UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Commission File Number: 001-36728
Delaware
56-2590442
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
465 State Route 17, Ramsey, New Jersey
07446
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (201) 478-5552
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, par value $0.0001 per share
ADMA
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates was $372,622,681 as of June 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter), based on a total of 188,193,273 shares of common stock held by non-affiliates and a closing price of $1.98 as reported on the Nasdaq Global Market on June 30, 2022.
As of March 17, 2023, there were 222,155,625shares of the issuer’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the ADMA Biologics, Inc. definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K and certain documents are incorporated by reference into Part IV.
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID )596
F-2
Consolidated Balance Sheets as of December 31, 2022 and 2021
F-4
Consolidated Statements of Operations for the years ended December 31, 2022 and 2021
F-5
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021
F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
F-7
Notes to Consolidated Financial Statements
F-8
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2008.
Parsippany, New Jersey
March 23, 2023
CONSOLIDATEDBALANCE SHEETS
December 31, 2022 and 2021
December 31,
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Right to use assets
Deposits and other assets
TOTAL ASSETS
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Current portion of deferred revenue
Current portion of lease obligations
Total current liabilities
Senior notes payable, net of discount
Deferred revenue, net of current portion
Lease obligations, net of current portion
Other non-current liabilities
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES
Preferred Stock, $0.0001 par value, 10,000,000 shares authorized, noshares issued and outstanding
Common Stock - voting, $0.0001 par value, 300,000,000 shares authorized, 221,816,930and 195,813,817 shares issued and outstanding
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OFOPERATIONS
Years Ended December 31, 2022 and 2021
Years Ended December 31,
2022
2021
REVENUES:
Product revenue
License revenue
Total revenues
Cost of product revenue
Gross profit
OPERATING EXPENSES:
Research and development
Plasma center operating expenses
Amortization of intangible assets
Selling, general and administrative
Total operating expenses
LOSS FROM OPERATIONS
OTHER INCOME (EXPENSE):
Interest income
Interest expense
Loss on extinguishment of debt
Other expense
Other expense, net
NET LOSS
BASIC AND DILUTED LOSS PER COMMON SHARE
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and Diluted
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY
Additional
Total
Common Stock
Paid-in
Accumulated
Stockholders’
Shares
Amount
Capital
Deficit
Equity
Balance at December 31, 2020
Stock-based compensation
Issuance of common stock, net of offering expenses
Net loss
Balance at December 31, 2021
Balance at December 31, 2022
CONSOLIDATED STATEMENTS OFCASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Loss on disposal of fixed assets
Amortization of debt discount
Amortization of license revenue
Changes in operating assets and liabilities:
Accounts receivable
Accrued expenses
Other current and non-current liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable
Proceeds from issuance of common stock, net of offering expenses
Payment of debt refinancing fees
Proceeds from issuance of note payable
Taxes paid on vested Restricted Stock Units
Payments on finance lease obligations
Net cash provided by financing activities
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year
1.
ORGANIZATION AND BUSINESS
ADMA Biologics, Inc. (“ADMA” or the “Company”) is an end-to-end commercial biopharmaceutical company dedicated to manufacturing, marketing and developing specialty plasma-derived biologics for the treatment of immunodeficient patients at risk for infection and others at risk for certain infectious diseases. The Company’s targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or who may be immune-suppressed for medical reasons.
ADMA operates through its wholly-owned subsidiaries ADMA BioManufacturing, LLC (“ADMA BioManufacturing”) and ADMA BioCenters Georgia Inc. (“ADMA BioCenters”). ADMA BioManufacturing was formed in January 2017 to facilitate the acquisition of the Biotest Therapy Business Unit (“BTBU”) from BPC Plasma, Inc. (formerly Biotest Pharmaceuticals Corporation) (“BPC” and, together with Biotest AG, “Biotest”) on June 6, 2017. The acquisition included certain assets (the “Biotest Assets”) of BTBU, which included the U.S. Food and Drug Administration (“FDA”)-licensed BIVIGAM and Nabi-HB immunoglobulin products, and an FDA-licensed plasma fractionation manufacturing facility located in Boca Raton, FL (the “Boca Facility”) (the “Biotest Transaction”). BTBU had previously been the Company’s third-party contract manufacturer. ADMA BioCenters is the Company’s source plasma collection business with ten plasma collection facilities located throughout the U.S., eight of which hold an approved license with the FDA.
The Company has threeFDA-approved products, all of which are currently marketed and commercially available: (i) BIVIGAM (Immune Globulin Intravenous, Human), an Intravenous Immune Globulin (“IVIG”) product indicated for the treatment of Primary Humoral Immunodeficiency (“PI”), also known as Primary Immunodeficiency Disease (“PIDD”) or Inborn Errors of Immunity, and for which the Company received FDA approval on May 9, 2019 and commenced commercial sales in August 2019; (ii) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), an IVIG product indicated for the treatment of PI, for which the Company received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019; and (iii) Nabi-HB (Hepatitis B Immune Globulin, Human), which is indicated for the treatment of acute exposure to blood containing Hepatitis B surface antigen (“HBsAg”) and other listed exposures to Hepatitis B. In addition to its commercially available immunoglobulin products, the Company provides contract manufacturing and laboratory services for certain clients and generates revenues from the sale of intermediate by-products that result from the immunoglobulin production process. The Company seeks to develop a pipeline of plasma-derived therapeutics, and its products and product candidates are intended to be used by physician specialists focused on caring for immune-compromised patients with or at risk for certain infectious diseases.
As of December 31, 2022, the Company had working capital of $231.1 million, including $86.5 million of cash and cash equivalents. Based upon the Company’s current projected revenue and expenditures, including capital expenditures and continued implementation of the Company’s commercialization and expansion activities, the Company’s management currently believes that its cash, cash equivalents, projected revenue and accounts receivable will be sufficient to fund ADMA’s operations, as currently conducted, through the end of the first quarter of 2024, at which time the Company believes it will begin to generate positive cash flow from operations. These estimates may change based upon several factors, including the success of the Company’s commercial sales of its products, whether or not the assumptions underlying the Company’s projected revenues and expenses are correct and the acceptability of ADMA’s immune globulin products by physicians, patients or payers. There can be no assurance that the Company’s approved products will be commercially viable, or that plant capacity expansion, plasma center buildouts or other capital improvements will be successfully completed or that any product developed in the future will be approved. The Company is subject to risks common to companies in the biotechnology and pharmaceutical manufacturing industries including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, inflationary pressures, supply chain constraints, protection of proprietary technology, and compliance with FDA and other governmental regulations and approval requirements.
The Company continues to evaluate a variety of strategic alternatives through its ongoing engagement with Morgan Stanley. The exploration of value-creating opportunities remains a top corporate priority for ADMA.
On December 9, 2022, the Company issued 24,125,873shares of its common stock through an underwritten public offering and received net proceeds of $64.6 million, and on March 23, 2022 the Company received approximately $47.0 million in net proceeds from the refinancing of its senior credit facility (see Note 7).
2.
SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation and basis of presentation
The accompanying consolidated financial statements include the accounts of ADMA and its wholly-owned subsidiaries, and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). All intercompany balances have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (the “FASB”). During the years ended December 31, 2022 and 2021, comprehensive loss was equal to the net loss amounts presented for the respective periods in the accompanying consolidated statements of operations.
Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include rebates and chargebacks deducted from gross revenues, the realizable value of accounts receivable, valuation of inventory, assumptions used in projecting future liquidity and capital requirements, assumptions used in the fair value of awards granted under the Company’s equity incentive plans and warrants issued in connection with the issuance of notes payable and the valuation allowance for the Company’s deferred tax assets.
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.
The Company regularly maintains cash and cash equivalents at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. Although the Company monitors the daily cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be impacted, and there could be a material adverse effect on the Company’s business, if one or more of the financial institutions with which the Company has deposits fails or is subject to other adverse conditions in the financial or credit markets. To date, the Company has not experienced a loss or lack of access to its deposited cash or cash equivalents; however, the Company cannot provide assurance that access to its cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets in the future.
Accounts receivable is reported at realizable value, net of allowances for contractual credits and doubtful accounts in the amount of $0.1 million and $0.2 million at December 31, 2022 and 2021, respectively, which are recognized in the period the related revenue is recorded. The Company extends credit to its customers based upon an evaluation of each customer’s financial condition and credit history. Evaluations of the financial condition and associated credit risk of customers are performed on an ongoing basis. Based on these evaluations, the Company has concluded that its credit risk is minimal (see Note 16).
Raw materials inventory consists of various materials purchased from suppliers, including normal source plasma, used in the production of the Company’s products. Work-in-process and finished goods inventories (see Note 3) reflect the cost of raw materials as well as costs for direct and indirect labor, primarily salaries, wages and benefits for applicable employees, as well as an allocation of overhead costs related to the Boca Facility including utilities, property taxes, general repairs and maintenance, consumable supplies and depreciation. The allocation of Boca Facility overhead to inventory is generally based upon the estimated square footage of the Boca Facility that is used in the production of the Company’s products relative to the total square footage of the facility.
Property and equipment
Assets comprising property and equipment (see Note 4) are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life. Land is not depreciated. The buildings have been assigned a useful life of 30 years. Property and equipment other than land and buildings have useful lives ranging from 3 to 15 years. Leasehold improvements are amortized over the lesser of the lease term or their estimated useful lives.
Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company. Goodwill at December 31, 2022 and 2021 was $3.5 million, all of which is attributable to the Company’s ADMA BioManufacturing business segment. There were no changes to the carrying amount of goodwill during the years ended December 31, 2022 and 2021.
Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators exist. The Company has the option to perform a qualitative assessment of goodwill to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company concludes that this is the case, then it must perform a goodwill impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company performs its annual goodwill impairment test as of October 1 of each year. The Company’s annual goodwill impairment tests as of October 1, 2022 and 2021 did not result in any impairment charges related to goodwill for the years ended December 31, 2022 and 2021.
Impairment of long-lived assets
The Company assesses the recoverability of its long-lived assets, which include property and equipment and finite-lived intangible assets, whenever significant events or changes in circumstances indicate impairment may have occurred. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to its carrying amount to determine whether the asset’s carrying value is recoverable. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the years ended December 31, 2022 and 2021, the Company determined that there was no impairment of its long-lived assets.
Revenue recognition
Revenues for the years ended December 31, 2022 and 2021 are comprised of (i) revenues from the sale of the Company’s immunoglobulin products, BIVIGAM, ASCENIV and Nabi-HB, (ii) product revenues from the sale of human plasma collected by the Company’s Plasma Collection Centers business segment, (iii) contract manufacturing and laboratory services revenue, (iv) revenues from the sale of intermediate by-products; and (v) license and other revenues primarily attributable to the out-licensing of ASCENIV to Biotest in 2012 to market and sell this product in Europe and selected countries in North Africa and the Middle East. Biotest has provided the Company with certain services and financial payments in accordance with the related Biotest license agreement and is obligated to pay the Company certain amounts in the future if certain milestones are achieved. Deferred revenue is amortized into income over the term of the Biotest license, representing a period of approximately 22 years.
Product revenues from the sale of human plasma collected at the Company’s plasma collection centers are recognized at the time control of the product has been transferred to the customer, which generally occurs at the time of shipment. Product revenues are recognized at the time of delivery if the Company retains control of the product during shipment.
Cost of product revenue includes costs associated with the manufacture of the Company’s FDA approved products and intermediates and for the collection of human source plasma, as well as expenses related to conformance batch production, process development and scientific and technical operations when these operations are attributable to marketed products. When the activities of these operations are attributable to new products in development, the expenses are classified as research and development expenses.
Research and development expenses
Research and development expenses consist of clinical research organization costs, costs related to clinical trials, post-marketing commitment studies for BIVIGAM and ASCENIV, wages, benefits and stock-based compensation for employees directly related to research and development activities. All research and development costs are expensed as incurred.
Advertising and marketing expenses
Advertising and marketing expense includes cost for promotional materials and trade show expenses for the marketing of the Company’s products and services and expenses incurred for attracting donors to the Company’s plasma collection centers. All advertising and marketing expenses are expensed as incurred. Advertising and marketing expenses were $2.2 million and $1.4 million for the years ended December 31, 2022 and 2021, respectively.
The Company follows recognized accounting guidance which requires all equity-based payments, including grants of stock options, to be recognized in the statement of operations as compensation expense based on their fair values at the date of grant. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis over the associated vesting period of the award based on the grant date fair value of the award. Stock options granted under the Company’s equity incentive plans generally have a four-year vesting period and a term of 10 years. For milestone-based equity awards (see Note 8) the Company periodically assesses the probability of vesting for each milestone-based award and adjusts compensation expense based on its probability assessment. Pursuant to ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), the Company has elected not to establish a forfeiture rate, as stock-based compensation expense related to forfeitures of unvested equity awards is fully reversed at the time of forfeiture.
Income taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or its tax returns. Under this method, deferred tax assets and liabilities are recognized for the temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company records a valuation allowance on its deferred tax assets if it is more likely than not that the Company will not generate sufficient taxable income to utilize its deferred tax assets (see Note 11). The Company is subject to income tax examinations by major taxing authorities for all tax years since 2018 and for previous periods as it relates to the Company’s net operating loss carryforwards.
Loss Per Share
Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders as adjusted for the effect of dilutive securities, if any, by the weighted average number of shares of common stock and dilutive common stock outstanding during the period. Potentially dilutive common stock includes the shares of common stock issuable upon the exercise of outstanding stock options and warrants (using the treasury stock method). Potentially dilutive common stock in the diluted net loss per share computation is excluded to the extent that it would be anti-dilutive. No potentially dilutive securities are included in the computation of any diluted per share amounts as the Company reported a net loss for all periods presented. For the years ended December 31, 2022 and 2021, the following securities were excluded from the calculation of diluted loss per common share because of their anti-dilutive effects:
For the Years Ended December 31,
Stock options
Restricted Stock Units
Warrants
Fair value of financial instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are shown at cost, which approximates fair value due to the short-term nature of these instruments. The debt outstanding under the Company’s senior notes payable (see Note 7) approximates fair value due to the variable interest rate on this debt.
Recent Accounting Pronouncements
3.
INVENTORIES
The following table provides the components of inventories:
December 31,2022
December 31,2021
Raw materials
Work-in-process
Finished goods
Total inventories
Raw materials includes plasma and other materials expected to be used in the production of BIVIGAM, ASCENIV and Nabi-HB. These materials will be consumed in the production of goods expected to be available for sale or otherwise have alternative uses that provide a probable future benefit. All other activities and materials associated with the production of inventories used in research and development activities are expensed as incurred.
Work-in-process inventory primarily consists of bulk drug substance and unlabeled filled vials of the Company’s immunoglobulin products.
Finished goods inventory is comprised of immunoglobulin product inventory and related intermediates that are available for commercial sale, as well as plasma collected at the Company’s plasma collection centers which is expected to be sold to third-party customers.
4.
PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2022 and 2021 is summarized as follows:
December 31, 2022
December 31, 2021
Manufacturing and laboratory equipment
Office equipment and computer software
Furniture and fixtures
Construction in process
Leasehold improvements
Land
Buildings and building improvements
Less: Accumulated depreciation
Total property, plant and equipment, net
The Company recorded depreciation expense on property and equipment of $6.4 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively.
5.
INTANGIBLE ASSETS
Intangible assets at December 31, 2022 and 2021 consist of the following:
Cost
Accumulated Amortization
Net
Trademark and other intangible rights related to Nabi-HB
Rights to intermediates
Under the previous contract manufacturing agreement between ADMA and BPC, intermediate by-products derived from the manufacture of ASCENIV were property of Biotest. As a result of the Biotest Transaction, ADMA obtained the right to these intermediate products, which are being amortized over a period of seven years. The intangible rights to Nabi-HB are also being amortized over a period of seven years.
Amortization expense related to the Company’s intangible assets for the years ended December 31, 2022 and 2021 was $0.7 million. Estimated aggregate future aggregate amortization expense is expected to be as follows:
2023
2024
6.
ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other current liabilities at December 31, 2022 and 2021 are as follows:
Accrued rebates
Accrued distribution fees
Accrued incentives
Accrued testing
Other
Total accrued expenses and other current liabilities
7.
NOTES PAYABLE
Senior Notes Payable
A summary of outstanding senior notes payable is as follows:
Notes payable
Less:
Debt discount
Senior notes payable
On March 23, 2022 (the “Hayfin Closing Date”), the Company and all of its subsidiaries entered into a Credit and Guaranty Agreement (the “Hayfin Credit Agreement”) with Hayfin Services LLP (“Hayfin”). The Hayfin Credit Agreement provides for a senior secured term loan facility in a principal amount of up to $175.0 million (the “Hayfin Credit Facility”), composed of (i) a term loan made on the Hayfin Closing Date in the principal amount of $ 150.0 million (the “Hayfin Closing Date Loan”), and (ii) a delayed draw term loan in the principal amount of $25.0 million (the “Hayfin Delayed Draw Loan” and, together with the Hayfin Closing Date Loan, the “Hayfin Loans”). The obligation of the lenders to make the Hayfin Delayed Draw Loan was to expire on March 22, 2023(see Note 17) and is subject to the satisfaction of certain conditions, including, but not limited to, the Company’s meeting certain 12-month revenue targets as set forth in the Hayfin Credit Agreement, which the Company has 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 Maturity Date, the Company will pay Hayfin the entire outstanding principal amount underlying the Hayfin Loans and any accrued and unpaid interest thereon, as well as an exit fee of 1.0% of the outstanding principal amount being paid. This exit fee is recorded separately as a non-current liability on the accompanying consolidated balance sheet as of December 31, 2022. Prior to the Hayfin Maturity Date, there are no scheduled principal payments on the Hayfin Loans. The Company may prepay outstanding principal on the Hayfin Loans at any time and from time to time upon five business days’ prior written notice, subject to the payment to Hayfin of, (A) any accrued but unpaid interest on the prepaid principal amount plus (B) an early prepayment fee in the amount equal to (i) 7.0% of the prepaid principal amount, if prepaid on or prior to the first anniversary of the Hayfin Closing Date, (ii) 3.0% of the prepaid principal amount, if prepaid after the first anniversary of the Hayfin Closing Date and on or prior to the second anniversary of the Hayfin Closing Date, or (iii) 1.0% of the prepaid principal amount, if prepaid after the second anniversary of the Hayfin Closing Date and on or prior to the third anniversary of the Hayfin Closing Date. In addition, for any prepayments of principal or payment of principal on the Hayfin Maturity Date, the Company is also required to pay the exit fee.
All of the Company’s obligations under the Hayfin Credit Agreement are secured by a first-priority lien and security interest in substantially all of the Company’s tangible and intangible assets, including intellectual property, and all of the equity interests in the Company’s subsidiaries. The HayfinCredit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings. The negative covenants restrict or limit the ability of the Company and its subsidiaries to, among other things and subject to certain exceptions contained in the Hayfin Credit Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to the Company’s or its subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Hayfin Credit Agreement); change its fiscal year; pay dividends; repay certain other indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the impact of restricting the Company’s ability to make loan repayments under the Hayfin Credit Agreement. In addition, the Company is required (i) at all times prior to the Maturity Date to maintain a minimum cash balance of $6.0 million; and (ii) as of the last day of each fiscal quarter, report IVIG product and related revenues for the trailing 12-month period that exceed the amounts set forth in the Hayfin Credit Agreement, which range from $75.0 million for the fiscal quarter ended June 30, 2022 to $250.0 million for the fiscal quarter ended December 31, 2026. As of December 31, 2022, the Company was in compliance with all of the covenants contained in the Hayfin Credit Agreement.
As a result of the upfront fee and exit fee paid or payable to Hayfin, the expenses incurred by the Company in connection with this transaction and the value of the Hayfin Warrants, the Company recognized an aggregate discount on the Hayfin Loans in the amount of $13.9 million. The Company records debt discount as a reduction to the face amount of the debt, and the debt discount is amortized as interest expense over the life of the debt using the interest method. Based on the fair value of the Hayfin Warrants and the aggregate amount of fees and expenses associated with obtaining the Hayfin Credit Facility, the effective interest rate on the Hayfin Loans as of the Hayfin Closing Date and as of December 31, 2022 was approximately 13.0% and 16.1%, respectively.
8.
STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is currently authorized to issue up to 10 million shares of preferred stock, $0.0001 par value per share. There were no shares of preferred stock outstanding at December 31, 2022 and 2021.
Years Ended
Expected term
5.5-6.3 years
Volatility
68
%
68-70
Dividend yield
Risk-free interest rate
1.72-1.73
0.80-1.27
On June 21, 2022, the Company’s stockholders approved the ADMA Biologics, Inc. 2022 Compensation Plan (the “2022 Equity Plan”). Approval of the 2022 Equity Plan resulted in approximately 18 million additional shares of the Company’s common stock being reserved for future awards. The 2022 Equity Plan provides for the Board or a Committee of the Board (the “Committee”) to grant awards to optionees and to determine the exercise price, vesting term, expiration date and all other terms and conditions of the awards, including acceleration of the vesting of an award at any time. Any options granted under the 2022 Equity Plan are intended to be Incentive Stock Options (“ISOs”), unless specified by the Committee to be Non-Qualified Options (“NQOs”) as defined by the Internal Revenue Code. ISOs and NQOs may be granted to employees, consultants or Board members at an option price not less than the fair market value of the common stock subject to the stock option agreement. The following table summarizes information about stock options outstanding as of December 31, 2022 and 2021:
Weighted
Average
Exercise Price
Options outstanding, vested and expected to vest at December 31, 2020
Forfeited
Expired
Granted
Exercised
Options outstanding, vested and expected to vest at December 31, 2021
Options outstanding, vested and expected to vest at December 31, 2022
Options exercisable
Stock Options Outstanding
Stock Options Exercisable
Range of
Exercise Prices
Options Outstanding
Remaining
Contractual
Life (Years)
Weighted Average Exercise Price
Aggregate Intrinsic Value
$1.10 - $1.67
$1.73 - $2.60
$2.62 - $3.93
$9.37 - $10.80
Average Grant
Date Fair Value
Vested
Total stock-based compensation expense for all awards granted under the Company’s equity incentive plans for the years ended December 31, 2022 and 2021 was as follows:
Total stock-based compensation expense
9.
RELATED PARTY TRANSACTIONS
The Company leases an office building and equipment from Areth, LLC (“Areth”) pursuant to an agreement for services effective as of January 1, 2016, as amended from time to time, and pays monthly rent on this facility in the amount of $10,000. On October 18, 2022, the Company amended the agreement to extend its term to December 31, 2026, with automatic successive one-yearrenewals thereafter. Either party may terminate the agreement by providing the other party with one year’s prior written notice. Rent expense for the years ended December 31, 2022 and 2021 amounted to $0.1million. Areth is a company controlled by Dr. Jerrold B. Grossman, the Vice Chairman of the Board, and Adam S. Grossman, the Company’s President and Chief Executive Officer. The Company also reimburses Areth for office, warehousing and building related (common area) expenses, equipment and certain other operational expenses, which were not material to the consolidated financial statements for the years ended December 31, 2022 and 2021.
During the years ended December 31, 2022 and 2021, the Company purchased certain specialized medical equipment and services related to the Company’s plasma collection centers, as well as personal protective equipment, from GenesisBPS and its affiliates (“Genesis”) in the amount of $0.2million. Genesis is owned by Dr. Grossman and Adam Grossman.
10.
General Legal Matters
From time to time the Company is or may become subject to certain legal proceedings and claims arising in connection with the normal course of its business. Management does not expect that the outcome of any such claims or actions will have a material effect on the Company’s liquidity, results of operations or financial condition.
COVID-19 Pandemic
Notwithstanding the foregoing, the COVID-19 pandemic to date has not had a material impact on the Company’s financial condition or results of operations, and the Company does not believe that its production operations at the Boca Facility, the Company’s contract fill/finishers or its plasma collection facilities have been significantly impacted by the COVID-19 pandemic. As a result, the Company does not anticipate and has not experienced any material impairments with respect to any of its long-lived assets, including the Company’s property and equipment, goodwill or intangible assets.
Although the COVID-19 pandemic has not, to date, materially adversely impacted the Company’s capital and financial resources, because the Company is unable to determine the ultimate severity or duration of the COVID-19 pandemic or other pandemics or their long-term effects on, among other things, the global, national or local economies, the capital and credit markets or the Company’s workforce, customers or our suppliers, at this time the Company is unable to predict whether COVID-19 or other pandemics will have a material adverse impact on the Company’s business, financial condition, liquidity or results of operations.
Vendor Commitments
Pursuant to the terms of a plasma purchase agreement with BPC dated as of November 17, 2011 (the “2011 Plasma Purchase Agreement”), the Company agreed to purchase from BPC an annual minimum volume of source plasma containing antibodies to RSV to be used in the manufacture of ASCENIV. The Company must purchase a to-be-determined and agreed upon annual minimum volume from BPC, but may also collect high-titer RSV plasma from up to five wholly-owned ADMA plasma collection facilities. During 2015, the Company and BPC amended the 2011 Plasma Purchase Agreement to allow the Company the ability to collect its raw material RSV high-titer plasma from other third-party collection organizations, thus allowing the Company to expand its reach for raw material supply as it executes its commercialization plans for ASCENIV. As part of the closing of the Biotest Transaction, the parties amended the 2011 Plasma Purchase Agreement to extend the initial term through the ten-year anniversary of the closing date of the Biotest Transaction. Unless terminated earlier, the 2011 Plasma Purchase Agreement expires in June 2027, after which it may be renewed for two additional five-year periods if agreed to by the parties. On December 10, 2018, BPC assigned its rights and obligations under the 2011 Plasma Purchase Agreement to Grifols Worldwide Operations Limited (“Grifols”) as its successor-in-interest, effective January 1, 2019. On January 1, 2019, Grifols and the Company entered into an additional amendment to the 2011 Plasma Purchase Agreement for the purchase of source plasma containing antibodies to RSV from Grifols. Pursuant to this amendment, until January 1, 2022, the Company could purchase RSV plasma from Grifols from the twoplasma collection centers that were transferred to BPC on January 1, 2019 at a price equal to cost plus five percent (5%) (without any additional increase due to inflation). Effective January 1, 2022, RSV plasma purchased from these two plasma collection centers are subject to the pricing terms in effect for RSV plasma purchased from other plasma collection centers owned by Grifols.
On June 6, 2017, the Company and BPC entered into a Plasma Supply Agreement pursuant to which BPC supplies, on an exclusive basis subject to certain exceptions, to ADMA BioManufacturing an annual minimum volume of hyperimmune plasma that contain antibodies to the Hepatitis B virus for the manufacture of Nabi-HB. The Plasma Supply Agreement has a 10-year term. On July 19, 2018, the Company and BPC entered into an amendment to the Plasma Supply Agreement to provide, among other things, that in the event BPC elects not to supply in excess of ADMA BioManufacturing’s specified amount of Hepatitis B plasma and ADMA BioManufacturing is unable to secure Hepatitis B plasma from a third party at a price that is within a low double- digit percentage of the price that ADMA BioManufacturing pays to BPC, then BPC shall reimburse ADMA BioManufacturing for the difference in price ADMA BioManufacturing incurs. On December 10, 2018, BPC assigned its rights and obligations under the Plasma Supply Agreement to Grifols, effective January 1, 2019.
On June 6, 2017, the Company and BPC entered into a Plasma Purchase Agreement (the “2017 Plasma Purchase Agreement”), pursuant to which ADMA BioManufacturing purchases normal source plasma (“NSP”) from BPC at agreed upon annual quantities and prices. The 2017 Plasma Purchase Agreement has an initial term of five years after which the 2017 Plasma Purchase Agreement may be renewed for additional twoterms of two years each upon the mutual written consent of the parties. On July 19, 2018, the Company and BPC entered into an amendment to the 2017 Plasma Purchase Agreement to, among other things, provide agreed upon amounts of normal source plasma to be supplied by BPC to ADMA BioManufacturing in calendar year 2019 at a specified price per liter, provided that ADMA BioManufacturing delivers a valid purchase order to BPC. Additionally, pursuant to the amendment to the 2017 Plasma Purchase Agreement, BPC agreed that, for calendar years 2020 and 2021, it shall supply no less than a high double-digit percentage of ADMA BioManufacturing’s requested NSP amounts, provided that such requested NSP amounts are within an agreed range, at a price per liter to be mutually determined. Furthermore, pursuant to the amendment to the 2017 Plasma Purchase Agreement, in the event BPC fails to supply ADMA BioManufacturing with at least a high double-digit percentage of ADMA BioManufacturing’s requested NSP amounts, BPC shall promptly reimburse ADMA BioManufacturing the difference in price ADMA BioManufacturing incurs due to BPC’s election not to supply NSP to ADMA BioManufacturing in such amounts as requested. On December 10, 2018, BPC assigned its rights and obligations under the Plasma Purchase Agreement to Grifols, effective January 1, 2019.
Effective as of May 12, 2021, the Company and Grifols amended the foregoing 2017 Plasma Purchase Agreement whereby, among other things, the term of the agreement was extended through December 31, 2022, while certain historical provisions were deleted. The 2017 Plasma Purchase Agreement expired on December 31, 2022 and was not renewed. In order to maintain a reliable supply of raw material plasma thereafter, the Company has executed additional agreements with multiple third-party suppliers of NSP. The Company has also increased its number of planned plasma collection center buildouts such that the Company expects to have ten FDA-approved plasma collection centers in operation by the end of 2023, while also continuing to increase its plasma collection capabilities at its ADMA BioCenters plasma collection centers business segment.
Post-Marketing Commitments
In connection with the FDA approval of the BLA for BIVIGAM on December 19, 2012, Biotest committed to perform two additional post-marketing studies, a pediatric study to evaluate the efficacy and safety of BIVIGAM in children and adolescents, and a post-authorization safety study to further assess the potential risk of hypotension and hepatic and renal impairment in BIVIGAM-treated patients with primary humoral immunodeficiency. The Pediatric study for BIVIGAM has been completed, and the safety study is still pending completion. ADMA has assumed the remaining obligations, and the costs of the studies will be expensed as incurred as research and development expenses. For the years ended December 31, 2022 and 2021, the Company incurred expenses related to these studies of $2.2 million and $1.7 million, respectively. The Company currently expects to incur expenses of approximately $2.0 million to complete these studies, with both studies anticipated to be completed by June of 2023.
In connection with the FDA approval of ASCENIV on April 1, 2019, the Company is required to perform a pediatric study to evaluate the safety and efficacy of ASCENIV in children and adolescents. For the years ended December 31, 2022 and 2021, the Company incurred expenses related to this study in the amount of $0.5 million and $0.6 million, respectively. The Company expects to incur expenses of approximately $1.5 million to complete this study, which is required to be completed by June of 2023.
11.
INCOME TAXES
A reconciliation of income taxes at the U.S. federal statutory rate to the benefit for income taxes is as follows:
Year Ended December 31,
Benefit at U.S. federal statutory rate
State taxes - deferred
Increase in valuation allowance
Research and development credits
Benefit for income taxes
A summary of the Company’s deferred tax assets is as follows:
Federal and state net operating loss carryforwards
Federal and state research credits
Interest expense limitation carryforwards
Transaction costs
Deferred revenue
Accrued expenses and other
Total gross deferred tax assets
Less: valuation allowance for deferred tax assets
Net deferred tax assets
As of December 31, 2022, the Company had federal and state (post-apportioned basis) net operating losses (“NOLs”) of $334.5 million and $211.7 million, respectively, as well as federal research and development tax credit carryforwards of approximately $0.4 million. Approximately $55.2 million and $91.8 million of the foregoing federal and state NOLs, respectively, will expire at various dates from 2027 through 2042, if not limited by triggering events prior to such time. Under the provisions of the Internal Revenue Code, changes in ownership of the Company, in certain circumstances, would limit the amount of federal NOLs that can be utilized annually in the future to offset taxable income. In particular, Section 382 of the Internal Revenue Code (“Section 382”) imposes limitations on an entity’s ability to use NOLs upon certain changes in ownership. If the Company is limited in its ability to use its NOLs in future years in which it has taxable income, then the Company will pay more taxes than if it were otherwise able to fully utilize its NOLs. The Company may experience ownership changes in the future as a result of subsequent shifts in ownership of the Company’s capital stock that the Company cannot predict or control that could result in further limitations being placed on the Company’s ability to utilize its federal NOLs. As of December 31, 2022, the Company performed a preliminary analysis of limitations imposed by Section 382 and determined that no ownership changes occurred in the current year which would cause additional limitations on the use of the NOLs.
As of December 31, 2021, the Company performed an analysis of limitations imposed by Section 382 and as a result the Company wrote off the deferred tax assets related to $3.0 million of federal NOLs, $1.0 million of federal research and development tax credits and $28.1 million of state NOLs which were limited by historical ownership changes. As a result, there was a $3.9 million reduction to the Company’s net deferred tax assets, which was offset by a corresponding $3.9 million reduction in the Company’s valuation allowance, resulting in no net impact to the Company’s provision for income taxes for the year ended December 31, 2021.
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income, exclusive of reversing taxable temporary differences, to outweigh objective negative evidence of recent financial reporting losses. Based on these criteria and the relative weighting of both the positive and negative evidence available, management continues to maintain a full valuation allowance against its net deferred tax assets.
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. The amount of the liability for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. Components of the liability are classified as either a current or a long-term liability in the accompanying consolidated balance sheets based on when the Company expects each of the items to be settled. The Company does not have any unrecognized tax benefits as of December 31, 2022 and 2021 and does not anticipate a significant change in unrecognized tax benefits during the next 12 months.
12.
LEASE OBLIGATIONS
The Company leases certain properties and equipment for its ADMA BioCenters and ADMA BioManufacturing subsidiaries, which leases provide the right to use the underlying assets and require lease payments through the respective lease terms which expire at various dates through 2033. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. Right-to-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of the lease payments is determined using the Company’s incremental borrowing rate as of the lease commencement date. For the lease liabilities recognized during the years ended December 31, 2022 and 2021, the Company used discount rates of 13% to 14% to determine the present value of its lease obligations. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is reflected in Plasma center operating expenses and Selling, general and administrative expenses in the accompanying consolidated statements of operations. Aggregate lease expense for the Company’s operating leases for the years ended December 31, 2022 and 2021 was $2.1 million and $1.4 million, respectively. Aggregate cash paid on these leases for the years ended December 31, 2022 and 2021 was $1.8 million and $1.4 million, respectively.
During the year ended December 31, 2022, the Company recognized additional right-to-use assets and corresponding lease liabilities aggregating to approximately $4.0million in connection with two new property leases where the Company has opened additional plasma collection facilities, a property lease for the storage of raw materials inventory and a property lease for the building that the Company utilizes as its corporate headquarters (see Note 9). During the year ended December 31, 2021, the Company recognized additional right-to-use assets and corresponding lease liabilities of $3.6 million in connection with four new property leases where the Company has opened additional plasma collection facilities. Including a finance lease the Company entered into in June 2018, the Company has aggregate lease liabilities of $11.6 million and $8.1 million as of December 31, 2022 and 2021, respectively, which are comprised primarily of the leases for the Company’s plasma collection centers. The Company’s operating leases have a weighted average remaining term of 8.4 years. Scheduled payments under the Company’s lease obligations are as follows:
Year ended December 31, 2023
2025
2026
2027
Thereafter
Total payments
Less: imputed interest
Current portion
13.
SEGMENTS
The Company is engaged in manufacturing, marketing and developing specialty plasma-derived biologics. The Company’s ADMA BioManufacturing segment reflects the Company’s immune globulin manufacturing and development operations in Florida, acquired on June 6, 2017. The Plasma Collection Centers segment consists of ten plasma collection facilities as of December 31, 2022, nine of which were operational and collecting plasma, and seven of which hold an approved license with the FDA (and of which three facilities have received approvals from the Korean Ministry of Food and Drug Safety as well as FDA approval to implement a Hepatitis B immunization program). The Corporate segment includes general and administrative overhead expenses. The Company defines its segments as those business units whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to analyze performance and allocate resources. The Company’s CODM is its President and Chief Executive Officer. Summarized financial information concerning reportable segments is shown in the following tables:
Year Ended December 31, 2022
BioManufacturing
Plasma Collection
Centers
Corporate
Consolidated
Revenues
Income (loss) from operations
Interest and other expense, net
Net income (loss)
Capital expenditures
Depreciation and amortization expense
Total assets
Year Ended December 31, 2021
Loss from operations
14.
OTHER EMPLOYEE BENEFITS
The Company sponsors a 401(k) savings plan. Under the plan, employees may make contributions which are eligible for a Company discretionary percentage contribution as defined in the plan and determined by the Board of Directors. The Company recognized $1.3million and $1.1 million of related compensation expense for the years ended December 31, 2022 and 2021, respectively.
15.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31, 2022 and 2021 is as follows:
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
Noncash Financing and Investing Activities:
Equipment acquired reflected in accounts payable and accrued liabilities
Right-to-use assets in exchange for lease obligations
Warrants issued in connection with notes payable
16.
CONCENTRATIONS
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. At December 31, 2022, two customers accounted for approximately 92% of the Company’s consolidated accounts receivable. At December 31, 2021, threecustomers accounted for approximately 94% of the Company’s consolidated accounts receivable.
For the year ended December 31, 2022, twocustomers accounted for approximately 74% of the Company’s consolidated revenues. For the year ended December 31, 2021, four customers accounted for approximately 81% of the Company’s consolidated revenues.
During the years ended December 31, 2022 and 2021, plasma purchases from Grifols totaled approximately $47.7 million and $42.0 million, respectively, or approximately 65% and 69%, respectively, of the Company’s total inventory purchases.
17.
SUBSEQUENT EVENTS
On March 22, 2023, the Company and Hayfin entered into an amendment to the Hayfin Credit Agreement whereby the lenders’ obligation to make the Hayfin Delayed Draw Loan (see Note 7) was extended to June 30, 2023.
F-23