**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

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**FORM 10-QSB**

 

| **(Mark One)**                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **ý**                                                                                                                                                         |   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                               |   |   |   |   |
| **For  the Quarterly Period Ended March 31, 2004**                                                                                                                 |
|                                                                                                                                                               |   |   |   |   |
| **OR**                                                                                                                                                             |
|                                                                                                                                                               |   |   |   |   |
| **o**                                                                                                                                                              |   | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                               |   |   |   |   |
| **For  the Transition Period from             to            ** |
|                                                                                                                                                               |
| **Commission file number 0-23181**                                                                                                                            |

 

**PAULA FINANCIAL******(Exactname of small business issuer as specified in its charter)

** **

| **Delaware**                                                    |   | **95-4640638**                            |
|-----------------------------------------------------------------|--------|-------------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer   identification number) |

 

**PAULAFINANCIAL**

**87 EastGreen Street, Suite 206**

**Pasadena,CA 91105**

(Addressof principal executive offices)

 

**(626)844-7100**

(Issuer’stelephone number, including area code)

 

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.

Yes  ý  No  o

 

State the number of shares outstanding of each of the issuer’s classesof common equity, as of the latest practicable date.  Number of shares of Common Stock, $.01 par value, outstanding asof close of business on April 30, 2004: 6,196,145 shares.

 

Transitional Small Business Disclosure Format (check one):

Yes  ý  No  o

 

 

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PAULA FINANCIAL

INDEX TO FORM 10-Q

 
| PART I. FINANCIAL INFORMATION                   |                                                                                                            |
|-------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
|                                            |                                                                                                            |   |
| Item 1.   Financial Statements             |                                                                                                            |
|                                            |                                                                                                            |   |
|                                            | Condensed consolidated balance sheets as of  March 31, 2004 (unaudited) and December 31, 2003                   |   |
|                                            |                                                                                                            |   |
|                                            | Condensed consolidated statements of income  for the three months ended March 31, 2004 and 2003 (unaudited)     |   |
|                                            |                                                                                                            |   |
|                                            | Condensed consolidated statements of cash  flows for the three months ended March 31, 2004 and 2003 (unaudited) |   |
|                                            |                                                                                                            |   |
|                                            | Notes to condensed consolidated financial  statements for the three months ended March 31, 2004 (unaudited)     |   |
|                                            |                                                                                                            |   |
| Item 2.                                         | Management’s  Discussion and Analysis of Consolidated Financial Condition and Results of  Operations       |   |
|                                            |                                                                                                            |   |
| Item 3.                                         | Controls  and procedures                                                                                        |   |
|                                            |                                                                                                            |   |
| PART  II. OTHER INFORMATION                     |                                                                                                            |
|                                            |                                                                                                            |   |
| Item  6.  Exhibits and Reports on Form 8-K |                                                                                                            |
|                                            |                                                                                                            |   |
| SIGNATURE                                       |                                                                                                            |

 

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**PART I****                                                       FINANCIALINFORMATION**

**Item 1.****           Financial Statements**

 

**PAULAFINANCIAL AND SUBSIDIARIES**

**CondensedConsolidated Balance Sheets**

(In thousands, except share data)

 
|                                                                                                   |   | **March 31,  2004** |     | **December  31,  2003** |     |
|--------------------------------------------------------------------------------------------------------|--------|---------------------|----------|-------------------------|----------|
|                                                                                                   |   | **(Unaudited)**     |     | **(*)**                 |     |
| ***Assets***                                                                                           |   |                |     |                    |     |
| *Current Assets:*                                                                                      |   |                | * * |                    | * * |
| Cash (restricted: 2004, $2,212; 2003,  $2,496)                                                         |   | $                   | 4,669    |                    | $        | 3,110 |   |
| Accounts receivable, net of allowance for  uncollectible accounts (2004 and 2003, $80)                 |   | 1,823               |     | 1,829                   |     |
| Commissions receivable                                                                                 |   | 1,602               |     | 2,896                   |     |
| Other receivables                                                                                      |   | 4                   |     | 13                      |     |
| Deferred income taxes                                                                                  |   | 1,224               |     | 1,662                   |     |
| Other assets                                                                                           |   | 462                 |     | 372                     |     |
|                                                                                                   |   | 9,784               |     | 9,882                   |     |
| *Non-Current Assets:*                                                                                  |   |                | * * |                    | * * |
| Property and equipment, net                                                                            |   | 243                 |     | 246                     |     |
| Investment in related party, at cost                                                                   |   | 703                 |     | 703                     |     |
| Goodwill, net                                                                                          |   | 2,069               |     | 2,069                   |     |
| Other amortizable intangible assets, net                                                               |   | 2,013               |     | 2,159                   |     |
| Deferred income taxes                                                                                  |   | 4,317               |     | 4,169                   |     |
| Other assets                                                                                           |   | 171                 |     | 173                     |     |
|                                                                                                   |   | $                   | 19,300   |                    | $        | 19,401 |   |
| ***Liabilities and Stockholders’ Equity***                                                        |   |                |     |                    |     |
|                                                                                                   |   |                |     |                    |     |
| *Current Liabilities:*                                                                                 |   |                |     |                    |     |
| Due to underwriters and assureds                                                                       |   | $                   | 3,964    |                    | $        | 4,257 |   |
| Accounts payable and accrued expenses                                                                  |   | 1,011               |     | 1,027                   |     |
| Employment related accruals                                                                            |   | 654                 |     | 645                     |     |
| Acquisition related accruals                                                                           |   | 1,161               |     | 993                     |     |
| Income taxes payable                                                                                   |   | 36                  |     | 121                     |     |
| Notes payable to bank                                                                                  |   | 400                 |     | 400                     |     |
|                                                                                                   |   | 7,226               |     | 7,443                   |     |
| *Non-Current Liabilities:*                                                                             |   |                |     |                    |     |
| Acquisition related accruals                                                                           |   | 1,058               |     | 1,326                   |     |
| Notes payable to bank                                                                                  |   | 1,076               |     | 1,276                   |     |
|                                                                                                   |   | $                   | 9,360    |                    | $        | 10,045 |   |
| *Stockholders’ Equity:*                                                                           |   |                |     |                    |     |
| Preferred stock, $0.01 par value.  Authorized 4,058,823 shares, none issued  and outstanding      |   | $                   | —   |                    | $        | — |   |
| Common stock, $0.01 par value (Authorized  15,000,000 shares, issued: 2004 and 2003, 7,118,379 shares) |   | 71                  |     | 71                      |     |
| Additional paid-in-capital                                                                             |   | 13,962              |     | 13,962                  |     |
| Accumulated earnings, after January 1, 2003                                                            |   | 1,986               |     | 1,428                   |     |
| Unearned compensation                                                                                  |   | (110                | )        | (127                    | )        |
| Employee loans for stock purchase                                                                      |   | (11                 | )        | (20                     | )        |
| Treasury stock, at cost (2004 and 2003,  924,734 shares)                                               |   | (5,958              | )        | (5,958                  | )        |
|                                                                                                   |   | $                   | 9,940    |                    | $        | 9,356 |   |
|                                                                                                   |   | $                   | 19,300   |                    | $        | 19,401 |   |

 

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* Derived from audited financial statements.

 

See notes to condensed consolidated financial statements.

 

2

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**PAULAFINANCIAL AND SUBSIDIARIES**

**CondensedConsolidated Statements of Income**

(In thousands, except share and per sharedata)

 
|                                                     |   | **Three  Months Ended  March 31,** |   |
|----------------------------------------------------------|--------|------------------------------------|--------|
|                                                     |   | **2004**                           |   | **2003** |   |
|                                                     |   | **(Unaudited)**                    |   |
| ***Income:***                                            |   |                               |   |   |   |
| Commissions                                              |   | $                                  | 3,689  |   | $ | 3,470 |   |
| Contingent commissions                                   |   | 1,278                              |   | 1,065 |   |
| Net investment income                                    |   | 3                                  |   | 2 |   |
| Service fees                                             |   | 171                                |   | 75 |   |
| Other income                                             |   | 11                                 |   | 7 |   |
|                                                     |   | 5,152                              |   | 4,619 |   |
|                                                     |   |                               |   |   |   |
| ***Operating  Expenses:***                               |   |                               |   |   |   |
| Salaries and related expenses                            |   | 2,674                              |   | 2,346 |   |
| Interest expense                                         |   | 27                                 |   | 43 |   |
| Amortization expense                                     |   | 146                                |   | 87 |   |
| Other expenses                                           |   | 1,445                              |   | 1,621 |   |
|                                                     |   | 4,292                              |   | 4,097 |   |
|                                                     |   |                               |   |   |   |
| Income from operations before income taxes               |   | 860                                |   | 522 |   |
| Income tax expense                                       |   | 302                                |   | 226 |   |
| ***Net income***                                         |   | $                                  | 558    |   | $ | 296 |   |
|                                                     |   |                               |   |   |   |
| Earnings per share                                       |   | $                                  | 0.09   |   | $ | 0.05 |   |
| Weighed average shares outstanding                       |   | 6,305,152                          |   | 6,177,212 |   |
|                                                     |   |                               |   |   |   |
| Earnings per share - assuming dilution                   |   | $                                  | 0.08   |   | $ | 0.05 |   |
| Weighted average shares outstanding -  assuming dilution |   | 6,610,916                          |   | 6,341,936 |   |

 

See notes to condensed consolidated financial statements.

 

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**PAULAFINANCIAL AND SUBSIDIARIES**

**CondensedConsolidated Statements of Cash Flows**

(In thousands)

 
|                                                                                 |   | **Three  Months Ended  March 31,** |   |
|--------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                 |   | **2004**                           |   | **2003** |   |
|                                                                                 |   | **(Unaudited)**                    |   |
| ***Cash flow from  operating activities:***                                          |   |                               |   |   |   |
| Net income                                                                           |   | $                                  | 558    |   | $ | 296 |   |
|                                                                                 |   |                               |   |   |   |
| *Adjustments to reconcile net income to net  cash provided by operating activities:* |   |                               |   |   |   |
| Depreciation and amortization                                                        |   | 181                                |   | 118 |   |
| (Increase) decrease in receivables                                                   |   | 1,309                              |   | (242 | ) |
| Decrease in deferred income taxes                                                    |   | 290                                |   | 178 |   |
| Increase (decrease) in accounts payable and  accrued expenses                        |   | (385                               | )      | 1,205 |   |
| (Increase) decrease in unearned  compensation                                        |   | 17                                 |   | (41 | ) |
| Other, net                                                                           |   | (88                                | )      | (105 | ) |
| ***Net cash provided  by operating activities***                                     |   | 1,882                              |   | 1,409 |   |
|                                                                                 |   |                               |   |   |   |
| ***Cash flows from  investing activities:***                                         |   |                               |   |   |   |
| Purchase of property and equipment                                                   |   | (32                                | )      | (25 | ) |
| Purchase of book of business                                                         |   | (100                               | )      | (247 | ) |
| ***Net cash used in  investing activities***                                         |   | (132                               | )      | (272 | ) |
|                                                                                 |   |                               |   |   |   |
| ***Cash flows from  financing activities:***                                         |   |                               |   |   |   |
| Payments on note payable to bank                                                     |   | —                             |   | (325 | ) |
| Payments on line of credit                                                           |   | (200                               | )      | — |   |
| Repayment of employee loans for stock  purchase                                      |   | 9                                  |   | 22 |   |
| ***Net cash used in  financing activities***                                         |   | (191                               | )      | (303 | ) |
|                                                                                 |   |                               |   |   |   |
| ***Net increase in  cash and invested cash***                                        |   | 1,559                              |   | 834 |   |
| Cash and invested cash at beginning of  period                                       |   | 3,110                              |   | 1,290 |   |
| ***Cash and invested  cash at end of period***                                       |   | $                                  | 4,669  |   | $ | 2,124 |   |

 

See notes to condensed consolidated financial statements.

 

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**PAULAFINANCIAL AND SUBSIDIARIES**

**Notesto Condensed Consolidated Financial Statements**

**Forthe Three Months Ended March 31, 2004 (Unaudited)**

 

**Note A - Basis ofPresentation**

 

PAULA Financial and subsidiaries (the “Company”) is a California-basedspecialty distributor of commercial insurance products.  The Company’s agency operations place a fullarray of commercial insurance products for their customers.  In addition, the Company owns a third partyadministration operation which has minimal operations.

 

The accompanying unaudited condensed consolidated financial statementsof the Company have been prepared in accordance with accounting principlesgenerally accepted in the United States (“GAAP”) for interim financialinformation and with the instructions to Form 10-Q and Article 10 of RegulationS-X.  Accordingly, they do not includeall of the information and footnotes required by GAAP for complete financialstatements.  In the opinion ofmanagement, all adjustments, including normally occurring accruals, considerednecessary for a fair presentation have been included.

 

The Company’s operating results tend to be cyclical. Consequently,operating results for the three months ended March 31, 2004 are not necessarilyindicative of the results to be expected for the year ended December 31,2004.  For further information, refer tothe consolidated financial statements and footnotes thereto included in theCompany’s Annual Report on Form 10-K for the year ended December 31, 2003.

 

In December 2002, the Financial Accounting Standards Board issuedStatement of Financial Accounting Standard (“SFAS”) No. 148, “Accounting forStock Based Compensation – Transition and Disclosure, an amendment of SFAS123”.  Among other provisions, SFAS 148amends the disclosure requirements of SFAS 123 to require prominent disclosuresin both annual and interim financial statements.  For the three months ended March 31, 2004, the differencesbetween the as reported net income and income per share amounts and the relatedpro forma amounts are not material to the consolidated financial statements.

 

**NoteB – Comprehensive Income**

 

The Company has not included a statement of comprehensive income in theaccompanying consolidated financial statements as the Company does not have anyother comprehensive income adjustments.

 

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**NoteC – Deferred Income Taxes**

 

As of March 31, 2004 and December 31, 2003, the Company’s net deferredtax asset is comprised of the following:

 
|                             |   | **March 31  2004** |   | **Dec 31  2003** |   |
|----------------------------------|--------|--------------------|--------|------------------|--------|
|                             |   | **(unaudited)**    |   |             |   |
| Deferred tax assets:             |   |               |   |             |   |
| Net operating loss carry forward |   | $                  | 25,448 |             | $      | 25,222 |   |
| Other                            |   | 2,739              |   | 3,255            |   |
| Gross deferred tax assets        |   | 28,187             |   | 28,477           |   |
| Less valuation allowance         |   | (22,646            | )      | (22,646          | )      |
| Deferred tax assets              |   | $                  | 5,541  |             | $      | 5,831 |   |
| Gross deferred tax liabilities   |   | $                  | — |             | $      | — |   |
| Net deferred tax asset           |   | $                  | 5,541  |             | $      | 5,831 |   |

 

The net operating loss carry forward includes losses generated by PAULAInsurance Company which are available to offset future taxable income of the Company.

 

Management believes that it is more likely than not that the results offuture operations will generate sufficient taxable income in the periodsnecessary to realize the net deferred tax asset.

 

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**PARTI****                  FINANCIALINFORMATION**

**Item 2**.                    Management’s Discussion and Analysis of ConsolidatedFinancial Condition and Results of Operations

 

**Overview**

 

The Company’s revenuesconsist of agency commission income, contingent commission income, and servicefees. Commission income is earned from Pan Am’s insurance sales activity.  Associated premiums are primarily billeddirectly by the insurance carrier. However, in certain instances, Pan Am will invoice the customer andremit the premium, less commission, to the insurance carrier.  The Company focuses its sales efforts onagribusiness and rural markets in California and Arizona.  Contingent commission is related to volumeand profit sharing arrangements with insurance carriers.  Service fees are primarily received for theperformance of services related to loss control and claims advocacy.

 

The Company’s expenses consist of salaries and related expenses,interest expense, amortization of intangibles and other general andadministrative expenses.

 

**Results of Operationsfor the Three Months Ended March 31, 2004 Compared to the Three Months EndedMarch 31, 2003:**

 

**Commission income.**  For the three months ended March 31, 2004commission income increased 6.3% to $3.7 million compared to $3.5 million forthe comparable 2003 period.  For thepast several quarters the Company has experienced significant commission growthover prior periods due to the integration of acquisitions initiated in mid-2002and early 2003.  As of the first quarterof 2004, these acquisitions are fully internalized.  As anticipated, these acquisitions and their associated revenuediversification have more than offset the market softening we are nowexperiencing in certain segments of the marketplace.  Also contributing to the increase in commissions in the firstquarter of 2004 is an increase in commissions associated with the placement ofvarious property and casualty lines of business.

 

**Contingent commissionincome.**  Forthe three months ended March 31, 2004 contingent commission income increased20.0% to $1.3 million compared to $1.1 million for the comparable 2003period.  Contingent commissionfluctuates from year to year based on the profitability of the underlyingbusiness and external market conditions which can result in changes tocontingency programs offered by insurance carriers.  In the first quarter of 2004, approximately 40% of the contingentcommission income earned related to contingency revenue received from theCalifornia State Compensation Insurance Fund (“SCIF”) related to the 2003 policyyear.  In total for the 2003 policyyear, the Company earned contingent revenue on the SCIF business totaling $1.5million which was comprised of three components:  volume bonuses, retention bonuses and profit sharing.  In 2004, SCIF has discontinued contingentcommission arrangements associated with volume and retention bonuses butretained the profit sharing component. Therefore, contingent commission revenue for the 2004 policy yearrelated to SCIF business is expected to decline.

 

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**Service fees.**  Service fee income increased to $171,000 forthe three months ended March 31, 2004 from $75,000 for the comparable 2003period.  The increase in service fees isdue to new service arrangements where the Company is paid for providing losscontrol and other field support services to selected accounts.  Pan Am provides loss control and otherservices both as a contractor to selected insurance carriers and on a direct basisto its customers.

 

**Salaries and relatedexpenses.** Salaries and employee benefits increased 14.0% to $2.7 million for thethree months ended March 31, 2004 from $2.3 million for the comparable 2003period.  The increase is largely due tothe recruitment of senior leadership in early 2004 related to furtherdeveloping the service fee platform. The costs associated with this investmentin new senior leadership is partially being offset by salary restructurings atthe most senior levels of the Company. Under the new program, variablecompensation is tied to compounded earnings growth with baseline targets inexcess of the Company’s current organic capacity.  Salaries and related expenses was 52% of total revenues in the2004 period compared to 51% in the comparable 2003 period.

 

**Interest expense.** Interest expense decreased 37.2% to$27,000 for the three months ended March 31, 2004 from $43,000 for thecomparable 2003 period due to the decline in the outstanding balance of therelated note payable.

 

**Amortization expense.**  Amortization expense increased 67.8% to$146,000 for the three months ended March 31, 2004 from $87,000 for thecomparable 2003 period due to an increase in intangible assets related toacquisitions in mid 2002 and early 2003.

 

**Other expenses.**  Other expenses decreased 10.9% to $1.4million for the three months ended March 31, 2004 from $1.6 million for thecomparable 2003 period.  The decrease isprimarily due to a decrease in expenses associated with legal matters that wereaccrued for in fiscal 2003.

 

**Income taxes oncontinuing operations.**  Income tax expense for the three months ended March 31, 2004 was$302,000 compared to $226,000 for the comparable 2003 period.  The effective combined income tax rates forthe three months ended March 31, 2004 and 2003 were 35.1% and 43.3%, respectively.  The differences between the applicableFederal tax rate and the effective tax rates is due to the impact of statetaxes.

 

**Net income.**  Net income increased 88.5% to $558,000 forthe three months ended March 31, 2004 from $296,000 for the comparable 2003period.  The increase is due to thefactors discussed above.

 

**Liquidity and CapitalResources:**

 

As a holding company, PAULA Financial’s principal sources of funds aredividends and expense reimbursements from its operating subsidiaries and proceedsfrom the sale of its capital stock. PAULA Financial’s principal uses of fundsare capital contributions to its subsidiaries, payment of operating expenses,and repurchase of Company common stock.

 

On November 1, 2003, the Company refinanced its outstanding bank debtwith a $1,800,000 reducing revolving line of credit (the “Line of Credit”) withUS Bank (the “Lender”).  The Line ofCredit matures one year from funding, with a one-year automatic option toextend as long as the Company is in compliance with all covenants.  As of March 31, 2004, PAULA Financial was incompliance with all of the covenants. Balances outstanding under the Line of Credit bear interest at

 

8

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the prime rate plus 1.0%.  As ofApril 30, 2004, the interest rate was 5.0%. PAULA Financial’s subsidiaries have guaranteed the obligations of PAULAFinancial under the Line of Credit. Additionally, the Lender has a security interest in the assets of theCompany.

 

The Company’s Board of Directors had previously approved a 1,000,000share repurchase program.  On February20, 2003, the Board of Directors authorized an additional 2,000,000 shares forthe share repurchase program.  As ofMarch 31, 2004, the Company held 924,734 shares in treasury stock.

 

**Off-Balance SheetArrangements**

 

The Company does not have any off-balance sheet arrangements.

 

**Forward-LookingStatements**

 

In connection with, and because it desires to take advantage of the“safe harbor” provisions of the Private Securities Litigation Reform Act of1995, the Company cautions readers to recognize the existence of certainforward-looking statements in this Form 10-Q and in any other statement madeby, or on behalf of, the Company, whether or not in future filings with theSecurities and Exchange Commission. Forward-looking statements are statements not based on historicalinformation and which relate to future operations, strategies, financialresults or other developments.  Someforward-looking statements may be identified by the use of terms such as“expects,” “believes,” “anticipates,” “intends,” or “judgment.” Forward-lookingstatements are necessarily based upon estimates and assumptions that areinherently subject to significant business, economic and competitiveuncertainties, many of which are beyond the Company’s control and many ofwhich, with respect to future business decisions, are subject to change.  Examples of such uncertainties andcontingencies include, among other important factors, those affecting theinsurance industry in general, such as the economic and interest rateenvironment, legislative and regulatory developments and market pricing andcompetitive trends, and those relating specifically to the Company and itsbusinesses, such as the level of commission revenue and fee income, andacquisitions of companies or blocks of business.  These uncertainties and contingencies can affect actual resultsand could cause actual results to differ materially from those expressed in anyforward-looking statements made by, or on behalf of, the Company. The Companydisclaims any obligation to update forward-looking statements.

 

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**PARTI****                                                       FINANCIALINFORMATION**

 

**Item 3****:  Controls and Procedures**

 

**Evaluation ofDisclosure Controls and Procedures**

 

The Company’s Chief Executive Officer and Vice President Finance haveevaluated the effectiveness of the Company’s disclosure controls and procedures(as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities ExchangeAct of 1934) as of the end of the period covered by this quarterly report.  Based on this evaluation, such officers haveconcluded that the Company’s disclosure controls and procedures as of the endof the period covered by this quarterly report were effective for ensuring thatinformation required to be disclosed in the reports it files or submits underthe Exchange Act is recorded, processed, summarized and reported in a timelymanner.  There have not been anysignificant changes in the Company’s internal controls or in other factors thatcould significantly affect such controls.

 

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## **PARTII**.  OTHER INFORMATION

 

**Item 6****:  Exhibits and Reports on Form 8-K:**

 

(a)        Exhibits.

 
|   | 11.    |   |  Computation  of Earnings Per Share.                          |
|--------|--------|--------|--------------------------------------------------------------------|
|   |   |   |                                                               |
|   | 31.1   |   | Rule  13a -14a /15d -14a Certification of Chief Executive Officer. |
|   |   |   |                                                               |
|   | 31.2   |   | Rule  13a -14a /15d -14a Certification of Chief Financial Officer. |
|   |   |   |                                                               |
|   | 32.1   |   | Section  1350 Certifications of Chief Executive Officer.           |
|   |   |   |                                                               |
|   | 32.2   |   | Section  1350 Certifications of Chief Financial Officer.           |

 

(b) Reports onForm 8-K.

 

OnMarch 30, 2004, the Company filed a Form 8-K related to the press releaseannouncing operating results for the year ended December 31, 2003.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange, the Registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
| Date:  May 14, 2004 | PAULA FINANCIAL           |
|--------------------------|---------------------------|
|                     |                      |   |
|                     |                      |   |
|                     | By:                       |  /s/ Deborah S. Maddocks |   |
|                     | Vice President -  Finance |

 

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