As of February 10, 2013, Tanke Biosciences Corporation is in default under the terms of the company's 8% Senior Convertible Notes issued to certain accredited investors. The default is the result of the company's failure to pay to the investors approximately $7.67 million in principal plus accrued interest due and payable on February 9, 2013 under the terms of the Senior Convertible Notes. The company has agreed to release $230,000 held in escrow to the investors, of which $68,178 will be used to pay Investors all remaining accrued interest, and the balance shall be applied towards the principal.

As a result of the company's failure to pay all amounts due and payable under the Senior Convertible Notes as of February 9, 2013, all obligations of the company under the Senior Convertible Notes shall be immediately due and payable and the Investors may exercise any other remedies the Investors may have under the transaction documents, at law or in equity. The company is currently in discussion with the investor representative and investors regarding proposals relating to the Senior Convertible Notes and the company's default thereunder, including a repayment schedule for the remaining principal.