-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Go0LVAn8MTja8Ue3byMkWxVytniu6P+isEmlvNo5UjaIhBr6OZNOFCk1GOctezaH IDZ75g9DT9tscqivIvqa7Q== 0000930413-01-500751.txt : 20010629 0000930413-01-500751.hdr.sgml : 20010629 ACCESSION NUMBER: 0000930413-01-500751 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010628 FILED AS OF DATE: 20010628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CLAIMS EVALUATION INC CENTRAL INDEX KEY: 0000774517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SOCIAL SERVICES [8300] IRS NUMBER: 112601199 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-14807 FILM NUMBER: 1670231 BUSINESS ADDRESS: STREET 1: 375 N BROADWAY STREET 2: ONE JERICHO PLAZA CITY: JERICHO STATE: NY ZIP: 11753 BUSINESS PHONE: 5169388000 MAIL ADDRESS: STREET 1: ONE JERICHO PLAZA CITY: JERICHO STATE: NY ZIP: 11753 10KSB 1 c21253-10ksb.txt FORM 10-KSB 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, 2001 -------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------- --------- Commission file number 0-14807 ------- AMERICAN CLAIMS EVALUATION, INC. (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, 2001 were $1,151,006. As of June 15, 2001, there were 4,273,500 shares of the issuer's common stock, $.01 par value, outstanding with an aggregate market value of $2,989,023 held by non-affiliates. For purposes of this disclosure, shares of common stock held by directors, officers and stockholders whose ownership exceeds five percent of the common stock outstanding 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. DOCUMENTS INCORPORATED BY REFERENCE None. Transitional Small Business Disclosure Format (check one): Yes No X ----- ----- 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 assists 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 expedite the adjudication process, resulting in timely and successful case closure. RPM was approved as a preferred provider of vocational rehabilitation services to the Washington State Department of Labor & Industries ("L&I") under two separate contracts, which expired on May 31, 2001. For the year ended March 31, 2001, the L&I contracts accounted for 65% of the Company's total revenues. Effective June 1, 2001, L&I eliminated the process of awarding contracts to qualifying firms in favor of a new system which creates the opportunity for any firm or individual meeting L&I's requirements to provide services. To be eligible under this new system, a provider must only meet certain business practice standards and counselor credentialing criteria without the necessity of being awarded a contract. All RPM counselors have been transitioned into the new system and have until December 1, 2006 to meet the new credentialing standards. The Company has instituted a program to assure that all counselors not currently meeting L&I's credentialing requirements will do so by the imposed deadline. Although the Company anticipates no material change in the volume of cases referred to it or its counselors, there can be no assurances that the new system of referring cases will result in a number of referrals comparable to prior results. 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. 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, 2001, 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 are 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, 2001. -3- 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, 1999 through March 31, 2001: HIGH LOW ---- --- Fiscal 2000: 4/01/99 - 6/30/99 2.56 1.69 7/01/99 - 9/30/99 4.50 2.16 10/01/99 - 12/31/99 2.81 1.50 1/01/00 - 3/31/00 4.31 1.91 Fiscal 2001: 4/01/00 - 6/30/00 3.25 1.88 7/01/00 - 9/30/00 2.97 1.81 10/01/00 - 12/31/00 2.88 1.56 1/01/01 - 3/31/01 3.03 1.81 The number of holders of the Company's Shares was approximately 915 on March 31, 2001, 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. -4- ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. RESULTS OF OPERATIONS For the fiscal year ended March 31, 2001 ("Fiscal 2001"), revenue from vocational rehabilitation services totaled $1,151,006, an increase of 3.8% from the $1,109,286 reported for the fiscal year ended March 31, 2000 ("Fiscal 2000"). Revenue for Fiscal 2000 had experienced a 5.1% decrease from the $1,169,436 generated in the fiscal year ended March 31, 1999. During Fiscal 2001, approximately 65% of total revenues were generated providing vocational rehabilitation services to the Washington State Department of Labor & Industries ("L&I") under two separate contracts which expired on May 31, 2001. Effective June 1, 2001, L&I has eliminated the process of awarding contracts to qualifying firms in favor of a new system which creates the opportunity for any firm or individual meeting L&I's requirements to provide services. To become eligible under this new system, a provider must only meet certain business practice standards and counselor credentialing criteria without the necessity of being awarded a contract. All RPM counselors have been transitioned into the new system and have until December 1, 2006 to meet the new credentialing standards. The Company has instituted a program to assure that all counselors not currently meeting L&I's credentialing requirements will do so by the imposed deadline. Although the Company anticipates no material change in the volume of cases referred to it or its counselors, there can be no assurances that the new system of referring cases will result in a number of referrals comparable to prior results. The cost of vocational rehabilitation services was 47.5% of revenues for Fiscal 2001 as compared to 46.0% of revenues for Fiscal 2000. The Company experienced an increase in the cost of vocational rehabilitation services due to an increase in the percentage of revenue generated from services provided to community access programs which achieve lower gross margins. Selling, general and administrative expenses were $1,091,651 and $1,105,147 in Fiscal 2001 and Fiscal 2000, respectively. Interest income increased slightly to $469,513 during Fiscal 2001, as compared to interest income of $461,257 for Fiscal 2000. An impairment charge of $916,976 was recorded during the three months ended December 31, 2000 on investments in IVCO Industries, Inc. common stock for which the decline in market value was deemed to be other than temporary. LIQUIDITY AND CAPITAL RESOURCES The Company's primary source of cash is internally generated funds. At March 31, 2001, the Company had working capital of $7,100,642 as compared to working capital of $8,094,047 at March 31, 2000. For Fiscal 2001, net cash provided by operating activities was $36,874. Cash flows used in investing activities totaled $598,879, consisting of $492,072 used for purchases of marketable securities and $106,807 in capital expenditures. 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. -5- 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 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 on page 12 of this report. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. -6- 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 54 Chairman of the Board, President and Chief Executive Officer Gary J. Knauer 41 Chief Financial Officer, Treasurer and Secretary Edward M. Elkin, M.D. 62 Director Peter Gutmann 72 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. -7- Compliance with Section 16(a) of the Securities Exchange Act of 1934 Under Federal securities laws, the Company's directors, its executive officers and any person holding more than 10% of the Company's Shares are required to report their ownership of the Company's Shares and any changes in that ownership to the Securities and Exchange Commission ("SEC") on the SEC's Forms 3, 4 and 5. Based on its review of the copies of such forms it has received, the Company believes that all officers, directors and greater than 10% beneficial owners complied with all filing requirements applicable to them with respect to transactions during Fiscal 2001. 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 three fiscal years. No other executive officer had total annual salary and bonus which exceeded $100,000 during the Company's fiscal year ended March 31, 2001. SUMMARY COMPENSATION TABLE
Long-Term Compensation Annual Compensation Awards --------------------------------------- ------------- Name and Other Annual All Other Principal Fiscal Salary Bonus Compensation Options Compensation Position Year ($) ($) ($) (1) (#) ($) (2) - --------- ------ -------- ----- ------------- ------------ ------------ Gary Gelman 2001 $244,311 - - 250,000 $2,511 Chairman, 2000 244,311 - - - $1,636 President 1999 244,311 - - - - and CEO
(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 years ended March 31, 2001, 2000 and 1999, respectively. 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, 2001, 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 which is qualified under Section 401(k) of the Internal Revenue Code. The Company matches 50 percent of employee contributions up to 3 percent of compensation. 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. -8- 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, 2001), and no additional options may be granted. 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. The 1991 Plan has also expired, except as to options outstanding (consisting of 188,000 options at March 31, 2001), and no additional options may be granted. 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. On August 25, 2000, the Board of Directors adopted the 2000 Incentive Stock Plan (the "2000 Plan"). The Company's shareholders ratified and approved the 2000 Plan in October 2000. The 2000 Plan permits the granting of an aggregate of 750,000 Shares. Under both the 1997 Plan and 2000 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 granted pursuant to the 1997 and 2000 Plans 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 November 1, 2000, the Board of Directors granted options to purchase a total of 325,000 Shares under the 1997 Plan at an exercise price of $2.56 to the Company's executive officers and outside directors. Both the 2000 and 1997 Plans provide that the number of Shares subject thereto and the outstanding options and their exercise prices are to be appropriately adjusted for mergers, consolidations, recapitalizations, stock dividends, stock splits or combinations of shares. The current option committee appointed by the Board of Directors to administer the Company's stock option plans consists of Messrs. Gelman, Gutmann and Elkin. The Board of Directors may at any time terminate or from time to time amend or alter any of the existing stock option plans. -9- OPTION GRANTS IN 2001 The following table summarizes the grant of stock options made during Fiscal 2001 to the Named Executive Officer.
Number of % of Total Securities Options Underlying Granted to Exercise Options Employees or Base Expiration Name Granted(#) in Fiscal Year Price ($/Sh) Date - ------------------ ------------- -------------- ------------ ------------- Gary Gelman 250,000 76.9% $2.56 11/01/11 Chairman, President and CEO
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES The following table summarizes the number and dollar value of unexercised stock options at March 31, 2001 for the Named Executive Officer.
Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at Value FY-End (#) FY-End ($)(1) Shares Acquired Realized Exercisable/ Exercisable/ Name on Exercise(#) ($) Unexercisable Unexercisable - ---------------------- --------------- -------- ------------- ------------- Gary Gelman, - - 650,000/- $243,900/- Chairman, President and CEO
(1) The closing price of the Company's Shares on March 31, 2001 as reported by the Nasdaq SmallCap Market was $2.063 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 two 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. -10- ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table and notes thereto set forth information regarding the beneficial ownership of the Company's Shares as of June 15, 2001 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.
Amount and Nature Name and Address of Beneficial Percent of Voting of Beneficial Owner Ownership (1) (4) Securities (1) - ------------------- ---------------------- --------------------- Gary Gelman (2) 2,946,400 59.8% Peter Gutmann (2) 91,000 (3) 2.1% Edward M. Elkin, M.D. (2) 65,200 1.5% Gary J. Knauer (2) 91,500 2.1% D.H. Blair Investment Corp. 423,824 (5) 9.9% All executive officers and directors as a group (four persons) 3,194,100 62.6%
- -------------- (1) Based on a total of 4,273,500 Shares issued and outstanding and 831,500 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 831,500 Shares) which, in the case of Messrs. Gelman, Gutmann, Elkin, and Knauer are 650,000, 45,000, 45,000, and 91,500 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. -11- 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, 2001 and 2000 Consolidated Statements of Operations for the years ended March 31, 2001 and 2000 Consolidated Statements of Stockholders' Equity for the years ended March 31, 2001 and 2000 Consolidated Statements of Cash Flows for the years ended March 31, 2001 and 2000 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. EXHIBITS -------- 10.1 Employment Agreement between the Company and Gary Gelman. 23 Consent of Independent Auditors. EXHIBITS The following was filed as Exhibit A to the Company's Proxy Statement dated September 11, 2000 and is incorporated by reference herein: 1. 2000 Stock Incentive Plan. The following was filed as an exhibit to the Company's Annual Report on Form 10-KSB for its year ended March 31, 2000 and is incorporated by reference herein: 1. Lease Renewal Agreement with respect to the RPM Rehabilitation & Associates, Inc. office located at 901 East Second Avenue, Spokane, WA. The following was filed as an exhibit to the Company's Annual Report on Form 10-K for its year ended March 31, 1998 and is incorporated by reference herein: 1. Lease Extension and Modification Agreement with respect to the Company's office at One Jericho Plaza, Jericho, NY. -12- 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, 1995 and is incorporated by reference herein: 1. Lease Agreement with respect to the RPM Rehabilitation & Associates, Inc. office at 901 East Second Avenue, Spokane, WA. The following was filed as an exhibit to the Company's Annual Report on Form 10-K for its year ended March 31, 1994 and is incorporated by reference herein: 1. Lease Agreement with respect to the Company's office at One Jericho Plaza, Jericho, NY. The following was filed as an exhibit to the Company's Annual Report on Form 10-K for its year ended March 31, 1989 and is incorporated by reference herein: 1. Certificate of Amendment of Certificate of Incorporation. The following were filed as exhibits 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. 10.3 1985 Stock Option Plan. The following were filed as exhibits 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. 10.5 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, 2001. -13- 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 15, 2001 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: SIGNATURES TITLE DATE - ---------- ----- ---- /s/ GARY GELMAN Chairman of the Board, June 15, 2001 - ----------------------------- President and Chief Gary Gelman Executive Officer (Principal Executive Officer) /s/ GARY J. KNAUER Chief Financial Officer, June 15, 2001 - ----------------------------- Treasurer (Principal Financial Gary J. Knauer and Accounting Officer) and Secretary /s/ EDWARD M. ELKIN Director June 15, 2001 - ----------------------------- Edward M. Elkin, M.D. /s/ PETER GUTMANN Director June 15, 2001 - ----------------------------- Peter Gutmann -14- [Logo]KPMG AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Consolidated Financial Statements (Form 10-KSB) March 31, 2001 and 2000 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY TABLE OF CONTENTS PAGE Independent Auditors' Report F-1 Consolidated Financial Statements: Consolidated Balance Sheets as of March 31, 2001 and 2000 F-2 Consolidated Statements of Operations for the years ended March 31, 2001 and 2000 F-3 Consolidated Statements of Stockholders' Equity for the years ended March 31, 2001 and 2000 F-4 Consolidated Statements of Cash Flows for the years ended March 31, 2001 and 2000 F-5 Notes to Consolidated Financial Statements F-6 [Logo]KPMG 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, 2001 and 2000 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years then ended. 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 auditing standards generally accepted in the United States of America. 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 consolidated 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, 2001 and 2000, and the results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP ------------ Melville, New York May 4, 2001 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Consolidated Balance Sheets March 31, 2001 and 2000
ASSETS 2001 2000 ----------- ---------- Current assets: Cash and cash equivalents $ 6,890,390 7,452,395 Marketable securities 225,064 644,240 Accounts receivable (net of allowance for doubtful accounts of $1,000 in 2001 and 2000) 99,078 88,429 Prepaid expenses 29,454 21,886 Deferred income taxes 5,527 15,677 ----------- ---------- Total current assets 7,249,513 8,222,627 Property and equipment, net 122,265 40,079 Excess cost over fair value of net assets acquired, net of accumulated amortization of $244,539 and $212,114 in 2001 and 2000, respectively 403,961 436,386 ----------- ---------- $ 7,775,739 8,699,092 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 26,806 18,503 Accrued expenses 81,199 78,691 Income taxes payable 40,866 31,386 ----------- ---------- Total current liabilities 148,871 128,580 ----------- ---------- Commitments (note 8) 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 (75,022) (68,600) Retained earnings 4,439,908 5,377,130 ----------- ---------- 7,925,085 8,868,729 Treasury shares, at cost, 176,500 shares (298,217) (298,217) ----------- ---------- Total stockholders' equity 7,626,868 8,570,512 ----------- ---------- $ 7,775,739 8,699,092 =========== ==========
See accompanying notes to consolidated financial statements. F-2 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Consolidated Statements of Operations Years ended March 31, 2001 and 2000
2001 2000 ----------- ---------- Revenues $ 1,151,006 1,109,286 Cost of services 547,114 510,706 ----------- ---------- Gross margin 603,892 598,580 Selling, general and administrative expenses 1,091,651 1,105,147 ----------- ---------- Operating loss (487,759) (506,567) Other income: Interest income 469,513 461,257 Loss on impairment of investment (916,976) -- Gain on sale of marketable securities -- 550 Miscellaneous income 1,000 47,684 ----------- ---------- Earnings (loss) from operations before Provision for income taxes 3,000 8,000 ----------- ---------- Net loss $ (937,222) (5,076) =========== ========== Net loss per share - basic and diluted $ (.22) 0.00 =========== ========== Weighted average shares - basic and diluted 4,273,500 4,273,500 =========== ==========
See accompanying notes to consolidated financial statements F-3 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Consolidated Statements of Stockholders' Equity Years ended March 31, 2001 and 2000
ACCUM- ULATED OTHER TOTAL COMMON STOCK ADDITIONAL COMPRE- TREASURY STOCK STOCK- -------------------- PAID-IN HENSIVE RETAINED -------------------- HOLDERS' SHARES PAR VALUE CAPITAL LOSS EARNINGS SHARES AMOUNT EQUITY ---------- --------- ------------ -------- ---------- --------- --------- ---------- Balance at March 31, 1999 4,450,000 44,500 $ 3,515,699 -- 5,382,206 176,500 (298,217) 8,644,188 Comprehensive loss: Net loss -- -- -- -- (5,076) -- -- (5,076) Unrealized loss on available-for- sale marketable securities -- -- -- (68,600) -- -- -- (68,600) Total comprehensive loss (73,676) ---------- --------- ------------ -------- ---------- --------- --------- ---------- Balance at March 31, 2000 4,450,000 44,500 $ 3,515,699 (68,600) 5,377,130 176,500 (298,217) 8,570,512 Comprehensive loss: Net loss -- -- -- -- (937,222) -- -- (937,222) Unrealized loss on available-for- sale marketable securities -- -- -- (6,422) -- -- -- (6,422) Total comprehensive loss (943,644) ---------- --------- ------------ -------- ---------- --------- --------- ---------- Balance at March 31, 2001 4,450,000 44,500 $ 3,515,699 (75,022) 4,439,908 176,500 (298,217) 7,626,868 ========== ========= ============ ======== ========== ========= ========= ==========
See accompanying notes to consolidated financial statements. F-4 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Consolidated Statements of Stockholders' Equity Years ended March 31, 2001 and 2000
2001 2000 ----------- ----------- Cash flows from operating activities: Net loss $ (937,222) (5,076) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 57,046 53,559 Loss on impairment of investment 916,976 -- Gain on sale of marketable securities -- (550) Deferred income taxes (2,000) (2,000) Changes in assets and liabilities: Accounts receivable (10,649) 562 Prepaid expenses (7,568) (2,506) Accounts payable 8,303 (31,619) Accrued expenses 2,508 (19,110) Income taxes payable 9,480 (19,389) ----------- ---------- 974,096 (21,053) ----------- ---------- Net cash provided by (used in) operating activities 36,874 (26,129) ----------- ---------- Cash flows from investing activities: Purchases of marketable securities (492,072) (728,790) Proceeds from sales of marketable securities -- 4,350 Capital expenditures (106,807) (6,457) ----------- ---------- Net cash used in investing activities (598,879) (730,897) ----------- ---------- Net decrease in cash and cash equivalents (562,005) (757,026) Cash and cash equivalents - beginning of year 7,452,395 8,209,421 ----------- ---------- Cash and cash equivalents - end of year $ 6,890,390 7,452,395 =========== ========== Supplemental disclosure of cash flow information: Cash paid during the year for: Income taxes $ 2,130 30,084 =========== ==========
See accompanying notes to consolidated financial statements. F-5 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000 (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. (RPM). (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. (b) REVENUE RECOGNITION Revenue for vocational rehabilitation services are recognized when the related services are provided. (c) 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 $6,686,156 and $6,983,206 as of March 31, 2001 and 2000, 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. F-6 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000 (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 each of the years ended March 31, 2001 and 2000 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 920,500 and 595,500 for the years ended March 31, 2001 and 2000, respectively, were not included in the net 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 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000 (l) COMPREHENSIVE INCOME 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 accumulated other comprehensive loss which is presented in the consolidated statements of stockholders' equity. (2) MARKETABLE SECURITIES AND INVESTMENT IMPAIRMENT At March 31, 2001, marketable securities consist of shares of IVC Industries, Inc. (IVCO) common stock which have been classified as available for sale securities. During the year ended March 31, 2001, the Company recorded an impairment charge of $916,976 related to its investment in IVCO, which was judged to have experienced an other than temporary decline in value. A summary of marketable securities information related to the adjusted cost after the impairment charge, fair value and unrealized holding loss at March 31, 2001 is as follows: UNREALIZED ADJUSTED FAIR HOLDING COST VALUE LOSS ---------- -------- ---------- Investment in IVCO $ 300,086 225,064 (75,022) ========== ======== ========= (3) PROPERTY AND EQUIPMENT Property and equipment at March 31, 2001 and 2000 consist of the following:
ESTIMATED 2001 2000 USEFUL LIFE ---------- ----------- ----------- Equipment $ 335,295 296,671 5 years Furniture and fixtures 72,366 72,366 5 to 10 years ----------- ---------- 407,661 369,037 Less accumulated depreciation 285,396 328,958 ----------- ---------- $ 122,265 40,079 =========== ==========
Depreciation expense for the years ended March 31, 2001 and 2000 amounted to $24,621 and $21,134, respectively. F-8 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000 (4) INCOME TAXES Income tax expense (benefit) for the years ended March 31, 2001 and 2000 is comprised of the following: YEAR ENDED MARCH 31, ----------------------- 2001 2000 ---------- --------- Current: Federal $ 4,000 8,000 State 1,000 2,000 --------- -------- 5,000 10,000 Deferred: Federal (2,000) (2,000) --------- -------- $ 3,000 8,000 ========= ======== 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:
YEAR ENDED MARCH 31, --------------------------------------- 2001 2000 ----------------- ------------------ Expected income tax (benefit) provision at the statutory Federal tax rate $(318,000) (34)% $ 1,000 34% Increase in valuation allowance 312,000 33 -- -- State taxes, net of Federal tax benefit 1,000 -- 1,000 34 Amortization of goodwill 11,000 1 11,000 376 Benefit of graduated rates (3,000) -- (5,000) (170) --------- --- --------- ----- Actual income tax provision $ 3,000 --% $ 8,000 274% ========= === ========= =====
The tax effects of temporary differences that give rise to the deferred tax assets at March 31, 2001 and 2000 are as follows:
2001 2000 ----------- -------- Deferred tax assets: Investment loss carryforward $ 312,000 -- Depreciation 5,527 3,527 Unrealized loss on marketable securities 25,500 12,150 Valuation allowance (337,500) -- ----------- -------- $ 5,527 15,677 =========== ========
F-9 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000 Capital losses may only be used to offset capital gains. Capital losses may be carried back three years and forward five years. As of March 31, 2001, the Company had a capital loss carryforward of approximately $917,000 related to the loss impairment (note 2). The Company has historically generated limited net capital gains. Therefore, the Company did not believe it was more likely than not that it would generate sufficient capital gains within the appropriate time period to offset those capital losses. For financial reporting purposes, a valuation allowance of $312,000 at March 31, 2001 was recognized for capital loss carryforwards not anticipated to be realized before expiration. (5) MAJOR CUSTOMERS The Company has one customer, Washington State Department of Labor & Industries (L&I), who accounted for 65% and 66% of revenues for the years ended March 31, 2001 and 2000, respectively. The Company was approved as a "preferred provider" of vocational rehabilitation services to L&I under two separate contracts, which expire on May 31, 2001. Effective June 1, 2001, L&I will institute a new system which eliminates the process of awarding contracts to qualifying firms in favor of a system which creates the opportunity for any firm or individual meeting L&I's requirements to be a provider of services. To become eligible under this new system, a provider must only meet certain business practice standards and counselor credentialing criteria without the necessity of being awarded a contract. The Company has instituted a system to assure that all counselors not currently meeting L&I's credentialing criteria will do so by the imposed deadline. Although the Company anticipates no material change in the volume of cases referred to it or its vocational rehabilitation consultants, there can be no assurances that the new system of referring cases to providers will result in a comparable number of referrals. The Company also had a customer who accounted for 13% of revenues for the year ended March 31, 2000. (6) STOCK OPTIONS The Company has four stock option plans, the 1985 Stock Option Plan (1985 Plan), the 1991 Stock Option Plan (1991 Plan), the 1997 Incentive Stock Option Plan (1997 Plan) and the 2000 Incentive Stock Option Plan (2000 Plan). The 1985 Plan and the 1991 Plan have expired except as to options outstanding. The 1997 Plan and the 2000 Plan provide 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 per Plan. 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. F-10 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000 Changes in the options outstanding during the years ended March 31, 2001 and 2000 are summarized in the following table: WEIGHTED NO. OF AVERAGE SHARES EXERCISE PRICE ---------- -------------- Balance - March 31, 1999 570,500 $ 1.72 Fiscal 2000: Options granted 25,000 2.50 ---------- ----- Balance - March 31, 2000 595,500 1.75 Fiscal 2001: Options granted 325,000 2.56 ---------- ----- Balance - March 31, 2001 920,500 2.04 ========== ===== As of March 31, 2001, 45,000 and 750,000 options were available for grant under the 1997 Plan and 2000 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, 2001:
WEIGHTED AVERAGE EXERCISE WEIGHTED PRICE OF AVERAGE NUMBER OF OPTIONS EXERCISABLE CONTRACTUAL EXERCISE PRICE OUTSTANDING EXERCISABLE OPTIONS LIFE REMAINING -------------- ----------- ------------ ----------- -------------- $1.25 300,000 300,000 $ 1.25 6 years $1.82 - $2.56 620,500 566,750 2.41 6.8 YEARS ---------- ---------- ------ --------- 920,500 866,750 $ 2.01 6.5 years ========== ========== ====== =========
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, 2001 and 2000 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: F-11 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000
2001 2000 ---------- ---------- Net loss: As reported $ (937,222) (5,076) Pro forma (1,466,535) (30,589) Basic net earnings (loss) per share: As reported (.22) .00 Pro forma (.34) (.01) Diluted net earnings (loss) per share: As reported (.22) .00 Pro forma (.34) (.01)
The weighted average fair value per stock option granted was $1.69 and $1.43 for those options granted in the years ended March 31, 2001 and 2000, respectively. The Company estimated the fair values using the Black-Scholes option pricing model, using the following assumptions: 2001 2000 ---- ---- Expected dividend yield -- -- Risk-free interest rate 6% 6% Expected stock price volatility 58% 59% 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, 2001 and 2000 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 $13,048 and $8,597 for the years ended March 31, 2001 and 2000, respectively. F-12 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2001 and 2000 (8) COMMITMENTS Rental expense under non-cancelable operating leases for office space amounted to $136,060 and $131,966 for the years ended March 31, 2001 and 2000, respectively. Minimum lease payments under non-cancelable operating leases, exclusive of future escalation charges, as of March 31, 2001 are as follows: 2002 $ 116,000 2003 118,000 2004 97,000 2005 53,000 2006 13,000 ---------- Total minimum lease payments $ 397,000 ========== F-13 EX-10.1 2 c21253ex-10_1.txt EMPLOYMENT AGREEMENT EXHIBIT 10.1 EMPLOYMENT AGREEMENT Agreement made and entered into the 7th day of June 2001, by and between American Claims Evaluation, Inc., a New York corporation, having a place of business at One Jericho Plaza, Jericho, New York 11753 ("Employer"), and Gary Gelman, c/o the Company, One Jericho Plaza, Jericho, NY 11753 ("Employee"). W I T N E S S E T H: -------------------- WHEREAS, Employer is engaged in the business of providing vocational rehabilitation and disability management services; and WHEREAS, Employer desires to employ Employee as Chairman of the Board and Chief Executive Officer of Employer, and Employee desires to be employed by Employer, all pursuant to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing and the mutual promises and covenants herein contained, it is agreed as follows: 1. EMPLOYMENT; DUTIES. ------------------ Employer hereby employs Employee as Chairman of the Board and Chief Executive Officer of Employer. Subject at all times to the direction of the Board of Directors of Employer, Employee shall perform executive duties and shall also perform such other services and duties as the Board of Directors shall determine. 2. EMPLOYMENT. ---------- Employee hereby accepts employment by Employer upon the terms and conditions contained herein and agrees that during the term of this Agreement, Employee shall devote such time as he in his sole discretion deems necessary or appropriate to promote the business of Employer. Except as specifically set forth below, Employee, during the term of this Agreement, will not perform any services for any other entity, whether such entity conducts a business which is competitive with the business of Employer or is engaged in any other business activity; provided, however, nothing herein contained shall be construed as (a) preventing Employee from investing his personal assets in any business or businesses which do not compete directly or indirectly with Employer, (b) preventing Employee from purchasing securities in any corporation whose securities are regularly traded, if such purchases shall not result in his owning beneficially at any time 3% or more of the equity securities of any corporation engaged in a business which is competitive, directly or indirectly, to that of Employer, or (c) preventing Employee from engaging in any activities, if he receives the prior approval of the Board of Directors of Employer with respect to his engaging in such activities. Employee is specifically given the right to devote time and effort to the business of American Para Professional Systems, Inc. 3. TERM. ---- Employee's employment hereunder shall be for a term of one (1) year commencing on the date hereof (the "Effective Date"). This Agreement shall be automatically extended from year to year thereafter unless either party gives not less than three (3) months prior written notice to the other that such party elects to have this Agreement terminate effective at the end of the initial or then current renewal term. 4. COMPENSATION. ------------ (a) As full compensation for the performance of the Employee's duties on behalf of Employer, Employer shall pay Employee a salary at the rate of Two Hundred Thirty Eight Thousand and Eight Hundred Dollars ($238,800), payable biweekly, or otherwise in accordance with the usual practice of Employer. (b) Employer shall reimburse Employee for the expenses incurred by Employee in connection with his duties hereunder, such expenses to include, but not be limited to, travel, entertainment, and automobile; such reimbursement to be made in accordance with regular Employer policy and upon presentation by Employee of the details of, and vouchers for, such expenses. 5. FRINGE BENEFITS. --------------- During the term of this Agreement, Employer shall make available to Employee on the same terms and conditions as afforded other employees, medical coverage and other fringe benefits. 6. NON-COMPETITION. --------------- (a) During the term of this Agreement and for a period of two (2) years from the date of termination of his employment hereunder, Employee agrees that he will not in any manner, directly or indirectly, on behalf of himself or any person, firm, partnership, joint venture, corporation or other business entity ("Person"), solicit any customers who are presently or may hereafter become customers of Employer for business similar to Employer's business, or enter into or engage in any business substantially similar to Employer's business, either as an individual for his own account, or as a partner, joint venturer, employee, agent, salesman, officer, director or shareholder of a Person operating or intending to operate in the United States. (b) Subsequent to the termination of this Agreement, Employee will not interfere with or disrupt or attempt to disrupt Employer's business relationship with its customers or suppliers or solicit any of the employees of Employer for a period of one (1) year from the date of termination of this Agreement. (c) In the event that Employee breaches any provisions of this paragraph or there is a threatened breach, then, in addition to any other rights which Employer may have, Employer shall be entitled to injunctive relief to enforce the restrictions contained herein. In the event that an actual proceeding is brought in equity to enforce the provisions of this paragraph, Employee shall not urge as a defense that there is an adequate remedy at law nor shall Employer be prevented from seeking any other remedies which may be available. (d) The existence of any claim or cause of action by Employer against Employee, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer of the foregoing restrictive covenants but shall be litigated separately. 7. DISABILITY COMPENSATION. ----------------------- If because of mental, physical or other disability Employee shall be incapacitated from fully performing his obligations and agreements hereunder, he will receive from Employer the following percentage of the payments to be made: Period After Beginning Percentage of of Disability Compensation ------------- ------------ 0-3 months 100% 3-6 months 50% Thereafter -0- Employer shall have the right to have Employee examined at such reasonable time or times by such physicians as Employer may designate, and Employee will make himself available for and submit himself to such examinations as and when requested. Any amounts received by Employee pursuant to any disability insurance maintained by Employer (including disability insurance maintained under state law) shall be applied against the payments to be made to Employee under this paragraph 7. 8. EARLY TERMINATION. ----------------- (a) In the event that Employee shall die or shall be disabled for a period of time greater than six (6) months (the "Disability Period."), this Agreement shall be terminated as of the date of death or the date of expiration of the Disability Period. (b) Employer shall have the right to terminate this Agreement, without any further obligation on Employer's part, upon fifteen (15) days notice if Employee commits an offense involving moral turpitude under federal, state or local laws. (c) This Agreement shall automatically terminate in the event of the dissolution, bankruptcy or insolvency of Employer. 9. NOTICES. ------- All notices hereunder shall be in writing and shall be sent to the parties at the respective addresses above set forth. All notices shall be delivered in person or given by facsimile, overnight courier service (such as Federal Express), registered or certified mail, postage prepaid, and shall be deemed to have been given when delivered in person or deposited in the United States mail. Either party may designate any other address to which notice shall be given, by giving notice to the other of such change of address in the manner herein provided. A copy of any such notice shall be sent by ordinary mail to Edward I. Tishelman, Esq., Hartman & Craven LLP, 460 Park Avenue, Suite 1100, New York, New York 10022. 10. SEVERABILITY OF PROVISIONS. -------------------------- If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provision shall be deemed dependent upon any other covenant or provision unless so expressed herein. 11. ENTIRE AGREEMENT; MODIFICATION. ------------------------------ This Agreement contains the entire agreement of the parties relating to the subject matter hereof, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein. No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto. 12. BINDING EFFECT. -------------- The rights, benefits, duties and obligations under this Agreement shall inure to, and be binding upon, the Employer, its successors and assigns, and upon the Employee and his legal representatives, heirs and legatees. This Agreement constitutes a personal service agreement, and the performance of the Employee's obligations hereunder may not be transferred or assigned by the Employee. 13. NON-WAIVER. ---------- The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and said terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party. 14. GOVERNING LAW. ------------- This Agreement shall be construed and governed by the laws of the State of New York. 15. ARBITRATION. ----------- Except as provided in Paragraph 7, any controversy or claim arising under, out of, or in connection with this Agreement or any breach or claimed breach thereof, shall be settled by arbitration in the Village of Mineola, New York, before a panel of three arbitrators, in accordance with the rules then obtaining of the American Arbitration Association, and judgment upon any award rendered may be entered in any court having jurisdiction thereof. 16. HEADINGS. -------- The headings of the paragraphs herein are inserted for convenience and shall not affect any interpretation of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. American Claims Evaluation, Inc. By: /s/ GARY J. KNAUER ---------------------------------------- Gary J. Knauer, Chief Financial Officer /s/ GARY GELMAN ---------------------------------------- Gary Gelman - Employee EX-23 3 c21253_ex-23.txt CONSENTS OF EXPERTS AND COUNSEL EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS The Board of Directors American Claims Evaluation, Inc.: We consent to incorporation by reference in the registration statement (No. 333-39071) on Form S-8 of American Claims Evaluation, Inc. of our report dated May 4, 2001, on the consolidated balance sheets of American Claims Evaluation, Inc. and subsidiary as of March 31, 2001 and 2000 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended, which report appears in the March 31, 2001 annual report on Form 10-KSB of American Claims Evaluation, Inc. KPMG LLP Melville, New York June 27, 2001 -----END PRIVACY-ENHANCED MESSAGE-----