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): July 6, 2007
MEDICAL
DISCOVERIES, INC
(Exact
Name of Registrant as Specified in Charter)
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Utah
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(State
of Incorporation)
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000-24569
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87-0407858
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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1338
S. Foothill Drive, #266, Salt Lake City, Utah 84108
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84108
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(801)
582-9583
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(Registrant’s
Telephone Number, Including Area Code)
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(Former
Name or Former Address, if Changed Since Last
Report)
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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:
¨
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Written
communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425).
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x
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12).
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b)).
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c)).
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Introduction
To
date,
Medical Discoveries, Inc. (the “Company”)
has
been a developmental-stage bio-pharmaceutical company engaged in the research,
validation, development and ultimate commercialization of two drug candidates
referred to as MDI-P and SaveCream. MDI-P is a drug candidate being developed
as
an anti-infective treatment for bacterial infections, viral infections and
fungal infections. SaveCream is a drug candidate being developed to reduce
breast cancer tumors. Both of these drug candidates are still in development
and
neither has been approved by the U.S. Food and Drug Administration (the
“FDA”).
The
total cost to develop these two drugs and to receive the approval from the
FDA
would cost many millions of dollars and take many more years. The Company
attempted to fund its development costs through the sale of its equity
securities, including the sale of its Series A Convertible Preferred Stock.
In
December 2006, the Securities and Exchange Commission revised its interpretation
of certain of its rules in a manner that materially affected the ability of
small companies to raise additional debt or equity funding from institutional
lenders. At the end of 2006, the Company had virtually no cash, had no source
of
revenues, had a working capital deficit of nearly $5,000,000, and had a total
stockholders deficit of $5,500,000. In addition, the holders of the Series
A
Convertible Preferred Stock informed the Company that they were no longer
willing to fund the Company’s then current operations. In December 2006, three
of the Company’s five directors resigned.
Because
of its lack of capital, the Company was unable to fund any on-going operations
and was not able to pay its professionals to audit the Company’s year end
financial statements and to prepare the public company period reports the
Company is required to file with the Securities and Exchange Commission. As
a
result, the Company is delinquent in its Securities and Exchange Commission
filings and, in July 2007, the Company was de-listed from the OTC Bulletin
Board.
In
February 2007, the Company engaged a consulting firm to assist it in resolving
its financial issues, to obtain advice regarding any strategic alternatives
that
may be available to it, and to prevent the Company from losing all of its assets
in bankruptcy. During the past several months, the Company has explored a number
of transactions that would (i) prevent the Company’s shareholders from losing
their entire investment in the Company and (ii) enable the Company to repay
some
of its currently outstanding debts and liabilities. The transactions described
in this Current Report reflect the Company’s efforts to reorganize its
operations and to reposition its business and operations.
The
Board
of Directors initially determined that it could no longer fund the development
of its two drug candidates and could not obtain additional funding for these
drug candidates. Accordingly, the Board sought to maximize its return from
these
assets and to invest the proceeds that it receives from the disposition of
these
technologies into a new business that it would develop. The Company chose to
develop a business in the rapidly expanding business of renewable alternative
energy sources.
The
Board
evaluated the value of both of its developmental stage drug candidates. The
commencement of human clinical trials of the Company’s MDI-P currently is on
Full Clinical Hold by FDA under 21 CRF 312.42(b) and may not be initiated until
deficiencies in the Company’s IND application are resolved to the FDA’s
satisfaction. The FDA has concluded that the Company’s IND application did not
contain sufficient toxicology and genetic toxicology data to support the safety
of the proposed clinical trial. The Company considered the uncertainty of the
efficacy and safety of the MDI-P compound, the costs involved in further
developing the compound, and the limited market, and thereafter concluded that
the Company did not have the capability or capacity to take the MDI-P compound
to commercialization. The Company also evaluated the value of its SaveCream
drug
candidate that is currently being co-developed with Eucodis Pharmaceuticals
Forschungs - und Entwicklungs GmbH, an Austrian company, and determined that
the
highest value for this drug candidate could be realized through a sale of that
drug candidate to Eucodis. Accordingly, as described in further detail below,
the Company on July 6, 2007 entered into an agreement with Eucodis to sell
SaveCream for an aggregate of 4,007,534 euros (approximately U.S. $5,491,123
based on the currency conversion rate in effect as of September 7, 2007), which
consideration is payable in cash and by the assumption of certain of the
Company’s outstanding liabilities. The consummation of the sale of the SaveCream
to Eucodis is contingent upon the approval of the Company’s shareholders. A
special meeting of the shareholders has been called and is currently scheduled
to be held on October 17, 2007. The Company thereafter also entertained various
offers to purchase the Company’s rights to the MDI-P compound. On August 9,
2007, the Company sold the MDI-P compound for $310,000 in cash.
Having
agreed to dispose of its assets, the Company considered entering into a number
of other businesses that would enable it to be able to provide the Company’s
shareholders with future value. The Board of Directors has decided to develop
a
business to produce and sell seed oils, including seeds oils harvested from
the
planting and cultivation of Jatropha
Curcas
plant,
for the purpose of providing feedstock oil intended for the generation of methyl
ester, otherwise known as bio-diesel (“Jatropha Business”). The Company
concluded that there was a significant opportunity to participate in the rapidly
growing biofuels industry, which previously was mainly driven by high priced,
food oil-based feedstocks. In order to commence its new Jatropha based biofuels
business, effective September 7, 2007, the Company (i) hired Richard Palmer,
an
energy consultant, to act as the Company’s new President, Chief Operating
Officer and future Chief Executive Officer, (ii) engaged Mobius Risk Group,
LLC,
a Texas company engaged in providing energy risk advisory services, to provide
the Company with consulting services related to the development of the Jatropha
bio-diesel business, and (iii) acquired certain proprietary rights, intellectual
property, know-how, business plans, contracts, term sheets, business
relationships, and other information relating to the cultivation and production
of seed oil from the Jatropha plant for the production of bio-diesel. In order
to fund the Company’s operations until cash is generated from the sale of the
Eucodis sale and from the new Jatropha business, the Company on September 7,
2007 entered into a $1,000,000 loan and security agreement. The terms of the
foregoing transactions are described in greater detail below in this Current
Reports on Form 8-K.
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ITEM
1.01 ENTRY
INTO A MATERIAL AGREEMENT
On
July
6, 2007, the Company, together with its wholly owned subsidiary MDI Oncology,
Inc. (“MDI,”
and
collectively with the Company, the “MDI
Entities”),
entered into a sale and purchase agreement (the “Asset
Sale Agreement”)
with
Eucodis Pharmaceuticals Forschungs - und Entwicklungs GmbH, an Austrian company
(“Eucodis”),
pursuant to which Eucodis agreed to acquire certain assets of the Company in
consideration for a cash payment and the assumption by Eucodis of certain
current indebtedness of the Company and MDI (such transactions, collectively,
the “Asset
Sale”).
Pursuant to the Asset Sale Agreement, the Asset Sale is scheduled to be
consummated on September 30, 2007, or as soon thereafter as the shareholders
of
the Company have approved the transaction.
The
assets to be acquired by Eucodis pursuant to the Asset Sale Agreement include
all of the MDI Entities’ right, title and interest in all patents, patent
applications, United
States and foreign regulatory files and data,
pre-clinical study data and anecdotal clinical trial data concerning
“SaveCream”, a developmental topical aromatase inhibitor cream (the
“Product”).
The
Company acquired the Product and certain other related intellectual property
assets from Savetherapeutics AG pursuant to a certain asset purchase agreement
between the Company and the liquidator of Savetherapeutics AG, a German company
in liquidation, dated as of March 11, 2005. In addition to the Product, at
the
closing of the Asset Sale, the Company will also assign to Eucodis all of MDI’s
right, title and interest in a certain co-development agreement between MDI
and
Eucodis, dated as of July 29, 2006, related to the co-development and licensing
of the Product (including the intellectual property rights acquired by MDI
or
the Company in connection with that development) and their rights under
certain
other contracts relating to the Products. The assets to be acquired by Eucodis
under the Asset Sale Agreement and in connection with the Asset Sale are
referred to in this disclosure as the “Disposed
Assets”.
The
purchase price paid by Eucodis for acquiring the Disposed Assets will be
approximately $5,491,123, a portion of which comprised (i) a cash payment of
$2,108,000, which is due and payable to the Company at the closing, and (b)
Eucodis’ assumption of an aggregate of $3,383,123 , constituting specific
indebtedness currently owed to certain creditors of the Company and MDI
(“Assumed
Indebtedness”).
In
addition, at the closing of the Asset Sale, Eucodis will assume (i) all
financial and other obligations of the MDI Entities under the Assigned
Contracts, and (ii) certain other costs incurred by the MDI Entities since
February 28, 2007 in connection with preserving the Purchased Assets for the
benefit of Eucodis until closing of the Asset Sale.
Non-Competition
The
MDI
Entities have agreed to a non-compete provision for the duration of five years
after the closing of the Asset Sale. Specifically, the non-compete provision
will restrict the MDI Entities, or any of their respective affiliates, from
undertaking research and development activities with respect to the Product,
or
any other product which could be used in reasonable substitution of the Product,
or commercializing any products based on the Product, unless expressly
authorized by Eucodis.
Representations
and Warranties
The
MDI
Entities and Eucodis each made certain customary representations, warranties
and
covenants in the Asset Sale Agreement, including non-infringement
representations made by the Company and MDI with respect to the Product. The
Asset Sale Agreement also contains customary and mutual indemnification
provisions for claims relating to breaches of any of the party’s representations
and warranties contained in the Asset Sale Agreement.
Closing
Conditions
The
closing of the Asset Sale is currently scheduled to occur on September 30,
2007.
Eucodis and the MDI Entities have agreed to extend the date of the closing
of
the Asset Sale until the day following the date on which the shareholders vote
to approve the Asset Sale. The Company has called a special meeting of its
shareholders to vote on the Asset Sale. The special meeting is to be held on
October 17, 2007. No assurance can be given that the shareholders will vote
to
approve the Asset Sale. The consummation of the Asset Sale is subject to certain
customary conditions, including (i) the delivery of releases from each Assumed
Indebtedness creditor releasing the Company from any liability concerning such
creditor’s portion of the Assumed Indebtedness, and (ii) the Company obtaining
additional capital or a credit facility in the aggregate amount of at least
$250,000.
A
copy of
the Asset Sale Agreement is filed as an exhibit to this Current Report on Form
8-K. The summary of the Asset Sale Agreement set forth above is qualified by
reference to such exhibit.
2.
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Share
Exchange Agreement; Employment Agreement; Consulting
Agreement
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On
September 7, 2007, the Company entered into a share and exchange agreement
(the
“Global
Agreement”)
pursuant to which the Company on September 7, 2007 acquired all of the
outstanding ownership interests in Global Clean Energy Holdings, LLC, a Delaware
limited liability company (“Global”).
Global is a company that owns certain
proprietary rights, intellectual property, know-how, business plans, financial
projections, contracts, term sheets, business relationships, and other
information relating to the cultivation and production of seed oil from the
seed
of the Jatropha plant, for the purpose of providing feedstock oil intended
for
the production of bio-diesel. Richard
Palmer and Mobius Risk Group, LLC (“Mobius”),
a
Texas limited liability company engaged in providing energy risk advisory
services, are the sole owners of the outstanding equity interests of Global.
In
exchange for all of the outstanding ownership interests in Global, the Company
issued 63,945,257 shares of its common stock to Richard Palmer and Mobius.
Of
the foregoing 63,945,257 shares, 27,405,111 shares are restricted shares that
are subject to forfeiture in the event that the Company does not achieve certain
operational milestones. In connection with the Global Agreement, the Company
also entered into an employment agreement with Richard Palmer (the “Palmer
Agreement”),
and a
consulting agreement with Mobius (“Mobius
Agreement”).
For a
description of significant terms of the Palmer Agreement see the discussion
under Item 5.02, below, which is incorporated herein by reference.
Share
Exchange Agreement
Under
the
Global Agreement, the Company on September 7, 2007 issued 63,945,257 shares
of
its common stock to Mobius and Richard Palmer (“Mr.
Palmer”)
in
exchange for all of the issued and outstanding membership interests of Global.
Of the 63,945,257 shares issued under the Global Agreement, 36,540,146 shares
were issued and delivered to Mr. Palmer (5,220,021 shares) and Mobius
(31,320,125 shares) at the closing of the Global Agreement without any
restrictions. The remaining 27,405,111 shares of common stock were, however,
issued as restricted shares (the “Restricted
Shares”),
subject to forfeiture in the event that certain specified performance milestones
are not achieved (23,490,095 Restricted Shares were issued to Mobius, and
3,915,016 Restricted Shares were being issued to Palmer). Upon the satisfaction
from time to time of the operational and market capitalization condition
milestones, the Restricted Shares will be released from their restrictions
and
delivered to Mr. Palmer and Mobius in accordance with the terms and conditions
of the Global Agreement. During the time that the Restricted Shares are
restricted and subject to forfeiture, the Restricted Shares shall be outstanding
shares for all purposes and shall be entitled to vote and receive dividends,
if
any are declared. In the event that all of the milestone conditions are not
achieved, the Restricted Shares that have not been released will be cancelled
by
the Company and thereafter cease to be outstanding. The transactions
contemplated in the Global Agreement were completed concurrently with the
execution of the Global Agreement on September 7, 2007 (the “Effective
Date”).
Of
the
Restricted Shares issued under the Global Agreement, 13,702,556 shares (the
“Operational
Milestone Shares”)
will
be released to Mr. Palmer and Mobius if and when the following conditions
(collectively, the “Operational
Conditions”)
are
satisfied:
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The
execution of certain land lease agreements suitable for the planting
and
cultivation of Jatropha
Curcas;
and
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The
execution of certain operation management agreements with a third-party
land and operations management companies with respect to the management,
planting and cultivation of Jatropha
Curcas.
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The
Operational Milestone Shares will be held in escrow subject to the satisfaction
of the Operational Milestones, at which time such shares will be released from
escrow and delivered to Mr. Palmer and Mobius.
Of
the
Restricted Shares issued under the Global Agreement, 13,702,555 shares (the
“Market
Capitalization Shares”)
will
be released to Mr. Palmer and Mobius in the amounts described below upon
satisfaction of the following conditions (collectively, the “Market
Conditions”):
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When
the Company’s “Market Capitalization” reaches $6,000,000, and
(ii) the average daily trading volume of the our common stock on
the
“Trading Market” reaches or exceeds 75,000 shares
of common stock for a period of at least 60 consecutive “Trading Days”.
Upon the satisfaction of this condition, 4,567,518 shares of the
Market
Capitalization Shares will be released from escrow and delivered
to Mr.
Palmer and Mobius;
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When
the Company’s “Market Capitalization” reaches $12,000,000, and
(ii) the average daily trading volume of the our common stock on
the
“Trading Market” reaches or exceeds 100,000 shares of common stock for a
period of at least 60 consecutive “Trading Days”. Upon the satisfaction of
this condition, 4,567,518 shares of the Market Capitalization Shares
will
be released from escrow and delivered to Mr. Palmer and Mobius;
and
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When
the Company’s “Market Capitalization” reaches $20,000,000, and
(ii) the average daily trading volume of the our common stock on
the
“Trading Market” reaches or exceeds 125,000 shares of common stock for a
period of at least 60 consecutive “Trading Days”. Upon the satisfaction of
this condition, 4,567,519 shares of the Market Capitalization Shares
will
be released from escrow and delivered to Mr. Palmer and
Mobius.
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Under
the
Global Agreement, the term “Market
Capitalization”
is
defined as the product of the number of shares of Common Stock issued and
outstanding at the time Market Capitalization is calculated, multiplied by
the
average closing price of the Company’s common stock for the 60 consecutive
Trading Days prior to the date of calculation of Market Capitalization, as
reported on the Trading Market; the term “Trading
Market”
means
the principal securities trading system on which the Company’s common stock is
then listed for trading, including the Pink Sheets, the NASDAQ Stock Market,
the
OTC Bulletin Board, or any other applicable stock exchange; and the term
“Trading
Day”
means
any day on which such Trading Market is open for trading.
The
Restricted Shares under the Global Agreement are subject to cancellation and
termination as follows:
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The
Operational Milestone Shares will be returned to the Company and
cancelled
if the Operational Conditions are not satisfied by the end of the
first
anniversary of the Effective Date of the Global Agreement; and
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The
Market Capitalization Shares will be returned to the Company and
cancelled
to the extent that the Market Conditions are not satisfied by the
end of
the second anniversary of the Effective Date of the Global
Agreement.
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As
part
of the Global Agreement, Mobius has agreed to a non-competition agreement that
prohibits Mobius from engaging or participating in any business that is in
competition in any manner whatsoever with the Company’s new Jatropha business.
The non-competition prohibition is in effect for a period of five years
following the Effective Date of the Global Agreement.
Board
of Directors
Pursuant
to the Global Agreement, Mobius has the right to appoint a director to the
Company’s Board of Directors following the closing of the transactions
contemplated by the Global Agreement (the “Mobius
Director”).
Eric
J. Melvin, who is Chief Executive Officer of Mobius, has been appointed by
Mobius to serve as the initial Mobius Director. See, Item 5.02
below.
Mobius
Consulting Agreement
Concurrent
with the execution of the Global Agreement, the Company also entered into a
consulting agreement with Mobius (the “Mobius
Agreement”)
pursuant to which Mobius has agreed to provide consulting services to the
Company in connection with the Company’s new Jatropha bio-diesel feedstock
business. The Company engaged Mobius as consultant to obtain Mobius’ experience
and expertise in the feedstock/bio-diesel market to assist the Company and
Mr.
Palmer in developing this new line of operations for the Company. The following
is a summary of certain material terms of the Mobius Agreement;
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Under
the Mobius Agreement, Mobius has agreed to provide the following
services
to the Company: (i) manage and supervise any research and development
program regarding the location, characterization, and optimal economic
propagation of the Jatropha plant;
and (ii) manage and supervise the creation, planning, construction,
and
start-up of plant nurseries and seed production plantations in two
geographical areas that may include either Texas, Mexico, the Caribbean
or
Central America;
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The
term of the Mobius Agreement is twelve (12) months, or until the
scope of
work under the agreement has been
completed;
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Mobius
will supervise the hiring of certain staff to serve in management
and
operations roles of the Company, or hire such persons to provide
similar
services as independent
contractors.
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Mobius’
compensation for the services provided under the Mobius Agreement
is a
monthly retainer of $45,000. The Company will also reimburse Mobius
for
reasonable business expenses incurred in connection with the services
provided; and
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The
Mobius Agreement contains customary confidentiality provisions with
respect to any confidential information disclosed to Mobius or which
Mobius receives while providing services under the
agreement.
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Copies
of
the Global Agreement and the Mobius Agreement are filed as exhibits to this
Current Report on Form 8-K. The summary of these agreements set forth above
is
qualified by reference to such exhibits.
On
September 7, 2007, the Company entered into a loan and security agreement with
Mercator Momentum Fund III, L.P., a California limited partnership, pursuant
to
which Lender made available to the Company a secured term credit facility in
the
aggregate principal amount of $1,000,000. In connection with the Loan Agreement,
the Company also issued a secured promissory note to Lender in the aggregate
principal amount of $1,000,000. To date, Lender has advanced $250,000 under
the
Loan to the Company. For a description of significant terms of the Loan
Agreement and the Note, see the discussion under Item 2.03, below, which is
incorporated herein by reference.
ITEM
2.01 COMPLETION
OF ACQUISITION OR DISPOSITION OF ASSETS.
As
described above, the Company acquired all of the outstanding membership
interests of Global Clean Energy Holdings, LLC from Mobius and Palmer pursuant
to the Global Agreement on September 7, 2007. The assets of Global Clean Energy
Holdings, LLC consist of certain proprietary rights, intellectual property,
know-how, business plans, financial projections, contracts, term sheets,
business relationships, and other information relating to the cultivation and
production of seed oil from the seed of the Jatropha plant, for the purpose
of
providing feedstock oil intended for the production of bio-diesel. Except for
the Global Agreement, there was no relationship between the Company and either
Mobius or Palmer prior to the Effective Date.
ITEM
2.03 CREATION
OF A DIRECT FINANCIAL OBLIGATION
In
order
to fund its operations pending the closing of the Eucodis Asset Sale Agreement,
on September 7, 2007, the Company entered into a loan and security agreement
(“Loan
Agreement”)
with
Mercator Momentum Fund III, L.P., a California limited partnership
(“Lender”),
pursuant to which Lender made available to the Company a secured term credit
facility in the aggregate principal amount of $1,000,000 (the “Loan”).
In
connection with the Loan Agreement, the Company also issued a secured promissory
note to Lender in the aggregate principal amount of $1,000,000 (the
“Note”).
The
Loan is secured by a first priority lien on all of the assets of the Company.
Lender and its affiliates currently own all of the issued and outstanding shares
of Series A Convertible Preferred Stock.
Loan
Agreement and Note
Under
the
Loan Agreement, Lender has agreed to advance the Loan to the Company, subject
to
the satisfaction of certain conditions discussed below. Lender may assign any
or
all of its rights under this Loan Agreement one or more institutional investors
or the affiliates thereof or to one or more of its affiliates or wholly-owned
subsidiaries. Interest is payable on the Loan and the Note at a rate of 12%
per
annum, payable monthly. The loan matures and becomes due and payable on December
14, 2007 (the “Maturity
Date”).
The
Company has the right to pre-pay the Loan at any time without penalty. The
$1,000,000 amount of the Loan will become available to the Company subject
to
the following schedule:
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$250,000
was advanced to the Company upon execution of the Loan
Agreement;
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$500,000
shall be available to the Company on September 28, 2007;
and
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$250,000
shall be available to the Company on October 12,
2007.
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Pursuant
to the Loan Agreement, the proceeds of the Loan may be used by the Company
for
working capital purposes, consisting of expenditures set forth on a proposed
budget. The Loan Agreement includes customary closing conditions for
transactions of this nature, including the following:
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Execution
and delivery by the Company to Lender of UCC-1 financing statements
covering the Collateral (defined below);
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Trading
in the Company’s common stock shall not have been suspended by the
Securities and Exchange Commission (the “SEC”),
and the Company’s common stock shall be listed for trading on a public
securities trading system or exchange, including the Pink Sheets,
the
Over-the-Counter Bulletin Board, the Nasdaq Capital Market, the
Nasdaq
Global Market, or any exchange;
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Exchange
of the warrants to purchase 27,452,973 shares at a price of $0.1967
per
share previously issued to Lender and certain of its affiliates
to (i)
lower the exercise price of such warrants to $0.01 per share, (ii)
permit
the cash-less exercise of the warrants, and (iii) extend the expiration
date thereof to September 30, 2013;
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The
closing of the transactions contemplated by Global
Agreement;
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Delivery
to Lender by the Company of written confirmation that the Company
has
commenced a financial audit by its certified public accountant
for the
fiscal year ended December 31, 2006; and
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Delivery
to Lender by the Company of written confirmation that the Company
has
commenced the preparation of the delinquent annual and quarterly
reports
required to be filed by it under the Securities Exchange Act of
1934, as
amended (the “SEC Reports”).
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Pursuant
to the Loan Agreement, the Company has granted to Lender a security interest
in
certain assets of the Company, including, all accounts, chattel paper,
documents, equipment, inventory, intellectual property and other general
intangibles of the Company (the “Collateral”).
The
Loan
Agreement includes certain affirmative covenants to be performed by the Company
during the term of the Note, including the following:
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The
Company shall file all delinquent SEC Reports
by October 31, 2007, and file all other SEC Reports on a timely basis;
and |
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Within
10 business days after the Company has filed all delinquent SEC
Reports,
the Company must apply to have its common stock quoted on the
OTCBB.
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The
Loan
Agreement also includes certain negative covenants binding on the Company during
the term of the Note, including that the Company shall not:
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Pay
declare or set apart for such payment, any dividend or other
distribution; |
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Redeem,
repurchase or otherwise acquire any of its capital stock; |
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Create,
incur or assume any liability for
borrowed money (other than trade creditors in the ordinary course
of
business); |
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Lend
money, give
credit or make advances to any person or entity, including affiliates
of
the Company (except for in the ordinary course of business); |
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Assume
or guarantee
the obligation of any person or entity; |
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Use any
of the
proceeds of Loan in a manner other than as permitted under the Loan
Agreement; |
|
|
|
|
·
|
Liquidate
or
dissolve or enter into any consolidation, merger, partnership, joint
venture, syndicate or other combination; |
|
|
|
|
·
|
Engage
in certain
transactions with affiliates of the Company, including, purchase
or
acquire any property from, or sell or transfer any property to, or
lend
any money to, or borrow any money from, or guarantee any obligation
of, or
acquire any stock, obligations or securities of, or enter into any
merger
or consolidation agreement with any such
affiliate. |
In
addition to the foregoing, the Loan Agreement includes customary representations
and warranties made the Company for the benefit of Lender, and usual and
customary events of default.
Copies
of
the Loan Agreement and the Note are filed as exhibits to this Current Report
on
Form 8-K. The summary of the Loan Agreement and the Note set forth above is
qualified by reference to such exhibits.
ITEM
3.02 UNREGISTERED
SALES OF SECURITIES.
As
described in Item 1.01 above, under the Global Agreement, the Company on
September 7, 2007 issued 63,945,257 shares of its common stock to Mobius
and
Richard Palmer in exchange for all of the issued and outstanding membership
interests of Global. The shares of Common Stock issued to Richard Palmer
and
Mobius under the Global Agreement were not registered under the Securities
Act
of 1933, as amended (the “Act”)
and
were issued and sold in reliance upon the exemption from registration contained
in Section 4(2) of the Act and Regulation D promulgated thereunder.
The shares of Common Stock issued under the Global Agreement may not be
reoffered or sold in the United States by the holders in the absence of an
effective registration statement, or valid exemption from the registration
requirements, under the Act.
In
consideration for the loan obtained under the Loan Agreement, on September
7,
2007, the Company agreed to issue to three accredited investment funds three
new
warrants to purchase an aggregate of 27,452,973 shares at a price of $0.01
per
share in exchange for currently outstanding warrants owned by those investment
funds to purchase the same number of shares. The cancelled warrants were
exercisable at a price of $0.1967 per share. The expiration date of the newly
issued warrants is September 30, 2013. The new warrants were issued in reliance
upon the exemption from registration contained in Section 4(2) of the Act
and Regulation D promulgated thereunder.
ITEM
5.02 ELECTION
OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS, COMPENSATORY ARRANGEMENTS
OF
CERTAIN OFFICERS
Palmer
Employment Agreement
On
September 7, 2007, the Company entered into an employment agreement with Richard
Palmer (the “Palmer
Agreement”)
pursuant to which the Company hired Richard Palmer to serve as its President
and
Chief Operating Officer effective as of September 1, 2007. Mr. Palmer was also
appointed to serve as director on the Company’s Board of Directors to serve
until the next election of directors by the Company’s shareholders. Upon the
resignation of the current Chief Executive Officer, Mr. Palmer also will become
the Company’s Chief Executive Officer. The Company hired Richard Palmer to take
advantage of his experience and expertise in the feedstock/bio-diesel space,
and
in particular, in the Jatropha bio-diesel and feedstock business. The following
is a summary of the material terms of the Palmer Agreement:
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·
|
The
term of employment commenced September 7, 2007 and ends on September
30,
2010, unless terminated in accordance with the Palmer
Agreement;
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|
·
|
Mr.
Palmer’s compensation package includes a base salary of $250,000, subject
to annual increases at the sole discretion of the Company’s Board of
Directors, and a bonus payment based on Mr. Palmer’s satisfaction of
certain performance criteria established by the compensation committee
of
the Company’s Board of Directors. The bonus amount in any fiscal year will
not exceed 100% of Mr. Palmer’s base salary. Mr. Palmer is eligible to
participate in the Company’s employee stock option plan and other welfare
plans;
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|
·
|
The
Company granted Mr. Palmer an incentive option to purchase up to
12,000,000 shares of its common stock at an exercise price of $0.03
(the
trading price on the date the agreement was signed), subject to the
Company’s achievement of certain market capitalization goals. The option
expires after five (5) years;
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|
·
|
If
Mr. Palmer’s employment is terminated by the Company without “cause” or by
Mr. Palmer for “good reason”, he will be entitled to a severance payments
including 100% of his then-current annual base salary, plus 50% of
the
target bonus for the fiscal year in which his employment is terminated,
and the incentive option to purchase 12,000,00 shares of common stock
shall vest following termination of Mr. Palmer’s employment;
and
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|
·
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The
Company has agreed to maintain directors’ and officers’ liability
insurance covering Richard Palmer for the services he renders under
the
Palmer Agreement. The coverage includes Directors and Officers Insurance
Tail Policy in the amount of at least $5,000,000 (covering past actions
of
the Company’s director and officers) and a Product Liability Insurance
Tail in the amount of $5,000,000 Million (for any past product development
of liability claims that may
arise).
|
Appointment
of Additional Directors
At
a
meeting of the Company’s Board of Directors (the “Board”)
held
on August 30, 2007, the Board appointed three individuals to the fill three
vacancies on the Board. All of the appointments were contingent upon, and became
effective as of the consummation of the Global Asset purchase and the execution
of the Palmer Agreement. In connection with covenants made by the Company under
the Global Agreement and the Palmer Agreement, as described above, the Board
appointed Richard Palmer and Eric J. Melvin to fill two of the vacancies on
the
Board. In addition, the Board appointed Martin Schroeder to fill the final
vacancy on the Board. Messrs. Palmer, Melvin and Schroeder will stand for
re-election at the Company’s next annual meeting of shareholders.
Mr.
Eric
Melvin currently is the Chief Executive Officer of Mobius and a principal owner
of that energy consulting business.
Mr.
Richard Palmer is the newly appointed President and Chief Operating Officer
of
the Company. Prior to joining the Company, Mr. Palmer was a Vice President
of
Mobius, specializing in the providing consulting services related to alternative
energy sources, including bio-diesel feedstock production. Mr. Palmer also
owns
a minority equity interest in Mobius.
Mr.
Martin Schroeder currently is the Executive Vice President & Managing
Director of The Emmes Group, a strategic business development, assessment and
planning organization specializing in the support of firms engaged in the
technology, internet, biotechnology and pharmaceutical industries. Mr. Schroeder
has been providing consulting services to the Company since February
2007.
Resignation
Agreement Judy Robinett
Effective
September 7, 2007, the Company entered into an agreement with Judy Robinett,
the
Company’s current Chief Executive Officer, pursuant to which Ms. Robinett agreed
to continue to act as the Company’s transitional Chief Executive Officer. Under
the agreement, Ms. Robinett agreed to, among other things, assist the Company
in
the sale of its legacy assets, complete the preparation and filing of the
delinquent SEC Reports that related to the periods prior to the appointment
of
Mr. Palmer, and provide certain shareholder and creditor related services.
Upon
the completion of the foregoing matters, in particular the filing of the
delinquent SEC Reports, Ms. Robinett will resign, and Mr. Palmer will thereafter
assume the office of Chief Executive Officer. Under the agreement, Ms. Robinett
agreed to (i) forgive her right to receive $1,851,804.93 in accrued and unpaid
compensation, un-accrued and pro-rata bonuses, and severance pay and (ii) the
cancellation of stock options to purchase 14,000,000 shares of common stock
at
an exercise price of between $0.01 and $0.02 per share. In consideration for
her
services, the forgiveness of the foregoing cash payments, the cancellation
of
the foregoing stock options, and settlement of other issues, the Company agreed
to (a) pay Ms. Robinett $500,000 upon the receipt of the Eucodis cash payment
under the Asset Sale Agreement, (b) pay Ms. Robinett a commission of fifteen
percent (15%) of the gross proceed received by the Company from the sale of
the
MDI-P asset, (c) pay Ms. Robinett $124,999.98 in cumulative salary and benefits
for serving as Chief Executive Officer of the Company during the period from
April 1, 2007 until September 30, 2007, and (d) permit Ms. Robinett to retain
some of her previously granted incentive stock options in such an amount
allowing her to purchase up to two million (2,000,000) shares of common stock,
which options shall continue to have the same terms and conditions as currently
in existence, including an option price of $0.01 per share and expiration date
of December 31, 2112.
ITEM
8.01
OTHER EVENTS
Board
of
Directors of the Company has called a special meeting of the Company’s
shareholders to approve the sale of the Company’s SaveCream assets to Eucodis.
The record date for the meeting is September 24, 2007, and the meeting date
is
October 17, 2007.
ITEM
9.01
FINANCIAL STATEMENTS AND EXHIBITS
(a) The
financial statements of Global Clean Energy Holdings, LLC will be filed
by
amendment to this Report.
(b) The
pro
forma financial statements of the Company giving effect to the acquisition
of
Global Clean Energy Holdings, LLC will be filed by amendment to this
Report.
(d) Exhibits
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
2.1
|
|
Asset
Sale Agreement dated July 6, 2007 among Medical Discoveries, Inc.,
MDI
Oncology, Inc. and Eucodis Pharmaceuticals Forschungs - und Entwicklungs
GmbH
|
|
|
|
|
|
2.2
|
|
Share
Exchange Agreement dated September 7, 2007 among Medical Discoveries,
Inc., Richard Palmer, and Mobius Risk Group, LLC
|
|
|
|
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10.1
|
|
Loan
and Security Agreement, dated September 7, 2007, between Medical
Discoveries, Inc. and Mercator Momentum Fund III, L.P. (including
the form
of promissory note and warrant)
|
|
|
|
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10.2
|
|
Services
Agreement dated September 7, 2007 between Medical Discoveries, Inc.
and
Mobius Risk Group, LLC
|
|
|
|
|
|
10.3
|
|
Employment
Agreement dated September 7, 2007 between Medical Discoveries, Inc.
and
Richard Palmer
|
|
|
|
|
|
10.4
|
|
Release
and Settlement Agreement dated August 31, 2007 between Medical
Discoveries, Inc. and Judy Robinett
|
|
|
|
|
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.
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|
|
|
MEDICAL DISCOVERIES, INC. |
|
|
|
Date: September
17, 2007
|
By: |
/s/ RICHARD PALMER |
|
Richard
Palmer |
|
President
|
EXHIBIT
INDEX
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
2.1
|
|
Asset
Sale Agreement dated July 6, 2007 among Medical Discoveries, Inc.,
MDI
Oncology, Inc. and Eucodis Pharmaceuticals Forschungs - und Entwicklungs
GmbH
|
|
|
|
|
|
2.2
|
|
Share
Exchange Agreement dated September 7, 2007 among Medical Discoveries,
Inc., Richard Palmer, and Mobius Risk Group, LLC
|
|
|
|
|
|
10.1
|
|
Loan
and Security Agreement, dated September 7, 2007, between Medical
Discoveries, Inc. and Mercator Momentum Fund III, L.P. (including
the form
of promissory note and warrant)
|
|
|
|
|
|
10.2
|
|
Services
Agreement dated September 7, 2007 between Medical Discoveries,
Inc. and
Mobius Risk Group, LLC
|
|
|
|
|
|
10.3
|
|
Employment
Agreement dated September 7, 2007 between Medical Discoveries,
Inc. and
Richard Palmer
|
|
|
|
|
|
10.4
|
|
Release
and Settlement Agreement dated August 31, 2007 between Medical
Discoveries, Inc. and Judy Robinett
|
|
|
|
|