Jeffrey A. Baumel
973.639.5904
Fax 973.297.3814
jbaumel@mccarter.com
December 13, 2005
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attn: David Roberts
Re: American Caresource Holdings, Inc. (the "Company" or the "Registrant")
File No. 333-122820
Dear Mr. Roberts:
On behalf of the Registrant, set forth below is the Registrant's response
to the Staff's comment letter dated December 12, 2005 (the "SEC Letter"). Set
forth below is the text of the comments contained in the SEC Letter and the
Company's response thereto. The heading and numbered paragraphs below correspond
to the headings and paragraph numbers in the SEC Letter.
General
1. On the cover page, you state that 10,091,899 shares are being distributed
pursuant to this prospectus. However, on page 30 you state that 10,981,899
shares are being distributed. Please advise us as to the reason for the
discrepancy or revise as necessary. In addition, please correct the
typographical error on page 28 that indicates that 10,91,899 shares are
being distributed.
The typographical errors appearing on page 28 and 30 (the number in each
should read 10,091,899) will be corrected in the final prospectus to be
filed in accordance with Rule 424(b)(3) under the Securities Act of 1933.
Securities and Exchange Commission
December 13, 2005
Page 2
Financial Statements
Notes to Unaudited Condensed Financial Statements for the Period Ended September
30, 2005
Issuance of Warrants, page F-21
2. We reviewed your response to comment 5. As follow-up to our conference
call with the Company on December 12, 2005, please tell us your
consideration of paragraphs 20-21 of EITF 00-19 as it relates to the
anti-dilution provisions that could potentially adjust the exercise price
of the warrants issued. In this regard, you should clarify that the
triggering events noted in the warrant agreements are within the Company's
control.
Paragraph 20 of EITF 00-19 notes that ". . . a company must evaluate
whether a sufficient number of authorized and unissued shares exists at
the classification assessment date to control settlement by delivering
shares."
The following table illustrates, without regard to the anti-dilution
provisions discussed below, that there are sufficient authorized and
unissued and uncommitted shares to satisfy warrant settlements under all
currently outstanding warrants.
Total common shares authorized 40,000,000
Less common shares outstanding 12,371,309
Less shares underlying options granted 1,612,206
----------
Total shares available to satisfy warrant settlements 26,016,485
==========
Total warrants outstanding 1,737,550
==========
The warrant agreement referred to by the Staff contains a series of, what
are intended to be, standard anti-dilution provisions which could affect
the exercise price and number of warrant shares to be issued upon exercise
thereof. The provisions provide for the adjustment to the exercise price
and number of shares issuable upon exercise of the warrants upon the
occurrence of certain events, including stock splits, rights offerings,
dividends of non cash assets or indebtedness, and the sale of securities
by the Company at a price below the exercise price of the warrants. There
are absolutely no anti-dilution provisions contained in the warrant which
could be triggered by events or actions that are not under the control of
the Company.
For example, none of a stock split, rights offering nor dividend could be
declared without the affirmative approval of the Board of Directors of the
Corporation. Also, the price protection anti-dilution provisions only come
into effect upon the offer and sale of shares by the Company, which also
cannot occur without the approval of the Board of Directors of the
Company. The price protection anti-dilution provisions do not apply to and
are not triggered by mere changes in the market price of the Company's
shares.
Securities and Exchange Commission
December 13, 2005
Page 3
All of the triggering events are under the Company's control.
Paragraph 21 of EITF 00-19 states that "If the number of shares that could
be required to be delivered to net-share settle the contract is
indeterminate, a company will be unable to conclude that it has sufficient
available authorized and unissued shares and, therefore net-share
settlement is not within the control of the company."
The number of shares to be issued under the warrant agreements is set
forth clearly in each warrant agreement, and may only be adjusted upon the
occurrence of the events set forth in the anti-dilution provisions
discussed above. Since the anti-dilution provisions can only be triggered
by a Company action, the Company will know the effect of the anti-dilution
provisions prior to undertaking the action and may increase authorized
capital at the same time that any such action is taken. In the unlikely
event that triggering event results in there being insufficient unissued
and uncommitted shares, the classification of the warrants would be
reclassified at that time in accordance with paragraph 10 of EITF00-19.
Finally, the Company represents that there is currently no agreement or
arrangement in place or other action anticipated to be taken that would
result in any adjustment to the warrants under the anti-dilution
provisions described above.
We appreciate your prompt response to our filing. If you have any
questions, or if we may be of any assistance, please contact the undersigned at
(973) 622-4444.
Very truly yours,
/s/ Jeffrey A. Baumel
Jeffrey A. Baumel
JAB:an