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 ended March 31, 2007

		or

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		Commission file number: 1-32203

Prospect Medical Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		33-0564370
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

400 Corporate Pointe, Suite 525
Culver City, California		90230
(Address of principal executive offices)		(Zip Code)

(310) 338-8677
(Registrant’s telephone number, including area code)

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 ý No o

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. (Check one):

Large accelerated filer o

Accelerated filer o

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 o No x

The number of shares of the issuer’s Common Stock, par value $0.01 per share, outstanding as of May 10, 2007 was 7,939,990.

PROSPECT MEDICAL HOLDINGS, INC.

Index

		Part I – Financial Information

Item 1.		Financial Statements

		Condensed Consolidated Balance Sheets as of March 31, 2007 (unaudited) and September 30, 2006

		Condensed Consolidated Statements of Operations for the three-month and six-month periods ended March 31, 2007 and 2006 (unaudited)

		Condensed Consolidated Statements of Cash Flows for the six-month periods ended March 31, 2007 and 2006 (unaudited)

		Notes to Condensed Consolidated Financial Statements (unaudited)

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

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Item 4.		Controls and Procedures

		Part II - Other Information

Item 1.		Legal Proceedings

Item 1A.		Risk Factors

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

Item 3.		Defaults Upon Senior Securities

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

Item 5.		Other information

Item 6.		Exhibits

Signatures

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

PROSPECT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31, 2007			September 30 2006
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	12,733,129		$	16,623,407
Investments, primarily restricted certificates of deposit		635,690			836,244
Risk pool receivables		2,355,284			1,418,973
Other receivables, net of allowances of $269,000 and $509,000 at March 31, 2007 and September 30, 2006		1,715,692			1,916,883
Notes receivable, current portion		179,902			176,265
Prepaid expenses and other		717,481			645,466
Refundable income taxes		3,648,995			2,493,035
Deferred income taxes, net		336,963			657,678
Total current assets		22,323,136			24,767,951

Property, improvements and equipment:
Land		40,620			40,620
Leasehold improvements		979,741			984,934
Equipment		3,819,217			3,478,435
Furniture and fixtures		805,171			782,087
		5,644,749			5,286,076
Less accumulated depreciation and amortization		(4,289,649		)	(3,999,863		)
Property, improvements and equipment, net		1,355,100			1,286,213

Notes receivable, long term portion		395,148			413,577
Deposits		710,976			613,087
Goodwill		38,213,828			37,838,169
Other intangible assets, net		1,245,236			1,738,475
Total assets		$	64,243,424		$	66,657,472

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued medical claims and other health care costs payable		$	13,165,000		$	11,400,000
Accounts payable and other accrued liabilities		6,078,810			8,191,849
Current maturities of long-term debt and capital leases		8,100,000			5,300,000
Total current liabilities		27,343,810			24,891,849

Long-term debt, less current maturities		—			6,700,000
Deferred income taxes		1,240,112			1,145,573
Other long-term liabilities		231,368			34,712
Total liabilities		28,815,290			32,772,134
Minority interest	</