August 1, 2007
VIA FASCIMILE (202) 772-9217
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United States
Securities and Exchange Commission
Mail Stop 6010
Washington, D.C. 20549
Attn: Mr. John Krug
Mr. Jeffrey Riedler
RE: HC INNOVATIONS, INC.
REGISTRATION STATEMENT ON FORM SB-2
FILED JUNE 29, 2007 (THE "REGISTRATION STATEMENT")
File No. 333-144200
Dear Sirs:
On behalf of HC Innovations, Inc. (the "Company"), please find
electronically transmitted herewith changes to the Company's filing in response
to your comments dated July 10, 2007. This response letter has been numbered to
coincide with your comment letter.
Recent Financings, page 2
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COMMENT 1. PLEASE REVISE THE DISCUSSION THROUGHOUT THE PROSPECTUS TO INDICATE
THE PRICE PAID FOR THE COMMON STOCK SOLD IN THE MAY 2007 OFFERING.
Response: We have revised the Registration Statement to indicate that the price
paid for the common stock sold in the May 2007 offering was $3.00 per share.
Please see pages 2, 6 and 50 of the Registration Statement.
Signatures
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COMMENT 2. THE REGISTRATION STATEMENT SHOULD ALSO BE SIGNED BY YOUR CONTROLLER
OR PRINCIPAL ACCOUNTING OFFICER. ANY PERSON WHO OCCUPIES MORE THAN ONE OF THE
SPECIFIED POSITIONS REQUIRED TO SIGN THE REGISTRATION STATEMENT SHOULD INDICATE
EACH CAPACITY IN WHICH THE REGISTRATION STATEMENT IS SIGNED. SEE INSTRUCTIONS 1
AND 2 FOR SIGNATURES TO FORM SB-2.
Response: We have revised the Registration Statement to respond to this comment.
Specifically, Mr. Jeffrey L. Zwicker, the Company's Chief Financial Officer and
Chief Operating Officer, is also the principal accounting officer.
General
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COMMENT 3. WE NOTE THAT YOU ARE REGISTERING THE SALE OF APPROXIMATELY 9.9
MILLION SHARES OF COMMON STOCK AND APPROXIMATELY 4.2 MILLION SHARES OF COMMON
STOCK UNDERLYING WARRANTS AND THAT "THERE IS AN EXTREMELY LIMITED AND ILLIQUID
MARKET FOR THE COMPANY'S COMMON STOCK.." GIVEN THE SIZE OF THE OFFERING RELATIVE
TO THE NUMBER OF SHARES OUTSTANDING HELD BY NON-AFFILIATES, THE NATURE OF THE
OFFERING, AND THE SELLING SECURITY HOLDERS, THE TRANSACTION APPEARS TO BE A
PRIMARY OFFERING. SINCE YOU ARE NOT ELIGIBLE TO CONDUCT A PRIMARY OFFERING ON
FORM S-3, IT APPEARS THAT YOU ARE NOT ELIGIBLE TO CONDUCT A PRIMARY
AT-THE-MARKET OFFERING UNDER RULE 415(A)(4) AND MUST SET A PRICE AT WHICH THE
SHARES WILL BE OFFERED.
IF YOU DISAGREE WITH OUR ANALYSIS, PLEASE ADVISE THE STAFF OF THE COMPANY'S
BASIS FOR DETERMINING THAT THE TRANSACTION IS APPROPRIATELY CHARACTERIZED AS A
TRANSACTION THAT IS ELIGIBLE TO BE MADE UNDER RULE 415(A)(1)(I). IN YOUR
ANALYSIS, PLEASE ADDRESS THE FOLLOWING AMONG ANY OTHER RELEVANT FACTORS:
o THE NUMBER OF SELLING SHAREHOLDERS AND THE PERCENTAGE OF THE OVERALL
OFFERING MADE BY EACH SHAREHOLDER;
o THE DATE ON WHICH AND THE MANNER IN WHICH EACH SELLING SHAREHOLDER RECEIVED
THE SHARES AND/OR THE OVERLYING SECURITIES;
o THE RELATIONSHIP OF EACH SELLING SHAREHOLDER WITH THE COMPANY, INCLUDING AN
ANALYSIS OF WHETHER THE SELLING SHAREHOLDER IS AN AFFILIATE OF THE COMPANY;
o ANY RELATIONSHIP AMONG THE SELLING SHAREHOLDERS;
o THE DOLLAR VALUE OF THE SHARES REGISTERED IN RELATION TO THE PROCEEDS THAT
THE COMPANY RECEIVED FROM THE SELLING SHAREHOLDERS FOR THE SECURITIES,
EXCLUDING AMOUNTS OF PROCEEDS THAT ARE RETURNED (OR WILL BE RETURNED) TO
THE SELLING SHAREHOLDERS AND/OR THEIR AFFILIATES IN FEES OR OTHER PAYMENTS;
o THE DISCOUNT AT WHICH THE SELLING SHAREHOLDERS WILL PURCHASE THE COMMON
STOCK UNDERLYING THE CONVERTIBLE SECURITIES (OR ANY RELATED SECURITY, SUCH
AS A WARRANT OR OPTION) UPON CONVERSION OR EXERCISE; AND
o WHETHER OR NOT ANY OF THE SELLING SHAREHOLDERS IS IN THE BUSINESS OF BUYING
AND SELLING SECURITIES.
Response: We respectfully disagree with the Staff's analysis in connection
with the Company's Registration Statement. The Company is not registering the
sale of shares of common stock and shares of common stock underlying warrants.
All shares of common stock and warrants have been issued to the Selling
Securityholders. These shares and warrants have been issued to the Selling
Secuurityholders at various times over the past several years (as more fully
disclosed in the Registration Statement on pages 2 and 50). The Company is not
conducting a primary offering but is registering such shares for resale by the
Selling Securityholders.
Under Rule 415(a)(1)(i), securities may be registered for sale on a delayed
or continuous basis if the registration statement pertains to securities which
are to be offered or sold solely by or on behalf of a person or persons other
than the registrant. In that
regard, we respectfully believe that the resale by the Selling Securityholders
of the shares of common stock held by them and the shares of common stock
underlying the warrants held by some of the Selling Securityholders, which were
purchased in private transactions exempt from the registration requirements of
the Securities Act, are permitted to be registered for resale on a shelf basis.
We have considered in light of the Commission Staff's existing telephone
interpretations whether the resale of the common stock underlying the warrants
may be viewed as a continuous offering of the warrants and have concluded that
there is no continuous offering as the warrants themselves are not being
registered for resale. We also have considered the question as to whether this
secondary offering is really a primary offering (i.e., that the Selling
Securityholders are actually underwriters selling on behalf of the issuer). In
this case, the Selling Securityholders do not share any identity in interest
with the Company.
Unlike a best efforts public offering on behalf of the Company, the Company
has already received the proceeds of the sale of the common stock and warrants
when such transactions consummated as provided in the Registration Statement and
will not receive any proceeds when or if any shares are ultimately resold by the
Selling Securityholders. In addition, the decision to sell to the registered
shares rests solely with the Selling Securityholders, not the Company, or any
person or entity acting on behalf of the Company.
For the reasons set forth above, we do not believe there is a basis in
current law to deny the registration of the shares of common stock and shares of
common stock underlying the warrants, nor do we believe that the transaction
being registered in the prospectus constitutes an indirect primary offering, but
rather a secondary offering to be made on a resale basis by bona fide Selling
Securityholders, who bear the full economic burden of their investment.
The Company believes that they have responded to all of the Staff's
comments. If you have any questions or anything that I can do to facilitate your
review, please let me know. The Company would like to go effective as soon as
possible. Your anticipated cooperation is greatly appreciated.
Sincerely,
/s/ Peter J. Gennuso, Esq.
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Peter J. Gennuso, Esq.