Health Discovery Corporation (OTCMKTS:HDVY) Files An 8-K Entry into a Material Definitive Agreement

Health Discovery Corporation (OTCMKTS:HDVY) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.

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Funding for Operations

As previously disclosed, Health Discovery Corporation (the Company) issued a convertible promissory note (the Promissory Note) to George H. McGovern, III, the Chairman and CEO of the Company, and James Dengler, a Company shareholder (the Note Holders), for $300,000. The Promissory Note contains an 8% annual interest rate and was due on January 1, 2019 (the Maturity Date). The proceeds of the Promissory Note will be used for general working capital purposes. to the terms of the Promissory Note, the Company granted to the Note Holders a priority security interest to all intellectual property as well as all past, current and future agreements involving the Company. The Promissory Note is senior to all unsecured indebtedness of the Company.

On April 22, 2019 the Note Holders agreed to waive the current default and to extend the terms of the Promissory Note until July 31, 2019. In consideration for the extension and waiver of the default, the Note Holders shall receive a five percent share of the potential recovery, if any, associated with previously disclosed arbitration proceeding between the Company and NeoGenomics, subject to a maximum amount to the Note Holders of $1,000,000 plus principal and unpaid accrued interest. All other terms of the Promissory Note shall remain in effect.

Additionally, on April 22, 2019, the Company issued a convertible promissory note (the Additional Promissory Note) in the amount of $200,000 to the Note Holders for funds advanced to the Company. The Additional Promissory Note contains an 8% annual interest rate and is due on July 31, 2019 (the Maturity Date). The proceeds of the Additional Promissory Note are for general working capital purposes. to the terms of the Additional Promissory Note, at any time, the Note Holders shall have the right to convert the principal and unpaid accrued interest of the Additional Promissory Note into Series D Preferred Stock (Preferred Stock) of the Company at a conversion price based upon the price of the Companys common stock on the date of advancement of the loan amount (the Conversion Price). The right of conversion (Optional Conversion) is solely at the Note Holders discretion.

In the event that there is a change of control transaction (a Change of Control) prior to the Maturity Date, the Additional Promissory Note shall be immediately converted to Preferred Stock of the Company. The total number of shares of Preferred Stock the Note Holders shall be entitled to upon conversion shall be equal to the number obtained by dividing (a) all principal and accrued but unpaid interest under the Additional Promissory Note by (b) the Conversion Price.

If not earlier converted in connection with an Optional Conversion or as a result of a Change of Control, the Additional Promissory Note will mature on July 31, 2019 and, at the option of the Note Holders, (i) principal and accrued interest shall be due and payable in cash at such time, or (ii) principal and accrued interest can be converted into Preferred Stock of the Company at the Conversion Price.

Additionally, the Note Holders shall be entitled to two warrants to purchase common stock of the Company for each share of Preferred Stock held and the price of each warrant is equal to the Conversion Price. Each warrant shall expire on July 31, 2029.

The above actions were approved on April 22, 2019 by the Companys non-interested and independent board members. Furthermore, all the above actions were made between the Note Holders and the Company without the knowledge or assurance of any recovery from the arbitration proceeding.

Litigation Funding

As previously disclosed, the Company entered into a non-recourse purchase agreement (the Purchase Agreement) with a litigation-funding firm (the Purchaser) to provide funding for the Companys ongoing legal action against NeoGenomics. The Company is committed to pursuing all legal actions available to rectify the damages caused by NeoGenomics. The Purchase Agreement allows the Company to pursue these actions against NeoGenomics. The Purchase Agreement remains in effect with the Purchaser.

Additionally, on April 22, 2019, the Company agreed to an advancement of $62,000 from the Note Holders to provide additional funding for the Companys ongoing arbitration between the Company and NeoGenomics. In consideration for the Note Holders additional funding, the Company will repay the $62,000 plus up to $310,000 of the potential recovery from the legal action against NeoGenomics on or before July 31, 2019. This advancement was made between the Note Holders and the Company without the knowledge or assurance of any recovery from the arbitration proceeding.

(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Exhibits.

None

About Health Discovery Corporation (OTCMKTS:HDVY)

Health Discovery Corporation (HDC) is a machine learning company that uses mathematical techniques to analyze data to uncover patterns that might otherwise be undetectable. The Company operates primarily in the field of molecular diagnostics where such tools are used for scientific discovery. Its Support Vector Machine (SVM) assets in particular have applicability in various other fields. HDC’s joint venture, SVM Capital, LLC (SVM Capital), applies SVM technology to the financial markets. The Company’s principal asset is its intellectual property, which includes mathematical algorithms called SVM and Fractal Genomic Modeling (FGM), as well as biomarkers that the Company has developed by applying its SVM and FGM techniques to genetic and proteomic data. It also owns the assets of Fractal Genomics, LLC, a company with FGM software. The FGM data analysis technique enables the mapping of genetic pathways involved in the diagnosis and prevention of certain diseases.

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