U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

Commission File Number: 001-15667

ACCESS PLANS USA, INC.

(Exact name of business issuer as specified in its Charter)

OKLAHOMA		73-1494382
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
4929 WEST ROYAL LANE, SUITE 200
IRVING, TEXAS		75063
(Address of principal executive offices)		(Zip Code)

(866) 578-1665
(Registrant’s telephone number)

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

     Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer: o	Accelerated filer: o	Non-accelerated filer: o	Smaller reporting company: þ

     Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     Yes o No þ

     As of August 13, 2008 the Registrant had outstanding 20,269,145 shares of Common Stock, $.01 par value.

 

 

ACCESS PLANS USA, INC.

FORM 10-Q

For the Quarter Ended September 30, 2008

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			3
Item 2. Management’s Discussion and Analysis			3
Item 3. Quantitative and Qualitative Disclosures about Market Risk			13
Item 4. Controls and Procedures (and Item 4T. Controls and Procedures)			13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			14
Item 1A. Risk Factors			15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			15
Item 3. Defaults upon Senior Securities			15
Item 4. Submission of Matters to a Vote of Security Holders			15
Item 5. Other Information			15
Item 6. Exhibits			16
SIGNATURES			17
Certification of Interim President and Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a)
Certification of Interim President and Chief Executive Officer Pursuant to Section 302
Certification of Chief Financial Officer Pursuant to Section 302
Certification of Interim President and Chief Executive Officer Pursuant to Section 906
Certification of Chief Financial Officer Pursuant to Section 906

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Our financial statements which are prepared in accordance with Regulation S-X are set forth in this report beginning on page 18.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion is qualified in its entirety by the more detailed information in our 2007 Annual Report on Form 10-K/A and the financial statements contained in this report, including the notes thereto, and our other periodic reports filed with the Securities and Exchange Commission since December 31, 2007 (collectively referred to as the “Disclosure Documents”). Certain forward-looking statements contained in this report and in the Disclosure Documents regarding our business and prospects are based upon numerous assumptions about future conditions that may ultimately prove to be inaccurate and actual events and results may materially differ from anticipated results described in the forward-looking statements. Our ability to achieve these results is subject to the risks and uncertainties discussed in the Disclosure Documents. Any forward-looking statements contained in this report represent our judgment as of the date of this report. We disclaim, however, any intent or obligation to update these forward-looking statements. As a result, the reader is cautioned not to place undue reliance on these forward-looking statements.

General
We at Access Plans USA, Inc., develop and distribute quality affordable consumer driven healthcare programs for individuals, and to a lesser extent, employer groups. Our products and programs are designed to deal with the rising costs of healthcare. These programs include health insurance plans and non-insurance healthcare discount programs to help provide solutions for the millions of Americans who need access to affordable healthcare.

On November 13, 2008, we announced that we had entered into a definitive agreement to merge with Alliance HealthCard, Inc. Once approved by our shareholders, our outstanding common stock shares will be exchanged for common stock shares of Alliance HealthCard. Alliance HealthCard, Inc. is a publicly-held company (OTCBB trading symbol: ALHC) with offices in Norman, Oklahoma. Under the terms of the agreement, the merger must be approved by a majority vote of our shareholders and is conditional upon our divesture of our Regional Healthcare operations based in El Paso, Alliance’s registration under the Securities Act of 1933 of the Alliance shares to be issued as part of the merger, and other routine matters. At closing, Alliance will issue up to 7.25 million of its shares to our shareholders. Immediately after closing, which is anticipated to occur during the first calendar quarter of 2009, we expect that our shareholders will own approximately 33% of the outstanding Alliance shares.

Alliance is a national marketing company specializing in the distribution of a broad range of discount savings plans, including discount medical plans. Alliance is the largest membership plan provider in the specialty rent-to-own market space and over the past year has increased its sales volume primarily by broadening its distribution of savings plans through new wholesale and retail relationships.

During the third quarter of 2008, we formally commenced an initiative to exit the third-party administration market. Accordingly, the El Paso-based Regional Healthcare operation has been reclassified as a discontinued operation. Our discontinued operations also include the results of ACP Agency. Since December 31, 2007, we have not actively engaged in the sale and marketing of Medicare insurance programs. In June of 2008, we sold

all of our rights to future override commissions on substantially all of the Medicare supplement business previously sold by agents contracted with ACP Agency, a wholly-owned subsidiary. Other business written by ACP Agency has been relatively minor and accordingly, the results of ACP Agency, which were previously included in the Insurance Marketing Division, have been reclassified as a discontinued operation.

Our operations are currently organized under two business divisions:

■		Consumer Plan Division: Consumer Plan develops and markets non-insurance healthcare discount programs and association memberships that include defined benefit insurance features through multiple distribution channels. We offer wellness programs, prescription drug and dental discount programs, medical discount cards, limited benefit insured plans and supplemental programs. Our distribution channels currently include network marketing representatives, independent agents and consumer direct tele-sales call centers. We also market to internet portals and financial institutions and wholesale lease some of our programs. This Division operates through our wholly-owned subsidiaries, The Capella Group, Inc. (“Capella”) and Protective Marketing Enterprises, Inc. (“PME”). PME was acquired in October 2007, and operates a proprietary customer healthcare advocacy department and proprietary dental and vision networks that provide services at negotiated rates to members of our discount medical plans (“program members”) and to members of other plans that have contracted with us for access to our networks (“network access members”). PME also has a back-office support platform that includes billing, administration and commission disbursement systems. Prior to 2007, this Division was referred to as our Consumer Healthcare Savings segment.
■		Insurance Marketing Division: Insurance Marketing offers and sells individual major-medical health insurance products and related benefit plans, including specialty insurance products, primarily through a national network of independent agents (AHCP Agency). We support AHCP agents with access to proprietary and private label products, leads for new sales, commission advance programs, incentive programs including an annual convention, web-based technology, and back-office support. Prior to the second quarter of 2008, this Division also included the results of ACP Agency (a broad network of independent agents that distributed Medicare supplement insurance programs to individuals) that is now reported as a discontinued operation, as further discussed below. This Division, which operates as Insuraco USA LLC (“Insuraco”), was acquired in January 2007 in connection with our merger with Insurance Capital Management USA, Inc.

Results of Operations
A summary of our results of operations for the three and nine months ended September 30, 2008 and 2007 is set forth below. The financial statements appearing elsewhere in this report provide additional related information. Certain reclassifications have been made to prior period financial statements to conform to the current presentation of the financial statements.

{$ in thousands}		Three Months Ended September 30,													Nine Months Ended September 30,
		2008				2007(a)				Change					2008				2007(a)				Change
Total revenue		$	8,688			$	7,482				16	%			$	26,895			$	20,365				32	%
Direct expenses			6,024				5,137				17	%				18,845				13,226				42	%
Gross margin			2,664				2,345				14	%				8,050				7,139				13	%
Total operating expenses			2,758				6,613				-58	%				9,123				13,396				-32	%
Loss from continuing operations before income taxes		$	(94	)		$	(4,268	)							$	(1,073	)		$	(6,257	)
Net loss		$	(828	)		$	(7,764	)							$	(2,197	)		$	(13,540	)
a) Reclassified to conform to the current period’s presentation.

Total revenue: The 16% increase in third quarter revenue to $8,688,000 reflects a 24% growth in Insurance Marketing revenue and increased revenue attributable to Consumer Plan’s October 1, 2007 acquisition of Protective Marketing Enterprises, Inc. (PME). The 32% year-to-date revenue growth to $26,895,000 reflects a comparable trend – compounded by the inclusion of only eight months of Insurance Marketing revenues in 2007 (Insurance Marketing was acquired January 30, 2007).

Gross margin: Gross margin comprises commission and services revenues, plus interest income, less commission costs, healthcare provider network benefit costs, other costs that are directly related to the generation of revenue, and interest expense. The 14% third quarter and 13% year-to-date increase in gross margin to $2,664,000, and $8,050,000, respectively, is attributable to growth in both the Consumer Plan and Insurance Marketing segments, as further discussed below.

Total operating expenses: The substantial quarter and year-to-date reductions in operating expenses were driven by the absence of the $3,977,000 prior year goodwill impairment charges and lower restructuring charges compared to the prior year. 2008 third-quarter and year-to-date personnel, sales, general and administrative expenses, which aggregate $2,506,000 and $8,197,000 approximate the corresponding 2007 prior period charges.

Loss from continuing operations before income taxes: The loss from continuing operations before income taxes aggregated $94,000 for the third quarter and $1,073,000 year-to-date. The reduction in the third quarter 2008 loss to $94,000, compared to the second quarter 2008 loss of $288,000 and the first quarter loss of $691,000 reflects earnings growth in Insurance Marketing’s AHCP Agency, combined with the modest turnaround in Consumer Plan’s operating results from earlier in the year, and a reduction in the Corporate and Other costs attributable to operating as a publicly-held company..

Net loss: The inclusion of results from discontinued operations increased the 2008 third-quarter and year-to-date net loss to $828,000 and $2,197,000 respectively.

The following table sets forth revenue, gross margin and the loss, by segment, from continuing operations.

{$ in thousands}		Three Months Ended September 30,													Nine Months Ended September 30,
Total Revenue - by segment		2008				2007(a)				Change					2008				2007(a)				Change
Consumer Plan		$	3,304			$	3,146				5	%			$	11,302			$	9,556				18	%
Insurance Marketing			5,376				4,331				24	%				15,567				10,778				28	%
Corporate			8				5									26				31
Total		$	8,688			$	7,482				16	%			$	26,895			$	20,365				32	%
Gross margin - by segment
Consumer Plan		$	1,437			$	1,241				16	%			$	4,366			$	4,190				4	%
Insurance Marketing			1,222				1,113				10	%				3,668				2,943				11	%
Corporate			5				(9	)			*					16				6				*
Total		$	2,664			$	2,345				14	%			$	8,050			$	7,139				13	%
Income (loss) from continuing operations before taxes - by Segment
Consumer Plan		$	120			$	(3,179	)			*				$	(32	)		$	(3,663	)			*
Insurance Marketing			259				(543	)			*					631				(774	)			*
Corporate			(473	)			(546	)								(1,672	)			(1,820	)			*
Total		$	(94	)		$	(4,268	)			*				$	(1,073	)		$	(6,257	)			*
a) Reclassified to conform to the current period’s presentation.
b) Insurance Marketing year-to-date percent change adjusts for acquisition of the division effective January 30, 2007.
*  Percent change not meaningful.

Consumer Plan Division. The operating results for our Consumer Plan Division are set forth below.

{$ in thousands}		Three Months Ended September 30,													Nine Months Ended September 30,
Results of Operations		2008				2007(a)				Change					2008				2007(a)				Change
Total revenue		$	3,304			$	3,146				5	%			$	11,302			$	9,556				18	%
Direct expenses			1,867				1,905				-2	%				6,936				5,366				29	%
Gross margin			1,437				1,241				16	%				4,366				4,190				4	%
Personnel costs			779				511				52	%				2,520				1,548				63	%
Other sales, general and administrative expenses			446				496				-10	%				1,595				2,269				-30	%
Depreciation and amortization			92				36				156	%				283				137				107	%
Restructuring and severance			-				-				*					-				522				*
Goodwill impairment charge			-				3,377				*					-				3,377				*
Total operating expenses			1,317				4,420				-70	%				4,398				7,853				37	%
Operating income (loss) before income taxes		$	120			$	(3,179	)			*				$	(32	)		$	(3,663	)			*
Percent of revenue:
Total revenue			100	%			100	%								100	%			100	%
Direct expenses			57	%			61	%								61	%			56	%
Gross margin			43	%			39	%								39	%			44	%
Personnel costs			24	%			16	%								22	%			16	%
Other sales, general and administrative expenses			13	%			16	%								14	%			24	%
Depreciation and amortization			3	%			1	%								3	%			1	%
Restructuring and severance			0	%			0	%								0	%			5	%
Goodwill impairment charge			0	%			107	%								0	%			35	%
Total operating expenses			40	%			140	%								39	%			82	%
Operating income (loss) before income taxes			4	%			-101	%								0	%			-38	%

		2008												2007
Selected Metrics		3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr (b)				2nd Qtr (b)
Program members:
New members enrolled			6,503				17,261				25,912				12,789				6,771				7,483
Members at end of period			39,855				49,709				55,535				39,737				27,902				28,965
Change from prior quarter			-20	%			-10	%			40	%			42	%			-4	%
Network access members:
Members at end of period			33,483				38,278				37,950				46,718
Change from prior quarter			-13	%			1	%			-19	%
Total revenue		$	3,304			$	4,092			$	3,906			$	4,238			$	3,146			$	3,269
Change from prior quarter			-19	%			5	%			-8	%			35	%			-4	%			4	%
Direct expenses (a)			1,867				2,539				2,530				2,503				1,905				1,849
Gross margin (a)			1,437				1,553				1,376				1,735				1,241				1,420
Gross margin ratio			43	%			38	%			35	%			41	%			39	%			43	%
Change from prior quarter			-7	%			13	%			-21	%			40	%			-13	%			-7	%
Operating expenses (b)			1,317				1,437				1,644				1,467				4,420				2,060
Operating income (loss) before income taxes (b)		$	120			$	116			$	(268	)		$	268			$	(3,179	)		$	(640	)
a) Reclassified to conform to the current period’s presentation.
b) 3Q07 and 2Q07 excludes the results of PME — which was acquired October 1, 2007. Additionally, 3Q07 operating expenses include a $3,377,000 goodwill impairment charge and 2Q07 includes a $522,000 restructuring charge.
*  Percent change not meaningful.

Total revenue: The 5% increase in third quarter revenue to $3,304,000 and the 18% increase in year-to-date revenue to $11,302,000 were primarily driven by the revenue from customers obtained in the October 2007 acquisition of PME. Revenue from new sales subsequent to this acquisition was substantially offset by the member terminations attributable to sales made by both Capella and PME prior to this date. The lower third quarter 2008 growth rate, relative to the year-to-date results, reflects the absence of strong new sales activity.

Gross margin: The year-to-date gross margin of $4,366,000 is 4% higher than the prior 2007 level. Additional gross margin from program and network members acquired with the PME acquisition, was offset by the continued decline in the more profitable legacy Capella multi-level-marketing book of business, and by high first durational month (“accelerated”) commissions paid to acquire new customers, particularly during the first quarter of 2008. During the second quarter of 2008, we experienced very high policy termination rates on the new “accelerated commission” call center program introduced earlier in the year. We have subsequently curtailed new sales from this distribution channel and modified our criteria for evaluating other new sales opportunities. Additionally, during the third quarter of 2008, we terminated a low margin legacy Capella private label relationship and experienced low sales volume in another legacy Capella private label contract. This is reflected in the 40% first quarter 2008 growth in program members to 55,535 at March 31, 2008, followed by a 10% decline in the second quarter of 2008 and a further 20% decline in the third quarter of 2008 to 39,855 program members at September 30, 2008.

Total operating expenses: Prior year operating expenses included a third-quarter 2007 goodwill impairment charge attributable to the write-off of the then remaining legacy Capella goodwill balance of $3,377,000 and a second-quarter 2007 restructuring charge of $522,000 attributable to an unsuccessful joint marketing initiative with Insurance Marketing and the anticipated termination of the legacy Capella administration outsourcing agreement. The 2008 third quarter and year-to-date reduction in sales, marketing and administrative costs were more than offset by the increase in personnel costs primarily due to the addition of the PME call center personnel and the shift in expenditures resulting from the September 2007 termination of the outsourcing agreement. The 2008 increase in depreciation and amortization charges was primarily attributable to the amortization of the intangible asset acquired in connection with the October 2007 PME acquisition.

Operating income (loss) before income taxes: While the Consumer Plan Division returned to profitability in the second quarter of 2008 and recorded modest third quarter growth to $120,000 of operating income before taxes, the 4% margin remains substantially below our blended pricing target of approximately 10%.

During the 2008 second quarter, Consumer Plan added sales and marketing resources and began to develop a relatively broad pipeline of new sales opportunities. We recently added new call centers and are seeking to diversify the distribution channels by adding web-portals, financial institutional relationships and new network access customers; although the recent introduction of a new product for the legacy Capella multi-level-marketing channel has been met with mixed results. Execution of these new sales opportunities, combined with the reductions in the cost structure targeted for later this year, should translate into improved profitability.

Insurance Marketing Division. The operating results for our Insurance Marketing Division are set forth below.

{$ in thousands}		Three Months Ended September 30,													Nine Months Ended September 30,
Results of Operations		2008				2007(a)				Change (b)					2008				2007(a)				Change (b)
Total revenue		$	5,376			$	4,331				24	%			$	15,567			$	10,778				28	%
Direct expenses			4,154				3,218				29	%				11,899				7,835				35	%
Gross margin			1,222				1,113				10	%				3,668				2,943				11	%
Personnel costs			465				425				9	%				1,430				1,222				4	%
Other sales, general and administrative expenses			340				476				-29	%				1,133				1,309				-23	%
Depreciation and amortization			158				155				2	%				474				412				2	%
Restructuring and severance			-				-				*					-				174				*
Goodwill impairment charge			-				600				*					-				600				*
Total operating expenses			963				1,656				42	%				3,037				3,717				27	%
Operating income (loss) before income taxes		$	259			$	(543	)			*				$	631			$	(774	)			*
Percent of revenue:
Total revenue			100	%			100	%								100	%			100	%
Total revenue			77	%			74	%								76	%			73	%
Gross margin			23	%			26	%								24	%			27	%
Personnel costs			9	%			10	%								9	%			11	%
Other sales, general and administrative expenses			6	%			11	%								8	%			12	%
Depreciation and amortization			3	%			4	%								3	%			4	%
Restructuring and severance			0	%			0	%								0	%			2	%
Goodwill impairment charge			0	%			14	%								0	%			5	%
Total operating expenses			18	%			39	%								20	%			34	%
Operating income (loss) before income taxes			5	%			-13	%								4	%			-7	%

		2008												2007
Selected Metrics		3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr				2nd Qtr (c)
Major medical insurance:
Submitted annualized premium		$	18,396			$	20,182			$	21,001			$	17,094			$	15,993			$	14,143
Issued annualized premium		$	15,144			$	15,488			$	16,272			$	13,545			$	12,269			$	10,314
New policies issued/sold			5,057				4,859				5,300				3,817				3,555				2,945
Policies in-force at end of period			20,318				19,161				17,820				16,449				15,317				14,353
Change from prior quarter			6	%			8	%			8	%			7	%			7	%
Total revenue (a)		$	5,376			$	5,268			$	4,923			$	4,468			$	4,331			$	4,077
Change from prior quarter			2	%			7	%			10	%			3	%			6	%
Direct expenses (a)			4,154				4,037				3,707				3,335				3,218				2,918
Gross margin (a)			1,222				1,231				1,216				1,133				1,113				1,159
Gross margin ratio			23	%			23	%			25	%			25	%			26	%			28	%
Change from prior quarter			-1	%			1	%			7	%			2	%			-4	%
Operating expenses (d)			963				1,041				1,034				992				1,656				1,309
Operating income (loss) before income taxes (d)		$	259			$	190			$	182			$	141			$	(543	)		$	(150	)
a) Reclassified to conform to the current period’s presentation.
b) Year-to-date percent change adjusts for absence of activity for January 2007 (division acquired January 30, 2007).
c) Two months activity through March 31, 2007, except for annualized premium and new policies issued/sold.
d) Expenses includes a 3Q07 $600,000 goodwill impairment charge in and a 2Q07 $174,000 restructuring charge.
*  Percent change not meaningful.

Total revenue: The 24% increase in 2008 third quarter revenue to $5,376,000, and the 28%* year-to-date increase to $15,567,000 reflects sustained quarter over preceding quarter growth in AHCP Agency’s major medical book of business. The September 30, 2008 major-medical policies in-force count of 20,318 is up 33% from a year ago.

Gross margin: The year-to-date gross margin of $3,668,000 reflects an 11%* growth over the 2007 period. This lower growth rate, relative to the revenue growth rate, reflects the shift in sales to lower-margin major-medical insurance carrier relationships. During the 2008 second and third quarters, the growth in gross margin was further constrained by additional lead cost amortization charges. In prior quarters, these expenditures were capitalized and, because the unamortized balance did not exceed unamortized deferred enrollment fee revenue, these costs were being amortized at an approximate 5% monthly rate. However, during the 2008 second and third quarters the continuation of the trend toward sales of lower-margin major-medical insurance products, which typically have no enrollment fee income at time of sale, resulted in accelerated lead expenditure amortization charges.

The Golden Rule program, currently our primary major-medical insurance carrier relationship, accounted for 44% of third quarter, and 40% of the year-to-date gross margin and 70% of the September 30, 2008 net outstanding agent advance balance of $6,448,000. This balance is net of a $650,000 provision for doubtful recoveries, which reflects a charge of $100,000 during the 2008 third quarter and a $250,000 2008 year-to-date charge. The corresponding charges for the three and nine month periods ended September 30, 2007 were $115,000 and $340,000, respectively.

Total operating expenses: The relatively modest 2008 third quarter and year-to-date* increase in personnel costs compared to the corresponding prior year periods was more than offset by substantive reductions in other sales, marketing and administrative expenditures. Additionally, the higher 2007 operating costs include the 2007 third quarter goodwill impairment charge of $600,000 (which arose from the prior year annual impairment assessment of the carrying value of all of our goodwill and intangible asset balances) and the $174,000 restructuring charge recorded in the 2007 second quarter in connection with an unsuccessful joint marketing initiative with Consumer Plan Division. Depreciation and amortization charges predominantly relate to the amortization of the intangible asset established in connection with the January 2007 acquisition of this Division.

Operating income (loss) before income taxes: Revenue growth and expense reductions during 2008 resulted in Insurance Marketing transitioning from a 2007 year-to-date operating loss of $774,000 (a 7% pre-tax operating loss margin) to a 2008 year-to-date gain of $631,000 (a 4% pre-tax operating income margin for the 2008 nine-month period). 45% of this change reflects growth in the book of business and operational efficiencies; the balance is attributable to the aforementioned 2007 goodwill impairment and restructuring charges.

Insurance Marketing recently secured commitments from two major carriers to provide us with new differentiated proprietary, or private label, product offerings. Execution of these new program opportunities, combined with further efficiencies in the cost structure, should translate into improved profitability and further improvement in the 2008 year-to-date 4% profit margin.

Corporate and Other. The operating costs for our corporate and other activities were as follows:

{$ in thousands}		Three Months Ended September 30,													Nine Months Ended September 30,
		2008				2007(a)				Change					2008				2007(a)				Change
Total revenue		$	8			$	5				*				$	26			$	31				*
Direct expenses			3				14				*					10				25				*
Gross margin			5				(9	)			*					16				6				*
Personnel costs			259				292				-11	%				802				1,105				-27	%
Other sales, general and administrative expenses			217				244				-11	%				717				716				0	%
Depreciation and amortization			2				1				*					5				5				*
Restructuring and severance			-				-				*					164				-				*
Total operating expenses			478				537				-11	%				1,688				1,826				-8	%
Operating (loss) before income taxes		$	(473	)		$	(546	)			*				$	(1,672	)		$	(1,820	)			*

		2008												2007
		3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr				2nd Qtr
Operating (loss) before income taxes		$	(473	)		$	(594	)		$	(605	)		$	(595	)		$	(546	)		$	(597	)
a) Reclassified to conform to the current period’s presentation.
*  Percent change not meaningful.

Total operating expenses: Operating expenses included in this segment comprise those expenses not readily allocable to our two divisions or our discontinued operations – the majority of these relate to public company operating costs. 2008 third quarter expenses are 11% lower than the corresponding prior year quarter. 2008 year-to-date expenses, inclusive of the second quarter 2008 severance charge, decreased 8% from the comparable 2007 period level.

Income Taxes
The modest income tax expense is attributable to state franchise taxes. We have not recognized any tax benefits attributable to net operating loss carry-forwards, as currently it is “more likely than not” that all this benefit will be realized. If the company returns to long-term profitability, we would be able to offset future taxable income by applying the net operating loss carry-forwards over a multi-year period. The aggregate tax-effected value of these benefits approximates $975,000 at September 30, 2008.

Discontinued Operations
The total revenue and net loss from discontinued operations comprises:

{$ in thousands}		Three Months Ended September 30,													Nine Months Ended September 30,
		2008				2007(a)				Change					2008				2007(a)				Change
Total Revenue:
Regional Healthcare division		$	691			$	1,620				-57	%			$	2,224			$	4,670				-52	%
ACP Agency			-				1,344				*					1,886				3,716				*
Total revenue		$	691			$	2,964				*				$	4,110			$	8,386				*
Net income (loss) from:
Regional Healthcare division		$	(702	)		$	(56	)			*				$	(1,601	)		$	(3,900	)			*
ACP Agency			-				(3,914	)			*					517				(3,843	)			*
Total net loss		$	(702	)		$	(3,970	)			*				$	(1,084	)		$	(7,743	)			*

Total revenue: The 2008 third-quarter and year-to-date decline in Regional Healthcare revenue was primarily attributable to the termination of two major contracts during the 2007 fourth quarter. The 2008 year-to-date decline in ACP Agency revenue reflects the absence of significant sales activity plus the impact of the June 2008 sale of our rights to future override commissions on substantially all of the business written by ACP Agency.

Total net loss: The 2008 third quarter and year-to-date Regional Healthcare loss reflects the impact of the aforementioned termination of two major contracts partially offset by a reduction in operating expenses. Additionally, in the third quarter of 2008 we recorded a $173,000 fixed asset impairment charge in connection with the valuation of the Regional Healthcare balance sheet at its estimated fair value. The prior year nine month loss includes a $4,092,000 goodwill impairment charge recorded in the second quarter of 2007.

The 2008 year-to-date ACP net income includes a $385,000 net gain recognized in June 2008 upon selling all of our rights to future override commissions on substantially all of the Medicare supplement business previously sold by agents contracted with ACP Agency. The 2007 third-quarter and year-to-date net loss included a $4,000,000 goodwill impairment charge.

Liquidity and Capital Resources
A summary of our net cash flow quarterly trend and liquidity and working capital metrics is set forth below.

{$ in thousands}		Three Months Ended September 30,													Nine Months Ended September 30,
		2008				2007(a)				Change					2008				2007(a)				Change
Net cash flow provided by (used in):
Operating activities (a):
Continuing operations		$	161			$	218				-26	%			$	(1,085	)		$	136				*
Discontinued operations			(600	)			145				*					(592	)			553				*
Total operating activity			(439	)			363				*					(1,677	)			689				*
Investing activities (a)			251				(62	)			*					100				320				*
Financing activities (a)			(280	)			(651	)			*					92				(735	)			*
Net change in unrestricted cash		$	(468	)		$	(350	)			*				$	(1,485	)		$	274				*

		2008												2007
		3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr				2nd Qtr
Net cash flow provided by (used in):
Operating activities (a):
Continuing operations		$	161			$	(431	)		$	(815	)		$	367			$	218			$	(445	)
Discontinued operations			(600	)			480				(472	)			374				145				418
Total operating activity			(439	)			49				(1,287	)			741				363				(27	)
Investing activities (a)			251				458				(609	)			(932	)			(62	)			126
Financing activities (a)			(280	)			(185	)			557				(604	)			(651	)			8
Net change in unrestricted cash		$	(468	)		$	322			$	(1,339	)		$	(795	)		$	(350	)		$	107
a) Cash flows have been reclassified to conform to the current period’s presentation; prior to the second quarter of 2008, net cash used to fund agent commission advances was presented as an investing activity and advance commissions received from insurance carriers was presented as a financing activity. Both commissions advanced to agents and commission advances received from carriers are now included in operating activities.

Selected balance sheet metrics:

		Sept. 30,				June 30,				March 31				Dec. 31,				Sept. 30,				June 30,
		2008				2008				2008				2007				2007				2007
Unrestricted cash (b)		$	1,226			$	1,694			$	1,372			$	2,711			$	3,508			$	3,856
Unrestricted short-term investments			-				-				-				-				11				11
Restricted short-term investments			858				1,154				1,735				1,231				1,100				1,100
Total cash and investments		$	2,084			$	2,848			$	3,107			$	3,942			$	4,619			$	4,967
Short-term debt		$	530			$	680			$	736			$	1,255			$	1,812			$	2,069
Long-term debt			864				995				1,124				-				-				348
Total debt		$	1,394			$	1,675			$	1,860			$	1,255			$	1,812			$	2,417
Working capital (c)		$	895			$	1,667			$	1,936			$	1,814			$	2,258			$	2,515
b) Consistent with the Company’s centralized cash management processes, all restricted and unrestricted cash has been classified as a continuing operations asset.
c) Working capital comprises the current assets less the current liabilities, and include all assets and liabilities attributable to discontinued operations other than goodwill.

Operating activities: While 2008 year-to-date net cash used in continuing operations activity aggregated $1,085,000, compared to net cash provided of $136,000 for the corresponding prior year-to-date period, there has been an improvement in the 2008 quarterly trend. The principal drivers of the 2008 quarterly trend and the change from 2007 are:

■		an increase in the amount of self-funding of agent advance commissions in the first quarter of 2008 and to a lesser extent in the second quarter of 2008;
■		funding certain Consumer Plan Division accelerated commission payments, primarily in the first quarter of 2008;
■		reversal of favorable fourth quarter 2007 expense payment timing variances, and;
■		the benefit in the first half of 2007 from lower expense payments resulting from the prepayment of certain costs in 2006 in conjunction with tax planning strategies.

The change in operating cash flow from discontinued operations was primarily driven by the adverse impact of the loss of two major Regional Healthcare contracts in the 2007 fourth quarter. The $480,000 of cash provided by discontinued operations in the second quarter of 2008 reflects receipt of $764,000 in connection with the sale of our rights to future override commissions on substantially all of the Medicare supplement insurance business written by ACP Agency.

Investing activities: The $100,000 of net cash provided by 2008 year-to-date investing activities represents a $373,000 net reduction in restricted cash less $273,000 of fixed asset expenditures, primarily leasehold improvement and equipment expenditures in connection with the PME integration and call center relocation. The $373,000 net reduction in restricted cash was attributable to:

■		the release of $911,000 of restricted deposits in connection with the conversion of legacy Capella credit card clearing and automated clearing-house processing onto the PME platform, net of a
■		$538,000 increase in restricted deposits resulting from a 2008 requirement to secure bonds for regulatory licenses in our Consumer Plan and Regional Healthcare divisions.

Financing activities: Substantially all of our financing activity relates to debt repayments and the March 2008 receipt of $874,000 in connection with securing a new three-year loan from Commission Funding Group (CFG), a specialty lending corporation (the proceeds received were net of loan repayments and an origination fee charge aggregating $731,000). During the 2008 third quarter we paid the final installment on the one-year

loan obtained from the Peter W. Nauert estate, All of the $1,394,000 outstanding debt at September 30, 2008 was attributable to the CFG facility.

Working capital: Working capital at September 30, 2008 aggregated $1,086,000, a $426,000 decrease from December 31, 2007. This primarily reflects 2008 year-to-date cash-based operating losses.

Capital commitments: We did not have any capital commitments as of September 30, 2008. We do not anticipate the need for any significant capital expenditures during the next several quarters.

Liquidity: Unrestricted cash at September 30, 2008 aggregated $1,226,000. Prior to the anticipated first quarter 2009 closing of the recently announced pending merger with Alliance HealthCard,Inc., we anticipate, but cannot provide assurance, that we will improve our unrestricted cash position by securing the release of additional restricted deposits; reducing recurring operating cost expenditures; and generating positive cash-flow sales and gross margin growth in our Consumer Plan and Insurance Marketing divisions.

We anticipate, but cannot provide assurance, that the cash on hand at September 30, 2008 together with the aforementioned initiatives to generate additional unrestricted cash will be more than sufficient to fund the operating losses of our El Paso based Regional Healthcare operation prior to exiting this business and to settle certain previously accrued litigation matters. However, there is no assurance that the pending merger with Alliance HealthCard Inc. will be completed during the first quarter of 2009 or that all of the other initiatives discussed above will be successful. Accordingly, our liquidity requirements cannot be predicted with certainty. Further, new sales growth, which will likely be a primary driver of improved earnings, could, in the short-term, generate the need for additional cash resources to fund Insurance Marketing growth in self-funded agent commission advances, accelerated commission payments on new Consumer Plan programs or any direct marketing initiatives that we may wish to pursue. Accordingly, there is no assurance that we will not require additional financing during the next twelve months, or that the terms of any available additional financing will be acceptable to us, or that we will in fact be able to obtain any additional financing.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not have any investments that are market risk sensitive.

ITEM 4. CONTROLS AND PROCEDURES (and ITEM 4T. CONTROLS AND PROCEDURES)
As of the end of September 30, 2008, management carried out an evaluation, under the supervision and with the participation of Ian Stuart, our Interim Chief Executive Officer (“CEO”) and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on this evaluation, Mr. Stuart concluded that our disclosure controls and procedures were still not fully effective at September 30, 2008 due to the significant deficiencies in internal control over financial reporting noted below.

In connection with the subsequent evaluation of disclosure controls and procedures effective as of June 30, 2008, management recognized that it had material weaknesses in its internal controls over financial reporting in the following areas:

■		Insurance Marketing division commission processing
■		Information technology general controls

During the third quarter 2008, sufficient progress was made to permit us to conclude that the weaknesses in the aforementioned areas were no longer material and would more appropriately be characterized as significant deficiencies. The following sets forth the basis for this conclusion at September 30, 2008:

•		Insurance Marketing division commission processing: Beginning earlier this year, we implemented various procedures to carefully analyze all of the commission data processed for us by third-party service providers, and to assure that the commission revenues and expenses recorded and reported in our financial statements are materially correct. In particular, during the third quarter of 2008, we repeatedly undertook a full, and satisfactory, reconciliation of the data provided by our major carrier. During the 2008 fourth quarter we anticipate that we will fully remediate the previously reported weakness by completing the implementation of an information management reporting system and processes that will readily provide in-depth analysis of commission results and trends.
•		Information technology general controls: During our assessment of internal controls over our information technology functions, we determined that we had several weaknesses in both our internal information technology controls and those of the third-party service providers, particularly with respect to the data processed on the legacy Capella discount card administration platform. Since June 30, 2008 we have converted a substantial portion of the legacy Capella book of business onto the PME automated processing platforms and also significantly enhanced the analytical review of transaction activity processed on both the legacy Capella and the PME administrative platforms. During the 2008 fourth quarter we anticipate we will complete the conversion onto the PME platform and by doing so will fully remediate the previously reported weakness.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
Except as provided below, there have been no new material legal proceedings that arose during the three months ended September 30, 2008, and there have been no material developments in legal proceedings reported by us in our 2007 Annual Report on Form 10-K.

		Foresight TPA dispute with Tenet. The Demand for Arbitration brought against our Foresight TPA subsidiary by Tenet Hospitals Limited d/b/a Sierra Medical Center and Providence Memorial Hospital and R.H.S.C. El Paso, Inc. d/b/a Rio Vista Physical Rehabilitation Hospital (collectively, “Tenet”) and a separate dispute between Tenet and Foresight regarding the administration of benefit plans by Foresight TPA that include access to Tenet hospitals have each been resolved by a confidential settlement agreement entered into by the parties on September 19, 2008. We disclosed these disputes in our 10-Q filed on August 14, 2008.
		William Andrew Rivell, M.D. and Alan B. Whitehouse, M.D., individually and on behalf of all persons similarly situated, v. Private Health Care Systems and The Capella Group, Inc.; Civil Action File No: CV106-176. was filed and remains pending in the United States District Court for the Southern District of Georgia, Augusta Division. The plaintiffs in this case allege that the contracts entered into by medical providers with our subsidiary, The Capella Group, Inc. (“Capella”) through Capella’s relationship with the Private Health Care Systems network of providers (“PHCS”) did not allow for the use of the providers’ names to market a discount medical plan whereby payment for services is made at the point of service by the consumer, and not by a third party payor such as an insurance company. We vigorously contest this assertion and intend to defend this case. The Plaintiffs are, however, seeking certification of this case as a class action on behalf of all similarly-situated physicians nationwide. If the plaintiffs succeed with such certification and ultimately prevail in the case, it could have a material adverse affect on our financial condition and our results of operation. The case was originally instituted on November 17, 2006, but was

thereafter dismissed by the District Court. The United States Court of Appeals for the Eleventh Circuit vacated such dismissal and remanded the case to the District Court on March 24, 2008.

At September 30, 2008, we accrued $625,000, inclusive of defense costs, for the resolution of the above matters and other pending litigation matters. While it is possible that we may incur costs in excess of this amount, we are unable to provide a reasonable estimate of the range of additional costs that may be incurred.

ITEM 1A. RISK FACTORS
Our 2007 Annual Report on Form 10-K sets forth our principal risk factors. In light of the significant year-to-date net loss, careful attention should be given to the liquidity discussion appearing in this report (see Part I Financial Information, Item 2. Management’s Discussion and Analysis).

		a) None.
		b) None.
		c) None.
		d) None.

None.

None.

None

ITEM 6. EXHIBITS

Exhibit
No.		Description
3.1		Registrant’s Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 of Registrant’s Form 10-K filed with the Commission on April 2, 2007.
3.2		Registrant’s Amended and Restated Bylaws incorporated by reference to Exhibit 3.2 of Registrant’s Form  10-K filed with the Commission on April 2, 2007.
4.1		Form of certificate of the common stock of Registrant is incorporated by reference to Exhibit 4.1 of Registrant’s Form 10-K filed with the Commission on April 2, 2007.
4.2		Precis, Inc. 1999 Stock Option Plan (amended and restated), incorporated by reference to the Schedule 14A filed with the Commission on June 23, 2003.
4.3		Precis, Inc. 2002 IMR Stock Option Plan, incorporated by reference to the Schedule 14A filed with the Commission on June 26, 2002.
4.4		Precis, Inc. 2002 Non-Employee Stock Option Plan (amended and restated), incorporated by reference to the Schedule 14A filed with the Commission on December 29, 2006.
31.1		Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of Ian R. Stuart as Interim President and Chief Executive Officer.
31.2		Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of Ian R. Stuart as Chief Financial Officer and Principal Accounting Officer.
32.1		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of Ian R. Stuart as Interim President and Chief Executive Officer.
32.2		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of Ian Stuart as Chief Financial Officer and Principal Accounting Officer.

SIGNATURES

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

INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007			19
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007			20
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2008			21
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007			22
Notes to Unaudited Condensed Consolidated Financial Statements			23

ACCESS PLANS USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(dollars in thousands)

		September 30,				December 31,
		2008				2007(b)
		(unaudited)
ASSETS
Cash and cash equivalents		$	1,226			$	2,711
Restricted short-term investments			858				1,231
Total cash and short-term investments			2,084				3,942
Accounts receivable, net			824				964
Income taxes receivable			-				70
Advanced agent commissions, net			6,448				4,942
Prepaid expenses			241				154
Deferred tax asset			-				23
Assets of discontinued operation			63				1,257
Total current assets			9,660				11,352
Fixed assets, net			542				447
Goodwill, net			5,489				5,489
Other intangible assets, net			2,877				3,462
Other assets			132				69
Total assets		$	18,700			$	20,819
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	398			$	562
Accrued commissions payable			652				478
Other accrued liabilities			1,839				2,021
Income taxes payable			239				247
Short-term debt			530				1,255
Current portion of capital leases			-				48
Unearned commissions			4,545				3,683
Deferred service fees and deferred enrollment fees, net of acquisition costs			308				289
Liabilities of discontinued operation			254				956
Total current liabilities			8,765				9,539
Long-term debt			864				-
Deferred tax liability			-				23
Total liabilities			9,629				9,562
Commitments and contingencies (Note 9)
Preferred stock, $1.00 par value, 2,000,000 authorized shares; none issued			-				-
Common stock, $0.01 par value, 100,000,000 shares authorized; 20,749,145 issued and 20,269,145 outstanding			207				207
Additional paid-in capital			40,630				40,619
Accumulated deficit			(30,757	)			(28,560	)
Less: Treasury stock (480,000 shares)			(1,009	)			(1,009	)
Total stockholders’ equity			9,071				11,257
Total liabilities and stockholders’ equity		$	18,700			$	20,819
a) The accompanying notes are an integral part of these condensed consolidated financial statements
b) Reclassified to conform to the current period’s presentation