<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, 1998
------------------
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.
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(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
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
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(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, 1999
<PAGE>
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
December 31, 1998 and March 31, 1998 3
Consolidated Statements of Operations
for the Nine Months and Three Months ended
December 31, 1998 and 1997 4
Consolidated Statements of Cash Flows
for the Nine months ended
December 31, 1998 and 1997 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
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Dec.31,1998 Mar.31,1998
----------- -----------
(Unaudited)
Assets
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $8,186,687 8,105,960
Accounts receivable, net 92,799 90,478
Prepaid expenses 18,206 27,748
----------- -----------
Total current assets 8,297,692 8,224,186
Property and equipment, net 61,015 94,056
Excess cost over fair value of net assets acquired, net 476,918 501,236
----------- ----------
$8,835,625 8,819,478
=========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable 24,596 42,775
Accrued expenses 112,053 101,032
Current liabilities of discontinued operations - 86,204
Income taxes payable 53,275 2,730
Deferred income taxes 2,473 2,473
----------- ----------
Total current liabilities 192,397 235,214
----------- ----------
Stockholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;
4,450,000 shares issued and outstanding 44,500 44,500
Additional paid-in capital 3,515,699 3,515,699
Retained earnings 5,381,246 5,322,282
----------- ----------
8,941,445 8,882,481
Less treasury shares, at cost, 176,500 shares (298,217) (298,217)
----------- ----------
Total stockholders' equity 8,643,228 8,584,264
----------- ----------
$8,835,625 8,819,478
=========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------------------------------------------------
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $281,755 311,974 882,981 968,104
Cost of services 124,592 135,267 390,465 427,324
------- ------- ------- -------
Gross margin 157,163 176,707 492,516 540,780
Selling, general and administrative
expenses 268,599 300,689 847,248 934,472
------- ------- ------- -------
Operating loss (111,436) (123,982) (354,732) (393,692)
Other income:
Interest income 117,421 119,338 347,828 345,783
Miscellaneous income 33,942 21,835 97,868 39,502
-------- -------- -------- --------
Earnings (loss) before provision for
(benefit from) income taxes 39,927 17,191 90,964 (8,407)
Provision for (benefit from) income taxes 22,000 6,000 32,000 (1,000)
--------- --------- -------- --------
Net earnings (loss) $ 17,927 11,191 58,964 (7,407)
======== ========= ======== ========
Net earnings per share:
Basic $ .00 .00 .01 .00
======== ========= ======== ========
Diluted $ .00 .00 .01 .00
======== ========= ======== ========
Weighted average common shares outstanding:
Basic 4,273,500 4,273,500 4,273,500 4,206,833
========= ========= ========= =========
Diluted 4,380,242 4,393,413 4,384,455 4,206,833
========= ========= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
-------------------------------
Dec.31,1998 Dec.31,1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) from continuing operations $ 58,964 (7,407)
----------- -----------
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 59,973 77,328
Loss on disposition of fixed assets - 48,753
Deferred income taxes - 39,000
Changes in assets and liabilities:
Accounts receivable (2,321) 19,485
Prepaid expenses 9,542 12,482
Prepaid income taxes - (18,270)
Accounts payable (18,179) 23,006
Accrued expenses 11,021 3,193
Income taxes payable 50,545 (11,004)
----------- ----------
Total adjustments 110,581 193,973
---------- ----------
Net cash provided by operating activities
of continuing operations 169,545 186,566
----------- ----------
Net cash flows provided by (used in) discontinued operations (86,204) 32,639
----------- ----------
Cash flows from investing activities:
Purchase of marketable securities - (10,116)
Proceeds on sales of fixed assets - 10,182
Capital expenditures (2,614) (42,296)
----------- ----------
Net cash used in investing activities (2,614) (42,230)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock - 250,000
----------- ----------
Net increase in cash and cash equivalents 80,727 426,975
Cash and cash equivalents at beginning of period 8,105,960 7,648,617
----------- ----------
Cash and cash equivalents at end of period $8,186,687 8,075,592
=========== ==========
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ 2,079 -
=========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
General
The accompanying unaudited consolidated financial statements and footnotes have
been condensed and therefore do not contain all disclosures required by
generally accepted accounting principles for complete financial statements. The
balance sheet at March 31, 1998 has been derived from the audited financial
statements at that date.
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. For further
information, reference should be made to the Company's Annual Report filed on
Form 10-K with the Securities and Exchange Commission for the year ended March
31, 1998.
Earnings Per Share
The Company has adopted Statement of Financial Accounting Standards No. 128,
Earnings per Share, which requires presentation of two calculations per share.
Basic earnings per share equals net earnings divided by weighted average common
shares outstanding during the period. Diluted earnings per share equals net
earnings divided by the sum of weighted average common shares outstanding
during the period plus common stock equivalents. Common stock equivalents are
assumed to be issued if outstanding stock options were exercised. The Company
has restated all prior period amounts to reflect these calculations.
6
<PAGE>
Item 2 -Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Nine Months ended December 31, 1998 and 1997
Revenues for the nine months ended December 31, 1998 totaled $882,981 as
compared with the $968,104 reported for the corresponding period ended December
31, 1997. This represents a decrease of approximately 8.8%. The related cost of
services remained consistent at 44.2% of revenues for the nine months ended
December 31, 1998, as compared to 44.1% of related revenues in the same period
last year.
Selling, general and administrative expenses for the nine months ended December
31, 1998 amounted to $847,248, a decrease of $87,224 from the comparable period
ended December 31, 1997. Although management has been successful in its efforts
to reduce corporate overhead, certain expenditures related to its search for
acquisition candidates have increased.
Liquidity and Capital Resources
At December 31, 1998, the Company had working capital of $8,105,295 as compared
to working capital of $7,988,972 at March 31, 1998. 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 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
The Company is working to resolve the potential impact of the year 2000 on the
ability of the Company's computerized information systems to accurately process
information that may be date- sensitive. Any of the Company's programs that
recognize a date using "00" as the year 1900 rather than the year 2000 could
result in errors or system failures. Assessment of both Company and client
information systems has not been completed, but management expects that there
will be no material adverse effects on operations and that future costs to be
incurred will not be material. The Company's most likely potential risk is the
temporary inability of its vocational rehabilitation clients to provide case
referrals and payments on a timely basis. There is no guarantee, however, that
all problems will be foreseen and corrected.
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 26, 1999 By: /s/ Gary Gelman
----------------------------------------
Gary Gelman
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: January 26, 1999 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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 8,186,687
<SECURITIES> 0
<RECEIVABLES> 93,799
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,297,692
<PP&E> 502,892
<DEPRECIATION> 441,877
<TOTAL-ASSETS> 8,835,625
<CURRENT-LIABILITIES> 192,397
<BONDS> 0
0
<COMMON> 44,500
<OTHER-SE> 3,515,699
0
<TOTAL-LIABILITY-AND-EQUITY> 8,835,625
<SALES> 882,981
<TOTAL-REVENUES> 882,981
<CGS> 390,465
<TOTAL-COSTS> 390,465
<OTHER-EXPENSES> 847,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 90,964
<INCOME-TAX> 32,000
<INCOME-CONTINUING> 58,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,964
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
