10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2013

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number 1-33094

AMERICAN CARESOURCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		20-0428568
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification no.)
	5429 LYNDON B. JOHNSON FREEWAY
	SUITE 850
	DALLAS, TEXAS
	75240
	(Address of principal executive offices)
	(Zip code)

(972) 308-6830

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes xNo o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “accelerated filer”,” large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Non-accelerated filer o
Accelerated filer  o (do not check if a smaller reporting company)	Smaller Reporting Company x

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)  Yes 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:  The number of shares of common stock of registrant outstanding on August 8, 2013 was 5,711,854.

TABLE OF CONTENTS

AMERICAN CARESOURCE HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2013

Part I		Financial Information	1
	Item 1.	Financial Statements	1
		Consolidated Statements of Operations (unaudited)	1
		Consolidated Balance Sheets (unaudited)	2
		Consolidated Statements of Stockholders’ Equity (unaudited)	3
		Consolidated Statements of Cash Flows (unaudited)	4
		Notes to Unaudited Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
	Item 4.	Controls and Procedures	21
Part II		Other Information	22
	Item 1A.	Risk Factors	22
	Item 5.	Other Information	22
	Item 6.	Exhibits	23
		Signatures	24

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

AMERICAN CARESOURCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(amounts in thousands, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Net revenues	$	6,443		$	8,215		$	14,048		$	17,616
Cost of revenues:
Provider payments	4,912			6,078			10,728			12,873
Administrative fees	258			364			588			828
Claims administration and provider development	678			725			1,366			1,577
Total cost of revenues	5,848			7,167			12,682			15,278
Contribution margin	595			1,048			1,366			2,338
Selling, general and administrative expenses	1,888			1,639			3,592			3,261
Depreciation and amortization	212			221			423			440
Total operating expenses	2,100			1,860			4,015			3,701
Loss before income taxes	(1,505		)	(812		)	(2,649		)	(1,363		)
Income tax provision	4			17			11			24
Net loss	$	(1,509	)	$	(829	)	$	(2,660	)	$	(1,387	)
Loss per basic and diluted common share	$	(0.26	)	$	(0.15	)	$	(0.47	)	$	(0.24	)
Basic and diluted weighted average common shares outstanding	5,712			5,710			5,711			5,703

See accompanying notes.

1

AMERICAN CARESOURCE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands except per share amounts)

	June 30, 2013 (Unaudited)			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	7,838		$	10,705
Accounts receivable, net	2,615			2,432
Prepaid expenses and other current assets	394			290
Deferred income taxes	6			6
Total current assets	10,853			13,433
Property and equipment, net	1,421			1,593
Other assets:
Deferred income taxes	221			222
Other non-current assets	16			16
Intangible assets, net	704			768
	$	13,215		$	16,032
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to service providers	$	2,513		$	3,100
Accounts payable and accrued liabilities	1,615			1,343
Total current liabilities	4,128			4,443
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000 shares authorized, none issued	—			—
Common stock, $0.01 par value; 40,000 shares authorized; 5,711 and 5,706 shares issued and outstanding in 2013 and 2012, respectively.	57			57
Additional paid-in capital	23,003			22,845
Accumulated deficit	(13,973		)	(11,313		)
Total stockholders' equity	9,087			11,589
	$	13,215		$	16,032

See accompanying notes.

2

AMERICAN CARESOURCE HOLDINGS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)

(amounts in thousands)

				Additional					Total
	Common Stock			Paid-in		Accumulated			Stockholders'
	Shares	Amount		Capital		Deficit			Equity
Balance at December 31, 2012	5,706	$	57	$	22,845	$	(11,313	)	$	11,589
Net loss	—	—		—		(2,660		)	(2,660		)
Stock-based compensation expense	—	—		153		—			153
Issuance of common stock as equity incentive awards, net of tax withholdings	5	—		5		—			5
Balance at June 30, 2013	5,711	$	57	$	23,003	$	(13,973	)	$	9,087

See accompanying notes.

3

AMERICAN CARESOURCE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)

	Six months ended June 30,
	2013			2012
Cash flows from operating activities:
Net loss	$	(2,660	)	$	(1,387	)
Adjustments to reconcile net loss to net cash used in operations:
Non-cash stock-based compensation expense	153			252
Depreciation and amortization	423			440
Amortization of long-term client agreement	—			125
Deferred income taxes	1			3
Changes in operating assets and liabilities:
Accounts receivable	(183		)	979
Prepaid expenses and other assets	(104		)	(69		)
Accounts payable and accrued liabilities	272			(181		)
Due to service providers	(587		)	(629		)
Net cash used in operating activities	(2,685		)	(467		)
Cash flows from investing activities:
Investment in software development costs	(176		)	(138		)
Additions to property and equipment	(11		)	(97		)
Net cash used in investing activities	(187		)	(235		)
Cash flows from financing activities:
Proceeds from exercise of equity incentives	5			—
Payment of income tax withholdings on net exercise of equity incentives	—			(8		)
Net cash provided by (used in) financing activities	5			(8		)
Net decrease in cash and cash equivalents	(2,867		)	(710		)
Cash and cash equivalents at beginning of period	10,705			11,315
Cash and cash equivalents at end of period	$	7,838		$	10,605
Supplemental cash flow information:
Cash paid for taxes	$	63		$	45
Supplemental non-cash operating and financing activity:
Accrued bonus paid with equity incentives	$	—		$	23

See accompanying notes.

4

AMERICAN CARESOURCE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(tables in thousands, except per share data)

1. Description of Business and Basis of Presentation

American CareSource Holdings, Inc. (“ACS,” “Company,” the “Registrant,” “we,” “us,” or “our”) works to help its clients control healthcare costs by offering cost containment strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers.  The Company markets its services to a number of healthcare companies including third party administrators (“TPAs”), insurance companies, large self-funded organizations, various employer groups and preferred provider organizations ("PPOs").  The Company offers payors this solution by:

• lowering its payors’ ancillary care costs through its network of high quality, cost effective providers that the Company has under contract at more favorable terms than they could generally obtain on their own;

• providing payors with a comprehensive network of ancillary healthcare service providers that is tailored to each payor’s specific needs and is available to each payor’s members for covered services;

• providing payors with claims management, reporting and processing and payment services;

• performing network/needs analysis to assess the benefits to payors of adding additional/different service providers to the payor-specific provider networks; and

• credentialing network service providers for inclusion in the payor-specific provider networks.

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 June 30, 2013 and December 31, 2012 and operating results are for the three and six months ended June 30, 2013 and 2012, and include all normal and recurring adjustments we consider necessary for the fair, summarized presentation of our financial position and operating results. Certain prior year amounts have been reclassified within the consolidated statement of operations to conform to the current year presentation.  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, 2012, filed with the SEC on March 4, 2013.

The Company uses the “management approach” for reporting information about segments in annual and interim financial statements.  The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance.  Reportable segments are based on products and services, geography, legal structure, management structure and any other manner in which management disaggregates a company.  Based on the “management approach” model, the Company has determined that its business is comprised of a single operating segment.

Our interim results of operations are not necessarily indicative of results of operations that will be realized for the full fiscal year.

2. Revenue Recognition

The Company recognizes revenue on the services that it provides, which includes (i) providing payor clients with a comprehensive network of ancillary healthcare providers, (ii) providing claims management, reporting, processing and payment services, (iii) providing network/need analysis to assess the benefits to payor clients of adding additional/different service providers to the client-specific provider networks and (iv) providing credentialing of network service providers for inclusion in the client payor-specific provider networks.  Revenue is recognized when services are delivered, which occurs after processed claims are billed to the client payors and collections are reasonably assured.  The Company estimates revenues and costs of revenues using average historical collection rates and average historical margins earned on claims.  Periodically, revenues are adjusted to reflect actual cash collections so that revenues recognized accurately reflect cash collected.

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The Company determines whether it is acting as a principal or agent in the fulfillment of the services rendered.  After careful evaluation of the key gross and net revenue recognition indicators, the Company acknowledges that while the determination of gross versus net reporting is highly judgmental in nature, the Company has concluded that its circumstances are most consistent with those key indicators that support gross revenue reporting.

Following are the key indicators that support the Company’s conclusion that it acts as a principal when settling claims for service providers through its contracted service provider network:

• The Company is the primary obligor in the arrangement.  The Company has assessed its role as primary obligor as a strong indicator of gross reporting.  The Company believes that it is the primary obligor in its transactions because it is responsible for providing the services desired by its client payors.  The Company has distinct, separately negotiated contractual relationships with its client payors and with the ancillary healthcare providers in its networks.  The Company does not negotiate “on behalf of” its client payors and does not hold itself out as the agent of the client payors when negotiating the terms of the Company’s ancillary healthcare service provider agreements.  The Company’s agreements contractually prohibit client payors and service providers to enter into direct contractual relationships with one another.  The client payors have no control over the terms of the Company’s agreements with the service providers.  In executing transactions, the Company assumes key performance-related risks.  The client payors hold the Company responsible for fulfillment, as the provider, of all of the services the client payors are entitled to under their contracts; client payors do not look to the service providers for fulfillment.  In addition, the Company bears the pricing/margin risk as the principal in the transactions.  Because the contracts with the client payors and service providers are separately negotiated, the Company has complete discretion in negotiating both the prices it charges its client payors and the financial terms of its agreements with the service providers.  Since the Company’s profit is the spread between the amounts received from the client payors and the amount paid to the service providers, it bears significant pricing/margin risk.  There is no guaranteed mark-up payable to the Company on the amount the Company has contracted.  Thus, the Company bears the risk that amounts paid to the service provider will be greater than the amounts received from the client payors, resulting in a loss or negative claim.

• The Company has latitude in establishing pricing.  As stated above, the Company has complete latitude in negotiating the price to be paid to the Company by each client payor and the price to be paid to each contracted service provider.  This type of pricing latitude indicates that the Company has the risks and rewards normally attributed to a principal in the transactions.

• The Company changes the product or performs part of the services.  The Company provides the benefits associated with the relationships it builds with the client payors and the service providers.  While the parties could deal with each other directly, the client payors would not have the benefit of the Company’s experience and expertise in assembling a comprehensive network of service providers, in claims management, reporting and processing and payment services, in performing network/needs analysis to assess the benefits to client payors of adding additional/different service providers to the client payor-specific provider networks, and in credentialing network service providers.

• The Company has complete discretion in supplier selection.  One of the key factors considered by client payors who engage the Company is to have the Company undertake the responsibility for identifying, qualifying, contracting with and managing the relationships with the ancillary healthcare service providers.  As part of the contractual arrangement between the Company and its client payors, the payors identify their obligations to their respective covered persons and then work with the Company to determine the types of ancillary healthcare services required in order for the payors to meet their obligations.  The Company may select the providers and contract with them to provide services at its discretion.

• The Company is involved in the determination of product or service specifications.  The Company works with its client payors to determine the types of ancillary healthcare services required in order for the payors to meet their obligations to their respective covered persons.  In some respects, the Company is customizing the product through its efforts and ability to assemble a comprehensive network of providers for its payors that is tailored to each payor’s specific needs.  In addition, as part of its claims processing and payment services, the Company works with the client payors, on the one hand, and the providers, on the other, to set claims review, management and payment specifications.

• The supplier (and not the Company) has credit risk.  The Company believes it has some level of credit risk, but that risk is mitigated because the Company does not remit payment to providers unless and until it has received payment from the relevant client payors following the Company’s processing of a claim.

• The amount that the Company earns is not fixed.  The Company does not earn a fixed amount per transaction nor does it realize a per-person per-month charge for its services.

6

The Company has evaluated the other indicators of gross and net revenue recognition, including whether or not the Company has general inventory risk.  The Company does not have any general inventory risk, as its business is not related to the manufacture, purchase or delivery of goods and it does not purchase in advance any of the services to be provided by the ancillary healthcare service providers.  While the absence of this risk would be one indicator in support of net revenue reporting, as described in detail above, the Company has carefully evaluated all of the key gross and net revenue recognition indicators and has concluded that its circumstances are most consistent with those key indicators that support gross revenue reporting.

If the Company were to report its revenues net of provider payments rather than on a gross reporting basis, for the three and six months ended June 30, 2013, its net revenues would have been approximately $1.5 million and $3.3 million. For the three and six months ended June 30, 2012, its net revenues would have been approximately $2.1 million and $4.7 million.

The Company records a provision for refunds based on an estimate of historical refund amounts. Refunds are paid to payors for overpayments on claims, claims paid in error, and claims paid for non-covered services. In some instances, we will recoup payments made to the ancillary service provider if the claim has been fully resolved. The evaluation is performed periodically and is based on historical data. We present revenue net of the provision for refunds on the consolidated statement of operations.

During the three and six months ended June 30, 2013 and 2012, three of the Company’s clients comprised a significant portion of the Company’s revenues.  The following is a summary of the approximate amounts of the Company’s revenue and accounts receivable contributed by each of those clients as of the dates and for the periods presented (amounts in thousands):

				Periods ended June 30, 2013													Periods ended June 30, 2012
	As of June 30, 2013			Three Months					Six Months					As of June 30, 2012			Three Months					Six Months
	Accounts Receivable			Net Revenue			% of Total Revenue		Net Revenue			% of Total Revenue		Accounts Receivable			Net Revenue			% of Total Revenue		Net Revenue			% of Total Revenue
Material Client Relationship	$	443		$	1,438		22	%	$	3,795		27	%	$	1,366		$	3,050		37	%	$	5,953		34	%
HealthMarkets, Inc.	179			881			14		1,537			11		161			633			8		1,283			7
MultiPlan, Inc. (formerly Viant Holdings, Inc.)	348			375			6		679			5		154			682			8		1,706			10
All Others	1,906			3,815			59		8,144			58		1,964			3,911			48		8,784			50
Allowance for Uncollectable Receivables/Provision for refunds	(261		)	(66		)	(1	)	(107		)	(1	)	(307		)	(61		)	(1	)	(110		)	(1	)
	$	2,615		$	6,443		100	%	$	14,048		100	%	$	3,338		$	8,215		100	%	17,616			100	%

7

3. Reverse Stock Split

On August 31, 2012 the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended (the “Amendment”), to effect a 1-for-3 reverse stock split (“reverse split”) of its common stock, par value $0.01 per share (the “Common Stock”), effective September 4, 2012 (the “Effective Day”). Because the Amendment did not result in a reduction in the number of authorized shares of Common Stock, its effect was to increase the number of shares of Common Stock available for issuance relative to the number of shares issued and outstanding. In addition, the par value per share of Common Stock remained $0.01, thus Common Stock and Additional Paid-In Capital were adjusted $114,000 to reflect the reverse split on the consolidated balance sheet.

At the Company's annual meeting of stockholders, held on June 11, 2012, the stockholders voted to amend the Company's certificate of incorporation for the purpose of effecting a reverse stock split and authorized its Board of Directors to determine, in its sole discretion, whether to effect the amendment, the timing of the amendment, and the specific ratio of the reverse stock split, provided that such ratio is 1-for-2, 1-for-2.5, 1-for-3, 1-for-3.5 or 1-for-4.

On the Effective Day, every three shares of the Company's Common Stock issued and outstanding immediately prior to the Effective Day were automatically combined into one share of Common Stock. Stockholders that were left with a fraction of a share as a result of the reverse split received cash in lieu of the fractional share in an amount based on the closing sale price of the Common Stock on the business day immediately preceding the Effective Day as reported on the The Nasdaq Capital Market. The amount paid to stockholders was less than $1,000. In addition, any options, warrants and restricted stock units outstanding as of the Effective Day were adjusted accordingly. As a result of the reverse split, the Company had approximately 5,711,000 shares of common stock issued and outstanding as of June 30, 2013.

Shares of common stock and common stock equivalents, along with earnings per share and other per share amounts, have been retroactively restated to reflect the 1-for-3 reverse stock split that occurred on September 4, 2012 for all periods presented.

4. Earnings (Loss) Per Share

For purposes of this calculation, outstanding stock options, stock warrants, and unvested restricted stock units are considered common stock equivalents using the treasury stock method, and are the only such equivalents outstanding.  For the three and six months ended June 30, 2013, options to purchase approximately 700,000 shares of common stock, warrants to purchase 44,400 shares of common stock and approximately 49,000 unvested restricted stock units were excluded from the calculation as their impact would be anti-dilutive.

5. Software Development Costs

The Company capitalizes costs associated with internally developed software, developed for internal use only, during the application development stage. Application development stage costs generally include costs associated with internal-use software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality also are capitalized, whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. Capitalized costs include external direct costs of materials and services utilized in developing or obtaining internal-use software and payroll and payroll-related expenses for employees who are directly associated with and devote time to the internal-use software projects. Capitalization of such costs begins when the preliminary project stage is complete and ceases no later than the point at which the project is substantially complete and ready for its intended purpose. Capitalized costs are amortized using the straight-line method over the useful life of the software, which is typically five years.

During the three and six months ended June 30, 2013, the Company capitalized approximately $22,000 and $176,000, respectively. During the three and six months ended June 30, 2012, the Company capitalized approximately $61,000 and $138,000, respectively.

8

6. Warrants

The Company entered into an agreement as of February 25, 2011 with an employee, whereby the Company agreed to issue warrants to purchase 83,333 shares of common stock with an exercise price of $5.01. The warrants have a term of 5 years and vest in increments over a time period of 2 years depending on the achievement of defined, agreed upon revenue targets generated by new clients. The agreement also obligates the Company to issue warrants to purchase up to an additional 166,666 shares of common stock (issued in 83,333 increments) pursuant to the achievement of additional defined agreed upon revenue targets. During the twelve months ended December 31, 2011, we did not recognize compensation costs associated with these warrants due to the low probability of vesting.

On February 1, 2012, certain terms of the agreement were modified, including the revenue targets and the total number of shares under the initial and future warrants. The warrants initially granted now cover 44,444 shares to be purchased at an exercise price of $1.50, 22,222 of which vested immediately, and the remaining 22,222 shares vesting upon the achievement of certain revenue targets. The number of shares underlying warrants to be issued under the agreement in the future was reduced to 88,889 shares (issued in 44,444 increments) based upon the achievement of additional defined agreed upon revenue targets. During the first quarter of 2012, we recognized compensation costs of approximately $21,000 associated with the initial vesting of 22,222 shares.

We did not recognize compensation costs during the three and six months ended June 30, 2013. Additional costs associated with the warrants will be recognized based on the probability that the revenue targets will be reached. That probability will be re-evaluated and updated based on current market conditions, on a quarterly basis, and compensation costs will be adjusted accordingly.

Shares of common stock and exercise price have been restated to reflect the 1-for-3 reverse stock split that occurred on September 4, 2012.

7. Severance Charges

At the Company's annual meeting of shareholders in May, the Company's shareholders reduced the Board of Directors from nine to five directors. Richard W. Turner, Ph.D., was appointed Chairman of the Board to lead the reconstituted Board consisting of four existing directors and one new director. Additionally, the Board appointed Matthew D. Thompson Acting Chief Operating Officer of the Company, replacing William J. Simpson, Jr. in that role. In addition to his duties as Acting Chief Operating Officer, Mr. Thompson continues to serve as the Company's Chief Financial Officer. The Board furthermore appointed Laura L. Little to the position of Vice President of Finance and Principal Accounting Officer. Ms. Little has been with the Company since December 2009.

On June 3, 2013, the Board of Directors accepted the resignation of Rost A. Ginevich from his position with the Company as Chief Information Officer and appointed James A. Honn to this position. In connection with his resignation, Mr. Ginevich entered into a severance agreement and general release with the Company, effective June 14, 2013. Under the agreement, Mr. Ginevich will receive, in addition to any base compensation owed and earned but unused vacation pay, severance payments over a three month period that in the aggregate equal three months' worth of his annual base compensation. The Company recorded a severance charge of approximately $46,000 in connection with the severance agreement.

Mr. Simpson continued to serve as President of the Company until July 2, 2013 when he resigned, effective July 1, 2013. In connection with his resignation, Mr. Simpson entered into a severance agreement and general release with the Company, effective July 1, 2013. Under the agreement, Mr. Simpson will receive, in addition to any base compensation owed and earned but unused vacation pay, severance payments over a six month period that in the aggregate equal six months' worth of his annual base compensation, or $147,500, and has the right to continue participation in the Company-sponsored group health insurance plan in accordance with applicable laws, rules and regulations. The total severance charge recorded by the Company during the three months ended June 30, 2013 related to Mr. Simpson's resignation was approximately $170,000.

The severance charges related to Mr. Simpson and Mr. Ginevich are included in selling, general and administrative expenses on the condensed consolidated statement of operations.

9

FORWARD-LOOKING STATEMENTS

This document contains 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.  These statements can be identified by forward-looking words such as “may,” “will,” “expect,” “intend”, “anticipate,” “believe,” “estimate” and “continue” or similar words and discuss the Company’s plans, objectives and expectations for future operations, including its services, contain projections of the Company’s future operating results or financial condition, and discuss its expectations with respect to the growth in healthcare costs in the United States, the demand for ancillary benefits management services, and the Company’s competitive advantages, or contain other “forward-looking” information.

Such forward-looking statements are based on current information, assumptions and belief of management, and are not guarantees of future performance.  Substantial risks and uncertainties could cause actual results to differ materially from those indicated by such forward-looking statements, including, but not limited to, the Company’s inability to attract or maintain providers or clients or achieve its financial results, changes in national healthcare policy, federal or state regulation, and/or rates of reimbursement including without limitation the impact of the Patient Protection and Affordable Care Act, Health Care and Educational Affordability Reconciliation Act and medical loss ratio regulations, general economic conditions (including economic downturns and increases in unemployment), lower than anticipated demand for ancillary services, pricing, market acceptance/preference, the Company’s ability to integrate with its clients, the Company's ability to maintain a network of ancillary service providers that is adequate to generate significant claims volume, consolidation in the industry that may affect the Company’s key clients, changes in the business decisions by significant clients, increased competition from major carriers, implementation and performance difficulties, and other risk factors detailed from time to time in the Company’s periodic filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2012 and the quarterly reports on Form 10-Q filed for each of the subsequent quarters.

Do not place undue reliance on these forward-looking statements, which speak only as of the date this document was prepared.  All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.  Except to the extent required by applicable securities laws and regulations, the Company undertakes no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

10

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Management’s discussion and analysis provides a review of the Company’s operating results for the three and six months ended June 30, 2013 and its financial condition at June 30, 2013.  The focus of this review is on the underlying business reasons for significant changes and trends affecting the net revenues, operating results 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, 2012.

OVERVIEW

American CareSource Holdings, Inc. (“ACS,” “Company,” the “Registrant,” “we,” “us,” or “our”) works to help its clients control healthcare costs by offering cost containment strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers.  The Company markets its services to a number of healthcare companies including third party administrators (“TPAs”), insurance companies, large self-funded organizations, various employer groups and preferred provider organizations ("PPOs").  The Company offers payors this solution by:

• lowering its payors’ ancillary care costs through its network of high quality, cost effective providers that the Company has under contract at more favorable terms than they could generally obtain on their own;

• providing payors with a comprehensive network of ancillary healthcare service providers that is tailored to each payor’s specific needs and is available to each payor’s members for covered services;

• providing payors with claims management, reporting and processing and payment services;

• performing network/needs analysis to assess the benefits to payors of adding additional/different service providers to the payor-specific provider networks; and

• credentialing network service providers for inclusion in the payor-specific provider networks.

The Company has assembled a network of ancillary healthcare service providers that supplement or support the care provided by hospitals and physicians and includes 31 service categories. We have a dedicated provider development function, whose primary responsibility is to contract with providers and strategically grow our network of ancillary service providers.

We secure contracts with ancillary service providers by offering them the following:

• inclusion in a nationwide network that provides exposure to our client payors and their aggregate member lives;

• an array of administrative and back-office services, such as collections and appeals;

• increased claims volume through various "soft steerage" mechanisms; and

• advocacy in the claims appeals process.

Payors route healthcare claims to us after service has been performed by participant providers in our network.  We process those claims and charge the payor according to its contractual rate for the services according to our contract with the payor.  In processing the claim, we are paid directly by the payor or the insurer for the service.  We then pay the provider of service according to its independently-negotiated contractual rate.  We assume the risk of generating positive margin, the difference between the payment we receive for the service and the amount we are obligated to pay the provider of service.

The Company recognizes revenues for ancillary healthcare services when services by providers have been authorized and performed, the claim has been billed to the payor and collections from payors are reasonably assured.  Cost of revenues for ancillary healthcare services consist of amounts due to providers for providing ancillary healthcare services, client administration fees paid to our client payors to reimburse them for routing the claims to us for processing, and the Company’s related direct labor and overhead of processing billings, collections and payments. The Company is not liable for costs incurred by independent contract service providers until payment is received by it from the payors. The Company recognizes actual or estimated liabilities to independent contract service providers as the related revenues are recognized.

11

The Company is seeking growth in the number of client payors and service provider relationships it secures by focusing on providing in-network services for its payors and aggressively pursuing additional TPAs, self-insured employers and other direct payors as its primary sales targets. The Company believes this strategy should increase the volume of claims the Company can process in addition to the expansion in the number of lives that are eligible to receive ancillary healthcare benefits.  No assurances can be given that the Company can expand its service provider or payor relationships, nor that any such expansion will result in an improvement in the results of operations of the Company.

In addition, under the medical loss ratio ("MLR") regulations included in the Affordable Care Act, it is possible that a portion of the fees our existing and prospective payors are contractually required to pay us and that do not qualify as 'incurred claims' may not be included as expenditures for activities that improve healthcare quality. Such a determination may make it more difficult for us to retain existing clients and/or add new clients,because our clients' or prospective clients' MLR may otherwise not meet the specified targets. This may reduce our net revenues and profit margins. See "Recent and pending healthcare reforms could materially adversely affect our revenues, financial position and our results of operations" under "Item 1.A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012.

OVERVIEW

We have experienced significant revenue declines over the past four years, primarily related to the declines in the business of our two largest clients, both of which are PPOs. Due to a variety of factors affecting the healthcare industry including but not limited to healthcare legislation, the economy, industry consolidation, change in strategic direction and for other reasons, revenue from each of our two largest clients continued to decline resulting in year-over-year quarterly declines in our revenue from those accounts. Because of the significance of the revenue concentration from these two clients (from approximately 98% in 2008 to 32% through June 30, 2013), the declines of the business of these clients has had a significant negative impact on our operating results and cash position over the past four years, despite our new business development efforts. We expect revenue from one of these clients to discontinue during 2013 and, although we have entered into a new agreement with the other, the agreement does not provide for any minimum level of volume, and we cannot be certain of any level of continued revenue from such relationship. During the period from 2008 to 2013 (excluding the addition of any entities affiliated with either of our two largest clients), we added 38 new clients, which contributed $20.4 million of gross revenue in 2012. Those clients generated $9.4 million of gross revenue in each of the first halves of 2013 and 2012.

The Company believes that it has a unique business model and offers a solid value proposition to our clients, as well as our providers, by delivering superior discounts through our network of contracted ancillary healthcare service providers. In addition, we believe that our network has application in areas outside of commercial group health market, where it has traditionally been utilized. In 2013, as mentioned, we anticipate adding new client relationships, but do not believe that the revenue from those accounts will offset the losses from our two significant client relationships and declines from our other legacy accounts. We will continue to opportunistically investigate strategic initiatives that will grow our revenue base, while controlling non-variable costs consistent with our existing revenue streams. Nevertheless, until we can replace a greater amount of the revenue than we have lost from our two largest clients, we will continue to experience operating losses and we will continue to reduce our existing cash reserves for operating and investing activities.

12

ANALYSIS OF RESULTS OF OPERATIONS

The following table sets forth a comparison of our results of operations for the following periods presented (certain prior year amounts have been reclassified for comparability purposes):

	Second Quarter											Six Months
							Change											Change
	2013			2012			$			%		2013			2012			$			%
Net revenue	$	6,443		$	8,215		$	(1,772	)	(21.6	)%	$	14,048		$	17,616		$	(3,568	)	(20.3	)%
Variable costs:
Provider payments	4,912			6,078			1,166			19.2		10,728			12,873			2,145			16.7
Administrative fees	258			364			106			29.1		588			828			240			29.0
Total variable costs	5,170			6,442			1,272			19.7		11,316			13,701			2,385			17.4
Percent of net revenue	80.2		%	78.4		%						80.6		%	77.8		%
Variable flowthrough	1,273			1,773			(500		)	(28.2	)	2,732			3,915			(1,183		)	(30.2	)
Variable margin	19.8		%	21.6		%						19.4		%	22.2		%
Non-variable costs:
Claims administration	544			564			20			3.5		1,078			1,168			90			7.7
Provider development	134			161			27			16.8		288			409			121			29.6
Sales & marketing	553			552			(1		)	(0.2	)	1,126			1,147			21			1.8
Finance & administration	1,335			1,087			(248		)	(22.8	)	2,466			2,114			(352		)	(16.7	)
Total non-variable costs	2,566			2,364			(202		)	(8.5	)	4,958			4,838			(120		)	(2.5	)
Percent of net revenue	39.8		%	28.8		%						35.3		%	27.5		%
Loss before depreciation, amortization, and income taxes	(1,293		)	(591		)	(702		)	(118.8	)	(2,226		)	(923		)	(1,303		)	(141.2	)
Percent of net revenue	(20.1		)%	(7.2		)%						(15.8		)%	(5.2		)%
Depreciation and amortization	212			221			9			4.1		423			440			17			3.9
Income tax provision	4			17			13			76.5		11			24			13			54.2
Net loss	$	(1,509	)	$	(829	)	$	(680	)	(82.0	)%	$	(2,660	)	$	(1,387	)	$	(1,273	)	(91.8	)%

The following discussion compares the historical results of operations on a basis consistent with GAAP for the three and six months ended June 30, 2013 and 2012.

Net Revenues

The Company’s net revenues are generated from ancillary healthcare service claims.  Revenue is recognized when we bill our client payors for services performed and collection is reasonably assured. The Company estimates revenues using average historical collection rates.  When estimating collectibility, we assess the impact of items such as non-covered benefits, denied claims, deductibles and co-payments. Periodically, revenues and related estimates are adjusted to reflect actual cash collections so that revenues recognized accurately reflect cash collected. There are no assurances that actual cash collections will meet or exceed estimated cash collections.

13

There can be variations in revenue from period-to-period due to the demand for various ancillary service specialties by our clients' members. The variations can impact revenue, revenue per claim, collectibility and margins after payments made to the ancillary service providers. While we focus on attaining the most advantageous contractual rates possible with our clients and ancillary service providers, we have minimal control over the mix of ancillary service specialties billed and the ancillary service providers that are utilized.

The following table set forth a comparison of our net revenues and billed claims for the following periods presented ended June 30, (in thousands):

	Net Revenue											Billed Claims Volume
	Second Quarter						Change					Second Quarter		Change
(in thousands)	2013			2012			$			%		2013	2012	Claims		%
Legacy clients:
Material Client Relationship	$	1,438		$	3,050		$	(1,612	)	(53	)%	5	8	(3	)	(38	)%
HealthMarkets, Inc.	881			633			248			39		7	9	(2	)	(22	)
MultiPlan, Inc. (formerly Viant, Inc.)	375			682			(307		)	(45	)	1	4	(3	)	(75	)
Other legacy clients	1,110			1,188			(78		)	(7	)	5	5	—		—
Sub-total	3,804			5,553			(1,749		)	(31	)	18	26	(8	)	(31	)
Clients implemented in 2010 - 2013	2,705			2,723			(18		)	(1	)	14	16	(2	)	(13	)
Total gross revenue	$	6,509		$	8,276		$	(1,767	)	(21	)%	32	42	(10	)	(24	)%
Provision for refunds	(66		)	(61		)	(5		)	8		—	—	—		nm
Net Revenue	$	6,443		$	8,215		$	(1,772	)	(22	)%	32	42	(10	)	(24	)%

	Net Revenue											Billed Claims Volume
	Six Months						Change					Six Months		Change
(in thousands)	2013			2012			$			%		2013	2012	Claims		%
Legacy clients:
Material Client Relationship	$	3,795		$	5,953		$	(2,158	)	(36	)%	11	20	(9	)	(45	)%
HealthMarkets, Inc.	1,537			1,283			254			20		14	18	(4	)	(22	)
MultiPlan, Inc. (formerly Viant, Inc.)	679			1,706			(1,027		)	(60	)	2	9	(7	)	(78	)
Other legacy clients	2,400			2,238			162			7		9	9	—		—
Sub-total	8,411			11,180			(2,769		)	(25	)	36	56	(20	)	(36	)
Clients implemented in 2010 - 2013	5,744			6,546			(802		)	(12	)	27	30	(3	)	(10	)
Total gross revenue	$	14,155		$	17,726		$	(3,571	)	(20	)%	63	86	(23	)	(27	)%
Provision for refunds	(107		)	(110		)	3			(3	)	—	—	—		nm
Net Revenue	$	14,048		$	17,616		$	(3,568	)	(20	)%	63	86	(23	)	(27	)%

In addition, the following table sets forth a comparison of processed and billed claims for the following periods presented ended June 30, (in thousands):

	Second Quarter						Six Months
			Change						Change
(in thousands)	2013	2012	Claims		%		2013	2012	Claims		%
Processed	39	53	(14	)	(26	)%	78	108	(30	)	(28	)%
Billed	32	42	(10	)	(24	)	63	86	(23	)	(27	)

14

Following is a discussion of the changes in net revenue generated by significant client/client groupings for the three and six months ended June 30, 2013 as compared to the same period in 2012:

Material Client Relationship

The decline in billed claims volume from our relationship with one of our material clients for the three and six months ended June 30, 2013 is due to, among others, the following factors:

• The client continues to suffer attrition in its client base, as it continues to re-focus its business strategy resulting in declines in claims volume.

• The client lost several significant employer groups which accounted for approximately $802,000 and $1.1 million of revenue to us during the three and six months ended June 30, 2012, respectively. Only $3,000 of revenue from these employer groups was generated during the six months ended June 30, 2013.

• Laboratory service claims generated from the client declined 65% and 76% for the three and six months ended June 30, 2013. The declines in claim count resulted in estimated declines in revenue of approximately $62,000 and $176,000 for the three and six months ended June 30, 2013.

• Under our new agreement executed on December 31, 2012, the client has more flexibility to utilize ancillary care providers with which it is directly contracted or that are accessible through other provider networks.

The performance of the client account during the remainder of 2013 will be affected by attrition in its own client base, its internal strategic initiatives and the actual utilization of our network of ancillary healthcare providers over other networks the client has access to. Despite the new agreement the Company and this client entered into on December 31, 2012, we cannot be certain of any level of continued volume from this client.

HealthMarkets, Inc.

HealthMarkets, Inc is a holding company headquartered in North Richland Hills, Texas. HealthMarkets' subsidiary insurance companies, The Chesapeake Life Insurance Company, Mid-West National Life Insurance Company of Tennessee, and The MEGA Life and Health Insurance Company, offer supplemental insurance and selected life insurance products through independent agents. We secured an agreement with this client in 2009 and have historically presented revenue and billed claims volume within the other legacy clients' group. The 39% and 20% increase in net revenue from this client during the three and six months ended June 30, 2013, respectively, is the result of claims billed for specialties which generate higher revenue per claim relative to other specialties. Additionally, collections in excess of our initial estimate contributed to this increase as well. A change in patient and specialty mix, as well as benefit plan design changes, is not a factor controlled by us.

The 22% decline in this client's billed claims volume during both the three and six months ended June 30, 2013 was due to a decline in claims billed for laboratory services, which generate lower revenue per claim relative to other specialties.

MultiPlan, Inc. (formerly Viant Holdings, Inc.)

The decline in net revenue and billed claims volume from our relationship with MultiPlan, Inc. ("MultiPlan") is due to the acquisition by MultiPlan of Viant Holdings, Inc. As part of that transition, MultiPlan moved its payors and employer groups to its existing networks. While we did not receive a formal termination notice from MultiPlan, the transition was completed as of December 31, 2012. The expectation is that all claims volume and related revenue from the client will discontinue in 2013. Thus, we have no assurances of future collections; therefore we will recognize revenue only to the extent of cash collections on outstanding claims.

Other Legacy Clients

Our other legacy clients consist of 11 various relationships with PPOs, insurance companies and direct payors that were contracted between 2005 and 2009. Most of the accounts have matured and there are only limited opportunities for growth. Through our account management group, we maintain contact with these clients to determine if opportunities exist to serve the accounts and generate incremental revenue.

15

For the three months ended June 30, 2013, revenue for this client group decreased 7%, while billed claims volume remained steady. The revenue from two of our clients within this group was negatively impacted as a result of a shift in the mix of ancillary specialties billed during the second quarter of 2013 as compared to the same prior year quarter. These two clients experienced a substantial decrease in billings, and related revenue, for specialties, such as infusion services and durable medical equipment, when compared to the same prior year period. This decrease was partially offset by a third client account, which experienced an increase in overall billings as a result of the client adding new employer groups that previously were not using our network of ancillary service providers.

During the six months ended June 30, 2013, revenue for this client group increased 7% primarily as a result of the client, discussed above, which added new employer groups in 2013 as compared to 2012. Billed claims volume for this client group remained relatively unchanged during the six months of 2013 compared to the same period in 2012. While there are limited opportunities for growth in these accounts, revenue is impacted most significantly by the mix of specialties utilized and those specialties' associated collection rates, and the clients' ability to maintain its own book of business.

Clients implemented in 2010 - 2013

The 13 clients implemented in 2010 consist of 12 TPAs and one PPO, and are the results of the initial stages of our focus on TPAs and direct payors. The accounts generated approximately $5.9, $11.9, and $12.4 million of annual revenue in 2010, 2011 and 2012, respectively. Through our account management group, we work with these clients to determine ways in which we can bring value to the relationships and to add our network to incremental employer groups in order to maximize our revenue opportunity.

The 13% and 10% decline in billed claims volume for this client group for the three and six months ended June 30, 2013, respectively, is attributable to a decline in volume from our only PPO client within this group due to a shift in specialty billed mix, (which impacted several of our other clients within this group) and the utilization of a major carrier network. While our account management group is working closely with the PPO client to ensure they are receiving the maximum benefit from our network of ancillary healthcare service providers, a change in patient and specialty mix, as well as benefit plan design changes, is not a factor controlled by us.

During the three months ended June 30, 2013, revenue for this client group, as a whole, was relatively flat as compared to the same prior year period. Revenue for this client group decreased 12%, or $802,000, during the six months ended June 30, 2013, as compared to the same prior year period. The decrease in revenue for this client group is due to a shift in specialty billed mix, mentioned above, which impacted several of the clients we implemented in 2010. When compared to the first half of 2012, we experienced significantly less billings and related revenue for specialties such as dialysis, durable medical equipment, surgery center and lab.

We continue our strategy to pursue TPAs and direct payors. The following table details the change in revenue generated from different client types (includes all Company clients) for the periods ended June 30,:

	Second Quarter
	2013					2012					Change
($ in thousands)	Count	Revenue		% of revenue		Count	Revenue		% of revenue		$			%
TPAs *	27	$	3,610	55.5	%	25	$	3,730	45.1	%	$	(120	)	(3	)%
PPOs	11	1,960		30.1		11	3,939		47.6		(1,979		)	(50	)
Direct/Insurance Companies	2	892		13.7		3	594		7.2		298			50
Other	3	47		0.7		1	13		0.1		34			nm
Gross revenue, before provision for refunds		$	6,509	100.0	%		$	8,276	100.0	%	$	(1,767	)	(21	)%

* This group includes a TPA controlled by our most significant client. The TPA generated revenue of approximately $183,000 and $348,000 in both 2013 and 2012.

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	Six Months
	2013					2012					Change
($ in thousands)	Count	Revenue		% of revenue		Count	Revenue		% of revenue		$			%
TPAs *	27	$	7,804	55.1	%	25	$	8,427	47.5	%	$	(623	)	(7	)%
PPOs	11	4,671		33.0		11	7,988		45.1		(3,317		)	(42	)
Direct/Insurance Companies	2	1,560		11.0		3	1,298		7.3		262			20
Other	3	120		0.9		1	13		0.1		107			nm
Gross revenue, before provision for refunds		$	14,155	100.0	%		$	17,726	100.0	%	$	(3,571	)	(20	)%

* This group includes a TPA controlled by our most significant client. The TPA generated revenue of approximately $384,000 and $700,000 in both 2013 and 2012.

Variable Costs

Variable costs are comprised of payments to our providers and administrative fees paid to our clients for converting claims to electronic data interchange and routing them to both the Company for processing and to their payors for payment.  Payments to providers are the most significant variable cost and it consists of our payments for ancillary care services in accordance with contracts negotiated separately with providers for specific ancillary services.

The following table sets forth a comparison of the variable cost components of our cost of revenues, for the periods presented ended June 30,:

	Second Quarter
									Change
($ in thousands)	2013		% of net revenue		2012		% of net revenue		$			%
Provider payments	$	4,912	76.2	%	$	6,078	74.0	%	$	(1,166	)	(19	)%
Administrative fees	258		4.0		364		4.4		(106		)	(29	)
Total variable costs	$	5,170	80.2	%	$	6,442	78.4	%	$	(1,272	)	(20	)%

	Six Months
									Change
($ in thousands)	2013		% of net revenue		2012		% of net revenue		$			%
Provider payments	$	10,728	76.4	%	$	12,873	73.1	%	$	(2,145	)	(17	)%
Administrative fees	588		4.2		828		4.7		(240		)	(29	)
Total variable costs	$	11,316	80.6	%	$	13,701	77.8	%	$	(2,385	)	(17	)%

Provider payments

The 19% and 17% decrease in provider payments for the second quarter and first half of 2013 is consistent with the decline in revenue as discussed above. The increase in provider payments as a percentage of net revenues compared to the same prior year period is primarily due to the combination of the mix of clients that utilized our network of ancillary service providers and the mix of ancillary service categories utilized. The mix of clients and service categories shifted from those that historically contribute higher margins relative to other clients and categories.

Administrative fees

Administrative fees paid to clients as a percent of net revenues were 4.0% and 4.4% for the three months ended June 30, 2013 and 2012. Additionally, administrative fees paid to clients during the six months ended June 30, 2013 decreased to 4.2% compared to 4.7% in the same prior year period. The decrease is due to a change in mix from clients with higher administrative fees to clients with lower administrative fees.

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Non-variable Costs

Non-variable costs are those that are not contingent on claims activity and are fixed in nature, but can be adjusted. They are comprised of such expenses as salaries and benefits, professional fees, consulting costs, non-cash equity compensation costs and travel and entertainment expenses. A significant driver of these costs are headcount, as payroll, commissions and related benefits (including non-cash equity compensation) accounted for approximately 57% of our non-variable cost structure during the six months ended June 30, 2013. Our headcount of full-time employees ("FTE's") was 50 and 55 at June 30, 2013 and 2012, respectively.

In the fourth quarter of 2012, two key departments were created: strategic development (classified as sales and marketing) and performance management (classified as finance and administration). Both groups were staffed solely from existing headcount. The prior year amounts have been reclassified within the consolidated statement of operations to conform to the current year presentation. In addition, the Company continually monitors and adjusts the alignment of the organizational structure in an effort to optimize performance and maximize output.

Following is a discussion of the changes in non-variable costs and related drivers:

Claims administration

Our claims administration function consists of our operations and information technology groups.  Our operations group is responsible for all aspects of claims management and processing, including billing, quality assurance and collection efforts. In addition, our operations group is responsible for credentialing contracted ancillary service providers.  Our information technology group is responsible for maintaining and enhancing the technological capabilities and applications of the claims management process.  

Consistent with the decline in claims volume, the costs related to the claims administration function decreased 4% during the three months ended June 30, 2013 primarily due to a decrease in outsourced claims processing costs of $18,000.

During the six months ended June 30, 2013 the costs related to the claims administration function decreased 8% partially due to a decrease in outsourced claims processing costs of $37,000. Additionally, a decrease in headcount by two FTE's, through natural attrition, within the information technology group contributed to the reduction in costs year-over-year.

Provider Development

Our provider development function is responsible for developing our network of ancillary healthcare service providers, which includes contracting with providers to be included in the network and maintaining a relationship with existing providers, all for the purpose of enhancing our ancillary service provider network for our client payors. We customize networks for our clients, thus as new client contracts are secured, our recruiting activities will increase.

The 17% and 30% decrease in costs related to the provider development function during the three and six months ended June 30, 2013 as compared to the same prior year period is a result of headcount reduction of two FTE's through natural attrition, reduced travel expenses and lower overall benefit costs.

Sales and Marketing

Our sales and marketing function consists of our sales and account management groups, as well as the strategic development group. Our sales group is primarily responsible for securing new client contracts, while our account management group maintains our existing client relationships, as well as attempts to generate incremental growth from those relationships. The strategic development group is responsible for executing the strategic objectives as dictated by the Board of Directors and executive management. There was a 2% decrease in costs related to sales and marketing during the six months ended June 30, 2013 as compared to the same prior year period.

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Finance and Administration

Our finance and administration function consists primarily of human resources, finance and accounting, and performance measurement as well as our Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer.

For the three months ended June 30, 2013, costs related to the finance and administration function increased 23%, as compared to the same prior year period, primarily due to a severance charge of approximately $216,000 recorded in the second quarter of 2013. The severance charge is discussed in greater detail within note seven to the unaudited consolidated financial statements.

The costs related to the finance and administration function increased 17% for the six months ended June 30, 2013 as compared to the same prior year period, respectively, as a result of the severance charge discussed above and an increase of $119,000 in professional fees related to investigating various strategic initiatives, legal consultation regarding employment issues and legal review of various client contracts.

Selling, General and Administrative Expenses

Following is a table showing the components of selling, general and administrative (“SG&A”) expenses as presented per the Statement of Operations for the period presented ending June 30,:

	Second Quarter											Six Months
							Change											Change
($ in thousands)	2013			2012			$			%		2013			2012			$			%
Sales and marketing	$	553		$	552		$	(1	)	—	%	$	1,126		$	1,147		$	21		2	%
Finance and administration	1,335			1,087			(248		)	(23	)	2,466			2,114			(352		)	(17	)
Selling, general and administrative expenses	$	1,888		$	1,639		$	(249	)	(15	)%	$	3,592		$	3,261		$	(331	)	(10	)%
Percentage of total net revenues	29.3		%	20.0		%						25.6		%	18.5		%

SG&A expenses as a percentage of total net revenues increased during the three and six months ended June 30, 2013 compared to the same prior year period, due primarily to the decline in net revenues compared to the same prior year period.

19

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements.  These condensed consolidated 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, provider cost recognition, the resulting contribution margins, potential impairment of intangible assets and stock-based compensation expense.  As these are condensed consolidated financial statements, you 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, 2012.  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, 2012.

FINANCIAL CONDITION AND LIQUIDITY

As of June 30, 2013 the Company had working capital of $6.7 million compared to $9.0 million at December 31, 2012.  Our cash and cash equivalents balance decreased to $7.8 million as of June 30, 2013 compared to $10.7 million at December 31, 2012. We continued to experience a decline in claims volume and related revenue, resulting in a net loss during the six months ended June 30, 2013, which expended cash despite our cost containment measures. Additionally, the decline in our cash balance is also attributable to the timing of payments to providers during January 2013 related to cash received from payors in December 2012. The payments made totaled $1.2 million. The table below reconciles the loss before income taxes to the net decrease in cash for the six months ended June 30, 2013.

	Six months ended June 30, 2013
Loss before income taxes	$	(2,649	)
Depreciation and amortization	423
Non-cash stock-based compensation expense	153
Payment of annual premiums for property and casualty insurance, net of amounts amortized	(147		)
Capital expenditures (primarily software development costs)	(187		)
Other working capital changes	(460		)
Decrease in cash for the six months ended June 30, 2013	$	(2,867	)

We believe our current cash balance of $7.8 million as of June 30, 2013 will be sufficient to meet our anticipated cash needs for working capital, capital expenditures and other activities through the foreseeable future, but our continuing losses will continue to reduce our available cash. We have reduced our non-variable cost structure to preserve our existing cash balances for investments in the business model and/or other strategic initiatives. However, we will need to increase our client base significantly or identify alternative business opportunities in order to stop the reduction in our available cash. If we are unable to do so, we might be required to access additional capital either through debt or equity markets. If additional financing is required, there cannot be assurances that we would be successful in obtaining sufficient capital financing on commercially reasonable terms or at all, or, if we did obtain capital financing, that it would not be dilutive to current shareholders.  We do not have any lines of credit, credit facilities or outstanding bank indebtedness as of June 30, 2013.

INFLATION

Inflation did not have a significant impact on the Company’s costs during the quarter ended June 30, 2013.  The Company continues to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements as of June 30, 2013 or 2012 or for the periods then ended.

20

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.  Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013.  Based upon this evaluation, our principal executive officer and principal 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 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Controls Over Financial Reporting.  Our management, with the participation of our principal executive officer and principal financial officer, has concluded that there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the last fiscal quarter that have materially affected the Company’s internal control over financial reporting or are reasonably likely to materially affect internal control over financial reporting. 

21

PART II. OTHER INFORMATION

ITEM 1A. Risk Factors

We have experienced declining revenue over the past four years primarily as a result of the decline in business from our two largest clients. While we continue to seek, and have secured, new client relationships, we have no assurances that they will generate revenue levels sufficient to offset the aforementioned revenue declines. Absent on-going revenue from new clients, overall revenues will continue to decline, resulting in operating losses and a decline in our available cash.

In addition to the other information set forth in this report, one should carefully consider the discussion of various risks and uncertainties contained in Part I, “Item 1A.  Risk Factors” in our 2012 Annual Report on Form 10-K.  We believe those risk factors are the most relevant to our business and could cause our results to differ materially from the forward-looking statements made by us.  

ITEM 5. Other Information

Not applicable.

22

ITEM 6. Exhibits

Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101	The following financial statements and footnotes from the American CareSource Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations; (ii) Consolidated Balance Sheets; (iii) Consolidated Statement of Stockholders' Equity; (iv) Consolidated Statements of Cash Flows; and (v) the Notes to Unaudited Consolidated Financial Statements.

23

SIGNATURES

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

		AMERICAN CARESOURCE HOLDINGS, INC.
Date:	August 14, 2013	By:	/s/ Matthew D. Thompson
			Matthew D. Thompson
			Acting Chief Operating Officer and Chief Financial Officer (Principal Executive Officer)

Date:	August 14, 2013	By:	/s/ Laura L. Little
			Laura L. Little
			Vice President of Finance (Principal Financial Officer and Principal Accounting Officer)

24

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Matthew D. Thompson, certify that:
 

1. I have reviewed this quarterly report on Form 10-Q of American CareSource Holdings, Inc.;

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 officer 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 officer 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 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 controls 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 controls over financial reporting.

Dated:	August 14, 2013	By: /s/ Matthew D. Thompson
		Matthew D. Thompson
		Acting Chief Operating Officer and Chief Financial Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Laura L. Little, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American CareSource Holdings, Inc.;

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 officer 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 officer 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 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 controls 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 controls over financial reporting.

Dated:	August 14, 2013	By: /s/ Laura L. Little
		Laura L. Little
		Vice President of Finance (Principal Financial Officer and Principal Accounting 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

Matthew D. Thompson, Acting Chief Operating Officer and Chief Financial Officer (Principal Executive Officer) of  American CareSource Holdings, Inc., (the “Company”) and Laura L. Little, Vice President of Finance (Principal Financial Officer and Principal Accounting Officer) of the Company, each certify pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; 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:	August 14, 2013	By: /s/ Matthew D. Thompson
		Matthew D. Thompson
		Acting Chief Operating Officer and Chief Financial Officer (Principal Executive Officer)
Dated:	August 14, 2013	By: /s/ Laura L. Little
		Laura L. Little
		Vice President of Finance (Principal Financial Officer and Principal Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to American CareSource Holdings, Inc. and will be retained by American CareSource Holdings, Inc. and furnished to the Securities and Exchange Commission upon request.

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Reverse Stock Split (Details) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	0 Months Ended	6 Months Ended			0 Months Ended
	Sep. 04, 2012	Jun. 30, 2013	Dec. 31, 2012	Sep. 04, 2012 Maximum	Jun. 11, 2012 Scenario 1	Jun. 11, 2012 Scenario 2	Jun. 11, 2012 Scenario 3	Jun. 11, 2012 Scenario 4	Jun. 11, 2012 Scenario 5	Jun. 30, 2013 Immediately prior to reverse split	Jun. 30, 2013 Immediately after reverse split
Class of Stock [Line Items]
Reverse stock split conversion ratio	0.3333				0.5000	0.4000	0.3333	0.2857	0.2500
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01							$ 0.01	$ 0.01
Common Stock and Additional Paid-In Capital adjustment to reflect reverse split		$ 114,000
Aggregate amount paid to stockholders				$ 1,000
Common Stock, shares outstanding		5,711	5,706

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Shareholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	40,000	40,000
Common stock, shares issued	5,711	5,706
Common Stock, shares outstanding	5,711	5,706

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Earnings (Loss) Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Earnings (Loss) Per Share

For purposes of this calculation, outstanding stock options, stock warrants, and unvested restricted stock units are considered common stock equivalents using the treasury stock method, and are the only such equivalents outstanding.  For the three and six months ended June 30, 2013, options to purchase approximately 700,000 shares of common stock, warrants to purchase 44,400 shares of common stock and approximately 49,000 unvested restricted stock units were excluded from the calculation as their impact would be anti-dilutive.

XML

Earnings (Loss) Per Share (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from calculation of earnings per share	774,000	700,000
Stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from calculation of earnings per share	44,400	44,400
Restricted Stock Units (RSU's)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from calculation of earnings per share	3,100	49,000

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Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net loss	$ (2,660,000)	$ (1,387,000)
Adjustments to reconcile net loss to net cash used in operations:
Non-cash stock-based compensation expense	153,000	252,000
Depreciation and amortization	423,000	440,000
Amortization of long-term client agreement	0	125,000
Deferred income taxes	1,000	3,000
Changes in operating assets and liabilities:
Accounts receivable	(183,000)	979,000
Prepaid expenses and other assets	(104,000)	(69,000)
Accounts payable and accrued liabilities	272,000	(181,000)
Due to service providers	(587,000)	(629,000)
Net cash used in operating activities	(2,685,000)	(467,000)
Cash flows from investing activities:
Investment in software development costs	(176,000)	(138,000)
Additions to property and equipment	(11,000)	(97,000)
Net cash used in investing activities	(187,000)	(235,000)
Cash flows from financing activities:
Proceeds from Stock Options Exercised	5,048.46	0
Payments of income tax withholdings on net exercise of equity incentives	0	(8,000)
Net cash used in financing activities	5,000	(8,000)
Net decrease in cash and cash equivalents	(2,867,000)	(710,000)
Cash and cash equivalents at beginning of period	10,705,000	11,315,000
Cash and cash equivalents at end of period	7,838,000	10,605,000
Supplemental cash flow information:
Cash paid for taxes	63,000	45,000
Supplemental non-cash operating and financing activity:
Accrued bonus paid with equity incentives	$ 0	$ 23,000

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Revenue Recognition

6 Months Ended

Jun. 30, 2013

Revenue Recognition [Abstract]

Revenue Recognition

Revenue Recognition

The Company recognizes revenue on the services that it provides, which includes (i) providing payor clients with a comprehensive network of ancillary healthcare providers, (ii) providing claims management, reporting, processing and payment services, (iii) providing network/need analysis to assess the benefits to payor clients of adding additional/different service providers to the client-specific provider networks and (iv) providing credentialing of network service providers for inclusion in the client payor-specific provider networks.  Revenue is recognized when services are delivered, which occurs after processed claims are billed to the client payors and collections are reasonably assured.  The Company estimates revenues and costs of revenues using average historical collection rates and average historical margins earned on claims.  Periodically, revenues are adjusted to reflect actual cash collections so that revenues recognized accurately reflect cash collected.

The Company determines whether it is acting as a principal or agent in the fulfillment of the services rendered.  After careful evaluation of the key gross and net revenue recognition indicators, the Company acknowledges that while the determination of gross versus net reporting is highly judgmental in nature, the Company has concluded that its circumstances are most consistent with those key indicators that support gross revenue reporting.

Following are the key indicators that support the Company’s conclusion that it acts as a principal when settling claims for service providers through its contracted service provider network:

• The Company is the primary obligor in the arrangement.  The Company has assessed its role as primary obligor as a strong indicator of gross reporting.  The Company believes that it is the primary obligor in its transactions because it is responsible for providing the services desired by its client payors.  The Company has distinct, separately negotiated contractual relationships with its client payors and with the ancillary healthcare providers in its networks.  The Company does not negotiate “on behalf of” its client payors and does not hold itself out as the agent of the client payors when negotiating the terms of the Company’s ancillary healthcare service provider agreements.  The Company’s agreements contractually prohibit client payors and service providers to enter into direct contractual relationships with one another.  The client payors have no control over the terms of the Company’s agreements with the service providers.  In executing transactions, the Company assumes key performance-related risks.  The client payors hold the Company responsible for fulfillment, as the provider, of all of the services the client payors are entitled to under their contracts; client payors do not look to the service providers for fulfillment.  In addition, the Company bears the pricing/margin risk as the principal in the transactions.  Because the contracts with the client payors and service providers are separately negotiated, the Company has complete discretion in negotiating both the prices it charges its client payors and the financial terms of its agreements with the service providers.  Since the Company’s profit is the spread between the amounts received from the client payors and the amount paid to the service providers, it bears significant pricing/margin risk.  There is no guaranteed mark-up payable to the Company on the amount the Company has contracted.  Thus, the Company bears the risk that amounts paid to the service provider will be greater than the amounts received from the client payors, resulting in a loss or negative claim.

• The Company has latitude in establishing pricing.  As stated above, the Company has complete latitude in negotiating the price to be paid to the Company by each client payor and the price to be paid to each contracted service provider.  This type of pricing latitude indicates that the Company has the risks and rewards normally attributed to a principal in the transactions.

• The Company changes the product or performs part of the services.  The Company provides the benefits associated with the relationships it builds with the client payors and the service providers.  While the parties could deal with each other directly, the client payors would not have the benefit of the Company’s experience and expertise in assembling a comprehensive network of service providers, in claims management, reporting and processing and payment services, in performing network/needs analysis to assess the benefits to client payors of adding additional/different service providers to the client payor-specific provider networks, and in credentialing network service providers.

• The Company has complete discretion in supplier selection.  One of the key factors considered by client payors who engage the Company is to have the Company undertake the responsibility for identifying, qualifying, contracting with and managing the relationships with the ancillary healthcare service providers.  As part of the contractual arrangement between the Company and its client payors, the payors identify their obligations to their respective covered persons and then work with the Company to determine the types of ancillary healthcare services required in order for the payors to meet their obligations.  The Company may select the providers and contract with them to provide services at its discretion.

• The Company is involved in the determination of product or service specifications.  The Company works with its client payors to determine the types of ancillary healthcare services required in order for the payors to meet their obligations to their respective covered persons.  In some respects, the Company is customizing the product through its efforts and ability to assemble a comprehensive network of providers for its payors that is tailored to each payor’s specific needs.  In addition, as part of its claims processing and payment services, the Company works with the client payors, on the one hand, and the providers, on the other, to set claims review, management and payment specifications.

• The supplier (and not the Company) has credit risk.  The Company believes it has some level of credit risk, but that risk is mitigated because the Company does not remit payment to providers unless and until it has received payment from the relevant client payors following the Company’s processing of a claim.

• The amount that the Company earns is not fixed.  The Company does not earn a fixed amount per transaction nor does it realize a per-person per-month charge for its services.

The Company has evaluated the other indicators of gross and net revenue recognition, including whether or not the Company has general inventory risk.  The Company does not have any general inventory risk, as its business is not related to the manufacture, purchase or delivery of goods and it does not purchase in advance any of the services to be provided by the ancillary healthcare service providers.  While the absence of this risk would be one indicator in support of net revenue reporting, as described in detail above, the Company has carefully evaluated all of the key gross and net revenue recognition indicators and has concluded that its circumstances are most consistent with those key indicators that support gross revenue reporting.

If the Company were to report its revenues net of provider payments rather than on a gross reporting basis, for the three and six months ended June 30, 2013, its net revenues would have been approximately $1.5 million and $3.3 million. For the three and six months ended June 30, 2012, its net revenues would have been approximately $2.1 million and $4.7 million.

The Company records a provision for refunds based on an estimate of historical refund amounts. Refunds are paid to payors for overpayments on claims, claims paid in error, and claims paid for non-covered services. In some instances, we will recoup payments made to the ancillary service provider if the claim has been fully resolved. The evaluation is performed periodically and is based on historical data. We present revenue net of the provision for refunds on the consolidated statement of operations.

During the three and six months ended June 30, 2013 and 2012, three of the Company’s clients comprised a significant portion of the Company’s revenues.  The following is a summary of the approximate amounts of the Company’s revenue and accounts receivable contributed by each of those clients as of the dates and for the periods presented (amounts in thousands):

				Periods ended June 30, 2013													Periods ended June 30, 2012
	As of June 30, 2013			Three Months					Six Months					As of June 30, 2012			Three Months					Six Months
	Accounts Receivable			Net Revenue			% of Total Revenue		Net Revenue			% of Total Revenue		Accounts Receivable			Net Revenue			% of Total Revenue		Net Revenue			% of Total Revenue
Material Client Relationship	$	443		$	1,438		22	%	$	3,795		27	%	$	1,366		$	3,050		37	%	$	5,953		34	%
HealthMarkets, Inc.	179			881			14		1,537			11		161			633			8		1,283			7
MultiPlan, Inc. (formerly Viant Holdings, Inc.)	348			375			6		679			5		154			682			8		1,706			10
All Others	1,906			3,815			59		8,144			58		1,964			3,911			48		8,784			50
Allowance for Uncollectable Receivables/Provision for refunds	(261		)	(66		)	(1	)	(107		)	(1	)	(307		)	(61		)	(1	)	(110		)	(1	)
	$	2,615		$	6,443		100	%	$	14,048		100	%	$	3,338		$	8,215		100	%	17,616			100	%

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Software Development Costs

6 Months Ended

Jun. 30, 2013

Software Development Costs [Abstract]

Software Development Costs

Software Development Costs

The Company capitalizes costs associated with internally developed software, developed for internal use only, during the application development stage. Application development stage costs generally include costs associated with internal-use software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality also are capitalized, whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. Capitalized costs include external direct costs of materials and services utilized in developing or obtaining internal-use software and payroll and payroll-related expenses for employees who are directly associated with and devote time to the internal-use software projects. Capitalization of such costs begins when the preliminary project stage is complete and ceases no later than the point at which the project is substantially complete and ready for its intended purpose. Capitalized costs are amortized using the straight-line method over the useful life of the software, which is typically five years.

During the three and six months ended June 30, 2013, the Company capitalized approximately $22,000 and $176,000, respectively. During the three and six months ended June 30, 2012, the Company capitalized approximately $61,000 and $138,000, respectively.

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Reverse Stock Split

6 Months Ended

Jun. 30, 2013

Reverse Stock Split [Abstract]

Reverse Stock Split

Reverse Stock Split

On August 31, 2012 the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended (the “Amendment”), to effect a 1-for-3 reverse stock split (“reverse split”) of its common stock, par value $0.01 per share (the “Common Stock”), effective September 4, 2012 (the “Effective Day”). Because the Amendment did not result in a reduction in the number of authorized shares of Common Stock, its effect was to increase the number of shares of Common Stock available for issuance relative to the number of shares issued and outstanding. In addition, the par value per share of Common Stock remained $0.01, thus Common Stock and Additional Paid-In Capital were adjusted $114,000 to reflect the reverse split on the consolidated balance sheet.

At the Company's annual meeting of stockholders, held on June 11, 2012, the stockholders voted to amend the Company's certificate of incorporation for the purpose of effecting a reverse stock split and authorized its Board of Directors to determine, in its sole discretion, whether to effect the amendment, the timing of the amendment, and the specific ratio of the reverse stock split, provided that such ratio is 1-for-2, 1-for-2.5, 1-for-3, 1-for-3.5 or 1-for-4.

On the Effective Day, every three shares of the Company's Common Stock issued and outstanding immediately prior to the Effective Day were automatically combined into one share of Common Stock. Stockholders that were left with a fraction of a share as a result of the reverse split received cash in lieu of the fractional share in an amount based on the closing sale price of the Common Stock on the business day immediately preceding the Effective Day as reported on the The Nasdaq Capital Market. The amount paid to stockholders was less than $1,000. In addition, any options, warrants and restricted stock units outstanding as of the Effective Day were adjusted accordingly. As a result of the reverse split, the Company had approximately 5,711,000 shares of common stock issued and outstanding as of June 30, 2013.

Shares of common stock and common stock equivalents, along with earnings per share and other per share amounts, have been retroactively restated to reflect the 1-for-3 reverse stock split that occurred on September 4, 2012 for all periods presented.

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 7,838	$ 10,705
Accounts receivable, net	2,615	2,432
Prepaid expenses and other current assets	394	290
Deferred income taxes	6	6
Total current assets	10,853	13,433
Property and equipment, net	1,421	1,593
Other assets:
Deferred income taxes	221	222
Other non-current assets	16	16
Intangible assets, net	704	768
Total assets	13,215	16,032
Current liabilities:
Due to service providers	2,513	3,100
Accounts payable and accrued liabilities	1,615	1,343
Total current liabilities	4,128	4,443
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value; 10,000 shares authorized, none issued	0	0
Common stock, $0.01 par value; 40,000 shares authorized; 5,711 and 5,706 shares issued and outstanding in 2013 and 2012, respectively.	57	57
Additional paid-in capital	23,003	22,845
Accumulated deficit	(13,973)	(11,313)
Total stockholders' equity	9,087	11,589
Total liabilities and stockholders' equity	$ 13,215	$ 16,032

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2013

Revenue Recognition [Abstract]

Summary of Revenues and Accounts Receivable Contributed by Client

The following is a summary of the approximate amounts of the Company’s revenue and accounts receivable contributed by each of those clients as of the dates and for the periods presented (amounts in thousands):

				Periods ended June 30, 2013													Periods ended June 30, 2012
	As of June 30, 2013			Three Months					Six Months					As of June 30, 2012			Three Months					Six Months
	Accounts Receivable			Net Revenue			% of Total Revenue		Net Revenue			% of Total Revenue		Accounts Receivable			Net Revenue			% of Total Revenue		Net Revenue			% of Total Revenue
Material Client Relationship	$	443		$	1,438		22	%	$	3,795		27	%	$	1,366		$	3,050		37	%	$	5,953		34	%
HealthMarkets, Inc.	179			881			14		1,537			11		161			633			8		1,283			7
MultiPlan, Inc. (formerly Viant Holdings, Inc.)	348			375			6		679			5		154			682			8		1,706			10
All Others	1,906			3,815			59		8,144			58		1,964			3,911			48		8,784			50
Allowance for Uncollectable Receivables/Provision for refunds	(261		)	(66		)	(1	)	(107		)	(1	)	(307		)	(61		)	(1	)	(110		)	(1	)
	$	2,615		$	6,443		100	%	$	14,048		100	%	$	3,338		$	8,215		100	%	17,616			100	%

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Consolidated Statement of Stockholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Balance at Dec. 31, 2012	$ 11,589	$ 57	$ 22,845	$ (11,313)
Balance, shares at Dec. 31, 2012	5,706	5,706
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(2,660)	0	0	(2,660)
Stock-based compensation expense	153	0	153	0
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures		5
Stock Issued During Period, Value, Stock Options Exercised	5	0	5	0
Balance at Jun. 30, 2013	$ 9,087	$ 57	$ 23,003	$ (13,973)
Balance, shares at Jun. 30, 2013	5,711	5,711

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Document Fiscal Year Focus			2013
Net revenues	$ 6,443	$ 8,215	$ 14,048	$ 17,616
Cost of revenues
Provider payments	4,912	6,078	10,728	12,873
Administrative fees	258	364	588	828
Claims administration and provider development	678	725	1,366	1,577
Total cost of revenues	5,848	7,167	12,682	15,278
Contribution margin	595	1,048	1,366	2,338
Selling, general and administrative expenses	1,888	1,639	3,592	3,261
Depreciation and amortization	212	221	423	440
Total operating expenses	2,100	1,860	4,015	3,701
Loss before income taxes	(1,505)	(812)	(2,649)	(1,363)
Income tax provision	4	17	11	24
Net loss	$ (1,509)	$ (829)	$ (2,660)	$ (1,387)
Loss per basic and diluted common share	$ (0.26)	$ (0.15)	$ (0.47)	$ (0.24)
Basic and diluted weighted average common shares outstanding	5,712	5,710	5,711	5,703

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Severance Charges

6 Months Ended

Jun. 30, 2013

Restructuring and Related Activities [Abstract]

Severance Charges

Severance Charges

At the Company's annual meeting of shareholders in May, the Company's shareholders reduced the Board of Directors from nine to five directors. Richard W. Turner, Ph.D., was appointed Chairman of the Board to lead the reconstituted Board consisting of four existing directors and one new director. Additionally, the Board appointed Matthew D. Thompson Acting Chief Operating Officer of the Company, replacing William J. Simpson, Jr. in that role. In addition to his duties as Acting Chief Operating Officer, Mr. Thompson continues to serve as the Company's Chief Financial Officer. The Board furthermore appointed Laura L. Little to the position of Vice President of Finance and Principal Accounting Officer. Ms. Little has been with the Company since December 2009.

On June 3, 2013, the Board of Directors accepted the resignation of Rost A. Ginevich from his position with the Company as Chief Information Officer and appointed James A. Honn to this position. In connection with his resignation, Mr. Ginevich entered into a severance agreement and general release with the Company, effective June 14, 2013. Under the agreement, Mr. Ginevich will receive, in addition to any base compensation owed and earned but unused vacation pay, severance payments over a three month period that in the aggregate equal three months' worth of his annual base compensation. The Company recorded a severance charge of approximately $46,000 in connection with the severance agreement.

Mr. Simpson continued to serve as President of the Company until July 2, 2013 when he resigned, effective July 1, 2013. In connection with his resignation, Mr. Simpson entered into a severance agreement and general release with the Company, effective July 1, 2013. Under the agreement, Mr. Simpson will receive, in addition to any base compensation owed and earned but unused vacation pay, severance payments over a six month period that in the aggregate equal six months' worth of his annual base compensation, or $147,500, and has the right to continue participation in the Company-sponsored group health insurance plan in accordance with applicable laws, rules and regulations. The total severance charge recorded by the Company during the three months ended June 30, 2013 related to Mr. Simpson's resignation was approximately $170,000.

The severance charges related to Mr. Simpson and Mr. Ginevich are included in selling, general and administrative expenses on the condensed consolidated statement of operations.

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Revenue Recognition (Revenue and Accounts Receivable) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Concentration Risk [Line Items]
Entity Wide Revenue Major Customer Number			3
Allowance for Uncollectable Receivables	$ (261)	$ (307)	$ (261)	$ (307)
Accounts Receivable, Net	2,615	3,338	2,615	3,338	2,432
Provision for refunds	(66)	(61)	(107)	(110)
Revenue, Net	6,443	8,215	14,048	17,616
Sales Revenue
Concentration Risk [Line Items]
% of Total Revenue	100.00%	100.00%	100.00%	100.00%
Sales Revenue | Provision for refunds
Concentration Risk [Line Items]
% of Total Revenue	(1.00%)	(1.00%)	(1.00%)	(1.00%)
Customer Concentration Risk | Material Client Relationship
Concentration Risk [Line Items]
Accounts Receivable, Gross	443	1,366	443	1,366
Revenue, Gross	1,438	3,050	3,795	5,953
Customer Concentration Risk | HealthMarkets, Inc
Concentration Risk [Line Items]
Accounts Receivable, Gross	179	161	179	161
Revenue, Gross	881	633	1,537	1,283
Customer Concentration Risk | MultiPlan, Inc.
Concentration Risk [Line Items]
Accounts Receivable, Gross	348	154	348	154
Revenue, Gross	375	682	679	1,706
Customer Concentration Risk | All Others
Concentration Risk [Line Items]
Accounts Receivable, Gross	1,906	1,964	1,906	1,964
Revenue, Gross	$ 3,815	$ 3,911	$ 8,144	$ 8,784
Customer Concentration Risk | Sales Revenue | Material Client Relationship
Concentration Risk [Line Items]
% of Total Revenue	22.00%	37.00%	27.00%	34.00%
Customer Concentration Risk | Sales Revenue | HealthMarkets, Inc
Concentration Risk [Line Items]
% of Total Revenue	14.00%	8.00%	11.00%	7.00%
Customer Concentration Risk | Sales Revenue | MultiPlan, Inc.
Concentration Risk [Line Items]
% of Total Revenue	6.00%	8.00%	5.00%	10.00%
Customer Concentration Risk | Sales Revenue | All Others
Concentration Risk [Line Items]
% of Total Revenue	59.00%	48.00%	58.00%	50.00%

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Warrants

6 Months Ended

Jun. 30, 2013

Warrants [Abstract]

Warrants

Warrants

The Company entered into an agreement as of February 25, 2011 with an employee, whereby the Company agreed to issue warrants to purchase 83,333 shares of common stock with an exercise price of $5.01. The warrants have a term of 5 years and vest in increments over a time period of 2 years depending on the achievement of defined, agreed upon revenue targets generated by new clients. The agreement also obligates the Company to issue warrants to purchase up to an additional 166,666 shares of common stock (issued in 83,333 increments) pursuant to the achievement of additional defined agreed upon revenue targets. During the twelve months ended December 31, 2011, we did not recognize compensation costs associated with these warrants due to the low probability of vesting.

On February 1, 2012, certain terms of the agreement were modified, including the revenue targets and the total number of shares under the initial and future warrants. The warrants initially granted now cover 44,444 shares to be purchased at an exercise price of $1.50, 22,222 of which vested immediately, and the remaining 22,222 shares vesting upon the achievement of certain revenue targets. The number of shares underlying warrants to be issued under the agreement in the future was reduced to 88,889 shares (issued in 44,444 increments) based upon the achievement of additional defined agreed upon revenue targets. During the first quarter of 2012, we recognized compensation costs of approximately $21,000 associated with the initial vesting of 22,222 shares.

We did not recognize compensation costs during the three and six months ended June 30, 2013. Additional costs associated with the warrants will be recognized based on the probability that the revenue targets will be reached. That probability will be re-evaluated and updated based on current market conditions, on a quarterly basis, and compensation costs will be adjusted accordingly.

Shares of common stock and exercise price have been restated to reflect the 1-for-3 reverse stock split that occurred on September 4, 2012.

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Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2013

Description of Business and Basis of Presentation [Abstract]

Description of Business and Basis of Presentation

Description of Business and Basis of Presentation

American CareSource Holdings, Inc. (“ACS,” “Company,” the “Registrant,” “we,” “us,” or “our”) works to help its clients control healthcare costs by offering cost containment strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers.  The Company markets its services to a number of healthcare companies including third party administrators (“TPAs”), insurance companies, large self-funded organizations, various employer groups and preferred provider organizations ("PPOs").  The Company offers payors this solution by:

• lowering its payors’ ancillary care costs through its network of high quality, cost effective providers that the Company has under contract at more favorable terms than they could generally obtain on their own;

• providing payors with a comprehensive network of ancillary healthcare service providers that is tailored to each payor’s specific needs and is available to each payor’s members for covered services;

• providing payors with claims management, reporting and processing and payment services;

• performing network/needs analysis to assess the benefits to payors of adding additional/different service providers to the payor-specific provider networks; and

• credentialing network service providers for inclusion in the payor-specific provider networks.

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 June 30, 2013 and December 31, 2012 and operating results are for the three and six months ended June 30, 2013 and 2012, and include all normal and recurring adjustments we consider necessary for the fair, summarized presentation of our financial position and operating results. Certain prior year amounts have been reclassified within the consolidated statement of operations to conform to the current year presentation.  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, 2012, filed with the SEC on March 4, 2013.

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.

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Software Development Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Software Development Costs [Abstract]
Useful life of developed software			5 years
Capitalized software development costs	$ 22	$ 61	$ 176	$ 138

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Revenue Recognition (Net Provider Payments) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenue Recognition [Abstract]
Revenues, net of provider payments	$ 1.5	$ 2.1	$ 3.3	$ 4.7

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Warrants (Details) (USD $)	0 Months Ended			6 Months Ended		0 Months Ended
	Sep. 04, 2012	Feb. 25, 2011	Feb. 01, 2012	Jun. 30, 2013 Vested immediately	Feb. 01, 2012 Vested immediately	Feb. 25, 2011 Vested upon acheivement of additional defined revenue targets	Feb. 01, 2012 Vested upon acheivement of additional defined revenue targets	Feb. 01, 2012 Acheivement of additional defined revenue targets	Feb. 25, 2011 Acheivement of additional defined revenue targets
Class of Warrant or Right [Line Items]
Reverse stock split conversion ratio	0.3333
Warrants issued		83,333	44,444		22,222		22,222	88,889	166,666
Exercise price		5.01	1.50
Award expiration period		5 years
Award vesting period						2 years
Incremental warrant issues								44,444	83,333
Compensation costs				$ 21,000

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 08, 2013
Entity Information [Line Items]
Entity Registrant Name	American Caresource Holdings, Inc.
Entity Central Index Key	0001316645
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		5,711,854

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Severance Charges (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	May 31, 2013 Director	Apr. 30, 2013 Director	Jun. 30, 2013 Chief Information Officer [Member] Selling, General and Administrative Expenses [Member] Special Severance Benefits [Member]	Jun. 30, 2013 President [Member] Selling, General and Administrative Expenses [Member] Special Severance Benefits [Member]
Restructuring Cost and Reserve [Line Items]
Number of directors	5	9
Number of existing directors	4
Number of new directors	1
Period over which aggregate benefits are to be paid			3 months	6 months
Base compensation owed, vacation pay, and severance payments				$ 148
Total severance charge			$ 46	$ 170