Cobalis faces involuntary Chapter 7 bankruptcy petition

By Laura Lutz

Des Moines, Aug. 7 - Cobalis Corp. said in an 8-K filing with the Securities and Exchange Commission that YA Global Investments, LP - formerly Cornell Capital Partners, LP - filed a petition to place Cobalis under involuntary Chapter 7 bankruptcy.

The Chapter 7 petition, which was filed with the U.S. Bankruptcy Court for the Central District of California, seeks liquidation of Cobalis' assets.

The filing alleges past-due debts of at least $3 million under secured convertible debentures that Cobalis issued to Cornell in a private placement that settled on Dec. 20, 2006 and Feb. 20, 2007.

Cobalis is considering either contesting the petition or consenting to a voluntary Chapter 11 reorganization, according to the 8-K filing. The latter option could allow Cobalis to continue operating under the supervision of the bankruptcy court. Otherwise, the company "will likely be forced to cease operations," according to the filing.

As previously reported, Cobalis received two default notices from Cornell in relation to the debentures.

The first default notice, received on July 23, said that Cobalis was in default on the debentures because of an April 23 lawsuit filed against the company by Gryphon Master Fund, LP.

That lawsuit asserted that Cobalis breached a settlement agreement in relation to a 2004 lawsuit against Cobalis by Gryphon. The earlier lawsuit stemmed from breach-of-contract claims relating to C$1.6 million of investments made by Gryphon in September 2003, according to an 8-K filing from May 2.

The first notice of default said that Cornell would demand full repayment of the debentures under its default provisions if Cobalis did not resolve the suit by Aug. 7.

The second default notice was issued on July 25. In it, Cornell said that Cobalis was in default under the Dec. 20, 2006 security agreement between the two companies. Under that security agreement, Cornell could seize Cobalis's assets as a result of the default, Cobalis said in an 8-K filing from July 30.

Located in Irvine, Calif., Cobalis develops medications to treat atopic diseases like allergies, migraine headaches, atopic asthma and dermatitis.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.