<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934
                  For the fiscal year ended September 30, 2001
                                       or

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

                    For the transition period from ___ to ___

                        Commission File Number 0001087216

                            Alliance HealthCard, Inc.
             (Exact name of registrant as specified in its charter)

           GEORGIA                                               58-2445301
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                3500 Parkway Lane, Suite 310, Norcross, GA 30092
              (Address of principal executive offices and zip code)

       Registrant's telephone number, including area code: (770) 734-9255

        Securities registered pursuant to Section 12 (b) of the Act: None
       Securities to be registered pursuant to Section 12 (g) of the Act:
                          Common Stock, $.001 Par Value
                                (Title of Class)

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 for such shorter periods that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Parts III of this Form 10-KSB or any amendment to
this Form 10-KSB. ( )

Registrant's revenues for the fiscal year ended September 30, 2001 were $24,769.

Aggregate market value of the voting and non-voting Common Stock held by
non-affiliates of the Registrant, computed using the last sale price as reported
for the Registrant's common stock on December 10, 2001 was $5,107,815.

Indicate the number of shares outstanding of the Registrant's common stock as of
the latest practicable date.

           Class                                Outstanding at December 10, 2001
           -----                                --------------------------------
Common Stock, $.001 par value                              4,086,252
                                                           ---------

      Transitional Small Business Disclosure Format (Check One): Yes X   No
                                                                     ---    ---

                                       1

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                            ALLIANCE HEALTHCARD, INC.

                                  FORM 10-K-SB

                                      INDEX

PART I
     ITEM 1.     BUSINESS................................................    3
     ITEM 2.     PROPERTIES..............................................    8
     ITEM 3.     LEGAL PROCEEDINGS.......................................    8
     ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....    8
PART II
     ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                        STOCKHOLDERS MATTERS.............................    9
     ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                        CONDITION AND RESULTS OF OPERATIONS..............   10
     ITEM 7.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............   11
     ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                        ACCOUNTING AND FINANCIAL DISCLOSURE..............   23
PART III
     ITEM 9.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......   23
     ITEM 10.    EXECUTIVE COMPENSATION..................................   26
     ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                        MANAGEMENT.......................................   27
     ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........   28
     ITEM 13.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                        FORM 8-K.........................................   29

SIGNATURES...............................................................   30



                                       2

<PAGE>

ITEM 1.  BUSINESS

         Certain statements contained in this filing are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, such as statements relating to financial results and plans for future
business development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors that could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, economic conditions, competition and other
uncertainties detailed from time to time in the Company's filings with the
Securities and Exchange Commission.

GENERAL

        Alliance HealthCard, Inc. (hereinafter referred to as "Alliance" or the
"Company") specializes in creating, marketing and distributing value added
healthcare savings programs, services, and products. Alliance gives individuals
and families access to medical providers at significantly discounted fees in
approximately 20 major healthcare categories for a low annual fee focusing
predominantly in underserved markets where individuals either have limited
health benefits, or no insurance. These markets may vary widely from senior
populations with Medicare (no prescription benefits), part time employees, and
to pockets of the over 40 million uninsured looking for lower cost medical
services and access to providers.

         The Company does not sell insured plans, however, the discounts
realized through their programs typically offer 10% to 60% off provider's usual
and customary fees. Building upon the power of group purchasing, Alliance has
negotiated discounts in over 20 different service categories. The Company's
programs require members to pay the provider at the time of service, therefore
eliminating the need for any insurance forms and filing. These discounts, which
are similar to managed care discounts, typically save the individual much more
than the cost of the program itself.

         The Company was founded with the expectation of marketing their
programs in the name of Alliance HealthCard. It soon became apparent that there
are many organizations that desire healthcare savings programs but are either
unwilling or incapable of developing the provider networks, infrastructure and
systems necessary to do so. Today, a major arm of the Company's sales and
delivery strategy is to include the provision of provider networks, systems and
services to third party organizations that will provide them to their various
constituencies (i.e. retail pharmacies, healthcare provider organizations to
their patients, large employers with part time employees, etc.) Those
organizations can then create an additional revenue stream while providing a
valuable service to their customers or employees. The benefits of such a program
range from customer loyalty to incremental business previously going to
competitors.

Membership Service Programs

         The Company offers memberships primarily on an individual basis.
Individual memberships are marketed by the Company to consumers through retail
pharmacies, insurance companies, health practitioners, associations and the
Internet.

         Through Alliance's provider network, holders of either the Alliance
Gold or Platinum HealthCard will be offered discounts for products and services
ranging from 10% to 60% depending on the area of coverage and the specific
procedure. Below is an example of the range of discounts in the major service
categories:

<TABLE>
<CAPTION>

 Service                             Discount Off       Service                      Discount Off
                                     Retail                                          Retail
------------------------------------ ----------------- ----------------------------- ------------
<S>                                  <C>               <C>                           <C>

Dental Care                          15-40%            Orthodontics                  23-35%
Vision Care                                            Massage Therapy               25-35%
     Prescription eyeglasses         10-60%            Physical Therapy              15-20%
     Contact Lenses                  10-60%            Health Clubs                  25-40%
     Sunglasses                      20-50%            Acupuncture                   25-40%
Lasik (vision correction)            10-30%            Alternative Medicine          25-35%
Hearing Aids                         15-40%            Diagnostic Centers            25-35%
Prescription Drugs                   10-50%            Pain Management               10-30%
Chiropractic Care                    30-50%            Personal Training             10-30%
Mental Health/Life Care              10-30%            Nutritionist                  10-30%
Electrolysis                         10-30%            Weight Loss Centers           10-30%
Nurse Help Line                      Complementary
</TABLE>


                                       3

<PAGE>

         In general, members subscribe for renewable one-year memberships in the
Company's programs. When consumers agree to enroll in a program, they generally
receive a trial membership. During the trial membership, the member may use the
program's services without obligation, as outlined in a membership brochure
included in each fulfillment kit along with a membership card and membership
identification number. The brochure outlines in detail the benefits that the
service offers and contains toll free numbers that may be called to access
service benefits and information. In the event that a consumer elects not to
participate in the service, he or she can call a toll free number during the
trial period to cancel the service without charge. Trial memberships are
generally for a period of 30 or 90 days and there are no conditions with respect
to the ability of the consumer to terminate a trial membership. The Company does
not record any revenue with respect to trial memberships. The consumer is
charged the monthly or annual membership fee upon enrollment in a program. In
the event that the member does cancel the membership during the initial trial
membership, a full refund of the fee is generated at that time. During the
course of an initial annual membership term or renewal term, a member is free to
cancel a membership in the program, generally for a prorated refund of the
membership fee for the remaining period.

The Network

         Alliance offers its membership a breadth of 20 healthcare provider
services nationwide. With access to over 100,000 providers on the Alliance Gold
Card and 380,000 providers on the Platinum Card, the Company is a leader in
providing one of the most varied and unique blends of healthcare savings
programs in the industry.

         The Company contracts directly with independent providers and provider
service organizations as well as with national and regional provider networks
("leased networks"). Provider services are typically discounted an average of
30% off retail or usual and customary charges. Some services such as dental and
vision discount routine and specialty procedures up to 55% off usual and
customary.

         Leased networks require the Company to pay an access fee based on the
number of active card members who have access to the network's providers and
practitioners. These fees range from $0.01 to $2.00 per member per month. The
contracts guarantee access, practitioner education, and discounts off their
usual and customary fee schedule. Future strategies are being developed to
reduce the number of leased networks and focus on more direct contracting
through recruitment and acquisition tactics.

         At the present time, the Company has provider agreements throughout the
United States that provide access to approximately 62,400 pharmacies, 15,200
optical centers, 10,100 chiropractic doctors, 250,000 medical doctors, 10,400
dentists, 5,000 alternative medicine and over 30,000 other service providers.

                                    PRODUCTS

        Alliance offers several different products based on its target market.
The two core plans of the Company are based on the types and quantities of
services individuals or groups may select.

The Gold Card

        The Gold Card presumes the member has some level of basic medical
coverage. It offers services that are typically not covered under a traditional
plan or that may have certain caps. The Gold Card provides individuals and
families national healthcare access to over 100,000 providers. This program
typically is marketed as add on services alongside an existing health plan or as
a stand-alone for those that have health insurance but minimal benefits for
prescription or other ancillary services (e.g. Medicare). Some of the services
of the Gold Card include:

         Pharmacy             Chiropractic            Medical Supplies
         Vision               Alternative Medicine    Medical Lab Services
         Dental               Long-Term Care          Podiatry
         Hearing              Mental Health           Emergency Medical Response
         24-hour nurse line   Physical Therapy        LifeFax Medical Records




                                       4

<PAGE>

The Platinum Card

         For individuals that do not have an insurance plan, Alliance offers the
Platinum Card product. This product includes all of the services of the Gold
Card plus medical providers, including hospitals and physicians. With over
400,000 providers nationally, this product is targeted at those with little or
no insurance, or those with just catastrophic coverage. The Platinum Card gives
members access to all of the Gold Card providers listed above, plus additional
access to several thousand hospitals and over 300,000 physicians in specialties
such as:

         Family Practice      Internists              OB/GYN
         Orthopedics          Pediatricians           Cardiology
         Radiology            Ophthalmology           Urology
         Surgery ENT          Neurology



Member Services

         The Company believes that providing high quality service to its members
is extremely important in order to encourage memberships and to strengthen the
affinity of those members for the client that offered the service program.
Currently, the Company maintains a call center in Atlanta, Georgia. The
Company's service center is available to members, toll free, 10 hours a day,
five days a week. All new membership service representatives are required to
complete a training course before beginning to take calls and attend on-the-job
training thereafter. Through both its training programs, its systems and its
software, the Company seeks to provide members with friendly, rapid and
effective answers to questions. The Company also works closely with its vendors'
customer service staffs to ensure that their representatives are knowledgeable
in matters relating to membership service programs offered by the Company.

                                INDUSTRY OVERVIEW

         Alliance provides healthcare solutions for individuals and families who
are insured, underinsured (limited benefit insurance plans), and the uninsured.
The individual or family who purchase the Alliance Gold or Platinum Card
generally has identified a gap in healthcare benefits because of a lack of
sufficient insurance coverage due to cost or product availability. The market is
not limited to self paying medical consumers. Some members will purchase an
Alliance product to gain access to a specific product or service that is limited
or not covered by a health plan. Examples of these products and services would
be alternative medicine, vision care or Federal programs such as prescription
drugs under Medicare.

The Insured

         The Company believes that a large number of individuals in the United
States are classified as insured who have traditional health care coverage. Most
often, that coverage is provided by an employer or by the consumer's being
demographically eligible for governmental programs such as Medicare and
Medicaid. While such coverage is usually satisfactory, it is most often used for
catastrophic situations and covers only certain traditional, mainline services
such as hospitalization and medical doctors. There are often significant gaps in
coverage that may place the consumer in financial peril. Services that are
essential to the quality of life may be excluded. Hearing aids, dental,
orthodontia, non-prescription nutritional supplements, eyeglasses, and pain
management are examples of some of the items that may be excluded from most
plans.

The Underinsured

         The definition of "underinsured" usually focuses on the issue of
assumed risk. A fully insured individual is ordinarily exposed to a level of
potential out of pocket cost for deductibles and co-pays that would not be
disruptive to that individual's personal financial situation. By contrast, the
underinsured individual has, for whatever reason, assumed a higher level of
financial risk for those out of pocket expenses that may be considered a
hardship if incurred.


                                       5

<PAGE>

The Uninsured

         The Company believes that a significant number of individuals in the
United States have no health care coverage whatsoever - they are uninsured.
Self-employed individuals, workers in casual occupations such as agriculture,
construction, fast food, entertainment and hospitality, semi-retirees and early
retirees are possible examples.

         In summary, there are many Americans who are faced with major
expenditures for health-related goods and services which they pay for
personally. These consumers are looking for ways to reduce that out of pocket
expenditure so they might access health care in an unencumbered fashion.

                             HISTORY OF THE COMPANY

         The Company was founded in September 1998 and was formed as a limited
liability company and was reorganized into a Georgia corporation in February
1999. The Company is not an insurance provider, but is a provider of an
innovative membership organization that receives discounts for health-related
products and services from a network of providers. Alliance offers its programs
to consumers who are underinsured, uninsured and to individuals who participate
in employer sponsored health plans which provide primary health insurance, but
do not provide insurance coverage for other health-related services and
products.

         On September 30, 1999, the Company completed a $900,000 private stock
offering under Regulation 504 consisting of 1,080,000 shares of Common Stock and
124 shareholders. The Company used the funds to successfully build the
infrastructure for network development, customer support systems and its sales
and marketing team.

         After completing the private stock offering in September, the Company
registered its securities with the Securities and Exchange Commission on March
10, 2000 and received approval from the NASD on November 29, 2000 to begin
trading its Common Stock under the trading symbol of ALHC.OB. The Company's
board of directors also approved a three for one stock split effective November
1, 2000.

         In anticipation of a major contract beginning in January 2001, the
Company began another private stock offering under Regulation 506 in December
2000. The offering was for 333,333 Units of its securities, for a total of
$1,500,000. Each Unit is comprised of three shares of Common Stock plus one
Warrant to purchase one share of Common Stock at $1.50 per share. As of
September 30, 2001, the Company has received approximately $937,000 consisting
of 624,999 shares of Common Stock from approximately 60 shareholders.

BUSINESS STRATEGY

         The Company intends to focus predominantly in underserved markets where
individuals either have limited health benefits, or no insurance. The Company
has developed programs that give individuals access to healthcare providers at a
reduced fee, and offers value and savings to healthcare consumers throughout the
country. Through product design, competitive membership pricing and strong
distribution channel partners, Alliance plans to fill a significant void in the
healthcare market that insurance plans have not addressed.


                                       6

<PAGE>

         The Company's primary target markets consist of: 1) Medicare population
without supplemental coverage 2) limited benefit insurance plans and 3)
uninsured individuals. Each of these markets has unique characteristics and
therefore, specific means of distribution. Alliance provides a wide degree of
flexibility to its distribution partners in both product design and network
services. The Company's distribution strategy is built on three models:

         Healthcare Provider Model - Alliance partners with healthcare providers
         gaining access to the provider's pool of health care lives. (Example:
         Retail Pharmacies)

         Affinity  Model - Alliance  produces a  co-branded  product to assist a
         partner in creating  value for the  partners  existing product, or in
         creating a product for resell by the partner. (Healthcare Related
         Insurance Companies)

         Alliance Gold and Platinum Model - Alliance sells cards on a direct
         basis, or through agents, brokers and resellers.

This flexibility, in conjunction with systems and operations built around the
provider distribution model is unique in the industry. The competition takes a
"one size fits all" approach to program design. The Company feels that this
flexible approach to its clients will contribute greatly to its ability to meet
revenue and profit goals.

SALES AND MARKETING

         The Company currently employs one full-time sales professional.
Alliance's prospects and sales have emerged principally from personal contacts
by the Company's sales professional and executive officers with healthcare
related executives as well as referrals from its board of directors and
telemarketing leads.

CUSTOMERS

         The Company executed a ten year contract in December, 2000 with CVS
Pharmacy, Inc., a major retail chain consisting of approximately 4,100 locations
that are selling the cards at their pharmacy counters to certain individuals who
lack pharmacy and other health benefits. The Company expects this agreement to
account for more than 80% of its future annual revenues. The initial term of the
agreement is five (5) years and automatically renews for consecutive five (5)
year terms until either party provides written notice of cancellation at least
180 days prior to the expiration of the then current term. There is no certainty
that CVS Pharmacy, Inc. will not cancel the renewal after the initial term.
Furthermore, CVS Pharmacy, Inc. may terminate the agreement with the Company,
following applicable notice, upon any of the following occurrences: (1) the
Company commits a material breach of the agreement; (2) the Company files a
petition in bankruptcy or becomes insolvent; (3) the Company fails to make a
payment; or (4) the Company merges with, or sells more than 40% of its voting
stock to a competitor of the retail chain. There can be no assurances that the
Company could replace these revenues when the agreement expires or if it is
terminated prior to expiration. Accordingly, termination or expiration of this
relationship would substantially reduce the Company's revenues and profits, and
thus, have a material adverse effect on the Company's business, financial
performance and operations.

COMPETITION

         There are several companies that represent competition to the Company.
In understanding the competition, the market is fragmented with small companies
that are attempting to compete on a local or regional basis. The Company
believes that these smaller entities do not have the scalability, resources, or
networks to compete on a national basis. The larger entities and national
competitors are Eckerds, Member Works, Peoples Prescription Plan, and Readers
Digest YouRX Plan.

         The Company recognizes that the capital required to enter this business
presents a rather high hurdle. Due to the lack of market dominance by any one
company, the industry does present an attractive opportunity for new entrants.
It is the Company's belief that the low price point of its product and the high
cost of member acquisition will dissuade many entrants. By focusing on delivery
models that rely upon established customer relationships (i.e. the existing
customer base of a large provider or the labor force of a large employer),
Alliance feels that it will be able to minimize the acquisition cost of its
members.


                                       7

<PAGE>

GOVERNMENT REGULATION

         The Company does not sell or market insurance products, and thus we
believe that its business is not subject to material regulation under the
insurance laws of the United States or any of the states in which it plans to
offer services. Licensing laws and regulations often differ materially between
states and within individual states such laws and regulations are subject to
amendment and reinterpretation by the agencies charged with their enforcement.
If the Company becomes subject to any licensing or regulatory requirements, the
failure to comply with any such requirements could lead to a revocation,
suspension or loss of licensing status, termination of contracts and legal and
administrative enforcement actions. In addition, the use of the Internet in the
marketing and distribution of the Company's services is relatively new and
presents issues, such as the limitations on an insurance regulator's
jurisdiction and whether Internet service providers, gateways or cybermalls are
(a) engaged in the solicitation or sale of insurance policies or (b) otherwise
transacting business requiring licensure under the laws of one or more states.
Accordingly, the insurance laws and regulations and interpretations thereof are
subject to uncertainty and change. The Company cannot be sure that a review of
its current and proposed operations will not result in a determination that
could materially and adversely affect its business, results of operations and
financial condition. Moreover, regulatory requirements are subject to change
from time to time and may in the future become more restrictive, thereby making
compliance more difficult or expensive or otherwise affecting or restricting the
Company's ability to conduct its business as now conducted or proposed to be
conducted.

EMPLOYEES

         As of November 30, 2001, the Company employed 13 individuals on a
full-time basis and 1 on a part-time basis. None of the Company's employees are
represented by a labor union. The Company believes that its employee relations
are good.

ITEM 2.  PROPERTIES.

         The Company's executive offices are located in Norcross, Georgia,
consisting of approximately 2,000 square feet of space subleased from NovaNet,
Inc. a company partially owned by Robert D. Garces, the Chairman of the Board of
the Company. The sublease is a month to month tenancy at approximately $4,400
per month, which includes the use of reception, office furniture, copying and
other office equipment. While the sublease was not negotiated at arms-length,
the Company believes the terms of the sublease are comparable to what it would
pay for such space on the open market. The Company believes that it has adequate
office space for its current operations. However, as the staffing of Alliance
has increased, the Company is currently in the process of securing additional
space by the second quarter of 2002.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company is not currently involved in any litigation or legal
proceedings and is not aware of any litigation or proceeding threatened against
it.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Company held its annual meeting of stockholders on April 25, 2001
for stockholders of record at the close of business on February 28, 2001. The
stockholders voted and approved the following matters:

         1.   To elect a Board of Directors consisting of seven members to hold
              office until the next annual meeting of stockholders or until
              their successors are elected and qualified.

         2.   To ratify the selection of Miller, Ray & Houser by the Board of
              Directors as the Company's independent public accountants to audit
              the accounts of the Company for the fiscal year ending September
              30, 2001.

         3.   To amend the Company's Articles of Incorporation to increase the
              number of authorized shares of Common Stock from ten million
              (10,000,000) to one hundred million (100,000,000) shares.


                                       8

<PAGE>

PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Alliance's Common Stock began trading on the Over The Counter Bulletin
Board in January 2001. As of December 15, 2001 there were approximately 160
holders of record of Alliance Common Stock. The table below sets forth for the
periods indicated the high and low price per share (using the closing average of
best bid and best ask price) of Alliance Common Stock as reported on the Over
The Counter Bulletin Board prior to September 2001.


                                                   Price Per Common Share
                                             ----------------------------------
                                                 High                 Low
                                             --------------       -------------
Year Ended September 30, 2001
   Second Quarter                                $2.70               $1.80
   Third Quarter                                 $2.70               $1.80
   Fourth Quarter                                $1.80               $0.90


DIVIDEND POLICY

         The Company declared a three for one stock dividend to shareholders of
record as of November 1, 2000. However, the Company has never paid cash
dividends or made other cash distributions on the Common Stock, and does not
expect to declare or pay any cash dividends in the foreseeable future. The
Company intends to retain future earnings, if any, for working capital and to
finance current operations and expansion of its business. Payments of dividends
in the future will depend upon the Company's growth, profitability, financial
condition and other factors the Company's Board of Directors may deem relevant.

RECENT SALE OF UNREGISTERED SECURITIES

         The Company issued an Offering Memorandum on December 15, 2000,
pursuant to the exemption set forth in Regulation D, Rule 506, for the sale of
333,333 Units of its securities at a price of $4.50 per Unit, with each Unit
being comprised of three shares of Common Stock, $.001 par value plus one
Warrant to purchase one share of Common Stock at $1.50 per share. The Offering
will terminate on December 31, 2001 unless extended by the Company or terminated
at an earlier date.

         As of September 30, 2001, the Company had sold a total of 208,333 Units
of its Common Stock at $4.50 per Unit for an aggregate of $937,500, pursuant to
the exemption set forth in Regulation D, Rule 506. Each Unit is comprised of
three shares of Common Stock, $.001 par value, plus one Warrant to purchase one
share of Common Stock at $1.50 per share.


                                       9

<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

General

         The Company was founded in September 1998 and was formed as a limited
liability company and was reorganized into a Georgia corporation in February
1999. The Company is not an insurance provider, but is a provider of an
innovative membership organization that receives discounts for health-related
products and services from a network of providers. Alliance offers its programs
to consumers who are underinsured, uninsured and to individuals who participate
in employer sponsored health plans which provide primary health insurance, but
do not provide insurance coverage for other health-related services and
products. The Company has financed its operations to date through the sale of
its securities and a line of credit obtained in May 2000. See "Liquidity and
Capital Resources."

Results of Operations

Year Ended September 30, 2001 Compared to Year Ended September 30, 2000

         The Company began sales of its membership cards in November 1999. Net
revenues for the company increased from $9,383 in 2000 to $24,769 in 2001 as a
result of a contract with CVS Pharmacy, Inc. signed in December 2000 which is
currently being implemented in four phases with completion of all phases
expected by June 2002.

         Gross profit decreased $92,048 to a loss of $104,317 for the year ended
2001 from a loss of $12,268 for the same prior year attributable to an increase
in salary expense for the Company's customer care and fulfillment center.

         Marketing and sales expenses decreased $34,138 to $96,286 in 2001 from
$130,424 in 2000 due to a decrease in expenses for sales and marketing
collateral in the current year. Expenses incurred were primarily for sales
personnel and trade shows.

         General and administrative expenses increased to $752,625 in 2001 from
$731,013 in the prior year. The increase is attributable to additional personnel
and other expenses incurred to continue to develop the operations of the
Company.

         Other income decreased $56,110 to a loss of $25,368 in 2001 from other
income of $30,742 in 2000. The decrease is a result of a decline of $26,666 in
consulting fees that were received for certain Company personnel who performed
services for an affiliated Company in the prior year (see "Related
Transactions") and an increase in net interest expense to $30,524 for 2001
incurred on the Company's line of credit.

         The Company reported a net loss of $978,596 in 2001 compared to a net
loss of $842,963 for the prior year. The increase in the net loss is a result of
expenses incurred to continue to develop and implement the infrastructure of the
Company for its customer care and fulfillment centers, network development and
sales and marketing.

Liquidity and Capital Resources

         The Company's operations used cash of $954,912 for the year ended
September 30, 2001. The Company's net working capital increased $100,100 to
($277,846) during the 12 months ended September 30, 2001 from $(377,946) at
September 30, 2000.

         The Company's investing activities during the year ended September 30,
2001 used cash of $16,435 for capital expenditures for computers and equipment
for card administration and the increase in additional personnel.

         The Company's financing activities during the year ended September 30,
2001 provided cash of $1,031,787 primarily from the sale of unregistered
securities offset by a reduction of $45,000 on the Company's line of credit
agreement. As of September 30, 2001, the Company had sold a total of 208,333
Units of its Common Stock at $4.50 per Unit for an aggregate of $937,500,
pursuant to the exemption set forth in Regulation D, Rule 506. Each Unit is
comprised of three shares of Common Stock, $.001 par value, plus one Warrant to
purchase one share of Common Stock at $1.50 per share.


                                       10

<PAGE>

         On September 29, 2001 the Company extended its credit agreement with
Suntrust Bank in Atlanta, Georgia. The agreement provides the Company with a
$500,000 working capital facility secured by personal guaranties from certain
officers and directors of the Company in exchange for common stock warrants. The
credit agreement matures on March 31, 2002 and bears an interest rate of 6% per
annum. The Company began interest only payments on June 17, 2000. A final
payment of the unpaid principal balance plus accrued interest is due and payable
on March 31, 2002. The Company has $195,000 available on its credit agreement as
of September 30, 2001. The working capital facility is being used to continue to
provide on-going capital to fund the implementation of the contract with CVS
Pharmacy, Inc.

         The Company's future liquidity and capital requirements will depend
upon numerous factors, including the success of its product offerings and
competing market developments. The Company has not yet achieved, and may never
achieve, profitable operations. The Company executed a five year contract in
December, 2000 with CVS Pharmacy, Inc. a major retail chain consisting of
approximately 4,100 locations that are selling a modified version of Alliance's
Gold Card at their pharmacy counters to individuals who lack pharmacy and other
health benefits. The Company intends to fund its ongoing development and
operations through a combination of sales through these retail stores and from
additional equity investments. The Company has signed a contract with an
investment firm to raise approximately $4,000,000 in additional equity for the
Company. However, as of November 30, 2001 there are not any commitments for any
new capital investments. If the Company fails to successfully develop a market
through the retail stores and receives less than $1,000,000 from new capital
investments, the Company may not be able to successfully implement its business
plan to the fullest extent during the next twelve months.

IMPACT OF INFLATION

         Inflation has not had a material effect on the Company to date.
However, the effects of inflation on future operating results will depend in
part, on the Company's ability to increase prices or lower expenses, or both, in
amounts that offset inflationary cost increases.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The Company has no material exposure to market risk from derivatives or
other financial instruments.

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following financial statements are filed with this report:

                  Reports of Independent Auditors

                  Balance Sheets as of September 30, 2001 and 2000

                  Statements of Operations for the year ended September 30, 2001
                  and 2000

                  Statements of Stockholders' Equity for the year ending
                  September 30, 2001 and 2000

                  Statements of Cash Flows for the year ended September 30, 2001
                  and 2000

                  Notes to Financial Statements


                                       11

<PAGE>

Independent Auditor's Report



The Board of Directors and Stockholders
Alliance HealthCard, Inc.

We have audited the accompanying balance sheet of Alliance HealthCard, Inc. as
of September 30, 2001 and 2000, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alliance HealthCard, Inc. as of
September 30, 2001 and 2000, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's significant operating losses and lack of
equity raise doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


Miller Ray & Houser, PC

Atlanta, Georgia
December 3, 2001


                                       12

<PAGE>

Alliance HealthCard, Inc.

                                 Balance Sheets

                                                        September 30,
                                                  ---------------------
                                                   2001             2000
                                                   ----             ----
Assets
Current assets:
  Cash and cash equivalents                  $   175,631       $   115,191
  Accounts receivable, net                        59,985             3,499
  Prepaid expenses and other
    current assets                                19,475             7,395
                                             -----------       -----------
Total current assets                             255,091           126,085
                                             -----------       -----------

Furniture and equipment, net                      32,875            31,907
Other assets                                           -             4,637
                                             -----------       -----------
Total assets                                 $   287,966       $   162,629
                                             ===========       ===========


Liabilities and stockholders' equity

Current Liabilities
Accounts payable                             $    54,863       $     9,224
Accrued salaries and benefits                     36,342           107,764
Other accrued liabilities                        125,311            27,382
Line of credit                                   305,000           350,000
Current portion of capital lease
  obligations                                     11,421             9,661
                                             -----------       -----------
Total current liabilities                        532,937           504,031

Capital lease obligation                          14,294            16,676

Commitments

Stockholders' equity:
  Common stock, $.0001 par value;
    100,000,000 shares authorized;
    3,945,919 shares issued and outstanding
    at September 30, 2001 and 3,299,400
    shares issued and outstanding at
    September 30, 2000                             1,747             1,100
  Additional paid-in-capital                   2,117,772         1,041,010
  Accumulated deficit                         (2,378,784)       (1,400,188)
                                             -----------       -----------
Total stockholders' equity                      (259,265)         (358,078)
                                             -----------       -----------
Total liabilities and stockholders' equity   $   287,966       $   162,629
                                             ===========       ===========


See accompanying notes.


                                       13

<PAGE>

                            Alliance HealthCard, Inc.
                            Statements of Operations

                                                           For The Year
                                                              Ending
                                                           September 30,
                                                 -----------------------------
                                                    2001               2000
                                                 ----------         ----------

Net revenues                                     $   24,769         $    9,383
Direct costs                                        129,086             21,651
                                                 ----------         ----------
Gross Profit                                       (104,317)           (12,268)

Marketing and sales expenses                         96,286            130,424
General and administrative expenses                 752,625            731,013
                                                 ----------         ----------

Operating loss                                     (953,228)          (873,705)
                                                 ----------         ----------
Other income (expense):
    Other                                             5,156             31,822
    Interest expense, net                           (30,524)            (1,080)
                                                 ----------         ----------
                                                    (25,368)            30,742
                                                 ----------         ----------
Net loss                                         $ (978,596)        $ (842,963)
                                                 ==========         ==========
Per share data:
     Basic loss                                  $    (0.27)        $    (0.26)
                                                 ==========         ==========
     Diluted loss                                $    (0.27)        $    (0.26)
                                                 ==========         ==========
Basic and diluted weighted average shares
outstanding                                       3,681,421          3,299,400
                                                 ==========         ==========



See accompanying notes.


                                       14

<PAGE>

                            Alliance HealthCard, Inc.
                       Statements of Stockholders' Equity


<TABLE>
<CAPTION>


                                                                                         Deficit
                                                                                       Accumulated
                                             Common Stock             Additional         During                Total
                                         ----------------------         Paid-In        Development         Stockholders'
                                           Shares        Amount         Capital           Stage               Equity
                                         ---------       ------       ----------      ------------         -----------
<S>                                      <C>             <C>          <C>             <C>                   <C>

Balance at September 30, 1999            3,299,400       $1,100       $1,014,010      $   (557,225)         $ 457,885

    Stock options granted on
    October 1, 1999                                                       27,000                               27,000
    ($.70 per share)
Net loss                                         -            -                -          (842,963)          (842,963)

Balance at September 30, 2000            3,299,400        1,100        1,041,010        (1,400,188)          (358,078)

Sale of stock ($1.50 per share),
    net of offering costs                  624,499          625          936,121                 -            936,746

Stock options and warrants
    exercised                               22,020           22            7,645                 -              7,667

Stock options issued on
    October 1, 2000
    ($0.83 per share)                            -            -          132,996                 -            132,996

Net loss                                         -            -                -          (978,596)          (978,596)
                                        ----------       ------       ----------       -----------          ---------
Balance at September 30, 2001            3,945,919       $1,747       $2,177,772       $(2,378,784)         $(259,265)
                                        ==========       ======       ==========       ===========          =========

</TABLE>

See accompanying notes.


                                       15

<PAGE>

                            Alliance HealthCard, Inc.

                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                   For The Year Ending
                                                                       September 30,
                                                             -------------------------------
                                                                2001                 2000
                                                             ---------            ----------
<S>                                                          <C>                  <C>

Cash flows from operating activities

Net loss                                                     $(978,596)           $ (842,963)
Adjustments to reconcile net loss to net cash used
   in operating activities:
     Depreciation and amortization                              15,467                 6,997
     Warrants issued in connection with consulting
       services                                                      -                27,000
     Change in operating assets and liabilities:
         Accounts receivable                                   (56,486)               (3,499)
         Prepaid expenses                                      (12,080)               (5,118)
         Deposits                                                4,637                (4,637)
         Accounts payable                                       45,639               (18,034)
         Accrued wages                                         (71,422)               56,327
              Other accrued expenses                            97,929                27,382
                                                            ----------            ----------
Net cash used in operating activities                         (954,912)             (756,545)
                                                            ----------           -----------
Cash flows from investing activities
Purchase of equipment                                          (16,435)              (29,727)
                                                            ----------           ----------
Net cash used in investing activities                          (16,435)              (29,727)
                                                            ----------           ----------
Cash flows from financing activities
(Repayments) borrowings from short-term debt                   (45,000)              350,000
Sale of stock and other issuances                            1,077,409                     -
(Repayments) borrowings from capital lease
   obligation                                                     (622)               18,681
                                                            ----------           ----------
Net cash provided by financing activities                    1,031,787               368,681
                                                            ----------            ----------
Net increase (decrease) in cash                                 60,440             (417,591)
Cash at beginning of period                                    115,191               532,782
                                                            ----------            ----------
Cash at end of period                                       $  175,631            $  115,191
                                                            ==========            ==========
</TABLE>


See accompanying notes.


                                       16

<PAGE>

                            Alliance HealthCard, Inc.

                          Notes to Financial Statements

                           September 30, 2001 and 2000

1. Description of the Business

Alliance HealthCard, Inc. (the "Company") was organized on September 30, 1998 to
provide comprehensive health care services through provider networks at
discounts to patients for services not covered by their primary health
insurance. The Company was formed as a limited liability corporation and was
reorganized into a Georgia corporation in February 1999.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and the accompanying
notes. Actual results inevitably will differ from those estimates and such
differences may be material to the financial statements.

Cash and Cash Equivalents

For the purposes of the balance sheets and statements of cash flows, the Company
considers investments purchased with a maturity of three months or less to be
cash equivalents.

Furniture and Equipment

Furniture and equipment are recorded at cost. Depreciation (which includes
amortization of assets under capital leases) is computed on a straight-line
basis based on management's estimates of the useful lives of the assets (or the
term of the related lease, if less), which range from three to five years.

Stock Options

Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation", encourages but does not require companies to record
compensation cost for their employee stock compensation plans at the fair value
of the options granted. The Company has elected to measure compensation costs
for stock-based compensation plans using the intrinsic value-based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25").

Income Taxes

Prior to February 1999, the Company was a limited liability corporation and
therefore, the owners assumed responsibility for the income taxes of the
Company. Deferred taxes arise primarily from the recognition of revenues and
expenses in different periods for income tax and financial reporting purposes.

Advertising

The Company's policy is to expense advertising costs as the costs are incurred.

                                       17

<PAGE>

                            Alliance HealthCard, Inc.

Notes to Financial Statements, Continued



3. Going Concern and Management's Plan

Subsequent to September 30, 2001, the Company continued to experience increasing
operational costs with minimal corresponding revenue that has adversely affected
the Company's results of operations and liquidity.

The Company plans to reduce its working capital needs and secure additional
financing until the Company is cash flow positive. The Company plans to obtain
additional financing through sales of its common stock. Also, the Company
executed a five year contract with CVS Pharmacy, Inc., a retail chain, to sell
the Company's product in the chain's 4,100 pharmacies to be implemented in four
phases with full implementation expected by June 2002. As of December 1, 2001,
the Company's card is being sold in approximately 2,000 stores. Although the
results of these actions cannot be predicted, the Company believes that these
steps will improve the Company's revenue, operating results and cash flows.

The Company is in negotiations with two insurance companies to include the
Alliance Health Card as a component or supplement to their coverage.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern; they do not include adjustments relating to
the recoverability of recorded asset amounts and classifications of recorded
assets and liabilities.

4. Short Term Debt

On May 17, 2000 the Company entered into a credit agreement with Suntrust Bank
in Atlanta, Georgia. The agreement provides the Company with a $500,000 working
capital facility secured by personal guaranties from certain officers and
directors of the Company in exchange for common stock warrants. The credit
agreement has been extended to March 31, 2002 and bears an interest rate of 6.0%
per annum. Interest only payments began on June 17, 2000 and have continued at
monthly time intervals thereafter. A final payment of the unpaid principal
balance plus accrued interest is due and payable on March 31, 2002. The Company
has $195,000 available on its credit agreement as of September 30, 2001.

5. Furniture and Equipment

Furniture and equipment consists of the following at September 30, 2001 and
2000:

                                                            September 30,
                                                     ------------------------
                                                       2001             2000
                                                     -------          -------
Furniture                                            $ 7,023          $ 7,023
Equipment                                             10,290            3,081
Equipment under capital leases                        40,133           30,909
                                                     -------          -------
                                                      57,446           41,013
Less:  accumulated depreciation and amortization     (24,573)          (9,106)
                                                     -------          -------
                                                     $32,873          $31,907
                                                     =======          =======




                                       18

<PAGE>

                            Alliance Healthcard, Inc.

Notes to Financial Statements, Continued



6. Stockholders' Equity

The Company issued an Offering Memorandum on December 15, 2000, pursuant to the
exemption set forth in Regulation D, Rule 506, for the sale of 333,333 Units of
its securities at a price of $4.50 per Unit, with each Unit being comprised of
three shares of Common Stock, $.001 par value plus one Warrant to purchase one
share of Common Stock at $1.50 per share. The Offering will terminate on
December 31, 2001 unless extended by the Company or terminated at an earlier
date. As of September 30, 2001, the Company had sold a total of 208,333 Units of
its Common Stock at $4.50 per Unit for an aggregate of $937,500.

The Company granted certain officers options to purchase 450,000 shares of
Common Stock at $0.83 per share with immediate vesting in lieu of salary
compensation for the years ended September 30, 2001 and September 30, 2000. The
Company has recognized approximately $73,000 and $60,000 of salary expense in
connection with these options for the years ending September 30, 2001 and
September 30, 2000 respectively. The Company granted certain board members
options to purchase 45,000 shares of Common Stock at $.23 per share in return
for certain advisory services, for the year ending September 30, 2000. The
Company has recognized approximately $27,000 of consulting fees in connection
with these options for the year ending September 30, 2000. The Company granted
certain officers and board members warrants to purchase 450,000 shares of Common
Stock at $.83 per share in return for their personal guaranties on the Company's
line of credit for the year ending 2000. (See "Liquidity and Capital
Resources.")

7. Stock Options

In conjunction with certain employment agreements, the Company granted stock
options and warrants relating to 863,167 shares of Common Stock for the year
ending September 30, 2001 and 312,900 shares of Common Stock for the year ending
September 30, 2000. The Company granted certain board members stock options
relating to 105,000 shares of Common Stock during the year ended September 30,
2000. The Company has reserved 1,200,000 shares of the Common Stock in
connection with the stock option plan and 483,333 warrants in connection with
the line of credit guarantee for SunTrust Bank and the Offering Memorandum dated
December 15, 2000. At September 30, 2001, there were 459,434 shares available
for future issuance, in connection with the Company stock option plan, line of
credit guarantees and the Offering Memorandum dated December 15, 2000. The
vesting schedules relating to these options range from immediate vesting to a
three year vesting period.

The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
grant date, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted under the fair
value method.


                                       19

<PAGE>

                            Alliance Healthcard, Inc.

Notes to Financial Statements, Continued



7. Stock Options (Continued)

The fair value of each option is estimated on the date of grant using the
Black-Scholes method with the following weighted average assumptions used for
grants for the years ending September 30, 2001 and September 30, 2000.

                                       September 30,
                                  ----------------------
                                  2001              2000
                                  ----              ----
Expected volatility               .01               .01
Dividend yield                     0                 0%
Risk free interest rate            6%                6%
Expected lives                  5 Years           5 Years

For purposes of fair value disclosures, the estimated fair values of the options
are amortized to expense over the options' vesting periods. The Company's pro
forma net loss for the year ending September 30, 2001 and for the year ending
September 30, 2000, as determined using the fair value method of accounting of
Statement 123, was $941,168 and $829,717 respectively.

Information regarding the options is as follows:

                                  Weighted
                                   Average
                                  Exercise        Options          Options
                                    Price       Outstanding      Exercisable
                                -----------------------------------------------

Balance, September 30, 1999        .86            154,500          45,000
Granted                            .67            162,900               -
Forfeited                          .83            (15,000)
Became exercisable                 .66                            136,500
                                -----------------------------------------------
Balance, September 30, 2000        .71            302,400         181,500
Granted                            .83            658,000               -
Forfeited                          .83            (45,000)              -
Became exercisable                 .92                  -         493,340
                                -----------------------------------------------
Balance, September 30, 2001        .79            915,400         674,840
                                ===============================================

The aggregate fair value of options granted for the year ending September 30,
2001 and for the year ending September 30, 2000 was $169,497 and $36,900
respectively. The following table summarizes information about stock options
outstanding at September 30, 2001.

                                                          September 30,
                                                    ------------------------
                                                     2001              2000
                                                    ------            ------

Range of exercise price                                           $0.23 - $01.83
Number outstanding                                 915,400            302,400
Weighted average remaining contractual life       8.6 Years          8.8 Years
Weighted average exercise price                       -                $0.71

During the year ending September 30, 2001, there were no options exercised
during this period.

                                       20

<PAGE>

                            Alliance HealthCard, Inc.

Notes to Financial Statements, Continued



8. Income Taxes

Effective February 1999, the Company changed its corporate tax status from a
limited liability corporation to a C corporation. As a result of this change,
the Company became liable for income taxes. Accordingly, as required by
generally accepted accounting principles, the Company recorded deferred tax
assets and liabilities on temporary differences between the income tax basis and
book basis of certain assets and liabilities as of the date of change. The
effect of recording these net deferred tax assets has been accounted for as a
cumulative effect adjustment upon the results of operations for the period from
inception (September 30, 1998) through September 30, 1999. The impact on net
loss was zero due to the establishment of a valuation allowance relating to the
net deferred tax assets.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Significant components of the Company's deferred tax
assets and liabilities as of September 30, 2001 and September 30, 2000 are as
follows:

                                                       September 30,
                                              ------------------------------
                                                  2001                2000
                                              -----------           --------

Deferred tax assets:
Net operating loss carryforwards              $ 1,011,871          $ 495,169
Other                                               3,171              5,506
                                              -----------          ---------
Gross deferred tax asset                        1,015,042            500,675
Less valuation allowance                       (1,015,042)          (500,675)
                                              -----------          ---------
Net deferred tax assets                       $         -          $       -
                                              ===========          =========

Significant components of the provision for income taxes are as follows:

                                                       September 30,
                                               -----------------------------
                                                   2001               2000
                                               -----------         ---------
Deferred

  Federal                                      $   879,703          $436,485
  State                                            135,339            64,190
                                               -----------          --------
Total income tax benefit                         1,015,042           500,675
Less valuation allowance                        (1,015,042)         (500,675)
                                               -----------          --------
                                               $         -          $      -
                                               ===========          ========

A valuation allowance has been provided because realization of the deferred tax
assets is uncertain. The effective tax rate varied from the statutory federal
rate due to the impact of changes in the valuation allowance.

The Company has net operating loss carryforwards available to offset future
taxable income of approximately $986,000 and $837,000 at September 30, 2001 and
September 30, 2000 respectively, which expire in 2020 and 2021.


                                       21

<PAGE>

                            Alliance HealthCard, Inc.

Notes to Financial Statements, Continued



9. Related Party Transactions

The Company performed consulting services for an affiliated company and recorded
other income of $5,156 and $30,742 for the years ending September 30, 2001 and
September 30, 2000 respectively.

The Company subleases its office space on a month to month basis from an
affiliated company. The Company expensed approximately $39,856 and $53,501 for
the years ending September 30, 2001 and September 30, 2000 respectively.

The Company expensed approximately $24,450 and $34,000 for the years ending
September 30, 2001 and September 30, 2000 respectively relating to printing,
graphic design, and recruiting services provided by an affiliated company.

10.  Equipment Leases

The Company leases certain equipment under capital leases and non-cancelable
operating lease agreements that expire on various dates through 2004. At
September 30, 2001 and 2000, minimum annual rental commitments under capital
leases and non-cancelable operating leases with terms in excess of one year are
as follows:

<TABLE>
<CAPTION>

                                                                 September 30,
                                            --------------------------------------------------------
                                                        2001                      2000
                                            --------------------------- ---------------------------
                                              Capital      Operating      Capital      Operating
                                              Leases         Leases        Leases        Leases
                                           -------------- ------------- ------------- -------------
<S>                                        <C>            <C>           <C>           <C>

2001                                          $     -         $539        $12,920        $  924
2002                                           14,091            -         10,545           308
2003                                           11,904            -          8,358             -
2004                                            2,824            -              -             -
                                              -------         ----        -------        ------
Total minimum lease payments                   28,819         $539         31,823        $1,232
                                                              ====                       ======
Less:  amounts representing interest            3,934                       5,485
                                              -------                     -------
Present value of net minimum lease
payments                                      $24,885                     $26,338
                                              =======                     =======

</TABLE>

Assets acquired under non-cancelable capital leases consist of computer
equipment with an aggregate cost of $40,133 at September 30, 2001 and $30,909 at
September 30, 2000 and accumulated amortization of $18,488 and $7,129 at
September 30, 2001 and September 30, 2000, respectively. Amortization of leased
assets is included in depreciation expense.

Rent expense related to operating leases amounted to $539 for the year ending
September 30, 2001 and $811 for the year ending September 30, 2000.

11.  Supplemental Cash Flows Information

The following information supplements the statements of cash flows:

                                                2001          2000
                                                ----          ----
Cash paid for interest                        $ 34,739      $ 8,706

12. Concentration of Credit Risk Arising from Cash Deposits in Excess of
Insured Limits

The Company uses financial institutions in which it maintains cash balances,
which at times may exceed federally insured limits. The Company has not
experienced any losses in such accounts and management believes it is not
exposed to any significant credit risk on cash. The Company's uninsured cash
balance totaled $73,620 and $20,647 at September 30, 2001 and 2000,
respectively.
                                       22

<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         The Company's board of directors recommended that the Company change
its independent auditors from Ernst & Young LLP to Miller, Ray & Houser of
Atlanta, Georgia. Ernst & Young was dismissed on August 4, 2000. The principal
accountant's report on the financial statements for the period from inception
(September 30, 1998) through September 30, 1999 did not contain an adverse
opinion or disclaimer of opinion and was not modified as to uncertainty, audit
scope, or accounting principles. The Company engaged Miller, Ray & Houser on
November 1, 2000 to audit the Company's financial statements for the fiscal year
ending September 30, 2000. The Company did not have any disagreements with the
former accountant.

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers and Directors

         The executive officers and directors of the Company, and their
respective ages as of September 30, 2001, are as follows:

<TABLE>
<CAPTION>

              Name                Age                    Position                     Term
------------------------------   -----    --------------------------------------    --------
<S>                              <C>      <C>                                       <C>

Robert D. Garces                  52      Chairman of the Board of Directors and    One Year
                                          Chief Executive Officer

Thomas W. Kiser                   38      Director and President                    One Year

Robert R. Goodyear                54      Chief Operating Officer and               One Year
                                          Secretary/Treasurer

Rita W. McKeown                   48      Chief Financial Officer                   One Year

Howard C. Chandler, Jr. M.D.      40      Director                                  One Year

Larry G. Gerdes                   52      Director                                  One Year

William Wallace                   47      Director                                  One Year

Richard M. Jackson                50      Director                                  One Year
</TABLE>



                                       23

<PAGE>

Robert D. Garces, Chairman of the Board of Directors and Chief Executive Officer

         Mr. Garces is a co-founder of the Company and has served as the
Chairman of the Board of Directors and Chief Executive Officer since the Company
was organized. Mr. Garces also serves as Chairman of NovaNet, Inc., a company he
founded in 1994 that provides a network of physicians, hospitals and other
ancillary health services to self-insured employers and insurance companies. In
1996, Mr. Garces co-founded Better Image, Inc. a consolidation of Plastic
Surgeons around the United States. In 1974, Mr. Garces started the Atlanta
company of Southeastern Medical Consultants, a physician billing and management
company. During this same period he also founded two companies, which grew into
one of the largest physician billing companies in the southeast. (i) ARTAC, a
software and receivables management company for hospital business offices; (ii)
Southern Medical Imaging, a mobile imaging company comprising 41 mobile CT units
and 40 mobile MRI units. In 1989 he developed a management company for
anesthesia departments for hospitals.

Thomas W. Kiser, Director and President

         Mr. Kiser is a co-founder of the Company with Mr. Garces and has served
as its President since the Company was organized. In 1996, Mr. Kiser founded TWK
Enterprises, Inc., a real estate acquisition and development company in Atlanta,
Georgia. Mr. Kiser also serves as President of TWK Enterprises, Inc., however,
operations are handled by outside property management, reporting to Mr. Kiser.
From 1991 to 1996, Mr. Kiser formed two franchise companies, TC Concepts, Inc.
in Orlando, Florida and MKM, Inc. in Atlanta, Georgia, which were sold in 1994
and 1997 respectively. From 1989 through 1991, Mr. Kiser held retail and
institutional sales positions with Bear Stearns Company and Shapiro Carter and
Company. In 1988, Mr. Kiser joined Marshall and Company, an Atlanta based
regional investment banking firm specializing in the private placement and
underwriting of securities of small-capitalization southeastern companies. From
1986 through 1988, Mr. Kiser was an assistant manager with Stuart James Co, an
investment banking and brokerage company. Mr. Kiser holds a Bachelor of Science
degree in economics from Vanderbilt University in Nashville, Tennessee.

Robert R. Goodyear, Chief Operating Officer and Secretary/Treasurer

         Mr. Goodyear joined the Company in 1999 and is the chief operating
officer. In 1997 and 1998, Mr. Goodyear served as president and chief executive
officer of Lumen, a Marietta, Georgia healthcare consulting firm specializing in
process re-design and re-engineering, management transformation and leadership
development services. From 1991 through 1996, Mr. Goodyear was senior
vice-president of the Marietta based healthcare division of First Data Corp. Mr.
Goodyear has also held senior marketing and sales positions with other
healthcare companies such as Inforum, Inc. in Nashville, Tennessee and HBO & Co.
in Atlanta. From 1981 through 1986, he served as the chief executive officer of
Community Memorial Hospital in Monmouth, Illinois and during four years prior
thereto was the assistant administrator and chief financial officer of St.
Joseph Medical Center in Ponca City, Oklahoma. Mr. Goodyear received his
Bachelor of Science degree in business administration from the University of
Arkansas in Fayetteville, Arkansas and received an MBA from the University of
Evansville in Evansville, Indiana. Among other activities, Mr. Goodyear is a
Fellow of the Healthcare Financial Management Association and a member of the
American College of Healthcare Executives.

Rita W. McKeown, Chief Financial Officer

         Ms. McKeown is the Company's chief financial officer. From 1994 to
1999, Ms. McKeown served as director of finance of Transcend Services, Inc., an
Atlanta Georgia healthcare company specializing in patient information
management solutions for hospitals and other associated healthcare providers.
From 1991 to 1994, Ms. McKeown served as director of accounting of Premier
Anesthesia, Inc. From 1981 to 1991, Ms. McKeown held multiple senior accounting
positions with HBO & Co in Atlanta. Ms. McKeown is a Certified Public Accountant
and received her Bachelor of Business Administration from Kennesaw State
University in Kennesaw, Georgia.


                                       24

<PAGE>

Howard C. Chandler, Jr. M.D., Director

         Dr. Chandler is a Board Certified practicing neurosurgeon and is the
President and Chief Executive Officer of the Montana Neuroscience Institute,
located in Missoula, Montana. He is also founder and Chairman of Interwest
Health, LLC, a managed care organization that develops and maintains networks of
physicians, hospitals and ancillary health services used by insurance companies
and self-insured employers. He has been the program director of the Montana
Neurosurgery Symposium since 1995. Dr. Chandler holds a Bachelor of Science
degree in chemistry from the University of the South in Sewanee, Tennessee where
he graduated cum laude. He completed medical school at Bowman Gray School of
Medicine of Wake Forest University in Winston - Salem, North Carolina. Dr.
Chandler holds licenses in the states of Montana and Florida. He is a member in
good standing of the American Medical Association, Montana Medical Association
and the Congress of Neurological Surgeons.

Larry G. Gerdes, Director

         Mr. Gerdes has served as a Director of the Company since February 1,
2001. Mr. Gerdes has served as the President and Chief Executive Officer of
Transcend Services, Inc. since May 1993. From 1991 to 1993, Mr. Gerdes was a
private investor and from May 1992 until January 1995, Mr. Gerdes was the
Chairman of the Board of Directors of the former Transcend Services, Inc. For
the five years prior to 1991, Mr. Gerdes held various executive positions with
HBO & Company, including Chief Financial Officer and Executive Vice President.
Mr. Gerdes also serves as a Director of EBIX.Com, Inc.

William Wallace, Director

         Mr. Wallace has served as Director of the Company since February 9,
2001. Dr. Wallace has spent the past twenty years involved in the business of
healthcare, having co-founded a hospital company, two physician practice
management companies, and three specialty managed care organizations. He has
previously been an officer of two New York Stock Exchange healthcare companies,
and currently leads the managed care business development activities for Perot
Systems Corporation.

Richard M. Jackson, Director

         Mr. Jackson is currently the President of Surgical Information Systems,
which he founded in 1997. In 1992, Mr. Jackson co-founded Premier Ambulatory
Surgery Center out of Pasadena, CA, which became the 3rd largest surgery center
company in America and recently became a part of HealthSouth. In 1987, Mr.
Jackson founded and served as chairman of the board of a hospital staffing firm
that subsequently became Premier Anesthesia, one of the largest anesthesia
contract management firms in the industry. In 1978, Mr. Jackson founded Jackson
& Coker, a physician recruiting firm.


                                       25

<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

The following table sets forth the cash and non-cash compensation paid by the
Company to its Chief Executive Officer and all other executive officers for
services rendered during the fiscal year ended September 30, 2001.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                       Long Term Compensation
                                                                        --------------------------------------------------
                                         Annual Compensation                     Awards            Payouts
                                -------------------------------------   ------------------------   -------
                                                                        Restricted   Securities
                                                         Other Annual     Stock      Underlying     LTIP        All Other
                                       Salary   Bonus    Compensation    Award(s)   Options/SARs   Payouts    Compensation
Name and Principle Position    Year     ($)     ($)         ($)           ($)           (#)         ($)           ($)
---------------------------    ----    ------   -----    ------------   ----------  ------------   -------    ------------
<S>                             <C>    <C>      <C>      <C>            <C>         <C>            <C>        <C>
Robert Garces, Chairman &
Chief Executive Officer        2001    22,268     -           -             -          225,000        -             -
                               2000    51,577     -           -             -          150,000        -             -
Thomas  Kiser, Director &
President                      2001    27,462     -           -             -          225,000        -             -
                               2000    59,423     -           -             -          150,000        -             -
Robert Goodyear, Chief
Operating Officer &
Secretary/                     2001    98,650     -           -             -           90,000        -             -
Treasurer                      2000    96,247     -           -             -                -        -             -

Rita McKeown, Chief
Financial Officer              2001    67,090     -           -             -            6,000        -             -
                               2000    52,908     -           -             -           23,400        -             -
</TABLE>


                     Options/SAR Grants in Last Fiscal Year

         The following table sets forth information regarding individual grants
of options and warrants to purchase Alliance HealthCard Common Stock during the
twelve months ended September 30, 2001 to each of the Named Executive Officers.
All stock option grants were made pursuant to the Alliance HealthCard, Inc. 1999
Stock Option Plan. All stock warrant grants were approved by the compensation
committee of the Board of Directors during 2001.

<TABLE>
<CAPTION>



                                    Number of
                                   Securities
                                   Underlying            % of Total Options/SAR's
                                  Options/SAR's          Granted to Employees in        Exercise or Base
      Name                        Granted(#)(1)               Fiscal Year (2)            Price ($/Share)       Expiration Date
-------------------               -------------          ------------------------       -----------------      ---------------
<S>                               <C>                    <C>                            <C>                    <C>
Robert Garces (3)                   225,000                       26%                        $0.83             October 1, 2010
Thomas Kiser (4)                    225,000                       26%                        $0.83             October 1, 2010
Rita McKeown (5)                      6,000                        1%                        $0.83             October 1, 2010
Robert Goodyear (6)                  90,000                       10%                        $0.83             October 1, 2010
</TABLE>

(1)  Stock options are granted with an exercise price equal to the fair market
     value of the Alliance HealthCard Common Stock on date of grant.
(2)  Alliance HealthCard granted options and warrants to purchase an aggregate
     of 655,000 shares to all directors, officers and employees in the twelve
     months ended September 30, 2001.
(3)  Mr. Garces was granted 225,000 options on October 1, 2000. These options
     are fully vested.
(4)  Mr. Kiser was granted 225,000 options on October 1, 2000. These options are
     fully vested.
(5)  Ms. McKeown was granted 6,000 options on October 1, 2000. These options
     vest over a three year period.
(6)  Mr. Goodyear was granted 90,000 options on October 1, 2000. These options
     vest over a three year period.


                                       26

<PAGE>

Compensation of Directors

         The Company's Directors do not receive any compensation for their
services on the Board of Directors or any committee thereof, but are reimbursed
for expenses incurred in connection with their attendance at Board or committee
meetings. However, non-employee directors have received options to purchase
shares of Common Stock pursuant to the 1999 Stock Option Plan. See "Stock
Plans."

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of September 30, 2001, certain
information regarding the shares of the Company's outstanding Common Stock
beneficially owned by each person who is known by the Company to own
beneficially or exercise voting or dispositive control over more than 5% of the
Company's Common Stock and (ii) by each of the Company's officers and directors.
(1)

                                                    Shares of
                                                  Common Stock
                                                  Beneficially            % of
                                                    Owned (1)          Ownership
                                                  ------------         ---------
   Robert D. Garces (2)                            1,044,800             26.5%
        3500 Parkway Lane
        Suite 310
        Norcross, Georgia  30092

   Thomas W. Kiser                                 1,009,050             25.6%
        3500 Parkway Lane
        Suite 310
        Norcross, Georgia  30092

   Robert R. Goodyear                                 78,000              2.0%
        3500 Parkway Lane
        Suite 310
        Norcross, Georgia  30092

   Rita W. McKeown                                    11,360              0.3%
        3500 Parkway Lane
        Suite 310
        Norcross, Georgia  30092

   Howard C. Chandler, Jr. (3)                       570,650             14.5%

   Larry G. Gerdes (4)                               146,665              3.7%

   Richard Jackson (5)                               123,000              3.1%

   All directors and officers as a group           2,983,525             75.6%

(1)  "Beneficially Owned" includes shares for which an individual, directly or
     indirectly, has or shares voting or investment power or both and also
     includes shares of Common Stock underlying options and warrants to purchase
     Common Stock which are exercisable within sixty days of the date hereof.


                                       27

<PAGE>

     Beneficial ownership as reported in the above table has been determined in
     accordance with Rule 13d-3 of the Securities Exchange Act of 1934. The
     percentages are based upon 3,945,919 shares outstanding as of September 30,
     2001. Unless otherwise indicated, each person has sole voting and
     dispositive power with respect to all shares listed opposite his name.
(2)  Includes 1,200 shares held by Mr. Garces' minor children and 1,050 shares
     held by Mr. Garces' spouse.
(3)  Includes 3,600 shares held by Mr. Chandler's minor children and 192,000
     shares held by Mr. Chandler's spouse.
(4)  Includes 100,000 shares held by Gerdes Huff Investments of which Mr. Gerdes
     is a general partner and 9,999 shares held by Gerdes Family Partnership of
     which Mr. Gerdes is a general partner.
(5)  Includes 60,000 shares held by Jackson Investment Group of which Mr.
     Jackson is a general partner.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management Relationships

         Robert D. Garces and Howard Chandler, Jr., a director of the Company,
are brothers-in-law.

         Prior to his appointment as a director of the Company, Jack Flowers
acted as a consultant to the Company. In partial compensation for his services
to the Company, the Company has agreed to grant him five year stock warrants at
a nominal fee that entitle him to purchase 33,000 shares of Common Stock for
$.70 per share. Under the terms of the options the Company will be required to
register the stock represented by the options should the Company register any of
its securities under the Securities Act. These options will expire December 31,
2003. Mr. Flowers resigned as director of the Company on June 1, 2000.

Related Transactions

         Robert Garces is a stockholder in NovaNet, Inc., the corporation from
which the Company subleases its executive offices and is obtaining an access to
providers of healthcare services in the State of Georgia. The Company also
provided consulting services to NovaNet, Inc. during the year ending September
30, 2000. While the terms of these transactions have not been negotiated at
arms-length, the Company believes that the terms are or will be comparable to
what it could obtain in arms-length transactions.

         Howard Chandler, Jr. and Robert Garces are stockholders in InterWest
Health LLC, a limited liability company with whom the Company is negotiating to
access a network of providers of health care services in the state of Montana.
While the terms of these transactions have not been negotiated at arms-length,
the Company believes that the terms are or will be comparable to what it could
obtain in arms-length transactions.


                                       28

<PAGE>

ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a)  The following documents are filed as a part of this Annual Report for
         Alliance HealthCard, Inc.:

         Financial Statements

         The Financial Statements, the Notes to Financial Statements and the
         Report of Independent Auditors listed below are included in Item 7.

         Reports of Independent Auditors.

         Balance Sheets as of September 30, 2001 and 2000

         Statements of Operations for the year ended September 30, 2001 and 2000

         Statements of Stockholders' Equity for the year ended September 30,
         2001 and 2000

         Statements of Cash Flows for the year ended September 30, 2001 and 2000

         Notes to Financial Statements

         Financial Statement Schedules are not required

    (b)  Reports on Form 8-K.

         The Company did not file any reports on Form 8-K during the year ended
September 30, 2001.


                                       29

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                Alliance HealthCard, Inc.


December 27, 2001               By:  /s/ Robert D. Garces
                                     --------------------
                                Robert D. Garces
                                Chairman and Chief Executive Officer
                                (Principal Executive Officer)


December 27, 2001               By:  /s/ Rita McKeown
                                     --------------------
                                Rita McKeown
                                Chief Financial Officer
                                (Principal Financial and Accounting Officer)


                                       30