Attached files
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended December 31, 2011
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _______________________ to _______________________
Commission File Number: 0-26372
ADAMIS PHARMACEUTICALS CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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82-0429727
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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11455 El Camino Real, Suite 310, San Diego, CA 92130
(Address of principal executive offices, including zip code)
(858) 997-2400
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “larger accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of the issuer’s common stock, par value $0.0001 per share, as of February 13, 2012, was 95,133,959.
ADAMIS PHARMACEUTICALS, INC.
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
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Page
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PART I
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements:
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3
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4
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5
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7
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Item 2.
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11
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Item 3.
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18
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Item 4.
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18
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PART II
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OTHER INFORMATION
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Item 1.
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18
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Item 1A.
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19
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Item 2.
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19
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Item 3.
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19
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Item 4.
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19
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Item 5.
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19
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Item 6.
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20
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Signatures
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2
CONDENSED CONSOLIDATED BALANCE SHEETS
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December 31, 2011
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ASSETS
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(Unaudited)
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March 31, 2011
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CURRENT ASSETS
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Cash
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$ | 1,602 | $ | 1,238,898 | ||||
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Prepaid Consulting Fees and Other Current Assets
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117,154 | 294,710 | ||||||
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Total Current Assets
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118,756 | 1,533,608 | ||||||
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ASSETS FROM DISCONTINUED OPERATIONS
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130,000 | 200,000 | ||||||
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Total Assets
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$ | 248,756 | $ | 1,733,608 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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CURRENT LIABILITIES
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Accounts Payable
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$ | 1,726,035 | $ | 1,263,199 | ||||
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Accrued Other Expenses
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567,660 | 484,407 | ||||||
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Accrued Bonuses
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101,436 | 101,436 | ||||||
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Notes Payable
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- | 1,163,000 | ||||||
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Notes Payable to Related Parties
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108,432 | 101,232 | ||||||
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Total Liabilities
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2,503,563 | 3,113,274 | ||||||
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS' EQUITY (DEFICIT)
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Preferred Stock – Par Value $.0001; 10,000,000 Shares
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Authorized; Issued and Outstanding-None
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- | - | ||||||
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Common Stock – Par Value $.0001; 175,000,000 Shares Authorized;
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98,362,147 and 86,818,532 Issued, 93,133,959 and 81,590,344 Outstanding, Respectively
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9,836 | 8,682 | ||||||
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Additional Paid-in Capital
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27,316,943 | 24,483,918 | ||||||
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Accumulated Deficit
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(29,576,357 | ) | (25,867,037 | ) | ||||
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Treasury Stock - 5,228,188 Shares
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(5,229 | ) | (5,229 | ) | ||||
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Total Stockholders' Equity (Deficit)
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(2,254,807 | ) | (1,379,666 | ) | ||||
| $ | 248,756 | $ | 1,733,608 | |||||
The accompanying notes are an integral part of these Consolidated Financial Statements
3
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ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months Ended
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Nine Months Ended
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December 31, 2011
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December 31, 2010
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December 31, 2011
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December 31, 2010
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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REVENUE
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$ | — | $ | — | $ | — | $ | — | ||||||||
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COST OF GOODS SOLD
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— | — | — | — | ||||||||||||
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Gross Margin
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— | — | — | — | ||||||||||||
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
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807,161 | 928,668 | 2,295,976 | 3,012,993 | ||||||||||||
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RESEARCH AND DEVELOPMENT
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181,500 | 2,092,524 | 1,385,969 | 2,109,820 | ||||||||||||
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Loss from Operations
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(988,661 | ) | (3,021,192 | ) | (3,681,945 | ) | (5,122,813 | ) | ||||||||
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OTHER INCOME (EXPENSE)
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| Interest Expense | (2,613 | ) | (72,148 | ) | (32,672 | ) | (712,760 | ) | ||||||||
| Gain on Sale of Asset | — | — | 5,297 | 5,600 | ||||||||||||
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Net (Loss)
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$ | (991,274 | ) | $ | (3,093,340 | ) | $ | (3,709,320 | ) | $ | (5,829,973 | ) | ||||
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Basic and Diluted (Loss) Per Share:
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Basic and Diluted (Loss) Per Share
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$ | (0.01 | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.09 | ) | ||||
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Basic and Diluted Weighted Average Shares Outstanding
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91,885,620 | 70,005,275 | 87,830,451 | 67,252,621 | ||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
4
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ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine Months Ended December 31,
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2011
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2010
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(Unaudited)
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(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net Loss
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$ | (3,709,320 | ) | $ | (5,829,973 | ) | ||
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Adjustments to Reconcile Net Loss to Net
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Cash (Used in) Operating Activities:
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Depreciation Expense
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— | 13,682 | ||||||
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Stock Issued for Interest
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621 | 777 | ||||||
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Stock Issued for Research & Development Services
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— | 1,215,000 | ||||||
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Reduction of Compensation Upon Forgiveness of Accrued Bonus
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— | (129,977 | ) | |||||
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Consulting Expense Paid in Common Stock
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— | 597,500 | ||||||
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Stock-Based Compensation Expense
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134,558 | 100,214 | ||||||
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Amortization of Discounts
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— | 527,369 | ||||||
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Inventory Reserve Adjustment
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— | (222,878 | ) | |||||
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Amortization of Stock Issued for Services
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293,876 | 311,904 | ||||||
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Sales Returns Reserve Adjustment
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(58,149 | ) | 307,660 | |||||
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Write-down of Discontinued Operations Receivable
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70,000 | — | ||||||
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Change in Assets and Liabilities:
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(Increase) Decrease in:
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Accounts Receivable
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— | 5,555 | ||||||
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Inventory
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— | 225,587 | ||||||
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Prepaid Expenses and Other Current Assets
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(35,320 | ) | 2,394 | |||||
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Increase (Decrease) in:
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Accounts Payable
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462,836 | (306,358 | ) | |||||
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Accrued Other Expenses
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141,402 | 123,301 | ||||||
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Net Cash (Used in) Operating Activities
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(2,699,496 | ) | (3,058,243 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Net Cash Provided by Investing Activities from Discontinued Operations
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— | 150,000 | ||||||
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Net Cash Provided by Investing Activities
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— | 150,000 | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Cash Received from Sale of Common Stock
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1,800,000 | 5,395,000 | ||||||
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Cash Received from Related Parties Notes Payable
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7,200 | — | ||||||
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Payment of Notes Payable
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(345,000 | ) | — | |||||
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Payment of Notes Payable to Related Parties
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— | (208,333 | ) | |||||
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Purchase of Treasury Stock
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— | (4,127 | ) | |||||
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Net Cash Provided by Financing Activities
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1,462,200 | 5,182,540 | ||||||
| (1,237,296 | ) | 2,274,297 | ||||||
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Cash:
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Beginning
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1,238,898 | 290,299 | ||||||
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Ending
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$ | 1,602 | $ | 2,564,596 | ||||
The accompanying notes are an integral part of these Consolidated Financial Statements
5
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ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine Months Ended December 31,
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2011
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2010
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(Unaudited)
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(Unaudited)
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
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Cash Paid for Interest
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$ | 33,859 | $ | 130,526 | ||||
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SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND
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INVESTING ACTIVITIES
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Warrants Issued for Prepaid Services
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$ | 21,000 | $ | - | ||||
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Common Stock issued for Prepaid Services
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$ | 60,000 | $ | |||||
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Notes Payable Converted to Common Stock
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$ | 818,000 | $ | 837,000 | ||||
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Common Stock issued for Interest
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$ | 621 | $ | 777 | ||||
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Stock Based Compensation Expense
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$ | 134,558 | $ | 100,214 | ||||
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Accrued Bonuses Converted to Paid-in Capital
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$ | - | $ | 1,068,786 | ||||
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Stock Issued for Consulting Services
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$ | - | $ | 1,265,000 | ||||
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Stock Issued for Research & Development Services
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$ | - | $ | 1,215,000 | ||||
The accompanying notes are an integral part of these Consolidated Financial Statements
6
Note 1: Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Articles 8 and 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments and the elimination of intercompany accounts) considered necessary for a fair statement of all periods presented. The results of Adamis Pharmaceuticals Corporation operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2011.
Liquidity and Capital Resources
Our cash and cash equivalents were $1,602 and $1,238,898 at December 31, 2011 and March 31, 2011, respectively.
We prepared the condensed consolidated financial statements assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. In preparing these condensed consolidated financial statements, consideration was given to the Company’s future business as described below, which may preclude the Company from realizing the value of certain assets.
The Company has negative working capital, liabilities that exceed its assets and significant cash flow deficiencies. Additionally, the Company will need significant funding for future operations and the expenditures that will be required to conduct the clinical and regulatory work to develop the Company’s product candidates. Management’s plans include seeking additional funding to satisfy existing obligations, liabilities and future working capital needs, to build working capital reserves and to fund its research and development projects. There is no assurance that the Company will be successful in obtaining the necessary funding to meet its business objectives.
Private Placement Financing Transaction
On November 10, 2010, Adamis completed a private placement transaction (the “Financing”) pursuant to a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement. The Purchase Agreement provides for the sale of up to 40,000,000 shares of common stock of Adamis to Eses Holdings (FZE), a foreign institutional investor (the “Investor”), at a price of $0.25 per share, for up to $10 million of gross proceeds. An initial closing was held on November 10, 2010, pursuant to which the Company received $5,000,000 in gross proceeds and issued 20,000,000 shares of common stock.
On June 30, 2011, the Company and the Investor entered into a first amendment to the Purchase Agreement. Pursuant to the amendment, the Investor agreed that the Company had satisfied the first set of milestone conditions described in the Purchase Agreement. The Investor and the Company agreed that the $2.5 million payment relating to the first set of milestone conditions for the first Milestone Closing, that was to have been paid following satisfaction of those conditions, would instead be paid as follows: $550,000 on or before June 27, 2011; $550,000 on or before July 21, 2011; and $1,400,000 on or before September 29, 2011. The Company received both of the $550,000 payments from the Investor and issued a total of 4,400,000 shares of common stock to the Investor. Pursuant to the amendment, the Investor also agreed to extend the outside date for achievement of the second set of milestones from April 30, 2011 to December 31, 2011.
On November 10, 2011, the Company and the Investor entered into a second amendment to the Purchase Agreement. Pursuant to the amendment, the Investor and the Company agreed that the remaining $1.4 million payment relating to the first set of milestone conditions, that was to have been paid on or before September 29, 2011, would instead be paid as follows: $700,000 on or before November 10, 2011; and $700,000 on or before December 15, 2011. On November 10, 2011, the Company received the first $700,000 payment from the Investor and issued 2,800,000 shares of common stock to the Investor. Pursuant to the second amendment, the Investor also agreed to extend the outside date for achievement of the second set of milestones from December 31, 2011 to March 31, 2012 (See Notes 3 and 6).
7
On January 31, 2012, the Company and the Investor entered into a third amendment to the Purchase Agreement. Pursuant to the amendment, the Investor and the Company agreed that the remaining $700,000 payment relating to the first set of milestone conditions, that was to have been paid on or before December 15, 2011, would instead be paid as follows: $375,000 on or before January 31, 2012; $125,000 on or before February 7, 2012; and $200,000 as soon as practicable thereafter, but in any event no later than February 29, 2012. On January 31, 2012 and February 13, 2012, the Company received the $375,000 and $125,000 payments and issued a total of 2,000,000 shares of common stock to the Investor.
Recent Accounting Pronouncements
In May 2011, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, updating “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. This ASU represents the converged guidance of the FASB and the International Accounting Standards Board (“IASB”) (collectively the “Boards”) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value”. The Boards have concluded that the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. For public entities, ASU 2011-04 is effective during interim and annual periods beginning after December 15, 2011, and early adoption is not permitted. The Company is currently assessing the impact of ASU 2011-04 on its future consolidated financial statements.
Note 2: Notes Payable
G-Max Trust Note
On December 29, 2009, the Company issued a Convertible Promissory Note (the “G-Max Note”) to The G-Max Trust (the “Note Holder”) in connection with a private placement to the Note Holder for gross proceeds of $500,000, and 500,000 shares of common stock of the Company at par value for gross proceeds of $500 as an inducement to enter into the agreement. The market value of the common stock on the date issued was $0.25 per share, for a total value of $125,000. A discount on the note payable of $124,500 was recorded as a result, and was being amortized over the term of the G-Max Note. The stock was restricted for six months from the date issued. The discount was fully amortized and the net carrying value was $500,000 (Note 3).
8
Interest on the outstanding principal balance of the G-Max Note accrued at a rate of 10% per annum compounded monthly and was payable monthly commencing February 1, 2010. On June 30, 2011, the maturity date of the note, the Note Holder converted the entire $500,000 principal amount of the note into 2,500,000 shares of common stock at the conversion price stated in the note.
Gemini Master Fund, Ltd. Notes
In January 2010, the Company completed the closing of a private placement financing transaction with a small number of institutional investors led by Gemini Master Fund, Ltd., pursuant to a Securities Purchase Agreement. The Company issued 10% Senior Secured Convertible Notes (the “Gemini Notes”) in the aggregate principal amount of approximately $1.5 million and 1,500,000 shares of common stock (sold at par value) of the Company, and received gross proceeds of $1.5 million, excluding transaction costs and expenses. The fair market value of the Company’s common stock on the date of the transaction was $ 0.41 per share. A discount of approximately $600,000 was calculated as a result, and was amortized over the life of the Gemini Notes. The stock was restricted for six months from the date issued. The discount was fully amortized.
During April through June 2011, certain of the Gemini Note holders exercised their conversion feature to convert their Gemini Notes into shares of the Company’s common stock. A total of approximately 1,593,102 shares were issued in the conversion of Gemini Notes with a total converted amount of $318,620, including interest (Note 3).
On June 30, 2011, the three remaining Gemini Note holders accepted payment of the principal amounts owed. The amount of the Gemini Notes paid and retired was $345,000.
Notes Payable to Related Party
The Company had notes payable to a related party amounting to $108,432 at December 31, 2011, which bear interest at 10%. Accrued interest related to the notes was $61,215 at December 31, 2011.
Note 3: Common Stock
During the first fiscal quarter ending June 30, 2011, certain holders of the Gemini Notes exercised their conversion feature to convert their notes into shares of the Company’s common stock. A total of approximately 1,593,102 shares were issued in the conversion of notes and accrued interest with a total converted amount of $318,620.
On June 30, 2011, the holder of the G-Max Note converted the entire $500,000 principal amount of the note into 2,500,000 shares of common stock at the conversion price stated in the note.
On June 30, 2011, the Investor received 2,200,000 shares of common stock at $0.25 per share in connection with the Financing, for cash proceeds totaling $550,000. Effective July 21, 2011, the Investor received an additional 2,200,000 shares of common stock at $0.25 per share in connection with the second cash payment of $550,000 pursuant to the amendment to the Purchase Agreement, as described in Note 1 above.
9
On August 1, 2011, the Company entered into a consulting agreement with a consultant to assist the Company in the evaluation of potential product and technology candidates and related product financing structures and arrangements, and the development of the Company’s general business plan. As compensation, the Company issued 250,000 shares of its common stock, with a value of $60,000. The value was capitalized and is being amortized over the five-month term of the agreement.
On November 10, 2011, the Company issued 2,800,000 shares of common stock to the Investor under the second amendment to the Purchase Agreement, as described in Note 1 above, for cash proceeds totaling $700,000.
Note 4: Stock Option Plans, Shares Reserved and Warrants
On July 11, 2011, the Company entered into a consulting agreement with a consultant to assist the Company in researching its markets and analyzing its opportunities. As part of the compensation, the consultant received a warrant to purchase 300,000 shares of common stock, with an exercise price of $0.22 and a term of five years. The value of the warrants was $21,000.
On September 12, 2011, the Company issued options to purchase 1,575,000 shares of common stock to directors, officers and employees of the Company under the 2009 Equity Incentive Plan with an exercise price of $0.19 per share. One third of the options vest immediately, and the options become exercisable with respect to the remaining shares over a period of two years. These options were valued using the Black-Scholes option pricing model during the quarter ended September 30, 2011, the expected volatility was aproximately 31%, the risk-free interest rate was approximately 2% which resulted in a calculated fair value of $118,000.
On September 13, 2011, the Company issued options to purchase 105,000 shares of common stock to the independent directors of the Company under the 2009 Equity Incentive Plan with an exercise price of $0.18 per share. The options become exercisable with respect to 1/36 of the shares monthly over a period of three years. These options were valued using the Black-Scholes option pricing model during the quarter ended September 30, 2011, the expected volatility was aproximately 31%, the risk-free interest rate was approximately 2% which resulted in a calculated fair value of $8,400.
No options or warrants expired or were cancelled during the nine months ended December 31, 2011.
The Company recorded $37,075 and $134,558 of share based compensation expense during the three and nine months ended December 31, 2011, respectively. The following summarizes outstanding stock options at December 31, 2011:
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Number of
Stock Options
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Weighted
Average
Remaining
Contractual Life
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Weighted
Average
Exercise
Price
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Number of
Stock Options
Vested
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Non-Plan Stock Options
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100,714
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1.85 Years
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$
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41.27
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100,714
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||||||||
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2009 Equity Incentive Plan
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5,230,398
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8.94 Years
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$
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0.24
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2,805,377
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The following summarizes warrants outstanding at December 31, 2011:
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Warrant Shares
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Exercise Price
Per Share
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Date Issued
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Expiration Date
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|||||||
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Biosyn Warrants
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8,245
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$ |
57.97 - $173.92
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October 22, 2004
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2013 - 2014
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Old Adamis Warrants
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1,000,000
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$ |
0.50
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November 15, 2007
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November 15, 2012
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Consultant Warrants
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300,000
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$ |
0.25
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August 26, 2009
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August 26, 2014
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|||||
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Consultant Warrants
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270,000
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$ |
0.20
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January 29, 2010
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January 29, 2015
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|||||
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Consultant Warrants
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200,000
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$ |
0.29
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October 26, 2009
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October 26, 2014
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|||||
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Various Investors
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395,000
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$ |
0.30
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June 14, 2010 -
September 15, 2010
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June 14, 2015 -
September 15, 2015
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|||||
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Consultant Warrants
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300,000
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$ |
0.22
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July 11, 2011
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July 11, 2016
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|||||
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Total Warrants
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2,473,245
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10
At December 31, 2011, the Company has reserved shares of common stock for issuance upon exercise as follows:
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Warrants
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2,473,245
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|||
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Non-Plan Stock Options
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100,714
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|||
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2009 Equity Incentive Plan
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13,406,915
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|||
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Total Shares Reserved
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15,980,874
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Note 5: Legal Matters
Information regarding certain legal proceedings to which the Company is a party can be found in the description of legal proceedings contained in the Company’s most recent Annual Report on Form 10-K for the year ended March 31, 2011, and our Quarterly Reports on Form 10-Q for the periods ended June 30, 2011, and September 30, 2011, previously filed with the Securities and Exchange Commission, and is incorporated herein by reference. Except as set forth below, there have not been any material developments with respect to such proceedings during the quarter to which this Report on Form 10-Q relates.
Curtis Leahy, et. al. v. Dennis J. Carlo, et al. The hearing on plaintiffs’ motion for class certification was held on June 24, 2011, and the court denied the plaintiffs’ motion for class certification. Plaintiffs have filed a motion for appeal which the Company believes will likely be heard in 2012.
The litigation described in our previous filings and above could divert management time and attention from the Company, and could involve significant amounts of legal fees and other fees and expenses. An adverse outcome in any such litigation could have a material adverse effect on Adamis. In addition to the matters described in our previous filings and above, we may become involved in or subject to routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business, which in our opinion will not have a material adverse effect on our financial condition, cash flows or results of operations.
Note 6: Subsequent Events
Other than the events described in Note 1, no other subsequent events have been identified.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Information Relating to Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 which provides a “safe harbor” for these types of statements. These forward-looking statements are not historical facts, but are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. These forward-looking statements include statements about our strategies, objectives and our future achievement. To the extent statements in this Quarterly Report involve, without limitation, our expectations for growth, estimates of future revenue, our sources and uses of cash, our liquidity needs, our current or planned clinical trials or research and development activities, product development timelines, our future products, regulatory matters, expense, profits, cash flow balance sheet items or any other guidance on future periods, these statements are forward-looking statements. These statements are often, but not always, made through the use of word or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and “would. “ These forward-looking statements are not guarantees of future performance and concern matters that could subsequently differ materially from those described in the forward-looking statements. Actual events or results may differ materially from those discussed in this Quarterly Report on Form 10-Q. Except as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-looking statements or to reflect events or circumstances arising after the date of this Report. Important factors that could cause actual results to differ materially from those in these forward-looking statements are in the section entitled “Risk Factors” in the most recent Annual Report on Form 10- K, as amended, filed with the Securities and Exchange Commission, and the other risks and uncertainties described elsewhere in this report as well as other risks identified from time to time in our filings with the Securities and Exchange Commission, press releases and other communications.
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Unless the context otherwise requires, the terms “we,” “our,” and “the Company” refer to Adamis Pharmaceuticals Corporation, a Delaware corporation, and its subsidiaries. Savvy and C31G® are our trademarks, among others. We also refer to trademarks of other corporations and organizations in this document.
General
Company Overview
Adamis Pharmaceuticals Corporation is an emerging pharmaceutical company engaged in the development and commercialization of a variety of specialty pharmaceutical products. Our products are concentrated in major therapeutic areas including oncology (cancer), immunology and infectious diseases (viruses) and allergy and respiratory.
We are focused on the development of preventive and therapeutic vaccine products and cancer drugs for patients with unmet medical needs. During 2010, we acquired rights under three exclusive license agreements covering three small molecule compounds, named APC-100, APC-200 and APC-300, that we believe are promising drug candidates for the potential treatment of human prostate cancer (PCa). The intellectual property covered by the agreements was licensed from the Wisconsin Alumni Research Foundation, or WARF. In 2006 and 2007, APC-100 and APC-200, respectively, received the National Cancer Institute’s multi-year, multimillion dollar RAPID (Rapid Access to Preventative Intervention Development) Award. The NCI Division of Cancer Prevention gives this award each year under the RAPID Program to promising new preventative/ therapeutic anti-cancer drugs.
We previously submitted an Investigational New Drug application, or IND, to the U.S. Food and Drug Administration, or FDA, seeking approval to permit us to commence human clinical trials for the APC-100 compound in men with castrate-resistant prostate cancer. On August 30, 2011, we announced that we had enrolled the first patient in a Phase 1/2a prostate cancer clinical study relating to the use of the APC-100 product to treat men with castrate-resistant prostate cancer. The study began at the University of Wisconsin Carbone Cancer Center and will be extended to the Wayne State University Karmanos Cancer Institute.
In April 2011, we acquired exclusive rights to patented telomerase-based cancer vaccine technology from the Regents of the University of California. At the same time, we acquired exclusive rights to a related patent from the Dana-Farber/Harvard Cancer Center. We intend to pursue development of the technology initially for what we believe may be a novel cell-based vaccine product for prostate cancer, tentatively named TeloB-VAX. The technology is intended to activate the body’s natural defense machinery to stimulate an immune response against one of nature’s most prevalent tumor markers, telomerase. We believe that the technology may have applicability to a variety of other kinds of cancer.
We have also acquired exclusive license rights to other patented preventive and therapeutic vaccine technology. The vaccine technology may be applicable to certain viral-induced diseases such as influenza and hepatitis B and C, as well as prostate cancer. However, we currently intend to focus initially on the development of one or more of the other recently licensed prostate cancer product candidates and technologies, and as a result the timing of development of this viral vaccine technology is subject to uncertainty and the availability of sufficient funding.
We are also focused on developing and commercializing products in the anti-inflammatory, allergy and respiratory field. We have developed an Epinephrine Injection USP 1:1000 (0.3mg Pre-Filled Single Dose Syringe) product, or the single dose PFS Syringe product, a pre-filled epinephrine syringe product for use in the emergency treatment of extreme acute allergic reactions, or anaphylactic shock. If launched, the product will compete in a well-established U.S. market estimated to be over $220 million in annual sales based on industry data. Following discussions with the FDA during fiscal 2011, we completed a regulatory dossier relating to the product, and once we obtain sufficient funding to support the costs of proceeding with the FDA filing for regulatory approval and the costs of a commercial launch of the product, we intend to submit an application to the FDA for marketing approval of the product and to commercially market the product as soon as reasonably practicable after the FDA allows for marketing of the product. There can be no assurances that we will file an application for regulatory approval, that the FDA will ultimately grant marketing approval for the PFS Syringe product, or concerning the timing of filing a marketing application or obtaining any such FDA approval.
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Additional product candidates in our allergy and respiratory product pipeline include a steroid HFA (hydrofluoroalkane) metered dose inhaler product, referred to as APC-1000, for asthma and chronic obstructive pulmonary disease, or COPD; a generic HFA bronchodilator, referred to as APC-2000; and an HFA pressurized metered dose inhaled nasal steroid for the treatment of seasonal and perennial allergic rhinitis, referred to as APC-3000. Our goal is to commence initial commercial sales of the APC-3000 nasal steroid product in the third quarter of calendar 2014 and two other respiratory products in calendar 2015, assuming adequate funding and no unexpected delays. During the fiscal year ended March 31, 2011, we entered into a strategic manufacturing, supply, and product development agreement with Beximco Pharmaceuticals Ltd. Beximco is a leading manufacturer of pharmaceutical formulations and active pharmaceutical ingredients in Bangladesh. Beximco has a large number of products covering broad therapeutic categories, including asthma and allergy inhalers, antibiotics, anti-hypertensives, anti-diabetics, and antiretrovirals. Adamis and Beximco intend to introduce a number of separate drugs into the U.S. over the next years in the allergy and respiratory areas and may co-develop certain drugs.
We also have a contraceptive gel product candidate named Savvy (C31G®). In December 2010, we announced the successful completion of a Phase 3 contraceptive trial of Savvy. The study met its primary endpoint and was conducted by the Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD), National Institutes of Health (NIH), in the Contraceptive Clinical Trials Network at 14 sites in the United States. The Phase 3 trial was a randomized, double-masked, controlled comparator study to assess whether a gel containing the spermicide C31G was non-inferior to Conceptrol®, a commercially available product containing nonoxynol-9 (N-9). The clinical investigators found that C31G was not inferior in contraceptive efficacy to the comparator drug. Moreover, the gel was well-tolerated and had a high degree of acceptability in women who completed the study. Currently, all spermicides commercially available in the U.S. contain the active ingredient N-9 in a carrier such as a gel, film, cream, foam, suppository, or tablet. C31G does not contain nonoxynol-9 and, if commercialized, may offer an alternative for women who seek a non-hormonal method of contraception. In considering whether there are commercialization alternatives, we will likely focus on seeking to enter into an out-licensing or similar transaction with organizations that have a focus or business unit in the area of contraception.
Our general business strategy is to generate revenue through launch of allergy and respiratory products in development, in order to generate cash flow to help fund expansion of our allergy and respiratory business as well as support our future cancer and vaccine product development efforts. To achieve our goals and support our overall strategy, we will need to raise a substantial amount of funding and make substantial investments in equipment, new product development and working capital.
Going Concern and Management Plan
Our independent registered public accounting firm has included a “going concern” explanatory paragraph in its report on our financial statements for the years ended March 31, 2011 and 2010 indicating that we have incurred recurring losses from operations and have limited working capital to pursue our business alternatives, and that these factors raise substantial doubt about our ability to continue as a going concern. As of December 31, 2011, we had approximately $1,600 in cash and equivalents and an accumulated deficit of approximately $29,600,000. As described below under the heading, “Liquidity and Capital Resources,” on January 31, 2012, and February 13, 2012, we received an additional $375,000 and $125,000, respectively, from the Investor described in note 1 to the financial statements included elsewhere herein, relating to our satisfaction of the first set of milestone conditions under our Purchase Agreement with the Investor. The Investor has agreed to pay the final $200,000 owed with respect to the first set of milestone conditions as soon as practicable but in any event no later than February 29, 2012. If the Investor makes this remaining payment, and if we timely achieve the second set of milestone conditions under the Purchase Agreement and receive the $2.5 million of additional funding as provided in the Purchase Agreement before March 31, 2012, then we believe that our cash and cash equivalents will be sufficient to fund our operations at least through our fiscal year end March 31, 2012, absent unexpected developments, although proceeding with the PFS Syringe product approval and commercialization efforts would require additional funding.
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Continued operations are dependent on our receipt of funding that the Investor has agreed to provide pursuant to the Purchase Agreement and the third amendment. Given the Investor’s payment history of amounts payable under the Purchase Agreement, there are no assurances that the Investor will make the $2.5 million payment even if the Company does timely achieve the second set of milestones, or concerning the timing or amounts of any such payments that the Investor may make. If the Investor does not make such payments, or if the Investor delays in payment of amounts that may become payable if we complete the second set of milestones, our cash resources will be substantially depleted, we will be required to materially reduce or suspend operations until additional funding, if any, becomes available, and continued operations in the short term will be dependent on our ability to complete other equity or debt fundraising transactions. Even with such funding from the Investor, we will need to raise additional funds to support our anticipated operations. Such capital formation activities may not be available or may not be available on reasonable terms. If we do not obtain funding from other sources, we will be dependent on receipt of the funding from the Investor as described above, and if we do not achieve the second set of milestone events or if the Investor does not invest the amounts described above, our cash resources would rapidly be depleted and we would be required to materially reduce or cease operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in us.
These conditions raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business.
Our management intends to address any shortfall of working capital by attempting to secure additional funding through equity or debt financings, sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research and development efforts, or similar transactions. However, there can be no assurance that we will be able to obtain any sources of funding. If we are unsuccessful in securing funding from any of these sources, we will defer, reduce or eliminate certain planned expenditures. There is no assurance that any of the above options will be implemented on a timely basis or that we will be able to obtain additional financing on acceptable terms, if at all. If adequate funds are not available on acceptable terms, we could be required to delay or suspend development or commercialization of some or all of our products, to license to third parties the rights to commercialize certain products that we would otherwise seek to develop or commercialize internally, or to reduce resources devoted to product development, and one or more licensors of patents and intellectual property rights that we have in-licensed could seek to terminate our license agreements. If we did not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us. Any failure to dispel any continuing doubts about our ability to continue as a going concern could adversely affect our ability to enter into collaborative relationships with business partners, make it more difficult to obtain required financing on favorable terms or at all, negatively affect the market price of our common stock and could otherwise have a material adverse effect on our business, financial condition and results of operations.
Results of Operations
Nine Months Ended December 31, 2011 and 2010.
Revenues and Cost of Sales. Adamis had no revenues during the nine month periods ending December 31, 2011 and 2010, respectively.
Research and Development Expenses. Our research and development costs are expensed as incurred. Non-refundable advance payments for goods and services to be used in future research and development activities are recorded as an asset and are expensed when the research and development activities are performed. Research and development costs were approximately $1,386,000 and $2,110,000 for the nine months ending December 31, 2011 and 2010, respectively, which were expensed. The decrease in research and development expenses for the first nine months of fiscal 2012 was primarily due to the expenses incurred during the comparable period of fiscal 2011 associated with the acquisition of the APC technology. Partially offsetting the reduction were increases in expenses associated with the development of APC-100, 200, 300 and Telomerase technologies and the allocation of approximately $567,000 of employee salaries to research and development during the first nine months of fiscal 2012, compared to an allocation of approximately $126,000 for the same period of the previous year.
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Selling, General and Administrative Expenses. Selling, general and administrative expenses for the nine months ending December 31, 2011 and 2010 were approximately $2,296,000 and $3,013,000, respectively. Selling, general and administrative expenses consist primarily of legal fees, accounting and audit fees, professional fees and employee salaries. The decrease in SG&A expenses was due in part to approximately $567,000 of employee salaries that were allocated to research and development during the nine months ended December 31, 2011, compared to an allocation of approximately $126,000 of employee salaries to research and development expenses during the same period of the previous year. Reductions in legal, accounting and professional fees of approximately $356,000 during the first nine months of fiscal 2012 compared to the same period of the prior year also contributed to the variance; the decrease in such fees was due in part to the completion of ongoing contract negotiations. The decreases in SG&A were partially offset by an increase in bad debt expense due to a write-down of assets from discontinued operations.
Other Income (Expenses). Interest expense for the nine month period ending December 31, 2011 and 2010 was approximately $(33,000) and approximately $(712,000), respectively. Interest consists primarily of interest expense paid in connection with various notes payable. The decrease in interest expense for the nine month period ended December 31, 2011 in comparison to the same period for fiscal 2011 was due to amortization of the discount associated with the G-Max notes and the payment or conversion of the Gemini notes and the G-Max notes effective June 30, 2011.
Three Months Ended December 31, 2011 and 2010
Revenues and Cost of Sales. Adamis had no revenues during the three month periods ending December 31, 2011 and 2010, respectively.
Research and Development Expenses. Our research and development costs are expensed as incurred. Non-refundable advance payments for goods and services to be used in future research and development activities are recorded as an asset and are expensed when the research and development activities are performed. Research and development costs were approximately $182,000 and $2,093,000 for the three months ending December 31, 2011 and 2010, respectively, which were expensed. The decrease in research and development expenses for the third quarter of fiscal 2012 was primarily due to the expenses incurred during the comparable period of fiscal 2011 associated with the acquisition of the APC technology. Partially offsetting the reduction were increases in expenses associated with the development of APC-100, 200, 300 and Telomerase technologies and the allocation of approximately $154,000 of employee salaries to research and development during the three months ended December 31, 2012, compared to an allocation of approximately $126,000 for the same period of the previous year.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ending December 31, 2011 and 2010 were approximately $807,000 and $928,000, respectively. Selling, general and administrative expenses consist primarily of legal fees, accounting and audit fees, professional fees and employee salaries. The decrease in SG&A expenses for the third quarter of fiscal 2012 was due in part to approximately $154,000 of employee salaries that were allocated to research and development during the three months ended December 31, 2011, compared to an allocation of $126,000 of employee salaries to research and development expenses during the same period of the previous year. Lower legal and accounting fees during the three months ending December 31, 2011 also contributed to the reduction in SG&A expenses compared to the same period of the prior year.
Other Income (Expenses). Interest expense for the three month period ending December 31, 2011 and 2010 was approximately $(2,600) and approximately $(72,000), respectively. Interest consists primarily of interest expense paid in connection with various notes payable. The decrease in interest expense for the three month period ended December 31, 2011, in comparison to the same period for fiscal 2011 was due to the payment or conversion of the Gemini notes and the G-Max notes effective June 30, 2011.
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Liquidity and Capital Resources
We have incurred net losses of $3,709,320 and $5,829,973 for the nine months ended December 31, 2011 and 2010, respectively. Since inception, and through December 31, 2011, we have an accumulated deficit of approximately $29,576,000. We have financed our operations principally through debt financing and through private issuances of common stock. We expect to finance future cash needs primarily through proceeds from equity or debt financings, loans, out-licensing transactions, and/or collaborative agreements with corporate partners.
Our cash balance was $1,620 and $1,238,898 as of December 31, 2011, and March 31, 2011, respectively. The decrease in cash compared to the end of fiscal 2011 was primarily the result of an increase in net cash used in operating activities and repayment of notes payable during the first three quarters of fiscal 2012, partially offset by the receipt of $1,750,000 million from the Investor pursuant to payments relating to the first milestone conditions under the Purchase Agreement.
Net cash used in operating activities for the nine months ended December 31, 2011 and 2010, were approximately $(2,699,000) and $(3,058,000), respectively. We expect net cash used in operating activities to increase going forward as we engage in additional product research and development and other business activities, assuming that we are able to obtain sufficient funding.
Net cash provided by investing activities was $0 and $150,000 for the nine months ended December 31, 2011 and 2010.
Net cash provided by financing activities was approximately $1,462,000 and $5,183,000 for the nine months ended December 31, 2011 and 2010. Results for the nine months ended December 31, 2011, were affected by $1,800,000 of proceeds received from the Investor under the Purchase Agreement and Adamis retiring the remaining Gemini notes. Results for the nine months ended December 31, 2010, were affected by proceeds received from new investors, including $5 million received from the Investor under the Purchase Agreement.
As further described in note 1 to the financial statements included elsewhere herein, pursuant to the second amendment to the Purchase Agreement, on November 10, 2011, we received $700,000 of the remaining payments from the Investor relating to the first set of milestone conditions in the Purchase Agreement. Pursuant to the third amendment to the Purchase Agreement, on January 31, 2012, and February 13, 2012, we received an additional $375,000 and $125,000, respectively, from the Investor relating to our satisfaction of those milestone conditions. The Investor has agreed to pay the final $200,000 owed with respect to those milestone conditions as soon as practicable but in any event no later than February 29, 2012. If the Investor makes this remaining payment, and if we timely achieve the second set of milestone conditions under the Purchase Agreement and receive the $2.5 million of additional funding as provided in the Purchase Agreement before March 31, 2012, then we believe that our cash and cash equivalents will be sufficient to fund our operations at least through our fiscal year end March 31, 2012, absent unexpected developments, although proceeding with the PFS Syringe product approval and commercialization efforts would require additional funding. Continued operations are dependent on our receipt of funding that the Investor has agreed to provide pursuant to the Purchase Agreement and the third amendment. Given the Investor’s payment history of amounts payable under the Purchase Agreement, there are no assurances that the Investor will make the $2.5 million payment even if the Company does timely achieve the second set of milestones, or concerning the timing or amounts of any such payments that the Investor may make. If the Investor does not make such payments, or if the Investor delays in payment of amounts that may become payable if we complete the second set of milestones, our cash resources will be substantially depleted, we will be required to materially reduce or suspend operations until additional funding, if any, becomes available, and continued operations in the short term will be dependent on our ability to complete other equity or debt fundraising transactions. Even with such funding from the Investor, we will need to raise additional funds to support our anticipated operations. Such capital formation activities may not be available or may not be available on reasonable terms. If we do not obtain funding from other sources, we will be dependent on receipt of the funding from the Investor as described above, and if we do not achieve the second set of milestone events or if the Investor does not invest the amounts described above, our cash resources would rapidly be depleted and we would be required to materially reduce or cease operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in us. Even if funding subsequently became available, our research and development programs would be delayed and adversely affected, and our relationships with third party suppliers, vendors, participants in our clinical trials, and other third parties with whom we have business relationships, could be adversely affected. Any failure to dispel any continuing doubts about our ability to continue as a going concern could adversely affect our ability to enter into collaborative relationships with business partners, make it more difficult to obtain required financing on favorable terms or at all, negatively affect the market price of our common stock and could otherwise have a material adverse effect on our business, financial condition and results of operations.
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At December 31, 2011, Adamis had substantial liabilities and obligations. Even if development and marketing efforts are successful, substantial time will pass before revenues will be realized from product sales, and during this period Adamis will require additional funds, even if all funds are provided under the terms of the Purchase Agreement. The availability of any required additional funding cannot be assured. Consequently, Adamis is subject to the risks associated with early stage companies, including the need for additional financings; the uncertainty of research and development efforts resulting in successful commercial products, as well as the marketing and customer acceptance of such products; unexpected issues with the FDA or other federal or state regulatory authorities; competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patent protection; and dependence on corporate partners and collaborators. To achieve successful operations, Adamis will require additional capital to continue research and development and marketing efforts. No assurance can be given as to the timing or ultimate success of obtaining future funding.
We prepared the condensed consolidated financial statements assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. In preparing these condensed consolidated financial statements, consideration was given to the Company’s future business as described below, which may preclude the Company from realizing the value of certain assets. The Company has limited cash reserves, liabilities that exceed its assets and significant cash flow deficiencies. Additionally, Adamis will need significant funding in the short term to continue operations and for the future operations and the expenditures that will be required to conduct the clinical and regulatory work to develop the Company’s product candidates. Management’s plans include seeking additional funding to satisfy existing obligations, liabilities and future working capital needs, to build working capital reserves and to fund the Company's research and development projects. There is no assurance that Adamis will be successful obtaining the necessary funding to meet its business objectives.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
The Company’s critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2011 have not significantly changed, and no additional policies have been adopted during the nine months ended December 31, 2011.
Recent Accounting Pronouncements
See Note 1 under the heading "Recent Accounting Pronouncements," which is incorporated herein by reference.
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Off Balance Sheet Arrangements
At December 31, 2011, Adamis did not have any off balance sheet arrangements.
ITEM 3. Quantitative and Qualitative Disclosure of Market Risk
Not required.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2011. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2011, our principal executive officer and principal financial officer concluded that, as of such date, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level, for the reasons set forth in the Company’s Annual Report on Form 10-K for the year ended March 31, 2011, under the heading “Item 9A(T) Controls and Procedures” relating to disclosure controls and procedures and internal controls over financial reporting.
Changes in Internal Controls
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended December 31, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. Legal Proceedings
Information regarding this item can be found in the description of legal proceedings contained in our most recent Annual Report on Form 10-K for the year ended March 31, 2011, and our Quarterly Reports on Form 10-Q for the periods ended June 30, 2011, and September 30, 2011, previously filed with the Securities and Exchange Commission, and is incorporated herein by reference. Except as set forth below, there have not been any material developments with respect to such proceedings during the quarter to which this Report on Form 10-Q relates.
Curtis Leahy, et. al. v. Dennis J. Carlo, et al. The hearing on plaintiffs’ motion for class certification was held on June 24, 2011, and the court denied the plaintiffs’ motion for class certification. Plaintiffs have filed a motion for appeal, which the Company believes will likely be heard in 2012.
The litigation described in our previous filings and above could divert management time and attention from the Company, could involve significant amounts of legal fees and other fees and expenses. An adverse outcome in any such litigation could have a material adverse effect on Adamis. In addition to the matters described in our previous filings and above, we may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business, which in our opinion will not have a material adverse effect on our financial condition, cash flows or results of operations.
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Item 1A. Risk Factors
As a smaller reporting company, Adamis is not required under the rules of the Securities and Exchange Commission, or SEC, to provide information under this Item. Risks and uncertainties relating to the amount of cash and cash equivalents at December 31, 2011, our reliance on receipt of funding from the Investor pursuant to the provisions of the Purchase Agreement as amended, and uncertainties concerning the amount and timing of receipt of such funding, are discussed above under the headings, "Going Concern and Management Plan" and "Liquidity and Capital Resources" in the Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Form 10-Q, and are incorporated herein by this reference. Other material risks and uncertainties associated with Adamis' business have been previously disclosed in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission, included under the heading "Risk Factors," and those disclosures are incorporated herein by reference.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
On November 10, 2011, the Company issued 2,800,000 shares to the Investor pursuant to the second amendment to the Purchase Agreement in connection with the payment by the Investor of $700,000 of the $1,400,000 payment from the Investor pursuant to an amendment to the Purchase Agreement. See note 1 to the financial statements included elsewhere herein for further information.
All issuances were issued in private placement transactions to a limited number of shareholders in reliance on Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated under the Securities Act. Each person or entity to whom securities were issued represented that the securities were being acquired for investment purposes, for the person’s or entity’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act.”
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. (Removed and Reserved)
ITEM 5. Other Information
None
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ITEM 6. Exhibits
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PR
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XBRL Taxonomy Extension Presentation Linkbase Document
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(1)
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Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Report on Form 8-K, filed with the Securities and Exchange Commission on February 6, 2012.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ADAMIS PHARMACEUTICALS, INC.
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Date: February 14, 2012
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By:
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/s/ Dennis J. Carlo
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Dennis J. Carlo
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Chief Executive Officer
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Date: February 14, 2012
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By:
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/s/ Robert O. Hopkins
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Robert O. Hopkins
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Vice President, Finance and Chief Financial Officer
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