SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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

For the Quarterly Period Ended ~~June~~September 30, 2015

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 000-50009

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for any 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 for such shorter period that the registrant was required to submit and post such files.) Yes x No o

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

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

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

PPA~~ACIFIC~~CIFIC HEALTH CARE ORGANIZATION, INC.

PART I. FINANCIAL INFORMATION

ItIteemm 1. Financial ~~Information~~Statements

PPa~~acific~~cific Health Care Organization, Inc.

Accounts receivable, net of allowance of $57,510 and $40,510

Accounts receivable, net of allowance of $67,260 and $40,510

Prepaid income taxes

Total current assets

Property and Equipment, net

Furniture and fixtures

Office equipment under capital lease

Total property and equipment

Less: accumulated depreciation

Less: accumulated depreciation and amortization

Net property and equipment

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current obligations under capital lease

Deferred rent expense

Total current liabilities

Commitments and Contingencies

Shareholders’ Equity

Preferred stock; 5,000,000 shares authorized at $0.001 par value;

zero shares issued and outstanding

Common stock, $0.001 par value 50,000,000 shares authorized at

June 30, 2015 and December 31, 2014; 802,424 shares issued,

(797,271 outstanding net of treasury shares) and 802,424 shares issued,

(800,396 outstanding net of treasury shares), respectively

Common stock, $0.001 par value 50,000,000 shares authorized at

September 30, 2015 and December 31, 2014; 802,424 shares issued,

(794,072 outstanding net of treasury shares) and 802,424 shares issued,

(800,396 outstanding net of treasury shares), respectively

Additional paid-in capital

Treasury stock at cost (5,153 shares and 2,028 shares at June 30, 2015 and December 31,

2014), respectively

Treasury stock at cost (8,269 shares and 2,028 shares at September 30, 2015 and

December 31, 2014), respectively

Total stockholders' equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

PPa~~acific~~cific Health Care Organization, Inc.

For three months ended

For six months ended

For three months ended

For nine months ended

Depreciation and amortization

Outsource service fees

General and administrative

Income from operations

Income tax provision

Basic and fully diluted earnings per share:

Earnings per share amount

Weighted average common shares outstanding

PPa~~acific~~cific Health Care Organization, Inc.

Adjustments to reconcile net income to net cash:

Depreciation and amortization

Changes in operating assets & liabilities:

Increase in bad debt provision

Changes in operating assets and liabilities

Increase (decrease) in bad debt provision

Decrease (increase) in accounts receivable

(Increase) in receivables – other

Decrease (increase) in other assets

(Increase) in other assets

(Increase) decrease in prepaid income tax

(Increase) decrease in prepaid expenses

(Increase) in prepaid expenses

(Decrease) increase in accounts payable

(Decrease) in accrued expenses

Increase in accrued expenses

(Decrease) increase in income tax payable

(Decrease) in deferred rent expense

Increase in unearned revenue

Net cash provided by operating activities

Cash flows from investing activities:

Cash flows used in investing activities

Purchases of computers, furniture and equipment

Net cash used by investing activities

Cash flows from financing activities:

Cash flows used in financing activities

Purchase of treasury stock

Issuance of cash dividend

Payment of obligation under capital lease

Net cash used in financing activities

Cash at beginning of period

Cash at end of period

Supplemental cash flow information

Supplemental Cash Flow Information

Non-cash financing and investing activities:

PPa~~acific~~cific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the ~~Six~~Nine Months Ended ~~June~~September 30, ~~2015~~2014

NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in these interim condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2014. Operating results for the ~~six~~nine months ended ~~June~~September 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015.

Revenue Recognition — In general, the Company recognizes revenue 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. Revenues are generated as services are provided to the customer based on the sales price agreed and collected. The Company recognizes revenue as the time is worked or as units of production are completed, which is when the revenue is earned and realized. Labor costs are recognized as the costs are incurred. The Company derives its revenue from the sale of Managed Care Services, Review Services, Case Management Services and Lien Representation Services. These services may be sold individually or in combination. When a sale combines multiple elements, the Company accounts for multiple-deliverable revenue arrangements in accordance with the guidance included in ASC 605-25, the services, however, are typically billed as separate components in accordance with the customer’s service agreement.

These fees include monthly administration fees, claim network fees, flat rate fees or hourly fees depending on the agreement with the client. Such revenue is recognized at the end of each month for which services are performed.

Management reviews each agreement in accordance with the provision of the revenue recognition topic ASC 605 that addresses multiple-deliverable revenue arrangements. The multiple-deliverable arrangements entered into consist of bundled managed care which includes various units of accounting such as network solutions and patient management which includes managed care. Such elements are considered separate units of accounting due to each element having value to the customer on a stand-alone basis. The selling price for each unit of accounting is determined using contract price. When the Company’s customers purchase several products the pricing of the products sold is generally the same as if the products were sold on an individual basis. Revenue is recognized as the work is performed in accordance with the Company’s customer contracts. Based upon the nature of the Company’s products, bundled managed care elements are generally delivered in the same accounting period. The Company recognizes revenue for patient management services ratably over the life of the customer contract. Based on prior experience in managed care, the Company estimates the deferral amount from when the customer’s claim is received to when the customer contract expires. Advance payments from subscribers and billings made in advance are recorded on the balance sheet as deferred revenue.

Accounts Receivables and Bad Debt Allowance – In the normal course of business the Company 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. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes. In order to assess the collectability of these receivables, the Company performs ongoing credit evaluations of its customers’ financial condition. Through these evaluations, the Company may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The allowance for doubtful accounts is based on the best information available to the Company and is reevaluated and adjusted as additional information is received. The Company evaluates the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall national economy. At ~~June~~September 30, 2015 and December 31, 2014, our bad debt reserve of ~~$57,510~~$67,260 and $40,510, respectively as a general reserve for certain 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 ~~June~~September 30, 2015 and December 31, 2014 are as follows:

	6/30/15			12/31/14			9/30/15			12/31/14
Customer A		23	%		25	%		38	%		25	%
Customer B		22	%		22	%		20	%		22	%
Customer C		11	%		0	%

Reclassifications – Certain 2014 balances have been reclassified to conform to the 2015 presentation. The reclassifications have had no effect on the financial position, operations or cash flows for the quarter ended ~~June~~September 30, 2015.

NOTE 2 – SHAREHOLDERS’ EQUITY

On September 4, 2015, our board of directors declared a special one-time cash dividend of $1.25 per share payable to the record holders of our common stock on September 14, 2015. On September 14, 2015, excluding treasury shares, we had 794,072 shares of common stock issued and outstanding. The payment date of the dividend was September 24, 2015. As of September 30, 2015, the amount paid from the dividend was $859,170 with $133,420 payable. This payable has been accrued and included in dividend payable on the balance sheet.

NOTE 23 – SUBSEQUENT EVENTS

~~On July~~In a letter dated October 23, 2015, AmTrust North America (“AmTrust”), who is the Company’s largest customer, notified the Company entered into a new 79 month lease (the “New Lease”) with its current landlord with an estimated commencement date of September 1, 2015. The Company’s principal executive offices are located at 1201 Dove Street, suite 300. The Company currently leases approximately 5,159 and 1,640 rentable square feet (the “Current Premises”) located in suites 300 and 375, respectively, consisting of a total of 6,799 rentable square feet. The lease onit is terminating the Current Premises is scheduled to terminate on February 29, 2016. Upon commencement of the New Lease, the lease for the Current Premises will terminate and the Company’s lease obligation for suite 375 consisting of 1,640 rentable square feet will terminate and no longer be in effect. To replace suite 375,services provided by the Company has leased suite 350 consisting of 4,280 rentable square feet (the “Expansion Premises”). Under the terms of the New Lease, the Company will lease the Current Premises (less suite 375) and the Expansion Premises, for a total of 9,439 rentable square feet (the “Combined Premises”). The Combined Premises will serve as the Company’s principal executive offices, as well as, the principal offices of the Company’s operating subsidiaries, Medex, IRC, MLS, MMM and MMC.

~~Following is the base annual rent payment schedule for the Combined Premises under the New Lease:~~

Rent Period Annual Rent Payment
Sep.1 to Dec. 31, 2015 $ 73,704
Jan. 1 to Dec. 31, 2016 237,713
Jan. 1 to Dec. 31, 2017 228,329
Jan. 1 to Dec. 31, 2018 257,874
Jan. 1 to Dec. 31, 2019 244,942
Jan. 1 to Dec. 31, 2020 275,996
Jan. 1 to Dec. 31, 2021 261,932
Jan. 1 to Mar. 31, 2022 48,705
Total $ 1,629,195

~~In accordance with ASC 855-10 Company management reviewed all material events through~~effective 60 days from the date of ~~issuance~~the letter. The reason given in the termination letter was due to AmTrust’s changing business needs. Under the Company’s current contract, the Company provides UR, NCM and ~~other than~~MPN services to AmTrust. The loss of this customer will significantly impact the Company’s profitability and liquidity until such time as ~~disclosed above there are no material subsequent events~~the Company is able to ~~report.~~replace the revenues generated from this customer. During the nine-month period ended September 30, 2015 UR, NCM and MPN fees generated from this customer were $2,223,965, $563, and $58,140, respectively. During the nine-month period ended September 30, 2014 UR, NCM and MPN fees generated from this customer were $1,426,760, $0, and $40,205. For the fiscal year 2014 we recorded revenues totaling $1,804,095 for all services provided to AmTrust.

ItIteemm 2. Management’s Discussion and Analysis of Financial Statements and Results of Operations

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 report that is not a statement of historical fact may be deemed to be forward-looking, including statements about our revenue, spending, cash flow, products, trends, expectations, actions, intentions, plans, strategies and objectives. Without limiting the foregoing, words such as “may,” “hope,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “project” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainty, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These 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; merger and acquisition activities; 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 completions, delays, reductions, or cancellations of contracts we have previously entered.

Forward-looking statements are predictions and not guarantees of future performance or events. The forward-looking statements are based on current industry, financial and economic information, which we have assessed but which, by its nature, is dynamic and subject to rapid and possibly abrupt changes. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. We hereby qualify all our forward-looking statements by these cautionary statements. We undertake no obligation to amend this report or revise publicly these forward-looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to the Exchange Act) to reflect subsequent events or circumstances.

The following discussion should be read in conjunction with our financial statements and the related notes contained elsewhere in this report and in our other filings with the Commission.

Throughout this quarterly report on Form 10-Q, unless the context indicates otherwise, the terms, “we,” “us,” “our” or “the Company” refer to Pacific Health Care Organization, Inc., (“PHCO”) and our wholly-owned subsidiaries Medex Healthcare, Inc. (“Medex”), Industrial Resolutions Coalition, Inc. (“IRC”), Medex Managed Care, Inc. (“MMC”), Medex Medical Management, Inc. (“MMM”) and Medex Legal Support, Inc., (“MLS”).

We are a specialty workers’ compensation managed care company providing a range of services for self-administered employers, insurers, third party administrators, municipalities and others. Our clients are primarily located in the state of California, although we have processed bill reviews in 13 other states from our customers as well. Workers’ compensation costs continue to increase due to rising medical costs, inflation, fraud and other factors. Medical and indemnity costs associated with workers’ compensation in the state California are billions of dollars annually. Our focus goes beyond the medical cost of claims. Our goal is to reduce the entire cost of the claim, including medical, legal and administrative costs. As noted above, through our subsidiary companies we provide a range of effective workers’ compensation cost containment services, including but not limited to:

Health Care Organizations (“HCOs”)

Medical Provider Networks (“MPNs”)

Workers’ Compensation Carve-Outs

Utilization Review (“UR”)

Medical Bill Review (“MBR”)

Nurse Case Management (“NCM”)

Lien Representation Services

According to recent studies conducted by auditing bodies on behalf of the California Division of Workers’ Compensation, (“DWC”) the two most significant cost drivers for workers’ compensation are claims frequency and medical treatment costs. It is the latter that our services impact.

As of 2014, California (with the highest claims costs in the nation per claim) costs for workers’ compensation claims are 188% above the median for all states, and 33% higher than the number two state, Connecticut. Medical costs per claim have risen since 2005 by $30,000 per claim. The use of the highly administered Company medical cost control tools listed above greatly diminishes costs for unnecessary and prolonged medical treatment. In addition, our network of specially selected and overseen providers are competent in returning injured workers back to modified or full duty in the most expeditious manner, thus saving costs for temporary disability payments.

While the goal of services performed by the Company is to deliver the highest quality of timely medical care under state guidelines, we also focus on ensuring that the provision of such care significantly reduces the costs associated with payment for claims.

Health Care Organizations

HCOs are networks of health care professionals specializing in the treatment of workplace injuries and in back-to-work rehabilitation and training. HCOs were created to appeal to employees, while providing substantial savings to the employer clients. In most cases, the HCO program gives the employer client 180 days of medical control in a provider network within which the employer client has the ability to direct the claim. The injured worker may change physicians once, but may not leave the network. The increased length of time during which the employer has control over the claim is designed to decrease the incidence of fraudulent claims and disability awards and is also based upon the notion that if there is more control over medical treatment there will be more control over getting injured workers back on the job and therefore, more control over the cost of claims and workers’ compensation premiums.

Our subsidiary Medex holds two HCO licenses. Through these licenses we cover the entire state of California. We offer injured workers a choice of enrolling in an HCO with a network managed by primary care providers requiring referrals to specialists or a second HCO where injured workers do not need any prior authorization to be seen and treated by specialists.

Our two HCO networks have contracted with over 3,900 individual providers and clinics, as well as hospitals, pharmacies, rehabilitation centers and other ancillary services enabling our HCOs to provide comprehensive medical services throughout California. We are continually developing these networks based upon the nominations of new clients and the approvals of their claims administrators. Provider credentialing is performed by Medex.

HCO guidelines impose certain medical oversight, reporting, information delivery and usage fees upon HCOs. These requirements increase the administrative costs and obligations on HCOs as compared to MPNs, although the obligations and cost differentials are not currently as substantial as they were in the past.

Medical Provider Networks

Like an HCO, an MPN is a network of health care professionals, but MPN networks do not require the same level of medical expertise in treating work place injuries. Under an MPN program the employer client dictates which physician the injured employee will see for the initial visit. Thereafter, the employee can choose to treat with any physician within the MPN network. Under the MPN program, however, for as long as the employee seeks treatment for his injury, he can only seek treatment from physicians within the MPN network.

Under the MPN program the employee must stay within the MPN network for treatment. The employer client has full control over the initial treatment before the employee can treat with anyone in the network. Because the employee must stay within the network, this provides the employer client some control. The MPN statute and regulations does allow injured workers to dispute treatment decisions, leading to second and third opinions, and also provides for a review by an independent medical reviewer, whose decision can result in the employer client losing medical control.

Unlike HCOs, MPNs are not assessed annual fees and have no annual enrollment notice delivery requirements. As a result, there are fewer administrative costs associated with an MPN program, which allows MPNs to market their services at a lower cost than HCOs. For this reason, many clients opt to use the less complicated MPN even though the employer client has less control over employee claims.

As a licensed HCO and MPN, in addition to offering HCO and MPN programs, we are also able to offer our clients a combination of the HCO and MPN programs. Under this plan model an employer can enroll its employees in the HCO program, and then prior to the expiration of the 90-day or 180-day treatment period under the HCO program, the employer can enroll the employee into the MPN program. This allows employers to take advantage of both programs. We believe that we are currently the only entity that offers both programs together in a combination program.

Workers’ Compensation Carve-outs

Through IRC we seek to create legal agreements for the implementation of Workers’ Compensation Carve-Outs for California employers with collective bargaining units and the administration of such programs within the statutory and regulatory requirements. The California legislature permits employers and employees to engage in collective bargaining over alternative systems to resolve disputes in the workers’ compensation context. These systems are called carve-outs because the employers and employees covered by such collective bargaining agreements are carved out from the state workers’ compensation system.

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 concurrently 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 through MMC. 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 clients and increase payer savings. Our UR staff is experienced in the workers’ compensation industry and dedicated to providing a high standard of customer service.

Medical bill review 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, customary and reasonableness 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 through MMC. 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 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.

Nurse Case Management

Nurse case management is a collaborative process that assesses plans, implements, coordinates, monitors and evaluates the options and services required to meet an injured worker’s health needs. Our nurse case managers use communication and available resources to promote quality, cost-effective outcomes with the goal of returning the injured worker to gainful employment and maximum medical improvement as soon as medically appropriate.

Our credentialed registered nurses have expertise in various clinical areas and extensive backgrounds in workers’ compensation. This combination allows our nurses the opportunity to facilitate medical treatment while understanding the nuances of workers’ compensation up to and including litigation. By providing these services through MMM, we contribute to effective delivery of medical treatment assuring the injured worker receives quality treatment in a timely and appropriate manner to return the worker to gainful employment.

We reinstated our lien representation services through MLS during the fourth quarter of 2014. There were two reasons for this decision: 1) in 2014 lien activation fees were declared unconstitutional by California courts, as a result the number of significant lien filings are increasing; 2) in November 2014 we were retained by a public sector employer to provide lien representation services. We retained a lien defense unit manager and a hearing representative in January 2015 with plans to expand our lien representation operations during 2015. During September 2015, our lien defense unit manager and lien defense administrator resigned. The vacant positions were filled in October 2015 by two existing personnel within the Company.

Results of Operations

Comparison of the three months ended ~~June~~September 30, 2015 and 2014

During the ~~three-month~~three month period ended ~~June~~September 30, 2015 total revenues decreased 2%25% to ~~$2,261,105~~$2,069,581 compared to ~~$2,298,211~~$2,752,516 for the three-month period ended ~~June~~September 30, 2014. For the three ~~months~~month period ended ~~June~~September 30, 2015 ~~HCO~~UR, MBR, MPN and ~~other~~NCM revenues ~~increased~~decreased by ~~54%~~25%, 61%, 21%, and ~~29%~~11%, respectively, compared to the same period in 2014 while ~~UR, MBR, MPN~~HCO and ~~NCM revenue~~Other revenues were ~~lower~~higher by ~~1%, 36%, 4%,~~5% and 9%66%, respectively.

As of ~~June~~September 30, 2015 we had approximately ~~740,000~~453,000 total enrollees in our HCO and MPN programs. Enrollment consisted of approximately ~~138,000~~142,000 HCO enrollees and ~~602,000~~311,000 MPN enrollees. By comparison as of ~~June~~September 30, 2014 we had approximately ~~621,000~~638,000 total enrollees, including approximately ~~86,000~~85,000 HCO enrollees and ~~535,000~~553,000 MPN enrollees. The growth in HCO enrollment of approximately 52,000 was primarily the result of one existing customer expanding its HCO program coverage during June 2015 to include an increased number of its locations. MPN enrollment increased by approximately 67,000 primarily as a result of two existing customers increasing their enrollment. Many of our HCO and MPN clients also use the other services we offer, but we also have customers that don’t use our HCO or MPN services.

Our business generally has a long sales cycle, typically in excess of one year. Once we have established a customer relationship, our revenue, particularly our HCO and MPN revenues adjusts with the growth or retraction of our customers’ managed headcount volume. New customers are added throughout the year and other customers terminate from the program for a variety of reasons.

In the current economic environment, we anticipate businesses will continue to seek ways to reduce their workers’ compensation program costs. Even though the HCO and MPN programs have been shown to create a favorable return on investment for employers, (as our services are a significant component of the employers’ loss prevention programs), it is always a challenge to justify our fees to our customers. In order to convince employers that the fees they pay us are well-spent, we must continue to provide a framework for expeditiously returning employees back to work at the lowest cost. As a result, we may experience some client turnover in the form of existing employer clients seeking to terminate or renegotiate the scope and terms of existing services. We also anticipate our market may shrink as some employers seek to reduce their costs by managing their workers’ compensation care services in-house.

During the three-month period ended ~~June~~September 30, 2015 UR revenues decreased by ~~$13,855~~$334,390 to ~~$961,840~~$1,027,893 when compared to the same period a year earlier. Commencing in March 2014 we began providing overflow utilization review services to a third-party partner to assist them in reducing their backlog. This third-party partner contributed $1,184,270 towards our overall UR revenues during the 2014 fiscal year. On February 28, 2015 we were notified by our third-party partner that their backlog overflow business was caught up. While they have not terminated their service agreement with us, we have received no overflow business from this third-party partner since that time. During the three-month period ended ~~June~~September 30, 2014 we recorded ~~$249,755~~$632,130 of this overflow revenue. We recorded $0 ofoverflow revenue from this ~~overflow revenue~~third-party partner during the three-month period ended ~~June~~September 30, 2015. Currently we have no way to predict whether the third-party partner will build up a backlog in the future, and if it does, whether it will again retain us to help it work through any such backlog.

Excluding UR fees generated from our third-party partner, during the three months ended ~~June~~September 30, 2015 and 2014 we generated ~~$961,840~~$1,027,893 and ~~$725,940~~$730,153 of UR fee revenue, respectively. This increase of ~~$235,900~~$297,740 was a result of ~~our largest customer~~AmTrust increasing its UR volume, which was partially offset by fewer numbers of UR bills submitted by several of our other customers. ~~While~~

As discussed in the notes to our condensed consolidated financial statements, in a letter dated October 23, 2015, AmTrust, our largest customer, notified us that it will be terminating the services we ~~have realized internal growth in UR fee revenue to compensate for some~~provide them effective 60 days from the date of ~~lost revenue from~~the letter. The loss of this customer and our third-party partner ifwill have a significant negative impact on our revenue, profitability and liquidity until such time as we are ~~unable~~able to ~~attract additional new customers over~~replace the ~~remaining months~~revenue generated from these customers. With the impending loss of AmTrust business in December 2015, we anticipate UR fees and total revenues will be significantly impacted as early as our fourth fiscal quarter of 2015 ~~or our third-party partner begins to again require overflow services, we anticipate revenues from UR services in~~and throughout 2016. During the three-month periods ended September 30, 2015 ~~will be lower than~~and 2014 UR fees ~~realized during 2014.~~generated from AmTrust were approximately $794,235 and $440,225, respectively.

For the three months ended ~~June~~September 30, 2015 MBR revenues decreased by ~~$160,191~~$324,438 to ~~$282,772~~$201,903 when compared to the same period a year earlier. As previously ~~discussed,~~reported, in October 2014 Companion Property and Casualty Insurance Company (“Companion”), one of our significant customers, notified us that subject to certain closing conditions, including necessary governmental and regulatory approvals, it would be acquired by Enstar Group Limited (“Enstar”). Enstar announced the completion of this acquisition on January 27, 2015. We anticipated Enstar would take in-house all of the business Companion had been outsourcing to MMC. Effective June 1, 2015, Companion ceased ~~conducting business with MMC.~~using our MBR services. As a result of this transaction, we had no MBR fee revenues from Companion during the three-month period ended ~~June~~September 30, ~~2015 and~~2015. For the same period in 2014 ~~from Companion were 40% and 67%, of total~~we recorded MBR revenues ~~respectively.~~totaling $311,249 from Companion. As a result of the loss of Companion as a customer, we anticipate MBR fees will be significantly lower throughout the remainder of fiscal 2015 compared to fiscal 2014. While the loss of Companion will have a significant negative impact on total MBR fee revenue in 2015, setting aside the loss of Companion as a customer, MBR fees from our other MBR customers have ~~increased~~decreased by approximately ~~16%~~6% during the three months ended ~~June~~September 30, 2015 when compared to the same period in 2014. We will continue our efforts to expand sales to existing MBR customers and to attract new MBR customer in our efforts to, at least partially, replace the lost revenue from Companion.

HCO employee enrollment was 67% higher during the three months ended September 30, 2015 compared to the same period 2014, while HCO fees increased 5% to $273,089. HCO employee enrollment fluctuates throughout the year. As new employees are enrolled or existing employees are renewed, we generate HCO annual notification fees. During the second quarter 2015, one existing customer increased its employee enrollment by approximately 71%, which is the principal reason for the higher HCO employee enrollment during the three months ended September 30, 2015. The annual notification fees were earned in second fiscal quarter 2015. Therefore, increases and decreases in HCO employee enrollment may not directly correspond to increases and total HCO fee revenue.

During the three months ended June 30, 2015 and 2014 HCO fee revenues were $399,060 and $259,316, respectively. During the quarter ended June 30, 2015 HCO revenues increased 54% and HCO employee enrollment increased 60% when compared to the same quarter a year earlier. The increase in HCO fee revenues of $139,744 was primarily attributable to revenues derived from billing an existing customer for its annual HCO enrollment notification fee resulting from the expansion of its HCO program during June 2015.

MPN fee ~~revenues~~revenue for the three months ended ~~June~~September 30, 2015 ~~were $247,695~~was $224,128 compared to ~~$258,605~~$285,415 for the three months ended ~~June~~September 30, 2014, a decrease of ~~$10,910. Although MPN revenues declined by 4% MPN employee enrollment increased by 13%.~~$61,287. The decline in MPN revenues of 4%22% resulted mainly from ~~re-negotiating our MPN network agreement with~~the loss of one of our major MPN customer ~~whereby the monthly MPN fee schedule was significantly reduced. In~~in July ~~2015 we substantially ceased doing all business with this customer.~~2015. The ~~fee change with~~loss of this customer impacted our MPN revenues by approximately ~~$42,000~~$132,978 during our 2015 ~~second~~third quarter when compared to the same quarter in 2014. This decrease of ~~$42,000~~$132,978 was partially offset by increases of approximately ~~$31,090~~$71,691 in MPN revenues from new and ~~other~~ existing customers which resulted in the net decrease of ~~$10,910.~~$61,287. Correspondingly, for the three months ended September 30, 2015 when compared to the same period in 2014, MPN enrollment decreased by approximately 242,000 to 311,000, resulting primarily from the loss of this customer.

As discussed in this report, AmTrust, will cease using our MPN services in December 2015. During the three months ended September 30, 2015 and 2014 AmTrust contributed $30,345 and $17,400 in MPN fee revenues, respectively. MPN enrollment will be negatively impacted by approximately 106,000 enrollees with the pending loss of AmTrust. With the loss of ~~this customer,~~AmTrust, we expect ~~our growth in~~ MPN revenues to be ~~limited for~~lower beginning as early as the ~~duration~~fourth quarter of fiscal 2015 and throughout 2016 unless we are able to add new ~~customers during the third and fourth quarters.~~customers.

During the three-month periods ended ~~June~~September 30, 2015 and 2014, NCM revenues were ~~$235,067~~$216,216 and ~~$257,334,~~$242,376, respectively. The decrease in revenue of ~~$22,267~~$26,160 was primarily the result of fewer numbers of claims filed by our ~~existing customers~~customers’ enrollees which reduced the number of cases we processed during the ~~second quarter~~three-month period ended September 30, 2015. During the three-month period ended September 30, 2015 ~~when compared~~and 2014 NCM fees generated from AmTrust were minimal, so we do not anticipate the loss of the AmTrust business to ~~the second quarter of 2014.~~have a significant impact on NCM fee revenue in future periods.

Other fees consist of revenues derived from lien service and network access and claims repricing ~~services provided by Medex and lien representation services provided by MLS. Other fee revenues~~services. Revenues for the three-month periods ended ~~June~~September 30, 2015 and 2014 were ~~$134,671~~$126,352 and ~~$104,298,~~$76,032 respectively.

Network Access and Repricing Fees

Our network access and claims repricing fees are generated from ~~certain~~various customers who have access to our network and split with Medex the cost savings generated from their PPO. ~~During~~Revenues for the ~~three months~~three-month periods ended ~~June~~September 30, 2015 and 2014 ~~network access fee revenues generated~~ were ~~$114,312~~$119,474 and ~~$104,298,~~$76,032 respectively. ~~This~~The increase of ~~$10,014~~$43,442 was primarily the result of one customer having higher savings realized from using our network. While we anticipate revenue from our network access and claims repricing services will grow in the future, at this time, we cannot accurately predict the rate at which this revenue stream might increase.

Lien Representation Fees

During the quarter ended ~~June~~September 30, 2015 we recorded lien representation fees totaling ~~$20,359~~$6,878 compared to none during the same period a year earlier. MLS commenced offering lien representation services in February 2012, but scaled back its operations in January 2013 as a result of the potential negative impact of Senate Bill 863. Based on changes made by the DWC, MLS reinstated its lien representation services during the fourth quarter 2014. There were two reasons for our decision: 1) lien activation fees have been declared unconstitutional by the California courts, so the number of significant lien filings is increasing; 2) in November 2014 a public sector employer retained MLS to provide it lien representation services. ~~MLS hired a lien defense manager and a lien defense administrator in January 2015 with plans to further expand its lien representation service operations during remaining months of 2015.~~ At this time there is no assurance that lien representation fees will continue to grow at rates currently being realized. The lien manager and lien administrative assistant resigned in September 2015 and were replaced by transferring personnel from MMC.

Total expenses for the three months ended ~~June~~September 30, ~~2015and~~2015 and 2014 were ~~$1,507,168~~$1,300,552 and ~~$1,440,443,~~$1,801,040, respectively. The ~~increase~~decrease of ~~$66,725~~$500,488 was the result of ~~increases~~decreases in bad debt provision, ~~depreciation, consulting fees,~~ salaries and wages, ~~insurance,~~professional fees, outsource service fees and data maintenance ~~and general and administrative~~ expense, partially offset by ~~a decrease~~increases in ~~professional fees.~~depreciation, consulting fees, insurance and general and administrative.

During the ~~three-month period ending June~~three months ended September 30, 2015 and 2014 we recorded ~~$8,677~~bad debt expense of $9,750 and ~~$887~~$15,851, respectively. The decrease of $6,101 in bad debt ~~provision to cover potential~~expense was the result of lower uncollectible ~~accounts~~ receivables.

During the three months ended ~~June~~September 30, 2015 consulting fees increased to ~~$88,335~~$90,063 from ~~$76,321~~$76,790 during the three months ended ~~June~~September 30, 2014. This increase of ~~$12,014~~$13,273 was primarily the result of increased IT fees and increases in other consulting fees.

Salaries and wages ~~increased $40,977~~decreased $143,430 or 7%21% to ~~$633,095~~$555,666 during the quarter ended ~~June~~September 30, 2015 compared to ~~$592,118~~$699,096 during the quarter ended ~~June~~September 30, 2014. The ~~increase~~decrease in salaries and wages was due to terminations partially offset by new hires and ~~annual~~ salary ~~increases offset by terminations~~increases. Medex hired a vice president of ~~employees. Since~~operations in August 2015. In June 2015 the ~~end~~operational manager of MMC resigned. We terminated an HCO manager and a marketing coordinator in August 2015. During the second ~~fiscal quarter~~half of 2014, ~~Medex hired 3 new employees and of those 3, 2 remain. To~~to handle the spike in demand for utilization review services, ~~during the second half of 2014,~~ MMC hired 14 new employees, of those 14, 2 remain with MMC as of the date of this report. ~~In addition, MMC’s operational director resigned~~Additionally, MLS terminated two employees in ~~June~~September 2015. ~~MMM replaced an~~The Company employed 35 and 48 full time employee ~~in April~~as of September 30, 2015 and ~~MLS hired two new employees January 2015.~~2014.

For the three months ended ~~June~~September 30, 2015 we incurred professional fees of ~~$95,593,~~$99,418 compared to ~~$122,920~~$109,871 during the three months ended ~~June~~September 30, 2014. This ~~22%~~10% decrease in fees was primarily the result of ~~decreases in~~lower professional fees paid for field case ~~management~~ services which was partially offset by ~~increases in our medical director fees, accounting fees and~~higher legal ~~service~~ fees.

During the three months ended ~~June~~September 30, 2015 we incurred insurance expenses of ~~$88,225,~~$83,283, a ~~$13,993~~$1,128 increase over the three-month period ended ~~June~~September 30, 2014. The increase was ~~mostly~~ the result of increased group health, vision and dental insurance ~~costs resulting from the hiring of new employees in PHCO, Medex, MMC and MMM and increases in our workers’ compensation and network security liability insurance.~~costs. We do not expect a material increase during the remainder of this fiscal year.

Outsource Service Fees

Outsource service fees consist of costs incurred in outsourcing UR and MBR services and certain NCM services. We do not, at this time, have enough volume to justify creating our own UR and MBR in-house staff. Instead, we utilize outside vendors to provide specific services for our clients, charging additional fees over and above those paid to our outside vendors for administration and coordination of UR, MBR and NCM services directly to the clients. Typically our outsource service fees increase and decrease in correspondence with the level of MBR and UR services, and some NCM services, we provide to our customers. In times when the level of MBR or UR services rendered increases, we typically experience higher outsource service fees, and when the level of services we render decreases, we typically experience lower outsource service fees. We incurred ~~$329,805~~$295,507 and ~~$401,447~~$658,233 in outsource service fees during the three months ended ~~June~~September 30, 2015 and 2014, respectively. The decrease of ~~$71,642~~$362,726 was mainly the result of the decrease in ~~the number of~~outsourced UR ~~outsource service fees realized~~work from the overflow business from our third-party ~~partner.~~partner and the loss of Companion in June 2015. We anticipate an additional significant decrease in outsource service fees in 2016 as a result of the loss of AmTrust business starting in December 2015.

During the ~~three months~~three-month periods ended ~~June~~September 30, 2015 and 2014 data maintenance fees were ~~$101,309~~$11,819 and ~~$21,561~~$12,953 respectively. The ~~increase of $79,748~~decrease in data maintenance fees was primarily attributable to ~~data maintenance costs incurred for an~~decreased levels of renewals from existing ~~customer’s annual HCO enrollment requirements resulting from~~customers during the ~~expansion of its HCO program locations during June 2015.~~quarter ended September 30, 2015 when compared to the same period a year earlier.

General and Administrative

General and administrative expenses increased 5%4% to ~~$146,240~~$139,035 during the three-month period ended ~~June~~September 30, 2015. This increase of ~~$6,894~~ $5,586,was primarily attributable to increases in advertising, ~~auto expense,~~ dues and subscriptions, ~~equipment repairs,~~ IT enhancement, moving expense, ~~license~~shareholders’ expense and ~~permits,~~miscellaneous general and administrative expenses, partially offset by decreases in equipment rent expense, office rent, travel and entertainment ~~partially offset by decreases in office supplies, postage~~ and ~~delivery, telephone,~~ vacation expense and miscellaneous general administrative expenses. Provided we increase our customer base over the remaining months of 2015, current levels of general and administrative expenses may marginally increase during fiscal year 2015.expense.

Income from Operations

~~During~~As a result of the ~~three months ended June~~$682,935 decrease in total revenue during the three-month period ending September 30, 2015, which was partially offset by the $500,488 decrease in total ~~revenues of $2,261,105 were lower by $37,106~~expenses during the same period, our income from operations decreased $182,447 or 19% during the three-month period ended September 30, 2015 when compared to the same period in 2014. This decrease in total revenues and increase in total expenses of $66,725, resulted in income from operations of $753,937 compared to income from operations of $857,768 during three months ended June 30, 2014.

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Income Tax Provision

~~Because we~~We realized income before taxes of ~~$314,771~~$769,023 during the three-month period ended ~~June~~September 30, 2015 compared to ~~$356,784~~$951,218 during the three-month period ~~June~~September 30, ~~2014,~~2014. As a result, we realized a ~~$42,013~~$75,811, or 19%, decrease in our income tax provision.

Net Income

Net income for the three-month periods ended ~~June~~September 30, 2015 and 2014 ~~were $439,101~~was $449,031 and ~~$500,665,~~$555,415, respectively. Based on current information, we expect the trend of lower revenues for the remaining ~~quarters~~quarter of 2015 to continue when compared to the same periods in 2014 which will also impact our net income. As discussed ~~elsewhere in~~throughout this report, with the loss of our third-party UR partner in February 2015, Companion, our major MBR customer, in June 2015, ~~and~~ one major MPN customer in July 2015 ~~are~~and the ~~primary reasons for our expected~~anticipated loss of AmTrust in December 2015 we expect the trend of lower revenues to continue ~~during the remaining quarters of 2015 when compared to the same periods in 2014.~~throughout 2016.. Although the loss of these customers will substantially impact our net income during the balance of fiscal 2015 and in 2016, the addition of a new MPN customer in April 2015, two significant HCO customers in June 2015, and three MPN customers starting the third quarter 2015 will partially offset the recent customer losses discussed above. Generally, new customers are added throughout the year and other customers terminate from the program for a variety of reasons. We have no assurances that we will continue to add new customers or lose existing ~~customers during the remaining months of 2015.~~customers.

Comparison of the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014

Revenue

Total revenues decreased 5% to $6,669,784 during the ~~six-month~~nine-month period ended ~~June~~September 30, 2015 increased 7% to $4,630,203 compared to the six-month period ended June 30, 2014. Although total revenues increased by 7%, the total number of employee enrollees increased by 19% during the six months ended June 30, 2015 when compared tofrom $7,079,396 for the same period ~~in 2014. As of June 30, 2015 we had approximately 740,000 total enrollees. Enrollment consisted of approximately 138,000 HCO enrollees and 602,000 MPN enrollees. By comparison as of June~~a year earlier. Compared to the nine months ended September 30, 2014, ~~we had approximately 621,000 total enrollees, including approximately 86,000~~ HCO ~~enrollees~~ and ~~535,000 MPN enrollees. The growth in HCO enrollment of approximately 52,000 was primarily~~Other revenues for the ~~result of one existing customer expanding its HCO program coverage during June 2015 to include an increased number of its locations. MPN enrollment~~nine months ended September 30, 2014 increased by ~~approximately 67,000 primarily the result of two existing customers increasing their enrollment. Many of our HCO~~18% and 84%, respectively, while UR, MBR, MPN ~~clients also use the other services we offer, but we also have customers that don’t use our HCO or MPN services.~~and NCM revenues were lower by 2%, 41%, 2% and 8%, respectively.

UR Fees

During the ~~six-month~~nine-month period ended ~~June~~September 30, 2015, UR revenues ~~increased by $274,580~~decreased $59,810 to ~~$1,976,130~~$3,004,023 when compared to the same period a year earlier. Commencing in March 2014 we began providing overflow utilization review services to a third-party partner to assist them in reducing their backlog. This third-party partner contributed $1,184,270 towards our overall UR revenues during fiscal 2014. On February 28, 2015 we were notified by our third-party partner that their backlog overflow business was caught up. While they have not terminated their service agreement with us, we have received no overflow business from this third-party partner since that time. During the ~~six-month period~~nine-month periods ended ~~June~~September 30, 2015 and 2014 we recorded ~~$17,510~~$13,355 and ~~$252,795~~$884,925 in ~~these~~ overflow revenues, ~~respectively. Currently we have no way to predict whether the~~respectively, from our third-party partner, ~~will build up a~~who, as discussed above, resolved its backlog inas of the ~~future, and if it does, whether it will again retain us to help it work through any such backlog.~~

~~Despite losing~~end of February 2015. During the ~~UR overflow revenue, during the six~~nine months ended ~~June~~September 30, 2015 and 2014 ~~excluding our third-party partner,~~UR fees from our other ~~existing~~ UR customers ~~accounted for $1,958,620 and $1,448,755 in UR revenues, respectively.~~increased $811,760. This increase ~~of $509,865~~ was a result of our largest UR customer, AmTrust, increasing its UR volume partially offset by fewer numbers of UR bills submitted by several of our other customers.

As discussed elsewhere in this report, our largest customer, AmTrust, will be terminating our services on, or about, December 22, 2015. The loss of this customer will have a significant negative impact the Company’s revenue, profitability and liquidity until such time as the Company is able to replace the revenues generated from AmTrust. We anticipate UR fees and total revenues will be significantly impacted beginning as early as the fourth quarter of 2015 and throughout 2016. During the nine-month period ended September 30, 2015 and 2014, UR revenue fees generated from AmTrust were $2,223,965 and $1,426,760, respectively. Unless we are able to attract additional new customers over the remaining months of fiscal 2015 ~~or our third-party partner again requires overflow services, or our existing customers increase their revenues, we anticipate~~and during 2016, UR revenues will be considerably lower in ~~2015 than in 2014.~~those periods compared to the comparable prior year periods.

MBR fees

For the ~~six-month~~nine-month period ended ~~June~~September 30, 2015 MBR revenues decreased by ~~$264,997~~$589,435 to ~~$653,186~~$855,089 when compared to the same period a year earlier. As discussed above, effective June 1, 2015, Companion ceased conducting business with MMC. MBR fee revenue during the six-month period ended June 30, 2015 and 2014 from Companion were $328,689 and $637,157 or 50% and 69%, of total MBR revenues, respectively. As a result of the loss of Companion as a customer in June 2015, we anticipate MBR fees will be significantly lower throughout the remainder of fiscal 2015 ~~compared to fiscal 2014.~~and into 2016. MBR fee revenue from Companion during the nine-month periods ended September 30, 2015 and 2014 were $328,689 and $948,506 or 38% and 66%, of total MBR revenues, respectively. While the loss of Companion ~~will have a significant negative impact on~~has significantly negatively impacted total MBR fee revenue in 2015, ~~setting aside the loss of Companion as a customer,~~ MBR fee revenue from ~~existing~~our other customers has increased approximately ~~15%~~6% during the first ~~six~~nine months of 2015 when compared to the same period in 2014. We have and will continue our efforts to, at least partially, replace the lost revenue from Companion.

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HCO Fees

During the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 HCO fee revenues were ~~$647,700~~$920,789 and ~~$518,800,~~$778,869, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2015 HCO revenues increased ~~25%~~18% and HCO employee enrollment increased ~~60%~~67% when compared to the same ~~quarter~~period a year earlier. The increase in HCO fee revenues of ~~$128,900~~$141,920 was primarily attributable to revenues derived from billing an existing customer for its annual HCO enrollment notification fee resulting from the expansion of its HCO program during June 2015.

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MPN Fees

MPN fee revenues for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 were ~~$555,813 compared to $512,034 for the six months ended June 30, 2014, an increase~~$779,941 and $797,449, respectively, a decrease of ~~$43,779. Although MPN revenues increased by 9%, MPN employee enrollment increased by 13%~~2%. ~~The increase in MPN revenues of 9% resulted primarily from adding three new customers and increases in revenues from six existing customers.~~ As mentioned above, in July 2015 we substantially ceased doing all business with a major MPN customer. This customer contributed approximately $542,000 in MPN revenues during the 12 month-period ended December 31, 2014. During the nine months ended September 30, 2015 and 2014, this customer contributed MPN fee revenues of $298,222 and $393,037, respectively. MPN enrollment decreased 44% during the first three quarters of 2015 primarily as a result of the loss of this customer.

During the nine months ended September 30, 2015 and 2014 AmTrust contributed $58,140 and $40,205 in MPN fee revenues, respectively. With the loss of AmTrust, we anticipate we will lose approximately 106,000 MPN enrollees in December 2015 resulting from the loss of this customer. Unless we have a significant influx of new MPN enrollees, we expect MPN fee revenue to be lower for the duration of fiscal 2015 and in 2016.

NCM Fees

During the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013 NCM revenues were $695,755 and $753,839, respectively. This decrease of $58,084 was result of fewer claims filed by our customers’ enrollees which reduced the number of cases we processed during the nine-month period ended September 30, 2015. During the nine-month periods ended September 30, 2015 and 2014 NCM fee revenues generated from AmTrust were ~~$479,539 and $511,463, respectively. The decrease of $31,924 was the result of a decrease in the number of NCM cases handled, mainly from existing customers.~~minimal.

Other Fees

Other fees during the ~~six-month~~nine-month periods ended ~~June~~September 30, 2015 and 2014 consisted of revenues derived primarily from network access and claims repricing services and lien representation fees. Other fee revenues for these periods were ~~$317,835~~$444,187 and ~~$164,850,~~$240,882, respectively.

Network Access and Repricing Fees

~~Our network access and claims repricing fees are generated from certain customers who have access to our network and who split with Medex the cost savings generated from their PPOs.~~ During the ~~six months~~nine month periods ended ~~June~~September 30, 2015 and 2014 network access and claims repricing fee revenues generated were ~~$272,417,~~$391,892 and ~~$164,850,~~$240,882, respectively. This increase of ~~$107,567~~$151,010 or 63% was primarily the result of one customer realizing higher savings by using our network. There is no assurance that the current rate of increase will continue over the remaining months of 2015.

Lien Representation Fees

During the ~~six~~nine months ended ~~June~~September 30, 2015 we recorded lien representation fees totaling ~~$45,418~~$52,295 compared to none during the same period a year earlier. At this time there is no assurance that lien representation fees will continue to grow at rates currently being realized.

Expenses

Total expenses for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 were ~~$3,005,709~~$4,306,261 and ~~$2,703,937,~~$4,504,977, respectively. The ~~increase~~decrease of ~~$301,772~~$198,716 was the result of decreases in salaries and wages, professional fees and outsource service fees, partially offset by increases in depreciation, bad debt ~~outsource service fees, salaries and wages,~~provision, consulting fees, insurance, data maintenance expense and general and administrative ~~expense, partially offset by decreases in professional fees.~~expense.

Bad Debt Provision

During the ~~six-month~~nine-month periods ending ~~June~~September 30, 2015 and 2014 we recorded a bad debt provision of ~~$16,927~~$26,677 and ~~$9,140,~~$24,991, respectively, as a result of potential uncollectible account receivables. At ~~June~~September 30, 2015 and December 31, 2014 our allowances for bad debt balances were ~~$57,510~~$67,260 and $40,510, respectively.

Consulting Fees

During the ~~six~~nine months ended ~~June~~September 30, 2015 consulting fees increased to ~~$178,525~~$268,588 from ~~$152,220~~$229,010 during the ~~six~~nine months ended ~~June~~September 30, 2014. This increase of ~~$26,305~~$39,578 was primarily the result of increased IT consultant fees, anthe addition of a temporary administrative consultant in January 2015 who was terminated after one month of service and annual increases in consulting fees for two consultants in January 2015.

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Salaries and Wages

Salaries and wages ~~increased $139,961 or 12% to $1,318,906 during~~were $1,874,572 and $1,878,041 for the ~~six~~nine months ended ~~June~~September 30, 2015 ~~compared with the six months ended June 30, 2014.~~and 2014, respectively. The ~~increase~~decrease in salaries and wages of $3,469 was primarily due to ~~hiring new~~a net decrease in employees as detailed above.

Professional Fees

For the ~~six~~nine months ended ~~June~~September 30, 2015 we incurred professional fees of ~~$215,939~~$315,357 compared to ~~$228,532~~$338,403 during the ~~six~~nine months ended ~~June~~September 30, 2014. This 6%7% decrease in fees iswas primarily the result of decreased NCM fees ~~paid for field case management services and legal expenses,~~ partially offset by ~~increases in~~higher medical consulting fees, ~~directors’~~legal fees and ~~other professional~~board of directors’ fees.

Insurance

During the ~~six~~nine months ended ~~June~~September 30, 2015 we incurred insurance expenses of ~~$172,982,~~$256,265, an increase of ~~$30,102~~$31,230 over the same ~~six-month~~nine-month period of 2014. The increase was mostly the result of increased group health, vision and dental insurance costs resulting from the hiring of new employees in PHCO, Medex, MMC and MMM and increases in our workers’ compensation and network security liability insurance. We do not expect a material increase during the remainder of the 2015 fiscal year.

Outsource Service Fees

As discussed above, outsource service fees consist of costs incurred by our subsidiaries in outsourcing its UR, MBR and NCM services, and typically tend to increase and decrease in correspondence with increases and decreases in UR, MBR and NCM services. We incurred ~~$667,552~~$963,059 and ~~$666,015~~$1,324,248 in outsource service fees during the ~~six-month~~nine-month periods ended ~~June~~September 30, 2015 and 2014, respectively. The ~~increase~~decrease of ~~$1,537~~$361,189 was largely the result of the ~~increased~~decreased number of UR and MBR reviews conducted by our outsource service ~~providers.~~providers, resulting primarily from loss business for our third-party UR partner and Companion as discussed above. We anticipate our outsource service fees will continue to move in correspondence with the level of UR, MBR and NCM services we provide in the future. As discussed above, we anticipate significant reduction in outsource service fees as a result of the expected loss of AmTrust business starting in December 2015.

Data Maintenance

For the nine months ended September 30, 2015 and 2014 we incurred data maintenance expense of $120,413 and $53,685, respectively or an increase of 124%. During the ~~six~~nine months ended ~~June~~September 30, 2015 we experienced an ~~overall MPN and~~ HCO employee enrollment increase of ~~19%~~67% when compared to the same period a year earlier. ~~While overall enrollment increased 19%,~~This data maintenance fees ~~increased 167% or $67,862 during the six months ended June 30, 2015. The~~ increase ~~of $67,862 in data maintenance fees~~ was primarily attributable to data maintenance ~~costs~~fees incurred for an existing customer’s annual HCO enrollment requirements resulting from the expansion of its HCO program locations during June 2015.

General and Administrative

General and administrative expenses increased ~~13%~~10% to ~~$297,609~~$436,644 during the ~~six~~nine months ended ~~June~~September 30, 2015 when compared to ~~$262,707 during~~ the same period inof 2014. The increase in general and administrative ~~expenses~~expense was ~~mainly~~primarily attributable to increases in advertising, ~~expense,~~ auto expense, dues and ~~subscriptions, rent expense,~~subscription, employment agency fees, equipment repairs, IT enhancement expense, license and permits, moving expense, printing and reproduction expense, equipment rent, shareholders’ expense and travel and entertainment, ~~expense,~~ partially offset by decreases in office supplies, postage and delivery, telephone expense, office rent, vacation expense and miscellaneous general and administrative ~~expenses. Provided we increase our customer base over the remaining months of 2015,~~expense. We expect current levels of general and administrative expenses ~~may~~to marginally ~~increase.~~increase during the remainder of this fiscal year.

Income from Operations

~~As a result of the 7% increase~~The 5% decrease in total revenue during the ~~six months~~nine-month period ended ~~June~~September 30, 2015 ~~which was substantially offset by an 11% increase~~outpaced the 4% decrease in total expenses during the ~~six months~~nine-month period ended ~~June~~September 30, 2015 ~~our~~to result in a 7% decrease in income from operations ~~was essentially unchanged~~ during the ~~six-month~~nine-month period ended ~~June~~September 30, 2015 when compared to the same period in 2014.

Income Tax Provision

As a result of realizing income before taxes, we made provision for our income tax obligations ~~of $676,957 and $675,019~~ for the ~~six~~nine months ended ~~June~~September 30, 2015 and ~~2014, respectively.~~2014. Our income tax provision for the ~~six~~nine months ended ~~June~~September 30, 2015 was ~~$1,938 greater~~7% lower than during the comparable period 2014 ~~primary~~to reflect the ~~result of recording a $1,086 tax adjustment~~7% decrease in ~~June 2015 for~~income before taxes realized during the ~~year 2012.~~nine months ended September 30, 2015. The effective tax rate resulting from the income tax provision of 41.61% has remained ~~substantially~~ the same for the comparable periods in 2015 and ~~2014, ranging from 41.61% to 41.75%.~~2014.

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Net Income

During the ~~six~~nine months ended ~~June~~September 30, 2015 total revenues of ~~$4,630,203~~$6,699,784 were ~~higher~~lower by ~~$303,323~~$379,612 when compared to the same period in 2014. This ~~increase~~decrease in total revenues was partially offset by ~~increases~~decreases in total expenses of ~~$301,772~~$198,716 resulting in income from operations of ~~$1,624,494~~$2,393,523 compared to income from operations of ~~$1,622,943~~$2,574,419 during the ~~six~~nine months ended ~~June~~September 30, 2014. We realized net income of ~~$947,342~~$1,396,373 for the ~~six~~nine months ended ~~June~~September 30, 2015, compared to net income of ~~$947,226,~~$1,502,641, during the ~~six~~nine months ended ~~June~~September 30, 2014. We anticipate net income through the remainder of fiscal 2015 will be lower compared to fiscal 2014, due to the loss of ~~several~~three major ~~clients.~~clients during the first nine months of 2015. As discussed ~~elsewhere~~ in this report, the loss of our third-party UR partner in February 2015, Companion, our major MBR customer, in June 2015, ~~and~~ one major MPN customer in July 2015 and the expected loss of AmTrust in December 2015 are the primary reasons ~~for~~ we expect our current trend of lower revenues to continue during the remaining ~~quarters~~quarter of fiscal 2015 and throughout 2016 when compared ~~same periods in fiscal 2014.~~to the comparable prior year periods. Although the loss of these customers will substantially impact our net income going forward, the addition of a new MPN customer in April 2015, two significant HCO customers in June 2015, and three MPN customers starting the third quarter of 2015 should help to partially offset the recent customer ~~losses discussed herein. Generally, new customers are added throughout the year and other customers terminate from the program for a variety of reasons.~~losses. We have no assurances that we will continue to add new customers ~~or lose existing customers~~ during the remaining months of 2015.

Liquidity and Capital Resources

As of ~~June~~September 30, 2015 we had cash on hand of ~~$3,618,333~~$3,281,140 compared to $2,946,025 at December 31, 2014. The ~~$672,308~~$335,115 increase in cash on hand is primarily the result of ~~increases~~net cash provided by our operating activities partially offset by cash used in investing activities and cash used in financing activities. Net cash provided by our operating activities was the result of our net income, ~~bad debt provision, depreciation and unearned revenues and~~ decreases in accounts receivable and ~~other assets,~~increases in depreciation, bad debt provision, accrued expenses, dividend payable and unearned revenues, partially offset by ~~increases in our prepaid income tax and prepaid expense, and~~ decreases in ~~our~~ accounts payable, ~~accrued expense,~~ income tax payable and deferred rent expense ~~combined with~~and increases in prepaid income tax, prepaid expenses and other assets. The $21,280 increase in cash used in investing activities was the result of purchases of ~~treasury stock,~~ computers, furniture and ~~equipment~~equipment. Cash used in in financing activities increased $1,034,876 as a result of the issuance of a special one-time dividend and ~~payments~~the purchase of ~~our obligations under capital lease.~~treasury stock. Barring a significant downturn in the economy or the continued loss of major customers, we believe that cash on hand and anticipated revenues from operations will be sufficient to cover our operating costs over the next twelve months.

We currently have planned certain capital expenditures during the remainder of fiscal 2015 ~~to accommodate~~resulting from our ~~growth.~~office expansion in September 2015. 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 debt and/or equity financing. We do not currently possess an institutional source of financing. There is no assurance that we could be successful in obtaining equity or debt financing on favorable terms, or at all.

~~We are currently engaged in a~~On September 1, 2015, based upon the recommendation of management, the board of directors of the Company announced the termination of the Company’s stock repurchase program. Our stock repurchase program ~~pursuant~~was scheduled to ~~which our~~expire on November 30, 2015. The board of directors ~~has~~had allocated up to $500,000 for the repurchase of currently issued and outstanding common stock of the Company. As of ~~June~~September 30, 2015, we had repurchased ~~approximately 3,125~~8,269 shares for approximately ~~$102,625. Our stock repurchase program is scheduled to expire on November 30, 2015. Our~~$254,057.

On September 4, 2015, our board of directors ~~may extend the term~~declared a special one-time cash dividend of ~~the program beyond the current expiration date, or terminate the program at any time prior~~$1.25 per share payable to the ~~current expiration date, or increase the amount~~record holders of ~~funds allocated for the purchase~~our common stock on September 14, 2015. On September 14, 2015, excluding treasury shares, we had 794,072 shares of common stock ~~in its sole discretion.~~

~~Cash Flow~~

~~During~~issued and outstanding. The payment date of the ~~six months ended June~~dividend was September 24, 2015. As of September 30, 2015, ~~cash~~the amount paid from the dividend was ~~primarily used to fund operations. We had a net increase~~$859,170 with $133,420 payable. This payable has been accrued and included in ~~cash of $672,308 during~~dividend payable on the ~~six months ended June 30, 2015 compared to an increase in cash of $783,943 during the six months ended June 30, 2014. See below for additional discussion and analysis of cash flow.~~

For the six months ended June 30,

2015
(unaudited)

2014
(unaudited)

Net cash provided by operating activities

$
813,032

$
847,619

Net cash used in investing activities

(27,736
)

(57,212
)
Net cash used in financing activities

(112,988
)

(6,464
)

Net increase in cash

$
672,308

$
783,943

During the six months ended June 30, 2015 net cash provided by operating activities was $813,032 compared to net cash provided by operating activities of $847,619 during the six months ended June 30, 2014. As discussed herein we realized net income of $947,342 during the six months ended June 30, 2015, compared to net income of $947,226 during the six months ended June 30, 2014.balance sheet.

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Cash Flow

During the nine months ended September 30, 2015 cash was primarily used to pay dividends, purchase treasury stock, and fund operations. We had a net increase in cash of $335,115 during the nine months ended September 30, 2015. See below for additional discussion and analysis of cash flow.

	For the nine months ended September 30,
	2015 (unaudited)			2014 (unaudited)

Net cash provided by operating activities	$	1,470,913		$	1,393,542
Net cash used in investing activities		(91,135	)		(69,855	)
Net cash used in financing activities		(1,044,663	)		(9,787	)

Net increase in cash	$	335,115		$	1,313,900

During the nine months ended September 30, 2015 net cash provided by operating activities was $1,470,913 compared to net cash provided by operating activities of $1,393,542 during the nine months ended September 30, 2014. As discussed herein we realized net income of $1,396,373 during the nine months ended September 30, 2015 compared to net income of $1,502,641 during the nine months ended September 30, 2014.

Summary of Material Contractual Commitments

The following is a summary of our material contractual commitments as of ~~June~~September 30, 2015:

	Payments Due By Period										Payments Due By Period
	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
Operating Leases:
Operating Leases – Equipment (1)	$	26,726	$	18,415	$	8,311	$	-	$	-	$	22,122	$	18,415	$	3,707	$	-	$	-
Office Leases (2) (4)		99,655		99,655		-		-		-
Office Leases (2)												1,659,474		231,542		481,672		516,408		429,852
Total Operating Leases	$	126,381	$	118,070	$	8,311	$	-	$	-	$	1,681,596	$	249,957	$	485,379	$	516,408	$	429,852

~~Capitalized Leases:~~

Capitalized Equipment Leases (3)

$
1,193

$
1,193

$
-

-

-

Total Capitalized Equipment Leases

$
1,193

$
1,193

$
-

-

-

Less amounts representing interest

(7
)

(7
)

-

-

-

Total Principal

$
1,186

$
1,186

$
-

$
-

$
-

~~See below for additional discussion and analysis of material contractual commitments including subsequent event in item (4).~~

(1)

In October 2013 we entered into a 36 month operating lease for an office copy machine with monthly payments at $160.93. In December 2013 we leased two document scanners with monthly operating lease payments of $206.93 each for 36 months. In February 2014 we entered into a 36 month operating lease for an office copy machine with monthly payments at $960.

~~(2)~~

~~As of June 30, 2015, the following is our annual base rent for our current office space throughout the remaining term of the lease:~~

Rent Period Annual Rent Payments
Jul. 1 to Dec. 31, 2015

$
74,741

Jan. 1 to Feb. 29, 2016

24,914

Total

$
99,655

(2)

On July 23, 2015 we entered into a new 79 month lease (the “New Office Lease”) with our current landlord with the commencement date being September 28, 2015. Prior to July 23, 2015, we leased approximately 5,159 and 1,640 rentable square feet (the “Prior Premises”) located in suites 300 and 375, respectively, consisting of a total of 6,799 rentable square feet. The lease for the Prior Premises was terminated on September 28, 2015. Upon commencement of the New Lease, our lease obligation for suite 375 consisting of 1,640 rentable square feet terminated and is no longer in effect. To replace suite 375, we leased suite 350 consisting of 4,280 rentable square feet (the “Expansion Premises”). Under the terms of the New Office Lease, we now lease suite 300 and the Expansion Premises, for a total of 9,439 rentable square feet (the “Combined Premises”). The Combined Premises will serve as our principal executive offices, as well as, the principal offices of our operating subsidiaries, Medex, IRC, MLS, MMM and MMC.

(3)

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 rents with capital interest rate at 7.5%. The term of this capital lease arrangement expired in July 2015.

~~(4)~~

Subsequent to the quarter end, on July 23, 2015 we entered into a new 79 month lease (the “New Lease”) with our current landlord with an estimated commencement date of September 1, 2015. Because the New Lease was entered into subsequent June 30, 2015, our obligations under the New Lease are not included in the table above. These obligations are, however, reflected in the table to this footnote and should be considered when taking into account our current contractual commitments moving forward. Our principal executive offices are located at 1201 Dove Street, suite 300. We currently lease approximately 5,159 and 1,640 rentable square feet (the “Current Premises”) located in suites 300 and 375, respectively, consisting of a total of 6,799 rentable square feet with the termination date of February 29, 2016. The lease for the Current Premises will terminate on the commencement date of the New Lease. Upon commencement of the New Lease, our lease obligation for suite 375 consisting of 1,640 rentable square feet will terminate and no longer be in effect. To replace suite 375, we have leased suite 350 consisting of 4,280 rentable square feet (the “Expansion Premises”). Under the terms of the New Lease, we now lease the Current Premises (less suite 375) and the Expansion Premises, for a total of 9,439 rentable square feet (the “Combined Premises”). The Combined Premises will serve as our principal executive offices, as well as, the principal offices of our operating subsidiaries, Medex, IRC, MLS, MMM and MMC.

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Following is the base annual rent payment schedule for the Combined Premises under the New Office Lease:

Rent Period	Annual Rent Payment		Annual Rent Payment
Sep.1 to Dec. 31, 2015	$	73,704
Oct.1 to Dec. 31, 2015			$	55,277
Jan. 1 to Dec. 31, 2016		237,713		237,713
Jan. 1 to Dec. 31, 2017		228,329		228,330
Jan. 1 to Dec. 31, 2018		257,874		257,874
Jan. 1 to Dec. 31, 2019		244,942		244,942
Jan. 1 to Dec. 31, 2020		275,996		275,996
Jan. 1 to Dec. 31, 2021		261,932		261,932
Jan. 1 to Mar. 31, 2022		48,705		97.410
Total	$	1,629,195	$	1,659,474

Off-Balance Sheet Financing Arrangements

As of ~~June~~September 30, ~~2015~~2014 we had no off-balance sheet financing arrangements.

We experience pricing pressures in the form of competitive prices. We are also impacted by rising costs for certain inflation-sensitive operating expenses such as labor and employee benefits and facility leases. However, we generally do not believe these impacts are material to our revenues or net income.

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 long-lived assets and its 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 attention that may vary its outlook for the future. Actual results may differ from these estimates under different assumptions.

We believe the critical accounting policies that most impact our consolidated financial statements are described below.

Basis of Accounting — We use the accrual method of accounting.

Revenue Recognition — In general, we recognize revenue 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. Revenues are generated as services are provided to the customer based on the sales price agreed and collected. We recognize revenue as the time is worked or as units of production are completed, which is when the revenue is earned and realized. Labor costs are recognized as the costs are incurred. We derive our revenue from the sale of Managed Care Services, Review Services and Case Management Services. These services may be sold individually or combined. When a sale combines multiple elements, we account for multiple-deliverable revenue arrangements in accordance with the guidance included in ASC 605-25.

Management reviews each agreement in accordance with the provision of the revenue recognition topic ASC 605 that addresses multiple-deliverable revenue arrangements. The multiple-deliverable arrangements entered into consist of bundled managed care which includes various units of accounting such as network solutions and patient management which includes managed care. Such elements are considered separate units of accounting due to each element having value to the customer on a stand-alone basis. The selling price for each unit of accounting is determined using a contract price. When our customers purchase several products the pricing of the products sold is generally the same as if the products were sold on an individual basis. Revenue is recognized as the work is performed in accordance with our customer contracts. Based upon the nature of our products, bundled managed care elements are generally delivered in the same accounting period. We recognize revenue for patient management services ratably over the life of the customer contract. We estimate, based upon prior experience in managed care, the deferral amount from when the customers claim is received to when the customer contract expires. Advance payments from subscribers and billings made in advance are recorded on the balance sheet as deferred revenue. At ~~June~~September 30, 2015 and 2014 we recognized ~~$40,754~~$40,904 and $0, respectively in billings made in advance, requiring deferral of revenue.

Accounts Receivables and Bad Debt Allowance – — In the normal course of business we extend credit to our customers on a short-term basis. Although the credit risk associated with these customers is minimal, we routinely reviews our accounts receivable balances and make provisions for doubtful accounts. We age our 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, we charge off the receivable against the bad debt reserve. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes. In order to assess the collectability of these receivables, we perform ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The allowance for doubtful accounts is based on the best information available to us and is reevaluated and adjusted as additional information is received. We evaluate the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall national economy. At ~~June~~September 30, 2015 and December 31, 2014, our bad debt reserve of ~~$57,510~~$67,260 and $40,510, respectively as a general reserve for certain 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 ~~June~~September 30, 2015 and December 31, 2014 are as follows:

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

IIt~~tem~~em 3. Quantitative and Qualitative Disclosure about Market Risk

As a smaller reporting company as defined in Rule 12b-2 of the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”),~~ and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Item 4. 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 Exchange Act), as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were effective in ensuring that information required by to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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

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

		Page

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements		3

	(Unaudited) Balance Sheets as of ~~June~~September 30, 2015 ~~(Unaudited)~~ and December 31, 2014	3

	(Unaudited) Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2015 and 2014	4

	(Unaudited) Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2015 and 2014	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		8

Item 3. Quantitative and Qualitative Disclosure about Market Risk		20

Item 4. Controls and Procedures		20

PART II — OTHER INFORMATION

Item 1A. Risk Factors		21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		21

Item 6. Exhibits		21

Signatures		22

									September 30, 2015			December 31, 2014
ASSETS	ASSETS							ASSETS
		June 30, 2015 (Unaudited)			December 31, 2014
Current Assets
Cash		$	3,618,333		$	2,946,025			$	3,281,140		$	2,946,025
Accounts receivable, net of allowance of $57,510 and $40,510			1,544,738			1,868,181
Prepaid income tax			374,484			2,703
Accounts receivable, net of allowance of $67,260 and $40,510										1,508,168			1,868,181
Deferred tax asset			77,059			77,059				77,059			77,059
Prepaid income taxes										240,359			2,703
Prepaid expenses			104,410			77,278				88,178			77,278
Total current assets			5,719,024			4,971,246				5,194,904			4,971,246

Property and Equipment, net
Computer equipment			249,976			222,240				294,405			222,240
Furniture and fixtures			92,191			92,191				149,541			92,191
Office equipment			27,160			27,160				27,160			27,160
Office equipment under capital lease			38,380			63,923				-			63,923
Total property and equipment			407,707			405,514				471,106			405,514
Less: accumulated depreciation			(229,461	)		(226,329	)
Less: accumulated depreciation and amortization										(245,472	)		(226,329	)
Net property and equipment			178,246			179,185				225,634			179,185

Other Assets			-			8,158				26,788			8,158
Total assets		$	5,897,270		$	5,158,589			$	5,447,326		$	5,158,589


LIABILITIES AND STOCKHOLDERS’ EQUITY								LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable		$	136,645		$	240,214			$	133,925		$	240,214
Accrued expenses			242,947			261,510				282,477			261,510
Income tax payable			-			9,348				4,867			9,348
Current obligations under capital lease			1,186			8,151				-			8,151
Deferred rent expense			9,385			14,332				258			14,332
Dividend payable										133,420			-
Unearned revenue			40,754			-				40,904			-
Total current liabilities			430,917			533,555				595,851			533,555

Commitments and Contingencies			-			-				-			-

Shareholders’ Equity
Preferred stock; 5,000,000 shares authorized at $0.001 par value; zero shares issued and outstanding			-			-				-			-
Common stock, $0.001 par value 50,000,000 shares authorized at June 30, 2015 and December 31, 2014; 802,424 shares issued, (797,271 outstanding net of treasury shares) and 802,424 shares issued, (800,396 outstanding net of treasury shares), respectively			797			800
Common stock, $0.001 par value 50,000,000 shares authorized at September 30, 2015 and December 31, 2014; 802,424 shares issued, (794,072 outstanding net of treasury shares) and 802,424 shares issued, (800,396 outstanding net of treasury shares), respectively										794			800
Additional paid-in capital			623,634			623,631				623,637			623,631
Treasury stock at cost (5,153 shares and 2,028 shares at June 30, 2015 and December 31, 2014), respectively			(182,738	)		(76,715	)
Treasury stock at cost (8,269 shares and 2,028 shares at September 30, 2015 and December 31, 2014), respectively										(254,057	)		(76,715	)
Retained earnings			5,024,660			4,077,318				4,481,101			4,077,318
Total stockholders' equity			5,466,353			4,625,034
Total stockholders’ equity										4,851,475			4,625,034
Total liabilities and stockholders’ equity		$	5,897,270		$	5,158,589			$	5,447,326		$	5,158,589

For the months	Total number of shares purchased		Average price paid per share(1)		Total number of shares purchased as part of publicly announced plans or programs(2)		Maximum dollar value of shares that may yet be purchased under the plans or programs(3)
April 1, 2015 to April, 2015		2,422	$	32.84		2,422	$	330,882
May 1, 2015 to May 31, 2015		-	$	-		-	$	-
June 1, 2015 to June 30, 2015		443	$	29.84		443	$	317,262
Total		2,865	$	32.37		2,865	$	317,262

For the months	Total number of shares purchased		Average price paid per share(1)		Total number of shares purchased as part of publicly announced plans or programs(2)		Maximum dollar value of shares that may yet be purchased under the plans or programs(3)
July 1, 2015 to July 31, 2015		306	$	32.47		306	$	306,998
August 1, 2015 to August 31, 2015		2,810	$	20.75		2,810	$	246,943
September 1, 2015 to September 30, 2015		-	$	-		-	$	-
Total		3,116	$	21.90		3,116	$	-

	For three months ended June 30,						For six months ended June 30,						For three months ended September 30,						For nine months ended September 30,
	2015			2014			2015			2014			2015			2014			2015			2014

Revenues
Revenues:
UR fees	$	961,840		$	975,695		$	1,976,130		$	1,701,550		$	1,027,893		$	1,362,283		$	3,004,023		$	3,063,833
MBR fees		282,772			442,963			653,186			918,183			201,903			526,341			855,089			1,444,524
HCO fees		399,060			259,316			647,700			518,800			273,089			260,069			920,789			778,869
MPN fees		247,695			258,605			555,813			512,034			224,128			285,415			779,941			797,449
NCM fees		235,067			257,334			479,539			511,463			216,216			242,376			695,755			753,839
Other		134,671			104,298			317,835			164,850			126,352			76,032			444,187			240,882
Total revenues		2,261,105			2,298,211			4,630,203			4,326,880			2,069,581			2,752,516			6,699,784			7,079,396

Expenses
Expenses:
Depreciation and amortization		15,889			11,611			28,675			22,766			16,011			12,642			44,686			35,408
Bad debt provision														9,750			15,851			26,677			24,991
Consulting fees		88,335			76,321			178,525			152,220			90,063			76,790			268,588			229,010
Bad debt provision		8,677			887			16,927			9,140
Salaries and wages		633,095			592,118			1,318,906			1,178,945			555,666			699,096			1,874,572			1,878,041
Professional fees		95,593			122,920			215,939			228,532			99,418			109,871			315,357			338,403
Insurance		88,225			74,232			172,982			142,880			83,283			82,155			256,265			225,035
Outsource service fees		329,805			401,447			667,552			666,015			295,507			658,233			963,059			1,324,248
Data maintenance		101,309			21,561			108,594			40,732			11,819			12,953			120,413			53,685
General and administrative		146,240			139,346			297,609			262,707			139,035			133,449			436,644			396,156
Total expenses		1,507,168			1,440,443			3,005,709			2,703,937			1,300,552			1,801,040			4,306,261			4,504,977

Income from operations		753,937			857,768			1,624,494			1,622,943			769,029			951,476			2,393,523			2,574,419

Other expense
Interest expense		(65	)		(319	)		(195	)		(698	)		(6	)		(258	)		(201	)		(956	)
Total other expense		(65	)		(319	)		(195	)		(698	)		(6	)		(258	)		(201	)		(956	)


Income before taxes		753,872			857,449			1,624,299			1,622,245			769,023			951,218			2,393,322			2,573,463

Income tax provision		314,771			356,784			676,957			675,019			319,992			395,803			996,949			1,070,822

Net income	$	439,101		$	500,665		$	947,342		$	947,226		$	449,031		$	555,415		$	1,396,373		$	1,502,641

Basic and fully diluted earnings per share:
Earnings per share amount	$	.55		$	.62		$	1.19		$	1.18		$	.57		$	.69		$	1.76		$	1.87
Weighted average common shares outstanding		797,271			802,424			797,271			802,424			794,072			802,424			794,072			802,424

	Six months ended June 30,						Nine months ended September 30,
	2015			2014			2015			2014
Cash flows from operating activities:
Net income	$	947,342		$	947,226		$	1,396,373		$	1,502,641
Adjustments to reconcile net income to net cash:
Depreciation and amortization		28,675			22,766			44,686			35,408
Changes in operating assets & liabilities:
Increase in bad debt provision		17,000			9,140
Changes in operating assets and liabilities
Increase (decrease) in bad debt provision								26,750			(327	)
Decrease (increase) in accounts receivable		306,443			(436,613	)		333,263			(567,614	)
(Increase) in receivables – other		-			(361	)
Decrease (increase) in other assets		8,158			(5,545	)
(Increase) in other assets								(18,630	)		(5,544	)
(Increase) decrease in prepaid income tax		(371,781	)		6,568			(237,656	)		6,568
(Increase) decrease in prepaid expenses		(27,132	)		3,640
(Increase) in prepaid expenses								(10,900	)		(6,703	)
(Decrease) increase in accounts payable		(103,569	)		112,262			(106,289	)		225,270
(Decrease) in accrued expenses		(18,563	)		(253	)
Increase in accrued expenses								20,967			56,170
(Decrease) increase in income tax payable		(9,348	)		192,318			(4,481	)		153,121
(Decrease) in deferred rent expense		(4,947	)		(3,529	)		(14,074	)		(5,448	)
Increase in unearned revenue		40,754			-			40,904			-
Net cash provided by operating activities		813,032			847,619			1,470,913			1,393,542

Cash flows from investing activities:
Cash flows used in investing activities
Purchases of computers, furniture and equipment		(27,736	)		(57,212	)		(91,135	)		(69,855	)
Net cash used by investing activities		(27,736	)		(57,212	)		(91,135	)		(69,855	)

Cash flows from financing activities:
Cash flows used in financing activities
Purchase of treasury stock		(106,023	)		-			(177,342	)		-
Issuance of cash dividend								(859,170	)		-
Payment of obligation under capital lease		(6,965	)		(6,464	)		(8,151	)		(9,787	)
Net cash used in financing activities		(112,988	)		(6,464	)		(1,044,663	)		(9,787	)
Increase in cash		672,308			783,943			335,115			1,313,900
Cash at beginning of period		2,946,025			1,265,535			2,946,025			1,265,535
Cash at end of period	$	3,618,333		$	2,049,478		$	3,281,140		$	2,579,435

Supplemental cash flow information
Supplemental Cash Flow Information
Cash paid for:
Interest	$	197		$	383		$	205		$	959
Income taxes paid	$	1,058,086		$	476,134		$	1,239,086		$	911,134
Non-cash financing and investing activities:
Dividend payable							$	133,420		$	-

	For the six months ended June 30,
	2015 (unaudited)			2014 (unaudited)

Net cash provided by operating activities	$	813,032		$	847,619
Net cash used in investing activities		(27,736	)		(57,212	)
Net cash used in financing activities		(112,988	)		(6,464	)

Net increase in cash	$	672,308		$	783,943

Capitalized Equipment Leases (3)	$	1,193		$	1,193		$	-		-		-
Total Capitalized Equipment Leases	$	1,193		$	1,193		$	-		-		-
Less amounts representing interest		(7	)		(7	)		-		-		-
Total Principal	$	1,186		$	1,186		$	-	$	-	$	-

Rent Period	Annual Rent Payments
Jul. 1 to Dec. 31, 2015	$	74,741
Jan. 1 to Feb. 29, 2016		24,914
Total	$	99,655

Exhibit Number		Title of Document

Exhibit 31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 3232.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101		The following materials from Pacific Health Care Organization, Inc.’s Quarterly Report on Form 10-Q for the period ended ~~June~~September 30, 2015 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2015 and December 31, 2014, (ii) the Condensed Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, (iii) the Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, and (iv) Notes to the Condensed Consolidated Financial Statements.

		PACIFIC HEALTH CARE ORGANIZATION, INC.


Date:	~~August~~November 12, 2015	/s/ Tom Kubota
		Tom Kubota Chief Executive Officer


Date:	~~August~~November 12, 2015	/s/ Fred Odaka
		Fred Odaka Chief Financial Officer