National Health Partners, Inc.
120 Gibraltar Road, Suite 107
Horsham, PA 19044
(215) 682-7114
September 14, 2011
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, NE
Washington, D.C. 20549
Attention: Jim Lopez, Legal Branch Chief
Re: National Health Partners, Inc.
Form 10-K for the Fiscal Year ended December 31, 2010
Filed March 31, 2011
Form 10-Q for the Fiscal Quarter Ended March 31, 2011
Filed May 16, 2011
File No. 000-51731
Gentlemen,
This letter is in response to your letter to me of August 12, 2011,
regarding the above referenced filings ("Comment Letter"). Our responses to the
Comment Letter follow:
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
BUSINESS, PAGE 4
1. ON PAGE THREE, YOU INDICATE YOUR "DEPENDENCE UPON A LIMITED NUMBER OF
MARKETING AND DISTRIBUTION PARTNERS FOR SUBSTANTIALLY ALL OF OUR REVENUE." WITH
A VIEW TO CLARIFYING DISCLOSURE IN FUTURE FILINGS, PLEASE ADVISE US OF THE
MARKETING AND DISTRIBUTION PARTNERS UPON WHICH YOU ARE SUBSTANTIALLY DEPENDENT.
ALSO, PLEASE ADVISE US WHETHER YOU HAVE ANY MATERIAL AGREEMENTS WITH YOUR
MARKETING AND DISTRIBUTION PARTNERS THAT ARE REQUIRED TO BE FILED PURSUANT TO
ITEM 601(B)(10) OF REGULATION S-K. SIMILARLY, WE NOTE THE STATEMENT ON PAGE SIX
THAT YOU RELY ON THE SERVICES OF "A HOSPITAL SAVINGS COMPANY." PLEASE ADVISE US
WHETHER YOU HAVE ANY MATERIAL AGREEMENTS WITH THIS ENTITY THAT ARE REQUIRED TO
BE FILED PURSUANT TO ITEM 601(B)(10) OF REGULATION S-K.
Response:
With a view to clarifying disclosure in our future filings, we have
approximately 50 primary marketing partners and insurance brokers who market and
distribute our programs, none of whom represent 10% or more of our revenues. We
feel that disclosure of the names of these primary marketing partners and
insurance brokers would impair our competitive position and enhance the
competitive positions of our competitors. We do not believe that our agreements
with our marketing and distribution partners are material agreements that should
have been filed pursuant to Item 601 (b) (10) of Regulation S-K.
2. SIMILARLY, WE NOTE THE STATEMENT ON PAGE SIX THAT YOU RELY ON THE
SERVICES OF "A HOSPITAL SAVINGS COMPANY." PLEASE ADVISE US WHETHER YOU HAVE ANY
MATERIAL AGREEMENTS WITH THIS ENTITY THAT ARE REQUIRED TO BE FILED PURSUANT TO
ITEM 601 (B) (10) OF REGULATIONS S-K.
Response:
Yes, we have a material agreement with this entity, First Access, Inc. See
Exhibit 10.7 to our Form 10-K for the Fiscal year Ended December 31, 2010.
OUR CAREXPRESS MEMBERSHIP PROGRAMS, PAGE 8
CAREXPRESS PLUS MEMBERSHIP PROGRAMS, PAGE 9
3. WE NOTE THAT YOUR CAREXPRESS PLUS PROGRAMS ARE MEMBERSHIP PROGRAMS
COMPRISED OF YOUR CAREXPRESS HEALTH DISCOUNT PROGRAMS AND LIMITED LIABILITY
INSURANCE BENEFITS UNDERWRITTEN BY U.S. FIRE INSURANCE COMPANY. PLEASE TELL US
THE KEY TERMS OF YOUR AGREEMENTS WITH U.S. FIRE INSURANCE COMPANY, YOUR
ACCOUNTING POLICIES FOR THE RELATED REVENUES EARNED AND COSTS INCURRED UNDER THE
AGREEMENTS, AND WHERE YOU PRESENT SUCH REVENUES AND COSTS ON YOUR FINANCIAL
STATEMENTS. ALSO CONFIRM TO US THAT WILL EXPAND TO DISCLOSE SUCH INFORMATION IN
FUTURE FILINGS, AND PROVIDE US WITH THE TEXT OF YOUR PROPOSED DISCLOSURE TO BE
INCLUDED IN FUTURE FILINGS.
Response:
The key terms to our agreement with U.S. Fire Insurance Company are (i) we
are able to offer our members an option to participate in a Silver, Gold or
Platinum Plan of health benefits including accidental death & dismemberment,
accident medical expense reimbursement, hospital daily benefit, ICU daily
benefit, doctor visit benefit, surgical benefit, emergency room benefit,
ambulance benefit and accident disability benefit. The Silver, Gold and Platinum
Plans vary in pricing to our members and benefits to our members.
The accounting policies for the related revenues earned and costs incurred
under the U.S. Fire Insurance agreement are handled exactly the same as our
health discount programs. See the section captioned "Revenue-Recognition on page
20 of our financial statements.
We confirm that in future filings, we will expand this disclosure in the
following manner:
"Our CARExpress Plus memberships are made available through our agreement
with American Advantage Association. The limited medical portion of the plan is
underwritten by U.S. Fire Insurance Company and the plan is made available
through membership in the American Advantage Association."
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURE, PAGE 25
4. WE NOTE YOUR CONCLUSION THAT DISCLOSURES CONTROLS AND PROCEDURES
("DC&P") WERE EFFECTIVE AS OF DECEMBER 31, 2010 TO PROVIDE REASONABLE ASSURANCE,
AND YOUR CONCLUSION THAT INTERNAL CONTROLS OVER FINANCIAL REPORTING ("ICFR")
WERE NOT EFFECTIVE AS OF DECEMBER 31, 2010. PLEASE DESCRIBE TO US THE FACTS AND
CIRCUMSTANCES THAT RESULTED IN YOUR CONCLUSION THAT DC&P WAS EFFECTIVE AS OF
DECEMBER 31, 2010 AND MARCH 31, 2011 GIVEN THE MATERIAL WEAKNESSES IDENTIFIED
AND CONCLUSION THAT ICFR WAS NOT EFFECTIVE AS OF DECEMBER 31, 2010, AND THAT
THERE WERE NO CHANGES IN YOUR ICFR DURING THE FISCAL QUARTER ENDED MARCH 31,
2011.
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Response:
DC&P was effective as of December 31, 2010 and March 31, 2011 due to the
disclosure controls and procedures that were in place and are currently in place
at the Company. All financial information and transactions are recorded,
processed and summarized within the accounting department with the constant
supervision and guidance of our accounting manager. In addition, all
transactions are reviewed by our vice president with the accounting manager. The
accounting manager and vice president are in constant communication with our
Chief Executive Officer, the principal executive officer and principal financial
officer, regarding all information, decisions and the review of all daily
activity at the Company. Based on the controls and procedures described above
our disclosure controls and procedures were effective as of December 31, 2010
and March 31, 2011 to provide reasonable assurance that information we are
required to disclose in reports that we file or submit under the Exchange Act
is: (i) recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and (ii) accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our ICFR during the fiscal quarter ended March 31,
2011 from December 31, 2010. Our conclusion that ICFR was not effective as of
December 31, 2010 and March 31, 2011 is based on that fact that our Chief
Executive Officer is our only director and is located in the state of Florida,
even though the accounting manager and vice president are in constant
communication with our Chief Executive Officer regarding all information,
decisions and the review of all daily activity at the Company.
5. WE NOTE YOUR CONCLUSION THAT DC&P WERE EFFECTIVE AS OF DECEMBER 31, 2010
TO PROVIDE REASONABLE ASSURANCE. PLEASE CONFIRM TO US THAT IN FUTURE FILINGS YOU
WILL STATE CLEARLY, IF TRUE, THAT YOUR DC&P ARE DESIGNED TO PROVIDE REASONABLE
ASSURANCE OF ACHIEVING THEIR OBJECTIVES AND THAT YOUR PRINCIPAL EXECUTIVE
OFFICER AND PRINCIPAL FINANCIAL OFFICER CONCLUDED THAT YOUR DC&P ARE EITHER
EFFECTIVE OR INEFFECTIVE AT THAT REASONABLE ASSURANCE LEVEL. ALTERNATIVELY,
CONFIRM TO US THAT IN FUTURE FILINGS YOU WILL REMOVE THE REFERENCE TO THE LEVEL
OF ASSURANCE RELATED TO YOUR DC&P CONCLUSION. REFER TO SECTION II.F.4 OF SEC
RELEASE NO. 33-8238 FOR ADDITIONAL GUIDANCE. ALSO, PROVIDE US WITH THE TEXT OF
YOUR PROPOSED FUTURE DISCLOSURE.
Response:
We confirm to you that in future filings we will state clearly, if true,
that our DC&P are designed to provide reasonable assurance of achieving their
objectives and that our principal executive officer and principal financial
officer will conclude that our DC&P are either effective or ineffective at that
reasonable assurance level. Alternatively, we confirm to you that in future
filings we will remove the reference to the level of assurance related to our
DC&P conclusion.
The text of our proposed future disclosure is as follows:
"Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding
required disclosure. In designing and evaluating our disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Our disclosure controls and procedures were designed to provide
reasonable assurance that the controls and procedures would meet management's
objectives.
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As of June 30, 2011, we carried out the evaluation of the effectiveness of
our disclosure controls and procedures as defined by Rule 13a-15(e) under the
Exchange Act under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of June 30, 2011, our disclosure controls and procedures were
effective to provide reasonable assurance that information we are required to
disclose in reports that we file or submit under the Exchange Act is: (i)
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and (ii) accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure."
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE, PAGE 28
6. PLEASE ADVISE US THE DATE OF YOUR MOST RECENT ELECTION OF DIRECTORS.
ALSO, PLEASE ADVISE US WHEN YOUR NEXT ANNUAL MEETING AND ELECTION OF DIRECTORS
WILL OCCUR.
Response:
David M. Daniels, our sole Director, was appointed to serve on our Board of
Directors by our Board of Directors at a Special Meeting of the Board of
Directors on February 13, 2005, and has continuously held his position as a
Director since that date. The Company has not held an annual meeting for the
election of Directors since Mr. Daniels' appointment to the Board of Directors
on February 13, 2005. The Company plans on holding its next Annual Meeting of
Shareholders in May or June 2012.
EXECUTIVE COMPENSATION, PAGE 30
7. PLEASE CONFIRM IN FUTURE FILINGS YOU WILL REVISE YOUR SUMMARY
COMPENSATION TABLE TO MOVE SALARY ATTRIBUTED TO STOCK AND OPTION AWARDS IN THE
APPROPRIATE COLUMNS AND CONFIRM THAT THE AMOUNTS ARE VALUED IN ACCORDANCE WITH
ITEMS 402(N)(2)(V) AND (VI) OF REGULATION S-K. PLEASE PROVIDE US DRAFT
DISCLOSURE.
Response:
We confirm that in our future filings, we will revise our summary
compensation table to move salary attributed to stock and option awards in the
appropriate columns and confirm that the amounts are valued in accordance with
Items 402 (n) (2) (v) and (vi) of Regulation S-K.
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Below is a draft disclosure of the summary compensation table:
SUMMARY COMPENSATION TABLE
Name and
Principal Stock Option All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Total($)
-------- ---- --------- -------- --------- --------- --------------- --------
David M. Daniels 2010 134,010(4) -0- 47,190(4) -0- -0- 181,200
President and 2009 232,870 -0- 149,930(1) -0- -0- 382,800
Chief Executive Officer
Alex Soufflas 2010 39,780(5) -0- 14,765(5) -0- -0- 54,545
Chief Financial Officer, 2009 172,660 -0- 146,780(2) -0- -0- 319,440
Executive Vice President
and Secretary
Patricia S. Bathurst 2010 78,500 -0- -0- -0- -0- 78,500
Vice President--Marketing 2009 97,163 -0- -0- 78,529(3) -0- 175,692
----------
(1) Includes 2,364,286 shares of common stock issued to Mr. Daniels in lieu of
salary earned during the year ended December 31, 2009. A more detailed
description of these stock issuances is provided herein under "ITEM 10.
EXECUTIVE COMPENSATION -- EMPLOYMENT CONTRACTS AND ARRANGEMENTS."
(2) Includes 1,961,143 shares of common stock issued to Mr. Soufflas in lieu of
salary earned during the year ended December 31, 2009. A more detailed
description of these stock issuances is provided herein under "ITEM 10.
EXECUTIVE COMPENSATION -- EMPLOYMENT CONTRACTS AND ARRANGEMENTS."
(3) Includes options to purchase 1,080,643 shares of common stock issued to Ms.
Bathurst in lieu of salary earned during the year ended December 31, 2009.
A more detailed description of these option issuances is provided herein
under "ITEM 10. EXECUTIVE COMPENSATION -- EMPLOYMENT CONTRACTS AND
ARRANGEMENTS."
(4) Includes 1,180,612 shares of common stock issued to Mr. Daniels in lieu of
salary earned during the year ended December 31, 2010. A more detailed
description of these stock issuances is provided herein under "ITEM 10.
EXECUTIVE COMPENSATION -- EMPLOYMENT CONTRACTS AND ARRANGEMENTS."
(5) Includes 382,112 shares of common stock issued to Mr. Soufflas in lieu of
salary earned during the year ended December 31, 2010. A more detailed
description of these stock issuances is provided herein under "ITEM 10.
EXECUTIVE COMPENSATION -- EMPLOYMENT CONTRACTS AND ARRANGEMENTS."
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR
INDEPENDENCE, PAGE 36
8. IT IS UNCLEAR WHY THIS SECTION IS BLANK. PLEASE CONFIRM IN FUTURE
FILINGS YOU WILL REVISE TO PROVIDE THE DISCLOSURE REQUIRED BY ITEM 404 OF
REGULATION S-K. WE NOTE THE RELATED PARTY DISCLOSURE ON PAGE 24 OF YOUR
FINANCIAL STATEMENTS. PLEASE PROVIDE US DRAFT DISCLOSURE. WE MAY HAVE FURTHER
COMMENT.
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Response:
Please be advised that this section was left blank because the disclosures
for this section were included in our related party disclosure on page 24 of our
financial statements. We confirm that in our future filings, we will revise this
section to include the disclosure in this section, as well as in the Notes to
our financial statements.
Below is a draft of our disclosure of this section for our future filings:
"In June 2009, the Company issued 500,000 and 405,000 shares of common
stock to David M. Daniels, its President and Chief Executive Officer, and Alex
Soufflas, its Vice President and Chief Financial Officer, respectively, in full
payment of deferred salary compensation that was earned by each of them during
the three months ended March 31, 2009 and payable to each of them as of March
31, 2009.
In June 2009, the Company issued a stock option to Patricia S. Bathurst to
acquire 225,000 shares of common stock in full payment of deferred salary
compensation that was earned by her during the three months ended March 31, 2009
and payable to her as of March 31, 2009. The option has an exercise price of
$0.09 per share and was vested in full on the date of grant.
In December 2009, the Company issued 1,864,286 and 1,556,143 shares of
common stock to David M. Daniels, its President and Chief Executive Officer, and
Alex Soufflas, its Vice President and Chief Financial Officer, respectively, in
full payment of deferred salary compensation that was earned by each of them
during the nine months ended December 31, 2009 and payable to each of them as of
December 31, 2009.
In December 2009, the Company issued a stock option to Patricia S. Bathurst
to acquire 855,643 shares of common stock in full payment of deferred salary
compensation that was earned by her during the nine months ended December 31,
2009 and payable to her as of December 31, 2009. The option has an exercise
price of $0.07 per share and was vested in full on the date of grant.
On March 31, 2010, the Company entered into a Securities Agreement with
David M. Daniels, its Chief Executive Officer, pursuant to which it granted
1,180,612 shares of the Company's common stock, $0.001 par value per share to
Mr. Daniels. The shares were issued in lieu of the payment of $17,690 of salary
compensation earned by Mr. Daniels under the Employment Agreement, dated May 1,
2006, by and between the Company and Mr. Daniels, during the period commencing
January 1, 2010 and ending January 31, 2010 and payable to Mr. Daniels as of
January 31, 2010, and in part for the termination of the following stock options
held by Mr. Daniels: (i) the stock option dated February 1, 2005 to acquire
2,500,000 shares of common stock at an exercise price of $0.40, (ii) the stock
option dated December 12, 2006 to acquire 250,000 shares of common stock at an
exercise price of $0.88, and (iii) the stock option dated March 25, 2008 to
acquire 400,000 shares of common stock at an exercise price of $0.28.
On March 31, 2010, the Company entered into a Securities Agreement with
Alex Soufflas, its Chief Financial Officer and Executive Vice President,
pursuant to which it granted 382,112 shares of common stock to Mr. Soufflas. The
shares were issued in lieu of the payment of $14,765 of salary compensation
earned by Mr. Soufflas under the Employment Agreement, dated February 1, 2006,
by and between the Company and Mr. Soufflas, during the period commencing
January 1, 2010 and ending January 31, 2010 and payable to Mr. Soufflas as of
January 31, 2010.
On March 31, 2010, the Company entered into a Securities Agreement with
Patricia S. Bathurst, its Vice President - Marketing, pursuant to which it
granted a stock option (the "Option") to acquire 500,000 shares of common stock
to Ms. Bathurst. The Option was issued in lieu of the payment of $8,119 of
salary compensation earned by Ms. Bathurst under the Employment Agreement, dated
May 1, 2006, by and between the Company and Ms. Bathurst during the period
commencing January 1, 2010 and ending January 31, 2010 and payable to Ms.
Bathurst as of January 31, 2010, and in part for the termination of the
following stock options held by Ms. Bathurst: (i) the stock option dated
February 1, 2005 to acquire 2,500,000 shares of common stock at an exercise
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price of $0.40, (ii) the stock option dated December 12, 2006 to acquire 250,000
shares of common stock at an exercise price of $0.88, (iii) the stock option
dated September 4, 2007 to acquire 400,000 shares of common stock at an exercise
price of $0.50, and (iv) the stock option dated March 25, 2008 to acquire
400,000 shares of common stock at an exercise price of $0.28. The Option is for
a term of 10 years, has an exercise price of $0.045 per share and vested in full
on the date of grant.
All stock options issued to David M. Daniels, Alex Soufflas and Patricia S.
Bathurst were cancelled in 2010."
SIGNATURES, PAGE 40
9. PLEASE CONFIRM IN FUTURE FILINGS YOU WILL REVISE YOUR ANNUAL REPORT TO
PROVIDE A SIGNATURE OF YOUR PRINCIPAL ACCOUNTING OFFICER OR CONTROLLER. IF YOUR
PRINCIPAL ACCOUNTING OFFICER OR CONTROLLER IS ANOTHER MEMBER OF MANAGEMENT,
PLEASE CLEARLY INDICATE ALL APPROPRIATE TITLES UNDER THEIR RESPECTIVE SIGNATURE.
Response:
We confirm that in our future filings, we will revise our annual report to
provide signature of our principal accounting officer or controller. We did,
however, indicate that David M. Daniels was our Principal Accounting Officer in
our Section 302 and 906 Certifications.
EXHIBITS
10. WE NOTE THAT YOUR PRINCIPAL SUPPLIERS ARE AETNA, OPTUM, OUTLOOK VISION,
INTEGRATED HEALTH, THREE RIVERS AND HEALTHFI, AS DISCLOSED ON PAGE 10. WE ALSO
NOTE EXHIBITS FILED WITH RESPECT TO CAREINGTON, UNITED HEALTHCARE SERVICES,
FIRST ACCESS, NATIONAL BENEFIT BUILDERS, AND ADVANCEPCS. PLEASE ADVISE US
WHETHER ALL MATERIAL AGREEMENTS WITH YOUR PRINCIPAL SUPPLIERS HAVE BEEN FILED
PURSUANT TO ITEM 601(B)(10) OF REGULATION S-K. IT IS UNCLEAR, FOR EXAMPLE,
WHETHER EXHIBITS 10.5 THROUGH 10.9 REPRESENT PREDECESSORS, EXCEPT FOR OPTUM, TO
YOUR PRINCIPAL SUPPLIERS AND IF THESE AGREEMENTS ARE STILL IN FORCE. TO THE
EXTENT THERE ARE MATERIAL AGREEMENTS NOT FILED WITH YOUR ANNUAL REPORT, PLEASE
CONFIRM YOU WILL FILE THEM IN THEIR ENTIRETY WITH YOUR NEXT PERIODIC REPORT.
Response:
The confusion arises from the fact that the supplier names are not
necessarily the contract name. For example, our contract with Aetna is under the
name of National Benefit Builders, which is Exhibit 10.8 to our Form 10-K. Our
contract with Optum is under the name of United Healthcare Services, which is
Exhibit 10.6 to our Form 10-K. Our contracts with Integrated Health, Three
Rivers and HealthFi all fall under the name of First Access, which is Exhibit
10.7 to our Form 10-K. Caremark is also listed as a principal supplier and our
contract with Caremark is under the name AdvancePCS, which is Exhibit 10.9 to
our Form 10-K. While Careington is not a principal supplier, we still have a
contract with them, so that is why it is still an exhibit. Outlook Vision is a
principal supplier that deals with our various vision coverages. We should have
filed the Outlook Vision as an Exhibit to our Form 10-K, but, for some reason,
inadvertently omitted it from our exhibits. We propose to file the Outlook
Vision agreement as an exhibit to our next scheduled filing of our Form 10-Q for
the Fiscal Quarter Ended September 30, 2011.
11. PLEASE ADVISE US WHETHER YOU HAVE ANY MATERIAL AGREEMENTS WITH U.S.
FIRE INSURANCE COMPANY, WHICH APPEARS TO BE YOUR SOLE VENDOR FOR LIMITED
LIABILITY INSURANCE BENEFITS OF YOUR CAREXPRESS PLUS MEMBERSHIP PROGRAM. IF YES,
PLEASE CONFIRM YOU WILL FILE THEM PURSUANT TO ITEM 601(B)(10) OF REGULATION S-K
WITH YOUR NEXT PERIODIC REPORT.
Response:
We confirm that we have a material agreement with American Advantage
Association through which the U.S. Fire Insurance plans are made available as
our sole vendor for limited liability insurance benefits to our CARExpress Plus
membership program and we will file this agreement as an exhibit to our next
scheduled filing of our Form 10-Q for the Fiscal Quarter Ended September 30,
2011.
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FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 2011
CONSOLIDATED BALANCE SHEETS, PAGE 3
12. WE NOTE YOUR TOTAL PREPAID EXPENSES HAVE SIGNIFICANTLY INCREASED FROM
$5,138 AS OF DECEMBER 31, 2010 TO $367,293 AS OF MARCH 31, 2011, AND THAT THE
BALANCE AS OF MARCH 31, 2011 IS APPROXIMATELY 88% OF YOUR TOTAL ASSETS. PLEASE
TELL US THE NATURE OF AND YOUR ACCOUNTING POLICY FOR PREPAID EXPENSES. ALSO TELL
US WHERE YOU PRESENT THE INCREASE OF PREPAID EXPENSES IN THE STATEMENT OF CASH
FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2011 ON PAGE FIVE.
Response:
Our prepaid expenses increased from $5,138 as of December 31, 2010, to
$367,293 as of March 31, 2011. Prepaid expenses of $5,138 as of December 31,
2010, consisted of health and dental insurance.
Prepaid expenses of $367,293 as of March 31, 2011, consisted of health and
dental insurance of $4,925 for the period of April 2011, and the unamortized
portion of shares of common stock issued for services of $362,368. A total of
16,800,000 shares were issued for such services and were valued in the aggregate
of $411,500, of which we amortized $49,132 in the fiscal quarter ended March 31,
2011.
The $213 reduction in prepaid health insurance was reflected in the change
in current assets of the Consolidated Statements of Cash Flows. The $49,132 in
amortized portion of shares of common stock issued for services was reflected in
our Consolidated Statements of Cash Flows in the line item captioned "Common
stock issued for services and amortization of prepaid services," which includes
the $49,132 accrual for common stock issued for services and $18,481 restricted
stock award for services.
We acknowledge that:
* the Company is responsible for the adequacy and accuracy of the
disclosure in these filings;
* staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filings;
* the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission from taking any action with
respect to the filings; 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.
Please address any further comments to our attorney, David E. Wise, Esq.
Mr. Wise's contact information is set forth below:
Law Offices of David E. Wise, P.C.
Attorney at Law
The Colonnade
9901 IH-10 West, Suite 800
San Antonio, Texas 78230
Telephone: (210) 558-2858
Facsimile: (210) 579-1775
Email: wiselaw@gvtc.com
Sincerely,
By: /s/ David M. Daniels
-------------------------------------
David M. Daniels
President and Chief Financial Officer
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