##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-19673
 
 AMERICA SERVICE GROUP INC.
  Delaware
    
    51-0332317(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)105 Westpark Drive, Suite 200Brentwood, Tennessee
    
    37027(Address of principal executive offices)
    
    (Zip Code)
 (615) 373-3100
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 o þ




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##### 



AMERICA SERVICE GROUP INC.
 QUARTERLY REPORT ON FORM 10-Q
INDEX
 PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    3Condensed
Consolidated Statements of Income for the quarters ended March 31, 2011 and 2010
    
    
    4Condensed
Consolidated Statements of Cash Flows for the quarters ended March 31, 2011 and 2010
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    40Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3. Defaults Upon Senior Securities
    
    
    40Item 4. Reserved
    
    
    40Item 5. Other Information
    
    
    40Item 6. Exhibits
    
    
    41Signatures
    
    
    42EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I:
 FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 AMERICA SERVICE GROUP INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (shown in 000s except share and per share amounts)  (UNAUDITED)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    41,606
    
    
    $
    39,584Accounts receivable, net of allowance for doubtful accounts of $430 and $411, respectively
    
    
    54,054
    
    
    
    52,481Inventories
    
    
    2,870
    
    
    
    2,868Prepaid expenses and other current assets
    
    
    14,048
    
    
    
    13,750Current deferred tax assets
    
    
    
    
    
    
    3,359Total current assets
    
    
    112,578
    
    
    
    112,042Property and equipment, net
    
    
    11,163
    
    
    
    11,040Goodwill
    
    
    40,772
    
    
    
    40,772Contracts, net
    
    
    1,588
    
    
    
    1,658Other assets
    
    
    11,776
    
    
    
    11,852Noncurrent deferred tax assets
    
    
    244
    
    
    
    Total assets
    
    $
    178,121
    
    
    $
    177,364LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    23,051
    
    
    $
    23,691Accrued medical claims liability
    
    
    20,310
    
    
    
    23,750Accrued expenses
    
    
    42,561
    
    
    
    38,810Deferred revenue
    
    
    12,377
    
    
    
    10,053Current deferred tax liabilities
    
    
    1,576
    
    
    
    Total current liabilities
    
    
    99,875
    
    
    
    96,304Noncurrent portion of accrued expenses
    
    
    20,744
    
    
    
    20,460Noncurrent deferred tax liabilities
    
    
    
    
    
    
    4,836Total liabilities
    
    
    120,619
    
    
    
    121,600Commitments and contingencies (Note 19)Stockholders equity:Preferred stock, $0.01 par value, 2,000,000 shares authorized at March 31, 2011 and
December 31, 2010; no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 20,000,000 shares authorized at March 31, 2011 and
December 31, 2010; 9,297,566 and 9,280,382 shares issued and outstanding at March 31,
2011 and December 31, 2010, respectively
    
    
    93
    
    
    
    93Additional paid-in capital
    
    
    40,553
    
    
    
    40,015Retained earnings
    
    
    16,856
    
    
    
    15,656Total stockholders equity
    
    
    57,502
    
    
    
    55,764Total liabilities and equity
    
    $
    178,121
    
    
    $
    177,364
 
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AMERICA SERVICE GROUP INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (shown in 000s except share and per share amounts)  (UNAUDITED)
 Quarter endedMarch 31,2011
    
    
    2010Healthcare revenues
    
    $
    153,865
    
    
    $
    159,960Healthcare expenses
    
    
    139,761
    
    
    
    144,628Gross margin
    
    
    14,104
    
    
    
    15,332Selling, general and administrative expenses
    
    
    8,682
    
    
    
    8,852Merger expenses
    
    
    1,339
    
    
    
    Audit Committee investigation and related expenses
    
    
    43
    
    
    
    153Depreciation and amortization
    
    
    927
    
    
    
    769Income from operations
    
    
    3,113
    
    
    
    5,558Interest income
    
    
    5
    
    
    
    20Income from continuing operations before income tax provision
    
    
    3,118
    
    
    
    5,578Income tax provision
    
    
    1,365
    
    
    
    2,328Income from continuing operations
    
    
    1,753
    
    
    
    3,250Income (loss) from discontinued operations, net of taxes
    
    
    5
    
    
    
    (53
    )Net income
    
    $
    1,758
    
    
    $
    3,197Net income available to common shareholders (Note 20)
    
    $
    1,741
    
    
    $
    3,091Net income (loss) available to common shareholders per common share  basic:Continuing operations
    
    $
    0.19
    
    
    $
    0.36Discontinued operations, net of taxes
    
    
    
    
    
    
    Net income available to common shareholders per common share (Note 20)
    
    $
    0.19
    
    
    $
    0.36Net income (loss) available to common shareholders per common share  diluted:Continuing operations
    
    $
    0.19
    
    
    $
    0.36Discontinued operations, net of taxes
    
    
    
    
    
    
    (0.01
    )Net income available to common shareholders per common share (Note 20)
    
    $
    0.19
    
    
    $
    0.35Weighted average common shares outstanding:Basic
    
    
    9,194,683
    
    
    
    8,659,803Diluted
    
    
    9,323,272
    
    
    
    8,743,774Dividends declared per share
    
    $
    0.06
    
    
    $
    0.06
 
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AMERICA SERVICE GROUP INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (shown in 000s)  (UNAUDITED)
 Quarter endedMarch 31,2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    1,758
    
    
    $
    3,197Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    928
    
    
    
    771Loss on retirement of fixed assets
    
    
    
    
    
    
    1Finance cost amortization
    
    
    8
    
    
    
    8Deferred income taxes
    
    
    (145
    )
    
    
    2,243Share-based compensation expense
    
    
    338
    
    
    
    432Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (1,573
    )
    
    
    (6,023
    )Inventories
    
    
    (2
    )
    
    
    141Prepaid expenses and other current assets
    
    
    (298
    )
    
    
    474Other assets
    
    
    69
    
    
    
    1,355Accounts payable
    
    
    (640
    )
    
    
    6,019Accrued medical claims liability
    
    
    (3,440
    )
    
    
    1,542Accrued expenses
    
    
    3,477
    
    
    
    (4,560
    )Deferred revenue
    
    
    2,324
    
    
    
    (665
    )Net cash provided by operating activities
    
    
    2,804
    
    
    
    4,935Cash flows from investing activities:Capital expenditures
    
    
    (982
    )
    
    
    (1,319
    )Net cash
used in investing activities
    
    
    (982
    )
    
    
    (1,319
    )Cash flows from financing activities:Share repurchases
    
    
    
    
    
    
    (544
    )Issuance of common stock
    
    
    200
    
    
    
    186Exercise of stock options
    
    
    
    
    
    
    591Net cash provided by financing activities
    
    
    200
    
    
    
    233Net increase in cash and cash equivalents
    
    
    2,022
    
    
    
    3,849Cash and cash equivalents at beginning of period
    
    
    39,584
    
    
    
    37,655Cash and cash equivalents at end of period
    
    $
    41,606
    
    
    $
    41,504
 
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AMERICA SERVICE GROUP INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 1. Basis of Presentation
   2. Description of Business
  3. Pending Merger
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4. Audit Committee Investigation
  5. Restructuring Charge
  7




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One-timeTerminationBenefitsBalance at December 31, 2010
    
    $
    144Plus: Costs incurred
    
    
    Less: Amounts paid
    
    
    (65
    )Balance at March 31, 2011
    
    $
    79
 6. Share-Based Compensation
   Weighted
    
    Weighted Average
    
    Aggregate IntrinsicAverage
    
    Remaining
    
    Value (inOptions
    
    Exercise Price
    
    Contractual Term
    
    thousands) (1)Outstanding, December 31, 2010
    
    
    897,172
    
    
    $
    17.12Granted
    
    
    
    
    
    
    Exercised
    
    
    (4,500
    )
    
    
    16.42Canceled
    
    
    
    
    
    
    Outstanding, March 31, 2011
    
    
    892,672
    
    
    $
    17.13
    
    
    
    5.65
    
    
    $
    7,599Exercisable, March 31, 2011
    
    
    638,672
    
    
    $
    18.05
    
    
    
    4.19
    
    
    $
    4,847Expected to vest, March 31, 2011 (2)
    
    
    244,793
    
    
    $
    14.79
    
    
    
    9.31
    
    
    $
    2,656
 
 (1)
    
    Based upon the difference between the closing market price of the Companys common stock on the last trading day of the
quarter and the exercise price of in-the-money options.(2)
    
    Amount represents options expected to vest, net of estimated forfeitures.  WeightedRestricted
    
    Average Grant-Shares
    
    Date Fair ValueNonvested, December 31, 2010
    
    
    91,065
    
    
    $
    13.53Granted
    
    
    
    
    
    
    Vested
    
    
    (4,665
    )
    
    
    10.63Forfeited
    
    
    
    
    
    
    Nonvested, March 31, 2011
    
    
    86,400
    
    
    $
    13.69
 7. Discontinued Operations
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Quarter endedMarch 31,2011
    
    
    2010Healthcare revenues
    
    $
    (139
    )
    
    $
    4,121Healthcare expenses
    
    
    (149
    )
    
    
    4,209Gross margin
    
    
    10
    
    
    
    (88
    )Depreciation and amortization
    
    
    1
    
    
    
    2Income (loss) from discontinued operations before taxes
    
    
    9
    
    
    
    (90
    )Income tax provision (benefit)
    
    
    4
    
    
    
    (37
    )Income (loss) from discontinued operations, net of taxes
    
    $
    5
    
    
    $
    (53
    )
 8. Fair Value of Financial Instruments
   9. Accounts Receivable
  March 31,
    
    
    December 31,2011
    
    
    2010Billed accounts receivable
    
    $
    19,598
    
    
    $
    23,894Unbilled accounts receivable
    
    
    34,122
    
    
    
    28,262Other accounts receivable
    
    
    1,006
    
    
    
    94354,726
    
    
    
    53,099Less: Allowances
    
    
    (430
    )
    
    
    (411
    )54,296
    
    
    
    52,688Less: Receivables reclassified as noncurrent
    
    
    (242
    )
    
    
    (207
    )$
    54,054
    
    
    $
    52,481
    9




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10. Prepaid Expenses and Other Current Assets
  March 31,
    
    
    December 31,2011
    
    
    2010Prepaid insurance
    
    $
    6,990
    
    
    $
    6,303Prepaid cash deposits for professional liability claims losses
    
    
    4,974
    
    
    
    5,524Prepaid other
    
    
    2,084
    
    
    
    1,923$
    14,048
    
    
    $
    13,750
 11. Property and Equipment
  March 31,
    
    
    December 31,
    
    
    Estimated2011
    
    
    2010
    
    
    Useful LivesLeasehold improvements
    
    $
    1,029
    
    
    $
    1,004
    
    
    7 yearsEquipment and furniture
    
    
    11,089
    
    
    
    10,635
    
    
    5 yearsComputer software
    
    
    10,004
    
    
    
    9,227
    
    
    3-5 yearsMedical equipment
    
    
    1,009
    
    
    
    980
    
    
    5 yearsAutomobiles
    
    
    44
    
    
    
    44
    
    
    5 yearsManagement information systems under development
    
    
    505
    
    
    
    689
    
    
    
    23,680
    
    
    
    22,579Less: Accumulated depreciation
    
    
    (12,517
    )
    
    
    (11,539
    )$
    11,163
    
    
    $
    11,040
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12. Other Assets
  March 31,
    
    
    December 31,2011
    
    
    2010Deferred financing costs
    
    $
    68
    
    
    $
    68Less: Accumulated amortization
    
    
    (49
    )
    
    
    (42
    )19
    
    
    
    26Prepaid cash deposits for professional
liability claims losses
    
    
    7,405
    
    
    
    7,509Prepaid insurance deposits
    
    
    3,996
    
    
    
    3,996Noncurrent receivables
    
    
    242
    
    
    
    207Other refundable deposits
    
    
    114
    
    
    
    114$
    11,776
    
    
    $
    11,852
 13. Contract Intangibles
  March 31,
    
    
    December 31,2011
    
    
    2010Gross contracts value
    
    $
    4,000
    
    
    $
    4,000Less: Accumulated amortization
    
    
    (2,412
    )
    
    
    (2,342
    )$
    1,588
    
    
    $
    1,658
   14. Accrued Expenses
  March 31,
    
    
    December 31,2011
    
    
    2010Salaries and employee benefits
    
    $
    21,429
    
    
    $
    22,230Professional liability claims
    
    
    24,287
    
    
    
    22,646Accrued workers compensation claims
    
    
    7,284
    
    
    
    6,469Other
    
    
    10,305
    
    
    
    7,92563,305
    
    
    
    59,270Less: Noncurrent portion of deferred lease liability
    
    
    (814
    )
    
    
    (844
    )Less: Noncurrent portion of professional liability
and workers compensation claims
    
    
    (19,930
    )
    
    
    (19,616
    )$
    42,561
    
    
    $
    38,810
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15. Reserve for Loss Contracts
    16. Banking Arrangements
      12




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17. Income Taxes
     13




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18. Professional and General Liability Self-Insurance Retention
   19. Commitments and Contingencies
  14




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Litigation and Claims
 DeSantis Professional Liability Suit.
 Dawkins Professional Liability Suit.
 Matters involving PHS and Baltimore County, Maryland.
   15




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Litigation Related to the Merger
 Colleen Witmer,
individually and on behalf of all others similarly situated, v. America Service Group Inc., Valitás
Health Services, Inc., Whiskey Acquisition Corp., Burton C. Einspruch, William M. Fenimore, Jr.,
John W. Gildea, Richard Hallworth, John C. McCauley, Michael W. Taylor, and Richard D. Wright
  Matters Related to the Audit Committee Investigation and Shareholder Litigation
  Shareholder Litigation.
 16




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Delaware Department of Justice Inquiry
 17




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Other Matters
  Performance Bonds
  20. Net Income (Loss) Per Common Share
   18




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Quarter endedMarch 31,2011
    
    
    2010Numerator:Income from continuing operations
    
    $
    1,753
    
    
    $
    3,250Income (loss) from discontinued operations, net of taxes
    
    
    5
    
    
    
    (53
    )Net income
    
    
    1,758
    
    
    
    3,197Less: Income allocated to participating securities (unvested restricted shares)
    
    
    (17
    )
    
    
    (106
    )Net income allocated to common shareholders
    
    $
    1,741
    
    
    $
    3,091Components of income allocated to participating securities (unvested restricted shares):Income from continuing operations
    
    $
    17
    
    
    $
    107Income (loss) from discontinued operations, net of taxes
    
    
    
    
    
    
    (1
    )Income allocated to participating securities
    
    $
    17
    
    
    $
    106Components of net income allocated to common shareholders  numerator for calculating
net income (loss) available to common shareholders per common share:Income from continuing operations
    
    $
    1,736
    
    
    $
    3,143Income (loss) from discontinued operations, net of taxes
    
    
    5
    
    
    
    (52
    )Net income allocated to common shareholders
    
    $
    1,741
    
    
    $
    3,091Denominator:Denominator for basic net income loss) available to common shareholders per common
share  weighted average shares
    
    
    9,194,683
    
    
    
    8,659,803Effect of dilutive non-participating securities:Employee stock options
    
    
    128,589
    
    
    
    83,971Denominator for diluted net income (loss) available to common shareholders per common
share  adjusted weighted average shares and assumed conversions
    
    
    9,323,272
    
    
    
    8,743,774Net income (loss) available to common shareholders per common share  basic:Continuing operations
    
    $
    0.19
    
    
    $
    0.36Discontinued operations, net of taxes
    
    
    
    
    
    
    Net income available to common shareholders per common share
    
    $
    0.19
    
    
    $
    0.36Net income (loss) available to common shareholders per common share  diluted:Continuing operations
    
    $
    0.19
    
    
    $
    0.36Discontinued operations, net of taxes
    
    
    
    
    
    
    (0.01
    )Net income available to common shareholders per common share
    
    $
    0.19
    
    
    $
    0.35
  Quarter endedMarch 31,2011
    
    
    2010Options excluded from computation of diluted net
income per common share as effect would be
anti-dilutive
    
    
    372,917
    
    
    
    396,000Weighted average exercise price of excluded options
    
    $
    20.07
    
    
    $
    21.82
 21. Comprehensive Income
  22. Share Repurchases
  19




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20




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 General
    Pending Merger
      21




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Forward-Looking Statements
  
    
    the Companys ability to obtain shareholder approval, regulatory approval and close the
transaction discussed in the section titled Pending Merger above;
    
    the Companys ability to retain existing client contracts and obtain new contracts at
acceptable pricing levels;
    
    whether or not government agencies continue to privatize correctional healthcare
services;
 22




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
    
    risks arising from governmental budgetary pressures and funding;
    
    the possible effect of adverse publicity on the Companys business;
    
    increased competition for new contracts and renewals of existing contracts;
    
    risks arising from the possibility that the Company may be unable to collect accounts
receivable or that accounts receivable collection may be delayed;
    
    the Companys ability to limit its exposure for inmate medical costs, catastrophic
illnesses, injuries and medical malpractice claims in excess of amounts covered under
contracts or insurance coverage;
    
    the Companys ability to maintain and continually develop information technology and
clinical systems;
    
    the outcome or adverse development of pending litigation, including professional
liability litigation;
    
    the Companys determination whether to continue the payment of quarterly cash dividends,
and if so, at the current amount;
    
    the Companys determination whether to repurchase shares under its stock repurchase
program;
    
    the Companys dependence on key management and clinical personnel;
    
    risks arising from potential weaknesses or deficiencies in the Companys internal control
over financial reporting;
    
    risks associated with the possibility that the Company may be unable to satisfy covenants
under its credit facility;
    
    the risk that government or municipal entities (including the Companys government and
municipal customers) may bring enforcement actions against, seek additional refunds from, or
impose penalties on, the Company or its subsidiaries as a result of the matters investigated
by the Audit Committee in prior years; and
    
    the Companys ability to expand its business beyond its traditional correctional health
client base.
  Critical Accounting Policies And Estimates
 General
  23




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
    
    revenue (net of contractual allowances) and cost recognition (including the
estimated cost of off-site medical claims);
    
    allowance for doubtful accounts;
    
    loss contracts;
    
    professional and general liability self-insurance retention;
    
    other self-funded insurance reserves;
    
    legal contingencies;
    
    impairment of intangible assets and goodwill;
    
    amortizable life of contract intangibles;
    
    income taxes; and
    
    share-based compensation.
   Revenue and Cost Recognition
     24




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Percentage of Revenue fromContinuing OperationsQuarter Ended
    
    Quarter EndedContract Category
    
    March 31, 2011
    
    March 31, 2010Fixed Fee
    
    
    12.9
    %
    
    
    12.0
    %Population Based
    
    
    67.3
    %
    
    
    68.2
    %Cost Plus a Fee
    
    
    19.8
    %
    
    
    19.8
    %
     25




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Allowance for Doubtful Accounts
        Loss Contracts
  26




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Professional and General Liability Self-Insurance Retention
     27




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Other Self-Funded Insurance Reserves
  Legal Contingencies
   Impairment of Intangible Assets and Goodwill
   28




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
    
    significant underperformance or loss of key contracts relative to expected
historical or projected future operating results;
    
    significant changes in the manner of use of the Companys assets or in the
Companys overall business strategy;
    
    significant negative industry or economic trends; and
    
    an adverse change in the Companys market capitalization.
    Amortizable Life of Contract Intangibles
  Income Taxes
    29




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Share-Based Compensation
  30




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Results of Operations
  Quarter endedMarch 31,Percentage of Healthcare Revenues
    
    2011
    
    
    2010Healthcare revenues
    
    
    100.0
    %
    
    
    100.0
    %Healthcare expenses
    
    
    90.8
    
    
    
    90.4Gross margin
    
    
    9.2
    
    
    
    9.6Selling, general and administrative expenses
    
    
    5.7
    
    
    
    5.5Merger expenses
    
    
    0.9
    
    
    
    Audit Committee investigation and related expenses
    
    
    
    
    
    
    0.1Depreciation and amortization
    
    
    0.6
    
    
    
    0.5Income from operations
    
    
    2.0
    
    
    
    3.5Interest income
    
    
    
    
    
    
    Income from continuing operations before income tax provision
    
    
    2.0
    
    
    
    3.5Income tax provision
    
    
    0.9
    
    
    
    1.5Income from continuing operations
    
    
    1.1
    
    
    
    2.0Income (loss) from discontinued operations, net of taxes
    
    
    
    
    
    
    Net income
    
    
    1.1
    %
    
    
    2.0
    %
 Quarter Ended March 31, 2011 Compared to Quarter Ended March 31, 2010
 Healthcare revenues.
 Healthcare expenses.
 Selling, general and administrative expenses.
 31




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Merger expenses.
 Audit Committee investigation and related expenses.
 Depreciation and amortization
 Interest income
 Income tax provision.
 Income from continuing operations.
 Income (loss) from discontinued operations, net of taxes
 Net income.
 Liquidity and Capital Resources
 Overview
   32




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Share Repurchases
   Dividends
   Credit Facility
  33




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Liquidity and Capital Resources Outlook
  34




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Other Financing Transactions
  Off-Balance Sheet Transactions
  35




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
    36




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PART II:
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   DeSantis Professional Liability Suit.
 Dawkins Professional Liability Suit.
 Matters involving PHS and Baltimore County, Maryland.
  37




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##### Table of Contents



Litigation Related to the Merger
 Colleen Witmer,
individually and on behalf of all others similarly situated, v. America Service Group Inc., Valitás
Health Services, Inc., Whiskey Acquisition Corp., Burton C. Einspruch, William M. Fenimore, Jr.,
John W. Gildea, Richard Hallworth, John C. McCauley, Michael W. Taylor, and Richard D. Wright
 38




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Matters Related to the Audit Committee Investigation and Shareholder Litigation
  Shareholder Litigation.
    39




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##### Table of Contents



Delaware Department of Justice Inquiry
 Other Matters
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. RESERVED
 
 ITEM 5. OTHER INFORMATION
  40




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##### Table of Contents



ITEM 6. EXHIBITS
 2.1
    
    
    
    Agreement and Plan of Merger, dated
March 2, 2011 by and among Valitás Health Services, Inc., Whiskey
Acquisition Corp. and America Service Group Inc. (incorporated herein
by reference to Exhibit 2.1 to the Companys Current Report on
Form 8-K filed on March 3, 2011).3.1
    
    
    
    Amended and Restated Certificate of Incorporation of America Service Group Inc.
(incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form
10-Q for the three month period ended June 30, 2002).3.2
    
    
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of America
Service Group Inc. (incorporated herein by reference to Exhibit 3.4 to the Companys Quarterly
Report on Form 10-Q for the three month period ended June 30, 2004).3.3
    
    
    
    Amended and Restated By-Laws of America Service Group Inc. (incorporated herein by
reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed on March 3, 2009).4.1
    
    
    
    Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the
Companys Quarterly Report on Form 10-Q for the three month period ended June 30, 2002).4.2
    
    
    
    Certificate of Designation of the Series A Convertible Preferred Stock (incorporated
herein by reference to Exhibit 99.3 to the Companys Current Report on Form 8-K filed on
February 10, 1999).11
    
    
    
    Computation of Per Share Earnings.*31.1
    
    
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Data required by U.S. GAAP related to earnings per share is provided in Note 20 to the condensed
consolidated financial statements in this report. 41




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SIGNATURES
  AMERICA SERVICE GROUP INC./s/ RICHARD HALLWORTH
 Richard
HallworthPresident & Chief Executive Officer(Duly Authorized Officer)
 /s/ MICHAEL W. TAYLOR
 Michael
W. TaylorExecutive Vice President & Chief Financial Officer(Principal Financial Officer)Dated: May 2, 2011
 42