SEC Company Response from National Health Partners Inc (CIK 0001306109) — Nov 7, 2005
National Health Partners Inc (CIK 0001306109)
Date: Nov. 7, 2005 · CIK: 0001306109 · Accession: 0000950116-05-003443
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November 7, 2005
VIA EDGAR AND OVERNIGHT MAIL
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Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attn: Mr. Alan Morris, Esq.
RE: NATIONAL HEALTH PARTNERS, INC. AMENDMENT NO. 1 TO REGISTRATION STATEMENT
ON FORM SB-2, REGISTRATION NO. 333 - 126315
Dear Mr. Morris:
I am writing to you on behalf of National Health Partners, Inc. in
regards to Amendment No. 1 to the Registration Statement on Form SB-2,
Registration No. 333 - 126315, filed by the company with the Securities and
Exchange Commission on September 30, 2005. The company received comments to the
registration statement from the SEC by means of a letter faxed to the company on
October 21, 2005.
Please find enclosed Amendment No. 2 to the Registration Statement on
Form SB-2. In addition, please find below each of the comments provided to the
company by the SEC along with the company's response to each comment. Each
comment is set forth in italics and is numbered to correspond to the numbered
paragraphs in the SEC's comment letter. The company's response to each comment
immediately follows the applicable comment.
Please note that the company has provided additional disclosure in this
letter subsequent to its responses to each of the comments to assist you in
reviewing additional changes reflected in Amendment No. 2 to the Registration
Statement on Form SB-2.
Please also note that the company previously submitted an application
for confidential treatment to the Office of the Secretary of the SEC
concurrently with the filing of Amendment No. 1 to the Registration Statement on
Form SB-2 for certain of the information contained in the agreements filed as
Exhibits 10.7, 10.8, 10.9, 10.10 and 10.11 to Amendment No. 1 to the
Registration Statement on Form SB-2.
<PAGE>
Securities and Exchange Commission
November 7, 2005
Page 2
Risk Factors, page 3
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1. Please add a risk factor or risk factors that highlight that the
trading price of your common stock may not be related to the offering
price. Also, quantify the average cost of the shares being sold by your
selling shareholders.
The company has added a risk factor entitled "The offering price of the
shares of our common stock offered hereby may not bear any relation to
the actual trading price of our common stock" that addresses each of
these requests.
2. Please add a risk factor that highlights the issuance of shares to
consultants and the related risk, such as dilution.
The company has added a risk factor entitled "We have issued a
significant number of securities to advisors and consultants to the
company and may issue additional securities to advisors and consultants
to the company in the future" under "Risks Associated With Our Stock"
that highlights the issuance of shares to consultants and the related
risk, such as dilution.
We are an early stage company with an unproven business model ... prospects,
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page 3
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3. We note your responses to prior comments 9, 10, 15, 25 and 26. Please
revise this section to clarify when the company or its predecessors
began implementing the business plan and the current state of
operational development of that plan. We note that although your
provider contracts were signed as early as April 2001 you still have
only limited revenues.
The company has revised this risk factor to clarify when the company
began implementing its current business plan and the current state of
operational development of its plan. The company notes that it has
added additional disclosure under "MD&A - Overview" regarding the
implementation of its current business plan and the current state of
operational development of its plan.
We have a history of losses and ... losses through the remainder of 2005, page 3
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4. We note that you revised the disclosure about being unprofitable in the
near term to losses through the remainder of 2005. Please tell us why
the disclosure changed, such as whether you recently entered into
material contracts.
The company revised the disclosure in this risk factor due to the rapid
growth in members and revenues it is beginning to experience through
its agreements with Trident Marketing International, Inc. and Hispanic
Global LLC. Please note that the company has further revised this risk
factor to state that it currently expects net losses to continue into
the second quarter of 2006. The company notes that it has provided
additional disclosure under "MD&A - Overview" regarding these
agreements and its expectations regarding future losses and
profitability.
<PAGE>
Securities and Exchange Commission
November 7, 2005
Page 3
The company notes its response to Comment No. 63 regarding agreements
relating to Trident and Hispanic Global that have been filed as
exhibits to the registration statement.
5. Please add or expand the appropriate risk factor to highlight the
compensation you are obligated to pay to your executives. Also, expand
your MD&A to include the amount you are obligated to pay and the source
of funds for these obligations.
The company has expanded the risk factor now entitled "We have
significant contractual obligations and may need to raise additional
funds in the future, which funds may not be available or, if available,
may not be available on acceptable terms" to highlight its significant
contractual obligations. Please note that the company moved the
disclosure regarding increases in operating expenses from the
immediately preceding risk factor to this risk factor as the company
believes increases in operating expenses are more appropriately
discussed in this risk factor.
The company has added a section entitled "Contractual Obligations" to
its MD&A to discuss its significant contractual obligations and the
source of funds for these obligations.
Our use of independent marketing representatives ... state regulations, page 7
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6. Please clarify whether the bullets in this risk factor relate to you or
the marketing representatives.
The company has clarified in each bullet to whom the particular risk
relates. Please note that the company has replaced the word
"distributor" with "marketing representative" so that the same term is
consistently used throughout the document.
Disclosure Regarding Forward-Looking Statements, page 17
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7. Please revise your disclosure here and throughout the document to
eliminate all references to the cited safe harbor, as it does not apply
to statements made by non-reporting companies.
The company has removed all references in the document to the safe
harbor for forward-looking statements.
Overview, page 18
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8. Please refer to prior comment 5. Please revise the references
throughout the filing to the "leading" and "largest," such as a
"leading national healthcare organization" and "one of the largest and
most comprehensive healthcare savings networks in the United States."
<PAGE>
Securities and Exchange Commission
November 7, 2005
Page 4
In the alternative, please provide us with support for the statements.
Also, balance your disclosure concerning affiliations with "some of the
largest ... networks in the country" to describe the lack of
exclusivity in provider contracts.
The company has removed all references to "leading national healthcare
organization" and "one of the largest and most comprehensive healthcare
savings networks in the United States." The company has removed or
toned down other words and phrases throughout the document that may be
deemed overly promotional in nature.
The company has balanced its disclosure regarding the provider networks
with which it has a business relationship by toning down the
description of the networks and by strengthening the risk factor
entitled "we currently rely heavily on a small number of preferred
provider organizations, the loss of any one of which or the change in
our relationship with any one of which could have a material adverse
effect on our business" to highlight the lack of exclusivity in, and
termination provisions of, the provider contracts.
Critical Accounting Policies, page 18
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9. We note that you have revised your critical accounting policies to
include revenue recognition as your only critical policy. In light of
the fact that you utilize stock and stock options as consideration for
services rendered to your company, it appears that stock-based
compensation to employees and consultants would qualify as a
significant accounting estimate. As appropriate for an investor to
better understand the significant estimates and assumptions involved in
the application of GAAP, revise your disclosure to discuss the
significant estimates inherent in valuing stock-based compensation or
tell us why you do not believe this disclosure is necessary. Refer to
the interpretative MD&A guidance in our Release 33-8350.
The company has added disclosure of its stock-based compensation
policies to its critical accounting policies.
Comparison of Years Ended December 31, 2004 and 2003, page 21
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10. We have reviewed your response to prior comment 10. We note that you
are unable to determine the amount of revenues derived in each period
from new members versus recurring revenues from old members because you
do not have sufficient information available to accurately break out
revenues in that manner. However, we note your disclosure that the
number of members is minimal. We also note your disclosures on page 38
that you pay your provider networks the greater of a flat fee or a
monthly rate based on the number of CARExpress members utilizing the
network. Please tell us why you cannot provide this information
requested.
The company has added disclosure to this section regarding the amount
of revenues derived in each period from new members versus recurring
revenues from old members. The company notes that at the time the
<PAGE>
Securities and Exchange Commission
November 7, 2005
Page 5
company previously responded to the request, it believed that it did
not have adequate information available to accurately break out
revenues in this manner. Upon reanalyzing its records and files, the
company determined that it could accurately break out revenues in the
manner requested.
11. We have reviewed your response to prior comments 53 and 69 wherein you
stated that you have omitted the disclosure of those shares not issued
for cash from your liquidity and capital resources discussion. Due to
the fact that you issued stock for services, please disclose the amount
of shares and compensation expense recorded for each such issuance in
your results of operations discussion for all periods presented.
The company has added disclosure to this section regarding the number
of shares issued for services and the compensation expense recorded for
such issuances to the extent material to the analysis of the applicable
periods.
General and Administrative Expense, page 22
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12. Please refer to prior comment 9. Your response that commission totaled
$3,065 in the six months in 2005 and none in 2004 is inconsistent with
your prior disclosure that commissions increased by $5,540 comparing 3
months ended 2005 with 2004. Please advise.
The company determined that the prior disclosure that commissions
increased by $5,540 for the 3 months ended March 31, 2005 compared to
the 3 months ended March 31, 2004 was incorrect. The information set
forth in our response that commissions totaled $3,065 for the 6 months
ended 2005 and that the no commissions were paid in 2004 is correct.
The company has not separately discussed commission expenses in general
and administrative expenses because the amounts incurred for each
period were immaterial.
Professional Fees, page 22
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13. Please discuss in greater detail the increase of $395,727. For example,
describe the services provided. Also, expand page 24 to clarify the
reference to the "various business transactions" such as which
transactions.
The company has added disclosure to this section to provide a reference
to other sections of the prospectus where additional information on the
services and the persons performing them can be found. The company
notes that the increase of $395,727 has been revised to $364,639 as a
result of a reclassification of $93,912 from deferred consulting
expense to consulting expense in 2005, which was more than offset by
the addition of $125,000 to professional fees in 2004 that were
incurred in connection with the issuance of 250,000 shares of common
stock in February and March 2004 for services rendered. Please see Note
5 under "Additional Information" below for additional information on
the reclassification of deferred consulting expense.
<PAGE>
Securities and Exchange Commission
November 7, 2005
Page 6
The company has clarified the reference to "various business
transactions" as requested.
Liquidity and Capital Resources, page 27
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14. Please clarify how you used the proceeds from your private placements
in 2004 and 2005.
The company has added disclosure to this section describing the uses to
which it put the proceeds from its private placements in 2004 and 2005.
Description of Business, page 31
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15. Please expand the appropriate section to discuss the material terms of
your agreements with consultants.
The company has added disclosure regarding the material terms of the
agreements with its marketing consultants and advisors under
"Description of Business - Marketing Consultants and Advisors."
Healthcare Industry, page 31
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16. Please refer to prior comment 13. Please provide us a copy of the
authoritative source cited in this section. Mark for ease of reference
the portions you believe support your disclosure. Also, provide us with
support of your ability to address the entire market. Also, state