Mail Stop 6010
July 27, 2005
David M. Daniels, CEO
National Health Partners, Inc.
120 Gibraltar Road, Suite 107
Horsham, PA 19044
Dear Mr. Daniels:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Fee Table
Selling Security Holders, page 56
Plan of Distribution, page 59
1. We note that the company`s common stock does not trade on any
established market. Provide that selling shareholders will sell
at a
specified fixed price per share until your shares are quoted on
the
OTC Bulletin Board (or other specified market) and thereafter at
prevailing market prices or at privately negotiated prices.
Revise
your prospectus, including your plan of distribution, accordingly.
National Health Partners, Inc., page 1
2. We note in a press release by XRAYMedia.com dated October 23,
2003
that you apparently operated under the name International Health
Partners, Inc. at that time. Please revise to discuss any former
or
alternative or trade style names you used in the past five years.
3. Please expand the appropriate section to discuss in greater
detail
your relationship with independent marketing representatives, such
as
the number of representatives, the fees paid to them and the
percentage of your revenues from marketing representatives.
Risk Factors, page 2
4. Please expand the appropriate risk factor to highlight the
going
concern opinion.
Overview, page 15
5. Please provide us with support for the reference to "a leading
national healthcare savings organization."
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 15
Comparison of Three-Month Periods Ended March 31, 2005 and 2004,
page
17
6. Please tell us why you only discuss $57,562 of your total
change
of $111,464 in general and administrative expenses. Please
disclose
the causes of the other significant changes, or tell us why
additional disclosure is not necessary or required. Please tell
us
why you expensed the fiscal 2004 audit fee of $74,232 in the three
months ended March 31, 2005, and not within fiscal 2004.
7. Please revise to discuss the nature of the significant cost
elements included within your cost of sales. Please also discuss
the
causes of significant changes in your cost of sales and gross
profit
for each period presented in your financial statements. Please
note
that you should not present separate line items titled cost of
sales
and gross profit unless your cost of sales line item includes all
expenses related to your cost of sales. For example, we note that
you exclude all salary expenses and depreciation from your cost of
sales and gross profit. Please tell us how this presentation
complies with SAB Topic 11.B.
8. Please expand the disclosure about commissions received from
the
sale of insurance products to discuss, if material, the insurance
products.
General and Administrative Expenses, pages 18 and 19
9. Please discuss the amount of commissions paid during each
period,
and the principal factors bearing upon the percentage of revenues
represented by commission costs.
Comparison of Years Ended December 31, 2004 and 2003, page 19
10. We note from your disclosure on page 17 that you derive
revenue
from two sources: monthly membership fees and commissions from the
sale of insurance products. Please disclose the extent to which
each
source contributed to your revenues in each period presented and
discuss the causes of significant changes in each type of revenue.
For membership fees, we note that you sell the memberships
directly
or through retailers, outlets, unions and associations. Please
disclose the extent to which each of these sources contributed to
your revenues in the three months ended March 31, 2005 compared to
the same period in 2004. Please explain why and how the
difference
in the source of your revenues (i.e., direct vs. indirect) impacts
your revenues and costs. We note the significant reduction in
your
revenues between 2004 and 2003 as a result of a change in the
source
of your revenues. Please also quantify to the extent practicable
the
amount of revenues derived in each period related to new members
versus recurring revenues from old members. If practicable,
quantify
the number of members in each period.
11. Please also tell us why you only discuss $172,001 of your
total
change of $328,543 in general and administrative expenses. Please
disclose the causes of the other significant changes, or tell us
why
additional disclosure is not necessary or required. Please tell
us
why you include payroll taxes within general and administrative
expenses and not within salary expense. Due to the significance
of
the amount of professional fees incurred in 2004, please revise
your
discussion of the causes of significant changes for this item to
quantify each of the factors listed to the extent practicable.
Please also disclose in more detail the nature of the business
transactions and the accounting and marketing activities of
January
and February 2004 that you discuss in the first paragraph on page
20.
12. Please expand the appropriate section to discuss the services
of
$874,125 from your chief executive officer and any material
offsetting expenses.
Health Savings Industry, page 26
13. Please provide us with support for the references to $1
billion
and $27 billion.
Our CARExpress Membership Program, page 27
14. Your website discusses long term care facilities as providers.
Please discuss this aspect of your provider network and member
benefit.
15. At an appropriate place please discuss the number of members
you
have at relevant benchmark dates. Break down the number by sales
channel and plan level. Discuss your member retention rate.
16. Please discuss, if material, how your program would be of
interest to persons enrolled in large publicly-funded health
insurance/care programs such as Medicare, Medicaid and the
Veterans
Health Administration.
17. Please discuss how the provider verifies that the membership
is
currently valid.
18. Please discuss in greater detail your arrangement with your
contract partner, such as identify the contract partner and
discuss
the material terms of your agreement with the contract partner.
CARExpress Insurance Programs, page 32
19. Please discuss the material terms of your agreement with
National
Health Brokerage Group.
20. The disclosure on page 33 about the insurance products you
offer
conflicts with disclosure elsewhere in your document, such as
pages 6
and 28, about insurance. Please advise or revise.
Suppliers, page 35
21. Please provide a description of the provider services you
utilize
from each of your principal suppliers. Also, discuss the material
terms of your agreements with preferred provider organizations.
Marketing and Distribution, page 35
22. Please describe what you refer to as "healthcare contacts
linked
to our executive officers." Explain the significance of these
contacts in securing and maintaining supplier relationships.
23. Please describe in greater detail the arrangements you have
with
retailers such as commission structure and incentives. Describe
the
methods they use to sell your memberships. Provide similar
information for unions and associations, and small business and
trade
associations.
24. Please disclose how small businesses, trade associations,
unions
and associations are compensated for distributing your product.
25. Please identify by name your principal marketing partners.
26. Please describe your success with each principal distribution
channel to date.
27. Please revise to describe the "network marketing" operations
of
your representatives. We note discussion later of regulation of
this
business practice.
Customer Service, Training and Support, page 37
28. Please provide us with support for the reference to "superior
customer support."
29. Please disclose the number of service agents as of the most
recent practical date.
Technology, page 38
30. Please quantify the "substantial investments."
31. Please explain the term "genealogy reporting."
Competition, page 39
32. Please provide a comparative description of products,
services,
promotional incentives and prices with your principal competitors.
Regulatory and Legislative Issues, page 40
33. Please describe the "current regulations in certain states"
that
limit your ability to operate.
34. Please describe the "recently enacted or introduced
legislation
and/or regulations" that may affect your selling methods.
Describe
how you will be affected to the extent practical.
35. Please expand the first paragraph on page 42 to clarify the
reference to "certain markets" such as which markets and whether
such
markets are applicable to your business.
36. Please clarify why you believe you are not currently required
to
comply with HIPAA. Also, clarify the references to "certain of
these
regulations" and "certain aspects," such as which regulations and
which aspects. In addition, please tell us why you have not
included
a risk factor that highlights this matter.
Employees, page 43
37. Please clarify whether management executives, and call center
and
other customer service personnel are included in the total
employee
count of nine.
Properties, page 43
38. Please file material leases as exhibits to the registration
statement.
Management, page 44
39. Please expand the appropriate section to clarify the nature
and
scale of the company`s business operations prior to 2004. For
example, the statement of operation for 2003 shows a total of only
$160,000 for all salaries and general and administrative expenses.
Also, expand the disclosure to clarify the nature and extent of
the
duties of Mr. Folts and Ms. Bathurst during that period.
40. Please describe in greater detail the nature and extent of the
"financing and management consulting services" provided by Mr.
Daniels from 1998 to 2004.
Security Ownership of Certain Beneficial Owners and Management,
page
50
41. Please add a risk factor to highlight the control of the
officers
and directors.
42. Please clarify your relationship with Ronald Westman and Jay
Rosen.
43. Please disclose the exercise price of the warrants and
options.
Shares Eligible for Future Sale, page 54
44. Please expand the second paragraph to clarify the number of
shares subject to outstanding warrants and options that will be
freely tradable upon exercise.
45. Please state the warrant expiration date(s) and exercise
price(s).
46. Disclose any offering period restrictions. For example, we
note
in Item 26 of the registration statement that the exercisability
of
some warrants expires after a fixed period following effectiveness
of
this registration statement.
Rule 144, page 54
47. Please clarify the final sentence in this subsection.
Selling Security Holders, page 55
48. Please disclose the transactions in which the registered
shares
were acquired by each selling shareholder.
49. Please tell us whether any of the selling shareholders are
broker-dealers or affiliates of broker-dealers.
50. Please describe any position, office or other material
relationship that each selling security holder has had within the
past three years with you or any of your predecessors or
affiliates.
See Item 507 of Regulation S-B.
Registration Rights, page 55
51. Please file the registration rights agreement, as well as any
securities sales agreements to the extent required by Reg. S-B
Item
601(b)(10).
Where you can find more information, page 64
52. Please clarify the last paragraph of this section about your
listing.
Annual Financial Statements, page F-1
Consolidated Statements of Stockholders` Equity, page F-6
53. Please reconcile the descriptions, number of shares, and
related
amounts in 2004 to your disclosures of equity transactions on
pages
22 and II-2.
Note 1. Nature of Organization, page F-9
a. Organization and Business Activities, page F-9
54. Please explain to us in more detail the structure of your
relationship with marketing representatives. Tell us the nature
and
significant terms of these relationships and any related
agreements.
Discuss whether or not these representatives must pay you any
initial
or ongoing fees as a result of their relationship to you.
e. Basic Loss Per Share, page F-9
55. We note your disclosure that the Company has excluded
10,724,791
common stock equivalents for the year ended December 31, 2004.
Please revise to discuss why these shares have been excluded from
the
computation of basic loss per share.
g. Revenue Recognition, page F-11
56. We note that you record revenue upon the receipt of payment.
Please tell us why you believe that this revenue recognition
method
is appropriate and consistent with U.S. GAAP. Explain methods of
billing, timing of receipt of payment, and the related timing of
the
services you provide. Discuss why you refer to pre-billing
revenues
and recording a deferral for the amount. We note no accounts
receivable. Please explain the entries you record for this
transaction. Tell us and disclose the nature of any refund
obligations, rights of return, money-back guarantees, etc. and how
you account for those obligations and why. Cite the accounting
literature upon which you relied. Discuss how you considered both
the accounting and disclosure requirements of SAB Topic 13.A,
Question 4(a) and why. Reconcile with the disclosures on page 16.
57. We note from page 36 that you are offering features to
encourage
new subscribers to try out CARExpress membership programs,
including
early cancellation privileges, refund guarantees and trial periods
of
free or discounted membership. Please tell us and disclose the
nature of these programs and how you account for them. Cite the
accounting literature upon which you relied and explain how you
applied that literature to your situation. Tell us the extent to
which you offered the programs in the periods presented, including
interim periods in fiscal 2005.
58. Please tell us and disclose the significant terms of your
agreements with health care providers and how you account for
those
agreements and why.
h. Newly Issued Accounting Pronouncements, page F-11
59. Since you are a small business issuer, it appears that you
must
adopt SFAS 123R as of the beginning of your annual reporting
period
that begins after December 15, 2005. Please revise and clarify
when
you plan to adopt the new statement. You should clearly describe
in
MD&A the change in accounting policy that will be required by
Statement 123R in subsequent periods and the reasonably likely
material future effects. See SAB`s 74 and 107 and
www.sec.gov/news/press/2005-57.htm.
k. Fixed Assets, page F-13
60. We note that you have capitalized costs related to your
website.
We note in your discussion of results of operations on page 18
that
you also expense a portion of your website development costs.
Please
tell us how you have considered the guidance in EITF 00-2 in
accounting for your website development costs.
Note 3. Accrued Expenses and Note 4. Notes Payable, page F-14
61. We note that you have accrued expenses of $75,955 and notes
payable of $80,993 to U.S. Script as of December 31, 2004. Please
tell us and disclose the nature of your relationship with U.S.
Script. That is, discuss whether or not U.S. Script is a related
party and the nature of the services, goods, etc. provided in
exchange for the notes and accounts payable.
Note 7. Equity Transactions, page F-16
62. We note that on February 17, 2004 you issued 1.7 million
shares
of common stock to your Chief Executive Officer for services
rendered, resulting in total consideration of $874,125. Tell us
and
revise to disclose the time period in which the services were
rendered and how the amounts are reflected in the statements of
operations.
63. Please tell us why the losses on extinguishment of debt of
$11,710 and $13,260 on March 4, 2004 were accounted for as a debit
to
additional paid-in capital and show us the accounting entries you
made for these transactions. Cite the accounting literature upon
which you relied.
64. Please disclose the dates that you issued the shares in each
of
your three private placements in fiscal 2004. Please disclose the
significant terms of the private placement agreements, including
the
warrants and any registration rights and related penalties
associated
with the stock and underlying warrants. Tell us and disclose how
you
are accounting for and valuing the warrants and tell us why. Cite
the accounting literature upon which you relied. See EITF 00-19
and
SFAS 133.
Note 8. Stock Options, page F-18
65. We note that you granted 7,015,000 options to your employees,
officers and directors at $0.40 per share in September and
December
2004 that fully vested on the grant date. We also note that you
issued common stock in private placements during 2004 at $0.50 per
share and valued common stock issued for services during this time
at
$0.50 per share. Since it appears that the exercise price is
below
the fair market value of the common stock on the date of grant,
please tell us why you did not record stock compensation expense
related to these stock options.
66. Please revise the notes to your annual and interim financial
statements to move your stock option pro forma disclosure from
this
footnote to your summary of significant accounting policies
footnote
in accordance with paragraph 45 of SFAS 123.
March 31, 2005 Financial Statements, page F-21
Review Report of Auditors, page F-21
67. Please request your auditors to include the city and state of
issue on their report. Additionally, we note that the report does
not refer to your subsidiary or consolidated financial statements.
As such, please either remove this review report, or include a
review
report that addresses your consolidated interim financial
statements
and not just the financial information of the parent.
Consolidated Statements of Cash Flows, page F-25
68. Please tell us why you classified the increase in your
certificate of deposit as net cash used by financing activities.
Note 5. Equity Transactions, page F-29
69. Please reconcile the descriptions, number of shares, and
related
amounts and type of consideration received in 2005 to your
disclosures of equity transactions in Note 7 on page F-31, and
pages
22 and II-2. Please reconcile the disclosures for 2005 on pages
22
and II-2, including your March 2005 offering, June 2005 offering
of
2,587,000 shares and the nature of the consideration received for
the
May 2005 offering where you acquired shares of Infinium Labs.
70. On page II-3 you discuss the issuance of 737,742 common
shares,
Class A warrants to acquire 368,871 shares of common stock and
Class
B warrants to acquire 368,871 shares of common stock to investors
of
your 2004 private placements in exchange for an extension of the
date
by which you would use your best efforts to file a registration
statement for the securities underlying the shares and the
warrants.
Please reconcile with your description of the reason for issuing
the
shares on page F-29. Please also tell us why you assigned no
value
to these additional shares and cite the accounting literature upon
which you relied. Discuss the significant terms of the agreement
with the investors including any registration rights and penalties
associated with the shares and warrants.
Note 6. Stock Options, page F-29
71. We note that you cancelled the vested options that you granted
to
your officers and directors in September 2004 to purchase
7,000,000
common shares at $0.40 per share, and that none of these
outstanding
options were exercised. We note that you replaced these options
with
options to purchase 4,500,000 shares at $0.40 per share, and that
the
new options do not fully vest as of the grant date. Please tell
us
if you recorded stock compensation expense related to the
modification of the awards in accordance with paragraphs 32-37 of
FIN
44.
Note 7. Subsequent Events, page F-31
72. Please reconcile the following with page II-4:
* The name of the company whose shares you acquired. That is,
page
F-31 refers to Infiniom Lass, Inc. and page II-4 refers to
Infinium
Labs, Inc.
* The number of common shares underlying Class A and Class B
warrants. That is, page F-31 refers to the sale of 600,000 units
with each unit including one Class A warrant and one Class B
warrant
each exercisable into 1.5 shares of your common stock. Page II-4
refers to Class A and Class B warrants to each acquire 1,800,000
shares of your common stock.
73. Please tell us how you have accounted for and valued the sale
of
the 600,000 units in exchange for the 2.7 million shares of
Infinium
Labs common stock and why. Cite the accounting literature upon
which
you relied. We note that the price of the stock of Infinium Labs
has
significantly decreased since May 2005. Please discuss the
ability
of the investor to issue the additional shares or cash under the
agreement`s make-whole provisions.
74. Please disclose the date upon which you sold the 600,000
units.
Please also disclose all of the significant terms of the units,
including the warrants. We note the additional disclosure on page
II-4.
75. Please tell us and disclose the nature of the consulting
services
to be rendered to the company in exchange for the issuance of
2,587,000 shares of your common stock in June 2005. Discuss the
relationship of the company to the person who will provide the
services. Please tell us and disclose how you are accounting for
and
valuing these shares and tell us why. Cite the accounting
literature
upon which you relied.
Item 26, page II-2
76. For each of the private placements to multiple investors
demonstrate for us the basis for your claim of Section 4(2) or
Rule
506 exemption. For example, how did you verify that each
purchaser
was an "accredited investor?"
77. Please tell us the consideration you gave to possible
integration
of your private placement offerings and the effect on your
registration exemptions. We note that several sales occurred over
a
period of a few months.
78. For transactions not involving cash consideration disclose the
basis for valuing the other consideration, such as consulting
services.
Item 27, page II-5
79. Please file all material contracts made within the last two
years
or to be performed after the effective date. In this regard we
note
that you describe numerous contractual relationships with
marketing
partners and suppliers. See Reg. S-B Item 601(b)(10).
80. Please be advised that we may have additional comments after
you
file your exhibits.
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Thomas Dyer at (202) 551-3641 Michelle
Goehlke
at (202) 551-3327 if you have questions regarding comments on the
financial statements and related matters. Please contact Alan
Morris
at (202) 551-3601 or me at (202) 551-3602 with any other
questions.
Sincerely,
Thomas A. Jones
Senior Attorney
cc. Alex Soufflas (Duane Morris)
Via telefax (609) 631-2401
David M. Daniels, CEO
National Health Partners, Inc.
July 27, 2005
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