UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-30099

Access Plans, Inc.

(Exact name of registrant as specified in its charter)

OKLAHOMA (State or other jurisdiction of incorporation or organization)		27-1846323 (I.R.S. Employer Identification No.)

900 36^th Avenue, Suite 105, Norman, OK 73072
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (405) 579-8525

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ

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

As of August 10, 2010, 19,777,204 shares of the registrant’s common stock, $.001 par value were outstanding.

 

 

INDEX

		PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2010 and September 30, 2009			4
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2010 and 2009			5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3. Defaults Upon Senior Securities			33
Item 5. Other Information			33
Item 6. Exhibits			33
Signatures			34
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Registrant Name Change

Following approval by the shareholders of Alliance HealthCard, Inc.(“Alliance HealthCard”), effective December 7, 2009, Alliance HealthCard Acquisition Corp., a subsidiary of Access Plans, Inc., an Oklahoma corporation, also one of Alliance HealthCard’s wholly-owned subsidiaries, merged into Alliance HealthCard. The shareholders of Alliance HealthCard exchanged their Alliance HealthCard common stock shares on a one-for-one basis for common stock shares of Access Plans, Inc. As a result of the merger, Access Plans, Inc. became a holding company of Alliance HealthCard and its subsidiaries and the registrant under the Securities Exchange Act of 1934, as amended.

Access Plans USA, Inc. acquired on April 1, 2009 became a wholly-owned subsidiary of Alliance HealthCard.

Certain information included in this Quarterly Report on Form 10-Q contains, and other reports or materials filed or that we may file with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us or our management) contain or will contain, “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, Section 27A of the Securities Act of 1933, as amended. Some of these forward-looking statements can be identified by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategies that involve risks and uncertainties. Such forward-looking statements may relate to financial results and plans for future business activities, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are competitive pressures, loss of significant customers, the mix of revenue, changes in pricing policies, delays in revenue recognition, lower-than-expected demand for our products and services, business conditions in the integrated healthcare delivery network market, general economic conditions, and the risk factors detailed from time to time in our periodic reports and registration statements filed with the United States Securities and Exchange Commission. Any forward-looking statements made are only as of the date made and are subject to change as may be reported.

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

Access Plans, Inc.

						September 30, 2009
		June 30, 2010				(Derived From
		(Unaudited)				Audited Statements)
Assets
Cash and cash equivalents		$	4,384,979			$	4,108,183
Restricted cash			695,159				470,378
Accounts receivable, net			5,122,634				3,789,790
Advanced agency commissions, net			5,054,008				5,827,406
Deferred income taxes			958,294				981,000
Prepaid expenses			60,496				92,922
Total current assets			16,275,570				15,269,679
Furniture, fixtures and equipment, net			356,779				385,967
Goodwill			4,376,339				4,376,339
Intangibles, net			3,252,070				3,975,823
Restricted cash			—				500,000
Deferred income taxes			612,046				1,221,767
Other assets			160,626				243,910
Total assets		$	25,033,430			$	25,973,485
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	1,181,226			$	766,920
Accrued salaries and benefits			167,343				247,075
Accrued commissions			573,177				641,550
Unearned commissions			4,871,328				5,700,347
Waiver reimbursement liability			880,000				1,102,900
Deferred revenue			1,001,375				1,023,002
Current portion of notes payable			546,930				1,647,201
Liability for unrecognized tax benefit			166,000				166,000
Other accrued liabilities			2,064,011				2,881,866
Total current liabilities			11,451,390				14,176,861
Notes payable, net of current portion shown above			—				302,744
Total liabilities			11,451,390				14,479,605
Stockholders’ equity:
Common stock, $.001 par value; 100,000,000 shares authorized; 19,777,204 shares issued and outstanding at June 30, 2010 and 21,633,705 at September 30, 2009, respectively			19,777				21,633
Additional paid-in-capital			11,094,221				11,584,359
Accumulated earnings (deficit)			2,468,042				(112,112	)
Total stockholders’ equity			13,582,040				11,493,880
Total liabilities and stockholders’ equity		$	25,033,430			$	25,973,485

See the accompanying notes to the condensed consolidated financial statements.

Access Plans, Inc.

		Three Months Ended								Nine Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net revenues		$	14,370,700			$	13,959,723			$	41,133,914			$	25,513,887
Direct costs			10,129,292				9,810,677				28,389,961				16,785,449
Gross profit			4,421,408				4,149,046				12,743,953				8,728,438
Marketing and sales expenses			589,933				573,321				1,794,051				1,169,800
General and administrative expenses			2,016,780				2,042,799				865,855				554,087
Depreciation and amortization			292,251				276,180				5,844,889				3,868,891
Operating income			1,342,444				1,256,746				4,239,158				3,135,660
Other income (expense):
Other income (expense)			(27,000	)			346,775				40,444				346,775
Interest income			7,969				3,707				26,570				11,466
Interest (expense)			—				(47,111	)			(47,140	)			(141,479	)
Total other income (expense):			(19,031	)			303,371				19,874				216,762
Income before income taxes			1,323,413				1,560,117				4,259,032				3,352,422
Provision for income taxes
Current			104,498				697,652				1,046,028				1,379,619
Deferred tax (benefit)			270,565				—				632,850				(175,000	)
Total provision for income taxes			375,063				697,652				1,678,878				1,204,619
Net income		$	948,350			$	862,465			$	2,580,154			$	2,147,803
Per share data:
Basic		$	0.05			$	0.04			$	0.13			$	0.13
Diluted		$	0.05			$	0.04			$	0.13			$	0.13
Average Shares Outstanding:
Basic			19,777,204				21,633,705				19,954,014				16,528,614
Diluted			20,009,146				21,636,384				20,134,261				16,533,690

See the accompanying notes to the condensed consolidated financial statements.

Access Plans, Inc.

		Nine Months Ended
		June 30,
		2010				2009
Cash flows from operating activities
Net income		$	2,580,154			$	2,147,803
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax expense (benefit)			632,850				(175,000	)
Depreciation and amortization			865,855				554,087
Amortization of loan discount to interest expense			38,643				115,927
Stock-based compensation			8,622				13,000
Gain on reduction in related party debt			(94,444	)			—
Provision for losses on receivables			(11,852	)			82,033
Change in operating assets and liabilities:
Receivables			(1,320,992	)			(120,391	)
Advanced agency commissions			773,398				(49,089	)
Prepaid expenses and other assets			115,709				(19,307	)
Accounts payable			414,306				(597,511	)
Accrued salaries and benefits			(79,732	)			25,141
Accrued commissions			(68,372	)			282,693
Unearned commissions			(829,019	)			63,431
Deferred revenue			(21,626	)			(42,343	)
Claims and other accrued liabilities			(1,041,178	)			579,173
Net cash provided by operating activities			1,962,322				2,859,647
Cash flows from investing activities
Cash received from acquisition			—				450,213
Decrease in restricted cash			275,219				673
Investment in LLC			—				(100,000	)
Purchase of equipment			(112,910	)			(29,381	)
Net cash provided by investing activities			162,309				321,505
Cash flows from financing activities
Proceeds from short term debt			195,800				—
Payments of related party term debt			(1,030,348	)			(1,717,247	)
Payments on other debt			(513,287	)			(118,604	)
Purchase of treasury stock			(500,000	)			—
Net cash (used in) financing activities			(1,847,835	)			(1,835,851	)
Net increase in cash and cash equivalents			276,796				1,345,301
Cash and cash equivalents at beginning of period			4,108,183				3,012,683
Cash and cash equivalents at end of period		$	4,384,979			$	4,357,984

See the accompanying notes to the condensed consolidated financial statements.

ACCESS PLANS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Following approval by the shareholders of Alliance HealthCard, Inc. (“Alliance HealthCard”), effective December 7, 2009, Alliance HealthCard Acquisition Corp., a subsidiary of Access Plans, Inc., an Oklahoma corporation, also one of Alliance HealthCard’s wholly-owned subsidiaries, merged into Alliance HealthCard. The shareholders of Alliance HealthCard exchanged their Alliance HealthCard common stock shares on a one-for-one basis for common stock shares of Access Plans, Inc. As a result of the merger, Access Plans, Inc. became a holding company of Alliance HealthCard and its subsidiaries and the registrant under the Securities Exchange Act of 1934, as amended.

NOTE 1 — NATURE OF BUSINESS

Access Plans, Inc. (the “Company”) develops and distributes consumer membership plans and consumer driven healthcare programs.

The Company’s operations are currently organized under four segments:

•

Wholesale Plans Division — plan offerings are customized membership marketing plans primarily offered at rent-to-own retail stores.

•

Retail Plans Division — plan offerings are primarily healthcare savings plans. These plans are not insurance, but allow members access to a variety of healthcare networks to obtain discounts from usual and customary fees.

•

Insurance Marketing Division — markets individual major medical health insurance and other insurance products through a national network of independent agents.

•

Corporate Division — includes salary and other expenses for individuals performing services for administration of overall operations of the Company.

NOTE 2 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2009.

All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01. All such adjustments made during the nine months ended June 30, 2010 and 2009 are of a normal, recurring nature.

RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB 51, which was subsequently incorporated into ASC Topic 810, Consolidation. ASC Topic 810 establishes new accounting and reporting standards for non-controlling interests in a subsidiary and for the deconsolidation of a subsidiary. ASC Topic 810 requires entities to classify non-controlling interests as a component of stockholders’ equity and requires subsequent changes in ownership interests in a subsidiary to be accounted for as an equity transaction. Additionally, ASC Topic 810 requires entities to recognize a gain or loss upon the loss of control of a subsidiary and to re-measure any ownership interest retained at fair value on that date. ASC Topic 810 also requires expanded disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. ASC Topic 810 is effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which are required to be applied retrospectively. The adoption of ASC Topic 810 was effective for the Company beginning October 1, 2009 and did not have a material impact on the Company’s financial condition or results of operations because the Company’s subsidiaries are wholly-owned.

In April 2008, the FASB issued an update to Codification Topic 350, Intangible- Goodwill and Other, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This amendment is effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008. Early adoption was prohibited. The amendment to Codification Topic 350 was effective for the Company beginning October 1, 2009 and did not have a material impact on the Company’s determination of the useful life of its intangible assets, financial condition or results of operations.

In May 2009, the FASB issued authoritative guidance on subsequent events, which was codified in ASC 855, Subsequent Events. ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company adopted these provisions of ASC 855 on June 30, 2009. On February 24, 2010, the FASB updated the guidance to address certain implementation issues related to an entity’s requirement to perform and disclose subsequent event procedures. Effective upon its issuance, the update exempts registrants reporting under the Securities Exchange Act of 1934 from disclosing the date through which subsequent events have been evaluated. As the update affected disclosure only, the adoption of the update did not have an impact on the Company’s Consolidated Financial Statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires expanded fair value disclosures of transfers into and out of Levels 1 and 2 fair value measurements and clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2010-06 became effective for the Company beginning January 1, 2010. The adoption of this accounting standard update did not have a material impact on the Company’s financial position, results of operations, cash flows and disclosures.

NOTE 3 — SIGNIFICANT ACCOUNTING POLICIES

Accounts Receivable and Credit Policies

Accounts receivable are recorded net of the allowance for doubtful accounts established to provide for losses on uncollectible accounts based on management’s estimates and historical collection experience. The allowance for doubtful accounts was $194,321 and $125,783, respectively, at June 30, 2010 and September 30, 2009. The Company did not record any additional bad debt expense for the nine months ended June 30, 2010 and 2009.

Advanced Agent Commissions

For the Company’s Insurance Marketing Division, the allowance for doubtful recoveries for advanced agent commissions is determined based primarily upon estimates of the recovery of future commissions expected to be earned by the insurance agents to whom advances are outstanding and, where applicable, the agents responsible for the management of those agents. The allowance for doubtful recoveries was $1,473,263 at June 30, 2010 and $1,571,892 at September 30, 2009. The Company did not recognize any bad debt expense on advanced agent commissions during the nine months ended at June 30, 2010.

The allowance for doubtful recoveries reflects significant judgment regarding the estimates used in the determination of the allowance. Accordingly, subsequent actual results may differ from the assumptions and estimates utilized for the analysis at June 30, 2010.

The Retail Plans Division advances agents’ commissions for certain retail plan programs. The advance commissions to the Company’s agents are funded by the Company and are reflected on the balance sheet as advanced agent commissions. Collection of the commissions advanced is accomplished by withholding amounts earned by the agent on the memberships upon which the advance was made. In addition, certain membership persistency levels must be maintained.

Revenue Recognition

The Company recognizes revenue when four basic criteria are met:

•

Persuasive evidence of an arrangement exists;

•

Delivery has occurred or services have been rendered;

•

The seller’s price to the buyer is fixed or determinable; and,

•

Collectability is reasonably assured.

The Company’s revenue recognition varies based on source.

Wholesale and Retail Plans — membership fees are paid to the Company on a weekly, monthly or annual basis, and fees paid in advance are recorded as deferred revenue and recognized monthly over the applicable membership term. The Company’s wholesale and private label partners bill their customers for the membership fees and periodically remit to the Company its portion of the fees. For the Company’s retail members that are typically billed directly, the billed amount is almost entirely collected by electronic charge to the member’s credit card, automated clearinghouse or electronic check.

Insurance Marketing — revenue reflects commissions and fees reported to the Company by insurance companies for policies sold by the division’s agents. Commissions and fees collected are recognized as earned on a monthly basis until such time that the underlying contract is reported to the division as terminated. The Company’s commission rates vary by insurance carrier, the type of policy purchased by the policyholder and the amount of time the policy has been active, with commission rates typically being higher during the first 12 months of the policy period. Revenue also includes administrative fees the Company charges and the interest income earned on commissions advanced to the division’s agents.

Unearned commissions comprise commission advances received from insurance carriers but not yet earned or collected. These advances are subject to repayment to the carrier in the event that the policy lapses before the advanced commissions are earned and collected. Additionally, enrollment fees received are recorded as deferred revenue and amortized over the expected weighted average life of the policies sold which currently approximates 18 months. Deferred revenue is reported net of related policy acquisition costs, principally lead and marketing credits, which are capitalized and amortized over the same weighted average life, to the extent such deferred costs do not exceed the related gross deferred revenue. Any excess costs are expensed as incurred.

Commission Expense

Commission expense is based on the applicable rates applied to membership revenues billed or insurance commissions collected, and are recognized as incurred on a monthly basis until the underlying program member or insurance policy is terminated.

The Insurance Marketing Division advances agent commissions, up to nine months, for certain insurance programs. The advance commissions to the Company’s agents are funded partly by the insurance carriers represented and partly by the Company. These commissions advanced to agents are reflected on the balance sheet as advanced agent commissions. Collection of the commissions advanced (plus accrued interest) is accomplished by withholding amounts earned by the agent on the policy upon which the advance was made. In the event of early termination of the underlying policy, the division seeks to recover the unpaid advance balance by withholding advanced and earned commissions on other policies sold by the agent. This division also has the contractual right to pursue other sources of recovery, including recovery from the agents managing the agent to whom advances were made.

This allowance requires judgment and is based primarily upon estimates of the recovery of future commissions expected to be earned by the agents with outstanding balances and, where applicable, the agents responsible for their management. Advances are written off when determined to be non-collectible.

The Retail Plans Division advances agents’ commissions for certain retail plan programs. The advance commissions to the Company’s agents are funded by the Company and are reflected on the balance sheet as advanced agent commissions. Collection of the commissions advanced is accomplished by withholding amounts earned by the agent on the memberships upon which the advance was made. In addition, certain membership persistency levels must be maintained.

Restricted Cash

Restricted cash represents investments with original maturities of one year or less pledged to obtain bonds for regulatory licenses and processing and collection arrangements for credit card and automated clearing house payments.

Goodwill and Intangible Assets

Goodwill associated with business acquisitions and combinations represents the excess of the cost of a business acquired over the net of the amounts assigned to assets acquired, including identifiable intangible assets and liabilities assumed. U.S. generally accepted accounting principles specify criteria used in determining whether intangible assets acquired in a business acquisition or combination must be recognized and reported separately from goodwill. Amounts assigned to goodwill and other intangible assets are based on independent appraisals or internal estimates.

Intangible assets other than goodwill, acquired on April 1, 2009 as part of Access Plans USA, were valued at $3,000,000 and are being amortized over the estimated useful life of those assets. The related amortization expense was $348,750 and $116,250 for the nine months ended June 30, 2010 and 2009; and $116,250 for the three months ended June 30, 2010 and 2009.

Acquisition acquired customer lists are capitalized and amortized over the estimated useful lives of the customer lists.

Customer lists acquired in fiscal 2007 were valued at $2,500,000 and are being amortized over 60 months, the estimated useful life of the lists. The related amortization expense was $375,003 for each of the nine months ended June 30, 2010 and 2009; and $125,001 for each of the three months ended June 30, 2010 and 2009.

Earnings per Share

Basic net earnings (loss) per common share is computed by dividing net earnings (loss) applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common share shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that may be issued upon exercise of common stock options. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

Fair Value of Financial Instruments

FASB ASC 825-10 requires disclosure of fair value information about financial instruments. The carrying amounts reflected in the balance sheets for cash, cash equivalents, restricted cash, accounts receivable, advanced agency commissions, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of those instruments. The fair value of the notes payable approximates carrying value since stated rates are similar to rates currently available to the Company for debt with similar terms and remaining maturities.

NOTE 4 — ADVANCED AGENT COMMISSIONS

Advanced agent commissions at June 30, 2010 and September 30, 2009 consist of:

		June 30,				September 30,
		2010				2009
Advances funded by:
Insurance carriers		$	4,871,328			$	5,700,347
Specialty lending corporation			448,420				863,795
Self-funded			1,207,523				835,156
Sub-total			6,527,271				7,399,298
Allowance for doubtful recoveries			(1,473,263	)			(1,571,892	)
Advanced agent commissions, net		$	5,054,008			$	5,827,406

The allowance for doubtful recoveries for advanced agent commissions was determined based primarily upon estimates of the recovery of future commissions expected to be earned by the agents to whom advances are outstanding and, where applicable, the agents responsible for the management. The Company did not recognize any bad debt expense on advanced agent commissions during the nine months ended June 30, 2010 and 2009.

NOTE 5 — GOODWILL AND INTANGIBLE ASSETS

The Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. Since September 30, 2009, the Company has not recognized an impairment loss related to intangible assets.

Management evaluates goodwill for impairment as of the end of each fiscal year of the Company and more often as determined by management. When considered impaired, goodwill will be written down to fair value and a corresponding impairment loss recognized. As of June 30, 2010 and September 30, 2009, no goodwill impairment was recognized.

In concluding the impairment analysis as of September 30, 2009, the Company incorporated a sensitivity analysis. Either the discount rate could increase by 30% of the discount rate utilized or the sales growth assumption could decline by 20% and the Company’s reporting units or divisions would continue to have fair value in excess of carrying value. The Company currently does not have any reporting units or divisions that are in risk of failing step 1 of this goodwill impairment test.

		Useful				June 30, 2010												September 30, 2009
		Life				Gross				Accumulated								Gross				Accumulated
		(Years)				Amount				Amortization				Net				Amount				Amortization				Net
Alliance HealthCard
Customer lists			5			$	2,500,000			$	(1,666,680	)		$	833,320			$	2,500,000			$	(1,291,677	)		$	1,208,323
Access Plans USA
In-force books of business			5				1,200,000				(300,000	)			900,000				1,200,000				(120,000	)			1,080,000
Agency relationships			8				1,500,000				(234,375	)			1,265,625				1,500,000				(93,750	)			1,406,250
Proprietary programs			8				300,000				(46,875	)			253,125				300,000				(18,750	)			281,250
Total						$	5,500,000			$	(2,247,930	)		$	3,252,070			$	5,500,000			$	(1,524,177	)		$	3,975,823

Amortization expense for the nine months ended June 30, 2010 and 2009 was $723,753 and $491,253, respectively. Amortization expense for each of the three months ended June 30, 2010 and 2009 was $241,351.

NOTE 6 — SUPPLEMENTAL CASH FLOWS INFORMATION

Cash payments for interest and income taxes for the nine months ended June 30, 2010 and 2009 are as follows:

		2010				2009
Interest		$	54,818			$	48,694
Income taxes paid		$	1,637,323			$	1,375,673

NOTE 7 — NOTES PAYABLE TO RELATED PARTIES

Pursuant to discussions between the note holders and our independent directors, on November 18, 2009 the disinterested directors accepted a proposal by the note holders for the notes to be paid off early at a 10% discount. The Company recorded a gain of $94,444 as other income for the three months ended December 31, 2009 as a result of the discount. Principal payments of $1,030,348 were made to the note holders on January 6, 2010 and the notes were deemed fully paid.

NOTE 8 — OTHER LONG TERM DEBT

During March 2008, Access Plans USA, Inc. obtained a loan of $1,605,000 from Commission Funding Group (CFG), a specialty lending corporation. The current CFG loan matures March 2011, and the loan principal is repayable in equal monthly installments. The interest rate, which is variable, together with the origination fee amortization charge, was 10% at June 30, 2010, the minimum rate provided by the loan agreement. The loan may be prepaid without penalty in 2010. Collateral provided to CFG includes rights, only in the event of a default, to cash, accounts receivable, and certain Insurance Marketing commissions from insurance carriers. Principal and interest payments on this loan were $466,213 for the nine months ended June 30, 2010.

In January 2010, America’s Healthcare/Rx Plan Agency (AHCP) obtained a loan of $195,800 from Loyal American Life Insurance Company (Loyal). The loan represents AHCP’s unsecured obligations or advances from Loyal. The amount may be adjusted for any secured advances transferred to unsecured obligations during the loan period. At June 30, 2010 these transfers are not material. The loan matures in December 2010 and the loan principal is repayable in equal monthly installments. The loan bears default interest at 1% of the outstanding balance per month. Interest is waived as long as payments are made when due and no interest has been accrued. Collateral provided to Loyal includes rights to accounts receivable and commissions from Loyal. Principal payments made on this loan were $97,912 for the nine months ended June 30, 2010.

Principal payments due on these loans for the Company’s 2010 and 2011 fiscal years are as follows:

		Principal Payments
Fiscal Year Ended September 30,		CFG				Loyal				Total
2010 (remaining payments)		$	145,676			$	49,377			$	195,053
2011		$	302,744			$	49,133			$	351,877

NOTE 9 — INCOME TAXES

Components of income tax expense for the nine months ended June 30, 2010 and 2009 are as follows:

		2010				2009
Current income tax expense
Federal		$	1,106,053			$	1,218,319
State			(60,026	)			161,300
Total current income tax expense			1,046,028				1,379,619
Deferred income tax (benefit)
Federal			566,960				22,078
State			65,890				2,922
State tax credit			—				(200,000	)
Total deferred income tax (benefit)			632,850				(175,000	)
Net income tax expense		$	1,678,878			$	1,204,619

NOTE 10 — WAIVER REIMBURSEMENTS LIABILITY

The Company has entered into contractual arrangements to administer certain membership programs for its clients, primarily in the rental purchase industry. For some clients, the administration duties include reimbursing the client for certain expenses incurred in the operation of a particular membership program. Under these arrangements, the Company is responsible for reimbursing the client when (under the terms of the agreement with the client’s customer) the client waives rental payments required of the client’s customer under specifically defined and limited circumstances, such as when the customer becomes unemployed for a stated time period or when the Company’s client provides product service to its customer. It is the Company’s policy to reserve the necessary funds in order to meet the anticipated reimbursement obligation owed to the Company’s clients in the event the Company’s reimbursement obligations require payment in the future. The Company’s obligations for these reimbursements do not have any kind of a tail that extends beyond Company’s client’s payment obligations following termination of the contractual arrangement or agreement with either the Company’s client or the client’s customer. As of June 30, 2010 and September 30, 2009 the Company recorded an estimated incurred-but-not-reported-reimbursements obligation of $880,000 and $1,102,900, respectively.

NOTE 11 — TREASURY STOCK

On October 27, 2009, the Company finalized an agreement with the Peter W. Nauert Revocable Trust in which the Company paid $500,000 as part of a stock repurchase-settlement transaction that settled the litigation with States General Life Insurance Company (The State of Texas v. States General Life Insurance Company, Cause No. GV-500484, 126th District Court, Travis County, Texas) and by which, as part of and a condition of the settlement, the Company repurchased 1,856,401 shares of its common stock from the Peter W. Nauert Revocable Trust for the $500,000 settlement payment.

While the shares acquired were not retired until January 2010 the share repurchase was recorded as effective during December 2009 as intended and authorized by the Company’s Board of Directors.

NOTE 12 — SEGMENT REPORTING

The Company operates in four reportable business segments; a) Wholesale Plans; b), Retail Plans; c) Insurance Marketing; and d) Corporate (holding company).

Reportable business segment information follows.

The following tables set forth revenue, gross margin and operating income by segment.

($ in thousands)

		For the Three Months Ended												For the Nine Months Ended
		June 30,												June 30,
		2010				2009				% Change				2010				2009				% Change
Net revenues — by segment
Wholesale Plans		$	5,764			$	5,021				15	%		$	16,539			$	14,707				12	%
Retail Plans (a)			4,883				4,479				9	%			12,893				8,723				48	%
Insurance Marketing			5,017				5,653				(11	%)			15,441				5,653				173	%
Corporate (holding company)			—				—				—				—				—				—
Intercompany Eliminations			(1,293	)			(1,193	)			8	%			(3,739	)			(3,569	)			5	%
Total		$	14,371			$	13,960				3	%		$	41,134			$	25,514				61	%
Gross margin — by segment
Wholesale Plans (a)		$	1,826			$	919				99	%		$	4,078			$	3,243				26	%
Retail Plans (a)			1,685				2,308				(27	%)			6,025				4,563				32	%
Insurance Marketing			730				922				(21	%)			2,641				922				186	%
Corporate (holding company)			—				—				—				—				—				—
Total		$	4,421			$	4,149				7	%		$	12,744			$	8,728				46	%
Operating income — by segment
Wholesale Plans		$	1,364			$	508				169	%		$	2,584			$	1,856				39	%
Retail Plans			359				860				(58	%)			2,239				1,863				20	%
Insurance Marketing			(49	)			114				(143	%)			275				114				141	%
Corporate (holding company)			(332	)			(225	)			(48	%)			(859	)			(697	)			(23	%)
Total		$	1,342			$	1,257				7	%		$	4,239			$	3,136				35	%

		June 30,				September 30,
		2010				2009
Segment assets
Wholesale Plans (a)		$	16,535			$	10,525
Retail Plans (a)			23,356				18,889
Insurance Marketing			9,256				11,324
Corporate			—				—
Intercompany Eliminations			(24,114	)			(14,765	)
Total		$	25,033			$	25,973

NOTE 13. SUBSEQUENT EVENTS

On August 2, 2010, our board of directors approved 900,000 common stock options for issuance to officers and employees of the Company. The closing price on August 2, 2010 was $0.93. The options vest as follows:

Upon Issuance			160,000
Year Two			220,000
Year Three			245,000
Year Four			125,000
Year Five			150,000

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Except as otherwise indicated, the first personal plural pronoun in the nominative case form “we” and its objective case form “us”, its possessive and the intensive case forms “our” and “ourselves” and its reflexive form “ourselves” in this report refer collectively to Access Plans, Inc. and its subsidiaries (including Alliance HealthCard, Inc.) and its executive officers and directors.

Overview

Following approval by the shareholders of Alliance HealthCard, effective December 7, 2009, Alliance HealthCard Acquisition Corp., a subsidiary of Access Plans, Inc., an Oklahoma corporation, also one of Alliance HealthCard’s wholly-owned subsidiaries, merged into Alliance HealthCard. The shareholders of Alliance HealthCard exchanged their Alliance HealthCard common stock shares on a one-for-one basis for common stock shares of Access Plans, Inc. As a result of the merger, Access Plans, Inc. became a holding company of Alliance HealthCard and its subsidiaries and the registrant under the Securities Exchange Act of 1934, as amended.

The Company’s operations are currently organized under four segments:

•

Wholesale Plans Division — plan offerings are customized membership marketing plans primarily offered at rent-to-own retail stores.

•

Retail Plans Division — plan offerings are primarily healthcare savings plans. These plans are not insurance, but allow members access to a variety of healthcare networks to obtain discounts from usual and customary fees.

•

Insurance Marketing Division — markets individual major medical health insurance and other insurance products through a national network of independent agents.

•

Corporate Division — includes salary and other expenses for individuals performing services for administration of overall management and operations of the Company.

Wholesale Plans

The Wholesale Plans Division provides our clients with customized membership marketing plans that leverage their brand names, customer relationships and typically their payment mechanism, plus offer benefits that appeal to their customers. The value provided by the plans to our clients, includes increased customer attraction and retention, plus incremental fee income with limited risk or capital cost.

Our plans are primarily offered at rent-to-own retail stores. Nationwide there are approximately 8,600 locations serving approximately 4.1 million households at any given time during the year according to the Association of Progressive Rental Organizations (“APRO”). It is estimated that the two largest rent-to-own industry participants’ account for approximately 4,800 of the total number of stores, and the majority of the remainder of the industry consists of companies each with fewer than 50 stores. The industry has been consolidating and is expected to continue, resulting in an increased concentration of stores in the two largest rent-to-own industry participants.

The rent-to-own industry serves a highly diverse customer base. According to the APRO, approximately 83% of rent-to-own customers have household incomes between $15,000 and $50,000 per year. The rent-to-own industry serves a wide variety of customers by allowing them to obtain merchandise that they might otherwise be unable to obtain due to insufficient cash resources or a lack of access to credit. APRO also estimates that 96% of customers have high school diplomas. According to an April 2000 Federal Trade Commission study, 75% of rent-to-own customers were satisfied with their experience with rent-to-own transactions. The study noted that customers gave a wide variety of reasons for their satisfaction, including “the ability to obtain merchandise they otherwise could not; the low payments; the lack of a credit check; the convenience and flexibility of the transaction; the quality of the merchandise; the quality of the maintenance, delivery, and other services; the friendliness and flexibility of the store employees; and the lack of any problems or hassles.”

We currently deliver membership plans to over 210 companies, including retail purchase dealers, insurance companies, financial institutions, retail merchants, and consumer finance companies. At June 30, 2010, our wholesale plans were offered at approximately 4,000 locations. Of the locations at June 30, 2010, 2,850 locations were Rent-A-Center owned locations operated under their brand, Rent-A-Center, Inc., a Nasdaq (symbol RCII) traded company. Rent-A-Center, Inc. is the largest rent-to-own company in the United States, Puerto Rico and Canada. Our revenue attributable to the contractual arrangements with Rent-A-Center was approximately $3.1 million (21% of total revenue) and $8.8 million (21% of total revenue) during the three and nine months ended June 30, 2010, compared to $2.7 million (19% of total revenue) and $8.3 million (33% of total revenue) during the three and nine months ended June 30, 2009, respectively. Revenue attributable to our Wholesale Plans Division accounted for $5.8 million (40% of total revenue) and $16.5 million (40% of total revenue) during the three and nine months ended June 30, 2010 compared to $5.0 million (36% of total revenue) and $14.7 million (58% of total revenue) during the three and nine months ended June 30, 2009, respectively. Our growth in wholesale plans revenue is dependent in significant part on an increase in the number of rent-to-own locations at which our plans are offered and the sales efforts of those locations. Although our revenue from wholesale plans continues to grow, revenue of this division has declined as a percentage of total revenues as we have diversified our revenue sources through the merger with Access Plans USA. Although we have long-term contracts with Rent-A-Center and other rent-to-own companies, loss of either, especially Rent-A-Center would have a significant impact on our revenues, profitability and our ability to negotiate discounts with our vendors.

Retail Plans

Our Retail Plans Division offerings include healthcare savings plans, auto related discount plans and association memberships that are not insurance, but provide insurance features and benefits. These membership savings plans allow members access to a variety of healthcare, auto related and retail merchant networks to obtain discounts from usual and customary fees or charges. Additionally, we offer wellness programs, prescription drug and dental discount programs, medical discount cards, and limited benefit insured plans. Our members pay healthcare providers the discounted rate at the time services are provided to them. These plans are designed to serve the markets in which individuals either have no health insurance or limited healthcare benefits. Revenue attributable to our Retail Plans Division was approximately $4.9 million (34% of total revenue) and $12.9 million (31% of total revenue) during the three and nine months ended June 30, 2010, respectively, compared to $4.5 million (32% of total revenue) and $8.7 million (34% of total revenue) during the three and nine months ended June 30, 2009, respectively.

This division is comprised of the membership business of Alliance Healthcard, The Capella Group, Inc. (“Capella”) and Protective Marketing Enterprises, Inc. (“PME”). Capella and PME are subsidiaries of Access Plans USA which was acquired on April 1, 2009. PME also owns and manages proprietary networks of dental and vision providers that provide services at negotiated rates to certain members of our plans and other plans that have contracted with us for access to our networks.

Through our healthcare savings plans, we believe customers save an average of 35% on their medical costs and between 10% and 50% on services through other discount medical providers. These discounts for services that do not require the use of a medical preferred provider organization (PPO) are more difficult to track because our members pay a discounted rate at point of service.

In addition to our wholesale and retail offerings, certain clients may choose to include our benefits with their own membership plan offering. In these instances, the client bears the cost of marketing and fulfillment, and we provide customer service. These offerings are designed to enhance our clients’ existing offering and improve their product value relative to their competition and in some instances to improve their customer retention. While these plans provide lower periodic member fees, we incur limited implementation costs and receive higher revenue participation rates. Our additional distribution channels also include network marketing representatives, independent agents and consumer direct sales call centers. We also market to internet portals and financial institutions.

In order to deliver our membership offerings, we contract with a number of different vendors to provide various products and services to our members. The majority of these vendor relationships involve the vendor providing our members access to their network or providers or their locations and our members obtain a discount at the time of service. We have vendor relationships with medical networks, automotive service companies, insurance companies, travel related entities and food and entertainment consumer discount providers. Our vendors value the relationship with us because we deliver many customers to them without incremental capital cost or risk on their part and these relationships are governed by multi-year agreements and aggregated volume scaling.

Insurance Marketing

Our Insurance Marketing Division offers and sells individual major medical health insurance products and related benefit plans, including specialty insurance products, primarily through a national network of independent agents.

America’s Healthcare/Rx Plan Agency (AHCP) is the centerpiece of the Insurance Marketing Division. AHCP distributes major medical, short-term medical, critical illness and related health insurance products to small businesses, self-employed and other individuals and families through a network of approximately 7,750 independent agents. Our primary carriers that we represent include Golden Rule Insurance Company, World Insurance Company, Aetna and Colorado Bankers.

We support our agents and recruit new agents via access to proprietary and private label products, leads for new sales, commission advance programs, incentive programs, including an annual convention, web-based technology, and back-office support. More specifically, our agent support and recruiting tools include:

•

e-Agent Center — provides agents with access to real-time rate quoting, on-line licensing and contracting, insurance application submission, access to brochures and other marketing materials.

•

Lead Distribution — we utilize an electronic system to connect agents with an on-line lead ordering and delivery system. Leads are also provided in certain situations as incentives to sell certain policies.

•

Incentive programs — to assist with agent motivation and recruitment, we provide paid annual convention trips and periodic sales contests.

•

Agent advances — with most of the major medical products we represent, agents are entitled to three to nine months of advance commissions either funded by AHCP or our insurance carrier partner. Our ability to grow this segment will depend, in part, on our continued access to working capital to fund these advances.

•

Home office support — this includes agent and product training, marketing materials and agent communication. The training programs include both on-site and in-house schools, DVDs and webcasts covering product knowledge and sales techniques as well as market conduct and regulatory compliance issues. In addition, our support includes development and distribution of a wide variety of marketing materials including flyers, brochures, email blasts and letters. We also promote and inform our agents on important news and updates via a weekly newsletter.

Our strategy for the Insurance Marketing Division is to:

•

Continue working with insurance carriers in the development of proprietary products for our agents to represent and offer;

•

Expand the number of carriers that we represent for more product choice for customers and expanded geographic representation; and

•

Enhance our e-agent platforms in order to better serve our existing agents and improve attraction to new agents to sell plans we represent.

Operating results for the Insurance Marketing Division for 2009 are only included for the reporting periods following completion of our acquisition of Access Plans USA on April 1, 2009.

The revenue of our Insurance Marketing Division is primarily from earned sales commissions paid by the insurance companies this Division represents. These sales commissions are generally a percentage of premium revenue. Our revenue attributable to commission and fee revenue was approximately $5.0 million (35% of total revenue) and $15.4 million (38% of total revenue) for the three and nine months ended June 30, 2010, respectively. Growth of our commission revenue is based on continued recruitment efforts of agents and the resulting penetration of the individual, family and small business health insurance markets, driving a corresponding growth in the number of policies in force. We estimate that as of June 30, 2010 we had 24,899 policies in force compared to an estimated 24,016 policies in force at September 30, 2009.

The Health Care and Education Affordability Reconciliation Act of 2010 (Health Care reform law) was signed into law on March 30, 2010. Although much of the regulatory interpretation of the new law has yet to be proposed and adopted, beginning in 2010 insurers are required to implement a number of changes related to major medical insurance policies. These changes include, but are not limited to: changes to required coverage, elimination of most preexisting condition exclusions and a minimum loss ratio of 80%. The minimum loss ratio requires health insurance companies to maintain premium levels such that 80% of the premium is utilized for claims on medical services and related expenses (85% for group health). The law will require certain people to purchase health insurance and will set up subsidies to assist certain people in purchasing health insurance and allows certain people to obtain insurance from the federal government. It is possible that this law will impact the products we currently offer or change the number of customers or potential customers for our products. As a result of the minimum loss ratio requirement in the Health Care Reform Law, it is likely that commissions on the sale of individual major medical insurance policies will be reduced in January 2011 and, if that happens, it could result in a significant reduction in our revenue. Most of our commission revenue is ultimately paid to our agents so the potential reduction in revenue will not necessarily cause a reduction in our profitability in the same proportion. The reduction in commission could cause our agents to stop selling health insurance because of the reduced commissions or cause them to sell other products to make up for the loss of their revenues.

In response, we are endeavoring to expand the portfolio of health related insurance products that we provide to our agents. These new and expanded products will furnish our agents a means to mitigate the possible financial impact that may result from the new law.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results may differ from those estimates and the differences may be material to the financial statements. Certain significant estimates are required in the evaluation of goodwill for impairment and intangible assets for amortization, allowances for doubtful recoveries of advanced agent commissions, deferred income taxes, accounts and notes receivable and the waiver reimbursements liability. Actual results could differ from those estimates and the differences could be material.

Goodwill and Intangible Assets

Goodwill in business acquisitions represents the excess of the cost of a business acquired over the net of the amounts assigned to assets acquired, including identifiable intangible assets and liabilities assumed. GAAP specifies criteria to be used in determining whether intangible assets acquired in a business combination must be recognized and reported separately from goodwill. Amounts assigned to goodwill and other intangible assets are based on independent appraisals or internal estimates.

Intangible assets other than goodwill, acquired on April 1, 2009 as part of Access Plans USA were valued at $3,000,000 and are being amortized over the estimated useful life of those assets. The related amortization expense was $348,750 and $116,250, respectively for the nine months ended June 30, 2010 and 2009; and was $116,250 for each of the three months ended June 30, 2010 and 2009, respectively.

Customer lists acquired in acquisitions are capitalized and amortized over the estimated useful lives of the customer lists.

Customer lists acquired in 2007 were valued at $2,500,000 and are being amortized over 60 months, the estimated useful life of the lists. The related amortization expense was $375,003 for each of the nine months ended June 30, 2010 and 2009; and was $125,001 for each of the three months ended June 30, 2010 and 2009, respectively.

Stock Based Compensation

We measure stock based compensation expense using the modified prospective method. Under the modified prospective method, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service or vesting period.

Revenue Recognition

We recognize revenue when four basic criteria are met:

•

Persuasive evidence of an arrangement exists;

•

Delivery has occurred or services have been rendered;

•

The seller’s price to the buyer is fixed or determinable; and,

•

Collectability is reasonably assured.

Our revenue recognition varies based on the revenue source.

Wholesale and Retail Plans Division — membership fees are paid to us on a weekly, monthly or annual basis and fees paid in advance are recorded as deferred revenue and recognized monthly over the applicable membership term. Our wholesale and private label partners bill their customers for the membership fees and periodically remit our portion of the fees to us. For our retail members that are typically billed directly, the billed amount is almost entirely collected by electronic charge to the member’s credit card, automated clearinghouse or electronic check.

Insurance Marketing Division — revenue reflects commissions and fees reported to us by insurance companies for policies sold by the division’s agents. Commissions and fees collected are recognized as earned on a monthly basis until the underlying insurance contract is reported to the division as terminated. Our commission rates vary by insurance carrier, the type of policy purchased by the policyholder and the amount of time the policy has been active, with commission rates typically being higher during the first 12 months of the policy period. Revenue also includes interest income earned on commissions advanced to the division’s agents.

Unearned commissions comprise commission advances received from insurance carriers but not yet earned or collected. These advances are subject to repayment back to the carrier in the event that the policy lapses before the advanced commissions are earned and collected. Additionally, enrollment fees received are recorded as deferred revenue and amortized over the expected weighted average life of the policies sold which currently approximates 18 months. Deferred revenue is reported net of related policy acquisition costs, principally lead and marketing credits, which are capitalized and amortized over the same weighted average life, to the extent these deferred costs do not exceed the related gross deferred revenue. Any excess costs are expensed as incurred.

Commission Expense

Commission expense is based on the applicable rates applied to membership revenues billed or insurance commissions collected, and are recognized as incurred on a monthly basis until the underlying program member or insurance policy is terminated.

The Insurance Marketing Division advances agent commissions, up to nine months, for certain insurance programs. The advance commissions to our agents are funded partly by the insurance carriers we represent and partly by us. These commissions advanced to agents are reflected on our balance sheet as advanced agent commissions. Collection of the commissions advanced (plus accrued interest) is accomplished by withholding amounts earned by the agent on the policy upon which the advance was made. In the event of early termination of the underlying policy, the division seeks to recover the unpaid advance balance by withholding advanced and earned commissions on other policies sold by the agent. This division also has the contractual right to pursue other sources of recovery, including recovery from the agents managing the agent to whom advances were made.

Advanced agent commissions are reviewed and an allowance is provided for those balances where recovery is considered doubtful. This allowance requires judgment and is based primarily upon estimates of the recovery of future commissions expected to be earned by the agents with outstanding balances and, where applicable, the agents responsible for their management. Advances are written off when determined to be non-collectible.

The Retail Plans Division advances agent commissions for certain retail plan programs. The advance commissions to the Company’s agents are funded by the Company and are reflected on the balance sheet as advanced agent commissions. Collection of the commissions advanced is accomplished by predetermined sales quotas that must be attained prior to the payment of additional commissions. In the event of early termination of the program, the division recovers the unpaid advance balance by withholding amounts earned by the agent on the memberships upon which the advance was made. In addition, certain membership persistency levels must be maintained.

The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, Revenue Recognition, corrected copy, that requires four basic criteria be met before revenue can be recognized:

•

Persuasive evidence of an arrangement exists;

•

Delivery has occurred or services have been rendered;

•

The seller’s price to the buyer is fixed or determinable; and,

•

Collectability is reasonably assured.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB 51, which was subsequently incorporated into ASC Topic 810, Consolidation. ASC Topic 810 establishes new accounting and reporting standards for non-controlling interests in a subsidiary and for the deconsolidation of a subsidiary. ASC Topic 810 requires entities to classify non-controlling interests as a component of stockholders’ equity and requires subsequent changes in ownership interests in a subsidiary to be accounted for as an equity transaction. Additionally, ASC Topic 810 requires entities to recognize a gain or loss upon the loss of control of a subsidiary and to re-measure any ownership interest retained at fair value on that date. ASC Topic 810 also requires expanded disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. ASC Topic 810 is effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which are required to be applied retrospectively. The adoption of ASC Topic 810 was effective for us beginning October 1, 2009. Because all of our subsidiaries are wholly-owned, ASC Topic 810 did not have a material impact on our financial condition or results of operations.

In April 2008, the FASB issued an update to Codification Topic 350, Intangible — Goodwill and Other, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This amendment became effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008. Early adoption was prohibited. The amendment to Codification Topic 350 was effective for us beginning October 1, 2009 and did not have a material impact on our determination of the useful life of our intangible assets, financial condition or results of operations.

In May 2009, the FASB issued authoritative guidance on subsequent events, which was codified in ASC 855, Subsequent Events. ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted these provisions of ASC 855 on June 30, 2009. On February 24, 2010, the FASB updated the guidance to address certain implementation issues related to an entity’s requirement to perform and disclose subsequent event procedures. Effective upon its issuance, the update exempts registrants reporting under the Securities Exchange Act of 1934 from disclosing the date through which subsequent events have been evaluated. As the update affected disclosure only, the adoption of the update did not have an impact on our consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires expanded fair value disclosures of transfers into and out of Levels 1 and 2 fair value measurements and clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2010-06 is effective for us beginning January 1, 2010. The adoption of this accounting standard update did not have a material impact on our financial position, results of operations, cash flows and disclosures.

Results of Operations

Introduction

We are a leading provider of consumer membership plans, healthcare savings membership plans and a leading marketer of individual major medical health insurance products. Through working with our wholesale and retail clients, we design and build membership plans that contain benefits aggregated from our vendors that appeal to our client’s customers. For our major medical health insurance products, we offer and sell these products through a national network of independent agents.

The following table sets forth selected results of our operations for the three and nine months ended June 30, 2010 and 2009. We operate in four reportable business segments: Wholesale Plans, Retail Plans, Insurance Marketing and Corporate. The Wholesale Plans operating segment includes the operations of our customized membership marketing plans primarily offered at rent-to-own retail stores. The Retail Plans operating segment includes the operations from our healthcare and membership savings plans designed to serve the markets other than rent to own. The Insurance Marketing operating segment offers and sells individual major medical health insurance products and related benefit plans. The Corporate operating segment includes salary and other expenses for individuals performing services for administration of overall operations of the Company at its holding company level.

The following information was derived and taken from our unaudited financial statements appearing elsewhere in this report.

($ in thousands)

		For the Three Months Ended												For the Nine Months Ended
		June 30,												June 30,
		2010				2009				% Change				2010				2009				% Change
Net revenues		$	14,371			$	13,960				3	%		$	41,134			$	25,514				61	%
Direct costs			10,129				9,811				3	%			28,390				16,785				69	%
Operating expenses			2,900				2,892				*				8,505				5,593				52	%
Operating income			1,342				1,257				7	%			4,239				3,136				35	%
Net other income (expense)			(19	)			303				(106	%)			20				217				(91	%)
Income before income taxes			1,323				1,560				(15	%)			4,259				3,353				27	%
Income taxes, net			375				698				(46	%)			1,679				1,205				39	%
Net income		$	948			$	862				10	%		$	2,580			$	2,148				20	%

The following tables set forth revenue, gross margin and operating income by segment.

($ in thousands)

		For the Three Months Ended												For the Nine Months Ended
		June 30,												June 30,
		2010				2009				% Change				2010				2009				% Change
Net revenues — by segment
Wholesale Plans		$	5,764			$	5,021				15	%		$	16,539			$	14,707				12	%
Retail Plans (a)			4,883				4,479				9	%			12,893				8,723				48	%
Insurance Marketing			5,017				5,653				(11	%)			15,441				5,653				173	%
Corporate (holding company)			—				—				—				—				—				—
Intercompany Eliminations			(1,293	)			(1,193	)			8	%			(3,739	)			(3,569	)			5	%
Total		$	14,371			$	13,960				3	%		$	41,134			$	25,514				61	%
Gross margin — by segment
Wholesale Plans (a)		$	1,826			$	919				99	%		$	4,078			$	3,243				26	%
Retail Plans (a)			1,685				2,308				(27	%)			6,025				4,563				32	%
Insurance Marketing			730				922				(21	%)			2,641				922				186	%
Corporate (holding company)			—				—				—				—				—				—
Total		$	4,421			$	4,149				7	%		$	12,744			$	8,728				46	%
Operating income — by segment
Wholesale Plans		$	1,364			$	508				169	%		$	2,584			$	1,856				39	%
Retail Plans			359				860				(58	%)			2,239				1,863				20	%
Insurance Marketing			(49	)			114				(143	%)			275				114				141	%
Corporate (holding company)			(332	)			(225	)			(48	%)			(859	)			(697	)			(23	%)
Total		$	1,342			$	1,257				7	%		$	4,239			$	3,136				35	%

Discussion of Three Months Ended June 30, 2010 and 2009

Net revenues increased $.4 million (a 3% increase) during the three months ended June 30, 2010 (“the 2010 3^rd quarter”), compared with the three months ended June 30, 2009 (the “2009 3^rd quarter”) to $14.4 million from $14.0 million in 2009. The increase in net revenues was primarily due to:

•

Growth in our Wholesale Plans Division of approximately $.8 million attributable to additional rent-to-own locations offering our plans and an increase in member acceptance rates among existing clients.

•

Growth in our Retail Plans Division of approximately $.4 million attributable to new business beginning in the second quarter of 2010. See the “Segment Discussion Analysis” below for additional information.

•

Our Insurance Marketing Division experienced a decrease of $.7 million primarily attributable to discontinued programs. See the “Segment Discussion Analysis” below for additional information.

•

Other increases of $.1 million.

Direct costs increased $.3 million (a 3% increase) during the 2010 3^rd quarter to $10.1 million from $9.8 million in the 2009 3^rd quarter. The increase in direct costs was attributable to the following:

•

Our Wholesale Plans Division decreased $.2 million primarily attributable to a decline in the company’s waiver reimbursements liability.

•

Growth for our Retail Plans Division of $1.0 million attributable to new business beginning in the second quarter of 2010. See the “Segment Discussion Analysis” below for additional information.

•

Our Insurance Marketing Division experienced a decrease of $.5 million attributable to discontinued programs. See the “Segment Discussion Analysis” below for additional information.

Operating expenses remained at $2.9 million during the 2010 and 2009 3^rd quarters.

Other income decreased $.3 million during the 2010 3^rd quarter to an expense of $.02 million from income of $.3 million during the 2009 3^rd quarter. The decrease was primarily attributable to income earned from a non-recurring transaction during the 2009 3^rd quarter.

Provision for income taxes, net decreased by $.3 million during the 2010 3^rd quarter to $.4 million from $.7 million in the 2009 3^rd quarter. The decrease was attributable to tax refunds of $.5 million for federal and state income taxes for prior fiscal years.

Net income increased $.1 million (a 10% increase) to approximately $.95 million during the 2010 3^rd quarter compared to $.86 million during the 2009 3^rd quarter.

Segment Discussion Analysis

Wholesale Plans Division

Selected Operating Metrics

($ in thousands except member data)

		For the Three Months Ended June 30,
		2010				2009				% Change
Results of operations
Net revenues		$	5,764			$	5,021				15	%
Direct costs (a)			3,939				4,102				(4	%)
Operating expenses			462				411				12	%
Operating income		$	1,364			$	508				169	%
Percent of revenue
Net revenues			100	%			100	%			—
Direct costs			68	%			82	%			(14	%)
Operating expenses			8	%			8	%			—
Operating income			24	%			10	%			14	%
Member count at June 30,			626,155				728,397				(14	%)

Net revenues increased $.8 million (a 15% increase) during the 2010 3^rd quarter to $5.8 million from $5.0 million during the 2009 3^rd quarter. The increase in net revenues was related to the increase in the number of new rent-to-own locations offering our membership plans plus membership growth from existing locations.

Direct costs decreased $.2 million (a 4% decrease) during the 2010 3^rd quarter to $3.9 million from $4.1 million during the 2009 3^rd quarter. The decrease was primarily attributable to our client’s waiver of rental payment expenses. We entered into contractual arrangements to administer certain membership programs for clients, primarily in the rental-purchase industry. For approximately 3,100 (78%) of our point-of-sale locations the administration duties include reimbursing the client for certain expenses it incurs in the operation of the program. Those expenses are primarily related to product service expenses and the client’s waiver of rental payments under defined circumstances including circumstances when the client’s customer becomes unemployed for a stated period of time. It is our policy to reserve the necessary funds in order to reimburse our clients as those obligations become due in the future. The increase in product service expense was attributable to increased program membership, increases in the average number of products that members have eligible for service and a slight increase in the average cost per incident. The increase in unemployment waiver expense was primarily related to increases in program membership and an increase in the level of national unemployment.

Operating expenses increased 12% to $.5 million during the 2010 3^rd quarter when compared to the 2009 3^rd quarter. The increase was attributable to an increase in compensation expense for additional employees resulting from the increase in revenue.

Retail Plans Operating Segment

Selected Operating Metrics

($ in thousands except member data)

		For the Three Months Ended June 30,
		2010				2009				% Change
Results of operations
Net revenues (a)		$	4,883			$	4,479				9	%
Direct costs			3,197				2,171				47	%
Operating expenses			1,326				1,448				(8	%)
Operating income		$	359			$	860				(58	%)
Percent of revenue
Net revenues			100	%			100	%			—
Direct costs			65	%			48	%			17	%
Operating expenses			27	%			32	%			(5	%)
Operating income			7	%			19	%			(12	%)
Member count at June 30,			1,561,345				1,194,864				31	%

Net revenues increased $.4 million (a 9% increase) during the 2010 3^rd quarter to $4.9 million from $4.5 million during the 2009 3^rd quarter. The increase in net revenues was attributable to new business beginning in the second quarter of 2010.

Direct costs increased $1.0 million (a 47% increase) during the 2010 3^rd quarter to $3.2 million from $2.2 million during the 2009 3^rd quarter. The increase in direct costs was attributable to new business beginning in the second quarter of 2010.

Operating expenses decreased $.1 million (an 8% decrease) to $1.3 million during the 2010 3^rd quarter from $1.4 million during the 2009 3^rd quarter. The decrease in operating expenses was attributable to the centralization of operations for our Retail Plans Division during the 2010 1^st quarter.

Operating income decreased $.5 million (a 58% decrease) to $.4 million during the 2010 3^rd quarter from $.9 million in the 2009 3^rd quarter.

Insurance Marketing Operating Segment

Selected Operating Metrics

($ in thousands except agent and insurance data)

		For the Three Months Ended June 30,
		2010				2009				% Change
Results of operations
Net revenues (a)		$	5,017			$	5,653				(11	%)
Direct costs			4,286				4,730				(9	%)
Operating expenses			780				809				(4	%)
Operating income (loss)		$	(49	)		$	114				(143	%)
Percent of revenue
Net revenues			100	%			100	%			—
Direct costs			85	%			84	%			1	%
Operating expenses			16	%			14	%			2	%
Operating income			(1	%)			2	%			(3	%)
Number of Agents			7,757				5,502				55	%
Number of In-force Policies			24,899				24,304				3	%

Net revenues decreased $.7 million (an 11% decrease) during the 2010 3^rd quarter to $5.0 million from $5.7 million during the 2009 3^rd quarter. The decrease in net revenues was attributable to customers who have terminated at $.8 million offset by an increase in active programs of $.1 million.

Direct costs decreased $.4 million (a 9% decrease) during the 2010 3^rd quarter to $4.3 million from $4.7 million during the 2009 3^rd quarter. The decrease in direct costs was attributable to the decrease in net revenues.

Operating expenses decreased $.03 million (a 4% decrease) to $.78 million during the 2010 3^rd quarter from $.81 million during the 2009 3^rd quarter. The decrease in operating expenses was attributable to a decrease in compensation expense resulting from staffing changes during the current fiscal quarter.

Operating income decreased $.16 million (a 143% decrease) to a loss of $.05 million during the 2010 3^rd quarter from $.1 million in the 2009 3^rd quarter.

Corporate Operating Segment

Selected Operating Metrics

($ in thousands)

		For the Three Months Ended June 30,
		2010				2009				% Change
Results of operations
Net revenues		$	—			$	—
Direct costs			—				—
Operating expenses			332				225				48	%
Operating income (loss)		$	(332	)		$	(225	)			(48	%)

Operating expenses increased $.1 million (a 48% increase) to $.3 million during the 2010 3^rd quarter from $.2 million during the 2009 3^rd quarter. The increase was attributable to: a) compensation expense for existing employees plus the addition of two employees; and b) additional travel expenses during the quarter.

Discussion of Nine Months Ended June 30, 2010 and 2009

Net revenues increased $15.6 million (a 61% increase) during the nine months ended June 30, 2010 (“the 2010 period”), compared with the nine months ended June 30, 2009 (the “2009 period”) to $41.1 million from $25.5 million in 2009. The increase in net revenues was primarily due to:

•

The acquisition of Access Plans USA in April 2009 which resulted in an increase of revenue of $13.5 million;

•

Growth in our Wholesale Plans Division of approximately $1.8 million attributable to additional rent-to-own locations offering our plans and an increase in member acceptance rates among existing clients; and

•

Growth in our existing Retail Plans Division of approximately $.3 million. See the “Segment Discussion Analysis” below for additional information.

Direct costs increased $11.6 million (a 69% increase) during the 2010 period to $28.4 million from $16.8 million in the 2009 period. The increase in direct costs was attributable to the following:

•

The acquisition of Access Plans USA in April 2009 which resulted in an increase in cost of sales of $10.8 million;

•

Our Wholesale Plans operating segment experienced an increase of $1.0 million primarily related to our clients’ product service expenses; and

•

Our existing Retail Plans Division experienced a decrease of $.2 million attributable to a decrease in compensation expense resulting from the centralization of operations for our Retail Plans Division during the fiscal 2010 1st quarter ended December 31, 2009. See the “Segment Discussion Analysis” below for additional information.

Operating expenses increased $2.9 million (a 52% increase) during the 2010 period to $8.5 million from $5.6 million in the 2009 period. The increase in operating expenses was attributable to the acquisition of Access Plans USA in April 2009. See the “Segment Discussion Analysis” below for additional information.

Net other income decreased $.2 million during the 2010 period to $.02 million from $.22 million during the 2009 period. The decrease was primarily attributable to income earned from a non-recurring transaction during the 2009 3^rd quarter.

Provision for income taxes, net increased by $.5 million during the 2010 period to $1.7 million from $1.2 million in the 2009 period. The net increase consisted of tax refunds of $.5 million for federal and state income taxes for prior fiscal years.

Net income was approximately $2.6 million during the 2010 period compared to $2.1 million during the 2009 period.

Segment Discussion Analysis

Wholesale Plans Division

Selected Operating Metrics

($ in thousands except member data)

		For the Nine Months Ended June 30,
		2010				2009				% Change
Results of operations
Net revenues		$	16,539			$	14,707				12	%
Direct costs (a)			12,461				11,464				9	%
Operating expenses			1,494				1,387				8	%
Operating income		$	2,584			$	1,856				39	%
Percent of revenue
Net revenues			100	%			100	%			—
Direct costs			75	%			78	%			(3	%)
Operating expenses			9	%			9	%			—
Operating income			16	%			13	%			3	%
Member count at June 30,			626,155				728,397				(14	%)

Net revenues increased $1.8 million (a 12% increase) during the 2010 period to $16.5 million from $14.7 million during the 2009 period. The increase in net revenues was attributable to additional rent-to-own locations offering our plans and an increase in member acceptance rates among existing clients.

Direct costs increased $1.0 million (a 9% increase) during the 2010 period to $12.5 million from $11.5 million during the 2009 period. The increase was primarily attributable to our client’s product service expenses. We entered into contractual arrangements to administer certain membership programs for clients, primarily in the rental purchase industry. For approximately 3,100 (78%) of our point of sale locations the administration duties include reimbursing the client for certain expenses it incurs in the operation of the program. Those expenses are primarily related to product service expenses and the client’s waiver of rental payments under defined circumstances such as when their customer becomes unemployed for a stated period of time. It is our policy to reserve the necessary funds in order to reimburse our clients as those obligations become due in the future. The increase in product service expense is attributable to increased program membership, increases in the average number of product that members have eligible for service and a slight increase in the average cost per incident. The increase in unemployment waiver expense is primarily related to increases in program membership and an increase in the level of national unemployment.

Operating expenses increased 8% to $1.5 million during the 2010 period when compared to the 2009 period. The increase was attributable to an increase in compensation expense for additional employees resulting from the increase in revenue.

Operating income increased $.7 million (a 39% increase) during the 2010 period to $2.6 million from $1.9 million in the 2009 period.

Retail Plans Operating Segment

Selected Operating Metrics

($ in thousands except member data)

		For the Nine Months Ended June 30,
		2010				2009				% Change
Results of operations
Net revenues (a)		$	12,893			$	8,723				48	%
Direct costs			6,869				4,160				65	%
Operating expenses			3,785				2,700				40	%
Operating income		$	2,239			$	1,863				20	%
Percent of revenue
Net revenues			100	%			100	%			—
Direct costs			53	%			48	%			5	%
Operating expenses			29	%			31	%			(2	%)
Operating income			17	%			21	%			(4	%)
Member count			1,561,345				1,194,864				31	%