UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13G
(Rule 13d - 102)
Under the Securities Exchange Act of 1934
BIODELIVERY SCIENCES INTERNATIONAL, INC.
--------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.001 per share
--------------------------------------------------------------------------------
(Title of Class of Securities)
09060J106
--------------------------------------------------------------------------------
(CUSIP Number)
December 29, 2006
--------------------------------------------------------------------------------
(Date of Event Which Requires Filing of this Statement)
Check the appropriate box to designate the rule pursuant to which this Schedule
13G is filed:
|_| Rule 13d-1(b)
|X| Rule 13d-1(c)
|_| Rule 13d-1(d)
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
--------------------------------------------------------------------------------
CUSIP No. 47008R103
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Laurus Master Fund, Ltd.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 98-0337673
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
--------------------------------------------------------------------------------
5 SOLE VOTING POWER
0 shares of Common Stock.*
-----------------------------------------------------------------
NUMBER OF 6 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,392,420 shares of Common Stock.*
OWNED BY -----------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0 shares of Common Stock.*
WITH -----------------------------------------------------------------
8 SHARED DISPOSITIVE POWER
1,392,420 shares of Common Stock.*
--------------------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,392,420 shares of Common Stock.
--------------------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
--------------------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99%*
--------------------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
CO
--------------------------------------------------------------------------------
----------------------------
* Based on 13,938,146 shares of the common stock, par value $0.001 per
share (the "Shares") of BioDelivery Sciences International, Inc., a Delaware
corporation (the "Company") outstanding, as represented in the Company's
Quarterly Report on Form 10-QSB for the period ended September 30, 2006. As of
December 29, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a common stock
purchase warrant (the "January Warrant #1") to acquire 22,500 Shares at an
exercise price of $0.01 per share, subject to certain adjustments, (ii) a common
stock purchase warrant (the "January Warrant #2") to acquire 39,574 Shares at an
exercise price of $.01, subject to certain adjustments, (iii) a common stock
purchase warrant (the "January Warrant #3") to acquire 29,700 Shares at an
exercise price of $.01, subject to certain adjustments; (iv) a common stock
purchase warrant (the "January Warrant #4") to acquire 350,000 Shares at an
exercise price of $3.00, subject to certain adjustments, (v) a common stock
purchase warrant (the "January Warrant #5") to acquire 483,871 Shares at an
exercise price of $3.88, subject to certain adjustments, (vi) a common stock
purchase warrant (the "July Warrant #1") to acquire 47,113 Shares at an exercise
price of $3.00, subject to certain adjustments; (vii) a common stock purchase
warrant (the "July Warrant #2" and together with the January Warrant #1, the
January Warrant #2, the January Warrant #3, the January Warrant #4, the January
Warrant #5 and the July Warrant #1, the "Early Warrants") to acquire 110,000
Shares, at an exercise price of $3.88, subject to certain adjustments, (viii) a
common stock purchase Warrant (the "December Warrant #1") to acquire 943,305
Shares, at an exercise price of $3.05, subject to certain adjustments, (vii) a
common stock purchase warrant (the "December Warrant #2" and together with the
December Warrant #1, the "December Warrants") to acquire 556,695 Shares, at an
exercise price of $3.05 per share, subject to certain adjustments, (viii) a
Convertible Term Note in the aggregate principal amount of $2,500,000, a portion
of which is convertible into Shares at a conversion rate of $2.45, subject to
certain adjustments ("Note #1"); (ix) a Convertible Term Note in the aggregate
principal amount of $2,500,000, a portion of which is convertible into Shares at
a conversion rate of $2.45, subject to certain adjustments ("Note #2", and
together with Note #1, the "Notes"); and (x) 19,403 Shares. The Early Warrants
and the Notes contain an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 4.99% of the Shares then issued
and outstanding (the "4.99% Issuance Limitation"). The December Warrants contain
an issuance limitation prohibiting the Fund from exercising those securities to
the extent that such exercise would result in beneficial ownership by the Fund
of more than 9.99% of the Shares then issued and outstanding (the "9.99%
Issuance Limitation" and together with the 4.99% Issuance Limitation, the
"Issuance Limitations"). The Issuance Limitations may be waived by the Fund upon
75 days prior notice to the Company and shall automatically become null and void
following notice to the Issuer of the occurrence and/or continuance of an Event
of Default (as defined in and pursuant to the terms of the applicable
instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin
and David Grin, through other entities, are the controlling principals of Laurus
Capital Management, LLC and share sole voting and investment power over the
securities owned by the Fund reported in this Schedule 13G, as amended.
--------------------------------------------------------------------------------
CUSIP No. 47008R103
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Laurus Capital Management, LLC
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 13-4150669
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
5 SOLE VOTING POWER
0 shares of Common Stock.*
-----------------------------------------------------------------
NUMBER OF 6 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,392,420 shares of Common Stock.*
OWNED BY -----------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0 shares of Common Stock.*
WITH -----------------------------------------------------------------
8 SHARED DISPOSITIVE POWER
1,392,420 shares of Common Stock.*
--------------------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,392,420 shares of Common Stock.
--------------------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
--------------------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99%
--------------------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
OO
--------------------------------------------------------------------------------
----------------------------
* Based on 13,938,146 shares of the common stock, par value $0.001 per
share (the "Shares") of BioDelivery Sciences International, Inc., a Delaware
corporation (the "Company") outstanding, as represented in the Company's
Quarterly Report on Form 10-QSB for the period ended September 30, 2006. As of
December 29, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a common stock
purchase warrant (the "January Warrant #1") to acquire 22,500 Shares at an
exercise price of $0.01 per share, subject to certain adjustments, (ii) a common
stock purchase warrant (the "January Warrant #2") to acquire 39,574 Shares at an
exercise price of $.01, subject to certain adjustments, (iii) a common stock
purchase warrant (the "January Warrant #3") to acquire 29,700 Shares at an
exercise price of $.01, subject to certain adjustments; (iv) a common stock
purchase warrant (the "January Warrant #4") to acquire 350,000 Shares at an
exercise price of $3.00, subject to certain adjustments, (v) a common stock
purchase warrant (the "January Warrant #5") to acquire 483,871 Shares at an
exercise price of $3.88, subject to certain adjustments, (vi) a common stock
purchase warrant (the "July Warrant #1") to acquire 47,113 Shares at an exercise
price of $3.00, subject to certain adjustments; (vii) a common stock purchase
warrant (the "July Warrant #2" and together with the January Warrant #1, the
January Warrant #2, the January Warrant #3, the January Warrant #4, the January
Warrant #5 and the July Warrant #1, the "Early Warrants") to acquire 110,000
Shares, at an exercise price of $3.88, subject to certain adjustments, (viii) a
common stock purchase Warrant (the "December Warrant #1") to acquire 943,305
Shares, at an exercise price of $3.05, subject to certain adjustments, (vii) a
common stock purchase warrant (the "December Warrant #2" and together with the
December Warrant #1, the "December Warrants") to acquire 556,695 Shares, at an
exercise price of $3.05 per share, subject to certain adjustments, (viii) a
Convertible Term Note in the aggregate principal amount of $2,500,000, a portion
of which is convertible into Shares at a conversion rate of $2.45, subject to
certain adjustments ("Note #1"); (ix) a Convertible Term Note in the aggregate
principal amount of $2,500,000, a portion of which is convertible into Shares at
a conversion rate of $2.45, subject to certain adjustments ("Note #2", and
together with Note #1, the "Notes"); and (x) 19,403 Shares. The Early Warrants
and the Notes contain an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 4.99% of the Shares then issued
and outstanding (the "4.99% Issuance Limitation"). The December Warrants contain
an issuance limitation prohibiting the Fund from exercising those securities to
the extent that such exercise would result in beneficial ownership by the Fund
of more than 9.99% of the Shares then issued and outstanding (the "9.99%
Issuance Limitation" and together with the 4.99% Issuance Limitation, the
"Issuance Limitations"). The Issuance Limitations may be waived by the Fund upon
75 days prior notice to the Company and shall automatically become null and void
following notice to the Issuer of the occurrence and/or continuance of an Event
of Default (as defined in and pursuant to the terms of the applicable
instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin
and David Grin, through other entities, are the controlling principals of Laurus
Capital Management, LLC and share sole voting and investment power over the
securities owned by the Fund reported in this Schedule 13G, as amended.
--------------------------------------------------------------------------------
CUSIP No. 47008R103
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: David Grin
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
Israel
--------------------------------------------------------------------------------
5 SOLE VOTING POWER
0 shares of Common Stock.*
-----------------------------------------------------------------
NUMBER OF 6 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,392,420 shares of Common Stock.*
OWNED BY -----------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0 shares of Common Stock.*
WITH -----------------------------------------------------------------
8 SHARED DISPOSITIVE POWER
1,392,420 shares of Common Stock.*
--------------------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,392,420 shares of Common Stock.
--------------------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
--------------------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99%
--------------------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
IN
--------------------------------------------------------------------------------
----------------------------
* Based on 13,938,146 shares of the common stock, par value $0.001 per
share (the "Shares") of BioDelivery Sciences International, Inc., a Delaware
corporation (the "Company") outstanding, as represented in the Company's
Quarterly Report on Form 10-QSB for the period ended September 30, 2006. As of
December 29, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a common stock
purchase warrant (the "January Warrant #1") to acquire 22,500 Shares at an
exercise price of $0.01 per share, subject to certain adjustments, (ii) a common
stock purchase warrant (the "January Warrant #2") to acquire 39,574 Shares at an
exercise price of $.01, subject to certain adjustments, (iii) a common stock
purchase warrant (the "January Warrant #3") to acquire 29,700 Shares at an
exercise price of $.01, subject to certain adjustments; (iv) a common stock
purchase warrant (the "January Warrant #4") to acquire 350,000 Shares at an
exercise price of $3.00, subject to certain adjustments, (v) a common stock
purchase warrant (the "January Warrant #5") to acquire 483,871 Shares at an
exercise price of $3.88, subject to certain adjustments, (vi) a common stock
purchase warrant (the "July Warrant #1") to acquire 47,113 Shares at an exercise
price of $3.00, subject to certain adjustments; (vii) a common stock purchase
warrant (the "July Warrant #2" and together with the January Warrant #1, the
January Warrant #2, the January Warrant #3, the January Warrant #4, the January
Warrant #5 and the July Warrant #1, the "Early Warrants") to acquire 110,000
Shares, at an exercise price of $3.88, subject to certain adjustments, (viii) a
common stock purchase Warrant (the "December Warrant #1") to acquire 943,305
Shares, at an exercise price of $3.05, subject to certain adjustments, (vii) a
common stock purchase warrant (the "December Warrant #2" and together with the
December Warrant #1, the "December Warrants") to acquire 556,695 Shares, at an
exercise price of $3.05 per share, subject to certain adjustments, (viii) a
Convertible Term Note in the aggregate principal amount of $2,500,000, a portion
of which is convertible into Shares at a conversion rate of $2.45, subject to
certain adjustments ("Note #1"); (ix) a Convertible Term Note in the aggregate
principal amount of $2,500,000, a portion of which is convertible into Shares at
a conversion rate of $2.45, subject to certain adjustments ("Note #2", and
together with Note #1, the "Notes"); and (x) 19,403 Shares. The Early Warrants
and the Notes contain an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 4.99% of the Shares then issued
and outstanding (the "4.99% Issuance Limitation"). The December Warrants contain
an issuance limitation prohibiting the Fund from exercising those securities to
the extent that such exercise would result in beneficial ownership by the Fund
of more than 9.99% of the Shares then issued and outstanding (the "9.99%
Issuance Limitation" and together with the 4.99% Issuance Limitation, the
"Issuance Limitations"). The Issuance Limitations may be waived by the Fund upon
75 days prior notice to the Company and shall automatically become null and void
following notice to the Issuer of the occurrence and/or continuance of an Event
of Default (as defined in and pursuant to the terms of the applicable
instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin
and David Grin, through other entities, are the controlling principals of Laurus
Capital Management, LLC and share sole voting and investment power over the
securities owned by the Fund reported in this Schedule 13G, as amended.
--------------------------------------------------------------------------------
CUSIP No. 47008R103
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Eugene Grin
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
--------------------------------------------------------------------------------
5 SOLE VOTING POWER
0 shares of Common Stock.*
-----------------------------------------------------------------
NUMBER OF 6 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,392,420 shares of Common Stock.*
OWNED BY -----------------------------------------------------------------
EACH 7 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0 shares of Common Stock.*
WITH -----------------------------------------------------------------
8 SHARED DISPOSITIVE POWER
1,392,420 shares of Common Stock.*
--------------------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,392,420 shares of Common Stock.
--------------------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES
|X|
--------------------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99%
--------------------------------------------------------------------------------
12 TYPE OF REPORTING PERSON
IN
--------------------------------------------------------------------------------
----------------------------
* Based on 13,938,146 shares of the common stock, par value $0.001 per
share (the "Shares") of BioDelivery Sciences International, Inc., a Delaware
corporation (the "Company") outstanding, as represented in the Company's
Quarterly Report on Form 10-QSB for the period ended September 30, 2006. As of
December 29, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a common stock
purchase warrant (the "January Warrant #1") to acquire 22,500 Shares at an
exercise price of $0.01 per share, subject to certain adjustments, (ii) a common
stock purchase warrant (the "January Warrant #2") to acquire 39,574 Shares at an
exercise price of $.01, subject to certain adjustments, (iii) a common stock
purchase warrant (the "January Warrant #3") to acquire 29,700 Shares at an
exercise price of $.01, subject to certain adjustments; (iv) a common stock
purchase warrant (the "January Warrant #4") to acquire 350,000 Shares at an
exercise price of $3.00, subject to certain adjustments, (v) a common stock
purchase warrant (the "January Warrant #5") to acquire 483,871 Shares at an
exercise price of $3.88, subject to certain adjustments, (vi) a common stock
purchase warrant (the "July Warrant #1") to acquire 47,113 Shares at an exercise
price of $3.00, subject to certain adjustments; (vii) a common stock purchase
warrant (the "July Warrant #2" and together with the January Warrant #1, the
January Warrant #2, the January Warrant #3, the January Warrant #4, the January
Warrant #5 and the July Warrant #1, the "Early Warrants") to acquire 110,000
Shares, at an exercise price of $3.88, subject to certain adjustments, (viii) a
common stock purchase Warrant (the "December Warrant #1") to acquire 943,305
Shares, at an exercise price of $3.05, subject to certain adjustments, (vii) a
common stock purchase warrant (the "December Warrant #2" and together with the
December Warrant #1, the "December Warrants") to acquire 556,695 Shares, at an
exercise price of $3.05 per share, subject to certain adjustments, (viii) a
Convertible Term Note in the aggregate principal amount of $2,500,000, a portion
of which is convertible into Shares at a conversion rate of $2.45, subject to
certain adjustments ("Note #1"); (ix) a Convertible Term Note in the aggregate
principal amount of $2,500,000, a portion of which is convertible into Shares at
a conversion rate of $2.45, subject to certain adjustments ("Note #2", and
together with Note #1, the "Notes"); and (x) 19,403 Shares. The Early Warrants
and the Notes contain an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 4.99% of the Shares then issued
and outstanding (the "4.99% Issuance Limitation"). The December Warrants contain
an issuance limitation prohibiting the Fund from exercising those securities to
the extent that such exercise would result in beneficial ownership by the Fund
of more than 9.99% of the Shares then issued and outstanding (the "9.99%
Issuance Limitation" and together with the 4.99% Issuance Limitation, the
"Issuance Limitations"). The Issuance Limitations may be waived by the Fund upon
75 days prior notice to the Company and shall automatically become null and void
following notice to the Issuer of the occurrence and/or continuance of an Event
of Default (as defined in and pursuant to the terms of the applicable
instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin
and David Grin, through other entities, are the controlling principals of Laurus
Capital Management, LLC and share sole voting and investment power over the
securities owned by the Fund reported in this Schedule 13G, as amended.
Item 1(a). Name of Issuer: BIODELIVERY SCIENCES INTERNATIONAL, INC.
Item 1(b). Address of Issuer's Principal Executive Offices:
185 South Orange Avenue, Administrative Building 4, Newark,
New Jersey 07103
Item 2(a). Name of Person Filing: Laurus Master Fund, Ltd.
This Schedule 13G, as amended, is also filed on
behalf of Laurus Capital Management, LLC, a Delaware
limited liability company, Eugene Grin and David
Grin. Laurus Capital Management, LLC manages Laurus
Master Fund, Ltd. Eugene Grin and David Grin, through
other entities, are the controlling principals of
Laurus Capital Management, LLC and share sole voting
and investment power over the shares owned by Laurus
Master Fund, Ltd. Information related to each of
Laurus Capital Management, LLC, Eugene Grin and David
Grin is set forth on Appendix A hereto.
Item 2(b). Address of Principal Business Office or if none, Residence:
c/o Laurus Capital Management, LLC, 825 Third Avenue, 14th
Floor, New York, NY 10022
Item 2(c). Citizenship: Cayman Islands
Item 2(d). Title of Class of Securities: Common Stock
Item 2(e). CUSIP Number: 09060J106
Item 3. Not Applicable
Item 4. Ownership:
(a) Amount Beneficially Owned: 1,392,420 shares of Common Stock*
(b) Percent of Class: 9.99%*
(c) Number of shares as to which such person has:
(i) sole power to vote or to direct the vote: 0 shares of
Common Stock*
(ii) shared power to vote or to direct the vote: 1,392,420
shares of Common Stock*
(iii) sole power to dispose or to direct the disposition of: 0
shares of Common Stock*
(iv) shared power to dispose or to direct the disposition of:
1,392,420 shares of Common Stock*
Item 5. Ownership of Five Percent or Less of a Class: Not applicable
Item 6. Ownership of More than Five Percent on Behalf of Another
Person: Not applicable
Item 7. Identification and Classification of Subsidiary Which Acquired
the Securities: Not applicable
Item 8. Identification and Classification of Members of the Group: Not
applicable
Item 9. Notice of Dissolution of Group: Not applicable
Item 10. Certification:
By signing below I certify that, to the best of my knowledge
and belief, the securities referred to above were not acquired and are not held
for the purpose of or with the effect of changing or influencing the control of
the issuer of the securities and were not acquired and are not held in
connection with or as a participant in any transaction having that purpose or
effect.
----------------------------
* Based on 13,938,146 shares of the common stock, par value $0.001 per
share (the "Shares") of BioDelivery Sciences International, Inc., a Delaware
corporation (the "Company") outstanding, as represented in the Company's
Quarterly Report on Form 10-QSB for the period ended September 30, 2006. As of
December 29, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a common stock
purchase warrant (the "January Warrant #1") to acquire 22,500 Shares at an
exercise price of $0.01 per share, subject to certain adjustments, (ii) a common
stock purchase warrant (the "January Warrant #2") to acquire 39,574 Shares at an
exercise price of $.01, subject to certain adjustments, (iii) a common stock
purchase warrant (the "January Warrant #3") to acquire 29,700 Shares at an
exercise price of $.01, subject to certain adjustments; (iv) a common stock
purchase warrant (the "January Warrant #4") to acquire 350,000 Shares at an
exercise price of $3.00, subject to certain adjustments, (v) a common stock
purchase warrant (the "January Warrant #5") to acquire 483,871 Shares at an
exercise price of $3.88, subject to certain adjustments, (vi) a common stock
purchase warrant (the "July Warrant #1") to acquire 47,113 Shares at an exercise
price of $3.00, subject to certain adjustments; (vii) a common stock purchase
warrant (the "July Warrant #2" and together with the January Warrant #1, the
January Warrant #2, the January Warrant #3, the January Warrant #4, the January
Warrant #5 and the July Warrant #1, the "Early Warrants") to acquire 110,000
Shares, at an exercise price of $3.88, subject to certain adjustments, (viii) a
common stock purchase Warrant (the "December Warrant #1") to acquire 943,305
Shares, at an exercise price of $3.05, subject to certain adjustments, (vii) a
common stock purchase warrant (the "December Warrant #2" and together with the
December Warrant #1, the "December Warrants") to acquire 556,695 Shares, at an
exercise price of $3.05 per share, subject to certain adjustments, (viii) a
Convertible Term Note in the aggregate principal amount of $2,500,000, a portion
of which is convertible into Shares at a conversion rate of $2.45, subject to
certain adjustments ("Note #1"); (ix) a Convertible Term Note in the aggregate
principal amount of $2,500,000, a portion of which is convertible into Shares at
a conversion rate of $2.45, subject to certain adjustments ("Note #2", and
together with Note #1, the "Notes"); and (x) 19,403 Shares. The Early Warrants
and the Notes contain an issuance limitation prohibiting the Fund from
exercising those securities to the extent that such exercise would result in
beneficial ownership by the Fund of more than 4.99% of the Shares then issued
and outstanding (the "4.99% Issuance Limitation"). The December Warrants contain
an issuance limitation prohibiting the Fund from exercising those securities to
the extent that such exercise would result in beneficial ownership by the Fund
of more than 9.99% of the Shares then issued and outstanding (the "9.99%
Issuance Limitation" and together with the 4.99% Issuance Limitation, the
"Issuance Limitations"). The Issuance Limitations may be waived by the Fund upon
75 days prior notice to the Company and shall automatically become null and void
following notice to the Issuer of the occurrence and/or continuance of an Event
of Default (as defined in and pursuant to the terms of the applicable
instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin
and David Grin, through other entities, are the controlling principals of Laurus
Capital Management, LLC and share sole voting and investment power over the
securities owned by the Fund reported in this Schedule 13G, as amended.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
January 8, 2007
Date
//s// Eugene Grin
-----------------------------
Eugene Grin
Director
APPENDIX A
A. Name: Laurus Capital Management, LLC, a Delaware
limited liability company
Business 825 Third Avenue, 14th Floor
Address: New York, New York 10022
Place of Organization: Delaware
B. Name: Eugene Grin
Business 825 Third Avenue, 14th Floor
Address: New York, New York 10022
Principal Director of Laurus Master Fund, Ltd.
Occupation: Principal of Laurus Capital Management, LLC
Citizenship: United States
C. Name: David Grin
Business 825 Third Avenue, 14th Floor
Address: New York, New York 10022
Principal Director of Laurus Master Fund, Ltd.
Occupation: Principal of Laurus Capital Management, LLC
Citizenship: Israel
Each of Laurus Capital Management, LLC, Eugene Grin and David Grin hereby
agrees, by their execution below, that the Schedule 13G, as amended, to which
this Appendix A is attached is filed on behalf of each of them, respectively.
Laurus Capital Management, LLC
//s// Eugene Grin
------------------------------------------
Eugene Grin
Principal
December 29, 2006
//s// David Grin
------------------------------------------
David Grin, on his individual behalf
December 29, 2006
//s// Eugene Grin
------------------------------------------
Eugene Grin, on his individual behalf
December 29, 2006