POWELL GOLDSTEIN, LLP
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WWW.POGOLAW.COM
June 8, 2005
VIA EDGAR AND OVERNIGHT DELIVERY
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FOR COMMISSION USE ONLY
Larry Spirgel
Division of Corporation Finance
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0303
Re: Health Discovery Corporation
Form 10-KSB for the fiscal year ended December 31, 2004 File No.
333-62216
Dear Mr. Spirgel:
Thank you for your comment letter, dated May 16, 2005, issued by the
staff of the Division of Corporation Finance with respect to the Form 10-KSB
referenced above with respect to Health Discovery Corporation (the "Company").
As per the conversation we had with Ms. Ivette Leon, the Assistant Chief
Accountant, on May 31, 2005 regarding the timing of our response, on behalf of
the Company, our client, we have prepared this reply to the comment letter.
For your convenience, we have copied each comment into this letter first
and responded to each one in sequence.
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004
ITEM 6-MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, PAGE 24
COMMENT 1:
IN FUTURE FILINGS PLEASE PROVIDE ALL DISCLOSURE REQUIRED BY ITEM 303(B)(1) AND
ITEM 303 (C) OF REGULATION S-B.
RESPONSE 1:
In future filings, the Company will provide all disclosure required by Item
303(b)(1) and Item 303(c) of the Regulation S-B.
NOTES TO FINANCIAL STATEMENTS
NOTE D-ACQUISITIONS
COMMENT 2:
WE NOTE THAT THE ACQUISITIONS OF BARNHILL GROUP, LLC AND FRACTAL GENOMICS, LLC
WERE ACCOUNTED FOR AS ACQUISITIONS OF "ASSETS" RATHER THAN ACQUISITIONS OF
"BUSINESSES" FOR THE PURPOSE OF ITEM 310(C) AND (D) OF REGULATION S-B. USING THE
GUIDANCE IN RULE 11-01(D) OF REGULATIONS S-X, WHICH PROVIDES GUIDANCE FOR
DETERMINING WHETHER AN ACQUISITION IS A BUSINESS OR NOT, PLEASE TELL US WHY YOU
BELIEVE THAT THE ACQUISITIONS OF BARNHILL GROUP, LLC AND FRACTAL GENOMICS, LLC
WERE ASSETS ACQUISITIONS AND THEREFORE YOU DID NOT NEED TO COMPLY WITH ITEM
310(C) AND (D) OF REGULATION S-B. YOUR RESPONSE SHOULD ADDRESS THE ASSET
PURCHASE AND SALE AGREEMENTS FILED AS EXHIBITS NOS. 10.2 AND 10.3 TO THE FORM
10-KSB FOR THE YEAR ENDED DECEMBER 31, 2003. ALSO, PLEASE PROVIDE US WITH ANY
OTHER INFORMATION THAT WOULD SUPPORT YOUR POSITION THAT YOU DID NOT ACQUIRE THE
BUSINESSES OF BARNHILL GROUP, LLC AND FRACTAL GENOMICS, LLC. WE MAY HAVE
ADDITIONAL COMMENTS AFTER REVIEW OF YOUR RESPONSE.
RESPONSE 2:
The Company completed the acquisition of assets of Barnhill Group, LLC on
September 25, 2003 and the acquisition of assets of Fractal Genomics, LLC on
December 30, 2003. Both acquisitions were treated as acquisitions of assets
rather than acquisitions of a business. The form of the transactions are
detailed in the Asset Purchase and Sale agreements filed as Exhibit nos. 10.2
and 10.3 to the Form 10-KSB for the year ended December 31, 2003. In determining
the proper treatment of the transactions, we referred to Rule 11-01(d) of
Regulation S-X, which gives guidance in determining whether an acquisition
should be accounted for as an acquisition of assets rather than a business.
Barnhill Group, LLC and Fractal Genomics, LLC were not operating entities at the
time the assets were acquired. In addition, the entities had no revenue
producing activities, and none of the following attributes existed, and
therefore, were not part of the assets acquired:
1. No physical facilities
2. No employee base
3. No market distribution system
4. No sales force
5. No customer base
6. No operating rights
7. No production techniques
8. No trade names
The assets acquired from Barnhill Group, LLC and Fractal Genomics, LLC primarily
consisted of ownership interests in Fractal Genomics, LLC and in patents,
pending patents and all rights to the patents. Barnhill Group, LLC and Fractal
Genomics, LLC did not have the resources or the complimenting technologies and
knowledge to properly develop the patents into future revenue generating
activities. The Company believes it has this ability and therefore acquired
these assets. The Company believes the transactions have been properly accounted
for as acquisitions of assets.
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EXHIBITS 31.2 AND 32.2, PAGES E-99 AND E-101
COMMENT 3:
WE NOTE THAT THE CERTIFICATIONS INCLUDED IN THE EXHIBITS 31.2 AND 32.2 HAVE BEEN
SIGNED BY MR. ROBERT BRASWELL IV AS "CHIEF ADMINISTRATIVE OFFICER", HOWEVER MR.
ROBERT S. BRASWELL IV SIGNED THE FORM 10-K FOR THE YEAR ENDED AS "PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER, DIRECTOR". IN FUTURE FILINGS, PLEASE NOTE THAT
YOUR CHIEF FINANCIAL OFFICER IS REQUIRED TO SIGN THE ABOVE EXHIBITS.
RESPONSE 3:
In future filings, Robert S. Braswell IV, the Company's Chief Financial Officer,
will sign certifications included in the exhibits 31.2 and 32.2.
We trust this response has addressed your concerns. Please do not
hesitate to let us know any additional questions or comments that the staff may
have. Thank you.
Very truly yours,
/s/ Todd Wade, Esq.
-------------------
Todd Wade, Esq.
For Powell Goldstein LLP
cc: Stephen D. Barnhill
Robert S. Braswell
Helen Zalik, Esq.
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