Adamis Pharmaceuticals
Annual Report 2012

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark one)xAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for the Fiscal Year Ended March 31, 2013 OR oTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Commission File Number 000-26372 ADAMIS PHARMACEUTICALS CORPORATION(Exact name of registrant as specified in its charter) Delaware 82-0429727(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)11455 El Camino Real, Suite 310, San Diego, CA 92130(Address of Principal Executive Offices) (zip code) Registrant’s telephone number, including area code: (858) 997-2400Securities registered pursuant to Section 12(b) of the Act: None None(Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act:Common Stock, $0.0001 par value(Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES oNO x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES oNO x Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligationsunder those sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days. YES xxNO o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). YES xxNO o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of the chapter) is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer oAccelerated filer oNon-accelerated filer oSmaller reporting company x Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES oNO xx The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30, 2012, was $30,145,883. At June 28, 2013, the Company had 104,704,046 shares outstanding. Documents Incorporated by Reference: Portions of the proxy statement for the 2013 annual stockholders meeting are incorporated by reference into Part III.  ADAMIS PHARMACEUTICALS CORPORATIONANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 2013 TABLE OF CONTENTS Page No.Part IItem 1.BUSINESS 1 Item 1A.RISK FACTORS 23 Item 1B.UNRESOLVED STAFF COMMENTS 37 Item 2.PROPERTIES 37 Item 3.LEGAL PROCEEDINGS 37 Item 4.MINE SAFETY DISCLOSURES 38 Part II Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUERPURCHASES OF EQUITY SECURITIES 39 Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 40 Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 45 Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE 45 Item 9A.CONTROLS AND PROCEDURES 45 Item 9B.OTHER INFORMATION 46 Part III Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 47 Item 11.EXECUTIVE COMPENSATION 47 Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS 47 Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 47 Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES 47 Part IV Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES 48  Information Relating to Forward-Looking Statements This Annual Report on Form 10-K includes “forward-looking” statements. These forward-looking statements are not historical facts, butare based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. These forward-looking statementsinclude statements about our strategies, objectives and our future achievement. To the extent statements in this Annual Report on form 10K involve,without limitation, our expectations for growth, estimates of future revenue, our sources and uses of cash, our liquidity needs, our current or plannedclinical trials or research and development activities, product development timelines, our future products, regulatory matters, expense, profits, cashflow balance sheet items or any other guidance on future periods, these statements are forward-looking statements. These statements are often, but notalways, 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 thosedescribed in the forward-looking statements. Actual events or results may differ materially from those discussed in this Annual Report on Form 10-K.Except as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-lookingstatements or to reflect events or circumstances arising after the date of this Report. Important factors that could cause actual results to differmaterially from those in these forward-looking statements are disclosed in this Annual Report on Form 10-K, including, without limitation, under theheadings “Item 1A. Risk Factors,” “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations,” as well as other risks identified from time to time in our filings with the Securities and Exchange Commission, press releases and othercommunications. In addition, many forward-looking statements in this Annual Report on Form 10-K, including statements concerning, among other matters,current or planned clinical trials, anticipated research and development activities, anticipated dates for commencement of clinical trials, anticipatedcompletion dates of clinical trials, anticipated dates for meetings with regulatory authorities and submissions to obtain required regulatory marketingapprovals, anticipated dates for commercial introduction of products, and other statements concerning our future operations and activities, assumethat we are able to obtain sufficient funding in the near term and thereafter to support such activities and continue our operations and plannedactivities. As discussed herein, including under “Item 1A. Risk Factors” and in “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” we require additional funding to continue operations, and there are no assurances that such funding will beavailable. Failure to timely obtain required funding would adversely affect and could delay or prevent our ability to realize the results contemplated bysuch forward looking statements. Unless the context otherwise requires, the terms “we,” “our,” and “the Company” refer to Adamis Pharmaceuticals Corporation, aDelaware corporation, and its subsidiaries. Savvy and, C31G®, Aerokid®, AeroOtic®, and Prelone® are our trademarks, among others. We alsorefer to trademarks of other corporations and organizations in this document.  PART I ITEM 1: BUSINESS In the discussion below, all statements concerning market sizes, annual U.S. sales of products, U.S. prescriptions and rates of prescriptions,the incidence of diseases or conditions in the general population, and similar statistical or market information are based on data published by thefollowing sources: IMS Health Sales Perspectives, Retail and Non-Retail Combined Report, referred to as the IMS Report; National DataCorporation’s Epinephrine Prescription and Dollar Data, referred to as the NDC Report; Commercial and Pipeline Insight: Allergic Rhinitis,published by DataMonitor, referred to as the DataMonitor Report; AAAAI — American Academy of Allergy, Asthma and Immunology AllergyStatistics for the U.S., referred to as the AAAAI Statistics; American Cancer Society, Cancer, Facts & Figures 2009, referred to as ACS Statistics; andSEER Cancer Statistics Review, 1975-2007, National Cancer Institute, referred to as the NCI Statistics. Company Overview Adamis Pharmaceuticals Corporation is an emerging pharmaceutical company engaged in the development and commercialization of a variety ofspecialty pharmaceutical products. Our products are concentrated in major therapeutic areas including oncology (cancer), immunology and infectious diseases(viruses) and allergy and respiratory. We are focused on the development of preventive and therapeutic vaccine products and cancer drugs for patients with unmet medical needs. During2010, we acquired rights under three exclusive license agreements covering three small molecule compounds, named APC-100, APC-200 and APC-300, that webelieve are promising drug candidates for the potential treatment of human prostate cancer (PCa). The intellectual property covered by the agreements waslicensed from the Wisconsin Alumni Research Foundation, or WARF. In 2006 and 2007, APC-100 and APC-200, respectively, received the National CancerInstitute’s multi-year, multi-million dollar RAPID (Rapid Access to Preventative Intervention Development) Award. The NCI Division of Cancer Preventiongives this award each year under the RAPID Program to promising new preventative/ therapeutic anti-cancer drugs. We previously submitted an Investigational New Drug application, or IND, to the U.S. Food and Drug Administration, or FDA, seeking approval topermit us to commence human clinical trials for the APC-100 compound in men with castrate-resistant prostate cancer. On August 11, 2011, we announcedthat we had enrolled the first patient in a Phase 1/2a prostate cancer clinical study relating to the use of the APC-100 product to treat men with castrate-resistantprostate cancer. The study began at the University of Wisconsin Carbone Cancer Center and was extended to the Wayne State University Karmanos CancerInstitute. In April 2011, we acquired exclusive rights to patented telomerase-based cancer vaccine technology from the Regents of the University of California.At the same time, we acquired exclusive rights to a related patent from the Dana-Farber/Harvard Cancer Center. We intend to pursue development of thetechnology initially for what we believe may be a novel cell-based vaccine product for prostate cancer, tentatively named TeloB-VAX. The technology isintended to activate the body’s natural defense machinery to stimulate an immune response against one of nature’s most prevalent tumor markers, telomerase.We believe that the technology may have applicability to a variety of other kinds of cancer. We have also acquired exclusive license rights to other patented potentially preventative and therapeutic vaccine technology. The vaccine technologymay be applicable to certain viral-induced diseases such as influenza and hepatitis B and C, as well as prostate cancer. However, we currently intend to focusinitially on the development of one or more of the other recently licensed prostate cancer product candidates and technologies, and as a result the timing ofdevelopment of this viral vaccine technology is subject to uncertainty. We are also focused on developing and commercializing products in the anti-inflammatory, allergy and respiratory field. We have developed anEpinephrine Injection USP 1:1000 (0.3mg Pre-Filled Single Dose Syringe) product, or the single dose PFS Syringe product, a pre-filled epinephrine syringeproduct for use in the emergency treatment of extreme acute allergic reactions, or anaphylactic shock. If launched, the product will compete in a well-established U.S. market estimated to be over $600 million in annual sales, based on industry data. Following discussions with the FDA during fiscal 2011,we completed a regulatory dossier relating to the product, and once we obtain sufficient funding to support the costs of proceeding with the FDA filing forregulatory approval and the costs of a commercial launch of the product, we intend to submit an application to the FDA for marketing approval of the productand to commercially market the product as soon as reasonably practicable after the FDA allows for marketing of the product. 1 Additional product candidates in our allergy and respiratory product pipeline include a steroid HFA (hydrofluoroalkane) metered dose inhalerproduct, referred to as APC-1000, for asthma and chronic obstructive pulmonary disease, or COPD; a generic HFA bronchodilator, referred to as APC-2000;and an HFA pressurized metered dose nasal steroid for the treatment of seasonal and perennial allergic rhinitis, referred to as APC-3000. Our goal is tocommence initial commercial sales of the APC-1000 nasal steroid product in calendar 2014 and APC-3000 in calendar 2015. During fiscal 2011, we enteredinto a strategic manufacturing, supply, and product development agreement with Beximco Pharmaceuticals Ltd. Beximco is a leading manufacturer ofpharmaceutical formulations and active pharmaceutical ingredients in Bangladesh. Beximco has a large number of products covering broad therapeuticcategories, including asthma and allergy inhalers, antibiotics, anti-hypertensives, anti-diabetics, and anti-retrovirals. Adamis and Beximco intend to introducea number of separate drugs into the U.S. over the next years in the allergy and respiratory areas and may co-develop certain drugs. We also have a contraceptive gel product candidate named Savvy (C31G®). In December 2010, we announced the successful completion of a Phase 3contraceptive trial of Savvy. The study met its primary endpoint and was conducted by the Eunice Kennedy Shriver National Institute of Child Health andHuman Development (NICHD), National Institutes of Health (NIH), in the Contraceptive Clinical Trials Network at 14 sites in the United States. The Phase 3trial was a randomized, double-masked, controlled comparator study to assess whether a gel containing the spermicide C31G was non-inferior toConceptrol®, a commercially available product containing nonoxynol-9 (N-9). The clinical investigators found that C31G was not inferior in contraceptiveefficacy to the comparator drug. Moreover, the gel was well-tolerated and had a high degree of acceptability in women who completed the study. Currently, toour knowledge all spermicides commercially available in the U.S. contain the active ingredient N-9 in a carrier such as a gel, film, cream, foam, suppository,or tablet. C31G does not contain nonoxynol-9 and, if commercialized, may offer an alternative for women who seek a non-hormonal method of contraception.In considering commercialization alternatives, we will likely focus on seeking to enter into an out-licensing or similar transaction with organizations that have afocus or business unit in the area of contraception. Our general business strategy is to generate revenue through launch of our allergy and respiratory products in development, in order to generate cashflow to help fund expansion of our allergy and respiratory business, as well as support our future cancer and vaccine product development efforts. To achieveour goals and support our overall strategy, we will need to raise a substantial amount of funding and make substantial investments in equipment, new productdevelopment and working capital. We estimate that approximately $1.5 million to $2.1 million will be required to support the regulatory application and acommercial launch of the PFS Syringe product following marketing approval. Recent Developments On June 26, 2013, we completed a private placement financing transaction with a small number of accredited institutional investors. Pursuant to asubscription agreement and other transaction documents, we issued secured convertible promissory notes (the “Secured Notes”), and common stock purchasewarrants ("Warrants") to purchase up to 13,004,316 shares of common stock, and received gross cash proceeds of $5,300,000, 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 issued inexchange for a previously outstanding convertible note, which is no longer outstanding. The maturity date of the Secured Notes is December 26, 2013. Ourobligations under the Secured Notes and the other transaction agreements are guaranteed by our principal subsidiaries and, pursuant to a Security Agreemententered into with the investors, are secured by a security interest in substantially all of our assets and those of the subsidiaries. The Secured Notes areconvertible into shares of common stock at any time at the discretion of the investor at an initial conversion price per share of $0.50. The transactiondocuments include price anti-dilution provisions providing that subject to certain exceptions, if we issue common stock or securities convertible into orexercisable for common stock at an effective price per share below the conversion price of the Secured Notes or Warrents, the conversion price of the SecuredNotes, or the exercise price of the Warrants and the number of shares issuable upon exercise of the Warrants (as applicable), will be adjusted downward toequal the effective per share price of the new securities. The Warrants have a term of five years and have an exercise price of $0.715 per share, subject toadjustment. We have agreed to file a registration statement with the Securities and Exchange Commission to register for resale the common stock issuable uponconversion of the Secured Notes and exercise of the Warrants. 2 Corporate Background Adamis Pharmaceuticals Corporation was founded in June 2006 as a Delaware corporation. Effective April 1, 2009, the company formerly namedAdamis Pharmaceuticals Corporation, or Old Adamis, completed a business combination transaction with Cellegy Pharmaceuticals, Inc., or Cellegy. Beforethe merger, Cellegy was a public company and Old Adamis was a private company. In connection with the consummation of the merger and pursuant to theterms of the definitive merger agreement relating to the transaction, Cellegy was the surviving corporation in the merger and changed its name from CellegyPharmaceuticals, Inc. to Adamis Pharmaceuticals Corporation, and Old Adamis survived as a wholly-owned subsidiary and changed its corporate name toAdamis Corporation.We have two wholly-owned subsidiaries: Adamis Corporation and Biosyn, Inc., which has rights to the C31G product. Adamis Corporation hastwo wholly-owned subsidiaries: Adamis Viral Therapies, Inc., or Adamis Viral, which was formed to focus on our cancer and vaccine technologies; andAdamis Laboratories, Inc., or Adamis Labs, which was formed to focus on our allergy and respiratory products. Allergy and Respiratory Specialty Pharmaceutical Products Our current allergy and respiratory product pipeline includes the single dose epinephrine pre-filled PFS Syringe product, an inhaled nasal steroidproduct candidate, and additional asthma and allergy products. Single Dose Epinephrine Pre-Filled Syringe Product There is a well-defined, market in the United States for patient-administered emergency epinephrine injectors used in the treatment of anaphylaxis.Based on information in the AAAAI Statistics, in the U.S., an estimated 5% of the population suffers from insect sting anaphylaxis, up to 6% are latexsensitive and up to 1.5% of adults and 5% of children under three years of age experience food related anaphylaxis. In January 2001, a published study byAAAAI revealed that up to 40 million Americans may be at risk for anaphylaxis, a significantly higher number than the historically estimated at-riskpopulation; the actual number could be lower than this estimate. According to information in the AAAAI Statistics, approximately 3,000 people in the U.S. dieeach year from anaphylaxis; the actual number of deaths in any particular year could, of course, be lower than this estimate. The number of prescriptions for epinephrine products has grown annually, as the risk of anaphylaxis has become more widely understood.According to the IMS Report, total prescriptions for EpiPen® products has historically grown at a rate of approximately 15% per year and has more thandoubled in the five year period from 2007 to 2012. We believe that the growth rate of annual prescriptions will decline, and there are no assurances concerningthe rate of annual growth or whether annual prescriptions will decline or grow in the future. EpiPen® was originally developed by Meridian Medical Technologies, Inc. as an auto-injection system for use by military personnel. It was designedfor self-administration as an antidote for chemical warfare agents and morphine. The EpiPen® products were introduced to the market in 1982 and were theonly epinephrine injectors for allergic emergencies that were available until 2005. In August 2005, another company introduced a competing product,Twinject® Dual Pack, (and now Adrenaclick®) 0.3mg epinephrine auto injectors. Late in 2012 AUVI-Q was introduced as another competing auto-injectoralternative product to the EpiPen. We believe that there are certain difficulties relating to, or limitations on, market entry for new competitors based on epinephrine’s susceptibility tocontamination, sensitivity to heat and light and a short shelf-life, as well as the need for a competitor to possess the expertise to overcome the packaging anddelivery challenges of introducing a competing product to the market. We also believe that the size of the market may be too small to be a major focus of thelarge pharmaceutical companies, although there can be no assurances that this will be the case. We believe that the primary opportunity lies in the 0.3 mg segment, which constitutes a substantial majority of the total market, based on EpiPen unitsales history and the NDC Report. When sales of dual packs of EpiPen and TwinJect/Adrenaclick are converted to single units, the total target market in theU.S. is estimated to be at least 2.5 million single units per year. We believe that there is an opportunity for a simple, low-cost, intuitive and user-friendly pre-filled syringe to compete in this largest segment of themarket. We believe that the PFS Syringe product has the potential to compete against other marketed products based on the following factors, among others: ●Lower Price. We believe that a lower-priced option may be attractive to individuals potentially susceptible to anaphylaxis, as well asmanaged healthcare drug reimbursement plans providing patient prescription reimbursement. If marketed, we expect to introduce the PFSSyringe product at a price point reflecting a discount to the price of the leading products, in part to make the product more attractive tocustomers. ●Ease of Use. EpiPen®, EpiPen® Jr., Twinject® and Adrenaclick® are powerful spring-loaded auto-injector devices. If not administeredproperly, they can misfire or be misused. Our PFS pre-filled 0.3mg syringe will allow patients to self-administer (self-inject) a pre-measuredepinephrine dose quickly with a device that does not have moving parts that the user cannot control. 3 We believe that the PFS Syringe product, if introduced, may acquire a share of the market in a manner somewhat similar to the pattern establishedby generic drugs, in that the price differential between the expected price of the PFS Syringe product and the price at which the market-leading product iscurrently sold will motivate purchasers and reimbursing payors to choose the lower cost alternative. We also believe, however, that if our product competessuccessfully, at least one of the current competitors may introduce a competing, low-priced, pre-filled single dose syringe while maintaining the price points ofits existing product lines. We believe that the PFS Syringe product has the potential to compete successfully, although there can be no assurance that this willbe the case. Our ability to implement a commercial launch of the PFS Syringe product has been materially hampered by various factors, including limitedfunding and regulatory considerations. In addition, we will need to file an application with the FDA, and the FDA will need to approve the application andgrant marketing approval, before the product may be launched and marketed. We have completed a regulatory dossier relating to the product, and once weobtain sufficient funding to support the costs of proceeding with the FDA filing for regulatory approval, including the filing fee, and the costs of a commerciallaunch of the product, we intend to submit an application to the FDA for marketing approval of the product and to commercially market the product as soonas reasonably practicable after the FDA allows for marketing of the product. Inhaled and Nasal Steroid Products We are developing an aerosolized inhaled nasal steroid product, which we refer to as APC-3000, for the treatment of seasonal and perennial allergicrhinitis. The market for inhaled nasal steroids, or INS, as estimated by us based on the DataMonitor Report, is at least $3 billion annually. Our product willtarget a small niche within this market. Although the market is dominated by two multi-national pharmaceutical companies, we believe there is a niche that canbe exploited and that our product candidate can achieve a small, but meaningful share of this market. INS products are sold under prescription for seasonal allergic rhinitis. In addition to inhaled nasal steroids, many different types of products treatthe symptoms of allergic rhinitis: in general, physicians view intranasal steroids as safe and effective. There are four major physician specialties that treatpatients with allergic rhinitis: allergists; otolaryngologists, or ENTs; primary care physicians; and pediatricians. On an individual basis, the allergist is thelargest prescriber of products within the INS category. ENT physicians contribute approximately one-half as many prescriptions as allergists, but that is stillsignificantly larger than the volume of the average primary care physician. Currently, the INS market is dominated by aqueous solution formulations delivered by a pump. These aqueous pump spray formulations havereplaced chlorofluorocarbons, or CFC, propellant INS products, which once dominated the INS market. The propellant inhaled nasal steroids that werepreviously available have been discontinued due to concerns regarding the effects of CFC on the environment. Based on information in the IMS Reportconcerning 2005 sales, the two leading products, which are marketed by large pharmaceutical companies, account for over 70% of total product sales in thismarket. We do not anticipate competing directly against the two leading companies in this market by attempting to out-spend or out-promote them in themarketplace. We believe that our market opportunity lies in capturing a small portion of the market with a new aerosolized hydrofluoroalkane, or HFA,version of an established product, but at a discount to the current prices of the leading branded products.We expect APC-3000 to be considered a “new” drug by the FDA, and accordingly we believe that we will be required to submit data for an applicationfor approval to market APC-3000 pursuant to Section 505(b)(2) of the Food Drug and Cosmetics Act, although there are no assurances that this will be thecase. Total time to develop the APC-3000 product, including manufacture of the product, clinical trials and FDA review, is expected to be approximately 25months from inception of full product development efforts. We intend to request a meeting with the FDA to discuss the specific requirements to develop andsell the product in the United States. We have chosen an organization that will assist us in developing the correct specifications, formulations, and a list of required tests that comply withthe FDA regulations for the product. We intend to develop the APC-1000 product with our manufacturing partner, Beximco. Once developed, we anticipate thatwe will transfer the specifications to Beximco for manufacturing. APC-1000, is an HFA metered dose inhaled steroid product for asthma and chronicobstructive pulmonary disease, or COPD. The anticipated dates of development and introduction will depend on a number of factors, including theavailability of adequate funding and other factors described below. Our third product candidate that we intend to develop with Beximco, APC-2000, is a generic HFA bronchodilator for the treatment of asthma andCOPD. We have had discussions with the FDA regarding regulatory approval requirements. The FDA has communicated to us that this product is subject toreview under the rules governing submission of abbreviated new drug applications, or ANDAs. Once product development is completed, we anticipatesubmitting an ANDA application to the FDA relating to this product. 4 Factors that could affect the actual launch date for our allergy and respiratory product candidates include the outcome of discussions with the FDAconcerning the number and kind of clinical trials that the FDA will require before the FDA will consider regulatory approval of the product, any unexpecteddifficulties in licensing or sublicensing intellectual property rights for other components of the product such as the inhaler, any unexpected difficulties in theability of our suppliers to timely supply quantities for commercial launch of the product, any unexpected delays or difficulties in assembling and deployingan adequate sales force to market the product, unexpected events affecting Beximco’s participation in developing and manufacturing products, and receipt ofadequate funding to support product development and sales and marketing efforts. Other Allergy and Respiratory Products On April 23, 2007, Adamis completed the acquisition of a specialty pharmaceutical drug company named Healthcare Ventures Group, Inc., or HVG.HVG had previously acquired a group of allergy and respiratory products and certain related assets from a third party company. Net revenues from sales ofour allergy and respiratory products from April 23, 2007, the date on which we acquired Adamis Laboratories, Inc., through our fiscal year ended March 31,2010, were approximately $1.6 million. We did not market these allergy and respiratory products during fiscal 2012 or fiscal 2013, primarily due to fundinglimitations and the competitive market for antihistamine/decongestant products and liquid steroids (Prelone). We believe there is limited potential for theseproducts and we have no plans to market these products for the foreseeable future, due in part to the widespread substitution of generic products at thedispensing pharmacy level for the conditions indicated for the products, limited funding, the elimination of our field sales force, and manufacturing andregulatory challenges facing this category of pharmaceutical products. 5 Manufacturing Agreement with Beximco On December 1, 2010, we announced the signing of a strategic manufacturing, supply, and product development agreement with BeximcoPharmaceuticals Ltd. Beximco is a leading manufacturer of pharmaceutical formulations and active pharmaceutical ingredients (APIs) in Bangladesh.Beximco has a large number of products covering broad therapeutic categories, including, but not limited to, asthma and allergy inhalers, antibiotics, anti-hypertensives, anti-diabetics, and anti-retrovirals. Beximco’s manufacturing site houses a number of self-contained production units including oral solids,metered dose inhalers, intravenous fluids, liquids, ointments, creams, suppositories, ophthalmic drops, injectables and nebulizer solutions. Subject to a number of factors including the availability of sufficient funding, Adamis and Beximco intend to introduce a number of separate drugsinto the U.S. over the next years, and we intend to partner with Beximco regarding the nasal steroid and inhaler products described above. The expected focusof these drugs will be in the areas of allergy and asthma. In addition, the companies intend to co-develop certain drugs. We will be responsible for regulatoryapproval and sales in the U.S. Cancer and Vaccine Product Candidates We are focused on the development of therapeutic vaccine product candidates and prostate cancer drugs for patients with unmet medical needs in themulti-billion dollar global prostate-cancer market. We initially focused on vaccine technologies only, with initial emphasis on developing a novel avianinfluenza vaccine. However, with the entering into during 2010 and 2011 of license agreements relating to the APC-100, APC-200, APC-300 and telomerasevaccine technologies, we are focusing on both the small molecule cancer therapeutic drugs and on therapeutic cancer vaccine opportunities. In February 2010, we entered into an agreement with a private company to acquire exclusive license agreements covering three small moleculecompounds, named APC-100, APC-200 and APC-300, that we believe are promising drug candidates for the potential treatment of human prostate cancer(PCa). The APC-300 agreement was acquired in February 2010, and the acquisition of the other two agreements was completed in October 2010. Theintellectual property covered by the agreements was licensed from the Wisconsin Alumni Research Foundation, or WARF. In 2006 and 2007, APC-100 andAPC-200, respectively, received the National Cancer Institute’s multi-year, multi-million dollar RAPID (Rapid Access to Preventative InterventionDevelopment) Award. The NCI Division of Cancer Prevention gives this award each year under the RAPID Program to promising new preventative/ therapeuticanti-cancer drugs. Collectively, more than $18 million has been spent through government and private foundation grants and private investor funding for thedevelopment of these three new small molecule drug candidates. We submitted an Investigational New Drug Application, or IND, to the FDA at the end ofFebruary 2011 and supplemented the IND at the end of April 2011. On August 11, 2011, we announced that we had enrolled the first patient in a Phase 1/2aprostate 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 Universityof Wisconsin Carbone Cancer Center and was extended to the Wayne State University Karmanos Cancer Institute. The Human Prostate and Prostate Cancer; Disease and Market Background In the discussion below concerning prostate cancer, all statistics, data and information concerning incidence of disease or other conditions in thegeneral population, market sizes, annual U.S. sales of products, U.S. prescriptions and rates of prescriptions, and similar statistical or market informationare based on data published by or in the following sources: MedTrack and IMMS data reports, American Cancer Society, or ACS, Statistics and NationalCancer Institute, or NCI, Statistics. 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 todevelop before birth and continues to grow until a man reaches adulthood. This growth is fueled by male hormones, the so-called androgens. The mainandrogen produced by men is the hormone testosterone. Testosterone can be converted by the body into dihydrotestosterone, or DHT, which in turn signals theprostate 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 foundin the prostate, but over 99% of prostate cancers develop from gland cells within the prostate. The medical term for a cancer that starts in gland cells is an“adenocarcinoma.” As the tumor grows, it can spread to the interior of the prostate, to tissues near the prostate, to the sac-like structures attached to the prostateknown as the seminal vesicles, and to distant parts of the body, such as the bones, liver lobes or lungs. Prostate cancer, or PCa, is one of the most invasivemalignancies and a leading cause of cancer related deaths in many countries. According to the American Cancer Society and the National Cancer Institute,prostate cancer is the second-most common cancer in American men, and the second leading cause of cancer death in American men. The ACS estimates forprostate cancer in the United States for 2011 were that about 241,000 new cases of prostate cancer would be diagnosed and about 33,700 men would die ofprostate cancer in 2011. The NCI has estimated that approximately 20% of patients present with locally advanced or metastatic prostate cancer at the time ofdiagnosis. 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-yearsurvival rate of patients with prostate cancer that has metastasized to distant organs is only about 30%. Metastatic prostate cancer is generally divided into twostates: 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. 6 Testosterone and other male sex hormones, known collectively as androgens, can fuel the growth of prostate cancer cells. Androgens exert their effectson prostate cancer cells by binding to and activating the Androgen Receptor, which is expressed in prostate cancer and other cells. When they first metastasizeto distant sites, most prostate cancers depend on androgen hormone for tumor growth. These prostate cancers are CS-PCa prostate cancers. The CS-PCatumors treated with ADT are often already inflamed or can also become chronically inflamed and invariably become CR-PCa tumors. For patients with advanced, metastatic CS-PCa prostate cancer, the standard of care is treatment with hormonal ablation therapy, also known asADT. ADT is used to suppress production or block the action of androgens. Accordingly, the leading therapies currently used for the treatment of prostatecancer, after it recurs following radiation or surgery, are focused on diminishing the production of androgens, or antagonizing the effects of androgens byblocking the Androgen Ligand Binding Domain on the Androgen Receptor inside prostate cancer cells with drugs known as anti-androgens. Thus, these twodifferent 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, referred to as an orchiectomy, or alternatively through use ofone or two different kinds of ADT drugs, called chemical castration. One chemical castrating therapeutic drug is known as a luteinizing hormone-releasing hormone, or LHRH agonist drug. This type of drug isexemplified by compounds such as Zolodex that lower the native production of testosterone from the adrenal gland. A second chemical castrating therapeuticapproach uses drugs known as anti-androgens, which directly block the interaction of androgens from binding to the ligand binding domain of the AndrogenReceptor, or AR-LBD. For example, Bicalutamide (Casodex®) is an anti-androgen drug that binds to the AR-LBD and displaces or blocks androgen binding tothe AR-LBD and thus inhibits normal AR function. Bicalutamide is now a generic. Additional generic anti-androgens include Flutamide (also known asNilutamide). Bicalutamide is still one of the largest selling of the anti-androgen CS-PCa therapeutic drugs, with AstraZeneca reporting global annual sales ofabout $550 million in 2011, according to its public disclosures of sales. Anti-androgens and LHRH agonists often are given in combination therapy, anapproach known as a Combined Androgen Blockade. However, because these ADT therapies operate by reducing the ability of androgen hormone to bind andactivate the AR to fuel the growth of prostate cancer cells, they generally are effective only on prostate cancers that remain hormone-sensitive, that is, those menwith CS-PCa tumors that still depend on androgen and the AR-LBD for PCa cell growth. Adamis, collaborators, and many others now commonly recognizethat androgen deprivation therapy causes prostate cancer cell programmed cell death, referred to as apoptosis, and can also contribute to pathophysiologicalchronic 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.Most animal and human prostate cancer initially is hormone-sensitive and thus initially responds to ADT. However, according to a study publishedin the October 7, 2004 issue of The New England Journal of Medicine, and other studies, virtually all hormone-sensitive metastatic prostate cancer (CS-PCa)are commonly believed to undergo changes that convert CS-PCa to the castration-resistant (CR-PCa) state within a median of 18-24 months after initiation ofADT. Once in this ADT resistant CR-PCa state, CR-PCa generally continues to grow even when there is a significant reduction of testosterone production. Thechange to the castration-resistant state is generally determined based on monitoring either rising levels of prostate-specific antigen, or PSA, in prostate patients’blood serum, or by documented disease progression as evidenced by radiographic imaging tests (via patient MRI or bone scans) or the CR-PCa patients’presentation of significant clinical symptoms, including pain with or without chronic fatigue. Metastatic prostate cancer that has become castration-resistantmost often becomes more highly advanced, resistant to therapy, and extremely aggressive. These patients have a median survival of often only 10 to 16months because, at present, there is no successful medium- or long-term chemotherapy or immunotherapy treatment for advanced metastatic CR-PCa.Treatment of patients with CR-PCa remains a clinical challenge. In summary, the standard treatment for localized advanced, recurrent, and metastatic prostate cancer is ADT, which blocks the growth promotingeffects of androgens and activates apoptosis. After an initial favorable response, progression to androgen-independence or castration resistance is the usualoutcome, for which there are currently no curative treatment options. Some brief survival extensions can sometimes be achieved using current Taxol-basedchemotherapy protocols, or recently approved therapies such as Provenge and ZYTIGA. We believe that APC-100, -200 and -300 may offer significant new treatments for prostate cancer and inflammation. In animal studies conducted todate, all three of these compounds were safe and well tolerated, and are active not only against castrate sensitive, but also against castrate resistant prostatetumors. 7 Drug Product Candidates in Development APC-100. APC-100 is the most advanced of the three small molecule anti-inflammatory drug candidates. In animal studies conducted to date, APC-100 demonstrated potent anti-androgenic and anti-inflammatory activities against prostate tumors growing in animal models and showed a strong safety profilein preclinical safety studies. To date, APC-100 has demonstrated desirable pharmacological characteristics as an oral or injectable anti-inflammatory and anti-androgenic drugcandidate with multiple mechanisms of action. APC-100 significantly decreases secretion of human PSA by human prostate cancer cells growing in mice andalso significantly increases the time-to-tumor progression and survival of PCa mice with CS-PCa and CR-PCa tumors. In animal studies conducted to date,APC-100 was found to be more effective than Casodex and Flutamide, which are leading ADT drugs. Based on studies to date, we believe that the APC-100 drug candidate may offer important advantages over existing anti-androgen standard of caredrugs that are used in hormonal therapies in prostate cancer patients. APC-100 has the potential to be used for both castrate-sensitive and castrate-resistantprostate cancer patients. The standard of care for second-line hormonal therapies includes using existing drugs, such as steroids (hydrocortisone,dexamethasone), hormones (estrogen, aminoglutethimide) and anti-fungal agents (ketoconazole) in “off-label” drug use settings. Each of these drugs hascharacteristics limiting its usefulness as a treatment for prostate cancer. We believe that APC-100 may have potential advantages over such existing treatments,most notably due to its being anti-inflammatory, anti-androgenic and multi-targeted, as well as safe and well tolerated in animal testing. A variety of serious side effects have been associated with the use of existing second-line hormonal treatments, which are limiting their uses. To date,however, no serious side effects appear to be associated with the use of APC-100. Should APC-100 continue to demonstrate a continued lack of serious sideeffects, we believe it would be favorably positioned against other therapeutic PCa agents. Finally, agents used as second-line hormonal PCa agents forcastration resistant prostate cancer must be taken multiple times during the day. In pre-clinical testing to date, APC-100 has shown the potential to beadministered once per day as an oral drug. Such a convenient oral dosing schedule may result in better patient at home compliance, when compared to otheragents that are used as second-line hormonal treatments. In 2006, APC-100 was awarded the National Cancer Institute, or NCI, Rapid Award. The award is given for promising new drugs for the treatmentof cancer and resulted in significant funding for research and development of APC-100. The development of APC-100 has been funded by Michael Milken’sProstate Cancer Foundation, the Department of Defense’s Congressionally Directed Medical Research Programs’ Prostate Cancer Research Program, as well asgrants and contracts from the U.S. Public Health Service and the NCI.We submitted an Investigational New Drug application, or IND, to the FDA at the end of February 2011, and supplemented the IND in April 2011,seeking approval to permit us to commence human clinical trials for the compound in men with castrate-resistant prostate cancer. On August 11, 2011, weannounced that we had enrolled the first patient in a Phase 1/2a prostate cancer clinical study relating to the use of the APC-100 product to treat men withcastrate-resistant prostate cancer. The study began at the University of Wisconsin Carbone Cancer Center and has been extended to the Wayne StateUniversity Karmanos Cancer Institute. Both of these institutions are currently named within “The Prostate Cancer Clinical Trials Consortium,” which ismade up of a 13 member clinical trial research group sponsored by the Prostate Cancer Foundation and the Department of Defense that capitalizes on theirscientific expertise and institutional resources with the goal of rapidly bringing new discoveries to prostate cancer patients. In the trial, each patient will beassessed for toxicity, biochemical responses (PSA), radiographic and clinical responses. We estimate that the Phase 1/2 clinical trial specified in the IND couldrequire approximately 18 months in total, and that the total cost of the clinical trial could be in the range of approximately $2.1 million. After completion of theanticipated Phase 1/2a APC-100 trial, we expect that we would meet with the FDA to review the trial results and determine extension of the Phase 2a toPhase 2b. APC-200. APC-200 is a drug candidate for both castrate-sensitive and castrate resistant prostate cancer. APC-200 blocks androgen-induced hydrogenperoxide production and inflammation and inhibits mouse PCa. Whereas acute inflammation is important for host defenses, for example against acutebacterial and viral infections in the prostate, chronic inflammation can contribute significantly to prostate tumor initiation, growth, progression and metasticPCa. In animal studies conducted to date, APC-200 was an excellent inhibitor of chronic inflammation, also completely inhibiting oxidase mediated high ratesof hydrogen peroxide production in vivo, and significantly delaying prostate cancer progression and death in the standard mouse prostate cancer model(TRAMP - transgenic adenocarcinoma of the mouse prostate – mouse model). TRAMP mice have spontaneously developing prostate cancer, where all animalsusually die from metastatic PCa at 22 weeks of age. In the TRAMP animal studies conducted to date, APC-200 repeatedly demonstrated a statisticallysignificant therapeutic efficacy and a strong safety profile with highly desirable pharmacological therapeutic characteristics and with the capacity to beadministered as either an oral or injectable drug. 8 APC-200 is being developed as an oral drug, specifically in appropriate formulations for patients with PCa for whom ADT is currently not approvedor appropriate with standard-of-care therapeutics. APC-200 may fulfill an unmet medical need for which there is no approved drug on the market, in that itmight be given after surgery or radiation, but before or with ADT, since it has been shown to be a potent anti-inflammatory drug in the animal studiesconducted to date. In pre-clinical studies conducted to date, APC-200 effectively inhibited the androgen-induced oxidase-mediated increased production ofhydrogen peroxide in prostate tissues and inhibited inflammation which has been recognized to be an important factor in the induction and progression ofprostate cancer. In the TRAMP mouse PCa model, APC-200 increased survival and time to tumor progression, and demonstrated inhibition of PSA secretionby human tumors and low toxicity with no pro-estrogenic or other negative side-effects. In 2007, APC-200 was awarded the NCI Rapid Award. Pre-clinical safety, pharmacology and toxicology studies are being conducted. GMP manufacture development of APC-200 for oral administration hasbeen initiated. A clinical protocol for the use of APC-200 for the treatment of prostate cancer has been completed with the exception of the dosing schedule,which is dependent on the toxicology data. Toxicology studies and GMP manufacturing have been delayed due to lack of funding, but will be undertaken andcompleted once we have adequate funding. After conclusion of the pre-clinical development activities, such as GMP manufacturing of drug substance anddrug product, as well as conclusion of the pre-clinical safety, pharmacology and toxicology studies, we anticipate filing and opening an Adamis-sponsoredIND relating to the clinical investigation of oral APC-200 in PCa patients with castrate resistant prostate cancer, assuming adequate funding and no unexpecteddelays. APC-300. 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 CR-PCa. In pre-clinical in vivo studies conducted to date,APC-300 repeatedly demonstrated a significant ability to inhibit human tumor growth and kill both castrate-sensitive and castrate-resistant human prostatecancer tumors. It also materially decreased human tumor volumes and suppressed local metastasis in human xenograft models, where malignant humanprostate or human melanoma tumor tissue was grafted onto athymic immunosuppressed experimental mice.APC-300 inhibited human androgen receptor protein production in these studies. It also inhibited PSA secretion by human PCa cells, which is aserum marker for human prostate cancer. Based on the pre-clinical studies conducted to date, APC-300 clearly targets microtubule assembly and regulation,inhibits inflammation and is a potent pro-apoptotic therapeutic oral drug with potential for human prostate cancer patients. Based on pre-clinical studiesconducted to date, APC-300 also (i) inhibits prostate growth with simultaneous effects on the level of alpha-tubulin and beta-tubulin (the microtubule structuralproteins), Stathmin (a micotubule regulating protein) and Survivin (a microtubule-regulatory downstream target/pro-survival protein), (ii) induces Fasreceptor-mediated apoptotic signaling, (iii) decreases the level of the anti-apoptotic protein cFLIP, (iv) decreases transcriptional activation of Survivin andcFLIP, and (v) has a strong safety profile and desirable pharmacological characteristics with the capacity to be administered as either an oral or injectable drugor as a nutraceutical. Because of its multiple mechanisms of action, we believe that APC-300 may have potential applications in the treatment of other tumortypes in which microtubule inhibitors have already been shown to be effective, including melanoma, as well as in prostate cancer. We have not yet developed aclinical 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. Telomerase Vaccine Technologies In April 2011, we acquired exclusive rights to patented telomerase-based cancer vaccine technology from the Regents of the University of California.The technology was developed by Maurizio Zanetti, M.D., at the University of California, San Diego, or UCSD. At the same time, Adamis licensed acomplementary technology from the Dana-Farber/Harvard Cancer Center. We intend to pursue development of the technology initially for what we believe maybe a novel cell-based vaccine product candidate for prostate cancer, tentatively named TeloB-VAX. The technology is intended to activate the body’s naturaldefense machinery to stimulate an immune response against one of nature’s most common tumor markers, telomerase. The vaccine will utilize the patient’sown B cells as antigen producing and antigen presenting cells. B cells represent approximately 12% of a person’s circulating blood cells. We believe that iffuture clinical trials prove successful, this technology may represent one of the first concrete opportunities to program the immune system to mobilize killerlymphocytes to combat cancer cells, whether these are adult differentiated cells or progenitor cancer stem cells. Since telomerase is increased in over 85% of allcancers, a vaccine product could potentially be used to treat multiple cancer types, such as breast, lung, and colon cancer. Telomerase is an enzyme that adds DNA sequence repeats (for example, “TTAGGG”) to the 3’ end of DNA strands in the telomere regions ofchromosomes at every cell division. Telomerase confers the immortality trait that converts normal cells into cancer cells and prevents the erosion of telomeresand end-to-end chromosomal fusion. As such, telomerase is over-expressed in the vast majority of differentiated cancer cell types. Importantly, telomerase isalso necessary for self-renewal of cancer stem cells and cancer cell progenitors. Based on the foregoing, telomerase reverse transcriptase, or TERT, is anantigen or tumor marker expressed in both differentiated and progenitor cancer cells making vaccination against TERT a potentially effective measure toinduce an immune response against cancer cells at both stages of differentiation. 9 The vaccine product candidate is composed of the patient’s own circulating B lymphocytes harboring a unique patented engineered plasmid DNA.The transfection (plasmid DNA entering the B cell) procedure is “spontaneous,” requiring no facilitating molecules or devices. Based on tests conducted todate, after approximately 60 minutes of incubation with the plasmid, the cells can be re-infused back into the patient. In studies conducted to date, the TeloB-VAX prostate cancer vaccine candidate induced a potent cellular immune response against the common cancer marker, TERT. In a Phase 1 study completed at UCSD in castrate resistant prostate cancer patients, the vaccine product candidate was safe, non-toxic andimmunogenic. Either a single injection or two injections of TeloB-VAX, spaced one month apart, was shown to induce a specific CD8 T cell response. Moreimportant, 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 competitivelyadvantageous features, including: prolonged antigen presentation by B cells (five days); a unique patented platform technology using a cancer antigen markerthat is increased in approximately 85% of all tumors; induces an immune response after a single injection; no need for complicated culture procedures; muchfewer steps; and potentially lower cost than other competitive products. We will initially focus development of the telomerase technology for prostate cancer. However, if the vaccine technology is successful, we intend todevelop the technology for other indications such as breast, lung and colon cancer. Other Vaccine Technologies In addition, we have licensed patented vaccine technology that we believe has the potential to provide protection against a number of different viralinfectious agents. This novel vaccination strategy, which employs DNA plasmids, appears, based on preclinical studies conducted to date, to have the abilityto “train” a person’s immune system to recognize and mount a defense against particular aspects of a virus’ structure. If successful, we believe this technologywill 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, HumanPapillomavirus, which is known to be involved in head and neck squamous cell carcinomas, and prostate cancer. The technology that provides the basis of our research and development in this area was developed by Dr. Maurizio Zanetti, M.D., a professor at theDepartment of Medicine at UCSC. Dr. Zanetti has developed and patented a method of DNA vaccination by somatic transgene immunization, or STI. Wehave entered into a worldwide exclusive license with Dr. Zanetti, through a company of which he is the sole owner, Nevagen, LLC, to utilize the technologywithin the field of viral infectious agents. We believe that the technology may have broad applications and intend to target viral disease indications for its initialproof of concept. STI, also sometimes called TLI, has already been tested in Phase I studies in humans for other vaccine applications. An immune response waselicited in the study, and the results suggested that the procedure was safe. Testing, for instance for influenza, is currently at the preclinical stage. Ifsuccessful, STI may provide a vaccine for a wide variety of forms of influenza, including avian flu, although there are no guarantees that any of the trials willbe successful or that a commercial product will be developed or marketed. Many current vaccines act by giving the immune system a preview of certain protein antigens expected to be found on the target structure; pathogens,such as influenza, however, demonstrate the limitations of this approach: the influenza virus changes its coat, often by recombination with swine or humanviruses or other variation processes approximately every flu season. The changes make each year’s new version of the flu unrecognizable to the immunesystem, and therefore immunity to influenza viral variants must be usually reestablished with a new vaccine every fall. The following summarizes the methodproposed by us to develop long lasting and cross-reactive immunity against, for example, influenza, but also against other therapeutic vaccine targets usingSTI: ●Draw a small amount of blood from patient ●Separate the white blood cells ●Add plasmid (DNA) to the white blood cells ●Incubate overnight to allow the plasmid to enter the white blood cells (ex vivo transgenesis) ●Inject white blood cells back to the individual to induce immunity to the target of choice, such as influenza, hepatitis, HPV, and prostatecancer). 10 Experiments conducted by third parties for us utilizing the STI technology in mice have shown that T-cell immunity can be induced in vivo by asingle intravenous inoculation of naïve B lymphocytes genetically programmed by ex vivo transgenesis. This is accomplished by administering a plasmidDNA under control of a B cell specific promoter. The process is entirely spontaneous and mimics the process of viral infection, which is intracellularreplication. Results show the induction of systemic effector CD4 and CD8 T-cell responses within 14 days after administration of the transgenic B cells.Durable immunologic memory is also induced. It has been demonstrated that a single injection of 5 x 103 transgenic B lymphocyte induces complete protectionfrom a lethal virus challenge. The following outlines the protocol used in the mouse trial: ●A small amount of blood was drawn from mice ●B cells were separated from the blood and transfected with DNA from flu virus ●Transfected lymphocytes, or priming B cells, were re-infused into the mice ●A lethal challenge of virus was administered via aerosol 14-21 days after re-infusion ●For controls, mice were injected with priming B cells transfected with DNA not specific for the flu A single injection of transgenic B lymphocytes in this trial was sufficient to generate specific CD8 T-cell memory responses, which protected micefrom a lethal viral challenge. The immune response that was induced was a reaction against the common components of the influenza virus, and was cross-reactive, meaning that it reacted against various types of flu virus (avian or any other). Thus, we believe this type of vaccine may be utilized to protectindividuals from various strains of influenza that may occur. We currently intend to focus initially on the development of one or more of the other recently licensed prostate cancer product candidates andtechnologies, and as a result the timing of development of this viral vaccine technology is subject to uncertainty. Savvy/C31G On December 7, 2010, we announced the successful completion of a Phase 3 contraceptive trial of our contraceptive gel product candidate namedSavvy (C31G). The study met its primary endpoint and was conducted by the Eunice Kennedy Shriver National Institute of Child Health and HumanDevelopment (NICHD), National Institutes of Health (NIH), in the Contraceptive Clinical Trials Network at 14 sites in the United States. The results of theNICHD study were published in December 2010 in Obstetrics and Gynecology. The Phase 3 trial was a randomized, double-masked, controlled comparatorstudy to assess whether a gel containing the spermicide C31G was non-inferior to Conceptrol®, a commercially available product containing nonoxynol-9 (N-9). The clinical investigators found that C31G was not inferior in contraceptive efficacy to the comparator drug Conceptrol®. Thus, the study met its primaryobjective. Moreover, the gel was well-tolerated and had a high degree of acceptability in women who completed the study. No drug-related serious adverse eventswere 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. contain the active ingredient 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 NICHD comparative trial, there were a significantly lower number of drug-related events with the C31G gel andfewer women discontinued the study due to drug-related side effects. C31G does not contain nonoxynol-9 and, if commercialized, may offer an alternative forwomen who seek a non-hormonal method of contraception. C31G previously was the subject of two Phase 3 clinical trials conducted in Africa, supported by Family Health International and the United StatesAgency for International Development, to determine whether C31G was safe and effective for reducing women’s risk of acquiring HIV infection. The externalindependent Data Monitoring Committee reviewing those trials concluded in 2005 and 2006 that, while there were no safety concerns based on the results ofthe studies to date, continuing the trials would not allow the effect of C31G on HIV acquisition to be determined because of a lower than expected rate of HIVseroconversion in the trials. The committee determined that continuation of the trials was not warranted due to a lack of statistical significance between C31Ggel and the vehicle control in the interim data. Accordingly, the trials were discontinued.Before considering any actions to seek regulatory approval for a C31G product, further meetings with the FDA would likely be required to discussthe 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 will likely seek to enter into an out-licensing or similar transaction with organizations that have a focus orbusiness unit in the area of contraception. The C31G product candidate is held by our Biosyn, Inc. subsidiary and was acquired in 2004 with Cellegy’sacquisition of Biosyn. Provisions in the acquisition agreement between Biosyn and Cellegy, and in certain of the funding agreements and other agreementsrelating 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 and payments to certain other third parties in the event of sales or other revenuesrelating to C31G or certain other events. In addition, sale or out-licensing of the C31G product candidate may require the consent of one or more such thirdparties. As a result, commercialization of the product may require renegotiation of the provisions relating to the former Biosyn shareholders and such thirdparties. Accordingly, there can be no assurances that we will be able to successfully conclude a transaction involving C31G or concerning the amounts that wemight receive from any such transaction, or that any C31G product will be submitted for regulatory approval or will be approved or marketed. 11 License Agreements License Agreements Relating to APC-100, APC-200 and APC-300 On February 24, 2010, we entered into an Assignment, Assumption and Stock Acquisition Agreement with Colby Pharmaceutical Company, aprivately held company, relating to the APC-100, APC-200 and APC-300 product candidates. Under the agreement as amended, Colby assigned to us thelicense agreement relating to the APC-300 compound in consideration of the issuance to Colby of 800,000 shares of our common stock, and agreed that theagreements relating to the APC-100 and APC-200 would be assigned upon satisfaction of certain conditions, in exchange for additional shares. Colby licensedthe patents, patent applications and related intellectual property relating to the compounds pursuant to license agreements with the Wisconsin Alumni ResearchFoundation, or WARF, the licensor. In October 2010, Adamis and Colby amended the agreement. Under the amendment, Colby assigned and transferred to usthe license agreements relating to APC-100 and APC-200 in consideration for the issuance to Colby of 5,000,000 shares of our common stock. Additionally, weissued 1,250,000 shares to each of two principals of Colby, for consulting services in connection with the intellectual property covered by the licenseagreements. The APC-100 and APC-200 license agreements are dated January 26, 2007. The APC-300 license agreement is dated January 2, 2008. Under eachseparate agreement, WARF grants to us, as the licensee, an exclusive license, with rights of sublicense, under the patents and patent applications identified inthe agreement, for the fields of human nutraceuticals, preventatives, therapeutics and diagnostics and for all territories worldwide that are covered by any ofthe licensed patents. The license agreements include milestones that we, as the licensee, agree to meet by certain dates, relating to obtaining cumulative funding by certaindates, 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 withthe 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 thefunding milestones or commercialization milestones. Under each agreement, we agree to pay WARF a milestone payment of $25,000 upon the filing of the firstIND or comparable regulatory filing for a covered product, and additional payments upon the achievement of the additional milestones, aggregatingapproximately $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. Theagreements include customary stacking provisions providing for a reduction in royalties if we become obligated to pay royalties to other third parties on salesof 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 forany 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 providedas 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 licensedpatents 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 accruedamounts 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 mayterminate 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 coveredproduct 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 mayalso terminate the agreement following our failure to meet a funding or commercialization milestone, or if we fail to pay amounts when due or deliver adevelopment report or commits a material breach of the agreement and fail to cure the default within 90 days. Telomerase Vaccine Technology Our telomerase vaccine technology was licensed pursuant to exclusive license agreements entered into in April 2011 with the Regents of the Universityof California and the Dana-Farber Cancer Institute, Inc. Pursuant to the agreement with the University of California, we acquired a license to certain patentsand related intellectual property rights relating to a telomerase-based cancer vaccine technology. We licensed a complementary patent based on technology fromthe Dana-Farber Cancer Institute, Inc. 12 Under the terms of the license agreement, we licensed the patents and related intellectual property for a field that includes therapeutic and preventivecancer 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-livedpatent 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 willpay 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 $1.87 million if all milestone payments are made, including obtaining U.S. regulatoryapproval 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. Theagreement includes customary provisions for adjusting the royalty rate in the case of a combination product that includes a licensed product and otherproducts or product components. The agreement includes customary royalty stacking provisions providing for a reduction in the royalty rate if we are requiredto 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 tothe 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 theuniversities, with the exact percentage depending on the time during the product development, clinical trials and regulatory approval process that the sublicenseis 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 exactpercentage depending on the status of product development and commercialization. Following commercial sales of a licensed product, the agreement providesfor 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 theagreement, we agree to diligently proceed with the development, manufacture and sale of licensed products, and to satisfy certain development and regulatorysubmission milestones by certain dates. Failure to satisfy these obligations permits the universities to either terminate the license agreement or convert thelicense 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 thedefault 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, we entered into a worldwide exclusive license agreement with Dr. Zanetti, through a company of which he is the sole owner,Nevagen, to utilize technology held by Nevagen within the field of viral infectious agents. The intellectual property, or IP, licensed by Adamis includes the useof the technology known as “Transgenic Lymphocyte Technology,” or TLI, covered by certain U.S. and foreign patents and patent applications. The U.S.patent was issued on October 9, 2007 and will expire on April 27, 2019, 20 years from the filing date of the earliest U.S. non-provisional application uponwhich the patent claims priority. The field for this license is the prevention and treatment and detection of viral infectious diseases. The license will terminatewith the expiration of the U.S. patent for the IP. As part of the initial license fee we granted Dr. Zanetti the right to purchase 1,000,000 shares of our common stock at a price of $0.001 per share, andhe subsequently exercised that right. In addition, we paid Nevagen an initial license fee of $55,000. For the first product, we will make payments uponreaching specified milestones in clinical development and submission of an application regulatory approval, potentially aggregating $900,000 if all milestonepayments are made. As of the date of this Annual Report, no milestones have been achieved and no milestone payments have been made. The agreement alsoprovides that we will pay Nevagen royalties, in the low single digits, payable on net sales received by us of products covered by the IP. If additionaltechnologies 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 cumulativetotal of $10 million. Adamis and Nevagen have the right to sublicense with written permission of the other party. In the event that Nevagen sublicenses or sells theimproved 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 IP for usein 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 andpayable based on net sales. If the IP is sublicensed by us 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 thesublicense is granted. Certain incremental non-flu virus related sublicensing payments described in the license agreement are specifically excluded from theroyalty cap. 13 All improvements of the IP conceived of, or reduced to practice by us, or made jointly by us and Nevagen, will be owned solely by us. We grantedNevagen a royalty-free nonexclusive license to use any improvements made on the existing technology for research purposes only, but not for any commercialpurposes of any kind. We have agreed to grant to Nevagen a royalty-free license for any improvement needed for the commercialization of the IP for Nevagen’suse 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 decidedby 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 becomesavailable. 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 forlicense, or sublicense, agreements if the technology is later developed into a product. Either party may terminate the license agreement in the event of a materialbreach of the agreement by the other party that has not been cured or corrected within 90 days of notice of the breach.Sources and Availability of Raw Materials; Manufacturing We purchase, in the ordinary course of business, necessary raw materials, components and supplies essential to our operations from severalsuppliers in the U.S. and overseas. We have entered into a contract with a manufacturing organization for the development and production of our PFS Syringeproduct. We intend to monitor these arrangements and to seek to provide a continued supply of both raw materials and components. We do not currently have in-house manufacturing capabilities. We rely on third party contract manufacturers to make the material used to supportthe development of our product candidates. We purchase the material used in our clinical trial activities from various companies and suppliers. Sales and Marketing During fiscal 2011, we materially reduced our sales force in light of the absence of marketing efforts relating to our allergy and respiratory products,and we do not currently have any sales force, as we did not market allergy, respiratory or other products during fiscal 2012 or 2013. If the PFS Syringeproduct is approved for marketing and is commercially launched, we intend either to hire and train sales representatives or else retain a third party sales force.Additional sales representatives may be retained if an aerosolized inhaled nasal steroid product is developed and launched. Governmental Regulation Governmental authorities in the United States and other countries extensively regulate the preclinical and clinical testing, manufacturing, labeling,storage, record-keeping, advertising, promotion, export, marketing and distribution, among other things, of pharmaceutical and biologic products. In theUnited States, the FDA subjects pharmaceutical and biologic products to rigorous review under the Federal Food, Drug, and Cosmetic Act, the Public HealthService Act and other federal statutes and regulations. Many of the products we are currently developing must undergo rigorous preclinical and clinical testing and an extensive regulatory approval processbefore they can be marketed. This process makes it longer, more difficult and more costly to bring our potential products to market, and we cannot guaranteethat any of our potential products will be approved. The pre-marketing approval process can be particularly expensive, uncertain and lengthy. If we or ourcollaboration partners do not comply with applicable regulatory requirements, 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. Withdrawal or rejection of FDA or other government entity approval of our potential products may occur for several reasons including, amongothers, lack of efficacy during clinical trials, unforeseen safety issues, inability to follow patients after treatment in clinical trials, inconsistencies betweenearly clinical trial results and results obtained in later clinical trials, varying interpretations of data generated by clinical trials, or changes in regulatory policyduring the period of product development in the United States and abroad. The process of obtaining FDA and other required regulatory approvals is expensive. The time required for FDA and other approvals is uncertain andmay require a number of years, depending on the complexity or novelty of the product. The process of obtaining FDA and other required regulatory approvalsfor many of our products under development is further complicated because some of these products use non-traditional or novel materials in non-traditional ornovel ways, and the FDA has not established guidelines, or has provided only limited guidance, concerning the clinical trials required to support approval ofsuch products. 14 Any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. Theselimitations may restrict the size of the market for the product and affect reimbursement by third-party payers. In addition, regulatory agencies may not grantapprovals on a timely basis or may revoke or significantly modify previously granted approvals. We, or our collaborative partners, are subject to numerous foreign regulatory requirements governing the manufacturing and marketing of ourpotential future products outside of the United States. The approval procedure varies among countries, additional testing may be required in somejurisdictions, and the time required to obtain foreign approvals often differs from that required to obtain FDA approvals. Moreover, approval by the FDA doesnot ensure approval by regulatory authorities in other countries, and vice versa.Even if our products are approved by regulatory authorities, if we fail to comply with ongoing regulatory requirements, or if there are unanticipatedproblems with the products, these products could be subject to restrictions or withdrawal from the market. Even if regulatory approval of a product is granted,the approval may be subject to requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Later discoveryof previously unknown problems with the products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, or failureto comply with regulatory requirements, may result in restrictions on such products or manufacturing processes, withdrawal of the products from the market,voluntary or mandatory recall, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties. As a result of these factors, we may not successfully begin or complete clinical trials in the time periods estimated, if at all. Moreover, if we incurcosts and delays in development programs or fails to successfully develop and commercialize products based upon our technologies, we may not becomeprofitable, and its stock price could decline. FDA Approval Process General In the United States, the FDA regulates drug products under the Federal Food, Drug, and Cosmetic Act, or FFDCA, and its implementingregulations, and regulates biological drug products under both the Public Health Service Act, or PHS Act, and its implementing regulations, as well as theFFDCA. Our product candidates include both biological drug products and drug products. The process required by the FDA before our drug and biologicaldrug product candidates may be marketed in the United States generally involves the following: ●completion of extensive preclinical laboratory tests, preclinical animal studies and formulation studies all performed in accordance with theFDA’s current Good Laboratory Practice, or cGLP, regulations; ●submission to the FDA of an IND, which must become effective before human clinical trials may begin; ●performance of adequate and well controlled human clinical trials to establish the safety and efficacy of the product candidate for eachproposed indication; ●submission to the FDA of a new drug application, or NDA, for drug products, or a Biologic License Application, or BLA, for biologicaldrug products; ●satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the product is produced to assesscompliance with cGMP regulations; and ●FDA review and approval of the NDA or BLA prior to any commercial marketing, sale or shipment of the drug or biological drug. Preclinical tests include laboratory evaluation of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals. Theresults of preclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND to the FDA. The IND becomeseffective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the clinical trial,including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve anyoutstanding concerns before the clinical trial can begin. An independent institutional review board, or IRB, for each medical center proposing to conduct theclinical trial must review and approve the plan for any clinical trial before it commences at that center and it must monitor the study until completed. Clinicaltesting also must satisfy extensive good clinical practices, or GCPs, regulations and regulations for informed consent. 15 Clinical Trials A company typically conducts human clinical trials in three sequential phases, but the phases may overlap. Phase 1 trials consist of testing of theproduct in a small number of patients or healthy volunteers, primarily for safety at one or more doses and, for vaccine products, immunogenicity. Phase 1trials in cancer are often conducted with patients who are not healthy and who have end-stage or metastatic cancer. Phase 2 trials, in addition to safety, evaluatethe efficacy of the product in a patient population somewhat larger than Phase 1 trials and the dose tolerance and optimal dosage. In some cases, a sponsormay decide to run what is referred to as a “Phase 2b” evaluation, which is a second, confirmatory Phase 2 clinical trial. Phase 3 trials typically involveadditional testing for safety and clinical efficacy in an expanded population at geographically dispersed test sites. A company must submit to the FDA aclinical plan, or “protocol,” which must also be approved by the IRBs at the institutions participating in the trials, prior to commencement of each clinicaltrial. The trials must be conducted in accordance with the FDA’s good clinical practices. The FDA may order the temporary or permanent discontinuation of aclinical trial at any time. In some cases, the FDA may conditionally approve an NDA or BLA for a product candidate based on the sponsor’s agreement toconduct additional clinical trials to further assess the drug’s safety and effectiveness after NDA or BLA approval. Such post-approval trials are typicallyreferred to as Phase 4 studies. To obtain marketing authorization, a company must submit to the FDA the results of the preclinical and clinical testing, together with, and amongother things, detailed information on the manufacture and composition of the product, in the form of a new drug application, or NDA, or, in the case of abiologic, a biologics license application, or BLA. After completion of the required clinical testing, an NDA or BLA is prepared and submitted to the FDA.FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA and BLA must include the results of allpreclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture and controls. The cost ofpreparing and submitting an NDA or BLA is substantial, and there can be no assurance that any approval will be granted on a timely basis, if at all. Underfederal law, the submission of most NDAs and BLAs are additionally subject to a substantial application user fee, and the manufacturer and/or sponsorunder an approved new drug application is also subject to annual product and establishment user fees. These fees are typically increased annually. The FDA has 60 days from its receipt of an NDA or BLA to determine whether the application will be accepted for filing based on the agency’sthreshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depthreview. The FDA has agreed to certain performance goals in the review of new drug applications. Most such applications for non-priority drug products arereviewed within ten months. The review process may be extended by the FDA for three additional months to consider certain information or clarificationregarding information already provided in the submission. The FDA may also refer applications for novel drug products or drug products which presentdifficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and arecommendation as to whether the application should be approved. The FDA is not bound by the recommendations of an advisory committee, but it considerssuch recommendations carefully when making decisions. The FDA may deny approval of an NDA or BLA if the applicable regulatory criteria are notsatisfied, or it may require additional information including clinical or CMC data. Even if such data are submitted, the FDA may ultimately decide that theNDA or BLA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and the FDA may interpret data differently than weor our collaborators interpret data. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety problemsoccur after the product reaches the market. Before approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with Good Clinical Practices, orGCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unlesscompliance with current good manufacturing practices, or cGMP, is satisfactory and the NDA or BLA contains data that provides substantial evidence thatthe drug is safe and effective in the indication studied. Failure to comply with GMP or other applicable regulatory requirements may result in withdrawal ofmarketing approval, criminal prosecution, civil penalties, recall or seizure of products, warning letters, total or partial suspension of production, suspensionof clinical trials, FDA refusal to review pending marketing approval applications or supplements to approved applications, or injunctions, as well as otherlegal or regulatory action against us or our corporate partners. After the FDA evaluates the NDA or BLA and the manufacturing facilities, it issues an approval letter, an approvable letter or a not-approvable letter.Both approvable and not-approvable letters generally outline the deficiencies in the submission and may require substantial additional testing or information inorder for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA orBLA, the FDA will issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition ofNDA or BLA approval, the FDA may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy and may impose otherconditions, including labeling or distribution restrictions or other risk-management mechanisms which can materially affect the potential market andprofitability of the drug. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems areidentified following initial marketing. Biosimilars The Biologics Price Competition and Innovation Act, or BPCIA, was passed on March 23, 2010 as Title VII to the Patient Protection and AffordableCare Act. The law provides for an abbreviated approval pathway for biological products that demonstrate biosimilarity to a previously-approved biologicalproduct. The BPCIA provides 12 years of exclusivity for innovator biological products. 16 Allergy and Respiratory Products Several of our allergy and respiratory products that we previously marketed before 2011, including AeroHist Caplets, AeroHist Plus Caplets,AeroKid Oral Liquid and AeroOtic HC Ear Drops, were not the subject of a new drug application or ANDA, and have not been specifically approved by theFDA for marketing by us. We did not market these products during fiscal 2012 or fiscal 2013. These products were marketed for many years and, webelieve, are similarly situated to products marketed by many companies that are marketed without an approved new drug application or abbreviated new drugapplication. The products are drug listed with the FDA in the National Drug Code Directory, but such listing does not constitute FDA approval of theproducts. In June 2006, the FDA issued a Compliance Policy Guide for Marketed Unapproved Drugs, which addressed some of the considerations utilized bythe FDA in exercising its discretion with respect to products marketed without FDA approval. The guide does not establish legally enforceable responsibilitieson the FDA and generally only represents the agency’s current thinking on a topic. The guide emphasizes that any product that is being marketed withoutrequired FDA approvals is subject to FDA enforcement action at any time. If the FDA were to issue a Federal Register Notice outlining revised conditions formarketing, which could include calling for the submission of an application for products such as our cough/cold products, then if we desired to market anysuch products, we would take appropriate action so as to be in compliance with any such policies. The FDA might also require clinical trials in support ofany such applications, and we would need to evaluate our alternatives in light of the costs required to conduct such trials, which could be substantial,compared to the economic benefit to us from such products. In addition, independently of such actions, at any time the FDA could also exercise its discretionto proceed against us and require immediate withdrawal of such products, if we decided to commence marketing them, from the market, or prohibit us frommarketing such products without first conducting required trials and obtaining approvals, or impose other penalties on us. In 2010 the FDA issued a warningletter indicating that we should not market the PFS Syringe product without FDA marketing approval and that the product may be sold only after anapplication has been submitted to the FDA and approved. Some of our unapproved allergy and respiratory products include extended release formulations, which may subject us to a higher risk of FDAenforcement action should we decide to commence marketing them. Such actions could have a material adverse effect on our business, financial condition andresults of operations. The Prelone product is the subject of an ANDA approval from the FDA. As we believe is common with many drug products, the Prelone product hasbeen manufactured by a third party manufacturer which holds the ANDA approval relating to the product. We own the trademark and intellectual propertyrights relating to the product.Abbreviated New Drug Applications In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’sproduct. 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 withTherapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitorsin support of approval of an ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths anddosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. ANDA applicants are notrequired to conduct or submit results of pre-clinical or clinical tests to prove the safety or effectiveness of their drug product, other than the requirement forbioequivalence testing. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted bypharmacists under prescriptions written for the original listed drug. The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book.Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has notexpired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the newproduct. A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid is called aParagraph IV certification. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claimingthe referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification tothe NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringementlawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IVcertification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or adecision in the infringement case that is favorable to the ANDA applicant. 17 The ANDA application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemicalentity, listed in the Orange Book for the referenced product has expired. Federal law provides a period of five years following approval of a drug containing nopreviously approved active ingredients, during which ANDAs for generic versions of those drugs cannot be submitted unless the submission contains aParagraph IV challenge to a listed patent, in which case the submission may be made four years following the original product approval. Federal law providesfor a period of three years of exclusivity following approval of a listed drug that contains previously approved active ingredients, but is approved in a newdosage form, route of administration or combination, or for a new use, the approval of which was required to be supported by new clinical trials conducted byor for the sponsor, during which FDA cannot grant effective approval of an ANDA based on that listed drug. Section 505(b)(2) New Drug Applications Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is a special type of NDA, commonlyreferred 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, orpublished literature, in support of its application. Section 505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulationsor 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 approvalcomes 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 theFDA’s findings with respect to certain pre-clinical or clinical studies conducted for an approved product. The FDA may also require companies to performadditional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some ofthe 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.To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is subject to existingexclusivity for the reference product and is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to thesame extent that an ANDA applicant would. Thus approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referencedproduct have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for thereferenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months,settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant. Fast Track Designation/Priority Review Congress enacted the Food and Drug Administration Modernization Act of 1997, or the Modernization Act, in part to ensure the availability of safeand effective drugs, biologics and medical devices by expediting the development and review for certain new products. The Modernization Act establishes astatutory program for the review of Fast Track products, including biologics. A Fast Track product is defined as a new drug or biologic intended for thetreatment of a serious or life-threatening condition that demonstrates the potential to address unmet medical needs for this condition. Under the Fast Trackprogram, the sponsor of a new drug or biologic may request that the FDA designate the drug or biologic as a Fast Track product at any time during thedevelopment of the product, prior to a new drug application submission. If appropriate, we intend to seek fast track designation, accelerated approval orpriority review for our biological drug candidates. Post-Marketing Obligations The Food and Drug Administration Amendments Act of 2007 expanded FDA authority over drug products after approval. All approved drugproducts are subject to continuing regulation by the FDA, including record-keeping requirements, reporting of adverse experiences with the product, samplingand distribution requirements, notifying the FDA and gaining its approval of certain manufacturing or labeling changes, complying with certain electronicrecords and signature requirements, submitting periodic reports to the FDA, maintaining and providing updated safety and efficacy information to the FDA,and complying with FDA promotion and advertising requirements. Failure to comply with the statutory and regulatory requirements can subject amanufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product, injunctive action, criminalprosecution, or civil penalties. The FDA may require post-marketing studies or clinical trials, referred as Phase 4 trials, to develop additional information regarding the safety of aproduct. These studies or trials may involve continued testing of a product and development of data, including clinical data, about the product’s effects invarious populations and any side effects associated with long-term use. The FDA may require post-marketing studies or trials to investigate known seriousrisks or signals of serious risks or identify unexpected serious risks and may require periodic status reports if new safety information develops. Failure toconduct these studies in a timely manner may result in substantial civil fines. 18 Drug and biologics manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, andto list their products with the FDA. The FDA periodically inspects manufacturing facilities in the United States and abroad in order to assure compliance withthe applicable current good manufacturing practices, or cGMP, regulations and other requirements. Facilities also are subject to inspections by other federal,foreign, state or local agencies. In complying with the cGMP regulations, manufacturers must continue to expend time, money and effort in record-keeping andquality control to assure that the product meets applicable specifications and other post-marketing requirements. We must ensure that any third-partymanufacturers continue to expend time, money and effort in the areas of production, quality control, record keeping and reporting to ensure full compliancewith those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension ofmanufacturing or recall or seizure of product.Also, newly discovered or developed safety or efficacy data may require changes to a product’s approved labeling, including the addition of newwarnings and contraindications, additional preclinical or clinical studies, or even in some instances, revocation or withdrawal of the approval. Violations ofregulatory requirements at any stage, including after approval, may result in various adverse consequences, including the FDA’s withdrawal of an approvedproduct from the market, other voluntary or FDA-initiated action that could delay or restrict further marketing, and the imposition of civil fines and criminalpenalties against the manufacturer and BLA holder. In addition, later discovery of previously unknown problems may result in restrictions on the product,manufacturer or BLA holder, including withdrawal of the product from the market. Furthermore, new government requirements may be established that coulddelay or prevent regulatory approval of our products under development, or affect the conditions under which approved products are marketed. The distribution of prescription pharmaceutical products is also subject to the Prescription Drug Marketing Act, or PDMA, which regulates thedistribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states.Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability indistribution. Anti-Kickback, False Claims and Other Laws In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrictcertain marketing practices in the pharmaceutical industry. These laws include anti-kickback statutes, false claims statutes and the federal PhysicianPayment Sunshine Act. The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying,soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare itemor service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangementsbetween pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickbackstatute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Althoughthere are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, theexemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations maybe subject to scrutiny if they do not qualify for an exemption or safe harbor. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false or fraudulent claim for payment, or knowingly making, or causing to be made, a falserecord or statement material to a false or fraudulent claim. Several pharmaceutical and other healthcare companies have been prosecuted under these laws forallegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates,and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certainmarketing practices, including off-label promotion, may also implicate false claims laws. The majority of states also have statutes or regulations similar to thefederal anti-kickback law and false claims laws, which apply to items and services, reimbursed under Medicaid and other state programs. A number of stateshave anti-kickback laws that apply regardless of the payor. In addition, the federal Physician Payment Sunshine Act, when implemented, will require the reporting by drug manufacturers of “payments ortransfer of value” made or distributed to physicians and teaching hospitals, with limited exceptions. Failure to comply with the reporting obligations mayresult in civil monetary penalties. 19 Approval Outside the United States In order to market any product outside of the United States, we must comply with numerous and varying regulatory requirements of other countriesregarding safety and efficacy and governing, among other things, clinical trials and commercial sales and distribution of our products. Approval proceduresvary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in othercountries might differ from and be longer or shorter than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatoryapproval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. In theEuropean Union, Canada and Australia, regulatory requirements and approval processes are similar, in principle, to those in the United States. To date, wehave not initiated any discussions with the European Medicines Agency, or EMEA, or any other foreign regulatory authorities with respect to seekingregulatory approval for any indication in Europe or in any other country outside the United States.Other Government Regulation In addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the EnvironmentalProtection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other similar federal and state laws regarding, among otherthings, occupational safety, the use and handling of radioisotopes, environmental protection and hazardous substance control. Although we believe that wehave 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 beno assurance that we will not be required to incur significant costs to comply with environmental and health and safety regulations in the future. Our researchand development may involve the controlled use of hazardous materials, chemicals, and various radioactive compounds. Although we believe that our safetyprocedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidentalcontamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages thatresult and any such liability could exceed our resources. Competition The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis onproprietary products. Many of our competitors, including biotechnology and pharmaceutical companies, academic institutions and other researchorganizations, are actively engaged in the discovery, research and development of products that could compete directly or indirectly with our products underdevelopment. Allergy and Respiratory Products. Our allergy and respiratory products and inhaled nasal steroid product, if developed and launched, will competewith 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 pharmaceuticalscompanies produce pharmaceutical products, such as antihistamines, corticosteroids and anti-leukotriene agents, which manage allergy and respiratorysymptoms. The FDA granted marketing approval of TEVA Pharmaceutical Industries Ltd.’s Qnasl nasal steroid product in March 2012. The PFS Syringeproduct, if commercialized, will compete against other self-administered epinephrine products, including EpiPen, EpiPen Jr. and Twinject. Prostate Cancer and Vaccine Products. The development and commercialization of new drugs for cancer, and of vaccine products for viralinfections, is highly competitive. Most of the larger pharmaceutical companies, and many smaller public and private companies, have products or are engagedin research and development activities in these fields. Some of the products approved by the FDA for certain prostate cancer-related indications include, but arenot limited to, antiandrogens (such as Leuprolide, Goserelin and Buserelin), Provenge®, Docetaxel, JEVTANA®, and ZYTIGA® (abiraterone acetate), andother products, such as Medivation, Inc.’s MDV3100 and Bavarian Nordic’s PROSTVAC®, are the subject of ongoing clinical trials in men with metastaticcastrate-resistant prostate cancer. Savvy. Biosyn’s Savvy contraceptive product candidate, if developed, launched and marketed, would be subject to competition from othermicrobicides that are currently undergoing clinical trials and which may be sold by prescription or over-the-counter, as well as non-microbicidal productssuch as condoms. There are also a number of existing contraception products currently on the market, which could greatly limit the marketability of theSavvy contraception product candidate. As a result, there can be no assurance that Biosyn’s Savvy product candidate, even if developed, would be able tocompete successfully with existing products or other innovative products under development. Most of the entities developing and marketing competing products have significantly greater financial resources and expertise in research anddevelopment, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing than we have. Smaller or early-stagecompanies may also prove to be significant competitors, particularly for collaborative agreements with large, established companies and access to capital.These entities may also compete with us in recruiting and retaining qualified scientific and management personnel, as well as in acquiring technologiescomplementary to, or necessary for, our programs.The pharmaceutical industry is characterized by extensive research efforts and rapid and significant technological change and intense competition.We are much smaller in terms of size and resources than many of our competitors in the United States and abroad, which include, among others, majorpharmaceutical, chemical, consumer product, and biotechnology companies, specialized firms, universities and other research institutions. Our competitorsmay succeed in developing technologies and products that are safer, more effective or less costly than any developed by us, thus rendering our technology andpotential products obsolete and noncompetitive. 20 Patents and Proprietary Technologies Patents and other proprietary rights are important to our business. Our policy is to file patent applications and protect inventions and improvementsto inventions that are commercially important to the development of our business. We also rely on trade secrets, know-how, confidentiality agreements,employee invention assignment agreements, continuing technology innovations and licensing opportunities to protect our technology and develop and maintainour competitive position. During 2010, we acquired license agreements covering intellectual property relating to three small molecule anti-inflammatory compounds, namedAPC-100, APC-200 and APC-300, for the potential treatment of human prostate cancer (PCa). The intellectual property covered by the agreements was licensedfrom the Wisconsin Alumni Research Foundation, or WARF. The patents and applications covered by the license agreements include two issued U.S. patentsand related U.S. and foreign patents and patent applications. The license agreements pursuant to which we license the telomerase vaccine technology cover two U.S. patents. We are the exclusive licensee, under the license agreement with Nevagen, of rights under two issued U.S. patents, and related U.S. and foreignpatents applications, relating to the TLI technology, in the field of prevention and treatment and detection of viral infectious diseases. The licensed intellectualproperty includes the use of the technology known as “Transgenic Lymphocyte Technology.” We currently hold one U.S. patent relating to Savvy gel for the reduction in transmission of HIV infection. It is impossible to anticipate the breadth or degree of protection that any of the above patents will afford, or whether we can meaningfully protect ourrights to our unpatented trade secrets. No assurance can be given that competitors will not independently develop substantially equivalent proprietaryinformation and techniques, or otherwise gain access to our trade secrets or disclose such technology. Because of limited financial resources, we may not havethe financial resources to prepare, file, or prosecute all of the patent applications that we might otherwise desire, or to maintain all U.S. and foreign patents thathave previously been issued. Our failure to obtain patent protection or otherwise protect our proprietary technology or proposed products may have a material adverse effect on ourcompetitive position and business prospects. The patent application process takes several years and entails considerable expense. There is no assurance thatadditional patents will issue from these applications or, if patents do issue, that the claims allowed will be sufficient to protect our technology. The patent positions of pharmaceutical and biotechnology firms are often uncertain and involve complex legal and factual questions. Furthermore,the breadth of claims allowed in biotechnology patents is unpredictable. We cannot be certain that others have not filed patent applications for technologycovered by the patents and applications described above, that the licensors of the technologies were the first to invent the technology that is the subject of suchpatents or patent applications, or that the patents and applications will provide meaningful protection. Competitors may have filed applications for, or mayhave received patents and may obtain additional patents and proprietary rights relating to, compounds, products or processes that block or compete with therights that we hold. We are aware of patent applications filed and patents issued to third parties relating to HFA propellant technology and aerosolized inhalers,and there can be no assurance that any patent applications or patents will not have a material adverse effect on potential products we are developing or mayseek to develop in the future.Patent litigation is widespread in the biotechnology industry. Litigation may be necessary to defend against or assert claims of infringement, toenforce patents issued to us, to protect trade secrets or know-how owned or licensed by us, or to determine the scope and validity of the proprietary rights ofthird parties. Except as described in “Item 3. Legal Proceedings” below, no third party has asserted that we are infringing such third party’s patent rights orother intellectual property, there can be no assurance that litigation asserting such claims will not be initiated, that we would prevail in any such litigation orthat we would be able to obtain any necessary licenses on reasonable terms, if at all. Any such claims against us, with or without merit, as well as claimsinitiated by us against third parties, can be time-consuming and expensive to defend or prosecute and to resolve. If other companies prepare and file patentapplications in the United States that claim technology also claimed by us, we may have to participate in interference proceedings to determine priority ofinvention, which could result in substantial cost to us even if the outcome is favorable to us. There can be no assurance that third parties will notindependently develop equivalent proprietary information or techniques, will not gain access to our trade secrets or disclose such technology to the public orthat Adamis can maintain and protect unpatented proprietary technology. We typically require our employees to execute confidentiality agreements uponcommencement of employment with us. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies forour technology in the event of unauthorized use or disclosure of such information, that the parties to such agreements will not breach such agreements or thatour trade secrets will not otherwise become known or be discovered independently by our competitors. 21 Employees As of June 28, 2013, we had seven full-time employees and no part-time employees. None of our employees is subject to a collective bargainingagreement or represented by a labor or trade union, and we believe that our relations with our employees are good. Available Information We are subject to the reporting requirements under the Securities Exchange Act of 1934. Consequently, we are required to file or furnish reports andinformation with the Securities and Exchange Commission, or SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reportson Form 8-K, amendments to those reports, and other information and documents. These reports and other information concerning us may be obtained at theSEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 or accessed through the SEC’s website at http://www.sec.gov or by calling1-800-SEC-0330. Upon written request to the Company at Adamis Pharmaceuticals Corporation, 11455 El Camino Real, Suite 310, San Diego, CA 92130,Attention: Chief Financial Officer, the Company will provide a copy of the annual report on Form 10-K to any stockholder. The information on our website isnot incorporated into, and is not part of, this annual report. 22 ITEM 1A:RISK FACTORS You should consider carefully the following information about the risks described below, together with the other information contained in thisAnnual Report on Form 10-K and in our other public filings in evaluating our business. If any of the following risks actually occurs, our business,financial condition, results of operations and future prospects would likely be materially and adversely affected. In these circumstances, the marketprice of our common stock would likely decline. Risks Related to Our Financial Condition Our auditors have expressed substantial doubt about our ability to continue as a going concern. Our audited financial statements for the year ended March 31, 2013, were prepared under the assumption that we would continue our operations as agoing concern. Our independent registered public accounting firm has included a “going concern” explanatory paragraph in its report on our financialstatements for the years ended March 31, 2013 and 2012, indicating that we have incurred recurring losses from operations and have limited working capitalto pursue our business alternatives, and that these factors raise substantial doubt about our ability to continue as a going concern. Uncertainty concerning ourability to continue as a going concern may hinder our ability to obtain future financing. We continiue to experience net operating losses. Continued operationsand 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 noassurances that such funding will be available at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not includeany 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, we will rapidly exhaust our resources and will beunable to continue operations. If we cannot continue as a viable entity, our stockholders would likely lose most or all of their investment in us. We 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. At March 31, 2013, we had no cash and cash equivalents,no accounts receivable, and significant liabilities and obligations. As described below under the heading, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations -- Liquidity and Capital Resources,” after the end of our fiscal 2013 year, (i) on April 5, 2013, we completed aprivate placement financing transaction with two investors, pursuant to which we issued 12% Convertible Debentures in the aggregate principal amount of$575,000 and received gross proceeds of $575,000, excluding transaction costs and expenses, and (ii) on June 26, 2013, we completed a private placementfinancing transaction pursuant to which we issued senior secured convertible promissory notes and common stock purchase warrants, and received grosscash proceeds of $5,300,000, excluding transactions costs, fees and expenses. Nevertheless, absent additional funding, we believe that our cash and cashequivalents will be sufficient to fund our operations only for a relatively short period of time. We will require significant additional funding in order to sustain our operations and implement our business strategy. The development of ourbusiness will require substantial additional capital in the future to commercialize our PFS syringe product, conduct research and develop our cancer andvaccine technologies and other product candidates. We have historically relied upon private sales of our equity and issuances of notes to fund ouroperations. We currently have no credit facility or committed sources of capital. Delays in obtaining funding to continue operations and support thedevelopment and introduction of our products would delay commercial introduction of products, reduce any future revenues and income, require additionalfunding from other sources, and adversely affect our ability to continue operations and fund research and development efforts. In addition, one or morelicensors of patents and intellectual property rights that we have in-licensed could seek to terminate our license agreements if our lack of funding made usunable to comply with the provisions of those agreements. When we seek additional capital, we may seek to sell additional equity and/or debt securities or toobtain a credit facility, which we may not be able to do on favorable terms, or at all. Our ability to obtain additional financing will be subject to a number offactors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or onacceptable terms, we may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of our productcandidates, restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on ourbusiness, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. Inaddition, we have outstanding convertible notes that become due at various times during fiscal 2014, and if those notes are not converted into common stockbefore their maturity dates, we would require additional funds in order to pay amounts owed under those notes upon their respective maturity dates. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likelyresult in our stockholders losing some or all of their investment in us. Any failure to dispel any continuing doubts about our ability to continue as a goingconcern could adversely affect our ability to enter into collaborative relationships with business partners, make it more difficult to obtain required financing onfavorable terms or at all, negatively affect the market price of our common stock and could otherwise have a material adverse effect on our business, financialcondition and results of operations. 23 Our management intends to address our capital needs by attempting to secure additional funding through equity or debt financings, sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research anddevelopment efforts, or similar transactions. However, there can be no assurance that we will be able to obtain any required funding. If we are unsuccessful insecuring funding, we will defer, reduce or eliminate certain planned expenditures. There is no assurance that any of the above options will be implemented on atimely basis or that we will be able to obtain additional financing on acceptable terms, if at all. If adequate funds are not available on acceptable terms, we willbe required to delay development or commercialization of some or all of our products, to seek to license to third parties the rights to commercialize certainproducts that we would otherwise seek to develop or commercialize internally, or to reduce resources devoted to product development. Statements in this Report concerning our future plans and operations are dependent on our ability to secure adequate funding and the absence ofunexpected delays or adverse developments. The statements contained throughout this Annual 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, anticipateddates for submissions to obtain required regulatory marketing approvals, anticipated dates for commercial introduction of products, and other statementsconcerning our future operations and activities, are forward-looking statements that in each instance assume that we are able to obtain sufficient funding in thenear term and thereafter to support such activities and continue our operations and planned activities in a timely manner. There can be no assurance that thiswill be the case. Also, such statements assume that there are no significant unexpected developments or events that delay or prevent such activities fromoccurring. Failure to timely obtain sufficient funding, or unexpected development or events, could delay the occurrence of such events or prevent the eventsdescribed in any such statements from occurring. 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 $38 million since inception and net losses of approximately $7.2 million for our fiscal year endedMarch 31, 2013. From inception through March 31, 2013, we have an accumulated deficit of approximately $38 million. These losses will increase as wecontinue our research and development activities, seek regulatory approvals for our product candidates and commercialize any approved products. Theselosses will cause, among other things, our stockholders’ equity and working capital to decrease. The future earnings and cash flow from operations of ourbusiness are dependent, in part, on our ability to further develop our products and on revenues and profitability from sales of our allergy and respiratoryproducts and product candidates. There can be no assurance that we will grow or be profitable. There can be no assurance that we will be able to generate sufficient product revenue tobecome profitable at all or on a sustained basis. We expect to have quarter-to-quarter fluctuations in revenues and expenses, some of which could besignificant, due to manufacturing, marketing, research, development, and clinical trial activities. If our product candidates fail in clinical trials or do not gainregulatory approval, or if our products do not achieve market acceptance, we may never become profitable. As we commercialize and market products, we willneed to incur expenses for product marketing and brand awareness and conduct significant research, development, testing and regulatory compliance activitiesthat, together with projected general and administrative expenses, are expected to result in substantial operating losses for the foreseeable future. Even if we doachieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Risks Related to Our Business and Industry We may never commercialize any of our products or earn a profit. Our limited operating history may make it difficult to evaluate our business andour future viability. We currently have no revenues from product sales and expect to incur substantial net losses for the foreseeable future to further develop andcommercialize our product candidates and technologies. We may never be able to commercialize any of our product candidates or be able to generate revenuesfrom products sales. We are in the early stage of operations and development and have only a limited operating history on which to base an evaluation of ourbusiness and prospects. Similarly, we acquired rights to the technologies underlying APC-100, APC-200 and APC-300, and the telomerase technology, during2010 and 2011. Even if we successfully obtain additional funding, we are subject to the risks associated with early stage companies with a limited operatinghistory, including: the need for additional financings; the uncertainty of research and development efforts resulting in successful commercial products, as wellas the marketing and customer acceptance of such products; unexpected issues with the FDA or other federal or state regulatory authorities; regulatorysetbacks and delays; competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patentprotection; fluctuations in expenses; and dependence on corporate partners and collaborators. Any failure to successfully address these risks and uncertaintiescould 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 inconnection with the growth of a new business, the continuing development of new drug technology, and the competitive and regulatory environment in whichwe operate or may choose to operate in the future. 24 Some 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 anddevelopment efforts we might undertake will be successful. Our potential products in oncology and viral fields will require extensive additional research anddevelopment before any commercial introduction, as will research and development work on the generic nasal steroid product and other allergy and respiratoryproducts. 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 andresults 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 ourfinancial goals. We are subject to substantial government regulation, which could materially adversely affect our business. If we do not receive regulatoryapprovals, we may not be able to develop and commercialize our technologies. We need FDA approval to market our proposed PFS Syringe or other products in the United States and similar approvals from foreign regulatoryauthorities 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 proposedproducts. The production and marketing of our products and potential products and our ongoing research and development, pre-clinical testing and clinicaltrial activities are currently subject to extensive regulation and review by numerous governmental authorities in the United States and will face similarregulation 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 contractmanufacturers’ facilities, is lengthy, expensive and uncertain. We have limited experience in filing and pursuing applications necessary to gain regulatoryapprovals. Most of the product candidates that we are currently developing must undergo rigorous pre-clinical and clinical testing and an extensive regulatoryapproval process before they can be marketed. This process makes it longer, more difficult and more costly to bring our potential products to market, and wecannot guarantee that any of our potential products will be approved. For example, there can be no assurances that we will file an application with the FDA formarketing approval of our PFS Syringe product, that the FDA will ultimately grant marketing approval for the PFS Syringe product, or concerning the timingof filing a marketing application or obtaining any such FDA approval. The pre-marketing approval process can be particularly expensive, uncertain andlengthy, and many products for which FDA approval has been sought by other companies have never been approved for marketing. In addition to testing andapproval procedures, extensive regulations also govern marketing, manufacturing, distribution, labeling, and record-keeping procedures. If we or ourcollaboration partners do not comply with applicable regulatory requirements, such violations could result in non-approval, suspensions of regulatoryapprovals, 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 decideafter review of an application that the data submitted is insufficient to allow approval of the proposed product. If regulatory authorities do not accept orapprove our applications, they may require that we conduct additional clinical, preclinical or manufacturing studies and submit that data before regulatoryauthorities will reconsider such application. We may need to expend substantial resources to conduct further studies to obtain data that regulatory authoritiesbelieve is sufficient. Depending on the extent of these studies, approval of applications may be delayed by several years, or may require us to expend moreresources than we may have available. It is also possible that additional studies may not suffice to make applications approvable. If any of these outcomesoccur, 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. Suchfailure or withdrawal may be encountered due to, among other reasons, lack of efficacy during clinical trials, unforeseen safety issues, inability to followpatients after treatment in clinical trials, inconsistencies between early clinical trial results and results obtained in later clinical trials, varying interpretations ofdata generated by clinical trials, or changes in regulatory policy during the period of product development in the United States and abroad. In the UnitedStates, there is stringent FDA oversight in product clearance and enforcement activities, causing medical product development to experience longer approvalcycles, greater risk and uncertainty, and higher expenses. Internationally, there is a risk that we may not be successful in meeting the quality standards orother certification requirements. Even if regulatory approval of a product is granted, this approval may entail limitations on uses for which the product may belabeled and promoted, or may prevent us from broadening the uses of products for different applications. In addition, we may not receive FDA approval toexport our potential products in the future, and countries to which potential products are to be exported may not approve them for import. 25 Manufacturing facilities for our products will also be subject to continual governmental review and inspection. The FDA has stated publicly thatcompliance with manufacturing regulations will continue to be strictly scrutinized. To the extent we decide to manufacture our own products, a governmentalauthority may challenge our compliance with applicable federal, state and foreign regulations. In addition, any discovery of previously unknown problemswith one of our potential products or facilities may result in restrictions on the potential product or the facility. If we decide to outsource the commercialproduction of our products, any challenge by a regulatory authority of the compliance of the manufacturer could hinder our ability to bring our products tomarket. We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expecteddeadlines, we may be unable to obtain, or may experience delays in obtaining, regulatory approval, or may not be successful in commercializingour 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 assistanceof third parties who conduct the studies on our behalf. These third parties are usually toxicology facilities and clinical research organizations, or CROs, thathave significant resources and experience in the conduct of pre-clinical and clinical studies. The toxicology facilities conduct the pre-clinical safety studies, aswell as all associated tasks connected with these studies. The CROs typically perform patient recruitment, project management, data management, statisticalanalysis, and other reporting functions. We intend to rely on third parties to conduct clinical trials of our product candidates and to use different toxicologyfacilities and CROs for our pre-clinical and clinical studies. Our reliance on these third parties for development activities will reduce our control over these activities. If these third parties do not successfullycarry 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 tothe 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 orterminated. Although we believe there are a number of third-party contractors that we could engage to continue these activities, replacing a third-party contractormay result in a delay of the affected trial. Accordingly, we may not be able to obtain regulatory approval for or successfully commercialize our productcandidates. Delays in the commencement or completion of clinical testing of our product candidates could result in increased costs and delay our ability togenerate significant revenues.Delays in the commencement or completion of clinical testing could significantly impact our product development costs. We do not know whethercurrent 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 ofreasons, including delays in: ●obtaining required funding; ●obtaining regulatory approval to commence a clinical trial; ●reaching agreement on acceptable terms with prospective contract research organizations and clinical trial sites; ●obtaining sufficient quantities of clinical trial materials for any or all 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 offactors, 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 aclinical 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, thenature of the trial protocol, the proximity of participants to clinical trial sites, the availability of effective treatments for the relevant disease, the eligibilitycriteria for our clinical trials and competing trials. Delays in enrollment can result in increased costs and longer development times. Our failure to enrollparticipants in our clinical trials could delay the completion of the clinical trials beyond current expectations. In addition, the FDA could require us to conductclinical 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 toenroll a sufficient number of participants in a timely or cost-effective manner. 26 Furthermore, enrolled participants may drop out of clinical trials, which could impair the validity or statistical significance of the clinical trials. Anumber 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 theproduct 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, the FDA or other applicable regulatory authorities may suspend clinical trials of a product candidate at any time if we or they believe theparticipants in such clinical trials, or in independent third-party clinical trials for drugs based on similar technologies, are being exposed to unacceptablehealth risks or for other reasons. 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 theresults are negative or inconclusive, which may result in significant negative repercussions on business and financial condition. Before regulatory approval for any potential product can be obtained, we must undertake extensive clinical testing on humans to demonstrate thetolerability and efficacy of the product, both on its own terms, and as compared to the other principal drugs on the market that have the same therapeuticindication. We cannot assure you that we will obtain authorization to permit product candidates that are already in the preclinical development phase to enterthe human clinical testing phase. In addition, we cannot assure you that any authorized preclinical or clinical testing will be completed successfully within anyspecified time period by us, or without significant additional resources or expertise to those originally expected to be necessary. We cannot assure you that suchtesting will show potential products to be safe and efficacious or that any such product will be approved for a specific indication. Further, the results frompreclinical 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 regulatoryauthorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks.Completion of clinical tests depends on, among other things, the number of patients available for testing, which is a function of many factors,including the number of patients with the relevant conditions, the nature of the clinical testing, the proximity of patients to clinical testing centers, the eligibilitycriteria for tests, as well as competition with other clinical testing programs involving the same patient profile, but different treatments. We will rely on thirdparties, such as contract research organizations and/or co-operative groups, to assist us in overseeing and monitoring clinical trials, as well as to process theclinical results and manage test requests, which may result in delays or failure to complete trials, if the third parties fail to perform or to meet the applicablestandards. A failure by us or such third parties to keep to the terms of a product program development for any particular product candidate or to complete theclinical trials for a product candidate in the envisaged time frame could have significant negative repercussions on our business and financial condition. We may not complete our clinical trials in the time expected, which could delay or prevent the commercialization of our products, which mayadversely affect our future revenues and financial condition. Although for planning purposes we will forecast the commencement and completion of clinical trials, the actual timing of these events can varydramatically due to factors such as delays, funding limitations, scheduling conflicts with participating clinicians and clinical institutions and the rate ofpatient enrollment. Clinical trials involving our product candidates may not commence or be completed as forecast. In certain circumstances, we will rely onacademic institutions or clinical research organizations to conduct, supervise or monitor some or all aspects of clinical trials involving our products. We willhave less control over the timing and other aspects of these clinical trials than if we conducted them entirely on our own. These trials may not commence or becompleted as we expect and may not be conducted successfully. Failure to commence or complete, or delays in, any of our planned clinical trials could delayor prevent the commercialization of our products and harm our business and may adversely affect our future revenues and financial condition. 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 ofapproved products entails an inherent risk of allegations of product liability and associated adverse publicity. We currently maintain liability insurancecoverage of $5,000,000. Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. As we conductadditional clinical trials and introduce products into the United States market, the risk of adverse events increases and our requirements for liability insurancecoverage are likely to increase. We are subject to the risk that substantial liability claims from the testing or marketing of pharmaceutical products could beasserted 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 overseaslocations, for clinical and commercial activities or that any insurance obtained will provide adequate protection against potential liabilities. An inability toobtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could inhibit our business. 27 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 exceedour insurance coverage, we may incur substantial liabilities that exceed our financial resources. In addition, a product or clinical trial liability action against uswould 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 financialresources and our business and results of operations may be harmed. A product liability claim brought against Adamis in excess of its insurance coverage, ifany, could have a material adverse effect upon its 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 partiesto 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 indrug formulation or manufacturing, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercialscale. Accordingly, we expect to depend on third-party contract manufacturers for the foreseeable future. Any performance failure on the part of our contractmanufacturers could delay clinical development, regulatory approval or commercialization of our current or future product candidates, depriving us ofpotential product revenue and resulting in additional losses.The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advancedmanufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scalingup initial production. These problems include difficulties with production costs and yields, quality control (including stability of the product candidate and qualityassurance testing), shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. If our third-partycontract manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations or under applicable regulations, our abilityto provide product candidates to patients in our clinical trials or commercially would be jeopardized. As an example, our PFS Syringe product is currentlymanufactured by Catalent Pharma Solutions (an FDA licensed and approved cGMP facility) in Brussels, Belgium and, therefore, is subject to regulation bythe Belgian Ministry of Health, as well as the FDA. 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 ofdelay, require us to commence new trials or qualify new manufacturers at significant additional expense, possibly causing commercial delays or termination ofthe trials. Our products can only be manufactured in a facility that has undergone a satisfactory inspection by the FDA and other relevant regulatoryauthorities. For these reasons, we may not be able to replace manufacturing capacity for our products quickly if we or our contract manufacturer(s) wereunable to use manufacturing facilities as a result of a fire, natural disaster (including an earthquake), equipment failure, or other difficulty, or if suchfacilities were deemed not in compliance with the regulatory requirements and such non-compliance could not be rapidly rectified. An inability or reducedcapacity to manufacture our products would have a material adverse effect on our business, financial condition, and results of operations. If we fail to obtain acceptable prices or appropriate reimbursement for our products, our ability to successfully commercialize our products will beimpaired. Government and insurance reimbursements for healthcare expenditures play an important role for all healthcare providers, including physicians andpharmaceutical companies such as Adamis, that plan to offer various products in the United States and other countries in the future. Our ability to earnsufficient returns on our products and potential products will depend in part on the extent to which reimbursement for the costs of such products will beavailable from government health administration authorities, private health coverage insurers, managed care organizations, and other organizations. In theUnited States, our ability to have our products eligible for Medicare, Medicaid or private insurance reimbursement will be an important factor in determiningthe 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. There can be no assurance that our potential drug products will be eligible forreimbursement. There has been a trend toward declining government and private insurance expenditures for many healthcare items and this trend may accelerate withproposed healthcare reform legislation. Third-party payors are increasingly challenging the price of medical and pharmaceutical products.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 mayforego or reduce such use. Significant uncertainty exists as to the reimbursement status of newly approved pharmaceutical products, and there can be noassurance that adequate third-party coverage will be available. Even if our products are approved for reimbursement by Medicare, Medicaid and privateinsurers, of which there can be no assurance, the amount of reimbursement may be reduced at times or even eliminated. This would have a material adverseeffect on our business, financial condition and results of operations. 28 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 thehealthcare system in ways that could impact our ability to sell our products profitably, including the Patient Protection and Affordable Care Act signed intolaw in the United States on March 22, 2010. In recent years, new legislation has been enacted in the United States at the federal and state levels that effectsmajor changes in the healthcare system, nationally and at the state level. These new laws include a prescription drug benefit plan for Medicare beneficiariesand certain changes in Medicare reimbursement. Given the recent enactment of these laws and other federal and state legislation and regulations relating to thehealthcare system, it is still too early to determine their impact on the biotechnology and pharmaceutical industries and our business. The U.S. Congresscontinues to consider issues relating to the healthcare system, and future legislation or regulations may affect our ability to market and sell products onfavorable terms, which would affect our results of operations, as well as our ability to raise capital, obtain additional collaborators or profitably market ourproducts. Such legislation or regulation may reduce our revenues, increase our expenses or limit the markets for our products. In particular, we expect toexperience pricing pressures in connection with the sale of our products due to the trend toward managed health care, the increasing influence of healthmaintenance 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 toestablish sales, marketing, and distribution capabilities or make arrangements with our current collaborators or others to perform such activities or that suchefforts will be successful. If we decide to market any of our new products directly, we must either acquire or internally develop a marketing and sales forcewith technical expertise and with supporting distribution capabilities. The acquisition or development of a sales, marketing and distribution infrastructurewould require substantial resources, which may not be available to us or, even if available, divert the attention of our management and key personnel, andhave 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 futureseek 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 collaborativearrangements will be successful. Similarly, we may seek to sell, out-license or enter into other similar arrangements concerning one or more of our products orproduct candidates, such as our C31G product. There are no assurances that any third party will have an interest in pursuing discussions concerning anysuch transaction regarding C31G or any other product. Our strategy for the future research, development, and commercialization of our products is expected to be based in part on entering into variousarrangements with corporate collaborators, licensors, licensees, health care institutions and principal investigators and others, and our commercial success isdependent upon these outside parties performing their respective contractual obligations responsibly and with integrity. The amount and timing of resourcessuch 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 asexpected. There can be no assurance that our collaborators will devote adequate resources to our products. If we are not successful in acquiring or licensing additional product candidates on acceptable terms, if at all, our business may be adverselyaffected. As part of our strategy, we may acquire or license additional product candidates that we believe have growth potential. There are no assurances thatwe will be able to identify promising product candidates. Even if we are successful in identifying promising product candidates, we may not be able to reachan agreement for the acquisition or license of the product candidates with their owners on acceptable terms or at all.We may not be able to successfully identify any other commercial products or product candidates to in-license, acquire or internally develop.Moreover, negotiating and implementing an economically viable in-licensing arrangement or acquisition is a lengthy and complex process. Other companies,including those with substantially greater resources, may compete with us for the in-licensing or acquisition of product candidates and approved products. Wemay not be able to acquire or in-license the rights to additional product candidates and approved products on terms that we find acceptable, or at all. If we areunable to in-license or acquire additional commercial products or product candidates, our ability to grow our business or increase our profits could be severelylimited. 29 If our competitors develop and market products that are more effective than our product candidates or obtain regulatory and marketing approvalfor similar products before we do, our commercial opportunity may be reduced or eliminated. The development and commercialization of new pharmaceutical products that target certain cancers and viral conditions, and allergy and otherrespiratory conditions, is a highly competitive field, and we face competition from numerous sources, including major biotechnology and pharmaceuticalcompanies worldwide. Many of our competitors have substantially greater financial and technical resources, and development, production and marketingcapabilities than we do. Certain companies have established technologies that may be competitive with our product candidates and any future products that wemay develop or acquire. Some of these products may use different approaches or means to obtain results, which could be more effective or less expensive thanour products for similar indications. In addition, many of these companies have more experience than we do in pre-clinical testing, clinical trials andmanufacturing of compounds, obtaining FDA and foreign regulatory approvals, and brand name exposure and expertise in sales and marketing. We alsocompete 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 aproduct or, alternatively, bring a similar product to market before we can do so. Failure to successfully compete will adversely impact the ability to raiseadditional 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 withdrawsuch 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 ingenerally accepted science or peer-reviewed scientific research, such concerns could adversely affect the market for these products. Similarly, negativepublicity 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 ourproprietary 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 propertycovering or incorporated into our technologies and products. The patents and patent applications in our existing patent portfolio are either owned by us orlicensed to us. Our ability to protect our product candidates from unauthorized use or infringement by third parties depends substantially on our ability toobtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents coveringpharmaceutical inventions and the scope of claims made under these patents, our ability to obtain and enforce patents is uncertain and involves complex legaland 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. Patents in the United States areissued to the party that is first to invent the claimed invention. There can be no assurance that any patent applications relating to our products or methods willbe issued as patents, or, if issued, that the patents will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide acompetitive advantage. We may not be able to obtain patent rights on products, treatment methods or manufacturing processes that we may develop or to whichwe 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 ourproduct candidates or provide sufficient protection to afford us a commercial advantage against our competitors or their competitive products or processes. It ispossible 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 ourintellectual property rights. The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome isfavorable to us. Any adverse outcome could subject us to significant liabilities, require us to license disputed rights from others, or require us to cease sellingour future products. In addition, many other organizations are engaged in research and product development efforts that may overlap with our products. For example, ourPFS Syringe product competes against other self-administered epinephrine products, including EpiPen, EpiPen Jr. and Twinject; our allergy and respiratoryproducts will compete with numerous prescription and non-prescription over-the-counter products targeting similar conditions; numerous companies areengaged in research, development and marketing of cancer drugs and have extensive patent portfolios relating to their drug products; and with regard to theSavvy product candidate, Ortho Pharmaceuticals and many other companies offer contraceptive vaginal gel 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 orconsideration by us. These rights may prevent us from commercializing technology, or may require us to obtain a license from the organizations to use thetechnology. We may not be able to obtain any such licenses that may be required on reasonable financial terms, if at all, and cannot be sure that the patentsunderlying any such licenses will be valid or enforceable. As with other companies in the pharmaceutical industry, we are subject to the risk that personslocated in other countries will engage in development, marketing or sales activities of products that would infringe our patent rights if such activities wereconducted in the United States. 30 Our patents also may not afford protection against competitors with similar technology. We may not have identified all patents, publishedapplications or published literature that affect our business either by blocking our ability to commercialize our product candidates, by preventing thepatentability of our products or by covering the same or similar technologies that may affect our ability to market or license our product candidates. Forexample, patent applications filed with the USPTO are normally maintained in confidence for up to 18 months after their filing. Patent applications filed incountries outside the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in thescientific or patent literature often lags behind actual discoveries. Therefore, we or our licensors might not have been the first to invent, or the first to file,patent applications on our product candidates or for their use. The laws of some foreign jurisdictions do not protect intellectual property rights to the sameextent as in the United States, and many companies have encountered significant difficulties in protecting and defending these rights in foreign jurisdictions. Ifwe encounter such difficulties or are otherwise precluded from effectively protecting our intellectual property rights in either the United States or foreignjurisdictions, 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 desireto 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. Even if we receive regulatory approval to market our product candidates, such products may not gain the market acceptance among physicians,patients, healthcare payors and the medical community. Any products that we may develop may not gain market acceptance among physicians, patients, healthcare payors and the medical community evenif they ultimately receive regulatory approval. If these products do not achieve an adequate level of acceptance, we, or future collaborators, may not be able togenerate material product revenues and we may not become profitable. The degree of market acceptance of any of our product candidates, if approved forcommercial sale, will depend on a number of factors, including: ●demonstration of efficacy and safety in clinical trials; ●the prevalence and severity of any unexpected side effects; ●the introduction and availability of generic substitutes for any of our products, potentially at lower prices (which, in turn, will depend onthe strength of our intellectual property protection for such products); ●potential or perceived advantages over alternative treatments; ●the timing of market entry relative to competitive treatments; ●the ability to offer our product candidates for sale at competitive prices; ●relative convenience and ease of administration; ●the strength of marketing and distribution support; ●sufficient third party coverage or reimbursement; and ●the product labeling or product insert (including any warnings) required by the FDA or regulatory authorities in other countries. If we fail to keep pace with rapid technological change in the biotechnology and pharmaceutical industries, our products could become obsolete,which may adversely affect our future revenues and financial condition. Biotechnology and related pharmaceutical technology have undergone and are subject to rapid and significant change. We expect that the technologiesassociated with biotechnology research and development will continue to develop rapidly. Our future will depend in large part on our ability to maintain acompetitive position with respect to these technologies. Any compounds, products or processes that we develop may become obsolete before we recover anyexpenses incurred in connection with developing these products, which may adversely affect our future revenues and financial condition.We depend on our officers. If we are unable to retain our management, research, development, and clinical teams and scientific advisors or toattract 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. 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 officersor key employees. If key individuals leave us, we could be adversely affected if suitable replacement personnel are not quickly recruited. There is competitionfor qualified personnel in all functional areas, which makes it difficult to attract and retain the qualified personnel necessary for the operation of ourbusiness. Our success also depends in part on our ability to attract and retain highly qualified scientific, commercial and administrative personnel. In orderto pursue our development and commercialization strategies, we will need to attract and hire, or engage as consultants, additional personnel with specializedexperience in a number of disciplines. If we are unable to attract new employees and retain existing employees, the development and commercialization of ourproduct candidates and any future tests could be delayed or negatively impacted. 31 The loss of the services of any principal member of our management and research, development and clinical teams could significantly delay orprevent the achievement of our scientific and business objectives. Competition among biotechnology and pharmaceutical companies for qualified employees isintense, and the ability to retain and attract qualified individuals is critical to our success. We may be unable to attract and retain key personnel on acceptableterms, if at all. We have relationships with consultants and scientific advisors who will continue to assist us in formulating and executing our research,development, regulatory and clinical strategies. These consultants and scientific advisors are not our employees and may have commitments to, or consultingor advisory contracts with, other entities that may limit their availability to us. We will have only limited control over the activities of these consultants andscientific advisors and can generally expect these individuals to devote only limited time to our activities. We also rely on these consultants to evaluate potentialcompounds and products, which may be important in developing a long-term product pipeline for us. Consultants also assist us in preparing and submittingregulatory filings. Our scientific advisors provide scientific and technical guidance on our drug discovery and development. Failure of any of these persons todevote sufficient time and resources to our programs could harm our business. In addition, these advisors may have arrangements with other companies toassist those companies in developing technologies that may compete with our products. Our management will be required to devote substantial time to comply with public company regulations. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, impose various requirementson public companies, including with respect to corporate governance practices. Our management and other personnel will need to devote a substantial amountof time to these requirements. In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosurecontrols and procedures. In particular, we must perform system and process evaluation and testing of our internal controls over financial reporting to allowmanagement to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Ourcompliance with Section 404 may require that we incur substantial accounting and related expense and expend significant management efforts. We may need tohire additional accounting and financial staff to satisfy the ongoing requirements of Section 404. Moreover, if we are not able to comply with the requirementsof Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal controls over financial reporting that aredeemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or otherregulatory authorities. Our corporate compliance programs cannot guarantee that we are now or will be in compliance with all potentially applicable regulations. The development, manufacturing, pricing, sales, and reimbursement of pharmaceutical products, together with our general operations, are subject to extensiveregulation by federal, state and other authorities within the United States and numerous entities outside of the United States. We are a small company and werely on third parties to conduct certain important functions. We also have significantly fewer employees than many other companies that have the same orfewer product candidates in clinical development. If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions,including suspension or termination of clinical trials, restrictions on our products or manufacturing processes, or other sanctions or litigation. In addition, asa publicly-traded company, we are subject to significant regulations, including the Sarbanes-Oxley Act of 2002. Failure to comply with potentially applicablelaws and regulations could also lead to the imposition of fines, cause the value of our common stock to decline and impede our ability to raise capital or lead tothe failure of our common stock to continue to be traded on the OTC Bulletin Board. We are subject to certain legal proceedings that may adversely affect our results of operations, financial condition and liquidity. We, and the persons who were officers and directors of Adamis at the time of the activities that are subject of the lawsuit, have been nameddefendants in a lawsuit alleging, among other things, that we made material misrepresentations in private placement memoranda used to offer our commonstock to the plaintiffs. In addition, a lawsuit has been filed against us for declaratory relief seeking a declaration that certain patent licenses held by us areinvalid. Although we believe that the lawsuits are without merit and that we have substantial defenses to these lawsuits, there can be no assurance as to theoutcome of these matters, and a loss in any of these cases could adversely affect our results of operations, our financial condition and liquidity. 32 Risks Related to Our Common Stock Provisions of our charter documents could discourage an acquisition of our company that would benefit our stockholders and may have the effectof 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 ofcontrol would benefit our stockholders. In particular, shares of our preferred stock may be issued in the future without further stockholder approval, andupon such terms and conditions, and have such rights, privileges and preferences, as our board of directors may determine, including, for example, rights toconvert 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 holdersof any of our preferred stock that may be issued in the future. The issuance of our preferred stock, while providing desirable flexibility in connection withpossible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire control of us. This could limitthe 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 majorityof our common stock. Further, the existence of these corporate governance provisions could have the effect of entrenching management and making it moredifficult to change our management. Our common stock price is expected to be volatile. The market price of our common stock could be subject to significant fluctuations. 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 ourcommon stock to fluctuate include: ●relatively low trading volume, which can result in significant volatility in the market price of our common stock based on a relativelysmaller number of trades and dollar amount of transactions; ●the results of our current and any future clinical trials of our product candidates; ●the timing and results of ongoing preclinical studies and planned clinical trials of our preclinical 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 drugs 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; ●clinical trial results, particularly the outcome of more advanced studies, or negative responses from both domestic and foreign regulatoryauthorities with regard to the approvability of our products; ●period-to-period fluctuations in our financial results, including our cash and cash equivalents balance, operating expenses, cash burn rateor 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 proceedings; or ●other potentially negative financial announcements including: a review of any of our filings by the SEC, changes in accounting treatment orrestatement 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 individualcompanies. 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 securitieslitigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, whichcould significantly harm our profitability and reputation. 33 Our common stock is currently traded on the OTCQB and be subject to additional trading restrictions as a “penny stock,” which could adverselyaffect the liquidity and price of such stock. If our common stock remains subject to the SEC’s penny stock rules, broker-dealers may experiencedifficulty 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 lessdesirable, 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 valueof our common stock. Because our common stock is not listed on any national securities exchange, such shares 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 stockunder 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 toinvest in penny stocks. To make that determination, a broker-dealer must obtain, from a prospective investor, information regarding thepurchaser’s financial condition and investment experience and objectives. Subsequently, the broker-dealer must deliver to the purchaser awritten 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 everypurchase until the purchaser becomes an “established customer.”A broker-dealer may not effect a purchase of a penny stock less than two business days after a broker-dealer sends such agreement to the purchaser: ●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 stockmarket and how it functions and the risks associated with such investment. These disclosure rules are applicable to both purchases andsales by investors. ●A dealer that sells penny stock must send to the purchaser, within ten days after the end of each calendar month, a written accountstatement including prescribed information relating to the security. These requirements can severely limit the liquidity of securities in the secondary market because few brokers or dealers are likely to be willing toundertake these compliance activities. As a result of our common stock not being listed on a national securities exchange and the rules and restrictionsregarding penny stock transactions, an investor’s ability to sell to a third party and our ability to raise additional capital may be limited. We make noguarantee that market-makers will make a market in our common stock, or that any market for our common stock will continue. 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 May 31, 2013, our directors, executive officers andtheir respective affiliates beneficially owned approximately 12% of our outstanding shares of common stock and our largest stockholder owned approximately29% 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 tothe outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all orsubstantially all of our assets. The interests of these persons may not always coincide with our interests or the interests of our other stockholders. Thisconcentration 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 ofotherwise attempting to obtain control of us. The significant concentration of stock ownership may adversely affect the trading price of our common stock dueto 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 ourinternal controls over financial reporting, were ineffective as of March 31, 2013, which could result in material misstatements in our financialstatements. 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 other material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could declinesignificantly and raising capital could be more difficult. 34 Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f)under the Securities Exchange Act of 1934, as amended, or the Exchange Act. As of March 31, 2013, our management has determined that our disclosurecontrols and procedures were ineffective, and that there was a material weakness in our internal controls over financial reporting, due to insufficientsegregation of duties in our finance and accounting function due to limited personnel, based on the absence of finance and accounting personnel other than theChief Financial Officer. This resulted in not ensuring appropriate segregation of duties between incompatible functions, and made it more difficult to ensurereview of financial reporting issues sufficiently in advance of the dates on which filings are required to be made with the Securities and Exchange Commissionand to ensure that financial information (both routine and non-routine) is adequately analyzed and reviewed on a timely basis to detect misstatements. Theseabove deficiencies represent a material weakness in our internal control over financial reporting given that they result in a reasonable possibility that a materialmisstatement to the annual or interim financial statements would not have been prevented or detected. A material weakness is a deficiency, or a combination ofdeficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interimfinancial statements will not be prevented or detected on a timely basis. If remedial measures are insufficient to address the ineffectiveness of our disclosure controls and procedures and our internal controls over financialreporting, or if other material weaknesses or significant deficiencies in our internal controls are discovered or occur in the future and the ineffectiveness of ourdisclosure controls and procedures continues, we may fail to meet our future reporting obligations on a timely basis, our consolidated financial statements maycontain material misstatements, we could be required to restate our prior period financial results, our operating results may be harmed, and we could becomesubject to class action litigation. Internal control deficiencies and ineffective disclosure controls and procedures could also cause investors to lose confidence inour reported financial information. We can give no assurance that the measures we plan to take in the future will remediate the ineffectiveness of our disclosurecontrols and procedures or that any material weaknesses or restatements of financial results will not arise in the future due to a failure to implement andmaintain adequate internal control over financial reporting or adequate disclosure controls and procedures or circumvention of these controls. In addition, evenif we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identifyirregularities or errors or to facilitate the fair presentation of our consolidated financial statements. If we fail to comply with the rules under the Sarbanes-OxleyAct of 2002 related to disclosure controls and procedures, or, if we discover additional material weaknesses and other deficiencies in our internal control andaccounting procedures, our stock price could decline significantly and raising capital could be more difficult. Moreover, effective internal controls arenecessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports orprevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading priceof our common stock could drop significantly. We cannot be certain that additional material weaknesses or significant deficiencies in our internal controls willnot be discovered in the future. The rights of the holders of common stock may be impaired by the potential issuance of preferred stock. Our amended and restated certificate of incorporation gives our board of directors the right to create new series of preferred stock. As a result, theboard of directors may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights which couldadversely affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right to more than onevote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The possible impact on takeover attempts couldadversely affect the price of our common stock. Although we have no present intention to issue any additional shares of preferred stock or to create any newseries of preferred stock, we may issue such shares in the future, subject to any restrictions that may be contained in the transaction documents relating to ouroutstanding convertible notes and convertible debentures.Our stockholders may experience significant dilution as a result of any additional financing using our equity securities and/or debt securities, oras a result of anti-dilution provisions in our Secured Notes and Warrants. To the extent that we raise additional funds by issuing equity securities or convertible debt securities, our stockholders may experience significantdilution. In addition, sale of additional equity and/or convertible debt securities (with certain excluded categories of issuances) at an effective price per sharebelow the conversion price of the Secured Notes or the exercise price of the Warrants (as applicable) issued in our June 2013 financing transaction will triggeranti-dilution provisions in the Secured Notes or Warrants (as applicable), reducing the conversion prices of those notes or exercise price of those warrants andrequiring us to issue a larger number of shares of common stock upon conversion of those notes or exercise of those warrants. 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 foreseeablefuture. Any return on investment may be limited to the value of our common stock. 35 No cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our futureoperations and growth. We do not expect to pay cash dividends on our common stock in the foreseeable future. Payment of dividends would depend upon ourprofitability 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, ourcommon stock may be less valuable because a return on a stockholder’s investment will only occur if our stock price appreciates. Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts thatstockholders may consider favorable. Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control orchanges in our management. For example, our board of directors has the authority to issue up to 10,000,000 shares of preferred stock in one or more series andto fix the powers, preferences and rights of each series without stockholder approval. The rights of the holders of our common stock will be subject to, andmay be adversely affected by, the rights of the holders of any of our preferred stock that may be issued in the future. This could limit the price that certaininvestors might be willing to pay in the future for shares of our common stock and discourage those investors from acquiring a majority of our commonstock. The ability to issue preferred stock could discourage unsolicited acquisition proposals or make it more difficult for a third party to gain control of ourcompany, or otherwise could adversely affect the market price of our common stock. Our bylaws require that any stockholder proposals or nominations forelection to our board of directors must meet specific advance notice requirements and procedures, which make it more difficult for our stockholders to makeproposals or director nominations. Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General CorporationLaw. These provisions may prohibit or restrict large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging orcombining with us, unless one or more exemptions from such provisions apply. These provisions in our certificate of incorporation and bylaws and underDelaware law could discourage potential takeover attempts, could reduce the price that investors might be willing to pay for shares of our common stock in thefuture, and could result in our market price being lower than it would without these provisions. 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 toraise 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 ordebentures and sale of the shares issuable upon conversion of such notes or debentures, or other events that cause stockholders to sell shares, could placedownward 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 largenumber 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, including the ending of restriction on resale,substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options, warrants, or uponconversion of outstanding convertible notes or debentures, the market price of our common stock could fall. Sales of a substantial number of shares of ourcommon 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 orappropriate. Our obligations to the holders of our convertible Secured Notes are secured by a security interest in substantially all of our assets, so if we defaulton those obligations, the convertible note holders could foreclose on our assets. The Secured Notes and the associated transaction documentscontain covenants that could limit our financing options and liquidity position, which would limit our ability to continue to fund our operations. As described elsewhere in the Form 10-K under the headings “Business – Recent Developments” and “Management’s Discussion and Anaylsis ofFinancial Condition and Results of Operations – Liquidity and Capital Resources,” on June 26, 2013, we completed a private placement transaction in whichwe issued Secured Notes with an aggregate principal amount of $6,502,158. Our obligations under the Secured Notes and the transaction documents relatingto the Secured Notes are secured by a security interest in substantially all of our assets and those of our principal subsidiaries. As a result, if we default underour obligations under the Secured Notes or the transaction documents, the holders of the Secured Notes could foreclose on their security interests and liquidatesome or all of these assets, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations. 36 The terms of the Secured Notes and related transaction documents could have negative consequences to us, making it difficult or impossible for usto obtain additional financing to obtain required additional working capital. Additionally, covenants in the transaction documents relating to the Secured Notesimpose operating and financial restrictions on us. These restrictions prohibit or limit our ability, without the consent of holders of the Secured Notes, to,among other things: pay cash dividends to our stockholders; redeem outstanding securities; complete certain kinds of debt or equity financing transactions;grant additional security interests, liens or encumbrances on our assets; incur additional indebtedness; sell or dispose of our assets; or engage in transactionswith affiliates. These restrictions may limit our ability to obtain additional financing or take advantage of business opportunities. The conversion of the Secured Notes or other outstanding convertible debentures or notes, or the exercise of warrants issued to the purchasers ofthe Secured Notes or other holders of outstanding warrants, would have a dilutive impact on our existing stockholders. The Secured Notes have an initial conversion price of $0.50 per share. The Secured Notes and related Warrants include anti-dilution provisionproviding that, with certain exceptions and exemptions for several categories of excluded issuances, if we issue shares of common stock or options, warrants,convertible securities or other common stock equivalents, or common stock equivalents are repriced, at an effective price per share less than the conversionprice of the Secured Notes or the exercise price of the Warrants (as applicable), the conversion price of the Secured Notes or the exercise price of the Warrantsand number of shares issuable upon exercise of the Warrants (as applicable) will be adjusted downward to equal the per share price of the securities issued insuch transaction. If we complete future debt or equity financing transactions involving the issuance of securities, or otherwise issue securities, at an effectiveprice per share below the conversion price of the Secured Notes or the exercise price of the Warrants (as applicable), the conversion price of the Secured Notesor the exercise price of the Warrants (as applicable) would be adjusted, the holders of Secured Notes or Warrants could convert the Secured Notes or exercisethe Warrants into a larger number of shares of our Common Stock, and our existing stockholders would suffer dilution, which could be significant. ITEM 1B: UNRESOLVED STAFF COMMENTS None. ITEM 2: PROPERTIES In April 2011, the Company leased approximately 2,400 square feet of office space in San Diego, California. The term of the lease is three years. The rent forthe remaining 10 months of the lease term is $55,283. There are no options to extend the lease term. Total rent expense was $64,948 and $71,050 for theyears ended March 31, 2013 and 2012, respectively. ITEM 3: LEGAL PROCEEDINGS In addition to the matters described below, we may become involved in or subject to, routine litigation, claims, disputes, proceedings andinvestigations in the ordinary course of business, which in our opinion will not have a material adverse effect on our financial condition, cash flows or resultsof operations. Cosmo Bioscience, Inc. et. al. v. Adamis Pharmaceuticals Corp. and Maurizio Zanetti Cosmo Bioscience, Inc. et. al. v. Adamis Pharmaceuticals Corp. and Maurizio Zanetti was filed in San Diego Superior Court in May 2010.Plaintiffs were affiliated Cosmo Bioscience entities who claimed to have sublicensed certain patented technology from Eurogen BV, an entity wholly owned andcontrolled by Maurizio Zanetti. Plaintiffs claimed that Dr. Zanetti wrongfully terminated their license, and further that Dr. Zanetti improperly licensed the sametechnology to Adamis in violation of plaintiffs’ exclusive sublicense agreement. Plaintiffs asserted a single claim for declaratory relief seeking a declaration thatthe Cosmo sublicense was in full force and effect, and that the Adamis license is invalid. On July 26, 2010, Dr. Zanetti filed a motion to compel arbitrationon the ground that the license he signed with Cosmo specified that Italian courts and Italian law would govern the license. Also on that date, Adamis filed amotion to stay the litigation pending resolution of any Italian arbitration. Those motions were granted in favor of Dr. Zanetti and Adamis on November 22,2010, the Cosmo litigation was stayed, and the court ordered that the matter be arbitrated in the Italian courts pursuant to the arbitration provisions of thesublicense agreement. Cosmo filed and served on Dr. Zanetti a Notice of Arbitration, seeking to compel arbitration in Italy, on May 14, 2012. Adamis wasnot a party to arbitration proceedings because it was not a party to the Cosmo license agreement. In December 2012, Adamis and Dr. Zanetti filed motions todismiss the lawsuit because of the plaintiffs’ failure to proceed with arbitration. The court heard the motions in February 2013 and subsequently entered anorder dismissing the case because of the plaintiffs’ failure to comply with the court’s order compelling arbitration. In addition, the court excised its discretionto dismiss with prejudice, thereby precluding the plaintiffs from bringing the suit again. 37 Curtis Leahy, et. al. v. Dennis J. Carlo, et al. In May 2010, Curtis Leahy, et. al. v. Dennis J. Carlo, et al. was filed in San Diego Superior Court. The plaintiffs – Antaeus Capital Partners,Curtis Leahy, and David Amron – are Adamis shareholders. The defendants named in the Complaint are Adamis, Dennis Carlo, David Marguglio, RobertHopkins, and Richard Aloi, who are (or, in the case of Mr. Aloi, were) officers and/or directors of Adamis. Plaintiffs assert claims for violations of Section25401, 25501, and 25504 of the California Corporations Code, and claims for common law fraud and negligent misrepresentation based on the allegationsthat defendants misrepresented and omitted material information in private placement memoranda distributed by Adamis in 2006 and 2008 regarding, amongother things, Adamis’ license rights with respect to certain patented anti-viral technology. On May 27, 2011, plaintiffs filed a motion for class certification seeking to certify a putative class of shareholders who purchased stock pursuantto either or both of Adamis’ 2006 and 2008 private placement memoranda. On June 28, 2011, the court issued an order denying the plaintiffs’ motion forclass certification on the grounds that (1) plaintiffs failed to meet their burden to show that there are common issues of fact to certify the class and (2) theindividual plaintiffs were not adequate class representatives. Plaintiffs appealed the court’s order denying class certification. The Company filed a motion forsummary judgment on March 28, 2012. In June 2013, the Company and plaintiffs entered into preliminary settlement negotiations. There can be noassurances that the lawsuit will be settled or concerning the terms of any such settlement. The Company continues to believe that the plaintiffs’ allegations are without merit and intends to defend against plaintiffs’ claims vigorously. The litigation fees and costs have been submitted to our insurance carrier, which has agreed to pay the fees and costs pursuant to the terms of ourinsurance policy, subject to a reservation of rights letter. Agape World, Inc. Agape World, Inc. is a company involved in an involuntary bankruptcy proceeding filed in 2009. Its principal, Nicholas Cosmo, was indicted onmany 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 in2010 and to the Company’s knowledge is serving his sentence in prison. More than three years before the date of this Report on Form 10-K, the bankruptcytrustee of Agape contacted Adamis by telephone, asserting that Agape World paid $1 million to Adamis for 2 million shares of common stock of Adamis, butthat 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 orany 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 orany action has been filed against Adamis. Management believes that the trustee has no basis for any fraudulent transfer or other claims against Adamis. Due tothe 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 thistime. The litigation described in this section could divert management time and attention from Adamis, could involve significant amounts of legal fees andother fees and expenses. An adverse outcome in any such litigation could have a material adverse effect on Adamis. ITEM 4: MINE SAFETY DISCLOSURES Not applicable. 38 PART II ITEM 5:MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUERPURCHASES OF EQUITY SECURITIES Price Range of Common Stock Our common stock is traded on the OTCQB, under the trading symbol ADMP. The following table sets forth the range of high and low sales pricesfor the common stock as reported on the OTCQB for the periods indicated below. The quotations below reflect inter-dealer prices, without retail mark-up,markdown or commission, and may not represent actual transactions. High Low Fiscal 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 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 As of June 17, 2013, there were approximately 102 holders of record common stock. The number of record holders was determined from the recordsof our transfer agent and does not include beneficial owners of our common stock whose shares are held in the names of various security brokers, dealers, andregistered clearing agencies. Dividend Policy We have never declared or paid any cash dividends on our common stock, and we do not intend to do so in the foreseeable future. Accordingly, ourstockholders will not receive a return on their investment unless the value of our shares increases, which may or may not occur. Any future determination topay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capital requirements,any applicable contractual restrictions and such other factors as our deems relevant. Equity Compensation Plan Information The following table sets forth, as of March 31, 2013, information with respect to our equity compensation plans, including our 1995 EquityIncentive Plan, the 1995 Directors’ Stock Option Plan, the 2005 Equity Incentive Plan and the 2009 Equity Incentive Plan, and with respect to certain otheroptions and warrants. Plan Category Number of securities to beissued upon exercise ofoutstanding options,warrants and rights(a) Weighted average exercise priceof outstanding options,warrants and rights(1)(b) Number of securitiesremaining available forfuture issuance under equitycompensationplans (excluding securitiesreflected in column (a))(2)(c) Equity compensation plans approved bysecurity holders 7,449,601 $.34 11,439,742 Equity compensation plans not approved bysecurity holders 1,800,505 $.77 9,250,106 11,439,742 (1)Excludes shares issuable upon exercise of restricted stock units, which do not have an exercise price.(2)Under the Company’s 2009 Equity Incentive Plan, the number of shares available for issuance under the plan increases automatically increase onJanuary 1st of each year in an amount equal to the lesser of (i) five percent of the total number of shares of Common Stock outstanding onDecember 31st of the preceding calendar year, or (ii) a lesser number of shares of Common Stock determined by the board of directors before thestart of a calendar year for which an increase applies. 39 Recent Sales of Unregistered Securities Information concerning our sales of unregistered securities during our fiscal year ended March 31, 2013, has previously been reported in reports onForm 10-Q and reports on Form 8-K that we filed during that fiscal year. ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations should be read together with the consolidated financialstatements and accompanying notes of the Company appearing elsewhere in this Report. This discussion of our financial condition and results of operationscontains certain statements that are not strictly historical and are “forward-looking” statements and involve a high degree of risk and uncertainty. Actualresults may differ materially from those projected in the forward-looking statements due to other risks and uncertainties that exist in our operations,development efforts and business environment, including those set forth in this Item 7, and in the sections entitled “1A. Risk Factors” and “1. Business” inthis Report and uncertainties described elsewhere in this Report. All forward-looking statements included in this Report are based on information available tothe Company as of the date hereof, and except as may be required under the Securities Exchange Act of 1934 and the rules and regulations promulgatedthereunder, the Company assumes no obligation to update any such forward-looking statement. General Company Overview We are an emerging pharmaceutical company engaged in the development and commercialization of a variety of specialty pharmaceutical products.Our products are concentrated in major therapeutic areas including oncology (cancer), immunology and infectious diseases (viruses) and allergy andrespiratory. We are focused on the development of preventive and therapeutic vaccine products and cancer drugs for patients with unmet medical needs. During2010, we acquired rights under three exclusive license agreements covering three small molecule compounds, named APC-100, APC-200 and APC-300, that webelieve are promising drug candidates for the potential treatment of human prostate cancer (PCa). The intellectual property covered by the agreements waslicensed from the Wisconsin Alumni Research Foundation, or WARF.On August 11, 2011, we announced that we had enrolled the first patient in a Phase 1/2a prostate cancer clinical study relating to the use of the APC-100 product to treat men with castrate-resistant prostate cancer. The study began at the University of Wisconsin Carbone Cancer Center and has been extendedto the Wayne State University Karmanos Cancer Institute, assuming adequate funding. In April 2011, we acquired exclusive rights to patented telomerase-based cancer vaccine technology from the Regents of the University of California.At the same time, we acquired exclusive rights to a related patent from the Dana-Farber/Harvard Cancer Center. We intend to pursue development of thetechnology initially for what we believe may be a novel cell-based vaccine product for prostate cancer, tentatively named TeloB-VAX. We have also acquired exclusive license rights to other patented potentially preventative and therapeutic vaccine technology. The vaccine technologymay be applicable to certain viral-induced diseases such as influenza and hepatitis B and C, as well as prostate cancer. However, we currently intend to focusinitially on the development of one or more of the other recently licensed prostate cancer product candidates and technologies, and as a result the timing ofdevelopment of this viral vaccine technology is subject to uncertainty. We are also focused on developing and commercializing products in the anti-inflammatory, allergy and respiratory field. We have developed anEpinephrine Injection USP 1:1000 (0.3mg Pre-Filled Single Dose Syringe) product, or the single dose PFS Syringe product, a pre-filled epinephrine syringeproduct for use in the emergency treatment of extreme acute allergic reactions, or anaphylactic shock. If launched, the product will compete in a well-established U.S. market. Once we obtain sufficient funding to support the costs of proceeding with the FDA filing for regulatory approval and the costs of acommercial launch of the product, we intend to submit an application to the FDA for marketing approval of the product and to commercially market theproduct as soon as reasonably practicable after the FDA allows for marketing of the product. 40 Additional product candidates in our allergy and respiratory product pipeline include a steroid HFA (hydrofluoroalkane) metered dose inhalerproduct, referred to as APC-1000, for asthma and chronic obstructive pulmonary disease, or COPD; and an HFA pressurized metered dose nasal steroid forthe treatment of seasonal and perennial allergic rhinitis, referred to as APC-3000. We also have a contraceptive gel product candidate named Savvy (C31G®). In December 2010, we announced the successful completion of a Phase 3contraceptive trial of Savvy. The Phase 3 trial was a randomized, double-masked, controlled comparator study to assess whether a gel containing thespermicide C31G was non-inferior to Conceptrol®, a commercially available product containing nonoxynol-9 (N-9). The clinical investigators found thatC31G was not inferior in contraceptive efficacy to the comparator drug. In considering commercialization alternatives, we will likely focus on seeking to enterinto an out-licensing or similar transaction with organizations that have a focus or business unit in the area of contraception. There are no assurances that anythird party will have an interest in pursuing discussions concerning a transaction regarding C31G, or that any C31G product will ever be developed orcommercialized. Our general business strategy is to generate revenue through launch of our allergy and respiratory products in development, in order to generate cashflow to help fund expansion of our allergy and respiratory business, as well as support our future cancer and vaccine product development efforts. To achieveour goals and support our overall strategy, we will need to raise a substantial amount of funding and make substantial investments in equipment, new productdevelopment and working capital. Recent Developments As described in greater detail below under the heading “Liquidity and Capital Resources,” on June 26, 2013, we completed a private placement financingtransaction pursuant to which we issued the Secured Notes and common stock purchase warrants to a small number of institutional investors and receivedgross cash proceeds of $5,300,000, excluding transactions costs, fees and expenses. The Secured Notes have an aggregate principal amount of $6,502,158,including $613,271 of principal amount resulting in the exchange of an outstanding convertible note for the Secured Notes and warrants. The maturity dateof 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 aninitial conversion price per share of $0.50, subject to adjustment for stock splits, stock dividends and other similar transactions, and to possible price anti-dilution adjustments. Our obligations under the Secured Notes and the other transaction agreements are guaranteed by our principal subsidiaries, and aresecured by a security interest in substantially all of our assets and those of the subsidiaries, pursuant to a Security Agreement. Going Concern and Management Plan Our independent registered public accounting firm has included a “going concern” explanatory paragraph in its report on our financial statements forthe years ended March 31, 2013 and 2012 indicating that we have incurred recurring losses from operations and have limited working capital to pursue ourbusiness alternatives, and that these factors raise substantial doubt about our ability to continue as a going concern. As of March 31, 2013, we had no cash,an accumulated deficit of approximately $38 million and substantial liabilities and obligations. We have no cash reserves, liabilities that exceed our assets andsignificant cash flow deficiencies. Additionally, we will need significant funding in the short term to continue operations and for the future operations and theexpenditures that will be required to conduct the clinical and regulatory work to develop our product candidates. As previously reported, after the end of our fiscal 2013 year, on April 5, 2013 we completed private placement financing transactions with twoinvestors pursuant to securities purchase agreements, pursuant to which we issued an aggregate of two 12% convertible debentures in the aggregate principalamount of $575,000 and received gross proceeds of $575,000, excluding transaction costs and expenses. A portion of the debentures were converted intoCommon Stock in June 2013, and the remainder of the amount payable at maturity of the debentures was paid in full with a portion of the proceeds from theissuance of the Secured Notes and Warrants, and the debentures are no longer outstanding. In addition, as discussed under the heading "Liquidity and CapitalResources" below, in June 2013 we completed a private placement transaction in which we received $5.3 milion of gross proceeds. However continuedoperations are dependent on our ability to complete other equity or debt funding transactions. Such capital formation activities may not be available or maynot be available on reasonable terms. If we do not obtain additional equity or debt funding in the near future, our cash resources will rapidly be depleted andwe will be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price and ourrelationships 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 forthe year ended March 31, 2013, were prepared under the assumption that we would continue our operations as a going concern, which contemplates therealization of assets and the satisfaction of liabilities during the normal course of business. In preparing these consolidated financial statements, considerationwas given to our future business as described elsewhere herein, which may preclude us from realizing the value of certain assets. Our financial statements donot include any adjustments that may result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of our assets and thesatisfaction of liabilities in the normal course of business. Without additional funds from debt or equity financing, sales of assets, sales or out-licenses ofintellectual property or technologies, or from a business combination or a similar transaction, we will soon exhaust our resources and will be unable tocontinue operations. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in us. 41 Our management intends to attempt to secure additional required funding through equity or debt financings, sales or out-licensing of intellectualproperty assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research and development efforts, orsimilar transactions. However, there can be no assurance that we will be able to obtain any sources of funding. If we are unsuccessful in securing fundingfrom any of these sources, we will defer, reduce or eliminate certain planned expenditures. There is no assurance that any of the above options will beimplemented on a timely basis or that we will be able to obtain additional financing on acceptable terms, if at all. If adequate funds are not available onacceptable terms, we could be required to delay development or commercialization of some or all of our products, to license to third parties the rights tocommercialize certain products that we would otherwise seek to develop or commercialize internally, or to reduce resources devoted to product development. Inaddition, one or more licensors of patents and intellectual property rights that we have in-licensed could seek to terminate our license agreements, if our lack offunding made us unable to comply with the provisions of those agreements. If we do not have sufficient funds to continue operations, we could be required toseek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us. Any failure to dispel anycontinuing doubts about our ability to continue as a going concern could adversely affect our ability to enter into collaborative relationships with businesspartners, make it more difficult to obtain required financing on favorable terms or at all, negatively affect the market price of our common stock and couldotherwise have a material adverse effect on our business, financial condition and results of operations. Funding that we may receive during fiscal 2014 is expected to be used to satisfy existing obligations and liabilities and working capital needs, tobegin building working capital reserves and to fund a number of projects, which may include some or all of the following: ●continue development of our PFS epinephrine syringe product; ●continue development of our generic nasal steroid product candidate; ●pursue the development of other product candidates that we may develop or acquire; ●fund clinical trials and seek regulatory approvals; ●expand research and development activities; ●access manufacturing and commercialization capabilities; ●implement additional internal systems and infrastructure; ●maintain, defend and expand the scope of our intellectual property portfolio; and ●hire additional management, sales, research, development and clinical personnel. Results of Operations Our consolidated results of operations are presented for the fiscal year ending March 31, 2013 and for the fiscal year ending March 31, 2012. Year Ended March 31, 2013 and Year Ended March 31, 2012Selling, General and Administrative Expenses. Selling, general and administrative expenses for fiscal 2013 and 2012 were approximately $2.0million and $2.6 million, respectively. Selling, general and administrative expenses consist primarily of legal fees, accounting and audit fees, consultingexpenses, and employee salaries. The elimination of a reserve for product returns accounted for approximately $168,000 of the decrease in selling, general andadministrative expenses. Reductions in salaries and consulting expenses accounted for approximately $168,000 and $261,000, respectively, of the decreaseduring the twelve months ended March 31, 2013. Research and Development Expenses. Our research and development costs are expensed as incurred. Non-refundable advance payments for goodsand services to be used in future research and development activities are recorded as an asset and are expensed when the research and development activities areperformed. 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 toinsufficient capital in fiscal 2013. Other Income (Expenses). Other income (expense) for fiscal 2013 and 2012 were approximately $(3,800,000) and $(30,000), respectively. Otherincome (expense) consist primarily of changes in the value of derivative and conversion features of our convertible notes payable as well as interest expensepaid in connection with various notes payable. The increase in the value of derivative and conversion features of our convertible notes payable, as wellas interest expense for fiscal 2013, in comparison to fiscal 2012 was due to the issuance of convertible notes payable in fiscal 2013. 42 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. Since ourinception, June 6, 2006, and through March 31, 2013, we have an accumulated deficit of approximately $38.0 million. Since inception and throughMarch 31, 2013, we have financed our operations principally through debt financing and through private issuances of common stock. Since inception, wehave raised a total of approximately $22.7 million in debt and equity financing transactions, consisting of approximately $9.4 million in debt financing andapproximately $13.3 million in equity financing transactions. We expect to finance future cash needs primarily through proceeds from equity or debtfinancings, loans, sales of assets, out-licensing transactions, and/or collaborative agreements with corporate partners. We have used the net proceeds from debtand equity financings for general corporate purposes, which have included funding for research and development, selling, general and administrativeexpenses, working capital, reducing indebtedness, pursuing and completing acquisitions or investments in other businesses, products or technologies, and forcapital expenditures. 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 inoperating activities to increase going forward as we continue product development and other business activities, assuming that we are able to obtain sufficientfunding. Net cash provided by financing activities from continuing operations was approximately $2.6 million in fiscal 2013 and approximately $2.1 millionin fiscal 2012. Results for fiscal 2013, were affected by proceeds from the issuance of four notes. As of March 31, 2013, we had outstanding a total of 12 secured promissory notes to executives of the Company, in the aggregate outstandingprincipal amount of $97,122. Each of these notes bears interest at an annual rate of 10% on the total outstanding balance remaining under these loanagreements.On November 10, 2010, we completed a private placement transaction with Eses Holdings (FZE), a foreign investor (the “Purchaser”), pursuant to a CommonStock Purchase Agreement and a registration rights agreement. The purchase agreement provided for the sale of up to 40 million shares of our common stockto the Purchaser at a price of $0.25 per share, for up to $10 million of gross proceeds. An initial closing was held on November 10, 2010, pursuant to whichwe received $5 million in gross proceeds and issued 20 million shares of common stock. At subsequent closings linked to the achievement of variousmilestones, the last of which occurred in February 2012, we received an additional $2.5 million and issued an additional 10 million shares of common stock. On May 1, 2012, we exercised our option to terminate the Common Stock Purchase Agreement by sending notice to the Purchaser. Termination of theCommon Stock Purchase Agreement means that Purchaser will no longer have the option to purchase the remaining 10 million shares of stock at $0.25 pershare. Certain provisions of the Common Stock Purchase Agreement survive termination, including the Purchaser’s right to have an observer attend meetingsof 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. ("Gemini")pursuant to a securitiespurchase agreement. We issued a 10% Senior Convertible Note (the “Gemini April Note”) in the aggregate principal amount of $1.0 million and 1,000,000shares of our common stock, and received gross proceeds of $1.0 million, excluding transaction costs and expenses. Interest on the Gemini Note payable at arate of 10% per annum and was payable on the maturity date. On December 31, 2012, the Gemini April Note was converted in full into 3,869,260 shares ofcommon stock before its maturity date and is no longer outstanding. During the quarter ended December 31, 2012, the Gemini Note and accrued interestpayable of approximately $73,000 was converted at $.25 per share into 4,293,370 shares of common stock. On June 11, 2012, we completed the closing of a private placement financing transaction with Gemini. We issued a 10% Senior Convertible Note inthe aggregate principal amount of $500,000 and 500,000 shares of common stock, and received gross proceeds of $500,000, excluding transaction costs andexpenses. As amended the maturity date is July 11, 2013. At March 31, 2013, the net carrying value of this note was $500,000. In connection with theclosing of the June 2013 secured convertible note and warrant financing transaction described below, the Gemini note was exchanged for $613,271 principalamount of Secured Notes and warrants, and the June 2012 Gemini note is no longer outstanding. On June 11, 2012, we issued a convertible promissory note in the aggregate principal amount of $500,000 and 500,000 shares of common stock toThe G-Max Trust, and received gross proceeds of approximately $500,000, excluding transaction costs and expenses. Interest on the outstanding principalbalance of the note accrued at a rate of 10% per annum compounded monthly and was payable monthly commencing July 1, 2012. The note was convertibleinto shares of common stock at any time at a conversion price per share of $0.55. During January 2013, G-Max elected to convert all of the remainingunconverted principal of the note and related interest into 913,384 shares of common stock, and the note is no longer outstanding. 43 On October 25, 2012, we issued a zero coupon secured promissory note to the G-Max Trust, evidencing a loan from G-Max to the Company, andreceived gross proceeds of approximately $500,000. The note was due and payable on or before six months after the date of the note. At maturity, we agreed topay G-Max the sum of $588,000. We issued 176,000 shares as part of the consideration for the loaned proceeds. On December 31, 2012, the note was repaidin full and is no longer outstanding. 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 aprivate investor, and received gross proceeds of $600,000, excluding transaction costs and expenses. Interest on the outstanding principal balance of the noteaccrues at a rate of 10% per annum compounded monthly and is payable monthly commencing February 1, 2013. All unpaid principal and interest on the noteis due and payable on September 30, 2013. In connection with our June 2013 financing transaction, the holder of the note agreed to extend the maturity date toMarch 26, 2014. 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 noteinto common stock at a conversion price equal to $0.55 per share (subject to adjustment for stock dividends, stock splits, reverse stock splits,reclassifications or other similar events affecting the number of outstanding shares of common stock). The proceeds from the note were used to retire theOctober 25, 2012 note. At March 31, 2013, the net carrying value of this note was $482,997. On April 5, 2013, we completed the closing of a private placement financing transaction with two accredited investors pursuant to a SecuritiesPurchase Agreement. Pursuant to the purchase agreement, we issued 12% Convertible Debentures in the aggregate principal amount of $575,000, and receivedgross proceeds of $575,000, excluding transaction costs, fees and expenses. Interest on the debentures is payable in the amount of 12% of the principalamount, regardless of how long the debentures remain outstanding. Principal and interest was due and payable October 5, 2013. The debentures wereconvertible into shares of common stock at any time at the discretion of the investor at an initial conversion price per share of $0.50. In June 2013, thenoteholders converted a portion of the notes into 208,000 shares of common stock, and $644,000 of the net proceeds from the Secured Note and warrantprivate placement transaction discussed below was used to redeem and pay the outstanding amounts due under the notes. As a result, the April 2013 notes areno longer outstanding. On June 26, 2013, we completed the closing of a private placement financing transaction with a small number of accredited institutionalinvestors. Pursuant to a subscription agreement (the “Purchase Agreement”) and other transaction documents, we issued Secured Convertible PromissorySecured Notes, or the Secured Notes, and common stock purchase warrants (the “Warrants”) to purchase up to 13,004,316 shares of common stock, andreceived gross cash proceeds of $5,300,000, 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 issued to Gemini Master Fund Ltd. in exchange for its previously outstanding June 2012convertible note, which is no longer outstanding. The maturity date of the Secured Notes is December 26, 2013. Our obligations under the Secured Notes andthe other transaction documents are guaranteed by our principal subsidiaries and, pursuant to a Security Agreement entered into with the investors, are securedby 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 anytime at the discretion of the investor at an initial conversion price per share of $0.50. The exercise price of the Warrants is $0.715 per share, subject toadjustment. Under the transaction documents, we have agreed to file a registration statement with the Securities and Exchange Commission, or the SEC, within60 days following the closing to register the resale of the shares issuable upon conversion of the Secured Notes and exercise of the Warrants, and to have theregistration statement declared effective within 120 days of the closing date. The transaction documents provide for a variety of monetary penalties, whichcould be material, if the registration statement is not filed or declared effective by the times contemplated in the transaction documents, or does not continue tobe effective thereafter. The transaction documents include restrictions on our ability to engage in certain kinds of transactions while the Secured Notes are outstandingwithout the consent of the investors, including without limitation: (a) incurring, paying or repaying certain kinds of indebtedness; (b) other than certainpermitted liens, creating or incurring any liens, security interests or encumbrances on our property or assets; (c) amending our charter documents (with certainexceptions) in any manner that materially and adversely affects the investors’ rights; (d) repurchasing shares of common stock, or repurchasing orreacquiring shares of common stock (with certain exceptions); (e) entering into certain kinds of related party transactions with our officers, directors,employees or affiliates; (f) paying or redeeming any financing related debt or securities, with certain permitted exceptions; (g) entering into any equity line ofcredit arrangements or issuing any variable priced equity linked instruments; (h) filing any registration statements relating to the offer and sale of shares untilthe registration statement contemplated by the transaction documents is declared effective; (i) selling, leasing or otherwise disposing of any significant portionof our assets outside the ordinary course of business; or ( j ) entering into transactions with any of our affiliates (with certain exceptions). In connection with the closing of a registered underwritten public offering or a registered direct public offering resulting in at least $10 million ofgross proceeds to us, the investors must elect to either have the Secured Notes redeemed at a price equal to 115% of the outstanding principal amount andinterest, if any, or convert the Secured Notes effective at the closing of the offering, at a conversion price of 85% of the lowest sales, conversion, exercise orpurchase price of any common stock or common stock equivalent issued in connection with the offering if such price is lower than the then-current conversionprice. Except in connection with a qualified offering, we may not redeem or prepay the Secured Notes. The occurrence of any of the following events of default will, at the option of the holder, make all principal, interest and other amounts due on theSecured Note immediately due and payable: (a) the Company (i) fails to pay any installment of principal or interest when due or (ii) fails to pay any interestor other sums due under the Secured Note when due; (b) the Company breaches any material covenant or other term or condition of the transaction documentsor the Secured Note, except for a breach of payment, in any material respect and if susceptible to cure, the Company has failed to cure such breach within fivedays after delivery of a notice of such breach; (c) any material representation or warranty of the Company made in the transaction documents is false ormisleading in any material respect; (d) any dissolution, liquidation or winding up by the Company or a material subsidiary of a substantial portion of theirbusiness; (e) cessation of operations by the Company or a material subsidiary; (f) the failure by the Company or any material subsidiary to maintain anymaterial intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or inthe future) and which failure could reasonably be expected to result in a material adverse effect on the Company, and such breach is not cured with 20 daysafter written notice to the Company from the holder; (g) the Company or any material subsidiary makes an assignment for the benefit of creditors, or appliesfor or consents to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwisebe appointed; (h) any money judgment, writ or similar final process is entered or made in a non-appealable adjudication against the Company or any materialsubsidiary or any of its property or other assets for more than $100,000 in excess of the Company’s or such material subsidiary’s insurance coverage, unlessstayed vacated or satisfied within 30 days; (i) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under anybankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors is instituted by or against the Company or anysubsidiary; (j) an event resulting in the Common Stock no longer being quoted on the OTCQB, failure to comply with the requirements for continuedquotation on the OTCQB for a period of 20 consecutive trading days, or notification from the OTCQB that the Company is not in compliance with theconditions for such continued quotation and such non-compliance continues for 20 days following such notification; (k) within 30 days following theconsummation of one or more private placement or public offering transactions after the closing date in which the Company has received in the aggregate atleast $10 million of net proceeds, a default by the Company or any material subsidiary under any one or more obligations in an aggregate monetary amount inexcess of $150,000 for more than 30 days after the due date; (l) an SEC or judicial stop trade order or OTCQB suspension; (m) the Company’s failure totimely deliver Common Stock to the holder pursuant to and in the form required by the Secured Notes, the subscription agreement and the Warrants or, ifrequired, a replacement Secured Note or Warrant following a partial conversion or exercise; (n) failure by the Company to have reserved for issuance uponconversion of the Secured Notes or upon exercise of the Warrants, the number of shares of Common Stock as required in the transaction documents and tohave cured such failure with any applicable time periods provided for in the transaction documents; (o) the restatement of any financial statements filed by theCompany with the SEC for any date or period from two years prior to the closing date and until the Secured Notes are no longer outstanding, if the result ofsuch restatement would, by comparison to the unrestated financial statements, have constituted a material adverse effect on the Company; (p) the Company’sfailure to materially comply with the registration obligations set forth in the subscription agreement; (q) failure by the Company to obtain, within three weeksof the date of issuance of the Secured Notes, all of the fully executed waivers from all prior investors in the Company in connection with any anti-dilutionrights that may be triggered as a result of the issuance of the Secured Notes and the Warrants and all of the fully executed consents from all prior securedinvestors in the Company with regards to the pari passu sharing of the security interests of such secured prior investors with the holders of the Secured Notes;(r) a failure by the Company to notify the holders of any material event of which the Company is obligated to notify the holders pursuant to the terms of thetransaction documents; (s) a default by the Company of a material term, covenant, warranty or undertaking of any other agreement to which the Companyand the holders are parties, or the occurrence of an event of default under any such other agreement to which the Company and the holders are parties which isnot cured after any required notice and/or cure period; and (t) the occurrence of an event of default under any other secured note. 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’sobligations under the transaction documents, and have customary rights of a secured party to dispose of the collateral to help satisfy payment of ourobligations under the transaction documents. In addition, following an event of default or after the maturity date, a default interest rate of 12% per annumapplies. Also, during the pendency of an event of default, the conversion price of the Secured Notes will be reduced to be 80% of the lowest volume weightedaverage price of the common stock for any five consecutive trading days during any 30-day period commencing on the original date of the Secured Notes andbefore a conversion date upon which some or all of the Secured Note is converted. The conversion prices of the Secured Notes and the Warrants are subject to anti-dilution provisions providing that, with the exception of certainexcluded categories of issuances and transactions, if we issue any shares of common stock or securities convertible into or exercisable for common stock, or ifcommon stock equivalents are repriced, at an effective price per share less than the conversion price of the Secured Notes or the exercise price of the Warrants(as applicable), without the consent of a majority in interest of the investors, the conversion price of the Secured Notes and Warrants will be adjusteddownward to equal the per share price of the securities issued or deemed issued in such transaction and the number of shares issuable upon exercise of theWarrants will be proportionately increased. In connection with a merger, sale of all or substantially all of our assets, certain kinds of tender offers, or certain other kinds of transactions or events, theholder may either (i) accelerate the maturity date of the Secured Note as of the date of the transaction and receive payment for the then outstanding principalamount of the Secured Note and any other amount owed under the transaction documents, or (ii) require us to redeem the Secured Note together with any otheramounts owed under the transaction documents.In the case of a delay in the delivery of conversion shares or warrant shares later than the period provided in the Secured Notes or Warrants, the transactionagreements provide for monetary penalties, which could be material, for each trading day after the required delivery date during which the shares are notdelivered. If the Company fails to timely deliver conversion shares or warrant shares and if the holder purchases shares of Common Stock to deliver insatisfaction of a sale by holder of the Common Stock which holder was entitled to receive upon such conversion or exercise, then the Company is obligated topay to holder the amount by which (A) holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchasedexceeds (B) the aggregate principal and/or interest amount of the Secured Note or Warrant (as applicable) for which such conversion or exercise request was nottimely honored, together with interest thereon at a rate of 15% per annum. If (i) the Company is prohibited from issuing conversion shares, or (ii) an event of default occurs and continues beyond any applicable cure period,or (iii) the Company or any material subsidiary liquidates, dissolves or winds up, then at the holder's election, the Company must pay to holder a sum ofmoney 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 demand is made by holder and thedenominator of which is the lowest applicable conversion price during such 30 day period, together with accrued but unpaid interest and any other amountsdue under the transaction documents. Upon receipt of such mandatory redemption payment, the corresponding Secured Note principal, interest and otheramounts will be deemed paid and no longer outstanding.The Warrants are exercisable for a period of five years from the date of issuance. The exercise price of the Warrants is $0.715 per share. The Warrants aregenerally exercisable for cash, unless a registration statement covering the resale of the warrant shares is not available, in which case the holder may exercise aWarrant on a cashless net exercise basis. The Warrants include a variety of penalties, which could be material, for the Company’s failure to timely deliversecurities upon exercise.In connection with certain kinds of mergers, sales of assets or other fundamental transactions, the Company is obligated to purchase the Warrantsfrom the holders for cash based on the Black Scholes value of the Warrants if that amount is higher than the spread between the per share price payable in thetransaction and the exercise price per share of the Warrant, pursuant to procedures described in the Warrants. For a period of one year after the closing date, the investors have a right of first refusal to purchase securities proposed to be offered and sold in the future byus, other than in connection with certain excluded or exempt issuances. Pursuant to the terms of the Purchase Agreement, we expect to use the net proceeds to pay operating, general and administrative expenses, includingcurrent and accrued salaries to employees, fees to directors, and other obligations incurred in the ordinary course of our business, to make scheduled interestpayments on our outstanding December 2012 promissory note, to pay expenses relating to our filing with the FDA for our epinephrine syringe productcandidate, and to help fund our acquisition of rights regarding other products, assets or technologies. As noted above under the heading “Going Concern and Management’s Plan,” at March 31, 2013, Adamis had substantial liabilities and obligations. Theavailability of any required additional funding cannot be assured. Even taking into account the net proceeds from the transactions described above, if we donot obtain additional equity or debt funding in the near future, our cash resources will rapidly be depleted and we will be required to materially reduce orsuspend operations. Even if are successful in obtaining additional funding to permit us to continue operations at the levels that we desire, substantial time willpass before we obtain regulatory marketing approval for any products and begin to realize revenues from product sales, and during this period Adamis willrequire additional funds. No assurance can be given as to the timing or ultimate success of obtaining future funding.Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based on our audited financial statements, which have beenprepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to makeestimates 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 underthe circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparentfrom 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 you in understanding and evaluating our reported financial results.For further discussion of our accounting policies, see Note 3 in the accompanying notes to our financial statements appearing elsewhere in this Annual Reporton Form 10-K.Stock-Based Compensation. We account for stock-based compensation transactions in which we receive employee services in exchange for optionsto purchase common stock. Stock-based compensation cost for restricted stock units (“RSUs”) is measured based on the closing fair market value of ourcommon 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 ascalculated by the Black-Scholes option-pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line basis over the requisiteservice period. 44 Derivative Financial Instruments. Derivatives are recognized as either assets or liabilities in the consolidated balance sheets and are measured at fairvalue. The treatment of gains and losses resulting from changes in the fair values of derivative instruments is dependent on the use of the respective derivativeinstrument and whether they qualify for hedge accounting. As of March 31, 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 inan instrument, are considered derivatives. This guidance can affect the accounting for convertible instruments that contain provisions to protect holders froma decline in the stock price, or down-round provisions. Down-round provisions reduce the exercise price of a convertible instrument if a company either issuesequity 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.The Company recognizes the derivative assets and liabilities at their respective fair values at inception and on each reporting date. The Company utilized abinomial option pricing model (BOPM) to develop its assumptions for determining the fair value of the conversion and anti-dilution features of its notes. SeeNote 8 in the accompanying financial statements for further discussion of derivative instruments.Off Balance Sheet Arrangements At March 31, 2013, we did not have any off balance sheet arrangements. Recent Accounting Pronouncements None. ITEM 8:FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and financial information required by Item 8 are set forth below commencing on page F-1. ITEM 9:CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. ITEM 9A:CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures In connection with the preparation of this annual report on Form 10-K, an evaluation was carried out by our management, with the participation ofthe Principal Executive Officer and Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15( e) and 15d-15( e) under the Securities Exchange Act of 1934, or the Exchange Act) as of March 31, 2013. Disclosure controls and procedures are designed to ensure thatinformation required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the timeperiods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Principal ExecutiveOfficer and Accounting Officer, to allow timely decisions regarding required disclosures. Based on their evaluation, our Principal Executive Officer and Accounting Officer concluded that disclosure controls and procedures were noteffective as of March 31, 2013, for reasons described below.Internal Control over Financial Reporting Management’s report on our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) in the Exchange Act),is included in this Annual Report on Form 10-K, under the heading “Management’s Annual Report on Internal Control Over Financial Reporting” and isincorporated herein by reference. This report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilitiesof that section, unless we specifically state that the report is to be considered “filed” under the Exchange Act or incorporate it by reference into a filing under theSecurities Act of 1933, as amended, or under the Exchange Act. 45 Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, a company’sprincipal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accountingprinciples generally accepted in the United States of America and includes those policies and procedures that: ●Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; ●Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and ●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’sassets that could have a material effect on the financial statements. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance thatthe objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, within our company have been detected. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2013. In making this assessment, ourmanagement used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - IntegratedFramework and Internal Control over Financial Reporting-Guidance for Smaller Public Companies. As a result of this assessment, management identified amaterial weakness in internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in our internal control over financial reporting as of March 31, 2013, based on the absence of finance andaccounting 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 theSecurities and Exchange Commission and to ensure that financial information (both routine and non-routine) is adequately analyzed and reviewed on a timelybasis to detect misstatements. These above deficiencies represent a material weakness in our internal control over financial reporting given that they result in areasonable possibility that a material misstatement to the annual or interim financial statements would not have been prevented or detected.Based on the material weakness described above, management has concluded that as of March 31, 2013 our internal control over financial reportingwere not effective. We intend to address the weaknesses identified above by increasing the oversight and review procedures of the board of directors with regard tofinancial reporting, financial processes and procedures and internal control procedures; where possible preparing and reviewing SEC filings farther inadvance of required filing dates; and when funding is available considering the addition of finance and accounting personnel. This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control overfinancial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules that permit us to provide onlymanagement’s report in this Annual Report on Form 10-K. Changes in Internal Controls There has been no change in our internal control over financial reporting that occurred, during the quarter ended March 31, 2013, that has materiallyaffected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B:OTHER INFORMATION Not Applicable. 46 PART III ITEM 10:DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 of Part III is incorporated by reference to the registrant’s proxy statement, to be filed within 120 days of theregistrant’s fiscal year end, or will be included in an amendment to this Annual Report on Form 10-K. ITEM 11:EXECUTIVE COMPENSATION The information required by Item 11 of Part III is incorporated by reference to the registrant’s proxy statement, to be filed within 120 days of theregistrant’s fiscal year end, or will be included in an amendment to this Annual Report on Form 10-K. ITEM 12:SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS The information required by Item 12 of Part III is incorporated by reference to the registrant’s proxy statement, to be filed within 120 days of theregistrant’s fiscal year end, or will be included in an amendment to this Annual Report on Form 10-K. ITEM 13:CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Item 13 of Part III is incorporated by reference to the registrant’s proxy statement, to be filed within 120 days of theregistrant’s fiscal year end, or will be included in an amendment to this Annual Report on Form 10-K. ITEM 14:PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 of Part III is incorporated by reference to the registrant’s proxy statement, to be filed within 120 days of theregistrant’s fiscal year end, or will be included in an amendment to this Annual Report on Form 10-K. 47 PART IV ITEM 15:EXHIBITS, FINANCIAL STATEMENT SCHEDULES Exhibits The following exhibits are attached hereto or incorporated herein by reference. Incorporated byReferenceExhibitNumber Exhibit Description FiledHerewith Form/File No. Date2.1 Agreement and Plan of Share Exchange dated as of October 7, 2004, by and between theCompany and Biosyn, Inc. 8-K 10/26/043.1 Certificate of Amendment to Amended and Restated Certificate of Incorporation 8-K 04/03/093.2 Amended and Restated Certificate of Incorporation of the Registrant 8-K 04/03/093.3 Certificate of Amendment to Amended and Restated Certificate of Incorporation of theRegistrant X 4.0 Amended and Restated Bylaws of the Company S-4/A333-155322 01/12/094.1 Specimen stock certificate for common stock 8-K 04/03/09*10.1 1995 Equity Incentive Plan 10-Q 08/13/02*10.2 2005 Equity Incentive Plan 10-K 03/31/06*10.3 Form of Option Agreement under the 2005 Equity Incentive Plan 10-K 03/31/06*10.4 2009 Equity Incentive Plan 8-K 01/13/11*10.5 Form of Stock Option Agreement for option awards 8-K 09/16/11*10.6*10.7 Form of Option Agreement for Non-Employee Directors*Form of Indemnity Agreement with directors and executive officers 8-K8-K 01/13/1101/13/1110.8 Agreement dated as of October 8, 1996 by and among Biosyn, Inc., Edwin B.Michaels and E.B. Michaels Research Associates, Inc. (Confidential treatment has beenrequested with respect to portions of this agreement.) 10-K 03/31/0510.9 Patent License Agreement by and among Biosyn, Inc., and certain agencies of the UnitedStates Public Health Service 10-K 03/31/0510.10 License Agreement dated as of May 22, 2001, by and between Crompton Corporationand Biosyn, Inc. (Confidential treatment has been requested for portions of thisagreement.) 10-K 03/31/0510.11 License Agreement dated January 30, 2006, by and between CONRAD, Eastern VirginiaMedical School, and Biosyn, Inc. (Confidential treatment has been requested forportions of this agreement.) 10-K 04/02/0710.12 Amendment to License Agreement dated as of March 15, 2006, by and betweenCrompton Corporation and Biosyn, Inc. S-4/A333-155322 01/12/0910.13 Funding Agreement dated October 12, 1992, by and between Ben Franklin TechnologyCenter of Southeastern Pennsylvania and Biosyn, Inc. S-4/A333-155322 01/12/0910.14 License Agreement dated July 28, 2006, by and between Nevagen, LLC and AdamisPharmaceuticals Corporation S-4/A333-155322 01/12/0910.15 Amendment to License Agreement dated December 29, 2008, by and between Nevagen,LLC and Adamis Pharmaceuticals Corporation S-4/A333-155322 01/12/09*10.16 Stock Repurchase Agreement dated November 3, 2008, by and between Dennis J. Carloand Adamis Pharmaceuticals Corporation S-4/A333-155322 01/12/09 48 Incorporated byReferenceExhibitNumber Exhibit Description FiledHerewith Form/FileNo. Date*10.17 Stock Repurchase Agreement dated November 3, 2008, by and between Robert Hopkinsand Adamis Pharmaceuticals Corporation S-4/A333-155322 01/12/09*10.18 Stock Repurchase Agreement dated November 3, 2008, by and between David J.Marguglio and Adamis Pharmaceuticals Corporation S-4/A333-155322 01/12/0910.19 Amendment to License Agreement dated October 18, 2007, by and between CONRAD,Eastern Virginia Medical School, and Biosyn, Inc. S-4/A333-155322 01/12/0910.20 Amendment to Lease Agreement dated October 30, 2007, by and between HRM II Ltdand Healthcare Ventures Group S-4/A333-155322 01/12/0910.21 Clinical Trial Agreement between Biosyn, Inc. and the National Institute of Child Healthand Human Development S-4/A333-155322 01/12/0910.22 Securities Purchase Agreement dated January 11, 2010 between the Registrant and theinvestors listed therein 8-K 01/14/1010.23 Form of 10% Senior Secured Convertible Note dated January 11, 2010 8-K 01/14/1010.24 Form of Security Agreement dated January 11, 2010 8-K 01/14/1010.25 Assignment, Assumption and Stock Acquisition Agreement dated February 24, 2010between the Registrant and Colby Pharmaceutical Company 10-K 07/14/1010.26 Amendment to Assignment, Assumption and Stock Acquisition Agreement dated as ofOctober 16, 2010, between the Registrant and Colby Pharmaceutical Company 8-K 10/19/1010.27 Form of Amendment to 10% Senior Secured Convertible Notes 8-K 04/04/1110.28 Amendment to G-Max Convertible Promissory Note 8-K 04/04/1110.29 Common Stock Purchase Agreement dated as of November 10, 2010, by and betweenAdamis Pharmaceuticals Corporation and the Purchaser named therein (Confidentialtreatment has been granted for portions of this exhibit.) 8-K 11/12/1010.30 Registration Rights Agreement dated as of November 10, 2010, by and between AdamisPharmaceuticals Corporation and the Purchaser named therein 8-K 11/12/1010.31 Employment Agreement between the Company and Dennis J. Carlo* 8-K 11/12/1010.32 Employment Agreement between the Company and David J. Marguglio* 8-K 11/12/1010.33 Employment Agreement between the Company and Robert O. Hopkins* 8-K 11/12/1010.34 Product Development and Contract Manufacturing Agreement dated November 1, 2010,between Adamis and Beximco 10-Q 02/14/1110.35 License Agreement between Adamis, the Regents of the University of California andDana-Farber Cancer Institute, Inc. 10-K 07/07/1110.36 License Agreement dated January 26, 2007, with Wisconsin Alumni ResearchFoundation 10-K 07/07/1110.37 License Agreement dated January 26, 2007, with Wisconsin Alumni ResearchFoundation 10-K 07/07/1110.38 License Agreement dated January 2, 2008, with Wisconsin Alumni Research Foundation 10-K 07/07/11 49 Incorporated by ReferenceExhibitNumber Exhibit Description FiledHerewith Form/FileNo. Date 10.39 First Amendment to Common Stock Purchase Agreement dated as of June 30, 2011, byand between the Company and Eses Holdings (FZE) 10-K 07/07/1110.40 Second Amendment to Common Stock Purchase Agreement dated as of November 10,2011, by and between the Company and Eses Holdings (FZE) 8-K 11/21/1110.41 Third Amendment to Common Stock Purchase Agreement dated as of January 31, 2012,by and between the Company and Eses Holdings (FZE) 10-Q 02/14/1210.42 Securities Purchase Agreement dated as of April 2, 2012 8-K 04/05/1210.43 10% Senior Convertible Note dated as of April 2, 2012 8-K 04/05/1210.44 Form of Subsidiary Guarantee dated as of April 2, 2012 8-K 04/05/1210.45 Securities Purchase Agreement dated as of June 11, 2012 8-K 06/15/1210.46 10% Senior Convertible Note dated as of June 11, 2012 8-K 06/15/1210.47 Form of Subsidiary Guarantee dated as of June 11, 2012 8-K 06/15/1210.48 Convertible Promissory Note dated as of June 11, 2012 8-K 06/15/1210.49 Zero Coupon Secured Promissory Note dated October 25, 2012 10Q 02/19/1310.50 Convertible Promissory Note dated December 31, 2012 10-Z 02/19/1310.51 Securities Purchase Agreement dated as of April 5, 2013 8-K 04/08/1310.52 12% Convertible Debenture dated April 5, 2013 8-K 04/08/1310.53 Subscription Agreement dated as of June 26, 2013. 8-K 07/01/1310.54 Form of Secured Convertible Notes dated June 26, 2013. 8-K 07/01/1310.55 Form of Warrants dated June 26, 2013. 8-K 07/01/1310.56 Security Agreement dated June 26, 2013. 8-K 07/01/1310.57 Intercreditor Agreement dated June 26, 2013. 8-K 07/01/1321.1 Subsidiaries of the Registrant X 23.1 Consent of Mayer Hoffman McCann PC, Independent Registered Public AccountingFirm X 24.1 Power of Attorney (See signature page) X 31.1 Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 31.2 Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.1 Certification by CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2 Certification by CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 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.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Represents a compensatory plan or arrangement. 50 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California. ADAMIS PHARMCEUTICALS CORPORATION By: /s/ DENNIS J. CARLO Dennis J. Carlo Chief Executive OfficerDated: July 3, 2013 Power of Attorney Each person whose signature appears below constitutes and appoints each of Dennis J. Carlo and Robert O. Hopkins, true and lawful attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign amendments to this Annual Report on Form 10-K, and to file the same, with allexhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that saidattorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in thecapacities and on the dates indicated: Name Title DatePrincipal Executive Officer: /s/ DENNIS J. CARLO Chief Executive Officer and Director July 3, 2013Dennis J. Carlo Principal Financial Officerand Principal Accounting Officer: /s/ ROBERT O. HOPKINS Vice President, Finance, July 3, 2013Robert O. Hopkins Chief Financial Officer and Secretary Directors: /s/ DAVID J. MARGUGLIO Director July 3, 2013David J. Marguglio /s/ KENNETH M. COHEN Director July 3, 2013 /s/ TINA S. NOVA, Ph.D. Director July 3, 2013 /s/ CRAIG A. JOHNSON Director July 3, 2013 51 ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS MARCH 31, 2013 AND 2012 PAGE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM MAYER HOFFMAN MCCANN P.C. F-1 FINANCIAL STATEMENTS: Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) F-4 Consolidated Statements of Cash Flows F-5 - F-6 Notes to the Consolidated Financial Statements F-7 - F-22 52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Adamis Pharmaceuticals Corporation and Subsidiaries We have audited the accompanying consolidated balance sheets of Adamis Pharmaceuticals Corporation and Subsidiaries (the "Company") as of March 31,2013 and 2012, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the two years in the period endedMarch 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration ofinternal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Adamis PharmaceuticalsCorporation and Subsidiaries as of March 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the two yearperiod ended March 31, 2013, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 tothe consolidated financial statements, the Company has incurred recurring losses from operations and has limited working capital to pursue its businessalternatives. Management’s plans with regard to these matters are also described in Note 2. These conditions raise substantial doubt about the Company’sability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of theseuncertainties. /s/ Mayer Hoffman McCann P.C. MAYER HOFFMAN MCCANN P.C. Certified Public Accountants Boca Raton, Florida July 3, 2013 F-1 ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS March 31, 2013 March 31, 2012 ASSETS CURRENT ASSETS Cash $— $7,519 Prepaid Expenses and Other Current Assets 64,347 31,520 Debt Issuance Cost 286,582 — Total Current Assets 350,929 39,039 ASSETS FROM DISCONTINUED OPERATIONS — 130,000 Total Assets $350,929 $169,039 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts Payable $2,431,919 $2,020,713 Accrued Other Expenses 754,709 469,279 Accrued Bonuses 101,436 101,436 Conversion Feature Liability 162,456 — Derivative Liability 50,545 — Notes Payable 97,683 195,608 Convertible Notes Payable, net 982,997 — Notes Payable to Related Parties 97,122 105,632 Total Liabilities 4,678,867 2,892,668 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; 200,000,000 Shares Authorized; 109,656,180 and101,161,953 Issued, 104,427,992 and 95,933,765 Outstanding, Respectively 10,966 10,116 Additional Paid-in Capital 33,643,449 28,053,816 Accumulated Deficit (37,977,124) (30,782,332)Treasury Stock - 5,228,188 Shares, at cost (5,229) (5,229) Total Stockholders' (Deficit) (4,327,938) (2,723,629) $350,929 $169,039 The accompanying notes are an integral part of these Consolidated Financial Statements F-2 ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS Year Ended March 31, 2013 2012 REVENUE $— $— SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,008,255 2,649,234 RESEARCH AND DEVELOPMENT 1,209,318 2,165,968 Loss from Operations (3,217,573) (4,815,202) OTHER INCOME (EXPENSE) Interest Expense (2,333,982) (35,390)Gain on Sale of Asset — 5,297 Change in Fair Value Derivative Liability (122,945) — Change in Fair Value of Conversion Feature Liability (1,390,292) — Total Other Income (Expense) (3,847,219) (30,093) Net (Loss) from Continuing Operations (7,064,792) (4,845,295) DISCONTINUED OPERATIONS Write-down of Discontinued Operations Receivable (130,000) (70,000) Net (Loss) from Discontinued Operations (130,000) (70,000) Net (Loss) $(7,194,792) $(4,915,295) Basic and Diluted (Loss) Per Share: Basic and Diluted (Loss) Per Share from Continuing Operations $(0.07) $(0.06) Basic and Diluted (Loss) Per Share from Discontinued Operations $— $— Basic and Diluted (Loss) Per Share $(0.07) $(0.06) Basic and Diluted Weighted Average Shares Outstanding 99,599,545 89,477,725 The accompanying notes are an integral part of these Consolidated Financial Statements F-3 ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock AdditionalPaid-In Treasury Stock Accumulated Shares Amount Capital Shares Amount Deficit Total Balance March 31, 2011 86,818,532 8,682 24,483,918 (5,228,188) (5,229) (25,867,037) (1,379,666) Common Stock Issued for NoteConversions 4,093,101 409 818,210 — — — 818,619 Common Stock Issued forCash at .25 per share 10,000,320 1,000 2,499,080 — — — 2,500,080 Common Stock Issued forServices 250,000 25 59,975 — — — 60,000 Warrants Issued for Services — — 21,000 — — — 21,000 Share Based Compensation — — 171,633 — — — 171,633 Net (Loss) — — — — — (4,915,295) (4,915,295)Balance March 31, 2012 101,161,953 $10,116 $28,053,816 (5,228,188) $(5,229) $(30,782,332) $(2,723,629) Common Stock Issued for NoteConversions at $0.25 4,293,370 430 2,912,913 — — — 2,913,343 Common Stock Issued for NoteConversions at $0.55 913,384 91 502,270 — — — 502,361 Common Stock Issued forExercised Warrants 411,473 41 (41) — — — — Common Stock Issued forServices 100,000 10 70,990 — — — 71,000 Common Stock Issued forFinancings 2,776,000 278 1,591,722 — — — 1,592,000 Beneficial Conversion Feature — — 347,272 — — — 347,272 Share Based Compensation — — 164,507 — — — 164,507 Net (Loss) — — — — — (7,194,792) (7,194,792)Balance March 31, 2013 109,656,180 $10,966 $33,643,449 (5,228,188) $(5,229) $(37,977,124) $(4,327,938) The accompanying notes are an integral part of these Consolidated Financial Statements F-4 ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Year Ending March 31, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Net (Loss) $(7,194,792) $(4,915,295)Adjustments to Reconcile Net (Loss) to Net Cash (Used in) Operating Activities: Stock Issued for Interest 75,703 621 Vesting of Options for Compensation 164,507 171,633 Reduction in Notes Payable (57,925) — Change in Derivative Liability Fair Value 122,945 — Change in Conversion Feature Liability Fair Value 1,390,292 — Amortization of Discount on Notes Payable 770,033 — Amortization of Debt Issuance Cost 1,305,418 — Amortization of Stock Issued for Services 36,792 364,884 Sales Returns Reserve Adjustment — (13,151)Write-down of Discontinued Operations Receivable 130,000 70,000 Change in Assets and Liabilities: (Increase) Decrease in: Prepaid Expenses and Other Current Assets 1,381 (20,694)Increase (Decrease) in: Accounts Payable 411,207 757,515 Accrued Other Expenses 285,430 238,628 Net Cash (Used in) Operating Activities (2,559,009) (3,345,859) CASH FLOWS FROM FINANCING ACTIVITIES Cash Received from Sale of Common Stock — 2,500,080 Issuance of Note Payable 3,099,800 — Payment of Notes Payable (539,800) (390,000)(Payment of) Proceeds from Notes Payable to Related Parties (8,510) 4,400 Net Cash Provided by Financing Activities 2,551,490 2,114,480 (Decrease) in Cash (7,519) (1,231,379)Cash: Beginning 7,519 1,238,898 Ending $— $7,519 The accompanying notes are an integral part of these Consolidated Financial Statements F-5 ADAMIS PHARMACEUTICALS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Year Ending March 31, 2013 2012 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash Paid for Interest $120,561 $33,859 SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTINGACTIVITIES Common Stock issued for Exercised Warrants $41 $— Common Stock issued for Debt Issuance Cost $1,592,000 $— Note Payable Discounts from Deriviative and Convertible Feature Liabilities $539,764 $— Additional Paid-In Capital from Notes Payable Discount $347,272 $— Conversion of Sales Return Liability to Notes Payable $— $147,866 Notes Payable converted to Common Stock $1,500,000 $818,000 Common Stock issued for Interest $75,703 $621 Stock Based Compensation Expense $164,507 $171,633 Warrants Issued for Prepaid Services $— $21,000 Common Stock Issued for Prepaid Services $71,000 $60,000 Additional Paid-In Capital Resulting from Reduction in Derivative and Conversion FeatureLiabilities $1,840,000 $— Reduction in Notes Payable $57,925 $— The accompanying notes are an integral part of these Consolidated Financial Statements F-6 NOTE 1: NATURE OF BUSINESS The company formerly named Adamis Pharmaceuticals Corporation, or Old Adamis, was founded in June 2006 as a Delaware corporation. Effective April 1,2009, Old Adamis completed a business combination transaction with Cellegy Pharmaceuticals, Inc., or Cellegy. Before the merger, Cellegy was a publiccompany and Old Adamis was a private company. In connection with the consummation of the merger and pursuant to the terms of the definitive mergeragreement relating to the transaction, Cellegy was the surviving corporation in the merger and changed its name from Cellegy Pharmaceuticals, Inc. to AdamisPharmaceuticals Corporation (the “Company", “Adamis Pharmaceuticals,” “Adamis,” “we” or “our”), and Old Adamis survived as a wholly-ownedsubsidiary and changed its corporate name to Adamis Corporation. The Company has two wholly-owned subsidiaries: Adamis Corporation; and Biosyn,Inc., which has rights to the C31G product. Adamis Corporation has two wholly-owned subsidiaries: Adamis Viral Therapies, Inc., or Adamis Viral, whichwas formed to focus on the Company’s cancer and vaccine technologies; and Adamis Laboratories, Inc., or Adamis Labs, which was formed to focus on theCompany’s allergy and respiratory products. The Company’s general business strategy is to generate revenue through launch of its allergy and respiratory products in development, in order to generatecash flow to help fund expansion of its allergy and respiratory business, as well as support its future cancer and vaccine product development efforts. NOTE 2: GOING CONCERN The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, whichcontemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as shown in the accompanying consolidatedfinancial statements, the Company has sustained substantial losses from continuing operations and has not introduced new revenue producing products sinceinception. In addition, the Company has used, rather than provided, cash in its continuing operations. Without realization of additional capital, it would beunlikely for the Company to continue as a going concern. Management intends to attempt to secure additional required funding through equity or debtfinancings, sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop andfund research and development efforts, or similar transactions.The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts andclassification of liabilities that might be necessary should the Company be unable to continue in existence. NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include Adamis Pharmaceuticals and its wholly-owned operating subsidiaries. All significant intra-entitybalances and transactions have been eliminated in consolidation. Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management tomake certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dateof the consolidated financial statements. Actual results could differ from those estimates, and the differences could be material. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with original maturities at the date ofpurchase of three months or less to be cash equivalents.Fair Value of Financial InstrumentsThe carrying amounts of the Company’s financial instruments, including cash, accounts payable and accrued liabilities approximate their fair value due totheir short-term nature. The Company’s notes payable approximate fair value based upon current rates available to the Company for loans with similarmaturities. The convertible notes payable have fixed interest rates and conversion features which are based upon the conversion price specified in theagreements. Additionally, one of the convertible notes payable contains price anit-dilution features which are adjusted to fair value on a recurring basis. Long-Lived Assets The Company periodically assesses whether there has been permanent impairment of its long-lived assets held and used whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison ofthe carrying amount of the asset to future net undiscounted cash flows expected to be generated from the use and eventual disposition of the asset.Derivative Instruments and Hedging ActivitiesDerivatives are recognized as either assets or liabilities in the consolidated balance sheets and are measured at fair value. The treatment of gains and lossesresulting from changes in the fair values of derivative instruments is dependent on the use of the respective derivative instrument and whether they qualify forhedge accounting. As of March 31, 2013, no derivative instruments qualified for hedge accounting. See Note 8 for further discussion of derivativeinstruments. Discontinued Operations As discussed in Note 4, the assets and liabilities at March 31, 2012, related to International Labs, Inc. (“INL”), the company’s former packaging division,have been accounted for as discontinued operations. There are no operations related to INL in the accompanying consolidated financial statements. Revenue Recognition In accordance with our revenue recognition policy, revenue is recognized when title and risk of loss are transferred to the customer, the sales price to thecustomer is fixed and determinable, and collectability of the sales price is reasonably assured. Reported revenue is net of estimated customer returns and otherwholesaler fees. Our policy regarding sales to customers is that we do not recognize revenue from, or the cost of, such sales, where we believe the customer hasmore than a demonstrably reasonable level of inventory. We make this assessment based on historical demand, historical customer ordering patterns forpurchases, business considerations for customer purchases and estimated inventory levels. If our actual experience proves to be different than ourassumptions, we would then adjust such allowances accordingly. Stock-Based Compensation The Company accounts for stock-based compensation transactions in which the Company receives employee services in exchange for options to purchasecommon stock. Stock-based compensation cost for restricted stock units (“RSUs”) is measured based on the closing fair market value of the Company’scommon 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 ascalculated by the Black-Scholes option-pricing model. The Company recognizes stock-based compensation cost as expense ratably on a straight-line basis overthe requisite service period. Research and Development Research and development costs are expensed as incurred. Non-refundable advance payments for goods and services to be used in future research anddevelopment activities are recorded as an asset and are expensed when the research and development activities are performed. Legal Expense Legal fees are expensed as incurred and are included in selling, general and administrative expenses on the consolidated statements of operations. Income Taxes The Company accounts for income taxes under the deferred income tax method. Under this method, deferred income taxes are determined based on theestimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets and liabilities from year to year. In providing for deferred taxes, the Companyconsiders tax regulations of the jurisdictions in which they operate, estimates of future taxable income, and available tax planning strategies. If tax regulations,operating results or the ability to implement tax planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may berequired. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria. F-8 The Company accounts for uncertain tax positions in accordance with accounting guidance which requires the Company to recognize the financial statementbenefit of a tax position only after determining that the relevant tax authority would, more likely than not, sustain the position following an audit. For taxpositions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percentlikelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied the guidance to all tax positionsfor which the statue of limitations remained open. Upon implementation, the Company did not recognize any additional liabilities for unrecognized taxbenefits. Accordingly, the adoption of the guidance had no impact on the Company’s financial statements. There have been no material changes inunrecognized tax benefits since April 1, 2009. The Company is subject to income taxes in the United States Federal jurisdiction, California and Florida. The Company is no longer subject to the UnitedStates Federal, California or Florida income examinations by tax authorities for the years before the year ended March 31, 2009. The Company recognizesinterest and penalty accrued related to unrecognized tax benefits in its income tax expense, if any. No interest or penalties have been accrued for all presentedperiods. Net Loss Per Share The Company computes basic loss per share by dividing the loss attributable to holders of common stock for the period by the weighted average number ofshares of common stock outstanding during the period. Since the effect of common stock equivalents was anti-dilutive, all such equivalents were excludedfrom the calculation of weighted average shares outstanding. Outstanding warrants at March 31, 2013 and 2012 were 1,800,505 and 2,473,245, respectively.The outstanding options at March 31, 2013 and 2012 were 6,723,582 and 5,230,398, respectively. Outstanding restricted stock units at March 31, 2013and 2012 were 726,019 and 0, respectively. Reclassifications Certain reclassifications have been made to the March 31, 2012 financial statement presentation to correspond to the current year’s classification. Totalstockholders’ (deficit) and net loss are unchanged due to these reclassifications. NOTE 4: DISCONTINUED OPERATIONS Effective July 18, 2008, the Company’s former packaging division (INL) was sold for $2,654,000. On the closing date, $2,154,000 was paid to a lender toretire long-term debt. Additionally, $500,000 of the purchase price was held in escrow to secure any of the Company’s indemnification obligations. During2011 and 2012, the Company settled a total of $150,000 of the amount held for indemnification obligations. At March 31, 2013 and 2012, assets fromdiscontinued operations consisted of $0 and $130,000, respectfully. NOTE 5: CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to credit risk consist principally of cash and accounts payable. Cash The Company at times may have cash in excess of the Federal Deposit Insurance Corporation (“FDIC”) limit. The Company maintains its cash with largerfinancial institutions. The Company has not experienced losses on these accounts and management believes that the Company is not exposed to significantrisks on such accounts. Purchases and Accounts Payable The Company had balances greater than 10% of trade accounts payable at March 31, 2013 with three vendors. Vendor A had a balance that accounted for 23%of total accounts payables, Vendor B had a balance of 14% and Vendor C had a balance of 10% at March 31, 2013. Comparatively, the Company hadbalances greater than 10% of trade accounts payable at March 31, 2012 with three vendors. Vendor A had a balance that accounted for 26% of total accountspayables Vendor B had a balance of 13% and Vendor C had a balance of 11% at March 31, 2012. F-9 NOTE 6: PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets at March 31, 2013 and 2012: 2013 2012 Prepaid Insurance $4,000 $3,750 Prepaid Rent 10,827 10,827 Prepaid Consulting Fees 47,333 13,125 Other Current Assets 2,187 3,818 $64,347 $31,520 NOTE 7: NOTES PAYABLE Ben Franklin Note Biosyn (a wholly owned subsidiary of the Company and previously a wholly owned subsidiary of Cellegy) issued a note payable to Ben Franklin TechnologyCenter of Southeastern Pennsylvania (“Ben Franklin Note”) in October 1992, in connection with funding the development of Savvy, a compound then underdevelopment to prevent the transmission of HIV/AIDS.The Ben Franklin Note was recorded at its estimated fair value of $205,000 and was assumed by Cellegy as an obligation in connection with its acquisition ofBiosyn in 2004. The repayment terms of the non-interest bearing obligation include the remittance of an annual fixed percentage of 3.0% applied to futurerevenues of Biosyn, if any, until the principal balance of $777,902 (face amount) is satisfied. Under the terms of the obligation, revenues are defined toexclude the value of unrestricted research and development funding received by Biosyn from nonprofit sources. Absent a material breach of contract or otherevent of default, there is no obligation to repay the amounts in the absence of future Biosyn revenues. Cellegy accreted the discount of $572,902 againstearnings using the interest rate method (approximately 46%) over the discount period of five years, which was estimated in connection with the Ben FranklinNote’s valuation at the time of the acquisition. Accounting principles generally accepted in the United States emphasize market-based measurement through the use of valuation techniques that maximize theuse of observable or market-based inputs. The Ben Franklin Note’s peculiar repayment terms outlined above affects its comparability with main streammarket issues and also affects its transferability. The value of the Ben Franklin Note would also be impacted by the ability to estimate Biosyn’s expectedfuture revenues which in turn hinge largely upon future efforts to commercialize the product candidate, the results of which efforts are not known by theCompany. Given the above factors and therefore the lack of market comparability, the Ben Franklin Note would be valued based on Level 3 inputs. As such,management has determined that the Ben Franklin Note will have no future cash flows, as we do not believe the product will create a revenue stream in thefuture. As a result, the Note had no fair market value at the time of the merger between the Company and Cellegy (see Note 1). G-Max Trust Notes On December 29, 2009, the Company issued a Convertible Promissory Note (the “G-Max Note”) in the aggregate principal amount of $500,000 and 500,000shares of common stock to The G-Max Trust (the “Investor”) in connection with a private placement to the Investor for gross proceeds of $500,500. Themarket value of the common stock on the date issued was $0.25 per share, for a total value of $125,000. A discount on the note payable of $124,500 wasrecorded as a result, and was being amortized to interest expense over the term of the G-Max Note. The stock was restricted for six months from the dateissued. As of March 31, 2012, the net carrying amount was $0 and the net unamortized discount was $0. The interest recognized in the contractual interestcoupon was $0 and $12,638 for the years ended March 31, 2013 and 2012, respectively. Interest on the outstanding principal balance of the G-Max Note accrued at a rate of 10% per annum compounded monthly and was payable monthlycommencing February 1, 2010. All unpaid principal and interest on the G-Max Note was due and payable on June 30, 2011 (the “Maturity Date”). At any time on or before the Maturity Date, the Investor had the right to convert part or all of the principal and interest owed under the G-Max Note intocommon stock at a conversion price equal to $0.20 per share (subject to adjustment for stock dividends, stock splits, reverse stock splits, reclassifications orother similar events affecting the number of outstanding shares of common stock). The conversion feature is considered beneficial to the Investor due to thepurchase of the discounted shares. The estimated value of the beneficial conversion feature was $249,500. The entire amount was recorded as interest expenseupon issuance as the G-Max Note was convertible at any time. The effective annual interest rate of the G-Max Note was 84.8% after considering the discountand beneficial conversion feature. The G-Max Note was converted into 2,500,000 shares of common stock on June 30, 2011. F-10 On June 11, 2012, the Company issued a convertible promissory note in the aggregate principal amount of $500,000 and 500,000 shares of common stock toThe G-Max Trust, and received gross proceeds of $500,000, excluding transaction costs and expenses. Interest on the outstanding principal balance of the noteaccrued at a rate of 10% per annum compounded monthly and is payable monthly commencing July 1, 2012. All unpaid principal and interest on the note isdue and payable on April 1, 2013. At any time on or before the maturity date, the investor had the right to convert part or all of the principal and interest owedunder the note into common stock at a conversion price equal to $0.55 per share (subject to adjustment for stock dividends, stock splits, reverse stock splits,reclassifications or other similar events affecting the number of outstanding shares of common stock). The market value of the common stock on the dateissued was $0.74 per share, for a total value of $370,000. Debt issuance cost of $370,000 was recorded as a result, and was being amortized over the term ofthe G-Max Note. The stock is restricted for six months from the date issued. Amortization of the debt issuance cost, which is included in interest expense, was$370,000 for the year ended March 31, 2013, and the remaining unamortized balance was $0.The conversion feature of the G-Max Note was considered beneficial to the investor due to the conversion price for the convertible note being lower than themarket value of the common stock on the date the note was issued. The estimated value of the beneficial conversion feature was $172,727. The beneficialconversion feature was being amortized over the term of the G-Max Note. The effective annual interest rate of the G-Max Note was 111.50% after consideringthe debt issuance cost and the beneficial conversion feature.In January 2013, the G-Max Note and accrued interest payable of approximately $2,000 was converted at $.55 per share into 913,384 shares of commonstock. The entire value of the beneficial conversion feature was recorded as a charge to interest expense as a result.On October 25, 2012 the Company entered into a zero coupon secured promissory note with The G-Max Trust, evidencing a loan from G-Max to theCompany, and received gross proceeds of approximately $500,000. The note had a stated maturity date of six months after the date of the note, April 25,2013. At maturity, we agreed to repay G-Max the sum of $588,000. The note did not have a stated interest rate so long as we repaid the principal balance bythe maturity date and there was no other event of default. The note was also due and payable if we completed a financing transaction or series of transactionsafter the date of the note that result in proceeds to the Company of $2,000,000 or more. As additional consideration for the loan, we issued to G-Max 176,000shares of our common stock. Pursuant to the terms of a security agreement and a stock escrow agreement, we issued 700,000 shares of our common stock ascollateral for the timely repayment of the note, to be held by a third party escrow agent pursuant to the terms of the escrow agreement. When the loan wasrepaid, then the collateral shares were to be returned to the Company and cancelled. On December 31, 2012 the note was repaid and the shares held in escrowwere cancelled. Gemini Master Fund, Ltd. Notes The Company completed a private placement financing transaction (the “January 2010 Financing”) with a small number of institutional investors led byGemini Master Fund, Ltd., pursuant to a Securities Purchase Agreement. The Company issued 10% Senior Secured Convertible Notes (the “Notes”) in theaggregate principal amount of approximately $1.5 million and 1,500,000 shares of common stock of the Company, and received gross proceeds of $1.5million, excluding transaction costs and expenses. The fair market value of the Company’s common stock on the date of the transaction was $ 0.41 per share.A discount of approximately $600,000 was calculated as a result, and was being amortized to interest expense over the life of the Notes. The stock wasrestricted for six months from the date issued. As of March 31, 2012, the net carrying amount was $0 and the net amortized discount was $0. Interestrecognized on the contractual coupon was $0 and $11,724 for the years ended March 31, 2013 and 2012, respectively. Interest on the Notes was payable at a rate of 10% per annum and was payable monthly on the first business day of each month. Principal and any accruedand unpaid interest were due and payable on June 30, 2011. The Notes were convertible into shares of the Company’s common stock at any time at thediscretion of the investor at an initial conversion price per share of $0.20, subject to adjustment for stock splits, stock dividends and other similartransactions and subject to the terms of the Notes. The conversion price was also subject to price anti-dilution adjustments providing that if the Companyissues equity securities or securities convertible into equity securities at an effective price per share below the conversion price of the Notes (subject to certainexceptions), the conversion price of the Notes would be adjusted downward to equal the price of the new securities. The conversion feature was consideredbeneficial to the investors due to the purchase of the discounted shares. The estimated value of the beneficial conversion feature was approximately $2.2million. The entire amount was recorded as interest expense upon issuance since the Notes were convertible at any time. The effective interest rate of the Noteswas 210.4% after considering the discount and beneficial conversion feature. F-11 During April through June 2011, certain of the Gemini Note holders exercised their conversion feature to convert their Notes into shares of the Company’scommon stock. A total of 1,593,102 shares were issued in the conversion of notes with a total converted amount of $318,620, including interest. On June 30,2011, the three remaining Gemini note holders accepted payment of the principal amounts owed. The amount of the Notes paid and retired was $345,000.On April 2, 2012, the Company completed the closing of a private placement financing transaction with Gemini Master Fund, Ltd. pursuant to a securitiespurchase agreement. The Company issued a 10% Senior Convertible Note (the “Gemini Note”) in the aggregate principal amount of $1.0 million and 1,000,000shares of our common stock, and received gross proceeds of $1.0 million, excluding transaction costs and expenses. Interest on the Gemini Note is payable ata rate of 10% per annum and is payable on the maturity date of the Gemini Note. Principal and accrued and unpaid interest is due and payable nine monthsafter the date of the Gemini Note. The Gemini Note is convertible into shares of common stock at any time at the discretion of the investor at an initialconversion price per share of $0.25, subject to adjustment for stock splits, stock dividends and other similar transactions and subject to the terms of theGemini Note. The conversion price is also subject to price anti-dilution adjustments providing that with the exception of certain excluded categories ofissuances and transactions, if we issue equity securities or securities convertible into equity securities at an effective price per share less than the conversionprice of the Gemini Note, the conversion price of the Gemini Note will be adjusted downward to equal the per share price of the new securities. The Companybifurcated the conversion option derivative from the debt. See Note 8. Our obligations under the Gemini Note and the other transaction agreements areguaranteed by our principal subsidiaries, including Adamis Corporation, Adamis Laboratories, Inc. and Adamis Viral, Inc. The market value of the commonstock issued on April 2, 2012 was $0.25 per share, aggregated $250,000. Debt issuance cost of $250,000 was recorded as a result and amortized over theterm of the Gemini Note, and is included in interest expense. The stock was restricted for six months from the date issued. Debt issuance costs have beenfully amortized as of March 31, 2013.During the quarter ended December 31, 2012, the Gemini Note and accrued interest payable of approximately $73,000 was converted at $.25 per share into4,293,370 shares of common stock. Concurrent with the conversion, the Company settled the related derivative and conversion feature liabilities which had atotal fair value of $1,840,000. The fair value of the derivative and conversion feature liabilities on the day prior to conversion was determined using theintrinsic value. This resulted in an increase to the derivative and conversion feature liabilities of $354,800. On December 31, 2012, the balance of the adjustedfair value of the derivative and conversion feature liabilities totaling $1,840,000 was reclassified to additional paid in capital. For further details on theconversion feature see Note 8. The effective annual interest of the Gemini Note was 46.1% after considering the debt issuance cost and the conversion feature.On June 11, 2012, the Company completed the closing of a private placement financing transaction with Gemini. The Company issued a 10% SeniorConvertible Note in the aggregate principal amount of $500,000 (“Gemini Note II”) and 500,000 shares of common stock, and received gross proceeds of$500,000, excluding transaction costs and expenses. The maturity date was originally nine months after the date of the note, but was extended to July 11, 2013on the original maturity date. The other material terms and conditions are similar to the Gemini Note described above, except that the initial conversion priceper share is $0.55. The market value of the common stock on the date issued was $0.74 per share, for a total value of $370,000. Debt issuance cost of$370,000 was recorded as a result, and was amortized over the term of the Gemini Note II, and is included in interest expense. The stock was restricted for sixmonths from the date issued. For further details on the conversion feature see Note 8. Debt issuance costs have been fully amortized as of March 31, 2013. AtMarch 31, 2013, the net carrying value of the Gemini Note II was $500,000. The effective annual interest rate of the Gemini Note II is 22.5% after consideringthe debt issuance cost and the beneficial conversion feature.Convertible Promissory NoteOn December 31, 2012, the Company issued a convertible promissory note in the principal amount of $600,000 and 600,000 shares of common stock to aprivate investor, and received gross proceeds of $600,000, excluding transaction costs and expenses. Interest on the outstanding principal balance of the noteaccrues at a rate of 10% per annum compounded monthly and is payable monthly commencing February 1, 2013. All unpaid principal and interest on the noteis due and payable on September 30, 2013. At any time on or before the maturity date, the investor has the right to convert part or all of the principal andinterest owed under the note into common stock at a conversion price equal to $0.55 per share (subject to adjustment for stock dividends, stock splits, reversestock splits, reclassifications or other similar events affecting the number of outstanding shares of common stock). The market value of the common stock onthe date issued was $0.71 per share, for a total value of $426,000. Debt issuance cost of $426,000 was recorded as a result, and is being amortized over theterm of the note. The stock is restricted for six months from the date issued. Amortization of the debt issuance cost, which is included in interest expense, was$139,418 for the year ended March 31, 2013, and the remaining unamortized balance at March 31, 2013 was $286,582. F-12 The conversion feature of the note is considered beneficial to the investor due to the conversion price for the convertible note being lower than the market valueof the common stock on the date the note was issued. The estimated value of the beneficial conversion feature was $174,545. The beneficial conversion featureis being amortized over the term of the note. This resulted in a charge to interest expense of $57,542 for the year ended March 31, 2013. At March 31, 2013,the net carrying value of the note was $482,997.The effective annual interest rate of the note is 107% after considering the debt issuance cost and the beneficial conversion feature. Notes Payable On November 30, 2010, the Company entered into a note payable with a drug wholesaler related to sales returns in the amount of $132,741. The note bearsinterest at the prime rate, plus 2% (5.25% at March 31, 2013), and originally required monthly payments of $10,000. The note is currently due on demand.The outstanding balance on this note at March 31, 2013 and 2012 was $22,441 and $75,242, respectively. On May 1, 2011, the Company entered into a non-interest bearing note payable with a drug wholesaler related to sales returns in the amount of $147,866. Thenote required monthly payments of $10,000 with a final payment of $7,866 due on July 15, 2012. The note is currently due on demand and now bearsinterest at 12% per annum. The outstanding balance on this note at March 31, 2013 and 2012 was $94,463 and $120,366, respectively. Notes Payable to Related Parties The Company had notes payable to a related party reflecting loans by related parties to the Company, amounting to $97,122 and $105,632 at March 31,2013 and 2012, respectively, which bear interest at 10%. Accrued interest, which is included in accrued expenses, in the consolidated balance sheet, related tothe notes was $72,655 and $63,934 at March 31, 2013 and 2012, respectively. On various dates during the twelve months ended March 31, 2013 and 2012, and included in the amounts above, the Company issued promissory notes tothe related party reflecting loans by a related party to the Company, for a total of $15,890 and $14,400, respectively, that bear interest at 10% with allprincipal and interest due on various maturity dates, originally. The principal amount repaid during fiscal 2013 and 2012 was $24,400 and $10,000,respectively. Interest continues to accrue on the unpaid principal balances. NOTE 8: DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTSAccounting Standards Codification (ASC) 815 - Derivatives and Hedging provides guidance to determine what types of instruments, or embedded features inan instrument, are considered derivatives. This guidance can affect the accounting for convertible instruments that contain provisions to protect holders from adecline in the stock price, or down-round provisions. Down-round provisions reduce the exercise price of a convertible instrument if a company either issuesequity shares for a price that is lower than the exercise price of those instruments, or issues new convertible instruments that have a lower exercise price. Wehave determined that the conversion feature with the down-round provision on the Gemini notes should be treated as a derivative liability. The Company isrequired to report the conversion feature liability and the derivative liability resulting from the down-round provision at fair value and record the fluctuation ofthe fair value in current operations.The Company recognizes the derivative liabilities at their respective fair values at inception and on each reporting date. The Company values its financialassets and liabilities on a recurring basis and certain nonfinancial assets and nonfinancial liabilities on a nonrecurring basis based on the price that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increaseconsistency and comparability in fair value measurements, a fair value hierarchy that prioritizes observable and unobservable inputs is used to measure fairvalue into three broad levels, which are described below: Level 1:Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. Thefair 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 inactivemarkets; or model-derived valuations in which all significant inputs are observable or can be derived principally from orcorroborated 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 toLevel 3 inputs. F-13 In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputsto the extent possible as well as considers counterparty credit risk in its assessment of fair value.The Company recognizes the derivative liabilities at their respective fair values at inception and on each reporting date. The Company utilized a binomialoption pricing model (BOPM) to develop its assumptions for determining the fair value of the conversion and anti-dilution features of the Gemini note. Keyassumptions at March 31, 2013 for the June 11, 2012 note include a volatility factor of 92.1%, a discount rate of 1, a dividend yield of 0%, expected life of.28 years and a risk free interest rate of .07%.The Company estimated the original fair values of the embedded conversion and anti-dilution features of the Gemini Note dated April 2, 2012 note to be$287,600 and $58,800, respectively. The loss on the convertible feature liability is $1,397,291 and the loss on the derivative liability is $96,309. Asdisclosed in Note 7, the note was converted to common stock during the quarter ended December 31, 2012.The Company estimated the original fair values of the embedded conversion and anti-dilution features of the Gemini Note II dated June 11, 2012 note to be$169,455 and $23,909, respectfully. The gain on the convertible feature liability is $7,000 and the loss on the derivative liability is $26,636 for the yearended March 31, 2013. The carrying value of the conversion feature at March 31, 2013 is $162,456 and the carrying value of the anti-dilution feature for thesame date is $50,545.The derivative liabilities and conversion feature liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair valuesincludes various assumptions about future activities and stock price and historical volatility as inputs. Significant unobservable inputs for the derivative and conversion feature liabilities include the estimated probability of the occurrence of a down-roundfinancing during the term over which the related debt is convertible and the estimated magnitude of the down-round. These estimates which are unobservablein the market were utilized to value the anti-dilution features of the convertible debt as of March 31, 2013. The table below provides a reconciliation of beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs(Level 3). Derivative Liability Convertible FeatureLiability Total Balance, April 1, 2012 $— — — Fair Value at Issuance 82,709 457,055 539,764 Net Change in Fair Value 122,945 1,390,292 1,513,237 Conversion of Debt (155,109) (1,684,891) (1,840,000)Balance, March 31, 2013 $50,545 $162,456 $213,001 NOTE 9: LEGAL MATTERS In addition to the matters described below, we may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in theordinary course of business, which in our opinion will not have a material adverse effect on our financial condition, cash flows or results of operations. Cosmo Bioscience, Inc. et. al. v. Adamis Pharmaceuticals Corp. and Maurizio ZanettiCosmo Bioscience, Inc. et. al. v. Adamis Pharmaceuticals Corp. and Maurizio Zanetti was filed in San Diego Superior Court in May 2010. Plaintiffs wereaffiliated Cosmo Bioscience entities who claimed to have sublicensed certain patented technology from Eurogen BV, an entity wholly owned and controlled byMaurizio Zanetti. Plaintiffs claimed that Dr. Zanetti wrongfully terminated their license, and further that Dr. Zanetti improperly licensed the same technology toAdamis in violation of plaintiffs’ exclusive sublicense agreement. Plaintiffs asserted a single claim for declaratory relief seeking a declaration that the Cosmosublicense was in full force and effect, and that the Adamis license is invalid. On February 21, 2013, the Court resolved the motion in Adamis’ favor anddismissed the action with prejudice, thereby precluding the plaintiffs from bringing the suit again. F-14 Curtis Leahy, et. al. v. Dennis J. Carlo, et al.In May 2010, Curtis Leahy, et. al. v. Dennis J. Carlo, et al. was filed in San Diego Superior Court. The plaintiffs – Antaeus Capital Partners, Curtis Leahy,and David Amron – are Adamis shareholders. The defendants named in the Complaint are Adamis, Dennis Carlo, David Marguglio, Robert Hopkins, andRichard Aloi, who are (or, in the case of Mr. Aloi, were) officers and/or directors of Adamis. Plaintiffs assert claims for violations of Section 25401, 25501,and 25504 of the California Corporations Code, and claims for common law fraud and negligent misrepresentation based on the allegations that defendantsmisrepresented and omitted material information in private placement memoranda distributed by Adamis in 2006 and 2008 regarding, among other things,Adamis’ license rights with respect to certain patented anti-viral technology.On May 27, 2011, plaintiffs filed a motion for class certification seeking to certify a putative class of shareholders who purchased stock pursuant to either orboth of Adamis’ 2006 and 2008 private placement memoranda. On June 28, 2011, the court issued an order denying the plaintiffs’ motion for classcertification on the grounds that (1) plaintiffs failed to meet their burden to show that there are common issues of fact to certify the class and (2) the individualplaintiffs were not adequate class representatives. Plaintiffs have appealed the court’s order denying class certification. The Company filed a motion forsummary judgment on March 28, 2012. In June 2013, the Company and plaintiffs have entered into preliminary settlement negotiations. The litigation fees and costs have been submitted to our insurance carrier who has agreed to pay the fees and costs pursuant to the terms of our insurancepolicy, subject to a reservation of rights letter. 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 manycounts 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 2010and to the Company’s knowledge is serving his sentence in prison. More than three years before the date of this Report on Form 10-K, the bankruptcy trusteeof Agape contacted Adamis by telephone, asserting that Agape World paid $1 million to Adamis for 2 million shares of common stock of Adamis, but that thestock was issued not to Agape World but instead to Mr. Cosmo, a principal of Agape World, and claiming that this constituted a fraudulent transfer. TheCompany believes that the trustee has recovered the stock from the principal. The Company responded to the trustee denying any fraudulent transfer or anyother 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 anyaction has been filed against Adamis. Management believes that the trustee has no basis for any fraudulent transfer or other claims against Adamis. Due to thelimited 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 in this section could divert management time and attention from Adamis, could involve significant amounts of legal fees and other feesand expenses. An adverse outcome in any such litigation could have a material adverse effect on Adamis. NOTE 10: LICENSING AGREEMENTS On July 28, 2006, the Company entered into a nonexclusive, royalty free license agreement with an entity for the technology used to research and develop newviral therapies, and an exclusive royalty-bearing license requiring a small percentage of revenue received by the Company on future products developed andsold with a payment cap of $10,000,000. The Company paid the entity an initial license fee and granted one of the entity’s officers the right to purchase1,000,000 shares of common stock of the Company at price of $0.001 pursuant to a separate stock purchase agreement. The Company also granted the entitya royalty-free non-exclusive license to use any improvements made on the existing technology for research purposes only. The Company and the entity have theright to sublicense with written permission of each party. In the event that the entity sublicenses or sells the improved technology to a third party, then a portionof the total payments, to be decided by mutual agreement, will be due to the Company. The Company is obligated to make the following milestone payments to the entity based on commencement of various clinical trials and submissions of anapplication to the FDA for regulatory approval: Amount Date due$50,000 Within 30 days of commencement of Phase I/II clinical trial. 50,000 Within 30 days of commencement of a separate Phase II trial as required by the FDA. 300,000 Within 30 days of commencement of a Phase III trial. 500,000 Within 30 days of submission of a biological license application or a new drug application with the FDA. F-15 Total milestone payments are not to exceed $900,000 and can only be paid one time and will not repeat for subsequent products. At March 31, 2013 and 2012,no milestones have been achieved. The agreement will remain in effect as long as the patent rights remain in effect. Adamis has the right to terminate the agreement if it is determined that noviable product can come from the technology. Adamis would be required to transfer and assign all filings, rights and other information in its control iftermination occurs. Adamis 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 within90 days of notice of the breach. On September 22, 2006, the Company entered into an agreement with an entity to manufacture an influenza vaccine for the Company. The agreement requiresthe Company to pay $70,000 upon commencement of the project, followed by monthly payments based upon services performed until the project is complete.No product has been manufactured and no payments have been made as of March 31, 2013. Once the project begins, the total payments will aggregate$283,420. The project has an open ended start time. Adamis may terminate the agreement upon notice to the other party, other than reimbursing the other partyfor non-cancellable materials and supplies ordered, and work in progress, through the date of the termination. On February 24, 2010, the Company entered into an agreement with Colby Pharmaceutical Company (“Colby”) to acquire three separate exclusive licenseagreements, covering three small molecule anti-inflammatory compounds, named APC-100, APC-200 and APC-300, for the potential treatment of humanprostate cancer, or PCa, in exchange for shares of the Company’s common stock. Colby licensed the patents, patent applications and related intellectualproperty relating to the compounds pursuant to license agreements with a third party (“WARF”). Pursuant to the agreement as amended, on February 25,2010, the Company was assigned and transferred the license agreement relating to the APC-300 compound in consideration of the issuance of 800,000 shares ofcommon stock to Colby. The transfer of the license agreements relating to APC-100 and APC-200 occurred at a subsequent closing, pursuant to an amendmentto the original agreement. Under the amendment, Colby assigned and transferred to the Company the license agreements relating to APC-100 and APC-200 inconsideration for the issuance to Colby of 5,000,000 shares of the Company’s common stock. Additionally, the Company issued 1,250,000 shares to each oftwo parties related to Colby, for consulting services rendered to the Company in connection with the intellectual property covered by the license agreements.Under the agreements, with respect to sublicenses granted by the Company, the Company is to pay WARF according to the following schedule: 1.Forty percent (40%) of amounts received under each agreement entered into before an Investigational New Drug (“IND”) application is filed by theCompany with the Federal Drug Administration (“FDA”) for a Product made a subject of the sublicense. 2.Thirty percent (30%) of amounts received under each agreement entered into after the filing of an IND under item (1) above until completion of aPhase 1 clinical trial by the Company for that Product. 3.Twenty-five percent (25%) of amounts received under each agreement entered into after completion of item (2) above until completion of a Phase IIclinical trial by the Company for that Product. 4.Twenty percent (20%) of amounts received under each agreement entered into after completion of item (3) above until a New Drug Application(“NDA”) has been approved by the FDA for that Product. 5.Ten percent (10%) of amounts received under each agreement entered into after the NDA has been approved by the FDA for that Product. Milestone Payments are outlined below: 1.$25,000 upon the filing of the first IND or comparable regulatory filing for a human therapeutic Product. 2.$150,000 upon the enrollment of its first patient under a Phase II clinical trial for the first human therapeutic Product. F-16 3.$200,000 upon the enrollment of its first patient under a Phase III clinical trial for the first human therapeutic Product. 4.$250,000 for the first NDA or comparable regulatory approval for a human therapeutic Product. These milestone payments occur only once for each of the compounds On April 18, 2011, the Company entered into an agreement with The Regents of the University of California (University) and the Dana-Farber CancerInstitute, Inc. (DFCI) to acquire the Telomerase Reverse Transcriptase as Antigen for Immunization in Cancer. The term of the agreement expires with the lastexpiration of the last patent covered by the license.Under the agreement, with respect to sublicenses granted by the Company, the Company is to pay the University and DFCI according to the followingschedule:1. A license issue fee of $10,000, within thirty (30) days after the effective date.2. License maintenance fees of $10,000 per year and payable on the first through third anniversary of theeffective date and $20,000 annuallythereafter on each anniversary until commercially selling a licensedproduct.3. Milestone payments in the amounts payable according to the following schedule or events:(i) $25,000 upon dosing of 50% of the patients expected to be enrolled for a Phase I clinical trial for the first indication (if such a trialis needed) of a licensed product;(ii) $25,000 upon the filing of an IND for the second indication of a licensed product;(iii) $100,000 upon dosing of the first patient and $150,000 upon dosing of the 40th patient in a Phase II clinical trial for the firstindication of a licensed product; (iv) $250,000 upon dosing of the first patient for a Phase II clinical trial for the second indication of a licensed product;(v) $600,000 upon dosing of the first patient for a Phase III clinical trial for the first indication of a licensed product;(vi) $600,000 upon dosing of the first patient for a Phase III clinical trial for the second indication of a licensed product;(vii) $1,000,000 upon receipt of US regulatory approval for each indication of a licensed product.4.An earned royalty of two percent (2%) on net sales of licensed products as defined in the agreement.In addition, the Company will reimburse the University and DFCI for past and future patent costs as outlined in the agreement.During the years ended March 31, 2013 and 2012, the Company paid license fees and reimbursed patent defense costs related to this agreement ofapproximately $7,900 and $46,200, respectively. NOTE 11:COMMITMENTS AND CONTINGENCIES In addition to the matters described in Note 9, the Company may become involved in or subject to, routine litigation, claims, disputes, proceedings andinvestigations in the ordinary course of business, which in our opinion will not have a material adverse effect on our financial condition, cash flows or resultsof operations. Office Lease In April 2011, the Company leased approximately 2,400 square feet of office space in San Diego, California. The term of the lease is three years. The rent forthe remaining 10 months is $55,283. There are no options to extend the lease term. Total rent expense was $64,948 and $71,050 for the years ended March31, 2013 and 2012, respectively. NOTE 12:CAPITAL STRUCTURE The Company is authorized to issue 200,000,000 shares of common stock and 10,000,000 shares of preferred stock with a par value of $0.0001 per share.On November 10, 2010, the Company completed a private placement transaction (the “Financing”) pursuant to a Common Stock Purchase Agreement (the“Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”). The Purchase Agreement provided for the sale of up to40,000,000 shares of common stock of Adamis to a foreign institutional investor (the “Purchaser”), at a price of $0.25 per share, for up to $10 million ofgross proceeds. An initial closing was held on November 10, 2010 pursuant to which the Company received $5,000,000 in gross proceeds and issued20,000,000 shares of common stock. Proceeds have been reduced by $36,664 for fees incurred related to the private placement transaction. During the first fiscal quarter ending June 30, 2011, certain holders of the Gemini Notes exercised their conversion feature to convert their notes into shares ofthe Company’s common stock. A total of 1,593,101 shares were issued in the conversion of notes and accrued interest with a total converted amount of$318,619. On June 30, 2011, the holder of the G-Max Note converted the entire $500,000 principal amount of the note into 2,500,000 shares of common stock at theconversion price stated in the note. On June 30, 2011, the Purchaser received 2,200,000 shares of common stock at $0.25 per share in connection with the Financing, for cash proceeds totaling$550,000. Effective July 21, 2011, the Purchaser received an additional 2,200,000 shares of common stock at $0.25 per share in connection with the secondcash payment of $550,000 pursuant to the amendment to the Purchase Agreement. On August 1, 2011, the Company entered into a consulting agreement with a consultant to assist the Company in the evaluation of potential product andtechnology candidates and related product financing structures and arrangements, and the development of the Company’s general business plan. Ascompensation, the Company issued 250,000 shares of its common stock, with a value of $60,000. The value was capitalized and was amortized over the five-month term of the agreement. On November 10, 2011, the Company issued 2,800,000 shares of common stock to the Purchaser under the second amendment to the Purchase Agreement forcash proceeds totaling $700,000. On January 31, 2012, the Purchaser received 1,500,000 shares of common stock at $0.25 per share in connection with the Financing, for cash proceedstotaling $375,000. Effective February 13, 2012, the Purchaser received an additional 499,680 shares of common stock at $0.25 per share in connection withthe second cash payment of $124,920. On February 29, 2012, the Purchaser received 800,640 shares of common stock at $0.25 per share in connection withthe Financing, for cash proceeds totaling $200,160 pursuant to the third amendment to the Purchase Agreement. On April 2, 2012, the Company issued 1,000,000 shares of common stock to Gemini as part of the $1,000,000 Gemini Note transaction as described in Note7 above. F-17 On June 11, 2012, the Company issued 500,000 shares of common stock to G-Max as part of the $500,000 note transaction described in Note 7 above.On June 11, 2012, the Company issued 500,000 shares of common stock to Gemini as part of the $500,000 note transaction described in Note 7 above.On October 25, 2012, the Company issued 176,000 shares of common stock to G-Max as part of the $588,000 note transaction described in Note 7 above.During the quarter ended December 31, 2012, Gemini converted its April 2012 note into common stock, and the Company issued 4,293,370 shares inconversion of the $1,000,000 principal and interest of $73,343.On December 28, 2012, the Company issued 100,000 shares of common stock to a consultant for services to be provided through December 2013.On December 31, 2012, the Company issued 600,000 shares of common stock to a private investor as part of the $600,000 note transaction as described inNote 7 above.On January 18, 2013, G-Max converted its June 2012 note into common stock, and the Company issued 913,384 shares in conversion of the $500,000principal and interest of $2,361.During the year ended March 31, 2013, the Company issued 411,473 shares of common stock to warrant holders for various strike prices ranging from $0.20to $0.30. The exercised warrants were cashless conversions. NOTE 13:STOCK OPTION PLANS, SHARES RESERVED AND WARRANTS The Company has a 2009 Equity Incentive Plan (the “2009 Plan”). The 2009 Plan provides for the grant of incentive stock options, non-statutory stockoptions, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, and other forms of equity compensation(collectively “stock awards”). In addition, the 2009 Plan provides for the grant of performance cash awards. The initial aggregate number of shares ofcommon stock that may be issued initially pursuant to stock awards under the 2009 Plan was 7,000,000 shares. The number of shares of common stockreserved for issuance automatically increase on January 1 of each calendar year, from January 1, 2010 through and including January 1, 2019, by the lesserof (a) 5.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year or (b) a lesser number of shares ofcommon stock determined by the Company’s board of directors before the start of a calendar year for which an increase applies. On January 1, 2013 and2012, the number of shares reserved for this issuance increased by 5,175,731 and 4,656,698 respectively, aggregating to 23,239,344 at March 31, 2013.On August 20, 2010 the Company granted 3,150,398 options to a number of its employees to purchase the Company’s common stock. The stock optionshave an exercise price of $0.27 per share, which was equal to the fair market value of the Company’s common stock on the date of the grant. 2,525,000 of thestock options vest over a period of three years from the date of the grant, and expire on the 10th anniversary of the grant date of the option and 625,398 of thestock options immediately vest. The Company estimated that the stock options have a fair market value of $0.12 per share using the Black-Scholes valuationmodel. Management’s assumptions included in the model were volatility of 31.675%, a risk-free interest rate of 2.6% based on the 10-year Treasury Rate atthe date of the grant and no dividends. The Company estimated a forfeiture rate of 0%. The Company recorded stock based compensation expense of$125,465 and a reduction of accrued expenses of $1,068,786 related to such stock options for the year-ended March 31, 2011. Stock based compensationexpense related to these options was $101,000 for each of the years ended March 31, 2013 and 2012. On January 12, 2011, the Company added a board member, who was granted a stock option by the Company to purchase up to 50,000 shares of commonstock. The stock option has an exercise price of $0.21 per share, which was equal to the fair market value of the Company’s common stock on the date of thegrant. The stock option vests over a period of three years from the date of the grant, and expire on the 10th anniversary of the grant date of the option. TheCompany estimated that the stock option has a fair market value of $0.10 per share using the Black-Scholes valuation model. Management’s assumptionsincluded in the model were volatility of 30.865%, a risk-free interest rate of 3.4% based on the 10-year Treasury Rate at the date of the grant and no dividends.The Company estimated a forfeiture rate of 0%. The Company recorded stock based compensation expense of $832 related to such stock options for each ofthe years ended March 31, 2013 and 2012. F-18 On February 10, 2011, the Company added two board members, who were granted stock options by the Company to purchase up to 100,000 shares ofcommon stock. The stock options have an exercise price of $0.20 per share, which was equal to the fair market value of the Company’s common stock on thedate of the grant. The stock options vest over a period of three years from the date of the grant, and expire on the 10th anniversary of the grant date of theoptions. The Company estimated that the stock options have a fair market value of $0.10 per share using the Black-Scholes valuation model. Management’sassumptions included in the model were volatility of 30.865%, a risk-free interest rate of 3.7% based on the 10-year Treasury Rate at the date of the grant andno dividends. The Company estimated a forfeiture rate of 0%. The Company recorded stock based compensation expense of $1,668 related to such stockoptions for each of the years ended March 31, 2013 and 2012.On July 11, 2011, the Company entered into a consulting agreement with a consultant to assist the Company in researching its markets and analyzing itsopportunities. As part of the compensation, the consultant received a warrant to purchase 300,000 shares of common stock, with an exercise price of $0.22 anda term of five years. The value of the warrants was $21,000.On September 12, 2011, the Company issued options to purchase 1,575,000 shares of common stock to directors, officers and employees of the Companyunder the 2009 Equity Incentive Plan with an exercise price of $0.19 per share. One-third of the options vest immediately, and the options become exercisablewith respect to the remaining shares over a period of two years. These options were valued using the Black-Scholes option pricing model during the quarterended September 30, 2011; the expected volatility was approximately 31% and the risk-free interest rate was approximately 2%, which resulted in a calculatedfair value of $126,000. The Company recorded stock based compensation expense of $42,000 and $66,500 for the years ended March 31, 2013 and 2012,respectively.On September 13, 2011, the Company issued options to purchase 105,000 shares of common stock to the independent directors of the Company under the2009 Equity Incentive Plan with an exercise price of $0.18 per share. The options become exercisable with respect to 1/36 of the shares monthly over a periodof three years. These options were valued using the Black-Scholes option pricing model during the quarter ended September 30, 2011; the expected volatilitywas approximately 31% and the risk-free interest rate was approximately 2%, which resulted in a calculated fair value of $8,400. The Company recordedstock based compensation expense of $2,800 and $1,633 for the years ended March 31, 2013 and 2012, respectively.On October 11, 2012, the Company issued options to purchase 105,000 shares of common stock to the independent directors of the Company under the 2009Equity Incentive Plan with an exercise price of $0.75 per share. The options become exercisable with respect to 1/36 of the shares monthly over a period ofthree years. These options were valued using the Black-Scholes option pricing model during the quarter ended December 31, 2012; the expected volatility wasapproximately 29% and the risk-free interest rate was approximately 2%, which resulted in a calculated fair value of $32,550. The Company recorded stockbased compensation expense of $5,424 for the year ended March 31, 2013.On March 6, 2013, the Company issued options to purchase 1,388,184 shares of common stock to directors, officers and employees of the Company underthe 2009 Equity Incentive Plan with an exercise price of $0.67 per share. The options vest monthly in equal amounts over 36 months. These options werevalued using the Black-Scholes option pricing model during the quarter ended March 31, 2013; the expected volatility was approximately 29% and the risk-free interest rate was approximately 2%, which resulted in a calculated fair value of $388,691. The Company recorded stock based compensation expense of$10,783 for the year ended March 31, 2013. The following summarizes the stock option activity for the years ended March 31, 2013 and 2012 below: 2009 EquityIncentivePlan WeightedAverageExercisePrice WeightedAverageRemainingContractLife Non-PlanStockOptions WeightedAverageExercisePrice WeightedAverageRemainingContractLifeBalance as of April 1, 20113,550,398 $0.26 9.34 years 100,714 $41.27 2.61 yearsOptions Granted1,680,000 $0.19 9.24 years — —Options Exercised— — — —Options Canceled— — — — Balance as of March 31, 20125,230,398 $0.24 8.69 years 100,714 $41.27 1.60 years Options Granted1,493,184 $0.68 9.91 years — —Options Exercised— — — —Options Canceled— — — — Balance as of March 31, 20136,723,582 $0.34 8.18 years 100,714 $41.27 0.60 years Exercisable at March 31, 20134,653,437 $0.25 7.69 years 100,714 $41.27 0.60 years F-19 The Company has reserved shares of common stock for issuance upon exercise at March 31, 2013 as follows: Warrants 1,800,505 Non-Plan Stock Options 100,714 2009 Equity Incentive Plan 23,239,344 Total Shares Reserved 25,140,563 The weighted-average grant-date fair value of stock options granted during the years ended March 31, 2013 and 2012 was approximately $1,021,000 and$317,000, respectively. At March 31, 2013 and 2012, there was approximately $479,000 and $222,000, respectively, of unrecognized compensation costs related to non-vested optionawards. The expense is expected to be recognized over a weighted average period of 2.88 years. The expiration date of the Old Adamis Warrants was extended three years to November 15, 2015. The following summarizes warrants outstanding at March31, 2013: Warrant Shares Exercise Price PerShare Date Issued ExpirationDate Biosyn Warrants 4,105 $57.97 - $173.92 October 22, 2004 January 4, 2014 Investor Warrants 275,000 $0.30 September 15, 2010 September 15, 2015 Old Adamis Warrants 1,000,000 $0.50 November 15, 2007 November 15, 2015 Consultant Warrants 221,400 $0.20 January 29, 2010 January 25, 2015 Consultant Warrants 300,000 $0.22 July 11, 2011 July 11, 2016 Total Warrants 1,800,505 During the year 4,140 Biosyn warrants expired. The strike price of the warrants were between $67.83 and $57.97.On March 6, 2013, the Company issued restricted stock units (RSU's) of 726,019 shares of common stock to directors, officers and employees of theCompany under the 2009 Equity Incentive Plan. The value of the award per share is $0.67. A portion of the award vests on the first anniversary date ofissuance with the remaining vesting monthly in equal amounts over 36 months. The fair value of RSU's are $486,433. At March 31, 2013 none of the RSUswere vested and unrecognized compensation expense will be recognized over a weighted average period of approximately one year. NOTE 14: INCOME TAXES At March 31, 2013, the Company had net operating loss carry forwards of approximately $128 million and $56 million for federal and state purposes,respectively. The net operating loss carry forwards expire through the year 2031. At March 31, 2013, the Company also had research and development creditcarry forwards of approximately $2.8 million and $200,000 for federal and state purposes, respectively. The federal credits expire through the year 2027 andthe state credits expire through the year 2019. The Tax Reform Act of 1986 (the “Act) provides for a limitation on the annual use of net operating loss andresearch and development tax credit carry forwards following certain ownership changes that could that could limit the Company’s ability to utilize these carryforwards. The Company most likely has experienced various ownership changes, as defined by the Act, as a result of past financings. Accordingly, theCompany’s ability to utilize the aforementioned carry forwards may be limited. Cellegy’s merger with Adamis as described in Note 1, may also impact theability for the Company to utilize certain of its net operating loss carry forwards. Additionally, U.S. tax laws limit the time during which these carry forwardsmay be applied against future taxes, therefore, the Company may not be able to take full advantage of these carry forwards for federal income tax purposes.The Company determined that the net operating loss carry forwards relating to Cellegy and Biosyn are limited due to the acquisitions, in 2009 and 2004 andhas reflected the estimated amount of usable net operating loss carry forwards in its deferred tax assets below. F-20 The benefit for income taxes from continuing operations consists of the following for the years ended March 31, 2013 and 2012: 2013 2012 Current $— $— Deferred (2,707.000) 1,212,000 Total (2,707.000) 1,212,000 Change in Valuation Allowance 2,707,000 (1,212,000) Tax Benefit, net $— $— At March 31, 2013 and 2012 the significant components of the deferred tax assets from continuing operations are summarized below: 2013 2012 Net Operating Loss Carry forwards $43,458,000 $40,945,000 Deferred Tax Assets 579,000 385,000 Net Deferred Tax Assets 44,037,000 41,330,000 Less Valuation Allowance (44,037,000) (41,330,000) Net Deferred Tax Assets $— $— Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities.In addition to net operating loss carry forwards, differences are primarily attributable to stock compensation expense, depreciation of assets, and accruals. We have determined at March 31, 2013 and 2012 that a full valuation allowance would be required against all of our operating loss carry forwards anddeferred tax assets that we do not expect to be utilized by deferred tax liabilities. The following table reconciles our losses from continuing operations before income taxes for the years ended March 31, 2013 and 2012. 2013 2012 Net (Loss) $(7,195,000) $(4,915,000) Permanent Differences: Non-Cash Interest — 1,000 Meals and Entertainment 2,000 4,000 $(7,193,000) $(4,910,000) Federal Statutory Rate 34.00% $(2,446,000) $(1,671,000)State Income Tax, net of Federal Tax 3.63% (261,000) (178,000) Permanent Differences 37.63% — 3,060,000 Change in Valuation Allowance 2,707,000 (1,211,000) Expected Tax Benefit $— $— NOTE 15:SUBSEQUENT EVENTSOn April 5, 2013, the Company issued convertible promissory notes in the principal amount of $575,000 to private investors, and received gross proceeds of$575,000, excluding transaction costs and expenses. Interest on the outstanding principal balance of the note accrues at a rate of 12% per annum compoundedmonthly. All principal and interest on the note is due and payable on October 5, 2013. At any time on or before the maturity date, the investor has the right toconvert part or all of the principal and interest owed under the note into common stock at a conversion price equal to $0.50 per share (subject to adjustment forstock dividends, stock splits, reverse stock splits, reclassifications or other similar events affecting the number of outstanding shares of commonstock). The conversion price is also subject to price anti-dilution adjustments. On June 28, 2013, the investors exercised their conversion features to convert aportion of the notes into shares of the Company's common stock. A total of 208,000 shares were issued in the conversion of $104,000 of principal. Thebalance of the notes was paid from the net proceeds of the June 2013 private placement transaction described below. F-21 On May 30, 2013, the Company issued common stock upon exercise of an employee stock option. The employee utilized a cashless conversion of 94,442options with a strike price of $0.19 and received 68,054 shares of common stock. On June 21, 2013 the Company converted a warrant for a total of 145,800 shares. The strike prices was $.20 and the warrant was exercised by means of acashless conversion with a value of $94,770. On June 26, 2013, we completed a private placement financing transaction pursuant to which we issued the Secured Notes and common stock purchasewarrants to purchase up to 13,004,316 shares of common stock, to a small number of institutional investors and received gross cash proceeds of $5,300,000,excluding transactions costs, fees and expenses. The Secured Notes have an aggregate principal amount of $6,502,158, including $613,271 of principalamount resulting in the exchange of an outstanding convertible note for the Secured Notes and warrants. The maturity date of the Secured Notes is December26, 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 shareof $0.50, subject to adjustment for stock splits, stock dividends and other similar transactions, and to possible price anti-dilution adjustments. Ourobligations under the Secured Notes and the other transaction agreements are guaranteed by our principal subsidiaries, and are secured by a security interest insubstantially all of our assets and those of the subsidiaries, pursuant to a Security Agreement. The common stock purchase warrants have a term of five yearsand have an excercise price of $0.715 per share, subject to adjustment. F-22Adamis Pharmaceuticals Corporation 10-KExhbit 3.3 CERTIFICATE OF AMENDMENTTO THE AMENDED AND RESTATEDCERTIFICATE OF INCORPORATIONOFADAMIS PHARMACEUTICALS CORPORATIONAdamis Pharmaceuticals Corporation, a corporation organized under and existing under the laws of the State of Delaware (the “Corporation”),certifies that:FIRST: The name of the Corporation is Adamis Pharmaceuticals Corporation.SECOND: The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the Delaware GeneralCorporation Law, adopted resolutions to amend Article IV, Paragraph A, of the Amended and Restated Certificate of Incorporation of the Corporation to read inits entirety as follows:“A. The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “PreferredStock”. The total number of shares of all classes of capital stock which the Company shall have authority to issue is two hundred ten million(210,000,000), of which two hundred million (200,000,000) shares shall be Common Stock, having a par value of $0.0001 per share (the “CommonStock”), and ten million (10,000,000) shares shall be Preferred Stock, having a par value of $0.0001 per share (the “Preferred Stock”).”THIRD: This Certificate of Amendment to the Amended and Restated Certificate of Incorporation was submitted to the stockholders of theCorporation and was duly approved by the required vote of stockholders of the Corporation in accordance with Sections 222 and 242 of the Delaware GeneralCorporation Law.IN WITNESS WHEREOF, said Certificate of Amendment to the Restated Certificate of Incorporation has been duly executed by its authorized officeron this 29th day of October, 2012. ADAMIS PHARMACEUTICALS CORPORATION By: /s/ Dennis J. Carlo Dennis J. Carlo, Ph.D. Chief Executive OfficerAdamis Pharmaceuticals, Corporation 10-KEXHIBIT 21.1SUBSIDIARIES OF ADAMIS PHARMACEUTCALS CORPORATION.Name State of Incorporation Biosyn, Inc. PennsylvaniaAdamis Corporation DelawareAdamis Laboratories, Inc. DelawareAdamis Viral Therapies, Inc. DelawareAdamis Pharmaceutical Corporation 10-K EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM As independent registered public accountants, we hereby consent to the incorporation by reference in the following registration statements of ourreport dated July 3, 2013, included in Adamis Pharmaceutical Corporation's Form 10-K for the year ended March 31, 2013. * Registration statement on Form S-8, SEC file number 333-159229, as filed with the Securities and Exchange Commission on May 19, 2009, * Registration statement on Form S-8, SEC file number 333-169106, as filed with the Securities and Exchange Commission on August 30, 2010. * Registration statement on Form S-8, SEC file number 333-175383, as filed with the Securities and Exchange Commission on July 7, 2011. /s/ Mayer Hoffman McCann P.C. MAYER HOFFMAN MCCANN PC Certified Public Accountants Boca Raton, Florida July 3, 2013 Adamis Pharmaceuticals, Corporation 10-KExhibit 31.1CERTIFICATION PURSUANT TO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002 I, Dennis J. Carlo, certify that: 1.I have reviewed this annual report on Form 10-K of Adamis Pharmaceuticals Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annualreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and (15d-15(e)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting disclosure to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial data; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:July 3, 2013 By:/s/ Dennis J. Carlo Chief Executive Officer Adamis Pharmaceuticals, Corporation 10-KExhibit 31.2CERTIFICATION PURSUANT TO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002 I, Robert O. Hopkins, certify that: 1.I have reviewed this annual report on Form 10-K of Adamis Pharmaceuticals Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annualreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and (15d-15(e)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting disclosure to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial data; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:July 3, 2013 By:/s/ Robert O. Hopkins Vice President, Finance and Chief Financial OfficerAdamis Pharmaceuticals, Corporation 10-KEXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT The undersigned, Dennis J. Carlo, the Chief Executive Officer of Adamis Pharmaceuticals Corporation (the “Company”), pursuant to 18 U.S.C. 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certifies that, to the best of my knowledge: (1) the Company’s Annual Report on Form 10-K for the year ended March 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a)of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ DENNIS J. CARLO Dennis J. Carlo Chief Executive Officer Dated: July 3, 2013 This certification is being furnished to the SEC with this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.Adamis Pharmaceuticals, Corporation 10-KEXHIBIT 32.2 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT The undersigned, Robert O. Hopkins, as Vice President, Finance and Chief Financial Officer of Adamis Pharmaceuticals, Corporation (the “Company”),pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certifies that, to the best of my knowledge: (1) the Company’s Annual Report on Form 10-K for the year ended March 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a)of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ ROBERT O. HOPKINS Robert O. Hopkins Vice President and Chief Financial Officer Dated: July 3, 2013 This certification is being furnished to the SEC with this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

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