<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
or
{ } 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: 0-14807
AMERICAN CLAIMS EVALUATION, INC.
(Exact name of Registrant as specified in its charter)
New York 11-2601199
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Jericho Plaza, Jericho New York 11753
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(Address of principal executive offices) (Zip Code)
(516) 938-8000
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(Registrant's telephone number, including area code)
Not applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share
4,273,500 shares outstanding at January 20, 1998
<PAGE>
AMERICAN CLAIMS EVALUATION, INC.
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
December 31, 1997 and March 31, 1997 3
Consolidated Statements of Operations
for the Nine Months and Three Months ended
December 31, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the Nine Months ended
December 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Dec.31,1997 Mar.31,1997
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 8,075,592 7,648,617
Marketable securities 10,116 -
Accounts receivable, net 100,395 119,880
Current assets of discontinued operations - 272,871
Prepaid expenses 12,250 24,732
Prepaid income taxes 18,270 -
Deferred income taxes - 39,000
----------- -----------
Total current assets 8,216,623 8,105,100
Property and equipment, net 103,144 81,461
Non-current assets of discontinued operations - 71,332
Excess cost over fair value of net assets acquired, net 509,343 533,661
----------- -----------
$ 8,829,110 8,791,554
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 44,305 21,299
Accrued expenses 97,267 94,074
Current liabilities of discontinued operations 142,293 362,525
Income taxes payable - 11,004
Deferred income taxes 8,473 8,473
----------- -----------
Total current liabilities 292,338 497,375
----------- -----------
Stockholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;
4,450,000 and 4,250,000 shares
issued and outstanding at Dec. 31, 1997
and March 31, 1997, respectively 44,500 42,500
Additional paid-in capital 3,515,699 3,267,699
Retained earnings 5,274,790 5,282,197
----------- -----------
8,834,989 8,592,396
Less treasury shares, at cost, 176,500 shares (298,217) (298,217)
----------- -----------
Total stockholders' equity 8,536,772 8,294,179
----------- -----------
$ 8,829,110 8,791,554
=========== ===========
</TABLE>
Note: The balance sheet at March 31, 1997 has been derived from the audited
financial statements at that date.
3
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
-------------------------------- --------------------------------
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 311,974 289,583 968,104 891,371
Cost of services 135,267 128,341 427,324 380,857
----------- ----------- ----------- -----------
Gross margin 176,707 161,242 540,780 510,514
Selling, general and administrative
expenses 300,689 311,575 934,472 944,775
----------- ----------- ----------- -----------
Operating loss from
continuing operations (123,982) (150,333) (393,692) (434,261)
Other income:
Interest income 119,338 99,165 345,783 317,784
Gain on sale of marketable securities - - - 285,356
Miscellaneous income 21,835 10,983 39,502 32,948
----------- ----------- ----------- -----------
Earnings (loss) from continuing
operations before provision for
(benefit from) income taxes 17,191 (40,185) (8,407) 201,827
Provision for (benefit from) income taxes 6,000 (11,000) (1,000) 83,000
----------- ----------- ----------- -----------
Net earnings (loss) from
continuing operations 11,191 (29,185) (7,407) 118,827
Earnings from discontinued operations,
net of taxes - 73,981 - 258,633
----------- ----------- ----------- -----------
Net earnings (loss) $ 11,191 44,796 (7,407) 377,460
=========== =========== =========== ===========
Net earnings (loss) per share:
From continuing operations $ .00 (.01) .00 .03
From discontinued operations 00 .02 .00 .06
----------- ----------- ----------- -----------
Net earnings (loss) per share $ .00 .01 .00 .09
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding 4,393,413 4,073,500 4,273,500 4,177,395
=========== =========== =========== ===========
</TABLE>
4
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
Dec. 31, 1997 Dec. 31, 1996
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) from continuing operations $ (7,407) 118,827
----------- -----------
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 77,328 99,368
Loss on disposition of fixed assets 48,753 -
Gain on sales of marketable securities - (285,356)
Deferred income taxes 39,000 (4,000)
Changes in assets and liabilities:
Accounts receivable 19,485 20,392
Prepaid expenses 12,482 4,888
Prepaid income taxes (18,270) -
Accounts payable 23,006 (242)
Accrued expenses 3,193 (9,793)
Income taxes payable (11,004) (116,528)
----------- -----------
Total adjustments 193,973 (291,271)
----------- -----------
Net cash provided by (used in) operating activities
of continuing operations 186,566 (172,444)
----------- -----------
Net cash flows provided by discontinued operations 32,639 427,417
----------- -----------
Cash flows from investing activities:
Purchase of marketable securities (10,116) (118,768)
Proceeds from sales of marketable securities - 591,116
Proceeds on sales of fixed assets 10,182 -
Capital expenditures (42,296) -
----------- -----------
Net cash provided by (used in) investing activities (42,230) 472,348
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 250,000 -
Purchase of treasury stock - (298,217)
----------- -----------
Net cash provided by (used in) financing activities 250,000 (298,217)
----------- -----------
Net increase in cash and cash equivalents 426,975 429,104
Cash and cash equivalents at beginning of period 7,648,617 7,242,029
----------- -----------
Cash and cash equivalents at end of period $ 8,075,592 7,671,133
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ - 336,797
=========== ===========
</TABLE>
5
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
General
The accompanying unaudited financial statements and footnotes have been
condensed and therefore do not contain all disclosures required by generally
accepted accounting principles. Reference should be made to the Company's Annual
Report to Shareholders for the year ended March 31, 1997. In the opinion of
management, all adjustments (consisting of normal recurring accruals) have been
made to present fairly the financial position, results of operations and cash
flows as at and for the periods shown.
6
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Nine Months ended December 31, 1997 and 1996
Over the past several years, the hospital bill audit ("HBA") industry as a whole
suffered a decline in demand for its services. This negative trend accelerated
during the fiscal year ended March 31, 1997 and management determined that the
Company's HBA division could not continue to operate profitably. In April 1997,
the Company completed an agreement to sell the HBA division. As defined in the
agreement, the Company will be entitled to payments based upon the net revenues
generated over the period ending April 30, 2000. Management does not anticipate
the potential value of these payments to be material. The financial statements
have been reclassified to exclude the operating results of the HBA division from
the continuing operations and account for them as discontinued operations. The
following discussion relates only to the Company's continuing operations, RPM
Rehabilitation & Associates, Inc., unless otherwise noted.
Revenues for the nine months ended December 31, 1997 totaled $968,613 as
compared with the $891,371 reported for the corresponding period ended December
31, 1996. This represents an increase of approximately 8.6%. The related cost of
services increased to 44.1% of revenues for the nine months ended December 31,
1997, as compared to 42.7% of related revenues in the same period last year.
Selling, general and administrative expenses for the nine months ended December
31, 1997 amounted to $934,472, relatively unchanged from the comparable period
ended December 31, 1996. Although management is currently exploring various
alternatives to decrease corporate overhead, it anticipates that certain
expenditures related to its search for acquisition candidates will increase.
During the nine months ended December 31, 1996, the Company realized gains of
$285,356 on the sales of marketable securities. The Company did not realize any
such gains in the current period.
Liquidity and Capital Resources
At December 31, 1997, the Company had working capital of $7,924,285 as compared
to working capital of $7,607,725 at March 31, 1997. The Company believes that it
has sufficient cash resources and working capital to meet its present cash
requirements.
During the nine months ended December 31, 1997, net cash provided by financing
activities consisted of $250,000 received from the issuance of common stock.
The Company has intensified its review of strategic alternatives for maximizing
shareholder value. With the disposition of the hospital bill audit division
completed, the Company will focus its attention on seeking acquisitions.
Potential acquisitions will be evaluated based on their merits within its
remaining line of business, as well as other fields.
7
<PAGE>
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 6 - Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this Quarterly
Report on Form 10-Q.
27 Financial Data Schedule (filed with electronically
filed copy only).
(b) None
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
AMERICAN CLAIMS EVALUATION, INC.
Date: January 20, 1998 By: /s/ Gary Gelman
---------------------------------------
Gary Gelman
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: January 20, 1998 By: /s/ Gary J. Knauer
---------------------------------------
Gary J. Knauer
Chief Financial Officer and Treasurer
(Principal Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 8,075,592
<SECURITIES> 10,116
<RECEIVABLES> 101,395
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,216,623
<PP&E> 494,814
<DEPRECIATION> 391,670
<TOTAL-ASSETS> 8,829,110
<CURRENT-LIABILITIES> 292,338
<BONDS> 0
0
0
<COMMON> 44,500
<OTHER-SE> 3,515,699
<TOTAL-LIABILITY-AND-EQUITY> 8,829,110
<SALES> 968,104
<TOTAL-REVENUES> 968,104
<CGS> 427,324
<TOTAL-COSTS> 427,324
<OTHER-EXPENSES> 934,472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,407)
<INCOME-TAX> (1,000)
<INCOME-CONTINUING> (7,407)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,407)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
