UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 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): November 14, 2008
MDWERKS,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or
Other Jurisdiction of Incorporation)
|
333-118155
|
|
33-1095411
|
|
(Commission
File Number)
|
|
(IRS
Employer Identification Number)
|
Windolph
Center, Suite I
1020
N.W.
6
th
Street
Deerfield
Beach, FL 33442
(Address
of Principal Executive Offices)
(954)
389-8300
(Registrant’s
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
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):
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13-e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
The
use of the terms “we,” “us” or “the Company” in this report shall be deemed to
mean MDwerks, Inc., unless the context requires otherwise. References in this
report to “our subsidiaries” shall be deemed to mean each of MDwerks Global
Holdings, Inc., Xeni Medical Systems, Inc., Xeni Financial Services, Corp.,
Xeni
Medical Billing, Corp. and Patient Payment Solutions, Inc.
Item
1.01 Entry into a Material Definitive Agreement
On
November 14, 2008, we, along with our subsidiary Xeni Financial Services, Corp.
(“XFS”), entered into a Loan and Securities Purchase Agreement (the “Loan
Agreement”) with Debt Opportunity Fund LLLP (“DOF”), pursuant to which DOF will
lend the Company up to $10,300,000, subject to a deduction for an original
issue
discount of 2%. The proceeds from the loan from DOF will be used by us primarily
to purchase medicinal preparations prescription workers’ compensation claims
from a prospective new client, pursuant to a claims assignment agreement.
The claims assignment agreement is currently being negotiated by us and the
prospective new client and there can be no assurance that such negotiations
will
result in a definitive agreement. Until such time as the claims assignment
agreement and documents related to the claims assignment agreement are executed,
and certain other conditions set forth in the Loan Agreement are satisfied,
other than $300,000 previously disbursed to MDwerks for working capital
purposes, the proceeds of the loan from DOF will be held in an escrow account.
In the event the conditions to the disbursement of the funds in the escrow
account are not satisfied on or before December 8, 2008, all proceeds in the
escrow account will be returned to DOF.
Pursuant
to the Loan Agreement, we issued a Senior Secured Promissory Note, dated
November 14, 2008, to DOF in the original principal amount of $10,300,000 (the
“DOF Note”). The DOF Note bears interest at the rate of 13% per annum and is
payable monthly, in arrears on the first day of each month, commencing on
December 1, 2008. Interest will not begin to accrue on amounts held in the
escrow account described above, until such time as those amounts are disbursed
to us. Principal payments in the monthly amount of $150,000 commence on June
1,
2009 and, subject to events of default specified in the Loan Agreement, the
entire amount of principal and accrued but unpaid interest due under the note
becomes due and payable on November 14, 2010. To the extent the balance of
the
loan is not disbursed to us on or before December 8, 2008, DOF will surrender
the DOF Note to us for cancellation and we and XFS will reissue a new note
in
the principal amount actually received by us.
In
connection with the Loan Agreement and the financing provided under the Loan
Agreement, we, and each of our subsidiaries and DOF entered into security
agreements, dated November 14, 2008, pursuant to which we and our subsidiaries
granted a security interest to DOF in substantially all of our assets. Each
of
our subsidiaries also entered into a guaranty agreement to guaranty all
obligations under the Loan Agreement and documents entered into in connection
with the Loan Agreement.
As
partial consideration for the loan provided by DOF we issued to DOF a ten-year
Series J Warrant to purchase 9,339,816 shares of our common stock at a price
of
$1.00 per share (the “Series J Warrant”). In the event the balance of the loan
is not disbursed to us on or before December 8, 2008, DOF will surrender the
Series J Warrant to us for cancellation.
In
connection with the issuance of the Series J Warrant, we and DOF entered into
a
registration rights agreement, dated November 14, 2008, pursuant to which,
among
other things, we granted “piggyback” registration rights to DOF for the Series J
Warrant.
The
following summary description of the material agreements and instruments entered
into in connection with the transaction described above is qualified in its
entirety by reference to the copies of such material agreements and instruments
filed as exhibits to this Current Report on Form 8-K.
Loan
and Securities Purchase Agreement
The
Loan
Agreement provides for the loan to us by DOF of up to $10,300,000, subject
to a
deduction for an original issuance discount of 2%. The Loan Agreement provides
that funded amounts under the Loan Agreement shall be funded into an escrow
account with DOF’s counsel serving as Escrow Agent. The release of the funded
amounts from the escrow account are subject to various conditions, including
the
entry into a definitive claims purchase agreement, controlled account agreement
and related documents with the prospective new client; the compliance by us
and XFS with the covenants contained in the Loan Agreement; the representations
and warranties contained in the Loan Agreement being true and correct; no change
occurs with respect to us or XFS that results in a Material Adverse Effect
(as
defined in the Loan Agreement).
The
Loan
Agreement contains certain restrictions on our ability to: (i) declare
dividends; (ii) reclassify, combine or reverse split our common stock; (iii)
incur liens; (iii) incur certain types of indebtedness; (iv) liquidate or sell
a
substantial portion of our assets; (v) enter into transactions that would result
in a Change of Control (as defined in the Loan Agreement); (vi) amend our
charter documents in a way that adversely affects the rights of DOF; (vii)
except through XFS, make loans to, or advances or guarantee the obligations
of,
third parties; (viii) make intercompany transfers; (ix) engage in transactions
with officers, directors, employees or affiliates; (x) divert business to other
business entities; (xi) make investments in securities or evidences of
indebtedness (excluding of loans made by XFS) in excess of $250,000 in a
calendar year; and (xii) file registration statements, until the earlier of:
(x)
60 Trading Days following the date that a registration statement or registration
statements registering all the shares of Common stock for which the Series
J
Warrant is exercisable is declared effective by the Commission; and (y) the
date
the shares of Common stock for which the Series J Warrant is exercisable are
saleable by DOF under Rule 144 under the Securities Act without limitation
as to
volume or manner of sale.
Events
of
default under the Loan Agreement include: (i) default in the payment of
dividends on or the failure to redeem the Series B Preferred Stock when due;
(ii) failure to perform the covenants contained in the Securities Purchase
Agreement or the related transaction documents; (iii) suspension from listing
on
the OTC Bulletin Board or other exchange for 10 consecutive trading days; (iv)
the failure to timely deliver shares of common stock upon conversion of the
Series B Preferred Stock or exercise of the Series H Warrant ; (v) default
in
the payment of indebtedness in excess of $250,000; (vi) a judgment entered
against us in excess of $250,000 that continues undischarged or unstayed for
thirty-five (35) days after entry thereof; and (vii) insolvency, bankruptcy
and
similar circumstances.
The
Loan
Agreement also contains customary representations, warranties, covenants and
indemnification provisions for transactions of the type entered into between
the
Company and DOF.
DOF
Note
The
DOF
Note bears interest at the rate of 13% per annum and is payable monthly, in
arrears on the first day of each month, commencing on December 1, 2008. Interest
will not begin to accrue on amounts held in the escrow account described above,
until such time as those amounts are disbursed to us. Principal payments in
the
monthly amount of $150,000 commence on June 1, 2009 and, subject to events
of
default specified in the Loan Agreement, the entire amount of principal and
accrued but unpaid interest due under the note becomes due and payable on
November 14, 2010. In the event any payment of principal or interest or both
remains unpaid under the DOF Note for a period of ten days or more after the
due
date thereof, a one-time late charge equivalent to five percent (5%) of each
unpaid amount will be charged against us and XFS. Furthermore, in the case
of an
Event of Default (as defined in the Loan Agreement), the interest rate will
be
adjusted to 18% per annum. The DOF Note may be prepaid at anytime, in whole
or
in part, without any penalty or premium.
Series
J Warrant
On
November 14, 2008, we issued to DOF the Series J Warrant. The Series J Warrant
is exercisable for an aggregate of 9,339,816 shares or our common stock at
a
price of $1.00 per share for a period of ten years from the date of issuance.
The Series J Warrant may be exercised on a cashless basis to the extent that
the
resale of shares of common stock underlying the Series J Warrant is not covered
by an effective registration statement. The exercise price will be subject
to
adjustment in the event of subdivision or combination of shares of our common
stock and similar transactions, distributions of assets, issuances of shares
of
common stock with a purchase price below the exercise price of the Series H
Warrant, issuances of any rights, warrants or options to purchase shares of
our
common stock with an exercise price below the exercise price of the Series
J
Warrant, issuances of convertible securities with a conversion price below
the
exercise price of the Series J Warrant.
Borrower
Security Agreements
Pursuant
to the terms of the Loan Agreement, we and XFS each entered into a Security
Agreement, dated November 14, 2008 with DOF (collectively, the “Borrower
Security Agreements”). The Borrower Security Agreements secure our and XFS’
obligations in connection with the Loan Agreement, the DOF Note and the
Transaction Documents (as defined in the Loan Agreement). The Borrower Security
Agreements provide for a lien in favor of DOF on all of our assets and all
of
the assets of XFS, except for accounts resulting from the purchase of
Prescription Claims (as defined in the Loan Agreement) from clients other
than the prospective new client that is the subject of the loan from
DOF.
Guaranty
Agreements
Pursuant
to the terms of the Loan Agreement, each of our subsidiaries entered into a
Guaranty Agreement, dated November 14, 2008, with DOF (collectively, the
“Guaranty Agreements”). The Guaranty Agreements provide for unconditional
guaranties of our and XFS’ obligations in connection with the Loan Agreement and
the Transaction Documents.
Guarantor
Security Agreements
Pursuant
to the terms of the Loan Agreement, each of our subsidiaries entered into a
Guarantor Security Agreement, dated November 14, 2008, with DOF (collectively,
the “Guarantor Security Agreements”). The Guarantor Security Agreements provide
for liens in favor of DOF on all of the assets of each of our subsidiaries
(other than XFS, which entered into one of the borrower Security Agreements
described above).
Registration
Rights Agreement
Pursuant
to the terms of the Loan Agreement, we entered into a Registration Rights
Agreement, dated November 14, 2008, with DOF (the “Registration Rights
Agreement”). The Registration Rights Agreement requires us, subject to
certain exceptions, to include shares of common stock that may be purchased
upon
exercise of the Series J Warrant in any registration statement that we file
until such time as such shares (i) have been sold pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (“Rule 144”) or an
effective registration statement or (ii) are eligible for immediate resale
under
Rule 144.
Item
3.02 Unregistered sales of Equity Securities.
Item
1.01
above is incorporated into this Item 3.02 by reference.
DOF
is an
“accredited investor,” as defined in Regulation D under the Securities Act of
1933, as amended, or the Securities Act. None of the DOF Note, the Series J
Warrant, or the shares of our common stock underlying the Series J Warrant
were
registered under the Securities Act, or the securities laws of any state and
were offered and sold in reliance on the exemption from registration afforded
by
Section 4(2) and Regulation D (Rule 506) under the Securities Act and
corresponding provisions of state securities laws, which exempts transactions
by
an issuer not involving any public offering.
We
made
this determination based on the representations of DOF, which included, in
pertinent part, that DOF is an “accredited investor” within the meaning of Rule
501 of Regulation D promulgated under the Securities Act, and that DOF was
acquiring the securities it was acquiring for investment purposes for its own
account and not as nominee or agent, and not with a view to the resale or
distribution, and that DOF understood such securities may not be sold or
otherwise disposed of without registration under the Securities Act or an
applicable exemption therefrom.
Thus,
the
DOF Note, the Series J Warrant, and shares of common stock underlying the Series
J Warrant may not be offered or sold in the United States absent registration
or
an applicable exemption from the registration requirements and certificates
evidencing such shares contain a legend stating the same.
Item
9.01 Financial Statements and Exhibits.
The
following exhibits are filed as part of this report:
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Exhibit No.
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Description
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4.1
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Loan and
Securities Purchase Agreement, dated November 14, 2008, by and among
DOF,
MDwerks, Inc. and Xeni Financial Services, Corp.
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|
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4.2
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Senior
Secured Promissory Note, dated November 14, 2008, issued by MDwerks,
Inc.
and Xeni Financial Services, Inc. in the original principal amount
of
$10,300,000
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|
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|
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4.3
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Series
J Warrant issued to Debt Opportunity Fund LLLP to purchase 9,339,816
shares of common stock at a price of $1.00 per share
|
|
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|
|
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4.4
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Registration
Rights Agreement, dated November 14, 2008, between MDwerks, Inc.
and Debt
Opportunity Fund, LLLP
|
|
|
|
|
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10.1
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|
Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
Xeni
Medical Billing, Corp.
|
|
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10.2
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Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
MDwerks
Global Holdings, Inc.
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|
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10.3
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Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
Xeni
Medical Systems, Inc.
|
|
|
|
|
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10.4
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|
Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
Patient
Payment Solutions, Inc.
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|
|
|
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10.5
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Security
Agreement, dated November 14, 2008, entered into by and between Debt
Opportunity Fund, LLLP and MDwerks, Inc.
|
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10.6
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Security
Agreement, dated November 14, 2008, entered into by and between Debt
Opportunity Fund, LLLP and Xeni Financial Services,
Corp.
|
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10.7
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Security
Agreement, dated November 14, 2008, entered into by and between Debt
Opportunity Fund, LLLP and MDwerks Global Holdings,
Inc.
|
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10.8
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|
Security
Agreement, dated November 14, 2008, entered into by and between
Debt
Opportunity Fund, LLLP and Xeni Medical Systems, Inc.
|
|
|
|
|
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10.9
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Security
Agreement, dated November 14, 2008, entered into by and between
Debt
Opportunity Fund, LLLP and Xeni Medical Billing, Corp.
|
|
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10.10
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Security
Agreement, dated November 14, 2008, entered into by and between
Debt
Opportunity Fund, LLLP and Patient Payment Solutions,
Inc.
|
|
|
|
|
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99.1
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Press
Release announcing DOF financing
transaction
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
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MDWERKS,
INC.
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Dated:
November 20, 2008
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By:
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/s/ Howard B. Katz
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Howard
B. Katz
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Chief
Executive Officer
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Exhibit
Index
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
4.1
|
|
Loan
and Securities Purchase Agreement, dated November 14, 2008, by and
among
DOF, MDwerks, Inc. and Xeni Financial Services, Corp.
|
|
|
|
|
|
4.2
|
|
Senior
Secured Promissory Note, dated November 14, 2008, issued by MDwerks,
Inc.
and Xeni Financial Services, Inc. in the original principal amount
of
$10,300,000
|
|
|
|
|
|
4.3
|
|
Series
J Warrant issued to Debt Opportunity Fund, LLP to purchase 9,339,816
shares of common stock at a price of $1.00 per share
|
|
|
|
|
|
4.4
|
|
Registration
Rights Agreement, dated November 14, 2008, between MDwerks, Inc.
and Debt
Opportunity Fund, LLLP
|
|
|
|
|
|
10.1
|
|
Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
Xeni
Medical Billing, Corp.
|
|
|
|
|
|
10.2
|
|
Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
MDwerks
Global Holdings, Inc.
|
|
|
|
|
|
10.3
|
|
Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
Xeni
Medical Systems, Inc.
|
|
|
|
|
|
10.4
|
|
Guaranty,
dated November 14, 2008, issued to Debt Opportunity Fund, LLLP by
Patient
Payment Solutions, Inc.
|
|
|
|
|
|
10.5
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Security
Agreement, dated November 14, 2008, entered into by and between Debt
Opportunity Fund, LLLP and MDwerks, Inc.
|
|
|
|
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10.6
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|
Security
Agreement, dated November 14, 2008, entered into by and between Debt
Opportunity Fund, LLLP and Xeni Financial Services,
Corp.
|
|
|
|
|
|
10.7
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|
Security
Agreement, dated November 14, 2008, entered into by and between Debt
Opportunity Fund, LLLP and MDwerks Global Holdings,
Inc.
|
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10.8
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|
Security
Agreement, dated November 14, 2008, entered into by and between
Debt
Opportunity Fund, LLLP and Xeni Medical Systems, Inc.
|
|
|
|
|
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10.9
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Security
Agreement, dated November 14, 2008, entered into by and between
Debt
Opportunity Fund, LLLP and Xeni Medical Billing, Corp.
|
|
|
|
|
|
10.10
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|
Security
Agreement, dated November 14, 2008, entered into by and between
Debt
Opportunity Fund, LLLP and Patient Payment Solutions,
Inc.
|
|
|
|
|
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99.1
|
|
Press
Release announcing DOF financing
transaction
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MDWerks (QB) (USOTC:MDWK)
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MDWerks (QB) (USOTC:MDWK)
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