##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission File Number: 000-50348
 NATIONSHEALTH, INC.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    06-1688360
(I.R.S. Employer Identification No.)13630 NW 8thStreet, Suite 210, Sunrise, FL
(Address of principal executive offices)
    
    33325
(Zip Code)
 (954) 903-5000
  (Title of each class) 
Common Stock, $0.0001 par value per share
    
    (Name of each exchange on which registered)
Over-the-Counter Bulletin Board
  
 Yes o No þ
 Yes o No þ
 o þ
 o o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
   Documents Incorporated By Reference




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##### 



NATIONSHEALTH, INC.
 FORM 10-K
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
 INDEX
 PagePART IItem 1 Business
    
    
    1Item 1A Risk Factors
    
    
    5Item 2 Properties
    
    
    15Item 3 Legal Proceedings
    
    
    15Item 4 Submission of Matters to a Vote of Security Holders
    
    
    15PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    16Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 8 Financial Statements and Supplementary Data
    
    
    36Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    68Item 9A(T) Controls and Procedures
    
    
    68Item 9B Other Information
    
    
    69PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    70Item 11 Executive Compensation
    
    
    75Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    81Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    83Item 14 Principal Accountant Fees and Services
    
    
    88PART IVItem 15 Exhibits, Financial Statement Schedules
    
    
    90SIGNATURES
    
    
    91Exhibit 10.71Exhibit 10.72Exhibit 10.73Exhibit 10.74Exhibit 10.75Exhibit 10.76Exhibit 10.77Exhibit 10.78Exhibit 21Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1




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PART I
 
 Item 1. Business.
 Business
   Merger Agreement
  Medical Products Segment
    1




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Insurance Services Segment
     2




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Patient Service Organization
   Competition
   
    
    other durable medical equipment providers;
 
    
    retail pharmacies;
 
    
    healthcare product distributors;
 
    
    pharmacy benefit management companies and prescription drug plans with in-house
pharmacies; and
 
    
    other companies that provide customer enrollment and services to prescription drug
plans.
  3




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Government Regulation
 General
   Medicare
   HIPAA
   4




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Pharmacy Regulations
  Seasonality
  Employees
  Website
 www.nationshealth.com
 
 Item 1A. Risk Factors.
 Risks Related to Our Business
 Our debt agreements impose restrictions on us that may adversely affect our ability to operate our
business.
   5




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We could experience significantly reduced revenues and earnings if Medicare changes, delays,
reduces or denies reimbursement.
   6




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Competitive bidding for DMEPOS and supplies may reduce our revenues and earnings.
   The results of our Insurance Services segment are heavily dependent on revenue derived under our
agreement with CIGNA.
   7




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If we do not have sufficient capital to fund additional advertising and/or acquisitions, our
ability to grow our business will be substantially diminished
  If we are unable to grow our business and manage growth successfully, we may not achieve
profitability.
   8




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The profitability of our Medical Products business will decrease if we do not receive recurring
orders from patients.
  We could experience significantly reduced revenues and profit from sales of diabetes products if
improved technologies developed for glucose monitoring eliminate the need for consumable testing
supplies.
  Due to our size and limited operating history, we depend substantially on certain key personnel.
  Certain executive officers have rights under employment agreements that could require us to make
substantial payments to them.
   9




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If any of our information technology platforms malfunction, our business and profitability may be
seriously harmed.
  We may have difficulties in achieving volume-based discounts or finding replacement supplies if we
lose any agreement with our suppliers of medical products.
  Risks Related to Our Industry
 If we do not comply with applicable government regulations, we may be prohibited from selling our
products and could experience significantly reduced revenues and profit.
    10




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The cost of efforts to comply with HIPAA regulations and the possible consequence of non-compliance
could adversely affect our operations and profit significantly.
   Our accounts receivable are subject to significant collection risk due to third-party payors.
   11




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Our business could suffer from rising insurance costs, the unavailability of insurance or other
events.
    Risks Related to Owning Our Equity Securities
 Future sales of our common stock may depress our stock price.
   12




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Voting control by our executive officers, directors and other affiliates may limit your ability to
influence the outcome of director elections and other matters requiring stockholder approval.
  If we fail to maintain an effective system of internal control in the future, we may not be able to
accurately report our financial results or prevent fraud. As a result, investors may lose
confidence in our financial reporting.
  Compliance with changing regulations relating to corporate governance and public disclosure may
result in additional expenses.
  Our common stock may continue to have a volatile public trading price and low trading volume.
   13




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
    
    Public announcements by us, our competitors or others
 
    
    Regulatory developments concerning the availability of reimbursement pursuant to
Medicare
 
    
    Public concern about the safety or efficacy of pharmaceuticals
 
    
    General market conditions and comments by securities analysts
 
    
    Quarterly fluctuations in our revenues and financial results
 
    
    Low trading volume associated with the number of shares that are publicly traded
 Trading on the OTC Bulletin Board may make it more difficult for investors to sell shares, may
potentially lead to future market declines.
  Anti-takeover provisions in our governing documents and under Delaware law may make an acquisition
of us more difficult.
      14




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Item 2. Properties.
  
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
   15




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
 Market Information
  Common Stock
    
    
    Warrants
    
    
    UnitsHigh
    
    
    Low
    
    
    High
    
    
    Low
    
    
    High
    
    
    LowYear Ended December
31, 2007First quarter
    
    $
    1.93
    
    
    $
    1.33
    
    
    $
    0.14
    
    
    $
    0.04
    
    
    $
    3.00
    
    
    $
    1.25Second quarter
    
    $
    1.69
    
    
    $
    1.28
    
    
    $
    0.10
    
    
    $
    0.02
    
    
    $
    3.00
    
    
    $
    1.01Third quarter
    
    $
    1.59
    
    
    $
    0.68
    
    
    $
    0.14
    
    
    $
    0.01
    
    
    $
    2.10
    
    
    $
    0.75Fourth quarter
    
    $
    0.74
    
    
    $
    0.29
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aYear Ended December
31, 2008First quarter
    
    $
    0.46
    
    
    $
    0.13
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aSecond quarter
    
    $
    0.40
    
    
    $
    0.16
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aThird quarter
    
    $
    0.23
    
    
    $
    0.12
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aFourth quarter
    
    $
    0.18
    
    
    $
    0.02
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
  Holders of Record
  Dividends
   16




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Securities Authorized for Issuance Under Equity Compensation Plans
  Weighted-average
    
    
    Number of securities remainingNumber of securities to
    
    
    exercise price of
    
    
    available for future issuance underbe issued upon exercise
    
    
    outstanding
    
    
    equity compensation plansof outstanding options,
    
    
    options, warrants
    
    
    (excluding securities reflected inwarrants and rights
    
    
    and rights
    
    
    column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    1,830,818
    
    
    $
    3.46
    
    
    
    1,083,239Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,830,818
    
    
    $
    3.46
    
    
    
    1,083,239
 Recent Sales of Unregistered Securities
  Issuer Purchases of Equity Securities
  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
   17




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Medical Products Segment
 Diabetes Supplies
  Pharmacy
  Other Medical Products
     18




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Insurance Services Segment
     19




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Results of Operations
  2008
    
    
    2007
    
    
    2006$
    
    
    %
    
    
    $
    
    
    %
    
    
    $
    
    
    %Net product sales
    
    $
    65,766
    
    
    
    65.5
    %
    
    $
    46,070
    
    
    
    59.4
    %
    
    $
    44,788
    
    
    
    51.4
    %Prescription drug card revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,983
    
    
    
    4.6Service revenue
    
    
    34,610
    
    
    
    34.5
    
    
    
    31,450
    
    
    
    40.6
    
    
    
    38,445
    
    
    
    44.1Total revenue
    
    
    100,376
    
    
    
    100.0
    
    
    
    77,520
    
    
    
    100.0
    
    
    
    87,216
    
    
    
    100.0Cost of product sales
    
    
    37,620
    
    
    
    37.5
    
    
    
    20,866
    
    
    
    26.9
    
    
    
    18,854
    
    
    
    21.6Cost of services
    
    
    13,380
    
    
    
    13.3
    
    
    
    12,221
    
    
    
    15.8
    
    
    
    31,907
    
    
    
    36.6Gross Profit
    
    
    49,376
    
    
    
    49.2
    
    
    
    44,433
    
    
    
    57.3
    
    
    
    36,455
    
    
    
    41.8Operating Expenses:Patient acquisition and related costs
    
    
    2,024
    
    
    
    2.0
    
    
    
    3,731
    
    
    
    4.8
    
    
    
    3,382
    
    
    
    3.9Patient service and fulfillment
    
    
    13,061
    
    
    
    13.0
    
    
    
    9,544
    
    
    
    12.3
    
    
    
    8,286
    
    
    
    9.5General and administrative
    
    
    22,333
    
    
    
    22.2
    
    
    
    24,753
    
    
    
    31.9
    
    
    
    27,940
    
    
    
    32.0Provision for doubtful accounts
    
    
    3,895
    
    
    
    3.9
    
    
    
    1,991
    
    
    
    2.5
    
    
    
    3,625
    
    
    
    4.2Depreciation and amortization
    
    
    5,123
    
    
    
    5.1
    
    
    
    6,419
    
    
    
    8.3
    
    
    
    5,231
    
    
    
    6.0Impairment of investment in joint
venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,292
    
    
    
    1.5Restructuring costs
    
    
    2,310
    
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of business line
    
    
    
    
    
    
    
    
    
    
    (338
    )
    
    
    (0.4
    )
    
    
    (5,000
    )
    
    
    (5.7
    )48,746
    
    
    
    48.6
    
    
    
    46,100
    
    
    
    59.5
    
    
    
    44,756
    
    
    
    51.3Income (Loss) from Operations
    
    
    630
    
    
    
    0.6
    
    
    
    (1,667
    )
    
    
    (2.2
    )
    
    
    (8,301
    )
    
    
    (9.5
    )Other expense, net
    
    
    (5,224
    )
    
    
    (5.2
    )
    
    
    (4,259
    )
    
    
    (5.5
    )
    
    
    (2,977
    )
    
    
    (3.4
    )Net Loss
    
    $
    (4,594
    )
    
    
    (4.6
    %)
    
    $
    (5,926
    )
    
    
    (7.6
    %)
    
    $
    (11,278
    )
    
    
    (12.9
    %)
 2008 Compared to 2007
 Revenue.
  20




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Cost of Product Sales .
 Cost of Services.
 Gross Profit.
 Patient Acquisition and Related Costs.
   21




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Patient Service and Fulfillment .
 General and Administrative .
 Provision for Doubtful Accounts.
 Depreciation and Amortization .
 Restructuring Costs.
 Other Expense, Net.
 Net Loss.
  22




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2007 Compared to 2006
 Revenue.
  Cost of Product Sales .
 Cost of Services.
 Gross Profit.
  23




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Patient Acquisition and Related Costs.
  Patient Service and Fulfillment .
 General and Administrative .
 Provision for Doubtful Accounts.
 Depreciation and Amortization .
  24




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Gain on Sale of Business Line.
 Other Expense, Net.
 Net Loss.
 Liquidity and Capital Resources
     25




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26




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27




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Merger Agreement
    28




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Off-Balance-Sheet Arrangements
  Critical Accounting Policies
   Revenue Recognition and Accounts Receivable
 Medical Product Sales
   29




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Insurance Services
  Allowances for Doubtful Accounts
    30




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Aging of Accounts Receivable as of December 31, 2008< 30
    
    
    31  60
    
    
    61  120
    
    
    > 120Payor
    
    Days
    
    
    Days
    
    
    Days
    
    
    Days
    
    
    TotalMedicare
    
    $
    2,287
    
    
    $
    536
    
    
    $
    798
    
    
    $
    2,649
    
    
    $
    6,270Commercial parties and
Medicaid
    
    
    2,441
    
    
    
    1,092
    
    
    
    1,107
    
    
    
    4,179
    
    
    
    8,819Patients
    
    
    276
    
    
    
    253
    
    
    
    533
    
    
    
    2,746
    
    
    
    3,808Other (1)
    
    
    3,686
    
    
    
    826
    
    
    
    463
    
    
    
    
    
    
    
    4,975Total gross accounts
receivable
    
    $
    8,690
    
    
    $
    2,707
    
    
    $
    2,901
    
    
    $
    9,574
    
    
    
    23,872Less: Allowances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,365Accounts receivable, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    16,507
 (1)
    
    Primarily represents amounts due from CIGNA and other clients of our Insurance Services
segment. Patient Acquisition and Related Costs
 Reporting on Advertising Costs
  31




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Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of Accounting Research Bulletin No. 51
 Determination of the Useful Life of
Intangible Assets Goodwill and Other Intangible Assets
  32




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Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 NASDAQ Delisting
    Important Factors That May Affect Future Operations and Results
   
    
    Expected future operations, revenue, gross margins and expenses
 
    
    Credit facilities and projected cash needs
 
    
    Sales opportunities, strategic relationships and marketing plans
  33




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
    
    Estimates of potential markets for our products and services, including the anticipated
drivers for future growth
 
    
    Assessment of the impact of future accounting pronouncements
   
    
    Restrictions imposed on us under our debt agreements may adversely affect our
ability to operate our business
 
    
    The heavy dependence of our Insurance Services segment on revenue derived under our
agreement with CIGNA.
 
    
    Competitive bidding for durable medical equipment (DME) and supplies
 
    
    Reduction in reimbursement rates by Medicare for DME and supplies
 
    
    Increases in the costs of medical products dispensed
 
    
    Our history of operating losses and the possibility that we will incur significant
additional operating losses
 
    
    Our ability to raise the capital that we will need to sustain our operations
 
    
    Our ability to attract new patients and retain existing patients
 
    
    Identification of, and competition for, growth and expansion opportunities
 
    
    Compliance with, or changes in, government regulation and legislation, or
interpretations thereof, including, but not limited to, pharmacy licensing requirements
and healthcare reform legislation, including HIPAA
 
    
    An inability to establish and maintain successful collaborative relationships could
adversely affect our ability to generate revenue
 
    
    Adverse developments in any investigation related to the pharmaceutical industry
 
    
    Competition and technological change that may make our products and technologies
less attractive or obsolete
 
    
    Our ability to obtain and maintain intellectual property protection for our
technologies
 
    
    Significant fluctuations in our revenue and operating results, which have occurred
in the past and which could continue to fluctuate in the future
  34




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
    
    Any loss or inability to hire and retain qualified personnel
 
    
    Our exposure to product liability in excess of our insurance coverage
 
    
    Any failure to maintain an effective system of internal controls in the future could
adversely affect our ability to accurately report financial results or prevent fraud
 
    
    Compliance with changing regulation of corporate governance and public disclosure
may result in additional expenses
 
    
    Our common stock may continue to have a volatile public trading price and low
trading volume
 
    
    Anti-takeover provisions in our governing documents and under Delaware law may make
an acquisition of us more difficult
   35




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Item 8. Financial Statements and Supplementary Data.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    37Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    38Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    39Consolidated Statements of Stockholders Equity for the years ended December 31, 2008, 2007 and 2006
    
    
    40Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    41Notes to Consolidated Financial Statements
    
    
    42
  36




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Report of Independent Registered Public Accounting Firm
 
    Share-Based Payment
  
  37




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NATIONSHEALTH, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
 December 31,2008
    
    
    2007ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,056
    
    
    $
    1,925Accounts receivable, net of allowances of $7,365 and $7,974,
respectively
    
    
    16,507
    
    
    
    10,993Inventory
    
    
    3,236
    
    
    
    2,557Costs related to billings in process, net
    
    
    1,416
    
    
    
    326Prepaid expenses and other current assets
    
    
    712
    
    
    
    927Total current assets
    
    
    22,927
    
    
    
    16,728Property and equipment, net
    
    
    3,155
    
    
    
    4,666Customer contract intangible, net
    
    
    5,487
    
    
    
    7,755Acquired customer lists, net
    
    
    2,032
    
    
    
    3,090Other intangible assets, net
    
    
    567
    
    
    
    907Goodwill
    
    
    2,375
    
    
    
    1,075Restricted cash
    
    
    1,899
    
    
    
    1,899Other assets, net
    
    
    1,051
    
    
    
    1,360Total assets
    
    $
    39,493
    
    
    $
    37,480LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    5,892
    
    
    $
    6,314Accrued expenses
    
    
    7,168
    
    
    
    4,553Promissory note payable, net
    
    
    
    
    
    
    1,478Current portion of long-term debt
    
    
    2,809
    
    
    
    2,810Current portion of capital lease obligations
    
    
    782
    
    
    
    679Line of credit
    
    
    8,736
    
    
    
    2,500Total current liabilities
    
    
    25,387
    
    
    
    18,334Long-Term Liabilities:Convertible notes, related party, net
    
    
    9,435
    
    
    
    7,715Long-term debt
    
    
    1,171
    
    
    
    3,980Obligations under capital leases
    
    
    638
    
    
    
    1,396Other long-term liabilities
    
    
    1,588
    
    
    
    1,212Total long-term liabilities
    
    
    12,832
    
    
    
    14,303Commitments and ContingenciesStockholders Equity:Preferred stock, $0.0001 par value; 50,000,000 shares authorized;
none issued
    
    
    
    
    
    
    Common stock, $0.0001 par value; 250,000,000 shares authorized;
29,389,731 and 29,408,763 issued and 28,551,805 and 29,318,591
outstanding, respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    75,243
    
    
    
    74,218Accumulated deficit
    
    
    (73,972
    )
    
    
    (69,378
    )Total stockholders equity
    
    
    1,274
    
    
    
    4,843Total liabilities and stockholders equity
    
    $
    39,493
    
    
    $
    37,480
 The accompanying notes are an integral part of these consolidated financial statements.
  38




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NATIONSHEALTH, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenue:Net product sales
    
    $
    65,766
    
    
    $
    46,070
    
    
    $
    44,788Prescription drug card revenue
    
    
    
    
    
    
    
    
    
    
    3,983Service revenue
    
    
    34,610
    
    
    
    31,450
    
    
    
    38,445100,376
    
    
    
    77,520
    
    
    
    87,216Cost of product sales
    
    
    37,620
    
    
    
    20,866
    
    
    
    18,854Cost of services
    
    
    13,380
    
    
    
    12,221
    
    
    
    31,907Gross Profit
    
    
    49,376
    
    
    
    44,433
    
    
    
    36,455Operating Expenses:Patient acquisition and related costs
    
    
    2,024
    
    
    
    3,731
    
    
    
    3,382Patient service and fulfillment
    
    
    13,061
    
    
    
    9,544
    
    
    
    8,286General and administrative
    
    
    22,333
    
    
    
    24,753
    
    
    
    27,940Provision for doubtful accounts
    
    
    3,895
    
    
    
    1,991
    
    
    
    3,625Depreciation and amortization
    
    
    5,123
    
    
    
    6,419
    
    
    
    5,231Impairment of investment in joint venture
    
    
    
    
    
    
    
    
    
    
    1,292Restructuring costs
    
    
    2,310
    
    
    
    
    
    
    
    Gain on sale of business line
    
    
    
    
    
    
    (338
    )
    
    
    (5,000
    )48,746
    
    
    
    46,100
    
    
    
    44,756Income (Loss) from Operations
    
    
    630
    
    
    
    (1,667
    )
    
    
    (8,301
    )Other Income (Expense):Interest income
    
    
    58
    
    
    
    155
    
    
    
    257Interest expense, related party
    
    
    (3,028
    )
    
    
    (2,708
    )
    
    
    (2,448
    )Interest expense
    
    
    (2,254
    )
    
    
    (1,706
    )
    
    
    (786
    )(5,224
    )
    
    
    (4,259
    )
    
    
    (2,977
    )Net Loss
    
    $
    (4,594
    )
    
    $
    (5,926
    )
    
    $
    (11,278
    )Loss per share  basic and diluted
    
    $
    (0.16
    )
    
    $
    (0.21
    )
    
    $
    (0.40
    )Weighted average shares outstanding  basic and diluted
    
    
    28,730
    
    
    
    28,350
    
    
    
    27,895
 The accompanying notes are an integral part of these consolidated financial statements.
  39




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##### Table of Contents



NATIONSHEALTH, INC.
 
 CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY
 (In thousands)
 AdditionalCommon Stock
    
    
    Paid-in
    
    
    Unearned
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    TotalBalance, December 31, 2005
    
    
    27,810
    
    
    $
    3
    
    
    $
    68,949
    
    
    $
    (2,761
    )
    
    $
    (52,174
    )
    
    $
    14,017Issuances of common stock
    
    
    52
    
    
    
    
    
    
    
    395
    
    
    
    
    
    
    
    
    
    
    
    395Repurchases of common stock
    
    
    (36
    )
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    (75
    )Restricted stock awards, net of forfeitures
    
    
    610
    
    
    
    
    
    
    
    1,328
    
    
    
    
    
    
    
    
    
    
    
    1,328Warrant exercises
    
    
    400
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Reclassification of unearned compensation
upon adoption of SFAS No. 123 (R)
    
    
    
    
    
    
    
    
    
    
    (2,761
    )
    
    
    2,761
    
    
    
    
    
    
    
    Employee stock options, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    963
    
    
    
    
    
    
    
    
    
    
    
    963Employee stock option exercises
    
    
    2
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,278
    )
    
    
    (11,278
    )Balance, December 31, 2006
    
    
    28,838
    
    
    
    3
    
    
    
    70,816
    
    
    
    
    
    
    
    (63,452
    )
    
    
    7,367Issuance of common stock for acquisition
    
    
    474
    
    
    
    
    
    
    
    479
    
    
    
    
    
    
    
    
    
    
    
    479Repurchases of common stock
    
    
    (31
    )
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Restricted stock awards, net of forfeitures
    
    
    38
    
    
    
    
    
    
    
    720
    
    
    
    
    
    
    
    
    
    
    
    720Accelerated vesting of equity compensation
    
    
    
    
    
    
    
    
    
    
    1,566
    
    
    
    
    
    
    
    
    
    
    
    1,566Employee stock options, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    673
    
    
    
    
    
    
    
    
    
    
    
    673Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,926
    )
    
    
    (5,926
    )Balance, December 31, 2007
    
    
    29,319
    
    
    
    3
    
    
    
    74,218
    
    
    
    
    
    
    
    (69,378
    )
    
    
    4,843Repurchases of common stock
    
    
    (767
    )
    
    
    
    
    
    
    (159
    )
    
    
    
    
    
    
    
    
    
    
    (159
    )Restricted stock awards, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    311
    
    
    
    
    
    
    
    
    
    
    
    311Accelerated vesting of equity compensation
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    
    
    
    
    
    
    
    
    324Employee stock options, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    549Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,594
    )
    
    
    (4,594
    )Balance, December 31, 2008
    
    
    28,552
    
    
    $
    3
    
    
    $
    75,243
    
    
    $
    
    
    
    $
    (73,972
    )
    
    $
    1,274
 The accompanying notes are an integral part of these consolidated financial statements.
  40




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##### Table of Contents



NATIONSHEALTH, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Cash Flows from Operating Activities:Net loss
    
    $
    (4,594
    )
    
    $
    (5,926
    )
    
    $
    (11,278
    )Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:Gain on sales of business lines
    
    
    
    
    
    
    (338
    )
    
    
    (5,000
    )Provision for doubtful accounts
    
    
    3,895
    
    
    
    1,991
    
    
    
    3,625Provision for sales allowances and returns
    
    
    1,744
    
    
    
    1,459
    
    
    
    2,210Reserve for (recovery of) costs related to billings in process
    
    
    50
    
    
    
    761
    
    
    
    (280
    )Depreciation and amortization
    
    
    6,188
    
    
    
    7,151
    
    
    
    5,747Amortization of note discount and other non-cash interest charges, net
    
    
    2,516
    
    
    
    2,118
    
    
    
    1,441Stock-based compensation
    
    
    1,184
    
    
    
    2,959
    
    
    
    2,291Impairment of investment in joint venture
    
    
    
    
    
    
    
    
    
    
    1,292Changes in operating assets and liabilities:Accounts receivable
    
    
    (10,672
    )
    
    
    (6,164
    )
    
    
    (3,115
    )Inventory
    
    
    (679
    )
    
    
    (157
    )
    
    
    (351
    )Prepaid expenses and other assets
    
    
    (606
    )
    
    
    (1,122
    )
    
    
    737Accounts payable and accrued expenses
    
    
    (439
    )
    
    
    (3,341
    )
    
    
    (15,644
    )Deferred revenue
    
    
    862
    
    
    
    
    
    
    
    (1,335
    )Net cash and cash equivalents used in operating activities:
    
    
    (551
    )
    
    
    (609
    )
    
    
    (19,660
    )Cash Flows from Investing Activities:Proceeds from sales of business lines
    
    
    
    
    
    
    
    
    
    
    7,600Dissolution of joint venture
    
    
    
    
    
    
    
    
    
    
    1,530Maturity of available for sale investments, net
    
    
    
    
    
    
    
    
    
    
    923Deposit paid for acquisition
    
    
    (250
    )
    
    
    
    
    
    
    Acquisition of property and equipment
    
    
    (1,131
    )
    
    
    (1,056
    )
    
    
    (1,669
    )Acquisition of Diabetes Care and Education, Inc., net of cash acquired
    
    
    
    
    
    
    (2,494
    )
    
    
    Asset acquisitions
    
    
    
    
    
    
    (2,856
    )
    
    
    (280
    )Net cash and cash equivalents (used in) provided by investing activities:
    
    
    (1,381
    )
    
    
    (6,406
    )
    
    
    8,104Cash Flows from Financing Activities:Proceeds from exercise of warrants
    
    
    
    
    
    
    
    
    
    
    2,000Draws (principal repayments ) on term loan
    
    
    (2,810
    )
    
    
    6,789
    
    
    
    Deposit of restricted cash under credit facility
    
    
    
    
    
    
    (1,500
    )
    
    
    Net draws on line of credit
    
    
    6,236
    
    
    
    
    
    
    
    100Payment of promissory note
    
    
    (1,500
    )
    
    
    
    
    
    
    Payment of debt issuance costs
    
    
    (20
    )
    
    
    (100
    )
    
    
    (100
    )Repurchases of common stock
    
    
    (159
    )
    
    
    (36
    )
    
    
    (75
    )Principal payments under capital lease obligations
    
    
    (684
    )
    
    
    (437
    )
    
    
    (133
    )Proceeds from exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    17Net cash and cash equivalents provided by financing activities
    
    
    1,063
    
    
    
    4,716
    
    
    
    1,809Net Decrease in Cash and Cash Equivalents
    
    
    (869
    )
    
    
    (2,299
    )
    
    
    (9,747
    )Cash and Cash Equivalents, Beginning of Year
    
    
    1,925
    
    
    
    4,224
    
    
    
    13,971Cash and Cash Equivalents, End of Year
    
    $
    1,056
    
    
    $
    1,925
    
    
    $
    4,224Supplemental Disclosure of Cash Flow Information:Interest Paid
    
    $
    2,721
    
    
    $
    2,036
    
    
    $
    1,578Non-cash Financing Activities:Payment of bonuses with stock
    
    $
    
    
    
    $
    
    
    
    $
    395Issuance of promissory note for joint venture termination fee
    
    $
    
    
    
    $
    
    
    
    $
    1,500Assets acquired under capital leases
    
    $
    29
    
    
    $
    2,426
    
    
    $
    
 The accompanying notes are an integral part of these consolidated financial statements.
  41




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##### Table of Contents



NATIONSHEALTH, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 1. BUSINESS AND BASIS OF PRESENTATION
 Business
  Principles of Consolidation
  Reclassifications
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Cash and Cash Equivalents
  Restricted Cash
   42




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##### Table of Contents



Accounts Receivable
   Inventory
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
 Revenue Recognition
    43




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##### Table of Contents



Patient Acquisition and Related Costs
    44




---



##### Table of Contents



Patient Service and Fulfillment Expenses
  Loss Per Share
  Use of Estimates
  Fair Value of Financial Instruments
    Concentrations of Credit Risk
   45




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##### Table of Contents



Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of Accounting Research Bulletin No. 51
 Determination of the Useful Life of
Intangible Assets Goodwill and Other Intangible Assets
  46




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##### Table of Contents



Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 3. LIQUIDITY CONSIDERATIONS
   Cost Reductions
  Sales of Lines of Business
  Credit Facility
   47




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Summary
  4. CIGNA AGREEMENT
      48




---



##### Table of Contents



5. BUSINESS COMBINATION
    AssetsCurrent assets
    
    $
    2,331Provider contracts and relationships
    
    
    930Customer list
    
    
    880Non-compete agreement
    
    
    90Goodwill
    
    
    1,075Total assets acquired
    
    
    5,306LiabilitiesCurrent liabilities
    
    
    (1,982
    )Long-term debt
    
    
    (24
    )Total liabilities assumed
    
    
    (2,006
    )Net assets acquired
    
    $
    3,300
  49




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006(in thousands)Total revenue
    
    $
    84,169
    
    
    $
    94,849Net loss
    
    $
    (6,464
    )
    
    $
    (11,893
    )Loss per share, basic and diluted
    
    $
    (0.23
    )
    
    $
    (0.42
    )
  6. US BIO JOINT VENTURE
    50




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##### Table of Contents



7. SALE OF DISCOUNT PRESCRIPTION DRUG CARD BUSINESS
  8. PROPERTY AND EQUIPMENT
  Estimated Useful
    
    December 31,Life (Years)
    
    2008
    
    
    2007(in thousands)Office and computer equipment
    
    3-5
    
    $
    3,414
    
    
    $
    3,533Furniture and fixtures
    
    5
    
    
    778
    
    
    
    922Leasehold improvements
    
    Up to 5
    
    
    892
    
    
    
    917Software
    
    3
    
    
    3,936
    
    
    
    4,9879,020
    
    
    
    10,359Less accumulated depreciation
and amortization
    
    
    
    
    5,865
    
    
    
    5,693$
    3,155
    
    
    $
    4,666
    51




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##### Table of Contents



9. INTANGIBLE ASSETS
     2008
    
    
    2007Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    Net(in thousands)Customer contract
    
    $
    16,156
    
    
    $
    (10,669
    )
    
    $
    5,487
    
    
    $
    16,156
    
    
    $
    (8,401
    )
    
    $
    7,755Provider contracts
and relationships
    
    
    930
    
    
    
    (413
    )
    
    
    517
    
    
    
    930
    
    
    
    (103
    )
    
    
    827Acquired customer
lists
    
    
    3,935
    
    
    
    (1,903
    )
    
    
    2,032
    
    
    
    3,935
    
    
    
    (845
    )
    
    
    3,090Non-compete
agreement
    
    
    90
    
    
    
    (40
    )
    
    
    50
    
    
    
    90
    
    
    
    (10
    )
    
    
    80$
    21,111
    
    
    $
    (13,025
    )
    
    $
    8,086
    
    
    $
    21,111
    
    
    $
    (9,359
    )
    
    $
    11,752
  52




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##### Table of Contents



Year ending December 31,2009
    
    $
    2,6562010
    
    
    2,5372011
    
    
    1,7962012
    
    
    1,097
 10. ACCRUED EXPENSES
  December 31,2008
    
    
    2007Accrued compensation
    
    $
    2,177
    
    
    $
    1,425Accrued refunds
    
    
    777
    
    
    
    1,216Other
    
    
    4,214
    
    
    
    1,912$
    7,168
    
    
    $
    4,553
 11. CREDIT FACILITY
 Balance Sheet Classification of Borrowings Outstanding under Revolving Credit
Agreements That Include both a Subjective Acceleration Clause and a Lock-Box Arrangement.
   53




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12. CONVERTIBLE NOTES
   54




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##### Table of Contents



13. STOCKHOLDERS EQUITY
 Preferred Stock
   55




---



##### Table of Contents



Warrants
    Common Stock Reserved
  14. RESTRUCTURING COSTS
  15. EMPLOYEE STOCK COMPENSATION AND BENEFIT PLANS
    56




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##### Table of Contents



2008 Grants
    
    2007 Grants
    
    2006 GrantsWeighted average expected volatility
    
    110%
    
    76%
    
    58%Range of expected volatility
    
    110%  120%
    
    70%  80%
    
    50%  70%Range of risk free interest rate
    
    3.10%  3.11%
    
    3.71%  4.91%
    
    4.35%  5.13%Expected term
    
    5.0 years
    
    5.0 years
    
    5.0 yearsExpected annual forfeiture rate
    
    40%
    
    20%
    
    20%Expected dividend rate
    
    0%
    
    0%
    
    0%
   WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    ContractualShares
    
    
    Price
    
    
    Term (years)Outstanding at beginning of year
    
    
    1,440,619
    
    
    $
    4.86Granted
    
    
    696,075
    
    
    
    0.29Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (195,035
    )
    
    
    1.86Expired
    
    
    (110,841
    )
    
    
    4.65Outstanding at end of year
    
    
    1,830,818
    
    
    $
    3.46
    
    
    
    3.59Vested and exercisable at end of year
    
    
    945,418
    
    
    $
    5.99
    
    
    
    2.23Vested and expected to vest at end of year
    
    
    1,304,741
    
    
    $
    4.62
    
    
    
    2.96
  57




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##### Table of Contents



Weighted AverageGrant DateShares
    
    
    Fair ValueNonvested restricted stock grants at beginning of year
    
    
    317,908
    
    
    $
    2.65Granted
    
    
    
    
    
    
    Vested
    
    
    (159,788
    )
    
    $
    2.27Forfeited
    
    
    
    
    
    
    Nonvested restricted stock grants at end of year
    
    
    158,120
    
    
    $
    2.13
  Accounting for Stock Issued to Employees Share-Based Payment
 Employee Savings Plan
   58




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##### Table of Contents



16. INCOME TAXES
   December 31,2008
    
    
    2007Deferred tax assets:Net operating loss carry forwards
    
    $
    12,808
    
    
    $
    12,918Stock-based compensation
    
    
    350
    
    
    
    2,464Allowances for doubtful accounts, claims denials and returns
    
    
    2,816
    
    
    
    3,074Accrued payroll
    
    
    577
    
    
    
    374Other
    
    
    1,430
    
    
    
    1,126Total deferred tax assets
    
    
    17,981
    
    
    
    19,956Less valuation allowance
    
    
    (16,801
    )
    
    
    (17,862
    )1,180
    
    
    
    2,094Deferred tax liabilities:Discount on Notes
    
    
    (844
    )
    
    
    (1,105
    )Finite-lived intangible assets
    
    
    (213
    )
    
    
    (634
    )Software development costs
    
    
    (73
    )
    
    
    (285
    )Other
    
    
    (50
    )
    
    
    (70
    )Total deferred tax liabilities
    
    
    (1,180
    )
    
    
    (2,094
    )Net deferred taxes
    
    $
    
    
    
    $
    
    2008
    
    
    2007
    
    
    2006Tax at U.S. statutory
rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State taxes, net of federal
benefit
    
    
    2.7
    %
    
    
    3.0
    %
    
    
    3.3
    %Non-deductible items
    
    
    (8.7
    %)
    
    
    (9.0
    %)
    
    
    (3.2
    %)Write-off of deferred tax asset to
non-deductible items
    
    
    
    %
    
    
    (31.3
    %)
    
    
    (8.6
    %)Change in valuation
allowance
    
    
    (28.0
    %)
    
    
    3.3
    %
    
    
    (25.5
    %)Income tax expense
    
    
    
    %
    
    
    
    %
    
    
    
    %
  59




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17. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
 Leases and Debt Maturities
      60




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##### Table of Contents



Capital
    
    
    Operating
    
    
    DebtYear Ending December 31,
    
    Leases
    
    
    Leases
    
    
    Maturities2009
    
    $
    972
    
    
    $
    1,943
    
    
    $
    2,8092010
    
    
    585
    
    
    
    1,374
    
    
    
    5,8712011
    
    
    59
    
    
    
    498
    
    
    
    2012
    
    
    48
    
    
    
    231
    
    
    
    10,3002013
    
    
    
    
    
    
    231
    
    
    
    Thereafter
    
    
    
    
    
    
    38
    
    
    
    1,664
    
    
    $
    4,315
    
    
    $
    18,980Less: amounts representing interest
    
    
    244Net present value of capital lease obligations
    
    $
    1,420
 Letter of Credit
  Employment Agreements
    61




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62




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
    
    An amount equal to the then current annual base salary for twenty-four months;
 
    
    In the event of the Dr. Parkers disability, medical insurance during the period he or
his spouse are eligible to receive benefits under COBRA;
 
    
    Immediate vesting of all stock options or restricted stock previously granted to Dr.
Parker;
 
    
    Require the Company to purchase from Dr. Parker up to $3,000,000 worth of shares of the
Companys common stock. In lieu of a cash payment, the Company may arrange for the sale of
the shares to a third party or register the resale of the shares, in which case Dr. Parker
shall receive at least $3,000,000.
 Legal Proceedings
  18. SEGMENT INFORMATION
    63




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2008
    
    
    2007
    
    
    2006Revenue:Medical Products (1)
    
    $
    65,766
    
    
    $
    46,070
    
    
    $
    48,771Insurance Services
    
    
    34,610
    
    
    
    31,450
    
    
    
    38,445Consolidated revenue
    
    $
    100,376
    
    
    $
    77,520
    
    
    $
    87,216Segment profit (loss):Medical Products (2)
    
    $
    912
    
    
    $
    3,290
    
    
    $
    9,520Insurance Services (3)
    
    
    16,184
    
    
    
    11,871
    
    
    
    (1,304
    )Unallocated amounts:Restructuring costs
    
    
    (2,310
    )
    
    
    
    
    
    
    Gain on sale of business line
    
    
    
    
    
    
    338
    
    
    
    5,000Impairment of investment in joint venture
    
    
    
    
    
    
    
    
    
    
    (1,292
    )Other corporate expenses
    
    
    (14,156
    )
    
    
    (17,166
    )
    
    
    (20,225
    )Consolidated income (loss) from operations
    
    $
    630
    
    
    $
    (1,667
    )
    
    $
    (8,301
    )
 (1)
    
    The Medical Products segment revenue for the year ended December 31, 2006 includes net
revenue from the Discount Prescription Drug Card Business, which was sold on September 5,
2006 (see Note 7).(2)
    
    Segment profit for the Medical Products segment for the year ended December 31, 2006
includes a gain of approximately $977,000 related to the settlement of a vendor obligation.(3)
    
    Segment profit for the Insurance Services segment for the year ended December 31, 2008
includes a gain of $500,000 realized pursuant to the CIGNA Second Amendment (see Note 4).   2008
    
    
    2007Medical Products
    
    $
    21,980
    
    
    $
    17,892Insurance Services
    
    
    10,629
    
    
    
    12,531Unallocated
    
    
    6,884
    
    
    
    7,057Consolidated assets
    
    $
    39,493
    
    
    $
    37,480
  64




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19. MAJOR SUPPLIERS
  Percentage
    
    
    Amountof
    
    
    ofPurchases
    
    
    PurchasesYear Ended December 31, 2008Supplier A
    
    
    35
    %
    
    
    13,971Supplier B
    
    
    18
    %
    
    
    6,985Supplier D
    
    
    14
    %
    
    
    5,74667
    %
    
    $
    26,702Year Ended December 31, 2007Supplier A
    
    
    24
    %
    
    
    5,420Supplier B
    
    
    22
    %
    
    
    4,996Supplier C
    
    
    12
    %
    
    
    2,798Supplier D
    
    
    11
    %
    
    
    2,45269
    %
    
    $
    15,666Year Ended December 31, 2006Supplier E
    
    
    25
    %
    
    $
    3,964Supplier B
    
    
    24
    %
    
    
    3,931Supplier F
    
    
    20
    %
    
    
    3,137Supplier G
    
    
    12
    %
    
    
    2,000Supplier H
    
    
    10
    %
    
    
    1,67991
    %
    
    $
    14,711
  65




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20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(in thousands, except per share data)2008Revenue
    
    $
    23,491
    
    
    $
    24,656
    (1)
    
    $
    25,277
    
    
    $
    26,952Gross profit
    
    
    12,553
    
    
    
    12,701
    
    
    
    12,500
    
    
    
    11,622Net loss
    
    
    (1,894
    )
    
    
    (1,941)
    (1)(2)
    
    
    (486)
    (3)
    
    
    (273)
    (4)Loss per share 
basic and
diluted *
    
    $
    (0.07
    )
    
    $
    (0.07
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )2007Revenue
    
    $
    18,752
    
    
    $
    17,025
    
    
    $
    18,175
    
    
    $
    23,568Gross profit
    
    
    10,619
    
    
    
    10,640
    
    
    
    10,470
    
    
    
    12,704Net loss
    
    
    (1,188
    )
    
    
    (524
    )
    
    
    (3,771)
    (5)
    
    
    (443
    )Loss per share 
basic and
diluted
    
    $
    (0.04
    )
    
    $
    (0.02
    )
    
    $
    (0.13
    )
    
    $
    (0.02
    )
 *
    
    For 2008, the sum of the quarterly loss per share amounts differs from the amounts reflected in
the accompanying consolidated statement of operations due to rounding.(1)
    
    Revenue and results for the quarter ended June 30, 2008 reflect $500,000 of incremental
revenue from the reversal of a recorded obligation pursuant to the CIGNA Second Amendment (see
Note 4).(2)
    
    Results for the quarter ended June 30, 2008 reflect approximately $1,507,000 of charges
related to the corporate restructuring undertaken in 2008.(3)
    
    Results for the quarter ended September 30, 2008 reflect approximately $426,000 of charges
related to the corporate restructuring undertaken in 2008.(4)
    
    Results for the quarter ended December 31, 2008 reflect approximately $377,000 of charges
related to the corporate restructuring undertaken in 2008.(5)
    
    Results for the quarter ended September 30, 2007 reflect approximately $1,566,000 of
stock-based compensation expense associated with the acceleration of vesting of certain
restricted stock awards and a gain of approximately $338,000 related to the finalization of
the purchase price related to the sale of the Companys Discount Prescription Drug Card
Business (see Note 7).  66




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21. SUBSEQUENT EVENT
     67




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A(T). Controls and Procedures.
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Managements Annual Report on Internal Control Over Financial Reporting
     (c) Changes in Internal Control Over Financial Reporting
   68




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Item 9B. Other Information.
    69




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PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
 Directors and Executive Officers
  Name
    
    Age
    
    PositionGlenn M. Parker, M.D.
    
    
    45
    
    
    Director and Chief Executive OfficerLewis P. Stone
    
    
    48
    
    
    Director, Executive Vice President and Chief Information OfficerTimothy Fairbanks
    
    
    35
    
    
    Director, Executive Vice President and Chief Operating OfficerArthur Spector
    
    
    68
    
    
    Chairman of the BoardElliot F. Hahn, Ph.D.
    
    
    64
    
    
    DirectorRichard R. Howard
    
    
    60
    
    
    DirectorMark H. Rachesky, M.D.
    
    
    50
    
    
    DirectorGeorge F. Raymond
    
    
    72
    
    
    DirectorDon K. Rice
    
    
    60
    
    
    DirectorGary D. Small, D.P.M.
    
    
    45
    
    
    DirectorRaymond N. Steinman
    
    
    45
    
    
    DirectorMichael D. Tabris
    
    
    71
    
    
    DirectorBryan Happ
    
    
    40
    
    
    Executive Vice President and Chief Financial OfficerJoshua B. Weingard
    
    
    36
    
    
    Executive Vice President, Chief Legal Officer and Secretary
  Glenn M. Parker, M.D.
 Lewis P. Stone
  70




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Timothy Fairbanks
 Arthur Spector
 Elliot F. Hahn, Ph.D.
 Richard R. Howard
  71




---



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Mark H. Rachesky, M.D.
 George F. Raymond
 Don K. Rice
 Gary D. Small, D.P.M.
  72




---



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Raymond N. Steinman
 Michael D. Tabris
 Bryan Happ
 Joshua B. Weingard
 Governance and Stockholder Agreements
   73




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Section 16(a) Beneficial Ownership Reporting Compliance
  Audit Committee Members and Financial Expert
  Code of Ethics
 www.nationshealth.com www.nationshealth.com
  74




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Item 11. Executive Compensation.
 SUMMARY COMPENSATION TABLE  2008
  Non-EquityName
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    All Otherand
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)(1)
    
    
    ($)(2)
    
    
    ($)(4)
    
    
    ($)(5)
    
    
    ($)Dr. Glenn M. Parker
    
    
    2008
    
    
    $
    500,000
    
    
    $
    
    
    
    $
    
    
    
    $
    100,165
    
    
    $
    375,000
    
    
    $
    60,541
    
    
    $
    1,035,706Chief Executive Officer
    
    
    2007
    
    
    $
    487,500
    
    
    $
    
    
    
    $
    
    
    
    $
    108,988
    
    
    $
    
    
    
    $
    55,757
    
    
    $
    652,245Lewis P. Stone
    
    
    2008
    
    
    $
    312,500
    
    
    $
    
    
    
    $
    
    
    
    $
    94,043
    (3)
    
    $
    
    
    
    $
    1,042,496
    
    
    $
    1,449,039Chief Information Officer
    
    
    2007
    
    
    $
    475,000
    
    
    $
    
    
    
    $
    
    
    
    $
    108,988
    
    
    $
    
    
    
    $
    39,712
    
    
    $
    623,700Timothy Fairbanks
    
    
    2008
    
    
    $
    360,000
    
    
    $
    
    
    
    $
    53,750
    
    
    $
    5,604
    
    
    $
    270,000
    
    
    $
    38,902
    
    
    $
    728,256Chief Operating Officer
    
    
    2007
    
    
    $
    320,000
    
    
    $
    
    
    
    $
    53,750
    
    
    $
    
    
    
    $
    
    
    
    $
    39,758
    
    
    $
    413,508
 
  (1)
    
    The amount in the Stock Awards column reflects the dollar amount recognized for
financial statement reporting purposes for the fiscal years ended December 31, 2007 and
2008, in accordance with Statement of Financial Accounting Standards No. 123 (revised)
(FAS 123(R)), excluding the impact of estimated forfeitures related to service-based
vesting conditions, and includes amounts attributable to awards granted during and prior to
fiscal 2008. Assumptions made in the calculation of these amounts for the fiscal year
ended December 31, 2008 are included in Note 15 to our consolidated financial statements in
this Annual Report on Form 10-K. There were no forfeitures of restricted stock during 2008
for the named executive officers. Additional information regarding restricted stock awards
is set forth in the Outstanding Equity Awards at Fiscal Year-End Table below.(2)
    
    The amounts in the Option Awards column reflect the dollar amounts recognized for
financial statement reporting purposes for the fiscal years ended December 31, 2007 and
2008, in accordance with FAS 123(R), excluding the impact of estimated forfeitures related
to service-based vesting conditions, and include amounts attributable to awards granted
during and prior to fiscal 2008. Assumptions made in the calculation of these amounts for
the fiscal year ended December 31, 2008 are included in Note 15 to our consolidated
financial statements in this Annual Report on Form 10-K.(3)
    
    Amount includes $68,885 of expense recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2008, for the acceleration of vesting of
stock options in connection with the amendment and restatement of Mr. Stones employment
agreement effective May 29, 2008.  75




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(4)
    
    On May 9, 2008, our
Compensation Committee adopted a bonus plan for certain executive
officers, including Dr. Parker and Mr. Fairbanks, who were eligible for bonus awards of
up to a maximum of 100% of their annual base salaries. 75% of the eligible bonus amount was
to be determined based on the attainment of certain quarterly and annual financial goals
and 25% of the eligible bonus amount was to be determined at the discretion of the
Compensation Committee. During 2008, each of the maximum financial goals were exceeded
and Dr. Parker and Mr. Fairbanks earned bonus awards of $375,000 and $270,000,
respectively. To date, $187,500 has been paid to Dr. Parker and $135,000 has been paid
to Mr. Fairbanks, with the balance expected to be paid later in 2009. The Compensation
Committee has not yet determined if any bonus amounts will be paid
under the discretionary components of the bonus plan.(5)
    
    Items included under All Other Compensation for each named executive officer are set
forth in the table below: ALL OTHER COMPENSATION TABLE  2008
 Perquisitesand Other
    
    
    
    
    
    
    
    
    
    
    SeverancePersonal
    
    
    Tax
    
    
    Insurance
    
    
    Payments /Benefits(a)
    
    
    Reimbursements
    
    
    Premiums(b)
    
    
    Accruals
    
    
    TotalName
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Dr. Glenn M. Parker
    
    
    2008
    
    
    $
    25,973
    (c)
    
    $
    4,847
    
    
    $
    29,721
    
    
    $
    
    
    
    $
    60,541Lewis P. Stone
    
    
    2008
    
    
    $
    7,928
    
    
    $
    4,847
    
    
    $
    29,721
    
    
    $
    1,000,000
    (d)
    
    $
    1,042,496Timothy Fairbanks
    
    
    2008
    
    
    $
    4,707
    
    
    $
    4,847
    
    
    $
    29,348
    
    
    $
    
    
    
    $
    38,902
 
  (a)
    
    The value of these perquisites and other personal benefits is calculated based on their
incremental cost to the Company, which is determined based upon the actual cost of
providing these perquisites and other personal benefits.(b)
    
    Represents reimbursement of life insurance premiums and Company-paid group medical and
dental coverage.(c)
    
    Includes personal expenses of $17,118 for meals and entertainment, $8,205 for
transportation and telecommunications and $650 for credit card and airline membership fees.(d)
    
    As discussed in the Potential Payments Upon Termination or Change in Control section
below, Mr. Stone received his contractual right under his employment agreement to 24 months
of base salary, representing $1,000,000, of which $750,000 was paid
during 2008 and $250,000 was paid during 2009.  76




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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE  2008
  Option Awards
    
    
    Stock AwardsMarketNumber of
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Value ofSecurities
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    
    
    
    
    
    Shares orUnderlying
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    Units of
    
    
    
    
    
    
    Units ofUnexercised
    
    
    Unexercised
    
    
    Option
    
    
    
    
    
    
    Stock That
    
    
    
    
    
    
    Stock ThatOptions
    
    
    Options
    
    
    Exercise
    
    
    Option
    
    
    Have Not
    
    
    
    
    
    
    Have Not(#)
    
    
    (#)
    
    
    Price
    
    
    Expiration
    
    
    Vested
    
    
    
    
    
    
    VestedName
    
    Exercisable
    
    
    Unexercisable
    
    
    ($)
    
    
    Date
    
    
    (#)
    
    
    
    
    
    
    ($)(1)Dr. Glenn M. Parker
    
    
    130,750
    
    
    
    
    
    
    $
    6.87
    
    
    
    10/21/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186,925
    (2)
    
    $
    0.30
    
    
    
    05/14/2014
    
    
    
    
    
    
    
    
    
    
    
    Timothy Fairbanks
    
    
    12,500
    
    
    
    
    
    
    $
    6.87
    
    
    
    10/21/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,750
    (2)
    
    $
    0.30
    
    
    
    05/14/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    (3)
    
    $
    2,000Lewis P. Stone
    
    
    130,750
    
    
    
    
    
    
    $
    6.87
    
    
    
    10/21/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,425
    (2)
    
    $
    0.30
    
    
    
    05/14/2014
    
    
    
    
    
    
    
    
    
    
    
    
 
  (1)
    
    Based upon closing stock price of $0.04 on December 31, 2008.(2)
    
    Vesting 25.0% on May 14, 2009 and 12.5% semi-annually thereafter.(3)
    
    Vesting 25.0% on May 15, 2009 and 25.0% semi-annually thereafter. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
   77




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78




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##### Table of Contents



Director Compensation
 Director Fees
 Equity Awards.
 Name
    
    OptionsArthur Spector, Chairman
    
    
    12,500Elliot F. Hahn, Ph.D.
    
    
    12,500George F. Raymond
    
    
    12,600Richard R. Howard
    
    
    12,500Don K. Rice
    
    
    12,750
  79




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##### Table of Contents



DIRECTOR COMPENSATION TABLE
  Fees Earned orPaid in Cash
    
    
    Option Awards(1)
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)Arthur Spector, Chairman
    
    $
    75,000
    
    
    $
    64,479
    
    
    $
    139,479Elliot F. Hahn, Ph.D.
    
    $
    43,500
    
    
    $
    9,659
    
    
    $
    53,159George F. Raymond
    
    $
    52,000
    
    
    $
    10,391
    
    
    $
    62,391Richard R. Howard
    
    $
    54,000
    
    
    $
    11,850
    
    
    $
    65,850Don K. Rice
    
    $
    58,250
    
    
    $
    12,584
    
    
    $
    70,834Michael D. Tabris
    
    $
    14,500
    
    
    
    
    
    
    $
    14,500Gary D. Small, D.P.M.
    
    $
    13,500
    
    
    
    
    
    
    $
    13,500Raymond N. Steinman
    
    $
    14,500
    
    
    
    
    
    
    $
    14,500Mark H. Rachesky, M.D.
    
    $
    14,500
    
    
    
    
    
    
    $
    14,500
 
  (1)
    
    The amounts in the Option Awards column reflect the dollar amount recognized for financial
statement reporting purposes for the fiscal year ended December 31, 2008, in accordance with
FAS 123(R), excluding the impact of estimated forfeitures related to service-based vesting
conditions, and include amounts attributable to awards granted during and prior to 2008.
Assumptions made in the calculation of these amounts for the fiscal year ended December 31,
2008 are included in Note 15 to our consolidated financial statements in this Annual Report on
Form 10-K. There were no forfeitures during 2008. The aggregate number of stock options held
by each non-employee director as of December 31, 2008 is as follows: Stock Options OutstandingName
    
    As of 12/31/08Arthur Spector, Chairman
    
    
    77,875Elliot F. Hahn, Ph.D.
    
    
    53,500George F. Raymond
    
    
    52,600Richard R. Howard
    
    
    53,500Don K. Rice
    
    
    51,250Michael D. Tabris
    
    
    5,000Gary D. Small, D.P.M.
    
    
    5,000Raymond N. Steinman
    
    
    5,000Mark H. Rachesky, M.D.
    
    
    
  80




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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
 Share Ownership
  Number of SharesName and Address of
    
    Beneficially OwnedBeneficial Owner
    
    Shares(1)(2)
    
    
    PercentLewis P. Stone (3)
    
    
    16,006,299
    (4)
    
    
    55.79
    %Glenn M. Parker, M.D. (3)
    
    
    16,039,050
    (5)
    
    
    55.83
    %RGGPLS, LLC (and certain related persons) (3)
    
    
    15,861,569
    (6)
    
    
    55.55
    %13630 N.W. 8th Street, Suite 210
Sunrise, Florida 33325Mark H. Rachesky, M.D. (and certain related persons) (7)
    
    
    5,805,900
    (8)
    
    
    18.83
    %40 West 57th Street, 24th Floor
New York, NY 10019GRH Holdings, L.L.C. (and certain related persons) (9)
    
    
    4,254,953
    (9)
    
    
    14.90
    %6701 Nob Hill Road
Tamarac, FL 33321Robert Gregg (and certain related persons)
    
    
    3,359,339
    (10)
    
    
    11.77
    %Arthur Spector
    
    
    431,125
    (11)
    
    
    1.51
    %Timothy Fairbanks
    
    
    332,816
    (12)
    
    
    1.16
    %Don K. Rice
    
    
    66,687
    (13)
    
    
    *George F. Raymond
    
    
    48,850
    (14)
    
    
    *Elliot F. Hahn, Ph.D.
    
    
    49,125
    (15)
    
    
    *Richard R. Howard
    
    
    49,125
    (16)
    
    
    *Gary D. Small, D.P.M.
    
    
    10,000
    (17)
    
    
    *Michael D. Tabris
    
    
    10,000
    (17)
    
    
    *Raymond N. Steinman
    
    
    10,000
    (17)
    
    
    *All executive officers and directors as a group (12 persons)
    
    
    21,211,694
    (18)
    
    
    68.46
    %
 *
    
    Less than 1%.(1)
    
    Except as otherwise set forth herein, we believe that all persons
referenced in the table have sole voting and investment power with
respect to all shares of Common Stock reflected as beneficially owned
by such persons.  81




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##### Table of Contents



(2)
    
    Applicable percentage of ownership as of April 28,
2009 is based upon 28,077,872 shares of Common Stock
outstanding as of that date. Beneficial ownership is
determined in accordance with the rules and
regulations of the SEC, and includes voting and
investment power with respect to shares. Common Stock
subject to options or warrants currently exercisable
or exercisable within 60 days after April 28, 2009 are
referred to as presently exercisable stock options
or presently exercisable warrants. Presently
exercisable stock options are deemed outstanding for
purposes of computing the percentage of ownership of
the person holding such options, but are not deemed
outstanding for computing the percentage of any other
person.(3)
    
    Based on the Schedule 13D/A filed by RGGPLS LLC.
(RGGPLS) with the SEC on March 31, 2009, the
shareholders of RGGPLS, who are deemed to share voting
and dispositive power over our Common Stock owned by
RGGPLS, are Lewis P. Stone, Glenn M. Parker, M.D., the
Glenn M. Parker 2004 Multigenerational Trust and the
Lewis P. Stone 2004 Multigenerational Trust.(4)
    
    Consists of the securities included in Note (6) below,
as well as, 7,874 shares of Common Stock held directly
and presently exercisable options to purchase 136,856
shares of Common Stock.(5)
    
    Consists of the securities included in Note (6) below
and presently exercisable options to purchase 177,481
shares of Common Stock.(6)
    
    Consists of (i) 6,568,678 shares of Common Stock held
by RGGPLS, (ii) 2,748,204 shares of Common Stock held
by the Gregg Multigenerational Trust, which RGGPLS,
has an irrevocable right to vote, other than under
certain limited circumstances, through December 31,
2010, (iii) 2,809,958 shares of Common Stock issued to
GRH Holdings, L.L.C., a Florida limited liability
company (GRH) which are subject to a Stockholders
Agreement dated as of March 9, 2004, and amended as of
June 2, 2004, by and among us, RGGPLS and GRH pursuant
to which GRH must vote certain of its shares of Common
Stock as directed by RGGPLS, (iv) 1,785,714 shares of
Common Stock issued to MHR Capital Partners LP, a
Delaware limited partnership (MHR) and OTQ LLC, a
Delaware limited liability company (OTQ) which are
subject to a Stockholders Agreement dated as of
February 28, 2005, by and among us, RGGPLS, GRH, MHR
and OTQ pursuant to which MHR and OTQ must vote
certain of their shares of Common Stock as directed by
RGGPLS, (v) 1,350,000 shares of Common Stock held by
Glenn M. Parker, M.D. which are subject to a voting
rights agreement dated as of December 5, 2005,
pursuant to which Dr. Parker must vote these shares of
Common Stock as directed by RGGPLS and (vi) 599,015
shares of Common Stock held by the Robert Gregg 2004
Trust, which RGGPLS, has an irrevocable right to vote,
other than under certain limited circumstances,
through December 31, 2010.(7)
    
    Based on the Schedule 13D/A filed by Dr. Mark H.
Rachesky and related entities with the SEC on April
17, 2009, Dr. Rachesky exercises voting and/or
investment control over the portfolio securities of
MHR, OTQ and MHR Capital Partners (100) LP, a Delaware
limited partnership (Capital Partners).(8)
    
    Includes (i) 2,046,096 shares of Common Stock held for
the account of MHR, (ii) 1,151,129 shares of Common
Stock that can be obtained by MHR pursuant to the
$15,000,000 par value in secured presently convertible
notes (the MHR Notes See the Transactions with
Related Personssection of Item 13.) held for the
account of MHR, (iii) 273,285 shares of Common Stock
held for the account of Capital Partners, (iv) 153,750
shares of Common Stock that can be obtained by Capital
Partners pursuant to the presently convertible MHR
Notes held for the account of Capital Partners, (v)
1,020,833 shares of Common Stock held for the account
of OTQ, (vi) 981,707 shares of Common Stock that can
be obtained by OTQ pursuant to the presently
convertible MHR Notes held for the account of OTQ and
(vii) 179,100 shares of Common Stock held for certain
personal, trusts, retirement and charitable foundation
accounts established by Dr. Rachesky.  82




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(9)
    
    Based on the Form 13D/A filed by GRH and certain related entities
with the SEC on February 14, 2008, the managing member of GRH is
Viaura Holdings, Ltd., a Florida limited partnership (Viaura
Holdings). The general partner of Viaura Holdings is Viaura, Inc., a
Florida corporation (Viaura). The sole directors and holders of a
majority of the issued and outstanding shares of Viaura are Michael
and Robin Gusky.(10)
    
    Consists of (i) 2,748,204 shares of Common Stock held by the Gregg
Multigenerational Trust, (ii) 599,015 shares held by the Robert Gregg
2004 Trust and (iii) 12,120 shares of Common Stock held directly.(11)
    
    Consists of 362,625 shares of Common Stock and presently exercisable
options to purchase 68,500 shares of Common Stock.(12)
    
    Consists of (i) 233,129 shares of unrestricted Common Stock held
directly, (ii) 50,000 shares of restricted common stock vesting
25.00% on May 15, 2009 and every six months thereafter and (iii)
presently exercisable options to purchase 49,687 shares of Common
Stock.(13)
    
    Consists of (i) presently exercisable options to purchase 41,687
shares of Common Stock and (ii) 25,000 shares of Common Stock.(14)
    
    Consists of (i) presently exercisable options to purchase 43,150
shares of Common Stock and (ii) 5,700 shares of Common Stock.(15)
    
    Consists of (i) presently exercisable options to purchase 44,125
shares of Common Stock and (ii) 5,000 shares of Common Stock.(16)
    
    Consists of (i) presently exercisable options to purchase 44,125
shares of Common Stock and (ii) 5,000 shares of Common Stock.(17)
    
    Consists of (i) presently exercisable options to purchase 5,000
shares of Common Stock and (ii) 5,000 shares of Common Stock.(18)
    
    Includes 2,286,586 shares of Common Stock convertible pursuant to the
presently convertible MHR Notes and presently exercisable options to
purchase 687,517 shares of Common Stock. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
 Parent
Company
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Transactions with Related Persons
       84




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85




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Director Independence
   87




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Item 14. Principal Accountant Fees and Services.
 Independent Auditor Fees
  Year EndedDecember 31,2008
    
    
    2007Audit fees (1)
    
    $
    349,000
    
    
    $
    372,000Audit related fees (2)
    
    
    
    
    
    
    40,000Tax fees (3)
    
    
    
    
    
    
    All other fees (4)
    
    
    1,500
    
    
    
    1,500Total fees
    
    $
    350,500
    
    
    $
    413,500
 (1)
    
    Audit Fees.Includes fees billed for professional services rendered by Ernst & Young LLP
for the audit of NationsHealths annual consolidated financial statements included in our Annual
Report on Form 10-K and the review of the quarterly consolidated financial statements included in
each of our Forms 10-Q.(2)
    
    Audit-Related Fees.Audit-related fees in 2007 consisted primarily of fees for assistance
provided to us with SEC comment letters.(3)
    
    Tax Fees.There were no tax fees in 2008 and 2007.(4)
    
    All Other Fees.Other fees pertain to subscription fees paid to Ernst & Young LLP for
access to their online accounting research library. Pre-Approval of Services
   88




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PART IV
 
 Item 15. Exhibits.
        90




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SIGNATURES
  NATIONSHEALTH, INC.By:
    /s/ Glenn M. ParkerGlenn M. Parker, M.D.Chief Executive Officer   Name
    
    Title
    
    Date/s/ Glenn M. Parker

Glenn M. Parker
    
    Chief Executive Officer and Director
(Principal Executive Officer)
    
    April 30, 2009/s/ Bryan Happ

Bryan Happ
    
    Chief Financial Officer
(Principal Financial Officer)
    
    April 30, 2009/s/ Timothy Fairbanks

Timothy Fairbanks
    
    Chief Operating Officer and Director
    
    April 30, 2009/s/ Arthur R. Spector

Arthur R. Spector
    
    Chairman of the Board of Directors
    
    April 30, 2009/s/ Lewis P. Stone

Lewis P. Stone
    
    Chief Information Officer and Director
    
    April 30, 2009/s/ Elliot F. Hahn

Elliot F. Hahn, Ph.D.
    
    Director
    
    April 30, 2009/s/ Gary D. Small

Gary D. Small
    
    Director
    
    April 30, 2009/s/ Raymond N. Steinman

Raymond N. Steinman
    
    Director
    
    April 30, 2009/s/ Michael D. Tabris

Michael D. Tabris
    
    Director
    
    April 30, 2009/s/ Mark H. Rachesky

Mark H. Rachesky, M.D.
    
    Director
    
    April 30, 2009/s/ Don K. Rice

Don K. Rice
    
    Director
    
    April 30, 2009/s/ Richard R. Howard

Richard R. Howard
    
    Director
    
    April 30, 2009/s/ George F. Raymond

George F. Raymond
    
    Director
    
    April 30, 2009
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NATIONSHEALTH, INC.
 
 EXHIBIT INDEX
 Exhibit No.
    
    Description2.1
    
    
    Amended and Restated Agreement and Plan of Merger dated as of
August 10, 2004 among Millstream Acquisition Corporation, N
Merger L.L.C. and NationsHealth Holdings, L.L.C. Filed as
Annex A to the Companys Definitive Proxy Statement (File No.
000-50348) filed August 13, 2004 and incorporated herein by
reference.2.2
    
    
    Amended and Restated Asset Purchase Agreement, dated September
3, 2005, by and between Lincare Inc., Med 4 Home Inc., United
States Pharmaceutical Group, LLC and NationsHealth, Inc.
Certain schedules referenced in the Amended and Restated Asset
Purchase Agreement have been omitted in accordance with Item
601(b)(2) of Regulation S-K. A copy of any omitted schedule
will be furnished supplementally to the Securities and
Exchange Commission upon request. Filed as Exhibit 2.1 to the
Companys Form 10-Q (File No. 000-50348) filed November 14,
2005 and incorporated herein by reference.2.3
    
    
    Stock Purchase Agreement, dated as of September 4, 2007, by
and between United States Pharmaceutical Group, L.L.C. and
Susan Hill. Filed as Exhibit 99.1 to the Companys Form 8-K
(File No. 000-50348) filed September 10, 2007 and incorporated
herein by reference.3.1
    
    
    Second Restated Certificate of Incorporation of Millstream
Acquisition Corporation. Filed as Exhibit 3.3 to the
Companys Form 8-A12G/A (File No. 000-50348) filed September
8, 2004 and incorporated herein by reference.3.2
    
    
    By-Laws of NationsHealth, Inc., as amended and restated on
August 31, 2004. Filed as Exhibit 3.4 to the Companys Form
8-A12G/A (File No. 000-50348) filed September 8, 2004 and
incorporated herein by reference.4.1
    
    
    Specimen Common Stock Certificate. Filed as Exhibit 4.1 to
the Companys Registration Statement on Form S-1 (File No.
333-105388), as amended, originally filed on May 19, 2003 and
incorporated herein by reference.4.2
    
    
    Specimen Warrant Certificate. Filed as Exhibit 4.2 to the
Companys Registration Statement on Form S-1 (File No.
333-105388), as amended, originally filed on May 19, 2003 and
incorporated herein by reference.4.3
    
    
    Form of Unit Purchase Option granted to Representative. Filed
as Exhibit 4.3 to the Companys Form S-1 (File No.
333-105388), as amended, originally filed on May 19, 2003 and
incorporated herein by reference.4.4
    
    
    Form of Warrant Agreement between Continental Stock Transfer &
Trust Company and the Company. Filed as Exhibit 4.4 to the
Companys Form S-1 (File No. 333-105388), as amended,
originally filed on May 19, 2003 and incorporated herein by
reference.4.5
    
    
    Specimen Unit Certificate. Filed as Exhibit 4.5 to the
Companys Form S-1 (File No. 333-105388), as amended,
originally filed on May 19, 2003 and incorporated herein by
reference.
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Exhibit No.
    
    Description4.6
    
    
    7 3/4% Secured Convertible Note issued by NationsHealth, Inc. to
MHR Capital Partners (100) LP dated February 28, 2005. Filed
as Exhibit 4.1 to the Companys Form 8-K (File No. 000-50348)
filed March 4, 2005 and incorporated herein by reference.4.7
    
    
    7 3/4% Secured Convertible Note issued by NationsHealth, Inc. to
MHR Capital Partners LP dated February 28, 2005. Filed as
Exhibit 4.2 to the Companys Form 8-K (File No. 000-50348)
filed March 4, 2005 and incorporated herein by reference.4.8
    
    
    7 3/4% Secured Convertible Note issued by NationsHealth, Inc. to
OTQ LLC dated February 28, 2005. Filed as Exhibit 4.3 to the
Companys Form 8-K (File No. 000-50348) filed March 4, 2005
and incorporated herein by reference.4.9
    
    
    Warrant Agreement, dated as of May 4, 2005, by and between
NationsHealth, Inc. and Connecticut General Life Insurance
Company. Filed as Exhibit 4.1 to the Companys Form 8-K (File
No. 000-50348) filed May 11, 2005 and incorporated herein by
reference.4.10
    
    
    Warrant Clarification Agreement, dated March 28, 2007, to the
Warrant Agreement, dated as of August 25, 2003, by and between
NationsHealth, Inc. and Continental Stock Transfer & Trust
Company. Filed as Exhibit 4.10 to the Companys Form 10-K
(File No. 000-50348) filed March 30, 2007 and incorporated
herein by reference.4.11
    
    
    Unit Purchase Option Clarification Agreement, dated March 28,
2007, to the Unit Purchase Option, dated as of August 25,
2003, by and between NationsHealth, Inc. and Earlybird
Capital, Inc. Filed as Exhibit 4.11 to the Companys Form 10-K
(File No. 000-50348) filed March 30, 2007 and incorporated
herein by reference.10.1*
    
    
    Employment Agreement made as of March 9, 2004, by and between
Millstream Acquisition Corporation and Glenn M. Parker, M.D.
Filed as Exhibit 5.02(d) to the Companys Form 8-K (File No.
000-50348) filed September 7, 2004 and incorporated herein by
reference.10.2*
    
    
    Employment Agreement made as of March 9, 2004, by and between
Millstream Acquisition Corporation and Robert Gregg. Filed as
Exhibit 5.02(e) to the Companys Form 8-K (File No. 000-50348)
filed September 7, 2004 and incorporated herein by reference.10.8
    
    
    Indemnification and Escrow Agreement, dated as of August 30,
2004, among Millstream Acquisition Corporation, Continental
Stock Transfer & Trust Company, as Escrow, RGGPLS Holding,
Inc., and Arthur Spector. Filed as Exhibit 5.02(g) to the
Companys Form 8-K (File No. 000-50348) filed September 7,
2004 and incorporated herein by reference.10.9
    
    
    Lease Agreement with Liberty Property Limited Partnership
dated December 23, 2002, for the property located at 13650
N.W. 8th Street, Sunrise, Florida. Filed as Exhibit
10.5 to the Companys Form 10-KSB (File No. 000-50348) filed
March 25, 2005 and incorporated herein by reference.10.10
    
    
    Assignment of Lease Agreement with Liberty Property Limited
Partnership for the property located at 13650 N.W.
8th Street, Sunrise, Florida, dated February 19,
2004. Filed as Exhibit 10.6 to the Companys  Form 10-KSB (File
No. 000-50348) filed March 25, 2005 and incorporated herein by
reference.
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Exhibit No.
    
    Description10.11
    
    
    Lease Agreement with Liberty Property Limited Partnership
dated February 9, 2004, for the property located at 13630 N.W.
8th Street, Sunrise, Florida. Filed as Exhibit 10.7
to the Companys Form 10-KSB (File No. 000-50348) filed March
25, 2005 and incorporated herein by reference.10.12
    
    
    Assignment of Lease Agreement with Liberty Property Limited
Partnership for the property located at 13630 N.W.
8th Street, Sunrise, Florida, dated February 19,
2004. Filed as Exhibit 10.8 to the Companys
Form 10-KSB (File
No. 000-50348) filed March 25, 2005 and incorporated herein by
reference.10.13
    
    
    Sublease Agreement with D & K Healthcare Resources Inc. dated
May 19, 2004, for the premises located at 2955 West Corporate
Lakes Boulevard, Weston, Florida. Filed as Exhibit 10.9 to the
Companys
Form 10-KSB (File No. 000-50348) filed March 25,
2005 and incorporated herein by reference.10.14
    
    
    First Amendment of Sublease Agreement with D & K Healthcare
Resources Inc. for the premises located at 2955 West Corporate
Lakes Boulevard, Weston, Florida, dated May 1, 2006. Filed as
Exhibit 10.3 to the Companys Form 10-Q (File No. 000-50348)
filed August 14, 2006 and incorporated herein by reference.10.16
    
    
    Industrial Lease Agreement between Industrial Property Fund
III, L.P. as Landlord, and NationsHealth, Inc. and United
States Pharmaceutical Group, L.L.C. collectively, as Tenant,
commencing on September 4, 2006. Filed as Exhibit 10.4 to the
Companys Form 10-Q (File No. 000-50348) filed November 13,
2006 and incorporated herein by reference.10.17
    
    
    Property Lease between Orange Blossom Investments, LLC, and
NationsHealth, Inc., dated October 13, 2006. Filed as Exhibit
10.10 to the Companys Form 10-Q (File No. 000-50348) filed
November 13, 2006 and incorporated herein by reference.10.18
    
    
    Lease Agreement between NationsHealth, Inc., as Lessee, and
Farnam Street Financial, Inc., as Lessor, dated February 5,
2007. Filed as Exhibit 99.1 to the Companys Form 8-K (File
No. 000-50348) filed February 9, 2007 and incorporated herein
by reference.10.19
    *
    
    NationsHealth, Inc. 2005 Long-Term Incentive Plan effective as
of April 25, 2005. Filed as Exhibit 10.1 to the Companys
Form 8-K (File No. 000-50348) filed June 17, 2005 and
incorporated herein by reference.10.20
    *
    
    RGGPLS Holding, Inc. Stock Bonus Plan & Trust effective
December 30, 2004. Filed as Exhibit 10.1 to the Companys
Form S-8 (File No. 333-126197) filed June 28, 2005 and
incorporated herein by reference.10.21
    *
    
    Amendment No. 1 to RGGPLS Holding, Inc. Stock Bonus Plan &
Trust effective February 28, 2005. Filed as Exhibit 10.2 to
the Companys Form S-8 (File No. 333-126197) filed June 28,
2005 and incorporated herein by reference.10.22
    *
    
    NationsHealth, Inc. 2004 Incentive Stock Plan, dated August
30, 2004. Filed as Annex I to the Companys Schedule 14A
(File No. 000-50348) filed August 13, 2004 and incorporated
herein by reference.10.23
    
    
    Second Amended and Restated Revolving Credit and Security
Agreement among NationsHealth, Inc., United States
Pharmaceutical Group, L.L.C., NationsHealth Holdings, L.L.C.
and CapitalSource Finance LLC dated as of March 21, 2006.
Filed as Exhibit 10.1 to the Companys Form 8-K (File No.
000-50348) filed March 27, 2006 and incorporated herein by
reference.
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Exhibit No.
    
    Description10.24
    
    
    First Amendment to Second Amended and Restated Revolving
Credit and Security Agreement dated August 11, 2006, by and
between CapitalSource Finance LLC, United States
Pharmaceutical Group, L.L.C., NationsHealth Holdings, L.L.C.
and NationsHealth, Inc. Filed as Exhibit 10.7 to the
Companys Form 10-Q (File No. 000-50348) filed November 13,
2006 and incorporated herein by reference.10.25
    
    
    Waiver, Consent and Second Amendment to Second Amended and
Restated Revolving Credit and Security Agreement dated
September 27, 2006, by and between CapitalSource Finance LLC,
United States Pharmaceutical Group, L.L.C., NationsHealth
Holdings, L.L.C. and NationsHealth, Inc. Filed as Exhibit
10.8 to the Companys Form 10-Q (File No. 000-50348) filed
November 13, 2006 and incorporated herein by reference.10.26
    
    
    Third Amendment to Second Amended and Restated Revolving
Credit and Security Agreement dated October 2, 2006, by and
between CapitalSource Finance LLC, United States
Pharmaceutical Group, L.L.C., NationsHealth Holdings, L.L.C.
and NationsHealth, Inc. Filed as Exhibit 10.9 to the
Companys Form 10-Q (File No. 000-50348) filed November 13,
2006 and incorporated herein by reference.10.27
    **
    
    Amended and Restated Preferred Vendor Agreement by and among
Connecticut General Life Insurance Company, United States
Pharmaceutical Group, L.L.C. and NationsHealth, Inc., dated as
of May 26, 2006. Filed as Exhibit 10.2 to the Companys Form
10-Q (File No. 000-50348) filed August 14, 2006 and
incorporated herein by reference.10.28
    **
    
    Limited Liability Company Agreement of NationsHealth Specialty
Rx, LLC, dated August 3, 2005, by and between US Bioservices
Corporation and NationsHealth, Inc. Filed as Exhibit 10.1 to
the Companys Form 10-Q (File No. 000-50348) filed November
14, 2005 and incorporated herein by reference.10.29
    
    
    Agreement to Dissolve Limited Liability Company and Promissory
Note, dated as of September 27, 2006, between NationsHealth,
Inc. and US Bioservices Corporation. Filed as Exhibit 10.1 to
the Companys Form 8-K (File No. 000-50348) filed October 3,
2006 and incorporated herein by reference.10.33
    
    
    Separation Agreement and General Release dated December 16,
2005, between Robert Gregg and NationsHealth, Inc. Filed as
Exhibit 10.1 to the Companys Form 8-K (File No. 000-50348)
filed December 22, 2005 and incorporated herein by reference.10.37
    *
    
    Employment Agreement, dated December 26, 2006, between
NationsHealth, Inc. and Joshua Weingard. Filed as Exhibit
10.37 to the Companys Form 10-K (File No. 000-50348) Filed
March 28, 2008, and incorporated herein by reference.10.38
    *
    
    Employment Agreement, dated April 27, 2007, between
NationsHealth, Inc. and Rodney Carson. Filed as Exhibit 10.1
to the Companys Form 8-K (File No. 000-50348) filed May 3,
2007 and incorporated herein by reference.10.39
    
    
    Stockholders Agreement, dated as of March 9, 2004, as amended
on June 2, 2004, among Millstream Acquisition Corporation,
RGGPLS Holding, Inc. and GRS Holdings, L.L.C. Filed as Annex
E to the Companys Schedule 14A (File No. 000-50348) filed
August 13, 2004 and incorporated herein by reference.
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Exhibit No.
    
    Description10.40
    
    
    Registration Rights Agreement, dated as of March 9, 2004, as
amended on June 2, 2004, by and among Millstream Acquisition
Corporation, RGGPLS Holding, Inc., GRH Holdings, L.L.C., and
Becton, Dickinson and Company. Filed as Annex F to the
Companys Schedule 14A (File No. 000-50348) filed August 13,
2004 and incorporated herein by reference.10.41
    
    
    Amended and Restated Governance Agreement, dated as of August
10, 2004, among Millstream Acquisition Corporation, RGGPLS
Holding, Inc., and Arthur Spector. Filed as Exhibit 5.02(a)
to the Companys Form 8-K(File No. 000-50348) filed September
7, 2004 and incorporated herein by reference.10.42
    *
    
    Form of Stock Option Agreement under the NationsHealth, Inc.
2004 Stock Option Plan. Filed as Exhibit 10.12 to the
Companys Form 10-QSB (File No. 000-50348) filed November 10,
2004 and incorporated herein by reference.10.43
    
    
    Securities Purchase Agreement, dated as of May 4, 2005, by and
between NationsHealth, Inc. and Connecticut General Life
Insurance Company. Filed as Exhibit 4.2 to the Companys Form
8-K (File No. 000-50348) filed May 11, 2005 and incorporated
herein by reference.10.44
    
    
    Stock Purchase Agreement, dated August 18, 2005, by and
between NationsHealth, Inc. and US Bioservices Corporation.
Filed as Exhibit 10.1 to the Companys Form 8-K (File No.
000-50348) filed August 24, 2005 and incorporated herein by
reference.10.45
    
    
    Registration Rights Agreement, dated August 18, 2005, by and
between NationsHealth, Inc. and US Bioservices Corporation.
Filed as Exhibit 10.2 to the Companys Form 8-K (File No.
000-50348) filed August 24, 2005 and incorporated herein by
reference.10.46
    
    
    Registration Rights Agreement, dated as of November 4, 2005,
by and among NationsHealth, Inc. and the Holders of
Registrable Securities. Filed as Exhibit 10.2 to the
Companys Form 8-K (File No. 000-50348) filed November 10,
2005 and incorporated herein by reference.10.47
    *
    
    Form of Stock Option Agreement under the NationsHealth, Inc.
2005 Long-Term Incentive Plan. Filed as Exhibit 10.4 to the
Companys Form 10-Q (File No. 000-50348) filed November 14,
2005 and incorporated herein by reference.10.48
    *
    
    Form of Restricted Stock Unit Agreement under the
NationsHealth, Inc. 2005 Long-Term Incentive Plan. Filed as
Exhibit 10.5 to the Companys Form 10-Q (File No. 000-50348)
filed November 14, 2005 and incorporated herein by reference.10.49
    *
    
    Form of Restricted Stock Agreement under the NationsHealth,
Inc. 2005 Long-Term Incentive Plan. Filed as Exhibit 10.6 to
the Companys Form 10-Q (File No. 000-50348) filed November
14, 2005 and incorporated herein by reference.
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Exhibit No.
    
    Description10.50
    *
    
    Form of Stock Appreciation Right Agreement under the
NationsHealth, Inc. 2005 Long-Term Incentive Plan. Filed as
Exhibit 10.7 to the Companys Form 10-Q (File No. 000-50348)
filed November 14, 2005 and incorporated herein by reference.10.51
    
    
    Investment Unit Purchase Agreement, dated February 28, 2005,
by and among NationsHealth, Inc., NationsHealth Holdings,
L.L.C., United States Pharmaceutical Group, L.L.C., MHR
Capital Partners LP, OTQ LLC and MHR Capital Partners
(100) LP. Filed as Exhibit 10.1 to the Companys Form 8-K
(File No. 000-50348) filed March 4, 2005 and incorporated
herein by reference.10.52
    
    
    Lease Agreement between NationsHealth, Inc., as lessee and
Farnam Street Financial, Inc., as lessor, dated February 5,
2007. Filed as Exhibit 99.1 to the Companys Form 8-K (File
No. 000-50348) filed February 9, 2007 and incorporated herein
by reference.10.53
    
    
    Third Amended and Restated Revolving Credit, Term Loan and
Security Agreement dated among United States Pharmaceutical
Group, L.L.C., NationsHealth Holdings, L.L.C., NationsHealth,
Inc., and CapitalSource Finance LLC, dated April 11, 2007.
Filed as Exhibit 10.1 to the Companys Form 8-K (File No.
000-50348) filed April 12, 2007 and incorporated herein by
reference.10.54
    
    
    Acknowledgement by Robert Gregg to NationsHealth, Inc. dated
July 16, 2007. Filed as Exhibit 10.1 to the Companys Form
10-Q (File No. 000-50348) filed August 14, 2007 and
incorporated herein by reference.10.55
    
    
    Form of Stock Option Agreement under the NationsHealth, Inc.
2004 Stock Option Plan, effective August 15, 2007. Filed as
Exhibit 10.1 to the Companys Form 10-Q (File No. 000-50348)
filed November 14, 2007 and incorporated herein by reference.10.56
    
    
    Lease Agreement between United States Pharmaceutical Group,
L.L.C., as lessee and Oakland 2600/2700, LLC, as lessor, dated
December 4, 2007. Filed as Exhibit 10.56 to the Companys Form
10-K (File No. 000-50348) filed March 28, 2008 and
incorporated herein by reference.10.57
    
    
    Senior Subordination Agreement, dated as of February 28, 2005,
by MHR Capital Partners LP, MHR Capital Partners (100) LP and
OTQ LLC, MHR Capital Partners LP in its capacity as collateral
agent, in favor of CapitalSource Finance LLC, and for certain
purposes RGGPLS Holding, Inc. Filed as Exhibit 10.2 to the
Companys Form 8-K (File No. 000-50348) filed March 4, 2005
and incorporated herein by reference.10.58
    
    
    Registration Rights Agreement, dated February 28, 2005,
between NationsHealth, Inc. and the parties specified on the
signature pages thereof. Filed as Exhibit 10.4 to the
Companys Form 8-K (File No. 000-50348) filed March 4, 2005
and incorporated herein by reference.10.59
    
    
    Stockholders Agreement, dated February 28, 2005, by and among
NationsHealth, Inc., RGGPLS Holding, Inc., GRH Holdings,
L.L.C, MHR Capital Partners LP, OTQ LLC and MHR Capital
Partners (100) LP. Filed as Exhibit 10.5 to the Companys Form
8-K (File No. 000-50348) filed March 4, 2005 and incorporated
herein by reference.10.60
    
    
    Consent and Waiver, dated as of February 28, 2005, among
NationsHealth, Inc. and the stockholders of NationsHealth,
Inc. named on the signature pages thereto. Filed as Exhibit
10.6 to the Companys Form 8-K (File No. 000-50348) filed
March 4, 2005 and incorporated herein by reference.
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Exhibit No.
    
    Description10.61
    
    
    Asset Purchase Agreement, dated as of September 5, 2006, by
and among NationsHealth, Inc., United States Pharmaceutical
Group, L.L.C. and HealthTran LLC. Filed as Exhibit 99.1 to the
Companys Form 8-K (File No. 000-50348) filed September 6,
2006 and incorporated herein by reference.10.62
    
    
    Agreement of Termination, dated as of September 13, 2006, by
and among NationsHealth, Inc., United States Pharmaceutical
Group, L.L.C. and Becton, Dickinson and Company. Filed as
Exhibit 99.1 to the Companys Form 8-K (File No. 000-50348)
filed September 13, 2006 and incorporated herein by reference.10.63
    
    
    Fifth Amendment to the Third Amended and Restated Credit
Agreement, dated as of March 27, 2008, by and among United
States Pharmaceutical Group, LLC dba NationsHealth,
NationsHealth Holdings, LLC, NationsHealth, Inc. and Diabetes
Care and Education, Inc. and CapitalSource Finance, LLC. Filed
as Exhibit 10.63 to the Companys Form 10-K (File No.
000-50348) filed March 28, 2008, and incorporated herein by
reference.10.64
    *
    
    Settlement Agreement and General Release made as of May 2,
2008, by and between Robert Gregg and NationsHealth, Inc.
Filed as Exhibit 10.64 to the Companys Form 8-K (File No.
000-50348) filed May 8, 2008, and incorporated herein by
reference.10.65
    *
    
    Amended and Restated Employment Agreement made as of May 14,
2008, by and between NationsHealth, Inc. and Tim Fairbanks.
Filed as Exhibit 10.65 to the Companys Form 8-K (File No.
000-50348) filed May 20, 2008, and incorporated herein by
reference.10.66
    *
    
    Employment Agreement made as of May 14, 2008, by and between
NationsHealth, Inc. and Bryan Happ. Filed as Exhibit 10.66 to
the Companys Form 8-K (File No. 000-50348) filed May 20,
2008, and incorporated herein by reference.10.67
    *
    
    Amended and Restated Employment Agreement made as of May 29,
2008, by and between NationsHealth, Inc. and Lewis Stone.
Filed as Exhibit 10.67 to the Companys Form 8-K (File No.
000-50348) filed May 29, 2008, and incorporated herein by
reference.10.68
    *
    
    Settlement Agreement and General Release made as of May 29,
2008, by and between NationsHealth, Inc. and Lewis Stone.
Filed as Exhibit 10.68 to the Companys Form 8-K (File No.
000-50348) filed May 29, 2008, and incorporated herein by
reference.10.69
    **
    
    Second Amended and Restated Preferred Vendor Agreement by and
among Connecticut General Life Insurance Company, United
States Pharmaceutical Group, L.L.C. and NationsHealth, Inc.,
dated as of May 1, 2008. Filed as Exhibit 10.69 to the
Companys Form 10-Q (File No. 000-50348) filed August 14,
2008, and incorporated herein by reference.10.70
    
    
    Sixth Amendment to Third Amended and Restated Revolving
Credit, Term Loan and Security Agreement dated May 14, 2008,
by and among CapitalSource Finance LLC, United States
Pharmaceutical Group, L.L.C., NationsHealth Holdings, L.L.C.
and NationsHealth, Inc. Filed as Exhibit 10.70 to the
Companys Form 10-Q (File No. 000-50348) filed August 14,
2008, and incorporated herein by reference.10.71
    *
    
    Amendment to Employment Agreement between NationsHealth, Inc.
and Glenn M. Parker, M.D., dated December 23, 2008.+
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Exhibit No.
    
    Description10.72
    *
    
    Amendment to Amended and Restated Employment Agreement between
NationsHealth, Inc. and Lewis Stone, dated December 23, 2008.+10.73
    *
    
    Amendment to Amended and Restated Employment Agreement between
NationsHealth, Inc. and Tim Fairbanks, dated December 23,
2008.+10.74
    *
    
    Amendment to Employment Agreement between NationsHealth, Inc.
and Bryan Happ, dated December 23, 2008.+10.75
    *
    
    Amendment to Employment Agreement between NationsHealth, Inc.
and Joshua Weingard, dated December 23, 2008.+10.76
    *
    
    Amendment to Employment Agreement between NationsHealth, Inc.
and Rodney Carson, dated December 23, 2008.+10.77
    **
    
    Medicare Part B Services and Medical Supplies Provider and
Services Agreement by and between Express Scripts, Inc. and
USPG dated December 11, 2008.+10.78

    *
    
    Settlement Agreement and General Release between
NationsHealth, Inc., United States Pharmaceutical Group,
L.L.C. and Susan Hill and Robert Hill, dated April 16, 2009.+21
    
    
    Subsidiaries of the Registrant.+23.1
    
    
    Consent of Ernst & Young LLP.+24.1
    
    
    Limited Power of Attorney appointing Joshua Weingard or
Timothy Fairbanks attorneys-in-fact, dated September 19, 2007,
by and on behalf of Robert Gregg, filed as Exhibit 24.1 to
Robert Greggs Form 4 filed on September 20, 2007, and
incorporated herein by reference.31.1
    
    
    Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.+31.2
    
    
    Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.+32.1
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.1
 *
    
    Management contract or compensatory plan or arrangement.**
    
    Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934.+
    
    Filed herewith.1
    
    Furnished herewith.  99