| x      |   | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934. |
|--------|--------|----------------------------------------------------------------------------------------------------|
|   |   |                                                                                               |
|   |   | For      the quarterly period ended: September      30, 2008                                       |

|  ̈ |   | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934. |
|--------|--------|-----------------------------------------------------------------------------------------------------|
|   |   |                                                                                                |
|   |   | Commission      file number: 001-33094                                                              |

| AMERICAN      CARESOURCE HOLDINGS, INC. |
|-----------------------------------------|

| DELAWARE                                                              |   | 20-0428568                                |
|-----------------------------------------------------------------------|--------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization)   |   | (I.R.S.      employer identification no.) |
|                                                                  |   |                                      |
| 5429 LYNDON B. JOHNSON      FREEWAYSUITE 700DALLAS,      TEXAS75240   |
| (Address      of principal executive offices)                         |
| (Zip      code)                                                       |
|                                                                  |
| (972)      308-6830                                                   |
| (Registrant’s      telephone number, including area code)  |

| q Large Accelerated      Filer                                                                                | q Non-Accelerated      Filer     |
|---------------------------------------------------------------------------------------------------------------|----------------------------------|
| q Accelerated      Filer  (do not check if a smaller reporting      company)    | x Smaller Reporting      Company |

----

| Part      I   | Financial      Information                                                                                           | 1      |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Item      1.  | Financial      Statements                                                                                            | 1      |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|          | Consolidated      Statements of Operations (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 1      |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|          | Consolidated      Balance Sheets (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 2      |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|          | Consolidated      Statements of Stockholders’ Equity (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 3      |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|          | Consolidated      Statements of Cash Flows (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 4      |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|          | Notes      to Unaudited Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 5      |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Item      2.  | Management’s      Discussion and Analysis of Financial Condition and Results of      Operation                                                                                                                                                                                                                                                                                                                                                                                                                                                | 9      |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Item      4.  | Controls      and      Procedures                                                                                    | 14     |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Part      II  | Other      Information                                                                                               | 15     |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Item      1A. | Risk      Factors                                                                                                    | 15     |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Item      2.  | Unregistered      Sales of Equity Securities and Use of Proceeds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 15     |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Item      6.  | Exhibits                                                                                                             | 15     |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Signatures    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 16     |

----

| AMERICAN      CARESOURCE HOLDINGS, INC.                 |
|---------------------------------------------------------|
| CONSOLIDATED      STATEMENTS OF OPERATIONS              |
| (Unaudited)                                             |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   | Three      months ended |   |   | Nine      months ended |   |
|                                                    |   | September      30, |   |   | September      30, |   |
|                                                    |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      revenues                                       |   | $ | 16,110,795 |   |   | $ | 7,088,499 |   |   | $ | 40,628,998 |   |   | $ | 13,363,356 |   |
| Cost      of revenues                                   |   |   | 13,554,352 |   |   |   | 6,091,789 |   |   |   | 34,466,067 |   |   |   | 11,671,724 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Gross      profit                           |   |   | 2,556,443 |   |   |   | 996,710 |   |   |   | 6,162,931 |   |   |   | 1,691,632 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expenses       |   |   | 1,488,455 |   |   |   | 766,648 |   |   |   | 3,795,813 |   |   |   | 2,677,920 |   |
| Depreciation      and amortization                      |   |   | 105,887 |   |   |   | 86,445 |   |   |   | 294,559 |   |   |   | 248,160 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Total      operating expenses               |   |   | 1,594,342 |   |   |   | 853,093 |   |   |   | 4,090,372 |   |   |   | 2,926,080 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Operating      income (loss)                |   |   | 962,101 |   |   |   | 143,617 |   |   |   | 2,072,559 |   |   |   | (1,234,448 | ) |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                                    |   |   | (65,531 | ) |   |   | (47,430 | ) |   |   | (137,439 | ) |   |   | (151,063 | ) |
| Interest      expense                                   |   |   | 1,067 |   |   |   | 2,836 |   |   |   | 4,511 |   |   |   | 9,286 |   |
| Debt      issuance costs                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 46,300 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Total      interest (income) expense, net   |   |   | (64,464 | ) |   |   | (44,594 | ) |   |   | (132,928 | ) |   |   | (95,477 | ) |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) before income taxes                  |   |   | 1,026,565 |   |   |   | 188,211 |   |   |   | 2,205,487 |   |   |   | (1,138,971 | ) |
| Income      tax provision                               |   |   | 25,559 |   |   |   | - |   |   |   | 61,623 |   |   |   | - |   |
| Net      income (loss)                                  |   | $ | 1,001,006 |   |   | $ | 188,211 |   |   | $ | 2,143,864 |   |   | $ | (1,138,971 | ) |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per common share:                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Basic               |   | $ | 0.07 |   |   | $ | 0.01 |   |   | $ | 0.14 |   |   | $ | (0.08 | ) |
|       Diluted             |   | $ | 0.06 |   |   | $ | 0.01 |   |   | $ | 0.12 |   |   | $ | (0.08 | ) |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      weighted average common shares outstanding   |   |   | 15,139,839 |   |   |   | 14,555,314 |   |   |   | 15,029,161 |   |   |   | 14,511,642 |   |
| Diluted      weighted average common shares outstanding |   |   | 18,044,602 |   |   |   | 16,888,882 |   |   |   | 17,577,846 |   |   |   | 14,511,642 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying notes.                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| AMERICAN      CARESOURCE HOLDINGS, INC.                                                                              |
|----------------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED      BALANCE SHEETS                                                                                     |
|                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                 |   | September      30, |   |   |   |   |
|                                                                                                                 |   | 2008 |   |   | December      31, |   |
|                                                                                                                 |   | (Unaudited) |   |   | 2007 |   |
| ASSETS                                                                                                               |   |   |   |   |   |   |
| Current      assets:                                                                                                 |   |   |   |   |   |   |
|      Cash      and cash equivalents                                                         |   | $ | 8,221,348 |   |   | $ | 4,272,498 |   |
|      Accounts      receivable, net                                                          |   |   | 4,960,235 |   |   |   | 3,651,203 |   |
|      Prepaid      expenses and other current assets                                         |   |   | 365,248 |   |   |   | 403,559 |   |
|      Deferred      income taxes                                                             |   |   | 5,886 |   |   |   | 5,886 |   |
|         Total      current assets                                            |   |   | 13,552,717 |   |   |   | 8,333,146 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Property      and equipment, net                                                                                     |   |   | 807,745 |   |   |   | 332,450 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Other      assets:                                                                                                   |   |   |   |   |   |   |   |   |
|      Certificate      of deposit, restricted                                                |   |   | - |   |   |   | 145,000 |   |
|      Deferred      income taxes                                                             |   |   | 255,731 |   |   |   | 255,731 |   |
|      Other      non-current assets                                                          |   |   | 176,913 |   |   |   | 237,246 |   |
|      Intangible      assets, net                                                            |   |   | 1,334,052 |   |   |   | 1,494,238 |   |
|      Goodwill                                                                               |   |   | 4,361,299 |   |   |   | 4,361,299 |   |
|                                                                                                                 |   | $ | 20,488,457 |   |   | $ | 15,159,110 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| LIABILITIES      AND SHAREHOLDERS' EQUITY                                                                            |   |   |   |   |   |   |   |   |
| Current      liabilities:                                                                                            |   |   |   |   |   |   |   |   |
|      Due      to service providers                                                          |   | $ | 5,077,322 |   |   | $ | 3,344,278 |   |
|      Accounts      payable and accrued liabilities                                          |   |   | 1,919,484 |   |   |   | 1,320,036 |   |
|      Current      maturities of long-term debt                                              |   |   | 10,765 |   |   |   | 55,697 |   |
|         Total      current liabilities                                       |   |   | 7,007,571 |   |   |   | 4,720,011 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Long-term      debt                                                                                                  |   |   | 5,911 |   |   |   | 50,348 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Commitments      and contingencies                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Shareholders'      equity:                                                                                           |   |   |   |   |   |   |   |   |
|      Preferred      stock, $0.01 par value; 10,000,000 shares authorized,                   |   |   |   |   |   |   |   |   |
|        none      issued                                                           |   |   | - |   |   |   | - |   |
|      Common      stock, $0.01 par value; 40,000,000 shares authorized;                      |   |   |   |   |   |   |   |   |
|        15,203,743  and      14,668,416 shares issued and outstanding in |   |   | 152,037 |   |   |   | 146,684 |   |
|        2008      and 2007, respectively                                           |   |   |   |   |   |   |   |   |
|      Additional      paid-in capital                                                        |   |   | 18,550,887 |   |   |   | 17,613,880 |   |
|      Accumulated      deficit                                                               |   |   | (5,227,949 | ) |   |   | (7,371,813 | ) |
|           Total      shareholders' equity                          |   |   | 13,474,975 |   |   |   | 10,388,751 |   |
|                                                                                                                 |   | $ | 20,488,457 |   |   | $ | 15,159,110 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| See      accompanying notes.                                                                                         |   |   |   |   |   |   |   |   |

----

| AMERICAN      CARESOURCE HOLDINGS, INC.             |
|-----------------------------------------------------|
| CONSOLIDATED      STATEMENT OF STOCKHOLDERS' EQUITY |
| (Unaudited)                                         |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |   |   |   |   |   |   | Additional |   |   |   |   |   | Total |   |
|                                                |   | Common      Stock |   |   | Paid-in |   |   | Accumulated |   |   | Stockholders' |   |
|                                                |   | Shares |   |   | Amount |   |   | Capital |   |   | Deficit |   |   | Equity |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                   |   |   | 14,668,416 |   |   | $ | 146,684 |   |   | $ | 17,613,880 |   |   | $ | (7,371,813 | ) |   | $ | 10,388,751 |   |
| Net      income                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,143,864 |   |   |   | 2,143,864 |   |
| Stock-based      compensation expense               |   |   | - |   |   |   | - |   |   |   | 485,568 |   |   |   | - |   |   |   | 485,568 |   |
| Issuance      of common stock upon                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| exercise      of stock options                      |   |   | 498,401 |   |   |   | 4,984 |   |   |   | 163,049 |   |   |   | - |   |   |   | 168,033 |   |
| Issuance      of common stock upon                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| exercise      of stock warrants                     |   |   | 23,177 |   |   |   | 232 |   |   |   | 127,196 |   |   |   | - |   |   |   | 127,428 |   |
| Issuance      of common stock upon                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net      warrant exercises                          |   |   | 13,749 |   |   |   | 137 |   |   |   | (137 | ) |   |   | - |   |   |   | - |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock warrants for          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| payment      of client management fees              |   |   | - |   |   |   | - |   |   |   | 161,331 |   |   |   | - |   |   |   | 161,331 |   |
| Balance      at September 30, 2008                  |   |   | 15,203,743 |   |   | $ | 152,037 |   |   | $ | 18,550,887 |   |   | $ | (5,227,949 | ) |   | $ | 13,474,975 |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying notes.                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| AMERICAN      CARESOURCE HOLDINGS, INC.                                                                                                |
|----------------------------------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED      STATEMENTS OF CASH FLOWS                                                                                             |
| (Unaudited)                                                                                                                            |
|                                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                                   |   | Nine      months ended September 30, |   |
|                                                                                                                                   |   | 2008 |   |   | 2007 |   |
| Cash      flows from operating activities:                                                                                             |   |   |   |   |   |   |
|     Net      income (loss)                                                                                         |   | $ | 2,143,864 |   |   | $ | (1,138,971 | ) |
|     Adjustments      to reconcile net income (loss) to net cash                                                    |   |   |   |   |   |   |   |   |
|       provided      by (used in) operations:                                                             |   |   |   |   |   |   |   |   |
|         Stock-based      compensation expense                                                  |   |   | 485,568 |   |   |   | 319,965 |   |
|         Depreciation      and amortization                                                     |   |   | 294,559 |   |   |   | 248,160 |   |
|         Amortization      of debt issuance costs                                               |   |   | - |   |   |   | 46,300 |   |
|         Client      administration fee expense related to warrants                             |   |   | 54,467 |   |   |   | 22,047 |   |
|         Changes      in operating assets and liabilities:                                      |   |   |   |   |   |   |   |   |
|             Accounts      receivable                                       |   |   | (1,309,032 | ) |   |   | (1,132,521 | ) |
|             Prepaid      expenses and other assets                         |   |   | 205,510 |   |   |   | (550,488 | ) |
|             Accounts      payable and accrued liabilities                  |   |   | 599,448 |   |   |   | 412,378 |   |
|             Due      to service providers                                  |   |   | 1,733,044 |   |   |   | 804,528 |   |
|              Net      cash provided by (used in) operating activities |   |   | 4,207,428 |   |   |   | (968,602 | ) |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                                                                             |   |   |   |   |   |   |   |   |
|     Investment      in software development costs                                                                  |   |   | (351,605 | ) |   |   | - |   |
|     Additions      to property and equipment                                                                       |   |   | (258,065 | ) |   |   | (139,563 | ) |
|     Redemption      of certificate of deposit                                                                      |   |   | 145,000 |   |   |   | - |   |
|             Net      cash used in investing activities                     |   |   | (464,670 | ) |   |   | (139,563 | ) |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                             |   |   |   |   |   |   |   |   |
|     Payments      on long-term debt                                                                                |   |   | (89,369 | ) |   |   | (339,308 | ) |
|     Proceeds      from exercise of stock warrants                                                                  |   |   | 127,428 |   |   |   | - |   |
|     Proceeds      from exercise of stock options                                                                   |   |   | 168,033 |   |   |   | 52,226 |   |
|             Net      cash provided by (used in) financing activities       |   |   | 206,092 |   |   |   | (287,082 | ) |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                                                              |   |   | 3,948,850 |   |   |   | (1,395,247 | ) |
| Cash      and cash equivalents at beginning of period                                                                                  |   |   | 4,272,498 |   |   |   | 5,025,380 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at end of period                                                                                        |   | $ | 8,221,348 |   |   | $ | 3,630,133 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Supplemental      cash flow information:                                                                                               |   |   |   |   |   |   |   |   |
| Cash      paid for interest                                                                                                            |   | $ | 4,511 |   |   | $ | 28,147 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Supplemental      non-cash financing activity:                                                                                         |   |   |   |   |   |   |   |   |
| Warrants      issued as payment of client management fees                                                                              |   | $ | 161,331 |   |   | $ | 52,913 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| See      accompanying notes.                                                                                                           |   |   |   |   |   |   |   |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |

----

,” “AmericanCareSource Holdings,” “ACS,”“we,” “our,” “us,” or the “Registrant”), isin the business of delivering ancillary healthcare services for employmentgroups through its national network of ancillary care providers. The Companymarkets its products to insurance companies, third-party administrators andpreferred provider organizations.  American CareSource Holdings has onewholly owned subsidiary, Ancillary Care Services, Inc. (“CareServices”).

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accounting principlesgenerally accepted in the United States (“GAAP”) interim reporting requirements of Form 10-Q and Rule 8-03 ofRegulation S-X of the rules and regulations of the Securities and ExchangeCommission (“SEC”). Consequently, financial information and disclosures normallyincluded in financial statements prepared annually in accordance with GAAP havebeen condensed or omitted.  Balance sheet amounts are as of September 30,2008 and December 31, 2007 and operating result amounts are for the three monthsand nine months ended September 30, 2008 and 2007, and include all normal andrecurring adjustments that we consider necessary for the fair, summarizedpresentation of our financial position and operating results.  As these arecondensed financial statements, readers of this report should, therefore, referto the consolidated financial statements and the notes included in our AnnualReport on Form 10-K for the fiscal year ended December 31, 2007, filed with theSEC on March 31, 2008.

In accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 131, “Disclosures About Segments of anEnterprise and Related Information,” the Company uses the “management approach”for reporting information about segments in annual and interim financialstatements.  The management approach is based on the way the chiefoperating decision-maker organizes segments within a company for makingoperating decisions and assessing performance.  Reportable segments arebased on products and services, geography, legal structure, management structureand any other manner in which management disaggregates a company.  Based onthe “management approach” model, the Company has determined that its business iscomprised of a single operating segment.

Our interim results of operations are notnecessarily indicative of results of operations that will be realized for thefull fiscal year. 

Revenues are recorded gross when services byproviders have been authorized and performed and collections from third-partypayors are reasonably assured. The Company acts as principal under EITF 99-19when settling claims for service providers through its contracted serviceprovider network for the following reasons:

|   | · | The      Company negotiates a contract with the service provider and also      negotiates separate contracts with the payor.  Neither the      service provider nor the payor can look through the Company and claim      directly against the other party. Each service provider contracts with the      Company only, and not with the payor.  Likewise, each payor      contracts with the Company only, and not with the service      provider.  Each party deals directly with the Company and does      not deal directly with each      other. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Company determines through negotiations which service providers will be      included in or excluded from the network to be offered to the      client payor based on, among other things, price andaccess. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Company does not earn a fixed dollar amount per client transaction      regardless of the amount billed to clients or earn a stated percentage of      the amount billed to its clients.  The Company has latitude in      establishing pricing, in that it negotiates rates for services with each      client payor with which it enters into agreements.  Client rates      for services are negotiated separately, independent of other client      contracts.  The Company also negotiates separately with the      service providers.  The Company bears the risk of profitability      as its contracted rates with service providers are negotiated separately      from its client rates. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The      Company is responsible to the service provider for properly processing      claims and managing the claims that are processed by its      adjustors. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Company sets prices to be settled with payors and separately negotiates      the prices to be settled with the service  providers. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Company may realize a positive or negative margin represented by the      difference between the negotiated fees received from the payor and the      negotiated amount paid to serviceproviders. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The payor’s payment to the Company is recorded asgross revenue and the Company’s payment to the service provider is recorded ascost of revenue in the statement of operations.

The Company does not have responsibility forcollecting co-payments to be made or co-insurance claims to be received.Accordingly, co-payments or co-insurance claims collected by the payor are notrecorded as either revenue or cost of revenues.

During the three and nine monthsended September 30, 2008, two ofthe Company Company’s customers comprised a significant portion ofthe Company’s revenues.  The following is a summary of the approximateamounts of the Company’s revenue and accounts receivable contributed by each ofthose customers as of the dates presented: 

|            |   |               |   |              | Periods      ended September 30, 2008 |             |            |    |   | Periods      ended September 30, 2007 |
|-----------------|--------|--------------------|--------|-------------------|---------------------------------------|------------------|-----------------|---------|--------|---------------------------------------|
|            |   | As      of         |   |              |                                  |             |            |    |   |                                  |   |   |   |   |   | As      of |   |   |   |   |   |   |   |   |   |   |   |   |
|            |   | September      30, |   |              |                                  |             |            |    |   |                                  |   |   |   |   |   | September      30, |   |   |   |   |   |   |   |   |   |   |   |   |
|            |   | 2008               |   | Three      months |                                  | Nine      months |            | 2008    |   | Three      months                     |   | Nine      months |
|            |   | Accounts           |   |              |                                  |             | % of      Total |    |   |                                  |   | % of      Total |   | Accounts |   |   |   |   | % of      Total |   |   |   |   | % of      Total |
|            |   | receivable         |   | Revenue           |                                  | Revenues         |            | Revenue |   | Revenues                              |   | receivable |   | Revenue |   | Revenues |   | Revenue |   | Revenues |
| Customer      A |   | $                  | 2,803  |              |                                  | $                | 9,419           |    |   |                                  | 58 | % |   | $ | 24,366 |   |   |   | 60 | % |   | $ | 1,247 |   |   | $ | 4,011 |   |   |   | 57 | % |   | $ | 8,460 |   |   |   | 63 | % |
| Customer      B |   |               | 1,998  |              |                                  |             | 6,265           |    |   |                                  | 39 | % |   |   | 15,305 |   |   |   | 38 | % |   |   | 1,261 |   |   |   | 2,856 |   |   |   | 40 | % |   |   | 3,854 |   |   |   | 29 | % |
| Others          |   |               | 159    |              |                                  |             | 427             |    |   |                                  | 3 | % |   |   | 958 |   |   |   | 2 | % |   |   | 121 |   |   |   | 222 |   |   |   | 3 | % |   |   | 1,049 |   |   |   | 8 | % |
|            |   | $                  | 4,960  |              |                                  | $                | 16,111          |    |   |                                  | 100 | % |   | $ | 40,629 |   |   |   | 100 | % |   | $ | 2,629 |   |   | $ | 7,089 |   |   |   | 100 | % |   | $ | 13,363 |   |   |   | 100 | % |

|                                             |   | Three      months ended September 30, |   |   | Nine      months ended September 30, |   |
|--------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
|                                             |   | 2008                                  |   |   | 2007                                 |   |   | 2008 |   |   | 2007 |   |
| Beginning      balance                           |   | $                                     | 200    |   |                                 | $      | 537 |   |   | $ | 190 |   |   | $ | 414 |   |
| Provisions      for losses - accounts receivable |   |                                  | -      |   |                                 |   | 355 |   |   |   | 85 |   |   |   | 243 |   |
| Deduction      for accounts charged off          |   |                                  | -      |   |                                 |   | (425 | ) |   |   | (75 | ) |   |   | (190 | ) |
| Ending      balance                              |   | $                                     | 200    |   |                                 | $      | 467 |   |   | $ | 200 |   |   | $ | 467 |   |

----

|                                                          |   | Three      months ended |   |   | Nine      months ended |   |
|---------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                                          |   | September      30,      |   |   | September      30,     |   |
|                                                          |   | 2008                    |   |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| Numerator      for basic and diluted earnings per share:      |   |                    |   |   |                   |   |   |   |   |   |   |   |
|                                                          |   |                    |   |   |                   |   |   |   |   |   |   |   |
|   Net      income (loss)                            |   | $                       | 1,001  |   |                   | $      | 188 |   |   | $ | 2,144 |   |   | $ | (1,139 | ) |
|                                                          |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                  |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average      basic common shares outstanding         |   |                    | 15,140 |   |                   |   | 14,555 |   |   |   | 15,029 |   |   |   | 14,512 |   |
|   Assumed      conversion of dilutive securities:   |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|    Stock      options                          |   |                    | 1,158  |   |                   |   | 969 |   |   |   | 941 |   |   |   | - |   |
|    Warrants                                    |   |                    | 1,747  |   |                   |   | 1,365 |   |   |   | 1,608 |   |   |   | - |   |
| Potentially      dilutive common shares                       |   |                    | 2,905  |   |                   |   | 2,334 |   |   |   | 2,549 |   |   |   | - |   |
|                                                          |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Denominator      for diluted earnings                         |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|   per      share - Adjusted weighted average shares |   |                    | 18,045 |   |                   |   | 16,889 |   |   |   | 17,578 |   |   |   | 14,512 |   |
|                                                          |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per common share:                        |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Basic                     |   | $                       | 0.07   |   |                   | $      | 0.01 |   |   | $ | 0.14 |   |   | $ | (0.08 | ) |
|       Diluted                   |   | $                       | 0.06   |   |                   | $      | 0.01 |   |   | $ | 0.12 |   |   | $ | (0.08 | ) |
|                                                          |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                                                                                                           |   | September 30,      2008 |   |   | December 31,      2007 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|
|                                                                                                                                                           |   |                         |   |   |                        |   |
| Notes      payable to Capital One Bank, $135,000 due September 2009, due in monthly      installments of approximately $4,143, including interest at      6.5% |   | $                            | -      |   |                        | $      | 82 |   |
|                                                                                                                                                           |   |                         |   |   |                        |   |   |   |
| Capital      lease obligations                                                                                                                                 |   |                         | 17     |   |                        |   | 24 |   |
|                                                                                                                                                           |   |                         |   |   |                        |   |   |   |
|                                                                                                                                                           |   |                         | 17     |   |                        |   | 106 |   |
|                                                                                                                                                           |   |                         |   |   |                        |   |   |   |
| Less      current maturities                                                                                                                                   |   |                         | (11    | )      |                        |   | (56 | ) |
|                                                                                                                                                           |   |                         |   |   |                        |   |   |   |
| Long-term      debt, less current maturities                                                                                                                   |   | $                            | 6      |   |                        | $      | 50 |   |
|                                                                                                                                                           |   |                         |   |   |                        |   |   |   |

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We believe it isimportant to communicate to our stockholders and potential investors not onlythe Company’s current condition, but management’s forecasts about the Company’sfuture opportunities, performance and results, including, for example,information with respect to potential margin expansion, cash reserves and otherfinancial items, and our strategies and prospects.  However,forward-looking statements are based on current expectations and assumptions andare subject to substantial risks and uncertainties, including, but not limitedto, risks of market acceptance of, or preference for, the Company’s systems andservices, competitive forces, the impact of geopolitical events and changes ingovernment regulations, general economic conditions and economic factors in thecountry and the healthcare industry, and other risk factors as may be listedfrom time to time in the Company’s filings with the SEC. In evaluating suchforward-looking statements, investors should specifically consider the matters set forth under the caption “Risk Factors” appearing inour Annual Report on Form 10-K for theyear ended December 31, 2007 which wasfiled with the SEC on March 31, 2008, as well as any other cautionary languagecontainedin this quarterly report, any of whichcould cause our actual results to differ materially from the expectations wedescribe in our forward-looking statements.  Except to the extent requiredby applicable securities laws and regulations, we disclaim any obligation toupdate or revise information contained in any forward-looking statementcontained herein to reflect events or circumstances occurring after the date ofthis quarterly report.

OVERVIEW

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|                        |   | Third      Quarter |   |   | Nine      Months |   |
|-----------------------------|--------|--------------------|--------|--------|------------------|--------|
|                        |   |               |   |   |             |   |   | Change |   |   |   |   |   |   |   |   | Change |   |
|  ($      in thousands) |   | 2008               |   |   | 2007             |   |   | $ |   | % |   |   | 2008 |   |   | 2007 |   |   | $ |   |   |   | % |   |
|  Net      revenues     |   | $                  | 16,111 |   |             | $      | 7,088 |   |   | $ | 9,023 |   |   |   | 127 | % |   | $ | 40,629 |   |   | $ | 13,363 |   |   | $ | 27,266 |   |   |   | 204 | % |
|                        |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

The Companywill continue to attempt to increase the number of client payors and serviceprovider relationships by focusing on providing in-network services for itspayors and aggressively pursuing preferred provider organizations and thirdparty administrators as its primary sales targets. The Company believes thatthis strategy should increase the volume of claims the Company can adjudicate aswell as the volume of patients it can direct through its service providernetwork. No assurances can be given that the Company can expand its serviceprovider network or payorrelationships, nor that any such expansion will result in an improvement in theresults of operations of the Company.

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|                                          |   | Third      Quarter |   |   | Nine      Months |   |
|-----------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                          |   |               |   |   |             |   |   | Change |   |   |   |   |   |   |   |   | Change |   |
|  ($      in thousands)                   |   | 2008               |   |   | 2007             |   |   | $ |   |   |   | % |   |   | 2008 |   |   | 2007 |   |   | $ |   |   |   | % |   |
|  Provider      payments                  |   | $                  | 11,744 |   |             | $      | 5,193 |   |   | $ | 6,551 |   |   |   | 126 | % |   | $ | 29,690 |   |   | $ | 9,530 |   |   | $ | 20,160 |   |   |   | 212 | % |
|  Administrative      fees                |   |               | 928    |   |             |   | 386 |   |   |   | 542 |   |   |   | 140 | % |   |   | 2,381 |   |   |   | 639 |   |   |   | 1,742 |   |   |   | 273 | % |
|  Fixed      costs                        |   |               | 882    |   |             |   | 513 |   |   |   | 369 |   |   |   | 72 | % |   |   | 2,395 |   |   |   | 1,503 |   |   |   | 892 |   |   |   | 59 | % |
|    Total      cost of revenues |   | $                  | 13,554 |   |             | $      | 6,092 |   |   | $ | 7,462 |   |   |   | 122 | % |   | $ | 34,466 |   |   | $ | 11,672 |   |   | $ | 22,794 |   |   |   | 195 | % |
|                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

revenues iscomprised of payments to our providers, administration fees paid to our clientpayors for converting claims to electronic data interchange and routing them toboth the Company for processing and to their payors for payment, and the fixedcosts of our network development and claims administration organizations. For the three and nine month periods ended September 30, 2008, the increases intotal cost of revenues compared to the corresponding prior year periods, reflect increased amounts paid to providers for their services as a result ofour increased revenues, and the fluctuation in the mix of types of servicesprovided by the Company.  The increase in administration fees was due toincreased claim volume as a result of expanded relationships with existingclients.  Fixed costs increased due to increased headcount, theimplementation of an employee incentive plan in early 2008 and increasedinformation technology costs associated with software development andinfrastructure expansion. 

|                    |   | Third      Quarter                                               |   |                                                             | Nine      Months |                                                                        |
|-------------------------|--------|------------------------------------------------------------------|--------|------------------------------------------------------------------|------------------|-----------------------------------------------------------------------------|
|                    |   |                                                             |   |                                                             |             |                                                                        |  Change |   |   |   |   |   |   |  Change |   |
|                    |   | 2008                                                             |   |                                                             | 2007             |                                                                        |  %      pts |   |   | 2008 |   | 2007 |   |  %      pts |   |
|  Gross      margin |   |           15.9 | %      |           14.1 | %                |             1.8 | % |           15.2 | % |  $       12.7 |  % |             2.5 |  % |

----

|                                                    |   | Third      Quarter |   |   | Nine      Months |   |
|---------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                    |   |               |   |   |             |   |   | Change |   |   |   |   |   |   |   |   | Change |   |
|  ($      in thousands)                             |   | 2008               |   |   | 2007             |   |   | $ |   |   |   | % |   |   | 2008 |   |   | 2007 |   |   | $ |   |   |   | % |   |
|  Selling,      general and                         |   | $                  | 1,488  |   |             | $      | 767 |   |   | $ | 721 |   |   |   | 94 | % |   | $ | 3,796 |   |   | $ | 2,678 |   |   | $ | 1,118 |   |   |   | 42 | % |
|    administrative      expenses          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Percentage      of total net revenues |   |               | 9.2    | %      |             |   | 10.8 | % |   |   |   |   |   |   |   |   |   |   | 9.3 | % |   |   | 20.0 | % |   |   |   |   |   |   |   |   |

|                                                      |   | Third      Quarter |   |   | Change |   |   | Nine      Months |   |   | Change |   |
|-----------------------------------------------------------|--------|--------------------|--------|--------|--------|--------|--------|------------------|--------|--------|--------|--------|
|  ($      in thousands)                               |   | 2008               |   |   | 2007   |   |   | $                |   |   |   | %      |   |   | 2008 |   |   | 2007 |   |   | $ |   |   |   | % |   |
|  Depreciation                                        |   | $                  | 53     |   |   | $      | 33     |             |   | $      | 20     |   |   |   | 61 | % |   | $ | 135 |   |   | $ | 88 |   |   | $ | 47 |   |   |   | 53 | % |
|  Amortization                                        |   |               | 53     |   |   |   | 53     |             |   |   | -      |   |   |   | - | % |   |   | 160 |   |   |   | 160 |   |   |   | - |   |   |   | - | % |
|    Total      Depreciation                 |   |               |   |   |   |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       and      amortization |   | $                  | 106    |   |   | $      | 86     |             |   | $      | 20     |   |   |   | 23 | % |   | $ | 295 |   |   | $ | 248 |   |   | $ | 47 |   |   |   | 19 | % |
|                                                      |   |               |   |   |   |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                         |   | Third      Quarter |   |   | Change |   |   | Nine      Months |   |   | Change |   |
|------------------------------|--------|--------------------|--------|--------|--------|--------|--------|------------------|--------|--------|--------|--------|
| ($      in thousands)        |   | 2008               |   |   | 2007   |   |   | $                |   |   | %      |   |   | 2008 |   |   | 2007 |   |   | $ |   |   | % |   |
| Interest      income         |   | $                  | (66    | )      |   | $      | (47    | )                |   | $      | (19    | )      |   |   | 40 | % |   | $ | (137 | ) |   | $ | (151 | ) |   | $ | 14 |   |   |   | (9 | )      % |
| Interest      expense        |   |               | 1      |   |   |   | 3      |             |   |   | (2     | )      |   |   | (67 | )      % |   |   | 5 |   |   |   | 9 |   |   |   | (4 | ) |   |   | (44 | )      % |
| Debt      issuance costs     |   |               | -      |   |   |   | -      |             |   |   | -      |   |   |   | - | % |   |   | - |   |   |   | 46 |   |   |   | (46 | ) |   |   | (100 | )      % |
| Total      interest (income) |   |               |   |   |   |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| expense,      net            |   | $                  | (65    | )      |   | $      | (44    | )                |   | $      | (21    | )      |   |   | 48 | % |   | $ | (132 | ) |   | $ | (96 | ) |   | $ | (36 | ) |   |   | 38 | % |

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ITEM 6.  Exhibits

|   | Exhibit      31.1 | Certification      Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                     |
|--------|-------------------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |              |                                                                                                                              |
|   | Exhibit      31.2 | Certification      Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                     |
|   |              |                                                                                                                              |
|   | Exhibit      32.1 | Certifications      Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of      the Sarbanes-Oxley Act of 2002 |

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|         | AMERICAN      CARESOURCE HOLDINGS, INC. |                                                                                                      |
|--------------|-----------------------------------------|-----------------------------------------------------------------------------------------------------------|
|         |                                    |                                                                                                      |   |
|    | By:                                | /s/ David      S. Boone                                                                              |   |
|         |                                    | David      S. Boone                                                                                       |   |
|         |                                    | President      and Chief Executive Officer (principal executive officer and an authorized      signatory) |   |
|         |                                    |                                                                                                      |   |

|         |      |                                                                                        |   |
|--------------|-----------|---------------------------------------------------------------------------------------------|--------|
|    | By:  | /s/ Steven      J. Armond                                                              |   |
|         |      | Steven      J. Armond                                                                       |   |
|         |      | Chief      Financial Officer (principal financial officer and an authorized      signatory) |   |
|         |      |                                                                                        |   |

|         |      |                                                                       |   |
|--------------|-----------|----------------------------------------------------------------------------|--------|
|    | By:  | /s/ Matthew      D. Thompson                                          |   |
|         |      | Matthew      D. Thompson                                                   |   |
|         |      | Controller      (principal accounting officer and an authorized signatory) |   |
|         |      |                                                                       |   |

----