The Amacore Group, Inc. (ACGI) 10-Q/A 2008 Q1 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)                                                                                                                                                                 

x      Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2008

o      Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from _________ to _________

Commission file number 0-27889

THE AMACORE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	59-3206480
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1211 North Westshore Boulevard, Suite 512

Tampa, Florida 33607

(Address of principal executive offices)

(813) 289-5552

(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 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 o

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

Large accelerated filer   o	Accelerated filer  o
Non-accelerated filer    o (Do not check if a smaller reporting company)	Smaller reporting company  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 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of May 5, 2008:

113,469,915 Class A Common Shares

29,062,802 Class B Common Shares

EXPLANATORY NOTE

This Amendment No. 1 to this Quarterly Report on Form 10-Q/A (“Form 10-Q/A”) is being filed in order to correct previously issued condensed consolidated financial statements of The Amacore Group, Inc. (the “Company”) as of and for the three months ended March 31, 2008, initially filed on Form 10-QSB with the Securities and Exchange Commission (the “SEC”) on May 20, 2008 (the “Original Form 10-QSB”).  This restatement corrects errors related to the treatment of certain warrant agreements with “change in control” provisions, the treatment of the allowance for sales refunds and chargebacks, and the treatment of capitalization of commissions paid.  The tables within Note 2 to the Condensed Consolidated Financial Statements contained herein show the amount originally reported, the amount of the adjustment and the restated amount.  In addition, the presentation of financial information (including notes to financial statements) has been revised to conform to the presentation of financial information in the Company Quarterly Report on Form 10-Q for the period ended September 30, 2008.  In addition, certain other enhancements and clarifications to Part I, Item 2 have been made.

This Form 10-Q/A includes items that have been changed as a result of the restatement as well as items that are unchanged from the Original Form 10-QSB.  Other than as required to reflect the effects of the restatement, this Form 10-Q/A has not been updated to reflect the effects of other events occurring subsequent to the filing date of the Original Form 10-QSB.  Therefore, this Form 10-Q/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Form 10-QSB, including any amendments to those filings.

This Form 10-Q/A amends the following items which were impacted by the adjustments described above:

·  Part I – Item 1 – Financial Statements

·  Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition, this Form 10-Q/A includes currently-dated certifications from our principal executive officer and principal financial officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended.

Additional information about the decision to restate the March 31, 2008 financial statements can be found in the Company’s Current Report on Form 8-K, filed with the SEC on December 18, 2008 and in Note 2 to the Condensed Consolidated Financial Statements contained herein.

THE AMACORE GROUP, INC.

FORM 10-Q/A

PART I - - FINANCIAL INFORMATION

	Page No.
Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets – March 31, 2008 and December 31, 2007	3
Condensed Consolidated Statements of Operations – For the Three Months Ended March 31, 2008 and 2007	4
Condensed Consolidated Statements of Cash Flows – For the Three Months Ended March 31, 2008 and 2007	5
Notes to Interim Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.	29
Item 4T. Controls and Procedures	29

PART II – OTHER INFORMATION

	Page No.
Item 1. Legal Proceedings	30
Item 2. Unregistered Sales of Equity and Use of Proceeds	30
Item 3. Defaults Upon Senior Securities	30
Item 4. Submission of Matters to a Vote of Security Holders	30
Item 5. Other Information	30
Item 6. Exhibits	31
Signatures	31

2

THE AMACORE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 31,			December 31,
	2008			2007
ASSETS
Current assets
Cash	$	2,824,526		$	2,161,042
Restricted cash		566,935			316,935
Accounts receivable (net of $0 allowance for doubtful accounts in 2008 and 2007, respectively)		496,896			470,049
Non-trade receivables – related party		75,469			64,385
Inventory		37,814			37,814
Deferred expenses		2,280,288			1,023,798
Deposits and advances		87,814			61,236
Total current assets		6,369,742			4,135,259
Property, plant and equipment (net of accumulated depreciation of $173,219 and $132,387 for 2008 and 2007, respectively)		760,048			418,356
Other assets
Deferred customer acquisition costs		253,839			-
Goodwill and other intangible assets		15,957,925			14,725,250
Total assets	$	23,341,554		$	19,278,865
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
Accounts payable	$	2,427,449		$	2,639,200
Accounts payable – related party		527,930			590,888
Loans and notes payable		1,250,610			1,414,530
Accrued expenses and other liabilities		5,219,677			5,147,665
Deferred compensation – related party		561,614			602,344
Deferred revenue		1,660,395			1,409,984
Total current liabilities		11,647,675			11,804,611
Long-term liabilities
Accrued dividends		704,482			479,896
Fair value of redeemable warrants		12,194,000			-
Total long-term liabilities		12,898,482			479,896
Total liabilities		24,546,157			12,284,507
Stockholders' (deficit) equity
Preferred Stock, $.001 par value, 20,000,000 shares authorized;
Series D mandatory convertible preferred stock; 694.6 shares authorized; 694.6 shares issued and outstanding for 2008 and 2007, respectively		-			-
Series E mandatory convertible preferred stock; 139 shares authorized; 139 shares issued and outstanding for 2008 and 2007, respectively		-			-
Series G mandatory convertible preferred stock; 1,000 shares authorized; 1,000 and 300 shares issued and outstanding for 2008 and 2007, respectively		1			-
Series A mandatory convertible preferred stock; 1,500 shares authorized; 155 shares issued and outstanding for 2008 and 2007, respectively		-			-
Common stock A, $.001 par value, 1,360,000,000 shares authorized; 119,170,401 and 110,149,156 shares issued and outstanding for 2008 and 2007, respectively		119,170			110,149
Common stock B, $.001 par value, 120,000,000 shares authorized; 29,087,802 and 27,563,802 shares issued and outstanding for 2008 and 2007, respectively		29,088			27,563
Additional paid-in capital		89,372,507			83,956,054
Accumulated deficit		(90,725,369	)		(77,099,408	)
Total stockholders' (deficit) equity		(1,204,603	)		6,994,358
Total liabilities and stockholders' (deficit) equity	$	23,341,554		$	19,278,865
See notes to condensed consolidated financial statements

3

THE AMACORE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31,
	2008			2007
REVENUES
Membership fees	$	4,635,009		$	159,867
Commissions		136,743			-
Marketing fees and materials		267,098			-
Total revenue		5,038,850			159,867
COST OF SALES
Sales commissions		2,741,332			66,100
Benefit and service cost		1,296,236			-
Total cost of sales		4,037,568			66,100
GROSS PROFIT		1,001,282			93,767
OPERATING EXPENSES
Depreciation		46,980			2,001
Amortization		714,031			-
Office-related expenses		358,643			64,168
Professional fees		721,153			1,864,612
Payroll and employee benefits		1,823,253			2,937,025
Travel		301,629			111,314
Selling and marketing		1,975,125			47,440
Total operating expenses		5,940,814			5,026,560
Loss from operations before other income and expense		(4,939,532	)		(4,932,793	)
OTHER INCOME (EXPENSE)
Interest income		14,872			-
Interest expense		(35,537	)		(29,112	)
Loss on conversion of note payable		(242,653	)		-
Change in fair value of redeemable warrants		(8,150,000	)		-
Other		1,995			-
Total other income (expense)		(8,411,323	)		(29,112	)
Net loss before income taxes		(13,350,855	)		(4,961,905	)
Income taxes		-			-
Net loss		(13,350,855	)		(4,961,905	)
Preferred stock dividend and accretion		(275,106	)		(41,375	)
Net loss available to common stockholders	$	(13,625,961	)	$	(5,003,280	)
Basic and diluted loss per share	$	(0.10	)	$	(0.05	)
Basic and diluted weighted average number of  common shares outstanding		140,981,596			95,289,598
See notes to condensed consolidated financial statements

4

THE AMACORE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31,
	2008			2007
Cash flows from operating activities
Net loss	$	(13,350,855	)	$	(4,961,905	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets		714,031			-
Depreciation		46,980			2,001
Loss on change in fair value of redeemable and noncompensatory warrants		900,000			-
Loss on conversion of note payable		242,653			-
Loss on the issuance of redeemable warrants		7,250,000			-
Share-based payments to employees and consultants		94,556			4,359,500
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(26,847	)		13,323
Increase in accounts receivable – related party		(11,084	)		-
(Increase) decrease in deferred expenses		(1,256,490	)		27,113
Increase in deposits and advances		(26,578	)		-
Increase in deferred customer acquisition costs		(253,839	)		-
Decrease in accounts payable and accrued expenses		(85,568	)		(35,781	)
Decrease in deferred compensation		(40,730	)		(84,216	)
Increase in deferred revenue		250,411			403
Net cash used in operating activities		(5,553,360	)		(679,562	)
Cash flows from investing activities:
Purchase of property and equipment		(220,169	)		-
Increase in restricted cash		(250,000	)		-
Net cash used by investing activities		(470,169	)		-
Cash flows from financing activities:
Equity issuance costs		(380,000	)		750,000
Net proceeds from credit card borrowing		40,445			-
Payments made on notes payable		(15,932	)		(180,000	)
Payments on and redemption of convertible notes		-			31,600
Proceeds from exercise of common stock warrants		42,000			4,815,000
Proceeds from private placement equity issuance		500			-
Proceeds from promissory notes		-			-
Proceeds from sale of preferred stock and redeemable warrants		7,000,000			(20,000	)
Net cash provided by financing activities		6,687,013			5,396,600
Increase in cash		663,484			4,717,038
Cash, beginning of period		2,161,042			135,046
Cash, end of period	$	2,824,526		$	4,852,084
SUPPLEMENTAL INFORMATION:
Cash paid for interest	$	2,229		$	-
Cash paid for income taxes	$	-		$	-
See notes to condensed consolidated financial statements

5

THE AMACORE GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – NATURE OF OPERATIONS

The Amacore Group, Inc. (Amacore or the Company) develops, designs and distributes health-related membership benefit programs, insurance programs, and other healthcare solutions, primarily through its wholly-owned subsidiary, LifeGuard Benefit Services, Inc. (LifeGuard).  The Company’s products include discount benefit and/or limited medical benefit programs such as hearing, dental, vision and doctor reimbursements among others.  The components of these product offerings represent both Company-developed products as well products marketed through arrangements with other vendors.  Additionally, the Company utilizes its distribution network to market certain non health-related products and services.

NOTE 2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

On December 17, 2008, the Board of Directors of the Company, after discussions with the Company’s independent registered public accounting firm, McGladrey & Pullen, LLP (“McGladrey”) and its former independent registered public accounting firm Brimmer, Burek & Keelan LLP (“Brimmer”), determined that it is necessary to restate the Company’s consolidated financial statements for the quarterly period ended March 31, 2008 to correct the errors described in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2008.  Accordingly, the Company’s consolidated interim financial statements previously filed for those periods should no longer be relied upon and the Company’s press releases and similar communications should no longer be relied upon to the extent that they refer to such financial statements.

6

The effects of these corrections on the accompanying condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of cash flows and descriptions of the nature of the adjustments made to the balances are as follows:

THE AMACORE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
	March 31,								March 31,
	2008								2008
	As Originally filed			Adjustments					As Restated
ASSETS
Current assets
Cash	$	2,824,526							$	2,824,526
Restricted cash		566,935								566,935
Accounts receivable		496,896								496,896
Non-trade receivables – related party		75,469								75,469
Inventory		37,814								37,814
Deferred expenses		3,920,234			(1,639,946	)	(1	)		2,280,288
Deposits and advances		87,814								87,814
Total current assets		8,009,688			(1,639,946	)				6,369,742
Property, plant and equipment		760,048								760,048
Other assets
Deferred customer acquisition costs					253,839		(1	)		253,839
Goodwill and other intangible assets		1,085,823			1,953,641		(2	)		15,957,925
					13,566,021		(2	)
					(647,560	)	(3	)
Unallocated assets		13,566,021			(13,566,021	)	(2	)		-
Total assets	$	23,421,580		$	(80,026	)			$	23,341,554
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	2,427,449							$	2,427,449
Accounts payable – related party		527,930								527,930
Loans and notes payable		1,150,610			100,000		(4	)		1,250,610
Accrued expenses and other liabilities		4,746,895			44,050		(4	)		5,219,677
					428,732		(5	)
Deferred compensation – related party		561,614								561,614
Deferred revenue		1,660,395								1,660,395
Total current liabilities		11,074,893			572,782					11,647,675
Long-term liabilities
Accrued dividends		704,482								704,482
Fair value of redeemable warrants					4,044,000		(6	)		12,194,000
					8,150,000		(6	)
Total liabilities		11,779,375			12,766,782					24,546,157
Stockholders' (deficit) equity
Preferred Stock		1								1
Common Stock A		114,674			4,496		(7	)		119,170
Common Stock B		29,063			25		(7	)		29,088
Additional paid-in capital		91,452,579			(4,521	)	(7	)		89,372,507
					(42,194	)	(6	)
					(4,044,000	)	(6	)
					2,010,643		(2	)
Accumulated deficit		(79,954,112	)		(55,251	)	(8	)		(90,725,369	)
					(10,716,006	)	(9	)
Total stockholders' (deficit) equity		11,642,205			(12,846,808	)				(1,204,603	)
Total liabilities and stockholders' (deficit) equity	$	23,421,580		$	(80,026	)			$	23,341,554

EXPLANATION OF ADJUSTMENTS AND RECLASSIFICATIONS

(1)  Certain selling costs were capitalized in error, resulting in an overstatement of deferred customer acquisition costs. Additionally, somecustomer acquisition costs that were properly deferred were erroneously classified as current assets. This adjustment recognizes asexpense the costs incorrectly capitalized and reclassifies the long-term portion to non-current assets.

(2)  During the third quarter of 2008, the Company completed its analysis and valuation of the assets acquired in the acquisition of LifeGuard. This adjustment reclassifies assets previously reported as unallocated assets to goodwill and other intangible assets and reflects the final determination of the LifeGuard purchase price.

(3)  This adjustment retrospectively adjusts the amortization of identifiable intangible assets acquired in the LifeGuard acquisition.

(4)  The Company incorrectly accounted for the conversion of certain notes payable. This adjustment correctly reflects the loss onconversion, the remaining outstanding balance of notes payable, and accrued interest payable.

(5)  The Company had not adequately analyzed the amount of sales refunds and charge-backs, resulting in an understatement of the related allowance. This adjustment increased the allowance for estimated refunds and charge-backs based on an established methodology.

(6) Certain of the Company’s outstanding warrants were classified as equity instruments at the time of issuance. After further analysis, the Company has determined that these warrants are properly classified as liabilities in accordance with the provisions of SFAS 150 and EITF 00-19. This adjustment reclassifies those warrants as liabilities and reflects the adjustment of the fair value of those liabilities as of March 31, 2008.

(7) This adjustment correctly reflects capital stock outstanding.

(8) This adjustment corrects an entry made to accumulated deficit in error.

(9) This is the effect on the accumulated deficit of restatement adjustments reflected in earnings.

7

THE AMACORE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31,
	2008								2008
	As Originally filed			Adjustments					As  Restated
REVENUES
Membership fees	$	5,065,492		$	(430,483	)	(1	)	$	4,635,009
Commissions		136,743								136,743
Marketing fees and materials		267,098								267,098
Total revenue		5,469,333			(430,483	)				5,038,850
COST OF SALES
Sales commissions		2,693,843			47,489		(2	)		2,741,332
Benefit and service cost		131,173			1,165,063		(3	)		1,296,236
Total cost of sales		2,825,016			1,212,552					4,037,568
GROSS PROFIT		2,644,317			(1,643,035	)				1,001,282
OPERATING EXPENSES
Depreciation		46,980								46,980
Amortization		66,471			647,560		(4	)		714,031
Office related expenses		358,643								358,643
Professional fees		721,153								721,153
Payroll and employee benefits		1,823,253								1,823,253
Travel		301,629								301,629
Selling and marketing		1,801,570			1,338,618		(2	)		1,975,125
					(1,165,063	)	(3	)
Total operating expenses		5,119,699			821,115					5,940,814
Loss from operations before other income and expense		(2,475,382	)		(2,464,150	)				(4,939,532	)
OTHER INCOME (EXPENSE)
Interest income		14,872								14,872
Interest expense		(35,537	)							(35,537	)
Loss on conversion of note payable		(98,603	)		(144,050	)	(5	)		(242,653	)
Change in fair value of redeemable warrants		-			(8,150,000	)	(6	)		(8,150,000	)
Other		1,995								1,995
Total other income (expense)		(117,273	)		(8,294,050	)				(8,411,323	)
Net loss before income taxes		(2,592,655	)		(10,758,200	)				(13,350,855	)
Income taxes		-								-
Net loss		(2,592,655	)		(10,758,200	)				(13,350,855	)
Preferred stock dividend and accretion		(317,300	)		42,194		(6	)		(275,106	)
Net loss available to common stockholders	$	(2,909,955	)	$	(10,716,006	)			$	(13,625,961	)
Basic and diluted loss per share	$	(0.02	)						$	(0.10	)

EXPLANATION OF ADJUSTMENTS AND RECLASSIFICATIONS

(1)  The Company had not adequately analyzed the amount of sales refunds and charge-backs, resulting in an understatement of the related allowance and a corresponding overstatement of revenue.  This adjustment increased the allowance for estimated refunds and charge-backs based on an established methodology.

(2)  Certain selling costs were capitalized in error, resulting in an overstatement of deferred customer acquisition costs and an understatement of selling and marketing expense and sales commissions.  This adjustment recognizes as expense the costs incorrectly capitalized.

(3)  The Company had previously classified certain benefit and service costs as selling and marketing expenses.  This adjustment reclassifies those costs.

(4)  During the third quarter of 2008, the Company completed its analysis and valuation of the assets acquired in the acquisition of LifeGuard.  This adjustment retrospectively reflects the amortization of identifiable intangible assets acquired in the LifeGuard acquisition.

(5)  The Company had incorrectly recorded the conversion of certain notes payable.  This adjustment correctly reflects the loss on conversion.

(6)  Certain of the Company’s outstanding warrants were classified as equity instruments at the time of issuance.  After further analysis, the Company has determined that these warrants are properly classified as liabilities in accordance with the provisions of SFAS 150 and EITF 00-19.  This adjustment reflects the loss on issuance of those warrants for proceeds less than their fair value, the adjustment of the fair value of the warrants as of March 31, 2008, and the reversal of discount accretion previously recorded related to preferred stock issued in conjunction with the warrants.

8

 THE AMACORE GROUP, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 Three Months Ended March 31,

	2008							2008
	As Originally filed			Adjustments				As Restated
Net cash used by operating activities	$	(4,833,669	)		(719,691	)	(1)(2)	$	(5,553,360	)
Cash flows from investing activities
Purchase of property and equipment		(381,735	)		161,566		(2)		(220,169	)
Decrease in restricted cash		(250,000	)						(250,000	)
Net cash used in investing activities		(631,735	)						(470,169	)
Cash flows from financing activities
Equity issuance costs		(380,000	)						(380,000	)
Net proceeds from credit card borrowing		40,445							40,445
Payments made on notes payable		(15,932	)						(15,932	)
Payments on and redemption of convertible notes		-							-
Proceeds from exercise of common stock warrants		42,000							42,000
Proceeds from private placement equity issuance		500							500
Proceeds from promissory notes		-							-
Proceeds from sale of preferred stock and redeemable warrants		7,000,000							7,000,000
Net cash provided by financing activities		6,687,013							6,687,013
Increase in cash		1,221,609			(558,125	)	(1)		663,484
Cash, beginning of period		2,161,042							2,161,042
Cash, end of period	$	3,382,651		$	(558,125	)		$	2,824,526

EXPLANATION OF ADJUSTMENTS AND RECLASSIFICATIONS

(1) This adjustment corrects an error in the previously reported balance of cash at the end of the period and, correspondingly, in the total reported increase in cash.

(2) This adjustment reflects the reclassification of property and equipment acquired under capital lease and the increase in the corresponding liability from cash flows from investing and operating activities to non-cash investing activities

NOTE 3 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated balance sheet as of December 31, 2007, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments considered necessary in order to make the financial statements not misleading have been included. Results for the three month period ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.  For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-KSB for the year ended December 31, 2007.

Management’s Assessment of Liquidity

At March 31, 2008, the Company had negative working capital of $5,277,933 and an accumulated deficit of $90,725,369.  For the three months ended March 31, 2008, the Company had an operating net loss of $13,350,855.  Anticipated revenue and the ongoing support of the Company’s majority shareholder will, in the opinion of management, be sufficient to sustain current planned operations for the next 12 months.  From January to March 2008, the Company received proceeds of $7,000,000 in two tranches through the sale of preferred stock to its majority shareholder.  Additional cash resources may be needed if the Company does not meet its sales targets, exceeds its projected operating costs, if unanticipated expenses arise or are incurred or the Company wishes to consummate an acquisition.  The Company does not currently maintain a line of credit or term loan with any commercial bank or other financial institution and has not made any other arrangements to obtain additional financing.  There can be no assurance that the Company will not require additional financing.  Likewise, the Company can provide no assurance that if the Company needs additional financing that it will be available in an amount or on terms acceptable to us, if at all.  If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms favorable to the Company, the Company may be unable to execute upon our business plan or pay costs and expenses as they are incurred, which could have a material, adverse effect on business, financial condition and results of operations.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.

9

Use of Estimates

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions 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.  The accounting estimates that require management’s most difficult and subjective judgments include the reserve for sales refunds, valuation of intangible assets acquired in business combinations and the fair value of common stock and warrants issued.  Due to of the uncertainty inherent in such estimates, actual results may differ from these estimates.

Revenue Recognition

Membership Fees

The Company recognizes revenues from membership fees for the sales of health-related discount benefit plans as earned.  These arrangements are generally renewable monthly and revenue is recognized over the renewal period.  As these products often include elements sold through contracts with third-party providers the Company considers each contractual arrangement in accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent (EITF 99-19).  The Company’s current contracts meet the requirements of EITF 99-19 for reporting revenue on a gross basis.

The Company records a reduction in revenue for estimated refunds, chargebacks from credit card companies, and allowances based upon actual history and management’s evaluation of current facts and circumstances.  Refunds, chargebacks and allowances totaled $1,035,925 and $270 for the three months ended March 31, 2008 and 2007, respectively, and were recorded as a reduction of revenue in the accompanying statements of operations.

Commissions

The Company is paid a commission for its sales of third-party products.  Commissions are recognized as products are sold and services performed and the Company has accomplished all activities necessary to complete the earnings process.

Marketing Fees and Materials

The Company markets certain of its products through a multi-level sales organization whereby independent distributors establish their own network of associates.  The independent distributors pay the Company a fee to become marketing representatives on behalf of the Company.  In exchange, the representatives receive various marketing and promotional materials and tools. The Company also earns ancillary revenue from the sale of marketing materials. Revenue is recognized when marketing materials are provided to the representatives.

Concentration of Credit Risk

For the three months ended March 31, 2008, revenue generated by LifeGuard represented approximately 87% of total consolidated revenue.  Lifeguard’s products are dependent upon strategic relationships with insurance companies; accordingly, a change in these strategic relationships, contractual or otherwise, could negatively impact the Company’s business.

For the three months ended March 31, 2008, one of Lifeguard’s customers represented 36% of LifeGuard’s revenue or 31% of consolidated revenue.

At certain times, the Company’s bank deposits exceed the amounts insured by the FDIC.  As of March 31, 2008, the Company had deposits in excess of FDIC insured limits of $2,521,559.  Should the financial institution cease operations when the Company’s deposit balances exceed FDIC insured limits, it would be a significant disruption to our cash flow.  Management continually monitors our banking relationships to lessen this risk.  In addition, a majority of the Company’s credit card processing is with one merchant processor.

Accounts Receivable

Accounts receivable are stated at estimated net realizable value.  Accounts receivable are primarily comprised of balances due from memberships, net of estimated allowances for uncollectible accounts.  In determining collectability, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances.  Based on the Company’s historical experience and an assessment of specific accounts no allowance was required at March 31, 2008 and at December 31, 2007.

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Customer Acquisition Costs

Customer acquisition costs relate to contractual arrangements with certain marketing companies primarily for the sale of Lifeguard products.  Payments are made as leads are provided and are amortized to cost of goods sold over a term relevant to the expected life of the membership.  The majority of these costs are amortized on an accelerated basis over a period less than twelve months, in proportion to recognition of the related revenue.  At March 31, 2008 and December 31, 2007, unamortized customer acquisition costs of $1,435,057 and $0, respectively, are included in deferred expenses and $253,839 and $0, respectively, are included in deferred customer acquisition costs in the accompanying balance sheets.  Amounts paid for leads that do not result in a sale are expensed immediately as a selling and marketing expense.

In January 2008, the Company entered into an arrangement with a third party to expand distribution of the Company’s products resulting in an increase in customer acquisition costs for the three months ended March 31, 2008.  Customer acquisition costs of $1,332,621 and $0 for the three months ended March 31, 2008 and 2007 are included in selling and marketing in the accompanying statements of operations.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost.  The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred.  The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: computer hardware and computer software, 3 years; furniture and fixtures, 7 years; equipment and machinery, 5 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset.  When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in the results of operations.

Property, plant and equipment, net of accumulated depreciation, consist of the following:

	March 31,			December 31,
	2008			2007
Computer hardware	$	123,688		$	418,804
Furniture and fixtures		375,149			70,634
Equipment and machinery		394,498			21,372
Building and leasehold improvements		39,932			39,933
		933,267			550,743
Less accumulated depreciation		(173,219	)		(132,387	)
Total	$	760,048		$	418,356

Depreciation expense including depreciation of assets held under capital leases, was $46,980 and $2,001 for the three months ended March 31, 2008 and 2007, respectively.

Goodwill and Acquired Intangible Assets

Management assesses goodwill related to reporting units for impairment annually as of October 1 or more frequently if an event occurs or circumstances indicate that the asset might be impaired and determines if a reduction of the carrying amount of goodwill is required.  An impairment charge is recorded if the implied fair value of goodwill of a reporting unit is less than the book value of goodwill for that unit.

Intangible assets with a finite useful life recorded as a result of acquisition transactions are amortized over their estimated useful lives on a straight-line basis as follows:

Software	3 years
Customer and vendor relationships	5 years
Tradenames	16 months

The Company evaluates its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.  To determine recoverability, the Company compares the carrying value of the assets to the estimated future cash flows.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

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Stock-Based Compensation

The Company accounts for share-based payments in accordance with Statement of Financial Accounting Standards (SFAS) No. 123R Share Based Payment (SFAS 123R).  SFAS 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements.  This Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions.  The Company uses the Black-Scholes Option model in computing fair value of warrant instrument issuances and uses market value of Common A and Common B stock issuances.

The Company determines the measurement date of its share-based payments made to non-employees in accordance EITF 96-18 Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services (EITF 96-18).  EITF 96-18 requires the issuer to measure the fair value of the equity instrument using the stock price or other measurement assumptions as of the earlier of either of the following:  the date at which a commitment for performance by the counterparty to earn the equity instruments is reached or the date at which the counterparty’s performance is complete.

Loss Per Share

Basic loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period.  Diluted loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect of common stock equivalents, using the treasury stock method.  Weighted average shares outstanding include both Class A and Class B Common stock.  There is no difference between the dividend rights and earnings allocation of Class A and Class B common stock.

The following sets forth the computation of basic and diluted net loss per common share for the three months ended March 31, 2008 and 2007:

	March 31,			March 31,
	2008			2007
Numerator:
Net loss	$	(13,350,855	)	$	(4,961,905	)
Less preferred stock dividend and accretions		(275,106	)		(41,375	)
Net loss available to common stockholders	$	(13,625,961	)	$	(5,003,280	)
Denominator:
Weighted average basic and fully diluted shares outstanding		140,981,596			95,289,598
Net earnings per common share - basic and diluted	$	(0.10	)	$	(0.05	)

As the Company reported losses in all periods presented, all common stock equivalents are excluded from the computation of diluted earnings per share, since the result would be antidilutive.  Securities that could potentially dilute earnings per share in the future, but which were not included in the calculation of diluted earnings per share because to do so would have been antidilutive for the periods presented, are as follows:

	As of March 31,
	2008		2007
Potentially dilutive securities outstanding at end of period:
Common stock warrants		74,277,850		21,295,400
Convertible preferred stock:
Series A		310,000		310,000
Series D		694,600,000		363,500,000
Series E		69,500,000		42,000,000
Series G		2,000,000		-
Total		840,687,850		427,105,400
Weighted-average share equivalents outstanding		803,518,894		241,558,538

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Fair Value Measurements

Statement of Financial Accounting Standard No. 157 (“SFAS 157”) Fair Value Measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date . In many cases, the exit price and the transaction (or entry) price will be the same at initial recognition.  However, in certain cases, the transaction price may not represent fair value.  Prior to SFAS 157, the fair value of a liability was often based on a settlement price concept, which assumed the liability was extinguished.  Under SFAS 157, fair value is based on the amount that would be paid to transfer a liability to a third party with the same credit standing.  SFAS 157 requires that fair value be a market-based measurement in which the fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant.  Accordingly, fair value is no longer determined based solely upon the perspective of the reporting entity. When quoted prices are not used to determine fair value, SFAS 157 requires consideration of three broad valuation techniques:  (i) the market approach, (ii) the income approach, and (iii) the cost approach.  SFAS 157 requires that entities determine the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs.  SFAS 157 prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available.  SFAS 157 establishes a three-level hierarchy, based on the priority of the inputs to the respective valuation technique.  The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  An asset or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its valuation.  SFAS 157 defines the input levels as follows:

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 Quoted prices in markets that are not active or inputs that are observable either directly or indirectly.  Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1, quoted prices in markets that are not active, or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.  Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.  Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Reclassifications

Certain amounts for the prior period have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements Issued But Not Yet Adopted

In December 2007, the FASB issued SFAS 160 Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51 (“SFAS 160“). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  SFAS 160is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  Earlier adoption is prohibited.  The Company believes that SFAS 160 will not have a material impact, if any, on its financial statements.

In February 2008, the FASB issued Financial Staff Position (“FSP”) SFAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), which delays the effective date of SFAS No. 157, Fair Value Measurements (“SFAS 157”), for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).  SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements.  FSP 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP.  FSP 157-2 is effective for us beginning January 1, 2009.  The Company is currently evaluating the potential impact of the adoption of those provisions of SFAS 157 for which effectiveness was delayed by FSP 157-2 on the Company’s consolidated financial position and results of operations.

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NOTE 4 – NONCASH INVESTING AND FINANCING ACTIVITIES

The following table presents a summary of the various noncash investing and financing transactions that the Company entered into during the three months ended:

	March 31,		March 31,
	2008		2007
Beneficial conversion feature accretion	$	57,566	$	-
Conversion value of notes payable and interest to common stock		645,814		-
Preferred stock dividends		217,540		-
Reclassification of noncompensatory warrants from equity to liabilities		44,000		-
Property and equipment acquired under capital lease agreements		161,567		-

NOTE 5 – ACQUISITIONS

On September 1, 2007, the Company acquired 100% ownership of JRM Benefits Consultants, LLC (JRM); and on October 9, 2007, the Company acquired 100% ownership of LifeGuard Benefit Services, Inc. (LifeGuard).

The Company completed the identification and valuation analysis of the intangible assets acquired in respect to the LifeGuard acquisition as of September 30, 2008.  Prior to the completion of the Company’s valuation analysis these intangible assets were identified as unallocated assets in the consolidated balance sheet (see Note 6).  Based upon the final analysis, the Company has adjusted amortization expense retrospectively and has allocated the purchase price to individual intangible assets within the restated financial statements for the period ended March 31, 2008.

The following table summarizes goodwill and the other identifiable intangible assets in respect to the LifeGuard acquisition and their respective estimated fair values as reclassified from the unallocated assets balance as of the acquisition date:

Customer and vendor relationships	$	10,688,000
Software		465,000
Trademark and tradename		710,000
Total identifiable intangible assets		11,863,000
Goodwill		4,281,662
Total	$	16,144,662

Unaudited pro forma operating data for the three months ended March 31, 2007 is presented as though JRM and LifeGuard had been acquired at January 1, 2007.  The unaudited pro forma operating data does not purport to represent what our actual results of operations would have been had we acquired JRM and LifeGuard on January 1, 2007 and should not serve as a forecast of the Company’s operating results for any future periods.  The pro forma adjustments are based solely upon certain assumptions that management believes are reasonable under the circumstances at this time.  The unaudited pro forma operating data is presented as follows:

	For the Three Months
	Ended
	March 31, 2007
Total revenues	$	1,664,020
Net loss	$	(135,311	)
Basic and diluted loss per share	$	(0.06	)

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NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS

The following table reflects the components of goodwill and other intangible assets.

	March 31, 2008						December 31, 2007
	Gross Carrying Amount		Accumulated Amortization		Carrying Value		Gross Carrying Amount		Accumulated Amortization		Carrying Value
Goodwill	$	4,603,906	$	-	$	4,603,906	$	492,144	$	-	$	492,144
Customer and vendor relationships		10,822,000		541,100		10,280,900		-		-		-
Software		548,250		87,906		460,344		708,250		41,164		667,086
Trademarks and tradenames		745,900		133,125		612,775		-		-		-
Unallocated assets		-		-		-		13,566,020		-		13,566,020
Total	$	16,720,056	$	762,131	$	15,957,925	$	14,766,414	$	41,164	$	14,725,250

Goodwill represents the excess of the purchase price over the sum of the amounts assigned to assets acquired less liabilities assumed in respect to the JRM and Lifeguard acquisitions.  None of this goodwill is expected to be deducted for tax purposes.

Amortization expense related to all of the Company’s identifiable intangible assets for the three months ended March 31, 2008 and 2007 was $714,031 and $0, respectively.  Management estimates amortization expense of approximately $11,318,120 over the next five years.  Future amortization of intangible assets is shown in the following table:

2008	$	2,159,738
2009		2,524,650
2010		2,304,932
2011		2,164,400
2012		2,164,400
	$	11,318,120

The weighted-average remaining amortization period for customer and vendor relationships, software, and amortizable trademarks and tradenames is 4.75 years, 2.5 years, and 13 months, respectively.

The table below presents the total carrying amount by intangible asset class for intangible assets not subject to amortization:

	Carrying Value
	March 31,		December 31,
	2008		2007
Goodwill	$	4,603,906	$	492,144
Trademarks and tradenames		35,900		-
Total	$	4,639,806	$	492,144

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NOTE 7 – NOTES AND LOANS PAYABLE

Notes and loans payable consist of the following as of March 31, 2008 and December 31, 2007:

	2008		2007
Promissory notes payable to investors and stockholders; bearing interest ranging from 8% to 10% per annum; due through December 2006; currently in default	$	557,500	$	572,500
Convertible promissory notes payable to investors and stockholders; bearing interest ranging from 10% to 11% per annum; due through December 2006; currently in default		122,000		122,000
Convertible promissory notes payable to investors and stockholders; bearing interest at 8% per annum; due through December 2007; currently in default		7,000		357,000
Promissory notes payable to investors and stockholders; bearing interest of 1.53% per annum; due through June 2004, increasing to 15% thereafter, currently in default		114,950		114,950
Revolving consumer credit cards		269,001		228,557
Capital lease obligation		161,567		-
Promissory notes payable to related parties (non-interest bearing; payable on demand)		18,592		19,523
Total notes and loans payable	$	1,250,610	$	1,414,530

At the date of issue of each of the convertible notes, the conversion price was equal to or exceeded the stock price at the time of issue, and as such, no intrinsic value was allocated to the embedded option of each note.  As of March 31, 2008, all notes and loans payable are classified as current maturities due to either maturity dates or events of default.

Approximately $801,450 of the above listed notes in default are held by investors who have been financial supporters of the Company.  The Company is in the process of negotiating either a conversion to equity or, a restructuring of the terms of these notes.

As of March 31, 2008, the Company had several capital lease obligations totaling $161,567, which are expected to be satisfied within twelve months and, accordingly, have been classified as current liabilities.

On February 13, 2008, the Company received notice to convert a promissory note in the amount of $100,000 with accrued interest of $44,050 into 1,617,680 shares of Class A common stock which were issued on or about February 13, 2008.

On March 31, 2008, the Company received notice to convert a promissory note in the amount of $350,000 with accrued interest of $53,162 into 4,031,620 shares of Class A common stock which were issued on or about March 31, 2008.

NOTE 8 – PREFERRED STOCK

The Company is authorized to issue 20,000,000 shares of preferred stock.

Series B, C, D, E, and G Preferred Stock is entitled to receive dividends payable on the stated value of the preferred stock at a rate of six percent (6%) per annum, which shall be cumulative, accrue daily from the issuance date and be due and payable on the first day of each calendar quarter.  Such dividends accrue whether or not declared, but no dividend shall be paid unless there are profits, surplus or other funds legally available for the payment of dividends.  Dividends are payable in cash or common stock, at the option of the holder.  The accumulation of unpaid dividends shall bear interest at a rate of six percent (6%) per annum.  At March 31, 2008 and December 31, 2007, accrued and unpaid dividends related to the preferred stock are $704,483 and $479,896, respectively.  The Company’s Series A Preferred Stock does not accrue dividends.

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In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, and before any junior security of the Company, the holders of preferred stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount per share equal to the stated value of holder’s respective preferred stock series plus the aggregate amount of accumulated but unpaid dividends on each share of preferred stock.  If, upon a liquidation event, the assets of the Company are insufficient to permit payment in full to such holders of the aggregate amount that they are entitled to be paid by their respective terms, then the entire assets, or proceeds thereof, available to be distributed to the Company’s stockholders shall be distributed to the holders of the preferred stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable were paid in full.  The liquidation value of Series A, B, C, D, E, and G as of March 31, 2008 was $155,000, $0, $0, $7,415,556, $1,490,380, and $10,134,546, respectively.

The table below sets forth the preferred stock outstanding as of March 31, 2008 December 31, 2007.  Note that no shares of Series B or Series C Preferred Stock were outstanding as of March 31, 2008 or December 31, 2007.

	March 31,		December 31,
	2008		2007
Series A		155		155
Series D		695		695
Series E		139		139
Series G		1,000		300
		1,989		1,289

Preferred Stock Series A

As of March 31, 2008, 155 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) were outstanding.  There were no issuances of Series A Preferred Stock during the three month period ended March 31, 2008.  Each share of Series A Preferred Stock is convertible into 2,000 shares of Class A common stock, subject to adjustment for stock dividend, stock split or combination, reclassification, reorganization, consolidation, merger or sale of all or substantially all of the assets or other corporate event.  As of March 31, 2008, the outstanding shares of Series A Preferred Stock were convertible into 310,000 shares of Class A common stock.

Preferred Stock Series B

Each share of Series B Convertible Preferred Stock (“Series B Preferred Stock”) is convertible at any time, at the option of the holder, into one share of Class A common stock, subject to adjustment for stock dividends, stock split or combination, reclassification, reorganization, consolidation, merger or sale of all or substantially all of the assets or other corporate event.   There were no issuances of Series B Preferred Stock during the three month period ended March 31, 2008.  As of March 31, 2008, no shares of Series B Preferred Stock were outstanding.

Preferred Stock Series C

Each share of Series C Mandatory Convertible Preferred Stock (“Series C Preferred Stock”) is deemed to have a value of $10,000 and is convertible at any time, at the option of the holder, into such amount of shares of Class A common stock purchasable for $10,000 on the day of conversion at the lesser of $2.88 or seventy-five percent (75%) of the lowest closing bid price during the five days immediately prior to the conversion date (the “Series C Conversion Price”).  The Series C Conversion Price is subject to adjustment for stock dividends, stock split or combination, reclassification, reorganization, consolidation, merger or sale of all or substantially all of the assets or other corporate event.  There were no issuances of Series C Preferred Stock during the three month period ended March 31, 2008.  As of March 31, 2008, no shares of Series C Preferred Stock were outstanding.

Preferred Stock Series D

As of March 31, 2008, 694.6 shares of Series D Preferred Stock were outstanding.  There were no issuances of Series D Preferred Stock during the three month period ended March 31, 2008. Each share of Series D Preferred Stock is convertible at any time after the second anniversary date of issuance, at the option of the holder, into that number of shares of Class A Common Stock equal to $10,000 divided by $0.01 (the “Series D Conversion Price”).  The Series D Conversion Price is subject to adjustment for certain events, including the payment of a dividend payable in capital stock of the Company, any stock split, combination, or reclassification and certain issuances of Class A Common Stock or securities convertible into or exercisable for Class A Common Stock at a price per share or conversion price less than the then applicable Series D Conversion Price.  In the event of certain corporate changes, including any consolidation or merger in which the Company is not the surviving entity, sale or transfer of all or substantially all of the Company’s assets, certain share exchanges and certain distributions of property or assets to the holders of Class A Common Stock, the holders of the Series D Preferred Stock have the right to receive upon conversion, in lieu of shares of Class A Common Stock otherwise issuable, such securities and/or other property as would have been issued or payable as a result of such corporate change with respect to or in exchange for the Class A Common Stock issuable upon conversion of the Series D Preferred Stock.  The shares of Series D Preferred Stock, generally, become convertible into Class A Common Stock two years after issuance.  As of March 31, 2008, the outstanding shares of Series D Preferred Stock, assuming that all shares of Series D Preferred Stock have been outstanding for at least two years, would have been convertible into 694,600,000 shares of Class A Common Stock.  If on July 15, 2011, any share of Series D Preferred Stock remains outstanding and a registration statement covering the resale of all of the Class A Common Stock underlying the Series D Preferred Stock is effective and has been effective for 90 days prior to such date, the Company must convert each share of the Series D Preferred Stock into Class A Common at the then applicable Series D Conversion Price.

In connection with the Series D Preferred Stock, the Company recorded an aggregate beneficial conversion feature of $6,410,000.  The Company accounted for the beneficial conversion feature in accordance with EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments (“EITF 00-27”) and EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios (“EITF 98-5”).  The resulting discounts have been accreted as a dividend to the preferred shareholders from the date of issuance to the preferred stock’s mandatory conversion date, using the effective yield method.  Accretion recognized for the three months ended March 31, 2008 was $50,584.

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Preferred Stock Series E

Each share of Series E Preferred Stock is convertible after the second anniversary of the issuance date of such shares, at the option of the holder, into that number of shares of Class A Common Stock equal to $10,000 divided by $0.02 (the “Series E Conversion Price”).  The Series E Conversion Price is subject to adjustment for certain events, including the payment of a dividend payable in capital stock of the Company, any stock split, combination, or reclassification and certain issuances of Class A Common Stock or securities convertible into or exercisable for Class A Common Stock at a price per share or conversion price less than the then applicable Series E Conversion Price.  In the event of certain corporate changes, including any consolidation or merger in which the Company is not the surviving entity, sale or transfer of all or substantially all of the Company’s assets, certain share exchanges and certain distributions of property or assets to the holders of Class A Common Stock, the holders of the Series E Preferred Stock have the right to receive upon conversion, in lieu of shares of Class A Common Stock otherwise issuable, such securities and/or other property as would have been issued or payable as a result of such corporate change with respect to or in exchange for the Class A Common Stock issuable upon conversion of the Series E Preferred Stock.

The Company, at its option, may call for redemption of all  the Series E Preferred Stock at any time, provided (a) the closing trading price of the Class A common stock exceeds $0.50 per share (as quoted on the principal exchange, including for this purpose, the Nasdaq National Market on which it is then listed, or if it is not so listed, the closing bid price per share for such stock, as reported by Nasdaq, the OTC Bulletin Board, the National Quotation Bureau, Incorporated or other similar service which regularly reports closing bid quotations for such stock) for 15 trading days during any 20-trading day period; and (b) there is at the time of the call for redemption by the Corporation, and has been for the period specified in (a) above preceding such call, an effective registration statement covering the resale of the shares of Class A common stock underlying the Series E Preferred Stock.  The Company shall effect any redemption of the Series E Preferred Stock by paying in cash in exchange for each share of Series E Preferred Stock to be redeemed a sum equal to 150% of the stated value of such shares of Series E Preferred Stock plus all accruing dividends accrued but unpaid thereon, whether or not declared, with respect to such share.

As of March 31, 2008, there were 139 shares of Series E Preferred Stock outstanding.  There were no issuances of Series E Preferred Stock during the three month period ended March 31, 2008.  The shares of Series E Preferred Stock, generally, become convertible into Class A common stock two years after issuance.  As of March 31, 2008, the outstanding shares of Series E Preferred Stock, assuming that all shares of Series E Preferred Stock have been outstanding for at least two years, would have been convertible into 69,500,000 shares of Class A common stock.  If on July 15, 2011, any share of Series E Preferred Stock remains outstanding and a registration statement covering the resale of all of the Class A Common Stock underlying the Series E Preferred Stock is effective and has been effective for 90 days prior to such date, the Company must convert each share of the Series E Preferred Stock into Class A Common at the then applicable Conversion Price.

In connection with the Series E Preferred Stock, the Company recorded an aggregate beneficial conversion feature of $970,000. The Company accounted for the beneficial conversion feature in accordance with EITF 00-27 and EITF 98-5. The resulting discounts are accreted as a dividend to the preferred shareholders from the date of issuance to the preferred stock’s mandatory conversion date, using the effective yield method.  Accretion recognized for the three months ended as of March 31, 2008 was $6,981.

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Preferred Stock Series G

Each share of Series G Preferred Stock is convertible at any time, at the option of the holder, into that number of shares of Class A Common Stock equal to $10,000 divided by $5.00 (the “Series G Conversion Price”). The Series G Conversion Price is subject to adjustment for certain events, including the payment of a dividend payable in capital stock of the Company, any stock split, combination, or reclassification and certain issuances of Class A Common Stock or securities convertible into or exercisable for Class A Common Stock at a price per share or conversion price less than the then applicable Series G Conversion Price. In the event of certain corporate changes, including any consolidation or merger in which the Company is not the surviving entity, sale or transfer of all or substantially all of the Company’s assets, certain share exchanges and certain distributions of property or assets to the holders of Class A Common Stock, the holders of the Series G Preferred Stock have the right to receive upon conversion, in lieu of shares of Class A Common Stock otherwise issuable, such securities and/or other property as would have been issued or payable as a result of such corporate change with respect to or in exchange for the Class A Common Stock issuable upon conversion of the Series G Preferred Stock. In addition, if on November 7, 2009, the Series G Conversion Price then in effect is higher than the current market price of the Company’s Class A Common Stock, then the Series G Conversion Price shall be reduced to such current market price (provided that the current market price shall never be less than $0.01).  If on July 15, 2011, any share of Series G Preferred Stock remains outstanding and a registration statement covering the resale of all of the Class A Common Stock underlying the Series G Preferred Stock is effective and has been effective for 90 days prior to such date, the Company must convert each share of the Series G Preferred Stock into Class A Common at the then applicable Conversion Price.

If the Conversion Price is reduced below $1.50 as a result of an adjustment on November 7, 2009, the Company may, within ten (10) days after November 7, 2009, elect to redeem all, but not less than all, of the outstanding Series G Preferred Stock by paying cash in exchange for each share to be redeemed in an amount equal to 150% of the stated value, less all dividends paid thereon.

On January 31, 2008 and March 13, 2008, the Company issued 300 and 400 shares of its Series G Mandatory Convertible Preferred Stock (“Series G Preferred Stock”) for proceeds of $3,000,000 and $4,000,000, respectively.  In connection with the Series G Preferred stock issued on March 13, 2008, detachable warrants for 45,000,000 shares of Class A common stock, exercisable for five years at an exercise price of $0.375, were issued.  As the holders of the warrants have the ability, under certain circumstances, to require cash settlement these warrants are liabilities in accordance with SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS 150”).  The fair value of the warrants was determined by a third–party valuation specialist based upon the Black-Scholes-Merton Option Pricing Model.

At March 31, 2008 the fair value of these warrants is $12,150,000.  For the three months ended March 31, 2008, the effect of mark-to-market adjustments was a loss of $900,000 and has been recorded as “Change in fair value of redeemable warrants” caption within the accompanying Statements of Operations.  See Note 11 for additional fair value disclosure information.

As the fair value of the warrants at issuance exceeded the proceeds, the preferred stock has no recorded value and a loss of $7,250,000 representing the excess of the fair value of the warrants over the proceeds was recorded at March 13, 2008.

In the event certain circumstances require cash settlement of these warrants, the warrant agreement provides for a specific pricing method and assumptions which can result in a different settlement value than the fair value at which the Company has recorded the warrants on the Balance Sheet.  The aggregate settlement value, if settlement were to occur on March 31, 2008, as calculated in accordance with the warrant agreements was $10,800,000.

As of March 31, 2008, 1,000 shares Series G Preferred Stock were outstanding and convertible into 2,000,000 Class A common shares.

NOTE 9 – COMMON STOCK

The Company has authorized one billion three hundred sixty million (1,360,000,000) Class A common shares and one hundred twenty million (120,000,000) Class B common shares.  On all matters required by law to be submitted to a vote of the holders of common stock, each share of Class A common stock is entitled to one vote per share, and each share of Class B common stock is entitled to five votes.

NOTE 10 – WARRANTS AND SHARE-BASED AWARDS

Warrants

During the three months ended March 31, 2008 and 2007, the Company issued warrants to purchase an aggregate of 46,075,000 and $9,625,000 shares of common stock, respectively.  At March 31, 2008 there were 66,312,850 and 7,965,000 warrants outstanding to purchase Class A and Class B common stock, respectively, exercisable at varying prices through 2013.

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Certain of these warrants are liability instruments issued in connection with preferred stock and convertible promissory notes. These warrants are classified as liability instruments because, under certain conditions, the holders may require cash settlement.  At March 31, 2008, 45,400,000 warrants were classified as liabilities.  No warrants were classified as liabilities at December 31, 2007.  The remaining warrants are compensatory warrants, issued to employees and others in exchange for services.

The following table summarizes this warrant activity:

	Class A Warrants
	Three Months Ended March 31,
	2008					2007
	Warrants			Weighted Average Exercise Price		Warrants			Weighted Average Exercise Price
Warrants outstanding, beginning of period		20,452,850		$	0.35		7,747,000		$	0.33
Warrants issued		46,075,000			0.38		9,625,000			0.13
Warrants cancelled or expired		(15,000	)		0.05		(502,000	)		0.03
Warrants exercised		(200,000	)		0.21		(3,210,000	)		0.01
Warrants outstanding, end of period		66,312,850		$	0.37		13,660,000		$	0.27
	Class B Warrants
	Three Months Ended March 31,
	2008					2007
	Warrants			Weighted Average Exercise Price		Warrants			Weighted Average Exercise Price
Warrants outstanding, beginning of period		7,965,000		$	0.44		4,100,000		$	0.06
Warrants issued		-			-		-			-
Warrants cancelled or expired		-			-		-			-
Warrants exercised		-			-		-			-
Warrants outstanding, end of period		7,965,000		$	0.44		4,100,000		$	0.06

The following table summarizes the status of warrants outstanding and exercisable at March 31, 2008:

Exercisable and Outstanding Warrants
Exercise Price		Number of Warrants		Weighted Average Remaining Contractual Life  in Years
$	0.01		762,850		2.13
$	0.03		6,000,000		3.99
$	0.10		350,000		3.07
$	0.15		200,000		1.30
$	0.16		2,375,000		2.10
$	0.30		3,700,000		3.98
$	0.32		50,000		4.46
$	0.375		45,000,000		4.95
$	0.39		200,000		4.82
$	0.50		13,465,000		4.68
$	1.25		1,300,000		1.78
			73,402,850

As of March 31, 2008, there was $355,648 of unrecognized compensation cost related to non-vested warrants that is expected to be recognized over a weighted-average period of one year.  The intrinsic value of warrants exercised during the three-month periods ended March 31, 2008 and 2007 was $34,000 and $1,212,600, respectively.  The market value of shares vested as of March 31, 2008 was $32,297,254.

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During the three months ended March 31, 2008 and 2007, the Company recognized $82,556 and $1,207,500, respectively, of compensation expense associated with warrants issued to directors, employees and consultants. Compensation expense was determined using the Black-Scholes Option Model with a volatility ranging between 212% and 249%, a risk free interest rate ranging between 2.78% and 4.48% , a life of five years and a zero dividend rate.

Stock Awards Issued

The following table details the stock awards that were granted and issued during the three months ended March 31, 2008 for various purposes, such as employment compensation and for goods and services.  The Company’s stock awards consist of Class A and Class B common stock.  The grant date fair value is based on the share price as of the award date.  For the three months ended March 31, 2008, $12,000 and $3,180,000, respectively, of share-based compensation was recognized within the Statement of Operations.  

Award Date	Award Type	Number of Shares		Grant Date  Fair Value of Stock-Based Awards
2008
3/3/2008	Class A Common		25,000	$	12,000
			25,000	$	12,000
2007
1/15/2007	Class A Common		3,000,000	$	105,000
1/31/2007	Class B Common		20,500,000		3,075,000
			23,500,000	$	3,180,000

Stock-Based Compensation Expense

For the three months ended March 31, 2008 and 2007, the Company recognized stock-based compensation expense, including both expense related to compensatory warrants and expense related to share awards, within the Statement of Operations as follows:

	Three Months Ended
	March 31,
	2008		2007
Stock-based compensation:
Professional fees	$	94,556	$	457,500
Payroll and employee benefits		-		3,960,000
Total	$	94,556	$	4,417,500

NOTE 11 – ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Recurring Fair Value Measurements

Financial instruments which are measured at estimated fair value in the consolidated financial statements include certain redeemable and other non-compensatory warrants.  The fair value of these warrants was determined by an independent valuation specialist using the Black-Scholes-Merton Option Pricing method.

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Liabilities measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy are summarized as follows:

March 31, 2008
Fair Value Measurements at Reporting Date Using
	Significant
	Unobservable
	Inputs		Total
	(Level 3)		Fair Value
Reedemable warrants	$	12,150,000	$	12,150,000
Non-compensatory warrants		44,000		44,000
Total liabilities	$	12,194,000	$	12,194,000

The Company has categorized its assets and liabilities measured at fair value into the three-level fair value hierarchy, as defined in Note 3, based upon the priority of inputs to respective valuation techniques.  Liabilities included within level 3 of the fair value hierarchy presented in the preceding table include:  (1) warrant instruments which contain redemption provisions which under certain circumstances may require cash settlement and (2) certain non-compensatory warrants.  The valuation methodology uses a combination of observable and unobservable inputs in calculating fair value.

The changes in level 3 liabilities measured at fair value on a recurring basis are summarized as follows:

Fair Value Measurements
Using Significant Unobservable Unputs
(Level 3)
Fair Value of Certain Warrants
	Balance Beginning of Period		Reclassification of Warrants  as Liabilities		(Gain) or Loss Recognized in Earnings From Change in Fair Value		Issuances		Balance End of Period
For the Three Months Ended March 31, 2008
Redeemable warrants	$	-	$	-	$	900,000	$	11,250,000	$	12,150,000
Non-compensatory warrants		-		44,000		-		-		44,000
Total	$	-	$	44,000	$	900,000	$	11,250,000	$	12,194,000

For the three months ended March 31, 2008, total unrealized losses of $8,150,000 are included in earnings in the Statement of Operations caption “Change in fair value of redeemable warrants.”  Unrealized losses for the three months ended March 31, 2008 include losses on initial issuance of warrants of $7,250,000.

NOTE 12 – RELATED PARTY TRANSACTIONS

During the three month period ending March 31, 2008, LifeGuard marketed a membership product which it licenses from DirectMed, a company thirty-three percent (33%) owned by the President of LifeGuard.   LifeGuard pays DirectMed a branding fee based on the number of memberships sold.  During the three month period ended March 31, 2008, LifeGuard paid DirectMed $60,370 in branding fees. Accounts payable at March 31, 2008 associated with DirectMed was $526,492.

At March 31, 2008, LifeGuard had Notes Payable totaling $18,592 to LifeGuard Marketing Corporation, a company fifty (50) percent owned by the President of LifeGuard.  This note is non-interest bearing.

As part of the acquisition agreement between the Company and JRM, the Company assumed $287,143 of liabilities of which $159,536 and $69,240 represent personal credit card balances and business credit lines, respectively.  The Company will continue to pay the monthly required payments for eighteen (18) months and will continue to do so if the eighteen (18) month minimum sales target of JRM is met.  The liabilities are personally guaranteed by two of the senior vice presidents of the JRM division and are recorded within the Company’s notes and loans payable category of the balance sheet.  As of March 31, 2008, the outstanding balance of said liabilities was $217,413.

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NOTE 13 – SUBSEQUENT EVENTS

Effective April 1, 2008, the Company acquired 100% of the outstanding common stock of U.S. Health Benefits Group (USHBG), a call center-based marketing company that was a key agent for the Company’s LifeGuard products. The consideration for the acquisition was a combination of cash and stock. The agreed value of the acquisition was $14,300,000 and was payable as follows:

● Cash at closing $1,215,568, net of cash acquired

● 1,800,000 unregistered shares of Class A common stock with a deemed value of $5.00 per share ($9,000,000 equivalent)

● Deferred cash payments of $1,609,090 payable in equal installments quarterly over a three-year period

● Contingent consideration of $2,550,000, consisting of $850,000 based on performance targets in each of the next three years.  This amount may be increased if USHBG exceeds its performance targets.

The purchase agreement provides for a share adjustment, if necessary, 18 months from the acquisition’s effective date. Within the immediately preceding thirty-day period prior to the 18-month anniversary of closing (the “Share Adjustment Date”) if the Company’s common stock has an average trading price below $5.00 per share (subject to certain adjustments), additional shares of the Company’s common stock will be issued such that the aggregate number of shares issued under the terms of the merger agreement have a value equal to the agreed-upon value of $9,000,000. In the event the Company’s common stock has an average trading price for the said period of $5.00 or more, no adjustment shall be made to the amount of common stock previously issued and the previous stock issuance shall be deemed final and not subject to further adjustment. However, in the event the average common stock price is below $1.50 for the said adjustment period, the Company has the right to effectively unwind the merger and irrevocably transfer 100% of USHBG’s acquired stock to previous USHBG shareholders. In addition, in such event the Company has the right to receive from USHBG shareholders 80% of the Company’s common stock issued as consideration.

Although the Company executed a purchase agreement with the stockholder of USHBG dated March 31, 2008, the Company did not transfer any consideration of cash or shares for the acquisition until April 1, 2008 and did not assume control of USHBG until April 1, 2008.  In addition, the purchase agreement specifies that the effective date for the acquisition was April 1, 2008 and therefore will be recorded in the second quarter of 2008.

On April 30, 2008, the Company issued 200 shares of Series G Preferred Stock with a warrant to purchase up to 22,500,000 shares of the Company’s Class A Common Stock at an exercise price of $0.375 per share for $2,000,000.

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

On December 17, 2008, the Board of Directors of the Company, after discussions with the Company’s independent registered public accounting firm, McGladrey & Pullen, LLP (“McGladrey”) and its former independent registered public accounting firm Brimmer, Burek & Keelan LLP (“Brimmer”), determined it necessary to restate the Company’s consolidated financial statements for the quarterly period ended March 31, 2008 to correct the errors described in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2008. Accordingly, the Company’s consolidated interim financial statements previously filed for those periods should no longer be relied upon and the Company’s press releases and similar communications should no longer be relied upon to the extent that they relate to such financial statements.

Based on the aforementioned, Part I Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended accordingly.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information contained in this discussion, other than historical information, is considered “forward-looking statements” that are subject to risks and uncertainties.  These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives including, without limitation, statements about the Company’s ability to continue operations through March 2009, the liability of the Company for claims made in pending litigation, plans for future products, strengthening our relationship with our various sales organizations, our marketing intentions, our anticipated products, efforts to expand distribution channels, Zurvita’s anticipated growth in sales and margins and our ability to achieve profitability. In some cases, you may identify forward-looking statements by words such as “may,” “should,” “plan,” “intend,” “potential,” “continue,” “believe,” “expect,” “predict,” “anticipate” and “estimate,” the negative of these words or other comparable words.  These statements are only predictions. One should not place undue reliance on these forward-looking statements.  The forward-looking statements are qualified by their terms and/or important factors, many of which are outside the Company’s control, involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made.  The forward-looking statements are based on the Company’s beliefs, assumptions and expectations of our future performance, taking into account information currently available to the Company.  These beliefs, assumptions and expectations can change as a result of many possible events or factors, including those events and factors described in “Risk Factors” in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with the Securities and Exchange Commission, not all of which are known to the Company.  If a change occurs, the Company’s business, financial condition, liquidity and results of operations may vary materially from those expressed in the aforementioned forward-looking statements. In addition, actual results in future periods may differ materially from those expressed or implied in such forward-looking statements as a result of many possible events or factors, including those events and factors described in “Risk Factors” in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007.  The Company will update this forward-looking information only to the extent required under applicable securities laws. Neither the Company nor any other person assumes responsibility for the accuracy or completeness of these forward-looking statements.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto, and other financial information included elsewhere in this Form 10-QSB. This report contains forward-looking statements that involve risks and uncertainties.

INTRODUCTORY OVERVIEW

The Company was founded over 10 years ago and began selling memberships in our discount vision program to retail customers in an effort to prove that a vision discount plan with an ophthalmologic (a medical doctor specializing in eye care) panel included would be not only accepted, but desired, by the general public and prove to other marketers of various health plans the benefits of including such a plan in their products.  We sold the plan on a retail only basis for many years proving that the general public did desire to have a vision plan with their medical coverage.  Once proof of concept became a reality, we shifted our emphasis to marketing our plan to marketers of health benefit plans.  Marketing programs on a retail basis requires a broad national marketing staff which we were not financially prepared to support, whereas a much smaller staff is needed to market to others on a wholesale basis.  During the period during which we were transitioning to and building up our wholesale network, revenues decreased and losses increased.  Our retail marketing efforts were reduced and we devoted most of our time to the continued development of our wholesale network and developing contractual relationships with other marketers of various health plans, including, but not limited to, insurance companies and marketers of other discount plans such as dental, vision (without a vision medical component), and prescription drugs.  Those contracts did not produce a substantial amount of revenue but served to establish The Amacore Group as having a product capable of not only servicing the needs of the general public, but servicing the marketers of other healthcare programs as a lead generator for their agents.  It also served to position us with marketers of other healthcare programs in such a way as to attract those marketers to The Amacore Group from a management perspective.  We then initiated activity designed to increase the scope of our product line; increase our distribution channels for our product line and increase our ability to generate sales leads for our distribution channels.  Integral to these goals was the hiring of executive personnel, experienced in the design and marketing of various types of healthcare programs ranging from discount programs to insured components.  Additionally, it was important for us to further develop the free eye exam component of our vision plan so that this component could serve as a sales lead generator for a wide range of other healthcare products.

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In January, 2007, we entered into long-term employment agreements with Mr. Jay Shafer, the former president of Protective Marketing Enterprises, Inc. (PME), and Mr. Guy Norberg, the former vice president of sales and marketing of PME. We also entered into an agreement employing Mr. William Heneghan, former vice president of operations for Innovative HealthCare Benefits, Inc., which had an intimate relationship with PME. Mr. Shafer now serves as Amacore Group’s President, Mr. Norberg serves as its Senior Vice President of Sales and Marketing and Mr. Heneghan serves as its Director of Operations. Along with the hiring of Messrs. Shafer, Norberg and Heneghan, we have also hired other staff members to support our expanding programs and opened a second office near Orlando, Florida.

During 2007, we concentrated our efforts on developing a wide range of both discount and insured products, which we intended to market through a significant number of distribution channels with whom Messrs. Shafer and Norberg had worked in the past. We successfully contracted with a number of distribution channels experienced not only in the sale of the types of products designed by us, but as with the networks forming the components of our new product line.  As a result, we have now positioned ourselves to provide not only vision programs, but also discount medical doctor visit programs, hospital savings programs, dental programs, hearing programs, chiropractic programs, pharmacy programs, an emergency informational system called Contact 911, long-term care programs, emergency medical travel and savings on alternative medicine, vitamins and nutritional supplements.  Some program features include access to a 24-hour nurse hotline, 24-hour counseling, a service which can get medical histories delivered to medical service providers around the world and the services of a personal patient advocate.  We are also in a position to market limited medical indemnity and accident group insurance programs.  In addition, we added an innovative network product of state-licensed, primary care physicians that diagnose routine, non-emergency, medical problems and recommend treatment and prescribe medication with a phone call called TelaDoc. Further, we have also added Global MedNet, a program that distributes personal medical records worldwide in the event of an emergency medical crisis.

We contracted with Chase Paymentech Solutions, LLC, who is one of the world’s largest merchant acquirers accepting payments at the point of sale.  During the same period, we simultaneously worked on developing various electronic systems necessary not only for the sale of our products, but the tracking of our revenue and payment of commissions to our sales agents on a weekly basis – a payment schedule we believe is unique to the healthcare industry.  Management believes that this type of payment schedule will significantly strengthen our relationships with our various sales organizations.  On May 1, in a 60-day program build, we completed the development of The Amacore Group gateway for transactions that include direct response, call center and web enrollment integrating commerce engines, our direct lease line to Paymentech and commission reconciliation for the benefit of our marketing partners. Further, this development allowed us to transition existing ECI business to a monthly renewal model.

We also entered into a strategic development agreement with Bridgeport, Connecticut-based OPTIMUS Solutions Consulting LLC (OPTIMUS), a privately held pioneer in the field of integrated solution development, as part of our continuing strategic initiative to aggressively expand healthcare services distribution channels. OPTIMUS has fully integrated the development of our back office system with the OPTIMUS front-end, call center marketing system and they are on target to launch two licensed call centers (containing licensed representatives able to sell insurance products) that are expected to produce sales in the second quarter of 2008.  With the development now complete, the focus now will be on expanding distribution through additional call center relationships under OPTIMUS’s management.

STRATEGIC INITIATIVES

Our strategic initiatives in 2007 focused around a three-staged plan.  The plan had, as its initial stage, the development of an electronic system capable of supporting a full administrative array of services involved in the healthcare industry.  In particular:  (a) total agent support, including the payment of agent commissions on a weekly basis; (b) customer support; and (c) full carrier support.  The second stage involved the development of a substantially enhanced array of products, and the third stage involved the establishment of six major distribution channels – direct response banking, direct response marketing, direct sales, agent sales, private label and wholesale transactions.

In developing this plan, we were well aware of the fact that the first two stages of development would produce little to no revenue and could take the better part of the entire 2007 year. That notwithstanding, we were also acutely aware of the fact that without the proper development of the first two stages, whatever sales that might inure to Amacore through the development of the third stage (distribution channels) might well be short-lived. With that in mind, we entered into the strategic plan as outlined above.

During the first two quarters of 2007, we devoted substantially the entirety of our time to the development of our back-office systems as described above.  Revenues during the first two quarters were, in the aggregate, less than $600,000.  During the third quarter of 2007, we initiated the testing phase of those systems, including our inbound telemarketing system.  During this quarter, we generated approximately $215,000 in revenues but, more importantly, we were able to refine all of our systems and position ourselves for launch during the fourth quarter of 2007.

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By the fourth quarter, we believed that we had properly developed our electronic system; developed a substantially enhanced array of products totaling approximately 86 different modular programs and had well advanced our acquisition and contractual arrangements with distribution channels.  Simply put, by the fourth quarter, we believed we had achieved a forefront position in the healthcare industry.  In particular, with respect to our distribution channels, we had either purchased or put in place contracts to secure these channels.  On August 31, 2007, we acquired JRM a ten-seat inbound telemarketing call center with additional agent distribution channels available to it.  On October 9, 2007, we acquired LifeGuard Benefit Services, Inc. (LifeGuard), which brought us an additional 52 inbound telemarketing seats plus significant agent distribution channels plus an array of additional company-owned products complementary to those products already either owned or otherwise being marketed by us.  LifeGuard also provides us with an established vertical administrative electronic system capable of tracking distribution, sales fulfillment, commission payments and a patient advocacy program unique in the healthcare industry.  Prior to these acquisitions, we had also contracted with OPTIMUS Solutions Consulting LLC (OPTIMUS) which provided us with access to approximately 150 inbound telemarketing rooms plus additional distribution channels, and OPTIMUS’s obligation to construct an additional electronic system, customized to our needs, to track sales of our products through our various distribution channels including affiliate internet marketing partners, credit card service centers, infomercial inbound centers and banking channels.  The cost of the construction of this system was borne exclusively by the OPTIMUS group.  We believe that these efforts helped us to achieve gross revenues in the fourth quarter of approximately $3,500,000. 

In January 2008, the Company formed a wholly-owned subsidiary, Zurvita, Inc., to establish a multilevel marketing distribution channel that would deliver products to the consumer directly.  Zurvita hired Mark Jarvis as its President, a veteran in this field with a proven track record at building sales.  Through Zurvita, the Company has begun to access a new market for its existing products.  Zurvita’s official launch occurred on February 29, 2008 and, with its sales force trained on only one product, Zurvita achieved sales of approximately $300,000 through March 31, 2008.  We are extremely pleased with these results and anticipate substantial growth in sales and margins as more Amacore products are added to Zurvita’s portfolio.

Leading into 2008, we had already commenced discussions to acquire yet another distribution channel, US Health Benefits Group (USHBG) (See Note 13 – Subsequent Events), a fifty-seat, inbound telemarketing call center that engages in the marketing of association membership programs and health insurance plans to individuals and families throughout the United States. USHBG utilizes its proprietary call center software application (LeadMaster) to connect consumers who are searching online for a health care quote with sales agents in one of its multiple call centers.

During the first quarter of 2008, we focused our efforts on driving strong organic growth.  By driving our products through established distribution channels, we were able to achieve total revenue for the quarter of $5,038,850.  This is a remarkable achievement as all the growth during the quarter was organic.  We were able to pay advance commissions to our marketing partners allowing them to focus on establishing our products in the market place.  The accelerated sales have continued during the beginning of the second quarter.

While we continue to focus on increasing our revenues during the remainder of 2008 and beyond, we are also focusing our attention on reducing losses and are working hard to achieve our objective of profitability during the fourth quarter of this year.  Our efforts during the first quarter of 2008 resulted in a basic & diluted loss per share of $0.10, a significant reduction from a basic & diluted loss per share of $0.12 in the fourth quarter of 2007. We believe that the successful execution of our strategic plan and the achievement of our forecast sales and margins will place Amacore well in its stated objective to achieve operational profitability.

All these activities are in line with our aim of vertical integration. Through well planned vertical integration, we believe we will be able to own even more of the products we sell and own more of our distribution channels, allowing us to retain more of the end dollar spent by each customer.

RESULTS OF OPERATIONS

Revenue:

Total revenue was $5,038,850 for the three months ended March 31, 2008, an increase of $4,878,983 from total revenue for the same period in 2007. New product offerings and growth in Amacore’s membership base as well as the acquisitions of LifeGuard and JRM contributed to the significant increase in revenue earned during the quarter ended March 31, 2008.  A reserve for refunds of $370,807 has been included in membership fees as of March 31, 2008.  The Company negotiates with health insurance companies to offer their programs in various combinations with other programs at a reduced rate from separate contracts.  The Company is obligated to pay the insurance company for the coverage at the time of sale regardless of refunds to the ultimate consumer of the product.  Different geographic areas result in different combinations of products and the Company alters its combinations over time depending on consumer surveys and other variables. Commission expense is recorded at the time of sale and is adjusted for refunds.

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Operating Expenses:

Our operating expenses for the three months ended March 31, 2008 and 2007 were $5,940,814 and $5,026,560, respectively.  Comparison of the more significant components of operating expenses follows:

	Three Months Ended March 31,
��					Increase
	2008		2007		(Decrease)
Depreciation and amortization	$	761,011	$	2,001	$	759,010
Office-related expenses		358,643		64,168		294,475
Professional fees		721,153		1,864,612		(1,143,459	)
Payroll and benefits		1,823,253		2,937,025		(1,113,772	)
Travel		301,629		111,314		190,315
Selling and marketing		1,975,125		47,440		1,927,685
Total	$	5,940,814	$	5,026,560	$	914,254

Depreciation and amortization expense, which is computed on a straight-line method over the assets estimated lives, for the three months ended March 31, 2008, was $761,011, an increase of $759,010 over the same period of 2007 due to the inclusion of the fair value of the assets purchased in the LifeGuard acquisition.

Office-related expense was $358,643 for the three months ended March 31, 2008, an increase of $294,475 over the same period in 2007.  This increase is primarily due to rent expense incurred for its new subsidiaries located in New Jersey, Dallas and Houston.

Professional fees for the three months ended March 31, 2008 were $721,153, a decrease of $1,143,459 over the same period in 2007.  The decrease was primarily the result of the Company issuing less number of warrants in the corresponding period.

Payroll and related expenses for the three months ended March 31, 2008 were $1,823,253, a decrease of $1,113,772 over the same period of 2007. During the first quarter of 2007, the Company incurred a significant expense by issuing stock to retain its President, Senior VP of Sales and Director of Operations.

Business travel and trade show expenses for the three months ended March 31, 2008 were $301,629, an increase of $190,315 over the same period of 2007.  The increase resulted mainly from additional travel required in negotiating contracts for the Company’s new programs, promoting additional sales, acquisitions and completing the financings that occurred during the first three months of 2008.

Selling and marketing expenses for the three months ended March 31, 2008, of $1,975,125 increased by $1,927,685 over the same period in 2007 due to significant lead cost and sales incentives as well as the acquired operations of JRM and LifeGuard.

Other Income (Expense)

Interest expense:

Interest expense for the three months ended March 31, 2008 was $35,537, compared to $29,112 for the same period in 2007. Interest expense relates to interest on our notes payable.

Loss on conversion of note payable

Loss on conversion of notes payable was $242,653 for the three months ended March 31, 2008 while no such loss was incurred during the three months ended March 31, 2007.

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Loss on change in fair value of redeemable warrants

Pursuant to FASB Statement No 150, redeemable warrants are recorded at fair value with changes in their fair value reflected in the Company’s condensed consolidated statements of operations.  For the three months ended March 31, 2008, the loss on change in fair value of redeemable warrants was $8,150,000, while no such loss was incurred during the three months ended March 31, 2007.  The loss is a non cash item not effecting operating cash flows.

Net loss:

Our net loss amounted to $13,350,855 for the three months ended March 31, 2008 compared to $4,961,905 for the three months ended March 31, 2007.  The significant change in our net loss is more fully discussed above in the details of changes in our account balances.

Preferred stock dividends and accretions:

Preferred stock dividends and accretions amounted to $275,106 for the three months ended March 31, 2008 compared to $41,375 for the same period in 2007.  The increase was due to the additional preferred stock issued by the Company over the course of 2007 and 2008.

Loss per common share:

Loss per common share amounted to $0.10 for the three months ended March 31, 2008 compared to $0.05 for the three months ended March 31, 2007.  Loss per common share is calculated by dividing loss applicable to common stockholders by the weighted average number of common shares outstanding.  Loss per common share does not give effect to warrants to acquire common stock and convertible securities because, while in a loss position, the effects would be anti-dilutive.

Loans to Stockholders and Officers:

As of March 31, 2008, there were no loans or advances to officers.

CONTRACTUAL OBLIGATIONS

Lease Commitments:  For information about non-cancelable commitments under our lease agreements, see Note 18 “Commitments and Contingency” in our annual financial statements contained in the Company’s Form 10-KSB for the year ended December 31, 2008 filed with the Securities and Exchange Commission on April 15, 2008, which Note 18 in incorporated herein by reference.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements as of March 31, 2008.

LIQUIDITY AND CAPITAL RESOURCES

The following table compares our cash flows for the three months ended March 31:

	2008			2007
Net cash used by operating activities	$	(5,553,360	)	$	(679,562	)
Net cash used by investing activities		(470,169	)		-
Net cash provided by financing activities		6,687,013			5,396,600
Net increase in cash	$	663,484		$	4,717,038

During the first three months of 2008, significant equity transactions consist of the issuance of 700 shares of preferred stock for $7,000,000 and the issuance of 5,649,300 shares of common stock through conversion of certain notes payables and accrued interest in the amount of $645,814.

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Future minimum rental payments required under the Company’s operating leases that have initial or remaining non-cancelable lease terms in excess of one year on a fiscal year basis are as follows:

For period ended March 31,
2009	$	244,022
2010		225,110
2010		188,787
2011		93,029
	$	750,948

As of March 31, 2008, the Company had several capital lease obligations totaling $161,567, which are expected to be satisfied within twelve months and, accordingly, have been classified as current liabilities.

At March 31, 2008, the Company had negative working capital of $5,277,933 and an accumulated deficit of $90,725,369.  For the three months ended March 31, 2008, the Company had an operating net loss of $13,350,855.  Anticipated revenue and the ongoing support of the Company’s majority shareholder will, in the opinion of management, be sufficient to sustain current planned operations for the next 12 months.  From January to March 2008, the Company received proceeds of $7,000,000 in two tranches through the sale of preferred stock to its majority shareholder.  Additional cash resources may be needed if the Company does not meet its sales targets, exceeds its projected operating costs, if unanticipated expenses arise or are incurred or the Company wishes to consummate an acquisition.  The Company does not currently maintain a line of credit or term loan with any commercial bank or other financial institution and has not made any other arrangements to obtain additional financing.  There can be no assurance that the Company will not require additional financing.  Likewise, the Company can provide no assurance that if the Company needs additional financing that it will be available in an amount or on terms acceptable to us, if at all.  If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms favorable to the Company, the Company may be unable to execute upon our business plan or pay costs and expenses as they are incurred, which could have a material, adverse effect on the Company business, financial condition and results of operations.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4T  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-QSB.  Based on this evaluation, our principal executive and principal financial officer concluded that our disclosure controls and procedures are ineffective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.  Presently, our disclosure controls and procedures are not designed adequately to provide reasonable assurance that such information is accumulated and communicated to our management.  This conclusion was based on the material weaknesses identified with regard to internal controls over financial reporting, as described in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 and filed with the SEC on April 15, 2008 (the “2007 Annual Report”).

There was no change in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-QSB that materially affected, or is reasonably likely to materially affect, our control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

As of March 31, 2008, there were no material changes in the Company’s legal proceedings as previously disclosed in the Company’s 2007 Annual Report.  Please refer to the 2007 Annual Report for information regarding legal proceedings.

Item 2. Unregistered Sales of Equity and Use of Proceeds

On January 15, 2008, the Company entered into a Preferred Stock Purchase Agreement with Vicis Capital Master Fund (“Vicis”) for the purchase by Vicis of 300 shares of the Company’s Series G Convertible Preferred Stock, par value $.001 per share, for an aggregate cash purchase price of $3,000,000. 

On March 13, 2008, the Company entered into a Preferred Stock Purchase Agreement with Vicis for the purchase by Vicis of (a) 400 shares of the Company’s Series G Convertible Preferred Stock, par value $0.001 per share for an aggregate cash purchase price of $4,000,000 and (b) warrants to acquire 45,000,000 shares of the Company’s Class A Common Stock, par value $0.001 per share, exercisable for five years at an exercise price of $0.375 per share.

The securities issued by the Company in the foregoing transaction were issued  in a private placement transaction in reliance upon exemptions from registration pursuant to Section 4 (2) of The Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated pursuant thereto based upon the following:

- the sale was made to a sophisticated or accredited investor, as defined in Rule 502;

- the Company gave the purchaser the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which the Company possessed or could acquire without unreasonable effort or expense that was necessary to verify the accuracy of information furnished;

- at a reasonable time prior to the sale of security, the Company advised the purchasers of the limitations on resale in the manner contained in Rule 502(d)2;

- neither the Company nor any person acting on our behalf sold the security by any form of general solicitation or general advertising; and

- the Company exercised reasonable care to assure that the purchaser of the security is not an underwriter within the meaning of Section 2(11) of the Securities Act of 1933 in compliance with Rule 502(d).

Item 3. Defaults Upon Senior Securities

The information set forth in Note 7 – Notes and Loans Payable is incorporated herein by reference.

The Company notes that approximately $801,450 of the notes in default listed in Note 7 – Notes and Loans Payable, are held by investors who have been supporters of the Company over the past years. The Company is in the process of negotiating a conversion to equity for these notes.  While the Company believes that such a conversion is likely, it cannot assure that this will be the eventual outcome.

Two notes included in the notes in default listed in Note 7 – Notes and Loans Payable, totaling approximately $385,000, are currently in dispute by the Company. The Company believes that these notes are not payable but has retained the notes on the balance sheet at March 31, 2008 and will continue to do so until such notes are legally extinguished.

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

None.

Item 5. Other Information.

None.

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Item 6. Exhibits

(a) Exhibits:	3.1   Amended Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report filed on Form 8-K on January 14, 2008 (the “1/14/2008 8-K”))
	3.2   Amended Certificate of Designation of Series G Convertible Preferred Stock filed with the Delaware Secretary of State on May 8, 2008 (incorporated by reference to Exhibit 3.2 to the Original Form 10-QSB filed on May 20, 2008).
	10.1 Preferred Stock Purchase Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated January 15, 2008 (incorporated by reference to Exhibit 1.1 to the 1/14/2008 8-K).
	10.2 Registration Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated January 15, 2008 (incorporated by reference to Exhibit 1.2 to the 1/14/2008 8-K).
	10.3 Preferred Stock Purchase Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated March 13, 2008 (incorporated by reference to Exhibit 10.3 to the Original Form 10-QSB filed on May 20, 2008).
	10.4 Warrant Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated March 13, 2008 (incorporated by reference to Exhibit 10.4 to the Original Form 10-QSB filed on May 20, 2008).
	10.5 Registration Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated March 13, 2008 (incorporated by reference to Exhibit 10.5 to the Original Form 10-QSB filed on May 20, 2008).
	31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1 Certification of the Chief Executive Officer  and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  March 25, 2009	/s/ Jay Shafer
	Chief Executive Officer
Dated:  March 25, 2009	/s/ Scott Smith
	Interim Chief Financial Officer

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EXHIBIT INDEX

3.1	Amended Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report filed on Form 8-K on January 14, 2008 (the “1/14/2008 8-K”))
3.2	Amended Certificate of Designation of Series G Convertible Preferred Stock filed with the Delaware Secretary of State on May 8, 2008 (incorporated by reference to Exhibit 3.2 to the Original Form 10-QSB filed on May 20, 2008).
10.1	Preferred Stock Purchase Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated January 15, 2008 (incorporated by reference to Exhibit 1.1 to the 1/14/2008 8-K).
10.2	Registration Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated January 15, 2008 (incorporated by reference to Exhibit 1.2 to the 1/14/2008 8-K).
10.3	Preferred Stock Purchase Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated March 13, 2008 (incorporated by reference to Exhibit 10.3 to the Original Form 10-QSB filed on May 20, 2008).
10.4	Warrant Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated March 13, 2008 (incorporated by reference to Exhibit 10.4 to the Original Form 10-QSB filed on May 20, 2008).
10.5	Registration Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital Master Fund dated March 13, 2008 (incorporated by reference to Exhibit 10.5 to the Original Form 10-QSB filed on May 20, 2008).
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer  and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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