ADMA BIOLOGICS INC

ADMA Biologics, Inc. (“ADMA” or the “Company”) is an end-to-end commercial biopharmaceutical company dedicated to manufacturing, marketing and developing specialty 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 certain assets held by the Company’s former third-party contract manufacturer, 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”). ADMA BioCenters is the Company’s source plasma collection business withten plasma collection facilities located throughout the United States, all of which hold an approved license with the FDA.

The Company hasthree FDA-approved products, all of which are currently marketed and commercially available: (i) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), 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, for which the Company received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019; (ii) BIVIGAM (Immune Globulin Intravenous, Human), an IVIG product indicated for the treatment of PI, and for which the Company 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 Hepatitis B surface antigen (“HBsAg”) and other listed exposures to Hepatitis B. In addition to its commercially available immunoglobulin products, the Company generates revenues from the sale of intermediate by-products that result from the immunoglobulin production process and from time to time provides contract manufacturing and laboratory services for certain clients. The Company seeks to develop a pipeline of plasma-derived therapeutics, and its products and product candidates are intended to be used by physician specialists focused on caring for immune-compromised patients with or at risk for certain infectious diseases.

As of September 30, 2024, the Company had working capital of $273.3 million, including $86.7 million of cash and cash equivalents, $50.1 million of accounts receivable and $171.8 million of inventories, partially offset by $44.9 million of current liabilities. 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 and accounts receivable, along with its projected future operating cash flow, will be sufficient to fund ADMA’s operations, as currently conducted, through the end of the fourth quarter of fiscal 2025 and beyond. However, the Company’s current outlook on cash flows and profitability 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 continued acceptability of ADMA’s immune globulin products by physicians, patients and payers. 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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (the “FASB”).

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The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2024. The accompanying consolidated balance sheet as of December 31, 2023 was derived from the audited financial statements as of and for the year ended December 31, 2023. These condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q, Article 10 of Regulation S-X and ASC 270, Interim Financial Statements, andtherefore omit or condense certain footnotes and other information normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements), as well as material non-recurring costs, gains and losses applicable to the interim period, that are considered necessary to present fairly the Company’s financial position as of September 30, 2024, its results of operations and changes in stockholders’ equity for the three and nine months ended September 30, 2024 and 2023 and cash flows for the nine months ended September 30, 2024 and 2023.

During the three and nine months ended September 30, 2024 and 2023, comprehensive income/loss was equal to the net income/loss amounts presented for the respective periods in the accompanying condensed consolidated statements of operations. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include rebates and chargebacks deducted from gross revenues, valuation of inventory, 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 estimates related to the valuation allowance for the Company’s deferred tax assets and its effective tax rate.

During thesecond quarter of 2024, the Company engaged a third-party specialist to assist in the evaluation of the Company’s accrual for U.S. Medicaid rebates related to the sale of the Company’s immunoglobulin products. As a result of this evaluation, the Company recognized a reduction in this accrual and a corresponding increase to net revenues of $12.6 million for the nine months ended September 30, 2024. This change in estimate was applied on a prospective basis as of June 30, 2024 and increased income from operations and net incomefor the nine months ended September 30, 2024 by approximately $12.6 million and $11.9 million, respectively, and increased basic and diluted earnings per share by $0.05. Because there was little to no historical data to rely upon at the time BIVIGAM and ASCENIV were launched, the Company had considered several qualitative factors when evaluating the initial rate to accrue for rebates, such as the absence of a statutory limitation on the rebate amounts drug manufacturers pay to state Medicaid programs and general uncertainty that pharmaceutical manufacturers have historically seen with government payors often submitting lagged claims many periods after the initial dispensing of a product to an end patient. The Company additionally considered that estimates may change over the lifetime of these products due to changes in utilization and payor mixes. There was additional new information that arose during the three months ended June 30, 2024 that suggested the need to reevaluate the underlying assumption of historical payer mix for BIVIGAM and ASCENIV, which resulted in the $12.6 million adjustment to the accrual for U.S. Medicaid rebates at June 30, 2024.

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 credit facility (see Note 7) approximates fair value due to the variable interest rate on this debt.

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Accounts Receivable

Accounts receivable is reported at realizable value, net of allowances for contractual credits and credit losses in the amount of $0.2 million and $0.1 million at September 30, 2024 and December 31, 2023, 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, payment history and associated credit risk of customers are performed on an ongoing basis. Based on these evaluations, the Company has concluded that its credit risk is minimal. At September 30, 2024, four customers accounted for an aggregate of approximately 91% of the Company’s total accounts receivable, and at December 31, 2023, five customers accounted for approximately 98% of the Company’s total accounts receivable.

Inventories

Raw materials inventory consists of various materials purchased from suppliers, including normal source plasma and Respiratory Syncytial Virus (“RSV”) high titer 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 Boca Facility overhead allocation to inventory is generally based upon the estimated square footage of the Boca Facility that is used in the production of the Company’s FDA-approved products relative to the total square footage of the facility.

Inventories, including plasma intended for resale and plasma intended for internal use in the Company’s manufacturing, commercialization or research and development activities, are carried at the lower of cost or net realizable value determined by the first-in, first-out method. Net realizable value is generally determined based upon the consideration the Company expects to receive when the inventory is sold, less costs to deliver the inventory to the recipient. The estimates for net realizable value of inventory are based on contractual terms or upon historical experience and certain other assumptions, and the Company believes that such assumptions are reasonable. Inventory is periodically reviewed to ensure that its carrying value does not exceed its net realizable value, and adjustments are recorded to write down such inventory, with a corresponding charge to cost of product revenue, when the carrying value or historical cost exceeds its estimated net realizable value.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company. Goodwill at September 30, 2024 and December 31, 2023 was $3.5 million. All of the Company’s goodwill is attributable to its ADMA BioManufacturing business segment.

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 didnot record any impairment charges related to goodwill for the threeand nine months ended September 30, 2024 and 2023.

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 three and nine months ended September 30, 2024 and 2023, the Company did not identify any impairment indicators for its long-lived assets, and as a resultno impairment charges were recorded.

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Revenue Recognition

Revenues for the three and nine months ended September 30, 2024 and 2023 are comprised of (i) revenues from the sale of the Company’s immunoglobulin products, ASCENIV, BIVIGAM and Nabi-HB,(ii) product revenues from the sale of human plasma collected through the Company’s Plasma Collection Centers business segment, (iii) contract manufacturing and laboratory services revenue, (iv) revenues from the sale of intermediate by-products; and (v) license and other revenues primarily attributable to the out-licensing of ASCENIV to Biotest AG (“Biotest”) in 2012 to market and sell this product in Europe and selected countries in North Africa and the Middle East. Biotest has provided the Company with certain services and financial payments in accordance with the related Biotest license agreement and is obligated to pay the Company certain amounts in the future if certain milestones are achieved. Deferred revenue is amortized into income over the term of the Biotest license, representing a period of approximately 22 years.

Product revenue is recognized when the customer is deemed to have control over the product. Control is determined based on when the product is shipped or delivered, depending on the sales terms, and title passes to the customer. Revenue is recorded in an amount that reflects the consideration the Company expects to receive in exchange. Revenue from the sale of the Company’s immunoglobulin products is recognized when the product reaches the customer’s destination, and is recorded net of estimated rebates, wholesaler distribution and related fees, customer incentives, including prompt pay discounts, wholesaler chargebacks, group purchasing organization fees and reimbursements for patient assistance. These estimates are based on historical experience and certain other assumptions, and while the Company believes that such estimates are reasonable, they are subject to change based on future experience and other factors. During thesecond quarter of 2024, the Company engaged a third-party specialist to assist in the evaluation of the Company’s accrual for U.S. Medicaid rebates related to the sale of the Company’s immunoglobulin products. As a result of this evaluation, the Company recognized a reduction in this accrual and a corresponding increase to net revenues of $12.6 million for the nine months ended September 30, 2024, substantially all of which was related to the sale of ASCENIV and BIVIGAM. This change in estimate was applied on a prospective basis as of June 30, 2024 and increased income from operations and net income by approximately $12.6 million and $11.9 million, respectively, and increased basic and diluted earnings per share by $0.05 for the nine months ending September 30, 2024. Because there was little to no historical data to rely upon at the time BIVIGAM and ASCENIV were launched, the Company had considered several qualitative factors when evaluating the initial rate to accrue for rebates, such as the absence of a statutory limitation on the rebate amounts drug manufacturers pay to state Medicaid programs and general uncertainty that pharmaceutical manufacturers have historically seen with government payors often submitting lagged claims many periods after the initial dispensing of a product to an end patient. The Company additionally considered that estimates may change over the lifetime of these products due to changes in utilization and payor mixes. There was additional new information that arose during the three months ended June 30, 2024 that suggested the need to reevaluate the underlying assumption of historical payer mix for BIVIGAM and ASCENIV, which resulted in the $12.6 million adjustment to the accrual for U.S. Medicaid rebates at June 30, 2024.

For revenues associated with contract manufacturing and the sale of intermediates, control transfers to the customer and the performance obligation is satisfied when the customer takes possession of the product from the Boca Facility or from a third-party warehouse that is utilized by the Company.

Product revenues from the sale of human plasma collected at the Company’s plasma collection centers are recognized at the time control of the product has been transferred to the customer, which generally occurs at the time of shipment. Product revenues are recognized at the time of delivery if the Company retains control of the product during shipment.

For the nine months ended September 30, 2024 and 2023, two customers represented an aggregate of approximately 71% of the Company’s consolidated revenues.

Cost of Product Revenue

Cost of product revenue includes costs associated with the manufacture of the Company’s FDA-approved products, intermediates and the 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 or processes in development, the expenses are classified as research and development expenses.

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Earnings/Loss Per Common Share

Basic earnings/loss per common share is computed by dividing net earnings/loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings/loss per common share is calculated by dividing net earnings/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, as well as restricted stock units (“RSUs”), using the treasury stock method. Potentially dilutive common stock is excluded from the diluted earnings/loss per common share computation to the extent that it would be anti-dilutive. For the three and nine months ended September 30, 2024 and the three months ended September 30, 2023, basic and diluted earnings per share is calculated as follows:

For the three and nine months ended September 30, 2024 and the three months ended September 30, 2023, there wereno shares with an anti-dilutive effect that needed to be excluded from the earnings per share computation. For the nine months ended September 30, 2023 no potentially dilutive securities were included in the computation of diluted loss per share in the accompanying condensed consolidated financial statements as the Company reported a net loss for this period. For the nine months ended September 30, 2023, the following securities were excluded from the calculation of diluted loss per common share because of their anti-dilutive effects:

Stock-Based Compensation

The Company follows recognized accounting guidance which requires all equity-based payments, including grants of stock options and RSUs, 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 generally 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 afour-year vesting period and a term of 10 years. RSUs granted to employees generally have afour-year vesting period. 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.

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Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or its tax returns. Under this method, deferred tax assets and liabilities are recognized for the temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company records a valuation allowance on its deferred tax assets if it is more likely than not that the Company will not generate sufficient taxable income to utilize its deferred tax assets. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2020 and for previous periods as it relates to the Company’s net operating loss carryforwards.

In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Tax benefits are recognized for an uncertain tax position when, in management’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances and when new information becomes available. Such adjustments are recognized entirely in the period in which they are identified. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it hasnot incurred any material liability for uncertain tax positions as of September 30, 2024 and December 31, 2023, and during the three and nine months ended September 30, 2024 and 2023 the Company recognized no adjustments for uncertain tax positions.

Recent Accounting Pronouncements

In November of 2023 the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU are intended to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments; however, the update does not change the definition of an operating segment or the method for determining reportable segments. This update becomes effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements, except that its adoption will likely lead to disclosures of additional significant segment expenses.

The following table provides the components of inventories:

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Raw materials includes plasma and other materials expected to be used in the production of ASCENIV, BIVIGAM 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.

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 that is expected to be sold to third-party customers.

Intangible assets at September 30, 2024 and December 31, 2023 consist of the following:

During the nine months ended September 30, 2024, the Company continued to develop its data intelligence and analytics programs at a cost of approximately $0.4 million, and such costs are amortized over a period ofthree tofive years upon the projects’ completion and placement into service. Amortization expense related to the Company’s intangible assets was $28,000 and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $0.4 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively. Estimated future aggregate amortization expense is expected to be as follows (in thousands):

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Property and equipment and related accumulated depreciation are summarized as follows:

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life. Land is not depreciated. The buildings were assigned a useful life of 30 years. Property and equipment other than land and buildings have useful lives ranging from three to 10 years. Leasehold improvements are amortized over the lesser of the lease term or their estimated useful lives.

The Company recorded depreciation expense on property and equipment for the three months ended September 30, 2024 and 2023 of $1.9 millionand for the nine months ended September 30, 2024 and 2023 of $5.7 million.

Accrued expenses and other current liabilities at September 30, 2024 and December 31, 2023 are as follows:

A summary of outstanding senior notes payable is as follows:

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On December 18, 2023 (the “Ares Closing Date”), the Company and all of its subsidiaries entered into a credit agreement (the “Ares Credit Agreement”) with Ares Capital Corporation and certain credit funds affiliated with Ares Capital Corporation (collectively, “Ares”). The Ares Credit Agreement provides for a total of $135.0 million in senior secured credit facilities (the “Ares Credit Facility”) consisting of (i) a term loan in the aggregate principal amount of $62.5 million and (ii) a revolving credit facility in the aggregate principal amount of $72.5 million (collectively, the “Ares Loans”), both of which were fully drawn on the Ares Closing Date. The Ares Credit Facility has a maturity date of December 20, 2027 (the “Ares Maturity Date”). On the Ares Closing Date, the Company used the proceeds from the Ares Loans, along with a portion of its existing cash on hand, to terminate and pay in full all of the outstanding obligations under the Company’s previous senior credit facility (the “Hayfin Credit Facility”) with Hayfin Services LLP (“Hayfin”) including the outstanding principal in the amount of $158.6 million. On August 14, 2024, the Company 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 athree-month tenor in effect on the day that istwo business days prior to the first day of the applicable calendar quarter plus 6.50% (the “Initial SOFR Term Loan Applicable Margin”). Borrowings under the revolving facility bear interest at the adjusted Term SOFR for athree-month tenor in effect on the day that istwo business days prior to the first day of the applicable calendar quarter plus 3.75% (the “SOFR Revolving Facility Applicable Margin”). 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, the Company is required to pay Ares the entire outstanding principal amount underlying the Ares Loans and any accrued and unpaid interest thereon. Prior to the Ares Maturity Date, there areno scheduled principal payments on the Ares Credit Facilities, and the Company is required to make quarterly interest payments to Ares of approximately $2.8 million. The Company may prepay the outstanding principal under the revolving facility, 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 withno prepayment premium. However, in the event the Company prepays an amount under the revolving credit 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), the Company will still be required to pay interest on 50% of this balance, or $36.3 million, through the term of the Ares Credit Facility. The Company 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, the Company incurred fees and expenses related to the transaction of $2.8 million, including a $1.7 million original discount payable to Ares, all of which was deducted from the Ares loan proceeds. In addition, the Company is 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 the Company’s consolidated balance sheets as of September 30, 2024 and December 31, 2023. As a result, the Company 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. This debt discount was recorded as a reduction to the face amount of the debt and is being amortized as interest expense over the term of the debt using the interest method.

All of the Company’s obligations under the Ares 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 Ares Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar debt financings. The negative covenants include certain financial covenants, including maximum total leverage ratios and a $15.0 million minimum liquidity covenant, and also restrict or limit the Company’s ability and the ability of the Company’s subsidiaries to, among other things and subject to certain exceptions contained in the Ares 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 the Company’s subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Ares Credit Agreement); 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 Ares Credit Agreement. As of September 30, 2024 the Company was in compliance with all of the covenants contained in the Ares Credit Agreement.

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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 events, material judgments, cross-defaults to material contracts and events constituting a change of control. If there is an event of default, the Company will incur an increase in the rate of interest on the Ares Loans of 2% per annum.

Preferred Stock

The Company is currently authorized to issue up to 10 million shares of preferred stock, $0.0001, par value per share. There wereno shares of preferred stock outstanding at September 30, 2024 and December 31, 2023.

Common Stock

As of September 30, 2024 and December 31, 2023, the Company was authorized to issue 300,000,000 shares of its common stock, $0.0001 par value per share, and 236,378,607 and 226,063,032 shares of common stock were outstanding as of September 30, 2024 and December 31, 2023, respectively. After giving effect to the 27,759,065 shares reserved for outstanding warrants and awards issued or reserved for future issuance under the Company’s equity incentive plans, as of September 30, 2024 there were 35,862,328 shares of common stock available for issuance.

Warrants

On January 10, 2024, a former noteholder of the Company exercised a warrant to purchase 4 million shares of the Company’s common stock on a cashless basis and the Company issued 1,977,514 shares of common stock to this noteholder. On March 8, 2024 Hayfin and its affiliates exercised warrants to purchase an aggregate of 3,388,681 shares of the Company’s common stock on a cashless basis and the Company issued 2,482,205 shares of common stock to Hayfin and its affiliates. On March 14, 2024 an entity associated with another former noteholder of the Company exercised a warrant to purchase 169,651 shares of the Company’s common stock on a cashless basis and the Company issued 85,784 shares of common stock to this entity. On May 9, 2024 Hayfin and its affiliates exercised warrants to purchase an aggregate of 1,787,424 shares of the Company’s common stock on a cashless basis and the Company issued 937,507 shares of common stock to Hayfin and its affiliates. On August 15, 2024 Hayfin and its affiliates exercised warrants to purchase an aggregate of 1,962,946 shares of the Company’s common stock on a cashless basis and the Company issued an aggregate of 1,741,882 shares of common stock to Hayfin and its affiliates.

On February 24, 2024 a warrant to purchase 34,800 shares of the Company’s common stock held by a former noteholder of the Company expired in accordance with its terms. At September 30, 2024 and December 31, 2023, the Company had outstanding warrants to purchase an aggregate of 1,159,404 and 12,502,906 shares of common stock, respectively, with weighted-average exercise prices of $2.26 and $2.32 per share, respectively, with expiration dates ranging between October 2024 and May 2030. The following table summarizes the changes in warrants outstanding for the nine months ended September 30, 2024:

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Equity Incentive Plans

The fair value of stock options granted under the Company’s equity incentive plans was determined on the date of grant using the Black-Scholes option valuation model. The Black-Scholes model was developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of certain subjective assumptions including the expected stock price volatility. The stock options granted to employees and directors have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. The following assumptions were used to determine the fair value of options granted during the nine months ended September 30, 2024 and 2023:

During the nine months ended September 30, 2024 and 2023, the Company granted options to purchase an aggregate of 1,511,624 and 1,727,510 shares of common stock, respectively, to its directors and employees. The weighted-average remaining contractual life of stock options outstanding and expected to vest at September 30, 2024 is 7.5 years. The weighted-average remaining contractual life of stock options exercisable at September 30, 2024 is 6.2 years. During the nine months ended September 30, 2024, options to purchase an aggregate of 1,925,498 shares of common stock were exercised, which included certain exercise transactions for which an aggregate of 31,219 shares were withheld to cover the exercise price and income tax liabilities, and the Company received aggregate net exercise proceeds of $7.1 million.

A summary of the Company’s option activity under the Company’s equity incentive plans and related information is as follows:

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As of September 30, 2024, the Company had $7.4 million of unrecognized compensation expense related to options granted under the Company’s equity incentive plans, which is expected to be recognized over a weighted-average period of 2.9 years.

During the nine months ended September 30, 2024 and 2023, the Company granted RSUs representing an aggregate of 3,227,188 and 3,345,760 shares, respectively, to certain employees of the Company and to members of its Board of Directors. These RSUs generally vest annually over a period offour years for employees and semi-annually over a period ofone year for directors. During the nine months ended September 30, 2024, an aggregate of 1,701,229 shares of common stock vested in connection with grants of RSUs. With respect to these vested RSUs,504,825 shares valued at approximately $4.3 million were withheld by the Company to cover employees’ tax liabilities. These shares were no longer outstanding as of September 30, 2024. A summary of the Company’s unvested RSU activity and related information is as follows:

As of September 30, 2024, the Company had $27.4 million of unrecognized compensation expense related to unvested RSUs granted under the Company’s equity incentive plans, which is expected to be recognized over a weighted-average period of 3.2 years.

Total stock-based compensation expense for all awards granted under the Company’s equity incentive plans for the three and nine months ended September 30, 2024 and 2023 is as follows:

The Company leases office space 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 through December 31, 2026. Rent expense for the nine months ended September 30, 2024 and 2023 amounted to $90,000. Areth is a company controlled by Dr. Jerrold B. Grossman, the Vice Chairman of the Company’s Board of Directors, and Adam S. Grossman, the Company’s President and Chief Executive Officer. The Company also reimburses Areth for office and building-related (common area) expenses, equipment and certain other operational expenses, which were not material to the condensed consolidated financial statements for the nine months ended September 30, 2024 and 2023.

During the nine months ended September 30, 2024 and 2023, the Company purchased certain specialized medical equipment and services primarily related to the Company’s plasma collection centers, as well as personal protective equipment, from GenesisBPS and its affiliates (“Genesis”), aggregating to $0.2 million and $0.4 million, respectively. Genesis is owned by Dr. Grossman and Mr. Grossman.

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During the three and nine months ended September 30, 2024, two of the Company’s executive officers exercised options to purchase an aggregate of 650,395 shares of common stock, for which the Company received net proceeds of $3.0 million (see Note 8). During the three and nine months ended September 30, 2023, two of the Company’s executive officers exercised options to purchase 2,909,721 shares of the Company’s common stock on a cashless basis, and 688,657 shares of common stock were issued to these executive officers, net of 257,867 shares of common stock to cover a portion of their tax liabilities.

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.

Vendor Commitments

Pursuant to the terms of a plasma purchase agreement dated as of November 17, 2011 (the “2011 Plasma Purchase Agreement”), the Company agreed to purchase from its former contract manufacturer 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 the counterparty, and under the original 2011 Plasma Purchase Agreement the Company was permitted to also collect high-titer RSV plasma from up tofive wholly-owned ADMA plasma collection facilities. During 2015, the Company amended the 2011 Plasma Purchase Agreement to (i) allow the Company to collect its raw material RSV high-titer plasma from any number of wholly-owned ADMA plasma collection facilities and (ii) allow the Company to purchase its raw material RSV high-titer plasma from other third-party collection organizations, in each case, provided that the annual minimum volumes from the Company’s former contract manufacturer were met, thus allowing the Company to expand its reach for raw material supply as it executes its commercialization plans for ASCENIV. Unless terminated earlier, the 2011 Plasma Purchase Agreement expires in June 2027, after which it may be renewed fortwo additional five-year periods if agreed to by the parties. On December 10, 2018, the Company’s former contract manufacturer 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 June 6, 2017, the Company entered into a Plasma Supply Agreement with its former contract manufacturer, pursuant to which the counterparty 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 Plasma Supply Agreement was amended to provide, among other things, that in the event the counterparty 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 the counterparty, then the counterparty shall reimburse ADMA BioManufacturing for the difference in price ADMA BioManufacturing incurs. On December 10, 2018, the Company’s former contract manufacturer assigned its rights and obligations under the Plasma Supply Agreement to Grifols, effective January 1, 2019.

Post-Marketing Commitments

In connection with the FDA’s approval of ASCENIV on April 1, 2019, the Company is required to perform a pediatric study to evaluate the safety and efficacy of ASCENIV in children and adolescents. For the nine months ended September 30, 2024 and 2023, the Company incurred expenses related to this study in the approximate amount of $1.0 million and $0.6 million, respectively. The Company expects to incur expenses of approximately $0.5 million to complete this study, which is required to be completed by June of 2026.

Employment Contracts

The Company previously entered into employment agreements with Mr. Grossman and with Brian Lenz, the Company’s former Executive Vice President, Chief Financial Officer and General Manager, ADMA BioCenters. Effective as of April 1, 2024, Mr. Lenz transitioned to a non-employee consulting role and entered into a consulting agreement with the Company. On April 1, 2024, the Company entered into an employment agreement with Kaitlin Kestenberg, who was promoted to Chief Operating Officer and Senior Vice President, Compliance. On July 24, 2024, the Company entered into an employment agreement with Brad Tade, who was appointed Chief Financial Officer and Treasurer of the Company.

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Other Commitments

In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. Further, the Company indemnifies its directors and executive officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these arrangements is unknown as of September 30, 2024. The Company does not anticipate recognizing any significant losses relating to these arrangements.

The Company is engaged in the manufacture, marketing and development of specialty plasma-derived biologics. The Company’s ADMA BioManufacturing operating segment reflects the Company’s immunoglobulin manufacturing, commercial and development operations in Boca Raton, FL. The Plasma Collection Centers operating segment consists often plasma collection facilities located throughout the United States, all of which are operational, collecting plasma and currently hold FDA licenses. The Company defines its operating segments as those business units whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to analyze performance and allocate resources. While not considered an operating segment, the Corporate information included in the tables below consists of certain unallocated general and administrative overhead expenses and interest expense on the Company’s senior debt (see Note 7). The Company’s CODM is its President and Chief Executive Officer. For the Company’stwo operating segments, the CODM uses income/loss before taxes as the measure of segment profit to determine the allocation of resources for each segment. Summarized financial information concerning reportable segments is shown in the following tables:

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Net revenues according to geographic area, based on the location of where the product is shipped, is as follows:

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. The Company’s lease expense is recognized on a straight-line basis over the lease term and is reflected in Plasma center operating expenses and Selling, general and administrative expenses. Aggregate lease expense for the Company’s leasesfor the three months ended September 30, 2024 and 2023 was approximately $0.6 million, andaggregate lease expense for the nine months ended September 30, 2024 and 2023 wasapproximately$1.8 million. Cash paid for the Company’s leases forthe three months ended September 30, 2024 and 2023 was also approximately $0.6 million, and cash paid for the nine months ended September 30, 2024 and 2023 was approximately $1.8 million.

The Company has aggregate lease liabilities of $10.1 million and $10.8 million as of September 30, 2024 and December 31, 2023, respectively, which are comprised primarily of the leases for the Company’s plasma collection centers and a warehouse lease for raw material storage related to the Company’s immunoglobulin manufacturing operations. The Company’s operating leases have a weighted-average remaining term of 7.0 years. Scheduled payments under the Company’s lease obligations are as follows(in thousands):

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The Company uses the estimated annual effective tax rate approach as prescribed by ASC 740-270, Interim Reporting, to calculate its interim tax provision. For the three and nine months ended September 30, 2024, the Company recorded income tax expense of $0.8 million and $5.2 million, respectively, resulting in an effective tax rate of 5.7%for the nine months ended September 30, 2024. The tax expense for the three and nine months ended September 30, 2024 represents federal and state tax liabilities that are not fully sheltered by net operating loss carryforwards (“NOLs”) due to limitations from prior ownership changes and other limitationson NOLs incurred after 2017. The Company’s effective tax rate differs from the federal statutory tax rate of 21% due primarily to the reversal of the valuation allowance on certain federal and state NOLs estimated 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.

Valuation Allowance

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, carryback and carryforward 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, the Company continues to maintain a full valuation allowance against its net deferred tax assets.

Net Operating Losses

As of December 31, 2023, the Company had federal and state (post-apportioned basis) NOLs of $315.6 million and $216.4 million, respectively. Approximately $35.6 million and $95.1 million of the foregoing federal and state NOLs, respectively, will expire at various dates from 2028 through 2043, 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. As of December 31, 2023, approximately $267.8 million of the foregoing federal NOLs are subject to limitation under Section 382 due to prior ownership changes.

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.

Supplemental cash flow information for the nine months ended September 30, 2024 and 2023 is as follows:

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