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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





---




FORM 10-KSB





xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF


THE SECURITIES EXCHANGE ACT OF 1934





For
the fiscal year ended September 30, 2002





or





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF


THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from              to





Commission File Number 0001087216





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Alliance HealthCard, Inc.


(Exact name of registrant as specified in its charter)





GEORGIA

58-2445301(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification No.)





3500 Parkway Lane, Suite 720, Norcross, GA 30092


(Address of principal executive offices and zip code)





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





Securities registered
pursuant to Section 12 (b) of the Act: None


Securities to be registered pursuant to Section 12 (g) of the Act:


Common Stock, $.001 Par Value


(Title of Class)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ̈





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in Parts III of this Form 10-KSB or any amendment to this Form 10-KSB.  ̈





Registrants revenues for the fiscal year ended September 30, 2002
were $1,384,830.





Aggregate market value of the voting and non-voting Common Stock held by non-affiliates of the
Registrant, computed using the last sale price as reported for the Registrants common stock on December 1, 2002 was $8,857,792.





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





Class

Outstanding at December 1, 2002Common Stock, $.001 par value

4,428,896





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





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ALLIANCE HEALTHCARD, INC.





FORM 10-K-SB





INDEX





PART IITEM 1.

BUSINESS

3ITEM 2.

PROPERTIES

9ITEM 3.

LEGAL PROCEEDINGS

9ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

10PART IIITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

10ITEM 6.

MANAGEMENTS DISCUSSION AND ANALYSIS FO FINANCIAL CONDITION AND RESULTS OF OPERATIONS

11ITEM 7.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

14ITEM 8.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

28PART IIIITEM 9.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

28ITEM 10.

EXECUTIVE COMPENSATION

31ITEM 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

32ITEM 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

33ITEM 13.

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

34SIGNATURES

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ITEM 1.    
BUSINESS





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





GENERAL





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





The Company does not sell insured plans. However, the discounts realized by its members through its programs typically range from 10% to 60% off providers usual
and customary fees. Building upon the power of group purchasing, Alliance has negotiated discounts up to 20 different service categories. The Companys programs require members to pay the provider at the time of service, thereby eliminating the
need for any insurance claims filing. These discounts, which are similar to managed care discounts, typically save the individual more than the cost of the program itself.





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





Membership Service Programs





The Company offers memberships on an individual basis. Individual memberships are marketed to consumers through retail pharmacies, insurance companies, large employers and associations.





Through Alliances provider networks, cardholders will be offered discounts for products and services ranging from 10% to
60% depending on the area of coverage and the specific procedures. Below are examples of the range of discounts in the major service categories:





Service

Discount Off Retail

Service

Discount Off RetailDental Care

15-40%

Orthodontics

23-35%Vision Care



Massage Therapy

25-35%Prescription eyeglasses

10-60%

Physical Therapy

15-20%Contact Lenses

10-60%

Health Clubs

25-40%Sunglasses

20-50%

Acupuncture

25-40%Lasik (vision correction)

10-30%

Alternative Medicine

25-35%Hearing Aids

15-40%

Diagnostic Centers

25-35%Prescription Drugs

10-50%

Pain Management

10-30%Chiropractic Care

30-50%

Personal Training

10-30%Mental Health/Life Care

10-30%

Nutritionist

10-30%Electrolysis

10-30%

Weight Loss Centers

10-30%Nurse Help Line

Complementary




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In general, members subscribe for renewable one-year memberships in the
Companys programs. The membership fees related to the healthcare provider model are paid directly to the Company by the individual members. Membership fees for subscribers through insurance companies, large employers, and associations are
generally paid directly to the Company by the associated company, not the individual subscriber.





Members who
enroll in a program through the healthcare provider model sometimes receive a trial membership. During the trial membership, the member may use the programs services without obligation, as outlined in a membership brochure included in each
fulfillment kit along with a membership card and membership identification number. Trial memberships are generally for a period of 30 or 90 days and there are no conditions with respect to the ability of the consumer to terminate a trial membership.
The Company does not record any revenue with respect to trial memberships. The consumer is charged the monthly or annual membership fee upon enrollment in a program. In the event that the member cancels the membership during the initial trial
membership period, the full membership fee is refunded. During the course of an initial annual membership term or renewal term, a member is free to cancel a membership in the program, generally for a prorated refund of the membership fee for the
remaining period.





Members enrolled through the institutional distribution model are already policyholders with
the insurance company. Insurance companies provide the health savings card to the selected group of policyholders, such as Medicare supplement or life insurance policyholders. The membership may be provided at a minimal cost or no additional cost to
the policyholder. The membership term is for one year and is generally paid to the Company on a monthly or annual basis. Membership fees generated through the institutional model are generally paid to the Company by the institution. For memberships
paid for in advance on an annual basis, revenue is recognized monthly over the applicable twelve-month period. Membership fees generated through the institutional model are generally paid to the Company by the institution.





Members who enroll through the retail model generally consist of individuals who have limited or no health benefits. They may enroll
directly in the Alliance Gold or Platinum Card program. Or, an employer may choose to provide a Gold or Platinum membership, or a variation thereof, at no cost to its employees or may choose to capture all or part of the membership fee from the
employee through payroll deduction.





Network Contracts





Alliance offers its members 20 healthcare provider services nationwide. Depending upon the membership level selected, cardholders can access up to 380,000 providers. The
Company is a leader in providing one of the most varied and unique blends of healthcare savings programs in the industry.





The Company contracts directly with independent providers and provider service organizations as well as with national and regional provider networks (leased networks). Provider services are typically discounted an average
of 30% off retail or usual and customary charges with discounts ranging from 10% to 60%.





A leased network
requires the Company to pay an access fee based on the number of active card members who have access to the networks providers and practitioners. These fees range from $0.01 to $.35 per member per month. The contracts guarantee access and
discounts off the networks usual and customary fee schedules.





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





Member Services





The Company believes that providing high quality service to its members is extremely important in order to encourage memberships and to strengthen the affinity of those members for the client that
offered the service program. Currently, the Company maintains a call center in Atlanta, Georgia. The Companys service center is available to members, toll free, Monday through Friday from 8:00 a.m. to 6:00 p.m. eastern time. All new membership
service representatives are required to complete a training course before beginning to take calls and attend on-the-job training thereafter. Through its training




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programs, systems and software, the Company seeks to provide members with friendly, rapid and effective answers to questions. The Company also works closely with its vendors customer
service staffs to ensure that their representatives are knowledgeable in matters relating to membership service programs offered by the Company.





Technology





The Company has made substantial investments in its proprietary
technology and management information systems. These systems were designed in-house and are used in all aspects of its business, including:





| | · |  | Maintenance of member eligibility and demographic information;
| | - |  | --------------------------------------------------------------




| | · |  | Maintenance of provider locator services;
| | - |  | -----------------------------------------




| | · |  | Member billing on a monthly or annual basis; and
| | - |  | ------------------------------------------------




| | · |  | Commission tracking
| | - |  | -------------------




The Company has also established a web site (www.alliancehealthcard.com) for its programs that provide information about membership benefits and services, and also allows new members to enroll on-line.





PRODUCTS





Based on the target market, Alliance offers several different healthcare benefit card programs that provide to members benefits that range from prescription drug discounts only to the 16 benefits available through its Platinum Card
program. The Company offers its Gold and Platinum Cards directly or co-brands them with its customers. It also offers its clients cards with custom-designed benefit packages.





The Gold Card





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





Pharmacy

Chiropractic

Medical SuppliesVision

Alternative Medicine

Medical Lab ServicesDental

Long-Term Care

PodiatryHearing

Mental Health

Emergency Medical Response24-hour nurse line

Physical Therapy





The Platinum Card





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





Family Practice

Internists

OB/GYNOrthopedics

Pediatricians

CardiologyRadiology

Ophthalmology

UrologyENT

Neurology

Surgery




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INDUSTRY OVERVIEW





Alliance provides healthcare solutions for individuals and families who are insured, underinsured (limited benefit insurance plans), and uninsured. The individual or family who benefits from membership
in Alliances healthcare networks generally has a gap in healthcare benefits because of a lack of sufficient insurance coverage due to cost or product availability. The market is not limited to self-paying healthcare consumers; it includes
employers, insurers and other affinity groups that offer Alliance membership services. Some members purchase an Alliance product to gain access to a specific product or service not covered by a health plan. Examples of the products and services not
covered by certain plans would be alternative medicine, vision care or prescription drugs under Medicare. Other clients purchase Alliance memberships for their customers to enhance customer loyalty and retention.





The Insured





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





The Underinsured





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





The Uninsured





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





In summary, there are many Americans at risk for major healthcare-related expenditures for
which they would be personally responsible. These consumers are looking for ways to reduce their out of pocket expenditures and the financial burden they would otherwise incur.





HISTORY OF THE COMPANY





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




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





After completing the private stock offering in September 1999, the Company registered its securities with the Securities and Exchange
Commission on March 10, 2000 and received approval from the NASD on November 29, 2000 to begin trading its Common Stock under the trading symbol of ALHC. The Companys board of directors also approved a three for one stock split effective
November 1, 2000.





In anticipation of the CVS contract beginning in January 2001, the Company began another
private stock offering under Regulation 506 in December 2000. The offering was for 333,333 Units of its securities, for a total of $1,500,000. Each Unit was comprised of three shares of Common Stock plus one Warrant to purchase one share of Common
Stock at $1.50 per share. As of September 30, 2002, the Company had sold a total of 346,378 Units of its securities at $4.50 per Unit with aggregate proceeds equaling $1,558,703 from such sales. The Company issued 1,039,134 shares of Common Stock
from approximately 65 shareholders pursuant to the exemption set forth in Regulation D, Rule 506. The Company completed the Offering on September 25, 2002.





BUSINESS STRATEGY





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





The Companys primary target markets consist of: 1) the Medicare population without supplemental coverage 2) individuals
with limited benefit insurance plans, 3) uninsured individuals, and 4) workers compensation funds seeking to reduce their prescription drug costs. Each of these markets has unique characteristics and, therefore, specific means of distribution.
Alliance provides a wide degree of flexibility to its distribution partners in both product design and network services. The Companys distribution strategy is built on three models:





| |  ̈ |  | Healthcare Provider ModelAlliance partners with healthcare providers to give their customers access to the savings available through
Alliances network of healthcare services in addition to those offered by the providers themselves. (Example: retail pharmacies)
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  ̈ |  | Institutional ModelAlliance produces custom and/or co-branded healthcare savings card to create an added value for an institutions
existing product or service, or a card for resale by the institution. (Example: healthcare related insurance companies)
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  ̈ |  | Retail ModelAlliance sells cards to individuals on a direct basis, or through agents, brokers and resellers.
| | - |  | -------------------------------------------------------------------------------------------------------------




The Gold and Platinum cards are the Companys principal retail or individual consumer oriented products
and represent the Companys retail distribution model. Variations of the Gold and Platinum cards, i.e., co-branded cards, are sold through healthcare providers to their customers and represent the healthcare provider model. The Company,
however, has issued the majority of its healthcare benefit cards to certain policyholders of insurance companies that purchased the cards from Alliance. These insurance company clients distributed the cards as a value added benefit to their
policyholders. The Company believes that this institutional distribution model may offer the greatest near-term growth opportunities for its card base.





The Company has also identified a new market for its pharmacy benefit service. Alliance is developing a pharmacy benefit program for workers compensation funds and third party administrators
thereof. The Company expects to begin to market this service by its third 2003 fiscal quarter.




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The Company believes its product design flexibility, in conjunction with systems
and operations built around its distribution models, is unique in the industry and that competitors takes a one size fits all approach to program design. The Companys flexible approach to clients needs should contribute directly to
the success of its business strategy.





The Companys future profitability, liquidity and capital requirements
will depend upon numerous factors, including the success of its product offerings and competing market developments. The Company has not yet achieved, and may never achieve, profitable operations. In December 2000, the Company signed a ten-year
contract with CVS Pharmacy, Inc., a major retail chain consisting of approximately 4,100 locations that sell a version of the Companys Gold Cad at its pharmacy counters to individuals who lack pharmacy and/or other health benefits. The Company
executed a three-year contract with State Farm Mutual Automobile Insurance Company in April 2002 with implementation beginning in July 2002 and completion expected during the first half of calendar year 2003. The Company executed a five-year
contract with Bankers Fidelity Life Insurance Company in July 2002 with implementation beginning in September 2002 with completion also expected during the first half of calendar year 2003. In December 2002, Alliance signed separate three-year
contracts with four subsidiaries of an insurance holding company. After the initial term, each contract renews automatically for a one-year term. Implementation of these contracts should be completed during Alliances third fiscal quarter. The
Company intends to fund its ongoing development and operations through a combination of sales through these three existing contracts and potential new contracts.





The Company expects to be profitable in its third fiscal quarter of 2003 if its pipeline business closes and comes on stream on the dates anticipated and at the expected implementation costs. Alliance
is still an emerging company and very sensitive to the timing of new business implementations and staying within their implementation budgets, especially accounts bringing a large number of new cardholders such as State Farm. Similarly, this outlook
anticipates the timely and successful implementation of the Companys new product for workers compensation funds.





SALES
AND MARKETING





The Company currently employs two full-time sales professional. Alliances prospects and
sales have emerged principally from personal contacts by the Companys sales professional and executive officers with healthcare related executives as well as referrals from its board of directors. The Company also retains several independent
consultants who market its products and services, and are compensated solely on the basis of actual sales closed.





CUSTOMERS





In December 2002, Alliance signed separate three-year contracts with four subsidiaries of an insurance
holding company. After the initial term, each contract renews automatically for a one-year term. Implementation of these contracts that provide co-branded prescription drug discount cards to the insurance companies policyholders should be
completed during Alliances third fiscal quarter. The Company executed a five-year contract with Bankers Fidelity Life Insurance Company in July 2002 with implementation beginning in September 2002 with completion expected during the first half
of calendar year 2003. Bankers Fidelity Life distributes at no cost to its policyholders the Senior SecuRxity card, a co-branded pharmacy benefit card. The Senior SecuRxity card will provide Bankers policyholders savings on their
prescription drug purchases throughout Alliances drug store network that exceeds 48,000 stores nationwide. The Company also executed a three-year contract with State Farm Mutual Automobile Insurance Company in April 2002. Implementation began
in July 2002 and has an expected completion date of March 2003. State Farms co-branded Good Neighbor Advantage card gives its policyholders discounts on their drug purchases within Alliances drug store network plus discounts on vision,
dental, hearing, chiropractic and alternative medicine services; and diabetes management supplies. A 24-hour nurse line service is also available. The initial term of the contract is three (3) years and it renews for one (1) year terms thereafter.
In December 2000 the Company executed a ten-year contract with CVS Pharmacy, Inc., a major retail chain consisting of approximately 4,100 locations that are selling the cards at their pharmacy counters to certain individuals who lack pharmacy and
other health benefits. The CVS membership card, co-branded as the Health Savings Pass, is a variation of the Companys Gold card. The initial term of the agreement is five (5) years and it renews for consecutive five (5) year terms until either
party provides written notice of cancellation at least 180 days prior to the expiration of the then current term. There is no certainty that Bankers Fidelity Life Insurance Company, State Farm Mutual Automobile Insurance Company or CVS Pharmacy,
Inc. will not cancel after the initial term. There can be no assurances that the Company could replace these revenues when the agreements expire or if one or both are terminated prior to expiration. Accordingly, termination or




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expiration of these relationships would substantially reduce the Companys revenues and profits, and, thus, have a material adverse effect on the Companys business, financial
performance and operations.





COMPETITION





There are several companies that compete with the Company. Although the medical savings industry is still in its early stages, competition for members is becoming more intense. The Companys
principal competitors are Eckerd, Member Works/Discount Development Services, Peoples Prescription Plan, and Readers Digests YouRX Plan. Its other competitors include large retailers, insurance companies and other organizations that offer
benefit programs to their customers.





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





GOVERNMENT REGULATION





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





EMPLOYEES





As of November 30, 2002, the Company employed 21 individuals on a full-time basis and 1 on a part-time basis.
None of the Companys employees are represented by a labor union. The Company believes that its employee relations are good.





ITEM 2.    
PROPERTIES.





The Companys executive offices are located in Norcross,
Georgia, consisting of approximately 5,800 square feet of space subleased from NovaNet, Inc., a company partially owned by Robert D. Garces, the Chairman of the Board of the Company. The sublease was executed on April 1, 2002 and terminates on April
30, 2004 at approximately $8,910 per month through February 28, 2003 and increases to $9,703 per month for the period from March 1, 2003 through April 30, 2004. The sublease includes the use of reception, office furniture, copying and other office
equipment. While the sublease was not negotiated at arms-length, the Company believes the terms of the sublease are comparable to what it would pay for such space on the open market. The Company believes that it has adequate office space for its
current operations.





ITEM 3.    
LEGAL PROCEEDINGS.





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




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





The Company held its annual meeting
of stockholders on August 21, 2002 for stockholders of record at the close of business on June 28, 2002. The stockholders voted and approved the following matters:





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




| | 2. |  | To ratify the selection of Miller, Ray & Houser by the Board of Directors as the Companys independent public accountants to audit the accounts of the
Company for the fiscal year ending September 30, 2002.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3. |  | To transact such other business as may properly come before the Annual Meeting or any postponement or adjournment thereof.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------




PART II.





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





Alliances Common Stock began trading on the Over The Counter Bulletin Board in January 2001. As of December 12, 2002 there were 166 holders of record of Alliance Common Stock. The table below sets forth for the periods
indicated the high and low price per share (using the closing average of best bid and best ask price) of Alliance Common Stock as reported on the Over The Counter Bulletin Board prior to September 30, 2002.





Price Per Common ShareHigh

LowYear Ended September 30, 2002First Quarter

$
2.50

$
0.55Second Quarter

$
2.55

$
1.50Third Quarter

$
2.40

$
0.80Fourth Quarter

$
2.50

$
1.01





DIVIDEND POLICY





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





RECENT SALE OF UNREGISTERED SECURITIES





The Company issued an Offering Memorandum on December 15, 2000, pursuant to the exemption set forth in Regulation D, Rule 506, for the sale of 333,333 Units of its securities at a price of $4.50 per Unit, with each Unit
being comprised of three shares of Common Stock, $.001 par value plus one Warrant to purchase one share of Common Stock at $1.50 per share. As of September 30, 2002, the Company had sold a total of 346,378 Units of its securities at $4.50 per Unit
with aggregate proceeds equaling $1,558,703 from such sales. The Company issued 1,039,134 shares of Common Stock to 65 shareholders pursuant to the exemption set forth in Regulation D, Rule 506. The Company completed the Offering on September 25,
2002.




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|ITEM  6. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|-------- |  | -------------------------------------------------------------------------------------




General





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





Results of Operations





Quarter Ended September 30, 2002 Compared to Quarter Ended September 30, 2001


|
|

Quarter Ended September
30,2002


2001Net revenues

$
810,769


$
14,809Direct costs


365,414



67,824Gross profit


445,355



(53,015
)Marketing and sales expenses


280,632



43,424General and administrative


484,640



229,822Operating loss


(319,917
)


(326,261
)Other income (expense)


(2,106
)


(4,867
)Net loss

$
(322,023
)

$
(331,128
)





Net revenues for the Company increased from $14,809 for the three
months ended September 30, 2001 to $810,769 for the three months ended September 30, 2002. The increase in co-branded cards issued under the contract with CVS Pharmacy, Inc. accounted for 60% of the increase. State Farm Mutual Automobile Insurance
Company signed a three-year contract in April 2002 and accounted for the remaining 40% of the revenue increase for the quarter. Full implementation of the State Farm contract is expected to occur during the first half of calendar 2003.





Gross profit increased $498,370 to $445,355 for the three months ended September 30, 2002 from a loss of $53,015 for the
quarter ending September 30, 2001. The increase in gross profit was primarily attributable to an increase in net revenues from the CVS contract plus a one-time expense reduction of $135,828 associated with a credit issued by a Company vendor. The
vendor credit was for customer service expenses associated with a CVS direct mail campaign incurred during the prior three quarters. The State Farm contract accounted for 9% of the gross profit increase.





Marketing and sales expenses increased to $280,632 for the three months ended September 30, 2002 from $43,424 in the same prior year
period primarily due to additional cards issued under the CVS Pharmacy, Inc. contract signed in December 2000. The additional cards resulted in increased royalty expenses pursuant to the CVS contract.





General and administrative expenses increased to $484,640 for the three months ended September 30, 2002 from $229,822 in the same prior
year period. The increase of $254,818 was attributable to the following: (a) an increase in compensation expense of $174,000 for additional personnel; (b) an increase of $55,000 for general office expenses including rent, telephone and other office
expenses associated with an increase of additional personnel and (c) an increase of $25,000 related to credit card fees and postage for card administration.




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##### Table of Contents




Interest expense decreased to $2,106 for the three months ended September 30,
2002 from $4,867 for the same prior year quarter. The decrease was attributable to a credit adjustment of $5,528 for interest expense related to the Companys line of credit.





The Company reported a net loss of $322,023 for the three months ended September 30, 2002 compared to a loss of $331,128 for the same prior year period. The decrease of
$9,105 resulted from the increase in gross profits related to the CVS and State Farm contracts that were nearly offset by the increase in marketing and sales, and general administrative expenses as discussed above.





Year Ended September 30, 2002 Compared to Year Ended September 30, 2001





Net revenues for the company increased $1,360,061 to $1,384,830 for the year ending September 30, 2002 from $24,769 for the same prior year period. The increase was
primarily the result of an increase of membership cards related to the CVS contract. In addition to the CVS revenue increase, State Farm Mutual Automobile Insurance Company signed a three-year contract in April 2002 that accounted for approximately
24% of the increase. The State Farm contract is expected to be fully implemented during the first half of calendar year 2003.





Gross profit increased $465,355 to $361,038 for the year ended 2002 from a loss of $104,317 for the same prior year. The increase in gross profit was primarily attributable to an increase in net revenues from the CVS contract.





Marketing and sales expenses increased $527,054 to $623,340 for the year ending September 30, 2002 from $96,286
for the year ending September 30, 2001 primarily as a result of additional cards outstanding under the CVS contract. The additional revenues resulted in higher royalty expense related to the CVS contract.





General and administrative expenses increased to $1,350,575 for the year ending September 30, 2002 from $752,625 in the prior year. The
increase of $597,950 is attributable to the following: (a) an increase in compensation expense of approximately $441,000 for additional personnel; (b) an increase of approximately $83,000 related to credit card fees and postage for card
administration; (c) an increase of $74,000 for general office expenses including rent, telephone and other office expenses associated with personnel additions and the relocation of the Company to larger office space.





Miscellaneous income decreased $5,156 for the year ending September 30, 2002 as a result of a decline in consulting fees that were
received for certain Company personnel who performed services for an affiliated Company for the year ending September 30, 2001 (see Related Transactions). Interest expense decreased $10,590 for the year ending September 30, 2002 to
$19,934 as a result of a lower average outstanding principal balance on the Companys line of credit for October 2001 through July 2002.





The Company reported a net loss of $1,632,811 in 2002 compared to a net loss of $978,596 for the prior year. The increase in the net loss is principally a result of the increase in general and
administrative expenses of $597,950 related to the abovementioned additional personnel and card administration expenses incurred to continue to develop the infrastructure of the Company to support expected growth.





Liquidity and Capital Resources





The Companys operations provided cash of $53,050 for the year ended September 30, 2002 primarily as a result of the increase in deferred revenue of $1,640,846 related to an increase of outstanding cards related to the
CVS contract. Approximately 70% of CVS card members pay their memberships annually when enrolling in the program. The Company recognizes annual membership revenues over the applicable twelve-month term of the membership period. The Companys
net working capital decreased $983,392 to $(1,261,238) during the 12 months ended September 30, 2002 from $(277,846) at September 30, 2001. The decrease in working capital was caused by the abovementioned increase in deferred revenue plus an
increase in notes payable of $349,172. The notes payable increase consist of $179,172 in the Companys line of credit usage and the issuance of the promissory note for $170,000 on September 30, 2002 to a Company vendor.





The Companys investing activities during the year ended September 30, 2002 used cash of $27,251 for capital expenditures for
computers and equipment for card administration and the increase in additional personnel.




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##### Table of Contents




The Companys financing activities during the year ended September 30, 2002
provided cash of $974,515 primarily from the sale of unregistered securities of $635,615, an increase of $179,172 in the Companys line of credit usage and the issuance on September 30, 2002 of a promissory note for $170,000. The promissory
note is related to expenses incurred for a direct mail campaign for the CVS contract. As of September 30, 2002, the Company had sold a total of 346,378 Units of its securities at $4.50 per Unit with aggregate proceeds equaling $1,558,703 from such
sales. Each Unit was comprised of three shares of the Companys Common Stock and one warrant to purchase an additional share of Common Stock for $1.50. The Company has issued a total of 1,039,134 shares of Common Stock and 346,378 warrants to
65 shareholders pursuant to the exemption set forth in Regulation D, Rule 506. The Company completed the Offering on September 25, 2002.





On October 22, 2002 the Company extended its credit agreement with SunTrust Bank in Atlanta, Georgia. The agreement provides the Company with a $500,000 working capital facility secured by personal guaranties from certain
officers and directors of the Company in exchange for common stock options. The credit agreement matures on April 22, 2003 and bears an interest rate of 5.25% per annum. The Company began interest only payments on June 17, 2000. A final payment of
the unpaid principal balance plus accrued interest is due and payable on April 22, 2003. The Company has $15,528 available on its credit agreement as of September 30, 2002. The working capital facility is being used to continue to provide on-going
capital to fund the implementation of the contracts with State Farm and Bankers Fidelity and general corporate operations.





The Companys future liquidity and capital requirements will depend upon numerous factors, including the success of its product offerings and competing market developments. The Company has not yet achieved, and may never
achieve, profitable operations. In December 2000, the Company signed a ten-year contract with CVS Pharmacy, Inc., a major retail chain consisting of approximately 4,100 locations that sell a version of the Companys Gold Card at its pharmacy
counters to individuals who lack pharmacy and/or other health benefits. The Company executed a three-year contract with State Farm Mutual Automobile Insurance Company in April 2002 with implementation beginning in July 2002 and completion expected
during the first half of calendar year 2003. The Company executed a five-year contract with Bankers Fidelity Life Insurance Company in July 2002 with implementation beginning in September 2002 with completion also expected during the first half of
calendar year 2003. The Company intends to fund its ongoing development and operations through a combination of sales through these three existing contracts and potential new contracts. If the Company fails to successfully develop a market through
the healthcare provider, institutional and retail distribution models, the Company may not be able to successfully implement its business plan to the fullest extent during the next twelve months.





The Company expects to be profitable in its third fiscal quarter of 2003 if its pipeline business closes and comes on stream on the dates
anticipated and at the expected implementation costs. Alliance is still an emerging company and very sensitive to the timing of new business implementations and staying within their implementation budgets, especially accounts bringing a large number
of new cardholders such as State Farm. Similarly, this outlook anticipates the timely and successful implementation of the Companys new product for workers compensation funds.





IMPACT OF INFLATION





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





QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK





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




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##### Table of Contents




ITEM 7.    
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The following financial statements
are filed with this report:





Reports of Independent Auditors





Balance Sheets as of September 30, 2002 and 2001





Statements of Operations for the year ended September 30, 2002 and 2001





Statements of
Stockholders Equity for the year ending September 30, 2002 and 2001





Statements of Cash Flows for the year
ended September 30, 2002 and 2001





Notes to Financial Statements




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##### Table of Contents

Report of Independent Accountants





The Board of Directors and Stockholders


Alliance HealthCard, Inc.





We have audited the accompanying balance sheets of Alliance HealthCard, Inc. as of September 30, 2002 and 2001, and the related statements of operations, stockholders equity and cash flows for the years then ended.
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.





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





In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alliance HealthCard, Inc. as of September 30, 2002 and 2001,
and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.





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





Miller Ray & Houser, LLP





Atlanta, Georgia


November 5, 2002




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##### Table of Contents




Alliance HealthCard, Inc.


Balance Sheets





September 30,2002




2001AssetsCurrent assets:Cash and cash equivalents

$
1,175,945




$
175,631Accounts receivable, net


908,259





59,985Prepaid expenses and other current assets


536,830





19,475Total current assets


2,621,034





255,091Furniture and equipment, net


38,778





32,875Other assets


10,249





Total assets

$
2,670,061




$
287,966Liabilities and stockholders equityCurrent liabilities:Accounts payable

$
1,305,228




$
54,863Accrued salaries and benefits


115,153





36,342Deferred revenue


1,678,870





Other accrued liabilities


117,656





125,311Notes payable


654,172





305,000Current portion of capital lease obligations


11,193





11,421Total current liabilities


3,882,272





532,937Capital lease obligation


4,250





14,294CommitmentsStockholders equity:Common stock, $.001 par value; 100,000,000 shares authorized; 4,428,896 shares issued and outstanding at September 30,
2002 and 3,945,919 shares issued and outstanding at September 30, 2001


2,227





1,747Additional paid-in-capital


2,792,907





2,117,772Accumulated deficit


(4,011,595
)




(2,378,784
)Total stockholders equity


(1,216,461
)




(259,265
)Total liabilities and stockholders equity

$
2,670,061




$
287,966





See accompanying notes.




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##### Table of Contents




Alliance HealthCard, Inc.


Statements of Operations


Twelve Months Ending September
30,2002


2001Net revenues

$
1,384,830


$
24,769Direct costs


1,023,792



129,086Gross profit


361,038



(104,317
)Marketing and sales expenses


623,340



96,286General and administrative expenses


1,350,575



752,625Operating loss


(1,612,877
)


(953,228
)Other income (expense):Other






5,156Interest, net


(19,934
)


(30,524
)(19,934
)


(25,368
)Net loss

$
(1,632,811
)

$
(978,596
)Per share data:Basic loss

$
(0.39
)

$
(0.27
)Diluted loss

$
(0.39
)

$
(0.27
)Basic and diluted weighted average shares outstanding


4,179,405



3,681,421





See accompanying notes.




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##### Table of Contents




Alliance HealthCard, Inc.


Statements of Stockholders Equity





Common Stock


Additional Paid-In Capital


Deficit Accumulated


Total Stockholders EquityShares


AmountBalance at September 30, 2000

3,299,400


$
1,100


$
1,041,010


$
(1,400,188
)

$
(358,078
)Sale of stock ($1.50 per share), net of offering costs

624,499



625



936,121







936,746Stock options and warrants exercised

22,020



22



7,645







7,667Stock options issued on October 1, 2000 ($0.83 per share)









132,996







132,996Net loss













(978,596
)


(978,596
)Balance at September 30, 2001

3,945,919



1,747



2,117,772



(2,378,784
)


(259,265
)Sale of stock ($1.50 per share)

425,687



423



635,026







635,449Stock options and warrants exercised

20,290



20



4,646







4,666Stock purchased 10/15/01

(3,000
)


(3
)


(4,497
)






(4,500
)Stock issued 09/12/02

40,000



40



39,960







40,000Net loss













(1,632,811
)


(1,632,811
)Balance at September 30, 2002

4,428,896


$
2,227


$
2,792,907


$
(4,011,595
)

$
(1,216,461
)





See accompanying notes.







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##### Table of Contents




Alliance HealthCard, Inc.


Statements of Cash Flows





For The Year EndedSeptember 30,2002




2001Cash flows from operating activitiesNet loss

$
(1,632,811
)



$
(978,596
)Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization


21,348





15,467Stock issued in connection with employment services


40,000





Change in operating assets and liabilities:Accounts receivable


(848,274
)




(56,486
)Prepaid expenses


(517,355
)




(12,080
)Deposits


(10,249
)




4,637Accounts payable


1,250,365





45,639Accrued wages


78,811





(71,422
)Other accrued expenses


1,671,215





97,929Net cash provided by (used in) operating activities


53,050





(954,912
)Cash flows from investing activitiesPurchase of equipment


(27,251
)




(16,435
)Net cash used in investing activities


(27,251
)




(16,435
)Cash flows from financing activitiesBorrowings (repayments) from short-term debt


349,172





(45,000
)Sale of stock and other issuances


635,615





1,077,409Repayments of capital lease obligations


(10,272
)




(622
)Net cash provided by financing activities


974,515





1,031,787Net increase in cash


1,000,314





60,440Cash at beginning of period


175,631





115,191Cash at end of period

$
1,175,945




$
175,631





See accompanying notes.




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##### Table of Contents

Alliance HealthCard, Inc.





Notes to Financial Statements





September 30, 2002 and 2001





1.    Description of the Business





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





2.    Summary of Significant Accounting Policies





Use of Estimates





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





Cash and Cash Equivalents





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





Furniture and Equipment





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





Stock Options





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





Income Taxes





Prior to February 1999, the Company was a limited liability corporation and therefore, the owners assumed responsibility for the
income taxes of the Company. Effective February 1999, the Company has changed its tax status to a C Corporation. The Company has since adopted FASB Statement No. 109, Accounting for Income Taxes, which requires, among other things, a
liability approach to calculating deferred income taxes. The objective is to measure a deferred income tax liability or asset using the tax rates expected to apply to taxable income in the periods in which the deferred income tax liability or asset
is expected to be settled or realized. Any resulting net deferred income tax assets should be reduced by a valuation allowance sufficient to reduce such assets to the amount that is more likely than not to be realized.




20




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##### Table of Contents

Alliance HealthCard, Inc.





Notes to Financial Statements, Continued





Accounts Receivable





Accounts receivables are recorded net of an allowance for doubtful accounts established to provide for losses on un-collectible accounts based on
managements estimates and historical collection experience. The provision for doubtful accounts was $391 for the years ended September 30, 2002 and 2001. The bad debt expense was $0 and $759 for years ended September 30, 2002 and 2001,
respectively.





Revenue Recognition





In general, members subscribe for renewable one-year memberships in the Companys programs. Membership fees are generally paid to the Company on a monthly or annual basis. For those members paying monthly, the
membership fees are recognized on a monthly basis. Membership fees paid in advance on an annual basis are recognized monthly over the applicable twelve-month membership term.





Implementation Expense Recognition





Contracts with insurance companies or large
employers often generate substantial implementation expense. For total contract implementation costs in excess of $5,000, the Company records that expense over the first twelve-month term of the contract. Costs less than $5,000 are expensed as
incurred such as in the healthcare provider model. If the contract provides for payments to offset implementation costs, the aggregate amount of such payments is also recognized over the first twelve-month term of the contract.





Fair Values of Financial Instruments





Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Companys financial instruments.





The carrying amounts of cash, accounts
receivables, other current assets, accounts payable, accrued expenses and current portion and non-current portion of notes payable approximate fair value because of the short maturity of those instruments.





3.    Going Concern and Managements Plan





The Companys future profitability, liquidity and capital requirements will depend upon numerous factors, including the success of its product offerings and competing market developments. The Company has not yet
achieved, and may never achieve, profitable operations. In December 2000, the Company signed a five-year contract with CVS Pharmacy, Inc., a major retain chain consisting of approximately 4,100 locations that sell a version of the Companys
Gold Card at their pharmacy counters to individuals who lack pharmacy and/or other health benefits. The Company executed a three-year contract with State Farm Mutual Automobile Insurance Company in April 2002 with implementation beginning in July
2002 and completion expected during the first half of calendar year 2003. The Company executed a five-year contract with Bankers Fidelity with completion also expected during the first half of calendar year 2003. The Company intends to fund its
ongoing development and operations through a combination of sales through these three existing contracts and potential new contracts.





The Company expects to be profitable in its third fiscal quarter of 2003 if its pipeline business closes and comes on stream on the dates anticipated and at the expected implementation costs. Alliance is still an emerging company and
very sensitive to the timing of new business implementations and staying on their implementation




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##### Table of Contents

Alliance HealthCard, Inc.





Notes to Financial Statements, Continued





3.    Going Concern and Managements Plan
(Continued)





budgets, especially accounts bringing a large number of new cardholders such as State Farm. Similarly, this outlook
anticipates the timely and successful implementation of the Companys new product for workers compensation funds. Management has prepared a contingency plan to address the impact of delayed or more costly new product and/or contract
implementations if such events were to occur.





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





4.    Short Term Debt





On May 17, 2000 the Company entered
into a credit agreement with SunTrust Bank in Atlanta, Georgia. The agreement provides the Company with a $500,000 working capital facility secured by personal guaranties from certain officers and directors of the Company in exchange for common
stock options and warrants. The credit agreement has been extended to April 22, 2003 and bears an interest rate of 5.25% per annum. Interest only payments began on June 17, 2000 and have continued at monthly time intervals thereafter. A final
payment of the unpaid principal balance plus accrued interest is due and payable on April 22, 2003. The Company has $15,528 available under its credit agreement as of September 30, 2002. The Company executed a promissory note with a vendor on
September 30, 2002 for $170,000. The promissory note, related to expenses incurred for a direct mail campaign for the CVS Pharmacy, Inc. contract, is payable in twelve monthly installments of $14,788 beginning on November 1, 2002 and concluding on
October 1, 2003 and bears an interest rate of 8%.





5.    Furniture and Equipment





Furniture and equipment consists of the following at September 30, 2002 and 2001:





September 30,2002


2001Furniture

$
12,023


$
7,023Equipment


40,449



10,291Equipment under capital leases


32,226



40,13384,698



57,447Less: accumulated depreciation and amortization


(45,920
)


(24,572
)$
38,778


$
32,875





6.    Stockholders Equity





The Company issued an Offering Memorandum on December 15, 2000, pursuant to the exemption set forth in Regulation D, Rule 506, for the sale of 333,333 Units of
its securities at a price of $4.50 per Unit, with each Unit being comprised of three shares of Common Stock, $.001 par value plus one Warrant to purchase one share of Common Stock at $1.50 per share. The Offering terminated on September 25, 2002. As
of September 30, 2002, the Company had sold a total of 346,378 Units of its Common Stock at $4.50 per Unit for an aggregate amount of $1,558,703.




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##### Table of Contents

Alliance HealthCard, Inc.





Notes to Financial Statements, Continued





6.    Stockholders Equity (Continued)





The Company granted certain officers options to purchase 450,000 shares of Common Stock at $0.83 per share with immediate vesting in
lieu of salary compensation for the year ended September 30, 2001. The Company has recognized approximately $73,000 of salary expense in connection with these options for the year ending September 30, 2001. The Company has also recognized salary
expense of $40,000 for the year ended September 30, 2002 paid to an employee, other than an officer, in the form of Common Stock. The Company granted certain officers and board members options to purchase 300,000 shares of Common Stock at $1.50 per
share in return for their personal guaranties on the Companys line of credit for the year ending 2002. (See Liquidity and Capital Resources.)





7.    Stock Options





In conjunction with certain employment and consulting
agreements, the Company granted stock options relating to 60,000 shares of Common Stock for the year ending September 30, 2002 and 863,167 shares of Common Stock for the year ending September 30, 2001. The Company granted certain board members stock
options relating to 350,000 shares of Common Stock during the year ended September 30, 2002. The Company has reserved 1,200,000 shares of the Common Stock in connection with the stock option plan and 856,691 warrants related to the line of credit
guarantee for SunTrust Bank and the Offering Memorandum dated December 15, 2000. The vesting schedules relating to these options granted range from immediate vesting to a three-year vesting period.





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





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





The fair value of each option is estimated on the date of grant using the Black-Scholes method with the following weighted average assumptions used for grants
for the years ending September 30, 2002 and September 30, 2001.





September 30,2002


2001Expected volatility

.01


.01Dividend yield

0
%

0
%Risk free interest rate

1.5
%

6
%Expected lives

5 Years


5 Years





For purposes of fair value disclosures, the estimated fair values of the options are
amortized to expense over the options vesting periods. The Companys pro forma net loss for the year ending September 30, 2002 and for the year ending September 30, 2001, as determined using the fair value method of accounting of
Statement 123, was $1,642,592 and $941,168 respectively.




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##### Table of Contents




Alliance HealthCard, Inc.





Notes to Financial Statements, Continued





7.    Stock Options (Continued)





Information regarding the options is as follows:





Weighted Average Exercise Price

Options Outstanding


Options ExercisableBalance, September 30, 2000

.71

302,400


181,500Granted

.83

658,000


Forfeited

.83

(45,000
)

Became Exercisable

.92




493,340Balance, September 30, 2001

.79

915,400


674,840Granted

1.48

360,000Forfeited






Became exercisable

.98




463,520Balance, September 30, 2002



1,275,400


1,138,360





The aggregate fair value of options granted for the year ending September 30, 2002 and for
the year ending September 30, 2001 was $218,113 and $180,547 respectively. The following table summarizes information about stock options outstanding at September 30, 2002.





September 30,2002

2001Range of exercise price

$0.23-$1.50

$0.23-$0.83Number outstanding

1,272,400

915,400Weighted average remaining contractual life

8.2 Years

8.6 YearsWeighted average exercise price

$           0.97

$           0.71





During the year ending September 30, 2002, there were no options exercised during this
period.




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##### Table of Contents




Alliance HealthCard, Inc.





Notes to Financial Statements, Continued





8.    Income Taxes





Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial reporting and tax purposes in different periods and the estimated future tax effects of carryforwards. Deferred income taxes are classified as current or noncurrent, depending on the classification of
the assets and liabilities to which they relate. The Company has established a 100% valuation allowance for its net deferred tax assets due to the uncertainty regarding the realization of these deferred income tax assets, including its net operating
loss carry-forwards.





September 30,2002


2001Deferred tax assets:Net operating loss carry forwards

$ 880,702


$ 1,011,871Other

2,707


3,171Gross deferred tax asset

883,409


1,015,042Less valuation allowance

(883,409
)

(1,015,042
)Net deferred tax assets

$          


$              





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





September 30,2002


2001DeferredFederal

$   750,898


$     879,703State

132,511


135,339Total income tax benefit

883,409


1,015,042Less valuation allowance

(883,409
)

(1,015,042
)$           


$              





The Company has unused net operating loss carry forwards available to offset future
taxable income as follows:





Expires
2019

$501,568Expires
2020

$825,874Expires
2021

$984,860







25




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Alliance HealthCard, Inc.





Notes to Financial Statements, Continued





9.    Related Party Transactions





The Company performed consulting services for an affiliated
company and recorded other income of $5,156 for the year ending September 30, 2001. The Company subleases its office space from an affiliated company. The Companys office consists of approximately 5,800 square feet of space subleased from
NovaNet, Inc. a company partially owned by Robert D. Garces, the Chairman of the Board of the Company. The Company expensed approximately $75,857 and $39,856 for the years ending September 30, 2002 and September 30, 2001 respectively. The sublease
was executed on April 1, 2002 and terminates on April 30, 2004 at approximately $8,910 per month through February 28, 2003 and increases to $9,703 per month for the period from March 1, 2003 through April 30, 2004. The sublease includes the use of
reception, office furniture, copying and other office equipment. The Company has also paid deposits of $9,692 for this sublease to NovaNet. While the sublease was not negotiated at arms-length, the terms of the sublease include lease rental rates
equal to those in the primary lease. The Company believes the terms of the sublease are comparable to what it would pay for such space on the open market.





Accounts receivable includes $18,475 and $2,981 from NovaNet, Inc. for expenses paid on their behalf for the years ended September 30, 2002 and 2001 respectively.





The Company expensed approximately $9,075 and $24,450 for the years ending September 30, 2002 and September 30, 2001 respectively relating to printing, graphic design, and recruiting
services provided by two companies related indirectly through common ownership.





10.  Equipment Leases





The Company leases certain equipment under capital leases and non-cancelable operating lease agreements that expire on various dates through 2005. At
September 30, 2002 and 2001, minimum annual rental commitments under capital leases and non-cancelable operating leases with terms in excess of one year are as follows:





September 30,2002

2001Capital Leases

Operating Leases

Capital Leases

Operating Leases2001

$


$


$


$
5392002








14,091


2003


12,529





11,904


2004


4,295





2,824


2005


179








Total minimum lease payments


17,003

$



28,819

$
539Less: amounts representing interest


1,560





3,934Present value of net minimum lease payments

$
15,443




$
24,885




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##### Table of Contents

Alliance HealthCard, Inc.





Notes to Financial Statements, Continued





10.  Equipment Leases (Continued)





Assets acquired under non-cancelable capital leases consist of computer equipment with an aggregate cost of $32,226 at September 30, 2002 and $40,133
at September 30, 2001 and accumulated amortization of $16,783 and $18,488 at September 30, 2002 and September 30, 2001, respectively. Amortization of leased assets is included in depreciation expense.





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





11.  Supplemental Cash Flows Information





The following
information supplements the statements of cash flows:





2002

2001Cash paid for interest

$16,110

$34,739





12.  Concentration of Credit Risk Arising





The Company uses financial institutions in which it maintains cash balances, which at times may exceed federally insured limits. The Company has not experienced
any losses in such accounts and management believes it is not exposed to any significant credit risk on cash. The Companys uninsured cash balance totaled $1,157,844 and $77,013 at September 30, 2002 and 2001, respectively.





Concentration of credit risk with respect to accounts receivable and revenue is due to a high volume of business conducted with one customer.
Approximately $870,334 (96%) and $55,662 (93%) of total accounts receivable was due from one customer as of September 30, 2002 and 2001, respectively. Approximately $1,047,125 (76%) and $11,133 (45%) of total sales were generated from the same
customer for the years ending September 30, 2002 and 2001, respectively. Another customer generated revenue of approximately $322,649 (23%) and 0% respectively, for the years ending September 30, 2002 and 2001.





Approximately $1,038,675 (80%) and $36,986 (81%) of the total accounts payable relate to the party from which more than 90% of the Companys accounts
receivable were due for the years ended September 30, 2002 and 2001, respectively.




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

|
|

None.





PART III.





|ITEM 9. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|------- |  | --------------------------------------------------




Executive Officers and Directors





The executive officers and directors of the Company, and their respective ages as of September 30, 2002, are
as follows:





Name

Age

Position

TermRobert D. Garces

53

Chairman of the Board of Directors and Chief Executive
Officer

One YearThomas W. Kiser

39

Director and President

One YearRobert R. Goodyear

55

Chief Operating Officer andSecretary/Treasurer

One YearRita W. McKeown

49

Chief Financial Officer

One YearHoward C. Chandler, Jr. M.D.

41

Director

One YearLarry G. Gerdes

53

Director

One YearWilliam Wallace, M.D.

48

Director

One YearRichard M. Jackson

48

Director

One Year




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##### Table of Contents




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





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





Thomas W. Kiser, Director and President





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





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





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





Rita W. McKeown, Chief Financial Officer





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




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





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





|Larry |  | G. Gerdes, Director
|----- |  | -------------------




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





|William |  | Wallace, M.D., Director
|------- |  | -----------------------




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





Richard M. Jackson, Director





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




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##### Table of Contents




ITEM 10.    
EXECUTIVE COMPENSATION





The following table sets forth the cash and non-cash
compensation paid by the Company to its Chief Executive Officer and all other executive officers for services rendered during the fiscal year ended September 30, 2002.





---

SUMMARY COMPENSATION TABLE


---

Long Term CompensationAnnual Compensation

Awards

PayoutsName and Principle Position

Year

Salary ($)

Bonus ($)

Other Annual Compensation ($)

Restricted Stock Award(s) ($)

Securities Underlying Options/SARs (#)

LTIP Payouts ($)

All Other Compensation ($)Robert Garces, Chairman & Chief Executive Officer

2002 2001

71,537 22,268

 

 

 

60,000 225,000

 

 Thomas Kiser, Director & President

2002 2001

77,691 27,462

 

 

 

60,000 225,000

 

 Robert Goodyear, Chief Operating Officer & Secretary/Treasurer

2002 2001

100,000 98,650

 

 

 

 90,000

 

 Rita McKeown, Chief Financial Officer

2002 2001

69,992 67,090

 

 

 

 6,000


 

 





Options/SAR Grants in Last Fiscal Year





The following table sets forth information regarding individual grants of options and warrants to purchase Alliance HealthCard
Common Stock during the twelve months ended September 30, 2002 to each of the Named Executive Officers. All stock option grants were made pursuant to the Alliance HealthCard, Inc. 1999 Stock Option Plan. The compensation committee of the Board of
Directors approved all stock option grants during 2002.





Name

Number of Securities Underlying Options/SARs Granted (#) (1)


% of Total Options/SARs Granted to Employees in Fiscal Year (2)

Exercise or Base Price ($/Share)

Expiration DateRobert Garces (3)

60,000

17%

$1.50

October 1, 2012Thomas Kiser (4)

60,000

17%

$1.50

October 1, 2012


---

|(1) |  | Stock options are granted with an exercise price equal to the fair market value of the Alliance HealthCard Common Stock on date of grant.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Alliance HealthCard granted options and warrants to purchase an aggregate of 360,000 shares to all directors, officers and employees in the twelve months ended
September 30, 2002.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Mr. Garces was granted 60,000 options on May 14, 2002. These options are fully vested.
|--- |  | --------------------------------------------------------------------------------------

|(4) |  | Mr. Kiser was granted 60,000 options on May 14, 2002. These options are fully vested.
|--- |  | -------------------------------------------------------------------------------------




Compensation of Directors





The Companys
Directors do not receive any compensation for their services on the Board of Directors or any committee thereof, but are reimbursed for expenses incurred in connection with their attendance at Board or




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##### Table of Contents

committee meetings. However, non-employee directors have received options to purchase shares of Common Stock pursuant to the 1999 Stock Option
Plan. See  Stock Plans.





ITEM 11.    
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The following table
sets forth, as of September 30, 2002, certain information regarding the shares of the Companys outstanding Common Stock beneficially owned by each person who is known by the Company to own beneficially or exercise voting or dispositive control
over more than 5% of the Companys Common Stock and (ii) by each of the Companys officers and directors. (1)





Shares of Common Stock Beneficially Owned (1)

% of OwnershipRobert D. Garces (2)

1,104,800

22.7%3500 Parkway LaneSuite 720Norcross, Georgia 30092Thomas W. Kiser

1,069,050

22.0%3500 Parkway LaneSuite 720Norcross, Georgia 30092Robert R. Goodyear

138,000

3.0%3500 Parkway LaneSuite 720Norcross, Georgia 30092Rita W. McKeown

20,380

0.5%3500 Parkway LaneSuite 720Norcross, Georgia 30092Howard C. Chandler, Jr. (3)

641,600

13.8%Larry G. Gerdes (4)

295,553

6.5%Richard Jackson (5)

208,224

4.6%William Wallace

50,000

1.1%All directors and officers as a group

3,527,607

59.1%


---

|(1) |  | Beneficially Owned includes shares for which an individual, directly or indirectly, has or shares voting or investment power or both and also
includes shares of Common Stock underlying options and warrants to purchase Common Stock which are exercisable within sixty days of the date hereof. Beneficial ownership as reported in the above table has been determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934. The percentages are based upon 4,428,896 shares outstanding as of September 30, 2002. Unless otherwise indicated, each person has sole voting and dispositive power with respect to all shares listed
opposite his name.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes 1,200 shares held by Mr. Garces minor children and 1,050 shares held by Mr. Garces spouse.
|--- |  | -----------------------------------------------------------------------------------------------------



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|(3) |  | Includes 3,600 shares held by Mr. Chandlers minor children and 192,000 shares held by Mr. Chandlers spouse.
|--- |  | -------------------------------------------------------------------------------------------------------------

|(4) |  | 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 Mr.
Gerdes is a general partner.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Includes 76,668 shares held by Jackson Investment Group of which Mr. Jackson is a general partner.
|--- |  | --------------------------------------------------------------------------------------------------




ITEM 12.    
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





Management Relationships





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





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





Related Transactions





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




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##### Table of Contents




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





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





1.    Financial Statements





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





Reports of Independent Auditors.





Balance Sheets as of September 30, 2002 and 2001





Statements of Operations for the year ended September 30, 2002 and 2001





Statements of Stockholders Equity for the year ended September 30, 2002 and 2001





Statements of Cash Flows for the year ended September 30, 2002 and 2001





Notes to Financial Statements





Financial Statement Schedules are not required





(b)    Reports on Form 8-K.





The Company did not file any reports on Form 8-K
during the year ended September 30, 2002.





(c)    Exhibits





Exhibit 99.1Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





Exhibit 99.2Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002




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##### Table of Contents




SIGNATURES





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





Alliance HealthCard, Inc.January 9, 2003

By:
/S/    ROBERT D. GARCESRobert D. GarcesChairman and Chief Executive Officer(Principal Executive Officer)January 9, 2003

By:
/S/    RITA MCKEOWNRita McKeownChief Financial Officer(Principal Financial and Accounting Officer)




35