UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, ~~2011~~2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: to

Commission File Number 0-50009

PACIFIC HEALTH CARE ORGANIZATION, INC.

(Exact name of registrant as specified in its charter)

Utah		87-0285238
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer I.D. No.)

1201 Dove Street, Suite 300 Newport Beach, California		92660
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (949) 721-8272

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

$.001 par value, common voting shares

(Title of class)

~~Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the~~ ~~Securities Act. Yes~~ o No x

~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the~~ ~~Exchange Act. Yes~~ o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to ~~submit and post such files). Yes~~ x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this ~~Form 10-K.~~ x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
				Yes		o	No	x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
				Yes		o	No	x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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	o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).
				Yes		x	No	o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K.
									x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer	o	Accelerated filer		o
		o
	Non-accelerated filer	o	Smaller reporting company		x
~~(Do~~	(Do not check if smaller reporting company)

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct. Yes~~ o No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity as of June 30, 2011 was approximately $144,849.

~~As of March 12, 2012 the issuer had 802,424 shares of its $.001 par value common stock outstanding.~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Yes oNo xThe aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity as of June 30, 2012 was approximately $1,156,122.As of March 13, 2013 the issuer had 802,424 shares of its $.001 par value common stock outstanding.Documents incorporated by reference: None

PACIFIC HEALTH CARE ORGANIZATION, INC.

Forward-Looking Statements

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Act of 1934, as amended, that are based on our management’s beliefs and assumptions and on information currently available to our management. For this purpose any statement contained in this annual report on Form 10-K that is not a statement of historical fact may be deemed to be forward-looking, including, but not limited to statements about future demand for the products and services we offer, changes in the composition of the products and services we offer, future revenues, expenses, results of operations, liquidity and capital resources or cash flows, or our actions, intentions, plans, strategies and objectives. Without limiting the foregoing, words such as “believe,” “expect,” “project,” “intend,” “estimate,” “budget,” “plan,” “forecast,” “predict,” “may,” “will,” “could,” “should,” or “anticipate” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, economic conditions generally and in the industry in which we and our customers participate; competition within our industry, including competition from much larger competitors; legislative requirements or changes which could render our services less competitive or obsolete; our failure to successfully develop new services and/or products or to anticipate current or prospective customers’ needs; price increases or employee limitations; and delays, reductions, or cancellations of contracts we have previously entered.

Business of the Company

·	Health Care Organizations (“HCOs”)

·	Medical Provider Networks (“MPNs”)

·	Workers’ Compensation Carve-Outs

·	Utilization Review (“UR”)

·	Medical Bill Review (“MBR”)

·	Nurse Case Management (“NCM”)

Medex Healthcare, Inc.

Health Care Organizations

Medical Provider Networks

Because we contract with medical providers, who own their own medical equipment, we have not incurred significant capital expenditures. We do, however, incur fixed costs such as liability insurance and other usual costs of running a business.

~~Ancillary Services~~HCO + MPN

~~Industry Background~~

In January 2010 revisions were made to the HCO regulations to make HCOs more competitive with MPNs, providing a viable network option for workers’ compensation care. The California Division of Workers’ Compensation (“DWC”) has reported that studies have shown that network care is associated with lower costs for employersIndustry Background and ~~better return to work outcomes for injured workers.~~

The revised regulations reduced HCO fees and eliminated duplicative HCO reporting requirements. Prior to the changes, annual HCO enrollment fees were based on a per enrolled fee. In 2010, the annual assessment structure has revised to provide for a flat fee structure. This change to a flat fee structure significantly reduced the fees associated with HCO administration.Regulation

Medex maintains direct contractual agreements with the primary and specialist healthcare providers in its networks for treatment of the injured workers of employer clients of Medex who are enrollees under the HCO or covered employees under the MPN. These agreements govern the relationship between Medex and the provider, including the obligations of the provider relating to hours of accessibility, reporting requirements, referral procedures, regulatory compliance, methodology for authorizations, compensation schedules, insurance requirements, utilization review, and grievance procedures. All agreements are in compliance with the requirements of the ~~DWC~~California Division of Workers’ Compensation (“DWC”) and have been approved through the HCO certification process.

The providers within our networks are paid ~~by various payers~~ in accordance with the appropriate California Workers’ Compensation Fee Schedule, unless such provider has entered into a discounted contract with a preferred provider organization (“PPO”), and the employer (through the payer) has contractually accessed those discounted rates for the employer client. The California Workers’ Compensation Fee Schedule, which is created by the DWC, regulates the maximum allowable fees payable under workers’ compensation for procedures performed by a variety of health treatment providers. The fee schedule also includes fees for hospital treatments. The purpose of the fee schedule is to standardize the billing process by using uniform procedure descriptions and to set maximum reimbursement levels for such covered services.

The providers within our networks are paid by the payer, either the workers’ compensation insurance carrier with whom the employer contracts, or a permissibly self-insured employer authorized by the ~~California Department of Industrial Relations (“DIR”)~~DIR Self Insurance Plan. Either of these entities may utilize a third party administrator (“TPA”).

~~HCO/MPN Certification Process~~

~~Physicians~~We maintain ongoing discussions with insurance brokers, carriers, third party administrators, managed care organizations and with representatives of self-insured employers, both as partners and potential clients. Based on potential cost savings to employers and the approximately fourteen million workers eligible for our services, we expect that employers will continue to sign contracts with us to retain our services. The amounts we charge employers per enrollee may vary based upon factors such as employer history and exposure to risk; for instance, a construction company would likely pay more than a payroll service company. In addition, employers who have thousands of enrollees are more likely to get a discount.

~~Provider Licensing & Performance Review~~

~~In 2001, we incorporated Workers~~Workers’ Compensation Assistance, Inc., (now known as Industrial Resolutions Coalition, Inc.), as a wholly-owned subsidiary with the intent of pursuing other opportunities in the workers’ compensation field. Toward the end of 2007, we identified a business opportunity within the workers’ compensation field that we have begun to pursue. Carve-outs

·	improving safety programs and having fewer injury and illness claims;

·	increasing access to quality medical providers and medical evaluators;

·	lowering costs of medical care;

·	reducing disputes;

·	improving collaboration between unions and employers;

·	increasing satisfaction of all parties; and

·	providing the opportunity for continuous improvement by renegotiating the terms of the carve-out on an as-needed basis.

·	an alternative dispute resolution process in place of most hearings before a workers’ compensation judge;

·	a mutually agreed upon list of medical providers and medical evaluators; and

·	a mutually agreed upon list of vocational rehabilitation providers.

·	that the carve-out process does not diminish compensation to injured workers; and

·	that the alternative dispute resolution process retain the right to appeal to the reconsideration unit of the Workers’ Compensation Appeals Board (“WCAB”) and, ultimately, to the state courts of appeal.

Only unions may initiate the carve-out process by petitioning the Administrative Director of the DWC (the “AD”). The AD will review the petition according to the statutory requirements and issue a letter allowing each employer and labor representative a one-year window for negotiations. The parties may jointly request a one-year extension to negotiate the labor-management agreement. No labor-management agreement may deny the right to representation by counsel at any stages during the alternative dispute resolution process.

IRC has expertise in the development of legal contracts, knowledge of negotiations of labor-management committees, and professional understanding of the medical and legal aspects of California workers’ compensation.

Medex Managed Care, Inc.

Through MMC we provide UR and MBR services. Utilization review includes utilization review or utilization management functions that prospectively, retrospectively, or concurrently review and approve, modify, delay, or deny, based in whole or in part on medical necessity to cure and relieve, treatment recommendations by physicians, prior to, retrospectively, or concurrent with the provision of such medical treatment services pursuant to California Workers’ Compensation law, or other jurisdictional statutes.

We provide UR to self-insured clients, insurance companies and public entities. UR helps to reduce costs for the ~~payor~~payer and determine if the recommended treatment is appropriate. MMC offers automated review services that can cut the overhead costs of our client and increase ~~payor~~payer savings. Our UR staff is experienced in the workers’ compensation industry and dedicated to provide a high standard of customer service.

Medical bill review ~~(“MBR”)~~ refers to professional analysis of medical provider, services, or equipment billing to ascertain the proper reimbursement. Such services include, but are not limited to, coding review and rebundling, reasonable and customary review, fee schedule analysis, out-of-network bill review, pharmacy review, PPO management, and repricing.

In connection with our MBR services, we provide bill review (cost containment) services to self-insured employers, insurance companies and the public sector to help reduce medical expenses paid by our customers. In providing these services we provide network savings on top of State Fee Schedule savings allowing top provider networks to achieve savings.

We offer our clients with quick turnaround, state of the art software and the expertise of our bill review staff. We are committed to service and believe the reputation of our staff sets us apart from our competition.

Medex Medical Management, Inc.

On February 13, 2012 we incorporated Medex Medical Management, Inc. (“MMM”) in the state of Nevada, as a wholly owned subsidiary of the Company. MMM will be responsible for overseeing and managing nurse case management (“NCM”) services previously managed by our subsidiary Medex.

Nurse Case Management

Medex Legal Support, Inc.

While ~~customers A and C have~~customer D has been ~~customers~~a customer of Medex for the past several years, the additional UR and MBR revenues generated by MMC during ~~2011~~2012 resulted in ~~these two customers~~this customer contributing ~~14% and 11%~~13% of our total ~~sales, respectively.~~sales.

Governmental Regulation

Managed care programs for workers’ compensation are subject to various laws and regulations. The nature and degree of applicable regulation varies depending upon the specific services provided. Parties that provide or arrange for the provision of healthcare services are subject to numerous complex regulatory requirements that govern many aspects of their conduct and operations. Because managed healthcare is a rapidly changing and expanding industry and the cost of providing healthcare continues to increase, it is possible that the applicable federal and state regulatory frameworks will expand to have a greater impact upon the conduct and operation of our business.

As discussed above, the provision of workers’ compensation managed care in the state of California is governed by legislation. The services we provide have developed largely in response to legislation or other governmental action. The fees we charge for a number of the services we provide are governed by maximum permissible fee schedules set by the DWC. Changes in the legislation regulating workers’ compensation may create greater or lesser demand for the services we offer or require us to develop new or modified services to meet the needs of the marketplace and compete effectively in the marketplace. We could also be materially and adversely affected if the state of California were to elect to reduce the extent of medical cost containment strategies available to insurance companies and other payers, or adopt other strategies for cost containment that would not support demand for our services.

There has been considerable discussion of healthcare reform at both the federal level and in the state of California in recent years. Due to uncertainties regarding the ultimate features of reform initiatives and the timing of their enactment, we cannot predict which, if any, reforms will be adopted, when they may be adopted, or what impact they may have on our business or within the industry in which we participate.

Reports to Security Holders

Securities Authorized for Issuance Under Equity Compensation Plans

Recent Sales of Unregistered Securities

No instruments defining the rights of the holders of any class of registered securities have been materially modified, limited or qualified during the quarter ended December 31, ~~2011.~~2012.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following is a discussion of our consolidated financial condition and results of operations for the years ended December 31, ~~2011~~2012 and ~~2010~~2011 and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our Consolidated Financial Statements and related notes beginning on page 2726 of this annual report on Form 10-K.

Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see “~~Information Concerning~~ Forward-Looking Statements” on page 4.

~~Table~~4 of ~~Contents~~this annual report on Form 10-K.

Results of Operations

Comparison of the years ended December 31, ~~2011~~2012 and ~~2010~~2011

Total revenues increased ~~75%~~70% during ~~2011~~2012 to ~~$2,831,793.~~$4,826,765. When compared to ~~2010,~~2011, revenues for HCO, MPN and other revenues increased by ~~27%~~22%, 4%19% and ~~256%~~118%, respectively. The primary reason for the growth in other revenues ~~category~~ was primarily the ~~increased revenues~~continuing growth in ~~generated from~~ MBR and UR ~~revenues resulting from MMC taking over the responsibilities of overseeing and managing the utilization review and medical bill review business previously managed by Medex.~~revenues.

During the ~~year~~years ended December 31, ~~2011~~2012 and ~~2010~~2011 HCO fee revenues were $945,823 and $770,303, ~~and $607,450~~ respectively. ~~As noted above, while~~While HCO enrollment increased ~~42%~~4% during the 2012 fiscal year, ~~ended in 2011,~~ we realized a ~~27%~~23% increase in revenue from HCO fees when compared to the same period ~~last year. The~~2011. While enrollment increased at only 4%, as a result of the non-renewal of six of our smaller HCO customers, the percentage increase in ~~enrollment~~revenues outpaced the percentage increase in ~~revenue~~enrollment by ~~15%, was the~~19%. Revenue growth outpaced enrollment growth principally as a result of ~~offering bundled services, including MBR, UR and NCM services~~an increase in the volume of claims network fees to a number of new ~~clients, which resulted in increased enrollment, without increasing HCO fees charged.~~clients.

MPN fee revenues for ~~2011~~2012 were ~~$627,341~~$749,250 compared to ~~$605,238~~$627,341 for year ended in ~~2010.~~2011. Although we had an increase in MPN enrollment of ~~27%~~47% during the year ended December 31, ~~2011, as noted above,~~2012, because of factors such as differing fee terms, unbundling of services, price competition and other similar factors as compared to ~~2010,~~2011, resulted in only a 4%19% increase in MPN revenues compared to ~~2010.~~

~~As mentioned earlier other~~Other fees consist of revenues derived from MBR, NCM, UR, lien service and network claims repricing services provided by Medex, MMC, MMM and ~~MMC.~~MLS. Other fee revenues for the year ended December 31, 2012 and 2011 were $3,131,692 and ~~2010 were~~ $1,434,149, respectively.

During the year ended December 31, ~~2011,~~2012, UR and MBR ~~fees~~revenues increased by ~~$425,661 from $123,980, in~~$582,259 and $508,541 to $1,131,900 and $934,071, respectively, when compared to the same period a year earlier. UR and MBR service revenues grew largely as a result of our increased marketing efforts in ~~signing up several major customers in 2010 and three new customers during 2011.~~these areas of our business.

During the year ended December 31, ~~2011~~2012 and ~~2010,~~2011, NCM revenue was ~~$370,114~~$722,766 and ~~$134,556,~~$370,114, respectively. This increase of ~~$235,558~~$352,652 was ~~primarily~~ the result ~~of signing a major~~from increased customer ~~in September 2010.~~

Our UR fee revenues during the year ended December 31, 2011 increased to $425,530 from $70,785 for the same period a year earlier. UR service revenues grew largely as a result of increased marketing efforts to sign up several major customers in September of 2010 and two new customers in 2011.

Our network claims repricing fees are generated from certain customers’ split cost savings generated from their PPO. During the year ended December 31, 2011 and 2010, network claims repricing fee revenues generated were $88,864, and $73,651, respectively.

~~Total expenses for the year ended December 31, 2011 and 2010 were $2,509,510 and $1,696,888, respectively. The increase of $817,894 was~~employee enrollment primarily ~~the result of increases in consulting fees, salaries & wages, professional fees, insurance, outsource service fees and miscellaneous general and administration expenses offset~~ by ~~decreases in data maintenance expenses.~~

During the year ended December 31, 2011 consulting fees increased to $358,996 from $273,684 during the 2010. This increase in consulting fees of $85,312 was due mainly to an increase in fees paid to Medex’s legal consultant, the addition of a UR consultant during the third quarter of 2010, the addition of a nurse case manager and the hiring of three temporary administrative consultants during the first and second quarters of 2011.

~~Salaries and Wages~~

Salaries and wages increased $440,014 or 64% to $1,132,351 from $692,337 during 2011 compared with 2010. The increase in salaries and wages was primarily due to the Company paying annual bonuses of $99,250 during the month of December, 2011 and the hiring of a nurse case manager in September 2010, a UR administrator in March 2011, two supervisors and three administrative support personnel in MMC in July 2011, and salary increases given to our CEO and CFO in March 2011.

~~Professional Fees~~

For the year ended December 31, 2011 we incurred professional fees of $212,572 compared to $190,519 during 2010. This 12% increase in professional fees was primarily the result of increased accounting fees and professional fees paid for nurse case management services.existing customers.

Network Repricing Fees

Our network claims repricing fees are generated from certain customers who have access to our network and split with Medex their cost savings generated from their PPO. During the years ended December 31, 2012 and 2011, network access fee revenues generated were $266,457, and $88,863, respectively. This increase of $177,594 when compared to 2011, was the result of increased savings realized from three of our existing customers during 2012.

Lien Representation Fees

From 2002 to 2004, the DWC instituted a $100 lien filing fee. The immediate result of such fees reduced the number of liens filed in California by approximately 40%. Assuming at least the same percentage of reduction for the new $150 fee, and adding the restriction of new statutes of limitation, has led industry leaders to project an approximate 50 % reduction in liens filed. We do not anticipate recommencing our lien representation services until we have had an opportunity to fully assess the impacts of the new filings fees and statute of limitations and how those impact on the ability of MLS to operate profitably.

Total expenses for the years ended December 31, 2012 and 2011 were $3,593,647 and $2,509,510, respectively. The increase of $1,084,137 was primarily the result of increases in depreciation, consulting fees, salaries and wages, professional fees, insurance, outsource service fees, data maintenance and miscellaneous general and administration expenses.

During the year ended December 31, 2012 consulting fees increased approximately 36% to $486,736 from $358,996 during the 2011. This increase in consulting fees of $127,740 was due mainly to contracting with two IT consulting firms during the year, increased fees paid to website consultant, the addition of three administrative consultants in January, June and September of 2012 and an accounting consultant in September 2012, additional fees paid to an existing consultant of MMC and the hiring of a lien service consultant in MLS in February 2012.

Salaries and wages increased $523,035 or 46% to $1,655,386 from $1,132,351 during 2012 compared with 2011. The increase in salaries and wages was primarily due to the Company hiring new employees during 2012 as follows:

Medex added four MPN Program Administrators, one in June 2012, one in July 2012 and two in September 2012 and hired a provider relations administrator in September 2012. PHCO added an accounting manager in August 2012, an accounting clerk in September 2012 and a receptionist in October 2012. MMM hired a nurse case manager in July 2012 and one in August 2012. MMC hired a bill review analyst and a UR program coordinator in September 2012, and a bill review specialist in October 2012.

Also contributing to the increase in salaries and wages during 2012 when compared to 2011 were the salary increases given to our Company’s CEO and CFO, and the COO of Medex, and the increase in annual bonuses paid to our employees and consultants in December 2012.

For the year ended December 31, 2012 we incurred professional fees of $267,434 compared to $212,572 during 2011. This 26% increase in professional fees was primarily the result of increased professional fees paid for nurse case management services, partially offset by lower accounting, legal and medical consultant fees.

During the year ~~2011~~2012 we incurred insurance expenses of ~~$151,227,~~$203,251, an increase of ~~$45,732~~$52,024 over the year ~~2010.~~2011. The increase in insurance expense was ~~the~~ mostly the result of increased group health, vision and dental insurance ~~incurred by~~costs resulting from the hiring of new employees in PHCO, Medex, MMC and ~~including PHCO employees to the Company’s group insurance benefit plan.~~ MMM and increases in our workers compensation and network security liability insurance.

Outsource Service Fees

Outsource service fees consist of costs incurred mainly by MMC in outsourcing its MBR services and certain UR services. We ~~commenced outsourcing these services during June 2010~~incurred $385,368 and ~~incurred~~ $190,917 ~~and $24,302~~ in outsource service fees during the ~~year~~years ended December 31, 2012 and 2011, respectively. The increase of $194,451 in 2012 when compared to 2011 was the result increased of MBR and ~~2010, respectively~~UR bills processed by our outsource service companies.

During the year ended December 31, ~~2011~~2012 we experienced a ~~41%~~4% increase in HCO enrollment and a ~~27%~~47% increase in MPN enrollment, resulting in an overall enrollment increase of ~~29%. Despite the increase in overall employee enrollment, data maintenance~~39% when compared to December 31, 2011. Maintenance fees ~~decreased 24%~~increased by 32% to ~~$57,445~~$75,530 during the year ended December 31, ~~2011. The decrease~~2012. This increase in data maintenance fees is primarily attributable to ~~lower~~higher data maintenance costs associated with the ~~renewal of MPN~~overall increase in enrollees ~~and~~partially offset by lower prices negotiated with third party service providers.

General and Administrative

General and administrative expenses increased ~~19%~~25% to ~~$392,407~~$490,663 during the year ended December 31, ~~2011.~~2012. The increase in general and administrative expense of ~~$62,872~~$98,256 was primarily attributable to increases in IT and internet expenses, office supplies, dues and subscriptions, employment agency fees, internet expense, ~~license and permits expense, moving expenses,~~ office supplies, ~~travel~~postage and ~~entertainment~~delivery expense, rent, and vacation expense partially offset by decreases in ~~parking expense, rent~~equipment and repairs, moving expenses, telephone expense and miscellaneous general administrative expenses. We expect current levels of general and administrative expenses to increase starting with the first quarter of 2013.

Income from Operations

Income Tax Provision

During the year ended December 31, ~~2011~~2012 we recorded total revenues of ~~$2,831,793~~$4,826,765 which were higher by ~~$1,216,134~~$1,994,972 when compared to ~~2010.~~2011. This increase in total revenues was partially offset by ~~an $812,622~~a $1,084,137 increase in total expenses ~~resulting~~which resulted in income from operations of ~~$322,283~~$1,233,118 compared to ~~a loss~~an income from operations of ~~$81,229~~$322,283 during the ~~year ended 2010.~~2011 fiscal year. During the ~~2011~~2012 fiscal year we realized total other ~~expense~~income of ~~$1,549,~~$319, compared to total other ~~income~~expense of ~~$106~~$1,549 during fiscal ~~2010,~~2011, primarily as a result of the recognition of a loss on the disposal of an asset induring fiscal 2011. We recorded provisions for income tax of $522,048 and $122,499 during the ~~amount of $1,564. Because~~years ended December 31, 2012 and 2011, respectively. Correspondingly, we realized net income ~~before income taxes in the 2011 period, we recognized a provision~~of $711,389, or $0.89 per share, for ~~income tax of $122,499 during~~ the year ended December 31, ~~2011~~2012 compared to ~~an income tax benefit of $21,190 during 2010. Correspondingly, we realized~~a net income of $198,235 or $0.25 per share, for the year ended December ~~31, 2011 compared to a net loss of $59,933, or $0.08 per share, during 2010.~~13, 2011. We expect revenues to moderately increase starting the first quarter of ~~2012 to be generated primarily~~2013 from ~~new~~the services ~~offered by the Company to~~we offer our existing and new customers, ~~primarily~~mainly in the areas of MBR and ~~UR fee revenues.~~UR.

Liquidity and Capital Resources

As of December 31, ~~2011~~2012 we had cash on hand of ~~$368,459~~$479,674 compared to ~~$349,552~~$368,459 at December 31, ~~2010.~~2011. The ~~$18,907~~$111,215 increase in cash on hand is the result primarily to increases in revenue from operations, accounts payable, ~~accrued expenses,~~depreciation, income tax payable, deferred rent expense, ~~deferred tax liabilities~~ and decreases in ~~deferred tax asset,~~ income tax receivable and ~~prepaid expenses.~~commission draw. These changes were partially offset by increases in accounts receivable ~~prepaid income tax, commission draw~~and other receivables and decreases in accrued expenses and unearned revenues. Barring a significant downturn in the economy, we believe that cash on hand and anticipated revenues from operations will be sufficient to cover our operating costs over the next twelve ~~months and we do not anticipate the need to find other sources of capital at this time.~~months.

We currently have planned certain capital expenditures during the next twelve months to accommodate our ~~growth however we~~growth. We do not anticipate this will require us to seek outside sources of funding. We do, however, from time to time, investigate potential opportunities to expand our business either through the creation of new business lines or the acquisition of existing businesses. We have not identified any suitable opportunity at the current time. An expansion or acquisition of this sort may require greater capital resources than we possess. Should we need additional capital resources, we most likely would seek to obtain such through equity and/or debt financing. We do not currently possess a financial institution source of financing. Given current credit market conditions, there is no assurance that we could be successful in obtaining debt financing on favorable terms, or at all. Similarly, given current market and economic conditions there is no guarantee that we could negotiate appropriate equity financing.

During the year ended December 31, ~~2011~~2012 cash was primarily used to fund operations. We had a net ~~increase~~increases in cash of ~~$18,907~~$111,215 and ~~a decrease of $254,470~~$18,907 during the years ended December 31, ~~2011~~2012 and ~~2010,~~2011, respectively. See below for additional discussion and analysis of cash flow.

Summary of Material Contractual Commitments as of December 31, ~~2011~~2012

(1)

In January 2010 we entered into a capital lease arrangement whereby we leased an office copy machine for $25,543. The asset was recorded on our balance sheet under office equipment under capital lease and our liability incurred under the lease was recorded as current and noncurrent obligations under capital lease. The lease arrangement is for a term of 48 months at level operating rents with capital interest rate at 7%. In August 2012 we entered into a capital lease arrangement whereby we leased office server equipment for $38,380. The asset was recorded on our balance sheet under office equipment under capital lease and our liability incurred under the lease was recorded as current and noncurrent obligations under capital lease. The lease arrangement is for a term of 36 months at level operating rents with capital interest rate at 7.5%.

(2)

In March 2011 we commenced a new office lease agreement that runs to February 29, 2016. In October 2011 we amended our office lease agreement to include an additional 1,640 square feet for our subsidiary MMC. Following is our annual ~~amended~~ base rent for ~~the new~~our office space throughout the remaining term of the lease:

Rent Period Annual Rent Payments
Jan. 1 to Dec. 31, 2012 $ 133,563
Jan. 1 to Dec. 31, 2013 $ 140,343
Jan. 1 to Dec. 31, 2014 $ 144,508
Jan. 1 to Dec. 31, 2015 $ 147,949
Jan. 1 to Feb. 29, 2016 $ 24,750
Total $ 591,113

~~Table of Contents~~

Rent Period	Annual Rent Payments
Jan. 1 to Dec. 31, 2013	$	140,343
Jan. 1 to Dec. 31, 2014	$	144,508
Jan. 1 to Dec. 31, 2015	$	147,949
Jan. 1 to Feb. 29, 2016	$	24,750
Total	$	457,550

Off-Balance Sheet Financing Arrangements

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect both the recorded values of assets and liabilities at the date of the financial statements and the revenues recognized and expenses incurred during the reporting period. Our estimates and assumptions affect our recognition of deferred expenses, bad debts, income taxes, the carrying value of ~~its~~our long-lived assets and ~~its~~our provision for certain contingencies. We evaluate the reasonableness of these estimates and assumptions continually based on a combination of historical information and other information that comes to ~~its~~our attention that may vary ~~its~~our outlook for the future. Actual results may differ from these estimates under different assumptions.

Management suggests that our Summary of Significant Accounting Policies, as described in Note 2 of ~~Notes to~~ our Consolidated Financial Statements, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations. We believe the critical accounting policies that most impact our ~~consolidated financial statements~~Consolidated Financial Statements are described below.

Basis of Accounting — We used the accrual method of accounting for the period ended December 31, ~~2011.~~2012.

Morrill & Associates, LLC

Certified Public Accountants

1448 North 2000 West, Suite 3

Clinton, Utah 84015

801-820-6233 Phone; 801-820-6628 Fax

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Pacific Health Care Organization, Inc.

Newport Beach, CA

We have audited the accompanying consolidated balance sheets of Pacific Health Care Organization, Inc. as of December 31, ~~2011~~2012 and ~~2010~~2011 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pacific Health Care Organization, Inc. as of December 31, 2012 and 2011 and ~~2010 and~~ the consolidated results of its operations and cash flows for the years ended December 31, ~~2011~~2012 and ~~2010~~2011 in conformity with generally accepted accounting principles in the United States of America.

/s/ Morrill & Associates

Morrill & Associates

Clinton, Utah 84015

March ~~28, 2012~~30, 2013

2022

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Pacific Health Care Organization, Inc.

Consolidated Balance Sheets

ASSETS
December 31, December 31,
2011 2010

Current Assets
Cash $ 368,459 $ 349,552
Accounts receivable, net of allowance of $20,000 523,864 239,205
Deferred tax asset - 10,582
Income tax receivable 3,998 35,100
Commission draw 29,853 24,000
Prepaid expenses 53,947 70,112
Total current assets 980,121 728,551

Property & Equipment, net
Computer equipment 80,963 60,922
Furniture & fixtures 56,471 28,839
Office equipment 12,537 -
Office equipment under capital lease 25,543 25,543
Total property & equipment 175,514 115,304
Less: accumulated depreciation and amortization (104,294 ) (92,009 )

Net property & equipment 71,220 23,295
Other assets 8,158 8,158

Total assets $ 1,059,499 $ 760,004

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable $ 86,482 $ 30,038
Accrued expenses 126,770 100,392
Income tax payable 1,611 100
Current obligations under capital lease 6,592 6,148
Deferred rent expense 21,903 -
Deferred tax liabilities 5,404 -
Unearned revenue 7,803 12,035
Total current liabilities 256,565 148,713
Long term liabilities
Noncurrent obligation under capital lease
7,069 13,661
Total liabilities 263,634 162,374

Commitments and Contingencies
- -

Shareholder's Equity
Preferred stock; 5,000,000 shares
authorized at $0.001 par value;
Zero shares issued and outstanding
- -
Common stock; 50,000,000 shares
authorized at $0.001 par value;
802,424 shares issued and outstanding
802 802
Additional paid-in capital 623,629 623,629
Retained earnings (deficit) 171,434 (26,801 )
Total stockholders' equity 795,865 597,630

Total liabilities and stockholders' equity $ 1,059,499 $ 760,004

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~Pacific Health Care Organization, Inc.~~

~~Consolidated Statements of Operations~~

December 31,
2011

December 31,
2010

Revenues
HCO fees $ 770,303 $ 607,450
MPN fees 627,341 605,238
Other 1,434,149 402,971
Total revenues 2,831,793 1,615,659

Expenses
Depreciation 13,595 5,691
Consulting fees 358,996 273,684
Salaries & wages 1,132,351 692,337
Professional fees 212,572 190,519
Insurance 151,227 105,495
Outsource service fees 190,917 24,302
Data maintenance 57,445 75,325
General & administrative 392,407 329,535

Total expenses 2,509,510 1,696,888

Income (loss) from operations 322,283 (81,229 )

Other income (expense)
       Loss on disposal of assets (1,564 ) -
       Interest income 957 1,712
       Rental income 250 -
       Interest (expense) (1,192 ) (1,606 )
                         Total other income (expense) (1,549 ) 106

Income (loss) before income tax provision 320,734 (81,123 )

Income tax provision (benefit) 122,499 (21,190 )

Net income (loss) $ 198,235 $ (59,933 )

Basic and fully diluted earnings per share:
Earnings per share amount $ .25 $ (0.08 )
Weighted average common shares outstanding 802,424 802,424

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~Pacific Health Care Organization, Inc.~~

~~Consolidated Statements of Stockholders’ Equity~~

~~From January 1, 2010 to December 31, 2011~~

Preferred Stock Common Stock Paid in
Retained
Earnings

Shares Amount Shares Amount Capital (Deficit)

Balance,
January 1, 2010
- $ - 802,424 $ 802 $ 623,629 $ 33,132

Net loss for the
year ended
December 31, 2010
- - - - - (59,933 )

Balance,
December 31, 2010
- $ - 802,424 $ 802 $ 623,629 $ (26,801 )

Net income for the
year ended
December 31, 2011
- - - - - 198,235

Balance,
December 31, 2011
- $ - 802,424 $ 802 $ 623,629 $ 171,434

ASSETS
	December 31,			December 31,
	2012			2011

Current Assets
Cash	$	479,674		$	368,459
Accounts receivable, net of allowance of $20,000		1,332,499			523,864
Income tax receivable		-			3,998
Commission draw		-			29,853
Receivable other		7,344			-
Prepaid expenses		52,988			53,947
Total current assets		1,872,505			980,121

Property & Equipment, net
Computer equipment		127,667			80,963
Furniture & fixtures		83,708			56,471
Office equipment		26,560			12,537
Office equipment under capital lease		63,923			25,543
Total property & equipment		301,858			175,514
Less: accumulated depreciation and amortization		(133,573	)		(104,294	)

Net property & equipment		168,285			71,220
Other assets		8,158			8,158

Total assets	$	2,048,948		$	1,059,499

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable	$	120,787		$	86,482
Accrued expenses		98,074			126,770
Income tax payable		249,162			1,611
Current obligations under capital lease		19,294			6,592
Deferred rent expense		24,951			21,903
Deferred tax liabilities		5,659			5,404
Unearned revenue		2,443			7,803
Total current liabilities		520,370			256,565
Long term liabilities
Noncurrent obligation under capital lease		21,324			7,069
Total liabilities		541,694			263,634

Commitments and Contingencies		-			-

Shareholder's Equity
Preferred stock; 5,000,000 shares authorized at $0.001 par value; Zero shares issued and outstanding		-			-
Common stock; 50,000,000 shares authorized at $0.001 par value; 802,424 shares issued and outstanding		802			802
Additional paid-in capital		623,629			623,629
Retained earnings		882,823			171,434
Total stockholders' equity		1,507,254			795,865

Total liabilities and stockholders' equity	$	2,048,948		$	1,059,499

The accompanying notes are an integral part of these consolidated financial ~~statements.~~statements

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Pacific Health Care Organization, Inc.

Consolidated Statements of ~~Cash Flows~~Operations

~~For the Years Ended December 31~~

2011 2010
Cash Flows from Operating Activities
   Net income (loss) $ 198,235 $ (59,933 )
   Adjustments to reconcile net income to net cash:
   Depreciation 13,595 5,691
   Loss on disposition of assets 1,564 -
Changes in operating assets & liabilities:
   (Increase) in accounts receivable (284,659 ) (84,139 )
   Decrease (increase) in income tax receivable 31,102 (23,577 )
   (Increase) in commission draw (5,853 ) (24,000 )
   Decrease in deferred tax asset 10,582 1,887
   Decrease (increase) in prepaid expenses 16,165 (3,712 )
   Increase in accounts payable 56,444 23,366
   (Decrease) increase in accrued expenses 26,378 (68,662 )
   Increase in income tax payable 1,511 -
   Increase in deferred rent expense 21,903 -
   Increase in deferred tax liabilities 5,404 -
   (Decrease) in unearned revenue (4,232 ) (7,499 )
   (Increase) in other assets - (8,158 )
   Net cash provided by (used in) operating activities 88,139 (248,736 )

Cash Flows from Investing Activities
   Purchase of furniture& equipment (63,084 ) -
   Purchase equipment under capital lease - (25,543 )
   Net cash used by investing activities (63,084 ) (25,543 )
Cash Flows from Financing Activities
   Increase in obligation under capital lease - 25,543
   Payment of obligations under capital lease (6,148 ) (5,734 )
    Net cash provided by (used in) financing activities (6,148 ) 19,809

   Increase (decrease) in cash 18,907 (254,470 )

   Cash at beginning of period 349,552 604,022
   Cash at end of period $ 368,459 $ 349,552

Supplemental Cash Flow Information

Cash paid (refunded) for:
Interest $ 1,191 $ 1,488
Income taxes refunded $ (38,718 ) -
Income taxes paid $ (107,346 ) $ 57,200

	December 31,			December 31,
	2012			2011
Revenues
HCO fees	$	945,823		$	770,303
MPN fees		749,250			627,341
Other		3,131,692			1,434,149
Total revenues		4,826,765			2,831,793

Expenses
Depreciation		29,279			13,595
Consulting fees		486,736			358,996
Salaries & wages		1,655,386			1,132,351
Professional fees		267,434			212,572
Insurance		203,251			151,227
Outsource service fees		385,368			190,917
Data maintenance		75,530			57,445
General & administrative		490,663			392,407

Total expenses		3,593,647			2,509,510

Income from operations		1,233,118			322,283

Other income (expense)
Loss on disposal of assets		-			(1,564	)
Interest income		704			957
Rental income		1,500			250
Interest (expense)		(1,885	)		(1,192	)
Total other income (expense)		319			(1,549	)

Income (loss) before income tax provision		1,233,437			320,734

Income tax provision		522,048			122,499

Net income	$	711,389		$	198,235

Basic and fully diluted earnings per share:
Earnings per share amount	$	.89		$	.25
Weighted average common shares outstanding		802,424			802,424

The accompanying notes are an integral part of these consolidated financial ~~statements.~~statements

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Pacific Health Care Organization, Inc.

Consolidated Statements of Stockholders’ Equity

From January 1, 2011 to December 31, 2012

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

Pacific Health Care Organization, Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31

	2012			2011
Cash Flows from Operating Activities
Net income	$	711,389		$	198,235
Adjustments to reconcile net income to net cash:
Depreciation		29,279			13,595
Loss on disposition of assets		-			1,564
Changes in operating assets & liabilities:
(Increase) in accounts receivable		(808,635	)		(284,659	)
Decrease in income tax receivable		3,998			31,102
Decrease (increase) in commission draw		29,853			(5,853	)
(Increase) in receivable other		(7,344	)		-
Decrease in deferred tax asset		-			10,582
Decrease in prepaid expenses		959			16,165
Increase in accounts payable		34,305			56,444
(Decrease) increase in accrued expenses		(28,696	)		26,378
Increase in income tax payable		247,551			1,511
Increase in deferred rent expense		3,048			21,903
Increase in deferred tax liabilities		255			5,404
(Decrease) in unearned revenue		(5,360	)		(4,232	)
Net cash provided by operating activities		210,602			88,139

Cash Flows from Investing Activities
Purchase of furniture & equipment		(87,964	)		(63,084	)
Purchase equipment under capital lease		(38,380	)		-
Net cash used by investing activities		(126,344	)		(63,084	)
Cash Flows from Financing Activities
Increase in obligation under capital lease		38,380			-
Payment of obligations under capital lease		(11,423	)		(6,148	)
Net cash provided by (used in) financing activities		26,957			(6,148	)

Increase in cash		111,215			18,907

Cash at beginning of period		368,459			349,552
Cash at end of period	$	479,674		$	368,459

Supplemental Cash Flow Information
Cash paid (refunded) for:
Interest		703			1,191
Income taxes refunded		-			(38,718	)
Income taxes paid		260,000			107,346

The accompanying notes are an integral part of these consolidated financial statements

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Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

Pacific Health Care Organization, Inc. (the “Company”) is a specialty workers’ compensation managed care company providing a range of services for California employers and claims administrators. The Company was incorporated under the laws of the state of Utah on April 17, 1970 under the name Clear Air, Inc. The Company changed its name to Pacific Health Care Organization, Inc., on January 31, 2001. On February 26, 2001 the Company acquired Medex Healthcare, Inc. (“Medex”), a California corporation organized March 4, 1994 in a share for share exchange. Medex is ~~now~~ a wholly-owned subsidiary of the Company. Medex is in the business of managing and administering both Health Care Organizations (“HCOs”) and Managed Provider Networks (”MPNs”) in the state of California. On August 14, 2001 we formed Workers Compensation Assistance, Inc., a California corporation, as a wholly-owned subsidiary of PHCO. Workers Compensation Assistance changed its name to Industrial Resolutions Coalition, Inc. (“IRC”) in January 2008. IRC oversees and manages the Company’s Workers’ Compensation Carve-Outs services. The Company acquired Arissa Managed Care, Inc., (“Arissa”) a Nevada corporation organized September 1, 2009 by purchasing all of its outstanding common stock. On February 2, 2012 Arissa changed its name to Medex Legal Services, Inc. (“MLS”). MLS ~~plans to offer~~began offering lien representation services to ~~clients.~~clients in 2012. Due to legislative changes that became effective on August 31, 2012, and significantly negatively impacted the economics of the lien representation services offered by MLS, MLS ceased operations on September 30, 2012. On February 13, 2012 we incorporated Medex Medical Management, Inc., in the state of Nevada, as a wholly owned subsidiary of the Company. Medex Medical Management (“MMM”) ~~will be~~is responsible for overseeing and managing nurse case management ~~services previously managed by our subsidiary Medex.~~services. On March 16, 2011 we incorporated Medex Managed Care, Inc. in the state of Nevada, as a wholly owned subsidiary of the Company. ~~In April 2011,~~ MMC ~~took over~~oversees and manages the ~~responsibilities of overseeing and managing the~~Company’s utilization review and managed bill review ~~business previously managed by our subsidiary, Medex.~~

~~Pacific Health Care Organization, Inc.~~

~~Notes to Consolidated Financial Statements~~

The Company used the accrual method of accounting for the periods ended December 31, ~~2011~~2012 and ~~2010.~~2011.

The Company applies the revenue recognition provisions pursuant to Accounting Standards Codification (“ASC”) 605.10, Revenue Recognition (“ASC 605”) (formerly SAB Topic 13A), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. The guidance outlines the basic criteria that must be met to recognize ~~the~~ revenue and provides guidance for disclosure related to revenue recognition policies.

In general, the Company recognizes revenue related to ~~licensing~~program management fees on a monthly basis, over the life of the ~~licensing~~management agreement, and when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured.

Health care service revenues are recognized in the period in which fees are fixed or determinable and the related services are provided to the subscriber.

The Company’s subscribers generally pay in advance for their services by check for billings made in advance, revenue is then recognized ratably over the period in which the related services are provided. Advance payments from subscribers and billings made in advance are recorded on the balance sheet as deferred revenue. An allowance for uncollectible accounts is established for any customer who is deemed as possibly uncollectible.

Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

The Company considers all short term, highly liquid investments that are readily convertible, within three months, to known amounts as cash equivalents. The Company currently has no cash equivalents.

Financial instruments that potentially subject ~~Pacific Health Care Organization, Inc. (the Company)~~the Company to concentrations of credit risks consist of cash and cash equivalents. The Company places its cash and cash equivalents at well-known, quality financial institutions. At times, such cash and investments may be in excess of the FDIC insurance limit.

The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.

	For the Years Ended December 31,
	2012		2011
Basic Earnings per share:
Income (numerator)	$	711,389	$	198,235
Shares (denominator)		802,424		802,424
Per share amount	$	.89	$	.25
Fully Diluted Earnings per share:
Income (numerator)	$	711,389	$	198,235
Shares (denominator)		802,424		802,424
Per share amount	$	.89	$	.25

The cost of property and equipment is depreciated over the estimated useful lives of the related assets. The cost of leasehold improvements is depreciated over the lesser of the length of the lease of the related assets for the estimated lives of the assets. Depreciation is computed on the straight line method.

The preparation of the financial statements in conformity with generally accepted accounting principles, in the United States of America, ~~require~~requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The accompanying ~~consolidated financial statements~~Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

NOTE 2 -– SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

I. Fair Value of Financial Instruments

On January 1, 2008, the Company adopted FASB ASC 820-10-50, “Fair Value Measurements. This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

	•	Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
	•	Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
	•	Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. ~~The carrying value of convertible notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of December 31, 2011 and 2010.~~

J. General and Administrative Expenses

General and administrative expenses include fees for office space and supplies, insurance, IT and internet expenses, postage and delivery expenses, compensated absences, travel expenses and entertainment costs.

K. Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred income tax assets and liabilities are provided based on the difference between the financial statements and tax basis of assets and liabilities measured by the currently enacted tax rates in effect for the years in which these differences are expected to reverse. Deferred tax expense or benefit is the result of changes in deferred tax assets and liabilities.

L. Capital Structure

The Company has two classes of stock. Preferred stock, 5,000,000 shares authorized, zero ~~issued.~~issued and outstanding. Voting rights and liquidation preferences have not been determined. The Company also has voting common stock of 50,000,000 shares authorized, with 802,424 shares issued and outstanding. No dividends were paid in either ~~2011~~2012 or ~~2010,~~2011, or in any prior years.

~~Table of Contents~~

~~Pacific Health Care Organization, Inc.~~

~~Notes to Consolidated Financial Statements~~

~~NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)~~

M. Stock Based Compensation

The Company has adopted the fair value method of accounting for stock-based employee compensation in accordance with statement of Financial Accounting Standards Board ASC Topic 718, “Stock Compensation.” This standard requires the Company to record compensation expense using the Black-Scholes pricing model.

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Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

N. Trade Receivables

The Company in the normal course of business extends credit to its customers on a short-term basis. Although the credit risk associated with these customers is minimal, the Company routinely reviews its accounts receivable balances and makes provisions for doubtful accounts. The Company ages its receivables by date of invoice. Management reviews bad debt reserves quarterly and reserves specific accounts as warranted or sets up a general reserve based on amounts over 90 days past due. When an account is deemed uncollectible, the Company charges off the receivable against the bad debt reserve. At the ~~2010~~2012 fiscal year end, the Company’s bad debt reserve of $20,000 is a general reserve for balances over 90 days past due and for accounts that are potentially uncollectible.

The percentages of the amounts due from major customers to total accounts receivable as of December 31, ~~2011~~2012 and ~~2010~~2011 are as follows:

12/31/11 12/31/10
    Customer A 6 % 20 %
    Customer B 12 % -
    Customer C 3 % 13 %
    Customer D 15 % -
   Customer E 12 % -
   Customer F 13 % -

	12/31/12			12/31/11
Customer A		12	%		12	%
Customer B		22	%		15	%
Customer C		8	%		12	%
Customer D		4	%		13	%

O. Subsequent Events

~~The~~

In February 2013 the Company ~~has evaluated subsequent~~entered into new Employment Agreements with Fred Odaka, the Company’s Chief Financial Officer, and David Kim, the Chief Operating Officer of the Company’s subsidiaries Medex, MMC and MMM. At that time the Company also entered into a new Consultant Agreement with Balzano & Associates for services rendered by Donald Balzano as the President of the Company’s subsidiaries, IRC and MLS. These agreements set forth the terms and conditions of their employment or consultancy with the Company, or its subsidiaries and are terminable by either party at will at any time.

In accordance with ASC 855-10 Company management reviewed all material events ~~from the balance sheet date~~ through the date ~~the financial statements were issued. See Note 12 for a description~~ of issuance and other than as disclosed above there are no material subsequent ~~events.~~events to report.

~~Table of Contents~~

~~Pacific Health Care Organization, Inc.~~

~~Notes to Consolidated Financial Statements~~

NOTE 3 – RECENTLY ISSUED ACCOUNTING STANDARDS

~~In January 2010,~~The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and outCompany believes that none of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASU 2010-06 did notthese pronouncements will have a ~~material impact~~significant effect on ~~the Company’s consolidated financial statements.~~its current or future earnings or operations.

In February 2010, the FASB issued Accounting Standards Update No. 2010-09 (“ASU 2010-09”) as amendments to certain recognition and disclosure requirements. The amendments remove the requirement for an SEC filer to disclose a date in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP. Those amendments remove potential conflicts with the SEC’s literature. All of the amendments in ASU 2010-09 were effective upon issuance for interim and annual periods. The adoption of ASU 2010-09 did not have a material impact on the Company’s consolidated financial statements.

In March 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-11, which is included in the Codification under ASC 815, “Derivatives and Hedging” (“ASC 815”). This update clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Only an embedded credit derivative that is related to the subordination of one financial instrument to another qualifies for the exemption. This guidance is effective for interim and annual reporting periods beginning January 1, 2010. The adoption of ASU 2010-11 did not have a material impact on the Company’s consolidated financial statements.

NOTE 4 -– FIXED ASSETS

The Company capitalizes the purchase of equipment and fixtures for major purchases in excess of $1,000 per item. Capitalized amounts are depreciated over the useful life of the assets using the straight line method of depreciation which is 3 and 7 years for the office equipment, and furniture and fixtures, respectively. Scheduled below are the assets, costs and accumulated depreciation at December 31, ~~2011~~2012 and ~~2010.~~2011.

Cost Depreciation Exp. & Amort Accum. Depre. & Amort.
Assets December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
Computer equipment $ 80,963 $ 60,922 $ 2,342 $ - $ 63,264 $ 60,922
Furniture & fixtures 60,544 28,839 4,678 582 30,656 25,978
Disposal of furniture (4,073 ) (1,309 )
Office equipment 12,537 1,465 - 1,465
Office equipment under capital lease
25,543 25,543 5,109 5,109 10,218 5,109
Totals $ 175,514 $ 115,304 $ 13,594 $ 5,691 $ 104,294 $ 92,009

	Cost						Depreciation Exp. & Amort.				Accum. Depre. & Amort.
Assets	December 31, 2012			December 31, 2011			December 31, 2012		December 31, 2011		December 31, 2012			December 31, 2011
Computer equipment	$	127,667		$	80,963		$	7,284	$	2,342	$	70,548		$	63,264
Furniture & fixtures		87,781			60,544			11,245		4,678		41,901			30,656
Disposal of furniture		(4,073	)		(4,073	)		-		-		(1,309	)		(1,309	)
Office equipment		26,560			12,537			4,362		1,465		5,827			1,465
Office equipment under capital lease		63,923			25,543			6,388		5,109		16,606			10,218
Totals	$	301,858		$	175,514		$	29,279	$	13,594	$	133,573		$	104,294

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Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

NOTE 5 – INCOME TAXES

The Company accounts for corporate income taxes in accordance with FASB ASC 740-10 “Income ~~Taxes”.~~Taxes.” FASB ASC 740-10 requires an asset and liability approach for financial accounting and reporting for income tax purposes.

The tax provision ~~(benefit)~~ for the year-ended December 31, ~~2011~~2012 and the year ended December 31, ~~2010~~2011 consisted of the following:

2011 2010
   Current:
   Federal $ 86,511 $ (25,758 )
   State 20,002 2,681
   Deferred
   Federal 12,389 1,463
   State 3,597 424
    Total tax provision (benefit) $ 122,499 $ (21,190 )

	2012			2011
Current:
Federal	$	403,153		$	86,511
State		118,640			20,002
Deferred
Federal		(6,370	)		12,389
State		6,625			3,597
Total tax provision	$	522,048		$	122,499

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s total deferred tax liabilities, deferred tax assets, and deferred tax asset valuation allowances at December 31, ~~2011~~2012 and December 31, ~~2010~~2011 are as follows:

~~Table of Contents~~

	2012			2011

Depreciation
Federal	$	(65,841	)		(20,858	)
State		(14,601	)		(5,858	)
Reserve for bad debts
Federal		8,000			6,200
State		1,800			1,800
State tax deductions		37,659			-
Vacation accrual
Federal		22,365			9,790
State		4,959			2,842

Deferred tax asset (liability)	$	(5,659	)	$	(5,404	)

~~Pacific Health Care Organization, Inc.~~

~~Notes to Consolidated Financial Statements~~

2011 2010

   Expense at federal statutory rate $ 101,905 $ (31,078 )
   State tax effects 24,281 2,549
   Non deductible expenses 16,270 5,876
   Taxable temporary differences 6,247 -
   Deductible temporary differences (26,204 ) 1,463
   Deferred tax asset valuation allowance - -
    Income tax provision (benefit) $ 122,499 $ (21,190 )

	2012		2011

Expense at federal statutory rate	$	419,369	$	101,905
State tax effects		82,675		24,281
Non deductible expenses		11,572		16,270
Effects of rate change		7,982		-
Taxable temporary differences		450		(19,957	)
Income tax provision	$	522,048	$	122,499

Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

NOTE 5 – INCOME TAXES (CONTINUED)

The Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10 (Prior authoritative literature: Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN 48)). FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.

~~At the adoption date of January 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized.~~

~~Pacific Health Care Organization, Inc.~~

~~Notes to Consolidated Financial Statements~~

NOTE 6 – OPERATING LEASES

In January 2010 we entered into a capital lease arrangement whereby we leased an office copy machine for $25,543. The asset was recorded on our balance sheet under office equipment under capital lease and our liability incurred under the lease was recorded as current and noncurrent obligations under capital lease. The lease arrangement is for a term of 48 months at level operating rents with a capital interest rate of 7%. In August 2012 we entered into a capital lease arrangement whereby we leased office server equipment for $38,380. The asset was recorded on our balance sheet under office equipment under capital lease and our liability incurred under the lease was recorded as current and noncurrent obligations under capital lease. The lease arrangement is for a term of 36 months at 7%level operating rents with a capital interest rate of 7.5%.

~~Our~~The Company’s principal executive offices were located at 1201 Dove Street, Suite 585, in Newport Beach, California, where we leased approximately 950 square feet of office space. We moved to this location in February 2009 and renewed our lease in March 2010 for one year. We extended our lease one month until March 31, 2011 when the lease expires. Our monthly rent for this space is approximately $1,700 per month. As of December 31, 2010, the principal offices of our operating subsidiaries, Medex and IRC were located in Long Beach, California. Medex leased approximately 3,504 square feet of office space in Long Beach, California and made some space available to IRC. The monthly lease payment during 2010 was approximately $7,900. The term of this lease was through February 2011. On September 27, 2010, Medex entered into a lease agreement for new office space. The Company took possession of the space on March 1, 2011 and its lease runs through February 29, 2016. On October 13, 2011 we amended our lease agreement to increase the square footage. We now lease approximately 6,740 square feetare located at 1201 Dove Street, Suites 300 and 375, in Newport Beach, ~~California.~~California, where it leases approximately 6,740 square feet of office space. The Company’s lease runs through February 29, 2016. This space also serves ~~as our principal executive offices, as well~~ as the principal offices of our operating subsidiaries, Medex, IRC, MLS, MMM and MMC. Following is our base annual rent payment schedule for the office space.

Total Lease Commitments as of December 31, ~~2011~~2012

Rent expense for ~~the~~ office space for the ~~year~~years ended December 31, ~~2011~~2012 and December 31, ~~2010~~2011 was $136,731 and $109,889, ~~and $115,393,~~ respectively. ~~During 2011 and 2010, no equipment rent expense was incurred.~~

Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

NOTE 7–7 – MAJOR CUSTOMERS

During ~~2011~~2012 we had three customers that accounted for more than 10% of our total sales. The following table sets forth details regarding the percentage of total sales attributable to our significant customers in the past two years:

	Year ended December 31,						Year ended December 31,
Customer:	2011			2010			2012			2011

Customer A		14	%		0	%		12	%		14	%
Customer B		12	%		22	%		7	%		12	%
Customer C		11	%		0	%		14	%		11	%
Customer D		7	%		12	%		13	%		8	%

NOTE 8–8 – ACCRUED AND OTHER LIABILITIES

Accrued liabilities consist of the following:

2011 2010

   Employment enrollment fee - 372
   Compensated absences 29,287 18,755
   Legal fees 52,000 16,000
   Accounting fees 43,812 46,922
   Sales commissions 930 18,025
   Other 741 318
   Total $ 126,770 $ 100,392

	2012		2011

Customer overpayment of accounts receivables		1,108		-
Compensated absences		55,913		29,287
Legal fees		3,200		52,000
Accounting fees		37,108		43,812
Sales commissions		427		930
Other		318		741
Total	$	98,074	$	126,770

NOTE 9–9 – OPTIONS FOR PURCHASE OF COMMON STOCK

2002 Stock Option Plan

In August 2002, the Company adopted a stock option plan. The Company adopted a plan which provides for the grant of options to officers, consultants and employees to acquire shares of the Company’s common stock at a purchase price equal to or greater than fair market value as of the date of the grant. Options are exercisable six months after the grant date and expire five years from the grant date. The plan calls for a total of 50,000 shares to be held for grant. ~~There was no activity for 2011 and 2010.~~Options to purchase 4,250 common shares were granted in August 2002. Options to purchase 938 common shares were exercised, the balance of the outstanding options expired unexercised in August 2007. No securities were awarded under this plan in 2012 or 2011.

2005 Stock Option Plan

On November 18, 2005, at the annual meeting of stockholders of the Company, the Company and its shareholders adopted the Pacific Health Care Organization, Inc., 2005 Stock Option Plan. The plan provides for the grant of Company securities, including options, warrants and restricted stock to officers, consultants and employees to acquire shares of the Company’s common stock at a purchase price equal to or greater than fair market value as of the date of the grant. Options are exercisable six months after the grant date and expire five years from the grant date. The plan permits the granting of up to 50,000 common shares of the Company. To date, no securities have been granted under this plan.

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Pacific Health Care Organization, Inc.

Notes to Consolidated Financial Statements

NOTE 10 – STOCKHOLDERS’ EQUITY

The Company held a special meeting of stockholders on April 11, 2008 at which the Company’s stockholders voted on the proposal to amend the Company’s Article of Incorporation to effect a 1 for 50 reverse split of the Company’s common stock, with a cash-out of all resulting fractional shares followed by a 2.5 for 1 forward split of our common stock. The Company did incur significant legal, proxy notification and mailing cost in connection with the meeting. The shareholders voted 12,365,710 shares in favor, 394,516 shares against and 379 shares abstained from voting on the proposed transaction.

As permitted under Utah law and as approved by the Company’s stockholders at athe special meeting, ~~of stockholders,~~ 12,568 pre-reverse split shares of common stock were reduced to fractional shares (less than one whole share) by the reverse split and such fractional shares were not reissued. Rather, the fractional shares were cancelled and converted into the right to receive a cash payment for the value of the fractional share. The transaction ~~has~~ resulted in reduced shareholder record keeping and mailing expenses, as well as providing holders of fewer than the 50 pre-reverse split shares with an efficient, cost-effective way to cash-out their investments. As of December 31, 2008, the Company had paid an aggregate amount of $1,005 owed to cashed-out fractional share shareholders.

As a result of the reverse and forward splits, the Company has restated its outstanding shares on the balance sheets for December 31, ~~2011~~2012 and ~~2010~~2011 and in Note ~~2(e).~~2E. Neither the authorized common stock of the Company, nor the par value of the common stock ~~were~~was affected by the splits. The outstanding shares at December 31, 2007 were 15,427,759 before the splits, following the splits; the outstanding shares of the Company were 802,424. For the year end December 31, 2008, $14,626 was reclassified from common stock to additional paid-in-capital.

NOTE 11 -– LITIGATION

To the knowledge of management, there is no material litigation or governmental agency proceeding pending or threatened against the Company or any of its subsidiaries. Further, the Company is not aware of any material proceeding to which any director, officer or affiliate of the Company, any owner of record or beneficially of more than five percent of any class of voting securities of the Company, or any associate of any such director, officer or affiliate of the Company or security holder is a party adverse to the Company of any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

~~NOTE 12 – SUBSEQUENT EVENTS~~

On February 2, 2012 Arissa changed its name to Medex Legal Support, Inc. and plans to offer to its customers all aspects of lien defense from negotiation to lien litigation, including filing petitions for reconsideration. MLS plans to provide its clients a broad comprehensive lien representation program, while settling liens resulting in high potential savings.

On February 13, 2012 we incorporated Medex Medical Management, Inc., in the state of Nevada, as a wholly owned subsidiary of the Company. MMM will be responsible for overseeing and managing nurse case management services previously managed by our subsidiary Medex.

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ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, ~~2011~~2012 our disclosure controls and procedures were effective in ensuring ~~that~~that: (1) information required to be disclosed by us in the reports filed ~~and~~or submitted by us to the Commission under the Exchange Act is ~~(1)~~ recorded, processed, summarized and reported within the time periods specified in ~~the Commission’s~~applicable rules and forms and (2) accumulated and communicated to our management, including our principal executive and financial officers, or persons performing similar functions, ~~as appropriate to allow~~in a manner that allows for timely decisions regarding required disclosure.

The effectiveness of our or any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable assurance that the objectives of the system will be met and is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating controls and procedures and the assumptions used in identifying the likelihood of future events.

Management's Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by or under the supervision of the Company’s principal executive officer and principal financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

·	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. ~~Projections~~A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are system constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The design of any ~~evaluation~~system of ~~effectiveness to~~controls is based in part upon certain assumptions about the likelihood of future ~~periods are subject to the risk~~events, and there can be no assurance that ~~controls may become inadequate because~~any design will achieve its stated objectives under all future conditions.

Table of ~~changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.~~Contents

Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of the end of the period covered by this report. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, our management concluded that, as of December 31, ~~2011,~~2012, our internal control over financial reporting is effective based on those criteria.

Attestation Report of Independent Registered Public Accounting Firm

This annual report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~quarter~~year ended December 31, ~~2011~~2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth, as of March ~~12, 2012 our directors,~~13, 2013, the executive officers and ~~certain significant employees and consultants~~directors of the Company, their ages, and all offices and positions ~~held~~they hold with the Company. Directors are elected for a period of one year and thereafter serve until their successor is duly elected by the stockholders and qualified. Officers and other employees serve at the will of the board of directors.

Name	Age	Positions with the Company	Director Since	Executive Officer Since

Tom Kubota	7273	Chief Executive Officer, President and Chairman of the Board of Directors	Sept. 2000	Sept. 2000

Fred Odaka	7576	Chief Financial Officer and Secretary		Aug. 2008

David Wang	4950	Independent Director	Nov. 2007

Thomas Iwanski	5455	Independent Director	Nov. 2004

~~Lester L. Sacks~~	80	~~President, Medex Healthcare, Inc~~

~~Donald P. Balzano~~	66	~~President, Industrial Resolutions Coalition, Inc., President Medex Legal Support, Inc.~~

~~David Kim~~	38	~~Executive Vice President, Medex Healthcare, Inc.~~

~~Geri Plotzke~~	69	~~Vice President, Managed Care Services, Medex Healthcare, Inc.~~

~~Kathy Torres~~	62	~~Executive Vice President, Medex Managed Care, Inc.~~

The following sets forth certain biographical information relating to the Company’s executive officers ~~directors~~ and ~~certain significant employees and consultants:~~directors:

Tom Kubota. Mr. Kubota has thirty years of experience in the investment banking, securities and corporate finance field. He held the position of Vice President at Drexel Burnham Lambert; at Stem, Frank, Meyer and Fox; and at Cantor Fitzgerald. Mr. Kubota is the president of Nanko Investments, Inc., which specializes in capital formation services for high technology and natural resources companies. He has expertise in counseling emerging public companies and has previously served as a director of both private and public companies. Since 2000, Mr. Kubota has been primarily engaged in the operations of PHCO and running his consulting firm Nanko Investments, Inc. During the past ten years, Mr. Kubota also served as CEO of Fabrics International, Ltd., a privately held corporation. Fabrics International, and each of its three wholly-owned subsidiaries, terminated operations and filed for bankruptcy in 2005. Mr. Kubota is not currently, nor has he in the past five years been, a nominee or director of any other SEC registrant. In concluding that Mr. Kubota was an appropriate candidate to serve on the Company’s board of directors, the board considered his experience as the Company’s president and chief executive officer, his many years of investment banking and corporate finance experience and his prior management experience.

~~Table of Contents~~

Fred Odaka. Mr. Odaka joined PHCO as CFO in August 2008. He has held senior level management positions in corporate finance for over 30 years and served as CFO for private and public companies. Most recently, from 1998 to May 2008, Mr. Odaka was CFO of Rx for Africa, Inc. (“RXAF”), f/k/a Diamond Entertainment Corporation (“DMEC”) – OTCBB. In May 2007, DMEC merged with RXAF and changed its name to Rx for Africa, Inc. RXAF owns and operates a large pharmaceutical plant in Addis Ababa, Ethiopia. Prior to the merger, DMEC marketed and sold DVD titles to the home video market primarily through mass merchandisers and department stores. For four years, Mr. Odaka was a Financial Consultant and Analyst for Kibel, Green Inc., a leading West Coast business advisory and financial service firm specializing in corporate re-structure and crisis intervention. Mr. Odaka was also a co-founder of Rexon Inc., a manufacturer of computers and computer peripheral equipment and from 1978 to 1984 held the position of Vice President/CFO and was instrumental in taking the company public. Mr. Odaka also served as Controller of the computer division of Perkin-Elmer, a NYSE traded company. Mr. Odaka received his Bachelor of Science degree in Finance from Fresno State College, Fresno, California.

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David Wang. Mr. Wang co-founded and has served as the President of Aces Fuel Technology in Santa Monica, ~~California.~~California since 2005. Aces Fuel Technology ~~specialized~~specializes in marketing and selling a fuel and oil catalyst. Mr. Wang is responsible for overseeing the day-to-day operations of the Aces Fuel Technology. From 2001 through 2003, Mr. Wang worked as a Proprietary Trader for Schonfeld Securities in Santa Monica, California where he was responsible for trading U.S. equities. Mr. Wang earned a BS in computer Science/Mathematics from the University of California, Los Angeles (UCLA) in 1985. He earned an MBA degree in Financial and Entrepreneurial Studies from the Anderson School at UCLA in 2000. Mr. Wang is not currently, nor has he in the past five years been, a nominee or director of any other SEC registrant. In concluding that Mr. Wang was an appropriate candidate to serve on the Company’s board of directors, the board considered his education background, his experience in entrepreneurial business enterprises and his favorable history of attracting venture capital funds through his established contacts in the investment banking community.

Thomas Iwanski. Since September 2010 Mr. Iwanski has ~~specialized~~been self-employed as a consultant specializing in corporate financing and operations improvement. In addition, since May 2007, Mr. Iwanski has served as Director and Chief Executive Officer of Live-Vu Communications, Inc, a company that specializes in turnkey telemedicine and telehealth solutions for hospitals, clinics, long-term care facilities and homes incorporating proprietary video technology. From September 2006 through May 2007, Mr. Iwanski served as Chief Financial Officer of SyncVoice Communications, Inc. From April 2005 through July 2006, Mr. Iwanski served as Senior Vice President, Corporate Secretary and Chief Financial Officer of IP3 Networks, Inc. From February 2003 through April 2005 Mr. Iwanski served as a Special Advisor to the CEO of Procom Technology, Inc., where he played a prominent role in the development and implementation of business and financial strategies. Mr. Iwanski has also served in various positions including, Vice President Finance, Chief Financial Officer, Director and Secretary for a number of companies, including Cognet, Inc., NetVantage, Inc., Kimalink, Inc., Xponent Photonics, Inc., Prolong, Inc., and Memlink, Inc. Mr. Iwanski also has approximately ten years of public accounting experience having worked for KPMG, LLP, as a Senior Audit Manager and a Certified Public Accountant. Mr. Iwanski received a Bachelor of Business Administration from the University of Wisconsin-Madison in 1980. Mr. Iwanski is not, nor has he in the past five years been, a nominee or director of any other SEC registrant. In concluding that Mr. Iwanski was an appropriate candidate to serve on the Company’s board of directors, the board considered his years of experience in management and as a director of various start-up ventures. The board also considered his experience in financial and strategic planning and his strong accounting background.

~~Table of Contents~~

~~Significant Employees and Consultants~~

~~Dr. Lester L. Sacks. President and Medical Director of Medex Healthcare, Inc.~~ As a Board Certified Physician, educator, and physician executive, Dr. Sacks has cross-disciplinary experience as the President/Medical Director for Medex. Dr. Sacks a native of New York City, completed his undergraduate training at both George Washington University and Long Island University. He then moved to California to complete his medical training at the University of California, School of Medicine at Irvine. Following his initial residency training, he pursued Family Practice, developed a chain of medical clinics specializing in work related injuries. He is Board Certified in Occupational Medicine, as well as several other specialties. After selling his clinics, he moved into the arena of managed care. First as Senior Vice President of Beech Street, Inc. and then after five years he moved to the insurance industry as President of Travelers Medical Management Service. Having then decided to move back to California, he became the President of EOS/Reviewco, the managed care division of HealthNet, Inc. and ultimately moving to Total HealthCare Management, Inc as a working partner from 2004 through 2009. He then sold his interest in that company and in January 2009 became Medical Director of Medex Healthcare, Inc. In December 2009, Dr. Sacks began serving as President of Medex Healthcare, Inc. He brings the experience of private practice, managed care and the insurance industry to this post. Dr. Sacks has served as the Medical Director for HHC Group, a managed care company in Maryland from 2001 to 2010, and as Medical Director for Decision UR, a software company from 2005 to the present time and of CompWest Insurance Company from 2010 to the present time. He has served as President and Chairman of the Western Occupational Medical Association and on the Board of Directors of the American College of Occupational and Environmental Medicine. He is currently a Voluntary Clinical Professor of Medicine at the University of California. He has served as consulting Medical Director for Levi Strauss, and Steelcase, as well as, several other national companies during his career.

~~Donald P. Balzano. President of Industrial Resolutions Coalition, Inc. and President of Medex Legal Support, Inc.~~ Mr. Balzano is a graduate of the UCLA School of Law and is a member of the State Bar of California. From 1979 through 1990 he was the president of Western Medical Review and Care Resources, Inc. From 1990 through 1995 he founded Balzano & Associates which focused on medical and legal delivery systems for workers’ compensation programs and he held the position of vice president and general counsel for Keenan & Associates where he was responsible for corporate legal activity and for creation of a workers' compensation defense attorney and managed medical care program. From 1996-2001 Mr. Balzano served as the president and CEO of Priority CompNet, a California workers’ compensation health care organization. Mr. Balzano has been with the Industrial Resolution Coalition, Inc. since 2007 and was appointed to the position of President in November 2007. Mr. Balzano also serves as a consultant with Medex and was formerly the Chief Executive Officer of Medex.

~~David Kim. Executive Vice President of Medex Healthcare, Inc.~~ Mr. Kim has been in the healthcare industry for 20 years. His background includes operations, management and business development. Mr. Kim has served in executive level positions for major managed care companies, specializing in assisting both public and private entity clients. Mr. Kim joined the Company in July 2007 as a Vice President of Medex, where he has overseen operations and management of Medex’s sales and marketing efforts. Mr. Kim is also responsible for day-to-day operations, staff performance and customer satisfaction, including the introduction and oversight of all product lines. Prior to joining the Company, Mr. Kim was the Director of Business Development for Lien on Me, Inc. where he was responsible for acquisition of new business and enhancement of existing accounts. He worked closely with the sales, marketing and operations teams to develop system enhancements for improved workflow patterns.

~~Geri Plotzke. Executive Vice President of Medex Healthcare, Inc.~~ Ms. Plotzke has served as the Executive Vice President of Medex since October 1, 2006. Prior to that she served as the Director of Managed Care Services of Medex since 2003 and has over 17 years of experience in the workers’ compensation and healthcare industries. Ms. Plotzke’s prior work experience includes various managerial positions including Medical Management Director, Workers; Compensation Program Director, and Disability Case Management Program Director for various insurance and medical management companies. Mrs. Plotzke received an AA in Nursing in 1970 at Los Angeles City College, as well as, a BA in 1981 and a MBA in 1989 in Business Administration from the University of Redlands.

~~Kathy Torres. Executive Vice President of Medex Managed Care, Inc.~~ Ms. Torres started her career in group health and benefits in 1990 selling group health insurance to large employers. Currently, Ms. Torres serves as President of Medex Managed Care, Inc. Prior to joining Arissa in July 2010, Ms. Torres was the owner of Total HealthCare Management, a company she founded in 2000, that was engaged in the workers’ compensation industry. She served as president of the company until she sold it in 2007. In January 2010 Ms. Torres became a consultant at Total HealthCare Management and ended this relationship in June 2010. As a business owner, Ms. Torres was responsible for servicing her clients and developing solutions for reducing workers’ compensation costs. Ms. Torres focused on strategic solutions to implement advanced technologies, streamlined processes, and solutions to develop successful cost savings programs.

Family Relationships

There are no family relations among any of our executive officers ~~directors or significant employees or consultants.~~and directors.

~~Table of Contents~~

Involvement in Certain Legal Proceedings

Except as disclosed in Mr. Kubota’s biographical information above, during the past ten years none of our ~~directors~~executive officers or ~~executive officers~~directors has been involved in any of the following events that could be material to an evaluation of his or her ability or integrity, including:

(1) Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

(2) Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting the following activities:

	(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity poll operator, floor broker, leverage transaction merchant, and other person regulated by the Commodity Futures Trading Commission (“CFTC”), or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company, bank savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

	~~(ii) Engaging in any type of business practice; or~~

	~~(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;~~

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(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity poll operator, floor broker, leverage transaction merchant, and other person regulated by the Commodity Futures Trading Commission (“CFTC”), or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company, bank savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

(ii) Engaging in any type of business practice; or

(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4) Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the rights of such person to engage in any activity described in (3)(i) above, or to be associated with persons engaged in any such activity;

(5) Being found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not be subsequently reversed, suspended or vacated;

(6) Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended, or vacated;

(7) Being the subject of, or a party to any Federal or State judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

	(i) Any Federal or State securities or commodities law or regulations; or (ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
	(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

	~~(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or~~

(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8) Being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and any persons who own more than 10% of the common stock of the Company to file with the Securities and Exchange Commission reports of beneficial ownership and changes in beneficial ownership of common stock. Officers and directors are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such reports furnished to us or written representations that no other reports were required, we believe that during fiscal ~~2011~~2012 all filing requirements applicable to our executive officers and directors were met on a timely basis.

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Code of Ethics

Our board of directors has adopted a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer or controller and to persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote honest and ethical conduct, full, fair, accurate, timely and understandable disclosure, compliance with applicable laws, rules and regulations, prompt internal reporting of violations of the code and accountability for adherence to the code. We will provide a copy of our code of ethics, without charge, to any person upon receipt of written request for such delivered to our corporate headquarters. All such requests should be sent care of Pacific Health Care Organization, Inc., Attn: Corporate Secretary, 1201 Dove Street, Suite 300, Newport Beach, California 92660.

~~Committees~~Director Nominations Procedures

There have been no material changes to the procedures by which shareholders may recommend nominees to our board of directors since March 30, 2012, the date we last provided information with regard to our director nomination process.

Audit Committee of the Board of Directors

The ~~OTCBB~~Company does not ~~require the Company to~~ have ~~an audit committee,~~ a ~~compensation committee or a corporate governance and nominating committee and the board does not currently have~~separately-designated standing audit ~~compensation or corporate governance and nominating committees.~~committee. Our board of directors has determined that it is in the Company’s best interest to have the full board fulfill the functions that would be performed by ~~these committees. The full board of directors is responsible for selection, review and oversight of the Company’s independent registered public accounting firm; approval of all~~an audit review and attest services provided by the independent registered public accounting firm; the integrity of the Company’s reporting practices and the evaluation of the Company’s internal controls and accounting procedures. The board is also responsible for the pre-approval of all non-audit services provided by its independent registered public accounting firm. Non-audit services are only provided by our independent registered public accounting firm to the extent permitted by law. Pre-approval is required unless a “de minimus” exception is met. To qualify for the “de minimus” exception, the aggregate amount of all such non-audit services provided to the Company must constitute not more than 5% of the total amount of revenues paid by us to our independent registered public accounting firm during the fiscal year in which the non-audit services are provided; such services were not recognized by us at the time of the engagement to be non-audit services; and the non-audit services are promptly brought to the attention of the board and approved prior to the completion of the audit by the board or by one or more members of the board to whom authority to grant such approval has been delegated.committee.

As we do not currently have a standing audit committee, we do not at this time have an “audit committee financial expert” as defined under the rules of the Securities and Exchange Commission. The board does believe, however, that should the Company form a standing audit committee in the future, Mr. Thomas Iwanski, an independent director, could qualify as an audit committee financial expert.

Our full board of directors also participates in the consideration of director nominees. In general, when the board determines that expansion of the board or replacement of a director is necessary or appropriate, the board will review through candidate interviews with members of management, consult with the candidate’s associates and through other means determine a candidate’s honesty, integrity, reputation in and commitment to the community, judgment, personality and thinking style, residence, willingness to devote the necessary time, potential conflicts of interest, independence, understanding of financial statements and issues, and the willingness and ability to engage in meaningful and constructive discussion regarding Company issues. The board will review any special expertise, for example, that qualifies a person as an audit committee financial expert, membership or influence in a particular geographic or business target market, or other relevant business experience. To date we have not paid any fee to any third party to identify or evaluate, or to assist in identifying or evaluating, potential director candidates.

~~Board Diversity~~

While we do not have a formal policy regarding the consideration of diversity in identifying and evaluating potential director candidates, the board considers the interplay of a candidate’s knowledge, expertise, skills and experience with that of the other members of the board of directors in order to build a board of directors that is effective, collegial and responsive to the needs of the Company. We believe this analysis results in a board of directors that is diverse in knowledge, expertise, skills, experience and viewpoint.

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~~Procedures for Security Holders to Nominate Candidates to the Board of Directors~~

During the fiscal year, there were no changes made to the procedures by which shareholders may nominate candidates to our board of directors. The full board of directors will consider all director candidates nominated by shareholders during such times as the Company is actively considering appointment of new directors. Candidates recommended by shareholders will be evaluated based on the same criteria described above. Shareholders desiring to suggest a candidate for consideration should send a letter to the Company’s Corporate Secretary and include:

·	~~a statement that the writer is a shareholder (providing evidence if the person’s shares are held in street name) and is proposing a candidate for consideration;~~

·	~~the name and contact information for the candidate;~~

·	~~a statement of the candidate’s business and educational experience;~~

·	information regarding the candidate’s qualifications to be director, including but not limited to an evaluation of the factors discussed above which the board would consider in evaluating a candidate;

·	~~information regarding any relationship or understanding between the proposing shareholder and the candidate;~~

·	~~information regarding potential conflicts of interest; and~~

·	~~a statement that the candidate is willing to be considered and willing to serve as a director if nominated and elected.~~

Because of the small size of the Company and the limited need to seek additional directors, there is no assurance that all shareholder proposed candidates will be fully considered, that all candidates will be considered equally, or that the proponent of any candidate or the proposed candidate will be contacted by the Company or the board, and no undertaking to do so is implied by the willingness to consider candidates proposed by shareholders.

~~From time to time our board may establish committees as it deems appropriate to facilitate our management.~~

~~Board Leadership Structure and Risk Oversight~~

We do not have a policy regarding the separation or combination of the roles of the Chairman and CEO and believe that the separation or combination of these offices is a matter for discussion and determination by the board. The board believes that it should be able to select the Chairman of the board based on the criteria that the board deems to be in the best interests of the Company and its stockholders.

Currently, the board of directors has chosen to combine the principal executive officer and board chairman positions and has not appointed a separate lead director. Mr. Kubota has served as the principal executive officer and board chairman since September 2000. At the present time, the independent directors believe that Mr. Kubota’s in-depth knowledge of our operations and vision for development of our business make him the best-qualified director to serve as Chairman.

The board of directors is responsible for consideration and oversight of risks facing the Company and is responsible for ensuring that material risks are identified and managed appropriately. The board of directors administers its oversight functions by reviewing the operations of the Company, by overseeing the executive officers’ management of the Company, and also oversees related party transactions, requiring pre-approval of any such transactions with the Company.

~~Table of Contents~~

ITEM 11. EXECUTIVE COMPENSATION

The table below summarizes compensation paid to or earned by: (i) all individuals serving as our principal executive officer or acting in a similar capacity during the last completed fiscal year (“PEO”) regardless of compensation level; (ii) our ~~two most highly compensated~~only executive officers other than our PEO who ~~were~~was serving as an executive ~~officers~~officer at the end of the last completed fiscal ~~year;~~year, whose total compensation exceeded $100,000; and (iii) ~~up to~~the two ~~additional~~next most highly compensated individuals who were not serving as executive officers of the Company at the end of the last fiscal ~~year.~~year, whose total compensation exceeded $100,000. These individuals are referred to herein collectively as our “named executive officers” or “NEOs.”

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year	Salary ($)		Bonus ($)		All Other Compensation ($)			Total ($)		Year	Salary ($)		Bonus ($)		All Other Compensation ($)			Total ($)
Tom Kubota	2011		135,450		-0-		4,493	(1)		139,943	2012		159,600		25,000		28,747	(1)		213,347
Chief Executive Officer,	2010		111,150		-0-		-0-			111,150	2011		135,450		-0-		4,493	(2)		139,943
President and Director, PHCO

Fred Odaka	2011		86,250		10,000		5,264	(1)		101,514	2012		92,160		10,000		10,827	(3)		112,987
Chief Financial Officer, PHCO	2010		67,500		-0-		-0-			67,500	2011		86,250		10,000		5,264	(2)		101,514

Dr. Lester Sacks	2011		96,000		20,000		-0-			116,000
President, Medex and MMC	2010		80,000		-0-		-0-			80,000

Donald Balzano	2011		-0-		6,000		151,600	(2)		157,600	2012		-0-		10,000		146,567	(4)		156,567
President, IRC	2010		-0-		-0-		153,664	(2)		153,664
President, IRC and MLS											2011		-0-		6,000		151,600	(4)		157,600

David Kim	2011		92,622		10,000		21,968	(3)		124,590	2012		117,333		15,000		10,242	(5)		142,575
Executive Vice President,	2010		90,364		-0-		8,000			98,364
Medex
Chief Operating Officer,											2011		92,622		10,000		21,968	(5)		124,590
Medex, MMC and MMM

(1) Reflects health insurance premiums, ~~paid by the Company on behalf~~accrued vacation pay and director’s fees of ~~the named executive officer.~~$4,347, $20,000, and $4,400, respectively.

(2)Reflects health insurance premiums.

(3) Reflects health insurance premiums and fees for attending board meetings of $6,427 and $4,400, respectively.

(4) Mr. Balzano provides services to Medex and IRC as a consultant, through his company Balzano & Associates, and not as an employee. This compensation represents consulting fees paid to Mr. Balzano.

~~(3)~~(5) Reflects health insurance premiums paid by the Company on behalf of Mr. Kim in the amounts of ~~$2,321~~$4,242 and ~~$2,000~~$2,322 during ~~2011~~2012 and ~~2010~~2011 respectively, and commissions resulting from the addition of new clients in the amounts of ~~$19,647~~$6,000 and ~~$6,000~~$19,646 during ~~2011~~2012 and ~~2010,~~2011, respectively.

Employment Agreements

~~With the exception of Don~~We have employment agreements with Mr. Odaka and Mr. Kim. We also entered into a consulting agreement with Balzano ~~who~~& Associates, Mr. Balzano’s company, pursuant to which, Mr. Balzano provides services to the ~~Company as a consultant, pursuant to~~Company. We do not have an employment or a consulting agreement ~~all~~with Mr. Kubota. Each of our NEOs are ~~employed~~employed/retained on an at will ~~basis. Pursuant to~~basis and each can terminate their employment/consulting arrangement with the ~~terms of his consulting agreement, Mr. Balzano,~~Company at any time, with or without cause. Likewise, the Company can terminate ~~his consulting agreement upon one day’s notice~~their employment at any time ~~and for any reason.~~with or without cause.

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Base Salary

~~Salary~~Base salary is used to recognize the experience, skills, knowledge and responsibilities required of our NEOs. The base salary for each NEO is typically set at the time the individual is hired based on the factors discussed in the preceding sentence and the negotiation process between the Company and the NEO. We also take into consideration the individual’s past performance, experience and expertise, Company need and local market and labor conditions.

~~Thereafter, changes~~ Changes to ~~annual~~base salary, if any, are determined based on several factors, including evaluation of performance, anticipated financial performance of the Company, economic condition and local market and labor conditions.

In ~~February 2011~~August 2012 the board awarded salary increases to Mr. Kubota, Mr. Odaka, and Mr. ~~Odaka,~~Kim which became effective on ~~March~~September 1, ~~2011~~2012 as follows:

·	Mr. Kubota from ~~$10,000~~$12,000 per month to ~~$12,000~~$14,400 per month;

·	Mr. Odaka from $7,200 per month to $8,640 per month; and

·	Mr. ~~Odaka~~Kim from ~~$5,400~~$8,417 per month to ~~$7,700~~$12,500 per month. This increase was in connection with his promotion to Chief Operating Officer of Medex, MMC and MMM effective September 1, 2012.

The board of directors did not extend salary or other benefit increases to any of the NEOs during the 2010 fiscal year. In an effort to help reduce operating costs to combat the economic conditions facing the Company, in May 2009 many Company employees, including the NEOs, agreed to a 10% reduction in salary. The above mentioned salary increases includes the re-instatement of the 10% salary reduction mentioned above.

In addition to a base salary, Mr. Kim also receives commissions ~~for~~from certain sales he ~~generates for the Company. Commissions are paid~~has generated. We previously agreed to pay commission to Mr. Kim ~~at a rate of 5% of paid customer sales~~ for a period of one year from the anniversary date of the initial sale made to the customers. ~~As of March 1, 2011~~We terminated Mr. Kim’s commission arrangement ~~was terminated~~in March 2011, with the exception that he would continue to receive commissions at 5% on customer paid sales made prior to March 1, 2011 up to the customer’s one year anniversary date. During 2012, Mr. Kim was paid $6,000 in commissions. As the one year anniversary date for all customer paid sales has expired, Mr. Kim is no longer entitled to commissions.

Pursuant to Mr. Balzano’s consulting agreement we pay him ~~$10,000~~$10,833 per month for the services he renders to the ~~Company, plus fees for appearance at~~Company. In addition, under a Workers’ Compensation Medical Provider Network Agreement between Medex and one of its customers, Mr. Balzano is entitled to a portion of PPO fee savings in the ~~WCAB and formal case preparation in an~~ amount ~~equal to 70%~~ of ~~revenues received fees~~3% of the total monthly PPO savings realized by ~~the Company for such work.~~one Medex customer. Mr. Balzano is also entitled to reimbursement for reasonable expenses incurred in a manner similar to employees of the Company.

Nonequity incentive compensation

From time to time we may make cash awards to our employees, including the ~~NEO.~~NEOs. Such awards may be designed to incentivize employees over a specified period of time pursuant to pre-established, performance-based criteria, the accomplishment of which is substantially uncertain at the time the criteria are established. In the event this type of cash award were made, it would be reflected in the “Summary Compensation Table” under a separate column entitled “Nonequity Incentive Plan Compensation.” We may use non-equity incentive compensation to incentivize our employees. The criteria for earning such non-equity incentive bonuses may be based on corporate financial performance measures that would be developed by our board of directors at the time such non-equity incentive plan is established. Our board has discretion to determine the applicable performance measures and the appropriate weighting of such measures at the time it establishes any non-equity incentive plan. Our board of directors did not establish a non-equity incentive compensation plan during the fiscal years ended December 31, ~~2011~~2012 or ~~2010~~2011 and no non-equity incentive compensation was awarded during these years.

Bonuses

We may also make cash awards to employees that are not part of any pre-established, performance-based criteria. Awards of this type are completely discretionary and subjectively determined by our board of directors at the time they are awarded. Such awards are reported in the “Summary Compensation Table” in the column entitled “Bonus.”

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During fiscal ~~2011~~2012 the board of directors, in recognition of the improved operating results of the Company, awarded a cash bonuses to the following NEOs in the following amounts:

·	Mr. ~~Odaka~~Kubota - ~~$10,000;~~$25,000

·	~~Dr. Sacks~~Mr. Odaka - ~~$20,000;~~$10,000;

·	Mr. Balzano - ~~$6,000;~~$10,000; and

·	Mr. Kim - ~~$10,000.~~$15,000.

As noted above, these cash bonuses were completely discretionary and were not based on any pre-established criteria. The board of directors was under no contractual or other obligation to award cash bonuses.

Equity Incentive Compensation

Our equity incentive award program is the primary vehicle for offering long-term incentives to our employees. From time to time, we may also make equity incentive awards to our NEOs in the form of stock options, restricted stock grants or some other form of equity award. Equity incentive awards would be reflected in the “Summary Compensation Table” under the columns entitled “Stock Awards” or “Option Awards” as appropriate. Our board of directors did not award equity incentive compensation to any of our NEOs during the fiscal years ended December 31, ~~2011~~2012 or ~~2010,~~2011, and we are under no contractual obligation to award equity incentive compensation in the future.

While our board of directors has not awarded equity incentive compensation in either of the past two fiscal years and is under no obligation to make any such awards in the future, that does not mean the board of directors may not, as it deems appropriate, award equity incentive compensation in the future.

Benefits and Other Compensation

The Company currently provides health care benefits, including medical, vision and dental insurance, subject to certain deductibles and co-payments to its full time employees. The Company also provides for paid time off (“PTO”), which includes vacation, sick leave and other out-of-the-office time and is accrued and paid in accordance with the Company’s PTO policy. The Company may also provide group life and disability insurance to employees who are eligible to participate in such programs.

The Company also offers a 401(k) profit sharing plan for employees who meet the eligibility requirements. Pursuant to the plan, the Company may make discretionary matching contributions and/or discretionary profit sharing contributions to the plan. All such contributions must comply with federal pension laws, non-discrimination requirements and the terms of the plan. In determining whether to make a discretionary contribution, the board of directors evaluates current and future prospects and management’s desire to reward and retain employees and attract new employees. To date, the Company has never made matching contributions and/or discretionary profit sharing contributions to any plan.

Other than the foregoing, the Company does not offer any retirement or other benefit plans to its employees, including the named executive officers, at the present time; however, the board of directors may adopt plans as it deems to be reasonable under the circumstances.

Mr. Kubota, Mr. Odaka and Mr. Kim are entitled to participate, if eligible under such plans, in any insurance programs offered by the Company to its employees, are eligible for PTO and to participate in such other fringe benefit programs as the Company may make available to its other employees.

Nonqualified Deferred Compensation

We offer no defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified to any of our employees including our NEOs.

Table of Contents

Pension Benefits

We offer no pension or other specified retirement payments or benefits, including but not limited to tax-qualified deferred benefit plans and supplemental executive retirement plans to our NEOs.

~~Table of Contents~~

Termination and Change in Control

We do not have agreements, plans or arrangements, written or unwritten, with any of our NEOs that would provide for payments or other benefits to any of our NEOs following, or in connection with, the resignation, retirement or other termination of any NEO or change in control of the Company or a change in the responsibilities of any NEO following a change in control of the Company.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

None of the NEOs held an outstanding equity award at our fiscal year end.

DIRECTOR COMPENSATION

We offer cash compensation to attract and retain candidates to serve on our board of directors. ~~We do not compensate directors who are also our employees for their service on our board of directors.~~

Meeting Fees

Our ~~non-employee~~ directors and certain officers receive a fee of ~~$500~~$1,200 per meeting for each meeting attended in person. Additionally, all ~~non-employee~~ directors and certain officers are paid $1,000 for attendance at the annual meeting of stockholders, plus airfare and hotel expense.

Equity Compensation

We do not currently have a fixed plan for the award of equity compensation to our directors, nor did we award any equity compensation to any of our directors during fiscal ~~2011.~~2012.

Director Compensation Table

The following table sets forth a summary of the compensation we paid to our ~~non-employee~~ directors for services on our board during our ~~2011~~2012 fiscal year.

Name	Fees Earned or Paid in Cash ($)			All Other Compensation($)			Total ($)		Fees Earned or Paid in Cash ($)			All Other Compensation($)			Total ($)
Thomas Iwanski		3,450	(1)		1,000	(2)		4,450		4,400	(1)		1,500	(2)		4,450

David Wang		3,450	(1)		1,000	(2)		4,450		4,400	(1)		1,500	(2)		4,450

Tom Kubota										4,400	(1)		208,947	(3)		213,347

(1) Includes ~~one directors’ meetings attended in person at $450 per meeting and six~~four directors’ meetings attended in person at $500 per meeting and two directors’ meetings attended in person at $1,200 per meeting during ~~2011.~~2012.

(2) Discretionary cash bonus paid to directors in December ~~2011.~~2012.

(3)Mr. Kubota ~~who~~ is ~~a director of the Company, is also~~ employed as the Company’s CEO and ~~President and therefore does not qualify for compensation paid to our non-employee directors.~~President. For details regarding ~~compensation~~All Other Compensation paid to Mr. Kubota, please see “Summary Compensation Table” ~~of this Item 11.~~above. (1)

Beneficial Ownership

(1) Mr. Kubota, Mr. Iwanski and Mr. Wang are directors of the Company. Mr. Kubota, Mr. Odaka, ~~Dr. Sacks,~~ Mr. Balzano and Mr. Kim are named executive officers (as defined in Item 402(a) of Regulation S-K) of the Company.

(2) The number of shares attributed to Mr. Kubota includes ~~37,078~~42,318 shares held of record or beneficially by Mr. Kubota and 432,626 shares held of record or beneficially by Nanko Investments, Inc. Mr. Kubota is the President of Nanko Investments, Inc. As such, Mr. Kubota may be deemed to have voting and/or investment power over the shares held by Nanko Investments and therefore may be deemed to be the beneficial owner of those shares.

(3) Mr. Balzano is the President of our wholly-owned subsidiaries Industrial Resolutions Coalition, Inc. and Medex Legal Support, Inc.

Equity Compensation Plans

Director Independence

The board has determined that Mr. Iwanski and Mr. Wang would ~~each~~ qualify as an independent ~~director~~directors as that term is defined in the listing standards of the NYSE Amex. Such independence definition includes as series of objective tests, including that the director is not an employee of the company and has not engaged in various types of business dealings with the company. In addition, as further required by the NYSE Amex listing standards, the board of directors has made a subjective determination as to each independent director that no relationships exist which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

ITEM 14. PRINCIPAL ~~ACCOUNTANT~~ACCOUNTING FEES AND SERVICES

Fees for professional services provided by our independent registered public accounting firms in each of the last two fiscal years, in each of the following categories, were as follows:

Audit Fees. Audit fees were for professional services rendered in connection with the audit of the financial statements included in our annual report on Form 10-K and review of the financial statements included in our quarterly reports on Form 10-Q and for services normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

~~All Other Fees. Other fees were for EDGAR filing services provided to the Company.~~

Board of Directors Pre-Approval Policies and Procedures. At its regularly scheduled and special meetings, our board of directors, in lieu of an established audit committee, considers and pre-approves any audit and non-audit services to be performed by our independent registered public accounting firm. The board of directors has the authority to grant pre-approvals of non-audit services.

Our full board of directors is responsible for selection, review and oversight of our independent registered public accounting firm. The board of directors has not, as of the time of filing this annual report on Form 10-K with the Securities and Exchange Commission, adopted policies and procedures for pre-approving audit or permissible non-audit services performed by our independent ~~auditors.~~registered public accounting firm. Instead, the board of directors as a whole has pre-approved all such ~~services.~~services, except for services meeting a “de minimus” exception. To qualify for the “de minimus” exception, the aggregate amount of all such non-audit services provided to the Company must constitute not more than 5% of the total amount of revenues paid by us to our independent registered public accounting firm during the fiscal year in which the non-audit services are provided; such services were not recognized by us at the time of the engagement to be non-audit services; and the non-audit services are promptly brought to the attention of the board and approved prior to the completion of the audit by the board or by one or more members of the board to whom authority to grant such approval has been delegated. In the future, our board of directors may approve the services of our independent registered public accounting firm pursuant to pre-approval policies and procedures adopted by the board of directors, or an audit committee if one is standing, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of director’s responsibilities to our management.

The board of directors has determined that the provision of services by Morrill & Associates, LLC, described above are compatible with maintaining their independence as our independent registered public accounting firm.

(a) Documents filed as a part of this report:

(1) Financial Statements

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets as of December 31, ~~2011~~2012 and ~~2010.~~2011.

Consolidated Statements of Operations for the years ended December 31, ~~2011~~2012 and ~~2010.~~2011.

Consolidated Statements of Stockholders’ Equity From January 1, ~~2010~~2011 to December 31, ~~2011.~~2012.

Consolidated Statements of Cash Flows for the years ended December 31, ~~2011~~2012 and ~~2010.~~2011.

Notes to Consolidated Financial Statements.

(2) Financial Statement Schedules

Schedules are omitted because the required information is either inapplicable or presented in the consolidated financial statements or related notes.

Exhibit No.		Exhibit Description

3.1		Articles of Incorporation and Amendments thereto(1)
3.2		Bylaws(1)
3.3		Bylaws(2)
3.4		Articles of Amendment to Articles of Incorporation to effect 1 share for 50 shares reverse split(3)
3.5		Articles of Amendment to Articles of Incorporation to effect 2.5 shares for 1 share forward split(3)
4.1		Pacific Health Care Organization, Inc., 2002 Stock Option Plan(1)+
4.2		Pacific Health Care Organization, Inc., 2005 Stock Option Plan(4)+
10.1		Employment Agreement, dated February 1, 2013, between Pacific Health Care Organization, Inc. and Fred Odaka*+
10.2		Employment Agreement, dated February 1, 2013, between Pacific Health Care Organization, Inc. and David Kim*+
10.3		Consultant Agreement, dated February 1, 2013, between Pacific Health Care Organization, Inc. and Balzano & Associates*+
14.1		Code of Ethics(5)
21.1		List of Subsidiaries*
31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1		Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2		Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema Document**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF		XBRL Taxonomy Definition Linkbase Document**
101.LAB		XBRL Taxonomy Extension Label Linkbase Document**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

+ Indicates management contract, compensatory plan or arrangement of the Company.

~~Filed herewith~~

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are not deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

(1)

Incorporated by reference to Registrant’s Registration Statement on Form 10-SB as filed with the Commission on September 19, 2002.

(2)

Incorporated by reference to Registrant’s Registration Statement on Form 10-SB/A-2 as filed with the Commission on July 13, 2004.

(3)

Incorporated by reference to Registrant’s Proxy Statement on Schedule 14A as filed with the Commission on May 15, 2008.

(4)

Incorporated by reference to Registrant’s Proxy Statement on Schedule 14A as filed with the Commission on October 21, 2005.

(5)

Incorporated by reference to Registrant’s Annual Report on Form 10-KSB as filed with the Commission on April 17, 2007.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Page
	PART I

Item 1.	Business	45

Item 1A.	Risk Factors	12

Item 1B.	Unresolved Staff Comments	1213

Item 2.	Properties	1213

Item 3.	Legal Proceedings	1213

Item 4.	~~Removed and Reserved~~Mine Safety Disclosures	1213

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1314

Item 6.	Selected Financial Data	1415

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	1415

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	1921

Item 8.	Financial Statements and Supplementary Data	2022

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	3635

Item 9A.	Controls and Procedures	3635

Item 9B.	Other Information	36

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	37

Item 11.	Executive Compensation	4341

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	4745

Item 13.	Certain Relationships and Related Transactions, and Director Independence	4846

Item 14.	Principal Accounting Fees and Services	4947

	PART IV

Item 15.	Exhibits, ~~and~~ Financial Statement Schedules	5048

	SIGNATURES	5250

	High		Low		High		Low

Fiscal year ended December 31, 2012

Fourth Quarter					$	5.05	$	4.37
Third Quarter					$	4.75	$	3.00
Second Quarter					$	3.58	$	1.55
First Quarter					$	1.74	$	.86

Fiscal year ended December 31, 2011

Fourth Quarter	$	.87	$	.27	$	.87	$	.27
Third Quarter	$	.56	$	.26	$	.56	$	.26
Second Quarter	$	.53	$	.30	$	.53	$	.30
First Quarter	$	.30	$	.01	$	.30	$	.01

Fiscal year ended December 31, 2010

Fourth Quarter	$	.22	$	.22
Third Quarter	$	.22	$	.214
Second Quarter	$	.45	$	.10
First Quarter	$	.45	$	.45

	Payments Due By Period										Payments Due By Period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years

Equipment Leases(1)	$	21,011	$	10,085	$	10,926	$	-	$	-	$	67,259	$	34,495	$	32,764	$	-	$	-
Office Leases(2)		591,113		133,563		432,800		24,750		-		457,550		140,343		292,457		24,750		-
Total	$	612,124	$	143,648	$	443,726	$	24,750	$	-	$	524,809	$	174,838	$	325,221	$	24,750	$	-

	Payments Due By Period										Payments Due By Period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years

Equipment Leases~~(1)~~	$	21,011	$	10,085	$	10,926	$	-	$	-	$	67,259	$	34,495	$	32,764	$	-	$	-
Office Leases~~(2)~~		591,113		133,563		432,800		24,750		-		457,550		140,343		292,457		24,750		-
Total	$	612,124	$	143,648	$	443,726	$	24,750	$	-	$	524,809	$	174,838	$	325,221	$	24,750	$	-

Type of Security	Name and Address	Amount & Nature of Beneficial Ownership		% of Class				Name and Address	Amount & Nature of Beneficial Ownership		% of Class

Common	Tom Kubota(1)(2) 1201 Dove Street, Suite 300 Newport Beach, CA 92660		469,704		58.5	%		Tom Kubota(1)(2)		474,944		59.2	%
								1201 Dove Street, Suite 300
Common	Fred Odaka(1) 1201 Dove Street, Suite 300 Newport Beach, CA 92660		-0-		*
								Newport Beach, CA 92660

Common	Lester Sacks(1) 1201 Dove Street, Suite 300 Newport Beach, CA 92660		-0-		*			Fred Odaka(1)		-0-		*
								1201 Dove Street, Suite 300
Common	Thomas Iwanksi(1) 1541 Amberwood Drive Santa Ana, CA 92705		-0-		*
								Newport Beach, CA 92660

Common	David Wang(1) 138 Ocean Way Santa Monica, CA 90402		-0-		*			Thomas Iwanksi(1)		-0-		*
								1551 Bullard Lane
Common	Donald P. Balzano(1) (3) 5422 Michelle Drive Torrance, CA90503		54,165		6.8	%
								Santa Ana, CA 92705

Common	David Kim(1) 1201 Dove Street, Suite 300 Newport Beach, CA 92660		-0-		*			David Wang(1)		-0-		*
								138 Ocean Way
								Santa Monica, CA 90402

Common	Nanko Investments, Inc.(2) 1280 Bison, Suite B9-596 Newport Beach, CA 92660		432,626		53.9	%		Donald P. Balzano(1) (3)		54,165		6.8	%
								5422 Michelle Drive
								Torrance, CA 90503

Common								David Kim(1)		-0-		*
								1201 Dove Street, Suite 300
								Newport Beach, CA 92660

Common								Nanko Investments, Inc.(2)		432,626		53.9	%
								1280 Bison, Suite B9-596
								Newport Beach, CA 92660

Common								Janet Zand		54,165		6.8	%
								1505 Rockcliff Road
								Austin, TX 78796

Common								Ronald A. Zlatniski		49,843		6.2	%
								4206 Cypress Grove Lane
								Greensboro, NC 27455

All executive officers and directors as a group (4 persons)			469,704		58.5	%	All executive officers and directors as a group (4 persons)			529,109		65.9	%

TOTAL			523,869		65.3	%
								TOTAL		633,117		78.9	%

	December 31, 2011			December 31, 2010			December 31, 2012			December 31, 2011

Net cash provided by (used in) operating activities	$	88,139		$	(248,736	)
Net cash provided by operating activities							$	210,602		$	88,139
Net cash (used in) investing activities		(63,084	)		(25,543	)		(126,344	)		(63,084	)
Net cash provided by (used in) financing activities		(6,148	)		19,809			26,957			(6,148	)
Net increase (decrease) in cash	$	18,907		$	(254,470	)
Net increase in cash							$	111,215		$	18,907

Rent Period	Annual Rent Payments
Jan. 1 to Dec. 31, 2012	$	133,563
Jan. 1 to Dec. 31, 2013	$	140,343
Jan. 1 to Dec. 31, 2014	$	144,508
Jan. 1 to Dec. 31, 2015	$	147,949
Jan. 1 to Feb. 29, 2016	$	24,750
Total	$	591,113

	December 31, 2011			December 31, 2010
Revenues
HCO fees	$	770,303		$	607,450
MPN fees		627,341			605,238
Other		1,434,149			402,971
Total revenues		2,831,793			1,615,659

Expenses
Depreciation		13,595			5,691
Consulting fees		358,996			273,684
Salaries & wages		1,132,351			692,337
Professional fees		212,572			190,519
Insurance		151,227			105,495
Outsource service fees		190,917			24,302
Data maintenance		57,445			75,325
General & administrative		392,407			329,535

Total expenses		2,509,510			1,696,888

Income (loss) from operations		322,283			(81,229	)

Other income (expense)
Loss on disposal of assets		(1,564	)		-
Interest income		957			1,712
Rental income		250			-
Interest (expense)		(1,192	)		(1,606	)
Total other income (expense)		(1,549	)		106

Income (loss) before income tax provision		320,734			(81,123	)

Income tax provision (benefit)		122,499			(21,190	)

Net income (loss)	$	198,235		$	(59,933	)

Basic and fully diluted earnings per share:
Earnings per share amount	$	.25		$	(0.08	)
Weighted average common shares outstanding		802,424			802,424

	Preferred Stock				Common Stock				Paid in		Retained Earnings
	Shares		Amount		Shares		Amount		Capital		(Deficit)

Balance, January 1, 2010		-	$	-		802,424	$	802	$	623,629	$	33,132

Net loss for the year ended December 31, 2010		-		-		-		-		-		(59,933	)

Balance, December 31, 2010		-	$	-		802,424	$	802	$	623,629	$	(26,801	)

Net income for the year ended December 31, 2011		-		-		-		-		-		198,235

Balance, December 31, 2011		-	$	-		802,424	$	802	$	623,629	$	171,434

	12/31/11			12/31/10
Customer A		6	%		20	%
Customer B		12	%		-
Customer C		3	%		13	%
Customer D		15	%		-
Customer E		12	%		-
Customer F		13	%		-

	Cost					Depreciation Exp. & Amort				Accum. Depre. & Amort.
Assets	December 31, 2011			December 31, 2010		December 31, 2011		December 31, 2010		December 31, 2011			December 31, 2010
Computer equipment	$	80,963		$	60,922	$	2,342	$	-	$	63,264		$	60,922
Furniture & fixtures		60,544			28,839		4,678		582		30,656			25,978
Disposal of furniture		(4,073	)								(1,309	)
Office equipment		12,537					1,465		-		1,465
Office equipment under capital lease		25,543			25,543		5,109		5,109		10,218			5,109
Totals	$	175,514		$	115,304	$	13,594	$	5,691	$	104,294		$	92,009

	2011		2010

Employment enrollment fee		-		372
Compensated absences		29,287		18,755
Legal fees		52,000		16,000
Accounting fees		43,812		46,922
Sales commissions		930		18,025
Other		741		318
Total	$	126,770	$	100,392

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))		Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)		(a)		(b)		(c)
Equity compensation plans approved by security holders		0	$	0.00		95,750		0	$	0.00		95,750
Equity compensation plans not approved by security holders		0	$	0.00		-0-		0	$	0.00		-0-
Total		0	$	0.00		95,750		0	$	0.00		95,750

	~~PACIFIC HEALTH CARE ORGANIZATION, INC.~~

~~Date: March 30, 2012~~	~~By:~~	~~/s/ Tom Kubota~~
		~~Tom Kubota~~
		~~Chief Executive Officer and President~~

Signatures	Title	Date


/s/ Tom Kubota	Chief Executive Officer, Presidentand Director	~~March 30, 2012~~April 1, 2013
Tom Kubota	~~and Director~~


/s/ Fred U. Odaka	Chief Financial Officer	~~March 30, 2012~~April 1, 2013
Fred U. Odaka


~~/s/~~/s/ Thomas Iwanski	Director	~~March 30, 2012~~April 1, 2013
Thomas Iwanski


/s/ David Wang	Director	~~March 30, 2012~~April 1, 2013
David Wang