U.S. SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

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

or

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

For the transition period from _______ to _______

Commission File Number: 001-13343

AMS HEALTH SCIENCES, INC.

(405) 842-0131
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) 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   (X)    No   (  )

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act.

Yes   (  )    No   (X)

On October 25, 2004, we had outstanding 6,773,960 shares of our common stock, $.0001 par value.

AMS HEALTH SCIENCES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     Certain statements under the caption “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology such as “anticipates”, “believes”, “expects”, “may”, “will”, or “should” or other variations thereon, or by discussions of strategies that involve risks and uncertainties. Our actual results or industry results may be materially different from any future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include general economic and business conditions; our ability to implement our business and acquisition strategies; changes in the network marketing industry and changes in consumer preferences; competition; availability of key personnel; increasing operating costs; unsuccessful advertising and promotional efforts; changes in brand awareness; acceptance of new product offerings; changes in, or the failure to comply with, government regulations (especially food and drug laws and regulations); product liability matters; our ability to obtain financing for future acquisitions and other factors.

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PART I –FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to consolidated financial statements.

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to consolidated financial statements.

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

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AMS HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
AMS Health Sciences, Inc. and Subsidiaries

We have reviewed the accompanying consolidated balance sheet of AMS Health Sciences, Inc. (formerly Advantage Marketing Systems, Inc.) and Subsidiaries as of September 30, 2004, and the related consolidated statements of operations and cash flows for the three-month and nine-month periods ended September 30, 2004 and 2003. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements, as of and for the periods ended September 30, 2004 and 2003, for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of AMS Health Sciences, Inc. and Subsidiaries as of December 31, 2003 and the consolidated statements of operations, stockholders’ equity and cash flows for the year then ended (not presented herein) and, in our report dated February 17, 2004, we expressed an unqualified opinion on those statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

GRANT THORNTON LLP

Oklahoma City, Oklahoma
October 15, 2004

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

     We market a product line consisting of approximately sixty products in three categories; weight management, dietary supplement and personal care products. These products are marketed through a network marketing organization in which independent associates purchase products for resale to retail customers as well as for their own personal use.

     Critical Accounting Policies. We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from those estimates. We consider the following policies to be most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.

     Throughout this report, “net sales” represents the gross sales amounts reflected on our invoices to our associates, including freight income, less associate discounts and sales returns. All of our products include a customer satisfaction guarantee. Our products may be returned within 30 days of purchase for a full refund or credit toward the purchase of another product. We also have a buy-back program whereby we repurchase products sold to an independent associate (subject to a restocking fee), provided the associate terminates his/her associateship agreement with us and returns the product within 12 months of original purchase in marketable condition. We receive our net sales price in cash or through credit card payments upon receipt of orders from associates.

     Our “gross profit” consists of net sales less:

     We recognize revenue upon shipment of products, training aids and promotional materials to the independent associates. All of our customers pay for sales in advance of shipment. As such, we have no trade receivables. In the past we made loans to associates, but no longer make such loans. We have some outstanding loans to associates which are all repayable in five years or less and are secured by commissions controlled by us. Interest rates on loans are typically two percent or more above the prime rate and are fixed. All loans and receivables are secured by guaranteed payment sources that are within our control. As such, we believe there is no need for an allowance for doubtful accounts.

     We write down our inventory to provide for estimated obsolete or unsalable inventory based on assumptions about future demand for our products and market conditions. If future demand and market conditions are less favorable than management’s assumptions, additional inventory write-downs could be required. Likewise, favorable future demand and market conditions could positively impact future operating results if written-off inventory is sold.

     On a regular basis, we evaluate all available evidence, both positive and negative, regarding the ultimate realization of the tax benefits of our deferred tax assets. Valuation allowances have been established for certain operating loss and credit carryforwards that reduce deferred tax assets to an amount that we believe will, more likely than not, be realized. Uncertainties that may affect the realization of these assets include tax law changes and the future level of product prices and costs. The outlook for determination of this allowance is calculated on our historical taxable income, our expectations for the future based on a three-year projection, and available tax-planning strategies. Based on this determination, we expect that the net deferred tax assets will be realized as offsets to reversing deferred tax liabilities and as offsets to the tax arising from future taxable income.

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     We account for contingencies in accordance with SFAS No. 5, “Accounting for Contingencies”. SFAS 5 requires that we record an estimated loss from a loss contingency when information available prior to issuance of our financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal and income tax matters requires us to use our judgment. Many legal and tax contingencies can take years to resolve. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases. However, an adverse outcome in these matters could have a material impact on our results of operations, financial condition and cash flows. No amounts were accrued for such uncertainties as of September 30, 2004.

Results of Operations

     The following table sets forth, as a percentage of our net sales, selected results of operations for the three and nine months ended September 30, 2004 and 2003. The selected results of operations are derived from our unaudited consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of our future operations.

Comparison of the Three Months ended September 30, 2004 and 2003

     Our net sales during the three months ended September 30, 2004 decreased by $360,372, or 7.4%, to $4,522,683 from $4,883,055 during the three months ended September 30, 2003. The sales decrease is due to the decrease in number of associate autoships experienced by us in late 2003, which resulted in lower net sales for us throughout 2004, and the FDA ban on ephedra-containing products. We have historically earned a material portion of our revenues from our AM-300 product, which contains ephedra. In 2003, the FDA banned the use of ephedra in nutritional supplements. This ban was effective April 12, 2004. Sales of our AM-300 product totaled $0 and approximately $1.7 million, respectively, in the third quarter and first nine months of 2004, as compared to sales of approximately $1.5 million and $5.0 million, respectively in the same periods of 2003. While the FDA’s decision had an adverse effect on our 2003 revenues, we had been preparing for this contingency. Over the last several years, through strategic acquisitions, product redevelopment and refocus of weight loss products, we have built a multi-product peak performance, weight loss and

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nutritional product line that is predominately non-ephedra. We have seen positive results in converting our AM-300 customers to AM-300 fat burning solution or other weight loss products in states like New York, Illinois and California that have previously banned ephedra. A majority of the customers in those states have chosen one or more of our other performance-based weight loss and nutritional products.

     On March 6, 2004, we announced the launch of our three-phase 2004 mass marketing preferred customer acquisition program using a free trial format. The three products, Prime One, AM-300 fat burning solution and ToppFast meal replacement shake, are packaged in two free trial programs and represent our core adaptogen and weight loss products, targeting consumer demand for increased energy, reduced belly fat and recognizable weight loss. On May 27, 2004, we announced the signing of a Product Infomercial Development agreement, representing the third phase of our customer acquisition program.

     During the third quarter of 2004, we added approximately 26,000 new sales associates and preferred customers with our free trial program. This compares to additions of approximately 4,000 new sales associates for the same period of the prior year. We believe retention rates from our free trial program appear to be equivalent with those associated with associate acquisition programs in past years.

     Also during the third quarter of 2004, we introduced our new energy and weight loss solution, AM 5000, a naturally sourced proprietary formula targeting energy/anti-fatigue and weight loss in one complete product. This product also is included in our free trial program. Sales of AM 5000 began September 15, 2004, and represent approximately $138,000 of our third quarter revenue.

     Our cost of sales during the three months ended September 30, 2004 increased by $687,070, or 21.1%, to $3,935,936 from $3,248,866 during the same period in 2003. Total cost of sales, as a percentage of net sales, increased to 87.0% during the three months ended September 30, 2004 from 66.5% during the same period in 2003. The increase in cost of sales was attributable to:

     The reduction in our net sales plus the factors discussed above resulted in a decrease in gross profit of $1,047,442, or 64.1%, to $586,747 for the three months ended September 30, 2004 from $1,634,189 for the same period in 2003.

     Marketing expenses decreased $29,348, or 7.0%, to $389,464 during the three months ended September 30, 2004, from $418,812 during the same period in 2003. The decrease in expense was primarily attributable to:

     Distribution and administrative expense increased $259,882, or 17.2%, to $1,767,624 for the three months ended September 30, 2004 compared to $1,507,742 for the three months ended September 30, 2003. The increase in expense was primarily attributable to:

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     Our marketing, distribution and administrative expenses as a percentage of net sales increased to 47.7% during the three months ended September 30, 2004 from 39.5% during the same period in 2003. Management expects marketing, distribution and administrative expenses to continue at or near the current dollar levels, with the exception of the lease abandonment expense.

     Our net other income (reduced by other expense) increased by $103,108 to net other income of $84,931 at September 30, 2004, from a net other expense of $18,176 during the same period in 2003, primarily due to a decrease in interest expense, related to the repayment of all outstanding debt in January 2004, and an increase in investment income from marketable securities and gains on the sale of marketable securities.

          Our loss before taxes increased $1,040,218 to a loss of $1,485,410 for the three months ended September 30, 2004, compared to a loss of $310,541 during the same period in 2003. Loss before taxes as a percentage of net sales was (32.8)% and (6.4)% for the three months ended September 30, 2004 and 2003, respectively. Income tax benefit for the three months ended September 30, 2004 and 2003 was $463,753 and $121,232. Our net loss increased $832,348 to $1,021,657 for the three months ended September 30, 2004, from $189,309 for the same period in 2003. This increase was attributable to:

Net loss as a percentage of net sales increased to (22.6%) for the three months ended September 30, 2004, from (3.9%) during the same period in 2003.

Comparison of the Nine Months ended September 30, 2004 and 2003

     Our net sales during the nine months ended September 30, 2004 decreased by $930,720, or 6.6%, to $13,253,272 from $14,183,992 during the nine months ended September 30, 2003. The sales decrease is due to the decrease in number of associate autoships experienced by us in late 2003, and the FDA ban on ephedra-containing products. We have launched a new free trial program, adding approximately 43,000 new associates and preferred customers in the first nine months of 2004, compared to additions of approximately 8,000 new associates in the same period of 2003. We believe retention rates from our free trial program appear to be equivalent with those associated with associate acquisition programs in past years.

     Also during the third quarter of 2004, we introduced our new energy and weight loss solution, AM 5000, a naturally sourced proprietary formula targeting energy/anti-fatigue and weight loss in one complete product. Sales of AM 5000 began September 15, 2004, and totaled approximately $138,000 for the month.

     Our cost of sales during the nine months ended September 30, 2004 increased by $681,197, or 7.1%, to $10,286,553 from $9,605,356 during the same period in 2003. Total cost of sales, as a percentage of net sales, increased to 77.6% during the nine months ended September 30, 2004, from 67.7% during the same period in 2003. The increase in cost of sales was attributed to:

     The factors discussed above resulted in a decrease in gross profit of $1,611,917, or 35.2%, to $2,966,719 for the nine months ended September 30, 2004 from $4,578,636 for the same period in 2003.

     Marketing expenses decreased $334,283, or 27.5%, to $879,891 during the nine months ended September 30, 2004, from $1,214,174 during the same period in 2003. The decrease in expense was primarily attributable to:

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     Distribution and administrative expense increased $554,787, or 12.9%, to $4,842,592 for the nine months ended September 30, 2004 compared to $4,287,805 for the nine months ended September 30, 2003. The increase in expense was primarily attributable to:

     The marketing, distribution and administrative expenses as a percentage of net sales increased to 43.2% during the nine months ended September 30, 2004 from 38.8% during the same period in 2003. Management expects marketing, distribution and administrative expenses to continue at or near the current dollar levels, with the exception of the lease abandonment expense.

     Our net other income (reduced by other expense) increased by $260,581 to net other income of $143,706 for the nine months ended September 30, 2004, from a net other expense of $116,875 during the same period in 2003, primarily due to a decrease in interest expense, related to the repayment of all outstanding debt in January 2004, and an increase in investment income related to our marketable securities and gains on the sale of marketable securities.

     Our loss before taxes increased $1,571,840 to a loss of $2,612,058 for the nine months ended September 30, 2004, compared to a loss of $1,040,218 during the same period in 2003. Loss before taxes as a percentage of net sales was (19.7%) and (7.3%) for the nine months ended September 30, 2004 and 2003, respectively. Income tax benefit for the nine months ended September 30, 2004 and 2003 was $702,095 and $405,806. Our net loss increased $1,275,551 to $1,909,963 for the nine months ended September 30, 2004, from $634,412 for the same period in 2003. This increase was attributable to:

Seasonality

     Our operations do not experience patterns of seasonal fluctuations. However, there is no assurance that we will not become subject to seasonal fluctuations in operations.

Liquidity and Capital Resources

     Our primary source of liquidity has been cash provided by sales of our equity securities and marketable securities, and from our operating activities. In January 2004, we added cash of approximately $1.2 million from the exercise of outstanding warrants by our warrant holders. Using a portion of the proceeds from the exercise of

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warrants in 2003 and 2004, we repaid all debt, totaling $1,504,009, resulting in a decrease in annual interest expense of approximately $123,000. On August 11, 2004, our Board of Directors authorized the repurchase of up to $1 million of our outstanding common stock. This authorization expires December 31, 2004. At September 30, 2004, we had purchased a total of 118,800 shares for a total cost of $388,303. At September 30, 2004, we had working capital of $4,700,673, compared to $4,420,554 at December 31, 2003. Our working capital needs over the next 12 months consist primarily of marketing, distribution and administrative expenses, and will be provided by our operating activities and existing cash and cash equivalents, and if necessary, the sale of our marketable securities. During the nine months ended September 30, 2004, net cash used in operating activities was $1,280,206, net cash used in investing activities was $3,005,478 and net cash provided by financing activities was $2,210,538. This represented a net decrease in cash during this period of $2,075,146.

     In 2001, we completed construction of a 23,346 square foot distribution and call center facility in Oklahoma City. This project was funded, in part, with bank loans of $980,000 for the land and building and $166,216 for the warehouse equipment. Both loans were with Bank One Oklahoma, N.A. and accrued interest at an annual rate of .25% under the prime rate. The loans were retired in January 2004. As of January 31, 2004, we had no long-term debt outstanding.

     On September 17, 2004 we purchased additional office and warehouse space for a cash price of $525,000. The building, which is adjacent to our corporate headquarters, provides 6,000 square feet of additional warehouse space and 4,000 additional square feet of office space. Management estimates additional capital expenditures of approximately $226,000 for remodeling the office space and construction of a breezeway connection between the two buildings.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our balance sheet includes marketable securities, which we believe are conservative blends of income and growth investments resulting in moderate market risk. We invest in equity marketable securities to generate capital growth, and fixed-income marketable securities to provide current income. Because of the nature of these investments, total return and risk will be affected by both current interest rates and equity market movements. Our fixed income investments of approximately $2,000,000 are subject to interest risk only. We have approximately $2,100,000 of equity investments that are exposed to market risk.

     Interest Rate Risk. We currently maintain an investment portfolio of high-quality fixed-income marketable securities. All securities are available for sale and recorded in the balance sheet at fair value with fluctuations in fair value reported as a component of accumulated other comprehensive income in stockholders equity. We do not hedge our investment portfolio. Fixed-income investments with a maturity date of three months or less at the date of purchase are deemed to be cash equivalents. Any remaining fixed-income securities are considered short-term and mainly consist of investments in U.S. Treasury notes and bonds.

     The following table lists our cash equivalents and our short-term fixed-income marketable securities at September 30, 2004 and December 31, 2003:

     The fair value of the cash equivalents and fixed-income marketable securities increased $1,220,468 during the nine months ended September 30, 2004 to $2,025,032 from $804,564 at December 31, 2003. This increase was primarily due to the purchase of fixed-income securities of approximately $1,200,000, purchased with cash from the exercise of our outstanding warrants.

     Equity Market Risks. We currently maintain an investment portfolio of equity securities. All securities are available for sale and recorded in the balance sheet at fair value with fluctuations in fair value reported as a component of accumulated other comprehensive income in stockholders’ equity. We do not engage in hedging our equity portfolio or otherwise purchase derivative securities. At September 30, 2004, our equity investments had a

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value of $2,098,391 compared to $1,072,414 at December 31, 2003, primarily due to the purchase of mutual fund equity investments, purchased with cash from the exercise of our outstanding warrants.

     We attempt to manage our interest and market risk by evaluating and purchasing what we believe to be the best investment securities and rates of return available.

Item 4. CONTROLS AND PROCEDURES

     As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as required by Rule 13a-15(b). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. Our Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

On March 5, 2004, we were sued in Ross v. Advantage Marketing Systems, Inc., Superior Court of the State of California for the County of Los Angeles, Case No. BC 309118. An answer has been filed. The case has been transferred to the United States District Court for the Southern District of New York as part of the multi-district ephedra litigation. The plaintiff alleges that she took AM-300, which contains ephedra, and was injured as a result. She seeks actual, compensatory and punitive damages, plus an accounting and disgorgement of profits we purportedly earned as a result of allegedly illegal conduct. Written discovery has been exchanged by the parties. We intend to vigorously defend the case.

On March 8, 2004, we were sued in Purcell v. Advantage Marketing Systems, Inc. and The Chemins Company, Inc., District Court in and for Pontotoc County, State of Oklahoma, Case No. C-04-127. The plaintiff alleges that she took AM-300, which contains ephedra, and was injured as a result. This case has been dismissed without prejudice.

The case of Ronald Potter et al v. Advantage Marketing Systems, Inc. et al, a products liability claim, was filed in the Oklahoma County District Court in March 2003. The Plaintiffs allege that the ingestion of ephedra included in AM-300 resulted in the death of Pamela Sue Potter. We have filed an Answer to the Petition. Written discovery and responses have been exchanged, and a limited number of depositions have been taken. Otherwise, there has been little activity in the case. We have denied any wrongdoing and intend to vigorously defend the claim. The amount of damages sought is unknown, but includes compensatory and punitive damages.

The case of In re Jose Garcia v. Advantage Marketing Systems, Inc., a products liability claim, was filed in the Superior Court of California, San Bernardino County, in February 2003. The Plaintiff claimed personal injury and lost wages resulting from the ingestion of ephedra included in AM-300. The case was recently dismissed by the Plaintiff with prejudice to re-filing.

On May 18, 2004, we were sued in Hearn v. Advantage Marketing Systems, Inc. and the Chemins Company, Inc., District Court in and for Choctaw County, State of Oklahoma, Case No. CJ-04-52. We were only recently served with the Petition. An answer has been filed. The Plaintiff alleges that she took AM-300, which contains ephedra, and was injured as a result. She seeks actual and punitive damages in an amount in excess of $10,000. We intend to vigorously defend the case.

Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

On August 11, 2004, our Board of Directors authorized the repurchase of up to $1 million of our outstanding common stock. This authorization expires December 31, 2004. During the third quarter of 2004, we repurchased the shares set forth in the table below:

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Item 3. DEFAULTS UPON SENIOR SECURITIES

None

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

At our annual meeting held August 20, 2004, John W. Hail, David J. D’Arcangelo and M. Thomas Buxton III were re-elected directors for a three-year term, shareholders approved the Company name change from Advantage Marketing Systems, Inc. to AMS Health Sciences, Inc. and Grant Thornton LLP was ratified as our independent auditor for the 2004 fiscal year. A total of 4,885,898 shares were cast in favor of Messrs. Hail, D’Arcangelo and Buxton’s re-election and no shares were cast against. Abstentions were 57,141. A total of 4,923,522 shares were cast in favor of the Company name change and 15,571 shares were cast against. Abstentions were 3,946. A total of 4,926,771 shares were cast in favor of Grant Thornton’s ratification and 11,489 shares were cast against. Abstentions were 4,779. Messrs. Reggie Cook, Steven Hague, Steven Dickey and Harland Stonecipher continued as directors following our annual meeting.

Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

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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.

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Index of Exhibits

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