STOCK OPTION PLANS, SHARES RESERVED AND WARRANTS

12 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK OPTION PLANS, SHARES RESERVED AND WARRANTS

NOTE 14: 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 stock options, 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 of common stock that may be issued initially pursuant to stock awards under the 2009 Plan was 411,765 shares. The number of shares of common stock reserved for issuance automatically increase on January 1 of each calendar year, from January 1, 2010 through and including January 1, 2019, by the lesser of (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 of common stock determined by the Company’s board of directors before the start of a calendar year for which an increase applies. On January 1, 2014 and 2013, the number of shares reserved for this issuance increased by 495,599 and 304,455 respectively, aggregating to 1,862,620 at March 31, 2014.

On October 11, 2012, the Company issued options to purchase 6,176 shares of common stock to the independent directors of the Company under the 2009 Equity Incentive Plan with an exercise price of $12.75 per share. The options become exercisable with respect to 1/36 of the shares monthly over a period of three years. These options were valued using the Black-Scholes option pricing model during the quarter ended December 31, 2012; the expected volatility was approximately 29% and the risk-free interest rate was approximately 2%, which resulted in a calculated fair value of $32,550.

On March 6, 2013, the Company issued options to purchase 81,658 shares of common stock to directors, officers and employees of the Company under the 2009 Equity Incentive Plan with an exercise price of $11.39 per share. The options vest monthly in equal amounts over 36 months. These options were valued 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.

During the year ended March 31, 2014, 327 options were cancelled due to expiration. The options had an exercise price of $3.23.

On July 31, 2013, the Company issued a stock option to a new employee under the Company’s equity incentive plan to purchase up to 8,823 shares of common stock. The option has a ten-year term. The exercise price of the option is $8.67 per share. The option was valued using a Black Scholes model; the expected volatility was approximately 28% and the risk-free interest rate was approximately 2%. The calculated fair value of the options was $73,500.

On October 16, 2013, in connection with the Company’s annual meeting of stockholders, the Company issued stock options to the non-employee directors under the Company’s equity incentive plan to purchase up to 6,177 shares of common stock. The options have a ten-year term. The exercise price of the options is $6.12 per share. The options were valued using a Black Scholes model; the expected volatility was approximately 28% and the risk-free interest rate was approximately 1%. The calculated fair value of the options was $36,750.

During the year ended March 31, 2014, 5,924 non-plan stock options were cancelled due to expiration. The warrants had exercise prices ranging from $487.82 - $843.97.

The following summarizes the stock option activity for the years ended March 31, 2014 and 2013 below:

	2009 Equity Incentive Plan			Weighted Average Exercise Price		Weighted Average Remaining Contract Life		Non-Plan Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contract Life
Balance as of April 1, 2012		307,670		$	4.08		8.69 years		5,924		$	701.59		1.60 years
Options Granted		87,834		$	11.56		9.91 years		—					—
Options Exercised		—					—		—					—
Options Canceled		—					—		—					—
Balance as of March 31, 2013		395,504		$	5.78		8.18 years		5,924		$	701.59		0.60 years
Options Granted		15,000		$	7.62		9.19 years		—					—
Options Exercised		(5,555	)		3.23		—		—					—
Options Canceled		(327	)		3.23		—		(5,924	)		701.59		—
Balance as of March 31, 2014		404,622		$	5.83		7.26 years		—		$	—		—
Exercisable at March 31, 2014		336,398		$	2.40		8.72 years		—		$	—		—

Stock based compensation expense for the years ended March 31, 2014 and 2013 were $236,944 and $164,507, respectively.

The Company has reserved shares of common stock for issuance upon exercise at March 31, 2014 as follows:

Warrants	1,127,698
2009 Equity Incentive Plan	1,862,620
Total Shares Reserved	2,990,318

Effective June 26, 2013, the Company issued warrants to purchase up to 764,960 shares of common stock to the holders of the Secured Notes. The warrants have a five-year term. The exercise price of the warrants, as adjusted, is $5.95 per share. The warrants were valued using a binomial option pricing model. The calculated fair value of the warrants was $1,781,592.

Effective June 26, 2013, the Company issued warrants to purchase up to 49,673 shares of common stock to the private placements agents involved in the June 26, 2013 private placement transaction. The exercise price of the warrants is $12.16 per share. The warrants were valued using the Black-Scholes option pricing model; the expected volatility was approximately 32% and the risk-free interest rate was approximately 1%, which resulted in a calculated fair value of $152,000.

Effective June 26, 2013, the Company issued a warrant to purchase 22,058 shares of common stock to the holder of the Company’s convertible promissory note dated December 31, 2012, in connection with the June 26, 2013 private placement transaction. The warrant has a five-year term. The exercise price of the warrant is $12.16 per share. The warrant was valued using the Black-Scholes option pricing model; the expected volatility was approximately 32% and the risk-free interest rate was approximately 1%, which resulted in a calculated fair value of $67,500.

Effective December 18, 2013, the Company issued warrants to purchase up to 186,000 shares of common stock to the underwriters involved in the underwritten public offering. The exercise price of the warrants is $7.44 per share. The warrants were valued using the Black-Scholes option pricing model; the expected volatility was approximately 25% and the risk-free interest rate was approximately 2%, which resulted in a calculated fair value of $399,900.

Effective January 16, 2014, the Company issued warrants to purchase up to 27,900 shares of common stock to the underwriters involved in underwritten public offering. The exercise price of the warrants is $7.44 per share. The warrants were valued using the Black-Scholes option pricing model; the expected volatility was approximately 25% and the risk-free interest rate was approximately 2%, which resulted in a calculated fair value of $39,618.

 The expiration date of the Old Adamis Warrants was extended three years to November 15, 2015. The following table summarizes warrants outstanding at March 31, 2014:

	Warrant Shares		Exercise Price Per Share		Date Issued	Expiration Date
Old Adamis Warrants		58,824	$	8.50	November 15, 2007	November 15, 2015
Consultant Warrants		635	$	3.40	January 29, 2010	January 25, 2015
Consultant Warrants		17,647	$	3.74	July 11, 2011	July 11, 2016
2013 Private Placement		836,692	$	5.95-12.16	June 26, 2013	June 25, 2018
Underwriter Warrants		186,000	$	7.44	December 12, 2013	December 12, 2018
Underwriter Warrants		27,900	$	7.44	January 16, 2014	January 16, 2019
Total Warrants		1,127,698

During the year ended March 31, 2014, 13,477 warrants expired. The strike price of the warrants were between $5.10 and $2,956.65.

On March 6, 2013, the Company issued restricted stock units (RSUs) of 42,707 shares of common stock to directors, officers and employees of the Company under the 2009 Equity Incentive Plan. The value of the award per share is $11.39. A portion of the award vests on the first anniversary date of issuance with the remaining vesting monthly in equal amounts over 36 months. The fair value of RSUs is $486,433. On March 6, 2014, 31,532 RSUs vested and were issued as common stock. The Company recorded compensation expense of $359,149 and $0 for the years ended March 31, 2014 and 2013, respectively. Unrecognized compensation expense related to these RSUs was $127,284, and will be recorded as compensation expense over the next two years.