===========================================================================

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON D.C. 20549

                                   FORM 10-Q

        [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2005

                                       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 0-11453

                     AMERICAN PHYSICIANS SERVICE GROUP, INC.
             (Exact name of registrant as specified in its charter)


                 TEXAS                                 75-1458323
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)                identification No.)


            1301  CAPITAL OF TEXAS  HIGHWAY  AUSTIN,  TEXAS  78746
            (Address  of principal executive offices)      (Zip Code)

                                 (512) 328-0888
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d ) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES     X         NO
     -------         -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                NUMBER OF SHARES
                                 OUTSTANDING at
       TITLE OF EACH CLASS                           OCTOBER 25, 2005
       --------------------                         ----------------
   Common Stock, $.10 par value                         2,730,320

============================================================================





                                     PART I

                              FINANCIAL INFORMATION


                                       2






                    AMERICAN PHYSICIANS SERVICE GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

(In thousands, except per share data)

Item 1 - Financial Statements


                                                              Three Months Ended                         Nine Months Ended
                                                                  September 30,                            September 30,
                                                             2005                2004                    2005            2004
                                                          ---------          ----------              ----------       ---------
Revenues:
                                                                                                               
Financial services                                          $5,450              $3,846                 $12,415         $11,905
Insurance services                                           3,732               3,747                  10,462          10,273
                                                            ------              ------                  ------           -----

   Total revenues                                            9,182               7,593                  22,877          22,178

Expenses:
Financial services                                           4,788               3,423                  11,009          10,324
Insurance services                                           2,931               2,704                   7,856           7,706
General and administrative                                     573                 429                   1,961           1,497
Gain on sale of assets (Note 4)                                (47)                  -                    (131)            (56)
                                                            ------              ------                 -------          ------

   Total expenses                                            8,245               6,556                  20,695          19,471
                                                            ------              ------                 -------          ------

Operating income                                               937               1,037                   2,182           2,707
Gain on investments (Note 5)                                 1,114                   -                   3,091             244
Loss on impairment of investments (Note 6)                     (96)             (2,374)                   (193)         (2,374)
Gain on extinguishment of debt (Note 7)                         24                   -                      24              76
                                                            ------              ------                 -------          ------

Income (loss) before interest, income
  taxes and minority interest                                1,979              (1,337)                  5,104             653

Interest income                                                166                  99                     413             254
Other income                                                     3                  21                      87              39
Interest expense                                                 6                   2                      10               4
Income tax expense                                             747                (386)                  1,966             392
Minority interests                                               -                   1                      13               1
                                                            ------              ------                 -------          ------

    Net income (loss)                                       $1,395               $(834)                 $3,615            $549
                                                           =======              ======                 =======         =======




The accompanying notes are a integral part of these consolidated financial
statements.

                                      - 3 -


                     AMERICAN PHYSICIANS SERVICE GROUP, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS, continued
                                   (Unaudited)


(In thousands, except per share amounts)

                                   Three Months Ended        Nine Months Ended
                                      September 30,             September 30,
                                    ----------------         -----------------
                                    2005       2004          2005         2004
                                    ----       ----          ----         ----
Net income (loss) per common share

Basic:

  Income (loss) from operations    $ 0.52     $ (0.32)       $ 1.36      $ 0.22
                                     ----       -----          ----        ----
    Net income (loss)              $ 0.52     $ (0.32)       $ 1.36      $ 0.22
                                     ====       =====          ====        ====

Diluted:

  Income (loss) from operations    $ 0.48     $ (0.32)       $ 1.24      $ 0.19
                                     ----       -----          ----        ----
    Net income (loss)              $ 0.48     $ (0.32)       $ 1.24      $ 0.19
                                     ====       =====          ====        ====


Basic weighted average shares
    outstanding                     2,702       2,589         2,667       2,523
                                    =====       =====         =====       =====
Diluted weighted average
    shares outstanding              2,885       2,589         2,920       2,823
                                    =====       =====         =====       =====





The accompanying notes are a integral part of these consolidated financial
statements. 

                                      - 4 -




                     AMERICAN PHYSICIANS SERVICE GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)


(In thousands)



                                                                   September 30,                 December 31,
                                                                        2005                         2004
                                                                    ------------                -------------
ASSETS

Current Assets:
                                                                                                 
  Cash and cash equivalents                                             $5,102                      $9,673
  Trading account securities                                               163                          --
  Trade receivables, net                                                   413                          19
  Notes receivable - current                                               751                         777
  Management fees and other receivables                                    878                       1,815
  Deposit with clearing organization                                       991                         660
  Investment in available-for-sale fixed
    income securities - current                                          8,667                       1,983
  Net deferred income tax asset                                            108                         124
  Income tax receivable                                                      2                          76
  Prepaid expenses and other                                               615                         642
                                                                    ------------                -----------
      Total current assets                                              17,690                      15,769


Notes receivable, less current portion                                     344                         141
Property and equipment, net                                                696                         619
Investment in available-for-sale equity
  securities (Notes 5 and 8)                                             5,135                       9,417
Investment in available-for-sale fixed
  income securities - non-current                                        3,604                       2,920
Net deferred income tax asset                                              741                          --
Goodwill                                                                 1,247                       1,247
Other assets                                                               236                         330
                                                                    ------------                -----------

Total Assets                                                           $29,693                     $30,443
                                                                    ============                ===========






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

                                      - 5 -


                     AMERICAN PHYSICIANS SERVICE GROUP, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS, continued
                                  (Unaudited)

(In thousands, except share data)



                                                                                   September 30,            December 31,
                                                                                       2005                     2004
                                                                                   ------------            ------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
                                                                                                           
  Accounts payable                                                                        $785                    $266
  Accrued incentive compensation                                                         1,641                   2,500
  Accrued expenses and other liabilities (Note 10)                                       1,200                   1,842
  Deferred gain - current                                                                  563                     488
                                                                                      --------                --------
      Total current liabilities                                                          4,189                   5,096

Payable under loan participation agreements (Note 7)                                        --                      24
Deferred tax liability - non-current                                                        --                     482
Deferred gain - non-current                                                                 49                     627
                                                                                      --------                --------
      Total liabilities                                                                  4,238                   6,229

Minority interests                                                                          14                       1
Commitments and contingencies (Note 3)

Shareholders' Equity:
  Preferred stock, $1.00 par value, 1,000,000
    shares authorized, none issued or outstanding                                          --                       --
  Common stock, $0.10 par value, shares authorized 20,000,000;
    2,731,770 and 2,646,646 issued and outstanding
    at 09/30/05 and 12/31/04, respectively                                                 273                     265
  Additional paid-in capital                                                             7,727                   7,919
  Retained earnings                                                                     16,892                  13,948
  Accumulated other comprehensive income,
     net of taxes                                                                          549                   2,081
                                                                                      --------                --------
      Total shareholders' equity                                                        25,441                  24,213
                                                                                      --------                --------

Total Liabilities and Shareholders' Equity                                             $29,693                 $30,443
                                                                                      ========                ========







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

                                      - 6 -



                     AMERICAN PHYSICIANS SERVICE GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)



                                                                                         Nine Months Ended September 30,

                                                                                            2005                 2004
                                                                                         ---------            ----------
Cash flows from operating activities:

                                                                                                             
     Net Income                                                                            $ 3,615              $ 549
     Adjustments to reconcile net income to cash
        (used in) provided by operating activities:
           Depreciation and amortization                                                       264                225
           Extinguishment of debt and other                                                    190                 75
           Common stock awarded                                                                159                 --
           Gain on sale of assets                                                             (131)               (56)
           Deferred gain on sale of building                                                  (372)              (365)
           Tax benefit from exercise of stock options                                          408                 --
           Gain on investments                                                              (3,091)              (244)
           Impairment of investment                                                            193              2,374
     Changes in operating assets and liabilities:
           Trade receivables                                                                  (394)                --
           Trading account securities                                                         (163)                 1
           Income tax receivable                                                                65              1,050
           Deferred income tax                                                                (789)              (542)
           Receivable from clearing organization                                              (331)              (160)
           Management fees & other receivables                                                 964                138
           Trade payables                                                                      519                 --
           Accrued expenses & other liabilities                                             (1,148)            (1,276)
                                                                                           --------           ---------
              Net cash used in operating activities                                            (42)             1,769

Cash flows from investing activities:
     Capital expenditures                                                                     (247)              (362)
     Proceeds from the sale of available-for-sale equity
        and fixed income securities                                                          6,174              1,116
     Purchase of available-for-sale equity securities                                       (8,483)            (4,190)
     Funds loaned to others                                                                   (800)              (624)
     Collection of notes receivable                                                            249                 --
                                                                                           --------           --------
              Net cash used in  investing activities                                        (3,107)            (4,060)

Cash flows from financing activities:
     Exercise of stock options                                                                 823                938
     Purchase and cancellation of treasury stock                                            (1,574)              (472)
     Dividends paid                                                                           (671)              (518)
                                                                                           --------           --------
              Net cash used in financing activities                                         (1,422)               (52)

Net change in cash and cash equivalents                                                   $ (4,571)          $ (2,343)

Cash and cash equivalents at beginning of period                                             9,673              8,989
                                                                                         ----------         ----------
Cash and cash equivalents at end of period                                                 $ 5,102            $ 6,646
                                                                                         ==========         ==========




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

                                     - 7 -




                     AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE 
                                 INCOME (LOSS)
       For the nine months ended September 30, 2004 and September 30, 2005
                                      
(In thousands)



                                                                                           Accumulated
                                                 Additional                                   Other                      Total
                                       Common     Paid-In     Retained    Comprehensive    Comprehensive    Treasury   Shareholders'
                                       Stock      Capital     Earnings    Income (loss)    Income (loss)     Stock       Equity
                                    ------------------------------------------------------------------------------------------------
Balance December 31, 2003 (audited)   $ 245      $ 6,918      $ 12,314        $ --            $ (371)         $ --       $ 19,106
                                    ------------------------------------------------------------------------------------------------
Comprehensive income:
                                                                                                        
  Net income                           --           --          549           $549               --            --          549
  Other comprehensive income:
    Unrealized gain on  securities,
    net of taxes of $616               --           --            --          1,195             1,195          --          1,195
                                                                             -------
Comprehensive income:                  --           --            --         $1,744              --            --             --
                                                                             =======
Stock options exercised                19           919           --                             --            --            938
Treasury stock purchase                --           --            --                             --          (472)          (472)
Dividend paid (per share-$0.20)        --           --          (518)                            --            --           (518) 
Cancelled treasury stock               (4)         (468)          --                             --           472             --
Forgiveness of Uncommon Care Debt      --           --           114                             --            --            114 
                                    ------------------------------------------------------------------------------------------------
Balance Sept 30, 2004 (unaudited)    $ 260      $ 7,369     $ 12,459           $ --           $ 824          $ --       $ 20,912
                                    ================================================================================================


Balance December 31, 2004 (audited)  $ 265      $ 7,919     $ 13,948           $ --           $ 2,081       $ --        $ 24,213
                                    ------------------------------------------------------------------------------------------------
Comprehensive income:
  Net income                            --           --        3,615         $ 3,615              --          --          3,615
  Other comprehensive income:
    Unrealized loss on securities,
    net of taxes of $789                --           --           --          (1,532)           (1,532)       --         (1,532)
                                                                               -----

Comprehensive income:                   --           --           --         $ 2,083               --         --             --
                                                                             ========
Treasury stock purchase                 --           --           --                               --       (1,574)      (1,574)
Stock options exercised                 20          803           --                               --         --            823
Tax benefit from exercise
  of stock options                      --          408           --                               --         --            408
Dividend paid (per share - $0.25)       --           --         (671)                              --         --           (671)
Cancelled treasury stock               (13)      (1,561)          --                               --        1,574           --
Stock awarded                            1          158           --                               --         --            159
                                    ------------------------------------------------------------------------------------------------
Balance Sept 30, 2005 (unaudited)    $ 273      $ 7,727       $16,892          $ --             $ 549       $ --       $ 25,441
                                    ================================================================================================
                                                       

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


                                     - 8 -


                    AMERICAN PHYSICIANS SERVICE GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)


1.  GENERAL

     The accompanying unaudited condensed consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the
United  States of  America  and  pursuant  to the rules and  regulations  of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles  generally  accepted  in the  United  States  of  America  have  been
condensed or omitted  pursuant to such rules and  regulations.  The consolidated
financial  statements  for the nine  months  ended  September  30, 2005 and 2004
reflect all adjustments which are, in the opinion of management, necessary for a
fair  presentation  of the financial  position,  results of operations  and cash
flows for the periods  presented.  Such  adjustments  consist of only items of a
normal recurring nature.  These consolidated  financial statements have not been
audited by our  independent  registered  public  accounting  firm. The operating
results for the interim  periods are not  necessarily  indicative of results for
the full fiscal year.

     The notes to  consolidated  financial  statements  appearing  in our Annual
Report  on Form  10-K  for the year  ended  December  31,  2004  filed  with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-Q.  There have been no significant  changes in the information
reported in those notes other than from normal business activities.


2.  MANAGEMENT'S ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management 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  consolidated  financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.


3.  CONTINGENCIES

     We are involved in various claims and legal actions that have arisen in the
ordinary course of business.  Management  believes that any liabilities  arising
from these actions will not have a significant  adverse  effect on our financial
condition or results of operations.





                                      - 9 -



4.  GAIN ON SALE OF ASSETS

     During the nine months ended September 30, 2005, we recognized  $372,000 of
deferred gain related to the November 2001 sale and subsequent leaseback of real
estate to Prime Medical (now called HealthTronics,  Inc.). Due to our continuing
involvement in the property, we deferred recognizing approximately $2,400,000 of
the  approximately  $5,100,000  gain and are  recognizing  it in earnings,  as a
reduction of rent expense,  monthly through  September 2006. A total of $563,000
remains to be recognized in the coming twelve  months.  In addition,  15% of the
gain  ($760,000)  related  to our  then  15%  ownership  in the  purchaser,  was
deferred.  As our ownership  percentage in  HealthTronics  declines  through our
sales of HealthTronics common stock, we recognize these gains proportionately to
our reduction of our interest in HealthTronics.  During the first nine months of
2005 we  recognized  $131,000  of these  deferred  gains,  leaving a balance  of
approximately $49,000 remaining to be recognized.

5.  GAIN ON INVESTMENTS

     Our gains resulted  primarily from the sales of  available-for-sale  equity
and fixed  income  securities.  During  the three and nine month  periods  ended
September 30, 2005, we received net cash  proceeds of  approximately  $2,000,000
and $6,174,000, respectively, and recognized gains of $1,274,000 and $3,250,000,
respectively,  resulting  from these sales.  Reducing these gains in the current
year three and nine month  periods was a charge to  earnings  of $160,000  which
represented  the balance of an investment loan made to a third party during 2004
which has since been deemed to be uncollectible.

6.  LOSS ON IMPAIRMENT OF INVESTMENTS

     On  June  4,  2003  we  purchased  from  Financial  Industries  Corporation
("FIC")(OTC: FNIN.PK) and from a foundation 339,879 shares of FIC's common stock
as an investment. Earlier in 2003 we had purchased 45,121 FIC shares in the open
market.  The 385,000  shares  represent an  approximate 4% ownership in FIC. The
aggregate  purchase price was  approximately  $5,647,000,  which was all sourced
from our cash reserves. The shares purchased from FIC and the foundation are not
registered,  but are subject to a registration  rights agreement requiring FIC's
best efforts to register them within one year of the  transaction.  Due to FIC's
delay in filing its 2003 Form 10-K and its  subsequent  10-Q's and 10-K,  it has
not been able to register these shares and was delisted from the NASDAQ exchange
in July, 2004.

     During 2004, the value of our investment in FIC had declined significantly.
On October 12, 2004, we  determined  that this decline in market price should be
considered  "other  than  temporary"  as  defined  in  Statements  of  Financial
Accounting  Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities, as amended.  Consequently,  we recorded pretax charges to
earnings totaling $2,567,000 during the third and fourth quarters of 2004. These
charges reduced our cost basis in FIC from  $5,647,000,  or $14.67 per share, to
$3,080,000, or $8.00 per share which was equal to the quoted market price of FIC
shares on December 31, 2004. We chose




                                     - 10 -



to take an additional pretax charge to earnings during the first quarter of 2005
of $39,000,  reducing  our cost basis in FIC to  $3,042,000,  or $7.90 per share
which was equal to the quoted  market price of FIC shares on March 31, 2005.  No
additional  charge was taken  during  the  second  quarter of 2005 as the quoted
market  price at June 30,  2005  remained  above  our  adjusted  cost.  While we
currently  continue  to have  the  ability  and the  intent  to hold  the  stock
indefinitely, we concluded that the additional uncertainty created by FIC's late
filings,  together with the lack of its current financial information,  dictated
that the decline  should be viewed as other than  temporary.  During the quarter
ended September 30, 2005 the price per share of FIC common stock had declined to
$7.65. As a result we took an additional charge to earnings of $96,000,  further
reducing our cost basis in FIC to $2,945,000. In July, 2005 FIC was able to file
its 2003 Form 10-K but has yet to file any 2004 or 2005  Forms  10-Q or 10-K and
thus  continued to be de-listed on the NASDAQ Stock Market.  We will continue to
monitor and  evaluate the  situation at FIC and further  determine if changes in
fair market value of the investment are temporary or "other than temporary".

     In April 2004 we purchased $300,000 of Toys R Us bonds. In March, 2005 Toys
R Us announced a plan of merger with another toy company and a planned leveraged
buyout  which  precipitated  a drop in the price of the  bonds.  An  independent
analysis indicated that the new debt to be issued will put the existing bonds in
a subordinated position. Since these bonds have a 2018 maturity, we believe that
the impairment is "other than  temporary"  during our shorter  expected  holding
period.  Consequently,  we wrote a charge against  earnings of $57,000 using the
quoted price of the bonds as of June 30, 2005. There were no additional  charges
taken against earnings  associated with these bonds in the current quarter ended
September  30, 2005.  We will  continue to monitor and evaluate the situation at
Toys R Us  and  further  determine  if  changes  in  fair  market  value  of the
investment are temporary or "other than temporary".


7.  GAIN ON FORGIVENESS OF DEBT

     We recorded  $24,000 and zero during the three months ended  September  30,
2005 and 2004, respectively, as gain on forgiveness of debt. For the nine months
ended September 30, 2005 and 2004 we recorded $24,000 and $76,000, respectively.
These gains  represent  that amount of liability  from which we were released in
the respective periods by participants in our loan to a former affiliate, net of
any interest due them from prior period payments made by that affiliate.  Due to
poor operating  results,  Uncommon Care was in default and not making  scheduled
payments under its loan agreement with us in which the  participations  had been
sold. As a result, the loan participants  released us from any obligations under
the participation agreements. During the current quarter, we determined there is
a remote  possibility  that the  final  obligation,  totaling  $24,000,  will be
required to be paid under the terms of the participation  agreement. As a result
we reversed it and recognized a gain in the same amount.





                                     - 11 -


8.  INVESTMENT IN AVAILABLE-FOR-SALE EQUITY SECURITIES 

     A  significant  portion of this balance  sheet  account is comprised of our
investment  in FIC common  stock.  As mentioned in Footnote 6 above,  during the
first nine months of 2005,  we  recognized  additional  "other  than  temporary"
impairment losses and, accordingly,  our cost basis in the 385,000 shares of FIC
common stock we own was reduced from $8.00 per share at January 1, 2005 to $7.65
per share at September 30, 2005. The effect of these 2005 "other than temporary"
impairment  losses totaling  $135,000 was to reclassify from  accumulated  other
comprehensive  income the unrealized  losses to realized losses in the statement
of operations. We classify all of these shares as securities  available-for-sale
and record  temporary  unrealized  changes in their  value,  net of tax,  in our
balance  sheet as part of  Accumulated  Other  Comprehensive  Income  (Loss)  in
Stockholders'  Equity.  Changes in their fair market  value  deemed to be "other
than temporary" are charged to earnings in the period that the determination was
made.

     As  part  of this  transaction  we were  granted  options  to  purchase  an
additional  323,000 shares of FIC's common stock at $16.42 per share. There is a
significant  revenue-related  performance  requirement  that must be met  before
these options are exercisable.  The option expires, if not previously exercised,
on December 31, 2006.  There are presently no registered FIC shares available to
issue upon the  exercise of these  options.  We have  assigned no value to these
options.


9.  INVESTMENT IN AVAILABLE-FOR-SALE FIXED INCOME SECURITIES

     We have  invested  primarily  in  U.S.  government-backed  securities  with
maturities  varying from one to three years,  as well as three  corporate  bonds
with Standard and Poor's ratings of no lower than B (investment grade).


10.  ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consists of the following:

                                      September 30           December 31
                                          2005                  2004
                                      -----------            ------------    
Commissions payable                    $ 739,000             $ 1,260,000
Taxes payable                            119,000                 205,000
Vacation                                 153,000                 153,000
401(k) plan matching                     174,000                 169,000
Other accrued liabilities                 15,000                  55,000 
                                        --------               ---------
                                      $1,200,000             $ 1,842,000
                                      ==========             ===========





                                     - 12 -


11.  NET INCOME PER SHARE

     Basic income per share is based on the weighted average shares  outstanding
without any  dilutive  effects  considered.  Diluted  income per share  reflects
dilution from all contingently  issuable shares, such as options and convertible
debt. A reconciliation of earnings and weighted average shares  outstanding used
in the  calculation  of basic and  diluted  earnings  per share from  operations
follows:

                                  For the Three Months Ended September 30, 2005 
                                  ---------------------------------------------
                                     Income            Shares         Per Share
                                   (Numerator)      (Denominator)       Amount
                                    ---------       ------------       --------
Basic EPS
  Net income                       $1,395,000          2,702,000        $ 0.52
                                                                        ======

Diluted EPS
  Effect of dilutive 
   securities                             --            183,000
                                   ----------         ---------

  Net income                       $1,395,000         2,885,000         $ 0.48
                                   ==========         ==========        ======




                                  For the Three Months Ended September 30, 2004
                                  ---------------------------------------------
                                    Income             Shares         Per Share
                                  (Numerator)       (Denominator)       Amount
                                   ---------         -----------      ---------
Basic EPS
  Net loss                        $ (834,000)          2,589,000       $ (0.32)
                                                                       =======

Diluted EPS
  None (Anti-dilutive)                    --                 --
                                   ----------          ---------

  Net loss                        $ (834,000)          2,589,000       $ (0.32)
                                  ===========          =========        =======








                                     - 13 -


                                   For the Nine Months Ended September 30, 2005
                                   --------------------------------------------
                                     Income           Shares          Per Share
                                   (Numerator)     (Denominator)        Amount
                                    ---------       -----------       ---------
Basic EPS
  Net income                       $3,615,000        2,667,000           $ 1.36
                                                                         ======

Diluted EPS
  Effect of dilutive 
   securities                              --          253,000
                                    ----------       ----------
 
  Net income                       $3,615,000        2,920,000           $ 1.24
                                    =========        =========           ======




                                   For the Nine Months Ended September 30, 2004
                                   --------------------------------------------
                                     Income           Shares          Per Share
                                   (Numerator)     (Denominator)        Amount
                                    ---------       -----------       ---------
Basic EPS
  Net income                       $ 549,000         2,523,000          $ 0.22
                                                                         ======

Diluted EPS
  Effect of dilutive 
   securities                             --           300,000
                                    ---------        ---------

  Net income                       $ 549,000         2,823,000           $ 0.19
                                    =========        =========           ======



12.    SEGMENT INFORMATION

The Company's segments are distinct by type of service provided. Comparative
financial data for the three and nine month periods ended September 30, 2005 and
2004 are shown as follows:

                                            Three months ended September 30,
                                               2005                  2004     
                                             ---------            ----------  
         Operating Revenue:                                                   
             Financial services            $ 5,450,000           $ 3,846,000
             Insurance services              3,732,000             3,747,000
             Corporate                         600,000               100,000
                                            ----------            ----------
         Total Segment Revenues            $ 9,782,000           $ 7,693,000
                                           ===========           ===========





                                     - 14 -


                                             Three months ended September 30,
                                               2005                   2004     
                                            ----------             --------- 

  Reconciliation to Consolidated
    Statement of Operations:
      Total segment revenues                $ 9,782,000          $ 7,693,000
      Less: Intercompany dividends             (600,000)            (100,000)
                                             ----------         ------------
            Total Revenues                  $ 9,182,000          $ 7,593,000
                                             ==========         ============



  Operating Income                                                             
     Financial services                       $ 662,000            $  423,000
     Insurance services                         801,000             1,043,000
     Corporate                                 (526,000)             (429,000)
                                              ---------             ---------
  Total segments operating income               937,000             1,037,000

  Gain on  investments                        1,114,000                    --
  Loss on impairment of investment              (96,000)           (2,374,000)
  Gain on extinguishment of debt                 24,000                    --
                                              ---------             ---------

  Income (loss) before interest, income
     taxes and minority interest              1,979,000            (1,337,000)

  Interest income                               166,000                99,000
  Other gain                                      3,000                21,000
  Interest expense                                6,000                 2,000
  Income tax expense                            747,000              (386,000)
  Minority interest                                  --                     1
                                              ---------             ---------

  Net income (loss)                         $ 1,395,000            $ (834,000)
                                            ===========            ===========




                                     - 15 -


                                              Nine months ended September 30,
                                                 2005                 2004     
                                              ----------           ----------- 
  Operating Revenue:                                                        
      Financial services                     $ 12,415,000         $ 11,905,000
      Insurance services                       10,462,000           10,273,000
      Corporate                                   600,000            1,700,000
                                              -----------          -----------
           Total Segment Revenues            $ 23,477,000         $ 23,878,000
                                             ============          ===========

  Reconciliation to Consolidated
    Statement of Operations:
      Total segment revenues                 $ 23,477,000         $ 23,878,000
      Less: Intercompany dividends               (600,000)          (1,700,000)
                                              -----------          -----------
           Total Revenues                    $ 22,877,000         $ 22,178,000
                                             ============         ============

  Operating Income                                                            
     Financial services                       $ 1,406,000          $ 1,581,000
     Insurance services                         2,606,000            2,567,000
     Corporate                                 (1,830,000)          (1,441,000)
                                              -----------          -----------
  Total segments operating income               2,182,000            2,707,000

  Gain on sale of  investments                  3,091,000              244,000
  Loss on impairment of investment               (193,000)          (2,374,000)
  Gain on extinguishment of debt                   24,000               76,000
                                               ----------           ----------

  Income before interest, income
     taxes and minority interest                5,104,000              653,000

  Interest income                                 413,000              254,000
  Other gain                                       87,000               39,000
  Interest expense                                 10,000                4,000
  Income tax expense                            1,966,000              392,000
  Minority interest                                13,000                    1
                                                ---------             --------

  Net income                                  $ 3,615,000           $  549,000
                                              ===========           ==========






                                     - 16 -


13.    STOCK-BASED COMPENSATION

     We have adopted the  disclosure-only  provisions  of Statement of Accouting
Standards No. 123,  Accounting for  Stock-Based  Compensation  ("SFAS 123"),  as
amended by SFAS 148,  "Accounting for Stock-Based  Compensation - Transition and
Disclosure",  but  measure  compensation  expense for our  stock-based  employee
compensation  plans using the intrinsic  value method  prescribed by APB Opinion
No. 25,  Accounting for Stock Issued to Employees.  Proforma  disclosures of net
income (loss) and earnings  (loss) per share as if the fair  value-based  method
prescribed  by SFAS 123 had  been  applied  in  measuring  compensation  expense
follow.  For purposes of the proforma  disclosures,  the estimated fair value of
the options is amortized to expense over the option's vesting periods.


                                                Three Months Ended September 30,

                                                      2005              2004
                                                      ----              ----

 Net income (loss) as reported                     $ 1,395,000      $ (834,000)

 Deduct: Total additional stock-based 
   employee compensation expense determined 
   under fair value based method for all 
   awards, net of related tax effects                  (45,000)        (77,000)
                                                     -----------      ---------

 Pro forma net income (loss)                       $ 1,350,000      $ (911,000)
                                                     ===========      =========

 Net income (loss) per share

          Basic - as reported                           $ 0.52         $ (0.32)
                                                        ======         =======
          Basic - pro forma                             $ 0.50         $ (0.35)
                                                        ======         =======
          Diluted - as reported                         $ 0.48         $ (0.32)
                                                        ======         ========
          Diluted - pro forma                           $ 0.47         $ (0.35)
                                                        ======         ========




                                                 Nine Months Ended September 30,

                                                      2005              2004
                                                      ----              ----

  Net income as reported                          $ 3,615,000        $ 549,000

  Deduct: Total additional stock-based 
    employee compensation expense determined 
    under fair value based method for all 
    awards, net of related tax effects               (180,000)        (250,000)
                                                    ----------        ---------

         Pro forma net income                     $ 3,435,000        $ 299,000
                                                   ===========        =========

         Net income per share

                  Basic - as reported                  $ 1.36           $ 0.22
                                                       ======           ======
                  Basic - pro forma                    $ 1.29           $ 0.12
                                                       ======           ======
                  Diluted - as reported                $ 1.24           $ 0.19
                                                       ======           ======
                  Diluted - pro forma                  $ 1.18           $ 0.11
                                                       ======           ======



                                     - 17 -


14.  RECENT ACCOUNTING PRONOUNCEMENTS

     In May  2005,  the FASB  issued  SFAS  154,  Accounting  Changes  and Error
Corrections. This Statement replaces APB Opinion No. 20, Accounting Changes, and
FASB  Statement  No.  3,  Reporting  Accounting  Changes  in  Interim  Financial
Statements, and changes the requirements for the accounting for and reporting of
a change in  accounting  principle.  This  Statement  applies  to all  voluntary
changes in  accounting  principle.  It also  applies to changes  required  by an
accounting pronouncement in the unusual instance that the pronouncement does not
include specific transition  provisions.  When a pronouncement includes specific
transition  provisions,  those  provisions  should  be  followed.  FASB  154  is
effective for accounting  changes and corrections of errors made in fiscal years
beginning  after  December 15, 2005. The Company does not expect the adoption of
this standard to have a material  effect on its financial  position,  results of
operations or cash flows.

     In  December  2004,  the FASB  issued SFAS 153,  Exchanges  of  Nonmonetary
Assets,  an amendment of APB No. 29,  Accounting for  Nonmonetary  Transactions.
SFAS 153 requires  exchanges of  productive  assets to be accounted  for at fair
value, rather than at carryover basis, unless (1) neither the asset received nor
the asset  surrendered has a fair value that is determinable  within  reasonable
limits or (2) the transactions lack commercial substance.  SFAS 153 is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005.  The Company  does not expect the adoption of this  standard to have a
material effect on its financial position, results of operations or cash flows.

     In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards, or SFAS, No. 123 (revised 2004), "Share-Based
Payment".  Statement 123(R) will provide  investors and other users of financial
statements  with more complete and neutral  financial  information  by requiring
that the  compensation  cost relating to  share-based  payment  transactions  be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability  instruments  used.  Statement  123(R) covers a
wide range of share-based  compensation  arrangements  including  share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. Statement 123(R) replaces FASB Statement No. 123,
Accounting  for  Stock-Based  Compensation,  and  supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees. Statement 123, as originally issued in
1995,  established  as preferable a  fair-value-based  method of accounting  for
share-based  payment  transactions  with  employees.   However,  that  Statement
permitted entities the option of continuing to apply the guidance in Opinion 25,
as long as the footnotes to financial statements disclosed what net income would
have been had the preferable  fair-value-based method been used. Public entities
(other than those filing as small  business  issuers)  will be required to apply
Statement  123(R) as of the first interim or annual reporting period that begins
after  December 31, 2005. We are currently  evaluating the effect of adoption of
SFAS  123(R)  will have on our  overall  results  of  operations  and  financial
position.




                                     - 18 -


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

FORWARD-LOOKING STATEMENTS

     Our statements  contained in this report that are not purely historical are
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,  including
statements regarding our expectations, hopes, intentions or strategies regarding
the future. You should not place undue reliance on  forward-looking  statements.
All forward-looking  statements included in this report are based on information
available to us on the date hereof,  and we assume no  obligation  to update any
such forward-looking statements. It is important to note that our actual results
could  differ  materially  from  those  in the  forward-looking  statements.  In
addition  to any risks and  uncertainties  specifically  identified  in the text
surrounding the  forward-looking  statements,  you should consult our reports on
Forms  10-K and our  other  filings  under  the  Securities  Act of 1933 and the
Securities Exchange Act of 1934, for factors that could cause our actual results
to differ materially from those presented.

     The  forward-looking  statements  included herein are necessarily  based on
various  assumptions  and estimates and are inherently  subject to various risks
and  uncertainties,  including risks and uncertainties  relating to the possible
invalidity of the underlying  assumptions and estimates and possible  changes or
developments  in  social,  economic,   business,  industry,  market,  legal  and
regulatory circumstances and conditions and actions taken or omitted to be taken
by  third  parties,  including  customers,   suppliers,  business  partners  and
competitors and  legislative,  judicial and other  governmental  authorities and
officials.  Assumptions relating to the foregoing involve judgments with respect
to, among other things,  future economic,  competitive and market conditions and
future business  decisions,  all of which are difficult or impossible to predict
accurately  and many of which are beyond our control.  Any of these  assumptions
could  be  inaccurate  and,  therefore,  there  can  be no  assurance  that  the
forward-looking statements included in this report will prove to be accurate.

GENERAL

     We provide (1)  financial  services,  including  brokerage  and  investment
services to individuals and institutions,  and (2) insurance services, including
management and agency services to medical malpractice insurance companies.

FINANCIAL  SERVICES.  We provide  investment  and  investment advisory  services
to  institutions  and  individuals throughout the United States through the 
following subsidiaries:




                                     - 19 -


   o   APS Financial. APS Financial is a fully licensed broker/dealer that
       provides brokerage and investment services primarily to institutional and
       high net worth individual clients. APS Financial also provides portfolio
       accounting, analysis, and other services to insurance companies, banks
       and public funds. We recognize commissions revenue, and the related
       compensation expense, on a trade date basis.

   o   Asset Management. Asset Management manages fixed income and equity assets
       for institutional and individual clients on a fee basis. We recognize fee
       revenues monthly based on the amount of funds under management.


INSURANCE SERVICES. Through Insurance Services we provide management and agency
services to medical malpractice insurance companies through the following
subsidiary:

   o     FMI. APS Facilities Management, Inc., dba APMC Insurance Services,
         Inc., or FMI, provides management and administrative services to APIE,
         a regional insurance exchange that sells medical professional liability
         insurance only to its physician subscribers, who pay annual insurance
         premiums and maintenance fees to APIE. APIE is governed by a physician 
         board of directors. Pursuant to a management agreement and the 
         direction of this board, FMI manages and operates APIE, including 
         performing policy issuance, claims investigation and settlement, and 
         all other management and operational functions. As a management fee, 
         FMI receives a percentage of APIE's earned premiums and a portion of 
         APIE's profit, subject to a cap based on premium levels. We recognize 
         revenues for the management fee portion based on a percentage of earned
         premium on a monthly basis, and we recognize revenues for the 
         management fee portion based on profit sharing in the fourth quarter, 
         when it is certain the managed company will have an annual profit. 
         FMI's assets are not subject to APIE policyholder claims.

     In addition,  as of September 30, 2005,  we have the following  significant
investments  accounted  for  as  available-for-sale   securities:   (1)  we  own
approximately  151,000 shares of  HealthTronics  (formerly Prime Medical) common
stock, representing less than 1% of its outstanding common stock, and (2) we own
385,000 shares of Financial Industries Corporation,  representing  approximately
4% of its  outstanding  common  stock.  We  account  for  these  investments  as
available-for-sale   securities,   which  means  they  are   reflected   on  our
consolidated  balance sheets at fair value,  and  fluctuations in fair value are
recognized as unrealized  gains or losses excluded from earnings and reported as
a separate component of stockholders' equity, net of income taxes.




                                     - 20 -


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The preparation of our  consolidated  financial  statements  requires us to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues  and  expenses.  On an on-going  basis,  we evaluate  our
estimates,  including those related to, impairment of assets; bad debts;  income
taxes;  and  contingencies  and litigation.  We base our estimates on historical
experience  and on various  other  assumptions  that we believe to be reasonable
under  the  circumstances,  the  results  of which  form the  basis  for  making
judgments  about the  carrying  values of assets  and  liabilities  that are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates under different assumptions or conditions.

     We believe the following critical  accounting policies and estimates affect
our more  significant  judgments and estimates  used in the  preparation  of our
consolidated financial statements.  We periodically review the carrying value of
our assets to determine if events and circumstances exist indicating that assets
might be  impaired.  If facts and  circumstances  support  this  possibility  of
impairment,  our management will prepare  undiscounted  and discounted cash flow
projections,  which  require  judgments  that are both  subjective  and complex.
Management may also obtain independent valuations.

     Our financial  services  revenues are composed  primarily of commissions on
securities  trades and asset  management  fees.  Revenues  related to securities
transactions  are recognized on a trade date basis.  Asset  management  fees are
recognized  as a percentage of assets under  management  during the period based
upon the terms of agreements with the applicable customers.

     Our insurance  services  revenues related to management fees are recognized
monthly at 13.5% of the earned  premiums of the managed  company.  We also share
equally  any profits of the  managed  company,  to a maximum of 3% of the earned
insurance  premiums.  Any past losses of the managed company are carried forward
and applied against  earnings before any profits are shared.  The profit sharing
component  is recorded  in the fourth  quarter  based on the  audited  financial
results of the managed company, which also has a December 31, year end.

     On  June  4,  2003  we  purchased  from  Financial  Industries  Corporation
("FIC")(OTC:  FNIN.PK) and a foundation  339,879 shares of FIC's common stock as
an  investment.  Earlier in 2003 we had purchased  45,121 FIC shares in the open
market.  The 385,000  shares  represent an  approximate 4% ownership in FIC. The
aggregate  purchase price was  approximately  $5,647,000,  which was all sourced
from our cash reserves. The





                                     - 21 -


shares purchased from FIC and the foundation are not registered, but are subject
to a registration rights agreement requiring FIC's best efforts to register them
within one year of the transaction. Due to FIC's delay in filing its 2003 Form
10-K and its subsequent 10-Q's and 10-K, it has not been able to register these
shares and was de-listed from the NASDAQ exchange in July, 2004.

     During 2004, the value of our investment in FIC had declined significantly.
On October 12, 2004, we  determined  that this decline in market price should be
considered  "other  than  temporary"  as  defined  in  Statements  of  Financial
Accounting  Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities, as amended.  Consequently, we recorded a pretax charge to
earnings of  $2,567,000 in 2004.  The charge  reduced our cost basis in FIC from
$5,647,000,  or $14.67 per share,  to  $3,080,000,  or $8.00 per share which was
equal to the quoted market price of FIC shares on December 31, 2004. We recorded
an additional pretax charge to earnings of $39,000 in the first quarter of 2005.
The charge reduced our cost basis in FIC from $3,080,000, or $8.00 per share, to
$3,041,000, or $7.90 per share which was equal to the quoted market price of FIC
shares on March 31,  2005.  No  additional  charge  was taken  during the second
quarter of 2005 as the quoted market price at June 30, 2005  remained  above our
adjusted cost. While we currently continue to have the ability and the intent to
hold the  stock  indefinitely,  we  concluded  that the  additional  uncertainty
created  by the  late  filings  together  with  the  lack of  current  financial
information  dictated that the decline should be viewed as other than temporary.
No additional  charge was  necessary in the second  quarter of 2005 but a charge
totaling  $96,000 was recorded in the third quarter of 2005 as the quoted market
price of FIC shares had fallen to $7.65 per share on September  30,  2005.  This
latest  charge  further  reduced  our  cost  basis  in FIC  from  $3,041,000  to
$2,945,000. We will continue to closely monitor FIC's situation.


RESULTS OF OPERATIONS

REVENUES

     Revenues from operations  increased  $1,589,000  (21%) and $699,000 (3%) in
the three  and nine  month  periods  ended  September  30,  2005,  respectively,
compared  to the same  periods  in  2004.  Our  income  from  operations  before
interest, income taxes and minority interest increased $3,316,000 and $4,451,000
(682%) in the current year three and nine months, respectively,  compared to the
same periods in 2004. Our net income increased  $2,229,000 and $3,066,000 (558%)
in the current  year three and nine months,  respectively,  compared to the same
periods in 2004.  Lastly,  our diluted net income per share  increased $0.80 and
$1.05 (553%) in the current year three and nine months,  respectively,  compared
to the same periods in 2004. The reasons for these changes are described below.


                                     - 22 -


FINANCIAL SERVICES

     Our financial services revenue increased $1,604,000 (42%) and $510,000 (4%)
in the three and nine months ended September 30, 2005,  respectively compared to
the  same  periods  in 2004.  Higher  commission  revenues  were  earned  at APS
Financial,   the   broker/dealer,   which  derives  most  of  its  revenue  from
transactions in the fixed income market,  in both investment and  non-investment
grade   securities.   During  the  current   quarter,   trading   revenue   from
non-investment   grade  securities  (high  yield)   transactions   significantly
increased.  Even though the market for non-investment  grade securities remained
relatively soft during the current quarter, we were able to capitalize on credit
specific  trading  opportunities.  Revenue  from our  investment  grade  trading
continued to be flat in a soft  investment  climate in which the Federal Reserve
has raised rates six times since the  beginning of the year (150 basis  points).
Financial  services also saw a net increase in revenues of $311,000 and $574,000
in the three and nine month  periods  ended  September  30, 2005 compared to the
same periods in 2004,  respectively,  derived from investment banking activities
and from our newly ramped-up bank debt clearing activities.

     Our financial  services  expenses  increased  $1,365,000 (40%) and $685,000
(7%) in the three and nine month periods ended September 30, 2005, respectively,
compared to the same  periods in 2004.  The primary  reason for the current year
increase is a $1,036,000 (46%) and $441,000 (6%) increase in commission  expense
in the current year three and nine month periods, respectively,  compared to the
same periods in 2004 resulting from the increase in commission  income mentioned
above.  In addition,  incentive  compensation  costs were up $158,000  (65%) but
still down  $263,000  (33%) in the three and nine months of 2005,  respectively,
compared to same periods in 2004. The current quarter  increase is the result of
higher profits at APS Financial  during the third quarter of 2005 while the nine
month decrease is the result of lower year-to-date  profits as well as to higher
minimum  performance  thresholds placed upon management in 2005. Payroll expense
increased  $104,000 (28%) and $315,000 (32%) in the three and nine month periods
ended September 30, 2005, respectively, compared to the same periods in 2004 due
to normal annual merit  raises,  an increase in  performance-related  forgivable
loans, and to the hiring of two new full-time  positions.  Lastly,  professional
fees  increased  $38,000  (88%) and $150,000  (116%) in the three and nine month
periods ended September 30, 2005, respectively,  compared to the same periods in
2004 primarily as a result of fees incurred related to Sarbanes Oxley compliance
as well as to fees related to  establishing  our new bank debt  clearing line of
business.





                                     - 23 -


INSURANCE SERVICES

     Our insurance services revenues from our premium-based insurance management
segment,  APS Insurance  Services,  declined $15,000 (0%) but increased $189,000
(2%) in the three and nine month periods ended September 30, 2005, respectively,
compared  to the same  periods  in  2004.  For the  three  month  period  ending
September  30,  2005,  management  fee revenue  declined as compared to the same
period in 2004 as a result of lower earned premiums in 2005 due to lower written
premiums in the current year. For the nine month period,  written premiums which
earn-out  pro-rata on an annual basis,  have decreased by $4.7 million this year
as  compared  to  2004.   Additionally,   pass-through   commissions  earned  by
third-party agents increased by $113,000 (8%) and decreased by $181,000 (5%) for
the three and nine-month periods,  respectively,  as compared to same periods in
2004.  For the three month period  ending  September  30, 2005,  the increase in
pass-through commissions is the result of higher effective commission rates paid
to agents as well as an increase in third party  agent  business  versus  direct
writings  over the  same  period  in 2004.  For the  nine  month  period  ending
September 30, 2005,  the increase in  management  fee revenue as compared to the
same period in 2005 is the result of higher 2004 written premiums  "earning-out"
in the first and second  quarter of 2005 and an  increase  in the basis by which
management fee is  calculated.  Earned premium was $50.6 million as of September
30, 2005 as compared to $47.2 million as of September 30, 2004.  Overall for the
nine months ended September 30, 2005, the decrease of  pass-through  commissions
is attributable to lower written premium over the same period for 2004. As noted
in the following  paragraph,  commissions paid to third party independent agents
decreased by an equivalent amount, resulting in no impact on net income. Lastly,
risk  management  fee income  decreased  $77,000 (65%) and $111,000 (39%) in the
three and nine  month  periods  ending  September  30,  2005,  respectively,  as
compared  to the  comparable  periods in 2004,  due to lower  number of renewals
utilizing this service.

     Insurance  services expenses  increased  $227,000 (8%) and $150,000 (2%) in
the three  and nine  month  periods  ended  September  30,  2005,  respectively,
compared to the same periods in 2004. The current quarter  increase is primarily
due  to  a  $113,000   (8%)   increase  in   commissions   expense  due  to  the
above-mentioned  increase in commissions paid to third party independent  agents
during the third  quarter of 2005  compared  to the same  period in 2004.  Also,
payroll  increased  $50,000 (7%) and  $117,000  (5%) in the three and nine month
periods ended September 30, 2005, respectively,  compared to the same periods in
2004 as a result  of normal  merit  raises  as well as the  addition  of two new
managerial positions.  Lastly,  professional fees increased $60,000 and $142,000
(338%) for the current year three and nine months, respectively, compared to the
same periods in 2004 primarily as a result of fees incurred  related to Sarbanes
Oxley compliance.




                                     - 24 -


GENERAL AND ADMINISTRATIVE EXPENSES

     General and  administrative  expenses increased $144,000 (34%) and $464,000
(31%)  in  the  three  and  nine  month  periods   ended   September  30,  2005,
respectively,  compared  to the same  periods  in 2004.  Incentive  compensation
expense  increased  $133,000 (125%) and $270,000 (66%) in the current year three
and nine  month  periods,  respectively,  compared  to the same  periods in 2004
resulting from  additional  bonuses that will be paid on the gains from the sale
of  HealthTronics  common  stock  completed  in  2005.  Also,  salaries  expense
increased  $20,000  (12%) and $133,000  (28%) in the current year three and nine
month periods, respectively, compared to the same periods in 2004 resulting from
merit raises  during the year.  The large nine month  current  year  increase is
primarily the result of a severance  payment to a former  employee who has since
been retained as a tax consultant.  Lastly,  audit and consulting fees increased
$22,000  (87%) and $103,000  (109%) during the current year three and nine month
periods as a result of fees incurred related to Sarbanes Oxley compliance.

GAIN ON SALE OF ASSETS

     During the nine months ended September 30, 2005, we recognized  $372,000 of
deferred gain related to the November 2001 sale and subsequent leaseback of real
estate to Prime Medical (now called  HealthTronics,  Inc.) Due to our continuing
involvement in the property, we deferred recognizing approximately $2,400,000 of
the  approximately  $5,100,000  gain and are  recognizing  it in earnings,  as a
reduction of rent expense,  monthly  through  November 2006. A total of $563,000
remains to be recognized in the coming twelve  months.  In addition,  15% of the
gain  ($760,000)  related  to our  then  15%  ownership  in the  purchaser,  was
deferred.  As our ownership  percentage in  HealthTronics  declines  through our
sales of HealthTronics common stock, we recognize these gains proportionately to
our reduction of our interest in that  company.  During the first nine months of
2005 we  recognized  $131,000  of these  deferred  gains,  leaving a balance  of
approximately  $49,000 remaining to be recognized.  The increase in both periods
of the current year is the result of an increased number of HealthTronics shares
of common stock sold during 2005.

GAIN ON INVESTMENTS

     The increase in the current  three and nine month periods of 2005 is due to
the sale of a  greater  number of  available-for-sale  equity  and fixed  income
securities in 2005 than were sold in the  comparable  periods of 2004.  Reducing
these  gains in the  current  year three and nine month  periods was a charge to
earnings of $160,000 which represented the balance of an investment loan made to
a third party during 2004 which has since been deemed to be uncollectible.



                                     - 25 -


LOSS ON IMPAIRMENT OF INVESTMENTS

     The  loss in the  three  months  ended  September  30,  2005  represents  a
write-down  of our  investment  in Financial  Industries  ("FIC")  common stock.
During the fourth  quarter of 2004,  we  determined  that the  decline in market
value of FIC common stock should be  considered  "other than  temporary"  and we
have since been recording a pretax charge to earnings  should there be a decline
in  market  value of FIC  common  stock  below  our  cost  basis at the end of a
quarter. At September 30, 2005 we took an additional charge to earnings totaling
$96,000 as the quoted  price per share had declined  below our cost basis.  This
charge  reduced our cost basis in FIC from  $3,040,000,  or $7.90 per share,  to
$2,945,000, or $7.65 per share which was equal to the quoted market price of FIC
shares on September  30, 2005. We believe the decline in the market price of FIC
has been  brought  about by its  failure  to file  its  2003  Form  10-K and its
subsequent de-listing from the NASDAQ Stock Market. We had expected FIC to bring
its filings current and pursue  restoring its exchange  listing but these events
have not yet  occurred.  FIC has since filed its 2003 Form 10-K in July 2005 but
is still  delinquent  in filing its 2004 Forms 10-Q and 10-K as well as its 2005
Forms 10-Q.  While we  currently  continue to have the ability and the intent to
hold the  stock  indefinitely,  we  concluded  that the  additional  uncertainty
created  by the  late  filings  together  with  the  continued  lack of  current
financial  information  dictated that the decline should be viewed as other than
temporary.  We will  continue to monitor and evaluate  the  situation at FIC and
further  determine  if  changes  in fair  market  value  of the  investment  are
temporary or "other than temporary".

     The  loss  in the  nine  months  ended  September  30,  2005  represents  a
write-down of our  investment  in Toys R Us bonds  together with first and third
quarter 2005  write-downs  totaling  $135,000 of our investment in FIC mentioned
above. In April 2004 we purchased  $300,000 of Toys R Us bonds.  In March,  2005
Toys R Us  announced  a plan of merger  with  another  toy company and a planned
leveraged  buyout  which  precipitated  a drop in the  price  of the  bonds.  An
independent  analysis  indicated  that  the new debt to be  issued  will put the
existing  bonds  in a  subordinated  position.  Since  these  bonds  have a 2018
maturity,  we believe that the impairment is "other than  temporary"  during our
shorter  expected  holding  period.  Consequently,  we  wrote a  charge  against
earnings of $57,000  using the quoted price of the bonds as of June 30, 2005. We
will  continue to monitor and  evaluate  the  situation at Toys R Us and further
determine if changes in fair market  value of the  investment  are  temporary or
"other than temporary".




                                     - 26 -


GAIN ON FORGIVENESS OF DEBT

     During the three and nine months ended  September  30, 2004, we recorded $0
and $76,000,  respectively,  as gains on forgiveness of debt.  This  represented
that amount of liability from which we were released by participants in our loan
to this affiliate.  Due to poor operating results,  Uncommon Care was in default
and not making scheduled  payments under its loan agreement with us in which the
participations  had been sold. As a result,  the loan  participants  released us
from any  obligations  under the  participation  agreements.  During the current
quarter,  we determined there is a remote possibility that the final obligation,
totaling  $24,000,  will  be  required  to  be  paid  under  the  terms  of  the
participation  agreement.  As a result,  we reversed it and recognized a gain in
the same amount.


INTEREST INCOME

     Our interest income increased $67,000 (68%) and $159,000 (63%) in the three
and nine month periods ended September 30, 2005,  respectively,  compared to the
same periods in 2004.  The current year three and nine month  increases were due
to interest  earned on a much higher  balance of  interest-bearing  fixed income
securities.  At September 30, 2005 there was a balance of $12.3 million compared
to a balance of $4.7 million held at September 30, 2004.


OTHER INCOME  (LOSS)

     Our other income decreased  $18,000 (86%) but increased  $48,000 (123%) for
the three  and nine  month  periods  ended  September  30,  2005,  respectively,
compared to the same  periods in 2004.  The  decrease in the current  year three
month period is primarily  due to the receipt of  management  fees from a former
affiliate  received in the third  quarter of 2004 that have not been received in
the third  quarter of 2005.  The  increase in the current year nine month period
represents  primarily  inventory  gains of  $20,000  on  securities  held at APS
Financial during 2005 compared to inventory losses of $25,000 in 2004.





                                     - 27 -


LIQUIDITY AND CAPITAL RESOURCES

         WORKING CAPITAL

     Our net working  capital was  $13,501,000  and $10,673,000 at September 30,
2005 and December 31, 2004,  respectively.  The increase in the current year was
due  primarily to cash  received  upon the sale of long-term  available-for-sale
equity   securities   which  was  used,   in  part,   to   purchase   short-term
available-for-sale fixed income securities.  Cash and cash equivalents decreased
during  this  period by  $4,571,000  as there  were net cash uses in  operating,
investing and financing  activities.  Cash from operating  activities  decreased
from  $1,769,000  provided by  operating  activities  in 2004 to $42,000 used in
operating  activities  in 2005  primarily as a result of cash paid in March 2005
for incentive  compensation  earned and accrued in 2004. In addition,  estimated
2005 federal  income tax payments have totaled $1.8 million and cash paid out in
the form of a dividend to shareholders totaled $671,000.  Cash used in investing
activities  decreased from $4,060,000 in 2004 to $3,107,000 in 2005 as purchases
of available-for-sale  securities exceeded cash received from the sales of other
available-for-sale  securities. Cash used in financing activities increased from
$52,000  in 2004 to  $1,422,000  in 2005  due to  purchases  of  treasury  stock
exceeding cash received from the exercise of employee stock options. For details
of the amounts described above, refer to the Condensed  Consolidated  Statements
of Cash Flows on page 7 of this Form 10-Q.

     Historically,  we have maintained a strong working capital position and, as
a result,  we have been able to satisfy our operational and capital  expenditure
requirements  with cash generated  from our operating and investing  activities.
These  same  sources  of funds have also  allowed  us to pursue  investment  and
expansion opportunities  consistent with our growth plans. Although there can be
no assurance our operating  activities will provide  positive cash flow in 2005,
we are  optimistic  that our working  capital  requirements  will be met for the
foreseeable future for the following  reasons:  (1) our current cash position is
very strong,  with a balance of approximately $5.1 million comprising 17 percent
of our total assets; (2) our investments in available-for-sale  equity and fixed
income  securities  could  provide an additional  $14.5 million  should the need
arise;  and (3) we  renewed  a line of credit  in April  2005 that is  described
below.

         LINE OF CREDIT

     During  April  2005,  we  renewed a $3.0  million  line of credit  that was
originally established in November 2003 with PlainsCapital Bank. The loan called
for interest  payments only to be made on any amount drawn until April 15, 2006,
when the  entire  amount of the note,  principal  and  interest  then  remaining
unpaid, became due and




                                     - 28 -


payable.  At September 30, 2005,  there were no draws taken against this line of
credit. We are in compliance with the covenants of the loan agreement, including
requirements  for a minimum of $5.0  million  of  unencumbered  liquidity  and a
minimum 2 to 1 net worth ratio.

         CAPITAL EXPENDITURES

     Our capital  expenditures for equipment were $247,000 in the nine months of
2005. The majority of these expenditures were necessary to upgrade our reporting
software at our  insurance  services  subsidiary.  At September  30,  2005,  our
reporting  software  upgrade is considered to be "in progress" with  anticipated
implementation  in  phases  during  the  rest of 2005  and  2006.  Those  assets
purchased  during 2005 that have not been placed in service,  are  appropriately
not  being   depreciated.   We  expect  capital   expenditures  in  2005  to  be
approximately  $500,000,  including  $200,000 in  improvements  to our  business
intelligence reporting software. Our 2005 capital expenditure budget is expected
to be funded through cash on hand.


ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

     In May  2005,  the FASB  issued  SFAS  154,  Accounting  Changes  and Error
Corrections. This Statement replaces APB Opinion No. 20, Accounting Changes, and
FASB  Statement  No.  3,  Reporting  Accounting  Changes  in  Interim  Financial
Statements, and changes the requirements for the accounting for and reporting of
a change in  accounting  principle.  This  Statement  applies  to all  voluntary
changes in  accounting  principle.  It also  applies to changes  required  by an
accounting pronouncement in the unusual instance that the pronouncement does not
include specific transition  provisions.  When a pronouncement includes specific
transition  provisions,  those  provisions  should  be  followed.  FASB  154  is
effective for accounting  changes and corrections of errors made in fiscal years
beginning  after  December 15, 2005. The Company does not expect the adoption of
this standard to have a material effect on its financial position, results of
operations or cash flows.

     In  December  2004,  the FASB  issued SFAS 153,  Exchanges  of  Nonmonetary
Assets,  an amendment of APB No. 29,  Accounting for  Nonmonetary  Transactions.
SFAS 153 requires  exchanges of  productive  assets to be accounted  for at fair
value, rather than at carryover basis, unless (1) neither the asset received nor
the asset  surrendered has a fair value that is determinable  within  reasonable
limits or (2) the transactions lack commercial substance.  SFAS 153 is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005.  The Company  does not expect the adoption of this  standard to have a
material effect on its financial position, results of operations or cash flows.


                                     - 29 -


     In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards, or SFAS, No. 123 (revised 2004), "Share-Based
Payment".  Statement 123(R) will provide  investors and other users of financial
statements  with more complete and neutral  financial  information  by requiring
that the  compensation  cost relating to  share-based  payment  transactions  be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability  instruments  used.  Statement  123(R) covers a
wide range of share-based  compensation  arrangements  including  share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. Statement 123(R) replaces FASB Statement No. 123,
Accounting  for  Stock-Based  Compensation,  and  supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees. Statement 123, as originally issued in
1995,  established  as preferable a  fair-value-based  method of accounting  for
share-based  payment  transactions  with  employees.   However,  that  Statement
permitted entities the option of continuing to apply the guidance in Opinion 25,
as long as the footnotes to financial statements disclosed what net income would
have been had the preferable  fair-value-based method been used. Public entities
(other than those filing as small  business  issuers)  will be required to apply
Statement  123(R) as of the first interim or annual reporting period that begins
after  December 31, 2005. We are currently  evaluating the effect of adoption of
SFAS  123(R)  will have on our  overall  results  of  operations  and  financial
position.


Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We have exposure to changes in interest  rates and the market values of our
investments but have no material exposure to fluctuations in foreign currency.

INTEREST RATE RISK

     Our exposure to market risk for changes in interest  rates  relates to both
our investment  portfolio and our revenues generated through  commissions at our
financial  services  segment.  All of our marketable fixed income securities are
designated as available-for-sale  and, accordingly,  are presented at fair value
on our balance  sheets.  Fixed rate  securities may have their fair market value
adversely  affected due to a rise in interest rates, and we may suffer losses in
principal if forced to sell securities that have declined in market value due to
changes in interest rates.




                                     - 30 -


     Changes  in  interest  rates  could  have an  impact  at our  broker/dealer
subsidiary,  APS Financial. The general level of interest rates may trend higher
or lower in 2005,  and this move may impact our level of business  in  different
fixed-income  sectors.  If a generally  improving  economy is the impetus behind
higher rates,  then while our  investment  grade business may drop off, our high
yield  business  might  improve with  improving  credit  conditions.  A volatile
interest rate environment in 2005 could also impact our business as this type of
market  condition  can lead to  investor  uncertainty  and  their  corresponding
willingness to commit funds.

     As we currently  have no debt and do not anticipate the need to take on any
debt in 2005,  interest  rate  changes  will  have no  impact  on our  financial
position as it pertains to interest expense.

INVESTMENT RISK

     As of September 30, 2005, our recorded basis in debt and equity  securities
was approximately  $17.4 million.  We regularly review the carrying value of our
investments  and  identify  and record  losses  when  events  and  circumstances
indicate  that  such  declines  in the  fair  value  of such  assets  below  our
accounting basis are other-than-temporary. See Footnote 6 to this report on Form
10-Q for a detailed description of charges to earnings in the prior year and the
current quarter that were considered to be "other than temporary".

     We  also  have  an  investment   of  151,200   shares  of  common  sock  of
HealthTronics,  Inc.  Although  we have  an  unrealized  gain  of  approximately
$746,000 as of September 30, 2005,  this  investment  can also be at risk should
market or economic  conditions change for the worse or should adverse situations
occur at  HealthTronics,  such as a major  product line becoming  obsolete.  The
remainder of our corporate  equity and fixed income  investments  share the same
risks as HealthTronics but our exposure is much lower.





                                     - 31 -


Item 4.              CONTROLS AND PROCEDURES

     We maintain  disclosure controls and procedures that are designed to ensure
that  information  required  to be  disclosed  by us in reports  that we file or
submit under the Securities Exchange Act, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms and that
such  information is accumulated and  communicated to our management,  including
our Chief Executive  Officer and Chief  Financial  Officer,  as appropriate,  to
allow  timely  decisions  regarding  required  disclosures.   In  designing  and
evaluating the disclosure  controls and procedures,  management  recognizes that
any controls and  procedures,  no matter how well  designed  and  operated,  can
provide only reasonable  assurances of achieving the desired control objectives,
and  management  necessarily is required to apply its judgment in evaluating the
cost-benefit  relationship of possible controls and procedures. As of the end of
the  period  covered  by this  report,  and under the  supervision  and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we evaluated the effectiveness of the design and operation of
these  disclosure  procedures.  Based  on this  evaluation  and  subject  to the
foregoing,  our Chief Executive  Officer and Chief Financial  Officer  concluded
that our  disclosure  controls  and  procedures  were  effective  in  reaching a
reasonable  level of assurance of achieving  management's  desired  controls and
procedures objectives.

     There have been no changes in internal  controls over  financial  reporting
that  occurred  during  our most  recent  fiscal  quarter  that have  materially
affected,  or are  reasonably  likely  to  affect,  our  internal  control  over
financial reporting.

     As part of a  continuing  effort to improve our  business  processes we are
evaluating our internal  controls and may update certain controls to accommodate
any modifications to our business processes or accounting procedures.



                                     - 32 -







                                    PART II

                               OTHER INFORMATION







                                     - 33 -



Item 1. LEGAL PROCEEDINGS

         We are involved in various claims and legal actions that have arisen in
the ordinary course of business. Management believes that any liabilities
arising from these actions will not have a significant adverse effect on our
financial condition or results of operations.



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

         Items 2(a) through(d) are not applicable.

         (e)  Stock Repurchases








                                                                                            (d)    Maximum
                                                                     (c)  Total Number           Dollar Value
                                                                           of Shares             of Shares that
                                                                         Purchased as Part         May yet be
Period                       a) Total Number      (b) Average              of Publicly           Purchased under
                                of shares           Price Paid           Announced  Plans          the Plans or
                                Purchased (1)        per Share             or Programs              Programs
                               -------------       ------------         -----------------        ----------------           

                                                                                                 
July 1, 2005 - July 31, 2005           --                   --                   --                  $ 618,000
Aug 1, 2005 - Aug 31, 2005         32,963              $ 12.81               32,963                  $ 196,000
Sept 1, 2005 - Sept 30, 2005        3,000                12.55                3,000                  $ 158,000



(1)    Of the total shares purchased 5,363 were purchased in open market 
       transactions and 30,600 were purchased in private transactions. Our share
       repurchase program was announced August 17, 2004 and authorizes the
       purchase of up to $2 million of common stock.



Item 3.  DEFAULTS UPON SENIOR SECURITIES

          Not Applicable


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         
         Not Applicable



                                     - 34 -


Item 5.  OTHER INFORMATION

          Not Applicable


Item 6.  EXHIBITS 

            Exhibits

                31.1     Section 302 Certification of Chief Executive Officer
                31.2     Section 302 Certification of Chief Financial Officer

                32.1     Section 906 Certification of Chief Executive Officer
                32.2     Section 906 Certification of Chief Financial Officer






                                     - 35 -