UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
T QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 2010
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:	001-09293
PRE-PAID LEGAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma			73-1016728
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
One Pre-Paid Way, Ada, Oklahoma			74820-5813
(Address of principal executive offices)			(Zip Code)
(580) 436-1234
(Registrants’ telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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.							T Yes £ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).							£ Yes £ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer £		Accelerated filer T		Non-accelerated filer £ (Do not check if a smaller reporting company)		Smaller reporting Company £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)							£ Yes T No
The number of shares outstanding of the registrant’s common stock (excluding 4,852,179 shares held in treasury) as of October 21, 2010 was 9,764,441.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2011

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

For The Transition Period From

Commission File Number: 001-09293

PRE-PAID LEGAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

Oklahoma	73-1016728
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Pre-Paid Way, Ada, Oklahoma	74820-5813
(Address of principal executive offices)	(Zip Code)

(580) 436-1234

(Registrants’ telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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.		xYes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).		¨Yes ¨ No

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

Large accelerated filer ¨	Accelerated filer x	Non-accelerated filer ¨	Smaller reporting Company ¨
		(Do not check if a smaller
		reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

¨Yes x No

The number of shares outstanding of the registrant’s common stock (excluding 4,852,179 shares held in treasury) as of April 20, 2011 was 9,789,269.

PRE-PAID LEGAL SERVICES, INC.

FORM 10-Q

For the Quarter Ended ~~September~~March 3031, ~~2010~~2011

CONTENTS

Part I. Financial Information

Item 1.	Financial Statements:	Page
			Page
	Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009	3
Item 1.		Financial Statements:		3
	Consolidated Statements of Income (Unaudited) for the three month and nine month periods ended September 30, 2010 and 2009	4
		Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010		3
	Consolidated Statements of Comprehensive Income (Unaudited) for the three month and nine month periods ended September 30, 2010 and 2009	5
		Consolidated Statements of Income (Unaudited)
	Consolidated Statements of Cash Flows (Unaudited) for the nine month periods ended September 30, 2010 and 2009	6
		for the three month periods ended March 31, 2011 and 2010		4
	Notes to Consolidated Financial Statements (Unaudited)	7
		Consolidated Statements of Comprehensive Income (Unaudited)
Item 2.	Management’s Discussion and Analysis of Financial Condition And Results of Operations	13
		for the three month periods ended March 31, 2011 and 2010		5
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
		Consolidated Statements of Cash Flows (Unaudited)
Item 4.	Controls and Procedures	20
		for the three month periods ended March 31, 2011 and 2010		6
		Notes to Consolidated Financial Statements (Unaudited)		7
Item 2.		Management’s Discussion and Analysis of Financial Condition And Results of Operations		11
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		15
Item 4.		Controls and Procedures		16
Part II. Other Information
Item 1.		Legal Proceedings		17
Item 1A.		Risk Factors		17
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 6.		Exhibits		17
		Signatures		18

Part II. Other Information

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6.	Exhibits	21
	Signatures	24

ITEM 1. FINANCIAL STATEMENTS

PRE-PAID LEGAL SERVICES, INC. CONSOLIDATED BALANCE SHEETS (Amounts in 000's, except par values)

CONSOLIDATED BALANCE SHEETS

(Amounts in 000's, except par values)

ASSETS

	September 30,	December 31,
		March 31,			December 31,
	2010	2009
		2011			2010
Current assets:	~~(Unaudited)~~	(Unaudited)
Cash and cash equivalents	~~$ 51,608~~	$ ~~32,904~~	73,538		$	47,768
Available-for-sale investments, at fair value	~~3,383~~	~~2,959~~	2,720			2,812
Membership fees receivable	~~6,452~~	~~6,286~~	5,958			6,268
Inventories	~~1,122~~	~~1,266~~	998			1,197
Refundable income taxes	3,824	1,330
Deferred member and associate service costs			14,954			14,297
Deferred member and associate service costs	15,151	16,074
Deferred income taxes			5,887			6,319
Deferred income taxes	5,999	5,370
Other assets			3,660			4,299
Other assets	2,963	6,123
Total current assets			107,715			82,960
Total current assets	90,502	72,312
Available-for-sale investments, at fair value			20,558			20,401
Available-for-sale investments, at fair value	20,229	20,529
Investments pledged			4,390			4,461
Investments pledged, at fair value	4,521	4,212
Property and equipment, net			42,994			44,026
Property and equipment, net	45,130	49,100
Deferred member and associate service costs			1,993			2,040
Deferred member and associate service costs	2,079	2,065
Cash value of life insurance policies			10,675			10,162
Cash value of life insurance policies	9,430	8,263
Other assets			1,179			1,269
Other assets	1,506	1,507
Total assets		$	189,504		$	165,319
Total assets	$ 173,397	$ 157,988
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Membership benefits payable		$	11,099		$	11,226
Deferred revenue and fees			28,053			27,766
Current portion of capital leases payable			27			27
Income taxes payable			8,626			2,513
Accounts payable and accrued expenses			13,894			13,730
Total current liabilities			61,699			55,262
Capital leases payable			852			858
Deferred revenue and fees			1,993			2,040
Deferred income taxes			4,202			4,359
Deferred compensation liabilities			11,871			11,441
Total liabilities			80,617			73,960
Stockholders’ equity:
Common stock, $.01 par value; 100,000 shares authorized; 14,641 and
14,616 issued at March 31, 2011 and December 31, 2010, respectively			146			146
Retained earnings			206,239			188,779
Accumulated other comprehensive income			1,530			1,462
Treasury stock, at cost; 4,852 shares held at March 31, 2011 and
December 31, 2010, respectively			(99,028	)		(99,028	)
Total stockholders’ equity			108,887			91,359
Total liabilities and stockholders’ equity		$	189,504		$	165,319

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Membership benefits payable	$11,429	$11,987
Deferred revenue and fees	27,949	28,383
Current portion of capital leases payable	26	245
Current portion of notes payable	17,837	23,241
Income taxes payable	244	–
Accounts payable and accrued expenses	14,441	19,249
Total current liabilities	71,926	83,105
Capital leases payable	866	886
Notes payable	5,733	19,010
Deferred revenue and fees	2,079	2,065
Deferred income taxes	6,306	5,405
Deferred compensation liabilities	10,695	9,190
Total liabilities	97,605	119,661
Stockholders’ equity:
Common stock, $.01 par value; 100,000 shares authorized; 14,619 and 14,904 issued at September 30, 2010 and December 31, 2009, respectively	146	149
Retained earnings	172,690	135,401
Accumulated other comprehensive income	1,984	1,805
Treasury stock, at cost; 4,852 shares held at September 30, 2010 and December 31, 2009, respectively	(99,028)	(99,028)
Total stockholders’ equity	75,792	38,327
Total liabilities and stockholders’ equity	$173,397	$157,988

The accompanying notes are an integral part of these financial statements.

PRE-PAID LEGAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in 000's, except per share amounts) (Unaudited)

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended
	March 31,
	2011		2010
Revenues:
Membership fees	$	102,545	$	107,320
Associate services		5,857		8,028
Other		851		883
		109,253		116,231

Costs and expenses:
Membership benefits		34,062		35,682
Commissions		23,677		29,526
Associate services and direct marketing		6,505		5,547
General and administrative		15,142		12,302
Other, net		2,295		2,380
		81,681		85,437

Income before income taxes		27,572		30,794
Provision for income taxes		10,731		12,008
Net income	$	16,841	$	18,786

Basic earnings per common share	$	1.72	$	1.87
Diluted earnings per common share	$	1.72	$	1.87

Weighted average number of shares:
Basic		9,777		10,040
Diluted		9,779		10,054

(Amounts in 000's, except per share amounts)

(Unaudited)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2010	2009	2010	2009
Revenues:
Membership fees	$105,255	$105,435	$319,314	$317,856
Associate services	6,103	7,624	20,627	18,814
Other	697	888	2,475	2,790
	112,055	113,947	342,416	339,460
Costs and expenses:
Membership benefits	35,180	35,991	106,713	108,209
Commissions	29,069	36,676	87,840	93,023
Associate services and direct marketing	6,593	7,827	19,694	21,132
General and administrative	12,329	12,613	37,075	38,918
Other, net	2,232	2,361	6,839	6,495
	85,403	95,468	258,161	267,777
Income before income taxes	26,652	18,479	84,255	71,683
Provision for income taxes	10,785	7,648	33,116	27,960
Net income	$ 15,867	$ 10,831	$ 51,139	$ 43,723
Basic earnings per common share	$ 1.61	$ .99	$ 5.14	$ 3.96
Diluted earnings per common share	$ 1.61	$ .99	$ 5.13	$ 3.95
Weighted average number of shares:
Basic	9,850	10,967	9,954	11,048
Diluted	9,866	10,983	9,969	11,061

The accompanying notes are an integral part of these financial statements.

PRE-PAID LEGAL SERVICES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in 000's) (Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months Ended
	March 31,
	2011			2010
Net income	$	16,841		$	18,786

Other comprehensive income, net of tax:
Unrealized foreign currency translation adjustment		147			(247	)
Reclassification adjustment for realized foreign currency translation gains included
in net income		(51	)		–
		96			(247	)

Unrealized losses on investments during period		(28	)		(47	)
Reclassification adjustment for realized gains included in net income		-			(32	)
		(28	)		(79	)

Other comprehensive income(loss), net of income taxes of $43 and $501 in 2011 and
2010, respectively		68			(326	)
Comprehensive income	$	16,909		$	18,460

(Amounts in 000's)

(Unaudited)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2010	2009	2010	2009
Net income	$15,867	$10,831	$51,139	$43,723
Other comprehensive loss, net of tax:
Unrealized foreign currency translation adjustment	272	646	(88)	1,149
Reclassification adjustment for realized foreign currency translation gains included in net income	(7)	-	(32)	-
	265	646	(120)	1,149
Unrealized holding gains arising on investments during period	282	641	342	858
Reclassification adjustment for realized gains included in net income	-	-	(43)	(85)
	282	641	299	773
Other comprehensive income, net of income taxes of $350 and $345 for the three months and $894 and $416 for the nine months ended September 30, 2010 and 2009, respectively	547	1,287	179	1,922
Comprehensive income	$16,414	$12,118	$51,318	$45,645

The accompanying notes are an integral part of these financial statements.

PRE-PAID LEGAL SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in 000's) (Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31,
	2011			2010
Cash flows from operating activities:
Net income	$	16,841		$	18,786
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for deferred income taxes		318			832
Depreciation and amortization		1,726			1,970
Decrease in Membership fees receivable		310			47
Decrease in inventories		199			431
Decrease in refundable income taxes		-			1,330
Increase in deferred member and associate service costs		(610	)		(320	)
Decrease (increase) in other assets		173			(90	)
Decrease in accrued Membership benefits		(127	)		(343	)
Increase (decrease) in deferred revenue and fees		240			(520	)
Increase in other non-current liabilities		430			439
Increase in income taxes payable		6,113			9,742
Increase (decrease) in accounts payable and accrued expenses		260			(5,621	)
Net cash provided by operating activities		25,873			26,683

Cash flows from investing activities:
Additions to property and equipment		(694	)		(237	)
Purchases of investments – available for sale		(2,879	)		(1,169	)
Maturities and sales of investments – available for sale		2,857			475
Net cash used in investing activities		(716	)		(931	)

Cash flows from financing activities:
Cash used in exercise of stock options		(48	)		–
Tax benefit on exercise of stock options		667			–
Decrease in capital lease obligations		(6	)		(6	)
Repayments of debt		-			(9,561	)
Purchases and retirement of treasury stock		-			(1,568	)
Net cash provided by (used in) financing activities		613			(11,135	)

Net increase in cash and cash equivalents		25,770			14,617
Cash and cash equivalents at beginning of period		47,768			32,904
Cash and cash equivalents at end of period	$	73,538		$	47,521

Supplemental disclosure of cash flow information:
Cash paid for interest	$	14		$	241
Cash paid for income taxes	$	3,777		$	546

(Amounts in 000's)

(Unaudited)

	Nine Months Ended September 30,
	2010	2009
Cash flows from operating activities:
Net income	$51,139	$43,723
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for deferred income taxes	272	502
Depreciation and amortization	5,809	6,074
Changes in operating assets and liabilities:
(Increase) decrease in Membership fees receivable	(166)	277
Decrease (increase) in inventories	144	(74)
Increase in refundable income taxes	(2,494)	(3,452)
Decrease (increase) in deferred member and associate service costs	909	(3,506)
Decrease (Increase) in other assets and cash value of life insurance policies	1,994	(2,086)
Decrease in accrued Membership benefits	(558)	(51)
(Decrease) increase in deferred revenue and fees	(420)	2,963
Increase in deferred compensation liabilities	1,505	983
Increase in income taxes payable	244	–
(Decrease) increase in accounts payable and accrued expenses	(4,928)	3,056
Net cash provided by operating activities	53,450	48,409
Cash flows from investing activities:
Additions to property and equipment	(1,839)	(2,516)
Purchases of investments – available for sale	(3,118)	(12,609)
Maturities and sales of investments – available for sale	2,984	11,862
Net cash used in investing activities	(1,973)	(3,263)
Cash flows from financing activities:
Proceeds from exercise of stock options	33	108
Tax benefit on exercise of stock options	26	14
Decrease in capital lease obligations	(239)	(243)
Repayments of debt	(18,681)	(17,848)
Purchases of treasury stock	(13,912)	(14,825)
Net cash used in financing activities	(32,773)	(32,794)
Net increase in cash and cash equivalents	18,704	12,352
Cash and cash equivalents at beginning of period	32,904	26,528
Cash and cash equivalents at end of period	$51,608	$38,880
Supplemental disclosure of cash flow information:
Cash paid for interest	$ 598	$ 982
Cash paid for income taxes	$32,676	$32,918
Non-cash activities - capital lease obligations incurred	$ –	$ 446

The accompanying notes are an integral part of these financial statements.

PRE-PAID LEGAL SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Except for per share amounts, dollar amounts and number of shares in tables are in thousands unless otherwise indicated) (Unaudited)

~~NOTES~~Note TO1 ~~CONSOLIDATED~~- ~~FINANCIAL~~Basis ~~STATEMENTS~~of Presentation The accompanying consolidated financial statements and notes thereto have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our 2010 Annual Report on Form 10-K. Terms such as “we”, “our” and “us” are sometimes used as abbreviated references to Pre-Paid Legal Services, Inc.

~~(Except~~ The accompanying unaudited financial statements as of March 31, 2011, and for ~~per~~the ~~share~~three ~~amounts~~months ended March 31, ~~dollar~~2011 ~~amounts~~and 2010, reflect adjustments (which were normal and recurring) which, in ~~tables~~our opinion, are innecessary ~~thousands~~for ~~unless~~a ~~otherwise~~fair ~~indicated)~~statement of our financial position and results of operations of the interim periods presented. Results for the three month period ended March 31, 2011 are not necessarily indicative of results expected for the full year.

(Unaudited)

Note 1 - Basis of Presentation

The accompanying consolidated financial statements and notes thereto have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our 2009 Annual Report on Form 10-K. Terms such as “we”, “our” and “us” are sometimes used as abbreviated references to Pre-Paid Legal Services, Inc.

The accompanying unaudited financial statements as of September 30, 2010, and for the three and nine month periods ended September 30, 2010 and 2009, reflect adjustments (which were normal and recurring) which, in our opinion, are necessary for a fair statement of our financial position and results of operations of the interim periods presented. Results for the three and nine month periods ended September 30, 2010 are not necessarily indicative of results expected for the full year.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2 – ~~Contingencies~~Agreement and Plan of Merger On January 30, 2011 we entered into an Agreement and Plan of Merger with MidOcean PPL Holdings Corp. and PPL Acquisition Corp., affiliates of MidOcean Associates SPC, providing for the merger of PPL Acquisition Corp. and us. The Merger Agreement was unanimously approved by our Board of Directors acting upon the unanimous recommendation of the Special Committee of the Board formed in September 2010 for the purpose of evaluating strategic alternatives for us. At the effective time of the Merger, each share of our Common Stock issued and outstanding immediately prior to the effective time, other than shares with respect to which the holder has properly exercised appraisal rights, will be automatically cancelled and converted into the right to receive $66.50 in cash without interest. Consummation of the Merger is subject to customary conditions, including, without limitation, (i) the approval by the holders of a majority of the outstanding shares of Common Stock entitled to vote on the Merger, (ii) the absence of any law, injunction, judgment or ruling that restrains or prohibits the consummation of the Merger and (iii) the approval of Oklahoma and Florida insurance regulatory authorities. We currently anticipate consummating the transaction on or before July 31, 2011.

Note 3 – Contingencies On March 27, 2006, we received a complaint filed by Blackburn & McCune PLLC, a former provider attorney law firm, in the Second Circuit Court of Davidson County, Tennessee seeking compensatory and punitive damages on the basis of allegations of breach of contract and fraud. On May 15, 2006, the trial court dismissed plaintiff’s complaint in its entirety. Plaintiff amended the complaint to allege fraud and breach of fiduciary duty on June 12, 2006 and filed a notice of appeal on June 13, 2006. On August 24, 2007, the Court of Appeals reversed the ruling of the trial court and remanded the suit to the trial court for further proceedings. On June 24, 2009, the trial court granted our motion for summary judgment and dismissed plaintiff's action against us in its entirety. Plaintiff appealed the summary judgment, and on June 30, 2010 the appeals court reversed the dismissal in part and affirmed it in part, remanding the case to the trial court on the two surviving claims of the plaintiffs. The ultimate outcome of this matter is not determinable but we will vigorously defend our interests in this matter.

On We ~~March~~are ~~23,~~the ~~2007,~~subject weof ~~received~~an ainformal ~~Civil~~inquiry ~~Investigative~~by ~~Demand (“CID”) from~~ the ~~Federal~~SEC. ~~Trade~~This ~~Commission~~inquiry ~~(“FTC”)~~is ~~requesting~~a ~~information~~fact-finding ~~relating~~inquiry toand ~~our~~does ~~Identity~~not ~~Theft~~mean ~~Shield~~that ~~and~~the ~~Affirmative~~SEC ~~Defense~~has ~~Response~~reached ~~System~~any ~~(“ADRS”) program~~conclusions. On ~~April 20~~October 5, 2009, we received a ~~letter~~subpoena from the ~~FTC~~Division ~~alleging~~of ~~misrepresentations~~Enforcement inof ~~sales~~the ~~materials~~SEC. ~~used~~The insubpoena ~~our~~required ~~Identity~~us ~~Theft~~to ~~Shield~~produce ~~and~~a ~~ADRS~~variety ~~program~~of ~~such~~documents ~~that~~pertaining weto ~~made~~our ~~false~~treasury ~~and~~stock ~~misleading~~repurchase ~~claims~~program; ~~about~~our ~~the~~Affirmative ~~effectiveness~~Defense ofResponse ~~ADRS~~System ~~for~~program ~~helping~~and ~~organizations~~other ~~comply~~marketing ~~with~~practices; ~~government~~membership ~~data~~statistical ~~security~~information; ~~requirements.~~segment ~~Revisions~~reporting; to the ~~marketing~~Federal ~~materials~~Trade ~~originally~~Commission ~~provided~~contingency todisclosure; ~~the~~and ~~FTC~~other ~~have~~operational ~~been~~practices. ~~made~~On ~~subsequent~~April to13, ~~the~~2010 ~~initial~~we ~~communication~~received ~~with~~an ~~the~~additional ~~FTC.~~subpoena Werequesting ~~attempted~~information relating to ~~resolve~~certain ~~this~~membership ~~matter~~information, ~~with~~member ~~the~~complaints ~~FTC~~about ~~between~~provider ~~May~~law ~~2009~~firms, ~~and~~our ~~November~~efforts ~~2009;~~to ~~however~~achieve oncompliance ~~November~~with ~~18, 2009,~~ the ~~FTC~~payment ~~forwarded~~card aindustry ~~staff~~requirements, ~~recommendation to~~ the ~~FTC~~resignation ~~Commissioners~~of ~~with~~Harland aC. ~~proposed~~Stonecipher ~~complaint~~as ~~seeking~~Chief ~~injunctive~~Executive ~~relief~~Officer and ~~disgorgement~~the resignation of ~~funds~~Tom ~~received~~Smith ~~for~~as ~~sales~~a ofdirector. ~~the~~On ~~Identity~~July ~~Theft~~9, ~~Shield~~2010 ~~and~~we ~~legal~~received ~~plan~~an ~~products~~additional atsubpoena ~~ADRS~~requesting ~~presentations.~~information Werelated ~~met~~to ~~with~~prior ~~the~~subpoenas ~~FTC~~and onour ~~February~~production 3,of ~~2010~~documents to ~~explain~~the ~~our~~SEC. ~~disagreement~~Since ~~with~~that ~~the~~time, ~~FTC~~we ~~and~~continue to ~~reach~~respond ato ~~mutually~~requests ~~agreeable~~to ~~solution~~clarify prior productions. ~~Following~~We ~~the~~continue ~~meetings~~to cooperate with the ~~FTC,~~staff weof ~~continued~~the toSEC ~~provide~~and ~~requested~~expect ~~information~~to continue to ~~the~~do ~~FTC~~so. OnWe ~~July~~are ~~28,~~not ~~2010~~able to predict what the ~~FTC~~outcome ~~issued~~of athis ~~closing~~inquiry ~~letter~~may ~~with~~be noor ~~findings~~when ~~against~~it ~~the~~will ~~Company~~be resolved.

We are the subject of an informal inquiry by the SEC. This inquiry is a fact-finding inquiry and does not mean that the SEC has reached any conclusions. On October 5, 2009, we received a subpoena from the Division of Enforcement of the SEC. The subpoena required us to produce a variety of documents pertaining to our treasury stock repurchase program; our ADRS program and other marketing practices; membership statistical information; segment reporting; the FTC contingency disclosure; and other operational practices. On April 13, 2010 we received an additional subpoena requesting information relating to certain membership information, member complaints about provider law firms, our efforts to achieve compliance with the payment card industry requirements, the resignation of Harland C. Stonecipher as Chief Executive Officer and the resignation of Tom Smith as a director. On July 9, 2010 we received an additional subpoena requesting information related to prior subpoenas and our production of documents to the SEC . Since that time, we continue to respond to requests to clarify prior productions. We continue to cooperate with the staff of the SEC and expect to continue to do so. We are not able to predict what the outcome of this inquiry may be or when it will be resolved.

We On ~~are~~February a8, ~~defendant~~2011, ina ~~various~~putative ~~other~~shareholder ~~legal~~class ~~proceedings~~action ~~that~~complaint ~~are~~was ~~routine~~filed ~~and~~in ~~incidental~~the toOklahoma ~~our~~District ~~business.~~Court Weof ~~will~~Oklahoma ~~vigorously~~County ~~defend~~by ~~our~~Andrew ~~interests~~D. inMcMullan ~~all~~and ~~proceedings~~James ~~in which we are named as a defendant~~E. WeMcCurdy, ~~also~~individually ~~receive~~and ~~periodic~~on ~~complaints~~behalf orof ~~requests~~all ~~for~~others ~~information~~similarly ~~from~~situated, ~~various~~against ~~state~~us and ~~federal~~each ~~agencies~~member ~~relating~~of to our ~~business~~board ~~or the activities~~ of ~~our marketing force~~directors. WeThe ~~promptly~~complaint ~~respond~~generally toalleges ~~any~~that ~~such~~the ~~matters~~directors ~~and~~breached ~~provide~~their ~~any~~fiduciary ~~information~~duties ~~requested.~~to ~~While~~ the ~~ultimate~~shareholders ~~outcome~~by ofagreeing ~~these~~to ~~proceedings~~sell isthe ~~not~~Company ~~determinable,~~pursuant ~~we do not currently anticipate that these contingencies will result in any material adverse effect~~ to ~~our~~an ~~financial~~unfair ~~condition~~process orand ~~results~~at ~~of operation, unless~~ an ~~unexpected~~unfair ~~result occurs in one of the cases~~price. The ~~costs~~complaint ofalleges that the ~~defense~~directors ofbreached ~~these~~their ~~various~~fiduciary ~~matters~~duties ~~are reflected as a part~~ of ~~general~~care, ~~and administrative expense~~loyalty, ~~or Membership benefits if fees relate to Membership issues~~candor, ingood ~~the~~faith ~~consolidated statements of income. We believe that we have meritorious defenses in all pending cases~~ and ~~will~~independence ~~vigorously defend against the claims~~ and have ~~not~~acted ~~established~~to anput ~~accrued~~their ~~liability~~personal ~~for~~interests ~~any~~ahead ~~estimated~~of ~~damages~~the ininterests ~~connection~~of ~~with~~our ~~these various cases~~shareholders. ~~However,~~The itcomplaint isalso ~~possible~~alleges that anwe ~~adverse~~aided ~~outcome~~and inabetted ~~certain~~such ~~cases~~breaches. orThe ~~increased~~complaint ~~litigation~~seeks ~~costs~~injunctive ~~could~~relief, ~~have~~rescission anof ~~adverse~~any ~~effect~~barriers ~~upon~~to ~~our~~the ~~financial~~maximization ~~condition,~~of ~~operating~~shareholder ~~results~~value orand ~~cash~~attorneys’ ~~flows in particular quarterly or annual periods~~fees.

~~Canadian~~ On ~~taxing~~February ~~authorities~~11, ~~challenged~~2011, ~~portions~~a ofputative ~~our~~shareholder ~~commission~~class ~~and~~action ~~general~~complaint ~~and~~was ~~administrative~~filed ~~deductions~~in ~~for~~the ~~tax~~Oklahoma ~~years~~District ~~1999~~Court -of ~~2002~~Pontotoc ~~and~~County ~~have~~by ~~tax~~Czar ~~assessments~~Fredrik ~~that aggregate $5~~D.7 ~~million. During 2007~~Reyes, weindividually ~~reached a settlement with Canadian taxing authorities regarding the general~~ and ~~administrative deductions that would allow us to claim a deduction~~ on ~~the~~behalf ~~Canadian tax return for over 70%~~ of ~~these~~all ~~items.~~others ~~This~~similarly ~~settlement~~situated, ~~offer~~against ~~allowed~~ us, toeach ~~amend~~member of our ~~U.S.~~board ~~federal~~of ~~tax~~directors, ~~returns~~ and ~~deduct~~MidOcean ~~the~~PPL ~~remaining~~Holdings ~~30% of these items~~Corp., ~~The~~and ~~Canadian~~PPL ~~and~~Acquisition UCorp.S. ~~tax~~(the ~~returns~~“MidOcean ~~have~~entities”). ~~been~~The ~~amended~~complaint togenerally ~~reflect~~alleges ~~the~~that ~~changes in~~ our ~~general~~directors ~~and~~breached ~~administrative~~their ~~expense~~fiduciary ~~and~~duties ~~credits/refunds~~to ~~for~~ the ~~associated~~shareholders ~~taxes,~~by ~~penalty~~agreeing ~~and~~to ~~interest.~~sell ~~The Canadian taxing authorities contended commission deductions should be matched with~~ the ~~membership~~Company ~~revenue~~pursuant asto ~~received,~~an weunfair ~~contend~~process ~~these~~and ~~commissions~~at ~~are~~an ~~deductible~~unfair ~~when paid~~price. ~~Under~~The ~~Canadian~~complaint ~~tax~~alleges ~~laws, our commission payments are treated as a prepaid expense and we base our deduction of commission on the fact~~ that ~~all~~ the ~~services~~directors ~~(the~~breached ~~sale~~their offiduciary ~~the~~duties ~~membership) have been performed by the sales associate at the time~~ of ~~sale~~loyalty, ~~therefore~~due ~~this~~care, ~~prepaid~~independence, ~~expense~~good ~~(the~~faith ~~commission~~and ~~payments)~~fair ~~is deductible when paid. In addition~~dealing, ~~the~~and ~~commission~~that ~~payment~~Pre-Paid isand ~~taxable to~~ the ~~sales~~MidOcean ~~associate~~entities ~~when~~have ~~paid~~aided and ~~each~~abetted ~~year~~such webreaches. ~~issue~~The acomplaint T4also ~~(Canadian~~alleges ~~1099 equivalent) to sales associates for the total commission payments made during~~ that ~~year.~~we Weagreed ~~did not prevail on the commission issue on our appeal~~ to ~~the~~onerous ~~Canadian taxing authorities~~ and onpreclusive ~~December~~deal ~~19,~~protection ~~2008~~devices ~~filed~~as ~~our~~part ~~Notice~~ of ~~Appeal with~~ the ~~Tax Court of Canada. During the 3rd quarter 2009~~merger, ~~the~~including ~~Canadian taxing authorities indicated they were amenable to~~ a ~~settlement~~no ~~regarding~~solicitation ~~the commission issue~~provision. InThe ~~October~~complaint ~~2010~~seeks ~~they~~injunctive ~~informed~~relief, usdamages ~~they~~and ~~had~~costs ~~agreed~~of tothe ~~our~~action, ~~proposed~~including ~~settlement~~attorneys’ ~~terms which allows a deduction for substantially all commissions paid during years 1999 – 2002 in those tax years~~fees. WeOn ~~believe~~March ~~this~~2, ~~settlement~~2011 ~~provides a basis for~~ the ~~full~~complaint ~~deduction~~was ofamended ~~commissions~~to ~~when~~add ~~paid~~allegations ~~for~~that ~~tax~~our ~~years~~directors ~~2003~~breached ~~forward.~~their Wefiduciary ~~have~~duties ~~paid~~of ~~all~~candor ~~the assessed tax, penalty and interest relating~~ to the ~~commission~~shareholders ~~issue~~ and atthat ~~September 30,~~the ~~2010~~preliminary ~~have~~proxy ~~$3.2~~statement ~~million~~filed ~~recorded~~with ~~in Refundable income taxes which represents~~ the ~~amount~~SEC weon ~~expect~~February to23, ~~receive~~2011 ~~for~~is ~~previously~~misleading ~~paid tax, penalty~~ and ~~interest~~omits ~~for~~material ~~tax years 1999 through 2002~~information.

~~Note~~ On March 3, –2011, ~~Treasury~~a ~~Stock~~putative ~~Purchases~~shareholder class action complaint was filed in the Oklahoma District Court of Pontotoc County by Troy Ball, individually and on behalf of all others similarly situated, against us, each member of our board of directors, officers Randy Harp and Kathleen S. Pinson, and the MidOcean entities. The complaint generally alleges that the merger is unfair and inequitable to shareholders and that the directors and such officers breached their fiduciary duties of loyalty, due care, good faith and candor and have acted to put their personal interests ahead of the interests of the shareholder and that the MidOcean entities aided and abetted such breaches. The complaint also alleges that we agreed to onerous and preclusive deal protection devices as part of the merger, including a no solicitation provision. In addition, the complaint alleges that the preliminary proxy statement filed with the SEC on February 23, 2011 provides misleading information or omits material information resulting in shareholders being unable to make a fully informed decision in voting. The complaint seeks injunctive relief and costs of the action, including attorneys' fees.

We On ~~announced~~March ~~on April 6~~11, ~~1999~~2011, athe ~~treasury~~plaintiffs ~~stock~~in ~~purchase~~the ~~program~~Reyes ~~authorizing~~and ~~management~~Ball toactions ~~acquire~~filed upmotions to ~~500,000~~consolidate ~~shares~~the oftwo ~~our~~actions ~~common~~and ~~stock.~~appoint ~~The~~Bull ~~Board~~& ofLifshitz, ~~Directors~~LLP ~~has~~and ~~increased~~Levi ~~such~~& ~~authorization from 500~~Korsinsky,~~000~~ ~~shares~~LLP toco-lead 16class ~~million shares through subsequent board actions~~counsel. AtOn ~~September 30,~~March ~~2010 we had purchased 15.~~4, ~~million~~2011 ~~treasury~~and ~~shares~~March ~~under these authorizations for a total consideration of $471.~~8 ~~million~~, an2011, ~~average~~respectively, ~~price~~the ofplaintiffs ~~$30.66~~in ~~per~~the ~~share.~~Reyes ~~We purchased~~ and ~~formally~~Ball ~~retired~~actions ~~162,648~~filed ~~shares~~motions ofseeking ~~our~~leave ~~common~~to ~~stock~~conduct ~~during~~discovery ~~the~~on ~~2010~~an ~~third~~expedited ~~quarter for $8~~basis.~~5 million,~~ orOn anMarch ~~average~~10, ~~price of $52.49 per share~~2011, ~~reducing~~the ~~our~~Company ~~common stock by $1,626~~ and ~~our~~the ~~retained~~other ~~earnings~~defendants byin ~~$8.5~~the ~~million.~~Reyes Weaction ~~purchased~~moved ~~and~~to ~~formally~~stay ~~retired~~the ~~286,455~~Reyes ~~shares~~action ofin ~~our~~deference ~~common~~to ~~stock during~~ the ~~nine~~earlier-filed ~~months~~McMullan ~~ended September 30, 2010 for $13~~action.~~9 million,~~ orAlso anon ~~average~~March ~~price of $48.56 per share~~10, ~~reducing our common stock by $2~~2011,~~865~~ ~~and~~all ~~our~~defendants ~~retained~~previously ~~earnings~~served bywith ~~$13.9~~process ~~million.~~in ~~See Note 6. Given~~ the ~~current~~Ball ~~interest~~action ~~rate~~moved ~~environment,~~to ~~the~~stay ~~nature~~that ofaction ~~other~~in ~~investments~~deference ~~available~~to ~~and~~the ~~our~~McMullan ~~expected~~action. ~~cash~~The ~~flows,~~foregoing wemotions ~~believe~~are ~~that~~currently ~~purchasing~~scheduled ~~treasury~~to ~~shares~~be ~~enhances~~heard ~~shareholder~~by ~~value~~the ~~and~~Oklahoma ~~may~~District ~~seek~~Court ~~alternative sources~~ of ~~financing~~Pontotoc toCounty ~~continue~~on orMay ~~accelerate~~9, ~~the program~~2011. ~~Any~~On ~~additional~~March ~~treasury~~28, ~~stock~~2011, ~~purchases~~the ~~will~~plaintiffs bein ~~made~~the atBall ~~prices~~action ~~that~~voluntarily wedismissed ~~consider~~their ~~attractive~~claims ~~and~~against atMr. ~~such~~Harp ~~times~~and ~~that~~Ms. wePinson ~~believe~~without ~~will not unduly impact our liquidity~~prejudice.

~~Note~~ On 4April –15, ~~Earnings~~2011, ~~Per~~the ~~Share~~parties to the McMullan action, along with the MidOcean entities, executed a Memorandum of Understanding ("MOU") reflecting their agreement to settle the claims asserted in the McMullan action, subject to, among other things, the execution of a stipulation of settlement, notice of the settlement being given to shareholders, approval of the settlement by the Oklahoma District Court of Oklahoma County, completion of confirmatory discovery and completion of the merger. If approved by the Oklahoma District Court of Oklahoma County, the settlement will resolve all pending litigation related to the merger, including the Reyes and Ball actions, and would result in the release by the plaintiffs and the proposed settlement class of all claims that were or could have been brought challenging any aspect of the merger agreement, the merger and any disclosures made in connection therewith. The parties to the MOU are in the process of drafting a stipulation of settlement.

~~Basic~~ Also ~~earnings~~on ~~per~~April ~~common~~15, ~~share~~2011, ~~are computed by dividing net income by the weighted average number of shares of common stock outstanding during the respective period~~Messrs. ~~Diluted~~Reyes ~~earnings~~and ~~per~~Ball, ~~common~~joined ~~share are computed~~ by ~~dividing~~a ~~net~~third ~~income~~putative byshareholder, ~~the~~James ~~weighted average number of shares of common stock and dilutive potential common shares outstanding during the respective period~~V. ~~The~~Clark, ~~weighted~~filed ~~average~~motions ~~number~~with ~~of common shares is increased by~~ the ~~number~~Oklahoma ofDistrict ~~dilutive~~Court ~~potential common shares issuable on the exercise~~ of ~~options~~Oklahoma ~~less~~County ~~the number of common shares assumed~~ to ~~have~~intervene ~~been~~in ~~purchased with~~ the ~~proceeds~~McMullan ~~from~~action ~~the~~and ~~exercise~~transfer ofthat ~~the~~proceeding ~~options pursuant~~ to ~~the~~Pontotoc ~~treasury~~County. ~~stock~~No ~~method;~~hearing ~~those~~date ~~purchases~~has ~~are assumed to have~~ been ~~made~~set aton ~~the~~either ~~average price of the common stock during the respective period~~motion.

We believe these lawsuits relating to the MidOcean merger are without merit and seek to resolve them solely to eliminate the burden and expense of litigation. Absent such settlement, we intend to defend ourselves vigorously.

We are a defendant in various other legal proceedings that are routine and incidental to our business. We will vigorously defend our interests in all proceedings in which we are named as a defendant. We also receive periodic complaints or requests for information from various state and federal agencies relating to our business or the activities of our marketing force. We promptly respond to any such matters and provide any information requested. While the ultimate outcome of these proceedings is not determinable, we do not currently anticipate that these proceedings will result in any material adverse effect to our financial condition or results of operation, unless an unexpected result occurs in one of the cases. The costs of the defense of these various matters are reflected as a part of general and administrative expense, or Membership benefits if fees relate to Membership issues, in the consolidated statements of income. We believe that we have meritorious defenses in all pending cases and will vigorously defend against the claims and have established an accrued liability of $500,000 for any estimated damages and/or settlements in connection with these various cases. However, it is possible that an adverse outcome in certain cases or increased litigation costs could have an adverse effect upon our financial condition, operating results or cash flows in particular quarterly or annual periods.

	Three Months Ended September 30,		Nine Months Ended September 30,
Basic Earnings Per Share:	2010	2009	2010	2009
Earnings:
Net income	$15,867	$10,831	$51,139	$43,723
Shares:
Weighted average shares outstanding	9,850	10,967	9,954	11,048
Diluted Earnings Per Share:
Earnings:
Net income	$15,867	$10,831	$51,139	$43,723
Shares:
Weighted average shares outstanding	9,850	10,967	9,954	11,048
Assumed exercise of options	16	16	15	13
Weighted average number of shares, as adjusted	9,866	10,983	9,969	11,061
Shares issued pursuant to option exercises	2	–	2	5

Note 4 – Earnings Per Share
Basic earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per common share are computed by dividing net income by the weighted average number of shares of common stock and dilutive potential common shares outstanding during the respective period. The weighted average number of common shares is increased by the number of dilutive potential common shares issuable on the exercise of options less the number of common shares assumed to have been purchased with the proceeds from the exercise of the options pursuant to the treasury stock method; those purchases are assumed to have been made at the average price of the common stock during the respective period.

Options to purchase shares of common stock are excluded from the calculation of diluted earnings per share when their inclusion would have an anti-dilutive effect on the calculation. No options were excluded for the three month or nine month periods ended September 30, 2010 and 2009.

	Three Months
	Ended March 31,
Basic Earnings Per Share:	2011		2010
Earnings:
Net income	$	16,841	$	18,786
Shares:
Weighted average shares outstanding		9,777		10,040
Diluted Earnings Per Share:
Earnings:
Net income	$	16,841	$	18,786
Shares:
Weighted average shares outstanding		9,777		10,040
Assumed exercise of options		2		14
Weighted average number of shares, as adjusted		9,779		10,054

~~Note~~ Options 5to –purchase ~~Recently~~shares ~~Issued~~of ~~Accounting~~common ~~Pronouncements~~stock are excluded from the calculation of diluted earnings per share when their inclusion would have an anti-dilutive effect on the calculation. No options were excluded for the three month periods ended March 31, 2011 and 2010.

Note 5 – Recently Issued Accounting Pronouncements In ~~February~~ January 2010, the Financial Accounting Standards Board (issued ASU 2010-06 “~~FASB”)~~Improving ~~issued~~Disclosures ~~Accounting~~about ~~Standards~~Fair ~~Update~~Value ~~(“ASU~~Measurements.”) ~~No.~~ ASU 2010-~~09,~~06 ~~Amendments~~requires toadditional ~~Certain~~disclosures ~~Recognition~~about ~~and~~fair ~~Disclosure~~value ~~Requirements~~measurements ~~(Accounting~~including ~~Standards~~transfers ~~Codification~~in —and ~~“ASC”~~out —of ~~Topic~~Levels ~~855)~~1 —and ~~Subsequent~~2 ~~Events.~~and ~~The~~more ~~ASU~~disaggregation ~~amends~~for the ~~subsequent~~different ~~events~~types ~~disclosure~~of ~~guidance~~financial instruments. ~~The~~This ~~amendments~~ASU ~~include~~is aeffective ~~definition~~for ofannual anand ~~SEC~~interim ~~filer,~~reporting ~~require~~periods anbeginning ~~SEC~~after ~~filer~~December to15, ~~evaluate~~2009 ~~subsequent~~for ~~events~~most ~~through~~of the ~~date~~new ~~the~~disclosures ~~financial~~and ~~statements~~for ~~are~~periods ~~issued~~beginning after December 15, ~~and~~2010 ~~remove~~for the ~~requirement~~new ~~for~~Level an3 ~~SEC~~disclosures. ~~filer~~Comparative todisclosures ~~disclose~~are ~~the~~not ~~date~~required ~~through~~in ~~which~~the ~~subsequent~~first ~~events~~year ~~have~~the ~~been~~disclosures ~~evaluated~~are required. ~~ASU~~We ~~2010-09~~did ~~was~~not ~~effective~~have ~~upon~~any ~~issuance.~~significant ~~The~~transfers ~~adoption~~in or out of ~~this~~Level ~~guidance~~1 ~~required~~and ~~additional~~Level ~~disclosures~~2 ~~but~~fair ~~did~~value ~~not~~measurements, ~~have~~or aany ~~material~~Level ~~impact~~3 onfair ~~the~~value ~~Company’s~~measurements, ~~consolidated~~during ~~results~~the ofthree ~~operations~~months ~~and~~ended ~~financial~~March ~~position~~31, 2011.

InNote ~~January~~6 ~~2010, the Financial Accounting Standards Board issued ASU 2010~~-06 ~~“Improving Disclosures about Fair Value Measurements.” ASU 2010~~Share-06based ~~requires~~Compensation During ~~additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and more disaggregation for~~ the ~~different~~three ~~types~~months ofended ~~financial~~March ~~instruments. This ASU is effective for annual and interim reporting periods beginning after December 15~~31, ~~2009 for most of the new disclosures and for periods beginning after December 15~~2011, ~~2010 for~~ the ~~new~~stock ~~Level~~option 3activity ~~disclosures.~~under ~~Comparative~~our ~~disclosures~~stock ~~are~~option ~~not~~plans ~~required~~was inas ~~the~~follows: ~~first year the disclosures are required. We did not have any significant transfers in or out of Level 1 and Level 2 fair value measurements during the nine months ended September 30, 2010 and 2009.~~

Note 6 – Notes Payable

	Weighted			Weighted Average	Aggregate
	Average		Number of	Remaining Contractual	Intrinsic
	Price		Options	Term (In Years)	Value
Outstanding, January 1, 2011	$	19.20	36,300
Granted		–	–
Cancelled		–	–
Exercised	$	19.20	36,300
Outstanding, March 31, 2011	$	-	-	-	$	-
Options exercisable as of March 31, 2011	$	-	-	-	$	-

During 2006, we received $80 million of senior, secured financing (the “Senior Loan”) from Wells Fargo Capital Finance (“Wells Fargo”) consisting of a $75 million five year term loan facility (the “Term Facility”) and a $5 million five year revolving credit facility (the “Revolving Facility”). At September 30, 2010, we had the full Revolving Facility available to us. After payment of an origination fee of 1%, lender costs and retirement of $15.3 million of existing bank indebtedness, the net proceeds of the Term Facility we received were $58.8 million and were used to purchase treasury stock.

The Term Facility provides for a five-year maturity and amortizes in monthly installments of $1.25 million commencing August 1, 2006, with interest on the outstanding balances under the Term Facility and the Revolving Facility payable, at our option, at a rate equal to Wells Fargo base rate or at the 30 day LIBOR rate plus 150 basis points. The interest rate at September 30, 2010 was 1.76%. We are also obligated to make additional quarterly payments equal to 50% of our “excess cash flow” (as defined in the Senior Loan agreement) if our Leverage Ratio is greater than or equal to 1 to 1 at the end of a quarter. Our Leverage Ratio was 0.22 to 1 at September 30, 2010. We expect to be able to repay the facilities with cash flow from operations. We have the right to prepay the Term Facility in whole or in part without penalty.

~~The~~ Other ~~Senior~~information ~~Loan~~pertaining isto ~~guaranteed~~option byactivity ~~our~~during ~~non-regulated~~the ~~wholly~~three ~~owned~~months ~~subsidiaries~~ended ~~and~~March ~~is secured by all of our tangible and intangible personal property (other than aircraft)~~31, ~~including~~2011 ~~stock in all of our direct subsidiaries,~~ and a2010 ~~mortgage~~was onas afollows: ~~building we own in Duncan, Oklahoma used for one of our existing customer service facilities.~~

In addition to customary covenants for loans of a similar type, the principal covenants for the Senior Loan are:

	March 31, 2011		March 31, 2010
Weighted average grant-date fair value of stock options granted	Not applicable		Not applicable
Total fair value of stock options vested	Not applicable		Not applicable
Total intrinsic value of stock options exercised	$	1,710	$	-

¨Note a7 ~~limitation~~– onFair ~~incurring~~Value ~~any~~Measurement FASB ~~indebtedness~~ASC in820, ~~excess~~Fair ofValue ~~the~~Measurements ~~remaining~~and ~~existing~~Disclosures, ~~bank~~defines ~~indebtedness~~fair ~~outstanding~~value, establishes a framework for using fair value to measure assets and $2liabilities, and provides for disclosures about fair value measurements.3 ~~million~~The instandard ~~permitted~~applies ~~capitalized~~whenever ~~leases~~other standards require or ~~purchase~~permit ~~money~~assets ~~debt;~~or liabilities to be measured at fair value. ASC 820 established the following fair value hierarchy that prioritizes the inputs used to measure fair value:

¨ a limitation on our ability to pay dividends or make stock purchases, other than with the net proceeds of the Term Loan, unless we meet certain cash flow tests; At September 30, 2010, we had approximately $31.9 million of availability pursuant to this limitation;

Level 1:	Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed equities and U.S. government treasury securities.

Level 2:	Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include obligations of state and political subdivisions, government guaranteed bank debt, auction rate certificates and corporate obligations.

Level 3:	Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. At each balance sheet date, we perform an analysis of all instruments subject to ASC 820 and include in Level 3 all of those whose fair value is based on significant unobservable inputs.

¨ The afollowing ~~prohibition~~table presents our financial assets and liabilities that were accounted for at fair value on ~~prepayment~~a recurring basis as of ~~other~~March ~~debt;~~31, 2011 and 2010 by level within the fair value hierarchy:

¨ a requirement to maintain consolidated EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) for a rolling twelve month period ending December 31, 2006 and each quarter thereafter of at least $80 million ($75 million for us and our top tier direct subsidiaries);

Investments	March 31,
Fair Value Measurements Using:	2011		2010
Level 1 inputs	$	–	$	–
Level 2 inputs:
Obligations of state and political subdivisions		24,776		22,461
Certificates of deposit		2,087		5,049
Other		805		837
		27,668		28,347
Level 3 inputs		–		–
Total	$	27,668	$	28,347

¨ a requirement to maintain a quarterly fixed charge coverage ratio (EBITDA (with certain adjustments) divided by the sum of interest expense, income taxes and scheduled principal payments) of at least 1.1 to 1;

¨ a requirement to maintain at least 1.3 million members;

¨ a requirement to maintain a Leverage Ratio (funded indebtedness as of the end of each quarter divided by EBITDA for the trailing twelve months) of no more than 1.5 to 1;

¨ we must have availability (unused portion of the Revolving Facility) plus Qualified Cash (the amount of unrestricted cash and cash equivalents) greater than or equal to $12.5 million; and

¨ an event of default occurs if Harland Stonecipher ceases to be our Chairman and Chief Executive Officer for a period of 120 days unless replaced with a person approved by Wells Fargo. In April 2010 we received written consent from Wells Fargo agreeing to Randy Harp and Mark Brown, as Chief Executive Officers of Borrower, replacing Harland Stonecipher as CEO.

We were in compliance with these covenants at September 30, 2010.

Our $20 million real estate loan was fully funded in 2002 to finance our new headquarters building in Ada, Oklahoma and has a final maturity of August 2011. This loan, with interest at the 30-day LIBOR rate plus 150 basis points adjusted monthly, is secured by a mortgage on our headquarters. The interest rate at September 30, 2010 was 1.76% with monthly principal payments of $191,000 plus interest with the balance of approximately $2.3 million due at maturity. The real estate loan’s financial covenants conform to those of the Senior Loan.

During 2007, we entered into a term loan agreement with Wells Fargo Equipment Finance, Inc. to refinance $9.6 million indebtedness related to our aircraft. This loan, with interest at the 30-day LIBOR rate plus 89 basis points adjusted monthly, is secured by a mortgage on the aircraft and engines. The interest rate at September 30, 2010 was 1.15% with monthly principal payments of $80,000 plus interest.

A schedule of outstanding balances as of September 30, 2010 is as follows:

Senior loan	$12,500
Real estate loan	4,381
Aircraft loan	6,689
Total notes payable	23,570
Less: current portion of notes payable	(17,837)
Long term portion	$ 5,733

A schedule of future maturities as of September 30, 2010 is as follows:

Repayment schedule commencing October 2010:
Year 1	$17,837
Year 2	956
Year 3	956
Year 4	956
Year 5	956
Thereafter	1,909
Total notes payable	$23,570

Note 7 - Share-based Compensation

During the nine months ended September 30, 2010, the stock option activity under our stock option plans was as follows:

	Weighted Average Price	Number of Shares	Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Outstanding, January 1, 2010	$19.20	38,000
Granted	–	–
Cancelled	–	–
Exercised	$19.20	1,700
Outstanding, September 30, 2010	$19.20	36,300	0.42	$ 1,571
Options exercisable as of September 30, 2010	$19.20	36,300	0.42	$ 1,571

Other information pertaining to option activity during the six months ended September 30, 2010 and 2009 was as follows:

	September 30, 2010	September 30, 2009
Weighted average grant-date fair value of stock options granted	Not applicable	Not applicable
Total fair value of stock options vested	Not applicable	Not applicable
Total intrinsic value of stock options exercised	$ 68	$ 40

Under our stock option plan, 1,346,252 shares of our Common Stock are available for issuance. Options outstanding and exercisable were granted at a stock option price which was not less than the fair market value of our Common Stock on the date the option was granted and no option has a term in excess of ten years. Additionally, options vested and became exercisable either on the grant date or up to five years from the option grant date.

Note 8 – Fair Value Measurement

On January 1, 2008, we adopted FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The Statement applies whenever other statements require or permit assets or liabilities to be measured at fair value. ASC 820 established the following fair value hierarchy that prioritizes the inputs used to measure fair value:

Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed equities and U.S. government treasury securities.

Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include obligations of state and political subdivisions, government guaranteed bank debt, auction rate certificates and corporate obligations.

Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. At each balance sheet date, we perform an analysis of all instruments subject to ASC 820 and include in Level 3 all of those whose fair value is based on significant unobservable inputs.

The following table presents our financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2010 and 2009 by level within the fair value hierarchy:

Investments	September 30,
Fair Value Measurements Using:	2010	2009
Level 1 inputs	$ –	$ –
Level 2 inputs: Obligations of state and political subdivisions Certificates of deposit Government guaranteed bank debt Other	22,359 4,938 – 836	32,327 4,069 1,602 1,010
	28,133	39,008
Level 3 inputs	–	–
Total	$28,133	$39,008

For securities without a readily ascertainable market value (Level 2), we utilize pricing services and broker quotes. Our pricing service’s evaluations are based on market data. Our pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information. Because many fixed income securities do not trade on a daily basis, our pricing service’s evaluated pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations. Such estimated fair values do not necessarily represent the values for which these securities could have been sold at the dates of the balance sheets.

Our financial instruments consist primarily of cash, certificates of deposit, short-term investments, debt securities, Membership fees receivable, Membership benefits payable, notes payable and accounts payable and accrued expenses. Fair value estimates have been determined by us, using available market information and appropriate valuation methodologies. Fair values of inactively traded debt securities are based on quoted market prices of identical or similar securities or based on observable inputs like interest rates. The carrying value of cash, certificates of deposit, Membership fees receivable, Membership benefits payable and accounts payable and accrued expenses are considered to be representative of their respective fair value, due to the short-term nature of these instruments. The carrying value of notes payable is considered to be representative of their respective fair values, due to the variable interest rate feature of such notes. The fair value disclosures relating to debt securities are presented above.

~~Note 9 – Subsequent Events~~10

OnITEM ~~October 25, 2010 we announced that we are evaluating strategic alternatives, including a possible sale of the Company and alternatives that do not involve a sale, to enhance shareholder value~~2. The Board of Directors has established a special committee comprised of independent directors to lead the process. As part of the process, the special committee has been evaluating an offer received by us from a well‐known private equity firm to acquire all of the outstanding shares of our common stock in a merger at a price of $60.00 cash per share. Counsel for the offeror has notified us that in the event of a public disclosure by us or our advisors of the offerorMANAGEMENT’sS ~~proposal,~~DISCUSSION ~~the~~AND ~~proposal~~ANALYSIS ~~will~~OF beFINANCIAL ~~deemed~~CONDITION ~~withdrawn.~~AND ~~The~~RESULTS ~~special~~OF committee has not set a definitive timetable for completion of its evaluation of strategic alternatives and there can be no assurances that the process will result in any transaction being announced or completed.OPERATIONS

The following discussion should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2010, which describes, among other things, our basic business model, critical accounting policies, measures of Membership retention, and basic cash flow characteristics of our business. The following tables set forth changes in the principal categories of revenues and expenses and Membership and recruiting activity for the first quarter of 2011 compared to the first quarter of 2010 and the fourth quarter of 2010 (Table amounts in 000’s, other than percentages). The sum of the percentages in the tables may not total due to rounding.

Three Months Ended March 31, 2011	Three			%		%		Three			Three
compared to	Months			Change		Change		Months			Months
Three Months Ended March 31, 2010	Ended		% of	From		From		Ended		% of	Ended		% of
and compared to	March 30,		Total	Prior		Sequential		March 31,		Total	Dec. 31,		Total
Three Months Ended December 31, 2010	2011		Revenue	Year		Period		2010		Revenue	2010		Revenue
Revenues:
Membership fees	$	102,545	93.9	(4.4	)	(2.1	)	$	107,320	92.3	$	104,776	94.0
Associate services		5,857	5.3	(27.0	)	(1.0	)		8,028	6.9		5,916	5.3
Other		851	0.8	(3.6	)	2.8			883	0.8		828	0.7
		109,253	100.0	(6.0	)	(2.0	)		116,231	100.0		111,520	100.0
Costs and expenses:
Membership benefits		34,062	31.2	(4.5	)	(2.3	)		35,682	30.7		34,865	31.3
Commissions		23,677	21.7	(19.8	)	(10.3	)		29,526	25.4		26,384	23.7
Associate services and direct marketing		6,505	5.9	17.3		(8.3	)		5,547	4.8		7,094	6.4
General and administrative		15,142	13.9	23.1		3.5			12,302	10.6		14,633	13.1
Other, net		2,295	2.1	(3.6	)	119.4			2,380	2.0		1,046	.9
		81,681	74.8	(4.4	)	(2.8	)		85,437	73.5		84,022	75.3

Income before income taxes		27,572	25.2	(10.5	)	.3			30,794	26.5		27,498	24.7
Provision for income taxes		10,731	9.8	(10.6	)	(4.3	)		12,008	10.3		11,210	10.1
Net income	$	16,841	15.4	(10.4	)	3.4		$	18,786	16.2	$	16,288	14.6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

	Three Months Ended:
New Memberships:	3/31/2011		12/31/2010		3/31/2010
New legal service membership sales		103,548		110,105		128,989
New “stand-alone” IDT membership sales		6,045		7,367		5,192
Total new membership sales		109,593		117,472		134,181
New “add-on” IDT membership sales		47,663		60,416		76,309
Average Annual Membership fee	$	304.40	$	312.15	$	325.17

Active Memberships:
Active legal service memberships at end of period		1,357,854		1,381,428		1,433,872
Active “stand-alone” IDT memberships at end of period (see note below)		91,900		91,809		91,047
Total active memberships at end of period		1,449,754		1,473,237		1,524,919
Active “add-on” IDT memberships at end of period (see note below)		645,535		668,646		702,266

New Sales Associates:
New sales associates recruited		16,378		28,160		37,640
Average enrollment fee paid by new sales associates	$	147.15	$	97.33	$	70.30

Average Membership fee in force:
Average Annual Membership fee	$	300.81	$	302.10	$	302.13

Note – reflects 3,758 net transfers from “add-on” status to “stand-alone” status during the first quarter 2011.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2009, which describes, among other things, our basic business model, critical accounting policies, measures of Membership retention, and basic cash flow characteristics of our business. The following tables set forth changes in the principal categories of revenues and expenses and Membership and recruiting activity for the third quarter of 2010 compared to the third quarter of 2009 and the second quarter of 2010 (Table amounts in 000’s). The sum of the percentages in the tables may not total due to rounding.

Three Months Ended September 30, 2010 compared to Three Months Ended September 30, 2009 and compared to Three Months Ended June 30, 2010	Three Months Ended Sept. 30, 2010	% of Total Revenue	% Change From Prior Year	% Change From Sequential Period	Three Months Ended Sept. 30, 2009	% of Total Revenue	Three Months Ended June 30, 2010	% of Total Revenue
Revenues:
Membership fees	$105,255	93.9	(.2)	(1.4)	$105,435	92.5	$106,739	93.5
Associate services	6,103	5.5	(20.0)	(6.0)	7,624	6.7	6,496	5.7
Other	697	0.6	(21.5)	(22.1)	888	0.8	895	0.8
	112,055	100.0	(1.7)	(1.8)	113,947	100.0	114,130	100.0
Costs and expenses:
Membership benefits	35,180	31.4	(2.3)	(1.9)	35,991	31.5	35,851	31.4
Commissions	29,069	25.9	(20.7)	(0.6)	36,676	32.2	29,245	25.6
Associate services and direct marketing	6,593	5.9	(15.8)	(12.7)	7,827	6.9	7,554	6.6
General and administrative	12,329	11.0	(2.3)	(.9)	12,613	11.1	12,444	10.9
Other, net	2,232	2.0	(5.5)	.2	2,361	2.1	2,227	2.0
	85,403	76.2	(10.5)	(2.2)	95,468	83.8	87,321	76.5
Income before income taxes	26,652	23.8	44.2	(.6)	18,479	16.2	26,809	23.5
Provision for income taxes	10,785	9.6	41.0	4.5	7,648	6.7	10,323	9.1
Net income	$15,867	14.2	46.5	(3.8)	$10,831	9.5	$16,486	14.4

	Three Months Ended:
New Memberships:	9/30/2010	6/30/2010	9/30/2009
New legal service membership sales	121,277	120,443	166,377
New “stand-alone” IDT membership sales	4,635	4,974	8,645
Total new membership sales	125,912	125,417	175,022
New “add-on” IDT membership sales	75,027	75,593	112,653
Average Annual Membership fee	$328.17	$333.29	$325.60
Active Memberships:
Active legal service memberships at end of period	1,403,848	1,419,673	1,455,492
Active “stand-alone” IDT memberships at end of period (see note below)	89,285	90,062	90,063
Total active memberships at end of period	1,493,133	1,509,735	1,545,555
Active “add-on” IDT memberships at end of period (see note below)	689,409	697,468	710,795
New Sales Associates:
New sales associates recruited	36,329	36,313	75,398
Average enrollment fee paid by new sales associates	$65.34	$70.58	$79.31
Average Membership fee in force:
Average Annual Membership fee	$303.70	$303.74	$302.86
Note – reflects 3,924 net transfers from “add-on” status to “stand-alone” status during the third quarter 2010.

Identity Theft Shield (“IDT”) memberships sold in conjunction with new legal plan memberships or “added-on” to existing legal plan memberships sell for $9.95 per month and are not counted as “new” memberships but do increase the average premium and related direct expenses (membership benefits and commissions) of our membership base, while “stand alone” IDT memberships are not attached to a legal plan membership and sell for $12.95 per month.

~~Recently Issued Accounting Pronouncements~~11

~~See~~Results ~~Note~~of 5Operations – ~~Recently~~First ~~Issued~~Quarter ~~Accounting~~of ~~Pronouncements~~2011 compared to First Quarter of 2010 Net income decreased 10% for the first quarter of 2011 to $16.8 million from $18.8 million for the prior year’s first quarter primarily due to a decrease in ~~Item~~Membership fees of $4.8 million, a decrease in associate services revenue of $2.2 million, an increase in associate services and direct marketing expenses of $1.0 ~~above~~million, and an increase in general and administrative expense of $2.8 million, partially offset by a decrease in Membership benefits of $1.6 million, a decrease in Commissions of $5.8 million, and a decrease in income taxes of $1.3 million. Diluted earnings per share decreased 8% to $1.72 per share from $1.87 per share for the prior year’s comparable quarter due to the 10% decrease in net income partially offset by a 3% decrease in the weighted average number of diluted shares outstanding.

Membership fees decreased 4% to $102.5 million during the 2011 first quarter compared to $107.3 million for the 2010 quarter. Membership fees and their impact on total revenues in any period are determined directly by the number of active Memberships in force during any such period and the monthly amount of such Memberships. The active Memberships in force are determined by both the number of new Memberships sold in any period together with the renewal rate of existing Memberships. New Membership sales decreased 18% during the three months ended March 31, 2011 to 109,593 from 134,181 during the comparable period of 2010. At March 31, 2011, there were 1,449,754 active Memberships in force compared to 1,524,919 at March 31, 2010, a decrease of 5%. The average annual fee per Membership has decreased from $302 for all Memberships in force at March 31, 2010 to $301 for all Memberships in force at March 31, 2011, primarily as a result of fewer “add-on” IDT memberships.

Associate services revenue decreased by $2.2 million to $5.9 million during the first quarter of 2011 when compared to the 2010 quarter. New associates enrolled decreased 56% to 16,378 during the 2011 period compared to 37,640 for the same period of 2010. The average enrollment fees paid by new sales associates were $147 and $70 for the respective periods. The eService fees decreased to $3.2 million for the first quarter of 2011 compared to $4.1 million for the 2010 quarter. Future revenues from associate services will depend primarily on the number of new associates enrolled, the price charged for new associates and the number who choose to participate in our eService program, but we expect that such revenues will be offset by the direct and indirect cost to us of training, providing associate services and other direct marketing expenses.

Other revenue declined 4% from $883,000 for the 2010 period to $851,000 for the 2011 period.

Total revenues decreased 6% to $109.3 million for the three months ended March 31, 2011 from $116.2 million during the comparable period of 2010 due to a $4.8 million decrease in Membership fees, a $2.2 million decrease in associate services revenue and a $32,000 decrease in other revenue.

Membership benefits, which primarily represent payments to provider law firms and Kroll Background America, Inc., a subsidiary of Kroll Inc. (“Kroll”), totaled $34.1 million for the three months ended March 31, 2011 compared to $35.7 million for the comparable period of 2010, and represented 33% of Membership fees for the both periods. This Membership benefit ratio (Membership benefits as a percentage of Membership fees) should be relatively stable going forward as substantially all active Memberships provide for a capitated cost.

Commissions to associates decreased to $23.7 million for the three months ended March 31, 2011 compared to $29.5 million for the comparable period of 2010, and represented 23% and 28% of Membership fees for the respective periods. Commissions to associates are primarily dependent on the number of new Memberships sold during a period and the average fee of those Memberships. New Memberships sold during the first quarter of 2011 totaled 109,593, an 18% decrease from the 134,181 for 2010, and the “add-on” IDT Membership sales which are not included in these totals decreased 38% to 47,663 for the first quarter of 2011 from 76,309 for 2010. Our average Annual Membership fee written during the first quarter of 2011 decreased to $304 from $325 during the 2010 period. Our new Membership fees written during the first quarter of 2011 decreased 24% from 2010. Average commission per new Membership was $216 for the 2011 first quarter compared to $220 for the 2010 third quarter. Commissions for the first quarter 2011 were approximately $2.6 million higher due to a “no-chargeback” promotion which reduced the amount of charge backs recovered. When new Membership fees written increases or when we add commissions to our compensation plan or reduce the amount of chargebacks collected from our associates as we have from time to time, the commission cost per new Membership may increase accordingly.

Associate services and direct marketing expenses increased to $6.5 million for the three months ended March 31, 2011 from $5.5 million for the comparable period of 2010. The increase was primarily a result of an increase in bonuses partially offset by a decrease in the cost of new associate enrollment materials. We offer the Player’s Club incentive program to provide additional incentives to our associates as a reward for consistent, quality business. Associates can earn the right to receive additional monthly bonuses by meeting monthly qualification requirements for a 12 month period and maintaining certain personal retention rates for the Memberships sold during the 12 month period. The Player’s Club expenses remained relatively unchanged. The associate services and direct marketing expenses also include the costs of providing associate services and marketing support.

General and administrative expenses during the three months ended March 31, 2011 and 2010 were $15.1 million and $12.3 million, respectively, and represented 15% and 11% of Membership fees. The $2.8 million increase in general and administrative expenses was primarily due to costs incurred in connection with the previously announced review of strategic alternatives by the Special Committee of our Board of Directors and the resulting MidOcean merger transaction.

Other expenses, net, which include depreciation and amortization, litigation accruals, interest expense and premium taxes reduced by interest income, were $2.3 million for the three months ended March 31, 2011 compared to $2.4 million for the 2010 comparable period. Depreciation expense was $1.7 million for the three months ended March 31, 2011 and $2.0 million for the 2010 comparable period. Interest expense decreased to $14,000 during the 2011 period from $232,000 during the comparable period of 2010 as a result of the reduction in debt. Premium taxes decreased from $469,000 for the three months ended March 31, 2010 to $415,000 for the comparable period of 2011. Interest income increased from $245,000 for the three months ended March 31, 2010 to $276,000 for the three months ended March 31, 2011, due to higher levels of investments. We increased our litigation accrual $500,000 during the first quarter of 2011 compared to an $8,000 change in the first quarter of 2010. We also realized a foreign currency gain of $84,000 during the first quarter of 2011 compared to a $53,000 realized foreign currency gain during the first quarter of 2010.

We have recorded a provision for income taxes of $10.7 million (39% of pretax income) and $12 million (39% of pretax income) for the three months ended March 31, 2011 and 2010, respectively.

Results of Operations – First Quarter of 2011 compared to Fourth Quarter of 2010
First quarter 2011 membership fees decreased to $102.5 million compared to $104.8 million for the 2010 fourth quarter. Commissions decreased 10%, membership benefits were 33% of membership fees for the 2011 first quarter and 2010 fourth quarter while general and administrative expenses were 15% and 14% of membership fees for the respective periods. The 2011 first quarter and the 2010 fourth quarter general and administrative expenses increased due to $2.8 million and $2.7 million, respectively, of costs incurred in connection with the Special Committee process described above and the MidOcean merger transaction. Associate services revenues were $5.9 million for both quarters and associate services and direct marketing expenses decreased to $6.5 million during the 2011 first quarter from $7.1 million during the 2010 fourth quarter. As previously disclosed, we resolved the vast majority of the pending Canadian tax issues that have been outstanding for several years resulting in $846,000 additional interest income to us during the 2010 fourth quarter as well as a reduction in previously recorded general and administrative expenses of $307,000 and a reduction of interest expense of $189,000 during the 2010 fourth quarter.

          Liquidity and Capital Resources
          General
          Net cash flow provided by operating activities was $25.9 million for the three months ended March 31, 2011 compared to $26.7 million for the same period in 2010. This $800,000 decrease was primarily the result of a $5.7 million decrease in cash payments from our members, a $761,000 decrease in cash receipts from our associates for new associate fees and eService fees, a $1.4 million increase in cash payments for associates services and direct marketing cost, a $1.4 million increase in cash payments to our employees and vendors for general and administrative expenses and a $3.2 million increase in cash payments for income taxes partially offset by a $1.6 million decrease in cash payments paid to our providers for the delivery of Membership benefits and a $9.9 million decrease in cash commissions paid to our associates.

Consolidated net cash used in investing activities was $716,000 for the first three months of 2011 compared to net cash used of $931,000 for the comparable period of 2010. This $215,000 change in investing activities resulted from a $2.4 million increase in investment maturities and sales, partially offset by a $1.7 million increase in the purchases of investments and a $457,000 increase in property and equipment purchases.

Net cash provided by financing activities during the first three months of 2011 was $613,000 compared to net cash used of $11.1 million for the comparable period of 2010. This change of approximately $11.7 million was primarily comprised of a $1.6 million decrease in treasury stock purchases, and a $9.6 million decrease in debt repayments, partially offset by a $667,000 increase in tax benefit on exercise of stock options.

We had positive working capital of $46 million at March 31, 2011, an increase of $18.3 million compared to our positive working capital of $27.7 million at December 31, 2010. The increase was primarily due to a $25.8 million increase in cash and cash equivalents, partially offset by a $6.1 million increase in income tax payable. The $46 million positive working capital at March 31, 2011 would have been a $59.1 million positive working capital excluding the current portion of deferred revenue and fees in excess of the current portion of deferred member and associate service costs. These amounts will be eliminated by the passage of time without the utilization of other current assets or us incurring other current liabilities.

~~Results~~ At ofMarch ~~Operations~~31, –2011 ~~Third~~we ~~Quarter~~reported of$96.8 ~~2010~~million in cash and cash equivalents and unpledged investments compared to ~~Third~~$71.0 ~~Quarter~~million at December 31, 2010. Our investments typically consist of ~~2009~~certificates of deposit, investment grade (rated Baa or higher) bonds primarily issued by corporations and the United States Treasury, auction rate certificates and state and municipal tax-exempt bonds.

~~Net~~ We ~~income~~generally ~~increased~~advance ~~46%~~significant ~~for~~commissions at the ~~third~~time ~~quarter~~a ofMembership ~~2010~~is ~~to $15~~sold.9 ~~million~~During ~~from $10.8 million for~~ the ~~prior~~three ~~year’s~~months ~~third~~ended ~~quarter~~March ~~primarily~~31, ~~due~~2011, towe aadvanced ~~decrease~~commissions, innet ~~commissions~~of chargebacks, of $725.67 million, aon ~~decrease~~new inMembership ~~associate~~sales ~~services~~compared ~~and~~to ~~direct marketing expenses of~~ $130.21 million, afor ~~decrease~~the ofsame ~~$811,000~~period inof ~~Membership~~2010. ~~benefits,~~Since aapproximately ~~decrease~~95% of ~~$284,000~~Membership infees ~~general~~are ~~and~~collected ~~administrative~~on ~~expenses,~~ a ~~decrease~~monthly ~~in other~~basis, ~~net expenses of $129,000, partially offset by~~ a ~~decrease~~significant incash ~~associate~~flow ~~services~~deficit ~~revenues~~is ofcreated ~~$1.5~~on ~~million,~~ a ~~decrease~~per inMembership ~~other~~basis ~~revenues~~at ofthe ~~$191,000,~~time a ~~decrease in~~ Membership ~~fees~~is ~~of $180,000 and an increase in income taxes of $3~~sold.1 ~~million.~~Since ~~Diluted~~there ~~earnings~~are ~~per~~no ~~share~~further ~~increased~~commissions ~~63%~~paid toon ~~$1.61~~a ~~per~~Membership ~~share~~during ~~from $99 cents per share for~~ the ~~prior~~advance ~~year’s~~period, ~~comparable~~we ~~quarter~~typically ~~due~~derive tosignificant ~~the~~positive ~~46%~~cash ~~increase~~flow infrom ~~net income and a 10% decrease in~~ the ~~weighted~~Membership ~~average~~over ~~number~~its ofremaining ~~diluted shares outstanding~~life.

~~Membership~~ We ~~fees~~expense ~~decreased~~advance ~~slightly~~commissions toratably ~~$105.3~~over ~~million during~~ the ~~2010~~first ~~third~~month ~~quarter~~of ~~compared~~the torelated ~~$105~~Membership.4 ~~million~~As ~~for~~a ~~2009.~~result ~~Membership~~of ~~fees~~this ~~and~~accounting ~~their~~policy, ~~impact~~our oncommission ~~total~~expenses ~~revenues in any period~~ are ~~determined~~all ~~directly~~recognized byover the ~~number~~first month of ~~active~~a ~~Memberships~~Membership ~~in force during any such period~~ and ~~the~~there ~~monthly~~is ~~amount~~no ofcommission ~~such~~expense ~~Memberships.~~recognized ~~The~~for ~~active~~the ~~Memberships~~same inMembership ~~force~~during ~~are determined by both~~ the ~~number~~remainder of ~~new Memberships sold in any period together with~~ the ~~renewal~~advance ~~rate of existing Memberships~~period. ~~New~~We ~~Membership~~track ~~sales~~our ~~decreased~~unearned ~~28%~~advance ~~during~~commission ~~the~~balances ~~three~~outstanding ~~months~~in ~~ended~~order ~~September 30, 2010~~ to ~~125,912~~ensure ~~from~~the ~~175,022~~advance ~~during~~commissions ~~the~~are ~~comparable~~recovered ~~period~~before ofany ~~2009~~renewal ~~due~~commissions toare ~~bonuses~~paid and ~~incentive~~for ~~programs~~internal ~~that~~purposes ~~were~~of inanalyzing ~~place~~our ~~during~~commission ~~the~~advance ~~2009 period~~program. AtWhile ~~September 30,~~not ~~2010,~~recorded ~~there~~as ~~were~~an 1asset,~~493,133~~ ~~active~~unearned ~~Memberships~~advance incommission ~~force~~balances ~~compared~~from toassociates ~~1,545,555~~as atof ~~September 30,~~March ~~2009~~31, ~~a decrease of 3%. The average annual fee per Membership has increased from $303 for all Memberships in force at September 30~~2011, ~~2009~~and torelated ~~$304~~activity for ~~all~~the ~~Memberships~~three inmonth ~~force~~period atthen ~~September 30~~ended, ~~2010, primarily as a result of a larger number of IDT memberships.~~were:

Associate services revenue decreased by $1.5 million to $6.1 million during the third quarter of 2010 when compared to the 2009 quarter. New associates enrolled decreased 52% to 36,329 during the 2010 period compared to 75,398 for the same period of 2009 due to bonuses and incentive programs that were in place during the 2009 period. The average enrollment fees paid by new sales associates were $65 and $79 for the respective periods. The eService fees increased to $3.5 million for the third quarter of 2010 compared to $2.4 million for the 2009 quarter. Future revenues from associate services will depend primarily on the number of new associates enrolled, the price charged for new associates and the number who choose to participate in our eService program, but we expect that such revenues will be offset by the direct and indirect cost to us of training, providing associate services and other direct marketing expenses.

	(Amounts in 000’s)
Beginning unearned advance commission payments (1)	$	172,167
Advance commission payments, net		25,733
Earned commissions applied		(26,196	)
Advance commission payment write-offs		(1,662	)
Ending unearned advance commission payments before
estimated unrecoverable payments (1)		170,042
Estimated unrecoverable advance commission payments (1)		(52,937	)
Ending unearned advance commission payments, net (1)	$	117,105

____________________

~~Other~~(1) ~~revenue~~These ~~declined~~amounts ~~22%~~do ~~from~~not ~~$888~~represent fair value,~~000~~ ~~for~~as ~~the~~they ~~2009~~do ~~period~~not totake ~~$697,000~~into ~~for~~consideration ~~the~~timing ~~2010~~of ~~period~~estimated recoveries.

~~Total~~ The ~~revenues~~ending ~~decreased~~unearned 2%advance commission payments, net, above includes net unearned advance commission payments to non-vested associates of $~~112~~80.1 million. ~~for~~As ~~the~~such, ~~three~~at ~~months~~March ~~ended September 30~~31, ~~2010~~2011 ~~from~~future ~~$113.9~~commission ~~million~~payments ~~during~~and ~~the~~related ~~comparable~~expense ~~period~~should ofbe ~~2009~~reduced ~~due~~as tounearned aadvance commission payments of approximately $~~1.5~~37 million ~~decrease~~are inrecovered. Commissions are earned by the associate ~~services~~as ~~revenue~~Membership premiums are earned by us, usually on a ~~$191~~monthly basis. For additional information concerning these commission advances,~~000~~ ~~decrease~~see our Annual report on Form 10-K under the heading Commissions to Associates in ~~other~~Item ~~revenue~~7 – Management’s Discussion and aAnalysis ~~$180,000~~of ~~decrease~~Financial inCondition ~~Membership~~and ~~fees~~Results of Operations.

~~Membership~~ We ~~benefits,~~believe ~~which~~that ~~primarily~~we ~~represent~~have ~~payments~~the ability to ~~provider~~finance ~~law~~the ~~firms~~next twelve months of operations and ~~Kroll~~anticipated ~~Background~~capital ~~America,~~expenditures ~~Inc.,~~based aon ~~subsidiary~~our existing amount of ~~Kroll~~cash ~~Inc.~~and ~~(“Kroll”)~~cash equivalents and unpledged investments at March 31, ~~totaled~~2011 of $3596.28 million. ~~for~~We ~~the~~believe ~~three~~our ~~months~~long-term ~~ended~~liquidity ~~September 30,~~needs ~~2010~~will ~~compared~~be tomet ~~$36.0~~by ~~million~~our ~~for~~ability ~~the~~to ~~comparable~~generate ~~period~~cash offlow ~~2009,~~from operations and ~~represented~~our ~~33%~~existing cash and ~~34%~~cash ofequivalent ~~Membership~~balances. ~~fees,~~We ~~respectively,~~expect ~~for~~to ~~the~~maintain ~~two~~cash ~~periods.~~and ~~This~~cash ~~Membership~~equivalents ~~benefit~~and ~~ratio~~investment ~~(Membership~~balances ~~benefits~~on asan aon-going ~~percentage~~basis of ~~Membership~~approximately ~~fees)~~$20 ~~should~~million beto ~~relatively~~$30 ~~stable~~million ~~going~~in ~~forward~~order asto ~~substantially~~meet ~~all~~expected ~~active~~working ~~Memberships~~capital ~~provide~~needs ~~for~~and aregulatory ~~capitated~~capital ~~cost~~requirements. Balances in excess of this amount would be invested in short term investments.

~~Commissions~~ Parent toCompany ~~associates~~Funding ~~decreased~~and toDividends Although ~~$29.1~~we ~~million~~are ~~for~~ the ~~three~~operating ~~months~~entity ~~ended~~in ~~September 30~~many jurisdictions, ~~2010~~our ~~compared~~subsidiaries toserve ~~$36.7~~as ~~million~~operating ~~for~~companies ~~the~~in ~~comparable~~various ~~period~~states ofthat ~~2009,~~regulate ~~and~~Memberships ~~represented~~as ~~28%~~insurance ~~and~~or ~~35%~~specialized oflegal ~~Membership~~expense ~~fees for the respective periods~~products. ~~Commissions~~The tomost ~~associates~~significant ~~are primarily dependent on the number~~ of ~~new~~these ~~Memberships~~wholly ~~sold~~owned ~~during~~subsidiaries aare ~~period~~Pre-Paid ~~and~~Legal ~~the~~Casualty, ~~average fee of those Memberships~~Inc. ~~New~~(“PPLCI”), ~~Memberships~~Pre-Paid ~~sold~~Legal ~~during~~Services ~~the~~Inc. ~~third quarter~~ of ~~2010~~Florida ~~totaled~~(“PPLSIF”) ~~125,912,~~and aLegal ~~28%~~Service ~~decrease~~Plans ~~from~~of ~~the 175~~Virginia,~~022~~ ~~for~~Inc. ~~2009, and the~~ (“~~add-on~~LSPV”). ~~IDT~~The ~~Membership~~ability ~~sales~~of ~~which~~these ~~are~~entities ~~not~~to ~~included~~provide infunds ~~these~~to ~~totals~~us ~~decreased~~is ~~33%~~subject to ~~75,027~~a ~~for~~number ~~the~~of ~~third~~restrictions ~~quarter~~under ofvarious ~~2010~~insurance ~~from~~laws ~~112,653~~in ~~for~~the ~~2009.~~jurisdictions ~~Our~~in ~~average~~which ~~Annual~~they ~~Membership~~conduct ~~fee~~business, ~~written~~including ~~during~~limitations on the ~~third~~amount ~~quarter~~ of ~~2010~~dividends ~~increased~~and tomanagement ~~$328~~fees ~~from~~that ~~$326~~may ~~during~~be ~~the~~paid ~~2009~~and ~~period.~~requirements ~~Our~~to ~~new~~maintain ~~Membership~~specified ~~fees~~levels ~~written during the third quarter~~ of ~~2010~~capital ~~decreased~~and ~~27% from 2009~~reserves. ~~Average~~In ~~commission~~addition ~~per~~PPLCI ~~new~~will ~~Membership~~be ~~was~~required ~~$231~~to ~~for~~maintain ~~the~~its ~~2010~~stockholders' ~~third~~equity ~~quarter~~at ~~compared~~levels sufficient to ~~$210~~satisfy ~~for~~various ~~the~~state ~~2009~~or ~~third~~provincial ~~quarter.~~regulatory ~~Commissions~~requirements, ~~for~~ the ~~thrid~~most ~~quarter~~restrictive ~~2010~~of ~~were~~which ~~approximately~~is currently $1.3 million. ~~higher~~Additional ~~due~~capital torequirements aof ~~“no-chargeback”~~these ~~promotion~~entities, ~~which~~or ~~reduced~~any ~~the amount~~ of ~~chargebacks~~our ~~recovered.~~regulated ~~When~~subsidiaries, ~~new~~will ~~Membership~~be ~~fees~~funded ~~written~~by ~~increases~~us orin ~~when~~the weform ~~add~~of ~~commissions~~capital tocontributions ~~our compensation plan~~ or ~~reduce~~surplus ~~the~~debentures. ~~amount~~During of2010, ~~chargebacks~~we ~~collected~~received ~~from~~$1.9 ~~our~~million ~~associates~~in asdividends ~~we have~~ from ~~time~~LSPV toand ~~time,~~$8.7 ~~the~~million ~~commission~~in ~~cost~~dividends ~~per~~from ~~new Membership will increase accordingly~~PPLCI.

Associate services and direct marketing expenses decreased to $6.6 million for the three months ended September 30, 2010 from $7.8 million for the comparable period of 2009. The decrease was primarily a result of a decrease in bonuses and printing. We offer the Player’s Club incentive program to provide additional incentives to our associates as a reward for consistent, quality business. Associates can earn the right to receive additional monthly bonuses by meeting monthly qualification requirements for a 12 month period and maintaining certain personal retention rates for the Memberships sold during the 12 month period. The Player’s Club expenses remained relatively unchanged. The associate services and direct marketing expenses also include the costs of providing associate services and marketing support.

~~General~~ Contractual ~~and~~Obligations There ~~administrative~~have ~~expenses~~been ~~during~~no ~~the~~material ~~three~~changes ~~months~~outside ~~ended~~of ~~September 30,~~the ~~2010~~ordinary ~~and~~course ~~2009 were $12.3 million and $12.6 million, respectively, and represented 12%~~ of ~~Membership~~business ~~fees for both periods. The $284,000 decrease~~ in ~~general~~our ~~and~~contractual ~~administrative~~obligations ~~expenses~~from ~~included~~those ~~decreases~~disclosed in ~~consulting~~our ~~fees~~Annual ~~associated~~Report ~~with~~on ~~Payment~~Form ~~Card~~10-K ~~Industry~~for ~~compliance,~~the ~~license~~year ~~and~~ended ~~fees,~~December ~~bank service charges and telephone expense~~31, ~~which were partially offset by increased director fees, employee expenses and legal fees~~2010.

~~Other~~Critical ~~expenses,~~Accounting ~~net,~~Policies Preparing ~~which~~financial ~~include~~statements ~~depreciation~~requires management to make estimates and ~~amortization,~~assumptions ~~litigation~~that ~~accruals~~affect the reported amounts of assets, ~~interest~~liabilities, ~~expense~~revenues and ~~premium~~expenses. ~~taxes~~These ~~reduced~~estimates and assumptions are affected by ~~interest~~management’s ~~income,~~application ~~were~~of $2accounting policies.2 ~~million~~If ~~for~~these ~~the~~estimates ~~three~~or ~~months~~assumptions ~~ended~~are ~~September 30~~incorrect, ~~2010~~there ~~compared~~could tobe ~~$2.4~~a ~~million~~material ~~for~~change ~~the~~in ~~2009~~our ~~comparable~~financial ~~period~~condition or operating results. ~~Depreciation~~Many ~~expense~~of ~~was~~these ~~$1.9~~“critical ~~million~~accounting ~~for~~policies” are common in the ~~three~~insurance ~~months~~and ~~ended~~financial ~~September 30,~~services ~~2010~~industries; others are specific to our business and $2operations.0 ~~million~~Our ~~for~~critical ~~the~~accounting ~~2009~~policies ~~comparable~~include ~~period.~~estimates ~~Interest~~relating ~~expense~~to ~~decreased~~revenue recognition related to ~~$160~~Membership and associate fees,~~000~~ ~~during~~deferral ~~the~~of ~~2010~~Membership ~~period~~and ~~from~~associate ~~$444~~related costs,~~000~~ ~~during~~expense ~~the~~recognition ~~comparable~~related ~~period~~to ofcommissions ~~2009~~to asassociates, aaccrual ~~result~~ of ~~the~~incentive ~~reduction~~awards inpayable ~~debt~~ and ~~lower~~accounting ~~interest~~for ~~rates~~legal contingencies. ~~Premium~~Each ~~taxes~~of ~~decreased~~these ~~from~~accounting ~~$442,000~~policies ~~for~~and the ~~three~~application ~~months~~of ~~ended~~critical ~~September 30,~~accounting ~~2009~~policies toand ~~$438,000~~estimates was discussed in our Annual Report on Form 10-K for the ~~comparable~~year ~~period~~ended ofDecember 31, 2010. ~~Interest~~There ~~income~~were ~~decreased~~no ~~from~~significant ~~$388,000~~changes ~~for~~in the ~~three~~application ~~months~~of ~~ended~~critical ~~September 30,~~accounting ~~2009~~policies toor ~~$266,000~~estimates ~~for~~during the first three months ~~ended~~of ~~September 30,~~2011. ~~2010,~~We ~~due~~are tonot ~~reduced~~aware ~~interest~~of ~~rates~~any reasonably likely events or circumstances which would result in different amounts being reported that would materially affect our financial condition or results of operations.

WeForward-Looking ~~have~~Statements All ~~recorded~~statements ain ~~provision~~this ~~for~~report ~~income~~other ~~taxes~~than purely historical information, including but not limited to, statements relating to our future plans and objectives, expected operating results and the assumptions on which such forward-looking statements are based, constitute “Forward-Looking Statements” within the meaning of ~~$10.8~~Section ~~million~~27A ~~(40.5%~~of the Securities Act of ~~pretax~~1933 ~~income)~~and Section 21E of the Securities Exchange Act of 1934 and ~~$7.6~~are ~~million~~based ~~(41~~on our historical operating trends and financial condition as of March 31, 2011 and other information currently available to management.4% We caution that the Forward-Looking Statements are subject to all the risks and uncertainties incident to our business, including but not limited to risks described in Item 1A of ~~pretax~~our ~~income)~~Annual Report on Form 10-K for the ~~three~~year ~~months~~ ended ~~September 30~~December 31, 2010. Moreover, we may make acquisitions or dispositions of assets or businesses, enter into new marketing arrangements or enter into financing transactions. None of these can be predicted with certainty and, ~~2009~~accordingly, ~~respectively~~are not taken into consideration in any of the Forward-Looking Statements made herein. For all of the foregoing reasons, actual results may vary materially from the Forward-Looking Statements. We assume no obligation to update the Forward-Looking Statements to reflect events or circumstances occurring after the date of the statement.

~~Results~~ITEM of3. ~~Operations~~QUANTITATIVE –AND ~~Third~~QUALITATIVE ~~Quarter~~DISCLOSURES ABOUT MARKET RISK Disclosures About Market Risk Our consolidated balance sheets include a certain amount of ~~2010~~assets ~~compared~~and liabilities whose fair values are subject to ~~Second~~market ~~Quarter~~risk. Due to our significant investment in fixed-maturity investments, interest rate risk represents the largest market risk factor affecting our consolidated financial position. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of ~~2010~~those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, liquidity of the instrument and other general market conditions.

~~Third~~ As ~~quarter 2010 membership fees decreased $1.5 million to $105.3 million from $106.7 million for the second quarter~~ of ~~2010.~~March ~~Associate~~31, ~~services revenues decreased during the 2010 third quarter by $393~~2011,~~000~~ toour ~~$6.1~~investments ~~million~~consisted from $6.5 million for the 2010 second quarter and associate services and direct marketing expenses decreased by approximately $1.0 million during the same period. Membership benefits totaled $35.2 million in the third quarter of ~~2010 compared to $35.9 million for~~ the ~~2010~~following: second quarter and represented 33% and 34% of membership fees for the respective quarters. Commissions to associates totaled $29.1 million in the 2010 third quarter compared to $29.2 million for the 2010 second quarter and represented 28% and 27%, respectively, of membership fees for the two periods. General and administrative expenses decreased $115,000 during the 2010 third quarter to $12.3 million compared to $12.4 million for the 2010 second quarter and represented 12% of membership fees for both periods. The $115,000 decrease in general and administrative expenses included decreases in telephone expense, consulting fees associated with Payment Card Industry compliance and bank service charges which were partially offset by increases in employee cost and director fees.

Results of Operations – First Nine Months of 2010 compared to First Nine Months of 2009

Description	Fair Value
Obligations of state and political subdivisions	$	24,776
Certificates of deposit		2,087
Corporate obligations		420
Auction Rate Securities		300
U. S. Government obligations		85
Total investments	$	27,668

~~Membership~~ We ~~revenues~~do ~~increased~~not ~~less~~hold ~~than~~any ~~one~~investments ~~percent~~classified inas ~~the~~trading ~~first~~account ~~nine~~assets ~~months~~or ofderivative ~~2010~~financial ~~to $319~~instruments.3 The ~~million~~table ~~compared~~below tosummarizes ~~$317.9 million for~~ the ~~first~~estimated ~~nine~~effects ~~months~~ of ~~2009.~~hypothetical ~~Net~~increases income increased 17% for the first nine months of 2010 to $51.1 million from $43.7 million for the prior year’s comparable period primarily due to a $5.2 million decrease in commissions, a decrease in general and ~~administrative~~decreases ~~expenses of $1.8 million, an increase~~ in ~~Associate~~interest ~~services~~rates ~~revenues~~on ofour ~~$1.8~~fixed-maturity ~~million,~~investment ~~a decrease in Membership benefits of $1~~portfolio.5 ~~million,~~It anis ~~increase~~assumed ofthat ~~$1.5 million in Membership revenues and a $1.4 million decrease in associate services and direct marketing expenses, partially offset by an increase in~~ the ~~provision~~changes ~~for~~occur ~~income~~immediately ~~taxes of $5.2 million, an increase in other, net expenses of $344,000~~ and ~~a decrease in other revenues of $315~~uniformly,~~000.~~ ~~Diluted~~with ~~earnings~~no ~~per~~effect ~~share~~given ~~increased 30%~~ to ~~$5.13~~any ~~per~~steps ~~share~~that ~~from~~we ~~$3.95~~might ~~per~~take ~~share for the prior year’s comparable nine month period. The 30% increase in diluted earnings per share is due~~ to acounteract ~~17%~~that ~~increase in net income and an approximate 10% decrease in the weighted average number of diluted shares outstanding~~change.

Membership fees and their impact on total revenues in any period are determined directly by the number of active Memberships in force during any such period. The active Memberships in force are determined by both the number of new Memberships sold in any period together with the renewal rate of existing Memberships. New Membership sales decreased approximately 8% during the nine months ended September 30, 2010 to 385,510 from 419,847 during the comparable period of 2009. At September 30, 2010, there were 1,493,133 active Memberships in force compared to 1,545,555 at September 30, 2009, a decrease of 3%. The average annual fee per Membership has increased from $303 for all Memberships in force at September 30, 2009 to $304 for all Memberships in force at September 30, 2010.

Associate services revenue increased 10% from $18.8 million for the first nine months of 2009 to $20.6 million during the comparable period of 2010 primarily due to an increase in eService fees offset partially by a decrease in associate enrollment fees. Total new associates enrolled decreased 11% during the first nine months of 2010 to 110,282 compared to 124,441 for the same period of 2009 and average enrollment fees paid by new sales associates decreased to $69 during the 2010 period from $106 during the 2009 nine months due to a lower average enrollment fee available during the 2010 period. The eService fees increased to $10.5 million during the first nine months of 2010 compared to $7.5 million for the comparable period of 2009. Future revenues from associate services will depend primarily on the number of new associates enrolled, the price charged and the number who choose to participate in the Company’s eService program, but the Company expects that such revenues will continue to be offset by the direct and indirect cost to the Company of training (including training bonuses paid), providing associate services and other direct marketing expenses.

~~Other~~ The ~~revenue~~hypothetical ~~decreased~~changes ~~$315,000~~in ~~from~~market $2interest rates reflect what could be deemed best and worst case scenarios.8 ~~million~~The ~~for~~fair values shown in the ~~nine~~following ~~month~~table ~~period~~are ~~ending~~based ~~September~~on ~~30,~~contractual ~~2009~~maturities. Significant variations in market interest rates could produce changes in the timing of repayments due to $2prepayment options available.5 ~~million~~The ~~for~~fair value of such instruments could be affected and, therefore, actual results might differ from those reflected in the ~~same~~following ~~period~~table of(dollar ~~2010.~~amounts in 000’s):

Primarily as a result of the increase in associate services revenue and Membership fees, total revenues increased to $342.4 million for the nine months ended September 30, 2010 from $339.5 million during the comparable period of 2009, an increase of approximately 1%.

				Hypothetical change in		Estimated fair value
				interest rate		after hypothetical
	Fair value			(bp = basis points)		change in interest rate
Fixed-maturity investments at March 31, 2011(1)		$	25,281		100 bp increase		$	24,097
					200 bp increase			23,207
					50 bp decrease			25,838
					100 bp decrease			26,414

Fixed-maturity investments at December 31, 2010(1)		$	23,100		100 bp increase		$	21,933
					200 bp increase			21,021
					50 bp decrease			23,662
					100 bp decrease			24,242

____________________

~~Membership~~(1) ~~benefits~~Excluding ~~totaled~~short-term investments (certificates of deposits and auction rate certificates) with a fair value of $~~106~~2.74 million ~~for~~at ~~the~~March ~~nine~~31, ~~months~~2011 ~~ended~~and ~~September 30~~$4.6 million December 31, 2010. ~~compared~~The totable ~~$108.2~~above ~~million~~illustrates, for ~~the~~example, ~~comparable~~that ~~period~~an ofinstantaneous ~~2009~~200 basis point increase in market interest rates at March 31, ~~and~~2011 ~~represented~~would ~~33%~~reduce ~~and~~the ~~34%~~estimated fair value of ~~Membership~~our ~~fees~~fixed-maturity investments by approximately $2.1 million at that date. At December 31, ~~respectively~~2010, ~~for~~an instantaneous 200 basis point increase in market interest rates would have reduced the ~~two~~estimated ~~periods.~~fair ~~This~~value ~~Membership~~of ~~benefit~~our ~~ratio~~fixed-maturity ~~(Membership~~investments ~~benefits~~by asapproximately a$2.1 ~~percentage~~million at that date. The definitive extent of ~~Membership~~the ~~fees)~~interest ~~should~~rate berisk ~~relatively~~is ~~stable~~not ~~going~~quantifiable ~~forward~~or aspredictable ~~substantially~~due ~~all~~to ~~active~~the ~~Memberships~~variability ~~provide~~of ~~for~~future ainterest ~~capitated~~rates, ~~cost~~but we do not believe such risk is material.

Commissions to associates decreased 6% to $87.8 million for the nine months ended September 30, 2010 compared to $93.0 million for the comparable period of 2009, and represented 28% and 29% of Membership fees, respectively, for the two periods. Commissions to associates are primarily dependent on the number of new Memberships sold during a period and the average fee of those Memberships. New Memberships sold during the first nine months of 2010 decreased 8% to 385,510 for the nine months ended September 30, 2010 from 419,847 for the comparable period of 2009, and the “add-on” IDT Membership sales which are not included in these totals decreased 14% to 226,929 for the nine months ended September 30, 2010 from 263,512 for 2009. Our average Annual Membership fee written during the first nine months of 2010 increased approximately 1% to $328.88 from $324.96 for 2009. Our new Membership fees written during the first nine months of 2010 decreased 27% from 2009. Commissions for the nine months ended September 30, 2010 were approximately $1.3 million higher due to a “no-chargeback” promotion which reduced the amount of chargebacks recovered. Should we add additional commissions to our compensation plan or reduce the amount of chargebacks collected from its associates as it has from time to time, the commission cost per new Membership will increase accordingly.

Associate services and direct marketing expenses decreased to $19.7 million for the nine months ended September 30, 2010 from $21.1 million for the comparable period of 2009. The decrease was primarily a result of decreased cost for bonus programs, incentive trip expenses and decreased costs for materials and related freight sent to new associates due to the decrease in the number of new associates enrolled during the period. We offer the Player’s Club incentive program to provide additional incentives to our associates as a reward for consistent, quality business. Associates can earn the right to receive additional monthly bonuses by meeting monthly qualification requirements for the entire calendar year and maintaining certain personal retention rates for the Memberships sold during the calendar year. These expenses also include the costs of providing associate services and marketing expenses.

General and administrative expenses during the nine months ended September 30, 2010 decreased 5% to $37.1 million from $38.9 million for the nine months ended September 30, 2009 and represented 12% of Membership fees for the two periods. The $1.8 million decrease in general and administrative expenses included decreases in employee expenses, legal fees, consulting fees associated with Payment Card Industry compliance, license and fees, and telephone expense, which were partially offset by increased computer maintenance fees, director fees and bank service charges

Other expenses, net, which include depreciation and amortization, litigation accruals, interest expense and premium taxes reduced by interest income, was $6.8 million for the nine months ended September 30, 2010 compared to $6.5 million for the 2009 comparable period. Depreciation decreased to $5.8 million for the first nine months of 2010 from $6.1 million for the comparable period of 2009. Litigation expenses increased by $8,000 for the first nine months of 2010 compared to a decrease of $450,000 in the 2009 period. Interest expense decreased to $577,000 during the 2010 period from $925,000 during the comparable period of 2009 as a result of lower indebtedness and lower interest rates. Premium taxes were $1.3 million for both periods. Interest income decreased $661,000 to $841,000 for the nine months ended September 30, 2010 from $1.5 million for the comparable period of 2009, due to lower interest rates.

We have recorded a provision for income taxes of $33.1 million (39.3% of pretax income) and $28.0 million (39.0% of pretax income) for the first nine months ended September 30, 2010 and 2009, respectively.

Liquidity and Capital Resources

General

Net cash flow provided by operating activities was $53.5 million for the nine months ended September 30, 2010 compared to $48.4 million for the same period in 2009. This $5.0 million increase was primarily the result of a $1.8 million decrease in cash payments to our employees and vendors for general and administrative expenses, a $1.6 million decrease in cash commissions paid to our associates, a $1.2 million increase in cash payments from our members, a $1.1 million decrease in cash payments paid to our providers for the delivery of Membership benefits and a $981,000 decrease in cash payments for associates services and direct marketing cost, partially offset by a $1.7 million decrease in cash receipts from our associates for new associate fees and eService fees

Consolidated net cash used in investing activities was $2.0 million for the first nine months of 2010 compared to net cash used of $3.3 million for the comparable period of 2009. This $1.3 million change in investing activities resulted from a $8.9 million decrease in the maturities and sales of investments offset by a $9.5 million decrease in investment purchases and approximately $677,000 decrease in property and equipment purchases.

Net cash used in financing activities during the first nine months of 2010 was $32.8 million compared to $32.8 million for the comparable period of 2009. This change of approximately $21,000 was primarily comprised of a $913,000 decrease in treasury stock purchases partially offset by an $833,000 increase in debt repayments.

We purchased and formally retired 286,455 shares of our common stock during the first nine months of 2010 for $13.9 million, or an average price of $48.56 per share, reducing our common stock by $2,865 and our retained earnings by $13.9 million. We had positive working capital of $18.6 million at September 30, 2010, an increase of $29.4 million compared to our negative working capital of $10.8 million at December 31, 2009. The increase was primarily due to an $18.7 million increase in cash and cash equivalents, a $4.8 million decrease in accounts payable and accrued expenses and a $5.4 million decrease in the current portion of notes payable. The $18.6 million positive working capital at September 30, 2010 would have been a $31.4 million positive working capital excluding the current portion of deferred revenue and fees in excess of the current portion of deferred member and associate service costs. These amounts will be eliminated by the passage of time without the utilization of other current assets or us incurring other current liabilities.

At September 30, 2010 we reported $75.2 million in cash and cash equivalents and unpledged investments compared to $56.4 million at December 31, 2009. Our investments typically consist of certificates of deposit, investment grade (rated Baa or higher) bonds primarily issued by corporations and the United States Treasury, auction rate certificates and state and municipal tax-exempt bonds.

We generally advance significant commissions at the time a Membership is sold. During the nine months ended September 30, 2010, we advanced commissions, net of chargebacks, of $88.2 million on new Membership sales compared to $92.4 million for the same period of 2009. Since approximately 95% of Membership fees are collected on a monthly basis, a significant cash flow deficit is created on a per Membership basis at the time a Membership is sold. Since there are no further commissions paid on a Membership during the advance period, we typically derive significant positive cash flow from the Membership over its remaining life.

We expense advance commissions ratably over the first month of the related Membership. As a result of this accounting policy, our commission expenses are all recognized over the first month of a Membership and there is no commission expense recognized for the same Membership during the remainder of the advance period. We track our unearned advance commission balances outstanding in order to ensure the advance commissions are recovered before any renewal commissions are paid and for internal purposes of analyzing our commission advance program. While not recorded as an asset, unearned advance commission balances from associates as of September 30, 2010, and related activity for the nine month period then ended, were:

	(Amounts in 000’s)
Beginning unearned advance commission payments (1)	$178,663
Advance commission payments, net	99,647
Earned commissions applied	(97,323)
Advance commission payment write-offs	(5,228)
Ending unearned advance commission payments before estimated unrecoverable payments (1)	175,759
Estimated unrecoverable advance commission payments (1)	(51,379)
Ending unearned advance commission payments, net (1)	$124,380

(1) These amounts do not represent fair value, as they do not take into consideration timing of estimated recoveries.

The ending unearned advance commission payments, net, above includes net unearned advance commission payments to non-vested associates of $74.5 million. As such, at September 30, 2010 future commission payments and related expense should be reduced as unearned advance commission payments of approximately $50 million are recovered. Commissions are earned by the associate as Membership premiums are earned by us, usually on a monthly basis. For additional information concerning these commission advances, see our Annual report on Form 10-K under the heading Commissions to Associates in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We believe that we have the ability to finance the next twelve months of operations, anticipated capital expenditures and required debt repayment obligations based on our existing amount of cash and cash equivalents and unpledged investments at September 30, 2010 of $75.2 million. We believe our long-term liquidity needs will be met by our ability to generate cash flow from operations and our existing cash and cash equivalent balances. We expect to maintain cash and cash equivalents and investment balances on an on-going basis of approximately $20 million to $30 million in order to meet expected working capital needs and regulatory capital requirements. Balances in excess of this amount would be used for discretionary purposes such as treasury stock purchases, dividends, and advance repayment of debt subject to the restrictions contained in our debt agreements.

Notes Payable

See Note 6 – Notes Payable in Item 1 above.

Parent Company Funding and Dividends

Although we are the operating entity in many jurisdictions, our subsidiaries serve as operating companies in various states that regulate Memberships as insurance or specialized legal expense products. The most significant of these wholly owned subsidiaries are Pre-Paid Legal Casualty, Inc. (“PPLCI”), Pre-Paid Legal Services Inc. of Florida (“PPLSIF”) and Legal Service Plans of Virginia, Inc. (“LSPV”). The ability of these entities to provide funds to us is subject to a number of restrictions under various insurance laws in the jurisdictions in which they conduct business, including limitations on the amount of dividends and management fees that may be paid and requirements to maintain specified levels of capital and reserves. In addition PPLCI will be required to maintain its stockholders' equity at levels sufficient to satisfy various state or provincial regulatory requirements, the most restrictive of which is currently $3 million. Additional capital requirements of these entities, or any of our regulated subsidiaries, will be funded by us in the form of capital contributions or surplus debentures. During 2010 we received $1.9 million in dividends from LSPV. During 2009, we received $1.8 million in dividends from LSPV and $6.7 million in dividends from PPLCI.

Contractual Obligations

There have been no material changes outside of the ordinary course of business in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

Critical Accounting Policies

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management’s application of accounting policies. If these estimates or assumptions are incorrect, there could be a material change in our financial condition or operating results. Many of these “critical accounting policies” are common in the insurance and financial services industries; others are specific to our business and operations. Our critical accounting policies include estimates relating to revenue recognition related to Membership and associate fees, deferral of Membership and associate related costs, expense recognition related to commissions to associates, accrual of incentive awards payable and accounting for legal contingencies. Each of these accounting policies and the application of critical accounting policies and estimates was discussed in our Annual Report on Form 10-K for the year ended December 31, 2009. There were no significant changes in the application of critical accounting policies or estimates during the first nine months of 2010. We are not aware of any reasonably likely events or circumstances which would result in different amounts being reported that would materially affect our financial condition or results of operations.

Capital and Dividend Plans

We continue to evaluate the desirability of additional share repurchases and additional cash dividends. We declared dividends of $0.50 per share during 2004 and $0.60 per share during 2005 and have previously announced that we will continue share repurchases, pay a dividend, or both, depending on our financial condition, available resources and market conditions, as well as compliance with our various loan covenants which limit our ability to repurchase shares or pay cash dividends. We expect to continue our open market repurchase program when we can acquire shares at prices we believe are attractive as we have existing authorization from the Board to purchase an additional 613,622 shares. We also continue to evaluate additional sources of financing that may enable us to accelerate the repurchase program at prices we believe are attractive.

Forward-Looking Statements

All statements in this report other than purely historical information, including but not limited to, statements relating to our future plans and objectives, expected operating results and the assumptions on which such forward-looking statements are based, constitute “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are based on our historical operating trends and financial condition as of September 30, 2010 and other information currently available to management. We caution that the Forward-Looking Statements are subject to all the risks and uncertainties incident to our business, including but not limited to risks described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009. Moreover, we may make acquisitions or dispositions of assets or businesses, enter into new marketing arrangements or enter into financing transactions. None of these can be predicted with certainty and, accordingly, are not taken into consideration in any of the Forward-Looking Statements made herein. For all of the foregoing reasons, actual results may vary materially from the Forward-Looking Statements. We assume no obligation to update the Forward-Looking Statements to reflect events or circumstances occurring after the date of the statement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosures About Market Risk

Our consolidated balance sheets include a certain amount of assets and liabilities whose fair values are subject to market risk. Due to our significant investment in fixed-maturity investments, interest rate risk represents the largest market risk factor affecting our consolidated financial position. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, liquidity of the instrument and other general market conditions.

As of September 30, 2010, our investments consisted of the following:

Description	Fair Value
Obligations of state and political subdivisions	$ 22,359
Certificates of deposit	4,938
Corporate obligations	426
Auction Rate Securities	325
U. S. Government obligations	85
Total investments	$ 28,133

We do not hold any investments classified as trading account assets or derivative financial instruments.

The table below summarizes the estimated effects of hypothetical increases and decreases in interest rates on our fixed-maturity investment portfolio. It is assumed that the changes occur immediately and uniformly, with no effect given to any steps that we might take to counteract that change.

The hypothetical changes in market interest rates reflect what could be deemed best and worst case scenarios. The fair values shown in the following table are based on contractual maturities. Significant variations in market interest rates could produce changes in the timing of repayments due to prepayment options available. The fair value of such instruments could be affected and, therefore, actual results might differ from those reflected in the following table:

	(In 000’s) Fair value	Hypothetical change in interest rate (bp = basis points)	Estimated fair value after hypothetical change in interest rate
Fixed-maturity investments at September 30, 2010 (1)	$22,870	100 bp increase	$21,825
		200 bp increase	20,835
		50 bp decrease	23,373
		100 bp decrease	23,899
Fixed-maturity investments at December 31, 2009 (1)	$22,493	100 bp increase	$21,406
		200 bp increase	20,375
		50 bp decrease	23,017
		100 bp decrease	23,551

___________________

(1) Excluding short-term investments (certificates of deposits and auction rate certificates) with a fair value of $5.2 million at both September 30, 2010 and December 31, 2009.

The table above illustrates, for example, that an instantaneous 200 basis point increase in market interest rates at September 30, 2010 would reduce the estimated fair value of our fixed-maturity investments by approximately $2.0 million at that date. At December 31, 2009, an instantaneous 200 basis point increase in market interest rates would have reduced the estimated fair value of our fixed-maturity investments by approximately $2.1 million at that date. The definitive extent of the interest rate risk is not quantifiable or predictable due to the variability of future interest rates, but we do not believe such risk is material.

We primarily manage our exposure to investment interest rate risk by purchasing investments that can be readily liquidated should the interest rate environment begin to significantly change.

Interest Rate Risk As of March 31, 2011, we had approximately $73 million in cash deposits that earn interest, either in cash or as an earnings credit which reduces processing expenses, and are re-priced on a daily or weekly basis.

As Foreign ofCurrency ~~September 30,~~Exchange ~~2010,~~Rate Risk Although we ~~had~~are ~~$23.6~~exposed ~~million~~to foreign currency exchange rate risk inherent in ~~notes~~revenues, ~~payable~~net ~~outstanding~~income atand ~~interest~~assets ~~rates~~and ~~indexed~~liabilities todenominated in Canadian dollars, the 30potential ~~day~~change ~~LIBOR~~in ~~rate~~foreign ~~that~~currency ~~exposes~~exchange usrates tois ~~the~~not a substantial risk, ofas ~~increased~~approximately ~~interest~~2.5% ~~costs~~of ifour ~~interest~~revenues ~~rates~~and ~~rise~~$7.2 ~~Assuming~~million aof ~~100~~our ~~basis~~assets ~~point~~are ~~increase~~derived/denominated in ~~interest~~Canadian ~~rates~~dollars. onAs reflected in the ~~floating~~attached ~~rate~~Consolidated ~~debt~~Statements of Comprehensive Income, ~~annual~~we ~~interest~~have ~~expense~~recorded ~~would~~positive ~~increase~~unrealized byforeign ~~approximately~~currency translation adjustments of $~~236~~147,000., Asnet of ~~September 30~~taxes, ~~2010~~for the three months ended March 31, 2011 and we ~~had~~recorded ~~not~~a ~~entered~~realized ~~into~~foreign ~~any~~currency ~~interest~~translation ~~rate~~gain ~~swap~~of ~~agreements~~$51,000, ~~with~~net ~~respect~~of totaxes, for the ~~term~~three ~~loans~~months ~~but~~ended ~~had~~March ~~approximately~~31, ~~$48~~2011. ~~million~~At inMarch ~~cash~~31, ~~deposits~~2011 ~~that~~we ~~earn~~have ~~interest,~~a ~~either~~cumulative inpositive ~~cash~~foreign orcurrency astranslation anadjustment ~~earnings~~balance ~~credit~~of ~~which~~$983,000, ~~reduces~~net ~~processing~~of ~~expenses,~~taxes. ~~and~~These amounts are ~~re-priced~~subject onto achange ~~daily~~dynamically orin ~~weekly~~conjunction ~~basis~~with the relative values of the Canadian and U.S. dollars.

~~Foreign~~ITEM ~~Currency~~4. CONTROLS AND PROCEDURES Under the supervision and with the participation of our management, including our co-Chief Executive Officers and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange ~~Rate~~Act ~~Risk~~of 1934). Based on that evaluation, our co-Chief Executive Officers and Chief Financial Officer have concluded that, as of March 31, 2011, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

~~Although~~ There wewere ~~are~~no ~~exposed~~changes ~~to foreign currency exchange rate risk inherent~~ in ~~revenues,~~our ~~net~~internal ~~income~~control ~~and~~over ~~assets~~financial ~~and~~reporting ~~liabilities denominated in Canadian dollars, the potential change in foreign currency exchange rates is not a substantial risk,~~ (as ~~approximately~~defined ~~2% of our revenues and $6.8 million of our assets are derived/denominated~~ in ~~Canadian~~Rule ~~dollars.~~13a-15(f) Asunder ~~reflected in~~ the ~~attached~~Securities ~~Consolidated~~Exchange ~~Statements~~Act of ~~Comprehensive~~1934) ~~Income,~~during ~~we have recorded negative unrealized foreign currency translation adjustments of $88,000, net of taxes, for~~ the ~~nine~~quarter ~~months~~ ended ~~September 30,~~March ~~2010 and we recorded a realized foreign currency translation gain of $32~~31,~~000,~~ ~~net~~2011 ofthat ~~taxes, for the nine months ended September 30, 2010. At September 30, 2010 we~~ have amaterially ~~cumulative positive foreign currency translation adjustment balance of $990~~affected,~~000,~~ ~~net~~or ~~of taxes. These amounts~~ are ~~subject~~reasonably likely to ~~change~~materially ~~dynamically~~affect, inour ~~conjunction~~internal ~~with~~control ~~the~~over ~~relative~~financial ~~values of the Canadian and U~~reporting.~~S. dollars.~~

~~ITEM 4. CONTROLS AND PROCEDURES~~16

Under the supervision and with the participation of our management, including our co-Chief Executive Officers and Chief Financial Officer, we have evaluated 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). Based on that evaluation, our co-Chief Executive Officers and Chief Financial Officer have concluded that, as of September 30, 2010, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS. See Note 3 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for information with respect to legal proceedings.

ITEM 1A. RISK FACTORS There are a number of risk factors that could affect our financial condition or results of operations. See Note 23 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for information with respect to legal proceedings. Please refer to pages 20-23 of our 2010 Annual Report on Form 10-K for a description of other risk factors. There has not been any material changes in the risk factors disclosed in the Annual Report.

ITEM 1A2. ~~RISK~~ ~~FACTORS~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Under the terms of the merger agreement for the MidOcean transaction, we are prohibited from declaring or paying any dividends without MidOcean’s consent.

There are a number of risk factors that could affect our financial condition or results of operations. See Note 2 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for information with respect to legal proceedings. Please refer to pages 16 - 19 of our 2009 Annual Report on Form 10-K for a description of other risk factors. There has not been any material changes in the risk factors disclosed in the Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

The following table provides information about our purchases of stock during the third quarter of 2010.

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 2010	6,313	$ 47.22	6,313	769,957
August 2010	144,377	51.97	144,377	625,580
September 2010	11,958	61.46	11,958	613,622
Total	162,648	$ 52.49	162,648

___________

(1) We announced on April 6, 1999, a treasury stock purchase program authorizing management to acquire up to 500,000 shares of our common stock. On occasion we purchase shares from related parties but transactions between the company and all related parties constitute less than one tenth of one percent of total share transactions since the company began its share repurchase program. The Board of Directors has subsequently from time to time increased such authorization from 500,000 shares to 16 million shares. The most recent authorization was for 1 million additional shares on November 30, 2009. There has been no time limit set for completion of the repurchase program.

See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Liquidity and Capital Resources” for a description of loan covenants that limit our ability to repurchase shares and pay dividends.

ITEM 6. EXHIBITS.

(a) Exhibits:

Exhibit No.	~~Description~~	Description
3.1	Amended and Restated Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibit 3.1 of the Company’s Report on Form 8-K dated June 27, 2005)
	2.1	Agreement and Plan of Merger, dated as of January 30, 2011, by and among MidOcean PPL Holdings Corp., PPL Acquisition Corp. and Pre-Paid Legal Services, Inc. (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated January 30, 2011)
3.2	Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.1 of the Company’s Report on Form 10-Q for the period ended June 30, 2003)
	3.1	Amended and Restated Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated June 27, 2005)
*10.1	Employment Agreement effective January 1, 1993 between the Company and Harland C. Stonecipher (Incorporated by reference to Exhibit 10.1 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1992)
	3.2	Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated August 19, 2010)
	*10.1	Employment Agreement effective January 1, 1993 between the Company and Harland C. Stonecipher (Incorporated by reference to Exhibit 10.1 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1992)
	*10.2	Agreements between Shirley Stonecipher, New York Life Insurance Company and the Company regarding life insurance policy covering Harland C. Stonecipher (Incorporated by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1985)
	*10.3	Amendment dated January 1, 1993 to Split Dollar Agreement between Shirley Stonecipher and the Company regarding life insurance policy covering Harland C. Stonecipher (Incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1992)
	*10.4	Form of New Business Generation Agreement Between the Company and Harland C. Stonecipher (Incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1986)
	*10.5	Amendment to New Business Generation Agreement between the Company and Harland C. Stonecipher effective January, 1990 (Incorporated by reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1992)
	*10.6	Amendment No. 2 to New Business Generation Agreement between the Company and Harland C. Stonecipher effective January, 1990 (Incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002)
	*10.7	Stock Option Plan, as amended effective May 2003 (Incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)
	*10.8	Deferred compensation plan effective November 6, 2002 (Incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002)

2117

*10.2	Agreements between Shirley Stonecipher, New York Life Insurance Company and the Company regarding life insurance policy covering Harland C. Stonecipher (Incorporated by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1985)
	*10.09	Amended Deferred Compensation Plan effective January 1, 2005 (Incorporated by reference to Exhibit 10.16 of the Company’s Report on Form 10-K for the year ended December 31, 2004)
*10.3	Amendment dated January 1, 1993 to Split Dollar Agreement between Shirley Stonecipher and the Company regarding life insurance policy covering Harland C. Stonecipher (Incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1992)
	10.10	Share Repurchase Letter agreement between Pre-Paid Legal Services, Inc. and Idoya Partners dated December 8, 2008 (Incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2008)
*10.4	Form of New Business Generation Agreement Between the Company and Harland C. Stonecipher (Incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1986)
	10.11	Share Repurchase Letter agreement between Pre-Paid Legal Services, Inc. and Idoya Partners dated January 30, 2009 (Incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2008)
*10.5	Amendment to New Business Generation Agreement between the Company and Harland C. Stonecipher effective January, 1990 (Incorporated by reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1992)
	*10.12	Second Amended and Restated Pre-Paid Legal Services, Inc. Change in Control Severance Plan (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated January 30, 2011)
*10.6	Amendment No. 2 to New Business Generation Agreement between the Company and Harland C. Stonecipher effective January, 1990 (Incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002)
	*10.13	Form of Retention Bonus Letter (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated December 30, 2010)
*10.7	Stock Option Plan, as amended effective May 2003 (Incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)
	31.1	Certification of Randy Harp, co-Chief Executive Officer, President and Chief Operating Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
10.8	Loan agreement dated June 11, 2002 between Bank of Oklahoma, N.A. and the Company (Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the six-months ended June 30, 2002)
	31.2	Certification of Mark Brown, co-Chief Executive Officer, Senior Vice President and Chief Marketing Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
10.9	Form of Mortgage dated July 23, 2002 between Bank of Oklahoma, N.A. and the Company (Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2002)
	31.3	Certification of Steve Williamson, Chief Financial Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
*10.10	Deferred compensation plan effective November 6, 2002 (Incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002)
	32.1	Certification of Randy Harp, co-Chief Executive Officer, President and Chief Operating Officer, Pursuant to 18 U.S.C. Section 1350
*10.11	Amended Deferred Compensation Plan effective January 1, 2005 (Incorporated by reference to Exhibit 10.16 of the Company’s Report on Form 10-K for the year ended December 31, 2004)
	32.2	Certification of Mark Brown, co-Chief Executive Officer, Senior Vice President and Chief Marketing Officer, Pursuant to 18 U.S.C. Section 1350
10.12	Credit Agreement dated June 23, 2006 among Pre-Paid Legal Services, Inc, the lenders signatory thereto and Wells Fargo Foothill, Inc. as Arranger and Administrative Agent and Bank of Oklahoma, N.A. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed June 27, 2006)
	32.3	Certification of Steve Williamson, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350
10.13	Security Agreement dated June 23, 2006 between Pre-Paid Legal Services, Inc and certain of its subsidiaries and Wells Fargo Foothill, Inc., as Agent (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed June 26, 2006)
10.14	Guaranty Agreement dated June 23, 2006 between certain subsidiaries of Pre-Paid Legal Services, Inc. and Wells Fargo Foothill, Inc., as Agent (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed June 27, 2006)
10.15	Mortgage, Assignment of Rents and Leases and Security Agreement by Pre-Paid Legal Services, Inc. in favor of Wells Fargo Foothill, Inc as Agent (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed June 26, 2006)
10.16	First Amendment to Loan Agreement dated June 23, 2006 between Pre-Paid Legal Services, Inc. and Bank of Oklahoma, N.A. (Incorporated by reference to Exhibit 10.5 of the Company’s of the Company’s Current Report on Form 8-K filed June 26, 2006)

____________________

10.17	First Amendment to Credit Agreement dated September 10, 2007 between Pre-Paid Legal Services, Inc. and the lenders named therein and Wells Fargo Foothill, Inc. as administrative agent (Incorporated by reference to Exhibit 10.1 of the Company’s of the Company’s Current Report on Form 8-K filed September 10, 2007)
10.18	Term Loan Agreement dated September 28, 2007 between Pre-Paid Legal Services, Inc. and Wells Fargo Equipment Finance, LLC (Incorporated by reference to Exhibit 10.1 of the Company’s of the Company’s Current Report on Form 8-K filed October 2, 2007)
10.19	Form of Aircraft Mortgage and Security Agreement between Pre-Paid Legal Services, Inc. and Wells Fargo Equipment Finance, LLC (Incorporated by reference to Exhibit 10.2 of the Company’s of the Company’s Current Report on Form 8-K filed October 2, 2007)
10.20	Second Amendment to Credit Agreement dated February 22, 2008 between Pre-Paid Legal Services, Inc. and the lenders named therein and Wells Fargo Foothill, Inc. as administrative agent (Incorporated by reference to Exhibit 10.20 of our Annual Report on Form 10-K for the year ended December 31, 2007)
10.21	Third Amendment to Credit Agreement dated June 5, 2008 between Pre-Paid Legal Services, Inc. and the lenders named therein and Wells Fargo Foothill, Inc. as administrative agent (Incorporated by reference to Exhibit 10.21 of the Company’s Quarterly Report on Form 10-Q for the six-months ended June 30, 2008)
10.22	Share Repurchase Letter agreement between Pre-Paid Legal Services, Inc. and Idoya Partners dated December 8, 2008 (Incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2008)
10.23	Share Repurchase Letter agreement between Pre-Paid Legal Services, Inc. and Idoya Partners dated January 30, 2009 (Incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2008)
31.1	Certification of Randy Harp, co-Chief Executive Officer, President and Chief Operating Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2	Certification of Mark Brown, co-Chief Executive Officer, Senior Vice President and Chief Marketing Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.3	Certification of Steve Williamson, Chief Financial Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1	Certification of Randy Harp, co-Chief Executive Officer, President and Chief Operating Officer, Pursuant to 18 U.S.C. Section 1350
32.2	Certification of Mark Brown, co-Chief Executive Officer, Senior Vice President and Chief Marketing Officer, Pursuant to 18 U.S.C. Section 1350
32.3	Certification of Steve Williamson, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350

____________________

Constitutes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.

SIGNATURES

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

		PRE-PAID LEGAL SERVICES, INC.
		(Registrant)

Date: October 26, 2010	/s/ Randy Harp
Date: April 26, 2011		/s/ Randy Harp
	Randy Harp co-Chief Executive Officer, President and Chief Operating Officer (co-Principal Executive Officer)
		Randy Harp
Date: October 26, 2010	/s/ Mark Brown
		co-Chief Executive Officer, President
	Mark Brown co-Chief Executive Officer, Senior Vice President and Chief Marketing Officer (co-Principal Executive Officer)
		and Chief Operating Officer
Date: October 26, 2010	/s/ Steve Williamson
		(co-Principal Executive Officer)
	Steve Williamson Chief Financial Officer (Principal Financial and Accounting Officer)
Date: April 26, 2011		/s/ Mark Brown
		Mark Brown
		co-Chief Executive Officer, Senior Vice President
		and Chief Marketing Officer
		(co-Principal Executive Officer)
Date: April 26, 2011		/s/ Steve Williamson
		Steve Williamson
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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