Investor Alert

Nov. 22, 2021, 5:18 p.m. EST


(EDGAR Online via COMTEX) -- ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Information Relating to Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report") includes forward-looking statements. Such statements are not historical facts, but are based on our current expectations, estimates and beliefs about our business and industry. Such forward-looking statements may include, without limitation, statements about our strategies, objectives and our future achievements; our expectations for growth; estimates of future revenue; our sources and uses of cash; our liquidity needs; our current or planned clinical trials or research and development activities; anticipated completion dates for clinical trials; product development timelines; anticipated dates for commercial introduction of products; our future products; regulatory matters; our expectations concerning the timing of regulatory actions relating to our products and product candidates; anticipated dates for meetings with regulatory authorities and submissions to obtain required regulatory marketing approvals; expense, profit, cash flow, or balance sheet items or any other guidance regarding future periods; the impact of broad-based business or economic disruptions, including relating to the COVID-19 pandemic, on our ongoing business and prospects; our expectations concerning the outcome of proceedings discussed in this Report under Item 1 of Part II of this Report under the caption "Legal Proceedings"; and other statements concerning our future operations and activities. Such forward-looking statements include those that express plans, anticipation, intent, contingencies, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events, and they are subject to risks and uncertainties, known and unknown, that could cause actual results and developments to differ materially from those expressed or implied in such statements. In some cases, you can identify forward-looking statements by terminology, such as "believe," "will," "expect," "may," "anticipate," "estimate," "intend," "plan," "should," and "would," or the negative of such terms or other similar expressions. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this Report. These forward-looking statements are not guarantees of future performance and concern matters that could subsequently differ materially from those described in the forward-looking statements. Actual events or results may differ materially from those discussed in this Report. In addition, many forward-looking statements concerning our anticipated future business activities assume that we have or are able to obtain sufficient funding to support such activities and continue our operations and planned activities. As discussed elsewhere in this Report, we may require additional funding to continue operations, and there are no assurances that such funding will be available. Failure to timely obtain required funding would adversely affect and could delay or prevent our ability to realize the results contemplated by such forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Because factors referred to elsewhere in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2020 (sometimes referred to as the "2020 Form 10-K") that we previously filed with the Securities and Exchange Commission, including without limitation the "Risk Factors" section in this Report and in the 2020 Form 10-K, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-looking statements or to reflect events or circumstances arising after the date of this Report. Important risks and factors that could cause actual results to differ materially from those in these forward-looking statements are disclosed in this Report including, without limitation, under the headings "Part II, Item 1A. Risk Factors," and "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," and in our 2020 Form 10-K, including, without limitation, under the headings "Part I, Item 1A. Risk Factors," "Part I, Item 1. Business," and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as in our subsequent filings with the Securities and Exchange Commission, press releases and other communications.

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

Investors and others should note that we may announce material information to our investors using our website ( www.adamispharmaceuticals.com ), SEC filings, press releases, public conference calls and webcasts, as well as social media and blogs. We use these channels as a means of disclosing material non-public information and making disclosures pursuant to Regulation FD, and to communicate with our members and the public about our company. It is possible that the information we post on our website or social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on our website social media channels and blogs listed on our investor relations website.


Company Overview

Adamis Pharmaceuticals Corporation ("we," "us," "our," "Adamis" or the "company") is a specialty biopharmaceutical company focused on developing and commercializing products in various therapeutic areas, including allergy, opioid overdose, respiratory and inflammatory disease. Our products and product candidates in the allergy, respiratory, and opioid overdose markets include:

Our US Compounding Inc. subsidiary, or USC, which we acquired in April 2016 and which is registered as a human drug compounding outsourcing facility under

SYMJEPI (epinephrine) Injection

On June 15, 2017, the FDA approved our SYMJEPI (epinephrine) Injection 0.3mg product for the emergency treatment of allergic reactions (Type I) including anaphylaxis. SYMJEPI (epinephrine) Injection 0.3mg is intended to deliver a dose of epinephrine, which is used for emergency, immediate administration in acute anaphylactic reactions to insect stings or bites, allergic reaction to certain foods, drugs and other allergens, as well as idiopathic or exercise-induced anaphylaxis for patients weighing 66 pounds or more. On September 27, 2018, the FDA approved our lower dose SYMJEPI (epinephrine) Injection 0.15mg product, for the emergency treatment of allergic reactions (Type I) including anaphylaxis in patients weighing 33 to 66 pounds.

In July 2018, we entered into a Distribution and Commercialization Agreement, or the Sandoz Agreement, with Sandoz Inc., or Sandoz, to commercialize both of our SYMJEPI products. In January 2019, we announced that Sandoz had launched SYMJEPI (epinephrine) 0.3 mg Injection in the U.S. market, initially available in the institutional setting. On July 9, 2019, we announced the full launch (institutional and retail) by Sandoz of both dose forms of the SYMJEPI injection products.

On May 11, 2020, we announced that we entered into an agreement, or the Termination Agreement, with Sandoz to terminate the Sandoz Agreement and simultaneously announced that we entered into an exclusive distribution and commercialization agreement, or the USWM Agreement, with USWM, LLC, or USWM or US WorldMeds, for the United States commercial rights for the SYMJEPI products, as well as for our ZIMHI product. Under the terms of the USWM Agreement, we appointed USWM as the exclusive distributor of SYMJEPI in the United States and related territories, or the Territory, effective upon the termination of the Sandoz Agreement, and of the ZIMHI product if approved by the FDA for marketing, and granted USWM an exclusive license under our patent and other intellectual property rights and know-how to market, sell, and otherwise commercialize and distribute the products in the Territory, in partial consideration of an initial payment of $1,000,000 by USWM and potential additional regulatory and commercial based milestone payments. There can be no assurances that any of these milestones will be met or that any milestone payments will be paid to us. We retain rights to the intellectual property subject to the USWM Agreement and to commercialize both products outside of the Territory. In addition, we may continue to use the licensed intellectual property (excluding certain of the licensed trademarks) to develop and commercialize other products (with certain exceptions), including products that utilize our Symject(TM) syringe product platform.

The USWM Agreement provides that, after deducting the supply price and subject to certain other deductions and adjustments, including an allocation for USWM sales and distribution expenses from net sales of the products, USWM will pay to us 50% of the net profit from net sales, as each such term is defined in the USWM Agreement, of the product in the Territory to third parties, determined on a quarterly basis. We will be the supplier of the products to USWM, and USWM will order and pay us a supply price for quantities of products ordered. The agreement does not include minimum payments to us by USWM, minimum requirements for sales of product by USWM or, with certain exceptions, minimum purchase commitments by USWM.

ZIMHI (naloxone) Injection

Naloxone is an opioid antagonist used to treat narcotic overdoses. Naloxone, which is generally considered the drug of choice for immediate administration for opioid overdose, blocks or reverses the effects of the opioid, including extreme drowsiness, slowed breathing, or loss of consciousness. Common opioids include morphine, heroin, tramadol, oxycodone, hydrocodone and fentanyl.

On December 31, 2018, we filed an NDA with the FDA relating to our higher dose naloxone injection product, ZIMHI, for the treatment of opioid overdose. On November 22, 2019, we received a Complete Response Letter, or CRL, from the FDA regarding our NDA for ZIMHI. A CRL is issued by the FDA's Center for Drug Evaluation and Research when it has completed its review of a file and questions remain that preclude the approval of the NDA in its current form. The CRL stated that the FDA determined that it could not approve the NDA in its present form and provided recommendations needed for resubmission. In December 2019, we provided responses to the FDA to the comments included in the CRL and subsequently held a Type A meeting with the FDA to discuss the company's response to the CRL and the process and timeline for resubmission of the NDA to the FDA. On May 15, 2020, we resubmitted to the FDA the NDA for ZIMHI. On November 13, 2020, we received a second CRL from the FDA regarding the resubmitted NDA. We submitted responses to the deficiencies identified in the CRL and held a Type A meeting with the FDA to discuss the CRL and the company's responses, and on May 13, 2021, we resubmitted the NDA for ZIMHI to the FDA. On October 18, 2021, we issued a press release announcing that the FDA had approved ZIMHI for the treatment of opioid overdose. The company's commercial partner USWM has indicated that it is preparing for a commercial launch of ZIMHI anticipated to be in the first quarter of 2022.

Tempol (APC400)

On June 12, 2020, we entered into a license agreement with Matrix Biomed, Inc., or the Licensor, to license rights under patents, patent applications and related know-how of Licensor relating to Tempol, an investigational drug. The exclusive license includes the worldwide use under the licensed patent rights and related rights of Tempol for the fields of COVID-19 infection, asthma, respiratory syncytial virus infection, and influenza infection. In addition, the exclusive license includes the use of Tempol as a therapeutic for reducing radiation-induced dermatitis in patients undergoing treatment for cancer. In consideration for the Licensor providing the rights under its patent rights and related know-how relating to Tempol within the licensed fields, we paid Licensor $250,000 and also issued to the Licensor 1,000,000 shares of our Series B Convertible Preferred Stock, which had been converted into an equal number of shares of our common stock.

Tempol is a redox cycling nitroxide that promotes the metabolism of many reactive oxygen species and improves nitric oxide bioavailability. It has been studied extensively in animal models of oxidative stress and inflammation. Overall, Tempol acts as both a super-oxide dismutase mimetic and also has demonstrated anti-inflammatory, anticoagulant activity and antiviral activity. Inflammation and oxidative stress occur in various disease states including COVID-19. Both inflammatory cytokines and reactive oxygen species (ROS) from cells of the immune system called macrophages and neutrophils damage the lung in Acute Respiratory Distress Syndrome (ARDS). Many published articles describing animal models of ARDS show Tempol caused a decrease in lung inflammation and preserved lung pathology associated with acute and chronic lung injury. In animal models, Tempol has been shown to decrease proinflammatory cytokines (cytokine storm), and through its antioxidant activity has been shown to decrease the harmful effects of ROS. In addition, Tempol has been shown to decrease platelet aggregation, a problem observed in many COVID-19 patients. More recently, Tempol has been shown to have antiviral activity against the virus that causes COVID-19 in-vitro and may have synergy with the antiviral Remdesivir.

In July 2020, we submitted to the FDA a pre-IND package which provided a protocol for a Phase 2/3 study examining Tempol in COVID-19 patients, and the FDA provided comments regarding the prospective use of Tempol in a randomized placebo controlled trial. In January 2021, we submitted an IND to the FDA for the investigational use of Tempol for the treatment of COVID-19. On February 22, 2021, we announced that the FDA notified the company that the agency had completed the safety review of the IND and concluded that the company may proceed with the proposed clinical investigation and trial described in the IND. The goal of the study titled, "A Phase 2/3, Adaptive, Randomized, Double-Blind, Placebo-Controlled Study to Examine the Effects of Tempol (MBM-02) on Preventing COVID-19 Related Hospitalization in Subjects with COVID-19 Infection," is to examine the safety and activity of Tempol in COVID-19 patients early in the infection. In addition to safety, the study will examine markers of inflammation and the rate of hospitalization for patients taking Tempol versus placebo early in COVID-19 infection. On June 11, 2021, we announced that clinical trial start-up activities were underway, that the company was carrying out those activities with a large clinical research organization, that commenced activities included site identification and initiation, data base production, vendor management, and the establishment of an independent data safety monitoring board of infectious disease experts, who will review the safety and efficacy of the trial, and that clinical trial drug product and placebo have also been obtained. On September 2, 2021, we announced the initiation of patient dosing in the trial. Our trial requires individuals with moderate COVID-19 symptoms to be unvaccinated and have co-morbidities such as heart disease, as those patients typically have worse outcomes, requiring hospitalization. We have experienced enrollment challenges primarily as a result of the decrease in COVID-19 infections and increased immunizations in the United States. To mitigate this challenge, we are in the process of undertaking the steps required to open new sites across the U.S., and enrollment rates may also be affected by any increase in COVID-19 during this coming winter. New site activation requires multiple steps and can take many weeks to complete. In addition, we intend to consider sites outside of the United States in geographic locations where vaccination rates are lower, and COVID19 rates are higher. Absent unexpected developments, the company intends to announce the interim analysis of interim results for the clinical trial after 50 eligible subjects have completed day 21of the trial protocol and the appropriate analysis has been performed and reviewed by the Data Safety Monitoring Board (DSMB).

On January 28, 2021, we announced that in collaboration with the Human Immune Monitoring Center at Stanford University we conducted a study to investigate the effects of Tempol on immune cells from COVID-19 patients, and that preliminary data from that study showed that Tempol decreased cytokines from stimulated cells from COVID-19 patients. On August 24, 2021, we announced that an article reporting on the study and study results was published in the peer reviewed journal Clinical Immunology. In March 2021, we announced that in studies conducted at Galveston National Laboratory, University of Texas Medical Branch, hamsters challenged with the virus that causes COVID-19 (SARS-CoV-2) showed decreased inflammation in the lungs when treated with Tempol compared to controls. We intend to continue to explore the availability of government and/or non-government funding to help support study the efficacy of Tempol as a therapeutic treatment for COVID-19. We also continue to explore options regarding the funding and design of a clinical study to examine the effects of Tempol for other clinical indications including, but not limited to, the treatment of methamphetamine use disorder, and are engaged in additional activities intended to support an IND to begin such a study.

US Compounding, Inc. Agreement

On July 30, 2021, the Company and its wholly-owned USC subsidiary entered into an Asset Purchase Agreement (the "USC Agreement") effective as of July 30, 2021 (the "Effective Date") with Fagron Compounding Services, LLC d/b/a Fagron Sterile Services (the "Purchaser"), providing for the sale and transfer by USC and the purchase by the Purchaser, effective as of the Effective Date, of certain assets of USC related to its human compounding pharmaceutical business (the "Business"), including certain customer information and information on products sold to such customers by USC (together, the "Book of Business"), including related formulations, know-how, and expertise regarding the compounding of pharmaceutical preparations, clinical support knowledge and other data and certain other information relating to the customers and products (collectively, the "Assets"). After the Effective Date, Purchaser may use the Book of Business to secure customers for its products and services and may otherwise use the Book of Business. Pursuant to the USC Agreement, the Purchaser will not assume any liabilities of USC, and the transaction did not include the sale or transfer of any USC equipment, buildings or real property, or any products, information, agreements, relationships or other assets relating to the veterinary business of USC.

The USC Agreement provides that the consideration payable by the Purchaser to the Company for the Assets sold and transferred will consist of the following amounts: (i) a payment of $107,500 on the Effective Date; and (ii) monthly payments in an amount equal to (a) two (2.0) times the amount actually collected by Purchaser or its affiliates for sales of products or services made to certain identified customers included in the Book of Business during the 12-month period following the Effective Date (the "Payment Term"), and (b) a lower multiple of the amount actually collected by Purchaser or its affiliates for sales of products or services made to certain other customers included in the Book of Business. In addition, to the extent that such product or service is supplied by USC pursuant to the supply arrangement provided for by the USC Agreement (the "Supply Agreement"), the Purchaser agreed to reimburse USC for the cost of such product or service, as set forth in the Supply Agreement. The USC Agreement provides that during the Payment Term, the Purchaser will maintain the Book of Business and use commercially reasonable efforts to maximize the consideration payable to the Company and collect amounts outstanding related to sales of products or services made to customers included in the Book of Business. However, the USC Agreement does not provide for any minimum purchase price consideration to the Company or USC. Accordingly, there is no assurance as to the amount of purchase price consideration that the Company or USC may ultimately receive as a result of the transactions contemplated by the USC Agreement. Certain of the customers included in the Book of Business may decide to not purchase products or to reduce their purchases of products from Purchaser after the Effective Date, and Purchaser may, in good faith, decide not to change its product mix from those products offered by Purchaser as of the Effective Date and may decide not to carry all of the products offered and sold by USC as part of the Business prior to the Effective Date.

The USC Agreement includes certain restrictive covenants of the Company and USC, including noncompetition provisions, pursuant to which, for a period of five years from the Effective Date (the "Restricted Period") and subject to certain exceptions, the Company and USC have agreed, among other matters, not to solicit any Business from any customers included in the Book of Business or engage in certain other activities. Each of the USC Agreement and the Supply Agreement includes standard indemnification provisions, and a number of other covenants and agreements of the parties concerning the transactions contemplated by the USC Agreement and the Supply Agreement, including concerning cooperation and assistance, confidentiality, non-disparagement and the transfer of information and documents, compliance with laws, and personnel matters. The USC Agreement includes indemnification provisions pursuant to which the Company and USC agreed to indemnify the Purchaser and certain related parties against losses incurred by such indemnified parties arising or resulting from certain matters including breach of the USC Agreement by USC and third party claims relating to product sales to customers by USC before the Effective Date. In connection with the transaction, the Company accrued a $700,000 liability for a transaction fee payable to a financial advisor of $700,000 as of September 30, 2021.

Plan for the Remaining Operations, Business and Assets of USC

In light of a number of factors including the sale of assets to the Purchaser pursuant to the USC Agreement, the Board approved a restructuring process of winding down the remaining operations and business of USC and selling, transferring or disposing of the remaining assets of USC. The restructuring and winding down includes, without limitation, the termination of USC's veterinary business and USC sales to veterinary customers; the termination of employment of all or substantially all employees engaged in the USC business (except as determined to be necessary or appropriate in connection with the Company's and USC's performance of their obligations under the USC Agreement and the transactions contemplated thereby, or in connection with resolving matters relating to the winding down of USC's business), and providing such notices and making such payments to such employees as the officers of the Company determine are necessary or appropriate, including as maybe required by law or as maybe provided for pursuant to any retention agreement, severance agreement, incentive agreement, or other written agreement with such employees; the sale or other disposition from time to time of the remaining equipment, real property, buildings and tangible and intangible assets relating to USC's business that are unrelated to the USC Agreement; the termination, assignment or other resolution of agreements with third parties relating to the USC business; making regulatory filings and taking appropriate actions with federal and state regulatory authorities in connection with the winding down and winding up of USC's business; and taking such other actions as the officers of the Company or USC (as appropriate) determine are necessary or appropriate in connection with the restructuring and the winding down and winding up of the remaining business, operations and assets of USC. In August 2021, the company and USC entered into an asset purchase agreement with a third party buyer providing for the sale and transfer by USC of certain customer information and other assets related to USC's veterinary compounded pharmaceuticals business, in consideration for the payment to the company by the buyer of a percentage of amounts actually collected by the buyer on sales of certain veterinary products to veterinary customers covered by the agreement over the five year period after the date of the agreement.

Going Concern and Management's Plan

The financial statements included elsewhere herein for the six months ended June . . .

Nov 22, 2021


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