Mail Stop 6010 December 22, 2005
David M. Daniels, CEO
National Health Partners, Inc.
120 Gibraltar Road, Suite 107
Horsham, PA 19044
Re: National Health Partners, Inc.
Amendment No. 3 to Registration Statement on Form SB-2
Filed December 12, 2005
File No. 333-126315
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.
Page references are to the marked copy furnished. Prior
comment refers to our letter dated November 23, 2005.
We Have a History of Operating Losses and Expect Losses to
Continue
into the Second Quarter of 2006, page 4
1. Please refer to prior comment 3. Please clarify whether expect
to
begin generating net profits for the second quarter period of
2006.
Also, the disclosure appears to conflict with the disclosure on
page
30 that you expect cost of sales to increase, the disclosure on
page
31 that you expect salary expense to increase and the disclosure
on
page 32 that you expect professional fees and rent expense to
increase.
Operational Metrics, page 23
2. Please revise to clarify the degree of alignment of your
receipt
of individual member`s fees with your obligation to make payment
of
related sales commissions. For example, clarify whether marketing
representatives and other agents earn commissions after the
initial
sale, such as residual commissions for retained members. If so,
please describe, and explain your reference to a four-week expense
recovery period. In this regard, we note the disclosure in the
fourth paragraph of Note 1a to the financial statements of ongoing
commission payments. Clarify whether you pay commissions on free-
trial memberships that do not convert to paying memberships and
whether a minimum member retention period is required for
commission
payment to be earned. Please conform related disclosure at
Marketing and Distribution at page 55.
Contractual Obligations, page 38
3. Please refer to prior comment 9 from our November 23, 2005
letter.
Please respond to the following comments:
* Please revise to include agreements to purchase goods or
services
that are enforceable and legally binding on you that specify all
significant terms, including fixed or minimum quantities to be
purchased, fixed, minimum or variable price provisions, and the
approximate timing of the transaction as purchase obligations
within
your table of contractual obligations.
* Please disclose material changes outside the ordinary course of
your business in your contractual obligations. We note that you
issued promissory notes in November 2005.
Off-Balance Sheet Arrangement, page 36
4. We note that the warrants issued to consultants in 2005 appear
to
qualify as off-balance sheet arrangements pursuant to Item
303(c)(2)(iii) of Regulation S-B. Please revise your disclosure
to
include a discussion of these warrants, or tell us why you believe
that this disclosure is not required.
Our CARExpress Healthcare Solutions, page 43
5. Please refer to prior comment 10 and your response. We reissue
the comment. It appears the "principles" cited in the comment all
describe limitations on healthcare access and utilization within
the
context of third-party payers. However, you state on page 50 that
your "primary target customer group..." is persons "who have no
health insurance of any kind." Please tell us, with a view to
disclosure, why you appear to believe that your product would
appeal
to your target customers because it addresses these third-party
payer
matters. It appears, rather, that potential members that are
all-
cash payers would not be affected third-party payments. Further,
we
note in the fourth bullet point that even "underinsured" persons
with
high deductibles would still pay less for medical services than
your
members. Please revise or advise.
Suppliers, page 53
6. We note the second sentence of the third paragraph of this
section. Please revise this section to discuss the material terms
of
the agreements.
Selling Security Holders, page 91
7. Please refer to prior comment 20. If applicable, please delete
any shares registered pursuant to the Trident option agreement
when
the option expires.
Financial Statements, page F-1
Consolidated Statements of Operations, page F-4
8. Please refer to prior comments 23 and 24 from our November 23,
2005 letter. Selling expenses should generally be included as
part
of other operating expenses and not within cost of sales. Refer
to
Item 5-03 of Regulation S-X. Please revise or advise.
Note 1. Nature of Organization, page F-8
9. We note that you have revised your pro forma stock compensation
disclosure in the annual and interim financial statements as
requested in our prior comment 28. We note that you have
disclosed
reported diluted loss per share amounts that differ from your
reported basic loss per share, and the reported diluted per share
amounts decrease the loss per share from the reported basic
measure.
Pursuant to SFAS 128, if the calculation of diluted per share
amounts
results in a per share amount that is antidilutive, then diluted
per
share amount reported would equal the basic per share amount.
Please
tell us how you have calculated the reported diluted per share
amounts in these disclosures.
Note 7. Equity Transactions, page F-21
10. Please refer to prior comment 29 from our November 23, 2005
letter. One of the factors considered in estimating expected
volatility is historical volatility of the underlying common stock
over the most recent period that is generally commensurate with
the
expected option/warrant life. If the option/warrant being valued
is
transferable, it is generally inappropriate to use an expected
life
shorter than the contractual term. We have evaluated your
response
and believe that the expected volatilities of similar entities
along
with your limited historical volatility may provide a more
meaningful
volatility measure. In addition, it appears unlikely that you
have
no readily comparables entities. In evaluating similarity of
entities, you should consider factors such as industry, stage of
life
cycle, and financial leverage. Please refer to the guidance in
paragraphs 277 and 285 of SFAS 123, paragraphs A22 and A43 of SFAS
123(R), and Question 6 of SAB Topic 14.D.1, including footnote 64
thereto, and revise the filing accordingly. Please also refer to
Question 3 of SAB Topic 14.D.2 regarding the expected term used in
your valuation.
Interim Financial Statements, page F-23
Consolidated Statements of Operations, page F-26
11. The cost of stock issued to previous investors for an
amendment
and release to their securities purchase agreements would
generally
be classified within other non-operating expenses as this item is
not
an expense related to your ongoing operating activities. Please
revise or advise.
Note 1. Basis of Financial Statement Presentation, page F-28
12. Please refer to prior comment 27 from our November 23, 2005
letter. We note from the revised disclosure on page F-28 that you
recognize the shipping and handling fees as services are rendered.
Please tell us and revise to disclose the method and period of
amortization for the shipping and handling fees. That is, you
should
amortize the fees over the term of the arrangement or the expected
period of performance on a systematic basis. The revenue
recognition
period should extend beyond the initial contractual period if the
relationship with the customer is expected to extend beyond the
initial term and the customer continues to benefit from the
payment
of the up-front fee. A systematic method would be on a straight-
line
basis, unless evidence suggests that revenue is earned or
obligations
are fulfilled in a different pattern, in which case that pattern
should be followed. Please refer to SAB Topic 13.A.3.f.
Note 7. Equity Transactions, page F-38
13. We have reviewed your response to prior comment 31 and note
that
you have deleted from the table amounts related to Park Financial,
because you have determined that there is no longer a commitment
or
contingency related to Park Financial. Please revise to put these
amounts back in the table due to the fact that the table contains
consulting expense information for the nine months ended September
30, 2005, of which amounts paid to Park Financial are a part.
Exhibits
14. Please refer to prior comment 34. Regarding Exhibit 10.28, we
note reference in Section 3 to "Exhibit B (the "Payment
Schedule").
This portion of the contract has still been omitted from the filed
document. This comment also applies to Exhibit 10.31. Please
file
both these exhibits in complete form.
15. Exhibit 5.1 must be current as of the date of effectiveness.
If
the updating disclaimer in the final paragraph is retained, please
refile this exhibit with current date to coincide with the date of
effectiveness.
16. Please file Exhibit 10.35 in its executed form, not as a "form
of" document.
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.
You may contact Thomas Dyer at (202) 551-3641 or Kate
Tillan,
Assistant Chief Accountant, at (202) 551-3604 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
Via telefax (215) 682-7116
David M. Daniels, CEO
National Health Partners, Inc.
December 22, 2005
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