SEC Company Response from American Caresource Holdings, Inc. (CIK 0001316645) — May 13, 2005
American Caresource Holdings, Inc. (CIK 0001316645)
Date: May 13, 2005 · CIK: 0001316645 · Accession: 0001017813-05-000031
AI Filing Summary & Sentiment
File numbers found in text: 333-122820
Letter
Securities and Exchange Commission Re: American Caresource Holdings, Inc. (the “Company” or the “Registrant”) Registration Statement on Form SB-2 filed February 14, 2005 File No. 333-122820
Dear Mr. Pinkerton:
Filed today is Amendment No. 1 to the above referenced registration statement (the "Registration Statement") marked to show changes from the registration statement filed with the Commission on February 14, 2005. This letter responds to the Commission's letter to the Company, dated March 15, 2005 (the "SEC Letter"), regarding the Registration Statement. Set forth below is the text of the comment 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. Page references in the Company's responses to the SEC comments correspond to the page numbers in the enclosed marked copy of the amended Registration Statement.
Form SB-2
General
1.
We note that you are registering the spin-off of shares held by your parent to your parent's stockholders. We further note that ACS was incorporated in December 2003 in order to facilitate the acquisition of American Caresource Corporation. Since your parent has held the shares of ACS for less than two years, it would appear that the parent is an underwriter in the public distribution of those securities. Please revise the cover page of the prospectus as well as all other relevant locations, to identify your parent as an underwriter. We refer to Staff Legal Bulletin No.4.
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
The Cover Page to the Prospectus and all relevant pages of the Registration Statement have been revised in response to the Staff’s comment above.
2.
We note your use of the term “Company” throughout the prospectus. Since the term is vague and abstract, please revise to use your actual company name or a shortened version of it throughout your document.
The Registration Statement has been revised throughout in response to the Staff’s comment above.
3.
Please supplementally provide us with copies of any graphics, maps, photographs, and related captions or other artwork including logos that you intend to use in the prospectus. Such graphics and pictorial representations should not be included in any preliminary prospectus distributed to prospective investors prior to our review.
The Registrant does not intend to use any graphics or pictorial representations in the Prospectus.
4.
Please supplementally provide us with your analysis of why you qualify as a small business issuer. As part of this analysis please inform us how many common equity shares of Patient Infosystems, Inc. were outstanding as of February 14, 2005, and how many of those shares were held by affiliates.
The Registrant qualifies as a small business issuer because it satisfies all of the requirements of Item 10(a)(1) of Regulation S-B. Specifically, (i) the Registrant has revenues of less than $25,000,000, (ii) is a U.S. issuer, (iii) is not an investment company and is not an asset-backed issuer (as defined in § 229.1101), and (iv) as a majority owned subsidiary, it’s parent immediately prior to the Distribution, Patient Infosystems, Inc., is also a small business issuer. Further, the Registrant has a public float (the aggregate of market value of the issuer’s outstanding voting and non-voting common equity held by non-affiliates) of less than $25,000,000. Further, as of February 14, 2005, Patient Infosystems, Inc., the parent of the Registrant, had 9,743,600 shares of common stock outstanding and of those shares 3,415,581 shares were held by affiliates. Patient Infosystems, Inc., the parent of the Registrant, remains a small business issuer because it has not exceeded the public float limit of Item 10(a) of Regulation S-B for two consecutive years.
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
5.
On page 35, you note that your financial statements for the fiscal year ended December 2003 were audited by McGladrey & Pullen LLP. You also note on page 35 that your financial statements for the fiscal year ended December 2002 were audited by BDO Seidman, LLP. Please add a section discussing any changes and disagreements with your accounts including all applicable disclosures required by Item 304 of Regulation S-B.
The Registration Statement has been revised to include the audited financial statements for the years ended December 31, 2003 and December 31, 2004, respectively, both of which were audited by McGladrey & Pullen, LLP. BDO Siedman, LLP audited the financial statements of American CareSource Corporation, the predecessor corporation of the Registrant, for the year ended December 31, 2002, and the Registrant’s change in accountants did not occur within the two most recent fiscal years.
6.
We note that your financial statements were stale as of February 15, 2005. Please update your financial statements by amending the registration statement. Refer to Item 310 of Regulation S-B.
The Registration Statement has been revised in response to the Staff’s comment above to include the audited financial statements for the years ended December 31, 2003 and December 31, 2004, respectively.
Facing Pages
7.
We note that you have calculated the registration fee based on Rule 457(c). In light of the fact that there is no market for you shares, this reliance appears to be inappropriate. Please revise or advise. Refer to Rule 457(f) of Regulation C and the Division of Corporation Finance Manual of Publicly Available Telephone Interpretations, Section B, paragraph 108.
The Registration Fee has been revised in response to the Staff’s comment above and has been recalculated based on Rule 457(f) of Regulation C.
Prospectus Summary
General
8.
We note that your summary is eight pages long, and contains unnecessary redundancy. Your summary should not merely repeat the text of the prospectus section by section, but should instead provide a brief overview of the key aspects of the offering. You should consider and identify only those aspects of the offering that are the most significant and determine how best to highlight those points. Please revise your summary as necessary.
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
The Registration Statement has been revised at pages 2-5 in response to the Staff’s comment above to include a brief overview of the key aspects of the offering.
Our Company, page 2
9.
Please briefly discuss the type of ancillary benefits you manage and what your services consist of.
The Registration Statement has been revised at page 2 in response to the Staff’s comment above to include a discussion of the ancillary benefits and services managed by the Registrant.
10.
On page 10, you note that you have never earned profits and that after you become independent of Patient Infosystems there can be no assurance that you will be able to obtain additional sources of funds. Please balance your disclosure in the Summary by discussing your history of net losses and the uncertainty regarding your ability to obtain sufficient funds to continue your operations.
The Registration Statement has been revised at page 2 in response to the Staff’s comment above.
Summary of the Distribution, page 3
11.
We note your disclosure here that one share of ACS common stock will be distributed for approximately every two shares of Patient Infosystems common stock outstanding as of the Record Date. Please advise us as to why you have included the word "approximately" above. We note, for example that on the cover page you have disclosed the same ratio without the qualifying language. Please revise or advise.
The qualifier “approximately” is used because the Registrant intends to issue one share of the Registrant’s common stock for any fractional portion of Patient Infosystems common stock. For example, the holder of 19 or 20 shares of Patient Infosystems common stock will receive 10 shares of the Registrant’s common stock during the Distribution. The holder of 21 or 22 shares of Patient Infosystems common stock will receive 11 shares of the Registrant’s common stock during the Distribution. The Cover Page to the Prospectus has been revised to include the qualifier “approximately”.
12.
We refer to your disclosure that you “anticipate” your shares will be traded on the OTC Bulletin Board and that you “expect” a market maker will apply to have your securities
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
quoted. If discussions have occurred regarding either of these actions, please include appropriate disclosure. If not, please revise to merely state that you will seek to have your securities traded on the OTC Bulletin Board.
Discussions have yet to occur in connection with the trading of the Registrant’s shares on the OTC Bulletin Board or the application by a market maker to have the Registrant’s shares quoted. The Registration Statement has been revised at page 4 in response to the Staff’s comment above.
Summary Financial Information, page 7
13.
You state that you included pro forma results for American Caresource Corporation. Please revise to disclose what the pro forma results represent, how they import the actual results and why they are important to a reader of the prospectus.
American Caresource Corporation was the predecessor corporation to the Registrant and its operating results are presented to the reader for comparative purposes. The Registration Statement has been revised at page 14 in response to the Staff’s comment above.
14.
Please revise to state whether the summary financial results are based on audited or unaudited numbers.
The summary financial results are based on the audited financial statements of the Company. The Registration Statement has been revised at page 6 in response to the Staff’s comment above.
Risk Factors, page 10
General
15.
Please revise your risk factor subheadings to ensure that your subheadings clearly identify the material risk disclosed in the narrative. Most of your risk factors merely state a fact. For example, the subheading for the first risk factor states that ACS has a history of operating losses. Please revise so that your subheadings highlight specific risk that results from that stated fact.
The risk factor subheadings at pages 7 through 12 have been revised in response to the Staff’s comment above to clearly identify the material risks disclosed in the narrative and highlight the specific risks that results from facts stated in the narrative.
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
16.
Please revise your disclosure to add a risk factor that you may be subject to the penny stock rules. This discussion should include what constitutes a “penny stock” under Rule 3a51-1, such as the criteria regarding trading on an exchange or being quoted on NASDAQ and the asset and revenue thresholds. Also, discuss the applicability of the penny stock rules to transactions in your securities.
The Registration Statement has been revised at page 12 in response to the Staff’s comment above to include a risk factor advising that the Registrant may be subject to the penny stock rules.
17.
Please discuss the risk presented by the fact that your largest stockholder, John Pappajohn, will own over 37 percent of your issued and outstanding common stock following the spin-off, including the fact that he also serves as a director of ACS and Patient Infosystems.
The Registration Statement has been revised at page 10 to include a risk factor in response to the Staff’s comment above.
18.
On page 6, you note that after the distribution of the ACS shares, arrangements between you and Patient Infosystems will not be on an “arms-length” basis because of the relationships between your board of directors and executive officers and the board of directors and executive officers of Patient Infosystems. We further note, from disclosure found on page 33, that you expect a continuing relationship with Patient Infosystems following the spin-off. Please add a risk factor discussing the fact that these arrangements will not be conducted at arms-length.
The Registration Statement has been revised at pages 10-11 to include a risk factor in response to the Staff’s comment above.
19.
On page 33, you note that “Patient Infosystems expects it will likely provide [you] services for a limited transition period in such areas as information management and technology, personnel and indirect overhead expenses, employee benefits administration, financial accounting and reporting and other areas where [you] may need transitional assistance and support.” Please supplementally advise us whether there is a binding agreement in place for Patient Infosystems to provide you with services after the distribution. If there is not a binding agreement in place, please note that fact in a risk factor. The risk factor should also discuss the fact that the lack of an agreement could cause ACS to pay higher fees based on the prior relationship between the parties.
The Registrant does not a have a transition services agreement with Patient Infosystems. The Registration Statement has been revised to include a risk factor discussing this fact at page 11.
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
20.
Please add a separate risk factor that discusses the fact that ACS historically has not entered into long-term agreements with its customers. In connection with this, please quantify the portion of agreements that are long-term and quantify the revenues associated with agreements that are set to expire within the next twelve months.
The Registration Statement has been revised at page 9 to include a risk factor in response to the Staff’s comment above.
ACS has a history of operating losses, page 10
21.
Please clarify that ACS has a history of net losses, not just operating losses, quantifying the losses. In addition, please disclose ACS's accumulated deficit.
The Registration Statement has been revised at page 7 in response to the Staff’s comment above.
ACS faces working capital shortfalls and has an urgent need for working capital, page 10
22.
Please indicate the cash available to you as of the most recent practicable date as well as your anticipated financing needs during the next twelve months.
The Registration Statement has been revised at page 7 in response to the Staff’s comment above.
ACS has a limited number of customers, a few of which account for a substantial portion of its business, page 10
23.
You state that your “five largest customers (including [your] non-continuing customers) account for approximately 92.7% of [your] revenues during the nine months ended September 30, 2004.” Please revise to define the term “non-continuing customers,” and state how much of your business the non-continuing customers accounted for.
The Registration Statement has been revised at p
Show Raw Text
CORRESP
1
filename1.htm
Jeffrey A. Baumel
973.639.5904
Fax 973.297.3814
jbaumel@mccarter.com
May 13, 2005
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attn: Owen Pinkerton
Re:
American Caresource Holdings, Inc. (the “Company” or the “Registrant”)
Registration Statement on Form SB-2 filed February 14, 2005
File No. 333-122820
Dear Mr. Pinkerton:
Filed today is Amendment No. 1 to the above referenced registration statement (the "Registration Statement") marked to show changes from the registration statement filed with the Commission on February 14, 2005. This letter responds to the Commission's letter to the Company, dated March 15, 2005 (the "SEC Letter"), regarding the Registration Statement. Set forth below is the text of the comment 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. Page references in the Company's responses to the SEC comments correspond to the page numbers in the enclosed marked copy of the amended Registration Statement.
Form SB-2
General
1.
We note that you are registering the spin-off of shares held by your parent to your parent's stockholders. We further note that ACS was incorporated in December 2003 in order to facilitate the acquisition of American Caresource Corporation. Since your parent has held the shares of ACS for less than two years, it would appear that the parent is an underwriter in the public distribution of those securities. Please revise the cover page of the prospectus as well as all other relevant locations, to identify your parent as an underwriter. We refer to Staff Legal Bulletin No.4.
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
The Cover Page to the Prospectus and all relevant pages of the Registration Statement have been revised in response to the Staff’s comment above.
2.
We note your use of the term “Company” throughout the prospectus. Since the term is vague and abstract, please revise to use your actual company name or a shortened version of it throughout your document.
The Registration Statement has been revised throughout in response to the Staff’s comment above.
3.
Please supplementally provide us with copies of any graphics, maps, photographs, and related captions or other artwork including logos that you intend to use in the prospectus. Such graphics and pictorial representations should not be included in any preliminary prospectus distributed to prospective investors prior to our review.
The Registrant does not intend to use any graphics or pictorial representations in the Prospectus.
4.
Please supplementally provide us with your analysis of why you qualify as a small business issuer. As part of this analysis please inform us how many common equity shares of Patient Infosystems, Inc. were outstanding as of February 14, 2005, and how many of those shares were held by affiliates.
The Registrant qualifies as a small business issuer because it satisfies all of the requirements of Item 10(a)(1) of Regulation S-B. Specifically, (i) the Registrant has revenues of less than $25,000,000, (ii) is a U.S. issuer, (iii) is not an investment company and is not an asset-backed issuer (as defined in § 229.1101), and (iv) as a majority owned subsidiary, it’s parent immediately prior to the Distribution, Patient Infosystems, Inc., is also a small business issuer. Further, the Registrant has a public float (the aggregate of market value of the issuer’s outstanding voting and non-voting common equity held by non-affiliates) of less than $25,000,000. Further, as of February 14, 2005, Patient Infosystems, Inc., the parent of the Registrant, had 9,743,600 shares of common stock outstanding and of those shares 3,415,581 shares were held by affiliates. Patient
Infosystems, Inc., the parent of the Registrant, remains a small business issuer because it has not exceeded the public float limit of Item 10(a) of Regulation S-B for two consecutive years.
2
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
5.
On page 35, you note that your financial statements for the fiscal year ended December 2003 were audited by McGladrey & Pullen LLP. You also note on page 35 that your financial statements for the fiscal year ended December 2002 were audited by BDO Seidman, LLP. Please add a section discussing any changes and disagreements with your accounts including all applicable disclosures required by Item 304 of Regulation S-B.
The Registration Statement has been revised to include the audited financial statements for the years ended December 31, 2003 and December 31, 2004, respectively, both of which were audited by McGladrey & Pullen, LLP. BDO Siedman, LLP audited the financial statements of American CareSource Corporation, the predecessor corporation of the Registrant, for the year ended December 31, 2002, and the Registrant’s change in accountants did not occur within the two most recent fiscal years.
6.
We note that your financial statements were stale as of February 15, 2005. Please update your financial statements by amending the registration statement. Refer to Item 310 of Regulation S-B.
The Registration Statement has been revised in response to the Staff’s comment above to include the audited financial statements for the years ended December 31, 2003 and December 31, 2004, respectively.
Facing Pages
7.
We note that you have calculated the registration fee based on Rule 457(c). In light of the fact that there is no market for you shares, this reliance appears to be inappropriate. Please revise or advise. Refer to Rule 457(f) of Regulation C and the Division of Corporation Finance Manual of Publicly Available Telephone Interpretations, Section B, paragraph 108.
The Registration Fee has been revised in response to the Staff’s comment above and has been recalculated based on Rule 457(f) of Regulation C.
Prospectus Summary
General
8.
We note that your summary is eight pages long, and contains unnecessary redundancy. Your summary should not merely repeat the text of the prospectus section by section, but should instead provide a brief overview of the key aspects of the offering. You should consider and identify only those aspects of the offering that are the most significant and determine how best to highlight those points. Please revise your summary as necessary.
3
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
The Registration Statement has been revised at pages 2-5 in response to the Staff’s comment above to include a brief overview of the key aspects of the offering.
Our Company, page 2
9.
Please briefly discuss the type of ancillary benefits you manage and what your services consist of.
The Registration Statement has been revised at page 2 in response to the Staff’s comment above to include a discussion of the ancillary benefits and services managed by the Registrant.
10.
On page 10, you note that you have never earned profits and that after you become independent of Patient Infosystems there can be no assurance that you will be able to obtain additional sources of funds. Please balance your disclosure in the Summary by discussing your history of net losses and the uncertainty regarding your ability to obtain sufficient funds to continue your operations.
The Registration Statement has been revised at page 2 in response to the Staff’s comment above.
Summary of the Distribution, page 3
11.
We note your disclosure here that one share of ACS common stock will be distributed for approximately every two shares of Patient Infosystems common stock outstanding as of the Record Date. Please advise us as to why you have included the word "approximately" above. We note, for example that on the cover page you have disclosed the same ratio without the qualifying language. Please revise or advise.
The qualifier “approximately” is used because the Registrant intends to issue one share of the Registrant’s common stock for any fractional portion of Patient Infosystems common stock. For example, the holder of 19 or 20 shares of Patient Infosystems common stock will receive 10 shares of the Registrant’s common stock during the Distribution. The holder of 21 or 22 shares of Patient Infosystems common stock will receive 11 shares of the Registrant’s common stock during the Distribution. The Cover Page to the Prospectus has been revised to include the qualifier “approximately”.
12.
We refer to your disclosure that you “anticipate” your shares will be traded on the OTC Bulletin Board and that you “expect” a market maker will apply to have your securities
4
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
quoted. If discussions have occurred regarding either of these actions, please include appropriate disclosure. If not, please revise to merely state that you will seek to have your securities traded on the OTC Bulletin Board.
Discussions have yet to occur in connection with the trading of the Registrant’s shares on the OTC Bulletin Board or the application by a market maker to have the Registrant’s shares quoted. The Registration Statement has been revised at page 4 in response to the Staff’s comment above.
Summary Financial Information, page 7
13.
You state that you included pro forma results for American Caresource Corporation. Please revise to disclose what the pro forma results represent, how they import the actual results and why they are important to a reader of the prospectus.
American Caresource Corporation was the predecessor corporation to the Registrant and its operating results are presented to the reader for comparative purposes. The Registration Statement has been revised at page 14 in response to the Staff’s comment above.
14.
Please revise to state whether the summary financial results are based on audited or unaudited numbers.
The summary financial results are based on the audited financial statements of the Company. The Registration Statement has been revised at page 6 in response to the Staff’s comment above.
Risk Factors, page 10
General
15.
Please revise your risk factor subheadings to ensure that your subheadings clearly identify the material risk disclosed in the narrative. Most of your risk factors merely state a fact. For example, the subheading for the first risk factor states that ACS has a history of operating losses. Please revise so that your subheadings highlight specific risk that results from that stated fact.
The risk factor subheadings at pages 7 through 12 have been revised in response to the Staff’s comment above to clearly identify the material risks disclosed in the narrative and highlight the specific risks that results from facts stated in the narrative.
5
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
16.
Please revise your disclosure to add a risk factor that you may be subject to the penny stock rules. This discussion should include what constitutes a “penny stock” under Rule 3a51-1, such as the criteria regarding trading on an exchange or being quoted on NASDAQ and the asset and revenue thresholds. Also, discuss the applicability of the penny stock rules to transactions in your securities.
The Registration Statement has been revised at page 12 in response to the Staff’s comment above to include a risk factor advising that the Registrant may be subject to the penny stock rules.
17.
Please discuss the risk presented by the fact that your largest stockholder, John Pappajohn, will own over 37 percent of your issued and outstanding common stock following the spin-off, including the fact that he also serves as a director of ACS and Patient Infosystems.
The Registration Statement has been revised at page 10 to include a risk factor in response to the Staff’s comment above.
18.
On page 6, you note that after the distribution of the ACS shares, arrangements between you and Patient Infosystems will not be on an “arms-length” basis because of the relationships between your board of directors and executive officers and the board of directors and executive officers of Patient Infosystems. We further note, from disclosure found on page 33, that you expect a continuing relationship with Patient Infosystems following the spin-off. Please add a risk factor discussing the fact that these arrangements will not be conducted at arms-length.
The Registration Statement has been revised at pages 10-11 to include a risk factor in response to the Staff’s comment above.
19.
On page 33, you note that “Patient Infosystems expects it will likely provide [you] services for a limited transition period in such areas as information management and technology, personnel and indirect overhead expenses, employee benefits administration, financial accounting and reporting and other areas where [you] may need transitional assistance and support.” Please supplementally advise us whether there is a binding agreement in place for Patient Infosystems to provide you with services after the distribution. If there is not a binding agreement in place, please note that fact in a risk factor. The risk factor should also discuss the fact that the lack of an agreement could cause ACS to pay higher fees based on the prior relationship between the parties.
The Registrant does not a have a transition services agreement with Patient Infosystems. The Registration Statement has been revised to include a risk factor discussing this fact at page 11.
6
NWK3: 875670.03
Securities and Exchange Commission
May 13, 2005
20.
Please add a separate risk factor that discusses the fact that ACS historically has not entered into long-term agreements with its customers. In connection with this, please quantify the portion of agreements that are long-term and quantify the revenues associated with agreements that are set to expire within the next twelve months.
The Registration Statement has been revised at page 9 to include a risk factor in response to the Staff’s comment above.
ACS has a history of operating losses, page 10
21.
Please clarify that ACS has a history of net losses, not just operating losses, quantifying the losses. In addition, please disclose ACS's accumulated deficit.
The Registration Statement has been revised at page 7 in response to the Staff’s comment above.
ACS faces working capital shortfalls and has an urgent need for working capital, page 10
22.
Please indicate the cash available to you as of the most recent practicable date as well as your anticipated financing needs during the next twelve months.
The Registration Statement has been revised at page 7 in response to the Staff’s comment above.
ACS has a limited number of customers, a few of which account for a substantial portion of its business, page 10
23.
You state that your “five largest customers (including [your] non-continuing customers) account for approximately 92.7% of [your] revenues during the nine months ended September 30, 2004.” Please revise to define the term “non-continuing customers,” and state how much of your business the non-continuing customers accounted for.
The Registration Statement has been revised at p