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EarthShell announces default on $4.5 million of convertible debentures
By Laura Lutz
Des Moines, Jan. 5 - EarthShell Corp. is now in default under agreements related to $4.5 million in convertible debentures held by Cornell Capital Partners, LP, according to an 8-K filing by EarthShell with the Securities and Exchange Commission.
As a result of the default, Cornell is entitled to 1% of the liquidated value of the debenture for each 30-day period after Dec. 31 that the statement is not effective.
Cornell also has the right to accelerate the due date of the debenture; demand payment of the principal and accrued interest of about $5.04 million; begin collection efforts; or attach their collateral securing the debenture.
The company said that it does not have funding to sustain its operations. It is "reviewing any and all options available in the event that the company is unable to secure the necessary funding to continue operations," according to the filing.
On Sept. 29, Cornell agreed not to pursue action for the default events or seek liquidated damages equal to 1% of the liquidated value of the debenture for each 30-day period after May 31, 2006.
That waiver expired on Dec. 31.
The event of default, according to an 8-K that EarthShell filed in September, occurred when the registration statement covering the debentures was not declared effective by the SEC by June 30.
In its recent filing, the company said that it filed a registration statement earlier in 2006, but it has not become effective.
For the waiver agreement, Cornell received 187,500 shares of EarthShell in September. If the registration statement had been declared effective before Dec. 1, Cornell would have returned some of the shares.
EarthShell, located in Lutherville, Md., makes disposable packaging used in the foodservice sector.
The company's stock dropped 4 cents, or 11.43%, to close at $0.31 on Friday.
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