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Item
3.02.
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Unregistered
Sales of Equity
Securities.
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Pursuant
to a private offering, on February 19, 2008 and February 21, 2008, Herborium
Group, Inc. (the “Company”) sold Units of its securities consisting of an
aggregate $225,000 in principal amount of its Convertible Notes (the “Notes”),
225,000 shares of its Common Stock, par value $.001 per share (the “Common
Stock”) and warrants (the “Warrants”) exercisable for 450,000 shares of the
Common Stock.
The
Warrants are exercisable for a period of five years from issuance. Half of
the
Warrants are exercisable at $.025 per share and half are exercisable at $.05
per
share, subject to certain adjustments, including, but not limited to,
adjustments for stock splits, stock dividends, mergers and
consolidations.
The
Notes
are convertible, beginning six months after issuance or, if earlier, the closing
of a qualified financing or an acquisition of the Company, into shares of Common
Stock in whole or in part from time to time at the option of the investors
at a
Conversion Price equal to
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80%
of the issuance price in a qualified financing or in connection with
an
acquisition of the Company. The Notes define a qualified financing
as the
date upon which the Company completes the sale of Common Stock (or
like
security) for aggregate gross proceeds of at least $1.5 million.
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The
Conversion Price is subject to certain customary adjustments, including, but
not
limited to, adjustments for stock splits, stock dividends, mergers and
consolidation.
The
Notes
bear interest at the rate of 10% per annum, payable semi-annually in shares
of
the Company’s common stock valued, for this purpose, at $.025 per share.
Unless
converted to Common Stock, the principal balance of the each Note is payable
upon demand made any time after the first anniversary of the issuance of the
Note, or upon a qualified financing or acquisition of the Company. In addition,
the Company is required to set aside 5% of its gross revenues for redemption
of
the principal amount of the Notes. The set-aside revenues will be distributed
to
the Note holders semi-annually, pro rata in accordance with the outstanding
principal balance of each Note.
Pursuant
to a Registration Rights Agreement, the Company has agreed to include the shares
of Common Stock issuable upon conversion of the Notes and exercise of the
Warrants, as well as the shares of Common Stock issued to the investors, in
any
registration statement filed by the Company under the Securities Act of 1933
with respect to the Company’s equity securities to be sold by the Company or any
other stockholder.
The
Company’s Board of Directors has authorized the sale of up to an additional
$275,000 principal amount of the Notes, in Units together with 275,000 shares
of
Common Stock and Warrants exercisable for 550,000 shares of Common
Stock.
Southridge
Investment Group is serving as the Company’s placement agent in connection with
the offer and sale of the Notes, Common Stock and Warrants. In its capacity
as
placement agent, Southridge will be paid a cash fee equal to 10% of the gross
proceeds received by the Company, as well as an expense allowance equal to
2% of
the gross proceeds. In addition, Southridge will be issued Warrants exercisable
for a number of shares of Common Stock equal to 10% of the aggregate shares
issued by the Company in the private placement, assuming conversion and exercise
of all of the Notes and Warrants. The placement agent warrants will be
exercisable for 5 years at a price of $.03 per share. In its capacity as the
Company’s financial advisor, Southridge is entitled to a retainer fee of 750,000
shares of the Company’s Common Stock, and one share for each $1 received by the
Company in the private placement.
The
offer
and sale of the Notes, Common Stock and Warrants, and the Common Stock into
which the Notes may be converted and for which the Warrants may be exercised
(collectively, the “Securities”) by the Company to the investors was exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof
and
Rule 506 of Regulation D promulgated thereunder. Each of the investors
represented and warranted to the Company that it was an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D. Each of the investors
further represented and warranted that it was purchasing the Securities for
its
own account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration
under
the Securities Act. Any certificates issued representing the Notes, Common
Stock
or Warrants will be legended to indicate that they are restricted. No sale
of
the Securities involved the use of underwriters.
THE
ABOVE
DESCRIPTION OF, AMONG OTHER THINGS, THE TERMS OF THE
THE
NOTES
AND WARRANTS, IS QUALIFIED IN ITS ENTIRETY BY THE FORMS OF NOTE, WARRANT,
REGISTRATION RIGHTS AGREEMENT AND SUBSCRIPTION AGREEMENT, WHICH ARE INCORPORATED
BY REFERENCE HEREIN. THE COMPANY IS FILING THE FORMS OF NOTE, WARRANT,
REGISTRATION RIGHTS AGREEMENT AND SUBSCRIPTION AGREEMENT, AS EXHIBITS 4.1,
4.2,
4.3 AND 10.1, RESPECTIVELY, TO THIS CURRENT REPORT ON FORM 8-K
