Item 3.03 |
Material Modification to Rights of Security Holders. |
Series E Convertible Preferred Stock
On May 24,
2023, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (the
“Certificate of Designation”) with the Secretary of State of the State of Delaware, designating 15,000 shares out of the authorized
but unissued shares of its preferred stock as Series E Preferred, with a stated par value of $0.0001 per share, and in connection with
the Merger the Company issued 1,941.2 shares of Series E Preferred to a former stockholder of DMK. The following is a summary of the material
terms of the Series E Preferred and is qualified in its entirety by the Certificate of Designation, which is attached to this Report as
Exhibit 3.1 and incorporated herein by this reference. Please refer to the Certificate of Designation for more information on the preferences,
rights and limitations of Series E Preferred.
Dividends.
Except for stock dividends or distributions for which adjustments are made pursuant to the Certificate of Designation, the holders of
Series E Preferred will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid
on shares of Adamis common stock, when, as and if actually paid on shares of Adamis common stock.
Voting Rights.
Except as otherwise provided in the Certificate of Designation or as otherwise required by law, holders of Series E Preferred are entitled
to vote with the holders of outstanding shares of Common Stock, voting together as a single class, with respect to all matters presented
to the stockholders of the Company. Each such holder is entitled to a number of votes equal to the number of shares of Common Stock into
which the Series E Preferred Stock held by such holder is convertible pursuant to the Certificate of Designation (subject to, and after
giving effect to and taking into account, the Beneficial Ownership Limitation described below and set forth in the Certificate of Designation)
as of the record date for such vote.
Liquidation,
Dissolution or Winding Up. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
subject to the rights of the holders of any other outstanding series of preferred stock, the holders of Series E Preferred are entitled
to receive, pari passu with the holders of Common Stock, out of the assets of the Company an amount equal to such amount per share as
would have been payable had all shares of Series E Preferred been converted into Common Stock pursuant to the Certificate of Designation
(without giving effect to any limitation on conversion as a result of the Beneficial Ownership Limitation) immediately prior to such Liquidation.
Conversion.
Each share of Series E Preferred (or fraction thereof) is convertible, at any time and from time to time at the option of the holder thereof,
into the number of shares of Adamis common stock (subject to the Beneficial Ownership Limitation) at a conversion ratio (the “Conversion
Ratio”) of 1,000 shares of Adamis common stock per one whole share of Series E Preferred (and giving effect proportionately to any
conversion of a fraction of a share of Series E Preferred) (subject to adjustment). If the Company fails to timely deliver shares of Adamis
common stock upon conversion of shares of Series E Preferred within the time period specified in the Certificate of Designation, then
the holder is entitled to elect, by notice to the Company at any time on or before its receipt of such Conversion Shares, to rescind such
conversion, and the holder shall return to the Company any Conversion Shares issued to the holder pursuant to the rescinded notice. The
Conversion Ratio and the number of shares of Adamis common stock into which a share of Series E Preferred is convertible is subject to
proportionate adjustments in the event of stock dividends or distributions payable in shares of Adamis common stock, stock splits or reverse
stock splits, or reclassifications.
Beneficial
Ownership Limitation. Under the Certificate of Designation, Adamis shall not effect any conversion of the Series E Preferred, and
a holder of Series E Preferred does not have the right to convert any portion of the Series E Preferred, to the extent that, after giving
effect to a requested conversion, such holder would beneficially own in excess of the Holder Beneficial Ownership Limitation, or such
Holder together with such Holder’s affiliates and any persons acting as a group together with such holder or affiliates (such persons,
“Attribution Parties”) would beneficially own in excess of the Affiliates Beneficial Ownership Limitation (as defined below).
For purposes of such determination, the number of shares of Adamis common stock beneficially owned by such holder and its affiliates includes
the number of shares of Adamis common stock issuable upon conversion of the Series E Preferred with respect to which such determination
is being made, but excludes the number of shares of Adamis common stock which are issuable upon (i) conversion of the remaining,
unconverted Series E Preferred beneficially owned by such holder or any of its affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of Adamis subject to a limitation on conversion or exercise
analogous to the limitation contained in the Certificate of Designation beneficially owned by such holder or any of its affiliates or
Attribution Parties. Except as set forth in the preceding sentence, beneficial ownership is determined in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder. The “Holder Beneficial Ownership Limitation” is
9.99% of the number of shares of the Adamis common stock outstanding immediately after giving effect to the issuance of shares of Adamis
common stock issuable upon conversion of Series E Preferred held by the applicable holder. The “Affiliates Beneficial Ownership
Limitation” is 9.99% of the number of shares of Adamis common stock outstanding immediately after giving effect to the issuance
of shares of Adamis common stock issuable upon conversion of Series E Preferred held by the applicable holder and its affiliates. The
Holder Beneficial Ownership Limitation together with the Affiliates Beneficial Ownership Limitation are sometimes referred to collectively
as the “Beneficial Ownership Limitation.”
Nasdaq Issuance
Limitation. The Company will not be obligated to issue any shares of Adamis common stock , and the holders of Series E Preferred do
not have the right to receive, upon conversion of the Series E Preferred, any shares of Common Stock to the extent such issuance of shares
of Adamis common stock would exceed that number of shares of Adamis common stock which the Company may issue in the aggregate pursuant
to the transactions contemplated under the Merger Agreement (including pursuant to the Certificate of Designation) without breaching the
Company’s obligations under the rules and regulations of the Nasdaq Capital Markets (the “Exchange Cap”). In addition,
no holder of Series E Preferred shall be issued, in the aggregate pursuant to the terms of the Certificate of Designation,
shares of Adamis common stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which
is the number of shares of Series E Preferred held by the holder and the denominator of which is the aggregate number of shares of Series
E Preferred originally issued to all holders in connection with the closing of the Merger (with respect to each holder, the “Exchange
Cap Allocation”). In the event that the holder sells or otherwise transfers any of the holder’s Series E Preferred, the transferee
shall be allocated a pro rata portion of the holder’s Exchange Cap Allocation, and the restrictions of the prior sentence shall
apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. If any holder of Series
E Preferred converts all of such holder’s Series E Preferred into a number of shares of Adamis common stock which, in the aggregate,
is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and
the number of shares of Adamis common stock actually issued to such holder will be allocated to the respective Exchange Cap Allocations
of the remaining holders of Series E Preferred on a pro rata basis in proportion to the shares of Series E Preferred then held by each
such holder.
Preemptive
Rights. No holders of Series E Preferred will, as holders of Series E Preferred, have any preemptive rights to purchase or subscribe
for shares of Adamis common stock or any of Adamis’ other securities.
Consent
Rights. In addition to the voting rights of the Series E Preferred described above, as long as any shares of Series E Preferred are
outstanding, the Company shall not, without the affirmative vote of holders of a majority of the outstanding shares of Series E Preferred,
directly or indirectly, by merger, consolidation, recapitalization or otherwise, (a) alter or change adversely the powers, preferences
or rights given to the Series E Preferred or alter or amend the Certificate of Designation or (b) increase the number of authorized shares
of Series E Preferred, or (c) enter into any agreement with respect to any of the foregoing.
Subsequent
Rights Offerings; Pro Rata Distributions. If the Company grants, issues or sells any Adamis common stock equivalents pro rata to all
the record holders of any class of shares of Adamis common stock (the “Purchase Rights”), then a holder of Series E Preferred
will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holder could have
acquired if the holder had held the number of shares of Adamis common stock acquirable upon conversion of the Series E Preferred (without
regard to any limitations on conversion, including without limitation, the Beneficial Ownership Limitation) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of shares of Adamis common stock are to be determined for the grant, issue or sale of such Purchase Rights (provided,
however, to the extent that the holder’s right to participate in any such Purchase Right would result in the holder exceeding the
Beneficial Ownership Limitation, then the holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Adamis common stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent
shall be held in abeyance for the holder until such time, if ever, as its right thereto would not result in the holder exceeding the Beneficial
Ownership Limitation). In addition, as long as the Series E Preferred Stock is outstanding, if the Company declares or makes any dividend
or other distribution of its assets (or rights to acquire its assets) to all holders of shares of Adamis common stock (including, without
limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance
of the Series E Preferred, then, in each such case, the holder of Series E Preferred shall be entitled to participate in such Distribution
to the same extent that the holder would have participated therein if the holder had held the number of shares of Adamis common stock
acquirable upon complete conversion of the Series E Preferred (without regard to any limitations on conversion including without limitation,
the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record
is taken, the date as of which the record holders of shares of Adamis common stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the holder’s right to participate in any such Distribution would result in the
holder exceeding the Beneficial Ownership Limitation, then the holder shall not be entitled to participate in such Distribution to such
extent (or in the beneficial ownership of any shares of Adamis common stock as a result of such Distribution to such extent) and the portion
of such Distribution shall be held in abeyance for the benefit of the holder until such time, if ever, as its right thereto would not
result in the holder exceeding the Beneficial Ownership Limitation).
Merger;
Sale of Assets. If at any time while the Series E Preferred Stock is outstanding: (i) the Company effects any merger or consolidation
of the Company with or into another person pursuant to which the shares of capital stock of the Company outstanding immediately prior
to such merger or consolidation are converted into or exchanged for shares of another corporation or entity, or are converted into or
exchanged for equity securities that represent, less than a majority, by voting power, of the equity securities of (1) the surviving or
resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such merger
or consolidation, the parent of such surviving or resulting party, immediately following such merger or consolidation; or (ii) the Company
sells all or substantially all of its assets in a single transaction or a series of related transactions (each, a “Merger or Sale”),
then each holder of the Series E Preferred Stock shall be entitled to receive such number of shares of common stock of the successor or
acquiring corporation and/or such other or additional consideration as are receivable by virtue of such Merger or
Sale by a holder of the number of shares of Adamis common stock for which the Series E Preferred Stock held by the holder is convertible
immediately prior to such Merger or Sale (without regard to the Beneficial Ownership Limitation).
The foregoing descriptions of
the Certificate of Designation are subject to and qualified in their entirety by reference to the Certificate of Designation, copies
of which are attached as Exhibit 3.1, and are incorporated herein by reference.