Item
1.01. Entry into Material Definitive Agreement
On April 13, 2020, Adamis Pharmaceuticals
Corporation (the “Company”) received $3,191,700 in loan
funding from the Paycheck Protection Program (the “PPP”), established pursuant to the recently enacted
Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business
Administration (“SBA”). The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the
Company (the “Note”), in the principal amount of $3,191,700, to Arvest Bank (the “Bank”), the
lender.
Under
the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0% per annum. The
term of the Note is two years, unless sooner provided in connection with an event of
default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company is obligated to make equal
monthly payments of principal and interest, beginning seven months from the date of the Note, until the maturity
date.
The
CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for and be
granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based
on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during
the eight-week period after the loan origination for certain purposes including payroll costs, interest on certain mortgage
obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 75% of the loan
amount is used for eligible payroll costs;
the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the
other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during
the covered eight-week period will qualify for forgiveness. No assurance is provided that the Company will obtain forgiveness
of the PPP Loan in whole or in part.
The
Note may be prepaid in part or in full, at any time, without penalty. The Company may prepay 20%
or less of the unpaid principal balance of the Note at any time without notice, and may prepay more than 20% of the unpaid
principal balance of the Note subject to certain conditions. If any payment on the Note is more than 15 days late, the Bank
may charge the Company a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. The Note
provides for certain customary events of default, including (i) failing to make a payment when due under the Note, (ii)
failure to do anything required by the Note or any other loan document, (iii) defaults of any other loan with the Bank, (iv)
failure to disclose any material fact or make a materially false or misleading representation to the Bank or SBA, (v) default
on any loan or agreement with another creditor, if the Bank believes the default may materially affect the Company’s
ability to pay the Note, (vi) failure to pay any taxes when due, (vii) becoming the subject of a proceeding under any
bankruptcy or insolvency law, having a receiver or liquidator appointed for any part of the Company’s business or
property, or making an assignment for the benefit of creditors, (viii) having any adverse change in financial condition or
business operation that the Bank believes may materially affect the Company’s ability to pay the Note, (ix) if the
Company reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the Bank’s
prior written consent, or (x) becoming the subject of a civil or criminal action that the Bank believes may materially affect
the Company’s ability to pay the Note. Upon the occurrence of an event of default, the Bank has customary remedies and
may, among other things, require immediate payment of all amounts owed under the Note, collect all amounts owing
from the Company, and file suit and obtain judgment against the Company.
The foregoing description of the Note is qualified
in its entirety by reference to the full text of the Note, a copy of which is filed as Exhibit 10.1 to this report and incorporated
herein by reference.
On
April 15, 2020, the Company issued a press release regarding the foregoing matters, a copy of which is attached hereto as
Exhibit 99.1 and incorporated herein by reference.