UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549




FORM
10-Q





(Mark
One)


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




For the
quarterly period ended June 30, 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.
      Employerincorporation
      or organization)
            
            Identification
      No.)







1211
      North Westshore Boulevard, Suite 512Tampa,
      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  oNon-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 August 13, 2008:


143,220,225
Class A Common Shares


2,503,522 Class
B Common Shares
















THE
AMACORE GROUP, INC.





FORM
10-Q




PART I
- FINANCIAL INFORMATION





Page No.Item
      1. Financial Statements.Condensed
      Consolidated Balance Sheets - June 30, 2008 and December 31,
      2007
            3Condensed
      Consolidated Statements of Operations - For the Three and Six Months
      Ended June 30, 2008 and 2007
            4Condensed
      Consolidated Statements of Cash Flows - For the Six Months Ended June 30,
      2008 and 2007
            5Notes
      to Consolidated Financial Statements
            6Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
            25Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
              
              Item
      4T.  Controls and Procedures.
            31








PART II
- OTHER INFORMATION





Page No.Item.
      1. Legal Proceedings.
            32Item
      2.  Unregistered Sales of Equity and Use of
      Proceeds.
            32Item
      3. Defaults Upon Senior Securities.
            32Item
      4. Submission of Matters to a Vote of Security Holders.
            32Item
      5. Other Information.
            32Item
      6. Exhibits
            34Signatures
            35





2


THE
      AMACORE GROUP, INC.CONDENSED
      CONSOLIDATED BALANCE SHEETSJune
      30,
              
              
              December
      31,2008
              
              
              2007ASSETSCurrent
      assetsCash
              
              $
              2,054,937
              
              
              $
              2,161,042Restricted
      cash
              
              
              250,000
              
              
              
              316,935Accounts
      receivable (net of $50,662 and $0 allowancefor
      doubtful accounts in 2008 and 2007, respectively)
              
              
              713,052
              
              
              
              470,049Non-trade
      receivables - related party
              
              
              92,114
              
              
              
              64,385Inventory
              
              
              37,814
              
              
              
              37,814Prepaid
      expenses
              
              
              5,597,726
              
              
              
              1,023,798Security
      deposit
              
              
              625,244
              
              
              
              61,236Total
      current assets
              
              
              9,370,887
              
              
              
              4,135,259Fixed
      assets (net of accumulated depreciation of $246,405 and
      $132,387for
      2008 and 2007, respectively)
              
              
              899,235
              
              
              
              418,356Other
      assetsAgent
      advances (net of $252,172 allowance for doubtful accounts)
              
              
              378,259
              
              
              
              -Assets
      not in use
              
              
              224,089
              
              
              
              -Goodwill
              
              
              11,913,386
              
              
              
              492,144Intangible
      assets - net
              
              
              534,658
              
              
              
              667,086Unallocated
      assets
              
              
              15,530,590
              
              
              
              13,566,020Total
      other assets
              
              
              28,580,982
              
              
              
              14,725,250Total
      assets
              
              $
              38,851,104
              
              
              $
              19,278,865LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
              
              $
              2,986,938
              
              
              $
              2,639,200Accounts
      payable - related party
              
              
              610,217
              
              
              
              590,888Loans
      and notes payable
              
              
              1,585,072
              
              
              
              1,414,530Accrued
      expenses and payroll taxes
              
              
              2,250,962
              
              
              
              5,147,665Accrued
      dividends
              
              
              1,029,831
              
              
              
              479,896Deferred
      compensation - related party
              
              
              466,414
              
              
              
              602,344Deferred
      revenue
              
              
              1,881,464
              
              
              
              1,409,984Deferred
      acquisition payments
              
              
              465,685
              
              
              
              -Total
      current liabilities
              
              
              11,276,583
              
              
              
              12,284,507Long-Term
      LiabilitiesDeferred
      acquisition payments
              
              
              884,760
              
              
              
              -Total
      long-term liabilities
              
              
              884,760
              
              
              
              -Total
      liabilities
              
              
              12,161,343
              
              
              
              12,284,507Stockholders'
      EquityPreferred
      Stock, $.001 par value, 20,000,000 shares authorized;Series
      D mandatory convertible preferred stock; 689 shares
      authorized;689
      and 689 shares issued and outstanding as of 6/30/08 and 12/31/07,
      respectively; aggregateliquidation
      value of  $7,526,600 and $7,306,076 as of 6/30/08 and 12/31/07,
      respectively.
              
              
              -
              
              
              
              -Series
      E mandatory convertible preferred stock; 139 shares
      authorized;139
      and 139 issued and outstanding, respectively; aggregate
      liquidationvalue
      of  $1,512,677 and $1,468,396 as of 6/30/08 and 12/31/07,
      respectively.
              
              
              -
              
              
              
              -Series
      G mandatory convertible preferred stock; 1000 shares
      authorized;1,200
      and 300 shares issued and outstanding as of 6/30/08 and 12/31/07,
      respectively;aggregate
      liquidation value of $12,306,555 and $3,041,425 as of 6/30/08 and
      12/31/07, respectively.
              
              
              -
              
              
              
              -Series
      H mandatory convertible preferred stock; 400 shares
      authorized;400
      and 0 shares issued and outstanding as of 6/30/08 and 12/31/07,
      respectively;aggregate
      liquidation value of $4,020,000 and $0 as of 6/30/08 and 12/31/07,
      respectively.Series
      A mandatory convertible preferred stock; 1,500 shares
      authorized;155
      shares issued and outstanding; aggregate liquidation value
    of$155,000
      as of 6/30/08 and 12/31/07.
              
              
              -
              
              
              
              -Common
      Stock A, $.001 par value, 1,500,000,000 shares authorized;118,673,456
      and 110,149,148 shares issued and outstanding as of 6/30/08 and 12/31/07,
      respectively.
              
              
              118,673
              
              
              
              110,149Common
      Stock B, $.001 par value, 120,000,000 shares authorized;29,037,802
      and 27,562,802 shares issued and outstanding as of 6/30/08 and 12/31/07,
      respectively.
              
              
              29,038
              
              
              
              27,563Additional
      paid-in capital
              
              
              106,806,895
              
              
              
              83,956,054Accumulated
      deficit
              
              
              (80,264,845
              )
              
              
              (77,099,408
              )Total
      stockholders' equity
              
              
              26,689,761
              
              
              
              6,994,358Total
      liabilities and stockholders' equity
              
              $
              38,851,104
              
              
              $
              19,278,865
  See
      notes to consolidated financial
statements


3


THE
      AMACORE GROUP, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF
OPERATIONS





For
      the Three Months Ended
              
              
              For
      the Six Months EndedJune
      30, 2008
              
              
              June
      30, 2007
              
              
              June
      30, 2008
              
              
              June
      30, 2007REVENUESMembership
      fees
              
              $
              7,005,908
              
              
              $
              432,590
              
              
              $
              12,071,400
              
              
              $
              592,457Commissions
              
              
              542,002
              
              
              
              -
              
              
              
              678,745
              
              
              
              -Marketing
      fees
              
              
              354,622
              
              
              
              -
              
              
              
              608,835
              
              
              
              -Marketing
      materials
              
              
              115,591
              
              
              
              -
              
              
              
              128,476
              
              
              
              -Total
      revenue
              
              
              8,018,123
              
              
              
              432,590
              
              
              
              13,487,456
              
              
              
              592,457COST
      OF SALESSales
      commissions
              
              
              4,529,814
              
              
              
              367,819
              
              
              
              7,223,657
              
              
              
              433,919Benefit
      and service cost
              
              
              1,604,012
              
              
              
              -
              
              
              
              2,897,890
              
              
              
              -Total
      cost of sales
              
              
              6,133,826
              
              
              
              367,819
              
              
              
              10,121,547
              
              
              
              433,919GROSS
      PROFIT
              
              
              1,884,297
              
              
              
              64,771
              
              
              
              3,365,909
              
              
              
              158,538OPERATING
      EXPENSESDepreciation
              
              
              78,922
              
              
              
              2,435
              
              
              
              125,902
              
              
              
              4,436Amortization
              
              
              52,083
              
              
              
              -
              
              
              
              118,554
              
              
              
              -Office
      related expenses
              
              
              554,139
              
              
              
              97,410
              
              
              
              912,782
              
              
              
              161,578Professional
      and consulting fees
              
              
              (163,620
              )
              
              
              233,194
              
              
              
              557,533
              
              
              
              2,097,807Payroll
      and benefits
              
              
              2,280,438
              
              
              
              587,915
              
              
              
              4,103,691
              
              
              
              3,524,940Travel
              
              
              337,756
              
              
              
              115,091
              
              
              
              639,385
              
              
              
              226,403Selling
      and marketing
              
              
              1,408,551
              
              
              
              59,305
              
              
              
              2,047,416
              
              
              
              106,745Total
      operating expenses
              
              
              4,548,269
              
              
              
              1,095,350
              
              
              
              8,505,263
              
              
              
              6,121,909Operating
      loss from operations before other income and expense
              
              
              (2,663,972
              )
              
              
              (1,030,579
              )
              
              
              (5,139,354
              )
              
              
              (5,963,371
              )OTHER
      INCOME (EXPENSE)Interest
      income
              
              
              2,241
              
              
              
              49,722
              
              
              
              17,113
              
              
              
              49,722Interest
      expense
              
              
              (94,633
              )
              
              
              (84,739
              )
              
              
              (130,170
              )
              
              
              (113,851
              )Loss
      on conversion of note payable
              
              
              (144,044
              )
              
              
              -
              
              
              
              (242,647
              )
              
              
              -Miscellaneous
              
              
              5,718
              
              
              
              -
              
              
              
              7,713
              
              
              
              -Total
      other income (expense)
              
              
              (230,718
              )
              
              
              (35,017
              )
              
              
              (347,991
              )
              
              
              (64,129
              )Net
      loss before income taxes
              
              
              (2,894,690
              )
              
              
              (1,065,596
              )
              
              
              (5,487,345
              )
              
              
              (6,027,500
              )Income
      taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      loss
              
              
              (2,894,690
              )
              
              
              (1,065,596
              )
              
              
              (5,487,345
              )
              
              
              (6,027,500
              )Preferred
      stock dividend and accretion
              
              
              (532,099
              )
              
              
              (99,735
              )
              
              
              (849,399
              )
              
              
              (141,110
              )Net
      loss available to common stockholders
              
              $
              (3,426,789
              )
              
              $
              (1,165,331
              )
              
              $
              (6,336,744
              )
              
              $
              (6,168,610
              )Basic
      and diluted loss per share
              
              $
              (0.02
              )
              
              $
              (0.01
              )
              
              $
              (0.04
              )
              
              $
              (0.06
              )Basic
      and diluted weighted average number of  common shares
      outstanding
              
              
              140,712,767
              
              
              
              98,408,325
              
              
              
              142,181,287
              
              
              
              96,857,577See
      notes to consolidated financial statements


4





THE
      AMACORE GROUP, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSFor
      the Six Months Ended June 30, 2008 and 20072008
              
              
              2007Cash
      flows from operating activitiesNet
      loss
              
              $
              (5,487,345
              )
              
              $
              (6,027,500
              )Adjustment
      to reconcile net loss to net cash provided by(used)
      in operating activitiesIssuances
      of shares and warrants for consulting services
              
              
              1,187,068
              
              
              
              4,066,099Loss
      on conversion of note payable
              
              
              242,652
              
              
              
              -Amortization
              
              
              118,554
              
              
              
              -Depreciation
              
              
              125,902
              
              
              
              4,436Changes
      in operating assets and liabilities(Increase)
      decrease in accounts receivable
              
              
              (51,106
              )
              
              
              9,472(Increase)
      decrease in accounts receivable - related party
              
              
              (21,137
              )
              
              
              -(Increase)
      decrease in prepaid expenses
              
              
              (4,647,720
              )
              
              
              (11,683
              )(Increase)
      decrease in deposits and other assets
              
              
              (946,167
              )
              
              
              -Increase
      (decrease) in accounts payable  and accrued
    expenses
              
              
              (2,638,869
              )
              
              
              160,064Increase
      (decrease) in deferred compensation
              
              
              (135,929
              )
              
              
              (206,960
              )Increase
      (decrease) in deferred revenue
              
              
              471,480
              
              
              
              20,501Net
      cash used by operating activities
              
              
              (11,782,618
              )
              
              
              (1,985,571
              )Cash
      flows from investment activitiesPurchase
      of property and equipment
              
              
              (466,729
              )
              
              
              (100,001
              )Decrease
      in restricted cash
              
              
              66,935
              
              
              
              -Net
      cash (used) provided by investing activities
              
              
              (399,794
              )
              
              
              (100,001
              )Cash
      flows from financing activitiesProceeds
      from sale of preferred stock
              
              
              13,000,000
              
              
              
              750,000Proceeds
      from private placement equity issuance
              
              
              500
              
              
              
              -Equity
      issuance costs
              
              
              (510,000
              )
              
              
              -Proceeds
      from exercise of common stock warrants
              
              
              122,000
              
              
              
              31,600Proceeds
      from promissory notes
              
              
              643,488
              
              
              
              4,835,000Net
      proceeds from lines of credit
              
              
              59,694
              
              
              
              -Payments
      made on notes payable
              
              
              (23,807
              )
              
              
              -Acquisition
      payment
              
              
              (1,275,000
              )
              
              
              -Funds
      obtained through acquisition
              
              
              59,432
              
              
              
              -Payments
      on and redemption of convertible notes
              
              
              -
              
              
              
              (55,000
              )Net
      cash provided by financing activities
              
              
              12,076,307
              
              
              
              5,561,600Increase
      in cash and cash equivalents
              
              $
              (106,105
              )
              
              $
              3,476,028Beginning
      cash and cash equivalents
              
              
              2,161,042
              
              
              
              135,046Ending
      cash and cash equivalents
              
              
              2,054,937
              
              
              $
              3,611,074SUPPLEMENTAL
      INFORMATION:Cash
      paid for interest
              
              $
              295
              
              
              $
              27,010Cash
      paid for taxes
              
              $
              -
              
              
              $
              -See
      notes to consolidated financial statements


5





THE
AMACORE GROUP, INC.


NOTES
TO FINANCIAL STATEMENTS


THREE
MONTHS ENDED JUNE 30, 2008 & 2007








NOTE
1 – NATURE OF OPERATIONS







Nature of
Operations




The
Amacore Group, Inc. (Amacore or 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 in which we were transitioning to and
building our wholesale network, revenues decreased and losses
increased.  We continued to market the plan on a retail basis with
less emphasis and 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 Amacore 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 Amacore 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 and
strategic acquisitions.  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.





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.








NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Basis of
Presentation





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
instruction to and requirements of Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary in order to make the financial statements not misleading have been
included. Results for the three and six month periods ended June 30, 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.


Certain
prior period expense items have been reclassified to conform with current period
presentation. For instance, Membership benefit cost within the March 31, 2008
consolidated financial statements have been reclassified from operating expenses
to cost of goods sold.  In addition, occupancy rent, insurance, office
supplies and utilities have been consolidated within the caption “Office Related
Expenses” of the Statement of Operations for all periods presented. Lastly,
consulting, professional fees, contract labor and legal costs have been
consolidated within the caption “Professional Fees” of the Statement of
Operations for all periods presented.  These reclassifications did not
have an impact on the Company’s financial position or results of
operation.





Principles of
Consolidation





The
accompanying consolidated financial statements include the accounts of Amacore
and its wholly-owned subsidiaries LBI, Inc. (LBI), LifeGuard Benefit Services,
Inc. (LifeGuard), Zurvita, Inc. (Zurvita), JRM Benefits Consultants, LLC (JRM),
U.S. Health Benefits Group Inc., U.S. Healthcare Plans, Inc. and On The Phone
Inc., Amacore Europe.  Intercompany balances and transactions have
been eliminated in consolidation.


6








Industry
Segment





The
products offered and operational activities of JRM, Zurvita, LifeGuard, U.S.
Health Benefits Group Inc., U.S. Healthcare Plans, Inc. and On The Phone Inc.
are similar in nature to the Company’s activities.   Management
has not reported these entities as separate reporting segments since in
management’s opinion they are managed collectively.  The Company’s
subsidiary LBI and Amacore Europe had no activity during the three and six
months ended June 30, 2008; accordingly, LBI and Amacore Europe have not been
considered a reportable segment since in management’s opinion the results of
LBI’s and Amacore Europe operations are not used in decision making relating to
the allocation of resources and in the assessment of the Company’s overall
performance.





Cash and Cash
Equivalents





For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.





Restricted
Cash





Restricted
cash consists of $250,000 deposited into escrow pursuant to a contract between
LifeGuard and Quality Resources Inc., to be used to guarantee commission
payments under that contract.  Assuming there is no claim made, this
amount will be released back to LifeGuard in July 2008 when the escrow
arrangement will terminate.





Inventory





Inventory
includes raw materials used in fulfillment of member packages, including paper,
print materials, toner cartridges, etc.  Inventory on hand is valued
at the lower of cost or market value using the First-In First-Out valuation
method.





Software Development
Costs





The
Company has adopted Statement of Position 98-1, “Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.” This statement requires
that certain costs incurred in purchasing or developing software for internal
use be capitalized as internal use software development costs and included in
fixed assets. Amortization of the software begins as software is ready
for its intended use. The Company has capitalized software development costs in
accordance with SOP 98-1 and is amortizing those costs over an estimated useful
life of three years.





Intangible
assets





Intangible
assets consist primarily of intellectual property. The Company accounts for
intangible assets using Financial Accounting Standard Statement (“SFAS”) No.
142, Goodwill and Other
Intangible Assets (“SFAS No. 142”).   In that regard,
intangible assets that have indefinite useful lives are not amortized but are
tested at least annually for impairment or more frequently if circumstances
indicate the asset might be impaired.  Intangible assets with finite
useful lives are amortized straight-line over their useful lives.




Impairment of
Assets





In
accordance with the provisions of Statement of Financial Accounting Standard No.
144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”, the Company’s policy is to
evaluate whether there has been a permanent impairment in the value of
long-lived assets such as leasehold improvement, equipment and purchased
intangibles subject to amortization when certain events have taken place that
indicate the remaining carrying balance may not be recoverable. When factors
indicate that the intangibles assets should be evaluated for possible
impairment, the Company uses an estimate of related undiscounted cash flows.
Factors considered in the valuation include current operating results, trends
and anticipated undiscounted future cash flows. The Company has designated
October 1 as the annual impairment assessment date.  There were no
impairment losses recorded for the three and six months ended June 30, 2008 and
2007.





Concentration of Credit
Risk





For the
six months ended June 30, 2008, LifeGuard’s revenue of $11,370,478 represented
approximately eighty-four percent (84%) percent of total consolidated
revenue of $13,487,456.  For the six months ended June 30, 2008,
revenue from Quality Resources represent forty-nine percent (49%) of total
LifeGuard revenue or $3,220,940.




Cash
deposits exceed the amounts covered by FDIC and as a result is a concentration
of risk of approximately $1,700,000. Should the financial institution cease
operations it would be a significant disruption to our cash flow.  A
marjority of the Company's credit card processing is with one vendor (or source)
and if that vendor ceased doing our processing it could cause an interruption in
our cash flows.





7





Advertising
Costs





The
Company expenses its non-direct response advertising costs to expense as
incurred. During the six months ended June 30, 2008 and 2007, advertising costs
were $15,552 and $0, respectively.




Use of
Estimates




The
preparation of the Company’s condensed consolidated financial statements in
conformity with the generally accepted accounting principles require 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, if any, and
expenses during the reporting period. The accounting estimates that require
management’s most difficult and subjective judgments include capitalization of
certain assets, depreciable/amortizable lives, impairment of long-lived assets,
the expected volatility of common stock, and the fair value of common stock and
options issued for services as well as the allocation of proceeds from the
issuance of debt and equity instruments. Because of the uncertainty inherent in
such estimates, actual results may differ from these estimates.





Revenues and Commissions
Recognition





The
Company recognizes revenues in accordance with SEC Staff Accounting Bulletin No.
101, Revenue Recognition in
Financial Statements(“SAB No. 101”) as amended by SEC Staff Accounting
Bulletin No. 104, “Revenue
Recognition”, as revised and updated (“SAB No. 104”), which stipulates
that revenue generally is realized or realizable and earned, once persuasive
evidence of an arrangement exists, delivery has occurred or services have been
rendered, the fee is fixed or determinable and collectability is reasonably
assured. In addition, we have reviewed the reporting requirements discussed in
EITF 99-19 entitled “Reporting
Revenue Gross as a Principal versus Net as an Agent”, issued by the
Financial Accounting Standards Board, and have determined that revenue from the
sale of a number of our bundled products sold through contracts with vendors
should be reported on a gross basis. The Company’s main source of revenue during
the six months ended June 30, 2008 was from the sales of bundled discount
benefits with added insurance components that have an annual or monthly renewal
period.  This revenue is recorded as earned.  We record a
provision for estimated refunds, returns, and allowances which are computed
based upon prior actual history of refunds, returns, and
allowances.  Commission expense associated with this revenue is
recorded at the time of sale and is adjusted for refunds, returns, and
allowances.   Revenue of $12,071,400 was from the sale of the
Company’s programs with an estimate for membership refunds and returns of
approximately $2,550,038.  Another component of revenue consists of
straight commissions with no direct expense or ultimate risk related to this
type of revenue generation.  Commission revenue was $678,745 and $0
for the six months ended June 30, 2008 and June 30, 2007,
respectively.





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. As of June 30, 2008 and December
31, 2007, the allowance for uncollectible accounts was $50,662 and
$   0 respectively.





Fixed
Assets





Fixed
Assets, consisting principally of furniture and fixtures, equipment, computer
equipment and purchased software programs, are recorded at cost. Depreciation
and amortization are provided for, using the straight-line method, in amounts
sufficient to relate the cost of depreciable and amortizable assets to
operations over their estimated useful lives. Repairs and maintenance are
charged to operations as incurred.





A summary
of the estimated useful lives of the property and equipment is presented
below:





Estimated
      useful livesComputer
      hardware
            
            3
      yearsComputer
      software
            
            3
      yearsEquipment
            
            5
      yearsFurniture
      and fixtures
            
            7
      yearsLeasehold
      improvements
            
            Shorter
      of life of asset or lease term









8


Stock-Based
Compensation





Effective
January 1, 2006, we were required to adopt Statement of Financial Accounting
Standards (SFAS) No. 123R “Share Based Payment” (SFAS
123R) which replaces SFAS 123 and SFAS 148, and supersedes Accounting Principles
Board (APB) Opinion No. 25 “
Accounting for Stock Issued to Employees”.  SFAS 123R requires
the cost relating to share-based payment transactions in which an entity
exchanges its equity instruments for goods and services from either employees or
non-employee be recognized in the financial statements as the goods are received
or when the services are rendered. That cost will be measured based on the fair
value of the equity instrument issued. We will no longer be permitted to follow
the previously-followed intrinsic value accounting method that APB 25 allowed
which resulted in no expense being recorded for stock option grants where the
exercise price was equal to or greater than the fair market value of the
underlying stock on the date of grant and further permitted disclosure-only pro
forma compensation expense effects on net income.  SFAS 123R now
applies to all of our existing outstanding unvested share-based stock
option/warrant awards as well as any and all future awards. We have elected to
use the modified prospective transition as opposed to the modified retrospective
transition method such that financial statements prior to adoption remain
unchanged. The Black-Scholes model will continue to be our method of
compensation expense valuation.





Convertible
Instruments





The
Company reviews the terms of convertible debt and equity securities for
indications requiring bifurcation, and separate accounting, for the embedded
conversion feature. Generally, embedded conversion features where the ability to
physical or net-share settle the conversion option is not within the control of
the Company are bifurcated and accounted for as derivative financial
instruments. (See Derivative Financial
Instruments below). Bifurcation of the embedded derivative instrument
requires allocation of the proceeds first to the fair value of the embedded
derivative instrument with the residual allocated to the debt instrument. The
resulting discount to the face value of debt instrument is amortized through
periodic charges to interest expense using the Effective Interest
Method.  The resulting discount to the redemption value of convertible
preferred securities is accreted through periodic charges to dividends over the
term of the instrument using the Effective Interest Rate Method.  No
convertible debt instruments were issued during the six months ended June 30,
2008.





Derivative
Financial Instruments





The
Company has adopted Statement of Financial Accounting Standard No. 133 “Accounting for Derivative
Instruments and Hedging Activities”. The Company generally does not use
derivative financial instruments to hedge exposures to cash-flow or market
risks. However, certain other financial instruments, such as the embedded
conversion features of debt and preferred instruments that are indexed to the
Company’s common stock are classified as liabilities when either (a) the holder
possesses rights to net-cash settlement or (b) physical or net share settlement
is not within the control of the Company. In such instances, net-cash settlement
is assumed for financial accounting and reporting. Such financial instruments
are initially recorded at fair value and subsequently adjusted to fair value at
the close of each reporting period. Fair value for option-based derivative
financial instruments is determined using the Black-Scholes Valuation
Model.





Other
convertible instruments that are not derivative financial instruments are
accounted for pursuant to EITF 98-5 “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios” and EITF 00-27 “Application of Issue No. 98-5 to
Certain Convertible Instruments” by recording the intrinsic value of the
embedded conversion feature (ECF) as a discount from the initial value of the
instrument and accreted back to face value over the term of the instrument using
the effective interest rate method.





Income
Taxes




The
Company has adopted Statement of Financial Accounting Standard No. 109 “Accounting for Income
Taxes”.  The Company has not made a provision for income tax
purposes due to incurring losses since inception.  There is no current tax
expense, and after consideration of a valuation allowance, there is no deferred
tax benefit.  See note 4.





Loss Per Common
Share




Basic
loss per common share was computed using (a) as the numerator, net loss adjusted
for preferred stock dividends and accretions and (b) as the denominator, the
weighted average number of shares outstanding during the periods presented.
Since the Company has a reported net operating loss, diluted loss per common
share is considered to be the same as basic loss per common share since the
effects of convertible securities and common stock option equivalents, if
included in the earnings per share calculation, would have the effect of
reducing the loss per common share.





Recent Accounting
Pronouncements Issued But Not Yet Adopted




In
February 2007, FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities(“SFAS No. 159”). SFAS No. 159 provides
a “Fair Value Option” under which a company may irrevocably elect fair value as
the initial and subsequent measurement attribute for certain financial assets
and liabilities. SFAS No. 159 will be available on a contract-by-contract basis
with changes in fair value recognized in earnings as those changes occur. SFAS
No. 159 is effective for fiscal years after November 15, 2007. SFAS No. 159 also
allows early adoption provided that the entity also adopts the requirements of
SFAS No. 157. The Company does not believe the adoption of SFAS No. 159 will
have a material impact, if any, on its condensed consolidated financial
statements.


9








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 does not have any
noncontrolling interests in subsidiaries and believes that SFAS 160 will not
have a material impact on its financial statements.




In
December 2007, the FASB issued SFAS 141 (Revised 2007) "Business Combinations''(``SFAS 141R''). SFAS 141R establishes principles and requirements for
the reporting entity in a business combination, including recognition and
measurement in the financial statements of the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R
also establishes disclosure requirements to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS 141R applies prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008, and interim periods within those
fiscal years.




In
February 2008, the FASB issued Financial Staff Positions (“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 Measurement (“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. We are currently evaluating the potential impact of the
adoption of those provisions of SFAS 157, for which effectiveness was delayed by
FSP 157-2, on our consolidated financial position and results of
operations.





In April
2008, the FASB issued FSP SFAS 142-3, Determination of the Useful Life of
Intangible Assets (“FSP 142-3”). This guidance is intended to improve the
consistency between the useful life of a recognized intangible asset under
SFAS No. 142, Goodwill and Other Intangible Assets(“SFAS 142”), and the period of expected cash flows used to measure the
fair value of the asset under SFAS 141R when the underlying arrangement
includes renewal or extension of terms that would require substantial costs or
result in a material modification to the asset upon renewal or extension.
Companies estimating the useful life of a recognized intangible asset must now
consider their historical experience in renewing or extending similar
arrangements or, in the absence of historical experience, must consider
assumptions that market participants would use about renewal or extension as
adjusted for SFAS 142’s entity-specific factors. FSP 142-3 is effective for us
beginning January 1, 2009. We are currently evaluating the potential impact
of the adoption of FSP 142-3 on our consolidated financial position, results of
operations and cash flows.





Management
does not believe that any other recently issued, but not yet effected,
accounting standards if currently adopted would have a material effect on the
Company’s condensed consolidated financial statements.





NOTE
3 – 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 six months
ended:


10





June
      30, 2008
              
              
              June
      30, 2007Preferred
      stock dividends
              
              $
              532,580
              
              
              $
              141,110Beneficial
      conversion feature accretion
              
              $
              131,495
              
              
              $
              -Preferred
      stock discount accretion
              
              $
              185,324
              
              
              $
              -Amortization
      of note payable discount
              
              $
              315,804
              
              
              $
              -Payment
      of accounts payable with common stock
              
              $
              -
              
              
              $
              5,450Conversion
      value of notes payable and interest to common stock
              
              $
              640,165
              
              
              $
              50,000Conversion
      value of notes payable and interest to preferred stock
              
              $
              -
              
              
              $
              4,811,000Common
      stock issued as acquisition consideration
              
              $
              9,000,000
              
              
              $
              -Deferred
      acquisition payment
              
              $
              1,350,444
              
              
              $
              -





NOTE
4 – ACQUISITION





Effective
April 1, 2008, the Company acquired USHBG & Combined Affiliates (USHBG), a
call center-based marketing company that engages in the marketing of association
membership programs and health insurance plans to individuals and families
throughout the United States.  USHBG utilizes a 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.





The
consideration for the acquisition is a combination of cash and
stock.  The agreed value of the acquisition is $14,300,000 and is
payable as follows:





●
            Cash
      at closing $1,140,910


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


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


●
            Earn
      out equal to $2,550,000, being $850,000 per annum based on USHBG attaining
      an audited net contribution of $2,000,000 (Target Contribution) in each of
      the next three (3) years.  This amount will be reduced if USHBG
      does not achieve the Target Contribution or will be increased if it
      exceeds the Target
Contribution.


11





The
purchase agreement provides for a share adjustment, if necessary, eighteen (18)
months from the acquisition’s effective date.  Within the immediate
preceding thirty (30) day period prior to 18 month anniversary of closing (the
“Share Adjustment Date”) date if the Company’s common stock has an average
trading price below $5.00 per share, 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 has 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. At June 30, 2008, our common stock was at $0.38 per
share.  If our common stock is at this price at the Share Adjustment
Date, we would be required to either issue 21,884,210 shares or unwind the
transaction





The USHBG
group includes three companies:


●
            US
      Healthcare Plans, Inc, a health benefit discount plan marketing
      company;


●
            On
      The Phone, Inc., a consulting company that receives overrides on all
      Health Care Sales; and


●
            US
      Health Benefits Group, Inc., a health benefit plan marketing
      company.





USHBG’
largest partner is LifeGuard and USHBG markets LifeGuard’s DirectMed association
membership program, which currently generates approximately $1,000,000 a month
in revenues for LifeGuard, resulting in approximately in $500,000 per month in
revenue for USHBG.





The
Company completed its assessment of the fair market values of net identifiable
assets and has allocated the purchase price. The below table shows the amount of
purchase price assigned to each major asset and liability caption of the
combined entities.





USHBG
      & Combined EntitiesAs
      of April 1Fair
      market value of assets:Cash
              
              $
              59,432Accounts
      receivable
              
              
              120,603Fixed
      assets
              
              
              271,453Total
      assets
              
              $
              451,488Fair
      market of liabilities:Accounts
      payable
              
              $
              67,005Accrued
      expenses
              
              
              97,245Loans
      and notes payable
              
              
              83,036Total
      liabilities
              
              $
              247,286





The
following unaudited pro forma information shows the results of the Company’s
operations for the six month reporting periods as though the merger had occurred
as of the beginning of that period.




June
      30, 2008
              
              
              June
      30, 2007Revenue
              
              $
              13,812,550
              
              
              $
              3,937,881Net
      loss
              
              $
              (6,196,080
              )
              
              $
              (5,673,094
              )Loss
      per share
              
              $
              (0.04
              )
              
              $
              (0.06
              )








The pro
forma results have been prepared for comparative purposes only and are not
necessarily indicative of the actual results of operations
had the merger taken place as of the beginning of the periods presented, or the
results that may occur in the future.








12


NOTE 5
- INCOME TAXES




In July
2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income
Taxes, and Interpretation of FASB Statement No. 109(“FIN 48”). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in a
company’s financial statements and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in an income tax return. FIN 48
also provides guidance in derecognition, classification, interest and penalties,
accounting in interim periods, disclosures and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did
not have a significant effect on the Company’s unaudited condensed consolidated
financial statements.































13


NOTE
5 – INCOME TAXES (Continued)





The
Company uses the asset and liability method of accounting for income taxes.
Deferred income taxes are recorded to reflect the tax consequences in future
years for differences between the tax basis of assets and liabilities and their
financial reporting amounts at each period-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts which are more likely than
not to be realized. For the six months ended June 30, 2008 and June 30, 2007,
there was no current income tax expense or (benefit).




2008
              
              
              2007Computed
      tax (benefit) expense at the statutory rate of 38.6%
              
              $
              2,118,115
              
              
              $
              8,153,119Change
      in deferred tax valuation
              
              
              (2,118,115
              )
              
              
              (8,153,119
              )Current
      income tax expense (benefit)
              
              $
              -
              
              
              $
              -Temporary
      differences that give rise to deferred tax assets and
      liabilities:2008
              
              
              2007Deferred
      tax assets:Net
      operating loss carryforward
              
              $
              30,417,767
              
              
              $
              27,502,170Allowance
      for sales returns
              
              
              67,673
              
              
              
              7,516Reserve
      for commission reversal
              
              
              5,780
              
              
              
              4,275Provision
      for litigation costs
              
              
              288,766
              
              
              
              1,170,797Depreciation
      of fixed assets
              
              
              -
              
              
              
              -Gross
      deferred tax asset
              
              
              30,779,986
              
              
              
              28,684,758Deferred
      tax liabilities:Depreciation
      of fixed assets
              
              
              21,752
              
              
              
              44,639Gross
      deferred tax liability
              
              
              -
              
              
              
              44,639Deferred
      tax asset - net
              
              
              30,758,234
              
              
              
              28,640,119Valuation
      allowance
              
              
              (30,758,234
              )
              
              
              (28,640,119
              )Net
      Deferred tax asset
              
              $
              -
              
              
              $
              -




As of
June 30, 2008, realization of the Company’s net deferred tax assets of
approximately $30,758,234 was not considered more likely than not, and
accordingly, a valuation allowance of an equal amount was provided. The net
change in the total valuation allowance during the six months ended June 30,
2008 was $2,118,115.








Note
6 - Prepaid Expenses




Prepaid
expense increased to $5,597,726 as of June 30, 2008 from $1,023,798 at December
31, 2007.  This increase is attributable to Lifeguard’s prepayment of
commissions on the block of sales titled Lifeguard Health Options. 
Commissions are paid at the time of sale but they are amortized over the
expected membership life.  Prepaid expense will increase until the
amortization of prior months’ sales exceeds the amount paid for a single
month.







NOTE 7
– FIXED ASSETS, NET





Fixed
assets, net of accumulated depreciation, consist of the following:





June
      30, 2008
              
              
              Dec
      31,2007Furniture
      & Equipment
              
              $
              970,584
              
              
              $
              503,470Printing
      Equipment
              
              
              7,353
              
              
              
              7,341Leasehold
      Improvements
              
              
              167,703
              
              
              
              39,9321,145,640
              
              
              
              550,743Less
      accumulated depreciation
              
              
              (246,405
              )
              
              
              (132,387
              )Total
              
              $
              899,235
              
              
              $
              418,356


14





NOTE
8 – INTANGIBLE ASSETS, NET





June
      30,
                2008
              
              
              Dec
      31,
                2007Software
              
              $
              625,000
              
              
              $
              625,000Website
      development costs
              
              
              83,250
              
              
              
              83,250708,250
              
              
              
              708,250Less
      accumulated amortization
              
              
              (173,592
              )
              
              
              (41,164
              )$
              534,658
              
              
              $
              667,086




NOTE 9
– UNALLOCATED ASSETS





As of
June 30, 2008, unallocated assets was $15,530,590.  This amount
relates to intangibles acquired in the acquisition of LifeGuard on October 9,
2007 such as customer lists, intellectual property and
goodwill. Unallocated assets increased $1,964,570 as a result of correcting
the purchase price of the LifeGuard acquisition. Accordingly, unallocated assets
and additional paid in capital have increased as of June 30, 2008 to reflect the
appropriate amounts. The Company is in the process of obtaining fair market
values with respect to the unallocated asset balance and will reallocate to the
appropriate asset categories when completed.





NOTE 10
- NOTES AND LOANS PAYABLE





Notes and
loans payable consist of the following as of June 30, 2008 and December 31,
2007:




2008
              
              
              2007Promissory
      notes payable to investors and shareholders; bearing interest ranging from
      8% to 10% per annum; due through December 2006; currently in
      default
              
              $
              532,500
              
              
              $
              532,500Convertible
      promissory notes payable to investors and shareholders; bearing interest
      ranging from 8% to 10% per annum; due through December 2006; currently in
      default
              
              
              122,000
              
              
              
              122,000Promissory
      notes payable to investors and shareholders; bearing interest ranging from
      8% to 10% per annum; due through June 2008
              
              
              25,000
              
              
              
              40,000Convertible
      promissory notes payable to investors and shareholders; bearing interest
      ranging from 8% to 10% per annum; due through December 2007; currently in
      default
              
              
              7,000
              
              
              
              357,000Promissory
      notes payable to investors and shareholders; bearing interest of 1.53% per
      annum; due through June 2004, increasing to 15% thereafter, currently in
      default
              
              
              114,950
              
              
              
              114,950Convertible
      promissory notes payable to investors and shareholders; bearing interest
      of 10% per annum; accrued quarterly at 2.5%; due April 25, 2010, net of
      $296,117 discount.
              
              
              278,883
              
              
              
              -Revolving
      consumer credit cards
              
              
              371,286
              
              
              
              228,557Capital
      lease obligation
              
              
              114,861
              
              
              
              -Promissory
      notes payable to related parties (at call @ 0% int pa)
              
              
              18,592
              
              
              
              19,523Total
      notes and loans payable
              
              $
              1,585,072
              
              
              $
              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 that time of issue, and as such, no intrinsic
value was allocated to the embedded option of each note.  As of June
30, 2008, all of promissory notes payable were classified as current
maturities.  The capital lease payable was allocated between current
and long-term portion of $45,442 and $69,419, respectively. The following
schedule details the future payments on capital leases:


15





2008
              
              $
              45,4422009
              
              
              37,2542010
              
              
              17,2042011
              
              
              14,961Thereafter
              
              $
              114,861





The
Company notes that approximately $701,450 of the above listed notes in default
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 table of above listed notes in default, 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 June 30, 2008 and will continue to do so until such notes are
legally extinguished.





On
February 13, 2008, the Company received notice to convert a promissory note in
the amount of $100,000 with accrued interest of $44,049 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
11 —PREFERRED STOCK





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





Series B,
C, D, E, G and H 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 of the Corporation legally available for the
payment of dividends.  The accumulation of unpaid dividends shall bear
interest at a rate of six percent (6%) per annum. The table below sets forth the
preferred stock outstanding as of June 30, 2008.  Note that no shares
of Series B or Series C Preferred Stock were outstanding as of June 30,
2008.  Accrued dividends at June 30, 2008 were $0, $0, $561,095,
$117,300, $303,924 and $20,000 for the said series,
respectively.  Accrued interest on accrued dividends at June 30, 2008
was $0, $19,505, $5,377, $2,630 and $0 for the said series, respectively. The
Company’s Series A does not accrue dividends.





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
following table presents the preferred stock outstanding as of June
30:




June
      30,
                2008
              
              
              December
      31,
                2007Series
      A
              
              
              155
              
              
              
              155Series
      D
              
              
              689
              
              
              
              689Series
      E
              
              
              139
              
              
              
              139Series
      G
              
              
              1,000
              
              
              
              300Series
      H
              
              
              400
              
              
              
              -2,383
              
              
              
              1,283




Preferred
Stock Series A





As of
June 30, 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 and six month periods ended June 30,
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 June 30, 2008, the outstanding shares of Series A
Preferred Stock were convertible into 310,000 Class A common
stock.


16


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 1 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.  As
of June 30, 2008, no shares of Series B Preferred Stock were outstanding. There
were no issuances of Series B Preferred Stock during the three and six month
periods ended June 30, 2008.
 
 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 (5)
days immediately prior to the conversion date (the “Series C Conversion
Price”).  The Series C Conversion Price is subject to 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.  As of June 30, 2008, no shares of
Series C Preferred Stock were outstanding. There were no issuances of Series C
Preferred Stock during the three and six month periods ended June 30,
2008.
 
 Preferred
Stock Series D
 
 In
connection with historical Series D Convertible Preferred Stock (“Series D
Preferred Stock”) issuances, the Company recorded an aggregate beneficial
conversion feature of $6,410,000 associated with Series D Preferred
Stock. The resulting discounts are accounted for as a dividend to the
preferred shareholders over the minimum period from the date of issuance to the
date at which the preferred shareholders can exercise the conversion feature,
using the effective yield method. Accretion recognized for the three and six
months ended as of June 30, 2008 was $50,585 and $116,064.
 
 As of
June 30, 2008, 689 shares Series D Preferred Stock were outstanding. There were
no issuances of Series D Preferred Stock during the three and six month periods
ended June 30, 2008.  Each share of Series D Preferred Stock is
convertible at any time, at the option of the holder, into shares of Class A
common stock at a conversion price of $0.01 per share, subject to adjustment due
to dividends, stock split, combination, reclassification, merger, consolidation,
sale of all or substantially all of the Company’s assets, or other corporate
events.  As of June 30, 2008, the outstanding shares of Series D
Preferred Stock were convertible into 689,000,000 shares of Class A common
stock.




Preferred
Stock Series E





In
connection with historical Series E Convertible Preferred Stock (“Series E
Preferred Stock”) issuances, the Company recorded an aggregate beneficial
conversion feature of $970,000. The resulting discounts are accounted for as a
dividend to the preferred shareholders over the minimum period from the date of
issuance to the date at which the preferred shareholders can exercise the
conversion feature, using the effective yield method. Accretion recognized for
the three and six months ended as of June 30, 2008 was $6,991 and $15,441,
respectively.
 
 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
June 30, 2008, there were 139 shares of Series E Preferred Stock outstanding.
There were no issuances of Series E Preferred Stock during the three and six
month periods ended June 30, 2008.  As of June 30, 2008, the
outstanding shares of Series E Preferred Stock were convertible into 69,500,000
shares of Class A common stock.
  Preferred
Stock Series G





During
the six months ended June 30, 2008, the Company issued 900 shares, respectively,
of its Series G Mandatory Convertible Preferred Stock (“Series G Preferred
Stock”) to Vicis for $9,000,000, respectively.
 
 The
Series G Preferred stock issued on January 16, 2008, March 13, 2008, and April
30, 2008, included 45,000,000 and  22,500,000, respectively, of detachable
warrants that are accounted for under EITF 00-27 and EITF 98-5 as a discount
from the preferred stock issued.  The fair value of the warrants were
determined using the Black-Scholes Option model with a volatility ranging
between 176% and 219%, risk free rate ranging between 2.78% and 3.15%, a five
year expected term and no dividends.  Using the relative fair value
approach, discounts resulted in the amount of $3,220,257, $1,636,364 and
$3,287,305, respectively, for the said issuances.  Resulting preferred
stock discounts are accreted back to stated value as a dividend to preferred
stockholders using the effective interest method and an assumed effective
interest rate ranging between 49.98% and 57.27%.  For the three and
six months ended June 30, 2008, accretion recognized in the Statement of
Operations was $16,239 and $169,084, respectively.
  17


Preferred
Stock Series H




On June
2, 2008, the Company entered into a Securities Purchase Agreement with Vicis for
the purchase of 400 shares of the Company’s Series H Convertible Preferred Stock
(“Series H Preferred Stock”) and a warrant agreement to acquire 45,000,000
shares of the Company’s Class A Common Stock, exercisable for five (5) years at
an exercise price of $0.375, for an aggregate cash purchase price of
$4,000,000.
 
 The
detachable warrants that are accounted for under EITF 00-27 and EITF 98-5 as a
discount from the preferred stock issued.  The fair value of the warrants
were determined using the Black-Scholes Option model with a volatility of 176%,
risk free rate of 3.5%, a five year expected term and no dividends.  Using
the relative fair value approach, a discount resulted in the amount of
$3,287,305.  Preferred stock discounts are accreted back to stated
value as a dividend to preferred stockholders using the effective interest
method and an assumed effective interest rate of 57.27%.  For the
three and six months ended June 30, 2008, accretion recognized in the Statement
of Operations was $0 and $31,746, respectively.
 
 Each
share of Series H 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 the
$10,000 divided by $5.00 (the “Series H Conversion Price”).  The
Series H 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 H
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 H 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
H Preferred Stock.  In addition, if on November 7, 2009 of the
issuance of Series H Preferred Stock, the applicable Series H Conversion Price
is less than the current market price of the Company’s Class A Common Stock,
then the Series H Conversion Price shall be reduced to such current market
price  (provided that the current market price shall never be less
than $0.01)
 
 The
Company has the option to partially repurchase 90% of acquired shares and equal
percentage of the issued warrants for an aggregate purchase price in cash equal
to the purchase price paid.
 
 If on
July 15, 2011, any shares of Series H Preferred Stock remaining outstanding they
will be automatically converted to Class A Common Stock at the then-applicable
Series H Conversion Price.
 
 As of
June 30, 2008, 400 shares Series H Preferred Stock were outstanding and
convertible into 689,000,000 Class A common shares.







NOTE
12 - COMMON STOCK




In
December 2007, the Company received approval from its shareholders, to increase
its authorized shares from one billion (1,000,000,000) shares to one billion
five hundred million (1,500,000,000) shares. The authorized shares for its Class
A common stock was increased from eight hundred sixty million (860,000,000)
shares to one billion three hundred sixty million (1,360,000,000) shares; the
authorized shares for its Class B common stock remained at one-hundred twenty
million (120,000,000) shares and the authorized shares for its preferred stock
remained at twenty million (20,000,000) 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
13 – EQUITY AWARDS





Warrant
Awards





During
the three and six months ended June 30, 2008, the Company issued warrants to
purchase an aggregate of 45,200,000 and 118,193,217 shares of common stock,
respectively.  During the three and six months ended June 30, 2007,
9,625,000 and 0 warrants were issued, respectively.  At June 30, 2008,
there were 145,766,067 and 17,711,600 warrants outstanding to purchase Class A
and Class B common stock, respectively, exercisable at varying prices through
2013.  The following table summarizes this warrant
activity:


18





Class
      A Warrants2008
              
              
              2007Warrants
              
              
              Average
                Exercise
                Price
              
              
              Warrants
              
              
              Weighted
                Average
                Exercise
      PriceWarrants
      outstanding, beginning of year
              
              
              20,452,850
              
              
              $
              0.35
              
              
              
              7,747,000
              
              
              $
              0.33Warrants
      issued
              
              
              118,193,217
              
              
              
              0.38
              
              
              
              9,625,000
              
              
              
              0.13Warrants
      cancelled or expired
              
              
              (145,000
              )
              
              
              0.09
              
              
              
              (550,400
              )
              
              
              0.03Warrants
      exercised
              
              
              (700,000
              )
              
              
              0.17
              
              
              
              (3,210,000
              )
              
              
              0.01Warrants
      outstanding, end of year
              
              
              137,801,067
              
              
              $
              0.38
              
              
              
              13,611,600
              
              
              $
              0.27
 
  Class
      B Warrants2008
              
              
              2007Warrants
              
              
              Average
                Exercise
                Price
              
              
              Warrants
              
              
              Weighted
                Average
                Exercise
      PriceWarrants
      outstanding, beginning of year
              
              
              7,965,000
              
              
              $
              0.44
              
              
              
              4,100,000
              
              
              $
              0.06Warrants
      issued
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Warrants
      cancelled or expired
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Warrants
      exercised
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Warrants
      outstanding, end of year
              
              
              7,965,000
              
              
              $
              0.44
              
              
              
              4,100,000
              
              
              $
              0.06







19


The
following table summarizes the status of warrants outstanding at June 30,
2008:





Exercise
      Price
              
              
              Number
      of
                Warrants
              
              
              Weighted
                Average
                Remaining
                Contractual
      Life
                in
      Years$
              0.01
              
              
              
              707,850
              
              
              
              2.03$
              0.03
              
              
              
              6,000,000
              
              
              
              3.74$
              0.10
              
              
              
              350,000
              
              
              
              2.82$
              0.15
              
              
              
              200,000
              
              
              
              1.05$
              0.16
              
              
              
              1,800,000
              
              
              
              1.91$
              0.30
              
              
              
              3,700,000
              
              
              
              3.73$
              0.32
              
              
              
              50,000
              
              
              
              4.21$
              0.375
              
              
              
              114,368,217
              
              
              
              4.82$
              0.38
              
              
              
              1,000,000
              
              
              
              4.95$
              0.39
              
              
              
              200,000
              
              
              
              4.57$
              0.45
              
              
              
              1,250,000
              
              
              
              2.75$
              0.50
              
              
              
              13,465,000
              
              
              
              4.43$
              0.60
              
              
              
              825,000
              
              
              
              4.59$
              0.90
              
              
              
              25,000
              
              
              
              4.75$
              1.00
              
              
              
              500,000
              
              
              
              4.75$
              1.20
              
              
              
              25,000
              
              
              
              4.75$
              1.25
              
              
              
              900,000
              
              
              
              1.71$
              2.40
              
              
              
              400,000
              
              
              
              1.11145,766,067











As of
June 30, 2008, there was $1,371,832 of total unrecognized compensation cost
related to non-vested warrants that is expected to be recognized over a
weighted-average period of 1.04 years.  The intrinsic value of
warrants exercised during the six-month period ended June 30, 2008 and June 30,
2007 was $144,000 and $1,212,600, respectively.  The fair value of
warrants vested as of June 30, 2008 was $54,156,105.  The weighted
average fair value per share of warrants granted during the six-month period
ended June 30, 2008 was $0.38.





During
the three and six-months ended June 30, 2008 and June 30, 2007, stock-based
compensation recognized relating to the issuance of warrants to employees and
consultants was $124,354, $481,005, $1,207,500, and $1,207,500,
respectively. 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
six months ended June 30, 2008 and June 30, 2007 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
and six months ended June 30, 2008, $12,500 and $726,250, respectively, of
share-based compensation was recognized within the Statement of
Operations.  For the three and six month period ended June 30, 2007,
$3,180,000 and $77,900, respectively, of share-based compensation was recognized
within the Statement of Operations.


20




Award
      Date
              Award
      Type
              
              Number
                of
                Shares
              
              
              Grant
      Date
                Fair
      Value
                of
                Stock-
      Based
                Awards20083/3/2008
              Class
      A Common
              
              
              25,000
              
              
              $
              12,0003/31/2008
              Class
      A Common
              
              
              150,000
              
              
              
              5004/1/2008
              Class
      A Common
              
              
              1,000,000
              
              
              
              450,0006/1/2008
              Class
      A Common
              
              
              400,000
              
              
              
              160,0006/2/2008
              Class
      A Common
              
              
              50,000
              
              
              
              20,5006/30/2008
              Class
      A Common
              
              
              225,000
              
              
              
              83,2501,850,000
              
              
              $
              726,25020071/15/2007
              Class
      A Common
              
              
              3,000,000
              
              
              $
              105,0001/31/2007
              Class
      B Common
              
              
              20,500,000
              
              
              
              3,075,0004/12/2007
              Class
      A Common
              
              
              60,000
              
              
              
              17,9006/27/2007
              Class
      A Common
              
              
              200,000
              
              
              
              60,00023,760,000
              
              
              $
              3,257,900





NOTE
14 - EARNINGS (LOSS) PER SHARE





Earnings
(loss) per share are computed using the basic and diluted calculations on the
face of the statement of operations. Basic earnings (loss) per share are
calculated by dividing net income (loss) available to common shareholders by the
weighted average number of shares of common stock outstanding for the period.
Diluted earnings (loss) per share is calculated by dividing the net income
(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. Convertible debt and warrants, officer, employee and
non-employee stock options that are considered potentially dilutive are not
included in the fully diluted shares calculation.





The
following sets for the computation of basic and diluted net earnings (loss) per
common share for the three and six months ended June 30, 2008 and
2007:




Three
      Months
                Ended
      June 30
              
              
              Six
      Months
                Ended
      June 30Numerator:
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Net
      loss
              
              $
              (2,894,690
              )
              
              $
              (1,065,596
              )
              
              $
              (5,487,345
              )
              
              $
              (6,027,500
              )Less
      preferred stock dividend and accretions
              
              
              (532,099
              )
              
              
              (99,735
              )
              
              
              (849,399
              )
              
              
              (141,110
              )Net
      loss applicable to common stockholders
              
              $
              (3,426,789
              )
              
              $
              (1,165,331
              )
              
              $
              (6,336,744
              )
              
              $
              (6,168,610
              )Denominator:Weighted
      average basic and fully diluted shares outstanding
              
              
              140,712,767
              
              
              
              98,408,325
              
              
              
              142,181,287
              
              
              
              96,857,577Net
      earnings per common share - basic and diluted
              
              $
              (0.02
              )
              
              $
              (0.01
              )
              
              $
              (0.04
              )
              
              $
              (0.06
              )





During
the three and six months ended June 30, 2008 and 2007, the effect of outstanding
exercisable warrants, convertible debt, and convertible preferred stock were not
included within the Company’s earnings (loss) per share calculation as their
effect would be anti-dilutive.  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.  As of June 30, 2008 and 2007, 145,766,067 and 17,711,600,
respectively, of warrants that were exercisable have been excluded as they were
anti-dilutive.


21





NOTE
15—FINANCIAL INSTRUMENTS





Fair Value of Financial
Instruments (other than Derivative Financial Instruments)





The
carrying amount of cash, accounts receivable, accounts payable and accrued
expenses approximates fair value because of their short maturity. The carrying
amount of loans and notes payable approximates fair value based on interest
rates that approximate market interest rates for these instruments.


























22





NOTE
16 - GOING CONCERN




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.  However, the
Company has sustained operating losses in recent years.  Further for the
quarter ended June 30, 2008, the Company had negative working capital of
$1,905,696, a net loss of $6,336,744 and has incurred substantial losses in
previous years resulting in an accumulated deficit of approximately
$80,264,845.  Although these factors raise substantial doubt about the
ability of the Company to continue as a going concern, the Company has taken
several actions that it believes will allow it to continue as a going concern
through June 30, 2009.   We believe that our current cash resources,
together with anticipated revenue, will be sufficient to sustain our current
planned operations for the next 12 months. The Company raised $13 million from
Vicis Capital in four tranches completed in January 2008, March 2008, April 2008
and June 2008.  Although management believes that the Company’s
current cash position and anticipated revenue in 2008 will be sufficient to meet
its current levels of operations, additional cash resources may be required
should the Company wish to accelerate sales or complete one or more
acquisitions.  In addition, additional cash resources may be needed if
the Company does not meet its sales targets, exceeds its projected operating
costs or if unanticipated expenses arise or are incurred.  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.  We can provide no assurance that we will
not require additional financing.  Likewise, we can provide no
assurance that if we need additional financing that it will be available in an
amount or on terms acceptable to us, if at all.  If we are unable to
obtain additional funds when they are needed or if such funds cannot be obtained
on terms favorable to us, we may be unable to execute upon our business plan or
pay our costs and expenses as they are incurred, which could have a material,
adverse effect on our business, financial condition and results of
operations.





NOTE 17
- RELATED PARTY TRANSACTIONS





During
the six month period ending June 30, 2008, LifeGuard marketed a membership
product which it licenses from DirectMed, a company thirty-three percent (33%)
owned by Ty Bruggemann who is the President of LifeGuard.   LifeGuard
pays DirectMed a branding fee based on the number of memberships
sold.  During the six month period ended June 30, 2008, LifeGuard paid
DirectMed $239,753 in branding fees.  Accounts payable at June 30,
2008 associated with DirectMed was $610,217.




At June
30, 2008, LifeGuard had Notes Payable totaling $18,592 (FY2007 $18,592) to
LifeGuard Marketing Corporation, a company fifty (50) percent owned by Ty
Bruggemann.  This note is not accruing interest.




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 both James Reed (Senior Vice President
of the JRM Division) and James Mignogna (Senior Vice President of the JRM
Division) and are recorded within the Company’s notes and loans payable category
of the balance sheet.  As of June 30, 2008, the outstanding balance of
said liabilities was $212,254.





Clark A.
Marcus, Chairman and Chief Executive Officer of the Company, is of Counsel and a
non-participating attorney with the law firm of Thorn Whittington & Marcus,
LLP (TWM), which regularly represents the Company on various matters, including
litigation transactions, corporate governance and various other legal issues
pertaining to the Company’s business.  Thorn Whittington & Marcus,
LLP has billed the Company $0 and $85,170 for legal services for the three and
six months ended June 30, 2008.  Mr. Marcus does not share directly or
indirectly any fee revenue generated as a result of TWM’s representation of the
Company.







NOTE
18 – SUBSEQUENT EVENTS





On August
6, 2008, the Company favorably settled the litigation pending in The Court of
Common Pleas for Hamilton County, Ohio, Case No. A 0511133, captioned, Richard
Abrahamson, Plaintiff vs. The Amacore Group, Inc., F/K/A Eye Care International,
Inc. and Clark A. Marcus, Defendants, alleging breach of promissory notes,
breach of oral loan agreements, action on account of promissory notes and oral
agreements, breach of third party beneficiary contracts, breach of fiduciary
duty to issue share certificate upon gift of share to plaintiff, breach of
fiduciary duties and unjust enrichment. Actual damages alleged are in excess of
$3,900,000, not including interest.  An additional $2,400,000 in
punitive damages is also claimed. The amended complaint also asserts the right
to recover attorney's fees.  The parties exchanged a mutual general
release and litigation has been dismissed with prejudice.  Terms of
the settlement are confidential. The settlement and the release of the
contingent liability to the Company for settlements, judgments and legal defense
costs for this litigation has resulted in a significant reduction in the accrual
for litigation costs in the amount of $2,707,402


23


On August
8, 2008, Clark A. Marcus (Chief Executive Officer) and related individuals
converted 15,509,280 shares of Class B common stock into Class A common stock.
Jerry Katzman (Chief Medical Officer) and related individuals converted
11,050,000 shares of Class B common stock into Class A common
stock.





On August
9, 2008, the Company received a call notice on certain promissory notes and
accrued interest in the amount of $591,699.  Thirty days from the
receipt of notice, the Company is obligated to make payment of principal and
accrued interest.


























24


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








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 June 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, 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 on April 15, 2008 (the “2007 Annual Report”), 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 2007 Annual Report.  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-Q. 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 Company 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 Company 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.




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 our President,
Mr. Norberg serves as our Senior Vice President of Sales and Marketing and Mr.
Heneghan serves as our 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.


25








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  contracted with a number of distribution channels
experienced not only in the sale of the types of products designed by us, but
also 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 have 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 a 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 (“Paymentech”), 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 also for
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, 2008, in a 60-day program build, we completed the development of The
Amacore 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 Company
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 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 began 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 the Company 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.





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 Benefits Consultants, LLC (“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 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.


26





In
January 2008, the Company formed a wholly owned subsidiary, Zurvita, Inc.
(“Zurvita”), 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 $313,334 and $555,514 for the three and six
months ended June 30, 2008.  We are extremely pleased with these
results and anticipate substantial growth in sales and margins as more of our
products are added to Zurvita’s portfolio.





On April
1, 2008, we acquired another distribution channel, US Health Benefits Group
(USHBG), 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 is
comprised of three companies: U.S. Healthcare Plans, Inc. a health benefit
discount marketing company, On The Phone, Inc., a consulting company that
receives overrides on all healthcare sales, and US Health Benefits Group, Inc.,
a health benefit plan marketing company. USHBG markets LifeGuard’s
DirectMed association membership program generating approximately $1 million a
month in gross revenue for LifeGuard, resulting in $500,000 per month in
commission revenue to USHGB.





During
the first and second quarters of 2008, we have focused our efforts primarily on
driving organic growth.  By driving our products through established
distribution channels, we were able to achieve total revenue for the six month
period ended June 30, 2008 of $13,487,456 as compared to $592,457 for the six
months ended June 30, 2007.





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.   We cannot guarantee we will become profitable in the fourth
quarter of this year, however, we believe that the successful execution of our
strategic plan and the achievement of our forecast sales and margins will place
us well in its stated objective to achieve operational
profitability.





All of
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:





The
Company markets health-related membership benefits programs, insurance programs
and other solutions to individuals, families and employer groups nationwide.
Total revenue was $8,018,123 and $13,487,456 for the three and six months ended
June 30, 2008, an increase of approximately $7,585,533 and $12,894,999 from
total revenue of $159,867 and $592,457 for the respective periods in 2007. New
product offerings, growth in the Company’s membership base as well as the
acquisitions of LifeGuard, JRM and USHBG contributed to the significant increase
in revenue earned during the three and six months ended June 30, 2008.
Revenue from said acquisitions accounted for $12,832,936 or ninety-nine percent
(99%) of the increase for the six month period ended June 30,
2008.  An estimate for refunds of $175,473 has been included in
membership fees and $14,985 has been included in cost of sales for the six
months ended June 30, 2008. Cost of sales includes commissions and product costs
of $5,271,623 and $9,259,344 for the three and six months ended June 30, 2008.
Total cost of sales increased $5,766,006 and $6,133,826 for the three and six
month period ended June 30, 2008. The increase in cost of sales is attributable
to membership revenue growth.





27





Operating
Expenses:




Our
operating expenses for the three and six month period ended June 30, 2008 were
$4,548,269 and $8,505,263,respectively, as compared to $1,095,350 and $6,121,909
for the three and six month period ended of June 30, 2007.





Three
      Months Ended June 30,
              
              
              Six
      Months Ended June 30,Increase
              
              
              
              
              
              
              
              
              Increase2008
              
              
              2007
              
              
              (Decrease)
              
              
              2008
              
              
              2007
              
              
              (Decrease)Depreciation
              
              $
              78,922
              
              
              $
              2,435
              
              
              $
              76,487
              
              
              $
              125,902
              
              
              $
              4,436
              
              
              $
              121,466Amortization
              
              
              52,083
              
              
              
              -
              
              
              
              52,083
              
              
              
              118,554
              
              
              
              -
              
              
              
              118,554Office
      related expenses
              
              
              554,139
              
              
              
              97,410
              
              
              
              456,729
              
              
              
              912,782
              
              
              
              161,578
              
              
              
              751,204Professional
      fees
              
              
              (163,620
              )
              
              
              233,194
              
              
              
              (396,814
              )
              
              
              557,533
              
              
              
              2,097,807
              
              
              
              (1,540,274
              )Payroll
      and benefits
              
              
              2,280,438
              
              
              
              587,915
              
              
              
              1,692,523
              
              
              
              4,103,691
              
              
              
              3,524,940
              
              
              
              578,751Travel
              
              
              337,756
              
              
              
              115,091
              
              
              
              222,665
              
              
              
              639,385
              
              
              
              226,403
              
              
              
              412,982Selling
      and marketing
              
              
              1,408,551
              
              
              
              59,305
              
              
              
              1,349,246
              
              
              
              2,047,416
              
              
              
              106,745
              
              
              
              1,940,671Total
      operating expenses
              
              $
              4,548,269
              
              
              $
              1,095,350
              
              
              $
              3,452,919
              
              
              $
              8,505,263
              
              
              $
              6,121,909
              
              
              $
              2,383,354





Depreciation
& Amortization expense, which is computed on a straight-line method over the
assets estimated lives, for the three and six months ended June 30, 2008, was
$131,005 and $244,456, respectively, an increase of $128,570 and $240,020 over
the same prior year period due to the inclusion of the fair value of the assets
purchased in the LifeGuard, JRM and USHBG acquisitions.





Office
related costs include rent, insurance, utilities and office
maintenance.  For the three month period ended June 30, 2008, said
costs were $133,017, $21,614, $231,984 and $167,524. For the six months ended
June 30, 2008, said costs were $223,299, $127,563, $339,521 and $222,399,
respectively.   The increase of  $456,729 and $751,204
for the three and six month period ended June 30, 2008 is a result of rent and
significant telephone costs associated with subsidiaries that were acquired
subsequent to June 30, 2007. These subsidiaries contain call center operations
for selling products and/or handle customer service.





Professional
fees consist of consulting, contract labor, legal costs and litigation accruals
and accounting fees. For the three month period ended June 30, 2008, said costs
were $1,032,586, $31,214, $(1,511,225) and $189,058. For the six months ended
June 30, 2008, said costs were $1,201,161, $153,760, $(1,372,659) and $575,271,
respectively. The decrease of $396,814 and $1,540,274, respectively, for the
three and six month period is attributable to reversing a litigation contingency
of $2,707,402 as a result of a favorable settlement (see Note 18 – Subsequent
Events to the financial statements contained in this report). Excluding the
effects of the litigation contingency reversal in the second quarter,
professional fees increased $1,167,128 as a result of legal fees incurred for
defending the Company in various litigation matters as well as audit fees
incurred for the recent acquisition of USHBG.





Payroll
and related expenses for the three and six months ended June 30, 2008 were
$2,280,438 and $4,103,691, respectively, an increase of $1,692,523 and $578,751
over the same prior year periods.  Payroll and benefits have increased
as a result of Company expansion and recent acquisitions.





Business
travel expenses for the three and six months ended June 30, 2008 were $337,756
and $639,385, respectively, an increase of $222,665 and $412,982 over the same
period prior year periods. 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 six months of 2008.





Selling
and marketing for the three and six months ended June 30, 2008 were $1,408,551
and $2,047,416, respectively, an increase of $1,349,246 and $1,940,671 over the
same prior year periods. The acquired operations of JRM, LifeGuard and USHBG
have contributed to the significant increase in selling and
marketing.





Interest
Expense:





Interest
expense for the three and six months ended June 30, 2008 was $94,633 and
$130,170, respectively, compared to $84,739 and $113,851, respectively, for the
same period in 2007.





Net
loss:





The
Company’s net loss amounted to $3,426,789 and $6,336,744 for the three and six
months ended June 30, 2008 as compared to $1,165,331 and $6,168,610 for the
three and six months ended June 30, 2007. Significant travel, payroll,
consulting and marketing expenses have contributed to the increase in net loss
between the said periods.





28





Preferred
stock dividends and accretions:





Preferred
stock dividends and accretions amounted to $532,099 and $849,399 for the three
and six months ended June 30, 2008 compared to $99,735 and $141,110 for the same
period in 2007. The increase from 2007 for all said periods was due to
additional preferred stock issued by the Company during late fiscal 2007 and
within the six month period ended June 30, 2008.





Loss
per common share:





Loss per
common share amounted to $0.02 and $0.04 for the three and six months ended June
30, 2008, respectively, compared to $0.01 and $0.06 for the three and six months
ended June 30, 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.





OFF
BALANCE SHEET ARRANGEMENTS





We do not
have any off balance sheet arrangements as of June 30, 2008.





LIQUIDITY
AND CAPITAL RESOURCES











The
following table compares our cash flows for the three and six month periods
ended June 30, 2008:





For
      the Three Months Ended
              
              
              For
      the Six Months EndedJune
      30, 2008
              
              
              June
      30, 2007
              
              
              June
      30, 2008
              
              
              June
      30, 2007Net
      cash used by operating activities
              
              $
              (6,948,949
              )
              
              $
              (1,306,009
              )
              
              $
              (11,782,618
              )
              
              $
              (1,985,571
              )Net
      cash used by investing activities
              
              
              231,941
              
              
              
              (100,001
              )
              
              
              (399,794
              )
              
              
              (100,001
              )Net
      cash provided by financing activities
              
              
              5,389,294
              
              
              
              165,600
              
              
              
              12,076,307
              
              
              
              5,561,600Net
      increase (decrease) in cash
              
              $
              (1,327,714
              )
              
              $
              (1,240,410
              )
              
              $
              (106,105
              )
              
              $
              3,476,028








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:








2008
              
              $
              223,3202009
              
              
              275,6072010
              
              
              215,1702011
              
              
              124,039$
              838,136










29





Long-term
debt consists of promissory notes and capital lease
obligations.  Future minimum payments on a fiscal year basis are as
follows (1)





2008
              
              $
              45,4422009
              
              
              37,2542010
              
              
              17,2042011
              
              
              14,961Thereafter
              
              $
              114,861


(1)
            Does
      not include interest





Funds
from operations are the anticipated source to fulfill these
commitments.





Since its
inception, the Company has met its capital needs principally through sales of
its equity and debt securities, including sales of common stock upon the
exercise of outstanding warrants.  We have used the proceeds from the
exercise of warrants and our other sales of securities to pay virtually all of
the costs and expenses we have incurred over the past 12 years.  These
costs and expenses included operating expenses, such as  salary
expenses, professional fees, rent expenses and other general and administrative
expenses discussed above, and the costs of sales discussed above to the extent
such costs of sales exceeded our revenue.  In addition, while the
majority of the consideration we paid in our recent acquisitions consisted of
the Company’s Class A common stock, cash consideration was also paid as part of
the purchase price.





We
believe that our current cash resources, together with anticipated revenue, will
be sufficient to sustain our current planned operations for the next 12 months.
The Company raised $13,000,000 from Vicis Capital in four tranches completed in
January 2008, March 2008, April 2008 and June 2008.  Although
management believes that the Company’s current cash position and anticipated
revenue in 2008 will be sufficient to meet its current levels of operations,
additional cash resources may be required should the Company not meet its sales
targets, exceed its projected operating costs, wish to accelerate sales or
complete one or more acquisitions or if unanticipated expenses arise or are
incurred.  If additional cash resources are needed, the Company may
sell additional equity or convertible debt securities which would result in
additional dilution to our shareholders. The issuance of additional debt would
result in increased expenses and could subject us to covenants that may have the
effect of restricting our operations.





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.  We can provide no
assurance that we will not require additional financing.  Likewise, we
can provide no assurance that if we need additional financing that it will be
available in an amount or on terms acceptable to us, if at all.  If we
are unable to obtain additional funds when they are needed or if such funds
cannot be obtained on terms favorable to us, we may be unable to execute upon
our business plan or pay our costs and expenses as they are incurred, which
could have a material, adverse effect on our business, financial condition and
results of operations.


30


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-Q. 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 for the
year ended December 31, 2007.





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











31





PART
II - OTHER INFORMATION




Item
1. Legal Proceedings


Except
for the case discussed below, as of June 30, 2008, there were no other material
changes in the Company’s legal proceedings as previously disclosed in the
Company’s 2007 Annual Report and Quarterly Report for the period ended March 31,
2008 (the “March 31 Quarterly Report”).  Please refer to the 2007
Annual Report and the March 31 Quarterly Report for additional information
regarding legal proceedings.
 
 On August
6, 2008, the Company favorably settled the litigation pending in The Court of
Common Pleas for Hamilton County, Ohio, Case No. A 0511133, captioned, Richard
Abrahamson, Plaintiff vs. The Amacore Group, Inc., F/K/A Eye Care International,
Inc. and Clark A. Marcus, Defendants, alleging breach of promissory notes,
breach of oral loan agreements, action on account of promissory notes and oral
agreements, breach of third party beneficiary contracts, breach of fiduciary
duty to issue share certificate upon gift of share to plaintiff, breach of
fiduciary duties and unjust enrichment. Actual damages alleged are in excess of
$3,900,000, not including interest.  An additional $2,400,000 in
punitive damages is also claimed. The amended complaint also asserts the right
to recover attorney's fees.  The parties exchanged a mutual general
release and litigation has been dismissed with prejudice.  Terms of
the settlement are confidential.
 Item
2. Unregistered Sales of Equity and Use of Proceeds





On March
31, 2008, the Company entered into a Private Stock Purchase Agreement with
Raymond L. Dirks for the sale of 150,000 shares of its Class A Common Stock to
Mr. Dirks for an aggregate purchase price of $500.00.  The shares
issued by the Company in this transaction were issued in a private placement
transaction in reliance upon an exemption from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended (the “Act”).


On April
25, 2008, the Company entered into promissory note agreements and warrant
agreements with 5 private investors.  For the said investors, the purchase
price of the respective notes were $195,000, $95,000, $95,000, $95,000, and
$95,000, respectively.  In addition, the warrant entitlements for said
investors were 633,569, 308,662, 308,662, 308,662, and
308,662.
  Item
3. Defaults Upon Senior Securities





The
information set forth in Note
8 – Notes and Loans Payableto the financial statements contained in this
reportis
incorporated herein by reference.





Approximately
$701,450 of the notes in default listed in Note 10 – Notes and Loans
Payable, to the financial statements contained in this report, 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 of
the notes in default listed in Note 10 – Notes and Loans Payableto the financial statements contained in this report, 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 June 30, 2008 and will continue to do so until such notes
are legally extinguished.





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





On May 8,
2008, shareholders voted to amend the Certificate of Designation of Preferred
Stock Series G.





Item
5. Other Information.





On June
16, 2008, the Board of Directors of the Company appointed Scott Smith, 56, as
the Company’s Chief Operating Officer, effective June 16, 2008.




Since
December 2007, Mr. Smith served as Chief Operating Officer of
LifeGuard.  Mr. Smith served as Chief Marketing Officer of ECOM PPO
Advisors Inc., a technology company that assists companies in maximizing their
preferred provider discounts and savings,from 2006 through
2007.  From 2004 to 2006, Mr. Smith served in several senior executive
positions at Insurance Capital Management, Inc., a holding company focusing on
insurance marketing and discount benefit programs, including President and Chief
Executive Officer.  Prior to 2004, Mr. Smith served as President and
Chief Executive Officer of National Health Insurance Company, a life health and
annuity insurance company which specialized in health insurance for self
employed individuals and qualified annuities in the 403(b) teachers
market.




The
Company and Mr. Smith entered into an Employment Agreement commencing on June
16, 2008 and ending on June 16,  2011.  Under the agreement,
Mr. Smith’s initial annual base salary is $250,000, subject to annual increases
as determined by the Board.  The annual percentage increase in such
salary shall be no less than the percentage increase in the consumer price index
for the Dallas, Texas metropolitan area for the applicable year.  Mr.
Smith is also entitled to receive an annual “special bonus” as follows: one half
percent (0.50%) of the Company’s pre-tax profits of the preceding fiscalyear up to the first
$1,000,000 of such pre-tax profits; plus three quarters of a percent (0.75%) of
the Company’s pre-tax profits over $1,000,000 and up to $2,000,000; plus one
percent (1%) of all pre-tax profits over $2,000,000 and up to $4,000,000; plus
one and one quarter percent (1.25%) for all pre-tax profits over
$4,000,000.  Mr. Smith may also receive other bonuses as the Board
deems appropriate.  Mr. Smith is eligible to participate in all
employee benefit programs generally afforded to other senior executives of the
Company.




32


Mr. Smith
also received a warrant to purchase 1,000,000 shares of the Company’s Class A
common stock.   This warrant vests in annual increments of
250,000 shares on July 1 of each of the years 2008 through 2011, inclusive,
provided that Mr. Smith remains employed with the Company on each such vesting
date.  The warrant exercise price and term is $0.38 and 5 years,
respectively, and expires on June 13, 2013.  A copy of the employment
agreement is filed herewith as Exhibit 10.8 and is incorporated herein by
reference.
  If Mr.
Smith terminates his employment as a result of the Company’s uncured breach of
his agreement or in the event that 50% of the equity securities of the Company
are acquired by any single person or group at an average acquisition price of at
least $5.00 per share and Mr. Smith’s employment is terminated within twelve
months of such event other than for cause, then Mr. Smith shall be entitled to
receive a lump sum amount equal to the sum of the following: (i) accrued but
unpaid Salary; (ii) accrued but unpaid expenses; (iii) accrued but unpaid
bonuses; (iv) unissued warrants; and (v) the total compensation which would have
been payable to Mr. Smith through the greater of the remaining term of the
agreement as of the date of termination or three years following the
termination.  In addition, any outstanding warrants held by Mr. Smith
shall become fully vested and exercisable as of the termination
date.  If Mr. Smith is terminated for cause (as defined in the
agreement), he is entitled to receive an amount equal to the sum of accrued but
unpaid expenses and bonuses plus the net salary compensation which would have
been paid through the termination date.  All unvested securities shall
be forfeited as of the termination date.




Mr. Smith
also entered into the Company’s form of Confidentiality Non-Competition
Agreement.




A copy of
the employment agreement is filed herewith as Exhibit 10.7 and is incorporated
herein by reference.













33


Item
6. Exhibits





(a)
      Exhibits:






2.1.1
      Stock Purchase Agreement between the Company, US Health Benefits Group,
      Inc., US Healthcare Plans, Inc., On the Phone, Inc. and stockholders,
      dated March 31, 2008 and effective April 1, 2008 (incorporated by
      reference to Exhibit 2.1 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on April 4, 2008).
              
              2.1.2
      Addendum to Stock Purchase Agreement between the Company, US Health
      Benefits Group, Inc., US Healthcare Plans, Inc., On the Phone, Inc. and
      stockholders, dated April 3, 2008 (incorporated by reference to Exhibit
      2.2 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on April 4, 2008).
              
              3.1.1
      Certificate of Incorporation, as amended (incorporated by reference to
      Exhibit 3.1 to the Current Report on Form 8-K filed on January 18,
      2008).
              
              3.1.2
      Certificate of Designation of Series A Convertible Preferred Stock
      (incorporated by reference to Exhibit 3.3 to Form 10SB12G/A filed on
      September 18, 2000).
              
              3.1.3
      Certificate of Designation of Series C Convertible Preferred Stock
      (incorporated by reference to the Company’s 2007 Annual
      Report).
              
              3.1.4
      Certificate of Designation of Series D Convertible Preferred Stock
      (incorporated by reference to the Company’s 2007 Annual
      Report).
              
              3.1.5
      Certificate of Designation of Series E Convertible Preferred Stock
      (incorporated by reference to the Company’s 2007 Annual
      Report).
              
              3.1.6  Amended
      and Restated Certificate of Designation of Series G Convertible Preferred
      Stock (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K
      filed with the Securities and Exchange Commission on May 6,
      2008).
              
              3.1.7
      Certificate of Designation of Series H Convertible Preferred Stock
      (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on June 6, 2008).
              
              10.1
      Preferred Stock Purchase Agreement by and between the Company and Vicis
      Capital Master Fund dated April 30, 2008 (incorporated by reference to
      Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on May 6, 2008).
              
              10.2
      Warrant Agreement by and between the Company and Vicis Capital Master Fund
      dated April 30, 2008 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      May 6, 2008).
              
              10.3
      Registration Rights Agreement by and between the Company and Vicis Capital
      Master Fund dated April 30, 2008 (incorporated by reference to Exhibit
      10.3 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on May 6, 2008).
              
              10.4
      Securities Purchase Agreement by and between the Company and Vicis Capital
      Master Fund dated June 2, 2008 (incorporated by reference to Exhibit 10.1
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on June 6, 2008).
              
              10.5
      Warrant Agreement by and between the Company and Vicis Capital Master Fund
      dated June 2, 2008 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      June 6, 2008).
              
              10.6
      Registration Rights Agreement by and between the Company and Vicis Capital
      Master Fund dated June 2, 2008 (incorporated by reference to Exhibit 10.3
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on June 6, 2008).
              
              10.7
      Employment with Chief Operating Officer
              
              10.8
      Warrant Agreement with Chief Operating Officer


34







31.1
      Certification of Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
      Certification of the Chief Financial Officer Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232.1
      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:August 14,
      2008
            /s/Clark
      A.
      MarcusClark
      A. MarcusChief
      Executive OfficerDated:August 14,
      2008
            /s/Giuseppe
      CrisafiGiuseppe
      CrisafiChief
      Financial Officer













35








EXHIBIT
INDEX








2.1.1
      Stock Purchase Agreement between the Company, US Health Benefits Group,
      Inc., US Healthcare Plans, Inc., On the Phone, Inc. and stockholders,
      dated March 31, 2008 and effective April 1, 2008 (incorporated by
      reference to Exhibit 2.1 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on April 4, 2008).
              
              2.1.2
      Addendum to Stock Purchase Agreement between the Company, US Health
      Benefits Group, Inc., US Healthcare Plans, Inc., On the Phone, Inc. and
      stockholders, dated April 3, 2008 (incorporated by reference to Exhibit
      2.2 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on April 4, 2008).
              
              3.1.1
      Certificate of Incorporation, as amended (incorporated by reference to
      Exhibit 3.1 to the Current Report on Form 8-K filed on January 18,
      2008).
              
              3.1.2
      Certificate of Designation of Series A Convertible Preferred Stock
      (incorporated by reference to Exhibit 3.3 to Form 10SB12G/A filed on
      September 18, 2000).
              
              3.1.3
      Certificate of Designation of Series C Convertible Preferred Stock
      (incorporated by reference to the Company’s 2007 Annual
      Report).
              
              3.1.4
      Certificate of Designation of Series D Convertible Preferred Stock
      (incorporated by reference to the Company’s 2007 Annual
      Report).
              
              3.1.5
      Certificate of Designation of Series E Convertible Preferred Stock
      (incorporated by reference to the Company’s 2007 Annual
      Report).
              
              3.1.6  Amended
      and Restated Certificate of Designation of Series G Convertible Preferred
      Stock (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K
      filed with the Securities and Exchange Commission on May 6,
      2008).
              
              3.1.7
      Certificate of Designation of Series H Convertible Preferred Stock
      (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on June 6, 2008).
              
              10.1
      Preferred Stock Purchase Agreement by and between the Company and Vicis
      Capital Master Fund dated April 30, 2008 (incorporated by reference to
      Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on May 6, 2008).
              
              10.2
      Warrant Agreement by and between the Company and Vicis Capital Master Fund
      dated April 30, 2008 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      May 6, 2008).
              
              10.3
      Registration Rights Agreement by and between the Company and Vicis Capital
      Master Fund dated April 30, 2008 (incorporated by reference to Exhibit
      10.3 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on May 6, 2008).
              
              10.4
      Securities Purchase Agreement by and between the Company and Vicis Capital
      Master Fund dated June 2, 2008 (incorporated by reference to Exhibit 10.1
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on June 6, 2008).
              
              10.5
      Warrant Agreement by and between the Company and Vicis Capital Master Fund
      dated June 2, 2008 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      June 6, 2008).
              
              10.6
      Registration Rights Agreement by and between the Company and Vicis Capital
      Master Fund dated June 2, 2008 (incorporated by reference to Exhibit 10.3
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on June 6, 2008).
              
              10.7
      Employment with Chief Operating Officer
              
              10.8
      Warrant Agreement with Chief Operating Officer


36







31.1
      Certification of Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
      Certification of the Chief Financial Officer Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232.1
      Certification of the Chief Executive Officer  and Chief
      Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002









37