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CORRESP
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filename1.htm

    Unassociated Document

    Via
Edgar

    January
7, 2011

    Jeffrey
Riedler, Assistant Director

    Securities
and Exchange Commission

    100 F
Street, N.E.

    Washington
D.C. 20549

            Re:

              Bacterin
      International Holdings, Inc.

              Registration
      Statement on Form S-1/A

              Filed
      December 7, 2010

              File
      No. 333-169620

    Dear Mr.
Riedler:

    This letter is in response to your
comment letter dated December 20, 2010 to our Registration Statement on Form
S-1/A filed December 7, 2010 (“Registration Statement”).  For your
convenience, your questions and comments are restated below in italics, followed
by our response.  The numbering corresponds with the comments in your
letter.

    We have concurrently filed via Edgar
Amendment No. 2 to our Registration Statement, which includes revisions to our
Registration Statement based on your comment letter, as well as other updated
information.

    Bacterin
International Holdings. Inc.. page 1

    1.           We note your response to our
prior comment 3. However, the word "leader" still appears in the same context on
page F-21 of your notes to the financial statements.
Please revise your disclosure there to delete the word.

    Response:                                We have deleted the word
leader from page F-21 in the notes to our
financial statements.

    2.           We note your response to our
prior comment 4. The statement in the first bullet still appears
on page F-21 and the statements in the second and third bullet still appear on
page 26. Please delete those statements and confirm that you have deleted these
statements elsewhere as applicable.

    Response:                                We have deleted these
statements in
response to your comment.

    Recent
Developments, page 1

    3.           We note your response to
prior comment 5. We also note that the private placements through which the selling
stockholders acquired the shares being registered are described
on page 2 of the filing; however, it
still does not appear that the share amounts mentioned add up to the amount being
registered through this registration statement. Please revise your disclosure to
clarify when, and in what transactions, the entirety of the 11,250,597 shares (including
4,126,630 shares issuable upon the exercise of warrants) were placed with the
selling stockholders.

    Response:                                We have revised our
disclosure to clarify when, and in what transactions, the entirety of the
11,296,112
shares (including 4,135,733 shares issuable upon the
exercise of warrants) were placed with the selling stockholders.  In addition, we
are providing the following table for your convenience:

                                            Shares

                                            Warrants

                                            Total

                                              Bridge
      note warrants

                                            -

                                            1,482,256

                                            1,482,256

                                            Private
      Placement 6/30/2010

                                              Cash
      from Investors

                                            2,516,250

                                            629,063

                                            3,145,313

                                              Note
      Conversions

                                            2,418,283

                                            604,583

                                            3,022,866

                                              Second
      closing – 7/30/2010

                                            1,102,500

                                            275,625

                                            1,378,125

                                              Post
      private placement note conversions

                                            316,823

                                            79,206

                                            396,029

                                              Placement
      agent - bridge

                                            -

                                            328,125

                                            328,125

                                              Placement
      agent – private placement

                                            106,217

                                            361,875

                                            468,092

                                              Former
      executive settlement agreement

                                            30,000

                                            -

                                            30,000

                                              Warrant
      exercises/replacement warrants

                                            489,710

                                            -

                                            489,710

                                              WTI
      Financing

                                            -

                                            375,000

                                            375,000

                                              Predecessor
      company shares

                                            180,596

                                              -

                                            180,596

                                              Total

                                            7,160,379

                                            4,135,733

                                            11,296,112

    Risk
Factors

    Future
revenue will depend
on our ability to develop new sales channels.... page 6

    4.           We note your response to
prior comment 10 where you included the $8 million you incurred for sales and
marketing expense in 2010. However, we also note that you will
continue to expand your
sales force in
the future. Please expand your disclosure in this risk factor to quantify, to
the extent practicable, the amount of funds you will need to further expand your direct
sales force. In addition, please quantify your funding requirements and
sources of funding in greater
detail in the section entitled "Cash Requirements” in your Management's
Discussion and Analysis.

    Response:                                We have expanded our
disclosure to quantify, to the extent practicable, the amount of funds we will
need to further expand our direct sales
force, and we
have also expanded our disclosure regarding our funding requirements in the
section entitled “Cash
Requirements” in
our Management’s Discussion and
Analysis.

    Results
of Operations

    Comparison
of Nine Months Ended September 30,
2010 and September 30, 2009

    Cost
of tissue sales, page 18

    5.           Please revise the discussion you provided in
response to
comment 16 to explain why you adjusted
biologics
inventories in the amount of $669,000 during 2009. In
addition, please revise your statement that this inventory
adjustment offset the cost increase relating to the higher sales, since both of
these factors would increase the cost of sales. Furthermore, please also revise the
discussion that is provided on page 20 as applicable.

    Response:                                We have revised our
discussion to explain why we adjusted biologics inventories in the amount of
$669,000 in 2009.  We have also
deleted the statement regarding an offset and we have revised our discussion on
page 20.

    Change
in Warrant Derivative
Liability
page
18

    6.           Please revise your discussion
to explain why there was such a significant increase in the value of warrant derivatives
during the three
months ended September 30, 2010.

    Response:                                We have revised our
discussion to explain why there was such a significant increase in
the value of warrant derivatives during the three months ended September 30,
2010.

    Business,
page
23

    Overview
of Our Business, page
23

    7.           We note your response to
prior comment 18 that you have revised your disclosure to disclose amounts incurred for
expansion of your direct sales force and amounts you anticipate that you will need
to increase, expand or update your existing facilities over the
next five years. To the
extent practicable, please disclose the amount of funds you will allocate to the future
expansion of your sales force.

    Response:                                We have disclosed the amount
of funds we plan to allocate to the future expansion of our sales
force.

    Products
and Services, page 24

    8.           We note your response to
prior comment 22. Please expand your disclosure to
clarify that the
FDA will have to approve OsteoSponge SC as a cartilage re-generation
scaffold before you can start
marketing the product for that indication.

    Response:                                We have expanded our
disclosure to clarify that the FDA will have to approve
OsteoSponge SC as a cartilage re-generation
scaffold before we can start marketing the product for that
indication.

    9.   We note your response to
prior comment 24. Please revise your disclosure to clarify that the reference
to “certain of
our products" is
a reference to OsteoSponge SC.

    Response:                                We have revised our
disclosure to clarify that the reference to “certain of our
products” is a
reference to OsteoSponge SC.

    10.
We note your response to
prior comment 26 that you do not believe that the contract with RyMed
Technologies, Inc. is material to your business or operations. Please provide us
with a detailed analysis supporting your belief that the agreement is not
material and that you are not substantially dependant on it For example,
please provide information
regarding the amount of revenues generated from the agreement with RyMed for the
periods covered by your registration statement.

    Response:                                We have not yet
generated any
revenues from
the agreement with RyMed for the periods covered by our registration statement,
and for that reason we do not believe the contract with RyMed is material to our
business or operations.  In addition, at the present time, we do not
expect future revenues from the RyMed Agreement to exceed
2% of our total
revenue for the foreseeable
future.

    Financial
Statements for the Quarterly Period Ended September 30.2010

     (12)
Stock-Based
Compensation, page F-11

    11.        Please tell us how the
warrant issuances described in the narrative on page
F-13
reconciles to the
roll-forward of
the warrant activities table. In addition, please revise your disclosure to describe
the method you utilized to fair value the warrants and how you accounted for the
warrants issued during 2010. If any were accounted for as a derivative, describe the feature that triggered
the derivative accounting.

    Response:                                We have revised our
disclosure to explain how the warrant issuances described on page F-13 reconcile
with the warrant activities table.  In addition, we have revised our
disclosure to indicate that we used the Black
Scholes method to determine the fair market value of the warrants.  We have also
indicated that the warrants were accounted for as derivatives in connection with
the price
protection
provisions of ASC 815.

    Financial
Statements for
the Year Ended December 31.2009

    (1)
Business
Description and Summary of Significant Accounting Policies

    Grants,
page F-22

    12.        Please revise your disclosure
to quantify the amount of grants you provided and received during the periods presented.
If no amount
was given or
received, disclose that fact.

    Response:                                We did not receive any grant
revenue for the periods presented.

    Revenue
Recognition, page F-23

    13.        We acknowledge your response
to comment 29. However, you continue to mention that you earn revenues from licensing on pages
16, 24, and
F-5. Please
revise your discussions throughout your
document to be consistent with your response.

    Response:                                We have deleted our
references to licensing revenue as these amounts are less than 2% of total
revenue.

    (8) Convertible
Notes Payable, page F-26

    14.        Refer to your response to
comment 41. While you state that the ratchet provision of the
conversion rate helps
maintain the clear and close relationship of the risks between the
conversion feature and the
host contract,
it is unclear to us how the market risk that the conversion feature will
continue to have, even in the event of a conversion price adjustment, are clearly and
closely related to a debt instrument Furthermore, since the economic characteristic of
the embedded instrument is
equity (i.e. the host instrument is convertible into an equity
instrument), the embedded instrument does not appear to be clearly and closely related
to the host instrument (debt). Please provide us a scope analysis under ASC 815-40-15 and ASC 815-40-25 as
originally requested in our comment to support your
accounting.

    Response:ASC
815-40-15 applies to freestanding contracts that are indexed to, and potentially
settled in, an entity’s own stock.  In determining if the conversion
feature is indexed to the entity’s own stock we referred at ASC 815-40-15-5
which states “the guidance in this paragraph through paragraph 815-40-15-8
applies to any free standing financial instrument or embedded feature that has
“all the characteristics of a derivative instrument”. This is consistent with
ASC 815-15-25-1 which requires that “an embedded derivative shall be separated
from the host contract and accounted for as a derivative instrument pursuant to
Subtopic 815-10 if and only if all of the following criteria are met: A. The
economic characteristics and risks of the embedded derivative are not clearly
and closely related to the economic characteristics and risks of the host
contract. B. the hybrid instrument is not remeasured at fair value under
otherwise applicable GAAP with changes in fair value reported in earnings as
they occur. C. A separate instrument with the same terms as the embedded
derivative would, pursuant to Section 815-10-15, be a derivative instrument
subject to the requirements of this Subtopic.” The Company performed the
following analysis to see if the embedded conversion option would meet all the
characteristics of a derivative instrument if it were a separate
instrument.

     Per
ASC 815-10-15-83, a derivative instrument is a financial
instrument or other contract with all three of the following
characteristics:

              a.

              It
      has one or more underlyings and one or more notional amounts or payment
      provisions or both. Those terms determine the amount of the settlement or
      settlements, and, in some cases, whether or not a settlement is required.

              b.

              It
      requires no initial net investment or an initial net investment that is
      smaller than would be required for other types of contracts that would be
      expected to have a similar response to changes in market
      factors.

              c.

              Its
      terms require or permit net settlement, it can readily be settled net by a
      means outside the contract, or it provides for delivery of an asset that
      puts the recipient in a position not substantially different from net
      settlement.

    With
respect to c. above:

    This part
of the definition of a derivative has three parts to it –

              (1)

              The
      contract perm