##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K/A

Amendment No. 1





(Mark One)

|x | Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2008 or
|- | -----------------------------------------------------------------------------------------------------------------------------------



| ̈ | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from
             to
|- | ---------------------------------------------------------------------------------------------------------------------------------------

Commission file number 000-18217





TRANSCEND
SERVICES, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 33-0378756                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|One Glenlake Parkway, Suite 1325, Atlanta, GA                  |  | 30328                            
|(Address of principal executive offices)                       |  | (Zip Code)                       

Registrants telephone number, including area code: (678) 808-0600





Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to
Section 12(g) of the Act:

Common Stock, $0.05 par value

(Title of class)





Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x

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 Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

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 definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12-b2 of the Act).    Yes   ̈    No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter: $76.0 million as of June 30, 2008.

Indicate the number of shares outstanding of each of the registrants classes of Common Stock, as of the latest practicable date.
8,479,492 shares of Common Stock, $0.05 par value, as of February 28, 2009.

Documents incorporated by reference:Portions of the registrants proxy statement filed in connection with the 2009 Annual Meeting of Stockholders are incorporated by reference herein in response to Part III of this report.









---

##### Table of Contents

EXPLANATORY NOTE

This Annual Report on Form 10-K/A (Form 10-K/A) is being filed as Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with
the Securities and Exchange Commission (SEC) on March 11, 2009 (the Original Filing). We are filing this Amendment No. 1 to include in Item 15, Reports on Financial Statement Schedule II, by two of our auditors for
the years ended December 31, 2006 and 2007. Other than Item 15, Exhibits and Financial Schedules, no other Items or information have been amended.

Except for the foregoing amended information, this Form 10-K/A continues to describe conditions as of the date of the Original Filing, and we have not updated the disclosures contained herein to reflect
events that have occurred subsequent to that date. Other events occurring after the date of the Original Filing or other information necessary to reflect subsequent events have been disclosed in reports filed with the SEC subsequent to the
Original Filing.

TABLE OF CONTENTS



|         |  |                                         |  |     
|-------- |  | --------------------------------------- |  | ----
|         |  |                                         |  | Page
|         |  |                                        
|         |  | Part IV                                 |  |     
|         |  |                                        
|Item 15. |  | Exhibits, Financial Statement Schedules |  | 3   
|         |  | Signatures                              |  | 6   



2



---

##### Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as a part of this Annual Report for Transcend Services, Inc.:

1. Financial
Statements

The Consolidated Financial Statements, the Notes to Consolidated Financial Statements and the
Reports of Independent Registered Public Accounting Firms listed below are included in Item 8.

Reports of
Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2008 and
2007

Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Stockholders Equity for the years ended December 31, 2008, 2007 and 2006

Notes to Consolidated Financial Statements

(b) Exhibits

The following exhibits are filed with or incorporated by reference
into this report, as noted.



|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            |  |            |  |          |  |                  
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- |  | ---------- |  | -------- |  | -----------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  | Incorporation by Reference
|Exhibit Number |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                |  | Form                       |  | File No.   |  | Exhibit  |  | Filing Date      
|3.1            |  | Certificate of Incorporation                                                                                                                                                                                                                                                                                                                                       |  | S-3                        |  | 333-106446 |  | 4.1      |  | June 25, 2003    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|3.2            |  | Restated Bylaws                                                                                                                                                                                                                                                                                                                                                    |  | 10-K                       |  | 000-18217  |  | 3    (a) |  | August 27, 1993  
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|4.1            |  | Stock Purchase Warrant granted to Premier Holding of Illinois dated October 27, 2004                                                                                                                                                                                                                                                                               |  | 10-K                       |  | 000-18217  |  | 4.1      |  | March 9, 2005    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|4.2            |  | Promissory Note Payable dated January 31, 2005 for $3,500,000 in favor of Susan McGrogan                                                                                                                                                                                                                                                                           |  | 10-K                       |  | 000-18217  |  | 4.3      |  | March 9, 2005    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|4.3            |  | Promissory Note dated as of March 1, 2005 between Transcend Services, Inc. and the Development Corporation of Abilene, Inc.                                                                                                                                                                                                                                        |  | 10-Q                       |  | 000-18217  |  | 4.1      |  | July 28, 2005    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|4.4            |  | Loan and Security Agreement dated December 30, 2005 between Transcend Services, Inc. and HFG Healthco-4 LLC.                                                                                                                                                                                                                                                       |  | 8-K/A                      |  | 000-18217  |  | 4.1      |  | January 12, 2006 
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|4.5            |  | Acquisition Promissory Note dated December 30, 2005 between Transcend Services, Inc. and HFG Healthco-4 LLC.                                                                                                                                                                                                                                                       |  | 8-K/A                      |  | 000-18217  |  | 4.2      |  | January 12, 2006 
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|4.6            |  | Revolving Promissory Note dated December 30, 2005 between Transcend Services, Inc. and HFG Healthco-4 LLC.                                                                                                                                                                                                                                                         |  | 8-K/A                      |  | 000-18217  |  | 4.3      |  | January 12, 2006 
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|10.1           |  | 1992 Stock Option Plan, as Amended and Restated                                                                                                                                                                                                                                                                                                                    |  | S-8                        |  | 333-16213  |  | 4.1      |  | November 15, 1996
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|10.2           |  | Form of Incentive Stock Option Agreement under 1992 Stock Option Plan, as Amended and Restated                                                                                                                                                                                                                                                                     |  | S-8                        |  | 333-16213  |  | 4.2      |  | November 15, 1996
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|10.3           |  | 2001 Stock Option Plan                                                                                                                                                                                                                                                                                                                                             |  | 10-K                       |  | 000-18217  |  | 4.1      |  | March 6, 2002    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|10.4           |  | 2003 Stock Incentive Plan                                                                                                                                                                                                                                                                                                                                          |  | 10-Q                       |  | 000-18217  |  | 4.3      |  | July 29, 2004    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|10.5           |  | 2004 Employee Stock Purchase Plan                                                                                                                                                                                                                                                                                                                                  |  | 10-Q                       |  | 000-18217  |  | 4.4      |  | July 29, 2004    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|10.6           |  | Clinical Documentation Solution Agreement between Transcend Services, Inc. and MultiModal Technologies, Inc. effective September 28, 2004 (Confidential treatment has been requested
for certain portions of this exhibit pursuant to Rule 24(b)(2) and accordingly, those portions have been omitted from this exhibit and filed separately with the Commission.) |  | 10-K                       |  | 000-18217  |  | 10.6     |  | March 9, 2005    
|               |  |                                                                                                                                                                                                                                                                                                                                                                    |  |                            | 
|10.7           |  | 2005 Stock Incentive Plan                                                                                                                                                                                                                                                                                                                                          |  | 10-Q                       |  | 000-18217  |  | 10.1     |  | July 28, 2005    



3



---

##### Table of Contents

|              |  |                                                                                                                                                                             |  |                            |  |            |  |         |  |                  
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- |  | ---------- |  | ------- |  | -----------------
|              |  |                                                                                                                                                                             |  | Incorporation by Reference
|ExhibitNumber |  | Exhibit Description                                                                                                                                                         |  | Form                       |  | File No.   |  | Exhibit |  | Filing Date      
|10.8          |  | Agreement for Financial Assistance dated March 1, 2005 between the Development Corporation of Abilene, Inc. and Transcend Services, Inc.                                    |  | 10-Q                       |  | 000-18217  |  | 10.1    |  | April 28, 2005   
|              |  |                                                                                                                                                                             |  |                            | 
|10.9          |  | Option Agreement to Purchase Stock dated August 15, 2005 between Susan McGrogan and Transcend Services, Inc.                                                                |  | 10-Q                       |  | 000-18217  |  | 10.2    |  | October 26, 2005 
|              |  |                                                                                                                                                                             |  |                            | 
|10.10         |  | Transcend Services, Inc. Stock Purchase Warrant to Purchase Shares of Common Stock, $.05 Par Value.                                                                         |  | 8-K/A                      |  | 000-18217  |  | 10.1    |  | February 27, 2006
|              |  |                                                                                                                                                                             |  |                            | 
|10.11         |  | Amendment to Option Agreement to Purchase Stock between Susan McGrogan and Transcend Services, Inc. dated December 21, 2005.                                                |  | 10-K                       |  | 000-18217  |  | 10.11   |  | March 6, 2006    
|              |  |                                                                                                                                                                             |  |                            | 
|10.12         |  | 2006 Executive Compensation Plan                                                                                                                                            |  | 10-K                       |  | 000-18217  |  | 10.12   |  | March 6, 2006    
|              |  |                                                                                                                                                                             |  |                            | 
|10.13         |  | Lease Agreement by and between Farnam Street Financial and Transcend Services, Inc. dated May 19, 2005.                                                                     |  | 10-K                       |  | 000-18217  |  | 10.13   |  | March 6, 2006    
|              |  |                                                                                                                                                                             |  |                            | 
|10.14         |  | Lease Schedule No. 001R to Lease Agreement by and between Farnam Street Financial and Transcend Services, Inc., dated December 20, 2005.                                    |  | 10-K                       |  | 000-18217  |  | 10.14   |  | March 6, 2006    
|              |  |                                                                                                                                                                             |  |                            | 
|10.15         |  | Lease Schedule No. 002R to Lease Agreement by and between Farnam Street Financial and Transcend Services, Inc., dated October 4, 2005.                                      |  | 10-K                       |  | 000-18217  |  | 10.15   |  | March 6, 2006    
|              |  |                                                                                                                                                                             |  |                            | 
|10.16         |  | Lease Schedule No. 003R to Lease Agreement by and between Farnam Street Financial and Transcend Services, Inc., dated December 21, 2005.                                    |  | 10-K                       |  | 000-18217  |  | 10.16   |  | March 6, 2006    
|              |  |                                                                                                                                                                             |  |                            | 
|10.17         |  | Clinical Documentation Solution Agreement by and between MultiModal Technologies, Inc. and Transcend Services, Inc., effective as of September 1, 2006.                     |  | 8-K/A                      |  | 000-18217  |  | 10.1    |  | March 1, 2006    
|              |  |                                                                                                                                                                             |  |                            | 
|10.18         |  | Promissory Note between Transcend Services and Development Corporation of Abilene dated December 1, 2008                                                                    |  | 8-K                        |  | 000-18217  |  | 10.1    |  | January 2, 2009  
|              |  |                                                                                                                                                                             |  |                            | 
|10.19         |  | 2007 Stock Incentive Plan                                                                                                                                                   |  | S-8                        |  | 333-157780 |  | 4.1     |  | March 9, 2009    
|              |  |                                                                                                                                                                             |  |                            | 
|14.1          |  | Transcend Services, Inc. Code of Business Conduct and Ethics Policy                                                                                                         |  | 10-K                       |  | 000-18217  |  | 14.1    |  | February 12, 2004
|              |  |                                                                                                                                                                             |  |                            | 
|*23.1         |  | Consent of Grant Thornton LLP                                                                                                                                               |  |                            |  |            |  |         |  |                  
|              |  |                                                                                                                                                                             |  |                            | 
|23.2          |  | Consent of Habif, Arogeti & Wynne, LLP                                                                                                                                      |  |                            |  |            |  |         |  |                  
|              |  |                                                                                                                                                                             |  |                            | 
|23.3          |  | Consent of Miller Ray Houser & Stewart LLP                                                                                                                                  |  |                            |  |            |  |         |  |                  
|              |  |                                                                                                                                                                             |  |                            | 
|**31.1        |  | Certification of Chief Executive Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended |  |                            |  |            |  |         |  |                  
|              |  |                                                                                                                                                                             |  |                            | 
|**31.2        |  | Certification of Chief Financial Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended |  |                            |  |            |  |         |  |                  
|              |  |                                                                                                                                                                             |  |                            | 
|**32.1        |  | Certification of Chief Executive Officer of the Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                        |  |                            |  |            |  |         |  |                  
|              |  |                                                                                                                                                                             |  |                            | 
|**32.2        |  | Certification of Chief Financial Officer of the Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                        |  |                            |  |            |  |         |  |                  



|* | Incorporated by reference to the Form 10-K Annual Report as filed with the Securities and Exchange on March 11, 2009.
|- | ---------------------------------------------------------------------------------------------------------------------

|** | This certification is furnished to, but not filed with, the Commission. This certification shall not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4



---

##### Table of Contents

(c) Financial Statement Schedules.

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2008, 2007 and 2006

|                                          |  |                              |           |                             |            |   |                           |          |   |                        |   |          
|----------------------------------------- |  | ---------------------------- | --------- | --------------------------- | ---------- | - | ------------------------- | -------- | - | ---------------------- | - | ---------
|                                          |  | Balance atBeginning
ofPeriod |           | Charged toCosts andExpenses |            |   | Net(Deductions)Recoveries |          |   | Balance atEnd ofperiod
|Year ended December 31, 2008              |  |                              |           |                             |            |   |                           |          |   |                        |   |          
|Allowance for doubtful accounts(1)        |  | $                            | 85,000    |                             | 57,000     |   |                           | (43,000  | ) |                        | $ | 99,000   
|Deferred tax asset valuation allowance(2) |  | $                            | 219,000   |                             | (193,000   | ) |                           |          |   |                        | $ | 26,000   
|Year ended December 31, 2007              |  |                              |           |                             |            |   |                           |          |   |                        |   |          
|Allowance for doubtful accounts(1)        |  | $                            | 115,000   |                             | 124,000    |   |                           | (154,000 | ) |                        | $ | 85,000   
|Deferred tax asset valuation allowance(2) |  | $                            | 6,702,000 |                             | (6,483,000 | ) |                           |          |   |                        | $ | 219,000  
|Year ended December 31, 2006              |  |                              |           |                             |            |   |                           |          |   |                        |   |          
|Allowance for doubtful accounts(1)        |  | $                            | 23,000    |                             | 83,000     |   |                           | 9,000    |   |                        | $ | 115,000  
|Deferred tax asset valuation allowance(2) |  | $                            | 7,252,000 |                             | (550,000   | ) |                           |          |   |                        | $ | 6,702,000



|(1) | Deductions in the allowance for doubtful accounts principally reflect the write-off of previously reserved accounts net of recoveries.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

|(2) | In 2006 and 2005, the Company had a 100% valuation allowance against the deferred tax asset that resulted from net operating loss carry forwards. Provisions or benefits
for all federal and certain state income taxes were offset in full by changes in the deferred tax asset valuation allowance. In 2007, the Company, except for a $219,000 valuation allowance related to state net operating loss carry forwards, reversed
its deferred tax asset valuation allowance, as future earnings will more likely than not be adequate to allow utilization of the net operating loss carry forwards prior to their expiration. At December 31, 2008, the Company had a $26,000
valuation allowance related to state net operating loss carry forwards.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors and Stockholders of Transcend Services, Inc. and subsidiary:

Our report on our audit of the basic consolidated financial statements of Transcend Services, Inc. and subsidiary for 2007 appears in Item 8. The audit
was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II  Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of
the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.

/s/ Habif, Arogeti & Wynne, LLP

Atlanta, Georgia

May 19, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Transcend Services, Inc.:

Our report on our audit
of the basic consolidated financial statements of Transcend Services, Inc. and subsidiary for 2006 appears in Item 8. The audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole.
Schedule II  Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

/s/ Miller Ray Houser & Stewart LLP

Atlanta, Georgia

March 1, 2007



5



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
amendment to its report on Form 10-k to be signed on its behalf by the undersigned, thereunto duly authorized.



Transcend Services, Inc.By:

/S/    LARRY G.
GERDESLarry G. GerdesChief Executive Officer and President (Principal Executive Officer)By:

/S/    LANCE
CORNELLLance CornellChief Financial Officer (Principal Financial and Accounting Officer)


Dated: November 5, 2009



6