##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---

FORM 10-Q



---



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

For the quarterly period ending September 30, 2007

OR



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

For the transition period from  to

Commission file number: 333-132913



---

MSCMedical Services
Company

(Exact name of registrant as specified in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 59-2997634                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|841 Prudential Drive  Suite 900 Jacksonville, FL              |  | 32207                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(904) 646-0199

(Registrants telephone number, including area code)



|                                                |  |           
|----------------------------------------------- |  | ----------
|11764-1 Marco Beach Drive Jacksonville, FL      |  | 32224     
|(Former Address of principal executive offices) |  | (Zip Code)



---

The registrant has no securities registered pursuant to Sections 12(b) or 12(g). The registrant files periodic reports under the Securities Exchange Act of 1934 solely to comply with requirements under that certain
Indenture and Supplemental Indenture related to its Senior Secured Floating Rate Notes due 2011. The original Indenture and form of note are filed with the Securities and Exchange Commission as part of the registrants Registration Statement on
Form S-4, amended as of May 17, 2006; the Supplemental Indenture was filed with the Securities and Exchange Commission on August 3, 2007 via a Current Report on Form 8-K dated July 24, 2007.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated
filer ̈Accelerated filer ̈Non-accelerated filer  x

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

Indicate the number of shares outstanding of each of
the issuers classes of common stock, as of the latest practicable date.



|                                        |  |                                
|--------------------------------------- |  | -------------------------------
|Class                                   |  | Outstanding at October 31,
2007
|Common Stock, $1.00 par value per share |  | 100 shares                     



---



---

##### Table of Contents

Table of Contents



|     |  |                                                                                                                   |  |   
|---- |  | ----------------------------------------------------------------------------------------------------------------- |  | --
|Item |  |                                                                                                                   |  |   
|     |  | Forward-Looking Statements                                                                                        |  | 3 
|     |  |                                                                                                                  
|     |  | Part I  Financial Information                                                                                    |  |   
|     |  |                                                                                                                  
|1.   |  | Financial Statements:                                                                                             |  |   
|     |  |                                                                                                                  
|     |  | Consolidated Balance Sheets As of September 30, 2007 (Unaudited) and December 31, 2006                            |  | 5 
|     |  | Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended September 30, 2007 and 2006 |  | 7 
|     |  | Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2007 and 2006           |  | 8 
|     |  |                                                                                                                  
|     |  | Notes to Unaudited Consolidated Financial Statements                                                              |  | 9 
|     |  |                                                                                                                  
|2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 20
|     |  |                                                                                                                  
|3.   |  | Quantitative and Qualitative Disclosures About Market Risk.                                                       |  | 28
|     |  |                                                                                                                  
|4T.  |  | Controls and Procedures                                                                                           |  | 28
|     |  |                                                                                                                  
|     |  | Part II  Other Information                                                                                       |  |   
|     |  |                                                                                                                  
|1.   |  | Legal Proceedings                                                                                                 |  | 29
|     |  |                                                                                                                  
|1A.  |  | Risk Factors                                                                                                      |  | 29
|     |  |                                                                                                                  
|2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                       |  | 29
|     |  |                                                                                                                  
|3.   |  | Defaults Upon Senior Securities                                                                                   |  | 29
|     |  |                                                                                                                  
|4.   |  | Submission of Matters to a Vote of Security Holders                                                               |  | 29
|     |  |                                                                                                                  
|5.   |  | Other Information                                                                                                 |  | 29
|     |  |                                                                                                                  
|6.   |  | Exhibits                                                                                                          |  | 29
|     |  |                                                                                                                  
|     |  | Signatures                                                                                                        |  | 30



2



---

##### Table of Contents

FORWARD-LOOKING STATEMENTS

Management may from time-to-time make written or oral forward-looking statements with respect to
the Companys annual or long-term goals, including statements contained in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K, and our Current Reports on Form 8-K filed with the Securities and Exchange Commission (the
SEC), and our press releases and other communications. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical earnings and those currently anticipated or projected.
Management cautions readers not to place undue reliance on any of the Companys forward-looking statements, which speak only as of the date made.

Words such as anticipates, expects, intends, plans, believes, seeks, estimates, may, could, and similar expressions identify
forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q that involve risks and uncertainties include, without limitation:



| |  |  | Managements expectation that gross margin and gross profit may be positively or adversely affected as a result of completed or ongoing requests for proposals;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Managements expectation that as the average wholesale price of pharmaceuticals move up or down, revenue and cost of revenue move correspondingly, leaving
gross profit margins largely unaffected, or that the use of generic drug pricing will improve profit margins;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Managements expectation that tax benefits will be utilized through the reversal of deferred tax liabilities in future periods;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | Managements expectations and estimates of revenue impact, net income impact and reassessment of goodwill and/or other intangible assets valuation, and cash
flow impact from the loss of the Liberty Mutual Pharmacy Benefit Management contract; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Managements expectation that current levels of operation and anticipated growth, cash from operations, together with other available sources of liquidity,
including borrowings available under its senior secured revolving credit facility, will be sufficient to fund its operations, anticipated capital expenditures and required payments on its debt for at least the next 12 months.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, management is
identifying important factors that could affect the Companys financial performance and could cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current
statements. The Companys future results could be adversely affected by a variety of factors, including:



| |  | the Companys dependence on sophisticated data processing software and hardware may impact business operations if they fail to operate properly or not as
anticipated;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the Companys net sales and operating results may fluctuate quarterly;
|- |  | ----------------------------------------------------------------------



| |  | operational disruptions due to natural disasters, particularly in regions susceptible to hurricanes;
|- |  | ----------------------------------------------------------------------------------------------------



| |  | the Companys inability to obtain certain medical supplies, services and pharmaceuticals, due to vendor supply disruptions;
|- |  | ---------------------------------------------------------------------------------------------------------------------------



| |  | increasing competitive pricing pressures on its sales to companies who are self-insured for workers compensation insurance and workers compensation
provider groups;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | government legislation or changes in government regulations that reduce workers compensation reimbursement rates that may have an adverse impact on the
Companys revenues in the Pharmaceutical and Medical Products and Services product lines;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3



---

##### Table of Contents

| |  | the Companys dependence upon workers compensation claims volumes (which claims require the Companys products and services) either
maintaining their current levels or increasing;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the Companys dependence on a limited number of large customers;
|- |  | ----------------------------------------------------------------



| |  | the Companys ability to successfully restructure operations to remove operational and other costs associated with revenue declines due to the loss of a large
customer;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the Company may not be able to continue to compete successfully with other medical supply companies and direct manufacturers;
|- |  | -----------------------------------------------------------------------------------------------------------------------------



| |  | continued consolidation within the healthcare industry may lead to increased competition;
|- |  | -----------------------------------------------------------------------------------------



| |  | the expansion of the multi-tiered pricing structure may place the Company at a competitive disadvantage;
|- |  | --------------------------------------------------------------------------------------------------------



| |  | the Companys dependence on the availability of lower cost, multi-tiered pricing of products;
|- |  | ---------------------------------------------------------------------------------------------



| |  | cost of goods sold may increase due to fuel surcharges from third parties;
|- |  | --------------------------------------------------------------------------



| |  | the Companys dependence on its ability to maintain good relations with customers and vendors;
|- |  | ----------------------------------------------------------------------------------------------



| |  | the loss of any significant agreements or the renegotiation of terms and conditions of existing agreements;
|- |  | -----------------------------------------------------------------------------------------------------------



| |  | the Companys ability to hire and retain qualified sales representatives to continue its sales growth;
|- |  | ------------------------------------------------------------------------------------------------------



| |  | the Companys ability to retain the services of senior management;
|- |  | ------------------------------------------------------------------



| |  | the Companys failure to execute its business plan and strategies for growth;
|- |  | -----------------------------------------------------------------------------



| |  | the Companys level of indebtedness, which may limit its ability to obtain financing in the future and may limit flexibility to react to market conditions;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | tax legislative initiatives and potential interest and penalty exposure related to existing and future tax audits;
|- |  | ------------------------------------------------------------------------------------------------------------------



| |  | litigation and liability exposure for existing and potential claims;
|- |  | --------------------------------------------------------------------



| |  | failure to maintain an effective system of internal controls may impact the Companys ability to accurately report its financial results;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | failure to comply with Federal and state regulations pertaining to physical security, record-keeping, and required reporting related to the purchase, sale, and
distribution of controlled and legend drugs;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | failure to comply with Federal and state regulations pertaining to filing claims for health care reimbursement or changes in the interpretation of those
requirements;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | willful circumvention of Federal and state regulations pertaining to filing claims for health care reimbursement by Company employees;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  | failure in the proper adoption of new accounting pronouncements or Securities and Exchange Commission rules and regulations; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------



| |  | the ongoing costs of complying with the provisions of Section 404 of the Sarbanes-Oxley Act.
|- |  | --------------------------------------------------------------------------------------------

In addition, all forward-looking statements are qualified by and should be read in conjunction with the risks described or referred to under the heading Risk
Factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these
forward-looking statements.



4



---

##### Table of Contents

Part I  Financial Information

Item 1  Financial Statements

MSC-Medical Services Company

Consolidated Balance Sheets

(Dollars in thousands)



|                                                                                                                        |  |                   |         |                  |   |        
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                                                                                                        |  | September 30,2007 |         | December 31,2006
|                                                                                                                        |  | (Unaudited)       |         |                 
|Assets                                                                                                                  |  |                   |         |                  |   |        
|Current assets:                                                                                                         |  |                   |         |                  |   |        
|Cash                                                                                                                    |  | $                 | 4,394   |                  | $ | 6,101  
|Accounts receivable, less allowance of $19,112 at September 30, 2007 and $18,795 at December 31, 2006                   |  |                   | 60,353  |                  |   | 63,537 
|Inventories                                                                                                             |  |                   | 62      |                  |   | 150    
|Other current assets                                                                                                    |  |                   | 1,264   |                  |   | 1,104  
|Current deferred income taxes                                                                                           |  |                   | 7,962   |                  |   | 7,965  
|                                                                                                                        |  |                   |         |                  |   |        
|Total current assets                                                                                                    |  |                   | 74,035  |                  |   | 78,857 
|                                                                                                                        |  |                  
|Property and equipment, net of accumulated depreciation of $6,305 at September 30, 2007 and $5,196 at December 31,
2006 |  |                   | 8,319   |                  |   | 5,801  
|Intangible assets:                                                                                                      |  |                   |         |                  |   |        
|Goodwill                                                                                                                |  |                   | 236,207 |                  |   | 236,207
|Trademarks                                                                                                              |  |                   | 24,100  |                  |   | 24,100 
|Customer relationships, net                                                                                             |  |                   | 46,550  |                  |   | 50,225 
|Other Intangibles, net                                                                                                  |  |                   | 37,180  |                  |   | 40,006 
|                                                                                                                        |  |                   |         |                  |   |        
|Total intangible assets                                                                                                 |  |                   | 344,037 |                  |   | 350,538
|                                                                                                                        |  |                  
|Other assets:                                                                                                           |  |                   |         |                  |   |        
|Deferred debt issuance costs, net                                                                                       |  |                   | 4,107   |                  |   | 4,959  
|Other                                                                                                                   |  |                   | 8       |                  |   | 921    
|                                                                                                                        |  |                   |         |                  |   |        
|Total other assets                                                                                                      |  |                   | 4,115   |                  |   | 5,880  
|                                                                                                                        |  |                   |         |                  |   |        
|Total assets                                                                                                            |  | $                 | 430,506 |                  | $ | 441,076
|                                                                                                                        |  |                   |         |                  |   |        

See notes to unaudited consolidated financial statements.



5



---

##### Table of Contents

MSC-Medical Services Company

Consolidated Balance Sheets  Continued

(Dollars in thousands)



|                                                                                          |  |                   |         |   |                  |   |         |  
|----------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                          |  | September 30,2007 |         |   | December 31,2006 |  
|                                                                                          |  | (Unaudited)       |         |   |                  |  
|Liabilities and stockholders equity                                                      |  |                   |         |   |                  |   |         |  
|Current liabilities:                                                                      |  |                   |         |   |                  |   |         |  
|Short-term debt                                                                           |  | $                 | 16,722  |   |                  | $ | 20,120  |  
|Accounts payable                                                                          |  |                   | 13,107  |   |                  |   | 11,874  |  
|Accrued expenses                                                                          |  |                   | 33,393  |   |                  |   | 42,369  |  
|Other current liabilities                                                                 |  |                   | 428     |   |                  |   | 3,599   |  
|                                                                                          |  |                   |         |   |                  |   |         |  
|Total current liabilities                                                                 |  |                   | 63,650  |   |                  |   | 77,962  |  
|                                                                                          |  |                  
|Non-current liabilities:                                                                  |  |                   |         |   |                  |   |         |  
|Long-term debt, less current portion                                                      |  |                   | 149,956 |   |                  |   | 148,895 |  
|Deferred income taxes                                                                     |  |                   | 26,790  |   |                  |   | 30,544  |  
|                                                                                          |  |                   |         |   |                  |   |         |  
|Total non-current liabilities                                                             |  |                   | 176,746 |   |                  |   | 179,439 |  
|                                                                                          |  |                   |         |   |                  |   |         |  
|Total liabilities                                                                         |  |                   | 240,396 |   |                  |   | 257,401 |  
|Stockholders equity:                                                                     |  |                   |         |   |                  |   |         |  
|Common stock, $1.00 par value, 1,000 shares authorized, 100 shares issued and outstanding |  |                   |        |   |                  |   |        |  
|Additional paid-in capital                                                                |  |                   | 215,560 |   |                  |   | 214,643 |  
|Accumulated other comprehensive income                                                    |  |                   | (136    | ) |                  |   | 561     |  
|Accumulated Deficit                                                                       |  |                   | (25,314 | ) |                  |   | (31,529 | )
|                                                                                          |  |                   |         |   |                  |   |         |  
|Total stockholders equity                                                                |  |                   | 190,110 |   |                  |   | 183,675 |  
|                                                                                          |  |                   |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                |  | $                 | 430,506 |   |                  | $ | 441,076 |  
|                                                                                          |  |                   |         |   |                  |   |         |  

See notes to unaudited consolidated financial statements.



6



---

##### Table of Contents

MSC-Medical Services Company

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2007 and 2006

(Unaudited)

(Dollars in thousands)



|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                           |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                                           |  | 2007                            |        |   | 2006                           |   |        | 2007 |  |   | 2006    |  
|Net Revenue:                                               |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Pharmaceutical                                             |  | $                               | 37,609 |   |                                | $ | 44,226 |      |  | $ | 127,567 |   |  | $ | 131,434 |  
|Medical Products & Services                                |  |                                 | 35,769 |   |                                |   | 37,270 |      |  |   | 113,754 |   |  |   | 113,838 |  
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Total net revenue                                          |  |                                 | 73,378 |   |                                |   | 81,496 |      |  |   | 241,321 |   |  |   | 245,272 |  
|Cost of Revenue (excluding depreciation and amortization): |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Pharmaceutical                                             |  |                                 | 31,257 |   |                                |   | 37,285 |      |  |   | 105,209 |   |  |   | 110,381 |  
|Medical Products & Services                                |  |                                 | 26,659 |   |                                |   | 27,835 |      |  |   | 86,025  |   |  |   | 86,002  |  
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Total cost of revenue                                      |  |                                 | 57,916 |   |                                |   | 65,120 |      |  |   | 191,234 |   |  |   | 196,383 |  
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Gross profit                                               |  |                                 | 15,462 |   |                                |   | 16,376 |      |  |   | 50,087  |   |  |   | 48,889  |  
|                                                           |  |                                 |        |  
|Operating expenses                                         |  |                                 | 11,649 |   |                                |   | 10,860 |      |  |   | 34,996  |   |  |   | 33,454  |  
|                                                           |  |                                 |        |  
|Depreciation and amortization                              |  |                                 | 2,774  |   |                                |   | 3,080  |      |  |   | 8,559   |   |  |   | 8,975   |  
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Total expenses                                             |  |                                 | 14,423 |   |                                |   | 13,940 |      |  |   | 43,555  |   |  |   | 42,429  |  
|Net loss on disposal of fixed assets                       |  |                                 | 15     |   |                                |   |       |      |  |   | 15      |   |  |   |        |  
|Litigation settlement                                      |  |                                 |       |   |                                |   |       |      |  |   | (12,363 | ) |  |   |        |  
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Operating income                                           |  |                                 | 1,024  |   |                                |   | 2,436  |      |  |   | 18,880  |   |  |   | 6,460   |  
|Interest expense, net                                      |  |                                 | 5,272  |   |                                |   | 5,430  |      |  |   | 15,983  |   |  |   | 15,705  |  
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Income (loss) before income taxes                          |  |                                 | (4,248 | ) |                                |   | (2,994 | )    |  |   | 2,897   |   |  |   | (9,245  | )
|Income tax benefit                                         |  |                                 | 1,672  |   |                                |   | 1,125  |      |  |   | 3,318   |   |  |   | 3,473   |  
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Net income (loss)                                          |  | $                               | (2,576 | ) |                                | $ | (1,869 | )    |  | $ | 6,215   |   |  | $ | (5,772  | )
|                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  

See notes to unaudited consolidated financial statements.



7



---

##### Table of Contents

MSC-Medical Services Company

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2007 and 2006

(Unaudited)

(Dollars in thousands)



|                                                                                                   |  |                                |        |   |      |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------- | -
|                                                                                                   |  | Nine Months EndedSeptember 30, |       
|                                                                                                   |  | 2007                           |        |   | 2006 |  
|Operating activities                                                                               |  |                                |        |   |      |   |         |  
|Net income (loss)                                                                                  |  | $                              | 6,215  |   |      | $ | (5,772  | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                                |        |   |      |   |         |  
|Depreciation                                                                                       |  |                                | 2,060  |   |      |   | 2,475   |  
|Amortization of intangibles                                                                        |  |                                | 6,499  |   |      |   | 6,500   |  
|Amortization of debt issuance costs and debt discount                                              |  |                                | 1,039  |   |      |   | 987     |  
|Provision for deferred income taxes                                                                |  |                                | (3,848 | ) |      |   | (3,480  | )
|Provision for bad debts                                                                            |  |                                | 6,267  |   |      |   | 5,963   |  
|Stock-based compensation                                                                           |  |                                | 1,236  |   |      |   | 915     |  
|Non-cash gain on litigation settlement                                                             |  |                                | (3,366 | ) |      |   |        |  
|Loss on disposal of leasehold improvements                                                         |  |                                | 15     |   |      |   |        |  
|Changes in operating assets and liabilities:                                                       |  |                                |        |   |      |   |         |  
|Increase in accounts receivable                                                                    |  |                                | (3,084 | ) |      |   | (14,128 | )
|Decrease in inventories                                                                            |  |                                | 88     |   |      |   | 10      |  
|(Increase) decrease in income tax receivable                                                       |  |                                | (127   | ) |      |   | 7,194   |  
|Increase in other current assets                                                                   |  |                                | (33    | ) |      |   | (449    | )
|Increase in other non-current assets                                                               |  |                                |       |   |      |   | (111    | )
|(Decrease) increase in accounts payable and accrued expenses                                       |  |                                | (7,745 | ) |      |   | 7,761   |  
|Increase in deferred revenue                                                                       |  |                                | 243    |   |      |   | 77      |  
|Decrease in income taxes payable                                                                   |  |                                | (48    | ) |      |   | (527    | )
|                                                                                                   |  |                                |        |   |      |   |         |  
|Net cash provided by operating activities                                                          |  |                                | 5,411  |   |      |   | 7,415   |  
|                                                                                                   |  |                                |        |   |      |   |         |  
|Investing activities                                                                               |  |                                |        |   |      |   |         |  
|Purchases of property, equipment and leasehold improvements                                        |  |                                | (3,688 | ) |      |   | (3,325  | )
|Proceeds from sale of fixed assets                                                                 |  |                                | 70     |   |      |   |        |  
|Payment to former owners                                                                           |  |                                |       |   |      |   | (8,803  | )
|                                                                                                   |  |                                |        |   |      |   |         |  
|Net cash used in investing activities                                                              |  |                                | (3,618 | ) |      |   | (12,128 | )
|                                                                                                   |  |                                |        |   |      |   |         |  
|Financing activities                                                                               |  |                                |        |   |      |   |         |  
|Repayment of short-term debt                                                                       |  |                                | (3,500 | ) |      |   |        |  
|                                                                                                   |  |                                |        |   |      |   |         |  
|Net cash used by financing activities                                                              |  |                                | (3,500 | ) |      |   |        |  
|                                                                                                   |  |                                |        |   |      |   |         |  
|Net decrease in cash                                                                               |  |                                | (1,707 | ) |      |   | (4,713  | )
|Cash, beginning of period                                                                          |  |                                | 6,101  |   |      |   | 8,300   |  
|                                                                                                   |  |                                |        |   |      |   |         |  
|Cash, end of period                                                                                |  | $                              | 4,394  |   |      | $ | 3,587   |  
|                                                                                                   |  |                                |        |   |      |   |         |  
|Non-cash investing and financing activities                                                        |  |                                |        |   |      |   |         |  

The Company financed the purchase of certain leasehold improvements of $1 million through the
lessor of the leased property.

See notes to unaudited consolidated financial statements.



8



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements

September 30, 2007

(Dollar amounts in
thousands except per share data, unless otherwise stated)

1. Summary of Significant Accounting Policies

Description of Business

MSC-Medical Services Company (the
Company or MSC) is a provider of healthcare products and services for the workers compensation industry in the United States. The Company provides workers compensation payors, such as insurers and third party
administrators, with a quality alternative to the costly and time-consuming process of coordinating the logistics for the delivery of non-acute care needs to their claimants. MSC currently manages relationships with over 7,000 vendors, enabling it
to provide over 20,000 healthcare products and services to workers compensation patients throughout the United States.

Basis of Presentation

The accompanying consolidated unaudited interim financial statements have been prepared in accordance with the rules and regulations of the United States
Securities and Exchange Commission (the SEC). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles
(GAAP) have been omitted pursuant to the SEC rules and regulations for interim reporting. The financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of
operations for the periods indicated. All such adjustments are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Operating results for the interim
period reported are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

The consolidated balance
sheet at December 31, 2006 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying fiscal year to date
2007 consolidated financial statements contained in this Quarterly Report on Form 10-Q include the activities of the Companys new wholly owned subsidiary, MSC Billing, Inc., as discussed below. All intercompany transactions have been
eliminated in consolidation.

In July 2007, the Company formed a new wholly-owned subsidiary, MSC Billing, Inc., incorporated and operated in the State of
Florida. The purpose of the subsidiary is to act as the Companys billing agent for certain clients which receive various services and products from the Company. The Company utilizes the billing agent in order to bill the different types
of products and services under separate employer tax identification numbers (which clearly distinguishes the amounts payable for such differentiated products in our clients payables systems).

For further information, refer to the financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2006 filed with the SEC.

Allowance for Doubtful Accounts

Additions to the allowance for doubtful accounts are made by means of the provision for bad debts which is based upon managements assessment of historical and expected collections and other collection
indicators. The provision for bad debts includes reserves for specific high-collection risk customer accounts and reserves for other customer collection risks. Such reserves and estimation factors are reviewed and updated periodically as
uncollectible accounts are deducted from the allowance, and subsequent recoveries are added.



9



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



Included in the allowance for doubtful accounts are provisions for sales allowances totaling $0.6 million at September 30, 2007 and $0.7 million at
September 30, 2006.

Bad debt expense for the nine months ended September 30, 2007 and 2006 was approximately $6.3 million and $6.0 million,
respectively.

Impairment of Long-Lived Assets

Goodwill represents the excess purchase price paid over net assets acquired resulting from the application of the purchase method of accounting. Goodwill is tested annually for impairment.

Under Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed at least annually for impairment. The Company performed its annual impairment review of goodwill and trademarks as of the measurement date, October 31, for fiscal year 2006, which
indicated no impairment charge was required.

The Company evaluates its long-lived assets for impairment whenever circumstances indicate that the carrying
amount of the asset may not be recoverable from estimated future cash flows, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. There were no impairment losses recognized in the nine months
ended September 30, 2007 nor in the years ended December 31, 2006 and December 31, 2005.

On March 6, 2007, MSC was provided with
notice by Liberty Mutual of their intent to terminate the Liberty Mutual Pharmacy Benefit Management (PBM) Agreement dated as of April 1, 2003 between the Company and Liberty Mutual. The effective date of the termination of the
Liberty Mutual PBM Agreement was June 4, 2007. MSCs contracts with Liberty Mutual for Home Health Services and Durable Medical Equipment are unaffected. Liberty Mutual represented approximately 19% of the Companys total billings for
the year ended December 31, 2006. Gross billings before sales adjustments from the Liberty Mutual PBM Agreement totaled approximately $42.8 million in 2006. Liberty Mutual also represented 13.9%, or $11.4 million of gross accounts receivable at
December 31, 2006 before reduction for allowance for doubtful accounts. In the first quarter of 2007, the Company tested the valuation of goodwill and other intangible assets in accordance with guidance included in SFAS No. 142,
Goodwill and Other Intangible Assets.As a result of this review, the Company concluded that no impairment had occurred as a result of the termination of the Liberty Mutual PBM Agreement.

Recently Issued Accounting Standards

In June 2006, the Financial
Accounting Standards Board (FASB) issued SFAS No. 155 Accounting for Certain Hybrid Financial Instrumentsan amendment of FASB Statements No. 133 and 140, SFAS No. 156 Accounting for Servicing of Financial
Assetsan amendment of FASB Statement No. 140 and FSP FIN 46(R)-6Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R). The Company has completed its evaluation of the SFAS
pronouncements staff position and concluded that they will not impact the Companys consolidated financial statements.

In June 2006, the FASB issued
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109and subsequently, on May 2, 2007, the FASB also issued FASB Staff Position (FSP) No. FIN 48-1
Definition ofSettlementin FASB Interpretation No. 48. This Interpretation and FSP provide guidance for recognizing and measuring tax positions taken or expected to be taken in a tax return that directly or indirectly affect
amounts reported in financial statements, as well as provide accounting guidance for the related income tax effects of tax positions that do not meet the recognition threshold specified in this Interpretation. This Interpretation is effective for
fiscal years beginning after December 15, 2006. The provisions of the FSP are effective upon the initial adoption of FIN 48. The Company adopted the provisions of these pronouncements effective January 1, 2007 as discussed in further
detail in Note 5 of Notes to Unaudited Consolidated Financial Statements in this report.



10



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.This Statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board
having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year. The Company has not completed its evaluation of the impact of adopting this pronouncement.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This pronouncement would permit entities to elect to measure financial
instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected would be reported in earnings. This statement is effective for fiscal
periods beginning after November 15, 2007; early adoption is only permitted for companies that have also elected to apply the provisions of SFAS No. 157, Fair Value Measurements as discussed above. The Company has not
completed its evaluation of the impact of adopting this pronouncement.

2. Stock Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment, (SFAS No. 123(R)) applying the modified prospective
method. SFAS No. 123(R) requires all equity-based payments to employees, including grants of employee stock options, to be recognized in the statement of earnings based on the grant date fair value of the award. Under the modified prospective
method, the Company is required to record equity-based compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards outstanding as of the date of adoption. The fair values of stock
options granted during 2005 and after the Company adopted SFAS No. 123(R) were determined using a Black-Scholes valuation model.

In adopting SFAS
No. 123(R), the Company did not modify the terms of any previously granted options.

The fair value of restricted shares is determined by the number
of shares granted and the grant date fair value of the Companys Common Shares. The compensation expense recognized for all equity-based awards is net of estimated forfeitures and is recognized over the awards service period. In
accordance with Staff Accounting Bulletin (SAB) No. 107, the Company classified equity-based compensation within operating expenses to correspond with the same line item as the majority of the cash compensation paid to employees.

The impact of the equity-based compensation is reflected in cash flow from operations on the Unaudited Consolidated Statement of Cash Flows.

Activity relative to the Companys common stock options is as follows:



11



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



|                                          |  |                  |   |  |                                          |       |   |                                                     |      |                             |   |      
|----------------------------------------- |  | ---------------- | - |  | ---------------------------------------- | ----- | - | --------------------------------------------------- | ---- | --------------------------- | - | -----
|                                          |  | Number of Shares |   |  | Weighted Average ExercisePrice Per Share |       |   | Weighted Average Remaining ContractualLife in Years |      | IntrinsicValue ($ in 000s)
|Options outstanding at December 31, 2006  |  | 29,782,003       |   |  | $                                        | 1.34  |   |                                                     | 8.48 |                             | $ | 1,789
|Options granted  time vesting            |  | 2,438,357        |   |  | $                                        | 1.50  |   |                                                     |      |                             |   |      
|Options granted  performance vesting     |  | 1,219,179        |   |  | $                                        | 1.50  |   |                                                     |      |                             |   |      
|Options forfeited                         |  | (986,386         | ) |  | $                                        | (1.50 | ) |                                                     |      |                             |   |      
|                                          |  |                  |   |  |                                          |       |   |                                                     |      |                             |   |      
|Options outstanding at March 31, 2007     |  | 32,453,153       |   |  | $                                        | 1.36  |   |                                                     | 8.42 |                             | $ | 1,750
|Options granted  time vesting            |  |                 |   |  |                                          |      |   |                                                     |      |                             |   |      
|Options granted  performance vesting     |  |                 |   |  |                                          |      |   |                                                     |      |                             |   |      
|Options forfeited                         |  | (1,081,430       | ) |  | $                                        | (1.50 | ) |                                                     |      |                             |   |      
|                                          |  |                  |   |  |                                          |       |   |                                                     |      |                             |   |      
|Options outstanding at June 30, 2007      |  | 31,371,723       |   |  | $                                        | 1.34  |   |                                                     | 8.43 |                             | $ | 1,903
|Options granted  time vesting            |  | 487,122          |   |  | $                                        | 1.50  |   |                                                     |      |                             |   |      
|Options granted  performance vesting     |  | 243,561          |   |  | $                                        | 1.50  |   |                                                     |      |                             |   |      
|Options forfeited                         |  | (559,983         | ) |  | $                                        | (1.50 | ) |                                                     |      |                             |   |      
|                                          |  |                  |   |  |                                          |       |   |                                                     |      |                             |   |      
|Options outstanding at September 30, 2007 |  | 31,542,423       |   |  | $                                        | 1.35  |   |                                                     |      |                             |   |      
|                                          |  |                  |   |  |                                          |       |   |                                                     |      |                             |   |      
|Exercisable at September 30, 2007         |  | 15,513,153       |   |  | $                                        | 1.18  |   |                                                     | 7.95 |                             | $ | 1,750
|                                          |  |                  |   |  |                                          |       |   |                                                     |      |                             |   |      

Two-thirds of options granted vest over a three-year period, with an exercise price ranging from $1.00 to $3.00.
The remaining one-third vest only upon change in control and also have exercise prices ranging from $1.00 to $3.00. Any portion of the stock options not then vested shall immediately vest. The 15.5 million vested options at September 30,
2007 have exercise prices between $0.29 and $3.00.

The fair value of options granted during the first quarter of 2007 was approximately $0.2 million and
is expected to be expensed over a period of 36 months. There were no options granted in the second quarter of 2007. The fair value of options granted during the third quarter of 2007 was approximately $0.1 million and is expected to be expensed over
a period of 36 months.

The estimated fair value of each option granted after January 1, 2006 is calculated using the Black-Scholes option pricing
model. The assumptions used for calculating fair value of grants issued during the first nine months of 2007 varied in range as follows: expected life of 2.5 to 3.0 years, risk-free interest rate of 4.5%  4.8%, expected volatility of 20.5%
 26.3% and no expected dividend yield.

An estimated expected life of 3 years before exercise was used for the grants during the nine months ended
September 30, 2007, based on the typical investment holding period of the shareholder with a controlling interest in MSC. A targeted holding period range of three to six years is cited in Monitor Clipper Equity Partners II, L.P. Private
Placement Memorandumat which time all shares would be expected to be vested and then exercised. Implicit in this assumption is that option-holders would not likely exercise before a transaction date as they would become the holders of minority
interest shares subject to marketability discounts should they wish to sell their shares. The expected change in control will likely provide a liquidity event for option-holders.

In order to calculate volatility, the Company analyzed the publicly traded stock options of guideline companies with respect to implied volatility. Implied volatilities were calculated using an average of the 10-day
trailing 720-day term to expiration on at the money options as of the valuation date. The Company relied exclusively on the median implied volatility as a proxy for expected volatility in the Black-Scholes model as the Company believes
it provides the best indication of expected volatility over the expected lives of the options.

Activity relative to the Companys restricted stock is
as follows:



|                                                    |  |                  |   |  |                          |    
|--------------------------------------------------- |  | ---------------- | - |  | ------------------------ | ---
|                                                    |  | Number of Shares |   |  | Fair value at grant date
|Restricted shares outstanding at December 31, 2006  |  | 900,000          |   |  | $                        | .88
|Shares granted                                      |  | 550,000          |   |  | $                        | .81
|Shares vested                                       |  | (300,000         | ) |  |                          |    
|                                                    |  |                  |   |  |                          |    
|Restricted shares outstanding at September 30, 2007 |  | 1,150,000        |   |  |                          |    
|                                                    |  |                  |   |  |                          |    



12



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



The restricted shares issued prior to 2007 were issued at a purchase price of $0.001 per share with one-third of the shares vesting on February 14 of
each of 2007, 2008 and 2009. The restricted shares issued during 2007 were issued at a purchase price of $0.001 per share with one-third of the shares vesting in March of each of 2008, 2009 and 2010.

3. Comprehensive Income

Comprehensive income represents all changes
in equity of the enterprise that results from recognized transactions and other economic events during the period. Other comprehensive (loss) income refers to revenues, expenses, gains, and losses that under GAAP are included in comprehensive income
but excluded from net income, such as the unrealized gain or loss on the Companys interest rate swap. The following table details the components of comprehensive income (loss) for the periods presented.



|                                                         |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|-------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                         |  | Three Months Ended |        |   | Nine Months Ended |  
|                                                         |  | September 30,2007  |        |   | September 30,2006 |   |        | September 30,2007 |  |   | September 30,2006 |  
|Net income (loss)                                        |  | $                  | (2,576 | ) |                   | $ | (1,869 | )                 |  | $ | 6,215             |   |  | $ | (5,772 | )
|Other comprehensive income (loss):                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Unrealized gain (loss) on interest rate swap, net of tax |  |                    | (771   | ) |                   |   | (992   | )                 |  |   | (697              | ) |  |   | 238    |  
|                                                         |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Comprehensive income (loss)                              |  | $                  | (3,347 | ) |                   | $ | (2,861 | )                 |  | $ | 5,518             |   |  | $ | (5,534 | )
|                                                         |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  

4. Commitments and Contingencies

In conjunction with the sale of the Company in March 2005, an escrow account was established with Wells Fargo Bank as the escrow agent and $15.0 million of the purchase price was deposited in the escrow account to be
used as security for and to satisfy claims arising out of the transaction. On May 26, 2006, the parent delivered to the stockholder representative for the sellers of the Company an indemnification claim against the escrow
balance. A $12.4 million settlement was reached on May 30, 2007 by and between the Company and the sellers as part of a settlement agreement that included a cash settlement to the Company paid out from the escrow account of $9 million and
forfeiture of $3.4 million of unpaid tax benefits due to the seller. Consistent with applicable accounting standards and SEC guidance, this transaction has been accounted for as an adjustment to results of operations in the second quarter of 2007,
accordingly, the effect of this transaction is included in the accompanying unaudited consolidated results of operations for the nine months ended September 30, 2007. See also Note 7.

5. Income Taxes

In June 2006, the FASB issued FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48).This Interpretation and related guidance prescribe a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and
transitions.

Effective January 1, 2007, the Company adopted the provisions of FIN 48 and related guidance. As of January 1, 2007, the
unrecognized tax benefit amount recorded was $0.2 million of which $0.1 million would affect income tax expense if recognized. There were no significant changes to this amount during the first nine months of 2007.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption and as of
September 30, 2007, the Company did not have accrued interest or penalties associated with any unrecognized tax benefits, nor were any interest or penalties recognized during the first nine months of 2007.



13



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



Our evaluation was based on the federal and state income tax years we believe remain open for examination, 2002 through 2006, and 1999 through 2006,
respectively. The Internal Revenue Service (IRS) is currently challenging $1.4 million of tax benefits recognized related to certain transaction costs deducted in prior years. The Company believes that its income tax filing positions will be
sustained and does not anticipate any adjustments that will result in a material change to its financial positions, however it is reasonably possible that an adjustment of $1.4 million of previously recognized tax benefits will occur within the next
twelve months. If the position is not sustained, the impact would not affect net income as the tax effect of the deduction relates to goodwill from a prior acquisition.

Income tax expense for the nine month period ended September 30, 2007 differed from our normal effective tax rate, as the litigation settlement gain recognized during the second quarter of 2007 is non-taxable.
Excluding the impact of this non-taxable gain, the Companys effective tax rate remained consistent with the prior year.

6. Debt

On July 23, 2007, the Company repaid $3.5 million of borrowings under the revolving credit facility, which reduced the outstanding short-term debt to $16.6
million.

In September 2007, the Company commenced occupation of a new leased facility (See Note 7). In order to occupy the new premises certain costs were
incurred by the lessor to convert the space to general office use, and additional costs were incurred to meet the specifications of the Company. The approximate $1 million incurred to meet Company specifications were paid for by the
lessor in exchange for an obligation under the lease to repay such amounts and interest (at a rate of 8%) over the term of the lease (94 months). The related leasehold improvements were capitalized and are being depreciated over the term of the
lease.

7. Leases

Effective December 4, 2006, the
Company entered into a full service lease agreement with South Shore Group Partners, LLC for new corporate headquarters office space of approximately 100,000 square feet located at 841 Prudential Drive, Jacksonville, FL 32207. The lease has a 94
month term which commenced in September 2007. The lease provides for an option to renew and extend the lease for two terms of five years each, commencing at the expiration of the initial term of the lease. The Company also has the option to contract
24,415 square feet of the space through calendar year 2008.

In accordance with SFAS No. 13Accounting for Leases, rent expense is being
recognized in the accompanying financial statements on a straight-line basis over the lease term, excluding extension periods, commencing September 2007. In accordance with FASB Technical Bulletin No. 88-1 Issues Relating to Accounting
for Leases, lease incentives totaling $450 thousand and ten months of abated rent granted to us by the lessor pursuant to the lease are being accounted for on a straight-line basis over the life of the lease excluding the extension periods.

Pursuant to the terms of the Companys prior facility lease, the Company recorded a $339 thousand non-cash charge to expense relative to lease
termination costs in the third quarter of 2007; which such amount is expected to be paid out during the next nine months.

8. Guarantor Financial
Statements (unaudited)

The Companys senior secured floating rate notes are guaranteed by the Parent (also referred to as the
Guarantor) on a



14



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



senior secured basis. The notes are the Companys and the Guarantors senior secured obligation and will rank equally in right of payment with all
of the Companys and Guarantors existing and future unsubordinated indebtedness. The notes are effectively junior to the Companys and Guarantors indebtedness under the Companys senior secured revolving credit facility to
the extent of the value of the assets securing such facility. The notes are secured by a second priority lien on substantially all of the Companys and Guarantors existing and future assets, as well as capital stock. The senior secured
revolving credit facility is secured by a first priority lien on all such assets.

The Company has not presented separate financial statements for the
Guarantor because it has deemed that such financial statements would not provide investors with any material additional information. Included in the tables below are the consolidating balance sheet as of September 30, 2007 and December 31,
2006, the consolidating statement of operations for the three and nine months ended September 30, 2007 and 2006, and consolidating statement of cash flows for the nine months ended September 30, 2007 and 2006 of: (a) the Parent
(Guarantor); (b) the Company (Subsidiary), (c) elimination entries necessary to consolidate the Parent with the Company; and (d) the consolidated company, MCPMSC Acquisition, Inc.

MCP-MSC Acquisition, Inc.

Condensed
Consolidating Balance Sheets



|                                      |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|------------------------------------- |  | -------------------------------------------- | ------- | -------------------------------------------- | - | ------------ |  | - | ------------ | - | -------- | - | ------------ |  | ------------ | ------- |  | ------------ | ------- |  | - | -------- | - |  | - | -------
|                                      |  | September 30, 2007                           |         | December 31, 2006                           
|                                      |  | (Parent)                                     |         | (Subsidiary)                                 |   | Eliminations |  |   | Consolidated |   | (Parent) |   | (Subsidiary) |  | Eliminations |         |  | Consolidated
|                                      |  | (Dollars in thousands except per share data) |         | (Dollars in thousands except per share data)
|Assets                                |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Current assets:                       |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Cash                                  |  | $                                            |        |                                              | $ | 4,394        |  | $ |             |   |          | $ | 4,394        |  | $            |        |  | $            | 6,101   |  | $ |         |   |  | $ | 6,101  
|Accounts receivable, net              |  |                                              |        |                                              |   | 60,353       |  |   |             |   |          |   | 60,353       |  |              |        |  |              | 63,537  |  |   |         |   |  |   | 63,537 
|Inventories                           |  |                                              |        |                                              |   | 62           |  |   |             |   |          |   | 62           |  |              |        |  |              | 150     |  |   |         |   |  |   | 150    
|Other current assets                  |  |                                              |        |                                              |   | 1,264        |  |   |             |   |          |   | 1,264        |  |              |        |  |              | 1,104   |  |   |         |   |  |   | 1,104  
|Deferred income taxes                 |  |                                              |        |                                              |   | 7,962        |  |   |             |   |          |   | 7,962        |  |              |        |  |              | 7,965   |  |   |         |   |  |   | 7,965  
|                                      |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Total current assets                  |  |                                              |        |                                              |   | 74,035       |  |   |             |   |          |   | 74,035       |  |              |        |  |              | 78,857  |  |   |         |   |  |   | 78,857 
|                                      |  |                                              |         |                                              |   |              |  |  
|Property and equipment, net           |  |                                              |        |                                              |   | 8,319        |  |   |             |   |          |   | 8,319        |  |              |        |  |              | 5,801   |  |   |         |   |  |   | 5,801  
|                                      |  |                                              |         |                                              |   |              |  |  
|Intangible assets:                    |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Goodwill                              |  |                                              |        |                                              |   | 236,207      |  |   |             |   |          |   | 236,207      |  |              |        |  |              | 236,207 |  |   |         |   |  |   | 236,207
|Trademarks                            |  |                                              |        |                                              |   | 24,100       |  |   |             |   |          |   | 24,100       |  |              |        |  |              | 24,100  |  |   |         |   |  |   | 24,100 
|Customer relationships, net           |  |                                              |        |                                              |   | 46,550       |  |   |             |   |          |   | 46,550       |  |              |        |  |              | 50,225  |  |   |         |   |  |   | 50,225 
|Other intangibles, net                |  |                                              |        |                                              |   | 37,180       |  |   |             |   |          |   | 37,180       |  |              |        |  |              | 40,006  |  |   |         |   |  |   | 40,006 
|                                      |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Total intangible assets               |  |                                              |        |                                              |   | 344,037      |  |   |             |   |          |   | 344,037      |  |              |        |  |              | 350,538 |  |   |         |   |  |   | 350,538
|                                      |  |                                              |         |                                              |   |              |  |  
|Other assets:                         |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Investment in consolidated subsidiary |  |                                              | 190,246 |                                              |   |             |  |   | (190,246     | ) |          |   |             |  |              | 183,114 |  |              |        |  |   | (183,114 | ) |  |   |       
|Deferred debt issuance costs, net     |  |                                              | 584     |                                              |   | 4,107        |  |   |             |   |          |   | 4,691        |  |              | 658     |  |              | 4,959   |  |   |         |   |  |   | 5,617  
|Deferred income taxes/other           |  |                                              | 4,385   |                                              |   | 8            |  |   |             |   |          |   | 4,393        |  |              | 2,855   |  |              | 921     |  |   |         |   |  |   | 3,776  
|                                      |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Total other assets                    |  |                                              | 195,215 |                                              |   | 4,115        |  |   | (190,246     | ) |          |   | 9,084        |  |              | 186,627 |  |              | 5,880   |  |   | (183,114 | ) |  |   | 9,393  
|                                      |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        
|Total assets                          |  | $                                            | 195,215 |                                              | $ | 430,506      |  | $ | (190,246     | ) |          | $ | 435,475      |  | $            | 186,627 |  | $            | 441,076 |  | $ | (183,114 | ) |  | $ | 444,589
|                                      |  |                                              |         |                                              |   |              |  |   |              |   |          |   |              |  |              |         |  |              |         |  |   |          |   |  |   |        



15



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



MCP-MSC Acquisition, Inc.

Condensed Consolidating Balance Sheets - continued



|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ------- | - | -------------------------------------------- | - | ------- | ------------ |  | - | ------------ | - |  | -------- | ------- | - | ------------ | - | ------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | ------- | -
|                                                                                                                                                    |  | September 30, 2007                           |         |   | December 31, 2006                            |  
|                                                                                                                                                    |  | (Parent)                                     |         |   | (Subsidiary)                                 |   |         | Eliminations |  |   | Consolidated |   |  | (Parent) |         |   | (Subsidiary) |   |         | Eliminations |  |   | Consolidated |  
|                                                                                                                                                    |  | (Dollars in thousands except per share data) |         |   | (Dollars in thousands except per share data) |  
|Liabilities and stockholders equity                                                                                                                |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current liabilities:                                                                                                                                |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Short-term debt                                                                                                                                     |  | $                                            |        |   |                                              | $ | 16,722  |              |  | $ |             |   |  | $        | 16,722  |   |              | $ |        |              |  | $ | 20,120       |   |  | $ |         |   |  | $ | 20,120  |  
|Accounts payable                                                                                                                                    |  |                                              |        |   |                                              |   | 13,107  |              |  |   |             |   |  |          | 13,107  |   |              |   |        |              |  |   | 11,874       |   |  |   |         |   |  |   | 11,874  |  
|Accrued expenses                                                                                                                                    |  |                                              | 2,222   |   |                                              |   | 33,393  |              |  |   |             |   |  |          | 35,615  |   |              |   | 817     |              |  |   | 42,369       |   |  |   |         |   |  |   | 43,186  |  
|Other current liabilities                                                                                                                           |  |                                              |        |   |                                              |   | 428     |              |  |   |             |   |  |          | 428     |   |              |   |        |              |  |   | 3,599        |   |  |   |         |   |  |   | 3,599   |  
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total current liabilities                                                                                                                           |  |                                              | 2,222   |   |                                              |   | 63,650  |              |  |   |             |   |  |          | 65,872  |   |              |   | 817     |              |  |   | 77,962       |   |  |   |         |   |  |   | 78,779  |  
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |             
|Non-current liabilities:                                                                                                                            |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Long-term debt                                                                                                                                      |  |                                              | 38,733  |   |                                              |   | 149,956 |              |  |   |             |   |  |          | 188,689 |   |              |   | 36,241  |              |  |   | 148,895      |   |  |   |         |   |  |   | 185,136 |  
|Deferred income taxes                                                                                                                               |  |                                              |        |   |                                              |   | 26,790  |              |  |   |             |   |  |          | 26,790  |   |              |   |        |              |  |   | 30,544       |   |  |   |         |   |  |   | 30,544  |  
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total non-current liabilities                                                                                                                       |  |                                              | 38,733  |   |                                              |   | 176,746 |              |  |   |             |   |  |          | 215,479 |   |              |   | 36,241  |              |  |   | 179,439      |   |  |   |         |   |  |   | 215,680 |  
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |             
|Total liabilities                                                                                                                                   |  |                                              | 40,955  |   |                                              |   | 240,396 |              |  |   |             |   |  |          | 281,351 |   |              |   | 37,058  |              |  |   | 257,401      |   |  |   |         |   |  |   | 294,459 |  
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |             
|Stockholders equity:                                                                                                                               |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Common stock, $.001 par value, 225,000,000 shares authorized, 181,375,000 shares issued and outstanding at September 30, 2007 and
December 31, 2006 |  |                                              | 181     |   |                                              |   |        |              |  |   |             |   |  |          | 181     |   |              |   | 181     |              |  |   |              |   |  |   |          |   |  |   | 181     |  
|Additional paid-in capital                                                                                                                          |  |                                              | 186,504 |   |                                              |   | 215,560 |              |  |   | (215,560     | ) |  |          | 186,504 |   |              |   | 185,590 |              |  |   | 214,643      |   |  |   | (214,643 | ) |  |   | 185,590 |  
|Accumulated other comprehensive income                                                                                                              |  |                                              |        |   |                                              |   | (136    | )            |  |   |             |   |  |          | (136    | ) |              |   |         |              |  |   | 561          |   |  |   |          |   |  |   | 561     |  
|Accumulated deficit                                                                                                                                 |  |                                              | (32,425 | ) |                                              |   | (25,314 | )            |  |   | 25,314       |   |  |          | (32,425 | ) |              |   | (36,202 | )            |  |   | (31,529      | ) |  |   | 31,529   |   |  |   | (36,202 | )
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total stockholders equity                                                                                                                          |  |                                              | 154,260 |   |                                              |   | 190,110 |              |  |   | (190,246     | ) |  |          | 154,124 |   |              |   | 149,569 |              |  |   | 183,675      |   |  |   | (183,114 | ) |  |   | 150,130 |  
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total liabilities and stockholders equity                                                                                                          |  | $                                            | 195,215 |   |                                              | $ | 430,506 |              |  | $ | (190,246     | ) |  | $        | 435,475 |   |              | $ | 186,627 |              |  | $ | 441,076      |   |  | $ | (183,114 | ) |  | $ | 444,589 |  
|                                                                                                                                                    |  |                                              |         |   |                                              |   |         |              |  |   |              |   |  |          |         |   |              |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  



16



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



MCP  MSC Acquisition, Inc.

Condensed Consolidating Statement of Operations

For the three months ended



|                                                 |  |                        |        |   |                        |   |        |              |  |              |       |  |          |        |   |              |   |        |              |  |              |        |   |  |   |       |  |   |        |  
|------------------------------------------------ |  | ---------------------- | ------ | - | ---------------------- | - | ------ | ------------ |  | ------------ | ----- |  | -------- | ------ | - | ------------ | - | ------ | ------------ |  | ------------ | ------ | - |  | - | ----- |  | - | ------ | -
|                                                 |  | September 30, 2007     |        |   | September 30, 2006     |  
|                                                 |  | (Parent)               |        |   | (Subsidiary)           |   |        | Eliminations |  | Consolidated |       |  | (Parent) |        |   | (Subsidiary) |   |        | Eliminations |  | Consolidated |       
|                                                 |  | (Dollars in thousands) |        |   | (Dollars in thousands) |  
|Net revenue                                      |  | $                      |       |   |                        | $ | 73,378 |              |  | $            |      |  | $        | 73,378 |   |              | $ |       |              |  | $            | 81,496 |   |  | $ |      |  | $ | 81,496 |  
|Cost of revenue                                  |  |                        |       |   |                        |   | 57,916 |              |  |              |       |  |          | 57,916 |   |              |   |       |              |  |              | 65,120 |   |  |   |      |  |   | 65,120 |  
|                                                 |  |                        |        |   |                        |   |        |              |  |              |       |  |          |        |   |              |   |        |              |  |              |        |   |  |   |       |  |   |        |  
|Gross profit                                     |  |                        |       |   |                        |   | 15,462 |              |  |              |      |  |          | 15,462 |   |              |   |       |              |  |              | 16,376 |   |  |   |      |  |   | 16,376 |  
|Operating expenses                               |  |                        |       |   |                        |   | 11,649 |              |  |              |      |  |          | 11,649 |   |              |   |       |              |  |              | 10,860 |   |  |   |      |  |   | 10,860 |  
|Depreciation and amortization                    |  |                        |       |   |                        |   | 2,774  |              |  |              |      |  |          | 2,774  |   |              |   |       |              |  |              | 3,080  |   |  |   |      |  |   | 3,080  |  
|                                                 |  |                        |        |   |                        |   |        |              |  |              |       |  |          |        |   |              |   |        |              |  |              |        |   |  |   |       |  |   |        |  
|Total expenses                                   |  |                        |       |   |                        |   | 14,423 |              |  |              |      |  |          | 14,423 |   |              |   |       |              |  |              | 13,940 |   |  |   |      |  |   | 13,940 |  
|Loss on disposal of fixed assets                 |  |                        |       |   |                        |   | 15     |              |  |              |      |  |          | 15     |   |              |   |       |              |  |              |       |   |  |   |      |  |   |       |  
|Operating income                                 |  |                        |       |   |                        |   | 1,024  |              |  |              |      |  |          | 1,024  |   |              |   |       |              |  |              | 2,436  |   |  |   |      |  |   | 2,436  |  
|Equity in gain (loss) of consolidated subsidiary |  |                        | (2,576 | ) |                        |   |       |              |  |              | 2,576 |  |          |       |   |              |   | (1,869 | )            |  |              |       |   |  |   | 1,869 |  |   |       |  
|Other expense (income):                          |  |                        |        |   |                        |   |        |              |  |              |       |  |          |        |   |              |   |        |              |  |              |        |   |  |   |       |  |   |        |  
|Interest expense, net                            |  |                        | 1,360  |   |                        |   | 5,272  |              |  |              |      |  |          | 6,632  |   |              |   | 1,262  |              |  |              | 5,430  |   |  |   |      |  |   | 6,692  |  
|                                                 |  |                        |        |   |                        |   |        |              |  |              |       |  |          |        |   |              |   |        |              |  |              |        |   |  |   |       |  |   |        |  
|Income (loss) before income taxes                |  |                        | (3,936 | ) |                        |   | (4,248 | )            |  |              | 2,576 |  |          | (5,608 | ) |              |   | (3,131 | )            |  |              | (2,994 | ) |  |   | 1,869 |  |   | (4,256 | )
|Income tax benefit                               |  |                        | 523    |   |                        |   | 1,672  |              |  |              |      |  |          | 2,195  |   |              |   | 474    |              |  |              | 1,125  |   |  |   |      |  |   | 1,599  |  
|                                                 |  |                        |        |   |                        |   |        |              |  |              |       |  |          |        |   |              |   |        |              |  |              |        |   |  |   |       |  |   |        |  
|Net income (loss)                                |  | $                      | (3,413 | ) |                        | $ | (2,576 | )            |  | $            | 2,576 |  | $        | (3,413 | ) |              | $ | (2,657 | )            |  | $            | (1,869 | ) |  | $ | 1,869 |  | $ | (2,657 | )
|                                                 |  |                        |        |   |                        |   |        |              |  |              |       |  |          |        |   |              |   |        |              |  |              |        |   |  |   |       |  |   |        |  



17



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



MCP  MSC Acquisition, Inc.

Condensed Consolidating Statement of Operations

For the nine months ended



|                                                 |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  
|------------------------------------------------ |  | ---------------------- | ----- | ------------ | ---------------------- | ------- | ------------ |  | - | ------------ | - |  | -------- | ------- | - | ------------ | - | ------ | ------------ |  | ------------ | ------- | - |  | - | ----- |  | - | ------- | -
|                                                 |  | September 30, 2007     |       |              | September 30, 2006     |        
|                                                 |  | (Parent)               |       | (Subsidiary) |                        |         | Eliminations |  |   | Consolidated |   |  | (Parent) |         |   | (Subsidiary) |   |        | Eliminations |  | Consolidated |        
|                                                 |  | (Dollars in thousands) |       |              | (Dollars in thousands) |        
|Net revenue                                      |  | $                      |      |              | $                      | 241,321 |              |  | $ |             |   |  | $        | 241,321 |   |              | $ |       |              |  | $            | 245,272 |   |  | $ |      |  | $ | 245,272 |  
|Cost of revenue                                  |  |                        |      |              |                        | 191,234 |              |  |   |             |   |  |          | 191,234 |   |              |   |       |              |  |              | 196,383 |   |  |   |      |  |   | 196,383 |  
|                                                 |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  
|Gross profit                                     |  |                        |      |              |                        | 50,087  |              |  |   |             |   |  |          | 50,087  |   |              |   |       |              |  |              | 48,889  |   |  |   |      |  |   | 48,889  |  
|Operating expenses                               |  |                        |      |              |                        | 34,996  |              |  |   |             |   |  |          | 34,996  |   |              |   |       |              |  |              | 33,454  |   |  |   |      |  |   | 33,454  |  
|Depreciation and amortization                    |  |                        |      |              |                        | 8,559   |              |  |   |             |   |  |          | 8,559   |   |              |   |       |              |  |              | 8,975   |   |  |   |      |  |   | 8,975   |  
|                                                 |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  
|Total expenses                                   |  |                        |      |              |                        | 43,555  |              |  |   |             |   |  |          | 43,555  |   |              |   |       |              |  |              | 42,429  |   |  |   |      |  |   | 42,429  |  
|Net loss on disposal of fixed assets             |  |                        |      |              |                        | 15      |              |  |   |             |   |  |          | 15      |   |              |   |       |              |  |              |        |   |  |   |      |  |   |        |  
|Litigation settlement                            |  |                        |      |              |                        | (12,363 | )            |  |   |             |   |  |          | (12,363 | ) |              |   |       |              |  |              |        |   |  |   |      |  |   |        |  
|                                                 |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  
|Operating income                                 |  |                        |      |              |                        | 18,880  |              |  |   |             |   |  |          | 18,880  |   |              |   |       |              |  |              | 6,460   |   |  |   |      |  |   | 6,460   |  
|Equity in gain (loss) of consolidated subsidiary |  |                        | 6,215 |              |                        |        |              |  |   | (6,215       | ) |  |          |        |   |              |   | (5,772 | )            |  |              |        |   |  |   | 5,772 |  |   |        |  
|Other expense (income):                          |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  
|Interest expense, net                            |  |                        | 3,968 |              |                        | 15,983  |              |  |   |             |   |  |          | 19,951  |   |              |   | 3,529  |              |  |              | 15,705  |   |  |   |      |  |   | 19,234  |  
|                                                 |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  
|Income (loss) before income taxes                |  |                        | 2,247 |              |                        | 2,897   |              |  |   | (6,215       | ) |  |          | (1,071  | ) |              |   | (9,301 | )            |  |              | (9,245  | ) |  |   | 5,772 |  |   | (12,774 | )
|Income tax benefit                               |  |                        | 1,530 |              |                        | 3,318   |              |  |   |             |   |  |          | 4,848   |   |              |   | 1,325  |              |  |              | 3,473   |   |  |   |      |  |   | 4,798   |  
|                                                 |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  
|Net income (loss)                                |  | $                      | 3,777 |              | $                      | 6,215   |              |  | $ | (6,215       | ) |  | $        | 3,777   |   |              | $ | (7,976 | )            |  | $            | (5,772  | ) |  | $ | 5,772 |  | $ | (7,976  | )
|                                                 |  |                        |       |              |                        |         |              |  |   |              |   |  |          |         |   |              |   |        |              |  |              |         |   |  |   |       |  |   |         |  



18



---

##### Table of Contents

MSC-Medical Services Company

Notes to Unaudited Consolidated Financial Statements  continued

September 30, 2007

(Dollar amounts in thousands except per share data, unless otherwise stated)



MCP  MSC Acquisition, Inc.

Condensed Consolidating Statement of Cash Flows

For the nine months ended



|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---------------------- | - | ------ | ------------ |  | - | ------------ | - |  | -------- | ------ | - | ------------ | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | - |  | - | ------- | -
|                                                                                                   |  | September 30, 2007     |        |   | September 30, 2006     |  
|                                                                                                   |  | (Parent)               |        |   | (Subsidiary)           |   |        | Eliminations |  |   | Consolidated |   |  | (Parent) |        |   | (Subsidiary) |   |        | Eliminations |  |   | Consolidated |  
|                                                                                                   |  | (Dollars in thousands) |        |   | (Dollars in thousands) |  
|Operating activities                                                                               |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Net income (loss)                                                                                  |  | $                      | 3,777  |   |                        | $ | 6,215  |              |  | $ | (6,215       | ) |  | $        | 3,777  |   |              | $ | (7,976 | )            |  | $ | (5,772       | ) |  | $ | 5,772  |   |  | $ | (7,976  | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Equity in (gain) loss of consolidated subsidiary                                                   |  |                        | (6,215 | ) |                        |   |       |              |  |   | 6,215        |   |  |          |       |   |              |   | 5,772  |              |  |   |             |   |  |   | (5,772 | ) |  |   |        |  
|Depreciation                                                                                       |  |                        |       |   |                        |   | 2,060  |              |  |   |             |   |  |          | 2,060  |   |              |   |       |              |  |   | 2,475        |   |  |   |       |   |  |   | 2,475   |  
|Amortization of intangibles                                                                        |  |                        |       |   |                        |   | 6,499  |              |  |   |             |   |  |          | 6,499  |   |              |   |       |              |  |   | 6,500        |   |  |   |       |   |  |   | 6,500   |  
|Amortization of debt issuance costs and debt discount                                              |  |                        | 119    |   |                        |   | 1,039  |              |  |   |             |   |  |          | 1,158  |   |              |   | 194    |              |  |   | 987          |   |  |   |       |   |  |   | 1,181   |  
|Provision for deferred income taxes                                                                |  |                        | (1,530 | ) |                        |   | (3,848 | )            |  |   |             |   |  |          | (5,378 | ) |              |   | (1,326 | )            |  |   | (3,480       | ) |  |   |       |   |  |   | (4,806  | )
|Provision for bad debts                                                                            |  |                        |       |   |                        |   | 6,267  |              |  |   |             |   |  |          | 6,267  |   |              |   |       |              |  |   | 5,963        |   |  |   |       |   |  |   | 5,963   |  
|Stock-based compensation                                                                           |  |                        |       |   |                        |   | 1,236  |              |  |   |             |   |  |          | 1,236  |   |              |   |       |              |  |   | 915          |   |  |   |       |   |  |   | 915     |  
|Non-cash gain on litigation settlement                                                             |  |                        |       |   |                        |   | (3,366 | )            |  |   |             |   |  |          | (3,366 | ) |              |   |       |              |  |   |             |   |  |   |       |   |  |   |        |  
|Loss on disposal of leasehold improvements                                                         |  |                        |       |   |                        |   | 15     |              |  |   |             |   |  |          | 15     |   |              |   |       |              |  |   |             |   |  |   |       |   |  |   |        |  
|                                                                                                   |  |                        |        |   |                        |   |        |             
|Changes in operating assets and liabilities:                                                       |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Increase in accounts receivable                                                                    |  |                        |       |   |                        |   | (3,084 | )            |  |   |             |   |  |          | (3,084 | ) |              |   |       |              |  |   | (14,128      | ) |  |   |       |   |  |   | (14,128 | )
|Increase in inventories                                                                            |  |                        |       |   |                        |   | 88     |              |  |   |             |   |  |          | 88     |   |              |   |       |              |  |   | 10           |   |  |   |       |   |  |   | 10      |  
|(Increase) decrease in income tax receivable                                                       |  |                        |       |   |                        |   | (127   | )            |  |   |             |   |  |          | (127   | ) |              |   |       |              |  |   | 7,194        |   |  |   |       |   |  |   | 7,194   |  
|Increase in other current assets                                                                   |  |                        |       |   |                        |   | (33    | )            |  |   |             |   |  |          | (33    | ) |              |   |       |              |  |   | (449         | ) |  |   |       |   |  |   | (449    | )
|Increase in other non-current assets                                                               |  |                        |       |   |                        |   |       |              |  |   |             |   |  |          |       |   |              |   |       |              |  |   | (111         | ) |  |   |       |   |  |   | (111    | )
|(Decrease) increase in accounts payable                                                            |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|& other liabilities                                                                                |  |                        | 3,849  |   |                        |   | (7,745 | )            |  |   |             |   |  |          | (3,896 | ) |              |   | 3,336  |              |  |   | 7,761        |   |  |   |       |   |  |   | 11,097  |  
|Increase in deferred revenue                                                                       |  |                        |       |   |                        |   | 243    |              |  |   |             |   |  |          | 243    |   |              |   |       |              |  |   | 77           |   |  |   |       |   |  |   | 77      |  
|Decrease in income taxes payable                                                                   |  |                        |       |   |                        |   | (48    | )            |  |   |             |   |  |          | (48    | ) |              |   |       |              |  |   | (527         | ) |  |   |       |   |  |   | (527    | )
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Net cash provided by operating activities                                                          |  |                        |       |   |                        |   | 5,411  |              |  |   |             |   |  |          | 5,411  |   |              |   |       |              |  |   | 7,415        |   |  |   |       |   |  |   | 7,415   |  
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Investing activities                                                                               |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Purchases of property, equipment and leasehold improvements                                        |  |                        |       |   |                        |   | (3,688 | )            |  |   |             |   |  |          | (3,688 | ) |              |   |       |              |  |   | (3,325       | ) |  |   |       |   |  |   | (3,325  | )
|Proceeds from sale of fixed assets                                                                 |  |                        |       |   |                        |   | 70     |              |  |   |             |   |  |          | 70     |   |              |   |       |              |  |   |             |   |  |   |       |   |  |   |        |  
|Payment to former owners                                                                           |  |                        |       |   |                        |   |       |              |  |   |             |   |  |          |       |   |              |   |       |              |  |   | (8,803       | ) |  |   |       |   |  |   | (8,803  | )
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Net cash used in investing activities                                                              |  |                        |       |   |                        |   | (3,618 | )            |  |   |             |   |  |          | (3,618 | ) |              |   |       |              |  |   | (12,128      | ) |  |   |       |   |  |   | (12,128 | )
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Financing activities                                                                               |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Proceeds from (repayments of) short-term debt                                                      |  |                        |       |   |                        |   | (3,500 | )            |  |   |             |   |  |          | (3,500 | ) |              |   |       |              |  |   |             |   |  |   |       |   |  |   |        |  
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Net cash used by financing activities                                                              |  |                        |       |   |                        |   | (3,500 | )            |  |   |             |   |  |          | (3,500 | ) |              |   |       |              |  |   |             |   |  |   |       |   |  |   |        |  
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Net decrease in cash                                                                               |  |                        |       |   |                        |   | (1,707 | )            |  |   |             |   |  |          | (1,707 | ) |              |   |       |              |  |   | (4,713       | ) |  |   |       |   |  |   | (4,713  | )
|Cash, beginning of period                                                                          |  |                        |       |   |                        |   | 6,101  |              |  |   |             |   |  |          | 6,101  |   |              |   |       |              |  |   | 8,300        |   |  |   |       |   |  |   | 8,300   |  
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Cash, end of period                                                                                |  | $                      |       |   |                        | $ | 4,394  |              |  | $ |             |   |  | $        | 4,394  |   |              | $ |       |              |  | $ | 3,587        |   |  | $ |       |   |  | $ | 3,587   |  
|                                                                                                   |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  
|Non-cash investing and financing activities                                                        |  |                        |        |   |                        |   |        |              |  |   |              |   |  |          |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |         |  

The Company financed the purchase of certain leasehold improvements of $1.0 million through the
lessor of the leased property.



19



---

##### Table of Contents

Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations

The following
should be read in conjunction with the financial statements and related notes included elsewhere in this report, as well as the financial statements and related notes included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2006 as filed with the SEC. In addition, all forward-looking statements are qualified by and should be read in conjunction with the risks described under the heading Forward-Looking Statements of this Form 10-Q and
under the heading Risk Factors included in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2006.

Overview

MSC  Medical Services Company (We, Us or Our) is the second largest procurement
provider, based on its knowledge of the industry, of health care products and services to workers compensation payors in the United States. We coordinate the delivery of these products and services from our vendor network to workers
compensation patients on behalf of our customers, which include payors such as insurers and third party administrators.

Workers compensation state
legislation in the United States generally requires employers to fund the total cost of an employees medical treatment, lost wages and other costs associated with a work-related injury or illness. Employers are generally required to provide
coverage of costs with no co-payment or deductible from the ill or injured employee, and there is typically no lifetime limit on medical expenses. Workers compensation programs vary across jurisdictions; each state separately determines the
level of wage replacement that must be paid and the level of medical care to be provided.

Factors affecting our financial results

Revenue. Revenue consists of amounts charged to customers for the products and services we provide. Overall, revenue is affected by the size of the workers
compensation market for pharmaceutical and medical products and services, federal and state fee schedules mandating maximum billable amounts, the extent of outsourcing in the industry and any market share changes resulting from shifts with existing
customers and new customer wins as well as average wholesale price (AWP) changes for pharmaceuticals. These factors combine to affect the number of patients served and revenue per patient. Industry research indicates that lost time per
employee due to worker compensation claims has decreased, which is consistent with the decline in number of claims processed by the Companys customers. This decline in overall claim volume was partially offset by an increase in the
Companys share of the claim spending in selected key accounts for the three and nine months ended September 30, 2007.

We have identified two
distinct product lines consisting of Pharmaceutical products, comprised primarily of prescription medication, and Medical Products and Services, which describes all other components of revenue. In our Pharmaceuticals product line, revenue per
patient reflects costs of new and existing medications, drug prescribing patterns, drug utilization controls, for example, generic substitution, state fees schedules which limit fees charged to customers and mix of retail versus mail order
fulfillment. In our Medical Products and Services product line, revenue per patient is driven by the nature and quantity of products and services used by patients, prices we are able to charge our customers for the provision of such products and
services as well as federal and state fee schedules mandating maximum billable amounts.

We operate in a competitive market place where revenue may be
affected by the competitive bidding process among other service providers. In addition, our customers may also periodically engage in formal requests for proposals (RFP) on non-contracted, as well as contracted business. We may decide to
offer reduced pricing in certain situations given the overall economics of the proposed business identified in the RFP and the competitive environment. Additionally, there is continuing consolidation within the healthcare industry leading to
increased competition. In this regard, one of our non-contracted Ancillary business customers took action in the current quarter of fiscal year 2007 to consolidate its vendor relationships, thereby reducing the number of vendors they utilize. While
this action will have an adverse short-term impact on our Ancillary revenue growth as the customer accounted for approximately 3% of total billings for the year ended December 31, 2006, we continue to believe our competitive product offering
and value proposition affords us opportunities for revenue growth from this industry-wide consolidation in the future.



20



---

##### Table of Contents

Cost of Revenue. Cost of revenue consists of payments to vendors for delivery of products and services, customer
service representative costs, inventory carrying costs and shipping costs. In our Pharmaceuticals product line, cost of revenue also includes credits for vendor rebates, as well as costs related to other service providers (e.g. retail card
distributor). We negotiate prices for the provision of services and products with vendors in our network. In many cases, prices are pre-negotiated under a contract or pre-agreed price list with vendors. Prior to procuring products or services, we
typically obtain written or verbal authorization and pricing approval from customers to minimize reimbursement risk. We also typically finalize the cost of products and services with our vendors before delivery.

Gross Profit. Gross profit reflects the differential between the price at which we sell our products and services and the cost of revenue. Margins are positively
affected when we negotiate lower costs from our vendors without a change in pricing to our customers and conversely margins are negatively affected when vendors increase prices and we are unable to increase prices with our customers. Examples of
this include customer negotiations where we agree to lower prices (for example, volume purchases or length of contracts) as well as certain legislative changes which result in a decrease in pharmaceutical prices that can be charged. The growth in
revenue from the Pharmaceuticals product line (which has lower margins) relative to Medical Products and Services product line revenues has historically lowered our overall margins; however, this impact on margins has been partially offset by the
negotiation of discounts with vendors. Fluctuations in revenue or the cost of revenue do not necessarily result in corresponding changes in gross profit margins. For example, in the Pharmaceuticals product line, the price at which we are able to
procure pharmaceuticals and the prices we charge customers are frequently tied to a common measurement, such as AWP. As the benchmark moves up or down, revenue and cost of revenue move correspondingly, leaving gross profit margins largely
unaffected. Recently, the proportion of generic drugs dispensed has increased. This has generally reduced revenue while improving overall gross margins.

Significant customers.For the nine months ended September 30, 2007, our largest customer, Liberty Mutual, accounted for approximately 12% of our billings for the period versus 16% for the nine months ended September 30,
2006. Billings to our top ten customers for the nine months ended September 30, 2007 represented 45% of total billings for this period and 48% for the nine months ended September 30, 2006.

On March 6, 2007, MSC was provided with notice by Liberty Mutual of their intent to terminate the Liberty Mutual Pharmacy Benefit Management (PBM)
Agreement dated as of April 1, 2003 between the Company and Liberty Mutual. The effective date of the termination of the Liberty Mutual PBM Agreement was June 4, 2007. MSCs contracts with Liberty Mutual for Home Health Services and
Durable Medical Equipment are unaffected. Liberty Mutual represented approximately 19% of the Companys total billings for the year ended December 31, 2006. Gross billings before sales adjustments from the Liberty Mutual PBM Agreement
totaled approximately $42.8 million in the year ended 2006. Gross billings before sales adjustments from the Liberty Mutual PBM Agreement totaled approximately $0.6 million and $18.2 million, respectively, in the three and nine months ended
September 30, 2007 as compared to approximately $10.6 million and $32.8 million in the same periods in the prior year.

Operating Expenses.
Operating expenses include cash compensation, as well as non-cash compensation associated with stock based compensation, other costs associated with our sales force and general and administrative expenses, including expenses related to information
technology, accounting, human resources, travel, professional fees, corporate overhead, sales tax expenses and bad debt expenses.



21



---

##### Table of Contents

Results of Operations

Three and Nine Months Ended September 30, 2007 compared to September 30, 2006.

Total Revenue



|                              |  |                                          |         |      |   |                    |  |   |                |   |  |       |   
|----------------------------- |  | ---------------------------------------- | ------- | ---- | - | ------------------ |  | - | -------------- | - |  | ----- | --
|                              |  | For the Three Months Ended September 30, |        
|                              |  | (dollars in thousands)                   |         |      |   |                    |  |  
|                              |  | 2007                                     |         | 2006 |   | Increase(Decrease) |  |   | Percent Change |  
|Pharmaceutical                |  | $                                        | 37,609  |      | $ | 44,226             |  | $ | (6,617         | ) |  | (15.0 | )%
|Medical Products and Services |  |                                          | 35,769  |      |   | 37,270             |  |   | (1,501         | ) |  | (4.0  | )%
|                              |  |                                          |         |      |   |                    |  |   |                |   |  |       |   
|Total Net Revenue             |  | $                                        | 73,378  |      | $ | 81,496             |  | $ | (8,118         | ) |  | (10.0 | )%
|                              |  |                                          |         |      |   |                    |  |   |                |   |  |       |   
|                              | 
|                              |  | For the Nine Months Ended September 30,  |        
|                              |  | (dollars in thousands)                   |         |      |   |                    |  |  
|                              |  | 2007                                     |         | 2006 |   | Increase(Decrease) |  |   | Percent Change |  
|Pharmaceutical                |  | $                                        | 127,567 |      | $ | 131,434            |  | $ | (3,867         | ) |  | (2.9  | )%
|Medical Products and Services |  |                                          | 113,754 |      |   | 113,838            |  |   | (84            | ) |  | 0.0   | % 
|                              |  |                                          |         |      |   |                    |  |   |                |   |  |       |   
|Total Net Revenue             |  | $                                        | 241,321 |      | $ | 245,272            |  | $ | (3,951         | ) |  | (1.6  | )%
|                              |  |                                          |         |      |   |                    |  |   |                |   |  |       |   

Factors contributing to the 10.0% and 1.6% decrease, respectively, in total net revenue during the three and nine
month periods ended September 30, 2007, as compared to the prior year, reflect the impact of the continuing implementation of Pharmaceutical services to new customers, offset by the loss of the Liberty Mutual PBM agreement in June 2007,
combined with favorable pricing adjustments, AWP price increases and product mix shift to higher margin products in our Medical Products and Services product lines, offset by lower order volume in selected product categories and loss of a
non-contracted Ancillary customer. The loss of this non-contracted customer accounted for $1.9 million and $2.6 million of the decrease in Medical Products and Services during the three and nine months ended September 30, 2007, respectively.

During the three months ended September 30, 2007, we served 12.9 % fewer individual patients as compared to the same period in 2006; during the
nine months ended September 30, 2007, we served 2.9% fewer individual patients as compared to the same period in 2006 primarily due to losses of (a) the Liberty Mutual PBM agreement, and (b) the non-contracted Ancillary customer.
However, total revenue per patient increased 3.5% and 1.2%, respectively, for the three and nine months ended September 30, 2007 as compared to the same periods in 2006. This increase is a result of several factors including a shift in product
mix within the Medical Products and Services lines as described below, as well as pricing adjustments in certain of our product lines, primarily Pharmaceutical products and Medical Products.

The State of New York enacted emergency revisions to the pharmacy and durable goods workers compensation fee schedules, effective July 11, 2007, which
significantly reduced the maximum allowable reimbursements for pharmacy and ancillary workers compensation services in New York. We expect that there will be an adverse financial impact to our operating results and cash flow over the short
term. Revisions to the New York fee schedules accounted for a decrease of approximately $.3 million in billings for the three months ended September 30, 2007. We are working aggressively with our customers and vendors to mitigate the financial
impact of this action.

Pharmaceutical Revenue



|                                     |  |                                          |        |      |   |                    |  |   |                |   |  |       |   
|------------------------------------ |  | ---------------------------------------- | ------ | ---- | - | ------------------ |  | - | -------------- | - |  | ----- | --
|                                     |  | For the Three Months Ended September 30, |       
|                                     |  | 2007                                     |        | 2006 |   | Increase(Decrease) |  |   | Percent Change |  
|                                     |  | (dollars in thousands)                   |        |      |   |                   
|Pharmacy Benefit Management Services |  | $                                        | 35,588 |      | $ | 41,528             |  | $ | (5,940         | ) |  | (14.3 | )%
|Mail Order Services                  |  |                                          | 2,021  |      |   | 2,698              |  |   | (677           | ) |  | (25.1 | )%
|                                     |  |                                          |        |      |   |                    |  |   |                |   |  |       |   
|Total Net Revenue                    |  | $                                        | 37,609 |      | $ | 44,226             |  | $ | (6,617         | ) |  | (15.0 | )%
|                                     |  |                                          |        |      |   |                    |  |   |                |   |  |       |   



22



---

##### Table of Contents

|                                     |  |                                         |         |      |   |                    |  |   |                |   |  |       |   
|------------------------------------ |  | --------------------------------------- | ------- | ---- | - | ------------------ |  | - | -------------- | - |  | ----- | --
|                                     |  | For the Nine Months Ended September 30, |        
|                                     |  | 2007                                    |         | 2006 |   | Increase(Decrease) |  |   | Percent Change |  
|                                     |  | (dollars in thousands)                  |         |      |   |                   
|Pharmacy Benefit Management Services |  | $                                       | 120,656 |      | $ | 122,963            |  | $ | (2,307         | ) |  | (1.9  | )%
|Mail Order Services                  |  |                                         | 6,911   |      |   | 8,471              |  |   | (1,560         | ) |  | (18.4 | )%
|                                     |  |                                         |         |      |   |                    |  |   |                |   |  |       |   
|Total Net Revenue                    |  | $                                       | 127,567 |      | $ | 131,434            |  | $ | (3,867         | ) |  | (2.9  | )%
|                                     |  |                                         |         |      |   |                    |  |   |                |   |  |       |   

The decrease in Pharmacy Benefit Management Services revenue of 14.3% and 1.9% for the three and nine month
periods ended September 30, 2007 respectively, as compared to the same periods in 2006, is due primarily to the loss of the Liberty Mutual PBM contract in early June of 2007, partially offset by new customers and the impact of AWP net price
increases. Excluding Liberty Mutual, billings for the three and nine months ended September 30, 2007 increased by 5.5% and 8.2%, respectively, as compared to the same periods in 2006. Based on an analysis performed by the Company regarding
total spending for workers compensation claims outside of the acute care setting of several of its larger customers, the overall decline is also partially attributable to the decline in customer claims volume, which is partially offset by the
increase in the Companys share of these claims. The decline in Mail Order Services revenue of 25.1% and 18.4% for the three and nine months ended September 30, 2007 was due primarily to (a) attrition of long-term mail order patients
who have been in the mail order program since the inception of our retail pharmaceutical services program, (b) improved screening practices designed to identify mail order candidates versus the historic method of using mail order as the default
when adding new patients, (c) implementation of our retail pharmacy card program, and (d) customers unwillingness to aggressively pursue a mail order conversion strategy. All of these factors combined have resulted in less mail order
conversion opportunities despite the economic benefit to the customer.

Total prescription fills decreased by 20.8% and 8.3%, respectively, for the three
and nine months ended September 30, 2007 as compared to the same periods in 2006 due to loss of the Liberty Mutual PBM contract in early June, partially offset by prescription fill increases for other customers. Excluding Liberty Mutual,
prescription fills for the three and nine months ended September 30, 2007 increased by 2.8% and 3.5%, respectively, as compared to the same periods in 2006. Third quarter revenue decreased 15% compared to the same period in 2006 primarily due
to loss of the Liberty Mutual PBM contract in early June 2007; the decrease in revenue reflects a decline related to prescription fills of $9.2 million, and a shift in mix from brand to generic of $0.7 million, partially offset by the impact of
favorable pricing of $3.3 million. For the nine months ended September 30, 2007 as compared to the prior year, revenue decreased by $3.9 million, reflecting a decline related to prescription fills of $10.9 million, a shift in mix from brand to
generic of $2.6 million, partially offset by the impact of favorable pricing of $9.6 million.

The shift to generic fills is due primarily to industry-wide
carrier initiatives that specify a generic fill if available. Generic prescription fills as a percent of total fills was 68.0% and 67.6%, respectively, for the three and nine months ended September 30, 2007 versus 66.7% and 66.1% during the
same periods in 2006.

For the three and nine months ended September 30, 2007, average AWP per fill increased 5.2% and 6.5%, respectively, while our
price as a percent of AWP decreased 1.8% and 2.3%, respectively, as compared to the same periods in 2006. The majority of the decrease in our prices as a percent of AWP resulted from reductions in state fee schedules as well the shift to generic
prescription fills. The revisions to the New York fee schedule in July 2007 had the most notable impact on price as a percent of AWP. Price as a percent of AWP decreased 11.3% for the three months ended September 30, 2007 on fills placed in New
York as compared to the same period in 2006, as New York billings accounted for approximately 8.1% of total billings for the same period.



23



---

##### Table of Contents

Medical Products and Services Revenue



|                  |  |                                          |        |      |   |                    |  |   |               |   |  |      |   
|----------------- |  | ---------------------------------------- | ------ | ---- | - | ------------------ |  | - | ------------- | - |  | ---- | --
|                  |  | For the Three Months Ended September 30, |       
|                  |  | (dollars in thousands)                   |        |      |   |                    |  |  
|                  |  | 2007                                     |        | 2006 |   | Increase(Decrease) |  |   | PercentChange |  
|Medical Products  |  | $                                        | 20,366 |      | $ | 22,069             |  | $ | (1,703        | ) |  | (7.7 | )%
|Medical Services  |  |                                          | 15,403 |      |   | 15,201             |  |   | 202           |   |  | 1.3  | % 
|                  |  |                                          |        |      |   |                    |  |   |               |   |  |      |   
|Total Net Revenue |  | $                                        | 35,769 |      | $ | 37,270             |  | $ | (1,501        | ) |  | (4.0 | )%
|                  |  |                                          |        |      |   |                    |  |   |               |   |  |      |   



|                  |  |                                         |         |      |   |                    |  |   |               |   |  |      |   
|----------------- |  | --------------------------------------- | ------- | ---- | - | ------------------ |  | - | ------------- | - |  | ---- | --
|                  |  | For the Nine Months Ended September 30, |        
|                  |  | (dollars in thousands)                  |         |      |   |                    |  |  
|                  |  | 2007                                    |         | 2006 |   | Increase(Decrease) |  |   | PercentChange |  
|Medical Products  |  | $                                       | 66,831  |      | $ | 69,332             |  | $ | (2,501        | ) |  | (3.6 | )%
|Medical Services  |  |                                         | 46,923  |      |   | 44,506             |  |   | 2,417         |   |  | 5.4  | % 
|                  |  |                                         |         |      |   |                    |  |   |               |   |  |      |   
|Total Net Revenue |  | $                                       | 113,754 |      | $ | 113,838            |  | $ | (84           | ) |  | 0.0  | % 
|                  |  |                                         |         |      |   |                    |  |   |               |   |  |      |   

During the three and nine months ended September 30, 2007, total net revenue for Medical Products and
Services decreased by 4.0% and was relatively unchanged, respectively, compared to the same periods in 2006. In the first nine months of 2007, there has been a shift in products/services mix from Medical Devices and Home Health to other Medical
Products and Services product categories (e.g. transportation services). Revenue for the three and nine months ended September 30 reflects the impact of lower product orders, decline in revenue from a non-contracted customer due to its vendor
consolidation initiative, offset by an increase in average billings per order achieved as a result of business process improvement for our more service intensive, higher billing value product lines. Overall orders decreased by 5.0% in the third
quarter and 7.9% in the nine months ended September 30, 2007 as compared to the same periods in 2006. Total average billings per order for all Medical Products and Services decreased by 1.1% for the three months ended September 30, 2007
but increased 8.1% for the nine months ended September 30, 2007, as compared to the same periods in 2006.

For the three and nine months ended
September 30, 2007, Medical Products orders declined by 9.5% and 12.7%, respectively, while billings per order increased by 6.3% and 7.9%, respectively, as compared to the same periods in 2006. A decline in Medical Device orders of 7.7% and
18.2%, respectively, in the three and nine months ended September 30, 2007, as compared to the same periods in 2006, was the result of (a) stricter credit policies with several customers which were in effect for the first nine months of
2007, and (b) action taken by one of our non-contracted Ancillary customers to consolidate its vendor relationships. There was a shift in product mix from Medical Devices to the Medical Supplies and other product lines, most of which
experienced increased billings per order in the three and nine month periods ended September 30, 2007 as compared to the same periods in 2006.

Medical Services revenue increased 1.3% and 5.4% in the three and nine month periods ended September 30, 2007, respectively, as compared to the same periods in 2006, due principally to order volume and price increases in the
Transportation product line. Transportation revenues increased 25.2% and 27.5%, respectively, for the three and nine months ended September 30, 2007 as compared to the same periods in 2006. A decrease in Home Health orders was offset by a mix
shift to higher value services resulting in a net increase in billings per order for the three and nine month periods ended September 30, 2007, as compared to the same periods in 2006.



24



---

##### Table of Contents

Cost of Revenue



|                              |  |                                          |         |      |   |                    |  |   |               |   |  |       |   
|----------------------------- |  | ---------------------------------------- | ------- | ---- | - | ------------------ |  | - | ------------- | - |  | ----- | --
|                              |  | For the Three Months Ended September 30, |        
|                              |  | (dollars in thousands)                   |         |      |   |                    |  |  
|                              |  | 2007                                     |         | 2006 |   | Increase(Decrease) |  |   | PercentChange |  
|Pharmaceutical                |  | $                                        | 31,257  |      | $ | 37,285             |  | $ | (6,028        | ) |  | (16.2 | )%
|Medical Products and Services |  |                                          | 26,659  |      |   | 27,835             |  |   | (1,176        | ) |  | (4.2  | )%
|                              |  |                                          |         |      |   |                    |  |   |               |   |  |       |   
|Total Cost of Revenue         |  | $                                        | 57,916  |      | $ | 65,120             |  | $ | (7,204        | ) |  | (11.1 | )%
|                              |  |                                          |         |      |   |                    |  |   |               |   |  |       |   
|                              | 
|                              |  | For the Nine Months Ended September 30,  |        
|                              |  | (dollars in thousands)                   |         |      |   |                    |  |  
|                              |  | 2007                                     |         | 2006 |   | Increase(Decrease) |  |   | PercentChange |  
|Pharmaceutical                |  | $                                        | 105,209 |      | $ | 110,381            |  | $ | (5,172        | ) |  | (4.7  | )%
|Medical Products and Services |  |                                          | 86,025  |      |   | 86,002             |  |   | 23            |   |  | 0.0   | % 
|                              |  |                                          |         |      |   |                    |  |   |               |   |  |       |   
|Total Cost of Revenue         |  | $                                        | 191,234 |      | $ | 196,383            |  | $ | (5,149        | ) |  | (2.6  | )%
|                              |  |                                          |         |      |   |                    |  |   |               |   |  |       |   

Cost of revenue, as a percentage of revenue, was 78.9% and 79.2%, respectively, for the three and nine month
periods ended September 30, 2007, as compared to 79.9% and 80.1% for the same periods in 2006. This decrease as a percentage of revenue is due to (a) favorable vendor pricing actions, (b) more favorable product mix towards higher
margin products and services, and (c) savings achieved from productivity gains of internal operating costs.

The 16.2% decrease in Pharmaceutical cost
of revenue during the third quarter of 2007 as compared to same period in the prior year is a result of a decrease in the total number of prescription fills primarily attributable to the loss of the Liberty Mutual PBM contract in early June, 2007.
This decrease is offset by an increase in the average cost per fill for branded drugs which increased approximately 10% and 8.5% per fill, respectively, for the three and nine months ended September 30, 2007 as compared to the same periods
in 2006. Generic cost per fill, however, decreased 6.7% and 3.8%, respectively, for the three and nine months ended September 30, 2007 as compared to the same periods in 2006. Pricing concessions from selected vendors mitigated the full effect
of the net increased price per fill. Although there was a 4.7% decrease in Pharmaceutical cost of revenue for the nine months ended September 30, 2007 as compared to the prior year, the same cost dynamics are applicable to this period as
explained above for the quarter.

Medical Products and Services cost of revenue changes are primarily a result of product mix shifts, as discussed in
Medical Products and Services Revenueabove. Medical Products and Services gross margin for the three and nine months ended September 30, 2007 was 25.5% and 24.4%, respectively, as compared to 25.3% and 24.4% during the same periods in
2006. The impacts of favorable vendor pricing actions primarily in transportation services during the first nine months were offset by lower order volume and higher service costs.

Operating Expenses

Operating expenses were $11.6 million and $34.9 million, respectively, for the three and nine
months ended September 30, 2007 as compared to $10.9 million and $33.5 million in the same periods in 2006. In the three and nine months ended September 30, 2007, non-cash stock compensation expense incurred amounted to $0.4 million and
$1.1 million, respectively, as compared to $0.2 million and $0.9 million in the same periods in 2006. Expenses increased by $0.6 million and $1.6 million, respectively, for the three and nine months ended September 30, 2007, as compared to the
same periods in 2006 as a result of increased pay rates and increased IT personnel expenses related to internally developed software projects, partially offset by a decrease in number of employees of 5% from September 30, 2006. In addition, for
the three and nine months ended September 30, 2007, we incurred $0.1 million of



25



---

##### Table of Contents

increased professional fees as consultants were hired to assist in various projects, e.g. efforts to comply with the internal control requirements outlined
in the Sarbanes-Oxley Act of 2002, HIPAA compliance program, as well as other operational consulting projects. These increases were partially offset by a decrease in certain expenses incurred in the first quarter of 2006 associated with the filing
of a registration statement and severance costs. Results for the third quarter of 2007 reflect the impact of a lower sales tax accrual, as well as a lower incentive compensation accrual based on year-to-date financial performance. Operating expenses
for the three and nine months ended September 30, 2007 include $0.6 million of costs associated with relocating to a new leased office facility in September 2007; such costs include a $0.3 million non-cash expense for lease termination costs
associated with the facility that was vacated by the Company. Such amount is expected to be paid out during the next nine months.

Bad debt expense, which
is included as a component of operating expense, was $2.1 million and $6.3 million, respectively, in the three and nine months ended September 30, 2007 as compared to $1.9 million and $6.0 million in the same periods in 2006. While overall cash
collections have remained strong, we have experienced a decline in cash collections in certain aged categories of outstanding receivables necessitating an addition to the bad debt reserve of approximately $0.2 million during the third quarter. We
continue to evaluate our requirements for specific reserves on a quarterly basis as part of the overall bad debt reserve analysis.

Depreciation and
Amortization expense for the three and nine month periods ended September 30, 2007 amounted to $2.8 million and $8.6 million, respectively, as compared to $3.1 million and $9.0 million in the same periods in 2006. The decrease is attributed
to lower capital expenditures during the first six months of 2007. The Company expects depreciation and amortization expense to increase in future periods relating to recently acquired assets associated with the Companys new leased office
facility in September 2007.

Litigation Settlement.In conjunction with the sale of the Company in March 2005, an escrow account was established
with Wells Fargo Bank as the escrow agent and $15.0 million of the purchase price was deposited in the escrow account to be used as security for and to satisfy claims arising out of the transaction. On May 26, 2006, the parent delivered to
the stockholder representative for the sellers of the Company an indemnification claim against the escrow balance. A $12.4 million settlement was reached on May 30, 2007 by and between the Company and the sellers as part of a
settlement agreement that included a cash settlement to the Company paid out from the escrow account of $9.0 million and forfeiture of $3.4 million of unpaid tax benefits. Consistent with applicable accounting standards and SEC guidance, this
transaction has been accounted for as an adjustment to results of operations in the second quarter of 2007. The impact of this transaction is included in the accompanying unaudited consolidated results of operations for the nine months ended
September 30, 2007.

Operating Income. For the three month period ended September 30, 2007, operating income totaled $1 million as
compared to $2.4 million in the same period in 2006; a favorable increase in gross margin percentage was offset by a $0.9 million decline in gross profit associated with a 10.0% decline in total net revenues combined with a $0.8 million increase in
operating expenses. For the nine month period ended September 30, 2007, operating income totaled $18.9 million as compared to $6.5 million in the same period in 2006, primarily due to the May 2007 litigation settlement and improvement in gross
margin due to favorable product mix changes as previously discussed.

Interest expense. For the three and nine month periods ended
September 30, 2007, interest expense totaled $5.3 and $15.9 million, respectively, as compared to $5.4 million and $15.7 million in the same periods in 2006. The increase in year to date interest expense is primarily the result of a $3.5
million increase in the amount of short-term debt outstanding associated with the increased borrowing under the revolving line of credit facility during the fourth quarter of 2006. On July 23, 2007, the Company repaid $3.5 million of borrowings
under the revolving credit facility, which reduced the outstanding short-term debt to $16.6 million, which accordingly reduced interest expense in the third quarter of 2007.

Income Tax Benefit. Income tax benefit for the nine month period ended September 30, 2007 differed from our normal effective tax rate, as the litigation settlement gain recognized during the second quarter
of 2007 is non-taxable. Excluding the impact of this non-taxable gain, the Companys effective tax rate remained consistent with the prior year. We expect to be able to utilize remaining tax benefits through the reversal of deferred tax
liabilities in future periods.



26



---

##### Table of Contents

Liquidity and Capital Resources

Operating activities provided $5.4 million of cash flow for the nine month period ended September 30, 2007 compared to $7.4 million in the same period in 2006. Operating cash flow in the first nine months of 2007
includes the impact of the litigation settlement. Excluding the impact of this settlement, cash provided by operating activities for the first nine months of 2007 was approximately $11.0 million lower than the same period in 2006. The year-to-year
decline in operating cash flow activities is a result of (a) approximately $7.2 million associated with the receipt of income tax receivables in the 2006 period, and (b) increased payments of $7.8 million to vendors in 2007, offset by
higher cash collections in fiscal 2007 versus 2006. The $9.0 million in cash received from the litigation settlement was used to fund payments to vendors and repay outstanding borrowings under the revolving credit facility of $3.5 million. The
increase in cash from the litigation settlement was offset by the loss of cash receipts from the Liberty Mutual PBM contract, which terminated in June 2007. Days sales outstanding was 68 days for the nine month period ended September 30,
2007, as compared to 72 days in the same period in 2006; while this is a one day increase from the second quarter of 2007, it is a four day reduction from the fiscal year ended December 31, 2006.

During the three and nine months ended September 30, 2007, cash collections totaled $75.6 million and $247.1 million, respectively, as compared to $78.6 million and
$234.9 million in the same periods in 2006. Sequentially, however, there was a $9.9 million decrease from $85.5 million for the three months ended June 30, 2007. This decline in cash collections for the three months ended September 30, 2007 is
primarily attributable to the loss of the Liberty Mutual PBM contract in June 2007. The 5.1% increase from the nine months ended September 30, 2006 is primarily a result of ongoing process improvements in our accounts receivable department.

Our cash balance decreased from $6.1 million at December 31, 2006 to $4.4 million at September 30, 2007. With the receipt of cash from the
litigation settlement and the increase in cash collections during the nine months ended September 30, 2007, the Company increased vendor payments during the first nine months of 2007 in response to a processing backlog that existed at the
beginning of the year. Our days payable outstanding decreased from 45 days as of December 31, 2006 to 42 days as of September 30, 2007.

Investing activities used cash of $3.7 million in the nine month period ended September 30, 2007 as compared to $12.1 million for the same period in 2006. The first nine months of 2006 includes proceeds from income tax refunds that
were disbursed to former shareholders as required by the applicable purchase agreement (Agreement filed March 7, 2005 by and between the Parent and former shareholders of the Company). Capital expenditures incurred in the nine months ended
September 30, 2007 relates to software development costs and computer equipment improvements, together with asset additions associated with the Companys occupation of a new leased office facility in September 2007. In the same period last
year, these expenditures related primarily to ongoing capitalizable information technology projects and software improvements.

Financing activities
included the repayment of $3.5 million of outstanding borrowings under the revolving credit facility in the third quarter of 2007. In September 2007, the Company incurred approximately $1.0 million of leasehold improvement costs, which were financed
by the lessor at its new headquarters; monthly payments of approximately $14 thousand will be made over the 94 month term of the lease at an 8% interest rate commencing October 2007.

Our senior secured revolving credit facility consists of a $40 million revolving loan, subject to a borrowing base test. Based on the covenant levels under the senior secured revolving credit facility, we had, as of
September 30, 2007, $7.1 million of available borrowing capacity under the revolving credit facility, a $3.8 million decrease from December 31, 2006, and had no additional borrowings on its revolving line of credit during the nine month
period ended September 30, 2007. On July 23, 2007, the Company repaid $3.5 million of borrowings under this revolving credit facility. This decline in available borrowing capacity is due to the strong cash collections of eligible
receivables during the first nine months of 2007.



27



---

##### Table of Contents

The senior secured revolving credit facility is guaranteed by the Parent, and secured by a first priority lien on
substantially all of the Companys and the Parents current and future assets, including all of the capital stock of MSC.

We believe that, based
on current levels of operations and anticipated growth, cash from operations, together with other available sources of liquidity, including borrowings available under our senior secured revolving credit facility, will be sufficient to fund
operations, anticipated capital expenditures and required payments on our debt for at least the next 12 months. In connection with our borrowings, net interest payments totaled $15.8 million in the nine month period ended September 30, 2007.
Our available sources of liquidity are dependent upon future operating performance, which, in turn, is subject to factors beyond our control, including the conditions of the workers compensation industry. The Company cannot assure that its
business will generate cash from operations, or that it will be able to obtain financing from other sources, sufficient to satisfy its debt service or other requirements.

As of September 30, 2007, the Company was compliant with all debt covenants.

Critical Accounting Estimates and
Policies

There has been no change in the Companys Critical Accounting Estimates and Policies, as disclosed in the Annual Report on Form 10-K for
the year ended December 31, 2006.

Item 3  Quantitative and Qualitative Disclosures About Market Risk

Due to the significant amount of indebtedness on
our balance sheet, we are exposed to interest rate risk. Pursuant to the terms of our senior secured revolving credit facility, we are required to enter into interest rate swap contracts such that at least 50% of all of our and our parents
indebtedness is subject to fixed interest rate protection. Based on our current hedging positions, under which we have secured a fixed rate for over 50% of our indebtedness, and outstanding debt at September 30, 2007, a 1% increase in interest
rates would result in an increase in interest expense of $0.4 million.

Item 4T  Controls and Procedures

Managements Evaluation of the Companys Disclosure Controls and
Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are intended to ensure that information required to be disclosed in the Companys reports submitted under the Securities Exchange Act of 1934, as
amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also are intended to ensure that information required to be
disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.

The Companys Chief
Executive Officer and Chief Financial Officer, with the participation of other members of the Companys management, have evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a
 15(e) and 15d  15(e) under the Exchange Act) and have concluded that the Companys disclosure controls and procedures were effective for their intended purposes as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There
were no changes in the Companys internal control over financial reporting that occurred during the quarter ended September 30, 2007 that materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.



28



---

##### Table of Contents

Part II  Other Information

Item 1  Legal Proceedings

We are from time to time involved in litigation incidental to the conduct of our
business. We believe that no litigation currently pending against us, if adversely decided, would have a material adverse effect on our financial position or results of operations.

Item 1A  Risk Factors

There have been no material changes to the risk factors previously disclosed the
Companys Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3  Defaults upon Senior Securities

None

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

None

Item 5  Other Information

Craig Rollins, Senior Vice President of Sales, resigned from the Company effective
November 1, 2007.

Item 6  Exhibits

Pursuant to the terms of the Indenture dated as of June 21, 2005, and Supplemental Indenture
dated as of July 24, 2007, among the Registrant, MSC Billing, Inc., MCP-MSC Acquisition, Inc. and U.S. Bank National Association relating to the Senior Secured Floating Rate Notes Due 2011, the Registrant is not required to provide the
certifications contained in exhibits 31.1, 31.2, 32.1 and 32.2.



|            |  |                                                                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                 
|4.5         |  | Supplemental Indenture dated as of July 24, 2007 among MSC  Medical Services Company, MSC Billing, Inc., MCP  MSC Acquisition, Inc., and U.S. Bank National Association (the
Trustee). *
|            | 
|10.19       |  | Standard Office Lease dated as of December 4, 2006 *                                                                                                                                        
|            | 
|10.26       |  | Amended and Restated Employment Agreement, dated July 16, 2007, by and between the Company and Gary S. Jensen. *                                                                            
|            | 
|10.27       |  | Security Agreement Supplement dated as of July 24, 2007 between MSC Billing, Inc. and Bank of America, N.A., as administrative agent. *                                                     
|            | 
|10.28       |  | Subsidiary Guaranty Supplement dated as of July 24, 2007 between MSC Billing, Inc. and Bank of America, N.A., as administrative agent. *                                                    
|            | 
|10.29       |  | Separation Agreement as of November 1, 2007 by and between the Company and Craig Rollins                                                                                                    

---

|* | Previously filed
|- | ----------------



29



---

##### Table of Contents

SIGNATURES

Pursuant to the terms of the Indenture dated as of June 21, 2005, and Supplemental Indenture dated as of
July 24, 2007, among the Registrant, MSC Billing, Inc., MCP-MSC Acquisition, Inc. and U.S. Bank National Association relating to the Senior Secured Floating Rate Notes Due 2011, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



|                        |  |                              |  |                                                               
|----------------------- |  | ---------------------------- |  | --------------------------------------------------------------
|                        |  | MSCMedical Services Company
|                        |  |                             
|Date: November 14, 2007 |  | By:                          |  | /s/ Joseph P. Delaney                                         
|                        |  |                              |  | Joseph P. Delaney                                             
|                        |  |                              |  | President and Chief Executive Officer                         
|                        |  |                              |  | (principal executive officer)                                 
|                        |  |                             
|Date: November 14, 2007 |  | By:                          |  | /s/ Gary S. Jensen                                            
|                        |  |                              |  | Gary S. Jensen, Senior Vice President - Chief                 
|                        |  |                              |  | Financial Officer (principal financial and accounting officer)



30