UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): October 19, 2006
IN VERITAS MEDICAL DIAGNOSTICS, INC.
(Exact name of registrant as specified in charter)
Colorado 000-49972 84-15719760
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
The Green House, Beechwood Business Park, North, Inverness, Scotland IV2 3BL
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area
code: 011-44-1463-667347
Copies to:
Richard A. Friedman, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas, 21st Floor
New York, New York 10018
(212) 930-9700 (212)
930-9725 (fax)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instructions 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))
Item 1.02 Termination of a Material Definitive Agreement
On October 19, 2006, the Company entered into a Termination, Settlement, and
Forbearance Agreement effective as of October 16 (the "Settlement Agreement"),
with Cornell Capital Partners LP ("Cornell") and Montgomery Equity Partners Ltd.
("Montgomery"), an affiliated fund of Cornell. The Settlement Agreement relates
to a Standby Equity Distribution Agreement (the "Distribution Agreement") with
Cornell and a Securities Purchase Agreement (the "Purchase Agreement") with
Montgomery entered into on September 7, 2005.
The Distribution Agreement with Cornell provided for the sale and issuance to
Cornell of up to $10,000,000 of Common Stock over a period of up to 24 months
after the signing of the Distribution Agreement. In addition as part of the
commitment fee arrangements the Company issued 472,000 shares of the Company's
common stock to Cornell.
The Purchase Agreement with Montgomery provided for the sale by the Company to
Montgomery of its 18% secured convertible debentures in the aggregate principal
amount of $750,000 (the "Debentures") of which $300,000 was funded. Under the
Purchase Agreement, the Company also issued to Montgomery three-year warrants
(the "Warrants") to purchase 350,000 shares of Common Stock at $0.001 per share.
As further security for its obligations under the Purchase Agreement and the
Accredited Investor Purchase Agreement, the Company deposited into escrow
25,685,000 shares (the "Escrow Shares") of common stock. The Escrow Shares are
deemed issued but not outstanding.
Subsequent to the completion of the Standby Equity Distribution Agreement and
the sale of the 18% secured convertible debentures pursuant to the Securities
Purchase Agreement in September 2005, the Company prepared and filed a
registration statement on Form SB-2 (File No. 333-128321) with the Securities
and Exchange Commission for the purpose of registering the securities underlying
such financing transactions. In connection therewith, the Company received
comments from the Commission indicating that, in the Commission's view, based
upon the structure of the transactions, the Company may not register the
securities sold in the financing transactions. On March 6, 2006, the Company
withdrew the registration statement on Form SB-2 (File No. 333-128321) by filing
a Form R-W with the Commission. As a result, the Company has not been able to
draw down any further amounts under the Debenture. In addition, because of the
failure to complete the entire financing transaction contemplated in the
September 2005 financing, the Company has been unable to pay interest and
principal payments on the Debentures.
Pursuant to the Settlement Agreement, the parties agreed to the following
principal terms:
o The Company shall pay Montgomery an aggregate of $348,000.00 (the
"Funds") which represents all amounts owed by the Company to
Montgomery under the Debenture as of the date hereof including
outstanding principal and interest. The Company shall pay the Funds to
Montgomery monthly at the rate of $29,000.00 ("Monthly Payment") per
calendar month, with the first payment being due and payable on
November 15, 2006 and each subsequent payment being due and payable on
the first business day of each subsequent month until the Funds are
repaid in full.
o Montgomery shall continue to have valid, enforceable and perfected
first-priority liens upon and security interests in the Pledged
Property and the Pledged Shares (each as defined in the Purchase
Agreement transaction documents).
o The Company and Montgomery agree that during the term of the
Settlement Agreement, the Debenture shall not bear any interest and no
liquidated damages shall accrue under any of the financing documents.
o The Conversion Price (as set forth in the Debenture) in effect on any
Conversion Date (as set forth in the Debenture) from and after the
date hereof shall be adjusted to equal $0.05, which may be
subsequently adjusted pursuant to the other terms of the Debenture.
o Montgomery shall retain the Warrants issued in accordance with the
Securities Purchase Agreement.
o The Company and Cornell agree to terminate the Distribution Agreement
and related transaction documents. Cornell shall retain the 472,000
shares of the Company's common stock.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
10.1 Termination, Settlement and Forbearance Agreement between In Veritas
Medical Diagnostics, Inc., Montgomery Equity Partners Ltd. and Cornell Capital
Partners L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IN VERITAS MEDICAL DIAGNOSTICS, INC.
Date: October 25, 2006 /s/ Graham Cooper
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Graham Cooper
President and Chief Executive Officer