Item 1. Financial Statements
Item 1 .
Financial Statements.
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
BALANCE SHEETS
September 30,
December 31,
2022
2021
ASSETS
(Unaudited)
Current assets:
Cash and cash equivalents
$
34,906,020
$
51,089,118
Accounts receivable, net
20,902,385
28,576,857
Inventories
162,913,633
124,724,091
Prepaid expenses and other current assets
5,372,484
4,339,245
Total current assets
224,094,522
208,729,311
Property and equipment, net
56,946,090
50,935,074
Intangible assets, net
1,192,254
1,728,768
Goodwill
3,529,509
3,529,509
Right to use assets
10,335,873
7,262,658
Deposits and other assets
4,459,322
4,067,404
TOTAL ASSETS
$
300,557,570
$
276,252,724
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
25,197,806
$
12,429,409
Accrued expenses and other current liabilities
18,378,932
17,214,988
Current portion of deferred revenue
142,834
142,834
Current portion of lease obligations
720,755
591,084
Total current liabilities
44,440,327
30,378,315
Senior notes payable, net of discount
141,365,706
94,866,239
Deferred revenue, net of current portion
1,868,739
1,975,865
End of term fee
1,500,000
-
Lease obligations, net of current portion
10,636,083
7,462,388
Other non-current liabilities
362,179
397,351
TOTAL LIABILITIES
200,173,034
135,080,158
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred Stock, $ 0.0001 par value, 10,000,000 shares authorized, no
shares issued and outstanding
-
-
Common Stock - voting, $ 0.0001 par value, 300,000,000 shares authorized, 196,776,871
and 195,813,817 shares issued and outstanding
19,678
19,581
Additional paid-in capital
566,149,846
553,265,706
Accumulated deficit
( 465,784,988
)
( 412,112,721
)
TOTAL STOCKHOLDERS’ EQUITY
100,384,536
141,172,566
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
300,557,570
$
276,252,724
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
REVENUES:
Product revenue
$
41,054,429
$
20,644,842
$
103,991,112
$
54,452,633
License revenue
35,708
35,708
107,125
107,125
Total revenues
41,090,137
20,680,550
104,098,237
54,559,758
Cost of product revenue
31,433,496
20,295,213
83,010,156
56,897,959
Gross profit (loss)
9,656,641
385,337
21,088,081
( 2,338,201
)
OPERATING EXPENSES:
Research and development
1,041,947
770,557
2,539,444
2,917,072
Plasma center operating expenses
4,859,450
3,146,221
12,755,525
8,191,890
Amortization of intangible assets
178,838
178,838
536,514
536,514
Selling, general and administrative
12,893,139
10,726,797
38,563,136
31,198,880
Total operating expenses
18,973,374
14,822,413
54,394,619
42,844,356
LOSS FROM OPERATIONS
( 9,316,733
)
( 14,437,076
)
( 33,306,538
)
( 45,182,557
)
OTHER INCOME (EXPENSE):
Interest income
7,236
4,256
42,573
32,241
Interest expense
( 5,580,366
)
( 3,298,680
)
( 13,542,419
)
( 9,741,110
)
Loss on extinguishment of debt
-
-
( 6,669,941
)
-
Other expense
( 9,641
)
18,546
( 195,942
)
( 106,772
)
Other expense, net
( 5,582,771
)
( 3,275,878
)
( 20,365,729
)
( 9,815,641
)
NET LOSS
$
( 14,899,504
)
$
( 17,712,954
)
$
( 53,672,267
)
$
( 54,998,198
)
BASIC AND DILUTED LOSS PER COMMON SHARE
$
( 0.08
)
$
( 0.13
)
$
( 0.27
)
$
( 0.44
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and Diluted
196,383,935
133,770,147
196,204,893
125,682,400
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY (Unaudited)
For the Three and Nine Months Ended September 30, 2022
Additional
Total
Common Stock
Paid-in
Accumulated
Stockholders’
Shares
Amount
Capital
Deficit
Equity
Balance at December 31, 2021
195,813,817
$
19,581
$
553,265,706
$
( 412,112,721
)
$
141,172,566
Stock-based compensation
-
-
1,641,388
-
1,641,388
Warrants issued in connection with notes payable
-
-
9,569,604
-
9,569,604
Vesting of Restricted Stock Units, net of shares withheld for taxes and retired
533,712
54
( 442,690
)
-
( 442,636
)
Net loss
-
-
-
( 25,007,857
)
( 25,007,857
)
Balance at March 31, 2022
196,347,529
19,635
564,034,008
( 437,120,578
)
126,933,065
Stock-based compensation
-
-
1,191,047
-
1,191,047
Vesting of Restricted Stock Units, net of shares withheld for taxes and retired
8,703
1
41,320
-
41,321
Net loss
-
-
-
( 13,764,906
)
( 13,764,906
)
Balance at June 30, 2022
196,356,232
19,636
565,266,375
( 450,885,484
)
114,400,527
Stock-based compensation
-
-
1,313,494
-
1,313,494
Vesting of Restricted Stock Units, net of shares withheld for taxes
420,639
42
( 430,023
)
-
( 429,981
)
Net loss
-
-
-
( 14,899,504
)
( 14,899,504
)
Balance at September 30, 2022
196,776,871
$
19,678
$
566,149,846
$
( 465,784,988
)
$
100,384,536
For the Three and Nine Months Ended September 30, 2021
Additional
Total
Common Stock
Paid-in
Accumulated
Stockholders’
Shares
Amount
Capital
Deficit
Equity
Balance at December 31, 2020
104,902,888
$
10,490
$
428,704,039
$
( 340,465,103
)
$
88,249,426
Stock-based compensation
-
-
781,397
-
781,397
Issuance of common stock, net of offering expenses
18,080,708
1,808
41,910,707
-
41,912,515
Vesting of Restricted Stock Units, net of shares withheld for taxes and retired
61,385
6
( 59,317
)
-
( 59,311
)
Net loss
-
-
-
( 18,379,941
)
( 18,379,941
)
Balance at March 31, 2021
123,044,981
12,304
471,336,826
( 358,845,044
)
112,504,086
Stock-based compensation
-
-
805,189
-
805,189
Issuance of common stock, net of offering expenses
8,827,045
883
17,188,677
-
17,189,560
Net loss
-
-
-
( 18,905,303
)
( 18,905,303
)
Balance at June 30, 2021
131,872,026
13,187
489,330,692
( 377,750,347
)
111,593,532
Stock-based compensation
-
-
688,274
-
688,274
Vesting of Restricted Stock Units, net of shares withheld for taxes and retired
3,515
-
( 2,287
)
-
( 2,287
)
Issuance of common stock, net of offering expenses
6,438,276
644
8,212,958
-
8,213,602
Net loss
-
-
-
( 17,712,954
)
( 17,712,954
)
Balance at September 30, 2021
138,313,817
$
13,831
$
498,229,637
$
( 395,463,301
)
$
102,780,167
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
( 53,672,267
)
$
( 54,998,198
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
5,176,492
3,977,786
Loss on disposal of fixed assets
8,408
80,479
Interest paid in kind
2,023,932
-
Stock-based compensation
4,145,929
2,274,860
Amortization of debt discount
1,908,127
1,394,142
Loss on extinguishment of debt
6,669,941
-
Amortization of license revenue
( 107,125
)
( 107,125
)
Changes in operating assets and liabilities:
Accounts receivable
7,674,472
( 7,155,331
)
Inventories
( 38,189,543
)
( 32,587,272
)
Prepaid expenses and other current assets
( 1,033,238
)
( 2,812,580
)
Deposits and other assets
195,756
( 813,415
)
Accounts payable
12,768,396
6,209,132
Accrued expenses
667,193
5,526,220
Other current and non-current liabilities
( 365,415
)
107,552
Net cash used in operating activities
( 52,128,942
)
( 78,903,750
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
( 10,162,650
)
( 9,835,404
)
Net cash used in investing activities
( 10,162,650
)
( 9,835,404
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable
( 100,000,000
)
-
Proceeds from issuance of common stock, net of offering expenses
-
67,315,677
Payment of debt refinancing fees
( 2,000,000
)
-
Proceeds from issuance of note payable
151,750,000
-
Taxes paid on vested Restricted Stock Units
( 831,297
)
( 61,598
)
Payments on finance lease obligations
( 27,281
)
( 25,507
)
Payment of deferred financing fees
( 2,782,928
)
-
Net cash provided by financing activities
46,108,494
67,228,572
Net decrease in cash and cash equivalents
( 16,183,098
)
( 21,510,582
)
Cash and cash equivalents - beginning of period
51,089,118
55,921,152
Cash and cash equivalents - end of period
$
34,906,020
$
34,410,570
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND BUSINESS
ADMA Biologics, Inc. (“ADMA” or the “Company”) is an end-to-end commercial biopharmaceutical
company dedicated to manufacturing, marketing and developing specialty plasma-derived biologics for the treatment of immunodeficient patients at risk for infection and others at risk for certain infectious diseases. The Company’s targeted
patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or who may be immune-suppressed for medical reasons.
ADMA operates through its wholly-owned subsidiaries ADMA BioManufacturing, LLC (“ADMA BioManufacturing”) and ADMA BioCenters
Georgia Inc. (“ADMA BioCenters”). ADMA BioManufacturing was formed in January 2017 to facilitate the acquisition of the Biotest Therapy Business Unit (“BTBU”) from BPC Plasma, Inc. (formerly Biotest Pharmaceuticals Corporation) (“BPC” and,
together with Biotest AG, “Biotest”) on June 6, 2017. The acquisition included certain assets of BTBU, including the U.S. Food and Drug Administration (“FDA”)-licensed BIVIGAM and Nabi-HB immunoglobulin products, and an FDA-licensed plasma
fractionation manufacturing facility located in Boca Raton, FL (the “Boca Facility”) (the “Biotest Transaction”). BTBU had previously been the Company’s third-party contract manufacturer. ADMA BioCenters is the Company’s source plasma
collection business with ten plasma collection facilities in
various stages of approval and development located throughout the U.S., seven of which hold an approved license with the FDA, with two additional collection facilities in operation and collecting plasma presently under FDA licensing preparation and review and another facility under construction.
The Company has three FDA-approved products, all of which are currently marketed and commercially available: (i) BIVIGAM (Immune Globulin Intravenous, Human), an Intravenous Immune Globulin (“IVIG”)
product indicated for the treatment of Primary Humoral Immunodeficiency (“PI”), also known as Primary Immunodeficiency Disease (“PIDD”), and for which the Company received FDA approval on May 9, 2019 and commenced commercial sales in August
2019; (ii) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), an IVIG product indicated for the treatment of PI, for which the Company received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019;
and (iii) Nabi-HB (Hepatitis B Immune Globulin, Human), which is indicated for the treatment of acute exposure to blood containing Hepatitis B surface antigen (“HBsAg”) and other listed exposures to Hepatitis B. In addition to its
commercially available immunoglobulin products, the Company provides contract manufacturing and laboratory services for certain clients and generates revenues from the sale of intermediate by-products that result from the immunoglobulin
production process. The Company seeks to develop a pipeline of plasma-derived therapeutics, and its products and product candidates are intended to be used by physician specialists focused on caring for immune-compromised patients with or at
risk for certain infectious diseases.
As of September 30, 2022, the Company had working capital of $ 179.7 million, including $ 34.9 million of cash and
cash equivalents. Based upon the Company’s current projected revenue and expenditures, including capital expenditures and continued implementation of the Company’s commercialization and expansion activities, the Company’s management currently
believes that its cash, cash equivalents, projected revenue and accounts receivable, together with the remaining available funds under the distribution agreement entered into in September of 2021 (see Note 8) and the additional proceeds
available from the refinancing of the Company’s senior debt on March 23, 2022 (see Note 7), will be sufficient to fund ADMA’s operations, as currently conducted, into the first quarter of 2024, at which time the Company believes it will begin
to generate positive cash flow from operations. These estimates may change based upon several factors, including the success of the Company’s commercial efforts with respect to the sale of its products, whether or not the assumptions
underlying the Company’s projected revenues and expenses are correct and the acceptability of ADMA’s immune globulin products by physicians, patients or payers. Depending on the cost of capital, the Company may decide to raise capital through
public or private equity offerings or debt financings, or may enter into a corporate collaboration or licensing arrangement. The sale of additional or equity or debt securities, if convertible, could result in dilution to the Company’s
stockholders and, in such event, the value and potential future market price of its common stock may decline. There can be no assurance that the Company’s approved products will be commercially viable, or that plant capacity expansion, plasma
center buildouts or other capital improvements will be successfully completed or that any product developed in the future will be approved. The Company is subject to risks common to companies in the biologics, biotechnology and pharmaceutical
manufacturing industries including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, inflationary pressures, supply
chain constraints, protection of proprietary technology and compliance with FDA and other governmental regulations and approval requirements.
T he
Company continues to evaluate a variety of strategic alternatives through its ongoing engagement with Morgan Stanley. The exploration of value-creating opportunities remains a top corporate priority for ADMA.
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) for interim financial information. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”)
of the Financial Accounting Standards Board (the “FASB”).
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto as of and
for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 24, 2022. The accompanying consolidated balance sheet as of December 31,
2021 was derived from the audited financial statements as of and for the year ended December 31, 2021. These condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8
of Regulation S-X, and therefore omit or condense certain footnotes and other information normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP. All intercompany balances and transactions have
been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and
assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of September 30, 2022, its results of operations and changes in stockholders’ equity for the three and nine months
ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021.
During the three and nine months ended September 30 , 2022 and 2021, comprehensive loss was equal to the net loss amounts presented for the respective periods in the
accompanying condensed consolidated statements of operations. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include
rebates and chargebacks deducted from gross revenues, the realizable value of accounts receivable, valuation of inventory, assumptions used in projecting future liquidity and capital requirements, assumptions used in the fair value of awards
granted under the Company’s equity incentive plans and warrants issued in connection with the issuance of notes payable and the valuation allowance for the Company’s deferred tax assets.
Fair Value of Financial Instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, are shown at
cost which approximates fair value due to the short-term nature of these instruments. The debt outstanding under the Company’s senior secured term loan (see Note 7) approximates fair value due to the variable interest rate on this debt.
Accounts Receivable
Accounts receivable is reported at realizable value, net of allowances for contractual credits and doubtful accounts in
the amount of $ 0.1 million and $ 0.2
million at September 30 , 2022 and December 31, 2021, respectively,
which are recognized in the period the related revenue is recorded. The Company extends credit to its customers based upon an evaluation of each customer’s financial condition and credit history.
Evaluations of the financial condition and associated credit risk of customers are performed on an ongoing basis. Based on these evaluations, the Company has concluded that its credit risk is minimal. At September 30 , 2022, four customers accounted for an aggregate of 93 % of the Company’s total
accounts receivable, and at December 31, 2021, three customers accounted for approximately 94 % of the Company’s total accounts receivable.
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Inventories
Raw materials inventory consists of various materials purchased from suppliers, including
normal source plasma and RSV plasma, used in the production of the Company’s products. Work-in-process and finished goods inventories (see Note 3) reflect the cost of raw materials as well as costs for direct and indirect labor, primarily
salaries, wages and benefits for applicable employees, as well as an allocation of overhead costs related to the Boca Facility including utilities, property taxes, general repairs and maintenance, consumable supplies and depreciation. The
allocation of Boca Facility overhead to inventory is generally based upon the estimated square footage of the Boca Facility that is used in the production of the Company’s products relative to the total square footage of the facility.
Inventories, including plasma intended for resale and plasma intended for internal use in the
Company’s manufacturing, commercialization or research and development activities, are carried at the lower of cost or net realizable value determined by the first-in, first-out method. Net realizable value is generally determined based upon
the consideration the Company expects to receive when the inventory is sold, less costs to deliver the inventory to the recipient. The estimates for net realizable value of inventory are based on contractual terms or upon historical
experience and certain other assumptions, and the Company believes that such assumptions are reasonable. Inventory is periodically reviewed to ensure that its carrying value does not exceed its net realizable value, and adjustments are
recorded to write down such inventory, with a corresponding charge to cost of product revenue, when the carrying value or historical cost exceeds its estimated net realizable value. In addition, costs associated with the production of
conformance or engineering lots that would not qualify as immediately available for commercial sale are charged to cost of product revenue and not capitalized into inventory.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company. Goodwill
at September 30, 2022 and December 31, 2021 was $ 3.5 million. All of the Company’s goodwill is attributable to its ADMA
BioManufacturing business segment and is related to the Biotest Transaction.
Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators
exist. The Company has the option to perform a qualitative assessment of goodwill to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill and other
intangible assets. If the Company concludes that this is the case, then it must perform a goodwill impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment charge is recorded to the extent the
reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company performs its annual goodwill impairment test as of October 1 of each year. The Company’s annual
goodwill impairment test as of October 1, 2022 did not result in a goodwill impairment charge, and the Company did no t record any impairment charges related to goodwill for the nine months
ended September 30, 2022 and 2021.
Impairment of Long-Lived Assets
The Company assesses the recoverability of its long-lived assets, which include property and equipment and finite-lived
intangible assets, whenever significant events or changes in circumstances indicate impairment may have occurred. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to its
carrying amount to determine whether the asset’s carrying value is recoverable. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the
nine months ended September 30 , 2022 and 2021, the
Company determined that there was no impairment of its long-lived assets.
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
Revenues for the three and nine months ended September 30 , 2022 and 2021 are comprised of (i) revenues from the sale of the Company’s immunoglobulin products, BIVIGAM, ASCENIV and Nabi-HB, (ii)
product revenues from the sale of human plasma collected through the Company’s Plasma Collection Centers business segment, (iii) contract manufacturing and laboratory services revenue, (iv) revenues from the sale of intermediate
by-products; and (v) license and other revenues primarily attributable to the out-licensing of ASCENIV to Biotest in 2012 to market and sell this product in Europe and selected countries in North Africa and the Middle East. Biotest has
provided the Company with certain services and financial payments in accordance with the related Biotest license agreement and is obligated to pay the Company certain amounts in the future if certain milestones are achieved. Deferred
revenue is amortized into income over the term of the Biotest license, representing a period of approximately 22 years.
Product revenue is recognized when the customer is deemed to have control over the product. Control is determined based
on when the product is shipped or delivered and title passes to the customer. Revenue is recorded in an amount that reflects the consideration the Company expects to receive in exchange. Revenue from the sale of the Company’s immunoglobulin
products is recognized when the product reaches the customer’s destination, and is recorded net of estimated rebates, price protection arrangements and customer incentives, including prompt pay discounts, wholesaler chargebacks and other
wholesaler fees. These estimates are based on historical experience and certain other assumptions, and the Company believes that such estimates are reasonable. For revenues associated with contract manufacturing and the sale of intermediates,
control transfers to the customer and the performance obligation is satisfied when the customer takes possession of the product from the Boca Facility or from a third-party warehouse that is utilized by the Company.
Product revenues from the sale of human plasma collected at the Company’s plasma collection centers are recognized at
the time control of the product has been transferred to the customer, which generally occurs at the time of shipment. Product revenues are recognized at the time of delivery if the Company retains control of the product during shipment.
For the nine months ended September 30 , 2022, two
customers represented an aggregate of 72 % of the Company’s consolidated revenues. For the nine months ended September
30 , 2021, four customers represented an aggregate of 74 % of the Company’s consolidated revenues.
Cost of Product Revenue
Cost of product revenue includes costs associated with the manufacture of the Company’s FDA approved products,
intermediates and the sale of human source plasma, as well as expenses related to conformance batch production, process development and scientific and technical operations when these operations are attributable to marketed products. When the
activities of these operations are attributable to new products in development, the expenses are classified as research and development expenses.
Loss Per Common Share
Basic loss per common share is computed by dividing net loss attributable to common stockholders by the
weighted average number of shares of common stock outstanding during the period. Diluted loss per common share is calculated by dividing net loss attributable to common stockholders, as adjusted for the effect of dilutive securities, if
any, by the weighted average number of shares of common stock and dilutive common stock outstanding during the period. Potentially dilutive common stock includes the shares of common stock issuable upon the exercise of outstanding stock
options and warrants, using the treasury stock method, as well as Restricted Stock Units (“RSUs”). Potentially dilutive common stock is excluded from the diluted loss per common share computation to the extent that it would be
anti-dilutive. As a result, no potentially dilutive securities are included in the computation of any of the accompanying diluted loss per share amounts in the accompanying condensed consolidated financial statements as the Company reported
a net loss for all periods presented. For the nine months ended September
30 , 2022 and 2021, the following securities were excluded from the calculation of diluted loss per common share because of their anti-dilutive effects:
8
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30,
2022
2021
Stock options
8,334,313
7,831,622
Restricted Stock Units
4,129,487
4,469,133
Warrants
13,556,898
4,528,160
26,020,698
16,828,915
Stock-Based Compensation
The Company follows recognized accounting guidance which requires all equity-based payments, including grants of stock
options, to be recognized in the statement of operations as compensation expense based on their fair values at the date of grant. Compensation expense related to awards to employees and directors with service-based vesting conditions is
recognized on a straight-line basis over the associated vesting period of the award based on the grant date fair value of the award. Stock options granted under the Company’s equity incentive plans generally have a four-year vesting period and a term of 10
years. Pursuant to ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718) , the Company has elected not to establish a forfeiture rate, as stock-based compensation expense
related to forfeitures of unvested stock options is fully reversed at the time of forfeiture.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or its tax returns. Under this
method, deferred tax assets and liabilities are recognized for the temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts at enacted tax rates in effect for the years in which
the temporary differences are expected to reverse. The Company records a valuation allowance on its deferred tax assets if it is more likely than not that the Company will not generate sufficient taxable income to utilize its deferred tax
assets. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2017 and for previous periods as it relates to the Company’s net operating loss carryforwards.
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by
the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is
greater than 50% likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company
has determined that it has not incurred any liability for unrecognized tax benefits as of September 30 , 2022 and December
31, 2021, and during the three and nine months ended September 30, 2022 and 2021, the Company recognized no
adjustments for uncertain tax positions.
3.
INVENTORIES
The following table provides the components of inventories:
September 30,
2022
December 31,
2021
Raw materials
$
47,777,758
$
36,755,720
Work-in-process
47,517,076
58,968,535
Finished goods
67,618,799
28,999,836
Total inventories
$
162,913,633
$
124,724,091
Raw materials includes plasma and other materials expected to be used in the production of BIVIGAM, ASCENIV and Nabi-HB.
These materials will be consumed in the production of goods expected to be available for sale or otherwise have alternative uses that provide a probable future benefit. All other activities and materials associated with the production of
inventories used in research and development activities are expensed as incurred.
9
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Work-in-process inventory primarily consists of bulk drug substance and unlabeled filled vials of the Company’s
immunoglobulin products.
Finished goods inventory is comprised of immunoglobulin product inventory and related intermediates that are available
for commercial sale, as well as plasma collected at the Company’s plasma collection centers which is expected to be sold to third-party customers.
4.
INTANGIBLE ASSETS
Intangible assets at September 30, 2022 and December 31, 2021 consist of the following:
September 30, 2022
December 31, 2021
Accumulated
Accumulated
Cost
Amortization
Net
Cost
Amortization
Net
Trademark and other intangible rights related to Nabi-HB
$
4,100,046
$
3,123,845
$
976,201
$
4,100,046
$
2,684,554
$
1,415,492
Rights to intermediates
907,421
691,368
216,053
907,421
594,145
313,276
$
5,007,467
$
3,815,213
$
1,192,254
$
5,007,467
$
3,278,699
$
1,728,768
All of the Company’s intangible assets were acquired in the Biotest Transaction. Amortization expense
related to these intangible assets was $ 0.5 million for the nine months ended September 30, 2022 and 2021 and $ 0.2 million for the three months ended September 30, 2022 and 2021. Estimated future aggregate amortization expense is expected to be as
follows:
Remainder of 2022
$
178,838
2023
715,352
2024
298,064
5.
PROPERTY AND EQUIPMENT
Property and equipment and related accumulated depreciation are summarized as
follows:
September 30, 2022
December 31, 2021
Manufacturing and laboratory equipment
$
18,245,894
$
16,702,991
Office equipment and computer software
5,251,818
4,082,462
Furniture and fixtures
4,680,870
3,389,140
Construction in process
5,537,520
5,496,222
Leasehold improvements
17,520,132
11,129,639
Land
4,339,441
4,339,441
Buildings and building improvements
19,266,803
19,067,032
74,842,478
64,206,927
Less: Accumulated depreciation
( 17,896,388
)
( 13,271,853
)
Total property, plant and equipment, net
$
56,946,090
$
50,935,074
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the
straight-line method over the asset’s estimated useful life. Land is not depreciated. The buildings were assigned a useful life of 30
years. Property and equipment other than land and buildings have useful lives ranging from three to 10 years. Leasehold improvements are amortized over the lesser of the lease term or their estimated useful lives.
10
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company recorded depreciation expense on property and equipment for the three
months ended September 30, 2022 and 2021 of $ 1.7 million and $ 1.2 million, respectively, and for the nine months
ended September 30, 2022 and 2021 of $ 4.6 million and $ 3.4 million, respectively.
6.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at September 30, 2022 and December 31, 2021 are as follows:
September 30, 2022
December 31, 2021
Accrued rebates
$
9,112,871
$
5,040,200
Accrued distribution fees
2,486,555
4,739,651
Accrued incentives
2,866,982
4,066,109
Accrued testing
256,608
1,189,970
Accrued payroll and other compensation
1,550,263
1,197,337
Other
2,105,653
981,721
Total accrued expenses and other current liabilities
$
18,378,932
$
17,214,988
7.
DEBT
A summary of outstanding senior notes payable is as follows:
September 30, 2022
December 31, 2021
Notes payable
$
153,773,932
$
100,000,000
Less:
Debt discount
( 12,408,226
)
( 5,133,761
)
Senior notes payable
$
141,365,706
$
94,866,239
On March 23, 2022 (the “Hayfin Closing Date”), the Company and all of its subsidiaries entered into a Credit and Guaranty Agreement (the “Hayfin Credit
Agreement”) with Hayfin Services LLP (“Hayfin”). The Hayfin Credit Agreement provides for a senior secured term loan facility in a principal amount of up to $ 175.0 million (the “Hayfin Credit Facility”), composed of (i) a term loan made on the Hayfin Closing Date in the principal amount of $ 150.0 million (the “Hayfin Closing Date Loan”), and (ii) a delayed draw term loan in the principal amount of $ 25.0 million (the “Hayfin Delayed Draw Loan” and, together with the Hayfin Closing Date Loan, the “Hayfin Loans”). The obligation of the lenders to make the Hayfin
Delayed Draw Loan expires on March 22, 2023 and is subject to the satisfaction of certain conditions, including, but not limited
to, the Company’s meeting certain 12-month revenue targets as set forth in the Hayfin Credit Agreement. The Hayfin Credit Facility has a maturity date of March 23, 2027 (the “Hayfin Maturity Date”), subject to acceleration pursuant to the Hayfin Credit Agreement, including upon an Event of Default (as defined in the Hayfin Credit Agreement).
On the Hayfin Closing Date, the Company used $ 100.0
million of the Hayfin Closing Date Loan to terminate and pay in full all of the outstanding obligations under the Company’s previously existing credit facility (the “Perceptive Credit Facility”) with Perceptive Credit Holdings II, LP
(“Perceptive”). The Company also used $ 2.0 million of the Hayfin Closing Date Loan proceeds to pay a redemption premium to
Perceptive and used approximately $ 1.0 million of the Hayfin Closing Date Loan proceeds to pay certain fees and expenses incurred
in connection with this transaction. In addition, a $ 1.8 million upfront fee payable to Hayfin was paid “in kind” and was added
to the outstanding principal balance in accordance with the terms of the Hayfin Credit Agreement. In connection with the retirement of the Perceptive Credit Facility and all of the obligations thereunder, the Company recorded a loss on
extinguishment of debt in the amount of $ 6.7 million, consisting of the write-off of unamortized discount related to the
Perceptive indebtedness and the redemption premium paid to Perceptive.
Borrowings under the Hayfin Credit Agreement bear interest, at the Company’s election, at either (a) a base rate (equal to the highest of (i) the rate of
interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the United States, (ii) the federal funds rate in effect on such day plus 0.50 % and (iii) adjusted Term Secured Overnight Financing Rate (“SOFR”) for a one-month tenor
in effect on such day plus 1.00 %), plus an applicable margin of 8.5 %, or (b) adjusted Term SOFR for either a one-month
or three-month tenor, as elected by the Company, and subject to a floor of 1.25 %, plus an applicable margin of 9.5 % (the
“Applicable Margin”); provided, however, that upon, and during the continuance of, an Event of Default, the Applicable Margin shall increase by an additional 3 % per annum. On the last day of each calendar month or quarter during the term of the Hayfin Credit Facility, the Company will pay accrued interest to Hayfin. The rate of interest in effect as of the
Hayfin Closing Date and as of September 30, 2022 was 10.75 % and approximately 12.1 %, respectively. The Company is also permitted to pay “in kind” a portion of the interest on the Hayfin Loans for each monthly or quarterly interest period in an
amount equal to 2.5 % per annum, which is added to the principal amount of the outstanding debt under the Hayfin Credit Facility.
From the Hayfin Closing
Date through September 30, 2022, approximately $ 2.0 million of interest was paid in kind and added to the balance of the
outstanding Hayfin Loans.
11
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On the Hayfin Maturity Date, the Company will pay Hayfin the entire outstanding principal amount underlying the Hayfin Loans and any accrued and unpaid
interest thereon, as well as an exit fee of 1.0 % of the outstanding principal amount being paid. This exit fee is recorded
separately as a non-current liability on the accompanying condensed consolidated balance sheet as of September 30, 2022. Prior to the Hayfin Maturity Date, there are no scheduled principal payments on the Hayfin Loans. The Company may prepay outstanding principal on the Hayfin Loans at any time and from time to time upon five business days’ prior written notice, subject to the payment to Hayfin of, (A) any accrued but unpaid interest on the prepaid principal
amount plus (B) an early prepayment fee in the amount equal to (i) 7.0 % of the prepaid principal amount, if prepaid on or prior
to the first anniversary of the Hayfin Closing Date, (ii) 3.0 % of the prepaid principal amount, if prepaid after the first
anniversary of the Hayfin Closing Date and on or prior to the second anniversary of the Hayfin Closing Date, or (iii) 1.0 % of
the prepaid principal amount, if prepaid after the second anniversary of the Hayfin Closing Date and on or prior to the third anniversary of the Hayfin Closing Date. In addition, for any prepayments of principal or payment of principal on
the Hayfin Maturity Date, the Company is also required to pay the exit fee.
All of the Company’s obligations under the Hayfin Credit Agreement are secured by a first-priority lien and security interest in substantially all of the
Company’s tangible and intangible assets, including intellectual property and all of the equity interests in the Company’s subsidiaries. The Hayfin Credit Agreement contains certain representations and warranties, affirmative covenants,
negative covenants and conditions that are customarily required for similar financings. The negative covenants restrict or limit the ability of the Company and its subsidiaries to, among other things and subject to certain exceptions
contained in the Hayfin Credit Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to the Company’s or its subsidiaries’ business
activities; make certain Investments or Restricted Payments (each as defined in the Hayfin Credit Agreement); change its fiscal year; pay dividends; repay certain other indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any
other agreements that have the impact of restricting the Company’s ability to make loan repayments under the Hayfin Credit Agreement. In addition, the Company is required (i) at all times prior to the Maturity Date to maintain a minimum
cash balance of $ 6.0 million; and (ii) as of the last day of each fiscal quarter, report IVIG product and related revenues for
the trailing 12-month period that exceed the amounts set forth in the Hayfin Credit Agreement, which range from $ 75.0 million for
the fiscal quarter ended June 30, 2022 to $ 250.0 million for the fiscal quarter ended December 31, 2026. As of September
30, 2022, the Company was in compliance with all of the covenants contained in the Hayfin Credit Agreement.
As consideration for the Hayfin Credit Agreement, the Company issued to various entities affiliated with Hayfin, on the Hayfin Closing Date, warrants to
purchase an aggregate of 9,103,047 shares of the Company’s common stock (the “Hayfin Warrants”). The Hayfin Warrants have an
exercise price equal to $ 1.6478 per share, which is equal to the trailing 30 -day Volume Weighted-average Price of the Company’s common stock on the business day immediately prior to the Hayfin Closing Date. The Hayfin Warrants were valued by
the Company at approximately $ 9.6 million as of the Hayfin Closing Date and have an expiration date of March 23, 2029 .
As a result of the upfront fee and exit fee paid or payable to Hayfin, the expenses incurred by the Company in connection with this transaction and the
value of the Hayfin Warrants, the Company recognized an aggregate discount on the Hayfin Loans in the amount of $ 13.9 million.
The Company records debt discount as a reduction to the face amount of the debt, and the debt discount is amortized as interest expense over the life of the debt using the interest method. Based on the fair value of the Hayfin Warrants and
the aggregate amount of fees and expenses associated with obtaining the Hayfin Credit Facility, the effective interest rate on the Hayfin Loans as of the Hayfin Closing Date and as of September 30, 2022 was approximately 13.0 % and 14.3 %, respectively.
12
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.
STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is currently authorized to issue up to 10 million shares of preferred stock, $ 0.0001 , par
value per share. There were no shares of preferred stock outstanding at September 30, 2022 and December 31, 2021.
Common Stock
As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 300,000,000 shares of its common stock, $ 0.0001
par value per share, and 196,776,871 and 195,813,817 shares of common stock were outstanding as of September 30, 2022 and December 31, 2021, respectively. After giving effect to the 49,951,243 shares reserved for outstanding warrants and awards issued or reserved for future issuance under the Company’s equity incentive plans, as of September 30, 2022
there were 53,271,886 shares of common stock available for issuance.
On September 3, 2021, the Company
entered into a distribution agreement with Raymond James & Associates, Inc., as agent (“Agent”), pursuant to which the Company may offer and sell, from time to time, at its option, through or
to the Agent, up to an aggregate o f $ 50 million of
shares of the Company’s common stock (the “Distribution Agreement”). The Company intends to use any net proceeds from the sale of common stock under the Distribution Agreement for general corporate purposes, including procurement of source plasma and other raw materials, supply chain initiatives and production expenditures, funding expansion of plasma collection centers, working capital,
capital expenditures, expansion and resources for commercialization activities, and other potential research and development and business opportunities. The Company currently has approximately $ 42.8 million of shares
available to sell under the Distribution Agreement. There were no sales under the Distribution Agreement during the nine months ended September 30, 2022.
During the nine months ended September 30, 2021, the Company issued 5,540,831 shares of
its common stock under the Distribution Agreement and received net proceeds of $ 6.9 million.
On August 5, 2020, the Company entered into an open market sale agreement (as amended from time to time, the “Sale Agreement”) with Jefferies LLC (“Jefferies”), pursuant to which the Company could
offer and sell, from time to time, at its option, through or to Jefferies, up to an aggregate of $ 50 million of shares of
the Company’s common stock. On November 5, 2020 and February 3, 2021, the Company and Jefferies amended the Sale Agreement to provide for increases in the aggregate offering amount under the Sale Agreement such that the Company could sell
shares having an aggregate offering price of up to $ 105.4 million under the Sale Agreement, as amended. The Sale Agreement was
terminated on August 31, 2021. During the nine months ended September 30, 2021, the Company issued and sold 27,805,198 shares of
common stock under the Sale Agreement and received net proceeds of $ 60.4 million.
Warrants
In connection with the Hayfin Credit Agreement that the Company entered into on March 23, 2022 (see Note 7), the Company
issued the Hayfin Warrants to purchase 9,103,047 shares of the Company’s common stock. The Hayfin Warrants were valued at $ 9.6 million using the Black-Scholes option-pricing model assuming an expected term of seven years , a volatility of 68.1 %, a dividend yield of 0 % and a risk-free rate of interest of 2.36 %.
During the nine months ended September 30, 2022, outstanding warrants to purchase 74,309 shares of the Company’s common stock
expired in accordance with the terms of the warrants. At September 30, 2022, the Company had outstanding warrants to purchase an aggregate of 13,556,898
shares of common stock, with a weighted-average exercise price of $ 2.00 per share. At December 31, 2021, the Company had outstanding
warrants to purchase an aggregate of 4,528,160 shares of common stock, with a weighted average exercise price of $ 2.82 per share and expiration dates ranging between June 2022 and December 2030.
13
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Equity Incentive Plans
The fair value of stock options granted under the ADMA Biologics, Inc. 2014 Omnibus Incentive Compensation
Plan, as amended and restated (the “2014 Plan”), was determined on the date of grant using the Black-Scholes option valuation model. The Black-Scholes model was developed for use in estimating the fair value of publicly traded options, which
have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of certain subjective assumptions including the expected stock price volatility. The stock options granted to employees and
directors have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. The following assumptions were used to determine the fair value of options granted during the nine months ended September 30, 2022 and 2021:
Nine Months Ended September 30,
2022
2021
Expected term
5.5 - 6.3 years
5.5 - 6.3 years
Volatility
68 %
69 %
Dividend yield
0.0
0.0
Risk-free interest rate
1.72 - 1.73 %
0.80 - 1.14 %
On June 21, 2022, the Company’s stockholders approved the ADMA Biologics, Inc. 2022 Compensation Plan (the “2022 Equity
Plan”). Approval of the 2022 Equity Plan resulted in approximately 18 million additional shares of the Company’s common stock being
reserved for future awards. During the nine months ended September 30, 2022 and 2021, the Company granted options to purchase an aggregate of 1,194,032
and 1,757,050 shares of common stock, respectively, to its directors and employees. The weighted average remaining contractual life
of stock options outstanding and expected to vest at September 30, 2022 is 6.3 years. The weighted average remaining contractual
life of stock options exercisable at September 30, 2022 is 5.4 years.
A summary of the Company’s option activity under the Company’s equity incentive plans and related information is as
follows:
Weighted
Average
Shares
Exercise Price
Options outstanding, vested and expected to vest at December 31, 2021
7,862,722
$
3.93
Forfeited
( 31,021
)
$
2.37
Expired
( 691,420
)
$
6.91
Granted
1,194,032
$
1.67
Options outstanding, vested and expected to vest at September 30, 2022
8,334,313
$
3.36
Options exercisable
5,992,738
$
3.86
As of September 30, 2022, the Company had $ 2.8 million of unrecognized compensation expense related to options granted under the Company’s equity incentive plans, which is expected to be recognized over a weighted-average period of 2.3 years.
During the nine months ended September 30, 2022 and 2021, the Company granted RSUs representing an aggregate of 1,119,266 and 4,332,244 shares, respectively, to certain management employees of the Company and to members of its Board of Directors. Except for the RSUs granted
under the Company’s retention incentive program discussed below, these RSUs generally vest annually over a period of four years for
employees and semi-annually over a period of one year for directors. On September 28, 2021, the Company implemented a retention
incentive program for the Company’s executive management and certain employees (see Note 10), whereby the Company issued an aggregate of 3,780,000
RSUs, of which 2,632,500 are time-based RSUs and 1,147,500 are milestone-based RSUs. Fifty percent of the time-based RSUs
granted under the retention bonus program will vest on December 31, 2022, with the remainder vesting in quarterly installments through December 31, 2024. The milestone-based RSUs vest upon achievement of the applicable milestone, and all of the
milestone-based RSUs vested during the nine months ended September 30, 2022. During the nine months ended September 30, 2022, an aggregate of 1,409,912
shares of common stock vested in connection with grants of RSUs, including all of the milestone-based RSUs. With respect to the vested RSUs, 446,858
shares valued at approximately $ 0.8 million were withheld by the Company to cover employees’ tax liabilities. These shares have been
retired by the Company or otherwise made available again for issuance under the 2022 Equity Plan and were no longer outstanding as of September 30, 2022. A summary of the Company’s unvested RSU activity and related information is as follows:
14
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Weighted
Average Grant
Shares
Date Fair Value
Balance at December 31, 2021
4,485,133
$
1.34
Granted
1,119,266
$
1.69
Vested
( 1,409,912
)
$
1.33
Forfeited
( 65,000
)
$
1.40
Balance at September 30, 2022
4,129,487
$
1.44
As of September 30, 2022, the Company had $ 4.2 million of unrecognized compensation expense related to unvested RSUs granted under the Company’s equity incentive plans, which is expected to be recognized over a weighted-average period of 2.6 years.
Total stock-based compensation expense for all awards granted under the Company’s equity incentive plans for the three
and nine months ended September 30, 2022 and 2021 is as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Research and development
$
4,952
$
1,526
$
14,521
$
149,232
Plasma center operating expenses
21,588
14,150
62,255
38,605
Selling, general and administrative
1,187,043
596,084
3,772,860
1,850,411
Cost of product revenue
99,911
76,514
296,293
236,612
Total stock-based compensation expense
$
1,313,494
$
688,274
$
4,145,929
$
2,274,860
9.
RELATED PARTY TRANSACTIONS
The Company leases an office building and equipment from Areth, LLC (“Areth”)
pursuant to an agreement for services effective as of January 1, 2016, as amended from time to time. Rent expense for the nine months ended September 30, 2022 and 2021 amounted to $ 90,000 (see Note 14). Areth is a company controlled by Dr. Jerrold B. Grossman, the Vice Chairman of the Company’s Board of Directors, and Adam S. Grossman, the Company’s
President and Chief Executive Officer. The Company also reimburses Areth for office and building-related (common area) expenses, equipment and certain other operational expenses, which were not material to the condensed consolidated financial
statements for the three and nine months ended September 30, 2022 and 2021.
During the nine months ended September 30, 2022 and 2021, the Company purchased
certain specialized medical equipment and services related to the Company’s plasma collection centers, as well as personal protective equipment, from GenesisBPS and its affiliates (“Genesis”), aggregating to $ 0.1 million. Genesis is owned by Dr. Grossman and Adam Grossman.
See Note 7 for a discussion of the Company’s former credit facility and related
transactions with Perceptive, a holder of more than 5 % of the Company’s common stock during the nine months ended September 30, 2022.
During the nine months ended September 30,
2021, in connection with the resignation of Dr. James Mond, the Company’s former Chief Scientific and Medical Officer, the Company recognized an expense and corresponding liability in the amount of $ 0.8 million for estimated payments to be made under a separation and transition agreement with Dr. Mond. Such payments were made in scheduled installments over a period of 10 months.
15
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10.
COMMITMENTS AND CONTINGENCIES
General Legal Matters
From time to time, the Company is or may become subject to certain legal proceedings and claims arising in connection
with the normal course of its business. Management does not expect that the outcome of any such claims or actions will have a material effect on the Company’s liquidity, results of operations or financial condition.
COVID-19 Pandemic
The Company continues to monitor the ongoing developments related to the COVID-19 pandemic, including the emergence of
the Delta and Omicron variants and other resistant strains of the coronavirus, and its impacts to the Company’s commercial and manufacturing operations and plasma collection facilities, including collections of source plasma, procurement of raw
materials and packaging materials, a portion of which are sourced internationally, and the testing of finished drug product that is required prior to its availability for commercial sale. A substantial portion of such testing has historically
been performed by contract laboratories outside the United States.
Due to a combination of previous state and local “shelter-in-place” orders, as well as government stimulus packages,
persisting social distancing measures and varying roll-outs of vaccinations by state, the Company was experiencing lower than normal donor collections at its FDA approved plasma collection centers. The Company was also subject to delays in
shipments of source plasma from its contracted third-party suppliers, as well as delays in deliveries for personal protective equipment, reagents and other non-plasma raw materials and supplies used in the manufacture and distribution of its
products. In addition, the Company is subject to supply chain delays as a result of certain of its suppliers diverting significant resources towards the rapid development and distribution of COVID-19 vaccines and, as a result, the Company has
elected to carry more raw materials inventory than it has in the past. The COVID-19 pandemic previously impacted, to a certain degree, the Company’s customer engagement initiatives, whereby ADMA’s sales and medical affairs field personnel faced
difficulties communicating directly with physicians and other healthcare professionals, as well as the cancellation or postponement of a number of key scientific and medical meetings, further limiting the Company’s ability to communicate with
potential customers.
The pandemic could also impact the Company’s ability to interact with the FDA or other regulatory authorities and may result in delays in the conduct of inspections or
review of pending applications or submissions. Although the Company received several FDA approvals and two FDA inspections of the
Boca Facility were completed during the year ended December 31, 2021, no assurances can be provided as to the timing for completion of any other regulatory submissions or applications that may be impacted by restrictions related to COVID-19.
During the nine months ended September 30, 2022 and 2021, revenue attributable to international customers was
approximately 7 % and 13 %,
respectively, of the Company’s total revenues. As the Company seeks to grow this aspect of its business, it may also be subject to the impacts of the COVID-19 pandemic in locations outside the United States.
Notwithstanding the foregoing, the COVID-19 pandemic to date has not had a material impact on the Company’s financial
condition or results of operations, and the Company does not believe that its production operations at the Boca Facility, the Company’s contract fill/finishers or its plasma collection facilities have been significantly impacted by the COVID-19
pandemic. As a result, the Company does not anticipate and has not experienced any material impairments with respect to any of its long-lived assets, including the Company’s property and equipment, goodwill or intangible assets.
Although the COVID-19 pandemic has not, to date, materially adversely impacted the Company’s capital and financial
resources, because the Company is unable to determine the ultimate severity or duration of the COVID-19 pandemic or other pandemics or their long-term effects on, among other things, the global, national or local economies, the capital and
credit markets or the Company’s workforce, customers or our suppliers, at this time the Company is unable to predict whether COVID-19 or other pandemics will have a material adverse impact on the Company’s business, financial condition,
liquidity and results of operations.
16
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Vendor Commitments
Pursuant to the terms of a plasma purchase agreement with BPC dated as of November 17, 2011 (the “2011 Plasma Purchase
Agreement”), the Company agreed to purchase from BPC an annual minimum volume of source plasma containing antibodies to RSV to be used in the manufacture of ASCENIV. The Company must purchase a to-be-determined and agreed upon annual minimum
volume from BPC, but may also collect high-titer RSV plasma from up to five wholly-owned ADMA plasma collection facilities. During
2015, the Company and BPC amended the 2011 Plasma Purchase Agreement to allow the Company the ability to collect its raw material RSV high-titer plasma from other third-party collection organizations, thus allowing the Company to expand its
reach for raw material supply as it executes its commercialization plans for ASCENIV. As part of the closing of the Biotest Transaction, the parties amended the 2011 Plasma Purchase Agreement to extend the initial term through the ten-year anniversary of the closing date of the Biotest Transaction. Unless terminated earlier, the 2011 Plasma Purchase Agreement expires in June
2027, after which it may be renewed for two additional five-year periods if agreed to by the parties. On December 10, 2018, BPC assigned its rights and obligations under the 2011 Plasma Purchase Agreement to Grifols Worldwide
Operations Limited (“Grifols”) as its successor-in-interest, effective January 1, 2019. On January 1, 2019, Grifols and the Company entered into an additional amendment to the 2011 Plasma Purchase Agreement for the purchase of source plasma
containing antibodies to RSV from Grifols. Pursuant to this amendment, until January 1, 2022, the Company could purchase RSV plasma from Grifols from the two plasma collection centers that were transferred to BPC on January 1, 2019 at a price equal to cost plus five percent ( 5 %) (without any additional increase due to inflation). Effective January 1, 2022, RSV plasma purchased
from these two plasma collection centers are subject to the pricing terms in effect for RSV plasma purchased from other plasma
collection centers owned by Grifols.
On June 6, 2017, the Company and BPC entered into a Plasma Supply Agreement pursuant to which BPC supplies, on an
exclusive basis subject to certain exceptions, to ADMA BioManufacturing an annual minimum volume of hyperimmune plasma that contain antibodies to the Hepatitis B virus for the manufacture of Nabi-HB. The Plasma Supply Agreement has a 10 -year term. On July 19, 2018, the Company and BPC entered into an amendment to the Plasma Supply Agreement to provide, among other things, that in
the event BPC elects not to supply in excess of ADMA BioManufacturing’s specified amount of Hepatitis B plasma and ADMA BioManufacturing is unable to secure Hepatitis B plasma from a third party at a price that is within a low double- digit
percentage of the price that ADMA BioManufacturing pays to BPC, then BPC shall reimburse ADMA BioManufacturing for the difference in price ADMA BioManufacturing incurs. On December 10, 2018, BPC assigned its rights and obligations under the
Plasma Supply Agreement to Grifols, effective January 1, 2019.
On June 6, 2017, the Company and BPC entered into a Plasma Purchase Agreement (the “2017 Plasma Purchase Agreement”),
pursuant to which ADMA BioManufacturing purchases normal source plasma (“NSP”) from BPC at agreed upon annual quantities and prices. The 2017 Plasma Purchase Agreement has an initial term of five years after which the 2017 Plasma Purchase Agreement may be renewed for additional two terms of two years each upon the mutual written consent of the parties. On July 19, 2018, the
Company and BPC entered into an amendment to the 2017 Plasma Purchase Agreement to, among other things, provide agreed upon amounts of normal source plasma to be supplied by BPC to ADMA BioManufacturing in calendar year 2019 at a specified
price per liter, provided that ADMA BioManufacturing delivers a valid purchase order to BPC. Additionally, pursuant to the amendment to the 2017 Plasma Purchase Agreement, BPC agreed that, for calendar years 2020 and 2021, it shall supply no
less than a high double-digit percentage of ADMA BioManufacturing’s requested NSP amounts, provided that such requested NSP amounts are within an agreed range, at a price per liter to be mutually determined. Furthermore, pursuant to the
amendment to the 2017 Plasma Purchase Agreement, in the event BPC fails to supply ADMA BioManufacturing with at least a high double-digit percentage of ADMA BioManufacturing’s requested NSP amounts, BPC shall promptly reimburse ADMA
BioManufacturing the difference in price ADMA BioManufacturing incurs due to BPC’s election not to supply NSP to ADMA BioManufacturing in such amounts as requested. On December 10, 2018, BPC assigned its rights and obligations under the Plasma
Purchase Agreement to Grifols, effective January 1, 2019.
17
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Effective as of May 12, 2021, the Company and Grifols amended the foregoing 2017 Plasma Purchase Agreement whereby, among other things, the term of the agreement was
extended through December 31, 2022, while certain historical provisions were deleted. In order to maintain a reliable supply of raw material plasma thereafter, the Company has executed additional agreements with multiple third-party suppliers
of NSP to supplement the 2017 Plasma Purchase Agreement. The Company has also increased its number of planned plasma collection center buildouts such that the Company expects to have ten FDA-approved plasma collection centers in operation by the end of 2023, while also continuing to increase its plasma collection capabilities at its ADMA BioCenters
plasma collection centers business segment.
The Company purchases substantially all of its raw material plasma from Grifols. For the nine months ended September 30,
2022, plasma purchases from Grifols totaled $ 40.3 million, or approximately 68 % of the Company’s total inventory purchases. For the nine months ended September 30, 2021, plasma purchases from Grifols totaled approximately $ 31.2 million, representing approximately 69 %
of the Company’s total inventory purchases.
Post-Marketing Commitments
In connection with
the approval of the BLA for BIVIGAM, on December 19, 2012 Biotest committed to perform two additional post-marketing studies, a pediatric study to evaluate the efficacy and safety of BIVIGAM in children and adolescents, and a post-authorization
safety study to further assess the potential risk of hypotension and hepatic and renal impairment in BIVIGAM-treated patients with primary humoral immunodeficiency. These studies are still pending completion. ADMA has assumed the remaining
obligations, and the costs of the studies will be expensed as incurred as research and development expenses. For the three months ended September 30, 2022 and 2021, the Company incurred expenses related to these studies $ 0.7 million and $ 0.3 million,
respectively. For the nine months ended September 30, 2022 and 2021, the Company incurred expenses of $ 1.5 million and $ 1.3 million, respectively. The Company currently expects to incur expenses of approximately $ 2.0 million to $ 3.0 million to complete these studies, with both studies to
be completed by June of 2023.
In connection with
the FDA’s approval of ASCENIV on April 1, 2019, the Company is required to perform a pediatric study to evaluate the safety and efficacy of ASCENIV in children and adolescents. For the three months ended September 30, 2022 and 2021, the Company
incurred expenses related to these studies $ 0.1 million and $ 0.2 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company incurred expenses of $ 0.3 million and $ 0.5 million, respectively. The Company expects to incur
expenses of approximately $ 2 million to complete this study, which is required to be completed by June of 2023.
Employment Contracts
The Company has entered into employment agreements with Mr. Grossman and with Brian Lenz, its Executive Vice President,
Chief Financial Officer and General Manager, ADMA BioCenters.
Other Commitments
On September 28, 2021, following the approval of the Company’s Board of
Directors upon recommendation of the Compensation Committee of the Board of Directors, and in consultation with an independent compensation consultant, the Company implemented a retention incentive program, consisting of cash payments and
awards of RSUs (see Note 8), to the Company’s management, including Mr. Grossman and Mr. Lenz, and to certain other employees. The purpose of the retention program is to promote and ensure business continuity and provide an incentive to the
Company’s executive management and certain other employees considering the operational challenges presented by the ongoing COVID -19 pandemic and the competitive work environment in which the Company operates
as an FDA regulated manufacturer of specialized biologic therapies. The retention awards were granted considering the nationwide labor shortages and the increased employee turnover rates that the Company, its pharmaceutical peers and other
companies outside of the Company’s industry have reported experiencing.
The cash portion of the retention program consists of two tranches. The first tranche was paid to employees on September 30, 2021 in the amount of $ 1.3 million, and the second tranche aggregating to approximately $ 1.3
million was paid on June 15, 2022. Based on the terms of the retention agreements the Company entered into with each applicable executive and employee, approximately $ 0.8 million of each tranche is being recognized over the retention service period, which began on October 1, 2021 and ends on December 31, 2022, with the remainder having
been recognized as expense when paid.
18
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its
employees, licensors, suppliers and service providers. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these arrangements is
unknown as of September 30, 2022. The Company does not anticipate recognizing any significant losses relating to these arrangements.
11.
SEGMENTS
The Company is engaged in the manufacture, marketing and development of specialty plasma-derived
biologics. The Company’s ADMA BioManufacturing segment reflects the Company’s immunoglobulin manufacturing, commercial and development operations in Boca Raton, FL, acquired on June 6, 2017 (see Note 1). The Plasma Collection Centers
segment consists of ten plasma collection facilities located throughout the U.S., seven of which currently hold FDA licenses, with two
additional plasma collection centers in operation and collecting plasma and the remaining facility under construction .
The Corporate segment includes general and administrative overhead expenses. The Company defines its segments as those business units whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to analyze
performance and allocate resources. The Company’s CODM is its President and Chief Executive Officer. Summarized
financial information concerning reportable segments is shown in the following tables:
Three Months Ended September 30, 2022
ADMA
Plasma Collection
BioManufacturing
Centers
Corporate
Consolidated
Revenues
$
37,280,798
$
3,773,631
$
35,708
$
41,090,137
Cost of product revenue
27,883,046
3,550,450
-
31,433,496
Income (loss) from operations
297,310
( 4,636,269
)
( 4,977,774
)
( 9,316,733
)
Interest and other expense, net
( 3,023
)
( 154
)
( 5,579,594
)
( 5,582,771
)
Net income (loss)
294,287
( 4,636,423
)
( 10,557,368
)
( 14,899,504
)
Total assets
242,983,498
39,125,933
18,448,139
300,557,570
Depreciation and amortization expense
1,214,529
647,463
-
1,861,992
19
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended September 30, 2021
ADMA
Plasma Collection
BioManufacturing
Centers
Corporate
Consolidated
Revenues
$
19,063,077
$
1,581,765
$
35,708
$
20,680,550
Cost of product revenue
18,695,783
1,599,430
-
20,295,213
Loss from operations
( 7,456,129
)
( 3,163,886
)
( 3,817,061
)
( 14,437,076
)
Interest and other expense, net
22,822
( 1,597
)
( 3,297,103
)
( 3,275,878
)
Net loss
( 7,433,307
)
( 3,165,483
)
( 7,114,164
)
( 17,712,954
)
Total assets
189,019,883
22,273,264
27,347,259
238,640,406
Depreciation and amortization expense
1,064,757
356,233
1,174
1,422,164
Nine Months Ended September 30, 2022
ADMA
Plasma Collection
BioManufacturing
Centers
Corporate
Consolidated
Revenues
$
95,129,542
$
8,861,570
$
107,125
$
104,098,237
Cost of product revenue
74,383,948
8,626,208
-
83,010,156
Loss from operations
( 4,423,228
)
( 12,520,163
)
( 16,363,147
)
( 33,306,538
)
Interest and other expense, net
( 70,084
)
( 1,221
)
( 13,624,483
)
( 13,695,788
)
Loss on extinguishment of debt
-
-
( 6,669,941
)
( 6,669,941
)
Net loss
( 4,493,312
)
( 12,521,384
)
( 36,657,571
)
( 53,672,267
)
Capital expenditures
4,292,246
5,870,404
-
10,162,650
Depreciation and amortization expense
3,486,212
1,689,362
918
5,176,492
20
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2021
ADMA
Plasma Collection
BioManufacturing
Centers
Corporate
Consolidated
Revenues
$
48,832,000
$
5,620,633
$
107,125
$
54,559,758
Cost of product revenue
51,527,832
5,370,127
-
56,897,959
Loss from operations
( 25,299,223
)
( 7,928,946
)
( 11,954,388
)
( 45,182,557
)
Interest and other expense, net
( 77,484
)
( 2,349
)
( 9,735,808
)
( 9,815,641
)
Net loss
( 25,376,707
)
( 7,931,295
)
( 21,690,196
)
( 54,998,198
)
Capital expenditures
3,805,472
6,029,932
-
9,835,404
Depreciation and amortization expense
3,130,064
843,151
4,571
3,977,786
Net revenues according to geographic area, based on the location of where the product is shipped, is as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
United States
$
37,854,167
$
18,265,945
$
96,445,162
$
47,368,793
International
3,235,970
2,414,605
7,653,075
7,190,965
Total revenues
$
41,090,137
$
20,680,550
$
104,098,237
$
54,559,758
12.
LEASE OBLIGATIONS
The Company leases certain properties and equipment for its ADMA BioCenters and ADMA BioManufacturing subsidiaries, which
leases provide the right to use the underlying assets and require lease payments through the respective lease terms which expire at various dates through 2032. The Company’s lease agreements do not contain any material residual value guarantees
or material restrictive covenants.
The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or
less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease
payments arising from the lease. Right-to-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when
they are reasonably certain to be exercised. The present value of the lease payments is determined using the Company’s then-incremental borrowing rate of 13 %. The Company’s lease expense is recognized on a straight-line basis over the lease term and is reflected in Plasma center operating expenses and Selling, general and administrative expenses. Aggregate lease
expense for the Company’s leases for the three months ended September 30, 2022 and 2021 was approximately $ 0.6 million and $ 0.4 million, respectively. Aggregate lease expense for the Company’s leases for the nine months ended September 30, 2022 and 2021 was approximately
$ 1.5 million and $ 1.0
million, respectively. Cash paid for the Company’s leases for the three months ended September 30, 2022 and 2021 was approximately $ 0.5
million and $ 0.3 million, respectively. Cash paid for the Company’s leases for the nine months ended September 30, 2022 and 2021 was
approximately $ 1.3 million and 1.1
million, respectively.
Including a finance lease the Company entered into in June 2018, the Company has aggregate lease
liabilities of $ 11.4 million and $ 8.1
million as of September 30, 2022 and December 31, 2021, respectively, which are comprised primarily of the leases for the Company’s plasma collection centers and a warehouse lease for raw material storage related to the Company’s
immunoglobulin manufacturing operations. The Company’s operating leases have a weighted average remaining term of 8.8 years. Scheduled payments under the
Company’s lease obligations are as follows:
21
Index
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Remainder of 2022
$
480,854
Year ended December 31, 2023
2,247,057
2024
2,223,314
2025
2,246,432
2026
1,996,036
2027
2,040,690
Thereafter
8,238,571
Total payments
19,472,954
Less: imputed interest
( 8,116,116
)
Current portion
( 720,755
)
Balance at September 30, 2022
$
10,636,083
In addition to the foregoing lease obligations, the Company leases an office building and equipment from Areth as
discussed in Note 7. In connection with the amendment to this lease discussed in Note 14, the Company will pay an additional $ 0.5
million to Areth from October 1, 2022 through December 31, 2026.
13.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental cash flow information for the nine months ended September 30, 2022 and 2021 is as follows:
2022
2021
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
$
9,610,361
$
8,346,968
Noncash Financing and Investing Activities:
Equipment acquired reflected in accounts payable and accrued liabilities
$
1,749,746
$
1,382,818
Right-to-use assets in exchange for lease obligations
$
3,660,890
$
2,844,875
Warrants issued in connection with notes payable
$
9,569,604
$
-
14.
SUBSEQUENT EVENT
As discussed in Note 7, the Company leases an office building and equipment from Areth. The lease term
was for a period of 12 months and provided for automatic one-year renewals unless ADMA provided written notice of termination to Areth 60 days prior to the end
of the term. Effective as of October 1, 2022, the Company and Areth agreed to extend the term of the lease to December 31, 2026 at the current monthly rent.
22
Index
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.