The Note is subject to various default provisions, including as a result of a failure to make an installment payment by the due date, a failure to deliver shares when required under the Note, or a breach of covenants in the Note and Purchase Agreement, among others. Upon an event of default, the Note accrues interest at the default rate of 1.83% per month (or 22% per annum), compounding daily. The Company is in default on this loan as of June 2, 2014 as a result of failing to make the required installment payments, as well as a result of the Company’s failure to timely file its annual reports with the SEC. Accordingly, the total due Iliad of $227,500 is classified as a current liability. On October 1, 2014, we received an event of default redemption notice from (the “Notice”) from Iliad. Pursuant to the Notice, Iliad indicated that it had elected to redeem the full outstanding balance of the Note, including default premiums, of $1,198,123.08. Iliad requested payment of the outstanding balance no later than October 15, 2014. Iliad has indicated a willingness to enter into a forbearance agreement and we are currently in negotiations with Iliad to enter into a forbearance agreement or otherwise to delay redemption. Based on discussions with Iliad, we believe that we will be able to reinstate the Note (perhaps with modifications) and cure the default.
