"NEITHER
THIS PROMISSORY NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS
CONVERTIBLE HAVE
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS
AMENDED (THE "SECURITIES ACT") OR ANY OTHER SECURITIES LAWS AND
HAVE BEEN ISSUED
IN RELIANCE UPON THE
EXEMPTION FROM SUCH REGISTRATION CONTAINED IN REGULATION S
UNDER THE SECURITIES ACT. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY
NOT BE OFFERED, SOLD OR TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF,
ANY "U.S. PERSON" (AS SUCH TERM IS DEFINED IN REGULATION
S) EXCEPT IN
ACCORDANCE WITH REGULATION S, PURSUANT TO A REGISTRATION UNDER
THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE
SECURITIES ACT."
CONVERTIBLE PROMISSORY NOTE
$10,000.00
December 21, 2005
FOR VALUE RECEIVED,
DERMISONICS, INC., a Nevada corporation having an office at
Four Tower
Bridge, 200 Bar Harbor Drive, West Conshohocken,
Pennsylvania,
19428-2977 U.S.A.
(the "Company"), hereby promises to pay
to John Varghese at
Zurich, Switzerland,
or his duly registered assigns (each a "Holder"), on
December 21,
2007 ("Maturity"), or earlier upon prepayment of this Note
as
provided herein,
the principal sum of US $10,000.00, together with
interest
(computed on the basis of a 364-day year) on the unpaid principal
balance at the
rate of 12% per annum, payable on the first anniversary of the
Note and at
Maturity.
The
principal amount of this Note and all
accrued interest thereon may be
prepaid by
the Company upon 60 day's prior written notice to
the Holder and
payment of
a prepayment penalty equal to two
months' interest, subject to the
Holder's conversion
rights. Upon any prepayment of this Note,
all accrued but
unpaid interest on the
principal amount shall be paid to the Holder on the date
of prepayment.
All payments hereunder shall be
applied first to interest then
to principal.
All payments of principal and interest
shall be made in lawful currency of
the United
States of America in immediately
available funds before 11:00 a.m.
California time
on the due date thereof at the
coordinates for the Holder on
file with the Company, or in such other manner or at such
other place as the
Holder of this Note designates in writing.
Subject to and in compliance with the provisions hereof, the Holder
may, on
the due date hereof or on any prepayment date hereunder,
convert all or any
portion of
the
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<PAGE>
outstanding principal
balance of this Note as of such payment or
prepayment
date, and all or any portion of the interest
accrued hereon to such date, into
shares ("Conversion
Shares") of the common stock, $.005 par value, of the
-----
Company (the
"Common Stock"), at a conversion price
equal to the lesser of US
$1.00 or 80% of the average closing bid
price per share of Common Stock during
---
the 10 trading days
immediately prior to any such conversion. The Holder hereof
shall communicate
its intention to
convert all or any portion of the principal
amount of this Note and all or any portion of interest
accrued through such
conversion date
by surrendering this
Note, with the Form of Notice of Election
to Convert
attached hereto duly completed and signed, to the
Company at its
address for
notice set forth elsewhere herein.
In
the event of a conversion by the Holder of all
or any portion of the
outstanding principal
balance of this Note and all or any portion
of accrued
interest thereon
into shares of the Common Stock, the Company
will issue and
deliver to
the Holder, as soon as
practical after the Company's receipt of the
Notice of Election a
certificate evidencing the shares of Common Stock issuable
upon any such conversion.
If
the Holder elects to convert less than the
entire principal amount of
this Note and interest accrued to the date of such conversion, the
Company shall
issue or cause to be issued and delivered
to the Holder, at its expense, a new
promissory note
evidencing
the outstanding amount of principal
due hereunder
after giving
effect to the amount applied to the conversion, which such
promissory note
shall, except as to
the principal amount thereof, be identical
to this Note in all respects.
The
Company covenants that
it will at all times reserve and keep available
out of the aggregate of its authorized but unissued and
otherwise unreserved
Common Stock,
solely for the purpose
of enabling it to issue Conversion Shares
upon conversion of this Note as herein provided, the number of
Conversion Shares
which are then issuable and deliverable upon the conversion of the
entire amount
due under this Note, free from preemptive rights or any other contingent
purchase rights of persons other than the Holder. The Company
covenants that all
Conversion Shares so issuable and deliverable shall, upon issuance
in accordance
with the terms hereof, be duly and validly authorized, issued and
fully paid and
nonassessable.
Except as provided elsewhere herein, if the Company
shall fail to make a
payment of principal or interest when due and such failure shall
continue for 10
days after
notice of such
failure; or shall make an assignment for the benefit
of creditors,
file a petition in bankruptcy, be adjudicated insolvent or
bankrupt, suffer an
order for relief under any federal bankruptcy law, petition
or apply to any tribunal for the appointment of a
custodian, receiver or any
trustee for the Company or any substantial part of its assets, or
shall commence
any proceeding
under any bankruptcy,
2
<PAGE>
reorganization,
arrangement,
readjustment of debt,
dissolution or liquidation
law or statue of any jurisdiction, whether now or
hereafter in effect; or if
there shall
have been filed any such petition or application, or any
such
proceeding shall
have been commenced against the Company, which remains
undismissed, unstayed
or unbonded for a period of 30 days or more;
or if the
Company, by
any act or omission shall indicate consent to, approve or
acquiescence in any
such petition, application or proceeding or the appointment
of a custodian, receiver or any trustee
for all or any substantial part of its
properties, or
if the Company shall
allow such custodianship, receivership, or
trusteeship to
continue undischarged, unstayed or unbonded
for a period of 30
days or more, or the Company violates any term or
provision of this Note and
same remains uncured
for a period of 30 days after notice thereof by the Holder
of this Note, then and in any such event, the
outstanding principal amount of
this Note,
together with all
accrued and unpaid interest thereon, shall be and
become immediately
due and payable.
Anything contained
in this Note to the contrary
notwithstanding, in the
event this
Note is placed in
default as a result of the Company's inability to
pay the amounts due hereunder when due, the Company
