ADMA BIOLOGICS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion of our financial condition and results of operations, which refers to our historical results, should be read in conjunction with the other sections of this Quarterly Report on Form 10-Q, including “Risk Factors” and our unaudited consolidated financial statements and the notes thereto appearing elsewhere herein, and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 23, 2023 (the “2022 10-K”). The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout or referenced within this Quarterly Report on Form 10-Q. See “Special Note Regarding Forward-Looking Statements.” Our actual results may differ materially from our current expectations. OVERVIEW Our Business ADMA Biologics, Inc. (the “Company,” “ADMA,” “we,” “us” or “our”) 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. Our targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or who may be immune-suppressed for medical reasons. We currently have three products with U.S. Food and Drug Administration (the “FDA”) approval, 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”) or Inborn Errors of Immunity, and for which we 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 we 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 HBsAg and other listed exposures to Hepatitis B. We seek to develop a pipeline of plasma-derived therapeutics, including but not limited to, a product based on our most recently approved patent application under U.S. Patent No. 10,259,865 related to methods of treatment and prevention of S. pneumonia infection for an immunoglobulin manufactured to contain standardized antibodies to numerous serotypes of S. pneumoniae . Our 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. We manufacture these products at our FDA-licensed, plasma fractionation and purification facility located in Boca Raton, Florida with a peak annual source plasma processing capability of up to 600,000 liters (the “Boca Facility”). Based on current production yields, our completed and ongoing supply chain enhancements and capacity expansion initiatives, we believe this facility has the potential to produce quantities of our immune globulin (“IG”) products representing annual revenues of $220 million or more in 2023, potentially more than $250 million in annual revenue in 2024 and potentially in excess of $300 million of annual revenue thereafter, as well as achieving profitability during the first quarter of 2024. At these revenue levels, we forecast achieving consolidated gross margins in the range of 40-50% and net income margins in the range of 20-30%. These assumptions translate to potential annual gross profit and net income in the range of $100-$150 million and $50-$100 million, respectively, during the 2024-2025 time period and beyond. 21 Index Through our ADMA BioCenters subsidiary, we currently operate ten source plasma collection facilities in the U.S. This business unit, which we refer to as our Plasma Collection Centers business segment, provides us with substantially all of our blood plasma for the manufacture of our products, and also allows us to sell certain quantities of source plasma and certain other plasma products to third-party customers for further manufacturing. With respect to our operational plasma collection centers, eight plasma collection centers currently hold FDA licenses, with the remaining plasma collection centers anticipated to receive FDA approvals throughout 2023. In addition, three of our FDA-approved plasma collection centers also have approvals from the Korean Ministry of Food and Drug Safety (“MFDS”), as well as FDA approval to operate a Hepatitis B immunization program. After giving effect to the supply chain robustness initiatives undertaken in 2021 and 2022 as it pertains to our plasma collection network expansion, we remain on track to achieve our goal of having 10 FDA-licensed plasma collection centers by the end of 2023. A typical plasma collection center, such as those operated by ADMA BioCenters, can collect approximately 30,000 to 50,000 liters of source and hyperimmune plasma annually, which may be sold for different prices depending upon the type of plasma, quantity of purchase and market conditions at the time of sale. Plasma collected from ADMA BioCenters’ facilities that is not used to manufacture our products is sold to third-party customers in the U.S. and in other locations outside the U.S. where we are approved under supply agreements or in the open “spot” market. We sell plasma-derived intermediate fractions to certain customers, which are generated as part of our FDA-approved manufacturing process for IG and IVIG products. In January 2020, we announced our entry into a five-year manufacturing and supply agreement to produce and sell these intermediate by-products, which are used as the starting raw material to produce other plasma-derived biologics. In addition, from time to time we provide contract manufacturing and testing services for certain third-party clients. We also provide laboratory contracting services to certain customers and anticipate providing contract filling, labeling and packaging services in light of the FDA approval of our in-house fill-finish capabilities. Our Products BIVIGAM BIVIGAM is a plasma-derived IVIG that contains a broad range of antibodies similar to those found in normal human plasma. These antibodies are directed against bacteria and viruses, and help to protect PI patients against serious infections. BIVIGAM is a purified, sterile, ready-to-use preparation of concentrated human Immunoglobulin G antibodies indicated for the treatment of PI, a group of genetic disorders. This includes, but is not limited to, the humoral immune defect in common variable immunodeficiency, X-linked agammaglobulinemia, congenital agammaglobulinemia, Wiskott-Aldrich syndrome and severe combined immunodeficiency. These PIs are a group of genetic disorders. Based on recent estimates, these disorders are no longer considered to be very rare, with as many as one in every 1,200 people in the United States having some form of PI. On May 9, 2019, the FDA approved the Prior Approval Supplement (the “PAS”) for the use of our IVIG manufacturing process, thereby enabling us to re-launch and commercialize this product in the United States. We resumed production of BIVIGAM during the fourth quarter of 2017 and commercial production is ongoing, using our FDA-approved IVIG manufacturing process under U.S. Department of Health and Human Services (“HHS”) License No. 2019. The commercial re-launch and first commercial sales for this product commenced in August of 2019. On April 28, 2021, we announced that the FDA granted approval for our expanded plasma pool production scale process, allowing for a 4,400-liter plasma pool for the manufacture of our BIVIGAM IVIG product. This increased IVIG plasma pool scale, which allows us to produce BIVIGAM at an expanded capacity utilizing the same equipment, release testing assays and labor force, has had a favorable impact on our gross margins and operating results. ASCENIV ASCENIV is a plasma-derived IVIG that contains naturally occurring polyclonal antibodies, which are proteins that are used by the body’s immune system to neutralize microbes, such as bacteria and viruses, and prevent against infection and disease. We manufacture ASCENIV under HHS License No. 2019 using a process known as fractionation. The Centers for Medicare and Medicaid Services (“CMS”) has issued a permanent, product-specific-J-code for ASCENIV. Under the Healthcare Common Procedure Coding System (“HCPCS”), the J-code (J1554) became effective April 1, 2021. As part of our proprietary manufacturing process for ASCENIV, we leverage our unique, patented plasma donor screening methodology and tailored plasma pooling design, which blends normal source plasma and plasma from donors tested to have high levels of neutralizing antibody titers to Respiratory Syncytial Virus (“RSV”) using our proprietary microneutralization testing assay. We are able to identify the high titer or “hyperimmune” plasma that meets our internal and required specifications for ASCENIV with our patented testing methods and assay. This type of high titer plasma is typically found in less than 10% of the total donor collection samples we test. 22 Index ASCENIV is approved for the treatment of Primary Immune Deficiency Disorder (“PIDD”), a class of inherited genetic disorders that causes a deficient or absent immune system in adults and adolescents (12 to 17 years of age). Our pivotal Phase III clinical trial in 59 PIDD patients met the primary endpoint of no Serious Bacterial Infections (“SBI”) reported during 12 months of treatment. Secondary efficacy endpoints further demonstrated the benefits of ASCENIV in the low incidence of infection, therapeutic antibiotic use, days missed from work/school/daycare and unscheduled medical visits and hospitalizations. We believe this clinical data together with the FDA approval for the treatment of PIDD better positions ADMA to potentially further evaluate ASCENIV in immune-compromised patients infected with or at-risk for RSV infection or potentially other respiratory viral pathogens at an appropriate time. Due to the COVID-19 pandemic, our plans have been delayed. In the future however, we may work with the FDA and the immunology and infectious disease community to design an appropriate clinical trial to evaluate the use of ASCENIV in this patient population. Commercial sales of ASCENIV commenced in October of 2019 and our commercial and medical education efforts are focused on the labeled indication of patients with PIDD. ASCENIV’s prescriber and patient base continued to expand during the fourth quarter of 2022, which drove record utilization and pull-through for the product. These elevated demand trends have sustained into 2023, and ADMA currently expects that this product’s rapid growth will continue throughout 2023 and beyond. The FDA granted approval for our expanded plasma pool production scale process, allowing for a 4,400-liter plasma pool for the manufacture of the ASCEINV IVIG product. This increased IVIG plasma pool scale, which allows us to produce ASCENIV at an expanded capacity utilizing the same equipment, release testing assays and labor force, is expected to have a favorable impact on our gross margins and operating results. During the second quarter of 2023, ADMA successfully commenced manufacturing of ASCENIV at the 4,400 Liter production scale for the first time in corporate history. Nabi-HB Nabi-HB is a hyperimmune globulin that is rich in antibodies to the Hepatitis B virus. Nabi-HB is a purified human polyclonal antibody product collected from plasma donors who have been previously vaccinated with a Hepatitis B vaccine. Nabi-HB is indicated for the treatment of acute exposure to blood containing HBsAg, prenatal exposure of infants born to HBsAg-positive mothers, sexual exposure to HBsAg-positive persons and household exposure to persons with acute Hepatitis B virus infection in specific, listed settings. Hepatitis B is a potentially life-threatening liver infection caused by the Hepatitis B virus. It is a major global health problem. It can cause chronic infection and puts people at high risk of death from cirrhosis and liver cancer. Nabi-HB has a well-documented record of long-term safety and effectiveness since its initial market introduction. The FDA approved Nabi-HB on March 24, 1999. Production of Nabi-HB at the Boca Facility has continued under our leadership since the third quarter of 2017. In early 2018, we received authorization from the FDA for the release of our first commercial batch of Nabi-HB for commercial distribution in the U.S. and we continue to manufacture Nabi-HB under HHS License No. 2019. POTENTIAL IMPACT OF COVID-19 We continue to monitor the ongoing developments related to the COVID-19 pandemic, including the emergence of the Delta, Omicron and BA.2 variants and other resistant strains of the coronavirus, and its impacts to our 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 previously mandated 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, we experienced at times lower than normal donor collections at our FDA approved plasma collection centers during 2021 and part of 2022. From time to time during 2021 and 2022, we were also subject to delays in shipments of source plasma from our 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 our products. In addition, we have been subject to supply chain delays as a result of certain of our suppliers diverting significant resources towards the rapid development and distribution of COVID-19 vaccines and, as a result, we have elected to carry more raw materials inventory than we have in the past. The COVID-19 pandemic previously impacted, to a certain degree, our 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 our ability to communicate with potential customers. 23 Index The pandemic could also impact our ability to interact with the FDA or other regulatory authorities and could result in delays in the conduct of inspections or review of pending applications or submissions. Although we have received FDA approvals for five of our plasma collection centers since January 1, 2022 and received several other FDA approvals while 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 future regulatory submissions or applications that may be impacted by restrictions related to COVID-19. During the three months ended March 31, 2023 and 2022, our revenue attributable to international customers was approximately 7% and 6%, respectively, of our total revenues. As we seek to grow this aspect of our business, we 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 our financial condition or results of operations, and we do not believe that our production operations at the Boca Facility, our contract fill/finishers or our plasma collection facilities have been significantly impacted by the COVID-19 pandemic. As a result, we do not anticipate and have not experienced any material impairments with respect to any of our long-lived assets, including our property and equipment, goodwill or intangible assets. Although the COVID-19 pandemic has not, to date, materially adversely impacted our capital and financial resources, because we are unable to determine the ultimate severity or duration of the pandemic or its long-term effects on, among other things, the global, national or local economies, the capital and credit markets or our workforce, customers or suppliers, at this time we are unable to predict whether COVID-19, or any known or future variant or government order, will have a material adverse impact on our business, financial condition, liquidity and results of operations. After the COVID-19 global pandemic has settled, we may continue to experience adverse impacts to our business as a result of evolving macroeconomic factors, including general economic uncertainty, unemployment rates, inflationary pressures and any actual economic recession that has occurred or may occur in the future. RESULTS OF OPERATIONS Critical Accounting Policies and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our condensed consolidated financial statements, which have been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates and assumptions, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates. Significant estimates include rebates and certain other deductions from gross revenues, impairment of long-lived assets, assumptions used in projecting future liquidity and capital requirements, assumptions used in the fair value of awards granted under our equity incentive plans and warrants issued in connection with the issuance of notes payable and the valuation allowance for our deferred tax assets. Some of the estimates and assumptions we have to make under U.S. GAAP require difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, actual results could differ from those estimates. Due to the estimation processes involved, the following summary of accounting estimates and their application are considered to be critical to understanding our business operations, financial condition and results of operations. For a description of our significant accounting policies, see Note 2 to the Consolidated Financial Statements included in the 2022 10-K. Estimates and assumptions used in projecting future liquidity and capital requirements are described in Note 1 to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. 24 Index Revenues Our gross product revenues are subject to a variety of deductions, which are estimated and recorded in the same period that the revenues are recognized. These deductions primarily consist of rebates, distribution fees, chargebacks and sales allowances. These deductions represent estimates of the related obligations, some of which are contractual in nature and do not require extensive judgment to be exercised by management, while other estimates require complex or subjective matters of knowledge and judgment when estimating the impact of these revenue deductions on net revenues for a reporting period. Historically, adjustments to these estimates to reflect actual results or updated expectations have not been material to our overall business. However, two of our primary immunoglobulin products, ASCENIV and BIVIGAM, were only approved for commercial sale by the FDA in 2019, and as such our historical experience with rebates with respect to these products is limited. If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate estimates of our future experience, our results could be materially affected. Estimates that are most at risk for material adjustment are those associated with U.S. Medicaid rebates because of the extensive time delay between the recording of the accrual and its ultimate settlement, an interval that can generally take up to several years or more. While our results of operations to date have not required any material adjustment due to this risk, the delay between when this obligation is initially recorded and ultimately settled could potentially materially impact our revenues and our results of operations in the future. Stock-Based Compensation and Valuation of Warrants All equity-based payments, including grants of stock options and Restricted Stock Units (“RSUs”) are recognized at their estimated fair value at the date of grant, and compensation expense is recognized on a straight-line basis over the grantee’s requisite vesting period. For the purpose of valuing stock options granted to our employees, directors and officers, we use the Black-Scholes option pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the underlying Black-Scholes assumptions can materially affect the fair value estimate. To determine the risk-free interest rate, we utilize the U.S. Treasury yield curve in effect at the time of the grant with a term consistent with the expected term of our awards. The expected term of the options granted is in accordance with U.S. Securities and Exchange Commission (“SEC”) Staff Accounting Bulletins 107 and 110 and is based on the average between vesting terms and contractual terms. The expected dividend yield reflects our current and expected future policy for dividends on our Common Stock. The expected stock price volatility for our stock options was calculated by examining the historical volatility of our Common Stock since our Common Stock became publicly traded in the fourth quarter of 2013. We will continue to analyze the expected stock price volatility and expected term assumptions and will adjust our Black-Scholes option pricing assumptions as appropriate. Any changes in the foregoing Black-Scholes assumptions, or if we were to elect to utilize an alternative method for valuing stock options granted to employees, directors and officers, could potentially impact our stock-based compensation expense and our results of operations. We also use the Black-Scholes option valuation model for the purpose of estimating the fair value of warrants we issue from time to time in connection with the issuance of notes payable. Changes in our Black-Scholes assumptions, or if we were to utilize an alternative method for valuing warrants issued to our lenders, could impact our interest expense and results of operations. Impairment of Long-Lived Assets We assess the recoverability of our long-lived assets, which include property and equipment and definite-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 three months ended March 31, 2023 and 2022, we determined that there was no impairment of our long-lived assets. Examples of events or circumstances that may be indicative of impairment that would require the use of significant judgment by management include: 25 Index • A significant adverse change in legal factors or in the business climate that could affect the value of the asset. • Significant and continued cash flow losses. • A significant adverse change in the extent or manner in which an asset is used, such as a restriction imposed by the FDA or other regulatory authorities that could affect our ability to manufacture our products using a particular asset. • An expectation of losses or reduced profits associated with an asset. This could result, for example, from the introduction of a competitor’s product that impacts projected revenue growth, or a change in the acceptance of a product by patients, physicians and payers that results in an inability to sustain projected product revenues. Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators exist. The testing of goodwill for impairment requires us to determine whether or not the fair value of the reporting unit associated with the goodwill is less than its carrying amount, including goodwill and other intangible assets. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value, with the impairment loss recognized not to exceed the total amount of goodwill allocated to that reporting unit. In order to determine the fair value of the reporting unit, we utilize the fair value of the Company as a whole, as determined by its market capitalization. Determination of the fair value and carrying value of each reporting unit, relative to the fair value of the Company, requires management to employ certain estimates, assumptions and judgment, which we believe are reasonable. However, any changes to these estimates and assumptions could impact our determination of whether or not our goodwill is impaired. We did not recognize any impairment charges related to goodwill for the three months ended March 31, 2023 and 2022. Deferred Tax Assets We maintain a full valuation allowance against all of our net deferred tax assets, and as a result have recorded no income tax benefit in the accompanying consolidated financial statements. This valuation allowance reflects our assessment of whether it is more likely than not that we will generate sufficient taxable income in the future to be able to utilize our deferred tax assets. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies. We consider all positive and negative evidence to estimate if sufficient future taxable income will be generated to realize our deferred tax assets. We consider cumulative losses in recent years to be a significant type of negative evidence. Based on our history of losses, at this time we have not included future projected taxable income as a source of income to recognize our deferred tax assets. 26 Index Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022 The following table presents a summary of the changes in our results of operations for the three months ended March 31, 2023, our first fiscal quarter, compared to the three months ended March 31, 2022: Three Months Ended March 31, 2023 2022 Increase (Decrease) Revenues $ 56,913,534 $ 29,103,093 $ 27,810,441 Cost of product revenue 40,400,544 25,441,046 14,959,498 Gross profit 16,512,990 3,662,047 12,850,943 Research and development expenses 855,351 624,111 231,240 Plasma center operating expenses 1,780,463 3,974,589 (2,194,126 ) Amortization of intangibles 178,838 178,838 - Selling, general and administrative expenses 14,511,656 13,699,575 812,081 Loss from operations (813,318 ) (14,815,066 ) 14,001,748 Interest expense (6,115,484 ) (3,389,038 ) (2,726,446 ) Loss on extinguishment of debt - (6,669,941 ) 6,669,941 Other income (expense), net 139,987 (133,812 ) 273,799 Net loss $ (6,788,815 ) $ (25,007,857 ) $ 18,219,042 Adjusted EBITDA * $ 2,469,800 $ (11,717,273 ) $ 14,187,073 * - See Non-GAAP Financial Measures appearing at the end of this discussion Revenues We recorded total revenues of $56.9 million during the three months ended March 31, 2023, as compared to $29.1 million during the three months ended March 31, 2022, an increase of $27.8 million, or approximately 96%. The increase is primarily related to increased sales of our immunoglobulin products, mainly ASCENIV and BIVIGAM, generated by our Boca Facility manufacturing operations in 2023 of $23.8 million, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV and expand our customer base for BIVIGAM. We also benefitted from a substantial increase in sales of normal source plasma through our Plasma Collection Centers business segment of $4.0 million. During the first quarter of 2023, we fulfilled our entire commitment to supply normal source plasma to our third-party customer for fiscal 2023. As a result, we do not expect to generate comparable revenues from our Plasma Collection Centers during the remainder of 2023, as we anticipate using all of the plasma collected during that period to support our IVIG production operations. Cost of Product Revenue and Gross Profit Cost of product revenue was $40.4 million for the three months ended March 31, 2023, as compared to $25.4 million for the three months ended March 31, 2022. This increase is primarily attributable to volume-driven increases in product revenue costs related to the increased sales of our immunoglobulin products of $15.2 million and increased sales of normal source plasma by our Plasma Collection Centers business segment in the amount of $3.0 million. These increases were partially offset by a decrease in other manufacturing expenses of approximately $3.3 million in the first quarter of 2023 as compared to the same period of a year ago, mainly due to a shorter routine shutdown of the Boca Facility in 2023 as compared to 2022. For the three months ended March 31, 2023, we had gross profit of $16.5 million, as compared to $3.7 million for the same period of a year ago. This gross profit improvement of approximately $12.9 million was primarily due to the revenue increases and the reduction in other manufacturing costs discussed above as we elected to extend our otherwise-routine plant shutdown in the first quarter of 2022 in order to complete certain projects. As a result, we achieved a gross margin of 29.0% in the first quarter of 2023 as compared to 12.6% in the first quarter of 2022. 27 Index Research and Development Expenses Research and development (“R&D”) expenses totaled $0.9 million for the first quarter of 2023, as compared to $0.6 million for the first quarter of 2022. The increase is primarily due to higher expenditures related to the BIVIGAM and ASCENIV post-marketing commitments we have with the FDA, which are required to be completed by June of 2023 (see Note 10 to the consolidated financial statements). Plasma Center Operating Expenses Plasma Center Operating Expenses decreased from $4.0 million in the first quarter of 2022 to $1.8 million in the first quarter of 2023. As a result of our plasma center expansion initiatives, including three additional plasma collection facilities that opened subsequent to March 31, 2022, we experienced a significant increase in the number of liters of plasma collected in the first quarter of 2023 as compared to the first quarter of 2022. In addition, as a result of changes in the market price of normal source plasma and the impact on the net realizable value of our plasma inventory, the amount of plasma center costs we capitalized into inventory increased by approximately $10.6 million in the first quarter of 2023 as compared to the same period of a year ago. This amount was largely offset by increases in donor fees of $3.4 million, compensation and benefits of $1.1 million, softgoods and supplies of $1.3 million, donor testing expenses of $1.1 million, depreciation of $0.3 million, temporary labor expenses of $0.3 million, software maintenance expense of $0.2 million, utilities and janitorial expense of $0.2 million, travel expenses of $0.1 million, transportation costs of $0.1 million, advertising expense of $0.1 million, repairs and maintenance expense of $0.1 million and rent of $0.1 million. Amortization of Intangibles Amortization expense pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.2 million for the three months ended March 31, 2023 and 2022. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses were $14.5 million for the three months ended March 31, 2023, an increase of $0.8 million from the three months ended March 31, 2022. The increase reflects increases in data services and market intelligence fees in support of the continued ASCENIV and BIVIGAM commercialization efforts in the amount of $0.7 million, other professional services of $0.6 million, insurance expense of $0.2 million, employee recruiting of $0.2 million, software maintenance expense of $0.2 million, utilities and janitorial expense of $0.1 million, marketing expenses of $0.1 million and travel and entertainment costs of $0.1 million, partially offset by the non-recurring professional fees incurred in connection with the Morgan Stanley strategic alternatives process during the first quarter of 2022 in the amount of $1.4 million. Loss from Operations Our operating loss was $0.8 million for the first quarter of 2023, as compared to $14.8 million for the first quarter of 2022. The $14.0 million decrease in operating loss was mainly due to the improved gross profit of $12.9 million and the reduction in Plasma Center Operating expenses of $2.2 million, partially offset by the increases in R&D and SG&A. Interest Expense Interest expense for the three months ended March 31, 2023 was $6.1 million, as compared to $3.4 million for the three months ended March 31, 2022. The increase is mainly due to approximately $55.7 million of additional debt principal resulting from the refinancing of our senior credit facility on March 23, 2022 (see Note 7 to the consolidated financial statements and “Liquidity and Capital Resources”), including interest payments made “in kind” in the form of additional indebtedness of approximately $4.0 million, as well as an increase in the stated interest rate on our senior debt from 10.75% in 2022 to 14.1% in 2023. Other Income (Expense), Net Other income, net, for the three months ended March 31, 2023 was $0.1 million, as compared to other expense, net, of $0.1 million for the three months ended March 31, 2022. The increase is mainly due to an increase in interest and other income of approximately $0.2 million in 2023, and to several non-recurring non-operational charges in 2022 of approximately $0.2 million. 28 Index Net Loss Our net loss was $6.8 million for the first quarter of 2023, as compared to $25.0 million for the first quarter of 2022. The $18.2 million decrease in net loss was mainly due to the narrowed operating loss of $14.0 million attributable to the increased revenues and gross profit and the loss on extinguishment of debt of $6.7 million we recorded in the first quarter of 2022 in connection with the refinancing of our senior credit facility, partially offset by the increase in interest expense. Non-GAAP Financial Measures Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA EBITDA and Adjusted EBITDA are important non-GAAP financial measures used by our management and board of directors to assess our operating performance. We use EBITDA and Adjusted EBITDA as key performance measures because we believe that they facilitate operating performance comparisons from period to period that exclude potential differences driven by the impact of variations of non-cash items such as depreciation and amortization, as well as, in the case of Adjusted EBITDA, stock-based compensation or certain non-recurring items. In addition, we believe that EBITDA and Adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other parties in evaluating companies in our industry as a measure of financial performance and debt-service capabilities. See below for a reconciliation of our EBITDA and Adjusted EBITDA to net income/loss, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP. Because EBITDA and Adjusted EBITDA are measures not deemed to be in accordance with U.S. GAAP and are susceptible to varying calculations, our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate EBITDA and Adjusted EBITDA in a different manner than we calculate these measurements. Although the Company uses Adjusted EBITDA as one of several financial measures to assess its operating performance, its use is limited as it excludes certain significant operating expenses. EBITDA and Adjusted EBITDA are not intended to represent cash flows for the periods presented, nor have they been presented as an alternative to operating income/loss, net income/loss or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP. The following table presents the reconciliation of net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2023 and 2022: Three Months Ended March 31, 2023 2022 Net loss $ (6,788,815 ) $ (25,007,857 ) Depreciation 1,854,127 1,411,378 Amortization 178,838 178,839 Interest expense 6,115,484 3,389,038 EBITDA 1,359,634 (20,028,602 ) Stock-based compensation 1,110,166 1,641,388 Loss on extinguishment of debt - 6,669,941 Adjusted EBITDA $ 2,469,800 $ (11,717,273 ) Adjusted EBITDA increased by $14.2 million for the three months ended March 31, 2023 as compared to the same period of a year ago. The improvement is driven primarily by the lower net loss attributable to increased sales and gross profit and, to a lesser extent, lower total operating expenses in 2023. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2023, we had working capital of $227.4 million, primarily consisting of $164.0 million of inventory, cash and cash equivalents of $69.2 million and $26.5 million of accounts receivable, partially offset by current liabilities of $36.7 million, as compared to working capital at December 31, 2022 of $231.1 million, primarily consisting of $163.3 million of inventory, cash and cash equivalents of $86.5 million and accounts receivable of $15.5 million, partially offset by current liabilities of $39.3 million. We have incurred an accumulated deficit of $484.8 million since inception and had negative cash flows from operations of $14.7 million and $26.0 million for the three months ended March 31, 2023 and 2022, respectively, and $59.5 million and $112.4 million for the years ended December 31, 2022 and 2021, respectively. We have funded our operations over the past few years primarily from the sale of our equity and debt securities. Our material cash requirements are primarily comprised of: 29 Index • The procurement of raw material plasma and other raw materials necessary to maintain and scale up our manufacturing operations; • Employee compensation and benefits; • Capital expenditures to complete the buildout for and maintain our plasma collection facilities and for equipment upgrades and capacity expansion at the Boca Facility; • Plasma donor fees and plasma center supplies; • Interest on our debt; • Marketing programs and continued commercialization efforts; • Boca Facility maintenance, repairs and supplies; and • Conducting required post-marketing clinical trials for our FDA-approved products. In addition, our end-to-end production cycle time from procurement of raw materials to commercial release of finished product can take between seven and 12 months or potentially longer, requiring substantial inventories of raw material plasma and other manufacturing materials and single use disposables. We expect that we will not be able to generate a sufficient amount of product revenue to achieve profitability until the beginning of 2024. We currently anticipate, based upon our projected revenue and expenditures, that our current cash, cash equivalents and accounts receivable will be sufficient to fund our operations, as currently conducted, through the end of the second quarter of 2024, by which time we believe we will begin to generate positive cash flow from operations. This time frame may change based on several factors, including the success of our commercial efforts with respect to the sale of our products and the acceptability of our immune globulin products by physicians, patients or payers, and whether or not the assumptions underlying our projected revenues and expenses are correct. If we are unable to achieve positive cash flow by the beginning of 2024, we may need to raise additional capital and if such capital is not available due to widespread liquidity constraints or significant market instability that could result from the COVID-19 pandemic, inflationary pressures or other factors beyond our control, we may have to delay, curtail or eliminate some of our commercialization efforts or product development activities. If we are unable to generate sufficient revenue to achieve positive cash flow by the beginning of 2024 and need to raise additional capital, we may decide to do so through public or private equity offerings or debt financings, or we may enter into a corporate collaboration or licensing arrangement. The sale of additional equity or debt securities, if convertible, could result in dilution to our stockholders and, in such event, the value and potential future market price of our common stock may decline. ADMA 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. On March 23, 2022, (the “Hayfin Closing Date”) we and all of our 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”). Pursuant to an amendment to the Hayfin Credit Agreement dated May 1, 2023 (the “Hayfin Second Amendment”), the obligation of the lenders to make the Hayfin Delayed Draw Loan expires on December 31, 2023, and was subject to the satisfaction of certain conditions, including, but not limited to, our meeting certain 12-month revenue targets as set forth in the Hayfin Credit Agreement which have been met. 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, we used $100.0 million of the Hayfin Closing Date Loan to terminate and pay in full all of the outstanding obligations under our previous senior credit facility with Perceptive (see Note 7 to the Consolidated Financial Statements). We 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. The remainder of the proceeds received or to be received from the Hayfin Loans are being used for working capital and other general corporate purposes. 30 Index After giving effect to the Hayfin Second Amendment, borrowings under the Hayfin Credit Agreement currently bear interest at the adjusted Term SOFR for either a one-month or three-month tenor, as elected by us, and subject to a floor of 1.25%, plus an applicable margin of 8.5% (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. We will also 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. Such interest paid “in kind” will reduce our quarterly cash interest obligation by approximately $1.0 million and will be added to the principal amount of the outstanding debt under the Hayfin Credit Facility. As a result, our outstanding debt principal on the Hayfin Loans will increase each month as long as we elect to continue to pay a portion of our interest obligation “in kind.” On the Hayfin Closing Date and as of March 31, 2023, the stated interest rate on the Hayfin Loans was 10.75% and 14.4%, respectively. On the last day of each calendar month or quarter during the term of the Hayfin Credit Facility, we are required to pay accrued interest to Hayfin of approximately $1.5 million per month or approximately $4.4 million per quarter based on current interest rates, after giving effect to the “in kind” interest of 2.5% per annum, but without giving effect to the Hayfin Delayed Draw Loan, which we have yet to draw upon. On the Hayfin Maturity Date, we 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. Prior to the Hayfin Maturity Date, there are no scheduled principal payments on the Hayfin Loans. We 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) a 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 Second Amendment, (ii) 3.0% of the prepaid principal amount, if prepaid after the first anniversary of the Hayfin Second Amendment and on or prior to the second anniversary of the Hayfin Second Amendment, or (iii) 1.0% of the prepaid principal amount, if prepaid after the second anniversary of the Hayfin Second Amendment and on or prior to the third anniversary of the Hayfin Second Amendment. The Hayfin Second Amendment also provides for a 50% reduction to the foregoing early prepayment fees if the Hayfin Loans are prepaid under certain circumstances as defined in the Hayfin Second Amendment. In addition, for any prepayments of principal, we are required to pay the 1.0% exit fee for the amount of principal being paid. All of our obligations under the Hayfin Credit Agreement are secured by a first-priority lien and security interest in substantially all of our tangible and intangible assets, including intellectual property and all of the equity interests in our 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 our ability and the ability of our 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 our or our subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Hayfin Credit Agreement); change our fiscal year; pay dividends; repay other certain indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the impact of restricting our ability to make loan repayments under the Hayfin Credit Agreement. In addition, we are 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 ending June 30, 2022 to $250.0 million for the fiscal quarter ending December 31, 2026 and each fiscal quarter thereafter. As of March 31, 2023, we were in compliance with all of the financial covenants contained in the Hayfin Credit Agreement. On December 9, 2022, we completed an underwritten public offering whereby we issued 24,125,873 shares of our common stock. Net proceeds after underwriting discounts and expenses associated with the offering were approximately $64.6 million and are being used to accelerate commercialization and production activities, complete plasma center buildouts and obtain FDA approvals, to conclude post‑FDA marketing approval research and development projects, and for working capital, capital expenditures and general corporate purposes. 31 Index On September 3, 2021, we entered into a distribution agreement with Raymond James & Associates, Inc., as agent (“Agent”), pursuant to which we may offer and sell, from time to time, at our option, through or to the Agent, up to an aggregate of $50 million of shares of our common stock (the “Distribution Agreement”). We currently intend to use any net proceeds from the sale of our 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. We currently have approximately $42.8 million of shares available to sell under the Distribution Agreement. Cash Flows The following table sets forth a summary of our cash flows for the periods indicated: Three Months Ended March 31, 2023 2022 Net cash used in operating activities $ (14,722,274 ) $ (26,013,413 ) Net cash used in investing activities (1,944,596 ) (2,842,085 ) Net cash (used in) provided by financing activities (650,509 ) 47,271,326 Net change in cash and cash equivalents (17,317,379 ) 18,415,828 Cash and cash equivalents - beginning of period 86,521,542 51,089,118 Cash and cash equivalents - end of period $ 69,204,163 $ 69,504,946 Net Cash Used in Operating Activities Cash used in operations for the three months ended March 31, 2023 was $14.7 million, a decrease of $11.3 million from the same period of a year ago, mainly due to a lower net loss after non-cash items. The following table illustrates the primary components of and changes to our cash flows from operations: Three Months Ended March 31, 2023 2022 Net loss $ (6,788,815 ) $ (25,007,857 ) Non-cash expenses, gains and losses 4,593,386 10,452,680 Changes in accounts receivable (11,013,446 ) 2,947,233 Changes in inventories (704,826 ) (14,422,219 ) Changes in prepaid expenses and other current assets 716,465 (1,180,056 ) Changes in accounts payable and accrued expenses (1,626,719 ) (89,802 ) Other 101,681 1,286,608 Cash used in operations $ (14,722,274 ) $ (26,013,413 ) Net Cash Used in Investing Activities Net cash used in investing activities for the three months ended March 31, 2023 and 2022 was $1.9 million and $2.8 million, respectively, consisting of capital expenditures for the construction and buildout of new plasma collection centers and related equipment and capital expenditures at the Boca Facility. While we currently have no firm commitments for capital expenditures, we expect our total capital expenditures will be between $7.0 million and $9.0 million for the remainder of fiscal 2023, mainly for additional upgrades to the Boca Facility manufacturing operations and related systems. Net Cash Provided by Financing Activities Cash used in financing activities was $0.7 million for the three months ended March 31, 2023, as compared to cash provided by financing activities was $47.3 million for the three months ended March 31, 2022 which mainly consisted of proceeds received from the Hayfin Credit Facility, net of payments to retire our previously existing credit facility with Perceptive (see Note 7 to the Consolidated Financial Statements). 32 Index Effect of Inflation Inflation impacted a number of facets of our business during the three months ended March 31, 2023 and 2022 at both of our business segments. We experienced price increases for, among other items, certain raw materials, consumable supplies, services for repairs and maintenance of our facilities, utilities, shipping and freight charges, fuel surcharges and labor costs. We expect this trend to continue through 2023 and potentially longer, which could have a significant impact on our future results of operations. In addition, some of our plasma purchase agreements provide for annual price increases that are tied to various consumer price indices, which have resulted in higher than historical percentage price increases and has resulted in and is expected to continue to result in higher source plasma and other raw material and supplies costs in the remainder of 2023 and future periods. Off-Balance Sheet Arrangements None. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.