March 20, 2008
Mr. Robert Telewicz
Senior Staff Accountant
Division of Corporation Finance
US Securities Exchange Commission
Washington, D.C. 20549
By Facsimile: (202) 772-9209 and EDGAR
| Re: | The Amacore Group, Inc. (the “Company”) Form 10-KSB for Fiscal Year Ended December 31, 2006 Filed April 17, 2007 Form 10-QSB for Quarterly Period Ended June 30, 2007 Filed August 20, 2007 File No. 000-27889 |
Dear Mr. Telewicz:
I refer to your request for further information as detailed in your letter to me dated January 3, 2008 and detail below the information requested in your letter. To facilitate the staff’s review, we have included the captions and comments from the letter with the Company’s response immediately following.
Form 10-KSB for Fiscal Year Ended December 31, 2006:
Financial Statements
Consolidated Statements of Stockholders’ Equity (Deficit), page 19
| 1. | We note your response to our prior comment one. As disclosed in Note 9 on page 27, it appears that the accretion of dividends for 2005 was $221,004, and this amount appears to be separately disclosed on your Consolidated Statements of Stockholders’ Equity (Deficit). We remain unclear how the amount labeled as “other Derivative Activities” in 2005 relates to the accretion of dividends on preferred stock . Please provide us with a detailed description of your accounting for these preferred stock instruments. To the extent the amount disclosed as “Other Derivative Activities” does not represent the accretion of preferred dividends, we reissue our previous comment and request that you provide us with a detailed description of the nature of this line item. |
1211 North Westshore Boulevard, Suite 512 • Tampa , Florida 33607
Phone: 813.289.5552 • Facsimile: 813.289.5553
www.amacoregroup.com
Response: The accreted dividends for the preferred stock in the amount of $221,004 were accounted for by a debit to dividend expense and a credit to additional paid in capital. The $529,463 amount is comprised of conversions of convertible debt that occurred during the year where the convertible debt was a derivative liability at the time of the conversion. At the time of the conversions, the amount of derivative liability that ceased to be a derivative liability due to the conversion taking place was reclassified from derivative liabilities to additional paid in capital. There were a number of these transactions and due to the large number of them occurring, they were grouped under this classification. We are attaching a copy of the dividend accretion computations for reference.
Notes to Consolidated Financial Statements
Note 9 Preferred Stock, page 26
| 2. | We have considered your response to our prior comment three. We do not agree with your statement that accounting for the beneficial conversion feature on your series D and E instruments would have no effect on your financial statements as it appears that there would be an impact on the Company’s earnings per share. Please provide us with your materiality analysis of the beneficial conversion features. In your response tell us the total beneficial conversion feature related to your series D and E preferred stocks and a detailed calculation of the accretion that was recorded in 2007. |
Response: We have attached hereto the detailed calculation of the accretion of the discount for the series D and E preferred stock from inception through 2007. The calculation utilized the effective interest rate method and as a result the calculated amounts for 2006 for each of the series D and E preferred stock are $12,774 and $6,239 respectively for a total of $19,013. That amount was deemed to be immaterial since the total weighted average shares outstanding as of December 31, 2006 was 68,306,991. The $19,013 would reduce earnings per share by $0.000279. The respective reported earnings per share was negative $0.03 so that the $19,013 would have affected earnings per share by 0.009% or 1/10 of one percent and was deemed immaterial. The accretion booked in 2007 includes the amounts noted above for 2006. For Series D and E the accretion for 2007 was $32,553 and $15,898 respectively for a total of $48,452.
| 3. | We note your response to our prior comment four. Please reconcile for us the reclassified amount of $793,831 to the retirement of preferred stock line item on your Consolidated Statements of Stockholders’ Equity (Deficit). |
Response: The line item described as “Retirement of Preferred Stock” on the Consolidated Statements of Stockholders’ Equity (Deficit) shows an amount of $1,679,785 representing a credit to Paid In Capital (PIC). This amount is comprised of the following items:
| Conversion of convertible debt in the period March 31, 2006 | 359,415 | |
| Reclass of Preferred C redeemable stock | 793,831 | |
| Proceeds from issuance of Series E convertible Preferred E | 526,539 | |
| Total | 1,679,785 |
Further, the line “Conversion of Debt to Common” on the Consolidated Statements of Stockholders’ Equity (Deficit) shows an amount for the conversion of the convertible debt of 31,697,010 shares and $439,678 added to PIC. In actuality, the $439,678 should have been $796,093 and the difference of $359,415 was inadvertently included in the line item listed as “Retirement of Preferred Stock”.
The proceeds from the issuance of the Series E convertible Preferred Stock is included since the financing took place at the same time. There are no shares listed for the E preferred stock since they were only 84 and were inadvertently not included as a separate column. However, they are properly disclosed on the balance sheet in the equity section of the financial statements.
Notes 11. Warrants, page 28
| 4. | We noted your response to our prior comment five. Your response did not address our comment in its entirety; thus, the comment will be partially reissued. Your response addressed your 2006 warrants; please provide the requested information for your 2005 warrants. Also, please tell us where you have recorded the warrants on your balance sheet. |
Response: The 2005 warrants were fully vested and were recorded as an expense with a corresponding credit to Additional Paid in Capital.
The 2005 warrants were valued as of each date of issue using the Black-Scholes Option Model with a volatility of 249%, a risk free interest rate ranging 3.82%, a life of five years and a zero dividend rate. Since the warrants were fully vested at each date of issue, the full fair market value of the warrants was recorded as an expense at the date of issue.
Form 10-QSB for the quarterly period ended June 30, 2007:
Exhibits 31.1 and 31.2
| 6. | We reviewed your response to our prior comment eight and your related Form 10-QSB/A. We note your certifications still do not comply with the content of the certifications required under Exchange Act Rules 13a-14(a) and 15d-14(a). Please amend your filing to revise your certifications to comply exactly with the content of the certifications required under Exchange Act Rules 13a-14(a) and 15d-14(a). Also, please amend your Form 10-QSB for the quarterly period ended September 30, 2007 to revise your certifications to comply exactly with the content of the certifications required under Exchange Act Rules 13a-14(a) and 15d-14(a). |
Response: The Company will cause its Quarterly Report on Form 10-QSB/A for the period ended June 30, 2007 to be amended so as to replace Exhibits 31.1 and 31.2 with certifications that comply with Exchange Act Rules 13a-14(a) and 15d-14(a). In addition, the Company will cause its Quarterly Report on Form 10-QSB for the period ended September 30, 2007 to be amended so as to replace Exhibits 31.1 and 31.2 with certifications that comply with Exchange Act Rules 13a-14(a) and 15d-14(a).
In addition to the above, on behalf of the Company, I confirm that:
| · | the Company is responsible for the adequacy and accuracy of the disclosure in the filings; |
| · | staff comments or changes to the disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filings; |
| · | The Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
If you should have any additional questions or comments, please do not hesitate to call me at 813-289-5552.
Sincerely,
/s/ Joe Crisafi
Chief Financial Officer
Attachments (2)
Amacore
Vicis Accretion Recalculation
| Series D | Series E | |||||||||||||||||||||||||||
| Face Value at Maturity | 860,000 | 420,000 | ||||||||||||||||||||||||||
| Initial Carrying Value | - | - | ||||||||||||||||||||||||||
| Day-One | 8,600 | 4,200 | ||||||||||||||||||||||||||
| Discount subject to Amortization | 851,400 | 415,800 | ||||||||||||||||||||||||||
| Periods (3 - Months, each) | 20.00 | 20.00 | ||||||||||||||||||||||||||
| Effective Rate (Quarterly) | 26.346850% | 26.346850% | ||||||||||||||||||||||||||
| PRINCIPAL | INTEREST | PRINCIPAL | INTEREST | |||||||||||||||||||||||||
| Initial Balance (7/31/2006) | 8,600 | 8,600 | 4,200 | 4,200 | ||||||||||||||||||||||||
| September 30, 2006 | 10,111 | 1,511 | Series D Interest 2006 | 4,938 | 738 | Series E Interest 2006 | Total Interest 2006 | |||||||||||||||||||||
| December 31, 2006 | 12,774 | 2,664 | 12,774 | 6,239 | 1,301 | 6,239 | 19,013 | |||||||||||||||||||||
| March 31, 2007 | 16,140 | 3,366 | 7,882 | 1,644 | ||||||||||||||||||||||||
| June 30, 2007 | 20,392 | 4,252 | 9,959 | 2,077 | ||||||||||||||||||||||||
| September 30, 2007 | 25,765 | 5,373 | Series D Interest 2007 | 12,583 | 2,624 | Series E Interest 2007 | Total Interest 2007 | |||||||||||||||||||||
| December 31, 2007 | 32,553 | 6,788 | 19,779 | 15,898 | 3,315 | 9,660 | 29,439 | |||||||||||||||||||||
| March 31, 2008 | 41,130 | 8,577 | 20,087 | 4,189 | ||||||||||||||||||||||||
| June 30, 2008 | 51,967 | 10,837 | 25,379 | 5,292 | ||||||||||||||||||||||||
| September 30, 2008 | 65,658 | 13,692 | Series D Interest 2008 | 32,066 | 6,687 | Series E Interest 2008 | Total Interest 2008 | |||||||||||||||||||||
| December 31, 2008 | 82,957 | 17,299 | 50,404 | 40,514 | 8,448 | 24,616 | 75,020 | |||||||||||||||||||||
| March 31, 2009 | 104,814 | 21,857 | 51,188 | 10,674 | ||||||||||||||||||||||||
| June 30, 2009 | 132,429 | 27,615 | 64,675 | 13,486 | ||||||||||||||||||||||||
| September 30, 2009 | 167,320 | 34,891 | Series D Interest 2009 | 81,714 | 17,040 | Series E Interest 2009 | Total Interest 2009 | |||||||||||||||||||||
| December 31, 2009 | 211,404 | 44,084 | 128,446 | 103,244 | 21,529 | 62,730 | 191,176 | |||||||||||||||||||||
| March 31, 2010 | 267,102 | 55,698 | 130,445 | 27,201 | ||||||||||||||||||||||||
| June 30, 2010 | 337,475 | 70,373 | 164,813 | 34,368 | ||||||||||||||||||||||||
| September 30, 2010 | 426,389 | 88,914 | Series D Interest 2007 | 208,236 | 43,423 | Series E Interest 2007 | Total Interest 2007 | |||||||||||||||||||||
| December 31, 2010 | 538,729 | 112,340 | 327,325 | 263,100 | 54,864 | 159,856 | 487,181 | |||||||||||||||||||||
| March 31, 2011 | 680,667 | 141,938 | Series D Interest 2008 | 332,419 | 69,319 | Series E Interest 2008 | Total Interest 2008 | |||||||||||||||||||||
| June 30, 2011 | 860,001 | 179,334 | 321,272 | 420,000 | 87,582 | 156,900 | 478,173 | |||||||||||||||||||||
Amortization is calculated using the effective interest method. Since the instrument had no day-one carrying value, the Company applied the 1% convention that is necessary to commence amortization. Accordingly, $17,500 was charged to interest expense on day-one.
The Amacore Group
Preferred Stock Accretion
Date: August 6, 2004 Redemption Date: July 26, 2006
Effective Rate: 261%
| Initial Carrying Value | - | |||
| Redemption Value | 860,000 | |||
| Preferred Stock Dividen (6.0%) | 103,200 | |||
| Subject to Accretion | 963,200 |
| Carrying | Quarterly | Cumulative | (by year) Cumulative | |||||||||||||||||
| Monthly Accretion: | Monthly | Value | Accretion | Accretion | Accretion | |||||||||||||||
| August 2004 | 10,472 | 10,472 | ||||||||||||||||||
| September 2004 | 2,279 | 12,750 | 12,750 | 12,750 | ||||||||||||||||
| October 2004 | 2,775 | 15,525 | ||||||||||||||||||
| November 2004 | 3,379 | 18,904 | ||||||||||||||||||
| December 2004 | 4,114 | 23,017 | 10,267 | 23,017 | 23,017 | 2004 total accretion | ||||||||||||||
| January 2005 | 5,009 | 28,027 | ||||||||||||||||||
| February 2005 | 6,099 | 34,126 | ||||||||||||||||||
| March 2005 | 7,426 | 41,552 | 18,535 | 41,552 | ||||||||||||||||
| April 2005 | 9,043 | 50,595 | ||||||||||||||||||
| May 2005 | 11,010 | 61,605 | ||||||||||||||||||
| June 2005 | 13,406 | 75,012 | 33,459 | 75,012 | ||||||||||||||||
| July 2005 | 16,297 | 91,309 | ||||||||||||||||||
| August 2005 | 19,838 | 111,146 | ||||||||||||||||||
| September 2005 | 24,148 | 135,294 | 60,282 | 135,294 | ||||||||||||||||
| October 2005 | 29,394 | 164,688 | ||||||||||||||||||
| November 2005 | 35,780 | 200,468 | ||||||||||||||||||
| December 2005 | 43,554 | 244,021 | 108,728 | 244,021 | 221,004 | 2005 total accretion | ||||||||||||||
| January 2006 | 53,016 | 297,038 | ||||||||||||||||||
| February 2006 | 64,534 | 361,572 | ||||||||||||||||||
| March 2006 | 78,555 | 440,127 | 196,106 | 440,127 | ||||||||||||||||
| April 2006 | 95,622 | 535,749 | ||||||||||||||||||
| May 2006 | 116,397 | 652,146 | ||||||||||||||||||
| June 2006 | 141,685 | 793,831 | 353,704 | 793,831 | ||||||||||||||||
| July 2006 | 169,369 | 963,200 | 169,369 | 963,200 | 719,178 | 2006 total accretion | ||||||||||||||