Unassociated Document

Registration No. 333-176951

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

Form S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

BIOZONE PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Nevada		7389		20-5978559
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Elliot Maza

Chief Executive Officer

550 Sylvan Avenue

Suite 101

Englewood Cliffs, NJ 07632

(201) 608-5101

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Harvey J. Kesner, Esq.

61 Broadway, 32nd Floor

New York, New York 10006

Telephone: (212) 930-9700

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):


Large Accelerated Filer o			Accelerated Filer o
Non-Accelerated Filer o (Do not check if a smaller reporting company)			Smaller Reporting Company þ

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered (1)	Proposed Maximum Offering Price per Share	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Common stock, par value $.001 per share	8,345,310	$3.90	$32,546,709	$3,729.85*
Total	8,345,310

(1)	Pursuant to Rule 416 under the Securities Act, the shares of Common stock offered hereby also include an indeterminate number of additional shares of Common stock as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions.
(2)	With respect to the shares of Common stock offered by the selling stockholder named herein, estimated at $3.90 per share, the average of the high and low prices of the Common stock as reported on the OTC Bulletin Board on October 27, 2011, for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act. *Previously paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 19, 2011

PRELIMINARY PROSPECTUS

8,345,310 Shares

BIOZONE PHARMACEUTICALS, INC.

Common Stock

This prospectus relates to the sale by the selling stockholder identified in this prospectus of up to 8,345,310 shares of our Common stock. All of these shares of our Common stock are being offered for resale by the selling stockholder.

The prices at which the selling stockholder may sell shares will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any proceeds from the sale of these shares by the selling stockholder.

We will bear all costs relating to the registration of these shares of our Common stock, other than any selling stockholder’s legal or accounting costs or commissions.

Our Common stock is quoted on the Over-the-Counter Bulletin Board under the symbol “BZNE.OB”. The last reported sale price of our common stock as reported by the OTC Bulletin Board on October 27, 2011, was $3.90 per share.

Investing in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties described under the heading “Risk Factors” beginning on page 4 of this prospectus before making a decision to purchase our Common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is _________, 2011

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY	1
THE OFFERING	2
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS	4
RISK FACTORS	4
USE OF PROCEEDS	11
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS	11
DIVIDEND POLICY	12
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
BUSINESS	20
MANAGEMENT	30
EXECUTIVE OFFICERS AND DIRECTORS	30
EXECUTIVE COMPENSATION	33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	35
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	36
SELLING STOCKHOLDER	37
DESCRIPTION OF SECURITIES	38
PLAN OF DISTRIBUTION	40
LEGAL MATTERS	41
EXPERTS	41
WHERE YOU CAN FIND ADDITIONAL INFORMATION	41
FINANCIAL STATEMENTS	F-1

You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless the context provides otherwise, the terms “the Company,” “we,” “us,” and “our” refer to Biozone Pharmaceuticals, Inc.

Overview

We are a manufacturer of pharmaceutical and cosmetic products. In addition, we are conducting research related to potential improvements in certain excipients commonly used in generic pharmaceutical products. We operate through BioZone Pharmaceuticals, Inc. (“BioZone Pharma”) and its four wholly owned subsidiaries: Biozone Laboratories, Inc. (“Biozone Labs”), Equalan LLC (“Equalan”), Equachem LLC (“Equachem”) and Baker Cummins Corp. (“Baker Cummins”).

Our core manufacturing business primarily consists of the development and manufacture of over-the-counter (OTC) pharmaceuticals, cosmetic and beauty products for third party contract manufacturing customers. We utilize certain proprietary drug delivery technology in the topical and liquid products that we manufacture for third parties, which we refer to as QuSomes®, LiquaVail®, HyperSorb® (and together with the EquaSomeTM technology, the “BioZone Technology”). We sell pharmaceutical ingredients containing QuSomes to various healthcare supply manufacturers. In addition, we manufacture and sell two proprietary brands of skin care products: Glyderm® and Baker Cummins®. Our research activity primarily consists of developing our EquaSomeTM drug delivery technology to enhance certain injectable generic pharmaceutical drug products. We do not rely on any third parties to manufacture our products. Our contract manufacturing customers are regional and national distributors and retailers of healthcare products. Our Glyderm and Baker Cummins customers are drug wholesalers, physicians who use and resell our products in their physician practices and customers who purchase our products over the internet.

The BioZone Technology was invented by Dr. Brian Keller, one of the co-founders of BioZone Labs. In the mid-1990s, BioZone Labs licensed a proprietary, patented, phospho lipid delivery technology for use in its contract manufacturing business. Subsequently, Dr. Keller modified the lipid to enhance final product stability, ingredient penetration, ease of manufacture process, and reduction in manufacturing and raw material costs. We obtained three U.S. patents covering the composition of matter of the enhanced lipid and method of manufacturing the resulting lipid vesicle. We modified the lipid through removal of phosphate and PEGylation, which is the process of covalent attachment of polyethylene glycol polymer chains to another molecule, normally a drug or therapeutic protein. We are in the early stages of directing our research and development efforts towards applying the EquaSomeTM Technology to drug molecules currently used in approved, generic prescription (Rx) drugs. In many cases, the benefits of such molecules are limited due to poor stability or bioavailability or variable absorption. In those cases, our technology may increase the benefit of the therapy by improving stability, bioavailability or absorption. The BioZone Technology can be applied to the injectable or oral route of administration as well other delivery pathways, such as topical, buccal, rectal, intra-vaginal or transdermal. The BioZone Technology utilizes a unique, proprietary lipid that spontaneously forms thermodynamically stable lipid vesicles (liposomes), which encapsulate the drug molecule with a membrane that enhances drug stability, bioavailability and absorption.

Our core business strategy for our manufacturing business is to leverage the BioZone Technology as a value added enhancement, which differentiates us from traditional contract manufacturing companies. Our core business strategy for our pharmaceuticals business, which currently is limited to research activity, is to exploit the EquaSomeTM Technology to develop and obtain Food and Drug Administration (“FDA”) approval for the marketing and sale of branded generic pharmaceutical products. As of the date of hereof, our pharmaceuticals business does not constitute a material part of our overall business.

We conduct our manufacturing business through BioZone Labs, our research activity through BioZone Pharma, our proprietary brand business through Equalan and Baker Cummins, and our pharmaceutical ingredient distribution business through Equachem. We have licensed the use of the BioZone Technology (excluding the EquaSomeTM Technology) to BetaZone Pharmaceuticals, LLC (“BetaZone), our 45% owned subsidiary, for application in certain products marketed and to be marketed in Mexico, Central America and South America, and for application in certain products marketed outside of countries in those regions.

Equalan markets the Glyderm brand of skin care products, which can be used to improve skin texture and tone.Baker Cummins markets the “P&S” line of scalp and skin care products, which can be used to treat dry commonly seen skin and scalp conditions. These products are sold OTC and include liquids and lotions.

Our History

We were incorporated under the laws of the State of Nevada on December 4, 2006. On March 1, 2011 we filed a Certificate of Amendment to our Articles of Incorporation in order to change our name to BioZone Pharmaceuticals, Inc. from International Surf Resorts, Inc. Prior to March 2011 we were generally seeking to engage in the business of operating an internet provider of international surf resorts, camps and guided surf tours. We anticipate discontinuing this prior business through the sale of our 55% ownership in ISR de Mexico, S. de R.L. de C.V., a Mexican corporation, in consideration for the return and cancellation of approximately 13,948,001 shares of the Company's common stock.

On May 16, 2011, we acquired the assets and assumed the liabilities of Aero Pharmaceuticals, Inc. (“Aero”) a Florida corporation, pursuant to an asset purchase agreement dated as of May 16, 2011 by and between the Company, Baker Cummins, and Aero. The asset purchase agreement constituted a plan of reorganization within the meaning of Treasury Regulations Section 1.368-2(g) and constituted a plan of liquidation of Aero. As a result of the asset purchase, we acquired the business of Aero consisting of the manufacturing, marketing and distribution of dermatological products under the trade name of Baker Cummins Dermatologicals. In exchange for the asset purchase we issued an aggregate of 8,331,396 shares of our restricted common stock to Aero, which are being registered hereunder. The transaction was intended to be tax-free for federal income tax purposes, as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder. On September 21, 2011, we issued an additional 13,914 shares to Aero due to the late filing of this registration statement, which shares are also registered hereunder.

Under the asset purchase agreement with Aero we acquired the following products and brands, marketed under the Baker Cummins brand: P&S Liquid, P&S Shampoo, Ultra Mide 25 Lotion, Ultra Mide-D, X-Seb T Pearl Shampoo, X-Seb T Plus Shampoo, and Acquaderm Cream.

In the asset purchase agreement we purchased (i) all rights to manufacture, distribute, market and sell the Baker Cummins Assets, (ii) all trademarks, marketing materials, training materials, market data, clinical data, research data, regulatory data, adverse event data, trade dress information and product labeling data associated with the Baker Cummins assets, (iii) all outstanding customer purchase orders for the Baker Cummins assets, (iv) all contracts relating to the Baker Cummins Assets, (v) all of Aero’s existing inventory of the Baker Cummins Assets, (vi) all cash and cash equivalents, (vii) all accounts or notes receivable held by Aero, (viii) all furniture, fixtures, equipment and machinery, books and records related to the Baker Cummins assets, (ix) all technological, scientific, chemical, biological, pharmaceutical, toxicological, regulatory and clinical trial materials and information relating to the Baker Cummins Assets, and (x) all information owned or licensed by Aero relating to specifications and test methods, raw materials, packaging instructions, master formulas, validation reports, stability data, analytical methods, records of complaints, annual product reviews and other master documents necessary for the manufacture, control and release of the Baker Cummins Assets.

On June 30, 2011, we entered into stock purchase agreements with the shareholders of BioZone Labs pursuant to which we purchased 100% of the outstanding common stock of BioZone Labs. Also on that date, we entered into LLC Membership Interest Purchase Agreements with the members of Equalan and Equachem, pursuant to which we purchased 100% of the outstanding membership interests of Equalan and Equachem, and LLC Membership Interest Purchase Agreements with certain members of BetaZone pursuant to which we purchased 45% of the outstanding membership interests of BetaZone.

THE OFFERING

Common stock offered by selling stockholder:		This prospectus relates to the sale by a single selling stockholder of 8,345,310 shares of our restricted common stock, issued pursuant to an Asset Purchase Agreement dated as of May 16, 2011 by and among the Company, Baker Cummins Corp. and Aero Pharmaceuticals, Inc.

Offering price:		Market price or privately negotiated prices.

Common stock outstanding before and after the offering:		68,110,810 (1)


Use of proceeds:		We will not receive any proceeds from the sale of the common stock by the selling stockholder.

OTC Symbol:		BZNE.OB

Risk Factors:		You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 4 of this prospectus before deciding whether or not to invest in our common stock

(1)	Represents the number of shares of our common stock issued and outstanding as of December 19, 2011.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs or intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the following paragraphs. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement. Market data used throughout this prospectus is based on published third party reports or the good faith estimates of management, which estimates are based upon their review of internal surveys, independent industry publications and other publicly available information. Although we believe that such sources are reliable, we do not guarantee the accuracy or completeness of this information, and we have not independently verified such information.

RISK FACTORS

Investing in our common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included or referred to in this prospectus, before purchasing shares of our common stock. There are numerous and varied risks as set forth below that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.

Risks related to our Company

We have not had profitable operations in recent periods, and we expect our financial losses to continue in the future.

We have recognized net losses for the years ended December 31, 2010 and 2009, respectively, and expect to incur a net loss for the year ended December 31, 2011. We intend to invest substantial amounts in research and development activities through the year ended December 31, 2014 to advance the development of our branded generic pharmaceutical product business. Therefore, we expect our lack of profitable operations to continue in the future.

We are reviewing our manufacturing cost structure to identify inefficiencies and opportunities for reductions and our sales programs to identify opportunities for increasing sales volume. Although we anticipate that these efforts will reduce or eliminate ongoing losses from our manufacturing business and allow us to continue manufacturing operations for the foreseeable future, there can be no assurance that our cost reduction and increased sales efforts will prove successful.

We have negative working capital and have sustained operating losses during the past several years.

As of September 30, 2011, we had negative working capital. We have sustained losses for the years ended December 31, 2010 and 2009. In addition, on August 15, 2011, the holder of BioZone Labs’ and Equalan’s notes payable declared the entire unpaid principal amount and accrued interest of these loans immediately due and payable. As of September 9, 2011, we had paid these loans in full, which reduced our cash balances by approximately $2.3 million. Notwithstanding our negative working capital, we expect that cash flow from manufacturing operations will enable us to continue operations with for the foreseeable future.

Even if we are successful in generating income from our manufacturing business to reduce our negative working capital balance, our pharmaceutical research activities will require substantial additional investment that we have not yet secured. Our failure to raise capital when needed would adversely affect our growth opportunities and investment in capital expenditures and could force us to discontinue our research activities. We believe that we will be able to continue operations with our current level of working capital through December 31, 2012.

We are in default on approximately $2.3 million of convertible promissory notes

As of October 29, 2011, we are in default with respect to secured convertible promissory notes with an aggregate principal balance of $2,250,000 and accrued interest of $131,918, due to the fact that we have not paid the amount due on maturity. The default is continuing as we are unable to pay the amounts due under such notes. We continue to attempt to restructure or extend the obligations due under these notes, however there can be no assurances that we will be able to reach terms acceptable to the holders of the notes. Holders of these notes could bring legal proceedings against us to recover the amounts due to them, and if they were successful in their respective proceedings, they could cause our assets to be sold to satisfy the amounts we owe them. Our inability to satisfy the promissory notes in default, or reach amendments or restructuring agreements acceptable to the holders, poses a risk to our shareholders that our operations may be materially and adversely affected if the note holders commence legal action against us to recover amounts due to them.

Our independent auditor has issued an audit opinion which includes a statement describing a substantial doubt whether we will continue as a going concern, which may have a detrimental effect on our ability to obtain additional financing.

The continuation of the Company as a going concern is dependent upon, among other things, the attainment of profitable operations and the ability of the Company to obtain necessary equity or debt financing. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. Accordingly, the audit report prepared by our independent registered public accounting firm relating to the consolidated financial statements for the years ended December 31, 2010 and 2009 for BioZone Labs, our largest subsidiary and major accounting survivor, includes an explanatory paragraph expressing substantial doubt about its ability to continue as a going concern. Our auditor’s going concern opinion may have a detrimental effect on our ability to obtain additional funding.

Risks related to our industry

We operate in a highly regulated industry. An inability to meet current or future regulatory requirements in the United States or foreign jurisdictions could have a material adverse effect on our business, financial position and operating results.

All facilities where Rx and OTC drugs are manufactured, tested, packaged, stored or distributed must comply with the FDA’s Current Good Manufacturing Processes (“cGMPs”). All of our drug products are manufactured, tested, packaged, stored and distributed according to cGMP regulations. The FDA performs periodic audits to ensure that our facilities remain in compliance with all appropriate regulations. Typically, after the FDA completes its inspection, it may or may not issue the Company a report on Form 483, containing the FDA’s observations of possible violations of cGMP. These violations can range from minor to severe in nature. The degree of severity of the violation is generally determined by the time necessary to remediate the cGMP violation, and any adverse consequences for the consumer of our drug products. If the deficiency observations are determined to be severe, the FDA may elect to issue a warning letter to us. FDA guidelines specify that a warning letter be issued only for violations of “regulatory significance” for which the failure to adequately and promptly achieve correction may be expected to result in further enforcement action. In addition to making its concerns public, the FDA could impose sanctions including, among others, fines, product recalls, total or partial suspension of production and/or distribution, suspension of the FDA’s review of product applications, injunctions and civil or criminal prosecution. These enforcement actions, if imposed, could have a material adverse effect on our operating results and financial condition. Under certain circumstances, the FDA also has the authority to revoke previously granted drug approvals. The FDA inspected our manufacturing facilities in January 2011 and again in November 2011. The inspections resulted in numerous observations on Form 483, which we are in the process of remediating. We responded to the FDA on December 8, 2011 with a written statement describing the remedial action taken. As of the date hereof, we have not received any additional correspondence from the FDA regarding these two inspections. We believe that the remedial actions we are taking adequately respond to the FDA’s observations on Form 483. However, the FDA may conclude that our actions are insufficient to meet regulatory standards. If compliance is deemed deficient in any significant way, it could have a material adverse effect on our business.

In addition to the FDA, several U.S. agencies regulate the manufacturing, processing, formulation, packaging, labeling, testing, storing, distribution, advertising and sale of our products. Various state and local agencies also regulate these activities. Should any of our third party pharmaceutical ingredient suppliers fail to adequately conform or comply with manufacturing, quality and testing guidelines and regulations, we could experience a significant adverse impact on our operating results.

Significant increases in the cost of raw materials used in our contract manufacturing business could adversely impact our profit margins and operating results.

Affordable high quality raw materials and packaging components are essential to our business due to the nature of the products we manufacture. Our contract manufacturing customers either supply us with the raw materials and packaging components necessary to manufacture their finished products or reimburse us for the cost of such materials and components. Moreover the raw materials and packaging components that we use are generally available from multiple suppliers and we have not experienced any problems with contaminated raw materials that would impact our business. However, a rapid increase in cost of raw materials from various factors, such as inflationary forces or scarcity, could have a material impact on our financial results if we are unable to pass on these increased costs to our customers.

We face significant competition.

The contract manufacturing business is highly competitive and price sensitive. We face competition from multiple competitors, some of whom are larger and more financially secure than we. They may reduce prices to an unacceptably low level for us in order to increase sales. Therefore, we can make no assurance that we will grow our contract manufacturing business or maintain our current level of sales in the future.

Our Glyderm and Baker Cummins lines of skin care products compete against other similar products marketed by companies much larger than we and who spend much more than us on consumer advertising. The skin care product business is highly promotion sensitive and we have a limited advertising budget. Therefore, we can make no assurance that we will grow sales of our proprietary skin care brands or maintain our current level of sales in the future.

If we fail to obtain, apply for, adequately prosecute to issuance, maintain, protect or enforce patents for our inventions and products, the value of our intellectual property rights and our ability to license, make, use or sell our products would materially diminish or could be eliminated entirely.

Our competitive position and future revenues, especially with regard to our strategy to leverage the BioZone Technology to increase sales, will depend in part on our ability to obtain and maintain patent protection for our inventions and products and for methods, processes and other technologies, as well as our ability to preserve our trade secrets, prevent third parties from infringing on our proprietary rights or invalidating our patents and operate without infringing the proprietary rights of third parties. The risks include the following:

Some of our issued patents or any patents that are issued to us in the future may be determined to be invalid and/or unenforceable, or may offer inadequate protection against competitive products;

If we have to defend the validity of our patents or any future patents or protect against third party infringements, the costs of such defense are likely to be substantial and we may not achieve a successful outcome;

Others may obtain patents claiming aspects similar to those covered by our patents and patent applications, which could enable them to make and sell products similar to ours; and

We may be estopped from claiming that one or more of our patents is infringed due to amendments to the claims and/or specification, or as a result of arguments that were made during prosecution of such patents in the United States Patent and Trademark Office, or by virtue of certain language in the patent application. The estoppel may result in claim limitation and/or surrender of certain subject matter to the public domain or the ability of competitors to design around our claims and/or avoid infringement of our patents. If our patents or those patents for which we have license rights become involved in litigation, a court could revoke the patents or limit the scope of coverage to which they are entitled.

If we fail to obtain and maintain adequate patent protection and trade secret protection for our products, proprietary technologies and their uses, we could lose any competitive advantage and the competition we face could increase, thereby reducing our potential revenues and adversely affecting our ability to attain or maintain profitability.

A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and costly and an unfavorable outcome could harm our business.

There is significant litigation in the biotechnology field regarding patents and other intellectual property rights. We may be exposed to future litigation by third parties based on claims that our products, technologies or activities infringe the intellectual property rights of others. Although we try to avoid infringement, and as of the date hereof, there are no claims against us alleging infringement, there is the risk that we will use a patented technology owned or licensed by another person or entity and/or be sued for infringement of a patent owned by a third party. Under current United States law, patent applications are confidential for 18 months following their priority filing date and may remain confidential beyond 18 months if no foreign counterparts are applied for in jurisdictions that publish patent applications. There are many patents relating to the use of lipids and liposomes. If our products or methods are found to infringe any patents, we may have to pay significant damages and royalties to the patent holder or be prevented from making, using, selling, offering for sale or importing such products or from practicing methods that employ such products.

In addition, we may need to resort to litigation to enforce our patents issued to us, protect our trade secrets or determine the scope and validity of third-party proprietary rights. Such litigation could be expensive and there is no assurance that we would be successful. From time to time, we may hire scientific personnel formerly employed by other companies involved in one or more fields similar to the fields in which we are working. Either these individuals or we may be subject to allegations of trade secret misappropriation or similar claims as a result of their prior affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. As a result, we could be prevented from commercializing current or future products or methods.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property.

Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors and contractors. We enter into confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties all confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property. However, these agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

Risks related to management

We rely on key executive officers and consultants, and their knowledge of our business and technical expertise would be difficult to replace.

We are highly dependent on Elliot Maza, JD, CPA, our Chief Executive and Chief Financial Officer, Dr. Brian Keller, our President and Chief Scientific Officer, and Christian Oertle, our Chief Operating Officer. We do not have “key person” life insurance. The loss of Mr. Maza, Dr. Keller or Mr. Oertle may have an adverse effect on our manufacturing business. We have entered into three year employment contracts with Dr. Keller and Mr. Oertle. In addition, we have entered into a three year employment contract with Daniel Fisher, our Executive Vice President, Director and co-founder of BioZone Labs. Each of the employment agreements may be terminated by the Company at will, subject to an obligation to pay severance for six months at the then applicable monthly base salary. We are competing for employees against companies that are more established than we are, and have the ability to pay more cash compensation than we do. As of the date hereof, we have not experienced problems hiring employees in the recent past.

Because Elliot Maza, our Chief Executive Officer, Chief Financial Officer and Secretary, devotes only a portion of his business time to us, conflicts of interests may arise with respect to his other activities which could materially and adversely affect our Company.

Elliot Maza, our Chief Executive Officer, Chief Financial Officer and Secretary, does not work for us exclusively as he is also the Chief Financial Officer of Intellect Neurosciences, Inc., a biotechnology company focused on the development of therapeutics for Alzheimer’s disease. We do not consider Intellect Neurosciences, Inc. to be a competitor of the Company. It is possible that a conflict of interest may arise with respect to Mr. Maza’s other employment. Mr. Maza devotes approximately 30 hours per week to Company matters, compared to approximately 20 hours per week Mr. Maza devotes to Intellect Neurosciences, Inc. matters. We have not adopted any policies or procedures for the review and approval of any transactions that may cause a conflict of interest.

Our officers and directors hold a substantial number of shares of our common stock.

Our officers and, directors and their affiliates own or control an aggregate of 16,850,000 shares of the Company’s common stock, which represents approximately 24.73% of our issued and outstanding common stock as of December 16, 2011. Therefore, our officers and directors will be able to have substantial influence over any election of our directors and our operations. It should also be noted that for the most part, authorization to modify our Articles of Incorporation, as amended, requires only majority stockholder consent. This concentration of ownership could also have the effect of delaying or preventing a change in control. Additionally, potential conflicts of interest may arise between our officers and directors and our shareholders and our officers and directors may vote their shares in a way that our other shareholders do not approve.

Our obligations to indemnify our directors and officers may pose substantial risks to our financial condition.

We have obtained directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures us against losses which we may incur in indemnifying our officers and directors. In addition, we may enter into indemnification agreements with key officers and directors and such persons shall also have indemnification rights under applicable laws, and the Company’s Articles of Incorporation and Bylaws. Our obligations to indemnify our directors and officers may pose substantial risks to our financial condition, as we may not be able to maintain our insurance or, even if we are able to maintain our insurance, claims in excess of our insurance coverage could materially deplete our assets.

Risks related to our common stock

Shares of our stock suffer from low trading volume and wide fluctuations in market price.

Our common stock is currently quoted on the Over the Counter Bulletin Board trading system under the symbol BZNE.OB. An investment in our common stock currently is illiquid and subject to significant market volatility. This illiquidity and volatility may be caused by a variety of factors including low trading volume and market conditions.

In addition, the value of our common stock could be affected by actual or anticipated variations in our operating results; changes in the market valuations of other similarly situated companies serving similar markets; announcements by us or our competitors of significant acquisitions, strategic partnerships, collaborations, joint ventures or capital commitments; adoption of new accounting standards affecting our industry; additions or departures of key personnel; introduction of new products or services by us or our competitors; actual or expected sales of our common stock or other securities in the open market; conditions or trends in the market in which we operate; and other events or factors, many of which are beyond our control.

Stockholders may experience wide fluctuations in the market price of our securities. These fluctuations may have an extremely negative effect on the market price of our securities and may prevent a stockholder from obtaining a market price equal to the purchase price such stockholder paid when the stockholder attempts to sell our securities in the open market. In these situations, the stockholder may be required either to sell our securities at a market price which is lower than the purchase price the stockholder paid, or to hold our securities for a longer period of time than planned. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using common stock as consideration or to recruit and retain managers with equity-based incentive plans.

We cannot assure you that our common stock will become listed on NYSE Amex Equities, Nasdaq or any other securities exchange.

We plan to seek listing of our common stock on NYSE Amex Equities or Nasdaq within the next three years. However, we do not currently meet the initial listing standards of those exchanges and there are no assurances that we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange. Currently, we fall below the bid price requirement of $4.00 per share for Nasdaq and do not currently meet the corporate governance standards of either Nasdaq or NYSE Amex Equities. Until our common stock is listed on NYSE Amex Equities or Nasdaq or another stock exchange, we expect that our common stock will continue to trade on the Over-The-Counter Bulletin Board, where an investor may find it difficult to dispose of our shares of common stock. We believe that we may seek listing on the NYSE Amex Equities or Nasdaq within the next three years.

We will incur significant costs as a result of being an operating public company.

As a public operating company, we will incur significant legal, accounting and other expenses not incurred by a private company. If our stock becomes listed on Nasdaq or another major exchange or if our total assets exceed $10 million at the end of any fiscal year, we will also incur additional compliance expenses. It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act of 2002, SEC proxy rules, other government regulations affecting public companies and/or stock exchange compliance requirements. As we currently do not have a large financial reporting, internal auditing and other finance staff, we may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. We anticipate expending approximately $100,000 in legal costs and $100,000 in accounting costs over the next 12 months as a result of our public company status.

Our common stock is subject to the “Penny Stock” rules of the SEC, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

Our common stock is considered a “Penny Stock”. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock. The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock. In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit investors’ ability to buy and sell our stock and have an adverse effect on the market for our shares.

Our common stock may be affected by limited trading volume and price fluctuation which could adversely impact the value of our common stock.

There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will either develop or be maintained. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.

We have never paid nor do we expect in the near future to pay dividends.

We have never paid cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock for the foreseeable future. Investors should not rely on an investment in our Company if they require income generated from dividends paid on our capital stock. Any income derived from our common stock would only come from rise in the market price of our common stock, which is uncertain and unpredictable.

We and our security holders are not subject to some reporting requirements applicable to most public companies; therefore, investors may have less information on which to base an investment decision.

We do not have a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Therefore, we do not prepare proxy or information statements in accordance with Section 14(a) of the Exchange Act with respect to matters submitted to the vote of our security holders, including, but not limited to, an increase in our authorized capital stock or the adoption of stock option plans. Our officers, directors and beneficial owners of more than 10% of our common stock are not required to file statements of beneficial ownership on SEC Forms 3, 4 and 5 pursuant to Section 16 of the Exchange Act, which such forms would disclose the reporting person’s initial ownership interest in our Company and would be subsequently updated to disclose any additional transactions. Beneficial owners of more than 5% of our outstanding common stock are not required to file reports on SEC Schedules 13D or 13G. Therefore, investors in our securities will not have any such information available in making an investment decision.

Our business will require additional capital for continued growth, and our growth may be slowed if we do not have sufficient capital.

The continued growth and operation of our business will require additional funding for working capital. We may be unable to secure such funding when needed in adequate amounts or on acceptable terms, if at all. To execute our business strategy, we may issue additional equity securities in public or private offerings, potentially at a price lower than the market price at the time of such issuance. The issuances of additional securities in public and private offerings will dilute our current investors’ interest in the Company. Similarly, we may seek debt financing and may be forced to incur significant interest expense. The issuance of debt securities may provide such holders with rights superior to existing shareholders. If we cannot secure sufficient funding, we will be forced to forego strategic opportunities or delay, scale back or eliminate operations, acquisitions, and other investments.

Our ability to obtain needed financing may be impaired by such factors as the condition of the economy and capital markets, both generally and specifically in our industry, and the fact that we are not profitable, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations. As of the date of this amendment, we have not approached any new sources for additional funding and have not entered into negotiations for a transaction, other than those transactions that have already been disclosed in our filings with the SEC.

We lack proper internal controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management has identified certain material weaknesses relating to our internal controls and procedures. The reason for the ineffectiveness of our disclosure controls and procedures was the result of the lack of segregation of duties and responsibilities with respect to our cash control over the disbursements related thereto. The lack of segregation of duties resulted from our limited accounting staff.

We may fail to qualify for continued listing on the OTC Bulletin Board, which could make it more difficult for investors to sell their shares.

Our common stock is quoted on the Over the Counter Bulletin Board (“OTCBB”). There can be no assurance that quotation of our common stock will be sustained. In the event that our common stock fails to qualify for continued quotation, our common stock could thereafter only be quoted on the “pink sheets.” Under such circumstances, shareholders may find it more difficult to dispose of, or to obtain accurate quotations, for our common stock, and our common stock would become substantially less attractive to certain purchasers such as financial institutions, hedge funds and other similar investors.

Investor relations activities, nominal “float” and supply and demand factors may affect the price of our stock.

The Company expects to utilize various techniques such as non-deal road shows and investor relations campaigns in order to create investor awareness for the Company. These campaigns may include personal, video and telephone conferences with investors and prospective investors in which our business practices are described. The Company may provide compensation to investor relations firms and pay for newsletters, websites, mailings and email campaigns that are produced by third-parties based upon publicly-available information concerning the Company. The Company does not intend to review or approve the content of such analysts’ reports or other materials based upon analysts’ own research or methods. Investor relations firms should generally disclose when they are compensated for their efforts, but whether such disclosure is made or complete is not under our control. In addition, investors in the Company may, from time to time, also take steps to encourage investor awareness through similar activities that may be undertaken at the expense of the investors. Investor awareness activities may also be suspended or discontinued which may impact the trading market our common stock.

The SEC and FINRA enforce various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information, particularly in cases where the hallmarks of “pump and dump” activities may exist, such as rapid share price increases or decreases. We, and our shareholders may be subjected to enhanced regulatory scrutiny due to the small number of holders who initially will own the registered shares of our common stock publicly available for resale, and the limited trading markets in which such shares may be offered or sold which have often been associated with improper activities concerning penny-stocks, such as the OTC Bulletin Board or the OTCQB Marketplace (Pink OTC) or pink sheets. Until such time as our restricted shares are registered or available for resale under Rule 144, there will continue to be a small percentage of shares held by a small number of investors, many of whom acquired such shares in privately negotiated purchase and sale transactions, which will constitute the entire available trading market. The Supreme Court has stated that manipulative action is a term of art connoting intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities. Often times, manipulation is associated by regulators with forces that upset the supply and demand factors that would normally determine trading prices. Since a small percentage of the outstanding common stock of the Company will initially be available for trading, held by a small number of individuals or entities, the supply of our common stock for sale will be extremely limited for an indeterminate amount of time, which could result in higher bids, asks or sales prices than would otherwise exist. Securities regulators have often cited factors such as thinly-traded markets, small numbers of holders, and awareness campaigns as hallmarks of claims of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or other manipulative trading timed to coincide with false or touting press releases. There can be no assurance that the Company’s or third-parties’ activities, or the small number of potential sellers or small percentage of stock in the “float,” or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy or sell stock will not artificially impact (or would be claimed by regulators to have affected) the normal supply and demand factors that determine the price of the stock.

USE OF PROCEEDS

The selling stockholder will receive all of the proceeds from the sale of the shares offered by them under this prospectus. We will not receive any proceeds from the sale of the shares by the selling stockholder covered by this prospectus.

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our common stock has been quoted on the OTC Bulletin Board under the symbol “BZNE.OB since March 7, 2011 and prior to that under the symbol “ISFR”. The following table sets forth the high and low prices as reported on the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Prior to May 19, 2011, there was no active market for our common stock. As of December 19, 2011, there were approximately 86 holders of record of our common stock.

Period	High		Low
May 19, 2011 through June 30, 2011	$	5.50	$	1.50
July 1, 2011 through September 30, 2011	$	4.65	$	1.50
October 1, 2011 through December 14, 2011	$	3.90	$	3.90

The last reported sales price of our Common stock on the OTC Bulletin Board on October 27, 2011 was $3.90 per share.

DIVIDEND POLICY

We have not declared nor paid any cash dividend on our Common stock, and we currently intend to retain future earnings, if any, to finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future. The decision whether to pay cash dividends on our Common stock will be made by our board of directors, in their discretion, and will depend on our financial condition, results of operations, capital requirements and other factors that our board of directors considers significant.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors”.

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, our unaudited condensed consolidated financial statements and related notes included elsewhere in this registration statement. Historical results and percentage relationships among any amounts in these financial statements are not necessarily indicative of trends in operating results for any future period. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The statements, which are not historical facts contained in this registration statement, including this Management’s discussion and analysis of financial condition and results of operation, and notes to our unaudited condensed consolidated financial statements, particularly those that utilize terminology such as “may” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements. Such statements are based on currently available operating, financial and competitive information, and are subject to various risks and uncertainties. Future events and our actual results may differ materially from the results reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, dependence on existing and future key strategic and strategic end-user customers, limited ability to establish new strategic relationships, ability to sustain and manage growth, variability of operating results, our expansion and development of new service lines, marketing and other business development initiatives, the commencement of new engagements, competition in the industry, general economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the service requirements of our clients, the potential liability with respect to actions taken by our existing and past employees, risks associated with international sales, and other risks described herein and in our other filings with the Securities and Exchange Commission.

The safe harbor for forward-looking statements provided by Section 21E of the Securities Exchange Act of 1934 excludes issuers of “penny stock” (as defined under Rule 3a51-1 of the Securities Exchange Act of 1934). Our common stock currently falls within that definition.

All forward-looking statements in this document are based on information currently available to us as of the date of this registration statement, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Company Overview

Biozone Pharmaceuticals, Inc. (formerly, International Surf Resorts, Inc.) was incorporated under the laws of the State of Nevada on December 4, 2006 to operate as an internet-based provider of international surf resorts, camps and guided surf tours. The Company proposed to engage in the business of vacation real estate and rentals related to its surf business and it owns the website isurfresorts.com (the "Original Business"). During late February 2011, the Company began to explore alternatives to its original business plan. On February 22, 2011, the prior officers and directors resigned from their positions and the Company appointed a new President, Director, principal accounting officer and treasurer and began to pursue opportunities in medical and pharmaceutical technologies and products. On March 1, 2011, the Company changed its name to Biozone Pharmaceuticals, Inc. We anticipate discontinuing our Original Business through the sale of our 55% ownership in ISR de Mexico, S. de R.L. de C.V., a Mexican corporation in consideration for the return and cancellation of approximately 13,948,001 shares of the Company's common stock.

Since March 2011, the Company has been engaged primarily in seeking opportunities related to its intention to engage in medical and pharmaceutical businesses. On May 16, 2011, the Company acquired substantially all of the assets and assumed all of the liabilities of Aero Pharmaceuticals, Inc. pursuant to an Asset Purchase Agreement dated as of that date. Aero manufactures markets and distributes a line of dermatological products under the trade name of Baker Cummins Dermatologicals.

On June 30, 2011, we acquired the Biozone Labs Group which operates as a developer, manufacturer, and marketer of over-the-counter drugs and preparations, cosmetics, and nutritional supplements on behalf of health care product marketing companies and national retailers. In addition, we have been developing our proprietary drug delivery technology as an enhancement for approved, generic prescription drugs that are limited due to poor stability or bioavailability or variable absorption.

Reverse Merger

Pursuant to authoritative accounting guidance, we accounted for the purchase of the BioZone Labs Group as a “Reverse Merger”, with each of BioZone Labs, Equalan and Equachem, treated as the accounting survivor. Accordingly, we have set forth below Management’s Discussion and Analysis of Financial Condition and Results of Operations for each acquiring entity.

As disclosed in our quarterly report on Form 10-Q for the period ended September 30, 2011, our management has concluded that the Company’s disclosure controls and procedures were ineffective as of September 30, 2011 (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.

Results of Operations – On a consolidated basis giving effect to the June 30, 2011 acquisition of the BioZone Labs Group

Three Months Ended September 30, 2011 Compared to the Three Months Ended September 30, 2010:

Revenues. Revenue for the three months ended September 30, 2011 and 2010 was $3,930,503 and $4,515,222 respectively. The decrease in revenue of $584,719 or 12.9% primarily was attributable to delays in customer orders from decreased end-user demand.

Cost of Sales and Gross Profit. Cost of sales for the three months ended September 30, 2011 and 2010 was $2,144,952 and $2,400,005, respectively, resulting in gross profit of $1,785,551 and $2,115,217, respectively. The gross profit percentage for the three months ended September 30, 2011 and 2010 was 45% and 47%, respectively. The decrease in gross profit of $329,666 was primarily attributable to delays in customer orders from decreased end-user demand, while the resulting decrease in gross profit percentage primarily is attributable to increased raw material costs.

Operating Expenses. We had total operating expenses of $4,001,843 for the three months ended September 30, 2011 as compared to $1,826,952 for the three months ended September 30, 2010. The increase in operating expenses of $2,174,891 primarily is attributable to a non-cash payment in stock for strategic consulting services as well as an increase of amortization of deferred financing cost as well as small increases in various other expenses partially offset by a decrease in Research and Development expenses and commissions.

Interest Expense. We incurred interest and other expense of $283,411 for the three months ended September 30, 2011 as compared to $123,415 for the three months ended September 30, 2010. The increase in interest and other expense of $159,996 is primarily the result from an increase in total debt outstanding at an increased average interest rate.

Net Loss / Income. As a result of the foregoing, we realized a net loss of $2,499,903 for the three months ended September 30, 2011 as compared to net income of $256,850 for the three months ended September 30, 2010, an increase in net loss of $2,756,753.

Nine Months Ended September 30, 2011 Compared to the Nine Months Ended September 30, 2010:

Revenues. Revenue for the nine months ended September 30, 2011 and 2010 was $8,937,818 and $11,133,223, respectively. The decrease in revenue of $2,195,405 or 19.7% is primarily was attributable to delays in customer orders from decreased end-user demand.

Cost of Sales and Gross Profit. Cost of sales for the nine months ended September 30, 2011 and 2010 was $4,668,316 and $5,555,191, respectively, resulting in gross profit of $4,269,502 and $5,578,032, respectively. The gross profit percentage for the nine months ended September 30, 2011 and 2010 was 48% and 50%, respectively. The decrease in gross profit of $1,308,530 was primarily attributable to delays in customer orders from decreased end-user demand, while the resulting decrease in gross profit percentage primarily is attributable to increase in raw material costs.

Operating Expenses. We had total operating expenses of $7,375,208 for the nine months ended September 30, 2011 as compared to $4,859,974 for the nine months ended September 30, 2010. The increase in operating expenses of $2,515,234 primarily is attributable to a non-cash payment in stock for strategic consulting services as well as an increase in amortization of deferred financing fees as well as small increases in various other expenses partially offset by a small decrease in Research and Development expenses and commissions.

Interest Expense. We incurred interest and other expense of $505,606 for the nine months ended September 30, 2011 as compared to $323,142 for the nine months ended September 30, 2010. The increase in interest and other expense of $182,464 is primarily the result of an increase in total debt outstanding at an increased average interest rate.

Net Loss / Income. As a result of the foregoing, we realized a net loss of $3,611,312 for the nine months ended September 30, 2011 as compared to net income of $395,612 for the nine months ended September 30, 2010, an increase in net loss of $4,006,924.

Evaluation of Disclosure Controls and Procedures

The reason for the ineffectiveness of our disclosure controls and procedures was the result of the lack of segregation of duties and responsibilities with respect to our cash control over the disbursements related thereto. The lack of segregation of duties resulted from our limited accounting staff. Although neither management nor our independent auditors discovered any significant errors in the preparation of our financial statements, the lack of multiple levels of review and segregation of duties could lead to error or fraud and is considered a per se material weakness in internal controls over financial reporting.

As of the date of filing of this Registration Statement on Form S-1, we have hired additional senior, qualified accounting staff to prepare the financial statements and footnotes related thereto and have restructured the accounting department at our manufacturing facility in California to provide independent levels of review of the financial information included in our financial statements. Management believes that the addition of senior staff and the realignment of accounting duties will remediate this material weakness.

Liquidity and Capital Resources

As of September 30, 2011, our current assets were $6,055,880, as compared to $4,195,769 at December 31, 2010. As of September 30, 2011, our current liabilities were $7,796,043, as compared to $5,034,880 at December 31, 2010. Operating activities used net cash of $40,986 for the nine months ended September 30, 2011, as compared to using net cash of $386,296 for the nine months ended September 30, 2010.

During the nine months ended September 30, 2011, investing activities provided net cash of $428,152, comprised primarily of cash acquired in connection with the Aero acquisition. During the nine months ended September 30, 2010, investing activities used net cash of $352,438.

During the nine months ended September 30, 2011, net cash of $143,084 was provided by financing activities, consisting of proceeds from the issuance of convertible notes of $2,750,000, offset by repayment of notes payable to banks and shareholders of $2,456,552, and payment of deferred financing fees of $150,364, as compared to net cash provided by financing activities of $282,535 during the comparable nine-month period ended September 30, 2010, which consisted of net advances from a shareholder of $376,640, offset by repayments of existing debt of $94,105.

Our net income (loss) for the nine months ended September 30, 2011 and September 30, 2010, respectively was a loss of $3,611,312 and net income of $395,612, respectively. We anticipate that we will continue to generate losses from operations for the foreseeable future as we invest in research and development activities in furtherance of our business plan of advancing our drug delivery technology. As of September 30, 2011, we had cash and cash equivalents of $781,725 and negative working capital of $1,740,163.

As of October 29, 2011 and continuing through the date of filing of this registration statement, the Company is in default with respect to the Convertible Promissory Notes with an aggregate principal balance of $2,250,000 due to the fact that the Company has not paid the amount due on maturity. The obligation to repay these notes will have a material impact on our future liquidity and we have not yet identified a source of funding to eliminate this liquidity demand.

The increase in net loss of $3,189,613 between the year ended December 31, 2010 and the nine months ended September 30, 2011 largely is attributable to our goal of transforming the company into a fully integrated pharmaceutical company and the costs associated with purchasing the Aero assets and investing in our branded generic pharmaceutical business. We intend to continue to invest substantial amounts in research and development activities through the year ended December 31, 2014 to advance the development of our EquaSome Technology and its application to generic pharmaceutical products. This planned investment will require us to obtain additional capital by selling debt or equity securities as we lack any material unused sources of liquid assets to support such investment. The cost of investment in our branded generic pharmaceutical business during the next three years likely will exceed any available cash flow we generate from our contract manufacturing business.

We are in the process of reviewing our contract manufacturing cost structure to identify inefficiencies and opportunities for reductions. Also, we are reviewing our sales efforts and programs to identify opportunities for increasing sales volume. We anticipate that these efforts will reduce or eliminate ongoing losses from our contract manufacturing business and allow us to continue contract manufacturing operations for the foreseeable future.

Our current balances of cash will not meet our working capital and capital expenditure needs for the next twelve months. Because we are not currently generating sufficient cash to fund our operations and we have debt that is in default, we may need to rely on external financing to meet future operating, debt repayment and capital requirements. Any projections of future cash needs and cash flows are subject to substantial uncertainty. We can make no assurance that financing will be available in amounts or on terms acceptable to us, if at all. Further, if we issue equity securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences, or privileges senior to those of existing holders of common stock, and debt financing, if available, may involve restrictive covenants that could restrict our operations or finances. If we cannot raise funds, when needed, on acceptable terms, we may not be able to continue our operations, grow market share, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements, all of which could negatively impact our business, operating results, and financial condition. These conditions raise substantial doubt about our ability to continue as a going concern.

Off–Balance Sheet Arrangements

As of September 30, 2011, we had no material off-balance sheet arrangements other than operating leases.

Contractual Obligations

On June 30, 2011, the Company entered into three year executive employment agreements with three stockholders, Brian Keller, Christian Oertle and Daniel Fisher, to serve as our President, Chief Operating Officer and Executive Vice President, respectively. The agreements with Messrs. Keller and Fisher provide for annual salaries of $200,000 each and the agreement with Mr. Oertle that provides for an annual salary of $150,000. Pursuant to the terms of the agreements, each of these executives is eligible to participate in the Company’s long term incentive compensation programs and is entitled to an annual bonus if the Company meets or exceeds criteria adopted by the Compensation Committee of the Board, subject to certain claw back rights. The agreements provide for payments of six months’ severance in the event of early termination (other than for cause).

Results of Operations - On a separate company basis

BioZone Labs

Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009:

Sales. Sales for the year ended December 31, 2010 and 2009 were $13,354,712 and $12,594,387 respectively. The increase in sales of $760,325 primarily was attributable to orders from new customers.

Cost of Sales and Gross Profit. Cost of sales for the year ended December 31, 2010 and 2009 was $7,676,217 and $6,726,757 respectively, resulting in gross profit of $5,678,495 and $5,867,630, respectively. The gross profit percentage for the year ended December 31, 2010 and 2009 was approximately 42% and 47%, respectively. The decrease in gross profit of $189,135 and reduction in gross profit percentage primarily is attributable to an increase in sales of product with reduced margins offset by an increase in sales.

Operating Expenses. We had total operating expenses of $6,062,008 for the year ended December 31, 2010 as compared to $5,626,082 for the year ended December 31, 2009. The increase in operating expenses of $435,926 is primarily attributable to an increase in payroll and related costs and a general increase to support the growth in sales.

Interest Expense. We incurred interest expense of $403,555 for the year ended December 31, 2010 as compared to $450,808 for the year ended December 31, 2009. The decrease in interest expense of $47,253 results from reduced borrowings under equipment leases and reduced rates on bank debt.

Net Loss / Income. As a result of the foregoing, we realized a net loss of $691,123 for the year ended December 31, 2010 as compared to net loss of $180,810 for the year ended December 31, 2009 an increase in net loss of $510,313.

Equalan

Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009:

Sales. Sales for the year ended December 31, 2010 and 2009 were $852,465 and $712,333 respectively. The increase in sales of $140,132 primarily was attributable to acquiring new customers.

Cost of Sales and Gross Profit. Cost of sales for the year ended December 31, 2010 and 2009 was $326,348 and $551,114 respectively, resulting in gross profit of $526,117 and $161,219, respectively. The gross profit percentage for the year ended December 31, 2010 and 2009 was approximately 62% and 23%, respectively. The increase in gross profit of $364,898 and increase in gross profit percentage primarily are attributable to a change in mix of products sold and a write down of inventory in 2009.

Operating Expenses. We had total operating expenses of $347,600 for the year ended December 31, 2010 as compared to $345,337 for the year ended December 31, 2009. The increase in operating expenses of $2,263 is primarily attributable to an increase in employee benefit costs.

Interest Expense. We incurred interest expense of $28,803 for the year ended December 31, 2010 as compared to $21,789 for the year ended December 31, 2009. The increase in interest expense of $7,014 results from increased borrowings under our notes payable – bank.

Net Loss / Income. As a result of the foregoing, we realized net income of $149,714 for the year ended December 31, 2010 as compared to a net loss of $205,907 for the year ended December 31, 2009 an increase in net income of 355,621.

Income tax benefit. We received a deferred income tax benefit of $95,945 and $28,450 for the years ended December 31, 2010 and 2009, respectively, due to losses sustained. The effective income tax benefit as a percentage of loss before income tax benefit was approximately 12% and 14% which varies from the expected Federal tax rate of 34% due to valuation allowances applied to net operating loss carryforwards.

Equachem

Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009:

Sales. Sales for the year ended December 31, 2010 and 2009 were $292,015 and $181,394, respectively. The increase in sales of $110,621 primarily was attributable to an increase in sales to our largest customer.

Royalties. Royalties for the year ended December 31, 2010 and 2009 were $95,518 and $48,800, respectively. The increase in royalties of $46,718 primarily was attributable to an increase in royalties from our largest customer.

Cost of Sales and Gross Profit. Cost of sales for the year ended December 31, 2010 and 2009 was $50,067 and $41,035 respectively, resulting in gross profit of $337,466 and $189,159, respectively. The gross profit percentage for the year ended December 31, 2010 and 2009 was approximately 87% and 82%, respectively. The increase in gross profit of $148,307 results from an increase in sales offset by a reduction in gross profit percentage.

Operating Expenses. We had total operating expenses of $217,756 for the year ended December 31, 2010 as compared to $191,973 for the year ended December 31, 2009. The increase in operating expenses of $25,783 is primarily attributable to increased legal fees related to patent prosecution.

Net Loss / Income. As a result of the foregoing, we realized net income of $119,710 for the year ended December 31, 2010 as compared to a net loss of $2,814 for the year ended December 31, 2009 an increase in net income of $122,524.

Liquidity and Capital Resources

BioZone Labs

As of December 31, 2010 our current assets were $3,970,603 as compared to $4,209,289 at December 31, 2009. As of December 31, 2010 our current liabilities were $4,954,319, as compared to $4,465,118 at December 31, 2009. Operating activities used net cash of $359,174 for the year ended December 31, 2010 as compared to providing net cash of $586,373 for the year ended December 31, 2009.

During the year ended December 31, 2010 and 2009 investing activities used net cash of $131,007 and $25,995, respectively, for the purchase of property and equipment.

During the year ended December 31, 2010, net cash of $65,105 was provided by financing activities, consisting of advances from shareholders of $375,321, offset by repayments of existing debt of $257,923 and net shareholder distributions from 580 Garcia LLC of $52,293, as compared to net cash used by financing activities of $227,958 during the year ended December 31, 2009 which consisted of repayments of existing debt of $360,946 and net shareholder distributions from 580 Garcia LLC of $62,755 offset by advances from a shareholder of $195,743.

Our net loss for the year ended December 31, 2010 and 2009 was $691,123 and $180,810, respectively. We anticipate that we will continue to generate losses from operations for the foreseeable future as we invest in research and development activities in furtherance of our business plan of advancing our drug delivery technology. As of December 31, 2010 we had cash and cash equivalents of $117,121 and negative working capital of $983,716.

On August 15, 2011, the holder of the notes payable – bank declared the entire unpaid balance and accrued interest of the notes immediately due and payable as a result of a default caused by the acquisition of the BioZone Labs Group referred to above. On September 9, 2011, the notes and all accrued interest owed by Biozone Labs totaling approximately $1,945,000 were paid in full.

Equalan

As of December 31, 2010 our current assets were $732,582 as compared to $563,244 at December 31, 2009. As of December 31, 2010 our current liabilities were $701,532, as compared to $688,771 at December 31, 2009. Operating activities provided net cash of $78,048 for the year ended December 31, 2010 as compared to providing net cash of $89,620 for the year ended December 31, 2009.

During the year ended December 31, 2010 investing activities used net cash of $961 for the purchase of intangible assets. During the year ended December 31, 2009 there were no cash flows from investing activities.

During the year ended December 31, 2010 and 2009 net cash of $63,097 and $90,000, respectively, was used by financing activities consisting of repayments of existing debt.

Our net income for the year ended December 31, 2010 was $149,714 and our net loss for the year ended December 31, 2009 was $205,907. We anticipate that we will continue to generate losses from operations for the foreseeable future as we invest in research and development activities in furtherance of our business plan of advancing our drug delivery technology. As of December 31, 2010 we had cash and cash equivalents of $53,042 and working capital of $31,052.

Equachem

As of December 31, 2010 our current assets were $617,314 as compared to $293,534 at December 31, 2009. As of December 31, 2010 our current liabilities were $405,268, as compared to $201,198 at December 31, 2009. Operating activities provided net cash of $52,373 for the year ended December 31, 2010 as compared to using net cash of $265 for the year ended December 31, 2009.

During the year ended December 31, 2010 and 2009 there were no cash flows from investing or financing activities.

Our net income for the year ended December 31, 2010 was $119,710 and our net loss for the year ended December 31, 2009 was $2,814. We anticipate that we will continue to generate losses from operations for the foreseeable future as we invest in research and development activities in furtherance of our business plan of advancing our drug delivery technology. As of December 31, 2010 we had cash and cash equivalents of $58,532 and working capital of $212,046.

Off–Balance Sheet Arrangements

As of September 30, 2011, we had no material off-balance sheet arrangements other than operating leases.

Contractual Obligations

On September 30, 2011, the Company entered into three year employment agreements with each of its President/Chief Scientific Officer, Executive Vice President and Chief Operating Officer, who are also shareholders of the Company. Two of such employment agreements provide for annual salaries of $200,000 each and one that provides for an annual salary of $150,000. Pursuant to the terms of the agreements, each of these officers is eligible to participate in the Company’s long term incentive compensation programs and is entitled to an annual bonus if the Company meets or exceeds criteria adopted by the Compensation Committee of the Board, subject to certain claw back rights. The agreements provide for payments of six months’ severance in the event of early termination (other than for cause).

Impact of Inflation

The impact of inflation upon our revenue and income/(loss) from continuing operations during each of the past two fiscal years has not been material to our financial position or results of operations for those years because we do not maintain significant inventories whose costs are affected by inflation.

Properties

Our facilities are located in Pittsburg, California and Miami, Florida. BioZone Labs manufactures its products in a 20,000 s.f., cGMP facility owned by 580 Garcia Avenue, LLC, its consolidated VIE. Also it fills and stores its products at a 60,000 sq. ft. rented facility located at 701 Willow Road, Pittsburg, CA, which provides for annual rentals of $343,470.

We lease approximately 1,500 square feet of office space at 4400 Biscayne Boulevard, Miami, Florida where we employ one sales professional for our Baker Cummins brand products. The lease expires on October 31, 2012 and provides for annual rentals of approximately $23,700.

In July 2011, we entered into a lease for approximately 3,869 square feet of laboratory space in Princeton, NJ where we intend to establish our lipid manufacturing and scale up facility. The lease expires July 20, 2016. Rent expense is approximately $7,575 per month.

Seasonality

Due to the nature of the products sold by BioZone Labs, which include cough/cold remedies, its business is cyclical. Approximately two thirds of BioZone Labs' revenue is generated in the second half of the calendar year.

Off-Balance Sheet Transactions

We have no material off-balance sheet transactions.

Royalty Obligation – Terminated

Aero was a party to an Asset Purchase Agreement (the "Ivax Agreement"), dated as of September 25, 2006, with Ivax Laboratories, Inc. pursuant to which Aero acquired the Baker Cummins product line. Aero agreed to pay to Ivax a 10% royalty on net sales, until $1 million is paid, and 5% thereafter. Royalty expense for the years ended December 31, 2010 and 2009 were $28,445 and $56,033, respectively. Aero had $278,460 of accrued royalties payable as of December 31, 2010. Upon payment of $224,000 for satisfaction of outstanding royalties, the Ivax Agreement was amended on April 25, 2011 to eliminate all continuing royalty obligations under the Agreement.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made, and changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated results of operations or financial condition.

Basis of Consolidation

The consolidated financial statements BioZone Pharmaceuticals, Inc. include the accounts of BioZone Pharmaceuticals, Inc. and its subsidiaries, all of which are wholly owned except for BetaZone, which is 45% owned. In addition, the Company consolidates the accounts of 580 Garcia Properties, LLC, (“580 Garcia”) which owns the land and building used by BioZone Labs and is owned by one of the former owners of the BioZone Lab Group. The Company is a guarantor of 580 Garcia’s mortgage loan payable on the property.

The consolidated financial statements of BioZone Labs include the accounts of BioZone Laboratories, Inc. and 580 Garcia. We have determined that 580 Garcia meets the conditions of ASC Topic 810 as a Variable Interest Entity, and therefore has consolidated the accounts of 580 Garcia into its financial statements.

Revenue Recognition

BioZone Labs operates as a contract manufacturer and produces finished goods according to customer specifications. Equalan sells its merchandise directly to dermatologists and to an online retailer. Equachem operates as a reseller of pharmaceutical raw materials and licensor of intellectual property. The agreements with customers for each of the companies do not contain any rights of return other than for goods that fail to meet the specifications provided by the customer. None of the companies has experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns is provided. We record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured.

Revenue from the licensing of intellectual property is recorded when reported to us by the licensee.

Fair Value Measurements

We adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long-term credit obligations approximate fair value because the effective yields on these obligations are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Concentration of Credit Risk

Financial instruments that potentially expose us to concentrations of credit risk consist principally of cash and cash equivalents. We maintain our cash accounts at high quality financial institutions with balances, at times, in excess of Federally insured limits. Management believes that the financial institutions that hold our deposits are financially sound and therefore pose minimal credit risk.

Research and development

Research and development expenditures are charged to operations as incurred.

Income Taxes

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This standard results in a common requirement between the FASB and the International Accounting Standards Board (IASB) for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 is effective for fiscal years and interim periods beginning after December 15, 2011.

In June, 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011.

BUSINESS

Overview

We are a manufacturer of Over the Counter (“OTC”) drug products and cosmetics. In addition, we are in the early stages of developing branded generic prescription pharmaceutical products utilizing our proprietary EquaSomeTM drug delivery technology, which is designed to increase the benefit of the targeted therapy of each such generic pharmaceutical product by improving stability, bioavailability or absorption.

We operate through BioZone Pharmaceuticals, Inc. (“BioZone Pharma”) and its four wholly owned subsidiaries: Biozone Laboratories, Inc. (“Biozone Labs”), Equalan LLC (“Equalan”), Baker Cummins Corp. (“Baker Cummins”) and Equachem LLC (“Equachem”). In addition, we own a 45% interest in BetaZone Laboratories LLC (“BetaZone”). We refer to BioZone Labs, Equalan and Equachem as the “BioZone Labs Group”.

BioZone Labs develops and manufactures OTC pharmaceuticals and cosmetic and beauty products on behalf of third parties, manufactures our proprietary skin care products, which we market under the brand names of Glyderm® and Baker Cummins® and manufactures raw materials containing QuSomes used in OTC and pharmaceutical products manufactured by others.

Equalan LLC sells our proprietary Glyderm® brand of skin care products to national wholesalers, ecommerce retailers such as Drugstore.com and Skinstore.com, physicians for resale in their offices and consumers.

Baker Cummins sells our proprietary Baker Cummins® brand of skin care products to national wholesalers, ecommerce retailers such as Drugstore.com and Skinstore.com, physician offices and consumers.

Equachem LLC sells raw materials containing QuSomes that are used in OTC and pharmaceutical products to manufacturers of OTC drugs and cosmetics. It also licenses our QuSome technology to BetaZone and other pharmaceutical manufacturers in exchange for sales based royalties. Betazone has yet to pay any material royalties to Equachem as it has yet to generate any significant sales or license payments from products using our licensed technology. Royalties from other pharmaceutical manufacturers are approximately $100,000 per year and do not constitute a material component of our business.

BetaZone is engaged in the development, sales and license of pharmaceutical and cosmetic products in Latin America.

BioZone Pharma is in the early stages of developing branded generic drugs, which will utilize our proprietary EquaSomeTM technology.

BioZone Pharma was incorporated as a Nevada corporation on December 4, 2006 under the name International Surf Resorts Inc. Its name was changed to BioZone Pharmaceuticals, Inc. on March 1, 2011. BioZone Labs was incorporated under the laws of the State of California on June 2, 1992. Equalan was formed as a limited liability company under the laws of the State of California on January 2, 2007. Equachem was formed as a limited liability company under the laws of the State of California on March 12, 2007 under the name Chemdyn, LLC. Its name was changed to Equachem, LLC on July 25, 2007. BetaZone was formed as a Florida limited liability company on November 7, 2006. Baker Cummins Corp. was incorporated under the laws of the State of Nevada on March 31, 2011.

Our principal executive offices are located at 550 Sylvan Avenue, Suite 101, Englewood Cliffs, NJ 07632. Our telephone number is (201) 608-5101.

BioZone®, Glyderm®, P&S®, UltraMide®, Acquaderm®, QuSomes®, LiquaVail® and HyperSorb® are trademarks that we own. Each trademark, trade name or service mark of any other company appearing in this Registration Statement on Form S-1 belongs to its respective holder.

Manufacturing Business

The BioZones Labs Group was founded by Daniel Fisher and Dr. Brian Keller in 1987 as a developer and manufacturer of over-the-counter drugs and preparations, cosmetics, and nutritional supplements.

BioZone Labs is registered with the FDA as a drug manufacturer. We manufacture our products in a 20,000 s.f., cGMP facility located at 580 Garcia Avenue, Pittsburg, CA and we fill, package and store our products at a 60,000 sq. ft. facility located at 701 Willow Pass Road, Pittsburg, CA. Our facilities include a full range of high to moderate speed custom filling and packaging equipment for jars, tubes, and bottles. Our personnel include technical support professionals for product development, packaging and labeling; quality control & quality assurance professionals for attention to conformity with government and customer specifications; and chemists for processing and testing. In addition, we manufacture and sell two proprietary skin care lines: Glyderm®, which we acquired from Valeant Pharmaceuticals in 2007, and Baker Cummins®, which we acquired from Aero Pharmaceuticals in 2011.

We manufacture products for skin care, body care and hair care, liquid soaps, oral drops and sprays, cosmetics, health & beauty aids, nasal sprays, liquid dietary supplements and other OTC drug preparations including topical and gel cap drugs. We do not rely on any third parties to manufacture our products. The following is a list of products that we manufacture:

OTC Products. Hair conditioners and shampoos for treatment of eczema and psoriasis; external analgesics; skin protectants; anti-fungal products; topical anesthetics; nasal sprays; wound care products; acne products; cough and cold products; anti-itch products; and skin lightening products. In general, these products are regulated by the FDA.

Cosmetic and Beauty Products. AHA and Beta Hydroxy products; instant firming serums; anti-aging products; body lotions; eye creams; moisture creams and lotions; facial scrubs; and facial masks. In general, these products are not regulated by the FDA.

Dietary Supplements. Vitamins, minerals and herbal remedies. In general, these products are not regulated by the FDA.

The primary market for BioZone Labs’ contract manufacturing business is the United States. Our contract manufacturing customers are regional and national distributors and retailers of healthcare products.

In addition to manufacturing products on behalf of third parties, we develop and manufacture two proprietary brands of skin care products and sell those products to national wholesalers, ecommerce retailers such as Drugstore.com and Skinstore.com, physician offices and consumers. We do not outsource any manufacturing. We market our proprietary brands through our wholly-owned subsidiaries, Equalan and Baker Cummins.

Glyderm. We acquired the Glyderm® line of anti-aging products from Valeant Pharmaceuticals Inc. in 2007. Glyderm products have been used by dermatologists for over 20 years in office procedures to treat acne, skin discolorations, removal of fine lines and wrinkles and skin resurfacing. The products include glycolic acid peels and moisturizers. We manufacture the Glyderm line at our manufacturing facility in Pittsburg, California.

The Glyderm® brand, which is manufactured by BioZone Labs and sold by Equalan, consists of the following products:

Product Name	Indication or Target Market
Glycolic Acid Peels – 20% to 70%	Health care practioners for in office use to improve the texture and tone of the skin and clean out pores and help even out pigmentation and give the face a fresher appearance.
Glyderm Gentle Cleanser (0.2%)	pH balanced, soap-free, non-irritating formula, which may be used on sensitive skin.
Exfoliating Cream Series (5%)	Patients beginning the Glyderm program to help to minimize the appearance of pigmentation irregularities, maintain the results of the six-week office facial program and soften fine lines
Exfoliating Cream Plus Series (10%)	Patients who have successfully used the Exfoliating Cream Series (5%)
Exfoliating Cream Plus Series with Glycolic Acid (12%) and Salicylic Acid	Patients with dry skin who have successfully used the Glyderm Cream Plus (10%)
Exfoliate Lotion Series (5%)	Patients with normal skin to help to minimize the appearance of pigmentation irregularities, maintain the results of the six-week office facial program and soften fine lines
Exfoliate Lotion Plus (10%)	Patients who have successfully used the Exfoliate Lotion Series (5%)
Exfoliate Lotion Lite Series (5%)	Patients with normal to oily skin to help to minimize the appearance of pigmentation irregularities, maintain the results of the six-week office facial program and soften fine lines.
Exfoliate Lotion Lite Plus (10%)	Patients who have successfully used the Exfoliate Lotion Lite Series (5%)
Exfoliate Solution Series, Solution (5%)	Patients with oily, non-sensitive skin to help to minimize the appearance of pigmentation irregularities, maintain the results of the six-week office facial program and soften fine lines
Exfoliate Solution Plus (10%)	Patients who have successfully used the Exfoliate Solution Series, Solution (5%)

Exfoliate Solution Plus 12% – Combination of Glycolic and Salicylic acids	Patients who have successfully used the Exfoliate Solution Plus (10%)
Hydrotone Moisturizers (Without Glycolic Acid)	Patients with dry or mature skin to alleviate the appearance of dryness associated with exfoliation
Hydrotone Lite	Patients with normal to oily skin
Hydrotone Max	Patients with extremely dry or mature skin
Simply Sunscreen SPF 30	Paba free, UVA and UVB protection sunscreen for patients of all ages and skin types to help prevent sunburn
Glyderm Gentle Eye	Blend of antioxidants and vitamin K to help hydrate skin around the eyes and reduce the appearance of dark under-eye circles
All Climates Body Lotion (10%)	Fast-absorbing Glycolic 10% lotion for patients with all skin types for use in all climates and all seasons to alleviate the appearance of dryness
Gly Mist (0.1%)	Mineral water spray that contains Glycolic acid for patients with all skin types
Gly Masque (3%)	Combination of Glycolic esters and natural rare earth for patients with all skin types to make the skin feel invigorated and smooth
Intense C Serum PM – 7.5% L-Ascorbic Acid	Form of vitamin C suitable for topical application to provide antioxidant protection, defend against damaging UVA and UVB rays, and to contribute to collagen synthesis for patients with aging and mature skin types

The primary market for Glyderm is the United States. Equalan’s customers who purchase Glyderm products are physicians who use and resell our products in their physician practices and customers who purchase our products over the internet. We employ one salesperson who markets Glyderm products directly to physicians for use and resale in their offices. Also, we market Glyderm through ecommerce retailers, such as Drugstore.com. We have no material major customers for this line of products.

Baker Cummins. Baker Cummins is a line of proprietary scalp and skin care products, which can be used to treat dry commonly seen skin and scalp conditions. On May 12, 2011, we acquired the Baker Cummins line of proprietary scalp and skin care products from Aero.

Baker Cummins sells the following products, manufactured by BioZone Labs, which we market under the Baker Cummins® brand:

Product Name	Indication or Target Market
P&S Liquid	Treatment for symptoms of psoriasis and seborrhea dermatitis by helping to loosen and remove dried skin from the scalp.
P&S Shampoo	Specially formulated shampoo designed to remove residual P&S Liquid from the hair; contains salicylic acid to control recurrent flaking and scaling of the scalp associated with seborrheic dermatitis and psoriasis
Ultramide 25 Lotion and Ultra Mide-D	Skin lotions that soften and moisturize dry, rough, cracked and calloused skin. Ultramide 25 contains a stable 25% urea formulation
X-Seb T Pearl Shampoo and X-Seb T Plus Shampoo	Therapeutic tar shampoos that relieve itching, irritation, redness, flaking and scaling associated with dandruff, seborrheic dermatitis and psoriasis of the scalp.
Acquaderm Cream	Hypoallergenic, non-comedogenic and non-greasy concentrated facial formula that provides maximum moisturization of the skin

The primary market for Baker Cummins products is the United States. Baker Cummins’ customers are drug wholesalers, physicians who use and resell our products in their physician practices and customers who purchase our products over the internet. We employ one salesperson who markets Baker Cummins products to physicians for resale in their office and who fills orders received from customers over the internet. We have no material major customers for this line of products.

Equachem. Our wholly-owned subsidiary, Equachem, sells raw materials containing QuSomes to manufacturers of OTC drugs and cosmetics. Also, it licenses our QuSomes® technology to certain of OTC manufacturers and to our 45% owned subsidiary, BetaZone, which is engaged in development and sales of pharmaceutical and cosmetic products in Latin America (Mexico, Central America and South America), and certain products marketed outside of countries in those regions.

The primary market for Equachem’s business is the United States and Latin America. Equachem’s customers are U.S. manufacturers of OTC pharmaceutical and cosmetic products and BetaZone.

Branded Generic Pharmaceutical Business

BioZone Pharma is in the early stages of directing its research and development efforts towards applying the EquaSome technology to drug molecules currently used in approved, generic prescription (Rx) drugs. Our goal is to develop our own proprietary, enhanced versions of certain generic drugs, and market them under our own brands.

In many cases, the benefits of generic prescription drugs are limited due to poor stability or bioavailability or variable absorption. In those cases, our EquaSome technology (described below) may increase the benefit of the therapy by improving stability, bioavailability or absorption. The EquaSome technology can be applied to the injectable or oral route of administration as well other delivery pathways, such as topical, buccal, rectal, intra-vaginal or transdermal. The EquaSome technology utilizes a unique, proprietary lipid that spontaneously forms thermodynamically stable lipid vesicles (liposomes), which encapsulate the drug molecule with a membrane that enhances drug stability, bioavailability and absorption.

The BioZone Technology - QuSomes®, LiquaVail®, HyperSorb® and EquaSomesTM

In the mid-1990s, we licensed a proprietary, patented, phospho lipid delivery technology for use in our contract manufacturing business. Subsequently we modified the lipid to enhance final product stability, ingredient penetration, ease of manufacture process, and reduction in manufacturing and raw material costs. We obtained three U.S. patents covering the composition of matter of the enhanced lipid and method of manufacturing the resulting lipid vesicle. We modified the lipid through removal of phosphate and PEGylation, which is the process of covalent attachment of polyethylene glycol polymer chains to another molecule, normally a drug or therapeutic protein.

We refer to the pegylated lipid (i.e., the lipid modified with the PEGylation process described above) used in dermatological products as QuSomes. Our Glyderm Specialty Product, Intense C Serum PM – 7.5% L-Ascorbic Acid, is formulated with QuSomes. We refer to the pegylated lipid used in liquid oral OTC products as LiquaVail; the pegylated lipid used in gelatin capsules as HyperSorb; and the pegylated lipid that we plan to use in our branded generic pharmaceutical drug products as EquaSomes. Together, we refer to the QuSomes, LiquaVail, HyperSorb and EquaSomes as the “Biozone Technology”.

BetaZone License

BioZone Labs and BetaZone entered into a license agreement on November 7, 2006, as amended on April 4, 2011 and on June 29, 2011. Pursuant to the terms of the agreement, BioZone Labs licensed to BetaZone the rights to manufacture, market, sell and import certain QuSome products in a territory comprised of Mexico and the countries located in Central America, South America, Asia and Eastern Europe, and, notwithstanding the foregoing, BetaZone had the continued right to market and sell the products outside the territory with BioZone Labs’ prior written consent. As consideration, BioZone Labs received equity in BetaZone and BetaZone agreed to develop, manufacture, market and seek sublicensees for the products.

BioZone Pharma, as the parent of BioZone Labs, entered into the second amendment with BetaZone. As set forth in the second amendment, BioZone Pharma consented to BetaZone’s sale of certain QuSome products in certain countries and acknowledged that BetaZone had licensed the BetaZone Technology platform to certain sub-licensees. BetaZone agreed to use its commercially reasonable efforts on a continuous basis to develop, market and sell certain QuSome products. In the event that BetaZone fails to sell or license these products by June 29, 2013, BioZone Pharma shall have the right to withdraw its consent to BetaZone’s future sales or licenses of these products. BetaZone agreed to purchase QuSomes and EquaSomes exclusively from BioZone Pharma or its designees.

The agreement has a term of 25 years and may be extended for successive periods unless terminated by either party with 6 months written notice prior to the end of the term. Upon termination of the agreement, (a) BetaZone shall pay to BioZone Labs all royalties within 60 days of such termination; (b) BetaZone shall immediately transfer to BioZone Labs (i) copies of all information, reports, submissions and data relating to the QuSome products and generated during the term of the agreement and (ii) all rights which BetaZone may possess under the agreement; and (c) all rights and licenses granted to BetaZone pursuant to the agreement shall immediately terminate.

Research and Development

Historically, BioZone Labs has conducted all of our research and development activities, which have been focused on enhanced OTC and cosmetic product formulations and analytical method development for our contract manufacturing customers, and more recently, the development of the BioZone Technology.

Since March 2011, we have shifted our research and development activities related to the BioZone Technology, and the EquaSome technology in particular, to BioZone Pharma. We have established a research facility in Princeton, New Jersey, which is expected to commence full scale operations in December 2011 or January 2012.

In addition to the continued research and development activities for our contract manufacturing customers, we are conducting research and development activities related to drug product formulation and analytical method development for our branded generic pharmaceutical product candidates. We expect this effort to intensify in 2012 as we intend to conduct animal toxicology studies.

We have limited research and development activities focused on drug discovery or clinical trials.

Total research and development costs for the last two fiscal years were $212,042 and $213,991, respectively.

Intellectual Property

The following table lists all patents and patent applications related to the BioZone Technology. All of our granted patents expire 20 years from the filing date or effective date indicated in the table unless otherwise noted.

Patent Title	Patent or Application Number	Filing or Effective Date
Delivery of biologically active material in a liposomal formulation for administration into the mouth	5891465	April, 1999
Liposomal delivery by iontophoresis	6048545	April, 2000
Compounds and methods for inhibition of phospholipase A2 and cyclooxygenase-2	6495596	December, 2002
Self-forming, thermodynamically stable liposomes and their applications	6610322	August, 2003
Oral Liposomal Delivery System	6776924	April, 2004
Self-forming, thermodynamically stable liposomes and their applications	6958160	October, 2005
Compounds and methods for inhibition of phospholipase A2 and cyclooxygenase-2	6998421	February, 2006
Self-forming, thermodynamically stable liposomes and their applications	7150883	December, 2006
Self-forming, thermodynamically stable liposomes and their applications	7718190	May, 2010
Self-forming, thermodynamically stable liposomes and their applications - Japan	4497765	April, 2010
X-conazoles plus Qusomes
EQUA-001 (regular application) "Enhanced Delivery of Antifungal Agents"	12/006,820	January, 2008

EQUA-001 PCT, "Enhanced Delivery of Antifungal Agents"	PCT/US2009/000003	January, 2009
EQUA-001 JP	PNLG
EQUA-001 EP, KEMP (N.111618 JHS/eg)	9701160.5	January, 2009
EQUA-003 (P), "Enhanced Delivery of Antifungal Agents"	61/128,011	May, 2008
EQUA-012 (R)	12/454,387	May, 2009
Pure PEG-Lipid Conjugates
EQUA-013	61/217,627	June, 2009
EQUA-017P	61/284,065	December, 2009
EQUA-024R	12/802,197	June, 2010
EQUA-024 PCT	PCT/US2010/001590	June, 2010
Cyclosporin formulation
EQUA-016P	61/273,656	August, 2009
EQUA-025R	12/802,200	June, 2010
EQUA-025 PCT	PCT/US2010/001589	June, 2010
Rapamycin
EQUA-018P	61/276,953	September, 2009
EQUA-027R - "Method of treatment with Rapamycin"	12/924,038	September, 2010
EQUA-027 PCT - "Pharmaceutical compositions of Rapamycin”	PCT/US2010/002547	September, 2010

Customers and Marketing

We are dependent on three contract manufacturing customers for a significant portion of our business. During 2010 and 2009, approximately 50% of our revenue was generated by sales of products to these customers. Sales to these major customers during each year aggregated approximately 30%, 11% and 9% of combined sales during those years. These customers are national marketers of proprietary branded OTC and cosmetic products who outsource their manufacturing need to third party contract manufacturers, such as Biozone Labs. If any of these three customers discontinues or substantially reduces its purchases from us, it may have a material adverse effect on our business and financial condition. We believe that we have good relationships with our customers.

We have agreements with our contract manufacturing customers, which include prompt payment discount, and various fee and rebate obligation arrangements. Our agreements do not require customers to purchase any specific volumes of our products.

BioZone Labs employs two sales professionals who market R&D, formulation and manufacturing services to potential contract manufacturing customers. Equalan employs two sales who market Glyderm to physicians, ecommerce retailers and customers via the internet. Baker Cummins employs one sales professional who sells Baker Cummins products to drug wholesalers and online customers located throughout the United States.

Manufacturing

The primary raw materials used in making products for our contract manufacturing customers either are supplied by our customers or are readily available in large quantities from multiple sources. Similarly, the primary raw materials used in making our proprietary brand products are readily available in large quantities from multiple sources. We believe that our manufacturing capabilities comply with the FDA’s current Good Manufacturing Practice (“cGMP”). We do not outsource any manufacturing.

Growth Strategy

Our growth strategy for our contract manufacturing business is to increase sales by establishing a dedicated sales team with industry experience who will leverage the BioZone Technology (other than the EquaSome Technology) and our expertise in product formulation to attract new contract manufacturing customers. Our growth strategy for our proprietary brand business is to hire dedicated salespeople who will introduce our proprietary brand products to regional and national wholesalers, retailers and physicians for resale in their offices.

Our strategy for our branded generic pharmaceutical business is to invest in our research and development activities to exploit the EquaSome Technology and apply it to certain generic pharmaceutical products. We intend to establish manufacturing capabilities to produce EquaSomes; advance any product candidates through toxicology studies; pursue registration of any drug product candidates under the 505(b)(2) regulatory approval pathway; create final pharmaceutical formulations to demonstrate commercialization; and obtain regulatory approval for, and market our own proprietary branded generic products.

Competition

The market for contract manufacturing services is highly competitive and price sensitive and gross margins are low. Our direct competition consists of numerous contract manufacturers, such as Perrigo Company ( Nasdaq : PRGO), many of which have greater financial and other resources than we do. If one or more other OTC contract manufacturers significantly reduce their prices in an effort to gain market share, our gross revenue from health care supply services, profitability or market position could be adversely affected.

The market for OTC health care products is highly competitive and promotion sensitive. Our direct competition consists of numerous drug manufacturers and marketers, many of which have greater financial and other resources than we do. If one or more other pharmaceutical manufacturers significantly reduce their prices or significantly increase their promotional activity in an effort to gain market share, our gross revenue from sales of proprietary health care products, profitability or market position could be adversely affected.

The market for generic and branded generic prescription drugs is subject to intense competition from other generic drug manufacturers, brand-name pharmaceutical companies launching their own generic version of a branded product (known as an authorized generic), manufacturers of branded drug products that continue to produce those products after patent expirations and manufacturers of therapeutically similar drugs.

Government Regulation

The manufacturing, processing, formulation, packaging, labeling, testing, storing, distributing, advertising and sale of our products are subject to regulation by one or more U.S. agencies, including the FDA, the FTC, the DEA and the Consumer Product Safety Commission (CPSC), as well as several foreign, state and local agencies in localities in which our products are sold. In addition, we manufacture and market certain of our products in accordance with standards set by organizations, such as the United States Pharmacopeial Convention, Inc. (USP) and NSF International (NSF). We believe that our policies, operations and products comply in all material respects with existing regulations.

U.S. Food and Drug Administration

The FDA has jurisdiction over our ANDA, NDA and OTC monograph drug products and dietary supplements. The FDA’s jurisdiction extends to the manufacturing, testing, labeling, packaging, storage and distribution of these products.

The majority of our OTC pharmaceuticals are regulated under the OTC monograph system and subject to certain FDA regulations. OTC medicines, other than those approved by an ANDA or NDA application, are marketed under regulations referred to as “OTC monographs”, which have been established through the FDA’s OTC Review that follow notice-and-comment rulemaking procedures. Under the OTC monograph system, selected OTC drugs are generally recognized as safe and effective and do not require the submission and approval of an ANDA or NDA prior to marketing. The FDA OTC monograph system includes well-known ingredients and specifies requirements for permitted indications, required warnings and precautions, allowable combinations of ingredients and dosage levels. Drug products marketed under the OTC monograph system must conform to specific quality and labeling requirements; however, these products generally can be developed with fewer regulatory hurdles than those products that require the filing of an ANDA or NDA.

It is, in general, less costly to develop and bring to market a product produced under the OTC monograph system. From time to time, adequate information may become available to the FDA regarding certain ANDA or NDA drug products that will allow the reclassification of those products as no longer requiring the approval of an ANDA or NDA prior to marketing. For this reason, there may be increased competition and lower profitability related to a particular product should it be reclassified to the OTC monograph system. In addition, regulations may change from time to time, requiring formulation, packaging or labeling changes for certain products. The Company cannot predict whether new legislation regulating our activities will be enacted or what effect any legislation would have on our business.

We intend to market generic prescription drugs. These products require approval by the FDA through its ANDA or NDA processes prior to commercialization. Based on current FDA regulations, ANDAs and NDAs provide information on chemistry, manufacturing and change control, bioequivalence, packaging and labeling. The ANDA development process generally requires less time and expense for FDA approval than the NDA process. For approval of an ANDA, we must demonstrate that the product is bioequivalent to a marketed product that has previously been approved by the FDA and that our manufacturing process meets FDA standards. This approval process for an ANDA may require that bioequivalence studies be performed using a small number of subjects in a controlled clinical environment, and for certain topical generic products, demonstration of efficacy in comparative full end-point clinical studies. Depending on the specific product, other types of studies may be required by the FDA. Approval time for the industry currently averages 26.7 months from the date an ANDA is submitted. Changes to a product marketed under an ANDA or NDA are governed by specific FDA regulations and guidelines that define when proposed changes can be implemented and whether prior FDA notice and/or approval is required.

Under the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act), a company submitting an NDA can obtain a three-year period of marketing exclusivity for an Rx product or an Rx to OTC switch product if the company performs a clinical study that is essential to FDA approval of the NDA. Longer periods of exclusivity are possible for new chemical entities and orphan drugs. These exclusivity periods prevent other companies from obtaining approval of any ANDAs for a similar or equivalent generic product. Where three years of exclusivity is granted to the initiating company, we will be unable to market the product unless we establish a relationship with the company having exclusive marketing rights. There can be no assurance that, in the event we apply for FDA approvals, we will obtain the approvals to market Rx products.

Under the Federal Food, Drug and Cosmetic Act (FFDCA), a manufacturer may obtain an additional six months (which, under certain circumstances, may be extended to one year) of exclusivity if the innovator conducts pediatric studies requested by the FDA on the product. This exclusivity will, in certain instances, delay FDA approval and the sales by us of certain ANDA and other products.

If we are first to file our ANDA and meet certain requirements relating to the patents owned or licensed by the brand company, we may be entitled to a 180-day generic exclusivity period for that product. When a company submits an ANDA, the company is required to include a patent non-infringement certification to certain patents that cover the innovator product. If the ANDA applicant challenges the validity of the innovator’s patent or certifies that its product does not infringe the patent, the product innovator may sue for infringement. The legal action would not ordinarily result in material damages but could prevent us from introducing the product if it is not successful in the legal action. We would, however, incur the cost of defending the legal action and that action could have the effect of triggering a statutorily mandated delay in FDA approval of the ANDA for a period of up to 30 months. In addition, if exclusivity is granted to us, there can be no assurance that we will be able to market the product at the beginning of the exclusivity period or that the exclusivity will not be shared with other generic companies, including authorized generics. It is possible that more than one applicant files the first ANDA on the same day and exclusivity is shared. This may happen by chance, but more likely when there is a certain type of innovator exclusivity that prevents the filing of all ANDAs until a specific date. As a result of events that are outside of our control, we may forfeit our exclusivity. Finally, if we are not first to file our ANDA, the FDA may grant 180-day exclusivity to another company, thereby effectively delaying the launch of our product.

All facilities where Rx and OTC drugs are manufactured, tested, packaged, stored or distributed must comply with FDA cGMPs. All of our ANDA, NDA and OTC drug products are manufactured, tested, packaged, stored and distributed according to cGMP regulations. The FDA performs periodic audits to ensure that our facilities remain in compliance with all appropriate regulations. The failure of a facility to be in compliance may lead to a breach of representations made to store brand customers or to regulatory action against our related to the products made in that facility, including suspension of or delay in ANDA approvals, seizure, injunction or recall. Serious product quality concerns could also result in governmental actions against us that, among other things, could result in the suspension of production or distribution of our products, product seizures, loss of certain licenses or other governmental penalties, and could have a material adverse effect on our financial condition or operating results. In addition, several bills have been introduced in Congress that could, if enacted, affect the manufacture and marketing of Rx and OTC drugs. We cannot predict whether new legislation regulating our activities will be enacted or what effect any legislation would have on our business.

On June 25, 2007, the FDA issued Final Good Manufacturing Practice (GMP) Regulations specific to Dietary Supplements, which became effective as they relate to our company on June 25, 2008. These regulations had no significant impact on our business. We believe that we are in compliance with the regulations.

Consumer Product Safety Commission

Under the Poison Prevention Packaging Act (PPPA), the CPSC has authority to designate that dietary supplements and pharmaceuticals require child-resistant packaging to help reduce the incidence of accidental poisonings. The CPSC has published regulations requiring iron-containing dietary supplements and numerous pharmaceuticals to have child resistant packaging, and has established rules for testing the effectiveness of child-resistant packaging and for ensuring senior adult effectiveness.

The Consumer Product Safety Improvement Act of 2008 (CPSIA) amended the Consumer Product Safety Act (CPSA) to require that the manufacturer of any product that is subject to any CPSC rule, ban, standard or regulation certify that based on a reasonable testing program the product complies with such requirements. This certification applies to pharmaceuticals and dietary supplements that require child-resistant packaging under the PPPA. The CPSC has lifted the stay of enforcement of the certification requirement and the regulation has been in effect since February 9, 2010.

Federal Trade Commission

The FTC exercises primary jurisdiction over the advertising and other promotional practices of marketers of dietary supplements and OTC pharmaceuticals and often works with the FDA regarding these practices. The FTC considers whether a product’s claims are substantiated, truthful and not misleading. The FTC is also responsible for reviewing mergers between and acquisitions of pharmaceutical companies exceeding specified thresholds and investigating certain business practices relevant to the healthcare industry. The FTC could challenge these business practices in administrative or judicial proceedings. For example, in accordance with the Medicare Prescription Drug Improvement and Modernization Act of 2003, agreements between NDA and ANDA holders relating to settlements of patent litigation involving paragraph IV certifications under the Hatch-Waxman Act, as well as agreements between generic applicants that have submitted ANDAs containing paragraph IV certifications where the agreement concerns either company’s 180-day exclusivity, must be submitted to the FTC (and the United States Department of Justice) for review.

State Regulation

Most states regulate foods and drugs under laws that generally parallel federal statutes. We are also subject to other state consumer health and safety regulations that could have a potential impact on our business if we are ever found to be non-compliant. Additionally, logistics facilities that distribute generic prescription drugs are required to be registered within each state. License requirements and fees vary by state.

United States Pharmacopeial Convention

The USP is a non-governmental, standard-setting organization. By reference, the Federal Food, Drug and Cosmetic Act incorporates the USP quality and testing standards and monographs as the standards that must be met for the listed drugs, unless compliance with those standards is specifically disclaimed on the product’s labeling. USP standards exist for most Rx and OTC pharmaceuticals and many nutritional supplements. The FDA typically requires USP compliance as part of cGMP compliance.

Product Liability

The sale of pharmaceutical products can expose the manufacturer or marketer of such products to product liability claims by consumers. A product liability claim, if successful and in excess of our insurance coverage, could have a material adverse effect on our financial condition. We maintain product liability insurance policies which provide coverage in the amount $5 million per claim and $5 million in the aggregate.

Seasonality

Properties

Our rent expense for our Miami facility is as follows:

	Monthly	Yearly
Nov 1, 2009 - Oct 31, 2010	$1,928	$23,132
Nov 1, 2010- Oct 31, 2011	$1,995	$23,941
Nov 1, 2011 - Oct 31, 2012	$2,064	$24,779

In July 2011, we entered into a lease for approximately 3,869 square feet of laboratory space in Princeton, New Jersey where we intend to establish our lipid manufacturing and scale up facility. The lease expires July 20, 2016. Rent expense is approximately $7,575 per month.

Employees

We currently employ 68 full time employees at our Pittsburg, California facilities, three employees in Princeton, New Jersey, one employee in Englewood Cliffs, New Jersey (who is our Chief Executive Officer, Chief Financial Officer and Secretary) and one full time employee in Miami, Florida. These employees perform various research and development, manufacturing, sales, marketing and administration functions. We believe that our relations with our employees are good.

Legal Proceedings

We are not involved in any pending legal proceeding or litigations that would have a material impact upon our business or results of operations. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on our business or results of operations.

MANAGEMENT

The following persons are our executive officers and directors on December 19, 2011, and hold the positions set forth opposite their respective names.

EXECUTIVE OFFICERS AND DIRECTORS

Name	Age	Position

Roberto Prego-Novo	68	Chairman

Elliot M. Maza	56	Chief Executive Officer, Chief Financial Officer and Secretary

Brian Keller	55	President, Chief Scientific Officer and Director

Christian Oertle	39	Chief Operating Officer

Daniel Fisher	68	Executive Vice President and Director

Roberto Prego-Novo, Chairman. Mr. Prego-Novo was appointed to our board of directors and as our President, Principal Accounting Officer and Secretary on February 24, 2011. Mr. Prego-Novo resigned from all executive positions with us and was appointed as our Chairman on June 30, 2011. Since 1974, Mr. Novo has served as the President of Laboratorios Elmor S.A., a Venezuelan pharmaceutical company. Mr. Novo served as the Vice President, Latin America, of Teva Pharmaceutical Industries Limited from 2006 to 2010 and as the Vice President, Latin America, of IVAX Corporation from 2006 to 2008. Mr. Prego-Novo served as our President and Principal Accounting Officer from February 24, 2011 to June 30, 2011. Mr. Prego-Novo was chosen to be a director based on his extensive pharmaceutical industry experience. We believe Mr. Prego-Novo’s qualifications to serve as our chairman include his years of experience as an executive of large pharmaceutical companies, in particular at Teva Pharmaceutical Industries Limited, one of the five largest manufacturers of generic pharmaceutical products in the world. We expect that Mr. Prego-Novo will be able to draw on his knowledge of the generic pharmaceuticals industry to help us develop our branded generic pharmaceutical business.

Elliot M. Maza, J.D., C.P.A., Chief Executive Officer, Chief Financial Officer and Secretary. Elliot Maza serves as our Chief Executive Officer, Chief Financial Officer and Secretary. Mr. Maza was appointed as our Interim Chief Executive Officer, Chief Financial Officer and Secretary on May 16, 2011. Mr. Maza was appointed as our Chief Executive Officer on August 2, 2011. From May 2006 until the present time, Mr. Maza has served in several management positions at Intellect Neurosciences, Inc., a biotechnology company focused on the development of therapeutics for Alzheimer’s disease. Mr. Maza served as the Executive Vice President of Intellect Neurosciences, Inc. from May 2006 to March 2007, as President from March 2007 until October 2011, and as Chief Financial Officer from May 2006 through the present time. Mr. Maza was also appointed to the board of directors of Intellect Neurosciences, Inc. on June 26, 2007. From December 2003 to May 2006, Mr. Maza served as Chief Financial Officer of Emisphere Technologies, Inc., a biopharmaceutical company specializing in oral drug delivery. He was a partner at Ernst and Young, LLP from March 1999 to December 2003. During the period from May 1989 to March 1999, Mr. Maza served as an Associate and subsequently Vice President in the Fixed Income divisions of Goldman Sachs, Inc. and JP Morgan Securities, Inc. Mr. Maza practiced tax and corporate law at Sullivan and Cromwell in New York from September 1985 to April 1989. Mr. Maza has served on the Board of Directors and as Chairman of the Audit Committee of several biotech and pharmaceutical companies. Mr. Maza received his B.A. degree from Touro College in New York and his J.D. degree from the University of Pennsylvania Law School. He is a licensed C.P.A. and a member of the Bar in the states of New York and New Jersey.

Brian Keller, Pharm.D., President, Chief Scientific Officer and Director. Dr. Keller has served as our President, Chief Scientific Officer and Director on June 30, 2011. Dr. Keller co-founded BioZone Laboratories, Inc. with Mr. Daniel Fisher in 1989, and has served as its Executive Vice President and Chief Scientific Officer since that time. Dr. Keller is the inventor of the Company’s QuSomes, LiquaVail, and HyperSorb technology. Dr. Keller graduated from University of California, San Diego, in 1979 with a BS in biology, and received his doctorate in pharmacy from University of California, San Francisco, in 1983. Dr. Keller is a registered pharmacist. We believe Dr. Keller’s qualifications to serve as a director include his management and industry experience gained as the co-founder of BioZone Laboratories, Inc., one of our subsidiaries, as well as his general scientific knowledge.

Christian Oertle, Chief Operating Officer. Mr. Oertle has served as our Chief Operating Officer since June 30, 2011. From May 2003 until the present time, Mr. Oertle has served as the General Manager of BioZone Laboratories, Inc. From May 2000 to May 2003, Mr. Oertle served as the Director of Product Research and Development for BioZone Laboratories, Inc. Prior to May 2000 Mr. Oertle worked as a formulation chemist at BioZone Laboratories, Inc; Bertek Pharmaceuticals, a division of Mylan Laboratories (formerly Penederm Incorporated); and Alza Corporation. Mr. Oertle holds a Bachelors of Science Degree in Chemistry from University of California at Davis.

Daniel Fisher, Executive Vice President and Director. Mr. Fisher has served as our Executive Vice President and Director since June 30, 2011. Mr. Fisher co-founded BioZone Laboratories, Inc. with Dr. Brian Keller in 1989, and has served as its President since that time, primarily focusing on the Company’s contract manufacturing business. Dr. Keller graduated from San Francisco State University in 1967 with a BS in Marketing. We believe Mr. Fisher’s qualifications to serve as a director include his management and industry experience gained as the co-founder of BioZone Laboratories, Inc., one of our subsidiaries, as well as his technical and scientific knowledge.

Family Relationships

There are no family relationships between the officers and directors listed above.

Employment Agreements

On June 30, 2011, we entered into an employment agreement with Dr. Keller pursuant to which Dr. Keller will serve as our President and Chief Scientific Officer for a period of three years in consideration for an annual salary of $200,000. Pursuant to the terms of his employment agreement, Dr. Keller shall be eligible to participate in the Company’s long term incentive compensation programs and shall be entitled to an annual bonus if the Company meets or exceeds criteria adopted by the Board and subject to certain claw back rights.

In the event Dr. Keller’s employment is terminated due to his death or disability, his estate or his beneficiaries, as the case may be, shall be entitled to earned and unpaid base salary through the date of death or date of termination of his employment and all accrued and unpaid vacation time and all other additional benefits then due or earned in accordance with the Company’s applicable plans and programs. In the event the Company terminates Dr. Keller’s employment for cause, he shall be entitled to earned and unpaid base salary through the termination date and all accrued and unpaid vacation time and all other additional benefits then due or earned in accordance with the Company’s applicable plans or programs. In the event Dr. Keller’s employment is terminated without cause, other than due to Dr. Keller’s death or disability, Dr. Keller shall be entitled to i) earned and unpaid base salary through the termination date, ii) the sum of his base salary, at the annualized rate in effect on the termination date (or, in the event a reduction in base salary is a basis for a termination by Dr. Keller for good reason, then the base salary in effect immediately prior to such reduction) divided by 12, and which such monthly payments are to be paid to Dr. Keller for a period of 6 months but not to extend beyond the last day of his employment period (the “Severance Period”), iii) any outstanding stock options or shares of restricted stock which are unvested shall vest and Dr. Keller shall have the right to exercise any vested stock options during the Severance Period or for the remainder of the exercise period, iv) continued participation in all medical, health and life insurance plans at the same benefit level at which he was participating on the date of the termination of his employment until the earlier of the end of the Severance Period or the date, or dates, he receives equivalent coverage and benefits under the plans and programs of a subsequent employer and (v) all accrued and unpaid vacation and all other additional benefits then due or earned in accordance with the Company’s applicable plans or programs. Upon termination of Dr. Keller’s employment, he shall not be entitled to any severance payments or severance benefits from the Company or any payments by the Company on account of any claim by him of wrongful termination, including claims under any federal, state or local human and civil rights or labor laws, other than the payments and benefits provided in the employment agreement.

On June 30, 2011, we also entered into an employment agreement with Christian Oertle pursuant to which Mr. Oertle will serve as our Chief Operating Officer for a period of three years in consideration for an annual salary of $150,000. Pursuant to the terms of his employment agreement, Mr. Oertle shall be eligible to participate in the Company’s long term incentive compensation programs and shall be entitled to an annual bonus if the Company meets or exceeds criteria adopted by the Board which shall be subject to certain claw back rights. Mr. Oertle’s employment agreement has the same termination and severance provisions as Dr. Keller’s employment agreement.

On June 30, 2011, we also entered into an employment agreement with Mr. Fisher pursuant to which Mr. Fisher will serve as our Executive Vice President for a period of three years in consideration for an annual salary of $200,000. Pursuant to the terms of the his employment agreement, Mr. Fisher shall be eligible to participate in the Company’s long term incentive compensation programs and shall be entitled to an annual bonus if the Company meets or exceeds criteria adopted by the Board which shall be subject to certain claw back rights. Mr. Fisher’s employment agreement has the same termination and severance provisions as Dr. Keller’s agreement and Mr. Oertle’s agreement.

Involvement in Certain Legal Proceedings

Except as set forth in the director and officer biographies above, to the Company’s knowledge, during the past ten (10) years, none of the Company’s directors, executive officers, promoters, control persons, or nominees has been:

the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law

Directors’ and Officers’ Liability Insurance

The Company has obtained directors’ and officers’ liability insurance insuring its directors and officers against liability for acts or omissions in their capacities as directors or officers. Such insurance also insures us against losses which we may incur in indemnifying our officers and directors. In addition, the Company may enter into indemnification agreements with key officers and directors and such persons shall also have indemnification rights under applicable laws, and the Company’s Articles of Incorporation and Bylaws.

Board Independence

We currently have three directors serving on our Board of Directors: Mr. Novo, Mr. Fisher and Dr. Keller. We are not listed on a national securities exchange and, as such, are not subject to any director independence standards. Using the definition of independence set forth in the rules of the American Stock Exchange, each of Mr. Novo, Mr. Fisher and Dr. Keller would not be considered an independent director of the Company.

Meetings of the Board of Directors

The Company’s board of directors did not hold any formal meetings during the fiscal year ended December 31, 2010.

Board Committees

We currently do not maintain any committees of the Board of Directors. Given our size and the development of our business to date, we believe that the board through its meetings can perform all of the duties and responsibilities which might be contemplated by a committee. Our board of directors is expected to appoint an audit committee, nominating committee and compensation committee, and to adopt charters relative to each such committee, in the near future. We intend to appoint such persons to the committees of the board of directors as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange, although we are not required to comply with such requirements until we elect to seek listing on a national securities exchange, and we are under no obligation to do so.

Except as may be provided in our bylaws, we do not currently have specified procedures in place pursuant to which whereby security holders may recommend nominees to the Board of Directors.

Board Leadership Structure and Role in Risk Oversight

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to separate these roles because it allows us to separate the strategic and oversight roles within our board structure.

Our Board of Directors is primarily responsible for overseeing our risk management processes. The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the Board’s appetite for risk. While the Board oversees our company, our company’s management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure supports this approach.

Code of Ethics

We have not yet adopted a Code of Ethics although we expect to as we develop our infrastructure and business.

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below sets forth, for the last two fiscal years, the compensation earned by the executive officers listed below. No other executive officers had annual compensation in excess of $100,000 during the last fiscal year.

Name and Principal Position	Year Ended	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	All Other Compensation ($)	Total ($)
Elliot Maza (1)	2010	0	0	0	0	0	0	0
	2009	0	0	0	0	0	0	0

Brian Keller (2)	2010	100,000	0	0	0	0	24,771 (3)	124,771
	2009	100,000					34,179 (4)	134,179

Daniel Fisher (5)	2010	112,000	0	0	0	3,360 (6)	35,149 (7)	150,509
	2009	112,000	0	0	0	3,360 (8)	30,930 (9)	146,290

Christian Oertle (10)	2010	100,000	0	0	0	0	5,498 (11)	105,498
	2009	100,000	0	0	0	0	5,429 (12)	105,429

Roberto Prego-Novo (13)	2010	0	0	0	0	0	0	0
	2009	0	0	0	0	0	0	0

Eduardo Biancardi President, Secretary, CFO (14)	2010	0	0	0	0	0	0	0
	2009	0	0	0	0	0	0	0

Timothy Neely, Chief Operating Officer (15)	2010	0	0	0	0	0	0	0
	2009	0	0	0	0	0	0	0

(1)	Appointed as Interim Chief Executive Officer, Chief Financial Officer and Secretary on June 30, 2011 and as Chief Executive Officer on August 2, 2011.

(2)	Appointed as President and Chief Scientific Officer on June 30, 2011. Mr. Keller served as our principal executive officer as described in Item 402(m) of Regulation S-K for the fiscal year ended December 31, 2010.

(3)	The compensation amount set forth represents reimbursement of medical and dental insurance, life insurance, and auto expenses.

(4)	The compensation amount set forth represents reimbursement of medical and dental insurance, life insurance, and auto expenses.

(5)	Appointed as Executive Vice President on June 30, 2011

(6)	The compensation amount set forth represents Company contributions to Mr. Fisher’s IRA account.

(7)	The compensation amount set forth represents reimbursement of medical and dental insurance, life insurance, and auto expenses.

(8)	The compensation amount set forth represents Company contributions to Mr. Fisher’s IRA account.

(9)	The compensation amount set forth represents reimbursement of medical and dental insurance, life insurance, and auto expenses.

(10)	Appointed as Chief Operating Officer on June 30, 2011

(11)	The compensation amount set forth represents reimbursement of medical and dental insurance and life insurance.

(12)	The compensation amount set forth represents reimbursement of medical and dental insurance and life insurance.

(13)	Appointed as President on February 24, 2011. Resigned from all officer positions and appointed as Chairman of the Board of Directors on June 30, 2011.

(14)	Resigned from all positions on February 24, 2011

(15)	Resigned from all positions on February 22, 2011

Outstanding Equity Awards at Fiscal Year-End

There were no outstanding equity awards issued to our named executive officers as of December 31, 2010.

Director Compensation

The Company does not have any compensation arrangements for members of its Board of Directors.

Stock Incentive Plan

As of December 31, 2010, the Company had not adopted a stock incentive plan.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as described below, during the past three years, there have been no transactions, whether directly or indirectly, between the Company and any of its officers, directors or their family members, that exceeded the lesser of $120,000 or 1% of the Company’s total assets at year end for the last two completed fiscal years.

We manufacture our products and conduct our research and development activities in a 20,000 s.f., cGMP manufacturing and laboratory facility located at 580 Garcia Avenue, Pittsburg, CA, which we rent from 580 Garcia Properties, LLC, a related company. Mr. Daniel Fisher, our Executive Vice President, and his wife, Sharon Fisher, own all of the membership interests in 580 Garcia Properties, LLC. Related party rent expense for this facility for the year ended December 31, 2010 and 2009 was $291,528 in each year.

Phillip Frost, M.D., through Frost Gamma Investments Trust, beneficially owned approximately 46% of Aero’s issued and outstanding capital stock, Roberto Prego-Novo, our Chairman, owned approximately 23% of Aero’s issued and outstanding capital stock through Olyrca Trust. Each of Dr. Frost and Mr. Prego-Novo beneficially own approximately 5.35% and 3.70%, respectively (excluding, with respect to Mr. Prego-Novo, 1,000,000 shares of which he disclaims ownership), of our issued and outstanding capital stock following the Asset Purchase. Dr. Frost acquired his shares in February and March, 2011 for approximately $0.027 per share and Mr. Prego-Novo acquired his shares in March 2011 for approximately $0.03 per share. These prices were negotiated at arm’s length when we had no viable business and prior to the acquisition of Aero and prior to a final letter of intent with Biozone Laboratories shareholders. Mr. Steven D. Rubin, a director of Aero and executive of the Frost Group, owns 530,000 of our shares, 30,000 of which he acquired for $0.05 per share and 500,000 of which he received as compensation for consulting services

Santana Martinez, one of our former directors, provided office space to us at no charge. Our financial statements will reflect, as occupancy costs, the fair market value of that space, which is approximately $150 per month. We treated the usage of the office space as additional paid-in capital and charged the estimated fair value rent of $150 per month to operations. We recorded total rent expense of $1,800 for the year ended December 31, 2010 and total rent expense of $1,800 for the year ended December 31, 2009.

From time to time, Daniel Fisher, our Executive Vice President has advanced funds to the Company for working capital purposes in the aggregate amount of approximately $1,099,715. The advances bear interest at a weighted average rate of approximately 10% and are due on demand. The Company is in dispute with Mr. Fisher as to the balance due but has recorded as a liability the full amount claimed by him.

As part of our regular business operations, BioZone Labs purchases raw material ingredients from Equachem and sells finished products to Equalan. The financial statement impact of these intercompany sales and purchases is eliminated in consolidation. Purchases by BioZone Labs from Equachem were approximately $209,000 and $158,000 for the years ended December 31, 2010 and 2009, respectively. Sales by BioZone Labs to Equalan were approximately $190,000 and $188,000 for the years ended December 31, 2010 and 2009, respectively.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth certain information as of December 19, 2011 regarding the beneficial ownership of our common stock, by (i) each person or entity who, to our knowledge, owns more than 5% of our common stock; (ii) our executive officers; (iii) each director; and (iv) all of our executive officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s address is c/o BioZone Pharmaceuticals, Inc., 550 Sylvan Avenue, Suite 101, Englewood Cliffs, NJ 07632. Shares of common stock subject to options, warrants, or other rights currently exercisable or exercisable within 60 days of December 19, 2011, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the stockholder holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other stockholder.

Name of Beneficial Owner	Number of Shares Beneficially Owned	Percentage Beneficially Owned (1)(2)
5% Owners:
ISR Investments LLC (2) 1097 Country Coach Dr., Suite 705 Henderson, Nevada 89002	12,548,001	18.42%
Aero Pharmaceuticals, Inc. 4400 Biscayne Boulevard Miami, FL 33137	8,345,310	12.25%
Frost Gamma Investments Trust (3) 4400 Biscayne Boulevard Miami, FL 33137	3,606,500	5.29%
Nian Wu 103 Sassafras Court, North Brunswick, NJ	6,650,000 (6)	9.76%
Executive Officers and Directors
Brian Keller	6,650,000 (6)	9.76%
Daniel Fisher	6,650,000 (6)	9.76%
Christian Oertle	1,050,000 (6)	1.54%
Elliot Maza	0	0%
Roberto Prego-Novo (4)	2,500,000	3.67%
All executive officers and directors as a group (5 persons)	16,850,000	24.73%

Based on 68,110,810 shares of our common stock issued and outstanding as of December 19, 2011.

Santana Martinez has sole voting and investment control over the securities held by ISR Investments LLC. Santana Martinez, Michelle Neely and Michael Muellerleile are the members of ISR Investments LLC. Excludes 1,000,000 shares held by Timothy Neely, an affiliate of Michelle Neely, as to which ISR Investments LLC disclaims beneficial ownership. Pursuant to an escrow agreement 13,548,001 shares of our common stock held will be cancelled under certain circumstances following closing of the Aero Purchase.

Dr. Phillip Frost has sole voting and investment control over the securities held by Frost Gamma Investments Trust.

Mr. Prego-Novo, our sole officer and director, has sole voting and investment control over the securities held by Olyrca Limited Partnership. Excludes 1,000,000 shares of common stock as to which Mr. Prego-Novo disclaims beneficial ownership.

Jane Hsiao, Ph.D. holds sole voting and investment control over the securities held by Aero Pharmaceuticals, Inc.

These shares are being held in escrow pending final determination of certain valuation calculations related to the BioZone Lab Group

SELLING STOCKHOLDER

Up to 8,345,310 shares of common stock are being offered by this prospectus, all of which are being registered for sale for the accounts of the selling security holder and consist of:

·	8,345,310 shares of our restricted common stock, issued pursuant to an Asset Purchase Agreement dated as of May 16, 2011 by and among the Company, Baker Cummins Corp. and Aero Pharmaceuticals, Inc. (the “APA” and the transaction, the “Asset Purchase”)

The transaction by which the selling stockholder acquired its securities from us was exempt under the registration provisions of the Securities Act. As a result of the Asset Purchase, we acquired the business of the selling stockholder consisting of the manufacturing, marketing and distribution of dermatological products under the trade name of Baker Cummins Dermatologicals (“Baker Cummins”).

The shares of common stock referred to above are being registered to permit public sales of the shares, and the selling stockholder may offer the shares for resale from time to time pursuant to this prospectus. The selling stockholder may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective registration statement covering those shares. We may from time to time include additional selling stockholder in supplements or amendments to this prospectus.

The table below sets forth certain information regarding the selling stockholder and the shares of our Common stock offered by them in this prospectus. The selling stockholder has had no material relationship with us within the past three years other than as described in the footnotes to the table below or as a result of their acquisition of our shares or other securities. To our knowledge, the selling stockholder has sole voting and investment power with respect to the shares of common stock set forth opposite its name.

Beneficial ownership is determined in accordance with the rules of the SEC. The selling stockholder’s percentage of ownership of our outstanding shares in the table below is based upon 68,110,810 shares of Common stock outstanding as of December 19, 2011.

	Ownership Before Offering				After Offering (1)
Selling Stockholder	Number of Shares of Common stock Beneficially Owned		Number of Shares Offered		Number of Shares of Common stock Beneficially Owned		Percentage of Common stock Beneficially Owned
Aero Pharmaceuticals, Inc.		8,345,310		8,345,310		0		0	%
Total		--		8,345,310		--		--

(1)

Represents the amount of shares that will be held by the selling stockholder after completion of this offering based on the assumptions that (a) all shares registered for sale by the registration statement of which this prospectus is part will be sold and (b) no other shares of our common stock are acquired or sold by the selling stockholder prior to completion of this offering. However, the selling stockholder may sell all, some or none of the shares offered pursuant to this prospectus and may sell other shares of our common stock that they may own pursuant to another registration statement under the Securities Act or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities Act, including under Rule 144. To our knowledge there are currently no agreements, arrangements or understanding with respect to the sale of any of the shares that may be held by the selling stockholder after completion of this offering or otherwise.

DESCRIPTION OF SECURITIES

Authorized Capital Stock

We have authorized 100,000,000 shares of capital stock, par value $0.001 per share, all of which are designated as common stock.

Capital Stock Issued and Outstanding

We have issued and outstanding 68,110,810 shares of common stock and warrants to purchase that number of shares as described in “Bridge Warrants” below.

Common Stock

The holders of the Common Stock will be entitled to one vote per share. In addition, the holders of the Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors out of legally available funds; however, the current policy of our Board of Directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Common Stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of the Common Stock will have no preemptive, subscription, redemption or conversion rights.

Dividend Policy

We have not previously paid any cash dividends on our Common Stock and do not anticipate or contemplate paying dividends on our Common Stock in the foreseeable future. We currently intend to use all our available funds to develop our business. We can give no assurances that we will ever have excess funds available to pay dividends.

Bridge Notes and Warrants

The Bridge Notes have an aggregate principal amount of $2,250,000 and matured on the earlier of September 29, 2011 or the closing date of the Target Transaction (which is defined as a transaction pursuant to which the Company will acquire one or more businesses or companies approved by the holders) financing (such earlier date, the “Maturity Date”). The entire principal amount and any accrued and unpaid interest was due and payable in cash on the Maturity Date. The Notes bear interest at the rate of 10% per annum.

The principal and interest shall not be prepaid except in connection with the consummation of the Target Transaction Financing (as defined below), in which case the holder may elect either to (i) convert all of the principal and accrued and unpaid interest then outstanding into the transaction securities at a price per share or unit, as the case may be, equal to 80% of the price at which such securities are sold or (ii) require the Company to repay the principal amount then outstanding and any accrued and unpaid interest in cash.

Effective October 28, 2011, the holders of the Notes agreed to extend the maturity date of the Notes to October 29, 2011(the “New Maturity Date”). As consideration for the extension, the Company (i) issued to the holders an aggregate of 112,500 shares of its common stock and (ii) paid to the holders, an aggregate of $135,000 as additional interest for the period beginning on February 28, 2011 (the date the holders placed the principal amount in escrow) and ending on March 28, 2011. The Company agreed to provide piggyback registration rights with respect to the 112,500 shares.

The Company has agreed that if it fails to repay the March 2011 Notes on or before the New Maturity Date, then in addition to the interest due under the Notes, the Company will pay an additional 2% (annualized) for each 30 day period all or any portion of the principal or accrued interest remain unpaid, subject to a maximum aggregate interest rate of 20% (the sum of the 10% interest rate plus 2% for each 30 day delay period), with such 2% being calculated on the full principal amount regardless of whether any portion thereof has been repaid by the Company and such full amount accruing as of the day following the New Maturity Date and then upon each 30 day anniversary of the New Maturity Date.

As of October 29, 2011 and continuing through the date of filing of this registration statement, the Company is in default under the terms of the Notes.

On September 22, 2011, the Company issued a 10% convertible promissory note with a principal amount of $500,000, due on March 22, 2012. The principal and interest may not be prepaid except in connection with the consummation of a Target Transaction Financing, in which case the holder may elect either to convert all of the principal and accrued and unpaid interest then outstanding into the securities offered in the Target Transaction Financing at a price per share or unit, as the case may be, equal to 70% of the price at which such securities are sold or require the Company to repay the principal amount then outstanding and any accrued and unpaid interest in cash. On November 30, 2011, the Company issued 1,018,456 shares of its common stock, par value $0.001 per share, upon conversion of the principal and all of the interest due on the note at a conversion price of $0.50 per share. In addition, the Company issued to the holder of the note a warrant to purchase 250,000 shares of its common stock at an exercise price of $1.00 per share in lieu of the warrants described above.

Bridge Warrants

The Bridge Warrants expire five years after the date of issue. The Bridge Warrants have an initial exercise price of 120% of the price of the Target Transaction Financing (defined as the private placement of the Company’s securities which yields gross proceeds of at least $8,000,000) (the “Financing Share Price”). The Bridge Warrant entitles the holder to purchase the number of shares of common stock and/or other securities, including units of securities, sold in the Target Transaction equal to the Bridge Warrant Coverage (as defined herein) (a) multiplied by $2,250,000 and (b) divided by the Financing Share Price. “Warrant Coverage” means (i) 50% if closed on or prior to 120 days, (ii) $75% if closed after 120 days but before 150 days and (iii) 100%, if closed after 150 days, after the closing of a private placement. The Bridge Warrant is exercisable in cash or, while a registration statement covering the shares of common stock and/or other securities issuable upon exercise of the Bridge Warrant, or an exemption from registration, is not available, by way of a “cashless exercise”. The exercise price of the Warrant is subject to a “full ratchet” anti-dilution adjustment for a period of one year. This adjustment provides that, in the event that the Company issues certain securities at a price lower than the then applicable exercise price, the exercise price of the Bridge Warrant shall be immediately reduced to equal the price at which the Company issued the securities.

Transfer Agent

The transfer agent for our common stock is Island Stock Transfer.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no changes in or disagreements with our accountants since our formation required to be disclosed pursuant to Item 304 of Regulation S-K, except those that have been previously reported in our filings with the Securities and Exchange Commission.

Indemnification of Directors and Officers

Nevada Revised Statutes (“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe his/her conduct was unlawful.

Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined such officer or director did not meet the standards.

Our Bylaws include an indemnification provision under which we have the power to indemnify our directors, officers, former directors and officers, or any person who serves or served at our request for our benefit as a director or officer of another corporation or our representative in a partnership, joint venture, trust, or other enterprise (including heirs and personal representatives) against all expenses, liability, and loss actually and reasonably incurred.

We also have a director and officer indemnification agreement with our Chairman that provides, among other things, for the indemnification to the fullest extent permitted or required by Nevada law, provided that such indemnity shall not be entitled to indemnification in connection with any “claim” (as such term is defined in the agreement) initiated by the indemnity against us or our directors or officers unless we join or consent to the initiation of such claim, or the purchase and sale of securities by the indemnity in violation of Section 16(b) of the Exchange Act.

Any repeal or modification of these provisions approved by our stockholders shall be prospective only, and shall not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification.

We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Limitation of Liability of Directors

Our Amended and Restated Articles of Incorporation provides a limitation of liability such that no director or officer shall be personally liable to us or any of our stockholders for damages for breach of fiduciary duty as a director or officer, involving any act or omission of any such director or officer, provided there was no intentional misconduct, fraud or a knowing violation of the law, or payment of dividends in violation of NRS Section 78.300.

PLAN OF DISTRIBUTION

This prospectus includes 8,345,310 shares of common stock offered by the selling stockholder, Aero Pharmaceuticals, Inc. (“Aero”), a Florida corporation. Aero purchased its securities pursuant to an Asset Purchase Agreement dated as of May 16, 2011 by and among the Company, Baker Cummins Corp., a Nevada corporation, and Aero (the “APA”).

In accordance with Section 7.2 of the APA, which is incorporated by reference herein, Aero shall distribute its shares of common stock to its shareholders pursuant to the plan of liquidation, which is contemplated by the APA.

Aero intends to make a pro-rata distribution to holders of the common stock of Aero of record no later than December 31, 2011 (the “Aero Record Date Holders”) of the shares of common stock of the Company held by Aero, which were acquired by Aero in connection with the APA. Presently, Aero, which has 111,145,001 shares of common stock outstanding, owns 8,345,310 shares of the Company’s common stock (out of approximately 68,110,810 shares outstanding). The Company has informed Aero that it will make a cash payment, in lieu of issuing fractional shares, to the Aero Record Date Holders who would otherwise be entitled to receive fractional shares upon the distribution by Aero of its shares of the Company’s common stock. The Company will deliver such cash amount to Aero so that Aero will pay such cash amount directly to the Aero Record Date Holders at the time it makes its cash distribution to the Aero Record Date Holders. In addition, the stock of the Company to be distributed to the Aero Record Date Holders (other than the fractional shares for which a cash payment will be made) may be placed in a statutory trust for the benefit of the Aero Record Date Holders entitled to receive such shares. Distribution of these shares will be made subsequent to registration of the shares by the Company or at such time as they may be distributed pursuant to an exemption from the registration requirements under the securities laws, subject to the right of the trustees to sell the shares, in which case the proceeds will be distributed.

As a result, Aero will pay to each Aero Record Date Holder a pro-rata distribution of shares of the Company’s common stock owned by Aero, including (a) the fractional cash amount to be paid to Aero by the Company, which would otherwise be paid by the Company to Aero Record Date Holders entitled to receive fractional shares of the Company’s common stock upon the pro-rata distribution of shares of the Company’s common stock owned by Aero; and (b) with respect to the Aero Record Date Holders who would have otherwise been entitled to receive whole shares of the Company’s common stock upon the distribution by Aero of its shares of the Company’s common stock, the appropriate number of units in the trust representing the right to receive the appropriate number of the whole shares of the Company’s common stock upon the registration of such shares under federal securities laws or at such time that they may be distributed pursuant to an exemption from the registration requirements, subject to the right of the trustees to sell the shares and distribute the proceeds.

The final distribution, consisting of payment of the fractional cash amount and the placement of the Company’s whole shares in trust (and the related distribution of units in the trust), is in complete cancellation of Aero’s common stock.

Upon Aero’s pro-rata distribution to its shareholders of the Company’s common stock, the Company will file a post-effective Rule 424(b) prospectus supplement to update the selling shareholder table to reflect this transfer from Aero.

LEGAL MATTERS

Sichenzia Ross Friedman and Ference LLP, New York, New York, will pass upon the validity of the shares of our common stock to be sold in this offering.

EXPERTS

The financial statements for the fiscal year ending December 31, 2010 included in this prospectus have been audited by Paritz and Co. P.A., an independent registered public accounting firm as set forth in their report, and are includedin reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act with respect to our shares of Common stock offered by this prospectus. The registration statement contains additional information about us and the shares of Common stock that we are offering in this prospectus.

We file annual, quarterly and current reports and other information with the SEC under the Exchange Act. You may request a copy of those filings, excluding exhibits, from us at no cost. These requests should be addressed to us at: Elliot Maza, Chief Executive Officer and Chief Financial Officer, Biozone Pharmaceuticals, Inc., 550 Sylvan Avenue, Suite 101, Englewood Cliffs, NJ 07632. Our telephone number is (201) 608-5101. The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into this filing by reference. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.

CONSOLIDATED FINANCIAL STATEMENTS OF BIOZONE PHARMACEUTICALS, INC.

Consolidated Balance Sheets (Unaudited) at September 30, 2011 and December 31, 2010	F-2
Consolidated Statements of Operations (Unaudited) for Three Months ended September 30, 2011 and 2010 and Nine Months Ended September 30, 2011 and 2010	F-3
Consolidated Statements of Cash Flows (Unaudited) for Nine months ended September 30, 2011 and 2010	F-4
Notes to Consolidated Financial Statements	F-5

F-1

BIOZONE PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2011			December 31, 2010

ASSETS

Current assets:
Cash and cash equivalents	$	781,725		$	251,475
Account receivable net of allowance for doubtful accounts		1,826,322			1,397,414
$156,212 and $118,356, respectively
Inventories		3,387,618			2,503,598
Prepaid expenses and other current assets		60,215			43,282
Total current assets		6,055,880			4,195,769

Property and equipment, net		3,186,605			3,262,133
Non-marketable investment		61,335			61,335
Deferred financing costs, net		48,199			35,363
Goodwill		1,353,574			-
		4,649,713			3,358,831

Total Assets	$	10,705,593		$	7,554,600

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities:
Note payable - bank		-			2,457,495
Account payable		2,725,375			970,913
Accrued expenses and other current liabilities		837,627			127,497
Notes payable - shareholder		1,099,715			1,102,926
Convertible notes payable		2,750,000			-
Deferred income tax		98,750			98,750
Current portion of long term debt		284,576			277,299
Total current liabilities		7,796,043			5,034,880

Long Term Debt		3,087,262			3,090,385

Shareholders' deficiency
Common stock, $.001 par value, 100,000,000 shares authorized,		67,543			37,698
67,529,396 and 37,698,396 shares issued and outstanding at September 30, 2011,
and December 31,2010, respectively
Additional paid-in capital		4,127,652			153,232
Accumulated deficit		(4,372,907	)		(761,595	)

Total shareholders' deficiency		(177,712	)		(570,665	)

Total liabilities and shareholders' deficiency	$	10,705,593		$	7,554,600

See accompanying notes to consolidated financial statements

F-2

BIOZONE PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010

Sales	$	3,930,503		$	4,515,222		$	8,937,818		$	11,133,223

Cost of sales		(2,144,952	)		(2,400,005	)		(4,668,316	)		(5,555,191	)

Gross profit		1,785,551			2,115,217			4,269,502			5,578,032

Operating Expenses:
General and adminstrative expenses		3,792,480			1,684,248			6,884,039			4,461,004
Depreciation expense		205,352			87,867			372,002			249,473
Research and development expenses		4,011			54,837			119,167			149,497
Total Operating Expenses		4,001,843			1,826,952			7,375,208			4,859,974

Income (Loss) from operations		(2,216,292	)		288,265			(3,105,706	)		718,058

Interest expense		(283,411	)		(123,415	)		(505,606	)		(323,142	)

Income (Loss) before provision for income taxes		(2,499,703	)		164,850			(3,611,312	)		394,916

(Provision) benefit for income taxes					92,000

Net income (loss) including noncontrolling interest		(2,499,703	)		256,850			(3,611,312	)		394,916

Less: Net income (loss) attributable to noncontrolling interest					-						(696	)

Net income (loss) attributable to Biozone	$	(2,499,703	)	$	256,850		$	(3,611,312	)	$	395,612


Income (Loss) per common share	$	(0.04	)	$	0.01		$	(0.07	)	$	0.01


Basic and diluted weighted average common share outstanding		67,492,714			37,698,000			49,112,016			37,698,000

See accompanying notes to consolidated financial statements

F-3

BIOZONE PHARMACEUTICAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2011			2010

Cash flows from operating activities
Net income (loss)	$	(3,611,312	)		395,612
Adjustments to reconcile net income (loss) to net cash
used in operating activities:

Bad debt expense		25,000			33,342
Depreciation & Amortization		372,002			249,473
Stock based compensation		1,950,000			-
Changes in assets and liabilities:
Account receivable-trade		(430,999	)		(1,140,380	)
Inventories		(791,677	)		(776,088	)
Prepaid expenses and other current assets		(16,933	)		25,810
Deferred taxes		-			-
Accounts payable		1,753,882			130,432
Accrued expenses and other current liabilities		709,051			695,503
Net cash used in operating activities		(40,986	)		(386,296	)

Cash flows from investing activities
Purchase of property and equipment		(157,568	)		(352,438	)
Cash acquired on business combination		585,720			-
Net cash provided by (used in) investing activities		428,152			(352,438	)

Cash flows from financing activities
Proceeds from convertible debt		2,750,000			-
Payment of deferred financing costs		(150,364	)
Repayment of borrowings from noteholders		(2,453,341	)		(94,105	)
Advance from (payment to) shareholder		(3,211	)		376,640
Net cash provided by financing activities		143,084			282,535

Net increase (decrease) in cash and cash equivalents		530,250			(456,199	)

Cash and cash equivalents, beginning of period		251,475			630,462

Cash and cash equivalents, end of period	$	781,725			174,263

Supplemental disclosures of cash flow information:

		319,872			176,181

See accompanying notes to consolidated financial statements

F-4

Biozone Pharmaceuticals. Inc.

(Formerly Known as International Surf Resorts, Inc.)

Notes To Consolidated Financial Statements

September 30, 2011

(Unaudited)

NOTE 1 – Business

Biozone Pharmaceuticals, Inc. (formerly, International Surf Resorts, Inc.; the “Company”, “we”, “our”) was incorporated under the laws of the State of Nevada on December 4, 2006 to operate as an internet-based provider of international surf resorts, camps and guided surf tours (the “Original Business”). On March 1, 2011, we changed our name from International Surf Resorts, Inc.to Biozone Pharmaceuticals, Inc. We anticipate discontinuing our Original Business through the sale of its 55% ownership in ISR de Mexico, S. de R.L. de C.V., a Mexican corporation in consideration for the return and cancellation of approximately 13,948,007 shares of the Company’s common stock. Disclosure contained in this Quarterly Report on Form 10-Q is not reflective of such stock cancellation.

On May 16, 2011, we acquired substantially all of the assets and assumed all of the liabilities of Aero Pharmaceuticals, Inc. ( “Aero”) pursuant to an Asset Purchase Agreement dated as of that date. Aero manufactures markets and distributes a line of dermatological products under the trade name of Baker Cummins Dermatologicals (see Note 3).

On June 30, 2011, we acquired: (i) 100% of the outstanding common stock of BioZone Laboratories, Inc. (“BioZone Labs”) in exchange for 19,266,055 shares of our common stock; (ii) 100% of the outstanding membership interests of Equalan, LLC (“Equalan”) and Equachem, LLC (“Equachem”) in exchange for 1,027,523 and 385,321 shares of our common stock, respectively; and (iii) 45% of the outstanding membership interests of BetaZone, LLC (“BetaZone”) in exchange for 321,101 shares of our common stock. The acquired entities shared substantially common ownership prior to the foregoing acquisition. (We refer to BioZone Labs, Equalan, Equachem and BetaZone, collectively as the “BioZone Lab Group”).

BioZone Labs was incorporated under the laws of the State of California in 1991. Equalan was formed as a limited liability company under the laws of the State of California on January 2, 2007. Equachem was formed as a limited liability company under the laws of the State of California on March 12, 2007 under the name Chemdyn, LLC and changed its name to Equachem, LLC on July 25, 2007. BetaZone was formed as a Florida limited liability company on November 7, 2006.

The BioZone Lab Group has operated since inception as a developer, manufacturer, and marketer of over-the-counter drugs and preparations, cosmetics, and nutritional supplements on behalf of health care product marketing companies and national retailers. The Company has been developing our proprietary drug delivery technology (the “BioZone Technology”) as an enhancement for approved, generic prescription drugs that are limited due to poor stability or bioavailability or variable absorption.

The Company accounted for the acquisition of the BioZone Lab Group as a “reverse acquisition”. Accordingly, the Company is considered the legal acquirer and the BioZone Lab Group is considered the accounting acquirer. The current and future financial statements will be those of the BioZone Lab Group.

These consolidated financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our current balances of cash will not meet our working capital and capital expenditure needs for the next twelve months. In addition, as of September 30, 2011, we have a shareholder deficiency of $177,712 and negative working capital of $1,740,163. Because we are not currently generating sufficient cash to fund our operations and we have debt that is in default, we will need to rely on external financing to meet future operating, debt repayment and capital requirements. These conditions raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. We believe that actions presently being taken to revise the Company’s operating and financial requirements provide the opportunity for the Company to continue as a going concern.

NOTE 2 - Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2011 and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the operating results for the full fiscal year or any future period.

Basis of Consolidation

The consolidated financial statements include the accounts of BioZone Pharmaceuticals, Inc. and its subsidiaries, all of which are wholly owned except for BetaZone, which is 45% owned which is accounted for under the equity method of accounting. In addition, the Company consolidates the accounts of 580 Garcia Properties, LLC, (“580 Garcia”) which owns the land and building used by BioZone Labs and is owned by one of the former owners of the BioZone Lab Group. The Company is a guarantor of 580 Garcia’s mortgage loan payable on the property (see Note 7).

F-5

Use of Estimates.

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include the collectability of accounts receivable and deferred taxes and related valuation allowances. Certain of our estimates, including evaluating the collectability of accounts receivable, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

Cash and Cash Equivalents.

We consider all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

Revenue Recognition

We follow the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”. The Company operates as a contract manufacturer and produces finished goods according to customer specifications. The agreements with customers do not contain any rights of return other than for goods that fail to meet the specifications provided by the customer. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns is provided. We record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured.

Accounts Receivable and Allowance for Doubtful Accounts Receivable

We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required.

We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts. The Company has recorded an allowance for doubtful accounts of $156,212 as of September 30, 2011.

Inventories

Inventories are stated at the lower of cost, determined using the weighted average cost method, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

Fair Value Measurements

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

F-6

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Concentration of Credit Risk

Financial instruments that potentially expose us to concentrations of credit risk consist principally of cash and cash equivalents. We maintain our cash accounts at high quality financial institutions with balances, at times, in excess of federally insured limits. As of September 30, 2011, we had $685,402 of balances in excess of federally insured limits. Management believes that the financial institutions that hold our deposits are financially sound and therefore pose minimal credit risk.

Stock-Based Compensation

We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

Goodwill

Goodwill represents the excess of the consideration transferred over the fair value of net assets of business purchased. Goodwill is not being amortized but is evaluated for impairment on at least an annual basis.

Impairment of long lived assets

Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

Income Taxes

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

NOTE 3 – Aero Acquisition

On May 16, 2011, we acquired the assets and assumed the liabilities of Aero in exchange for a total of 8,331,396 shares of our common stock valued at the estimated value of Aero at the acquisition date. We are in the process of obtaining an independent appraisal of the acquisition price of the assets, which has been estimated at $2 million. The acquisition was accounted for under the acquisition method of accounting. Accordingly, the purchase price has been allocated to the fair values of tangible and intangible assets acquired and liabilities assumed at the acquisition date as follows:

F-7

On September 21, 2011, the Company issued 13,914 shares of common stock to Aero Pharmaceuticals, Inc. inconsideration for the delay in filing the Company’s Registration Statement on Form S-1, as required in the Asset Purchase Agreement between the Company and Aero Pharmaceuticals, Inc.

The above referenced securities were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder.

Financial assets	$	608,644
Inventory		92,343
Property and equipment		1,377
Financial liabilities		(1,673	)
Total identifiable assets		700,691
Goodwill		1,299,309
		2,000,000

The results of operations of Aero are included in the consolidated statement of operations from its date of acquisition.

NOTE 4 – Property and Equipment

A summary of property and equipment and the estimated useful lives used in the computation of depreciation and amortization is as follows:

Fixed Asset	Useful Life	September 30, 2011			December 31, 2010

Vehicles	5 years		271,607			271,607
Furniture and Fixtures	10 years		68,462			66,195
Computers	5 years		156,439			142,978
MFG equipment	10 years		3,962,396			3,938,440
Lab Equipment	10 years		535,018			413,198
Bldg/Leasehold	19 years (remainder of lease)		1,548,909			1,545,758
Building	40 years		571,141			571,141
Land	Not depreciated		380,000			380,000
			7,493,972			7,329,317
Accumulated depreciation			(4,307,367	)		(4,067,184	)
Net			3,186,605			3,262,133

NOTE 5 – Convertible Notes Payable

The “March 2011 Notes”

On March 29, 2011, the Company sold 10% secured convertible promissory notes in the amount of $2,250,000, (the “March 2011 Notes”) and warrants (the “March Warrants”) to purchase securities of the Company in the Target Transaction Financing (as defined below), pursuant to a Securities Purchase Agreement entered into on February 22, 2011 (the “Securities Purchase Agreement” and the “Private Placement”).

The March 2011 Notes, as extended (described below) (see Note 11), mature on the earlier of October 29, 2011 or the closing date of the Target Transaction Financing (such earlier date, the “Maturity Date”). The entire principal amount and any accrued and unpaid interest is due and payable in cash on the Maturity Date.

As of October 29, 2011, the Company is in default with respect to the March 2011 Notes due to the fact that the Company has not paid the amount due on maturity (see Note 11).

The principal and interest may not be prepaid except in connection with the consummation of the Target Transaction Financing, in which case the holder may elect either to (i) convert all of the principal and accrued and unpaid interest then outstanding into the securities offered in the Target Transaction Financing at a price per share or unit, as the case may be, equal to 80% of the price at which such securities are sold or (ii) require the Company to repay the principal amount then outstanding and any accrued and unpaid interest in cash.

As set forth in the Securities Purchase Agreement, the Company intends to close a private placement of its common stock, par value $0.001 per share (the “Common Stock”), or other securities (the “PIPE Securities”) yielding gross proceeds to the Company of at least eight million Dollars ($8,000,000) (the “Target Transaction Financing,” and the price at which such PIPE Securities are sold is referred to as the “PIPE Share Price”); within one hundred twenty (120) days from the issuance date of the Note.

We recorded the liability for the March 2011 Notes at an amount equal to the full consideration received upon issuance, without considering the Warrant value because the determination of the number of warrants and the exercise price of the warrants is dependent on the closing date of, and the price of securities issued in the Target Transaction Financing, which has yet to take place.

F-8

The “September 2011 Note”

On September 22, 2011, the Company issued a 10% unsecured convertible promissory note with a principal amount of $500,000, due on March 22, 2012 (unless accelerated as described below) (the “September 2011 Note”) and a warrant (the “September Warrant”) to purchase certain securities of the Company in the Target Transaction Financing, pursuant to a Securities Purchase Agreement entered into on that date (the “Securities Purchase Agreement”). The September 2011 Note and Warrant were issued to an accredited investor in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated by the Securities and Exchange Commission thereunder.

The September 2011 Note matures on the earlier of March 22, 2012 or the closing date of the Target Transaction Financing (such earlier date, the “Maturity Date”). The entire principal amount and any accrued and unpaid interest is due and payable in cash on the Maturity Date.

The principal and interest may not be prepaid except in connection with the consummation of the Target Transaction Financing, in which case the holder may elect either to convert all of the principal and accrued and unpaid interest then outstanding into the securities offered in the PIPE Offering at a price per share or unit, as the case may be, equal to 70% of the price at which such securities are sold or require the Company to repay the principal amount then outstanding and any accrued and unpaid interest in cash.

We recorded the liability for the September 2011 Note at an amount equal to the full consideration received upon issuance, without considering the Warrant value because the determination of the number of warrants and the exercise price of the warrants is dependent on the closing date of, and the price of securities issued in the Target Transaction Financing, which has yet to take place.

NOTE 6 – Notes Payable - Shareholder

This amount is due to our Executive Vice President for advances made to the Company, bears interest at a weighted average rate of approximately 10% and is due on demand. The Company is in dispute with the shareholder as to the balance due but has recorded the full amount claimed by the shareholder.

NOTE 7 – Long Term Debt

Notes payable of Biozone Labs
Capitalized lease obligations bearing interest at rates ranging from 8.6% to 16.3%,	$	347,714
payable in monthly installments of $168 to $1,589, inclusive of interest
City of Pittsburg Redevelopment Agency, 3% interest, payable in monthly installments		278,409
of $3,640 inclusive of interest
Other		90,000
Notes payable of 580 Garcia Properties
Mortgage payable of 580 Garcia collateralized by the land and building		2,655,715
payable in monthly installments of $20,794, inclusive of interest at 7.24% per annum
	$	3,371,838
Less: current portion		284,576
		3,087,262

NOTE 8 - Warrants

On March 29, 2011 and September 22, 2011, the Company issued warrants to purchase securities of the Company in the Target Transaction Financing (Note 5). The Warrants are immediately exercisable and expire five years after the date of issue. Each Warrant has an initial exercise price of 120% of the price of the securities sold in the Target Transaction Financing (the “Financing Share Price”). The Warrant entitles the holder to purchase the number of shares of Common Stock and/or other securities, including units of securities, sold in the Target Transaction Financing equal to the Warrant Coverage (as defined herein) (a) multiplied by the principal amount of the Note (the “Purchase Price”) and (b) divided by the Financing Share Price. “Warrant Coverage” means (i) 50% if closed on or prior to 120 days, (ii) 75% if closed after 120 days but before 150 days and (iii) 100%, if closed after 150 days after the closing of the Private Placement. The Warrant is exercisable in cash or by way of a “cashless exercise” during any period that a registration statement covering the shares of Common Stock and/or other securities issuable upon exercise of the Warrant, or an exemption from registration, is not available. The exercise price of the Warrant is subject to a “ratchet” anti-dilution adjustment for a period of one year from the closing of the Private Placement. This adjustment provides that, in the event that the Company issues certain securities at a price lower than the then applicable exercise price, the exercise price of the Warrant will be immediately reduced to equal the price at which the Company issued the securities.

We have not recorded any amounts in the financial statements for the Warrants because the determination of the number of warrants and the exercise price of the warrants is dependent on the closing date of, and the price of securities issued in the Target Transaction Financing, which has yet to take place.

NOTE 9 – Income Taxes

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.

F-9

NOTE 10 - Contingencies

Employment Agreements

On June 30, 2011, the Company entered into three year executive employment agreements with three stockholders, Brian Keller, Christian Oertle and Daniel Fisher, to serve as our President, Chief Operating Officer and Executive Vice President, respectively. The agreements with Messrs. Keller and Fisher provide for annual salaries of $200,000 each and the agreement with Mr. Oertle provides for an annual salary of $150,000. Pursuant to the terms of the agreements, each of these executives is eligible to participate in the Company’s long term incentive compensation programs and is entitled to an annual bonus if the Company meets or exceeds criteria adopted by the Compensation Committee of the Board, subject to certain claw back rights. The agreements provide for payments of six months’ severance in the event of early termination (other than for cause).

Leases

The Company is committed under operating leases for its various properties, which provide for annual rentals of approximately $372,000 through September 2014. Rental expense charged to operations for the nine months ended September 30, 2011 was approximately $279,000.

NOTE 11 - Subsequent Events

Extension of March 2011 Notes

Effective October 28, 2011, the purchasers of the March 2011 Notes (the “Investors”) agreed to extend the maturity date of the Notes (the “Extension Agreement”) to October 29, 2011(the “New Maturity Date”) (see Note 5). As consideration for the agreement by the Note Holders to enter into the Extension Agreement, the Company (i) issued to the Note Holders an aggregate of 112,500 shares of its common stock, par value $0.001 per share and (ii) paid to the Investors, an aggregate of $135,000 as additional interest for the period beginning on February 28, 2011 (the date the Note Holders placed the principal amount in escrow) and ending on March 28, 2011. The Company agreed to provide piggyback registration rights with respect to the 112,500 shares on the same terms and conditions provided for the registrable securities in the Registration Rights Agreement contained in the Private Placement.

The Company has agreed that if it fails to repay the March 2011 Notes on or before the New Maturity Date, then in addition to the interest due under the March 2011 Notes, the Company will pay an additional 2% (annualized) for each 30 day period all or any portion of the principal or accrued interest remain unpaid, subject to a maximum aggregate interest rate of 20% (the sum of the 10% interest rate plus 2% for each 30 day delay period), with such 2% being calculated on the full principal amount regardless of whether any portion thereof has been repaid by the Company and such full amount accruing as of the day following the New Maturity Date and then upon each 30 day anniversary of the New Maturity Date.

Issuance of common stock

On October 28, 2011, the Company issued an aggregate of 112,500 shares of its common stock to the holders of the March 2011 Notes in consideration for the extension of the maturity date of such notes.

On November 3, 2011, the Company sold 455,000 shares of our common stock, par value $0.001 per share, for $1.00 per share pursuant to subscription agreements entered into on October 31, 2011 and November 1, 2011.

On November 30, 2011, the Company issued 500,000 shares of its common stock, par value $0.001 per share, pursuant to a Subscription Agreement entered into on that date.

Also on November 30, 2011, the Company issued 1,018,456 shares of its common stock, par value $0.001 per share, upon conversion of the principal and all of the interest due on a certain convertible promissory note issued by the Company on September 22, 2011, according to the conditions set forth in such note. In addition, pursuant to the terms of the Securities Purchase Agreement related to the note, the Company issued to the holder of the note a warrant to purchase 250,000 shares of its common stock at an exercise price of $1.00 per share.

The above referenced securities were issued were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 promulgated thereunder.

F-10

FINANCIAL STATEMENTS OF BUSINESS ACQUIRED – BIOZONE LABORATORIES, INC.

Report of Independent Registered Public Accounting Firm			F-12
Consolidated Balance Sheets as of December 31, 2010 and 2009			F-13
Consolidated Statements of Operations for the years ended December 31, 2010 and 2009			F-14
Consolidated Statements of Changes in Shareholders’ Equity (Deficiency) for the years ended December 31, 2010 and 2009			F-15
Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009			F-16
Notes to the Consolidated Financial Statements			F-17

F-11

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

BioZone Laboratories, Inc.

We have audited the accompanying consolidated balance sheets of BioZone Laboratories, Inc., (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in shareholders’ equity (deficiency) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As disclosed in Note 2 to the consolidated financial statements, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of December 31, 2010, the Company had a shareholders’ deficiency of $939,095, negative working capital of $983,716 and sustained losses for the years ended December 31, 2010 and 2009. In addition, on August 15, 2011, the holder of the Company’s notes payable - bank declared the entire unpaid principal amount and accrued interest of these loans immediately due and payable. As of September 9, 2011, these loans were paid in full. The continuation of the Company as a going concern is dependent upon, among other things, the ability of the Company to obtain necessary equity or debt financing and the attainment of profitable operations. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to continue as a going concern.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BioZone Laboratories, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Paritz and Co. P.A.

Hackensack, N.J.

August 25, 2011, except as to the last paragraph

of Note 13, which is dated September 9, 2011.

F-12

BIOZONE LABORATORIES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2010			2009

ASSETS

Current assets:
Cash and cash equivalents	$	117,121		$	542,197
Account receivable - trade, net of allowance for doubtful accounts		1,208,677			1,565,339
$118,356 and $83,856, respectively
Account receivable - related party		411,816			-
Inventories		2,191,539			2,067,080
Prepaid expenses and other current assets		41,450			34,673
Total current assets		3,970,603			4,209,289

Property and equipment, net		3,256,873			3,331,493
Note receivable - related party		52,077			52,077
Deferred financing costs, net		11,648			12,186
		3,320,598			3,395,756

Total Assets	$	7,291,201		$	7,605,045

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities:

Notes payable - bank		2,039,055			2,068,655
Accounts payable - trade		928,768			890,513
related party		399,078			198,851
Accrued expenses and other current liabilities		108,442			179,601
Notes payable - shareholder		1,102,926			727,605
Deferred income taxes		98,751			194,695
Current portion of long term debt		277,299			205,198
Total current liabilities		4,954,319			4,465,118

Long Term Debt		3,275,977			3,335,606

Shareholders' deficiency
Preferred stock, no par value, 5,000,000 shares authorized,
zero shares issued at December 31, 2010 and 2009		-			-
Common stock, no par value, 10,000,000 shares authorized,
2,250,000 shares issued and outstanding at December 31, 2010
and 2009, respectively		184,000			184,000
Accumulated deficit		(1,123,095	)		(379,679	)
Total shareholders' deficiency		(939,095	)		(195,679	)

Total liabilities and shareholders' deficiency	$	7,291,201		$	7,605,045

The accompanying notes are an integral part of these consolidated financial statements.

F-13

BIOZONE LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

	For The Year Ended December 31,
	2010			2009

Sales	$	13,354,712		$	12,594,387

Cost of sales		7,676,217			6,726,757

Gross profit		5,678,495			5,867,630

Operating Expenses:
General and adminstrative expenses		5,403,006			4,945,318
Depreciation expense		446,960			466,773
Research and development expenses		212,042			213,991
Total Operating Expenses		6,062,008			5,626,082

Income (Loss) from operations		(383,513	)		241,548

Interest expense		(403,555	)		(450,808	)

Loss before income tax benefit		(787,068	)		(209,260	)

Income tax benefit		(95,945	)		(28,450	)

Net loss	$	(691,123	)	$	(180,810	)