SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 6, 2011
Stone Harbor Investments, Inc.
(Exact name of registrant as specified in its charter)
450 East Las Olas Blvd.
Ft. Lauderdale, Florida 33301
(Address of principal executive offices) (zip code)
(Registrant's telephone number, including area code)
Jolie Kahn, Esq.
61 Broadway, Suite 2820
New York, New York 10006
Phone: (212) 422-4910
Fax: (866) 705-3071
STONE HARBOR INVESTMENTS, INC.
7985 113th Street, Suite 211
Seminole, FL 33772
(Former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 3.02 Unregistered Sales of Equity Securities.
As previously disclosed in Stone Harbor Investment Inc.’s (the “Company”) 8-K filed with the Securities and Exchange Commission on April 6, 2011, the Company entered into a subscription agreement (the “Subscription Agreement”) with accredited investors (the “Investors”) on April 6, 2011. Pursuant to the Subscription Agreement, on April 6, 2010, the Company issued and sold to the Investors, convertible promissory notes (the “Notes”) in the aggregate principal amount of $4,690,376.34 (the “Private Placement”). The Notes are secured by a senior security interest in all of the assets of the Company and its subsidiaries. The Notes are convertible into common stock of the Company at an exercise price of $0.50 per share, subject to adjus tment in the event of stock splits, stock dividends, or in the event of certain subsequent issuances by the Company of common stock or securities convertible into common stock at a lower price. The Company intends to effect a 50:1 forward stock split of its Common Stock as a dividend, and this stock split shall not affect the exercise price of the Notes which shall remain at $.50 per share after the effectiveness of the stock split. The Notes mature two years from the date of issuance. The Notes bear interest at the rate of 10% per annum due and payable in cash semi-annually in arrears commencing six months from the date of closing and upon maturity. If an event of default has not occurred, the Company may elect to make any interest payments in shares of its common stock at a discount of 20% to the VWAP (volume weighted average price) for the Company’s common stock for the five final trading days directly preceding such semi annual interest payment date. In the eve nt (i) the Company is prohibited from issuing shares issuable upon conversion of a note, (ii) upon the occurrence of any other event of default, that continues beyond any applicable cure period, (iii) a change in control occurs, or (iv) upon the liquidation, dissolution or winding up of the Company or any subsidiary, then at the noteholder’s option, the Company must pay to each noteholder, a sum of money determined by multiplying up to the outstanding principal amount of the note designated by each such noteholder by, at the noteholder’s election, the greater of (x) 120%, or (y) a fraction the numerator of which is the highest closing price of the Company’s common stock for the thirty days preceding the date demand is made by the noteholder and the denominator of which is the lowest applicable conversion price during such thirty (30) day period, plus accrued but unpaid interest and any other amounts due. The Company has also i ssued to the Investors two warrants (collectively, the “Warrants”) to purchase common stock for each one share of Company common stock purchased on the closing date of the Private Placement . The Warrants will have a five-year term, may be exercised on a cashless basis (commencing twelve months after the closing date of the Private Placement only if the common stock underlying the Warrants is not included for public resale in an effective registration statement), and have an exercise price of $0.50, subject to adjustment in the event of stock splits, stock dividends, or in the event of certain subsequent issuances of the Company of common stock or securities convertible into common stock at a lower price. The Notes may not be converted, and the Warrants may not be exercised, to the extent such conversion or exercise would cause the holder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 4.99% of the Company’s then outstandin g shares of common stock following such conversion or exercise. Pursuant to the Subscription Agreement, the Investors shall have demand and piggyback registration rights. The Company’s obligations under the Notes are guaranteed by Source Vitamin Company, the Company’s wholly owned subsidiary.
Pursuant to an escrow agreement entered into between the Company, the Investors, and Grushko & Mittman, P.C., as escrow agent, $1,500,000 from the sale of the Notes will continue to be held in escrow in a non-interest bearing account and released to the Company or on the Company’s behalf not more frequently than one time each ten days. A request for release must be made in writing to the Escrow Agent and Collateral Agent. The request must include a copy of unanimously adopted resolutions of the board of directors of the Company certified by the secretary of the Company and the Company’s chief financial officer that (i) the Company is requesting a release of funds and the details thereof including the amount, purposes, and wire delivery instructions, (ii) that such requested funds are for reimbursement of funds which were timely employed in conformity in all material respects with the use of proceeds set forth on Schedule 9(e) to the Subscription Agreement under the heading “Use of Proceeds to be Reimbursed After Closing”, and (iii) an Event of Default, or an event that with the giving of notice or the passage of time could become an Event of Default, has not occurred. The Company must provide to Collateral Agent reasonably satisfactory proof that the funds for which reimbursement is sought had been used for the purposes described in part (ii) of the previous sentence. The Escrow Agent may not release any funds if an objection to such release has been made by Collateral Agent. Deviations from Schedule 9(e) to the Subscription Agreement may be made subject to the written approval of the Collateral Agent. 9(e) contemplates the entire $1,500,000 will be used for public relations and investor relations services rendered by a direct marketing firm under t he Company’s direction to implement and manage a direct mail correspondence program. The Company believes that this program will be beneficial for its business and keeping its shareholders apprised of its progress. Unless postponed by the Company and Collateral Agent, any funds retained in escrow on the nine month anniversary of the Closing Date will be released to Subscribers requesting such release in proportion to the relative amount of Note principal held by all Subscribers as of such nine month anniversary date. Upon release to the Subscribers, such sums shall be applied against amounts outstanding on the Notes in the manner set forth in the Notes.
In connection with the foregoing, the Company relied upon the exemption from securities registration afforded by Rule 506 of Regulation D as promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”) and/or Section 4(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, and transfer was restricted by the Company in accordance with the requirements of the Securities Act of 1933.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.