Item 3.02. Unregistered Sales of Equity Securities.
On June 28, 2012, BioZone Pharmaceuticals, Inc. (the “Company”) issued 10% convertible promissory notes (the “Revised Notes”) with an aggregate principal amount of $455,274 and warrants (the “Warrants”) to purchase 2,250,000 shares of the Company’s common stock at an exercise price of $0.40 per share to certain holders of the Company’s previously issued promissory notes (the “Prior Notes”) with an aggregate amount of principle and accrued interest due as of such date equal to the aggregate principle amount of the Revised Notes. The Prior Notes, described on Form 8-K filed with the Securities and Exchange Commission on June 20, 2012 and April 24, 2012, have been cancelled.
The Revised Notes bear interest at the rate of 10% per annum and mature two years from their issue date. The Company may prepay any outstanding amounts owing under the Revised Notes, in whole or in part, at any time prior to the maturity date. The entire remaining principal amount and all accrued but unpaid or unconverted interest thereof, is due and payable on the earlier of the maturity date or the occurrence of an Event of Default (as defined in the Note). The Revised Notes are convertible into shares of the Company’s common stock at an initial conversion price of $0.20 per share.
The Warrant is immediately exercisable and expires ten years after the date of issuance. The Warrant has an initial exercise price of $0.40 per share. The Warrant is exercisable in cash or by way of a “cashless exercise”.
The Company is prohibited from effecting a conversion of the Revised Notes or exercise of the Warrants, to the extent that as a result of such conversion or exercise, the holder would beneficially own more than 4.99% (subject to waiver) in the aggregate of the issued and outstanding shares of the Company’s common stock, calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Revised Note or exercise of such Warrant, as the case may be.
The Revised Notes and the Warrants were issued to “accredited investors,” as such term is defined in the Securities Act of 1933, as amended (the “Securities Act”) and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933 and corresponding provisions of state securities laws.
The foregoing descriptions of the Revised Note and the Warrant are not complete and are qualified in their entirety by reference to Exhibits 10.1 and 10.2, annexed hereto.