Via Facsimile and U.S. Mail
Mail Stop 6010
September 16, 2005
Mr. Mark Szporka
Chief Financial Officer
Paincare Holdings, Inc.
3832 Bay Center Place
Hayward, CA 94545
Re: Paincare Holdings, Inc.
Form 10-KSB for Fiscal Year Ended December 31, 2004
Filed March 16, 2005
File No. 001-14160
Dear Mr. Szporka:
We have limited our review of your filing to those issues we
have addressed in our comments. In our comments, we ask you to
provide us with information so we may better understand your
disclosure.
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 on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for Fiscal Year Ended December 31, 2004
Managements Discussion and Analysis of Financial Condition and
Results of Operations
Significant Accounting Policies and Estimates, page 29
1. Please provide us the following information in disclosure-type
format to help us evaluate the adequacy of your disclosure:
a) State if your billing system generates contractual adjustments
based on fee schedules for the patient`s insurance plan for each
patient encounter or if an estimate of contractual allowances is
made. If an estimate is made, state what factors are considered
in
determining the estimate.
b) Provide your policy for collecting co-payments.
c) For each period presented, quantify and provide the amount of
changes in estimates of prior period contractual adjustments that
you
recorded during the current period. For example for 2004, this
amount
would represent the amount of the difference between estimates of
contractual adjustments for services provided in 2003 and the
amount
of the new estimate or settlement amount that was recorded during
2004.
d) Quantify and provide the reasonably possible effects that a
change
in estimate of unsettled amounts from 3rd party payors as of the
latest balance sheet date could have on financial position and
operations.
e) Provide in a comparative tabular format, the payor mix
concentrations and related aging of accounts receivable. The
aging
schedule may be based on management`s own reporting criteria (i.e.
unbilled, less than 30 days, 30 to 60 days etc.) or some other
reasonable presentation. At a minimum, the disclosure should
indicate the past due amounts and a breakdown by payor
classification
(i.e. Medicare, Medicaid, Managed care and other, and Self-pay).
We
would expect Self-pay to be separately classified from any other
grouping. If your billing system does not have the capacity to
provide an aging schedule of your receivables, disclose that fact
and
clarify how this affects your ability to estimate your allowance
for
bad debts.
f) If you have amounts that are pending approval from third party
payors (i.e. Medicaid Pending), please provide the balances of
such
amounts, where they have been classified in your aging buckets,
and
what payor classification they have been grouped with. If amounts
are classified outside of self-pay, tell us why this
classification
is appropriate, and disclose the historical percentage of amounts
that get reclassified into self-pay.
Liquidity and Capital Resources, page 31
2. Please provide us, in disclosure type format, the steps you
take
in collecting accounts receivable. Provide your policy with
respect
to determining when a receivable is recorded as a bad debt and
when a
write off is recorded. Clarify the threshold (amount and age) for
account balance write-offs.
Contractual Obligations
3. Please provide us, in disclosure type format, your contractual
obligations table. Please refer to Financial Reporting Release 67,
Disclosure in Management`s Discussion and Analysis about Off-
Balance
Sheet Arrangements and Aggregate Contractual Obligations,
regarding
the contractual obligation table.
Convertible Debt, page 32
4. Please tell us the basis of accounting for each of the
debentures
and warrants issued and provide us with the accounting literature
that supports your accounting treatment. Please tell us what
consideration was given to APB 14, SFAS 150, SFAS 133, EITF 00-19
and
other applicable literature.
5. Please tell us whether you considered if there was a beneficial
conversion feature for convertible debt securities issued and how
your accounting treatment complies with EITF 98-5 and 00-27.
Consolidated Statements of Operations, page F-4
6. Please tell us the amount of bad debt expense for each period
presented and where it is classified in the Statements of
Operations.
(b) Summary of Significant Accounting Policies
Revenue Recognition, page F-15
7. Please tell us why you believe you are within the scope of SOP
81-
1 in accounting for real estate services under the percentage of
completion method.
8. Please provide us, in disclosure type format, a separate
analysis
of the changes in the allowance for credit losses and contractual
allowance for the periods presented.
Note 8 Acquisitions, page F-20
9. Please tell us why you did not allocate purchase price to
intangible assets such as customer lists and customer
relationships
and your process and use of outside valuation experts for
determining
that no intangible assets were acquired other than goodwill.
* * * *
Please provide us the information requested within 10
business
days of the date of this letter or tell us when you will provide a
response prior to the expiration of the 10-day period. Please
furnish
a letter with your responses that keys your responses to our
comments. Detailed letters greatly facilitate our review. You
should
file the letter on EDGAR under the form type label CORRESP.
Please
understand that we may have additional comments after reviewing
your
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
Exchange Act of 1934 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.
In connection with responding to our comments, please
provide,
in your letter, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments 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 our review of your filing or in
response to our comments on your filing.
You may contact Sasha Parikh, Staff Accountant, at (202)
551-
3627 or Mary Mast, Review Accountant, at (202) 551-3613 if you
have
questions regarding the comments. In this regard, do not hesitate
to
contact me, at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief
Accountant
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Mark Szporka
Paincare Holdings, Inc.
September 16, 2005
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