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, 2015
OR
¨ |
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)
|
|
Delaware |
20-0428568 |
(State or other jurisdiction of
incorporation or organization) |
(IRS Employer
Identification No.) |
1170 Peachtree Street, Suite 2350
Atlanta, Georgia 30309
(Address of principal executive offices)
(404) 465-1000
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Name of Each Exchange on Which Registered |
Common Stock, par value $.01 per share |
The NASDAQ Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
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 ¨
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 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 definitions of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer |
¨ |
Accelerated Filer |
¨ |
Non-Accelerated Filer |
¨ (Do not check if a smaller reporting company) |
Smaller reporting company |
x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes ¨ No x
As of August 14, 2015, there were 6,743,853 outstanding shares of common stock of the
registrant.
TABLE OF CONTENTS
AMERICAN CARESOURCE HOLDINGS, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2015
PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements
AMERICAN CARESOURCE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
| |
June 30, 2015
(Unaudited) | |
December 31,
2014 (Audited) |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 491 | | |
$ | 1,020 | |
Accounts receivable | |
| 3,470 | | |
| 4,135 | |
Prepaid expenses and other current assets | |
| 667 | | |
| 612 | |
Deferred income taxes | |
| 6 | | |
| 6 | |
Total current assets | |
| 4,634 | | |
| 5,773 | |
| |
| | | |
| | |
Property and equipment, net | |
| 4,089 | | |
| 4,322 | |
| |
| | | |
| | |
Other assets: | |
| | | |
| | |
Deferred income taxes | |
| 12 | | |
| 12 | |
Deferred loan fees, net | |
| 1,725 | | |
| 2,666 | |
Deferred offering costs | |
| 254 | | |
| 225 | |
Other non-current assets | |
| 117 | | |
| 488 | |
Intangible assets, net | |
| 756 | | |
| 1,437 | |
Goodwill | |
| 6,182 | | |
| 6,182 | |
Total other assets | |
| 9,046 | | |
| 11,010 | |
Total assets | |
$ | 17,769 | | |
$ | 21,105 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Lines of credit | |
$ | 5,000 | | |
$ | - | |
Due to ancillary network service providers | |
| 2,045 | | |
| 2,308 | |
Due to HealthSmart, ancillary network | |
| 745 | | |
| 903 | |
Accounts payable | |
| 932 | | |
| 762 | |
Accrued liabilities | |
| 2,411 | | |
| 1,875 | |
Current portion of long-term debt | |
| 576 | | |
| 989 | |
Capital lease obligations, current portion | |
| 126 | | |
| 117 | |
Total current liabilities | |
| 11,835 | | |
| 6,954 | |
| |
| | | |
| | |
Long-term liabilities: | |
| | | |
| | |
Lines of credit | |
| 4,500 | | |
| 4,716 | |
Promissory notes and notes payable | |
| 171 | | |
| 312 | |
Capital lease obligations | |
| 1,698 | | |
| 1,764 | |
Warrant derivative liability | |
| 1,871 | | |
| 3,200 | |
Other long-term liabilities | |
| 341 | | |
| 222 | |
Total long-term liabilities | |
| 8,581 | | |
| 10,214 | |
Total liabilities | |
| 20,416 | | |
| 17,168 | |
| |
| | | |
| | |
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; 6,902 and 6,713 shares issued and outstanding in 2015 and 2014, respectively | |
| 69 | | |
| 67 | |
Additional paid-in capital | |
| 26,165 | | |
| 25,731 | |
Accumulated deficit | |
| (28,881 | ) | |
| (21,861 | ) |
Total stockholders' equity | |
| (2,647 | ) | |
| 3,937 | |
Total liabilities and stockholders' equity | |
$ | 17,769 | | |
$ | 21,105 | |
The accompanying notes are an integral part of these unaudited 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, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Net revenues: | |
| | | |
| | | |
| | | |
| | |
Ancillary network | |
$ | 5,604 | | |
$ | 5,497 | | |
$ | 11,347 | | |
$ | 10,505 | |
Urgent and primary care | |
| 2,354 | | |
| 474 | | |
| 5,026 | | |
| 474 | |
Total net revenues | |
| 7,958 | | |
| 5,971 | | |
| 16,373 | | |
| 10,979 | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Ancillary network provider payments | |
| 4,137 | | |
| 3,880 | | |
| 8,468 | | |
| 7,633 | |
Ancillary network administrative fees | |
| 194 | | |
| 307 | | |
| 524 | | |
| 527 | |
Ancillary network other operating costs | |
| 933 | | |
| - | | |
| 1,905 | | |
| - | |
Ancillary network prepaid write-off | |
| 487 | | |
| - | | |
| 487 | | |
| - | |
Salaries, wages, benefits and taxes | |
| 2,968 | | |
| 1,695 | | |
| 5,776 | | |
| 3,082 | |
Other operating expenses | |
| 2,430 | | |
| 1,199 | | |
| 5,332 | | |
| 2,111 | |
Intangible asset impairment | |
| 520 | | |
| - | | |
| 520 | | |
| - | |
Depreciation and amortization | |
| 292 | | |
| 215 | | |
| 583 | | |
| 393 | |
Total operating expenses | |
| 11,961 | | |
| 7,296 | | |
| 23,595 | | |
| 13,746 | |
Operating (loss) | |
| (4,003 | ) | |
| (1,325 | ) | |
| (7,222 | ) | |
| (2,767 | ) |
| |
| | | |
| | | |
| | | |
| | |
Interest expense: | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 93 | | |
| 13 | | |
| 176 | | |
| 9 | |
Gain on warrant liability, net of deferred loan fees amortization | |
| (757 | ) | |
| - | | |
| (388 | ) | |
| - | |
Total interest expense | |
| (664 | ) | |
| 13 | | |
| (212 | ) | |
| 9 | |
Loss before income taxes | |
| (3,339 | ) | |
| (1,338 | ) | |
| (7,010 | ) | |
| (2,776 | ) |
Income tax expense | |
| 4 | | |
| 4 | | |
| 10 | | |
| 1 | |
Net (loss) | |
$ | (3,343 | ) | |
$ | (1,342 | ) | |
$ | (7,020 | ) | |
$ | (2,777 | ) |
Basic net loss per share | |
$ | (0.49 | ) | |
$ | (0.21 | ) | |
$ | (1.03 | ) | |
$ | (0.46 | ) |
Diluted net loss per share | |
$ | (0.49 | ) | |
$ | (0.21 | ) | |
$ | (1.14 | ) | |
$ | (0.46 | ) |
Basic weighted-average shares outstanding | |
| 6,849 | | |
| 6,395 | | |
| 6,811 | | |
| 6,062 | |
Diluted weighted-average shares outstanding | |
| 6,849 | | |
| 6,395 | | |
| 6,851 | | |
| 6,062 | |
The accompanying notes are an integral part of these unaudited financial
statements
AMERICAN CARESOURCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(amounts in thousands)
| |
Common Stock | |
| |
| |
|
| |
Shares | |
Amount | |
Additional
Paid-In
Capital | |
Accumulated Deficit | |
Total Stockholders'
Equity |
Balance at December 31, 2014 | |
| 6,713 | | |
$ | 67 | | |
$ | 25,731 | | |
$ | (21,861 | ) | |
$ | 3,937 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (7,020 | ) | |
| (7,020 | ) |
Stock-based compensation expense | |
| - | | |
| - | | |
| 403 | | |
| - | | |
| 403 | |
Issuance of common stock upon exercise of equity incentive awards | |
| 34 | | |
| - | | |
| 33 | | |
| - | | |
| 33 | |
Issuance of common stock upon conversion of restricted stock units | |
| 155 | | |
| 2 | | |
| (2 | ) | |
| - | | |
| - | |
Balance at June 30, 2015 | |
| 6,902 | | |
$ | 69 | | |
$ | 26,165 | | |
$ | (28,881 | ) | |
$ | (2,647 | ) |
The accompanying notes are an integral part of these unaudited financial
statements
AMERICAN CARESOURCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
| |
Six months ended June 30, |
| |
2015 | |
2014 |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (7,020 | ) | |
$ | (2,777 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Non-cash stock-based compensation expense | |
| 403 | | |
| 197 | |
Intangible asset impairment | |
| 520 | | |
| - | |
Depreciation and amortization | |
| 583 | | |
| 393 | |
Gain on warrant liability, net of deferred loan fees amortization | |
| (388 | ) | |
| - | |
Change in deferred rent | |
| 119 | | |
| - | |
Changes in operating assets and liabilities, net of effects of acquisitions: | |
| | | |
| | |
Accounts receivable | |
| 665 | | |
| (111 | ) |
Prepaid expenses and other assets | |
| 265 | | |
| (192 | ) |
Due to ancillary network service providers | |
| (263 | ) | |
| (145 | ) |
Due to HealthSmart, ancillary network | |
| (158 | ) | |
| - | |
Accounts payable | |
| 163 | | |
| (51 | ) |
Accrued liabilities | |
| 536 | | |
| 456 | |
Net cash used in operating activities | |
| (4,575 | ) | |
| (2,230 | ) |
Cash flows from investing activities: | |
| | | |
| | |
Cost of acquisition | |
| - | | |
| (2,180 | ) |
Additions to property and equipment | |
| (138 | ) | |
| (196 | ) |
Net cash used in investing activities | |
| (138 | ) | |
| (2,376 | ) |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from issuance of common stock and option exercises | |
| 33 | | |
| 2,000 | |
Proceeds from borrowings under line of credit | |
| 4,784 | | |
| - | |
Principal payments on capital lease obligations | |
| (57 | ) | |
| (1 | ) |
Principal payments on long-term debt | |
| (554 | ) | |
| (6 | ) |
Offering costs, paid and deferred | |
| (22 | ) | |
| - | |
Net cash provided by financing activities | |
| 4,184 | | |
| 1,993 | |
Net decrease in cash and cash equivalents | |
| (529 | ) | |
| (2,613 | ) |
Cash and cash equivalents at beginning of period | |
| 1,020 | | |
| 6,207 | |
Cash and cash equivalents at end of period | |
$ | 491 | | |
$ | 3,594 | |
Supplemental cash flow information: | |
| | | |
| | |
Cash paid for taxes, net of refunds | |
$ | - | | |
$ | 25 | |
Cash paid for interest | |
| 117 | | |
| - | |
Supplemental non-cash operating and financing activity: | |
| | | |
| | |
Offering costs, unpaid and deferred | |
$ | 7 | | |
$ | - | |
Reclassified property and equipment from prepaid expenses | |
$ | 51 | | |
$ | - | |
The accompanying notes are an integral part of these unaudited financial
statements
AMERICAN CARESOURCE HOLDINGS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(tables in thousands, except per share data)
1. General
Basis of Presentation
The accompanying unaudited
consolidated financial statements of American CareSource Holdings, Inc. and its subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States for interim financial information, with the instructions to Form
10-Q and Rule 8-03 of Regulation S-X of the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly,
they do not include all of the information and notes required by accounting principles generally accepted in the United States
for complete financial statements. In the opinion of management, these statements include all adjustments necessary to present
a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim
period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s
financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from
those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial
statements and notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014. References
herein to the "Company," "we," "us," or "our" refer to American CareSource Holdings, Inc.
and its subsidiaries.
Recent Accounting Pronouncements
In May 2014, the FASB issued
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount
of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace
most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for the
Company on January 1, 2018. Early application is not permitted. The standard permits the use of either the retrospective or cumulative
effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements
and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard
on its ongoing financial reporting.
In August 2014, the FASB
issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going Concern. The guidance relates to the disclosures around going concern. The
new standard update provides guidance around management's responsibility to evaluate whether there is substantial doubt about an
entity's ability to continue as a going concern and to provide related footnote disclosures. The new guidance is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.
We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.
In April 2015, the FASB
issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance
Costs. The guidance relates to the presentation of debt issuance costs. The new standard update provides guidance
that would require debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the
debt liability. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2016. Early adoption is permitted. We do not believe the adoption of this guidance will have a material impact
on our consolidated financial statements.
2. Description of Business
The Company engages in two lines of business: our
urgent and primary care business and our ancillary network business. These lines of business are supported through a
shared services function.
Urgent and Primary Care Business
In May 2014, we announced our entry into the
urgent and primary care market. During the remainder of 2014, we, through our wholly-owned subsidiaries, acquired ten urgent and
primary care centers located in Georgia (three), Florida (two), Alabama (three) and Virginia (two). These centers offer a wide
array of services for non-life-threatening medical conditions. We strive to improve access to quality medical care by
offering extended hours and weekend service and also by accepting patients primarily on a walk-in basis.
Ancillary Network Business
Our ancillary network business offers cost containment
strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers. Our
services are marketed to a number of healthcare companies including third-party administrators, insurance companies, large self-funded
organizations, various employer groups, and preferred provider organizations. We offer payors this solution by:
· | | lowering
our payors' ancillary care costs throughout network of high quality, cost effective providers that we have 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 needs and is available to each payor's members for covered services; |
· | | providing payors with claims management, reporting,
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. |
On October 1, 2014, we entered into a management
services agreement with HealthSmart Preferred Care II, L.P. ("HealthSmart"). Under the management services agreement,
HealthSmart manages our ancillary network business, subject to the supervision of a five-person oversight committee comprised of
three members selected by us and two members selected by HealthSmart. As part of the management arrangement, HealthSmart
hired substantially all of our ancillary network business employees, purchased substantially all of our furniture, fixtures and
equipment located in our Dallas, Texas office and assumed our lease for that office. As a result of this arrangement,
we no longer employ the workforce of our ancillary network business.
Under the management services agreement, HealthSmart
manages and operates our ancillary network business for a monthly fee equal to the sum of (a) 35% of the net profit derived from
the operation of our ancillary network business plus (b) 120% of all direct and documented operating expenses and liabilities actually
paid during such calendar month by HealthSmart in connection with providing its management services. For purposes of the
fee calculation, the term "net profit" means gross ancillary network business revenue, less the sum of (x) the provider
payments and administrative fees and (y) 120% of all direct and documented operating expenses and liabilities actually paid during
such calendar month by HealthSmart in connection with providing its management services. Any remaining net profit accrues
to us. During the term of the agreement, HealthSmart is responsible for the payment of all expenses incurred in providing
the management services with respect to our ancillary network business, including personnel salaries and benefits, the cost of
supplies and equipment, and rent. The initial term of the management services agreement is three years, and it renews
annually thereafter for one-year terms unless either party gives notice of termination at least 90 days prior to the end of the
then-current term.
Our management agreement with
HealthSmart provides that at any time between October 1, 2016 and the expiration date of the management services agreement,
HealthSmart may purchase, or we may require that HealthSmart purchase, our ancillary network business for a price equal to
$6,500,000 less the aggregate sum of net profit received by us since the beginning of the management arrangement, which as of
June 30, 2015 was approximately $1.1 million. The purchase price is to be payable by HealthSmart solely out of the
net profit it derives from the operation of the ancillary network business after consummation of the transaction.
Consummation of the transaction will be subject to the satisfaction of certain material conditions, currently including
stockholder approval of the sale. If, the sale of our ancillary network business to HealthSmart is not consummated
during or at the end of the term of the management services agreement, we expect to then either reassume management of that
line of business, or seek to sell that business on the most favorable terms we are able to obtain.
3. Liquidity and
Earnings (Loss) Per Share
Liquidity
We incurred losses from our investment in shared services
to support planned growth in our urgent and primary care business segment and oversight of the network and ancillary
business, the write-off of intangible assets, the payment and accrual of one-time severance charges, costs incurred to
integrate our acquired urgent and primary care facilities, operating losses incurred by our urgent and primary care business
segment as we implement changes to improve performance, and operating losses incurred in our network and ancillary network
business. As a result of our recurring and nonrecurring losses, we used cash in our operations of $4.6 million and $2.2
million during the six months ended June 30, 2015 and 2014, respectively.
We anticipate we will continue to
experience negative cash flow relating to our losses, during the next 12 months as we improve the operating performance of
our existing urgent and primary care centers, expand our urgent and primary care segment and operate our ancillary network
business.
Until we generate positive cash flows from operations, we will
be dependent on our existing lines of credit and outside capital to fund our operations, fund planned and future acquisitions,
and repay debt. At August 14, 2015, we have funds of $1,961,000 available for these needs. We plan to raise additional capital
as follows:
· | | Increase our existing lines of credits. We have two existing lines of credit
under credit agreements with Wells Fargo, National Association, or Wells Fargo. One of our lines was entered into in July 2014
for $5.0 million of financing and the other was entered into in December 2014 for $6.0 million of financing. Both credit agreements
were originally scheduled to mature on June 1, 2016. On August 12, 2015, the maturity of the
$6.0 million line was extended to October 1, 2016 and the outstanding balance of $4.5 million was reclassified
to long-term on our consolidated balance sheets. We plan to further extend these lines of credit, and will request the guarantors
remain obligated under their respective guarantees until we have adequate capital to repay them. Along with the maturity date extension,
we also increased the line of credit under our December 2014 credit agreement from $6,000,000 to $7,000,000. As of August 12, 2015,
we have borrowed the $11.0 million of the $12 million available to us under our existing lines of credit.
|
· | | A public offering of shares of our common stock. On February 6, 2015, we filed a Form
S-1 Registration Statement with the SEC to sell additional shares of our common stock. If the public offering is fully subscribed,
we will raise an additional $13,000,000 (less offering expenses), plus any proceeds we receive on account of the 15% over-allotment
option we have granted to underwriters.
|
We also expect to raise additional
capital later this year or in early 2016 to fund our operations, to repay indebtedness and to facilitate the expansion of our
urgent and primary care business. We may raise such capital through one or more public or private equity offerings, debt
financings, borrowings or a combination thereof.
There are no assurances that we will be
successful in further extending the maturity dates under our lines of credit, that our guarantors will agree to
continue their obligations under their guarantees, or that we will be able to obtain additional capital at terms acceptable
to us or at all.
Earnings (Loss) Per Share
Basic (loss) per share is computed by dividing
net (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period of computation. Diluted
(loss) per share is computed similar to basic earnings per share except that the numerator is adjusted for the change in fair value
of the warrant liability (only if dilutive), and the denominator is increased to include the number of dilutive potential common
shares outstanding during the period using the treasury stock method.
Basic net (loss) and diluted net (loss) per
share data were computed as follows:
| |
Three months ended June 30, 2015 | |
Six months ended June 30, 2015 |
Numerator: | |
| | | |
| | |
Net (loss) for basic earnings per share | |
| (3,343 | ) | |
| (7,020 | ) |
Less gain on change in fair value of warrant liability | |
| - | | |
| 791 | |
Net (loss) for diluted earnings per share | |
| (3,343 | ) | |
| (7,811 | ) |
Denominator: | |
| | | |
| | |
Weighted-average basic common shares outstanding | |
| 6,849 | | |
| 6,811 | |
Assumed conversion of dilutive securities: | |
| | | |
| | |
Common stock purchase warrants | |
| - | | |
| 40 | |
Denominator for dilutive earnings per share - adjusted weighted-average shares | |
| 6,849 | | |
| 6,851 | |
| |
| | | |
| | |
Basic net (loss) per share | |
$ | (0.49 | ) | |
$ | (1.03 | ) |
Diluted net (loss) per share | |
$ | (0.49 | ) | |
$ | (1.14 | ) |
The following table summarizes potentially dilutive
shares outstanding as of June 30, 2015, which were excluded from the calculation due to being anti-dilutive:
| |
2015 |
Common stock purchase warrants | |
| 1,782 | |
Stock options | |
| 748 | |
Restricted shares of common stock | |
| - | |
4. Acquisitions
During the year ended December 31, 2014, we closed five transactions
supporting our entry into the urgent and primary care market. A summary of the acquisitions is as follows:
Business Acquired | |
State | |
Sites | |
Date of Closing |
CorrectMed | |
| Georgia | | |
| 2 | | |
| May 8, 2014 | |
Bay Walk-In Clinic | |
| Florida | | |
| 2 | | |
| August 29, 2014 | |
Mid-South Urgent Care | |
| Alabama | | |
| 3 | | |
| September 12, 2014 | |
MedHelp | |
| Georgia | | |
| 1 | | |
| October 31, 2014 | |
Stat Medical Care | |
| Virginia | | |
| 2 | | |
| December 31, 2014 | |
The following table provides certain pro forma financial information for the Company as if the acquisition of CorrectMed had occurred
on January 1, 2014. Pro forma information for Bay Walk-In, Mid-South Urgent Care, MedHelp, and Stat Medical Care was
not included since it was impracticable to obtain, due to the financial reporting approaches utilized by the prior owners of the
businesses.
| |
6 months ended June 30, |
| |
2015 | |
2014 |
Net revenue | |
| | | |
| | |
Ancillary network | |
$ | 11,347 | | |
$ | 10,505 | |
Urgent and primary care | |
| 5,026 | | |
| 1,598 | |
Total net revenue | |
| 16,373 | | |
| 12,103 | |
| |
| | | |
| | |
Net loss | |
$ | (7,020 | ) | |
$ | (3,102 | ) |
| |
| | | |
| | |
Basic net (loss) per common share | |
$ | (1.03 | ) | |
$ | (0.51 | ) |
Diluted net (loss) per common share | |
$ | (1.14 | ) | |
$ | (0.51 | ) |
5. Revenue Recognition, Accounts Receivable, and Concentration of Credit Risk
Our Urgent and Primary Care Business
We have agreements with governmental and other
third-party payors that provide for payments to us based on contractual adjustments to our established rates. Net revenue is reported
at the time service is rendered at the estimated net realizable amounts, after giving effect to estimated contractual amounts from
patients, third-party payors and others, and an estimate for bad debts.
Contractual adjustments are accrued on an estimated
basis in the period the related services are rendered, and adjusted in future periods as final settlements are determined. We
grant credit without collateral to our patients, who consist primarily of local residents insured by third-party payors. A
summary of the basis of reimbursement with major third-party payors is as follows:
Commercial and HMO – We have entered into agreements
with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. Billing methodologies
under these agreements include discounts from established charges and prospectively determined rates.
Medicare – Services rendered to Medicare
program beneficiaries are recorded at prospectively determined rates. These rates vary according to a patient classification system
that is based on clinical, diagnostic, and other factors.
In establishing allowance for bad debts, we
consider historical collection experience, the aging of the account, payor classification and patient payment patterns. We
adjust this allowance prospectively.
Collection of payment for services provided
to patients without insurance coverage is done at time of service.
Below is a summary of accounts receivable
as of June 30, 2015, and revenues for the six months ending June 30, 2015, for our urgent and primary care
business. We entered the urgent and primary care business in May 2014.
| |
June 30, 2015 |
Accounts receivable | |
$ | 2,616 | |
Less: | |
| | |
Estimated allowance for uncollectible amounts | |
| (1,538 | ) |
Accounts receivable, net | |
$ | 1,078 | |
| |
June 30, 2015 |
Gross revenue | |
$ | 10,119 | |
Less: | |
| | |
Provision for contractual adjustments and estimated uncollectible amounts | |
| (5,093 | ) |
Net revenue | |
$ | 5,026 | |
Our Ancillary Network Business
We recognize revenue on
the services that we provide, 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 payor clients and collections are
reasonably assured. We estimate 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.
We record a provision for
refunds based on an estimate of historical refund amounts. Refunds are paid to payors for overpayment 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.
After
careful evaluation of the key gross and net revenue recognition indicators, we have concluded that our circumstances are most consistent
with those key indicators that support gross revenue reporting, since we are fulfilling the services of a principal versus an agent.
Following are the key indicators
that support our conclusion that we act as a principal when settling claims for service providers through our contracted service
provider network:
● | | The Company is the primary obligor in the arrangement.
We have assessed our role as primary obligor as a strong indicator of gross reporting. We believe that we are the primary
obligor in our transactions because we are responsible for providing the services desired by our payor clients. We
have distinct, separately negotiated contractual relationships with our payor clients and with the ancillary healthcare providers
in our networks. We do not negotiate "on behalf of" our payor clients and do not hold ourselves out as the
agent of the payor clients when negotiating the terms of our ancillary healthcare service provider agreements. Our
agreements contractually prohibit payor clients and service providers from entering into direct contractual relationships with
one another. The payor clients have no control over the terms of our agreements with the service providers. In
executing transactions, we assume key performance-related risks. The payor clients hold us responsible for fulfillment,
as the provider, of all of the services the payor clients are entitled to under their contracts; payor clients do not look to
the service providers for fulfillment. In addition, we bear the pricing/margin risk as the principal in the transactions. Because
the contracts with the payor clients and service providers are separately negotiated, we have complete discretion in negotiating
both the prices we charge our payor clients and the financial terms of our agreements with the service providers. Because
our profit is the spread between the amounts received from the payor clients and the amount paid to the service providers, we
bear significant pricing and margin risk. There is no guaranteed mark-up payable to us on the amount we have contracted. Thus,
we bear the risk that amounts paid to the service provider will be greater than the amounts received from the payor clients, resulting
in a loss or negative claim. |
● | | The Company has latitude in establishing pricing.
As stated above, we are able to negotiate the price payable to us by our payor clients as well as the price to be paid to each
contracted service provider. This type of pricing latitude indicates that we have the risks and rewards normally attributed
to a principal in the transactions. |
● | | The Company changes the product or performs part
of the services. We provide the benefits associated with the relationships we build with the payor clients and the services
providers. While the parties could deal with each other directly, the payor clients would not have the benefit of our
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 payor clients 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.
We have complete discretion in supplier selection. One of the key factors considered by payor clients which engage
us 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 us and our payor clients,
the payors identify their obligations to their respective covered persons and then work with us to determine the types of ancillary
healthcare services required in order for the payors to meet their obligations. We 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. We work with our payor clients 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, we are customizing
the product through our efforts and ability to assemble a comprehensive network of providers for our payors that is tailored to
each payor's specific needs. In addition, as part of our claims processing and payment services, we work with the payor
clients, 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.
We believe we have some level of credit risk, but that risk is mitigated because we do not remit payment to providers unless and
until we have received payment from the relevant payor clients following our processing of a claim. |
● | | The amount that the Company earns is not fixed.
We do not earn a fixed amount per transaction nor do we realize a per-person per-month charge for our services. |
We have evaluated the other indicators of gross
and net revenue recognition, including whether or not we have general inventory risk. We do not have any general inventory
risk, as our business is not related to the manufacture, purchase or delivery of goods and we do 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, we have carefully evaluated all of the key gross and
net revenue recognition indicators and have concluded that our circumstances are more consistent with those key indicators that
support gross revenue reporting.
If, however, we were to report our
ancillary network revenues, net of provider payments rather than on a gross reporting basis, for the three and six months
ended June 30, 2015, our net ancillary network revenues would have been $1.5 million and $2.9 million, respectively. For the
three and six months ended June 30, 2014, our net ancillary network revenues would have been approximately $1.6 million and
$2.9 million, respectively.
For our ancillary network business, HealthSmart
comprised a significant portion of our net revenue during the period ended June 30, 2015 and 2014. The following is a summary of
the approximate amounts of our net revenue and accounts receivable attributable to HealthSmart as of the dates and for the periods
presented:
| |
| |
Period ended June 30, 2015 | |
| |
Period ended June 30, 2014 |
| |
As of June 30, 2015 | |
Three months | |
Six months | |
As of June 30, 2014 | |
Three months | |
Six months |
| |
Accounts
Receivable | |
Revenue | |
% of Total Revenue | |
Revenue | |
% of Total Revenue | |
Accounts Receivable | |
Revenue | |
% of Total Revenue | |
Revenue | |
% of Total Revenue |
HealthSmart Preferred Care II, L.P. | |
$ | 557 | | |
$ | 2,056 | | |
| 25 | % | |
$ | 3,873 | | |
| 23 | % | |
$ | 1,029 | | |
$ | 2,312 | | |
| 39 | % | |
$ | 3,544 | | |
| 32 | % |
We maintain an allowance for uncollectible receivables
which primarily relates to payor refunds. 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 payment made to the ancillary service provider
if the claim has been fully resolved. Co-payments, deductibles and co-insurance payments can also impact the collectability of
claims. While we are able to process a claim and estimate the cash we 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. We record an allowance against
revenue to better estimate collectability. Provisions for refunds recorded were approximately $(174,000) and $53,000 for the three-month periods
ended June 30, 2015 and 2014, respectively. The allowance was approximately $125,000 and $341,000 at June 30, 2015 and 2014, respectively.
6. Capital and Operating Lease Obligations
The following is a schedule of the future
required payments under our lease agreements in effect at June 30, 2015:
| |
Capital
Leases | |
Operating Leases | |
Total |
2015 (remaining 6 months) | |
$ | 145 | | |
$ | 440 | | |
$ | 585 | |
2016 | |
| 299 | | |
| 879 | | |
| 1,178 | |
2017 | |
| 287 | | |
| 766 | | |
| 1,053 | |
2018 | |
| 276 | | |
| 651 | | |
| 927 | |
2019 | |
| 273 | | |
| 585 | | |
| 858 | |
Thereafter | |
| 2,898 | | |
| 827 | | |
| 3,725 | |
Total minimum lease payments | |
| 4,178 | | |
$ | 4,148 | | |
$ | 8,326 | |
Less amount representing interest | |
| (2,354 | ) | |
| | | |
| | |
Present value of net minimum obligations | |
| 1,824 | | |
| | | |
| | |
Less current obligation under capital lease | |
| 126 | | |
| | | |
| | |
Long-term obligation under capital lease | |
$ | 1,698 | | |
| | | |
| | |
7. Lines of Credit, Promissory Notes, and Notes Payable
Below is a summary of our short-term and long-term
debt obligations.
Lines of Credit
On July 30, 2014, we entered into a
credit agreement with Wells Fargo providing for a $5,000,000 revolving line
of credit. On December 4, 2014, we entered into a second credit agreement with Wells Fargo Bank, providing for
a $6,000,000 revolving line of credit. We refer to these two agreements as our credit
agreements. Our obligation to repay advances under the credit agreements are evidenced by revolving line of credit
notes, each with a fluctuating interest rate per annum of 1.75% above daily one month LIBOR, as in effect from time to
time. The July 30, 2014 credit agreement matures on June 1, 2016, and all borrowings under this credit agreement
are due and payable on that date. On August 12, 2015, we increased the line of credit under the December 4, 2014
credit agreement from $6,000,000 to $7,000,000 and extended the maturity date to October 1, 2016, and all borrowings under
the December 2014 credit agreement are due and payable on that date. The obligations under the credit agreements are secured
by all the assets of the Company and its subsidiaries. The credit agreements include ordinary and customary
covenants related to, among other things, additional debt, further encumbrances, sales of assets, and investments and
lending.
Borrowings under the credit agreements are also
secured by guarantees provided by certain officers and directors of the Company, among others. On July 30, 2014, we
issued to the guarantors of the July 2014 obligations warrants to purchase an aggregate of 800,000 shares of our common stock at
$3.15 per share in consideration of their guaranteeing such indebtedness. The July 2014 warrants vested immediately and are exercisable
any time prior to their expiration on October 30, 2019. In addition, on December 4, 2014, we issued to the guarantors
of the December 2014 obligations warrants to purchase an aggregate of 960,000 shares of our common stock at $2.71 per share in
consideration of their guaranteeing such indebtedness. The December 2014 warrants vested immediately and are exercisable any time
prior to their expiration on December 4, 2019. In connection with the $1,000,000 increase in the line of credit under the December 2014
credit agreement, we issued warrants to the guarantors to purchase an additional 300,000 shares of our common stock at $1.70
per share, subject to certain adjustments under certain circumstances, in consideration of their guaranteeing such
indebtedness. The warrants vested immediately and are exercisable at any time prior to their expiration on August 12, 2020.
As of June 30, 2015, we had
outstanding borrowings of $5,000,000 under our July 2014 credit agreement and $4,500,000 under our December 2014 credit
agreement. The amount outstanding under our July 2014 credit agreement was recorded as a current liability on our
consolidated balance sheet as of June 30, 2015. Based on the extension of the December 2014 credit agreement to October 2016
subsequent to quarter end, the $4.5 million outstanding balance has been reclassified to long-term on our consolidated
balance sheet. Substantially all of the borrowings under the credit agreements were used to finance acquisition activity, fund
losses, and $200,000 was used to secure a bond required by a state license for the network business. The
weighted-average interest rate on these borrowings was 1.94% as of June 30, 2015.
Promissory Notes and Notes Payable
The following is a summary of all Company debt
as of June 30, 2015:
Revolving line of credit | |
$ | 9,500 | |
Promissory notes, related to acquisitions | |
| 747 | |
Total debt | |
| 10,247 | |
Less current maturities | |
| 5,576 | |
Long-term debt | |
$ | 4,671 | |
Outstanding debt balances as of June 30, 2015 mature, adjusted for
subsequent extension, as follows: 2015 (remaining 6 months) - $466,000; 2016 - $9,762,000; 2017 - $19,000.
8. Intangible Assets
Intangible assets and related accumulated amortization
consists of the following as of the dates presented:
| |
June 30, 2015 | |
December 31, 2014 |
Gross carrying amount of urgent and primary care intangibles: | |
| | | |
| | |
Patient relationships and contracts | |
$ | 972 | | |
$ | 972 | |
Accumulated amortization | |
| (144 | ) | |
| (47 | ) |
Intangible asset impairment* | |
| (520 | ) | |
| - | |
Urgent and primary care intangibles, net | |
| 308 | | |
| 925 | |
| |
| | | |
| | |
Gross carrying amount of ancillary intangibles: | |
| | | |
| | |
Ancillary provider network | |
| 1,921 | | |
| 1,921 | |
Software | |
| 428 | | |
| 428 | |
| |
| 2,349 | | |
| 2,349 | |
Accumulated amortization | |
| (1,901 | ) | |
| (1,837 | ) |
Ancillary intangibles, net | |
| 448 | | |
| 512 | |
Total intangibles, net | |
$ | 756 | | |
$ | 1,437 | |
* At the time we purchased one of our urgent and primary care
centers, we allocated $600,000 of the purchase price to a contract
held by the acquired center that related to non-urgent care services. During the quarter ended June 30, 2015 we suspended our
provision of services under that contract and have recorded a one-time impairment charge of $520,000 relating to the
unamortized balance of that intangible asset.
Total amortization expense related
to intangibles was approximately $80,000 and $37,000 during the three-month periods ended June 30, 2015 and 2014, respectively. The
patient relationships and contracts are being amortized using the straight-line method over their estimate useful lives of five
(5) years. The ancillary provider network is being amortized using the straight-line method over its expected useful
life of 15 years. Experience-to-date is that approximately 2% - 8% annual turnover or attrition of provider contracts
occurs each year. The ancillary provider network is being accounted for on a pooled basis and the actual cancellation
rates of provider contracts that were acquired are monitored for potential impairment or amortization adjustment, if warranted.
Estimated annual amortization expense relating to intangibles is as follows:
Years ending December 31, | |
Urgent and Primary Care | |
Ancillary Care Services | |
Total |
2015 (remaining 6 months) | |
$ | 38 | | |
$ | 64 | | |
$ | 102 | |
2016 | |
| 74 | | |
| 128 | | |
| 202 | |
2017 | |
| 74 | | |
| 128 | | |
| 202 | |
2018 | |
| 74 | | |
| 128 | | |
| 202 | |
2019 | |
| 48 | | |
| - | | |
| 48 | |
Total | |
$ | 308 | | |
$ | 448 | | |
$ | 756 | |
9. Warrants
The Company had 1,782,222 and 22,222
outstanding warrants to purchase common stock as of June 30, 2015 and June 30, 2014, respectively. 1,760,000 of those
warrants, at June 30, 2015, are considered derivative warrants because they contain exercise-price adjustment features. The
remaining 22,222 warrants that were outstanding as of June 30, 2015 and 2014 were non-derivative warrants, which expire on
February 1, 2017 and have an exercise price of $1.50 per share of common stock.
July 30, 2014 Warrants
On July 30, 2014, we issued warrants to individuals
who provided guarantees in connection with a $5,000,000 line of credit that was obtained by us on that same date. The
warrants allow the warrant holders to purchase a total of 800,000 shares of our common stock for $3.15 per share, which was $0.01
per share higher than the closing market price of our common stock on July 30, 2014. The warrants vested immediately
and are exercisable any time prior to their expiration on October 30, 2019. These warrants have anti-dilution provisions
that could require some of the warrants' terms to change upon the occurrence of certain future events. The anti-dilution provisions
could result in changes to the warrants' strike price and the number of shares that can be purchased by the warrant holders. Because
the strike price is not fixed, the warrants are reported as liabilities on our balance sheet. On the date the warrants
were issued, we recognized a warrant liability that was equal to the warrants' fair value of $1,420,000. A corresponding entry
was made to deferred loan fees.
Deferred loan fees, an asset on our balance sheet,
are being amortized over the life of the line of credit agreement, which expires on June 1, 2016. During the three months
and six months ended June 30, 2015, we recognized $195,000 and $388,000, of amortization expense, respectively, on this asset.
The warrant liability is adjusted to the warrants'
fair value at the end of each reporting period. Increases (decreases) in the warrant liability are reported as interest expense
on the Company's statement of operations. On December 31, 2014 and June 30, 2015, the warrants were adjusted to their estimated
fair value of $1,410,000 and $872,000, respectively. The Company's statement of operations for the three months and six months
ended June 30, 2015 include unrealized gains included in interest expense of $578,000 and $538,000, respectively. The unrealized
gains correspond with the decrease in the warrant liability since March 31, 2015 and December 31, 2014, respectively.
The warrants' fair value was calculated using the
binomial options-pricing model. Pursuant to the terms of the relevant warrant agreements, the anti-dilution provisions are only
applicable if a private offering is closed at a price below the warrant exercise price ($3.15) before a public offering is closed
for at least $10,000,000. In the June 30, 2015 calculation, we assumed that there was a 25% probability that the Company would
close a private stock offering in the remainder of 2015 that is not preceded by a material public offering. If the market price
of the Company's stock was less than the warrants' exercise price on the date of a private stock offering, we assumed that the
warrants' exercise price would be reduced, and the number of shares purchasable by warrant holders would increase, in accordance
with the terms of the warrant agreements. Additional assumptions we used in our valuation calculations were as follows:
| |
June 30, 2015 | |
December 31, 2014 |
Stock price | |
$ | 1.72 | | |
$ | 2.90 | |
Volatility | |
| 80.0 | % | |
| 72.5 | % |
Risk-free interest rate | |
| 1.32 | % | |
| 1.65 | % |
Exercise price | |
$ | 3.15 | | |
$ | 3.15 | |
Expected life (years) | |
| 4.33 | | |
| 4.83 | |
Dividend yield | |
| 0 | % | |
| 0 | % |
Private stock offering % | |
| 25 | % | |
| 15 | % |
Public stock offering % | |
| 70 | % | |
| 80 | % |
Equity raise time period | |
| 3rd Quarter 2015 | | |
| 4th Quarter 2015 | |
December 4, 2014 Warrants
On December 4, 2014, we issued warrants to individuals
who provided guarantees in connection with a $6,000,000 line of credit that was obtained by us on that same date. The
warrants allow the warrant holders to purchase a total of 960,000 shares of the common stock for $2.71 per share, which was equal
to the closing market price of our common stock on December 4, 2014. The warrants vested immediately and are exercisable
any time prior to their expiration on December 4, 2019. These warrants have anti-dilution provisions, under which the
warrants' strike price could change if certain future events occur. The anti-dilution provisions could result in changes to the
warrants' strike price and the number of shares that can be purchased by the warrant holders. Because the strike price is
not fixed, the warrants are reported as liabilities on our balance sheet. On the date the warrants were issued, we recognized
a warrant liability that was equal to the warrants' fair value of $1,660,000. A corresponding entry was made to deferred
loan fees.
Deferred loan fees, an asset on our balance
sheet, is being amortized over the life of the line of credit agreement, which expires on June 1, 2016. During the
three months and six months ended June 30, 2015, we recognized $277,000 and $553,000 of amortization expense, respectively, on
this asset.
The warrant liability is adjusted to the warrants'
fair value at the end of each reporting period. Increases (decreases) in the warrant liability are reported as interest
expense on our statement of operations. On December 31, 2014 and June 30, 2015, the warrants were adjusted to their estimated fair
value of $1,790,000 and $999,000, respectively. The Company's statement of operations for the three months and six months ended
June 30, 2015 include unrealized gains included in interest expense of $651,000 and $791,000, respectively. The unrealized gains
correspond with the decrease in the warrant liability since March 31, 2015 and December 31, 2014, respectively.
The warrants' fair value was calculated using
the binomial options-pricing model. Pursuant to the terms of the relevant warrant agreements, the anti-dilution provisions
are applicable if either a public or private offering is closed at a price below the warrant exercise price ($2.71). In the
June 30, 2015 calculation, we assumed that there was a 100% probability that the Company would close a public or private stock
offering in the remainder of 2015. If the market price of the Company's stock was less than the warrants' exercise price on the
date of a stock offering, we assumed that the warrants' exercise price would be reduced, in accordance with the terms of the warrant
agreements. Additional assumptions we used in our valuation calculations were as follows:
| |
June 30, 2015 | |
December 31, 2014 |
Stock price | |
$ | 1.72 | | |
$ | 2.90 | |
Volatility | |
| 80.0 | % | |
| 72.5 | % |
Risk-free interest rate | |
| 1.32 | % | |
| 1.65 | % |
Exercise price | |
$ | 2.71 | | |
$ | 2.71 | |
Expected life (years) | |
| 4.43 | | |
| 4.93 | |
Dividend yield | |
| 0 | % | |
| 0 | % |
The following table summarizes the derivative warrant activity since
December 31, 2014:
| |
Weighted- Average Exercise Price | |
Warrants Outstanding December 31, 2014 | |
Warrants Issued in 2015 | |
Warrants Outstanding June 30, 2015 |
Warrants issued July 30, 2014 | |
$ | 3.15 | | |
| 800 | | |
| - | | |
| 800 | |
Warrants issued December 4, 2014 | |
$ | 2.71 | | |
| 960 | | |
| - | | |
| 960 | |
Total | |
$ | 2.91 | | |
| 1,760 | | |
| - | | |
| 1,760 | |
The following table summarizes the changes in the derivative warrants'
fair values since December 31, 2014:
| |
Warrants Issued on July 30, 2014 | |
Warrants Issued on December 4, 2014 | |
Total |
Fair value of outstanding warrants as of December 31, 2014 | |
$ | 1,410 | | |
$ | 1,790 | | |
$ | 3,200 | |
Change in fair value of warrants through 2nd Quarter 2015 | |
| (538 | ) | |
| (791 | ) | |
| (1,329 | ) |
Fair value of outstanding warrants as of June 30, 2015 | |
$ | 872 | | |
$ | 999 | | |
$ | 1,871 | |
10. Segment Reporting
We operate in two segments, urgent and
primary care and ancillary network. We evaluate performance based on several factors, of which the primary financial
measure for each segment is operating income. We define segment income for our business segments as
income before interest expense, gain or loss on disposal of assets, income taxes, depreciation expense, non-cash amortization
of intangible assets, intangible asset impairment, non-cash stock-based compensation expense, shared service expenses, severance
charges and any non-recurring costs. Shared services primarily consist of compensation costs for the executive
management team, facilities' costs for our corporate headquarters, support services such as finance and accounting, human
resources, legal, marketing and information technology and general administration. Shared services also include
transactional costs.
The following tables set forth a comparison
of operations for the following periods presented for our two lines of business and shared services (certain prior year amounts
have been reclassified for comparability purposes).
Consolidated statements of operations by segment
for the respective periods are as follows:
| |
Three months ended June 30, |
| |
2015 |
|
2014 |
| |
Urgent and Primary Care | |
Ancillary Network | |
Shared Services | |
Total | |
Urgent and Primary Care | |
Ancillary Network | |
Shared Services | |
Total |
Net revenues | |
$ | 2,354 | | |
$ | 5,604 | | |
$ | - | | |
$ | 7,958 | | |
$ | 474 | | |
$ | 5,497 | | |
$ | - | | |
$ | 5,971 | |
Total segment income (loss) | |
| (795 | ) | |
| 340 | | |
| (1,610 | ) | |
| (2,065 | ) | |
| 71 | | |
| 242 | | |
| (1,300 | ) | |
| (987 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Additional Segment Disclosures: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 70 | | |
| - | | |
| 23 | | |
| 93 | | |
| 13 | | |
| - | | |
| - | | |
| 13 | |
Gain on warrant liability, net of
deferred loan fees amortization | |
| (568 | ) | |
| - | | |
| (189 | ) | |
| (757 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Depreciation and amortization expense | |
| 151 | | |
| 141 | | |
| - | | |
| 292 | | |
| 41 | | |
| 174 | | |
| - | | |
| 215 | |
Income tax expense | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4 | | |
| - | | |
| 4 | |
Total asset expenditures | |
| 19 | | |
| - | | |
| 29 | | |
| 48 | | |
| - | | |
| 85 | | |
| - | | |
| 85 | |
| |
Six months ended June 30, |
| |
2015 |
|
2014 |
| |
Urgent and Primary Care | |
Ancillary Network | |
Shared Services | |
Total | |
Urgent and Primary Care | |
Ancillary Network | |
Shared Services | |
Total |
Net revenues | |
$ | 5,026 | | |
$ | 11,347 | | |
$ | - | | |
$ | 16,373 | | |
$ | 474 | | |
$ | 10,505 | | |
$ | - | | |
$ | 10,979 | |
Total segment income (loss) | |
| (1,245 | ) | |
| 450 | | |
| (3,638 | ) | |
| (4,433 | ) | |
| 71 | | |
| 75 | | |
| (2,215 | ) | |
| (2,069 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Additional Segment Disclosures: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 132 | | |
| - | | |
| 44 | | |
| 176 | | |
| 13 | | |
| - | | |
| - | | |
| 13 | |
Gain on warrant liability, net of
deferred loan fees amortization | |
| (291 | ) | |
| - | | |
| (97 | ) | |
| (388 | ) | |
| (4 | ) | |
| - | | |
| - | | |
| (4 | ) |
Depreciation and amortization expense | |
| 300 | | |
| 283 | | |
| - | | |
| 583 | | |
| 41 | | |
| 352 | | |
| - | | |
| 393 | |
Income tax expense | |
| - | | |
| 6 | | |
| - | | |
| 6 | | |
| - | | |
| 1 | | |
| - | | |
| 1 | |
Total asset expenditures | |
| 19 | | |
| - | | |
| 119 | | |
| 138 | | |
| - | | |
| 196 | | |
| - | | |
| 196 | |
The following provides a reconciliation of reportable
segment operating income (loss) to the Company’s consolidated totals:
| |
Three months ended June 30, | |
Six months ended June 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Total segment loss | |
$ | (2,065 | ) | |
$ | (987 | ) | |
$ | (4,433 | ) | |
$ | (2,069 | ) |
Less: | |
| | | |
| | | |
| | | |
| | |
Severance charges | |
| 346 | | |
| - | | |
| 346 | | |
| 108 | |
Ancillary network prepaid write-off | |
| 487 | | |
| - | | |
| 487 | | |
| - | |
Depreciation and amortization expense | |
| 292 | | |
| 215 | | |
| 583 | | |
| 393 | |
Non-cash stock-based compensation expense | |
| 256 | | |
| 123 | | |
| 403 | | |
| 197 | |
Intangible asset impairment | |
| 520 | | |
| - | | |
| 520 | | |
| - | |
Non-recurring professional fees | |
| 37 | | |
| - | | |
| 450 | | |
| - | |
Operating loss | |
| (4,003 | ) | |
| (1,325 | ) | |
| (7,222 | ) | |
| (2,767 | ) |
Bank interest expense | |
| 93 | | |
| 13 | | |
| 176 | | |
| 13 | |
Gain on warrant liability, net of deferred loan fees amortization | |
| (757 | ) | |
| - | | |
| (388 | ) | |
| (4 | ) |
Loss before income taxes | |
$ | (3,339 | ) | |
$ | (1,338 | ) | |
$ | (7,010 | ) | |
$ | (2,776 | ) |
Segment assets include accounts receivable,
prepaid expenses and other current assets, property and equipment, and intangibles. Shared services assets consist of
cash and cash equivalents, prepaid insurance, deferred income taxes and property and equipment primarily related to information
technology assets. Consolidated assets, by segment and shared services, as of the periods presented are as follows:
| |
Urgent and Primary Care | |
Ancillary Network | |
Shared Services | |
Consolidated |
June 30, 2015 | |
$ | 12,137 | | |
$ | 4,515 | | |
$ | 1,117 | | |
$ | 17,769 | |
December 31, 2014 | |
| 11,958 | | |
| 5,202 | | |
| 3,945 | | |
| 21,105 | |
11. Subsequent Events
On July 31, 2015, we entered into an asset
purchase agreement with Medac Health Services, P.A., or Medac, and its shareholders to purchase certain assets used by Medac in the operation of its four urgent care centers in the greater Wilmington,
North Carolina area. In connection with the purchase of the Medac assets, we will assume or enter into new leases for the
four centers and then sublease them to Medac. The purchase price for the assets is $5,600,000, with $5,040,000 payable
in cash at closing and the balance of $560,000 payable in the form of a promissory note with interest at 5% per annum
and maturing 18 months after the closing. The asset purchase agreement provides that consummation of the transaction is
subject to the satisfaction or waiver of certain conditions, including our receipt of financing in an amount no less
than $5,600,000. In order to close this acquisition, we will require additional capital which we expect to raise through
the offering discussed in Note 3.
On August 12, 2015 we amended the
December 2014 credit agreement (a) to provide for $1,000,000 of additional borrowing capacity, and (b) to extend the maturity
date to October 1, 2016. In connection with the $1,000,000 increase in the line of credit under the December 2014
credit agreement, we issued warrants to the guarantors to purchase an additional 300,000 shares of our common stock at $1.70
per share, subject to certain adjustments under certain circumstances, in consideration of their guaranteeing such
indebtedness. The warrants vested immediately and are exercisable at any time prior to their expiration on August 12, 2020.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used herein, the “Company,” “we,” “us,”
“our” or similar terms, refer to American CareSource Holdings, Inc. and its wholly owned subsidiaries, except as expressly
indicated or unless the context otherwise requires. The following Management’s Discussion and Analysis of Financial Condition
and Results of Operations (“MD&A”) is intended to help facilitate an understanding of our financial condition and
our historical results of operations for the periods presented and should be read together with our financial statements and related
notes included elsewhere in this report. This MD&A may contain forward-looking statements that involve risks and uncertainties.
See “Forward-Looking Statements” below.
Overview
We engage in two lines of business: our urgent and primary care
business and our ancillary network business. Although we have been engaged in our ancillary network business for a number
of years, with our entry into the urgent and primary care business and our management arrangement with HealthSmart Preferred
Care II, L.P., or HealthSmart, we now focus primarily on our urgent and primary care business. We believe that urgent and primary
care centers are and will continue to be an essential component of the effective delivery of healthcare services in the United
States. Accordingly, our resources are focused on the growth of that line of business.
Our Urgent and Primary Care Business
In early May 2014, we announced our entry into the
urgent and primary care market. During the remainder of 2014, we, through our wholly-owned subsidiaries,
consummated five transactions resulting in our acquisition of ten urgent and primary care centers, three of which are located
in Georgia, two in Florida, three in Alabama and two in Virginia.
Our healthcare centers offer a wide array of services for
non-life-threatening medical conditions. We strive to improve access to quality medical care by offering extended hours and
weekend service primarily on a walk-in basis. Our centers offer a broad range of medical services that generally fall within
the urgent care, primary care, family care, and occupational medicine classifications. Specifically, we offer
non-life-threatening, out-patient medical care for the treatment of acute, episodic, and some chronic medical conditions.
When hospitalization or specialty care is needed, referrals to appropriate providers are made.
Patients typically visit our centers on a walk-in basis when their
condition is not severe enough to warrant an emergency visit or when treatment by their primary care provider is inconvenient.
We also attempt to capture follow-up, preventative and general primary care business after walk-in visits. The services provided
at our centers include, but are not limited to, the following:
| · | routine treatment of general medical problems, including colds, flu, ear infections, hypertension, asthma, pneumonia, urinary
tract infections, and other conditions typically treated by primary care providers; |
| · | treatment of injuries, such as simple fractures, dislocations, sprains, bruises, and cuts; |
| · | minor, non-emergent surgical procedures, including suturing of lacerations and removal of foreign bodies; |
| · | diagnostic tests, such as x-rays, electrocardiograms, complete blood counts, and urinalyses; and |
| · | occupational and industrial medical services, including drug testing, workers' compensation cases, and pre-employment physical
examinations. |
We staff our centers with a combination of licensed physicians,
nurse practitioners, physician assistants, medical support staff, and administrative support staff. Our medical support staff includes
licensed nurses, certified medical assistants, laboratory technicians, and registered radiographic technologists.
Our patient volume, and therefore our revenue, is sensitive
to seasonal fluctuations in urgent and primary care activity. Typically, winter months tend to be busier as we see a higher
occurrence of influenza, bronchitis, pneumonia and similar illnesses; however, the timing and severity of these outbreaks can
vary dramatically. Additionally, as consumers shift towards high deductible insurance plans, they are responsible
for a greater percentage of their bill, particularly in the early months of the year before other healthcare spending has
occurred. Our inability to collect the full patient liability portion of the bill at the time of service may lead to an
increase in bad debt expense during that period. Our quarterly operating results may fluctuate significantly in the future
depending on these and other factors.
We intend to grow our urgent and primary care business through
the acquisition of new centers, by improving patient volume of overall performance in our existing centers, and by developing
new centers in strategic areas located in the eastern and southeastern United States.
Our Ancillary Network Business
Our ancillary network business offers cost containment strategies
to our payor clients, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers. This
service is marketed to a number of healthcare companies including third-party administrators, insurance companies, large self-funded
organizations, various employer groups and preferred provider organizations. We are able to lower the payors' ancillary
care costs through our network of high quality, cost effective providers that we have under contract at more favorable terms than
the payors could generally obtain on their own.
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 an agreed upon, contractual
rate. Upon processing the claim, we are paid directly by the payor or the insurer for the service. We then
pay the medical service provider according to a separately negotiated contractual rate. We assume the risk of generating
positive margin, which is calculated as the difference between the payment we receive for the service from the payor and the amount
we are obligated to pay the service provider.
On October 1, 2014, we entered into a management services agreement
with HealthSmart. Under the management services agreement, HealthSmart manages the operation of our ancillary network
business, subject to the supervision of a five-person oversight committee comprised of three members selected by us and two members
selected by HealthSmart. As a result of this arrangement, we no longer employ the workforce of our ancillary network
business. Under the management services agreement, HealthSmart operates our ancillary network business for a management
fee equal to the sum of (a) 35% of the net profit derived from operation of our ancillary network business, plus (b) 120% of all
direct and documented operating expenses and liabilities actually paid during such calendar month by HealthSmart in connection
with providing its management services. For purposes of the fee calculation, the term "net profit" means gross
ancillary network business revenue, less the sum of (x) the provider payments and administrative fees and (y) 120% of all direct
and documented operating expenses and liabilities actually paid during such calendar month by HealthSmart in connection with providing
its management services. Any remaining net profit accrues to us. During the term of the agreement, HealthSmart
is responsible for the payment of all expenses incurred in providing the management services with respect to our ancillary network
business, including personnel salaries and benefits, the cost of supplies and equipment, and rent. The initial term
of the management services agreement is three years, and it renews annually thereafter for one-year terms unless either party gives
notice of termination at least 90 days prior to the end of the then-current term.
Our management services agreement with HealthSmart
provides that at any time after October 1, 2016 and during the remaining term of the management services agreement,
HealthSmart may purchase, or we may require that HealthSmart purchase, our ancillary network business for a price equal to
$6,500,000 less the aggregate sum of net profit received by us since the beginning of the management services agreement. As
of June 30, 2015, the aggregate net profit received by us since the beginning of the management services agreement was
approximately $1.1 million. Consummation of the transaction will be subject to the satisfaction of certain material
conditions, currently including stockholder approval of the sale. The purchase price is to be payable by HealthSmart as
follows: Within 30 days following each calendar month after the closing, HealthSmart will be obligated to pay to us 65% of
the net profit derived from the operation of the ancillary network business minus 120% of all direct and documented operating
expenses and liabilities actually paid by HealthSmart during such calendar month in connection with operating the ancillary
network business until the purchase price is paid in full. In the event HealthSmart purchases our ancillary network business,
the urgent and primary care business will be our only business line following completion of that transaction. If the sale of
our ancillary network business to HealthSmart is not consummated during or at the end of the term of the management services
agreement, we expect to then re-assume management of that line of business, seek to sell that business on the most favorable
terms we are able to obtain or phase out that line of business.
Results of Operations
Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014
The following table summarizes our results of operations for the
three months ended June 30, 2015 and 2014 (in thousands) (certain prior quarter amounts have been reclassified for comparability
purposes):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
|
June 30, 2014 |
|
|
Change |
|
|
|
Urgent and
Primary
Care |
|
|
Ancillary Network |
|
|
Shared Services |
|
|
Total |
|
|
Urgent and
Primary
Care |
|
|
Ancillary Network |
|
|
Shared Services |
|
|
Total |
|
|
$ |
|
|
|
% |
|
Net revenues |
|
$ |
2,354 |
|
|
$ |
5,604 |
|
|
$ |
- |
|
|
$ |
7,958 |
|
|
$ |
474 |
|
|
$ |
5,497 |
|
|
- |
|
|
$ |
5,971 |
|
|
$ |
1,987 |
|
|
|
33 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ancillary network provider payments |
|
|
- |
|
|
|
4,137 |
|
|
|
- |
|
|
|
4,137 |
|
|
|
- |
|
|
|
3,880 |
|
|
|
- |
|
|
|
3,880 |
|
|
|
257 |
|
|
|
7 |
% |
Ancillary network administrative fees |
|
|
- |
|
|
|
194 |
|
|
|
- |
|
|
|
194 |
|
|
|
- |
|
|
|
307 |
|
|
|
- |
|
|
|
307 |
|
|
|
(113 |
) |
|
|
-37 |
% |
Ancillary network other operating
costs |
|
|
- |
|
|
|
933 |
|
|
|
- |
|
|
|
933 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
933 |
|
|
|
N/A |
|
Ancillary network prepaid write-off |
|
|
- |
|
|
|
487 |
|
|
|
- |
|
|
|
487 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
487 |
|
|
|
N/A |
|
Salaries, wages, benefits and taxes |
|
|
1,744 |
|
|
|
- |
|
|
|
1,224 |
|
|
|
2,968 |
|
|
|
265 |
|
|
|
825 |
|
|
|
605 |
|
|
|
1,695 |
|
|
|
1,273 |
|
|
|
75 |
% |
Other operating expenses |
|
|
1,405 |
|
|
|
- |
|
|
|
1,025 |
|
|
|
2,430 |
|
|
|
138 |
|
|
|
270 |
|
|
|
791 |
|
|
|
1,199 |
|
|
|
1,231 |
|
|
|
103 |
% |
Intangible asset impairment |
|
|
520 |
|
|
|
- |
|
|
|
- |
|
|
|
520 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
520 |
|
|
|
N/A |
|
Depreciation and amortization |
|
|
151 |
|
|
|
141 |
|
|
|
- |
|
|
|
292 |
|
|
|
41 |
|
|
|
174 |
|
|
|
- |
|
|
|
215 |
|
|
|
77 |
|
|
|
36 |
% |
Total operating expenses |
|
$ |
3,820 |
|
|
$ |
5,892 |
|
|
$ |
2,249 |
|
|
$ |
11,961 |
|
|
$ |
444 |
|
|
$ |
5,456 |
|
|
$ |
1,396 |
|
|
$ |
7,296 |
|
|
$ |
4,665 |
|
|
|
64 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
(1,466 |
) |
|
$ |
(288 |
) |
|
$ |
(2,249 |
) |
|
$ |
(4,003 |
) |
|
$ |
30 |
|
|
$ |
41 |
|
|
$ |
(1,396 |
) |
|
$ |
(1,325 |
) |
|
$ |
(2,678 |
) |
|
|
202 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
80 |
|
|
|
|
|
Gain on warrant liability, net of deferred
loan fees amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
(757 |
) |
|
|
|
|
Total interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
(677 |
) |
|
|
-5208 |
% |
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(3,339 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,338 |
) |
|
$ |
(2,001 |
) |
|
|
150 |
% |
Our Urgent and Primary Care Business
Our urgent and primary care business segment reported
an operating loss of $1,466,000 during the three months ended June 30, 2015. Because we entered the urgent
and primary care business in May 2014, a comparison of the results for the second quarter of 2015 with those for the
second quarter of 2014 would not be meaningful. Contributing to the segment's operating loss in the second quarter
of 2015 were, among other things, the following:
| · | we experienced predictable declines in our quarterly patient volumes, and therefore revenue, due to the seasonality of the
business; |
| · | we incurred expenses related to our integration of our ten centers, which were acquired at various dates between May and December
2014; |
| · | our Springville, Alabama center opened for business in October 2014, and we experienced customary start-up operating losses
relating to the center; |
| · | two of our centers were underperforming at the time we acquired them, and our operational improvement efforts have yet to produce
their expected results; and |
| · | we have yet to realize certain economies of scale we expect to realize. |
Net Revenues
Net revenues are recognized at the time services
are rendered at the estimated net realizable amounts from patients, third-party payors and others, after reduction for
estimated contractual adjustments pursuant to agreements with third-party payors and an estimate for bad debts. For the
quarter ended June 30, 2015, our urgent and primary care business experienced, in the aggregate, approximately 20,000
patient visits which generated net revenues of approximately $2,354,000. We averaged 22 patient visits per day per center,
resulting in average net revenue per patient visit of approximately $118 for the three months ended June 30, 2015. We
define a patient visit as a billable patient encounter.
Salaries, Wages, Benefits and Taxes
Salaries, wages and benefits primarily consist of
compensation and benefits to our clinical providers and staff at our centers. We employ a staffing model at each center that
generally includes at least one board-certified physician, one or more physician assistants or nurse practitioners, nurses or
medical assistants and a front office staff member on-site at all times. Salaries, wages, benefits and taxes are
the most significant operating expense components of our urgent and primary care business. For the three-month period
ended June 30, 2015, salaries, wages and associated benefits and taxes aggregated approximately 74% of net revenues. We
monitor our center-level staffing to ensure staffing levels are sufficient, but not excessive, to meet expected patient
demands. Management has implemented several cost reduction measures and is considering several others to further reduce
compensation expense relative to revenues.
Other Operating Expenses
Other operating expenses primarily consist of facility
and operating lease costs, medical and laboratory supplies, billing and collection fees, radiology overhead and laboratory
fees, utilities, software licensing fees, premiums for medical malpractice and other insurance, and costs related to
office administration and information technology. Also included in other operating expenses was approximately $416,000 of
labor costs paid or payable to our contracted (not employed) medical professionals for the three months ended June 30,
2015.
For the three months ended June 30, 2015, other operating expenses
were 60% of net revenue.
Intangible Asset Impairment
At the time we purchased one of our urgent and primary care
centers, we allocated $600,000 of the purchase price to a contract held by the acquired center that related to non-urgent
care services. During the quarter ended June 30, 2015 we suspended our provision of services under that contract and have
recorded a one-time impairment charge of $520,000 relating to the unamortized balance of that intangible asset.
Our Ancillary Network Business
Our ancillary network business segment reported an
operating income (loss) of $(288,000) and $41,000 for the three months ended June 30, 2015 and 2014, respectively. During
the quarter ended June 30, 2014, our shared services costs and expenses were included in the ancillary network
business. With our entry into the urgent and primary care business, these costs have been allocated to shared
services, rather than to our two operating segments.
Net Revenues
Revenue from our ancillary network business is recognized when
we bill our client payors for services performed and collection is reasonably assured. We estimate revenues using average historical
collection rates. When estimating collectability, we assess the impact of items such as non-covered benefits, payments
made directly to the service provider by the client payor, 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. 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, collectability and margins after payments made to the ancillary service providers. Also
impacting revenue is the mix of ancillary service specialties billed and the ancillary service providers that are utilized.
During the quarter ended June 30, 2015 net revenue from our ancillary
network business increased 2%, compared to the same period in 2014. Although revenue increased in the second quarter
of 2015, we believe future declines in revenue are more likely than continued growth.
Provider Payment and Administrative Fees
We make payments to our providers and pay administrative fees 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 cost and they consist of our payments for ancillary care services in
accordance with contracts negotiated separately with providers for specific ancillary services.
· | | Provider payments. Provider payments represented 73.8% and 70.6% of revenues for the
three months ended June 30, 2015 and 2014, respectively. The increase in the current year period is attributable in large
part to
payor
clients
utilizing more of our lower margin contracts. |
· | | Administrative fees. Administrative fees paid to clients as a percent of net revenue
were 3.5% for the three-month period ended June 30, 2015 and 5.6% for the comparable period in 2014. The decrease in the
current year period is
due to a change in mix to clients with lower administrative fees. |
Other Network Operating Costs
Ancillary network other operating costs amounted to $933,000
in the current year period. This amount represents profit sharing and expense reimbursement amounts paid or payable
to HealthSmart under our management services agreement. The majority of the operating costs were attributable to payroll expenses. HealthSmart
began managing our ancillary network business under our management services agreement on November 1, 2014, at which time HealthSmart
hired substantially all our employees dedicated to our ancillary network business.
Network Prepaid Write-Off
During the first quarter of 2014 we advanced $500,000 to one
of our ancillary network customers, which was to be withheld from future administrative fees earned by the customer. During
the quarter ended June 30, 2015 the customer terminated its contract with us. Accordingly we have recorded a one-time charge
of $487,000 to write-off the remaining balance of this asset that was recorded as prepaid expense and other
non-current assets.
Shared Services
Shared services include the common costs related to both the urgent
and primary care and ancillary network lines of business such as the salaries of our Chief Executive Officer, Chief Financial Officer,
Chief Information Officer and the remainder of the executive management team, whose time is allocable across both business segments.
The following functions are also included in shared services: finance and accounting; human resources; legal; marketing; information
technology; and general administration.
In addition, all
strategic functions, including but not limited to transactional activities and the related integration of the acquired
businesses, are included in shared services. As of June 30, 2015 and 2014, shared services included 17 and 12 full-time
employees, respectively. Certain 2014 expenses were reclassified to conform to the 2015 shared services
presentation. Shared services expenses totaled $2,249,000 and $1,396,000 for the three months ended June 30, 2015
and June 30, 2014, respectively. The increase in the current year period in costs relates to the transition of the
Company to owning and operating urgent and primary care centers, including significant professional fees resulting therefrom,
and to establishing the infrastructure to accommodate future growth. The Company expects to reduce professional fees
significantly in subsequent quarters.
We reduced our operating
costs during the quarter ended June 30, 2015 through a reduction in work force resulting in a one-time severance charge of $346,000.
The severance charge was recorded in shared services other operating expenses. We believe this workforce reduction will reduce
our quarterly operating expenses by approximately $250,000 beginning in the third quarter of 2015.
Interest Expense, Warrant Gain
We issued warrants to individuals who provide guarantees in connection
with our credit agreements. The warrant fair value at date of grant has been capitalized as deferred loan fees and is being amortized
over the term of credit agreement and a warrant liability was established. These warrants are considered derivative warrants because
they contain exercise-price adjustment features. Accordingly, the warrant liability is adjusted to its fair market value at the
end of each reporting period. For the quarter ended June 30, 2015, the gain due to change in warrant liability amounted to $1,229,000
and amortization of deferred loan fees amounted to $472,000, resulting in a positive income effect of $757,000.
Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014
The following table summarizes our results of operations for the
six months ended June 30, 2015 and 2014 (in thousands) (certain prior period amounts have been reclassified for comparability
purposes):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
|
June 30, 2014 |
|
|
Change |
|
|
|
Urgent and
Primary
Care |
|
|
Ancillary Network |
|
|
Shared Services |
|
|
Total |
|
|
Urgent and
Primary
Care |
|
|
Ancillary Network |
|
|
Shared Services |
|
|
Total |
|
|
$ |
|
|
|
% |
|
Net revenues |
|
$ |
5,026 |
|
|
$ |
11,347 |
|
|
$ |
- |
|
|
$ |
16,373 |
|
|
$ |
474 |
|
|
$ |
10,505 |
|
|
- |
|
|
$ |
10,979 |
|
|
$ |
5,394 |
|
|
|
49 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ancillary network provider payments |
|
|
- |
|
|
|
8,468 |
|
|
|
- |
|
|
|
8,468 |
|
|
|
- |
|
|
|
7,633 |
|
|
|
- |
|
|
|
7,633 |
|
|
|
835 |
|
|
|
11 |
% |
Ancillary network administrative fees |
|
|
- |
|
|
|
524 |
|
|
|
- |
|
|
|
524 |
|
|
|
- |
|
|
|
527 |
|
|
|
- |
|
|
|
527 |
|
|
|
(3 |
) |
|
|
-1 |
% |
Ancillary network other operating
costs |
|
|
- |
|
|
|
1,905 |
|
|
|
- |
|
|
|
1,905 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,905 |
|
|
|
N/A |
|
Ancillary network prepaid write-off |
|
|
- |
|
|
|
487 |
|
|
|
- |
|
|
|
487 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
487 |
|
|
|
N/A |
|
Salaries, wages, benefits and taxes |
|
|
3,650 |
|
|
|
- |
|
|
|
2,126 |
|
|
|
5,776 |
|
|
|
265 |
|
|
|
1,804 |
|
|
|
1,013 |
|
|
|
3,082 |
|
|
|
2,694 |
|
|
|
87 |
% |
Other operating expenses |
|
|
2,621 |
|
|
|
- |
|
|
|
2,711 |
|
|
|
5,332 |
|
|
|
138 |
|
|
|
524 |
|
|
|
1,449 |
|
|
|
2,111 |
|
|
|
3,221 |
|
|
|
153 |
% |
Intangible asset impairment |
|
|
520 |
|
|
|
- |
|
|
|
- |
|
|
|
520 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
520 |
|
|
|
N/A |
|
Depreciation and amortization |
|
|
300 |
|
|
|
283 |
|
|
|
- |
|
|
|
583 |
|
|
|
41 |
|
|
|
352 |
|
|
|
- |
|
|
|
393 |
|
|
|
190 |
|
|
|
48 |
% |
Total operating expenses |
|
$ |
7,091 |
|
|
$ |
11,667 |
|
|
$ |
4,837 |
|
|
$ |
23,595 |
|
|
$ |
444 |
|
|
$ |
10,840 |
|
|
$ |
2,462 |
|
|
$ |
13,746 |
|
|
$ |
9,849 |
|
|
|
72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
(2,065 |
) |
|
$ |
(320 |
) |
|
$ |
(4,837 |
) |
|
$ |
(7,222 |
) |
|
$ |
30 |
|
|
$ |
(335 |
) |
|
$ |
(2,462 |
) |
|
$ |
(2,767 |
) |
|
$ |
(4,455 |
) |
|
|
161 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
167 |
|
|
|
|
|
Gain on warrant liability, net of deferred loan fees amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
(388 |
) |
|
|
|
|
Total interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(212 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
(221 |
) |
|
|
-2456 |
% |
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(7,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2,776 |
) |
|
$ |
(4,234 |
) |
|
|
153 |
% |
Our Urgent and Primary Care Business
Our urgent and primary care business segment reported an operating
loss of $2,065,000 during six months ended June 30, 2015. Because we entered the urgent and primary care business in
May 2014, a comparison of the results for the six months ended June 30, 2015 with those for the six months ended June 30,
2014 would not be meaningful.
Net Revenues
For the six months ended June 30, 2015, our urgent and primary
care business experienced, in the aggregate, approximately 43,000 patient visits which generated net revenues of approximately
$5,026,000. We averaged 24 patient visits per day per center, resulting in average net revenue per patient visit of approximately
$117 for the six months ended June 30, 2015.
Salaries, Wages, Benefits and Taxes
Salaries, wages, benefits and taxes are the most
significant operating expense components of our urgent and primary care business. For the six months ended June 30, 2015,
salaries, wages and associated benefits and taxes aggregated approximately 73% of net revenue.
Other Operating Expenses
Other operating expenses primarily consist of facility and
operating lease costs, medical and laboratory supplies, radiology and laboratory fees, utilities, medical malpractice and
other insurance, office and information technology. For the six months ended June 30, 2015, other operating expenses were 52%
of net revenue. Also included in other operating expenses was approximately $681,000 of labor costs paid or payable to our contracted (not employed) medical professionals for the six
months ended June 30, 2015.
Intangible Asset Impairment
At the time we purchased one of our urgent and primary
care centers, we allocated $600,000 of the purchase price to a
contract held by the acquired center that related to non-urgent care services. During the six months ended June 30, 2015 we
suspended our provision of services under that contract and have recorded a one-time impairment charge of $520,000 relating
to the unamortized balance of that intangible asset.
Our Ancillary Network Business
Our ancillary network business segment reported operating losses
of $320,000 and $335,000 for the six months ended June 30, 2015 and 2014, respectively. During the six months ended June 30,
2014, shared service cost and expenses were included in the ancillary network business. These costs have been reclassified
to shared services to conform to the current year segment reporting presentation.
Net Revenues
During the six months ended June 30, 2015, net
revenue increased 8%. Although revenue increased in the six months ended June 30, 2015 we believe future declines in
revenue are more likely than continued growth.
Provider Payment and Administrative Fees
We make payments to our providers and pay administrative fees 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 cost and they consist of our payments for ancillary care services in accordance with contracts
negotiated separately with providers for specific ancillary services.
· | | Provider payments. Provider payments represent 74.6% and 72.7% of revenues for the six
months ended June 30, 2015 and 2014, respectively. The increase is attributable in large part to payor clients utilizing more
of our lower margin contracts. |
· | | Administrative fees. Administrative fees paid to clients as a percent of net
revenue were 4.6% for the six-month period ended June 30, 2015 and 5.0% for the comparable period in 2014. The decrease is due
to a change in mix to clients with lower administrative fees. |
Other Operating Costs
Ancillary network other operating costs amounted to $1,905,000
for the six months ended June 30, 2015. This amount represents profit sharing and expense reimbursement amounts paid or payable
to HealthSmart under the management services agreement. The majority of the operating costs were attributable to payroll expenses.
HealthSmart began managing our ancillary network business under our management services agreement on November 1, 2014, at which
time HealthSmart hired substantially all our employees dedicated to our ancillary network business.
Network Prepaid Write-Off
During the first quarter of 2014 we advanced $500,000 to
one of our ancillary network customers, which was to be withheld from future administrative fees earned by the customer. During the
six months ended June 30, 2015 the customer terminated its contract with us. Accordingly we have recorded a one-time charge of
$487,000 to write-off the remaining balance of this asset that was recorded as prepaid expense and other non-current
assets.
Shared Services
As of June 30, 2015, shared services included 17 full-time employees
compared to 12 at June 30, 2014. Certain expenses for the six months ended June 30, 2014 were reclassified to conform to the
shared services presentation for the six months ended June 30, 2015. Shared services expenses totaled $4,837,000 and
$2,462,000 for the six months ended June 30, 2015 and June 30, 2014, respectively. The increase was primarily due to
the expansion of our infrastructure to operate and grow our urgent and primary care business, including interim staffing and accounting
costs related to personnel changes and relocation of our corporate office to Atlanta, Georgia.
Interest Expense, Warrant Gain
We issued warrants to individuals who provide guarantees in connection
with our credit agreements. The warrant fair value at date of grant has been capitalized as deferred loan fees and is being amortized
over the term of credit agreement and a warrant liability was established. These warrants are considered derivative warrants because
they contain exercise-price adjustment features. Accordingly, the warrant liability is adjusted to its fair market value at the
end of each reporting period. For the six months ended June 30, 2015, the gain due to change in warrant liability amounted to
$1,329,000 and amortization of deferred loan fees amounted to $941,000, resulting in a positive income effect of $388,000.
Liquidity and Capital Resources
We had negative working capital of $7,201,000
at June 30, 2015 compared to negative working capital of $1,181,000 at December 31, 2014. The increase in negative
working capital in the six months ended June 30, 2015 was due to additional operating losses. We expect to generate
additional operating losses until we acquire or develop sufficient centers to generate positive operating income. The table
below reconciles the loss before income taxes to the net decrease in cash for the six months ended June 30, 2015.
| |
Six months ended
June 30, 2015 |
Loss before income taxes | |
$ | (7,010 | ) |
Borrowings under line of credit | |
| 4,784 | |
Depreciation and amortization | |
| 583 | |
Non-cash stock-based compensation expense | |
| 403 | |
Other | |
| 711 | |
Decrease in cash | |
$ | (529 | ) |
Our cash and cash equivalents balance decreased to
approximately $491,000 as of June 30, 2015 compared to $1,020,000 at December 31, 2014. Our available borrowing
capacity under existing lines of credit was $1,500,000 and $6,284,000 at June 30, 2015 and December 31, 2014,
respectively. At August 14, 2015 our available borrowing capacity was $1,000,000 as a result of the August 12,
2015 increase in the line of credit under our December 2014 credit agreement discussed below.
On July 30, 2014, we entered into the July 2014 credit agreement
with Wells Fargo providing for a $5,000,000 revolving line of credit, which we used primarily to fund our urgent and primary care
acquisitions. Our obligation to repay advances under the July 2014 credit agreement is evidenced by a credit note, with a fluctuating
interest rate per annum of 1.75% above daily one month LIBOR, as in effect from time to time. The credit note matures on June 1,
2016, and all borrowings under the July 2014 credit agreement are due and payable on that date.
Borrowings under the July 2014 credit agreement are also
secured by guarantees provided by our Chairman and acting Chief Executive Officer and another director of the Company and
two stockholders who were not officers or directors of the Company. On July 30, 2014, we issued warrants to
the guarantors to purchase an aggregate of 800,000 shares of our common stock at $3.15 per share, subject to certain
adjustments under certain circumstances, in consideration of their guaranteeing such indebtedness. The warrants vested
immediately and are exercisable any time prior to their expiration on October 30, 2019.
To further our ability to execute our strategy of
acquiring urgent care and primary care facilities and operations, on December 4, 2014, we entered into the December 2014
credit agreement with Wells Fargo providing for a $6,000,000 line of credit. Our obligation to repay advances under the
December 2014 credit agreement is evidenced by a credit note, with a fluctuating interest rate per annum of 1.75% above daily
one month LIBOR, as in effect from time to time. On August 12, 2015 we increased the line of credit to $7,000,000 and
extended the maturity date to October 1, 2016, and all borrowings are due and payable on that date.
The obligations under the July 2014 credit agreement and the December
2014 credit agreement and the credit notes are secured by all the assets of the Company and its subsidiaries. The credit
agreements include customary covenants related to, among other things, additional debt, further encumbrances, sales of
assets, and investments and lending.
Borrowings under the December 2014 credit agreement are
secured by guarantees provided by two directors of the Company and a third party who is not an officer, director or
stockholder of the Company. On December 4, 2014, we issued warrants to the guarantors to purchase an aggregate of 960,000
shares of our common stock at $2.71 per share, subject to certain adjustments under certain circumstances, in consideration
of their guaranteeing such indebtedness. The warrants vested immediately and are exercisable any time prior to their
expiration on December 4, 2019. In connection with the $1,000,000 increase in the line of credit under the December 2014
credit agreement, we issued warrants to the guarantors to purchase an additional 300,000 shares of our common stock at $1.70
per share, subject to certain adjustments under certain circumstances, in consideration of their guaranteeing such
indebtedness. The warrants vested immediately and are exercisable at any time prior to their expiration on August 12, 2020.
As of June 30, 2015, we had outstanding borrowings of
$5,000,000 and $4,500,000, under our July 2014 and December 2014 credit agreements, respectively. As of June 30, 2015, the weighted-average interest rate on these borrowings was 1.94%. The
July 2014 credit agreement matures on June 1, 2016, and the December 2014 credit agreement matures on October 1, 2016.
In connection with the acquisitions of our urgent and primary
care centers in 2014, our wholly-owned subsidiaries issued promissory notes to the sellers in the transactions
in the aggregate original principal amount of $1,500,000, as follows:
ACSH Urgent Care of Georgia, LLC, or ACSH Georgia, issued
a promissory note in the principal amount of $500,000 to CorrectMed, LLC and other sellers. The note provided for simple
interest at a fixed rate of 5% per annum, matured on May 8, 2015 and the full amount due thereunder has been paid.
ACSH Urgent Care of Florida, LLC issued three promissory
notes in the aggregate principal amount of $700,000 to Bay Walk-In Clinic, Inc. One promissory note in the principal amount of
$200,000 bears simple interest at a fixed rate of 5% per annum and is payable in two installments: $110,000 on August 29, 2015
and $105,000 on August 29, 2016. The second promissory note also in the principal amount of $200,000 bears simple interest
at a fixed rate of 5% per annum and is payable in 24 equal monthly installments of $8,776.51 each, beginning on September 30, 2014.
The third promissory note in the principal amount of $300,000 is noninterest bearing and is due and payable in 30 equal monthly
installments of $10,000 each, beginning on September 30, 2014.
ACSH Urgent Care Holdings, LLC issued a promissory
note in the principal amount of $150,000 to Jason Junkins, M.D. The note is guaranteed by American CareSource Holdings, Inc. and
is payable in two equal principal installments of $75,000, plus accrued interest at the rate of 5% per annum, on the first and
second annual anniversaries of the closing date, September 12, 2014.
ACSH Georgia issued a promissory note in the amount
of $100,000 to Han C. Phan, M.D. and Thinh D. Nguyen, M.D. The note matures on the one-year anniversary of the closing date, October
31, 2014.
ACSH Urgent Care of Virginia, LLC issued a promissory
note in the principal amount of $50,000 to Stat Medical Care, P.C. (d/b/a Fair Lakes Urgent Care Center) and William and Teresa
Medical Care, Inc. (d/b/a Virginia Gateway Urgent Care Center). The note bears simple interest at a fixed rate of 5% annum, matures
on December 31, 2015, and is subject to a working capital adjustment as set forth in the purchase agreement.
On July 31, 2015, our wholly owned subsidiary, ACSH Medical Management,
LLC, or ACSH Management, entered into an asset purchase agreement with Medac Health Services, P.A., or Medac, and its shareholders
to purchase certain of the assets, including Medac's accounts receivable, used by Medac in the operation of its four urgent care
centers in the greater Wilmington, North Carolina area. In connection with the purchase of these assets, we will assume or enter
into new leases for the four centers and then sublease them to Medac. The purchase price for the assets is $5,600,000, with $5,040,000
payable in cash at closing and the balance of $560,000 payable in the form of a promissory note with interest at 5% per annum and
maturing 18 months after the closing. The asset purchase agreement provides that consummation of the transaction is subject to
the satisfaction or waiver of certain conditions, including ACHS Management having received financing in an amount no less than
$5,600,000. We expect to use a portion of the proceeds of the offering discussed below to fund the purchase of the Medac assets
and expect the transaction to close in the third quarter of 2015 shortly after the closing of the offering.
We have
initiated efforts to raise additional equity capital during 2015. On February 6, 2015 we filed a Form S-1
Registration Statement to sell additional shares of our common stock. If the offering is fully subscribed, we will
raise an additional $13,000,000 (less offering expenses), plus any proceeds we receive on account of the 15% over-allotment option we
have granted to underwriters. With the anticipated net proceeds from the offering
along with the remaining borrowing capacity under the December 2014 credit agreement, we believe our cash resources will be
sufficient to satisfy our liquidity requirements, including funding the purchase the Medac assets, until the first quarter of
2016. We expect to raise additional capital later this year or in early 2016 to fund our operations, to repay indebtedness
and to facilitate the expansion of our urgent and primary care business. We may raise such capital through one or more public
or private equity offerings, debt financings, borrowings or a combination thereof. If we raise funds through the incurrence
of additional debt or the issuance of debt securities, the lenders or purchasers of debt securities may require security that
is senior to the rights of our common stockholders. In addition, our incurrence of additional debt could result in the
imposition of covenants that restrict our operations or limit our ability to achieve our business objectives. The issuance of
any new equity securities will likely dilute the interest of our current stockholders. In light of our historical
performance, additional capital may not be available when needed on acceptable terms, or at all. If adequate funds are not
available, we will need to curb our expansion plans, which would have a material adverse impact on our business prospects and
results of operations.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies
and estimates from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2014.
Forward-Looking Statements
Statements in this Management's Discussion and Analysis and
elsewhere in this Quarterly Report on Form 10-Q that are forward-looking are based upon current expectations, and actual
results or future events may differ materially. Therefore, the inclusion of such forward-looking information should not be
regarded as a representation by us that our objectives or plans will be achieved. Such statements include, but are not
limited to, our expectations regarding the revenues in our ancillary network business, acquiring the Medac assets, using of a
portion of offering proceeds to fund the purchase of the Medac assets, raising additional equity capital in 2015, our cash on
hand, borrowings, and proceeds from financings being sufficient to meet our anticipated needs until the first quarter of
2016, raising additional capital later in 2015 or in early 2016 and expense reductions. Words such as
“expects,” “believes,” “anticipates,” “intends,” “should,”
“plans,” and variations of such words and similar expressions are intended to identify such forward-looking
statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of
factors that could cause actual results or future events to differ materially, including, but not limited to, our ability to
attract or maintain patients, clients or providers or achieve our financial results, changes in national healthcare policy,
federal or state regulation, and/or rates of reimbursement, including without limitation due to 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), the Company's ability
to successfully implement our growth strategy for the urgent and primary care business, the Company's ability to identify and
acquire target centers, increased competition in the urgent care and primary care market, the Company's ability to recruit
and retain qualified physicians and other healthcare professionals, reduction in reimbursement rates from governmental
payors, lower than anticipated demand for services, pricing, market acceptance or preference, changes in the business
relationship with significant clients, term expirations of contracts with significant clients, increased competition, the
Company's inability to maintain a network of ancillary service providers that is adequate to generate significant claims
volume, increased competition in the ancillary network business, the Company's inability to manage growth, 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. Except as otherwise required by law, the Company undertakes no obligation to update or
revise these forward-looking statements.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
Pursuant to permissive authority under Rule 305 of Regulation S-K, we
have omitted Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls And Procedures.
Evaluation of Disclosure Controls and Procedures
Management (with the participation of our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO)), carried out an evaluation of the effectiveness of the design and operation
of 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) as of June 30, 2015. Based on this evaluation, our principal executive officer and principal financial
officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures along with the
related internal controls over financial reporting were not effective to provide reasonable assurance that the information required
to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in Securities and Exchange Commission 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 disclosure. Please refer to Item 9A “Controls and Procedures” in our Annual Report on
Form 10K for the year ended December 31, 2014 for a complete description of our control deficiencies and our remediation plan.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over
financial reporting during the three months ended June 30, 2015 that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Status of Remediation Plan
We are training our new employees. We are also using outside consulting services when the scope and complexity of our internal control needs exceed our
internal capabilities.
We expect to have addressed and fully remediated
our significant deficiencies and material weaknesses by December 31, 2015, but we cannot assure you that our current remediation
plan can resolve all of our material weaknesses. If not, we will need to implement additional remedial
measures. Subsequent to quarter end, management is in the process of implementing new processes and controls over financial reporting
to promote effective remediation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments in the
legal proceeding described in Part II, Item 1, of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.
Item 1A. Risk Factors.
There have been no material changes to the
risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2014
except as set forth below which relates to our planned acquisition of Medac:
We may be unable to complete our planned acquisition of certain
assets of Medac Health Services, P.A., or Medac, on currently anticipated terms, or at all.
On July 31, 2015, we entered into an
asset purchase agreement to acquire certain assets of Medac. The agreement provides that the transaction will close, if at all,
by October 4, 2015. The total consideration for the acquisition is $5,600,000, subject to certain adjustments set forth in the
asset purchase agreement. We plan to finance the acquisition with a portion of the proceeds from a public equity offering, which
we anticipate closing in September 2015. If we do not successfully complete this offering, or if we raise an amount less than $5,600,000,
we may be unable to complete the acquisition on currently anticipated terms, or at all, which could have a material adverse effect
on our results from operation, financial condition and the trading price of our common stock.
Item 6. |
Exhibits
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Exhibit
Number |
Description |
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10.1 |
Amended and Restated American CareSource Holdings, Inc. 2009 Equity Incentive Plan. |
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31.1 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
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32.2 |
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
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, 2015 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.
|
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.
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AMERICAN CARESOURCE HOLDINGS, INC. |
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Date: |
August 14, 2015 |
By: |
/s/ John Pappajohn |
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John Pappajohn |
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Acting Chief Executive Officer (Principal Executive Officer) |
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|
|
|
|
|
Date: |
August 14, 2015 |
By: |
/s/ Anthony R. Levinson |
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Anthony R. Levinson |
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|
|
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Chief Financial Officer (Principal Financial Officer) |
|
Exhibit Index
Exhibit Number |
Description |
|
|
10.1 |
Amended and Restated American CareSource Holdings, Inc. 2009 Equity Incentive Plan. |
|
|
31.1 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1 |
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2 |
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
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, 2015 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.
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32
Exhibit 10.1
AMENDED AND RESTATED AMERICAN CARESOURCE HOLDINGS, INC.
2009 EQUITY INCENTIVE PLAN
American CareSource Holdings, Inc., a Delaware
corporation (the “Company”), hereby adopts this Amended and Restated American CareSource Holdings, Inc. 2009 Equity
Incentive Plan, effective March 31, 2015, subject to approval of the Company's stockholders, which amends and restates the American
CareSource Holdings, Inc. 2009 Equity Incentive Plan, as amended and restated effective April 28, 2014 (as hereby amended and restated,
the "Plan"). The terms of the Plan, as so amended and restated, are as follows:
Article 1.
Objectives and Duration
1.1 Purposes of the Plan. The purposes of this
Plan are (a) to recognize and compensate selected employees, Non-Employee Directors and Consultants who contribute to the success
of the Company and the Subsidiaries, (b) to attract and retain employees, Non-Employee Directors and Consultants, and (c) to provide
incentive compensation to employees, Non-Employee Directors and Consultants based upon the performance of the Company and the Subsidiaries.
1.2 Duration of the Plan. The Plan shall remain
in effect, subject to the right of the Board of Directors of the Company (“Board”) to amend or terminate the Plan at
any time pursuant to Article 13 hereof, until March 10, 2019 with respect to the initial 500,000 shares authorized for issuance
under the American CareSource Holdings, Inc. 2009 Equity Incentive Plan and until April 28, 2024 with respect to the additional
1,500,000 shares authorized under the American CareSource Holdings, Inc. 2009 Equity Incentive Plan, as amended and restated effective
April 28, 2014. If earlier, the Plan shall terminate on the date all Shares subject to the Plan shall have been purchased or acquired
and the restrictions on all Restricted Stock and Restricted Stock Units, and deferred periods on all Deferred Stock Units, granted
under the Plan shall have lapsed, according to the Plan’s provisions.
Article 2.
Definitions
Whenever used in the Plan, the following terms
shall have the meanings set forth below:
2.1 “Award” means Options (including
non-qualified options and Incentive Stock Options and Director Options), Restricted Shares, Restricted Stock Units, Deferred Stock
Units, Performance Units (which may be paid in cash), Performance Shares, Deferred Stock, Dividend Equivalents, or Other Stock-Based
Awards granted under the Plan.
2.2 “Award Agreement” means the written
agreement by which an Award shall be evidenced.
2.3 “CEO” means the Chief Executive
Officer of the Company.
2.4 "Board" means the Board of Directors
of the Company.
2.5 "Company" means American CareSource
Holdings, Inc. or any business organization that succeeds to all or substantially all of its business, whether by virtue of a purchase,
merger, consolidation or otherwise.
2.6 “COO” means the Chief Operating
Officer of the Company.
2.7 “Code” means the Internal Revenue
Code of 1986, as amended from time to time. References to a particular section of the Code include references to regulations and
rulings thereunder and to successor provisions.
2.9 “Committee” or “Stock Option
Committee” has the meaning set forth in Section 3.1.
2.10 “Common Stock” means the common
stock, $0.01 par value, of the Company.
2.11 “Covered Employee” means a Participant
who, as of the last day of the fiscal year in which the value of an Award is recognizable as income for federal income tax purposes,
is one of the group of “covered employees,” within the meaning of Code Section 162(m), with respect to the Company.
2.12 “Deferred Stock” means a right, granted under Section
10.1 to receive Shares at the end of a specified deferral period.
2.13 "Deferred Stock Unit" means a right to receive shares
awarded under Article 8.
2.14 “Disability” means, unless otherwise defined in an
Award Agreement, or as otherwise determined under procedures established by the Committee for purposes of the Plan, a disability
within the meaning of Section 22(e)(3) of the Code.
2.15 “Dividend Equivalent” means
a right to receive payments equal to dividends or property, if and when paid or distributed, on a specified number of Shares.
2.16 “Effective Date” means March
10, 2009 with respect to the initial 500,000 shares authorized for issuance under the Plan and April 28, 2014 with respect to the
additional 1,500,000 shares authorized under the Plan.
2.17 “Eligible Person” means any
employee (including any officer and employed director) of, or non-employee consultant to, or Non-Employee Director of, the Company
or any Subsidiary, or potential employee (including a potential officer) of, or non-employee consultant to, the Company or any
Subsidiary; provided, however, that solely with respect to the grant of an Incentive Stock Option an “Eligible Person”
shall be any employee (including any officer) of the Company or any Subsidiary.
2.18 “Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time. References to a particular section of the Exchange Act include references to
successor provisions.
2.19 “Fair Market Value” means (a)
with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures
as shall be established from time to time by the Committee, and (b) with respect to Shares, unless otherwise determined in the
good faith discretion of the Committee, as of a given date, (i) the closing sales price of the Shares on any national securities
exchange on which the Shares are principally traded, or, if no Shares are traded on any such exchange on such date, then on the
next preceding date on which any Shares were traded on such exchange or (ii) if no such prices are available, the average of the
high bid and low asked quotations in the over-the-counter market as reported by the National Quotation Bureau Incorporated or similar
organization; or (iii) in the event that there shall be no public market for the Shares, the fair market value of the Shares as
determined (which determination shall be conclusive) in good faith by the Committee.
2.20 "Grant Date” means the date on
which an Award is granted or, in the case of a grant to an Eligible Person, such later date as specified in advance by the Committee.
2.21 "Immediate Family" has the meaning
set forth in Section 5.4(c).
2.22 "Incentive Stock Option” means an Option that is intended
to meet the requirements of Section 422 of the Code.
2.23 "including” or “includes” means “including,
without limitation,” or “includes, without limitation,” respectively.
2.24 "Management Committee” has the meaning set forth in
Section 3.1(b).
2.25 "Non-Employee Director” means a member of the Board
who is not an employee of the Company or any Subsidiary.
2.26 "Option Price” means the price at which a Share may
be purchased by a Participant pursuant to an Option.
2.27 "Option Term” means the period beginning on the Grant
Date of an Option and ending on the date such Option expires, terminates or is canceled.
2.28 "Option” means an option granted under Article 6 of
the Plan.
2.29 "Other Stock-Based Award” means a right, granted under
Article 12 hereof, that relates to or is valued by reference to Shares or other Awards relating to Shares.
2.30 "Participant” means a person who has been granted
an Award.
2.31 "Performance Measures” has the meaning set forth in
Section 4.4.
2.32 "Performance Period” means the time period during
which performance goals must be met.
2.33 "Performance Share” and “Performance Unit”
have the respective meanings set forth in Article 9.
2.34 "Performance-Based Exception”
means the performance-based exception from the tax deductibility limitations of Code Section 162(m) contained in Code Section 162(m)(4)(C)
(including the special provisions for options thereunder).
2.35 "Period of Restriction” means
the period during which Restricted Shares or Restricted Stock Units are subject to forfeiture if the conditions specified in the
Award Agreement are not satisfied.
2.36 "Person” means any individual,
sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government instrumentality, division, agency, body or department.
2.37 "Restricted Shares” means Shares
that are both subject to forfeiture and are nontransferable if the Participant does not satisfy the conditions specified in the
Award Agreement applicable to such Shares.
2.38 "Restricted Stock Unit" shall
mean a right to receive Shares awarded under Article 8.
2.39 "Rule 16b-3” means Rule 16b-3
promulgated by the SEC under the Exchange Act, as amended from time to time, together with any successor rule.
2.40 "SEC” means the United States
Securities and Exchange Commission, or any successor thereto.
2.41 "Section 16 Non-Employee Director”
means a member of the Board who satisfies the requirements to qualify as a “non-employee director” under Rule 16b-3.
2.42 "Section 16 Person” means a person
who is subject to potential liability under Section 16(b) of the Exchange Act with respect to transactions involving equity securities
of the Company.
2.43 "Share” means a share of Common
Stock, and such other securities of the Company as may be substituted or resubstituted for Shares pursuant to Section 4.2 hereof.
2.44 "Subsidiary” means an entity
in an unbroken chain beginning with the Company if each of the entities other than the last entity in the unbroken chain owns 50%
or more of the total combined voting power of all classes of equity in one of the other entities in such chain.
2.45 "Termination of Affiliation”
occurs on the first day on which an individual is for any reason no longer providing services to the Company or any Subsidiary
in the capacity of an employee, officer or consultant or with respect to an individual who is an employee or officer of or a consultant
to an Subsidiary, the first day on which such entity ceases to be a Subsidiary of the Company.
Article 3.
Administration
3.1 Committee.
(a) Subject to Article 13 and to Section 3.2,
the Plan shall be administered by a Committee (the “Stock Option Committee” or the “Committee”) appointed
by the Board from time to time. Notwithstanding the foregoing, either the Board or the compensation committee of the Board (the
“Compensation Committee”) may at any time and in one or more instances reserve administrative powers to itself as the
Committee or exercise any of the administrative powers of the Committee. To the extent the Board or Compensation Committee considers
it desirable to comply with Rule 16b-3 or meet the Performance-Based Exception, the Committee shall consist of two or more directors
of the Company, all of whom qualify as “outside directors” within the meaning of Code Section 162(m) and Section 16
Non-Employee Directors. The number of members of the Committee shall from time to time be increased or decreased, and shall be
subject to such conditions, in each case if and to the extent the Board deems it appropriate to permit transactions in Shares pursuant
to the Plan to satisfy such conditions of Rule 16b-3 and the Performance-Based Exception as then in effect.
(b) The Board or the Compensation Committee may
appoint and delegate to another committee (“Management Committee”), to the CEO, or to the COO, any or all of the authority
of the Board or the Committee, as applicable, with respect to Awards to Participants other than Participants who are executive
officers, Non-Employee Directors, or are (or are expected to be) Covered Employees and/or are Section 16 Persons at the time any
such delegated authority is exercised. As of the Effective Date, the authority of the Committee with respect to Awards to Participants
other than Non-Employee Directors and senior vice presidents or higher ranking officers of the Company or any Subsidiary shall
be delegated to the CEO and the COO. This delegation shall remain in effect until such time as the Board or the Compensation Committee
rescinds or modifies such delegation.
(c) Unless the context requires otherwise, any
references herein to “Committee” include references to the Stock Option Committee, to the Board or Compensation Committee
to the extent either has assumed or exercises administrative powers itself as the Committee pursuant to subsection (a), and the
Management Committee, the CEO or the COO to the extent they have been delegated authority pursuant to subsection (b), as applicable;
provided that for purposes of Awards intended to comply with Rule 16b-3 or meet the Performance-Based Exception, “Committee”
shall include only the Stock Option Committee or the Compensation Committee.
3.2 Powers of Committee. Subject to and consistent
with the provisions of the Plan, the Committee has full and final authority and sole discretion as follows:
(a) to determine when, to whom and in what types
and amounts Awards should be granted;
(b) to grant Awards to Eligible Persons in any
number, and to determine the terms and conditions applicable to each Award (including the number of Shares or the amount of cash
or other property to which an Award will relate, any exercise price, grant price or purchase price, any limitation or restriction,
any schedule for or performance conditions relating to the earning of the Award or the lapse of limitations, forfeiture restrictions,
restrictions on exercisability or transferability, any performance goals including those relating to the Company and/or a Subsidiary
and/or any division thereof and/or an individual, and/or vesting based on the passage of time, based in each case on such considerations
as the Committee shall determine);
(c) to determine the benefit payable under any
Performance Unit, Performance Share, Dividend Equivalent, or Other Stock-Based Award and to determine whether any performance or
vesting conditions have been satisfied;
(d) to determine whether or not specific Awards
shall be granted in connection with other specific Awards, and if so, whether they shall be exercisable cumulatively with, or alternatively
to, such other specific Awards and all other matters to be determined in connection with an Award;
(e) to determine the Option Term;
(f) to determine the amount, if any, that a Participant
shall pay for Restricted Shares or Restricted Stock Units, whether to permit or require the payment of cash dividends thereon to
be deferred and the terms related thereto, when Restricted Shares (including Restricted Shares acquired upon the exercise of an
Option) or Restricted Stock Units shall be forfeited and whether Restricted Shares shall be held in escrow;
(g) to determine whether, to what extent and
under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Shares, other Awards
or other property, or an Award may be accelerated, vested, canceled, forfeited or surrendered or any terms of the Award may be
waived, and to accelerate the exercisability of, and to accelerate or waive any or all of the terms and conditions applicable to,
any Award or any group of Awards for any reason and at any time;
(h) to determine with respect to Awards granted
to Eligible Persons whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts
payable with respect to an Award will be deferred, either at the election of the Participant or if and to the extent specified
in the Award Agreement automatically or at the election of the Committee (whether to limit loss of deductions pursuant to Code
Section 162(m) or otherwise);
(i) to offer to exchange or buy out any previously
granted Award for a payment in cash, Shares or other Award;
(j) to construe and interpret the Plan and to
make all determinations, including factual determinations, necessary or advisable for the administration of the Plan;
(k) to make, amend, suspend, waive and rescind
rules and regulations relating to the Plan;
(l) to appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(m) to determine the terms and conditions of
all Award Agreements applicable to Eligible Persons (which need not be identical) and, with the consent of the Participant, to
amend any such Award Agreement at any time, among other things, to permit transfers of such Awards to the extent permitted by the
Plan; provided that the consent of the Participant shall not be required for any amendment (i) which does not adversely affect
the rights of the Participant, or (ii) which is necessary or advisable (as determined by the Committee) to carry out the purpose
of the Award as a result of any new applicable law or change in an existing applicable law, or (iii) to the extent the Award Agreement
specifically permits amendment without consent;
(n) to cancel, with the consent of the Participant,
outstanding Awards and to grant new Awards in substitution therefor;
(o) to impose such additional terms and conditions
upon the grant, exercise or retention of Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate,
including limiting the percentage of Awards which may from time to time be exercised by a Participant;
(p) to make adjustments in the terms and conditions
of, and the criteria in, Awards in recognition of unusual or nonrecurring events (including events described in Section 4.2) affecting
the Company or a Subsidiary or the financial statements of the Company or a Subsidiary in response to changes in applicable laws,
regulations or accounting principles; provided, however, that in no event shall such adjustment increase the value of an Award
for a person expected to be a Covered Employee for whom the Committee desires to have the Performance-Based Exception apply;
(q) to correct any defect or supply any omission
or reconcile any inconsistency, and to construe and interpret the Plan, the rules and regulations, and Award Agreement or any other
instrument entered into or relating to an Award under the Plan; and
(r) to take any other action with respect to
any matters relating to the Plan for which it is responsible and to make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.
Any action of the Committee with respect to the
Plan shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, any Participant, any person
claiming any rights under the Plan from or through any Participant, and stockholders, except to the extent the Committee may subsequently
modify, or take further action not consistent with, its prior action. If not specified in the Plan, the time at which the Committee
must or may make any determination shall be determined by the Committee, and any such determination may thereafter be modified
by the Committee. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall
not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the
Company or any Subsidiary the authority, subject to such terms as the Committee shall determine, to perform specified functions
under the Plan (subject to Sections 4.3 and 5.7(c)).
Article 4.
Shares Subject to the Plan, Maximum Awards, and 162(m) Compliance
4.1 Number of Shares Available for Grants. The Plan originally provided
for the issuance of a maximum of 1,500,000 shares, which was restated to 500,000 shares to effect a 1-for-3 reverse stock split,
effective September 4, 2012, pursuant to Section 4.2. Effective as of April 28, 2014, an additional 1,500,000 shares were authorized
for issuance under the Plan. All shares authorized for issuance under the plan are subject to adjustment as provided in Section
4.2, and subject to the limitations of Section 5.6(b).
If any Shares subject to an Award granted hereunder
are forfeited or such Award otherwise terminates without the delivery of such Shares, the Shares subject to such Award, to the
extent of any such forfeiture or termination, shall again be available for grant under the Plan. If any Shares subject to an Award
granted hereunder are withheld or applied as payment in connection with the exercise of an Award or the withholding or payment
of taxes related thereto (“Returned Shares”), such Returned Shares shall again be available for grant under the Plan.
The Committee shall from time to time determine
the appropriate methodology for calculating the number of Shares to which an Award relates pursuant to the Plan.
Shares delivered pursuant to the Plan may be,
in whole or in part, authorized and unissued Shares, or treasury Shares, including Shares repurchased by the Company for purposes
of the Plan.
4.2 Adjustments in Authorized Shares and Awards.
In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, or other
property), recapitalization, forward or reverse stock split, subdivision, consolidation or reduction of capital, reorganization,
merger, consolidation, scheme of arrangement, split-up, spin-off or combination involving the Company or repurchase or exchange
of Shares or other securities of the Company or other rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that any adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then
the Committee shall, in such manner as it may deem equitable, adjust any or all of (a) the number and type of Shares (or other
securities or property) with respect to which Awards may be granted, (b) the number and type of Shares (or other securities or
property) subject to outstanding Awards, (c) the grant or exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award, (d) the number and kind of Shares of outstanding Restricted
Shares or relating to any other outstanding Award in connection with which Shares are subject, and (e) the number of Shares with
respect to which Awards may be granted to a Participant, as set forth in Section 4.3; provided in each case, that with respect
to Stock Options, no such adjustment shall be authorized to the extent that such adjustment would cause the Option (determined
as if such Option was an Incentive Stock Option) to violate Section 424(a) of the Code; and provided further that the number of
Shares subject to any Award denominated in Shares shall always be a whole number.
4.3 Compliance with Section 162(m) of the Code.
To the extent the Committee determines that compliance with the Performance-Based Exception is desirable, the following shall apply:
(a) Section 162(m) Compliance. All Awards granted
to persons the Committee believes likely to be Covered Employees shall comply with the requirements of the Performance-Based Exception;
provided, however, that to the extent Code Section 162(m) requires periodic stockholder approval of performance measures, such
approval shall not be required for the continuation of the Plan or as a condition to grant any Award hereunder after such approval
is required. In addition, in the event that changes are made to Code Section 162(m) to permit flexibility with respect to the Award
or Awards available under the Plan, the Committee may, subject to this Section 4.3, make any adjustments to such Awards as it deems
appropriate.
(b) Annual Individual Limitations. No Participant
may be granted Awards (other than Awards that cannot be satisfied in Shares) with respect to more than 850,000 Shares, subject
to adjustment as provided in Section 4.2 and except as otherwise provided in Section 5.6(b). The maximum potential value of Awards
to be settled in cash or property (other than Shares) that may be granted with respect to any calendar year to any Participant
expected to be a Covered Employee (regardless of when such Award is settled) shall not exceed $5,000,000. (Thus, Awards that accrue
over more than one calendar year (or fiscal year) may exceed the one-year grant limit in the prior sentence at the time of payment
or settlement.)
4.4 Performance-Based Exception Under Section
162(m). Unless and until the Committee proposes for stockholder vote and stockholders approve a change in the general performance
measures set forth in this Section 4.4, for Awards (other than Options) designed to qualify for the Performance-Based Exception,
the objective Performance Measure(s) shall be chosen from among the following:
(a) Earnings (either in the aggregate or on a
per-share basis);
(b) Net income or loss;
(c) Operating income or loss;
(d) Operating profit;
(e) Cash flow (as modified or adjusted for purposes
of reporting cash flow in accordance with industry practice);
(f) Stockholder returns (including return on assets, investments,
equity, or gross sales) (including in-come applicable to common stockholders or other class of stockholders);
(g) Return measures (including return on assets, equity, or sales);
(h) Earnings before or after either, or any combination
of, interest, taxes, depreciation or amortization (EBITDA) (as modified or adjusted for purposes of reporting EBITDA in accordance
with industry practice);
(i) Gross revenues;
(j) Share price (including growth measures and
total stockholder return or attainment by the Shares of a specified value for a specified period of time);
(k) Reductions in expense levels in each case,
where applicable, determined either on a Company-wide basis or in respect of any one or more business units;
(l) Net economic value;
(m) Market share;
(n) Annual net income to Common Stock;
(o) Annual cash flow provided by operations;
(p) Changes in annual revenues;
(q) Strategic business criteria, consisting of
one or more objectives based on meeting specified revenue, market penetration, geographic business expansion goals, objectively
identified project milestones, production volume levels, cost targets, and goals relating to acquisitions or divestitures;
(r) Economic value added;
(s) Sales;
(t) Costs;
(u) Results of customer satisfaction surveys;
(v) Aggregate product price and other product
price measures;
(w) Safety record;
(x) Service reliability;
(y) Operating and maintenance cost management;
(z) Debt rating; and/or
(aa) Achievement of business or operational goals
such as market share and/or business development;
provided that applicable performance measures
may be applied on a pre- or post-tax basis; and provided further that the Committee may, on the Grant Date of an Award intended
to comply with the Performance-Based Exception, and in the case of other grants, at any time, provide that the formula for such
Award may include or exclude items to measure specific objectives, such as losses from discontinued operations, extraordinary gains
or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts and any unusual,
nonrecurring gain or loss. For Awards intended to comply with the Performance-Based Exception, the Committee shall set the Performance
Measures within the time period prescribed by Section 162(m) of the Code. The levels of performance required with respect to Performance
Measures may be expressed in absolute or relative levels and may be based upon a set increase, set positive result, maintenance
of the status quo, set decrease or set negative result. Performance Measures may differ for Awards to different Participants. The
Committee shall specify the weighting (which may be the same or different for multiple objectives) to be given to each performance
objective for purposes of determining the final amount payable with respect to any such Award. Any one or more of the Performance
Measures may apply to the Participant, a department, unit, division or function within the Company or any one or more Subsidiaries;
and may apply either alone or relative to the performance of other businesses or individuals (including industry or general market
indices).
The Committee shall have the discretion to adjust
the determinations of the degree of attainment of the pre-established performance goals; provided, however, that Awards which are
designed to qualify for the Performance-Based Exception may not (unless the Committee determines to amend the Award so that it
no longer qualified for the Performance-Based Exception) be adjusted upward (the Committee shall retain the discretion to adjust
such Awards downward). The Committee may not, unless the Committee determines to amend the Award so that it no longer qualifies
for the Performance-Based Exception, delegate any responsibility with respect to Awards intended to qualify for the Performance-Based
Exception. All determinations by the Committee as to the achievement of the Performance Measure(s) shall be in writing prior to
payment of the Award.
In the event that applicable laws change to permit
Committee discretion to alter the governing performance measures without obtaining stockholder approval of such changes, and still
qualify for the Performance-Based Exception, the Committee shall have sole discretion to make such changes without obtaining stockholder
approval.
Article 5.
Eligibility and General Conditions of Awards
5.1 Eligibility. The Committee may in its discretion
grant Awards to any Eligible Person, whether or not he or she has previously received an Award.
5.2 Award Agreement. To the extent not set forth
in the Plan, the terms and conditions of each Award shall be set forth in an Award Agreement.
5.3 General Terms and Termination of Affiliation.
The Committee may impose on any Award or the exercise or settlement thereof, at the date of grant or, subject to the provisions
of Section 13.2, thereafter, such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee
shall determine, including terms requiring forfeiture, acceleration or pro-rata acceleration of Awards in the event of a Termination
of Affiliation by the Participant. Except as may be required under the Delaware General Corporation Law, Awards may be granted
for no consideration other than prior and future services. Except as otherwise determined by the Committee pursuant to this Section
5.3, all Options that have not been exercised, or any other Awards that remain subject to a risk of forfeiture or which are not
otherwise vested, or which have outstanding Performance Periods, at the time of a Termination of Affiliation shall be forfeited
to the Company.
5.4 Nontransferability of Awards.
(a) Each Award and each right under any Award
shall be exercisable only by the Participant during the Participant’s lifetime, or, if permissible under applicable law,
by the Participant’s guardian or legal representative or by a transferee receiving such Award pursuant to a qualified domestic
relations order (a “QDRO”) as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974
as amended, or the rules thereunder.
(b) No Award (prior to the time, if applicable,
Shares are delivered in respect of such Award), and no right under any Award, may be assigned, alienated, pledged, attached, sold
or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution (or in
the case of Restricted Shares, to the Company) or pursuant to a QDRO, and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the Company or any Subsidiary; provided that the designation
of a beneficiary to receive benefits in the event of the Participant’s death shall not constitute an assignment, alienation,
pledge, attachment, sale, transfer or encumbrance.
(c) Notwithstanding subsections (a) and (b) above,
to the extent provided in the Award Agreement, Awards other than Incentive Stock Options and Deferred Stock may be transferred,
without consideration, to a Permitted Transferee. For this purpose, a “Permitted Transferee” in respect of any Participant
means any member of the Immediate Family of such Participant, any trust of which all of the primary beneficiaries are such Participant
or members of his or her Immediate Family, or any partnership (including limited liability companies and similar entities) of which
all of the partners or members are such Participant or members of his or her Immediate Family; and the term "Immediate Family”
of a Participant means the Participant’s spouse, children, stepchildren, grandchildren, parents, stepparents, siblings, grandparents,
nieces and nephews. Such Award may be exercised by such transferee in accordance with the terms of such Award. If so determined
by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise
the rights of the Participant, and to receive any distribution with respect to any Award upon the death of the Participant. A transferee,
beneficiary, guardian, legal representative or other person claiming any rights under the Plan from or through any Participant
shall be subject to and consistent with the provisions of the Plan and any applicable Award Agreement, except to the extent the
Plan and Award Agreement otherwise provide with respect to such persons, and to any additional restrictions or limitations deemed
necessary or appropriate by the Committee.
(d) Nothing herein shall be construed as requiring the Committee
to honor a QDRO except to the extent required under applicable law.
5.5 Cancellation and Rescission of Awards. Unless
the Award Agreement specifies otherwise, the Committee may cancel, rescind, suspend, withhold, or otherwise limit or restrict any
unexercised Award at any time if the Participant is not in compliance with all applicable provisions of the Award Agreement and
the Plan or if the Participant has a Termination of Affiliation.
5.6 Stand-Alone, Tandem and Substitute Awards.
(a) Awards granted under the Plan may, in the
discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award
granted under the Plan unless such tandem or substitution Award would subject the Participant to tax penalties imposed under Section
409A of the Code; provided further that if the stand-alone, tandem or substitute Award is intended to qualify for the Performance-Based
Exception, it must separately satisfy the requirements of the Performance-Based Exception. If an Award is granted in substitution
for another Award or any non-Plan award or benefit, the Committee shall require the surrender of such other Award or non-Plan award
or benefit in consideration for the grant of the new Award. Awards granted in addition to or in tandem with other Awards or non-Plan
awards or benefits may be granted either at the same time as or at a different time from the grant of such other Awards or non-Plan
awards or benefits.
(b) The Committee may, in its discretion and
on such terms and conditions as the Committee considers appropriate in the circumstances, grant Awards under the Plan (“Substitute
Awards”) in substitution for stock and stock-based awards (“Acquired Entity Awards”) held by employees of or
consultants to another corporation or entity who become Eligible Persons as the result of a merger or consolidation of the employing
corporation or other entity (the “Acquired Entity”) with the Company or a Subsidiary or the acquisition by the Company
or a Subsidiary of property or stock of the Acquired Entity immediately prior to such merger, consolidation or acquisition in order
to preserve for the Participant the economic value of all or a portion of such Acquired Entity Award at such price as the Committee
determines necessary to achieve preservation of economic value. The limitations of Sections 4.1 and 4.3 on the number of Shares
reserved or available for grants shall not apply to Substitute Awards granted under this subsection (b).
5.7 Compliance with Rule 16b-3.
(a) Six-Month Holding Period Advice. Unless a
Participant could otherwise dispose of or exercise a derivative security or dispose of Shares delivered under the Plan without
incurring liability under Section 16(b) of the Exchange Act, the Committee may advise or require a Participant to comply with the
following in order to avoid incurring liability under Section 16(b): (i) at least six months must elapse from the date of acquisition
of a derivative security under the Plan to the date of disposition of the derivative security (other than upon exercise or conversion)
or its underlying equity security, and (ii) Shares granted or awarded under the Plan other than upon exercise or conversion of
a derivative security must be held for at least six months from the date of grant of an Award.
(b) Reformation to Comply with Exchange Act Rules.
To the extent the Committee determines that a grant or other transaction by a Section 16 Person should comply with applicable provisions
of Rule 16b-3 (except for transactions exempted under alternative Exchange Act rules), the Committee shall take such actions as
necessary to make such grant or other transaction so comply, and if any provision of this Plan or any Award Agreement relating
to a given Award does not comply with the requirements of Rule 16b-3 as then applicable to any such grant or transaction, such
provision will be construed or deemed amended, if the Committee so determines, to the extent necessary to conform to the then applicable
requirements of Rule 16b-3.
(c) Rule 16b-3 Administration. Any function relating
to a Section 16 Person shall be performed solely by the Committee or the Board if necessary to ensure compliance with applicable
requirements of Rule 16b-3, to the extent the Committee determines that such compliance is desired. Each member of the Committee
or person acting on behalf of the Committee shall be entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer, manager or other employee of the Company or any Subsidiary, the Company’s independent certified
public accountants or any executive compensation consultant or attorney or other professional retained by the Company to assist
in the administration of the Plan.
5.8 Deferral of Award Payouts. The Committee
may permit a Participant to defer, or if and to the extent specified in an Award Agreement require the Participant to defer, receipt
of the payment of cash or the delivery of Shares that would otherwise be due by virtue of the lapse or waiver of restrictions with
respect to Restricted Shares or Restricted Stock Units, the satisfaction of any requirements or goals with respect to Performance
Units or Performance Shares, the lapse or waiver of the deferral period for Deferred Stock Units or Deferred Stock, or the lapse
or waiver of restrictions with respect to Other Stock-Based Awards. If the Committee permits such deferrals, the Committee shall
establish rules and procedures for making such deferral elections and for the payment of such deferrals, which shall conform in
form and substance with applicable regulations promulgated under Section 409A of the Code to ensure that the Participant is not
subjected to tax penalties under Section 409A of the Code with respect to such deferrals. Except as otherwise provided in an Award
Agreement, any payment or any Shares that are subject to such deferral shall be made or delivered to the Participant as specified
in the Award Agreement or pursuant to the Participant’s deferral election.
Article 6.
Stock Options
6.1 Grant of Options. Subject to and consistent
with the provisions of the Plan, Options may be granted to any Eligible Person in such number, and upon such terms, and at any
time and from time to time as shall be determined by the Committee.
6.2 Award Agreement. Each Option grant shall
be evidenced by an Award Agreement that shall specify the Option Price, the Option Term, the number of Shares to which the Option
pertains, the time or times at which such Option shall be exercisable and such other provisions as the Committee shall determine.
6.3 Option Price. The Option Price of an Option
under this Plan shall be determined in the sole discretion of the Committee but may not be less than 100% of the Fair Market Value
of a Share on the Grant Date. Subject to the adjustment allowed under Section 4.2, neither the Committee nor the Board shall have
the authority or discretion to change the Option Price of any outstanding Option.
6.4 Grant of Incentive Stock Options. At the
time of the grant of any Option, the Committee may in its discretion designate that such Option shall be made subject to additional
restrictions to permit it to qualify as an Incentive Stock Option. Any Option designated as an Incentive Stock Option:
(a) shall be granted only to an employee of the
Company or a Subsidiary;
(b) shall have an Option Price of not less than
100% of the Fair Market Value of a Share on the Grant Date, and, if granted to a person who owns capital stock (including stock
treated as owned under Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of
capital stock of the Company or any Subsidiary Corporation (a “10% Owner”), have an Option Price not less than 110%
of the Fair Market Value of a Share on its Grant Date;
(c) shall be for a period of not more than 10
years (five years if the Participant is a 10% Owner) from its Grant Date, and shall be subject to earlier termination as provided
herein or in the applicable Award Agreement;
(d) shall not have an aggregate Fair Market Value
(as of the Grant Date) of the Shares with respect to which Incentive Stock Options (whether granted under the Plan or any other
stock option plan of the Participant’s employer or any parent or Subsidiary (“Other Plans”)) are exercisable
for the first time by such Participant during any calendar year (“Current Grant”), determined in accordance with the
provisions of Section 422 of the Code, which exceeds $100,000 (the “$100,000 Limit”);
(e) shall, if the aggregate Fair Market Value
of the Shares (determined on the Grant Date) with respect to the Current Grant and all Incentive Stock Options previously granted
under the Plan and any Other Plans which are exercisable for the first time during a calendar year (“Prior Grants”)
would exceed the $100,000 Limit, be, as to the portion in excess of the $100,000 Limit, exercisable as a separate option that is
not an Incentive Stock Option at such date or dates as are provided in the Current Grant;
(f) shall require the Participant to notify the
Committee of any disposition of any Shares delivered pursuant to the exercise of the Incentive Stock Option under the circumstances
described in Section 421(b) of the Code (relating to holding periods and certain disqualifying dispositions) (“Disqualifying
Disposition”), within 10 days of such a Disqualifying Disposition;
(g) shall by its terms not be assignable or transferable
other than by will or the laws of descent and distribution and may be exercised, during the Participant’s lifetime, only
by the Participant; provided, however, that the Participant may, to the extent provided in the Plan in any manner specified by
the Committee, designate in writing a beneficiary to exercise his or her Incentive Stock Option after the Participant’s death;
and
(h) shall, if such Option nevertheless fails
to meet the foregoing requirements, or otherwise fails to meet the requirements of Section 422 of the Code for an Incentive Stock
Option, be treated for all purposes of this Plan, except as otherwise provided in subsections (d) and (e) above, as an Option that
is not an Incentive Stock Option.
Notwithstanding the foregoing and Section 3.2,
the Committee may, without the consent of the Participant, at any time before the exercise of an Option (whether or not an Incentive
Stock Option), take any action necessary to prevent such Option from being treated as an Incentive Stock Option.
6.5 Payment. Except as otherwise provided by
the Committee in an Award Agreement, Options shall be exercised by the delivery of a written notice of exercise to the Company,
setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares
made by any one or more of the following means:
(a) cash, personal check or wire transfer;
(b) delivery of Common Stock owned by the Participant
prior to exercise, valued at their Fair Market Value on the date of exercise;
(c) with the approval of the Committee, Shares
acquired upon the exercise of such Option, such Shares valued at their Fair Market Value on the date of exercise;
(d) with the approval of the Committee, Restricted
Shares held by the Participant prior to the exercise of the Option, each such share valued at the Fair Market Value of a Share
on the date of exercise; or
(e) subject to applicable law (including the
prohibited loan provisions of Section 402 of the Sarbanes Oxley Act of 2002), through the sale of the Shares acquired on exercise
of the Option through a broker-dealer to whom the Participant has submitted an irrevocable notice of exercise and irrevocable instructions
to deliver promptly to the Company the amount of sale or loan proceeds sufficient to pay for such Shares, together with, if requested
by the Company, the amount of federal, state, local or foreign withholding taxes payable by Participant by reason of such exercise.
The Committee may in its discretion specify that,
if any Restricted Shares (“Tendered Restricted Shares”) are used to pay the Option Price, (x) all the Shares acquired
on exercise of the Option shall be subject to the same restrictions as the Tendered Restricted Shares, determined as of the date
of exercise of the Option, or (y) a number of Shares acquired on exercise of the Option equal to the number of Tendered Restricted
Shares shall be subject to the same restrictions as the Tendered Restricted Shares, determined as of the date of exercise of the
Option.
Article 7.
Stock Appreciation Rights
7.1 Issuance. Subject to and consistent with
the provisions of the Plan, the Committee, at any time and from time to time, may grant SARs to any Eligible Person either alone
or in addition to other Awards granted under the Plan. Such SARs may, but need not, be granted in connection with a specific Option
granted under Article 6. Any SAR related to an Option must be granted at the same time such Option is granted and have the same
term. The Committee may impose such conditions or restrictions on the exercise of any SAR as it shall deem appropriate.
7.2 Award Agreements. Each SAR grant shall be
evidenced by an Award Agreement in such form as the Committee may approve and shall contain such terms and conditions not inconsistent
with other provisions of the Plan as shall be determined from time to time by the Committee.
7.3 Grant Price. The grant price of a SAR shall
be determined by the Committee in its sole discretion; provided that the grant price shall not be less than the lesser of 100%
of the Fair Market Value of a Share on the date of the grant of the SAR, or the Option Price under Option to which the SAR relates.
7.4 Exercise and Payment. Upon the exercise of
SARs, the Participant shall be entitled to receive the value thereof. The Fair Market Value of a Share on the date of exercise
of SARs shall be determined in the same manner as the Fair Market Value of a Share on the date of grant of an Option is determined.
SARs shall be deemed exercised on the date written notice of exercise in a form acceptable to the Committee is received by the
Secretary of the Company. The Company shall make payment in respect of any SAR within five (5) days of the date the SAR is exercised.
Any payment by the Company in respect of a SAR may be made in cash, Shares, other property, or any combination thereof, as the
Committee, in its sole discretion, shall determine Grant Limitations. The Committee may at any time impose any other limitations
upon the exercise of SARs which, in the Committee's sole discretion, are necessary or desirable in order for Participants to qualify
for an exemption from Section 16(b) of the Exchange Act.
Article 8.
Stock Awards
8.1 Grant of Restricted Shares, Restricted Stock
Units and Deferred Stock Units. Subject to and consistent with the provisions of the Plan, the Committee, at any time
and from time to time, may grant Restricted Shares, Restricted Stock Units and Deferred Stock Units to any Eligible Person in such
amounts as the Committee shall determine.
8.2 Award Agreement. Each grant of
Restricted Shares, Restricted Stock Units and Deferred Stock Units shall be evidenced by an Award Agreement that shall set forth
the number of Restricted Shares, Restricted Stock Units and Deferred Stock Units granted, specify in the case of Restricted Shares
and Restricted Stock Units the Period(s) of Restriction, set forth in the case of Deferred Stock Units the deferral period, and
set forth such other provisions as the Committee shall determine. The Committee may impose such conditions and/or restrictions
on any Restricted Shares and Restricted Stock Units granted pursuant to the Plan as it may deem advisable, including restrictions
based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable securities laws; provided that such conditions and/or restrictions may lapse, if so
determined by the Committee, in the event of the Participant’s Termination of Affiliation due to death, disability, normal
or approved early retirement, or involuntary termination by the Company or a Subsidiary without “cause”.
8.3 Consideration for Restricted Shares, Restricted
Stock Units and Deferred Stock Units. The Committee shall determine the amount, if any, that a Participant shall pay
for Restricted Shares, Restricted Stock Units and Deferred Stock Units.
8.4 Effect of Forfeiture. If Restricted
Shares or Restricted Stock Units are forfeited, and if the Participant was required to pay for Restricted Shares or Restricted
Stock Units or acquired such Restricted Shares upon the exercise of an Option, the Participant shall be deemed to have resold such
Restricted Shares or Restricted Stock Units to the Company at a price equal to the lesser of (x) the amount paid by the Participant
for such Restricted Shares or Restricted Stock Units, or (y) the Fair Market Value of such Restricted Shares or the Shares underlying
such Restricted Stock Units on the date of such forfeiture. The Company shall pay to the Participant the deemed sale price as soon
as is administratively practical. Such Restricted Shares shall cease to be outstanding, and shall no longer confer on the Participant
thereof any rights as a stockholder of the Company, from and after the date of the event causing the forfeiture, whether or not
the Participant accepts the Company’s tender of payment for such Restricted Shares.
8.5 Escrow; Legends. The Committee may provide
that the certificates for any Restricted Shares (x) shall be held (together with a stock power executed in blank by the Participant)
in escrow by the Secretary of the Company until such Restricted Shares become nonforfeitable or are forfeited and/or (y) shall
bear an appropriate legend restricting the transfer of such Restricted Shares under the Plan. If any Restricted Shares become nonforfeitable,
the Company shall cause certificates for such shares to be delivered without such legend.
8.6 Stock Award Account. Upon the selection of
an Eligible Person to be awarded Restricted Stock Units or Deferred Stock Units, the Committee shall instruct the Secretary of
the Company to establish a Stock Award Account on behalf of each such Eligible Person. The Committee may impose such
conditions on the issuance of such Restricted Stock Units or Deferred Stock Units as it deems appropriate.
8.7 Vesting of Restricted Shares and Restricted
Stock Units. Awards of Restricted Shares and Restricted Stock Units shall vest pursuant to the Award Agreement.
8.8 Vesting of Deferred Stock Units. A
Participant shall be 100% vested in the number of Deferred Stock Units held in his or her Stock Award Account at all times. The
term for which the Deferred Stock Units shall be deferred shall be provided for in the Award Agreement.
8.9 Conversion. Upon vesting in the
case of Restricted Stock Units, and upon the lapse of the deferral period in the case of Deferred Stock Units, such Restricted
Stock Units and Deferred Stock Units shall be converted into an equivalent number of Shares that will be distributed to the Participant,
or in the case of the Participant's death, to the Participant's legal representative. Such distribution shall be evidenced
by a stock certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or
other appropriate means as determined by the Company. All distributions shall be made no later than March 15th of the
calendar year following the year, with respect to the Restricted Stock Units, in which such Restricted Stock Units vest or, with
respect to Deferred Stock Units, in which the deferral period lapses. In the event ownership or issuance of the Shares
is not feasible due to applicable exchange controls, securities regulations, tax laws or other provisions of applicable law, as
determined by the Company in its sole discretion, the Participant, or, in the case of the Participant's death, the Participant's
legal representative, shall receive cash proceeds in an amount equal to the value of the Shares otherwise distributable to the
Participant, net of tax withholding as provided in Article 14.
8.10 Nothing in this Plan shall be construed
as giving a Participant who receives an Award of Restricted Stock Units or Deferred Stock Units any of the rights of an owner of
Shares unless and until Shares are issued and transferred to the Participant in accordance with the terms of the Plan and the Award
Agreement. Notwithstanding the foregoing, in the event that any dividend is paid by the Company with respect to the
Shares (whether in the form of cash, Shares or other property), then the Committee shall, in the manner it deems equitable or appropriate,
adjust the number of Restricted Stock Units or Deferred Stock Units allocated to each Participant's Stock Award Account to reflect
such dividend.
Article 9.
Performance Units and Performance Shares
9.1 Grant of Performance Units and Performance
Shares. Subject to and consistent with the provisions of the Plan, Performance Units or Performance Shares may be granted to any
Eligible Person in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.
9.2 Value/Performance Goals. The Committee shall
set performance goals in its discretion which, depending on the extent to which they are met, will determine the number or value
of Performance Units or Performance Shares that will be paid to the Participant. With respect to Covered Employees and to the extent
the Committee deems it appropriate to comply with Section 162(m) of the Code, all performance goals shall be objective Performance
Measures satisfying the requirements for the Performance-Based Exception, and shall be set by the Committee within the time period
prescribed by Section 162(m) of the Code and related regulations.
(a) Performance Unit. Each Performance Unit shall
have an initial value that is established by the Committee at the time of grant.
(b) Performance Share. Each Performance Share
shall have an initial value equal to the Fair Market Value of a Share on the date of grant.
9.3 Earning of Performance Units and Performance
Shares. After the applicable Performance Period has ended, the holder of Performance Units or Performance Shares shall be entitled
to payment based on the level of achievement of performance goals set by the Committee. If a Performance Unit or Performance Share
Award is intended to comply with the Performance-Based Exception, the Committee shall certify the level of achievement of the performance
goals in writing before the Award is settled.
At the discretion of the Committee, the settlement
of Performance Units or Performance Shares may be in cash, Shares of equivalent value, or in some combination thereof, as set forth
in the Award Agreement.
If a Participant is promoted, demoted or transferred
to a different business unit of the Company during a Performance Period, then, to the extent the Committee determines that the
Award, the performance goals, or the Performance Period are no longer appropriate, the Committee may adjust, change, eliminate
or cancel the Award, the performance goals, or the applicable Performance Period, as it deems appropriate in order to make them
appropriate and comparable to the initial Award, the performance goals, or the Performance Period.
At the discretion of the Committee, a Participant
may be entitled to receive any dividends or Dividend Equivalents declared with respect to Shares deliverable in connection with
grants of Performance Units or Performance Shares which have been earned, but not yet delivered to the Participant.
Article 10.
Deferred Stock
10.1 Grant of Deferred Stock. Subject to and
consistent with the provisions of the Plan, the Committee, at any time and from time to time, may grant Deferred Stock to any Eligible
Person, in such amount and upon such terms as the Committee shall determine; provided that any such grant of Deferred Stock shall
either (i) qualify as a short-term deferral within the meaning of final regulations under Section 409A of the Code or (ii) conform
in form and substance with applicable regulations promulgated under Section 409A of the Code to ensure that the Participant is
not subjected to tax penalties under Section 409A of the Code with respect to such Deferred Stock.
10.2 Vesting and Delivery. Delivery of Shares
will occur upon expiration of the deferral period or upon the occurrence of one or more of the distribution events described in
Section 409A(a)(2) of the Code as specified by the Committee in the Participant’s Award Agreement for the Award of Deferred
Stock. In addition, an Award of Deferred Stock shall be subject to such substantial risk of forfeiture conditions as the Committee
may impose, which conditions may lapse at the expiration of the deferral period or at other specified times, separately or in combination,
in installments or otherwise, as the Committee shall determine at the time of grant or thereafter. Unless and only to the extent
that the Committee shall provide otherwise in the Award Agreement, a Participant awarded Deferred Stock will have no voting rights
but will have the rights to receive Dividend Equivalents in respect of Deferred Stock, which Dividend Equivalents shall be deemed
reinvested in additional Shares of Deferred Stock. Except as provided in the Award Agreement, to the extent that the Participant
has a Termination of Affiliation while the Deferred Stock remains subject to a substantial risk of forfeiture, such Deferred Shares
shall be forfeited.
Article 11.
Dividend Equivalents
The Committee is authorized to grant Awards of
Dividend Equivalents alone or in conjunction with other Awards. The Committee may provide that Dividend Equivalents shall be paid
or distributed when accrued or shall be deemed to have been reinvested in additional Shares or additional Awards or otherwise reinvested.
Article 12.
Other Stock-Based Awards
The Committee is authorized, subject to limitations
under applicable law, to grant such other Awards that are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan including
Shares awarded which are not subject to any restrictions or conditions, convertible or exchangeable debt securities or other rights
convertible or exchangeable into Shares, and Awards valued by reference to the value of securities of or the performance of specified
Subsidiaries. Subject to and consistent with the provisions of the Plan, the Committee shall determine the terms and conditions
of such Awards. Except as provided by the Committee, Shares delivered pursuant to a purchase right granted under this Article 12
shall be purchased for such consideration, paid for by such methods and in such forms, including cash, Shares, outstanding Awards
or other property, as the Committee shall determine.
Article 13.
Amendment, Modification, and Termination
13.1 Amendment, Modification, and Termination.
Subject to Section 13.2, the Board may, at any time and from time to time, alter, amend, suspend, discontinue or terminate the
Plan in whole or in part without the approval of the Company’s stockholders, except that (a) any amendment or alteration
shall be subject to the approval of the Company’s stockholders if such stockholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated quotation system on which the Shares may then be listed
or quoted, and (b) the Board may otherwise, in its discretion, determine to submit other such amendments or alterations to stockholders
for approval.
13.2 Awards Previously Granted. Except as otherwise
specifically permitted in the Plan or an Award Agreement, no termination, amendment, or modification of the Plan shall adversely
affect in any material way any Award previously granted under the Plan, without the written consent of the Participant to
whom such Award was made.
Article 14.
Withholding
14.1 Required Withholding
(a) The Committee in its sole discretion may
provide that when taxes are to be withheld in connection with the exercise of an Option, or upon the lapse of restrictions on Restricted
Shares or Restricted Stock Units, or upon lapse of the deferred period in the case of Deferred Stock, or upon the transfer of Deferred
Stock, or upon payment of any other benefit or right under this Plan (the date on which such exercise occurs or such restrictions
lapse or such payment of any other benefit or right occurs hereinafter referred to as the “Tax Date”), the Participant
shall be required to elect to make payment for the withholding of federal, state and local taxes, including Social Security and
Medicare (“FICA”) taxes by one or a combination of the following methods:
(i) payment of an amount in cash equal to the
amount to be withheld;
(ii) delivering part or all of the amount to
be withheld in the form of Common Stock valued at their Fair Market Value on the Tax Date;
(iii) requesting the Company to withhold from
those Shares that would otherwise be received upon exercise of the Option, upon the lapse of restrictions on Restricted Stock or
Restricted Stock Units, upon lapse of the deferral period in the case of Deferred Stock Units, or upon the transfer of Deferred
Stock, a number of Shares having a Fair Market Value on the Tax Date equal to the amount to be withheld; or
(iv) withholding from any compensation otherwise
due to the Participant.
The Committee in its sole discretion may provide
that the maximum amount of tax withholding upon exercise of an Option to be satisfied by withholding Shares upon exercise of such
Option pursuant to clause (iii) above shall not exceed the minimum amount of taxes, including FICA taxes, required to be withheld
under federal, state and local law. An election by Participant under this subsection is irrevocable. Any fractional share amount
and any additional withholding not paid by the withholding or surrender of Shares or delivery of Mature Shares must be paid in
cash. If no timely election is made, the Participant must deliver cash to satisfy all tax withholding requirements.
(b) Any Participant who makes a Disqualifying
Disposition (as defined in Section 6.4(f)) or an election under Section 83(b) of the Code shall remit to the Company an amount
sufficient to satisfy all resulting tax withholding requirements in the same manner as set forth in subsection (a).
14.2 Notification under Code Section 83(b). If
the Participant, in connection with the exercise of any Option, or the grant of Restricted Shares, makes the election permitted
under Section 83(b) of the Code to include in such Participant’s gross income in the year of transfer the amounts specified
in Section 83(b) of the Code, then such Participant shall notify the Company of such election within 10 days of filing the notice
of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations
issued under Section 83(b) of the Code. The Committee may, in connection with the grant of an Award or at any time thereafter,
prohibit a Participant from making the election described above.
Article 15.
Additional Provisions
15.1 Successors. All obligations of the Company
under the Plan with respect to Awards granted here-under shall be binding on any successor to the Company, whether the existence
of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise of all or substantially all
of the business and/or assets of the Company.
15.2 Gender and Number. Except where otherwise
indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular
and the singular shall include the plural.
15.3 Severability. If any part of the Plan is
declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate
any other part of the Plan. Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed
in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining
lawful and valid.
15.4 Requirements of Law. The granting of Awards
and the delivery of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be required. Notwithstanding any provision of the Plan or
any Award, Participants shall not be entitled to exercise, or receive benefits under, any Award, and the Company shall not be obligated
to deliver any Shares or deliver benefits to a Participant, if such exercise or delivery would constitute a violation by the Participant
or the Company of any applicable law or regulation.
15.5 Change in Control. In the event
of a change in control of the Company, all Awards shall be fully vested and exercisable as of the effective date of the change
in control, unless otherwise provided in the Award Agreement when the Award is made. A change in control means the occurrence of
any of the following:
(a) any person or “group” (within
the meaning of Section 13(d)(3) of the 1934 Act), acquiring “beneficial ownership” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of more than fifty percent of the aggregate voting power of the capital stock ordinarily
entitled to elect directors of the Company;
(b) the sale of all or substantially all of the
Company’s assets in one or more related transactions within a 12-month period to a person other than such a sale to a subsidiary
of the Company which does not involve a change in the equity holdings of the Company directly or indirectly controls; or
(c) any merger, consolidation, reorganization
or similar event of the Company or any Subsidiary, as a result of which the holders of the voting stock of the Company immediately
prior to such merger, consolidation, reorganization or similar event do not directly or indirectly hold at least fifty percent
of the aggregate voting power of the capital stock of the surviving entity.
15.6 Securities Law Compliance.
(a) If the Committee deems it necessary to comply
with any applicable securities law, or the requirements of any stock exchange upon which Shares may be listed, the Committee may
impose any restriction on Awards or Shares acquired pursuant to Awards under the Plan as it may deem advisable. All certificates
for Shares delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the SEC, any
stock exchange upon which Shares are then listed, any applicable securities law, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate reference to such restrictions. If so requested by the Company, the Participant
shall make a written representation to the Company that he or she will not sell or offer to sell any Shares unless a registration
statement shall be in effect with respect to such Shares under the Securities Act of 1993, as amended, and any applicable state
securities law or unless he or she shall have furnished to the Company, in form and substance satisfactory to the Company, that
such registration is not required.
(b) If the Committee determines that the exercise
or nonforfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of securities laws
or the listing requirements of any national securities exchange or national market system on which are listed any of the Company’s
equity securities, then the Committee may postpone any such exercise, nonforfeitability or delivery, as applicable, but the Company
shall use all reasonable efforts to cause such exercise, nonforfeitability or delivery to comply with all such provisions at the
earliest practicable date.
15.7 No Rights as a Stockholder. No Participant
shall have any rights as a stockholder of the Company with respect to the Shares (other than Restricted Shares) which may be deliverable
upon exercise or payment of such Award until such Shares have been delivered to him or her. Restricted Shares, whether held by
a Participant or in escrow by the Secretary of the Company, shall confer on the Participant all rights of a stockholder of the
Company, except as otherwise provided in the Plan or Award Agreement. At the time of a grant of Restricted Shares, the Committee
may require the payment of cash dividends thereon to be deferred and, if the Committee so determines, reinvested in additional
Restricted Shares. Stock dividends and deferred cash dividends issued with respect to Restricted Shares shall be subject to the
same restrictions and other terms as apply to the Restricted Shares with respect to which such dividends are issued. The Committee
may in its discretion provide for payment of interest on deferred cash dividends.
15.8 Nature of Payments. Unless otherwise specified
in the Award Agreement, Awards shall be special incentive payments to the Participant and shall not be taken into account in computing
the amount of salary or compensation of the Participant for purposes of determining any pension, retirement, death or other benefit
under (a) any pension, retirement, profit sharing, bonus, insurance or other employee benefit plan of the Company or any Subsidiary,
except as such plan shall otherwise expressly provide, or (b) any agreement between (i) the Company or any Subsidiary and (ii)
the Participant, except as such agreement shall otherwise expressly provide.
15.9 Non-Exclusivity of Plan. Neither the adoption
of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board to adopt such other compensatory arrangements for employees, consultants, or Non-Employee
Directors as it may deem desirable.
15.10 Governing Law. The Plan, and all agreements
hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware, other than its laws respecting
choice of law.
15.11 Share Certificates. All certificates for
Shares delivered under the terms of the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee
may deem advisable under federal or state securities laws, rules and regulations thereunder, and the rules of any national securities
laws, rules and regulations thereunder, and the rules of any national securities exchange or automated quotation system on which
Shares are listed or quoted. The Committee may cause a legend or legends to be placed on any such certificates to make appropriate
reference to such restrictions or any other restrictions or limitations that may be applicable to Shares. In addition, during any
period in which Awards or Shares are subject to restrictions or limitations under the terms of the Plan or any Award Agreement,
or during any period during which delivery or receipt of an Award or Shares has been deferred by the Committee or a Participant,
the Committee may require any Participant to enter into an agreement providing that certificates representing Shares deliverable
or delivered pursuant to an Award shall remain in the physical custody of the Company or such other person as the Committee may
designate.
15.12 Unfunded Status of Awards; Creation of
Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect
to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall
give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that
the Committee may authorize the creation of trusts or make other arrangements to meet the Company’s obligations under the
Plan to deliver cash, Shares or other property pursuant to any Award which trusts or other arrangements shall be consistent with
the “unfunded” status of the Plan unless the Committee otherwise determines.
15.13 Affiliation. Nothing in the Plan or an
Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s
employment or consulting contract at any time, nor confer upon any Participant the right to continue in the employ of or as an
officer of or as a consultant to the Company or any Subsidiary.
15.14 Participation. No employee or officer shall
have the right to be selected to receive an Award under this Plan or, having been so selected, to be selected to receive a future
Award.
15.15 Military Service. Awards shall be administered
in accordance with Section 414(u) of the Code and the Uniformed Services Employment and Reemployment Rights Act of 1994.
15.16 Construction. The following rules of construction
will apply to the Plan: (a) the word “or” is disjunctive but not necessarily exclusive, and (b) words in the singular
include the plural, words in the plural include the singular, and words in the neuter gender include the masculine and feminine
genders and words in the masculine or feminine gender include the other neuter genders.
15.17 Headings. The headings of articles and
sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this
Plan, the text shall control.
15.18 Obligations. Unless otherwise specified
in the Award Agreement, the obligation to deliver, pay or transfer any amount of money or other property pursuant to Awards under
this Plan shall be the sole obligation of a Participant’s employer; provided that the obligation to deliver or transfer any
Shares pursuant to Awards under this Plan shall be the sole obligation of the Company.
15.19 No Right to Continue as Director. Nothing
in the Plan or any Award Agreement shall confer upon any director the right to continue to serve as a director of the Company.
20
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934
I, John Pappajohn, 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 statement 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(s) 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(s) and I
have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 14, 2015 |
By: |
/s/ John Pappajohn |
|
|
|
John Pappajohn |
|
|
|
Acting Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934
I, Anthony R. Levinson, 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 statement 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(s) 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(s) and I
have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 14, 2015 |
By: |
/s/ Anthony R. Levinson |
|
|
|
Anthony R. Levinson |
|
|
|
Chief Financial Officer |
|
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Pursuant to 18 U.S.C. section 1350, the undersigned
officer of American CareSource Holdings, Inc. (the “Company”), hereby certifies, to such officer’s knowledge,
that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (the “Report”) fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that 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, 2015 |
By: /s/ John Pappajohn |
|
|
John Pappajohn |
|
|
Acting Chief Executive Officer
(Principal Executive Officer) |
|
|
|
This certification is made solely for the purpose
of 18 U.S.C Section 1350 and not for any other purpose.
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Pursuant to 18 U.S.C. section 1350, the undersigned
officer of American CareSource Holdings, Inc. (the “Company”), hereby certifies, to such officer’s knowledge,
that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (the “Report”) fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that 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, 2015 |
By: /s/ Anthony R. Levinson |
|
|
Anthony R. Levinson |
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
This certification is made solely for the purpose
of 18 U.S.C Section 1350 and not for any other purpose.
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