What changed in this filing

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Item 9A. Controls and Procedures

2024-05-24 compared with 2023-05-26 · 320 added, 410 removed, 845 unchanged (46% of the section changed)

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Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2024, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining a system of internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

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and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control—Integrated Framework .

Based on this assessment, our management concluded that our internal control over financial reporting was effective as of March 31, 2023 to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Based on this assessment, our management, including our principal exectuive officer and principal financial officer, concluded that our internal control over financial reporting was effective as of March 31, 2024 to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Our independent registered public accounting firm, Haskell & White LLP, has audited our consolidated financial statements included in this annual report and has issued an attestation report on the effectiveness of our internal control over financial reporting as of March 31, 2024 as stated in their report that is included in Part II, Item 8 herein.

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Directors, Executive Of ficers and Corporate Governance.

The information required by this item will be disclosed in our definitive proxy statement on Schedule 14A (Proxy Statement) for our 2023 annual meeting of stockholders and is incorporated herein by reference.

Our Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2023, pursuant to Regulation 14A under the Exchange Act.

The Board of Directors has adopted a code of ethics and business conduct that applies to all of the Company’s employees, officers and directors.

The full text of the Company’s code of ethics and business conduct is posted on the Company’s website at www.corvel.com.

The Company intends to disclose future amendments to certain provisions of the Company’s code of ethics and business conduct, or waivers of such provisions, applicable to the Company’s directors and executive officers, at the same location on the Company’s website identified above.

The inclusion of the Company’s website address in this annual report does not include or incorporate by reference the information on the Company’s website into this annual report.

Information required by this Item will be included under the captions "Election of Directors — Nominee Information", "Section 16(a) Beneficial Ownership Reporting Compliance," "Executive Officers," "Corporate Governance—Standing Committees and Attendance at Board and Committee Meetings," and "Corporate Governance — Corporate Governance Guidelines, Committee Charters and Code of Business Conduct" of the Registrant's Proxy Statement for its 2024 Annual Meeting of Shareholders (the "Proxy Statement") to be filed within 120 days after March 31, 2024, and is incorporated herein by reference.

The Board of Directors has adopted a code of ethics and business conduct that applies to all of the Company’s employees, officers and directors.

The full text of the Company’s code of ethics and business conduct is posted on the Company’s website at www.corvel.com.

The inclusion of the Company’s website address in this annual report does not include or incorporate by reference the information on the Company’s website into this annual report.

Executi ve Compensation.

The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference.

The information required by this Item will be included under the captions "Compensation Discussion and Analysis," "Summary Compensation Table," "Employment and Change in Control Arrangements," "Corporate Governance—Director Compensation," "Report of the Compensation Committee of the Board of Directors on Executive Compensation," and "Compensation Committee Interlocks and Insider Participation" of the Registrant's Proxy Statement, and is incorporated herein by reference.

Security Ownership of Certain Beneficial Ow ners and Management and Related Stockholder Matters.

The information in the sections titled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”

and “Equity Compensation Plan Information”

appearing in the Company’s definitive proxy statement for the 2023 Annual Meeting is incorporated herein by reference.

The information in the sections titled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Equity Compensation Plan Information” appearing in the Company’s definitive proxy statement for the 2024 Annual Meeting is incorporated herein by reference.

Certain Relationships and Related P arty Transactions, and Director Independence.

The information in the sections titled “Certain Relationships and Related-Person Transactions,”

“Proposal One:

Election of Directors,”

“Information Regarding Director Nominees,”

and “Corporate Governance, Board Composition and Board Committees”

appearing in the Company’s definitive proxy statement for the 2023 Annual Meeting is incorporated herein by reference.

The information in the sections titled “Certain Relationships and Related-Person Transactions,” “Proposal One:

Election of Directors,” “Information Regarding Director Nominees,” and “Corporate Governance, Board Composition and Board Committees” appearing in the Company’s definitive proxy statement for the 2024 Annual Meeting is incorporated herein by reference.

Principal Accou ntant Fees and Services.

The information under the captions “Principal Accountant Fees and Services,”

“Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm”

and “Proposal Two:

Ratification of Appointment of Independent Registered Public Accounting Firm”

appearing in the Company’s definitive proxy statement for the 2023 Annual Meeting is incorporated herein by reference.

The information under the captions “Principal Accountant Fees and Services,” “Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm” and “Proposal Two:

Ratification of Appointment of Independent Registered Public Accounting Firm” appearing in the Company’s definitive proxy statement for the 2024 Annual Meeting is incorporated herein by reference.

Exhibit and Financial State ment Schedules.

(a)(1) Financial Statements:

The Company’s financial statements appear in a separate section of this annual report, beginning on the pages referenced below:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

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Consolidated Statements of Income for the Fiscal Years Ended March 31, 2024, 2023 and 2022

Consolidated Statements of Stockholders’

Equity for the Fiscal Years Ended March 31, 2023, 2022 and 2021

Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended March 31, 2024, 2023 and 2022

Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2024, 2023 and 2022

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(a)(2) Financial Statement Schedule:

The Company’s consolidated financial statements, as listed under Item 15(a)(1), appear in a separate section of this annual report and are incorporated herein by this reference.

The Company’s financial statement schedule is as follows:

Schedule II —

Valuation and Qualifying Accounts

The Company’s consolidated financial statements, as listed under Item 15(a)(1), appear in a separate section of this annual report and are incorporated herein by this reference.

The Company’s financial statement schedule is as follows:

Schedule II — Valuation and Qualifying Accounts

Beginning of Year

Charged to Cost

Allowance for doubtful accounts:

Allowance for expected credit losses:

Fiscal Year Ended March 31, 2024:

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Fourth Amended and Restated Certificate of Incorporation of CorVel Corporation.

Incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 filed on August 6, 2020 (File No.

Second Amended and Restated Bylaws of CorVel Corporation.

Incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 filed on August 6, 2020 (File No.

Description of Securities

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Restated Omnibus Incentive Plan (Formerly The Restated 1988 Executive Stock Option Plan)

Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 4, 2020 (File No.

Forms of Notice of Grant of Stock Option, Stock Option Agreement and Notice of Exercise Under the Restated Omnibus Incentive Plan (Formerly The Restated 1988 Executive Stock Option)

Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 8, 2018 (File No.

000-19291), Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 filed on November 9, 2006 (File No.

000-19291), Exhibits 10.7, 10.8 and 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994 filed on June 29, 1994 (File No.

000-19291), Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8 to the Company’s Registration Statement on Form S-8 (File No.

333-94440) filed on July 10, 1995, and Exhibits 99.3 and 99.5 to the Company’s Registration Statement on Form S-8 (File No.

Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 8, 2018 (File No.

000-19291), Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 filed on November 9, 2006 (File No.

000-19291), Exhibits 10.7, 10.8 and 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994 filed on June 29, 1994 (File No.

000-19291), Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8 to the Company’s Registration Statement on Form S-8 (File No.

333-94440) filed on July 10, 1995, and Exhibits 99.3 and 99.5 to the Company’s Registration Statement on Form S-8 (File No.

333-58455) filed on July 2, 1998.

Restated 1991 Employee Stock Purchase Plan, as amended

Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 11, 2021 (File No.

Fidelity Master Plan for Savings and Investment, and amendments (P) Paper filing

Incorporated herein by reference to Exhibits 10.16 and 10.16A to the Company’s Registration Statement on Form S-1 Registration No.

33-40629 initially filed on May 16, 1991.

Stock Option Agreement, dated November 2, 2017, by and between CorVel Corporation and Michael G.

Combs, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 2, 2017, by and between CorVel Corporation and Diane J.

Blaha, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 2, 2017, by and between CorVel Corporation and Michael Saverien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 2, 2017, by and between CorVel and Corporation and Maxim Shishin, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 1, 2018, by and between CorVel Corporation and Michael G.

Combs, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 1, 2018, by and between CorVel Corporation and Diane J.

Blaha, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 1, 2018, by and between CorVel Corporation and Michael Saverien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 1, 2018, by and between CorVel aCorporation and Maxim Shishin, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 1, 2018, by and between CorVel Corporation and Brandon O’Brien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 1, 2018, by and between CorVel Corporation and Jennifer Yoss, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed on June 10, 2020 (File No.

Stock Option Agreement, dated November 5, 2019, by and between CorVel Corporation and Michael Combs, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Stock Option Agreement, dated November 5, 2019, by and between CorVel Corporation and Brandon O’Brien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Stock Option Agreement, dated November 5, 2019, by and between CorVel Corporation and Brandon O’Brien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Stock Option Agreement, dated November 5, 2019, by and between CorVel Corporation and Diane J.

Blaha, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Stock Option Agreement, dated November 5, 2019, by and between CorVel Corporation and Michael Saverien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Stock Option Agreement, dated November 5, 2019, by and between CorVel Corporation and Maxim Shishin, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Stock Option Agreement, dated November 5, 2019, by and between CorVel Corporation and Jennifer Yoss, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K/A filed on December 31, 2019 (File No.

Stock Option Agreement, dated November 5, 2020, by and between CorVel Corporation and Michael Combs, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2020 (File No.

Stock Option Agreement, dated November 5, 2020, by and between CorVel Corporation and Brandon O’Brien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 12, 2020 (File No.

Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2020 (File No.

Stock Option Agreement, dated November 5, 2020, by and between CorVel Corporation and Brandon O’Brien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 12, 2020 (File No.

Stock Option Agreement, dated November 5, 2020, by and between CorVel Corporation and Diane J.

Blaha, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 12, 2020 (File No.

Stock Option Agreement, dated November 5, 2020, by and between CorVel Corporation and Maxim Shishin, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on November 12, 2020 (File No.

Stock Option Agreement, dated November 5, 2020, by and between CorVel Corporation and Jennifer Yoss, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on November 12, 2020 (File No.

Stock Option Agreement, dated December 8, 2021, by and between CorVel Corporation and Michael Combs, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 filed on February 3, 2022 (File No.

Stock Option Agreement, dated December 8, 2021, by and between CorVel Corporation and Brandon O’Brien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 filed on February 3, 2022 (File No.

Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 filed on February 3, 2022 (File No.

Stock Option Agreement, dated December 8, 2021, by and between CorVel Corporation and Brandon O’Brien, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 filed on February 3, 2022 (File No.

Stock Option Agreement, dated December 8, 2021, by and between CorVel Corporation and Diane J.

Blaha, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 filed on February 3, 2022 (File No.

Stock Option Agreement, dated December 8, 2021, by and between CorVel Corporation and Maxim Shishin, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 filed on February 3, 2022 (File No.

Stock Option Agreement, dated December 8, 2021, by and between CorVel Corporation and Jennifer Yoss, providing for performance vesting.

Incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 filed on February 3, 2022 (File No.

Insider Trading Policy

Filed herewith.

Subsidiaries of the Company.

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Furnished herewith.

Executive Clawback Policy

Filed herewith.

Inline XBRL Instance Document

Furnished herewith.

Inline XBRL Taxonomy Extension Schema Document

Furnished herewith.

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Furnished herewith.

Inline XBRL Taxonomy Extension Definition Linkbase Document

Furnished herewith.

Inline XBRL Taxonomy Extension Label Linkbase Document

Furnished herewith.

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

Furnished herewith.

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An unredacted copy of the exhibit will be provided on a supplemental basis to the SEC upon request.

Previously filed only in paper.

(P) – Previously filed only in paper.

The exhibits filed as part of this annual report are listed under Item 15(a)(3) of this annual report.

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Chief Executive Officer and President

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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/s/ Brandon T.

O’Brien

Chief Financial Officer

O’Brien

(Principal Financial Officer)

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/s/ J effrey J.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations may include certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial performance, including the impact of COVID-19, growth and acquisition opportunities and other similar forecasts and statements of expectation.

Words such as “expects,”

“anticipates,”

“intends,”

“plans,”

“predicts,”

“believes,”

“seeks,”

“estimates,”

“potential,”

“continue,”

“strive,”

“ongoing,”

“may,”

“will,”

“would,”

“could,”

“should,”

as well as variations of these words and similar expressions, are intended to identify these forward-looking statements.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations may include certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial performance, growth and acquisition opportunities and other similar forecasts and statements of expectation.

Words such as “expects,” “anticipates,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “potential,” “continue,” “strive,” “ongoing,” “may,” “will,” “would,” “could,” “should,” as well as variations of these words and similar expressions, are intended to identify these forward-looking statements.

Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance.

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Actual future performance, outcomes, and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions.

Representative examples of these factors include (without limitation) the impact of global pandemics, such as COVID-19;

Representative examples of these factors include (without limitation);

general industry and economic conditions, including a decreasing number of national claims due to a decreasing number of injured workers;

competition from other managed care companies and third party administrators;

the ability to expand certain areas of the Company’s business;

growth in the Company’s sale of TPA services;

the ability to expand certain areas of the Company’s business;

growth in the Company’s sale of TPA services;

shifts in customer demands;

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the impact of possible cybersecurity incidents;

existing and possible litigation and legal liability in the course of operations and the Company’s ability to resolve such litigation;

governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change;

the impact of recently issued accounting standards on the Company’s consolidated financial statements;

the continued availability of financing in the amounts and at the terms necessary to support the Company’s future business and the other risks identified in Part I, Item 1A of this annual report, “Risk Factors.”

The Company is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’

compensation benefits, automobile insurance claims, and group health insurance benefits.

The Company’s services are provided to insurance companies, TPAs, governmental entities, and self-administered employers to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims.

the impact of recently issued accounting standards on the Company’s consolidated financial statements;

The Company is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits.

Network Solutions Services

The Company’s network solutions services are designed to reduce the price paid by its customers for medical services rendered in workers’

compensation cases, automobile insurance policies, and group health insurance policies.

The Company’s network solutions services are designed to reduce the price paid by its customers for medical services rendered in workers’ compensation cases, automobile insurance policies, and group health insurance policies.

The network solutions services offered by the Company include automated medical fee auditing, preferred provider management and reimbursement services, retrospective utilization review, facility claim review, professional review, pharmacy services, directed care services, Medicare solutions, clearinghouse services, independent medical examinations, and inpatient medical bill review.

Network solutions services also includes revenue from the Company’s directed care network (known as CareIQ), including imaging, physical therapy, durable medical equipment, and translation and transportation.

Patient Management Services

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Patient management services include claims management and all services sold to claims management customers, case management, 24/7 nurse triage, utilization management, vocational rehabilitation, and life care planning.

The services are designed to monitor the medical necessity and appropriateness of healthcare services provided to workers’

compensation and other healthcare claimants and to expedite return to work.

The services are designed to monitor the medical necessity and appropriateness of healthcare services provided to workers’ compensation and other healthcare claimants and to expedite return to work.

The Company offers these services on a stand-alone basis, or as an integrated component of its medical cost containment services.

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Organizational Structure

The Company’s management is structured geographically with regional vice presidents who are responsible for all services provided by the Company in his or her particular region and responsible for the operating results of the Company in multiple states.

These regional vice presidents have area and district managers who are also responsible for all services provided by the Company in their given area and district.

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The Company operates in one reportable operating segment, managed care.

The Company’s services are delivered to its customers through its local offices in each region and financial information for the Company’s operations follows this service delivery model.

All regions provide the Company’s patient management and network solutions services to customers.

Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 280-10, “Segment Reporting”, establishes standards for the way that public business enterprises report information about operating segments in annual and interim consolidated financial statements.

The Company’s internal financial reporting is segmented geographically, as discussed above, and managed on a geographic rather than service line basis, with virtually all of the Company’s operating revenue generated within the United States.

The Company’s services are delivered to its customers through its local offices in each region and financial information for the Company’s operations follows this service delivery model.

All regions provide the Company’s patient management and network solutions services to customers.

Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 280-10, “Segment Reporting” establishes standards for the way that public business enterprises report information about operating segments in annual and interim consolidated financial statements.

Under FASB ASC 280-10, two or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and basic principles, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas:

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The Company had revenues of $795 million in fiscal 2024, an increase of $77 million, or 11%, compared to $719 million for fiscal 2023.

This increase was due to an increase in revenues from both patient management and network solutions activity with existing customers, and to a lesser extent, an increase in new customers.

During fiscal 2023, the Company’s gross profit increased to $158 million from $152 million in fiscal 2022, an increase of $6 million, or 4%.

This increase was due to an increase in revenues from both patient management and network solutions activity primarily with existing customers.

During fiscal 2024, the Company’s gross profit increased to $172 million from $158 million in fiscal 2023, an increase of $13 million, or 9%.

This increase was primarily due to the increase of 11% in revenue mentioned above.

Additionally, there was an increase in salaries of 14.5% resulting from increased average headcount of 10% in field operations and growth in average annual salary increases due to wage inflation.

During fiscal 2023, the Company’s general and administrative expenses increased to $73.7 million from $67.6 million in fiscal 2022, an increase of $6.1 million, or 9%.

This increase was primarily due to an increase in legal expenses and corporate system costs.

During fiscal 2023, the Company’s net income before tax increased to $84.6 million from $84.5 million in fiscal 2022.

The increase in revenues was offset by a decrease in gross profit margin.

During fiscal 2023, the Company’s income tax expense increased to $18.2 million from $18.1 million in fiscal 2022, an increase of $0.1 million, or 0.5%.

This was offset by an increase in salaries of 10% resulting from increased average headcount of 8% in field operations.

During fiscal 2024, the Company’s general and administrative expenses increased to $76.6 million from $73.7 million in fiscal 2023, an increase of $2.9 million, or 4%.

This increase was primarily due to an increase in corporate system development costs.

During fiscal 2024, the Company’s net income before tax increased to $95.1 million from $84.6 million in fiscal 2023, an increase of $10.5 million, or 12.5%.

The increase in revenues was offset by a slight decrease in gross profit margin.

During fiscal 2024, the Company’s income tax expense increased to $18.8 million from $18.2 million in fiscal 2023, an increase of $0.7 million, or 3.6%.

The increase was due to an increase in income before income taxes.

The Company’s effective income tax rate was 22% for fiscal year 2023 and 21% for fiscal year 2022.

The Company’s effective income tax rate was 20% for fiscal year 2024 and 22% for fiscal year 2023.

Diluted weighted average shares were 17.3 million shares in fiscal 2024 and 17.6 million shares in fiscal 2023, with a decrease of 245,000 shares, or 1.4%.

This decrease was primarily due to the repurchase of 598,241 shares of common stock in fiscal 2023 offset by stock issuances to employees.

This decrease was primarily due to the repurchase of 215,313 shares of common stock in fiscal 2024.

Since commencing this program in the fall of 1996, the Company has repurchased 38,033,179 shares of its common stock through March 31, 2024, at a cost of $794 million.

These repurchases were funded primarily from the Company’s operating cash flows.

Diluted earnings per share increased to $4.40 per share in fiscal 2024 from $3.77 per share in fiscal 2023, an increase of $0.63 per share, or 16.7%.

This was primarily due to a decrease in diluted weighted average shares.

The increase in diluted earnings per share was primarily due to an increase in net income and a decrease in diluted weighted average common and common equivalent shares.

Results of Operations

The Company derives its revenues from providing patient management and network solutions services to payors of workers’

compensation benefits, automobile insurance claims, and group health insurance benefits.

The Company derives its revenues from providing patient management and network solutions services to payors of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits.

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Weighted average shares used in net income per share:

As previously identified in Part I, Item 1A of this annual report, “Risk Factors,”

the Company’s ability to maintain or grow revenues is subject to several risks including, but not limited to, the COVID-19 pandemic, changes in government regulations, exposure to litigation and the ability to add or retain customers.

Any of these, or a combination of all of them, could have a material and adverse effect on the Company’s results of operations going forward.

The following table sets forth, for the periods indicated, the percentage of revenues represented by certain items reflected in the Company’s consolidated statements of income.

The Company’s past operating results are not necessarily indicative of future operating results.

As previously identified in Part I, Item 1A of this annual report, “Risk Factors,” the Company’s ability to maintain or grow revenues is subject to several risks including, but not limited to, changes in government regulations, exposure to litigation and the ability to add or retain customers.

Any of these, or a combination of all of them, could have a material and adverse effect on the Company’s results of operations going forward.

The following table sets forth, for the periods indicated, the percentage of revenues represented by certain items reflected in the Company’s consolidated statements of income.

The Company’s past operating results are not necessarily indicative of future operating results.

The percentages for the fiscal years ended March 31, 2024, 2023 and 2022 are as follows:

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Income tax provision

The Company derives its revenues from providing patient management and network solutions services to payors of workers’

compensation benefits, automobile insurance claims, and group health insurance benefits.

Change in Revenue

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Patient management services increased to $530 million from $479 million, an increase of 11%.

This increase is primarily due to higher revenue from the Company’s TPA and related services.

Total new claims increased by 4% during fiscal 2024 compared to fiscal 2023.

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This increase is primarily due to increases in enhanced bill review programs services, which resulted in higher revenue per bill.

Most of the increase in revenues resulted from an increase in activity and services provided for existing customers and, to a lesser extent, an increase in new customers.

Most of the increase in revenues resulted from an increase in activity and services provided for existing customers.

Fiscal 2023 Compared to Fiscal 2022

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Patient management services increased to $479 million from $424 million, an increase of 13%.

This increase is primarily due to higher revenue from the Company’s TPA and related services.

Total new claims increased by 5% during fiscal 2023 compared to fiscal 2022.

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Cost of Revenue

The Company’s cost of revenues consists of direct expenses, costs directly attributable to the generation of revenue, and indirect costs which are incurred to support the operations in the field offices which generate the revenue.

Direct expenses primarily include (i) case manager and bill review analysts’

salaries, along with related payroll taxes and fringe benefits, and (ii) costs associated with independent medical examinations (known as IME), prescription drugs, and MRI, physical therapy, and durable medical equipment providers.

Most of the Company’s revenues are generated in offices which provide both patient management services and network solutions services.

Direct expenses primarily include (i) case manager and bill review analysts’ salaries, along with related payroll taxes and fringe benefits, and (ii) costs associated with independent medical examinations (known as IME), prescription drugs, and MRI, physical therapy, and durable medical equipment providers.

Most of the Company’s revenues are generated in offices which provide both patient management services and network solutions services.

The largest of the field indirect costs are (i) manager salaries and bonuses, (ii) account executive base pay and commissions, (iii) salaries of administrative and clerical support, field systems personnel and PPO network developers, along with related payroll taxes and fringe benefits, and (iv) office rent.

During fiscal 2023 and 2022, approximately 35% and 36%, respectively, of the costs incurred in the field were considered field indirect costs, which support both the patient management services and network solutions services operations of the Company’s field operations.

During fiscal 2024 and 2023, approximately 34% and 35%, respectively, of the costs incurred in the field were considered field indirect costs, which support both the patient management services and network solutions services operations of the Company’s field operations.

Change in Cost of Revenue

Fiscal 2024 Compared to Fiscal 2023

The Company’s cost of revenues increased to $560 million in fiscal 2023 from $494 million in fiscal 2022, an increase of $66 million, or 13%.

The Company’s cost of revenues increased to $624 million in fiscal 2024 from $560 million in fiscal 2023, an increase of $63 million, or 11%.

The increase in cost of revenues was primarily due to the increase in total revenues of 11%.

Just over half the Company's cost of revenue is labor cost.

There was an increase in salaries of 15% resulting from increased average headcount of 10% in field operations and growth in average annual salary increases due to wage inflation.

Headcount has increased due to an increase in new business and volume of business.

Additionally, there was an increase in salaries of 10% resulting from increased average headcount of 8% in field operations and growth in average annual salary increases due to wage inflation.

Headcount increased due to an increase in business volume.

Fiscal 2023 Compared to Fiscal 2022

The Company’s cost of revenues increased to $494 million in fiscal 2022 from $429 million in fiscal 2021, an increase of $65 million, or 15%.

The Company’s cost of revenues increased to $560 million in fiscal 2023 from $494 million in fiscal 2022, an increase of $66 million, or 13%.

The increase in cost of revenues was primarily due to the increase in total revenues of 11%.

Additionally, there was an increase in salaries resulting from increased headcount of 15% in field operations.

Headcount has increased due to an increase in new business and volume of business.

Just over half the Company's cost of revenue is labor cost.

There was an increase in salaries of 15% resulting from increased average headcount of 10% in field operations and growth in average annual salary increases due to wage inflation.

Headcount has increased due to an increase in new business and business volume.

General and Administrative Expense

During fiscal years 2023, 2022 and 2021, approximately 49%, 51%, and 51%, respectively, of general and administrative costs consisted of corporate systems costs, which include the corporate systems support, implementation and training, rules engine development, national IT strategy and planning, depreciation of hardware costs in the Company’s corporate offices and backup data center, the Company’s nationwide area network, and other systems related costs.

During fiscal years 2024, 2023 and 2022, approximately 51%, 49%, and 51%, respectively, of general and administrative costs consisted of corporate systems costs, which include the corporate systems support, implementation and training, rules engine development, national IT strategy and planning, depreciation of hardware costs in the Company’s corporate offices and backup data center, the Company’s nationwide area network, and other systems related costs.

The Company includes all IT-related costs managed by the corporate office in general and administrative whereas the field IT-related costs are included in the cost of revenues.

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General and administrative expenses increased to $76.6 million in fiscal 2024 from $73.7 million in fiscal 2023, an increase of $2.9 million, or 4%.

This increase was primarily due to an increase in legal costs related to data privacy compliance.

Additionally, there was an increase in corporate system costs due to an increase spending on developed software.

This increase was was primarily due to an increase in corporate system costs due to an increase spending in developed software.

Fiscal 2023 Compared to Fiscal 2022

General and administrative expenses increased to $73.7 million in fiscal 2023 from $67.6 million in fiscal 2022, an increase of $6.1 million, or 9%.

This increase was primarily due to an increase in advertising and corporate marketing events which started to occurring again in calendar year 2021 after being cancelled in 2020 due to the COVID-19 pandemic.

Additionally, software development costs also increased due to an increase in headcount and consulting expenses.

This increase was primarily due to an increase in legal costs related to data privacy compliance.

Additionally, there was an increase in corporate system costs due to an increase spending in developed software.

Income Tax Provision

Fiscal 2024 Compared to Fiscal 2023

The Company’s income tax expense increased to $18.2 million for fiscal 2023 from $18.1 million for fiscal 2022, an increase of $0.1 million.

The Company’s income tax expense increased to $18.8 million for fiscal 2024 from $18.2 million for fiscal 2023, an increase of $0.7 million.

Income before income tax provision increased to $95.1 million in fiscal 2024 from $84.6 million in fiscal 2023, an increase of $10.5 million.

The Company’s effective income tax rate was 22% for fiscal 2023 and 21% for fiscal 2022.

The Company’s effective income tax rate was 20% for fiscal 2024 and 22% for fiscal 2023.

The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises for both periods.

Fiscal 2023 Compared to Fiscal 2022

The Company’s income tax expense increased to $18.1 million for fiscal 2022 from $12.8 million for fiscal 2021, an increase of $5.3 million.

Income before income tax provision increased to $84.5 million in fiscal 2022 from $59.2 million in fiscal 2021, an increase of $25.3 million, or 42.8%.

The Company’s effective income tax rate was 21% for fiscal 2022 and 22% for fiscal 2021.

The Company’s income tax expense increased to $18.2 million for fiscal 2023 from $18.1 million for fiscal 2022, an increase of $0.1 million.

Income before income tax provision increased to $84.6 million in fiscal 2023 from $84.5 million in fiscal 2022, an increase of $0.1 million.

The Company’s effective income tax rate was 22% for fiscal 2023 and 21% for fiscal 2022.

The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises for both periods.

Fiscal 2024 Compared to Fiscal 2023

The Company’s net income was $66.4 million in fiscal 2023 and 2022.

The Company’s net income was $76.3 million in fiscal 2024 and $66.4 in fiscal 2023, an increase of $9.9 million, or 14.9%.

The increase in revenues was offset by a slight decrease in gross profit margin.

The increase in cost of revenue is due to an increase in headcount.

Fiscal 2023 Compared to Fiscal 2022

The Company’s net income was $66.4 million in fiscal 2023 and 2022.

The increase in revenues was offset by a decrease in gross profit margin.

The increase in cost of revenue is due to an increase in labor rates and headcount.

Fiscal 2022 Compared to Fiscal 2021

The Company’s net income increased to $66.4 million in fiscal 2022 from $46.4 million in fiscal 2021, an increase of $20.1 million, or 43.3%.

This increase was primarily due to an increase in pretax margin, which increased to 13.1% from 10.7%, and a 17% increase in revenues.

Earnings per Share

Fiscal 2024 Compared to Fiscal 2023

The Company’s diluted earnings per share increased to $3.77 per share in fiscal 2023 from $3.66 per share in fiscal 2022, an increase of $0.11 per share, or 3.0%.

This was primarily due to a decrease in diluted weighted average shares.

Fiscal 2022 Compared to Fiscal 2021

The Company’s diluted earnings per share increased to $3.66 per share in fiscal 2022 from $2.55 per share in fiscal 2021, an increase of $1.11 per share, or 43.5%.

The Company’s diluted earnings per share increased to $4.40 per share in fiscal 2024 from $3.77 per share in fiscal 2023, an increase of $0.63 per share, or 16.7%.

This was primarily due to an increase in net income.

Fiscal 2023 Compared to Fiscal 2022

The Company’s diluted earnings per share increased to $3.77 per share in fiscal 2023 from $3.66 per share in fiscal 2022, an increase of $0.11 per share, or 3.0%.

This was primarily due to a decrease in diluted weighted average shares.

Liquidity and Capital Resources

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Cash flows generated from operating activities are principally from earnings before non-cash expenses.

The risk of decreased operating cash flow from a decline in earnings is partially mitigated by the diversity of the Company’s services, geographies and customers, and the Company has had virtually no interest-bearing debt for the past 32 years.

The risk of decreased operating cash flow from a decline in earnings is partially

mitigated by the diversity of the Company’s services, geographies and customers, and the Company has had virtually no interest-bearing debt for the past 33 years.

The Company has historically funded its operations and capital expenditures primarily from cash flow from operations, and to a lesser extent, stock option exercises.

The Company’s net accounts receivables have ranged from 39 to 44 days of average sales for the fiscal years ended March 31, 2023, 2022 and 2021.

The Company’s net accounts receivables have ranged from 39 to 44 days of average sales for the fiscal years ended March 31, 2024, 2023 and 2022.

The Company expects days sales outstanding (known as DSO) to remain in the low to mid 40-day range.

The Company’s historical profit margins and historical ratio of investments in assets used in the business has allowed the Company to generate sufficient cash flow to repurchase $748 million of its common stock during the past 27 fiscal years, on inception-to-date net earnings of $732 million.

The Company’s historical profit margins and historical ratio of investments in assets used in the business has allowed the Company to generate sufficient cash flow to repurchase $794 million of its common stock during the past 28 fiscal years, on inception-to-date net earnings of $808 million.

The Company repurchases shares during periods of excess liquidity, which has occurred in all 33 years that the Company has been public.

Should the Company have lower income or cash flows, it could reduce or eliminate repurchases under the stock repurchase program until earnings and cash flow improved.

Working capital decreased to $75.9 million at March 31, 2023 from $93.6 million at March 31, 2022.

This is primarily due to the increase in spending to repurchase shares of the Company’s common stock.

The Company deferred a total of $10.4 million in payroll tax deposits related to the CARES Act, half of which was paid during the December 31, 2021 quarter, and the other half of which was paid during the December 31, 2022 quarter.

Working capital increased to $117.7 million at March 31, 2024 from $75.9 million at March 31, 2023.

This is primarily due to the increase in net income, and to a lesser extent, a decrease in spending to repurchase shares of the Company’s common stock under its stock repurchase program.

The Company is not a party to off-balance sheet arrangements as defined by the SEC.

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The contracts primarily relate to:

(i) certain contracts to perform services, under which the Company may provide customary indemnification for the purchases of such services, (ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises, and (iii) certain agreements with the Company’s officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of certain actions taken by such persons, acting in their respective capacities within the Company.

The terms of such customary obligations vary by contract and in most instances a specific or maximum dollar amount is not explicitly stated therein.

Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted.

Consequently, no liabilities have been recorded for these obligations on the Company’s balance sheets for any of the periods presented.

The Company believes that cash from operations and funds from exercises of stock options granted to employees are adequate to fund existing obligations, repurchase shares of the Company’s common stock under its current stock repurchase program, introduce new services, and continue to develop the Company’s healthcare related services for at least the next twelve months.

Consequently, no liabilities have been recorded for these obligations on the Company’s balance sheets for any of the periods presented.

Should the Company have lower income or cash flows, it could reduce or eliminate repurchases under the stock repurchase program until earnings and cash flow have returned to comfortable levels.

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As of March 31, 2024, the Company had $105.6 million in cash and cash equivalents, invested primarily in short-term, interest-bearing, highly-liquid, investment-grade securities with maturities of 90 days or less.

The Company believes that the cash balance at March 31, 2023 along with anticipated internally-generated funds will be sufficient to meet the Company’s expected cash requirements for at least the next twelve months.

The Company believes that the cash balance at March 31, 2024 along with anticipated internally-generated funds will be sufficient to meet the Company’s expected cash requirements for at least the next twelve months and beyond.

Operating Cash Flows

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Net cash provided by operating activities increased to $99.2 million in fiscal 2024 from $82.3 million in fiscal 2023, an increase of $16.9 million.

The increase in cash flow from operating activities was primarily due to an increase in net income of $9.9 million during fiscal 2024.

Fiscal 2023 Compared to Fiscal 2022

Net cash provided by operating activities increased to $82.3 million in fiscal 2023 from $67.2 million in fiscal 2022, an increase of $15.1 million.

The increase in cash flow from operating activities was primarily due to the fact that during fiscal 2023, revenues increased while accounts receivable remained flat due to strong collections.

During fiscal 2022, accounts receivable increased which caused a decrease in operating cash flow.

Fiscal 2022 Compared to Fiscal 2021

Net cash provided by operating activities decreased to $67.2 million in fiscal 2022 from $94.4 million in fiscal 2021, a decrease of $27.2 million.

The decrease in cash flow from operating activities was primarily due to the fact that the Company had a prior year deferral of payroll taxes provided by the CARES Act in 2020 that was no longer available during the same period in 2021.

The Company paid back half of the deferral of payroll taxes during the December 31, 2021 quarter.

There was an increase in accounts receivable due to an increase in revenues.

Additionally, annual bonuses for calendar years 2021 and 2022 were paid in fiscal 2022.

Investing Activities

Fiscal 2024 Compared to Fiscal 2023

Net cash flow used in investing activities increased to $29.2 million in fiscal 2024 from $26.3 million in fiscal 2023, an increase of $2.9 million.

This increase in investing activity was primarily due to an increase in software development efforts.

The Company expects future expenditures for property and equipment to increase if revenues increase.

Fiscal 2023 Compared to Fiscal 2022

Net cash flow used in investing activities decreased to $26.3 million in fiscal 2023 from $29.8 million in fiscal 2022, a decrease of $3.5 million.

The Company reduced its spending on furniture and leasehold improvements as the Company reduced its lease footprint.

Fiscal 2022 Compared to Fiscal 2021

Net cash flow used in investing activities increased to $29.8 million in fiscal 2022 from $17.2 million in fiscal 2021, an increase of $12.6 million.

The Company increased its spending primarily on developed software and reduced its spending on furniture and leasehold improvements as the Company reduces its lease footprint.

Financing Activities

Fiscal 2024 Compared to Fiscal 2023

Net cash flow used in financing activities increased to $82.1 million in fiscal 2023 from $79.6 million in fiscal 2022, an increase of $2.5 million.

Net cash flow used in financing activities decreased to $35.8 million in fiscal 2024 from $82.1 million in fiscal 2023, a decrease of $46.4 million.

During fiscal 2024, the Company spent $45.7 million to repurchase 215,313 shares of its common stock (at an average price of $212.29 per share).

During fiscal 2023, the Company spent $93.7 million to repurchase 598,241 shares of its common stock (at an average price of $159.14 per share).

If the Company continues to generate cash flow from operating activities, the Company may continue to repurchase shares of its common stock on the open market, if authorized by the Company’s Board of Directors pursuant to the Company's stock repurchase program, or seek to identify other businesses to acquire.

The Company has historically used cash provided by operating activities and from the exercise of stock options to repurchase stock.

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Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements.

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We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances.

Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

Such estimates and assumptions could change in the

future as more information becomes known, which could impact the amounts reported and disclosed herein.

We believe the following significant accounting estimates may involve a higher degree of judgment and complexity.

The following is not intended to be a comprehensive list of our accounting policies.

See Note 1, “Summary of Significant Accounting Policies”

in the notes to our consolidated financial statements for other significant accounting policies.

See Note 1, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements for other significant accounting policies.

Revenue Recognition :

Revenue is recognized when control of the promised services is transferred to the Company’s customers in an amount that reflects the consideration expected to be entitled to in exchange for those services.

As the Company completes its performance obligations which are identified below, it has an unconditional right to consideration as outlined in the Company’s contracts.

Generally, the Company’s billed accounts receivable are expected to be collected in 30 days in accordance with the underlying payment terms.

For many of the Company’s services, the Company typically has one performance obligation;

As the Company completes its performance obligations which are identified below, it has an unconditional right to consideration as outlined in the Company’s contracts.

Generally, the Company’s billed accounts receivable are expected to be collected in 30 days in accordance with the underlying payment terms.

For many of the Company’s services, the Company typically has one performance obligation;

however, it also provides the customer with an option to acquire additional services.

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Pricing is generally consistent for each service irrespective of the other services or quantities requested by the customer.

In transactions related to third-party service revenue, which includes pharmacy, directed care services and other services provided by the Company’s integrated network solutions services, the Company is considered the principal, as it directs the third party, controls the specified service, performs program utilization review, directs payment to the provider, accepts the financial risk of loss associated with services rendered and combines the services provided into an integrated solution, as specified within the Company’s customer contracts.

Revenue is recognized based upon the transfer of the results of the medical bill review service to the customer as this is the most accurate depiction of the transfer of the service to the customer.

Medical bill review revenues are variable, generally based on performance metrics set forth in the underlying contracts.

Each period, the Company bases its estimates on a contract-by-contract basis.

The Company makes its best estimate of amounts the Company has earned and expects to be collected using historical averages and other factors to project such revenues.

Variable consideration is recognized in the amount that the Company concludes is probable that a significant revenue reversal will not occur in future periods.

The Company has the ability to influence contractual fees with customers and possesses the financial risk of loss in certain contractual obligations.

These factors indicate the Company is the principal and, as such, it is required to recognize revenue gross and service partner vendor fees in the cost of revenue in the Company’s consolidated income statements.

The Company determines if an arrangement includes a lease at inception.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term;

and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term;

and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets and lease liabilities are recognized at the commencement date of the lease, renewal date of the lease or significant remodeling of the lease space based on the present value of the remaining future minimum lease payments.

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As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that we will exercise any such options.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Allowance for Uncollectible Accounts :

current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.

Allowance for Expected Credit Losses :

The Company determines its allowance for uncollectible accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customers’ current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.

The Company writes off accounts receivable when they become uncollectible.

The Company must make significant judgments and estimates in determining contractual and bad debt allowances in any accounting period.

One significant uncertainty inherent in the Company’s analysis is whether its past experience will be indicative of future periods.

Although the Company considers future projections when estimating contractual and bad debt allowances, the Company ultimately makes its decisions based on the best information available to it at the time the decision is made.

Adverse changes in general economic conditions or trends in reimbursement amounts for the Company’s services could affect the Company’s contractual and bad debt allowance estimates, collection of accounts receivable, cash flows, and results of operations.

One customer accounted for 10% or more of accounts receivable at March 31, 2024 and 2023.

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Goodwill arising from business combinations represents the excess of the purchase price over the estimated fair value of the net assets of the acquired business.

Pursuant to ASC 350-10 through ASC 350-30, “Goodwill and Other Intangible Assets,”

goodwill is tested annually for impairment or more frequently if circumstances indicate the potential for impairment.

Pursuant to ASC 350-10 through ASC 350-30, “Goodwill and Other Intangible Assets,” goodwill is tested annually for impairment or more frequently if circumstances indicate the potential for impairment.

Also, management tests for impairment of its amortizable intangible assets and long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The impairment test is conducted at the company level.

The measurement of fair value is based on an evaluation of market capitalization and is further tested using a multiple of earnings approach.

In projecting the Company’s cash flows, management considers industry growth rates and trends and cost structure changes.

Based on the Company’s tests and reviews, no impairment of its goodwill, intangible assets, or other long-lived assets existed at March 31, 2023 or March 31, 2022.

The impairment test is conducted at the company

The measurement of fair value is based on an evaluation of market capitalization.

Management considers industry growth rates and trends and cost structure changes.

Based on the Company’s tests and reviews, no impairment of its goodwill, intangible assets, or other long-lived assets existed at March 31, 2024 or March 31, 2023.

However, future events or changes in current circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets.

Accrual for Self-insurance Costs :

The Company accrues for the group medical costs and workers’

compensation costs of its employees based on claims filed and an estimate of claims incurred but not reported as of each balance sheet date.

The Company accrues for the group medical costs and workers’ compensation costs of its employees based on claims filed and an estimate of claims incurred but not reported as of each balance sheet date.

The Company determines its estimated self-insurance reserves based upon historical trends along with outstanding claims information provided by its claims paying agents.

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Adjustments, if any, to estimated accruals resulting from ultimate claim payments will be reflected in earnings during the periods in which such adjustments are determined.

The Company’s self-insured liabilities contain uncertainties because management is required to make assumptions and judgments to estimate the ultimate cost to settle reported claims and claims incurred but not reported at the balance sheet date.

The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate its self-insured liabilities.

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In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws.

Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.

The significant assumptions and estimates described above are important contributors to our ultimate effective tax rate in each year.

Legal and Other Contingencies :

As discussed in Part I, Item 3 of this annual report, “Legal Proceedings”

and in Note 10, “Contingencies and Legal Proceedings”

in the notes to our consolidated financial statements, the Company is subject to various legal proceedings and claims that arise in the ordinary course of business.

As discussed in Part I, Item 3 of this annual report, “Legal Proceedings” and in Note 10, “Contingencies and Legal Proceedings” in the notes to our consolidated financial statements, the Company is subject to various legal proceedings and claims that arise in the ordinary course of business.

The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable.

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Share-Based Compensation :

The Company accounts for share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation –

Stock Compensation”.

Under ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

The Company accounts for share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – Stock Compensation”.

For the fiscal year ended March 31, 2024, the Company recorded share-based compensation expense of $4,982,000.

The Company estimates the fair value of stock options using the Black-Scholes valuation model.

Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s term, and the Company’s expected annual dividend yield.

The Company issues performance-based stock options which vest only upon the Company’s achievement of certain earnings per share targets on a calendar year basis, as determined by the Company’s Board of Directors.

These options were valued in the same manner as the time-based options.

However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options.

The Company’s management believes that this valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options granted in fiscal 2023.

However, the Company only recognizes stock compensation expense to the extent that the

targets are determined to be probable of being achieved, which triggers the vesting of the performance options.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

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Recently Issued Accounting Standards

Management has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the SEC and believes that there are none that will have a material impact on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , a new accounting standard to enhance the transparency and decision usefulness of income tax disclosures.

The new standard is effective for fiscal years beginning after December 15, 2024, with retrospective application permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires more detailed information about a reportable segment’s expenses.

The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with retrospective application required.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

REPORT OF INDEPENDENT REGIS TERED PUBLIC ACCOUNTING FIRM

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Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of CorVel Corporation (the “Company”) as of March 31, 2023 and 2022, the related consolidated statements of income, stockholders’

equity, and cash flows for each of the years in the three-year period ended March 31, 2023, and the related notes and financial statement schedule (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control —

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

We have audited the accompanying consolidated balance sheets of CorVel Corporation (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended March 31, 2024, and the related notes and financial statement schedule (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control —

Integrated Framework (2013) issued by COSO.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinion

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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The Company recognizes revenue upon transfer of control of promised services or products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services or products.

Certain services and products involve estimation of the related transaction price that, in turn, led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s judgments.

Revenues that are most significantly impacted by management’s estimates and judgments include (i) bill review services that contain contractual provisions that allow the customer to compensate the Company only for services that it utilizes and (ii) directed care services at period-end for which the Company has not been billed by the related providers.

How the Critical Matter was Addressed in the Audit:

The primary procedures we performed to address this critical audit matter included the following, among others:

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to estimate the most likely amount of consideration to which the Company will be entitled in exchange for transferring the promised services or products to a customer.

We tested the effectiveness of certain controls over revenue recognition, including management’s controls over the methodology used to determine estimated revenues.

▪ We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to estimate the most likely amount of consideration to which the Company will be entitled in exchange for transferring the promised services or products to a customer.

We tested the effectiveness of certain controls over revenue recognition, including management’s controls over the methodology used to determine estimated revenues.

▪ We tested the underlying data used by the Company to determine related bill review revenue estimates by examining customer contracts and analyzing historical utilization analyses completed by the Company.

We also examined subsequent period invoicing and cash collection activities to evaluate the reasonableness of management’s estimates.

We tested significant assumptions used in management’s calculations of period-end directed care revenues by analyzing historical time lag patterns between the provision of service and provider invoicing.

We also examined trends associated with the number of period-end provider referrals and performed gross margin reasonableness analyses to evaluate management’s estimates.

We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements.

We also examined subsequent period invoicing and cash collection activities to evaluate the reasonableness of management’s estimates.

▪ We tested assumptions used in management’s calculations of period-end directed care revenues by analyzing historical time lag patterns between the provision of service and provider invoicing.

We also examined trends associated with the number of period-end provider referrals and performed gross margin reasonableness analyses to evaluate management’s estimates.

▪ We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements.

/s/ HASKELL & WHITE LLP

We have served as the Company’s auditor since 2006.

Irvine, California

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Customer deposits

Accounts receivable (less allowance for doubtful accounts of $ 2,823,000 at March 31,

Accounts receivable (less allowance for expected credit losses of $ 4,245,000 at March 31,

2024 and $ 2,823,000 at March 31, 2023)

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Total current liabilities

Deferred income taxes, net

Long-term lease liabilities

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CORVEL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Fiscal Years Ended March 31, 2024, 2023 and 2022

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Stockholders'

Balance –

March 31, 2020

Balance – March 31, 2021

( 564,435,000

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Purchase of treasury stock

Balance –

March 31, 2021

Balance – March 31, 2022

( 654,520,000

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Purchase of treasury stock

Balance –

March 31, 2022

Balance – March 31, 2023

( 748,195,000

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Purchase of treasury stock

Balance –

March 31, 2023

Balance – March 31, 2024

( 793,905,000

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Stock compensation expense

Provision for doubtful accounts

Provision for expected credit losses

Deferred income taxes

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Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Fiscal Years Ended March 31, 2024, 2023 and 2022

Note 1 —

Summary of Significant Accounting Policies

Note 1 — Summary of Significant Accounting Policies

Organization:

CorVel Corporation (“CorVel”

or “the Company”), incorporated in Delaware in 1987, is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’

compensation benefits, automobile insurance claims, and group health insurance benefits.

CorVel Corporation (“CorVel” or “the Company”), incorporated in Delaware in 1987, is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits.

Basis of Presentation:

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Significant intercompany accounts and transactions have been eliminated in consolidation.

These changes had no impact on previously-reported results of operations or shareholders’

These changes had no impact on previously-reported results of operations or shareholders’ equity.

The Company evaluated all subsequent events and transactions through the date of this filing.

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Actual results could differ from those estimates.

Significant estimates include the values assigned to intangible assets, capitalized software development, the allowance for doubtful accounts, work in process, accrual for income taxes, share-based payments related to performance-based awards, loss contingencies, estimated lives of claims for claims administration revenue recognition, estimates used in stock options valuations, and accrual for self-insurance reserves.

Significant estimates include the values assigned to intangible assets, capitalized software development, the allowance for expected credit losses, work in process, accrual for income taxes, share-based payments related to performance-based awards, loss contingencies, estimated lives of claims for claims administration revenue recognition, estimates used in stock options valuations, and accrual for self-insurance reserves.

Cash and Cash Equivalents:

Cash and cash equivalents consist of short-term, interest-bearing highly-liquid investment-grade securities with maturities of 90 days or less when purchased.

The carrying amounts of the Company’s financial instruments approximate their fair values at March 31, 2023 and 2022 due to the short-term nature of those instruments.

Customer deposits represent cash that is expected to be returned or applied towards payment within one year through the Company’s provider reimbursement services.

The carrying amounts of the Company’s financial instruments approximate their fair values at March 31, 2024 and 2023 due to the short-term nature of those instruments.

Customer deposits represent cash that is expected to be returned or applied towards payment within one year through the Company’s provider reimbursement services.

Fair Value of Financial Instruments:

The Company applies ASC 820, “Fair Value Measurements and Disclosures,”

which defines fair value, establishes a framework for measuring fair value, and provides for disclosures about fair value measurements, with respect to fair value measurements of (i) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s consolidated financial statements on a recurring basis (at least annually) and (ii) all financial assets and liabilities.

The Company applies ASC 820, “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for measuring fair value, and provides for disclosures about fair value measurements, with respect to fair value measurements of (i) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s consolidated financial statements on a recurring basis (at least annually) and (ii) all financial assets and liabilities.

ASC 820 prioritizes the inputs used in measuring fair value into the following hierarchy:

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Level 2 Observable inputs other than those included in Level 1 (for example, quoted prices for similar assets in active markets or quoted prices for identical assets in inactive markets);

Level 3 Unobservable inputs reflecting management’s own assumptions about the inputs used in estimating the value of the asset.

The carrying amount of the Company’s financial instruments (i.e.

Level 3 Unobservable inputs reflecting management’s own assumptions about the inputs used in estimating the value of the asset.

The carrying amount of the Company’s financial instruments (i.e.

cash and cash equivalents, accounts receivable, accounts payable, etc.) approximates their fair values at March 31, 2024 and 2023 due to the short-term nature of those instruments.

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Revenue Recognition:

As the Company completes its performance obligations which are identified in Note 2, it has an unconditional right to consideration as outlined in the Company’s contracts.

Generally, the Company’s billed accounts receivable are expected to be collected in 30 days in accordance with the underlying payment terms.

For many of the Company’s services, the Company typically has one performance obligation;

As the Company completes its performance obligations which are identified in Note 2, it has an unconditional right to consideration as outlined in the Company’s contracts.

Generally, the Company’s billed accounts receivable are expected to be collected in 30 days in accordance with the underlying payment terms.

For many of the Company’s services, the Company typically has one performance obligation;

however, it also provides the customer with an option to acquire additional services.

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Pricing is generally consistent for each service irrespective of the other services or quantities requested by the customer.

The Company has the ability to influence contractual fees with customers and possesses the financial risk of loss in certain contractual obligations.

Accounts Receivable:

The majority of the Company’s accounts receivable are due from companies in the property and casualty insurance industries, self-insured employers and governmental entities.

Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required.

Accounts receivable are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts.

The majority of the Company’s accounts receivable are due from companies in the property and casualty insurance industries, self-insured employers and governmental entities.

Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required.

Accounts receivable are generally due within 30 days and are stated at amounts due from customers net of an allowance for expected credit losses.

Those accounts outstanding longer than the contractual payment terms are considered past due.

The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.

The Company writes off accounts receivable against the reserve when they become uncollectible.

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Concentrations of Credit Risk:

Substantially all of the Company’s customers are payors of workers’

compensation benefits and property and casualty insurance, which include insurance companies, third party administrators, self-insured employers and government entities.

Credit losses consistently have been within management’s expectations.

Virtually all of the Company’s cash is invested at financial institutions in amounts which exceed the FDIC insurance levels.

Substantially all of the Company’s customers are payors of workers’ compensation benefits and property and casualty insurance, which include insurance companies, third party administrators, self-insured employers and government entities.

Credit losses consistently have been within management’s expectations.

Virtually all of the Company’s cash is invested at financial institutions in amounts which exceed the FDIC insurance levels.

No customer accounte d for 10 % or more of revenue for fiscal 2024, 2023 or 2022.

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Computer Software

The Company accounts for internally-developed software costs in accordance with ASC 350-40, “Internal Use Software”.

Capitalized software development costs, intended for internal use, totaled $ 37,166,000 (net of $ 155,998,000 in accumulated amortization) and $ 33,695,000 (net of $ 143,329,000 in accumulated amortization), as of March 31, 2024 and 2023 , respectively.

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The Company determines if an arrangement includes a lease at inception.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term;

and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term;

and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

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The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that we will exercise any such options.

Opearting lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that we will exercise any such options.

Operating lease expense for lease payments is recognized on a straight-line basis over the lease term.

Goodwill and Indefinite Lived Long-Lived Assets:

The Company accounts for its business combinations in accordance with the ASC 805-10 through ASC 805-50, “Business Combinations,”

which (i) requires that the purchase method of accounting be applied to all business combinations and (ii) addresses the criteria for initial recognition of intangible assets and goodwill.

The Company accounts for its business combinations in accordance with the ASC 805-10 through ASC 805-50, “Business Combinations,” which (i) requires that the purchase method of accounting be applied to all business combinations and (ii) addresses the criteria for initial recognition of intangible assets and goodwill.

In accordance with ASC 350-10 through ASC 350-30, goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment annually, or more frequently if circumstances indicate the possibility of impairment.

If the carrying value of goodwill or an intangible asset exceeds its fair value, an impairment loss will be recognized.

Based on the Company’s tests and reviews, no impairment of its goodwill, intangible assets or other long-lived assets existed at March 31, 2023 and 2022 .

Based on the Company’s tests and reviews, no impairment of its goodwill, intangible assets or other long-lived assets existed at March 31, 2024 and 2023 .

However, future events or changes in current circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets.

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Cost of services consists primarily of the compensation and fringe benefits of field personnel, including managers, medical bill analysts, field case managers, telephonic case managers, systems support, administrative support, account managers and account executives, and related facility costs including rent, telephone and office supplies.

Historically, the costs associated with these additional personnel and facilities have been the most significant factor driving increases in the Company’s cost of services.

Income Taxes:

The Company provides for income taxes in accordance with provisions specified in ASC 740, “Accounting for Income Taxes”.

Accordingly, deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities.

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible.

In making an assessment regarding the probability of realizing a benefit from these deductible differences, management considers the Company’s current and past performance, the market environment in which the Company operates, tax-planning strategies and the length of carry-forward periods for loss carry-forwards, if any.

Valuation allowances are established when necessary to reduce deferred tax assets to amounts that are more likely than not to be realized.

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Share-Based Compensation:

The Company accounts for share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation –

Stock Compensation.”

Under ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company accounts for share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – Stock Compensation.” Under ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

These options were valued in the same manner as the time-based options.

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Accrual for Self-insurance Costs:

The Company self-insures for the group medical costs and workers’

compensation costs of its employees.

The Company self-insures for the group medical costs and workers’ compensation costs of its employees.

Management believes that the self-insurance reserves are appropriate;

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Recently Issued Accounting Standards

Note 2 –

Revenue Recognition