UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DECEMBER 10, 2007 (DECEMBER 5, 2007)
Date of Report (Date of earliest event reported)
HC INNOVATIONS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 0-52197 04-3570877
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
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10 Progress Drive, Suite 200
Shelton, CT 06484
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (203) 925-9600
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
FORWARD-LOOKING STATEMENTS
Statements in this Current Report on Form 8-K (including the exhibit) that are
not purely historical facts, including statements regarding HC Innovation's
beliefs, expectations, intentions or strategies for the future, may be
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. All forward-looking statements involve a number of risks and
uncertainties that could cause actual results to differ materially from the
plans, intentions and expectations reflected in or suggested by the
forward-looking statements. These risks include the HC Innovation's entry into
new commercial businesses, the risk of obtaining financing, delays in obtaining
regulatory approvals, recruiting and retaining qualified personnel, potential
litigation and other risks described in the HC Innovation's Securities and
Exchange Commission filings. Risk factors, cautionary statements and other
conditions which could cause HC Innovation's actual results to differ from
management's current expectations are contained in HC Innovation's filings with
the Securities and Exchange Commission. HC Innovations undertakes no obligation
to update any forward-looking statement to reflect events or circumstances that
may arise after the date of this filing.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On December 5, 2007, HC Innovations, Inc. (the "Company") closed on the sale of
$6,000,000 of a total $7,000,000 of its Twelve-Month 10% Secured Convertible
Notes ("Notes") and Warrant for the Purchase of Shares of Common Stock
("Warrants") to three (3) "accredited investors" (the "Offering"). Pursuant to
the Offering, the Company entered into Subscription Agreements for the Purchase
of Securities (the "Subscription Agreement"), Security Agreement ("Security
Agreement"), Registration Rights Agreement ("Registration Agreement") and
Corporate Guaranty ("Corporate Guaranty", together with the Subscription
Agreement, Security Agreement and Registration Agreement, the "Transaction
Documents").
The Subscription Agreement contains customary provisions for transactions of
this nature and provides for a collateral assignment of the proceeds from the
Company's key man life insurance policy covering its Chief Executive Officer to
the investors on a pro rata basis; such key man life insurance policy is
currently in the amount of $5,000,000 and the Company is in the process of
getting an additional policy to cover at least the full amount of the Offering.
Further, pursuant to the Subscription Agreement, the Company may not incur new
lines of credit, credit facilities or otherwise incur any additional
indebtedness without the consent of the investors. The Conversion Price of the
Notes is equal to seventy percent (70%) of the average of the lowest bid prices
for the Company's common stock for the consecutive twenty (20) trading days
immediately prior to the Conversion Date (as defined in the Note); provided,
however, the Conversion Price shall not be lower than $1.00 per share. Further,
upon the closing of a Qualified Financing (as defined herein), the investor of
the Note shall have the right to either: (i) tender all or a portion of the Note
(in lieu of cash) for securities issued in the Qualified Financing (as defined
in the Note), receiving credit for all unpaid principal and interest then due on
the Note, or (ii) have all or a portion of the unpaid principal and interest
then due on the Note paid in full. In the event of an Optional Conversion
pursuant to the Note, the investor may convert the principal and unpaid interest
due under the Note at a price equal to the lower of (a) a thirty percent (30%)
discount to the issue price of the new securities offered in the Qualified
Financing; or (b) a thirty percent (30%) discount to the average of the lowest
bid prices for the Company's common stock for the consecutive twenty (20)
trading days prior to the announcement of the issue of new securities in the
Qualified Financing; provided, however, that the tender price pursuant to the
Note shall not be lower than $1.00 per share. In connection with the issuance of
a Note to one of the investors in the Offering, the Company and this investor
agreed to add a five percent (5%) arrangement fee ("Arrangement Fee") in the
principal amount of this investor's Note and provide for a Conversion Price
equal to seventy-five percent (75%) as opposed to seventy percent (70%).
The Warrants issued in connection with the Offering expire five (5) years from
the date of issuance and have a per share exercise price equal to the exercise
price of any warrants issued in connection with the Company's Qualified
Financing (as defined in the Note and Warrant); provided, however, that in the
event the Company does not consummate a Qualified Financing prior to the
Maturity Date (as defined in the Note) of Note, the "Exercise Price" shall be
the average of the lowest bid prices for the consecutive twenty (20) trading day
period prior to the Maturity Date.
The Company also entered into Registration Rights Agreements with these
investors providing for certain mandatory and piggyback registration rights,
including requiring the Company to prepare and file a registration statement
covering the shares of Common Stock and the shares of Common Stock underlying
the Warrants sold in this offering prior to the Maturity Date of the Note
The Company also entered into a Security Agreement with these investors securing
its obligations under the Notes with certain collateral of the Company, as more
fully described in that agreement. The security interest granted pursuant to the
Security Agreement is at all times subordinated to certain indebtedness of the
Company. Moreover, the Security Agreement provides that the Company is to
deliver into escrow stock certificates representing its ownership in Enhanced
Care Initiatives, Inc. and NP Care, LLC. In connection with the Security
Agreement, the Company's subsidiaries provided a corporate guaranty for all of
the Company's obligations under the Notes.
In connection with the Offering, two (2) investors converted certain promissory
notes previously issued to them on October 25, 2007 into the Offering. The total
amount converted into the Offering by these investors was $1,004,955.22.
A copy of the Subscription Agreement, Form of Note, Form of Warrant, Security
Agreement, Corporate Guaranty and Registration Rights Agreement are filed
herewith as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6, respectively.
The Company utilized Ansley Securities, LLC ("Ansley") as placement agent in
connection with the Offering. In addition to the Investor's Arrangement Fee
specified above, the Company paid Ansley a cash fee on the $6 million raised to
date of $240,000. In addition to the cash fee outlined above, Ansley earned a
warrant to purchase equity of the same type and at the same price per share or
conversion price as provided for the investment giving rise to the cash fee. The
warrant will contain anti-dilution provisions comparable with those provided to
the investor, expire in 5 years and allow Ansley to purchase a dollar value of
securities equal to 4% of the capital raised
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
See Item 1.01 above.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
See Item 1.01 above.
The Company claims an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Act") for the private placement of
these securities pursuant to Section 4(2) of the Act and/or Rule 506 of
Regulation D promulgated thereunder since, among other things, the transaction
did not involve a public offering, the investors were "accredited investors"
and/or qualified institutional buyers, the investors had access to information
about the Company and its investment, the investors took the securities for
investment and not resale, and the took appropriate measures to restrict the
transfer of the securities.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Not applicable.
(c) EXHIBITS.
Exhibit
Number Description
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10.1 Form of Subscription Agreement for the Purchase of Securities *
10.2 Form of Twelve-Month 10% Secured Convertible Notes*
10.3 Form of Warrant for the Purchase of Shares of Common Stock*
10.4 Form of Security Agreement*
10.5 Form of Corporate Guaranty*
10.6 Form of Registration Rights Agreement*
* Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned thereunto duly authorized.
HC INNOVATIONS, INC.
By: /s/ David Chess, MD
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Chief Executive Officer and President
December 10, 2007