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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 286 added, 289 removed, 250 unchanged (70% of the section changed)

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, 2023, filed on February 28, 2024 (the “2023 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.

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, 2023, filed on February 28, 2024 (the “2023 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.

ADMA Biologics, Inc.

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treatment of PI, and for which we received FDA approval on May 9, 2019 and commenced commercial sales in August 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.

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 a product based on our most recently approved patent application under U.S.

10,259,865 related to methods of

treatment and prevention of S.

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.

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 have successfully completed production of a pilot-scale batch and identified a laboratory partner to conduct forthcoming animal studies for our S.

pneumoniae hyperimmune globulin

program, SG-001.

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 processing capability of up to 600,000

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Through our ADMA BioCenters subsidiary, we currently operate ten source plasma collection facilities in the United States, all of which hold FDA licenses.

This business unit, which we refer to as our Plasma Collection

Centers business segment, provides us with the blood plasma required for the manufacture of our products, and also allows us to sell certain quantities of source and hyperimmune plasma to third-party customers for further manufacturing.

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.

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.

This business unit, which we refer to as our Plasma

Collection Centers business segment, provides us with the blood plasma required for the manufacture of our products, and also allows us to sell certain quantities of source and hyperimmune plasma to third-party customers for further

manufacturing.

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.

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.

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, through a plasma intermediates supply agreement we

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These intermediate by-products are used as the starting raw material to produce other plasma-derived biologics.

In addition, from time to time we provide contract manufacturing services for certain third-party clients.

In addition, from time to time we provide contract manufacturing services for certain third-party

We also provide laboratory contracting services to certain customers and anticipate providing contract filling, labeling and packing services utilizing our FDA-approved in-house fill-finish capabilities.

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The Centers for Medicare and Medicaid Services (“CMS”) has issued a permanent, product-specific J-code for ASCENIV.

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.

patented testing methods and assay, we are able to identify the high-titer or “hyperimmune” plasma that meets our internal and required specifications for ASCENIV.

This type of high-titer plasma is typically found in less than 10% of the total

donor collection samples we test.

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.

With our patented testing methods and assay, we are able to identify the high-titer or “hyperimmune” plasma that meets our internal and required specifications for ASCENIV.

This type of high-titer plasma is typically found in less than 10% of the

total donor collection samples we test.

ASCENIV is approved for the treatment of PIDD or PI, a class of inherited genetic disorders that causes a deficient or absent immune system in adults and adolescents (12 to 17 years of

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Following FDA approval in April 2019, commercial sales of ASCENIV commenced in

October of 2019 and in 2023 ADMA commenced manufacturing ASCENIV at the 4,400 Liter production scale for the first time in the Company’s history.

This expansion has improved the product’s margin profile and increases plant production

capacity as fewer batches are needed to support our revenue goals .

October of 2019 and in 2023 ADMA commenced manufacturing ASCENIV at the 4,400-Liter production scale.

This expansion has improved the product’s margin profile and increases plant production capacity as fewer batches are needed to support

our revenue goals .

ASCENIV’s prescriber and patient base continued to expand during 2023, which drove record utilization and pull-through for this product.

elevated demand trends have sustained into 2024, and ADMA currently expects that this product’s rapid growth will continue throughout 2024 and beyond.

These elevated demand trends have sustained

into 2024, and ADMA currently expects that this product’s rapid growth will continue throughout 2024 and beyond.

BIVIGAM is a plasma-derived IVIG that contains a broad range of antibodies similar to those found in normal human plasma.

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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.

production of BIVIGAM during the fourth quarter of 2017 and commercial production is ongoing, using our FDA-approved IVIG manufacturing process under U.S.

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.

The commercial re-launch

and first commercial sales for this product commenced in August of 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.

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Hepatitis B is a potentially life-threatening liver infection caused by the Hepatitis B virus, which is a major global health problem.

The Hepatitis B virus can cause chronic infection

and places people at high risk of death from cirrhosis and liver cancer.

The Hepatitis B virus can cause chronic

infection and places 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

United States and we continue to manufacture Nabi-HB under HHS License No.

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 United States and we continue to manufacture Nabi-HB under HHS License No.

RESULTS OF OPERATIONS

Critical Accounting 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.

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.

principles generally accepted in the United States of America (“U.S.

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.

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

Actual results and experiences may

differ materially from these estimates.

Some of the estimates and assumptions we have to make under U.S.

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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.

These deductions primarily consist of rebates, distribution

fees, chargebacks and sales allowances.

complex or subjective matters of knowledge and judgment when estimating the impact of these revenue deductions on net revenues for a reporting period.

Prior to June 30, 2024, adjustments to these estimates to reflect actual results or updated expectations have not been material to our overall business.

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These estimates may change from time to time based on changes in utilization, payer and channel mixes.

During the three and six months ended June

30, 2024, we engaged a third-party specialist to assist in the evaluation of our accrual for U.S.

During the second quarter of 2024, we

engaged a third-party specialist to assist in the evaluation of our accrual for U.S.

Medicaid rebates related to the sale of our immunoglobulin products.

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corresponding increase to net revenues of $12.6 million in the three months ended June 30, 2024 (see Note 2 to the Consolidated Financial Statements).

The primary driver in our estimated rebates accrual at June 30, 2024 relates to a change in the

assumption around the payor mix for our products, specifically the proportion of our revenue that is attributable to providers and patients utilizing Managed Medicaid, Medicaid and Medicare Part D, relative to our total sales.

The change in this

key assumption to our standing estimation model was based on the collection of additional historical data from our direct experience with selling our primary immunoglobulin products.

Additional changes in estimate assumptions surrounding U.S.

The primary driver in the adjustment to our estimated rebates accrual at June 30, 2024 relates

to a change in the assumption around the payor mix for our products, specifically the proportion of our revenue that is attributable to providers and patients utilizing Managed Medicaid, Medicaid and Medicare Part D, relative to our total sales.

The change in this key assumption to our standing estimation model was based on the collection of additional historical data from our direct experience with selling our primary immunoglobulin products.

Additional changes in estimate assumptions

surrounding U.S.

Medicaid and other rebate obligations could materially impact our revenues and our results of operations in the future.

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the case, would require a charge against earnings to write down the value of the inventory to its net realizable value.

Net realizable value of inventory is based on our management’s estimate of the future net selling price of the inventory, which

is subject to market conditions and the estimation processes we use for revenues as discussed above.

With respect to raw materials inventory, we are required to estimate the level and timing of usage of these materials prior to their expiration

dates in determining whether it is appropriate to carry these materials on our balance sheet as a valid asset of the Company.

Changes in either of these estimates could materially impact our cost of product revenue and results of operations.

Net realizable value of inventory is based on our management’s estimate of the future net selling price of the inventory,

which is subject to market conditions and the estimation processes we use for revenues as discussed above.

With respect to raw materials inventory, we are required to estimate the level and timing of usage of these materials prior to their

expiration dates in determining whether it is appropriate to carry these materials on our balance sheet as a valid asset of the Company.

Changes in either of these estimates could materially impact our cost of product revenue and results of

Stock-Based Compensation and Valuation of Warrants

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For the purpose of valuing stock options granted to our employees, directors and executive 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.

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 term of our awards.

Treasury yield curve in effect at the time of the grant

with a term consistent with the 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.

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.

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 our election to utilize an alternative method for valuing stock options granted to employees, directors and executive officers, could potentially impact our stock-based compensation expense and our

results of operations.

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.

We will continue to analyze the expected stock price volatility and expected term assumptions and will adjust our Black-Scholes option pricing assumptions as

Any changes in the foregoing Black-Scholes assumptions, or our election to utilize an alternative method for valuing stock options granted to employees, directors and executive 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.

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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 and six months ended June 30, 2024 and 2023, we did not identify any impairment indicators for our long-lived assets,

and as a result no impairment charges were recorded.

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 and nine months ended September 30, 2024 and 2023, we did not identify any impairment indicators for our

long-lived assets, and as a result no impairment charges were recorded.

Examples of events or circumstances that may be indicative of impairment that would require the use of significant judgment by management include:

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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.

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.

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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 and six months ended June 30, 2024 and

We did not recognize any impairment charges related to goodwill for the three and nine months ended

September 30, 2024 and 2023.

Deferred Tax Assets and Effective Tax Rate

We currently maintain a full valuation allowance against all of our net deferred tax assets, and as a result we have historically not recorded an income tax benefit in the accompanying consolidated financial statements

despite continued losses through December 31, 2023.

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.

statements despite continued losses through December 31, 2023.

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

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 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 through December 31,

2023, at this time we have not included future projected taxable income as a source of income to recognize our deferred tax assets, despite our achievement of positive net income for the three and six months ended June 30, 2024.

After consideration of all available positive and negative evidence regarding our estimates of future taxable income, we have elected to maintain a full valuation allowance for our deferred tax assets as of June 30,

We will continue to monitor this evidence through the balance of 2024 to determine if a reduction to the valuation allowance is required, which could potentially result in our recognition of an income tax benefit later in fiscal 2024.

Our income tax expense for the six months ended June 30, 2024 is based on our estimated effective tax rate for the full year 2024, which is a function of our projected net income under U.S.

GAAP, our estimates and

assumptions regarding certain permanent and temporary differences between U.S.

GAAP income and taxable income, and the limitations to our net operating loss carryforwards and their limitations under Section 382 of the Internal Revenue Code of 1986,

as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

The following table presents a summary of the changes in our results of operations for the three months ended June 30, 2024, our second fiscal quarter, compared to the three months ended June 30,

Three Months Ended June 30,

Based on our history of losses through

December 31, 2023, at this time we have not included future projected taxable income as a source of income to recognize our deferred tax assets, despite our achievement of positive net income for the three and nine months ended September 30,

We will continue to monitor this evidence through the remainder of 2024 to determine if a reduction to the valuation allowance is warranted, which could potentially result in our recognition of an income tax benefit later in fiscal

Our income tax expense for the nine months ended September 30, 2024 is based on our estimated effective tax rate for the full year 2024, which is a function of our projected pre-tax income under U.S.

estimates and assumptions regarding certain permanent and temporary differences between U.S.

GAAP income and taxable income, and the limitations to our net operating loss carryforwards and their limitations under Section 382 of the Internal

Revenue Code of 1986, as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

The following table presents a summary of the changes in our results of operations for the three months ended September 30, 2024, our third fiscal quarter, compared to the three months ended

September 30, 2023:

Three Months Ended September 30,

(in thousands)

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Selling, general and administrative expenses

Income (loss) from operations

Income from operations

Interest expense

Other income, net

Income (loss) from before taxes

Income before taxes

Provision for income taxes

Net income (loss)

Adjusted EBITDA *

* - See Non-GAAP Financial Measures appearing at the end of this discussion

We recorded total revenues of $107.2 million for the three months ended June 30, 2024, as compared to $60.1 million for the three months ended June 30, 2023, an increase of $47.1 million, or approximately 78%.

Excluding the $12.6 million adjustment we recorded in the second quarter of 2024 to decrease our accrual for U.S.

Medicaid rebates (which had the effect of increasing net revenues by $12.6 million), revenue would have increased by approximately

$34.4 million, or 57%.

This increase is primarily related to increased sales of our ASCENIV IG product, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV.

We also experienced a $0.6 million increase in third-party plasma sales by our Plasma Collection Centers business segment, as we fulfilled our entire commitment to supply normal source plasma (“NSP”) to our primary

third-party customer for fiscal 2023 in the first quarter of 2023, while that same commitment for fiscal 2024 is being met over the course of the full year.

We recorded total revenues of $119.8 million for the three months ended September 30, 2024, as compared to $67.2 million for the three months ended September 30, 2023, an increase of $52.6 million, or approximately

The increase is primarily related to increased sales of our ASCENIV IG product, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV.

We also experienced a $6.0 million increase in third-party plasma sales by our Plasma Collection Centers business segment, mainly due to an additional spot purchase of normal source plasma (“NSP”) by our primary

third-party customer in excess of the amount of NSP we are contractually committed to sell to this customer in fiscal 2024.

Cost of Product Revenue and Gross Profit

Cost of product revenue was $49.7 million for the three months ended June 30, 2024, as compared to $43.4 million for the three months ended June 30, 2023.

This increase is primarily attributable to volume-driven

increases in product revenue costs related to the increased sales of our IG products and NSP of $7.1 million and $0.5 million, respectively, partially offset by decreases in other manufacturing costs totaling $1.4 million, mainly due to the

inventory losses in the second quarter of 2023 related to the IT systems disruption we experienced in June of 2023.

For the three months ended June 30, 2024, we had gross profit of $57.5 million, as compared to $16.7 million for the same period of a year ago, which represents a gross margin in the second quarter of 2024 of 53.6%, as

compared to 27.8% in the second quarter of 2023.

Excluding the $12.6 million adjustment we recorded in the second quarter of 2024 to reduce our accrual for estimated U.S.

Medicaid rebates, our gross profit for the second quarter of 2024 was $44.8

million, representing a gross margin of 47.4%.

This improvement in gross margin is mainly driven by a significantly more favorable mix of higher margin IG sales in 2024 as compared to 2023, along with the absence of the $2.1 million of inventory

losses experienced in 2023 due to the IT systems disruption.

Cost of product revenue was $60.2 million for the three months ended September 30, 2024, as compared to $42.6 million for the three months ended September 30, 2023.

This increase is primarily attributable to

volume-driven increases in product revenue costs related to the increased sales of our IG products, including intermediates, and NSP of $13.0 million and $6.5 million, respectively, partially offset by decreases in other manufacturing costs

totaling $1.9 million, mainly due to lower unabsorbed manufacturing expenses in 2024.

For the three months ended September 30, 2024, we had gross profit of $59.7 million, as compared to $24.7 million for the same period of a year ago, which represents a gross margin in the third quarter of 2024 of

49.8%, as compared to 36.6% in the third quarter of 2023.

This improvement in gross margin is mainly driven by a significantly more favorable mix of higher margin IG sales in 2024 as compared to 2023, along with the reduction in other

manufacturing costs in the third quarter of 2024 as compared with the third quarter of 2023.

Research and Development Expenses

Research and development (“R&D”) expenses totaled $0.6 million for the second quarter of 2024, as compared to $1.4 million for the second quarter of 2023.

Research and development (“R&D”) expenses totaled $0.4 million for the third quarter of 2024, as compared to $0.6 million for the third quarter of 2023.

The decrease is primarily due to the absence of

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Plasma Center Operating Expenses

Plasma Center Operating Expenses decreased from $1.3 million for the three months ended June 30, 2023 to $0.9 million for the three months ended June 30, 2024.

The decrease is due to a 31% increase in the amount of

plasma collected in the second quarter of 2024 as compared to the second quarter of 2023, which resulted in a $3.7 million increase in the amount of plasma center costs we capitalized into inventory in 2024.

This amount was partially offset by

increases in donor fees of $2.2 million, softgoods and supplies of $0.4 million and donor testing expenses of $0.6 million.

Plasma center operating expenses increased from approximately $0.5 million for the three months ended September 30, 2023 to $1.0 million for the three months ended September 30, 2024.

The increase is primarily due to

increases in donor fees of $0.9 million and softgoods and supplies of $0.3 million, partially offset by an increase in the capitalization of plasma center expenses into inventory of $0.4 million related to increased collections and to lower donor

testing expenses of $0.2 million.

Amortization of Intangibles

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.1 million and $0.2 million for the three months ended June 30, 2024 and 2023,

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $28,000 and $0.2 million for the three months ended September 30, 2024 and 2023,

respectively.

The decrease is mainly due to the intangibles acquired in 2017 becoming fully amortized in June of 2024.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $16.6 million for the three months ended June 30, 2024, an increase of $2.4 million from the three months ended June 30, 2023.

The increase reflects

increases in employee-related costs, including salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $1.3 million, severance expense of $0.3 million and temporary labor, software maintenance expense, insurance

expense and professional service fees in the amount of $0.2 million each.

SG&A expenses as a percentage of net revenues fell from 23.7% in the second quarter of 2023 to 15.5% in the second quarter of 2024, or 17.6% excluding the revenue

adjustment described above.

Income/Loss from Operations

Our operating income was $39.2 million for the second quarter of 2024, as compared to an operating loss of $0.5 million for the second quarter of 2023.

The $39.7 million improvement in operating income was due to the

improved gross profit of $40.8 million, partially offset by an increase in total operating expenses of $1.1 million in 2024.

The higher gross profit reflects the foregoing change in estimate which increased our revenues in the second quarter of

2024 by $12.6 million.

Selling, general and administrative (“SG&A”) expenses were $18.6 million for the three months ended September 30, 2024, an increase of $3.8 million from the three months ended September 30, 2023.

reflects increases in employee-related costs, including salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $3.0 million, temporary labor and software maintenance expense of $0.3 million each and professional

fees in the amount of $0.2 million.

SG&A expenses as a percentage of net revenues fell from 21.9% in the third quarter of 2023 to 15.5% in the third quarter of 2024.

Income from Operations

Our operating income was $39.6 million for the third quarter of 2024, as compared to $8.7 million for the third quarter of 2023.

The approximately $31.0 million improvement in operating income was due to the improved

gross profit of $35.0 million, partially offset by an increase in total operating expenses of $4.1 million in 2024.

Interest Expense

Interest expense for the three months ended June 30, 2024 was $3.8 million, as compared to $6.3 million for the three months ended June 30, 2023.

The decrease is due to the refinancing of our senior debt in December of

2023 (see “Liquidity and Capital Resources”).

This transaction reduced our stated rate of interest from approximately 13.9% in the second quarter of 2023 to approximately 10.3% in the second quarter of 2024, and also resulted in a reduction to our

outstanding debt principal in the second quarter of 2024 compared with the second quarter of 2023 of approximately $21.7 million.

In addition, we had lower amortization of debt discount in 2024 of approximately $0.5 million.

Interest expense for the three months ended September 30, 2024 was $3.5 million, as compared to $6.4 million for the three months ended September 30, 2023.

The decrease is due to the refinancing of our senior debt in

December of 2023 (see “Liquidity and Capital Resources”).

This transaction reduced our stated rate of interest from approximately 13.9% in the third quarter of 2023 to approximately 10.4% in the third quarter of 2024, and also resulted in a

reduction to our outstanding debt principal of approximately $23.6 million.

We also had lower amortization of debt discount in 2024 of approximately $0.5 million.

In addition, our interest expense for the third quarter of 2024 was favorably

impacted by the $30.0 million partial paydown of our senior debt on August 14, 2024.

Other Income, Net

Other income, net, which primarily consists of interest income on our cash balances, was $0.4 million for the three months ended June 30, 2024 and 2023.

Other income, net, which primarily consists of interest income on our cash balances, was $0.6 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively.

Provision for Income Taxes

As a result of our generating pre-tax U.S.

GAAP income of $35.9 million for the three months ended June 30, 2024, we recorded income tax expense of $3.8 million for the three months ending June 30, 2024, with no

comparable amount for the three months ending June 30, 2023.

The provision for income taxes for the second quarter of 2024 represents an effective tax rate of 8.1% for the first six months of 2024 and reflects federal and state income tax

liabilities that are not fully sheltered by net operating losses due to limitations from prior ownership changes and other limitations on net operating loss carryforwards under the Internal Revenue Code of 1986, as amended (see “Risk Factors”

appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Our effective tax rate for the three months ended June 30, 2024 differs from the federal statutory tax rate of 21%, mainly due to the reversal of the

valuation allowance on certain federal and state net operating loss carryforwards expected to be realized in the current year.

Net Income/Loss

Our net income was $32.1 million for the second quarter of 2024, as compared to a net loss of $6.4 million for the second quarter of 2023.

This $38.9 million improvement in our results of operations was primarily due

to the increase in operating income of $39.7 million discussed above and the reduction in interest expense for the period, partially offset by the provision for income taxes in 2024.

The foregoing change in estimate in our accrual for Medicaid

rebates favorably impacted our net income for the second quarter of 2024 by approximately $11.6 million.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

The following table presents a summary of the changes in our results of operations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023:

Six Months Ended June 30,

We recorded income tax expense of $0.8 million for the three months ending September 30, 2024, with no comparable amount for the three months ending September 30, 2023.

The provision for income taxes for the third

quarter of 2024 represents an effective tax rate of 5.7% for the first nine months of 2024 and reflects federal and state income tax liabilities that are not fully sheltered by net operating losses due to limitations from prior ownership changes

and other limitations on net operating loss carryforwards under the Internal Revenue Code of 1986, as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Our effective tax rate for

the three months ended September 30, 2024 differs from the federal statutory tax rate of 21%, mainly due to the reversal of the valuation allowance on certain federal and state net operating loss carryforwards expected to be realized in the

current year and, to a lesser extent, the tax benefit associated with the employee exercise of stock options and vesting of RSUs.

Our net income was $35.9 million for the third quarter of 2024, as compared to $2.6 million for the third quarter of 2023.

The $33.3 million increase was primarily due to the increase in operating income of

approximately $31.0 million discussed above and the reduction in interest expense for the third quarter of 2024.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

The following table presents a summary of the changes in our results of operations for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023:

Nine Months Ended September 30,

(in thousands)

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Selling, general and administrative expenses

Income (loss) from operations

Income from operations

Interest expense

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* - See Non-GAAP Financial Measures appearing at the end of this discussion

We recorded total revenues of $189.1 million for the six months ended June 30, 2024, as compared to $117.0 million for the six months ended June 30, 2023, an increase of approximately $72.0 million, or 62%.

We recorded total revenues of $308.9 million for the nine months ended September 30, 2024, as compared to $184.3 million for the nine months ended September 30, 2023, an increase of $124.6 million, or 68%.

the $12.6 million adjustment we recorded in the second quarter of 2024 to decrease our accrual for U.S.

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million, or 61%.

This increase is primarily related to increased sales of ASCENIV and our other IG products, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV and expand our customer base for

The foregoing increase in IG revenues for the first six months of 2024 was partially offset by a $4.9 million decrease in third-party plasma sales by our Plasma Collection Centers business segment.

During the first

quarter of 2023, we fulfilled our entire commitment to supply NSP to our primary third-party customer for fiscal 2023, while that same commitment for fiscal 2024 is being met over the course of the full year.

This increase is primarily related to increased sales of ASCENIV and our other IG products, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV.

The revenue increase also

includes an increase in NSP sales by our Plasma Collection Centers business segment in the amount of $1.1 million.

Cost of Product Revenue and Gross Profit

Cost of product revenue was $92.5 million for the first six months of 2024, as compared to $83.8 million for the first six months of 2023.

This increase is primarily attributable to volume-driven increases in product

revenue costs related to the increased sales of our IG products of $15.1 million, partially offset by $4.5 million of lower product revenue costs related to plasma sales and a reduction in other manufacturing costs of $1.8 million.

For the six months ended June 30, 2024, we had gross profit of $96.6 million, as compared to $33.2 million for the same period of a year ago, which represents a gross margin in the first six months of 2024 of 51.1%, as

compared to 28.4% in the first six months of 2023.

Cost of product revenue was $152.7 million for the first nine months of 2024, as compared to $126.5 million for the first nine months of 2023.

This increase is primarily attributable to volume-driven increases in

product revenue costs related to the increased sales of our IG products and NSP of $28.1 million and $2.3 million, respectively, partially offset by a reduction in other manufacturing costs, mainly unabsorbed manufacturing expenses, of $4.2

For the nine months ended September 30, 2024, we had gross profit of $156.2 million, as compared to $57.9 million for the same period of a year ago, which represents a gross margin for the first nine months of 2024

of 50.6%, as compared to 31.4% in the first nine months of 2023.

Excluding the $12.6 million adjustment we recorded in the second quarter of 2024 to reduce our accrual for estimated U.S.

Medicaid rebates, our gross profit for the first six months of 2024 was

$83.9 million, representing a gross margin of 47.6%.

This improvement in gross margin is mainly driven by a significantly more favorable mix of higher margin IG sales in 2024 as compared to 2023, along with the reduction in other manufacturing

Medicaid rebates, our gross profit for the first nine

months of 2024 was approximately $143.5 million, representing a gross margin of 48.4%.

The improvement in gross margin is mainly driven by a significantly more favorable mix of higher margin IG sales in 2024 as compared to 2023, along with the

reduction in other manufacturing costs.

Research and Development Expenses

R&D expenses totaled $1.0 million for the first six months of 2024, as compared to $2.3 million for the first six months of 2023.

The decrease is primarily due to the absence of expenditures in 2024 related to the

BIVIGAM post-marketing commitments, which were completed in June of 2023.

R&D expenses totaled $1.4 million for the first nine months of 2024, as compared to $2.9 million for the first nine months of 2023.

The decrease is primarily due to the absence of expenditures in 2024 related to

the BIVIGAM post-marketing commitments, for which we incurred $1.7 million of expenses in 2023, partially offset by an increase in expenses associated with our ASCENIV post-marketing commitment in the amount of $0.3 million.

Plasma Center Operating Expenses

Plasma Center Operating Expenses decreased from $3.1 million for the six months ended June 30, 2023 to $1.9 million for the six months ended June 30, 2024.

The decrease is due to a 34% increase in the amount of plasma

collected in the first six months of 2024 as compared to the first six months of 2023, which resulted in a $7.4 million increase in the amount of plasma center costs we capitalized into inventory in 2024.

This amount was partially offset by

increases in donor fees of $3.5 million, softgoods and supplies of $1.1 million, donor testing expenses of $1.3 million and software maintenance expense of $0.3 million.

Plasma center operating expenses decreased from $3.6 million for the nine months ended September 30, 2023 to $3.0 million for the nine months ended September 30, 2024.

The decrease is due to a 22% increase in the

amount of plasma collected in the first nine months of 2024 as compared to the same period of a year ago, which resulted in a $7.8 million increase in the amount of plasma center costs we capitalized into inventory in 2024.

This amount was

partially offset by increases in donor fees of $4.4 million, softgoods and supplies of $1.4 million, donor testing expenses of $1.0 million, salaries, wages, benefits and temporary labor of $0.2 million and software maintenance expense of $0.2

Amortization of Intangibles

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.3 million and $0.4 million for the six months ended June 30, 2024 and 2023,

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.4 million and $0.5 million for the nine months ended September 30, 2024 and 2023,

respectively.

Selling, General and Administrative Expenses

SG&A expenses were $32.2 million for the six months ended June 30, 2024, an increase of $3.5 million from the six months ended June 30, 2023.

The increase reflects increases in employee-related costs, including

salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $2.5 million, $1.9 million of which is stock-based compensation, repairs and maintenance expense of $0.5 million, software maintenance expense of $0.3 million

and insurance expense of $0.2 million.

SG&A expenses as a percentage of net revenues decreased from 24.6% in the first six months of 2023 to 17.1% in the first six months of 2024, or 18.3% excluding the revenue adjustment described above.

Income/Loss from Operations

Our operating income was $61.0 million for the first six months of 2024, as compared to an operating loss of $1.3 million for the first six months of 2023.

The $62.3 million increase in operating income was mainly due

to the improved gross profit, partially offset by $1.0 million of lower total operating expenses.

The higher gross profit reflects the foregoing change in estimate which increased our revenues for the six months ended June 30, 2024 by $12.6

SG&A expenses were $50.8 million for the nine months ended September 30, 2024, an increase of $7.3 million from the nine months ended September 30, 2023.

The increase reflects increases in employee-related costs,

including salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $5.7 million, $3.1 million of which is stock-based compensation, repairs and maintenance expense of $0.6 million, software maintenance expense of

$0.6 million and temporary labor expense of $0.5 million.

SG&A expenses as a percentage of net revenues decreased from 23.6% in the first nine months of 2023 to 16.4% in the first nine months of 2024, or 17.2% excluding the revenue adjustment

described above.

Income from Operations

Our operating income was $100.7 million for the first nine months of 2024, as compared to $7.4 million for the first nine months of 2023.

The $93.3 million increase in operating income was mainly due to the improved

gross profit, partially offset by $5.1 million of higher total operating expenses.

The higher gross profit reflects the foregoing change in estimate which increased our revenues for the nine months ended September 30, 2024 by $12.6 million.

Interest Expense

Interest expense for the six months ended June 30, 2024 was $7.6 million, as compared to $12.4 million for the six months ended June 30, 2023.

The decrease is due to the refinancing of our senior debt in December of

2023 (see “Liquidity and Capital Resources”).

Interest expense for the nine months ended September 30, 2024 was $11.1 million, as compared to $18.8 million for the nine months ended September 30, 2023.

The decrease is due to the refinancing of our senior debt in

December of 2023 (see “Liquidity and Capital Resources”).

This transaction reduced our stated interest rate by approximately 360 basis points in 2024 compared to 2023, and also resulted in a reduction to our outstanding debt principal balance.

In addition, we

had lower amortization of debt discount in 2024 of approximately $0.7 million.

addition, we had lower amortization of debt discount in 2024 of approximately $1.2 million.

Other Income, Net

Other income, net, for the six months ended June 30, 2024 was $0.8 million, as compared to $0.5 million for the six months ended June 30, 2023.

The increase is mainly due to an increase in interest income of $0.3

million in 2024.

Other income, net, for the nine months ended September 30, 2024 was $1.4 million, as compared to $0.8 million for the nine months ended September 30, 2023.

The increase is mainly due to an increase in interest income

of $0.5 million in 2024.

Provision for Income Taxes

We recorded income tax expense of $4.4 million for the six months ended June 30, 2024, with no comparable amount for the six months ending June 30, 2023.

The provision for income taxes for the first six months of 2024

represents an effective tax rate of 8.1% and reflects federal and state income tax liabilities that are not fully sheltered by net operating losses due to limitations from prior ownership changes and other limitations on net operating loss

carryforwards under the Internal Revenue Code of 1986, as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

After consideration of all available positive and negative evidence

regarding our estimates of future taxable income, we have elected to maintain a full valuation allowance for our deferred tax assets as of June 30, 2024.

We will continue to monitor this evidence through the balance of 2024 to determine if a

reduction to the valuation allowance is required, which could potentially result in our recognition of an income tax benefit later in fiscal 2024.

We recorded income tax expense of $5.2 million for the nine months ended September 30, 2024, with no comparable amount for the nine months ending September 30, 2023.

The provision for income taxes for the first nine

months of 2024 represents an effective tax rate of 5.7% and reflects federal and state income tax liabilities that are not fully sheltered by net operating losses due to limitations from prior ownership changes and other limitations on net

operating loss carryforwards under the Internal Revenue Code of 1986, as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

After consideration of all available positive and

negative evidence regarding our estimates of future taxable income, we have elected to maintain a full valuation allowance for our deferred tax assets as of September 30, 2024.

We will continue to monitor this evidence through the balance of 2024

to determine if a reduction to the valuation allowance is required, which could potentially result in our recognition of an income tax benefit later in fiscal 2024.

Net Income/Loss

Our net income was $49.9 million for the first six months of 2024, as compared to a net loss of $13.2 million for the first six months of 2023.

This $63.0 million improvement in our results of operations was primarily

due to the increase in operating income of $62.3 million and lower interest expense of $4.9 million discussed above, partially offset by the provision for income taxes for the period.

The foregoing change in estimate in our accrual for Medicaid

rebates favorably impacted our net income for the first six months of 2024 by approximately $11.6 million.

Our net income was $85.8 million for the first nine months of 2024, as compared to a net loss of $10.6 million for the first nine months of 2023.

This $96.4 million improvement in our results of operations was

primarily due to the increase in operating income of $93.3 million and lower interest expense of $7.8 million discussed above, partially offset by the provision for income taxes for the period.

The foregoing change in estimate in our accrual for

Medicaid rebates favorably impacted our net income for the first nine months of 2024 by approximately $12.0 million.

Non-GAAP Financial Measures

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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.

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.

Because EBITDA and Adjusted EBITDA are measures not deemed to be in accordance with U.S.

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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 we use Adjusted

EBITDA as one of several financial measures to assess our 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.

The following table presents the reconciliation of net income/loss to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Three Months ended June 30,

Six Months ended June 30,

(In thousands, except share and per share data)

Although we use

Adjusted EBITDA as one of several financial measures to assess our 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, 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.

The following table presents the reconciliation of net income/loss to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023:

Three Months ended September 30,

Nine Months ended September 30,

(In thousands)

Net income (loss)

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Adjusted EBITDA

Adjusted EBITDA increased for the three and six months ended June 30, 2024 by $38.1 million and $62.1 million, respectively, as compared to the same periods of a year ago.

The improvement is driven primarily by the

increased sales and gross profit in 2024, as well as continued operational oversight and cost containment efforts at both of our business segments.

Adjusted EBITDA increased for the three and nine months ended September 30, 2024 by $32.6 million and $94.7 million, respectively, as compared to the same periods of a year ago.

The improvement is driven primarily by

the increased sales and gross profit in 2024, as well as continued operational oversight and cost containment efforts at both of our business segments.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2024, we had working capital of $259.5 million, primarily consisting of $179.8 million of inventory, cash and cash equivalents of $88.2 million and $30.1 million of accounts receivable, partially offset by

current liabilities of $44.2 million, as compared to working capital at December 31, 2023 of $207.2 million, primarily consisting of $172.9 million of inventory, cash and cash equivalents of $51.4 million and accounts receivable of $27.4 million,

partially offset by current liabilities of $49.8 million.

We had positive cash flows from operations for the six months ended June 30, 2024 and the year ended December 31, 2023 of $43.4 million and $8.8 million, respectively.

Prior to fiscal 2023,

we funded our operations primarily from the sale of our equity and debt securities.

At September 30, 2024, we had working capital of $273.3 million, primarily consisting of $171.8 million of inventory, cash and cash equivalents of $86.7 million and $50.1 million of accounts receivable, partially

offset by current liabilities of $44.9 million, as compared to working capital at December 31, 2023 of $207.2 million, primarily consisting of $172.9 million of inventory, cash and cash equivalents of $51.4 million and accounts receivable of

$27.4 million, partially offset by current liabilities of $49.8 million.

We had positive cash flows from operations for the nine months ended September 30, 2024 and the year ended December 31, 2023 of $68.5 million and $8.8 million, respectively.

Prior to fiscal 2023, we funded our operations primarily from the sale of our equity and debt securities.

Our material cash requirements are primarily comprised of:

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We currently anticipate, based upon our projected revenue and expenditures, that our current cash, cash equivalents and accounts receivable, along with our projected future operating cash flow, will be sufficient to

fund our operations, as currently conducted, through the end of the third quarter of fiscal 2025 and beyond.

fund our operations, as currently conducted, through the end of the fourth quarter of fiscal 2025 and beyond.

Based on current operations and assuming continued market acceptance and utilization of our finished drug products, we do not anticipate

the need to raise additional capital at this time.

However, should the market for our products or political, economic or inflationary conditions change, we may need to seek additional capital which may not be available due to a variety of potential

factors beyond our control (see “Risk Factors” appearing elsewhere in this report).

However, should the market for our products or political or economic conditions change, we may need to seek additional capital which may not be available due to a variety of potential factors

beyond our control (see “Risk Factors” appearing elsewhere in this report).

ADMA continues to evaluate a variety of strategic alternatives, and the exploration of value-creating opportunities remains a top corporate priority.

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maturity date of December 20, 2027 (the “Ares Maturity Date”).

On the Ares Closing Date, we used the proceeds from the Ares Loans, along with a portion of our existing cash on hand, to terminate and pay in full all of the outstanding obligations

under our previous senior credit facility (the “Hayfin Credit Facility”) with Hayfin Services LLP (“Hayfin”) including the outstanding principal in the amount of $158.6 million, a prepayment penalty in the amount $11.1 million, an exit fee of

$1.6 million, all accrued and unpaid interest outstanding on the Hayfin Credit Facility as of the Ares Closing date, as well as certain fees and expenses related thereto.

On the Ares Closing Date, we used the proceeds from the Ares Loans, along with a portion of our existing cash on hand, to terminate and pay in full all of the outstanding

obligations under our previous senior credit facility (the “Hayfin Credit Facility”) with Hayfin Services LLP (“Hayfin”) including the outstanding principal in the amount of $158.6 million, a prepayment penalty in the amount $11.1 million, an

exit fee of $1.6 million, all accrued and unpaid interest outstanding on the Hayfin Credit Facility as of the Ares Closing date, as well as certain fees and expenses related thereto.

On August 14, 2024 we repaid $30.0 million against the

revolving credit facility and the outstanding balance on the revolving credit facility as of September 30, 2024 was $42.5 million.

Borrowings under the term loan bear interest at the adjusted Term SOFR for a three‑month tenor in effect on the day that is two business days prior to the first day of the applicable calendar

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first day of the applicable calendar quarter plus 3.75% (the “SOFR Revolving Facility Applicable Margin”).

As of June 30, 2024 and December 31, 2023, the interest

rate on the term loan was approximately 11.84% and 11.88%, respectively, and the interest rate on the revolving facility was approximately 9.05% and 9.13%, respectively.

As of September 30, 2024 and December 31, 2023, the

interest rate on the term loan was approximately 11.36% and 11.88%, respectively, and the interest rate on the revolving facility was approximately 9.08% and 9.13%, respectively.

On the Ares Maturity Date, we are required to pay Ares the entire outstanding principal amount underlying the Ares Loans and any accrued and unpaid interest thereon.

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However, in the event that

we prepay an amount under the revolving facility that is greater than 50% of the current $72.5 million outstanding balance, we will still be required to pay interest on 50% of this balance, or $36.3 million, through the term of the Ares Credit

We may prepay the outstanding principal on the term loan, together with any accrued but unpaid interest on the prepaid principal amount, at any time and from time to time upon three business days’ prior written notice, subject to the

payment to Ares of a prepayment premium equal to (i) the present value as of such date of all remaining required interest payments on the principal amount being repaid plus 1.5% of the prepaid principal amount, if prepaid on or prior to the first

anniversary of the Ares Closing Date, (ii) 1.5% of the prepaid principal amount, if prepaid after the first anniversary of the Ares Closing Date and on or prior to the second anniversary of the Ares Closing Date, or (iii) 1.0% of the prepaid

principal amount, if prepaid on or prior to the third anniversary of the Ares Closing Date.

In connection with the closing of the Ares Credit Facility, we incurred fees and expenses related to the transaction of approximately $2.7 million, including a $1.7 million original issue discount

payable to Ares, all of which was deducted from the Ares loan proceeds.

In addition, we are also required to pay Ares an exit fee of $1.7 million upon the earlier of any prepayment date or the Ares Maturity Date, and this amount has been accrued

as a separate liability in our consolidated balance sheet as of June 30, 2024 and December 31, 2023.

As a result, we recognized an aggregate debt discount of $4.4 million as of the Ares Closing Date, and the weighted-average effective interest

rate on the Ares Loans as of June 30, 2024 and December 31, 2023 was 11.35% and 11.39%, respectively.

All of our obligations under the Ares 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 Ares Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar

The negative covenants include certain financial covenants, including maximum total leverage ratios and a $15.0 million liquidity covenant, and also restrict or limit our ability and the ability of our subsidiaries to, among other

things and subject to certain exceptions contained in the Ares Credit Agreement, incur new indebtedness;

we prepay an amount under the revolving facility that is greater than 50% of the original $72.5 million outstanding balance (of which $30.0 million, or 41.4%, has been repaid to date), we will still be required to pay interest on 50% of this

balance, or $36.3 million, through the term of the Ares Credit Facility.

We may prepay the outstanding principal on the term loan, together with any accrued but unpaid interest on the prepaid principal amount, at any time and from time to time

upon three business days’ prior written notice, subject to the payment to Ares of a prepayment premium equal to (i) the present value as of such date of all remaining required interest payments on the principal amount being repaid plus 1.5% of

the prepaid principal amount, if prepaid on or prior to the first anniversary of the Ares Closing Date, (ii) 1.5% of the prepaid principal amount, if prepaid after the first anniversary of the Ares Closing Date and on or prior to the second

anniversary of the Ares Closing Date, or (iii) 1.0% of the prepaid principal amount, if prepaid on or prior to the third anniversary of the Ares Closing Date.

In connection with the closing of the Ares Credit Facility, we incurred fees and expenses related to the transaction of approximately $2.7 million, including a $1.7 million original issue

discount payable to Ares, all of which was deducted from the Ares loan proceeds.

In addition, we are also required to pay Ares an exit fee of $1.7 million upon the earlier of any prepayment date or the Ares Maturity Date, and this amount has

been accrued as a separate liability in our consolidated balance sheet as of September 30, 2024 and December 31, 2023.

As a result, we recognized an aggregate debt discount of $4.4 million as of the Ares Closing Date, and the weighted-average

effective interest rate on the Ares Loans as of September 30, 2024 and December 31, 2023 was 11.73% and 11.39%, respectively.

All of our obligations under the Ares 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 Ares Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for

similar financings.

other things and subject to certain exceptions contained in the Ares Credit Agreement, incur new indebtedness;

create liens on assets;

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impact of restricting our ability to make loan repayments under the Ares Credit Agreement.

As of June 30, 2024, we were in compliance with all of the covenants contained in the Ares Credit Agreement.

As of September 30, 2024, we were in compliance with all of the covenants contained in the Ares Credit Agreement.

Events of default on the Ares Loans include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency

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The following table sets forth a summary of our cash flows for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Net cash used in investing activities

Net cash used in financing activities

Net cash (used in) provided by financing activities

Net change in cash and cash equivalents

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Net Cash Provided by (Used in) Operating Activities

Cash provided by operations for the six months ended June 30, 2024 was $43.4 million, as compared to cash used in operations of $20.8 million, for the same period of a year ago, mainly due to the increase revenues,

gross margin and net income in 2024.

The following table illustrates the primary components of and changes to our cash flows from operations:

Six Months Ended June 30,

Cash provided by operations for the nine months ended September 30, 2024 was $68.5 million, as compared to cash used in operations of $8.8 million, for the same period of a year ago, mainly due to the increase in

revenues, gross margin and net income in 2024, partially offset by higher unfavorable changes in accounts receivable and accounts payable and accrued expenses.

The following table illustrates the primary components of and changes to our cash

flows from operations:

Nine Months Ended September 30,

(in thousands)

5 unchanged sentences

Cash provided by (used in) operations

Net Cash Used in Investing Activities

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $4.7 million and $2.8 million, respectively, and is mainly comprised of capital expenditures at the Boca Facility.

currently have no firm commitments for capital expenditures, we expect our total capital expenditures will be between $5.0 million and $10.0 million for the remainder of fiscal 2024, mainly for additional upgrades to the Boca Facility manufacturing

operations and related operational systems.

Net Cash Used in Financing Activities

Net cash used in financing activities was $1.8 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

The increase is due to additional taxes paid in connection with shares that were

withheld from RSUs that vested during the period, partially offset by an increase in proceeds from the exercise of stock options.

Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 was $5.8 million and $3.6 million, respectively, and is mainly comprised of capital expenditures at the Boca Facility.

we currently have no firm commitments for capital expenditures, we expect our total capital expenditures will be between $3.0 million and $5.0 million for the remainder of fiscal 2024, mainly for additional upgrades to the Boca Facility

manufacturing operations and related operational systems.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities was $27.3 million for the nine months ended September 30, 2024, and was comprised of the $30.0 million repaid under the Ares Credit Facility and $4.3 million of taxes paid in

connection with shares that were withheld from RSUs that vested during the period, partially offset by approximately $7.1 million in proceeds from the exercise of stock options.

During the nine months ended September 30, 2023, proceeds from the

exercise of stock options of $1.1 million was offset by $1.1 million of taxes paid in connection with shares withheld from RSUs that vested during the period.

Effect of Inflation

Inflation impacted a number of facets of our business during the six months ended June 30, 2024 and for the years ended December 31, 2023 and 2022 at each 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, among other expenses.

Based upon the macroeconomic

environment, publicly available information and reports from the U.S.

government, we expect this trend to continue in 2024 and potentially longer, which could potentially have a significant impact on our future results of operations.

some of our third-party inventory 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 could

continue to result in higher source plasma and other raw material and supplies costs in 2024 and beyond.

Also, in a higher inflationary environment, we may not be able to raise the prices of our products to keep up with the rate of inflation.

are unable to predict when these external drivers of inflation will subside.

Inflation impacted a number of facets of our business during the nine months ended September 30, 2024 and for the years ended December 31, 2023 and 2022 at each 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, among other expenses.

Based upon the

macroeconomic environment, publicly available information and reports from the U.S.

government, we expect this trend to continue in 2024 and potentially longer, which could potentially have a significant impact on our future results of

In addition, some of our third-party inventory 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 could continue to result in higher source plasma and other raw material and supplies costs in 2024 and beyond.

Also, in a higher inflationary environment, we may not be able to raise the prices of our products to keep up with the

rate of inflation.

We are unable to predict when these external drivers of inflation will subside.

Off-Balance Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis