**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-QSB**

**QUARTERLY      REPORT UNDER SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

| For                the quarter ended: |   | Commission                File Number: |
|---------------------------------------|--------|----------------------------------------|
| June                30, 2007          |   | 0-27554                                |

**Conmed      Healthcare Management, Inc**
**.**

| Delaware                                                                      |   | 42-1297992                                          |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (IRS                Employer Identification Number) |

| 9375                Chesapeake StreetSuite                203La                Plata, MD 20646 |
|------------------------------------------------------------------------------------------------|
| (Address                and zip code of principal executive                offices)            |

| (301)                609-8460                                                         |
|---------------------------------------------------------------------------------------|
| (Issuer’s                telephone -number, including area                code) |

|                                                     | Number                of Shares Outstanding |
|----------------------------------------------------------|---------------------------------------------|
| Class                                                    | August                14, 2006              |
| Common                Stock, $0.0001 par value per share | 11,933,141                                  |

----

**CONMED      HEALTHCARE MANAGEMENT, INC.**

**TABLE      OF CONTENTS**

**PART      I.**
**FINANCIAL      INFORMATION**

|                                                                                                                                                                                                                 | **Page** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| ITEM                  1. FINANCIAL STATEMENTS (UNAUDITED)                                                                                                                                                            |     |
|                                                                                                                                                                                                                 |     |
| Consolidated                  Balance Sheets                                                                                                                                                                         |  1  |
| June                  30, 2007 and December 31, 2006                                                                                                                                                                 |     |
|                                                                                                                                                                                                                 |     |
| Consolidated                  Statements of Operations                                                                                                                                                               |     |
| January                  26 to June 30, 2007, January 1 to January 25, 2007, the six months                  ended                  June 30, 2006 and the three months ended June 30, 2007 and                  2006 | 2        |
|                                                                                                                                                                                                                 |     |
| Consolidated                  Statements of Cash Flows                                                                                                                                                               |     |
| January                  26 to June 30, 2007, January 1, 2007 to January 25, 2007 and the                  six                  months ended June 30, 2006                                                           | 3        |
|                                                                                                                                                                                                                 |     |
| Notes                  to Consolidated Financial Statements                                                                                                                                                          | 5        |
|                                                                                                                                                                                                                 |     |
| ITEM                  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF                  OPERATION                                                                                                            | 20       |
|                                                                                                                                                                                                                 |     |
| ITEM                  3. CONTROLS AND PROCEDURES                                                                                                                                                                     | 28       |
|                                                                                                                                                                                                                 |     |

**PART        II.**
**OTHER        INFORMATION**

|                                                                         |   |
|------------------------------------------------------------------------------|--------|
| ITEM                  1. LEGAL PROCEEDINGS                                   | 29     |
|                                                                         |   |
| ITEM                  2. UNREGISTERED SALES OF EQUITY SECURITIES             | 29     |
|                                                                         |   |
| ITEM                  3. DEFAULT UPON SENIOR SECURITIES                      | 29     |
|                                                                         |   |
| ITEM                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 29     |
|                                                                         |   |
| ITEM                  5. OTHER INFORMATION                              | 29     |
|                                                                         |   |
| ITEM                  6. EXHIBITS                                            | 29     |
|                                                                         |   |
|                                                                         |   |
| SIGNATURES                                                                   | 30     |

----

**PART      1. FINANCIAL INFORMATION**

**ITEM      1. FINANCIAL      STATEMENTS**

**CONMED      HEALTHCARE MANAGEMENT, INC.**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                      |   |  **SUCCESSOR                June 30, 2007 (unaudited)** |        |  **PREDECESSOR                December 31, 2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|-------------|--------------------------------------------------------|--------|
| **ASSETS**                                                                                                                                                |   |                                                    |        |                                              |   |
| CURRENT                ASSETS                                                                                                                             |   |                                                    |        |                                              |   |
| Cash                and cash equivalents                                                                                                                  |   | $                                                            | 6,574,297   |                                                   | $      | 122,269 |   |
| Accounts                receivable                                                                                                                        |   |                                                         | 1,373,922   |                                                   |   | 1,304,193 |   |
| Taxes                receivable                                                                                                                           |   |                                                         | 85,000      |                                                   |   |   |   |
| Claims                against escrow                                                                                                                      |   |                                                         | 333,373     |                                                   |   | -- |   |
| Prepaid                expenses                                                                                                                           |   |                                                         | 427,789     |                                                   |   | 226,629 |   |
| **Total                current assets**                                                                                                                   |   |                                                         | 8,794,381   |                                                   |   | 1,653,091 |   |
| PROPERTY                AND EQUIPMENT, NET                                                                                                                |   |                                                         | 66,824      |                                                   |   | 45,861 |   |
| OTHER                ASSETS                                                                                                                               |   |                                                         |        |                                                   |   |   |   |
| Service                contracts acquired, net                                                                                                            |   |                                                         | 3,559,000   |                                                   |   | -- |   |
| Non-compete                agreements, net                                                                                                                |   |                                                         | 884,000     |                                                   |   | -- |   |
| Goodwill                                                                                                                                                  |   |                                                         | 5,745,369   |                                                   |   | -- |   |
| Deposits                                                                                                                                                  |   |                                                         | 2,424       |                                                   |   | 2,424 |   |
| **Total                other assets**                                                                                                                     |   |                                                         | 10,190,793  |                                                   |   | 2,424 |   |
|                                                                                                                                                      |   | $                                                            | 19,051,998  |                                                   | $      | 1,701,376 |   |
|                                                                                                                                                      |   |                                                         |        |                                                   |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                             |   |                                                         |        |                                                   |   |   |   |
| CURRENT                LIABILITIES                                                                                                                        |   |                                                         |        |                                                   |   |   |   |
| Accounts                payable                                                                                                                           |   | $                                                            | 1,399,620   |                                                   | $      | 580,507 |   |
| Accrued                expenses                                                                                                                           |   |                                                         | 823,550     |                                                   |   | 987,979 |   |
| Deferred                revenue                                                                                                                           |   |                                                         | 24,997      |                                                   |   | 103,673 |   |
| Notes                payable, current portion                                                                                                             |   |                                                         | 165,664     |                                                   |   | 7,326 |   |
| **Total                current liabilities**                                                                                                              |   |                                                         | 2,413,831   |                                                   |   | 1,679,485 |   |
| NOTES                PAYABLE, LONG-TERM                                                                                                                   |   |                                                         | 9,365       |                                                   |   | 13,236 |   |
| DEFERRED                TAXES                                                                                                                             |   |                                                         | 1,021,000   |                                                   |   | --- |   |
| SHAREHOLDERS’                EQUITY                                                                                                                 |   |                                                         |        |                                                   |   |   |   |
| Preferred                stock no par value; authorized 5,000,000 shares; issued and outstanding                zero shares as of June 30, 2007           |   |                                                         | --          |                                                   |   | -- |   |
| Common                stock, $0.0001 par value, authorized 40,000,000 shares; issued and                outstanding 11,933,141 shares as of June 30, 2007 |   |                                                         | 1,193       |                                                   |   | 300 |   |
| Additional                paid-in capital                                                                                                                 |   |                                                         | 35,645,876  |                                                   |   | -- |   |
| Retained                earnings (deficit)                                                                                                                |   |                                                         | (20,039,267 | )                                                      |   | 8,355 |   |
| **Total                shareholders' equity**                                                                                                             |   |                                                         | 15,607,802  |                                                   |   | 8,655 |   |
|                                                                                                                                                      |   | $                                                            | 19,051,998  |                                                   | $      | 1,701,376 |   |
| *See                Notes to Financial Statements*                                                                                                        |   |                                                         |        |                                                   |   |   |   |

----

**CONMED      HEALTHCARE MANAGEMENT, INC.**

**CONSOLIDATED      STATEMENTS OF OPERATIONS (UNAUDITED)**
** **

|                                                   |   | **SUCCESSOR****For                  the 156-Day****Period                  January****26,                  2007 to June 30,****2007** |       | **PREDECESSO****R****For                  the 25-Day****Period                  January 1,****2007                  to January****25,                  2007** |   | **PREDECESSOR****For                  the Six****Months****Ended****June                  30, 2006** |   | **SUCCESSOR****For                  the Three****Months                  Ended****June                  30, 2007** |      | **PREDECESSOR****For                  the Three Months Ended****June                  30, 2006** |    |
|--------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|-----------|--------------------------------------------------------------------------------------------------|---------|
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |
| **Service                  Contract Revenue**          |   | $                                                                                                                                     | 10,015,594 |                                                                                                                                                          | $      | 1,504,565                                                                                            |   | $                                                                                                                  | 7,085,981 |                                                                                             | $       | 5,969,220 |   | $ | 3,548,631 |   |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| HEALTHCARE                  EXPENSES:                  |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| Salaries,                  wages and employee benefits |   |                                                                                                                                  | 4,995,851  |                                                                                                                                                          |   | 842,575                                                                                              |   |                                                                                                               | 3,468,435 |                                                                                             |    | 3,093,425 |   |   | 1,754,053 |   |
| Medical                  expenses                      |   |                                                                                                                                  | 2,680,219  |                                                                                                                                                          |   | 439,206                                                                                              |   |                                                                                                               | 2,177,562 |                                                                                             |    | 1,505,682 |   |   | 1,058,531 |   |
| Other                  operating expenses              |   |                                                                                                                                  | 411,685    |                                                                                                                                                          |   | 45,552                                                                                               |   |                                                                                                               | 281,617   |                                                                                             |    | 246,619 |   |   | 145,497 |   |
| **Total                  healthcare expenses**         |   |                                                                                                                                  | 8,087,755  |                                                                                                                                                          |   | 1,327,333                                                                                            |   |                                                                                                               | 5,927,614 |                                                                                             |    | 4,845,726 |   |   | 2,958,081 |   |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| **Gross                  Profit**                      |   |                                                                                                                                  | 1,927,839  |                                                                                                                                                          |   | 177,232                                                                                              |   |                                                                                                               | 1,158,367 |                                                                                             |    | 1,123,494 |   |   | 590,550 |   |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| Selling                  and administrative expenses   |   |                                                                                                                                  | 2,045,301  |                                                                                                                                                          |   | 92,264                                                                                               |   |                                                                                                               | 1,105,735 |                                                                                             |    | 1,178,286 |   |   | 514,327 |   |
| Depreciation                  and amortization         |   |                                                                                                                                  | 1,071,652  |                                                                                                                                                          |   | 1,698                                                                                                |   |                                                                                                               | 26,578    |                                                                                             |    | 572,409 |   |   | 10,949 |   |
| **Total                  operating expenses**          |   |                                                                                                                                  | 3,116,953  |                                                                                                                                                          |   | 93,962                                                                                               |   |                                                                                                               | 1,132,313 |                                                                                             |    | 1,750,695 |   |   | 525,276 |   |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| **Operating                  income (loss)**           |   |                                                                                                                                  | (1,189,114 | )                                                                                                                                                             |   | 83,270                                                                                               |   |                                                                                                               | 26,054    |                                                                                             |    | (627,201 | ) |   | 65,274 |   |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| INTEREST                  INCOME (EXPENSE)             |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| Interest                  income                       |   |                                                                                                                                  | 143,943    |                                                                                                                                                          |   | 287                                                                                                  |   |                                                                                                               | 2,479     |                                                                                             |    | 84,193 |   |   | 1,367 |   |
| Interest                  (expense)                    |   |                                                                                                                                  | (422       | )                                                                                                                                                             |   | (93                                                                                                  | )      |                                                                                                               | (6,447    | )                                                                                                |    | (244 | ) |   | (1,482 | ) |
| **Total                  interest income (expense)**   |   |                                                                                                                                  | 143,521    |                                                                                                                                                          |   | 194                                                                                                  |   |                                                                                                               | (3,968    | )                                                                                                |    | 83,949 |   |   | (115 | ) |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| **Income                  (loss) before income taxes** |   |                                                                                                                                  | (1,045,593 | )                                                                                                                                                             |   | 83,464                                                                                               |   |                                                                                                               | 22,086    |                                                                                             |    | (543,252 | ) |   | 65,159 |   |
| Income                  tax benefit                    |   |                                                                                                                                  | (291,000   | )                                                                                                                                                             |   | --                                                                                                   |   |                                                                                                               | --        |                                                                                             |    | (168,000 | ) |   | -- |   |
| **Net                  income (loss )**                |   | $                                                                                                                                     | (754,593   | )                                                                                                                                                             | $      | 83,464                                                                                               |   | $                                                                                                                  | 22,086    |                                                                                             | $       | (375,252 | ) |   | 65,159 |   |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| LOSS                  PER COMMON SHARE                 |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| Basic                  and diluted                     |   | $                                                                                                                                     | (0.09      | )                                                                                                                                                             |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |  $ |  (0.03 | ) |   |   |   |
|                                                   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| WEIGHTED                  AVERAGE SHARES OUTSTANDING   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |
| Basic                  and diluted                     |   |                                                                                                                                  | 8,389,615  |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    | 11,833,356 |   |   |   |   |
| *See                  Notes to Financial Statements*   |   |                                                                                                                                  |       |                                                                                                                                                          |   |                                                                                                 |   |                                                                                                               |      |                                                                                             |    |   |   |   |   |   |

----

**CONMED      HEALTH****CARE      MANAGEMENT, INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS (UNAUDITED)**

|                                                                                                           |   | **SUCCESSOR****For                the Period****January                236, 2007 to June 30, 2007** |       |  **PREDECESSOR****For                the Period January 1, 2007 to January 25, 2007** |   |  **PREDECESSOR****For                the Six Months Ended June 30, 2006** |   |
|----------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|
| CASH                FLOWS FROM OPERATING ACTIVITIES                                                            |   |                                                                                                |       |                                                                                  |   |                                                                      |   |
| Net                income (loss)                                                                               |   | $                                                                                                   | (754,593   | )                                                                                          | $      | 83,464                                                                         |   | $ | 22,086 |   |
| Adjustments                to reconcile net income to net cash provided by                operating activities |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| Depreciation                                                                                                   |   |                                                                                                | 14,652     |                                                                                       |   | 1,698                                                                          |   |   | 26,577 |   |
| Amortization                                                                                                   |   |                                                                                                | 1,057,000  |                                                                                       |   | --                                                                             |   |   | -- |   |
| Stock                based compensation                                                                        |   |                                                                                                | 299,449    |                                                                                       |   | --                                                                             |   |   | -- |   |
| Deferred                taxes                                                                                  |   |                                                                                                | (376,000   | )                                                                                          |   | --                                                                             |   |   | -- |   |
| Changes                in working capital components                                                           |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| (Increase)                decrease in accounts receivable                                                      |   |                                                                                                | (264,283   | )                                                                                          |   | 197,327                                                                        |   |   | (248,997 | ) |
| (Increase)                in claims against escrow                                                             |   |                                                                                                | (333,373   | )                                                                                          |   | --                                                                             |   |   | -- |   |
| (Increase)                decrease in prepaid expenses                                                         |   |                                                                                                | (32,571    | )                                                                                          |   | 30,687                                                                         |   |   | (141 | ) |
| Increase                in accounts payable                                                                    |   |                                                                                                | 146,558    |                                                                                       |   | 258,562                                                                        |   |   | 359,156 |   |
| Increase                (decrease)in accrued expenses                                                          |   |                                                                                                | 643,374    |                                                                                       |   | (469,320                                                                       | )      |   | (18,691 | ) |
| (Decrease)                in deferred revenue                                                                  |   |                                                                                                | (49,521    | )                                                                                          |   | (29,155                                                                        | )      |   | (66,268 | ) |
| **Net                cash provided by operating activities**                                                   |   |                                                                                                | 350,692    |                                                                                       |   | 73,263                                                                         |   |   | 71,722 |   |
|                                                                                                           |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                            |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| Purchase                of property and equipment                                                              |   |                                                                                                | (37,313    | )                                                                                          |   | --                                                                             |   |   | (7,446 | ) |
| Proceeds                received from sale of property and equipment                                           |   |                                                                                                | --         |                                                                                       |   | --                                                                             |   |   | 25,394 |   |
| Acquisition                of Conmed, Inc., net of cash acquired                                               |   |                                                                                                | (7,675,097 | )                                                                                          |   | --                                                                             |   |   | -- |   |
| **Net                cash provided by (used in) investing activities**                                         |   |                                                                                                | (7,712,410 | )                                                                                          |   | --                                                                             |   |   | 17,948 |   |
|                                                                                                           |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                                                            |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| Borrowings                on line of credit                                                                    |   |                                                                                                | --         |                                                                                       |   | --                                                                             |   |   | 550,000 |   |
| Short-term                borrowings                                                                           |   |                                                                                                | 289,368    |                                                                                       |   | --                                                                             |   |   | -- |   |
| Payments                on line of credit                                                                      |   |                                                                                                | --         |                                                                                       |   | --                                                                             |   |   | (550,000 | ) |
| Payments                in loans payable                                                                       |   |                                                                                                | (134,307   | )                                                                                          |   | (594                                                                           | )      |   | (47,770 | ) |
| Net                proceeds from Private Placement                                                             |   |                                                                                                | 13,085,649 |                                                                                       |   | --                                                                             |   |   | -- |   |
| Proceeds                from exercise of warrants                                                              |   |                                                                                                | 33,000     |                                                                                       |   | --                                                                             |   |   | -- |   |
| Distributions                to shareholders                                                                   |   |                                                                                                | --         |                                                                                       |   | --                                                                             |   |   | (375,000 | ) |
| **Net                cash provided by (used in) financing activities**                                         |   |                                                                                                | 13,273,710 |                                                                                       |   | (594                                                                           | )      |   | (422,770 | ) |
|                                                                                                           |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| **Net                increase (decrease) in cash and cash equivalents**                                        |   |                                                                                                | 5,911,992  |                                                                                       |   | 72,669                                                                         |   |   | (333,400 | ) |
|                                                                                                           |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| CASH                AND CASH EQUIVALENTS                                                                       |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |
| Beginning                                                                                                      |   |                                                                                                | 662,305    |                                                                                       |   | 122,269                                                                        |   |   | 487,029 |   |
| Ending                                                                                                         |   | $                                                                                                   | 6,574,297  |                                                                                       | $      | 194,938                                                                        |   | $ | 153,629 |   |
|                                                                                                           |   |                                                                                                |       |                                                                                       |   |                                                                           |   |   |   |   |

----

**CONMED      HEALTHCARE MANAGEMENT, INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS (UNAUDITED)**

|                                                                                                                     |   | **SUCCESSOR                For the Period January 26, 2007 to June 30, 2007** |      |  **PREDECESSOR                For the Period January 1, 2007 to January 25,                2007** |   |  **PREDECESSOR                For the Six Months Ended June 30, 2006** |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|-----------|--------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|
| NON-CASH                INVESTING AND FINANCING ACTIVITIES WERE AS FOLLOWS:                                              |   |                                                                          |      |                                                                                              |   |                                                                   |   |
| Escrow                payments on Acquisition in prior periods                                                           |   | $                                                                             | 500,000   |                                                                                                   | $      | --                                                                          |   | $ | -- |   |
| Acquisition                expenses paid in prior periods                                                                |   |                                                                          | 239,935   |                                                                                                   |   | --                                                                          |   |   | -- |   |
| Private                Placement expenses paid in prior periods                                                          |   |                                                                          | 148,652   |                                                                                                   |   | --                                                                          |   |   | -- |   |
| Income                tax claims receivable related to tax benefit received from                the exercise of warrants |   |                                                                          | 85,000    |                                                                                                   |   | --                                                                          |   |   | -- |   |
| Deferred                tax effect related to tax benefit received from theexercise                of warrants           |   |                                                                          | 61,000    |                                                                                                   |   | --                                                                          |   |   | -- |   |
|                                                                                                                     |   | $                                                                             | 1,034,587 |                                                                                                   | $      | --                                                                          |   | $ | -- |   |
|                                                                                                                     |   |                                                                          |      |                                                                                                   |   |                                                                        |   |   |   |   |
| SUPPLEMENTAL                DISCLOUSURE OF CASH FLOW INFORMATION                                                         |   |                                                                          |      |                                                                                                   |   |                                                                        |   |   |   |   |
| Cash                payments for interest                                                                                |   | $                                                                             | 422       |                                                                                                   | $      | 93                                                                          |   | $ | 6,447 |   |
| Income                taxes paid                                                                                         |   | $                                                                             | 85,000    |                                                                                                   | $      | --                                                                          |   | $ | -- |   |

*See      Notes to Financial Statements*

----

**Conmed        Healthcare Management, Inc**

**Notes        to Financial Statements**

----

**NOTE      1. Nature      of      Business**

*Nature      of business:*

*Stock      Purchase Agreement*

----

*Private      Placement*

150      units, each unit consisting of (i) 100 shares of its Series B Convertible      Preferred Stock (“ Series B Preferred Stock ”), (ii) a common stock purchase      warrant entitling the holder to purchase up to 10,000 shares of its Common      Stock      at an exercise price equal to $0.30 per share and (iii) a common stock purchase      warrant entitling the holder to purchase up to 3,333 shares of its Common Stock      at an exercise price equal to $2.50 per share (such units, the “ Units”), in a      private offering pursuant to exemption from registration under Section 4(2)      of      the Securities Act of 1933, as amended and Rule 506 of Regulation D promulgated      thereunder. Each Unit was sold for $100,000, for an aggregate purchase price      of      $15,000,000. The proceeds from the sale of the Units were used to purchase      all      the issued and outstanding capital stock of Conmed, Inc. and to provide working      capital following such purchase.      The fair      value of the 1,500,000 and 500,000 warrants issued using the Black Scholes      pricing model was $2,628,847 and $289,554, respectively

*Plan      of Recapitalization*

| o   | Reincorporate                the Company into the state of Delaware pursuant to the Merger Agreement.                Created                a subsidiary (the “Merger Sub”) under the laws of the State of Delaware                and merged the Company into the Merger Sub. All of the liabilities                and                assets of the Company existing prior to the reincorporation were                transferred, assumed and assigned to the Delaware entity. The certificate                of incorporation and bylaws of the Delaware entity became the Company’s                new Certificate of Incorporation and Bylaws, and reflect the Plan. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Change                in name.                Changed the name of the Company from Pace Health Management Systems,                Inc.                to Conmed Healthcare Management,                Inc. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Reverse                Stock Split.                Enacted a reverse stock split on a 1 for 20 basis thereby reducing                the                number of outstanding shares to 415,830 share of common stock from                the                8,316,074 shares of common stock outstanding at that                time. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Change                in authorized shares.                Increased the number of authorized common shares to                40,000,000. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Conversion                of Series A Preferred Stock.                Converted the Series A Preferred Stock (and the waiver of all accrued                and                unpaid dividends and liquidation rights on the Series A Preferred                Stock                after conversion of 50% of such accrued and unpaid dividends into                shares                of Common Stock in connection with the transactions contemplated                by the                Plan of Reorganization) into 4,584,196 shares of Common Stock on                a post                reverse split basis. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Reclassifications*
* *

** NOTE      2. Significant      Accounting Policies**

*Accounting      estimates and assumption*

*Acquisition*

*Business      Combinations*

----

**Conmed          Healthcare Management, Inc**

**Notes          to Financial Statements**

----

| **Asset**                                                         |   | **Fair                Value** |       |
|-------------------------------------------------------------------|--------|-------------------------------|------------|
| Service                contracts acquired                         |   | $                             | 4,500,000  |   |
| Non-compete                agreements                             |   |                          | 1,000,000  |   |
| Goodwill                (includes $1,458,000 deferred tax effect) |   |                          | 5,745,369  |   |
| **Total**                                                         |   | $                             | 11,245,369 |   |

*Service      Contracts Acquired*

| **For                the Twelve Months Ended December 31,** |   | **Amortization** |      |
|-------------------------------------------------------------|--------|------------------|-----------|
| 2007                                                        |   | $                | 1,801,000 |   |
| 2008                                                        |   |             | 1,459,000 |   |
| 2009                                                        |   |             | 869,000   |   |
| 2010                                                        |   |             | 277,000   |   |
| 2011                                                        |   |             | 94,000    |   |
|                                                        |   | $                | 4,500,000 |   |

*Non-Compete      Agreements*

----

**Conmed          Healthcare Management, Inc**

**Notes          to Financial Statements**

----

| **For                the Twelve Months Ended December 31,** |   | **Amortization** |      |
|-------------------------------------------------------------|--------|------------------|-----------|
| 2007                                                        |   | $                | 251,000   |   |
| 2008                                                        |   |             | 268,000   |   |
| 2009                                                        |   |             | 269,000   |   |
| 2010                                                        |   |             | 200,000   |   |
| 2011                                                        |   |             | 12,000    |   |
|                                                        |   | $                | 1,000,000 |   |

*Goodwill: *

*Goodwill      and Other Intangible Assets*

*Cash      and cash equivalents*

*Concentration      of credit risk*

*Fair      value of financial instruments*

*Principles      of consolidation:*

*Revenue      recognition*

----

**Conmed          Healthcare Management, Inc**

**Notes          to Financial Statements**

----

*Accounts      receivables*

*Property      and equipment*

*Stock      compensation*

*Shared-Based      Payments*

*Income      taxes*

*Basic      and diluted loss per share*

----

*Recently      adopted accounting standards: *

*Accounting      for Uncertainty in Income Taxes*
*.*
*Accounting      for Income Taxes.*

*New      Accounting Pronouncements*

*Fair      Value Measurements*

*The      Fair Value Option for Financial Assets and Financial Liabilities - Including      an      amendment of FASB Statement No. 115, *
*Fair      Value Measurements*

*Presentation      of share and per share information*

**NOTE      3**
**.      **
**Business      Combination**

----

**Conmed          Healthcare Management, Inc**

**Notes          to Financial Statements**

----

| **Conmed,                Inc, net assets acquired** |   |   |      |
|-----------------------------------------------------|--------|--------|-----------|
| CURRENT                ASSETS                       |   |   |      |
| Cash                and cash equivalents            |   | $      | 194,938   |   |
| Accounts                receivable                  |   |   | 1,106,866 |   |
| Prepaid                expenses                     |   |   | 195,943   |   |
| **Total                current assets**             |   |   | 1,497,747 |   |
| PROPERTY                AND EQUIPMENT, NET          |   |   | 44,163    |   |
| OTHER                ASSETS                         |   |   |      |   |
| Service                contracts acquired           |   |   | 4,500,000 |   |
| Non-compete                agreements acquired      |   |   | 1,000,000 |   |
| Deposits                                            |   |   | 2,424     |   |
| **Total                other assets**               |   |   | 5,502,424 |   |
| **Total                assets**                     |   |   | 7,044,334 |   |
| CURRENT                LIABILITIES                  |   |   |      |   |
| Accounts                payable                     |   |   | 839,070   |   |
| Accrued                expenses                     |   |   | 180,176   |   |
| Deferred                revenue                     |   |   | 74,518    |   |
| Notes                payable, current portion       |   |   | 7,362     |   |
| **Total                current liabilities**        |   |   | 1,101,126 |   |
| NOTES                PAYABLE, LONG-TERM             |   |   | 12,606    |   |
| DEFERRED                TAXES                       |   |   | 1,458,000 |   |
| **Total                liabilities**                |   |   | 2,571,732 |   |
| **Conmed,                Inc. net assets acquired** |   |   | 4,472,602 |   |
|                                                |   |   |      |   |
| **Goodwill**                                        |   | $      | 5,745,369 |   |

| **Conmed,                Inc. purchase price**                          |   |   |       |
|-------------------------------------------------------------------------|--------|--------|------------|
| Cash                purchase price                                      |   | $      | 8,000,000  |   |
| Equity                adjustment at closing                             |   |   | 30,602     |   |
| Escrow                deposit forfeited                                 |   |   | 250,000    |   |
| Deal                expenses                                            |   |   | 329,369    |   |
| Less:                Conmed, Inc. cash acquired                         |   |   | (194,938   | ) |
| **Net,                cash purchase price**                             |   |   | 8,415,033  |   |
| Addback:                Conmed, Inc. cash acquired                      |   |   | 194,938    |   |
| Common                stock issued to Conmed, Inc.’s shareholders |   |   | 1,608,000  |   |
| **Total                purchase price**                                 |   | $      | 10,217,971 |   |

----

**Conmed          Healthcare Management, Inc**

**Notes          to Financial Statements**

----

**NOTE      4**
**.      **
**Private      Placement **

| **Acquisition                financed by:**               |   |   |       |
|-----------------------------------------------------------|--------|--------|------------|
| Cash                received from sale of preferred stock |   | $      | 15,000,000 |   |
| Deal                costs and expenses                    |   |   | (2,217,943 | ) |
| Net                proceeds from sales of preferred stock |   |   | 12,782,057 |   |
| Add-back                non-cash banker warrant expense   |   |   | 154,940    |   |
| Net                cash received from sale of securities  |   | $      | 12,936,997 |   |

**NOTE      5**
**.      **
**Changes      in Equity **

|                                                                                                                                |   | **Preferred****Stock** |       | **Common****Stock** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|---------------------|--------|
| Balance                at December 31, 2006                                                                                         |   |                   | 2,875,000  |                |   | 285,830                (1. | ) |
| Conversion                of 50% of Series A preferred stock accrued dividends                                                      |   |                   | --         |                |   | 130,000                (1. | ) |
| Issuance                of Series B redeemable convertible preferred stock and warrants,                net of                costs |   |                   | 15,000     |                |   | -- |   |
| Issuance                of Series C convertible preferred stock, net of costs                                                       |   |                   | 8,000      |                |   | -- |   |
| Conversion                of Series A convertible preferred stock                                                                   |   |                   | (2,875,000 | )                   |   | 4,584,196 |   |
| Conversion                of Series B convertible preferred stock                                                                   |   |                   | (15,000    | )                   |   | 6,000,000 |   |
| Conversion                of Series C convertible preferred stock                                                                   |   |                   | (8,000     | )                   |   | 800,000 |   |
| Issuance                of common shares following the exercise of warrants                                                         |   |                   | --         |                |   | 133,115 |   |
| Balance                at June 30, 2007                                                                                             |   |                   | --         |                |   | 11,933,141 |   |

*(1.)      As adjusted for the 1 for 20 reverse stock split*

**NOTE      6. **
**Common      Stock Warrants and Options **

*Common      stock warrants *

----

**Conmed          Healthcare Management, Inc**

**Notes          to Financial Statements**

----

*Common      stock options *

----

**Conmed          Healthcare Management, Inc**

**Notes          to Financial Statements**

----

|                                                |   | **Number                of Shares** |      | **Weighted                Average Exercise Price per Share** |   | **Weighted                Average Remaining Contractual Term (Years)** |   | **Aggregate                Intrinsic****Value** |   |
|-----------------------------------------------------|--------|-------------------------------------|-----------|--------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|-------------------------------------------------|--------|
| Outstanding,                December 31, 2006       |   |                                | --        |                                                         |   | --                                                                     |   |                                            | --     |   |   | -- |   |
| Granted                                             |   |                                | 1,722,500 |                                                         | $      | 2.14                                                                   |   |                                            |   |   |   |   |   |
| Forfeited                                           |   |                                | (138,333  | )                                                            |   | 2.01                                                                   |   |                                            |   |   |   |   |   |
| Exercised                                           |   |                                | --        |                                                         |   | --                                                                     |   |                                            |   |   |   |   |   |
| Outstanding,                June 30, 2007           |   |                                | 1,584,167 |                                                         | $      | 2.15                                                                   |   |                                            | 9.6    |   | $ | 1,836,034 |   |
|                                                |   |                                |      |                                                         |   |                                                                   |   |                                            |   |   |   |   |   |
| Exercisable                at June 30, 2007         |   |                                | 100,000   |                                                         | $      | 2.01                                                                   |   |                                            | 9.6    |   | $ | 117,890 |   |
|                                                |   |                                |      |                                                         |   |                                                                   |   |                                            |   |   |   |   |   |
| Remaining                shares available for grant |   |                                | 15,833    |                                                         |   |                                                                   |   |                                            |   |   |   |   |   |

| Expected                life (years)                                            | 6.0    |
|---------------------------------------------------------------------------------|--------|
| Expected                volatility                                              | 57.15% |
| Risk-free                interest rate                                          | 5.0%   |
| Expected                dividend yield                                          | 0.0%   |
| Weighted                average fair value of options granted during the period | $1.26  |

----

**Conmed        Healthcare Management, Inc**

**Notes        to Financial Statements**

----

**NOTE      7. ****Property      and Equipment**

|                                                     |   |  **SUCCESSOR                June 30, 2007** |    |  **PREDECESSOR                December 31, 2006** |   |
|----------------------------------------------------------|--------|--------------------------------------------------|---------|--------------------------------------------------------|--------|
| Furniture                                                |   | $                                                | 15,648  |                                                   | $      | 13,900 |   |
| Equipment                                                |   |                                             | 24,917  |                                                   |   | 21,475 |   |
| Computers                                                |   |                                             | 74,275  |                                                   |   | 42,152 |   |
| Vehicles                                                 |   |                                             | 36,087  |                                                   |   | 36,087 |   |
| **Tota**l                                                |   |                                             | 150,927 |                                                   |   | 113,614 |   |
| Accumulated                depreciation and amortization |   |                                             | (84,103 | )                                                      |   | (67,753 | ) |
| **Property                and equipment, net**           |   | $                                                | 66,824  |                                                   | $      | 45,861 |   |

**NOTE      8. Notes      Payable**

**NOTE      9. ****Earnings      Per Share**

|                                                  |   | **Numerator** |     | **Denominator** |   | **Per-Share                  Amount Net (loss)** |   |
|-------------------------------------------------------|--------|---------------|----------|-----------------|--------|--------------------------------------------------|--------|
| **Three                  months ended June 30, 2007** |   |          |     |            |   |                                             |   |
| Net                  (loss)                           |   | $             | (375,252 | )               |   | 11,833,356                                       |   | $ | (0.03 | ) |
|                                                  |   |          |     |            |   |                                             |   |   |   |   |
| **156                  days ended June 30, 2007**     |   |          |     |            |   |                                             |   |   |   |   |
| Net                  (loss)                           |   | $             | (754,593 | )               |   | 8,389,615                                        |   | $ | (0.09 | ) |
|                                                  |   |          |     |            |   |                                             |   |   |   |   |

**NOTE      10. 401(k)      Plan**

----

**Conmed        Healthcare Management, Inc**

**Notes        to Financial Statements**

----

**NOTE      11 Operating      Leases **

| **Twelve                months ending June 30, 2008** |   |   |    |
|-------------------------------------------------------|--------|--------|---------|
| 2008                                                  |   | $      | 45,000  |   |
| 2009                                                  |   |   | 40,000  |   |
| 2010                                                  |   |   | 18,000  |   |
| **Total**                                             |   | $      | 103,000 |   |

**NOTE      12 ****Major      Customers and Commitments**

|                           |   | **SUCCESSOR****For                the Period January 26,****2007                June 30, 2007** |      | **PREDECESSOR****For                the Period January 1,****2007                to January 25, 2007** |   | **PREDECESSOR****For                the Six Months Ended****June                30, 2006** |   |
|--------------------------------|--------|-------------------------------------------------------------------------------------------------|-----------|--------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|
|                           |   | **Revenue**                                                                                     |      | **Accounts                  Receivable**                                                               |   | **Revenue**                                                                                |   | **Accounts                  Receivable** |   | **Revenue** |   | **Accounts                Receivable** |   |
| Company                A  |   | $                                                                                               | 2,548,000 |                                                                                                   | $      | --                                                                                         |   | $ | 374,000 |   | $ | 26,000 |   | $ | -- |   | $ | -- |   |
| Company                B       |   |                                                                                            | 1,532,000 |                                                                                                   |   | 242,0000                                                                                   |   |   | 240,000 |   |   | -- |   |   | 1,717,000 |   |   | 284,000 |   |
| Company                C       |   |                                                                                            | 866,000   |                                                                                                   |   | 150,000                                                                                    |   |   | 135,000 |   |   | 173,000 |   |   | 886,000 |   |   | 151,000 |   |
| Company                D       |   |                                                                                            | 687,000   |                                                                                                   |   | 127,000                                                                                    |   |   | 103,000 |   |   | 127,000 |   |   | -- |   |   | -- |   |
| Company                E       |   | $                                                                                               | 677,000   |                                                                                                   | $      | --                                                                                         |   | $ | 101,000 |   | $ | -- |   | $ | 721,000 |   | $ | -- |   |

----

**Conmed        Healthcare Management, Inc**

**Notes        to Financial Statements**

----

|                     |   | **SUCCESSOR****For                the Three Months Ended****June                30, 2007** |      | **PREDECESSOR****For                the Three Months Ended****June                30, 2006** |   |
|--------------------------|--------|--------------------------------------------------------------------------------------------|-----------|----------------------------------------------------------------------------------------------|--------|
|                     |   | **Revenue**                                                                                |      | **Accounts                Receivable**                                                       |   | **Revenue** |   | **Accounts                Receivable** |   |
| Company                A |   | $                                                                                          | 1,432,000 |                                                                                         | $      | 19,000 |   | $ | -- |   | $ | -- |   |
| Company                B |   |                                                                                       | 840,000   |                                                                                         |   | 242,000 |   |   | 852,000 |   |   | 284,000 |   |
| Company                C |   |                                                                                       | 468,000   |                                                                                         |   | 150,000 |   |   | 449,000 |   |   | 151,000 |   |
| Company                D |   |                                                                                       | 382,000   |                                                                                         |   | 127,000 |   |   | -- |   |   | -- |   |
| Company                E |   | $                                                                                          | 376,000   |                                                                                         | $      | -- |   | $ | 361,000 |   | $ | -- |   |

**NOTE      13 ****Income      Tax Matters**

|                                                         |   | **As                of June 30, 2007** |       |
|--------------------------------------------------------------|--------|----------------------------------------|------------|
| **Deferred                tax asset**                        |   |                                   |       |
| Net                operating loss carryforwards              |   | $                                      | 6,602,000  |   |
| Research                and development credit carryforwards |   |                                   | 391,000    |   |
|                                                         |   |                                   | 6,993,000  |   |
| Less:                valuation allowance                     |   |                                   | (6,661,000 | )  |
| **Net                deferred tax asset**                    |   |                                   | 332,000    |   |
|                                                         |   |                                   |       |   |
| **Deferred                tax liabilities**                  |   |                                   |       |   |
| Intangible                assets                             |   |                                   | 1,353,000  |   |
| **Net                deferred tax liabilities**              |   |                                   | 1,353,000  |   |
|                                                         |   |                                   |       |   |
| Deferred                taxes                                |   | $                                      | 1,021,000  |   |

----

**Conmed        Healthcare Management, Inc**

**Notes        to Financial Statements**

----

|                                                                |   | **For                156-Day****Period                Ended****June                30, 2007** |     |
|---------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|----------|
| Computed                federal income tax (benefit)                |   | $                                                                                             | (356,000 | ) |
| Other,                primarily computed state income tax (benefit) |   |                                                                                          | (52,000  | ) |
| Permanent                difference related to stock options        |   |                                                                                          | 117,000  |   |
| Income                tax expense (benefit)                         |   | $                                                                                             | (291,000 | ) |

At      June      30, 2007, the Company has approximately $16,928,000 of net operating loss      carryforwards subject to IRS change of control limitations to offset future      federal taxable income. 

**NOTE      14. ****CONCENTRATION      OF CREDIT RISK**

**NOTE      15. ****RELATED      PARTY TRANSACTIONS**

----

**ITEM      2.  MANAGEMENT’S      DISCUSSION AND ANALYSIS **

**                         OR      PLAN OF OPERATION**

*Information      included in this section contains forward-looking statements regarding the      business, operations and financial condition of both the Company and Conmed,      Inc. within the meaning of Section 27A of the Securities Act of 1933, as amended      and Section 21E of the Securities Exchange Act of 1934, as amended (the      "Exchange Act"). This information may involve known and unknown risks,      uncertainties and other factors which may cause the Company’s actual results,      performance or achievements to be materially different from our future results,      performance or achievements expressed or implied by any forward-looking      statements. Forward-looking statements, which involve assumptions and describe      the Company’s future plans, strategies and expectations, are generally      identifiable by use of the words "may," "will," "should," "expect,"      "anticipate," "estimate," "believe," "intend,"      "plan," "potential" or "project" or the negative of these words or other      variations on these words or comparable terminology. These forward-looking      statements are based on assumptions that may be incorrect, and there can be      no      assurance that these projections included in these forward-looking statements      will come to pass. The Company’s actual results could differ materially from      those expressed or implied by the forward-looking statements as a result of      various factors. The Company cautions you not to place undue reliance on these      forward-looking statements. Such forward-looking statements relate only to      events as of the date on which the statements are made. The Company undertakes      no obligation to update any forward-looking statements, whether as a result      of      new information, future events or otherwise, even if experience or future      changes make it clear that any projected results or events expressed or implied      therein will not be realized. You are advised, however, to consult any further      disclosures the Company makes in future public statements and press      releases.*

**General**

**Critical      Accounting Policies**

----

*Accounting      estimates and assumption*

*Acquisition*

*Business      Combinations*

*Service      Contracts Acquired*

*Non-Compete      Agreements*

*Goodwill *

*Goodwill      and Other Intangible Assets*

*Revenue      recognition*

----

*Stock      compensation*

*Shared-Based      Payments*

*Income      taxes*

**Recently      adopted accounting standards**

*Accounting      for Uncertainty in Income Taxes*
*.*
*Accounting      for Income Taxes.*

**New      Accounting Pronouncements**

*Fair      Value Measurements*

----

*The      Fair Value Option for Financial Assets and Financial Liabilities - Including      an      amendment of FASB Statement No. 115, *
*Fair      Value Measurements*

**Presentation      of share and per share information**

**Results      of Operations**

*Three-Months      Ended June 30, 2007 compared to June 30, 2006*

|                                                          |   | **Three                Months Ended June 30, 2007** |      |  **Three                Months Ended June 30, 2006** |   |
|---------------------------------------------------------------|--------|-----------------------------------------------------|-----------|-----------------------------------------------------------|--------|
|                                                          |   | **Amount**                                          |      | **%                of Revenue**                           |   |  **PROFORMA                Amount** |   | **%                of Revenue** |   |
| Service                contract revenue                       |   | $                                                   | 5,969,220 |                                                      |   | 100.0 | % | $ | 3,548,631 |   |   | 100.0 | % |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| HEALTHCARE                EXPENSES:                           |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Salaries,                wages and employee benefits          |   |                                                | 3,093,425 |                                                      |   | 51.7 | % |   | 1,754,053 |   |   | 49.5 | % |
| Medical                expenses                               |   |                                                | 1,505,682 |                                                      |   | 25.2 | % |   | 1,058,531 |   |   | 29.8 | % |
| Other                operating expenses                       |   |                                                | 246,619   |                                                      |   | 4.1 | % |   | 145,497 |   |   | 4.1 | % |
| Total                healthcare expenses                      |   |                                                | 4,845,726 |                                                      |   | 81.2 | % |   | 2,958,081 |   |   | 83.4 | % |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Gross                profit                                   |   |                                                | 1,123,494 |                                                      |   | 18.8 | % |   | 590,550 |   |   | 16.6 | % |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| OPERATING                EXPENSES:                            |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Selling,                general & administrative expenses |   |                                                | 1,178,286 |                                                      |   | 19.7 | % |   | 571,907 |   |   | 16.1 | % |
| Depreciation                and amortization                  |   |                                                | 572,409   |                                                      |   | 9.6 | % |   | 573,949 |   |   | 16.2 | % |
| Total                operating expenses                       |   |                                                | 1,750,695 |                                                      |   | 29.3 | % |   | 1,145,856 |   |   | 32.3 | % |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Operating                loss                                 |   |                                                | (627,201  | )                                                         |   | (10.5 | )% |   | (555,306 | ) |   | (15.7 | )% |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Net                interest income and (expense)              |   |                                                | 83,949    |                                                      |   | 1.4 | % |   | 19,787 |   |   | 0.6 | % |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Loss                before income taxes                       |   |                                                | (543,252  | )                                                         |   | (9.1 | )% |   | (535,519 | ) |   | (15.1 | %) |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Income                tax (benefit)                           |   |                                                | (168,000  | )                                                         |   | (2.8 | %) |   | (166,000 | ) |   | (4.7 | %) |
|                                                          |   |                                                |      |                                                      |   |   |   |   |   |   |   |   |   |
| Net                (loss)                                     |   | $                                                   | (375,252  | )                                                         |   | (6.3 | )% | $ | (369,519 | ) |   | (10.4 | %) |

----

*Revenues*

*Healthcare      Expenses *

*Salaries      and employee benefits*

*Medical      expenses*

*Other      operating expenses*

*Operating      Expenses*

*Selling,      general and administrative expenses*

*Depreciation      and amortization*

----

*Interest      income*

*Interest      expense*

*Income      tax benefit*

*Six-Months      Ended June 30, 2007 compared to June 30, 2006*

|                                                          |   | **Six                Months Ended****June                30, 2007** |       |  **Six                Months Ended****June                30, 2006** |   |
|---------------------------------------------------------------|--------|---------------------------------------------------------------------|------------|---------------------------------------------------------------------------|--------|
|                                                          |   | **PROFORMA****Amount**                                              |       | **%                of Revenue**                                           |   |  **PROFORMA                Amount** |   | **%                of Revenue** |   |
| Service                contract revenue                       |   | $                                                                   | 11,520,159 |                                                                      |   | 100.0 | % | $ | 7,085,981 |   |   | 100.0 | % |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| HEALTHCARE                EXPENSES:                           |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Salaries,                wages and employee benefits          |   |                                                                | 5,838,464  |                                                                      |   | 50.7 | % |   | 3,468,435 |   |   | 49.0 | % |
| Medical                expenses                               |   |                                                                | 3,079,426  |                                                                      |   | 26.7 | % |   | 2,177,562 |   |   | 30.7 | % |
| Other                operating expenses                       |   |                                                                | 457,236    |                                                                      |   | 4.0 | % |   | 281,617 |   |   | 4.0 | % |
| Total                healthcare expenses                      |   |                                                                | 9,375,126  |                                                                      |   | 81.4 | % |   | 5,927,614 |   |   | 83.7 | % |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Gross                profit                                   |   |                                                                | 2,145,033  |                                                                      |   | 18.6 | % |   | 1,158,367 |   |   | 16.3 | % |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| OPERATING                EXPENSES:                            |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Selling,                general & administrative expenses |   |                                                                | 2,153,200  |                                                                      |   | 18.7 | % |   | 1,208,047 |   |   | 17.0 | % |
| Depreciation                and amortization                  |   |                                                                | 1,249,350  |                                                                      |   | 10.86 | % |   | 1,259,578 |   |   | 17.8 | % |
| Total                operating expenses                       |   |                                                                | 3,402,550  |                                                                      |   | 29.5 | % |   | 2,467,625 |   |   | 34.8 | % |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Operating                loss                                 |   |                                                                | (1,257,517 | )                                                                         |   | (10.9 | )% |   | (1,309,259 | ) |   | (18.5 | )% |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Net                interest income and expense                |   |                                                                | (143,714   | )                                                                         |   | (1.2 | %) |   | (16,111 | ) |   | (0.3 | )% |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Loss                before income taxes                       |   |                                                                | (1,113,803 | )                                                                         |   | (9.7 | )% |   | (1,293,147 | ) |   | (18.2 | %) |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Income                tax (benefit)                           |   |                                                                | (429,000   | )                                                                         |   | (3.7 | %) |   | (498,000 | ) |   | (7.0 | %) |
|                                                          |   |                                                                |       |                                                                      |   |   |   |   |   |   |   |   |   |
| Loss                before income taxes                       |   | $                                                                   | (684,803   | )                                                                         |   | (5.9 | %) | $ | (795,147 | ) |   | (11.2 | %) |

----

*Revenues*

*Healthcare      Expenses *

*Salaries      and employee benefits*

*Medical      expenses*

*Other      operating expenses*

*Operating      expenses*

*Selling,      general and administrative expenses*

*Depreciation      and amortization*

----

*Interest      income*

*Interest      expense*

*Income      tax benefit*

**LIQUIDITY      AND CAPITAL RESOURCES**

*Cash      flow for the sixty-five day period from January 26, 2007 to June 30,      2007.*

*Liquidity*

*Loans*

*Off      Balance Sheet Arrangements*

----

*Contractual      Obligations*

|                                              |   | **Total** |    | **Due                as of 6/30/08** |   | **Due                as of****6/30/09                and 6/30/10** |   | **Due                as of****6/30/11                and 6/30/12** |   | **Due****Thereafter** |   |
|---------------------------------------------------|--------|-----------|---------|--------------------------------------|--------|--------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|-----------------------|--------|
| Automobile                Loan                    |   | $         | 16,953  |                                 | $      | 7,588                                                              |   | $                                                                  | 9,365  |                  | $      | -- |   | $ | -- |   |
| Short-term                loan                    |   |      | 158,076 |                                 |   | 158,076                                                            |   |                                                               | --     |                  |   | -- |   |   | -- |   |
| Automobile                Leases                  |   |      | 25,214  |                                 |   | 13,529                                                             |   |                                                               | 11,685 |                  |   | -- |   |   | -- |   |
| Office                Space Leased                |   |      | 77,382  |                                 |   | 31,399                                                             |   |                                                               | 45,983 |                  |   | -- |   |   | -- |   |
| Total                Contractual Cash Obligations |   | $         | 277,625 |                                 | $      | 210,592                                                            |   | $                                                                  | 67,033 |                  | $      | -- |   | $ | -- |   |

*Effects      of Inflation*

*Potential Future      Service Contract Revenue*

**ITEM      3. CONTROLS      AND      PROCEDURES**

----

**PART      II.  OTHER INFORMATION**

**ITEM      1.  LEGAL      PROCEEDINGS**

    None

**ITEM      2.  UNREGISTERED      SALES OF EQUITY SECURITIES**

**ITEM      3.  DEFAULT      UPON SENIOR SECURITIES**

**ITEM      4.  SUBMISSION      OF MATTERS TO A VOTE OF**

**            SECURITY      HOLDERS**

    None

**ITEM      5.  OTHER      INFORMATION**

**ITEM      6. EXHIBITS**

|   | 10.1 | Medical                Services Agreement, by and among Conmed, Inc. and Baltimore County,                Maryland, dated March 26, 2007          |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.2 | Medical                Services Agreement, by and among Conmed, Inc. and Henrico County                Virginia,                dated May 7, 2007 |
|   | 31   | Certifications                Pursuant to Section 302 of the Sarbanes-Oxley Act of                2002                                            |
|   | 32   | Certifications                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                                            |

----

**SIGNATURES**

**Conmed      Healthcare Management, Inc.**
** **

|                               |                                               |                               |
|------------------------------------|----------------------------------------------------|------------------------------------|
|                               |                                               |
|  August              14, 2007 |                                          |                          |
|                               | By:                                      | /s/              Richard W. Turner |
|                               | Richard              W. Turner                     |
|                               | President              and Chief Executive Officer |
|                        |                                               |                           |
|-----------------------------|----------------------------------------------------|--------------------------------|
|                        |                                               |
|  August 14, 2007  |                                          |                      |
|                        | By:                                      | /s/              Thomas W. Fry |
|                        | Thomas                W. Fry                       |
|                        | Chief              Financial Officer and Secretary |

----