UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q





(Mark
One)


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





For the
quarterly period ended September 30, 2009





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





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.)





Maitland
      Promenade 1, 485 North Keller Road, Suite 450Maitland,
      Florida 32751(Address
      of principal executive offices) (zip
code)








(407)
      805-8900(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 has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes o   No 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 November 14, 2009:


1,033,939,168Class
A Common Shares


200,000
Class B Common Shares














THE
AMACORE GROUP, INC.





FORM
10-Q





PART I
- FINANCIAL INFORMATION





Page
      No.Item
      1.   Financial Statements (Unaudited).Condensed
      Consolidated Balance Sheets – September 30, 2009 and December 31,
      2008
            3Condensed
      Consolidated Statements of Operations – For the Three and Nine Months
      Ended September 30, 2009 and 2008
            4Condensed
      Consolidated Statements of Cash Flows – For the Nine Months Ended
      September 30, 2009 and 2008
            5Consolidated
      Statement of Stockholders’ Deficit
            6Notes
      to Interim Condensed Consolidated Financial Statements
            7Item
      2.   Management’s Discussion and Analysis of Financial
      Condition and Results of Operations.
            33Item
      3.   Quantitative and Qualitative Disclosures about Market
      Risk.
            44Item
      4.   Controls and Procedures.
            44





PART II
- OTHER INFORMATION





Page
      No.Item
      1.   Legal Proceedings.
            45Item
      1a. Risk Factors.
            46Item
      2.   Unregistered Sales of Equity Securities and Use of
      Proceeds.
            46Item
      3.   Defaults Upon Senior Securities.
            46Item
      4.   Submission of Matters to a Vote of Security
      Holders.
            46Item
      5.   Other Information.
            46Item
      6.   Exhibits.
            47Signatures
            49




2




THE
AMACORE GROUP, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




(Unaudited)September
      30, 2009
              
              
              December
      31, 2008ASSETSCurrent
      assetsCash
              
              $
              6,268,479
              
              
              $
              238,437Accounts
      receivable
              
              
              630,563
              
              
              
              612,945Non-trade
      receivables - related party
              
              
              16,211
              
              
              
              26,699Inventory
              
              
              23,891
              
              
              
              23,891Deferred
      expenses
              
              
              3,134,369
              
              
              
              2,816,952Deposits
      and advances
              
              
              15,574
              
              
              
              287,130Total
      current assets
              
              
              10,089,087
              
              
              
              4,006,054Property,
      plant and equipment (net of accumulated depreciation of $785,667 and
      $418,887for 2009 and 2008, respectively)
              
              
              1,054,516
              
              
              
              863,537Deferred
      customer acquisition costs
              
              
              201,888
              
              
              
              407,297Goodwill
      and other intangible assets
              
              
              4,756,244
              
              
              
              9,744,891Deposits
      and other assets
              
              
              1,529,327
              
              
              
              2,172,321Total
      assets
              
              $
              17,631,062
              
              
              $
              17,194,100LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilitiesAccounts
      payable
              
              $
              2,072,889
              
              
              $
              3,064,721Accounts
      payable - related party
              
              
              485,013
              
              
              
              524,633Loans
      and notes payable - current
              
              
              1,191,709
              
              
              
              1,059,373Notes
      payable - related parties
              
              
              878,765
              
              
              
              833,092Accrued
      expenses and other liabilities
              
              
              1,040,634
              
              
              
              2,429,315Deferred
      compensation - related party
              
              
              89,318
              
              
              
              82,954Deferred
      acquisition payments
              
              
              771,875
              
              
              
              472,670Deferred
      revenue
              
              
              2,692,865
              
              
              
              2,752,365Total
      current liabilities
              
              
              9,223,068
              
              
              
              11,219,123Capital
      lease obligation
              
              
              227,289
              
              
              
              52,900Deferred
      acquisition payments
              
              
              300,000
              
              
              
              648,399Deferred
      compensation - related party
              
              
              247,566
              
              
              
              315,364Loans
      and notes payable - long term
              
              
              236,769
              
              
              
              -Accrued
      dividends
              
              
              2,438,866
              
              
              
              879,575Fair
      value of warrants
              
              
              9,143,679
              
              
              
              13,315,364Total
      liabilities
              
              
              21,817,237
              
              
              
              26,430,725Redeemable
      preferred stock - Zurvita Holdings
              
              
              1,211,000Stockholders'
      DeficitThe
      Amacore Group, Inc.Preferred
      Stock, $.001 par value, 20,000,000 shares authorized;Series
      G mandatorily convertible preferred stock; 1,200 shares authorized;1,200 shares issued and outstanding for 2009 and
    2008.
              
              
              1
              
              
              
              1Series
      H mandatorily convertible preferred stock; 400 shares authorized;400 shares issued and outstanding for 2009 and 2008.
              
              
              -
              
              
              
              -Series
      I mandatorily convertible preferred stock; 10,000 shares authorized;1,650 and 850 shares issued and outstanding for 2009 and 2008,
      respectively.
              
              
              2
              
              
              
              -Series
      L mandatorily convertible preferred stock; 10,000 shares authorized;1,050 and 0 shares issued and outstanding for 2009 and 2008,
      respectively.
              
              
              -
              
              
              
              -Series
      A mandatorily convertible preferred stock; 1,500 shares authorized;155 shares issued and outstanding for 2009 and 2008.
              
              
              -
              
              
              
              -Common
      Stock A, $.001 par value, 1,360,000,000 shares authorized; 1,033,939,186and 1,008,806,919 shares issued and outstanding for 2009 and 2008,
      respectively.
              
              
              1,033,939
              
              
              
              1,008,807Common
      Stock B, $.001 par value, 120,000,000 shares authorized; 200,000shares issued and outstanding for 2009 and 2008.
              
              
              200
              
              
              
              200Additional
      paid-in capital
              
              
              124,928,220
              
              
              
              109,295,378Accumulated
      deficit
              
              
              (129,443,586
              )
              
              
              (119,541,011
              )Total
      Amacore Group, Inc. stockholders' deficit
              
              
              (3,481,224
              )
              
              
              (9,236,625
              )Deficit
      related to noncontrolling interest in Zurvita Holdings,
    Inc.
              
              
              (1,915,951
              )
              
              
              -Total
      stockholders' deficit
              
              
              (5,397,175
              )
              
              
              (9,236,625
              )Total
      liabilities and stockholders' deficit
              
              $
              17,631,062
              
              
              $
              17,194,100




The
accompanying notes are an integral part of these condensed consolidated
financial statements.


3




THE
AMACORE GROUP, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)






For
      the Three Months Ended
              
              
              For
      the Nine Months EndedSeptember
      30,
              
              
              September
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008REVENUESCommissions
              
              $
              374,115
              
              
              $
              404,953
              
              
              $
              1,125,656
              
              
              $
              1,083,734Marketing
      fees and materials
              
              
              991,366
              
              
              
              1,051,399
              
              
              
              2,567,682
              
              
              
              1,788,796Membership
      fees
              
              
              5,722,601
              
              
              
              7,096,301
              
              
              
              18,272,660
              
              
              
              18,367,063Total
      revenues
              
              
              7,088,082
              
              
              
              8,552,653
              
              
              
              21,965,998
              
              
              
              21,239,593COST
      OF SALESBenefit
      and service cost
              
              
              1,166,071
              
              
              
              1,393,609
              
              
              
              3,350,693
              
              
              
              4,303,312Sales
      commissions
              
              
              3,439,759
              
              
              
              4,577,399
              
              
              
              10,801,652
              
              
              
              10,949,551Total
      cost of sales
              
              
              4,605,830
              
              
              
              5,971,008
              
              
              
              14,152,345
              
              
              
              15,252,863GROSS
      PROFIT
              
              
              2,482,252
              
              
              
              2,581,645
              
              
              
              7,813,653
              
              
              
              5,986,730OPERATING
      EXPENSESAmortization
              
              
              213,253
              
              
              
              1,001,142
              
              
              
              811,984
              
              
              
              2,725,834Depreciation
              
              
              113,733
              
              
              
              100,036
              
              
              
              337,958
              
              
              
              225,939Impairment
      loss on goodwill and other intangible assets
              
              
              4,201,699
              
              
              
              15,308,944
              
              
              
              4,201,699
              
              
              
              15,308,944Office
      related expenses
              
              
              613,916
              
              
              
              602,271
              
              
              
              1,866,190
              
              
              
              1,427,706Payroll
      and employee benefits
              
              
              2,090,188
              
              
              
              2,299,556
              
              
              
              6,802,486
              
              
              
              6,500,665Professional
      fees and legal settlement
              
              
              1,172,136
              
              
              
              1,583,485
              
              
              
              5,806,404
              
              
              
              2,141,098Selling
      and marketing
              
              
              1,637,228
              
              
              
              3,351,142
              
              
              
              5,019,518
              
              
              
              8,115,736Travel
              
              
              120,595
              
              
              
              401,935
              
              
              
              339,952
              
              
              
              1,024,041Total
      operating expenses
              
              
              10,162,748
              
              
              
              24,648,511
              
              
              
              25,186,191
              
              
              
              37,469,963Loss
      from operations before other income and expense
              
              
              (7,680,496
              )
              
              
              (22,066,866
              )
              
              
              (17,372,538
              )
              
              
              (31,483,233
              )OTHER
      INCOME (EXPENSE)Gain
      on change in fair value of warrants
              
              
              405,434
              
              
              
              11,448,822
              
              
              
              11,184,590
              
              
              
              2,538,644Gain
      on extinguishment of debt
              
              
              38,700
              
              
              
              -
              
              
              
              38,700
              
              
              
              -Interest
      expense
              
              
              (103,934
              )
              
              
              (562,456
              )
              
              
              (258,569
              )
              
              
              (691,618
              )Interest
      income
              
              
              770
              
              
              
              3,564
              
              
              
              5,030
              
              
              
              20,678Loss
      on conversion of note payable
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (242,653
              )Other
              
              
              75,207
              
              
              
              1,280
              
              
              
              89,614
              
              
              
              8,993Total
      other income
              
              
              416,177
              
              
              
              10,891,210
              
              
              
              11,059,365
              
              
              
              1,634,044Net
      loss before income taxes
              
              
              (7,264,319
              )
              
              
              (11,175,656
              )
              
              
              (6,313,173
              )
              
              
              (29,849,189
              )Income
      taxes
              
              
              5,086
              
              
              
              -
              
              
              
              5,086
              
              
              
              -Net
      loss
              
              
              (7,269,405
              )
              
              
              (11,175,656
              )
              
              
              (6,318,259
              )
              
              
              (29,849,189
              )Less:  Net
      loss attributed to non-controlling interest in Zurvita Holdings,
      Inc.
              
              
              1,610,555
              
              
              
              -
              
              
              
              1,610,555
              
              
              
              -Net
      loss attributed to The Amacore Group, Inc.
              
              
              (5,658,850
              )
              
              
              (11,175,656
              )
              
              
              (4,707,704
              )
              
              
              (29,849,189
              )Preferred
      stock dividend and accretion
              
              
              (4,224,426
              )
              
              
              (489,524
              )
              
              
              (5,194,871
              )
              
              
              (1,153,599
              )Net
      loss attributed to The Amacore Group, Inc.available to common
      stockholders
              
              $
              (9,883,276
              )
              
              $
              (11,665,180
              )
              
              $
              (9,902,575
              )
              
              $
              (31,002,788
              )Basic
      and diluted loss per share
              
              $
              (0.01
              )
              
              $
              (0.08
              )
              
              $
              (0.01
              )
              
              $
              (0.21
              )Basic
      and diluted weighted average number of  common shares
      outstanding
              
              
              1,030,774,307
              
              
              
              149,297,612
              
              
              
              1,022,343,362
              
              
              
              145,866,798




The
accompanying notes are an integral part of these condensed consolidated
financial statements.


4


THE
AMACORE GROUP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


For
the Nine Months ended September 30, 2009 and 2008


(Unaudited)




2009
              
              
              2008Cash
      flows from operating activities:Net
      loss
              
              $
              (6,318,259
              )
              
              $
              (29,849,189
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      of intangible assets
              
              
              811,984
              
              
              
              2,725,834Amortization
      of discount on notes payable
              
              
              -
              
              
              
              504,419Depreciation
              
              
              337,958
              
              
              
              225,939(Gain)
      loss on change in fair value of warrants
              
              
              (11,184,590
              )
              
              
              (17,288,644
              )(Gain)
      on extinguishment of debt
              
              
              (38,700
              )
              
              
              -Loss
      on conversion of note payable
              
              
              -
              
              
              
              242,652Loss
      on impairment of goodwill and other intangible assets
              
              
              4,201,699
              
              
              
              15,308,944Note
      payable issued in legal settlement
              
              
              600,000
              
              
              
              -Note
      payable issued in settlement claim
              
              
              85,173
              
              
              
              -Loss
      on the issuance of warrants
              
              
              -
              
              
              
              14,750,000Provision
      for doubtful accounts
              
              
              -
              
              
              
              50,662Share-based
      payments to employees and consultants
              
              
              140,208
              
              
              
              1,870,586Changes
      in operating assets and liabilities(Increase)
      decrease in accounts receivable
              
              
              (17,618
              )
              
              
              184,618Decrease
      in non-trade receivables - related party
              
              
              10,488
              
              
              
              40,874Decrease
      in inventory and prepaid expenses
              
              
              -
              
              
              
              13,923(Increase)
      in deferred expenses
              
              
              (317,417
              )
              
              
              (2,651,639
              )Increase
      in deposits and advances
              
              
              (45,415
              )
              
              
              (874,810
              )Decrease
      (increase) in deferred customer acquisition costs
              
              
              205,409
              
              
              
              (579,636
              )Decrease
      (increase) in deposits and other assets
              
              
              1,300,394
              
              
              
              (1,250,736
              )Decrease
      in accounts payable and accrued expenses
              
              
              (1,759,925
              )
              
              
              (1,113,811
              )Decrease
      in deferred compensation - related party
              
              
              (61,434
              )
              
              
              (277,493
              )Increase
      in deferred revenue
              
              
              (59,500
              )
              
              
              706,430Net
      cash used in operating activities
              
              
              (12,109,545
              )
              
              
              (17,261,077
              )Cash
      flows from investing activities:Acquisition
      payment
              
              
              -
              
              
              
              (1,215,568
              )Purchase
      of property and equipment
              
              
              (271,399
              )
              
              
              (340,588
              )Purchase
      of certificate of deposit
              
              
              -
              
              
              
              (184,230
              )Decrease
      in restricted cash
              
              
              -
              
              
              
              316,935Net
      cash used in investing activities
              
              
              (271,399
              )
              
              
              (1,423,451
              )Cash
      flows from financing activities:Deferred
      acquisition payments
              
              
              (1,464,434
              )
              
              
              (134,092
              )Equity
      issuance costs
              
              
              -
              
              
              
              (510,000
              )Net
      (reduction)/proceeds from credit card borrowing
              
              
              (190,495
              )
              
              
              101,880Payments
      on capital lease obligations
              
              
              (64,612
              )
              
              
              -Payments
      made on notes payable
              
              
              (123,473
              )
              
              
              (515,000
              )Payments
      on and redemption of convertible notes
              
              
              -
              
              
              
              (575,000
              )Proceeds
      from exercise of Amacore Group, Inc. common stock warrants
              4,000
              
              
              
              122,000Proceeds
      from private placement equity issuance
              
              
              -
              
              
              
              500Proceeds
      from promissory notes
              
              
              -
              
              
              
              1,575,000Proceeds
      from sale of Amacore Group, Inc. preferred stock and
      warrants
              
              
              18,500,000
              
              
              
              17,000,000Proceeds
      from sale of Zurvita Holdings, Inc.preferred stock and
      warrants
              
              
              1,750,000
              
              
              
              -Net
      cash provided by financing activities
              
              
              18,410,986
              
              
              
              17,065,288Increase
      (decrease) in cash
              
              
              6,030,042
              
              
              
              (1,619,240
              )Beginning
      cash
              
              
              238,437
              
              
              
              2,161,042Ending
      cash
              
              $
              6,268,479
              
              
              $
              541,802SUPPLEMENTAL
      INFORMATION:Cash
      paid for interest
              
              $
              28,362
              
              
              $
              43,521Cash
      paid for income taxes
              
              $
              5,086
              
              
              $
              -


The
accompanying notes are an integral part of these condensed consolidated
financial statements.


5




THE
AMACORE GROUP, INC.


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' DEFICIT
 For
the Nine Months Ended Septmeber 30, 2009
 (Unaudited)


The
      Amacore Group, Inc. ShareholdersPreferred
      Stock
              
              
              
              
              
              Common
      StockSeries
      A
              
              Series
      G
              
              Series
      H
              
              Series
      I
              
              Series
      L
              
              
              Class
      A
              
              
              Class
      B
              
              
              Paid-In
      Capital
              
              
              Accumu-lated
                Deficit
              
              
              Non-controlling
      Interest in Zurvita Holdings, Inc.
              
              
              TotalDecember
      31, 2008
              
              $
              0.16
              
              
              $
              1.20
              
              
              $
              0.40
              
              
              $
              0.85
              
              
              $
              -
              
              
              $
              1,008,807
              
              
              $
              200
              
              
              $
              109,295,378
              
              
              $
              (119,541,011
              )
              
              $
              -
              
              
              $
              (9,236,625
              )Issuance
      of preferred stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              0.80
              
              
              
              0.90
              
              
              
              
              
              
              
              
              
              
              
              12,036,873
              
              
              
              
              
              
              
              
              
              
              
              12,036,875Issuance
      of common stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,075
              
              
              
              
              
              
              
              (5,075
              )
              
              
              
              
              
              
              
              
              
              
              -Partial
      disposition of ownership of Zurvita Holdings, Inc.
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (305,396
              )
              
              
              615,608Common
      stock issuancefor consulting services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              19,757
              
              
              
              
              
              
              
              572,963
              
              
              
              
              
              
              
              
              
              
              
              592,720Exercise
      of warrants
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              300
              
              
              
              
              
              
              
              3,700
              
              
              
              
              
              
              
              
              
              
              
              4,000Share
      based compensationto employees
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              129,427
              
              
              
              
              
              
              
              
              
              
              
              129,427USHBG
      purchase priceadjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,721,450
              )
              
              
              
              
              
              
              
              
              
              
              (1,721,450
              )Net
      loss available tocommon stockholders
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (9,902,575
              )
              
              
              
              
              
              
              (9,902,575
              )Net
      loss attributable tononcontrolling interest
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,610,555
              )
              
              
              (1,610,555
              )Preferred
      stock accretion
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,695,400
              
              
              
              
              
              
              
              
              
              
              
              3,695,400September
      30, 2009
              
              $
              0.16
              
              
              $
              1.20
              
              
              $
              0.40
              
              
              $
              1.65
              
              
              $
              0.90
              
              
              $
              1,033,939
              
              
              $
              200
              
              
              $
              124,928,220
              
              
              $
              (129,443,586
              )
              
              $
              (1,915,951
              )
              
              $
              (5,397,175
              )






The
accompanying notes are an integral part of these consolidated financial
statements.
 6


THE
AMACORE GROUP, INC.


NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





NOTE
1 – NATURE OF OPERATIONS





The
Amacore Group, Inc. (the “Company,” “Amacore,” “we,” “our,” and “us” all refer
to The Amacore Group, Inc. together with its consolidated subsidiaries) is
primarily a provider and marketer of healthcare-related products, including
healthcare benefits, dental and vision networks, and administrative services
such as billing, fulfillment, patient advocacy, claims administration and
servicing.  The healthcare-related membership programs primarily
marketed by the Company include limited and major medical programs, supplemental
medical and discount dental programs for individuals and
families.  The Company distributes these products and services through
various distribution methods such as its agent network, direct response
marketing companies, DRTV (Direct Response TV), inbound call centers, in-house
sales representatives, network marketing and affinity marketing
partners.  The Company’s secondary line of business is to provide and
market membership programs through these same marketing
channels.  These membership programs utilize the same back office and
systems creating marketing efficiencies to provide low cost ancillary products
such as pet insurance, home warranty, involuntary unemployment insurance, and
accident insurance.





The
Company operates through five different business divisions:





·
            LifeGuard Benefit Services
      Division – This division generates revenue primarily from the sale
      of healthcare benefit membership plans and provides product fulfillment,
      customer support, membership billing, claims administration, provider
      membership network maintenance and information technology.  The
      Company operates this division through LifeGuard Benefit Services, Inc., a
      wholly owned subsidiary of the Company
  (“LifeGuard”).





·
            U.S. Health Benefits Group
      Division – This is an inbound lead generation telemarketing
      operation primarily marketing major and limited medical benefit
      plans.  The Company operates this division through US Health
      Benefits Group, Inc., US Healthcare Plans, Inc. and On the Phone, Inc.,
      each a wholly owned subsidiary of the Company  (collectively,
      “USHBG”).·
            JRM Benefits Consultants
      Division – This division historically marketed various
      financial services and healthcare products through its telemarketing
      center and agent distribution network to individuals, families and
      employer groups.  In September 2009, the division reduced its
      call center focus and shifted to an agent distribution model for its
      products as well as other Amacore division products.  The Company
      operates this division through JRM Benefits Consultants, LLC, a wholly
      owned subsidiary of the Company
(“JRM”).





·
            Corporate and Other
      Division – This division provides management and financial support
      to the Company’s various divisions and is responsible for corporate
      governance and compliance. The Company operates this division through The
      Amacore Group, Inc. and its wholly owned subsidiary Amacore Direct
      Marketing, Inc.  Other legal entities such as LBI Inc. and LBS
      Acquisition Corp. which do not have any activity are included within the
      other division segment.  These entities were originally created
      for strategic transaction purposes.





·
            Zurvita Holdings
      Inc.– This is a network marketing company that sells
      healthcare products, financial services, and consumer products to
      individuals and families. The Company is the primary beneficiary of
      Zurvita Holdings Inc. (“Zurvita”), a variable interest
    entity.





Management’s Assessment of
Liquidity





At
September 30, 2009, the Company had positive working capital of approximately
$866 thousand, an accumulated deficit of approximately $129 million and negative
cash flows from operating activities of approximately $12.1
million.  For the nine months ended September 30, 2009, the Company
had an operating loss of approximately $17.4 million.





The
Company believes that existing cash resources, together with increasing revenue
and the expected continued support of its majority stockholder, will be
sufficient to sustain current planned operations for the next 12 months. The
Company raised $18.5 million from its majority stockholder in four tranches
completed in January 2009, March 2009, June 2009 and September
2009.  Although management believes that the Company’s current cash
position and anticipated revenue will be sufficient to meet its current levels
of operations, additional cash resources may be required should the Company not
meet its sales targets, exceed its projected operating costs, wish to accelerate
sales or complete one or more acquisitions or if unanticipated expenses arise or
are incurred.





The
Company does not currently maintain a line of credit or term loan with any
commercial bank or other financial institution and has not made any other
arrangements to obtain additional financing.  We can provide no
assurance that we will not require additional financing.  Likewise, we
can provide no assurance that if we need additional financing that it will be
available in an amount or on terms acceptable to us, if at all.  If we
are unable to obtain additional funds when they are needed or if such funds
cannot be obtained on terms favorable to us, we may be unable to execute upon
our business plan or pay our costs and expenses as they are incurred, which
could have a material, adverse effect on our business, financial condition and
results of operations.




7




NOTE
2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES





The
accompanying condensed consolidated balance sheet as of December 31, 2008, which
was derived from audited financial statements, and the unaudited condensed
consolidated financial statements as of September 30, 2009 and 2008 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 (consisting of normal recurring accruals)
considered necessary in order to make the financial statements not misleading
have been included. Results for the three and nine month periods ended September
30, 2009 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2009.  For further information, refer to the
financial statements and footnotes thereto included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008.





In June
2009, the Financial Accounting Standards Board (“FASB”) approved FASB Accounting Standards
Codification(“Codification”) as the single source of authoritative
accounting guidance used in the preparation of financial statements in
conformity with U.S. GAAP for all non-governmental entities. Codification,
which changed the referencing and organization of accounting guidance without
modification of existing U.S. GAAP, is effective for interim and annual
periods ending after September 15, 2009. Since it did not modify existing
U.S. GAAP, Codification did not have any impact on the Company’s financial
condition or results of operations. On the effective date of Codification,
substantially all existing non-SEC accounting and reporting standards are
superseded and, therefore, are no longer referenced by title in the accompanying
interim condensed consolidated financial statements.





Principles
of Consolidation





The
accompanying condensed consolidated financial statements include the accounts of
Amacore and its wholly-owned subsidiaries, Amacore Direct Marketing Inc., JRM,
LBI, LifeGuard, and USHBG.




The
Company owns approximately 66 percent of the outstanding common stock of Zurvita
which represents approximately 44 percent of the voting rights of total
outstanding equity securities.  Management has determined Zurvita to
be a variable interest entity and Amacore to be the primary beneficiary;
therefore, the accounts of Zurvita are included in the accompanying condensed
consolidated financial statements.  See Note 12 for more
information.




Intercompany
balances and transactions have been eliminated upon consolidation.




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.  These products often include elements sold through contracts
with third-party providers.  Based on consideration of each
contractual arrangement, revenue is reported on a gross basis.





The
Company records a reduction in revenue for estimated refunds and
chargebacks from credit card companies, and allowances based upon actual history
and management’s evaluation of current facts and circumstances.  
Refunds and chargebacks totaled approximately $1.1 million and $3.4 million
for the three months ended September 30, 2009 and 2008, respectively, and $3.4
million and $6.7 million for the nine months ended September 30, 2009 and 2008,
respectively and were recorded as a reduction of revenue in the accompanying
statements of operations.  Estimates for an allowance for refunds and
chargebacks totaled approximately $217 thousand and $1.5 million at September
30, 2009 and 2008, respectively and were included in accrued expenses and other
liabilities in the accompanying balance sheets.





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 access, on an annual basis, to various marketing and
promotional materials and tools as well as access to customized management
reports; accordingly, revenue from marketing fees is recognized over an annual
period.  The Company also earns ancillary revenue from the sale of
marketing materials to third parties.  Revenue is recognized when
marketing materials are delivered.




8


Concentration of Credit
Risk





For the
nine months ended September 30, 2009, revenue generated by LifeGuard represented
approximately 75% of total consolidated revenue.  Revenues from
DirectMed products, a company 33% owned by a former majority shareholder of
LifeGuard, accounts for 24% of LifeGard’s revenue and 18% of 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.





At
certain times, the Company’s bank deposits exceed the amounts insured by the
FDIC.  As of September 30, 2009, the Company had deposits in excess of
FDIC insured limits of approximately $2.8 million.  Should the
financial institution cease operations when the Company’s deposit balances
exceed FDIC limits, it could be a significant disruption to the Company’s cash
flow.  Management continually monitors the Company’s banking
relationships to manage this risk.  In addition, a majority of the
Company’s credit card processing is with one merchant processor.  Any
service interruptions, delays or quality problems could result in delays in
collecting payments, which could adversely affect our revenue and
profitability.





Use of
Estimates





The
preparation of the Company’s condensed consolidated financial statements in
conformity with U.S. GAAP 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 requiring a high degree of
management’s subjective judgments include the allowance for sales refunds and
chargebacks, capitalization of certain assets, depreciable/amortizable lives,
impairment of long-lived assets, the expected volatility of common stock,
and the fair value of common stock and warrants issued for services as well as
the allocation of proceeds from the issuance of debt and equity
instruments.  Due to the uncertainty inherent in such estimates,
actual results may differ from these estimates.





Deferred 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
September 30, 2009 and December 31, 2008, unamortized customer acquisition costs
of $952 thousand and $1.6 million, respectively, are included in deferred
expenses and $202 thousand and $407 thousand, 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.





Customer
acquisition costs of $0 and $1.8 million for the three months ended September
30, 2009 and 2008, respectively, and $0 and $5.1 million for the nine months
ended September 30, 2009 and 2008 respectively, are included in selling and
marketing in the accompanying statements of operations.





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.





For
purposes of testing goodwill impairment, each of our reportable segments is a
reporting unit. We review each reporting unit for possible goodwill
impairment by comparing the estimated fair value of each respective reporting
unit to the carrying value of that reporting unit’s net assets. If the estimated
fair value exceeds the net assets, no goodwill impairment is deemed to exist. If
the fair value of the reporting unit does not exceed the carrying value of that
reporting unit’s net assets, we then perform, on a notional basis, a purchase
price allocation allocating the reporting unit’s fair value to the fair value of
all tangible and identifiable intangible assets and liabilities with residual
fair value representing the implied fair value of goodwill of that reporting
unit.  The carrying value of goodwill for the reporting unit is
written down to this implied value.





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




9


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.





Stock-Based
Compensation





The
Company recognizes the cost resulting from all share-based payment transactions
in the financial statements using a fair-value-based measurement
method.  The Company uses the Black-Scholes Option Pricing Model in
computing the fair value of warrant instrument issuances and uses closing market
prices in computing the fair value of Common A and Common B stock
issuances.





The
measurement date for valuing share-based payments made to non-employees is the
earlier of 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.





Convertible
Instruments





The
Company reviews the terms of convertible debt and equity securities for
indications that bifurcation and separate accounting for the embedded conversion
feature is required. Generally, embedded conversion features where the ability
to physical or net-share settle the conversion option is not within the control
of the Company are bifurcated and accounted for as derivative financial
instruments. Bifurcation of the embedded derivative instrument requires
allocation of the proceeds first to the fair value of the embedded derivative
instrument with the residual allocated to the debt or equity instrument. The
resulting discount to the face value of the debt instruments is amortized
through periodic charges to interest expense using the effective interest
rate method.  The resulting discount to the redemption value of
convertible preferred securities is accreted through periodic charges to
dividends over the period to the earliest conversion date.





Derivative Financial
Instruments





The
Company generally does not use derivative financial instruments to hedge
exposures to cash-flow or market risks. However, certain other financial
instruments, such as warrants to purchase the Company’s common stock and the
embedded conversion features of debt and preferred instruments that are indexed
to the Company’s common stock are classified as liabilities when either (a) the
holder possesses rights to net-cash settlement, (b) physical or net share
settlement is not within the control of the Company, or (c) based on its
settlement provisions, the instrument is determined not to be indexed to the
Company’s common stock.  In such instances, net-cash settlement is
assumed for financial accounting and reporting. Such financial instruments are
initially recorded at fair value and subsequently adjusted to fair value at the
close of each reporting period. Fair value for option-based derivative financial
instruments is determined using the Black-Scholes Option Pricing
Model.





Other
convertible instruments that are not derivative financial instruments are
accounted for by recording the intrinsic value of the embedded conversion
feature as a discount from the initial value of the instrument and accreting it
back to face value over the period to the earliest conversion date using the
effective interest rate method.





Income
Taxes





The
Company accounts for income taxes using an asset and liability method pursuant
to which deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to reverse.  The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.  A valuation allowance is
provided against deferred tax assets based on the weight of available evidence
when it is more likely than not that some or all of the deferred tax assets will
not be realized.





When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others may be
subject to uncertainty about the merits of the position taken or the amount of
the position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, we believe it is more likely than not that the
position will be sustained upon examination, including the resolution of appeals
or litigation processes, if any.  Tax positions taken are not offset
or aggregated with other positions.  Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest amount of
tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority.  The portion of the
benefits associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheet along with any associated interest and penalties that
would be payable to the taxing authorities upon examination. Interest and
penalties associated with unrecognized tax benefits are classified as income tax
expense in the statement of operations.




10


Fair Value
Measurements





U.S. GAAP
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability to a third party with the same credit standing (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.  Fair value is a
market-based measurement determined based on a hypothetical transaction at the
measurement date, considered from the perspective of a market participant, not
based solely upon the perspective of the reporting entity.  When
quoted prices are not used to determine fair value, consideration is given to
three broad valuation techniques: (i) the market approach, (ii) the income
approach, and (iii) the cost approach.  Entities are required to
determine the most appropriate valuation technique to use, given what is being
measured and the availability of sufficient inputs.  Inputs to fair
valuation techniques are prioritized, allowing for the use of unobservable
inputs to the extent that observable inputs are not available.  The
applicable guidance 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.  The input levels are defined 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 those whose values are determined using pricing
      models, discounted cash flow methodologies, or similar techniques, as well
      as those for which the determination of fair value requires significant
      management judgment or estimation.





Earnings Per
Share





Basic
earnings (loss) per share are calculated by dividing net income (loss) available
to common stockholders by the weighted average number of shares of common stock
outstanding for the period. Diluted earnings (loss) per share is calculated by
dividing the net income (loss) by the weighted average number of shares of
common stock outstanding for the period, adjusted for the dilutive effect of
common stock equivalents, using the treasury stock method for warrants and the
if converted method for convertible preferred stock and convertible debt.
Convertible debt and warrants, officer, employee and non-employee stock options
that are considered potentially dilutive are included in the fully diluted
shares calculation as long as the effect is not
anti-dilutive.  Contingently issuable shares are included in the
computation of basic earnings (loss) per share when the issuance of the shares
is no longer contingent and in the computation of diluted earnings (loss) per
share based on the number of shares issuable as if the end of the reporting
period were the end of the contingency period.  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.  For the three and nine months ended September
30, 2009 and 2008, securities that could potentially dilute earnings per share
in the future were not included within the Company’s earnings (loss) per share
calculation as their effect would be anti-dilutive.





Recent Accounting
Pronouncements





In April
2009, the FASB issued guidance on interim disclosures about fair value of
financial instruments which requires disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well
as in annual financial statements. This guidance also requires those disclosures
in summarized financial information at interim reporting periods and is
effective for interim reporting periods ending after June 15,
2009.  As this pronouncement is only disclosure-related, it did not
have an impact on our financial position and results of operations. The required
disclosures are presented in Note8 – Assets and Liabilities
Measured at Fair Value.








11






In June
2009, the FASB issued revised guidance on how companies should determine when an
entity that is insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. The determination of whether a
company is required to consolidate an entity is based on, among other things, an
entity’s purpose and design, a company’s ability to direct the activities of the
entity that most significantly impact the entity’s economic performance and the
obligation to absorb losses of or the right to receive benefits from
the entity.  The guidance is effective as of the beginning of the
first fiscal year that begins after November 15, 2009 and early adoption is
prohibited. The Company’s adoption of this guidance is not expected to have a
material impact on the Company’s consolidated financial position, results of
operations and cash flows.





NOTE
3 – NON CASH 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 nine months
ended:




September
      30,
                2009
              
              
              September
      30,
                2008Beneficial
      conversion feature accretion
              
              $
              3,695,400
              
              
              $
              227,312Common
      stock issued as acquisition consideration
              
              
              -
              
              
              
              9,000,000Common
      stock of Zurvita issued in exchange for marketing services
              
              
              657,400
              
              
              
              -Conversion
      of Common B stock to Common A stock
              
              
              -
              
              
              
              25,689Conversion
      value of notes payable and interest to common stock
              
              
              -
              
              
              
              645,814Liability
      issued as acquisition consideration
              
              
              -
              
              
              
              1,352,129Preferred
      stock dividends
              
              
              1,499,471
              
              
              
              926,287Property
      and equipment acquired under capital lease obligations
              
              
              282,574
              
              
              
              63,212Reclassification
      of noncompensatory warrants from equity to liability
              
              
              -
              
              
              
              44,000Common
      stock issuance for consulting services
              
              
              592,720
              
              
              
              -USHBG  purchase
      price adjustment
              
              
              742,950
              
              
              
              -




NOTE
4 – DEFERRED MARKETING AGREEMENT





On July
30, 2009, Zurvita entered into an Advertising and Marketing Agreement with a
related party and issued 3.8 million shares of Zurvita Holdings common stock in
exchange for certain marketing services to be received over a one year period.
The marketing agreement is capitalized at the estimated fair market value of the
Zurvita stock issued and amortized over the one year life of the
agreement.  See Footnote 8 – Assets and Liabilities
Measured at Fair Value for further information on the Company’s
determination of fair value of the stock issued.  Approximately $110
thousand of amortization was recognized during the three and nine months ended
September 30, 2009, and is included in selling and marketing in the accompanying
statements of operations.  The remaining unamortized balance of
approximately $548 thousand is included in deferred expenses in the accompanying
balance sheet.




12


NOTE
5 – GOODWILL AND OTHER INTANGIBLE ASSETS





The
following table reflects the components of goodwill and other intangible assets
as of September 30, 2009 and December 31, 2008:




September
      30, 2009Gross
                
                
                
                
                
                Pre-Impairment
                
                
                
                
                
                AdjustedCarrying
                
                
                Accumulated
                
                
                Carrying
                
                
                Impairment
                
                
                CarryingAmount
                
                
                Amortization
                
                
                Value
                
                
                Loss
                
                
                ValueGoodwill
                
                $
                6,408,605
                
                
                $
                -
                
                
                $
                6,408,605
                
                
                $
                2,126,943
                
                
                $
                4,281,662Customer
      and vendor relationships
                
                
                2,639,000
                
                
                
                586,444
                
                
                
                2,052,556
                
                
                
                2,052,556
                
                
                
                -Software
                
                
                588,087
                
                
                
                256,502
                
                
                
                331,585
                
                
                
                -
                
                
                
                331,585Trademarks
      and tradenames
                
                
                475,825
                
                
                
                310,629
                
                
                
                165,197
                
                
                
                22,200
                
                
                
                142,997Total
                
                $
                10,111,517
                
                
                $
                1,153,575
                
                
                $
                8,957,943
                
                
                $
                4,201,699
                
                
                $
                4,756,244December
      31, 2008GrossCarrying
                
                
                Accumulated
                
                
                CarryingAmount
                
                
                Amortization
                
                
                ValueGoodwill
                
                $
                6,408,605
                
                
                $
                -
                
                
                $
                6,408,605Customer
      and vendor relationships
                
                
                2,639,000
                
                
                
                146,610
                
                
                
                2,492,390Software
                
                
                563,052
                
                
                
                61,856
                
                
                
                501,196Trademarks
      and tradenames
                
                
                475,825
                
                
                
                133,125
                
                
                
                342,700Total
                
                $
                10,086,482
                
                
                $
                341,591
                
                
                $
                9,744,891




Goodwill
represents the excess of the purchase price over the sum of the amounts assigned
to assets acquired less liabilities assumed with respect to the LifeGuard
acquisition.  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 and nine months ended September 30, 2009 and 2008 was $213 thousand and
$812 thousand and $1 million and $2.7 million, respectively.   Future
amortization of intangible assets, consisting of software, is shown in the
following table:




2009
              
              
              $
              66,6422010
              
              
              
              224,3472011
              
              
              
              35,3182012
              
              
              
              5,2782013
              
              
              
              -Thereafter
              
              
              
              -Total
              
              
              $
              331,585





The
weighted-average remaining amortization period for software is 1.38
years.





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





September
      30,
                2009
              
              
              December
      31,
                2008Goodwill
              
              $
              4,281,662
              
              
              $
              6,408,605Trademarks
      and tradenames
              
              
              142,997
              
              
              
              165,200$
              4,424,659
              
              
              $
              6,573,805




Based on
the Company’s annual impairment analysis and consideration of the current and
expected future market conditions, we determined that goodwill and certain
intangible assets related to the JRM and USHBG reporting units were impaired as
of September 30, 2009.  The Company recorded non-cash, pre-tax total
impairment charges of approximately $167 thousand and $4 million for JRM and
USHBG, respectively.  The analysis was conducted by independent valuation
specialists.  The decline in estimated fair values resulted from an
analysis of the current economic conditions, the Company’s performance as
compared to budget and lower estimated future cash flows.




13




Inherent
in management’s fair value determinations are certain judgments and estimates,
including projections of future cash flows, the discount rate reflecting the
risk inherent in future cash flows, the interpretation of current economic
indicators and market valuations and our strategic plans with regard to our
operations.  A change in these underlying assumptions would cause a change
in the results of the tests, which could cause the fair value of one or more
reporting units to be more or less than their respective carrying amounts.
 In addition, to the extent that there are significant changes in market
conditions or overall economic conditions or the Company’s strategic plans
change, it is possible that the Company’s conclusion regarding impairment could
change.





The
Company has recognized an aggregate impairment loss on goodwill and other
intangible assets in the amount of $4.2 million for the three months ended
September 30, 2009 as compared $15.3 million for the three months ended
September 30, 2008.  This impairment loss has been included within the
Company’s loss from continuing operations under the caption “Impairment loss on
goodwill and other intangible assets.”  Of the aggregate impairment
losses recorded for the three and nine months ended September 30, 2009 and 2008,
$2.1 million and $3.6 million, respectively, was attributable to carrying
amounts of goodwill.  The following table details the impairment loss by
intangible asset category as well as by reporting unit.




Reporting
      UnitFor
      the Three Months Ended, September 30, 2009JRM
                
                
                Lifeguard
                
                
                USHBG
                
                
                TotalGoodwill
                
                $
                156,400
                
                
                $
                -
                
                
                $
                1,970,543
                
                
                $
                2,126,943Customer
      and vendor relationships
                
                
                -
                
                
                
                -
                
                
                
                2,052,556
                
                
                
                2,052,556Trademarks
      and tradenames
                
                
                10,200
                
                
                
                -
                
                
                
                12,000
                
                
                
                22,200Total
                
                $
                166,600
                
                
                $
                -
                
                
                $
                4,035,099
                
                
                $
                4,201,699
   Reporting
      UnitFor
      the Three Months Ended, September 30, 2008JRM
                
                
                Lifeguard
                
                
                USHBG
                
                
                TotalGoodwill
                
                $
                165,844
                
                
                $
                -
                
                
                $
                3,431,700
                
                
                $
                3,597,544Customer
      and vendor relationships
                
                
                113,900
                
                
                
                9,084,800
                
                
                
                2,257,000
                
                
                
                11,455,700Trademarks
      and tradenames
                
                
                25,700
                
                
                
                -
                
                
                
                230,000
                
                
                
                255,700Total
                
                $
                305,444
                
                
                $
                9,084,800
                
                
                $
                5,918,700
                
                
                $
                15,308,944


14





NOTE 6
– LOANS AND NOTES PAYABLE





Loans and
Notes payable, all of which are unsecured, consist of the
following:





September
      30,
                2009
              
              
              December
      31,
                2008Promissory
      notes payable to investors and shareholders; bearing interest ranging from
      8% to 10% per annum; due December 2006; currently in
    default
              
              $
              415,000
              
              
              $
              425,000Convertible
      promissory note payable to investor; bearing interest at 7.5% per annum;
      due December 2006; currently in default
              
              
              100,000
              
              
              
              100,000Promissory
      notes payable to investors and shareholders; bearing interest of 1.53% per
      annum; due through June 2004, increasing to 15% thereafter, currently in
      default
              
              
              114,950
              
              
              
              114,950Promissory
      notes payable to Company executives bearing interest of 6% per annum;
      payable on demand
              
              
              800,000
              
              
              
              814,500Promissory
      note payable for legal settlement; bearing interest of 8.35% per annum;
      payable in monthly installments of $27,000; due through July
      2011
              
              
              525,833
              
              
              
              -Revolving
      consumer credit cards
              
              
              187,990
              
              
              
              378,485Capital
      lease obligations, at interest rates ranging from 5.2% to
    10%
              
              
              311,994
              
              
              
              93,838Promissory
      notes payable to related parties (on demand; noninterest
      bearing)
              
              
              18,592
              
              
              
              18,592Promissory
      notes payable to related parties (noninterest bearing; payable in monthly
      installments of $5,000; due through August 2010)
              
              
              60,173
              
              
              
              -Total
      loans and notes payable
              
              $
              2,534,532
              
              
              $
              1,945,365





At the
date of issue of the convertible note, 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.  As of September 30, 2009 and
December 31, 2008, $2.0 million and $1.9 million, respectively, of the loans and
notes payable are classified as current due to either maturity dates or events
of default.





The
following schedule details the future payments on capital leases:





Current
              
              $
              109,2602010
              
              
              90,4612011
              
              
              82,7852012
              
              
              72,0382013
              
              
              18,1682014
              
              
              -Total
      minimum payments
              
              
              372,712Less:
      Amount representing interest
              
              
              (60,718
              )Present
      value of capital lease obligations
              
              
              311,994Less:
      current portion
              
              
              (84,705
              )Long-term
      capital lease obligations
              
              $
              227,289





The
promissory note payable for a legal settlement was issued by Zurvita and the
note is guaranteed by the Company as of September 30, 2009.




15




NOTE
7 – DEFERRED ACQUISITION PAYMENTS





The
Company entered into a Stock Purchase Agreement on March 31, 2008 which was
subsequently amended on April 3, 2008 with USHBG and the sole stockholder of
USHBG (“Stockholder”).  Effective April 1, 2008, the Company acquired
all outstanding stock of the acquired entities.  The Stock Purchase
Agreement provided, on the share adjustment date, as defined, that the Company
had the option of unwinding the acquisition or issuing additional shares to the
Stockholder with a minimum value of $9 million.





In lieu
of unwinding the transaction or issuing additional shares, on September 10, 2009
(the “Amendment Closing”), the Company and USHBG entered an Amendment to Stock
Purchase Agreement (the “Amendment”).  Pursuant to the Amendment, the
value of the Acquired Entities has been reduced from $11,625,445 to $4,331,664
(the “Amended Purchase Price”).  The Amended Purchase Price shall be
payable as follows in accordance with the terms of the Amendment:





·
            As
      of the Amendment Closing, the Company has paid the Stockholder the
      aggregate sum of $2,191,664, which amount shall be deemed a reduction in
      the Amended Purchase Price


·
            Upon
      the Amendment Closing, the Company paid the Stockholder the sum of
      $737,500


·
            Upon
      the Amendment Closing, the Company issued an aggregate of 1,800,000 shares
      of the Company’s Class A common stock, which for the purposes of the
      Amendment were valued at $0.05 per share or $90,000.  This
      amount shall also be treated as a reduction to the Amended Purchase
      Price


·
            Upon
      the Amendment Closing, the Company issued a Promissory Note to the
      Stockholder in the principal amount of $1,312,500 with an interest rate of
      3.25% per annum, payable over a three year
term.





At
September 30, 2009, this note is classified on the accompanying balance sheet as
current and noncurrent deferred acquisition payments with quarterly payments of
approximately $241 thousand through June 2010 and $50 thousand thereafter until
March 2012.





After
taking into consideration prior amortization, impairment charges as well as an
adjustment for change in value of deferred cash consideration, a $1.7 million
adjustment resulted. This adjustment was made to paid-in capital reflecting a
modification to the amount of equity consideration issuable in connection with
the acquisition of USHBG. Of the $1.7 million adjustment to paid-in capital,
$743 thousand represented a non-cash portion that has no impact on operating
cash flows or results of operations.





NOTE
8 – ASSETS AND LIABILITIES MEASURED AT FAIR VALUE





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 Option Pricing
Model.  See Footnote
13 – Warrants and Share-Based Warrantsfor specifics on the inputs used
in determining the fair value.





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




September
      30, 2009Fair
      Value Measurements at Reporting Date UsingSignificantUnobservableInputs
              
              
              Total(Level
      3)
              
              
              Fair
      ValueWarrants
              
              $
              9,143,679
              
              
              $
              9,143,679Total
      liabilities
              
              $
              9,143,679
              
              
              $
              9,143,679







The
Company has categorized its assets and liabilities measured at fair value into
the three-level fair value hierarchy, as defined in Note 2, 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 or were
determined, based on their settlement provisions, not to be indexed to the
Company’s stock and (2) certain non-compensatory warrants.  The
valuation methodology uses a combination of observable and unobservable inputs
in calculating fair value.




16




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





Fair
      Value MeasurementsUsing
      Significant Unobservable Inputs(Level
      3)WarrantsBalance
      Beginning
                of
      Period
              
              
              Issuance
              
              
              (Gain)
      Loss Recognized in Earnings from Change in
                Fair
      Value
              
              
              Balance
      End
                of
      PeriodFor
      the Three Months Ended September 30, 2009Warrants
              
              $
              8,121,833
              
              
              $
              1,427,280
              
              
              $
              (405,434
              )
              
              $
              9,143,679For
      the Nine Months Ended September 30, 2009Warrants
              
              $
              13,315,364
              
              
              $
              7,012,905
              
              
              $
              (11,184,590
              )
              
              $
              9,143,679




For the
three and nine months ended September 30, 2009, total unrealized gains (losses)
of approximately ($405) thousand  and $11.2 million,
respectively, are included in earnings in the Statement of Operations caption
“Gain on change in fair value of warrants.”





Fair
value of Financial Instruments





The fair
values of accounts receivable and accounts payable approximate the carrying
values due to the short term nature of these instruments.  The fair
values of the notes payable approximate their carrying amounts as interest rates
on these obligations are representative of estimated market rates available to
the Company on similar instruments.





Nonrecurring
Fair Value Measurements





The
following table presents the assets and liabilities carried on the balance sheet
by level within the hierarchy as of September 30, 2009 for which a nonrecurring
change in fair value has been recorded during the three and nine months ended
September 30, 2009:




Fair
      Value at September 30,
                2009
              
              
              Significant
      Unobservable
                Inputs
      (Level 3)
              
              
              Total
      Gains
                (Losses)Goodwill
              
              $
              4,281,662
              
              
              $
              4,281,662
              
              
              $
              (2,126,943
              )Marketing
      agreement
              
              
              657,400
              
              
              
              657,400
              
              
              
              -Other
      intangible assets
              
              
              142,997
              
              
              
              142,997
              
              
              
              (2,074,756
              )$
              5,082,059
              
              
              $
              5,082,059
              
              
              $
              (4,201,699
              )


With
respect to the marketing agreement, there was no quoted market price for
Zurvita’s securities at the date Zurvita issued common stock as
consideration.  Consequently, Zurvita utilized an independent expert
valuation specialist to determine the fair value of stock issued using the
Black-Scholes Option Pricing Model.





Goodwill
and other intangible assets, consisting of customer and vendor relationships and
tradenames, with prior carrying amounts of $6.4 million and $2.2 million,
respectively, were written down to their fair values of $4.3 million and $143
thousand, respectively, resulting in impairment charges of $2.1 million each for
a total of $4.2 million.  Both market and income approaches were used
to estimate fair value of goodwill and other intangible assets.  These
valuation techniques utilized a significant number of nonobservable
inputs.




17


NOTE
9—REDEEMABLE PREFERRED STOCK




On July
30, 2009, Zurvita issued 1.75 million shares of Series A Convertible Preferred
Stock (the “Convertible Preferred Stock”) for proceeds of $1.75 million which
are convertible at a conversion price of $0.0625 (adjusted for the 4-to-1
forward stock split which occurred on August 10, 2009) into 28 million
shares.  The stated value of each issued share of Convertible
Preferred Stock is $1.00.





Events
that may result in the redemption for cash of preferred stock, and that are not
within a company’s control, require the preferred stock to be classified outside
of stockholders’ equity (in the mezzanine section).  Zurvita’s
Convertible Preferred Stock contains redemption for cash provisions with respect
to change of control, bankruptcy, adverse judicial judgment and the failure to
have available a sufficient number of authorized and unreserved shares of common
stock to issue in the event of a conversion. All the aforementioned events are
presumed not to be within Zurvita’s control. Accordingly, these instruments are
recorded within the Redeemable Preferred Stock caption of the balance sheet,
which is outside of stockholders’ equity.  Management estimates the
probability of the triggering events to be remote due to the
Company’s affiliation of stockholders that represent a majority of the
outstanding common and preferred stock.  Therefore, the carrying value
of the preferred stock has not been increased to the full redemption
value.  The reason the carrying value is not equal to the redemption
amount is due to the allocation of value to certain warrants issued in
connection with the preferred stock.  The warrants were valued at $540
thousand and the remaining proceeds of $1.21 million were allocated to the
preferred stock.





Redeemable
Preferred Stock outstanding as of September 30, 2009 and December 31, 2008, was
1.75 million shares and 0 shares, respectively.





NOTE
10—PREFERRED STOCK





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





On March
5, 2009, the Board of Directors of the Company approved the elimination of
series B, C, D, E, J, and K Preferred Stock.





Series G,
H, I and L Preferred Stock are 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 Class A 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 September
30, 2009 and December 31, 2008, accrued and unpaid dividends related to the
preferred stock are $2.4 million and $880 thousand, respectively.  The
Company’s Series A Preferred Stock does not accrue dividends.





In the
event of any liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, and before any junior security of the
Company, the holders of preferred stock shall be entitled to be paid out of the
assets of the Company available for distribution to its stockholders an
amount per share equal to the stated value of holder’s respective preferred
stock series plus the aggregate amount of accumulated but unpaid dividends on
each share of preferred stock.  If, upon a liquidation event, the
assets of the Company are insufficient to permit payment in full to such holders
of the aggregate amount that they are entitled to be paid by their respective
terms, then the entire assets, or proceeds thereof, available to be distributed
to the Company’s stockholders shall be distributed to the holders of the
preferred stock ratably in accordance with the respective amounts that would be
payable on such shares if all amounts payable were paid in full.  The
liquidation value of Series A, G, H, I, and L as of September 30, 2009 were $155
thousand, $13.3 million, $4.3 million, $17.3 million and $10.6 million,
respectively.





The table
below sets forth the number of shares of preferred stock outstanding as of
September 30, 2009 and December 31, 2008.





September
      30,
              
              
              December
      31,2009
              
              
              2008Series
      A
              
              
              155
              
              
              
              155Series
      G
              
              
              1,200
              
              
              
              1,200Series
      H
              
              
              400
              
              
              
              400Series
      I
              
              
              1,650
              
              
              
              850Series
      L
              
              
              1,050
              
              
              
              -4,455
              
              
              
              2,605





Series A Preferred
Stock





As of
September 30, 2009, 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 nine months period ended September 30,
2009.  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 certain other
corporate events.  As of September 30, 2009, the outstanding shares of
Series A Preferred Stock were convertible into 310,000 shares of Class A common
stock.




18


Series G
Preferred Stock





As of
November 7, 2009, the conversion price of each share of Series G Convertible
Preferred Stock (“Series G Preferred Stock”) was adjusted such that each share
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 $0.0275 (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.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 stock at the then applicable Series G Conversion Price.





The
Company had the option to redeem all of the outstanding Series G Preferred Stock
ten (10) days after the conversion price adjustment date (November 7, 2009), but
elected not to do so.





No shares
of Series G Preferred Stock were issued during the nine months period ended
September 30, 2009.





As of
September 30, 2009, 1,200 shares of Series G Preferred Stock were outstanding
and convertible into 436,363,636 Class A common shares.





Series H Preferred
Stock





As
of November 7, 2009, the conversion price of each share of Series H
Convertible Preferred Stock (“Series H Preferred Stock”) was adjusted such that
each share 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 $0.0275
(the “Series H Conversion Price”). The
Series H Conversion Price is subject to adjustment for certain events, including
the payment of a dividend payable in capital stock of the Company, any stock
split, combination, or reclassification and certain issuances of Class A Common
Stock or securities convertible into or exercisable for Class A Common Stock at
a price per share or conversion price less than the then applicable Series H
Conversion Price.  In the event of certain corporate changes,
including any consolidation or merger in which the Company is not the surviving
entity, sale or transfer of all or substantially all of the Company’s assets,
certain share exchanges and certain distributions of property or assets to the
holders of Class A Common Stock, the holders of the Series H Preferred Stock
have the right to receive upon conversion, in lieu of shares of Class A Common
Stock otherwise issuable, such securities and/or other property as would have
been issued or payable as a result of such corporate change with respect to or
in exchange for the Class A Common Stock issuable upon conversion of the Series
H Preferred Stock. If on
July 15, 2011, any share of Series H Preferred Stock remains outstanding and a
registration statement covering the resale of all of the Class A common stock
underlying the Series H Preferred Stock is effective and has been effective for
90 days prior to such date, the Company must convert each share of the Series H
Preferred Stock into Class A common stock at the then applicable Series H
Conversion Price.





The
Company had the option to redeem all of the outstanding Series H Preferred Stock
ten (10) days after the conversion price adjustment date, but elected not to do
so.





No shares
of Series H Preferred Stock were issued during the nine months period ended
September 30, 2009.





As of
September 30, 2009, 400 shares of Series H Preferred Stock were outstanding and
convertible into 145,454,545 Class A common shares.





Series I Preferred
Stock





As
of November 7, 2009, the conversion price of each share of Series I
Convertible Preferred Stock (“Series I Preferred Stock”) was adjusted such that
each share 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 $0.0275
(the “Series I Conversion Price”). The
Series I 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 I
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 I 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
I Preferred Stock. If on
July 15, 2011 any share of Series I Preferred Stock remains outstanding and a
registration statement covering the resale of all of the Class A common stock
underlying the Series I Preferred Stock is effective and has been effective for
90 days prior to such date, the Company must convert each share of the Series I
Preferred Stock into Class A common stock at the then applicable Series I
Conversion Price.





The
Company had the option to redeem all of the outstanding Series I Preferred Stock
ten (10) days after the conversion price adjustment date, but elected not to do
so.





So long
as there is an aggregate of not less than 363 shares of Series I Preferred Stock
issued and outstanding (subject to appropriate adjustment for any stock split,
stock dividend combination or other similar event), the majority of the holders
of Series I Preferred Stock, voting exclusively as a separate class and with
each share of Series I Preferred Stock entitled to one vote, shall have the
right to nominate and elect two of the members of the Board of Directors of the
Company.





In
January and March 2009, the Company issued 400 shares each (800 shares total) of
its Series I Preferred Stock and a warrant agreement to acquire 45,000,000
shares each (90,000,000 shares total) of the Company’s Class A common stock,
exercisable for five (5) years at an exercise price of $0.375, for an aggregate
cash purchase price of $8,000,000.  These warrants are classified as
liabilities due to certain settlement provisions; these warrants were determined
not to be indexed to the Company’s stock under the provisions.  The
fair value of the warrants was determined by a third–party valuation specialist
based upon the Black-Scholes Option Pricing Model.





At
September 30, 2009, the fair value of these warrants is approximately $990
thousand. The effect of mark-to market adjustments was a decrease in value
of $3.3 million and has been recorded as “Gain on change in fair value of
warrants” within the accompanying Statement of Operations.  See Note 8
for additional fair value disclosure information.





As of
September 30, 2009, 1,650 shares Series I Preferred Stock were outstanding and
convertible into 600,000,000 Class A common shares.




19


Series L Preferred
Stock





Each
share of Series L Convertible Preferred Stock (“Series L 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 $0.01 (the “Series L
Conversion Price”).  The Series L 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 L 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 L 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 L Preferred Stock.  If on July 15, 2011 any
share of Series L Preferred Stock remains outstanding and a registration
statement covering the resale of all of the Class A common stock underlying the
Series L Preferred Stock is effective and has been effective for 90 days prior
to such date, the Company must convert each share of the Series L Preferred
Stock into Class A common stock at the then applicable Series L Conversion
Price.





In June
and September 2009, the Company issued a total of 1,050 shares of its Series L
Preferred Stock and a warrant agreement to acquire 50,625,000 and 67,500,000
shares respectively (118,125,000 shares total) of the Company’s Class A common
stock, exercisable for five (5) years at an exercise price of $0.375, for an
aggregate cash purchase price of $10,500,000.  These warrants are
classified as liabilities due to certain settlement provisions; these warrants
were determined not to be indexed to the Company’s stock under the
provisions.  The fair value of the warrants was determined by a
third–party valuation specialist based upon the Black-Scholes Option Pricing
Model.





At
September 30, 2009, the fair value of these warrants is approximately $1.5
million.  See Note 8 for additional fair value disclosure
information.





In
connection with the Series L Preferred Stock, the Company recorded an aggregate
beneficial conversion feature of approximately $8.4 million.  The
resulting discounts are being accreted as a dividend to the preferred
stockholders from the date of issuance to the earliest preferred stock’s
conversion date, using the effective yield method. Accretion recognized for the
nine month period ended September 30, 2009 was approximately $3.7
million.





As of
September 30, 2009, 1,050 shares of Series L Preferred Stock were outstanding
and convertible into 1,050,000,000 Class A common shares.





NOTE
11 – COMMON STOCK





The
Company has authorized one billion three hundred sixty million (1,360,000,000)
Class A common stock shares and one hundred twenty million (120,000,000) Class B
common stock 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.





During
August 2009, the Company issued 5,074,872 shares of its common stock to an
individual in settlement of potential claims.




NOTE 12 – NON-CONTROLLING
INTEREST





On July
30, 2009 (the “Closing Date”), Red Sun Minning Inc. (“Red Sun”), entered into a
Share Exchange Agreement (the “Share Exchange Agreement”) with Zurvita and the
holders of all of the issued and outstanding securities of Zurvita prior to the
Closing Date (the “Zurvita Securities Holders”), pursuant to which, among other
things, the Zurvita Securities Holders contributed all of their securities of
Zurvita to Red Sun in exchange for Red Sun’s issuance to them of 9.3 million
shares of common stock of Red Sun.  Prior to the consummation of the
Share Exchange agreement, Zurvita was a wholly-owned subsidiary of Amacore, and
Red Sun was a public shell.





Concurrent
with the closing of the Share Exchange Transaction, Zurvita entered into a
Securities Purchase Agreement (the “Purchase Agreement”) with an accredited
investor and closed a private placement offering pursuant to which it raised
gross proceeds of $1.75 million and, among other things, issued and sold
convertible preferred stock convertible into shares of Zurvita’s common stock at
an initial conversion price of $0.25, subsequently adjusted to $0.0625 pursuant
to a four (4) for one (1) forward stock split.





Concurrent
with the closing of the Share Exchange Transaction, Zurvita entered into an
Advertising and Marketing Agreement with OmniReliant Holdings, Inc.
(“OmniReliant”), a related party, pursuant to which Zurvita agreed to provide
placement of advertising for OmniReliant on its website and OmniReliant agreed
to provide Zurvita with certain marketing services (the “OmniReliant
Agreement”). The marketing services to be provided by OmniReliant include the
production of infomercials, video production services, management of call
centers, buying and fulfillment services. In consideration for such services,
OmniReliant received an aggregate of 15.2 million shares of Zurvita’s
common stock.




20


Pursuant
to the terms of a repurchase agreement (the “Repurchase Agreement”), Red Sun
repurchased 2 million or 66% of the outstanding shares of Red Sun common stock
for a total repurchase price of $210 thousand.




As a
result of the Share Exchange Transaction and the consummation of the
transactions pursuant to the Repurchase Agreement, Red Sun experienced a change
in control and ceased to be a shell company. Zurvita became a wholly-owned
subsidiary of Red Sun and the former shareholders of Zurvita became the owners
of approximately 66 percent of Red Sun’s issued and outstanding shares of common
stock and 44 percent of the voting rights of total equity securities outstanding
(after giving effect to subsequent issuances of common stock).  The
combined entity elected to change its name from Red Sun Mining, Inc. to Zurvita
Holdings, Inc. while maintaining Red Sun’s status as a SEC registrant and
continuing the business plan of Zurvita only.





Subsequent
to the reverse merger, management determined Zurvita to be a variable interest
entity due to affiliated parties participating in the design of the entity and
insufficent equity investment at risk to permit Zurvita to finance its
activities without requiring additional subordinated financial
support.  Management also determined Amacore to be the primary
beneficiary and has included the accounts of Zurvita within its consolidated
financial statements.  Significant factors that led to this
determination were Amacore’s voting rights relative to other common and
preferred stockholders as well as how closely associated Amacore and Zurvita are
relative to other related party variable interest holders, and the extent of
Amacore's ability to direct the significant activities of Zurvita.





As a
result of the aforementioned transactions, Amacore’s ownership interest in
Zurvita Holdings changed from 100% to 66%.  The below schedule shows
the effects of this change on Amacore’s equity.




Net
      Loss Attributable to The Amacore Group, Inc. andTransfers
      to the Noncontrolling InterestFor
      the Nine Months Ended September 30, 2009Net
      loss attributable to The Amacore Group, Inc.
              
              $
              (9,902,575
              )Increase
      in additional paid in capital from share exchange
              
              
              921,004Change
      from net loss attributable to The Amacore Group, Inc.and
      transfers to noncontrolling interest
              
              $
              (8,981,571
              )




The loss
attributable to the noncontrolling interest exceeds the noncontrolling interest
in the equity capital of Zuvita Holdings, resulting in a deficit noncontrolling
interest.  The Company has adopted ASC Paragraph 810-10-45-21 which
requires that the noncontrolling interest continue to be attributed its share of
losses even if that attribution results in a deficit noncontrolling interest
balance. The table below presents consolidated net income (loss) attributable to
Amacore and earnings (loss) per share on a pro forma basis as if the said excess
had been charged to the controlling interest in accordance with the prior
requirement of ASC Paragraph 810-10-45-7.






21




For
      the Three Months Ended September 30, 2009As
      Reported
              
              
              Pro
      Forma AdjDecrease
      (Increase)
              
              
              Pro
      FormaBalanceNet
      loss before income taxes
              
              
              (7,264,319
              )
              
              
              
              
              
              (7,264,319
              )Income
      taxes
              
              
              5,086
              
              
              
              
              
              
              5,086Net
      Loss
              
              
              (7,269,405
              )
              
              
              
              
              
              (7,269,405
              )Less:
      Net loss attributed to the noncontrolling interest
              
              
              1,610,555
              
              
              
              (1,610,555
              ) 
      (1)
              
              
              -Net loss
      attributed to The Amacore Group, Inc.
              
              
              (5,658,850
              )
              
              
              
              
              
              
              (7,269,405
              )Preferred
      stock dividend and accretion
              
              
              (4,224,426
              )
              
              
              
              
              
              
              (4,224,426
              )Net
      loss attributed to The Amacore Group, Inc.available to common
      stockholders
              
              
              (9,883,276
              )
              
              
              (1,610,555
              ) 
      (1)
              
              
              (11,493,831
              )Basic
      and diluted loss per share
              
              $
              (0.01
              )
              
              
              
              
              
              $
              (0.01
              )Basic
      and diluted weighted average number of common shares
      outstanding
              
              
              1,030,774,307
              
              
              
              
              
              
              
              1,030,774,307(1)
      Noncontrolling interest's portion of net loss in excess of noncontrolling
      interest's equity capital
  For
      the Nine Months Ended September 30, 2009As
      Reported
              
              
              Pro
      Forma AdjDecrease
      (Increase)
              
              
              Pro
      FormaBalanceNet
      loss before income taxes
              
              
              (6,313,173
              )
              
              
              
              
              
              
              (6,313,173
              )Income
      taxes
              
              
              5,086
              
              
              
              
              
              
              
              5,086Net
      Loss
              
              
              (6,318,259
              )
              
              
              
              
              
              
              (6,318,259
              )Less:
      Net loss attributed to the noncontrolling interest
              
              
              1,610,555
              
              
              
              (1,610,555
              )
      (1)
              
              
              -Net loss
      attributed to The Amacore Group, Inc.
              
              
              (4,707,704
              )
              
              
              
              
              
              
              (6,318,259
              )Preferred
      stock dividend and accretion
              
              
              (5,194,871
              )
              
              
              
              
              
              
              (5,194,871
              )Net
      loss attributed to The Amacore Group, Inc.available to common
      stockholders
              
              
              (9,902,575
              )
              
              
              (1,610,555
              )
      (1)
              
              
              (11,513,130
              )Basic
      and diluted loss per share
              
              $
              (0.01
              )
              
              
              
              
              
              $
              (0.01
              )Basic
      and diluted weighted average number of common shares
      outstanding
              
              
              1,022,343,362
              
              
              
              
              
              
              
              1,022,343,362(1)
      Noncontrolling interest's portion of net loss in excess of noncontrolling
      interest's equity capital






22





As of
September 30, 2009, the assets and liabilities of Zurvita are included in the
consolidated balance sheet of the Company and are disclosed as
follows:




September
      30, 2009ASSETSCurrent
      assetsCash
              
              $
              162,571Accounts
      receivable
              
              
              27,587Deferred
      expenses
              
              
              1,001,737Deferred
      Omni marketing agreement
              
              
              547,833Total
      current assets
              
              
              1,739,728Property,
      plant and equipment (net of accumulated depreciation of
      $37,238)
              
              
              106,401Deposits
              
              
              138,393Agent
      advanced compensation
              
              
              135,527Total
      Assets
              
              $
              2,120,049LIABILITIESCurrent
      liabilitiesAccounts
      payable
              
              $
              285,115Loans
      and notes payable - current
              
              
              289,065Accrued
      expenses and other liabilities
              
              
              118,863Deferred
      revenue
              
              
              1,039,783Total
      current liabilities
              
              
              1,732,826Fair
      value of warrants
              
              
              4,551,440Loans
      and notes payable - long term
              
              
              236,769Total
      liabilities
              
              $
              6,521,035
 
 There are
no restrictions as to the use of Zurvita’s assets as of September 30,
2009.





NOTE
13 – WARRANTS AND SHARE-BASED AWARDS





Amacore





Employee Stock Incentive
Plan





In 1997
the Company adopted a Stock Incentive Plan (the “Plan”). The Plan is
administered by the Board of Directors or a committee thereof and provides for
options to purchase 750,000 shares of Class A common stock to be granted under
the Plan to employees including officers, directors, independent contractors and
consultants to the Company.  The Plan authorizes the issuance of incentive
stock options (“ISOs”), as defined in the Internal Revenue Code of 1986, as
amended, non-qualified stock options (“NQSOs”) and stock appreciation rights
(“SARs”).  Consultants and directors who are not also employees of the
Company are eligible for grants of only NQSOs and SARs. The exercise price of
each ISO may not be less than 100% of the fair market value of the common stock
at the time of grant, except that in the case of a grant to an employee who owns
10% or more of the outstanding Class A common stock of the Company or a
subsidiary of the Company, the exercise price may not be less than 110% of the
fair market value on the date of grant. The exercise price of each NQSO or SAR
may not be less than 85% of the fair market value of the Class A common stock at
the time of grant. Generally, options shall vest at 20%, per year, and shall be
outstanding for ten years. As of September 30, 2009 and December 31, 2008, no
options have been granted under the Plan.





Warrants





During
the nine months ended September 30, 2009, the Company issued warrants to
purchase an aggregate of 208.2 million shares of Class A common stock.  At
September 30 2009, there were outstanding warrants to purchase approximately
438.9 million and 8.0 million shares of Class A and Class B common stock,
respectively, exercisable at varying prices through 2014.




23


The
following table summarizes the status of all warrants outstanding and
exercisable at September 30, 2009:





Class
      AOutstanding
      and Exercisable WarrantsRange
      of
                  Exercise
                  Prices
                
                
                Number
      of
                  Warrants
                
                
                Weighted
                  Average
                  Exercise
      Price
                
                
                Weighted
                  Average
                  Remaining
                  Contractual
      Term$
                0.01
      to $0.49
                
                
                
                428,518,217
                
                
                $
                0.37
                
                
                
                4.20$
                0.50
      to $0.99
                
                
                
                7,850,000
                
                
                $
                0.51
                
                
                
                3.10$
                1.00
      to $1.49
                
                
                
                1,175,000
                
                
                $
                1.20
                
                
                
                1.18437,543,217
                
                
                $
                0.38
                
                
                
                4.17
   Class
      BOutstanding
      and Exercisable WarrantsRange
      of
                  Exercise
                  Prices
                
                
                Number
      of
                  Warrants
                
                Weighted
                  Average
                  Exercise
      Price
                
                Weighted
                  Average
                  Remaining
                  Contractual
      Term$
                0.01
      to $0.49
                
                
                
                1,500,000
                
                $
                0.16
                
                
                0.66$
                0.50
      to $0.99
                
                
                
                6,465,000
                
                $
                0.50
                
                
                3.187,965,000
                
                $
                0.44
                
                
                2.71








24


Equity
Warrants





The
following tables summarize the activity for compensatory warrants classified as
equity:





Class
      A WarrantsNine
      Months Ended September 30,2009Warrants
                
                
                Weighted
      Average
                  Exercise
                  Price
                
                
                Weighted
      Average Remaining Contractual
                  Term
                
                
                Aggregate
      Intrinsic
                  ValueOutstanding
      at December 31, 2008
                
                
                13,125,000
                
                
                $
                0.46
                
                
                
                3.76
                
                
                $
                -Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Cancelled
      or expired
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Exercised
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Outstanding
      at September 30, 2009
                
                
                13,125,000
                
                
                $
                0.46
                
                
                
                3.01
                
                
                $
                -Exercisable
      at September 30, 2009
                
                
                12,375,000
                
                
                $
                0.45
                
                
                
                2.97
                
                
                $
                -
   Class
      B WarrantsNine
      Months Ended September 30,2009Warrants
                
                
                Weighted
      Average
                  Exercise
                  Price
                
                
                Weighted
      Average Remaining Contractual
                  Term
                
                
                Aggregate
      Intrinsic
                  ValueOutstanding
      at December 31, 2008
                
                
                7,965,000
                
                
                $
                0.44
                
                
                
                3.46
                
                
                $
                -Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Cancelled
      or expired
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Exercised
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Outstanding
      and exercisable at September 30, 2009
                
                
                7,965,000
                
                
                $
                0.44
                
                
                
                2.71
                
                
                $
                -





A summary
of the status of all of the Company's non-vested equity warrants as of September
30, 2009, and the changes during the nine months ended September 30, 2009, is
presented below.  There were no non-vested outstanding Class B equity
warrants outstanding as of September 30, 2009 and December 31, 2008, nor were
there any issuances during the nine months ended September 30,
2009.





Class
      A Equity WarrantsNine
      Months EndedSeptember
      30, 2009Warrants
              
              
              Weighted
                Average
                Excerise
                PriceNon-vested
      at December 31, 2008
              
              
              1,925,000
              
              
              $
              0.41Issued
              
              
              -
              
              
              
              -Vested
              
              
              (1,175,000
              )
              
              
              0.42Exercised
              
              
              -
              
              
              
              -Non-vested
      at September 30, 2009
              
              
              750,000
              
              
              $
              0.41




25




As of
September 30, 2009, there was approximately $208 thousand of total unrecognized
compensation cost related to non-vested warrants that is expected to be
recognized over a weighted-average period of 1.79 years.  The
intrinsic value of warrants exercised during the nine month periods ended
September 30, 2009 and September 30, 2008 was $14 thousand and $144 thousand,
respectively.  The total fair value of warrants vested during the nine
month period ended September 30, 2009 was $495 thousand. The weighted
average grant date fair value of warrants granted during the nine month periods
ended September 30, 2009 and 2008 was $0 and $0.38, respectively.





Liability
Warrants





Certain
of these warrants are liability instruments issued in conjunction with preferred
stock and convertible promissory notes.  These warrants are classified
as liability instruments as net share settlement is not considered within the
Company’s control and non-standard anti-dilutive provisions.  At September
30, 2009, there were warrants to purchase 426 million shares of Class A common
stock that were classified as liabilities.  The remaining warrants are
compensatory warrants, issued to employees and others in exchange for
services.





The fair
value of each option award classified as a liability on the balance sheet is
estimated on the date of the grant using the Black-Scholes Option Pricing Model
that uses the assumptions noted in the following table. Expected volatility is
based on the historical volatility of the Company’s stock. The risk-free rate
for periods within the contractual life of the option is based on the U.S.
Treasury Strip yield curve in effect at the time of grant. The expected term of
options granted represents the period of time that options granted are expected
to be outstanding.





Assumptions
used to determine the fair value of the stock options and warrants granted are
as follows:




Nine
      Months EndedSeptember
      30, 2009Expected
      dividends
              0%Expected
      volatility
              128%Risk
      free interest rate
              2.01%
      - 2.38%Expected
      life
              5
      years





A summary
of the status of the Company's non-compensatory warrants classified as
liabilities on the balance sheet is presented below.




Nine
      Months Ended
                  September
      30, 2009Warrants
                
                
                Weighted
      Average
                  Exercise
                  Price
                
                
                Weighted
      Average Remaining Contractual
                  Term
                
                
                Aggregate
      Intrinsic
                  ValueOutstanding
      at December 31, 2008
                
                
                218,368,217
                
                
                $
                0.37
                
                
                
                4.47
                
                
                $
                458,500Granted
                
                
                208,225,000
                
                
                
                0.37
                
                
                
                -
                
                
                
                -Exercised
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Cancelled
      or Expired
                
                
                (800,000
                )
                
                
                0.67
                
                
                
                -
                
                
                
                -Outstanding
      at September 30, 2009
                
                
                425,793,217
                
                
                $
                0.37
                
                
                
                4.20
                
                
                $
                118,000Exercisable
      at September 30, 2009
                
                
                425,168,217
                
                
                $
                0.37
                
                
                
                4.20
                
                
                $
                118,000
 A summary
of the status of all of the Company's non-vested liability warrants as of
September 30, 2009, and the changes during the nine months ended September 30,
2009, is presented below.
  Class
      A Liability WarrantsNine
      Months EndedSeptember
      30, 2009Warrants
                
                
                Weighted
                  Average
                  Grant-Date
                  Fair
      ValueNon-vested
      at December 31, 2008
                
                
                1,250,000
                
                
                $
                0.45Granted
                
                
                -
                
                
                
                -Vested
                
                
                (625,000
                )
                
                
                0.45Forfeited
                
                
                -
                
                
                
                -Non-vested
      at September 30, 2009
                
                
                625,000
                
                
                $
                0.45




26




Stock Awards
Issued





During
the nine months ended September 30, 2009 and 2008, 19,757,377 and 3,200,000
million shares of common stock were issued for various purposes, such as
employment compensation and for goods and services, respectively.  The
Company’s stock awards consist of Class A and Class B common stock.  The
grant date fair value is based on the share price as of the award
date.  For the three and nine months ended September 30, 2009 no
share-based compensation was recognized within the Statement of
Operations.  For the three and nine months ended September 30, 2008,
approximately $13 thousand and $727 thousand, respectively, of share-based
compensation was recognized within the Statement of
Operations.





Stock-Based Compensation
Expense





For the
three and nine months ended September 30, 2009 and 2008, 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:




For
      the Three Months Ended
              
              
              For
      the Nine Months EndedSeptember
      30,
              
              
              September
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008Stock-based
      compensation:Professional
      fees
              
              $
              -
              
              
              $
              474,240
              
              
              $
              -
              
              
              $
              1,481,665Payroll
      and employee benefits
              
              
              35,466
              
              
              
              208,778
              
              
              
              129,427
              
              
              
              388,422Total
              
              $
              35,466
              
              
              $
              683,018
              
              
              $
              129,427
              
              
              $
              1,870,087




Zurvita





Warrants





At
September 30, 2009 Zurvita had outstanding warrants to purchase an aggregate of
approximately 28.6 million shares of common stock, exercisable at $0.0625 per
share through 2016.





These
warrants are liability instruments issued in conjunction with preferred
stock.  These warrants are classified as liability instruments as net
share settlement is not considered within the Company’s control. No warrants
were issued, exercised, canceled or expired, outstanding or exercisable at
December 31, 2008.




The fair
value of warrants is estimated on the date of the grant using the Black-Scholes
Option Pricing Model that uses the assumptions noted in the following table.
Expected volatility is based on the historical volatility of the stock of
comparable public companies. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury Strip yield curve
in effect at the time of grant. The expected term of options granted represents
the period of time that options granted are expected to be
outstanding.





Assumptions
used to determine the fair value of the stock options and warrants granted for
the period from January 1, 2009 to September 30, 2009:





September
      30, 2009Expected
      dividends
              0%Expected
      volatility
              65%Risk
      free interest rate
              3.22%Expected
      life
              5 -
      7 years





Zurvita
has 28.6 million warrants that are outstanding and exercisable at September 30,
2009 with a weighted average exercise price of $0.0625 and a weighted average
remaining contractual life of 6.79 years.




27


A summary
of the status of Zurvita’s non-compensatory warrants classified as
liabilities on the Company’s consolidated balance sheet is presented
below.




Nine
      Months EndedSeptember
      30, 2009Warrants
              
              
              Weighted
      Average
                Exercise
                Price
              
              
              Weighted
      Average Remaining Contractual
                Term
              
              
              Aggregate
      Intrinsic
                ValueOutstanding
      at December 31, 2008
              
              
              -
              
              
              $
              -
              
              
              
              -
              
              
              $
              -Granted
              
              
              28,560,000
              
              
              
              0.06
              
              
              
              6.96
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Cancelled
      or Expired
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      at September 30, 2009
              
              
              28,560,000
              
              
              $
              0.06
              
              
              
              6.79
              
              
              $
              5,355,000Exercisable
      at September 30, 2009
              
              
              28,560,000
              
              
              $
              0.06
              
              
              
              6.79
              
              
              $
              5,355,000


The total
fair value of warrants vested during the nine months ended September 30, 2009
was approximately $550 thousand.  The weighted average grant date fair
value of warrants granted during the nine months ended September 30, 2009 was
$0.02.





Share-Based
Expense





For the
nine months ended September 30, 2009, Zurvita issued to a related party, for
consulting services, a warrant to purchase up to 140 thousand shares of Common
Stock at an initial exercise price of $0.25 per share.  Due to a four
(4) for one (1) forward stock split, the number of warrants increased to 560
thousand and the exercise price has been adjusted to $0.0625 per
share.  For the three and nine months ended September 30,
2009, $190 thousand share-based expense is included within the Statement of
Operations, respectively.  For the three and nine months ended
September 30, 2008 no share-based compensation was recognized within the
Statement of Operations.





Stock Awards
Issued





On July
30, 2009, Zurvita granted to an executive 1.8 million shares of common stock, to
be held in escrow, in connection with the execution of an employment agreement
and pursuant to Zurvita’s 2009 Incentive Stock Plan.  These shares
will be issued in accordance with the vesting period or upon completion of
certain performance measures.  Due to a four (4) for one (1) forward
stock split, the amount of shares was increased to 7.2 million.  3.6
million shares vest on July 30, 2010 and 3.6 million shares vest on July 30,
2011.  The grant date fair value was $306 thousand. For the three
and nine months ended September 30, 2009, approximately $38 thousand, of
share-based compensation was recognized within the Statement of
Operations.  For the three and nine months ended September 30, 2008 no
share-based compensation was recognized within the Statement of
Operations.





2009 Incentive Stock
Plan





Following
the closing of the Share Exchange Transaction, Zurvita’s Board of Directors
adopted the 2009 Incentive Stock Plan (the 2009 Plan), pursuant to which we
reserved for issuance 6 million shares of Zurvita common stock to be used as
awards to employees, directors, consultants, and other service providers. The
purpose of the 2009 Plan is to provide an incentive to attract and retain
officers, consultants, advisors and employees whose services are considered
valuable, to encourage a sense of proprietorship and to stimulate an active
interest of such persons into Zurvita’s development and financial success. It is
currently anticipated that we will adopt a separate plan for Zurvita’s Board of
Directors. Under the proposed 2009 Plan, Zurvita is authorized to issue
incentive stock options intended to qualify under Section 422 of the Code,
non-qualified stock options, stock appreciation rights, performance shares,
restricted stock and long term incentive awards. The 2009 Plan will be
administered by our Board of Directors until such time as such authority has
been delegated to a committee of the Board of Directors.




28


Stock-Based Compensation
Expense





For the
three and nine months ended September 30, 2009 and 2008, 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:




For
      the Three Months Ended
                
                
                For
      the Nine Months EndedSeptember
      30,
                
                
                September
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Stock-based
      compensation:Professional
      fees
                
                $
                10,780
                
                
                $
                -
                
                
                $
                10,780
                
                
                $
                -Payroll
      and employee benefits
                
                
                218,025
                
                
                
                -
                
                
                
                218,025
                
                
                
                -Total
                
                $
                228,805
                
                
                $
                -
                
                
                $
                228,805
                
                
                $
                -


NOTE 14
– INCOME TAXES





The
Company has estimated its Texas gross margin tax liability to be $5 thousand and
$0 as of September 30, 2009 and 2008, respectively; and these amounts have been
included within the income tax provision on the Statement of
Operations.





NOTE 15
- RELATED PARTY TRANSACTIONS





As part
of the acquisition agreement between the Company and JRM, the Company assumed
$287 thousand of liabilities of which $163 thousand and $69 thousand represented
personal credit card balances and business credit lines, respectively. The
liabilities are personally guaranteed by two of the Senior Vice Presidents
of the JRM and are recorded within the Company’s notes and loans payable
category of the Balance Sheet.  As of September 30, 2009 and December
31, 2008, the outstanding balance of these personal credit cards and business
credit lines was approximately $188 thousand and $203 thousand,
respectively.





LifeGuard
markets a membership product, which it licenses from DirectMed, a company 33%
owned by a former majority shareholder of LifeGuard.   LifeGuard pays
DirectMed a branding fee based on the number of memberships sold. During
the nine month periods ended September 30, 2009 and 2008, LifeGuard paid
DirectMed approximately $112 thousand and $378 thousand, respectively, in
branding fees.  In addition, LifeGuard owed DirectMed approximately
$485 thousand and $525 thousand as of September 30, 2009 and December 31, 2008,
respectively, for unpaid branding fees.  Branding fees are included in
sales commissions in the accompanying Statements of Operations.





In 2008,
the Company and Jay Shafer (Chief Executive Officer) entered into promissory
notes in an aggregate amount of $800 thousand payable to Jay Shafer evidencing
loans made by Mr. Shafer to the Company.  The promissory notes bear
interest at 6% and are payable upon demand.  As of September 30, 2009, the
principal balance remains outstanding and the Company has recorded accrued
interest expense of approximately $47 thousand.





NOTE
16 – SEGMENT ANALYSIS





The
Company's reportable segments are strategic business units that offer different
products and services and have separate management teams and each respective
segment’s financial performance is analyzed separately for making operational
and financial decisions. The business units represent five reportable segments:
JRM, LifeGuard, USHBG, Zurtiva and Corporate and Other. The LifeGuard segment is
the Company’s operations division consisting of product fulfillment, customer
support, membership billing, claims administration, provider membership network
maintenance and information technology.  LifeGuard generates revenue
primarily from the sale of healthcare benefit membership plans. USHBG segment is
an outbound telemarketing company primarily marketing major and limited medical
benefit plans.  The Zurvita segment is a multi-level marketing company
that sells healthcare, financial services and consumer products to individuals
and families.  The JRM segment markets various financial services and
healthcare products through its telemarketing center and agent distribution
network to individuals, families and employer groups. The Corporate and Other
segment provides management and financial support to the Company’s various
divisions as well as performs corporate governance and compliance. The Corporate
and Other segment recognizes residual revenue from agreements entered into prior
to the acquisitions of LifeGuard, JRM and USHBG.





The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on operating earnings of the respective business segments.




29


Summarized
financial information concerning the Company's reportable segments is shown in
the following tables, followed by a reconciliation of segment revenue to
consolidated revenue for the three months ended September 30, 2008 and
2009:





For
      the Three Months Ended September 30, 2009LifeGuard
              
              
              USHBG
              
              
              Zurvita
              
              
              JRM
              
              
              Corporate
                and
      Other
              
              
              TotalTotal
      revenue
              
              $
              5,350,267
              
              
              $
              871,530
              
              
              $
              1,289,135
              
              
              $
              45,372
              
              
              $
              288,304
              
              
              $
              7,844,608Net
      income (loss) before in income taxes
              
              $
              418,242
              
              
              $
              (4,523,962
              )
              
              $
              (5,733,643
              )
              
              $
              (292,574
              )
              
              $
              4,478,173
              
              
              $
              (5,653,764
              )Income
      taxes
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              5,086
              
              
              $
              5,086Net
      income (loss)
              
              $
              418,242
              
              
              $
              (4,523,962
              )
              
              $
              (5,733,643
              )
              
              $
              (292,574
              )
              
              $
              4,473,086
              
              
              $
              (5,658,850
              )






For
      the Three Months Ended September 30, 2008LifeGuard
              
              
              USHBG
              
              
              Zurvita
              
              
              JRM
              
              
              Corporate
                and
      Other
              
              
              TotalTotal
      revenue
              
              $
              6,462,754
              
              
              $
              1,422,031
              
              
              $
              1,405,442
              
              
              $
              39,398
              
              
              $
              246,264
              
              
              $
              9,575,889Net
      income (loss) before income taxes
              
              $
              (11,055,481
              )
              
              $
              (6,090,959
              )
              
              $
              (1,574,710
              )
              
              $
              (463,837
              )
              
              $
              8,009,331
              
              
              $
              (11,175,656
              )Income
      taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      income (loss)
              
              $
              (11,055,481
              )
              
              $
              (6,090,959
              )
              
              $
              (1,574,710
              )
              
              $
              (463,837
              )
              
              $
              8,009,331
              
              
              $
              (11,175,656
              )




Total
depreciation and amortization expense for the three months ended September 30,
2009 for LifeGuard, USHBG, Zurvita, JRM and Corporate and Other was
approximately $112 thousand, $182 thousand, $9 thousand, $1 thousand and $24
thousand, respectively.  For the three months ended September 30,
2008, total depreciation and amortization expense for LifeGuard, USHBG, Zurvita,
JRM and Corporate and Other was approximately $773 thousand, $307 thousand, $2
thousand, $8 thousand and $12 thousand, respectively.




For
      the Three Months Ended
                September
      30,2009
              
              
              2008RevenuesTotal
      revenues for reportable segments
              
              $
              7,844,608
              
              
              $
              9,575,889Elimination
      of intersegment revenues
              
              
              (756,526
              )
              
              
              (1,023,236
              )Total
      consolidated revenue
              
              $
              7,088,082
              
              
              $
              8,552,653Net
      LossNet
      loss for reportable segments
              
              $
              (5,658,850
              )
              
              $
              (11,175,656
              )Elimination
      of intersegment profits
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (5,658,850
              )
              
              $
              (11,175,656
              )










30




For
      the Nine Months Ended September 30, 2009LifeGuard
                
                USHBG
                
                Zurvita
                
                JRM
                
                
                Corporate
                  and
      Other
                
                TotalTotal
      revenue
                
                $
                16,825,378
                
                
                $
                3,153,552
                
                
                $
                3,634,110
                
                
                $
                137,210
                
                
                $
                657,532
                
                
                $
                24,407,782Net
      income (loss) before in income taxes
                
                $
                (228,889
                )
                
                $
                (5,178,259
                )
                
                $
                (8,345,743
                )
                
                $
                (570,565
                )
                
                $
                9,620,838
                
                
                $
                (4,702,618
                )Income
      taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                5,086
                
                
                $
                5,086Net
      income (loss)
                
                $
                (228,889
                )
                
                $
                (5,178,259
                )
                
                $
                (8,345,743
                )
                
                $
                (570,565
                )
                
                $
                9,615,752
                
                
                $
                (4,707,704
                )Total
      assets held
                
                $
                8,000,345
                
                
                $
                2,330,492
                
                
                $
                2,120,050
                
                
                $
                13,727
                
                
                $
                7,094,768
                
                
                $
                19,559,382
   For
      the Nine Months Ended September 30, 2008LifeGuard
                
                USHBG
                
                Zurvita
                
                JRM
                
                Corporate
                  and
      Other
                
                TotalTotal
      revenue
                
                $
                16,965,782
                
                
                $
                2,893,743
                
                
                $
                2,274,377
                
                
                $
                212,099
                
                
                $
                950,194
                
                
                $
                23,296,195Net
      loss before income taxes
                
                $
                (16,664,496
                )
                
                $
                (6,313,418
                )
                
                $
                (3,590,448
                )
                
                $
                (633,463
                )
                
                $
                (2,647,364
                )
                
                $
                (29,849,189
                )Income
      taxes
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss
                
                $
                (16,664,496
                )
                
                $
                (6,313,418
                )
                
                $
                (3,590,448
                )
                
                $
                (633,463
                )
                
                $
                (2,647,364
                )
                
                $
                (29,849,189
                )Total
      assets held
                
                $
                10,351,316
                
                
                $
                6,373,853
                
                
                $
                1,162,878
                
                
                $
                191,692
                
                
                $
                1,574,259
                
                
                $
                19,653,999





Summarized
financial information concerning the Company's reportable segments is shown in
the following tables, followed by a  reconciliation of segment revenue
and assets to consolidated revenue and assets is as follows for the nine months
ended September 30, 2008 and 2009:





For
      the Nine Months Ended
                September
      30,2009
              
              
              2008RevenuesTotal
      revenues for reportable segments
              
              $
              24,407,782
              
              
              $
              23,296,195Elimination
      of intersegment revenues
              
              
              (2,441,784
              )
              
              
              (2,056,602
              )Total
      consolidated revenue
              
              $
              21,965,998
              
              
              $
              21,239,593Net
      IncomeNet
      total loss for reportable segments
              
              $
              (4,707,704
              )
              
              $
              (29,849,189
              )Elimination
      of intersegment profits
              
              
              -
              
              
              
              -Net
      income
              
              $
              (4,707,704
              )
              
              $
              (29,849,189
              )AssetsTotal
      assets for reportable segements
              
              $
              19,559,382
              
              
              $
              19,653,999Elimination
      of intersegment receivables
              
              
              (1,928,320
              )
              
              
              (1,130,801
              )Total
      consolidated assets
              
              $
              17,631,062
              
              
              $
              18,523,198





31





Total
depreciation and amortization expense for the nine months ended September 30,
2009 for LifeGuard, USHBG, Zurvita, JRM and Corporate and Other was
approximately $513 thousand, $545 thousand, $25 thousand, $4 thousand and $63
thousand, respectively.  For the nine months ended September 30, 2008,
total depreciation and amortization expense for LifeGuard, USHBG, Zurvita, JRM
and Corporate and Other was approximately $2.26 million, $618 thousand, $5
thousand, $21 thousand and $36 thousand, respectively.





NOTE
17 – SUBSEQUENT EVENTS





Management
has evaluated subsequent events through November 23, 2009, the date of issuance
of the financial statements.





During
November 2009, the Company issued 13,786,260 shares of its common stock and a
promissory note for $105,000 to an individual in settlement of potential
claims.  The shares were issued in a transaction that was exempt from
registration of the Securities Act of 1933, as amended (the “Securities Act”)
pursuant to Section 4(2) of the Securities Act of 1933, which exempts
transactions by an issuer not involving a public offering.





On
November 17, 2009, the Company paid off an $800 thousand note payable to an
executive with accrued interest of approximately $54 thousand.

















32




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





SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS





Information
contained in this discussion, other than historical information, is considered
“forward-looking statements” that are subject to risks and
uncertainties.  These forward-looking statements include information
about possible or assumed future results of our business, financial condition,
liquidity, results of operations, plans and objectives including, without
limitation, statements about the Company’s ability to continue operations
through September 2010, 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-K for the year ended December 31, 2008 filed with the
Securities and Exchange Commission on March 31, 2009 (the “2008 Annual Report”),
not all of which are known to the Company.  If a change occurs, the
Company’s business, financial condition, liquidity and results of operations may
vary materially from those expressed in the aforementioned forward-looking
statements. The Company will update this forward-looking information only to the
extent required under applicable securities laws.  Neither the Company
nor any other person assumes responsibility for the accuracy or completeness of
these forward-looking statements.





The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto, and other financial
information included elsewhere in this Form 10-Q.





Introduction





Management’s
discussion and analysis of results of operations and financial condition
(“MD&A”) is provided as a supplement to and should be read in conjunction
with our unaudited condensed consolidated financial statements and the related
notes thereto included elsewhere herein to help provide an understanding of our
financial condition and results of our operations.  The MD&A is
organized as follows:





·
            Overview– This section
      provides a general description of our business and operating
      segments.





·
            Results of operations
      –This section provides an analysis of our results of
      operations comparing the three and nine months ended September 30, 2009 to
      2008.  This analysis is provided on a consolidated and operating
      segment basis.





·
            Liquidity and capital
      resources– This section provides an analysis of our cash
      flows for the three and nine months ended September 30, 2009 and 2008 as
      well as a discussion of our liquidity and capital
    resources.





Overview





Description
of Business





The
Company is primarily a provider and marketer of healthcare-related products,
including healthcare benefits, dental and vision networks, and administrative
services such as billing, fulfillment, patient advocacy, claims administration
and servicing. The Company primarily markets healthcare-related membership
programs such as limited and major medical programs, supplemental medical and
discount dental programs to individuals and families.  The Company
distributes these products and services through various distribution methods
such as its agent network, direct response marketing companies, DRTV (Direct
Response TV), inbound call centers, in-house sales representatives, network
marketing and affinity marketing partners.  The Company’s secondary
line of business is to place membership programs through these same marketing
channels.  These membership programs utilize the same back office and
systems creating marketing efficiencies to provide low cost ancillary products
such as pet insurance, home warranty, involuntary unemployment insurance, and
accident insurance.





The
Company operates through five different business divisions:





·
            LifeGuard Benefit Services
      Division – This division generates revenue primarily from the sale
      of healthcare benefit membership plans and provides for product
      fulfillment, customer support, membership billing, claims administration,
      provider membership network maintenance and information technology. The
      Company operates this division through
  LifeGuard.




33




·
            U.S. Health Benefits Group
      Division – This is an outbound telemarketing operation primarily
      marketing major and limited medical benefit plans.  The Company
      operates this division through
USHBG.





·
            JRM Benefits Consultants
      Division – This division markets various financial services and
      healthcare products through its agent distribution network to individuals,
      families and employer groups.  The Company operates this
      division through JRM.  In September 2009, the division reduced
      its call center focus and shifted to an agent distribution model for its
      products as well as other Amacore division products.  The Company
      operates this division through JRM Benefits Consultants, LLC, a wholly
      owned subsidiary of the Company
(“JRM”).





·
            Corporate and Other
      Division – This division provides management and financial support
      to the Company’s various divisions as well as performs corporate
      governance and compliance.  Additionally, the Company recognizes
      residual revenue from the initial launch of market campaigns prior to the
      acquisition of LifeGuard.  ·
            Zurvita Marketing Division –This is a network marketing company that sells healthcare
      products, financial services, and consumer products to individuals and
      families. The Company is the primary beneficiary of Zurvita Holdings Inc.
      (“Zurvita”), a variable interest
entity.





Marketing





We use
various marketing methods to sell our products and services.  Below
are the primary methods by which we sell our products and services.





·
            Inbound telemarketing –
      We utilize our telemarketing capabilities as well as the capabilities of
      third parties to handle calls from prospective customers who are
      responding to direct response advertising (mail, infomercial, statement
      inserts, phone messaging).





·
            Online Marketing – We
      partner with other online marketers to sell affiliated products. We
      utilize search engine optimization techniques to increase our online
      sales.





·
            Direct mail – We
      utilize direct mail to cross sell our products through statement stuffers
      with our affinity marketing partners such as banks, credit unions and
      insurance carriers.





·
            Agent –Our insurance
      products are required to be sold by licensed agents.  We utilize
      in house and third-party licensed agents to sell our insurance
      products.





·
            Wholesale – When
      companies have full or limited benefits administration capabilities and
      are seeking to offer or market a medical benefit product to their
      customers or members, we can offer a wholesale product at lower
      cost.  Wholesale products are customized to consist of just a
      benefit or any particular mix of benefits administration services
      depending on the customer
requirements.





·
            Private label – For
      companies who have great brand recognition and large customer bases but do
      not have product development capability or do not have a competitive
      product in a particular market segment, Amacore can design a private label
      product for the company to
sell.





Business
History





On July
30, 2009 (the “Closing Date”), Red Sun Minning Inc. (“Red Sun”), entered into a
Share Exchange Agreement (the “Share Exchange Agreement”) with Zurvita and the
holders of all of the issued and outstanding securities of Zurvita prior to the
Closing Date (the “Zurvita Securities Holders”), pursuant to which, among other
things, the Zurvita Securities Holders contributed all of their securities of
Zurvita to Red Sun in exchange for Red Sun’s issuance to them of 9.3 million
shares of common stock of Red Sun.  Prior to the consummation of the
Share Exchange agreement, Zurvita was a wholly-owned subsidiary of Amacore, and
Red Sun was a public shell.





Concurrent
with the closing of the Share Exchange Transaction, Zurvita entered into a
Securities Purchase Agreement (the “Purchase Agreement”) with an accredited
investor and closed a private placement offering pursuant to which it raised
gross proceeds of $1.75 million and, among other things, issued and sold
convertible preferred stock convertible into shares of Zurvita’s common stock at
an initial conversion price of $0.25, subsequently adjusted to $0.0625 pursuant
to a four (4) for one (1) forward stock split.





Concurrent
with the closing of the Share Exchange Transaction, Zurvita entered into an
Advertising and Marketing Agreement with OmniReliant Holdings, Inc.
(“OmniReliant”), a related party, pursuant to which Zurvita agreed to provide
placement of advertising for OmniReliant on its website and OmniReliant agreed
to provide the Company with certain marketing services (the “OmniReliant
Agreement”). The marketing services to be provided by OmniReliant include the
production of infomercials, video production services, management of call
centers, buying and fulfillment services. In consideration for such services,
OmniReliant received an aggregate of 3.8 million shares of Zurvita’s common
stock.




34




Pursuant
to the terms of a repurchase agreement (the “Repurchase Agreement”), Red Sun
repurchased 2 million or 66% of the outstanding shares of Red Sun common stock
for a total repurchase price of $210 thousand.




As a
result of the Share Exchange Transaction and the consummation of the
transactions pursuant to the Repurchase Agreement, the Red Sun experienced a
change in control and ceased to be a shell company. Zurvita became a
wholly-owned subsidiary of Red Sun and the former shareholders of Zurvita became
the owners of approximately 66% of Red Sun’s issued and outstanding shares
of common stock and 44% of the voting rights of total equity securities
outstanding (after giving effect to subsequent issuances of common
stock).  The combined entity elected to change its name from Red Sun
Mining, Inc. to Zurvita Holdings, Inc. while maintaining Red Sun’s status as a
SEC registrant and continuing the business plan of Zurvita only.





Subsequent
to the reverse merger, management determined Zurvita to be a variable interest
entity due to affiliated parties participating in the design of the entity and
insufficent equity investment at risk to permit Zurvita to finance its
activities without requiring additional subordinated financial
support.  Management also determined Amacore to be the primary
beneficiary and has included the accounts of Zurvita within its consolidated
financial statements.  Significant factors that led to this
determination were Amacore’s voting rights relative to other common and
preferred stockholders as well as how closely associated Amacore and Zurvita are
relative to other related party variable interest holders, and the extent of
Amacore's ability to direct significant activities of Zurvita.





As a
result of the aforementioned transactions, Amacore’s ownership interest in
Zurvita Holdings changed from 100% to 66%.





RESULTS
OF OPERATIONS





Consolidated
Results of Operations





For
      the Three Months Ended September 30,
              
              
              For
      the Nine Months Ended September 30,Increase
              
              
              
              
              
              
              
              
              Increase2009
              
              
              2008
              
              
              (Decrease)
              
              
              2009
              
              
              2008
              
              
              (Decrease)Revenues
              
              $
              7,088,082
              
              
              $
              8,552,653
              
              
              $
              (1,464,571
              )
              
              $
              21,965,998
              
              
              $
              21,239,593
              
              
              $
              726,405Cost
      of Sales
              
              
              4,605,830
              
              
              
              5,971,008
              
              
              
              (1,365,178
              )
              
              
              14,152,345
              
              
              
              15,252,863
              
              
              
              (1,100,518
              )Gross
      Profit
              
              
              2,482,252
              
              
              
              2,581,645
              
              
              
              (99,393
              )
              
              
              7,813,653
              
              
              
              5,986,730
              
              
              
              1,826,923Operating
      Expenses
              
              
              10,162,748
              
              
              
              24,648,511
              
              
              
              (14,485,763
              )
              
              
              25,186,191
              
              
              
              37,469,963
              
              
              
              (12,283,772
              )Operating
      Loss
              
              
              (7,680,496
              )
              
              
              (22,066,866
              )
              
              
              14,386,370
              
              
              
              (17,372,538
              )
              
              
              (31,483,233
              )
              
              
              14,110,695Other
      Income
              
              
              416,177
              
              
              
              10,891,210
              
              
              
              (10,475,033
              )
              
              
              11,059,365
              
              
              
              1,634,044
              
              
              
              9,425,321Net
      Loss Before Income Taxes
              
              
              (7,264,319
              )
              
              
              (11,175,656
              )
              
              
              
              
              
              
              (6,313,173
              )
              
              
              (29,849,189
              )Income
      Taxes
              
              
              5,086
              
              
              
              -
              
              
              
              
              
              
              
              5,086
              
              
              
              -Net
      Loss
              
              
              (7,269,405
              )
              
              
              (11,175,656
              )
              
              
              3,906,251
              
              
              
              (6,318,259
              )
              
              
              (29,849,189
              )
              
              
              23,536,016Less:  Net
      Loss Attributed to Non-Controlling Interest in Zurvita Holdings,
      Inc.
              
              
              1,610,555
              
              
              
              -
              
              
              
              
              
              
              
              1,610,555
              
              
              
              -Net Loss
      Attributed to The Amacore Group, Inc.
              
              
              (5,658,850
              )
              
              
              (11,175,656
              )
              
              
              5,516,806
              
              
              
              (4,707,704
              )
              
              
              (29,849,189
              )
              
              
              25,141,485Preferred
      Stock Dividend and Accretion
              
              
              (4,224,426
              )
              
              
              (489,524
              )
              
              
              3,734,902
              
              
              
              (5,194,871
              )
              
              
              (1,153,599
              )
              
              
              4,041,272Net Loss
      Available to Common Stockholders
              
              $
              (9,883,276
              )
              
              $
              (11,665,180
              )
              
              $
              1,781,904
              
              
              $
              (9,902,575
              )
              
              $
              (31,002,788
              )
              
              $
              21,100,213Basic
      and Diluted Loss Per Share
              
              $
              (0.01
              )
              
              $
              (0.08
              )
              
              
              
              
              
              $
              (0.01
              )
              
              $
              (0.21
              )





Revenue:





Total
revenue was approximately $7.1 million and $22 million for the three and nine
months ended September 30, 2009, a decrease of $1.5 million and an increase of
approximately $726 thousand from total revenue of approximately $8.6 million and
$21.2 million for the same periods in 2008.





The
Company’s decrease in revenue for the three month period ended September 30,
2009 is mainly attributed to the cancellation of a significant contract with a
third-party direct response marketer who was marketing a lifestyle benefit
product of the LifeGuard division.  Prior to the cancellation of the
contract in late October 2008, the sales volume for this particular marketer had
reached its peak during the three months ended September 30,
2008.  The contract was cancelled due certain contractual terms that
resulted in significant customer acquisition costs and selling and marketing
costs. During the nine months ended September 30, 2009, the Company has added
multiple direct response marketing partnerships that are expected to surpass the
sales volume of the cancelled contract in future periods as well as provide for
increased profitability as the new contracts have been structured to
significantly reduce lead cost.




35


Cost
of Sales:





For the
three and nine months ended September 30, 2009, cost of sales was approximately
$4.6 million and $14.2 million, a decrease of approximately $1.4 million and
$1.1 million from total cost of sales of $6.0 million and $15.3 million for the
respective period in 2008.  Cost of sales represented approximately
65% and 70% of total revenue for the three months ended September 30, 2009 and
2008, respectively, and 64% and 72% for the nine months ended September 30, 2009
and 2008, respectively.  The decrease in cost of sales as a percentage
of total revenue for the three month period is attributed to improved gross
margin of Zurvita.  The decrease for the nine month period is a direct
result of the strategic acquisition of USHBG during the second quarter of the
fiscal year 2008 and the improved gross margin Zurvita has recognized in
2009.  Commission expense paid by LifeGuard to USHBG for selling
certain products has been eliminated upon consolidation for the three and nine
months ended September 30, 2008 and for the three and nine months ended
September 30, 2009.  Prior to the acquisition of USHBG, commissions paid to
USHBG were not eliminated and thus were added as a cost of sales
item.





For the
three and nine months ended September 30, 2009, sales commissions accounted for
$3.4 million or 75% of cost of sales, and $10.8 million or 76% of cost of sales,
respectively as compared to $4.6 million or 77%, of cost of sales, and $10.9
million or 72% of cost of sales for the three and nine months ended September
30, 2008, respectively.  For the three and nine months ended September
30, 2009, medical benefit cost accounted for $1.2 million or 25% of cost of
sales and $3.4 million or 24% of cost of sales, respectively, compared to $1.4
million or 23% of cost of sales and $4.3 million or 28% of cost of sales for the
three and nine months ended September 30, 2008, respectively.





Gross
Profit:





The
Company’s gross profit was approximately $2.5 million or 35% of revenue and $7.8
million or 36% of revenue for the three and nine month periods ended September
30, 2009, respectively, as compared to approximately $2.6 million or 30% of
revenue and $6.0 million or 28% of revenue for the three and nine month periods
ended September 30, 2008, respectively.  While much of the improvement in
gross profit is a direct result of the strategic acquisition of USHBG through
the intercompany elimination of commission expense, there were also notable
improvements in gross profit for LifeGuard and Zurvita.





Operating
Expenses:





Our
operating expenses for the three and nine month periods ended September 30, 2009
were $10.2 million and $25.2 million, respectively, as compared to $24.6 million
and $37.5 million for the same periods in 2008.





The table
below sets forth components of our operating expenses for the three and nine
months ended September 30, 2009 compared to the corresponding prior year
period:




Three
      Months Ended September 30,
              
              
              Nine
      Months Ended September 30,2009
              
              
              2008
              
              
              Increase
      (Decrease)
              
              
              2009
              
              
              2008
              
              
              Increase
      (Decrease)Amortization
              
              $
              213,253
              
              
              $
              1,001,142
              
              
              $
              (787,889
              )
              
              $
              811,984
              
              
              $
              2,725,834
              
              
              $
              (1,913,850
              )Depreciation
              
              
              113,733
              
              
              
              100,036
              
              
              
              13,697
              
              
              
              337,958
              
              
              
              225,939
              
              
              
              112,019Impairment
      loss on goodwilland other intangible assets
              
              
              4,201,699
              
              
              
              15,308,944
              
              
              
              (11,107,245
              )
              
              
              4,201,699
              
              
              
              15,308,944
              
              
              
              (11,107,245
              )Office
      related expenses
              
              
              613,916
              
              
              
              602,271
              
              
              
              11,645
              
              
              
              1,866,190
              
              
              
              1,427,706
              
              
              
              438,484Payroll
      and benefits
              
              
              2,090,188
              
              
              
              2,299,556
              
              
              
              (209,368
              )
              
              
              6,802,486
              
              
              
              6,500,665
              
              
              
              301,821Professional
      fees and legal settlement
              
              
              1,172,136
              
              
              
              1,583,485
              
              
              
              (411,349
              )
              
              
              5,806,404
              
              
              
              2,141,098
              
              
              
              3,665,306Selling
      and marketing
              
              
              1,637,228
              
              
              
              3,351,142
              
              
              
              (1,713,914
              )
              
              
              5,019,518
              
              
              
              8,115,736
              
              
              
              (3,096,218
              )Travel
              
              
              120,595
              
              
              
              401,935
              
              
              
              (281,340
              )
              
              
              339,952
              
              
              
              1,024,041
              
              
              
              (684,089
              )Total
      operating expenses
              
              $
              10,162,748
              
              
              $
              24,648,511
              
              
              $
              (14,485,763
              )
              
              $
              25,186,191
              
              
              $
              37,469,963
              
              
              $
              (12,283,772
              )


Depreciation
and amortization expense, which is computed on a straight-line method over
the assets’ estimated lives, for the three and nine months ended September 30,
2009, was approximately $327 thousand and $1.1million, respectively, a decrease
of approximately $774 thousand and $1.8 million over the same prior year
periods. This decrease is attributable to lower carrying balances of
intangible assets as a result of an impairment charge taken at September 30,
2008.





Impairment
loss on goodwill and other intangible assets was based on the Company’s
impairment analysis and consideration of the current and expected future market
conditions. The Company determined that goodwill and certain intangible
assets related to the JRM and USHBG reporting units were impaired. The Company
recorded non-cash, pre-tax total impairment charges of approximately $167
thousand and $4 million for the JRM and USHBG reporting units, respectively, for
the three and nine months ended September 30, 2009. The Company recognized
an aggregate impairment loss on goodwill and other intangible assets in the
amount of $4.2 million and $15.3 for the three and nine months ended September
30, 2009 and 2008, respectively. The decrease in the aggregate impairment
is a result of lower goodwill and other intangible asset balances as well as
improvement in the profitability of the LifeGuard division.




36




Office
related costs include rent, insurance, utilities and office
maintenance. For the three month period ended September 30, 2009, these
costs were approximately $182 thousand, $46 thousand, $189 thousand, and $197
thousand, respectively.  For the nine month period ended September 30,
2009, these costs were approximately $526 thousand, $136 thousand, $572
thousand, and $633 thousand, respectively.  Total office related
expenses increased approximately $12 thousand and $438 thousand over the
respective three and nine months periods ended September 30,
2008.  The overall nine month period increase is as a result of growth
in the Company’s operations as well as the addition of the acquired operations
of USHBG.





Professional
fees and legal settlement consist of consulting, accounting fees, contract
labor, legal costs and litigation accruals. For the three month period ended
September 30, 2009, these costs were approximately $268 thousand, $196 thousand,
$13 thousand and $700 thousand, respectively.   For the nine month period
ended September 30, 2009, these costs were approximately $1.1 million, $917
thousand, $243 thousand, and $3.6 million, respectively.   The
decrease noted in the three months ended September 30, 2009 is attributable to
the decrease in legal costs incurred by the Company as a result of the Company
settling certain litigation. The increase of approximately $3.7 million for the
nine month period ended is attributed to settling an outstanding litigation
matter for $1.8 million as well as the significant legal costs incurred up until
the settlement date.





Payroll
and related expenses for the three and nine months ended September 30, 2009 were
approximately $2.1 million and $6.8 million, respectively, a decrease of
approximately $209 thousand and an increase of approximately $302 thousand over
the same prior year periods.  The decrease for the three months was
due to the effect of cost reduction measures employed by the
Company.  The Company expects to continue realizing significant
payroll savings in future quarters as a result of cost reduction measures taken
during the three months ended September 30, 2009.  The overall nine
month increase is a result of Company acquiring the operations of
USHBG.





Business
travel expenses for the three and nine months ended September 30, 2009 were
approximately $121 thousand and $340 thousand, respectively, a decrease of $281
thousand and $684 thousand, over the same prior year periods.  The decrease
in travel expenses is a result of the Company’s efforts to reduce non-essential
costs.





Selling
and marketing expenses for the three and nine months ended September 30, 2009
was $1.6 million and $5 million, respectively, an approximate decrease of
approximately $1.7 million and $3.1 million over the same prior year
periods.  During the three and nine months ended September 30, 2008, a
major direct response marketing contract was in effect that resulted in
significant selling and marketing lead cost.  This direct response
marketing contract did not exist during the nine months ended September 30,
2009.





Loss
from operations before other income and expense:





Loss from
operations was approximately $7.7 million and $17.4 million for the three and
nine months ended September 30, 2009, respectively, as compared to approximately
$22.1 million and $31.5 million for the three and nine months ended September
30, 2008, respectively.  Excluding amortization, depreciation and
impairment loss on goodwill and other intangible assets which are significant
non-cash expenses, the loss from operations was approximately $3.2 million and
$12 million for the three and nine months ended September 30, 2009,
respectively, as compared to approximately $5.7 million and $13.2 million for
the three and nine months ended September 30, 2008.  The decrease of
approximately $2.5 million and $1.2 million for the three and nine month periods
is a result of the Company’s cost reduction and containment measures employed
over the past year.  The decrease for the nine month period is less
substantial as compared to the three month period due to a significant legal
settlement of $1.8 million incurred as of June 30, 2009.





Other
Income (Expense)





Interest
expense:





Interest
expense for the three and nine months ended September 30, 2009 was approximately
$104 thousand and $259 thousand, respectively, compared to approximately $562
thousand and $692 thousand, respectively, for the same periods in
2008.  During the three months ended September 30, 2008, the company
paid off certain notes payable issued at a discount. As a result of paying off
these notes, the $504 thousand of unamortized discount was recognized as
additional interest expense during the three months ended September 30,
2008.  During the three and nine months ended September 30, 2009, the
Company neither issued debt at a discount nor issued debt in conjunction with
other financial instruments that upon the allocation of proceeds to each
instrument would result in a discount.





Loss
on conversion of note payable:





There was
no loss on conversion of notes payable for the nine months ended September 30,
2009, while a loss of approximately $243 thousand was incurred for the nine
months ended September 30, 2008.




37


Gain
(loss) on change in fair value of warrants:





Certain
of the Company’s warrants are recorded at fair value with changes in their fair
value reflected in the Company’s condensed consolidated Statement of
Operations.  For the three and nine months ended September 30, 2009,
the gain on change in fair value of warrants was approximately $405 thousand and
$11.2 million, respectively, while an approximate $11.4 million  and
$2.5 million gain was incurred during the three and nine months ended September
30,  2008.  Excluding the $4 million loss recognized from
the change in fair value of Zurvita issued warrants for the three and nine
months ended September 30, 2009, a gain of approximately $4.4 million and $15.2
million resulted from the change in fair value of Amacore’s issued warrants for
the three and nine months ended September 30, 2009, respectively.  The
gain on Amacore warrants is attributable to the common stock market price
decreasing to $0.03 from $0.12 as of September 30, 2009 and December 31, 2008,
respectively.  These gains and losses are a non-cash item not
impacting operating cash flows or results of operations.  See Note 8 – Liabilities Measured at
Fair Value to the financial statements contained elsewhere in this report
for additional information with respect to the calculation of change in fair
value of warrants for the three and nine months ended September 30,
2009.





Net
loss:





The
Company’s net loss amounted to approximately $7.3 million and $6.3 million for
the three and nine months ended September 30, 2009 as compared to approximately
$11.2 million and $29.8 million net loss for the same prior year
periods.





Net
loss attributed to non-controlling interest in Zurvita Holdings,
Inc.:





Net loss
attributed to the non-controlling interest in Zurvita represents 34% of
Zurvita’s net loss for the period subsequent to the change in ownership
structure of Zurvita.  The non-controlling interest portion of
Zurvita’s net loss was approximately $1.6 million for the three and nine months
ended September 30, 2009 as compared to $0 for the three and nine months ended
September 30, 2008.  The increase between the periods is a result of
The Amacore Group’s ownership changing from 100% to 66% on July 30,
2009.  Zurvita’s net loss for the period July 30, 2009 to September
30, 2009 was $4.7 million.  The remaining 66% or $3.1 million is
included within the net loss attributed to The Amacore Group, Inc. for the three
and nine months ended September 30, 2009.





Net
loss attributed to The Amacore Group, Inc.:





After
reducing consolidated net loss by the amount allocated to the non-controlling
interest in Zurvita, the net loss attributed to The Amacore Group, Inc. before
income taxes was approximately $5.7 million and $4.7 million for the three and
nine months ended September 30, 2009, respectively, as compared to approximately
$11.2 million and $29.8 million for the three and nine months ended September
30, 2008, respectively.  The decrease of approximately $5.5 million
and $25.1 million between the three and nine month periods is attributable
to





Preferred
stock dividends and accretion:





Preferred
stock dividends and accretion amounted to approximately $4.2 million and $5.2
million for the three and nine months ended September 30, 2009 as compared to
$490 thousand and $1.2 million for the same periods in 2008.  The increase
is due to a $3.2 million beneficial conversion feature that resulted from the
issuance of Series L Preferred Stock on June 29, 2009 which had been fully
accreted as of September 30, 2009.   An additional $18.5 million
of preferred stock has been issued since December 31, 2008 which accounts for an
additional $368 thousand of preferred stock dividends.





Net
loss attributed to The Amacore Group, Inc. available to common
stockholders:





After the
effect of allocating to the non-controlling interest its portion of Zurvita’s
net loss and after the effects of income taxes and preferred stock dividends and
accretion, the net loss attributed to The Amacore Group, Inc. common
stockholders was approximately $9.9 million for the three and nine months ended
September 30, 2009 as compared to approximately $11.7 million and $31 million
for the three and nine months ended September 30, 2008,
respectively.  The slight decrease of $1.8 million for the three month
periods is a result of Amacore recognizing its substantial portion of the loss
associated with fair valuing Zurvita’s warrants as of September 30, 2009 and the
recognition of accretion related to a beneficial conversion feature on certain
of the Company’s Series L Preferred Stock issuances.  The decrease of
$21.1 million for the nine month period is attributable to less impairment
recognized, significant gains on fair valuing the Company’s warrants which
significantly offset the loss recognized on fair valuing the Zurvita warrants
and cost reduction and containment measures employed over the past nine
months.





Loss
per common share:





Loss per
common share amounted to $0.01 for the three and nine months ended September 30,
2009, compared to $0.08 and $0.21 for the three and nine months ended September
30, 2008, respectively.  The decrease in loss per share between the
periods resulted due to the improvement in the Company’s net loss and the
increase in the number of average common shares outstanding by approximately 881
million and 876 million for the three and nine months ended September 30, 2009,
respectively.  The significant share increase is attributed to the
December 31, 2008 conversion of Series J and Series K preferred stock into 775.3
million and 77.9 million, respectively, shares of common stock.





38





Segment
Analysis





LifeGuard
Division




For
      the Three Months Ended
              
              
              For
      the Nine Months Ended2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              5,350,267
              
              
              $
              6,462,754
              
              
              $
              16,825,378
              
              
              $
              16,965,782Cost
      of Sales
              
              
              (3,722,598
              )
              
              
              (5,196,158
              )
              
              
              (12,464,845
              )
              
              
              (13,924,010
              )Gross
      Profit
              
              
              1,627,669
              
              
              
              1,266,596
              
              
              
              4,360,533
              
              
              
              3,041,772Operating
      Expenses
              
              
              (1,254,505
              )
              
              
              (12,321,030
              )
              
              
              (4,618,611
              )
              
              
              (19,698,418
              )Other
      Income (Expense)
              
              
              45,078
              
              
              
              (1,047
              )
              
              
              29,189
              
              
              
              (7,850
              )Net
      Income (Loss) Before Taxes
              
              $
              418,242
              
              
              $
              (11,055,481
              )
              
              $
              (228,889
              )
              
              $
              (16,664,496
              )Income
      Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      Income (Loss)
              
              $
              418,242
              
              
              $
              (11,055,481
              )
              
              $
              (228,889
              )
              
              $
              (16,664,496
              )





LifeGuard’s
revenue was $5.4 million compared to $6.5 million for the three months ended
September 30, 2009 and 2008, respectively.  The decrease in revenue
for the three month period ended September 30, 2009 is attributable to the
cancellation of a significant contract with a third-party direct response
marketer who was marketing a lifestyle benefit product of the LifeGuard
division.  Prior to the cancellation of the contract in late October
2008, the sales volume for this particular marketer had reached its peak during
the three months ended September 30, 2008.  The contract was cancelled
due to certain contractual terms that resulted in significant customer
acquisition costs and selling and marketing costs. During the nine months ended
September 30, 2009, the Company has added multiple direct response marketing
partnerships that are expected to surpass the sales volume of the cancelled
contract in future periods as well as provide for increased profitability as the
new contracts have been structured to significantly reduce lead
cost.





Cost of
sales decreased approximately $1.5 million for the three month period ended
September 30, 2009 over the prior year period.  The cost of sales
decrease is a direct result of decreased revenue in the three months ended
September 30, 2009 over the same prior year period.  Operating
expenses and net loss decreased approximately $11 million and $11.5 million,
respectively, for the three months ended September 30, 2009 as compared to same
period in 2008.  The decrease is related directly to the impairment
charge of approximately $9.1 million taken during the three months ended
September 30, 2008 that was not taken in the same period in
2009.  Excluding the effects of the impairment charges, operating
expense and net loss decreased by approximately $1.9 million and $2.4 million,
respectively.  This decrease is due to a decrease in the amount of
lead costs that were incurred in 2009 as compared to 2008.  During
2009, the company has shifted its efforts to contract with direct response
marketers whereby commission payment structures compensate based upon leads that
produce billable sales, which lowers overall customer acquisition costs and
improves profitability.





For the
nine months ended September 30, 2009, LifeGuard’s revenue decreased
approximately $200 thousand from $17 million to $16.8 million despite the
significant revenue decrease experienced in the three months ended September 30,
2009.  The reason for this is due to the division entering into
multiple agreements with new direct response marketers to sell the division’s
products which were entered into to replace the revenue of a significant
marketing agreement that was cancelled during October 2008.





Cost of
sales decreased by approximately $1.4 million to $12.5 million compared to $13.9
million for the nine months ended September 30, 2009 and 2008,
respectively.  The cost of sales decrease is a direct result of
decreased revenue in the nine months ended September 30, 2009 over the same
prior year period.




39




Operating
expenses and net loss decreased approximately $11 million and $11.5 million,
respectively, for the three months ended September 30, 2009 as compared to the
same period in 2008.  Operating expenses and net loss decreased $15.1
million and $16.4 million, respectively, for the nine months ended September 30,
2009 as compared to the same period in 2008.  The decrease for each
period is attributed to an impairment charge of approximately $9.1 million taken
during the three and nine months ended September 30, 2008 that was not taken in
the same period in 2009 as well as the reduction of selling and marketing costs
incurred as a result of the cancellation of significant direct response
marketing contract in October 2008.  Excluding the effects of the
impairment charges, operating expense and net loss decreased by approximately
$2.0 million and $2.4 million, respectively, for the three months ended
September 30, 2009 and $6 million and $7.3 million for the nine months ended
September 30, 2009.  Significant decreases in amortization expense and
selling and marketing expense contributed to the overall decrease between the
periods of comparison.  Amortization expense decreased approximately
$729 thousand and $1.8 million for the three and nine months ended September 30,
2009 as a result of lower carrying amounts of intangible assets subject to
amortization as a result of the impairment charge taken on September 30,
2008.  Selling and marketing decreased approximately $1.1 million and
$3.9 million for the three and nine months ended September 30, 2009 as a result
of the division’s efforts to modify how it contracts with direct response
marketers to lower customer acquisition costs and selling and marketing
costs.


USHBG
Division





For
      the Three Months Ended
              
              
              For
      the Nine Months Ended2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              871,530
              
              
              $
              1,422,031
              
              
              $
              3,153,552
              
              
              $
              2,893,743Cost
      of Sales
              
              
              (377,685
              )
              
              
              (469,875
              )
              
              
              (1,072,398
              )
              
              
              (914,790
              )Gross
      Profit
              
              
              493,845
              
              
              
              952,156
              
              
              
              2,081,154
              
              
              
              1,978,953Operating
      Expenses
              
              
              (5,017,807
              )
              
              
              (7,043,115
              )
              
              
              (7,132,267
              )
              
              
              (8,167,537
              )Other
      Expense
              
              
              -
              
              
              
              -
              
              
              
              (127,146
              )
              
              
              (124,834
              )Net
      Loss Before Taxes
              
              $
              (4,523,962
              )
              
              $
              (6,090,959
              )
              
              $
              (5,178,259
              )
              
              $
              (6,313,418
              )Income
      Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      Loss
              
              $
              (4,523,962
              )
              
              $
              (6,090,959
              )
              
              $
              (5,178,259
              )
              
              $
              (6,313,418
              )





USHBG
revenues were $872 thousand and $1.4 million for the three months ended
September 30, 2009 and 2008, respectively.  The decrease of $551
thousand is due to lower sales of products due to national economic
conditions.  Operating expenses decreased approximately $2.0 million
for the three months ended September 30, 2009 as compared to the same period in
2008.   The decrease is related directly to the impairment charge of
approximately $4 million taken during the nine months ended September 30, 2009
compared to $6 million taken during the same period in 2008.





For the
nine months ended ended September 30, 2009 and 2008, total revenue was $3.2
million and $2.9 million, respectively, an increase of $260
thousand.  Operating expenses decreased $1 million for the nine months
ended September 30, 2009 compared to the same period of 2008. The increase in
revenue for the nine months ended September 30, 2009 as compared to the same
period of 2008 is directly related to the fact that the company had nine months
of activity in 2009 as compared to six months in 2008 due to the fact that the
Company was acquired at the beginning of the second quarter of fiscal year 2008.
The decrease in operating expenses is related directly to the impairment charge
of approximately $4 million taken during the nine months ended September 30,
2009 compared to $6 million taken during the same period in
2008.  Excluding the effects of the impairment charges, operating
expense increased by approximately $1 million.  The increase is a
result of the difference in the number of months USHBG was operating as a
subsidiary of the Company during the nine months ended September 30, 2009 and
2008.




40


Zurvita
Division





For
      the Three Months Ended
              
              
              For
      the Nine Months Ended2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              1,289,135
              
              
              $
              1,405,442
              
              
              $
              3,634,110
              
              
              $
              2,274,377Cost
      of Sales
              
              
              (1,218,300
              )
              
              
              (1,176,108
              )
              
              
              (2,890,695
              )
              
              
              (2,003,565
              )Gross
      Profit
              
              
              70,835
              
              
              
              229,334
              
              
              
              743,415
              
              
              
              270,812Operating
      Expenses
              
              
              (1,834,685
              )
              
              
              (1,804,044
              )
              
              
              (5,119,365
              )
              
              
              (3,861,260
              )Other
      Income
              
              
              (3,969,793
              )
              
              
              -
              
              
              
              (3,969,793
              )
              
              
              -Net
      Loss Before Taxes
              
              $
              (5,733,643
              )
              
              $
              (1,574,710
              )
              
              $
              (8,345,743
              )
              
              $
              (3,590,448
              )Income
      Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      Loss
              
              $
              (5,733,643
              )
              
              $
              (1,574,710
              )
              
              $
              (8,345,743
              )
              
              $
              (3,590,448
              )





Zurvita
was incorporated in late January 2008. For the three months ended September
30, 2009 and 2008, Zurvita achieved total revenue of approximately $1.3 million
and $1.4 million, respectively, an approximate decrease of $100
thousand.  Revenue primarily consisted of membership product sales to
individual consumers and marketing fees paid by independent Zurvita marketing
representatives.  Membership product sales for the three months ended
September 30, 2009 and 2008 were approximately $309 thousand and $461 thousand,
respectively, while marketing fees were approximately $867 thousand and $617
thousand, respectively.  The increase in total revenue is a direct
result of growth in the division’s network sales representatives to 6,385 from
4,309 as of September 30, 2009 as compared to 2008.  The division was
able to attract and retain more representatives as a result of greater product
offering as of September 30, 2009 as compared to September 30,
2008.





For the
nine months ended September 30, 2009 and 2008, Zurvita achieved total revenue of
approximately $3.6 million and $2.3 million, respectively, an increase of $1.3
million.  Revenue primarily consisted of membership product sales to
individual consumers and marketing fees paid by independent Zurvita marketing
representatives.  Membership product sales for the nine months ended
September 30, 2009 and 2008 were approximately $1.2 million and $796 thousand,
respectively, while marketing fees were approximately $2.1 million and $1.2
million, respectively.   The increase in total revenue is a
direct result of the growth in the division’s network sales representatives as a
result of greater product offerings as of September 30, 2009 as compared to
September 30, 2008.





Cost of
sales for the three month period ended September 30, 2009 increased by $42
thousand to $1.2 million over the same prior year period.  Cost of
sales included sales commissions paid to marketing representatives and the
benefit and product cost associated with the products and services
sold.  For the three months ended September 30, 2009 these costs were
approximately $960 and $258 thousand, respectively, as compared to approximately
$906 thousand and $270 thousand, respectively, for the three months ended
September 30, 2008.    The increase in cost of sales is
related to certain promotions run during the three months ended September 30,
2009 on product and recruiting.





Cost of
sales for the nine month period ended September 30, 2009 increased by
approximately $900 thousand to $2.9 million over the same prior year
period.  Costs of sales included sales commissions paid to marketing
representatives and the benefit and product cost associated with the products
and services sold.  For the nine months ended September 30, 2009 these
costs were approximately $2.3 million and $600 thousand, respectively, as
compared to $1.7 million and $300 thousand, for the nine months ended September
30, 2008, respectively.  The increase in cost of sales is directly
related to the increase in revenues as each product sold generates sales
commissions and contains a product cost.  However, cost of sales as a
percentage of revenue has decreased from 88% to 80% for the nine month period
ended September 30, 2009 as compared to the same prior period as a result of
less non-traditional sales incentive compensation strategies.  In
order to attract and retain marketing representatives while the division was
being structured and products developed, non-traditional means of sales
compensation was employed.  During 2009, the division had a greater
product offering and larger marketing representative base thereby reducing the
need for non-traditional compensation methods.




41




Operating
expenses and net loss were approximately $1.8 million and $5.7 million,
respectively, for the three months ended September 30, 2009, as compared to
operating expenses and net loss of $1.8 and $1.6 million, respectively for the
same prior year periods.  Operating expenses and net loss were
approximately $5.1 million and $8.3 million, respectively, for the nine months
ended September 30, 2009 as compared to operating expenses and net loss of $3.9
million and $3.6 million, respectively, for the same prior year
periods.  The $4.1 million increase in net loss for the three months
ended September 30, 2009 is mainly attributable to the $4 million loss
recognized from fair valuing Zurvita’s warrants which are accounted for as a
liability.  The $4.8 million increase in net loss for the nine months
ended September 30, 2009 and 2008 is attributed to fair valuing the
aforementioned warrants and the recognition of a $600 thousand loss with respect
to a legal settlement entered into by Zurvita, the Company and AmeriPlan
Corporation.  The Companies were able to settle the outstanding
litigation for $1.8 million by means of a Mutual Compromise and Settlement
Agreement of which $1.2 million was paid by Amacore and of which $600 thousand
was the future responsibility of Zurvita and structured as a note payable. If
Zurvita and Amacore were not related parties or named parties of the lawsuit at
the time of the settlement, the outcome, and consequently, the loss incurred by
Zurvita with respect to this settlement may have been materially different. (See
Part II Item 1 “Legal Proceedings” for further discussion on this legal
matter.





JRM
Division





For
      the Three Months Ended
              
              
              For
      the Nine Months Ended2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              45,372
              
              
              $
              39,398
              
              
              $
              137,210
              
              
              $
              212,099Cost
      of Sales
              
              
              (6,015
              )
              
              
              -
              
              
              
              (7,944
              )
              
              
              (140
              )Gross
      Profit
              
              
              39,357
              
              
              
              39,398
              
              
              
              129,266
              
              
              
              211,959Operating
      Expenses
              
              
              (324,765
              )
              
              
              (497,457
              )
              
              
              (676,391
              )
              
              
              (824,395
              )Other
      Expense
              
              
              (7,167
              )
              
              
              (5,778
              )
              
              
              (23,440
              )
              
              
              (21,029
              )Net
      Loss Before Taxes
              
              $
              (292,574
              )
              
              $
              (463,837
              )
              
              $
              (570,565
              )
              
              $
              (633,465
              )Income
      Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      Loss
              
              $
              (292,574
              )
              
              $
              (463,837
              )
              
              $
              (570,565
              )
              
              $
              (633,465
              )





During
the fourth quarter of 2008 and continuing in the first quarter of fiscal 2009,
the JRM division shifted its resources to market other insurance related
products as a result of the national economic downturn in the mortgage
market.  The impact of the decline in demand for the division’s
mortgage protection product, which was the main product that JRM marketed during
2008,  has contributed to the decrease in revenue of approximately $92
thousand for the nine months ended September 30, 2009, respectively, as compared
to the nine months ended September 30, 2008.  At September 30, 2008,
the division realized an impairment loss on its goodwill and other intangible
assets of $305 thousand which was attributed to lower forecasted cash flows as a
result of less demand for the mortgage protection product.





During
the second quarter of fiscal 2009, this division migrated all sales effort to an
agent distribution network model and reduced its focus on call center services
while further shifting its resources to market other insurance related products
such as final expense, dental and critical illness life. These products are
being sold in the voluntary employee benefits market, through small employer
groups and through agent and broker networks. At September 30, 2009, the
division realized an additional impairment loss on its goodwill and other
intangible assets of $167 thousand as a result of insufficient revenue growth
for the three months ended September 30, 2009 as compared to the three months
ended September 30, 2008.  The lack of revenue growth and the
continuing trend of the division’s fixed operating costs exceeding its revenue
had led to this impairment determination.  The division has
implemented a workforce reduction in June 2009 and will continue to market
Amacore and other third-party products through an agent distribution network
model.





Excluding
the impairment loss recognized on goodwill and other intangible assets of $167
thousand and $305 thousand as of September 30, 2009 and 2008, respectively,
operating expenses for the three and nine months ended September 30, 2009 were
$158 thousand and $509 thousand, respectively, as compared to $192 and $519,
respectively, for the three and nine months ended September 30, 2008. Operating
expenses decreased approximately $34 thousand and $10 thousand for the three and
nine months ended September 30, 2009 due to the workforce reduction implemented
during the end of the second quarter of 2009.




42





Corporate and
Other





For
      the Three Months Ended
              
              
              For
      the Nine Months Ended2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              288,304
              
              
              $
              246,264
              
              
              $
              657,532
              
              
              $
              950,194Cost
      of Sales
              
              
              (37,759
              )
              
              
              (152,103
              )
              
              
              (158,247
              )
              
              
              (466,960
              )Gross
      Profit
              
              
              250,545
              
              
              
              94,161
              
              
              
              499,285
              
              
              
              483,234Operating
      Expenses
              
              
              (1,730,986
              )
              
              
              (2,982,865
              )
              
              
              (7,639,557
              )
              
              
              (4,918,353
              )Other
      Income
              
              
              4,348,059
              
              
              
              10,898,035
              
              
              
              15,150,555
              
              
              
              1,787,757Net
      Income (Loss) Before Taxes
              
              $
              2,867,618
              
              
              $
              8,009,331
              
              
              $
              8,010,283
              
              
              $
              (2,647,362
              )Income
      Taxes
              
              
              5,086
              
              
              
              -
              
              
              
              5,086
              
              
              
              -Net
      Income (Loss)
              
              
              2,862,531
              
              
              
              8,009,331
              
              
              
              8,005,196
              
              
              
              (2,647,362
              )Net
      Loss Attributed to Non-Controlling Interestin
      Zurvita Holdings, Inc.
              
              
              1,610,555
              
              
              
              -
              
              
              
              1,610,555
              
              
              
              -Net
      Income (Loss)
              
              $
              4,473,087
              
              
              $
              8,009,332
              
              
              $
              9,615,752
              
              
              $
              (2,647,361
              )








This
division’s primary function is to provide executive managerial support and to
provide financial resources to the Company’s various divisions and is
responsible for corporate governance and compliance.  Operating
expenses and net income were approximately $1.7 million and $2.9 million,
respectively, for the three months ended September 30, 2009 as compared to
operating expenses and net income of $3.0 million and $8.0 million,
respectively, for the same prior year periods.  Operating expenses and
net income were approximately $7.6 million and $8.0 million, respectively, for
the nine months ended September 30, 2009 as compared to operating expenses and
net loss of $4.9 million and $2.6 million, respectively, for the same prior year
periods.  The $1.3 million decrease in operating expenses between the
three months ended September 30, 2009 and 2008 is a result of significant cost
reduction efforts, specifically, in the areas of payroll, consulting and
legal.  Excluding the effects of reversing a $3 million litigation
accrual upon a successful settlement during the nine months ended September 30,
2008 and excluding a $1.2 million legal settlement entered into during the nine
months ended September 30, 2009, operating expenses decreased $1.3
million.  Significant cost reduction efforts, specifically, in the
areas of payroll, consulting and legal have led to this decrease.





Other
income for this division is mainly the change in the fair value of the Company’s
warrants accounted for as liabilities.  At each reporting period, the
warrants are fair valued and any resulting gain or loss is recognized as other
income or expense.  A significant input for determining fair value is
the market price of the Company’s common stock.  Due to the Company’s
share price decreasing from $0.20 at September 30, 2008 to $0.03 at September
30, 2009, significant gains have resulted and have been recorded as other income
at each reporting period.  These gains are non-cash transactions and
do not impact cash flows from operations.





Net
income or net loss for Corporate and Other division is driven by the level of
the division’s operating expenses and other income or expense as this division
is a cost center.  This division recognizes minimal residual revenue
from the initial launch of certain market campaigns prior to the acquisition of
LifeGuard.





OFF
BALANCE SHEET ARRANGEMENTS





We do not
have any off balance sheet arrangements as of September 30, 2009.





LIQUIDITY
AND CAPITAL RESOURCES





The
following table compares our cash flows for the nine month period ended
September 30, 2009 to the corresponding prior fiscal year:





September
      30, 2009
              
              
              September
      30, 2008Net
      cash used in operating activities
              
              $
              (12,109,545
              )
              
              $
              (17,261,077
              )Net
      cash used in investing activities
              
              
              (271,399
              )
              
              
              (1,423,451
              )Net
      cash provided by financing activities
              
              
              18,410,986
              
              
              
              17,065,288Net
      increase (decrease) in cash
              
              $
              6,030,042
              
              
              $
              (1,619,240
              )







43




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
      the Year Ended December 31,2009
                
                
                $
                108,1522010
                
                
                
                379,8462011
                
                
                
                290,8802012
                
                
                
                137,1042013
                
                
                
                141,204Thereafter
                
                
                
                194,389$
                1,251,575




Future
minimum payments under capital lease obligations on a fiscal year basis are as
follows (1):




2009
                
                
                $
                109,2602010
                
                
                
                90,4612011
                
                
                
                82,7852012
                
                
                
                72,0382013
                
                
                
                18,168$
                372,712


(1)           Payments
include interest





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





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





We
believe that without significant equity and debt investment from outside
sources, the Company will not be able to sustain its current planned operations
for the next 12 months.  During 2009, the Company has raised from an
outside source $18.5 million of equity funding.  In order to raise
capital, the Company may sell additional equity or convertible debt securities
which would result in additional dilution to our stockholders. The issuance of
additional debt would result in increased expenses and could subject us to
covenants that may have the effect of restricting our operations.  We
can provide no assurance that additional financing will be available in an
amount or on terms acceptable to us, if at all. If we are unable to obtain
additional funds when they are needed or if such funds cannot be obtained on
terms favorable to us, we may be unable to execute upon our business plan or pay
our costs and expenses as they are incurred, which could have a material,
adverse effect on our business, financial condition and results of
operations.





Currently,
the Company does not maintain a line of credit or term loan with any commercial
bank or other financial institution.  The Company has approximately $2
million of outstanding notes payable as of September 30, 2009.





Item
3. Quantitative and Qualitative Disclosures About Market Risk





Not
applicable


Item
4.  Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





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





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




44


PART
II - OTHER INFORMATION




Item
1. Legal Proceedings





The
Amacore Group, Inc. vs. Clark A. Marcus, Jerry Katzman, MD,  and Giuseppe
Crisafi, Case No. 0904006,  and Giuseppe Crisafi, Dr. Jerry Katzman, and
Clark Marcus vs. The Amacore Group, Inc., Case No. 094463, each  in the
Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County,
Florida Circuit Civil.   On February 17, 2009, the Company filed a
petition for Declaratory Judgment seeking to determine its obligations under
Consulting Agreements entered into by and between the Company and Mr. Marcus,
Dr. Katzman and Mr. Crisafi and on February 25, 2009, Mr. Marcus,  Dr.
Katzman and Mr. Crisafi filed a separate civil action against the Company. 
The parties, wishing to resolve the disputes between them and to avoid the fees
and costs associated with litigation, amicably resolved the lawsuits pending
between them pursuant to the terms of a confidential Settlement Agreement dated
May 5, 2009 without any admission of wrongdoing by any party.  Pursuant to
the Settlement Agreement, the Consulting Agreements generally were
terminated (other than those provisions which by their terms survive termination
or as specifically provided in the Settlement Agreement), the Company paid a
lump sum of $475,000 to Mr. Marcus, Dr. Katzman and Mr.Crisafi and agreed
to continue to provide certain health, dental and life insurance
benefits and indemnification as otherwise provided for in the
Consulting Agreements.   In addition, the Settlement Agreement
contains a general release by the Company (and certain related parties) in
favor of Mr. Marcus, Dr. Katzman and Mr. Crisafi and, subject to certain
exceptions, a general release in favor of the Company by Mr. Marcus, Dr. Katzman
and Mr. Crisafi.





As of
July 9, 2009 a Mutual Compromise and Settlement Agreement and General Release of
Claims was entered into between AmeriPlan Corporation, The Amacore Group, Inc,
Zurvita, Inc., TransMark Financial Services, Inc. and Mark Jarvis in regards to
the litigation by and among numerous parties.  The settlement terms
stated that the Company pay a lump sum of $1,150,000 and deliver a promissory
note in the principal amount of $600,000 bearing interest at a 7.5% per annum,
payable in 24 monthly installments to AmeriPlan.  This agreement
discharges all claims, counter-claims and causes of action, known or unknown,
including without limitation, the allegations set forth in the litigation
aforementioned.





The Amacore Group, Inc. v. Ty
Bruggemann, Thomas Welch, Paul Johnson, Lifeguard Benefit Services, Inc.,
Consumer Assistance Services Association, Direct Medical Network Solutions,
Inc.; In the United States District Court, Middle District of Florida,
Tampa Division; Case No. 8:09-cv-00748-JSM-TGW (the “Florida Litigation”). In
April, 2007, Amacore initiated the Florida Litigation against the named
individuals and companies asserting fraud in the inducement with respect to an
October 12, 2009, Agreement of Plan and Merger between Amacore Group, Inc.
(“Amacore”), LBS Acquisition Corp., and Lifeguard Benefit Services, Inc.
(“Lifeguard”) (“Agreement”). Alternatively, Amacore initiated this litigation to
dispute or modify certain adjustments that were to be made on or about April 12,
2009, pursuant to the terms of the Agreement. Amacore asserted causes of action
against the defendants including fraud in the inducement, negligent
misrepresentation, conspiracy to commit fraud, breach of contract, theft and
conversion, unjust enrichment, and a demand for an accounting. Defendants
responded by filing a motion to dismiss based upon jurisdictional and other
grounds. The Florida Litigation has just begun; Amacore will vigorously pursue
every available legal remedy for the claims asserted in the Florida
Litigation.





Ty Bruggemann, Paul Johnson, Thomas
Welch, Rocky Williams, Richard Burton, and Kim Fleischer v. The Amacore Group,
Inc., Jay Shafer, Shad Stastney, Chris Phillips, Clark A. Marcus, Giuseppe
Crisafi, Guy Norberg, Jerry Katzman, Vicis Capital, LLC, and John Doe
1-100; In the United States District Court, District of New Jersey; Case
No. 2:09-cv-02776-JAG-MCA (the “New Jersey Litigation”). In September, 2009,
despite knowledge of the pending Florida Litigation, the above named plaintiffs
initiated the New Jersey Litigation against Amacore and other named individuals
and companies for allegations arising from the same transaction or occurrence
giving rise to the Florida Litigation described above. Plaintiffs asserted
claims against the defendants for fraud in the inducement, common law fraud,
breach of fiduciary duties, breach of contract, unjust enrichment, breach of
covenant of good faith and fair dealing, New Jersey consumer fraud statute,
conversion, declaratory judgment, and sought to pierce the corporate veil, all
arising from disputes between the parties regarding the Agreement of Plan and
Merger between Amacore Group, Inc., LBS Acquisition Corp., and Lifeguard Benefit
Services, Inc. dated on or about October 12, 2007. Amacore and the individually
named defendants who are or were officers or directors of Amacore responded by
filing a motion to dismiss based upon jurisdictional and other grounds. The New
Jersey Litigation has just begun; Amacore will vigorously defend itself against
these allegations and assert counterclaims against the Plaintiffs as set forth
in the Florida Litigation.





As of
September 30, 2009, there were no additional material changes than those noted
above in the Company’s legal proceedings as previously disclosed in the
Company’s 2008 Annual Report.  Please refer to the 2008 Annual Report
for additional information regarding legal proceedings.  The Company
settled various matters during the nine months ended September 30, 2009, none of
which were material to the Company.




45


Item
1a. Risk Factors





Not
applicable.





Item
2. Unregistered Sales of Equity and Use of Proceeds





On August
5, 2009, the Company issued 5,074,872 shares of its common stock to an
individual in settlement of potential claims.  The shares were issued in a
transaction that was exempt from registration of the Securities Act of 1933, as
amended (the “Securities Act”) pursuant to Section 4(2) of the Securities Act of
1933, which exempts transactions by an issuer not involving a public
offering.




Item
3. Defaults Upon Senior Securities





Not
applicable.





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





None





Item
5. Other Information.





None











46





Item
6. Exhibits





(a)
Exhibits:





1.01
            Series
      L Preferred Stock Purchase Agreement by and between the Company and Vicis
      Capital Master Fund dated September 29, 2009 (incorporated by reference to
      Exhibit 10.1, 10.2 and 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission July 2, 2009)1.02
            Entry
      into a material definitive agreement, dated July 30, 2009 (incorporated by
      reference to Exhibit 2.4, 10.5 and 99.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 5,
      2009).2.03
            Creating
      of a Direct Financial Obligation or an Obligation under an Off-Balance
      Sheet arrangement of a registrant, dated July 9, 2009 (incorporated by
      reference to Exhibit 4.1, 4.2, and 10.16 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on July 14,
    2009).2.3(c)
            Amendment
      to Stock Purchase Agreement by and among the Company, US health Benefits
      Group, Inc., US Healthcare Plans, Inc., On the Phone, Inc. and
      stockholders, dated September 10, 2009 (incorporated by reference to
      Exhibit 2.3(c)) to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on September 10, 2009)3.1
            Certificate
      of Designation of Series L Convertible Preferred Stock, filed with the
      Delaware Secretary of State on September 26, 2009. (incorporated by
      reference to Exhibit 3.2 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on July 2, 2009).3.2
            Bylaws
      of The Amacore Group, Inc. amended and restated on September 23, 2009
      (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on September 23,
      2009).3.3
            Amended
      and Restated Certificate of Designation of Series L Convertible Preferred
      Stock, filed with the Delaware Secretary of State on November 13, 2009
      incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on November 13,
      2009).4.2
            Guaranty
      Agreement, dated July 9, 2009 (incorporated by reference to Exhibit 4.2 to
      the Company’s Form 8-K filed with the Securities and Exchange Commission
      on July 14, 2009).4.3
            Promissory
      Note of Zurvita, Inc., dated July 9, 2009 (incorporated by reference to
      Exhibit 4.1 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on July 14, 2009).10.1
            Securities
      Purchase Agreement by and between the Company and Vicis Capital Master
      Fund dated September 29, 2009 (incorporated by reference to Exhibit 10.1
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on July 2, 2009).10.2
            Warrant
      Agreement by and between the Company and Vicis Capital Master Fund dated
      September 29, 2009 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      July 2, 2009).10.3
            Registration
      Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital
      Master Fund, dated September 29, 2009 (incorporated by reference to
      Exhibit 10.3 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on July 2, 2009).10.4
            Securities
      Purchase Agreement by and between the Company and Vicis Capital Master
      Fund dated November 12, 2009, 2009 (incorporated by reference to Exhibit
      10.1 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on November 12, 2009).10.5
            Warrant
      Agreement by and between the Company and Vicis Capital Master Fund dated
      November 12, 2009 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      November 12, 2009).10.6
            Registration
      Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital
      Master Fund, dated November 12, 2009 (incorporated by reference to Exhibit
      10.3 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on November 12, 2009).  47
  10.7
            First
      Amendment to Warrant by and between The Amacore Group, Inc. and Vicis
      Capital Master Fund, dated November 12, 2009 (incorporated by reference to
      Exhibit 10.4 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on November 12, 2009).10.16
            Mutual
      Compromise Settlement Agreement and General Release of Claims, dated July
      9, 2009 (incorporated by reference to Exhibit 4.1 to the Company’s Form
      8-K filed with the Securities and Exchange Commission on July 14,
      2009).31.1
            Certification
      of Chief Executive Officer pursuant to Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
            Certification
      of Chief Financial Officer pursuant to Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
      Section 1350)







48




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:
      November 23,
      2009
            /s/
      Jay
      ShaferJay
      ShaferChief
      Executive OfficerDated:
      November 23,
      2009
            /s/
      Scott
      SmithScott
      SmithInterim
      Chief Financial OfficerDated:
      November 23,
      2009
            /s/
      Jason PostJason
      PostPrincipal
      Accounting Officer











49





EXHIBIT
INDEX





1.01
            Series
      L Preferred Stock Purchase Agreement by and between the Company and Vicis
      Capital Master Fund dated September 29, 2009 (incorporated by reference to
      Exhibit 10.1, 10.2 and 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission July 2, 2009)1.02
            Entry
      into a material definitive agreement, dated July 30, 2009 (incorporated by
      reference to Exhibit 2.4, 10.5 and 99.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 5,
      2009).2.03
            Creating
      of a Direct Financial Obligation or an Obligation under an Off-Balance
      Sheet arrangement of a registrant, dated July 9, 2009 (incorporated by
      reference to Exhibit 4.1, 4.2, and 10.16 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on July 14,
    2009).2.3(c)
            Amendment
      to Stock Purchase Agreement by and among the Company, US health Benefits
      Group, Inc., US Healthcare Plans, Inc., On the Phone, Inc. and
      stockholders, dated September 10, 2009 (incorporated by reference to
      Exhibit 2.3(c)) to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on September 10, 2009)3.1
            Certificate
      of Designation of Series L Convertible Preferred Stock, filed with the
      Delaware Secretary of State on September 26, 2009. (incorporated by
      reference to Exhibit 3.2 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on July 2, 2009).3.2
            Bylaws
      of The Amacore Group, Inc. amended and restated on September 23, 2009
      (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on September 23,
      2009).3.3
            Amended
      and Restated Certificate of Designation of Series L Convertible Preferred
      Stock, filed with the Delaware Secretary of State on November 13, 2009
      incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on November 13,
      2009).4.2
            Guaranty
      Agreement, dated July 9, 2009 (incorporated by reference to Exhibit 4.2 to
      the Company’s Form 8-K filed with the Securities and Exchange Commission
      on July 14, 2009).4.3
            Promissory
      Note of Zurvita, Inc., dated July 9, 2009 (incorporated by reference to
      Exhibit 4.1 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on July 14, 2009).10.1
            Securities
      Purchase Agreement by and between the Company and Vicis Capital Master
      Fund dated September 29, 2009 (incorporated by reference to Exhibit 10.1
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on July 2, 2009).10.2
            Warrant
      Agreement by and between the Company and Vicis Capital Master Fund dated
      September 29, 2009 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      July 2, 2009).10.3
            Registration
      Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital
      Master Fund, dated September 29, 2009 (incorporated by reference to
      Exhibit 10.3 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on July 2, 2009).10.4
            Securities
      Purchase Agreement by and between the Company and Vicis Capital Master
      Fund dated November 12, 2009, 2009 (incorporated by reference to Exhibit
      10.1 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on November 12, 2009).10.5
            Warrant
      Agreement by and between the Company and Vicis Capital Master Fund dated
      November 12, 2009 (incorporated by reference to Exhibit 10.2 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      November 12, 2009).10.6
            Registration
      Rights Agreement by and between The Amacore Group, Inc. and Vicis Capital
      Master Fund, dated November 12, 2009 (incorporated by reference to Exhibit
      10.3 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on November 12, 2009).  50
   10.7
            First
      Amendment to Warrant by and between The Amacore Group, Inc. and Vicis
      Capital Master Fund, dated November 12, 2009 (incorporated by reference to
      Exhibit 10.4 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on November 12, 2009).10.16
            Mutual
      Compromise Settlement Agreement and General Release of Claims, dated July
      9, 2009 (incorporated by reference to Exhibit 4.1 to the Company’s Form
      8-K filed with the Securities and Exchange Commission on July 14,
      2009).31.1
            Certification
      of Chief Executive Officer pursuant to Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
            Certification
      of Chief Financial Officer pursuant to Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
      Section 1350)




















51