INVI comments on the large debt, from 10Q:
"The Company is in default under the terms of the Fifth Amended and Restated Note and Warrant Purchase Agreement (the “Agreement”), because it failed to make full payment of principal and interest on certain Class 2 and Class 3 Notes on their respective maturity dates. As of September 30, 2010, the outstanding principal and unpaid interest on the Class 2 Notes was $3,845,894. As of October 1, 2010, the outstanding principal and interest on the Class 3 Notes was $5,239,111.
The Class 2 and Class 3 Notes are secured by the Company’s intellectual property pursuant to a Collateral Assignment of Proprietary Rights and Security Agreement (the “Collateral Assignment”), and the Class 2 Notes are also secured by the Company’s accounts receivable and inventory pursuant to a Security Agreement (the “Security Agreement”).
The Class 2 and Class 3 Notes have begun to accrue interest at their default interest rates, which is equal to their respective interest rates plus an additional 4%. As such, $2,910,612 of Class 2 Notes are currently accruing interest at the default rate of 14% and $200,000 of Class 2 Notes are currently accruing interest at the default rate of 16%. Also, $3,671,643 of Class 3 Notes are currently accruing interest at the default rate of 12% and $1,196,989 of Class 3 Notes are currently accruing interest at the default rate of 16%.
Pursuant to the Collateral Assignment and the Security Agreement, the Class 2 and Class 3 Note holders (or the collateral agent acting on their behalf) have the right to foreclose on the collateral covered by such agreements, and exercise any of several remedies provided in such agreements, including taking possession of such collateral and selling such collateral. See Note I – Subsequent Events for recent activity associated with the Class 2 and Class 3 Notes.
The Company is in discussions with the note holders about curing or waiving the default. The note holders have continued to purchase new notes to provide additional funding to the Company after the default. See Note I – Subsequent Events for information on note activity since September 30, 2010.
Note I – Subsequent Events
On October 1, 2010, we defaulted on Class 3 Notes, as reported in our Form 8-K filed with the SEC on October 6, 2010. See our Form 8-K filed with the SEC on October 6, 2010 for more information regarding the default.
On October 1, 2010, we sold an additional $50,000 of Class 2 Notes and issued 41,096 warrants to note holders holding notes in default.
On October 12, 2010, we sold an additional $30,000 of Class 2 Notes and issued 26,986 warrants.
On October 26, 2010, we sold an additional $166,784 of Class 2 Notes earning 12% interest without warrants to note holders holding notes in default, of which $111,284 were issued to related parties.
During the month of October, we paid $134,618 of Class 2 Note principle of which $120,939 was to related parties.
These transactions bring the aggregate amount of outstanding Class 2 and Class 3 Notes to $8,505,559 as of November 12,2010.
On October 31, 2010, we defaulted on an additional $164,425 of Class 2 Note principle and interest. This brings the total defaulted Class 2 Note principle and interest to $4,341,981. See our Form 8-K filed with the SEC on October 6, 2010 for more information regarding the terms of the notes defaulted. |
