<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
--------------
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14807
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AMERICAN CLAIMS EVALUATION, INC.
(Name of small business issuer in its charter)
New York 11-2601199
----------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Jericho Plaza, Jericho, NY 11753
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (516) 938-8000
--------------
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Shares, $.01 par value
-----------------------------
(Title of class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the fiscal year ending March 31, 2000 were $1,109,286.
[Cover page 1 of 2 pages]
<PAGE>
The aggregate market value of the issuer's voting stock held by non-affiliates,
based on the average high and low prices of such stock on June 16, 2000, as
reported on NASDAQ, was $3,379,706. For purposes of this calculation, shares of
common stock held by directors, officers and stockholders whose ownership
exceeds five percent of the common stock outstanding at June 16, 2000 were
excluded. Exclusion of shares held by any person should not be construed to
indicate that such person possesses the power, direct or indirect, to direct or
cause the direction of management or policies of the issuer, or that such person
is controlled by or under common control of the issuer.
As of June 16, 2000, there were 4,273,500 shares of the issuer's common stock,
$.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
[Cover page 2 of 2 pages]
<PAGE>
PART I
Item 1. Description of Business.
American Claims Evaluation, Inc. (the "Company") was incorporated in the State
of New York and commenced operations in April 1982. The Company provides a full
range of vocational rehabilitation and disability management services designed
to maximize injured workers' abilities in order to reintegrate them into their
respective communities through its wholly-owned subsidiary, RPM Rehabilitation &
Associates, Inc.
The functional capabilities of the injured workers referred to the Company vary.
Comprehensive, in-house vocational evaluations are utilized to assess aptitudes,
interests, values and abilities. Issues of medical restrictions, functional
overlays, illiteracy and occupational diseases are assessed and factored into
the development of a rehabilitation strategy.
Specifically, in working with injured workers, the purpose and intent are to
bring the injured worker back to work with the employer of injury as soon as
medically feasible. The role of a vocational rehabilitation consultant is to
convene the claimant, the employer of injury, and associated medical
professionals to facilitate an expedited return to work, utilizing the
principles of job accommodation, job modification and transitional work. In
addition, the consultant can provide medical monitoring of the worker's progress
through pain clinics and work hardening programs. Coordination of these services
assist the worker in building strength and motivation to return to their
employer and/or occupation at the time of injury. The Company's philosophy is
that timely coordination of professional services, coupled with education and
liaison with the employer community provides positive results for all parties
concerned.
Some early intervention activities include contacting employers at the time of
injury to develop return to work strategies such as work restructuring and job
modification, on site analysis, local labor market analysis and obtaining work
histories. Feedback from clients' claims managers regarding the Company's
responsive interventions indicates a trusting, team approach which allows for
clear and accurate assessments that expedites the adjudication process,
resulting in timely and successful case closure.
RPM is currently approved as a "preferred provider" of vocational rehabilitation
services to the Washington State Department of Labor & Industries ("L&I") under
two separate contracts, which expire on January 1, 2001, as extended. For the
year ended March 31, 2000, the L&I contracts accounted for 66% of the Company's
total revenues. Although RPM has successfully renewed its contracts with L&I
since its inception in 1986, there can be no assurances that these contracts
will continue to be renewed in future periods.
Marketing and Advertising
The President of the Company and the President of RPM are responsible for the
Company's sales and marketing program. In addition to direct contact with
leading health care payers, the Company advertises its services in trade
magazines and exhibits at conventions and trade association meetings.
Competition
The vocational rehabilitation field is highly competitive. The Company competes
with a number of businesses that provide the same services. Many of these
competitors have a longer operating history, greater financial resources, and
provide other services to the insurance companies that the Company does not
provide.
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Principal competitors in vocational rehabilitation include national firms, such
as Concentra Managed Care, Inc. and Crawford & Company, as well as many regional
firms. Quality of service, high caliber consultants, proper pricing and range of
services offered are the principal factors that will enable the Company to
compete effectively.
Employees
As of March 31, 2000, the Company had twenty full-time employees and two
part-time employees. Of these full-time employees, three were in management,
eleven were vocational rehabilitation consultants and six were in
administration.
Item 2. Description of Property.
The Company leases approximately 2,700 square feet of space at its executive
office in Jericho, New York under a lease, as extended, which expires in
November 2003. RPM leases approximately 3,300 square feet of office space in
Spokane, Washington under a lease, as extended, which expires in June 2005. RPM
also maintains an office in Moses Lake, Washington which is leased on a
month-to-month basis.
The Company believes that its existing facilities will be adequate to meet its
present needs. However, should the Company require additional space it is
assumed that such space will be available.
Item 3. Legal Proceedings.
The Company is not engaged in any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended March 31, 2000.
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<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's common shares, par value $.01 (the "Shares"), trade on the Nasdaq
SmallCap Market under the symbol "AMCE.".
The following table sets forth the range of high and low sales prices for the
Company's Shares for each quarter during the period April 1, 1998 through March
31, 2000:
High Low
---- ---
Fiscal 1999:
4/01/98 - 6/30/98 2 5/8 1 3/8
7/01/98 - 9/30/98 2 11/16 1 7/8
10/01/98 - 12/31/98 2 1/8 1 5/8
1/01/99 - 3/31/99 2 1/4 1 11/16
Fiscal 2000:
4/01/99 - 6/30/99 2 9/16 1 11/16
7/01/99 - 9/30/99 4 1/2 2 5/32
10/01/99 - 12/31/99 2 13/16 1 1/2
1/01/00 - 3/31/00 4 5/16 1 29/32
The number of holders of the Company's Shares was approximately 768 on March 31,
2000, computed by the number of record holders, inclusive of holders for whom
Shares are being held in the name of brokerage houses and clearing agencies.
The Company has never paid a cash dividend and does not presently anticipate
doing so in the foreseeable future, but expects to retain earnings, if any, for
use in its business.
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<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
For the fiscal year ended March 31, 2000 ("Fiscal 2000"), revenue from
vocational rehabilitation services totaled $1,109,286, a decrease of 5.1% from
the $1,169,436 reported for the fiscal year ended March 31, 1999 ("Fiscal
1999"). Revenue for Fiscal 1999 had experienced a 9.0% decrease from the
$1,285,798 generated in the fiscal year ended March 31, 1998.
During Fiscal 2000, approximately 66% of total revenues were generated providing
vocational rehabilitation services to the Washington State Department of Labor &
Industries ("L&I"). If the Company's contracts with L&I are not renewed in
January 2001, there would be a material adverse effect on the consolidated
results of operations.
The cost of vocational rehabilitation services was 46.0% of revenues for Fiscal
2000 as compared to 43.7% of revenues for Fiscal 1999. The Company experienced
an increase in the cost of vocational rehabilitation services beginning in
Fiscal 1999 due to larger percentages of cases being completed by higher priced
rehabilitation consultants.
Selling, general and administrative expenses were $1,105,147 and $1,133,580 in
Fiscal 2000 and Fiscal 1999, respectively.
Interest income increased slightly to $461,257 during Fiscal 2000, as compared
to interest income of $452,181 for Fiscal 1999. Miscellaneous income, including
commission payments received based upon the net revenues of its sold hospital
bill audit division, amounted to $47,684 in Fiscal 2000, as compared with
ancillary revenues of $115,967 for Fiscal 1999.
Liquidity and Capital Resources
The Company's primary source of cash is internally generated funds. At March 31,
2000, the Company had working capital of $8,094,047 as compared to working
capital of $8,120,621 at March 31, 1999.
For Fiscal 2000, net cash used by operating activities was $26,129. Cash flows
used in investing activities totaled $730,897, consisting primarily of $728,790
used for purchases of marketable securities.
The Company continues its review of strategic alternatives for maximizing
shareholder value. Potential acquisitions will be evaluated based on their
merits within its current line of business, as well as other fields. Management
believes that the Company has sufficient cash resources and working capital to
meet its capital resource requirements for the foreseeable future.
Forward Looking Statements
Except for the historical information contained herein, the matters discussed in
this report on Form 10-KSB and the Company's other periodic reports and other
documents incorporated by reference or incorporated herein as exhibits, 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
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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.
Item 7. Financial Statements.
The financial statements required by this Item are set forth at the pages
indicated in Item 13 following page 12 of this report.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
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<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
The executive officers and directors of the Company are as follows:
Name Age Position
---- --- --------
Gary Gelman 53 Chairman of the Board,
President and
Chief Executive Officer
Gary J. Knauer 40 Chief Financial Officer,
Treasurer and Secretary
Edward M. Elkin, M.D. 61 Director
Peter Gutmann 71 Director
Gary Gelman, the founder of the Company, has been Chairman of the Board since
July 1, 1985, and President, Chief Executive Officer and a director since
inception. Mr. Gelman served as Treasurer from inception to October 1991. Since
1973, Mr. Gelman has also been Chief Executive Officer and a principal of
American Para Professional Systems, Inc., which provides nurses who perform
physical examinations of applicants for life and/or health insurance for
insurance companies. He received a B.A. from Queens College. Since 1996, Mr.
Gelman has been Chairman of the Board of Directors of Misonix, Inc., a publicly
traded company engaged in the design, development and manufacturing of
ultrasonic devices including medical instruments.
Gary J. Knauer joined the Company as its Controller in July 1991 and has served
as Chief Financial Officer and Treasurer since October 1991 and as Secretary
since March 1993. Before joining the Company, Mr. Knauer was employed from
October 1984 to June 1991 by the accounting firm of KPMG LLP. He is a Certified
Public Accountant and holds a B.S. from the State University of New York at
Binghamton. Since February 1994, Mr. Knauer also serves as Chief Financial
Officer of American Para Professional Systems, Inc.
Edward M. Elkin, M.D. has been a director of the Company since July 1, 1985. For
more than the past five years, Dr. Elkin has been performing services relating
to utilization review and quality assurance in hospitals for the New York State
Department of Health. He is certified by the American Board of Pediatrics and
the American Board of Quality Assurance and Utilization Review Physicians. He
received his B.A. from Harvard College and his M.D. from New York University
School of Medicine.
Peter Gutmann has been a director of the Company since July 1, 1985. For more
than the past twenty years, he has been a Professor of Economics and Finance at
Baruch College, City University of New York and was Chairman of the Economics
and Finance Department from 1971 to 1977. He received a B.A. from Williams
College, a B.S. from Massachusetts Institute of Technology, an M.A. from
Columbia University and a PhD. from Harvard University.
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<PAGE>
Item 10. Executive Compensation.
The following table sets forth all plan and non-plan compensation awarded to,
earned or paid to the Company's Chief Executive Officer for each of the
Company's last two fiscal years. No other executive officer had total annual
salary and bonus which exceeded $100,000 during the Company's fiscal year ended
March 31, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- -----------------
Name and Other Annual All Other
Principal Fiscal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($)(1) (#) ($)(2)
----------- ------ ------------- --------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Gary Gelman 2000 $244,311 - - - $1,636
Chairman, 1999 244,311 - - - -
President
and CEO
</TABLE>
(1) The aggregate amount of all perquisites and other personal benefits paid
to the Chief Executive Officer is not greater than either $50,000 or 10%
of the total annual salary and bonus reported.
(2) Consists of matching contributions made by the Company under the 401(k)
plan for the fiscal year ended March 31, 2000.
Compensation Plans
The following describes plans adopted by the Company pursuant to which cash or
non-cash compensation was paid or distributed during the years ended March 31,
2000 and 1999, or pursuant to which such compensation may be distributed in the
future, to the Chief Executive Officer.
401(k) Profit Sharing Plan
The Company sponsors a profit sharing plan covering all employees having reached
the age of 21 with one or more years of service. The plan is qualified under
Section 401(k) of the Internal Revenue Code of 1986 (the "Code"). Such plan
requires the Company to match participants' contributions to the extent of 10%
of such eligible contributions. Under the terms of the plan, there is a vesting
requirement with respect to Company contributions, but employees are fully
vested in their own salary deferral contributions.
Stock Option Plans
In July 1985, the Company's Board of Directors adopted the 1985 Stock Option
Plan (the "1985 Plan"). The 1985 Plan has expired, except as to options
outstanding (consisting of 27,500 options outstanding at March 31, 2000), and no
additional options may be granted. The 1985 Plan provided for the issuance of up
to 400,000 Shares to full-time employees and directors of the Company. Incentive
stock options were granted at the fair market value of the Company's Shares at
the date of grant. The option terms were determined by
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the Board of Directors, but no options were granted with a term of more than ten
years. The options are not transferable and not exercisable while any previously
granted incentive stock options under the 1985 Plan are outstanding, and are
exercisable only while the optionee is associated with the Company and for three
months thereafter, with certain exceptions.
In March 1991, the Board of Directors adopted the Company's 1991 Stock Option
Plan (the "1991 Plan") and in October 1991, the shareholders of the Company
ratified, approved and adopted the 1991 Plan. Under the 1991 Plan, a total of
400,000 Shares are reserved for issuance to employees, including directors and
officers who may not be salaried employees.
Both incentive and nonstatutory stock options may be granted under the 1991
Plan, at a price to be determined by the option committee, provided, however,
that incentive stock options must be granted at an exercise price not less than
the fair market value of the Shares on the date of the grant. Such exercise
price may be payable in cash or by a combination of cash or Shares with the
approval of the committee which administers the 1991 Plan. The term of any
option may not exceed ten years from the date of grant. Condi tions of the
exercise of options are fixed by a committee appointed by the Board of
Directors, consisting of not less than two nor more than five persons.
Optionees under the 1991 Plan with incentive options may exercise up to 25
percent of such option granted for each year of service to the Company after the
date of grant of the option, but the committee may accelerate the schedule of
the time or times when an option may be exercised, provided that the fair market
value of the securities subject to an incentive option may not exceed $100,000
at the first time such options become exercisable.
The 1991 Plan also provides for stock appreciation rights, pursuant to which the
optionee may surrender to the Company all or any part of an unexercised option
and receive from the Company in exchange therefor Shares having an aggregate
market value equal to the dollar amount obtained by multiplying the number of
Shares subject to the surrendered options by the amount by which the market
value per share at the time of such surrender exceeds the exercise price per
share of the related option. The Company's obligation arising from an exercise
of stock appreciation rights may also be settled by the payment of cash, or a
combination of cash and Shares.
On May 7, 1997, the Board of Directors adopted the 1997 Incentive Stock Option
Plan (the "1997 Plan") covering 750,000 Shares reserved for issuance. The
shareholders of the Company ratified and approved the 1997 Plan in September
1997. Under the 1997 Plan, either incentive stock options or nonstatutory
options may be granted as an incentive to key employees (including directors and
officers who are key employees), non-employee directors, independent contractors
and consultants of the Company and to offer an additional inducement in
obtaining the services of such individuals.
The exercise price of the Shares under each option shall be determined by a
fixed committee appointed by the Board of Directors; provided, however, that the
exercise price shall not be less than the fair market value of the Shares on the
date of the grant. The term of each option pursuant to the 1997 Plan shall be
such term as established by the committee appointed by the Board of Directors,
in its sole discretion, provided that it shall be for a period not exceeding ten
years from the date of the grant.
On July 1, 1999, the Board of Directors granted options to purchase 25,000
Shares under the 1997 Plan at an exercise price of $2.50 to an executive
officer.
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<PAGE>
Both the 1997 and 1991 Plans provide that the number of Shares subject thereto
and the outstanding options and their exercise prices are to be appropriately
adjusted for mergers, consolidations, recapitalizations, stock dividends, stock
splits or combinations of shares.
The current option committee appointed by the Board of Directors to administer
the Company's stock option plans consists of Messrs. Gelman, Gutmann and Elkin.
The Board of Directors may at any time terminate or from time to time amend or
alter any of the existing stock option plans.
Aggregated Option/SAR Exercises in 2000
and FY-End Option/SAR Values
----------------------------
The following table summarizes the number and dollar value of unexercised stock
options at March 31, 2000 for the Chief Executive Officer.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Value FY-End (#) FY-End ($)(1)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise(#) ($) Unexercisable Unexercisable
----------------------------------- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Gary Gelman, - - 400,000/- $425,000/-
Chairman of the Board,
President and CEO
</TABLE>
(1) The closing price of the Company's Shares on March 31, 2000 as reported by
the NASDAQ National Market System was $2.625 per Share.
Employment Agreements
Mr. Gelman's employment agreement with the Company provides for him to be
employed as Chairman of the Board of Directors and Chief Executive Officer at an
annual salary of $238,800. In addition, Mr. Gelman is entitled to participate in
all employee benefit programs and other policies and programs of the Company.
Mr. Gelman is not required to devote any specific number of hours to the
business of the Company. He is subject to a non-competition and non-disclosure
covenant for a period of three years following termination of employment with
the Company.
Director Compensation
The Company's policy is to pay its non-employee directors a uniform fee of $400
for each Board of Directors meeting and/or Audit Committee meeting attended in
person.
Option Grants in Last Fiscal Year
No options were granted to the Chief Executive Officer during the fiscal year
ended March 31, 2000.
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<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table and notes thereto sets forth information regarding the
beneficial ownership of the Company's Shares as of June 16, 2000 by (i) each
person known by the Company to be the beneficial owner of more than 5% of such
voting security, (ii) each director of the Company and (iii) all executive
officers and directors of the Company as a group. The percentages have been
calculated by taking into account all Shares owned on the record date as well as
all such Shares with respect to which such person has the right to acquire
beneficial ownership at such date or within 60 days thereafter. Unless otherwise
indicated, all persons listed below have sole voting and sole investment power
over the Shares owned.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent of Voting
of Beneficial Owner Ownership (1)(4) Securities (1)
------------------- --------------------- ---------------------
<S> <C> <C>
Gary Gelman(2) 2,696,400 57.7%
Peter Gutmann(2) 80,000(3) 1.9%
Edward M. Elkin, M.D.(2) 60,200 1.4%
Gary J. Knauer(2) 74,000 1.7%
D.H. Blair Investment Corp. 423,824(5) 9.9%
All executive officers and directors
as a group (four persons) 2,910,600 60.4%
</TABLE>
----------------
(1) Based on a total of 4,273,500 Shares issued and outstanding and 548,000
Shares issuable upon the exercise of presently exercisable stock options by
persons described in the preceding table.
(2) Address is c/o the Company, One Jericho Plaza, Jericho, N.Y. 11753.
(3) Includes 4,000 Shares owned by the wife of Mr. Gutmann, as to which
beneficial ownership is disclaimed by the respective reporting person.
(4) Includes the presently exercisable portions of outstanding stock options
(aggregating 548,000 Shares) which, in the case of Messrs. Gelman, Gutmann,
Elkin, and Knauer are 400,000, 34,000, 40,000, and 74,000 Shares,
respectively.
(5) These Shares are owned of record by D.H. Blair Investment Banking Corp.,
whose address is 44 Wall Street, New York, New York ("Blair Investment")
(385,824 Shares), by Mr. J. Morton Davis' wife (16,200 Shares) and by
Rivkalex Corporation, a private corporation controlled by Mr. Davis' wife
(21,800 Shares). Mr. Davis has reported Blair Investment's Shares as being
beneficially owned by himself but has disclaimed ownership of the 21,800
Shares and 16,200 Shares described in this table owned by Rivkalex
Corporation and by Mr. Davis' wife, respectively.
Item 12. Certain Relationships and Related Transactions.
None.
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<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
Documents filed with this report
1. Financial Statements:
--------------------
Independent Auditors' Report
Consolidated Balance Sheets as of March 31, 2000 and 1999
Consolidated Statements of Operations for the years ended
March 31, 2000 and 1999
Consolidated Statements of Stockholders' Equity for the years
ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended
March 31, 2000 and 1999
Notes to Consolidated Financial Statements
Financial Statement Schedules
Financial statement schedules have been omitted because the
required information is inapplicable or because the information is
presented in the financial statements or related notes.
2. 10.1 Lease Renewal Agreement dated May 16, 2000 between Gateway
Associates as Owner and RPM Rehabilitation & Associates,
Inc. as tenant with respect to the premises at 901 E. 2nd
Avenue, Spokane, Washington.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
Exhibits
The following were filed as exhibits to the Company's Annual Report on
Form 10-K for its year ended March 31, 1998 and are incorporated by
reference herein:
1. Tenth Amendment dated May 1997 to Employment Agreement between the
Company and Gary Gelman.
2. Lease Extension and Modification Agreement dated February 24, 1998
between Chasco Company as landlord and the Company as tenant with
respect to the premises at One Jericho Plaza, Jericho, New York.
The following was filed as an Exhibit to the Company's Registration
Statement on Form S-8 (File No. 333-39071) and is incorporated by
reference herein:
1. 1997 Stock Incentive Plan.
The following was filed as an exhibit to the Company's Annual Report on
Form 10-K for its year ended March 31, 1996 and is incorporated by
reference herein:
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<PAGE>
1. Ninth Amendment dated February 13, 1996 to Employment Agreement
between the Company and Gary Gelman.
The following were filed as exhibits to the Company's Annual Report on
Form 10-K for its year ended March 31, 1995 and are incorporated by
reference herein:
1. Eighth Amendment dated March 2, 1995 to Employment Agreement
between the Company and Gary Gelman.
2. Lease dated March 10, 1995 between Gateway Associates as landlord
and RPM Rehabilitation & Associates, Inc. as tenant with respect to
premises at 901 East Second Avenue, Spokane, Washington.
The following were filed as exhibits to the Company's Annual Report on
Form 10-K for its year ended March 31, 1994 and are incorporated by
reference herein:
1. Seventh Amendment dated March 9, 1994 to Employment Agreement
between the Company and Gary Gelman.
2. Lease dated August 20, 1993 between Chasco Company as landlord and
the Company as tenant with respect to premises at One Jericho
Plaza, Jericho, New York.
The following were filed as exhibits to the Company's Annual Report on
Form 10-K for its year ended March 31, 1989 and are incorporated by
reference herein:
1. Amendment dated March 1, 1989 to Employment Agreement between the
Company and Gary Gelman.
2. Certificate of Amendment of Certificate of Incorporation of the
Company filed October 19, 1987.
The following were filed as an Exhibit to the Company's Registration
Statement on Form S-18 (File No. 2-99625-NY) and are incorporated by
reference herein:
3.1 Certificate of Incorporation of the Company as amended.
10.1 Employment Agreement dated February 1, 1986 between the Company
and Gary Gelman.
10.3 1985 Stock Option Plan.
The following were filed as an Exhibit to the Company's Registration
Statement on Form S-3 (File No. 33-40200) and are incorporated by
reference herein:
3.2 By-Laws of the Company.
10.1 Fourth Amendment to Employment Agreement dated as of February 27,
1991 between the Company and Gary Gelman.
10.5 1991 Stock Option Plan
Exhibits to the Company's reports on Form 8-K dated September 14, 1993
and April 21, 1997 are incorporated by reference herein.
Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended March
31, 2000.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN CLAIMS EVALUATION, INC.
By: /s/ Gary Gelman
---------------------------------
Gary Gelman
Chairman of the Board, President
and Chief Executive Officer
DATE: June 23, 2000
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Gary Gelman Chairman of the Board, June 23, 2000
------------------------------------ President and Chief
Gary Gelman Executive Officer
(Principal Executive Officer)
/s/ Gary J. Knauer Chief Financial Officer, June 23, 2000
------------------------------------- Treasurer (Principal Financial
Gary J. Knauer and Accounting Officer)
and Secretary
/s/ Edward M. Elkin Director June 23, 2000
------------------------------------
Edward M. Elkin, M.D.
/s/ Peter Gutmann Director June 23, 2000
-------------------------------------
Peter Gutmann
</TABLE>
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<PAGE>
AMERICAN CLAIMS EVALUATION, INC.
AND SUBSIDIARY
Consolidated Financial Statements
(Form 10-KSB)
March 31, 2000 and 1999
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report F-1
Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2000 and 1999 F-2
Consolidated Statements of Operations for the years ended
March 31, 2000 and 1999 F-3
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 2000 and 1999 F-4
Consolidated Statements of Cash Flows for the years ended
March 31, 2000 and 1999 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
Financial statement schedules have been omitted as the required information is
inapplicable or the information is presented in the related notes to the
consolidated financial statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Claims Evaluation, Inc.:
We have audited the accompanying consolidated balance sheets of American Claims
Evaluation, Inc. and subsidiary as of March 31, 2000 and 1999 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the two-year period ended March 31, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Claims
Evaluation, Inc. and subsidiary, as of March 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the years in the two-year
period ended March 31, 2000 in conformity with generally accepted accounting
principles.
KPMG LLP
Melville, New York
May 22, 2000
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 2000 and 1999
<TABLE>
<CAPTION>
Assets 2000 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,452,395 8,209,421
Marketable securities 644,240 -
Accounts receivable (net of allowance for doubtful accounts of
$1,000 in 2000 and 1999) 88,429 88,991
Prepaid expenses 21,886 19,380
Deferred income taxes 15,677 1,527
----------- -----------
Total current assets 8,222,627 8,319,319
Property and equipment, net 40,079 54,756
Excess cost over fair value of net assets acquired, net of
accumulated amortization of $212,114 and $179,689
in 2000 and 1999, respectively 436,386 468,811
----------- -----------
$ 8,699,092 8,842,886
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 18,503 50,122
Accrued expenses 78,691 97,801
Income taxes payable 31,386 50,775
----------- -----------
Total current liabilities 128,580 198,698
----------- -----------
Commitments
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
Accumulated other comprehensive loss (68,600) -
Retained earnings 5,377,130 5,382,206
----------- -----------
8,868,729 8,942,405
Treasury shares, at cost, 176,500 shares (298,217) (298,217)
----------- -----------
Total stockholders' equity 8,570,512 8,644,188
----------- -----------
$ 8,699,092 $ 8,842,886
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---------------- ---------------
<S> <C> <C>
Revenues $ 1,109,286 1,169,436
Cost of services 510,706 511,080
---------------- ---------------
Gross margin 598,580 658,356
Selling, general and administrative expenses 1,105,147 1,133,580
---------------- ---------------
Operating loss (506,567) (475,224)
Other income:
Interest income 461,257 452,181
Gain on sale of marketable securities 550 -
Miscellaneous income 47,684 115,967
---------------- ---------------
Earnings from operations before
provision for income taxes 2,924 92,924
Provision for income taxes 8,000 33,000
---------------- ---------------
Net earnings (loss) $ (5,076) 59,924
================ ===============
Net earnings (loss) per share - basic $ 0.00 0.01
================ ===============
Net earnings (loss) per share - diluted $ 0.00 0.01
================ ===============
Weighted average shares - basic 4,273,500 4,273,500
Potential dilutive shares - 111,377
---------------- ---------------
Weighted average shares - diluted 4,273,500 4,384,877
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Accum-
ulated
other
Common stock Additional compre-
------------ paid-in hensive Retained
Shares Par value capital loss earnings
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1998 4,450,000 44,500 $3,515,699 -- 5,322,282
Net earnings -- -- -- -- 59,924
---------- ---------- ---------- --------- ----------
Balance at March 31, 1999 4,450,000 44,500 3,515,699 -- 5,382,206
Comprehensive loss:
Net loss -- -- -- -- (5,076)
Unrealized loss on available-for-
sale marketable securities, net
of tax benefit of $12,150 -- -- -- (68,600) --
Total comprehensive loss
Balance at March 31, 2000 4,450,000 44,500 $3,515,699 (68,600) 5,377,130
========== ========== ========== ========== =========
<CAPTION>
Total
Treasury stock stock-
-------------- holders'
Shares Amount equity
------- --------- ----------
<S> <C> <C> <C>
Balance at March 31, 1998 176,500 (298,217) 8,584,264
Net earnings -- -- 59,924
---------- ---------- ----------
Balance at March 31, 1999 176,500 (298,217) 8,644,188
Comprehensive loss:
Net loss -- -- (5,076)
Unrealized loss on available-for
sale marketable securities, ne
of tax benefit of $12,150 -- -- (68,600)
----------
Total comprehensive loss (73,676)
----------
Balance at March 31, 2000 176,500 (298,217) 8,570,512
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) from continuing operations $ (5,076) 59,924
---------- -----------
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) continuing operations:
Depreciation and amortization 53,559 74,339
Gain on sale of marketable securities (550) -
Deferred income taxes (2,000) (4,000)
Changes in assets and liabilities:
Accounts receivable 562 1,487
Prepaid expenses (2,506) 8,368
Accounts payable (31,619) 7,347
Accrued expenses (19,110) (3,231)
Income taxes payable (19,389) 48,045
---------- -----------
(21,053) 132,355
---------- -----------
Net cash provided by (used in) operating
activities of continuing operations (26,129) 192,279
---------- -----------
Net cash flows used in discontinued operations - (86,204)
---------- -----------
Cash flows from investing activities:
Purchases of marketable securities (728,790) -
Proceeds from sales of marketable securities 4,350 -
Capital expenditures, net (6,457) (2,614)
---------- -----------
Net cash used in investing activities (730,897) (2,614)
---------- -----------
Net increase (decrease) in cash and cash equivalents (757,026) 103,461
Cash and cash equivalents - beginning of year 8,209,421 8,105,960
---------- -----------
Cash and cash equivalents - end of year $7,452,395 8,209,421
========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ 30,084 10,511
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF BUSINESS
American Claims Evaluation, Inc. (the Company) operates in a
single segment that provides a full range of vocational
rehabilitation and disability management services through its
wholly-owned subsidiary, RPM Rehabilitation & Associates, Inc.
(b) PRINCIPLES OF CONSOLIDATION
The Company's financial statements are prepared on a consolidated
basis and include the Company and its wholly-owned subsidiary. All
significant intercompany transactions and balances have been
eliminated in consolidation.
(c) REVENUE RECOGNITION
Revenue for vocational rehabilitation services are recognized when
the related services are provided.
(d) CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or
less at the date of purchase are considered to be cash
equivalents. Cash equivalents are comprised of short-term
commercial paper of $6,983,206 and $7,954,166 as of March 31, 2000
and 1999, respectively.
(e) MARKETABLE SECURITIES
The Company classifies its investments in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and Equity
Securities. These marketable securities have been classified as
available-for-sale securities and as a result are recorded at fair
value. Fair value is determined based on quoted market prices.
Unrealized losses, net of taxes, are reported as accumulated other
comprehensive loss as a separate component of stockholders'
equity. For purposes of determining realized gains and losses, the
cost of marketable securities sold is based upon the first-in,
first-out method.
(f) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated
depreciation. Depreciation of property and equipment is computed
using the straight-line method over the estimated useful lives of
the respective assets.
(g) GOODWILL
The excess of cost over fair value of net assets acquired
(goodwill) is being amortized on a straight-line basis over a
period of twenty years. Amortization expense amounted to $32,425
for
F-6
(Continued)
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
each of the years ended March 31, 2000 and 1999 and is included in
selling, general and administrative expenses in the consolidated
statements of operations.
The Company assesses the recoverability of this intangible asset
by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted
future operating cash flows of the acquired operation. The amount
of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of
the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.
(h) INCOME TAXES
The Company accounts for income taxes under the asset and
liability method. Under this method, deferred tax assets and
liabilities are recognized based on the temporary differences
between the carrying amounts of assets and liabilities for
financial statement purposes and income tax purposes using enacted
tax rates expected to be in effect when such amounts are realized
and settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that
includes the enactment date.
(i) EARNINGS PER SHARE
Basic earnings per share are computed on the weighted average
common shares outstanding. Diluted earnings per share reflects the
maximum dilution from potential common shares issuable pursuant to
the exercise of stock options, if dilutive, outstanding during
each period. Employee stock options totaling 595,500 and 206,500
for the years ended March 31, 2000 and 1999, respectively, were
not included in the net earnings (loss) per share calculations
because their effect would have been anti-dilutive.
(j) FAIR VALUE OF FINANCIAL INSTRUMENTS
The book values of the Company's monetary assets and liabilities
approximate fair value as a result of the short term nature of
such assets and liabilities.
(k) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare
these consolidated financial statements in conformity with
generally accepted accounting principles. Actual results could
differ from those estimates.
F-7
(Continued)
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(l) COMPREHENSIVE LOSS
SFAS No. 130, Reporting Comprehensive Income, establishes
standards for reporting and presentation of comprehensive income
and its components. SFAS No. 130 requires unrealized losses on the
Company's available-for-sale marketable securities to be included
in other comprehensive loss which is presented in the consolidated
statements of stockholders' equity. The Statement requires only
additional disclosures in the consolidated financial statements;
it does not affect the Company's financial position, results of
operations or cash flows.
(2) MARKETABLE SECURITIES
At March 31, 2000, marketable securities were classified as
available-for-sale. A summary of marketable securities information
related to cost, fair value and unrealized holding losses at March 31,
2000 is as follows:
UNREALIZED
HOLDING FAIR
COST LOSSES VALUE
----------- ---------- ----------
Equity securities $ 724,990 (80,750) 644,240
=========== ========== ==========
(3) PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 and 1999 consist of the
following:
<TABLE>
<CAPTION>
ESTIMATED
2000 1999 USEFUL LIFE
---------- ---------- -------------
<S> <C> <C> <C>
Equipment $ 296,671 290,214 5 years
Furniture and fixtures 72,366 72,366 5 to 10 years
----------- ----------
369,037 362,580
Less accumulated depreciation 328,958 307,824
----------- ----------
$ 40,079 54,756
=========== ==========
</TABLE>
Depreciation expense for the years ended March 31, 2000 and 1999 amounted
to $21,134 and $41,914, respectively.
F-8
(Continued)
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(4) INCOME TAXES
Income tax expense (benefit) for the years ended March 31, 2000 and 1999
is comprised of the following:
YEAR ENDED MARCH 31,
------------------------
2000 1999
----------- ----------
Current:
Federal $ 8,000 36,000
State 2,000 1,000
----------- ----------
10,000 37,000
Deferred:
Federal (2,000) (4,000)
----------- ----------
$ 8,000 33,000
=========== ==========
The actual provision for income taxes differed from that which would have
resulted when applying the statutory Federal income tax rate as a result
of the following items:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C> <C> <C>
Expected income tax provision at
the statutory Federal tax rate $ 1,000 34% $ 32,000 34%
State taxes, net of Federal tax
benefit 1,000 34 - -
Amortization of goodwill 11,000 376 11,000 12
Benefit of graduated rates (5,000) (170) (11,000) (11)
Other, net - - 1,000 1
-------- ---- ---------- ----
Actual income tax provision $ 8,000 274% $ 33,000 36%
======== ==== ========== ====
</TABLE>
The tax effects of temporary differences that give rise to the deferred
tax assets at March 31, 2000 and 1999 are as follows:
2000 1999
--------- -------
Deferred tax assets:
Depreciation $ 3,527 1,527
Unrealized loss on marketable securities 12,150 -
--------- -------
$ 15,677 1,527
========= =======
F-9
(Continued)
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(5) MAJOR CUSTOMER
The Company has one customer who accounted for 66% and 69% of revenues
for the years ended March 31, 2000 and 1999, respectively. Services are
performed by the Company for this customer under two separate contracts
which expire on January 1, 2001. The renewal of these contracts can not
be assured and the loss of these contracts would have a material effect
on the consolidated financial statements. The Company also has a customer
who accounted for 13% and 11% of revenues for the years ended March 31,
2000 and 1999, respectively.
(6) STOCK OPTIONS
The Company has three stock option plans, the 1985 Stock Option Plan
(1985 Plan), the 1991 Stock Option Plan (1991 Plan) and the 1997
Incentive Stock Option Plan (1997 Plan). The 1985 Plan, which provided
for the granting of 400,000 stock options of the Company's common stock,
expired except as to options outstanding. The 1991 Plan provides for the
granting of 400,000 stock options, which may be incentive or
non-qualified stock options, to directors and employees. The 1991 Plan
also provides for stock appreciation rights. No such rights have been
granted as of March 31, 2000. The 1997 Plan provides for incentive or
non-qualified stock options to be granted to key employees, officers,
directors, independent contractors and consultants of the Company, for
the purchase of up to 750,000 shares.
Under the Plans, options may be granted at prices not less than the fair
market value on the date the option is granted. Options become
exercisable as determined at the date of grant by a committee of the
Board of Directors. Options expire ten years after the date of grant
unless an earlier expiration date is set at the time of grant. The
vesting schedules for the options are from zero to five years.
Changes in the options outstanding during the years ended March 31, 2000
and 1999 are summarized in the following table:
WEIGHTED
NO. OF AVERAGE
SHARES EXERCISE PRICE
---------- ---------------
Balance - March 31, 1998 550,500 $ 1.70
Fiscal 1999:
Options granted 20,000 2.25
---------- ----
Balance - March 31, 1999 570,500 1.72
Fiscal 2000:
Options granted 25,000 2.50
---------- -----
Balance - March 31, 2000 595,500 $ 1.75
========== =====
F-10
(Continued)
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
As of March 31, 2000, 6,000 and 370,000 options were available for grant
under the 1991 Plan and 1997 Plan, respectively.
The following table sets forth the exercise prices, the number of options
outstanding and exercisable, and the remaining contractual lives of the
Company's stock options at March 31, 2000:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE WEIGHTED
PRICE OF AVERAGE
NUMBER OF OPTIONS EXERCISABLE CONTRACTUAL
EXERCISE PRICE OUTSTANDING EXERCISABLE OPTIONS LIFE REMAINING
-------------- ------------ ----------- ---------- --------------
<S> <C> <C> <C> <C>
$1.25 300,000 300,000 $1.25 7 years
$1.82 - $2.50 295,500 246,750 $2.24 4.8 years
---------- ---------- ----- ---------
595,500 546,750 $1.70 5.5 years
========== ========== ===== =========
</TABLE>
The Company has adopted the "disclosure only" provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, and will continue to use the
intrinsic value-based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. Accordingly, no compensation expense has been recognized for
the Company's stock option plans. Had compensation expense for the
Company's stock option plans been determined based on the fair value at
the grant date for awards during the years ended March 31, 2000 and 1999
consistent with the provisions of SFAS No. 123, the Company's net
earnings (loss) and earnings (loss) per share would have been reduced to
the pro forma amounts indicated below:
2000 1999
---------- ----------
Net earnings (loss):
As reported $ (5,076) 59,924
Pro forma (30,589) 42,339
Basic net earnings (loss) per share:
As reported .00 .01
Pro forma (.01) .01
Diluted net earnings (loss) per share:
As reported .00 .01
Pro forma (.01) .01
F-11
(Continued)
<PAGE>
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
The weighted average fair value per stock option granted was $1.45 and
$1.03 for those options granted in the years ended March 31, 2000 and
1999, respectively. The Company estimated the fair values using the
Black-Scholes option pricing model, using the following assumptions:
2000 1999
---------- -----------
Expected dividend yield - -
Risk-free interest rate 6.00% 6.00%
Expected stock price volatility 59.00% 55.00%
Expected option lives (years) 7.5 7.5
The pro forma effects on net earnings (loss) and net earnings (loss) per
share for the years ended March 31, 2000 and 1999 may not be
representative of the pro forma effects in future years since
compensation cost is allocated on a straight-line basis over the vesting
periods of the grants, which extend beyond the reported years.
(7) RETIREMENT PLAN
The Company sponsors a retirement plan pursuant to section 401(k) of the
Internal Revenue Code (the "Code") for all employees meeting certain
service requirements. Participants may contribute a percentage of
compensation not to exceed the maximum allowed under the Code. The plan
provides for a matching contribution by the Company which amounted to
$8,597 and $2,917 for the years ended March 31, 2000 and 1999,
respectively.
(8) COMMITMENTS
Rental expense under non-cancelable operating leases for office space
amounted to $131,966 and $132,990 for the years ended March 31, 2000 and
1999, respectively. Minimum lease payments under non-cancelable operating
leases, exclusive of future escalation charges, as of March 31, 2000 are
as follows:
2001 $ 118,000
2002 116,000
2003 118,000
2004 97,000
2005 53,000
2006 and thereafter 13,000
-----------
Total minimum lease payments $ 515,000
===========
F-12
