NOTE 15:

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 November 3, 2014, the number of shares reserved for this issuance increased by 1,000,000, aggregating to 2,862,620 at December 31, 2014. On January 1, 2015, pursuant to the provisions of the 2009 Plan, 532,597 shares were added to the shares reserved for issuance pursuant to awards under the 2009 Plan (see Note 18).

On April 1, 2014, the Company issued options to purchase 86,300 shares of common stock to officers and employees of the Company under the 2009 Equity Incentive Plan with an exercise price of $6.32 per share. The options were granted as a discretionary bonus for performance during the year ended March 31, 2014 and vested immediately. These options were valued using the Black-Scholes option pricing model, the expected volatility was approximately 28% and the risk-free interest rate was approximately 3%, which resulted in a calculated fair value of $239,051 which was accrued as compensation during the year ended March 31, 2014.

On April 1, 2014, the Company issued options to purchase 283,800 shares of common stock to officers and employees of the Company under the 2009 Equity Incentive Plan with an exercise price of $6.32 per share. These options were valued using a Black Scholes model; the expected volatility was approximately 28% and the risk-free interest rate was approximately 3%. The calculated fair value of the options was $786,126 as of date of grant.

From August 25, 2014 to September 29, 2014, the Company issued options to purchase 215,036 shares of common stock to directors, officers and employees of the Company under the 2009 Equity Incentive Plan with exercise prices ranging from $4.04 to $4.71 per share. These options were valued using a Black Scholes model; the expected volatility was approximately 104% and the risk-free interest rate was approximately 2%. The calculated fair value of the options was $795,643 as of date of grant.

On September 18, 2014 and September 22, 2014, the Company issued options to purchase 100,000 and 20,000 shares of common stock to consultants of the Company under the 2009 Equity Incentive Plan with exercise prices of $4.80 and $4.78 per share. These options were valued using a Black Scholes model; the expected volatility was approximately 104% and the risk-free interest rate was approximately 2%. The calculated fair value of the options was $466,400 as of date of grant.

From October 6, 2014 to December 15, 2014, the Company issued options to purchase 230,000 shares of common stock to directors and employees of the Company under the 2009 Equity Incentive Plan with exercise prices ranging from $4.00 to $5.12 per share. These options were valued using a Black Scholes model; the expected volatility was approximately 100% and the risk-free interest rate was approximately 2%. The calculated fair value of the options was $796,500 as of date of grant.

In December 2014, 100,000 options issued on September 18, 2014 were cancelled because these options shall not be exercisable with respect to any shares until the date, if any, the option holder becomes a full-time employee of the Company and the management had made a determination not to hire the option holder on a full-time basis. The options had an exercise price of $4.80 and a calculated fair value of $389,000 as of date of grant.

The following summarizes the stock option activity for the transition period ended December 31, 2014 and fiscal year ended March 31, 2014 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, 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			—		$	—		—

Options Granted		935,100			5.29	9.35 years			—			—		—
Options Exercised		—			—		—		—			—		—
Options Canceled		(100,000	)		4.80		—		—			—		—

Balance as of December 31, 2014		1,239,722		$	5.46	8.42 years			—		$	—		—

Exercisable at December 31, 2014		558,117		$	5.47	7.15 years			—		$	—		—

Stock based compensation expense for the transition period ended December 31, 2014 and fiscal year ended March 31, 2014 were $625,518 and $596,093, respectively. The fiscal year ended March 31, 2014 stock based compensation consisted of $236,944 in stock options expense and $359,149 in common stock issued for employee stock award. Moreover, during the fiscal year ended March 31, 2014 the Company accrued $239,051 for the stock bonuses awarded on March 31, 2014. As of December 31, 2014, unrecognized compensation expense related to these stock options was approximately $2.2 million and will be recorded as compensation expense over the next three years.

The aggregate intrinsic value (the difference between the Company’s closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) of 1,239,722 and 404,622 stock options outstanding at December 31, 2014 and March 31, 2014 was approximately $1.4 million and approximately $685,000, respectively. The aggregate intrinsic value of 558,117 and 336,398 stock options exercisable at December 31, 2014 and March 31, 2014 was approximately $683,000 and $681,000, respectively.

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

Warrants			2,401,049
2009 Equity Incentive Plan			2,862,620
Total Shares Reserved			5,263,669

On August 19, 2014, the Company issued warrants to purchase 1,418,439 shares of common stock to a small number of related funds. The warrants were part of the offering to issue Series A Convertible Preferred Stock (see Note 4). The exercise price of the warrants is $3.40 per share, and the warrants are exercisable for five years from the issuance date.

The expiration date of the Old Adamis Warrants was extended three years to November 15, 2015. The following table summarizes warrants outstanding at December 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	691,604	$	3.40 - 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
Aug 2014 Preferred Stock Sale	1,418,439		3.40	August 19, 2014	August 19, 2019

Total Warrants	2,401,049

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 annually in equal amounts over 2 years. 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 $47,764 and $359,149 for the transition period ended December 31, 2014 and fiscal year ended March 31, 2014, respectively. Unrecognized compensation expense related to these RSUs as of December 31, 2014 was $79,520, and will be recorded as compensation expense over the next fifteen months.