Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ADMP > SEC Filings for ADMP > Form 10-Q on 13-May-2016All Recent SEC Filings

Show all filings for ADAMIS PHARMACEUTICALS CORP

Form 10-Q for ADAMIS PHARMACEUTICALS CORP


13-May-2016

Quarterly Report


ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Information Relating to Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "forward-looking" statements. These forward-looking statements are not historical facts, but are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. These forward-looking statements include statements about our strategies, objectives and our future achievement. To the extent statements in this Quarterly Report involve, without limitation, our expectations for growth, estimates of future revenue, our sources and uses of cash, our liquidity needs, our current or planned clinical trials or research and development activities, product development timelines, our future products, regulatory matters, expense, profits, cash flow balance sheet items or any other guidance on future periods, these statements are forward-looking statements. These statements are often, but not always, made through the use of word or phrases such as "believe," "will," "expect," "anticipate," "estimate," "intend," "plan," and "would." These forward-looking statements are not guarantees of future performance and concern matters that could subsequently differ materially from those described in the forward-looking statements. Actual events or results may differ materially from those discussed in this Quarterly Report on Form 10-Q. Except as may be required by applicable law, we undertake no obligation to update any forward-looking statements or to reflect events or circumstances arising after the date of this Report. Important factors that could cause actual results to differ materially from those discussed in these forward-looking statements are identified in the section entitled "Risk Factors" in the most recent Annual Report on Form 10- K, filed with the Securities and Exchange Commission, and in the other risks and uncertainties described elsewhere in this report as well as in other risks identified from time to time in our filings with the Securities and Exchange Commission, press releases and other communications. In addition, the statements contained throughout this Quarterly Report concerning future events or developments or our future activities, including concerning, among other matters, 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 developments or events, could delay the occurrence of such events or prevent the events described in any such statements from occurring.

Unless the context otherwise requires, the terms "we," "our," and "the Company" refer to Adamis Pharmaceuticals Corporation, a Delaware corporation, and its subsidiaries.

General

Company Overview

We are an emerging pharmaceutical company focused on combining specialty pharmaceuticals and biotechnology to provide innovative medicines for patients and physicians. We are currently primarily focused on our specialty pharmaceutical products. We are currently developing several products in the allergy and respiratory markets, including a dry powder inhaler that we acquired 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 submit Section 505(b)(2) New Drug Applications, or NDAs, or
Section 505(j) Abbreviated New Drug Applications or ANDAs, regulatory approval filings with the U.S. Food and Drug Administration, or FDA, whenever possible, in order to potentially reduce the time to market and to save on costs, compared to those associated with Section 505(b)(1) NDAs for new drug products. Our US Compounding, Inc. subsidiary, which is registered as a drug compounding outsourcing facility under Section 503B of the U.S. Food, Drug & Cosmetic Act, provides prescription medications to patients, physician clinics, hospitals, surgery centers and other clients throughout most of the United States. We also have a number of biotechnology product candidates and technologies, including therapeutic vaccine and cancer product candidates and technologies for patients with unmet medical needs in the global cancer market.

Epinephrine Injection USP 1:1000 0.3mg Pre-filled Single Dose Syringe

On May 28, 2014, we submitted a Section 505(b)(2) NDA application to the FDA for approval for sale of our Epinephrine Injection USP 1:1000 0.3mg Pre-filled Single Dose Syringe, or the Epinephrine PFS product. The Epinephrine PFS product delivers a premeasured dose of epinephrine for the emergency treatment of acute allergic reactions, including anaphylaxis. We received a complete response letter ("CRL") from the FDA on March 27, 2015. A CRL is issued by the FDA's Center for Drug Evaluation and Research when it has completed its review of a file and questions remain that preclude the approval of the NDA in its current form. We resubmitted the NDA on December 4, 2015. The FDA subsequently confirmed that it considered the resubmission to be a complete class 2 response to the CRL, and pursuant to guidelines under the Prescription Drug User Fee Act ("PDUFA"), provided a PDUFA target response date of June 4, 2016 for the agency's response to the resubmission.

Under goals established in connection with PDUFA, the FDA's guidance for the review and acting on Class 2 NDA resubmissions, such as the Company's resubmitted NDA relating to the PFS product, is six months from the date of receipt of the resubmission. However, the FDA's review processes can extend beyond, and in some cases significantly beyond, anticipated completion dates due to the timing of the FDA's review process, FDA requests for additional data, information, materials or clarification, difficulties scheduling an advisory committee meeting, FDA workload issues, extensions resulting from the submission of additional information or clarification regarding information already in the submission within the last three months of the target PDUFA date, or other reasons. As a result, the dates of regulatory approval, if obtained, and commercial introduction of our product could be delayed beyond our expectations. There are no assurances that the FDA will grant marketing approval for our PFS product on or shortly after June 4, 2016, or at all.

APC-1000

The Company is continuing development of the APC-1000 product candidate, a steroid hydrofluoroalkane, or HFA, metered dose inhaler product for asthma. Following discussions with the FDA and additional consideration of the development pathway for the product, the Company decided to conduct additional development work for APC-1000. As a result, the Company intends, depending on the outcome of several factors including results of the additional development work and obtaining additional funding that will be required to commence a trial, to submit an IND for APC-1000 during the second half of 2016, although there can be no assurances concerning the timing of any such filing or the commencement of a clinical trial relating to APC-1000 after submission of such an IND.

APC-5000

The Company is continuing development of the APC-5000 product candidate, a dry powder inhaler or DPI product for asthma and COPD. We currently have no in-house manufacturing capabilities, so we intend to rely on third-party contract manufacturers to manufacture the components and materials needed to produce APC-5000 DPI, as well as manufacture and assemble the APC-5000 DPI product. The Company intends to file an investigational new drug application, or IND, to initiate the clinical development of APC-5000, depending on the outcome of several factors, including the outcome of discussions with the FDA, results of additional development work and obtaining additional funding that will be required to commence a trial. There can be no assurances concerning the timing, if any, of any such filing or the commencement of a clinical trial relating to APC-5000 after submission of such an IND.

Recent Developments

Acquisition of U.S. Compounding, Inc.

As previously disclosed in our filings with the Securities and Exchange Commission, on April 11, 2016, we completed our acquisition of U.S.
Compounding, Inc., an Arkansas corporation ("USC'), pursuant to the terms of the Agreement and Plan of Merger, dated as of March 28, 2016 (the "Merger Agreement"), with USC. Pursuant to the terms of the Merger Agreement, a newly-created merger subsidiary of the Company merged with and into USC (the "Merger"), with USC surviving as a wholly owned subsidiary of the Company. All of the outstanding shares of common stock of USC were converted into the right to receive a total of approximately 1,618,540 shares of Adamis common stock. In addition, in connection with the transaction, we assumed approximately $5,722,500 principal amount of debt obligations under certain loan agreements and related agreements and documents of USC and certain related entities.

License Agreement

On May 9, 2016, the Company entered into a Development, License and Commercialization Agreement (the "Agreement") with Allergan plc's wholly owned subsidiary, Watson Laboratories, Inc. ("Licensee"), regarding the Company's Epinephrine Pre-filled Syringe ("PFS") product candidate for the emergency treatment of anaphylaxis. Additional information regarding the Agreement is contained in Note 8 to the financial statements appearing elsewhere in this Report on Form 10-Q. There can be no assurances (i) that the FDA will approve the Company's NDA relating to the PFS product to which the Agreement relates,
(ii) that Licensee will not terminate the Agreement if the FDA does not grant marketing approval for the PFS product within the periods described in the Agreement, (iii) that even if the FDA does grant marketing approval for the PFS product that Licensee will not terminate the Agreement for one or more other reasons permitted by the Agreement before the Company has received any royalty payments or additional milestone payments, (iv) that unexpected labeling, manufacturing, supply or other regulatory issues will not arise, (v) that Licensee will commercially introduce and market the PFS product even if approved, (vi) that the product will be commercially successful if introduced, or (vii) that any of the milestone payments contemplated by the Agreement will be made to the Company.

Going Concern and Management's Plan

Our independent registered public accounting firm has included a "going concern" explanatory paragraph in its report on our consolidated financial statements for the year ended December 31, 2015 and nine-month transition period ended December 31, 2014 indicating that we have sustained substantial losses from continuing operations and have used, rather than provided, cash in its continuing operations, and 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, 2016, we had cash of approximately $4.4 million, an accumulated deficit of approximately $75.4 million, and liabilities of approximately $4.0 million. 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 and launch 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 condensed consolidated financial statements included elsewhere herein for the three months March 31, 2016, 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 condensed 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 unaudited condensed consolidated 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 from a business combination or a similar transaction, after expenditure of our existing cash resources we would exhaust our resources and would be unable to continue operations.

Our management intends to attempt to secure additional required funding through equity or debt financings, sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research and development efforts, or similar transactions. However, there can be no assurance that we will be able to obtain any required additional funding. If we are unsuccessful in securing funding from any of these sources, we will defer, reduce or eliminate certain planned expenditures, delay development or commercialization of some or all of our products and might not be able to support the operations of our newly acquired company, USC. 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

Three Months Ended March 31, 2016 and 2015

Revenues. Adamis had no revenues during the three month periods ended March 31, 2016 and 2015, 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 $3,401,000 and $1,355,000 for the three months ended March 31, 2016 and 2015, respectively. The increase in research and development expenses was primarily due to the additional expense in product development, consisting mostly of expenditures related to product testing and product validation of approximately $1,973,000 relating to our Epinephrine PFS, APC-2000 and APC-5000 product candidates. Compensation expense, which includes salaries, stock options, employee benefits and bonus accrual, increased by approximately $64,000 for the three month period ended March 31, 2016 compared to the quarter ended March 31, 2015 because of salary increases, additional stock options granted and monthly accrual of bonus.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of depreciation and amortization, legal fees, accounting and audit fees, professional/consulting fees and employee compensation. Selling, general and administrative expenses for the three months ended March 31, 2016 and 2015 were approximately $2,616,000 and $2,794,000, respectively. The decrease in expense was primarily due to the decline in spending related to the commercialization of the Epinephrine PFS product candidate of approximately $598,000 of expenses relating to market research, training, branding, marketing and distribution strategies and payments to third party consultants and contractors pursuant to agreements relating to the foregoing, and approximately $17,000 decrease in expenses related to consulting, data processing and expensed equipment. An offset to the decrease in expenses was the increase in compensation expense of the Selling, General and Administrative employees of approximately $343,000 for the three months ended March 31, 2016 compared to the comparable period of the prior year, primarily due to new hires in mid-March 2015, salary increases, additional stock options granted and monthly accrual of bonus. The increase in expenditures for the three months ended March 31, 2016 compared to the quarter ended March 31, 2015 was also due to the increase of approximately $95,000 in legal expenses relating to the acquisition of US Compounding, Inc.

Other Income (Expense). Other expense for the three month period ended March 31, 2016 and 2015 was approximately $(391,000) and $1,007,000, respectively. Other Income (Expense) consists primarily of a change in fair value of warrants and change in fair value of derivative liabilities. The net change in fair value of warrants and derivatives resulted in an expense of approximately $391,000 for the three months ended March 31, 2016 compared to the income of approximately $1,007,000 for the three months ended March 31, 2015. The fluctuation in the valuation of warrants and warrant derivatives was primarily due to the change in stock price between quarters combined with the changes in the term and volatility.

Liquidity and Capital Resources

We have incurred net losses of approximately $6.4 million and $3.1 million for the three months ended March 31, 2016 and 2015, respectively. Since inception, and through March 31, 2016, we have an accumulated deficit of approximately $75.4 million. Since inception and through March 31, 2016 we have financed our operations principally through debt financing, through private issuances of common stock and preferred stock, and through underwritten public offerings of common stock. Since inception, we have raised a total of approximately $76.8 million in debt and equity financing transactions, consisting of approximately $15.8 million in debt financing and approximately $61.0 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.

Total assets were approximately $12.7 million and $12.1 million as of March 31, 2016 and December 31, 2015. All liabilities are classified as current. Current assets exceed current liabilities by approximately $1.0 million and $1.4 million as of March 31, 2016 and December 31, 2015.

Net cash used in operating activities for the three months ended March 31, 2016 and 2015, was approximately $4.7 million and $3.2 million, respectively. Net cash used in operating activities increased due to additional research and development costs, and slight decrease in Selling, General & Administrative expenses.

Net cash provided by financing activities was approximately $5.0 million and $10.6 million for the three months ended March 31, 2016 and 2015, respectively. Net cash flows provided by financing activities decreased primarily due to the issuance of common stock in January 2015 that generated net proceeds of approximately $10.6 million, compared to the net proceeds of approximately $5.0 million generated from the issuance of preferred stock in January 2016.

As noted above under the heading "Going Concern and Management Plan," through March 31, 2016, Adamis had incurred substantial losses. The availability of any required additional funding cannot be assured. If we do not obtain additional equity or debt funding, our cash resources will be depleted and we will be required to reduce or suspend operations. Even if we are successful in obtaining additional funding to permit us to continue operations at the levels that we desire, substantial time may pass before we obtain regulatory marketing approval for any of our product candidates and begin to realize revenues from sales of such products, and during this period Adamis will require additional funds to continue operations and development of our product candidates. No assurance can be given as to the timing or ultimate success of obtaining future funding.

As we have previously disclosed in our SEC filings, in connection with our acquisition of USC and the transactions contemplated by the Merger Agreement relating to the USC transaction, we assumed approximately $5,722,500 principal amount of debt obligations under certain loan agreements and related agreements and documents of USC and certain related entities (the "Existing Loan Documents"), and agreed to become an additional co-borrower under such Existing Loan Documents. The borrowers under these Existing Loan Documents, which include USC and us, among other parties, are required to make current periodic interest and principal payments under the Existing Loan Documents, in an amount of approximately $32,000 per month. We also entered into a loan and security agreement with the lender under the Existing Loan Documents, Bear State Bank, N.A. (the "Lender" or the "Bank"), pursuant to which we may borrow up to an aggregate of $2,000,000 to provide working capital to USC, subject to the terms and conditions of the loan agreement. Interest on amounts borrowed under our loan agreement with the Bank accrues at a rate equal to the prime interest rate, as defined in the agreement. Interest payments are required to be made quarterly. The entire outstanding principal balance, and all accrued and unpaid interest and all other sums payable pursuant to the loan documents, are due and payable on March 1, 2017, or sooner upon the occurrence of certain events as provided in the loan agreement and related documents. Our obligations under our loan agreement are secured by certain collateral, including without limitation our interest in amounts that we have loaned to USC, and a warrant that we issued to the Bank to purchase up to 1,000,000 shares of our common stock at an exercise price equal to par value per share, exercisable only if we are in default under the loan agreement or related loan documents.

In connection with the closing of the USC Merger, we entered into a Loan Amendment, Forbearance and Assumption Agreement (the "Loan Amendment Agreement") with the Bank and certain other parties. Pursuant to the Loan Amendment Agreement, we were added as a "Borrower" under the Existing Loan Documents described above and assumed all of the rights, duties, liabilities and obligations as a Borrower and a party under the Existing Loan Documents. In addition, in recognition of the fact that the loans made by the Bank under the Existing Loan Documents are currently in default with respect to certain nonmonetary covenants in the Existing Loan Documents, the Bank agreed that until October 31, 2016, and subject to compliance with the other provisions of the Loan Amendment Agreement, it would not pursue available remedies as a result of such noncompliance or demand payment under the promissory notes included in the Existing Loan Documents.

In addition, in the Loan Amendment Agreement the Company and the Bank agreed to discuss in good faith mutually agreeable amendments or modifications to the Existing Loan Documents in light of the changes in circumstances resulting from the Merger and the transfer of the real property and equipment discussed above to Adamis and USC.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, 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.

The Company's critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015 have not significantly changed, and no additional policies have been adopted during the three months ended March 31, 2016.

Recent Accounting Pronouncements

In April 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing. ASU 2016-10 is intended to reduce the cost and complexity of applying the guidance in the FASB's new revenue standard on identifying performance obligations, and is also intended to improve the operability and understandability of the licensing implementation guidance. The effective date for ASU 2016-10 is the same as for ASU 2014-09, which will be our first quarter of fiscal 2018. We have not yet evaluated the impact of ASU 2014-09 on our financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation, which simplifies the accounting for the taxes related to stock based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that year, which will be fiscal 2017 for us. We do not expect adoption of ASU 2016-09 to have a significant impact on our financial statements.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for ASU 2016-08 is the same as for ASU 2014-09, which will be our first quarter of fiscal 2018. We have not yet evaluated the impact of ASU 2014-09 on our financial statements.

Off Balance Sheet Arrangements

At March 31, 2016, Adamis did not have any off balance sheet arrangements.

  Add ADMP to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ADMP - All Recent SEC Filings
Copyright © 2017 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.