Zila skips two interest payments on convertibles, resulting in default

By Devika Patel

Knoxville, Tenn., May 1 - Zila, Inc. is in default on its senior secured convertible notes, according to an 8-K filed Friday with the Securities and Exchange Commission.

The company said it failed to make the Jan. 31 quarterly interest payment due under the notes. In addition, it did not make the quarterly interest payment due on April 30.

Each of these failures constitutes an event of default, but the company said it has not yet received a default notice from the investors.

Due to the defaults, all amounts outstanding under the notes will now accrue interest at the default rate of 15%.

The company said it was unable to issue shares for the April 30 payment because, due to the share price, the number of shares required would need shareholder consent.

In addition, the company said it is preserving cash in order to meet its existing commitments. Zila said it is unclear whether it will have sufficient cash available to pay the next quarterly interest payment when it becomes due.

Phoenix-based Zila is a cancer diagnostic company focused on developing technologies to detect oral cancer.

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