Just hours after Inside MMA broke news of Nick Diaz signing to fight former champion Fernando Vargas, MMAJunkie has caught up with Cesar Gracie to find that already Vargas is unable to compete due to a private medical issue.

“We were talking about Vargas, but the thing is, I just came under some information that Vargas apparently has some kind of medical issue where he’s not able to pass the test any more, and he could be retiring,” Gracie said. “Vargas was very interested, but unfortunately, if he can’t pass the test, he can’t pass the test.”

With Vargas out focus switched to former IBF champ, Jeff Lacy which is currently in works for a fight in the fall. As for Zuffa stepping in with a new contract to create exclusive fights for Diaz, Gracie says that has not going to be signed.

“We didn’t sign it,” Gracie said of the proposed Forza deal (Zuffa’s llc.).

But he did get Diaz’s original deal amended.

“We got it changed, so we’re good,” Gracie said

That, Gracie said, clears the way for boxing.

Meaning that Diaz original contract prior to the Zuffa buyout will be honored which allows him a Boxing match with Showtime having the rights to promoting.

Gracie also mentions that Diaz is actually not motivated anymore by the talent pool in Strikeforce, including highly toted, undefeated wrestler Tyron Woodley (8-0). Diaz’s only interest would be a fight against top pound for pound Anderson Silva  said Gracie.

“People think he’s better now, but he was physically in better shape then,” Gracie said. “He’s winning now because he’s figured the game out of how to finish people quicker – how to deal with people that just want to hug you. He’s not fighting a lot of wrestlers, obviously.

“He’s technically better than he ever was, but from a physical standpoint, he’s not in the same shape. He’s just not as motivated. We’re just not seeing the best Nick Diaz out there, really. He’s just kind of going through the motions. He’s not training as hard as he used to. It’s been a problem, really”