Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1 Filing Table of Contents
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Delayed-Release ‘CORRESP’ — Comment-Response or Other Letter to the SEC
Securities and Exchange Commission
Division of Corporation Finance
100 F Street N.E.
Washington, D.C. 20549-3561
Mail Stop — 4561
Attention: Ms. Karen J. Garnett
Re:
athenahealth, Inc. Amendment No. 3 to Registration Statement on Form S-1 Filed August 31, 2007 File No. 333-143998
Ladies and Gentlemen:
This letter is being furnished on behalf of athenahealth, Inc. (the “Company”) in response to
comments contained in the letter dated August 17, 2007 (the “Letter”) from Karen Garnett of the
Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) to Jonathan Bush,
Chief Executive Officer, President and Chairman of the Company, with respect to the Company’s
Registration Statement on Form S-1 (the “Registration Statement”) that was filed with the
Commission on August 3, 2007. Amendment No. 3 to the Registration Statement (“Amendment No. 3”),
including the prospectus contained therein, is being filed on behalf of the Company with the
Commission on August 31, 2007.
The responses and supplementary information set forth below have been organized in the same
manner in which the Commission’s comments were organized and all page references in the Company’s
response are to Amendment No. 3 as marked. Copies of this letter and its attachments will also be
provided to Angela McHale, Rachel Zablow and Cicely LaMothe of the Commission. The Company
respectfully requests that the Staff return to us all material supplementally provided by the
Company once the Staff has completed its review.
FOIA CONFIDENTIAL TREATMENT REQUESTED
United States Securities and Exchange Commission August 31, 2007
Page 2
On behalf of the Company, we respectfully request, pursuant to the provisions of 17 C.F.R. §
200.83, confidential treatment under the Freedom of Information Act (the “FOIA”) (5 U.S.C. §
552(b)) of the portions of this response letter as indicated below by “/*/ confidential treatment
requested /*/” (the “Materials”).
We believe that the Materials contain information which is covered by one or more exemptions
in the FOIA. In particular, 17 C.F.R. § 200.80(b)(4) exempts disclosure of trade secrets and
commercial or financial information which are privileged or confidential. We believe that the
Materials, as well as any Staff memoranda, notes of conversation or other materials relating
thereto, contain privileged and confidential trade secrets and commercial and financial information
which will be protected from public disclosure pursuant to this exemption. The documents for which
the Company seeks confidential treatment have been marked in accordance with the requirements of 17
C.F.R. § 200.83.
The foregoing reasons are neither exhaustive nor exclusive as regards the substantiation of
the Company’s request for confidential treatment.
The Company makes this request to ensure that the information submitted by it is not disclosed
pursuant to a request under the FOIA. It is the Company’s understanding that substantiation of
this request for confidential treatment is not required until the information provided by the
Company to the Commission becomes the subject of a request for access under the FOIA, in which case
the Commission shall notify the undersigned promptly of such request and the need for
substantiation. If this understanding is incorrect, please notify me immediately, and I will
undertake to provide any needed substantiation.
If any person (including any government employee who is not an employee of the Commission)
should request an opportunity to inspect or copy the Materials, we specifically request that we be
(i) promptly notified by telephone of any such request; (ii) furnished with a copy of all written
materials pertaining to such request (including, but not limited to, the request itself and any
Commission determination with respect to such request); and (iii) given sufficient advance notice
of any intended release so that the Company, and their respective counsel, if deemed necessary or
appropriate, may pursue any available remedies. If the Commission is not satisfied that the
Company’s Materials are exempt from disclosure pursuant to the FOIA and the applicable rules of the
Commission, we hereby request an opportunity to be heard on this claim of exemption.
United States Securities and Exchange Commission August 31, 2007
Page 3
Prospectus Summary
Overview, page 1
1.
We note your response to prior comment 6. As previously requested, please revise to disclose
the measure by which you are a “leading” provider of internet-based business services for
physician practices.
RESPONSE: The Company believes that it could potentially be confusing to investors to quantify the
various measures by which it considers itself to be a “leading” provider of internet-based business
services for physician practices. Accordingly, in response to the Staff’s comment, the prospectus
contained in Amendment No. 3 has been revised to remove the references to the word “leading.”
Risk Factors, page 8
We may be unable to adequately protect, and we may incur significant costs in enforcing, our intellectual property and other proprietary rights, page 14
2.
Please revise to clearly state that your patent application relating to the athenaNet Rules
Engine system has been rejected by the USPTO. We note the revised disclosure on page 74.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on page 14 in response to
the Staff’s comment.
If our security measures are breached or fail and unauthorized access is obtained to a client’s data..., page 17
3.
We note your response to comment 13, as well as your additional disclosure that your clients
have, on occasion, failed to perform certain security activities. Please tell us whether
these incidents have constituted material breaches or failures of security measures. If so,
please revise to provide a materially complete description of the material breaches or
failures. Disclose when such breaches or failures were discovered and what remedial measures
have been taken to specifically address each situation.
RESPONSE: The Company advises the Staff that it does not consider the occasional breaches by its
clients described on page 17 of the prospectus contained in Amendment No. 3 to be material. The
prospectus contained in Amendment No. 3 has been revised on page 17 in response to the
Staff’s comment in order to describe the types of breaches we have experienced to date and the
remedial measures we have undertaken to resolve them.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 37
United States Securities and Exchange Commission August 31, 2007
Page 4
Operating Expense, page 38
4.
We note your additional disclosure in response to Comment 19. Please describe your
“beta-testing program.” Similarly, please explain what you mean by “beta client,” which you
reference on page 44.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on pages 39 and 44 in
response to the Staff’s comment.
Consolidated Results of Operations, page 46
5.
We reissue Comment 22. We note, for example, that you have expanded your disclosure on page
47 to state the percentage increase in the number of physicians using your services; however,
to the extent practicable, please quantify the amount of the change in revenue that can be
attributed to this increased percentage of physicians using your services. See Section III. D
of Release 33-6835.
RESPONSE: The Company advises the Staff that it is not practicable to quantify the amount of change
in revenue that can be attributed to the percentage change in average number of physicians using
the Company’s services during these periods. Moreover, the Company advises the Staff that, even if
it were practicable to quantify such amount, such disclosure could potentially be misleading, since
it could potentially imply a direct correlation between the number of new physicians using the
Company’s services and its revenues. The Company advises the Staff that, while it is true that an
increase in the number of physicians using its services will result in increased revenues, the
extent to which these revenues increase is not constant. Not all physician practices are the same.
The Company advises the Staff that, because its business services fees are primarily based on a
percentage of payments collected by its clients, the extent to which new physician practices result
in additional revenue is largely a function of the number of physicians included in the practice,
the number of patients seen or procedures performed by the practice, the medical specialty in which
the practice operates and the geographic location of the practice. For example, high volume,
specialty practices in metropolitan areas tend to collect more payments than slower, primary care
practices in rural areas. Accordingly, the Company is concerned that quantifying the amount of
change in revenue, even if it were practicable to do so, would incorrectly imply that the same
increase could be expected in future periods assuming the growth rate in new practices remains
constant. This is not necessarily so, since as described above the increase will depend on other
factors.
The Company has revised its disclosure under the subheading “—Sources of Revenue” on page 38 of
the prospectus contained in Amendment No. 3 to more clearly inform investors of the variety of
factors that influence the amount of new revenue the Company may collect from new physician
practice clients.
United States Securities and Exchange Commission August 31, 2007
Page 5
As more fully described under the subheading “—Sources of Revenue,”the Company’s revenues are
driven by the following factors:
•
the percentage of a practice’s total collections that is received by the Company in
exchange for its services, which ranges from 2% to 8% depending upon the size, complexity
and other characteristics of the particular practice;
•
the number of physician practices the Company services;
•
the number of physicians working in those physician practices; and
•
the volume of activity and related collections of those physicians, which is largely
driven by the number of patients seen or procedures performed by the practice, the medical
specialty in which the practice operates and the geographic location of the practice.
There is also moderate seasonality in the activity level of physician offices, which also impacts
revenue.
With regard to the Company’s disclosure of material changes in revenue under the subheading
“—Consolidated Results of Operations,”the Company advises the Staff that it has endeavored to
discuss and quantify “the contribution of two or more factors to such material changes,” in
accordance with Section III.D of the SEC’s Release 33-6835. Specifically, the Company has
identified (i) the increase in the average number of physicians using the Company’s services and
(ii) the increase in posted collections by the Company’s clients during the relevant periods. The
Company believes that such disclosures help quantify significant trends relevant to the Company’s
business, and is informed by the cautionary language under the subheading “—Sources of Revenue.”
6.
In your discussion of “Other income (expense)” on page 48, you state that you had an
unrealized loss on warrant liability of $3.7 million, which is an increase of $3.4 million
from the previous year. You attribute this increase to a change in the fair value of the
warrants. Please expand your disclosure to further explain the cause of the change in fair
value.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on page 48 to clarify that
the increase in fair value is attributable to the appreciation in the fair value of the Company’s
common stock during this period, which increased from $5.26 to $9.30 per share.
Intellectual Property, page 74
7.
We note your response to prior comment 36. Please revise further to disclose whether you
have any registered trademarks.
United States Securities and Exchange Commission August 31, 2007
Page 6
The prospectus contained in Amendment No. 3 has been revised on page 75 to disclose the Company’s
registered and unregistered trademarks. The Company advises the Staff that this same disclosure is
also included on page 4 of the prospectus contained in Amendment No. 3.
Directors, Executive Officers and Key Employees, page 76
8.
On page 78, please state where John A. Kane was employed from 2006 — July 2007. Refer to
Item 401(e) of Regulation S-K.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on page 78 to disclose that
Mr. Kane has not been employed on a full-time basis since the acquisition of IDX Systems
Corporation by GE Healthcare in 2006.
Compensation Discussion and Analysis
Determination of Compensation Awards, page 82
9.
Please revise the second paragraph to disclose all of the factors that the compensation
committee considered in determining executive officer compensation for 2006. Your use of the
word “including” indicates that there are some factors you have not disclosed. Similarly,
please revise the third paragraph to identify all of the peer companies.
RESPONSE: The Company advises the Staff that it has revised the disclosure to list all of the
factors considered by the Company’s board of directors and/or compensation committee to determine
executive officer compensation for 2006. The prospectus contained in Amendment No. 3 has been
revised on pages 82-83 accordingly.
The Company further advises the Staff that the Axiom Consulting Partners executive compensation
market survey included executive compensation data for over 50 companies (51 companies in all).
Although the Company does not believe that disclosing the name of each company included in the
survey would provide material or meaningful disclosure to investors, the Company acknowledges that
disclosing the nature of these companies and the method by which Axiom selected these particular
companies for purposes of comparing executive compensation would be helpful. Accordingly, the
prospectus contained in Amendment No. 3 has been revised on page 83 to provide that all of the
companies surveyed were selected because they are software, information technology services or
other technology oriented companies, are located in metropolitan areas and have annual revenue
between approximately $100 million to $200 million.
10.
We note the statement that “most” of the peer companies had revenue between approximately
$100 million and $200 million. Please disclose the full range of revenue or separately
identify the companies that fell outside this range and disclose their revenues.
United States Securities and Exchange Commission August 31, 2007
Page 7
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on page 83 to disclose that
all of companies included in the Axiom Consulting Partners survey had annual revenue between
approximately $100 million to $200 million.
11.
We note your use of a compensation consultant. Please provide the disclosure required under
Item 407(e)(3)(iii) of Regulation S-K.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on pages 82-83 to disclose
the compensation consultant and provide the disclosure required by Item 407(e)(3)(iii) of
Regulation S-K.
Base Salary, page 83
12.
We note your response to prior comment 41 Please provide a more detailed description of the
base salary factors for each of your named executive officers. Disclose the specific
objectives established for each person. Also, describe how the CEO and the Compensation
Committee measured each item in the “portfolio of competencies” listed in the second bullet
point on page 83. Similarly, disclose how the Compensation Committee measured each factor in
the third bullet point and describe how all of these measurements factored into the
determination of base salary. It is not sufficient to say that the committee reviewed the
NEOs’ achievements.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on pages 83-84 in response
to the Staff’s comment accordingly.
As described in the revised disclosure, the Company advises the Staff that the 2006 base salary for
the Company’s named executive officers (other than the CEO) was determined by its board of
directors upon recommendation of the compensation committee which in turn followed the
recommendation of the CEO. The CEO’s recommendation was based largely on the CEO’s general
understanding of compensation at comparable companies and professional service firms, and to a
lesser degree on the CEO’s subjective assessment of each NEO’s professional effectiveness and
capabilities based on his annual performance evaluations. The Company further advises the Staff
that it believes the revised disclosure summarizes the material elements that went into the
determination of base salary for the NEOs.
13.
Please revise to disclose whether base salary amounts for 2007 reflect good performance and
compensation at the 60th percentile of peer companies or superior performance and
compensation at the 75th percentile. Also, describe how the Compensation Committee
assessed whether performance was good or superior.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on page 84 in response to
the Staff’s comment.
United States Securities and Exchange Commission August 31, 2007
Page 8
14.
We note the disclosure indicating that the CEO makes recommendations to the Compensation
Committee to help determine salary increases (page 83), annual cash incentives (pages 84-85),
and long-term stock-based compensation (page 86). Please disclose whether the CEO recommends
actual compensation amounts to the Compensation Committee. Also disclose whether the
Compensation Committee ever grants awards that differ in amount from what the CEO has
recommended.
RESPONSE: The Company advises the Staff that the CEO has historically recommended actual
compensation amounts to the Compensation Committee and the Compensation Committee typically
followed these recommendations. The prospectus contained in Amendment No. 3 has been revised on
page 82 in response to the Staff’s comment accordingly.
Annual Cash Incentives, page 83
15.
We note your response to prior comments 42 and 44. Please provide us with a more detailed
explanation of why you would be damaged by competitors obtaining access to specific
performance targets. Explain in more detail why you would be placed at a competitive
disadvantage as a result of disclosing information that is tied to gross margin, revenue, and
EBITDA, all of which are disclosed in or derived from your financial statements. Discuss more
specifically how targets relating to customer satisfaction rates and client days-in-accounts
receivable would provide a roadmap to your strategic plans and operating objectives.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on pages 85-86 in response
to the Staff’s comment in order to provide additional disclosure of the corporate scorecard and to
provide the specific performance targets for 2006 financial metrics that are disclosed in or
derived from the Company’s financial statements.
The Company advises the staff that the disclosure of specific performance targets for each other
metric included in the corporate scorecard and the financial scorecard would result in the
disclosure of confidential trade secrets or confidential commercial or financial information, the
disclosure of which would result in competitive harm for the Company. As set forth in more detail
below for each metric that comprises the corporate scorecard and one of the metrics that is
included in the financial scorecard, the Company advises the Staff that disclosure of the
performance targets for each metric would result in competitive harm for the following reasons:
•
Competitors of the Company would use the data in sales pitches to our current and
potential clients to the Company’s disadvantage; or
•
Competitors of the Company would use the data to reverse engineer the methods and
processes we utilize to perform our services.
United States Securities and Exchange Commission August 31, 2007
Page 9
The Company further advises the Staff that disclosure of these metrics and the corresponding
targets would allow competitors to present the data to current or potential clients in a manner
that may be inconsistent with their use in the prospectus contained in Amendment No. 3. Although
the Company could provide disclosure to investors to explain the metrics and the targets and
provide appropriate context, the Company can not control how competitors will present this
information to our current or potential clients. Additionally, since the intent of the corporate
scorecard is to measure the overall health of the Company disclosing any single performance target
that is not in or derived from our financial statements would be immaterial to an investor and
potentially misleading.
A)
Financial Metrics (30% of the overall scorecard value):
•
Estimated value of new contracts(10%). /*/confidential treatment requested /*/
•
Revenue (10%). As mentioned above, the prospectus contained in Amendment No. 3
has been revised on page 86 to include the performance targets for this metric.
•
Gross Margin (10%). As mentioned above, the prospectus contained in Amendment
No. 3 has been revised on page 86 to include the performance targets for this
metric.
B)
Client Metrics (25% of the overall scorecard value):
Certification of Employees (10%). /*/confidential treatment requested /*/
16.
We note your response to prior comment 43. Please disclose how the CEO measured Messrs.
Byers’ and Nolin’s overall job performance in making his recommendation to the Compensation
Committee. Disclose any specific factors that the CEO considered in assessing overall job
performance, including both qualitative and quantitative factors. Explain how these factors
differed, if at all, from the base salary factors described on
FOIA CONFIDENTIAL TREATMENT REQUESTED
United States Securities and Exchange Commission August 31, 2007
Page 10
page 83. Also, please disclose the percentage of the 25% bonus target that was actually
awarded to Messrs. Byers and Nolin for 2006.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on page 86 in response to
the Staff’s comment. The Company advises the Staff that it believes the revised disclosure
contains the materials factors used to determine the cash incentive amounts for Mssrs. Byers and
Nolin.
Long-term Stock-Based Compensation, page 85
17.
You state on page 86 that the Compensation Committee uses qualitative factors to help
determine stock option award grants. Please explain how the consideration of these factors
resulted in the actual amounts paid to each NEO.
RESPONSE: The prospectus contained in Amendment No. 3 has been revised on pages 88-89 in response
to the Staff’s comment.
Consolidated Financial Statements
Note 2 — Summary of Significant Accounting Policies, page F-7
Warrant Liability, page F-10
18.
We have read your response to prior comment 55 and understand that at the time of your
adoption of FSP 150-5, you were a private company and reported on an annual basis. However,
considering that your financial statements are included in a Securities Act registration
statement, we believe that the financial statements should adhere to all SEC requirements
incremental to US GAAP. In light of the fact that the guidance in FSP 150-5 should generally
be applied to the first reporting period beginning after June 30, 2005, and you have prepared
and reported on interim periods subsequent to June 30, 2005 in your Quarterly Results on page
52, we remain unclear why you applied the guidance as of January 1, 2006. Please further
advise us or revise accordingly.
RESPONSE:
Overview
The Company respectfully advises the Staff that it applied the guidance in FSP 150-5 as of
January 1, 2006 in accordance with the transition provisions in paragraph 8 of the FSP. The
Company respectfully advises the Staff that it believed at the time and continues to believe
that its adoption of FSP 150-5 effective January 1, 2006 is consistent with U.S. Generally Accepted
Accounting Principles (“GAAP”) since FSP 150-5 indicates that adoption should be made upon the
first reporting period beginning after June 30, 2005. The Company’s first reporting period
United States Securities and Exchange Commission August 31, 2007
Page 11
after June 30, 2005 was the annual period beginning on January 1, 2006 and ending on December 31,2006. Although the Company did prepare unaudited monthly financial statements and analysis for
internal purposes in order to enable its management and board of directors to evaluate its
operations during 2005 and into 2006, it only prepared full financial statements in accordance with
GAAP on an annual basis in connection with the completion of its annual audit. Accordingly, the
2006 reporting period was the first reporting period after the transition date provided in FSP
150-5. Moreover, the Company supplementally advises the Staff that, since its inception, the
Company has had no external reporting requirements other than a requirement to deliver on a
confidential basis annual audited financial statements to certain of its investors and financial
lenders. Prior to the initial filing of the Registration Statement and before the need to do so,
no interim financial statements had been audited or reviewed by the Company’s auditors.
The Company supplementally advises the Staff that, in preparing the Registration Statement for
filing it did not retroactively change its adoption of FSP 150-5 because to do so would require a
restatement of its 2005 financial statements, which statements were correct at the time they were
prepared, audited and issued, and because such restatement, if deemed to be required, would not
result in a material change to the financial statements currently presented in the Registration
Statement. The Company supplementally advises the Staff that date of the audit report on its 2005
annual financial statements is July 7, 2006. The Company believes that the standard for restating
audited financial statements requires (i) that there be a finding of error and (ii) that such error
be material. In this case, given the reporting period structure in place at the time, the Company
does not believe that an error exists in its financial statements as currently presented. In
addition, as more fully described below, even if such change were made to our financial statements,
the differences resulting from such change would not be material.
Finally, as was discussed during our recent conference call regarding this matter, the Company
respectfully advises the Staff that as part of its own research on this matter it believes there to
be diversity in practice with respect to the adoption of FSP 150-5 in similar situations and among
similarly situated companies (i.e., in connection with IPOs and pre-IPO financial statement
reporting). Specifically, the Company is aware of at least two recent IPO registrants with similar
fact patterns (whose registration statements have recently gone effective) that adopted FSP 150-5
on January 1, 2006.
For all the reasons noted above, the Company respectfully submits that a restatement of its
financial statements to retroactively adopt FSP 150-5 on July 1, 2005 is not required, nor would
such revised disclosure result in meaningful or material disclosure for investors.
Proposed Footnote Disclosure
The Company advises the Staff that it recognizes and appreciates the need for transparency in
financial statement reporting and the need to provide information consistent with public company
reporting requirements. Although the Company continues to believe that the
United States Securities and Exchange Commission August 31, 2007
Page 12
financial statements and disclosures included in its Registration Statement reflect such
transparency, as it considered the Staff’s comment on this matter, the Company believes that adding
disclosure to Note 2 to its financial statements under the heading “Warrant Liability” could
potentially enhance such transparency and provide information consistent with what other companies
that adopted the reporting standard on a public company reporting timeline may have included. Our
proposed additional disclosure is provided below.
“During the year ended December 31, 2005, the fair value of the Company’s warrants to
purchase Series D and Series E Preferred Stock increased by approximately $397,000 related
to the fair value assigned to warrants issued in December 2005 (see note 9) and by $373,000
due to a change in warrant fair value.”
Materiality Considerations
As referred to above, the Company believes that a restatement of its financial statements as
currently presented in the Registration Statement would not result in materially different or
particularly meaningful disclosure for investors. The following factors and considerations support
this conclusion. The Company advises the Staff that it referred to SAB 99 and SAB 108 in reaching
its conclusion.
First, the Company advises the Staff that it analyzed quantitatively the impact of
restating its 2005 financials statements as though the September quarter of 2005 had been a
reporting period and note the following:
•
In its statement of operations, the total change in 2005 would be approximately
$373,000, which would represent 3.27% of the Company’s 2005 net loss as reported. This
includes a cumulative effect adjustment of approximately $61,000 and a periodic expense of
approximately $312,000.
•
On its December 31, 2005 balance sheet, the only change other than the immaterial impact
on the accumulated deficit would be a shift of accrued warrant liability from Additional
Paid-In Capital (APIC) to Warrant Liability of approximately $1,186,000, which would
represent 2.78% of the Company’s Total Liabilities as of December 31, 2005 as reported.
•
Adding the $373,000 to the $1,186,000, the total change in Warrant Liability (both from
APIC and from incremental expense) would be $1,559,000, which would represent 3.66% of
Total Liabilities as reported. When these totals are compared to Stockholders Equity
(Deficit), the percentage changes are even smaller.
•
The Warrant Liability amounts at December 31, 2006 and June 30, 2007 would not change as
a result of an adoption of FSP 150-5 retroactively to July 1, 2005 and the changes to the
Company’s statements of operations for those periods would not be materially impacted.
United States Securities and Exchange Commission August 31, 2007
Page 13
The Company therefore respectfully advises the Staff that, in its judgment, on a quantitative
basis, these changes would not be material.
Second, the Company advises the Staff that it analyzed qualitatively the impact of
restating its 2005 financials statements as though the September quarter of 2005 had been a
reporting period and note the following:
•
The Company respectfully suggests that the primary qualitative question is whether users
of the financial statements could reasonably conclude that the numbers that would change in
a restatement are important metrics in evaluating the business performance and prospects of
the Company.
•
Based in part on the Company’s continued conversations with its investment bankers, the
Company believes that investors will place little emphasis, if any, on the numbers that
would change in a restatement of the financial statements to adopt FSP 150-5 on July 1,2005. This is because these expenses are non-cash items that upon the completion of our
proposed IPO will revert to APIC (because the preferred stock warrants that cause this
liability will become common stock warrants automatically, in which case FSP 150-5 no
longer applies) and no further non-cash expenses will accrue subsequently. In addition,
the Company believes that investors are primarily focused on metrics such as revenue growth
and operating income growth, rather than other income (loss) and net income during 2005.
•
In addition, the Company advises the Staff that none of the changes under discussion
would impact financial covenants arising under the Company’s debt facilities. The Company’s
loan covenants relate to profitability measures and to balance sheet measures that are not
affected by expenses related FSP 150-5 or the classification of
accrued warrant liabilities.
The Company therefore respectfully advises the Staff that, in its judgment, on a qualitative basis,
these changes would not be material.
Overall Conclusion
Based on all factors considered, the Company respectfully advises the Staff that it believes its
adoption of FSP 150-5 on January 1, 2006 was appropriate and that a restatement of its 2005 audited
financial statements is neither warranted nor necessary to provide investors with materially
meaningful financial disclosures and transparency. However, mindful of the Staff’s comment, the
Company is willing to provide additional footnote disclosure as described above.
Part II
Recent Sales of Unregistered Securities, page II-3
United States Securities and Exchange Commission August 31, 2007
Page 14
19.
We reissue comment 57. Please revise to provide a more detailed description of the type and
amount of consideration you received for all warrants and options described in this section.
Refer to Item 701(c) of Regulation S-K.
RESPONSE: Amendment No. 3 has been revised on page II-3 in response to the Staff’s comment.
20.
Please disclose the exemption from registration that you relied upon for granting stock
options and for the issuance of shares upon exercise of those options.
RESPONSE: Amendment No. 3 has been revised on page II-4 in response to the Staff’s comment.
* * *
If you require additional information, please telephone either Lawrence S. Wittenberg at (617)
570-1035 or the undersigned at (617) 570-1928.
Christopher E. Nolin, Esq. (athenahealth, Inc.)
Lawrence S. Wittenberg, Esq. (Goodwin Procter LLP)
Michael H. Bison, Esq. (Goodwin Procter LLP)
Christopher J. Austin, Esq. (Ropes & Gray LLP)
Michael D. Beauvais, Esq. (Ropes & Gray LLP)
Dates Referenced Herein and Documents Incorporated by Reference
