10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended: March 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: 001-33094

American CareSource Holdings, Inc.

 (Exact name of small business issuer as specified in its charter)

Delaware	20-0428568
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5429 Lyndon B. Johnson Freeway, Suite 700, Dallas, Texas  75240
(Address of principal executive offices)
(972) 308-6830
(Issuer’s telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last report)

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 (the “Exchange Act”) 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 last 90 days. Yes x No ¨

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.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x 
 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 12, 2008, 15,067,423 shares of the Company’s common stock, par value $0.01 per share, were outstanding.

 TABLE OF CONTENTS

AMERICAN CARESOURCE HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2008

Part I	Financial Information	1
Item 1.	Financial Statements	1
	Consolidated Balance Sheets (unaudited)	1
	Consolidated Statements of Operations (unaudited)	2
	Consolidated Statements of Stockholders’ Equity (unaudited)	3
	Consolidated Statements of Cash Flows (unaudited)	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	9
Item 4.	Controls and Procedures	13
Part II	Other Information	13
Item 1A.	Risk Factors	13
Item 6.	Exhibits	14
Signatures		15

ii

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	As of
Assets	March 31, 2008 (unaudited)			December 31, 2007
Current assets:
Cash and cash equivalents	$	5,857,094		$	4,272,498
Accounts receivable (less allowance for losses of $358,158  in 2008 and $189,556 in 2007)		3,248,579			3,651,203
Prepaid and other current assets		427,195			409,445
Total current assets		9,532,868			8,333,146
Property and equipment, net		388,504			332,450
Other Assets
Certificate of deposit, restricted		145,000			145,000
Deferred income taxes Other non-current assets Intangible assets		255,731 164,507 1,440,843			255,731 237,246 1,494,238
Goodwill		4,361,299			4,361,299
Total other assets		6,367,380			6,493,514
Total assets	$	16,288,752		$	15,159,110
Liabilities and stockholders’ equity
Current Liabilities
Due to service providers	$	3,709,889		$	3,344,278
Accounts payable and accrued liabilities		1,288,963			1,320,036
Current maturities of long-term debt		56,697			55,697
Total current liabilities		5,055,549			4,720,011
Long-term debt		35,784			50,348
Total liabilities		5,091,333			4,770,359
Stockholders’ equity:
Common stock-par value $0.01, 40,000,000 shares authorized and 15,067,423 and 14,668,416 shares issued and outstanding as of March 31, 2008 and December 31, 2007, respectively		150,674			146,684
Preferred stock-par value $0.01, 10,000,000 shares authorized and none outstanding		-			-
Additional paid-in-capital		17,897,140			17,613,880
Accumulated deficit		(6,850,395	)		(7,371,813	)
Total stockholders’ equity		11,197,419			10,388,751
Total liabilities and stockholders’ equity	$	16,288,752		$	15,159,110

See notes to unaudited consolidated financial statements.

1

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended
	March 31,
	2008			2007
Net revenue	$	11,505,675		$	2,266,569
Total cost of revenues		9,801,122			2,101,643
Contribution margin		1,704,553			164,926
Selling, general, and administrative expense		1,112,854			694,421
Depreciation and amortization		92,067			78,074
Total operating expense		1,204,921			772,495
Operating  income (loss)		499,632			(607,569	)
Financing (income) expenses:
Interest income		(40,668	)		(53,874	)
Interest expense		1,838			11,071
Debt issuance cost		—			46,300
Total financing (income) expenses		(38,830	)		3,497
Net income (loss) before income taxes		538,462			(611,066	)
Income tax provision		17,044			—
Net income (loss)	$	521,418		$	(611,066	)
Earnings (loss) per common share:
Basic	$	0.04		$	(0.04	)
Diluted	$	0.03		$	(0.04	)
Basic weighted average common shares outstanding		14,880,266			14,486,749
Diluted weighted average common shares outstanding		17,255,201			14,486,749

See notes to unaudited consolidated financial statements.

2

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2008 (UNAUDITED)
	Common Stock				Additional Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance December 31, 2007		14,668,416	$	146,684	$	17,613,880	$	(7,371,813	)	$	10,388,751
Exercise of stock options		399,007		3,990		125,735		—			129,725
Stock-based compensation expense		—		—		157,525		—			157,525
Net income		—		—		—		521,418			521,418
Balance March 31, 2008		15,067,423	$	150,674	$	17,897,140	$	(6,850,395	)	$	11,197,419

See notes to unaudited consolidated financial statements.

3

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months Ended
	March 31,
	2008			2007
Cash flows from operating activities:
Net income (loss)	$	521,418		$	(611,066	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock-based compensation expense		157,525			49,536
Depreciation and amortization		92,067			78,074
Amortization of debt issuance costs		—			46,300
Client management fee expense related to warrants		13,228			—
Changes in operating assets and liabilities:
Accounts receivable		402,624			384,844
Prepaid and other current assets		41,761			(25,660	)
Accounts payable and accrued liabilities		(31,073	)		(22,287	)
Due to service providers		365,611			(445,683	)
Net cash provided by(used in) operating activities		1,563,161			(545,942	)
Cash flows from investing activities:
Purchase of property and equipment		(94,726	)		(18,833	)
Net cash used in investing activities		(94,726	)		(18,833	)
Cash flows from financing activities:
Payments on long-term debt		(13,564	)		(309,659	)
Net proceeds from the exercise of stock options		129,725			1,924
Net cash provided by (used in) financing activities	$	116,161			(307,735	)
Net increase (decrease) in cash and cash equivalents	$	1,584,596			(872,510	)
Cash and cash equivalents at beginning of period		4,272,498			5,025,380
Cash and cash equivalents at end of period	$	5,857,094		$	4,152,870
Supplemental disclosures cash flow information:
Cash paid for interest	$	1,838		$	29,931

See notes to unaudited consolidated financial statements.

4

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements for the period ended March 31, 2008

Note 1.  Description of Business and Basis of Presentation

American CareSource Holdings, Inc., a Delaware corporation (the “Company,” “American CareSource Holdings,” “ACS,” “we,” “our,” “us,” or the “Registrant”), is in the business of delivering ancillary healthcare services for employment groups through its national network of ancillary care providers. The Company markets its products to insurance companies, third-party administrators and preferred provider organizations.  American CareSource Holdings has one wholly owned subsidiary, Ancillary Care Services, Inc. (“Care Services”).

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, 2008 and December 31, 2007 and operating result amounts are for the three months ended March 31, 2008 and 2007, 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, 2007, filed with the SEC on March 31, 2008.

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.

Note 2.  Revenue Recognition

The Company evaluates its service provider contracts using the indicators of EITF No. 99-19 “Reporting Gross Revenue as a Principal vs. Net as an Agent” (EITF 99-19) to determine whether the Company is acting as a principal or an agent in the fulfillment of services to be rendered.

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

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

5

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

· The Company does not earn a fixed dollar amount per client transaction regardless of the amount billed to clients or earn a stated percentage of the amount billed to its clients.

· The Company is responsible to the service provider for processing claims and managing the claims its adjustors process.

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

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

When claims are recorded gross, the payor’s payment to the Company is recorded as revenue and the Company’s payment to the service provider is recorded as cost of revenue in the statement of operations.

The Company does not have responsibility for collecting co-payments to be made or co-insurance claims to be received. Accordingly, co-payments or co-insurance claims collected are not recorded as either revenue or cost of revenues.

The Company records an allowance on all sales reported as gross to arrive at a net revenue amount. Co-payments, deductibles and co-insurance can all affect the collectability of each individual claim. While the Company is able to re-price a claim and accurately estimate what should be paid for the service, the presence of co-pays, deductibles and co-insurance can all affect the ultimate collectability of the claim. In addition, the Company’s collection experience with each payor varies.  The Company records an allowance against gross revenue to better estimate collectability. This allowance is applied specifically for each payor and is adjusted to reflect the Company’s collection experience each quarter.

During the three months ended March 31, 2008, two of the Company’s customers comprised a significant portion of the Company’s revenue.  The following is a summary of the approximate amounts of the Company’s revenue and accounts receivable contributed by each of those customers:

	Three Months Ended March 31, 2008							Three Months Ended March 31, 2007
	Accounts Receivable		Revenue		% of Total Revenue			Accounts Receivable		Revenue		% of Total Revenue
Customer A	$	1,833,000	$	7,067,000		61	%	$	584,000	$	1,859,000		82	%
Customer B		1,188,000		4,015,000		35	%		113,000		40,000		2	%
All Others		228,000		424,000		4	%		253,000		368,000		16	%
	$	3,249,000	$	11,506,000		100	%	$	950,000	$	2,267,000		100	%

6

Note 3.    Earnings Per Share

Earnings (loss) per common share - basic represents income or (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the periods presented. The diluted earnings (loss) per common share amounts were computed using the weighted average number of common shares outstanding during the period, adjusted for the effect of dilutive potential common shares equivalents, which consists of outstanding stock options and warrants.

The following table details the reconciliation of basic earnings (loss) per share to diluted earnings (loss) per share:

	Three Months Ended March 31,
	2008		2007
Numerator for basic and diluted earnings per share:
Net income (loss)	$	521,418	$	(611,066	)
Denominator:
Weighted-average basic common shares outstanding		14,880,266		14,486,749
Assumed conversion of dilutive securities:
Stock options		859,796		-
Warrants		1,515,139		-
Potentially dilutive common shares		2,374,935		-
Denominator for diluted earnings
per share - Adjusted weighted-average shares		17,255,201		14,486,749
Earnings (loss) per common share:
Basic	$	0.04	$	(0.04	)
Diluted	$	0.03	$	(0.04	)

Note 4.  Long-Term Debt

Long-term debt consists of the following:

	March 31, 2008			December 31, 2007
Notes payable to Capital One Bank, $135,000 due September 2009, due in monthly installments of approximately $4,143, including interest at 6.5%	$	70,787		$	81,939
Capital lease obligations		21,694			24,106
		92,481			106,045
Less current maturities		(56,697	)		(55,697	)
Long-term debt, less current maturities	$	35,784		$	50,348

7

Note 5.  Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board issued SFAS No. 141(R) “Business Combinations” (“SFAS No. 141(R)”)  SFAS No. 141(R) changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance.  SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited.   We are currently evaluating the impact of the pending adoption of SFAS No. 141(R) on our financial statements.

In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements”.  This Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.   SFAS No. 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets.  Under SFAS No. 157, fair value measurements are disclosed by level within that hierarchy.  Our adoption of this standard on January 1, 2008 did not have a material impact on our consolidated financial statements.

The Company was required to adopt SFAS No. 159 “The Fair Value Option for Financial Assets and Liabilities” (“SFAS No. 159”) for the fiscal year beginning January 1, 2008. SFAS No. 159 provides the option to report certain financial assets and liabilities at fair value, with the intent to mitigate volatility in financial reporting that can occur when related assets and liabilities are measured differently. The Company does not expect to voluntarily implement the optional fair value measurements portions of SFAS No. 159 for eligible items.  The adoption of SFAS No. 159 did not have a material effect on our consolidated financial position or results of operations as we elected not to adopt fair value accounting on applicable financial assets and liabilities.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company currently has no minority interests and therefore expects the adoption of SFAS No. 160 will not have a material impact on our consolidated financial statements.

8

SPECIAL CAUTIONARY NOTE REGARDING 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, 2007 which was filed with the SEC on March 31, 2008, 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

Management’s discussion and analysis provides a review of the Company’s operating results for the three months ended March 31, 2008 and its financial condition at March 31, 2008. The focus of this review is on the underlying business reasons for significant changes and trends affecting the revenues, net income or loss 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, 2007.

Overview

ACS provides ancillary healthcare services through its proprietary network of ancillary healthcare service providers for the benefit of its healthcare payor clients.  Clients route healthcare claims to ACS after service has been performed by providers who participate in the ACS network.  ACS re-prices those claims according to its contractual rate with the service provider.  In the process of re-pricing the claim, ACS is paid directly by the client or the insurer for the provider’s service.  ACS then pays the service provider according to its contractual rate.  ACS assumes the risk of generating positive margin, the difference between the payment it receives for the service and the amount it is obligated to pay the original service provider or member of its proprietary network.

The Company recognizes revenues for ancillary healthcare services when services by providers have been authorized and performed and collections from payors are reasonably assured.  Patient claims revenues are recognized by the Company as services are provided. Cost of revenues for ancillary healthcare services consist of amounts due to providers for providing patient services, client administration fees paid to client payors to reimburse them for the cost of implementing and managing claims submissions, 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 the Company receives payment from the payors. The Company recognizes actual or estimated liabilities to independent contract service providers as the related revenues are recognized. Patient claim costs of revenue consist of amounts due the service providers as well as our direct labor and overhead to administer the patient claims.

9

The Company markets its products to insurance companies, third-party administrators and preferred provider organizations.

Although we have never reported a profit for a full fiscal year, we realized our first quarterly profit during the second half of 2007, with net income of $188,211 and $318,742, respectively, for each of the three month periods ended September 30, 2007 and December 31, 2007.  Our improved performance during the aforementioned three-month periods was attributable to the addition of five new clients during our fiscal year 2007 and the expansion of services performed for existing clients. 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 preferred provider organizations and third-party administrators as its primary sales targets. The Company believes that this strategy should increase the volume of claims the Company can adjudicate as well as the volume of patients it can direct through its service provider network. No assurances can be given that the Company can expand its service provider network or payor relationships, nor that any such expansion will result in an improvement in the results of operations of the Company.

Recent Events

There have been changes to the composition of our senior management team since the beginning of fiscal year 2008.  

The Company did not renew the employment agreements of Maria L. Baker, formerly Vice President of Marketing, and Jennifer Boone, formerly Vice President of Network Development. Ms. Baker and Ms. Boone left the Company on January 31, 2008.

On February 27, 2008, M. Cornelia Outten joined the Company as Vice President of Network Development.

On March 10, 2008, Rost A. Ginevich joined the Company as Chief Information Officer.

On April 28, 2008, Matthew D. Thompson joined the Company as Controller and Principal Accounting Officer, replacing Steven M. Phillips, formerly Controller and Principal Accounts Officer, who resigned effective May 1, 2008.

Critical Accounting Policies

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 our Annual Report on Form 10-K for the year ended December 31, 2007. There have been no material changes to our critical accounting policies and estimates from the information provided in our Form 10-K for the year ended December 31, 2007.

10

Results of Operations

The three months ended March 31, 2008 compared to the three months ended March 31, 2007:

	Statement of Operations for the Quarters Ended
	March 31, 2008			March 31, 2007
Net revenue	$	11,505,675		$	2,266,569
Cost of revenue		9,801,122			2,101,643
Contribution margin		1,704,553			164,926
Selling, general and administrative expense		1,112,854			694,421
Depreciation and amortization		92,067			78,074
Operating income (loss)		499,632			(607,509	)
Financing (income) expense		(38,830	)		3,497
Net income (loss) before income taxes		538,462			(611,066	)
Income tax provision		17,044			—
Net income (loss)	$	521,418		$	(611,066	)

Revenue

The Company’s revenues are generated from ancillary healthcare service claims. Net revenues increased 407% to $11.5 million from $2.3 million for the quarter ended March 31, 2008 from the same quarter of the prior year.  Approximately $6.2 million of the increase was due to the addition of five new clients which began with us in 2007.  In addition, revenue from established clients increased approximately $3.0 million in the first quarter of 2008 compared to the first quarter in 2007.  That increase was the result of expansion of services for those existing clients.

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

Costs and Expenses

Cost of revenue is comprised of payments to our providers, administration 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 network development and claims administration organizations.  Cost of revenue increased from $2.1 million for the quarter ended March 31, 2007 to $9.8 million for the quarter ended March 31, 2008.  This represents an increase of 366% over the prior year’s comparable quarter.  Cost of revenue directly related to provider services in the quarter ended March 31, 2008 increased approximately $6.8 million, or 443%, compared to the prior year’s comparable quarter.  This increase reflects increased amounts paid to providers for their services as a result of our increased revenue, and fluctuation in the mix of services provided by the Company.  Administration fees increased approximately $615,000 to $702,000, compared to the prior year’s comparable period due to the addition of five new clients and expanded relationships with existing clients.  Fixed costs increased approximately $238,000, or 50%, compared with the prior year’s comparable period due to increased costs and expenses related to increased volume of claims processing.

11

Contribution margin (net revenue less cost of revenue) for the quarter ended March 31, 2008 was $1.7 million compared to $164,926 for the quarter ended March 31, 2007.  Contribution margin as a percentage of net revenue for the quarter was 14.8% compared to 7.3% for the comparable period in 2007.  The increase in contribution margin is attributable primarily to the increase in revenue, offset by a variety of factors, including more aggressive pricing by the Company, fluctuations in the mix of services provided by the Company, and increased administration fees payable to clients.  The Company anticipates that it will continue to experience margin expansion as the rate of client volume increases over time as a result of leveraging its fixed cost infrastructure.

Selling, general and administrative (“SG&A”) expense increased to $1.1 million for the quarter ended March 31, 2008 as compared to $694,421 for the quarter ended March 31, 2007.  As a percent of net revenues, SG&A expense was 9.7% for the first quarter 2008 compared to 30.6% for the same period in 2007.  These costs 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 is primarily related to increased professional expenses, specifically accounting, legal and consulting fees, accrued bonuses related to improved operating results compared to the prior year period, increased stock-based compensation expense and sales commissions commensurate with our increased sales.

Depreciation and amortization expense was $92,067 in the quarter ended March 31, 2008 compared to $78,074 in the quarter ended March 31, 2007. These expenses include $53,000 of amortization of intangibles, which consists of $21,000 in amortization of certain software development costs and $32,000 in amortization of the capitalized value of provider contracts that were acquired in the 2003 acquisition of American CareSource Corporation’s assets by Patient Infosystems (now CareGuide, Inc.) in 2003.

Financing (Income) Expense

Financing (income) expense is comprised of interest income, interest expense and other expenses.  For the three months ended March 31, 2008, net financing income was $38,830, as compared to net financing expense of $3,497 for the three months ended March 31, 2007.  The change from the prior year period was the result of amortization of debt issuance costs of $46,300, which was incurred during the first quarter of 2007.  Those costs were fully amortized as of December 31, 2007.

Income Tax Provision

For the three months ended March 31, 2008, an income tax provision of $17,044 was recorded, as compared to no income tax provision being recorded to the same period of 2007.  The provision recorded in the first quarter 2008 represents our estimated margin tax liability in the State of Texas.

Liquidity and Capital Resources

As of March 31, 2008, the Company had a working capital surplus of $4.5 million as compared to a working capital surplus of $3.6 million at December 31, 2007.  The increase in working capital is primarily the result of net cash provided by operating activities during the quarter ended March 31, 2008 compared to the same prior year period.

For the three months ended March 31, 2008, operating activities provided net cash of $1.6 million, primarily generated from net income of $521,418, non-cash share-based compensation expense of $157,525, and a net decrease in operating assets and liabilities of $778,923.  Net operating assets and liabilities declined mainly 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.

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Investing activities in the quarter ended March 31, 2008 were comprised of investments of $94,726 in property and equipment.

Financing activities in the quarter ended March 31, 2008 produced cash of $116,161, compared to cash used of $307,735 in the same period in 2007.  Cash generated in financing activities was primarily comprised of proceeds of $129,725 from the exercise of 399,007 stock options by the former Chief Executive Officer of the Company.

During the quarter ended March 31, 2008, the Company’s net income was $521,418 and cash flows from operating activities were $1.6 million.  Historically, we have relied on external sources of capital, including indebtedness or issuance of equity securities.  We believe our current cash balances 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.

Inflation

Inflation did not have a significant impact on the Company’s costs during the quarters ended March 31, 2008 and March 31, 2007, 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 material off-balance sheet arrangements at March 31, 2008 or March 31, 2007, or for the periods then ended.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2008.  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 for the recording, processing, summarizing and reporting of the information that the Company is required to disclose in the reports it files under the Exchange Act, within the time periods specified in the SEC’s rules and forms.

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) during the quarter ended March 31, 2008 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.

PART II.  OTHER INFORMATION

Item 1A.  Risk Factors.

In addition to the other information set forth in this report, the reader should carefully consider the discussion of various risks and uncertainties contained in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007.  We believe those risk factors are the most relevant to our business and could cause our results to differ materially from the expectations concerning our future opportunities, performance and results described in forward-looking statements made by us. Please note, however, that those are not the only risk factors facing 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 occurs or materializes.  In that event, the market price for our common stock could decline, and our stockholders may lose all or part of their investment.  During the three months ended March 31, 2008, 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, 2007.

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Item 6.  Exhibits.

See Exhibit Index following this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			American CareSource Holdings, Inc.
Date:	May 15, 2008	By:	/s/ David S. Boone
			David S. Boone President and Chief Executive Officer
Date:	May 15, 2008	By:	/s/ Steven J. Armond
			Steven J. Armond Chief Financial Officer

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Exhibit Index

Exhibit # Description of Exhibits

14.1 Code of Business Conduct and Ethics

20.1 Audit Committee Charter

20.2 Compensation Committee Charter

20.3 Governance and Nominations Committee Charter

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-14.1

Exhibit 14.1

AMERICAN CARESOURCE HOLDINGS, INC.

CODE OF BUSINESS CONDUCT AND ETHICS

(as adopted on April 17, 2008)

The reputation of American CareSource Holdings, Inc. (the “Company”) is a priceless asset that each employee is responsible for maintaining. The Company has adopted this Code of Business Conduct and Ethics (this “Code”) as a guide for the personal business ethics of all of its Directors, officers and employees to help in the recognition and management of ethical issues as well as to provide mechanisms to report unethical conduct and to foster a culture of honesty, integrity and accountability. Adherence to the standards contained in this Code will help to ensure that decisions reflect care for all of the Company’s stockholders. The Code is also applicable to and should be followed by the Company’s agents and representatives including consultants.

The fundamental principle that underlies the way the Company operates its business is good judgment. This Code is intended as an overview of the Company’s guiding legal and ethical parameters in judgment and not as a restatement of the Company’s policies and procedures. This Code cannot and is not intended to cover every applicable law or to provide answers to all questions that might arise; for that the Company ultimately must rely on each Director’s and employee’s good sense of what is right including a sense of when it is proper to seek guidance from others on the appropriate course of conduct. Because the Company’s business depends upon its reputation and on the integrity and principled business conduct of its Directors, officers and employees, in many instances this Code goes beyond the requirements of the law. The Code embodies such rules regarding individual and peer responsibilities as well as responsibilities to employees, customers, suppliers, stockholders, the public and other stakeholders and includes:

• prohibiting conflicts of interest (including protecting corporate opportunities);

• protecting the Company’s confidential and proprietary information;

• treating the Company’s employees, customers, suppliers and competitors fairly;

• protection and proper use of Company assets;

• compliance with laws, rules and regulations (including insider trading laws);

• encouraging the reporting of any unlawful or unethical behavior.

Since no code or policy can anticipate every situation that may arise, employees are encouraged to bring questions about particular circumstances that may implicate one or more of the provisions of this Code to the attention of the Chair of the Governance and Nominations Committee, who may consult with inside or outside legal counsel as appropriate.

This Code is a statement of goals and expectations for individual and business conduct and is not intended to and does not in any way constitute an employment contract or assurance of continued employment and does not create any rights in any employee, stockholder or other person or entity.

It is the obligation of each and every Director, officer and employee of the Company to become familiar with the goals and policies of the Company and to integrate them into every aspect of the business. The Company’s standard has been and will continue to be that of the highest ethical conduct. Each Director, officer and employee must comply with the letter and spirit of this Code. Those who violate the standards in this Code will be subject to disciplinary action.

A. Maintain Fiduciary Duties

Directors and officers must be loyal to the Company and must act at all times in the best interest of the Company and its stockholders and subordinate their own self-interest. Directors and officers should never use their position to make a personal profit. Directors and officers must perform their duties in good faith, with sound business judgment and with the care of a prudent person.

B. Conflicts of Interest

All Directors, officers and employees owe a duty of loyalty to the Company and must avoid any business, financial or other direct or indirect interests or relationships which conflict with or which divide his or her loyalty to the Company. A “conflict of interest” occurs when the private interest of a Director, officer or employee interferes in any way, or appears to interfere, with the interests of the Company as a whole. Conflicts of interest also arise when a Director, officer or employee, or a member of his or her family,receives improper personal benefits as a result of his or her position with the Company. Any activity which even appears to present such a conflict must be avoided or terminated unless, after disclosure to the Chair of the Governance and Nominations Committee and the Chairman of the Board, it is determined that the activity is not harmful to the Company or otherwise improper.

Conflicts of interest may not always be obvious. This Code does not attempt to describe all possible conflicts of interest which could develop and, as such, those suspecting a conflict of interest should bring it to the attention of a supervisor, manager or other appropriate personnel. Some of the more common conflicts are set out below.

• Interest in other businesses. Employees and members of their families must avoid direct or indirect financial relationships with other businesses that could cause divided loyalties. This does not mean that family members are precluded from being employed by one of the Company’s customers, competitors or suppliers but that employees must avoid conducting Company business with members of their families or others with whom they have a significant personal relationship unless they have prior authorization from the Company.

• Relationship of Company with third-parties. Directors, officers and employees may not engage in any conduct or activities that are inconsistent with the Company’s best interests or that disrupt or impair the Company’s relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship. Ownership of or an interest in a competitor or in a business with which the Company has or is contemplating a relationship may be a conflict of interest.

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• Investments in public companies. Passive investments of not more than one percent of the total outstanding shares of companies listed on a national securities exchange are permitted without the Company’s approval provided that the investment is not so large financially either in absolute dollars or percentage of the individual’s total investment portfolio that it creates the appearance of a conflict of interest. Any such investment must not involve the use of confidential “inside” or proprietary information. Investments in diversified publicly traded mutual funds are not deemed subject to these conflict of interest guidelines.

• Compensation from non-Company sources. Directors, officers and employees may not accept compensation, in any form, for services performed for the Company from any source other than the Company.

• Gifts or entertainment. Directors, officers, employees and members of their families may not offer, give or receive gifts or entertainment from persons or entities who deal with the Company in those cases where any such gift or entertainment is being made in order to influence the actions of a Director as member of the Board or the actions of an officer or employee in his or her position with the Company, or where acceptance of the gifts or entertainment would create the appearance of a conflict of interest. Social amenities customarily associated with legitimate business relationships are permissible including lunches, dinners and gifts of modest value.

• Inside information. Directors, officers and employees may not use inside information and must be equally careful not to make such information available to others who might profit from it. The law and the Company forbid employees from using or disclosing material, non-public information that they acquire during the course of their employment with the Company. Employees are directed to review the Company’s Insider Trading Policy.

C. Corporate Opportunities

A more specific form of conflict of interest is usurpation of a corporate opportunity. Directors, officers and employees owe a duty to the Company to advance the Company’s legitimate interests when the opportunity to do so arises. Directors, officers and employees are prohibited from: (a) taking for themselves personally opportunities that are discovered through the use of corporate property, information or their positions with the Company; (b) using the Company’s property, information, or position for personal gain; or (c) competing with the Company, directly or indirectly, for business opportunities, provided, however,that if the Company’s disinterested Directors determine that the Company will not pursue an opportunity that relates to the Company’s business, a Director, executive officer or employee may do so.

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D. Confidentiality

Directors, officers and employees must maintain the confidentiality of information entrusted to them by the Company or its customers, and any other confidential information about the Company that comes to them, from whatever source, in their capacity as Director, officer or employee, except when disclosure is authorized or required by laws or regulations. Confidential information includes all non-public information including the nature of the Company’s business operations, information regarding inventions, trade secrets, etc. that might be of use to competitors, or harmful to the Company or its customers, if disclosed. Such information should be protected and not disclosed to outsiders and every practicable step to preserve the Company’s confidential information should be taken. This should include care in conducting confidential conversations in public areas or on telephones with the potential for eavesdropping, discarding confidential documents where they can be retrieved by others, leaving confidential documents in unattended areas and engaging in other unsecured means of communication.

E. Protection and Proper Use of Company Assets

All Company assets should be used for legitimate business purposes. Directors, officers and employees must protect the Company’s assets and ensure their efficient use. Theft, loss, misuse, carelessness and waste of assets have a direct impact on the Company’s profitability. Directors, officers and employees must not use Company time, employees, supplies, equipment, tools, buildings or other assets for personal benefit without prior authorization from the Chair of the Governance and Nominations Committee or as part of a compensation or expense reimbursement program available to all Directors or executive officers.

The obligations of employees to protect the Company’s assets includes its proprietary information which includes intellectual property such as trade secrets, patents, trademarks, copyrights, as well as business, marketing and service plans, databases, records, salary information and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy and could also be illegal and result in civil or criminal penalties.

F. Competition and Fair Dealing

The Company seeks to outperform its competition fairly and honestly. The Company seeks competitive advantages through superior performance, never through unethical or illegal business practices. Directors, officers and employees shall deal fairly and oversee fair dealing by employees and officers with the Company’s Directors, officers, employees, customers, suppliers and competitors. None should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair dealing practices.

G. Compliance with Laws, Rules and Regulations

Obeying the law, both in letter and in spirit, is the foundation on which this Company’s ethical standards are built. Directors, officers and employees shall comply, and oversee compliance by others, with all laws, rules and regulations applicable to the Company. Although not all employees are expected to know the details of these laws, it is important to know enough to determine when to seek advice from supervisors, managers or other appropriate personnel.

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H. Dealings with the Press and Other Outside Entities

Since corporations are subject to increasing public scrutiny, it is important that any public statement that might be attributed to the Company be carefully considered and that personal views be kept separate from Company views. For these reasons, employees (other than designated employees) must refrain from communication with the news media or securities analysts or investors and not speak publicly for the Company unless specifically authorized by senior management. The name and contact information of any party seeking information or making other inquiries should be obtained and the Chief Executive Officer should be notified immediately.

I. Use of the Internet and Communications Systems

Access to the Internet and to all Company electronic communication systems, such as electronic mail and voice mail, are made available to employees solely for the purpose of carrying out legitimate business of the Company and incidental use. These systems are the property of the Company and all communications are subject to review by appropriate and authorized Company personnel at any time. Users have no expectation of personal privacy in their use of Company communications systems or in information sent to or from or stored in Company communications systems. Access to the Internet via modem puts both a user’s computer and the entire Company-net at risk and, as such, users must use approved mechanisms, tools and procedures for these activities. Use of Company computer resources or communications systems for any of the following is prohibited: abusive or otherwise objectionable language, information which is illegal or obscene, messages which defame or libel others and use which interferes with the work of the employee or others, including sexual or other harassment violative of applicable laws and Company policies.

J. Document Retention and Management

Accurate business records must be maintained, retained and stored in a consistent and reliable manner in order to comply with the requirements of various laws as well as to provide for effective operations. Officers and employees are expected to become familiar with the Company’s policies regarding records management.

K. Special Ethics Obligations for Employees with Financial Reporting Obligations

As a public company, it is of critical importance that the Company’s filings with the Securities and Exchange Commission be accurate and timely. Depending upon an employee’s position with the Company, employees may be called upon to provide information to assure that the Company’s public reports are complete, fair and understandable. The Company expects that all of its personnel will take this responsibility very seriously and will provide prompt and accurate answers to inquiries related to the Company’s public disclosure requirements.

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The Finance Department bears a special responsibility for promoting integrity throughout the organization with responsibilities to stakeholders both inside and outside of the Company. The Chief Executive Officer and Finance Department personnel have a special role both to adhere to these principles themselves and also to ensure that a culture exists throughout the Company as a whole that ensures the fair and timely reporting of the Company’s financial results and condition.

Due to these special roles, the Chief Executive Officer and each of the members of the Finance Department are bound by the following Financial Code of Ethics and by accepting the Code of Business Conduct and Ethics, each agrees that he or she will:

• act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships;

• provide information that is accurate, complete, objective, relevant, timely and understandable to ensure full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, government agencies and in other public communications;

• comply with rules and regulations of federal, state and local governments and other appropriate private and public regulatory agencies;

• act in good faith, responsibly, with due care, competence and diligence, without misrepresenting or omitting material facts or allowing one’s independent judgment to be subordinated;

• respect the confidentiality of information acquired in the course of one’s work except when authorized or otherwise legally obligated to disclose;

• share knowledge and maintain skills important and relevant to stakeholders’ needs;

• proactively promote and be an example of ethical behavior as a responsible partner among subordinates and peers;

• achieve responsible use of and control over all assets and resources employed or entrusted;

• not unduly or fraudulently influence, coerce, manipulate or mislead any authorized audit or interfere with any auditor engaged in the performance of an internal or independent audit of the Company’s financial statements or accounting books and records;

• promptly report to the Chair of the Audit Committee any conduct that the individual believes to be a violation of law or business ethics or of any provision of this Code including any transaction or relationship that reasonably could be expected to give rise to such a conflict.

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Violations of this Financial Officer Code of Ethics, including failures to report potential violations by others, will be viewed as a severe disciplinary matter that may result in personnel action, including termination of employment. Anyone believing that a violation of the Financial Officer Code of Ethics has occurred should contact the Chair of the Audit Committee via email or regular mail to the Company’s principal offices.

L. Amendments to and/or Waivers of the Code of Business Conduct and Ethics

Any amendment to this Code may be made only by the Board and shall be disclosed promptly to the stockholders of the Company. Any waiver of this Code as to the actions of Directors and officers may be made only by the Board and shall be disclosed promptly to the stockholders of the Company.

M. Encouraging the Reporting of any Illegal or Unethical Behavior

The Company encourages employees to talk to supervisors, managers and other appropriate personnel when in doubt about the best course of action in a particular situation and encourages Directors, officers and employees to report any suspected violations of laws, rules or regulations or of this Code promptly to appropriate personnel or directly to the Chair of the Governance and Nominations Committee. The Company will not permit retaliation for reports made in good faith.

Violations will be investigated by the Governance and Nominations Committee or by the Board or by a person or persons designated by the Board and appropriate action will be taken in the event of any violations of this Code.

A failure by any Director, officer or employee to comply with the laws or regulations governing the Company’s business, this Code or any other Company policy or requirement may result in disciplinary action, and, if warranted, legal proceedings.

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EX-20.1

Exhibit 20.1

AMERICAN CARESOURCE HOLDINGS, INC.

(THE “COMPANY”)

CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

(As Approved By the Board of Directors at Its May 16, 2005 Meeting, As Revised by the Unanimous Written Consent of the Board of Directors on April 17, 2008)

I. Purpose.

The purpose of the Audit Committee (the “Committee”) is to assist the Board of Directors’ (the “Board”) oversight of the Company’s accounting and financial reporting processes and the audits of the Company’s financial statements.

II.           Structure and Membership.

A.  Number.  The Board may appoint at least two but no more than five of its members to serve on the Committee.

B.  Chair.  The Chair of the Audit Committee shall be the Audit Committee financial expert who shall be designated by a majority of the full Board of Directors.

C.  Independence and Financial Literacy.  Each member of the Committee shall satisfy the independence, experience and financial literacy requirements of the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the rules of the American Stock Exchange.  In addition, each member of the Committee shall be free of any relationship that, in the opinion of the Board, would interfere with his or her individual exercise of independent judgment.  No individual may serve on the Committee if he or she participated in the preparation of the Company’s financial statements at any time within three years prior to his or her proposed appointment to the Committee.  At least one member of the Committee shall (i) qualify as a “financial expert” as required by the rules of the SEC and (ii) have employment experience in finance or accounting, professional certification in accounting or comparable experience or background which results in the individual’s “financial sophistication” as required by the rules of the American Stock Exchange.

D.  Term.  The Committee shall serve at the pleasure of the Board, which may from time to time, appoint members in substitution for members previously appointed to, and fill vacancies (however caused) in, the Committee.  A Committee member will serve at the pleasure of the Board until the earlier of the day of the first Board meeting following the annual meeting of stockholders of the Company or the removal or resignation of the Committee member.  Notwithstanding the foregoing, a Committee member may be removed at any time prior to the expiration of such term by the Board, in its sole discretion, with or without cause and for any reason whatsoever.

III.           Duties, Responsibilities and Authority.

The Committee will have the following duties, responsibilities and authority.  Except as specifically stated below or prohibited by law, the actions of the Committee are made for, and on behalf of, the Board and as such, do not require subsequent ratification or approval by the Board.

A.  General.  The Committee shall discharge its responsibilities, and shall assess the information provided by the Company’s management and the independent auditor, in accordance with its business judgment.  Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements and for the appropriateness of the accounting principles and reporting policies that are used by the Company.  The independent auditor is responsible for auditing the Company’s financial statements and for reviewing the Company’s unaudited interim financial statements.  The authority and responsibilities set forth in this Charter do not reflect or create any duty or obligation of the Committee to plan or conduct any audit, to determine or certify that the Company’s financial statements are complete, accurate, fairly presented, or in accordance with generally accepted accounting principles or applicable law, or to guarantee the independent auditor’s report.

B.  Independent Auditor.

1.  Selection. The Committee shall be solely and directly responsible for appointing, evaluating, retaining and, when necessary, terminating the engagement of the independent auditor.

2.  Independence.  The Committee shall take, or recommend that the full Board of Directors take, appropriate action to oversee the independence of the independent auditor.  In connection with this responsibility, the Committee shall obtain and review a formal written statement from the independent auditor describing all relationships between the independent auditor and the Company, including the disclosures required by Independence Standards Board Standard No. 1.  The Committee shall actively engage in dialogue with the independent auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the auditor.

3.  Compensation.  The Committee shall have sole and direct responsibility for setting the compensation of the independent auditor.  The Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of the independent auditor established by the Committee.

4.  Preapproval of Services. The Committee shall preapprove all audit services to be provided to the Company, whether provided by the principal auditor or other firms, and all other services (review, attest and non-audit) to be provided to the Company by the independent auditor; provided, however, that de minimis non-audit services may instead be approved in accordance with applicable SEC rules.  The Committee may, in its discretion, adopt policies relating to the approval of services to be provided by the Company’s independent auditor.

5. Oversight.  The independent auditor shall report directly to the Committee, and the Committee shall have sole and direct responsibility for overseeing the work of the independent auditor, including resolution of disagreements between Company management and the independent auditor regarding financial reporting.  In connection with its oversight role, the Committee shall, from time to time as appropriate, receive and consider the reports required to be made by the independent auditor regarding:

(i) critical accounting policies and practices;

(ii) alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with Company management, including ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and

(iii) other material written communications between the independent auditor and Company management.

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C.  Audited Financial Statements.

1.  Review and Discussion.  The Committee shall review and discuss with the Company’s management and independent auditor the Company’s audited financial statements, including the matters required to be discussed by Statement on Auditing Standards No. 61.

2.  Recommendation to Board Regarding Financial Statements.  The Committee shall consider whether it will recommend to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K.

D.  Review of Other Financial Disclosures.

1.  Independent Auditor Review of Interim Financial Statements.  The Committee shall direct the independent auditor to use its best efforts to perform all reviews of interim financial information prior to disclosure by the Company of such information and to discuss promptly with the Committee and the Chief Financial Officer any matters identified in connection with the auditor’s review of interim financial information which are required to be discussed by applicable auditing standards.  The Committee shall direct management to advise the Committee in the event that the Company proposes to disclose interim financial information prior to completion of the independent auditor’s review of interim financial information.

2.  Earnings Release and Other Financial Information.  The Committee shall discuss generally the types of information to be disclosed in the Company’s earnings press releases, as well as in financial information and earnings guidance provided to analysts, rating agencies and others.

3.  Quarterly Financial Statements.  The Committee shall review with the Company’s management and independent auditor the Company’s quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

E.  Other Responsibilities.

1.  Internal Controls.  The Committee shall discuss with the independent auditors the adequacy and effectiveness of the accounting and financial controls of the Company, and consider any recommendations for improvement of such internal controls and procedures.

2.  Procedures for Complaints.  The Committee shall establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

3.  Related-Party Transactions.  The Committee shall review all “related party transactions” (defined as transactions required to be disclosed pursuant to Item 404 of Regulation S-K) on an ongoing basis, and all such transactions must be approved by the Committee.

4.  Committee Report.  The Committee shall prepare an annual committee report for inclusion where necessary in the proxy statement of the Company relating to its annual meeting of security holders.

5.  Additional Powers.  The Committee shall have such other duties as may be delegated from time to time by the Board of Directors.

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IV. Meetings, Procedures and Administration.

A.  Meetings.  The Committee shall meet as often as it deems necessary in order to perform its responsibilities, but at least quarterly.  The Committee shall periodically meet separately with the independent auditor and Company management.  The Committee shall keep such records of its meetings as it shall deem appropriate.

B.  Quorum and Voting.  A majority of the Committee shall constitute a quorum for the transaction of business.  The action of a majority of those present at a meeting, at which a quorum is present, shall be the act of the Committee.  If, however, the Committee has only two members, attendance of each member is required for the transaction of business and all actions of the Committee must be the unanimous act of its members.  The Committee may also act by unanimous consent in lieu of a meeting.

C.  Subcommittees.  The Committee may form and delegate authority to one or more subcommittees (including a subcommittee consisting of a single member), as it deems appropriate from time to time under the circumstances.  Any decision of a subcommittee to preapprove audit, review, attest or non-audit services shall be presented to the full Committee at its next scheduled meeting.

D.  Reports to Board.  The Committee shall report regularly to the Board of Directors.

E.  Charter.  The Committee shall review and reassess the adequacy of this Charter on at least an annual basis and recommend any proposed changes to the Board of Directors for approval.

F.  Independent Advisors.  The Committee is authorized, without further action by the Board of Directors, to engage such independent legal, accounting and other advisors as it deems necessary or appropriate to carry out its responsibilities.  Such independent advisors may be the regular advisors to the Company.  The Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of such advisors as established by the Committee.

G.  Investigations.  The Committee shall have the authority to conduct or authorize investigations into any matters within the scope of its responsibilities as it shall deem appropriate, including the authority to request any officer, employee or advisor of the Company to meet with the Committee or any advisors engaged by the Committee.

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EX-20.2

Exhibit 20.2

AMERICAN CARESOURCE HOLDINGS, INC

COMPENSATION COMMITTEE CHARTER

(as adopted on April 17, 2008)

Purpose

The Compensation Committee is appointed by the Board of Directors to review and approve the Corporation’s compensation and benefit programs.

Committee Membership

The Committee shall be composed of such number of directors as the Board of Directors shall from time to time determine consistent with applicable laws and regulations.  All members of the Committee shall satisfy the definition of “independent” under the Securities Exchange Act of 1934 and under the standards established by listing standards of the appropriate exchange where the company either lists its securities or intends to list its securities.  The Committee members will be appointed by the Board and may be removed by the Board in its discretion.   Unless the Board elects a Chair of the Compensation Committee, the Committee shall elect a Chair by a majority vote.  The Committee shall have the authority to delegate any of its responsibilities to one or more subcommittees as the Committee may from time to time deem appropriate.  Each such subcommittee shall consist of one or more members of the Committee.  The Committee shall also have the authority to delegate any of its administrative or other responsibilities to executive officers or other employees of the Corporation where such delegation is consistent with applicable law and exchange listing standards. 

Meetings

The Committee shall meet as often as its members deem necessary to perform the Committee’s responsibilities.  The committee may meet either formally in person or via conference call.  The committee will meet in person at least once per year.

Committee Authority and Responsibilities

The Committee shall:

· Evaluate the performance of the Chief Executive Officer in light of the Corporation’s goals and objectives and determine the Chief Executive Officer’s compensation based on this evaluation and such other factors as the Committee shall deem appropriate;

· Approve all salary, bonus, and long-term incentive awards for executive officers;

· Approve the employment contracts for executive officers and any amendments to such employment contracts;

· Approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers;

· Review and recommend equity-based compensation plans to the full Board and approve all grants and awards thereunder;

· Review and approve changes to the Corporation’s equity-based compensation plans other than those changes that require stockholder approval under the plans, the appropriate listing exchange and/or any applicable law;

· Review and recommend to the full Board changes to the Corporation’s equity-based compensation plans that require stockholder approval under the plans, the requirements of the appropriate listing exchange and/or any applicable law;

· Review and approve changes in the Corporation’s retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided;

· Administer the Corporation’s equity-based compensation plans; and

· Approve the annual Committee report on executive compensation for inclusion in the Corporation’s proxy statement.

The Committee will have the authority, to the extent it deems necessary or appropriate, to retain compensation consultants and other professional advisors to assist it in carrying out its responsibilities.  The Corporation will provide for appropriate funding, as determined by the Committee, for payment of the fees and expenses of any advisors retained by the Committee.

The Committee will make regular reports to the Board and will propose any necessary action to the Board.  Such reports shall provide information with respect to any delegation of authority by the full Committee to a subcommittee, to management, or to third parties.

The Committee will review and reassess the adequacy of this charter annually and recommend any proposed changes to the Board for approval. 

The Committee will annually evaluate the Committee’s own performance and provide a report on such evaluation to the Board.

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EX-20.3

Exhibit 20.3

AMERICAN CARESOURCE HOLDINGS, INC.

GOVERNANCE AND NOMINATIONS COMMITTEE CHARTER

(as adopted on April 17, 2008)

A. Purpose

The purpose of the Governance and Nominations Committee is to:

· recommend to the Board the persons to be nominated for election as directors at any meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board;

· develop and recommend to the Board a set of corporate governance principles applicable to the Company; and

· oversee the evaluation of the Board and management.

B. Structure and Membership

1. Number.  The Governance and Nominations Committee shall consist of such number of directors as the Board shall from time to time determine consistent with applicable laws and regulations.

2. Independence.  Except as otherwise permitted by the applicable rules of the American Stock Exchange, or such other exchange where the Company either lists its securities or intends to list its securities, each member of the Governance and Nominations Committee shall be an “independent director” as defined by such rules.

3. Chair.  Unless the Board elects a Chair of the Governance and Nominations Committee, the Committee shall elect a Chair by majority vote.

4. Compensation.  The compensation of Governance and Nominations Committee members shall be as determined by the Board.

5. Selection and Removal.  Members of the Governance and Nominations Committee shall be appointed by the Board, upon the recommendation of the Committee. The Board may remove members of the Governance and Nominations Committee from such Committee, with or without cause.

C. Authority and Responsibilities

General.

           The Governance and Nominations Committee shall discharge its responsibilities, and shall assess the information provided by the Company’s management, in accordance with its business judgment.

Board and Committee Membership.

1. Selection of Director Nominees.  Except where the Company is legally required by contract, bylaw or otherwise to provide third parties with the right to nominate directors, the Governance and Nominations Committee shall be responsible for recommending to the Board nominees for election as directors at any meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board. In making such recommendations, the Committee shall consider candidates proposed by stockholders. The Committee shall review and evaluate information available to it regarding candidates proposed by stockholders and shall apply the same criteria, and shall follow substantially the same process in considering them, as it does in considering other candidates.

2. Criteria for Selecting Directors.  The Board’s criteria for selecting directors are as set forth in the Company’s Corporate Governance Guidelines. The Governance and Nominations Committee shall use such criteria and the principles set forth in such Guidelines to guide its director selection process. The Committee shall be responsible for reviewing with the Board, on an annual basis, the requisite skills and criteria for new Board members as well as the composition of the Board as a whole. The Committee may adopt, and periodically review and revise as it deems appropriate, procedures regarding director candidates proposed by stockholders.

3. Search Firms.  The Governance and Nominations Committee shall have the sole authority to retain and terminate any search firm to be used to identify director nominees, including sole authority to approve the search firm’s fees and other retention terms. The Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of any search firm engaged by the Committee.

4. Selection of Committee Members.  The Governance and Nominations Committee shall be responsible for recommending to the Board on an annual basis the directors to be appointed to each committee of the Board.

Corporate Governance.

5. Corporate Governance Guidelines.  The Governance and Nominations Committee shall develop and recommend to the Board a set of Corporate Governance Guidelines applicable to the Company. The Committee shall, from time to time as it deems appropriate, review and reassess the adequacy of such Corporate Governance Guidelines and recommend any proposed changes to the Board for approval.

Evaluation of the Board; Succession Planning

6. Evaluation of the Board.  The Governance and Nominations Committee shall be responsible for overseeing an annual self-evaluation of the Board to determine whether it and its committees are functioning effectively. The Committee shall determine the nature of the evaluation, supervise the conduct of the evaluation and prepare an assessment of the Board’s performance, to be discussed with the Board.

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7. Succession of Senior Executives.  The Governance and Nominations Committee shall present an annual report to the Board on succession planning, which shall include transitional Board leadership in the event of an unplanned vacancy.

8. Additional Powers.  The Governance and Nominations Committee shall have such other duties as may be delegated from time to time by the Board of Directors.

D. Procedures and Administration

1. Meetings.  The Governance and Nominations Committee shall meet as often as it deems necessary in order to perform its responsibilities. The Committee shall keep such records of its meetings as it shall deem appropriate.

2. Subcommittees.  The Governance and Nominations Committee may form and delegate authority to one or more subcommittees (including a subcommittee consisting of a single member), as it deems appropriate from time to time under the circumstances.

3. Reports to the Board.  The Governance and Nominations Committee shall report regularly to the Board.

4. Charter.  The Governance and Nominations Committee shall, from time to time as it deems appropriate, review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval.

5. Independent Advisors.  The Governance and Nominations Committee shall have the authority, without further action by the Board of Directors, to engage such independent legal and other advisors as it deems necessary or appropriate to carry out its responsibilities. Such independent advisors may be the regular advisors to the Company. The Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of such advisors as established by the Committee.

6. Investigations.  The Governance and Nominations Committee shall have the authority to conduct or authorize investigations into any matters within the scope of its responsibilities as it shall deem appropriate, including the authority to request any officer, employee or advisor of the Company to meet with the Committee or any advisors engaged by the Committee.

7. Annual Self-Evaluation.  At least annually, the Governance and Nominations Committee shall evaluate its own performance and report on such evaluation to the full Board.

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Rule 13a-14(a)/15d-14(a)

Under the Securities Exchange Act of 1934, As Amended

I, David S. Boone, certify that:

1. I have reviewed this Interim Report on Form 10-Q of American CareSource Holdings, Inc. for the period ended March 31, 2008;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which  such statements

were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability  of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: May 15, 2008	By:	/s/ David S. Boone
		Name: David S. Boone
		Title: Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Rule 13a-14(a)/15d-14(a)

Under the Securities Exchange Act of 1934, As Amended

I, Steven J. Armond, certify that:

1. I have reviewed this Interim Report on Form 10-Q of American CareSource Holdings, Inc. for the period ended March 31, 2008;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under  which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: May 15, 2008	By:	/s/ Steven J. Armond
		Name: Steven J. Armond
		Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of American CareSource Holdings, Inc. (the “Company”), certifies that:

(1) the Interim Report on Form 10-Q of the Company for the three month period ended March 31, 2008, as filed with the Securities and Exchange Commission  (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 15, 2008	By:	/s/ David S. Boone
		David S. Boone
		Chief Executive Officer

Dated: May 15, 2008	By:	/s/ Steven J. Armond
		Steven J. Armond
		Chief Financial Officer

This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.