-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FAgW9furSy76mEyaSf4XCvCXZ3I/gCpzAeOJY/ZTqW7PYTK/vUB2c+ECZP7yUjMC UKvvlAQulQhwWT28Js5bNA== 0001334950-06-000008.txt : 20060811 0001334950-06-000008.hdr.sgml : 20060811 20060811112737 ACCESSION NUMBER: 0001334950-06-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060811 DATE AS OF CHANGE: 20060811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: American Caresource Holdings, Inc. CENTRAL INDEX KEY: 0001316645 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 200428568 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-51603 FILM NUMBER: 061023556 BUSINESS ADDRESS: STREET 1: 8080 TRISTAR DRIVE STREET 2: SUITE 100 CITY: IRVING STATE: TX ZIP: 75063 BUSINESS PHONE: 972-871-7912 MAIL ADDRESS: STREET 1: 8080 TRISTAR DRIVE STREET 2: SUITE 100 CITY: IRVING STATE: TX ZIP: 75063 FORMER COMPANY: FORMER CONFORMED NAME: American Caresouce Holdings, Inc. DATE OF NAME CHANGE: 20050204 10-Q 1 form10q_063006v2.htm 10-Q Q2 2006

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-QSB

[ X ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:

June 30, 2006

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from		to

Commission file number:	000-51603

American CareSource Holdings, Inc.

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

Delaware

20-0428586

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

8080 Tristar Drive, Irving, Texas

(Address of principal executive offices)

(214) 596-2400

(Issuer’s telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act as of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.

Yes x

No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 1, 2006, 14,472,248 shares of the Company’s common stock, par value $0.01 per share, were outstanding.

Transitional Small Business Disclosure Format (check one)

Yes o

No x

TABLE OF CONTENTS

AMERICAN CARESOURCE HOLDINGS, INC.

FORM 10-QSB QUARTER ENDED JUNE 30, 2006

Part I	Financial Information	3
Item 1.	Financial Statements	3
	Unaudited Consolidated Balance Sheets	3
	Unaudited Consolidated Statements of Operations	4
	Unaudited Statement of Stockholders’ Equity	6
	Unaudited Consolidated Statements of Cash Flows	7
	Unaudited Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis or Plan of Operation	16
Item 3.	Controls and Procedures	25
	Risk Factors	26
Part II	Other Information	31
Item 1.	Legal Proceedings	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		35

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	As of
ASSETS	June 30, 2006	December 31, 2005
CURRENT ASSETS

Cash	$5,370,354	$23,399
Accounts Receivable	1,670,154	482,159
Other	114,349	30,151
Total Current Assets	7,154,857	535,709

Net Property, Plant, and Equipment	154,747	175,608

Intangible Assets	1,814,610	1,921,401
Goodwill	4,361,299	4,361,299
Total Assets	$13,485,513	$6,994,017

Liabilities and Stockholders' Equity

Current Liabilities
Due to Service Providers	$1,400,909	$386,217
Accounts Payable and Accrued Liabilities	560,570	352,383
Current Maturities of Long-Term Debt	346,933	20,231
Total Current Liabilities	2,308,412	758,831

Long-Term Debt	48,858	3,845,929

Total Liabilities	2,357,270	4,604,760

stockholders' Equity:

Common Stock-par value $0.01, 40,000,000 shares authorized and	144,521	123,713
14,452,071 and 12,371,309 shares issued and outstanding as of
June 30, 2006 and December 31, 2005 respectively
Preferred Stock-par value $0.01, 10,000,000 shares authorized and	0	0
none outstanding
Additional Paid in Capital	16,884,584	7,734,800
Deferred Debt Issuance Cost	(138,900)	(231,500)
Accumulated (Deficit)	(5,761,962)	(5,237,756)

Total Stockholders’ Equity	11,128,243	2,389,257

Total Liabilities and Equity	$13,485,513	$6,994,017

See notes to unaudited consolidated financial statements.

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended
	June 30,
	2006	2005
REVENUES
Net Ancillary Health	$2,796,623	$1,005,014
Patient Claims Processing	33,318	33,803
Net Revenue	2,829,941	1,038,817

Total Cost of Revenues	2,169,835	1,090,913

Contribution Margin	660,106	(52,096)


Selling, General, and Administrative Expense	804,225	482,812
Depreciation and Amortization	80,099	83,912

Total Operating Expense	884,324	566,724

Operating (Loss)	(224,218)	(618,820)

Other (Income) Expense	34,754	(7,378)
Debt Issuance Cost	46,300	35,748
Net Interest and Finance Cost	(41,303)	31,563

Total Other Expense	39,751	59,933

Net (Loss) Before Income Tax	(263,969)	(678,753)
Income Tax Expense	0	0

Net (Loss)	$(263,969)	$(678,753)

NET LOSS PER SHARE – BASIC AND DILUTED	$(0.02)	$(0.05)

WEIGHTED AVERAGE COMMON SHARES	14,447,061	12,371,309

See notes to unaudited consolidated financial statements.

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Six Months Ended
	June 30,
	2006	2005
REVENUES
Net Ancillary Health	$5,228,855	$2,213,876
Patient Claims Processing	65,467	134,125
Net Revenue	5,294,322	2,348,001

Total Cost of Revenues	4,215,309	2,352,552

Contribution Margin	1,079,013	(4,551)


Selling, General, and Administrative Expense	1,335,490	937,890
Depreciation and Amortization	158,347	160,426

Total Operating Expense	1,493,837	1,098,316

Operating (Loss)	(414,824)	(1,102,867)

Other (Income) Expense	37,386	(7,378)
Debt Issuance Cost	92,600	59,580
Net Interest and Finance Cost	(20,604)	42,180

Total Other Expense	109,382	94,382

Net (Loss) Before Income Tax	(524,206)	(1,197,249)
Income Tax Expense	0	0

Net (Loss)	$(524,206)	$(1,197,249)

NET LOSS PER SHARE – BASIC AND DILUTED	$(0.04)	$(0.10)

WEIGHTED AVERAGE COMMON SHARES	13,862,855	12,371,309

See notes to unaudited consolidated financial statements.

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005 (UNAUDITED)

				Deferred		Accum
	Shares	Amount	APIC	Debt		Deficit	Total
Balance December 31, 2004	12,371,309	$ 123,713	$7,158,154	$	-	$ (2,831,238)	$4,450,629
Issue & Amortization of Warrants			214,489	(154,909)			59,580
Net Loss						(1,197,249)	(1,197,249)

Balance June 30, 2005	12,371,309	$123,713	$7,372,643	$(154,909)		$ (4,028,487)	$3,312,960




Balance December 31, 2005	12,371,309	$ 123,713	$7,734,800	$(231,500)		$ (5,237,756)	$ 2,389,257
Issue of 1,999,400 Common Stock Shares	1,999,400	19,994	9,049,854				9,069,848
Exercise of 81,362 Stock Options	81,362	814	25,538				26,352
Option Compensation Expense			74,392				74,392
Amortization of Warrants Associated with Deferred Debt				92,600			92,600
Net Loss						(524,206)	(524,206)

Balance June 30, 2006	14,452,071	$144,521	$16,884,584	$ (138,900)		$ (5,761,962)	$11,128,243

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months	Six Months
	Ended	Ended
	June 30, 2006	June 30, 2005

OPERATING ACTIVITIES:
Net loss	$(524,206)	$(1,197,249)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense	74,392	-
Depreciation and amortization	158,347	160,426
Compensation expense related to warrants	92,600	59,580
(Gain) on Disposal of Assets	-	(7,378)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(1,187,995)	23,769
(Increase) in other current assets	(84,198)	(39,598)
Increase in accounts payable and accrued liabilities	208,187	100,180
Increase (decrease) in amounts payable to service providers	1,014,692	(7,187)

Net cash used in operating activities	(248,181)	(907,457)

INVESTING ACTIVITIES:
Purchase of Property and equipment	(30,695)	(188,021)
Proceeds from the Sale of Equipment	-	31,656

Net cash used in investing activities	(30,695)	(156,365)

FINANCING ACTIVITIES:
Borrowings from line of credit	200,000	1,993,328
Payment on line of credit or long term debt	(3,670,369)	(43,256)
Net proceeds from the exercising of stock options	26,352	-
Net proceeds from the sale of capital stock	9,069,848	-
Net (payments) to parent company	-	(873,339)

Net cash provided by financing activities	$5,625,831	$1,076,733

NET INCREASE IN CASH AND CASH EQUIVALENTS	$5,346,955	$12,911

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	23,399	16,749

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$5,370,354	$29,660

Supplemental disclosures cash flow information
Cash paid for interest expense	$46,995	$41,133

See notes to unaudited consolidated financial statements.

AMERICAN CARESOURCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements for the period ended June 30, 2006

Note 1. Summary of Significant Accounting Policies

Description of business: American CareSource Holdings, Inc. a Delaware corporation (the “Company”) and its subsidiaries are in the business of delivering ancillary healthcare services for employment groups through its national network of ancillary care providers. The Company markets its products to insurance companies, third party administrator and preferred provider organizations. The Company currently has three subsidiaries: Ancillary Care Services, Ancillary Care Medicare, and Ancillary Care Workers Comp. These subsidiaries currently do not have any financial or other activity for the three or six months ended June 30, 2006 and June 30, 2005.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the interim reporting requirements of Form 10-QSB and Item 310(b) of Regulation S-B. Consequently, financial information and disclosures normally included in financial statements prepared annually in accordance with Generally Accepted Accounting Principals (GAAP) have been condensed or omitted. Readers of this report should therefore, refer to the consolidated financial statements and the notes included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, filed with Securities and Exchange Commission on March 31, 2006.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) which are necessary to fairly present our financial position and our results of operations as of and for these periods have been made.

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

Use of estimates in the preparation of financial statements: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.

Accounts receivable: Accounts receivable are reported at amounts expected to be received from third party payors and other customers. Each period, the Company estimates revenue based on claims processed and actual billed revenue. The Company recognizes a reserve each month to adjust billed revenue for co-pays and deductibles the Company will not be paid. This reserve offsets accounts receivables accordingly.

Because of the nature of the Company’s business, the majority of the receivable amounts are expected to be collected. Each quarter the Company reviews collections history and adjusts its revenue estimate accordingly.

Fair value of financial instruments: The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued expenses, a line of credit and long-term debt. The fair value of instruments is determined by reference to various market data and other valuation techniques, as appropriate. Unless otherwise disclosed, the fair value of short-term financial instruments approximates their recorded values due to the short-term nature of the instruments. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of long-term debt approximates its carrying value.

Property and equipment: Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed over the estimated useful lives of the assets using the straight-line method for financial reporting purposes and on the straight-line and accelerated methods for tax purposes. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the lease term, whichever is shorter. Ordinary maintenance and repairs are charged to

operations. Expenditures that extend the physical or economic life of property and equipment are capitalized.

The estimated useful lives of property and equipment are as follows:

Leasehold improvements	5 years
Computer equipment	3 - 5 years
Furniture and fixtures	7 years
Software	3 - 5 years

The Company periodically reviews the carrying value of its long-lived assets for possible impairment. In management’s opinion, there is no impairment of such assets at June 30, 2006.

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

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

The Company negotiates contracts with service providers and also negotiates contracts with payors. Neither service providers nor payors can look through the Company and claim directly against the other party. Both contracts with these parties are separate and each only contracts with the Company. Each party deals directly with the Company and does not deal with each other directly.

The Company determines through negotiations which payor will be included or excluded in the network to be offered to each service provider, based on price, access, etc.

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

The Company is responsible to the service provider for processing the claim and managing the claim their adjustor processes.

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

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

When claims are recorded gross, the payor’s payment to the Company is recorded as revenue and the Company’s payment to the service provider is recorded as cost of revenue in the statement of operations. The Company does, however, record revenue on a net basis when an agency relationship exists. When the Company receives a fee for claims processing and there are no financial risks to the Company, then only the claims processing fee is recorded as revenue.

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

Costs of revenues: Costs of ancillary health revenues consist of expenses due to providers for providing employee (patient) services and the related direct labor and overhead of providing such services. The Company is not liable for costs incurred by independent contract service providers until payment is received by the Company from the payors. The Company recognizes actual or estimated liabilities to independent contract service providers as related revenues are recognized.

Costs of patient claims revenues consist of direct labor and overhead to administer the patient claims.

Issuance of Warrants: The Company has issued warrants to stockholders and directors in exchange for a guarantee of Company debt and as compensation to an outside investment bank for arranging equity financing. The warrants issued in exchange for the guarantee were valued at $376,646 as of the date of the grant using the fair value method. These deferred debt issuance costs are being amortized to expense over the life of the guarantee. The Company also issued warrants to purchase 159,952 shares of current stock as compensation to an investment bank for arranging a private placement during the first quarter of 2006. The warrants were valued at $463,409 as of the date of the grant using the fair value method. This amount has been offset against the capital raised.

Concentration of revenues: The Company has five customers that compromise the following approximate amounts of the Company’s revenue and accounts receivable:

	Six Months Ended June 30, 2006

	Accounts Receivable	Revenue	% of Total Revenue

Customer A	$ 741,000	$3,266,000	62%
Customer B	267,000	1,320,000	25%
Customer C	255,000	330,000	6%
Customer D	32,000	183,000	3%
Customer E	35,000	66,000	1%
	$1,330,000	$5,165,000	98%

Stock-Based Compensation: We have one stock-based compensation plan. The plan is administered by our compensation committee of the Board of Directors, which selects persons eligible to receive awards and determines the number of shares and/or options subject to each award, the terms, conditions, performance measures, and other provisions of the award. Readers should refer to Note 7 of our consolidated financial statements in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, for additional information related to the stocked-based compensation plan.

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised), “Share-Based Payment” (SFAS 123(R)) utilizing the modified prospective approach. Prior to the adoption of SFAS 123(R) we accounted for stock option grants in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees” (the intrinsic value method), and accordingly, recognized no compensation expense for stock option grants.

Under the modified prospective approach, SFAS 123(R) applies to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation cost recognized in the first quarter of 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). Prior periods were not restated to reflect the impact of adopting the new standard.

As a result of adopting SFAS 123(R) on January 1, 2006, our income before taxes, net income and basic and diluted earnings per share for three months ended June 30, 2006, was approximately $52,162 less than if we had continued to account for stock-based compensation under APB Opinion No. 25 for our stock option grants. For the six months ended June 30, 2006, our income before taxes was reduced by $74,392.

We may receive a tax deduction for certain stock option exercises during the period the options are exercised, generally for the excess of the price at which the options are sold over the exercise prices of the options. Prior to adoption of SFAS 123(R), we reported all tax benefits resulting from the exercise of stock options as operating cash flows in our condensed consolidated statements of cash flows. In accordance with

SFAS 123(R), for the six months ended June 30, 2006, we revised our condensed consolidated statements of cash flow presentation to report the tax benefits from the exercise of stock options as financing cash flows. For the three months ended June 30, 2006, we are not recording a current tax benefit.

Net cash proceeds from the exercise of stock options were $26,352 for the six months ended June 30, 2006 and $5,355 for the three months ended June 30, 2006. There was no income tax benefit realized from stock options exercised as the Company is in a loss position and has recorded a valuation allowance related to any net deferred tax asset.

The following table illustrates the effect on operating results and per share information had the Company accounted for stock-based compensation in accordance with SFAS 123(R) for the three and six months ended June 30, 2005:

		Three Months Ended	Six Months Ended
		June 30, 2005
Net income:
	As reported	$ (678,753)	$ (1,197,249)
	Add: Stock-based employee compensation reported in net income, net of taxes	-	-
	Deduct: Stock-based employee compensation under the fair value method of all awards, net of taxes	(28,631)	(28,631)
	Pro forma	(707,384)	(1,225,880)
Basic and diluted net income per share:
	As reported	$ (0.05)	$ (0.10)
	Pro forma	$ (0.06)	$ (0.10)

Stock Options

We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards with the following weighted-average assumptions for the indicated periods.

	Three Months Ended June 30,		Six Months Ended June 30,
	2006	2005	2006	2005
Dividend yield	0%	0%	0%	0%
Expected volatility	110%	60%	110%	60%
Risk-free interest rate	6.5%	4%	6.5%	4%
Expected life of options (in years)	6.5	6.5	6.5	6.5
Weighted-average grant-date fair value	$3.15	$0.19	$4.09	$0.19

The assumptions above are based on multiple factors, including historical exercise patterns of employees in relatively homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and the implied volatility of our stock price.

Earnings per common share: Basic earnings per share is computed by dividing net loss by the weighted average number of shares outstanding during each of the periods. Diluted earnings per share is the same amount because all outstanding stock options have been excluded from the calculation of diluted earnings per share since they are anti-dilutive.

The calculations for the basic and diluted loss per share were based upon loss attributable to common stockholders and a weighted average number of common shares outstanding for the periods ended June 30,

2006 and 2005. Amounts presented for share and per share data are shown after giving effect to the stock splits effected June 2, 2005 and November 14, 2005 as described in the following paragraph.

Stock split and change to authorized shares: On May 25, 2005, the Company amended its Certificate of Incorporation, increasing the number of authorized common shares to 40,000,000 shares and authorizing 10,000,000 preferred shares. On June 2, 2005, the Company effected a 110,000 for one stock split on the common shares outstanding at the time. On November 14, 2005, the Company effected a 1.1246645 for one stock split on the common shares outstanding at the time. After the stock splits, the Company had 12,371,309 shares outstanding. Amounts presented for share and per share data are shown after giving effect to the stock splits.

Sale of Capital Shares:

In March 2006, American CareSource Holdings completed a private placement of securities from which it received gross proceeds of approximately $10.0 million. Net proceeds after expenses and broker commissions was approximately $9.1 million. A portion of the proceeds from this transaction was used to repay the existing credit line with Wells Fargo Bank N.A. American CareSource Holdings paid an 8% fee to the placement agent and issued warrants to purchase up to 159,952 shares of common stock with an exercise price of $5.50, in connection with the financing, in addition to other costs.

Income taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for all the effects of changes in tax laws and rates on the date of enactment. Prior to December 16, 2005, the Company filed consolidated tax returns with Patient Infosystems. The Company recorded its tax expense using the separate company method.

New accounting pronouncements: In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets-an amendment of APB Opinion No. 29 (SFAS No. 153), addressing the measurement of exchanges of nonmonetary assets. SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar production assets in APB Opinion No. 29, Accounting for Nonmonetary Exchanges and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 with earlier application permitted.

The Company does not expect adoption of the provisions of SFAS No. 153 to have a material impact on the consolidated financial statement, results of operations or liquidity of American CareSource Holdings.

In June 2006, the FASB issued Interpretation No. 48 (“FIN48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, to clarify certain aspects of accounting for uncertain tax positions, including issues related to the recognition and measurement of those tax positions. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is in the process of evaluating the impact of this interpretation and believes that any entry will not have a material effect on the Company’s consolidated financial position or results of operations.

Note 2. Line of Credit and Long-Term Debt

In December 2004, American CareSource Holdings entered into a credit agreement with Wells Fargo Bank, N.A. establishing a line of credit of $300,000 guaranteed by John Pappajohn, a director of American CareSource Holdings. Mr. Pappajohn did not receive any remuneration in connection therewith.

On January 28, 2005, American CareSource Holdings amended its credit agreement with Wells Fargo Bank, N.A. extending the line of credit to $3,000,000. Derace Schaffer, a director of American CareSource Holdings, guaranteed the extension with Mr. Pappajohn. As compensation for the guarantees of Mr.

Pappajohn and Dr. Schaffer for the initial extension of credit, American CareSource Holdings issued warrants to purchase an aggregate of 1,096,491 shares to Mr. Pappajohn and Dr. Schaffer at an exercise price of $0.40 which was equal to the per share fair market value of American CareSource Holdings common stock established by American CareSource Holdings’ Board of Directors based upon an independent appraisal.

On August 9, 2005, the Company amended its credit agreement with Wells Fargo Bank, N.A. extending the line of credit to $4,000,000. Mr. Pappajohn and Dr. Schaffer guaranteed each increase in the credit line. In connection with the August 2005 increase in the credit line, American CareSource Holdings issued additional warrants to purchase an aggregate of 576,953 shares as compensation for the guarantee extension by Mr. Pappajohn and Dr. Schaffer. Mr. Pappajohn received warrants to purchase 432,715 shares of common stock and Dr. Schaffer received warrants to purchase 144,238 shares of common stock. In addition, American CareSource Holdings issued warrants to purchase 64,106 shares as compensation to Matthew Kinley, who also guaranteed the increased credit line. Matthew Kinley is an employee of a company owned by Mr. Pappajohn. These warrants were issued at a strike price of $0.49 based on current fair value of the stock.

In December 2005, American CareSource Holdings entered into a credit agreement with Wells Fargo Bank, N.A. increasing the line of credit to $5,000,000 and extending the maturity of the line to March 31, 2007, which was guaranteed by Mr. Pappajohn, a director of American CareSource Holdings. Mr. Pappajohn did not receive any remuneration in connection with the increase in the line or the extension of the maturity date. The line of credit bears interest at the bank’s prime index rate. The outstanding principal owed by American CareSource Holdings as of June 30, 2006 and December 31, 2005 was none and $3,450,000, respectively. The line remains open for future use through March 31, 2007, as needed.

Long-term debt consists of the following:

	June 30, 2006		December 31, 2005

Line of credit payable to Wells Fargo Bank, N.A. maturing March 2007	$	0	$	3,450,000

Note payable, due in monthly installments of approximately $800 including interest at 7.0%, maturing in April 2009		24,949		28,820

Note payable to Patient Infosystems, Inc. due February 2007 bearing interest at 6%. Payable to Patient Infosystems, Inc. was converted to note at time of distribution to stockholders.		325,792		336,277

Capital lease obligations		45,050		51,063
		395,791		3,866,160
Less current maturities		(346,933)		(20,231)
Long-term debt, less current maturities	$	48,858	$	3,845,929

The Company has entered into a new lease for its principal offices at 5429 LBJ Freeway in Dallas that will commence on September 1, 2006. The following are the estimated annual cash payments required under the lease:

2006

$27,811

2007

$21,833

2008

$94,530

2009

$186,062

2010

$190,096

2011

$196,329

2012

$196,329

2013

$32,722

Note 3. Stock Options and Warrants

American CareSource Holdings has an Employee Stock Option Plan (the “Stock Option Plan”) for the benefit of certain employees, non-employee directors, and key advisors. On May 16, 2005, the stockholders approved the Stock Option Plan which (i) authorized 2,249,329 (split adjusted ) options and (ii) established the class of eligible participants to include employees, nominees to the Board of Directors of American CareSource Holdings and consultants engaged by American CareSource Holdings, limited to 50,000 the number of shares of Common Stock underlying the one-time grant of a Non-Qualified Option to which non-employee directors or non-employee nominees of the Board of Directors may be entitled. The Company filed a Form S-8 registering 2,249,329 of the Stock Option Plan shares on April 7, 2006. Stock options granted under the Stock Option Plan may be of two types: (1) incentive stock options and (2) nonqualified stock options. The option price of such grants shall be determined by a Committee of the Board of Directors (the “Committee”), but shall not be less than the estimated fair market value of the common stock at the date the option is granted. The Committee shall fix the terms of the grants with no option term lasting longer than ten years. The ability to exercise such options shall be determined by the Committee when the options are granted.

A summary of stock option activity follows:

	Outstanding Options		Weighted-Average Exercise Price
Options outstanding at December 31, 2005	1,651,289		$	0.33
Options granted during the quarter ended March 31, 2006	100,000		$	5.60
Options forfeited by holders during the quarter ended March 31, 2006	(42,737	)	$	0.31
Options exercised during the quarter ended March 31, 2006	(64,106	)	$	0.31
Options outstanding at March 31, 2006	1,644,446		$	0.65

Options granted during the quarter ended June 30, 2006	50,000		$	3.85
Options forfeited by holders during the quarter ended June 30, 2006	(1,968	)	$	0.31
Options exercised during the quarter ended June 30, 2006	(17,256	)	$	0.31
Options outstanding at June 30, 2006	1,675,222		$	0.75
Options exercisable at June 30, 2006	587,591		$	0.39
Options available for grant at June 30, 2006	492,745

The following table summarizes information concerning outstanding and exercisable options at June 30, 2006:

	Options Outstanding			Options Exercisable
Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$0.31 - $0.49	1,525,222	8.9	$0.33	579,258	$0.32
$5.60	100,000	9.6	$5.60	6,944	$5.60
$3.85	50,000	9.9	$3.85	1,389	$3.85

American CareSource has warrants outstanding and exercisable for the purchase of 1,897,502 shares of common stock at June 30, 2006. American CareSource valued the warrants using the Black Scholes method. The weighted average exercise price at June 30, 2006 was $0.86.

The total intrinsic value of options exercised during the quarter ended June 30, 2006, was $87,460.

A summary of the Company’s nonvested shares as of June 30, 2006, and changes during the quarter ended June 30, 2006, is presented below:

Nonvested Shares	Options		Weighted-Average Grant-Date Fair Value
Nonvested at March 31, 2006	1,075,769	$	0.81
Granted	50,000		3.85
Vested	(157,838)		0.49
Forfeited	1,968		0.31
Nonvested at June 30, 2006	1,087,631	$	0.71

As of June 30, 2006, there was approximately $656,282 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 3.0 years. The total fair value of shares vested during the quarter ended June 30, 2006, was $54,458.

SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This filing contains many forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future operating results or of our financial condition or state other “forward-looking” information.

We believe that it is important to communicate our future expectations to our investors. However, we may be unable to accurately predict or control events in the future. The factors listed in the section captioned “Risk Factors,” as well as any other cautionary language in this filing, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of certain of the events described in the Risk Factors section could seriously harm our business.

Item 2. Management’s Discussion and Analysis or Plan of Operations

Management’s discussion and analysis provides a review of American CareSource Holdings’ operating results for the quarter ended June 30, 2006 and its financial condition at June 30, 2006. The focus of this review is on the underlying business reasons for significant changes and trends affecting the revenues, net losses and financial condition of American CareSource Holdings. This review should be read in conjunction with the accompanying consolidated financial statements.

In an effort to give investors a well-rounded view of American CareSource Holdings’ current condition and future opportunities, this quarterly report may include forecasts by American CareSource Holdings’ management about future performance and results. Because they are forward-looking, these forecasts involve uncertainties. They include risks of market acceptance of, or preference for, American CareSource Holdings’ systems and services, competitive forces, the impact of, and changes in, government regulations, general economic factors in the healthcare industry, and other factors discussed in American CareSource Holdings’ filings with the Securities Exchange Commission. In evaluating such statements, investors should specifically consider the various factors identified in this 10-QSB, including the matters set forth under the caption “Risk Factors” which could cause actual results to differ materially from those indicated by such forward-looking statements. We disclaim any obligation to update information contained in any forward-looking statement.

Overview

American CareSource Holdings was incorporated in November 2003 under the laws of Delaware as a wholly-owned subsidiary of Patient Infosystems in order to facilitate its acquisition of substantially all of the assets of American CareSource Corporation. American CareSource Corporation had been in operation since 1997. The predecessor company to American CareSource Corporation, Physician’s Referral Network, had been operable since 1995. The business of American CareSource Holdings includes the previous business of American CareSource Corporation. Accordingly, all information provided herein with respect to American CareSource Holdings prior to December 31, 2003 is the historical information of American CareSource Corporation. As of December 23, 2005, American CareSource Holdings became an independent public company, after Patient Infosystems distributed by dividend all of its shares of American CareSource Holdings common stock to Patient Infosystems’ stockholders.

American CareSource Holdings has, since formation, maintained separate books, accounts and records. Further, American CareSource Holdings was allocated the Patient Infosystems corporate assets, liabilities and expenses related to Patient Infosystems’ ancillary health benefits management business based on an estimate of the proportion of such amounts allocable to American CareSource Holdings, utilizing such factors as total revenues, employee headcount and other relevant factors. American CareSource Holdings believes that these allocations have been made on a reasonable basis. American CareSource Holdings believes that all costs allocated to American CareSource Holdings are a reasonable representation

of the costs that American CareSource Holdings would have incurred if American CareSource Holdings had performed these functions as an independent company.

American CareSource Holdings recognizes revenues for ancillary services when services by providers have been authorized and performed and collections from payors are reasonably assured. Patient claims revenues are recognized by American CareSource Holdings as services are provided. Cost of revenues for ancillary services consist of expenses due to providers for providing patient services and American CareSource Holdings’ related direct labor and overhead of processing invoices, collections and payments. American CareSource Holdings is not liable for costs incurred by independent contract service providers until payment is received by American CareSource Holdings from the payors. American CareSource Holdings recognizes actual or estimated liabilities to independent contract service providers as the related revenues are recognized. Patient claim costs of revenue consist of amounts due the providers as well as American CareSource Holdings’ direct labor and overhead to administer the patient claims.

American CareSource Holdings has never operated at a profit, and will require significant growth in either claims volume from existing contracts, new contracts or both in order to generate sufficient operational margin to become profitable. No assurances can be given that sufficient sources of new revenue will be identified and other sources of capital may have to be secured by American CareSource Holdings to support these operations. If American CareSource Holdings in unable to generate enough working capital either from its own operations or through the sale of its equity securities, American CareSource Holdings may be required to curtail or cease operations.

Recent Events

American CareSource Holdings filed a registration statement on Form S-8 covering 2,249,329 shares of its Employee Stock Option Plan on April 7, 2006. Additionally, on May 11, 2006 the Securities and Exchange Commission declared effective American CareSource Holding’s Registration Statement on Form SB-2 covering 4,292,280 shares of common stock for the resale of such shares from time to time by certain selling stockholders listed therein. Of such shares, (i) 1,859,310 shares were issued pursuant to the distribution by dividend of American CareSource Holdings’ common stock by Patient Infosystems to investors in its October 2005 private offering; (ii) 273,618 shares were issued pursuant to the distribution by dividend of shares of American CareSource Holdings’ common stock by Patient Infosystems as payment of dividends in the October 2005 dividend distribution of Patient Infosystems’ common stock to its Series C and Series D preferred stockholders of Patient Infosystems; and (iii) 2,159,352 shares were issued by American CareSource Holdings in its March 2006 private placement. Of the above amounts, 313,470 shares are issuable upon exercise of certain common stock purchase warrants issued as compensation to Laidlaw & Company (UK) Ltd. for acting as the placement agent in connection with the March 2006 private placement.

On May 23, 2006, David A. George was elected to serve on the American CareSource Holdings Board of Directors. Mr. George serves as the Chairman of Compensation Committee and serves as a member on the Corporate Governance Committee. Also on May 23, 2006, American CareSource Holdings Board of Directors adopted a charter for its Governance and Nomination Committee and Compensation Committee.

On June 14, 2006, the Company entered into a new lease for 9,349 square feet of office space that will commence on September 1, 2006. The Company plans to use the new space as its primary office space and will vacate its existing office space.

Results of Operations

The three months ended June 30, 2006 compared to the three months ended June 30, 2005:

	American CareSource Holdings statement of operations for the quarters ended
	June 30, 2006	June 30, 2005

Net Revenue	$2,829,941	$1,038,817

Cost of revenue	2,169,835	1,090,913
Selling, general and administrative expense	804,225	482,812
Depreciation and amortization	80,099	83,912
Operating loss	(224,218)	(618,820)
Financing costs & other	39,752	59,933
Net loss	($263,969)	($678,753)

Revenues	June 30, 2006	June 30, 2005
Net Ancillary Health	$ 2,796,623	$ 1,005,014
Patient claims	33,318	33,803
Net Revenues	$2,829,941	$1,038,817

Revenues of American CareSource Holdings are comprised of revenues from ancillary service claims and processing of patient claims. Net ancillary health revenues increased to $2,796,623 from $1,005,014 during the quarter ended June 30, 2006 as compared to the quarter ended June 30, 2005. The majority of the increase is a result of a single new client that was implemented in December 2005. This represents an increase of $1,791,609 or 178%.

American CareSource Holdings expects to see growth in the number of client and payor relationships due to a shift in strategy, focusing on providing in-network services for its payors rather than out-of-network services in an effort to capture more claim activity. This should increase the volume of claims the Company can adjudicate as well as the volume of patients it can direct through its network. No assurances can be given that American CareSource Holdings can expand its provider or payor relationships, nor that any such expansion will result in an improvement in the results of operations of American CareSource Holdings.

The revenues for the processing of patient claims for the quarter ended June 30, 2006 was relatively constant at $33,318 versus $33,803 for the quarter ended June 30, 2005. American CareSource Holdings does not expect to increase its revenues from claims processing as it is shifting its focus to the ancillary health business.

Costs and Expenses

$2,169,835 for the quarter ended June 30, 2006. The increase in these costs primarily reflects an increase in amounts paid to providers for service as a result of our increase in revenue.

Selling, general and administrative expense increased to $804,225 for the quarter ended June 30, 2006 as compared to $482,812 for the quarter ended June 30, 2005. These costs consist primarily of salaries, related benefits and travel costs, commissions and management fees, sales materials, other marketing related expenses, costs of corporate operations, finance and accounting, human resources and other general operating expenses of American CareSource Holdings. The majority of the cost increase is related to the increased cost of operating as a public company, which includes the cost of expensing stock options, and the increased commissions and management fees associated with our higher sales.

Amortization and depreciation expense decreased to $80,099 in the quarter ended June 30, 2006 compared to $83,912 in the quarter ended June 30, 2005. These expenses include $53,395 of amortization of intangibles that includes $21,379 in amortization of certain software development costs and $32,016 in amortization of the capitalized value of provider contracts that were acquired as part of the acquisition of American CareSource assets by Patient Infosystems.

The on-going value of these acquired contracts are re-evaluated each quarter to test for any potential impairment to this asset. As of June 30, 2006, the Company’s analysis of its goodwill and related intangibles did not indicate any impairment.

Other Income/Expense is comprised of financing costs, interest expenses and other expenses. The totals are as follows:

	Quarters Ended
	June 30, 2006	June 30, 2005
Other Expense	34,754	(7,378)
Debt Issuance Cost	$46,300	$35,748
Net Interest (Income)	(41,303)	31,563
Total Other	$39,751	$59,933

Net interest income was $41,303 for the quarter ended June 30, 2006 as compared to an interest expense of $31,563 for the quarter ended June 30, 2005, due to the decrease in the line of credit and the invested cash balance. The increase in debt issuance cost is associated with the amortization cost of warrants and expenses related to the guarantees of the Company’s Wells Fargo Line of credit. Other expense represents an accrual for franchise taxes.

Taxes

American CareSource Holdings had no tax benefit in the quarter ended June 30, 2006 or the quarter ended June 30, 2005 due, in part, to recording a full valuation allowance to reduce its deferred tax assets. American CareSource Holdings’ deferred tax assets consist primarily of the tax benefit associated with its net operating loss carry forwards. At this time, management is continuing to record a full valuation allowance to reduce deferred tax benefit.

Management of American CareSource Holdings has evaluated the available evidence about future taxable income and other possible sources of realization of deferred tax assets. The valuation allowance reduces deferred tax assets to zero, which represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized.

Loss

American CareSource Holdings reported a net loss of ($263,969) for the quarter ended June 30, 2006 as compared to $(678,753) for the quarter ended June 30, 2005. On a per share basis, the Company lost $0.02 per share for the quarter ending June 30, 2006 and $0.05 per share for the quarter ended June 30, 2005.

The six months ended June 30, 2006 compared to June 30, 2005:

	American CareSource Holdings, Inc. statement of operations for the six months ended
	June 30, 2006	June 30, 2005
Net Revenue	$5,294,322	$2,348,001

Cost of revenue	4,215,309	2,352,552
Selling, general and administrative expense	1,335,490	937,890
Depreciation and amortization	158,347	160,426
Operating loss	(414,824)	(1,102,867)
Financing costs & other	(109,382)	(94,382)
Net loss	($524,206)	($1,197,249)

Revenues	June 30, 2006	June 30, 2005
Net Ancillary health	$5,228,855	$2,213,876
Patient claims	65,467	134,125
Net Revenues	$5,294,322	$2,348,001

Revenues of American CareSource Holdings are comprised of revenues from ancillary service claims and processing of patient claims. Net revenues for ancillary health services increased to $5,228,855 from $2,213,876 during the six months ended June 30, 2006 as compared to the six months ended June 30, 2005, or 136%. The majority of the increase is a result of a new client that was implemented in December 2005.

The revenues for the processing of patient claims for the six months ended June 30, 2006 declined from $134,125 for the six months ended June 30, 2005 to $65,467 for the six months ended June 30, 2005. American CareSource Holdings expects to experience a continued decline in its revenues from claims processing as it is shifting its focus to the ancillary health business.

Costs and Expenses

Cost of revenue includes salaries and related benefits, services provided by third parties and our providers, and other expenses associated with the development of American CareSource Holdings’ ancillary health programs. Cost of revenue increased from $2,352,552 for the six months ended June 30, 2005 to $4,215,309 for the six months ended June 30, 2006 or 79%. The increase in these costs primarily reflects an increase in amounts expected to be paid to providers for service as a result of our increase in revenue.

Selling, general and administrative expense remained increased by $397,600 to $1,335,490 for the six months ended June 30, 2006 as compared to $937,890 for the six months ended June 30, 2005. These costs consist primarily of salaries, related benefits and travel costs, commissions and management fees, sales materials, other marketing related expenses, costs of corporate operations, finance and accounting, human resources and other general operating expenses of American CareSource Holdings. The majority of the cost increase is related to the increased cost of operating as a public Company, which includes the cost of expensing stock options, and the increased commissions and management fees associated with our higher sales.

Amortization and depreciation expense was $158,347 a decrease of $2,079 in the quarter ended June 30, 2006 compared to $160,426 in six months ended June 30, 2005. These expenses include $106,791 of amortization of intangibles that includes $42,758 in amortization of certain software development costs and $64,033 in amortization of the capitalized value of provider contracts that were acquired as part of the acquisition of American CareSource assets by Patient Infosystems.

It is anticipated that American CareSource Holdings will need to invest heavily in the sales and marketing process in future periods, and intends to do so as funds are available. To the extent that American CareSource Holdings has limited funds available for sales and marketing, or cannot leverage its marketing partnerships adequately, it will likely be unable to invest in the necessary marketing activities to generate substantially greater sales.

Other Income/Expense is comprised of financing costs, interest expenses and other expenses. The totals are as follows:

	Six Months Ended
		June 30, 2006	June 30, 2005
Other (Income)/Expense		37,386	(7,378)
Debt Issuance Cost		$92,600	$59,580
Net Interest (Income)/Expense		(20,604)	42,180
Total revenues		$(109,382)	$(94,382)

Interest income was $20,604 for the six months ended June 30, 2006 compared to expense of $42,180 for the six months ended June 30, 2005, due to the decrease in the line of credit and the invested cash balance. The increase in debt issuance cost is associated with the amortization cost of warrants and expenses related to the guarantees of the Company’s Wells Fargo Line of credit.

Taxes

American CareSource Holdings had no tax benefit in the six months ended June 30, 2006 or the six months ended June 30, 2005 due, in part, to recording a full valuation allowance to reduce its deferred tax assets. American CareSource Holdings’ deferred tax assets consist primarily of the tax benefit associated with its net operating loss carry forwards. At this time, management is continuing to record a full valuation allowance to reduce deferred tax benefit.

Loss

American CareSource Holdings reported a net loss of $(524,206) for the six months ended June 30, 2006 as compared to $(1,197,249) for the six months ended June 30, 2005. On a per share basis, the Company lost $0.04 per share for the six months ending June 30, 2006 and $0.10 per share for the six months ended June 30, 2005.

Liquidity and Capital Resources

As of June 30, 2006, American CareSource Holdings had a working capital surplus of $4,846,445 as compared to working capital deficit of ($223,122) at December 31, 2005. Since its inception, American CareSource Holdings has not generated positive cash flow from operations and has relied on external sources for its operational, working capital and capital expenditures needs.

Since the acquisition by Patient Infosystems in December 2003, American CareSource Holdings received funding of $3,201,288 from Patient Infosystems in the form of equity contributions and loans. The balance due to Patient Infosystems was $325,792 and $336,277 as of June 30, 2006 and December 31, 2005, respectively. The loan is due and payable on February 1, 2007.

American CareSource Holdings has a credit agreement in place with Wells Fargo Bank, NA providing for a $5,000,000 line of credit. The agreement is guaranteed by John Pappajohn, Derace Schafer, directors of American CareSource Holdings, and Matt Kinley, an employee of a company owned by Mr. Pappajohn. The line of credit bears interest at the bank’s prime index rate which is 8.25% as of June 30, 2006. The line of credit requires interest to be paid currently with the principal due on the expiration of the credit facility on March 31, 2007. The Company currently has no borrowing against the line of credit.

In March 2006 the Company completed a private placement of its common stock. The offering raised approximately $10.0 million at a price of $5.00 per share. In connection with such private placement, American CareSource relied upon the exemption from registration provided under Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. The net proceeds from the transaction was approximately $9.1 million. Additionally, American CareSource Holdings granted the accredited investors certain registration rights pursuant to a registration rights agreement, in connection with this transaction. The registration rights agreement required the Company to file a registration statement following the final closing of the private placement covering the resale of all shares included therein, as well as the shares underlying the placement agent’s warrants. A registration statement registering such shares for resale was filed on April 7, 2006. On May 11, 2006, the Securities and Exchange Commission declared effective this registration statement.

A portion of the proceeds from the March 2006 transaction was used to re-pay the full balance of the Wells Fargo Bank, N.A. credit line. The outstanding principal retired by American CareSource Holdings was $3,650,000. The remainder of the proceeds will be used to fund working capital and other general corporate purposes. Although American CareSource Holdings paid in full all obligations outstanding under its credit agreement with Wells Fargo Bank, N.A, the line of credit remains fully available to American CareSource Holdings if needed. If there are any future drawings under the line of credit, American

CareSource Holdings believes it will be able to satisfy its cash requirements based on its current customer base and anticipated timing of new accounts, its existing service agreements, and available capital. Therefore, American CareSource Holdings does not anticipate the need to raise additional funds through 2006.

Inflation

Inflation did not have a significant impact on American CareSource Holdings’ costs during the quarters and six months ended June 30, 2006 and June 30, 2005. American CareSource Holdings continues to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions.

Critical Accounting Policies

Critical accounting policies are those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

American CareSource Holdings’ significant accounting policies are described in Note 1 to the Financial Statements. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following accounting policies are deemed to be critical by American CareSource Holdings’ management.

Use of Estimates. In preparing the financial statements, American CareSource Holdings uses estimates in determining the economic useful lives and possible impairments of its assets, provisions for doubtful accounts, tax valuation allowances and various other recorded or disclosed amounts. Estimates require management to use its judgment. While American CareSource Holdings believes that its estimates for these matters are reasonable, if the actual amount is significantly different than the estimated amount, its assets, liabilities or results of operations may be overstated or understated.

Intangible Assets. The value of American CareSource Holdings’ intangible assets was derived from the allocation of the purchase price from the December 31, 2003 acquisition of the assets of American CareSource Corporation by Patient Infosystems. The allocation of purchase price was based on an independent appraisal of the acquired assets. The amounts assigned to each asset are being amortized on a straight line basis over the expected life of the asset, 5 years for software and 15 years for the provider contracts. The provider contracts do not have a specified contract period. Our experience to date demonstrates attrition of less than 2% per year, implying a greater than twenty year life, however we believe that 15 years represents a more realistic estimate. Accordingly, American CareSource Holdings has elected to amortize the value of these contracts over 15 years. The on going value of these acquired contracts are re-evaluated each quarter using the discounted cashflow method to test for any potential impairment to this asset that would result from either reduced cash flows or a shorter than anticipated useful life. The contracts are accounted for as a pool of contracts. There will be no additions to the capitalized amounts that were established at the time of the acquisition, the cost of adding additional providers is considered an ongoing operating expense.

Impairment of Long-Lived Assets. American CareSource Holdings records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future net cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. If the actual value is significantly less than the estimated value, American CareSource Holdings assets may be overstated.

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

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

•

American CareSource Holdings negotiates a contract with the service provider and also negotiates contracts with payors. Neither the service provider nor the payor can look through the Company and claim directly against the other party. Both contracts with these parties are separate and each only contracts with the Company. Each party deals directly with the Company and does not deal with each other directly.

•

American CareSource Holdings determines through negotiations which payor will be included or excluded in the network to be offered to the service provider, based on price, access, etc.

•

American CareSource Holdings does not earn a fixed dollar amount per customer transaction regardless of the amount billed to customers or earn a stated percentage of the amount billed to its customers.

•

American CareSource Holdings is responsible to the service provider for processing the claim and managing the claim their adjustor processes.

•

American CareSource Holdings sets prices to be settled with payors and separately negotiates the prices to be settled with the service providers.

•

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

•

When claims are recorded gross, the payor’s payment to American CareSource Holdings is recorded as revenue and the American CareSource Holdings’ payment to the service provider is recorded as cost of revenue in the statement of operations. American CareSource Holdings does, however, record revenue on a net basis when an agency relationship exists. When American CareSource Holdings receives a fee for claims processing and there are no financial risks to American CareSource Holdings, then only the claims processing fee is recorded as revenue.

•

American CareSource Holdings does not have responsibility to collect co-payments to be made or co-insurance claims to be received. Accordingly, co-payments or co-insurance claims collected are not recorded as either revenue or cost of sales.

Off-balance sheet arrangements

American CareSource Holdings does not have any material off-balance sheet arrangements at June 30, 2006 or June 30, 2005, or for the periods then ended.

Pending Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets-an amendment of APB Opinion No. 29” (“SFAS No. 153”), addressing the measurement of exchanges of nonmonetary assets. SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar production assets in APB Opinion No. 29 “Accounting for Nonmonetary Exchanges,” and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 with earlier application permitted. American CareSource Holdings does not expect adoption of the provisions of SFAS No. 153 to have material impact on the consolidated financial statement, results of operations or liquidity of American CareSource Holdings.

Item 3. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2006. Based upon this evaluation, our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer concluded that our disclosure controls and procedures (as defined in Rules 130-15(e) and 15(d)-15(e) under the Securites and Exchange Act of 1934) are effective for the recording, processing, summarizing and reporting the information that American CareSource Holdings is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC’s rules and forms.

Changes in Internal Controls. There were no significant changes in American CareSource Holdings’ internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

RISK FACTORS

You should carefully consider each of the following risk factors and all of the other information in this report. The following risks relate principally to American CareSource Holdings’ business. If any of the following risks actually occur, the business, financial condition or results of operations of American CareSource Holdings could be materially adversely affected. As a result, the market price of shares of American CareSource Holdings common stock could decline significantly.

American CareSource Holdings has a history of losses, has never been profitable and will likely continue to lose money for the foreseeable future.

American CareSource Holdings has incurred net losses in each year since its inception in December 2003 and has an accumulated deficit of approximately $5.8 million as of June 30, 2006. Its predecessor never achieved profitability either. American CareSource Holdings will require significant growth in either claims volume for existing contracts, new contracts or both in order to generate sufficient operational margin to become profitable. No assurances can be given that American CareSource Holdings will be able to generate additional revenues or ever operate profitably in the future. American CareSource Holdings prospects must be considered in light of the numerous risks, expenses, delays and difficulties frequently encountered in an industry characterized by intense competition, as well as the risks inherent in the development of new programs and the commercialization of new services particularly given its failure to date to operate profitably.

American CareSource Holdings has faced working capital shortfalls and may need to identify additional sources of capital within 12 months to maintain its operations.

American CareSource Holdings has never earned profits. Based on American CareSource Holdings’ current plans, and as a result of the March 2006 private placement, the Company believes that it has sufficient funds to meet its operating expenses and capital requirements through 2006. If the Company is unable reach profitability within the year, it will need to raise additional funds to continue is operations following that period. No assurance can be given that American CareSource Holdings will be able to obtain financing, or successfully sell assets or stock, or, even if such transactions are possible, that they will be on terms reasonable to American CareSource Holdings or that such transactions will enable American CareSource Holdings to satisfy its cash requirements. If American CareSource Holdings does not obtain additional funds, American CareSource Holdings will likely be required to eliminate programs, delay development of its products, alter its business plans, or in the extreme situation, cease operations.

American CareSource Holdings is dependent on payments from third party payors who may reduce rates of reimbursement.

The profitability of American CareSource Holdings will depend on payments provided by third-party payors. Competition for patients, efforts by traditional third-party payors to contain or reduce healthcare costs and the increasing influence of managed care payors such as health maintenance organizations in recent years have resulted in reduced rates of reimbursement. If these trends continue, they could adversely affect American CareSource Holdings’ results of operations unless American CareSource Holdings can implement measures to offset the loss of revenues and decreased profitability. In addition, changes in reimbursement policies of private and governmental third-party payors, including policies relating to the Medicare and Medicaid programs, could reduce the amounts reimbursed to these customers for American CareSource Holdings’ services and consequently, the amount these customers would be willing to pay for the services.

American CareSource Holdings has a limited number of customers, a few of which account for a substantial portion of its business.

American CareSource Holdings’ five largest customers account for approximately 92% of its revenues quarter ending June 30, 2005 and 98% of its revenue during the quarter ended June 30, 2006. Significant declines in the level of use of American CareSource Holdings services by one or more of these customers could have a material adverse effect on American CareSource Holdings’ business and results of operations.

Additionally, an adverse change in the financial condition of any of these customers, including an adverse change as a result of a change in governmental or private reimbursement programs, could have a material adverse effect on its business. No assurance can be given that American CareSource Holdings will not lose additional substantial customers in the future.

American CareSource Holdings is dependent upon discounted rates made available by ancillary service providers which may be discontinued at any time.

American CareSource Holdings obtains revenue from cost savings that it is able to receive from the ancillary service providers and pass on to customers. Should the ancillary service providers not continue to provide a discount to American CareSource Holdings, American CareSource Holdings will be unable to recognize any gain from the sale of services to payors or networks. If American CareSource Holdings is unable to recognize these margins, it will be unable to continue its business as it is currently conducted.

American CareSource Holdings historically has not entered into any long-term contracts with any of its customers and failure to retain such customers could have a material adverse effect on American CareSource Holdings’ business and results of operations.

Generally, American CareSource Holdings does not have any long-term contracts with any of its customers. Currently, American CareSource Holdings only has one long-term contract with its customers that is set to extend beyond the next twelve months. In the aggregate, customer agreements that are set to expire within the next twelve months accounted for 60% of the revenues of American CareSource Holdings during the quarter ended June 30, 2006. There can be no assurance that customers will maintain their agreements with American CareSource Holdings or that customers will renew their contracts upon expiration, or on terms favorable to, American CareSource Holdings. Consequently, the failure to retain such customers could have a material adverse effect on American CareSource Holdings’ business and results of operations.

Changes in state and federal regulations could restrict American CareSource Holdings’ ability to conduct its business.

Numerous state and federal laws and regulations affect American CareSource Holdings’ business and operations. These laws and regulations include, but are not necessarily limited to:

•

healthcare fraud and abuse laws and regulations, which prohibit illegal referral and other payments;

•

Employee Retirement Income Security Act of 1974 and related regulations, which regulate many healthcare plans;

•

mail pharmacy laws and regulations;

•

privacy and confidentiality laws and regulations;

•

consumer protection laws and regulations;

•

legislation imposing benefit plan design restrictions;

•

various licensure laws, such as managed care and third party administrator licensure laws;

•

drug pricing legislation; and

•

Medicare and Medicaid reimbursement regulations.

American CareSource Holdings believes it is operating its business in substantial compliance with all existing legal requirements material to the operation of its business. There are, however, significant uncertainties regarding the application of many of these legal requirements to its business, and there cannot be any assurance that a regulatory agency charged with enforcement of any of these laws or regulations will not interpret them differently or, if there is an enforcement action, that American CareSource Holdings’ interpretation would prevail. In addition, there are numerous proposed healthcare laws and regulations at the federal and state levels, many of which could materially affect American CareSource Holdings’ ability to conduct its business or adversely affect its results of operations.

If American CareSource Holdings fails to comply with the requirements of HIPAA, it could face sanctions and penalties.

HIPAA provides safeguards to ensure the integrity and confidentiality of such health information. Violation of the standards is punishable by fines and, in the case of wrongful disclosure of individually identifiable health information, imprisonment. Although American CareSource Holdings intends to comply with all applicable laws and regulations regarding medical information privacy, failure to do so could have an adverse effect on American CareSource Holdings’ business.

There are large competitors in the healthcare industry that could choose to compete against American CareSource Holdings, reducing American CareSource Holdings’ profit margins.

Traditional health insurance companies, preferred provider networks, and pharmacy benefit managers (“PBM’s”) are potential competitors of American CareSource Holdings. These companies include well-established companies which may have greater financial, marketing and technological resources than American CareSource Holdings, such as Merck-Medco, Express Scripts and Caremark Rx. Competition in the marketplace has caused many PBM’s to reduce the prices charged to clients for core services and share a larger portion of the formulary fees and related revenues received from drug manufacturers with clients. Increased price competition could reduce American CareSource Holdings’ profit margins and have a material adverse effect on its results of operations.

There are limited barriers to entry into the ancillary services market which could result in greater competition.

Although American CareSource Holdings is not aware of any organization or company that currently provides similar ancillary services management, there are limited barriers to entry into the ancillary services management market. Major benefit management companies and healthcare companies not presently offering ancillary services management may decide to enter the market. These companies may have greater financial, marketing and other resources than American CareSource Holdings. Competition from other companies may have a material adverse effect on American CareSource Holdings’ financial condition and results of operations.

American CareSource Holdings’ inability to react effectively to changes in the healthcare industry could adversely effect its operating results.

In recent years, the healthcare industry has undergone significant change driven by various efforts to reduce costs, including potential national healthcare reform, trends toward managed care, cuts in Medicare reimbursements, and horizontal and vertical consolidation within the healthcare industry. Proposed changes to the U.S. healthcare system may increase governmental involvement in healthcare and ancillary health services, and otherwise change the way payors, networks and providers conduct business. Healthcare organizations may react to these proposals and the uncertainty surrounding them by reducing or delaying purchases of cost control mechanisms and related services that American CareSource Holdings provides. Other legislative or market-driven changes in the healthcare system that American CareSource Holdings cannot anticipate could also materially adversely affect American CareSource Holdings’ business. American CareSource Holdings’ inability to react effectively to these and other changes in the healthcare industry could adversely affect its operating results. American CareSource Holdings cannot predict whether any healthcare reform efforts will be enacted and what effect any such reforms may have on American CareSource Holdings or its customers. The inability of American CareSource Holdings to react effectively to changes in the healthcare industry may result in a material adverse effect on its business.

The continued services and leadership of American CareSource Holdings’ senior management is critical to its ability to maintain growth and any loss of key personnel could adversely affect its business.

The future of the business of American CareSource Holdings depends to a significant degree on the skills and efforts of its senior executives, in particular, Wayne Schellhammer, its Chief Executive Officer and David Boone, its Chief Operating Officer and Chief Financial Officer. If American CareSource Holdings

loses the services of any of its senior executives, and especially if any of its executives joins a competitor or forms a competing company, American CareSource Holdings’ business and financial performance could be seriously harmed. American CareSource Holdings has employment agreements with Mr. Schellhammer and Mr. Boone. Mr. Schellhammer’s initial term under his employment agreement expired October 10, 2005, but was automatically renewed for a successive one year term. Mr. Boone’s initial term under his employment agreement expired April 30, 2006, but automatically renewed for a successive one year term. If, for any reason, we lose any of our executive officers’ skills, knowledge of the industry, contacts and expertise, it could result in a setback to the American CareSource Holdings operating plan.

American CareSource Holdings will incur additional costs as an independent public company and may be unable to operate profitably as a stand-alone company.

American CareSource Holdings will incur significant additional costs as a newly separate and independent public company. These costs include, among other things, additional legal and accounting costs incurred as a result of becoming a public company. Furthermore, American CareSource Holdings will need to put in place the financial, administrative and managerial structure necessary to operate as an independent public company, or the development of such structure may require a significant amount of management’s time and other resources including financial resources, which could hinder American CareSource Holdings’ ability to operate profitably.

American CareSource Holdings may be unsuccessful in the successful hiring and retention of skilled personnel.

The future growth of American CareSource Holdings’ business depends on successful hiring and retention of skilled personnel, and American CareSource Holdings may be unable to hire and retain the skilled personnel it needs to succeed. Qualified personnel are in great demand throughout the healthcare industry. The failure of American CareSource Holdings to attract and retain sufficient skilled personnel may limit the rate at which its business can grow, which will harm its financial performance.

The interruption of data processing capabilities and telecommunications will negatively impact American CareSource Holdings’ operating results.

The business of American CareSource Holdings is dependent upon its ability to store, retrieve, process and manage data and to maintain and upgrade its data processing capabilities. Interruption of data processing capabilities for any extended length of time, loss of stored data, programming errors, other computer problems or interruptions of telephone service could have a material adverse effect on its business.

Any inability to adequately protect its intellectual property could harm American CareSource Holdings’ competitive position.

American CareSource Holdings considers its methodologies, processes and know-how to be proprietary. American CareSource Holdings seeks to protect its proprietary information through confidentiality agreements with its employees. American CareSource Holdings’ policy is to have employees enter into confidentiality agreements containing provisions prohibiting the disclosure of confidential information to anyone outside of American CareSource Holdings, requiring employees to acknowledge, and, if requested, assist in confirming American CareSource Holdings’ ownership of new ideas, developments, discoveries or inventions conceived during employment, and requiring assignment to American CareSource Holdings of proprietary rights to such matters that are related to American CareSource Holdings’ business. There can be no assurance that the steps taken by American CareSource Holdings to protect its intellectual property will be successful. If American CareSource Holdings does not adequately protect its intellectual property, competitors may be able to use its technologies and erode or negate its competitive advantage.

Fluctuations in the number and types of claims processed could make it more difficult to predict American CareSource Holdings’ revenues from quarter to quarter.

Monthly fluctuations in the number of claims American CareSource Holdings processes and the types of claims they process will impact the quarterly and annual results of the Company. American CareSource

Holdings’ discount rate varies by type of service provided and the overall mix of these claims will impact profitability. Consequently, it will be difficult to predict the revenue for American CareSource Holdings from one quarter to another quarter.

Future sales of American CareSource Holdings common stock, or the perception that these sales may occur, could depress the price of American CareSource Holdings’ common stock.

Sales of substantial amounts of American CareSource Holdings common stock, or the perception in the public that such sales may occur, could cause the market price of American CareSource Holdings common stock to decline. This could also impair the ability of American CareSource Holdings to raise additional capital through the sale of equity securities. As of July 25, 2006, American CareSource Holdings has 14,472,248 shares of common stock outstanding. At July 25, 2006, there are outstanding warrants to purchase 1,897,502 shares of common stock and 2,249,329 shares are available for grant (1,809,442 shares have been granted and 1,675,222 options are outstanding as of July 25, 2006) under the American CareSource Holdings, Inc. 2005 Stock Option Plan. If all of the outstanding warrants are exercised and all options available under the American CareSource Holdings, Inc. 2005 Stock Option Plan are issued and exercised, there will be approximately 18,517,540 shares of common stock outstanding. Accordingly, American CareSource Holdings stockholders could experience significant dilution. In addition, American CareSource Holdings will file a registration statement that will register for resale substantially all of its restricted securities, the effect of which could have a depressive effect on the market price of the common stock.

Some of our existing stockholders can exert control over us and may not make decisions that further the best interests of all stockholders.

As of July 25, 2006, our officers, directors and principal stockholders (greater that 5% stockholders) together control beneficially approximately 45.9% of our outstanding common stock. As a result, these stockholders, if they act individually or together, may exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Furthermore, the interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders and accordingly, they could cause us to enter into transactions or agreements which we would not otherwise consider. In addition, this concentration of ownership may delay or prevent a merger or acquisition resulting in a change in control of us and might affect the market price of our common stock, even when such a change in control may be in the best interest of all stockholders.

Our common stock qualifies as a “penny stock” under Securities and Exchange Commission rules which may make it more difficult for our stockholders to resell their shares of our common stock.

American CareSource Holdings’ common stock trades on the OTC Bulletin Board. As a result, the holders of American CareSource Holdings common stock may find it more difficult to obtain accurate quotations concerning the market value of the stock. Stockholders also may experience greater difficulties in attempting to sell the stock than if it were listed on a stock exchange or quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market. Because our common stock does not trade on a stock exchange or on the Nasdaq National Market or the Nasdaq Small-Cap Market, and the market price of the common stock is, at times, less than $5.00 per share, the common stock qualifies as a “penny stock.” SEC Rule 15g-9 under the Securities Exchange Act, of 1934, as amended (the “Exchange Act”) imposes additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as an “established customer” or an “accredited investor.” This includes the requirement that a broker-dealer must make a determination on the appropriateness of investments in penny stocks for the customer and must make special disclosures to the customer concerning the risks of penny stocks. Application of the penny stock rules to our common stock could adversely affect the market liquidity of the shares, which in turn may affect the ability of holders of our common stock to resell the stock.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

On March 1, 2006, Dayton Area Health Plan and CareSource Management Group, Co. Inc. (collectively “DAHP”), wrote a letter to American CareSource Holdings informing American CareSource Holdings that it believed American CareSource Holdings is infringing on the designation “CARESOURCE”. DAHP represented to the United States Patent and Trademark Office that it first used the “CARESOURCE” designation on August 25, 2000. American Caresource Holdings, which is the successor-in-interest to Physician’s Referral Network and Patient Infosystems had used the designation “AMERICAN CARESOURCE,” “CARESOURCE,” and other similar designations in connection with its ancillary care business since May 9, 1996. Accordingly, American Caresource Holdings, demanded that DAHP, cease and desist from all use of the “CARESOURCE” designation and related designations, and abandon its registrations of such mark and related marks. No assurance can be given that American CareSource Holdings will prevail or that it will not be required to cease use of the name itself or that it will not incur costs or expenses in connection with the action.

On April 24, 2006, Ancillary Care Management, Inc. (“ACM”) wrote a letter to American CareSource Holdings informing American CareSource Holdings that it believed that American CareSource Holdings’ wholly owned subsidiary Ancillary Care Services is infringing on ACM’s registered mark “ANCILLARY CARE MANAGEMENT”. ACM has asked American CareSource Holdings and Ancillary Care Services to cease and desist the use of the designations ANCILLARY CARE SERVICES, ANCILLARY CARE or any other designations similar to ANCILLARY CARE MANAGEMENT. American CareSource Holdings believes that the claim is without merit and that its use is valid. However, no assurance can be given that American CareSource Holdings will prevail or that it will not be required to cease use of the name itself or that it will not incur costs or expenses in connection with the action.

Item 5. Other Information.

American CareSource Holdings filed a registration statement on Form S-8 covering the 2,249,329 shares of its Employee Stock Option Plan on April 7, 2006. Additionally, on May 11, 2006 the Securities and Exchange Commission declared effective American CareSource Holding’s registration statement on Form SB-2 covering the resale of 4,292,280 shares of common stock from time to time by certain selling stockholders listed therein. Of such shares, (i) 1,859,310 shares were issued pursuant to the distribution by dividend of American CareSource Holdings’ common stock by Patient Infosystems to investors in its October 2005 private offering; (ii) 273,618 shares were issued pursuant to the distribution by dividend of shares of American CareSource Holdings’ common stock by Patient Infosystems as payment of dividends in the October 2005 dividend distribution of Patient Infosystems’ common stock to its Series C and Series D preferred stockholders of Patient Infosystems; and (iii) 2,159,352 shares were issued by American CareSource Holdings in its March 2006 private placement. Of the above amounts, 313,470 shares are issuable upon exercise of certain common stock purchase warrants issued as compensation to Laidlaw & Company (UK) Ltd. for acting as the placement agent in connection with the March 2006 private placement.

On May 23, 2006, David A. George was elected to serve on the American CareSource Holdings, Inc. Board of Directors. Mr. George serves as the chairman of the Compensation Committee and serves as a member of the Corporate Governance Committee. Also on May 23, 2006, American CareSource Holdings Board of Directors adopted a charter for its Governances and Nomination Committee and Compensation Committee.

Item 6. Exhibits.

Exhibit #	Description of Exhibits
3.1(2)	Certificate of Incorporation
3.2(2)	By-Laws
3.3(4)	Amendment to the Certificate of Incorporation, dated May 25, 2005.
3.4(4)	Amendment to the Certificate of Incorporation, dated June 2, 2005.
3.5(7)	Amendment to the Certificate of Incorporation, dated November 14, 2005.
3.6(10)	Certificate of Incorporation of Ancillary Care Services – Group Health, Inc.
3.7(10)	Certificate of Incorporation of Ancillary Care Services – Medicare, Inc.
3.8(10)	Certificate of Incorporation of Ancillary Care Services – Worker’s Compensation, Inc.
3.9(10)	Certificate of Incorporation of Ancillary Care Services, Inc.
4.1(2)	2005 Stock Option Plan.
4.2(3)	Specimen Stock Certificate.
10.01(3)	Employment Agreement, dated October 11, 2004 between the American CareSource Holdings and Wayne A. Schellhammer.
10.02(3)	Employment Agreement, dated May 1, 2005, between the American CareSource Holdings and David Boone.
10.03(2)	Commercial Lease, dated July 1, 1998, between Today Tristar, L.P. and American CareSource Corporation, as amended.
10.04(2)	Lease, dated July 1, 2002, between Madison Square Park, LLC and American CareSource Corporation.
10.05(2)	Credit Agreement, dated December 1, 2004, between Well Fargos Bank, National Association and American CareSource Holdings, Inc.
10.06(2)	Security Agreement, dated December 1, 2004, between Well Fargo Bank, National Association and American CareSource Holdings, Inc.
10.07(2)	First Addendum to Credit Agreement dated February 2, 2005 between Well Fargo Bank, National Association and American CareSource Holdings, Inc.
10.08(3)	Guaranty, dated January 26, 2005, by and between Wells Fargo Bank, National Association, American CareSource Holdings, Inc. and Derace L. Schaffer.
10.09(3)	Guaranty, dated January 26, 2005, by and between Wells Fargo Bank, National Association, American Caresource Holdings, Inc. and John Pappajohn.
10.10(3)	Stock Purchase Warrant, dated January 27, 2005, by and between American CareSource Holdings, Inc. and Derace L. Schaffer.
10.11(8)	Corrected Stock Purchase Warrant, dated January 27, 2005, by and between American CareSource Holdings, Inc. and John Pappajohn.
10.12(3)	Transitional Services Agreement, by and between Patient Infosystems, Inc. and American CareSource Holdings, Inc.
10.13(6)	Second Addendum to Credit Agreement dated August 9, 2005 between Wells Fargo Bank, National Association and American CareSource Holdings, Inc.
10.14(5)	Consent to Second Addendum to Credit Agreement, Ratification of Guaranty and Waiver of Claims, dated August 9, 2005 from John Pappajohn.

10.15(5)	Consent to Second Addendum to Credit Agreement, Ratification of Guaranty and Waiver of Claims, dated August 9, 2005 from Derace L. Schaffer.
10.16(5)	Consent to Second Addendum to Credit Agreement, Ratification of Guaranty and Waiver of Claims, dated August 9, 2005 from Matthew P. Kinley.
10.17(5)	Guaranty, dated August 9, 2005, by and among Wells Fargo Bank, National Association, American Caresource Holdings, Inc. and John Pappajohn.
10.18(5)	Guaranty, dated August 9, 2005, by and among Wells Fargo Bank, National Association, American CareSource Holdings, Inc. and Derace L. Schaffer.
10.19(5)	Guaranty, dated August 9, 2005, by and among Wells Fargo Bank, National Association, American CareSource Holdings, Inc. and Matthew P. Kinley.
10.20(5)	Guarantors’ Letter, dated August 9, 2005 by and among Wells Fargo Bank, National Association, John Pappajohn, Derace L. Schaffer and Matthew P. Kinley.
10.21(5)	Creditor Agreement, dated August 26, 2005 among American CareSource Holdings, Inc., John Pappajohn, Derace L. Schaffer and Matthew P. Kinley.
10.22(5)	Stock Purchase Warrant, dated August 15, 2005, by and among American CareSource Holdings, Inc. and John Pappajohn.
10.23(5)	Stock Purchase Warrant, dated August 15, 2005, by and among American Caresource Holdings, Inc. and Derace L. Schaffer.
10.24(5)	Stock Purchase Warrant, dated August 15, 2005, by and among American Caresource Holdings, Inc. and Matthew P. Kinley.
10.25(9)	Third Addendum to the Credit Agreement, dated December 28, 2005, by and between Wells Fargo Bank, National Association and American CareSource Holdings, Inc.
10.26(9)	Consent to Third Addendum to Credit Agreement, Ratification of Guaranty and Waiver of Claims, dated December 28, 2005 from John Pappajohn.
10.27(9)	Guaranty, dated December 28, 2005, by and among Wells Fargo Bank, National Association, American CareSource Holdings, Inc. and John Pappajohn.
10.28(10)	Form of Registration Rights Agreement used in March 2006 private placement.
10.29(10)	Form of Subscription Agreement used in March 2006 private placement.
10.30(10)	Amended and Restated Stock Purchase Warrant, dated March 30, 2006, by and between American CareSource Holdings, Inc. and John Pappajohn (amends Stock Purchase Warrant, dated January 27, 2005).
10.31(10)	Amended and Restated Stock Purchase Warrant, dated March 29, 2006, by and between American CareSource Holdings, Inc. and Derace L. Schaffer (amends Stock Purchase Warrant, dated January 27, 2005).
10.31(10)	Amended and Restated Stock Purchase Warrant, dated March 29, 2006, by and between American CareSource Holdings, Inc. and John Pappajohn (amends Stock Purchase Warrant, dated August 15, 2005).
10.32(10)	Amended and Restated Stock Purchase Warrant, dated March 29, 2006, by and between American CareSource Holdings, Inc. and Derace L. Schaffer (amends Stock Purchase Warrant, dated August 15, 2005).
10.33(10)	Amended and Restated Stock Purchase Warrant, dated March 30, 2006, by and between American CareSource Holdings, Inc. and Matthew P. Kinley (amends Stock Purchase Warrant, dated January 27, 2005).

10.34	Lease dated June 14, 2006 between American CareSource Holding and TR LBJ Campus Partners, L.P.
14.1(10)	Code of Ethics
20.1	Governance and Nomination Committee Charter
20.2	Audit Committee Charter
20.3	Compensation Committee Charter
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer and Chief Operating Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3	Certification of the Principal Accounting Officer and Controller pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Form SB-2 filed on February 14, 2005 and incorporated herein by reference.

(2)	Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 1 to the Form SB-2 filed May 13, 2005 and incorporated herein by reference.

(3)	Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 2 to the Form SB-2 filed June 15, 2005 and incorporated herein by reference.

(4)	Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 5 to the Form SB-2 filed August 12, 2005 and incorporated herein by reference.

(5)	Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 6 to the Form SB-2 filed September 14, 2005 and incorporated herein by reference.

(6)	Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 7 to the Form SB-2 filed September 30, 2005 and incorporated herein by reference.

(7)	Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 8 to the Form SB-2 filed November 18, 2005 and incorporated herein by reference.

(8)	Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 9 to the Form SB-2 filed December 5, 2005 and incorporated herein by reference.

(9)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Form 8-K/A filed January 13, 2006 and incorporated herein by reference.

(10)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Form 10-KSB filed March 31, 2006 and incorporated herein by reference.

SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			American CareSource Holdings, Inc.
Date:	August 11, 2006	By:	/s/ Wayne A. Schellhammer
			Wayne A. Schellhammer Chief Executive Officer

Date:	August 11, 2006	By:	/s/ David S. Boone
			David S. Boone Chief Operating Officer and Chief Financial Officer

Date:	August 11, 2006	By:	/s/ Steven M. Phillips
			Steven M. Phillips Controller and Principal Accounting Officer

EX-20 2 compcommitteecharter.htm COMPENSATION COMMITTEE CHARTER

AMERICAN CARESOURCE HOLDINGS, INC

COMPENSATION COMMITTEE CHARTER

Purpose

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

Committee Membership

The Committee will be composed of at least three directors. All members of the Committee shall satisfy the definition of “independent” under the Securities Exchange Act of 1934 and under the standards established by listing standards of the appropriate exchange where the company either lists its securities or intends to list its securities. The Committee members will be appointed by the Board and may be removed by the Board in its discretion. The Chairman of the Committee will be designated by the Board. The Committee shall have the authority to delegate any of its responsibilities to one or more subcommittees as the Committee may from time to time deem appropriate. Each such subcommittee shall consist of one or more members of the Committee. The Committee shall also have the authority to delegate any of its administrative or other responsibilities to executive officers or other employees of the Corporation where such delegation is consistent with applicable law and exchange listing standards.

Meetings

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

Committee Authority and Responsibilities

The Committee shall:

•

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

•

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

•

Approve and our amend the employment contracts for any executive officers;

•

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

•

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

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

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

•

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

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

•

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

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

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

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

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

EX-31 3 exhibit-31_1.htm WAS CERT

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Wayne A. Schellhammer, certify that:

1.	I have reviewed this interim report on Form 10-QSB of American CareSource Holdings, Inc. for the period ending June 30, 2006;

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

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

4.	The small business issuer'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)) for the small business issuer and have:

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 small business issuer, 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;

evaluated the effectiveness of the small business issuer'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

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

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

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 small business issuer’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date:

August 11, 2006

By:

/s/ Wayne A. Schellhammer

Wayne A. Schellhammer

Chief Executive Officer

EX-31 4 exhibit-31_2.htm DSB CERT

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David S. Boone, certify that:

1.	I have reviewed this interim report on Form 10-QSB of American CareSource Holdings, Inc. for the period ending June 30, 2006;

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

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

4.	The small business issuer'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)) for the small business issuer and have:

any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date:

August 11, 2006

By:

/s/ David S. Boone

David S. Boone

Chief Operating Officer and Chief Financial Officer

EX-31 5 exhibit-31_3.htm SMP CERT

Exhibit 31.3

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven M. Phillips, certify that:

1.	I have reviewed this interim report on Form 10-QSB of American CareSource Holdings, Inc. for the period ending June 30, 2006;

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

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

4.	The small business issuer'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)) for the small business issuer and have:

any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date:

August 11, 2006

By:

/s/ Steven M. Phillips

Steven M. Phillips

Controller and Principal

Accounting Officer

EX-32 6 exhibit-32_1.htm ALL CERT

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned officers of American CareSource Holdings, Inc. (the “Company”), certifies that:

(1)	the Quarterly Report on Form 10-QSB of the Company for the three month periods ended June 30, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

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


Date:	August 11, 2006	By:	/s/ Wayne A. Schellhammer
			Wayne A. Schellhammer Chief Executive Officer

Date:	August 11, 2006	By:	/s/ David S. Boone
			David S. Boone Chief Operating Officer and Chief Financial Officer

Date:	August 11, 2006	By:	/s/ Steven M. Phillips
			Steven M. Phillips Controller and Principal Accounting Officer

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

EX-20 7 auditcommitteecharter.htm AUDIT COMMITTEE CHARTER

AMERICAN CARESOURCE HOLDINGS, INC.

(THE "COMPANY")

CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

(As Approved By the Board of Directors at Its May 16, 2005 Meeting)

I.	Purpose.

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

II.

Structure and Membership.

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

B. Chair. Unless the Board elects a Chair of the Committee, the Committee shall elect a Chair by majority vote.

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

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

III.

Duties, Responsibilities and Authority.

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

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

B. Independent Auditor.

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

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

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

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

discretion, adopt policies relating to the approval of services to be provided by the Company’s independent auditor.

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

(i)

critical accounting policies and practices;

(ii)

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

(iii)

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

C. Audited Financial Statements.

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

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

D. Review of Other Financial Disclosures.

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

2. Earnings Release and Other Financial Information. The Committee shall discuss generally the types of information to be disclosed in the Company’s earnings press

releases, as well as in financial information and earnings guidance provided to analysts, rating agencies and others.

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

E. Other Responsibilities.

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

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

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

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

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

IV.

Meetings, Procedures and Administration.

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

B. Quorum and Voting. A majority of the Committee shall constitute a quorum for the transaction of business. The action of a majority of those present at a meeting, at which a quorum is present, shall be the act of the Committee. The Committee may also act by unanimous consent in lieu of a meeting.

C. Subcommittees. The Committee may form and delegate authority to one or more subcommittees (including a subcommittee consisting of a single member), as it

deems appropriate from time to time under the circumstances. Any decision of a subcommittee to preapprove audit, review, attest or non-audit services shall be presented to the full Committee at its next scheduled meeting.

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

E. Charter. The Committee shall periodically review and reassess the adequacy of this Charter and recommend any proposed changes to the Board of Directors for approval.

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

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

EX-10 8 lbj5429leaseagreement.htm LBJ LEASE

OFFICE LEASE AGREEMENT

STATE OF TEXAS

COUNTY OF DALLAS

THIS LEASE AGREEMENT, made and entered into as of the ___ day of June, 2006, by and between the Landlord and Tenant hereinafter named.

W I T N E S S E T H:

1. Definitions and Basic Provisions. The following definitions and basic provisions shall be used in conjunction with and limited by the reference thereto in the provisions of this lease:

(a)

“Landlord":

TR LBJ CAMPUS PARTNERS, L.P

(b)

"Tenant":

American CareSource Holdings, Inc.

(c)

"Premises":

Galleria Crossing I

5429 LBJ Freeway

Suite 700

Dallas, Texas 75240

as generally outlined on the plan attached hereto as Exhibit "A." The term “rentable area” means (1) the “usable area” within any leased premises (i.e., the gross area enclosed by the surface of the exterior glass walls, the mid-point of any walls separating portions of the Premises from those adjacent tenants, the slab penetration line of all such leased premises from Service Areas and the corridor side of walls separating such leased premises from Common Areas), plus (2) a pro rata part of the Common Areas and Service Areas within the Building, including the area encompassed by any columns or other structural elements which provide support to such leased Premises and/or the Building, but excluding permanent vertical penetrations, such as fire stairs, elevator shafts, flues, pipe shafts and vertical ducts. The rentable area in the Premises has been calculated on the basis of the foregoing definition and is hereby stipulated for all purposes hereof to be 9,349 square feet of rentable area, whether the same should be more or less as a result of a minor variation resulting from actual construction and completion of the leased Premises for occupancy so long as such work is done in accordance with the terms and provisions hereof. The total rentable area of the Building is stipulated for all purposes herein to be 232,541 square feet.

(d)	Lease term:	A period of 78 months, commencing the later of (x) on September 1, 2006, or (y) the date Landlord delivers to Tenant possession of the Premises with all of Landlord’s Work and Obligations under the Work Letter Agreement substantially complete as described in Section 4 of the Work Letter Agreement (the "Commencement Date") and ending on last day of the seventy-eighth full month thereafter.
(e)	Basic rental:	$1,139,937.72.
(f)	Monthly rental installment:	Months 1-3 Month4: Months 5-24: Months 25-48: Months 49-78:		$-0- * $10,266.74 $13,244.42 $15,581.67 $16,360.75
(f1)	Landlord Concession Payment (“LCP”):	Months 1-20:		$11,425.00
		The monthly LCP described herein is only due from Landlord to Tenant so long as no uncured event of default by Tenant as described in Paragraph 20 of this lease shall remain in existence. The monthly LCP, in the form of a cash payment by Landlord or credit against the monthly rental installment, as clarified in Paragraph 1(f2) below, is due on or before the first day of any pertinent calendar month.
(f2)	Reconciliation of amounts due NOT INCLUDING sums pursuant to Exhibit “B”:
		Monthly rental installment	LCP		“Prepaid Rent” (see Paragraph 3)	Net amount due
	Months 1-3: Month 4: Months 5-8: Months 9-20: Months 21-24: Months 25-48: Months 49-78:	$-0- $10,266.74 $13,244.42 $13,244.42 $13,244.42 $15,581.67 $16,360.75	$11,425.00 $11,425.00 $11,425.00 $11,425.00 N/A N/A N/A		$10,266.74 $13,244.42 N/A N/A N/A N/A	$11,425.00 (L)* $11,425.00 (L) $11,425.00 (L) $ 1,819.42 (T)** $13,244.42 (T) $15,581.67 (T) $16,360.75 (T)
	* “L” = Amount due by Landlord to Tenant ** “T” = Amount due by Tenant to Landlord

(g)	Security deposit:	$15,581.67.
(h)	Permitted use:	Office and related uses.
(i)	"Land":	The real property upon which the Project is located, described more particularly on Exhibit "E" attached hereto and made a part hereof.
(j)	"Building":	Galleria Crossing I located at 5429 LBJ Freeway, Dallas, Texas 75240.
(k)	"Project":	Galleria Crossing I located at 5429 LBJ Freeway, Dallas, Texas 75240.
		* Tenant agrees to pay all sums due pursuant to Exhibit “B”, including “Tenant’s Share” of “Electrical Costs” as defined therein, at all times, including months 1-3 of the lease term.

2. Lease Grant. Landlord, in consideration of the rent to be paid and the other covenants and agreements to be performed by Tenant and upon the terms and conditions hereinafter stated, does hereby lease, demise and let unto Tenant the Premises (as defined in paragraph 1 (c) hereof) commencing on the Commencement Date (as defined in Paragraph 1(d) hereof, or as adjusted as hereinafter provided) and ending on the last day of the lease term, unless sooner terminated as herein provided. If this lease is executed before the Premises becomes vacant or otherwise available and ready for occupancy, or if any present tenant or occupant of the Premises holds over, and Landlord cannot acquire possession of the premises prior to the commencement date of this lease, Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the premises at such time as Landlord is able to tender the same and such date shall be deemed to be the commencement date and this lease shall continue for the lease term described in Paragraph 1(d) hereof; provided if Landlord does not obtain possession of the Premises on or before September 1, 2006 Tenant, in its sole discretion, may terminate this lease at any time thereafter by written notice to Landlord; provided further Tenant my not terminate this lease pursuant to this sentence if Tenant has not terminated this Lease prior to receipt of written notice from Landlord that Landlord has obtained full possession of the Premises. Landlord hereby waives payment of monthly rental installments covering any period prior to the tendering of possession of the Premises to Tenant hereunder. Likewise, should Tenant occupy the Premises prior to the commencement date specified in Paragraph 1(d), the commencement date shall be altered to coincide with said occupancy with the ending date of the lease remaining unchanged, however basic rental shall be increased pro rata. By occupying the Premises, Tenant shall be deemed to have accepted the same as suitable for the purpose herein intended and to have acknowledged that the same comply fully with Landlord's covenants and obligations.

3. Rent. In consideration of this lease, Tenant promises and agrees to pay Landlord the basic rental (as defined in Paragraph 1(e) hereof) in monthly installments as set forth in Paragraph 1(f) hereof, and the additional rent as determined in accordance with Exhibit “B”, without deduction, set off, notice or demand, except as otherwise provided herein.

Five monthly installments of basic rental, to be applied to the fourth, fifth, sixth, seventh an eighth monthly basic rental installments accruing hereunder, totaling $63,244.42("Prepaid Rent"), together with the security deposit (as defined in Paragraph 1(g) hereof), shall be payable by Tenant to Landlord contemporaneously with the execution hereof. On the first day of the second month on which basic rental begins to accrue under this lease, Tenant shall begin paying the scheduled monthly rental installment without demand and shall continue paying such monthly rental installments on or before the first day of each succeeding calendar month during the term hereof. The monthly rental installment for any fractional month at the beginning or the end of the lease term shall be prorated.

If the monthly rental installment is not received by the Landlord on or before the 5th day of the month for which such monthly rental installment is due, a service charge of 5% of the monthly rental installment owed shall become due and payable in addition to the monthly rental installment owed. Such service charge is for the purpose of reimbursing Landlord for the extra costs and expenses incurred in connection with the handling and processing of late monthly rental installment payments. Provided however that Tenant shall be allowed one (1) grace period per calendar year in which Tenant shall not be charged the 5% service charge provided the rental installment is received by Landlord by the tenth (10) day of the month.

The security deposit shall be held by Landlord without liability for interest and as security for the performance by Tenant of Tenant's covenants and obligations under this lease, it being expressly understood that such deposit shall not be considered an advance payment of rental or a measure of Landlord's damages in case of default by Tenant. Upon the occurrence of any event of default by Tenant and the expiration of any applicable notice and cure period, Landlord may, from time to time, without prejudice to any other remedy, use such deposit to the extent necessary to make good any arrearages of rent and other damage, injury, expense of liability caused to Landlord by such event of default. Following any such application of the security deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the security deposit to this original amount. If no uncured event of default then exists any remaining balance of such deposit shall be returned by Landlord to Tenant upon termination of this lease. If Landlord transfers its interest in the Premises during the lease term, Landlord may assign the security deposit to the transferee and, thereafter, upon such assignee’s assumption of Landlord’s obligations with respect to the security deposit, Landlord shall have no further liability for the return of such security deposit. Tenant may request receipt of a written acknowledgement from the successor landlord of its receipt of the security deposit and its agreement to refund or apply the same in

accordance with the terms of this Lease in the form of a copy of the assignment and assumption of leases executed by the successor or Landlord. The obligation of Tenant to pay rent is an independent covenant, and no act or circumstance whatsoever, whether such act or circumstance constitutes a breach of covenant by Landlord or not shall release Tenant of the obligation to pay rent.

4. Rental Escalation. See Exhibit "B" attached hereto and incorporated as a part hereof.

5. Services.

(a) Landlord agrees to furnish Tenant while leasing the Premises, at Landlord's sole cost and expense: (i) hot and cold water at those points of supply provided for general use of tenants in the Building; (ii) electrical current for Tenant's use and occupancy of the Premises to the extent reasonably deemed to be standard in comparable suburban "Class A" high rise office buildings in Dallas, Texas, provided however, that all costs for extraordinary or unusual demand for electrical service (which shall mean more than __watts per square foot of the Premises) shall be borne by Tenant; (iii) heating and air conditioning from 7:00 am until 6:00 pm Monday through Friday and 8:00 am through 1:00 pm on Saturdays (other than holidays) and between 68 and 78 degrees; (iv) janitorial service on a daily basis excluding holidays and weekends; (v) replacement of Building standard light bulbs and tubes.

(b) Landlord does not warrant that any of such specified services will be free from interruption or stoppage, but nevertheless Landlord shall use reasonable diligence to resume any such interrupted or stopped service; provided, however should any interruption both (1) continue for a period of ten (10) consecutive days, and (2) render the Premises untenantable, then Tenant’s rent shall be abated from the date of the initial interruption through the date the services are restored.

Leasehold Improvements. See Exhibit “C”.

7. Use. Tenant shall use the Premises only for the permitted use (as defined in Paragraph 1(h) hereof), and uses that are commonly related thereto. Tenant will not occupy or use the Premises, or permit any portion of the Premises to be occupied or used for any business or purpose other than the permitted use or for any use or purpose which is unlawful in part or in whole or extra hazardous on account of fire, nor permit anything to be done which will in any way materially increase the rate of fire insurance on the Building or contents; and in the event that, by reason of acts of Tenant, there shall be any increase in the rate of insurance on the Building or contents created by Tenant's acts or conduct of business and then Tenant hereby agrees to pay to Landlord the amount of such increase on demand and acceptance of such payment shall not constitute a waiver of any of Landlord's other rights provided herein. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance, nor unreasonably interfere with, unreasonably annoy or disturb other tenants or Landlord in management of the Building. Tenant will maintain the Premises in a clean, healthful and safe condition and will comply, in all material respects, with all laws, ordinances, orders, rules and regulations (state, federal, municipal and other agencies or bodies having any jurisdiction thereof) with reference to use, condition or occupancy of Premises. Tenant's obligation to comply with all laws specifically includes any and all laws relating to environmental hazards and to accessibility by persons with disabilities. Tenant will not, without the prior written consent of Landlord, install lighting, window coverings or decoration, or install any signs, window or door lettering or advertising media of any type on or about the Premises or any part thereof (other than door identification signage customary in the Building); provided Tenant may alter floor coverings and wall coverings (including painting) with replacements of similar quality and utility. Should Landlord agree in writing to any of the foregoing items in the preceding sentence, Tenant will maintain such permitted items in good condition and repair at all times, normal wear and tear and casualty excepted.

8. Repairs and Maintenance and Compliance with Accessibility Laws

(a) By Landlord: Landlord shall maintain only the roof, foundation, heating and air conditioning systems, common areas, plumbing (including fixtures), elevators (if any), fire protection sprinkler system(if any), the structural soundness of the exterior walls, the paving outside the Building, and the landscaping in good repair and condition consistent with a class A office building in the sub-market in which the Building is located, except for reasonable wear and tear. Landlord shall be responsible for pest eradication. If such pests result from Tenant's use and occupancy of the Premises, Tenant shall pay to Landlord on demand the cost for such eradication. Tenant shall give immediate written notice to Landlord of the need for repairs or corrections and Landlord shall proceed promptly to make such repairs or corrections. Landlord's liability hereunder shall be limited to the cost of such repairs or corrections.

(b) By Tenant: Tenant shall at its expense and risk maintain the Premises and related facilities in good repair and condition. Tenant will not in any manner knowingly deface or injure the Building, the Premises or related facilities and will pay the cost of repairing any damage or injury done by Tenant or Tenant's agents, employees or invitees. Tenant shall throughout the term of this lease take good care of the Building, the Premises and related facilities and keep them free from waste and nuisance of any kind. If Tenant shall fail to make any repair required hereunder (including all necessary replacements) within fifteen (15) days (or such longer time so long as Tenant commences such repair within such fifteen day period and diligently pursues such repair to completion) after written notification to do so, Landlord may at its option make such repair and Tenant shall, upon demand therefor, pay Landlord for the reasonable cost thereof together.

(c) By Landlord and Tenant: Tenant shall at its expense and risk cause the Premises and related facilities to be in compliance with the requirements of the Americans With Disabilities Act and all other pertinent laws relating to public access ("Accessibility Laws"). Landlord shall at its expense and risk cause the common areas of the Building and the Project (including but not limited to restrooms, parking areas, sidewalks and elevators) to comply with Accessibility Laws.

Any extraordinary or atypical requirements imposed by Accessibility Laws relating to the unique nature of Tenant's business shall be Tenant's responsibility and Tenant shall bear the risk and expense of compliance with such extraordinary or atypical requirements. Tenant acknowledges that Landlord's responsibility is to insure that common areas of the Building comply with Accessibility Laws assuming the imposition of requirements typical for a suburban office building.

9. Alterations and Improvements. Tenant will not make or allow to be made any alterations or physical additions in or to the Premises other than non-structural and cosmetic changes and changes that are less then $10,000 without the prior written consent of Landlord, which consent shall not be unreasonably withheld as to nonstructural alterations. Landlord may require, as a condition to granting its consent to any such alterations or physical additions, that Tenant agree to remove such alterations or physical additions at the end of the lease term and restore the Premises to the condition in which the same existed before such alterations or physical additions were made. At the end or other termination of this lease, Tenant shall deliver up the Premises with all improvements located thereon (except as otherwise herein provided) in good repair and condition, reasonable wear and tear and casualty excepted, and shall deliver to Landlord all keys to the Premises. The cost and expense of any repairs necessary to restore the condition of the Premises to such condition in which they are to be delivered to Landlord shall be borne by Tenant. All alterations, additions or improvements (whether temporary or permanent in character) made in or upon the Premises, either by Landlord or Tenant, shall be Landlord's property on termination of this lease and shall remain on the Premises without compensation to Tenant. All furniture, trade fixtures and equipment installed by Tenant may be removed by Tenant at the termination of this lease if Tenant so elects, and shall be so removed if required by Landlord, or if not so removed shall at the option of Landlord, become the property of Landlord. All such installations, removals and restoration shall be accomplished in good workmanlike manner so as not to damage the Premises or the primary structure or structural qualities of the Building or the plumbing, electrical lines or other utilities.

10. Common Areas. The use and occupation by Tenant of the Premises shall include the use in common with others entitled thereto of the common areas, parking areas, service roads, loading facilities, sidewalks, and other facilities as may be designated from time to time by Landlord (together with the “common areas”), subject, however, to the terms and conditions of this agreement and to reasonable rules and regulations for the use thereof as prescribed from time to time by Landlord.

All common areas described above shall at all times be subject to the exclusive control and management of Landlord, and Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all facilities and areas mentioned in this Article. Landlord shall have the right to construct, maintain, and operate lighting facilities on all such areas and improvements; to police same; from time to time to change the area, level, location and arrangement of parking areas and other facilities hereinabove referred to; and to restrict parking by tenants, their officers, agents, and employees to employee parking areas.

All common areas and facilities not within the Premises, which Tenant may be permitted to use and occupy, are to be used and occupied under a revocable license, and if the amount of such areas be diminished, Landlord shall not be subject to liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such diminution of such areas be deemed constructive or actual eviction; provided, however, in no event shall Landlord materially reduce the parking spaces or access to the Building or Premises without Tenant’s prior written consent, which consent shall not be unreasonably withheld or delayed.

11. Assignment and Subletting. If Tenant desires to assign this lease or sublet the Premises or any part thereof, Tenant shall give Landlord written notice of such desire together with the name of the proposed assignee or sublessee, a reasonable description of its business, and current financial information about it in reasonable detail to allow Landlord to assess the financial condition of such proposed assignee or sublessee. Tenant shall give such notice and information to Landlord at least ten (10) days prior to the date on which Tenant desires to make such assignment or sublease. If Tenant transfers more than half of the stock or other voting control of Tenant Landlord shall approve the assignment of this Lease. Any other proposed subletting or assignment shall be subject to landlord’s reasonable approval. Landlord shall, within ten (10) days following receipt of such notice, notify Tenant in writing that Landlord elects either (i) to terminate this lease as to the space so affected as of the date so specified by Tenant, in which event Tenant will be relieved of all further obligation hereunder as to such space, (ii) to permit Tenant to assign this lease or sublet such space, or (iii) refuse to permit Tenant to assign this lease or sublet such space. Consent by landlord shall not be unreasonably withheld or delayed. If Landlord should fail to notify Tenant in writing of such election within such ten-day period, Landlord shall be deemed to have elected (iii) above. Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord's rights as to any subsequent assignments and sublettings. Tenant shall pay all costs incurred by Landlord in connection with the foregoing provisions including without limitation legal fees, construction costs to reconfigure the Premises, and credit checks. Notwithstanding any assignment or subletting, Tenant and any guarantor of Tenant's obligations under this lease shall at all times remain fully responsible and liable for the payment of the rent herein specified and for compliance with all of Tenant's other obligations under this lease. Moreover, if the rental or other consideration (or a combination of the rental and any bonus or other consideration therefor or incident thereto) due and payable to Tenant by an assignee or sublessee exceeds the rental payable under this lease (appropriately prorated in the case of a sublease of less than all of the Premises), then Tenant shall be bound and obligated to pay Landlord fifty percent (50%) of all such excess rental and other excess consideration within ten (10) days after receipt thereof by Tenant. Finally, upon any assignment or subletting all rentals paid to Tenant by an assignee or sublessee shall be received by Tenant in trust for Landlord, to be forwarded immediately to Landlord. If Landlord transfers and assigns its interest in this lease and the Building containing the Premises, Landlord shall thereby be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Tenant shall not mortgage, pledge or otherwise encumber its interest in this lease or in the Premises.

12. Indemnity. Landlord shall not be liable for and Tenant will indemnify and save harmless Landlord of and from all fines, suits, claims, demands, losses and actions (including attorney's fees) for

any injury to person or damage to or loss of property on or about the Premises caused by the negligence or misconduct or breach of this lease by Tenant, its agents, employees, sublessees, invitees or by any other person entering the Building, the Premises, or related facilities under express or implied invitation of Tenant, or arising out of Tenant's use of the Building, the Premises, or related facilities. Landlord shall not be liable or responsible for any loss or damage to any property or death or injury to any person occasioned by theft, fire, Act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition of any governmental body or authority, by other tenants of the Building or related facilities or any other matter beyond control of Landlord, or for any injury or damage or inconvenience which may arise through repair or alteration of any part of the Building, the Premises or related facilities, or failure to make repairs or from any cause whatsoever except the gross negligence of Landlord, its agents, and Contractor and their employees. Tenant shall, at all times during the term of this lease, maintain a policy or policies of insurance with the premiums thereon fully paid in advance, in amounts and with insurance companies approved by Landlord insuring Tenant's obligations to Landlord under Paragraph 12 of this lease.

13. Mortgages. Tenant accepts this lease subject to any deeds of trust, security interests or mortgages which might now or hereafter constitute a lien upon the Building or improvements therein, the Premises, or related facilities (provided Landlord shall use commercially reasonable efforts to obtain a non-disturbance agreement for Tenant), and to zoning ordinances and other building and fire ordinances and governmental regulations relating to the use of the property Tenant shall at any time hereafter, on demand, execute any instruments, releases or other documents that may be required by any mortgagee for the purpose of subjecting and subordinating this lease to the lien of any such deed of trust, security interest or mortgage so long as Tenant’s rights hereunder are not materially reduced. Landlord, at its sole options, shall have the right to waive the applicability of this Paragraph 13 so that this lease will not be subject and subordinate to any such deed of trust, security interest or mortgage.

14. Insurance. Landlord shall, at all times during the term of this lease maintain a policy or policies of insurance with the premiums thereon fully paid in advance, issued by and binding upon some solvent insurance company, insuring the Building against loss or damage by fire, explosion, or other hazards and contingencies for the full insurable value thereof; provided that Landlord shall not be obligated to insure any furniture, equipment, machinery, goods or supplies not covered by this lease which Tenant may bring or obtain upon the Premises, or any additional improvements which Tenant may construct thereon.

Tenant shall, at all times during the term of this lease, maintain a policy or policies of insurance, with the premiums thereon fully paid in advance, issued by and binding upon insurance companies approved by Landlord, such approval not to be unreasonably withheld, insuring any furniture, equipment, machinery, goods or supplies which Tenant may bring or obtain upon the Premises, and any additional improvements which Tenant may construct on the Premises against loss or damage by fire, explosion or other hazards and contingencies for the full insurable value thereof. Tenant shall also, at all times during the term of this lease, maintain a policy or policies of insurance, with the premiums thereon fully paid in advance, for comprehensive general and contractual liability insurance against claims for personal injury, death and property damage occurring in or about the Premises, such insurance to afford protection to the limits of (i) not less than $1,000,000.00 in respect of injury to or death of any number of persons arising out of any one occurrence and (ii) $1,000,000.00 in respect of any instance of property damage. Such policy or policies shall be issued by and binding upon insurance companies approved by Landlord, such approval not to be unreasonably withheld.

Tenant shall deliver to Landlord, prior to the Commencement Date, certificates of such insurance and shall, at all times during the term of this lease, deliver to Landlord upon request true and correct copies of such insurance policies. The comprehensive general and contractual liability policy described above shall (i) name Landlord as an additional insured,(ii) insure performance of the indemnities of Tenant contained in this lease, and (iii) be primary coverage, so that any insurance coverage obtained by Landlord shall be in excess thereof. Each insurance policy obtained by Tenant shall provide that it will not be canceled or reduced in coverage without 30 days prior written notice to Landlord. Tenant shall deliver to Landlord certificates of renewal at least 30 days prior to the expiration date of each such policy and copies of new policies at least 30 days prior to terminating any such policies.

15. Inspection. Landlord or representatives shall have the right to enter into and upon any and all parts of the Premises at reasonable hours to (i) inspect same or clean or make repairs or alterations or additions as Landlord may deem necessary (but without any obligation to do so, except as expressly provided for herein), or (ii) during the last six 96) months of the lease show the Premises to prospective tenants, purchasers or lenders; and Tenant shall not be entitled to any abatement or reduction of rent by reason thereof, nor shall such be deemed to be an actual or constructive eviction. Landlord shall use all reasonable efforts to ensure that they, their agents, contractors and visitors do not disturb Tenant while on the Premises.

16. Condemnation. If, during the term of this lease, or any extension or renewal thereof, a substantial portion of the Premises or a material portion of the Building should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, and in Tenant’s reasonable judgment Tenant’s ability to operate the Premises is materially and adversely impaired, this lease shall terminate and the rent shall be abated during the unexpired portion of this lease, effective on the date physical possession is taken by the condemning authority, and Tenant shall have no claim against Landlord for the value of any unexpired term of this lease; provided, Tenant may make a claim against the condemning authority for relocation costs, the value of Tenant’s improvements and for Tenant’s equipment and fixtures.

In the event a portion less than fifty percent (50%) of the Premises shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain or by private sale in lieu thereof and the partial taking or condemnation shall render the Premises unsuitable for Tenant's business, then Landlord shall have the option, in its sole discretion, of terminating this lease, or, at Landlord's sole risk and expense, restoring and reconstructing the Premises to its original size and with the same quality of tenant improvements installed by tenant prior to such taking. Should

Landlord elect to restore, the lease shall continue in full force and effect with the rent payable except for the portion that was taken during the unexpired portion of this lease adjusted to such an extent as may be fair and reasonable under the circumstances, and Tenant shall have no claim against Landlord for the value of any interrupted portion of this lease.

In the event of any condemnation or taking, total or partial, Tenant shall not be entitled to any part of the award or price paid in lieu thereof, and Landlord shall receive the full amount of such award or price, Tenant hereby expressly waiving any right or claim to any part thereof.

17. Fire or Other Casualty. In the event that the Premises should be totally destroyed by fire, tornado or other casualty or in the event the Premises or the Building should be so damaged that rebuilding or repairs cannot be completed within 180 days after the date of such damage, either Landlord or Tenant may at its option terminate this lease by delivering written notice thereof to the other party within twenty (20) days following such damage, in which event the rent shall be abated during the unexpired portion of this lease effective with the date of such damage. In the event the Premises should be damaged by fire, tornado or other casualty covered by Landlord's insurance, but only to such extent that rebuilding or repairs can be completed within 180 days after the date of such damage, or if the damage should be more serious but neither Landlord nor Tenant elects to terminate this lease, in either such event Landlord shall within thirty (30) days after the date of such damage commence to rebuild or repair the Premises and shall proceed with reasonable diligence to restore the Premises to substantially the same condition in which they were immediately prior to the happening of the casualty, except that Landlord shall not be required to rebuild, repair or replace any part of the furniture, equipment, fixtures and other improvements which may have been placed by Tenant or other tenants within the Building or the Premises, or related facilities. In the event that the Premises are untenantable such that Tenant is deprived of the use and enjoyment thereof, Landlord shall abate the rent during the time Premises are unfit for occupancy. If the Premises are not totally untenantable, Landlord shall allow Tenant a fair diminution of rent during the time the Premises are partially unfit for occupancy. In the event any mortgagee under a deed of trust, security agreement or mortgage elects pursuant to a right granted therein that insurance proceeds be used to retire the mortgage debt, Landlord shall have no obligation to rebuild and this lease shall terminate upon notice to Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Project or to the Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

18. Holding Over. Should Tenant, or any of its successors in interest, hold over the Premises, or any part thereof, after the date that is thirty (30) days after the expiration of the term of this lease, unless otherwise agreed in writing, such holding over shall constitute and be construed as tenancy at sufferance only. Such tenancy shall be at a daily rental equal to 1/30th of 150% of the sum of the monthly rental installment plus the most current rental adjustment which may have been made thereto pursuant to Paragraph 4 hereof The inclusion of the preceding sentence shall not be construed as Landlord's consent for the Tenant to hold over.

19. Taxes on Tenant's Property. Tenant shall be liable for all taxes levied or assessed against personal property, furniture or fixtures placed by Tenant in the Premises. If any such taxes for which Tenant is liable are levied or assessed against Landlord or Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is increased by inclusion of personal property, furniture or fixtures placed by Tenant in the Premises, and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder.

20. Events of Default. The following events shall be deemed to be events of default by Tenant under this lease:

(a) Tenant shall fail to pay any monthly rental installment or any portion of the basic rental or additional rent or any other obligation hereunder involving the payment of money within five (5) days of when due; provided, not more than twice in any twelve (12) month period Tenant shall be provided written notice of any such default and five (5) days thereafter to cure any such monetary default;

(b) Tenant shall fail to comply with any term, provision or covenant of this lease, other than the payment of rent or shall fail to comply with any term, provision or covenant in any other agreement with Landlord affecting the Premises, and shall not cure such failure within thirty (30) days after written notice thereof to Tenant;

(d) Tenant shall file a petition under any section or chapter of the Federal Bankruptcy Code, as amended, or under any similar law or statute of the United States or any State thereof, or Tenant shall be adjudged bankrupt or insolvent in any proceeding filed against Tenant thereunder and such adjudication shall not be vacated or set aside within thirty (30) days;

(e) A receiver or Trustee shall be appointed for all or substantially all of the assets of Tenant and such receivership shall not be terminated or stayed within thirty (30) days;

(f) Tenant shall fail to take possession of the Premises within Sixty (60)days after the same are tendered by Landlord to Tenant for occupancy; or

(g) Tenant shall assign this lease or sublet the Premises in violation of the terms of this Lease without Landlord's consent.

21. Remedies. Upon the occurrence of any event of default specified in Paragraph 20 hereof, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever:

(a) Terminate this lease in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession and expel or remove Tenant and any other person who may be occupying such Premises or any part thereof, without being liable for prosecution or any claim of damages therefor. Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, including (i) the reasonable cost of recovering the Premises (including attorneys fees and costs of suit), (ii) the reasonable cost of removing and storing any personal property, (iii) the unpaid rent earned at the time of termination, plus interest thereon at the rate described in Paragraph 35, (iv) the present value (discounted at the rate of six percent (6%) per annum) of the balance of the basic rental and additional rental for the remainder of the lease term less the present value (discounted at the same rate) of the fair market rental value of the Premises for such period, taking into account the period of time the Premises will remain vacant until a new tenant is obtained, and the reasonable cost to prepare the Premises for occupancy and the other costs (such as costs of repairs or remodeling, leasing commissions and attorneys fees) to be incurred by Landlord in connection therewith, and (v) any other sum of money and damages owed by Tenant to Landlord under this lease;

(b) Enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim for damages therefor, and if Landlord so elects, relet the Premises on such terms as Landlord shall deem advisable and receive the rent thereof. Tenant agrees to pay to Landlord on demand any deficiency in basic rental that may arise by reason of such reletting;

(c) Enter upon the Premises, without being liable for prosecution or any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this lease, and tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action; and

(d) Landlord may, and is hereby entitled and authorized, without any notice to Tenant whatsoever, to enter upon the Premises by use of a master key, a duplicate key, or other peaceable means, and to change, alter, and/or modify the door locks on all entry doors of the Premises, thereby permanently excluding Tenant, and its officers, principals, agents, employees, and representatives therefrom. If Landlord has either permanently repossessed the Premises pursuant to the foregoing provisions of this Lease, or has terminated this lease by reason of Tenant's default, Landlord shall not thereafter be obligated to provide Tenant with a key to the Premises at any time; provided, however, that in any such instance, during Landlord's regular business hours and at the convenience of Landlord, and upon the written request of Tenant accompanied by such written waivers and releases as Landlord may require, Landlord will escort Tenant or its authorized personnel to the Premises to retrieve any personal belongings or other property of Tenant not subject to the lien or security interest described herein. If Landlord elects to exclude Tenant from the Premises without permanently repossessing or terminating pursuant to the foregoing provisions of this lease, then Landlord (at any time prior to actual repossession or termination) shall not be obligated to provide Tenant a key to re-enter the Premises until such time as all delinquent rental and other amounts due under this lease have been paid in full (and all other defaults, if any, have been completely cured to Landlord's satisfaction), and Landlord has been given assurance reasonably satisfactory to Landlord evidencing Tenant's ability to satisfy its remaining obligations under this lease. During any such temporary period of exclusion, Landlord will, during Landlord's regular business hours and at Landlord's convenience, upon written request by Tenant, escort Tenant or its authorized personnel to the Premises to retrieve personal belongings of Tenant or its employees, and such other property of Tenant as is not subject to the Landlord's lien and security interest described herein. This remedy of Landlord shall override and control any conflicting provisions of the Texas Property Code.

No re-entry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this lease, unless a written notice of such intention be given to Tenant. Notwithstanding any such reletting or re-entry or taking possession, Landlord may at any time thereafter elect to terminate this lease for a previous default. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Landlord's acceptance of rent following an event of default hereunder shall not be construed as Landlord's waiver of such event of default. No waiver by Landlord of any violation or breach of any of the terms, provisions, and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a wavier of any other violation or default.

22. Surrender of Premises. No act or thing done by the Landlord or its agents during the term hereby granted shall be deemed as acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless the same be made in writing and subscribed by the Landlord.

23. Attorneys' Fees. In case it should be necessary or proper for Landlord or Tenant to bring any action under this lease or to consult or place such lease, or any amount payable by Landlord or Tenant thereunder, with an attorney concerning or for the enforcement of any of Landlord's or Tenant's rights hereunder, then the non-prevailing party agrees in each and any such case to pay the prevailing party on demand a reasonable attorney's fee.

24. Landlord’s Lien. Landlord waives any statutory or contractual landlord’s lien for rent.

25. Mechanic's Lien. Tenant will not permit any mechanic's lien or liens to be placed upon the Premises or the Project or improvements thereon during the term hereof caused by or resulting from any work performed, materials furnished or obligation incurred by or at the request of Tenant, and in the case of the filing of any such lien Tenant will promptly pay same. If default in payment thereof shall continue for twenty (20) days after written notice thereof from Landlord to the Tenant, the Landlord shall have the right and privilege at Landlord's option of paying the same or any portion thereof without inquiry as to the validity thereof, and any amounts so paid, including expenses and interest, shall be so much additional rent hereunder due from Tenant to Landlord and shall be repaid to Landlord immediately on rendition of bill therefor, together with interest until repaid as provided in Paragraph 35. Tenant will have the option to "bond around" any mechanic's lien or liens, provided such bonding around is in accordance with and permitted by deeds of trust or mortgages affecting the Building.

26. Waiver of Subrogation. Anything in this lease to the contrary notwithstanding, the parties hereto hereby waive any and all rights of recovery, claim action or cause of action, against each other, their agents, officers, and employees, for any loss or damage that may occur to the Premises hereby demised, or any improvements thereof, or such Project of which the Premises are a part, any improvements thereto, or related facilities, by reason of fire, the elements, or any other cause which could be insured against under the terms of standard fire and extended coverage insurance policies, regardless of cause or origin, including negligence of the parties hereto, their agents, officers and employees.

No insurer of one party hereunder shall hold any right of subrogation against the other party. If the respective insurer of Landlord and Tenant does not permit the foregoing waiver without an appropriate endorsement to such party’s insurance policy, then Landlord and Tenant each covenant and agree to notify its insurer of the waiver set forth herein and to secure from such insurer an appropriate endorsement to its respective insurance policy with respect to such waiver.

27. Notices. Each provision of the Agreement, or of any applicable governmental laws, ordinances, regulations, and other requirements with reference to the sending, mailing or delivery of any notice, or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken:

(a) All rent and other payment required to be made by Tenant to Landlord hereunder shall be payable to Landlord in Dallas County, Texas, at the address hereinbelow set forth, or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith:

(b) Any notice or document required to be delivered hereunder shall be deemed to be delivered if actually received and whether or not received when deposited in the United States mail, postage prepaid, certified or registered mail (with or without return receipt requested) addressed to the parties hereto at the respective addresses set out opposite their names below, or at such other address as they have heretofore specified by written notice delivered in accordance herewith:

LANDLORD:

TR LBJ CAMPUS PARTNERS, L.P.

c/o Thompson Realty Corporation

2505 N. Plano Road, Suite 3000

Richardson, Texas 75082

TENANT:

American Caresource Holdings, Inc.

5429 LBJ Freeway

Suite 700

Dallas, Texas 75240

28. Force Majeure. Whenever a period of time is herein prescribed for action to be taken by Landlord or Tenant, as the case may be, except for the payment by Tenant of any sums due hereunder including basic rental and additional rental, Landlord or Tenant, as the case may be, shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, Acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the control of Landlord or Tenant, as the case may be.

29. Separability. If any clause or provision of this lease is illegal, invalid or unenforceable under present or future laws effective during the term of this lease, then and in that event, it is the intention of the parties hereto that the remainder of this lease shall not be affected thereby, and it is also the intention of the parties to this that in lieu of each clause or provision of this lease that is illegal, invalid, or unenforceable, there be added as part of this lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.

30. Entire Agreement; Amendments; Binding Effect. This lease contains the entire agreement between the parties and may not be altered, changed or amended, except by instrument in writing signed by both parties hereto. No provision of this lease shall be deemed to have been waived by Landlord unless such waiver be in writing signed by Landlord and addressed to Tenant, nor shall any custom or practice which may grow up between the parties in the administration of the terms hereof be construed to waive or lessen the right of Landlord to insist upon the performance by Tenant in strict accordance with the terms hereof. The terms, provisions, covenants and conditions contained in this lease shall apply to, inure to the benefit of, and binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided.

31. Quiet Enjoyment. Provided Tenant has performed all of the terms, covenants, agreements and conditions of this lease, including the payment of rent, to be performed by Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises for the term hereof, without hindrance from Landlord, subject to the terms and conditions of this lease.

32. Rules and Regulations. Tenant and Tenant's agents, employees, and invitees will comply fully with all requirements of the rules and regulations of the Project and related facilities which are attached hereto as Exhibit "D," and made a part hereof as though fully set out herein. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such reasonable manner as may be deemed advisable for safety, care, or cleanliness of the Project, the Premises, or related facilities, and for preservation of good order therein, all of which rules and regulations, changes and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant; provided, in no event shall any such rules and regulations conflict with the term of this Lease. Tenant shall further be responsible for the compliance with such rules and regulations by the employees, servants, agents, visitors and invitees of Tenant.

33. Broker's or Agent's Commission. Tenant represents and warrants that there are no claims for brokerage commissions or finder's fees in connection with the execution of this lease, except for Trammell Crow Company, and Tenant agrees to indemnify and hold harmless Landlord against all liabilities and costs arising from such claims, including without limitation attorneys' fees in connection therewith.

34. Guaranty, Joint and Several Liability. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. If there be a guarantor of Tenant's obligations hereunder, the obligations hereunder imposed upon Tenant shall be the joint and several obligations of Tenant and such guarantor and Landlord need not first proceed against the Tenant hereunder before proceeding against such guarantor, nor shall any such guarantor be released from its guaranty for any reason whatsoever, including without limitation, in case of any amendments hereto, waivers hereof or failure to give such guarantor any notices hereunder.

35. Interest. Any rent or other amount which becomes owing by Tenant to Landlord under this lease (including unpaid service charges) shall bear interest from the date of demand at the maximum contractual rate of interest which could be charged legally by Landlord in the event of a loan of such rent or other amount by Landlord to Tenant under the then applicable laws of the State of Texas or in the event there is no established maximum contractual rate of interest, such interest shall be a the rate of fourteen percent (14%) per annum.

36. Estoppel Certificate. Tenant will, at any time and from time to time, upon not less than ten (10) business days' prior request by Landlord, execute, acknowledge and deliver to Landlord a statement in writing executed by Tenant certifying that this lease is unmodified and in full effect (or, if there have been modifications, that this lease is in full effect as modified, and setting forth such modifications) and the dates to which the rent has been paid, and either stating that to the knowledge of the signer of such certificate no default exists hereunder or specifying each such default of which the signer may have knowledge; it being intended that any such statement by Tenant may be relied upon by any prospective purchaser or mortgagee of the Project. In the event Tenant shall fail or neglect to execute, acknowledge and deliver any such certificate, and such failure shall continue for five (5) days after written notice, Tenant shall be in default under this lease.

37. Landlord's Liability. The liability of Landlord to Tenant for any default by Landlord under the terms of this lease shall be limited to the Landlord’s interest in the rents for the Building, the proceeds from any sale or condemnation event or the proceeds of sale on execution of the interest of Landlord in the Building and Landlord shall not be personally liable for any deficiency. This clause shall not be deemed to limit or deny any remedies which Tenant may have in the event of default by Landlord hereunder, which do not involve the personal liability of Landlord.

38. Captions. The captions contained in this lease are for convenience of reference only, and in no way limit or enlarge the terms and conditions of this lease.

39. Gender. Words of any gender used in this lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.

40. Place of Performance. Tenant shall perform all covenants, conditions and agreements contained herein, including but not limited to payment of rent, in Dallas County, Texas. Any suit arising from or relating to this agreement shall be brought in Dallas County, Texas.

41. Relocation. Intentionally deleted.

42. Lender Approval. Intentionally deleted.

43. Lease Submission. The submission of this lease to Tenant shall not be construed as an offer, nor shall Tenant have any rights with respect hereto unless and until Landlord shall execute a copy of this lease and deliver the same to Tenant.

44. Blocked Persons. Tenant and Landlord hereby represent to each other that neither is a “blocked person” or “specially designated national” listed by the United States Department of the Treasury’s Office of Foreign Assets Control, and neither is a person described in section (a), (b), (c), or (d) of Section 1 of the Executive Order 13224 issued by President George W. Bush on September 23, 2001, as amended (“Order”). Tenant further represents to Landlord that none of the funds Tenant will deliver to Landlord as payment of rent are subject to being blocked pursuant to the Order. Landlord further represents to Tenant that neither the Property nor Landlord’s interest in the Property is subject to being blocked pursuant to the Order. Tenant and Landlord shall indemnify, defend and hold harmless the other from and against any and all loss, cost, damage or expense, including court costs and reasonable attorneys’ fees, suffered or incurred by the other party as a consequence of breach of this representation.

Notwithstanding anything in this Lease to the contrary, the indemnification obligations contained in this paragraph shall survive termination of the lease agreement.

45. Moving Allowance. Upon Tenant’s occupancy of the Premises, and within thirty (30) days after Landlords receipt of an invoice from Tenant, Landlord agrees to pay the sum of $1.00 per square foot of rentable area to Tenant as a reimbursement of Tenant’s costs to relocate to the Building.

46. Workout Facility. Landlord agrees to allow four (4) Tenant employees to use the facility at no cost for the first 24 months of the lease term and $25.00 per month per user for the remainder of the lease term.

47. Monument Signage. During the entire term of the lease, Landlord grants to Tenant the right, at Tenant’s sole cost and expense, to place its company name on the Building’s monument signage. The parties agree to mutually cooperate concerning the placement and size of Tenant’s signage (not to be less than the proportionate size of Tenant’s Premises) on the monument, which shall require the mutual consent of Landlord and Tenant.

48. Special Provisions. Exhibits “A”,“B”,“C”,“D”,“E”,“F”, Rider No. 101 and Rider No. 201.

	LANDLORD:	TR LBJ CAMPUS PARTNERS, L.P., a Georgia limited partnership
	By:	Thompson Realty Development Corporation, a Texas corporation
	By:	/s/ W.T. Field
		W.T. Field, President

	TENANT:	American CareSource Holdings, Inc., a Delaware corporation

	By:	/s/ David S. Boone
	Name:	David S. Boone
	Title:	Chief Operating Officer and Chief Financial Officer

EXHIBIT "A"

SITE PLAN

American Caresource Holdings, Inc.

Galleria Crossing I

5429 LBJ Freeway

Suite 700

Dallas, Texas 75240

Premises: 9,349 rentable square feet

Growth Area: 16,211 rentable square feet

EXHIBIT "B"

RENTAL ESCALATION - OPERATING EXPENSES AND ELECTRICAL COSTS

In addition to the basic rental payable by Tenant in accordance with Paragraph 1(e) of this lease, Tenant shall pay additional rent determined as follows:

(a) For the purposes of this provision, the term "Basic Cost" shall mean any and all costs, expenses and disbursements of every kind and character (subject to the limitations set forth below) (specifically excluding leasing commissions, attorney's fees, costs, and disbursements and other expenses incurred in connection with leasing, renovating or improving space for tenants, and costs incurred in leasing disputes) which Landlord shall incur, pay or become obligated to pay in connection with the ownership of any estate or interest in, operation, maintenance, repair, replacement, and security of the Building, determined in accordance with generally accepted accounting principles consistently applied, including but not limited to the following:

(i) Normal and customary wages and salaries (including management fees not to exceed 5%) of all employees engaged in the operation, repair, replacement, maintenance, and security of the Building, including taxes, insurance, and benefits relating thereto.

(ii) All normal and customary supplies and materials used in the operation, maintenance, repair, replacement, and security of the Building.

(iii) Annual cost of all capital improvements made to the Building which although capital in nature can reasonably be expected to reduce the normal operating costs of the Building, as well as all capital improvements made in order to comply with any statutes, rules, regulations or directives hereafter promulgated by a governmental authority relating to energy, conservation, public safety or security, as amortized over the useful life of such improvements by Landlord for federal income tax purposes.

(iv) Cost of all utilities.

(v) Cost of all maintenance and service agreements on equipment, including alarm service, window cleaning and elevator maintenance.

(vi) Cost of casualty and liability insurance applicable to the Building and Landlord's personal property used in connection therewith.

(vii) All taxes, assessments and governmental charges, whether federal, state, county or municipal, and whether they be by taxing districts or authorities presently taxing or by other, subsequently created or otherwise, and any other taxes, assessments or other governmental charges attributable to the Building or its operation, excluding, however, federal and state taxes on income.

(viii) Cost of repairs and general maintenance of the Building.

(ix) Cost of service or maintenance contract with independent contractors for the operation, maintenance, repair, replacement, or security of the Building.

There are specifically excluded from the definition of the term "Basic Cost" expenses for capital improvements made to the Building, other than capital improvements described in subparagraph (iii) above and except for items which, though capital for accounting purposes, are properly considered maintenance and repair items, such as painting of common areas, replacement of carpet in elevator lobbies, and the like; expenses for repair, replacements and general maintenance paid by proceeds of insurance or by Tenant or other third parties, and alterations attributable solely to tenants of the Building other than Tenant; interest, amortization or other payments on loans to Landlord, whether secured or unsecured; depreciation of the Building; legal expenses; costs of environmental cleanup, costs to comply with applicable laws in effect on the date hereof, and income, excess profits or franchise taxes or other such taxes imposed on or measured by the income of the Landlord from the operation of the Building. Additionally, electrical service costs paid separately pursuant to (c) below are excluded from the definition of the term “Basic Cost”.

(b) Tenant shall during the term of this lease pay as additional rent an amount (the "Excess") equal to (i) the total amount of Basic Costs for a calendar year, divided by the rentable area of the Building, and multiplied by the rentable area of the Premises minus (ii) the product of the "Basic Costs Stop" (hereinafter defined) multiplied by the rentable area of the Premises. Basic Cost Stop is herein defined to be the quotient of the Basic Cost applicable to the Premises per calendar year 2006 divided by the number of square feet of rentable area in the Premises. Landlord may collect such additional rent in arrears on a calendar year basis. Beginning with January 1, 2007, and on each January 1 thereafter, Landlord shall also have the option to make a good faith estimate of the Excess for each upcoming calendar year and upon thirty (30) days' written notice to Tenant may require the monthly payment of such additional rent equal to 1/12 of such estimate. Any amounts paid based on such an estimate shall be subject to adjustment pursuant to subparagraph (c) when actual Basic Cost is available for each calendar year. For the purposes of calculating the additional rental payable hereunder with respect to any fractional calendar year during the term of this lease, Landlord may either (i) estimate Basic Cost for the portion of the lease term during such partial year, or (ii) estimate Basic Cost for the entire calendar year and reduce the same to an amount bearing the same proportion to the full amount of estimated Basic Cost for such year as the number of days in such fractional calendar year bears to the total number of days in such full calendar year.

(c) In addition to the Excess defined in (b) above, Tenant shall also pay during the term of this lease as additional rent “Tenant’s Share” (hereinafter defined) of the following costs incurred by Landlord which are directly attributable or reasonably allocable to the Building (collectively, “Electrical Costs”): (i) electrical service used in the operation, maintenance, and use of the Project; (ii) sales, use, excise and other taxes assessed by governmental authorities on electrical services supplied to the Project; and (iii) other reasonable costs of providing electrical services to the Project. “Tenant’s Share” is defined to be the number of square feet of rentable area in the Premises divided by the number of square feet of rentable area in the Building. Tenant shall, with each monthly installment of basic rental, pay Landlord’s monthly estimate of Tenant’s Share of Electrical Costs; provided, however, Tenant, at its option and at Tenant’s cost, may elect to have Landlord install a submeter for the Premises, in which event Tenant’s share of Electrical Costs shall be based on the submeter usage.

(d) By April 1 of each calendar year during Tenant's occupancy, or as soon thereafter as practical, Landlord shall furnish to Tenant a statement of Landlord's actual Basic Cost for the previous year adjusted as provided in subparagraph (d). If for any calendar year additional rent collected for the prior year as a result of Landlord's estimate of Basic Cost is in excess of the additional rent actually due during such prior year, then Landlord shall refund to Tenant any overpayment. Likewise, Tenant shall pay to Landlord, on demand, any underpayment with respect to the prior year.

(e) With respect to any calendar year or partial calendar year during the term of this lease in which the Building is not occupied to the extent of ninety-five percent (95%) of the rentable area thereof, the Basic Cost for such period shall, for the purposes hereof, be increased to the amount which would have been incurred had the Building been occupied to the extent of ninety-five percent (95%) of the rentable area thereof.

(f) If any amounts which become due by reason hereof are not paid by the 5th day following the day on which they are due, a service charge of 10% of such rental escalation amount shall become due and payable in addition to such rental escalation. Such service charge is for the purpose of reimbursing Landlord for the extra costs and expenses incurred in connection with the handling and processing of late rental escalation payments.

EXHIBIT "C"

WORK LETTER AGREEMENT

American Caresource Holdings, Inc.

5429 LBJ Freeway

Suite 700

Dallas, Texas 75240

Re:	Suite 700, 5429 LBJ Freeway, Dallas, Texas 75240.

Gentlemen:

You (hereinafter referred to as "Tenant") and we (hereinafter referred to as "Landlord") are executing, simultaneously with this "Work Letter Agreement" (herein so called), a written lease (the "Lease") covering the space referred to above (hereinafter called the "Premises").

To induce Tenant to enter into such Lease (which is hereby incorporated by reference) and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant mutually agree as follows:

1. Final Plans. Landlord agrees to provide, by Landlord's designated space planner, architect and/or engineer, the following Building Standard (hereinafter defined) space plans and architectural and mechanical drawings and specifications (hereinafter collectively referred to as the "Final Plans"), to be drawn for the Premises on Tenant's behalf and such Final Plans shall be in accordance with the attached “Preliminary Space Plan” prepared by Entos Design:

(a) Complete Building Standard "Space Plans" (herein so called) for the layout of the Premises;

(b) Complete, finished and detailed 1/8 inch scale architectural drawings and specifications for Tenant's partition layout, reflected ceiling, telephone and electrical outlets, and finish schedule for the work to be done by Landlord under Paragraph 3 hereof (the "Construction Plans"); and

(c) Complete Building Standard mechanical plans and specifications where necessary for installation of normal air conditioning system and duct work and heating and electrical facilities for the work to be done by Landlord under Paragraph 3 hereof (the "MP & E Plans").

Landlord shall pay all costs of preparing the Final Plans.

2. Preparation of Final Plans; Changes to Final Plans. Tenant covenants and agrees to furnish to Landlord all information necessary for the preparation of each of the Space Plans, the Construction Plans and the M P & E Plans on or before June 15, 2006. Subject to the provisions of Section 3 above, Landlord will cause the Space Plans, the Construction Plans, and the M P & E Plans to be prepared from such information and will submit such plans to Tenant. Within ten (10) days after receipt thereof, Tenant shall approve the Space Plans, Construction Plans and M P & E Plans or indicate what changes, if any, that it desires to make. Such proposed changes, if any, shall be submitted to Landlord in writing for Landlord's written approval. If within ten (10) days after receipt thereof, Tenant fails to approve any of the Space Plans, Construction Plans and M P & E Plans or if Tenant fails to propose in writing any changes to be made to such Space Plans, Construction Plans and M P & E Plans, then Tenant shall be deemed to have approved each of same. Any redrawing of all or any of the Final Plans occasioned by Tenant after Tenant's approval (or deemed approval) thereof as well as any changes requested by Tenant in connection with its initial review of the Final Plans which are agreed to by Landlord shall be at Tenant's sole cost and expense.

3. Obligations Contingent. Tenant has represented that the Premises will need to be improved to meet Tenant’s needs and such build out shall conform to the Preliminary Space Plan which shall use Building Standard materials and finishes which shall also include supplemental HVAC, raised flooring, sound attenuation in specific area and upgraded locking system. Landlord’s obligations hereunder to incur the costs associated with preparation of Final Plans and construction of improvements are contingent upon these representations remaining true and upon Landlord’s reasonable right to approve the Final Plans. If Landlord, in its reasonable discretion, disapproves the Final Plans, the Lease shall terminate automatically and neither Landlord nor Tenant shall have any further rights or obligations hereunder or under the Lease.

4. Construction of Improvements. Subject to each of Paragraph 2 and Paragraph 28 of the Lease, provided that Tenant has not committed an event of default pursuant to Paragraph 20 of the Lease, Landlord agrees to cause the improvements to the Premises to be constructed pursuant to and in substantial accordance with the Final Plans which landlord shall have reasonable approval rights thereon. The construction of such improvements in the Premises shall be at Landlord's sole cost and expense. The timing of such construction will be structured to achieve delivery of space in accordance with Paragraph 2 of the Lease. Tenant acknowledges that all work done in the Premises pursuant to this Work Letter Agreement shall be performed by a contractor (and such subcontractors, suppliers and laborers) designated by Landlord, in Landlord's sole discretion. Upon substantial completion of the work to be done by Landlord Landlord shall deliver to Tenant an application for a final Certificate of Occupancy. Tenant shall promptly apply for such Certificate of Occupancy and receipt thereof will be a condition precedent to the Commencement Date. Completion of minor finish and punch-list items are specifically not a condition precedent to the Commencement Date.

5.	Condition of Premises. The Premises has been previously improved.

6. Modifications. To the extent that the Final Plans call for any modifications (herein "Modifications") the costs of such Modifications shall be borne solely by Landlord. By way of example, and not by way of limitation, the following shall each be examples of Modifications:

(a) Any modifications to the existing sprinkler system, or the moving of existing sprinkler heads, or the installation of additional sprinkler heads.

(b) Any modifications to the existing HVAC system, the moving of the existing duct work and/or diffusers, or the installation of additional duct work and/or diffusers.

(c) Any rewiring of existing junction boxes, relocation of existing junction boxes, or installation of additional junction boxes.

7. Building Standard. Tenant shall be required to use, and the Final Plans shall specify Building Standard (a) light fixtures, (b) doors, (c) ceiling tiles, and (d) hardware throughout the Premises and the costs of purchasing, transporting and installing each of the foregoing Building Standard items shall be borne solely by Landlord. Whenever the term "Building Standard" is used in this Work Letter Agreement, it shall mean the exclusive type, brand, quality, and/or quantity of materials Landlord designates from time to time to be the quality or quantity to be used in the Building.

Payment of Costs; Credit. Intentionally deleted.

9. Delays. It is agreed that, notwithstanding the provisions of Paragraph 2 of the Lease, waiving Tenant's obligation for the payment of rental under Paragraph 1(f) of the Lease until the date on which Landlord can deliver possession of the Premises, if Landlord shall be delayed in substantially completing the work to be performed by Landlord pursuant to this Work Letter Agreement as a result of:

(a) Tenant's failure to timely furnish information or specifications in accordance with Paragraph 2 above; or

(b) Tenant's request for materials, finishes or installations other than Landlord's Building Standard; or

(d) The performance of any work in the Premises by a person, firm or corporation employed by Tenant; (all such persons, firms or corporations being subject to the approval of Landlord);

Tenant's obligation for payment of rental under the Lease (as affected by such waiver) shall be accelerated by the number of days of such delay.

10. Entry by Tenant's Agents. Landlord will permit Tenant and its agents to enter the Premises prior to the date specified for the commencement of Tenant's occupancy under the Lease, in order that Tenant may perform through its own contractors (to be first approved by Landlord) such other work and decorations as Landlord may approve at the same time that Landlord's contractors are working in the Premises. The foregoing license to enter prior to the commencement of the lease term, however, is conditioned upon Tenant's workmen and mechanics working in harmony and not interfering with the labor employed by Landlord, Landlord's mechanics or contractors or by any other tenant or their contractors. Such license is further conditioned upon workers' compensation and public liability insurance for bodily injury and property damage, all in amounts and with companies and on forms satisfactory to Landlord, being provided and at all times maintained by Tenant's contractors engaged in the performance of the work, and certificates of such insurance being furnished to Landlord prior to proceeding with the work. If at any time such entry shall cause disharmony or interference therewith, this license may be withdrawn by Landlord upon forty-eight (48) hours written notice to Tenant. Such entry conditions shall be deemed to be under all of the terms, covenants, provisions and conditions of the Lease except as to the covenant to pay rent. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any of Tenant's decorations or installations so made prior to commencement of the lease term, the same being solely at Tenant's risk, and Tenant shall hold Landlord harmless from any claim, demand or action arising from activities of Tenant's contractors, workmen or mechanics.

If the foregoing correctly sets forth our understanding, kindly acknowledge your approval in the space provided below whereupon this work letter shall become a binding agreement between us.

Yours very truly,

		TR LBJ CAMPUS PARTNERS, L.P., a Georgia limited partnership
	By:	Thompson Realty Development Corporation, a Texas corporation
	By:	/s/ W.T. Field
		W.T. Field, President
	AGREED TO AND ACCEPTED as of the _______ day of June, 2006.
		American CareSource Holdings, Inc., a Delaware corporation

	By:	/s/ David S. Boone
	Name:	David S. Boone
	Title:	Chief Operating Officer and Chief Financial Officer

EXHIBIT "D"

BUILDING RULES AND REGULATIONS

1. Landlord agrees to furnish Tenant two keys to Tenant door at no charge and two keys to entry doors requiring a $10.00 refundable deposit. Additional keys will be furnished at a nominal charge.

2. Tenant will refer all contractors, contractor's representatives and installation technicians, rendering any service on or to the Premises for Tenant, to Landlord for Landlord's approval and supervision before performance of any contractual service. This provision shall apply to all work performed in the Building including installation of telephones, telegraph equipment, electrical devices and attachments and installations of any nature affecting floors, walls, woodwork, trim, windows, ceiling, equipment or any other physical portion of the Building.

3.	No Tenant shall at any time occupy any part of the Project as sleeping or lodging quarters.

4. Tenant shall not place, install or operate on Premises or in any part of the Project, any engine, stove or machinery or conduct mechanical operations or cook thereon or therein (other than a microwave oven in a typical break room), or place or use in or about Premises any explosives, gasoline, kerosene, oil, acids, caustics, or any other inflammable, explosive, or hazardous material without prior written consent of Landlord.

5. Landlord will not be responsible for lost or stolen personal property, equipment, money or jewelry from Tenant's area or public rooms regardless of whether such loss occurs when area is locked against entry or not.

6. Except for seeing-eye dogs, no birds, fowl, dogs, animals or pets of any kind shall be brought into or kept in or about the Project.

7. Landlord will not permit entrance to Tenant's offices by use of pass key controlled by Landlord, to any person at any time without permission by Tenant, except employees, contractors, or service directly supervised or employed by Landlord.

8. None of the entries, passages, doors, elevators, hallways or stairways shall be blocked or obstructed, or any rubbish, litter, trash, or material of any nature placed, emptied or thrown into these areas, or shall such areas be used at any time except for ingress or egress by Tenant, Tenant's agents, employees or invitees.

9. The water closets and other water fixtures shall not be used for any purpose other than those for which they were constructed. No person shall waste water by interfering with the faucets or otherwise.

10. No person shall disturb the occupants of the Building by the use of any musical instruments, the making of raucous noises, or other unreasonable use.

11. Nothing shall be thrown out of the windows of the Building, or down the stairways or other passages.

12. Tenant shall not store any materials, equipment, products, etc., outside the Premises as shown on the plats attached hereto.

13. Tenant shall not erect any sign or other insignia upon or in any part of the Project or other portion of the Premises without the prior written consent of the Landlord.

14. Tenant shall comply with all local and federal codes and ordinances. In the event of fire or code problems, Tenant shall comply with such requirements.

15. Tenant and its agents, employees and invitees shall observe and comply with the driving and parking signs and markers on the Project grounds and surrounding areas.

16.	Corridor and passage doors when not in use shall be kept closed.

17. Movement in or out of the Building of furniture, office equipment, or any other bulky or heavy materials shall be controlled by the Landlord. Landlord will determine the method of routing of such items so as to ensure the safety of all concerned.

18. Directories will be placed by the Landlord, at Landlord's expense, in the building and no other directories shall be permitted.

19. No signs, draperies, shutters, window coverings, decorations, hangings or obstructions of any type shall be placed on any skylights or on any doors or windows which are visible from outside the leased premises without the prior written consent of the Landlord.

20. All locks for doors in each tenant's leased area shall be building standard and no tenant shall place any additional lock or locks on any door in its leased area without Building Management's written consent.

21. Building Management shall have the authority to prescribe the weight and manner that safes and other heavy equipment are positioned.

22.	Tenant space that is visible from public areas must be kept neat and clean.

23. Standard climate control hours are 7 a.m. to 6 p.m., Monday through Friday, and 8 a.m. to 12 noon on Saturday. Landlord shall adjust thermostats to maintain building standard temperature. Tenant shall not attempt to adjust temperature control thermostats. Window blinds should remain down and tilted at a 45 degree angle toward the street to maintain temperatures and conserve energy.

24. Tenant will comply with all requirements necessary for the security of the Premises both during business hours and after hours and on weekends.

25. Tenants are to lock all office doors leading to corridors and to turn out all lights at the close of their working day.

26. The work of the janitor or cleaning personnel shall not be hindered by Tenant after 6:30 p.m. The windows, doors and fixtures may be cleaned at any time. Tenant shall provide adequate waste and rubbish receptacles, cabinets, bookcases, map cases, etc., necessary to prevent unreasonable hardship to Landlord in discharging its obligation regarding cleaning service.

27. Employees of Landlord shall not receive or carry messages for or to any tenant or other person nor contact with or render free or paid services to any tenant or tenant's agent, employees or invitees.

28. Landlord desires to maintain standards of environment, comfort and convenience for its tenants. It will be appreciated if any undesirable conditions or lack of courtesy or attention by its employees are reported directly to Landlord.

29. All tenant modifications resulting from remodeling in or to the leased Premises must conform to the City of Dallas Building and Fire Codes and approved by property management in writing prior to performance of the work.

30. The Landlord reserves the right to rescind any of these rules and make such other and further rules and regulations as in the judgment of Landlord shall from time to time be needed for the safety, protection, care and cleanliness of the Project, the operation thereof, the preservation of good order therein, and the protection and comfort of its tenants, their agents, employees and invitees, including but not limited to rules and regulations regarding hours of access to the Project, which rules when made and notice thereof given to a tenant shall be binding upon him in like manner as if originally prescribed. In the event of any conflict, inconsistency, or other difference between the terms and provisions of these rules and regulations and any lease now or hereafter in effect between Landlord and any tenant in the Building, Landlord shall have the right to rely on the term or provision in either such lease or such Rules and Regulations which is most restrictive on such tenant and most favorable to Landlord.

31.	The Building is a non-smoking building.

32.	Smoking is not permitted in the Premises.

EXHIBIT "E"

DESCRIPTION OF LAND

EXHIBIT “F”

PARKING AGREEMENT

1. Parking Spaces. At all times during the lease term, Tenant may lease from Landlord five (5) reserved, covered parking spaces located on the first level of under-building garage parking (the "Reserved Parking Garage"). At all times during the lease term, Tenant shall pay to Landlord (as provided in Paragraph 2 below) the sum of $50.00 per month per space plus all applicable sales taxes (the "Basic Parking Charge"). Tenant is under no obligation to rent the five (5) reserved, covered parking spaces upon which the Basic Parking Charge will be assessed, but if Tenant elects not to rent those spaces, Landlord may rent them to other Tenants of the Building and Tenant will be able to convert the reserved, covered not utilized to covered, unreserved spaces. Landlord will provide a reasonable means of controlling access to the parking areas within the Reserved Parking Garage, but no specific parking spaces in the parking areas within the Reserved Parking Garage are to be provided to Tenant. Landlord reserves the right to relocate any parking areas or spaces from time to time, and may also use portions of the Reserved Parking Garage outside such designated areas for free, visitor, or other parking needs of Landlord. Landlord may make, modify and enforce rules and regulations relating to the parking of automobiles in the Reserved Parking Garage, and Tenant will abide by such rules and regulations. Landlord also reserves the right to increase the size of the Reserved Parking Garage.

The Basic Parking Charge for five (5) covered, reserved parking spaces is abated for the first 24 months of the initial lease term.

2. Basic Parking Charge. Tenant covenants and agrees to pay Landlord during the lease term, as additional rental hereunder, the Basic Parking Charges hereinabove specified for each of the parking spaces leased by Tenant as hereinabove provided, such sum to be payable monthly in advance on the first day of each and every calendar month during the lease term. A pro rata portion of such Basic Parking Charge shall be payable for the first partial calendar month in the event the lease term commences on a date other than the first day of a calendar month. Tenant's obligation to pay the Basic Parking Charges shall be considered an obligation to pay rent for all purposes hereunder, and default in payment of any Basic Parking Charge shall be deemed a default in payment of rental under Paragraph 20 herein. Tenant shall be responsible for ensuring that its employees do not park their cars in visitor parking spaces or areas, if any, established by Landlord, or in parking spaces or areas, if any, reserved or designated by Landlord for the use of other tenants of the Building or for other purposes. Landlord shall not be liable or responsible for any loss of or to any car or vehicle or equipment or other property therein or damage to property or injuries (fatal or non-fatal), unless such loss, damages, or injury be caused by the gross negligence or willful misconduct of Landlord, its agents, contractor, or their employees.

3. Additional Parking Spaces. Subject to availability, upon written request by Tenant, Tenant may lease additional parking spaces in the Parking Garage from Landlord on the same terms, conditions and charges as are specified above; provided, however, that Landlord may terminate Tenant's right to use any such additional parking spaces so leased upon ten (10) days' written notice to Tenant.

4. Free Unreserved Parking. Landlord hereby grants to Tenant a license to use, in common with Landlord and others, thirty-three (33) unreserved parking spaces located under and/or adjacent to the Building, at no charge to Tenant. Landlord shall have the right to charge a parking fee for amounts levied, assessed, imposed or required to be paid to any governmental authority on account of the parking of vehicles, including all sums required to be paid pursuant to transportation controls imposed by the Environmental Protection Agency under the Clean Air Act of 1970, if any, or otherwise required to be paid by any governmental authority with respect to the parking, use or transportation of motor vehicles, or the reduction or control of motor vehicle pollution.

If requested by Landlord, Tenant shall notify Landlord of the license plate number, year, make and model of the automobiles entitled to use such parking spaces and if requested by Landlord, such automobiles shall be identified by automobile window stickers provided by Landlord, and only such designated automobiles shall be permitted to use such parking spaces.

The parking spaces are provided solely for the accommodation of Tenant and Landlord assumes no responsibility or liability of any kind whatsoever from whatever cause with respect to the automobile parking areas, including adjoining streets, sidewalks, driveways, property and passageways, or the use thereof by Tenant of Tenant’s representatives.

RIDER NO. 101

OPTION TO EXTEND

Tenant at its option may extend the term of this Lease for up to two (2) extension term(s) of five (5) years (each) by serving written notice thereof upon Landlord at least six (6) months before the expiration of the initial Lease Term (or any extension term), provided that at the time of such notice and at the commencement of such extended term, no uncured event of default, as defined in Section 20 of this Lease, shall have occurred. Upon the service of such notice and subject to the conditions set forth in the preceding sentence, this Lease shall be extended without the necessity of the execution of any further instrument or document. Such extended term shall commence upon the expiration date of the initial Lease Term (or the prior extension term), expire upon the annual anniversary of such date five (5) years thereafter, and be upon the same terms, covenants, and conditions as provided in this Lease for the initial term, except that the Base Rent payable during each extended term shall be at the prevailing rate (the "Market Rate") for comparable space in office buildings comparable to the Building located in the same submarket in Dallas County, Texas, taking into consideration quality of construction and finish of the Building, the ease of accessibility to the Building from major thoroughfares, and the availability of free parking associated with the Building, at the commencement of each such extended term, which new Base Rent shall be adjusted as provided in and under this Lease. Any termination of this Lease during the initial term (or any extension term) shall terminate all rights of extension hereunder. Any assignment or subletting by Tenant pursuant to Section 11 of this Lease shall terminate the option(s) of Tenant contained herein. Notwithstanding the foregoing, in no event shall the Base Rent for any extension term be less than the Base Rent during the last year of the initial term (or the prior extension term).

RIDER NO. 201

SUBORDINATE RIGHT OF FIRST REFUSAL

Provided this Lease is then in full force and effect and no event of default, as defined in Paragraph 20 of this Lease, shall have occurred and subject to the rights of existing tenants, Tenant shall have the right of first refusal as hereinafter described to lease all or any part of the space (the "Right of First Refusal Space") containing approximately 16,211 square feet of Rentable Area and which is labeled on Exhibit A to this Lease as the "Growth Area" at such time as Landlord engages in negotiations with a prospective tenant, such Right of First Refusal is subject to similar rights contained in existing leases, exercisable at the following times and upon the following conditions:

1. If Landlord enters into a bona-fide letter of intent with a prospective tenant to lease all or any part of the Right of First Refusal Space within the first six (6) months of the initial lease term, Landlord shall notify Tenant of such fact and Tenant shall lease the space at the same terms and conditions as the primary lease except that the tenant improvements allowance shall be prorated to reflect the remaining term of the lease.

2. If Landlord enters into negotiations with a prospective tenant to lease all or any part of the Right of First Refusal Space, Landlord shall notify Tenant of such fact and shall include in such notice the rent, term, and other terms (including finish out) at which Landlord is prepared to offer such Right of First Refusal Space to such prospective tenant. Tenant shall have a period of ten (10) days from the date of delivery of the notice to notify Landlord whether Tenant elects to exercise the right granted hereby to lease the pertinent portion of the Right of First Refusal Space. If Tenant fails to give any notice to Landlord within the required ten (10) day period, Tenant shall be deemed to have waived its right to lease the pertinent portion of the Right of First Refusal Space.

3. If Tenant so waives its right to lease the pertinent portion of the Right of First Refusal Space (either by giving written notice thereof or by failing to give any notice), Landlord shall have the right to lease all or the applicable portion of the Right of First Refusal Space to the prospective tenant at substantially the same terms and conditions as the Landlord notification and upon the execution of such lease between Landlord and the prospective tenant this Right of First Refusal shall thereafter be null, void and of no further force or effect.

4. If Landlord does not enter into a lease with such prospective tenant covering all or the applicable portion of the Right of First Refusal Space, Landlord shall not thereafter engage in other lease negotiations with respect to the Right of First Refusal Space without first complying with the provisions of this Rider No. 201.

5. Upon the exercise by Tenant of its right of first refusal as provided in this Rider No. 201, Landlord and Tenant shall, within ten (10) days after Tenant delivers to Landlord notice of its election, and commence diligently pursuing a lease covering, or at Landlord's option amend this Lease to cover, the Right of First Refusal Space for the rent, for the term, and containing such other terms and conditions as Landlord notified Tenant pursuant to paragraph 1 above.

6. Any assignment or subletting by Tenant pursuant to Paragraph 11 of this Lease shall terminate the right of first refusal of Tenant contained herein.

EX-20 9 govnomcommitteecharter.htm GOVERNANCE & NOMINATIONS COMMITTEE CHARTER

AMERICAN CARESOURCE HOLDINGS, INC.

GOVERNANCE AND NOMINATIONS COMMITTEE CHARTER

A. Purpose

The purpose of the Governance and Nominations Committee is to:

•

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

•

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

•

oversee the evaluation of the Board and management.

B. Structure and Membership

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

2. Independence. Except as otherwise permitted by the applicable rules of NASDAQ, each member of the Governance and Nominations Committee shall be an “independent director” as defined by such rules.

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

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

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

C. Authority and Responsibilities

General.

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

Board and Committee Membership.

1. Selection of Director Nominees. Except where the Company is legally required by contract, bylaw or otherwise to provide third parties with the right to nominate directors, the

Governance and Nominations Committee shall be responsible for recommending to the Board nominees for election as directors at any meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board. In making such recommendations, the Committee shall consider candidates proposed by stockholders. The Committee shall review and evaluate information available to it regarding candidates proposed by stockholders and shall apply the same criteria, and shall follow substantially the same process in considering them, as it does in considering other candidates.

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

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

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

Corporate Governance.

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

Evaluation of the Board; Succession Planning

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

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

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

D. Procedures and Administration

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

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

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

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

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

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

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

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