Viragen gets notice of potential default on $1.1 million convertibles

By Laura Lutz

Des Moines, July 19 - Viragen, Inc. received a notice of default from the holder of about $1.1 million principal amount of a convertible promissory note, according to an 8-K filing with the Securities and Exchange Commission.

The note was issued in a private placement on June 18, 2004.

According to the notice, the delisting of Viragen's securities from the American Stock Exchange will result in a default 15 days after the date of the notice, which was July 13.

Upon an event of default, any holder may demand accelerated payment of 110% of the outstanding principal under the terms of the convertible promissory note. Interest on the note will accrue at a default rate of 16% from the date of default until the note is paid.

A default on the convertible promissory note would also constitute an event of default under a convertible debenture issued on Sept. 15, 2005 that is owned by the same holder. There is $40,625 principal amount outstanding under the debenture.

Upon an event of default, the holder may demand accelerated payment of 130% of the outstanding principal amount of the debenture. Interest on the debenture will accrue at a default rate of 18% from the date of default until the debenture is paid.

Viragen said in the 8-K that it "cannot predict" whether it would be able to pay amounts due under the note and debenture if the holder demanded accelerated payment.

Based in Plantation, Fla., Viragen develops treatments for cancer and viral diseases.

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