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
Date of Report (Date of earliest event reported): September 7, 2005
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In Veritas Medical Diagnostics, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 000-49972 84-15719760
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
The Green House, Beechwood Business Park, North, Inverness, Scotland IV2 3BL
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(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code:
011-44-1463-667347
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Copies to:
Richard A. Friedman, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Phone: (212) 930-9700
Fax: (212) 930-9725
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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 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))
Item 1.01 Entry into a Material Definitive Agreement
Standby Equity Distribution Agreement
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On September 7, 2005, In Veritas Medical Diagnostics, Inc. (the "Company")
entered into a Standby Equity Distribution Agreement (the "Distribution
Agreement") with Cornell Capital Partners LP ("Cornell") providing 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. Under the
Distribution Agreement, the Company may sell to Cornell up to $500,000 in shares
of its common stock (the "Common Stock") once every five trading days at a price
of 97% of the lowest closing bid price (as reported by Bloomberg L.P.), of the
Common Stock on the principal market where the Common Stock is traded for the
five consecutive trading days following a notice by the Company to Cornell of
its intention to sell shares. The Company will also pay a 5% commitment fee upon
each sale of shares under the Distribution Agreement. Cornell has agreed not to
short any of the shares of Common Stock.
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The Company has agreed to file a registration statement registering the Common
Stock issuable upon sales under the Distribution Agreement and no sale will be
made to Cornell unless and until such registration statement has been declared
effective.
In connection with the Distribution Agreement, the Company has issued to Cornell
472,000 shares of Common Stock as a commitment fee. It also issued to Monitor
Capital, Inc., a registered broker dealer, 28,000 shares of Common Stock as
compensation for its services as the exclusive placement agent for the sale of
the Common Stock under the Distribution Agreement.
18% Secured Convertible Debentures
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Also on September 7, 2005, the Company entered into a Securities Purchase
Agreement (the "Purchase Agreement") with Montgomery Equity Partners Ltd.
("Montgomery"), an affiliated fund of Cornell, providing 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 on
September 7, 2005; $200,000 shall be funded two business days prior to the
Company's completion of its audited financial statements for the fiscal year
ended July 31, 2005, and; $250,000 shall be funded within five business days of
the date the Registration Statement (as defined below) is declared effective by
the SEC. 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.
In addition to the foregoing, the Company entered into a Securities Purchase
Agreement (the "Accredited Investor Purchase Agreement") with the investors in
its April 2005 financing (the "Accredited Investors") pursuant to which the
Accredited Investors agreed to exchange the securities that they purchased in
such financing for an aggregate of $556,500 principal amount of Debentures.
Specifically, the Accredited Investors agreed to exchange an aggregate of
863,845 units (the "Units"), as well as a warrant to purchase an additional Unit
for an aggregate of $556,500 principal amount of Debentures. Each Unit consisted
of one share of 5% convertible preferred stock of the Company, $.001 par value
per share, and one warrant to purchase one share of the Company's common stock.
The Debentures mature on the first anniversary of the date of issuance and bear
interest at the annual rate of 18% in cash. The Company is required to make
monthly interest payments commencing on October 7, 2005, and to make monthly
principal payments commencing on March 7, 2006.
Holders may convert, at any time, the principal amount outstanding under the
Debentures into shares of Common Stock, at a conversion price per share equal to
$0.144, subject to adjustment. Upon three-business day advance written notice,
the Company may redeem the Debentures, in whole or in part. In the event that
the closing bid price of the Common Stock on the date that the Company provides
advance written notice of redemption or on the date redemption is made exceeds
the conversion price then in effect, the redemption will be calculated at 112%
of the Debentures' face value.
In connection with the Purchase Agreement and the Accredited Investor Purchase
Agreement, the Company also entered into registration rights agreements (the
"Registration Rights Agreements") providing for the filing of a registration
statement (the "Registration Statement") with the Securities and Exchange
Commission registering the Common Stock issuable upon conversion of the
Debentures and exercise of the Warrants. The Company is obligated to file the
Registration Statement no later than 30 days from the date of closing and to use
its best efforts to cause the Registration Statement to be declared effective no
later than 90 days after filing and to insure that the registration statement
remains in effect until all of the shares of common stock issuable upon
conversion of the Debentures and exercise of the Warrants have been sold. In the
event of a default of its obligations under the Registration Rights Agreements,
including its agreement to file the Registration Statement with the Securities
and Exchange Commission no later than 30 days from the date of closing, or if
the Registration Statement is not declared effective within 90 days of filing,
it is required pay to Montgomery and the Accredited Investors, as liquidated
damages, for each month that the registration statement has not been filed or
declared effective, as the case may be, either a cash amount or shares of our
common stock equal to 2% of the liquidated value of the Debentures.
The Company's obligations under the Purchase Agreement and the Accredited
Investor Purchase Agreement are secured by substantially all of the Company's
assets. In addition, the Accredited Investors entered into an Intercreditor
Agreement with Montgomery whereby Montgomery shall be a secured party pursuant
to the UCC-1 filed on behalf of Montgomery and shall be superior to the
Accredited Investors as if Montgomery's UCC-1 was filed before any and all of
the Accredited Investor's liens. As further security for its obligations under
the Purchase Agreement and the Accredited Investor Purchase Agreement, the
Company has deposited into escrow 25,685,000 shares of Common Stock.
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 for a description of a secured loan obligation by the Company.
Item 3.02 Unregistered Sales of Equity Securities.
See Item 1.01 above for a description of the transactions pursuant to which the
Company issued Common Stock, Debentures and Warrants. All securities were issued
pursuant to Rule 506 of Regulation D promulgated under the Securities Act of
1933, as amended (the "Act"), and/or Section 4(2) of the Act.
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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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4.1 Secured Convertible Debenture issued to Montgomery dated September 7, 2005
4.2 Warrant issued to Montgomery dated September 7, 2005
4.3 Form of Convertible Debenture dated September 7, 2005
10.1 Investor Registration Rights Agreement dated September 7, 2005 by and
between the Company and Montgomery
10.2 Pledge and Escrow Agreement dated September 7, 2005 by and among the
Company, Montgomery and David Gonzalez as escrow agent
10.3 Securities Purchase Agreement dated September 7, 2005 by and between the
Company and Montgomery
10.4 Security Agreement dated September 7, 2005 by and between the Company and
Montgomery
10.5 Standby Equity Distribution Agreement dated September 7, 2005 by and
between the Company and Cornell
10.6 Registration Rights Agreement dated September 7, 2005 by and between the
Company and Cornell
10.7 Intercreditor Agreement dated September 7, 2005 by and among the Company,
Montgomery and the investors identified in Schedule I thereto.
10.8 Investor Registration Rights Agreement dated September 7, 2005 by and
between the Company and the investors identified thereto.
10.9 Securities Purchase Agreement dated September 7, 2005 by and between the
Company and the investors identified thereto.
10.10 Security Agreement dated September 7, 2005 by and between the Company and
the investors identified thereto.
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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: September 13, 2005 /s/ John Fuller
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John Fuller
Chief Executive Officer
End of Filing
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