<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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
(Address of principal executive offices) (Zip Code)
(516) 938-8000
(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 October 29, 1999
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AMERICAN CLAIMS EVALUATION, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
September 30, 1999 (unaudited) and March 31, 1999 3
Consolidated Statements of Operations
for the Three Months and Six Months ended
September 30, 1999 and 1998 (unaudited) 4
Consolidated Statements of Cash Flows
for the Six Months ended
September 30, 1999 and 1998 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Sep.30,1999 Mar.31,1999
----------- -----------
(Unaudited)
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $8,177,219 8,209,421
Accounts receivable, net 81,955 88,991
Prepaid expenses 16,406 19,380
Deferred tax asset 1,527 1,527
--------- ---------
Total current assets 8,277,107 8,319,319
Property and equipment, net 42,869 54,756
Excess cost over fair value of net assets acquired, net 452,599 468,811
--------- ---------
$8,772,575 8,842,886
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 34,869 50,122
Accrued expenses 69,514 97,801
Income taxes payable 30,275 50,775
--------- ---------
Total current liabilities 134,658 198,698
--------- ---------
Stockholders' equity:
Common stock, $.01 par value;
10,000,000 shares authorized;
4,450,000 shares issued;
4,273,500 shares outstanding 44,500 44,500
Additional paid-in capital 3,515,699 3,515,699
Retained earnings 5,375,935 5,382,206
--------- ---------
8,936,134 8,942,405
Treasury shares, at cost, 176,500 shares (298,217) (298,217)
--------- ---------
Total stockholders' equity 8,637,917 8,644,188
--------- ---------
$8,772,575 8,842,886
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------- -------------------------------
Sep. 30, 1999 Sep. 30, 1998 Sep. 30, 1999 Sep. 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $282,103 300,074 549,147 601,226
Cost of services 133,019 130,793 252,172 265,873
------- ------- ------- -------
Gross margin 149,084 169,281 296,975 335,353
Selling, general and administrative
expenses 279,607 292,285 546,000 578,649
------- ------- ------- -------
Operating loss (130,523) (123,004) (249,025) (243,296)
Other income:
Interest income 115,977 115,176 219,640 230,407
Miscellaneous income 11,284 38,613 25,114 63,926
-------- -------- -------- --------
Earnings (loss) before
provision for income taxes (3,262) 30,785 (4,271) 51,037
Provision for income taxes 1,000 5,000 2,000 10,000
--------- --------- --------- --------
Net earnings (loss) $ (4,262) 25,785 (6,271) 41,037
======== ======== ======== ========
Net earnings (loss) per share:
Basic $ .00 .01 .00 .01
=========== =========== =========== ===========
Diluted $ .00 .01 .00 .01
=========== =========== =========== ===========
Weighted average common shares outstanding:
Basic 4,273,500 4,273,500 4,273,500 4,273,500
========= ========= ========= =========
Diluted 4,273,500 4,406,490 4,273,500 4,386,561
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
----------------
Sep.30,1999 Sep.30,1998
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<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) from continuing operations $ (6,271) 41,037
--------- ---------
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 28,099 45,167
Changes in assets and liabilities:
Accounts receivable 7,036 16,273
Prepaid expenses 2,974 7,275
Accounts payable (15,253) (15)
Accrued expenses (28,287) 24,454
Income taxes payable (20,500) 7,921
--------- ----------
(25,931) 101,075
--------- ----------
Net cash provided by (used in) operating activities
of continuing operations (32,202) 142,112
--------- ----------
Net cash flows used in discontinued operations - (86,204)
--------- ----------
Net increase (decrease) in cash and cash equivalents (32,202) 55,908
Cash and cash equivalents at beginning of period 8,209,421 8,105,960
--------- ---------
Cash and cash equivalents at end of period $8,177,219 8,161,868
========= =========
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ 22,500 2,079
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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, 1999. 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 of and for the periods shown.
Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted net earnings
(loss) per share for the three and six months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended Six months ended
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Numerator:
Net earnings (loss) $ (4,262) 25,785 (6,271) 41,037
========= ========= ========= =========
Denominator:
Denominator for basic earnings
(loss) per share - weighted
average shares 4,273,500 4,273,500 4,273,500 4,273,500
Effect of dilutive securities:
Stock options - 132,990 - 113,061
--------- --------- --------- ---------
Denominator for diluted
earnings (loss) per share 4,273,500 4,406,490 4,273,500 4,386,561
========= ========= ========= =========
Basic earnings (loss) per share $ .00 .01 .00 .01
========= ========= ========= =========
Diluted earnings (loss) per share $ .00 .01 .00 .01
========= ========= ========= =========
</TABLE>
Employee stock options totaling 595,500 and 249,167 for the three months ended
September 30 ,1999 and 1998, respectively, were not included in the net earnings
(loss) per share calculations because their effect would have been
anti-dilutive.
6
<PAGE>
Item 2 -Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Three Months and Six Months ended September 30, 1999 and
1998
Revenues for the three months ended September 30, 1999 totaled $282,103 as
compared with the $300,074 reported for the corresponding period ended September
30, 1998. This represents a decrease of approximately 6.0%. Revenues for the six
month period ended September 30, 1999 decreased approximately 8.7% from the
comparable period ended September 30, 1998. During the period from March 1999
through May 1999, RPM Rehabilitation & Associates, Inc. ("RPM"), a wholly-owned
subsidiary, experienced a substantial decrease in new case referrals received
from the Washington State Department of Labor & Industries ("L&I") due to L&I's
implementation of a new performance-based vocational referral program ("the
referral program"). RPM's performance rating was deemed to be below L&I's
required rating to receive new case referrals. Updated ratings were subsequently
released by L&I in May 1999 which reported a qualifying rating for RPM. L&I
began sending new case referrals shortly thereafter. It cannot be predicted
whether or not RPM will continue to receive a favorable rating under the
referral program as it currently exists.
Cost of services increased to 47.2% of revenues for the quarter ended September
30, 1999, as compared to 43.6% of revenues in the same period last year due to a
larger percentage of cases being completed by higher priced rehabilitation
consultants. During the six months ended September 30, 1999, the cost of
services as a percentage of revenues increased to 45.9% from 44.2% in the six
months ended September 30, 1998.
Selling, general and administrative expenses decreased $12,678 to $279,607 in
the quarter ended September 30, 1999, from $292,285 in the quarter ended
September 30, 1998. Selling, general and administrative expenses for the six
months ended September 30, 1999 decreased to $546,000 from $578,649 for the six
months ended September 30, 1998.
Liquidity and Capital Resources
At September 30, 1999, the Company had working capital of $8,142,449 as compared
to working capital of $8,120,621 at March 31, 1999. The Company believes that it
has sufficient cash resources and working capital to meet its present cash
requirements.
The Company continues its review of strategic alternatives for maximizing
shareholder value. Potential acquisitions will be evaluated based on their
merits within its remaining line of business, as well as other fields.
Year 2000
This issue affects computer systems that have time-sensitive programs that may
not properly recognize the Year 2000. Such programs may interpret the Year 2000
to mean some other year or not interpret it at all. If not corrected, those
programs could cause date-related transaction failures.
7
<PAGE>
Assessment of both Company and client information systems is ongoing. The
Company believes that the Year 2000 issue will not pose significant operational
problems for its computer systems. Communications continue with all significant
clients and vendors to determine the extent to which the Company's systems are
vulnerable to such third parties' failure to remediate their own Year 2000
issues. The Company can provide no assurance that such clients and vendors will
complete their respective Year 2000 solutions in time for the Company to fully
test interfaces with them. Although the Company does not have a formal Year 2000
contingency plan, it will respond to any disruption in service from a Year 2000
compliance problem in its systems and software or in a client's or vendor's
system. There is no assurance, however, that the Company will be able to remedy
any disruption in service, in particular any disruption from a client's or
vendor's failure to be Year 2000 compliant.
Based on current plans and efforts to date, management expects that there will
be no material adverse effect on operations and the associated costs to be
incurred are not considered to be material. There is no guarantee, however, that
all problems will be foreseen and corrected. In the event that any such problems
are not foreseen and corrected, the Company could be unable to receive new case
referrals, invoice clients and collect payments electronically.
Forward Looking Statements
Except for the historical information contained herein, the matters discussed in
this report on Form 10-QSB may contain forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, general economic and
market conditions, the potential loss or termination of existing clients and
contracts and the ability of the Company to successfully identify and thereafter
consummate one or more acquisitions.
8
<PAGE>
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
- ------
The Annual Meeting of Shareholders of American Claims Evaluation,
Inc. was held on October 12, 1999.
One proposal, subject to shareholder approval, was approved at the
Annual Meeting by a vote of shareholders. Under this proposal,
management nominees for election to the Board of Directors,
Messrs. Gelman, Elkin and Gutmann, were reelected as directors of
the Company to serve until their respective successors are duly
elected and qualified.
Item 6 - Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this Quarterly
Report on Form 10-QSB.
27 Financial Data Schedule (filed with electronically
filed copy only).
(b) None
9
<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: October 27, 1999 By: /s/ Gary Gelman
----------------------------------------
Gary Gelman
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: October 27, 1999 By: /s/ Gary J. Knauer
----------------------------------------
Gary J. Knauer
Chief Financial Officer and Treasurer
(Principal Financial Officer)
10
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 8,177,219
<SECURITIES> 0
<RECEIVABLES> 82,955
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,277,107
<PP&E> 362,580
<DEPRECIATION> 319,711
<TOTAL-ASSETS> 8,772,575
<CURRENT-LIABILITIES> 134,658
<BONDS> 0
<COMMON> 44,500
0
0
<OTHER-SE> 3,515,699
<TOTAL-LIABILITY-AND-EQUITY> 8,772,575
<SALES> 549,147
<TOTAL-REVENUES> 549,147
<CGS> 252,172
<TOTAL-COSTS> 252,172
<OTHER-EXPENSES> 546,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,271)
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (6,271)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,271)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
