Item 3.03
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Material Modification to Rights of Security Holders.
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Effective March 23, 2020, the Board of
Directors (the “Board”) of AIkido Pharma Inc., a Delaware corporation (the “Company”), declared
a dividend of one right (a “Right”) for each of the Company’s issued and outstanding shares of common
stock, $0.0001 par value per share (“Common Stock”). The dividend will be paid to the stockholders of record
at the close of business on March 30, 2020 (the “Record Date”). Each Right entitles the registered holder, subject
to the terms of the Rights Agreement (as defined below), to purchase from the Company one one-thousandth of a share of the Company’s
Series L preferred stock (the “Preferred Stock”) at a price of $5.00 (the “Exercise Price”),
subject to certain adjustments. The description and terms of the Rights are set forth in the Rights Agreement, dated as of March
23, 2020 (the “Rights Agreement”), by and between the Company and VStock Transfer, LLC, as rights agent (the
“Rights Agent”).
The purpose of the Rights Agreement is
to diminish the risk that the Company’s ability to use its net operating losses and certain other tax assets (collectively,
“Tax Benefits”) to reduce potential future federal income tax obligations would become subject to limitations
by reason of the Company experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue Code
of 1986, as amended (the “Tax Code”). A company generally experiences such an ownership change if the percentage
of its stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code, increases by more than
50 percentage points over a rolling three-year period. The Rights Agreement is designed to reduce the likelihood that the Company
will experience an ownership change under Section 382 of the Tax Code by (i) discouraging any person or group from becoming a shareholder
of 4.99% or more of Common Stock and (ii) discouraging any existing 4.99% shareholder from acquiring any additional shares of the
Company’s stock.
The Rights will not be exercisable until
the earlier to occur of (i) the close of business on the tenth business day after a public announcement or filing that a person
has, or group of affiliated or associated persons or persons acting in concert have, become an “Acquiring Person,”
which is defined as a person or group of affiliated or associated persons or persons acting in concert who, at any time after the
date of the Rights Agreement, have acquired, or obtained the right to acquire, beneficial ownership of 4.99% or more of the Company’s
outstanding shares of Common Stock, subject to certain exceptions or (ii) the close of business on the tenth business day after
the commencement of, or announcement of an intention to commence, a tender offer or exchange offer the consummation of which would
result in any person becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”).
Certain synthetic interests in securities created by derivative positions, whether or not such interests are considered to be ownership
of the underlying Common Stock or are reportable for purposes of Regulation 13D of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), are treated as beneficial ownership of the number of shares of Common Stock
equivalent to the economic exposure created by the derivative position, to the extent actual shares of the Common Stock are directly
or indirectly held by counterparties to the derivatives contracts.
With respect to certificates representing
shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates
for shares of Common Stock registered in the names of the holders thereof, and not by separate Rights Certificates, as described
further below. With respect to book entry shares of Common Stock outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by the balances indicated in the book entry account system of the transfer agent for the Common Stock.
Until the earlier of the Distribution Date and the Expiration Date, as described below, the transfer of any shares of Common Stock
outstanding on the Record Date will also constitute the transfer of the Rights associated with such shares of Common Stock. As
soon as practicable after the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”)
will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and such Right Certificates
alone will evidence the Rights.
The Rights, which are not exercisable until
the Distribution Date, will expire prior to the earliest of (i) October 23, 2023 or such later day as may be established by the
Board prior to the expiration of the Rights; (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement; (iii)
the time at which the Rights are exchanged pursuant to the Rights Agreement; (iv) the time at which the Rights are terminated upon
the occurrence of certain transactions; (v) the close of business on the effective date of the repeal of Section 382 of the Tax
Code, if the Board determines that the Rights Agreement is no longer necessary or desirable for the preservation of Tax Benefits;
and (vi) the close of business on the first day of a taxable year of the Company to which the Board determines that no Tax Benefits
are available to be carried forward, (the earliest of (i), (ii), (iii), (iv), (v) and (vi) is referred to as the “Expiration
Date”).
Each share of Preferred Stock will be entitled,
when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share or
(ii) an amount equal to 1,000 times the dividend declared per share of Common Stock. Each share of Preferred Stock will entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are converted or exchanged, each share of Preferred Stock will
be entitled to receive 1,000 times the amount received per one share of Common Stock.
The Exercise Price payable, and the number
of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of
the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or purchase
Preferred Stock or convertible securities at less than the then-current market price of the Preferred Stock or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends
payable in Preferred Stock) or of subscription rights or warrants (other than those referred to above). The number of outstanding
Rights and the number of one one-thousandths of a Preferred Stock issuable upon exercise of each Right are also subject to adjustment
in the event of a stock split, reverse stock split, stock dividends and other similar transactions.
In the event that, after a person or a
group of affiliated or associated persons has become an Acquiring Person, the Company is acquired in a merger or other business
combination transaction, or 50% or more of the Company’s assets or earning power are sold, proper provision will be made
so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then-current exercise
price of the Right, that number of shares of common stock of the acquiring company having a market value at the time of that transaction
equal to two times the Exercise Price.
With certain exceptions, no adjustment
in the Exercise Price will be required unless such adjustment would require an increase or decrease of at least one percent in
the Exercise Price. No fractional shares of Preferred Stock will be issued (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts)
and, in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Stock on the trading day immediately
prior to the date of exercise.
At any time after any person or group of
affiliated or associated persons becomes an Acquiring Person and prior to the acquisition of beneficial ownership by such Acquiring
Person of 50% or more of the outstanding shares of Common Stock, the Board, at its option, may exchange each Right (other than
Rights owned by such person or group of affiliated or associated persons which will have become void), in whole or in part, at
an exchange ratio of two shares of Common Stock per outstanding Right (subject to adjustment).
At any time before any person or group
of affiliated or associated persons becomes an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at
a price of $0.0001 per Right (subject to certain adjustments) (the “Redemption Price”). The redemption of the
Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.
Immediately upon the action of the Board
electing to redeem or exchange the Rights, the Company shall make announcement thereof, and upon such election, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.
In addition, if a Qualifying Offer (as
defined in the Rights Agreement) is made and the Board has not redeemed the outstanding Rights or exempted such offer from the
terms of the Rights Agreement or has not called a special meeting of stockholders for the purpose of voting on whether or not to
exempt such Qualifying Offer from the terms of the Rights Agreement, in each case after ninety (90) days from the commencement
of the Qualifying Offer (the “Board Evaluation Period”), the record holders of 20% of the outstanding shares
of Common Stock may request, not later than ninety (90) days following the Board Evaluation Period, the Board to submit to a vote
of stockholders at a special meeting of the stockholders of the Company (a “Special Meeting”) a resolution exempting
such Qualifying Offer from the provisions of the Rights Agreement (the “Qualifying Offer Resolution”). If a
Special Meeting is not held within ninety (90) days following the last day of the Board Evaluation Period or, if at the Special
Meeting the holders of a majority of the shares of Common Stock outstanding (other than shares held by the offeror and its affiliated
and associated persons) vote in favor of the Qualifying Offer Resolution, then the Board will exempt the Qualifying Offer from
the provisions of the Rights Agreement or take such other action as may be necessary to prevent the Rights from interfering with
the consummation of the Qualifying Offer.
Until a Right is exercised or exchanged,
the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote
or to receive dividends.
The Board may amend or supplement the Rights
Agreement without the approval of any holders of Rights, including, without limitation, in order to (a) cure any ambiguity, (b)
correct inconsistent provisions, (c) alter time period provisions or (d) make additional changes to the Rights Agreement that the
Board deems necessary or desirable. However, from and after any person or group of affiliated or associated persons becomes an
Acquiring Person, the Rights Agreement may not be supplemented or amended in any manner that would adversely affect the interests
of the holders of Rights.
The Rights Agreement is attached hereto
as Exhibit 4.1 and is incorporated herein by reference. The description of the Rights Agreement herein does not purport to be complete
and is qualified in its entirety by reference to Exhibit 4.1.