UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549 

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2026

or

☐ 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

PACIFIC HEALTH CARE ORGANIZATION, INC.

(Exact name of registrant as specified in its charter)

(949) 721-8272

(Registrant’s telephone number, including area code)

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

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.) Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of August 4, 2026, the registrant had 12,800,000 shares of common stock, par value $0.001, issued and outstanding.

PACIFIC HEALTH CARE ORGANIZATION, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Pacific Health Care Organization, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

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

Pacific Health Care Organization, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

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

Pacific Health Care Organization, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

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

Pacific Health Care Organization, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pacific Health Care Organization, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 15 – SUBSEQUENT EVENTS

In July 2026, the Company received ERC refund checks from the IRS totaling $239,970, which included interest in the amount of $37,313. The Company has no additional ERC applications pending with the IRS.

In accordance with ASC 855-10, Company management reviewed all material events through the date of issuance and, other than the receipt of ERC refund checks disclosed above, there are no other material subsequent events to report.

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

Throughout this Quarterly Report on Form 10-Q (this “quarterly report”), 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”), Medex Managed Care, Inc. (“MMC”) and Medex Medical Management, Inc. (“MMM”).

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth below should be read in conjunction with our unaudited condensed consolidated financial statements, and notes thereto, contained in this quarterly report, as well as our audited consolidated financial statements, and notes thereto, contained in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2026 (the “Annual Report”).

All statements other than statements of historical fact included herein and in the documents incorporated by reference in this quarterly report, if any, including without limitation, statements regarding future events, financial condition or results of operations, business strategy, potential acquisitions, budgets, projected costs, liquidity, capital resources, and plans and objectives of management for future operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “future,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “will,” “would,” and other similar expressions and their negatives.

Forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties, many of which may be beyond our control. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and actual results could differ materially as a result of various factors. The following include some but not all of the factors that could cause actual results and financial condition to differ materially from those expressed or implied by forward-looking statements:

For more detailed information about particular risk factors related to us and our business, see Part I, Item 1A Risk Factors of our Annual Report.

New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

One should not place undue reliance on forward-looking statements. Forward-looking statements are based on the beliefs of management as well as assumptions made by and information currently available to management and apply only as of the date of this quarterly report or the respective dates of the documents it incorporates by reference. Neither we nor any other person assumes any responsibility for the accuracy or completeness of forward-looking statements. Further, except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or a change in events, conditions, circumstances, or assumptions underlying such statements, or otherwise.

Overview

We are workers’ compensation cost containment specialists providing a range of services principally to California employers and claims administrators. We incorporated under the laws of the State of Utah in April 1970, under the name Clear Air, Inc. We changed our name to Pacific Health Care Organization, Inc., in January 2001. In February 2001, we acquired Medex, a California corporation organized in March 1994, in a share for share exchange. Medex is in the business of managing and administering both Health Care Organizations (“HCOs”) and Medical Provider Networks (“MPNs”) in the state of California and providing workers’ compensation carve-out and Medicare set-aside services. In March 2011, we incorporated MMC, a Nevada corporation, as a wholly owned subsidiary of the Company. MMC oversees and manages the Company’s utilization review and bill review services. In February 2012, we incorporated MMM, a Nevada corporation, as a wholly owned subsidiary of the Company. MMM is responsible for overseeing and managing medical case management and employee advocate services. We discontinued lien representation services in the third quarter of 2023 due to the lack of demand.

Business of the Company

We offer an integrated and layered array of complementary business solutions that enable our customers to better manage their workers’ compensation-related healthcare administration costs. We are constantly looking for ways to expand the suite of services we can provide our customers, either through strategic acquisitions or organic development.

Our business objective is to deliver value to our customers by reducing their workers’ compensation-related medical claims expenses in a manner that will ensure injured employees receive high quality healthcare, returning them to gainful employment without undue delay. According to 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 longer than average treatment duration. Our services focus on ensuring timely medical treatment to reduce the claim duration and medical treatment costs.

Our services include providing customers access to our HCOs and MPNs. We also provide medical bill review, medical case management, employee advocate services, utilization review, workers’ compensation carve-outs and Medicare set-aside services. Complementary to these services, we also provide expert witness testimony. We offer our services as a bundled managed care solution, as standalone services, or as add-on ancillary services.

Our core services focus on reducing medical treatment costs by enabling our customers to have control and oversight of the medical treatment of their injured employees to ensure treatment is timely and appropriate. This control is primarily obtained by participation in our HCOs or one of our MPNs. Through Medex, we hold two of three total licenses issued by the state of California to establish and manage HCOs within the state of California. We hold several government-issued licenses to operate medical provider networks. We also hold approvals issued by the state of California to function as an MPN and currently administer 19 MPNs. Our HCO and MPN programs provide our customers with provider networks within which the customer has some ability to direct the administration of the claim. This is designed to decrease the incidence of fraudulent claims and disability awards, and ensure injured employees receive necessary vocational rehabilitation and training. Our medical bill and utilization review services provide oversight of medical billing and treatment requests, and our medical case management and employee advocate services keep workers’ compensation claims progressing to a resolution and assure treatment plans are aligned from a medical perspective.

Our customers include self-administered employers, insurers, third party administrators, municipalities, and others. Our principal customers are companies with operations located in the state of California where the cost of workers’ compensation insurance is a critical problem for employers, though we process medical bill reviews, utilization reviews and provide medical case management and employee advocate services in several other states. Our provider networks, which are located only in California, are comprised of providers experienced in treating occupational injuries.

Our business has a long sales cycle, typically eight months or more. Once we have established a customer relationship and enrolled the employees of our employer customers, we anticipate our revenue to adjust with the growth or retraction of our customers’ employee headcount. We also expect growth and contraction of employee headcounts throughout the year as we gain new customers and lose existing customers. The reasons for customer terminations vary but include when a customer opts to use a different workers’ compensation administration vendor; engages an insurance carrier or third-party administrator that uses a different workers’ compensation administration vendor; and when our contract ends with state and local governments and they are required to engage in a public bidding process for their workers’ compensation administration vendor.

Key trends affecting results of operations

The employee enrollment numbers in our HCO and MPN programs typically correlate with general economic conditions and the size and activities of our customers’ workforce. If economic conditions become challenging, including from the effects of inflationary pressures, elevated interest rates, and difficult labor market conditions, our customers may reduce their workforce or seek price-competitive alternatives to our services, in which case we would expect a decline in the number of employees enrolled in our HCO and MPN programs and employee advocate programs, which could materially affect related revenues. During the six months ended June 30, 2026, our operating revenue decreased primarily due to the significant customer terminations discussed below. We believe these terminations were influenced, at least in part, by challenging economic conditions and the customers’ efforts to seek more price-competitive alternatives to our services.

Though we continue our efforts to increase our customer base and reduce customer concentration across all service lines, the addition or loss of a single customer can materially impact our results of operations. For example, in October 2024 we received notice of termination from one of our significant customers. This termination did not materially impact our operating revenues in 2025, but did materially impact our operating revenues during the first six months of 2026, and will likely continue to impact our operating revenues in future periods. Further, in January and June 2026, we received notices of termination from two additional significant customers, which we anticipate will have material impacts on our operating revenues in future periods. However, we also expect these impacts will be partially offset in future periods by increased services and new programs requested by our other customers, as well as internal labor cost reductions made during the third quarter of 2026. We expect to continue to be susceptible to risks associated with customer concentration, and related potential material impacts on our results of operations for the foreseeable future.

Our medical bill review and utilization review programs grew by 22% and 12%, respectively, during the six months ended June 30, 2026, compared to the same period in 2025, which partially offset the overall decreases in HCO program revenue. We believe that increased demand for our medical bill review and utilization review services was driven by rising and difficult to control healthcare costs, as these services are an additional means to decrease healthcare costs for our customers. However, these service lines remain sensitive to labor reductions and future labor reductions by our customers could adversely affect the demand for these programs.

Revenue

We derive revenue from fees charged for HCO notifications, HCO/MPN program administration, HCO/MPN custom networks, HCO/MPN claim network fees, medical bill review, utilization review services, medical case management, employee advocate services, Medicare set-aside, and network access.

HCO

HCO revenue is generated from fees charged to our employer customers for annual and new hire notifications to enroll their employees into our HCO program, annual or monthly program administration, custom network fees, claim network fees to access our HCO provider networks, and fees for other ancillary services they may select.

MPN

Like HCO revenue, MPN revenue is generated from fees charged to our employer customers for monthly program administration, custom network fees, and claim network fees to access our MPN provider networks. Unlike HCOs, from which we derive revenues from annual and new hire notification fees, MPNs do not require annual and new hire notifications and as such we do not generate related revenues.

Medical bill review

Medical bill review involves analyzing medical provider services and equipment billing to ascertain proper reimbursement. California and many other states have established fee schedules for the maximum allowable fees payable under workers’ compensation for a variety of procedures performed by medical providers. Many procedures, however, are not covered under the fee schedules, such as hospital bills, which still require review and negotiation. Our medical bill review services include coding review and re-bundling, confirming that the services are customary and reasonable, fee schedule compliance, out-of-network bill review, pharmacy review, and preferred provider organization repricing arrangements. Our medical bill review services can result in significant savings for our customers. Revenue for medical bill reviews is generated based on a fixed fee per medical bill reviewed and a percentage of savings of the preferred provider organization discounts. Hospital bill review services generate revenue on a percentage of savings off of the hospital bill, usually with a negotiated cap.

Utilization review

Utilization review is the review of medical treatment requests by providers to give a safeguard for employers and injured employees against unnecessary or inappropriate medical treatment from the perspective of medical necessity, quality of care, appropriateness of decision-making, and timeliness of treatment. Its purpose is to reduce employer liability for medical costs that are not medically appropriate or approved by the relevant medical and legal authorities and the payor. We generate revenue when we receive a referral for a request for authorization of treatment from a claims adjuster. We bill by the number of treatment requests and the level of expertise of the reviewer required to approve, modify, or deny the request.

Medical case management

Medical case management oversees the injured employees’ medical treatment to ensure that it progresses to a resolution and treatment plans are aligned from a medical perspective. Medical oversight is a collaborative process that assesses, evaluates, coordinates, implements and monitors medical treatment plans and the options and services required to meet an injured worker’s health needs. Our medical case management services are performed by nurses who are licensed by the state and have expertise in various clinical areas and backgrounds in workers’ compensation matters. We work to manage the number of nurses in our program to maintain our ratio of claims per nurse at a level that ensures timely and appropriate medical care is given to the injured worker and facilitates faster claim closures for our customers.

We also offer employee advocate services, which is similar to medical case management in that it utilizes our medical case managers who provide similar services; however, the medical case manager is an advocate for the employee. We generate revenue from these services when we receive a workers’ compensation claim and a medical case manager is assigned to oversee the injured workers’ medical treatment, with billing based on the number of hours a medical case manager works on the claim.

Other

Other revenue consists of revenue derived from network access fees charged for network access for preferred provider organizations, ancillary legal support services, Medicare set-aside and workers’ compensation carve-out services.

The following table sets forth, for the below indicated periods ended June 30, 2026 and 2025, respectively, the percentage each revenue item identified in our unaudited condensed consolidated financial statements contributed to total revenues during the respective period.

Expense

Salaries and wages

Salaries and wages reflect employment-related compensation we pay to our employees, payroll processing, payroll taxes, vacation expenses and commissions.

Professional fees

Professional fees include fees we pay to third parties to provide IT, financial, marketing, lobbying, in-house legal services related to the various services we offer, consulting, field medical case management, and board of directors’ fees for board meetings, as well as legal, accounting, and other professional services fees.

Insurance

Insurance expenses are comprised primarily of health insurance benefits offered to our employees, directors’ and officers’ liability insurance, and cyber liability, workers’ compensation and business liability coverages.

Outsource service fees

Outsource service fees consist of costs incurred by our subsidiaries by partially outsourcing utilization review, medical bill review, administrative services for medical case management and HCO, and Medicare set-aside services; and typically tend to fluctuate in correlation with customer demand for those services.

Data maintenance fees

Data maintenance fees include fees we pay to a third party to process HCO annual and new hire employee enrollments and notifications. HCO employee enrollment and notification fees fluctuate throughout the year because of the varied timing of customer enrollment in our HCO program, the number of employees our customers have in their workforce, the number of new hires throughout the year, and the number of new workers’ compensation claims.

General and administrative

General and administrative expenses consist primarily of depreciation, bad debt, dues and subscriptions, IT enhancement, meals, travel, and entertainment, office rent, telephone, licenses and permits, miscellaneous, advertising and marketing, auto expenses, bank charges and fees, education, parking, postage and delivery, shareholders’ expense, equipment repairs and office supplies.

The following table sets forth, for the below indicated periods ended June 30, 2026 and 2025, respectively, the percentage each expense item identified in our unaudited condensed consolidated financial statements contributed to total expenses during the respective period.

Results of Operations

Comparison of the three months ended June 30, 2026 and 2025

The following represents selected components of our unaudited condensed consolidated results of operations for the three-month periods ended June 30, 2026 and 2025, respectively, together with changes from period-to-period:

Revenue

HCO

HCO revenue for the three-month period ended June 30, 2026, decreased by 6% compared to the same period in the prior year. The decrease in HCO revenue was largely due to the termination of services performed for a significant customer that completed a phase out of our services during fiscal year 2025.

MPN

MPN revenue for the three-month period ended June 30, 2026, decreased by 14% compared to the same period in the prior year. The decrease in MPN revenue was largely due to the termination of this service line by existing and terminating customers.

Medical bill review

During the three-month period ended June 30, 2026, medical bill review revenue increased by 66% compared to the same period in the prior year. The increase was primarily due to a shift in the mix of bill reviews performed from period to period, with a higher proportion of higher-priced hospital bill reviews performed in the second quarter of 2026 compared to a higher proportion of lower-priced bill reviews in the second quarter of 2025.

Utilization review

During the three-month period ended June 30, 2026, utilization review revenue increased 16%, compared to the same period in the prior year. The increase in utilization review revenue was primarily due to increased referrals for requests for authorization from existing customers.

Medical case management

During the three-month period ended June 30, 2026, medical case management revenue decreased 9% compared to the same period in the prior year. The decrease was primarily attributable to the termination of services performed for a significant customer.

Other

 During the three-month period ended June 30, 2026, other revenue increased 130% compared to the same period in the prior year, primarily due to an increase in the request for Medicare set-aside services from existing customers.

Expenses

Salaries and wages

During the three-month period ended June 30, 2026, salaries and wages decreased 9% compared to the three months ended June 30, 2025. The decrease was due primarily to the loss of one employee from period to period.

Professional fees

During the three-month period ended June 30, 2026, professional fees increased 22% compared to the three months ended June 30, 2025. The increase in professional fees was primarily the result of fees paid to external human resources and medical consultants.

Insurance

During the three-month period ended June 30, 2026, insurance expenses decreased 11% compared to the same period in the prior year due to decreases in business insurance rates.

Outsource service fees

During the three-month period ended June 30, 2026, outsource service fees increased 28% compared to the three months ended June 30, 2025. The increase in outsource service fees was primarily related to the increase in use of these services for our utilization review service line.

Data maintenance

During the three-month period ended June 30, 2026, data maintenance fees decreased 5% compared to the three months ended June 30, 2025. The decrease in data maintenance fees is due to an overall decrease in costs associated with creating and sending annual and renotification letters for our customers.

General and administrative

General and administrative expenses decreased by 9% during the three-month period ended June 30, 2026 compared to the three months ended June 30, 2025. The decrease was primarily due to decreases in vehicle expenses and advertising and marketing. The decreases were partially offset by increases in miscellaneous expenses.

Income from Operations

During the three-month period ended June 30, 2026, we recognized a 3% increase in total revenue and a 1% decrease in total expenses. As a result, our income from operations increased $65,837, or 22% for the three months ended June 30, 2026 when compared to the three months ended June 30, 2025.

Other Income, net

During the three-month period ended June 30, 2026, other income, net decreased $497,887 compared to the same period in 2025, primarily due to ERC refunds received in 2025 from the Internal Revenue Service in the amount of $488,655, which includes interest of $68,854. There were no ERC refunds received during the three months ended June 30, 2026.

Income Tax Provision

We realized a decrease in our income tax provision of $122,151, or 47%, during the three-month period ended June 30, 2026 compared to the same period in the prior year, which was primarily attributable to the receipt of ERC refund checks during the prior period, which increased our tax liability.

Net Income

During the three-month period ended June 30, 2026, we realized a 3% increase in total revenues, a 1% decrease in total expenses, a $497,887 decrease in other income, net, and a 47% decrease in our provision for income tax when compared to the same period in the prior year. As a result, we realized net income of $327,008, a 49% decrease in net income year over year.

Comparison of the six months ended June 30, 2026 and 2025

The following represents selected components of our unaudited condensed consolidated results of operations for the six-month periods ended June 30, 2026 and 2025, respectively, together with changes from period-to-period:

Revenue

HCO

During the six-month period ended June 30, 2026, HCO revenue decreased 40% compared to the same period in the prior year. The decrease in HCO revenue was primarily attributable to the termination of services performed for a significant customer that completed a phase out of our services during fiscal year 2025.

MPN

MPN revenue for the six-month period ended June 30, 2026, decreased by 9% compared to the same period in the prior year. The decrease in MPN revenue was largely due to the termination of this service line by existing and terminating customers.

Medical bill review

During the six-month period ended June 30, 2026, medical bill review revenue increased by 22% compared to the same period in the prior year. The increase was primarily due to an increase in medical bill review requests from an existing customer.

Utilization review

During the six-month period ended June 30, 2026, utilization review revenue increased 12%, compared to the same period in the prior year. The increase in utilization review revenue was due to increased referrals for requests for authorization from existing customers.

Medical case management

During the six-month period ended June 30, 2026, medical case management revenue decreased 6% compared to the same period in the prior year. The decrease was primarily attributable to the termination of services performed for a significant customer.

Other

Other revenue for the six-month period ended June 30, 2026 decreased 78% compared to the same period in the prior year, primarily due to the discontinuance of network access fee-related services for the significant customer that completed a phase out of our services during fiscal year 2025.

Expenses

Salaries and wages

During the six-month period ended June 30, 2026, salaries and wages decreased 9% compared to the six months ended June 30, 2025. The decrease was due primarily to the loss of one employee from period to period.

Professional fees

During the six-month period ended June 30, 2026, professional fees decreased 4% compared to the six months ended June 30, 2025. The decrease in professional fees was primarily the result of a normalization of accounting and legal fees after our transition to a new auditing firm.

Insurance

During the six-month period ended June 30, 2026, insurance expenses decreased 5% compared to the same period in the prior year due to decreases in business insurance rates.

Outsource service fees

During the six-month period ended June 30, 2026, outsource service fees increased 26% compared to the six months ended June 30, 2025. The increase in outsource service fees was primarily related to the increase in use of these services for our utilization review service line.

Data maintenance

During the six-month period ended June 30, 2026, data maintenance fees decreased 57% compared to the six months ended June 30, 2025. The decrease in data maintenance fees was primarily due to the timing of when we completed annual and termination letters, and related billing for the significant customer that completed a phase out of our services during fiscal year 2025.

General and administrative

General and administrative expenses decreased by 6% during the six-month period ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease was primarily due to decreases in vehicle expenses, dues and subscriptions, advertising and marketing, and meals expenses. The increases were partially offset by increases in IT enhancements and miscellaneous expenses.

Income from Operations

During the six-month period ended June 30, 2026, we recognized an 8% decrease in total revenue and a 7% decrease in total expenses. As a result, our income from operations decreased $75,896, or 12%, for the six months ended June 30, 2026, when compared to the six months ended June 30, 2025.

Other Income, net

During the six-month period ended June 30, 2026, other income, net decreased $494,924, primarily due to ERC refunds received in 2025 from the Internal Revenue Service in the amount of $488,655, which includes interest of $68,854.

Income Tax Provision

We realized a decrease in our income tax provision of $161,927, or 43%, during the six-month period ended June 30, 2026 compared to the same period in the prior year. The decrease was primarily attributable to higher pre-tax income in the prior year resulting from the receipt of ERC refund checks in the prior year, which also increased our tax liability in that period.

Net Income

During the six-month period ended June 30, 2026, we realized an 8% decrease in total revenues, a 7% decrease in total expenses, a decrease in other income, net of $494,924, and a 43% decrease in our provision for income tax when compared to the same period in the prior year. As a result, we realized net income of $520,677, a 44% decrease in net income year over year.

Liquidity and Capital Resources

Management currently believes that cash on hand and anticipated cash flows from operations will be sufficient to fund our operations for at least the next twelve months. Our primary sources of liquidity are cash, cash equivalents, short-term investments, and future cash generated from operations. However, our ability to generate cash from operations will depend on our future operating performance, which is subject to certain ongoing known and unknown risks and uncertainties. For a discussion of particular risk factors related to our business, see Part I, Item 1A Risk Factors of our Annual Report.

We intend to continue to pursue potential acquisition transactions that, if additional cash on hand were needed for such a transaction, we would either need to condition closing upon maturity of our investments, if applicable, or seek alternate financing, or a combination of those approaches. We may also seek growth through organic development of new lines of business or expansion of existing offerings. Depending upon the nature of the opportunities we identify, such acquisitions or expansion could require greater capital resources than we currently possess. Should we need additional capital resources, we could seek to obtain such through debt and/or equity financing. We do not currently possess an institutional source of financing and there is no assurance that we could be successful in obtaining equity or debt financing when needed, on favorable terms, or at all. We could also use shares of our capital stock as consideration for a business acquisition transaction, but there is also no assurance that there would be significant interest in our capital stock from a potential seller or the market.

Cash Flow

During the six months ended June 30, 2026, we had a net increase in cash and cash equivalents of $70,856. See below for additional discussion and analysis of cash flow.

Net cash provided by operating activities was $222,793 and $785,838 for the six months ended June 30, 2026 and 2025, respectively. This $563,496 decrease in cash flow from operations during the first half of 2026 was the result of lower operating income, no receipt of ERC refund checks, and changes in working capital balances.

Net cash used in investing activities was $151,937 and $664,536 for the six months ended June 30, 2026 and 2025, respectively. The change in net cash used in investing activities was due to an additional cash investment made in the prior period that was not repeated in the current period.

Net cash used in financing activities was $0 and $35,930 for the six months ended June 30, 2026 and 2025, respectively. The change in net cash used in financing activities from period to period was the result of our insurance financing agreement maturing during fiscal year 2025.

Off-Balance Sheet Financing Arrangements

As of June 30, 2026, we had no off-balance sheet financing arrangements.

Inflation

We experience pricing pressures in the form of competitive pricing. Insurance carriers and third-party administrators compete against us for customers by offering bundled claims administration services with their own managed care services at a lower rate. We are also impacted by rising costs for certain inflation-sensitive operating expenses such as labor and employee benefits and facility leases. We believe that these impacts can be material to our revenues or net income. Some of our customers are public entities which contract with us at a fixed price for the term of the contract. Increases in labor and employee benefits can reduce our profit margin over the term of these contracts. See also “the effects of inflation may have a disproportionate impact on our business” under Part I, Item 1A Risk Factors of our Annual Report.

For more detailed information about our critical accounting estimates, see “Critical Accounting Estimates” under Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Smaller reporting companies are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to provide reasonable assurance that information required to be disclosed by a company in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on the evaluation of our disclosure controls and procedures as of June 30, 2026, the end of the period covered by this quarterly report, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level. 

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2026 that materially affect, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

Management does not believe there have been any material changes to the risk factors listed under Part I, Item 1A Risk Factors of our Annual Report.

Item 5. Other Information

Insider Trading Arrangements

During the quarter ended June 30, 2026, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

Item 6. Exhibits

Exhibits. The following exhibits are filed or furnished, as applicable, as part of this quarterly report: