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Subsequent Events
3 Months Ended
Mar. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events

Note 8: Subsequent Events

 

          On April 15, 2016, the Company issued common stock upon exercise of an investor warrant. The warrant holder exercised for cash at an exercise price of $3.40 per share. The Company received a total of approximately $89,000 and the warrant holder received 26,144 shares of common stock.

 

          Acquisition of U.S. Compounding, Inc.  As previously disclosed in its filings with the Securities and Exchange Commission, on April 11, 2016, the Company completed its acquisition of U.S. Compounding, Inc., an Arkansas corporation (“USC’), pursuant to the terms of the Agreement and Plan of Merger, dated as of March 28, 2016 (the “Merger Agreement”), with USC. USC is registered as a drug compounding outsourcing facility under Section 503B of the U.S. Food, Drug & Cosmetic Act and provides prescription medications to patients, physician clinics, hospitals and surgery centers throughout most of the United States. Pursuant to the terms of the Merger Agreement, a newly-created merger subsidiary of the Company merged with and into USC, with USC surviving as a wholly owned subsidiary of the Company. All of the outstanding shares of common stock of USC were converted into the right to receive a total of approximately 1,618,540 shares of Adamis common stock. Prior to the closing of the merger, the Company had advanced to USC approximately $368,000 to pay its audit fees, salary of one of its employees and help fund its operations. The amount, reflected in the Balance Sheet as part of Prepaid and Other Current Assets, is the Company's receivable from USC.

          

         Pursuant to the terms of the Merger Agreement, 300,000 shares of the Company’s common stock issued to the principal former stockholders of USC (the “Indemnifying Stockholders”) will be held in escrow for a period of three years after the closing date in order to satisfy the indemnification obligations of the Indemnifying Stockholders under the Merger Agreement for breaches of USC’s representations, warranties, covenants and certain other matters. In addition, the persons serving as the chief executive officer and president, respectively, of USC entered into individual milestone agreements pursuant to which 750,000 of the shares issued to such stockholders will be withheld, with such shares to vest and be released annually over a period of three years after the closing date provided that such stockholder continues to be employed by USC or the Company (with certain exceptions) as of the applicable vesting date.

 

          Loan Agreements and Loan Documents.  In connection with the transactions contemplated by the Merger Agreement and the transfer of certain assets to the Company, the Company assumed approximately $5,722,500 principal amount of debt obligations under certain loan agreements and related agreements and documents of USC and certain related entities (the “Existing Loan Documents”) and agreed to become an additional co-borrower under such Existing Loan Documents. Similarly, in recognition of the fact that the loans evidenced by the Existing Loan Documents are currently in default with respect to certain nonmonetary covenants in the Existing Loan Documents, the lending bank agreed that until October 31, 2016, and subject to compliance with the other provisions of the loan amendment agreement, it would not pursue available remedies as a result of such noncompliance or demand payment under the promissory notes included in the Existing Loan Documents. 

          License Agreement. On May 9, 2016, the Company entered into a Development, License and Commercialization Agreement (the “Agreement”) with Allergan plc’s wholly owned subsidiary, Watson Laboratories, Inc. (“Licensee”), regarding the Company’s Epinephrine Pre-filled Syringe (“PFS”) product candidate for the emergency treatment of anaphylaxis. Under the terms of the Agreement, the Company granted Licensee exclusive commercial rights to market and sell the PFS product in the United States and related territories, with broad control concerning decisions relating to commercialization and marketing of the product.  Licensee agreed to pay the Company an upfront payment and agreed to make additional potential regulatory, performance and sales based milestone payments which, together with the initial upfront payment, could total up to $32.5 million over the term of the Agreement, assuming FDA approval of the product and that all milestones are achieved over the term of the Agreement.  If the FDA does not approve the Company's New Drug Application ("NDA") relating to the PFS product within the time period specified in the Agreement, Licensee has the right, but not the obligation, to terminate the Agreement, and if Licensee elects to terminate the Agreement then the upfront payment previously paid to the Company will be refunded.  Licensee also has the right within certain periods of time specified in the Agreement to terminate the Agreement in certain circumstances and for certain reasons (not related to breach of the Agreement), including even if the FDA approves the NDA.  Such termination by Licensee after FDA approval of the NDA does not require the return of any payments previously made by Licensee.  Under the Agreement, Licensee agreed to pay double-digit royalties to the Company based on percentages of a formulaic net profit amount, as defined and calculated as provided in the Agreement, from net sales of the PFS product in the United States by Licensee or certain affiliated parties.  The Company retains the right to commercialize the PFS product in the rest of the world. Licensee will be responsible for the marketing and sales of the PFS product and will be responsible for marketing and sales costs. Licensee agreed to use commercially reasonable efforts to commence marketing and sale of the PFS product following regulatory approval, subject to various conditions and to the other provisions of the Agreement. The Agreement also covers development of certain related additional PFS product candidates and future activities and responsibilities by the Company and Licensee relating to those product candidates. The Company will be responsible for costs relating to the NDA and related regulatory materials and to regulatory filings and seeking regulatory approvals for products covered by the Agreement.  The Agreement includes a number of other customary provisions including representations and warranties, covenants, provisions dealing with product recalls, intellectual property and other matters, and agreements by the Company and Licensee to indemnify the other party for certain matters relating to the Agreement and the product.