services to establish privacy policies. Manystate insurance codes limit the collection and use of personal information byinsurance agencies, brokers and carriers or insurance service organizations.Moreover, the Federal Trade Commission has settled a proceeding against oneonline service that agreed in the settlement to limit the manner in whichpersonal information could be collected from users and provided to thirdparties.

 

**Futuregovernment regulation of the Internet could place financial burdens on ourbusinesses.**

 

Because of the Internet’s popularity and increasing use, new laws andregulations directed specifically at e-commerce may be adopted. These laws andregulations may cover issues such as the collection and use of data fromwebsite visitors, including the placing of small information files, or“cookies,” on a user’s hard drive to gather information, and related privacyissues; pricing; taxation; telecommunications over the Internet; content;copyrights; distribution; domain name piracy; and quality of products andservices. The enactment of any additional laws or regulations, includinginternational laws and regulations, could impede the growth of our revenue fromour Internet operations and place additional financial burdens on our business.

 

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***RisksRelated To Our Common Stock***

 

**Theprice of our common stock may be extremely volatile.**

 

In some future periods, our results of operations may be below theexpectations of public market investors, which could negatively affect themarket price of our common stock. Furthermore, the stock market in general hasrecently experienced extreme price and volume fluctuations. We believe that, inthe future, the market price of our common stock could fluctuate widely due tovariations in our performance and operating results or because of any of thefollowing factors which are, in large part, beyond our control:

 

•                                          announcementsof new services, products, technological innovations, acquisitions or strategicrelationships by us or our competitors;

 

•                                          trendsor conditions in the insurance, software and Internet markets;

 

•                                          changesin market valuations of our competitors; and

 

•                                          generalpolitical, economic and market conditions.

 

In addition, the market prices of securities of technology companies,including our own, have been volatile and have experienced fluctuations thathave often been unrelated or disproportionate to operating performance. As aresult, you may not be able to sell shares of our common stock at or above theprice at which you purchase them. In the past, following periods of volatilityin the market price of a company’s securities, securities class actionlitigation has often been instituted against that company. If any securitieslitigation is initiated against us, we could incur substantial costs and ourmanagement’s attention and resources could be diverted from our business.

 

**Thesignificant concentration of ownership of our common stock will limit yourability to influence corporate actions.**

 

The concentration of ownership of our common stock may have the effectof delaying, preventing or deterring a change in control of our company, coulddeprive our stockholders of an opportunity to receive a premium for theircommon stock as part of a sale of our company and may affect the market priceof our common stock. At September 30, 2003, BRiT Insurance Holdings plc heldapproximately 41% of our outstanding common stock and, together with ourexecutive officers and directors, beneficially owned in excess of 50% of ouroutstanding common stock. As a result, those stockholders, if they acttogether, are able to control all matters requiring stockholder approval,including the election of all directors and approval of significant corporatetransactions and amendments to our certificate of incorporation. Thesestockholders may use their ownership position to approve or take actions thatare adverse to your interests or prevent the taking of actions that areconsistent with your interests.

 

**Wemay issue equity securities in the future whose terms and rights are superiorto those of our common stock.**

 

Our certificate of incorporation authorizes the issuance of up to2,000,000 shares of preferred stock. No shares of preferred stock are currentlyoutstanding. However, shares of preferred stock may be issued by our board ofdirectors from time to time in one or more series for the consideration, andwith the rights and preferences, as our board of directors decides. Any sharesof preferred stock that we may issue in the future could be given voting andconversion rights that could dilute the voting power and equity of holders ofshares of our common stock and have preferences over the common stock withrespect to dividends and in liquidation.

 

**Provisionsin our charter and Delaware law may discourage takeover attempts which couldpreclude our stockholders from receiving a change of control premium.**

 

Our certificate of incorporation could make it more difficult for athird party to acquire control of us because it gives our Board of Directorsthe ability to issue shares of preferred stock with rights as they deemappropriate without stockholder approval. In addition, Delaware law contains ananti-takeover provision that could have the effect of delaying or preventing achange in control that stockholders may consider favorable. This provision prohibitsus from engaging in a business combination with any significant stockholder fora period of three years from the date the person became a significantstockholder unless specific conditions are met.

 

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Item 3.             QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

 

There have been no material changes in the Company’s market risk duringthe nine months ended September 30, 2003. For additional information on market risk, refer to the “Quantitativeand Qualitative Disclosures About Market Risk” section of the Company’s AnnualReport on Form 10-K for the year ended December 31, 2002.

 

Item 4.             CONTROLS AND PROCEDURES

 

The Company carried out an evaluation, under the supervision and withthe participation of the Company’s management, including its Chief ExecutiveOfficer and Chief Financial Officer, of the design and operation of theCompany’s disclosure controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer andChief Financial Officer concluded that, as of September 30, 2003, theCompany’s disclosure controls and procedures were effective to providereasonable assurance that the information required to be disclosed by theCompany in the reports filed or submitted under the Securities Exchange Act of1934 is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms.

 

Any control system, no matter how well designed and operated, canprovide only reasonable (not absolute) assurance that its objectives will bemet.  Furthermore, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, have beendetected.

 

There was not any change in the Company’s internal control over financialreporting during the quarter ended September 30, 2003 that has materiallyaffected, or is reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

Part II —OTHER INFORMATION

 

Item 6.      EXHIBITS AND REPORTS ON FORM 8-K
|   |   |                                                                                                                     |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|
| (a)    |   | Exhibits                                                                                                                 |
|   |   |                                                                                                                     |
| 31.1   |   | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)  (Section 302 of the Sarbanes-Oxley Act of 2002).    |
|   |   |                                                                                                                     |
| 31.2   |   | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)  (Section 302 of the Sarbanes-Oxley Act of 2002).    |
|   |   |                                                                                                                     |
| 32.1   |   | Certification of Chief Executive Officer Pursuant to Section 906 of  the Sabanes-Oxley Act of 2002 (furnished herewith). |
|   |   |                                                                                                                     |
| 32.2   |   | Certification of Chief Financial Officer Pursuant to Section 906 of  the Sabanes-Oxley Act of 2002 (furnished herewith). |
|   |   |                                                                                                                     |
| (b)    |   | Reports on Form 8-K                                                                                                      |

 

The Company did not file any current reportson Form 8-K during the third quarter of 2003.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|                    | ebix.com, Inc. |
|-------------------------|----------------|
|                    |           |   |
|                    |           |   |
| Date: November 10, 2003 | By             |   |
|                    |           | /s/ RICHARD J. BAUM |
|                    |           | Richard J. Baum |
|                    |           | Executive Vice President — Finance & Administration, Chief  Financial Officer (principal financial and accounting officer), and  Secretary |

 

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EXHIBIT INDEX

 
| **EXHIBIT NO.** |   | **DESCRIPTION**                                                                                                         |
|-----------------|--------|-------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                    |
| 31.1            |   | Certification of Chief Executive Officer Pursuant to Rule 13(a)-14(a)  (Section 302 of the Sarbanes-Oxley Act of 2002). |
|            |   |                                                                                                                    |
| 31.2            |   | Certification of Chief Financial Officer Pursuant to Rule 13(a)-14(a)  (Section 302 of the Sarbanes-Oxley Act of 2002). |
|            |   |                                                                                                                    |
| 32.1            |   | Certification of Chief Executive Officer Pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002                     |
|            |   |                                                                                                                    |
| 32.2            |   | Certification of Chief Financial Officer Pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002                     |

 

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