UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
DC 20549
  FORM
10-Q/A
 Amendment No.
1
 
 (Mark
One)
 x     
Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
  For the
quarterly period ended March 31, 2008
 
 o     
Transition report under Section 13 or 15(d) of the Exchange Act
  For the
transition period from _________ to _________
  Commission
file number 0-27889
 
 THE
AMACORE GROUP, INC.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
              
              59-3206480(State
      or other jurisdiction of
              
              (I.R.S.
      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 May 5, 2008:
 113,469,915
Class A Common Shares
 29,062,802 Class
B Common Shares
  
 
 
 
 EXPLANATORY
NOTE


This
Amendment No. 1 to this Quarterly Report on Form 10-Q/A (“Form 10-Q/A”) is being
filed in order to correct previously issued condensed consolidated financial
statements of The Amacore Group, Inc. (the “Company”) as of and for the three
months ended March 31, 2008, initially filed on Form 10-QSB with the Securities
and Exchange Commission (the “SEC”) on May 20, 2008 (the “Original Form
10-QSB”).  This restatement corrects errors related to the treatment
of certain warrant agreements with “change in control” provisions, the treatment
of the allowance for sales refunds and chargebacks, and the treatment of
capitalization of commissions paid.  The tables within Note 2 to the
Condensed Consolidated Financial Statements contained herein show the amount
originally reported, the amount of the adjustment and the restated amount. In
addition, the presentation of financial information (including notes to
financial statements) has been revised to conform to the presentation of
financial information in the Company Quarterly Report on Form 10-Q for the
period ended September 30, 2008.  In addition, certain other enhancements
and clarifications to Part I, Item 2 have been made.
  This Form
10-Q/A includes items that have been changed as a result of the restatement as
well as items that are unchanged from the Original Form 10-QSB.  Other
than as required to reflect the effects of the restatement, this Form 10-Q/A has
not been updated to reflect the effects of other events occurring subsequent to
the filing date of the Original Form 10-QSB.  Therefore, this Form
10-Q/A should be read in conjunction with our filings made with the SEC
subsequent to the filing of the Original Form 10-QSB, including any amendments
to those filings.
  This Form
10-Q/A amends the following items which were impacted by the adjustments
described above:
  ·
                Part
      I – Item 1 – Financial
Statements
  ·
                Part
      I – Item 2 – Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
  In
addition, this Form 10-Q/A includes currently-dated certifications from our
principal executive officer and principal financial officer, as required by
Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended.
  Additional
information about the decision to restate the March 31, 2008 financial
statements can be found in the Company’s Current Report on Form 8-K, filed with
the SEC on December 18, 2008 and in Note 2 to the Condensed Consolidated
Financial Statements contained herein.
  
  
  
 THE
AMACORE GROUP, INC.
 
 FORM
10-Q/A
  PART I
- FINANCIAL INFORMATION
 
 Page No.Item
      1. Financial Statements (Unaudited)
              3Condensed
      Consolidated Balance Sheets – March 31, 2008 and December 31,
      2007
              3Condensed
      Consolidated Statements of Operations – For the Three Months
      Ended March 31, 2008 and 2007
              4Condensed
      Consolidated Statements of Cash Flows – For the Three Months Ended
      March 31, 2008 and 2007
              5Notes
      to Interim Condensed Consolidated Financial Statements
              6Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              24Item
      3.  Quantitative and Qualitative Disclosures About Market
    Risk.
              29Item
      4T. Controls and Procedures
              29
 
 
 PART II
– OTHER INFORMATION
 
 Page No.Item
      1. Legal Proceedings
              30Item
      2. Unregistered Sales of Equity and Use of Proceeds
              30Item
      3. Defaults Upon Senior Securities
              30Item
      4. Submission of Matters to a Vote of Security Holders
              30Item
      5. Other Information
              30Item
      6. Exhibits
              31Signatures
              31
 
  2
  THE
      AMACORE GROUP, INC.CONDENSED
      CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 March
      31,
              
              
              December
      31,2008
              
              
              2007ASSETSCurrent
      assetsCash
              
              $
              2,824,526
              
              
              $
              2,161,042Restricted
      cash
              
              
              566,935
              
              
              
              316,935Accounts
      receivable (net of $0 allowance for doubtful accountsin
      2008 and 2007, respectively)
              
              
              496,896
              
              
              
              470,049Non-trade
      receivables – related party
              
              
              75,469
              
              
              
              64,385Inventory
              
              
              37,814
              
              
              
              37,814Deferred
      expenses
              
              
              2,280,288
              
              
              
              1,023,798Deposits
      and advances
              
              
              87,814
              
              
              
              61,236Total
      current assets
              
              
              6,369,742
              
              
              
              4,135,259Property,
      plant and equipment (net of accumulated depreciation of $173,219 and
      $132,387for
      2008 and 2007, respectively)
              
              
              760,048
              
              
              
              418,356Other
      assetsDeferred
      customer acquisition costs
              
              
              253,839
              
              
              
              -Goodwill
      and other intangible assets
              
              
              15,957,925
              
              
              
              14,725,250Total
      assets
              
              $
              23,341,554
              
              
              $
              19,278,865LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCurrent
      liabilitiesAccounts
      payable
              
              $
              2,427,449
              
              
              $
              2,639,200Accounts
      payable – related party
              
              
              527,930
              
              
              
              590,888Loans
      and notes payable
              
              
              1,250,610
              
              
              
              1,414,530Accrued
      expenses and other liabilities
              
              
              5,219,677
              
              
              
              5,147,665Deferred
      compensation – related party
              
              
              561,614
              
              
              
              602,344Deferred
      revenue
              
              
              1,660,395
              
              
              
              1,409,984Total
      current liabilities
              
              
              11,647,675
              
              
              
              11,804,611Long-term
      liabilitiesAccrued
      dividends
              
              
              704,482
              
              
              
              479,896Fair
      value of redeemable warrants
              
              
              12,194,000
              
              
              
              -Total
      long-term liabilities
              
              
              12,898,482
              
              
              
              479,896Total
      liabilities
              
              
              24,546,157
              
              
              
              12,284,507Stockholders'
      (deficit) equityPreferred
      Stock, $.001 par value, 20,000,000 shares authorized;Series
      D mandatory convertible preferred stock; 694.6 shares authorized;694.6
      shares issued and outstanding for 2008 and 2007,
      respectively
              
              
              -
              
              
              
              -Series
      E mandatory convertible preferred stock; 139 shares authorized;139
      shares issued and outstanding for 2008 and 2007,
      respectively
              
              
              -
              
              
              
              -Series
      G mandatory convertible preferred stock; 1,000 shares authorized;1,000
      and 300 shares issued and outstanding for 2008 and 2007,
      respectively
              
              
              1
              
              
              
              -Series
      A mandatory convertible preferred stock; 1,500 shares authorized;155
      shares issued and outstanding for 2008 and 2007,
      respectively
              
              
              -
              
              
              
              -Common
      stock A, $.001 par value, 1,360,000,000 shares authorized;119,170,401
      and 110,149,156 shares issued and outstanding for 2008 and 2007,
      respectively
              
              
              119,170
              
              
              
              110,149Common
      stock B, $.001 par value, 120,000,000 shares authorized;29,087,802
      and 27,563,802 shares issued and outstanding for 2008 and 2007,
      respectively
              
              
              29,088
              
              
              
              27,563Additional
      paid-in capital
              
              
              89,372,507
              
              
              
              83,956,054Accumulated
      deficit
              
              
              (90,725,369
              )
              
              
              (77,099,408
              )Total
      stockholders' (deficit) equity
              
              
              (1,204,603
              )
              
              
              6,994,358Total
      liabilities and stockholders' (deficit) equity
              
              $
              23,341,554
              
              
              $
              19,278,865See
      notes to condensed consolidated financial statements





3







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








4







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





5








THE AMACORE GROUP, INC.


NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








NOTE
1 – NATURE OF OPERATIONS





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





NOTE
2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS





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























6





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




THE
      AMACORE GROUP, INC.CONDENSED
      CONSOLIDATED BALANCE SHEETS (UNAUDITED)March
      31,
              
              
              
              
              
              
              
              
              March
      31,2008
              
              
              
              
              
              
              
              
              2008As
                Originally
      filed
              
              
              Adjustments
              
              
              
              
              
              As
                RestatedASSETSCurrent
      assetsCash
              
              $
              2,824,526
              
              
              
              
              
              
              
              
              $
              2,824,526Restricted
      cash
              
              
              566,935
              
              
              
              
              
              
              
              
              
              566,935Accounts
      receivable
              
              
              496,896
              
              
              
              
              
              
              
              
              
              496,896Non-trade
      receivables – related party
              
              
              75,469
              
              
              
              
              
              
              
              
              
              75,469Inventory
              
              
              37,814
              
              
              
              
              
              
              
              
              
              37,814Deferred
      expenses
              
              
              3,920,234
              
              
              
              (1,639,946
              )
              
              
              (1
              )
              
              
              2,280,288Deposits
      and advances
              
              
              87,814
              
              
              
              
              
              
              
              
              
              
              
              87,814Total
      current assets
              
              
              8,009,688
              
              
              
              (1,639,946
              )
              
              
              
              
              
              
              6,369,742Property,
      plant and equipment
              
              
              760,048
              
              
              
              
              
              
              
              
              
              
              
              760,048Other
      assetsDeferred
      customer acquisition costs
              
              
              
              
              
              
              253,839
              
              
              
              (1
              )
              
              
              253,839Goodwill
      and other intangible assets
              
              
              1,085,823
              
              
              
              1,953,641
              
              
              
              (2
              )
              
              
              15,957,92513,566,021
              
              
              
              (2
              )(647,560
              )
              
              
              (3
              )Unallocated
      assets
              
              
              13,566,021
              
              
              
              (13,566,021
              )
              
              
              (2
              )
              
              
              -Total
      assets
              
              $
              23,421,580
              
              
              $
              (80,026
              )
              
              
              
              
              
              $
              23,341,554LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
              
              $
              2,427,449
              
              
              
              
              
              
              
              
              
              
              $
              2,427,449Accounts
      payable – related party
              
              
              527,930
              
              
              
              
              
              
              
              
              
              
              
              527,930Loans
      and notes payable
              
              
              1,150,610
              
              
              
              100,000
              
              
              
              (4
              )
              
              
              1,250,610Accrued
      expenses and other liabilities
              
              
              4,746,895
              
              
              
              44,050
              
              
              
              (4
              )
              
              
              5,219,677428,732
              
              
              
              (5
              )Deferred
      compensation – related party
              
              
              561,614
              
              
              
              
              
              
              
              
              
              
              
              561,614Deferred
      revenue
              
              
              1,660,395
              
              
              
              
              
              
              
              
              
              
              
              1,660,395Total
      current liabilities
              
              
              11,074,893
              
              
              
              572,782
              
              
              
              
              
              
              
              11,647,675Long-term
      liabilitiesAccrued
      dividends
              
              
              704,482
              
              
              
              
              
              
              
              
              
              
              
              704,482Fair
      value of redeemable warrants
              
              
              
              
              
              
              4,044,000
              
              
              
              (6
              )
              
              
              12,194,0008,150,000
              
              
              
              (6
              )Total
      liabilities
              
              
              11,779,375
              
              
              
              12,766,782
              
              
              
              
              
              
              
              24,546,157Stockholders'
      (deficit) equityPreferred
      Stock
              
              
              1
              
              
              
              
              
              
              
              
              
              
              
              1Common
      Stock A
              
              
              114,674
              
              
              
              4,496
              
              
              
              (7
              )
              
              
              119,170Common
      Stock B
              
              
              29,063
              
              
              
              25
              
              
              
              (7
              )
              
              
              29,088Additional
      paid-in capital
              
              
              91,452,579
              
              
              
              (4,521
              )
              
              
              (7
              )
              
              
              89,372,507(42,194
              )
              
              
              (6
              )(4,044,000
              )
              
              
              (6
              )2,010,643
              
              
              
              (2
              )Accumulated
      deficit
              
              
              (79,954,112
              )
              
              
              (55,251
              )
              
              
              (8
              )
              
              
              (90,725,369
              )(10,716,006
              )
              
              
              (9
              )Total
      stockholders' (deficit) equity
              
              
              11,642,205
              
              
              
              (12,846,808
              )
              
              
              
              
              
              
              (1,204,603
              )Total
      liabilities and stockholders' (deficit) equity
              
              $
              23,421,580
              
              
              $
              (80,026
              )
              
              
              
              
              
              $
              23,341,554
  EXPLANATION
      OF ADJUSTMENTS AND RECLASSIFICATIONS
  (1)
                Certain
      selling costs were capitalized in error, resulting in an overstatement of
      deferred customer acquisition costs. Additionally, somecustomer acquisition
      costs that were properly deferred were erroneously classified as current
      assets. This adjustment recognizes asexpense the costs
      incorrectly capitalized and reclassifies the long-term portion to
      non-current assets.
 
 (2)
                During
      the third quarter of 2008, the Company completed its analysis and
      valuation of the assets acquired in the acquisition of
      LifeGuard. This adjustment reclassifies assets previously reported as
      unallocated assets to goodwill and other intangible assets and reflects
      the final determination of the LifeGuard purchase
  price.
 
 (3)
                This
      adjustment retrospectively adjusts the amortization of identifiable
      intangible assets acquired in the LifeGuard
  acquisition.
 
 (4)
                The
      Company incorrectly accounted for the conversion of certain notes
      payable. This adjustment correctly reflects the loss onconversion, the
      remaining outstanding balance of notes payable, and accrued interest
      payable.
 
 (5)
                The
      Company had not adequately analyzed the amount of sales refunds and
      charge-backs, resulting in an understatement of the related allowance.
      This adjustment increased the allowance for estimated refunds and
      charge-backs based on an established
  methodology.
 
 (6)
                Certain of the Company’s
      outstanding warrants were classified as equity instruments at the time of
      issuance. After further analysis, the Company has determined that
      these warrants are properly classified as liabilities in accordance with
      the provisions of SFAS 150 and EITF 00-19. This adjustment
      reclassifies those warrants as liabilities and reflects the adjustment of
      the fair value of those liabilities as of March 31,
      2008.
 
 (7)
                This adjustment correctly
      reflects capital stock
outstanding.
 
 (8)
                This adjustment corrects an entry
      made to accumulated deficit in
error.
 
 (9)
                This is the effect on the
      accumulated deficit of restatement adjustments reflected in
      earnings.








7




THE
      AMACORE GROUP, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)For
      the Three Months Ended March 31,2008
              
              
              
              
              
              
              
              
              2008As
                Originally
      filed
              
              
              Adjustments
              
              
              
              
              
              As
                RestatedREVENUESMembership
      fees
              
              $
              5,065,492
              
              
              $
              (430,483
              )
              
              
              (1
              )
              
              $
              4,635,009Commissions
              
              
              136,743
              
              
              
              
              
              
              
              
              
              
              
              136,743Marketing
      fees and materials
              
              
              267,098
              
              
              
              
              
              
              
              
              
              
              
              267,098Total
      revenue
              
              
              5,469,333
              
              
              
              (430,483
              )
              
              
              
              
              
              
              5,038,850COST
      OF SALESSales
      commissions
              
              
              2,693,843
              
              
              
              47,489
              
              
              
              (2
              )
              
              
              2,741,332Benefit
      and service cost
              
              
              131,173
              
              
              
              1,165,063
              
              
              
              (3
              )
              
              
              1,296,236Total
      cost of sales
              
              
              2,825,016
              
              
              
              1,212,552
              
              
              
              
              
              
              
              4,037,568GROSS
      PROFIT
              
              
              2,644,317
              
              
              
              (1,643,035
              )
              
              
              
              
              
              
              1,001,282OPERATING
      EXPENSESDepreciation
              
              
              46,980
              
              
              
              
              
              
              
              
              
              
              
              46,980Amortization
              
              
              66,471
              
              
              
              647,560
              
              
              
              (4
              )
              
              
              714,031Office
      related expenses
              
              
              358,643
              
              
              
              
              
              
              
              
              
              
              
              358,643Professional
      fees
              
              
              721,153
              
              
              
              
              
              
              
              
              
              
              
              721,153Payroll
      and employee benefits
              
              
              1,823,253
              
              
              
              
              
              
              
              
              
              
              
              1,823,253Travel
              
              
              301,629
              
              
              
              
              
              
              
              
              
              
              
              301,629Selling
      and marketing
              
              
              1,801,570
              
              
              
              1,338,618
              
              
              
              (2
              )
              
              
              1,975,125(1,165,063
              )
              
              
              (3
              )Total
      operating expenses
              
              
              5,119,699
              
              
              
              821,115
              
              
              
              
              
              
              
              5,940,814Loss
      from operations before other income and expense
              
              
              (2,475,382
              )
              
              
              (2,464,150
              )
              
              
              
              
              
              
              (4,939,532
              )OTHER
      INCOME (EXPENSE)Interest
      income
              
              
              14,872
              
              
              
              
              
              
              
              
              
              
              
              14,872Interest
      expense
              
              
              (35,537
              )
              
              
              
              
              
              
              
              
              
              
              (35,537
              )Loss
      on conversion of note payable
              
              
              (98,603
              )
              
              
              (144,050
              )
              
              
              (5
              )
              
              
              (242,653
              )Change
      in fair value of redeemable warrants
              
              
              -
              
              
              
              (8,150,000
              )
              
              
              (6
              )
              
              
              (8,150,000
              )Other
              
              
              1,995
              
              
              
              
              
              
              
              
              
              
              
              1,995Total
      other income (expense)
              
              
              (117,273
              )
              
              
              (8,294,050
              )
              
              
              
              
              
              
              (8,411,323
              )Net
      loss before income taxes
              
              
              (2,592,655
              )
              
              
              (10,758,200
              )
              
              
              
              
              
              
              (13,350,855
              )Income
      taxes
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -Net
      loss
              
              
              (2,592,655
              )
              
              
              (10,758,200
              )
              
              
              
              
              
              
              (13,350,855
              )Preferred
      stock dividend and accretion
              
              
              (317,300
              )
              
              
              42,194
              
              
              
              (6
              )
              
              
              (275,106
              )Net
      loss available to common stockholders
              
              $
              (2,909,955
              )
              
              $
              (10,716,006
              )
              
              
              
              
              
              $
              (13,625,961
              )Basic
      and diluted loss per share
              
              $
              (0.02
              )
              
              
              
              
              
              
              
              
              
              $
              (0.10
              )
  EXPLANATION
      OF ADJUSTMENTS AND RECLASSIFICATIONS
  (1)
                The
      Company had not adequately analyzed the amount of sales refunds and
      charge-backs, resulting in an understatement of the related allowance and
      a corresponding overstatement of revenue.  This adjustment
      increased the allowance for estimated refunds and charge-backs based on an
      established methodology.
 
 (2)
                Certain
      selling costs were capitalized in error, resulting in an overstatement of
      deferred customer acquisition costs and an understatement of selling and
      marketing expense and sales commissions.  This adjustment
      recognizes as expense the costs incorrectly
  capitalized.
 
 (3)
                The
      Company had previously classified certain benefit and service costs as
      selling and marketing expenses.  This adjustment reclassifies
      those costs.
 
 (4)
                During
      the third quarter of 2008, the Company completed its analysis and
      valuation of the assets acquired in the acquisition of
      LifeGuard.  This adjustment retrospectively reflects the
      amortization of identifiable intangible assets acquired in the LifeGuard
      acquisition.
 
 (5)
                The
      Company had incorrectly recorded the conversion of certain notes
      payable.  This adjustment correctly reflects the loss on
      conversion.
 
 (6)
                Certain
      of the Company’s outstanding warrants were classified as equity
      instruments at the time of issuance.  After further analysis,
      the Company has determined that these warrants are properly classified as
      liabilities in accordance with the provisions of SFAS 150 and EITF
      00-19.  This adjustment reflects the loss on issuance of those
      warrants for proceeds less than their fair value, the adjustment of the
      fair value of the warrants as of March 31, 2008, and the reversal of
      discount accretion previously recorded related to preferred stock issued
      in conjunction with the
warrants.





8





THE
      AMACORE GROUP, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)Three
      Months Ended March 31,
  2008
              
              
              
              
              
              
              2008As
                Originally
      filed
              
              
              Adjustments
              
              
              
              As
                RestatedNet
      cash used by operating activities
              
              $
              (4,833,669
              )
              
              
              (719,691
              )
              (1)(2)
              
              $
              (5,553,360
              )Cash
      flows from investing activitiesPurchase
      of property and equipment
              
              
              (381,735
              )
              
              
              161,566
              
              (2)
              
              
              (220,169
              )Decrease
      in restricted cash
              
              
              (250,000
              )
              
              
              
              
              
              
              
              (250,000
              )Net
      cash used in investing activities
              
              
              (631,735
              )
              
              
              
              
              
              
              
              (470,169
              )Cash
      flows from financing activitiesEquity
      issuance costs
              
              
              (380,000
              )
              
              
              
              
              
              
              
              (380,000
              )Net
      proceeds from credit card borrowing
              
              
              40,445
              
              
              
              
              
              
              
              
              40,445Payments
      made on notes payable
              
              
              (15,932
              )
              
              
              
              
              
              
              
              (15,932
              )Payments
      on and redemption of convertible notes
              
              
              -
              
              
              
              
              
              
              
              
              -Proceeds
      from exercise of common stock warrants
              
              
              42,000
              
              
              
              
              
              
              
              
              42,000Proceeds
      from private placement equity issuance
              
              
              500
              
              
              
              
              
              
              
              
              500Proceeds
      from promissory notes
              
              
              -
              
              
              
              
              
              
              
              
              -Proceeds
      from sale of preferred stock and redeemable warrants
              
              
              7,000,000
              
              
              
              
              
              
              
              
              7,000,000Net
      cash provided by financing activities
              
              
              6,687,013
              
              
              
              
              
              
              
              
              6,687,013Increase
      in cash
              
              
              1,221,609
              
              
              
              (558,125
              )
              (1)
              
              
              663,484Cash,
      beginning of period
              
              
              2,161,042
              
              
              
              
              
              
              
              
              2,161,042Cash,
      end of period
              
              $
              3,382,651
              
              
              $
              (558,125
              )
              
              
              $
              2,824,526
  EXPLANATION
OF ADJUSTMENTS AND RECLASSIFICATIONS
 
 (1)
                This adjustment corrects an error
      in the previously reported balance of cash at the end of the period and,
      correspondingly, in the total reported increase in
      cash.
 
 (2)
                This adjustment reflects the
      reclassification of property and equipment acquired under capital lease
      and the increase in the corresponding liability from cash flows from
      investing and operating activities to non-cash investing
      activities





NOTE
3 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES





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





Management’s Assessment of
Liquidity





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





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





9





Use of
Estimates





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





Revenue
Recognition





Membership
Fees





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





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





Commissions





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





Marketing
Fees and Materials





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





Concentration of Credit
Risk





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





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





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





Accounts
Receivable





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






10




Customer Acquisition
Costs





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





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





Property, Plant and
Equipment





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





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





March
      31,
              
              
              December
      31,2008
              
              
              2007Computer
      hardware
              
              $
              123,688
              
              
              $
              418,804Furniture
      and fixtures
              
              
              375,149
              
              
              
              70,634Equipment
      and machinery
              
              
              394,498
              
              
              
              21,372Building
      and leasehold improvements
              
              
              39,932
              
              
              
              39,933933,267
              
              
              
              550,743Less
      accumulated depreciation
              
              
              (173,219
              )
              
              
              (132,387
              )Total
              
              $
              760,048
              
              
              $
              418,356





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





Goodwill and Acquired
Intangible Assets





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





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





Software
            3
      yearsCustomer
      and vendor relationships
            5
      yearsTradenames
            16
      months





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






11




Stock-Based
Compensation





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





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





Loss Per
Share





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





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





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





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





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





12





Fair Value
Measurements





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





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





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





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





Reclassifications





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





Recent Accounting
Pronouncements Issued But Not Yet Adopted





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





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








13





NOTE
4 – NONCASH INVESTING AND FINANCING ACTIVITIES





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





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





NOTE
5 – ACQUISITIONS





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





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





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





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





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





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






14




NOTE
6 – GOODWILL AND OTHER INTANGIBLE ASSETS





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





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





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





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





2008
              
              $
              2,159,7382009
              
              
              2,524,6502010
              
              
              2,304,9322011
              
              
              2,164,4002012
              
              
              2,164,400$
              11,318,120




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





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





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





15





NOTE 7 –
NOTES AND LOANS PAYABLE





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





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




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





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





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





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





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





NOTE
8 – PREFERRED STOCK





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





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





16





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





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





March
      31,
              
              
              December
      31,2008
              
              
              2007Series
      A
              
              
              155
              
              
              
              155Series
      D
              
              
              695
              
              
              
              695Series
      E
              
              
              139
              
              
              
              139Series
      G
              
              
              1,000
              
              
              
              3001,989
              
              
              
              1,289





Preferred
Stock Series A





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





Preferred
Stock Series B





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





Preferred
Stock Series C





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





Preferred
Stock Series D





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




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


17







Preferred
Stock Series E





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





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





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





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






18




Preferred
Stock Series G





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





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





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





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





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





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





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





NOTE
9 – COMMON STOCK





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





NOTE
10 – WARRANTS AND SHARE-BASED AWARDS





Warrants





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





19





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





The
following table summarizes this warrant activity:





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





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




Exercisable
      and Outstanding WarrantsExercise
      Price
              
              
              Number
      of Warrants
              
              
              Weighted
      Average
                Remaining
                Contractual
      Life
                in
      Years$
              0.01
              
              
              
              762,850
              
              
              
              2.13$
              0.03
              
              
              
              6,000,000
              
              
              
              3.99$
              0.10
              
              
              
              350,000
              
              
              
              3.07$
              0.15
              
              
              
              200,000
              
              
              
              1.30$
              0.16
              
              
              
              2,375,000
              
              
              
              2.10$
              0.30
              
              
              
              3,700,000
              
              
              
              3.98$
              0.32
              
              
              
              50,000
              
              
              
              4.46$
              0.375
              
              
              
              45,000,000
              
              
              
              4.95$
              0.39
              
              
              
              200,000
              
              
              
              4.82$
              0.50
              
              
              
              13,465,000
              
              
              
              4.68$
              1.25
              
              
              
              1,300,000
              
              
              
              1.7873,402,850





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





20





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





Stock
Awards Issued





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





Award
      Date
                Award
      Type
                
                Number
      of
                  Shares
                
                
                Grant
      Date
                  Fair
      Value of
                  Stock-Based
                  Awards20083/3/2008
                Class
      A Common
                
                
                25,000
                
                
                $
                12,00025,000
                
                
                $
                12,00020071/15/2007
                Class
      A Common
                
                
                3,000,000
                
                
                $
                105,0001/31/2007
                Class
      B Common
                
                
                20,500,000
                
                
                
                3,075,00023,500,000
                
                
                $
                3,180,000





Stock-Based
Compensation Expense





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




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





NOTE
11 – ASSETS AND LIABILITIES MEASURED AT FAIR VALUE





Recurring
Fair Value Measurements





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





21





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




March
      31, 2008Fair
      Value Measurements at Reporting Date UsingSignificantUnobservableInputs
              
              
              Total(Level
      3)
              
              
              Fair
      ValueReedemable
      warrants
              
              $
              12,150,000
              
              
              $
              12,150,000Non-compensatory
      warrants
              
              
              44,000
              
              
              
              44,000Total
      liabilities
              
              $
              12,194,000
              
              
              $
              12,194,000





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





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





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





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





NOTE 12
– RELATED PARTY TRANSACTIONS





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





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





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








22





NOTE
13 – SUBSEQUENT EVENTS





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





●
            Cash
      at closing $1,215,568, net of cash acquired●
            1,800,000
      unregistered shares of Class A common stock with a deemed value of $5.00
      per share ($9,000,000 equivalent)


●
            Deferred
      cash payments of $1,609,090 payable in equal installments quarterly over a
      three-year period●
            Contingent
      consideration of $2,550,000, consisting of $850,000 based on performance
      targets in each of the next three years.  This amount may
      be increased if USHBG exceeds its performance
  targets.





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





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





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






23






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





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





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





SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS





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


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





INTRODUCTORY
OVERVIEW





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





24





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





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





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





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





STRATEGIC
INITIATIVES





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





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





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





25





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





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





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





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





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





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





RESULTS
OF OPERATIONS





Revenue:





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





26





Operating
Expenses:





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





Three
      Months Ended March 31,Increase2008
              
              
              2007
              
              
              (Decrease)Depreciation
      and amortization
              
              $
              761,011
              
              
              $
              2,001
              
              
              $
              759,010Office-related
      expenses
              
              
              358,643
              
              
              
              64,168
              
              
              
              294,475Professional
      fees
              
              
              721,153
              
              
              
              1,864,612
              
              
              
              (1,143,459
              )Payroll
      and benefits
              
              
              1,823,253
              
              
              
              2,937,025
              
              
              
              (1,113,772
              )Travel
              
              
              301,629
              
              
              
              111,314
              
              
              
              190,315Selling
      and marketing
              
              
              1,975,125
              
              
              
              47,440
              
              
              
              1,927,685Total
              
              $
              5,940,814
              
              
              $
              5,026,560
              
              
              $
              914,254





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





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





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





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





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





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





Other
Income (Expense)





Interest
expense:





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





Loss
on conversion of note payable





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





27





Loss
on change in fair value of redeemable warrants





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





Net
loss:





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





Preferred
stock dividends and accretions:





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





Loss
per common share:





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





Loans
to Stockholders and Officers:





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





CONTRACTUAL
OBLIGATIONS





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





OFF
BALANCE SHEET ARRANGEMENTS





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





LIQUIDITY
AND CAPITAL RESOURCES





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





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





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





28





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





For
      period ended March 31,2009
              
              $
              244,0222010
              
              
              225,1102010
              
              
              188,7872011
              
              
              93,029$
              750,948





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





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





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




Item
3.  Quantitative and Qualitative Disclosures About Market
Risk.




Not
applicable.


Item
4T  Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





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





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





29





PART
II - OTHER INFORMATION





Item
1. Legal Proceedings





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





Item
2. Unregistered Sales of Equity and Use of Proceeds





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





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





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





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


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


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


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


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





Item
3. Defaults Upon Senior Securities





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





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





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





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





None.





Item
5. Other Information.





None.





30





Item
6. Exhibits





(a)
      Exhibits:
            3.1   Amended
      Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to
      the Company’s Current Report filed on Form 8-K on January 14, 2008 (the
      “1/14/2008 8-K”))3.2   Amended
      Certificate of Designation of Series G Convertible Preferred Stock filed
      with the Delaware Secretary of State on May 8, 2008 (incorporated by
      reference to Exhibit 3.2 to the Original Form 10-QSB filed on May 20,
      2008).10.1
      Preferred Stock Purchase Agreement by and between The Amacore Group, Inc.
      and Vicis Capital Master Fund dated January 15, 2008 (incorporated by
      reference to Exhibit 1.1 to the 1/14/2008 8-K).10.2
      Registration Rights Agreement by and between The Amacore Group, Inc. and
      Vicis Capital Master Fund dated January 15, 2008 (incorporated by
      reference to Exhibit 1.2 to the 1/14/2008 8-K).10.3 Preferred
      Stock Purchase Agreement by and between The Amacore Group, Inc. and Vicis
      Capital Master Fund dated March 13, 2008 (incorporated by reference to
      Exhibit 10.3 to the Original Form 10-QSB filed on May 20,
      2008).10.4 Warrant
      Agreement by and between The Amacore Group, Inc. and Vicis Capital Master
      Fund dated March 13, 2008 (incorporated by reference to Exhibit 10.4
      to the Original Form 10-QSB filed on May 20, 2008).10.5
      Registration Rights Agreement by and between The Amacore Group, Inc. and
      Vicis Capital Master Fund dated March 13, 2008 (incorporated by reference
      to Exhibit 10.5 to the Original Form 10-QSB filed on May 20,
      2008).31.1
      Certification of Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 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:  March
      25, 2009
            /s/Jay
      ShaferChief
      Executive OfficerDated: 
      March 25, 2009
            /s/Scott
      SmithInterim
      Chief Financial Officer








31





EXHIBIT
INDEX








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