x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 82-0429727 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Large accelerated filer | o | Accelerated filer | o | |
Non-accelerated filer | o | Smaller reporting company | x |
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PART I FINANCIAL INFORMATION | |||
Item 1. | Financial Statements: | ||
3 | |||
4 | |||
5–6 | |||
7 | |||
15 | |||
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21 | |||
22 | |||
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December 31, 2013 | ||||||||
(Unaudited) | March 31, 2013 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 4,674,162 | $ | — | ||||
Prepaid Expenses and Other Current Assets | 23,289 | 64,347 | ||||||
Debt Issuance Cost | 66,369 | 286,582 | ||||||
4,763,820 | 350,929 | |||||||
EQUIPMENT | 500,000 | — | ||||||
INTANGIBLES | 9,500,000 | — | ||||||
Total Assets | $ | 14,763,820 | $ | 350,929 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts Payable | $ | 1,706,737 | $ | 2,431,919 | ||||
Accrued Other Expenses | 590,648 | 754,709 | ||||||
Accrued Bonuses | 101,436 | 101,436 | ||||||
Conversion Feature Derivative, at fair value | — | 162,456 | ||||||
Down-round Protection Derivative, at fair value | — | 50,545 | ||||||
Warrant Derivative, at fair value | 1,146,445 | — | ||||||
Warrant Down-round Protection Derivative, at fair value | 360,220 | — | ||||||
Convertible Notes Payable, net | 581,413 | 982,997 | ||||||
Other Notes Payable | 97,683 | 97,683 | ||||||
Notes Payable to Related Party | 81,232 | 97,122 | ||||||
Total Liabilities | 4,665,814 | 4,678,867 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Preferred Stock – Par Value $.0001; 10,000,000 Shares Authorized; Issued and Outstanding-None | — | — | ||||||
Common Stock – Par Value $.0001; 100,000,000 Shares Authorized; 10,219,528 and 6,450,634 Issued, 9,911,988 and 6,143,094 Outstanding, Respectively | 1,022 | 645 | ||||||
Additional Paid-in Capital | 54,683,024 | 33,653,770 | ||||||
Accumulated Deficit | (44,580,811 | ) | (37,977,124 | ) | ||||
Treasury Stock - 307,540 Shares, at cost | (5,229 | ) | (5,229 | ) | ||||
Total Stockholders’ Equity (Deficit) | 10,098,006 | (4,327,938 | ) | |||||
$ | 14,763,820 | $ | 350,929 |
3 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, 2013 | December 31, 2012 | December 31, 2013 | December 31, 2012 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
REVENUE | $ | — | $ | — | $ | — | $ | — | ||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 776,408 | 541,962 | 2,053,730 | 1,589,070 | ||||||||||||
RESEARCH AND DEVELOPMENT | 208,027 | 205,867 | 627,497 | 734,627 | ||||||||||||
Loss from Operations | (984,435 | ) | (747,829 | ) | (2,681,227 | ) | (2,323,697 | ) | ||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest Expense | (5,298,282 | ) | (845,098 | ) | (8,480,740 | ) | (1,719,393 | ) | ||||||||
Change in Fair Value of Derivative Liabilities | 1,141,779 | (16,727 | ) | 938,126 | (93,763 | ) | ||||||||||
Change in Fair Value of Conversion Feature Liability | 381,026 | (364,346 | ) | 2,985,007 | (1,421,019 | ) | ||||||||||
Change in Fair Value of Warrants Liability | (769,319 | ) | — | 635,147 | — | |||||||||||
Total Other Income (Expense) | (4,544,796 | ) | (1,226,171 | ) | (3,922,460 | ) | (3,234,175 | ) | ||||||||
Net (Loss) | $ | (5,529,231 | ) | $ | (1,974,000 | ) | $ | (6,603,687 | ) | $ | (5,557,872 | ) | ||||
Basic and Diluted (Loss) Per Share | $ | (0.82 | ) | $ | (0.34 | ) | $ | (1.04 | ) | $ | (0.96 | ) | ||||
Basic and Diluted Weighted Average Shares Outstanding | 6,741,175 | 5,810,423 | 6,351,650 | 5,769,549 |
4 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended December 31, | ||||||||
2013 | 2012 | |||||||
(Unaudited) | (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net (Loss) | $ | (6,603,687 | ) | $ | (5,557,872 | ) | ||
Adjustments to Reconcile Net (Loss) to Net Cash (Used in) Operating Activities: | ||||||||
Stock Issued for Interest | — | 73,342 | ||||||
Vesting of Options for Compensation | 191,486 | 113,923 | ||||||
Change in Derivative Liabilities Fair Value | (938,126 | ) | 93,763 | |||||
Change in Conversion Feature Liability Fair Value | (2,985,007 | ) | 1,421,019 | |||||
Change in Warrant Liability Fair Value | (635,147 | ) | — | |||||
Amortization of Discount on Notes Payable | 6,600,574 | 586,248 | ||||||
Amortization of Debt Issuance Costs | 726,062 | 906,909 | ||||||
Amortization of Stock Issued for Services | 47,333 | — | ||||||
Change in Assets and Liabilities: | ||||||||
(Increase) Decrease in: | ||||||||
Prepaid Expenses and Other Current Assets | (6,275 | ) | (1,782 | ) | ||||
Increase (Decrease) in: | ||||||||
Accounts Payable | (725,182 | ) | (79,125 | ) | ||||
Accrued Other Expenses | (112,117 | ) | (98,121 | ) | ||||
Net Cash (Used in) Operating Activities | (4,440,086 | ) | (2,541,696 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of equipment | (500,000 | ) | — | |||||
Purchase of intangible assets | (9,500,000 | ) | ||||||
Net Cash (Used in) Investing Activities | (10,000,000 | ) | — | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from Notes Payable | 5,875,000 | 3,099,800 | ||||||
Payment of Notes Payable | (6,779,471 | ) | (539,800 | ) | ||||
Cash Paid for Debt Issuance Costs | (286,349 | ) | — | |||||
Paymemt of Notes Payable to Related Parties | (15,890 | ) | (24,400 | ) | ||||
Proceeds from Issuance of Common Stock | 22,134,000 | — | ||||||
Cash Paid for Common Stock Issuance Costs | (1,813,042 | ) | — | |||||
Net Cash Provided by Financing Activities | 19,114,248 | 2,535,600 | ||||||
Increase (Decrease) in Cash | 4,674,162 | (6,096 | ) | |||||
Cash: | ||||||||
Beginning | — | 7,519 | ||||||
Ending | $ | 4,674,162 | $ | 1,423 |
5 |
Nine Months Ended December 31, | ||||||||
2013 | 2012 | |||||||
(Unaudited) | (Unaudited) | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
Cash Paid for Interest | $ | 1,170,105 | $ | 113,694 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES | ||||||||
Common Stock issued for Exercised Warrants and/or Options | $ | 1 | $ | 2 | ||||
Common Stock issued for Debt Issuance Cost | $ | — | $ | 1,592,000 | ||||
Note Payable Discounts from Deriviative and Convertible Feature Liabilities, and Warrants | $ | 5,962,763 | $ | 539,764 | ||||
Additional Paid-In Capital from Notes Payable Discount | $ | — | $ | 347,272 | ||||
Accrued Interest Applied to Principal Balance | $ | 51,944 | $ | — | ||||
Notes Payable Converted to Common Stock | $ | 297,687 | $ | 1,000,000 | ||||
Common Stock Issued for Interest | $ | — | $ | 73,342 | ||||
Stock Based Compensation Expense | $ | 191,486 | $ | 113,923 | ||||
Common Stock Issued for Prepaid Services | $ | — | $ | 71,000 | ||||
Additional Paid-In Capital resulting from reduction in derivative and conversion feature liabilities | $ | — | $ | 1,840,000 | ||||
Warrants Issued for Debt Costs | $ | 219,500 | $ | — | ||||
Settlement of Derivative Liability though Modification of Note | $ | 110,819 | $ | — |
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Level 1: | Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. | |
Level 2: | Observable inputs other that Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in inactive markets; or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data. | |
Level 3: | Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
10 |
Convertible | Warrant | |||||||||||||||||||
Down-round | Feature | Warrant | Down-round | |||||||||||||||||
Protection Derivative | Derivative | Derivative | Protection Derivative | Total | ||||||||||||||||
Balance, March 31, 2013 | $ | (50,545 | ) | $ | (162,456 | ) | $ | — | $ | — | $ | (213,001) | ||||||||
Net Change in Fair Value | 40,545 | 61,637 | — | — | 102,182 | |||||||||||||||
Settlement Through Modification of Gemini Note II | 10,000 | 100,819 | — | — | 110,819 | |||||||||||||||
Fair Value at Issuance of Secured Notes | (641,113 | ) | (2,923,370) | (1,781,592) | (616,688) | (5,962,763 | ) | |||||||||||||
Balance at June 30, 2013 | (641,113) | (2,923,370) | (1,781,592) | (616,688) | (5,962,763) | |||||||||||||||
Net Change in Fair Value | (89,730 | ) | 2,542,344 | 1,404,466 | (154,468) | 3,702,612 | ||||||||||||||
Balance at September 30, 2013 | (730,843) | (381,026) | (377,126) | (771,156) | (2,260,151) | |||||||||||||||
Net Change in Fair Value | 730,843 | 381,026 | (769,319) | 410,936 | 753,486 | |||||||||||||||
Balance at December 31, 2013 | $ | — | $ | — | $ | (1,146,445 | ) | $ | (360,220) | $ | (1,506,665) |
11 |
Fair Value at | Valuation | ||||||||||||||||
12/31/2013 | Technique | Unobservable Input | Range | ||||||||||||||
Warrant Derivative and Warrant Down-round Protection Derivative (combined) | $ | 1,506,665 | Binomial Option Pricing Model | Probability of common stock issuance at prices less than exercise prices stated in agreements Probability of reset provision being | 30% | ||||||||||||
waived | 5% |
The following table summarizes the preliminary estimates of the fair values of the identifiable assets acquired on December 27, 2013:
Equipment | $ | 500,000 | ||
Patents & intellectual property | 9,060,000 | |||
Transition services agreement | 200,000 | |||
Supply agreement | 240,000 | |||
Total identifiable assets acquired | $ | 10,000,000 |
The purchase price allocation is preliminary. In connection with the preliminary purchase price allocation, we have made preliminary estimates of the fair values of our long-lived and intangible assets based upon currently available information and in some cases, preliminary valuation results from independent valuation specialists. The purchase price allocation will remain preliminary until the Company completes a third-party valuation and determines the fair values of assets acquired. The final amounts allocated to assets acquired could differ significantly from the preliminary recorded amounts.
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Number of Stock Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number of Stock Options Vested | |||||||||||||
Non-Plan Stock Options | 5,924 | .15 Years | $ | 701.51 | 5,924 | |||||||||||
2009 Equity Incentive Plan | 404,622 | 7.50 Years | $ | 5.83 | 327,314 |
Warrant Shares | Exercise Price Per Share | Date Issued | Expiration Date | |||||||||||
Biosyn Warrants | 241 | $ | 985.55-2,956.65 | October 22, 2004 | January 4, 2014 | |||||||||
Old Adamis Warrants | 58,824 | $ | 8.50 | November 15, 2007 | November 15, 2015 | |||||||||
Consultant Warrants | 635 | $ | 3.40 | January 29, 2010 | January 29, 2015 | |||||||||
2013 Private Placement | 836,692 | $ | 5.95 | June 26, 2013 | June 25, 2018 | |||||||||
Consultant Warrants | 17,647 | $ | 3.74 | July 11, 2011 | July 11, 2016 | |||||||||
Underwriter Warrants | 186,000 | $ | 5.95 | December 12, 2013 | December 12, 2018 | |||||||||
Total Warrants | 1,100,039 |
Warrants | 1,100,039 | |||
Non-Plan Stock Options | 5,924 | |||
2009 Equity Incentive Plan | 1,862,620 | |||
Total Shares Reserved | 2,968,583 |
Effective January 16, 2014, the Company issued warrants to purchase up to 27,900 shares of common stock to the underwriters involved in underwritten public offering.
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3.1 | Certificate of Amendment to Amended and Restated Certificate of Incorporation(1). |
4.1 | Form of Representative’s Warrant Agreement(2). |
10.1 | Purchase Agreement dated December 12,2013, with CRT Capital Group, LLC, as representative of the several underwriters(1). |
10.2 | Consent and Waiver dated October 31, 2013(3). |
Sublease dated as of February 1, 2014 between the Registrant and McDermott Will & Emery LLP | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PR | XBRL Taxonomy Extension Presentation Linkbase Document |
(1) | Incorporated herein by reference to Exhibits filed with the Registrant’s Report on Form 8-K, filed with the Securities and Exchange Commission on December 17, 2013. |
(2) | Incorporated herein by reference to Exhibits filed with the Registrant’s registration statement on Form S-1/A, filed with the Securities and Exchange Commission on December 10, 2013. |
(3) | Incorporated herein by reference to Exhibits filed with the Registrant’s Report on Form 8-K, filed with the Securities and Exchange Commission on October 31, 2013. |
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ADAMIS PHARMACEUTICALS, INC. | ||
Date: February 14, 2013 | By: | /s/ Dennis J. Carlo |
Dennis J. Carlo | ||
Chief Executive Officer | ||
Date: February 14, 2013 | By: | /s/ Robert O. Hopkins |
Robert O. Hopkins | ||
Vice President, Finance and Chief Financial Officer |
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