U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
{X} QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2002
{ } TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number: 0-14807
AMERICAN CLAIMS EVALUATION, INC.
(Exact name of small business issuer as specified 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 NEW YORK 11753
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(Address of principal executive offices)
(516) 938-8000
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(Issuer's telephone number)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
The number of shares outstanding of the issuer's common stock, par value $.01,
was 4,259,800 as of July 31, 2002.
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
AMERICAN CLAIMS EVALUATION, INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2002
(unaudited) and March 31, 2002 3
Consolidated Statements of Operations for the Three Months
ended June 30, 2002 and 2001 (unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
ended June 30, 2002 and 2001 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6 - 7
Item 2. Management's Discussion and Analysis or Plan of Operation 8 - 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
- ------
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
JUN.30, MAR.31,
2002 2002
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $7,389,341 7,440,897
Accounts receivable, net 87,158 99,571
Prepaid expenses 30,884 33,329
Prepaid and recoverable income taxes 77,535 59,535
Deferred tax asset 2,527 2,527
---------- ----------
Total current assets 7,587,445 7,635,859
Property and equipment, net 112,989 121,724
Goodwill, net 371,536 371,536
---------- ----------
Total assets $8,071,970 8,129,119
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,467 34,811
Accrued expenses 105,393 89,579
---------- ----------
Total current liabilities 134,860 124,390
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Stockholders' equity:
Common stock, $.01 par value -
10,000,000 shares authorized; 4,450,000
shares issued; 4,259,800 and 4,273,500
shares outstanding at June 30, 2002 and
March 31, 2002, respectively 44,500 44,500
Additional paid-in capital 3,515,699 3,515,699
Retained earnings 4,694,052 4,742,747
---------- ----------
8,254,251 8,302,946
Treasury shares, at cost, 190,200 and
176,500 shares at June 30, 2002
and March 31, 2002, respectively (317,141) (298,217)
---------- ----------
Total stockholders' equity 7,937,110 8,004,729
---------- ----------
Total liabilities and stockholders' equity $8,071,970 8,129,119
========== ==========
See accompanying notes to consolidated financial statements.
3
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED
------------------------
JUN. 30, JUN. 30,
2002 2001
---------- ----------
Revenues $ 312,466 324,589
Cost of services 148,457 156,126
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Gross margin 164,009 168,463
Selling, general and administrative expenses 270,644 301,382
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Operating loss (106,635) (132,919)
Interest income 39,940 95,478
---------- ----------
Loss before income tax benefit (66,695) (37,441)
Income tax benefit (18,000) (4,000)
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Net loss $ (48,695) (33,441)
========== ==========
Net loss per share:
Basic $ (.01) (.01)
========== ==========
Diluted $ (.01) (.01)
========== ==========
Weighted average common shares outstanding:
Basic 4,259,800 4,273,500
========== ==========
Diluted 4,259,800 4,273,500
========== ==========
See accompanying notes to consolidated financial statements.
4
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED
------------------------
JUN.30, JUN.30,
2002 2001
---------- ----------
Cash flows from operating activities:
Net loss $ (48,695) (33,441)
---------- ----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 8,735 14,867
Changes in assets and liabilities:
Accounts receivable 12,413 7,142
Prepaid expenses 2,445 (294)
Prepaid and recoverable income taxes (18,000) --
Accounts payable (5,344) 5,397
Accrued expenses 15,814 9,886
Income taxes payable -- (4,000)
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16,063 32,998
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Net cash used in operating activities (32,632) (443)
---------- ----------
Cash flows from financing activities:
Purchase of treasury stock (18,924) --
---------- ----------
Net cash used in financing activities (18,924) --
---------- ----------
Net decrease in cash and cash equivalents (51,556) (443)
Cash and cash equivalents at beginning of period 7,440,897 6,890,390
---------- ----------
Cash and cash equivalents at end of period $7,389,341 6,889,947
========== ==========
Supplemental disclosure of cash flow information:
Income taxes paid $ -- --
========== ==========
See accompanying notes to consolidated financial statements.
5
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
accounting principles generally accepted in the United States of America. In the
opinion of management, the information furnished reflects all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
consolidated financial position, results of operations and cash flows for the
interim periods. Interim periods are not necessarily indicative of results for a
full year.
These consolidated financial statements should be read in conjunction with the
audited consolidated financial statements of the Company for the fiscal year
ended March 31, 2002 and the notes thereto contained in the Company's Annual
Report on Form 10-KSB, as filed with the Securities and Exchange Commission.
NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per
share for the three months ended June 30, 2002 and 2001:
THREE MONTHS THREE MONTHS
ENDED ENDED
06/30/02 06/30/01
---------- ----------
Numerator:
Net loss $ (48,695) (33,441)
========== ==========
Denominator:
Denominator for basic loss per share
- weighted average shares 4,259,800 4,273,500
Effect of dilutive securities:
Stock options -- --
---------- ----------
Denominator for diluted loss per share 4,259,800 4,273,500
========== ==========
Basic loss per share $ (.01) $ (.01)
========== ==========
Diluted loss per share $ (.01) $ (.01)
========== ==========
Employee stock options to purchase 1,490,500 and 920,500 shares for the three
months ended June 30, 2002 and 2001, respectively, were not included in the net
loss per share calculations because their effect would have been anti-dilutive.
6
COMPREHENSIVE LOSS
Statement of Financial Accounting Standards ("SFAS") No. 130, REPORTING
COMPREHENSIVE INCOME, required unrealized losses on the Company's available for
sale marketable securities to be included in other comprehensive loss.
Comprehensive loss for the three months ended June 30, 2002 and 2001 was $0 and
$18,436, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective April 1, 2002, the Company adopted SFAS No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS, which had the effect of prospectively eliminating the
Company's amortization of goodwill beginning with the first quarter of fiscal
year 2003 and replacing such amortization with periodic tests of impairment. The
Company performed the required SFAS No. 142 impairment test of goodwill as of
April 1, 2002 and has determined that no adjustment to the asset value is
required. However, future impairment reviews may result in write-downs. The
Company does not have any intangible assets, other than goodwill, with
indefinite useful lives.
On July 30, 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES, which
requires, effective January 1, 2003, that a liability be recognized for costs
associated with an exit or disposal activity only when the liability is
incurred. SFAS No. 146 also establishes fair value as the measurement of such
liabilities. The Company has not determined the effect, if any, that the
adoption of SFAS No. 146 will have on the Company's consolidated financial
statements.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2002 AND 2001
Revenues for the three months ended June 30, 2002 totaled $312,466 as compared
with the $324,589 reported for the corresponding period ended June 30, 2001,
representing a decrease of approximately 3.7%. Although revenues generated by
vocational rehabilitation services remained consistent with prior periods, the
Company experienced a decrease in revenues generated from nurse case management
services in the current period.
Cost of services was 47.5% of revenues for the three months ended June 30, 2002
as compared to 48.1% of revenues in the same period last year.
Selling, general and administrative expenses for the quarter ended June 30, 2002
decreased to $270,644 from $301,382 for the three months ended June 30, 2001.
Overall, the percentage of selling, general and administrative expenses as a
percentage of revenues decreased from 92.9% of revenues during the three months
ended June 30, 2001 to 86.6% as a percentage of revenues in the current three
month period ended June 30, 2002.
Selling, general and administrative expenses for the quarter ended June 30, 2001
included amortization of goodwill of $8,106. No such amortization expense was
recognized in the quarter ended June 30, 2002 due to the Company's adoption of
SFAS No. 142 effective April 1, 2002.
Interest income for the three months ended June 30, 2002 was $39,940 which was
substantially lower than the $95,478 recognized during the three month period
ended June 30, 2001. This decrease was the result of the considerable decrease
in prevailing market interest rates.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, the Company had working capital of $7,452,585 as compared to
working capital of $7,511,469 at March 31, 2002. The Company believes that it
has sufficient cash resources and working capital to meet its present cash
requirements.
During the three months ended June 30, 2002, net cash used in operations of
$32,632 consisted principally of a net loss of $48,695 coupled with an increase
in prepaid and recoverable income taxes of $18,000 offset by a decrease in
accounts receivable of $12,413 and an increase in accrued expenses of $15,814.
Cash flows used in financing activities during the quarter ended June 30, 2002
consisted of purchases of treasury stock totaling $18,924.
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.
8
RECENT ACCOUNTING PRONOUNCEMENTS
Effective April 1, 2002, the Company adopted SFAS No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS, which had the effect of prospectively eliminating the
Company's amortization of goodwill beginning with the first quarter of fiscal
year 2003 and replacing such amortization with periodic tests of impairment. The
Company performed the required SFAS No. 142 impairment test of goodwill as of
April 1, 2002 and has determined that no adjustment to the asset value is
required. However, future impairment reviews may result in write-downs. The
Company does not have any intangible assets, other than goodwill, with
indefinite useful lives.
On July 30, 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL ACTIVITIES, which requires, effective January 1, 2003,
that a liability be recognized for costs associated with an exit or disposal
activity only when the liability is incurred. SFAS No. 146 also establishes fair
value as the measurement of such liabilities. The Company has not determined the
effect, if any, that the adoption of SFAS No. 146 will have on the Company's
consolidated financial statements.
MARKET RISK
The Company is exposed to market risk related to changes in interest rates. Most
of the Company's cash and cash equivalents are invested at variable rates of
interest and further decreases in market interest rates would cause a related
reduction in interest income.
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.
9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 2002.
10
SIGNATURES
In accordance with the requirements 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.
Date: August 14, 2002 By: /s/ GARY GELMAN
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Gary Gelman
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2002 By: /s/ GARY J. KNAUER
----------------------------------------
Gary J. Knauer
Chief Financial Officer, Treasurer
(Principal Financial and Accounting
Officer) and Secretary
11