SUBSEQUENT EVENTS

12 Months Ended

Mar. 31, 2012

Subsequent Events [Abstract]

Subsequent Events

NOTE 14: SUBSEQUENT EVENTS

On April 2, 2012, the Company completed the closing of a private placement financing transaction with Gemini Master Fund, Ltd., pursuant to a Securities Purchase Agreement. The Company issued a 10% Senior Convertible Note in the aggregate principal amount of $1,000,000 and 1,000,000 shares of common stock of the Company, and received gross proceeds of $1,000,000, excluding transaction costs and expenses.

Interest on the Gemini note is payable at a rate of 10% per annum and is payable on the maturity date of the Gemini Note. Principal and accrued and unpaid interest is due and payable nine months after the date of the Gemini Note. The Gemini note is convertible into shares of the Company’s common stock at any time at the discretion of the investor at an initial conversion price per share of $0.25, subject to adjustment for stock splits, stock dividends and other similar transactions and subject to the terms of the Gemini note. The conversion price is also subject to price anti-dilution adjustments providing that with the exception of certain excluded categories of issuances and transactions, if the Company issues equity securities or securities convertible into equity securities at an effective price per share less than the conversion price of the Gemini note, the conversion price of the Gemini note will be adjusted downward to equal the per share price of the new securities. The Company’s obligations under the Gemini note and the other transaction agreements are guaranteed by the Company’s principal subsidiaries, including Adamis Corporation, Adamis Laboratories, Inc. and Adamis Viral, Inc.

The transaction agreements include restrictions on the Company’s ability to engage in certain kinds of transactions while the Gemini note is outstanding without the consent of Gemini, including incurring or paying certain kinds of indebtedness, entering into certain kinds of financing transactions, or encumbering the Company’s assets (subject to certain exceptions). The transaction documents include a variety of liquidated damages, penalties and default provisions upon events of default by the Company, including without limitation an increase in the principal amount and interest rate and a potential decrease in the conversion price of the Gemini note, and in connection with certain other breaches of covenants of the Company. If the shares underlying the Gemini note are not freely tradable under SEC Rule 144 after six months from the closing of the Gemini note transaction, the Company intends to file a registration statement covering the resale of such shares.

On June 11, 2012, the Company completed the closing of a private placement financing transaction with Gemini Master Fund, Ltd., pursuant to a Securities Purchase Agreement. The Company issued a 10% Senior Convertible Note in the aggregate principal amount of $500,000 and 500,000 shares of common stock of the Company, and received gross proceeds of $500,000, excluding transaction costs and expenses. The maturity date is nine months after the date of the note. The other materials terms and conditions are similar to the April 2, 2012 Gemini note described above, except that the initial conversion price per share is $0.55.

Between April and June 2012 the Company converted seven warrants for a total of 212,825 shares. The strike prices ranged between $.20 and $.30. The warrants were all exercised by means of cashless conversions and the cumulative value was $146,762. 

On June 11, 2012, the Company issued a Convertible Promissory Note in the aggregate principal amount of $500,000 and 500,000 shares of common stock to The G-Max Trust (the “Investor”), and received gross proceeds of approximately $500,000, excluding transaction costs and expenses.

Interest on the outstanding principal balance of the G-Max Note accrues at a rate of 10% per annum compounded monthly and is payable monthly commencing July 1, 2012. All unpaid principal and interest on the Note is due and payable on April 1, 2013.

At any time on or before the maturity date, the Investor has the right to convert part or all of the principal and interest owed under the G-Max Note into Common Stock at a conversion price equal to $0.55 per share subject to adjustment for stock dividends, stock splits, reverse stock splits, reclassifications or other similar events affecting the number of outstanding shares of Common Stock.

The G-Max Note includes piggyback registration rights providing that at any time after one year after the date of the G-Max Note, if the shares issued to the Investor and the shares of common stock issuable upon conversion of the G-Max Note (together, the “Transaction Shares”) cannot be sold without restriction pursuant to SEC Rule 144, then if the Company files a registration statement pursuant to the Securities Act of 1933, as amended (the “Act”) relating to an offering for the account of others under the Act of any of its equity securities (other than on Form S-4 or Form S-8 (each as promulgated under the Act) or their then equivalents), then the Company will promptly notify the Investor and will include in such registration and any related qualification under blue sky laws or other compliance, and in any underwriting involved therein, all Transaction Shares specified by the Investor. The Company will pay the registration fees relating to the inclusion of the Transaction Shares in the registration statement.

The G-Max Note includes subordination provisions providing that payment of principal, interest and any other amounts that may become due pursuant to the G-Max Note, and any other obligation that the Company may have to the Investor (“Subordinated Indebtedness”), is subordinated to the payment in full of all “Senior Indebtedness” of the Company, which is defined as any obligations of the Company outstanding on the date of the G-Max Note or created thereafter pursuant to any secured note of the Company and any agreements relating thereto, and that as between the Investor and any holder of Senior Indebtedness (a “Senior Lender”) the Senior Lender will hold a first priority lien in all collateral relating to the Senior Indebtedness.  Until all of the Senior Indebtedness has been paid in full and the Senior Lender has released its lien in the collateral, the Investor may not, without the Senior Lender’s prior written consent, demand, receive or accept any payment, other than current interest payments, from the Company in respect of the Subordinated Indebtedness, or exercise any right of or permit any setoff in respect of the Subordinated Indebtedness.  The G-Max Note includes other customary subordination provisions, including provisions subordinating the Subordinated Indebtedness to any Senior Indebtedness in the event of bankruptcy or similar proceedings or events.  In addition, if an event of default occurs with respect to any Senior Indebtedness permitting the holder to accelerate the maturity thereof, then, unless the event of default has been cured or waived or has ceased to exist, or all Senior Indebtedness has been paid in full, no payment may be made in respect of the G-Max Note for a period of 180 days after the first occurrence of such event of default.