UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended December 31, 2008
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number: 0-14807
AMERICAN CLAIMS EVALUATION, INC.
(Exact name of registrant as specified in its charter)
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New York
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11-2601199
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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One Jericho Plaza, Jericho, New York
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11753
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(Address of principal executive offices)
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(Zip code)
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(516) 938-8000
(Registrants telephone number, including area code)
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 twelve 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
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
þ
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
o
No
þ
The number of shares outstanding of the Registrants common stock as of February 13, 2009 was
4,761,800.
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
INDEX
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
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Dec. 31, 2008
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Mar. 31, 2008
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(Unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$
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4,293,768
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$
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6,239,442
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Accounts receivable, net
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1,029,710
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Note receivable former ITG shareholders
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302,764
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Current assets of discontinued operations
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111,337
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Prepaid expenses and other current assets
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30,309
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33,560
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Total current assets
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5,656,551
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6,384,339
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Property and equipment, net
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256,435
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92,072
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Goodwill
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750,000
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Non-current assets of discontinued operations
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7,674
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Other assets
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18,565
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Total assets
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$
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6,681,551
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$
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6,484,085
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Liabilities and Stockholders Equity
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Current liabilities:
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Accounts payable
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$
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53,050
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$
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18,936
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Accrued expenses
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534,403
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106,190
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Deferred revenue
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141,962
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Current liabilities of discontinued operations
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33,150
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Capital lease obligations current
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17,651
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Total current liabilities
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747,066
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158,276
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Long-term liabilities:
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Capital lease obligations net of current portion
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32,212
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Total long-term liabilities
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32,212
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Commitments
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Stockholders equity:
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Common stock, $.01 par value. Authorized
20,000,000 shares; issued 5,050,000 shares;
outstanding 4,761,800 shares
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50,500
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50,500
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Additional paid-in capital
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4,952,199
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4,931,099
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Retained earnings
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1,361,415
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1,806,051
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6,364,114
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6,787,650
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Treasury stock, at cost
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(461,841
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)
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(461,841
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)
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Total stockholders equity
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5,902,273
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6,325,809
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Total liabilities and stockholders equity
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$
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6,681,551
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$
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6,484,085
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See accompanying notes to condensed consolidated financial statements.
3
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
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Three months ended
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Nine months ended
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Dec. 31,
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Dec. 31,
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Dec. 31,
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Dec. 31,
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2008
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2007
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2008
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2007
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Revenues
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$
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1,439,638
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$
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$
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1,687,328
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$
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Cost of services
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1,017,326
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1,192,660
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Gross margin
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422,312
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494,668
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Selling, general and
administrative expenses
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670,230
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166,597
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1,131,841
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794,881
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Operating loss from
continuing operations
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(247,918
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(166,597
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(637,173
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(794,881
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Interest income
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27,200
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87,252
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104,906
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267,652
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Interest expense
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(626
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(886
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Loss from continuing
operations
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(221,344
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(79,345
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(533,153
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(527,229
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Discontinued operations:
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Gain (loss) from
discontinued
operations
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19,607
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(1,996
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13,043
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Gain on sale of discontinued
operations
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90,513
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Net loss
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$
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(221,344
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$
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(59,738
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$
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(444,636
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$
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(514,186
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Net earnings (loss) per share:
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From continuing operations
basic and diluted
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$
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(0.05
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$
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(0.02
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$
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(0.11
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$
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(0.11
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From discontinued
operations
basic and diluted
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$
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$
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$
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0.02
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$
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Net loss
basic and diluted
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$
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(0.05
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$
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(0.02
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$
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(0.09
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$
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(0.11
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Weighted average shares
basic and diluted
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4,761,800
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4,761,800
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4,761,800
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4,761,800
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See accompanying notes to condensed consolidated financial statements.
4
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Nine months ended
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Dec. 31,
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Dec. 31,
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2008
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2007
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Cash flows from operating activities:
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Loss from continuing operations
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$
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(533,153
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$
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(527,229
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Adjustments to reconcile net loss to net
cash used in operating activities:
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Depreciation and amortization
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45,334
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15,207
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Stock-based compensation expense
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21,100
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285,000
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Provision for allowance for doubtful accounts
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35,000
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Changes in assets and liabilities:
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Accounts receivable
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16,942
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Prepaid expenses and other current assets
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47,227
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28,883
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Accounts payable
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(127,292
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)
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29,695
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Accrued expenses
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123,213
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(6,383
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)
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Deferred revenue
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(62,108
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99,416
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352,402
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Net cash used in operating activities of
continuing operations
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(433,737
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(174,827
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Operating activities of discontinued operations
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34,439
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40,172
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Net cash used in operating activities
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(399,298
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)
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(134,655
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Cash flows from investing activities:
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Acquisition of business, net of cash acquired
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(568,375
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)
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Proceeds from sale of subsidiary, net of cash divested
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149,391
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Capital expenditures
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(5,598
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)
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(39,055
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Net cash used in investing activities
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(424,582
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)
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(39,055
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Investing activities of discontinued operations
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(9,452
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(2,637
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)
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Net cash used in investing activities
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(434,034
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)
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(41,692
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Cash flows from financing activities:
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Payment of debt
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(1,105,356
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)
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Payment of capitalized lease obligations
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(6,986
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Net cash used in financing activities
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(1,112,342
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)
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Net decrease in cash and cash equivalents
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(1,945,674
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)
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(176,347
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Cash and cash equivalents at beginning of period
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6,239,442
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6,589,576
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Cash and cash equivalents at end of period
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$
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4,293,768
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$
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6,413,229
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Supplemental disclosure of cash flow information:
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Cash paid during the period for:
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Interest
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$
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886
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$
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See accompanying notes to condensed consolidated financial statements.
5
AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
December 31, 2008
(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 make the consolidated
financial position, results of operations and cash flows for the interim periods not misleading.
Interim periods are not necessarily indicative of results for a full year.
These condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of the Company for the fiscal year ended March 31, 2008 and the
notes thereto contained in the Companys Annual Report on Form 10-KSB, as filed with the Securities
and Exchange Commission (SEC).
Discontinued Operations
On September 12, 2008, the Company completed the disposition of its wholly-owned subsidiary, RPM
Rehabilitation & Associates, Inc. (RPM), pursuant to a Stock Purchase Agreement whereby the
Company sold all of the issued and outstanding shares of RPM to Stephen D. Renz, the President of
RPM, for a purchase price of $150,000 in cash, plus an additional purchase price of up to $150,000
in cash contingent upon the future net earnings of RPM calculated over a period of five years from
and after the closing of the transaction. A gain on the sale of RPM of $90,513 was recognized for
book purposes.
The Company followed the provisions of Statement of Financial Accounting Standards (SFAS) No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, related to the accounting
and reporting for segments of a business to be disposed of. Accordingly, the results of RPMs
operations have been classified as discontinued operations in all periods presented.
Acquisition
On September 12, 2008 (the Closing Date), the Company acquired all of the issued and outstanding
shares of Interactive Therapy Group Consultants, Inc. (ITG), a New York corporation and provider
of a comprehensive range of services to children with developmental delays and disabilities, for
$570,000 in cash. Under the terms of the Stock Purchase Agreement (the Stock Purchase
Agreement), the purchase price is subject to positive or negative adjustment based on the final
determination of the tangible net worth of ITG as of the close of business on the Closing Date (the
Final Calculation). Based on the preliminary Final Calculation, a negative adjustment to the
purchase price, amounting to $302,764, will be required. Accordingly, the Company has recorded a
note receivable from the former ITG shareholders for this balance and is currently negotiating
repayment terms. The collectability of this receivable will be continually monitored by the
Company.
The results of operations for ITG are included in the consolidated results of operations beginning
September 13, 2008.
6
The Company had been seeking an acquisition to transition into a new line of business. ITG created
the opportunity for growth in its industry organically and through potential add-on acquisitions.
The business combination was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on
fair values at the date of acquisition as follows:
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Cash
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$
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1,625
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Accounts receivable
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1,081,652
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Prepaid expenses
|
|
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43,976
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|
|
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Total current assets
|
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1,127,253
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Property and equipment
|
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204,099
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Other assets
|
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18,565
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|
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Total assets acquired
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$
|
1,349,917
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Accounts payable
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|
$
|
161,406
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Accrued expenses
|
|
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305,000
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Deferred revenue
|
|
|
204,070
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Bank debt
|
|
|
1,105,356
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Capital lease obligations
|
|
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56,849
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|
|
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Total liabilities assumed
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$
|
1,832,681
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|
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Net assets acquired
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$
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(482,764
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)
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|
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The purchase price has been calculated as follows:
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Purchase price paid on the Closing Date
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$
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570,000
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Note receivable from former ITG shareholders
per terms of the Stock Purchase Agreement
|
|
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(302,764
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)
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|
|
|
Adjusted purchase price
|
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$
|
267,236
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|
|
|
|
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Excess of the purchase price over the net assets acquired (Goodwill)
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|
$
|
750,000
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|
|
|
|
|
The following pro forma information presents the Companys revenues, net loss and loss per share as
if the acquisition of ITG had occurred on the first day of the fiscal year presented below:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Revenue
|
|
$
|
1,439,638
|
|
|
$
|
1,478,969
|
|
|
$
|
4,439,733
|
|
|
$
|
4,259,648
|
|
Loss from continuing operations
|
|
$
|
(247,918
|
)
|
|
$
|
(184,192
|
)
|
|
$
|
(781,311
|
)
|
|
$
|
(1,087,784
|
)
|
Net loss
|
|
$
|
(221,344
|
)
|
|
$
|
(94,847
|
)
|
|
$
|
(644,210
|
)
|
|
$
|
(876,260
|
)
|
Net loss per share basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.18
|
)
|
The pro forma supplemental information is not necessarily indicative of actual results had the
acquisition occurred on the first day of the respective period, nor is it necessarily indicative of
future results. The pro
forma supplemental information does not reflect potential synergies, integration costs, or other
costs or savings.
Pursuant to the terms of the ITG acquisition, $105,000 of the cash consideration was deposited into
an escrow account in accordance with an Escrow Agreement to assure that there are funds available
to satisfy indemnification obligations in respect of any amounts payable by ITG pursuant to a claim
by the
7
New York State Insurance Fund for non-payment of workers compensation premiums and in
respect of any outstanding accounts receivable that are not collected in full within 240 days of
the Closing Date.
ITG also entered into a two-year Employment Agreement (the Employment Agreement) with John
Torrens. Under this Employment Agreement, Mr. Torrens will be employed as President of ITG, is
entitled to receive an annual base salary of $200,000 and is entitled to certain other benefits.
The Employment Agreement contains non-competition, non-solicitation and confidentiality provisions.
The Company is currently exploring alternatives to ITGs corporate structure concerning
non-compliance issues regarding the practice of certain licensed professions in the State of New
York. If a change in professional practice structure is deemed necessary, the Company will take
all appropriate measures to assure compliance on a timely basis. Revenues derived from services
performed by these licensed professionals approximate 23% of total revenues.
Subsequent to the Closing Date, the Company paid off ITGs line of credit and a term note payable
totaling approximately $1,105,000, including interest.
Revenue Recognition
The Company recognizes revenue for services rendered when there is evidence of billable time
expended and recoverability is reasonably assured. Deferred revenue is recorded for federal
allocation amounts attributable to special education programs when invoiced and recognized over the
applicable program periods.
Concentration of Credit Risk
Service revenue is concentrated within a limited number of clients throughout New York State;
municipalities within New York State provide substantial and significant revenue to ITG. This
concentration of customers may impact ITGs overall exposure to credit risk, either positively or
negatively, in that ITGs customers may be similarly affected by changes in economic or other
conditions in New York State.
Net Earnings (Loss) Per Share
Basic earnings (loss) per share are computed on the weighted average common shares outstanding.
Diluted earnings (loss) per share reflects the maximum dilution from potential common shares
issuable pursuant to the exercise of stock options, if dilutive, outstanding during each period.
The Companys net earnings (loss) and weighted average shares outstanding used for computing
diluted earnings (loss) per share for continuing operations and discontinued operations were the
same as those used for computing basic earnings (loss) per share for the three and nine months
ended December 31, 2008 and 2007 because the inclusion of common stock equivalents to the
calculation of diluted earnings (loss) per share for continuing operations would be anti-dilutive.
Potentially dilutive securities consisting of employee and director stock options to purchase
1,251,000 and 1,236,000 shares as of December 31, 2008 and 2007, respectively, were not included in
the diluted net loss per share calculations because their effect would have been anti-dilutive.
Stock Option Plans
The Company follows the provisions of SFAS No. 123 (revised 2004), Share-Based Payment (SFAS
123R). Under these provisions, stock-based compensation is measured at the grant date, based on
the
8
calculated fair value of the award, and is recognized as an expense over the recipients
requisite service period (generally the vesting period of the grant).
The Company recognized stock-based compensation totaling $21,100 during the nine months ended
December 31, 2008 based on the fair value of stock options granted. This expense is included in
selling, general and administrative expenses in the Condensed Consolidated Statements of
Operations. At December 31, 2008, all outstanding options to purchase shares are fully vested.
However, certain option grants contain disposition restrictions which prohibit the sale of 50% of
the shares obtained through the exercise of such awarded options until the first anniversary of the
grant date and the remaining 50% of the shares obtained through the exercise of the awarded options
until the second anniversary of the grant date.
The Company estimates the fair value of stock options granted using the Black-Scholes option
pricing model. Under this method, the average fair value of stock options granted during the nine
months ended December 31, 2008 was $0.47 per share. In addition to the exercise price of the
awards, certain weighted average assumptions were used to estimate the fair value of stock option
grants as follows: expected volatility of 61.7%, expected dividend yield of 0%, risk
-
free interest
rate of 3.18% and an expected option term of 5 years.
The following table summarizes information about stock option activity for the nine months ended
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
Outstanding at March 31, 2008
|
|
|
1,233,500
|
|
|
$
|
2.12
|
|
|
6.0 years
|
|
|
|
|
Granted
|
|
|
45,000
|
|
|
$
|
2.11
|
|
|
10 years
|
|
|
|
|
Expired
|
|
|
(27,500
|
)
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
1,251,000
|
|
|
$
|
2.12
|
|
|
5.5 years
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2008
|
|
|
1,251,000
|
|
|
$
|
2.12
|
|
|
5.5 years
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no options outstanding with an exercise price less than the closing price of the
Companys shares of $0.60 as of December 31, 2008. Accordingly, there was no intrinsic value
associated with outstanding options at such date. At December 31, 2008, there was no unrecognized
compensation cost related to non-vested stock option awards.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those estimates.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Critical Accounting Policies
The Company makes estimates and assumptions in the preparation of its consolidated financial
statements in conformity with accounting principles generally accepted in the United States of
America. Actual results could differ significantly from those estimates under different
assumptions and conditions. Our
9
significant accounting policies are described in Note 1 to the
audited consolidated financial statements included in our Annual Report on Form 10-KSB for the
fiscal year ended March 31, 2008. The accounting policies used in preparing our interim condensed
consolidated financial statements are the same as those described in such Annual Report.
Results of Operations Three and Nine Months ended December 31, 2008 and 2007
On September 12, 2008, the Company completed the disposition of its wholly-owned subsidiary, RPM.
The financial statements have been reclassified to exclude the operating results of RPM from the
continuing operations and account for them as discontinued operations. The following discussion
relates only to the Companys continuing operations, unless otherwise noted.
During the period of September 13, 2008 to December 31, 2008, the Company recognized revenues of
$1,687,638 generated by its newly acquired subsidiary, ITG. ITG provides a comprehensive range of
services to children with developmental delays and disabilities. Costs of services for this period
were $1,192,660, approximately 70.7% of revenue, consisting of payroll and payroll related costs
paid to its staff of salaried and per diem clinicians.
Selling, general and administrative expenses for the quarter ended December 31, 2008 increased to
$670,230 from $166,597 for the three months ended December 31, 2007 as a result of expenses
incurred by ITGs operations. Excluding ITGs expenses, corporate selling, general and
administrative expenses for the three months ended December 31, 2008 experienced a modest increase
over the comparable period in the prior year due to additional accounting fees incurred related to
the Final Calculation. During the nine months ended December 31, 2008, the Company recorded
stock-based compensation expense of $21,100 in accordance with the provisions of SFAS 123R for
stock options granted during the period. By comparison, stock-based compensation expense of
$285,000 was recorded during the nine months ended December 31, 2007.
Interest income for the three and nine months ended December 31, 2008 was $27,200 and $104,906,
respectively. Interest income for the three and six months ended December 31, 2007 was $87,252 and
$267,652, respectively. The dramatic decrease in interest income was a result of declining cash
balances available for investment and a shift to more conservative investments which produced lower
yields.
As a result of the sale of RPM, the Company recognized a gain of $90,513 for book purposes.
Liquidity and Capital Resources
At December 31, 2008, the Company had working capital of $4,909,485 as compared to working capital
of $6,226,063 at March 31, 2008. 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, 2008, net cash used in operating activities was $433,737,
primarily due to the Companys operating loss offset by stock-based compensation expense of $21,100
and the gain on the sale of RPM of $90,513.
Subsequent to the Closing Date, the Company paid off ITGs line of credit and a term note payable
totaling approximately $1,105,000, including interest. ITG will seek a new line of credit for
working capital purposes, if deemed necessary.
10
Future minimum lease payments under non-cancelable capital and operating leases and subleases,
exclusive of future escalation charges, for the remainder of the fiscal year ending March 31, 2009
and fiscal years ending thereafter are as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
Leases
|
|
|
Leases
|
|
2009
|
|
$
|
5,381
|
|
|
$
|
48,000
|
|
2010
|
|
|
21,523
|
|
|
|
182,000
|
|
2011
|
|
|
21,523
|
|
|
|
116,000
|
|
2012
|
|
|
8,004
|
|
|
|
84,000
|
|
2013 and thereafter
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
56,431
|
|
|
$
|
490,000
|
|
|
|
|
|
|
|
|
|
Less: Amounts representing interest
|
|
|
(6,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of minimum lease payments
|
|
|
49,863
|
|
|
|
|
|
Less: Current portion
|
|
|
(17,651
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion of capital leases
|
|
$
|
32,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
While we have not experienced any significant impact from the general slowdown of the economy or
current global credit crisis, continuing economic deterioration could have a negative impact on our
net revenues and profitability in future periods.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Companys financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to the Company.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans An Amendment of FASB Statements No. 87, 88, 106 and 132(R)
(SFAS 158). SFAS 158 requires an employer to (i) recognize in its statement of financial
position an asset for a plans overfunded status or a liability for a plans underfunded status;
(ii) measure a plans assets and its benefit obligations that determine its funded status as of the
end of the employers fiscal year (with limited exceptions); and (iii) recognize changes in the
funded status of a defined benefit postretirement plan in the year in which the changes occur.
Those changes will be reported in comprehensive income. The Company does not maintain any such
plans. Therefore, the requirement to recognize the funded status of a benefit plan and the
disclosure requirements did not have a material effect on the Companys consolidated financial
statements. The requirement to measure plan assets and benefit obligations to determine the funded
status as of the end of the fiscal year and to recognize changes in the funded status in the year
in which the changes occur is effective for fiscal years ending after December 15, 2008. The
adoption of the measurement date provisions of this standard is not expected to have a material
effect on the Companys consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
141R). SFAS 141R replaces SFAS 141, which the Company previously adopted. SFAS 141R revises the
standards for accounting and reporting of business combinations. In summary, SFAS 141R requires
the acquirer of a business combination to measure, at fair value, the assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, with
limited exceptions. SFAS 141R applies to all business combinations for which the acquisition date
is on or after the
11
beginning of the first annual reporting period beginning on or after December
15, 2008. The Company does not believe that the adoption of this statement on April 1, 2009 will
have a material effect on the Companys consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements (SFAS 160), which requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and noncontrolling interest. SFAS 160 is
effective for fiscal years beginning on or after December 15, 2008. The adoption of this standard
is not expected to have a material effect on the Companys consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161 changes the reporting requirements for derivative instruments
and hedging activities under SFAS 133, Accounting for Derivatives and Hedging Activities, by
requiring enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments are accounted for under SFAS 133 and (c) the effect of derivative
instruments and hedging activities on an entitys financial position, financial performance and
cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008. The Company
does not believe that the adoption of this statement will have a material effect on the Companys
consolidated financial statements.
In April 2008, the FASB issued FASB Staff Position (FSP) No. FAS 142-3, Determination of the
Useful Life of Intangible Assets (FAS 142-3). FAS 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under SFAS 142, Goodwill and Other Intangible Assets. The objective
of FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset
under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset
under SFAS 141R and GAAP. FAS 142-3 is effective for financial statements issued for years
beginning after December 15, 2008, and interim periods within those years and applied prospectively
to intangible assets acquired after the effective date. The Company does not believe that the
adoption of FAS 142-3 will have a material effect on the Companys consolidated financial
statements.
In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities (EITF 03-6-1). EITF 03-6-1
affects entities which accrue non-returnable cash dividends on share-based payment awards during
the awards service period. The FASB concluded that unvested share-based payment awards which are
entitled to cash dividends, whether paid or unpaid, are participating securities any time the
common shareholders receive dividends. Because the awards are considered participating securities,
the issuing entity is required to apply the two-class method of computing basic and diluted
earnings per share. EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008,
and early adoption is not permitted. The Company does not believe that the adoption of EITF 03-6-1
will have a material effect on the Companys consolidated financial statements.
Cautionary Statement Regarding Forward Looking Statements
Except for the historical information contained herein, the matters discussed in this Report on
Form 10-Q may contain forward-looking statements that involve risks and uncertainties. The
Companys 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 and the ability of the Company to successfully identify and thereafter consummate
one or more acquisitions.
12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk related to changes in interest rates. Most of the Companys
cash and cash equivalents are invested at variable rates of interest and decreases in market
interest rates would cause a related reduction in interest income.
Item 4. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure the reliability of the financial
statements and other disclosures included in this Report. As of the end of the fiscal quarter ended
December 31, 2008, the Company carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the Companys disclosure
controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as
amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective in timely alerting
them to material information required to be included in the Companys periodic SEC filings.
(b)
Changes in Internal Controls over Financial Reporting
There have been no changes in the Companys internal controls over financial reporting that
occurred during the quarter ended December 31, 2008 that has materially affected, or is reasonably
likely to materially affect, the internal controls over financial reporting identified by the
Companys evaluation in connection with the preparation of this Form 10-Q.
Management is aware that there is a lack of segregation of duties due to the small number of
employees dealing with general administrative and financial matters. However, management has
decided that considering the employees involved and the control procedures in place, risks
associated with such lack of segregation are insignificant and the potential benefits of adding
employees to clearly segregate duties do not justify the expenses associated with such increases.
13
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
|
(a)
|
|
Annual Meeting of Shareholders, October 15, 2008
|
|
|
(b)
|
|
Directors to serve one year terms:
|
|
|
|
|
Gary Gelman
Edward M. Elkin, M.D.
Peter Gutmann
Joseph Looney
|
|
|
(c)
|
|
Election of Directors. Management nominees for election to the
Board of Directors were reelected as directors of the Company to serve until
their respective successors are duly elected and qualified as follows:
|
|
|
|
|
|
Gary Gelman
|
|
4,659,422 for
|
|
54,474 withheld
|
Edward M. Elkin, M.D.
|
|
4,685,422 for
|
|
34,474 withheld
|
Peter Gutmann
|
|
4,685,422 for
|
|
34,474 withheld
|
Joseph Looney
|
|
4,685,422 for
|
|
34,474 withheld
|
Item 6. Exhibits.
|
|
|
Exhibit 31.1
|
|
Section 302 Principal Executive Officer Certification
|
|
|
|
Exhibit 31.2
|
|
Section 302 Principal Financial Officer Certification
|
|
|
|
Exhibit 32.1
|
|
Section 1350 Certification
|
|
|
|
Exhibit 32.2
|
|
Section 1350 Certification
|
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
AMERICAN CLAIMS EVALUATION, INC.
|
|
Date: February 13, 2009
|
By:
|
/s/ Gary Gelman
|
|
|
|
Gary Gelman
|
|
|
|
Chairman of the Board,
President and Chief Executive Officer
|
|
|
|
|
|
Date: February 13, 2009
|
By:
|
/s/ Gary J. Knauer
|
|
|
|
Gary J. Knauer
|
|
|
|
Chief Financial Officer,
Treasurer and Secretary
|
|
15
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