-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ArKT2G4oIBYRyxvb7BmRzcf0UED2wOUULWhaJzVkLrddvIydlTt9y4Qk0UuCC1SU HU0uaJP5UX0CSWl8jCMtqw== 0000950136-06-005413.txt : 20060629 0000950136-06-005413.hdr.sgml : 20060629 20060629091648 ACCESSION NUMBER: 0000950136-06-005413 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060629 DATE AS OF CHANGE: 20060629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CLAIMS EVALUATION INC CENTRAL INDEX KEY: 0000774517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SOCIAL SERVICES [8300] IRS NUMBER: 112601199 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14807 FILM NUMBER: 06931760 BUSINESS ADDRESS: STREET 1: 375 N BROADWAY STREET 2: ONE JERICHO PLAZA CITY: JERICHO STATE: NY ZIP: 11753 BUSINESS PHONE: 5169388000 MAIL ADDRESS: STREET 1: ONE JERICHO PLAZA CITY: JERICHO STATE: NY ZIP: 11753 10KSB 1 file1.htm

U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form 10-KSB

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended March 31, 2006

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the transition period from ____ to ____

Commission file number 0-14807

AMERICAN CLAIMS EVALUATION, INC.
(Name of small business issuer in its charter)

New York 11-2601199
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

One Jericho Plaza, Jericho, NY 11753
(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (516) 938-8000

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The issuer's revenues for the fiscal year ending March 31, 2006 were $1,141,967.

On June 26, 2006, the aggregate market value of the registrant's common stock
held by non-affiliates was $2,403,028. For purposes of this disclosure, shares
of common stock held by directors, officers and shareholders whose ownership
exceeds five percent of the common stock outstanding were excluded. Exclusion of
shares held by any person should not be construed to indicate that such person
possesses the power, direct or indirect, to direct or cause the direction of
management or policies of the issuer, or that such person is controlled by or
under common control with the issuer.

The number of shares of the registrant's common stock outstanding on June 26,
2006 was 4,761,800.

DOCUMENTS INCORPORATED BY REFERENCE
None.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

PART I

Item 1. Description of Business.

American Claims Evaluation, Inc. (the "Company") was incorporated in the State
of New York and commenced operations in April 1982. The Company provides a full
range of vocational rehabilitation and disability management services designed
to maximize injured workers' abilities in order to reintegrate them into their
respective communities through its wholly owned subsidiary, RPM Rehabilitation &
Associates, Inc. ("RPM").

The functional capabilities of the injured workers referred to the Company vary.
Comprehensive, in-house vocational evaluations are utilized to assess aptitudes,
interests, values and abilities. Issues of medical restrictions, functional
overlays, illiteracy and occupational diseases are assessed and factored into
the development of a rehabilitation strategy.

Specifically, in working with injured workers, the purpose and intent are to
bring the injured worker back to work with the employer of injury as soon as
medically feasible. The role of a vocational rehabilitation consultant is to
convene the claimant, the employer of injury and associated medical
professionals to facilitate an expedited return to work, utilizing the
principles of job accommodation, job modification and transitional work. In
addition, the consultant can provide medical monitoring of the worker's progress
through pain clinics and work hardening programs. Coordination of these services
assists the worker in building strength and motivation to return to their
employer and/or occupation at the time of injury. The Company's philosophy is
that timely coordination of professional services coupled with education and
liaison with the employer community provides positive results for all parties
concerned.

Some early intervention activities include contacting employers at the time of
injury to develop return to work strategies such as work restructuring and job
modification, on site analysis, local labor market analysis and obtaining work
histories. Feedback from clients' claims managers regarding the Company's
responsive interventions indicates a trusting, team approach, which allows for
clear and accurate assessments that expedite the adjudication process, resulting
in timely and successful case closure.

RPM provides vocational rehabilitation and case management services to the
Washington State Department of Labor & Industries ("L&I"). During 2001, L&I
eliminated the process of awarding contracts to qualifying firms in favor of a
new system which created the opportunity for any firm or individual meeting
L&I's requirements to provide services. To be eligible under this new system, a
provider must only meet certain business practice standards and consultant
credentialing criteria without the necessity of being awarded a contract. All
RPM consultants have been transitioned into the new system and have until
December 1, 2010, as extended, to meet the credentialing standards. The Company
has instituted an educational program to ensure all remaining consultants not
currently meeting L&I's credentialing requirements will do so by the imposed
deadline, as extended.

L&I uses a statistical formula to measure vocational rehabilitation provider
performance. Based on this formula, each provider's performance is compared to
his/her peers statewide and individual counselors and provider firms are
assigned a "conditional" or "eligible" rating. These ratings are then made
available to L&I's Claims Managers to assist them in choosing a provider when
making a vocational referral. RPM currently has a conditional rating. This has
negatively impacted RPM's ability to acquire referrals from L&I. Although RPM
continues to receive cases from L&I, the rate at which they are being received
has lessened. Updated individual counselor and firm ratings are issued on a
quarterly basis and in fact can change significantly from one quarter to
another. RPM anticipates that its current rating will improve in subsequent
performance measures. However, the ability to achieve an eligible status on
future ratings and a related increase in the number of referrals from L&I are
not assured.

For the years ended March 31, 2006 and 2005, L&I accounted for 44% and 41%,
respectively, of the Company's revenues. The Company has two other customers
that accounted for 13% and 12% of revenues and 10% and 12% of revenues for the
years ended March 31, 2006 and 2005, respectively. Revenues from a fourth
customer comprised 10% of revenues for the year ended March 31, 2005.

Marketing and Advertising

The President of the Company and the President of RPM are responsible for the
Company's sales and marketing program. The Company markets its services by
direct contact with leading healthcare payers.

Competition

The vocational rehabilitation field is highly competitive. The Company competes
with a number of businesses that provide the same services. Many of these
competitors have a longer operating history, greater financial resources, and
provide other services to insurance companies that the Company does not provide.

Principal competitors in vocational rehabilitation include national firms, such
as Concentra, Inc. and Crawford & Company, as well as many regional firms.
Quality of service, high caliber consultants, proper pricing and range of
services offered are the principal factors that will enable the Company to
compete effectively.

Employees

As of March 31, 2006, the Company had fifteen full-time employees and three
part-time employees. Of these full-time employees, three were in management,
nine were vocational rehabilitation consultants and three were in
administration.

Item 2. Description of Property.

The Company leases office space in Jericho, New York under a seven-year
non-cancelable operating sublease with American Para Professional Systems, Inc.
("APPS"), an entity under the control of the Company's Chairman of the Board,
which expires on November 30, 2011. Basic rent under the sublease has been
established as a pass-through with the Company's cost being fixed at a cost
equal to the pro-rated rent payable for the subleased space by APPS to the
building's landlord.

RPM leases approximately 2,500 square feet of office space in Spokane,
Washington under a three-year non-cancelable operating lease which expires on
June 30, 2008. RPM also maintains an office in Moses Lake, Washington, which is
leased on a month-to-month basis.

The Company believes that its existing facilities are adequate to meet its
present needs. However, should the Company require additional space it is
assumed that such space will be available.

Item 3. Legal Proceedings.

The Company is not engaged in any litigation.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth
quarter of the year ended March 31, 2006.

PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities.

The Company's common stock, par value $.01 (the "Shares"), trades on the Nasdaq
SmallCap Market under the symbol "AMCE".

The following table sets forth the range of high and low sales prices for the
Company's Shares for each quarter during the period April 1, 2004 through March
31, 2006:

High Low
------ ------

Fiscal 2005:
Quarter ended Jun. 30, 2004 $3.95 $1.65
Quarter ended Sept. 30, 2004 $2.38 $1.57
Quarter ended Dec. 31, 2004 $2.75 $1.55
Quarter ended Mar. 31, 2005 $2.60 $1.78

Fiscal 2006:
Quarter ended Jun. 30, 2005 $2.48 $1.50
Quarter ended Sept. 30, 2005 $2.25 $1.61
Quarter ended Dec. 31, 2005 $3.75 $1.40
Quarter ended Mar. 31, 2006 $3.60 $1.83

The number of holders of the Company's Shares was approximately 573 on March 31,
2006, computed by the number of record holders, inclusive of holders for whom
Shares are being held in the name of brokerage houses and clearing agencies.

The Company has never paid a cash dividend and does not presently anticipate
doing so in the foreseeable future, but expects to retain earnings, if any, for
use in its business.

Item 6. Management's Discussion and Analysis or Plan of Operation.

Results of Operations

Revenue from vocational rehabilitation services for the fiscal year ended March
31, 2006 ("Fiscal 2006") totaled $1,141,967, consistent with revenues of
$1,139,947 generated in the fiscal year ended March 31, 2005 ("Fiscal 2005").
During Fiscal 2005, revenue had decreased 4.3% from the $1,190,921 reported for
the fiscal year ended March 31, 2004 ("Fiscal 2004"). The decrease in revenues
during Fiscal 2005 was predominately the result of a decrease in case referrals
from L&I. For the years ended March 31, 2006 and 2005, L&I accounted for 44% and
41%, respectively, of the Company's revenues.

The cost of vocational rehabilitation services was 50.4% of revenues for Fiscal
2006 which remained consistent with the cost of vocational rehabilitation
services for Fiscal 2005, which was 50.5% of revenues. During Fiscal 2004, the
cost of vocational rehabilitation services was 47.9% of revenues. The cost of
services had increased during Fiscal 2005 as a result of a larger percentage of
cases being performed by higher priced rehabilitation consultants.

Selling, general and administrative expenses were $1,180,537 and $1,169,879 in
Fiscal 2006 and Fiscal 2005, respectively. The Company's expenditures increased
as a result of the hiring of an individual to market vocational rehabilitation
and related services. This increase was offset by a decrease in rent expense
during the current fiscal year under its new sublease in New York and a new
lease for its Spokane, Washington location. Selling, general and administrative
expenses in Fiscal 2004 were $1,182,194.

Interest income increased to $286,542 during Fiscal 2006, as compared to
interest income of $127,982 for Fiscal 2005, as a direct result of incrementally
higher interest rates during the current fiscal year. Interest income during
Fiscal 2005 had increased from $93,173 in Fiscal 2004 as a result of an increase
in the amount of cash available for investment purposes as well as incrementally
higher interest rates over the prior fiscal period.

Management evaluates the realizability of the deferred tax assets and the need
for additional valuation allowances quarterly. The Company believes it is more
likely than not that the deferred tax assets will not be realized. As of March
31, 2006, the Company has net operating loss and capital loss carryforwards of
approximately $1,499,000 and $467,000, respectively, which will be available to
reduce future taxable income.

Liquidity and Capital Resources

The Company's primary source of cash is internally generated funds. At March 31,
2006, the Company had working capital of $6,948,167 as compared to working
capital of $7,396,108 at March 31, 2005.

During Fiscal 2006, operating activities used cash of $280,378, primarily due to
its operating loss. Cash used in financing activities during Fiscal 2006
reflects the repurchase of 98,000 Shares of the Company's stock in private
transactions at an aggregate cost of $144,700. Cash provided by financing
activities during Fiscal 2005 reflects $1,070,000 of proceeds related to the
issuance of Shares pursuant to the exercise of options to purchase 600,000
Shares. The Company used $6,309 and $10,611 in its investing activities for
capital expenditures during the years ended March 31, 2006 and 2005,
respectively.

The Company continues its review of strategic alternatives for maximizing
shareholder value. Potential acquisitions will be evaluated based on their
merits within its current line of business, as well as other fields. Management
believes that the Company has sufficient cash resources and working capital to
meet its capital resource requirements for the foreseeable future.

Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to the Company.

Critical Accounting Policies

The Company makes estimates and assumptions in the preparation of its financial
statements in conformity with accounting principles generally accepted in the
United States of America. Actual results could differ significantly from those
estimates under different assumptions and conditions. The Company does not
consider any of its accounting policies to be critical. Note 1 of the notes to
the consolidated financial statements includes a summary of the significant
accounting policies used in the preparation of the accompanying consolidated
financial statements, which are those that are most important to the portrayal
of the Company's financial condition and results of operations and which require
management's most difficult and subjective judgments, often as a result of the
need to make estimates about the effect of matters that are inherently
uncertain.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in
this Report on Form 10-KSB and the Company's other periodic reports and other
documents incorporated by reference or incorporated herein as exhibits, may
contain forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, general economic and market conditions, the potential
loss or termination of existing clients and contracts and the ability of the
Company to successfully identify and thereafter consummate one or more
acquisitions.

Item 7. Financial Statements.

The financial statements required by this Item are set forth at the pages
indicated in Item 13 on page 15 of this report.

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

None.

Item 8A. Controls and Procedures.

Disclosure controls and procedures are designed to ensure the reliability of the
financial statements and other disclosures included in this Report. As of the
end of the period covered by this Annual Report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information required to be included in the Company's periodic
Securities and Exchange Commission ("SEC") filings.

There have been no changes in the Company's internal controls over financial
reporting or in other factors that could significantly affect the internal
controls over financial reporting subsequent to the date of the Company's
evaluation in connection with the preparation of this Report.

Management is aware that there is a lack of segregation of duties due to the
small number of employees dealing with general administrative and financial
matters. However, management has decided that considering the employees involved
and the control procedures in place, risks associated with such lack of
segregation are insignificant and the potential benefits of adding employees to
clearly segregate duties do not justify the expenses associated with such
increases.

Item 8B. Other Information.

None.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.

The executive officers and directors of the Company are as follows:

Name Age Position
---------------------- ------ -------------------------
Gary Gelman 59 Chairman of the Board,
President and Chief
Executive Officer

Gary J. Knauer 46 Chief Financial Officer,
Treasurer and Secretary

Edward M. Elkin, M.D. 67 Director

Peter Gutmann 77 Director

Joseph Looney 48 Director

Gary Gelman, the founder of the Company, has been Chairman of the Board since
July 1, 1985 and President, Chief Executive Officer and a director since
inception. Mr. Gelman served as Treasurer from inception to October 1991. Since
1973, Mr. Gelman has also been Chief Executive Officer and a principal of
American Para Professional Systems, Inc. ("APPS"), which provides nurses who
perform physical examinations of applicants for life and/or health insurance for
insurance companies. He received a B.A. from Queens College.

Gary J. Knauer joined the Company as its Controller in July 1991 and has served
as Chief Financial Officer and Treasurer since October 1991 and as Secretary
since March 1993. Before joining the Company, he was employed from October 1984
to June 1991 by the accounting firm of KPMG LLP. He is a Certified Public
Accountant and holds a B.S. from the State University of New York at Binghamton.
Since February 1994, Mr. Knauer also has served as Chief Financial Officer of
APPS.

Edward M. Elkin, M.D. has been a director of the Company since July 1, 1985. For
more than the past five years, Dr. Elkin has been performing services relating
to utilization review and quality assurance in hospitals for the New York State
Department of Health. He is certified by the American Board of Pediatrics and
the American Board of Quality Assurance and Utilization Review Physicians. He
received his B.A. from Harvard College and his M.D. from
New York University School of Medicine.

Peter Gutmann has been a director of the Company since July 1, 1985. For more
than the past twenty years, he has been a Professor of Economics and Finance at
Baruch College, City University of New York and was Chairman of the Economics
and Finance Department from 1971 to 1977. He received a B.A. from Williams
College, a B.S. from Massachusetts Institute of Technology, an M.A. from
Columbia University and a PhD. from Harvard University.

Joseph Looney was appointed a director of the Company on June 14, 2005. He is
currently the Vice President - Finance for NBTY, Inc., a vertically integrated
manufacturer and distributor of vitamins and

nutritional supplements. He was the Chief Financial Officer of EVCI Career
College Holding Corp. from October 2005 to May 2006. Previously, he had been the
Chief Financial Officer and Secretary of Astrex, Inc., a distributor of
electronic components, since 2002. From 1996-2002, he was the Chief Financial
Officer, V.P. of Finance and Assistant Secretary of Manchester Technologies,
Inc., a network integrator and reseller of computer products. From 1984-1996, he
was employed by the accounting firm of KPMG LLP. He is a Certified Public
Accountant and has a B.A. from Queens College, City University of New York and
an M.S. from Long Island University. Since 1996, Mr. Looney has also been an
Adjunct Professor of Accounting and Business Law at Hofstra University.

The directors are elected at the Annual Meeting of Shareholders and hold office
until the next Annual Meeting of Shareholders and until their respective
successors have been elected and qualified or until their prior death,
resignation or removal.

The Company has a separately-designated standing audit committee established in
accordance with section 3(a)(58)(A) of the Exchange Act. Messrs. Elkin, Gutmann
and Looney are the members of the Audit Committee. The Board has determined that
Mr. Looney is (i) the "audit committee financial expert", as defined in
regulations adopted pursuant to the Sarbanes-Oxley Act of 2002 and (ii)
"independent" in accordance with Item 7(d)(3)(iv) of Schedule 14A of the
Exchange Act.

Code of Ethics

The Company has adopted a Code of Ethics (the "Code of Ethics") that applies to
its Chief Executive Officer, Chief Financial Officer, Directors and employees.
Any amendments or waivers to the Code of Ethics will be promptly disclosed as
required by applicable laws, rules and regulations of the SEC.

Section 16(a) Beneficial Ownership Reporting Compliance

Under Federal securities laws, the Company's directors, its executive officers
and any person holding more than 10% of the Company's Shares are required to
report their ownership of the Company's Shares and any changes in that ownership
to the SEC on the SEC's Forms 3, 4 and 5. Based on its review of the copies of
such forms it has received, the Company believes that all officers, directors
and owners of greater than 10% of the Company's equity securities complied on a
timely basis with all filing requirements applicable to them with respect to
transactions during Fiscal 2006.

Item 10. Executive Compensation.

The following table sets forth all compensation paid or accrued to the Company's
Chief Executive Officer and another executive officer (the "Named Executive
Officers") for each of the Company's last three fiscal years. No other executive
officer had total annual salary and bonus which exceeded $100,000 during the
fiscal year ended March 31, 2006.

SUMMARY COMPENSATION TABLE

Long Term
Compensation
Annual Compensation Awards
----------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Fiscal Salary Bonus Compensation Options Compensation
Principal Position Year ($) ($) ($) (1) (#) ($) (2)
- ---------------------- -------- -------- ------- -------------- ------------ ------------

Gary Gelman 2006 $244,311 -- -- 250,000 $3,247
Chairman, 2005 244,311 -- -- -- 2,592
President and CEO 2004 244,311 -- -- 100,000 2,514

Gary J. Knauer 2006 $129,010 -- -- 20,000 $1,997
Treasurer, 2005 125,840 -- -- 50,000 1,842
Secretary and CFO 2004 119,881 -- -- 30,000 1,810

(1) The aggregate amount of all perquisites and other personal benefits paid
were not greater than either $50,000 or 10% of the total annual salary and
bonus reported for the respective officers.

(2) Consists of matching contributions made by the Company under the 401(k)
plan for the fiscal years ended March 31, 2006, 2005 and 2004,
respectively.

Compensation Plans

The following describes plans adopted by the Company pursuant to which cash or
non-cash compensation was paid or distributed during the years ended March 31,
2006, 2005 and 2004 or pursuant to which such compensation may be distributed in
the future, to the Named Executive Officers.

401(k) Profit Sharing Plan

The Company sponsors a profit sharing plan covering all employees having reached
the age of 21 with one or more years of service which is qualified under Section
401(k) of the Internal Revenue Code of 1986, as amended. The Company matches 50
percent of employee contributions up to 3 percent of compensation. Under the
terms of the plan, there is a vesting requirement with respect to Company
contributions, but employees are fully vested in their own salary deferral
contributions.

Stock Option Plans

In July 1985, the Company's Board of Directors adopted the 1985 Stock Option
Plan (the "1985 Plan"). The 1985 Plan has expired, except as to options
outstanding (consisting of options to purchase 5,000 Shares at March 31, 2006).
No additional options may be granted.

In March 1991, the Board of Directors adopted the Company's 1991 Stock Option
Plan (the "1991 Plan") and in October 1991, the shareholders of the Company
ratified, approved and adopted the 1991 Plan. The 1991 Plan has also expired,
except as to options outstanding (consisting of options to purchase 30,000
Shares at March 31, 2006). No additional options may be granted.

On May 7, 1997, the Board of Directors adopted the 1997 Incentive Stock Option
Plan (the "1997 Plan") covering 750,000 Shares. The shareholders of the Company
ratified and approved the 1997 Plan in September 1997. There are no remaining
options available for grant under the 1997 Plan.

On August 25, 2000, the Board of Directors adopted the 2000 Incentive Stock Plan
(the "2000 Plan"). The Company's shareholders ratified and approved the 2000
Plan in October 2000. The 2000 Plan permits the granting of an aggregate of
options to purchase 750,000 Shares.

On June 14, 2005, the Board of Directors adopted the 2005 Stock Incentive Plan
(the "2005 Plan") covering 1,000,000 Shares. The Company's shareholders ratified
and approved the 2005 Plan in October 2005.

On August 15, 2005, Company granted options to purchase a total of 310,000
Shares under the 2005 Plan to the Company's directors and executive officers at
an exercise price of $1.94 per Share. Additionally, in light of the Company's
expected adoption of Statement of Financial Accounting Standards No. 123
(revised 2004) on January 1, 2006, the Board authorized the immediate vesting of
unvested stock options previously granted to an executive officer of the Company
effective August 15, 2005. The Board's decision to accelerate the vesting of
these stock options was based on the belief that it was in the best interest of
its shareholders as it will reduce the Company's reported compensation expense
in future periods. In order to prevent unintended personal benefit to the
officer, the Board imposed certain restrictions on the sale of any Shares
obtained through the exercise of an accelerated option.

At March 31, 2006, options to purchase 690,000 and 9,000 Shares were available
for grant under the 2005 Plan and 2000 Plan, respectively.

Under the 2000 Plan and 2005 Plan, either incentive stock options or
nonstatutory options may be granted as an incentive to key employees (including
directors and officers who are key employees), non-employee directors,
independent contractors and consultants of the Company and to offer an
additional inducement in obtaining the services of such individuals.

The exercise price of the Shares under each option is determined by a committee
appointed by the Board of Directors; provided, however, that the exercise price
shall not be less than the fair market value of the Shares on the date of the
grant. The term of each option granted pursuant to the 2000 and 2005 Plans is
established by the committee appointed by the Board of Directors, in its sole
discretion, provided that the term shall not exceed ten years from the date of
the grant.

All of the Company's Plans provide that the number of Shares subject thereto and
the outstanding options and their exercise prices are to be appropriately
adjusted for mergers, consolidations, recapitalizations, stock dividends, stock
splits or combinations of shares.

The current option committee appointed by the Board of Directors to administer
the Company's stock option plans consists of Messrs. Gutmann, Elkin and Looney,
all independent directors within the meaning of the Qualitative Listing Rules of
the NASDAQ Stock Market. The Board of Directors may at any time terminate or
from time to time amend or alter any of the existing stock option plans.

Option Grants in Last Fiscal Year

The following table contains information concerning options granted to the Named
Executive Officers during the fiscal year ended March 31, 2006:

Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted (#) in Fiscal Year ($/sh) Date
-------------- ------------ --------------- -------- ----------
Gary Gelman 250,000 92.6% $1.94 08/15/2015
Gary J. Knauer 20,000 7.4% $1.94 08/15/2015

Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values

The following table sets forth information regarding the dollar value of
unexercised stock options for the Named Executive Officers at March 31, 2006.
The value of the unexercised in-the-money options is based on the closing price
of the Shares on March 31, 2006 of $2.48 per Share, minus the exercise price,
multiplied by the number of Shares issuable upon exercise of the options. These
values have not been, and may never be, realized.

Shares Value Number of Securities Value of Unexercised
Acquired Realized Underlying Unexercised In-the-Money Options
Name on Exercise (#) ($) Options at FY-End (#) at FY-End ($)
- ---------------- --------------- -------- --------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------

Gary Gelman -- -- 800,000 -- $504,000 --
Gary J. Knauer -- -- 250,000 -- $91,700 --

Employment Agreements

Mr. Gelman's employment agreement with the Company provides for him to be
employed as Chairman of the Board of Directors and Chief Executive Officer at an
annual salary of $238,800, plus sick and vacation pay of approximately $6,000.
In addition, Mr. Gelman is entitled to participate in all employee benefit
programs and other policies and programs of the Company. Mr. Gelman is not
required to devote any specific number of hours to the business of the Company.
He is subject to a non-competition and non-disclosure covenant for a period of
two years following termination of employment with the Company.

Director Compensation

Each Director who is not a salaried employee receives an annual retainer of
$1,000 and a uniform fee of $500 for each Board of Directors' meeting and/or
Audit Committee meeting attended in person. In addition, Mr. Looney will receive
an additional fee of $500 per Audit Committee meeting as the "audit committee
financial expert" serving on the Company's Audit Committee.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.

The following table and notes thereto set forth information regarding the
beneficial ownership of the Company's Shares as of June 26, 2006 by (i) each
person known by the Company to be the beneficial owner of more than 5% of such
voting security, (ii) each director of the Company, (iii) each Named Executive
Officer and (iv) all executive officers and directors of the Company as a group.
The percentages have been calculated by taking into account all Shares owned on
such date as well as all such Shares with respect to which such person has the
right to acquire beneficial ownership at such date or within 60 days thereafter.
Unless otherwise indicated, all persons listed below have sole voting and sole
investment power over the Shares owned.

Amount and Nature
Name and Address of Beneficial Percent of
of Beneficial Owner Ownership (1) (4) Class (1)
- ------------------------------------ ----------------- -----------
Gary Gelman (2) 3,696,400 66.5%
Peter Gutmann (2) 121,000 (3) 2.5%
Edward M. Elkin, M.D. (2) 81,000 1.7%
Joseph Looney (2) 20,000 *
Gary J. Knauer (2) 250,000 5.0%
J. Morton Davis 388,024 (5) 8.1%
Kinder Investments, L.P. 292,500 (6) 6.1%
All executive officers and directors
as a group (five persons) 4,168,400 69.6%

* Less than 1%.

(1) Based on a total of 4,761,800 Shares issued and outstanding and 1,226,000
Shares issuable upon the exercise of presently exercisable stock options
by persons described in the preceding table.

(2) Address is c/o the Company, One Jericho Plaza, Jericho, NY 11753.

(3) Includes 4,000 Shares owned by the wife of Mr. Gutmann, as to which
beneficial ownership is disclaimed by Mr. Gutmann.

(4) Includes the presently exercisable portions of outstanding stock options
(aggregating 1,226,000 Shares) which, in the case of Messrs. Gelman,
Gutmann, Elkin, Looney and Knauer, are 800,000, 75,000, 81,000, 20,000 and
250,000 Shares, respectively.

(5) 386,924 of these Shares are owned of record by D.H. Blair Investment
Banking Corp., whose address is 44 Wall Street, New York, New York 10005
("Blair Investment"). Mr. Davis has reported that Blair Investment's
Shares may be deemed to be beneficially owned by him. Mr. Davis owns 1,100
Shares directly.

(6) These Shares are owned of record by Kinder Investments, L.P. ("Kinder"),
Nesher, LLC, the general partner of Kinder ("Nesher") and Dov Perlysky,
the managing member of Nesher ("Perlysky"). The reporting parties'
business address is 100 Park Avenue, New York, NY 10017. Nesher and Kinder
may be deemed to beneficially own 292,500 Shares. Perlysky may be deemed
to beneficially own 292,572 Shares, consisting of 292,500 Shares owned
directly by Kinder and 72 Shares owned directly by Perlysky's wife.

Equity Compensation Plan Information

Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
Plan category (a) (b) (c)
- --------------------- -------------------- -------------------- ----------------------------

Equity compensation
Plans approved by
security holders 1,236,000 $1.96 699,000

Equity compensation
Plans not approved by
security holders 0 N/A 0

Total 1,236,000 $1.96 699,000

Item 12. Certain Relationships and Related Transactions.

The Company entered into a seven-year non-cancelable operating sublease which
expires November 30, 2011 for office space with APPS, an entity under the
control of the Company's Chairman of the Board. Basic rent under the sublease
has been established as a pass-through with the Company's cost being fixed at a
cost equal to the pro-rated rent payable for the subleased space by APPS to the
building's landlord.

PART IV

Item 13. Exhibits.

Documents filed with this report:

1. Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of March 31, 2006 and 2005

Consolidated Statements of Operations for the years ended March 31,
2006 and 2005

Consolidated Statements of Stockholders' Equity for the years ended
March 31, 2006 and 2005

Consolidated Statements of Cash Flows for the years ended March 31,
2006 and 2005

Notes to Consolidated Financial Statements

Financial Statement Schedules

Financial statement schedules have been omitted because the required
information is inapplicable or because the information is presented
in the financial statements or related notes.

2. Exhibits

3 Certificate of Incorporation of the Company as amended
(Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-18, File No. 2-99625-NY,
dated March 31, 1989).

3.1 Certificate of Amendment of Certificate of Incorporation
(Incorporated by reference to Exhibit 4 to the Company's
Annual Report on Form 10-K for its year ended March 31, 1989).

3.2 By-Laws of the Company (Incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-3, File
No. 33-40200, dated April 26, 1991).

10.1 1985 Stock Option Plan (Incorporated by reference to Exhibit
10.5 to the Company's Registration Statement on Form S-18,
File No. 2-99625-NY, dated March 31, 1989).

10.2 1991 Stock Option Plan (Incorporated by reference to Exhibit
10.5 to the Company's Registration Statement on Form S-3, File
No. 33-40200, dated April 26, 1991).

10.3 1997 Stock Incentive Plan (Incorporated by reference to
Exhibit 4 to the Company's Registration Statement on Form S-8,
File No. 333-39071, dated October 30, 1997).

10.4 2000 Stock Incentive Plan (Incorporated by reference to
Exhibit A to the Company's Proxy Statement dated September 11,
2000).

10.5 Employment Agreement, dated June 7, 2001, between the Company
and Gary Gelman (Incorporated by reference to Exhibit 10.1 to
the Company's Annual Report on Form 10-KSB for its year ended
March 31, 2001).

10.6 Sublease Agreement, dated August 20, 2004, between American
Para Professional Systems, Inc. and the Company with respect
to the premises at One Jericho Plaza, Jericho, NY
(Incorporated by reference to Exhibit 10 to the Company's Form
10-QSB for the quarter ended September 30, 2005).

10.7 Lease Agreement, dated March 14, 2005, with respect to the RPM
Rehabilitation & Associates, Inc. office located at 1212 N.
Washington Street, Spokane, WA (Incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-KSB for
its year ended March 31, 2005).

10.8 2005 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8 to the Company's Annual Report on Form 10-KSB for
its year ended March 31, 2005).

14 Code of Ethics (Incorporated by reference to Exhibit 14 to the
Company's Annual Report on Form 10-KSB for its year ended
March 31, 2004).

21 Subsidiaries.

23.1 Consent of Independent Registered Public Accounting Firm.

31.1 Rule 13a-14(a)/15d-14(a) Certification.

31.2 Rule 13a-14(a)/15d-14(a) Certification.

32.1 Section 1350 Certification of Chief Executive Officer.

32.2 Section 1350 Certification of Chief Financial Officer.

Item 14. Principal Accountant Fees and Services.

Audit Fees.

The aggregate fees billed or billable for the fiscal years ended March 31, 2006
and 2005 for professional services rendered by J.H. Cohn LLP for the audits of
the annual financial statements and the review of the financial statements
included in our quarterly reports on Form 10-QSB were $35,000 and $30,000,
respectively.

Audit Related Fees.

The Company did not pay any additional fees for services to J.H. Cohn LLP that
are reasonably related to the audit of the Company's annual financial statements
and review of the financial statements included in the quarterly reports that
are not reported under "Audit Fees" during the fiscal years ended March 31, 2006
and 2005.

Tax Fees.

The Company did not engage J.H. Cohn LLP to provide tax services to the Company
during the fiscal years ended March 31, 2006 and 2005.

All Other Fees.

The Company did not engage J.H. Cohn LLP to provide products and services to the
Company other than the services referred to above during the fiscal years ended
March 31, 2006 and 2005.

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

The Audit Committee, consisting of Messrs. Elkin, Gutmann and Looney, is to
pre-approve all audit and non-audit services provided by the independent
registered public accounting firm. These services may include audit services,
audit-related services, tax services and other services as allowed by law or
regulation. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specifically approved amount. The independent
registered public accounting firm and the Company's management are required to
periodically report to the Audit Committee regarding the extent of services
provided by the independent registered public accounting firm in accordance with
this pre-approval and the fees incurred to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.

The Audit Committee pre-approved 100% of the Company's fiscal 2006 audit fees.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

AMERICAN CLAIMS EVALUATION, INC.

By: /s/ Gary Gelman
---------------
Gary Gelman
Chairman of the Board, President
and Chief Executive Officer

DATE: June 26, 2006

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:

SIGNATURES TITLE DATE
- ---------------------- ----------------------------- -------------

/s/ Gary Gelman Chairman of the Board, June 26, 2006
- ---------------------- President and Chief
Gary Gelman Executive Officer
(Principal Executive Officer)

/s/ Gary J. Knauer Chief Financial Officer, June 26, 2006
- ---------------------- Treasurer and Secretary
Gary J. Knauer (Principal Financial
and Accounting Officer)

/s/ Edward M. Elkin Director June 26, 2006
- ----------------------
Edward M. Elkin, M.D.

/s/ Peter Gutmann Director June 26, 2006
- ----------------------
Peter Gutmann

/s/ Joseph Looney Director June 26, 2006
- ----------------------
Joseph Looney

                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

                                                                           PAGE

Report of Independent Registered Public Accounting Firm                    F-1

Consolidated Financial Statements

   Consolidated Balance Sheets as of March 31, 2006 and 2005               F-2

   Consolidated Statements of Operations for the years ended
     March 31, 2006 and 2005                                               F-3

   Consolidated Statements of Stockholders' Equity for the years ended
     March 31, 2006 and 2005                                               F-4

   Consolidated Statements of Cash Flows for the years ended
     March 31, 2006 and 2005                                               F-5

   Notes to Consolidated Financial Statements                              F-6




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
American Claims Evaluation, Inc.

We have audited the accompanying consolidated balance sheets of American Claims
Evaluation, Inc. and subsidiary as of March 31, 2006 and 2005, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Claims
Evaluation, Inc. and subsidiary as of March 31, 2006 and 2005, and their results
of operations and cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.


/s/ J.H. Cohn LLP


Jericho, New York
May 31, 2006


                                       F-1




                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets

                             March 31, 2006 and 2005



                            ASSETS                                     2006            2005
                                                                  -------------   ------------

Current assets:
  Cash and cash equivalents                                       $  6,939,798    $ 7,371,185
  Accounts receivable (net of allowance for doubtful
    accounts of $1,000 in 2006 and 2005)                                90,716        109,721
  Prepaid expenses                                                      36,870         35,301
                                                                  -------------   ------------
             Total current assets                                    7,067,384      7,516,207

Property and equipment, net                                             16,224         33,045
                                                                  -------------   ------------
             Total assets                                         $  7,083,608    $ 7,549,252
                                                                  =============   ============

             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                $     18,193    $    10,354
  Accrued expenses                                                     101,024        108,517
  Income tax payable                                                        --          1,228
                                                                  -------------   ------------
             Total current liabilities                                 119,217        120,099
                                                                  -------------   ------------
Commitments

Stockholders' equity:
  Common stock, $0.01 par value. Authorized 10,000,000 shares;
    issued 5,050,000 shares; outstanding 4,761,800 shares
    and 4,859,800 shares in 2006 and 2005, respectively                 50,500         50,500
  Additional paid-in capital                                         4,586,849      4,579,699
  Retained earnings                                                  2,788,883      3,116,095
                                                                  -------------   ------------
                                                                     7,426,232      7,746,294

  Treasury stock, at cost                                             (461,841)      (317,141)
                                                                  -------------   ------------
             Total stockholders' equity                              6,964,391      7,429,153
                                                                  -------------   ------------
             Total liabilities and stockholders' equity           $  7,083,608    $ 7,549,252
                                                                  =============   ============


See accompanying notes to consolidated financial statements.


                                      F-2



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                      Consolidated Statements of Operations

                       Years ended March 31, 2006 and 2005



                                                                       2006            2005
                                                                  -------------   ------------

Revenues                                                          $  1,141,967    $ 1,139,947
Cost of services                                                       575,184        575,282
                                                                  -------------   ------------
             Gross margin                                              566,783        564,665
Selling, general, and administrative expenses                        1,180,537      1,169,879
                                                                  -------------   ------------
             Operating loss                                           (613,754)      (605,214)
Other income:
  Interest income                                                      286,542        127,982
                                                                  -------------   ------------
             Loss before income tax expense                           (327,212)      (477,232)
Income tax expense                                                          --          4,000
                                                                  -------------   ------------
             Net loss                                             $   (327,212)   $  (481,232)
                                                                  =============   ============
Loss per share - basic and diluted                                $      (0.07)   $     (0.10)
                                                                  =============   ============
Weighted average shares - basic and diluted                          4,794,258      4,789,800
                                                                  =============   ============


See accompanying notes to consolidated financial statements.


                                       F-3



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                 Consolidated Statements of Stockholders' Equity

                       Years ended March 31, 2006 and 2005




                                    COMMON STOCK         ADDITIONAL                      TREASURY STOCK            TOTAL
                              ------------------------    PAID-IN       RETAINED    ------------------------   STOCKHOLDERS'
                                SHARES      PAR VALUE     CAPITAL       EARNINGS      SHARES       AMOUNT         EQUITY
                              -----------  -----------  ------------  ------------  ----------  ------------  --------------

Balance at March 31, 2004       4,450,000  $   44,500   $  3,515,699  $ 3,597,327     190,200   $ (317,141)   $   6,840,385

Net loss                               --          --             --     (481,232)         --           --         (481,232)
Exercise of stock options         600,000       6,000      1,064,000           --          --           --        1,070,000
                              -----------  -----------  ------------  ------------  ----------  ------------  --------------
Balance at March 31, 2005       5,050,000      50,500      4,579,699    3,116,095     190,200     (317,141)       7,429,153

Net loss                               --          --             --     (327,212)         --           --         (327,212)
Purchase of treasury shares            --          --             --           --      98,000     (144,700)        (144,700)
Stock compensation expense             --          --          7,150           --          --           --            7,150
                              -----------  -----------  ------------  ------------  ----------  ------------  --------------
Balance at March 31, 2006       5,050,000  $   50,500   $  4,586,849  $ 2,788,883     288,200   $ (461,841)   $   6,964,391
                              ===========  ===========  ============  ============  ==========  ============  ==============


See accompanying notes to consolidated financial statements.


                                       F-4



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                       Years ended March 31, 2006 and 2005



                                                                      2006            2005
                                                                  -------------   ------------

Cash flows from operating activities:
  Net loss                                                        $   (327,212)   $  (481,232)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization                                     23,130         33,483
      Stock compensation expense                                         7,150             --
      Changes in operating assets and liabilities:
        Accounts receivable                                             19,005         15,976
        Prepaid expenses                                                (1,569)           629
        Prepaid and recoverable income taxes                                --            272
        Accounts payable                                                 7,839        (34,003)
        Accrued expenses                                                (7,493)        11,523
        Income tax payable                                              (1,228)         1,228
                                                                  -------------   ------------
          Net cash used in operating activities                       (280,378)      (452,124)
                                                                  -------------   ------------
Cash flows from investing activities:
  Capital expenditures                                                  (6,309)       (10,611)
                                                                  -------------   ------------
          Net cash used in investing activities                         (6,309)       (10,611)
                                                                  -------------   ------------
Cash flows from financing activities:
  Purchase of treasury shares                                         (144,700)            --
  Proceeds from exercise of stock options                                   --      1,070,000
                                                                  -------------   ------------
          Net cash provided by (used in) financing activities         (144,700)     1,070,000
                                                                  -------------   ------------
          Net increase (decrease) in cash and cash equivalents        (431,387)       607,265
Cash and cash equivalents - beginning of year                        7,371,185      6,763,920
                                                                  -------------   ------------
Cash and cash equivalents - end of year                           $  6,939,798    $ 7,371,185
                                                                  =============   ============
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Income taxes                                                  $         --    $     2,500
                                                                  =============   ============


See accompanying notes to consolidated financial statements.


                                       F-5

                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                            March 31, 2006 and 2005

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (A)   NATURE OF BUSINESS

            American Claims Evaluation, Inc. (the "Company") operates in a
            single segment that provides a full range of vocational
            rehabilitation and disability management services through its wholly
            owned subsidiary, RPM Rehabilitation & Associates, Inc.

      (B)   PRINCIPLES OF CONSOLIDATION

            The Company's financial statements are prepared on a consolidated
            basis and include the Company and its wholly owned subsidiary. All
            intercompany transactions and balances have been eliminated in
            consolidation.

      (C)   REVENUE RECOGNITION

            Revenue for vocational rehabilitation services is recognized when
            there is a pervasive understanding of the arrangement, the related
            services are provided and the revenues are realizable.

      (D)   CASH AND CASH EQUIVALENTS

            All highly liquid investments with a maturity of three months or
            less at the date of purchase are considered to be cash equivalents.
            Cash equivalents are comprised of short-term commercial paper of
            $6,773,455 and $6,992,621 as of March 31, 2006 and 2005,
            respectively.

      (E)   PROPERTY AND EQUIPMENT

            Property and equipment are stated at cost, less accumulated
            depreciation. Depreciation is computed using the straight-line
            method over the estimated useful lives of the respective assets.

      (F)   INCOME TAXES

            Income taxes are accounted for under the asset and liability method.
            Deferred tax assets and liabilities are recognized based on the
            temporary differences between the carrying amounts of assets and
            liabilities for financial statement purposes and income tax purposes
            using enacted tax rates expected to be in effect when such amounts
            are realized and settled. The effect on deferred tax assets and
            liabilities of a change in tax rates is recognized in income in the
            period that includes the enactment date. Deferred tax assets are
            reduced by a valuation allowance if it is deemed more likely than
            not that some or all of the deferred tax assets will not be
            realized.

      (G)   EARNINGS (LOSS) PER SHARE

            Basic earnings (loss) per share is computed on the weighted average
            common shares outstanding. Diluted earnings per share reflects the
            maximum dilution from potential common shares issuable pursuant to
            the exercise of stock options, if dilutive, outstanding during each
            period. Employee stock options to purchase 1,236,000 and 938,500
            shares of common stock for the years ended March 31, 2006 and 2005,
            respectively, were not included in the diluted loss per share
            calculations because their effect would have been anti-dilutive.


                                       F-6



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                            March 31, 2006 and 2005

      (H)   FAIR VALUE OF FINANCIAL INSTRUMENTS

            The carrying values of the Company's monetary assets and liabilities
            approximate fair value as a result of the short-term nature of such
            assets and liabilities.

      (I)   USE OF ESTIMATES

            The preparation of consolidated financial statements in conformity
            with accounting principles generally accepted in the United States
            of America requires management to make estimates and assumptions
            that affect the reported amounts of assets and liabilities and the
            disclosure of contingent assets and liabilities at the date of the
            consolidated financial statements and the reported amounts of
            revenues and expenses during the reported period. Actual results
            could differ from those estimates.

      (J)   STOCK-BASED COMPENSATION

            In December 2004, the Financial Accounting Standards Board issued
            Statement of Financial Accounting Standards ("SFAS") No. 123
            (revised 2004), Share-Based Payment ("SFAS 123R") amending SFAS No.
            123, Accounting for Stock-Based Compensation ("SFAS 123") and
            requiring that all share-based payments to employees be recognized
            in the financial statements. Generally, the approach to accounting
            for share-based payments in SFAS 123R is similar to the approach in
            SFAS 123, however, pro forma footnote disclosure will no longer be
            an alternative to financial statement recognition. The Company
            adopted the new standard effective January 1, 2006 utilizing the
            modified prospective approach as allowed under SFAS 123R.

            Prior to January 1, 2006, the Company followed the "disclosure only"
            provisions of SFAS 123 and accounted for share-based payments to
            employees using the intrinsic value method of Accounting Principles
            Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
            25"). Under APB 25, no compensation expense was recognized at the
            time of option grant if the exercise price of the Company's stock
            option grants equaled or exceeded the fair value of the underlying
            common stock on the date of grant.

            On August 15, 2005, in light of the Company's expected adoption of
            SFAS 123R, the Board of Directors (the "Board") authorized the
            immediate vesting of unvested stock options previously granted to an
            officer of the Company. The Board's decision to accelerate the
            vesting of these stock options was based on the belief that it was
            in the best interest of its stockholders as it will reduce the
            Company's reported compensation expense in future periods. In order
            to prevent unintended personal benefit to the officer, the Board
            imposed certain restrictions on the sale of any shares obtained
            through the exercise of an accelerated option.

            As a result of the vesting acceleration, options to purchase 85,000
            shares became exercisable immediately. Based on the closing price of
            the Company's stock on August 15, 2005, approximately 41% of the
            total accelerated options had economic value. Such acceleration of
            unvested "in-the-money" options did not have a material effect on
            the accompanying consolidated financial statements. As of March 31,
            2006, there is no unamortized compensation expense to be recorded by
            the Company in future periods.

            The pro forma disclosures required by SFAS No. 148, Accounting for
            Stock-Based Compensation - Transition and Disclosure are presented
            below for the years ended March 31, 2006 and 2005. The unamortized
            fair value associated with the acceleration of unvested options in
            the amount of $64,000


                                       F-7



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                            March 31, 2006 and 2005

            amortized immediately and has been included in the pro forma
            disclosures below for the year ended March 31, 2006. These pro forma
            effects may not be representative of future stock compensation
            expense since the estimated fair value of stock options on the date
            of grant is amortized to expense over the vesting period and the
            vesting options of certain options was accelerated on August 15,
            2005.



                                                                     2006         2005
                                                                 ------------  -----------

            Net loss, as reported                                $  (327,212)  $ (481,232)
            Less:    Total stock-based employee compensation
                     expense determined under fair value-based
                     method for all awards                          (424,850)     (37,050)
                                                                 ------------  -----------
            Net loss, pro forma                                  $  (752,062)  $ (518,282)
                                                                 ============  ===========
            Basic loss per share:
              As reported                                        $     (0.07)  $    (0.10)
                                                                 ============  ===========
              Pro forma                                          $     (0.16)  $    (0.11)
                                                                 ============  ===========
            Diluted loss per share:
              As reported                                        $     (0.07)  $    (0.10)
                                                                 ============  ===========
              Pro forma                                          $     (0.16)  $    (0.11)
                                                                 ============  ===========


            The per share weighted average fair value of stock options granted
            during the years ended March 31, 2006 and 2005 was $1.16 and $1.33,
            respectively, on the dates of the grants. These fair values were
            determined using the Black-Scholes option-pricing model with the
            following weighted average assumptions: 2006 - expected dividend
            yield 0%, risk-free interest rate of 4.27%, an expected option life
            of 7.5 years and an expected volatility of 52%; 2005 - expected
            dividend yield 0%, risk-free interest rate of 4.07%, an expected
            option life of 7.5 years and an expected volatility of 52%.

(2)   PROPERTY AND EQUIPMENT

      Property and equipment consists of the following at March 31, 2006 and
      2005:

                                                                    ESTIMATED
                                         2006          2005        USEFUL LIFE
                                      -----------   ----------   ---------------
      Equipment                       $  157,837    $ 172,910        5 years
      Furniture and fixtures              32,064       36,803     5 to 10 years
                                      -----------   ----------
                                         189,901      209,713

      Less accumulated depreciation      173,677      176,668
                                      -----------   ----------
                                      $   16,224    $  33,045
                                      ===========   ==========

      Depreciation expense for the years ended March 31, 2006 and 2005 amounted
      to $23,130 and $33,483, respectively.


                                       F-8



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                            March 31, 2006 and 2005

(3)   INCOME TAXES

      Income tax expense for the years ended March 31, 2006 and 2005 is
      comprised of the following:

                                                          YEAR ENDED MARCH 31
                                                       -------------------------
                                                          2006           2005
                                                       -----------   -----------
      Current:
         Federal                                       $       --    $       --
         State                                                 --         4,000
                                                       -----------   -----------
                                                       $       --    $    4,000
                                                       ===========   ===========

      Total income tax expense differed from that which would have resulted when
      applying the statutory Federal income tax rate as a result of the
      following items:



                                         ----------------------  -----------------------
                                                  2006                    2005
                                         ----------------------  -----------------------
                                           AMOUNT      PERCENT      AMOUNT       PERCENT
                                         -----------  ---------  ------------   ---------

      Expected income tax benefit
         at the statutory Federal
         tax rate                        $ (111,000)      (34)%  $  (162,000)      (34)%
      Increase in valuation allowance       111,000        34        165,000        35
      State taxes, net of Federal tax            --        --          1,000        --
                                         -----------  ---------  ------------   ---------

      Actual income tax expense          $       --        --    $     4,000         1%
                                         ===========  =========  ============   =========


      The tax effects of temporary differences comprising the Company's deferred
      tax assets at March 31, 2006 and 2005 are as follows:

                                                          2006          2005
                                                       -----------   -----------
      Deferred tax assets:
         Capital loss carryforwards                    $  159,000    $  159,000
         Net operating loss carryforwards                 518,000       399,000
         Depreciation                                          --         8,000
         Valuation allowance                             (677,000)     (566,000)
                                                       -----------   -----------
                                                       $       --    $       --
                                                       ===========   ===========

      At March 31, 2006, the Company had net operating and capital loss
      carryforwards of approximately $1,499,000 and $467,000, respectively, for
      Federal income tax purposes which will be available to reduce future
      taxable income. The utilization of such net operating losses ("NOLs") and
      capital losses is subject to certain limitations under Federal income tax
      laws. Capital losses may only be used to offset future capital gains. NOLs
      and capital losses are scheduled to expire in the years ending March 31,
      2026 and March 31, 2007, respectively.




                                       F-9



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                            March 31, 2006 and 2005

      Based upon the uncertainty of whether the Company's NOLs and capital loss
      carryforwards may ultimately be utilized prior to their respective
      expirations, increases in valuation allowances of $111,000 and $165,000
      were recorded during 2006 and 2005. Benefits currently considered
      unrealizable could be adjusted in the future if estimates of future
      taxable income during the carryforward period are revised.

(4)   MAJOR CUSTOMERS

      The Company has one customer, Washington State Department of Labor &
      Industries, that accounted for 44% and 41% of revenues during the years
      ended March 31, 2006 and 2005, respectively. The Company has two other
      customers that accounted for 13% and 12% of revenues and 10% and 12% of
      revenues for the years ended March 31, 2006 and 2005, respectively.
      Revenues from a fourth customer comprised 10% of revenues for the year
      ended March 31, 2005.

(5)   STOCK OPTIONS

      The Company has five stock option plans, the 1985 Stock Option Plan ("1985
      Plan"), the 1991 Stock Option Plan ("1991 Plan"), the 1997 Incentive Stock
      Option Plan ("1997 Plan"), the 2000 Incentive Stock Option Plan ("2000
      Plan") and the 2005 Incentive Stock Option Plan ("2005 Plan"). The 1985
      Plan and the 1991 Plan have expired except as to options outstanding. The
      1997 Plan, 2000 Plan and the 2005 Plan provide for incentive or
      nonqualified stock options to be granted to key employees, officers,
      directors, independent contractors and consultants of the Company.

      Under the 1997, 2000 and 2005 Plans, options may be granted at prices not
      less than the fair market value on the date the option is granted. Options
      become exercisable and vest as determined at the date of grant by a
      committee of the board of directors. Options expire ten years after the
      date of grant unless an earlier expiration date is set at the time of
      grant.

      Changes in the options outstanding during the years ended March 31, 2006
      and 2005 are summarized in the following table:

                                                                   WEIGHTED
                                                   NUMBER OF        AVERAGE
                                                     SHARES     EXERCISE PRICE
                                                  ------------  --------------
      Outstanding at March 31, 2004                1,508,500    $     1.89

        Exercised                                   (600,000)         1.78

        Granted                                       50,000          2.24

        Expired                                      (20,000)         1.88
                                                  ------------
      Outstanding at March 31, 2005                  938,500          1.97

        Granted                                      310,000          1.94

        Expired                                      (12,500)         1.92
                                                  ------------  --------------
      Outstanding at March 31, 2006                1,236,000    $     1.96
                                                  ============  ==============

      At March 31, 2005, there were options to purchase 690,000 and 9,000 shares
      available for grant under the 2005 Plan and 2000 Plan, respectively.


                                       F-10



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                            March 31, 2006 and 2005

      The following table sets forth the exercise prices, the number of options
      outstanding and exercisable, and the remaining contractual lives of the
      Company's stock options at March 31, 2006:



                                                                 WEIGHTED
                                                                 AVERAGE         WEIGHTED
                                    NUMBER OF OPTIONS         EXERCISE PRICE     AVERAGE
            RANGE OF         -----------------------------    OF EXERCISABLE    REMAINING
         EXERCISE PRICE       OUTSTANDING      EXERCISABLE       OPTIONS           LIFE
      ------------------     -------------     -----------    --------------    ---------

              $1.25               300,000         300,000     $    1.25          1 years
          $1.70 - $1.80           136,000         136,000          1.80          7 years
              $1.94               310,000         310,000          1.94          9 years
          $2.10 - $2.56           490,000         490,000          2.47          4 years
                             -------------     -----------
                                1,236,000       1,236,000     $    1.96          6 years
                             =============     ===========    ==============    =========


(6)   RETIREMENT PLAN

      The Company sponsors a retirement plan pursuant to Section 401(k) of the
      Internal Revenue Code of 1986, as amended (the "Code"), for all employees
      meeting certain service requirements. Participants may contribute a
      percentage of compensation not to exceed the maximum allowed under the
      Code. The plan provides for a matching contribution by the Company which
      amounted to $13,238 and $11,458 for the years ended March 31, 2006 and
      2005, respectively.

(7)   COMMITMENTS

      Rent expense under operating leases for office space amounted to $89,263
      and $127,297 for the years ended March 31, 2006 and 2005, respectively.

      On August 20, 2004, the Company entered into a seven-year non-cancelable
      operating sublease commencing December 1, 2004, for office space with
      American Para Professional Systems, Inc. ("APPS"), an entity under the
      control of the Company's Chairman of the Board. Basic rent under the
      sublease has been established as a pass-through with the Company's cost
      being fixed at a cost equal to the pro-rated rent payable for the
      subleased space by APPS to the building's landlord. Rent expense paid to
      this related entity under the sublease for the years ended March 31, 2006
      and 2005 was $36,360 and $12,000, respectively.

      Minimum lease payments under the related party sublease as of March 31,
      2006 are as follows:

               2007                                          $    37,000
               2008                                               39,000
               2009                                               40,000
               2010                                               41,000
               2011                                               42,000
               Thereafter                                         29,000
                                                             -------------
                           Total minimum lease payments      $   228,000
                                                             =============


                                      F-11



                 AMERICAN CLAIMS EVALUATION, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                            March 31, 2006 and 2005

      Minimum lease payments under the non-cancelable lease as of March 31, 2006
      are as follows:

               2007                                          $    43,000
               2008                                               44,000
               2009                                               11,000
                                                             -------------
                           Total minimum lease payments      $    98,000
                                                             =============


                                      F-12

EX-21 2 file2.htm SUBSIDIARIES




                                                                      EXHIBIT 21

                                  SUBSIDIARIES

The following is the only subsidiary of American Claims Evaluation, Inc. as of
June 26, 2006:

      Subsidiary                                         State of Incorporation
      ----------                                         ----------------------

      RPM Rehabilitation and Associates, Inc.            Washington

EX-23.1 3 file3.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



                                                                    EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
American Claims Evaluation, Inc.

We consent to the incorporation by reference in the registration statement (No.
333-39071) on Form S-8 of American Claims Evaluation, Inc. of our report dated
May 31, 2006 on the consolidated balance sheets of American Claims Evaluation,
Inc. and Subsidiary as of March 31, 2006 and 2005, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended, which report appears in this March 31, 2006 Annual Report on Form 10-KSB
of American Claims Evaluation, Inc.


/s/  J.H. Cohn LLP

Jericho, New York
June 26, 2006

EX-31.1 4 file4.htm CERTIFICATIONS





                                                                    EXHIBIT 31.1

                                 CERTIFICATIONS

I, Gary Gelman, certify that:

1.    I have reviewed this annual report on Form 10-KSB of American Claims
      Evaluation, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the small business issuer as of, and for, the periods presented in this
      report;

4.    The small business issuer's other certifying officer(s) and I are
      responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [***
      Omitted pursuant to extended compliance period] for the small business
      issuer and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            small business issuer, including its consolidated subsidiaries, is
            made known to us by others within those entities, particularly
            during the period in which this report is being prepared;

      (b)   [*** Omitted pursuant to extended compliance period];

      (c)   Evaluated the effectiveness of the small business issuer's
            disclosure controls and procedures and presented in this report our
            conclusions about the effectiveness of the disclosure controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (d)   Disclosed in this report any change in the small business issuer's
            internal control over financial reporting that occurred during the
            small business issuer's most recent fiscal quarter (the small
            business issuer's fourth fiscal quarter in the case of an annual
            report) that has materially affected, or is reasonably likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The small business issuer's other certifying officer(s) and I have
      disclosed, based on our most recent evaluation of internal control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small business issuer's board of directors (or persons
      performing the equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the small business issuer's
            ability to record, process, summarize and report financial
            information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the small business
            issuer's internal control over financial reporting.

Date:  June 26, 2006

/s/  Gary Gelman

Gary Gelman
Chief Executive Officer

EX-31.2 5 file5.htm CERTIFICATIONS




                                                                    EXHIBIT 31.2

                                 CERTIFICATIONS

I, Gary J. Knauer, certify that:

1.    I have reviewed this annual report on Form 10-KSB of American Claims
      Evaluation, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the small business issuer as of, and for, the periods presented in this
      report;

4.    The small business issuer's other certifying officer(s) and I are
      responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [***
      Omitted pursuant to extended compliance period] for the small business
      issuer and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            small business issuer, including its consolidated subsidiaries, is
            made known to us by others within those entities, particularly
            during the period in which this report is being prepared;

      (b)   [*** Omitted pursuant to extended compliance period];

      (c)   Evaluated the effectiveness of the small business issuer's
            disclosure controls and procedures and presented in this report our
            conclusions about the effectiveness of the disclosure controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (d)   Disclosed in this report any change in the small business issuer's
            internal control over financial reporting that occurred during the
            small business issuer's most recent fiscal quarter (the small
            business issuer's fourth fiscal quarter in the case of an annual
            report) that has materially affected, or is reasonably likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The small business issuer's other certifying officer(s) and I have
      disclosed, based on our most recent evaluation of internal control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small business issuer's board of directors (or persons
      performing the equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the small business issuer's
            ability to record, process, summarize and report financial
            information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the small business
            issuer's internal control over financial reporting.

Date:  June 26, 2006

/s/  Gary J. Knauer

Gary J. Knauer
Chief Financial Officer

EX-32.1 6 file6.htm CERTIFICATION 1350



                                                                    EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Annual Report of American Claims Evaluation, Inc.
(the "Company") on Form 10-KSB for the year ended March 31, 2006 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Gary Gelman, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:

            (1)   The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

            (2)   The information contained in the Report fairly presents, in
all material respects, the financial condition and result of operations of the
Company.


/s/ Gary Gelman

Chief Executive Officer
June 26, 2006


A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to American Claims Evaluation, Inc.
and will be retained by American Claims Evaluation, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.

EX-32.2 7 file7.htm CERTIFICATION 1350



                                                                    EXHIBIT 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Annual Report of American Claims Evaluation, Inc.
(the "Company") on Form 10-KSB for the year ended March 31, 2006, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Gary J. Knauer, Chief Financial Officer of the Company, certify pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:

            (1)   The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

            (2)   The information contained in the Report fairly represents, in
all material respects, the financial condition and result of operations of the
Company.


/s/ Gary J. Knauer

Chief Financial Officer
June 26, 2006


A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to American Claims Evaluation, Inc.
and will be retained by American Claims Evaluation, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.

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