UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE
 SECURITIES
EXCHANGE ACT OF 1934.
 
 For the
quarterly period ended March 31, 2009
 
 OR
 
 o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
 OF THE
SECURITIES EXCHANGE ACT OF 1934.
 
 Commission
File Number 1-33094
 
 AMERICAN
CARESOURCE HOLDINGS, INC.
 (Exact
name of registrant as specified in its charter)
  DELAWARE
              
              20-0428568(State
      or other jurisdiction of
              
              (I.R.S.
      employerincorporation
      or organization)
              
              identification
      no.)
  5429
LYNDON B. JOHNSON FREEWAY
 SUITE
850
 DALLAS,
TEXAS
 75240
 (Address
of principal executive offices)
 (Zip
code)
 
 (972)
308-6830
 (Registrant's
telephone number, including area code)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes xNo o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).   Yes oNo o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of  “large accelerated
filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
  Large
      accelerated filer o
                
                Accelerated
      filer oNon-accelerated
      filer o(do not
      check if a smaller reporting company)
                
                Smaller
      Reporting Company x
  Indicated
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act.)  Yes oNo x
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
 The
number of shares of common stock of registrant outstanding on May 4, 2009 was
15,421,305.
  
  TABLE OF
CONTENTS
 AMERICAN
CARESOURCE HOLDINGS, INC.
 FORM
10-Q
 FOR THE
QUARTER ENDED MARCH 31, 2009
  Part
      I
              Financial
      Information
              1Item
      1.
              Financial
      Statements
              1Consolidated
      Statements of Operations (unaudited)
              1Consolidated
      Balance Sheets (unaudited)
              2Consolidated
      Statements of Stockholders’ Equity (unaudited)
              3Consolidated
      Statements of Cash Flows (unaudited)
              4Notes
      to Unaudited Consolidated Financial Statements
              5Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
              10Item
      4.
              Evaluation
      of Disclosure Controls and Procedures
              15Part
      II
              Other
      Information
              16Item
      1A.
              Risk
      Factors
              16Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              16Item
      6.
              Exhibits
              16Signatures
              
              17
  
  PART
I. FINANCIAL INFORMATION
 
 ITEM 1.
Financial Statements
  AMERICAN
      CARESOURCE HOLDINGS, INC.CONSOLIDATED
      STATEMENTS OF OPERATIONS(Unaudited)Three
      months endedMarch
      31,2009
              
              
              2008Net
      revenues
              
              $
              16,055,649
              
              
              $
              11,505,675Cost
      of revenues:Provider
      payments
              
              
              11,935,835
              
              
              
              8,390,610Administrative
      fees
              
              
              815,526
              
              
              
              701,676Fixed
      costs
              
              
              1,004,573
              
              
              
              708,835Total
      cost of revenues
              
              
              13,755,934
              
              
              
              9,801,121Contribution
      margin
              
              
              2,299,715
              
              
              
              1,704,554Selling,
      general and administrative expenses
              
              
              1,900,678
              
              
              
              1,112,854Depreciation
      and amortization
              
              
              112,797
              
              
              
              92,067Total
      operating expenses
              
              
              2,013,475
              
              
              
              1,204,921Operating
      income
              
              
              286,240
              
              
              
              499,633Other
      income (expense), net:Interest
      income
              
              
              40,962
              
              
              
              40,668Interest
      expense
              
              
              (312
              )
              
              
              (1,838
              )Other
      expense
              
              
              (24,482
              )
              
              
              -Total
      other income, net
              
              
              16,168
              
              
              
              38,830Income
      before income taxes
              
              
              302,408
              
              
              
              538,463Income
      tax provision
              
              
              23,349
              
              
              
              17,045Net
      income
              
              $
              279,059
              
              
              $
              521,418Earnings
      per common share:Basic
              
              $
              0.02
              
              
              $
              0.04Diluted
              
              $
              0.02
              
              
              $
              0.03Basic
      weighted average common shares outstanding
              
              
              15,418,433
              
              
              
              14,880,266Diluted
      weighted average common sharesoutstanding
              
              
              18,287,409
              
              
              
              17,255,201
 See accompanying
notes.
  1
  AMERICAN
      CARESOURCE HOLDINGS, INC.CONSOLIDATED
      BALANCE SHEETSMarch
      31,2009
              
              
              December
      31,(Unaudited)
              
              
              2008ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              10,346,294
              
              
              $
              10,577,829Accounts
      receivable, net
              
              
              6,173,110
              
              
              
              5,788,457Prepaid
      expenses and other current assets
              
              
              539,844
              
              
              
              489,928Deferred
      income taxes
              
              
              5,886
              
              
              
              5,886Total
      current assets
              
              
              17,065,134
              
              
              
              16,862,100Property
      and equipment, net
              
              
              1,119,527
              
              
              
              915,224Other
      assets:Deferred
      income taxes
              
              
              243,959
              
              
              
              243,959Other
      non-current assets
              
              
              783,299
              
              
              
              883,155Intangible
      assets, net
              
              
              1,248,640
              
              
              
              1,280,656Goodwill
              
              
              4,361,299
              
              
              
              4,361,299$
              24,821,858
              
              
              $
              24,546,393LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Due
      to service providers
              
              $
              5,796,503
              
              
              $
              5,964,392Accounts
      payable and accrued liabilities
              
              
              2,942,368
              
              
              
              3,100,839Current
      maturities of long-term debt
              
              
              11,287
              
              
              
              11,023Total
      current liabilities
              
              
              8,750,158
              
              
              
              9,076,254Other
      liabilities
              
              
              374,174
              
              
              
              -Long-term
      debt
              
              
              127
              
              
              
              3,053Commitments
      and contingenciesShareholders'
      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;15,420,116 and 15,406,972 shares issued and outstanding in2009
      and 2008, respectively
              
              
              154,201
              
              
              
              154,069Additional
      paid-in capital
              
              
              19,055,309
              
              
              
              19,046,367Accumulated
      deficit
              
              
              (3,512,111
              )
              
              
              (3,733,350
              )Total
      shareholders' equity
              
              
              15,697,399
              
              
              
              15,467,086$
              24,821,858
              
              
              $
              24,546,393
 
 See accompanying
notes.
  2
  AMERICAN
      CARESOURCE HOLDINGS, INC.CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY(Unaudited)Additional
              
              
              
              
              
              TotalCommon
      Stock
              
              
              Paid-in
              
              
              Accumulated
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              EquityBalance
      at December 31, 2008
              
              
              15,406,972
              
              
              $
              154,069
              
              
              $
              19,046,367
              
              
              $
              (3,733,350
              )
              
              $
              15,467,086Cumulative
      effect of change in accounting principle-January
      1, 2009 reclassification of embedded featureof
      equity-linked financial instrument to derivativeliability
              
              
              -
              
              
              
              -
              
              
              
              (316,376
              )
              
              
              (57,820
              )
              
              
              (374,196
              )Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              279,059
              
              
              
              279,059Stock-based
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              259,748
              
              
              
              -
              
              
              
              259,748Issuance
      of common stock uponexercise
      of stock options
              
              
              6,000
              
              
              
              60
              
              
              
              1,845
              
              
              
              -
              
              
              
              1,905Issuance
      of common stock uponexercise
      of stock warrants
              
              
              7,144
              
              
              
              72
              
              
              
              63,725
              
              
              
              -
              
              
              
              63,797Balance
      at March 31, 2009
              
              
              15,420,116
              
              
              $
              154,201
              
              
              $
              19,055,309
              
              
              $
              (3,512,111
              )
              
              $
              15,697,399
  See accompanying
notes.
  3
  AMERICAN
      CARESOURCE HOLDINGS, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)Three
      months ended March 31,2009
              
              
              2008Cash
      flows from operating activities:Net
      income
              
              $
              279,059
              
              
              $
              521,418Adjustments
      to reconcile net income to net cashprovided by
      operations:Stock-based compensation
      expense
              
              
              259,748
              
              
              
              157,525Depreciation and
      amortization
              
              
              112,797
              
              
              
              92,067Other non-cash
      charges
              
              
              24,482
              
              
              
              -Amortization of long-term client
      agreement
              
              
              62,500
              
              
              
              -Client administration fee expense
      related to warrants
              
              
              28,011
              
              
              
              13,228Changes in operating assets and
      liabilities:Accounts
      receivable
              
              
              (384,653
              )
              
              
              402,624Prepaid expenses and other
      assets
              
              
              (40,570
              )
              
              
              41,761Accounts payable and accrued
      liabilities
              
              
              (119,179
              )
              
              
              (31,073
              )Due to service
      providers
              
              
              (167,889
              )
              
              
              365,611Net cash provided by operating
      activities
              
              
              54,306
              
              
              
              1,563,161Cash
      flows from investing activities:Investment in
      software development costs
              
              
              (113,842
              )
              
              
              (28,084
              )Additions to property
      and equipment
              
              
              (171,242
              )
              
              
              (66,642
              )Net cash used in investing
      activities
              
              
              (285,084
              )
              
              
              (94,726
              )Cash
      flows from financing activities:Payments on long-term
      debt
              
              
              (2,662
              )
              
              
              (13,564
              )Proceeds from
      exercise of stock options
              
              
              1,905
              
              
              
              129,725Net cash provided by (used in)
      financing activities
              
              
              (757
              )
              
              
              116,161Net
      increase (decrease) in cash and cash equivalents
              
              
              (231,535
              )
              
              
              1,584,596Cash
      and cash equivalents at beginning of period
              
              
              10,577,829
              
              
              
              4,272,498Cash
      and cash equivalents at end of period
              
              $
              10,346,294
              
              
              $
              5,857,094
  See accompanying
notes.
  4
  American
CareSource Holdings, Inc.
 Notes to
Condensed Financial Statements
 (Unaudited)
 (tables
in thousands, except per share data)
 
 
 (1)
              Description
      of Business and Basis of
Presentation
 
 American
CareSource Holdings, Inc. (“ACS,” “Company,” the “Registrant,” “we,” “us,” or
“our,”) is an ancillary benefits management company that offers cost effective
access to a comprehensive national network of ancillary healthcare service
providers.  The Company’s healthcare payor customers, which include
preferred provider organizations (“PPOs”), third party administrators (“TPAs”),
insurance companies, large self-funded organizations and Taft-Hartley union
plans (i.e., employee benefit plans that are self-administered under collective
bargaining agreements), engage the Company to provide them with a complete
outsourced solution designed to manage each customer’s obligations to its
covered persons.  The Company offers its customers this solution
by:
  ·
              providing
      payor customers with a comprehensive network of ancillary healthcare
      services providers that is tailored to each payor customer’s specific
      needs and is available to each payor customer’s covered persons for
      covered services;
 ·
              providing
      payor customers with claims management, reporting, and processing and
      payment services;
 ·
              performing
      network/needs analysis to assess the benefits to payor customers of adding
      additional/different service providers to the payor customer-specific
      provider networks; and
 ·
              credentialing
      network service providers for inclusion in the payor customer-specific
      provider networks.
  ACS was
incorporated in Delaware in 2003 as a wholly-owned subsidiary of Patient
Infosystems, Inc. (“Patient Infosystems”) in order to facilitate Patient
Infosystems’ acquisition of substantially all of the assets of American
CareSource Corporation.  American CareSource Corporation had been in
operation since 1997, and its predecessor company, Physician’s Referral Network,
had been in operation since 1995.  In December 2005, Patient
Infosystems distributed substantially all of its shares of the Company to its
then-current stockholders through a dividend, and since that time ACS has been
an independent, publicly-traded company.
  The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States (“GAAP”) interim reporting requirements of Form 10-Q and Rule 8-03
of Regulation S-X of the rules and regulations of the Securities and Exchange
Commission (“SEC”). Consequently, financial information and disclosures normally
included in financial statements prepared annually in accordance with GAAP have
been condensed or omitted.  Balance sheet amounts are as of March 31,
2009 and December 31, 2008 and operating result amounts are for the three months
ended March 31, 2009 and 2008, and include all normal and recurring adjustments
that we consider necessary for the fair, summarized presentation of our
financial position and operating results.  As these are condensed
financial statements, readers of this report should, therefore, refer to the
consolidated financial statements and the notes included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2008, filed with the SEC on
March 31, 2009.
  In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 131,
“Disclosures About Segments of an Enterprise and Related Information,” the
Company uses the “management approach” for reporting information about segments
in annual and interim financial statements.  The management approach
is based on the way the chief operating decision-maker organizes segments within
a company for making operating decisions and assessing
performance.  Reportable segments are based on products and services,
geography, legal structure, management structure and any other manner in which
management disaggregates a company.  Based on the “management
approach” model, the Company has determined that its business is comprised of a
single operating segment.
  Our
interim results of operations are not necessarily indicative of results of
operations that will be realized for the full fiscal year.
  (2)
              Revenue
      Recognition
 
 The
Company recognizes revenue on the services that it provides, which includes (i)
providing payor clients with a comprehensive network of ancillary healthcare
providers, (ii) providing claims management, reporting, processing and payment
services, (iii) providing network/need analysis to assess the benefits to payor
clients of adding what additional/different service providers to the
client-specific provider networks and (iv) providing credentialing of network
services providers for inclusion in the client payor-specific provider networks.
Revenue is recognized when services are delivered, which occurs after processed
claims are billed to the client payors and collections are reasonably
assured.  The Company estimates revenues and costs of revenues using
average historical collection rates and average historical margins earned on
claims.  Periodically, revenues are adjusted to reflect actual cash
collections so that revenues recognized accurately reflect cash
collected.
  5
  The
Company presents its revenues in accordance with EITF No. 99-19 "Reporting Gross
Revenue as a Principal vs. Net as an Agent" (EITF 99-19), which requires the
determination of whether the Company is acting as a principal or an agent in the
fulfillment of the services rendered.  After careful evaluation of the
key indicators detailed in EITF No. 99-19, the Company acknowledges that while
the determination of gross versus net reporting is highly judgmental in nature,
the Company has concluded that its circumstances are most consistent with those
key indicators that support gross revenue reporting.
 
 Following
are the key indicators that support the Company’s conclusion that it acts as a
principal under EITF No. 99-19 when settling claims for service providers
through its contracted service provider network:
 
 ·
              The Company is the primary
      obligor in the arrangement.  The Company has assessed its
      role as primary obligor as a strong indicator of gross reporting as
      described in EITF No. 99-19.  The Company believes that it is
      the primary obligor in its transactions because it is responsible for
      providing the services desired by its client payors.  The
      Company has distinct, separately negotiated contractual relationships with
      its client payors and with the ancillary health care providers in its
      networks.  The Company does not negotiate “on behalf of” its
      client payors and does not hold itself out as the agent of the client
      payors when negotiating the terms of the Company’s ancillary healthcare
      service provider agreements.  The Company’s agreements
      contractually prohibit client payors and service providers to enter into
      direct contractual relationships with one another.  The client
      payors have no control over the terms of the Company’s agreements with the
      service providers.  In executing transactions, the Company
      assumes key performance-related risks.  The client payors hold
      the Company responsible for fulfillment, as the provider, of all of the
      services the client payors are entitled to under their contracts; client
      payors do not look to the service providers for fulfillment.  In
      addition, the Company bears the pricing/margin risk as the principal in
      the transactions.  Because the contracts with the client payors
      and service providers are separately negotiated, the Company has complete
      discretion in negotiating both the prices it charges its client payors and
      the financial terms of its agreements with the service
      providers.  Since the Company’s profit is the spread between the
      amounts received from the client payors and the amount paid to the service
      providers, it bears significant pricing/margin risk.  There is
      no guaranteed mark-up payable to the Company on the amount the Company has
      contracted.  Thus, the Company bears the risk that amounts paid
      to the service provider will be greater than the amounts received from the
      client payors, resulting in a loss or negative
  claim.
  ·
              The Company has latitude in
      establishing pricing.  As stated above, the Company has
      complete latitude in negotiating the price to be paid to the Company by
      each client payor and the price to be paid to each contracted service
      provider.  This type of pricing latitude indicates that the
      Company has the risks and rewards normally attributed to a principal in
      the transactions.
  ·
              The Company changes the
      product or performs part of the services.  The Company
      provides the benefits associated with the relationships it builds with the
      client payors and the services providers.  While the parties
      could deal with each other directly, the client payors would not have the
      benefit of the Company’s experience and expertise in assembling a
      comprehensive network of service providers, in claims management,
      reporting and processing and payment services, in performing network/needs
      analysis to assess the benefits to client payors of adding
      additional/different service providers to the client payor-specific
      provider networks, and in credentialing network service
      providers.
  ·
              The Company has discretion in
      supplier selection.  The Company has complete discretion
      in supplier selection.  One of the key factors considered by
      client payors who engage the Company is to have the Company undertake the
      responsibility for identifying, qualifying, contracting with and managing
      the relationships with the ancillary healthcare service
      providers.  As part of the contractual arrangement between the
      Company and its client payors, the payors identify their obligations to
      their respective covered persons and then work with the Company to
      determine the types of ancillary healthcare services required in order for
      the payors to meet their obligations.  The Company may select
      the providers and contract with them to provide services at its
      discretion.
  ·
              The Company is involved in the
      determination of product or service specifications.  The
      Company works with its client payors to determine the types of ancillary
      healthcare services required in order for the payors to meet their
      obligations to their respective covered persons.  In some
      respects, the Company is customizing the product through its efforts and
      ability to assemble a comprehensive network of providers for its customers
      that is tailored to each client payor’s specific needs.  In
      addition, as part of its claims processing and payment services, the
      Company works with the client payors, on the one hand, and the providers,
      on the other, to set claims review, management and payment
      specifications.
  6
  ·
              The supplier (and not the
      Company) has credit risk.  The Company believes it has
      some level of credit risk, but that risk is mitigated because the Company
      does not remit payment to providers unless and until it has received
      payment from the relevant client payors following the Company’s processing
      of a claim.
  ·
              The amount that the Company
      earns is not fixed.  The Company does not earn a fixed
      amount per transaction nor does it realize a per person per month charge
      for its services.
  The
Company has evaluated the other indicators under EITF 99-19, including whether
or not the Company has general inventory risk. The Company does not have any
general inventory risk, as its business is not related to the manufacture,
purchase or delivery of goods and it does not purchase in advance any of the
services to be provided by the ancillary healthcare service providers. While the
absence of this risk would be one indicator in support of net revenue reporting,
as described in detail above, the Company has carefully evaluated all of the key
indicators detailed in EITF No. 99-19 and has concluded that its circumstances
are most consistent with those key indicators that support gross revenue
reporting.
 If the
Company were to report its revenues net of provider payments rather than on a
gross reporting basis, for the three months ended March 31, 2009 and March 31,
2008, its net revenues would have been approximately $4.1 million and
approximately $3.1 million, respectively.
 
 During
the three months ended March 31, 2009 and 2008, two ofthe Company’s customers comprised a significant portion of the Company’s
revenues.  The following is a summary of the approximate amounts of
the Company’s revenue and accounts receivable contributed by each of those
customers as of the dates and for the periods presented:
  As of March31,
      2009
              
              
              Three
      months endedMarch 31, 2009
              
              
              As
      of March31, 2008
              
              
              Three
      months endedMarch 31, 2008Accounts
              
              
              
              
              
              %
      of Total
              
              
              Accounts
              
              
              
              
              
              %
      of Totalreceivable
              
              
              Revenue
              
              
              Revenues
              
              
              receivable
              
              
              Revenue
              
              
              RevenuesCustomer
      A
              
              $
              3,289
              
              
              $
              8,738
              
              
              
              54
              %
              
              $
              1,833
              
              
              $
              7,067
              
              
              
              61
              %Customer
      B
              
              
              2,335
              
              
              
              6,446
              
              
              
              40
              %
              
              
              1,188
              
              
              
              4,015
              
              
              
              35
              %Others
              
              
              549
              
              
              
              872
              
              
              
              6
              %
              
              
              228
              
              
              
              424
              
              
              
              4
              %$
              6,173
              
              
              $
              16,056
              
              
              
              100
              %
              
              $
              3,249
              
              
              $
              11,506
              
              
              
              100
              %
  (3)
              Allowance
      for Doubtful Accounts
 
 We
maintain an allowance for doubtful accounts which are provided at the time
revenue is recognized.  Co-payments, deductibles and co-insurance
payments can all impact the collectability of each individual claim submitted to
payors for payment.  While the Company is able to re-price a claim and
estimate the cash it will receive from the payor for that claim, the presence of
co-pays, deductibles and co-insurance payments can affect the ultimate
collectability of the claim.  The Company records an allowance against
gross revenue to better estimate collectability.  The allowance is
applied specifically for each payor and is adjusted to reflect the Company’s
collection experience on a quarterly basis.
 
 The
following table summarizes the changes in the allowance for doubtful accounts
for the periods presented:
  Three months ended March
      31,2009
              
              
              2008Beginning
      balance
              
              $
              200
              
              
              $
              190Provisions
      for losses - accounts receivable
              
              
              -
              
              
              
              168Deduction
      for accounts charged off
              
              
              (31
              )
              
              
              -Ending
      balance
              
              $
              169
              
              
              $
              358
  7
  (4)
              Earnings
      Per Share
 
 The
following table details the reconciliation of basic earnings per share to
diluted earnings per share:
  Three
      months endedMarch
      31,2009
              
              
              2008Numerator
      for basic and diluted earnings per share:Net
      income
              
              $
              279
              
              
              $
              521Denominator:Weighted-average
      basic common shares outstanding
              
              
              15,418
              
              
              
              14,880Assumed
      conversion of dilutive securities:Stock
      options
              
              
              1,051
              
              
              
              860Warrants
              
              
              1,818
              
              
              
              1,515Potentially
      dilutive common shares
              
              
              2,869
              
              
              
              2,375Denominator
      for diluted earningsper
      share - Adjusted weighted average shares
              
              
              18,287
              
              
              
              17,255Earnings
      per common share:Basic
              
              $
              0.02
              
              
              $
              0.04Diluted
              
              $
              0.02
              
              
              $
              0.03
  (5)
              Significant
      Client Agreements
 
 On
December 31, 2008, we entered into an amendment (the “Amendment”) to our
Provider Service Agreement with one of our significant clients.  The
purpose of the Amendment is, among other things, to facilitate and accelerate
the integration into the Company’s business model of one of the client’s
affiliates, adjust the administrative fees outlined in the previous amendment,
define and clarify the exclusivity and levels of cooperation contemplated by the
previous amendments, and extend the partnership between the Company and the
client and the duration of their Provider Service Agreement to December 31,
2012.  Under a strategic contracting plan that the Amendment requires
the parties to develop, the Company will be the exclusive outsourced ancillary
contracting and network management provider for the client’s group health
clients and any third party administrators (TPAs).
 
 As part
of the Amendment, the Company agreed to pay to the client $1,000,000 for costs
incurred in connection with the integration of and access to the Company’s
network by members of the affiliate’s network, including, but not limited to,
costs associated with salaries, benefits, and third party
contracts.   The Amendment specifies that payment of such amount
will be made within 90 days of December 31, 2008.  The Company will
continue to pay a service fee to the client designed to reimburse and compensate
for the work that it is required to perform to support the Company’s
program.  The Company recognized the $1,000,000 fee as a prepaid
expense which is being amortized over the term of the
agreement.  During the three months ended March 31, 2009, we recorded
amortization related to the agreement of $62,500.  At March 31, 2009,
$250,000 was classified as a current asset on the consolidated balance sheet
representing the amount to be amortized during the subsequent twelve-month
period.  The remaining $687,500 balance was classified as a long-term
other asset at March 31, 2009.
  (6)
              Stock
      Warrants
 
 In June
2008, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues
Task Force (“EITF”) Issue No. 07-5, “Determining Whether an Instrument (or
Embedded Feature) Is Indexed to Entity’s Own Stock (“EITF
07-5”).  EITF 07-5 mandates a two-step process for evaluating whether
an equity-linked financial instrument or embedded feature is indexed to the
entity’s own stock.  109,095 warrants issued by the Company contain a
strike price adjustment feature, which upon adoption of EITF 07-5, resulted in
the instruments no longer being considered indexed to the Company’s own
stock.  Accordingly, adoption of EITF 07-5 changed the current
classification (from equity to liability) and the related accounting for these
warrants outstanding as of January 1, 2009.  As of that date, we
reclassified the warrants, based on a fair value of $3.43 per warrant, as
calculated using the Black–Scholes–Merton valuation
model.   During the first quarter of 2009, the liability was
adjusted for warrants exercised and the change in fair value of the
warrants.  In accordance with EITF 07-5, a liability of $374,174
related to the stock warrants is included in other liabilities in our
consolidated balance sheet as of March 31, 2009.  During the three
months ended March 31, 2009, we recorded other expense of $24,482 related to the
change in fair value of the warrants.
  8
  (7)
              Financial
      Instruments
  As a
result of the adoption of EITF 07-5, the Company is required to disclose the
fair value measurements required by SFAS No. 157, “Fair Value Measurements.” The
other liabilities recorded at fair value in the balance sheet as of
March 31, 2009 are categorized based upon the level of judgment associated
with the inputs used to measure their fair value. Hierarchical levels, defined
by SFAS No. 157 are directly related to the amount of subjectivity associated
with the inputs to fair valuation of these liabilities are as
follows:
 
 Level 1
      —
              Inputs
      are unadjusted, quoted prices in active markets for identical assets or
      liabilities at the measurement date;Level 2
      —
              Inputs
      other than Level 1 inputs that are either directly or indirectly
      observable; andLevel
      3 —
              Unobservable
      inputs, for which little or no market data exist, therefore requiring an
      entity to develop its own
assumptions.
 
 The
following table summarizes the financial liabilities measured at fair value on a
recurring basis as of March 31, 2009, segregated by the level of the valuation
inputs within the fair value hierarchy utilized to measure fair
value:
  Quoted
      prices inactive
      markets for
              
              
              Significant
      other
              
              
              Significantidentical
      assets
              
              
              observable
      inputs
              
              
              unobservable
      inputsTotal
              
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)Other
      liabilities
              
              $
              374
              
              
              $
              —
              
              
              $
              —
              
              
              $
              374
 
 Equity-linked
financial instruments consist of stock warrants issued by the Company that
contain a strike price adjustment feature, as described in Note 6 in the Notes
to the Consolidated Financial Statements.  In accordance with EITF
07-5, we calculated the fair value of the warrants using the
Black–Scholes–Merton valuation model.  During the three months ended
March 31, 2009, we recognized approximately $24,000 of unrealized losses related
to the change in the fair value of the financial instruments.  Those
unrealized losses were classified as Other Expense on the Statement of
Operations.
 
 The
assumptions used in the Black-Scholes-Merton valuation model were as
follows:
 
 January
      1,
              
              
              March
      31,2009
              
              
              2009Fair
      value
              
              $
              3.43
              
              
              $
              3.64Expected
      volatility
              
              
              73.4
              %
              
              
              6.9
              %Expected
      life (years)
              
              
              2.13
              
              
              
              1.89Risk
      free interest rate
              
              
              0.8
              %
              
              
              2.5
              %Forfeiture
      rate
              
              
              -
              
              
              
              -Dividend
      rate
              
              
              -
              
              
              
              -
 
 The
following table reflects the activity for liabilities measured at fair value
using Level 3 inputs for the three months ended March 31,
2009:
  Initial
      recognition of equity-linked financial instruments as of January 1,
      2009
              
              $
              374Transfers
      into level 3
              
              
              —Transfers
      out of level 3
              
              
              —Sales
      of equity-linked financial instruments
              
              
              24Unrealized
      losses related to the change in fair value
              
              
              (24
              )Balance
      as of March 31, 2009
              
              $
              374
  9
  FORWARD-LOOKING
STATEMENTS
 
 This
discussion includes forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. You can identify these statements by
forward-looking words such as “may,” “will,” “expect,” “intend”, “anticipate,”
“believe,” “estimate” and “continue” or similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future operating results or of our
financial condition or state other “forward-looking” information.
  We believe it is important to communicate to our stockholders and
potential investors not only the Company’s current condition, but management’s
forecasts about the Company’s future opportunities, performance and results,
including, for example, information with respect to potential margin expansion,
cash reserves and other financial items, and our strategies and
prospects.  However, forward-looking statements are based on current
expectations and assumptions and are subject to substantial risks and
uncertainties, including, but not limited to, risks of market acceptance of, or
preference for, the Company’s systems and services, competitive forces, the
impact of geopolitical events and changes in government regulations, general
economic conditions and economic factors in the country and the healthcare
industry, and other risk factors as may be listed from time to time in the
Company’s filings with the SEC. In evaluating such forward-looking statements,
investors should specifically consider the matters set forth under the caption
“Risk Factors” appearing in our Annual Report on Form 10-K for the year ended
December 31, 2008 which was filed with the SEC on March 31, 2009, as well as any
other cautionary language contained in this quarterly report, any of which could
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements.  Except to the extent required by
applicable securities laws and regulations, we disclaim any obligation to update
or revise information contained in any forward-looking statement contained
herein to reflect events or circumstances occurring after the date of this
quarterly report.
  ITEM
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
 
 GENERAL
 
 Management’s
discussion and analysis provides a review of the Company’s operating results for
the three months ended March 31, 2009 and its financial condition at March 31,
2009. The focus of this review is on the underlying business reasons for
significant changes and trends affecting the revenues, net income and financial
condition of the Company. This review should be read in conjunction with the
accompanying unaudited consolidated financial statements and the audited
consolidated financial statements and the notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2008.
  OVERVIEW
  American
CareSource Holdings, Inc. (the “Company”, “ACS”, “we”, “us”, or “our”) is an
ancillary benefits management company that offers cost effective access to a
comprehensive national network of ancillary healthcare service
providers.
 The
Company’s healthcare payor customers, which include preferred provider
organizations (“PPOs”), third party administrators (“TPAs”), insurance
companies, large self-funded organizations and Taft-Hartley union plans (i.e.,
employee benefit plans that are self-administered under collective bargaining
agreements), engage the Company to provide them with a complete outsourced
solution designed to manage each customer’s obligations to its covered
persons.  The Company offers its customers this solution
by:
 
 ·
              providing
      payor customers with a comprehensive network of ancillary healthcare
      services providers that is tailored to each payor customer’s specific
      needs and is available to each payor customer’s covered persons for
      covered services;
 ·
              providing
      payor customers with claims management, reporting, and processing and
      payment services;
 ·
              performing
      network/needs analysis to assess the benefits to payor customers of adding
      additional/different service providers to the payor customer-specific
      provider networks; and
 ·
              credentialing
      network service providers for inclusion in the payor customer-specific
      provider networks.
  10
  The
Company’s business model, illustrating the relationships among the persons
involved, directly or indirectly, in the Company’s business and its generation
of revenue and expenses is depicted below:
  
  Our
clients route healthcare claims to us after service has been performed by
participant providers in our network.  We process those claims and
charge the client/payor according to its contractual rate for the services
according to our contract with the client/payor.  In processing the
claim, we are paid directly by the client or the insurer for the
service.  We then pay the provider of service according to its
independently-negotiated contractual rate.  We assume the risk of
generating positive margin, the difference between the payment we receive for
the service and the amount we are obligated to pay the provider of
service.
 
 The
Company recognizes revenues for ancillary healthcare services when services by
providers have been authorized and performed, the claim has been billed to the
payor and collections from payors are reasonably assured.  Cost of
revenues for ancillary healthcare services consist of amounts due to providers
for providing ancillary health care services, client administration fees paid to
our client payors to reimburse them for routing the claims to us for processing,
and the Company’s related direct labor and overhead of processing invoices,
collections and payments. The Company is not liable for costs incurred by
independent contract service providers until payment is received by us from the
payors. The Company recognizes actual or estimated liabilities to independent
contract service providers as the related revenues are recognized.
 
 The
Company markets its products to preferred provider organizations (“PPOs”), third
party administrators (“TPAs”), insurance companies, large self-funded
organizations and Taft-Hartley union plans, such as employee benefit plans that
are self-administered under collective bargaining agreements.
 
 The
Company is seeking continuing growth in the number of client payor and service
provider relationships by focusing on providing in-network services for its
payors and aggressively pursuing additional PPOs, TPAs and other direct payors
as its primary sales target. The Company believes that this strategy should
increase the volume of claims the Company can process in addition to the
expansion in the number of lives that are eligible to receive ancillary health
care benefits.  No assurances can be given that the Company can expand
its service provider or payor relationships, nor that any such expansion will
result in an improvement in the results of operations of the
Company.
  11
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 Management’s discussion and analysis of our
financial condition and results of operations is based upon our condensed financial
statements.  These condensed financial statements have been prepared
following the requirements of accounting principles generally accepted in the
United States (“GAAP”) for interim periods and require us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities.  On an ongoing basis, we evaluate our estimates,
including those related to revenue recognition and amortization and potential
impairment of intangible assets and goodwill and stock-based compensation
expense.  As these are condensed financial statements, one should also
read expanded information about our critical accounting policies and estimates
provided in Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” under the heading
“Critical Accounting Policies,” included in ourAnnual Report on Form 10-K for the year ended
December 31, 2008. There have been no material changes to our critical
accounting policies and estimates from the information provided in our Form10-K for the year ended December 31,
2008.
 
 ANALYSIS
OF RESULTS OF OPERATIONS
 
 Revenues
 
 The
following table sets forth a comparison of our revenues for the periods
presented ended March 31:
  First
      QuarterChange($
      in thousands)
              
              2009
              
              2008
              
              $
              
              %Net
      revenues
              
              $
              16,056
              
              
              $
              11,506
              
              
              $
              4,550
              
              
              
              40
              %
  The
Company’s net revenues are generated from ancillary healthcare service
claims.  Revenue is recognized when we bill our client payors for
services performed.  The increase in revenue for the three months
ended March 31, 2009 as compared to the same period in 2008 is due to the
progression of our client relationships, which allowed the Company access to a
greater number of payors and allowed us to benefit from the external growth and
expansion of our clients.  In addition, revenues were positively
impacted by growth in our ancillary service provider
network.  Revenues generated from existing clients, i.e., those that
were already our clients in the first quarter of 2008, increased $3.7 million,
or 33%, in the first three months of 2009 compared to the same prior year
period.  During 2008, we added seven new clients (one of which is an
affiliate of one of our two existing significant customers), which were
responsible for approximately $800,000 of incremental revenues in the first
quarter of 2009.  In, addition, during the first quarter of 2009, the
number of billed claims increased by 46% compared to the first quarter of
2008.  Existing clients accounted for 36% of the increase in billed
claims. Conversely,
revenues were negatively impacted in the first quarter of 2009
compared to previous quarters due to the seasonal resetting of co-pays and
deductibles with typical health insurance plans as well as a broad based
reduction in healthcare spending due to the current economic
conditions.
 
 The
Company will continue to seek growth in the number of client payor and service
provider relationships by focusing on providing in-network services for its
payors and aggressively pursuing additional PPOs, TPAs and other direct payors
as its primary sales target. The Company believes that this strategy should
increase the volume of claims the Company can process, as well as expand the
number of lives that are eligible to receive ancillary health care
benefits.  No assurances can be given that the Company can expand its
service provider or payor relationships, nor that any such expansion will result
in an improvement in the results of operations of the Company.
 
 Cost of Revenues and
Contribution Margin
 
 The
following table sets forth a comparison of the components of our cost of
revenues, for the periods presented ending March 31:
  First
      QuarterChange%
      of
              
              
              
              
              
              %
      of($
      in thousands)
              
              2009
              
              
              revenues
              
              
              2008
              
              
              revenues
              
              
              $
              
              
              %Provider
      payments
              
              $
              11,936
              
              
              
              74
              %
              
              $
              8,390
              
              
              
              73
              %
              
              $
              3,546
              
              
              
              42
              %Administrative
      fees
              
              
              815
              
              
              
              5
              
              
              
              702
              
              
              
              6
              
              
              
              113
              
              
              
              16Fixed
      costs
              
              
              1,005
              
              
              
              6
              
              
              
              709
              
              
              
              6
              
              
              
              296
              
              
              
              42Total
      cost of revenues
              
              $
              13,756
              
              
              
              86
              %
              
              $
              9,801
              
              
              
              85
              %
              
              $
              3,955
              
              
              
              40
              %
  Cost of
revenues is comprised of payments to our providers, administrative fees paid to
our client payors for converting claims to electronic data interchange and
routing them to both the Company for processing and to their payors for payment,
and the fixed costs of our provider development and claims administration
organizations.  Payments to providers is the largest component of our
cost of revenues and it consists of our payments for ancillary care services in
accordance with contracts negotiated separately with providers for specific
ancillary services.  In the first quarter of 2009, cost of revenues
related to payments to providers increased as compared to the first quarter of
2008 as a result of increased claims volume and increased revenues, and the
fluctuation in the mix of types of services provided by the
Company.  Payments made to providers as a percent of net revenues were
74.3% during the first quarter of 2009 and 72.9% during the same period in
2008.  The increase is due to a change in product mix and a shift in
revenue to clients that carry inherently lower margins on claims.  The
increase in administrative fees was due to increased claim volume as a result of
expanded relationships with existing clients.  Conversely, the
decrease in administrative fees as a percent of net revenues in the first
quarter of 2009 compared to the corresponding prior year period is due to a
shift in revenues to clients that carry lower contracted administrative fee
rates.  Fixed costs increased due to increased salaries and benefits
related to headcount additions, primarily in our provider development and
information technology groups.  Our provider development group is
responsible for developing our network of ancillary healthcare service
providers, which includes contracting with providers to be included in the
network, credentialing new service providers and maintaining a relationship with
existing providers, all for the purpose of enhancing our ancillary service
provider network offering to our client payors.   In addition,
during 2008, we implemented an employee incentive plan and commenced matching
employee contributions to our defined contribution plan, we incurred
provider-specific marketing expenses related to the development of our network
and we incurred incremental rent expense related to additional lease space to
accommodate growth, all of which contributed to the increase in fixed costs in
the first quarter of 2009 compared to the corresponding quarter last
year.
  12
 
 The
following table sets forth a comparison of contribution margin percentage for
the periods presented ending March 31:
 
 First
      QuarterChange2009
              
              2008
              
              %
      ptsContribution
      margin percentage
              
              
              14.3
              %
              
              
              14.8
              %
              
              
              (0.5
              )
      %
 
 Contribution
margin percentage is calculated by dividing the difference between net revenues
and total cost of revenues by net revenues.  The decline in
contribution margin percentage reflected in the above table is attributable
primarily to fluctuations in the mix of services provided by the
Company.  Our contribution margin percentage fluctuates from quarter
to quarter due to changes in the prices we charge our client payors as compared
to the financial terms of our provider agreements, changes in fixed costs and
changes in the mix of services we provide. There can be no assurances that we
will be able to maintain contribution margin at current levels, either in
absolute or in percentage terms.
 
 Selling,
General and Administrative Expenses
 
 The
following table sets forth a comparison of our selling, general and
administrative (“SG&A”) expenses for the periods presented ending March
31:
 
 First
      QuarterChange($
      in thousands)
              
              2009
              
              
              2008
              
              
              $
              
              %Selling,
      general and
              
              $
              1,901
              
              
              $
              1,113
              
              
              $
              788
              
              
              
              71
              %administrative
      expensesPercentage
      of total net revenues
              
              
              11.8
              %
              
              
              9.7
              %
 
 Selling,
general and administrative (“SG&A”) expenses consist primarily of salaries
and related benefits, travel costs, sales commissions, sales materials, other
marketing related expenses, costs of corporate operations, finance and
accounting, human resources and other general operating expenses of the
Company.  The increase in SG&A, reflected in the above table is
primarily related to increased headcount, primarily in our sales and marketing
and client development groups, increased costs related to the
implementation of an employee incentive plan and the commencement of matching
employee contributions to our defined contribution plan, increased stock-based
compensation expense, increased recruiting fees related to attracting and hiring
talented employees to facilitate the Company’s growth and the amortization of
the fees paid associated with the amendment to the contract with one of our
significant clients, as discussed in Note 5 in the Notes to the Consolidated
Financial Statements.  In addition, during the first quarter 2009,
marketing expenses increased related to strategic marketing initiatives as
compared to the same prior year period.
 
 SG&A
expenses as a percentage of net revenues increased over the prior year period as
a result of SG&A expenses growing more rapidly than our net revenues (71% as
compared to 40%), which is primarily the result of positioning the Company for
future growth, including in connection with the expenses identified in the
paragraph above.
  13
  Depreciation and
Amortization
 
 The
following table sets forth a comparison of depreciation and amortization for the
periods presented ending March 31:
 
 First
      Quarter
              
              
              Change($
      in thousands)
              
              2009
              
              
              2008
              
              
              $
              
              
              %Depreciation
              
              $
              81
              
              
              $
              39
              
              
              $
              42
              
              
              
              108
              %Amortization
              
              
              32
              
              
              
              53
              
              
              
              (21
              )
              
              
              (40
              ) %Total
      Depreciationand
      amortization
              
              $
              113
              
              
              $
              92
              
              
              $
              21
              
              
              
              23
              %
  Amortization
of intangibles consists of amortization of $32,000 of the capitalized value of
provider contracts that were acquired in
the2003 acquisition of the assets of our
predecessor, American CareSource Corporation by Patient Infosystems (now
CareGuide, Inc.), our former parent corporation.  The balance is being
amortized using the straight-line method over its expected useful life, which is
15 years for provider contracts.  Amortization in the first quarter of
2008 included amortization of approximately $21,000 related to the value
assigned to software as part of the aforementioned transaction.  The
balance became fully amortized as of December 31, 2008.
 
 The
increase in depreciation expense is due to increased capital expenditures
(primarily internally developed software) during 2008 and early 2009 due to
growth and expansion.
  Income Tax
Provision
 
 For the
three months ended March 31, 2009 and 2008, a provision for income taxes of
$23,349and
$17,045 was recorded, respectively.  The provision for the
aforementioned periods represents our estimated margin tax liability in the
State of Texas.  Due to the existence of our net operating loss
carryforward, which was approximately $5.0 million at December 31, 2008, we have
no federal income tax liability for the three months ended March 31,
2009.
  14
  FINANCIAL
CONDITION AND LIQUIDITY
  As of
March 31, 2009, the Company had a working capital surplus of $8.3 million
compared to $7.8 million at December 31, 2008.  In addition, our cash
and cash equivalents balance decreased to $10.3 million as of March 31, 2009
compared to $10.6 million at December 31, 2008. The decrease in cash is
primarily related to the payment of 2008 performance bonus compensation during
the first quarter of 2009 and capital expenditures of approximately
$285,000.
  For the
three months ended March 31, 2009, operating activities provided net cash of
approximately $54,000, the primary components of which were net income of
approximately $279,000, adjusted for non-cash charges of share-based
compensation expense of approximately $260,000, depreciation and amortization of
approximately $113,000 offset by a use of cash from net operation assets, and
amortization of the costs associated with the amendment to the contract with one
of our significant clients of $62,500, as well as, an increase in net operating
assets and liabilities of approximately $712,000, compared to the corresponding
prior year quarter.  Net operating assets and liabilities increased
due to the timing of collection of claims paid to us by our clients and payments
made by us to the service providers in our network and payment of 2008
performance bonus compensation.
  Investing
activities in the quarter ended March 31, 2009 were comprised of investments in
software development costs of approximately $114,000 and in property and
equipment of approximately $171,000.  The software development costs
relate primarily to enhancements to our internal billing system, while the
increase in property and equipment relates primarily to investments in computer
equipment and leasehold improvements made to our expanded lease space to
accommodate continued growth and increased headcount.
 
 Historically,
we have relied on external sources of capital, including indebtedness or
issuance of equity securities to fund our operations.  We believe our
current cash balance of $10.3 million as of March 31, 2009 and expected future
cash flows from operations will be sufficient to meet our anticipated cash needs
for working capital, capital expenditures and other activities through the next
twelve months.  If operating cash flows are not sufficient to meet our
needs, we believe that credit or access to capital through issuance of equity
would be available to us.  However, as a result of the tightening in
the credit markets, low level of liquidity in many financial markets and extreme
volatility in fixed income, credit, currency and equity markets, there can be
assurances that, if necessary, we would be successful in obtaining sufficient
capital financing on commercially reasonable terms or at all.
  INFLATION
  Inflation
did not have a significant impact on the Company’s costs during the quarters
ended March 31, 2009 and March 31, 2008, respectively.  The Company
continues to monitor the impact of inflation in order to minimize its effects
through pricing strategies, productivity improvements and cost
reductions.
  OFF-BALANCE
SHEET ARRANGEMENTS
  The
Company does not have any off-balance sheet arrangements at March 31, 2009 or
March 31, 2008 or for the periods then ended.
  ITEM
4.  Evaluation of Disclosure Controls and Procedures
  Evaluation of Disclosure Controls
and Procedures. Our management, with the participation of our Chief
Executive Officerand Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and
procedures as of March 31, 2009.  Based upon this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as
amended) are effective to ensure that information required to the
disclosed by us  in reports we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosures.
  Changes in Internal Controls Over
Financial Reporting.  Our management, with the participation of
our Chief Executive Officer and Chief Financial Officer, has concluded that there were no changes in the
Company’s internal controls over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) since the last fiscal quarter
that have materially affected the Company’s internal controls over financial
reporting or are reasonably likely to materially affect internal controls over
financial reporting, including any corrective actions with regard to significant
deficiencies and material weaknesses.
  15
  Part II.
OTHER INFORMATION
 
 ITEM
1A.  Risk Factors
 
 In
addition to the other information set forth in this report, one should carefully
consider the discussion of various risks and uncertainties contained in Part I,
“Item 1A. Risk Factors” in our 2008 Annual Report on Form 10-K.  We
believe those risk factors are the most relevant to our business and could cause
our results to differ materially from the forward-looking statements made by
us.  Please note, however, that those are not the only risk factors
facing us.  Although the Company has not experienced a decline in its
operations as a result of the current financial crisis, it may be affected in
the future in at least two ways. First, to the extent that there are significant
increases in unemployment, fewer people may participate in insurance programs
with our customers. Second, plan participants, seeking to make their operations
more cost effective, could make less frequent use of some ancillary services. In
either case, we may receive less revenue and our profitability and growth could
be adversely affected, depending on the extent of the declines. Finally, as with
any business, the deterioration of the financial condition of our significant
customers (with two customers accounting for in excess of 94% of our revenue
during the three months ended March 31, 2009) could have a corresponding adverse
effect on us.  Additional risks that we do not consider material, or
of which we are not currently aware, may also have an adverse impact on
us.  Our business, financial condition and results of operations could
be seriously harmed if any of these risks or uncertainties actually occur or
materialize.  In that event, the market price for our common stock
could decline, and our shareholders may lose all or part of their
investment.  During the three months ended March 31, 2009, there were
no material changes in the information regarding risk factors contained in our
Annual Report on Form 10-K for the year ended December 31, 2008.
 
 ITEM
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 On
January 20, 2009, the Company issued an aggregate of 7,144 shares of its common
stock in connection with an exercise by an accredited investor of restricted
warrants to purchase an aggregate of 7,144 shares for an aggregate exercise
price of $39,292, which has been received in December 2008.
 
 This
share issuance was not registered under the Securities Act of 1933, as amended
(the “Securities Act”).  The issuance was exempt from registration
pursuant to Section 4(2) of the Securities Act and Regulation D thereunder, as
it was a transaction by the issuer that did not involve public offerings of
securities and involved a sale made to an accredited investor.
 
 
 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
  16
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
   AMERICAN
      CARESOURCE HOLDINGS, INC.By:
                /s/ David
      S. BooneDavid
      S. BoonePresident
      and Chief Executive Officer (principal executive officer and an authorized
      signatory)
  By:
                /s/ Steven
      J. ArmondSteven
      J. ArmondChief
      Financial Officer (principal financial officer and an authorized
      signatory)
 By:
                /s/ Matthew
      D. ThompsonMatthew
      D. ThompsonController
      (principal accounting officer and an authorized signatory)
  Date: May
7, 2008
  17