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Replies to post #26 on Integrated BioPharma Inc (INBP)
The Company defaulted on the $4,500 million outstanding principal amount of its Convertible Note Payable, issued by the Company under that certain Securities Purchase Agreement, dated as of February 21, 2008, by failing to repay the Convertible Note Payable on the scheduled maturity date of February 21, 2011. The Company’s failure to repay the Convertible Note Payable on the scheduled maturity date constituted an Event of Default under the Convertible Note Payable and triggered the right of the holder of the Convertible Note Payable to give the Company a notice (“CD Acceleration Notice”) to accelerate the payment of all unpaid principal and accrued and unpaid interest (including interest accruing at the default rate, if any). The Convertible Note Payable is secured by a pledge of substantially all of the Company’s assets, which pledge is subordinated to the security interest held by the Note Payable Holders. As of February 21, 2012, the Company has not repaid the Convertible Note Payable or the default interest on the Convertible Note Payable. The holder of the Convertible Note Payable, CD Financial, LLC (“CD Financial”) is a significant shareholder of the Company and has not made any payment demands on the Company with respect to the Convertible Note Payable, nor has it converted the Convertible Note Payable into common shares of the Company.
There can be no assurance that the Company will be able to repay, restructure or amend the Notes Payable prior to the receipt of an Acceleration Notice or the Convertible Note Payable prior to receipt by the Company of a CD Acceleration Notice. In the interim, the Company has continued to make timely interest payments to the Note Payable Holders at the non default rate of 8% per annum and is exploring its strategic alternatives, which may include business divestitures, developing business and sales strategies to increase operating income, the sale of some or all of the Company’s assets or operating subsidiaries and/or capital restructuring plans.
As a result of the events of default that arose based upon the Company’s failure to pay each of the Notes Payable at maturity, the Note Payable Holders have the right to give the Company an Acceleration Notice. As a result of the event of default that arose based upon the Company’s failure to repay the Convertible Note Payable at maturity, CD Financial has the right to give the Company a CD Acceleration Notice. Each acceleration notice would (i) accelerate the payment of all unpaid principal and accrued and unpaid interest (including default interest (if any); and (ii) require the Company to pay an amount equal to the sum of all of the respective amounts described in the preceding clause (i) in same day funds on the payment date specified in such notice. If the Company is unable to raise additional capital, sell certain assets or successfully refinance the full outstanding amount of the Notes Payable and the Convertible Note Payable upon acceptable terms, it would have a material adverse effect on the Company, including the possible foreclosure by the holders of the Notes Payable and/or the Convertible Note Payable of all or some of the Company’s assets, which would impact the Company’s ability to continue as a going concern.
On October 4, 2011, the Company and the Collateral Agent for the holders of the Notes Payable entered into a Forbearance Agreement (the "Forbearance Agreement") extending, among other things, the due date until December 31, 2011 (See Note 6. Debt). Several extensions of the Forbearance Agreement were granted from December 31, 2011 through February 8, 2012; however, on February 8, 2012, the forbearance period under the Forbearance Agreement expired. As of February 21, 2012, the Company remains in default under the Notes Payable (See Note 6. Debt). In addition, pursuant to the Forbearance Agreement, a $1.0 million forbearance fee is due and payable at the end of the forbearance period under the Forbearance Agreement. Such fee is included in accrued expenses and other liabilities in the condensed consolidated balance sheets as of December 31, 2011. The Company is negotiating with the Collateral Agent regarding a further forbearance, however, there can be no assurance that any further forbearance will be granted.
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