UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
1
0
-Q
x
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
|
|
|
|
|
For
the quarterly period ended:
September
30, 2008
|
¨
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
|
|
|
|
|
Commission
file number:
001-33094
|
AMERICAN
CARESOURCE HOLDINGS, INC.
|
(Exact
name of registrant as specified in its charter)
|
|
20-0428568
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
employer identification no.)
|
|
|
|
5429 LYNDON B. JOHNSON
FREEWAY
SUITE 700
DALLAS,
TEXAS
75240
|
(Address
of principal executive offices)
|
(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 (the
“Exchange Act”) during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the last 90 days. Yes
x
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
q
Large Accelerated
Filer
|
q
Non-Accelerated
Filer
|
q
Accelerated
Filer (do not check if a smaller reporting
company)
|
x
Smaller Reporting
Company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o
No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: The number of shares of common stock
of registrant outstanding on November 11, 2008 was 15,230,743.
TABLE
OF CONTENTS
AMERICAN
CARESOURCE HOLDINGS, INC.
FORM
10-Q
FOR
THE QUARTER ENDED SEPTEMBER 30, 2008
Part
I
|
Financial
Information
|
1
|
|
|
|
Item
1.
|
Financial
Statements
|
1
|
|
|
|
|
Consolidated
Statements of Operations (unaudited)
|
1
|
|
|
|
|
Consolidated
Balance Sheets (unaudited)
|
2
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity (unaudited)
|
3
|
|
|
|
|
Consolidated
Statements of Cash Flows (unaudited)
|
4
|
|
|
|
|
Notes
to Unaudited Consolidated Financial Statements
|
5
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
9
|
|
|
|
Item
4.
|
Controls
and
Procedures
|
14
|
|
|
|
Part
II
|
Other
Information
|
15
|
|
|
|
Item
1A.
|
Risk
Factors
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
Item
6.
|
Exhibits
|
15
|
|
|
|
Signatures
|
|
16
|
PART
I.
FINANCIAL INFORMATION
ITEM 1. Financial
Statements
AMERICAN
CARESOURCE HOLDINGS, INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
|
|
|
Nine
months ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
16,110,795
|
|
|
$
|
7,088,499
|
|
|
$
|
40,628,998
|
|
|
$
|
13,363,356
|
|
Cost
of revenues
|
|
|
13,554,352
|
|
|
|
6,091,789
|
|
|
|
34,466,067
|
|
|
|
11,671,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
2,556,443
|
|
|
|
996,710
|
|
|
|
6,162,931
|
|
|
|
1,691,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
1,488,455
|
|
|
|
766,648
|
|
|
|
3,795,813
|
|
|
|
2,677,920
|
|
Depreciation
and amortization
|
|
|
105,887
|
|
|
|
86,445
|
|
|
|
294,559
|
|
|
|
248,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,594,342
|
|
|
|
853,093
|
|
|
|
4,090,372
|
|
|
|
2,926,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
962,101
|
|
|
|
143,617
|
|
|
|
2,072,559
|
|
|
|
(1,234,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
(65,531
|
)
|
|
|
(47,430
|
)
|
|
|
(137,439
|
)
|
|
|
(151,063
|
)
|
Interest
expense
|
|
|
1,067
|
|
|
|
2,836
|
|
|
|
4,511
|
|
|
|
9,286
|
|
Debt
issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest (income) expense, net
|
|
|
(64,464
|
)
|
|
|
(44,594
|
)
|
|
|
(132,928
|
)
|
|
|
(95,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
1,026,565
|
|
|
|
188,211
|
|
|
|
2,205,487
|
|
|
|
(1,138,971
|
)
|
Income
tax provision
|
|
|
25,559
|
|
|
|
-
|
|
|
|
61,623
|
|
|
|
-
|
|
Net
income (loss)
|
|
$
|
1,001,006
|
|
|
$
|
188,211
|
|
|
$
|
2,143,864
|
|
|
$
|
(1,138,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.07
|
|
|
$
|
0.01
|
|
|
$
|
0.14
|
|
|
$
|
(0.08
|
)
|
Diluted
|
|
$
|
0.06
|
|
|
$
|
0.01
|
|
|
$
|
0.12
|
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
15,139,839
|
|
|
|
14,555,314
|
|
|
|
15,029,161
|
|
|
|
14,511,642
|
|
Diluted
weighted average common shares outstanding
|
|
|
18,044,602
|
|
|
|
16,888,882
|
|
|
|
17,577,846
|
|
|
|
14,511,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CARESOURCE HOLDINGS, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
|
2008
|
|
|
December
31,
|
|
|
|
(Unaudited)
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
8,221,348
|
|
|
$
|
4,272,498
|
|
Accounts
receivable, net
|
|
|
4,960,235
|
|
|
|
3,651,203
|
|
Prepaid
expenses and other current assets
|
|
|
365,248
|
|
|
|
403,559
|
|
Deferred
income taxes
|
|
|
5,886
|
|
|
|
5,886
|
|
Total
current assets
|
|
|
13,552,717
|
|
|
|
8,333,146
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
807,745
|
|
|
|
332,450
|
|
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
Certificate
of deposit, restricted
|
|
|
-
|
|
|
|
145,000
|
|
Deferred
income taxes
|
|
|
255,731
|
|
|
|
255,731
|
|
Other
non-current assets
|
|
|
176,913
|
|
|
|
237,246
|
|
Intangible
assets, net
|
|
|
1,334,052
|
|
|
|
1,494,238
|
|
Goodwill
|
|
|
4,361,299
|
|
|
|
4,361,299
|
|
|
|
$
|
20,488,457
|
|
|
$
|
15,159,110
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Due
to service providers
|
|
$
|
5,077,322
|
|
|
$
|
3,344,278
|
|
Accounts
payable and accrued liabilities
|
|
|
1,919,484
|
|
|
|
1,320,036
|
|
Current
maturities of long-term debt
|
|
|
10,765
|
|
|
|
55,697
|
|
Total
current liabilities
|
|
|
7,007,571
|
|
|
|
4,720,011
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
5,911
|
|
|
|
50,348
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value; 10,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
none
issued
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.01 par value; 40,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
15,203,743 and
14,668,416 shares issued and outstanding in
|
|
|
152,037
|
|
|
|
146,684
|
|
2008
and 2007, respectively
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
18,550,887
|
|
|
|
17,613,880
|
|
Accumulated
deficit
|
|
|
(5,227,949
|
)
|
|
|
(7,371,813
|
)
|
Total
shareholders' equity
|
|
|
13,474,975
|
|
|
|
10,388,751
|
|
|
|
$
|
20,488,457
|
|
|
$
|
15,159,110
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
AMERICAN
CARESOURCE HOLDINGS, INC.
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
14,668,416
|
|
|
$
|
146,684
|
|
|
$
|
17,613,880
|
|
|
$
|
(7,371,813
|
)
|
|
$
|
10,388,751
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,143,864
|
|
|
|
2,143,864
|
|
Stock-based
compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
485,568
|
|
|
|
-
|
|
|
|
485,568
|
|
Issuance
of common stock upon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercise
of stock options
|
|
|
498,401
|
|
|
|
4,984
|
|
|
|
163,049
|
|
|
|
-
|
|
|
|
168,033
|
|
Issuance
of common stock upon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercise
of stock warrants
|
|
|
23,177
|
|
|
|
232
|
|
|
|
127,196
|
|
|
|
-
|
|
|
|
127,428
|
|
Issuance
of common stock upon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
warrant exercises
|
|
|
13,749
|
|
|
|
137
|
|
|
|
(137
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock warrants for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
payment
of client management fees
|
|
|
-
|
|
|
|
-
|
|
|
|
161,331
|
|
|
|
-
|
|
|
|
161,331
|
|
Balance
at September 30, 2008
|
|
|
15,203,743
|
|
|
$
|
152,037
|
|
|
$
|
18,550,887
|
|
|
$
|
(5,227,949
|
)
|
|
$
|
13,474,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CARESOURCE HOLDINGS, INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
2,143,864
|
|
|
$
|
(1,138,971
|
)
|
Adjustments
to reconcile net income (loss) to net cash
|
|
|
|
|
|
|
|
|
provided
by (used in) operations:
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
485,568
|
|
|
|
319,965
|
|
Depreciation
and amortization
|
|
|
294,559
|
|
|
|
248,160
|
|
Amortization
of debt issuance costs
|
|
|
-
|
|
|
|
46,300
|
|
Client
administration fee expense related to warrants
|
|
|
54,467
|
|
|
|
22,047
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,309,032
|
)
|
|
|
(1,132,521
|
)
|
Prepaid
expenses and other assets
|
|
|
205,510
|
|
|
|
(550,488
|
)
|
Accounts
payable and accrued liabilities
|
|
|
599,448
|
|
|
|
412,378
|
|
Due
to service providers
|
|
|
1,733,044
|
|
|
|
804,528
|
|
Net
cash provided by (used in) operating activities
|
|
|
4,207,428
|
|
|
|
(968,602
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Investment
in software development costs
|
|
|
(351,605
|
)
|
|
|
-
|
|
Additions
to property and equipment
|
|
|
(258,065
|
)
|
|
|
(139,563
|
)
|
Redemption
of certificate of deposit
|
|
|
145,000
|
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(464,670
|
)
|
|
|
(139,563
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Payments
on long-term debt
|
|
|
(89,369
|
)
|
|
|
(339,308
|
)
|
Proceeds
from exercise of stock warrants
|
|
|
127,428
|
|
|
|
-
|
|
Proceeds
from exercise of stock options
|
|
|
168,033
|
|
|
|
52,226
|
|
Net
cash provided by (used in) financing activities
|
|
|
206,092
|
|
|
|
(287,082
|
)
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
3,948,850
|
|
|
|
(1,395,247
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
4,272,498
|
|
|
|
5,025,380
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
8,221,348
|
|
|
$
|
3,630,133
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
4,511
|
|
|
$
|
28,147
|
|
|
|
|
|
|
|
|
|
|
Supplemental
non-cash financing activity:
|
|
|
|
|
|
|
|
|
Warrants
issued as payment of client management fees
|
|
$
|
161,331
|
|
|
$
|
52,913
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American CareSource Holdngs, Inc.
Notes to Condensed Financial Statements
(Unaudited)
(tables in thousands, except per share data)
(1) Description
of Business and Basis of Presentation
American CareSource Holdings, Inc., a Delaware corporation (the
“Company
,
”
“American
CareSource Holdings
,
”
“ACS
,
”
“we
,
”
“our
,
”
“us
,
”
or the “Registrant”), is
in the business of delivering ancillary healthcare services for employment
groups through its national network of ancillary care providers. The Company
markets its products to insurance companies, third-party administrators and
preferred provider organizations. American CareSource Holdings has one
wholly owned subsidiary, Ancillary Care Services, Inc. (“Care
Services”).
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States
(“GAAP”)
interim reporting requirements of Form 10-Q and Rule 8-03 of
Regulation S-X of the rules and regulations of the Securities and Exchange
Commission (“SEC”). Consequently, financial information and disclosures normally
included in financial statements prepared annually in accordance with GAAP have
been condensed or omitted. Balance sheet amounts are as of September 30,
2008 and December 31, 2007 and operating result amounts are for the three months
and nine months ended September 30, 2008 and 2007, and include all normal and
recurring adjustments that we consider necessary for the fair, summarized
presentation of our financial position and operating results. As these are
condensed financial statements, readers of this report should, therefore, refer
to the consolidated financial statements and the notes included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the
SEC on March 31, 2008.
(2) Revenue Recognition
The Company evaluates its service provider contracts using the
indicators of EITF No. 99-19 “Reporting Gross Revenue as a Principal vs. Net as
an Agent” (“EITF 99-19”) to determine whether the Company is acting as a
principal or an agent in the fulfillment of services to be rendered.
|
·
|
The
Company negotiates a contract with the service provider and also
negotiates separate contracts with the payor. Neither the
service provider nor the payor can look through the Company and claim
directly against the other party. Each service provider contracts with the
Company only, and not with the payor. Likewise, each payor
contracts with the Company only, and not with the service
provider. Each party deals directly with the Company and does
not deal
directly
with each
other.
|
|
·
|
The
Company determines through negotiations which service providers will be
included
in
or excluded
from
the network to be offered to the
client payor based on, among other things, price
and
access.
|
|
·
|
The
Company does not earn a fixed dollar amount per client transaction
regardless of the amount billed to clients or earn a stated percentage of
the amount billed to its clients. The Company has latitude in
establishing pricing, in that it negotiates rates for services with each
client payor with which it enters into agreements. Client rates
for services are negotiated separately, independent of other client
contracts. The Company also negotiates separately with the
service providers. The Company bears the risk of profitability
as its contracted rates with service providers are negotiated separately
from its client rates.
|
|
·
|
The
Company is responsible to the service provider for properly processing
claims and managing the claims that are processed by its
adjustors.
|
|
·
|
The
Company sets prices to be settled with payors and separately negotiates
the prices to be settled with the service
providers.
|
|
·
|
The
Company may realize a positive or negative margin represented by the
difference between the negotiated fees received from the payor and the
negotiated amount paid to service
providers.
|
|
|
|
|
|
Periods
ended September 30, 2008
|
|
|
|
|
Periods
ended September 30, 2007
|
|
|
As
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Three
months
|
|
Nine
months
|
|
2008
|
|
Three
months
|
|
Nine
months
|
|
|
Accounts
|
|
|
|
|
% of
Total
|
|
|
|
|
% of
Total
|
|
Accounts
|
|
|
|
|
% of
Total
|
|
|
|
|
% of
Total
|
|
|
receivable
|
|
Revenue
|
|
Revenues
|
|
Revenue
|
|
Revenues
|
|
receivable
|
|
Revenue
|
|
Revenues
|
|
Revenue
|
|
Revenues
|
Customer
A
|
|
$
|
2,803
|
|
|
$
|
9,419
|
|
|
|
58
|
%
|
|
$
|
24,366
|
|
|
|
60
|
%
|
|
$
|
1,247
|
|
|
$
|
4,011
|
|
|
|
57
|
%
|
|
$
|
8,460
|
|
|
|
63
|
%
|
Customer
B
|
|
|
1,998
|
|
|
|
6,265
|
|
|
|
39
|
%
|
|
|
15,305
|
|
|
|
38
|
%
|
|
|
1,261
|
|
|
|
2,856
|
|
|
|
40
|
%
|
|
|
3,854
|
|
|
|
29
|
%
|
Others
|
|
|
159
|
|
|
|
427
|
|
|
|
3
|
%
|
|
|
958
|
|
|
|
2
|
%
|
|
|
121
|
|
|
|
222
|
|
|
|
3
|
%
|
|
|
1,049
|
|
|
|
8
|
%
|
|
|
$
|
4,960
|
|
|
$
|
16,111
|
|
|
|
100
|
%
|
|
$
|
40,629
|
|
|
|
100
|
%
|
|
$
|
2,629
|
|
|
$
|
7,089
|
|
|
|
100
|
%
|
|
$
|
13,363
|
|
|
|
100
|
%
|
(3) Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts which are provided
at the time revenue is recognized. Co-payments, deductibles and
co-insurance payments can all impact the collectability of each individual claim
submitted to payors for payment. While the Company is able to re-price a
claim and estimate the cash it will receive from the payor for that claim, the
presence of co-pays, deductibles and co-insurance payments can affect the
ultimate collectability of the claim. The Company records an allowance
against gross revenue to better estimate collectability. The allowance is
applied specifically for each payor and is adjusted to reflect the Company’s
collection experience on a quarterly basis.
The following table summarizes the changes in the allowance for
doubtful accounts for the periods presented:
|
|
Three
months ended September 30,
|
|
|
Nine
months ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Beginning
balance
|
|
$
|
200
|
|
|
$
|
537
|
|
|
$
|
190
|
|
|
$
|
414
|
|
Provisions
for losses - accounts receivable
|
|
|
-
|
|
|
|
355
|
|
|
|
85
|
|
|
|
243
|
|
Deduction
for accounts charged off
|
|
|
-
|
|
|
|
(425
|
)
|
|
|
(75
|
)
|
|
|
(190
|
)
|
Ending
balance
|
|
$
|
200
|
|
|
$
|
467
|
|
|
$
|
200
|
|
|
$
|
467
|
|
(4) Earnings (Loss) Per Share
The following table details the reconciliation of basic earnings
(loss) per share to diluted earnings (loss) per share:
|
|
Three
months ended
|
|
|
Nine
months ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Numerator
for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
1,001
|
|
|
$
|
188
|
|
|
$
|
2,144
|
|
|
$
|
(1,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
basic common shares outstanding
|
|
|
15,140
|
|
|
|
14,555
|
|
|
|
15,029
|
|
|
|
14,512
|
|
Assumed
conversion of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
1,158
|
|
|
|
969
|
|
|
|
941
|
|
|
|
-
|
|
Warrants
|
|
|
1,747
|
|
|
|
1,365
|
|
|
|
1,608
|
|
|
|
-
|
|
Potentially
dilutive common shares
|
|
|
2,905
|
|
|
|
2,334
|
|
|
|
2,549
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for diluted earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per
share - Adjusted weighted average shares
|
|
|
18,045
|
|
|
|
16,889
|
|
|
|
17,578
|
|
|
|
14,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.07
|
|
|
$
|
0.01
|
|
|
$
|
0.14
|
|
|
$
|
(0.08
|
)
|
Diluted
|
|
$
|
0.06
|
|
|
$
|
0.01
|
|
|
$
|
0.12
|
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) Long-term Debt
Long-term debt consists of the following as of the dates
presented:
|
|
September 30,
2008
|
|
|
December 31,
2007
|
|
|
|
|
|
|
|
|
Notes
payable to Capital One Bank, $135,000 due September 2009, due in monthly
installments of approximately $4,143, including interest at
6.5%
|
|
$
|
-
|
|
|
$
|
82
|
|
|
|
|
|
|
|
|
|
|
Capital
lease obligations
|
|
|
17
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
Less
current maturities
|
|
|
(11
|
)
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
Long-term
debt, less current maturities
|
|
$
|
6
|
|
|
$
|
50
|
|
|
|
|
|
|
|
|
|
|
During the three months ended September 30, 2008, we retired the
note payable with Capital One Bank. The final payment under the note was
approximately $48,000. As a condition to the issuance of the note, we were
required to hold a restricted certificate of deposit in the amount of
$145,000. Subsequent to the retirement of the debt, the restriction on the
balance was lifted and the certificate of deposit was redeemed.
(6) Stock Warrants
On July 2, 2007, the Company announced that it had signed an
Ancillary Care Services Network Access Agreement (“the agreement”) effective May
21, 2007 with a new customer, Texas True Choice, Inc. (“TTC”). As partial
compensation under the agreement, the Company issued to an affiliate of TTC,
warrants to purchase a total of 225,000 shares of the Company’s common stock at
an exercise price of $1.84, the closing price of our stock on May 21,
2007. 25% of the shares vested on each of May 21, 2007 and May 21, 2008,
and 25% vest on May 21 of each of the two subsequent years. As of
September 30, 2008, 25%, or 56,250 warrants had vested. According to the
agreement, TTC must provide two years notice in the event of termination.
Since the measurement date for the third traunch of warrants was reached as of
June 30, 2008, we recorded the fair value of 25% of the warrants, or 56,250
warrants, which were recorded as other non-current assets and will be amortized
over the related contract period. The total fair value of the warrants was
$161,331, which was recorded based on the Black-Scholes-Merton method.
(7) Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board issued
SFAS No. 141(R) “Business Combinations.” SFAS No. 141(R) changes the
accounting for business combinations including the measurement of acquirer
shares issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals,
the treatment of acquisition related transaction costs and the recognition of
changes in the acquirer’s income tax valuation allowance. SFAS No. 141(R)
is effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. We are currently evaluating the impact of the
pending adoption of SFAS 141(R) on our financial statements.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of
Generally Accepted Accounting Principles”
.
SFAS No. 162 is
intended to improve financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with U.S. generally
accepted accounting principles for nongovernmental entities. Prior to the
issuance of SFAS No. 162, the GAAP hierarchy was defined in the American
Institute of Certified Public Accountants (“AICPA”) Statement on Auditing
Standards (“SAS”) No. 69,
The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.
SFAS
No. 162 is effective 60 days following the Securities and Exchange
Commission’s (“SEC’s”) approval of the Public Company Accounting Oversight Board
(“PCAOB”) Auditing amendments to AU Section 411,
The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.
The Company
does not expect the adoption of SFAS No. 162 to have an impact on its
operating results or financial position.
FORWARD-LOOKING STATEMENTS
This discussion includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You
can identify these statements by forward-looking words such as “may,” “will,”
“expect,” “intend”, “anticipate,” “believe,” “estimate” and “continue” or
similar words. You should read statements that contain these words carefully
because they discuss our future expectations, contain projections of our future
operating results or of our financial condition or state other “forward-looking”
information.
We believe it is
important to communicate to our stockholders and potential investors not only
the Company’s current condition, but management’s forecasts about the Company’s
future opportunities, performance and results, including, for example,
information with respect to potential margin expansion, cash reserves and other
financial items, and our strategies and prospects. However,
forward-looking statements are based on current expectations and assumptions and
are subject to substantial risks and uncertainties, including, but not limited
to, risks of market acceptance of, or preference for, the Company’s systems and
services, competitive forces, the impact of geopolitical events and changes in
government regulations, general economic conditions and economic factors in the
country and the healthcare industry, and other risk factors as may be listed
from time to time in the Company’s filings with the SEC. In evaluating such
forward-looking statements, investors should specifically consider the
matters set forth under the caption “Risk Factors” appearing in
our
Annual Report
on Form 10-K for the
year ended December 31,
2007 which was
filed with the SEC on March 31, 2008, as well as any other cautionary language
contained
in this
quarterly report
, any of which
could cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. Except to the extent required
by applicable securities laws and regulations, we disclaim any obligation to
update or revise information contained in any forward-looking statement
contained herein to reflect events or circumstances occurring after the date of
this quarterly report.
ITEM 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
Management’s discussion
and analysis provides a review of the Company’s operating results for the three
and nine months ended September 30, 2008 and its financial condition at
September 30, 2008. The focus of this review is on the underlying business
reasons for significant changes and trends affecting the revenues, net income or
loss and financial condition of the Company. This review should be read in
conjunction with the accompanying unaudited consolidated financial statements
and the audited consolidated financial statements and the notes thereto included
in our Annual Report on Form 10-K for the year ended December 31,
2007.
ACS
provides ancillary healthcare services through its proprietary network of
ancillary healthcare service providers for the benefit of its healthcare payor
clients. Clients route healthcare claims to ACS after service has been performed
by providers who participate in the ACS network. ACS re-prices those claims
according to its contractual rate with the service provider. In the process of
re-pricing the claim, ACS is paid directly by the client or the insurer for the
provider’s service. ACS then pays the service provider according to its
contractual rate. ACS has the risk of generating positive margin, the difference
between the payment it receives for the service and the amount it is obligated
to pay the original service provider or member of its proprietary
network.
The
Company recognizes revenues for ancillary healthcare services when services by
providers have been authorized and performed and collections from payors are
reasonably assured. Cost of revenues for ancillary healthcare services consist
of amounts due to providers for providing patient services, client
administration fees paid to client payors to reimburse them for the cost of
implementing and managing claims submissions, and the Company’s related direct
labor and overhead of processing invoices, collections and payments. The Company
does not pay independent contract service providers until the Company receives
payment from the payors. The Company recognizes actual or estimated liabilities
to independent contract service providers as the related revenues are
recognized. The Company markets its products to insurance companies, third-party
administrators and preferred provider organizations. Although we have never
reported a profit for a full fiscal year, we have produced five consecutive
profitable quarters, including the three months ended September 30, 2008. Our
improved operating performance during the period is attributable to (1) the
addition of five new clients that were added during and prior to 2007 and four
new clients that were added in 2008, (2) the expansion of our relationships with
our two largest clients, one of which was established in 2006 and the other in
early 2007, which resulted in increased number of payors, (3) the expansion of
services performed for existing clients and (4) the additions to our network of
service providers. The Company is seeking continuing growth in the number of
client payor and service provider relationships by focusing on providing
in-network services for its payors and aggressively pursuing additional
preferred provider organizations and third-party administrators as its primary
sales targets. The Company believes that this strategy should increase the
volume of claims the Company can adjudicate as well as the volume of patients it
can direct through its service provider network. No assurances can be given that
the Company can expand its service provider network or payor relationships, nor
that any such expansion will result in an improvement in the results of
operations of the Company.
RECENT
EVENTS
During
the third quarter of 2008, the Company’s Board of Directors approved the
decision to move the listing of the Company’s common stock to The NASDAQ Stock
Market (“the NASDAQ”) from the American Stock Exchange. Trading of the Company’s
common stock commenced on the NASDAQ on September 29, 2008 under the stock
symbol “ANCI”.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Management’s
discussion and analysis of our financial condition and results of operations is
based upon our condensed financial statements. These condensed financial
statements have been prepared following the requirements of accounting
principles generally accepted in the United States (“GAAP”) for interim periods
and require us to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to revenue recognition and amortization and
potential impairment of intangible assets and goodwill and stock-based
compensation expense. As these are condensed financial statements, one should
also read expanded information about our critical accounting policies and
estimates provided in Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” under the heading “Critical Accounting
Policies,” included in our Annual Report on Form 10-K for the year ended
December 31, 2007. There have been no material changes to our critical
accounting policies and estimates from the information provided in our Form 10-K
for the year ended December 31, 2007.
ANALYSIS
OF RESULTS OF OPERATIONS
Revenues
The
following table sets forth a comparison of our revenues for the periods
presented ended September 30:
|
|
Third
Quarter
|
|
|
Nine
Months
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
Change
|
|
($
in thousands)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
Net
revenues
|
|
$
|
16,111
|
|
|
$
|
7,088
|
|
|
$
|
9,023
|
|
|
|
127
|
%
|
|
$
|
40,629
|
|
|
$
|
13,363
|
|
|
$
|
27,266
|
|
|
|
204
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s net revenues
are generated from ancillary healthcare service claims. The increase in
revenue for the three and nine months ended September 30, 2008 as compared to
the same periods in 2007 is due to the addition of five new clients during 2007
and four new clients during 2008 and the expansion of our relationships with our
two largest clients, one of which was established in 2006 and the other in early
2007. The progression of these relationships allowed the Company access to
a greater number of payors and allowed us to benefit from the external growth
and expansion of our clients. In addition, revenues were positively
impacted by growth in our service provider network.
Allowance for Doubtful
Accounts
We maintain an allowance for doubtful accounts
which are provided for at the time revenue is recognized. Co-payments,
deductibles and co-insurance payments can all impact the collectability of each
individual claim submitted to payors for payment. While the Company is
able to re-price a claim and estimate the cash it will receive from the payor
for that claim, the presence of co-pays, deductibles and co-insurance payments
can affect the ultimate collectability of the claim. The Company records
an allowance against gross revenue to better estimate collectability. The
allowance is applied specifically for each payor and is adjusted to reflect the
Company’s collection experience on a quarterly basis.
During the three months
ended September 30, 2008, we did not record a provision for doubtful accounts
and we did not write-off any accounts receivable, as compared to three months
ended September 30, 2007 when we recorded a provision for doubtful accounts of
approximately $355,000 and we wrote off accounts receivable of approximately
$425,000. During the nine months ended September 30, 2008, we recorded a
provision for doubtful accounts of approximately $85,000 compared to a provision
of approximately $243,000 for the same period in the prior year. During
2008, we wrote off accounts receivable of approximately $75,000, compared to
receivable write offs of approximately $190,000 during 2007.
Revenue is recognized based
on estimates of amounts to be collected in the future related to re-priced
claims submitted to payors. As our historical collection data has improved
and our client/payor relationship have matured, we have improved our ability to
more accurately estimate future amounts to be collected. Thus, during
2008, the adjustments to the allowance for uncollectable accounts and
receivables written off were consistent with the improvement of our collection
estimates.
Cost of Revenues and Gross
Margin
The following table sets forth a comparison of
the components of our cost of revenues, for the periods presented ending
September 30:
|
|
Third
Quarter
|
|
|
Nine
Months
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
Change
|
|
($
in thousands)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
Provider
payments
|
|
$
|
11,744
|
|
|
$
|
5,193
|
|
|
$
|
6,551
|
|
|
|
126
|
%
|
|
$
|
29,690
|
|
|
$
|
9,530
|
|
|
$
|
20,160
|
|
|
|
212
|
%
|
Administrative
fees
|
|
|
928
|
|
|
|
386
|
|
|
|
542
|
|
|
|
140
|
%
|
|
|
2,381
|
|
|
|
639
|
|
|
|
1,742
|
|
|
|
273
|
%
|
Fixed
costs
|
|
|
882
|
|
|
|
513
|
|
|
|
369
|
|
|
|
72
|
%
|
|
|
2,395
|
|
|
|
1,503
|
|
|
|
892
|
|
|
|
59
|
%
|
Total
cost of revenues
|
|
$
|
13,554
|
|
|
$
|
6,092
|
|
|
$
|
7,462
|
|
|
|
122
|
%
|
|
$
|
34,466
|
|
|
$
|
11,672
|
|
|
$
|
22,794
|
|
|
|
195
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth a comparison of
gross margin percentage for the periods presented ending September
30:
|
|
Third
Quarter
|
|
|
Nine
Months
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
Change
|
|
|
|
2008
|
|
|
2007
|
|
%
pts
|
|
|
2008
|
|
2007
|
|
%
pts
|
|
Gross
margin
|
|
15.9
|
%
|
14.1
|
%
|
1.8
|
%
|
15.2
|
%
|
$ 12.7
|
%
|
2.5
|
%
|
Gross margin is calculated
by dividing the difference between net revenues and total costs of revenues by
net revenues. The increase in gross margin reflected in the above table is
attributable primarily to the increase in net revenues, offset by a variety of
factors, including more aggressive pricing by the Company, fluctuations in the
mix of services provided by the Company, and increased administration fees
payable to clients as result of higher claim volume. The Company
anticipates that it will continue to experience margin expansion as the rate of
client volume increases over time resulting in improved leverage of its fixed
cost infrastructure.
S
elling, General and Administrative
Expenses
The following table sets forth a comparison of
our selling, general and administrative (“SG&A”) expenses for the periods
presented ending September 30:
|
|
Third
Quarter
|
|
|
Nine
Months
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
Change
|
|
($
in thousands)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
Selling,
general and
|
|
$
|
1,488
|
|
|
$
|
767
|
|
|
$
|
721
|
|
|
|
94
|
%
|
|
$
|
3,796
|
|
|
$
|
2,678
|
|
|
$
|
1,118
|
|
|
|
42
|
%
|
administrative
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
of total net revenues
|
|
|
9.2
|
%
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
9.3
|
%
|
|
|
20.0
|
%
|
|
|
|
|
|
|
|
|
Selling, general and
administrative (“SG&A”) expenses consist primarily of salaries and related
benefits, travel costs, sales commissions, sales materials, other marketing
related expenses, costs of corporate operations, finance and accounting, human
resources and other general operating expenses of the Company. The
increase in SG&A, on an absolute dollar basis, reflected in the above table
is primarily related to increased professional expenses, specifically
accounting, legal and consulting fees, accrued bonuses related to improved
operating results compared to the prior year periods, increased stock-based
compensation expense, increased recruiting fees related to attracting and hiring
talented employees to facilitate the Company’s growth and sales commissions
commensurate with our increased revenues. For the nine months ended
September 30, 2008, the increase was offset by the effect of the severance costs
incurred during the three months ended June 30, 2007 related to our former Chief
Executive Officer, who resigned effective June 30, 2007. Those costs were
approximately $330,000.
SG&A expenses as a percentage of net revenues
decreased over the prior year periods as a result of net revenues growing more
rapidly than our SG&A expenses, which is primarily the result of the
achievement of economies of scale as our revenues increased.
Depreciation and Amortization
The following table sets forth a comparison of
depreciation and amortization for the periods presented ending September
30:
|
|
Third
Quarter
|
|
|
Change
|
|
|
Nine
Months
|
|
|
Change
|
|
($
in thousands)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
Depreciation
|
|
$
|
53
|
|
|
$
|
33
|
|
|
$
|
20
|
|
|
|
61
|
%
|
|
$
|
135
|
|
|
$
|
88
|
|
|
$
|
47
|
|
|
|
53
|
%
|
Amortization
|
|
|
53
|
|
|
|
53
|
|
|
|
-
|
|
|
|
-
|
%
|
|
|
160
|
|
|
|
160
|
|
|
|
-
|
|
|
|
-
|
%
|
Total
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
amortization
|
|
$
|
106
|
|
|
$
|
86
|
|
|
$
|
20
|
|
|
|
23
|
%
|
|
$
|
295
|
|
|
$
|
248
|
|
|
$
|
47
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of intangibles consists of $21,000 of amortization of certain software
development costs and $32,000 in amortization of the capitalized value of
provider contracts that were acquired in the
2003
acquisition
of the assets of our predecessor, American CareSource Corporation by Patient
Infosystems (now CareGuide, Inc.), our former parent corporation. Each of these
items is being amortized using the straight-line method over its expected useful
life, which is five years for software and 15 years for provider
contracts.
Interest (Income) Expense,
net
The
following table sets forth a comparison of the components of interest (income)
expense, net for the periods presented ending September 30:
|
|
Third
Quarter
|
|
|
Change
|
|
|
Nine
Months
|
|
|
Change
|
|
($
in thousands)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
Interest
income
|
|
$
|
(66
|
)
|
|
$
|
(47
|
)
|
|
$
|
(19
|
)
|
|
|
40
|
%
|
|
$
|
(137
|
)
|
|
$
|
(151
|
)
|
|
$
|
14
|
|
|
|
(9
|
)
%
|
Interest
expense
|
|
|
1
|
|
|
|
3
|
|
|
|
(2
|
)
|
|
|
(67
|
)
%
|
|
|
5
|
|
|
|
9
|
|
|
|
(4
|
)
|
|
|
(44
|
)
%
|
Debt
issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
|
-
|
|
|
|
46
|
|
|
|
(46
|
)
|
|
|
(100
|
)
%
|
Total
interest (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense,
net
|
|
$
|
(65
|
)
|
|
$
|
(44
|
)
|
|
$
|
(21
|
)
|
|
|
48
|
%
|
|
$
|
(132
|
)
|
|
$
|
(96
|
)
|
|
$
|
(36
|
)
|
|
|
38
|
%
|
For the
nine months ended September 30, 2008, interest (income) expense, net increased
compared to the prior year period due to the amortization of debt issuance costs
of $
46,300,
which was incurred during the
first quarter of 2007. Those costs were fully amortized as of
December 31, 2007.
For the
three and nine months ended September 30, 2008, a provision for income taxes of
$
25,559 and $61,623
was recorded,
respectively, as compared to no income tax provision being recorded in the prior
year periods. The provision for the aforementioned periods in 2008
represents our estimated margin tax liability in the State of
Texas. Due to the existence of our net operating loss carryforward,
we have no federal income tax liability for the three and nine month periods
ended September 30, 2008.
FINANCIAL
CONDITION AND LIQUIDITY
As of
September 30, 2008, the Company had a working capital surplus of $6.5 million
compared to $3.6 million at December 31, 2007. In addition, our cash
and cash equivalents balance increased to $8.2 million as of September 30, 2008
compared to $4.3 at December 31, 2007. The increase is primarily the
result of net cash provided by operating activities of $4.2 million during the
nine months
ended September 30,
2008. That increase was offset by capital expenditures of
approximately $610,000 during the same period.
For the
nine months ended September 30, 2008, operating activities provided net cash of
$4.2 million, the primary components of which were net income of $
2.1 million,
adjusted for non-cash charges of
share-based compensation expense of approximately $
48
6
,
000
and depreciation and amortization of
approximately
$29
5
,
000
,
and an increase in net operating assets and
liabilities of $
1.2 million.
Net
operating assets and liabilities increased due to the timing of collection of
claims paid to us by our clients and payments made by us to the service
providers in our network and the accrual made for performance related bonuses
during the nine months ended September 30, 2008.
Investing
activities in the quarter
ended
September 30, 2008
were comprised of investments
in software development costs of approximately $352,000 and in property and
equipment of approximately $
258,0
00
. The software development costs
relate primarily to enhancements to our business intelligence capabilities,
while the increase in property and equipment relates primarily to investments in
computer equipment to facilitate our growth and increases in
headcount. During the three months ended September 30, 2008, we
retired our outstanding note payable with Capital One Bank. The final
payment under the note was approximately $48,000. As a condition to
the issuance of the note, we were required to hold a restricted certificate of
deposit in the amount of $145,000. Subsequent to the retirement of
the debt, the restriction on the balance was lifted and the certificate of
deposit was redeemed.
Financing
activities
in the quarter ended September 30, 2008
produced cash of approximately $
206
,000,
compared to cash used of approximately $
287,
000
in
the corresponding period
in
2007. Cash generated in financing activities was primarily comprised
of proceeds of approximately $168,000, from the exercise of employee stock
options, approximately $
1
30
,
000
of which was received from the exercise of
399,007
stock options by the former Chief
Executive Officer of the Company. In addition, approximately $127,000
was generated from the exercise of stock warrants, which resulted in the
issuance of 23,177 shares of the Company’s common stock. Those cash
inflows were offset by the retirement of our note payable with Capital One Bank
as described above.
Historically,
we have relied on external sources of
capital,
including indebtedness
or
issuance of equity
securities
to fund
our operations
. We believe our current cash balance of $8.2
million as of September 30, 2008 and expected future cash flows from operations
will be sufficient to meet our anticipated cash needs for working capital,
capital expenditures and other activities through the next twelve
months. If operating cash flows are not sufficient to meet our needs,
we believe that credit or access to capital through issuance of equity would be
available to us.
INFLATION
Inflation
did not have a significant impact on the Company’s costs during the quarters
ended September 30, 2008 and September 30, 2007, respectively. The
Company continues to monitor the impact of inflation in order to minimize its
effects through pricing strategies, productivity improvements and cost
reductions.
OFF-BALANCE
SHEET ARRANGEMENTS
The
Company does not have any off-balance sheet arrangements at September 30, 2008
or September 30, 2007 or for the periods then ended.
ITEM
4. Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls
and Procedures.
Our management, with the participation of our Chief
Executive Officer
and
Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and
procedures as of September 30, 2008. Based upon this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of
1934, as
amended
) are effective for the recording, processing, summarizing and
reporting of the information that the Company is required to disclose in the
reports it files under the Exchange Act, within the time periods specified in
the
SEC
’s rules and forms.
Changes in Internal Controls Over
Financial Reporting
. Our management, with the participation of
our Chief Executive Officer and Chief Financial Officer
,
has concluded that there were no changes in the
Company’s internal controls over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of
1934, as amended
) during the quarter ended
September 30, 2008 that have materially affected the Company’s internal controls
over financial reporting or are reasonably likely to materially affect internal
controls over financial reporting, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Part
II. OTHER INFORMATION
ITEM
1A. Risk Factors
In
addition to the other information set forth in this report, one should carefully
consider the discussion of various risks and uncertainties contained in Part I,
“Item 1A. Risk Factors” in our 2007 Annual Report on Form 10-K. We
believe those risk factors are the most relevant to our business and could cause
our results to differ materially from the forward-looking statements made by
us. Please note, however, that those are not the only risk factors
facing us. Although the Company has not experienced a decline in its
operations as a result of the recent financial crisis, it may be affected in the
future in at least two ways. First, to the extent that there are significant
increases in unemployment, fewer people may participate in insurance programs
with our customers. Second, plan participants, seeking to make their operations
more cost effective, could make less frequent use of some ancillary services. In
either case, we may receive less revenue and our profitability and growth could
be adversely affected, depending on the extent of the declines. Finally, as with
any business, the deterioration of the financial condition of our significant
customers (with two customers accounting for in excess of 98% of our revenue
during the nine months ended September 30, 2008) could have a corresponding
adverse effect on us. Additional risks that we do not consider
material, or of which we are not currently aware, may also have an adverse
impact on us. Our business, financial condition and results of
operations could be seriously harmed if any of these risks or uncertainties
actually occur or materialize. In that event, the market price for
our common stock could decline, and our shareholders may lose all or part of
their investment. During the nine months ended September 30, 2008,
there were no material changes in the information regarding risk factors
contained in our Annual Report on Form 10-K for the year ended December 31,
2007.
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds
On June
26, 2008, the Company issued 886 shares of its common stock in connection with a
cashless exercise by an accredited investor of restricted warrants to purchase
1,000 shares. The Holder of the warrant forfeited the right to
acquire 114 shares of its common stock under the warrant as consideration for
this cashless exercise.
On July
2, 2008, the Company issued 4,430 shares of its common stock in connection with
a cashless exercise by an accredited investor of restricted warrants to purchase
5,000 shares. The Holder of the warrant forfeited the right to
acquire 570 shares of its common stock under the warrant as consideration for
this cashless exercise.
On
September 17, 2008, the Company issued 8,433 shares of its common stock in
connection with a cashless exercise by an accredited investor of restricted
warrants to purchase an aggregate of 26,680 shares. The Holder of the
warrant forfeited the right to acquire 18,247 shares of its common stock under
the warrant as consideration for this cashless exercise.
On
September 24, 2008, the Company issued an aggregate of 23,177 shares of its
common stock in connection with exercises by five accredited investors of
restricted warrants to purchase an aggregate of 23,177 for an aggregate exercise
price of $127,428.
The share
issuances in all of the above transactions were not registered under the
Securities Act of 1933, as amended (the “Securities Act”). The
issuances were exempt from registration pursuant to Section 4(2) of the
Securities Act and Regulation D thereunder, as they were transactions by the
issuer that did not involve public offerings of securities and involved sales
made to accredited investors.
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
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
AMERICAN
CARESOURCE HOLDINGS, INC.
|
|
|
|
|
|
|
By:
|
/s/ David
S. Boone
|
|
|
|
David
S. Boone
|
|
|
|
President
and Chief Executive Officer (principal executive officer and an authorized
signatory)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Steven
J. Armond
|
|
|
|
Steven
J. Armond
|
|
|
|
Chief
Financial Officer (principal financial officer and an authorized
signatory)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Matthew
D. Thompson
|
|
|
|
Matthew
D. Thompson
|
|
|
|
Controller
(principal accounting officer and an authorized signatory)
|
|
|
|
|
|
Date:
November 13, 2008
American CareSource (CE) (USOTC:GNOW)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
American CareSource (CE) (USOTC:GNOW)
Historical Stock Chart
Von Jul 2023 bis Jul 2024