##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2009
 or
 o
    
    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 000-30099
 Alliance HealthCard, Inc.
  GEORGIA
(State or other jurisdiction of 
incorporation or organization)
    
    58-2445301
(I.R.S. Employer
Identification No.)
 th
 
 o þ
 Yes o No þ
 þ o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



ALLIANCE HEALTHCARD, INC.
 FORM 10-K
 TABLE OF CONTENTS
 PART IITEM 1. BUSINESS
    
    
    3ITEM 1A. RISK FACTORS
    
    
    14ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    21ITEM 2. PROPERTIES
    
    
    21ITEM 3. LEGAL PROCEEDINGS
    
    
    22ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    23PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    24ITEM 6. SELECTED FINANCIAL DATA
    
    
    25ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
    
    
    25ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    39ITEM 8. FINANCIAL STATEMENTS
    
    
    40ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
    
    
    70ITEM 9A. CONTROLS AND PROCEDURES
    
    
    70ITEM 9B. OTHER INFORMATION
    
    
    70PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    71ITEM 11. EXECUTIVE COMPENSATION
    
    
    75ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
    
    
    84ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
    
    
    85ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    86PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
    
    
    87SIGNATURES
    
    
    88Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



ITEM 1.
    
    BUSINESS.
   Wholesale Plans
   Retail Plans
  Insurance Marketing
  INDUSTRY OVERVIEW
 Wholesale Plans
   3




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
    
    the ability to obtain merchandise they otherwise could not; the low payments;
    
    the lack of a credit check;
    
    the convenience and flexibility of the transaction;
    
    the quality of the merchandise;
    
    the quality of the maintenance, delivery, and other services;
    
    the friendliness and flexibility of the store employees; and
    
    the lack of any problems or hassles.
 Healthcare Industry
  The uninsured
  The insured and underinsured .
 Over-utilization, increasing regulation and legislation
  4




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Self-employed and small businesses .
 Senior population
 HISTORY OF THE COMPANY
       5




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BUSINESS OVERVIEW
   Wholesale Plans
   Retail Plans
     6




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
    
    Maintaining member eligibility
    
    Generate periodic reporting to contracted third party networks and other vendors
    
    Paying commissions
    
    Maintaining a database of providers and provider locator services
    
    Drafting member accounts and tracking cash receipts
   Insurance Marketing
   
    
    e-Agent Center  provides agents with access to real-time rate quoting, on-line
licensing and contracting, insurance application submission, access to brochures
and other marketing materials.
    
    Lead Distribution  we utilize an electronic system to connect agents with an
on-line lead ordering and delivery system. Leads are also provided in certain
situations as incentives to sell certain policies.
    
    Incentive programs  to assist with agent motivation and recruitment, we
provide paid annual convention trips and periodic sales contests.
    
    Agent advances  with most of the major medical products we represent, agents
are entitled to from 3 to 9 months of advance commissions either funded by AHCP or
our insurance carrier partner. Our ability to grow this segment will depend, in
part, on our continued access to working capital to fund these advances.
    
    Home office support  this includes agent and product training, marketing
materials and agent communication. The training programs include both on-site and
in-house schools, DVDs and webcasts covering product knowledge and sales techniques
as well as market conduct and regulatory compliance issues. In addition, our
support includes development and distribution of a wide variety of marketing
materials including flyers, brochures, email blasts and letters. We also promote
and inform our agents on important news and updates via a weekly newsletter.
  7




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
    
    continue working with insurance carriers in the development of proprietary products
for our agents to represent;
    
    expand the number of carriers that we represent for more product choice for customers
and expanded geographic representation; and
    
    enhance our e-agent platforms in order to better serve our existing agents and improve
attraction to new agents to sell plans we represent.
   BUSINESS STRATEGY
  
    
    expanding and improving relationships with our membership plans provider vendors and
insurance carrier partners;
    
    maintaining and enhancing customer and agent satisfaction by providing high quality telephone
and web support;
    
    continually enhancing existing programs and developing innovative solutions and products for
our clients and agents; and
    
    assisting the market to understand how our offerings are different and superior.
 Increase Market Penetration
  Maintain and Enhance Customer Satisfaction
   8




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Continually Enhance Programs
  Manage Growth Effectively
  SERVICES
  Discount Medical
    
    InsurancePhysician Network Access
    
    Major Medical/Individual Health InsuranceDental Network Access
    
    Life insurance and AnnuityVision Care & Eyewear Network Access
    
    Accidental Death & DismembermentPharmacy Network Discounts
    
    Involuntary UnemploymentMail Order Pharmacy Discounts
    
    Leased Property InsuranceChiropractor Network Access
    
    Dental InsuranceHearing Aid Discounts
    
    Limited Medical InsuranceVitamins & Nutritional Supplements
 Automotive Discounts
    
    Dealer Add-In BenefitsDiscounted Roadside Assistance
    
    Lease Cancellation BenefitsAutomotive Service Provider Savings
    
    Account ReinstatementCustomer Trip Routing
    
    Points Program for On Time PaymentsCar Theft RewardRental Car Savings
 Food and Entertainment
    
    Miscellaneous BenefitsGrocery Coupon Savings
    
    Kid SecureRestaurant Savings
    
    Discounted Legal ServicesTheme Park Discounts
    
    Savings at Choice HotelsMovie Theater Discounts
    
    Savings at 1-800Flowers.comProduct Service Plans
 CUSTOMERS
     9




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EMPLOYEES
  Number ofDepartment
    
    EmployeesCustomer Services and Client Support
    
    
    48Sales and Marketing
    
    
    13Executive and Administration
    
    
    8Finance and Accounting
    
    
    11Information Services
    
    
    5
 COMPETITION
 Wholesale and Retail Plans Divisions
  Insurance Marketing Division
     GOVERNMENT REGULATION
    10




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Discount Medical Regulations
   
    
    non-compliance may cause us to lose licensing status or to become the subject of a
variety of enforcement or private actions;
    
    compliance with changes in applicable regulations could materially increase the
associated operating costs;
    
    non-compliance with any rules and regulations enforced by a federal or state
consumer protection authority may subject us or our management personnel to fines or
various forms of civil or criminal prosecution; and
    
    non-compliance or alleged non-compliance may result in loss of contracts, negative
publicity potentially damaging our reputation, network relationships, client
relationships and the relationship with program members, representatives and consumers in
general.
 Insurance Regulations
   11




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
    
    Similar to the insurance companies providing products and services offered by us,
we are unable to accurately predict additional government regulations, including health
care reform currently pending at the federal level, that may be enacted affecting the
insurance industry and the offered products and service or how existing or future
regulations might be interpreted.
    
    Additional governmental regulation or future interpretation of existing regulations
may decrease the amount of commissions we can earn, eliminate some of the products we
offer, increase the cost of compliance or materially affect the insurance products and
services offered by us and our profitability.
    
    We must rely on the insurance companies that provide the insurance products and
financial services offered by us to carefully monitor state and federal legislative and
regulatory activity as it affects their insurance products and services. We believe that
the insurance products and financial services that we offer comply in all material
respects with all applicable federal and state regulations.
    
    Among the benefits afforded to the members of our association are varying forms of
insurance. Our ability to offer insurance products that we are authorized to distribute
to this association for inclusion in its benefit packages may be affected by
governmental regulation or future interpretation of existing regulations that may
increase the cost of regulatory compliance or affect the nature and scope of products
that we may make available to such associations.
    
    We are currently offering extended service contracts that we obtain from a service
contract provider in three states through a retailer of electronics and appliances. Those
three states regulate extended service contracts under the state insurance code. These
laws generally regulate the disclosures, service contract provisions and require us to
obtain insurance coverage for the cost of service. We contract with a third party vendor
that provides the insurance and the customer contracts.
 Healthcare Regulation and Reform
        12




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E-Commerce Regulation
  Network Marketing Regulation
   Legislative Development
   Privacy Laws
   13




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ITEM 1A.
    
    RISK FACTORS.
  
    
    adversely affect the market price of our common stock,
    
    adversely affect our future operations,
    
    adversely affect our business,
    
    adversely affect our financial condition,
    
    adversely affect our results of operations,
    
    require significant reduction or discontinuance of our operations,
    
    require us to seek a merger partner, or
    
    require us to sell additional stock on terms that are highly dilutive to our
shareholders.
 THIS REPORT CONTAINS CAUTIONARY STATEMENTS RELATING TO FORWARD LOOKING
INFORMATION.
  
    
    discuss our future expectations,
    
    contain projections of our future operating results or of our future
financial condition, or
    
    states other forward-looking information.
  A SIGNIFICANT PORTION OF OUR REVENUE IS DEPENDENT ON TWO CLIENTS.
   A PORTION OF OUR EXPENSES ARE DEPENDENT ON FACTORS THAT WE DO NOT CONTROL.
   14




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WE DEPEND ON VARIOUS THIRD-PARTY VENDORS TO SUPPLY CERTAIN PRODUCTS AND SERVICES THAT WE
MARKET.
  WE FACE COMPETITION FOR CLIENTS TO MARKET OUR PROGRAMS AS WELL AS COMPETITIVE OFFERINGS
OF BENEFIT PROGRAMS.
   WE HAVE MANY COMPETITORS AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY WHICH MAY LEAD TO A LACK
OF REVENUES AND DISCONTINUANCE OF OUR OPERATIONS.
   
    
    we will be able to compete successfully;
    
    our competitors will not develop programs that render our programs less
marketable or even obsolete; or
    
    we will be able to successfully enhance our programs when necessary.
 GOVERNMENT REGULATION AND RELATED PRIVATE PARTY LITIGATION MAY ADVERSELY AFFECT OUR FINANCIAL
POSITION AND LIMIT OUR OPERATIONS.
   15




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WE MAY HAVE EXPOSURE AND LIABILITY RELATING TO NON-COMPLIANCE WITH THE HEALTH INSURANCE
PORTABILITY AND ACCOUNTABILITY ACT OF 1996 AND THE COST OF COMPLIANCE COULD BE MATERIAL.
  OUR FAILURE TO COMPLY WITH FEDERAL AND STATE REGULATION COULD RESULT IN ENFORCEMENT ACTION AND
IMPOSITION OF PENALTIES, MODIFICATION OF OUR OPERATIONS, AND NEGATIVE PUBLICITY.
    16




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
    
    result in enforcement action and imposition of penalty,

    
    require modification of our operations or programs,

    
    result in negative publicity
  THE
RECORDED GOODWILL RESULTING FROM OUR ACQUISITION OF ACCESS PLANS USA
AND OUR MERGER OF BMS HOLDING COMPANY MAY
BECOME IMPAIRED AND REQUIRE A WRITE-DOWN AND THE RECOGNITION OF AN IMPAIRMENT EXPENSE THAT
MAY BE SUBSTANTIAL.
 See Note 5.
 Notes Payable to Related Parties in the accompanying financial statements appearing elsewhere
in this report.
 OUR FAILURE TO PROTECT PRIVATE DATA COULD SUBJECT US TO PENALTIES, DAMAGE OUR REPUTATION,
CAUSE US TO BE IN BREACH OF CONTRACTS AND CAUSE US TO EXPEND CAPITAL AND OTHER RESOURCES TO
PROTECT AGAINST FUTURE SECURITY BREACHES.
   17




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WE RELY ON OUR INSURANCE CARRIER PARTNERS AND THIRD PARTIES TO ACCURATELY AND REGULARLY
PREPARE COMMISSION REPORTS, AND IF THESE REPORTS ARE INACCURATE OR NOT SENT TO US IN A TIMELY
MANNER, OUR RESULTS OF OPERATIONS COULD SUFFER.
     OUR REVENUES IN THE RETAIL PLANS DIVISION ARE LARGELY DEPENDENT ON THE INDEPENDENT MARKETING
REPRESENTATIVES, WHOSE REDUCED SALES EFFORTS OR TERMINATION MAY RESULT IN SIGNIFICANT LOSS OF
REVENUES.
   A LARGE PART OF OUR RETAIL PLANS DIVISION REVENUES ARE DEPENDENT ON KEY RELATIONSHIPS WITH A
FEW PRIVATE LABEL RESELLERS AND WE MAY BECOME MORE DEPENDENT ON SALES BY A FEW PRIVATE LABEL
RESELLERS.
   18




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THE FAILURE OF OUR NETWORK MARKETING ORGANIZATION TO COMPLY WITH FEDERAL AND STATE REGULATION
COULD RESULT IN ENFORCEMENT ACTION AND IMPOSITION OF PENALTIES, MODIFICATION OF OUR NETWORK
MARKETING SYSTEM, AND NEGATIVE PUBLICITY.
  
    
    the evolving interpretations of existing laws and regulations, and
    
    the enactment of new laws and regulations pertaining in general to
network marketing organizations and product and service distribution.
  
    
    result in enforcement action and imposition of penalty,
    
    require modification of the marketing representative network system,
    
    result in negative publicity, or
    
    have a negative effect on distributor morale and loyalty.
  THE LEGALITY OF OUR NETWORK MARKETING ORGANIZATION IS SUBJECT TO CHALLENGE BY OUR MARKETING
REPRESENTATIVES, WHICH COULD RESULT IN SIGNIFICANT DEFENSE COSTS, SETTLEMENT PAYMENTS OR
JUDGMENTS, AND COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
  ADVERTISING AND PROMOTIONAL ACTIVITIES OF OUR INDEPENDENT MARKETING REPRESENTATIVES AND
PRIVATE-LABEL CUSTOMERS ARE SUBJECT TO AND MAY VIOLATE FEDERAL AND STATE REGULATION CAUSING
US TO BE SUBJECT TO THE IMPOSITION OF CIVIL PENALTIES, FINES, INJUNCTIONS AND LOSS OF STATE
LICENSES.
   19




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DISRUPTIONS IN OUR OPERATIONS DUE TO OUR RELIANCE ON OUR MANAGEMENT INFORMATION SYSTEM MAY
OCCUR AND COULD ADVERSELY AFFECT OUR CLIENT RELATIONSHIPS.
  WE MAY FIND IT DIFFICULT TO INTEGRATE ACCESS PLANS USA BUSINESSES AND OPERATIONS WITH OUR
BUSINESS AND OPERATIONS.
  THE AVAILABILITY OF OUR INSURANCE PRODUCTS AND FINANCIAL SERVICES ARE DEPENDENT ON OUR
STRATEGIC RELATIONSHIPS WITH VARIOUS INSURANCE COMPANIES AND THE UNAVAILABILITY OF THOSE
PRODUCTS AND SERVICES FOR ANY REASON MAY RESULT IN SIGNIFICANT LOSS OF REVENUES.
   WE ARE DEPENDENT UPON INDEPENDENT INSURANCE AGENCIES AND THEIR
AGENTS TO OFFER AND SELL OUR INSURANCE PRODUCTS AND FINANCIAL SERVICES.
   20




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WE FACE INTENSE COMPETITION IN THE MARKETPLACE FOR OUR PRODUCTS AND SERVICES AS WELL AS
COMPETITION FOR INSURANCE AGENCIES AND THEIR AGENTS FOR THE MARKETING OF THE PRODUCTS AND
SERVICES OFFERED.
    
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS.
  
 ITEM 2.
    
    PROPERTIES.
     21




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ITEM 3.
    
    LEGAL PROCEEDINGS.
  William Andrew Rivell, M.D. and Alan B. Whitehouse, M.D., individually and on behalf of all
persons similarly situated, v. Private Health Care Systems and The Capella Group, Inc.;
 Hartford Accident and Indemnity Insurance Company v. The Capella Group, Inc. D/b/a Care Entrée;
 Zermeno v Precis, Inc.
     22




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States General Life Insurance Company.
    
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  1.
    
    The election of five members to our Board of Directors, to hold office until
their successors are duly elected and qualified at the annual meeting of our
shareholders to be held in 2010 or until the earlier of their death, resignation, or
removal;2.
    
    Approval of the Agreement and Plan of Merger (which is attached to the
accompanying Information Statement as Appendix A) providing for our reincorporation in
Oklahoma by merging with and into one of our wholly-owned subsidiaries, Alliance
HealthCard Acquisition Corp., a subsidiary of Access Plans, Inc., an Oklahoma
corporation, also one of our wholly-owned subsidiaries,
re-organization into a holding company structure, and effectively changing our corporate name to Access
Plans, Inc. (the Reincorporation Merger);3.
    
    Approval of the Alliance HealthCard, Inc. 2009 Equity Compensation Plan; and4.
    
    The ratification of Eide Bailly LLP as our independent registered public
accounting firm.
  23




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
  Price Per Common ShareHigh
    
    
    LowYear Ended September 30, 2009:First Quarter ended December 31, 2008
    
    $
    1.05
    
    
    $
    0.30Second Quarter ended March 31, 2009
    
    $
    0.95
    
    
    $
    0.55Third Quarter ended June 30, 2009
    
    $
    0.89
    
    
    $
    0.36Fourth Quarter ended September 30, 2009
    
    $
    1.00
    
    
    $
    0.40Year Ended September 30, 2008:First Quarter ended December 31, 2007
    
    $
    1.90
    
    
    $
    1.55Second Quarter ended March 31, 2008
    
    $
    1.70
    
    
    $
    0.80Third Quarter ended June 30, 2008
    
    $
    1.25
    
    
    $
    0.75Fourth Quarter ended September 30, 2008
    
    $
    1.35
    
    
    $
    0.60
 DIVIDEND POLICY
  See Note 4  Mergers
and Acquisitions to the financial statements appearing elsewhere in this report
  REPURCHASE OF COMMON STOCK SHARES
   24




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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
    Number ofSecurities to be
    
    
    
    
    
    
    Number of securitiesissued upon exercise
    
    
    Weighted-average
    
    
    remaining availableof outstanding
    
    
    exercise price of
    
    
    for future issuanceoptions, warrants
    
    
    outstanding options,
    
    
    under equityPlan category
    
    and rights
    
    
    warrants and rights
    
    
    compensation plansEquity compensation plans approved by security holders:2009 Stock Option Plan
    
    
    
    
    
    
    
    
    
    
    Equity compensation plans not approved by security holders:2000 Stock Option Plan
    
    
    1,601,787
    
    
    $
    1.61
    
    
    
    948,213Total
    
    
    1,601,787
    
    
    
    
    
    
    
    948,213
 
 ITEM 6.
    
    SELECTED FINANCIAL DATA.
  
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
 Overview
    25




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Wholesale Plans
     Retail Plans
   26




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Insurance Marketing
    
    
    e-Agent Center  provides agents with access to real-time rate quoting, on-line
licensing and contracting, insurance application submission, access to brochures
and other marketing materials.
 
    
    Lead Distribution  we utilize an electronic system to connect agents with an
on-line lead ordering and delivery system. Leads are also provided in certain
situations as incentives to sell certain policies
 
    
    Incentive programs  to assist with agent motivation and recruitment, we
provide paid annual convention trips and periodic sales contests
 
    
    Agent advances  with most of the major medical products we represent, agents
are entitled to from 3 to 9 months of advance commissions either funded by AHCP or
our insurance carrier partner. Our ability to grow this segment will depend, in
part, on our continued access to working capital to fund these advances.
 
    
    Home office support  this includes agent and product training, marketing
materials and agent communication. The training programs include both on-site and
in-house schools, DVDs and webcasts covering product knowledge and sales techniques
as well as market conduct and regulatory compliance issues. In addition, our
support includes development and distribution of a wide variety of marketing
materials including flyers, brochures, email blasts and letters. We also promote
and inform our agents on
important news and updates via a weekly newsletter.
  27




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##### Table of Contents




    
    Continue working with insurance carriers in the development of proprietary products
for our agents to represent;
 
    
    Expand the number of carriers that we represent for more product choice for customers
and expanded geographic representation; and
 
    
    Enhance our e-agent platforms in order to better serve our existing agents and improve
attraction to new agents to sell plans we represent.
   Critical Accounting Policies
 Use of Estimates
  Goodwill and Intangible Assets
  See Note 4  Mergers and
Acquisitions
   28




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##### Table of Contents




    
    a significant decrease in the market value of an asset;
 
    
    a significant adverse change in the extent or manner in which an asset is used; or
 
    
    an accumulation of costs significantly in excess of the amount originally expected for
the acquisition of an asset
  Stock Based Compensation
  Income Taxes
  Income Taxes
 Revenue Recognition
  
    
    persuasive evidence of an arrangement exists;
 
    
    delivery has occurred or services have been rendered;
 
    
    the sellers price to the buyer is fixed or determinable; and
 
    
    collectability is reasonably assured.
   29




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Commission Expense
     
    
    persuasive evidence of an arrangement exists;
 
    
    delivery has occurred or services have been rendered;
 
    
    the sellers price to the buyer is fixed or determinable; and,
 
    
    collectability is reasonably assured.
 Recent Accounting Pronouncements
   30




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Recently Issued Accounting Pronouncements Not Yet Adopted
  Results of Operations
 Introduction
   32




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For the Years EndedSeptember 30,($ in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeNet revenues
    
    $
    39,081
    
    
    $
    20,914
    
    
    
    87
    %Direct costs
    
    
    26,469
    
    
    
    11,113
    
    
    
    138
    %Operating expenses
    
    
    8,324
    
    
    
    4,919
    
    
    
    69
    %Operating income
    
    
    4,288
    
    
    
    4,882
    
    
    
    (12
    %)Net other income
    
    
    200
    
    
    
    15
    
    
    
    *Income before income taxes
    
    
    4,488
    
    
    
    4,897
    
    
    
    (8
    %)Income taxes, net
    
    
    1,049
    
    
    
    2,189
    
    
    
    *Net income
    
    $
    3,439
    
    
    $
    2,708
    
    
    
    27
    %
  For the Years EndedSeptember 30,($ in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeNet revenues  by segmentWholesale Plans
    
    $
    19,522
    
    
    $
    18,102
    
    
    
    8
    %Retail Plans (a)
    
    
    12,838
    
    
    
    7,263
    
    
    
    77
    %Insurance Marketing
    
    
    11,432
    
    
    
    
    
    
    
    *Corporate
    
    
    
    
    
    
    
    
    
    
    Intercompany Eliminations
    
    
    (4,711
    )
    
    
    (4,451
    )
    
    
    6
    %Total
    
    $
    39,081
    
    
    $
    20,914
    
    
    
    87
    %
 For the Years EndedSeptember 30,($ in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeGross margin  by segmentWholesale Plans (a)
    
    $
    3,884
    
    
    $
    6,048
    
    
    
    36
    %Retail Plans (a)
    
    
    6,710
    
    
    
    3,752
    
    
    
    79
    %Insurance Marketing
    
    
    2,018
    
    
    
    
    
    
    
    *Corporate
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    12,612
    
    
    $
    9,800
    
    
    
    29
    %
 For the Years EndedSeptember 30,($ in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeOperating income  by segmentWholesale Plans
    
    $
    2,030
    
    
    $
    4,185
    
    
    
    (33
    %)Retail Plans
    
    
    2,734
    
    
    
    1,607
    
    
    
    70
    %Insurance Marketing
    
    
    482
    
    
    
    
    
    
    
    *Corporate
    
    
    (958
    )
    
    
    (910
    )
    
    
    (5
    %)Total
    
    $
    4,288
    
    
    $
    4,882
    
    
    
    (12
    %)
 
 *
    
    Percent change not meaningful (a)
    
    Gross of intercompany eliminations  33




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Discussion of Years Ended September 30, 2009 and 2008
 Net revenues
 
    
    The acquisition of Access Plans USA on April 1, 2009 which resulted in an
increase of revenue of $15.8 million;
 
    
    Growth in our Wholesale and Retail operating segments of approximately $2.4
million attributable to new business and growth in our existing contracts.
  Direct costs
 
    
    The acquisition of Access Plans USA on April 1, 2009 which resulted in an
increase in cost of sales of $11.7 million;
 
    
    Growth in our Wholesale and Retail Plans operating segments experienced an
increase of $3.7 million primarily related to our clients waiver of rental payments
and product service expenses.
  Operating expenses
 
    
    The acquisition of Access Plans USA on April 1, 2009 which resulted in an
increase in operating expenses of $3.0 million;
 
    
    Our Retail Plans and Corporate operating segments experienced an increase of $.4
million with merger related expenses of $.2 million for legal, accounting and
consulting expenses. Additional merger related cost was also incurred for
compensation and travel of $.2 million.
  Net other income
 Provision for income taxes net See Note 9- Investment in
LLC in the financial statements appearing elsewhere in this report
 Net income
  34




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##### Table of Contents



Wholesale Plans Operating Segment
 Selected Operating Metrics
 For the Years Ended 
September 30,($ in thousands except member data)
    
    2009
    
    
    2008
    
    
    % ChangeResults of operationsNet revenues
    
    $
    19,522
    
    
    $
    18,102
    
    
    
    8
    %Direct costs
    
    
    15,638
    
    
    
    12,054
    
    
    
    30
    %Operating expenses
    
    
    1,854
    
    
    
    1,863
    
    
    
    0
    %Operating income
    
    $
    2,030
    
    
    $
    4,185
    
    
    
    (33
    %)Percent of revenueNet revenues
    
    
    100
    %
    
    
    100
    %
    
    
    Direct costs
    
    
    80
    %
    
    
    67
    %
    
    
    13
    %Operating expenses
    
    
    10
    %
    
    
    10
    %
    
    
    (1
    %)Operating income
    
    
    10
    %
    
    
    23
    %
    
    
    (13
    %)Member count
    
    
    547,532
    
    
    
    491,795
    
    
    
    11
    %
 Net revenues
 Direct costs
 Operating expenses
 Operating income
  35




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##### Table of Contents



Retail Plans Operating Segment
 Selected Operating Metrics
 For the Years Ended 
September 30,($ in thousands except member data)
    
    2009
    
    
    2008
    
    
    % ChangeResults of operationsNet revenues
    
    $
    12,838
    
    
    $
    7,263
    
    
    
    77
    %Direct costs
    
    
    6,128
    
    
    
    3,510
    
    
    
    75
    %Operating expenses
    
    
    3,975
    
    
    
    2,146
    
    
    
    85
    %Operating income
    
    $
    2,734
    
    
    $
    1,607
    
    
    
    70
    %Percent of revenueNet revenues
    
    
    100
    %
    
    
    100
    %
    
    
    Direct costs
    
    
    48
    %
    
    
    48
    %
    
    
    Operating expenses
    
    
    31
    %
    
    
    30
    %
    
    
    1
    %Operating income
    
    
    21
    %
    
    
    22
    %
    
    
    (1
    %)Member count
    
    
    1,104,669
    
    
    
    780,614
    
    
    
    42
    %
 Net revenues
 
    
    The acquisition Access Plans USA Retail Plans operating segment on April 1,
2009 which resulted in an increase of $4.4 million;
 
    
    The remaining $1.6 million was attributable to 3 new contracts for our existing
Retail Plans operating segment during 2009.
 Direct costs
 
    
    The acquisition Access Plans USA Retail Plans operating segment on April 1, 2009 which
resulted in an increase of $2.3 million;
 
    
    The remaining $.3 million was attributable to 3 new contracts for our existing
Retail Plans operating segment during 2009.
 Operating expenses
 
    
    The acquisition Access Plans USA Retail Plans operating segment on April 1,
2009 resulting in an increase of $1.5 million;
 
    
    Merger related expenses of $0.2 million for legal, accounting and consulting services; and
 
    
    Additional costs of $0.2 million were also incurred for compensation and travel
expenses related to the acquisition.
 Operating income
  36




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##### Table of Contents



Insurance Marketing Operating Segment
 Selected Operating Metrics
 For the Year EndedSeptember 30,($ in thousands except agent and insurance data)
    
    2009Results of operationsNet revenues
    
    $
    11,432Direct costs
    
    
    9,413Operating expenses
    
    
    1,537Operating income
    
    $
    482Percent of revenueNet revenues
    
    
    100
    %Direct costs
    
    
    82
    %Operating expenses
    
    
    14
    %Operating income
    
    
    4
    %Number of agents
    
    
    5,872Number of major insurance carriers
    
    
    15Number of in-force policies
    
    
    24,016
  Corporate Operating Segment
 Selected Operating Metrics
 For the Years Ended 
September 30,($ in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeResults of operationsNet revenues
    
    $
    
    
    
    $
    Direct costs
    
    
    
    
    
    
    Operating expenses
    
    
    958
    
    
    
    910
    
    
    
    5
    %Operating income
    
    $
    (958
    )
    
    $
    (910
    )
    
    
    (5
    %)
  OFF-BALANCE SHEET ARRANGEMENTS
   37




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  
    
    Deferred tax assets increased $.8 million primarily attributable to Access Plans USA
 
    
    Cash decreased $.5 million as a result of the States General legal settlement
  See Note 23- Legal Proceedings in the financial statements appearing elsewhere in
this report and Item 3. Litigation, above.
 
    
    Accounts receivable increased $.3 million as a result of new business for our
Wholesale and Retail Plans operating segments;
 
    
    Accounts payable decreased $.4 million due to a one-time non-recurring transaction;
 
    
    Notes payable, short-term, to related parties decreased $1.2 million;
 
    
    Claims liability increased $.6 million due to the upward trend of our claims
and product services expenses; and
 
    
    Decreases of $.1 million for other current liabilities
  Principal
    
    
    Discount
    
    
    NetFiscal Year Ended September 30,
    
    Payments
    
    
    Applied
    
    
    Amount Due2010
    
    $
    1,144,830
    
    
    $
    58,680
    
    
    $
    1,086,150
  
    
    An increase in net income of $.7 million primarily due to Access Plans USA at $.6
million;
 
    
    Receivables decreased by $.2 million offset by an increase of $.1 million for the
provision for losses on receivables and advanced agent commissions;
 
    
    An increase in our deferred tax asset of $.8 million resulting from a decrease of
the valuation allowance reserve;
 
    
    An increase in amortization expense of $.3 million due to the amortization of
intangible assets related to the acquisition of Access Plans;
 
    
    An increase in advanced agency commissions of $.9 million offset by a decrease in
unearned commissions of $.4 million related to Access Plans USA;
 
    
    A decrease in other accrued liabilities of $.4 million primarily attributable to a
decline for income taxes payable; and
 
    
    Other decreases of $.1 million
  38




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##### Table of Contents



See Note 23  Legal Proceedings in the financial statements appearing elsewhere
in this report.
   IMPACT OF INFLATION
  
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
   39




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Report of Independent Registered Public Accounting Firm
    
    
    41Consolidated Balance Sheets as of September 30, 2009 and 2008
    
    
    42Consolidated Statements of Operations for the years ended September 30, 2009 and 2008
    
    
    43Consolidated Statements of Stockholders Equity for the years ended September 30, 2009 and 2008
    
    
    44Consolidated Statements of Cash Flows for the years ended September 30, 2009 and 2008
    
    
    45Notes to Consolidated Financial Statements
    
    
    46
 
  40




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Report of Independent Registered Public Accounting Firm
 
    
  41




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##### Table of Contents



Alliance HealthCard, Inc. & Subsidiaries
 
 Consolidated Balance Sheets
 September 30,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,108,183
    
    
    $
    3,012,683Restricted cash, current
    
    
    470,378
    
    
    
    156,935Accounts receivable, net
    
    
    3,789,790
    
    
    
    2,486,938Advanced agent commissions, net
    
    
    5,827,406
    
    
    
    Deferred income taxes, current
    
    
    981,000
    
    
    
    325,000Prepaid expenses
    
    
    92,499
    
    
    
    31,372Total current assets
    
    
    15,269,679
    
    
    
    6,012,928Furniture, fixtures and equipment, net
    
    
    385,967
    
    
    
    165,020Goodwill
    
    
    4,376,339
    
    
    
    2,534,152Intangibles, net
    
    
    3,975,823
    
    
    
    1,708,883Restricted cash, other
    
    
    500,000
    
    
    
    Deferred income taxes, long term
    
    
    1,221,767
    
    
    
    18,000Other assets
    
    
    243,910
    
    
    
    83,604Total assets
    
    $
    25,973,485
    
    
    $
    10,523,587Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    766,920
    
    
    $
    927,101Accrued salaries and benefits
    
    
    247,075
    
    
    
    161,732Accrued commissions
    
    
    641,550
    
    
    
    Unearned commissions
    
    
    5,700,347
    
    
    
    Waiver reimbursements liability
    
    
    1,102,900
    
    
    
    462,596Deferred revenue
    
    
    1,023,002
    
    
    
    843,868Current portion of notes payable to related parties and other notes
    
    
    1,647,201
    
    
    
    2,289,663Liability for unrecognized tax benefit
    
    
    166,000
    
    
    
    166,000Other accrued liabilities
    
    
    2,881,866
    
    
    
    1,468,349Total current liabilities
    
    
    14,176,861
    
    
    
    6,319,309Long term liabilities:Notes payable to related parties and other notes, net of current portion shown above
    
    
    302,744
    
    
    
    931,581Total liabilities
    
    
    14,479,605
    
    
    
    7,250,890CommitmentsStockholders equity:Common stock, $.001 par value; 100,000,000 shares authorized; 21,633,705
and 14,796,763 shares issued and outstanding at September 30,
2009 and 2008,
respectively.
    
    
    21,633
    
    
    
    14,796Additional paid-in-capital
    
    
    11,584,359
    
    
    
    6,808,758Accumulated deficit
    
    
    (112,112
    )
    
    
    (3,550,857
    )Total stockholders equity
    
    
    11,493,880
    
    
    
    3,272,697Total liabilities and stockholders equity
    
    $
    25,973,485
    
    
    $
    10,523,587
 See the accompanying notes to the financial statements.
  42




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##### Table of Contents



Alliance HealthCard, Inc. & Subsidiaries
 
 Consolidated Statements of Operations
 Year EndedSeptember 30,2009
    
    
    2008Net revenues
    
    $
    39,081,383
    
    
    $
    20,913,609Direct costs
    
    
    26,469,014
    
    
    
    11,113,452Gross profit
    
    
    12,612,369
    
    
    
    9,800,157Marketing and sales expenses
    
    
    1,658,451
    
    
    
    1,252,051General and administrative expenses
    
    
    5,820,860
    
    
    
    3,115,049Depreciation and amortization expense
    
    
    844,960
    
    
    
    550,764Operating income
    
    
    4,288,098
    
    
    
    4,882,293Other income (expense):Other income
    
    
    346,775
    
    
    
    163,951Other expense, net
    
    
    (146,692
    )
    
    
    (148,985
    )200,083
    
    
    
    14,966Net income before income taxes
    
    
    4,488,181
    
    
    
    4,897,259Provision for income taxesCurrent
    
    
    1,879,000
    
    
    
    2,140,000Deferred tax (benefit)
    
    
    (830,000
    )
    
    
    49,000Total provision for income taxes
    
    
    1,049,000
    
    
    
    2,189,000Net income
    
    $
    3,439,381
    
    
    $
    2,708,259Per share data:Basic income
    
    $
    0.19
    
    
    $
    0.18Diluted income
    
    $
    0.19
    
    
    $
    0.18Basic weighted average shares outstanding
    
    
    18,242,732
    
    
    
    14,797,612Diluted weighted average shares outstanding
    
    
    18,247,606
    
    
    
    15,262,596
 See the accompanying notes to the financial statements.
  43




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##### Table of Contents



Alliance HealthCard, Inc. & Subsidiaries
 
 Consolidated Statements of Stockholders Equity
 Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance at October 1, 2008
    
    
    14,647,763
    
    
    $
    14,647
    
    
    $
    6,677,567
    
    
    $
    (6,259,116
    )
    
    $
    433,098Stock options exercised on 12/28/07
    
    
    149,000
    
    
    
    149
    
    
    
    112,721
    
    
    
    
    
    
    
    112,870Stock options issued to consultant on
12/31/07
    
    
    
    
    
    
    
    
    
    
    2,250
    
    
    
    
    
    
    
    2,250Stock options issued to consultant on
03/31/08
    
    
    
    
    
    
    
    
    
    
    2,250
    
    
    
    
    
    
    
    2,250Stock options issued to directors on
5/31/08
    
    
    
    
    
    
    
    
    
    
    13,970
    
    
    
    
    
    
    
    13,970Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,708,259
    
    
    
    2,708,259Balance at September 30, 2008
    
    
    14,796,763
    
    
    
    14,796
    
    
    
    6,808,758
    
    
    
    (3,550,857
    )
    
    
    3,272,697Correction of outstanding shares
    
    
    36,364
    
    
    
    36
    
    
    
    (36
    )
    
    
    
    
    
    
    Stock issued in business acquisition
on 4/1/09
    
    
    6,800,578
    
    
    
    6,801
    
    
    
    4,761,700
    
    
    
    
    
    
    
    4,768,501Stock options issued to
directors on 5/21/09
    
    
    
    
    
    
    
    
    
    
    13,937
    
    
    
    
    
    
    
    13,937Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,438,745
    
    
    
    3,438,745Balance at September 30, 2009
    
    
    21,633,705
    
    
    $
    21,633
    
    
    $
    11,584,359
    
    
    $
    (112,112
    )
    
    $
    11,493,880
 See the accompanying notes to the financial statements.
  44




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##### Table of Contents



Alliance HealthCard, Inc. & Subsidiaries
 
 Consolidated Statements of Cash Flows
 Year EndedSeptember 30,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    3,438,745
    
    
    $
    2,708,259Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    844,960
    
    
    
    550,764Deferred tax (benefit)
    
    
    (829,985
    )
    
    
    49,000Stock option expense
    
    
    13,937
    
    
    
    18,470Amortization of loan discount to interest expense
    
    
    154,569
    
    
    
    160,194Provision for losses on receivables and advanced agent commissions
    
    
    118,894
    
    
    
    Change in operating assets and liabilities, net of acquisition:Receivables
    
    
    68,896
    
    
    
    (88,928
    )Advanced agent commissions
    
    
    916,232
    
    
    
    Prepaid expenses
    
    
    77,816
    
    
    
    2,294Other long term assets
    
    
    
    
    
    
    Accounts payable
    
    
    (592,657
    )
    
    
    (514,602
    )Accrued salaries and benefits
    
    
    85,343
    
    
    
    32,207Unearned commissions
    
    
    (439,034
    )
    
    
    Deferred revenue
    
    
    (86,419
    )
    
    
    (67,720
    )Claims and other accrued liabilities
    
    
    39,744
    
    
    
    471,404Net cash provided by operating activities
    
    
    3,811,041
    
    
    
    3,321,342Cash flows from investing activitiesIncrease in restricted cash
    
    
    (472,186
    )
    
    
    (156,935
    )Cash received from acquisition
    
    
    450,213
    
    
    
    Investment in LLC
    
    
    (100,000
    )
    
    
    Purchase of equipment
    
    
    (44,407
    )
    
    
    (80,479
    )Net cash( used by) investing activities
    
    
    (166,380
    )
    
    
    (237,414
    )Cash flows from financing activitiesPayments on promissory notes  related parties
    
    
    (2,289,663
    )
    
    
    (2,308,546
    )Payment on promissory notes  other
    
    
    (259,769
    )
    
    
    Stock options exercised
    
    
    
    
    
    
    112,870Repayment of line of credit
    
    
    
    
    
    
    (149,980
    )Net cash (used by) financing activities
    
    
    (2,549,432
    )
    
    
    (2,345,656
    )Net increase in cash and cash equivalents
    
    
    1,095,500
    
    
    
    738,272Beginning of period
    
    
    3,012,683
    
    
    
    2,274,411End of period
    
    $
    4,108,183
    
    
    $
    3,012,683
 See the accompanying notes to the financial statements.
  45




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2009 AND 2008
 NOTE 1. DESCRIPTION OF THE BUSINESS
    NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Use of Estimates
  Goodwill and Intangible Assets
   46




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 See Note 4  Mergers and
Acquisitions, below).
    Stock Based Compensation
  Income Taxes
  Income Taxes
  47




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##### Table of Contents



ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Revenue Recognition
  
    
    persuasive evidence of an arrangement exists;
 
    
    delivery has occurred or services have been rendered;
 
    
    the sellers price to the buyer is fixed or determinable; and
 
    
    collectability is reasonably assured.
     Accounts Receivable
   Commission Expense
    48




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##### Table of Contents



ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
   Advertising Expense
  Cash and Cash Equivalents
  Certain Reclassifications
  Fixed Assets
  Furniture and Fixtures
    
    7-10 yearsLeasehold Improvements
    
    Over the term of the lease, or useful life, whichever is shorterComputers and Office Equipment
    
    3-5 yearsSoftware
    
    3 years
 Earnings per Share
   49




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##### Table of Contents



ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent Accounting Pronouncements
     50




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##### Table of Contents



ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
    Recently Issued Accounting Pronouncements Not Yet Adopted
   51




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##### Table of Contents



ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 3. SUPPLEMENTAL CASH FLOWS INFORMATION
  2009
    
    
    2008Interest
    
    $
    77,025
    
    
    $
    53,020Income taxes paid
    
    $
    2,193,086
    
    
    $
    1,704,883Stock issued in relation to acquisition
    
    $
    4,768,501
    
    
    $
    
 NOTE 4. MERGERS AND ACQUISITIONS
 Access Plans USA Acquisition
    Current assets
    
    $
    9,086,216Property and equipment
    
    
    289,000Other assets
    
    
    1,167,699Intangible assets
    
    
    3,000,000Goodwill
    
    
    1,842,186Total assets acquired
    
    
    15,385,101Current liabilities assumed
    
    
    9,887,746Long-term liabilities assumed
    
    
    728,855Total liabilities assumed
    
    
    10,616,601Net assets acquired
    
    $
    4,768,500
  Year EndedSeptember 30,(Unaudited)Statement of Operations Data:Total revenue
    
    $
    32,277,000Operating income (loss)
    
    $
    (547,000
    )Diluted earnings per share
    
    $
    (0.03
    )Weighted average number of diluted common shares outstanding
    
    
    18,248,000
  52




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 4. MERGERS AND ACQUISITIONS (continued)
    Value
    
    
    Estimated LifeIn-force books of business
    
    $
    1,200,000
    
    
    5 YearsAgency relationships
    
    $
    1,500,000
    
    
    8 YearsProprietary programs
    
    $
    300,000
    
    
    8 Years
   Useful
    
    
    2009
    
    
    2008Life
    
    
    Gross
    
    
    Accumulated
    
    
    
    
    
    
    Gross
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetAlliance HealthCardCustomer lists
    
    
    5
    
    
    $
    2,500,000
    
    
    $
    (1,291,677
    )
    
    $
    1,208,323
    
    
    $
    2,500,000
    
    
    $
    (791,117
    )
    
    $
    1,708,883Access Plans USAIn-force books of
business
    
    
    5
    
    
    
    1,200,000
    
    
    
    (120,000
    )
    
    
    1,080,000
    
    
    
    
    
    
    
    
    
    
    
    Agency relationships
    
    
    8
    
    
    
    1,500,000
    
    
    
    (93,750
    )
    
    
    1,406,250
    
    
    
    
    
    
    
    
    
    
    
    Proprietary programs
    
    
    8
    
    
    
    300,000
    
    
    
    (18,750
    )
    
    
    281,250
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    5,500,000
    
    
    $
    (1,524,177
    )
    
    $
    3,975,823
    
    
    $
    2,500,000
    
    
    $
    (791,117
    )
    
    $
    1,708,883
   53




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 4. MERGERS AND ACQUISITIONS (continued)
  2010
    
    $
    965,0002011
    
    $
    965,0002012
    
    $
    673,3232013
    
    $
    465,0002014
    
    $
    120,000
 Benefit Marketing Solutions Acquisition
 See Note 5, Notes Payable to Related
Parties, below
    54




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##### Table of Contents



ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 4. MERGERS AND ACQUISITIONS (continued)
  Current assets
    
    $
    1,860,252Property and equipment
    
    
    3,624Other assets
    
    
    39,637Customer lists
    
    
    2,500,000Goodwill
    
    
    2,291,945Total assets acquired
    
    
    6,695,458Current liabilities assumed
    
    
    1,718,769Total liabilities assumed
    
    
    1,718,769Net assets acquired
    
    $
    4,976,689
 Foresight Acquisition
   Goodwill
    
    $
    455,000Non-competition agreement
    
    
    10,000Software
    
    
    10,000$
    475,000
    55




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##### Table of Contents



ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 5. NOTES PAYABLE TO RELATED PARTIES
       Principal
    
    
    Discount
    
    
    NetFiscal Year Ended September 30,
    
    Payments
    
    
    Applied
    
    
    Amount Due2010
    
    $
    1,144,830
    
    
    $
    58,680
    
    
    $
    1,086,150
  56




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 6. OTHER LONG TERM DEBT
   PrincipalFiscal Year Ended September 30,
    
    Payments2010
    
    $
    561,0512011
    
    $
    302,744
 NOTE 7. FURNITURE AND EQUIPMENT
  2009
    
    
    2008Furniture, fixtures and equipment
    
    $
    390,950
    
    
    $
    368,155Websites
    
    
    33,595
    
    
    
    33,595Software
    
    
    158,051
    
    
    
    83,099Leasehold improvements
    
    
    107,686
    
    
    
    12,686690,282
    
    
    
    497,535Less: accumulated depreciation and amortization
    
    
    (304,315
    )
    
    
    (332,515
    )$
    385,967
    
    
    $
    165,020
  NOTE 8.  ADVANCED AGENT COMMISSIONS
  Advances funded by:Insurance carriers
    
    $
    5,700,347Specialty lending corporation
    
    
    863,795Self-funded
    
    
    835,156Sub-total
    
    
    7,399,298Allowance for doubtful recoveries
    
    
    (1,571,892
    )Advanced agent commissions, net
    
    $
    5,827,406
   57




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 9.  INVESTMENT IN LLC
   NOTE 10.  STOCK BASED COMPENSATION
   Estimated volatility
    
    
    21
    %Dividend yield
    
    
    0
    %Risk free interest rate
    
    
    1.0
    %Expected lives
    
    10 Years
  WeightedAverageExercise
    
    
    Options
    
    
    OptionsPrice
    
    
    Outstanding
    
    
    ExercisableBalance at October 1, 2007
    
    
    
    
    
    
    1,701,396
    
    
    
    1,668,896Granted
    
    $
    1.61
    
    
    
    82,500
    
    
    
    62,500Forfeited
    
    $
    1.37
    
    
    
    (115,999
    )
    
    
    (103,499
    )Exercised
    
    $
    0.76
    
    
    
    (149,000
    )
    
    
    (149,000
    )Became exercisable
    
    $
    0.93
    
    
    
    
    
    
    
    10,833Balance at September 30, 2008
    
    
    
    
    
    
    1,518,897
    
    
    
    1,489,730Granted
    
    $
    4.88
    
    
    
    309,536
    
    
    
    274,727Forfeited
    
    $
    1.42
    
    
    
    (226,646
    )
    
    
    (220,355
    )Exercised
    
    $
    
    
    
    
    
    
    
    
    Became exercisable
    
    $
    1.50
    
    
    
    
    
    
    
    18,333Balance, September 30, 2009
    
    
    
    
    
    
    1,601,787
    
    
    
    1,562,435
  58




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 10. STOCK BASED COMPENSATION (continued)
   Range of exercise price
    
    $
    0.55  $8.23Number outstanding
    
    
    1,601,787Weighted average remaining contractual life
    
    4.0 YearsWeighted average exercise price
    
    $
    1.613
  NOTE 11. INCOME TAXES
  2009
    
    
    2008Current income tax expenseFederal
    
    $
    1,690,000
    
    
    $
    1,890,000State
    
    
    190,000
    
    
    
    250,000Total current income tax expense
    
    
    1,880,000
    
    
    
    2,140,000Deferred income tax (benefit)Federal
    
    
    (556,000
    )
    
    
    43,000State
    
    
    (275,000
    )
    
    
    6,000Total deferred income tax (benefit)
    
    
    (829,000
    )
    
    
    49,000Net income tax expense
    
    $
    1,049,000
    
    
    $
    2,189,000
  Fiscal Year Ended
 September 30,2009
    
    
    2008Computed tax at federal statutory rate of 34%
    
    $
    1,526,000
    
    
    $
    1,667,000State income taxes
    
    
    190,000
    
    
    
    221,000Tax effect of non deductible amortization of intangible assets
    
    
    193,000
    
    
    
    193,000Tax effect of CAPIC settlement  See Note 5
    
    
    
    
    
    
    166,000Tax effect of utilization of NOL
    
    
    (109,000
    )
    
    
    (79,000
    )Change in valuation allowance
    
    
    (700,000
    )
    
    
    (100,000
    )Non-deductible expenses
    
    
    24,000
    
    
    
    18,000Other
    
    
    (75,000
    )
    
    
    103,000Provision for income taxes
    
    $
    1,049,000
    
    
    $
    2,189,000Effective tax rate
    
    
    23%
    
    
    
    45%
  59




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 11. INCOME TAXES (continued)
  Deferred Income Tax Assets
    
    2009
    
    
    2008CurrentRevenue deferred for financial reporting purposes
    
    $
    309,000
    
    
    $
    325,000Agent advance reserves for financial reporting purposes
    
    
    548,000
    
    
    
    Other deferred tax assets, current for financial reporting purposes
    
    
    124,000
    
    
    
    Total
    
    
    981,000
    
    
    
    325,000Long TermBook depreciation in excess of tax depreciation
    
    
    101,000
    
    
    
    119,000Intangible assets for financial reporting purposes
    
    
    (644,000
    )
    
    
    Covenant not to compete for financial reporting purposes
    
    
    94,000
    
    
    
    State tax credit
    
    
    200,000
    
    
    
    Other deferred tax assets for financial reporting purposes
    
    
    33,000
    
    
    
    18,000NOL carryover
    
    
    1,438,000
    
    
    
    582,000Total
    
    
    1,222,000
    
    
    
    719,000Total deferred tax assets
    
    
    2,203,000
    
    
    
    1,044,000Less Valuation allowance
    
    
    
    
    
    
    (700,000
    )Net Deferred income tax asset at September 30
    
    $
    2,203,000
    
    
    $
    344,000
  Fiscal year ended September 30,2011
    
    $
    413,0002017
    
    
    767,0002018
    
    
    226,0002021
    
    
    438,0002023
    
    
    903,0002025
    
    
    468,0002027
    
    
    109,0002029
    
    
    728,000$
    4,052,000
  60




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 11. INCOME TAXES (continued)
  Unrecognized tax benefits
    
    $
    141,000Portion that, if recognized, would reduce tax expense and effective tax rate
    
    
    141,000Accrued interest and penalties on unrecognized tax benefits
    
    
    25,000Portion that, if recognized, would reduce tax expense and effective tax rate
    
    
    25,000
  2009
    
    
    2008Beginning balance
    
    $
    166,000
    
    
    $
    Additions for tax positions of the current year
    
    
    
    
    
    
    166,000Ending balance
    
    $
    166,000
    
    
    $
    166,000
   NOTE 12. EARNINGS PER SHARE
  Fiscal Year Ended 
September 30,2009
    
    
    2008Weighted-average common shares
    
    
    18,242,732
    
    
    
    14,797,612Effect of dilutive securitiesOptions to purchase common stock
    
    
    4,874
    
    
    
    464,984Diluted potential common shares
    
    
    18,247,606
    
    
    
    15,262,596
  NOTE 13. RELATED PARTY TRANSACTIONS
   61




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 13. RELATED PARTY TRANSACTIONS (continued)
    Year Ending September 30,
    
    Amount2010
    
    $
    105,225
 NOTE 14. OPERATING LEASES
    Year Ending September 30,
    
    Amount2010
    
    $
    372,9242011
    
    
    350,0152012
    
    
    50,063$
    773,002
 NOTE 15. WAIVER REIMBURSEMENTS LIABILITY
  NOTE 16. CONCENTRATION OF CREDIT RISK
   62




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 16. CONCENTRATION OF CREDIT RISK (continued)
   NOTE 17. DEFINED CONTRIBUTION PLAN
  NOTE 18. RESTATED QUARTERLY FINANCIAL STATEMENTS FOR MARCH 31, 2008 AND JUNE 30, 2008
     63




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 18. RESTATED QUARTERLY FINANCIAL STATEMENTS FOR MARCH 31, 2008 AND JUNE 30, 2008
(continued)
 A. Restated Condensed Balance Sheets
 As PreviouslyRestated
    
    
    ReportedMarch 31, 2008
    
    
    March 31, 2008(Unaudited)
    
    
    (Unaudited)Current assets
    
    $
    5,271,479
    
    
    $
    5,271,479Other assets
    
    
    609,774
    
    
    
    609,774Goodwill
    
    
    2,746,945
    
    
    
    2,746,945Intangibles, net
    
    
    1,960,551
    
    
    
    1,960,551Total assets
    
    $
    10,588,749
    
    
    $
    10,588,749LiabilitiesCurrent liabilities
    
    $
    6,557,087
    
    
    $
    6,191,367Dividends payable
    
    
    
    
    
    
    365,720Long-term debt, related party
    
    
    2,116,438
    
    
    
    2,116,438Total liabilities
    
    
    8,673,525
    
    
    
    8,673,525Total stockholders equity
    
    
    1,915,224
    
    
    
    1,915,224Total liabilities and stockholders equity
    
    $
    10,588,749
    
    
    $
    10,588,749
 B. Restated Condensed Statements of Operations For the Three and Six Months Ended March 31, 2008:
 Three Months Ended
    
    
    Six Months EndedMarch 31, 2008
    
    
    March 31, 2008As Previously
    
    
    
    
    
    
    As PreviouslyRestated
    
    
    Reported
    
    
    Restated
    
    
    Reported(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net revenues
    
    $
    5,291,812
    
    
    $
    5,291,812
    
    
    $
    10,055,445
    
    
    $
    10,055,445Gross profit
    
    
    2,356,950
    
    
    
    2,356,950
    
    
    
    4,631,036
    
    
    
    4,631,036Operating income
    
    
    1,071,100
    
    
    
    1,071,100
    
    
    
    2,156,383
    
    
    
    2,156,383Other income (expense)
    
    
    119,230
    
    
    
    484,950
    
    
    
    76,593
    
    
    
    442,313Pre-tax income
    
    
    1,190,330
    
    
    
    1,556,050
    
    
    
    2,232,976
    
    
    
    2,598,696Tax provision
    
    
    461,471
    
    
    
    461,471
    
    
    
    868,221
    
    
    
    868,221Net income prior to dividends
    
    
    728,859
    
    
    
    1,094,579
    
    
    
    1,364,755
    
    
    
    1,730,475Dividends and distributions
    
    
    
    
    
    
    365,720
    
    
    
    
    
    
    
    365,720Net income (loss) available for common stock
    
    $
    728,859
    
    
    $
    728,859
    
    
    $
    1,364,755
    
    
    $
    1,364,755Diluted net income (loss) per share
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    0.09
  64




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 18. RESTATED QUARTERLY FINANCIAL STATEMENTS FOR MARCH 31, 2008 AND JUNE 30, 2008
(continued)
 C. Restated Condensed Statements of Operations For the Nine Months Ended June 30, 2008:
 Nine Months EndedJune 30, 2008As PreviouslyRestated
    
    
    Reported(Unaudited)
    
    
    (Unaudited)Net revenues
    
    $
    15,421,698
    
    
    $
    15,421,698Gross profit
    
    
    7,125,588
    
    
    
    7,125,588Operating income
    
    
    3,450,164
    
    
    
    3,450,164Other income (expense)
    
    
    41,337
    
    
    
    407,057Pre-tax income
    
    
    3,491,501
    
    
    
    3,857,221Tax provision
    
    
    1,596,493
    
    
    
    1,596,493Net income prior to dividends
    
    
    1,895,008
    
    
    
    2,260,728Dividends and distributions
    
    
    
    
    
    
    365,720Net income (loss) available for common stock
    
    $
    1,895,008
    
    
    $
    1,895,008Diluted net income (loss) per share
    
    $
    0.12
    
    
    $
    0.12
 NOTE 19.  FINANCIAL INSTRUMENTS
 Fair Value Measurements (SFAS 157) Effective Date of FASB Statement No. 157 Accounting for the Impairment or Disposal of Long-Lived Assets
     65




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 19.  FINANCIAL INSTRUMENTS (continued)
    NOTE 20. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
 First
    
    
    Second
    
    
    Third
    
    
    Fourth2009
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterNet revenue
    
    $
    5,668,541
    
    
    $
    5,885,623
    
    
    $
    13,959,723
    
    
    $
    13,567,496Gross profit
    
    $
    2,581,128
    
    
    $
    1,998,264
    
    
    $
    4,149,046
    
    
    $
    3,883,931Net income
    
    $
    955,450
    
    
    $
    329,888
    
    
    $
    862,465
    
    
    $
    1,290,942Diluted net income per share
    
    $
    0.06
    
    
    $
    0.02
    
    
    $
    0.04
    
    
    $
    0.06
 2008
    
    
    
    
    
    (Restated)
    
    
    (Restated)Net revenue
    
    $
    4,763,633
    
    
    $
    5,291,812
    
    
    $
    5,366,253
    
    
    $
    5,491,911Gross profit
    
    $
    2,274,086
    
    
    $
    2,356,950
    
    
    $
    2,494,552
    
    
    $
    2,674,569Net income
    
    $
    635,896
    
    
    $
    728,859
    
    
    $
    530,253
    
    
    $
    813,251Diluted net income per share
    
    $
    0.04
    
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    0.05
 NOTE 21. SEGMENT REPORTING
    66




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 21. SEGMENT REPORTING (continued)
  For the Years EndedSeptember 30,($ in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeNet revenues  by segmentWholesale Plans
    
    $
    19,522
    
    
    $
    18,102
    
    
    
    8
    %Retail Plans (a)
    
    
    12,838
    
    
    
    7,263
    
    
    
    77
    %Insurance Marketing
    
    
    11,432
    
    
    
    
    
    
    
    *Corporate
    
    
    
    
    
    
    
    
    
    
    Eliminations
    
    
    (4,711
    )
    
    
    (4,451
    )
    
    
    6
    %Total
    
    $
    39,081
    
    
    $
    20,914
    
    
    
    87
    %
 For the Years EndedSeptember 30,($ in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeGross margin  by segmentWholesale Plans (a)
    
    $
    3,884
    
    
    $
    6,048
    
    
    
    36
    %Retail Plans (a)
    
    
    6,710
    
    
    
    3,752
    
    
    
    79
    %Insurance Marketing
    
    
    2,018
    
    
    
    
    
    
    
    *Corporate
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    12,612
    
    
    $
    9,800
    
    
    
    29
    %
 For the Years EndedSeptember 30,(Dollars in Thousands)
    
    2009
    
    
    2008
    
    
    % ChangeOperating income  by segmentWholesale Plans
    
    $
    2,030
    
    
    $
    4,185
    
    
    
    (33
    %)Retail Plans
    
    
    2,734
    
    
    
    1,607
    
    
    
    70
    %Insurance Marketing
    
    
    482
    
    
    
    
    
    
    
    *Corporate
    
    
    (958
    )
    
    
    (910
    )
    
    
    (5
    %)Total
    
    $
    4,288
    
    
    $
    4,882
    
    
    
    (12
    %)
 For the Years EndedSeptember 30,(Dollars in Thousands)
    
    2009
    
    
    2008Segment assetsWholesale Plans (a)
    
    $
    10,525
    
    
    $
    7,491Retail Plans (a)
    
    
    18,889
    
    
    
    6,358Insurance Marketing
    
    
    11,324
    
    
    
    Corporate
    
    
    (14,765
    )
    
    
    Total
    
    $
    25,973
    
    
    $
    13,849
 
 a)
    
    Gross of intercompany eliminations*
    
    % change not meaningful  67




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 22. OTHER INCOME
  NOTE 23. LEGAL PROCEEDINGS
  William Andrew Rivell, M.D. and Alan B. Whitehouse, M.D., individually and on behalf of all
persons similarly situated, v. Private Health Care Systems and The Capella Group, Inc.;
 Hartford Accident and Indemnity Insurance Company v. The Capella Group, Inc. D/b/a Care Entrée;
 Zermeno v Precis, Inc.
     68




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ALLIANCE HEALTHCARD, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
 NOTE 23. LEGAL PROCEEDINGS (continued)
 States General Life Insurance Company.
   Bankers Fidelity Life Insurance Company.
 NOTE 24. SUBSEQUENT EVENTS
      69




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ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
   Managements Annual Report on Internal Control Over Financial Reporting
   
 
 ITEM 9B.
    
    OTHER INFORMATION
   70




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PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
 Our Directors and Executive Officers
  Name
    
    Age
    
    PositionDanny C. Wright
    
    
    58
    
    
    Chairman of the Board of Directors and Chief Executive OfficerBrett Wimberley
    
    
    47
    
    
    Director, President and Chief Operating OfficerRita W. McKeown
    
    
    56
    
    
    Chief Financial Officer and TreasurerSusan Matthews
    
    
    51
    
    
    President, Wholesale Plans Division (a subsidiary)Bradley W. Denison
    
    
    49
    
    
    Executive Vice President, General Counsel, and SecretaryDavid Huguelet
    
    
    50
    
    
    President, Retail Plans DivisionMichael J. Shiomos
    
    
    53
    
    
    President, Insurance Marketing DivisionLarry G. Gerdes(1) (2)
    
    
    60
    
    
    DirectorMark Kidd (1) (2)
    
    
    43
    
    
    DirectorJohn Simonelli (1) (2) (3)
    
    
    63
    
    
    DirectorRussell Cleveland (2) (3)
    
    
    70
    
    
    DirectorJ. French Hill
    
    
    52
    
    
    Director
 
 (1)
    
    Member of the Audit Committee(2)
    
    Member of the Stock Option and Compensation Committee(3)
    
    Member of the Nominating and Governance Committee  71




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Danny C. Wright
 Brett Wimberley
 Rita W. McKeown
 Susan Matthews
 Bradley W. Denison
 David Huguelet
 Michael J. Shiomos
 Larry G. Gerdes
 John Simonelli
  72




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Mark Kidd
 J. French Hill
 Russell Cleveland
 Committees of the Board of Directors
  Audit Committee
    73




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Stock Option and Compensation Committee
 www.alliancehealthcard.com
 Nominating and Governance Committee
  Code of Ethics
  
    
    honest and ethical conduct,
 
    
    full, fair, accurate, timely, and understandable disclosure in reports and documents
that we file with, or submit to, the Securities and Exchange Commission and in other
public communications made by us;
 
    
    compliance with applicable governmental laws, rules and regulations;
 
    
    prompt internal reporting of violations of the Code to an appropriate person or persons
identified in the Code; and
 
    
    accountability for adherence to the Code.
 www.alliancehealthcard.com th
 Compliance with Section 16(a) of the Exchange Act
   74




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
  SUMMARY COMPENSATION TABLE
 Option
    
    
    All OtherName and Principle Position
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Awards(1)
    
    
    Compensation
    
    
    TotalDanny C. Wright
    
    
    2009
    
    
    $
    200,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    200,000Chief Executive Officer
    
    
    2008
    
    
    $
    200,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    200,0002007
    
    
    $
    180,358
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    180,358Brett Wimberley
    
    
    2009
    
    
    $
    175,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    175,000Director, President
    
    
    2008
    
    
    $
    175,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    175,000and Chief Operating Officer
    
    
    2007
    
    
    $
    118,817
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    118,817Bradley W. Denison
    
    
    2009
    
    
    $
    250,000
    
    
    $
    10,400
    
    
    $
    
    
    
    $
    
    
    
    $
    260,400Senior Vice President, General
    
    
    2008
    
    
    $
    250,000
    
    
    $
    10,400
    
    
    $
    6,096
    
    
    $
    
    
    
    $
    266,496Counsel and Secretary
    
    
    2007
    
    
    $
    205,743
    
    
    $
    4,800
    
    
    $
    
    
    
    $
    
    
    
    $
    210,543Rita W. McKeown
    
    
    2009
    
    
    $
    100,671
    
    
    $
    9,000
    
    
    $
    
    
    
    $
    
    
    
    $
    109,671Chief Financial Officer
    
    
    2008
    
    
    $
    94,000
    
    
    $
    5,000
    
    
    $
    
    
    
    $
    
    
    
    $
    99,000and Treasurer
    
    
    2007
    
    
    $
    87,833
    
    
    $
    
    
    
    $
    11,500
    
    
    $
    
    
    
    $
    99,333Susan Matthews
    
    
    2009
    
    
    $
    175,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    175,000Executive Vice President
    
    
    2008
    
    
    $
    175,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    175,000of Sales and Marketing
    
    
    2007
    
    
    $
    118,792
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    118,792
 Outstanding Equity Awards at Fiscal Year-End
 .
 Outstanding Equity Awards at September 30, 2009
 Stock Option AwardsNumber of Common Stock
    
    
    Option
    
    
    OptionUnderlying Options
    
    
    Exercise
    
    
    ExpirationName
    
    Exercisable
    
    
    Un-exercisable
    
    
    Price(1)
    
    
    DateDanny C. Wright
    
    
    -0-
    
    
    
    -0-
    
    
    $
    -0-
    
    
    N/ABrett Wimberley
    
    
    -0-
    
    
    
    -0-
    
    
    $
    -0-
    
    
    N/ABradley Denison
    
    
    7,500
    
    
    
    -0-
    
    
    $
    1.00
    
    
    May 13, 2018Rita McKeown
    
    
    23,410
    
    
    
    -0-
    
    
    $
    0.83
    
    
    October 1, 20096,000
    
    
    
    -0-
    
    
    $
    1.00
    
    
    October 1, 20104,999
    
    
    
    -0-
    
    
    $
    1.01
    
    
    May 26, 201410,000
    
    
    
    -0-
    
    
    $
    1.15
    
    
    February 15, 2017Susan Matthews
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    N/A
 
 (1)
    
    The closing sale price of our common stock as reported on the OTC Bulletin Board on
September 30, 2009 was $1.00.  75




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Equity Compensation Plans
 Alliance HealthCard, Inc. 2000 Stock Option Plan
     Alliance HealthCard, Inc. 2009 Equity Compensation Plan
       76




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##### Table of Contents




    
    Select the employees to participate in the 2009 Plan;
 
    
    Determine the time or times when incentive awards will be made;
 
    
    Determine the form of an incentive award (stock option, restricted stock award,
performance unit, performance bonus or stock appreciation right), the number of common
stock shares or performance units subject to the incentive award, the amount and all the
terms, conditions (including performance requirements), restrictions and limitations of an
incentive award, including the time and conditions of exercise or vesting, and the terms of
any incentive award agreement;
 
    
    Determine whether incentive awards will be granted singly or in combination;
 
    
    Accelerate the vesting, exercise or payment of an inventive award or the performance
period of an incentive award;
 
    
    Determine extent an incentive award may be deferred, either automatically or at the
election of the participant or the Committee; and
 
    
    Take any and all other action it deems necessary or advisable for the proper operation
or administration of the Plan.
    Grant of Awards.
 
    
    The aggregate number of common stock shares subject to the grant of stock options or
stock appreciation rights to an employee in any calendar year may not exceed 500,000;
 
    
    The aggregate number of common stock shares subject to the grant of restricted stock
awards and performance unit awards to an employee in any calendar year may not exceed
250,000;
 
    
    The maximum amount made subject to the grant of performance bonuses to an employee in
any calendar year may not exceed $500,000;
 
    
    Any common stock shares related to incentive awards which (i) terminate by expiration,
forfeiture, cancellation or otherwise, (ii) are used or withheld to pay an incentive
awards exercise price or withholding taxes, or (iii) are exchanged in the Committees
discretion for incentive awards not involving common stock, will be available again for
grant and shall not be counted against the 2,550,000 shares authorized under the 2009 Plan;
  77




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
    
    Any common stock shares delivered by us in payment of an incentive award authorized
under may be authorized and unissued common stock or common stock held as treasury shares;
 
    
    The Compensation Committee has the sole discretion to determine the manner in which
fractional shares arising under the 2009 Plan will be treated;
 
    
    The Compensation Committee will from time to time establish guidelines for the Regular
Award Committee regarding the grant of incentive awards to employees;
 
    
    Separate certificates or a book-entry registration representing common stock shares
will be delivered to a participant upon the exercise of any stock option;
 
    
    The Committee is prohibited from canceling, reissuing or modifying incentive awards if
the action will have the effect of increasing the exercise price of options or re-pricing
the participants incentive award adversely to the participants benefit without the prior
written consent of the participant;
 
    
    Our non-employee directors may only be granted nonqualified stock options, stock
appreciation rights or restricted stock awards;
 
    
    The aggregate number of our common stock shares made subject to the grant of stock
options or stock appreciation rights to any individual non-employee director in any
calendar year may not exceed 100,000;
 
    
    In no event may more than 75,000 shares of restricted stock be awarded to any
individual non-employee director in any calendar year; and
 
    
    The maximum term of any incentive award may not exceed 10 years.
 Grant of Options.
 
    
    Exercise Price  The option exercise price must be stated and set by the Committee at the
date of grant at the fair market value of our common stock on that date;
    
    Form of Payment  The exercise price of an option may be paid
      78




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Other Terms and Conditions.
 
    
    the period or periods and the conditions of exercisability of an option;
 
    
    the minimum periods during which participants must be employed with us or must hold
options before they may be exercised;
 
    
    the minimum periods during which shares acquired upon exercise must be held before sale
or transfer would be permitted;
 
    
    conditions under which the options or shares may be subject to forfeiture;
 
    
    the frequency of exercise or the minimum or maximum number of shares that may be
acquired at any one time;
 
    
    our achievement of specified performance criteria; and
 
    
    non-compete and protection of business matters.
  Grant of Restricted Stock Awards.
     
    
    The minimum periods during which participants must be employed by us;
    
    Conditions under which the performance units may be subject to forfeiture;
    
    Our achievement of specified performance criteria; and
    
    Non-compete and protection of business matters.
  79




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Grant of Performance Bonus.
 Grant of Stock Appreciation Rights.
    
    
    changes into or are exchangeable for a different number or kind of shares of our stock or
other securities or those of another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, stock split, combination of shares or otherwise), or
    
    if the number of those common stock shares will be increased through the payment of a stock
dividend, or
    
    if rights or warrants to purchase our securities will be issued to holders of our outstanding
common stock, then there will be substituted for or added to each share available under and subject to the
2009 Plan, and each share theretofore appropriated under the Plan, the number and kind of
 shares of stock or other securities into which each outstanding common stock share will be
changed or for which each share will be exchanged or to which each share will be entitled, as
the case may be, on a fair and equivalent basis in accordance with the applicable provisions
of Section 424 of the Code; provided, however, with respect to options, in no event will the
adjustment result in a modification of any option as defined in Section 424(h) of the Code.
No fractional common stock shares or units of other securities will be issued pursuant to any
adjustment, and any fractions resulting from any adjustment will be eliminated by rounding
downward to the nearest whole share.
 Amendment or Termination of Plan.
  80




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Termination of Employment; Termination of Service.
  Non-transferability of Incentive Awards.
 Withholding Taxes.
 Change of Control.
 Amendments to Incentive Awards.
 Regulatory Approval and Listings.
 
    
    the obtaining of any approval from, or satisfaction of any waiting period or
other condition imposed by, any governmental agency that the Committee determines
necessary or advisable; and
 
    
    the completion of any registration or other qualification of the shares under
applicable federal or state law, regulation or ruling of any governmental body that the
Committee determines necessary or advisable.
 Governing Law.
 Other Laws.
  81




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Employment Arrangements and Keyman Insurance
      Compensation of Directors
   
    
    payment of $1,000 for each calendar quarter;
 
    
    reimbursement for travel and out of pocket expenses in connection with their attendance at
board and committee meetings; and
 
    
    stock options to the non-employee board members, all of which remain outstanding at
September 30, 2009
 Director Name
    
    Options GrantedJ. French Hill
    
    
    
    
    
    
    10,000Russell Cleveland
    
    
    
    
    
    
    10,000
  82




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Fees Earned
    
    
    Optionor
    
    
    AwardsName
    
    Paid in Cash
    
    
    (1)
    
    
    TotalJohn Simonelli
    
    $
    4,000
    
    
    $
    6,006
    
    
    $
    10,006Mark R. Kidd
    
    $
    4,000
    
    
    $
    
    
    
    $
    4,000Larry G. Gerdes
    
    $
    4,000
    
    
    $
    
    
    
    $
    4,000J. French
Hill
    
    $
    2,000
    
    
    $
    1,785
    
    
    $
    3,785Russell
Cleveland
    
    $
    2,000
    
    
    $
    1,785
    
    
    $
    3,785
 (1)
    
    Alliance HealthCard used the Black Scholes option-pricing model to estimate the option fair
values as described in Note 2  Summary of Significant Accounting Policies (Stock Based
Compensation) of the financial statements appearing above in this report, to determine the
value of the amounts for Option Awards. Officer and Director Liability and Indemnification
  
    
    One or more of our officers or employees whom the director reasonably believes to be
reliable and competent in the matters presented;
 
    
    Legal counsel, public accountants, investment bankers, or other persons as to matters the
director reasonably believes are within the persons professional or expert competence; or
 
    
    A committee of our Board of Directors of which he is not a member if the director reasonably
believes the committee merits confidence.
     83




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ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  SharesOwned
    
    
    Rights
    
    
    
    
    
    
    % ofName (and Address)
    
    Of
    
    
    To
    
    
    Total
    
    
    Ownershipof Beneficial Owner
    
    Record
    
    
    Acquire
    
    
    Shares
    
    

(1)Danny Wright
(2)(8)
900 36th Avenue, NW 
Norman, Oklahoma 73072
    
    
    3,994,900
    
    
    
    -0-
    
    
    
    3,994,900
    
    
    
    20.2
    %Brett
Wimberley (3)(8)
900 36th Avenue, NW 
Norman, Oklahoma 73072
    
    
    3,966,327
    
    
    
    -0-
    
    
    
    3,966,327
    
    
    
    20.1
    %Susan
Matthews (4) 
900 36th Avenue, NW 
Norman, Oklahoma 73072
    
    
    1,990,000
    
    
    
    -0-
    
    
    
    1,990,000
    
    
    
    10.1
    %RENN Capital
(5) 
4929 W. Royal Lane, Suite 200 
Irving, TX 75063
    
    
    1,561,554
    
    
    
    18,387
    
    
    
    1,579,941
    
    
    
    8.0
    %Russell
Cleveland (5)(8)
    
    
    1,561,554
    
    
    
    18,387
    
    
    
    1,579,941
    
    
    
    8.0
    %Robert D. Garces
    
    
    669,600
    
    
    
    415,000
    
    
    
    1,084,600
    
    
    
    5.5
    %Thomas W. Kiser
    
    
    633,050
    
    
    
    380,000
    
    
    
    1,013,050
    
    
    
    5.1
    %Larry G.
Gerdes (7)(8)
    
    
    176,665
    
    
    
    145,000
    
    
    
    321,665
    
    
    
    1.6
    %John
Simonelli (8)
    
    
    5,000
    
    
    
    85,000
    
    
    
    90,000
    
    
    
    0.5
    %J. French
Hill (8)
    
    
    5,000
    
    
    
    26,839
    
    
    
    31,839
    
    
    
    0.2
    %Rita W.
McKeown (6)
    
    
    -0-
    
    
    
    26,999
    
    
    
    26,999
    
    
    
    0.1
    %David
Huguelet (9)
    
    
    900
    
    
    
    4,500
    
    
    
    5,400
    
    
    
    **
    %Bradley W.
Denison (10)
    
    
    1,500
    
    
    
    7,500
    
    
    
    9,000
    
    
    
    **
    %Mark Kidd (8)
    
    
    5,000
    
    
    
    10,000
    
    
    
    15,000
    
    
    
    **
    %All
directors and officers as a group of 13 individuals
    
    
    13,009,495
    
    
    
    1,119,225
    
    
    
    14,128,720
    
    
    
    71.4
    %
  84




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##### Table of Contents



(1)
    
    Rounded to the nearest one-tenth of one percent, based upon 19,277,304 shares of
common stock outstanding at December 14, 2009.(2)
    
    Mr. Wright is our Chairman of Board of Directors and Chief Executive Officer.(3)
    
    Mr. Wimberley is one of our directors and our President and Chief Operating Officer.(4)
    
    Ms. Matthews is President of our subsidiary, Benefit Marketing Solutions, LLC.(5)
    
    The beneficial shares owned are held of record by Global Special Opportunities Trust PLC
(268,997 shares), RENN Global Entrepreneurs Fund, Inc. (formerly Renaissance Capital Growth &
Income Fund III, Inc.) (313,175 shares), Premier RENN Entrepreneurial Fund Limited (formerly
Premier RENN US Emerging Growth Fund Limited) (417,306 shares), Renaissance US Growth
Investment Trust PLC (562,076 shares), each of which is an investment fund managed by RENN
Capital Group, Inc. Mr. Cleveland controls RENN Capital Group, Inc. and is also deemed to be
the beneficial owner of those common stock shares. Mr. Cleveland serves as one of our
directors.(6)
    
    Ms. McKeown is our Chief Financial Officer.(7)
    
    The number of shares and the percent includes 166,666 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 M. Gerdes is a general partner. Mr. Gerdes serves as one of our directors.(8)
    
    The named individual is one of our directors.(9)
    
    Mr. Huguelet is Senior Vice President, New Business Development.(10)
    
    Mr. Denison is Executive Vice President, General Counsel and Secretary. 
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
     Merger-Acquisition of BMS Holding Company
   85




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##### Table of Contents



Director Independence
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES.
 Audit Fees
  Tax Fees
   86




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
  Exhibit 3.1
    
    Certificate of Incorporation, incorporated by reference to the Registration Statement
on Form 10-SB filed with the Commission on March 24, 2000.Exhibit 3.2
    
    Bylaws, incorporation by reference to the Registration Statement on Form 10-SB filed
with the Commission on March 24, 2000.Exhibit 4.1
    
    Common stock certificate, incorporation by reference to the Registration Statement on
Form 10-SB filed with the Commission on March 24, 2000.Exhibit 10.1
    
    Certificate of Merger Agreement with Access Plans USA, Inc. incorporated by reference
to the Form 8K filed with the Commission on November 18,
2008.Exhibit 31.1
    
    Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 Exhibit 31.2 Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002Exhibit 32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
  87




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SIGNATURES
 
 Alliance HealthCard, Inc.December 28, 2009
    By:
    /s/ Danny WrightDanny WrightChairman and Chief Executive Officer 
(Principal Executive Officer)December 28, 2009
    By:
    /s/ Rita McKeownRita McKeownChief Financial Officer
(Principal Financial and Accounting Officer)  88




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    DescriptionExhibit 31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley
Act of 2002Exhibit 32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley
Act of 2002
  89