S-1/A 1 admp-s1a_120913.htm



As filed with the Securities and Exchange Commission on December 10, 2013
Registration No. 333-192372
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
     
     
FORM S-1/A
(Pre-Effective Amendment No. 2)
 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
     
     
ADAMIS PHARMACEUTICALS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
2834
 
82-0429727
(State or other jurisdiction
of incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification Number)
11455 El Camino Real, Suite 310
San Diego, CA  92130
(858)-997-2400
(Address, including zip code, and telephone number, including area code,
of registrant’s principal executive offices)
Dennis J. Carlo, Ph.D., Chief Executive Officer
Adamis Pharmaceuticals Corporation
11455 El Camino Real, Suite 310
San Diego, CA  92130
(858)-997-2400
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
 
C. Kevin Kelso, Esq.
Weintraub Tobin
400 Capitol Mall, 11th Floor
Sacramento, CA  95814
(916) 558-6000
 
David B. Allen
Jeffrey J. Plumer
K&L Gates LLP
1 Park Plaza, 12th Floor
Irvine, CA  92614
(949) 253-0900
 
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 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 the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   o
Accelerated filer                     o
Non-accelerated filer     o  (Do not check if a smaller reporting company)
Smaller reporting company   x
 


 
 

 

 
 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of
Securities to be Registered
Amount
to be
Registered
Proposed Maximum
Aggregate
Offering
Price Per Share
Proposed Maximum
Aggregate
Offering
Price (1)
Amount of
Registration Fee
Common Stock, par value $0.0001 per share (2) 3,565,000 (3) $10.46(4) $37,289,900 $4,802.94
Representative’s Common Stock Purchase Warrant _ _ _ (5)
Shares of Common Stock underlying Representative’s Common Stock Purchase Warrant (2)(6) 178,250 $13.07(4) $2,329,727.50 $330.07
TOTAL: 3,743,250   $39,619,627.50 $5,103.01 (7)

 

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act, as amended.
(2) Pursuant to Rule 416 under the Securities Act of 1933, as amended, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
(3) Includes up to 465,000 shares of common stock that may be purchased by the underwriters to cover over-allotments, if any.
(4) The offering price per share is based on the closing price of the registrant’s common stock as reported on the OTCQB regulated quotation service on December 6, 2013, $0.615, multiplied by 17 based on a proposed 1-for-17 reverse stock split of the common stock which the registrant intends to effect immediately before the offering.
(5) No fee required pursuant to Rule 457(g) under the Securities Act.
(6) Assumes the full exercise of the underwriter’s allotment option, and an exercise price equal to 125% of the proposed maximum offering price per share, calculated as described above.
(7) Of this amount, $3,422 was previously paid in connection with the initial filing of this Registration Statement.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 

 

 
 
 
 

 

 
The information in this prospectus is not complete and may be changed.  These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
PRELIMINARY PROSPECTUS
 
SUBJECT TO COMPLETION
 
DATED DECEMBER 10, 2013
 
3,100,000 Shares of Common Stock
 
We are offering 3,100,000 shares of our common stock pursuant to this prospectus.   We expect to effect a 1-for-17 reverse stock split of our outstanding common stock just prior to the date of this prospectus.
 
Our common stock is presently quoted on the OTCQB Marketplace, operated by the OTC Markets Group, under the symbol “ADMP.”  We have applied to list our common stock on The Nasdaq Capital Market under the symbol “ADMP.”  On December 6, 2013, the last reported sale price for our common stock on the OTCQB was $0.615 per share.  
 
Our business and an investment in our securities involves a high degree of risk.  See “Risk Factors” beginning on page 9 of this prospectus for a discussion of information that you should consider before investing in our securities.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 
    Per Share  
Total
Public offering price
 
$
 
$
Underwriting discount (1)
 
$
 
$
Proceeds, before expenses, to us
 
$
 
$
 
(1) 
The underwriters will receive compensation in addition to the underwriting discount.  See “Underwriting” beginning on page 88 of this prospectus for a description of compensation payable to the underwriters.
 
The underwriters may also purchase up to an additional 465,000 shares of common stock from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments, if any.
 
The underwriters expect to deliver the shares against payment therefor on or about __________, 2013.
 
Sole Book-Running Manager 
 
 CRT Capital
Co- Manager 
Newport Coast Securities, Inc. 

__________, 2013
 
 
 

 

 
TABLE OF CONTENTS
 
You should rely only on the information contained in this prospectus.  We have not, and the underwriters have not, authorized anyone to provide you with any information other than that contained in this prospectus.  We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.  This prospectus may only be used where it is legal to offer and sell shares of our securities.  The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.  Our business, financial condition, results of operations and prospects may have changed since that date.  We are not, and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted.
 
For investors outside the United States:  We have not and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States.  Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.
 
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is included as an exhibit to the registration statement of which this prospectus forms a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you.  Moreover, such representations, warranties or covenants were accurate only as of the date when made.  Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
 
Some of the industry and other data contained in this prospectus may be derived from data from various third-party sources.  We have not independently verified any of that information and it may not be accurate or complete and may be subject to change based on various factors, including those discussed under the heading “Risk Factors” elsewhere in this prospectus.
 
 
 

 

 
The Adamis Pharmaceuticals logo and other trademarks or service marks of Adamis Pharmaceuticals Corporation appearing in this prospectus are the property of Adamis Pharmaceuticals Corporation. All other brand names or trademarks appearing in this prospectus are the property of their respective owners. 
 
 
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision.  Before investing in our securities, you should carefully read this entire prospectus, including our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included elsewhere in this prospectus.
 
Unless otherwise stated or the context requires otherwise, references in this prospectus to Adamis, the company, or the Company, we, us, or our refer to Adamis Pharmaceuticals Corporation and our subsidiaries, taken together.
 
Company Overview
 
We are an emerging pharmaceutical company focused on combining specialty pharmaceuticals and biotechnology to provide innovative medicines for patients and physicians.  Within our group of specialty pharmaceutical products, we are currently developing four products in the allergy and respiratory markets, including a dry powder inhaler technology that we recently exclusively licensed and have the rights to acquire from 3M Company.  Our goal is to create low cost therapeutic alternatives to existing treatments.  Consistent across all specialty pharmaceuticals product lines, we intend to pursue section 505(b)(2) New Drug Application, or NDA, regulatory approval filings with the U.S. Food and Drug Administration, or FDA, whenever applicable in order to reduce the time needed to get to market and to save on costs, compared to Section 505(b)(1) NDA filings for new drug products.  Within our group of biotechnology products, we are focused on the development of therapeutic vaccine product candidates and cancer drugs for patients with unmet medical needs in the multi-billion dollar global cancer market.
 
Our general business strategy is to generate revenue through launch of our allergy and respiratory products in development, in order to generate cash flow to help fund expansion of our allergy and respiratory business.  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.
 
The current status of our development programs is as follows:
 
Product Portfolio
 
Specialty Pharmaceutical Products
 
Target Indication
 
Development Status (1)
Epinephrine PFS
 
Anaphylaxis
 
Submit for regulatory approval to sell
APC-5000
 
Asthma/COPD
 
Phase 3 trial (2)
APC-1000
 
Asthma/COPD
 
Phase 3 trial (2)
APC-3000
 
Allergic Rhinitis
 
Phase 3 trial (2)
         
Biotechnology Products
 
Target Indication
 
Development Status (1)
TeloB-VAX (vaccine)
 
Prostate Cancer
 
Phase 2 trial
APC-100
 
Prostate Cancer
 
Phase 1 trial (3)
APC-200
 
Prostate Cancer
 
Preclinical
APC-300
 
Prostate Cancer
 
Preclinical
 

(1)
Represents the next development or regulatory stage that we intend to pursue.  We may not have the financial resources to pursue any of these opportunities even assuming the successful completion of this offering.
(2)
A single Phase 3 trial, without previous Phase 1 or Phase 2 trials, is anticipated.
(3)
Phase 1/2a clinical trial has commenced and is ongoing.
 
We have not received regulatory approval for, or since our fiscal 2010 year generated commercial revenues from marketing or selling, any drugs or other products.
 
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Anaphylaxis; Epinephrine Pre-Filled Syringe
 
Our most advanced product candidate, the Epinephrine Injection USP 1:1000 0.3mg Pre-filled Single Dose Syringe, or the Epinephrine PFS, is a simple syringe designed to deliver a premeasured 0.3 mg dose of epinephrine for the treatment of anaphylaxis.  The American Academy of Allergy Asthma and Immunology, or AAAAI, defines anaphylaxis as a serious life-threatening allergic reaction.  The most common anaphylactic reactions are to foods, insect stings, medications and latex.  According to information published by AAAAI, up to 8% of U.S. children under the age of 18 have a food allergy, and approximately 38% of those with a food allergy have a history of severe reactions. Anaphylaxis requires immediate medical treatment, including an injection of epinephrine.  The number of prescriptions for epinephrine products has grown annually, as the risk of anaphylaxis has become more widely understood.
 
We believe that there is an opportunity for a simple, low-cost, intuitive pre-filled syringe to compete in this market.  We are preparing a 505(b)(2) submission to the FDA for approval for sale of the Epinephrine PFS product.  We hope to make the submission within a few months after the closing of this offering and, assuming no unexpected regulatory delays, to receive an approval by the end of calendar year 2014 or early in 2015.
 
Asthma and COPD
 
Asthma is a chronic lung disease that inflames and narrows the airways.  Asthma causes recurring periods of wheezing, chest tightness, shortness of breath, and coughing.  Asthma affects people of all ages, but it most often starts during childhood.  The National Institute of Health, or NIH, has stated that more than 25 million people in the U.S. have been diagnosed with asthma, of which an estimated approximately 7 million are children.  COPD, or chronic obstructive pulmonary disease, is a progressive disease that makes it difficult to breathe.  COPD can cause coughing that produces large amounts of mucus, wheezing, shortness of breath, chest tightness, and other symptoms.  According to the NIH, cigarette smoking is the leading cause of COPD.  However, long-term exposure to other lung irritants such as air pollution, chemical fumes, or dust may also contribute to COPD.
 
Taper DPI.  On August 1, 2013, we entered into an agreement with 3M Company, or 3M, to exclusively license and, upon final payment acquire, assets relating to 3M’s patented Taper dry powder inhaler, or DPI, technology under development for the treatment of asthma and COPD.  The Taper DPI technology was under development as a device designed to efficiently deliver dry powder by utilizing a 3M proprietary microstructured carrier tape, to be supplied by 3M under a separate supply agreement to be negotiated with 3M.  We believe that, once developed, the device can be utilized to deliver a wide variety of different drug compounds.  We intend to utilize the Taper DPI assets initially to develop a pre-metered inhaler device for the treatment of asthma and COPD to deliver the same active ingredients as GlaxoSmithKline’s Advair Diskus®.  Advair Diskus®, marketed by GlaxoSmithKine, or GSK, for the treatment of asthma and COPD, generated more than $4 billion in U.S. sales in 2012, based on GSK’s publicly announced results.  The Advair Diskus® is a dry powder inhaler, or DPI, product that combines fluticasone propionate, or fluticasone and salmeterol xinafoate, or salmeterol.  Fluticasone belongs to the family of medicines known as corticosteroids or steroids.
 
Upon completion of product development and clinical trials and if required regulatory approvals are obtained, we intend to commercially market the inhaler product to compete for a share of the Advair Diskus market with a branded generic version utilizing the Taper DPI technology.  We believe that one advantage of the Taper DPI technology is that it can deliver drug particles without the need for lactose or formulation excipients.  The majority of current dry powder products use lactose carrier excipients to enhance flowability; however, they have the disadvantage of increased bulk and require a mechanism for detaching the drug from the surface of the lactose.  Lactose carrier formulations require a complicated blending process and delivery that is highly sensitive to excipient powder properties.  There are currently no excipient-free DPIs in the U.S. market.  Due to the design of theTaper DPI, it can efficiently deliver drug without the need for formulation excipients.  As such, it enables consistent dose metering and delivery across a broad dosing range.  In addition, high fine particle fractions are achievable, which could allow more active drug to be delivered deep into the patient’s lungs.
 
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We are currently preparing an investigational new drug application, or IND, to be submitted to the FDA for approval to begin human testing of Taper DPI delivering fluticasone/salmeterol for the treatment of asthma and COPD.  Assuming receipt of sufficient funding and if clinical trials are initiated and successfully completed, we intend to pursue a new drug application under Section 505(b)(2) of the Food, Drug & Cosmetic Act, as amended, or FDCA, to seek approval for sale in the U.S. market.  We also intend to seek to identify opportunities to market Taper DPI based products outside of the U.S.  Pursuant to the agreement with 3M, we made an initial payment of $3.0 million to 3M and acquired an exclusive license to the DPI assets, and upon a final payment to 3M of $7.0 million before December 31, 2013, and satisfaction of other customary closing conditions, the Taper DPI assets will be transferred to us.  We intend to use approximately $7.0 million of the net proceeds of this offering to make the final payment to 3M and acquire the Taper DPI assets.
 
Additional Allergy Products.  Additional product candidates in our allergy and respiratory product pipeline include a steroid hydrofluoroalkane, or HFA, metered dose inhaler product, referred to as APC-1000, for asthma and COPD and an HFA pressurized metered dose nasal steroid for the treatment of seasonal and perennial allergic rhinitis, referred to as APC-3000.  Inhaled nasal steroid, or INS, products are sold under prescription for seasonal allergic rhinitis.  Our product candidates, if developed and approved for marketing, will target a small niche within the larger market for INS products.
 
Cancer
 
We believe that there is a significant need for new products and therapies for the treatment of prostate cancer and other forms of cancer.
 
TeloB-VAX. In April 2011, we acquired exclusive rights to patented telomerase-based cancer vaccine technology from the Regents of the University of California and 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 candidate for 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 common tumor markers, telomerase reverse transcriptase, or telomerase.  We believe that a vaccine product, if developed, will utilize the patient’s own B cells as antigen producing and antigen presenting cells.  In a Phase 1 study completed at UCSD in castrate resistant prostate cancer patients, the vaccine product candidate was shown to be safe and well tolerated.  The vaccine was found to be immunogenic, and was shown to induce a specific CD8 T cell response.  More importantly, the T cells induced post-vaccination were shown to specifically kill prostate cancer cells.  We believe that if future trials are successful and a vaccine product is developed, such a vaccine product may have a number of competitively advantageous features, including:  prolonged antigen presentation by B cells; induction of an immune response after a single injection; no need for complicated culture procedures; fewer steps; and potentially lower cost than other competitive products.  This vaccine product candidate utilizes a cancer antigen marker, telomerase, that is increased in approximately 85% of all tumors.  We believe that this technology may represent one of the first concrete opportunities to program the immune system to mobilize killer lymphocytes to combat cancer cells, including progenitor cancer stem cells that were shown to also express telomerase.
 
Prostate Cancer.  According to the American Cancer Society, or ACS, and the National Cancer Institute, or NCI, prostate cancer is the second-most common cancer in American men and the second leading cause of cancer death in American men.  The ACS estimated that for 2013 in the United States, approximately 238,000 new cases of prostate cancer will be diagnosed and about 29,700 men will die of prostate cancer in 2013.  In 2010, we licensed patents and related intellectual property relating to three cancer drug candidates developed at the University of Wisconsin.  We believe these drug candidates, named APC-100, -200 and -300, may offer significant new treatment opportunities for prostate cancer.
 
APC-100 is the most advanced of the three drug candidates.  In animal studies conducted to date, APC-100 demonstrated anti-androgenic and anti-inflammatory activities against prostate tumors growing in animal models and showed a strong safety profile in preclinical safety studies.  In 2006, APC-100 was awarded the NCI Rapid Award.  The award is given for promising new drugs for the treatment of cancer and resulted in significant funding for research and development of APC-100.  APC-100 has demonstrated desirable pharmacological characteristics as an oral or injectable anti-inflammatory and anti-androgenic drug candidate with multiple mechanisms of action.  APC-100 significantly decreases secretion of human PSA by human prostate cancer cells growing in mice and also significantly increases the time-to-tumor progression and survival of mice with prostate sensitive and castrate resistant tumors.  In animal studies, APC-100 was found to be more effective than Casodex or Flutamide, which are leading prostate cancer treatments.  In August 2011, we announced the enrollment of 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 was extended to the Wayne State University Karmanos Cancer Institute.  In the trial, each patient will be assessed for toxicity, biochemical responses (PSA), radiographic and clinical responses.  After completion of the Phase 1/2a APC-100 trial, we expect that we would meet with the FDA to review the trial results and determine the continuation of the clinical development with Phase 2b studies.
 
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APC-200 is a drug candidate for both castrate-sensitive and castrate resistant prostate cancer.  In 2007, APC-200 was awarded the NCI Rapid Award.  APC-200 blocks androgen-induced hydrogen peroxide production and inflammation and inhibits mouse prostate cancer.  In animal studies conducted to date, APC-200 was an excellent inhibitor of chronic inflammation, also completely inhibiting oxidase mediated high rates of hydrogen peroxide production in vivo, and significantly delaying prostate cancer progression and death in the standard mouse prostate cancer model.  After conclusion of the pre-clinical development activities, such as GMP manufacturing of drug substance and drug product, as well as conclusion of the pre-clinical safety, pharmacology and toxicology studies, we anticipate filing and opening an Adamis-sponsored IND relating to the clinical investigation of oral APC-200 in PCa patients with castrate resistant prostate cancer, assuming adequate funding and no unexpected delays.
 
APC-300 is a multi-targeted small molecule therapeutic drug that we believe has the potential to demonstrate anti-inflammatory, pro-apoptotic anti-cancer activities for prostate cancer patients, including men with advanced metastatic castrate resistance prostate cancer.  In pre-clinical in vitro studies conducted to date, APC-300 inhibited human tumor cell growth and killed both castrate-sensitive and castrate-resistant human prostate cancer tumors.  It also materially decreased tumor volumes and suppressed local metastasis in human to mouse xenograft models, where malignant human prostate, pancreas, or melanoma tumor tissue was grafted onto athymic immunosuppressed experimental mice.  We have not yet developed a clinical protocol and other materials for submission of an IND, due to funding limitations, and we expect to begin that process once we have adequate funding.
 
Recent Developments
 
Proposed Reverse Stock Split.  At our annual meeting of stockholders held on October 15, 2013, our stockholders approved a proposal to authorize our board of directors to effect a reverse stock split of our outstanding common stock if our board of directors in its discretion determines to effect a reverse stock split, by a ratio of not less than 1-for-2 and not more than 1-for-25 with a possible reduction in the number of shares of common stock that are authorized in our certificate of incorporation, depending on the exact ratio of the reverse stock split.  We expect to effect a 1-for-17 reverse stock split of our outstanding common stock just prior to the date of this prospectus.
 
Private Placement Transaction.  On June 26, 2013, we completed a private placement financing transaction pursuant to which we issued secured convertible promissory notes, or the Secured Notes, and common stock purchase warrants, or the June Warrants, to a small number of institutional investors.  As of September 30, 2013, the Secured Notes have an aggregate principal amount of $6,502,158.  The maturity date of the Secured Notes is December 26, 2013.  The Secured Notes are convertible into shares of common stock at any time at the discretion of the investor at an initial conversion price per share of $0.50 ($8.50 giving effect to the proposed reverse stock splits), subject to adjustment.  The June Warrants have a term of five years and have an initial exercise price of $0.715 per share ($12.16 giving effect to the proposed reverse stock split), subject to adjustment.  Our obligations under the Secured Notes and the other transaction documents are guaranteed by our principal subsidiaries, and are secured by a security interest in substantially all of our assets and those of the subsidiaries pursuant to a Security Agreement.  The investors may publicly sell shares that are issued upon conversion of the Secured Notes or exercise of the June Warrants pursuant to a registration statement that has been filed with, and declared effective by, the Securities and Exchange Commission; such shares may also be sold upon compliance with the applicable provisions of Rule 144.  The conversion prices of the Secured Notes and the June Warrants are subject to full-ratchet price anti-dilution downward adjustment, with certain exceptions, if we issue equity securities, including in this offering, at prices below the conversion price of the Secured Notes or the exercise price of the June Warrants.
 
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The Secured Notes will either be converted into common stock or paid in full following the closing of this offering.  Not later than three trading days before the closing of a Qualified Offering as defined in the transaction documents, including this offering, a holder must elect in writing to either (a) accelerate the maturity date to not later than 20 trading days after the final closing of such Qualified Offering and receive payment equal to 115% of the outstanding principal amount and interest, if any, on the Secured Note, or (b) exercise the holder’s conversion rights, with such conversion to be effective at the closing of the Qualified Offering, at a conversion price of 85% of the lowest sales, conversion, exercise or purchase price of any common stock or common stock equivalent issued in connection with the offering if such price is lower than the then-current conversion price.  As a result, following the completion of this offering and completion of the 20 trading day period described above, the Secured Notes will be either paid utilizing a portion of the net proceeds of this offering, or converted into common stock, and will not remain outstanding.  Upon conversion or payment of all Secured Notes, and provided that there are no outstanding events of default under the transaction documents, the security interest relating to the transaction documents will be terminated.
 
Under the transaction documents as amended, the investors have waived the right of any investor to convert the Secured Notes in connection with a Qualified Offering, including this offering, that is completed before December 26, 2013 if the price to public of common stock sold in such a Qualified Offering is at or below $10.03 per share ($.59 per share as adjusted by the proposed 1-for-17 reverse stock split).  As of the date of this prospectus, approximately $75,000 of Secured Notes have been converted into common stock at a pre-reverse stock split price of $0.50 per share.  As a result, if the price to the public of the common stock sold in this offering is at or below $10.03 per share, the outstanding Secured Notes will not be converted at the conversion price described in the preceding paragraph, and approximately $7,391,232 of the net proceeds from this offering will be used to pay all amounts owed under the Secured Notes, assuming that no additional Secured Notes are converted before this offering.  In addition, if our common stock is listed on The Nasdaq Capital Market or other national exchange in connection with the closing of this offering, then the exercise price of the June Warrants, but not the number of shares issuable upon exercise of the June Warrants, is subject to adjustments based on the anti-dilution provisions in the June Warrants.
 
Taper DPI.  As described above under the heading “Company Overview—Asthma and COPD,” on August 1, 2013, we entered into an agreement with 3M Company to exclusively license and, upon final payment acquire, assets relating to 3M Company’s patented Taper dry powder inhaler, technology under development under development for the treatment of asthma and COPD.
 
Corporate Background
 
Our principal executive offices are located at 11455 El Camino Real, Suite 310, San Diego, CA  92130, and our telephone number is (858) 997-2400.  Our website address is:  www.adamispharmaceuticals.com.  We have included our website address as a factual reference and do not intend it to be an active link to our website.  The information that can be accessed through our website is not part of this prospectus, and investors should not rely on any such information in deciding whether to purchase our common stock.
 
Risks
 
We are an early stage company.  We have not received regulatory approval for, or since our fiscal 2010 year generated commercial revenues from marketing or selling, any drugs or other products.  Since our inception, we have incurred substantial losses.  Our business and our ability to execute our business strategy are subject to a number of risks of which you should be aware before you decide to buy our common stock.  In particular, you should carefully consider the following risks, which are discussed more fully along with additional risks in “Risk Factors” beginning on page 9 of this prospectus.
 
 
We may never commercialize any of our products or earn a profit.
 
 
Our auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
 
 
Even assuming the successful completion of this offering, we may require additional financing to continue as a going concern.
 
 
Statements in this prospectus concerning our future plans and operations are dependent on our ability to secure adequate funding and the absence of unexpected delays or adverse developments.  We may not be able to secure required funding.
 
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We have incurred losses since our inception, and we anticipate that we will continue to incur losses.  We may never achieve or sustain profitability.
 
 
Our limited operating history may make it difficult to evaluate our business and our future viability.
 
 
Many of our potential products and technologies are in early stages of development.
 
 
Delays in the commencement or completion of clinical testing of our product candidates could result in increased costs and delay our ability to generate significant revenues.
 
 
We intend to pursue Section 505(b)(2) regulatory approval filings with the FDA for our products where applicable.  Such filings involve significant costs, and we may also encounter difficulties or delays in obtaining regulatory approval for our products.
 
 
We are subject to substantial government regulation, which could materially adversely affect our business.  If we do not receive regulatory approvals, we may not be able to develop and commercialize our technologies.
 
 
If we fail to obtain acceptable prices or appropriate reimbursement for our products, our ability to successfully commercialize our products will be impaired.
 
 
Legislative or regulatory reform of the healthcare system may affect our ability to sell our products profitably.
 
 
We have limited sales, marketing and distribution experience.
 
 
Our failure to adequately protect or to enforce our intellectual property rights or secure rights to third party patents could materially harm our proprietary position in the marketplace or prevent the commercialization of our products.
 
 
We depend on our officers.  If we are unable to retain our key employees or to attract additional qualified personnel, our product operations and development efforts may be seriously jeopardized.
 
 
The price of our common stock may be volatile.
 
 
Our principal stockholders have significant influence over us, they may have significant influence over actions requiring stockholder approval, and your interests as a stockholder may conflict with the interests of those persons.
 
 
In preparing our consolidated financial statements, our management determined that our disclosure controls and procedures and that our internal controls over financial reporting, were ineffective as of March 31, 2013, which could result in material misstatements in our financial statements.  If we continue to fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or if we discover additional material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult.
 
 
A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline and may impair our ability to raise capital in the future.
 
 
You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
 
 
Our stockholders approved a proposal at our annual meeting of stockholders held on October 15, 2013, to authorize our board of directors to effect a reverse stock split of our common stock.  We expect to effect a 1-for-17 reverse stock split of our outstanding common stock just prior to the date of this prospectus.  There are risks associated with a reverse stock split, if it is effected.
 
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The Offering
 
Securities offered by us
 
3,100,000  shares of common stock (up to 3,565,000 shares if the underwriters exercise their over-allotment option in full).
 
Common Stock to be outstanding after this offering
 
9,269,201 shares.  If the underwriters’ over-allotment option is exercised in full, the total number of shares of common stock outstanding after this offering would be 9,734,201 shares.
 
Use of Proceeds
 
We intend to use approximately $7 million of the net proceeds received from this offering to make our final payment to 3M to acquire the assets relating to the Taper dry powder inhaler technology.  We will also use a portion of the net proceeds to pay all amounts owed under any of the Secured Notes that the holders of the Secured Notes do not convert into common stock before this offering, or in connection with the closing of this offering.  The holders have waived their right to convert their Secured Notes in connection with this offering if the price to public of common stock sold in this offering is less than $10.03 per share ($.59 per share as adjusted by the proposed 1-for-17 reverse stock split).  As a result, if the price to public of the shares sold in this offering is less than $10.03, we do not expect any of the holders of Secured Notes to convert into common stock in connection with this offering.  If no additional Secured Notes are converted, approximately $7,391,232 of the net proceeds would be used to pay the Secured Notes.  We may also use a portion of the net proceeds from this offering to pay any accrued interest owed and any unconverted balance of principal and interest owed under an outstanding convertible promissory note dated December 31, 2012, held by an individual investor in the principal amount of $600,000, which is due March 26, 2014, which accrues interest a rate of 10% per annum, and which is convertible at the option of the holder into shares of common stock at a price of $9.35 ($0.55 per share, as adjusted by the proposed reverse stock split).  We intend to use the remaining net proceeds to fund our research and development activities and for working capital and general corporate purposes, including payment of outstanding obligations and indebtedness including transaction expenses of this offering, and seeking regulatory approval for and commercially launching our Epinephrine PFS syringe product.  See “Use of Proceeds” on page 29.
 
Risk Factors
 
See “Risk Factors” beginning on page 9 and the other information included in this prospectus for a discussion of factors you should carefully consider before investing in our securities.
     
 
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OTCQB trading symbol
 
ADMP
 
Proposed Symbol and Listing
 
We have applied for listing of our common stock on The Nasdaq Capital Market under the symbol “ADMP.”
 
Unless we indicate otherwise, all information in this prospectus (i) except for our consolidated financial statements and notes thereto, reflects a 1-for-17 reverse stock split of our issued and outstanding shares of common stock (and proportional adjustment of options and warrants) to be effected just prior to the this offering and the corresponding adjustment of all common stock price per share and stock option and warrant exercise price data; (ii) is based on 104,876,409 pre-reverse split shares of common stock issued and outstanding as of November 30, 2013 (approximately 6,169,201 shares giving effect to the proposed reverse stock split), see “Description of Securities”; (iii) assumes no exercise by the underwriters of their option to purchase up to an additional 465,000 shares of common stock to cover over-allotments, if any; (iv) excludes approximately 64,171 post-reverse split shares of common stock issuable upon conversion of outstanding convertible notes and convertible debentures, other than the Secured Notes; (v) excludes approximately 404,622 post-reverse split shares of our common stock issuable upon exercise of outstanding stock options under our equity incentive plans with exercise prices ranging from $3.06 to $12.75 and having a weighted average exercise price of $5.78 per share as of November 30, 2013, and approximately 42,707 post-reverse split shares issuable upon the vesting of outstanding restricted stock units awarded under our equity incentive plans; (vi) excludes approximately 149,079 post-reverse split shares of our common stock issuable upon the exercise of outstanding warrants, other than the June Warrants, at a weighted average exercise price of $14.28 per share as of November 30, 2013; (vii) excludes approximately 764,960 post-reverse split shares of our common stock issuable upon exercise of the June Warrants at an exercise price of approximately $12.16 per share (subject to “full-ratchet” anti-dilution protection upon certain equity issuances, including the shares of common stock offered in this offering, at prices below $12.16 per share, as defined in the June Warrants); (viii) excludes approximately 764,960 post-reverse split shares of common stock issuable upon conversion of the Secured Notes if all Secured Notes were converted in connection with this offering; and (ix) excludes 155,000 shares of common stock underlying the warrants to be issued to the underwriters in connection with this offering.
 
 
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Any investment in our common stock involves a high degree of risk.  Investors should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock.  Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur.  This prospectus also contains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this prospectus.
 
Risks Related to Our Business, Industry and Financial Condition
 
We may never commercialize any of our products or earn a profit.
 
We currently have no revenues from product sales, have not generated any revenue from operations for the last two fiscal years, and expect to incur substantial net losses for the foreseeable future to further develop and commercialize our product candidates and technologies.  We may never be able to commercialize any of our product candidates or be able to generate revenues from products sales.  Because of the risks and uncertainties associated with developing and commercializing our specialty pharmaceuticals, cancer and other product candidates, we are unable to predict when we may commercially introduce products, the extent of any future losses or when we will become profitable, if ever.  We may never successfully commercialize our product candidates, and our business may fail.
 
Our auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain further financing.
 
Our audited financial statements for the year ended March 31, 2013, were prepared under the assumption that we would continue our operations as a going concern.  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, 2013 and 2012, 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.  Uncertainty concerning our ability to continue as a going concern may hinder our ability to obtain future financing.  Continued operations and our ability to continue as a going concern are dependent on our ability to obtain additional funding in the near future and thereafter, and there are no assurances that such funding will be available at all or will be available in sufficient amounts or on reasonable terms.  Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.  Without additional funds from debt or equity financing, sales of assets, sales or out-licenses of intellectual property or technologies, or other transaction, we will rapidly exhaust our resources and will be unable to continue operations.  If we cannot continue as a viable entity, our stockholders would likely lose most or all of their investment in us.
 
Even assuming the successful completion of this offering, we may require additional financing to continue as a going concern.
 
We incurred a net loss of approximately $7.2 million for the year ended March 31, 2013, and a net loss of approximately $1.1 million for the six months ended September 30, 2013.  At March 31 and September 30, 2013, we had cash and cash equivalents of $0 and approximately $120,000, respectively, no accounts receivable and significant liabilities and obligations.  Absent additional funding, we believe that our cash and cash equivalents will be sufficient to fund our operations only for a relatively short period of time, even assuming the successful completion of this offering.  The development of our business will require substantial additional capital in the future to commercialize our Epinephrine pre-filled syringe product, or Epinephrine PFS, proceed with development of the Taper inhaler technology, and conduct research and develop our cancer and vaccine technologies and other product candidates, as well as to fund our ongoing operations and satisfy our obligations and liabilities.  We have historically relied upon private sales of our equity or debt securities to fund our operations.  We currently have no credit facility or committed sources of capital.  Delays in obtaining funding could adversely affect our ability to develop and commercially introduce products and cause us to be unable to comply with our obligations under outstanding instruments.  For example, if we are not able to make the $7.0 million payment to 3M Company in order to complete the acquisition of Taper inhaler assets that we have licensed, we could lose the rights to acquire those assets.
 
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Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment.  If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates, restrict our operations or obtain funds by entering into agreements on unattractive terms, 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, at least until additional funding is obtained.  If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all of their investment in us.
 
Statements in this prospectus concerning our future plans and operations are dependent on our ability to secure adequate funding and the absence of unexpected delays or adverse developments.  We may not be able to secure required funding.
 
The statements contained in this prospectus concerning future events or developments or our future activities, such as concerning current or planned clinical trials, anticipated research and development activities, anticipated dates for commencement of clinical trials, anticipated completion dates of clinical trials, anticipated meetings with the FDA or other regulatory authorities concerning our product candidates, anticipated dates for submissions to obtain required regulatory marketing approvals, anticipated dates for commercial introduction of products, and other statements concerning our future operations and activities, are forward-looking statements that in each instance assume that we are able to obtain sufficient funding in the near term and thereafter to support such activities and continue our operations and planned activities in a timely manner.  There can be no assurance that this will be the case.  Also, such statements assume that there are no significant unexpected developments or events that delay or prevent such activities from occurring.  Failure to timely obtain sufficient funding, or unexpected development or events, could delay the occurrence of such events or prevent the events described in any such statements from occurring which could adversely affect our business, financial condition and results of operations.
 
We have incurred losses since our inception, and we anticipate that we will continue to incur losses.  We may never achieve or sustain profitability.
 
We incurred net losses of approximately $7.2 and $1.1 million for our fiscal year ended March 31, 2013 and for the six months ended September 30, 2013, respectively.  From inception through September 30, 2013, we have an accumulated deficit of approximately $39.1 million.  These losses will increase as we continue our research and development activities, seek regulatory approvals for our product candidates and commercialize any approved products.  These losses will cause, among other things, our stockholders’ equity and working capital to decrease.  Any future earnings and cash flow from operations of our business are dependent on our ability to further develop our products and on revenues and profitability from sales of products.
 
There can be no assurance that we will be able to generate sufficient product revenue to become profitable at all or on a sustained basis.  Even if we generate revenues, we expect to have quarter-to-quarter fluctuations in revenues and expenses, some of which could be significant, due to research, development, clinical trial, marketing and manufacturing expenses and activities.  If our product candidates fail in clinical trials or do not gain regulatory approval, or if our products do not achieve market acceptance, we may never become profitable.  As we commercialize and market products, we will need to incur expenses for product marketing and brand awareness and conduct significant research, development, testing and regulatory compliance activities that, together with general and administrative expenses, could result in substantial operating losses for the foreseeable future.  Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
 
Our limited operating history may make it difficult to evaluate our business and our future viability.
 
We are in the relatively early stage of operations and development and have only a limited operating history on which to base an evaluation of our business and prospects.  Even if we successfully obtain additional funding, we are subject to the risks associated with early stage companies with a limited operating history, 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; regulatory setbacks and delays; competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patent protection; fluctuations in expenses; and dependence on corporate partners and collaborators.  Any failure to successfully address these risks and uncertainties could seriously harm our business and prospects.  We may not succeed given the technological, marketing, strategic and competitive challenges we will face.  The likelihood of our success must be considered in light of the expenses, difficulties, complications, problems and delays frequently encountered in connection with the growth of a new business, the continuing development of new drug technology, and the competitive and regulatory environment in which we operate or may choose to operate in the future.
 
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Many of our potential products and technologies are in early stages of development.
 
The development of new pharmaceutical products is a highly risky undertaking, and there can be no assurance that any future research and development efforts we might undertake will be successful.  Our potential products in the cancer and viral fields will require extensive additional research and development before any commercial introduction, as will research and development work on our allergy and respiratory products.  There can be no assurance that any future research, development or clinical trial efforts will result in viable products or meet efficacy standards.  Future clinical or preclinical results may be negative or insufficient to allow us to successfully market our product candidates.  Obtaining needed data and results may take longer than planned or may not be obtained at all.  Any such delays or setbacks could have an adverse effect on our ability to achieve our financial goals.
 
We rely on third parties to conduct our clinical trials.  If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain, or may experience delays in obtaining, regulatory approval, or may not be successful in commercializing our planned and future products.
 
Like many companies our size, we do not have the ability to conduct preclinical or clinical studies for our product candidates without the assistance of third parties who conduct the studies on our behalf.  These third parties are usually toxicology facilities and clinical research organizations, or CROs, that have significant resources and experience in the conduct of pre-clinical and clinical studies.  The toxicology facilities conduct the pre-clinical safety studies as well as associated tasks connected with these studies.  The CROs typically perform patient recruitment, project management, data management, statistical analysis, and other reporting functions.  We intend to rely on third parties to conduct clinical trials of our product candidates and to use third party toxicology facilities and CROs for our pre-clinical and clinical studies.  We may also rely on academic institutions or clinical research organizations to conduct, supervise or monitor some or all aspects of clinical trials involving our products.
 
Our reliance on these third parties for development activities will reduce our control over these activities.  If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, we may be required to replace them, and our clinical trials may be extended, delayed or terminated.  Although we believe there are a number of third-party contractors that we could engage to continue these activities, replacing a third-party contractor may result in a delay of the affected trial.
 
Delays in the commencement or completion of clinical testing of our product candidates could result in increased costs and delay our ability to generate significant revenues.
 
The actual timing of commencement and completion of clinical trials can vary dramatically from our anticipated timing due to factors such as funding limitations, scheduling conflicts with participating clinicians and clinical institutions, and the rate of patient enrollment.  Clinical trials involving our product candidates may not commence or be completed as forecast.  Delays in the commencement or completion of clinical testing could significantly impact our product development costs.  We do not know whether current or planned clinical trials will begin on time or be completed on schedule, if at all.  The commencement of clinical trials can be delayed for a variety of reasons, including delays in:
 
 
obtaining required funding;
 
 
obtaining regulatory approval to commence a clinical trial;
 
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reaching agreement on acceptable terms with prospective contract research organizations and clinical trial sites;
 
 
obtaining sufficient quantities of clinical trial materials for product candidates;
 
 
obtaining institutional review board approval to conduct a clinical trial at a prospective site; and
 
 
recruiting participants for a clinical trial.
 
In addition, once a clinical trial has begun, it may be suspended or terminated by us or the FDA or other regulatory authorities due to a number of factors, including:
 
 
failure to conduct the clinical trial in accordance with regulatory requirements;
 
 
inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
 
 
failure to achieve certain efficacy and/or safety standards; or
 
 
lack of adequate funding to continue the clinical trial.
 
Clinical trials require sufficient participant enrollment, which is a function of many factors, including the size of the target patient population, the nature of the trial protocol, the proximity of participants to clinical trial sites, the availability of effective treatments for the relevant disease, the eligibility criteria for our clinical trials and competing trials.  Delays in enrollment can result in increased costs and longer development times.  Our failure to enroll participants in our clinical trials could delay the completion of the clinical trials beyond current expectations.  In addition, the FDA could require us to conduct clinical trials with a larger number of participants than we may project for any of our product candidates.  As a result of these factors, we may not be able to enroll a sufficient number of participants in a timely or cost-effective manner.
 
Furthermore, enrolled participants may drop out of clinical trials, which could impair the validity or statistical significance of the clinical trials.  A number of factors can influence the discontinuation rate, including, but not limited to:  the inclusion of a placebo in a trial; possible lack of effect of the product candidate being tested at one or more of the dose levels being tested; adverse side effects experienced, whether or not related to the product candidate; and the availability of numerous alternative treatment options that may induce participants to discontinue from the trial.
 
We may be required to suspend, repeat or terminate our clinical trials if the trials are not well designed, do not meet regulatory requirements or the results are negative or inconclusive, which may result in significant negative repercussions on business and financial condition.
 
Before regulatory approval for a potential product can be obtained, we must undertake clinical testing on humans to demonstrate the tolerability and efficacy of the product.  We cannot assure you that we will obtain authorization to permit product candidates that are in the preclinical development phase to enter the human clinical testing phase.  In addition, we cannot assure you that any authorized preclinical or clinical testing will be completed successfully within any specified time period by us, or without significant additional resources or expertise to those originally expected to be necessary.  We cannot assure you that such testing will show potential products to be safe and efficacious or that any such product will be approved for a specific indication.  Further, the results from preclinical studies and early clinical trials may not be indicative of the results that will be obtained in later-stage clinical trials.  In addition, we or regulatory authorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks.
 
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We are subject to the risk of clinical trial and product liability lawsuits.
 
The testing of human health care product candidates entails an inherent risk of allegations of clinical trial liability, while the marketing and sale of approved products entails an inherent risk of allegations of product liability and associated adverse publicity.  We currently maintain liability insurance coverage of $1,000,000.  Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all.  As we conduct additional clinical trials and introduce products into the United States market, the risk of adverse events increases and our requirements for liability insurance coverage are likely to increase.  We are subject to the risk that substantial liability claims from the testing or marketing of pharmaceutical products could be asserted against us in the future.  There can be no assurance that we will be able to obtain or maintain insurance on acceptable terms, particularly in overseas locations, for clinical and commercial activities or that any insurance obtained will provide adequate protection against potential liabilities.  An inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could inhibit our business.
 
Moreover, our current and future coverages may not be adequate to protect us from all of the liabilities that we may incur.  If losses from liability claims exceed our insurance coverage, we may incur substantial liabilities that exceed our financial resources.  In addition, a product or clinical trial liability action against us would be expensive and time-consuming to defend, even if we ultimately prevailed.  If we are required to pay a claim, we may not have sufficient financial resources and our business and results of operations may be harmed.  A product liability claim brought against us in excess of our insurance coverage, if any, could have a material adverse effect upon our business, financial condition and results of operations.
 
We do not have commercial-scale manufacturing capability, and we lack commercial manufacturing experience.  We will likely rely on third parties to manufacture and supply our product candidates.
 
We do not own or operate manufacturing facilities for clinical or commercial production of product candidates.  We do not have any experience in drug formulation or manufacturing, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale.  Accordingly, we expect to depend on third-party contract manufacturers for the foreseeable future.  Any performance failure on the part of our contract manufacturers could delay clinical development, regulatory approval or commercialization of our current or future product candidates, depriving us of potential product revenue and resulting in additional losses.
 
The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.  Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up initial production.
 
These problems can include difficulties with production costs and yields, quality control (including stability of the product candidate and quality assurance testing), shortages of qualified personnel, and compliance with strictly enforced federal, state and foreign regulations.  If our third-party contract manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations or under applicable regulations, our ability to provide product candidates to patients in our clinical trials or commercially would be jeopardized.  If we file an application for marketing approval of the product and the FDA grants marketing approval, any delay or interruption in the supply of product could delay the commercial launch of the product or impair our ability to meet demand for the product.  Difficulties in supplying products for clinical trials could increase the costs associated with our clinical trial programs and, depending upon the period of delay, require us to commence new trials or qualify new manufacturers at significant additional expense, possibly causing commercial delays or termination of the trials.
 
Our products can only be manufactured in a facility that has undergone a satisfactory inspection by the FDA and other relevant regulatory authorities.  For these reasons, we may not be able to replace manufacturing capacity for our products quickly if we or our contract manufacturer(s) were unable to use manufacturing facilities as a result of a fire, natural disaster (including an earthquake), equipment failure, or other difficulty, or if such facilities were deemed not in compliance with the regulatory requirements and such non-compliance could not be rapidly rectified.  An inability or reduced capacity to manufacture our products would have a material adverse effect on our business, financial condition, and results of operations.
 
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We are subject to substantial government regulation, which could materially adversely affect our business.  If we do not receive regulatory approvals, we may not be able to develop and commercialize our technologies.
 
We need FDA approval to market our proposed Epinephrine PFS product and other products in the United States, and similar approvals from foreign regulatory authorities to market products outside the United States.  We have not yet filed an application with the FDA to obtain approval to market any of our proposed products.  The production and marketing of our products and potential products and our ongoing research and development, pre-clinical testing and clinical trial activities are subject to extensive regulation and review by numerous governmental authorities in the United States and will face similar regulation and review for overseas approval and sales from governmental authorities outside of the United States.  The regulatory review and approval process, which may include evaluation of preclinical studies and clinical trials of our products, as well as the evaluation of manufacturing processes and contract manufacturers’ facilities, is lengthy, expensive and uncertain.  We have limited experience in filing and pursuing applications necessary to gain regulatory approvals.  Many of the product candidates that we are currently developing must undergo rigorous pre-clinical and clinical testing and an extensive regulatory approval process before they can be marketed.  This process makes it longer, more difficult and more costly to bring our potential products to market, and we cannot guarantee that any of our potential products will be approved.  Many products for which FDA approval has been sought by other companies have never been approved for marketing.  In addition to testing and approval procedures, extensive regulations also govern marketing, manufacturing, distribution, labeling, and record-keeping procedures.  If we or our collaboration partners do not comply with applicable regulatory requirements, such violations could result in non-approval, suspensions of regulatory approvals, civil penalties and criminal fines, product seizures and recalls, operating restrictions, injunctions, and criminal prosecution.
 
Regulatory authorities generally have substantial discretion in the approval process and may either refuse to accept an application, or may decide after review of an application that the data submitted is insufficient to allow approval of the proposed product.  If regulatory authorities do not accept or approve our applications, they may require that we conduct additional clinical, preclinical or manufacturing studies and submit that data before regulatory authorities will reconsider such application.  We may need to expend substantial resources to conduct further studies to obtain data that regulatory authorities believe is sufficient.  Depending on the extent of these studies, approval of applications may be delayed by several years, or may require us to expend more resources than we may have available.  It is also possible that additional studies may not suffice to make applications approvable.  If any of these outcomes occur, we may be forced to abandon our applications for approval.
 
Failure to obtain FDA or other required regulatory approvals, or withdrawal of previous approvals, would adversely affect our business.  Even if regulatory approval of a product is granted, this approval may entail limitations on uses for which the product may be labeled and promoted, or may prevent us from broadening the uses of products for different applications.
 
We intend to pursue Section 505(b)(2) regulatory approval filings with the FDA for our products where applicable.  Such filings involve significant costs, and we may also encounter difficulties or delays in obtaining regulatory approval for our products.
 
We intend to pursue a Section 505(b)(2) regulatory filing with the FDA in connection with our Epinephrine PFS syringe product, our APC-1000 and APC-3000 inhalation and nasal products and, when developed, our inhaler product based on the Taper DPI technology.  A section 505(b)(2) NDA is a special type of NDA that enables the applicant to rely, in part, on the FDA’s findings of safety and efficacy of an existing previously approved product, or published literature, in support of its application.  Section 505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.  Such filings involve significant filing costs, including filing fees.
 
To the extent that a Section 505(b)(2) NDA relies on clinical trials conducted for a previously approved drug product or the FDA’s prior findings of safety and effectiveness for a previously approved drug product, the Section 505(b)(2) applicant must submit patent certifications in its Section 505(b)(2) application with respect to any patents for the previously approved product on which the applicant’s application relies and that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.  Specifically, the applicant must certify for each listed patent that, in relevant part, (1) the required patent information has not been filed; (2) the listed patent has expired; (3) the listed patent has not expired, but will expire on a particular date and approval is not sought until after patent expiration; or (4) the listed patent is invalid, unenforceable or will not be infringed by the proposed new product.  A certification that the new product will not infringe the previously approved product’s listed patent or that such patent is invalid or unenforceable is known as a Paragraph IV certification.  If the applicant does not challenge one or more listed patents through a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application until all the listed patents claiming the referenced product have expired.
 
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If the Section 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the owner of the referenced NDA for the previously approved product and relevant patent holders within 20 days after the Section 505(b)(2) NDA has been accepted for filing by the FDA.  The NDA and patent holders may then initiate a patent infringement suit against the Section 505(b)(2) applicant.  Under the FDCA, the filing of a patent infringement lawsuit within 45 days of receipt of the notification regarding a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA until the earliest to occur of 30 months beginning on the date the patent holder receives notice, expiration of the patent, settlement of the lawsuit, or until a court deems the patent unenforceable, invalid or not infringed.
 
If we rely in our Section 505(b)(2) regulatory filings on clinical trials conducted, or the FDA’s prior findings of safety and effectiveness, for a previously approved drug product that involves patents referenced in the Orange Book, then we will need to make the patent certifications or the Paragraph IV certification described above.  If we make a Paragraph IV certification and the holder of the previously approved product that we referenced in our application initiates patent litigation within the time periods described above, then any FDA approval of our 505(b)(2) application would be delayed until the earlier of 30 months, resolution of the lawsuit, or the other events described above.  Accordingly, our anticipated dates of commercial introduction of our Epinephrine PFS syringe product and or other products would be delayed.  In addition, we would incur the expenses, which could be material, involved with any such patent litigation.  As a result, we may invest a significant amount of time and expense in the development of our product only to be subject to significant delay and patent litigation before our product may be commercialized, if at all.
 
In addition, even if we submit a 505(b)(2) application for the Epinephrine PFS product, or other future product, that relies on clinical trials conducted for a previously approved product where there are no patents referenced in the Orange Book for such other product with respect to which we have to provide certifications, we are subject to the risk that the FDA could disagree with our reliance on the particular previously approved product that we chose to rely on, conclude that such previously approved product is not an acceptable reference product, and require us instead to rely as a reference product on another previously approved product that involves patents referenced in the Orange Book, requiring us to make the certifications described above and subjecting us to additional delay, expense and the other risks described above.
 
If we fail to obtain acceptable prices or appropriate reimbursement for our products, our ability to successfully commercialize our products will be impaired.
 
Government and insurance reimbursements for healthcare expenditures play an important role for all healthcare providers, including physicians and pharmaceutical companies such as Adamis, that plan to offer various products in the United States and other countries in the future.  Physicians and patients may decide not to order our products unless third-party payors, such as managed care organizations as well as government payors such as Medicare and Medicaid, pay a substantial portion of the price of the products.  Market acceptance and sales of our products and potential products will depend in part on the extent to which reimbursement for the costs of such products will be available from government health administration authorities, private health coverage insurers, managed care organizations, and other organizations.  In the United States, our ability to have our products eligible for Medicare, Medicaid or private insurance reimbursement will be an important factor in determining the ultimate success of our products.  If, for any reason, Medicare, Medicaid or the insurance companies decline to provide reimbursement for our products, our ability to commercialize our products would be adversely affected.
 
Third-party payors may challenge the price of medical and pharmaceutical products.  Reimbursement by a third-party payor may depend on a number of factors, including a payor’s determination that our product candidates are:
 
 
not experimental or investigational;
 
 
effective;
 
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medically necessary;
 
 
appropriate for the specific patient;
 
 
cost-effective;
 
 
supported by peer-reviewed publications; and
 
 
included in clinical practice guidelines.
 
If purchasers or users of our products and related treatments are not able to obtain appropriate reimbursement for the cost of using such products, they may forego or reduce such use.  Significant uncertainty exists as to the reimbursement status of newly approved pharmaceutical products, and there can be no assurance that adequate third-party coverage will be available for any of our products.  Even if our products are approved for reimbursement by Medicare, Medicaid and private insurers, of which there can be no assurance, the amount of reimbursement may be reduced at times or even eliminated.  This would have a material adverse effect on our business, financial condition and results of operations.
 
Legislative or regulatory reform of the healthcare system may affect our ability to sell our products profitably.
 
In both the United States and certain foreign jurisdictions, there have been and are expected to be a number of legislative and regulatory changes to the healthcare system in ways that could impact our ability to sell our products profitably, including the Patient Protection and Affordable Care Act signed into law in the United States in March 2010.  Given the enactment of these laws and other federal and state legislation and regulations relating to the healthcare system, it is still too early to determine their impact on the biotechnology and pharmaceutical industries and our business.  The U.S. Congress continues to consider issues relating to the healthcare system, and future legislation or regulations may affect our ability to market and sell products on favorable terms, which would affect our results of operations, as well as our ability to raise capital, obtain additional collaborators or profitably market our products.  Such legislation or regulation may reduce our revenues, increase our expenses or limit the markets for our products.  In particular, we expect to experience pricing pressures in connection with the sale of our products due to the influence of health maintenance and managed health care organizations and additional legislative proposals.
 
We have limited sales, marketing and distribution experience.
 
We have limited experience in the sales, marketing, and distribution of pharmaceutical products.  There can be no assurance that we will be able to establish sales, marketing, and distribution capabilities or make arrangements with our current collaborators or others to perform such activities or that such efforts will be successful.  If we decide to market any products directly, we must either acquire or internally develop a marketing and sales force with technical expertise and with supporting distribution capabilities.  The acquisition or development of a sales, marketing and distribution infrastructure would require substantial resources, which may not be available to us or, even if available, could divert the attention of our management and key personnel and have a negative impact on further product development efforts.
 
We may seek to enter into arrangements to develop and commercialize our products.  These collaborations, if secured, may not be successful.
 
We have entered into arrangements with third parties regarding development and commercialization of some of our products and may in the future seek to enter into collaborative arrangements to develop and commercialize some of our potential products both in North America and international markets.  There can be no assurance that we will be able to negotiate collaborative arrangements on favorable terms or at all or that our current or future collaborative arrangements will be successful.  The amount and timing of resources such third parties will devote to these activities may not be within our control.  There can be no assurance that such parties will perform their obligations as expected.  There can be no assurance that our collaborators will devote adequate resources to our products.
 
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If our potential products are unable to compete effectively with current and future products targeting similar markets as our potential products, our commercial opportunities will be reduced or eliminated.
 
The markets for epinephrine products, our proposed APC-5000 inhaler product and other allergy and respiratory products, and cancer and vaccine products, are intensely competitive and characterized by rapid technological progress.  We face competition from numerous sources, including major biotechnology and pharmaceutical companies worldwide.  Many of our competitors have substantially greater financial and technical resources, and development, production and marketing capabilities, than we do.  Certain companies have established technologies that may be competitive with our product candidates and any future products that we may develop or acquire.  Some of these products may use different approaches or means to obtain results, which could be more effective or less expensive than our products for similar indications.  In addition, many of these companies have more experience than we do in pre-clinical testing, clinical trials and manufacturing of compounds, obtaining FDA and foreign regulatory approvals, and brand name exposure and expertise in sales and marketing.  We also compete with academic institutions, governmental agencies and private organizations that are conducting research in the same fields.
 
Competition among these entities to recruit and retain highly qualified scientific, technical and professional personnel and consultants is also intense.  As a result, there is a risk that one or more of our competitors will develop a more effective product for the same indications for which we are developing a product or, alternatively, bring a similar product to market before we can do so.  Failure to successfully compete will adversely impact the ability to raise additional capital and ultimately achieve profitable operations.
 
If we suffer negative publicity concerning the safety of our products in development, our sales may be harmed and we may be forced to withdraw such products.
 
If concerns should arise about the safety of any of our products that are marketed, regardless of whether or not such concerns have a basis in generally accepted science or peer-reviewed scientific research, such concerns could adversely affect the market for these products.  Similarly, negative publicity could result in an increased number of product liability claims, whether or not these claims are supported by applicable law.
 
Our failure to adequately protect or to enforce our intellectual property rights or secure rights to third party patents could materially harm our proprietary position in the marketplace or prevent the commercialization of our products.
 
Our success depends in part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technologies and products.  The patents and patent applications in our existing patent portfolio are either owned by us or licensed to us.  Our ability to protect our product candidates from unauthorized use or infringement by third parties depends substantially on our ability to obtain and maintain, or license, valid and enforceable patents.  Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our ability to obtain and enforce patents is uncertain and involves complex legal and factual questions for which important legal principles are unresolved.
 
There is a substantial backlog of patent applications at the United States Patent and Trademark Office, or USPTO.  There can be no assurance that any patent applications relating to our products or methods will be issued as patents, or, if issued, that the patents will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide a competitive advantage.  We may not be able to obtain patent rights on products, treatment methods or manufacturing processes that we may develop or to which we may obtain license or other rights.  Even if we do obtain patents, rights under any issued patents may not provide us with sufficient protection for our product candidates or provide sufficient protection to afford us a commercial advantage against our competitors or their competitive products or processes.  It is possible that no patents will be issued from any pending or future patent applications owned by us or licensed to us.  Others may challenge, seek to invalidate, infringe or circumvent any patents we own or license.  Alternatively, we may in the future be required to initiate litigation against third parties to enforce our intellectual property rights.  The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome is favorable to us.  Any adverse outcome could subject us to significant liabilities, require us to license disputed rights from others, or require us to cease selling our future products.
 
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In addition, many other organizations are engaged in research and product development efforts that may overlap with our products.  Such organizations may currently have, or may obtain in the future, legally blocking proprietary rights, including patent rights, in one or more products or methods under development or consideration by us.  These rights may prevent us from commercializing technology, or may require us to obtain a license from the organizations to use the technology.  We may not be able to obtain any such licenses that may be required on reasonable financial terms, if at all, and we cannot be sure that the patents underlying any such licenses will be valid or enforceable.  As with other companies in the pharmaceutical industry, we are subject to the risk that persons located in other countries will engage in development, marketing or sales activities of products that would infringe our patent rights if such activities were conducted in the United States.
 
Our patents also may not afford protection against competitors with similar technology.  We may not have identified all patents, published applications or published literature that affect our business either by blocking our ability to commercialize our product candidates, by preventing the patentability of our products or by covering the same or similar technologies that may affect our ability to market or license our product candidates.  Many companies have encountered difficulties in protecting and defending their intellectual property rights in foreign jurisdictions.  If we encounter such difficulties or are otherwise precluded from effectively protecting our intellectual property rights in either the United States or foreign jurisdictions, our business prospects could be substantially harmed.  In addition, because of funding limitations and our limited cash resources, we may not be able to devote the resources that we might otherwise desire to prepare or pursue patent applications, either at all or in all jurisdictions in which we might desire to obtain patents, or to maintain already-issued patents.
 
We may become involved in patent litigations or other intellectual property proceedings relating to our future product approvals, which could result in liability for damages or delay or stop our development and commercialization efforts.
 
The pharmaceutical industry has been characterized by significant litigation and other proceedings regarding patents, patent applications, and other intellectual property rights.  The situations in which we may become parties to such litigation or proceedings may include any third parties initiating litigation claiming that our products infringe their patent or other intellectual property rights; in such case, we will need to defend against such proceedings.  For example, the field of generic pharmaceuticals is characterized by frequent litigation that occurs in connection with the regulatory filings under Section 505(b)(2) of the FFDCA and attempt to invalidate the patent of the reference drug.
 
The costs of resolving any patent litigation or other intellectual property proceeding, even if resolved in our favor, could be substantial.  Many of our potential competitors will be able to sustain the cost of such litigation and proceedings more effectively than we can because of their substantially greater resources.  Uncertainties resulting from the initiation and continuation of patent litigation or other intellectual property proceedings could have a material adverse effect on our ability to compete in the marketplace.  Patent litigation and other intellectual property proceedings may also consume significant management time.
 
In the event that a competitor infringes upon our patent or other intellectual property rights, enforcing those rights may be costly, difficult, and time-consuming.  Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time-consuming and could divert our management’s attention.  We may not have sufficient resources to enforce our intellectual property rights or to defend our patent or other intellectual property rights against a challenge.  If we are unsuccessful in enforcing and protecting our intellectual property rights and protecting our products, it could materially harm our business.
 
We depend on our officers.  If we are unable to retain our key employees or to attract additional qualified personnel, our product operations and development efforts may be seriously jeopardized.
 
Our success will be dependent upon the efforts of a small management team and staff, including Dennis J. Carlo, Ph.D., our chief executive officer.  The employment of Dr. Carlo may be terminated at any time by either us or Dr. Carlo.  We currently do not have key man life insurance policies covering any of our executive officers or key employees.  If key individuals leave us, we could be adversely affected if suitable replacement personnel are not quickly recruited.  There is competition for qualified personnel in all functional areas, which makes it difficult to attract and retain the qualified personnel necessary for the operation of our business.  Our success also depends in part on our ability to attract and retain highly qualified scientific, commercial and administrative personnel.  If we are unable to attract new employees and retain existing key employees, the development and commercialization of our product candidates could be delayed or negatively impacted.
 
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We may experience difficulties in managing growth.
 
We are a small company.  Future growth will impose significant added responsibilities on members of management, including the need to identify, attract, retain, motivate and integrate highly skilled personnel.  We may increase the number of employees in the future depending on the progress of our development of our Epinephrine PFS, Taper, cancer and vaccine, and other products and technologies.  Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.  To that end, we must be able to:
 
 
manage our clinical studies effectively;
 
 
integrate additional management, administrative, manufacturing and regulatory personnel;
 
 
maintain sufficient administrative, accounting and management information systems and controls; and
 
 
hire and train additional qualified personnel.
 
We may not be able to accomplish these tasks, and our failure to accomplish any of them could harm our financial results.
 
Risks Related to Our Common Stock and This Offering
 
Provisions of our charter documents could discourage an acquisition of our company that would benefit our stockholders and may have the effect of entrenching, and making it difficult to remove, management.
 
Provisions of our certificate of incorporation and bylaws may make it more difficult for a third party to acquire control of us, even if a change of control would benefit our stockholders.  For example, shares of our preferred stock may be issued in the future without further stockholder approval, and upon such terms and conditions, and having such rights, privileges and preferences, as our board of directors may determine, including, for example, rights to convert into our common stock.  The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any of our preferred stock that may be issued in the future.  The issuance of our preferred stock could have the effect of making it more difficult for a third party to acquire control of us.  This could limit the price that certain investors might be willing to pay in the future for shares of our common stock and discourage those investors from acquiring a majority of our common stock.  Similarly, our bylaws require that any stockholder proposals or nominations for election to our board of directors must meet specific advance notice requirements and procedures, which make it more difficult for our stockholders to make proposals or director nominations.  The existence of these charter provisions could have the effect of entrenching management and making it more difficult to change our management.  Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law.  These provisions may prohibit or restrict large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us, unless one or more exemptions from such provisions apply.  These provisions under Delaware law could discourage potential takeover attempts and could reduce the price that investors might be willing to pay for shares of our common stock in the future.
 
The price of our common stock may be volatile.
 
The market price of our common stock may fluctuate substantially.  For example, from April 2012 to December 6, 2013, the market price of our common stock has fluctuated between $0.23 and $1.05.  The price of our common stock that will prevail in the market after this offering may be higher or lower than the price you have paid, depending on many factors, some of which are beyond our control and may not be related to our operating performance.  Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile.  Some of the factors that may cause the market price of our common stock to fluctuate include:
 
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relatively low trading volume, which can result in significant volatility in the market price of our common stock based on a relatively smaller number of trades and dollar amount of transactions;
 
 
the timing and results of our current and any future preclinical or clinical trials of our product candidates;
 
 
the entry into or termination of key agreements, including, among others, key collaboration and license agreements;
 
 
the results and timing of regulatory reviews relating to the approval of our product candidates;
 
 
the initiation of, material developments in, or conclusion of, litigation to enforce or defend any of our intellectual property rights;
 
 
failure of any of our product candidates, if approved, to achieve commercial success;
 
 
general and industry-specific economic conditions that may affect our research and development expenditures;
 
 
the results of clinical trials conducted by others on products that would compete with our product candidates;
 
 
issues in manufacturing our product candidates or any approved products;
 
 
the loss of key employees;
 
 
the introduction of technological innovations or new commercial products by our competitors;
 
 
changes in estimates or recommendations by securities analysts, if any, who cover our common stock;
 
 
future sales of our common stock;
 
 
period-to-period fluctuations in our financial results;
 
 
publicity or announcements regarding regulatory developments relating to our products;
 
 
period-to-period fluctuations in our financial results, including our cash and cash equivalents balance, operating expenses, cash burn rate or revenue levels;
 
 
common stock sales in the public market by one or more of our larger stockholders, officers or directors;
 
 
our filing for protection under federal bankruptcy laws;
 
 
a negative outcome in any litigation or potential legal proceeding; or
 
 
other potentially negative financial announcements, such as a review of any of our filings by the Securities and Exchange Commission, referred to as the Commission or the SEC, changes in accounting treatment or restatement of previously reported financial results or delays in our filings with the SEC.
 
The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies.  These broad market fluctuations may also adversely affect the trading price of our common stock.  In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies.  Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.
 
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Trading of our common stock is limited.
 
Trading of our common stock is limited, and trading restrictions imposed on us by applicable regulations may further reduce our trading, making it difficult for our stockholders to sell their shares.
 
Trading of our common stock is currently conducted on the OTCQB.  The liquidity of our common stock is limited, not only in terms of the number of shares that can be bought and sold at a given price, but also as it may be adversely affected by delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us, if at all.
 
The foregoing factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.  In addition, without a large public float, our common stock is less liquid than the stock of companies with broader public ownership, and as a result, the trading price of our common stock may be more volatile.  In the absence of an active public trading market, an investor may be unable to liquidate his or her investment in our common stock.  Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger.  We cannot predict the price at which our common stock will trade at any given time.
 
Our common stock is currently traded on the OTCQB and is subject to additional trading restrictions as a “penny stock,” which could adversely affect the liquidity and price of such stock.  If our common stock remains subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be adversely affected.
 
Our common stock currently trades on the OTCQB.  The OTCQB, the OTC Bulletin Board and Pink Sheets are viewed by most investors as a less desirable, and less liquid, marketplace.  As a result, an investor may find it more difficult to purchase, dispose of or obtain accurate quotations as to the value of our common stock.
 
Unless our common stock is listed on a national securities exchange, such as the NASDAQ Capital Market, our common stock will also be subject to the regulations regarding trading in “penny stocks,” which are those securities trading for less than $5.00 per share, and that are not otherwise exempted from the definition of a penny stock under other exemptions provided for in the applicable regulations.  The following is a list of the general restrictions on the sale of penny stocks:
 
 
Before the sale of penny stock by a broker-dealer to a new purchaser, the broker-dealer must determine whether the purchaser is suitable to invest in penny stocks.  To make that determination, a broker-dealer must obtain, from a prospective investor, information regarding the purchaser’s financial condition and investment experience and objectives.  Subsequently, the broker-dealer must deliver to the purchaser a written statement setting forth the basis of the suitability finding and obtain the purchaser’s signature on such statement.
 
 
A broker-dealer must obtain from the purchaser an agreement to purchase the securities.  This agreement must be obtained for every purchase until the purchaser becomes an “established customer.”
 
 
The Securities Exchange Act of 1934, or the Exchange Act, requires that before effecting any transaction in any penny stock, a broker-dealer must provide the purchaser with a “risk disclosure document” that contains, among other things, a description of the penny stock market and how it functions and the risks associated with such investment.  These disclosure rules are applicable to both purchases and sales by investors.
 
 
A dealer that sells penny stock must send to the purchaser, within 10 days after the end of each calendar month, a written account statement including prescribed information relating to the security.
 
These requirements can severely limit the liquidity of securities in the secondary market because fewer brokers or dealers are likely to be willing to undertake these compliance activities.  If our common stock is not listed on a national securities exchange, the rules and restrictions regarding penny stock transactions may limit an investor’s ability to sell to a third party and our ability to raise additional capital.  We make no guarantee that market-makers will make a market in our common stock, or that any market for our common stock will continue.
 
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Our stockholders have approved a reverse stock split that is intended to increase the price per share of our common stock such that it would not be subject to the “penny stock” rules, and we have applied to list the common stock on The Nasdaq Capital Market.  However, no assurance can be given that we will be able to obtain or maintain any listing of the common stock on The Nasdaq Capital Market or other national securities exchange, or that the per share price of our common stock will improve following the reverse stock split such that our common stock will no longer be subject to these rules.
 
Our principal stockholders have significant influence over us, they may have significant influence over actions requiring stockholder approval, and your interests as a stockholder may conflict with the interests of those persons.
 
Based on the number of outstanding shares of our common stock held by our stockholders as of November 30, 2013, our directors, executive officers and their respective affiliates owned approximately 41.5% of our outstanding shares of common stock and our largest stockholder owned approximately 28.2% of the outstanding shares of our common stock.  As a result, those stockholders have the ability to exert a significant degree of influence with respect to the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.  The interests of these persons may not always coincide with our interests or the interests of our other stockholders.  This concentration of ownership could harm the market price of our common stock by (i) delaying, deferring or preventing a change in corporate control, (ii) impeding a merger, consolidation, takeover or other business combination involving us, or (iii) discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.  The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.
 
In preparing our consolidated financial statements, our management determined that our disclosure controls and procedures, and that our internal controls over financial reporting, were ineffective as of March 31, 2013, which could result in material misstatements in our financial statements.  If we continue to fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover additional material weaknesses and other deficiencies in our internal controls over financial reporting, our stock price could decline and raising capital could be more difficult.
 
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.  As of March 31, 2013, our management determined that our disclosure controls and procedures were ineffective, and that there was a material weakness in our internal controls over financial reporting, due to insufficient segregation of duties in our finance and accounting function because of limited personnel, based on the absence of finance and accounting personnel other than the Chief Financial Officer.  This resulted in not ensuring appropriate segregation of duties between incompatible functions, and made it more difficult to ensure review of financial reporting issues sufficiently in advance of the dates on which filings are required to be made with the SEC and to ensure that financial information is adequately analyzed and reviewed on a timely basis to detect misstatements.  These above deficiencies represent a material weakness in our internal control over financial reporting given that they result in a reasonable possibility that a material misstatement to the annual or interim financial statements would not have been prevented or detected.  In addition, management determined that our disclosure controls and procedures, and that our internal controls over financial reporting had several significant deficiencies which did not rise to the level of material weakness.
 
Because the material weaknesses and significant deficiencies identified by our management will require significant financial resources to address, we expect to continue to experience these material weaknesses and significant deficiencies for the foreseeable future.  For example, in order to remediate our material weakness related in part to our limited personnel, we will need to hire additional finance and accounting personnel.  Even after applying the net proceeds from this offering, we may not have enough financial resources to remedy our current material weaknesses and significant deficiencies.
 
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If remedial measures that we intend to take are insufficient to address the ineffectiveness of our disclosure controls and procedures and our internal controls over financial reporting, or if other material weaknesses or significant deficiencies in our internal controls are discovered or occur in the future and the ineffectiveness of our disclosure controls and procedures continues, we may fail to meet our future reporting obligations on a timely basis, our consolidated financial statements may contain material misstatements, we could be required to restate our prior period financial results, our operating results may be harmed, and we could become subject to class action litigation.  Internal control deficiencies and ineffective disclosure controls and procedures could also cause investors to lose confidence in our reported financial information.  We can give no assurance that the measures we plan to take in the future will remediate the ineffectiveness of our disclosure controls and procedures or that any material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or adequate disclosure controls and procedures or circumvention of these controls.  In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.  If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could decline.
 
Our stockholders may experience significant dilution as a result of any additional financing using our securities, as the result of the securities that we issued in our June 2013 private placement transaction, or as a result of anti-dilution provisions in our Secured Notes and June Warrants.
 
We will need to raise significant additional capital in order to maintain and continue our operations.  To the extent that we raise additional funds by issuing equity securities or securities convertible into or exercisable for equity securities, our stockholders may experience significant dilution.  In addition, conversion of the Secured Notes or exercise of the June Warrants that we issued in our June 2013 private placement transaction, or exercise of other outstanding options or warrants, could result in there being a significant number of additional shares outstanding and dilution to our stockholders.  Moreover, the Secured Notes and related June Warrants include anti-dilution provision providing that, with certain exceptions, if we issue shares of common stock or options, warrants, convertible securities or other common stock equivalents, at an effective price per share less than the conversion price of the Secured Notes or the exercise price of the June Warrants (as applicable), the conversion price of the Secured Notes or the exercise price of the June Warrants (and, in certain circumstances, the number of shares issuable upon exercise of the June Warrants) will be adjusted downward to equal the per share price of the securities issued in such transaction, entitling the holders to acquire a larger number of shares upon conversion of the Secured Notes or exercise of the June Warrants, which could result in dilution to our stockholders.
 
We have not paid dividends on our common stock in the past and do not expect to pay dividends on our common stock for the foreseeable future.  Any return on investment may be limited to the value of our common stock.
 
No cash dividends have been paid on our common stock, and we do not expect to pay cash dividends on our common stock in the foreseeable future.  Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors as our board of directors may consider relevant.  If we do not pay dividends, our common stock may be less valuable because a return on a stockholder’s investment will only occur if our stock price appreciates.
 
A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline and may impair our ability to raise capital in the future.
 
Our common stock is currently traded on the OTCQB, and there have been and may continue to be periods when it could be considered “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent.  Finance transactions resulting in a large amount of newly issued shares that become readily tradable, conversion of outstanding convertible notes or debentures and sale of the shares issuable upon conversion of such notes or debentures, or other events that cause stockholders to sell shares, could place downward pressure on the trading price of our stock.  In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares of common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.  If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons, substantial amounts of our common stock in the public market, the market price of our common stock could decline.  Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
 
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Sales of additional equity securities may adversely affect the market price of our common stock.
 
We expect to incur research, development and selling, general and administrative costs, and to satisfy our funding requirements we will need to sell additional equity securities, which may be subject to registration rights, and warrants with anti-dilutive protective provisions.  The sale or the proposed sale of substantial amounts of our common stock or other equity securities in the public markets may adversely affect the market price of our common stock, and our stock price may decline substantially.  Our stockholders may experience substantial dilution and a reduction in the price that they are able to obtain upon the sale of their shares.  Also, new equity securities issued may have greater rights, preferences or privileges than our existing common stock.
 
Our obligations to the holders of our secured convertible promissory notes are secured by a security interest in substantially all of our assets.  If we default on those obligations, the Secured Note holders could foreclose on our assets.
 
As described elsewhere in this prospectus under the heading “Description of Securities,” on June 26, 2013, we completed a private placement transaction in which we issued the Secured Notes with an aggregate principal amount of $6,502,158, and related June Warrants.  Our obligations under the Secured Notes and the related transaction documents are secured by a security interest in substantially all of our assets and those of our principal subsidiaries.  As a result, upon an event of default of our obligations under the Secured Notes or the transaction documents, the holders of the Secured Notes could foreclose on their security interest and liquidate some or all of these assets, which would materially harm our business, financial condition and results of operations and could require us to reduce or cease operations.
 
Because we will have broad discretion and flexibility in how the net proceeds from this offering are used, we may use the net proceeds in ways in which you disagree.
 
We currently intend to use a portion of the net proceeds from this offering to pay amounts to 3M to complete our acquisition of the Taper DPI assets, pay any Secured Notes that are not converted into common stock in connection with this offering, support the launch of our PFS Syringe product, fund our research and development activities and for working capital and other general corporate purposes.  See “Use of Proceeds” on page 29 of this prospectus.  Other than as described in the “Use of Proceeds” section, we have not allocated specific amounts of the net proceeds from this offering for any of the foregoing purposes.  Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this offering.  You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately.  It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us.  The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.
 
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
 
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.  We do not currently have and may never obtain research coverage by industry or financial analysts.  If no or few analysts commence coverage of us, the trading price of our stock would likely decrease.  Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline.  If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
 
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You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
 
You will incur immediate and substantial dilution as a result of this offering.  After giving effect to the sale by us of up to 3,100,000  shares offered in this offering at an assumed public offering price of $10.46 per share, which is based on the closing price of the common stock on the OTCBB on December 6, 2013, of $0.615, adjusted and multiplied by the proposed 1-for-17 reverse stock split, and after deducting the underwriters’ discounts and commissions and estimated offering expenses payable by us, investors in this offering can expect an immediate dilution of $7.77 per post-reverse split share.  There are no assurances that the actual public offering price will be based on the assumed public offering price described above.  The actual public offering price may be less than the assumed public offering price described above, in which case additional dilution would result.  In addition, in the past, we issued options, warrants and convertible notes to acquire shares of common stock.  To the extent these securities are ultimately exercised or converted, you will sustain future dilution.
 
The accounting treatment for the Secured Notes and the June Warrants is complex and subject to judgments concerning the valuation of embedded derivative rights within the applicable securities.  Fluctuations in the valuation of these rights could cause us to record expenses on our financial statements and make our financial results unpredictable.
 
Our outstanding Secured Notes and June Warrants contain, or may be deemed to contain from time to time, embedded derivative rights in accordance with U.S. Generally Accepted Accounting Principles, or GAAP.  These derivative rights, or similar rights in securities that we may issue in the future, need to be, or may need to be, separately valued as of the end of each accounting period in accordance with GAAP.  We record these embedded derivatives as liabilities at issuance, valued using the Binomial option pricing model and subject to re-valuation at each reporting date.  Any change in fair value between reporting periods is reported on our statement of operations.  For the year ended March 31, 2013, we recorded a change in fair value derivative liability of $(122,945) and a change in fair value of conversion feature liability of $(1,390,292), and for the six months ended September 30, 2013, we recorded a change in fair value derivative liabilities of $(203,653), a change in fair value of conversion feature liability of $2,603,981, and a change in fair value of warrants liability of $1,404,466.  Changes in the valuation of these rights, the valuation methodology or the assumptions on which the valuations are based, could cause us to take charges to our earnings, which would adversely impact our results of operations.  Moreover, the methodologies, assumptions and related interpretations of accounting or regulatory authorities associated with these embedded derivatives are complex and in some cases uncertain, which could cause our accounting for these derivatives, and as a result, our financial results, to fluctuate.  There is a risk that questions could arise from investors or regulatory authorities concerning the appropriate accounting treatment of these instruments, which could require us to restate previous financial statements, which in turn could adversely affect our reputation, as well as our results of operations.
 
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Risks Associated with Our Proposed Reverse Stock Split
 
Our stockholders approved a proposal at our annual meeting of stockholders held on October 15, 2013, to authorize our board of directors to effect a reverse stock split of our common stock.  There are risks associated with a reverse stock split, if it is effected.
 
At our annual meeting of stockholders held on October 15, 2013, our stockholders approved a proposal to effect a reverse stock split of our issued and outstanding common stock, if our board of directors, or the Board, in its discretion determines to effect a reverse stock split, by a ratio of not less than 1-for-2 and not more than 1-for-25 at any time within 18 months after the date of the meeting, with the exact ratio to be set at a whole number within this range as determined by the Board in its sole discretion, referred to as the Reverse Stock Split, with a possible reduction in the number of shares of common stock authorized in our amended and restated certificate of incorporation, or the Restated Certificate, depending on the exact ratio of the Reverse Stock Split.  We expect to effect a 1-for-17 reverse stock split of our issued and outstanding common stock just before the date of this prospectus. However, the Board reserves the right to elect to abandon and not effect the Reverse Stock Split, including any or all proposed reverse stock split ratios, if it determines, in its sole discretion, that effecting the Reverse Stock Split is not in the best interests of the Company and its stockholders.
 
We intend to effect the Reverse Stock Split immediately before the consummation of this offering; however, there are no assurances that the Reverse Stock Split will be implemented.  If the Reverse Stock Split is effected, there are certain risks associated with the Reverse Stock Split, including the following:
 
 
We would have additional authorized shares of common stock that the Board could issue in future without stockholder approval, and such additional shares could be issued, among other purposes, in financing transactions or to resist or frustrate a third-party transaction that is favored by a majority of the independent stockholders.  This could have an anti-takeover effect, in that additional shares could be issued, within the limits imposed by applicable law, in one or more transactions that could make a change in control or takeover of us more difficult.
 
 
There can be no assurance that the Reverse Stock Split, if completed, will achieve the benefits that we hope it will achieve.  The total market capitalization of our common stock and the company after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split.
 
We intend to effect a 1-for-17  Reverse Stock Split of our outstanding common stock immediately prior to the date of this prospectus. However, the Reverse Stock Split may not increase our stock price sufficiently and we may not be able to list our common stock on The Nasdaq Capital Market, in which case this offering may not be completed.
 
We expect that the 1-for-17 Reverse Stock Split of our outstanding common stock will increase the market price of our common stock so that we will be able to meet the minimum bid price requirement of the Listing Rules of The Nasdaq Capital Market.  However, the effect of a reverse stock split upon the market price of our common stock cannot be predicted with certainty, and the results of reverse stock splits by companies in similar circumstances have been varied.  It is possible that the market price of our common stock following the Reverse Stock Split will not permit us to be in compliance with the applicable minimum bid or price requirements.  If we are unable meet the minimum bid or price requirements, we may be unable to list our shares on The Nasdaq Capital Market, in which case this offering may not be completed.
 
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Even if the Reverse Stock Split achieves the requisite increase in the market price of our common stock, we cannot assure you that we will be able to continue to comply with the minimum bid price requirement of The Nasdaq Capital Market.
 
Even if the Reverse Stock Split achieves the requisite increase in the market price of our common stock to be in compliance with the minimum bid price of The Nasdaq Capital Market, there can be no assurance that the market price of our common stock following the Reverse Stock Split will remain at the level required for continuing compliance with that requirement.  It is not uncommon for the market price of a company’s common stock to decline in the period following a reverse stock split.  If the market price of our common stock declines following the effectuation of the Reverse Stock Split, the percentage decline may be greater than would occur in the absence of a Reverse Stock Split.  In any event, other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and jeopardize our ability to meet or maintain The Nasdaq Capital Market’s minimum bid price requirement.  In addition to specific listing and maintenance standards, The Nasdaq Capital Market has broad discretionary authority over the initial and continued listing of securities, which it could exercise with respect to the listing of our common stock.
 
Even if the Reverse Stock Split increases the market price of our common stock, there can be no assurance that we will be able to comply with other continued listing standards of The Nasdaq Capital Market.
 
Even if the market price of our common stock increases sufficiently so that we comply with the minimum bid price requirement, we cannot assure you that we will be able to comply with the other standards that we are required to meet in order to maintain a listing of our common stock on The Nasdaq Capital Market.  Our failure to meet these requirements may result in our common stock being delisted from The Nasdaq Capital Market, irrespective of our compliance with the minimum bid price requirement.
 
The Reverse Stock Split may decrease the liquidity of the shares of our common stock.
 
The liquidity of the shares of our common stock may be affected adversely by the Reverse Stock Split given the reduced number of shares that will be outstanding following the Reverse Stock Split, especially if the market price of our common stock does not increase as a result of the Reverse Stock Split.  In addition, the Reverse Stock Split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
 
Following the Reverse Stock Split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors.  Consequently, the trading liquidity of our common stock may not improve.
 
Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that the Reverse Stock Split will result in a share price that will attract new investors, including institutional investors.  In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors.  As a result, the trading liquidity of our common stock may not necessarily improve.
 
27
 

 

 
 
This prospectus contains forward-looking statements.  Forward looking statements give our current expectations or forecasts of future events.  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.  Forward looking statements involve risks and uncertainties and include statements regarding, among other things, our expectations for revenues and profitability, prospective products, market acceptance, future performance results, expenses, the outcome of contingencies such as legal proceedings, our strategies and opportunities, anticipated trends in our market, our anticipated needs for working capital, current or planned clinical trials, anticipated research and development activities, anticipated dates for commencement of clinical trials, anticipated completion dates of clinical trials, anticipated meetings with the FDA or other regulatory matters concerning our product candidates, anticipated dates for submissions to obtain required regulatory marketing approvals, anticipated dates for commercial introduction of products, and other statements concerning our future operations and activities.  These statements are often, but not always, made through the use of word or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “ongoing,” “intend,” “plan,” or “would,” or the negative of these words or other variations on these words or comparable terminology.  These statements may be found under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectus generally.  These statements are based on our management’s expectations, beliefs and assumptions concerning future events affecting us, which in turn are based on currently available information.  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 prospectus.  We operate in a very competitive and rapidly changing environment.  New factors emerge from time to time.  It is not possible for us to predict all of those factors, nor can we assess the impact of all of those factors on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statements.  The forward-looking statements in this prospectus are based on assumptions management believes are reasonable as of the date on the front cover of this prospectus.  Except as may be required by applicable law, we undertake no obligation to update any forward-looking statements or to reflect events or circumstances arising after the date of this prospectus.  In addition, the statements contained throughout this prospectus concerning future events or developments or our future activities in each instance assume that we are able to obtain sufficient funding to support such activities and continue our operations and planned activities in a timely manner.  There can be no assurance that this will be the case.  Also, such statements assume that there are no significant unexpected developments or events that delay or prevent such activities from occurring.  Failure to timely obtain sufficient funding, or unexpected developments or events, could delay the occurrence of such events or prevent the events described in any such statements from occurring.  You should not place undue reliance on any forward-looking statements.
 
28
 

 

 
 
We estimate that our net proceeds from the sale of the common stock offered pursuant to this prospectus will be approximately $[●] million, or approximately $[●] million if the underwriters exercise in full their option to purchase 465,000 additional shares of common stock, after deducting the underwriting discount and the estimated offering expenses that are payable by us.
 
We intend to use approximately $7 million of the net proceeds received from this offering to make our final payment to 3M to acquire the assets relating to the Taper dry powder inhaler technology.  We will also use a portion of the net proceeds received from this offering to pay all amounts owed under any of the Secured Notes that the holders of the Secured Notes do not convert into common stock before this offering or in connection with the closing of this offering.  The Secured Notes have an original aggregate principal amount of $6,502,158.  Approximately $3 million of the proceeds from the Secured Notes was used to make the initial $3 million payment to 3M under the agreement to acquire the assets relating to the Taper dry power inhaler technology, and the balance was used for general corporate purposes.  The Secured Notes have a maturity date of December 26, 2013; however, as described elsewhere in this prospectus under the heading “Description of Securities—The Secured Notes and the June Warrants—The Secured Notes,” in connection with the closing of this offering, the holders of the Secured Notes must elect either to convert the Secured Notes or accelerate the maturity date of the Secured Notes to a date not later than 20 trading days after the final closing of this offering and receive payment equal to 115% of the outstanding principal amount and interest, if any, on the Secured Note.  As described elsewhere in this prospectus under the heading Prospectus Summary—Recent Developments,” the holders of the Secured Notes have amended the transaction documents relating to the Secured Notes to waive the right of any holder to convert the Secured Notes in connection with this offering if completed before December 26, 2013 and if the price to public of common stock sold in this offering is at or below $10.03 per post-reverse split share ($.59 per share as adjusted by the proposed 1-for-17 reverse stock split).  As a result, if the price to public of the common stock sold in this offering is at or below $10.03 per share, the previously unconverted Secured Notes will not be converted, and approximately $7,391,232 of the net proceeds from this offering will be used to pay amounts owed under the Secured Notes, representing 115% of the aggregate amount of the unconverted Secured Notes.
 
We may also use a portion of the net proceeds from this offering to pay obligations and liabilities in the ordinary course of business, including those liabilities reflected on our balance sheets included in our financial statements appearing elsewhere herein.  In addition, we may use a portion of the net proceeds from this offering to pay any accrued interest owed and any unconverted balance of principal and interest owed under an outstanding convertible promissory note dated December 31, 2012, held by an individual investor in the principal amount of $600,000, which is due March 26, 2014, which accrues interest a rate of 10% per annum, and which is convertible at the option of the holder into shares of common stock at a price of $9.35 per share ($0.55 per share, as adjusted by the proposed reverse stock split).  We intend to use the remaining net proceeds received from this offering to fund our research and development activities and for working capital and general corporate purposes, including payment of outstanding obligations and indebtedness including transaction expenses of this offering, and seeking regulatory approval for and commercially launching our Epinephrine PFS syringe product.
 
Other than as described above, we have not yet determined the amount of net proceeds to be used specifically for any of the foregoing purposes.  Accordingly, our management will have significant discretion and flexibility in applying the net proceeds from this offering.  Pending any use as described above, we intend to invest the net proceeds in high-quality, short-term, interest-bearing securities.
 
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Market and Other Information
 
Our common stock is quoted on the OTCQB quotation platform under the symbol “ADMP.”  We have applied to The Nasdaq Capital Market to list our common stock under the symbol “ADMP.”
 
Our stockholders have authorized our board of directors to approve the Reverse Stock Split in a range of not less than 1-for-2 and not more than 1-for-25.  All share and per share information in the table below does not reflect the Reverse Stock Split (which we intend to complete immediately prior to the consummation of the offering).
 
Immediately following the offering, we expect to have one class of common stock and no classes of preferred stock outstanding.  As of November 1, 2013, there were approximately 105 registered holders of record of our common stock. As of December 6, 2013, the last reported sale price of our common stock on the OTCQB on that date was $0.615 per share.
 
The following table sets forth the high and low sales price of our common stock on the OTCQB for each quarterly period during the fiscal years ended March 31, 2013 and 2012, for the first two quarters of our fiscal 2014 year, and after the end of our second quarter, as quoted in U.S. dollars.  These prices do not reflect the expected reverse stock split that we intend to effect in connection with this offering.
 
PERIOD
 
High
   
Low
 
Fiscal Year Ended March 31, 2012:
           
First Quarter (April 2011 - June 2011)
 
$
0.25
   
$
0.18
 
Second Quarter (July 2011 - September 2011)
 
$
0.26
   
$
0.17
 
Third Quarter (October 2011 - December 2011)
 
$
0.30
   
$
0.15
 
Fourth Quarter (January 2012 - March 2012)
 
$
0.25
   
$
0.15
 
Fiscal Year Ended March 31, 2013:
               
First Quarter (April 2012 - June 2012)
 
$
0.77
   
$
0.23
 
Second Quarter (July 2012 - September 2012)
 
$
0.70
   
$
0.48
 
Third Quarter (October 2012 - December 2012)
 
$
1.05
   
$
0.57
 
Fourth Quarter (January 2013 - March 2013)
 
$
0.95
   
$
0.58
 
Fiscal Year Ended March 31, 2014:
               
First Quarter (April 2013 - June 2013)
 
$
0.76
   
$
0.38
 
Second Quarter (July 2013 – September 2013)
 
$
0.67
   
$
0.38
 
Third Quarter (October 2013 – December 6, 2013)
 
$
0.70
   
$
0.22
 
 
Dividend Policy
 
We have not previously declared or paid any dividends on our common stock.  The payment of dividends on our common stock in the future will depend on our profitability at the time, cash available for those dividends, and such other factors as our board of directors may consider appropriate.  Under the terms of our transaction documents relating to the Secured Notes and June Warrants issued in our June 2013 private placement transaction, as long as the Secured Notes are outstanding we are prohibited from paying cash dividends without the prior written consent of a majority in interest of the holders of such Secured Notes.  We do not anticipate paying dividends on our common stock in the foreseeable future.
 
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If you invest in our common stock, your investment will be diluted immediately to the extent of the difference between the public offering price per share of common stock you pay in this offering, and the pro forma net tangible book value per share of common stock immediately after this offering.  Unless otherwise indicated, share and per share amounts below reflect the proposed 1-for-17 reverse stock split of our issued and outstanding common stock.
 
Pro forma net tangible book value represents the amount of our total tangible assets reduced by our total liabilities.  Tangible assets equal our total assets less goodwill and intangible assets.  Pro forma net tangible book value per share represents our pro forma net tangible book value divided by the number of shares of common stock outstanding, after giving effect to our proposed 1-for-17 reverse stock split upon consummation of the offering.  As of September 30, 2013, our actual net tangible book value was $(4,933,024) and our net tangible book value per post-reverse split share was $(0.80).
 
After giving effect to the sale of the sale of the shares in this offering at the assumed public offering price of $10.46, which represents the closing price of our common stock on the OTCBB on December 6, 2013, of $0.615, multiplied by the proposed 1-for-17 reverse stock split, and after deducting the underwriting discount and commission and estimated offering expenses, our pro forma as adjusted net tangible book value as of September 30, 2013 would have been $24,898,896, or $2.69  per post-reverse split share.  This represents an immediate increase in pro forma net tangible book value of $3.49 per share to existing stockholders and immediate dilution of $7.77 per share to new investors purchasing shares in the offering.  There are no assurances that the actual public offering price will be based on the assumed public offering price described above.  The actual public offering price may be less than the assumed public offering price described above, in which case additional dilution would result.
 
The following table illustrates this per share dilution, giving effect to our proposed reverse stock split:
 
   
As of
September
30, 2013
 
Pro Forma,
as Adjusted
 
Assumed public offering price per share
       
$
10.46
 
Net tangible book value per share as of September 30, 2013 (1)
 
$
(0.05)
     
(0.80
Increase in pro forma net tangible book value per share attributable to new investors
         
$
3.49
 
                 
Pro forma net tangible book value per share after giving effect to this offering
         
$
2.69
 
                 
Dilution in net tangible book value per share to new investors
         
$
7.77
 
                 
 

(1)
The calculation of net tangible book value as of  September 30, 2013, assumes no exercise by the underwriters of their option to purchase up to an additional 465,000 shares of common stock to cover over-allotments, if any, and excludes the following:  (i) approximately 64,171 post-reverse split shares of common stock issuable upon conversion of outstanding convertible notes and convertible debentures, other than the Secured Notes; (ii) approximately 404,622 post-reverse split shares of our common stock issuable upon exercise of outstanding stock options under our equity incentive plans with exercise prices ranging from $3.06 to $12.75 and having a weighted average exercise price of $5.78 per share as of November 30, 2013, and approximately 42,707 post-reverse split shares issuable upon the vesting of outstanding restricted stock units awarded under our equity incentive plans;; (iii) approximately 149,079 post-reverse split shares of our common stock issuable upon the exercise of outstanding warrants, other than the June Warrants, at a weighted average exercise price of $14.28 per share as of November 30, 2013; (iv) approximately 764,960 post-reverse split shares of our common stock issuable upon exercise of the June Warrants at an exercise price of approximately $12.16 per share (subject to “full-ratchet” anti-dilution protection upon certain equity issuances, including the shares of common stock offered in this offering, at prices below $12.16 per share, as defined in the June Warrants); (v) approximately 764,960 post-reverse split shares of common stock issuable upon conversion of the Secured Notes if all Secured Notes were converted in connection with this offering; and (vi) 155,000 shares of common stock underlying the warrants to be issued to the underwriters in connection with this offering.
 
If the underwriters’ overallotment option is exercised, our adjusted pro forma net tangible book value following the offering will be $2.55 per share, and the dilution to new investors in the offering will be $7.91 per share.  If any shares are issued upon exercise of outstanding options, warrants or convertible notes, new investors will experience further dilution.
 
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A $1.00 increase or decrease in the assumed public offering price per share would increase or decrease our adjusted pro forma net tangible book value per share after this offering by approximately $2.9  million, and dilution per share to new investors by approximately $0.70  for an increase of $1.00, or $(0.69) for a decrease of $1.00, after deducting the underwriting discount and estimated offering expenses payable by us.
 
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The following table sets forth our consolidated cash and cash equivalents and capitalization as of September 30, 2013.  Such information is set forth on the following basis:
 
 
 ●
on an actual basis;
 
 
 ●
on a pro forma basis, giving effect to a 1-for-17 reverse stock split prior to the consummation of this offering and the issuance of common stock, convertible notes, and warrants from September 30, 2013 through November 30, 2013; and
 
 
 ●
on a pro forma as adjusted basis, giving effect to the (i) pro forma adjustments set forth in the immediately preceding bullet, and (ii) sale of the securities in this offering at the assumed public offering price of $10.46 per share, which represents the closing price of our common stock on the OTCBB on December 6, 2013, of $0.615, multiplied by the proposed 1-for-17 reverse stock split, after deducting underwriting discounts and commissions and estimated offering expenses.
 
The pro forma as adjusted information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.  You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and the related notes appearing elsewhere in this prospectus.
                         
   
As of September 30, 2013
 
    Actual     Pro Forma    
Pro Forma
as Adjusted
(1)
 
   
(in thousands,
except per share amounts)
 
Cash and cash equivalents
 
$
120
   
$
120
   
$
29,951
 
                         
Total indebtedness
   
8,456
     
8,456
     
8,456
 
Stockholders’ equity:
                       
Preferred Stock, par value $0.0001 per share; 10,000,000 shares authorized; 0 shares issued
   
     
     
 
Common Stock, par value $0.0001 per share; authorized, 200,000,000 shares authorized; 110,104,597 shares; 104,876,409 shares issued and outstanding, and 9,269,201 shares issued and outstanding pro forma and pro forma as adjusted, respectively
   
11
      1
     
1
 
Additional paid-in capital
   
34,113
      34,123
     
66,549
 
                         
Total stockholders’ equity (deficit)
   
(4,933
)
    (4,933
)     
24,899
 
                         
Total capitalization
   
3,523
      3,523
     
33,355
 
 

(1)
A $1.00 increase or decrease in the assumed public offering would increase or decrease our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately$2.9 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this prospectus.  This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties.  See “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.  Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.
 
General
 
Company Overview
 
We are an emerging pharmaceutical company focused on combining specialty pharmaceuticals and biotechnology to provide innovative medicines for patients and physicians.  Within our group of specialty pharmaceutical products, we are currently developing four products in the allergy and respiratory markets, including a dry powder inhaler technology that we recently exclusively licensed and have rights to acquire from 3M Company.  Our goal is to create low cost therapeutic alternatives to existing treatments.  Consistent across all specialty pharmaceuticals product lines, Adamis intends to pursue section 505(b)(2) NDA regulatory approval filings with the FDA whenever applicable in order to reduce the time needed to get to market and to save on costs, compared to section 505(b)(1) NDA filings for new drug products.  Within our group of biotechnology products, we are focused on the development of therapeutic vaccine product candidates and cancer drugs for patients with unmet medical needs in the multi-billion dollar global cancer market.
 
Our general business strategy is to generate revenue through launch of our 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.
 
Recent Developments
 
On August 1, 2013, we entered into an agreement to exclusively license and, upon final payment and a closing before December 31, 2013 or, in certain circumstances June 30, 2014, acquire assets relating to 3M Company’s patented Taper dry powder inhaler, or DPI, platform technology under development for the treatment of asthma and chronic obstructive pulmonary disease, or COPD.  The Taper DPI technology was being developed by 3M to compete with other dry powder inhalers such as GlaxoSmithKline’s Advair Diskus.  We intend to utilize the Taper DPI assets initially to develop a pre-metered inhaler device for the treatment of asthma and COPD, to deliver the same active ingredients as GlaxoSmithKline’s Advair Diskus.  Upon completion of product development and clinical trials and if required regulatory approvals are obtained, we intend to commercially market the inhaler product to compete for a share of the Advair market with a branded generic version utilizing the acquired technology.  Pursuant to the agreement, we made an initial payment of $3.0 million to 3M and acquired an exclusive license to the DPI assets, and upon a final payment to 3M of $7.0 million before December 31, 2013 or, in certain circumstances $8.0 million before June 30, 2014, and satisfaction of other customary closing conditions, the DPI assets will be transferred to us.  If we do not make the final payment before the required dates, 3M may terminate the license and the agreement.
 
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Going Concern and Management’s 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, 2013 and 2012 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 March 31, 2013 and September 30, 2013, we had cash and cash equivalents of $0 and approximately $120,000, respectively, an accumulated deficit as of September 30, 2013 of approximately $39.1 million, no accounts receivable and substantial liabilities and obligations.  We incurred net losses of approximately $7.2 million and $1.1 million for the year ended March 31, 2013 and the six months ended September 30, 2013, respectively.  We will need significant funding to continue operations, satisfy our obligations and fund the future expenditures that will be required to conduct the clinical and regulatory work to develop our product candidates.  Such additional funding may not be available, may not be available on reasonable terms, and could result in significant additional dilution to our stockholders.  If we do not obtain required additional equity or debt funding, our cash resources will be depleted and we could be required to materially reduce or suspend 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, at least until additional funding is obtained. 
 
The above conditions raise substantial doubt about our ability to continue as a going concern.  The financial statements included elsewhere herein were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business.  In preparing these consolidated financial statements, consideration was given to our future business as described elsewhere herein, which may preclude us from realizing the value of certain assets.  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.  Without additional funds from debt or equity financing, sales of assets, sales or out-licenses of intellectual property or technologies, or from a business combination or a similar transaction, we will soon exhaust our resources and will be unable to continue operations.  If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in us.
 
Our management intends to attempt to secure additional required funding primarily through additional equity or debt financings, including through this offering.  We may also seek to secure required funding through 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 required funding.  If we are unsuccessful in securing funding from any of these sources, we will defer, reduce or eliminate certain planned expenditures and delay development or commercialization of some or all of our products.  If we do 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.
 
Results of Operations
 
Our consolidated results of operations are presented for the fiscal years ending March 31, 2013 and 2012, and for the six months ending September 30, 2013 and 2012.
 
Year Ended March 31, 2013 and Year Ended March 31, 2012
 
Revenues.  Adamis had no revenues during the year ending March 31, 2013 and 2012, respectively.
 
Selling, General and Administrative Expenses.  Selling, general and administrative expenses for fiscal 2013 and 2012 were approximately $2.0 million and $2.6 million, respectively.  Selling, general and administrative expenses consist primarily of legal fees, accounting and audit fees, consulting expenses, and employee salaries.  The elimination of a reserve for product returns accounted for approximately $168,000 of the decrease in selling, general and administrative expenses.  Reductions in salaries and consulting expenses accounted for approximately $168,000 and $261,000, respectively, of the decrease during the 12 months ended March 31, 2013.
 
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 expenses were approximately $1.2 million and $2.2 million for the fiscal years ended March 31, 2013 and 2012, respectively, which were expensed.  The decrease in research and development expenses for fiscal 2013 compared to fiscal 2012 was primarily due to reduced availability of capital in fiscal 2013 compared to fiscal 2012.
 
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Other Income (Expenses).  Other income (expense) for fiscal 2013 and 2012 was approximately $(3,800,000) and $(30,000), respectively.  Other income (expense) consist primarily of changes in the fair value of derivative and conversion features of our convertible notes, as well as interest expense paid in connection with various notes payable.  The increase in the value of derivative and conversion features of our convertible notes, as well as interest expense for fiscal 2013, in comparison to fiscal 2012 was due to the issuance of convertible notes in fiscal 2013.
 
Six Months Ended September 30, 2013 and 2012
 
Revenues. Adamis had no revenues during the six month periods ending September 30, 2013 and 2012, 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 $419,000 and $529,000 for the six months ending September 30, 2013 and 2012, respectively.
 
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the six months ending September 30, 2013 and 2012 were approximately $1,278,000 and $1,047,000, respectively. Selling, general and administrative expenses consist primarily of legal fees, accounting and audit fees, professional/consulting fees and employee salaries.
 
Other Income (Expense). Interest expense for the six month period ending September 30, 2013 and 2012 was approximately $(3,182,000) and approximately $(874,000), respectively. Interest consists primarily of interest expense in connection with various notes outstanding at September 30, 2013, and the amortization of debt issuance costs as well as the amortization of the discounts on the notes for the six months ended September 30, 2013. The increase in interest expense for the six month period ended September 30, 2013, in comparison to the same period for fiscal 2013 was due to the new notes payable entered into during the first quarter of fiscal 2014. The change in fair value of the derivative liability for the period was approximately $(204,000) and the change in the fair value of the conversion feature was approximately $2,604,000. The change in fair value of warrants liability was approximately $1,404,000. The June 26, 2013 notes contain full ratchet anti-dilution provisions and the corresponding changes in fair value are recorded in Other Income (Expense).
 
Financial Position
 
Total assets, all of which are classified as current, were approximately $3,523,000 at September 30, 2013, an increase of approximately $3,172,000 from March 31, 2013.  Liabilities, all of which are classified as current, exceed current assets by approximately $4,930,000 at September 30, 2013.
 
The most significant change in assets resulted from the payment of a $3,000,000 non-refundable deposit to initially license and acquire certain intellectually property and assets from 3M Company and 3M Innovative Properties Company. 
 
The most significant change in liabilities results in the amortization of note payable discounts recorded in conjunction with the Secured Notes issued with the June 26, 2013 private placement transaction.  Amortization of these discounts was approximately $2,456,000.
 
Liquidity and Capital Resources
 
We have incurred net losses of approximately $7.2 million and $4.9 million for the years ended March 31, 2013 and 2012, respectively, and net losses of approximately $1.1 million and $3.6 million for the six months ended September 30, 2013 and 2012, respectively.  Since our inception, June 6, 2006, and through September 30, 2013, we have an accumulated deficit of approximately $39.1 million.  Since inception and through September 30, 2013, we have financed our operations principally through debt financing and through private issuances of common stock.  Since inception, we have raised a total of approximately $29.1 million in debt and equity financing transactions, consisting of approximately $15.7 million in debt financing and approximately $13.4 million in equity financing transactions.  We expect to finance future cash needs primarily through proceeds from equity or debt financings, loans, sales of assets, out-licensing transactions, and/or collaborative agreements with corporate partners.  We have used the net proceeds from debt and equity financings for general corporate purposes, which have included funding for research and development, selling, general and administrative expenses, working capital, reducing indebtedness, pursuing and completing licenses, acquisitions or investments in other businesses, products or technologies, and for capital expenditures.
 
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Net cash used in operating activities from continuing operations for fiscal 2013 and 2012 was approximately $2.6 million and $3.3 million, respectively.  The decrease in the use of cash was due primarily to an increase in accounts payable and accrued other expenses.  We expect net cash used in operating activities to increase going forward as we continue product development and other business activities, assuming that we are able to obtain sufficient funding.
 
Net cash provided by financing activities from continuing operations was approximately $2.6 million in fiscal 2013 and approximately $2.1 million in fiscal 2012.  Results for fiscal 2013 were affected by proceeds from the issuance of five notes.
 
Net cash used in operating activities for the six months ended September 30, 2013 and 2012, was approximately $(2.0) million and $(1.9) million, 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 used in investing activities for the six months ended September 30, 2013 and 2012 was $3,000,000 and $0, respectively. Results for the six months ended September 30, 2013 represents the payment of the non-refundable deposit to 3M described in Note 4 to the condensed consolidated financial statements for the six months ended September 30, 2013, included elsewhere herein.
 
Net cash provided by financing activities was approximately $5.1 million and $1.9 million for the six months ended September 30, 2013 and 2012. Results for the six months ended September 30, 2013, were affected primarily by $5.3 million of proceeds received from the a private placement completed in June 2013 and the reduction of a promissory note from a related party.
 
On December 31, 2012, we issued a convertible promissory note in the principal amount of $600,000 and 600,000 shares of common stock to a private investor, and received gross proceeds of $600,000, excluding transaction costs and expenses.  Interest on the outstanding principal balance of the note accrues at a rate of 10% per annum compounded monthly and is payable monthly commencing February 1, 2013 with an original maturity date of September 30, 2013.  The maturity date of the note is extended to March 26, 2014 as a result of the June 2013 financing transaction.  In consideration for the amendment of the maturity date, the company granted the private investor warrants to purchase 22,059 post-reverse split shares of common stock.  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 note into common stock at a conversion price equal to $9.35 per post-reverse split share, subject to adjustment for stock dividends, stock splits, reverse stock splits, or other similar events.  The proceeds from the note were used to retire the October 25, 2012 note.
 
On June 26, 2013, we completed the closing of a private placement financing transaction with a small number of accredited institutional investors.  Pursuant to a subscription agreement and other transaction documents, we issued the Secured Notes and June Warrants, and received gross cash proceeds of $5,300,000, of which approximately $286,300 was used to pay for transaction costs, fees and expenses.  The Secured Notes have an original aggregate principal amount of $6,502,158, including a $613,271 principal amount Secured Note issued to a previous investor in exchange for its previously outstanding June 2012 convertible note, which is no longer outstanding.  The maturity date of the Secured Notes is December 26, 2013.  Our obligations under the Secured Notes and the other transaction documents are guaranteed by our principal subsidiaries and, pursuant to a Security Agreement entered into with the investors, are secured by a security interest in substantially all of our assets and those of the subsidiaries.  The Secured Notes are convertible into shares of common stock at any time at the discretion of the investor at an initial conversion price per share of $0.50 ($8.50 per post-reverse split share).  The initial exercise price of the June Warrants is $0.715 per pre-reverse split share ($12.16 per post-reverse split share).  The June Warrants are exercisable for a period of five years from the date of issuance.
 
As noted above under the heading “Going Concern and Management’s Plan,” Adamis has substantial liabilities and obligations.  If we do not obtain additional equity or debt funding, our cash resources will be depleted and we will be required to materially reduce or suspend operations.  Even if are successful in obtaining additional funding to permit us to continue operations at the levels that we desire, substantial time will pass before we obtain regulatory marketing approval for any products and begin to realize revenues from product sales, and during this period Adamis will require additional funds.  No assurance can be given as to the timing or ultimate success of obtaining future funding.
 
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Critical Accounting Policies and Estimates
 
The discussion and analysis of our financial condition and results of operations are based on our audited consolidated financial statements, and our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, 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 from these estimates under different assumptions or conditions.
 
We believe the following accounting policies and estimates are most critical to aid in understanding and evaluating our reported financial results.  For further discussion of our accounting policies, see Note 3 in the accompanying notes to our audited consolidated financial statements appearing elsewhere in this prospectus.
 
Stock-Based Compensation.  We account for stock-based compensation transactions in which we receive employee services in exchange for options to purchase common stock.  Stock-based compensation cost for restricted stock units, or RSUs, is measured based on the closing fair market value of our common stock on the date of grant.  Stock-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes option-pricing model.  We recognize stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period.
 
Derivative Financial Instruments.  Derivatives are recognized as either assets or liabilities in the consolidated balance sheets and are measured at fair value.  The treatment of gains and losses resulting from changes in the fair values of derivative instruments is dependent on the use of the respective derivative instrument and whether they qualify for hedge accounting.  As of March 31, 2013 and September 30, 2013, no derivative instruments qualified for hedge accounting.
 
Accounting Standards Codification (ASC) 815 - Derivatives and Hedging provides guidance to determine what types of instruments, or embedded features in an instrument, are considered derivatives.  This guidance can affect the accounting for convertible instruments that contain provisions to protect holders from a decline in the stock price, or down-round provisions.  Down-round provisions reduce the exercise price of a convertible instrument if a company either issues equity share for a price that is lower than the exercise price of those instruments, or issues new convertible instruments that have a lower exercise price.
 
We recognize the derivative assets and liabilities at their respective fair values at inception and on each reporting date.  We utilized a binomial option pricing model to develop our assumptions for determining the fair value of the conversion and anti-dilution features of its notes.  See Note 8 in the accompanying audited financial statements for further discussion of derivative instruments.
 
Off Balance Sheet Arrangements
 
At March 31, 2013 and September 30, 2013, we did not have any off balance sheet arrangements.
 
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Recent Accounting Pronouncements
 
In July 2013, the Financial Accounting Standards Board (FASB) issued accounting guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward exists.  Under this guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward.  This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  Other than a potential change in presentation within a potential consolidated balance sheet, this accounting guidance will not have an impact on our consolidated financial position, results of operations or cash flows.
 
Inflation
 
It is our opinion that inflation has not had a material effect on our operations.
 
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Our general business strategy is to generate revenue through launch of our allergy and respiratory products in development, in order to generate cash flow to help fund expansion of our allergy and respiratory business.  To achieve our goals and support our overall strategy, we may need to raise a substantial amount of funding and make substantial investments in equipment, new product development and working capital.
 
Overview and Business Strategy
 
We are an emerging pharmaceutical company focused on combining specialty pharmaceuticals and biotechnology to provide innovative medicines for patients and physicians.  Within our group of specialty pharmaceutical products, we are currently developing four products in the allergy and respiratory markets, including a dry powder inhaler technology that we recently exclusively licensed and have the rights to acquire from 3M Company.  Our goal is to create low cost therapeutic alternatives to existing treatments.  Consistent across all specialty pharmaceuticals product lines, we intend to pursue section 505(b)(2) New Drug Application (NDA) regulatory approval filings with the FDA whenever possible in order to reduce the time needed to get to market and to save on costs, compared to 505(b)(1) NDA filings for new drug products.  Within our group of biotechnology products, we are focused on the development of therapeutic vaccine product candidates and cancer drugs for patients with unmet medical needs in the multi-billion dollar global cancer market.  The current status of our development programs is as follows:
 
Product Portfolio
 
Specialty Pharmaceutical Products
 
Target Indication
 
Development Status (1)
Epinephrine PFS
 
Anaphylaxis
 
Submit for regulatory approval to sell
APC-5000
 
Asthma/COPD
 
Phase 3 trial (2)
APC-1000
 
Asthma/COPD
 
Phase 3 trial (2)
APC-3000
 
Allergic Rhinitis
 
Phase 3 trial (2)
         
Biotechnology Products
 
Target Indication
 
Development Status (1)
TeloB-VAX (vaccine)
 
Prostate Cancer
 
Phase 2 trial
APC-100
 
Prostate Cancer
 
Phase 1 trial (3)
APC-200
 
Prostate Cancer
 
Preclinical
APC-300
 
Prostate Cancer
 
Preclinical
 

(1)
Represents the next development or regulatory stage that Adamis intends to pursue.
(2)
A single Phase 3 trial, without previous Phase 1 or Phase 2 trials, is anticipated.
(3)
Phase 1/2a clinical trial has commenced and is ongoing.
 
Anaphylaxis
 
American Academy of Allergy Asthma and Immunology, or AAAAI, defines anaphylaxis as a serious, life-threatening allergic reaction.  The most common anaphylactic reactions are to foods, insect stings, medications and latex.  According to information published by AAAAI, up to 8% of U.S. children under the age of 18 have a food allergy, and approximately 38% of those with a food allergy have a history of severe reactions.
 
Anaphylaxis requires immediate medical treatment, including an injection of epinephrine.  The number of prescriptions for epinephrine products has grown annually, as the risk of anaphylaxis has become more widely understood.  We estimate that sales of prescription epinephrine products in 2012 were at least $800 million, based on industry data. We cannot provide any assurances concerning any possible future rates of annual growth or whether annual prescriptions will decline or grow.
 
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Epinephrine Pre-Filled Syringe
 
Our most advanced product candidate, Epinephrine Injection USP 1:1000 0.3mg Pre-filled Single Dose Syringe, or the Epinephrine PFS, is a simple syringe designed to deliver a premeasured 0.3 mg dose of epinephrine for the treatment of anaphylaxis.  The syringe is protected in a hard plastic carrying case small enough to fit, for example, in a shirt pocket.
 
We believe that there is an opportunity for a simple, low-cost, intuitive pre-filled syringe to compete in this market.  We believe that our Epinephrine PFS has the potential to compete against other marketed products based on the following:
 
Lower Price.  We expect to introduce the Epinephrine PFS product at a price point reflecting a discount to the price of the leading products.  A lower-priced option may be attractive to individuals that pay cash for their epinephrine products, professional users such as hospitals and first responders, and military and prison systems.
 
Ease of Use.  Auto-injectors, such as EpiPen, Twinject and Auvi-Q, are powerful spring-loaded auto-injector devices.  If not administered properly, they can misfire or be misused.  Our Epinephrine PFS product will allow users to administer a pre-measured epinephrine dose quickly with a simple syringe that we believe will be familiar to many potential users.
 
We believe that the Epinephrine PFS product, if introduced, may acquire a share of the market based on the price differential between the expected price of the Epinephrine PFS product and the price at which the market-leading product is currently sold, which may motivate purchasers and reimbursing payors to choose the lower cost alternative.  We believe that the Epinephrine PFS product has the potential to compete successfully, although there can be no assurance that this will be the case.
 
With the help of our contract manufacturer, we have accumulated what we believe is all of the required data, and are preparing a 505(b)(2) submission to the FDA for approval for sale of the Epinephrine PFS product.  We hope to make the submission within a few months after the closing of this offering and, assuming no unexpected regulatory delays, to receive an approval by the end of calendar year 2014 or early in 2015.  Under goals established in connection with the Prescription Drug User Fee Act, or PDUFA, the FDA’s guidance for the review and acting on standard NDA submissions that do not relate to new molecular entities, which we believe will be the case with our Epinephrine PFS product, is 10 months from the date of receipt of the submission.  However, the FDA’s review processes can extend beyond, and in some cases significantly beyond, anticipated completion dates due to FDA requests for additional information or clarification, difficulties scheduling an advisory committee meeting, FDA workload issues or other reasons.  See “Government Regulation—Regulation in the United States.”  As a result, the dates of regulatory approval, if obtained, and commercial introduction of our product could be delayed beyond our expectations.  We estimate that approximately $2.0 million to $2.5 million, which includes anticipated required regulatory filings fees, will be required over the next 12 months to support the regulatory application and a commercial launch of the Epinephrine PFS product following marketing approval, assuming no unexpected delays or expenses.  The Federal Food, Drug, and Cosmetic Act, as amended by the Prescription Drug User Fee Amendments of 2012, authorizes the FDA to collect user fees for certain applications for approval of drug and biological products.  The stated fee for the government’s fiscal 2014 year for an application requiring clinical data is $2,169,100.  For an application not requiring new clinical data, such as we believe will be the case with our Eprinephrine PFS product, or a supplement requiring clinical data, the application fee is $1,084,550.  These fees are effective commencing October 1, 2013 and will remain in effect at least through September 30, 2014.  Fee rates are reviewed and adjusted annually and are published in the Federal Register, typically in August for the subsequent fiscal year.
 
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Asthma and COPD
 
According to the National Institute of Health, or NIH, asthma is a chronic lung disease that inflames and narrows the airways.  Asthma causes recurring periods of wheezing, chest tightness, shortness of breath, and coughing.  Asthma affects people of all ages, but it most often starts during childhood.  According to information published by AAAAI, the number of people in the U.S. with asthma is approximately 25 million and growing.
 
COPD, or chronic obstructive pulmonary disease, is a progressive disease that makes it difficult to breathe.  COPD can cause coughing that produces large amounts of mucus, wheezing, shortness of breath, chest tightness, and other symptoms.  According to the NIH, cigarette smoking is the leading cause of COPD.  Most people who have COPD smoke or used to smoke.  However, long-term exposure to other lung irritants such as air pollution, chemical fumes, or dust may also contribute to COPD.
 
We estimate that global sales of asthma and COPD prescription products was approximately $14 billion in 2012, based on industry data. Within the global asthma and COPD market, one product in particular, we estimate that Advair Diskus marketed by GlaxoSmithKine, generated more than $4 billion in U.S. sales and $8 billion in global sales in 2012, based on GSK’s publicly announced results.  The Advair Diskus is a dry powder inhaler, or DPI, product that combines fluticasone propionate, or fluticasone and salmeterol xinafoate, or salmeterol.  Inhaled fluticasone belongs to the family of medicines known as corticosteroids or steroids.  It works by preventing certain cells in the lungs and breathing passages from releasing substances that cause asthma symptoms.  Inhaled salmeterol is a long-acting bronchodilator.  Bronchodilators are medicines that are breathed in through the mouth to open up the bronchial tubes (air passages) in the lungs.  It relieves cough, wheezing, shortness of breath, and troubled breathing by increasing the flow of air through the bronchial tubes.  The combination of the two medicines, as in the Advair Diskus, is used when a patient’s asthma has not been controlled sufficiently on other asthma medicines, or when a patient’s condition is so severe that more than one medicine is needed every
 
Taper DPI
 
Adamis entered into an agreement dated as of August 1, 2013 with 3M Company to exclusively license and, upon final payment acquire, assets relating to 3M Company’s patented Taper dry powder inhaler, or DPI, technology under development by 3M.  The Taper DPI technology was under development as a device designed to efficiently deliver dry powder by utilizing a 3M proprietary microstructured carrier tape, to be supplied by 3M under a separate supply agreement to be negotiated with 3M.  We believe that, once developed, the device can be utilized to deliver a wide variety of different drug compounds.  We intend to utilize the Taper DPI assets initially to develop a pre-metered inhaler device for the treatment of asthma and chronic obstructive pulmonary disorder, or COPD, to deliver the same active ingredients as GlaxoSmithKline’s Advair Diskus.  Upon completion of product development and clinical trials and if required regulatory approvals are obtained, we intend to commercially market the inhaler product to compete for a share of the Advair market with a branded generic version utilizing the Taper technology.
 
We believe that one advantage of the Taper DPI technology is that it can deliver drug particles without the need for lactose or formulation excipients.  The majority of current dry powder products use lactose carrier excipients to enhance flowability; however, they have the disadvantage of increased bulk and require a mechanism for detaching the drug from the surface of the lactose.  Lactose carrier formulations require a complicated blending process and delivery that is highly sensitive to excipient powder properties.  There are currently no excipient-free dry powder inhalers in the U.S. market.
 
Due to the design of Taper DPI, it can efficiently deliver drug without the need for formulation excipients.  As such, it enables consistent dose metering and delivery across a broad dosing range.  In addition, high fine particle fractions are achievable, which could allow more active drug to be delivered deep into the patient’s lungs.
 
We are currently preparing an investigational new drug application, or IND, to be submitted to the FDA for approval to begin human testing of Taper DPI.  Assuming receipt of sufficient funding and if clinical trials are initiated and successfully completed, we intend to pursue an NDA under Section 505(b)(2) of the FDCA to seek approval for sale in the U.S. market. Assuming no unforeseen delays and if we successfully complete product development and trials and receive regulatory approval, we estimate that we could commence sales of the product in 2016 or 2017, although there are no assurances that this will be the case. We also intend to seek to identify opportunities to market Taper DPI based products outside of the U.S.
 
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Additional Allergy Products
 
Additional product candidates in our allergy and respiratory product pipeline include a steroid hydrofluoroalkane, or HFA, metered dose inhaler product, referred to as APC-1000, for asthma and COPD and an HFA pressurized metered dose nasal steroid for the treatment of seasonal and perennial allergic rhinitis, referred to as APC-3000. We estimate that the market for inhaled oral steroids, and the market for inhaled nasal steroids, or INS, as estimated by us based on industry data is approximately $3 billion and $1.3 billion annually, respectively. INS products are sold under prescription for seasonal allergic rhinitis. Our product candidates, if developed and approved for marketing, will target small niches within these markets.
During fiscal 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 anti-retrovirals.  We intend to develop the APC-1000 product with Beximco.  Once developed, we anticipate that we will transfer the specifications to Beximco for manufacturing.  Adamis and Beximco intend to introduce a number of separate drugs into the U.S. over the next several years in the allergy and respiratory areas and may co-develop certain drugs.  The anticipated dates of development and introduction of APC-1000 and APC-3000 will depend on a number of factors, including the availability of adequate funding to support product development efforts.  We expect APC-1000 and APC-3000 to be considered “new” drugs by the FDA, and accordingly we believe that we will be required to submit data for an application for approval to market both products pursuant to Section 505(b)(2) of the Food Drug and Cosmetics Act, or FDCA, although there are no assurances that this will be the case.  We intend to conduct a Phase 3 pivotal trial for APC-1000 and APC-3000 but do not believe that Phase 1 or Phase 2 trials will be required.  Total time to develop the APC-1000 and APC-3000 products, including manufacture of the products, clinical trials and FDA review, is expected to be approximately 24-30 months from inception of full product development efforts, assuming no unforeseen regulatory or other delays.  Factors that could affect the actual launch date for our allergy and respiratory product candidates, as well as our other product candidates, include the outcome of discussions with the FDA concerning the number and kind of clinical trials that the FDA will require before the FDA will consider regulatory approval of the applicable product, any unexpected difficulties in licensing or sublicensing intellectual property rights for other components of the product such as the inhaler, patent infringement lawsuits relating to Paragraph IV certifications as part of any Section 505(b)(2) filings, see “Government Regulation—Regulation in the United States—Section 505(b)(2) New Drug Applications,” any unexpected difficulties in the ability of our suppliers to timely supply quantities for commercial launch of the product, any unexpected delays or difficulties in assembling and deploying an adequate sales force to market the product, unexpected events affecting Beximco’s participation in developing and manufacturing products, and receipt of adequate funding to support product development and sales and marketing efforts.
 
Cancer
 
Cancer is a group of diseases in which malignant cells grow out of control and spread to other parts of the body. Normally, your body forms new cells as you need them, replacing old cells that die.  Sometimes this process goes afoul, new cells grow when you don’t need them, and old cells do not die when they should.  Extra cells can form a mass called a tumor.  Those tumors can be benign or malignant (cancerous).  Cells from malignant tumors can invade nearby tissues and can spread to other parts of the body, called metastasis.  Most treatment plans include surgery, radiation or chemotherapy.  Some may involve hormone therapy, biologic therapy, or stem cell transplantation.
 
We believe that there is a significant market opportunity for our product candidates, should they be successfully developed, approved and commercialized.  We believe that there is a significant need for new products and that there is growing interest in targeted therapies for the treatment of cancer.
 
TeloB-VAX
 
In April 2011, we acquired exclusive rights to patented telomerase-based cancer vaccine technology from the Regents of the University of California and 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 candidate for 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 common tumor markers, telomerase reverse transcriptase, or telomerase.  We believe that a vaccine product, if developed, will utilize the patient’s own B cells as antigen producing and antigen presenting cells.
 
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In a Phase 1 study completed at UCSD in castrate resistant prostate cancer patients, the vaccine product candidate was shown to be safe and well tolerated.  The vaccine was found to be immunogenic, and was shown to induce a specific CD8 T cell response.  More important, the T cells induced post-vaccination were shown to specifically kill prostate cancer cells.  We believe that if future trials are successful and a vaccine product is developed, such a vaccine product may have a number of competitively advantageous features, including:  prolonged antigen presentation by B cells; induction of an immune response after a single injection; no need for complicated culture procedures; much fewer steps; and potentially lower cost than other competitive products.  This vaccine product candidate is covered by what we believe is a unique patented platform technology using a cancer antigen marker, telomerase, that is increased in approximately 85% of all tumors.
 
We believe that this technology may represent one of the first concrete opportunities to program the immune system to mobilize killer lymphocytes to combat cancer cells, including progenitor cancer stem cells that were shown to also express telomerase.
 
Prostate Cancer
 
According to the American Cancer Society, prostate cancer is the second-most common cancer in American men and the second leading cause of cancer death in American men.  The ACS estimated that for 2013 in the United States, approximately 238,000 new cases of prostate cancer will be diagnosed and about 29,700 men will die of prostate cancer in 2013.
 
The Human Prostate and Prostate Cancer; Disease and Market Background
 
The prostate is a walnut-sized gland located in front of the rectum and underneath the urinary bladder.  It is found only in men.  The prostate starts to develop before birth and continues to grow until a man reaches adulthood.  This growth is fueled by male hormones, the so-called androgens.  The main androgen produced by men is the hormone testosterone.  Testosterone can be converted by the body into dihydrotestosterone, which in turn signals the prostate to grow.  The prostate stays at adult size in adult males as long as the male hormone is present at physiological levels.
 
A prostate cancer develops when cells in the prostate begin to grow out of control, and a cancerous tumor can form.  Several types of cells are found in the prostate, but most prostate cancers develop from gland cells within the prostate.  Prostate cancer, or PCa, is one of the most invasive malignancies and a leading cause of cancer related deaths in many countries.  Metastatic prostate cancer is advanced prostate cancer that has spread beyond the prostate and surrounding tissues into distant organs and tissues.  The majority of men who die from prostate cancer die from the consequences of metastatic disease.  According to the National Cancer Institute, the five-year survival rate of patients with prostate cancer that has metastasized to distant organs is only about 28%.  Metastatic prostate cancer is generally divided into two states:  the androgen hormone-sensitive, androgen-dependent or castrate sensitive PCa state, referred to as CS-PCa; and the castrate-resistant PCa state, or CR-PCa, also referred to as the androgen hormone-refractory, androgen-independent, or the Androgen Deprivation Therapy, or ADT, resistant state.
 
Testosterone and other male sex hormones, known collectively as androgens, can fuel the growth of prostate cancer cells.  Androgens exert their effects on prostate cancer cells by binding to and activating the Androgen Receptor, which is expressed in prostate cancer and other cells.  When they first metastasize to distant sites, most prostate cancers depend on androgen hormone for tumor growth.  These prostate cancers are CS-PCa prostate cancers.
 
For patients with advanced, metastatic CS-PCa prostate cancer, the standard of care is treatment with hormonal ablation therapy, also known as ADT.  ADT is used to suppress production or block the action of androgens.  Accordingly, the leading therapies currently used for the treatment of prostate cancer, after it recurs following radiation or surgery, are focused on diminishing the production of androgens, or antagonizing the effects of androgens by blocking the Androgen Ligand Binding Domain on the Androgen Receptor inside prostate cancer cells with drugs known as anti-androgens.  Thus, these two different effects are achieved through two separate therapeutic approaches.  The first approach is often to reduce the amount of androgens produced in the body, primarily in the testes.  This can be achieved by surgical castration by removal of both testicles, or alternatively through use of one or two different kinds of ADT drugs, called chemical castration.
 
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Adamis, collaborators, and many others now commonly recognize that androgen deprivation therapy causes prostate cancer cell programmed cell death, referred to as apoptosis, and can also contribute to pathophysiological chronic inflammation in men with CS-PCa.  There is significant published data supporting the important role of chronic inflammation in the change from CS-PCa to CR-PCa.
 
In summary, the standard treatment for localized advanced, recurrent, and metastatic prostate cancer is ADT, which blocks the growth promoting effects of androgens and activates apoptosis.  After an initial favorable response, progression to androgen-independence or castration resistance is the usual outcome for which there are currently no curative treatment options.  Some survival extensions can sometimes be achieved using current Taxol-based chemotherapy protocols, or recently approved therapies such as Provenge and ZYTIGA.
 
In 2010, Adamis licensed patents and related intellectual property relating to three cancer drug candidates developed at the University of Wisconsin.  We believe these drug candidates, named APC-100, -200 and -300, may offer significant new treatment opportunities for prostate cancer.
 
APC-100
 
APC-100 is the most advanced of the three drug candidates.  In animal studies conducted to date, APC-100 demonstrated anti-androgenic and anti-inflammatory activities against prostate tumors growing in animal models and showed a strong safety profile in preclinical safety studies.  In 2006, APC-100 was awarded the National Cancer Institute, or NCI, Rapid Award.  The award is given for promising new drugs for the treatment of cancer and resulted in significant funding for research and development of APC-100.  APC-100 has demonstrated desirable pharmacological characteristics as an oral or injectable anti-inflammatory and anti-androgenic drug candidate with multiple mechanisms of action.  APC-100 decreases secretion of human PSA by human prostate cancer cells growing in mice and also increases the time-to-tumor progression and survival of mice with prostate sensitive and castrate resistant tumors.  In animal studies, APC-100 was found to be more effective than Casodex or Flutamide, which are leading prostate cancer treatments.
 
In August 2011, we announced the enrollment of 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 was extended to the Wayne State University Karmanos Cancer Institute.  In the trial, each patient will be assessed for toxicity, biochemical responses (PSA), radiographic and clinical responses.  After completion of the Phase 1/2a APC-100 trial, we expect that we would meet with the FDA to review the trial results and determine the continuation of the clinical development with Phase 2b studies.
 
Additional Cancer Products
 
APC-200 is a drug candidate for both castrate-sensitive and castrate resistant prostate cancer.  In 2007, APC-200 was awarded the NCI Rapid Award.  APC-200 blocks androgen-induced hydrogen peroxide production and inflammation and inhibits mouse prostate cancer.  In animal studies conducted to date, APC-200 was an excellent inhibitor of chronic inflammation, also completely inhibiting oxidase mediated high rates of hydrogen peroxide production in vivo, and delaying prostate cancer progression and death in the standard mouse prostate cancer model.  After conclusion of the pre-clinical development activities, such as GMP manufacturing of drug substance and drug product, as well as conclusion of the pre-clinical safety, pharmacology and toxicology studies, we anticipate filing and opening an Adamis-sponsored IND relating to the clinical investigation of oral APC-200 in PCa patients with castrate resistant prostate cancer, assuming adequate funding and no unexpected delays.
 
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APC-300 is a multi-targeted small molecule therapeutic drug that we believe has the potential to demonstrate anti-inflammatory, pro-apoptotic anti-cancer activities for prostate cancer patients, including men with advanced metastatic castrate resistance prostate cancer.  In pre-clinical in vitro studies conducted to date, APC-300 repeatedly demonstrated inhibition of human tumor cell growth and the ability to kill both castrate-sensitive and castrate-resistant human prostate cancer tumors.  It also materially decreased tumor volumes and suppressed local metastasis in human to mouse xenograft models, where malignant human prostate, pancreas, or melanoma tumor tissue was grafted onto athymic immunosuppressed experimental mice.  We have not yet developed a clinical protocol and other materials for submission of an IND, due to funding limitations, and we expect to begin that process once we have adequate funding.
 
Other Technologies
 
STI Technology
 
In addition, we have licensed patented vaccine technology that we believe has the potential to provide protection against a number of different viral infectious agents. This novel vaccination strategy, which employs DNA plasmids, appears, based on preclinical studies conducted to date, to have the ability to “train” a person’s immune system to recognize and mount a defense against particular aspects of a virus’s structure.  If successful, we believe this technology will give physicians a new tool in generating immunity against a number of viral infections that have been difficult to target in the past.
 
The first target indication for this technology has yet to be determined, but will be based on market, technology, and patent position considerations. Disease targets might include therapeutic vaccines for Influenza, Hepatitis B and C, which are known to be involved in hepatocellular carcinomas, Human Papillomavirus, which is known to be involved in head and neck squamous cell carcinomas, and prostate cancer.
 
The licensed technology was developed by Dr. Maurizio Zanetti, M.D., a professor at the Department of Medicine at UCSD.  Dr. Zanetti has developed and patented a method of DNA vaccination by somatic transgene immunization, or STI.  We have entered into a worldwide exclusive license with Dr. Zanetti, through a company of which he is the sole owner, Nevagen, LLC, to utilize the technology within the field of viral infectious agents.  We believe that the technology may have broad applications and intend to target viral disease indications for its initial proof of concept.
 
STI, also sometimes called TLI, has already been tested in Phase I studies in humans for other vaccine applications.  An immune response was elicited in the study, and the results suggested that the procedure was safe and well tolerated.  We have conducted certain experiments in mice utilizing the STI technology, but our testing is currently at the preclinical stage.
 
We currently intend to focus initially on the development of one or more of the other licensed prostate cancer product candidates and technologies, and as a result the timing of development of this viral vaccine technology is subject to uncertainty.
 
Savvy/C31G
 
We also have a microbicide product candidate, named Savvy (C31G).  On December 7, 2010, we announced the successful completion of a Phase 3 contraceptive trial of C31G.  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 clinical investigators found that C31G was not inferior in contraceptive efficacy to the comparator drug Conceptrol.  Moreover, the gel was well-tolerated and had a high degree of acceptability in women who completed the study.  No drug-related serious adverse events were observed with C31G.  Drug-related side effects of C31G were generally mild and did not lead to discontinuation.  Currently, to our knowledge all spermicides commercially available in the U.S., including Conceptrol, contain the active ingredient nonoxynol-9, or N-9, in a carrier such as a gel, film, cream, foam, suppository, or tablet.  N-9 has been reported in some studies to cause irritant and allergic reactions in some users.  Although the Conceptrol® product was effective and well-tolerated in the trial, there were a lower number of drug-related events with the C31G gel and fewer women discontinued the study due to drug-related side effects.  C31G does not contain N-9 and, if commercialized, may offer an alternative for women who seek a non-hormonal method of contraception.  In addition, on September 9, 2013, we announced that a recently published study conducted by university researchers at Louisiana State University Health Science Center found that C31G was effective in treating Herpes Simplex Virus, or HSV, in an eye infection, ocular keratitis, animal model using live rabbits.  The rabbit eye model utilized for the study mimics the disease in humans.  In the same study the researchers also reported that ocular administration of C31G was safe and well tolerated, confirming earlier clinical studies that established C31G safety and tolerability in other applications.  HSV-1 is the same virus that causes cold sores and is common in humans.  In the eye, it usually causes an infection of the cornea, and that infection is the most common cause of cornea-derived blindness.  In previous animal studies, C31G was also active against HSV-2, the cause of genital herpes.
 
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Before considering any actions to seek regulatory approval for a C31G product, further meetings with the FDA would likely be required to discuss the regulatory pathways for submitting an NDA for marketing approval, including whether any additional trials will be required before an NDA is submitted.  In considering commercialization alternatives, we would likely seek to enter into an out-licensing or similar transaction with organizations that have a focus or business unit in the area of antimicrobials or contraception, or in other fields where C31G may have potential as a product candidate.  The C31G product candidate is held by our Biosyn, Inc. subsidiary, which we acquired in 2004.  Provisions in the agreement pursuant to which we acquired Biosyn, and/or in certain of the funding agreements and other agreements relating to the C31G product, provide for payments to the former Biosyn shareholders upon marketing approval by the FDA (or, in certain circumstances, certain foreign regulatory authorities) of C31G for one or more indications, for payments to certain other third parties in the event of sales or other revenues relating to C31G or certain other events, and include limitations on certain activities of Biosyn including payment of dividends.  In addition, sale or out-licensing of the C31G product candidate may require the consent of one or more such third parties.  As a result, commercialization of the product may require renegotiation of the provisions relating to the former Biosyn shareholders and such third parties.  Accordingly, there can be no assurances that we will be able to successfully conclude a transaction involving C31G or concerning the amounts that we might receive from any such transaction, or that any C31G product will be submitted for regulatory approval or will be approved or marketed.
 
For our fiscal 2013 and fiscal 2012 years, we estimate that we have spent approximately $1.2 million and $2.2 million, respectively, on research and development activities.
 
Clinical Supplies and Manufacturing
 
We have no in-house manufacturing capabilities.  We rely on third-party contract manufacturers to make the material used to support the development of our product candidates.  We purchase the material used in our clinical trial activities from various companies and suppliers.
 
Sales and Marketing
 
We do not currently have sales or marketing capabilities.  In order to commercially market any pharmaceutical product that we successfully advance through preclinical and clinical development and for which we obtain regulatory approval, we must either develop a sales and marketing infrastructure or collaborate with third parties with sales and marketing capabilities.  We have not yet developed a sales and marketing strategy for any pharmaceutical products that we may successfully develop.
 
Customers and Distribution
 
We do not currently sell or distribute pharmaceutical products.
 
Competition
 
The biotechnology and pharmaceutical industries are extremely competitive.  Our potential competitors in the field are many in number and include major pharmaceutical and specialized biotechnology companies.  Many of our potential competitors have significantly more financial, technical and other resources than we do, which may give them a competitive advantage.  In addition, they may have substantially more experience in effecting strategic combinations, in-licensing technology, developing drugs, obtaining regulatory approvals and manufacturing and marketing products.  We cannot give any assurances that we can compete effectively with these other biotechnology and pharmaceutical companies.  Our potential competitors in these markets may succeed in developing products that could render our products and those of our collaborators obsolete or non-competitive.  In addition, many of our competitors have significantly greater experience than we do in the fields in which we compete.
 
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Our allergy and respiratory products and inhaled nasal steroid product, if developed and launched, will compete with numerous prescription and non-prescription over-the-counter products targeting similar conditions, including, in the seasonal or perennial rhinitis areas, cough and cold, as well as prescription generic products, and with other inhaled nasal steroid products.  In addition, a number of large pharmaceuticals companies produce pharmaceutical products, such as antihistamines, corticosteroids and anti-leukotriene agents, which manage allergy and respiratory symptoms.  The Epinephrine PFS product, if commercialized, will compete against other self-administered epinephrine products, including EpiPen, EpiPen Jr., Auvi-Q and Twinject.  Our APC-5000 product, if developed and commercialized, is expected to compete with allergy inhaler products offered by several companies, including GlaxoSmithKline.  The development and commercialization of new drugs for cancer, and of vaccine products for viral infections, is highly competitive.  Most of the larger pharmaceutical companies, and many smaller public and private companies, have products or are engaged in research and development activities in these fields.
 
Intellectual Property
 
Our success will depend in large part on our ability to:
 
 
obtain and maintain international and domestic patent and other legal protections for the proprietary technology, inventions and improvements we consider important to our business;
 
 
prosecute and defend our patents;
 
 
preserve our trade secrets; and
 
 
operate without infringing the patents and proprietary rights of other parties.
 
We intend to continue to seek appropriate patent protection for product candidates in our research and development programs where applicable and their uses by filing patent applications in the United States and other selected countries.  We intend for these patent applications to cover, where possible, claims for composition of matter, medical uses, processes for preparation and formulations.
 
We own or are the licensees of a total of thirteen issued United States patents, and related U.S. applications and foreign patents and patent applications, relating to our APC-100, APC-200, APC-300, telomerase, STI, Taper DPI and C31G technologies and product candidates.
 
Although we believe that our rights under patents and patent applications provide a competitive advantage, the patent positions of pharmaceutical and biotechnology companies are highly uncertain and involve complex legal and factual questions.  We may not be able to develop patentable products or processes, and may not be able to obtain patents from pending applications.  Even if patent claims are allowed, the claims may not issue, or in the event of issuance, may not be sufficient to protect the technology owned by or licensed to us.  Any patents or patent rights that we obtain may be circumvented, challenged or invalidated by our competitors.
 
We also rely on trade secrets, proprietary know-how and continuing innovation to develop and maintain our competitive position, especially when we do not believe that patent protection is appropriate or can be obtained.  We seek protection of these trade secrets, proprietary know-how and any continuing innovation, in part, through confidentiality and proprietary information agreements.  However, these agreements may not provide meaningful protection for, or adequate remedies to protect, our technology in the event of unauthorized use or disclosure of information.  Furthermore, our trade secrets may otherwise become known to, or be independently developed by, our competitors.
 
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Government Regulation
 
Pharmaceutical Regulation
 
If and when we market any pharmaceutical products in the United States, they will be subject to extensive government regulation.  Likewise, if we seek to market and distribute any such products abroad, they would also be subject to extensive foreign government regulation.
 
In the United States, the FDA regulates pharmaceutical products.  FDA regulations govern the testing, manufacturing, advertising, promotion, labeling, sale and distribution of pharmaceutical products, and generally require a rigorous process for the approval of new drugs.  We also may be subject to foreign regulatory requirements governing clinical trials and drug product sales if products are tested or marketed abroad.  The approval process outside the United States varies from jurisdiction to jurisdiction and the time required may be longer or shorter than that required for FDA approval.
 
Regulation in the United States
 
The FDA testing and approval process requires substantial time, effort and money.  We cannot assure you that any of our products will ever obtain approval.  Our potential products will be regulated either as biological products or as drugs.  In the United States, drugs are subject to regulation under the FDCA.  Biological products, in addition to being subject to provisions of the FDCA, are regulated under the Public Health Service Act, or PSHA.  Both statutes and related regulations govern, among other things, testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising, and other promotional practices.  The FDA approval process for new drugs and biologics includes, without limitation:
 
 
preclinical studies;
 
 
submission of an Investigational New Drug application, or IND, for clinical trials;
 
 
adequate and well-controlled human clinical trials to establish safety and efficacy of the product;
 
 
review of a New Drug Application, or NDA, or review of a Biologics License Application, or BLA; and
 
 
inspection of the facilities used in the manufacturing of the drug to assess compliance with the FDA’s current Good Manufacturing Practices, or cGMP, regulations.
 
Preclinical studies include laboratory evaluation of the product, as well as animal studies to assess the potential safety and effectiveness of the product.  Most of these studies must be performed according to good laboratory practices, a system of management controls for laboratories and research organizations to ensure the consistency and reliability of results.  The results of the preclinical studies, existing clinical and/or human use data (if applicable) together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which we are required to file before we can commence any clinical trials for our product candidates in the United States.  Clinical trials may begin 30 days after an IND is received, unless the FDA raises concerns or questions about the conduct of the clinical trials.  If concerns or questions are raised, an IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed.  We cannot assure you that submission of any additional IND for any of our preclinical product candidates will result in authorization to commence clinical trials.
 
Clinical trials involve the administration of the product candidate that is the subject of the trial to volunteers or patients under the supervision of a qualified principal investigator.  Each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at each institution at which the study will be conducted.  The IRB will consider, among other things, ethical factors, safety of human subjects and the possible liability of the institution arising from the conduct of the proposed clinical trial.  Also, clinical trials must be performed according to good clinical practices, which are enumerated in FDA regulations and guidance documents.
 
Clinical trials typically are conducted in sequential phases:  Phases 1, 2 and 3.  The phases may overlap.  The FDA may require that we suspend clinical trials at any time on various grounds, including if the FDA makes a finding that the subjects participating in the trial are being exposed to an unacceptable health risk.
 
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In Phase 1 clinical trials, a drug is usually tested on patients to determine safety, any adverse effects, proper dosage, absorption, metabolism, distribution, excretion and other drug effects.
 
In Phase 2 clinical trials, a drug is usually tested on a limited number of subjects to preliminarily evaluate the efficacy of the drug for specific, targeted indications, determine dosage tolerance and optimal dosage, and identify possible adverse effects and safety risks.
 
In Phase 3 clinical trials, a drug is usually tested on a larger number of subjects in an expanded patient population and at multiple clinical sites.
 
We cannot assure you that any of our current or future clinical trials will result in approval to market our products.
 
A NDA or BLA must include comprehensive and complete descriptions of the preclinical testing, clinical trials and the chemical, manufacturing and control requirements of a drug that enable the FDA to determine the drug’s or biologic’s safety and efficacy.  A NDA or BLA must be submitted, filed and approved by the FDA before any product that we may successfully develop can be marketed commercially in the United States.
 
The facilities, procedures and operations for any of our contract manufacturers must be determined to be adequate by the FDA before product approval.  Manufacturing facilities are subject to inspections by the FDA for compliance with cGMP, licensing specifications and other FDA regulations before and after an NDA or BLA has been approved.  Foreign manufacturing facilities are also subject to periodic FDA inspections or inspections by foreign regulatory authorities.  Among other things, the FDA may withhold approval of NDAs, BLAs or other product applications if deficiencies are found at the facility.  Vendors that may supply us with finished products or components used to manufacture, package and label products are also subject to similar regulations and periodic inspections.
 
In addition, the FDA imposes a number of complex regulatory requirements on entities that advertise and promote pharmaceuticals, including, but not limited to, standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities, and promotional activities involving the Internet.
 
Failure to comply with FDA and other governmental regulations can result in fines, unanticipated compliance expenditures, recall or seizure of products, total or partial suspension of production and/or distribution, suspension of the FDA’s review of NDAs or BLAs, injunctions and criminal prosecution.  Any of these actions could have a material adverse effect on us.
 
Some of our cancer and vaccine product candidates may involve biological products, which are subject to regulation under the PHSA.  In addition to the FDA requirements, the NIH has established guidelines for research involving human genetic materials, including recombinant DNA molecules.  The FDA cooperates in the enforcement of these guidelines, which apply to all recombinant DNA research that is conducted at facilities supported by the NIH, including proposals to conduct clinical research involving gene therapies.  The NIH review of clinical trial proposals and safety information is a public process and often involves review and approval by the Recombinant DNA Advisory Committee, or RAC, of the NIH.  Some of our cancer and vaccine product candidates may be subject to NIH RAC review.
 
The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests, proposed labeling and other relevant information are submitted to the FDA in the form of a BLA, requesting approval to market the product for one or more specified indications.  The submission of a BLA is subject to the payment of substantial user fees.
 
Once the FDA receives an NDA or BLA, it has 60 days to review the application to determine if it is substantially complete and the data is readable, before it accepts the NDA or BLA for filing.  Once the submission is accepted for filing, the FDA begins an in-depth review of the submission to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and purity.
 
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Under the goals and policies agreed to by the FDA under PDUFA, the FDA agrees to specific goals for NDA review time through a two-tiered classification system, Priority Review and Standard Review.  A Priority Review designation is given to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists.  For a Priority Review application, the FDA aims to complete the initial review cycle for New Molecular Entities, or NMEs, within six months of the 60 day filing date, and for non-NMEs within six months of the date of receipt. Standard Review applies to all applications that are not eligible for Priority Review. The FDA aims to complete Standard Review NDAs for NMEs within ten months of the 60 day filing date, and for Non-NMEs within ten months of the date of receipt.  Such dates are often referred to as the PDUFA dates.  The FDA does not always meet its PDUFA dates for either Standard Reviews or Priority Reviews of NDAs or BLAs.  The review process and the PDUFA date may be extended by three months if the FDA requests or the sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA date.  In addition, the FDA’s review processes can extend beyond, and in some cases significantly beyond, anticipated completion dates due to FDA requests for additional information or clarification, difficulties scheduling an advisory committee meeting, negotiations regarding any required risk evaluation and mitigation strategies, FDA workload issues or other reasons. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to the application’s approval.  The amount of time taken for the approval process is a function of a number of variables, including whether the product has received priority review, the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment of the disease in question, and the workload at the FDA.
 
The FDA may, during its review of a NDA or BLA, ask for additional test data or the conducting of additional clinical trials.  If the FDA does ultimately approve the product, it may require post-marketing testing to monitor the safety and effectiveness of the product.  In addition, the FDA may in some circumstances impose restrictions on the use of the product, which may be difficult and expensive to administer and may require prior approval of promotional materials.
 
Prior to regulatory approval, the FDA may elect to obtain advice from outside experts regarding scientific issues and/or marketing applications under FDA review.  These outside experts are convened through the FDA’s Advisory Committee process.  An Advisory Committee will report to the FDA and make recommendations.  Views of the Advisory Committee may differ from those of the FDA, and the FDA is not bound by the recommendations of an Advisory Committee.
 
Before approving an NDA or BLA, the FDA can inspect the facilities at which the product is manufactured.  The FDA will not approve the submission unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.  Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical studies were conducted in compliance with GCP requirements.  If the FDA determines that the processes and procedures used are not acceptable, it will outline the deficiencies in the submission and often will request additional clinical testing or information before an NDA or BLA can be approved.  The FDA may also inspect one or more of the preclinical toxicology research sites to assure that the preclinical studies were conducted in compliance with GLP requirements.  If the FDA determines that the studies were not performed in compliance with applicable GLP rules and regulations, the FDA may request additional preclinical testing or information before an NDA or BLA can be approved.
 
The FDA will issue a complete response letter if the agency decides not to approve the NDA or BLA.  The complete response letter describes all of the specific deficiencies in the submission identified by the FDA.  The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials.  Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval.  If a complete response letter is issued, the applicant may either resubmit the NDA or BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.
 
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If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product.  Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling.  In addition, the FDA may require post marketing studies, sometimes referred to as Phase 4 testing, which involves clinical trials designed to further assess drug safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.  After approval, certain changes to the approved drug or biologic, such as adding new indications, manufacturing changes or additional labeling claims, are subject to further FDA review and approval.  Depending on the nature of the change proposed, an NDA or BLA supplement must be filed and approved before the change may be implemented.  For many proposed post-approval changes to an NDA or BLA, the FDA has up to 180 days to review the application.  As with new NDAs or BLAs, the review process is often significantly extended by FDA requests for additional information or clarification.
 
Any drug or biologic products for which we or our collaborators receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product storage, sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, restrictions on direct-to-consumer advertising, promoting biologics for uses or in patient populations that are not described in the product’s approved labeling, known as “off-label use, industry-sponsored scientific and educational activities and promotional activities involving the internet.  The FDA closely regulates the post-approval marketing and promotion of biologics, and although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.  Failure to comply with these or other FDA requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product, injunctive action, mandated corrective advertising or communications with healthcare professionals, possible civil or criminal penalties or other negative consequences, including adverse publicity.
 
We will rely, and expect to continue to rely, on third-parties for the production of clinical and commercial quantities of our products.  Our collaborators may also utilize third-parties for some or all of a product we are developing with such collaborator.  Manufacturers are required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations.  cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation.  Drug manufacturers and other entities involved in the manufacture and distribution of approved biologics are required to register their establishments with the FDA and certain state agencies and are subject to periodic inspections by the FDA and certain state agencies for compliance with cGMP and other laws.  Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.
 
Section 505(b)(2) New Drug Applications
 
Most drug products obtain FDA marketing approval pursuant to a Section 505(b)(1) NDA filing or an Abbreviated NDA, or ANDA.  A third alternative is a special type of NDA, commonly referred to as a Section 505(b)(2) NDA, which enables the applicant to rely, in part, on the FDA’s findings of safety and efficacy of an existing product, or published literature, in support of its application.  Section 505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.  Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.  The applicant may rely upon the FDA’s findings with respect to certain pre-clinical or clinical studies conducted for an approved product.  The FDA may also require companies to perform additional studies or measurements to support the change from the approved product.  The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
 
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In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product or a method of using the product.  Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.  For some drugs, the FDA may require risk evaluation and mitigation strategies, or REMS, which could include medication guides, physician communication plans, or restrictions on distribution and use, such as limitations on who may prescribe the drug or where it may be dispensed or administered.
 
To the extent that a Section 505(b)(2) NDA relies on clinical trials conducted for a previously approved drug product or the FDA’s prior findings of safety and effectiveness for a previously approved drug product, the Section 505(b)(2) applicant must submit patent certifications in its Section 505(b)(2) application with respect to any patents for the previously approved product on which the applicant’s application relies that are listed in the Orange Book.  Specifically, the applicant must certify for each listed patent that, in relevant part, (1) the required patent information has not been filed; (2) the listed patent has expired; (3) the listed patent has not expired, but will expire on a particular date and approval is not sought until after patent expiration; or (4) the listed patent is invalid, unenforceable or will not be infringed by the proposed new product.  A certification that the new product will not infringe the previously approved product’s listed patent or that such patent is invalid or unenforceable is known as a Paragraph IV certification.  If the applicant does not challenge one or more listed patents through a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application until all the listed patents claiming the referenced product have expired.  Further, the FDA will also not approve, as applicable, a Section 505(b)(2) NDA application until any non-patent exclusivity, such as, for example, five-year exclusivity for obtaining approval of a new chemical entity, three year exclusivity for an approval based on new clinical trials, or pediatric exclusivity, listed in the Orange Book for the referenced product, has expired.
 
If the Section 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the owner of the referenced NDA for the previously approved product and relevant patent holders within 20 days after the Section 505(b)(2) NDA has been accepted for filing by the FDA.  The NDA and patent holders may then initiate a patent infringement suit against the Section 505(b)(2) applicant.  Under the FDCA, the filing of a patent infringement lawsuit within 45 days of receipt of the notification regarding a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA until the earliest to occur of 30 months beginning on the date the patent holder receives notice, expiration of the patent, settlement of the lawsuit, or until a court deems the patent unenforceable, invalid or not infringed.  Even if a patent infringement claim is not brought within the 45-day period, a patent infringement claim may be brought under traditional patent law, but it does not invoke the 30-month stay.  Moreover, in cases where a Section 505(b)(2) application containing a Paragraph IV certification is submitted after the fourth year of a previously approved drug’s five year exclusivity period and the patent holder brings suit within 45 days of notice of certification, the 30-month period is automatically extended to prevent approval of the Section 505(b)(2) application until the date that is seven and one-half years after approval of the previously approved reference product.  The court also has the ability to shorten or lengthen either the 30 month or the seven and one-half year period if either party is found not to be reasonably cooperating in expediting the litigation.
 
As a result, we may invest a significant amount of time and expense in the development of a product and our Section 505(b)(2) applications only to be subject to significant delay and patent litigation before our product may be commercialized.  Alternatively, if the prior NDA applicant or relevant patent holder does not file a patent infringement lawsuit within the specified 45 day period, the FDA may approve the Section 505(b)(2) application at any time, assuming the application is otherwise approvable.
 
Notwithstanding the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years, some pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2).  If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any Section 505(b)(2) NDA that we submit.
 
We intend to pursue a Section 505(b)(2) regulatory filing in connection with our Epinephrine PFS syringe product, APC-1000 and APC-3000 and, when developed, our inhaler product based on the Taper DPI technology.  Accordingly, if we rely in our regulatory filing on clinical trials conducted, or the FDA’s prior findings of safety and effectiveness, for a previously approved drug product that involves patents referenced in the Orange Book, then we will need to make the patent certifications or the Paragraph IV certification described above.  If we make a Paragraph IV certification and the holder of the previously approved product that we referenced in our application initiates patent litigation within the time periods described above, then we will be subject to the risks of patent litigation, with the accompanying delay described above and potentially material expense of patent litigation, before we could commercially market our product.
 
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In addition, even if we submit a 505(b)(2) application for the Epinephrine PFS product, or other future product, that relies on clinical trials conducted for a previously approved product where there are no patents for such other product with respect to which we have to provide certifications, we are subject to the risk that the FDA could disagree with our reliance on the particular previously approved product that we chose to rely on, conclude that such previously approved product is not an acceptable reference product,  and require us instead to reference another previously approved product that involves patents referenced in the Orange Book, requiring us to make the certifications described above and subjecting us to the risks of delay and expense described above.

Regulation Outside the United States
 
If we market our products in foreign countries, we also will be subject to foreign regulatory requirements governing human clinical trials and marketing approval for pharmaceutical products.  The requirements governing the conduct of clinical trials, product approval, pricing and reimbursement vary widely from country to country.  Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained before manufacturing or marketing the product in those countries.  The approval process varies from country to country and the time required for such approvals may differ substantially from that required for FDA approval.  There is no assurance that any future FDA approval of any of our clinical trials or drugs will result in similar foreign approvals or vice versa.
 
Additional Regulation
 
Third-Party Reimbursement
 
In the United States, physicians, hospitals and other healthcare providers that purchase pharmaceutical products generally rely on third-party payors, principally private health insurance plans, Medicare and, to a lesser extent, Medicaid, to reimburse all or part of the cost of the product and procedure for which the product is being used.  Even if a product is approved for marketing by the FDA, there is no assurance that third-party payors will cover the cost of the product and related medical procedures.  If they do not, end-users of the drug would not be eligible for any reimbursement of the cost, and our ability to successfully market any such drug would be materially and adversely impacted.
 
Reimbursement systems in international markets vary significantly by country and, within some countries, by region.  Reimbursement approvals must be obtained on a country-by-country basis.  In many foreign markets, including markets in which we hope to sell our products, the pricing of prescription pharmaceuticals is subject to government pricing control.  In these markets, once marketing approval is received, pricing negotiations could take significant additional time.  As in the United States, the lack of satisfactory reimbursement or inadequate government pricing of any of our products would limit their widespread use and lower potential product revenues.
 
Fraud and Abuse Laws
 
Federal and state anti-kickback and anti-fraud and abuse laws, as well as the federal Civil False Claims Act may apply to certain drug and device research and marketing practices.  The Civil False Claims Act prohibits knowingly presenting or causing to be presented a false, fictitious or fraudulent claim for payment to the United States.  Actions under the Civil False Claims Act may be brought by the Attorney General or by a private individual acting as an informer or whistleblower in the name of the government.  Violations of the Civil False Claims Act can result in significant monetary penalties.  The federal government is using the Civil False Claims Act, and the threat of significant liability, in its investigations of healthcare providers, suppliers and drug and device manufacturers throughout the country for a wide variety of drug and device marketing and research practices, and has obtained multi-million dollar settlements.  The federal government may continue to devote substantial resources toward investigating healthcare providers’, suppliers’ and drug and device manufacturers’ compliance with the Civil False Claims Act and other fraud and abuse laws.  We may have to expend significant financial resources and management attention if we ever become the focus of such an investigation, even if we are not guilty of any wrong doings.
 
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HIPAA
 
The Health Insurance Portability and Accountability Act of 1996, or HIPAA, requires the use of standard transactions, privacy and security standards and other administrative simplification provisions, by covered entities which include many healthcare providers, health plans and healthcare clearinghouses.  HIPAA instructs the Secretary of the Department of Health and Human Services to promulgate regulations implementing these standards in the United States.
 
Other Laws
 
We are also subject to other federal, state and local laws of general applicability, such as laws regulating working conditions, and various federal, state and local environmental protection laws and regulations, including laws such as the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other similar federal and state laws regarding, among other things, occupational safety, the use and handling of radioisotopes, environmental protection and hazardous substance control.  Although we believe that we have complied with these laws and regulations in all material respects and have not been required to take any action to correct any noncompliance, there can be no assurance that we will not be required to incur significant costs to comply with environmental and health and safety regulations in the future.  Our research and development activities may involve the controlled use of hazardous materials, including chemicals that cause cancer, volatile solvents, radioactive materials and biological materials that have the potential to transmit disease, and our operations may produce hazardous waste products.  If we fail to comply with these laws and regulations we could be subjected to criminal sanctions and substantial financial liability or be required to suspend or modify our operations.  Although we believe that our safety procedures for handling and disposing of these materials comply in all material respects with legally prescribed standards, we cannot completely eliminate the risk of accidental contamination or injury from these materials.  In the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our resources.
 
License Agreements
 
Agreement Relating to Taper DPI Technology
 
On August 1, 2013, we entered into an agreement to initially license and, with an additional payment, fully acquire from 3M Company certain intellectual property and assets relating to 3M’s Taper Dry Powder Inhaler, or DPI, technology under development for the treatment of asthma and COPD.  The intellectual property includes patents, patent applications and other intellectual property relating to the Taper assets.
 
Pursuant to the terms of the agreement, Adamis made an initial non-refundable payment to 3M of $3.0 million and obtained an exclusive worldwide license to the assets and intellectual property in all indications in the dry powder inhalation field through December 31, 2013.  Upon a subsequent closing payment by Adamis of an additional $7.0 million before December 31, 2013, and satisfaction of other customary closing conditions, ownership of the assets and intellectual property will be transferred to Adamis, with Adamis granting back to 3M a license to the intellectual property assets outside of the dry powder inhalation field.
 
Under the agreement, if Adamis has not made the closing payment and the closing has not occurred by December 15, 2013, then 3M may in its discretion elect to accept payment of the closing payment by delivery of a number of shares of Adamis common stock equal to $14,000,000 divided by the average of the closing prices of the Adamis common stock for the 30 trading days preceding the business day before the closing date.
 
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If the closing does not occur by December 31, 2013, then the exclusive license converts to a non-exclusive license, and 3M can license, transfer, assign or otherwise enter into any transaction involving the assets with any third party.  If after December 31, 2013, 3M sells or enters into an agreement with a third party to sell or exclusively license in any territory any of the assets, then 3M may terminate the agreement with us.  If at any time prior to June 30, 2014 3M has not entered into such an agreement with a third party and Adamis tenders the closing payment in cash plus a premium of $1,000,000, and the other closing conditions are satisfied or waived, then the assets will be transferred to Adamis with the same effect as if the closing had occurred before December 31, 2013.  If the closing does not occur by June 30, 2014, 3M may terminate the agreement.  Pursuant to the agreement, after full payment of the purchase price 3M has agreed to provide certain services to assist with transfer and transition of the assets to us.  The agreement includes certain other customary provisions, including representations and warranties, warranty disclaimers and indemnification provisions.
 
The design of the Taper DPI inhaler uses proprietary 3M technology to store the active pharmaceutical ingredients on a microstructured carrier tape.  Under the agreement, 3M and Adamis have agreed to work in good faith to negotiate and enter into a separate supply agreement before the closing providing for the supply of the drug delivery tape to be used with the product.
 
License Agreements Relating to APC-100, APC-200 and APC-300
 
Pursuant to an agreement entered into in February 2010, a privately held company assigned to us all of its rights under exclusive license agreements relating to the APC-100, APC-200 and APC-300 product candidates, in return for consideration consisting of shares of our common stock.  Under the license agreement, Wisconsin Alumni Research Foundation, or WARF, is the licensor of the patents, patent applications and related intellectual property relating to the compounds.  Under each separate agreement, WARF grants to us, as the licensee, an exclusive license, with rights of sublicense, under the patents and patent applications identified in the agreement, for the fields of human nutraceuticals, preventatives, therapeutics and diagnostics and for all territories worldwide that are covered by any of the licensed patents.
 
The license agreements include milestones that we, as the licensee, agree to meet by certain dates, relating to obtaining cumulative funding by certain dates, the filing of an IND relating to a covered product, enrollment of a first patient under a Phase II clinical trial by certain dates, and filing of an NDA with the FDA relating to a covered product by certain dates.  WARF has the right to terminate the license agreement with advance notice if we fail to meet any of the funding milestones or commercialization milestones.  Under each agreement, we agree to pay WARF a milestone payment of $25,000 upon the filing of the first IND or comparable regulatory filing for a covered product, and additional payments upon the achievement of the additional milestones, aggregating approximately $600,000.
 
Under all of the agreements, we agree to pay product royalties to WARF based on net sales of covered products, at a rate of 5% of net sales.  The agreements include customary stacking provisions providing for a reduction in royalties if we become obligated to pay royalties to other third parties on sales of covered products, but in all events the rate will be not less than 2.5% of net sales.  In addition, if we receive any fees or other payments in consideration for any rights granted under a sublicense, and the fees or payments are not based directly on the amount or value of products sold by the sublicensee or provided as reimbursement for research and development costs incurred by us, then we are obligated to pay to WARF a percentage of such payments, ranging from 10% to 40% depending on what the stage of regulatory approval and clinical trial development at the time the payments are received.  Each agreement provides that we will reimburse WARF for legal fees and other costs incurred in filing, prosecuting and maintaining the licensed patents during the term of the agreement.  These amounts will accrue for a period of four years after the date of the agreement, after which time the accrued amounts will be paid in four annual installments.
 
The term of each agreement continues until the date that none of the licensed patents under the agreement remains an enforceable patent.  We may terminate the agreement at any time with 90 days prior notice to WARF.  WARF may terminate the agreement if the date of first commercial sale of a covered product does not occur by December 31, 2020 under the APC-100 and APC-200 agreements and December 31, 2021 under the APC-300 agreement.  WARF may also terminate the agreement following our failure to meet a funding or commercialization milestone, or if we fail to pay amounts when due or deliver a development report or commits a material breach of the agreement and fail to cure the default within 90 days.
 
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Telomerase Vaccine Technology
 
Our telomerase vaccine technology was licensed pursuant to exclusive license agreements entered into in April 2011 with the Regents of the University of California and the Dana-Farber Cancer Institute, Inc.  Pursuant to the agreement with the University of California, we acquired a license to certain patents and related intellectual property rights relating to a telomerase-based cancer vaccine technology.  We licensed a complementary patent based on technology from the Dana-Farber Cancer Institute, Inc.  Under the terms of the license agreement, we licensed the patents and related intellectual property for a field that includes therapeutic and preventive cancer vaccines in humans, and for a territory that includes the United States.  The term of the license extends through the expiration date of the longest-lived patent rights covered by the agreement.  Under the agreement, we paid to the universities a small upfront license issue fee in connection with the execution of the license agreement.  We will pay the universities a small annual maintenance fee on the first three anniversaries of the date of the agreement, increasing in an immaterial amount thereafter, until we or a permitted sublicensee is commercially selling a licensed product.
 
For the first indication of a licensed product, we will make payments upon reaching specified milestones in clinical development and obtaining U.S. regulatory approval for a licensed product, potentially aggregating approximately $1.87 million if all milestone payments are made, including obtaining U.S. regulatory approval for a licensed product.  Similar payments apply to the second indication of a licensed product.  The agreement also provides that we will pay the universities royalties, in the low single digits, payable on net sales of licensed products.  The agreement includes customary provisions for adjusting the royalty rate in the case of a combination product that includes a licensed product and other products or product components.  The agreement includes customary royalty stacking provisions providing for a reduction in the royalty rate if we are required to pay royalties to other third parties to acquire patent rights necessary to make, use or sell licensed products, up to one-half of the amounts otherwise due to the universities.
 
If we enter into sublicenses of the licensed technology, then a portion of the sublicense fees received by us from the sublicensee is payable to the universities, with the exact percentage depending on the time during the product development, clinical trials and regulatory approval process that the sublicense is entered into.  If we receive product royalty payments from sublicensees, we are obligated to pay a percentage of those fees to the universities, with the exact percentage depending on the status of product development and commercialization.  Following commercial sales of a licensed product, the agreement provides for minimum annual royalties to the universities, with an increased amount starting with the third full year of sales.  We are responsible for payment of patent costs relating to the licensed patents, including patent costs previously incurred by the universities.  In the agreement, we agree to diligently proceed with the development, manufacture and sale of licensed products, and to satisfy certain development and regulatory submission milestones by certain dates.  Failure to satisfy these obligations permits the universities to either terminate the license agreement or convert the license to a non-exclusive license.  The universities may terminate the agreement if we fail to perform or violate any term of the agreement and do not cure the default within 60 days of notice.  We may terminate the agreement upon 90 days’ notice to the universities.
 
License Agreement Relating to Vaccine Technologies
 
On July 28, 2006, for consideration consisting of shares of our common stock and a $55,000 initial license fee, we entered into a worldwide exclusive license agreement with Nevagen, LLC, an entity owned by Dr. Zanetti, to utilize technology held by Nevagen within the field of viral infectious agents.  The licensed intellectual property includes the use of the technology known as “Transgenic Lymphocyte Technology” covered by certain U.S. and foreign patents and patent applications.  The license will terminate with the expiration of the U.S. patent for the intellectual property.
 
For the first product, we will make payments upon reaching specified milestones in clinical development and submission of an application regulatory approval, potentially aggregating $900,000 if all milestone payments are made.  As of the date of this prospectus, no milestones have been achieved and no milestone payments have been made.  The agreement also provides that we will pay Nevagen royalties, in the low single digits, payable on net sales received by us of covered products.  If additional technologies are required to be licensed to produce a functional product, the royalty rate will be reduced by the amount of the royalty paid to the other licensor, but not more than one-half the specified royalty rate.  Royalties and incremental payments with respect to influenza will continue until reaching a cumulative total of $10.0 million.
 
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Adamis and Nevagen have the right to sublicense with written permission of the other party.  In the event that Nevagen sublicenses or sells the improved technology to a third party, then a portion of the total payments, to be decided by mutual agreement, will be due to us.  If we sublicense the intellectual property for use in influenza to a third party, Nevagen will be paid a fixed percentage of all license fees, royalties, and milestone payments, in addition to royalties due and payable based on net sales.
 
If we grant a sublicense to another company for any indication in the field covered by the license agreement other than with respect to influenza, Nevagen will be paid a portion of all license fees, royalties and milestone payments, with the percentage declining over time based on the year in which the sublicense is granted.  Certain incremental non-flu virus related sublicensing payments described in the license agreement are specifically excluded from the royalty cap.
 
All improvements of the intellectual property conceived of, or reduced to practice by us, or made jointly by us and Nevagen, will be owned solely by us.  We granted Nevagen a royalty-free nonexclusive license to use any improvements made on the existing technology for research purposes only, but not for any commercial purposes of any kind.  We have agreed to grant to Nevagen a royalty-free license for any improvement needed for the commercialization of the intellectual property for Nevagen’s use outside the field licensed to us.  If Nevagen sublicenses or sells the improved technology to a third party, then a portion of the total payments, to be decided by mutual agreement, will be due to us.  We also have the right of first offer to license certain related technologies from Nevagen, if and when it becomes available.
 
We have the right to terminate the agreement if it is determined that no viable product can come from the licensed technology.  Upon such termination, we would be required to transfer and assign to Nevagen all filings, rights and other information in our control.  We would retain the same royalty rights for license, or sublicense, agreements if the technology is later developed into a product.  Either party may terminate the license agreement in the event of a material breach of the agreement by the other party that has not been cured or corrected within 90 days of notice of the breach.
 
Employees
 
As of November 30, 2013, we employed 8 regular full-time employees and no part-time employees.  None of our employees are subject to a collective bargaining agreement or represented by a labor or trade union, and we believe that our relations with our employees is good.  We believe that we have been successful in attracting skilled and experienced personnel, but competition for personnel is intense and there can be no assurance that we will be able to attract and retain the individuals needed.
 
Properties
 
In April 2011, we leased approximately 2,400 square feet of office space in San Diego, California.  The term of the lease is three years.  The rent for the remaining months of the lease term is approximately $5,528 per month.  There are no options to extend the lease term.  Total rent expense was $64,948 and $71,050 for the years ended March 31, 2013 and 2012, respectively.
 
Legal Proceedings
 
In addition to the matters described below, 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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Curtis Leahy, et. al. v. Dennis J. Carlo, et al.
 
Adamis and certain of its officers and/or directors, including Dennis Carlo, David Marguglio and Robert Hopkins, were named as defendants in May 2010 in a lawsuit entitled Curtis Leahy, et. al. v. Dennis J. Carlo, et al., filed in the San Diego superior court.  The plaintiffs – Antaeus Capital Partners, Curtis Leahy, and David Amron – were Adamis shareholders.  Plaintiffs asserted claims for violations of the California Corporations Code and claims for common law fraud and negligent misrepresentation, based on allegations that defendants misrepresented and omitted material information in private placement memoranda distributed by Adamis (before it was a public company) in 2006 and 2008 regarding, among other things, Adamis’ license rights with respect to certain patented anti-viral technology.
 
In 2011, the plaintiffs unsuccessfully attempted to have the lawsuit certified as a class action on behalf of a putative class of shareholders who purchased stock pursuant to either or both of Adamis’ 2006 and 2008 private placement memoranda.  The court denied the plaintiff’s motion, and plaintiffs appealed the court’s order denying class certification.
 
Adamis filed a motion for summary judgment in March 2012.  At the plaintiffs’ request, in June 2013 the parties entered into preliminary settlement negotiations.  Although Adamis believes that the plaintiffs’ allegations were without merit, Adamis and its insurance carrier agreed to a settlement of the litigation with two of the plaintiffs, including the plaintiff who had sought to be certified as the class representative, with all amounts under the settlement paid by our insurance carrier.  In August 2013, the court dismissed the remainder of the case without prejudice.
 
Agape World, Inc.
 
Agape World, Inc. is a company involved in an involuntary bankruptcy proceeding filed in 2009.  Its principal, Nicholas Cosmo, was indicted on many counts of wire fraud and other claims, based on allegations that he operated a Ponzi scheme through Agape and other entities.  Mr. Cosmo pled guilty in 2010 and to the company’s knowledge is serving his sentence in prison.  More than three years before the date of this prospectus, the bankruptcy trustee of Agape contacted Adamis by telephone, asserting that Agape World paid $1.0 million to Adamis for two million shares of common stock of Adamis, but that the stock was issued not to Agape World but instead to Mr. Cosmo, a principal of Agape World, and claiming that this constituted a fraudulent transfer.  The company believes that the trustee has recovered the stock from the principal.  The company responded to the trustee denying any fraudulent transfer or any other basis for a claim by the trustee.  There has been no further communication between the trustee and Adamis for more than three years, and no suit or any action has been filed against Adamis.  Management believes that the trustee has no basis for any fraudulent transfer or other claims against Adamis.  Due to the limited nature of discussions with Agape, the early stage of this matter and the facts in this case, the outcome of this matter cannot be determined at this time.
 
The litigation described above could divert management time and attention from Adamis, 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.
 
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Executive Officers, Directors and Key Employees
 
The following table sets forth the names and ages of the members of our board of directors, or the Board, and our executive officers and the positions held by each as of September 30, 2013.
 
NAME
 
AGE
 
PRINCIPAL OCCUPATION/POSITION WITH ADAMIS
Dennis J. Carlo, Ph.D.
 
70
 
President, Chief Executive Officer and Director
Kenneth M. Cohen
 
58
 
Consultant, Director
Craig A. Johnson
 
51
 
Consultant, Director
David J. Marguglio
 
43
 
Senior Vice President of Corporate Development, Director
Tina S. Nova, Ph.D.
 
59
 
President of Genoptix, Inc., Director
Robert O. Hopkins
 
53
 
Vice President, Finance and Chief Financial Officer
Karen K. Daniels
 
60
 
Vice President of Operations
Thomas Moll, Ph.D.
 
48
 
Vice President of Research
 
All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors.  Officers are elected annually by the board of directors and serve at the discretion of the board.
 
Executive Biographies
 
The principal occupations for the past five years (and, in some instances, for prior years) of each of our directors and executive officers are as follows:
 
Dennis J. Carlo, Ph.D.  Dr. Carlo became President, Chief Executive Officer and a director of Adamis in April 2009 in connection with the closing of the merger transaction between Cellegy Pharmaceuticals, Inc. and Adamis Corporation, which was formerly known as Adamis Pharmaceuticals Corporation, or Old Adamis; pursuant to the merger, Cellegy was the surviving corporation in the merger and changed its name to Adamis Pharmaceuticals Corporation.  Dr. Carlo was a co-founder of Old Adamis and served as its President and Chief Executive Officer, and a director, from October 2006 to April 2009.  From 2003 to 2006, he served as president of Telos Pharmaceuticals, a private biotechnology company, from 2003 to 2006.  From 1982 to 1987, he served as Vice President of Research and Development and Therapeutic Manufacturing at Hybritech Inc., a pharmaceutical and life science company which was acquired by Eli Lilly & Co in 1985.  After the sale to Lilly, Dr. Carlo, along with Dr. Jonas Salk, James Glavin and Kevin Kimberland, founded Immune Response Corporation, a public biotechnology company, where he served as its President and Chief Executive Officer from 1994 to 2002.  Before then, he held various positions with life science companies, including Merck & Co.  Dr. Carlo received a B.S. degree in microbiology from Ohio State University and has a Ph.D. in Immunology and Medical Microbiology from Ohio State University.  In 1991, Dr. Carlo received the Ernst & Young entrepreneur of the year award.
 
Kenneth M. Cohen.  Mr. Cohen has served as one of our directors since January 2011.  He is an advisor to companies, entrepreneurs and investors in the life sciences area.  He was a co-founder of publicly held Somaxon Pharmaceuticals and served as its President and Chief Executive Officer from August 2003 through December 2007 and continued as a director until June 2008.  Previously, he was an independent advisor to various biotechnology and pharmaceutical companies, entrepreneurs and investors, including Synbiotics Corporation, Applied NeuroSolutions, Inc. and Highbridge Capital Management.  From May 1996 to April 2001, he was President and Chief Executive Officer of Synbiotics Corporation, a veterinary diagnostics company.  From March 1995 to February 1996, Mr. Cohen was Executive Vice President and Chief Operating Officer for Canji Incorporated, a human gene-therapy company, until its acquisition by Schering-Plough Corporation in February 1996.  Prior to joining Canji, he was Vice President of Business Affairs at Argus Pharmaceuticals, Inc. and Vice President of Marketing and Business Development for LifeCell Corporation.  Mr. Cohen began his career at Eli Lilly and Company in 1978, where, among many different responsibilities over 10 years, he directed business planning for the Medical Instrument Systems Division and managed the launch of Prozac.  He received an A.B. in biology and chemistry from Dartmouth College and an M.B.A. from the Wharton School of The University of Pennsylvania.
 
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Craig A. Johnson.  Mr. Johnson has served as one of our directors since February 2011.  He served as Chief Financial Officer of PURE Bioscience, Inc. from August 2011 to May 2012, and Senior Vice President and Chief Financial Officer of NovaDel Pharma Inc. from 2010 to 2011.  Mr. Johnson served as Vice President and Chief Financial Officer of TorreyPines Therapeutics, Inc. from 2004 until the company’s acquisition by Raptor Pharmaceuticals Corp. in October 2009, and then as Vice President of TPTX, Inc., a wholly owned subsidiary of Raptor Pharmaceutical Corp. through March 2010.  From 1994 to 2004, he was employed by MitoKor, Inc. and last held the position of Chief Financial Officer and Senior Vice President of Operations.  Prior to joining MitoKor, Mr. Johnson served as a senior financial executive for several early-stage technology companies, and he also practiced as a Certified Public Accountant with Price Waterhouse.  Mr. Johnson served as a director and the chairman of the audit committee for Ardea Biosciences, Inc., from 2008 until the company’s acquisition by AstraZeneca PLC in June 2012.  Mr. Johnson received his B.B.A. in accounting from the University of Michigan and is a certified public accountant.
 
David J. Marguglio.  Mr. Marguglio joined Adamis as Vice President, Business Development and Investor Relations, and a director in April 2009 in connection with the closing of the merger transaction between Cellegy and Old Adamis.  Mr. Marguglio was a co-founder of Old Adamis and served as its Vice President of Business Development and Investor Relations, and a director, since its inception in June 2006 until April 2009.  From 1996 to 2006, he held various positions with Citigroup Global Markets, Smith Barney and Merrill Lynch.  Before entering the financial industry, from 1994 to 1996, he founded and ran two different startup companies, the latter of which was eventually acquired by a Fortune 100 company.  From 1993 to 1994, he served as financial counsel for the commercial litigation division of a national law firm.  He received a degree in finance and business management from the Hankamer School of Business at Baylor University.
 
Tina S. Nova, Ph.D.  Dr. Nova has served as a member of our Board of Directors since February 2011.  Dr. Nova is a co-founder of Genoptix, Inc., a medical laboratory diagnostics company, and has served as its President since 2000.  Dr. Nova also served as Genoptix’ Chief Executive Officer and as a member of its board of directors from 2000 until Novartis AG acquired Genoptix in February 2011.  Dr. Nova was a co-founder of Nanogen, Inc., a provider of molecular diagnostic tests, and she served as its Chief Operating Officer and President from 1994 to 2000.  Dr. Nova served as Chief Operating Officer of Selective Genetics, a targeted therapy, biotechnology company, from 1992 to 1994, and in various director-level positions with Ligand Pharmaceuticals Incorporated, a drug discovery and development company, from 1988 to 1992, most recently as Executive Director of New Leads Discovery.  Dr. Nova has also held various research and management positions with Hybritech, Inc., a former subsidiary of Eli Lilly & Company, a pharmaceutical company.  Dr. Nova also served as a member of the board of directors of Cypress Bioscience, Inc., a company focused on developing drugs for functional somatic syndromes.  Dr. Nova was the Chair of the board of directors of BIOCOM from March 2001 to March 2002.  Dr. Nova holds a B.S. in Biological Sciences from the University of California, Irvine and a Ph.D. in Biochemistry from the University of California, Riverside.
 
Robert O. Hopkins.  Mr. Hopkins became Vice President, Finance and Chief Financial Officer of Adamis in April 2009 in connection with the closing of the merger transaction between Cellegy and Old Adamis.  He joined Old Adamis in April 2007 as Vice President, Finance and Chief Financial Officer.  From 2000 to 2004, he was an Executive Vice President and the Chief Financial Officer of Chatham Capital Corp.  In that position he managed financial operations for a corporation that held several hospitals, an extensive life sciences operation and a number of other business units within its portfolio.  Mr. Hopkins served as Chief Financial Officer of Veritel Corp. from 1999 and 2000, a biometric software company.  He has also served as Chief Operating Officer for Circle Trust Company from 2004 to 2005, during which time he was responsible for corporate reorganization after acquiring a troubled trust company.  From 2005 until Mr. Hopkins joined Old Adamis in April 2007, he consulted for Acumen Enterprises providing analysis and business plans for the various projects with which the company was involved.  From 1997 to 1999, Mr. Hopkins was Senior Vice President for Finance for the Mariner Post-Acute Network, Atlanta, Georgia.  In this position he was responsible for financial management of a division consisting of 12 long-term, acute care hospitals.  Among his previous medical-related experience, he has served as Assistant Administrator of Finance for Kindred Hospitals; President and Chief Executive Officer of Doctors Hospital of Hyde Park; and Vice President of Accounting for Cancer Treatment Centers of America.  Mr. Hopkins received a B.S. degree in Finance from Indiana State University and an M.B.A. from Lake Forest Graduate School of Management.
 
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Karen K. Daniels.  Ms. Daniels joined Adamis in July 2009 as Vice President of Operations.  She has over 30 years of experience in operational and engineering roles across diverse industries including electronics, medical devices, contract manufacturing and pharmaceutical manufacturing.  Prior to joining Adamis, Ms. Daniels served as President of Althea Technologies from 2007 to 2009.  Althea Technologies is a contract manufacturer for the pharmaceutical industry.  She also served as Senior Director of Operations and Logistics for Vidacare, a medical device manufacturer from 2006 to 2007.  From 2003 to 2006, she was President of Lambda Power.  Ms. Daniels received a B.S. degree from the University of Arizona.
 
Thomas Moll, Ph.D.  Dr. Moll joined Adamis Pharmaceuticals in February 2008 as Vice President of Research.  He has more than 20 years of experience in both academic and industrial preclinical research and development in the areas of inflammation, immunology and cancer biology.  Prior to joining Adamis, Dr. Moll was Vice President of Research at privately held Telos Pharmaceuticals from 2003 to 2008.  From 1998 to 2003 he was Vice President of Immunology at Cardion AG, a privately held German biotech company.  Dr. Moll holds a diploma in Biology II from the University of Basel, Switzerland, and received his doctorate degree in Genetics and Biochemistry from the University of Vienna, Austria.
 
Director Experience, Qualifications, Attributes and Skills
 
We believe that the backgrounds and qualifications of our directors, considered as a group, provide a broad mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.  Our Board is composed of a diverse group of leaders in their respective fields.  Many of the current directors have executive experience at public companies, as well as experience serving on other companies’ boards, which provides an understanding of different business processes, challenges and strategies facing boards and other companies.  Further, our directors also have other experience that makes them valuable members and provides insight into issues relevant to Adamis, such as prior experience with financing transactions, acquisitions and licensing transactions.
 
The following highlights the specific experience, qualification, attributes and skills of our individual Board members that have led our Nominating and Governance Committee and the Board to conclude that these individuals should serve on our Board:
 
Dennis J. Carlo, Ph.D., brings his executive experience, including his experience in senior management positions at several companies in the life science industry including Immune Response Corporation, Hybritech Inc. and Merck & Co., his extensive knowledge of the markets in which we compete and intend to compete, and his deep knowledge of Adamis gained from his position as chief executive officer of Adamis.
 
Kenneth M. Cohen brings his extensive leadership, business and scientific knowledge of the life science industry, including his service as an officer and director of private and public biotechnology companies including Somaxon Pharmaceuticals and the knowledge gained from consulting to numerous companies in the biotechnology and pharmaceuticals industries and to entrepreneurs and investors in the life science area, as well as his previous experience working at large pharmaceutical companies.
 
Craig A. Johnson brings his extensive public accounting, financial and executive management background and experience at many pharmaceutical and life science companies including Pure Bioscience, Inc., NovaDel Pharma Inc., TorreyPines Therapeutics, Inc. and MitoKor, Inc., as well as his service on the board of directors and audit committee of Ardea Bioscience, Inc.
 
David J. Marguglio brings his executive experience, including his experience in business development of new companies and financial services background, and his deep knowledge of Adamis gained from his position as an officer of Adamis.
 
Tina S. Nova, Ph.D., brings her extensive leadership, business and scientific expertise, including her background of founding, financing, developing and operating companies in the healthcare industry, her service in senior management positions at several public and private companies in the life science industry including Genoptix, Inc., Nanogen and Selective Genetics, her experience in successfully developing, launching and commercializing medical products, and her service on other public company boards of directors.
 
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Family Relationships
 
There is no family relationship between any of our officers or directors.
 
Involvement in Certain Legal Proceedings
 
To our knowledge, during the last 10 years, none of our directors, executive officers (including those of our subsidiaries), promoters or control persons have:
 
 
had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
 
 
been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses;
 
 
been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
 
 
been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated; or
 
 
been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
 
Director Independence
 
The Board annually determines the independence of each director, based on the independence criteria set forth in the listing standards of the Marketplace Rules of Nasdaq.  In making its determinations, the Board considers all relevant facts and circumstances brought to its attention as well as information provided by the directors and a review of any relevant transactions or relationships between each director or any member of his or her family, and Adamis, its senior management or Adamis’ independent registered public accounting firm.  Based on its review, the Board determined that each member of the board of directors, other than Dr. Carlo and Mr. Marguglio who are executive officers of Adamis, is independent under the Nasdaq criteria for independent board members, and that each member of the standing committees of the Board is independent under such criteria.
 
Our Audit Committee is responsible for overseeing risk management and on at least an annual basis reviews and discusses with management policies and systems pursuant to which management addresses risk, including risks associated with our audit, financial reporting, internal control, disclosure control, legal and regulatory compliance, and investment policies.  Our Audit Committee also serves as the contact point for employees to report corporate compliance issues.  Our Audit Committee regularly reviews with our Board any issues that arise in connection with such topics.  Our full Board regularly engages in discussions of risk management to assess major risks facing the Company and reviews options for their mitigation.
 
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Summary Compensation Table
 
The following table sets forth all compensation awarded, earned or paid for services rendered in all capacities to Adamis during fiscal year 2013 and 2012 to (i) each person who served as Adamis’ chief executive officer during fiscal 2013, (ii) the two most highly compensated officers other than the chief executive officer who were serving as executive officers at the end of fiscal 2013 and whose total compensation for such year exceeded $100,000, and (iii) up to two additional individuals for whom disclosures would have been provided in this table but for the fact that such persons were not serving as executive officers as of the end of fiscal 2013, of which there were none (sometimes referred to collectively as the “named executive officers”). Except where otherwise indicated, share and per share amounts below reflect the proposed 1-for-17 reverse stock split described elsewhere in this prospectus.
                                           
                           
Non-Equity
             
               
Stock
   
Option
   
Incentive Plan
   
All Other
       
Name and Principal
     
Salary
 
Bonus
 
Awards
   
Awards
   
Compensation
   
Compensation
       
Position
 
Year
 
($)
 
($)
 
($)
   
($)
   
($)
   
($)
   
Total ($)
 
Dennis J. Carlo, Ph.D.
 
2013
 
$
500,000
       
158,258
(3)
   
150,075
(1)
   
   
$
19,471
(2)
 
$
827,804
 
President and Chief Executive Officer
 
2012
 
$
500,000
       
     
48,000
(1)
   
   
$
15,515
(2)
 
$
563,515
 
                                                       
Robert O. Hopkins
 
2013
 
$
225,000
       
63,724
(3)
   
52,526
(1)
   
   
$
15,829
(2)
 
$
357,079
 
Vice President, Chief Financial Officer
 
2012
 
$
225,000
       
     
10,000
(1)
   
   
$
11,446
(2)
 
$
246,446
 
                                                       
David J. Marguglio
 
2013
 
$
250,000
       
79,129
(3)
   
75,037
(1)
   
   
$
18,751
(2)
 
$
422,917
 
Senior Vice President, Corporate Development
 
2012
 
$
250,000
       
     
10,000
(1)
   
   
$
15,515
(2)
 
$
275,515
 
 
(1)
Reflects the grant date fair value for financial statement reporting purposes with respect to stock options granted during the years ended March 31, 2013 and 2012, respectively, calculated in accordance with applicable rules and regulations and authoritative guidance.  For a discussion of assumptions used to estimate fair value, please see Note 13 to our audited financial statements appearing elsewhere herein.  The actual amount ultimately realized from the equity awards will likely vary based on a number of factors, including, but not limited to, Adamis’ actual performance, stock price fluctuations, differences from the valuation assumptions used and the timing of exercise or applicable vesting.  Each option is intended to be an incentive stock option.  Each option has a term of 10 years from the grant date, subject to earlier termination of the term as provided in our 2009 Equity Incentive Plan, or the Plan.  Reflects stock options granted on March 6, 2013 to the named executive officers to purchase shares of common stock, as follows:  Dr. Carlo, 31,529 shares; Mr. Hopkins, 11,035 shares; and Mr. Marguglio,15,765 shares.  Each fiscal 2013 option had an exercise price equal to $11.39 per share.  For each 2013 award, the option vests at a rate of 1/36 per month becoming exercisable ratably monthly over a period of three years from the grant date.  Reflects stock options granted in fiscal 2012 to the named executive officers to purchase shares of common stock, as follows:  Dr. Carlo, 35,295 shares; Mr. Hopkins, 7,353 shares; and Mr. Marguglio,7,353 shares.  Each option vested and became exercisable immediately on the grant date with respect to one-third of the shares covered by the option, with the remaining two-thirds of the option shares vesting and becoming exercisable ratably monthly over a period of two years from the grant date.  Each fiscal 2012 option had an exercise price equal to $3.23 per share.
   
(2)
For fiscal 2013 and 2012, reflects premiums paid by Adamis on behalf of each of Messrs. Carlo, Marguglio and Hopkins for health, dental, and vision insurance.
   
(3)
Reflects restricted stock unit awards granted on March 6, 2013, with respect to the following numbers of shares of common stock:  Dr. Carlo,13,894 shares (7,316 vesting March 6, 2014 and 6,578 vesting in three equal annual installments on the anniversary of the award date); Mr. Hopkins,5,595 shares (3,292 vesting March 6, 2014 and 2,302 vesting in three equal annual installments on the anniversary of the award date); and Mr. Marguglio, 6,947 shares (3,658 vesting March 6, 2014 and 3,289 vesting in three equal annual installments on the anniversary of the award date).  The fair market value of the shares at the time of issuance was $11.39 per share.  For a discussion of assumptions used to estimate fair value, please see Note 13 to our audited financial statements appearing elsewhere herein.
 
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Outstanding Equity Awards at Year-End
 
The following table provides a summary of equity awards outstanding at March 31, 2013, for each of our named executive officers.
 
   
Option Awards
     
Stock Awards
 
       
Number of Securities Underlying Unexercised Options (#) Exercisable
 
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
   
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned Options (#)
   
Option
Exercise
Price
($)
 
Option
Expiration
Date
   
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
   
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($)
 
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
(#)
 
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
($)
 
Name
                                                       
Dennis J. Carlo, Ph.D.
 
(1)
 
876
   
30,653
           
$
11.39
 
3/5/2023
                           
   
(2)
 
30,390
   
4,904
     
   
$
3.23
 
9/11/2021
(5)
   
7,316
   
$
83,333
 
 
$
 
   
(3)
 
49,387
   
7,966
           
$
4.59
 
8/20/2020
(6)
   
6,578
   
$
74,925
           
                                                               
Robert O. Hopkins
 
(1)
 
307
   
10,729
           
$
11.39
 
3/5/2023
                           
   
(2)
 
6,331
   
1,022
     
   
$
3.23
 
9/11/2021
(5)
   
3,292
   
$
37,500
 
 
$
 
   
(3)
 
25,327
   
4,085
           
$
4.59
 
8/20/2020
(6)
   
2,302
   
$
26,224
           
   
(4)
 
9,402
   
           
$
4.59
 
8/20/2020
                           
                                                               
David J. Marguglio
 
(1)
 
438
   
15,326
           
$
11.39
 
3/5/2023
                           
   
(2)
 
6,331
   
1,022
     
   
$
3.23
 
9/11/2021
(5)
   
3,658
   
$
41,667
 
 
$
 
   
(3)
 
27,859
   
4,493
           
$
4.59
 
8/20/2020
(6)
 
3,289
   
$
37,462
           
 

(1)
The options vest with respect to 1/36 monthly of the shares subject to the option, and have a term of 10 years (subject to earlier termination upon the events described in the Plan such as termination of employment).
   
(2)
The options vest with respect to one-third of the shares immediately and monthly thereafter with respect to 1/24 of the shares subject to the option, and have a term of 10 years (subject to earlier termination upon the events described in the Plan such as termination of employment).
   
(3)
The options vest with respect to one-sixth of the shares subject to the option on the six-month anniversary of the grant date and monthly thereafter with respect to 1/36 of the shares subject to the option, and have a term of 10 years (subject to earlier termination upon the events described in the Plan such as termination of employment).
   
(4)
The options are fully vested and have a term of 10 years (subject to earlier termination upon the events described in the Plan such as termination of employment).
   
(5)
The RSUs are fully vested at the end of one year and have a term of 10 years (subject to earlier termination upon the events described in the Plan such as termination of employment).
   
(6)
The RSUs vest as to one-third of the shares subject to the RSU in three equal annual installments on the anniversary of the award date (subject to earlier termination upon the events described in the Plan or the applicable award agreement, including termination of employment).
 
There were no options or other derivative securities exercised in fiscal 2013 by our named executive officers.  In addition, there were no shares acquired by our named executive officers upon the vesting during fiscal 2013 of restricted stock or restricted stock units.
 
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Employment Agreements and Potential Payments Upon Termination or Change in Control
 
On November 9, 2010, Adamis entered into employment agreements with certain of its officers.  The agreements provide for the employment of the following persons to the following positions:  Dennis J. Carlo, Ph.D., President and Chief Executive Officer; David J. Marguglio, Vice President of Business Development; and Robert O. Hopkins, Vice President of Finance and Chief Financial Officer.  On July 2, 2012, we entered into employment agreements with Karen K. Daniels, Vice President of Operations, and Thomas Moll, Vice President of Research.  The agreements provide for the employment of Ms. Daniels and Dr. Moll in their current officer positions.
 
The agreements provide for base compensation at the following annual rates:  Dr. Carlo, $500,000; Mr. Marguglio, $250,000; and Mr. Hopkins, Ms. Daniels and Dr. Moll, $225,000.  Under the agreements, the officers are eligible to participate in benefit programs that are routinely made available to executive officers, including any executive stock ownership plans, profit sharing plans, incentive compensation or bonus plans, retirement plans, Company-provided life insurance, or similar executive benefit plans maintained or sponsored by Adamis.
 
Except with respect to titles, salary amounts, and severance and benefit periods following certain kinds of employment terminations or change of control events, the agreements are similar in all material respects.
 
The agreements are terminable at any time by either party.  If Adamis terminates the officer’s employment at any time, the officer will be entitled to receive any unpaid prorated base salary for the actual number of days worked along with all benefits and expense reimbursements to which the officer is entitled by virtue of the officer’s past employment with Adamis.  The agreements provide that if the officer’s employment is terminated without cause (as defined in the employment agreements), the officer will be entitled to receive severance payments at the officer’s then-annual base salary for the following periods from the date of termination:  Dr. Carlo, 18 months; and Messrs. Marguglio, Hopkins and Moll and Ms. Daniels, nine months.  These payments will be accelerated in the event of a change of control transaction.  The officers would also receive continued medical, dental and vision benefits pursuant to COBRA at our expense for such periods (or until the officer becomes employed full-time by another employer).  In addition, in the event of a termination without cause, a number of unvested stock options will accelerate, vest and be exercisable in full as if the officer had remained employed during the severance periods described above, and all options will remain exercisable for a period of one year after the date of termination.  The agreements also provide that if officer is terminated without cause or the officer terminates the officer’s employment for good reason (as defined in the employment agreements), in each case within 90 days before a change in control or within 13 months after the date of a change in control, the officer will also be entitled to receive the severance and medical benefits described above.  Good reason is defined in the agreements to include events such as material reduction in base salary or responsibilities and duties or required relocation out of the San Diego area.  In addition, in the event of a change in control, all unvested options held by the officer will accelerate and be exercisable in full and any unvested shares will vest in full.  The company’s obligation to pay the severance benefits described above is conditioned on the officer’s timely execution of a general release of claims.  Upon termination of employment by reason of death or disability, any options that are vested and exercisable on the termination date will remain exercisable for 12 months after the date of cessation of service.
 
IRC Section 162(m) Compliance
 
Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, generally disallows a tax deduction to public companies for certain compensation in excess of $1.0 million paid to our named executive officers.  Certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if certain requirements are met.  In general, our compensation program is designed to reward executives for the achievement of our performance objectives.  Our equity incentive plan is designed in a manner intended to comply with the performance-based exception to Section 162(m).  Nevertheless, compensation attributable to awards granted under our plans may not be treated as qualified performance-based compensation under Section 162(m).  In addition, the compensation committee and the Board consider it important to retain flexibility to design compensation programs that are in the best interests of Adamis and its stockholders and, to this end, the committee and the Board reserve the right to use their judgment to authorize compensation payments that may be subject to the limitations under Section 162(m) when the committee or the Board believe that compensation is appropriate and in the best interests of Adamis and our stockholders, after taking into consideration changing business conditions and performance of our employees.
 
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Compensation of Directors
 
The general policy of the Board is that compensation for independent directors should be a mix of cash and equity-based compensation.  Adamis does not pay employee directors for Board service in addition to their regular employee compensation.  The Compensation Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering any revisions to director compensation.  The Board reviews the Compensation Committee’s recommendations and determines the amount of director compensation.
 
Pursuant to its charter, the Compensation Committee may engage the services of outside advisors, experts, and others to assist them.  During fiscal 2013, the Compensation Committee did not engage the services of outside advisors, experts or others to assist in setting director compensation.
 
The following table shows amounts earned by each director during the fiscal year ended March 31, 2013, other than Dr. Carlo and Mr. Marguglio, who are named executive officers and received no additional compensation for their services as a director.
                                                         
Director
 
Fees Earned
or Paid
in
Cash
($) (1)
   
Stock Awards
($) (4)
   
Option Awards
($) (2) (3)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings
   
All Other
Compensation
($)
   
Total
($)
 
Kenneth M. Cohen
 
$
38,000
     
13,250
   
$
10,850
     
     
     
   
$
 62,100
 
Craig A. Johnson
 
$
43,000
     
15,125
   
$
10,850
     
     
     
   
$
68,975
 
Tina S. Nova, Ph.D.
 
$
37,000
     
13,250
   
$
10,850
     
     
     
   
$
61,100
 


(1)
Reflects the amount of fees earned during the year ended March 31, 2013.
   
(2)
Amounts reflect the grant date fair value for financial statement reporting purposes with respect to stock options granted during the year ended March 31, 2013, calculated in accordance with applicable rules and regulations and authoritative guidance.  The assumptions used for these calculations are included in Note 13 to our audited consolidated financial statements appearing elsewhere herein.  Represents options awarded to each of Mr. Cohen, Mr. Johnson and Dr. Nova to purchase 2,059 shares of common stock.  The exercise price of the options is $12.75 per share.  The options have a term of 10 years and vest and become exercisable as to 1/36 of the option shares per month over a period of three years.
   
(3)
The aggregate number of option awards outstanding at March 31, 2013, for each of Mr. Cohen, Mr. Johnson and Dr. Nova, was 7,059.
   
(4)
Amounts reflect the grant date fair value for financial statement reporting purposes with respect to restricted stock unit awards granted during the year ended March 31, 2013.  The fair market value of the stock on the day of the award was $11.391 per share.  The restricted stock units represent a contingent right to receive 1,164, in the case of Mr. Cohen and Dr. Nova, and1,328 in the case of Mr. Johnson, shares of common stock, vesting on March 6, 2014.
 
Upon joining the Board, and pursuant to the provisions of the Plan regarding option awards to non-employee directors, each of Mr. Cohen, Mr. Johnson and Dr. Nova was granted an initial stock option to purchase 2,942 shares.  The options have a term of 10  years and an exercise price equal to the fair market value of the common stock on the date of grant.  The initial option vests and becomes exercisable with respect to 1,471 of the shares subject to the option on the grant date.  The option vests and becomes exercisable with respect to the remaining 1,471 of the shares subject to the option monthly over a period of three years from the grant date at the rate of 1/36 of the option shares each month.  Under the provisions of the Plan, each non-employee director also receives a succeeding annual grant, on the first business day after the annual meeting of stockholders, to purchase 1,471 shares of common stock (pro rated if the director joined the Board within the preceding 12 months), with the annual grant vesting and becoming exercisable as to 1/36 of the total shares subject to the annual grant on each monthly anniversary of the date of grant, such that succeeding grants are fully vested and exercisable on the third anniversary of the date of grant, so long as the non-employee director continuously remains a director, consultant or employee of Adamis.  Non-employee directors are also eligible to receive additional option or other awards under the Plan.
 
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In general, under the company’s policies concerning fees for non-employee directors, non-employee directors of Adamis are entitled to receive the following amounts of cash compensation for service as a director:  each non-employee director is entitled to receive an annual fee of $25,000 per year, paid quarterly in arrears; the Chair of the Audit Committee is entitled to receive $10,000 per year, paid quarterly in arrears; the Chair of the Compensation Committee and the Nominating and Governance Committee are each entitled to receive $5,000 per year, paid quarterly in arrears; and each non-employee director is entitled to receive $1,500 for each meeting attended in person, and $500 for each meeting attended telephonically so long as the telephonic meeting is more than one hour.  Each director is also entitled to reimbursement of reasonable expenses incurred in connection with board-related activities.
 
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The following table sets forth information, as of November 30, 2013 (the “Table Date”), regarding beneficial ownership of the Common Stock to the extent known to us, by (i) each person who is a director or a nominee for director, (ii) each named executive officer in the Summary Compensation Table, (iii) all directors and named executive officers as a group, and (iv) each person who is known by us to be the beneficial owner of 5% or more of the outstanding Common Stock.  Except as otherwise noted, each person has sole voting and investment power as to his or her shares.  The table below reflects the propose 1-for-17  reverse stock split that we expect to effect in connection with this offering.
 
Directors
 
Shares Beneficially
Owned (1)
   
Percent
 
Dennis J. Carlo, Ph.D.
   
540,987
(2)
   
8.6
 
Kenneth M. Cohen
   
8,570
(3)
   
*
 
Craig A. Johnson
   
5,629
(4)
   
*
 
David J. Marguglio
   
243,929
(5)
   
3.9
 
Tina S. Nova, Ph.D.
   
5,629
(6)
   
*
 
Other Named Officers
               
Robert O. Hopkins
   
100,759
(7)
   
1.6
 
Greater than 5% Holders
               
Eses Holdings (FZE)
   
1,742,386
(8)
   
28.2
 
Gemini Master Fund (Ltd.)
   
452,860
(10)
   
7.3
 
All Adamis directors and named officers as a group (6 persons) (9)
   
905,503
     
14.2
 

 *
Less than 1%.
   
(1)
Based upon information supplied by officers, directors and principal stockholders.  Beneficial ownership is determined in accordance with rules of the SEC that deem shares to be beneficially owned by any person who has or shares voting or investment power with respect to such shares.  Unless otherwise indicated, the persons named in this table have sole voting and sole investing power with respect to all shares shown as beneficially owned, subject to community property laws where applicable.  Shares of common stock subject to an option that is currently exercisable or exercisable within 60 days of the Table Date are deemed to be outstanding and to be beneficially owned by the person holding such option for the purpose of computing the percentage ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.  Except as otherwise indicated, the address of each of the persons in this table is as follows:  c/o Adamis Pharmaceuticals Corporation, 11455 El Camino Real, Suite 310, San Diego, California  92130.  The percentages in the table are based on 104,876,409 pre-reverse split shares, or 6,169,201  post-reverse split shares, of common stock outstanding.
   
(2)
Includes 432,824  shares of Common Stock owned of record, 5,882 shares of Common Stock held of record by a family member and beneficially owned by Dr. Carlo, and 102,281  shares of Common Stock subject to options which were exercisable as of the Table Date or 60 days after such date.  Excludes 21,895  shares of Common Stock underlying options, which become exercisable over time after such period.
   
(3)
Includes 2,941 shares of Common Stock owned of record by the Cohen-Salsitz family trust and 5,629 shares of Common Stock subject to options which were exercisable as of the Table Date or 60 days after such date.  Excludes 1,430  shares of Common Stock underlying options which become exercisable or vest over time after such period.
   
(4)
Includes 0 shares of Common Stock owned of record and 5,629  shares of Common Stock subject to options which were exercisable as of the Table Date or 60 days after such date.  Excludes 1,430  shares of Common Stock underlying options, which become exercisable over time after such period.
   
(5)
Includes 199,406  shares of Common Stock owned of record and 44,523  shares of Common Stock subject to options which were exercisable as of the Table Date or 60 days after such date.  Excludes 10,947  shares of Common Stock underlying options, which become exercisable or vest over time after such period.
   
(6)
Includes 0 shares of Common Stock owned of record and 5,629  shares of Common Stock subject to options which were exercisable as of the Table Date or 60 days after such date.  Excludes 1,430  shares of Common Stock underlying options, which become exercisable over time after such period.
 
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(7)
Includes 51,221  shares of Common Stock owned of record and 49,538  shares of Common Stock subject to options which were exercisable as of the Table Date or 60 days after such date.  Excludes 7,663  shares of Common Stock underlying options which become exercisable or vest over time after such period.
   
(8)
Based on an Amendment No. 1 to Schedule 13D filed on behalf of Eses Holdings (FZE) with the SEC on July 5, 2011 and subsequent Form 4 filings made by the named stockholder with the SEC.  The address for Eses Holdings (FZE) is Sharjah Airport International Free Zone, Executive Suite, P.O. Box 9366, Sharjah, United Arab Emirates.
   
(9)
Includes 213,229  shares of Common Stock issuable upon the exercise of options as of or within 60 days after the Table Date.
   
(10)
The address for Gemini Master Fund, Ltd. is Appleby Trust (Cayman) Ltd., Clifton House #1350, 75 Fort Street, Grand Cayman KY1-1108, Cayman Islands.  All of the securities reflected in the table are owned directly by Gemini Master Fund, Ltd.  Gemini Strategies LLC, Inc. is the investment manager of Gemini Master Fund, Ltd., and Steven Winters is the President of Gemini Strategies LLC, Inc.  Each of Gemini Strategies LLC, Inc. and Steven Winters expressly disclaim any equitable or beneficial ownership of such securities.  Includes (i) 308,561  shares of common stock owned by Gemini Master Fund, Ltd., (ii) 72,150  shares issuable upon conversion of our Secured Notes issued in the June 26, 2013 private placement transaction, and 72,150  shares issuable upon exercise of our June Warrants issued in the June 26, 2013 private placement transaction.
 
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Except as otherwise indicated, all share and per share information included under this “Certain Relationships and Related Transactions” heading reflects the proposed 1-for-17  reverse stock split that we intend to effectuate prior to the consummation of this offering.
 
In addition to the matters described below, and other than compensation to, and transactions with, our directors and executive officers as disclosed above under the heading “Management,” which disclosures are incorporated herein by reference, to our knowledge, other than as set forth below, during the last three years there were no material transactions, or series of similar transactions, or any currently proposed transactions, or series of similar transactions, to which we were a party, in which the amount involved exceeded the lesser of (i) $120,000 or (ii) one percent of the average of our total assets at the end of our last two completed fiscal years, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest.
 
On November 10, 2010, we completed a private placement transaction with Eses Holdings (FZE), a foreign investor, pursuant to a common stock purchase agreement and a registration rights agreement.  The purchase agreement provided for the sale of up to approximately 2.352,942 shares of our common stock to the purchaser at a price of $4.25  per share, for up to $10.0 million of gross proceeds.  An initial closing was held on November 10, 2010, pursuant to which we received $5.0 million in gross proceeds and issued approximately 1,176,471  shares of common stock.  At subsequent closings linked to the achievement of various milestones, the last of which occurred in February 2012, we received an additional $2.5 million and issued an additional approximately 588,236  shares of common stock.  On May 1, 2012, we exercised our option to terminate the purchase agreement by sending notice to the purchaser.  As the result of the termination of the purchase agreement, the purchaser no longer has the option to purchase any additional shares of stock.  Certain provisions of the purchase agreement survive termination, including the purchaser’s right to have an observer attend meetings of the board of directors and to receive certain materials that are provided to the directors in connection with such meetings.
 
On April 2, 2012, we completed the closing of a private placement financing transaction with Gemini Master Fund, Ltd., or Gemini, pursuant to a securities purchase agreement.  We issued a 10% Senior Convertible Note in the aggregate principal amount of $1.0 million and 58,824  shares of our common stock, and received gross proceeds of $1.0 million, excluding transaction costs and expenses.  Interest on the note was payable at a rate of 10% per annum and was payable on the maturity date.  During the third quarter of fiscal 2013 the note and accrued interest of approximately $73,000 was converted at $4.25  per share into 252,551  shares of common stock before its maturity date, and the note is no longer outstanding.
 
On June 11, 2012, we completed the closing of a private placement financing transaction with Gemini.  We issued a 10% Senior Convertible Note in the aggregate principal amount of $500,000 and 29,412  shares of common stock, and received gross proceeds of $500,000, excluding transaction costs and expenses.  As amended, the maturity date was July 11, 2013.  In connection with the closing of the June 2013 Secured Note and Warrant financing transaction described elsewhere in this prospectus, the Gemini note was exchanged for $613,271 principal amount of Secured Notes and June Warrants, and the June 2012 Gemini note is no longer outstanding.
 
We made payments to Dr. Carlo, our chief executive officer, in repayment of loans previously made by Dr. Carlo to the company, which bear interest at 10% per annum, totaling approximately $208,333, $10,000 and $24,400 of payments for fiscal 2011, fiscal 2012, and fiscal 2013 and thereafter to the date of this prospectus, respectively.  At September 30, 2013, the amount of outstanding notes relating to the loans was $81,232, and accrued interest was $76,727.  In addition, in April 2013 we repaid approximately $7,640 to Dr. Thomas Moll, our Vice President of Research, which was advanced by Dr. Moll to us in March 2013. In addition, one or more of our officers may advance some of the transaction expenses associated with this offering, which we intend to reimburse following the closing of this offering.
 
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Except as otherwise indicated, all share and per share information included under this “Description of Securities” heading reflects the proposed 1-for-17  reverse stock split which we intend to effectuate prior to the consummation of the offering.
 
General
 
As of the date of this prospectus, our authorized capital stock consisted of 100,000,000  shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share.  Our board of directors may establish the rights and preferences of the preferred stock from time to time.  As of November 30, 2013, there were 6,169,201  shares of our common stock outstanding; this figure includes 167,926  shares represented by stock certificates of Old Adamis that are held by certain persons who were stockholders of Old Adamis who are entitled to receive certificates for an equal number of shares of our common stock upon compliance with procedures for surrender and exchange of their old stock certificates in connection with the April 2009 merger of the company and Old Adamis.  As of November 1, 2013, no shares of preferred stock are issued and outstanding.  At our annual meeting of stockholders held on October 15, 2013, our stockholders approved a proposal to authorize the Board to implement a reverse stock split at a ratio ranging from 1-for-2 to 1-for-25 of all of the outstanding shares of common stock, the final ratio to be determined at the discretion of the Board and to be implemented, if at all, within 18 months after the date of the meeting.  In connection with our proposed 1-for-17  reverse stock split, the number of authorized shares of common stock will be reduced from 200,000,000 to 100,000,000.   As a result, immediately following the consummation of the offering and after giving effect to the consummation of the proposed 1-for-17  Reverse Stock Split, and the sale by us of 3,100,000 shares of common stock in this offering, we expect to have 9,269,201 shares of common stock outstanding and no shares of preferred stock outstanding.  Assuming that the Reverse Stock Split is effected and that we consummate the offering, we expect to have, immediately following the offering, [•] shares of common stock authorized and 9,269,201  shares issued and outstanding and 10,000,000 shares of preferred stock authorized and none outstanding.
 
Common Stock
 
Holders of our common stock are entitled to one vote per share.  Our certificate of incorporation does not provide for cumulative voting.  Holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board out of legally available funds.  However, the current policy of our board of directors is to retain earnings, if any, for the operation and expansion of the company, and the consent of holders of the Notes is required for the payment of any such dividends on our common stock.  Upon liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all of our assets which are legally available for distribution, after payment of or provision for all liabilities and the liquidation preference of any outstanding preferred stock.  The holders of our common stock have no preemptive, subscription, redemption or conversion rights.
 
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Preferred Stock
 
Our certificate of incorporation provides that the Board is authorized to provide for the issuance of shares of preferred stock in one or more series and, by filing a certificate of designation pursuant to the applicable law of the State of Delaware, to establish from time to time for each such series the number of shares to be included in each such series and to fix the designations, powers, rights and preferences of the shares of each such series, and the qualifications, limitations and restrictions thereof, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.  The authority of the Board with respect to each series of Preferred Stock includes, but is not limited to, determination of the following:
 
 
the designation of the series, which may be by distinguishing number, letter or title;
 
 
the number of shares of the series, which number the Board may thereafter (except where otherwise provided in the certificate of designation) increase or decrease (but not below the number of shares thereof then outstanding);
 
 
whether dividends, if any, shall be paid, and, if paid, the date or dates upon which, or other times at which, such dividends shall be payable, whether such dividends shall be cumulative or noncumulative, the rate of such dividends (which may be variable) and the relative preference in payment of dividends of such series;
 
 
the redemption provisions and price or prices, if any, for shares of the series;
 
 
the terms and amounts of any sinking fund or similar fund provided for the purchase or redemption of shares of the series;
 
 
the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of our corporation;
 
 
 
whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of our corporation or any other corporation, and, if so, the specification of such other class or series of such other security, the conversion price or prices, or rate or rates, any adjustments thereto, the date or dates on which such shares shall be convertible and all other terms and conditions upon which such conversion may be made;
 
 
restrictions on the issuance of shares of the same series or of any other class or series; and
 
 
the voting rights, if any, of the holders of shares of the series.
 
Preferred stock may be issued in the future in connection with acquisitions, financings, or other matters as the Board deems appropriate.  In the event that any shares of preferred stock are to be issued, a certificate of designation containing the rights, privileges and limitations of such series of preferred stock may be filed with the Secretary of State of Delaware.  The effect of such preferred stock is that, subject to federal securities laws and Delaware law, the Board alone may be able to authorize the issuance of preferred stock which could have the effect of delaying, deferring or preventing a change in control of us without further action by the stockholders, and may adversely affect the other rights of the holders of our common stock.  The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of holders of our common stock, including the loss of voting control to others.
 
Stock Options
 
As of November 30, 2013, giving effect to the proposed reverse stock split, we had outstanding stock options to purchase 404,622  shares, with a weighted average exercise price of $5.78  per share.
 
Warrants
 
As of November 30, 2013, giving effect to the proposed reverse stock split, we had warrants, other than the June Warrants, to purchase 149,079  shares of common stock, with a weighted average exercise price of $14.28  per share, expiration dates ranging from January 2014 through July 2016, and cashless exercise provisions.
 
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Restricted Stock Units
 
As of November 30, 2013, giving effect the proposed reverse stock split, there were approximately 42,707  shares that are issuable upon the vesting of outstanding restricted stock units granted under our 2009 Equity Incentive Plan, which vest and become issuable at various times commencing March 6, 2014.
 
The Secured Notes and the June Warrants
 
Financing Transaction; Securities Purchase Agreement
 
On June 26, 2013, which we sometimes refer to below as the issue date or the closing date, we completed the closing of a private placement financing transaction with a small number of accredited institutional investors.  Pursuant to a Subscription Agreement, referred to as the Purchase Agreement, and other transaction documents, we issued Secured Convertible Promissory Notes, referred to as the Secured Notes, initially convertible into 764,960  shares of common stock, sometimes referred to as the Conversion Shares, and common stock purchase warrants, referred to as the June Warrants, to purchase up to 764,960  shares of common stock, sometimes referred to as the Warrant Shares, and received gross cash proceeds of $5,300,000, reflecting an approximately 10% original issue discount from the principal amount of the Secured Notes and excluding transactions costs, fees and expenses.  The Secured Notes have an aggregate principal amount of $6,502,158, including a $613,271 principal amount Secured Note and related Warrant issued to one investor in exchange for its previously outstanding June 2012 convertible note for which we previously received $500,000 of gross cash proceeds, which note is no longer outstanding.  Each investor received a Warrant to purchase a number of Warrant Shares equal to the number of Conversion Shares that are initially issuable upon conversion of the Secured Note issued to that investor.
 
Effective October 30, 2013, the investors in the transaction, pursuant to action taken by a majority in interest of such investors, amended the transaction documents in certain respects, in the event that we complete a registered underwritten public offering or a registered direct public offering, including this offering, resulting in at least $10 million of gross proceeds to us, referred to as a Qualified Offering, before December 26, 2013.  The investors waived the right of first refusal provisions relating to the investors’ right to purchase shares in such a Qualified Offering.  The investors also waived the price anti-dilution provisions of the transaction documents with respect to such a Qualified Offering, including any adjustment to the Conversion Price of the Secured Notes which could otherwise result from such Qualified Offering, if such Qualified Offering is completed on or before December 26, 2013, and the right of any investor to convert the Secured Notes in connection with or after such a Qualified Offering if the price to the public of common stock sold in such Qualified Offering is at or below $10.03  per share ($0.59 per share as adjusted by the proposed 1-for-17 reverse stock split); however, this waiver did not constitute a waiver of any adjustment to the Exercise Price of the Warrants resulting from the closing of a Qualified Offering on or before December 26, 2013.  Finally, the investors agreed that any election by an investor to accelerate or to convert an investor’s Secured Note in connection with a Qualified Offering before December 26, 2013, must be given three trading days, rather than two trading days, prior to the anticipated closing of such a Qualified Offering.
 
The Secured Notes
 
Maturity Date.  Unless earlier converted or redeemed, the Secured Notes mature six months from the closing date, December 26, 2013, referred to as the Maturity Date.
 
Conversion; Conversion Price.  A holder may, at any time, convert some or all of any outstanding and unpaid principal and accrued unpaid interest of the Secured Note into shares of common stock, at an initial conversion price of $8.50 per share.  We are obligated to deliver shares within three trading days after the holder gives a notice of conversion to us.  During the pendency of an event of default, the conversion price, if lower than $8.50  or the then-applicable conversion price, will be 80% of the lowest volume weighted average price, or VWAP, for any five consecutive trading days during any 30-day period commencing on the issue date and before a conversion date.  In addition, if the holder converts a Secured Note in connection with a Qualified Offering, then the conversion price, if lower than the price as determined above, will be 85% of the lowest sales, conversion, exercise or purchase price of any common stock or common stock equivalent issued in connection with the Qualified Offering.
 
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Redemption or Conversion in Connection With a Qualified Offering.  Not later than three trading days before the closing of a Qualified Offering, a holder must elect in writing to either (a) accelerate the Maturity Date to not later than 20 trading days after the final closing of such Qualified Offering and receive payment equal to 115% of the outstanding principal amount and interest, if any, on the Secured Note, or (b) exercise the holder’s conversion rights, with such conversion to be effective at the closing of the Qualified Offering, at the conversion price described above.  The holder may elect either or both of the foregoing alternatives provided the entire outstanding principal amount and interest is subject to such election.  As described above, the investors have amended the transaction documents to waive their right to convert the Secured Notes in connection with or after a Qualified Offering that is completed before December 26, 2013, if the price to the public of common stock sold in such Qualified Offering is at or below $10.03  per share.
 
Events of Default.  Upon the occurrence of an event of default as defined in the transaction documents, all principal, interest and other amounts due on the Secured Notes become immediately due and payable.  Events of default include, without limitation, (i) payment defaults, (ii) uncured material breach by us of any representation, warranty or covenant in the transaction documents, (iii) dissolution, liquidation or cessation of operations, (iv) uncured failure to maintain material intellectual property rights or material assets, (v) bankruptcy, insolvency or certain other similar proceedings or actions, (vi) failure of the common stock to be listed on a stock exchange or the OTCBB or uncured noncompliance with applicable listing standards, (vii) failure to timely deliver shares or to have sufficient shares reserved for issuance upon conversion of the Secured Notes or exercise of the June Warrants, (viii) a material restatement of our financial statements, or (ix) failure to comply with our registration obligations under the transaction documents regarding maintaining a registration statement covering the resale of shares issuable upon conversion of the Secured Notes or exercise of the June Warrants.
 
After the Maturity Date and during the pendency of an event of default, a default interest rate of 12% per annum applies, and the holder’s conversion rights continue until the Secured Note is paid in full regardless of the occurrence of an event of default.  In addition, if an event of default occurs, each holder may require us to redeem all or any portion of the Secured Notes in cash, by paying to the holder a sum of money determined by multiplying the amount of outstanding principal amount designated by holder by, at the holder’s election, the greater of (i) 115% or (ii) a fraction the numerator of which is the highest closing price of the common stock for the 30 days preceding the date of the holder’s demand and the denominator of which is the lowest applicable conversion price during such 30-day period, together with accrued but unpaid interest and any other amounts due under the transaction documents.
 
Ranking; Guarantees; Security Agreement.  The Secured Notes are senior secured obligations of the company.  Our obligations under the Secured Notes and the other transaction documents are guaranteed by our principal subsidiaries and, pursuant to a Security Agreement entered into with the investors, are secured by a security interest in substantially all of our assets and those of the subsidiaries.  Pursuant to the Security Agreement, upon an event of default the investors have the right to foreclose on all of the collateral securing the company’s obligations under the transaction documents, and have customary rights of a secured party to dispose of the collateral to help satisfy payment of our obligations under the transaction documents.  In addition, if any proceeding under any bankruptcy or insolvency law is commenced by or against Adamis or a subsidiary, or if any of the collateral becomes the subject to any bankruptcy or insolvency proceeding, the holder is entitled, to the maximum extent permitted under applicable law, to an order from the court granting immediate relief from the automatic stay pursuant to the federal bankruptcy laws to permit the holder to exercise all of holder’s rights and remedies pursuant to the security agreement and other transaction documents or applicable law.
 
Adjustments to Conversion Price; Anti-Dilution Adjustments.  The conversion price of the Secured Notes, and the number and kind of shares or other securities to be issued upon conversion of the Secured Notes, are subject to adjustment for stock splits, combinations or similar events, and are also subject to price anti-dilution adjustments.
 
Under the Purchase Agreement, if at any time the Secured Notes or June Warrants are outstanding, other than in connection with Excluded Issuances as described below, we agree to issue or issue any common stock or securities convertible into or exercisable for shares of common stock (or modify any of the foregoing which may be outstanding) to any person or entity for a price per share or conversion or exercise price per share which is less than the conversion price for the Secured Notes in effect at such time, or less than the Warrant exercise price in effect at such time, without the consent of a majority in interest of the Secured Note holders, then the conversion price or exercise price (as applicable) will automatically be reduced to such other lower price.  The conversion price of the Secured Notes and exercise price of the June Warrants will be calculated separately for the Conversion Shares and Warrant Shares.
 
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Under the transaction documents, the following kinds of issuances of common stock or common stock equivalents by us are defined as Excluded Issuances and do not result in adjustments to the conversion price of the Secured Notes or the exercise of the June Warrants pursuant to the anti-dilution provisions of the Secured Notes and June Warrants:  (i) issuance of securities as full or partial consideration in connection with a bona fide strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or other entity, or pursuant to acquisitions of assets or intellectual property (or licensing of or rights to use assets or intellectual property) or similar strategic transactions approved by a majority of our non-employee directors, in each case so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, (ii) issuance of securities in connection with bona fide strategic license agreements and other bona fide partnering arrangements so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, (iii) issuance of common stock or the issuances or grants of options, restricted stock, restricted stock units or other equity awards to purchase common stock to officers, employees, and directors, and up to 11,765  shares or awards to consultants who perform consulting services to Adamis, pursuant to any option or equity incentive plan or agreement adopted for such purpose approved by a majority of our non-employee directors, (iv) the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into shares of common stock issued and outstanding on the issue date of the Secured Notes on the unamended terms disclosed in our filings with the SEC, (v) as a result of the exercise of June Warrants or conversion of Secured Notes which are granted or issued pursuant to the transaction documents, (vi) securities issued pursuant to stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the common stock resulting in a proportionate and an equitable adjustment to the conversion price of the Secured Notes or the exercise price of the June Warrants, and (vii) placement agent warrants issuable to licensed broker-dealers in connection with the transactions contemplated by the Purchase Agreement or underwriter warrants issued as compensation to licensed broker-dealers in connection with underwritten public offerings.
 
Fundamental Transactions.  If, at any time while the Secured Notes are outstanding, (a) Adamis effects any merger or consolidation of Adamis with or into another entity, (b) Adamis effects any sale of all or substantially all of its assets in one or a series of related transactions, (c) any tender offer or exchange offer (whether by Adamis or another entity) for more than 50% of the outstanding shares of common stock is completed, (d) Adamis consummates a stock purchase agreement or other business combination with one or more persons or entities whereby such other persons or entities acquire more than the 50% of the outstanding shares of common stock, (e) any person or group is or becomes the beneficial owner of 50% or more of the aggregate common stock or any material subsidiary, (f) Adamis effects any reclassification (other than stock splits or reverse stock splits or similar proportionate changes) of the common stock or any compulsory s